<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 8, 1997
REGISTRATION NO. 333-38093
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ISLE OF CAPRI BLACK HAWK L.L.C.
ISLE OF CAPRI BLACK HAWK CAPITAL CORP.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN ITS CHARTER)
COLORADO 799302 84-1422931
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL 91-1842691
JURISDICTION OF CLASSIFICATION NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR IDENTIFICATION NUMBER)
ORGANIZATION)
ISLE OF CAPRI BLACK HAWK L.L.C.
ISLE OF CAPRI BLACK HAWK CAPITAL CORP.
C/O CASINO AMERICA, INC., AS MANAGER
711 WASHINGTON LOOP
BILOXI, MISSISSIPPI 39530
601-436-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ALLAN B. SOLOMON, SECRETARY
ISLE OF CAPRI BLACK HAWK L.L.C.
ISLE OF CAPRI BLACK HAWK CAPITAL CORP.
C/O CASINO AMERICA, INC., AS MANAGER
711 WASHINGTON LOOP
BILOXI, MISSISSIPPI 39530
601-436-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
WITH A COPY TO:
PAUL W. THEISS
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE(1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13% Series B First Mortgage Notes
Due 2004........................ $75,000,000 100% $75,000,000 $22,727.27
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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(1) Previously paid.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, DATED DECEMBER 8, 1997
ISLE OF CAPRI BLACK HAWK L.L.C.
ISLE OF CAPRI BLACK HAWK CAPITAL CORP.
----------
OFFER TO EXCHANGE 13% SERIES B FIRST MORTGAGE NOTES DUE 2004
WITH CONTINGENT INTEREST WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, FOR ANY AND ALL OF ITS OUTSTANDING
13% SERIES A FIRST MORTGAGE NOTES DUE 2004 WITH CONTINGENT INTEREST
----------
Isle of Capri Black Hawk L.L.C., a Colorado limited liability company (the
"Company"), and Isle of Capri Black Hawk Capital Corp., a Colorado corporation
and wholly owned subsidiary of the Company ("Capital" and, together with the
Company, the "Issuers"), hereby offer, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (the "Letter of Transmittal") (which together constitute the
"Exchange Offer"), to exchange up to $75 million aggregate principal amount of
13% Series B First Mortgage Notes due 2004 with Contingent Interest (the "New
Notes") of the Issuers for a like principal amount of the Issuers' issued and
outstanding 13% Series A First Mortgage Notes due 2004 with Contingent Interest
(the "Old Notes" and, together with the New Notes, the "Notes") with the
holders (each holder of Old Notes a "Holder") thereof. The terms of the New
Notes are substantially identical to the terms of the Old Notes that are to be
exchanged therefor. See "Description of the New Notes." The Company is using
the net proceeds of the offering of the Old Notes to finance the development,
construction, equipping and operation of the Isle of Capri Casino and related
amenities (the "Isle-Black Hawk") to be located in Black Hawk, Colorado. The
total indebtedness of the Company consists of the Old Notes in the amount of
$75.0 million and, when added to FF&E Financing (as defined herein) expected to
be incurred in the future in the amount of $13.2 million, is expected to be
$88.2 million. The Company is a limited liability company in which Casino
America of Colorado, Inc., a wholly owned subsidiary of Casino America, Inc.
("Casino America"), owns a 60% interest and Blackhawk Gold, Ltd., a wholly
owned subsidiary of Nevada Gold & Casinos, Inc. ("Nevada Gold"), owns a 40%
interest. Pursuant to the Members Agreement (as defined herein), the Company
will make quarterly distributions of cash from operations to Casino America of
Colorado, Inc. and Blackhawk Gold, Ltd. in proportion to their respective
ownership interests in the Company, subject to restrictions in the Indenture
governing both the Old Notes and the New Notes. Casino America will be entitled
to the payment of a management fee pursuant to a Management Agreement (as
defined herein) with the Company.
The Company is in the development stage and has no revenue from operations.
The Isle-Black Hawk is largely undeveloped and is not expected to be
operational until early 1999.
Fixed Interest on the New Notes is payable at the rate of 13% per annum,
semiannually on February 28 and August 31 of each year, commencing February 28,
1998. The New Notes will mature on August 31, 2004. Contingent Interest (as
defined herein) is payable on the New Notes on each interest payment date, in
an aggregate amount equal to 5% of the Company's Consolidated Cash Flow (as
defined herein) for the two fiscal quarter period ending during the January or
July immediately preceding such interest payment date (each a "Semiannual
Period"); provided that no Contingent Interest shall be payable with respect to
any period prior to the date that the Isle-Black Hawk is first Operating (as
defined herein). The Issuers, at their option, may defer payment of all or a
portion of any installment of Contingent Interest then otherwise due subject to
certain conditions described herein. See "Description of the New Notes--
Principal, Maturity and Interest." The Issuers will not be required to make any
mandatory redemption or sinking fund payments with respect to the New Notes
prior to maturity. The Notes are without recourse to Casino America of
Colorado, Inc., Casino America, Blackhawk Gold, Ltd. or Nevada Gold and no such
party is a guarantor of the Notes or has any fiduciary obligation to the
Holders. The New Notes will be redeemable at the option of the Issuers, in
whole or in part, at any time on or after August 31, 2001 at the redemption
prices set forth herein, plus accrued and unpaid interest and Liquidated
Damages (as defined herein), if any, to the date of redemption. Notwithstanding
the foregoing, at any time prior to August 31, 2000, the Issuers may redeem up
to 35% of the original principal amount of the New Notes at a redemption price
equal to 113% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of redemption with the net proceeds
of a Public Equity Offering (as defined herein). Upon a Change in Control (as
defined herein), each holder of the New Notes will have the right to require
the Issuers to repurchase such holder's New Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of repurchase. There can be no assurance, however, that the
Company will have sufficient funds to satisfy its repurchase obligations upon a
Change in Control. Beginning with the first Operating Year (as defined herein)
after the Isle-Black Hawk becomes Operating, the Issuers will be required to
offer to purchase, at a price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, the
maximum principal amount of New Notes that may be purchased with 50% of the
Company's Excess Cash Flow (as defined herein) in respect of the Operating Year
then ended.
Prior to the Exchange Offer, there has been no established trading market for
the New Notes. The Issuers do not intend to apply for listing or quotation of
the New Notes on any securities exchange or stock market. Therefore, there can
be no assurance as to the existence or liquidity of any trading market for the
New Notes or that an active public market for the New Notes will develop. Any
Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, a Holder's ability to sell untendered, or tendered but
unaccepted, Old Notes could be adversely affected. Following the consummation
of the Exchange Offer, the Holders of Old Notes will continue to be subject to
the existing restrictions on transfer thereof and the Company will have no
further obligations to such Holders to provide for the registration of the Old
Notes under the Securities Act. See "Exchange Offer-- Consequences of not
Exchanging Old Notes." Broker-dealers selling the New Notes may be deemed to be
"underwriters" under the Securities Act (as defined herein).
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED, PROVIDED THAT NO
EXTENSION WILL BE PERMITTED BEYOND 45 BUSINESS DAYS FROM THE DATE OF THIS
PROSPECTUS.
----------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE NEW NOTES, INCLUDING BY HOLDERS OF OLD NOTES
WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER, SEE "RISK
FACTORS" ON PAGE 13 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is December , 1997
<PAGE>
The New Notes will be senior secured obligations of the Issuers and will
rank pari passu in right of payment with any existing and future senior
Indebtedness (as defined herein) of the Issuers and will rank senior in right
of payment to all subordinated Indebtedness of the Issuers. As of the date of
this Prospectus, the Notes were the only outstanding senior Indebtedness of
the Issuers. The Company also intends to incur approximately $13.2 million of
FF&E Financing in the future. The New Notes will be secured by a first
priority lien, subject to Permitted Liens (as defined herein), in
substantially all of the existing and future assets of the Issuers, including,
without limitation (i) a pledge of the net proceeds from the Old Notes
Offering (as defined herein) deposited and held as collateral in the Cash
Collateral Accounts pending disbursement pursuant to the Cash Collateral and
Disbursement Agreement, (ii) a security interest in substantially all of the
assets that will comprise the Isle-Black Hawk and (iii) an assignment of
certain agreements pursuant to which the Isle-Black Hawk will be constructed
and managed and certain licenses and permits relating thereto. The New Notes
will not be secured by furniture, fixtures and equipment financed by FF&E
Financing or any gaming or liquor licenses. See "Description of the New
Notes--Security."
The Issuers will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on
, 1998, or such later time and date to which the Exchange Offer is
extended (the "Expiration Date"), provided that no such extension may be made
beyond 45 business days from the date of this Prospectus. Tenders of Old Notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. However, the
Exchange Offer is subject to certain customary conditions which may be waived
by the Issuers. The Issuers have agreed to pay the expenses of the Exchange
Offer. There will be no cash proceeds to the Issuers from the Exchange Offer.
See "Use of Proceeds."
The Old Notes were issued and sold (the "Old Notes Offering") on August 20,
1997 (the "Closing Date") in a transaction that was not registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon
the exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Old Notes may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is
available. The New Notes are being offered for exchange in order to satisfy
certain obligations of the Issuers under Registration Rights Agreements (as
defined herein) between the Issuers and the Initial Purchasers (as defined
herein). The New Notes will be obligations of the Issuers evidencing the same
indebtedness as the Old Notes and will be entitled to the benefits of the same
Indenture which governs both the Old Notes and the New Notes. The form and
terms (including principal amount, interest rate, dividend payment, maturity
and ranking) of the New Notes are the same as the form and terms of the Old
Notes except that the New Notes (i) have been registered under the Securities
Act and therefore are not subject to certain restrictions on transfer
applicable to the Old Notes; (ii) will not be entitled to registration rights;
and (iii) will not provide for any Liquidated Damages (as defined herein). See
"The Exchange Offer--Registration Rights; Liquidated Damages."
The Issuers are making the Exchange Offer pursuant to the registration
statement of which this Prospectus is a part in reliance upon the position of
the staff of the Securities and Exchange Commission (the "Commission") set
forth in certain no-action letters addressed to other parties in other
transactions. However, the Issuers have not sought their own no-action letter
and there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer. Based on these
interpretations by the staff of the Commission, the Issuers believe that the
New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by holders thereof (other than (i) any such
holder that is an "affiliate" of the Issuers within the meaning of Rule 405
under the Securities Act; (ii) an Initial Purchaser or holder who acquired the
Old Notes directly from the Issuers solely in order to resell pursuant to Rule
144A under the Securities Act or any other available exemption under the
Securities Act; or (iii) a broker-dealer who acquired the Old Notes as a
result of market-making or other trading activities) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and such holder is not participating and has
no arrangement or understanding with any person to participate in a
distribution (within the meaning of the
i
<PAGE>
Securities Act) of such New Notes. Each broker-dealer that receives New Notes
for its own account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Issuers have agreed
that, for a period of one year after the date on which the Registration
Statement (as defined herein) was declared effective by the Commission, they
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
AVAILABLE INFORMATION
The Issuers have filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the New Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Issuers and the New Notes, reference is hereby
made to the Registration Statement. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to in the
Registration Statement are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
Upon the effectiveness of the Registration Statement, the Issuers will be
subject to the reporting requirements of the Exchange Act and the
interpretations issued thereunder by the staff of the Commission. The
Registration Statement, such reports and other information can be inspected
and copied at the offices of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as the following regional
offices of the Commission: Seven World Trade Center, Suite 1300, New York, New
York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such material also may be accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
ii
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. As used herein, the term "Black Hawk Market" means the combined
gaming markets of the adjacent cities of Black Hawk and Central City, Colorado.
Prospective investors are urged to read this Prospectus in its entirety,
including, without limitation, the "Risk Factors" beginning on page 12.
THE COMPANY
The Company plans to develop, own and operate the Isle-Black Hawk as a
premier casino gaming facility to be located in the Black Hawk Market
approximately 40 miles west of Denver. The Isle-Black Hawk will be one of the
first gaming facilities encountered by customers traveling from Denver to the
Black Hawk Market. Upon completion, the Isle-Black Hawk will be one of the
largest gaming facilities in Colorado. Plans for the Isle-Black Hawk include a
55,000 square foot, single-floor gaming facility featuring approximately 1,100
slot machines, 24 table games and 1,000 on-site parking spaces, a fine dining
restaurant, a delicatessen, a full service buffet and other related amenities.
The Isle-Black Hawk will be designed and constructed pursuant to a bonded,
"guaranteed maximum price" design/build agreement (the "Design/Build
Agreement"), which also provides for the addition of a hotel at the option of
the Company for an agreed-upon increase to the guaranteed maximum price. This
"guaranteed maximum price" may be increased if plans or specifications change
or the project encounters unforeseen geological or excavation conditions or due
to certain delays caused by the Company, certain changes in law or many other
contingencies, any or all of which may increase the actual price paid for the
development of the Isle-Black Hawk. See "Recent Developments."
The Black Hawk Market includes many small, privately held gaming facilities
that the Company believes offer limited amenities and are characterized by a
shortage of convenient on-site parking. In addition, there are several larger
gaming facilities in the Black Hawk Market that provide varying levels of
services and amenities. Management believes that the Isle-Black Hawk's large
and modern gaming facility, superior location, convenient on-site covered
parking and extensive amenities will afford it a significant competitive
advantage. The Isle-Black Hawk is expected to include the largest single-floor
gaming facility in Colorado upon its opening and will offer a broad array of
amenities, including what is expected to be the largest buffet in the Black
Hawk Market. The Company believes that the customer convenience afforded its
patrons by providing ample on-site, covered self-parking spaces will
significantly differentiate the Isle-Black Hawk from its competitors.
Management believes that, upon completion, parking at the Isle-Black Hawk will
represent in excess of 25% of the total covered parking spaces in the Black
Hawk Market. The Isle-Black Hawk will be designed and operated under a
distinctive Caribbean theme as an "Isle of Capri Casino," further
differentiating it from other gaming facilities in the area, which primarily
stress Victorian and western themes. In addition, the Company will utilize
database marketing techniques used by Casino America at its existing
facilities.
Casino gaming in Colorado is restricted to the three towns of Black Hawk,
Central City and Cripple Creek and two Native American gaming facilities
located in the southwest corner of the state. The Black Hawk Market, which
includes both Black Hawk and Central City, primarily attracts drive-in or "day
trip" customers from the population centers of Denver, Boulder, Fort Collins
and Golden, Colorado as well as Cheyenne, Wyoming. These population centers are
located within a 100-mile radius of the Black Hawk Market. The population
within this 100-mile radius has experienced steady growth from a population of
2.8 million in 1990 to 3.2 million in 1996. Gaming revenues generated in the
Black Hawk Market have grown from $127.6 million in 1992, the first full year
of gaming operations, to $308.8 million in 1996. For the twelve-month period
ended May 31, 1997, gaming revenues in the city of Black Hawk, which accounted
for 72.1% of gaming revenues in the Black Hawk Market, grew at a rate of 9.2%
compared to the prior twelve-month period.
The total cost for the Isle-Black Hawk is estimated to be $103.6 million,
which includes approximately (i) $14.4 million in contributed value for a 9.12-
acre site upon which the Isle-Black Hawk will be developed, (ii)
1
<PAGE>
$47.3 million for the estimated development and construction budget for the
Isle-Black Hawk pursuant to the Design/Build Agreement, which is a bonded
"guaranteed maximum price" contract, (iii) $10.3 million for furniture,
fixtures and equipment not included within the guaranteed maximum price under
the Design/Build Agreement, (iv) $5.4 million for project development costs,
fees and permits, (v) $2.8 million for pre-opening costs and opening bankroll,
(vi) $19.1 million for a completion reserve and an interest reserve and (vii)
$4.3 million for fees and expenses related to the Old Notes Offering and the
Exchange Offer. The design/build team under the Design/Build Agreement includes
Haselden Construction, Inc. ("Haselden"), a large Denver-based general
contractor with experience in constructing facilities in the mountain towns of
Colorado, including Black Hawk, as well as Parkhill-Ivins Architects, a Denver-
based architectural firm that has designed several other facilities in the
Black Hawk Market. The Company commenced excavation and other site preparation
activities in August 1997, which are anticipated to be substantially completed
within approximately six to nine months of their commencement. Following the
completion of site preparation, on-site construction activities will commence
and are expected to take approximately ten months to complete. Accordingly, the
Company expects to open the Isle-Black Hawk in early 1999. See "Recent
Developments." Under the terms of the Design/Build Agreement and the Cash
Collateral and Disbursement Agreement, the Company has the option, which must
be exercised by March 1, 1998, to add a hotel which, if exercised, would add
$6.3 million to the "guaranteed maximum price" under the Design/Build Agreement
(the "Hotel Option"). In the event that the Company exercises the Hotel Option,
the Company expects to fund the construction of the hotel within the project
budget described herein. See "Material Agreements--Design/Build Agreement."
Casino America will manage and implement a business and marketing strategy
for the Isle-Black Hawk. The Isle-Black Hawk will be designed and operated
under the theme of an "Isle of Capri Casino," a theme used by Casino America at
its existing gaming facilities that emphasizes a tropical island atmosphere and
offers value-oriented gaming facilities and complementary amenities. Casino
America will license the use of the "Isle of Capri(R)" name to the Company,
together with other service marks and trade names utilized at its existing
gaming facilities. Casino America has developed, constructed, and currently
operates gaming facilities at four locations and has developed two hotels, a
367-room hotel at its Biloxi, Mississippi facility and a 241-room hotel at its
Lake Charles, Louisiana facility.
Casino America, as manager of the Isle-Black Hawk (the "Manager"), intends to
utilize database marketing techniques previously developed and implemented at
its existing gaming facilities. Database marketing is intended to identify a
facility's core customers by tracking visits and levels of play, and that
information is then used to foster increased customer loyalty and promote
repeat visits through, among other things, various promotional activities and
special events. The Company intends to use its promotional programs,
particularly the Island Gold Players Club, to build its database of core
customers. The Company also intends to use bus programs to promote group visits
and other promotional programs designed to increase customer volume, track
customer trends and develop its customer database.
RECENT DEVELOPMENTS
The Company delivered a "Notice to Proceed" to Haselden under the
Design/Build Agreement on August 25, 1997, at which time excavation and site
preparation activities were commenced. Except as set forth in the following
paragraph, the Company believes that excavation and site preparation activities
have been conducted through the date of this Prospectus within the budgeted
amounts therefor, and within the project completion schedule. As of November
23, 1997, approximately $5,444,000 had been disbursed from the Construction
Disbursement Amount. All necessary local permits and approvals have been
obtained as required to date, and the Company is not aware of any material
issues concerning its pending gaming approval applications with the State of
Colorado.
Haselden has notified the Company that excavation and site preparation
activities have uncovered a greater amount of less stable weathered rock and
overburden soil than originally anticipated. Consequently, Haselden expects
that substantial additional structural support of the mountain wall forming the
rear of the construction site for the Isle-Black Hawk will be required. In
addition, the City of Black Hawk has required certain changes
2
<PAGE>
to the Company's excavation and site preparation plans with regard to the slope
of the rear wall excavation. Haselden's position is that it is entitled to an
increase in the guaranteed maximum price under the Design/Build Agreement and
an extension to the construction schedule. Although the Company and Haselden
have not yet agreed to the amount of any price adjustment or any revision to
the construction schedule, the preliminary, unsubstantiated estimates provided
by Haselden indicate that the foregoing developments may lead to a price
increase and schedule extension that could be material. The Company and
Haselden are working to determine the extent of the necessary changes and which
party should bear any increased cost or schedule delays. In the meantime, based
on preliminary discussions with Haselden, the Company intends to add
approximately $2.2 million to the development and construction budget for the
Isle-Black Hawk pending such determination, to be drawn first from interest
earnings on amounts in the Construction Disbursement Account, with the
remainder (expected to be approximately $1.6 million) to be allocated from the
Completion Reserve Account to the Construction Disbursement Account, to provide
for a possible increase in the "guaranteed maximum price" under the
Design/Build Agreement ultimately resulting from the foregoing, and has revised
its estimate of the date of substantial completion of the Isle-Black Hawk from
"late 1998 or early 1999" to "early 1999." The Company believes that sufficient
funds remain to enable the Isle-Black Hawk to be developed as planned and open
for business within the anticipated time frame.
CAPITALIZATION TRANSACTIONS
The Company was formed in April 1997 and is owned 60% by Casino America of
Colorado, Inc. and 40% by Blackhawk Gold, Ltd. Simultaneously with the
consummation of the Old Notes Offering, (i) Casino America of Colorado, Inc.
assigned to the Company the contractual right to purchase a portion of the
property (the "Casino America Parcel") upon which the Isle-Black Hawk will be
developed, $100,000 of the purchase price of which was previously paid by
Casino America on behalf of Casino America of Colorado, Inc., (ii) Casino
America of Colorado, Inc. contributed sufficient cash to the Company to enable
the Company to purchase the Casino America Parcel for the unpaid balance of the
purchase price of $6.4 million, (iii) Blackhawk Gold, Ltd. transferred, or
caused to be transferred, to the Company the remaining portion of the property
upon which the Isle-Black Hawk will be developed (the "Blackhawk Gold Parcel"),
(iv) the Company exercised and closed the purchase right referred to in clause
(i) above and (v) Casino America of Colorado, Inc. contributed to the Company
$1,000,000 consisting of (A) development costs paid by Casino America of
Colorado, Inc. to third parties in the amount of $0.3 million and (b) cash in
the amount of $0.7 million (collectively, the "Capitalization Transactions").
Until the completion of the Isle-Black Hawk, the executive offices of the
Company will be located in care of the Manager at 711 Washington Loop, Biloxi,
Mississippi 39530 (telephone number (601) 436-7000).
CASINO AMERICA
Casino America is a leading developer, owner and operator of dockside and
riverboat casinos and related facilities in emerging gaming markets in the
United States, owning and operating five dockside or riverboat casinos at four
facilities. All of Casino America's gaming facilities are based on a tropical
island theme and operate under the "Isle of Capri Casino" name. Casino America
owns and operates a dockside riverboat casino and hotel in Bossier City,
Louisiana, two riverboat casinos at a single facility on a site one mile from
Lake Charles, Louisiana where it is presently constructing a 241-room hotel, a
dockside casino and 367-room hotel in Biloxi, Mississippi and a dockside casino
and recreational vehicle park in Vicksburg, Mississippi. Casino America also
owns and operates Pompano Park, a harness racing track in Pompano Beach,
Florida. For the fiscal year ended April 27, 1997, Casino America had total
revenues of $375.6 million, Adjusted EBITDA (as defined herein) of $69.2
million and net loss of $21.1 million which included certain settlement
expenses and valuation charges. Excluding these expenses and charges, and also
excluding certain pre-opening costs for its Lake Charles operation and an
extraordinary after-tax charge resulting from the refinancing of debt, Casino
America would have had a net loss of $0.2 million for the fiscal year ended
April 27, 1997. For the six months ended October 26, 1997, Casino America had
total revenues of $218.0 million, Adjusted EBITDA of $46.4 million and net
income of $4.0 million. See "Business--Casino America." The term "EBITDA,"
while commonly used, is not
3
<PAGE>
defined by generally accepted accounting principles ("GAAP"). EBITDA is not
calculated the same by all companies and should not be considered an accurate
comparative measure or considered without referring to GAAP financial
information and should not be construed as an alternative either to income from
operations or cash flows from operating activities.
Casino America's business strategy, which has been implemented in its
existing operations, emphasizes the development and operation of value-oriented
gaming facilities and complementary amenities with a tropical island theme
using the "Isle of Capri Casino" brand name. Casino America believes that the
use of the "Isle of Capri Casino" brand name and associated theme creates a
readily identifiable brand image connoting excitement, quality and value, which
Casino America complements by emphasizing customer service and non-gaming
entertainment amenities. Casino America believes that this strategy fosters
customer loyalty, enhances the ability to compete effectively in existing
markets and facilitates the efficient and cost-effective development of gaming
facilities in new markets. Casino America, as Manager of the Isle-Black Hawk,
intends to tailor and implement this business strategy for the Black Hawk
Market. Other than the Completion Capital Commitment and the deferral, under
certain circumstances required by the Indenture and the collateral documents
executed in connection therewith, of certain payments due to it under the
Management Agreement, Casino America is under no obligation, and does not
intend, to provide financial support for the Company.
SOURCES AND USES OF FUNDS
(DOLLARS IN MILLIONS)
The Company will not receive any proceeds in connection with the Exchange
Offer. The net proceeds received by the Company from the Old Notes Offering
(after the deduction of discounts and commissions, fees and other expenses in
connection with the Old Notes Offering) were approximately $72.0 million. The
net proceeds from the Old Notes Offering, together with contributions received
in the Capitalization Transactions and certain FF&E Financing, are being used
to finance the development, construction, equipping and operation of the Isle-
Black Hawk.
The sources and uses of funds for the development, construction, equipping
and operation of the Isle-Black Hawk are as follows:
<TABLE>
<CAPTION>
SOURCES
-------
<S> <C>
First Mortgage Notes........ $ 75.0
FF&E Financing.............. 13.2
Equity contributions(1)(2).. 15.4
------
Total Sources........... $103.6
======
</TABLE>
<TABLE>
<CAPTION>
USES
----
<S> <C>
Land(1)........................... $ 14.4
Construction costs(3)(4).......... 44.4
Furniture, fixtures and equipment. 13.2
Permits, fees and other(5)........ 5.4
Working capital(6)................ 2.8
Interest reserve(7)............... 14.1
Estimated offering fees and
expenses......................... 4.3
Completion Reserve(8)............. 5.0
------
Total Uses.................... $103.6
======
</TABLE>
- --------
(1) Reflects the contribution to the Company (a) by Casino America of Colorado,
Inc. of a contractual right to purchase the Casino America Parcel, $0.1
million of the purchase price of which was previously paid by Casino
America on behalf of Casino America of Colorado, Inc., (b) by Casino
America of Colorado, Inc. of $6.4 million in cash to enable the Company to
purchase the Casino America Parcel for the unpaid balance of the purchase
price and (c) by Blackhawk Gold, Ltd. of the Blackhawk Gold Parcel, valued
at $7.9 million (a portion of which secured $0.4 million of mortgage
indebtedness repaid with the proceeds of the Old Notes Offering). See "--
Capitalization Transactions," "Material Agreements--Members Agreement" and
"Material Agreements--Land Purchase Contract."
(2) Includes a $1.0 million contribution to the Company by Casino America of
Colorado, Inc. consisting of (a) development costs paid by Casino America
of Colorado, Inc. to third parties in an amount of $0.3 million and (b)
cash in the amount of $0.7 million. See "Material Agreements--Operating
Agreement."
4
<PAGE>
(3) Represents the bonded "guaranteed maximum price" set forth in the
Design/Build Agreement of $47.3 million, less $2.9 million of non-gaming
furniture, fixtures and equipment. This price includes a contingency
allowance of $2.2 million. Such price is subject to increase if plans and
specifications change or the project encounters certain unforeseen
geological or excavation conditions, changes in law, delays caused by the
Company or other contingencies. The price also will be increased or
decreased based upon the amount that the actual costs to complete certain
allowance items, in the aggregate, are above or below $2.6 million. The
Design/Build Agreement also provides contractor incentives for early
completion and construction cost savings as well as liquidated damages
payable to the Company for certain unexcused delays. Although the Company
believes that the site preparation and construction budget is reasonable,
actual costs may be higher given the risks inherent in the site preparation
and construction process. See "--Recent Developments," "Risk Factors--
Construction Budget and Site Risks," "Risk Factors--Permits and Approvals,"
"Risk Factors--Adverse Weather and Road Conditions; Seasonality," "Risk
Factors--Environmental Matters" and "Material Agreements--Design/Build
Agreement."
(4) Assumes that the Company does not exercise the Hotel Option, which is
exercisable on or before March 1, 1998. If the Company exercises the Hotel
Option, the "guaranteed maximum price" set forth in the Design/Build
Agreement will increase by $6.3 million. If the Company exercises the Hotel
Option, it intends to fund the increased costs of construction through cost
savings achieved through value engineering, the availability of
contractor's funds represented by the contractor's contingency allowance
and the sources identified in footnote 8 below.
(5) Includes approximately $3.9 million in permits and impact fees, $1.1
million for operating supplies and $0.4 million used to repay mortgage
indebtedness on a portion of the Blackhawk Gold Parcel.
(6) Includes pre-opening costs and opening bankroll for the Isle-Black Hawk
currently estimated to be $1.8 million and $1.0 million, respectively.
(7) Reserve established for the payment of the first three interest payments on
the Notes. The amount set forth is an estimate and is subject to change
based on the actual interest rate payable on the Notes and the yield rate
of the Government Securities purchased with the proceeds of the Offering
and deposited in the Interest Reserve Account.
(8) Represents the Company's $5.0 million deposit of Offering proceeds into the
Completion Reserve Account. Excludes interest earnings on amounts deposited
in the Construction Disbursement Account and the Completion Reserve
Account, which the Company will invest in Investment Grade Securities.
Pursuant to the Cash Collateral and Disbursement Agreement, the Company may
use amounts in the Completion Reserve Account to fund increases to the
construction budget, subject to certain limitations. See "--Recent
Developments." Also excludes the Completion Capital Commitment of Casino
America, pursuant to which Casino America will commit to contribute to the
Company up to $5.0 million in the event that such amounts are necessary to
cause the Isle-Black Hawk to become Operating on or before April 1, 1999,
or if the Isle-Black Hawk is not Operating by such date. See "Description
of the New Notes--Completion Capital Commitment."
5
<PAGE>
THE EXCHANGE OFFER
Securities Offered......
$75,000,000 principal amount of 13% Series B First
Mortgage Notes due 2004 with Contingent Interest. The
terms of the New Notes are identical in all material
respects to those of the Old Notes except for certain
transfer restrictions and registration rights
relating only to the Old Notes and except for certain
Liquidated Damages provisions relating only to the
Old Notes described below under "--Summary
Description of the New Notes."
Issuance of Old Notes;
Registration Rights....
The Old Notes were issued on August 20, 1997 to
Jefferies & Company, Inc. (the "Initial Purchaser"),
which placed the Old Notes with "qualified
institutional buyers" (as such term is defined in
Rule 144A promulgated under the Securities Act). In
connection therewith, the Issuers executed and
delivered for the benefit of the holders of Old Notes
a certain registration rights agreement (the
"Registration Rights Agreement"), pursuant to which
the Issuers agreed (i) to file a registration
statement on or prior to October 19, 1997 with
respect to the Exchange Offer and (ii) to use its
best efforts to cause such registration statement to
be declared effective by the Commission on or prior
to December 18, 1997. In certain circumstances, the
Issuers will be required to provide a shelf
registration statement (the "Shelf Registration
Statement") to cover resales of the Old Notes. If the
Issuers do not comply with their obligations under
the Registration Rights Agreement, they will be
required to pay Liquidated Damages to holders of the
Old Notes under certain circumstances. See "The
Exchange Offer--Registration Rights; Liquidated
Damages."
The Exchange Offer......
The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance of
the New Notes is intended to satisfy the obligations
of the Issuers contained in the Registration Rights
Agreement. Based upon the position of the staff of
the Commission set forth in no-action letters issued
to third parties in other transactions substantially
similar to the Exchange Offer (Exxon Capital Holdings
Corporation (available April 13, 1988), Morgan
Stanley & Co., Inc. (available June 5, 1991) and
Shearman & Sterling (available July 2, 1993)), the
Issuers believe that the New Notes issued pursuant to
the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other
than (i) any such holder that is an "affiliate" of
the Issuers within the meaning of Rule 405 under the
Securities Act, (ii) the Initial Purchaser or any
holder who acquired the Old Notes directly from the
Issuers solely in order to resell pursuant to Rule
144A of the Securities Act or any other available
exemption under the Securities Act or (iii) a broker-
dealer who acquired the Old Notes as a result of
market-making or other trading activities) without
further compliance with the registration and
prospectus delivery requirements of the Securities
Act, provided that such New Notes are acquired in the
ordinary course of such holder's business and such
holder is not participating and has no arrangement
with any person to participate in a distribution
(within the meaning of the Securities Act) of such
New Notes. Each broker-dealer that receives New Notes
for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in
connection with any resale for such New Notes.
6
<PAGE>
Although there has been no indication of any change
in the Commission staff's position, there can be no
assurance that the staff of the Commission would make
a similar determination with respect to the resale of
the New Notes. See "Risk Factors."
Procedures for
Tendering.............. Tendering Holders of Old Notes must complete and sign
the Letter of Transmittal in accordance with the
instructions contained therein and forward the same
by mail, facsimile or hand delivery, together with
any other required documents, to the Exchange Agent,
either with the Old Notes to be tendered or in
compliance with the specified procedures for
guaranteed delivery of Old Notes. Holders of the Old
Notes desiring to tender such Old Notes in exchange
for New Notes should allow sufficient time to ensure
timely delivery. Certain brokers, dealers, commercial
banks, trust companies and other nominees may also
effect tenders by book-entry transfer. Holders of Old
Notes registered in the name of a broker, dealer,
commercial bank, trust companies or other nominee are
urged to contact such person promptly if they wish to
tender Old Notes pursuant to the Exchange Offer.
Letters of Transmittal and certificates representing
Old Notes should not be sent to the Issuers. Such
documents should only be sent to the Exchange Agent.
Questions regarding how to tender and requests for
information should be directed to the Exchange Agent.
See "The Exchange Offer--Procedures for Tendering Old
Notes."
Tenders, Expiration
Date; Withdrawal ......
The Exchange Offer will expire on 5:00 p.m., New York
City time, on , 1998, or such later date
and time to which the Exchange Offer is extended,
provided that no such extension may be made beyond 45
business days after the date of this Prospectus. The
tender of Old Notes pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration
Date. Any Old Note not accepted for exchange for any
reason will be returned without expense to the
tendering Holder thereof as promptly as practicable
after the expiration or termination of the Exchange
Offer. See "The Exchange Offer--Terms of the Exchange
Offer; Period for Tendering Old Notes" and "--
Withdrawal Rights."
Certain Conditions to
the Exchange Offer.....
The Exchange Offer is subject to certain customary
conditions, all of which may be waived by the
Issuers, including the absence of (i) threatened or
pending proceedings seeking to restrain the Exchange
Offer or resulting in a material delay to the
Exchange Offer; (ii) a general suspension of trading
on any national securities exchange or in the over-
the-counter market; (iii) a banking moratorium; (iv)
a commencement of war, armed hostilities or other
similar international calamity directly or indirectly
involving the United States; and (v) change or
threatened change in the business, properties,
assets, liabilities, financial condition, operations,
results of operations or prospects of the Issuers and
their subsidiaries taken as a whole that, in the sole
judgment of the Issuers, is or may be adverse to the
Issuers. The Issuers shall not be required to accept
for exchange, or to issue New Notes in exchange for,
any Old Notes, if at any time before the acceptance
of such Old Notes for exchange or the exchange of the
New Notes for such Old Notes, any of the
7
<PAGE>
foregoing events occurs which, in the sole judgment
of the Issuers, make it inadvisable to proceed with
the Exchange Offer and/or with such
acceptance for exchange or with such exchange. If the
Issuers fail to consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law
or Commission policy, they are obligated to file with
the Commission a Shelf Registration Statement to
cover resales of the Transfer Restricted Securities
(as defined herein) by the holders thereof who
satisfy certain conditions. If the Issuers fail to
consummate the Exchange Offer or file a Shelf
Registration Statement in accordance with the
Registration Rights Agreement, the Issuers will pay
Liquidated Damages to each holder of Transfer
Restricted Securities until the cure of all defaults.
The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes being
tendered for exchange. See "The Exchange Offer--
Registration Rights; Liquidated Damages" and "--
Certain Conditions to the Exchange Offer."
Federal Income Tax
Consequences......
For Federal income tax purposes, the exchange
pursuant to the Exchange Offer will not result in any
income, gain or loss to the Holders or the Issuers.
See "Certain Federal Income Tax Considerations."
Use of Proceeds......... There will be no proceeds to the Issuers from the
exchange pursuant to the Exchange Offer.
Exchange Agent.......... IBJ Schroder Bank & Trust Company is serving as
Exchange Agent in connection with the Exchange Offer.
CONSEQUENCES OF NOT EXCHANGING THE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuers do not currently anticipate that
they will register the Old Notes under the Securities Act. See "Risk Factors--
Consequences of Exchange and Failure to Exchange" and "The Exchange Offer--
Consequences of Not Exchanging Old Notes."
THE NEW NOTES
Securities Offered ..... $75.0 million aggregate principal amount of 13%
Series B First Mortgage Notes due 2004 With
Contingent Interest (the "New Notes").
Issuers ................ The New Notes will be the joint and several
obligations of Isle of Capri Black Hawk L.L.C. and
its wholly owned subsidiary, Isle of Capri Black Hawk
Capital Corp.
Maturity Date .......... August 31, 2004.
Fixed Interest Rate .... The New Notes will bear fixed interest at 13% per
annum.
Interest Payment Dates Interest on the New Notes will be payable semi-
....................... annually on each February 28 and August 31,
commencing February 28, 1998.
8
<PAGE>
Contingent Interest ....
Contingent Interest is payable on the New Notes,
on each interest payment date, in an aggregate
principal amount equal to 5% of the Company's
Consolidated Cash Flow for the two fiscal quarter
period ending during the January or July
immediately preceding such interest payment date
(each, a "Semiannual Period"); provided that no
Contingent Interest shall be payable with respect
to any period prior to the date that the Isle-
Black Hawk is first Operating (as defined below;
see "Description of the New Notes--Certain
Definitions--Operating"). The Company, at its
option, may defer payment of all or a portion of
any installment of Contingent Interest then
otherwise due if and only to the extent that (i)
the payment of such portion of Contingent
Interest will cause the Company's Adjusted Fixed
Charge Coverage Ratio (as defined herein) for the
Company's most recently completed Semiannual
Period prior to such interest payment date to be
less than 1.5 to 1.0 on a pro forma basis after
giving effect to the assumed payment of such
Contingent Interest and (ii) the principal amount
of the New Notes corresponding to such Contingent
Interest has not then matured or become due and
payable (at stated maturity, upon acceleration,
upon redemption, upon maturity of repurchase
obligation or otherwise). Contingent Interest
that is deferred shall become due and payable, in
whole or in part, on the earlier of (a) the next
succeeding interest payment date on which all or
a portion of such Contingent Interest is not
permitted to be deferred, and (b) upon the
maturity of the corresponding principal amount of
the Notes (whether at stated maturity, upon
acceleration, upon redemption, upon maturity of
repurchase obligation or otherwise). No interest
will accrue on any Contingent Interest deferred
and which does not become due and payable. To the
extent permitted by law, interest will accrue on
overdue Contingent Interest at the rate of 14%
per annum. The aggregate amount of Contingent
Interest payable in a Semiannual Period will be
reduced pro rata for reductions in the
outstanding principal amount of New Notes prior
to the close of business on the record date
immediately preceding such payment of Contingent
Interest. The payment of Contingent Interest is
subject to certain restrictions set forth herein.
See "Description of the New Notes--Principal,
Maturity and Interest."
Ranking ................
The New Notes will be senior secured obligations of
the Issuers and will rank pari passu in right of
payment with any existing and future senior
Indebtedness of the Issuers, including FF&E
Financing, and will rank senior in right of payment
to all subordinated Indebtedness of the Issuers. As
of the Closing Date, the Old Notes were the only
outstanding senior Indebtedness of the Issuers.
Security................ The New Notes will be secured by a first priority
lien, subject to Permitted Liens, in substantially
all of the existing and future assets of the Issuers,
including, without limitation, (i) a pledge of the
net proceeds from the Old Notes Offering deposited
and held as collateral in the Cash Collateral
Accounts pending disbursement pursuant to the Cash
Collateral and Disbursement Agreement, (ii) a
security interest in substantially all of the assets
that will comprise the Isle-Black Hawk and (iii) an
assignment of certain agreements pursuant to which
the Isle-Black Hawk will be constructed and managed
and certain licenses and permits relating thereto.
The New Notes will not be secured by furniture,
fixtures and equipment
9
<PAGE>
financed by FF&E Financing. In addition, the
Company's Colorado gaming and liquor licenses are not
pledgeable or transferable. See "Description of the
New Notes--Security." All rights and remedies with
respect to the security interest are expressly
subject to all laws, statutes, regulations and orders
affecting gaming. See "Description of the New Notes--
Security--Certain Gaming Law Limitations."
No Recourse Against The New Notes are without recourse to the members of
Affiliates............. the Company or their respective parent or affiliate
entities.
Completion Capital
Commitment............. Casino America has delivered to the Company a
completion capital commitment (the "Completion
Capital Commitment") pursuant to which it committed
to contribute to the Company up to $5.0 million in
the event that there are insufficient funds available
to complete the development, construction and
equipping of the Isle-Black Hawk, so that the Isle-
Black Hawk is Operating on or before April 1, 1999,
or in the event that the Isle-Black Hawk is not
Operating on or before April 1, 1999; provided,
however, that if the Isle-Black Hawk is not Operating
by such date, Casino America has committed to
contribute to the Company $5.0 million in cash less
any amounts previously contributed to the Company
pursuant to the Completion Capital Commitment.
Optional Redemption..... The New Notes will be redeemable at the option of the
Issuers, in whole or in part, on or after August 31,
2001, at the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated Damages,
if any, to the redemption date. Notwithstanding the
foregoing, at any time prior to August 31, 2000, the
Issuers may redeem up to 35% of the original
principal amount of the New Notes at a redemption
price equal to 113% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption with the
net proceeds of a Public Equity Offering; provided
that at least $48.75 million of the aggregate
principal amount of the New Notes remains outstanding
immediately thereafter and that the call for such
redemption occurs within 45 days of the date of the
closing of such offering. See "Description of the New
Notes--Optional Redemption."
Gaming Redemption....... The New Notes will be subject to mandatory
disposition and redemption requirements following
certain determinations by any Gaming Authority (as
defined herein). See "Description of the New Notes--
Gaming Redemption."
Offers to Purchase
Change in Control......
Upon a Change in Control, the Issuers will be
required to offer to repurchase all of the
outstanding New Notes at a price equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest and Liquidated Damages, if any, to
the date of purchase. There can be no assurance that
the Issuers will have sufficient funds to satisfy
their repurchase obligations upon a Change in
Control. See "Description of the New Notes--
Repurchase at Option of the Holders--Change in
Control."
Excess Cash Purchase Beginning with the first Operating Year after the
Offer.................. Isle-Black Hawk becomes Operating, the Issuers will
be required to offer to purchase, at a price equal to
101% of the aggregate principal amount thereof, plus
10
<PAGE>
accrued and unpaid interest and Liquidated Damages,
if any, the maximum principal amount of the New Notes
that may be purchased with 50% of the Company's
Excess Cash Flow in respect of the Operating Year
then ended. "Excess Cash Flow," as defined below
under "Description of the New Notes--Certain
Definitions--Excess Cash Flow," is calculated after
the Company's cash interest expense (including
Contingent Interest). See "Description of the New
Notes--Excess Cash Purchase Offer." The Company does
not believe that its obligations to make Excess Cash
Purchase Offers will materially and adversely affect
its financial condition.
Asset Sales and Events In addition, under certain circumstances, the Issuers
of Loss................ may be required to use proceeds from Asset Sales (as
defined herein) or Events of Loss (as defined herein)
to offer to purchase a portion of the New Notes. See
"Description of the New Notes--Repurchase at the
Option of Holders--Asset Sales" and "Description of
the New Notes--Repurchase at the Option of Holders--
Event of Loss."
Certain Covenants.......
The Indenture pursuant to which the New Notes will be
issued (and pursuant to which the Old Notes were
issued) contains certain covenants that limit the
ability of the Company and its subsidiaries to, among
other things, (i) make restricted payments, (ii)
incur additional indebtedness and issue preferred
stock, (iii) incur liens, (iv) pay dividends, (v)
enter into mergers or consolidations, (vi) enter into
certain transactions with affiliates, (vii) sell
assets and (viii) issue and sell capital stock of
subsidiaries. In addition, the Indenture provides
that Capital will not hold any assets, become liable
for any other obligations or engage in any business
activities. See "Description of the New Notes--
Certain Covenants."
Cash Collateral and
Disbursement
Agreement..............
All of the net proceeds from the Old Notes Offering
were initially deposited by the Company in the Cash
Collateral Accounts as described below. The Cash
Collateral Accounts have been pledged to the Trustee
for the benefit of the Holders as security for the
Notes. The proceeds of the Cash Collateral Accounts
will be disbursed in accordance with the terms of the
Cash Collateral and Disbursement Agreement. See
"Description of the New Notes--Cash Collateral and
Disbursement Agreement."
Construction
Disbursement Account...
Of the net proceeds from the Old Notes Offering,
approximately $52.9 million (net of initial
disbursements made on the Closing Date) was deposited
in the Construction Disbursement Account pending
disbursement for the development, construction and
opening of the Isle-Black Hawk and for other expenses
of the Company, in each case upon satisfaction of
certain conditions set forth in the Cash Collateral
and Disbursement Agreement. Pending disbursement from
the Construction Disbursement Account, such proceeds
will be invested in Investment Grade Securities. As
of November 23, 1997, approximately $5,444,000 had
been disbursed from the Construction Disbursement
Account for excavation and site preparation work.
Completion Reserve Of the net proceeds from the Old Notes Offering, $5.0
Account................ million was deposited in the Completion Reserve
Account pending disbursement in the
11
<PAGE>
event there are insufficient funds in the
Construction Disbursement Account to complete the
Isle-Black Hawk. Pending disbursement from the
Completion Reserve Account, such proceeds will be
invested in Investment Grade Securities.
Interest Reserve Of the net proceeds from the Old Notes Offering,
Account........... approximately $14.1 million was deposited in the
Interest Reserve Account and used to purchase
Government Securities representing funds sufficient
to pay the first three Fixed Interest payments on the
Notes.
Isle of Capri Black
Hawk Capital Corp......
Isle of Capri Black Hawk Capital Corp. is a wholly
owned subsidiary of the Company whose sole purpose is
to serve as a co-issuer of the Notes in order to
facilitate the Offering.
For a more detailed discussion of the terms of the New Notes, see
"Description of the New Notes."
SUMMARY DESCRIPTION OF THE OLD NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except that if the Exchange Offer is not
consummated by February , 1998, subject to certain exceptions, with respect to
the first 90-day period immediately following thereafter, the Issuers will be
obligated to pay Liquidated Damages to each Holder of Old Notes in an amount
equal to $.05 per week for each $1,000 principal amount of Old Notes held by
such Holder.
RISK FACTORS
Holders of the Old Notes should consider carefully all of the information set
forth in this Prospectus and, in particular, should evaluate the factors set
forth under "Risk Factors."
12
<PAGE>
RISK FACTORS
Potential investors in the New Notes, including Holders of Old Notes who
tender their Old Notes in the Exchange Offer, should carefully consider the
following matters, together with other information contained herein, before
investing in the New Notes.
RISK OF NEW VENTURE; LACK OF PRIOR OPERATING HISTORY
To date, the Company's activities have been limited to development activities
and certain excavation and site preparation activities and, as a result, the
Company has had no earnings or operations. Although certain members of Casino
America's management have had experience constructing and operating dockside,
riverboat and land-based gaming facilities outside of Colorado, neither the
Company nor Casino America, which will manage the Company's gaming operations,
have previously been involved in constructing or operating a land-based gaming
facility or any facility in the Black Hawk Market. Moreover, the Isle-Black
Hawk is a start-up development and, as such, will be subject to all of the
risks inherent in establishing a new business enterprise, including, but not
limited to, unanticipated site-related, construction, licensing, permitting or
operating problems, as well as having no proven ability to market and operate a
land-based gaming facility or any new venture in the Black Hawk Market. There
can be no assurance that the Company or Casino America will be able to market
successfully the Isle-Black Hawk or that the operations thereof will be
profitable or will generate sufficient operating cash flow to enable the
Company to make payments of principal and interest on the Notes.
SUBSTANTIAL LEVERAGE
The Company is highly leveraged, with substantial debt service in addition to
construction and operating expenses. As of the Closing Date, the Old Notes were
the only outstanding senior Indebtedness of the Company. In addition, the
Indenture permits the Company to incur up to $15.0 million of FF&E Financing
outstanding at any time, approximately $13.2 million of which the Company
intends to incur in connection with the opening of the Isle-Black Hawk. See
"Capitalization." Giving pro forma effect to the expected incurrence of $13.2
million of FF&E Indebtedness, the Company would have had total indebtedness of
$88.2 million and total equity of $15.0 million.
The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including, but not limited to, the
following: (i) the Company's increased vulnerability to adverse general
economic and industry conditions, (ii) the dedication of a substantial portion
of the Company's operating cash flow to the payment of principal and interest
on Indebtedness, thereby reducing the funds available for operations and
further development of the Isle-Black Hawk and (iii) the Company's impaired
ability to obtain additional financing for future working capital, capital
expenditures, acquisitions or other general corporate purposes. There can be no
assurance that any such additional financing will be available in the future on
terms satisfactory to the Company, if at all. Failure by the Company to obtain
any required additional financing in the future could have a material adverse
effect on its financial condition and results of operations.
POTENTIAL INABILITY TO REPAY DEBT
Of the net proceeds from the Old Notes Offering, approximately $14.1 million
was deposited in the Interest Reserve Account and used to purchase Government
Securities representing funds sufficient to pay the first three Fixed Interest
payments on the Notes. Other than these funds, the Issuers' ability to meet the
debt service obligations on the Notes is entirely dependent upon the successful
completion of the Isle-Black Hawk, expected to take place in early 1999, and
the Company's future operating performance, which is itself dependent on a
number of factors, many of which are outside of the Company's control,
including prevailing economic conditions and financial, business, regulatory
and other factors affecting the Company's operations and business. Any
significant increases in the construction budget for the Isle-Black Hawk or
delays in completing the construction and commencing the operation of the Isle-
Black Hawk would adversely affect the operating results of the Company and
could result in the Company's not being able to make required payments on its
debt
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obligations, including the Notes. Assuming timely completion of the Isle-Black
Hawk and its successful operation thereafter, management believes that the
Company's operating cash flow will be sufficient to meet its expenses,
including interest costs. There can be no assurance, however, that the Company
will be profitable or will generate sufficient operating cash flow to enable
the Company to (i) service its Indebtedness, including the Notes, or (ii)
purchase any Notes required to be purchased by the terms of the Indenture.
Since operations at the Isle-Black Hawk have not yet commenced and the Black
Hawk Market has few, if any, facilities directly comparable to the Isle-Black
Hawk, it is difficult to formulate estimates of the Isle-Black Hawk's potential
earnings. None of Casino America, Nevada Gold, Casino America of Colorado, Inc.
or Blackhawk Gold, Ltd. or guarantors of the Notes has any fiduciary obligation
to the Noteholders.
If the Company is unable to generate sufficient cash flow, it could be
required to adopt one or more alternatives, such as reducing or delaying
planned capital expenditures, selling assets, restructuring debt or obtaining
additional equity capital. There can be no assurance that any of these
alternatives could be effected on satisfactory terms or at all. None of Casino
America, Nevada Gold, Casino America of Colorado, Inc. or Blackhawk Gold, Ltd.
will have any obligation under the Notes nor does any such party have any
obligation to provide any financing to or on behalf of the Company, except for
Casino America's obligation to pay up to $5.0 million pursuant to, and subject
to the conditions in, the Completion Capital Commitment. In addition, Casino
America will be limited, subject to certain exceptions, in its ability to
provide additional capital to the Company (other than pursuant to the
Completion Capital Commitment) even should it desire to do so, by the terms of
certain debt agreements to which it is subject, including the indenture
governing the $315.0 million aggregate principal amount of its outstanding 12
1/2% Senior Secured Notes due 2003.
CONSTRUCTION BUDGET AND SITE RISKS
The Company has entered into the Design/Build Agreement with Haselden to
design and construct the Isle-Black Hawk and perform all necessary excavation
and other site work, as well as provide certain non-gaming furniture, fixtures
and equipment, for a "guaranteed maximum price" to the Company of $47.3
million. The $47.3 million price is a guaranteed maximum price for construction
of the casino, which the timetable set forth in the Design/Build Agreement
contemplates to be completed within approximately 15.5 months from the date the
Company issued a notice to proceed with construction. The Company issued the
notice to proceed on August 25, 1997. The price may be increased if plans or
specifications change or the project encounters unforeseen geological or
excavation conditions, certain delays caused by the Company, certain changes in
law or certain other contingencies, any or all of which may increase the actual
price paid for the development of the Isle-Black Hawk. See "Material
Agreements--Design/Build Agreement." The construction of Isle-Black Hawk and
the hotel (if applicable) may be delayed without any cost to Haselden if such
delays result from (i) certain delays caused by the Company, (ii) certain force
majeure events, (iii) unforeseen environmental, excavation or geological
problems, (iv) weather delays which exceed 15 days or (v) certain changes in
law. Construction projects such as the Isle-Black Hawk entail significant
construction risks, including, but not limited to, cost overruns, delay in
receipt of governmental approvals, changes in laws applicable to the project,
shortages of materials or skilled labor, labor disputes, unforeseen
environmental or engineering conditions, work stoppages, natural disasters,
construction scheduling problems and weather interferences, any of which, if
they occurred, could delay construction or result in a substantial increase in
costs to the Company. Such risks may be compounded by the Company's decision to
construct the Isle-Black Hawk on an accelerated schedule under which
construction will be in progress while final plans are being completed and
which will include the use of multiple shifts, early ordering of materials and
fast-tracking. An accelerated construction schedule may cause actual
construction costs to exceed budgeted amounts.
Of the net proceeds from the Old Notes Offering, approximately $52.9 million
(net of initial disbursements on the Closing Date) was deposited in the
Construction Disbursement Account pending disbursement upon satisfaction of
certain conditions, including certain conditions subject to the satisfaction of
an independent construction consultant (the "Independent Construction
Consultant"). The primary purpose of the Independent Construction Consultant is
to monitor the construction process and provide independent verification that
the
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construction time line and budget are within specified parameters. Pursuant to
the Cash Collateral and Disbursement Agreement, the Disbursement Agent (as
defined herein) will require certain certifications from the Independent
Construction Consultant to determine the satisfaction of conditions for
disbursements. There can be no assurance that the Independent Construction
Consultant will discharge its responsibilities in a manner that will ensure
that funds will not be disbursed prior to satisfaction of all applicable
requirements.
Because the site for the Isle-Black Hawk is located in an area previously
used for mining, the risk exists that mine tunnels or other structural
aberrations at or near the site will be uncovered or exacerbated in the
excavation process. If such matters were uncovered or exacerbated, additional
measures would be required to remediate and stabilize the site. Such measures
can increase the costs of excavation significantly and also cause considerable
delay to the excavation and construction process. Pursuant to the Design/Build
Agreement, the Company has assumed the risk of any cost increases resulting
from any unforeseen excavation problems, including the existence of any mine
tunnels or other structural aberrations at or near the site. In addition to
the foregoing concerns, excavation is an inherently dangerous and
unpredictable process and no assurance can be given against unforeseen events
or circumstances that could result in delays or increased cost. See "Summary--
Recent Developments."
PERMITS AND APPROVALS
The opening of the Isle-Black Hawk will be contingent upon, among other
things, the Company's receipt of all required licenses, permits and
authorizations. The scope of the approvals required for a project of this
nature is extensive, including, without limitation, gaming and liquor
licenses, pre-opening permits from gaming authorities, state and local land-
use permits, excavation, building and zoning permits, architectural approvals,
approval of street and traffic signal improvements and health and safety
permits. In addition, unexpected changes or concessions required by local,
regulatory and state authorities, or challenges from local or special interest
groups, could involve significant additional costs and could delay or prevent
the completion of construction or the opening of all or part of the Isle-Black
Hawk. There can be no assurance that the Company will receive the necessary
permits, licenses and approvals for the construction and operation of the
Isle-Black Hawk that it has not yet obtained, or that such permits, licenses
and approvals will be obtained within the anticipated time frame. Unexpected
changes or concessions required by local, state or federal regulatory
authorities could involve significant additional costs and delay or prevent
the scheduled openings of the facilities. Any failure to receive any required
approvals could have a material adverse effect on the Company and its ability
to pay amounts due under the Notes.
COMPETITION
Competition in the Black Hawk Market is intense. Certain of the Company's
current and future competitors, particularly the larger gaming facilities,
have or may have more gaming experience than the Company or Casino America and
significantly greater financial resources than the Company. For instance,
Colorado Gaming & Entertainment Co., owner and operator of Bullwhackers Black
Hawk, Bullwhackers Central City and Silver Hawk Casino, has announced that it
has entered into a merger agreement pursuant to which it will be acquired by a
subsidiary of Ladbroke Group PLC of England, a multi-national operator of the
U.K.'s largest chain of betting shops and approximately 160 Hilton
International hotels. Colorado Gaming & Entertainment Co. has announced that
it anticipates that the merger will close late in the first quarter or early
in the second quarter of 1998.
Of the 31 gaming facilities currently operating in the Black Hawk Market,
seven have over 400 gaming positions and two offer varying types of hotel
accommodations. These larger gaming facilities all have on-site parking and
have high-profile brand names established in the local market, such as Gilpin
Hotel Casino, Colorado Central Station, Fitzgeralds Black Hawk, Bullwhackers
Black Hawk and Harvey's Wagon Wheel Hotel/Casino. In addition to the existing
gaming facilities, several new development projects and expansion plans have
been announced or are in process. Riviera Black Hawk, Inc., an indirect
wholly-owned subsidiary of Riviera Holdings Corporation, has announced that it
acquired a 71,000 square foot site in Black Hawk, Colorado, on which it
intends to construct a large casino. The site for the Riviera project is an
undeveloped site directly across Main
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Street from the Isle-Black Hawk. Riviera has announced that it expects to begin
construction of the casino in the fourth quarter of 1997, with an opening
scheduled for the spring of 1999. In addition, a joint venture between Jacobs
Entertainment, Ltd. and the owner/operator of Gilpin Hotel Casino is currently
constructing a gaming facility in Black Hawk. The Jacobs Entertainment, Ltd.
casino is located near Colorado Central Station. Other projects have also been
announced, proposed, discussed or rumored for the Black Hawk Market, such as a
large "Country World" casino and Radisson hotel and a "Black Hawk Brewery"
casino. Country World Casinos Inc., which proposes to develop the Country World
Casino and Radisson hotel, has announced that it has obtained a development
site in Black Hawk and retained a management company for the proposed casino.
Country World Casinos Inc. has also announced that it has retained an
investment bank to assist in raising the necessary financing but has not yet
obtained such financing. The Company is not aware of whether these or other
announced, proposed, discussed or rumored projects are proceeding or have
obtained the necessary financing. Therefore only the proposed number of slots,
table games and parking at the Riviera and Jacobs projects have been factored
into the comparisons contained in this Prospectus.
The gaming facilities located at or near the intersection of Main and Mill
Streets are expected to provide significant competition to the Isle-Black Hawk.
Colorado Central Station, one of the larger gaming facilities in the Black Hawk
Market, is located across the intersection from the Isle-Black Hawk and has
approximately 700 slot machines, approximately 20 gaming tables, other
amenities such as a food court and a bar and among the most parking of any
gaming property in Black Hawk with approximately 690 valet parking spaces.
Riviera has announced that the plans for its gaming facility in Black Hawk
include 1,000 slot machines and a 500 space covered parking garage. The
developers of the Jacobs facility have announced that it will have 800 slot
machines, 20 table games, underground parking for 450 vehicles (with an
affiliated two-story overflow parking facility for approximately 200 additional
vehicles) and 50 hotel rooms. In addition, construction is proceeding on a
third major intersection off State Highway 119 in between the two current
access points onto Main Street in Black Hawk which will provide access directly
to the Jacobs Entertainment, Ltd. casino from State Highway 119, thereby
allowing traffic the option to bypass the Isle-Black Hawk.
Historically, Black Hawk has enjoyed an advantage over Central City because
customers have to drive by and, in part, through Black Hawk to reach Central
City. Central City has proposed the development of a road directly connecting
Central City and Black Hawk with Interstate 70 which could result in the
elimination of this particular advantage, since customers would be able to
reach Central City without driving by or through Black Hawk.
The Isle-Black Hawk will compete, to a limited extent, with the casinos
located in Cripple Creek, since both the Black Hawk Market and Cripple Creek
compete for customers from Denver. The Isle-Black Hawk will also compete with
other forms of gaming, including lottery gaming, and horse and dog racing as
well as other forms of entertainment.
The market data and certain information, including parking data, contained in
this Offering Circular with respect to the current Black Hawk Market is based
on information supplied by the city of Black Hawk and various public
announcements and filings made by certain of the larger casinos in the Black
Hawk Market, in addition to other sources the Company believes to be reliable.
The Company has not independently verified any such information, announcements
or filings. Accordingly, investors should not place undue reliance on such
data, as there can be no assurance that such data is accurate in all material
respects. The Black Hawk Market and the gaming market in Colorado generally are
subject to changes, including changes due to facilities expanding or closing or
new facilities opening. The data contained in this Offering Circular, including
data regarding the Isle-Black Hawk's expected position in the Black Hawk Market
(in terms of size, comparable amenities, parking, proximate competition and
other relevant factors), could be rendered inaccurate by such changes.
DEPENDENCE UPON SINGLE GAMING SITE
The Company does not currently anticipate having operations other than the
Isle-Black Hawk and is entirely dependent upon the Isle-Black Hawk for its
revenues. Accordingly, the Company will be subject to greater risks
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than a geographically diversified gaming operation, including, but not limited
to, risks related to local economic and competitive conditions, complications
caused by weather or road closure, road construction on primary access routes,
changes in local and state governmental laws and regulations (including changes
in laws and regulations affecting gaming operations and taxes) and natural and
other disasters. Any decline in the number of residents near or visitors to the
Black Hawk Market, a downturn in the overall economy of the area served by the
Black Hawk Market, a decrease in gaming activities in the Black Hawk Market or
an increase in competition could have a material adverse effect on the Company.
ADVERSE WEATHER AND ROAD CONDITIONS; SEASONALITY
The city of Black Hawk is located in the Colorado Rocky Mountains, which can
be subject to inclement weather. Wind, blizzard, flood or other severe weather
conditions could (i) cause significant physical damage to the Isle-Black Hawk
or (ii) result in reduced hours of operation or access to the Isle-Black Hawk,
or the complete closure of the Isle-Black Hawk for a period of time, any of
which may have a material adverse effect on the Company. In addition, the city
of Black Hawk is serviced by winding mountain roads that require extremely
cautious driving, particularly in bad weather. These roads have tunnels that
are subject to closure. In addition, congestion on the roads leading to Black
Hawk is not uncommon during the peak summer season, holidays and other times of
year and may discourage potential customers from traveling to the Isle-Black
Hawk, particularly if road construction is in process.
The Company expects the highest level of customer visits to occur during the
summer months, due to more favorable weather conditions. Therefore, a poor
summer season, due to any cause, including causes outside the Company's
control, would have a material adverse effect on the Company.
ABILITY TO REALIZE ON COLLATERAL; BANKRUPTCY CONSIDERATIONS
The Notes will be secured by a first priority lien, subject to Permitted
Liens, on substantially all of the assets of the Company, including the Isle-
Black Hawk and the components thereof, the real property on which the Isle-
Black Hawk will be developed and improvements to be constructed thereon. The
Notes will not be secured by furniture, fixtures and equipment financed by FF&E
Financing. The Company's Colorado gaming license is not pledgeable or
transferable. Under Colorado gaming laws and the regulations promulgated
thereunder, the Trustee may be precluded from or otherwise limited or delayed
in exercising certain powers of attorney contained in the Collateral Documents
(as defined herein) or selling collateral, including, without limitation, slot
machines, at a foreclosure sale since only a person licensed by the Colorado
gaming authorities may have slot machines in their possession. In addition, the
Trustee may be delayed in its efforts to sell collateral due to various legal
restrictions, including, without limitation, requirements that an operator of a
gaming facility be licensed by state authorities or that prior approval of a
sale or disposition of collateral be obtained. Licensing restrictions would
also apply to the Trustee and its agents, if the Trustee sought to operate, or
retain an operator for, the Isle-Black Hawk. In such a case, the Trustee or its
agent, as the case may be, would have to be licensed as an operator of the
casino. Without the ability to operate or transfer the gaming operations and
related assets, the improved real estate at the Isle-Black Hawk would be of
diminished value. Licensing restrictions may also adversely affect the number
of bidders, and quality of bids submitted, at any sale of the collateral.
In addition to gaming law restrictions, the Trustee's ability to foreclose
upon and sell collateral will be subject to the procedural and other
restrictions of state real estate law and commercial law. The right of the
Trustee under the Indenture, as the secured party under the Collateral
Documents, to foreclose upon and sell the collateral subject thereto upon an
acceleration after any Event of Default is likely to be significantly impaired
by applicable bankruptcy laws if a bankruptcy proceeding were to be commenced
by or against the Company prior to or possibly even after the Trustee has
foreclosed upon and sold the collateral. In view of the broad discretionary
powers of a bankruptcy court, it is impossible to predict if payments under the
Notes would be made following commencement of and during a bankruptcy case,
whether or when the Trustee could foreclose upon or sell the collateral,
whether the term of the Notes could be altered in a bankruptcy case or whether
or to what extent holders of the Notes would be compensated for any delay in
payment or loss of value of the
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collateral. Furthermore, to the extent a bankruptcy court were to determine
that the value of the collateral is not sufficient to repay all amounts due on
the Notes, the holders of the Notes would hold "undersecured claims" with
respect to any such deficiency. Applicable federal bankruptcy laws do not
permit the payment and/or accrual of interest, costs and attorneys' fees for
"undersecured claims" during the debtor's bankruptcy case.
In the event the holders of the Notes are undersecured, the Trustee may be
entitled to a deficiency judgment under certain circumstances after application
of any proceeds from any foreclosure sale. There can be no assurance, however,
that the Trustee would be successful in obtaining any deficiency judgment, what
the amount of any such judgment if obtained might be, or that the Company would
be able to satisfy any such judgment, if obtained.
Certain of the Company's affiliates are involved in activities that are
related to the Company's business and assets. In addition, the Company and its
affiliates have overlapping officers and directors. In the event that an
affiliate of the Company is the subject of a proceeding under the United States
Bankruptcy Code ("Bankruptcy Code"), the creditors of such affiliated entity or
the trustee in bankruptcy may argue that the assets and liabilities of the
various entities, including the Company, should be consolidated so as to cause
the assets of the Company to be available for satisfaction of claims against
the bankrupt affiliate. Although the Company believes that it is a distinct and
separate legal entity from its affiliates, there can be no assurance that in
the event of a bankruptcy of one of its affiliated entities a bankruptcy court
would not order consolidation of the assets of the Company and its affiliates.
CERTAIN BANKRUPTCY CONSIDERATIONS--LIMITED LIABILITY COMPANIES
The Company is a limited liability company organized under the laws of the
State of Colorado. Limited liability companies ("LLCs") are relatively recent
creations not only under the laws of the State of Colorado but also under the
laws of other jurisdictions. Generally stated, LLCs are intended to provide
both the limited liability of the corporate form for their members and certain
advantages of partnerships, including "pass-through" income tax treatment for
members, and thus have attributes of both corporations and partnerships. Given
their recent creation, LLCs and their members have been involved in relatively
few bankruptcy cases as debtors, and there has been little reported judicial
authority addressing bankruptcy issues as they pertain to LLCs. Moreover, the
existing judicial authority on such issues in bankruptcies of analogous
entities (e.g., partnerships) is not well settled. Consequently, a bankruptcy
of the Company, its members or any of their affiliates, may be litigated and
decided in the absence of dispositive judicial precedent, and thus, no
assurance can be made as to any particular outcome.
Pursuant to the provisions of the Operating Agreement, the bankruptcy of a
member of the Company is intended to have little, if any, effect on the Company
or its business operations. Among other things, the Operating Agreement
provides that bankruptcy of a member will not cause automatically the Company's
dissolution provided that there remains at least one member that is not
bankrupt, and the Company is to continue in business and is to continue to be
managed by the Managers. The foregoing provisions are expressly permitted by
the provisions of the Colorado statutory law, although there has been little,
if any, reported judicial authority interpreting such provisions under the
Colorado statutory law or similar provisions under the LLC statutes of other
jurisdictions. Moreover, even if the foregoing provisions would be enforceable
under state law, the enforceability of any or all of such provisions under the
Bankruptcy Code is not assured. In particular, in the event of the bankruptcy
of a member, the member as a debtor-in-possession in a Chapter 11 case, any
trustee appointed for the member's bankruptcy estate, or any creditor or other
party in interest of the member may challenge the enforceability of such
provisions under various Bankruptcy Code provisions and the Bankruptcy Code may
preempt such provisions and their enforceability under state law. As indicated,
there is no definitive judicial authority that addresses these issues in the
context of LLCs, and there is conflicting authority that addresses similar
issues arising in possibly analogous partnership bankruptcies. Any of such
challenges, even if ultimately unsuccessful, could lead to a disruption of the
Company's business and an alteration in the manner in which that business is
managed and, ultimately, could have a material adverse effect on the ability of
the Issuers to meet their obligations under the Notes.
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Steps have been taken to make the bankruptcy of either member remote as a
practical matter. For example, the members themselves are subsidiaries that are
restricted under their respective charter documents from having any business
other than the ownership of their membership interests in the Company. Also,
with respect to Nevada Gold, which owns all of the outstanding stock of
Blackhawk Gold, Ltd., its bankruptcy is intended to be made remote through the
payment on the Closing Date of substantially all of Nevada Gold's known
indebtedness and the limitation contained in a promissory note between Nevada
Gold and Casino America on Nevada Gold's ability to incur indebtedness for
three years after the Closing Date. In its most recently filed report on Form
10-K for the year ended March 31, 1997, the audited financial statements for
Nevada Gold were qualified by a "going concern" opinion of its auditors. Such
"going concern" qualification has been removed from their audit opinion upon
payment of substantially all of its outstanding debts, which payment took place
concurrent with the closing of the Old Notes Offering. However, there can be no
assuring that these steps will prove successful; for example, there can be no
assurance that the members will never be collapsed or otherwise legally
consolidated with their shareholders in the event of the latter's financial
difficulties or that Nevada Gold will never have future creditors that will
render it insolvent or otherwise cause it financial difficulties. Consequently
there can be no assurance that these steps will ensure that no member will ever
become a debtor in a bankruptcy case or otherwise subject to the jurisdiction
of a bankruptcy court. See "Business--Nevada Gold."
FRAUDULENT CONVEYANCE CONSIDERATIONS
In connection with the issuance of the Notes, the Issuers will grant security
interests in the collateral to the Trustee, including, without limitation,
certain after acquired property. Various fraudulent conveyance and revocatory
laws have been enacted for the protection of creditors (including, in some
instances, parties who were not creditors at the time of the challenged
transfer but who subsequently became creditors ("future creditors")) and may
permit a court of competent jurisdiction to avoid, i.e., nullify, any transfer
of a property interest (such as an outright transfer of ownership of property
or the granting of a security interest or other lien in property) or any
obligation incurred (collectively, a "transfer") by any of the parties involved
in the transactions described in this Offering Circular.
Generally, however, if a court were to find that (a) the debtor made or
incurred the challenged transfer or obligation with the intent of hindering,
delaying or defrauding its present or future creditors or (b)(i) the debtor
received less than reasonably equivalent value or fair consideration for
incurring the challenged obligation or making the challenged transfer and (ii)
the debtor (A) was insolvent or was rendered insolvent by reason of incurring
the challenged obligation or making the challenged transfer, (B) was engaged or
about to engage in a business or transaction for which its assets constituted
unreasonably small capital, or (C) intended to incur, or believed that it would
incur, debts beyond its ability to pay as such debts matured (as all of the
foregoing terms are defined in or interpreted under the applicable fraudulent
transfer law and each a "Financially Non-Viable Condition"), such court could,
subject to applicable statutes of limitations, avoid in whole or in part the
challenged obligation or transfer or subordinate claims with respect to the
challenged obligation or transfer to all other debts of the debtor. The
determination of whether the debtor was a Financially Non-Viable Condition at
the relevant time will vary depending upon the law applied in any such
proceeding. Generally, however, a debtor will be considered insolvent if the
sum of its debts was greater than the fair saleable value of all of its assets
at a fair valuation or if the present fair saleable value of its assets was
less than the amount that would be required to pay its probable liability on
its existing debts, as they become fixed in amount and nature. Also, a debtor
generally will be considered to have been left with unreasonably small capital
if its remaining capital, including its reasonably projected cash flow, was
reasonably likely to be insufficient for its foreseeable needs, taking into
account its foreseeable business operations and reasonably foreseeable economic
conditions.
With respect to the members and their shareholders, the most significant
possible fraudulent transfer issues are likely to pertain to the transfers made
by such entities in connection with the capitalization of the Company, which
consist principally of real estate upon which the Isle-Black Hawk is to be
constructed. See "Capitalization Transactions." However, with respect to a
challenge based on actual fraud, the Issuers intend and believe that each of
such transferors is making its capital contributions (and is entering into the
related transactions) for legitimate business purposes and without the intent
to hinder, delay or defraud any of its creditors.
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The Issuers intend and believe that the transfers made in connection with the
capitalization of the Company will not constitute actual or constructive
fraudulent transfers as to the transferors' creditors. For example, the
formation of the Company was the product of arms-length negotiation between
unrelated parties, and the allocation of the percentages of member interests
between the transferors based upon their initial capital contributions is
intended to reflect the ratio that the fair market value of the property
contributed by such transferor bears to the fair market value of the combined
contributed property. Consistent with the foregoing, the member interests to be
received by Casino America of Colorado, Inc. and Blackhawk Gold, Ltd. in
exchange for their respective contributions are intended to have a value that
is essentially the equivalent of the fair market value of the property
contributed. Moreover, it is intended that the value of the outstanding capital
stock of Casino America of Colorado, Inc. and Blackhawk Gold, Ltd. will have
value essentially equivalent to the value of their respective membership
interests in the Company because all the assets contributed to Casino America
of Colorado, Inc. and Blackhawk Gold, Ltd., respectively, will in turn be
contributed to the Company. Consequently, the Issuers believe that each of such
transferors will have received at least reasonably equivalent value (if not
equivalent value) in return for the contributed property within the meaning of
general fraudulent transfer principles. Moreover, each such transfer would not
be a constructive fraudulent transfer, regardless of whether the transferor
received reasonably equivalent value or fair consideration in return therefor,
if such transferor was not in a Financially Non-Viable Condition at the time of
or as a result of the transfer. The Issuers believe that this will be the case.
Notwithstanding the foregoing, there can be no assurance that a transferor's
contribution of its property will not be found to have constituted either an
actual or a constructive fraudulent transfer. Any such possible fraudulent
transfer challenges, even if ultimately unsuccessful, could lead to a
disruption of the Company's business and an alteration in the manner in which
that business is managed and, ultimately, could have a material adverse effect
on the ability of the Issuers to meet their obligations under the Notes.
In connection with the issuance of the Notes, the Issuers and any future
subsidiaries of the Company will grant security interests in collateral to the
Trustee, including, without limitation, in certain after-acquired property of
the Company and any of its subsidiaries. The Issuers intend and believe that
the Issuers, and any of the future subsidiaries of the Company, are and will be
undertaking the transactions described in this Offering Circular, including the
issuance and collateralization of the Notes, for legitimate business purposes
and without the intent to hinder, defraud or delay their creditors.
Substantially all of the collateral to be pledged by the Issuers and any future
subsidiaries of the Company to secure the Notes is expected to be acquired or
improved, in whole or in part, with the proceeds received from the sale of the
Notes, and each of the Issuers and any future subsidiaries of the Company are
not expected to be in a Financially Non-Viable Condition at the time of the
granting of the security interest and other liens in substantially all of the
collateral. However, there can be no assurance that the security interests and
liens granted in the material portion of the collateral will never be avoided
as having constituted fraudulent conveyances as to the creditors of the Issuers
or of any subsidiaries of the Company.
MECHANIC'S LIENS
Colorado law provides contractors, subcontractors and material suppliers with
a lien on the real property being improved by their services or materials in
order to secure their right to be paid. Following compliance with applicable
Colorado law, such parties may foreclose their liens if they are not paid in
full. The priority of all mechanic's liens arising out of a particular
construction project relates back to the date on which construction of the
project first commenced. Construction of the Isle-Black Hawk (for purposes of
Colorado law) commenced prior to the recordation of the Deed of Trust securing
the repayment of the Notes. Accordingly, all contractors, subcontractors and
material suppliers who provide services or material in connection with the
Isle-Black Hawk, including parties providing services or materials prior to the
Old Notes Offering, after the Old Notes Offering or the Exchange Offer and/or
near the end of the construction period, and who otherwise comply with the
applicable requirements of Colorado law, will have a lien on the project,
senior in priority to the lien of the Deed of Trust.
The Company has taken steps to minimize the possibility that mechanic's liens
may be filed, including requiring that Haselden procure a performance and
payment bond to ensure performance under the Design/Build
20
<PAGE>
Agreement. The bond, however, may not cover costs resulting from defaults by
the Company under the Design/Build Agreement or other defenses Haselden may
have to performance thereunder. In addition, the Cash Collateral and
Disbursement Agreement will require that no periodic payments be released
unless lien releases are obtained from all contractors, subcontractors and
suppliers being paid with the proceeds of such periodic payments (subject only
to retainage amounts).
Notwithstanding the foregoing, there can be no assurance that enforceable
mechanic's liens will not be senior to the lien of the Deed of Trust under
certain circumstances, including for work performed or materials supplied (i)
within 120 days prior to the recording of the Deed of Trust (which was
concurrent with the consummation of the Old Notes Offering) by contractors,
subcontractors or suppliers who have not been identified or paid or (ii) by
unpaid contractors, subcontractors or suppliers who are not covered by the
performance bond. The Company has not obtained payment or performance
collateral to satisfy any such liens nor has it obtained title insurance
protection against such liens.
ENVIRONMENTAL MATTERS
The Isle-Black Hawk will be located in an area that has been designated by
the Environmental Protection Agency ("EPA") as a National Priorities List
("NPL") area under the Comprehensive Environmental Response, Compensation and
Liability Act, as a result of hazardous substance contamination caused by
historical mining activity in the Black Hawk Market. The EPA can require owners
or operators of property to remediate contamination on or from their property
in a NPL area or to reimburse costs incurred by the government in connection
with such remediation. However, the property upon which the Isle-Black Hawk
will be developed has already been remediated by an affiliate of the Company
that was responsible for disposing of waste tailings and rock located on the
property that were generated during the construction and operation of the
National Tunnel. This remediation was performed under a consent order with the
EPA, and the EPA has issued a notification that no further action is required
to remediate known contamination on the parcel. Nevertheless, there can be no
assurance that the EPA or another governmental entity, including the State of
Colorado, might not require additional remediation for other contaminated soil
that might be uncovered during excavation or construction at the parcel or for
contamination in the groundwater which sampling has disclosed. In addition, the
EPA requires the maintenance and monitoring of drainage pipes installed in a
tunnel, the opening of which is located on property which is owned by Nevada
Gold and is adjacent to the parcel on which the Isle-Black Hawk will be
developed, in order to prevent the backup of heavily mineralized, acidic water.
In the event of an unexpected water discharge from the tunnel, the Company's
property and access roads to the Isle-Black Hawk could suffer damage and
require remediation or repair.
GAMING REGULATION
The Company and the operation of the Isle-Black Hawk will be subject to
comprehensive and stringent governmental regulation, including the restriction
of permissible gaming to slot machines and card games of blackjack and poker,
each with a maximum single bet of five dollars, and the restrictions that no
more than 35% of the square footage of any building and no more than 50% of any
one floor of such building may be used for gaming.
Gaming licensees (including the Company) have a continuing duty to report to
the gaming authorities information concerning persons with a financial or
equity interest in the licensee, including, without limitation, persons who
loan money to the licensee. Persons found unsuitable by the Colorado
authorities may be required immediately to terminate any interest in a
licensee. Holders of the Notes may be subject to the regulatory review process.
In the event a holder of a New Note is found unsuitable by the appropriate
gaming authorities, the Company may, at its option, (a) require such holder to
transfer the New Note to an acceptable party or (b) redeem the New Note at a
redemption price equal to the lesser of the principal amount thereof or the
price at which the holder acquired the New Note, together with, in either case,
accrued and unpaid interest and Liquidated Damages, if any. See "Description of
the Notes--Gaming Redemption." Additionally, if Casino America reasonably
determines, based on communications with regulatory authorities, that Blackhawk
Gold, Ltd.'s
21
<PAGE>
interest in the Company will cause Casino America or its affiliates (including
the Company) a licensing problem in any jurisdiction including Colorado, and
such licensing problem cannot be resolved, Casino America can require Blackhawk
Gold, Ltd. to sell its ownership interest in the Company to Casino America of
Colorado, Inc. or to any other party acceptable to Casino America. In the event
of a sale to Casino America of Colorado, Inc., the purchase price shall equal
the capital account balance of Blackhawk Gold, Ltd. in the Company. See
"Material Agreements--Members Agreement--Members."
LACK OF GAMING LICENSES
Applicable Colorado law requires each of the Company, Casino America of
Colorado, Inc., Blackhawk Gold, Ltd., Casino America, Nevada Gold and their
respective officers, directors, members and significant shareholders to submit
to a background regulatory review process prior to the licensing of the Isle-
Black Hawk. The review process includes submission of a gaming application, an
investigation and submission of a personal history and financial information.
In addition, all employees of the Company engaged in gaming operations will
have to be separately licensed. The applicant for the gaming license has the
burden of proving its qualification for license. There can be no assurance that
all necessary licenses will be issued, or issued on a timely basis. Any license
issued or other approval granted is a revocable privilege, and must be renewed,
as a general rule, on an annual basis. The Colorado gaming authorities have
broad discretion to condition, suspend, revoke, limit, restrict or deny renewal
of any gaming license at any time. Persons found unsuitable by the Colorado
gaming authorities may be required immediately to terminate any interest in,
association or agreement with or relationship to a licensee. A finding of
unsuitability with respect to any officer, director, employee, associate,
lender or beneficial owner of a licensee or applicant also may jeopardize the
licensee's license or the applicant's license application. A license grant may
be conditioned upon the termination of any relationship with unsuitable
persons.
While the Company believes that it will be able to obtain all requisite
licenses, no assurances can be given that all such licenses will be issued or
granted, or, if issued and granted, not subject to additional material
restrictions or subsequently revoked. The failure or inability to obtain any
such licenses in a timely manner, the imposition of additional material
restrictions in connection therewith, or the subsequent revocation of any such
license, would materially and adversely affect the Company.
Unless properly licensed, no person is permitted to collect gaming revenues.
In addition, no person is permitted to act as an attorney in fact for any
licensee. Gaming licenses are not saleable, otherwise transferable or subject
to nominee arrangements. Only properly licensed persons may own or sell any
slot machine or other gaming device. The foregoing limitations may impair the
ability of the holders of the Notes to realize upon the collateral. See "--
Ability to Realize on Collateral; Bankruptcy Considerations," "Gaming and
Liquor Regulatory Matters" and "Description of the Notes."
LEGISLATIVE ISSUES
The legalization of gaming in or near any area from which the Isle-Black Hawk
is expected to draw customers would have a material adverse effect on the Isle-
Black Hawk's business. Additionally, the legalization of various types of
gaming, such as video lottery terminals, in existing venues such as airports,
race tracks or drinking establishments, would have a material adverse effect on
the Isle-Black Hawk's business. See "Gaming and Liquor Regulatory Matters."
Colorado law requires statewide voter approval for any expansion of limited
gaming into additional locations and, depending on the authorization approved
by the statewide vote, requires, in addition, voter approval from the locality
in question.
In 1994, Colorado voters refused by a margin of 93% to 7% to permit gaming in
Manitou Springs (located near Colorado Springs and Cripple Creek) or slot
machines in airports. On November 5, 1996, Colorado voters defeated by a margin
of 69% to 31% a proposal to allow gaming in the community of Trinidad, located
on the New Mexico border. Recently, the state legislature passed, but the
Governor vetoed, a bill that would have permitted video lottery terminals in
dog and horse race tracks under certain terms and conditions. Several cities
within Colorado have active citizens' lobbies that were able to place gaming
initiatives on recent statewide
22
<PAGE>
ballots. Although these initiatives have failed, new initiatives could be
introduced on future statewide ballots to allow expansion of gaming in
Colorado or prohibit gaming in the Black Hawk Market. Future initiatives, if
passed, could significantly increase the competition for gaming customers,
thereby adversely affecting business in the Black Hawk Market. Additionally,
there can be no assurance against future legislation that would impose
additional restrictions or prohibitions on, or assess additional fees with
respect to, the Company's business.
Currently, Colorado law does not authorize video lottery terminals. However,
Colorado law permits the legislature, with executive approval, to authorize
new types of lottery gaming at certain locations, such as video lottery
terminals. As used herein, "video lottery terminals" mean games of chance,
similar to slot machines, in which the player pushes a button that causes a
random set of numbers or characters to be displayed on a video screen.
Depending on the display, the player may be awarded a ticket, which can be
exchanged for cash or playing credit. Certain lottery gaming could compete
with slot machine gaming.
In August 1996, President Clinton signed a bill creating the National
Gambling Impact and Policy Commission to conduct a comprehensive study of all
matters relating to the economic and social impact of gaming in the United
States. The legislation provides that, not later than two years after the
enactment of such legislation, the commission must issue a report to the
President and to Congress containing its findings and conclusions, together
with recommendations for legislation and administrative actions. Any such
recommendations, if enacted into law, could adversely impact the gaming
industry and have a material adverse effect on the Company's business or
results of operations.
Additionally, from time to time, certain federal legislators have proposed
the imposition of a federal tax on gaming revenues. Any such tax could have a
material adverse effect on the Company's financial condition or results of
operations.
STATE GAMING TAX ISSUES
The amendment to the Colorado Constitution that legalized limited gaming
also subjects casinos in Colorado to a gaming tax of up to 40% of adjusted
gross proceeds of gaming operations ("AGP"). AGP is generally defined as the
total amounts wagered less all payments to players. With respect to games of
poker, AGP means those sums wagered in a hand retained by the licensee as
compensation. Currently, the gaming tax on AGP is: 2% on the first $2 million
of AGP; 4% on AGP from $2 million to $4 million; 14% on AGP from $4 million to
$5 million; 18% on AGP from $5 million to $10 million; and 20% on AGP over $10
million. In 1992, the citizens of Colorado passed Amendment No. 1 to the
Colorado Constitution that requires any change in tax rates or any new tax to
be voted on by the electorate. Nevertheless, in 1996, the Colorado Commission,
by promulgation of a regulation, raised the tax rate on AGP. There can be no
assurance that tax rates or fees applicable to the Isle-Black Hawk will not be
increased in the future, either by the Colorado electorate, legislation or
action by the Colorado Commission, resulting in an adverse effect on the
Company's operations. Effective October 1 of each year, the Colorado
Commission establishes the gaming tax for the following 12 months.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is largely dependent upon the efforts and skills
of the Manager and key executive officers of the Company and the Manager. The
loss of the services of the Manager or any key executive officers could have a
material adverse effect on the Company, including John M. Gallaway, President
and Chief Operating Officer of the Company, and Edward Reese, who is managing
project development and construction of the Isle-Black Hawk. There can be no
assurance that the Company would be able to attract and hire suitable
replacements in the event of any such loss of services.
DIFFICULTY IN ATTRACTING AND RETAINING QUALIFIED EMPLOYEES
The operation of the Company's business requires qualified executives,
managers and skilled employees with gaming industry experience and
qualifications to obtain the requisite licenses. The Company believes that a
shortage of skilled labor which exists in the gaming industry will make it
increasingly difficult and expensive to attract and retain qualified
employees. Increasing competition in the Black Hawk Market may lead to higher
costs in order to retain and attract qualified employees. The Company may
incur higher labor costs to attract qualified
23
<PAGE>
employees from existing gaming facilities. While the Company believes that it
will be able to attract and retain qualified employees, there can be no
assurance that the Company will be able to do so.
RISK OF ADVERSE TAX TREATMENT
The Notes provide for payment of both Fixed Interest and Contingent Interest,
which Contingent Interest is based on a percentage of the Company's
Consolidated Cash Flow after the Isle-Black Hawk becomes Operating. The Notes
and the Indenture have legal and other economic terms typically contained in
instruments evidencing indebtedness and are intended to create a debtor-
creditor relationship between the Issuers and the Holders. The Company intends
to treat the Notes as indebtedness for federal income tax purposes. Such
treatment, however, is not binding on the Internal Revenue Service (or the
courts), and there can be no assurance that the Internal Revenue Service will
not assert that the Notes should be recharacterized, in whole or in part, as
equity of the Company for federal income tax purposes. If the Internal Revenue
Service were successful in such an assertion, (i) the Company would be unable
to deduct all or a portion of the interest on the Notes and (ii) the Company
might not be treated as a "pass-through" entity for federal income tax
purposes, with the result that it would be subject to an entity level tax the
same as if it were a C-Corporation. The combination of these factors could have
a material adverse effect on the Company's after-tax cash flow. Moreover, such
a recharacterization would cause all or a portion of the interest payments on
the Notes to be taxable either as dividends received from an entity taxable as
a C-Corporation or as a distributable share of a partnership's profits. In
either case, such treatment could adversely affect the timing, character and
amount of income includible in a Holder's income. In order to mitigate the risk
to the Company described in (ii) above, the Indenture provides that the Company
may not distribute to the Company's equity holders tax payment distributions in
certain circumstances as described under "Description of the Notes--Certain
Covenants--Restricted Payments" unless the equity holder has provided Financial
Assurances (as defined herein) to the Trustee or unless there has been obtained
a Favorable Private Letter Ruling (as defined herein) or Favorable Tax Opinion
(as defined herein) with respect to such risk. See "Description of the Notes--
Certain Covenants--Restricted Payments" and "Certain Federal Income Tax
Considerations."
NO RECOURSE AGAINST AFFILIATES
No direct or indirect member, manager, employee, officer, director, or
affiliate whether past, present or future, of the Issuers, Casino America of
Colorado, Inc., Blackhawk Gold, Ltd., Casino America or Nevada Gold will have
any liability in respect of the obligations of the Issuers under the Notes.
Capital will not have any substantial operations or assets of any kind and will
not have any revenues. Prospective investors in the Notes should not expect
Capital to participate in servicing the principal, interest and other payment
obligations on or with respect to the Notes.
POSSIBLE CONFLICT OF INTEREST OF CASINO AMERICA
Casino America owns undeveloped real estate in Cripple Creek, Colorado.
Casino America may decide to develop this real estate for gaming, possibly with
an "Isle of Capri Casino" theme, in which case Casino America would be in
competition, to a limited extent, with the Isle-Black Hawk. Some of the
individuals involved in the management of any such Cripple Creek casino might
also be involved in the management of the Isle-Black Hawk.
ABSENCE OF PUBLIC MARKET
The Notes are a new issue of securities for which there is currently no
active trading market. If the Notes are traded after their initial issuance,
they may trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities and other factors,
including general economic conditions and the financial condition of,
performance of and prospects for the Company. The Initial Purchaser has advised
the Company that it currently intends to make a market in the Notes. However,
it is not obligated to do so, and any market making activity with respect to
the Notes may be discontinued at any time without notice. The Company does not
intend to list the Notes on any securities exchange or to seek approval for
quotation of
24
<PAGE>
the Notes through any automated quotation system. The Company has made
application to have the Old Notes designated for trading in the Private
Offerings, Resales and Tradings through Automated Linkages ("PORTAL") System of
the National Association of Securities Dealers. There can be no assurance that
an active trading market for the Notes will develop.
POTENTIAL INABILITY TO FUND A CHANGE IN CONTROL OFFER; POSSIBLE ANTI-TAKEOVER
EFFECTS OF RESTRICTIONS ON TRANSFERABILITY
Upon the occurrence of a Change in Control, the holders of the Notes would be
entitled to require the Company to repurchase the Notes at a purchase price
equal to 101% of the principal amount of such Notes, plus accrued and unpaid
interest, if any, to the date of purchase. The source of funds for any such
repurchase would be the Company's available cash or cash generated from
operations or other sources, including borrowings, sales of equity or funds
provided by a new controlling person. However, there can be no assurance that
sufficient funds will be available at the time of any Change in Control to make
any required purchases of the Notes tendered. In addition, there are
substantial restrictions on the transferability of Membership Interests in the
Company imposed by law and by the Company's Operating Agreement. See "Material
Agreements--Operating Agreement." Such restrictions would materially restrict
the ability of any persons desiring to effect a Change in Control of the
Company to do so.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Issuance of the Notes in exchange for the Old Notes pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of such Old
Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Notes should allow sufficient time to
ensure timely delivery. The Issuers are under no duty to give notification of
defects or irregularities with respect to tenders of Old Notes for exchange.
Holders of Old Notes who do not exchange their Old Notes for Notes pursuant to
the Exchange Offer will continue to be subject to the restrictions on transfer
of such Old Notes as set forth in the legend thereon. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. In addition, upon the consummation of the Exchange Offer holders of Old
Notes which remain outstanding will not be entitled to any rights to have such
Old Notes registered under the Securities Act or to any rights under the
Registration Rights Agreements. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a Holder's ability to sell untendered, or
tendered but unaccepted, Old Notes could be adversely affected. See "The
Exchange Offer--Consequences of Not Exchanging Old Notes."
Based on interpretations by the staff of the Commission, the Issuers believe
that the Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by a holder thereof
(other than (i) an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act, (ii) the Initial Purchaser or any Holder who acquired
the Old Notes directly from the Company solely in order to resell pursuant to
Rule 144A of the Securities Act or any other available exemption under the
Securities Act, or (iii) a broker-dealer who acquired the Old Notes as a result
of market making or other trading activities) without further compliance with
the registration and prospectus delivery requirements of the Securities Act,
provided that such Notes are acquired in the ordinary course of such holder's
business and that such holder is not participating and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such Notes. The Issuers have not, however,
sought their own no-action letter from the staff of the Commission. Although
there has been no indication of any change in the staff's position, there can
be no assurance that the staff of the Commission would make a similar
determination with respect to the resale of the Notes. Any holder that cannot
rely upon such prior staff interpretations must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction, unless such sale is made pursuant to an exemption
from such requirements. See "The Exchange Offer--Purpose of the Exchange
Offer."
25
<PAGE>
USE OF PROCEEDS
The Issuers will not receive any proceeds in connection with the Exchange
Offer. The net proceeds received by the Issuers from the Old Notes Offering,
after deducting discounts and commissions, were $72.0 million, which were
deposited in the Cash Collateral Accounts. The proceeds deposited in the Cash
Collateral Accounts were comprised of (i) approximately $52.9 million (net of
initial disbursements on the Closing Date) deposited in the Construction
Disbursement Account to be used, together with FF&E Financing to be obtained by
the Company, to finance the cost of developing, constructing, equipping and
operating the Isle-Black Hawk, repay the outstanding indebtedness secured by a
lien on the Blackhawk Gold Parcel, and to pay certain other operating expenses
of the Company, (ii) $5.0 million deposited in the Completion Reserve Account
to be held as a reserve with respect to the completion of the Isle-Black Hawk
and (iii) approximately $14.1 million to be deposited in the Interest Reserve
Account and used to purchase Government Securities representing funds
sufficient to pay the first three Fixed Interest payments on the Notes.
The net proceeds from the Old Notes Offering were deposited in the Cash
Collateral Accounts and assigned to the Trustee as collateral security for the
Notes. Funds will be disbursed from the Cash Collateral Accounts only upon
satisfaction of certain conditions set forth in the Cash Collateral and
Disbursement Agreement. Pending disbursement of the net proceeds deposited in
the Cash Collateral Accounts, such proceeds will be invested in Investment
Grade Securities, other than amounts held in the Interest Reserve Account,
which will be invested in Government Securities. See "Description of the New
Notes--Cash Collateral and Disbursement Agreement."
SOURCES AND USES OF FUNDS
(DOLLARS IN MILLIONS)
The sources and uses of funds for the development, construction, equipping
and operation of the Isle-Black Hawk are as follows:
<TABLE>
<CAPTION>
SOURCES
-------
<S> <C>
First Mortgage Notes........ $ 75.0
FF&E Financing.............. 13.2
Equity contributions(1)(2).. 15.4
------
Total Sources........... $103.6
======
</TABLE>
<TABLE>
<CAPTION>
USES
----
<S> <C>
Land(1)........................... $ 14.4
Construction costs(3)(4).......... 44.4
Furniture, fixtures and equipment. 13.2
Permits, fees and other(5)........ 5.4
Working capital(6)................ 2.8
Interest reserve(7)............... 14.1
Estimated offering fees and
expenses......................... 4.3
Completion Reserve(8)............. 5.0
------
Total Uses.................... $103.6
======
</TABLE>
- --------
(1) Reflects the contribution to the Company (a) by Casino America of Colorado,
Inc. of a contractual right to purchase the Casino America Parcel, $0.1
million of the purchase price of which was previously paid by Casino
America on behalf of Casino America of Colorado, Inc., (b) by Casino
America of Colorado, Inc. of $6.4 million in cash to enable the Company to
purchase the Casino America Parcel for the unpaid balance of the purchase
price and (c) by Blackhawk Gold, Ltd. of the Blackhawk Gold Parcel, valued
at $7.9 million (a portion of which secured $0.4 million of mortgage
indebtedness repaid with the proceeds of the Old Notes Offering). See
"Business--Capitalization Transactions," "Material Agreements--Members
Agreement" and "Material Agreements--Land Purchase Contract."
(2) Includes a $1.0 million contribution to the Company by Casino America of
Colorado, Inc. consisting of (a) development costs paid by Casino America
of Colorado, Inc. to third parties in an amount of $0.3 million and (b)
cash in an amount of $0.7 million. See "Material Agreements--Operating
Agreement."
(3) Represents the bonded "guaranteed maximum price" set forth in the
Design/Build Agreement of $47.3 million, less $2.9 million of non-gaming
furniture, fixtures and equipment. This price includes a contingency
allowance of $2.2 million. Such price is subject to increase if plans and
specifications change or the project encounters certain unforeseen
geological or excavation conditions, changes in law, delays caused by the
Company or other contingencies. The price also will be increased or
decreased based upon the amount that the actual costs to complete certain
allowance items, in the aggregate, are above or below $2.6 million. The
Design/Build Agreement also provides contractor incentives for
26
<PAGE>
early completion and construction cost savings as well as liquidated
damages payable to the Company for certain unexcused delays. Although the
Company believes that the site preparation and construction budget is
reasonable, actual costs may be higher given the risks inherent in the site
preparation and construction process. See "Summary--Recent Developments,"
"Risk Factors--Construction Budget and Site Risks," "Risk Factors--Permits
and Approvals," "Risk Factors--Adverse Weather and Road Conditions;
Seasonality," "Risk Factors--Environmental Matters" and "Material
Agreements--Design/Build Agreement."
(4) Assumes that the Company does not exercise the Hotel Option, which is
exercisable on or before March 1, 1998. If the Company exercises the Hotel
Option, the "guaranteed maximum price" set forth in the Design/Build
Agreement will increase by $6.3 million. If the Company exercises the
Hotel Option, it intends to fund the increased costs of construction
through cost savings achieved through value engineering, the availability
of contractor's funds represented by the contractor's contingency
allowance and the sources identified in footnote 8 below.
(5) Includes approximately $3.9 million in permits and impact fees, $1.1
million for operating supplies and $0.4 million used to repay mortgage
indebtedness on a portion of the Blackhawk Gold Parcel.
(6) Includes pre-opening costs and opening bankroll for the Isle-Black Hawk
currently estimated to be $1.8 million and $1.0 million, respectively.
(7) Reserve established for the payment of the first three interest payments
on the Notes. The amount set forth is an estimate and is subject to change
based on the actual interest rate payable on the Notes and the yield rate
of the Government Securities purchased with the proceeds of the Offering
and deposited in the Interest Reserve Account.
(8) Represents the Company's $5.0 million deposit of Offering proceeds into
the Completion Reserve Account. Excludes interest earnings on amounts
deposited in the Construction Disbursement Account and the Completion
Reserve Account, which the Company will invest in Investment Grade
Securities. Pursuant to the Cash Collateral and Disbursement Agreement,
the Company may use amounts in the Completion Reserve Account to fund
increases to the construction budget, subject to certain limitations. See
"Summary--Recent Developments." Also excludes the Completion Capital
Commitment of Casino America, pursuant to which Casino America will commit
to contribute to the Company up to $5.0 million in the event that such
amounts are necessary to cause the Isle-Black Hawk to become Operating on
or before April 1, 1999, or if the Isle-Black Hawk is not Operating by
such date. See "Description of the New Notes--Completion Capital
Commitment."
27
<PAGE>
SELECTED FINANCIAL DATA
The Company was organized in April 1997 for the purpose of developing,
constructing, equipping and operating the Isle-Black Hawk. Since that time, the
Company has been in the development stage, and its activities have been limited
to applying for necessary permits, licenses and approvals, arranging for the
design, construction and financing of the Isle-Black Hawk, arranging for the
contribution to the Company of the property upon which the Isle-Black Hawk is
being developed and other capital contributions as described herein under
"Business--Capitalization Transactions," and conducting excavation at the site
in preparation for construction. This information is qualified in its entirety
by, and should be read in conjunction with, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the financial
statements, including the Notes thereto, and other financial information
included elsewhere herein.
<TABLE>
<CAPTION>
AUGUST 24, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
INCOME STATEMENT DATA:
Net loss........................................... $ (53)
BALANCE SHEET DATA:
Cash............................................... 682
Total assets....................................... 90,082
Long-term debt, including current maturities....... 75,000
Total liabilities.................................. 75,131
Members' equity.................................... 14,952
</TABLE>
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Company's financial statements, including
the notes thereto, and the other financial information included elsewhere in
this Prospectus.
DEVELOPMENT ACTIVITIES
The Company was organized in April 1997 and was initially capitalized with
cash contributions from its members in the aggregate amount of $1,000. Since
that time, the Company's activities have been limited to applying for certain
necessary permits, licenses and approvals to enable it to construct and
operate the Isle-Black Hawk; arranging for the design, construction and
financing of the Isle-Black Hawk; coordinating the contribution to the Company
of the property on which the Isle-Black Hawk will be developed and other
capital contributions on the Closing Date as described herein under "Use of
Proceeds" and conducting excavation at the site in preparation for
construction. It is anticipated that the Isle-Black Hawk will be a 55,000
square foot gaming facility featuring approximately 1,100 slot machines, 24
table games and on-site parking for approximately 1,000 vehicles, and various
other amenities. Subject to the delays inherent in construction projects of
the magnitude of the Isle-Black Hawk, and subject to obtaining the necessary
gaming licenses, other permits and financing, the Company expects to open the
Isle-Black Hawk in early 1999. See "Summary--Recent Developments."
RESULTS OF OPERATIONS
The Company is in the development stage and does not have any historical
operating results other than interest expense on the Company's outstanding
indebtedness, interest income on the Company's restricted cash, the receipt of
certain capital contributions and the capitalization of certain costs. The
capitalized costs have consisted primarily of license and permit application,
design, construction and financing fees. Future operating results are subject
to significant business, economic, regulatory and competitive uncertainties
and contingencies, many of which are beyond the control of the Company. While
the Company believes that the Isle-Black Hawk, if completed and opened, will
be able to attract a sufficient number of patrons and achieve the level of
activity and revenues necessary to permit the Company to meet its payment
obligations, including with respect to the Notes, there can be no assurance
that the Company will be able to achieve these results. Capital is a wholly
owned subsidiary of the Company and was incorporated for the sole purpose of
serving as co-issuer of the Notes in order to facilitate the Offering. Capital
will not have any operations or material assets and will not have any
revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's development expenses were borne by its members as provided in
the Members Agreement and capitalized on the Closing Date. The Company expects
to fund the development of the Isle-Black Hawk from a combination of (i)
equity contributions (primarily real estate and up to $1.0 million of cash and
third party development costs) valued at approximately $15.4 million, (ii) net
proceeds of $72.0 million from the Old Notes Offering, which were deposited
and invested as set forth in the Cash Collateral and Disbursement Agreement
and (iii) furniture, fixtures and equipment financing in the amount of up to
$15.0 million. In addition, Casino America provided the Completion Capital
Commitment, pursuant to which it committed to contribute up to $5.0 million to
the Company in the event that amounts in the Construction Disbursement Account
and the Completion Reserve Account are insufficient to cause the Isle-Black
Hawk to become Operating on or before April 1, 1999, or if the Isle-Black Hawk
is not Operating by such date. The Company intends to add approximately $2.2
million to the development and construction budget for the Isle-Black Hawk, to
be drawn first from interest earnings in the Construction Disbursement
Account, with the remainder (expected to be approximately $1.6 million) to be
allocated from the Completion Reserve Account to the Construction Disbursement
Account, to provide for a possible increase in the "guaranteed maximum price"
under the Design/Build Agreement due to the discovery of a greater amount of
less stable weathered rock and overburden soil at the construction site than
was originally anticipated. See "Summary--Recent Developments." If the Company
exercises the Hotel Option, it intends to fund the increased costs of
construction, which are anticipated
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<PAGE>
to be a $6.3 million increase to the "guaranteed maximum price" set forth in
the Design/Build Agreement, through cost savings achieved through value
engineering, the availability of contractor's funds represented by the
contractor's contingency allowance and interest earnings on amounts deposited
in the Construction Disbursement Account and the Completion Reserve Account.
The funds provided by these sources are expected to be sufficient to develop
and commence operations of the Isle-Black Hawk and, if the Hotel Option is
exercised, a hotel, assuming no delays or construction cost overruns beyond
amounts in the Completion Reserve Account and the Completion Capital
Commitment. See "Risk Factors--Construction Budget and Site Risks." The Company
has no other sources or plans to finance the completion of the Isle-Black Hawk
in the event that amounts in the Completion Reserve Account and amounts
available pursuant to the Completion Capital Commitment prove insufficient.
Following the commencement of operations of the Isle-Black Hawk, the Company
expects to fund its operating and capital needs from operating cash flows. The
Company intends to establish initial working capital reserves to provide for
reasonably anticipated short-term liquidity needs. However, there can be no
assurance that any additional financing, if needed to meet its liquidity needs,
will be available to the Company in the future, or that, if available, any such
financing will be on terms favorable to the Company. There can be no assurance
that the Company's estimate of its reasonably foreseeable liquidity needs is or
will be accurate or that new business developments or other unforeseen events
will not occur, resulting in the need to raise additional funds. The Company
expects that the adequacy of its operating cash flow will depend, among other
things, upon customer acceptance of the Isle-Black Hawk, the continued
development of the Black Hawk Market as a gaming destination, the intensity of
the Company's competition, the efficiency of operations, depth of customer
demand, the effectiveness of the Company's marketing and promotional efforts
and the performance by the Manager of its responsibilities.
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BUSINESS
OVERVIEW
The Company plans to develop, own and operate the Isle-Black Hawk as a
premier casino gaming facility to be located in the Black Hawk Market
approximately 40 miles west of Denver. The Isle-Black Hawk will be one of the
first gaming facilities encountered by customers traveling from Denver to the
Black Hawk Market. Upon completion, the Isle-Black Hawk will be one of the
largest gaming facilities in Colorado. Plans for the Isle-Black Hawk include a
55,000 square foot, single-floor gaming facility featuring approximately 1,100
slot machines, 24 table games and 1,000 on-site parking spaces, a fine dining
restaurant, a delicatessen, a full service buffet and other related amenities.
The Isle-Black Hawk will be designed and constructed pursuant to the
Design/Build Agreement, which also provides for the addition of a hotel at the
option of the Company for an agreed-upon addition to the guaranteed maximum
price.
The Black Hawk Market includes many small, privately held gaming facilities
that the Company believes offer limited amenities and are characterized by a
shortage of convenient on-site parking. In addition, there are several larger
gaming facilities in the Black Hawk Market that provide varying levels of
services and amenities. Management believes that the Isle-Black Hawk's large
and modern gaming facility, superior location, convenient on-site covered
parking and extensive amenities will afford it a significant competitive
advantage. The Isle-Black Hawk is expected to include the largest single-floor
gaming facility in Colorado upon its opening and will offer a broad array of
amenities including what is expected to be the largest buffet in the Black Hawk
Market. The Company believes that the customer convenience afforded its patrons
by providing ample on-site covered self-parking spaces will significantly
differentiate the Isle-Black Hawk from its competitors. Management believes
that, upon completion of the Isle-Black Hawk, its covered parking spaces will
represent in excess of 25% of the total covered parking spaces in the Black
Hawk Market. The Isle-Black Hawk will be designed and operated under a
distinctive Caribbean theme as an "Isle of Capri Casino," further
differentiating it from other gaming facilities in the area, which primarily
stress Victorian and western themes. In addition, the Company will utilize
database marketing techniques used by Casino America at its existing
facilities.
THE ISLE-BLACK HAWK
The Company believes that the location of the Isle-Black Hawk, as well as the
extensive covered on-site self-parking, the use of the "Isle of Capri Casino"
brand name and associated promotions, the number of slot machines and varied
amenities will establish the Isle-Black Hawk as one of the preeminent casino
gaming facilities in the Black Hawk Market. The Isle-Black Hawk will be
situated immediately adjacent to the southeast corner of Mill and Main Streets
in Black Hawk, Colorado, the first intersection to the Black Hawk Market
reached by customers arriving from Denver. This location makes the Isle-Black
Hawk one of the first gaming facilities encountered when arriving from Denver.
The Company's plans include a 55,000 square foot facility featuring
approximately 1,100 slot machines and 24 table games (blackjack and poker)
which is expected to constitute one of the largest number of gaming positions
and, upon its opening, the largest single floor gaming facility in the Black
Hawk Market. The interior of the Isle-Black Hawk will emphasize a relaxed,
Caribbean theme through the use of water features, rock formations, foliage and
bright Caribbean colors. The exterior of the building will be distinctive,
subtly stressing the Caribbean theme while conforming to local architectural
requirements. The Company believes that the interior and exterior features,
along with the use of the branded "Isle of Capri Casino" name and theme will
further serve to distinguish it from the other establishments in the area,
which primarily stress Victorian and western themes.
The Isle-Black Hawk will be designed to coordinate efficiently bus, car and
pedestrian traffic. Patrons arriving by bus will enter through a separate,
covered drop off point with a bus turnaround to facilitate clearing the area of
bus traffic. Customers arriving by car will have the choice to use the two lane
valet parking or self- parking directly into the garage. The Company believes
that the self-park option will make the Isle-Black Hawk's parking facility more
convenient and easily accessed by customers and distinguish it from gaming
facilities with valet parking only. The entrance to the Isle-Black Hawk is
situated such that bus, valet, self-park and pedestrian
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<PAGE>
traffic may enter and exit independent of each other. The Company expects this
design to maximize customer traffic to the Isle-Black Hawk by minimizing
traffic congestion. The Isle-Black Hawk will have a four-level on-site parking
garage with approximately 1,000 parking spaces, directly accessible by elevator
to the casino. The majority of these parking spaces will be covered. Based on
existing casinos and the Jacobs and Rivieria projects under development in the
Black Hawk Market, the Company believes that this parking complex is expected
to be the largest on-site parking in the Black Hawk Market, and will constitute
over 25% of the covered parking spaces in the Black Hawk Market. The Company
expects its extensive on-site parking facility, with the self park option, to
give it a competitive advantage over other casinos in the area that do not have
as extensive parking facilities or that require the use of a valet service.
In addition to the Company's plans to offer customers among the largest
number of gaming positions, the largest single-floor gaming facility in
Colorado and among the most on-site parking in the market, the Isle-Black Hawk
will provide extensive amenities for its customers. The Company expects its
300-seat buffet restaurant to be the largest buffet in the Black Hawk Market.
Customers will also have the option of dining at an 80-seat Farradday's steak
house offering more upscale dining. Farradday's steak house is Casino America's
own branded dining concept and emphasizes wood and nautical detailing to
promote an atmosphere of exploration and adventure. The Isle-Black Hawk will
also include an events center, with the ability to seat up to 350 people, that
will be used for meetings, concerts, parties and promotions. Plans call for a
delicatessen, a VIP lounge, a video arcade and a gift shop offering items
specific to the "Isle of Capri Casino" theme. The Design/Build Agreement
permits the Company, by notice delivered to the general contractor no later
than March 1, 1998, to include the construction of a hotel under that agreement
for an increase of $6.3 million to the "guaranteed maximum price" under the
Design/Build Agreement. See "Material Agreements--Design/Build Agreement."
THE BLACK HAWK MARKET
General. The Black Hawk Market consists of the cities of Black Hawk and
Central City which are located approximately 40 miles west of Denver and
approximately ten miles from Interstate 70, the main east-west artery from
Denver. Historically, these two gold mining communities were popular tourist
towns, especially during the summer months. However, since the inception of
casino gaming in October 1991, many of the former tourist-related businesses
have been displaced by gaming establishments. Casino customers to Black Hawk
and Central City are primarily "day trippers" from within a 100-mile radius of
Black Hawk and Central City, which includes the major population centers of
Denver, Boulder, Fort Collins and Golden, Colorado and Cheyenne, Wyoming.
Demographics. At December 31, 1996, approximately 1.6 million adults lived
within 50 miles of the Black Hawk Market, and approximately 2.3 million adults
lived within 100 miles. Average income for households within 100 miles of the
Black Hawk Market was $48,384 in 1996, 3.4% above the national average of
$46,797. Average income for households within 50 miles of the Black Hawk Market
was 8.0% above the national average, with an average household income of
$50,563 in 1996.
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Gaming. The following table sets forth gaming statistics for the Black Hawk
Market as well as the individual cities of Black Hawk and Central City all of
which were derived from information obtained from the Colorado Division of
Gaming:
<TABLE>
<CAPTION>
TWELVE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
BLACK HAWK MARKET: -------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gaming revenues (in
thousands)............. $127,565 $191,104 $243,405 $290,325 $308,781 $319,624
Number of gaming posi-
tions(1)(2)............ 7,252 7,960 8,737 8,732 8,706 8,795
Number of casinos(1).... 42 39 36 32 31 31
Average gaming positions
per
casino................. 173 204 243 273 281 284
Win per gaming posi-
tion(3)................ $ 73.66 $ 74.86 $ 85.36 $ 90.12 $ 97.84 $ 99.59
BLACK HAWK:
Gaming revenues (in
thousands)............. $ 56,201 $112,140 $173,703 $195,857 $219,911 $231,763
Number of gaming posi-
tions(1)(2)............ 3,276 4,779 4,334 4,990 5,387 5,347
Number of casinos(1).... 21 23 19 19 19 19
Average gaming positions
per
casino................. 156 208 228 263 284 281
Win per gaming posi-
tion(3)................ $ 76.03 $ 85.12 $ 104.97 $ 110.68 $ 116.10 $ 117.39
CENTRAL CITY:
Gaming revenues (in
thousands)............. $ 71,364 $ 78,964 $ 69,702 $ 94,468 $ 88,870 $ 87,861
Number of gaming posi-
tions(1)(2)............ 3,976 3,181 4,403 3,742 3,319 3,448
Number of casinos(1).... 21 16 17 13 12 12
Average gaming positions
per
casino................. 189 212 259 288 277 287
Win per gaming posi-
tion(3)................ $ 68.24 $ 63.92 $ 58.20 $ 65.06 $ 70.43 $ 71.13
</TABLE>
- --------
(1) As of December 31 for each period shown, except 1997 data which is shown
at September 30, 1997.
(2) According to the Colorado Division of Gaming, each table game is counted
as one gaming position.
(3) Calculated based on average number of positions during the period
presented.
Gaming revenues (excluding gaming on Native American lands) for the state of
Colorado were approximately $412 million in 1996, of which revenues from the
Black Hawk Market constituted over 75%. As with other new gaming markets, the
early years following legalization of gaming represented periods of rapid
expansion. The first casinos opened in the state in October 1991, and by year
end there were 14 casinos in the Black Hawk Market. In 1992, the number of
casinos peaked at 42 in the Black Hawk Market. While the number of casinos has
since declined to 31, the total supply of gaming devices has increased as a
result of a trend towards larger casinos. Since 1992, the number of gaming
positions in an average casino in the Black Hawk Market has grown
approximately 65% from 173 positions to 285 positions as of May 31, 1997.
Currently, 23 casinos operate with less than 300 gaming positions while only
seven operate with more than 400 gaming positions.
Win per gaming position per day in the Black Hawk Market has continued to
grow despite the increases in the number of gaming devices. This growth has
been largely due to gaming revenue growth in the city of Black Hawk. For
example, from 1992 to 1996, win per gaming position in the city of Black Hawk
increased approximately 63% while total gaming positions grew by over 64%.
Revenue growth in Central City has been moderate compared to that of Black
Hawk, with an approximately 3% growth in win per gaming position from 1992 to
1996, but a nearly 17% decline in total gaming positions over the same period.
Colorado's constitution currently permits a maximum single bet of $5 which
results in most casinos emphasizing slot machine play. Approximately 94% of
the Black Hawk Market's total gaming revenues are generated by slot machines.
By comparison, in the developed gaming markets of New Jersey and Nevada slot
33
<PAGE>
machines generate between 63% and 67% of total revenues while slot revenues in
emerging markets such as Iowa and Indiana account for approximately 70% of
total revenues.
The information contained in this discussion of the Black Hawk Market was
derived from publicly available data, except where stated otherwise. While the
Company regards these sources as reasonably reliable, no assurances can be made
regarding the accuracy of such information. See "Risk Factors--Competition."
MARKETING STRATEGY
The Company plans to attract customers to the Isle-Black Hawk by designing
and implementing marketing strategies and promotions that emphasize value-
oriented gaming and the tropical island theme and promote repeat visits and
customer loyalty. For example, the Isle-Black Hawk plans to offer membership in
the Island Gold Players Club to its customers and "V.I.P." services to repeat
gaming customers. The Island Gold Players Club is a promotion that rewards
casino play and repeat visits to the casino with various privileges and
amenities. Casino America has used the Island Gold Players Club promotion in
other locales and, in its capacity as Manager of the Isle-Black Hawk, will
tailor it for the Black Hawk Market and implement it at the Isle-Black Hawk.
The Company also intends to emphasize distinctive food and entertainment
amenities to enhance its customer-friendly atmosphere with a view toward
attracting repeat customers. To encourage group visits, and as a service to its
customers, the Company intends to utilize bus programs to facilitate customer
visits.
The Company also intends to utilize database marketing techniques previously
implemented by Casino America at its existing gaming facilities in other
markets. The database will be primarily derived from information supplied by
the Island Gold Players Club, which will help the Company identify its best
customers by reference to levels of play and frequency of visits. The Company
plans to rely on database marketing in order to best identify the segments of
the population that are most likely to be attracted to the Isle-Black Hawk, and
to tailor its theme, promotions and amenities to its core group of customers.
COMPETITION
The Company believes that the primary competitive factors in the Black Hawk
Market are location, availability and convenience of parking, number of slot
machines and table games, types and pricing of amenities, name recognition,
customer service and overall atmosphere. Although the Company believes that the
Black Hawk Market is primarily characterized by numerous small, privately held
gaming facilities, the Company considers its main competition to be the larger
gaming facilities located in Black Hawk and Central City, and particularly
those with considerable on-site parking and established brand names and
reputations in the local market. The largest casinos in the Black Hawk Market
in terms of number of gaming positions are Harvey's Wagon Wheel Casino Hotel,
Colorado Central Station, Bullwhackers Black Hawk, Canyon Casino (formerly
operated by Harrah's), Fitzgeralds Black Hawk and Gilpin Hotel Casino. Each of
these casinos also offers on-site parking.
The Company believes that its primary competition will be from casinos
located in the immediate proximity of the Isle-Black Hawk. Colorado Central
Station, a well-established casino, is located closest to the Isle-Black Hawk
across the intersection of Mill Street and Main Street. Colorado Central
Station has approximately 700 slot machines, approximately 20 table games,
amenities such as a food court and a bar and among the most parking spaces of
any gaming facility in the city of Black Hawk with approximately 690 valet
parking spaces. In terms of operating performance, Colorado Central Station
generated an estimated $240 win per gaming position per day over the twelve-
month period ended March 31, 1997.
In addition to the existing competition, two new casinos are already under
construction or otherwise proceeding in Black Hawk. Riviera has announced that
the plans for its gaming facility in Black Hawk include a facility containing
1,000 slot machines and a 500 space covered parking garage, with opening
scheduled for the spring of 1999. Riviera has stated that the site for the
Riviera project is a 71,000 square foot undeveloped site directly across Main
Street from the Isle-Black Hawk. Jacobs Entertainment, Ltd. has begun
construction on a
34
<PAGE>
50,000 square foot facility, which the developer has announced will
accommodate 800 slot machines, 20 table games, underground parking
accommodating 450 vehicles (with an affiliated two-story overflow parking
facility for approximately 200 additional vehicles), and 50 hotel rooms. This
facility is expected to be completed by May 1998 and will be located
approximately 0.3 miles from Isle-Black Hawk. In addition to these projects
Country World Casinos Inc., which proposes to develop the Country World
Casino, has announced that it has obtained a development site in Black Hawk,
retained a management company but has not yet obtained financing.
The 24 casinos in Cripple Creek (located a driving distance of 110 miles to
the south of the Black Hawk Market) and the Native American casinos located in
the southwestern corner of the state, constitute the only other casino gaming
communities in the state of Colorado. Management believes that Cripple Creek,
located 45 miles west of Colorado Springs, provides only limited competition
to the Black Hawk Market given its distance from the Black Hawk Market and its
relatively smaller facilities with fewer amenities. Management also believes
that the Native American casinos are too removed from the Black Hawk Market to
provide any significant competition. The Isle-Black Hawk will also compete
with other forms of gaming including lottery gaming, and horse and dog racing,
among others, and compete for entertainment dollars generally with other forms
of entertainment. See "Risk Factors--Competition." The information contained
in this discussion of competition were derived from publicly available data,
except where stated otherwise. While the Company regards these sources as
reasonably reliable, no assurances can be made regarding the accuracy of such
information. See "Risk Factors--Competition."
CONSTRUCTION SUMMARY
The development and construction of the Isle-Black Hawk will consist of: (a)
excavation, including any remediation or reinforcement of structural
abnormalities or other problems uncovered in or caused by the excavation
process, (b) construction of the foundation and superstructure of the Isle-
Black Hawk, (c) interior finish of the Isle-Black Hawk, (d) the widening of
the Mill Street bridge and construction of a pedestrian bridge (as required by
the city of Black Hawk), (e) construction of the parking facilities and (f)
other aesthetic enhancements, including landscaping. With respect to clause
(a) above, although the Company has reviewed the results of previous soil
bearings at the site conducted by the party from which the Company purchased
the parcel, and has conducted its own soil borings after excavation and site
preparation commenced, the existence and nature of any such structural
abnormalities or other problems are likely to become known only during
excavation. See "--Development Update." The timetable set forth in the
Design/Build Agreement contemplates the Isle-Black Hawk to be substantially
completed 15.5 months after the date that the Company gives notice to Haselden
to proceed with design and construction (the "Casino Substantial Completion
Date").
The Design/Build Agreement provides that Haselden, itself and through
various subcontractors, has agreed to design and construct the Isle-Black Hawk
and perform all necessary excavation and other site work as well as provide
certain non-gaming furniture, fixtures and equipment. Haselden, through itself
and its subcontractors, has agreed to perform the work contemplated in items
(a) through (f) in the preceding paragraph, other than the provision of
certain interior finish, furniture and equipment, which will be provided by
the Company. The Isle-Black Hawk will be constructed to allow a hotel to be
developed on top of the facility which meets the design requirements set forth
in the Design/Build Agreement. Pursuant to the terms of the Design/Build
Agreement, the Company may elect to add a hotel to the Isle-Black Hawk by
providing Haselden with written notice on or prior to March 1, 1998. If such
notice is delivered, the scheduled completion date for the hotel (the "Hotel
Substantial Completion Date") will be 120 days after the Casino Substantial
Completion Date and is not expected to materially disrupt the operations of
the Isle-Black Hawk. The construction of the Isle-Black Hawk (and the hotel if
applicable) may be delayed without any cost to Haselden if such delays result
from Excusable Events. See "Material Agreements--Design/Build Agreement."
The Design/Build Agreement provides for a "guaranteed maximum price" of
$47.3 million (exclusive of construction of a hotel) which is fully supported
by a payment and performance bond from Haselden and a site specific errors and
omissions policy in the amount of $5.0 million, subject to a $25,000
deductible payable by
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<PAGE>
Haselden which covers errors and omissions of all professional architects and
engineers working on the project. The payment and performance bond does not
cover professional design or engineering errors or omissions. The "guaranteed
maximum price" is subject to increases if plans or specifications change or if
the project (i) encounters certain unforeseen geological or excavation
conditions, (ii) is delayed by the Company without the fault or negligence of
Haselden, (iii) is delayed because of a change in law or (iv) is delayed
because a notice to proceed is issued by the Company on or after August 30,
1997. Such notice to proceed was issued on August 25, 1997. The "guaranteed
maximum price" may also be decreased if changes in design and specifications
provide cost savings. Additionally, to discourage delays, liquidated damages
will be payable by Haselden for each day that substantial completion of the
Isle-Black Hawk is delayed (other than by an Excusable Event) past the Casino
Substantial Completion Date by (i) $0 per day for the first fourteen days of
the delay, (ii) $12,000 per day for the next fourteen days and (iii) $18,000
for each day thereafter. To encourage early completion of the Isle-Black Hawk,
incentive fees will be payable to Haselden in the amount of $10,000 for each
day that the Isle-Black Hawk is substantially completed before the seventh day
prior to the Casino Substantial Completion Date. The Design/Build Agreement
also provides incentives for Haselden to limit construction costs by sharing
cost savings between the Company and Haselden as follows: (i) the first
$500,000 of savings accrues entirely to the Company, (ii) the next $500,000 of
savings are split 80% to the Company and 20% to Haselden, (iii) the next
$1,000,000 of savings are split 70% to the Company and 30% to Haselden and
(iv) any additional savings are split 60% to the Company and 40% to Haselden.
If the Company elects to have Haselden build the hotel, the "guaranteed
maximum price," exclusive of other price adjustments, will increase to $53.6
million. The payment and performance bond to be provided by Haselden, which
will not cover professional design or engineering errors or omissions, is
required to be increased by Haselden to fully support the $53.6 million price.
In addition to the possible increases and decreases referred to above, the
"guaranteed maximum price" will be increased or decreased based upon the
aggregate amount that the actual cost to complete certain allowance items is
above or below $2.6 million. To discourage delays of completion of the hotel,
liquidated damages will be payable by Haselden in the amount of $1,000 for
each day that substantial completion of the hotel is delayed (other than by an
Excusable Event) beyond the Hotel Substantial Completion Date. Similarly, to
encourage early completion of the hotel, incentive fees of $1,000 for each day
that the hotel is substantially completed prior to the Hotel Substantial
Completion Date will be payable to Haselden. The Company will not exercise the
Hotel Option unless the Company believes that it is able to complete
construction of the hotel within the overall project budget, the sources for
which may include other sources of funds. Such sources may include cost
savings achieved through value engineering, interest earned from the
investment of amounts in the Construction Disbursement Account and the
Completion Reserve Account and the availability of contractor's funds
represented by the contractor's contingency allowance due to favorable site
and construction conditions which would be verifiable in part by the Company
prior to the Hotel Option being exercised. The Company has also budgeted for
the acquisition of $10.3 million of furniture, fixtures and equipment in
addition to $2.9 million of furniture, fixtures and equipment acquired under
the Design/Build Agreement. Such $13.2 million of furniture, fixtures and
equipment is expected to be separately financed with FF&E Financing and such
financing is expected to be secured by the furniture, fixtures and equipment
purchased. While the Company has held preliminary discussions with potential
providers of FF&E Financing, no agreements with respect thereto have been
reached and no negotiations with respect to the terms and conditions thereof
are taking place. See "Use of Proceeds--Sources and Uses of Funds" and
"Material Agreements--Design/Build Agreement."
The scope of permits and approvals required for the construction of the
Isle-Black Hawk is extensive and includes state and local land use permits,
excavation, building and zoning permits, architectural approvals and approval
of street and traffic signals. The Company has received concept approval by
the Historic Architectural Review Committee and all local permits and
approvals required to date.
DESIGN AND CONSTRUCTION TEAM
The Company has assembled what it believes to be a highly qualified team to
design and construct the Isle-Black Hawk.
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<PAGE>
Edward F. Reese, Casino America's Vice President--Construction and Design,
is managing project development and construction for the Isle-Black Hawk. Over
the past 30 years, Mr. Reese has been responsible for the project management
of complex, mixed use building projects, and most recently, riverboat casino
projects (including adjacent land based hotels). Mr. Reese has experience
negotiating specialty design and construction contracts. Mr. Reese currently
serves as the Vice Chairman of the Executive Committee of the American Society
of Civil Engineers--Construction Division.
Haselden Construction, Inc., the design/builder for the Isle-Black Hawk, is
a large Denver-based general contractor with experience in constructing
facilities in the mountain towns of Colorado, including Black Hawk. Haselden
was general contractor for the design and construction of Colorado Central
Station.
Parkhill-Ivins Architects ("Parkhill-Ivins"), pursuant to the Design/Build
Agreement, will serve as the architect for the design, development and
construction of the Isle-Black Hawk. Parkhill-Ivins has significant experience
in the design and construction of casinos in Colorado's mountain towns,
including Colorado Central Station, Bullwhackers Black Hawk and Bullwhackers
Central City.
DEVELOPMENT UPDATE
The Company delivered the "Notice to Proceed" to Haselden under the
Design/Build Agreement on August 25, 1997, at which time excavation and site
preparation activities were commenced. Except as set forth in the following
paragraph, the Company believes that excavation and site preparation
activities have been conducted through the date of this Prospectus within the
budgeted amounts therefor, and within the project completion schedule. As of
November 23, 1997, approximately $5,444,000 had been disbursed from the
Construction Disbursement Account. All necessary local permits and approvals
have been obtained as required to date, and the Company is not aware of any
material issues concerning its pending gaining approval applications with the
State of Colorado.
Haselden has notified the Company that excavation and site preparation
activities have uncovered a greater amount of less stable weathered rock and
overburden soil than originally anticipated. Consequently, Haselden expects
that substantial additional structural support of the mountain wall forming
the rear of the construction site for the Isle-Black Hawk will be required. In
addition, the City of Black Hawk has required certain changes to the Company's
excavation and site preparation plans with regard to the slope of the rear
wall excavation. Haselden's position is that it is entitled to an increase in
the guaranteed maximum price under the Design/Build Agreement and an extension
to the construction schedule. Although the Company and Haselden have not yet
agreed the amount of any price adjustment or any revision to the construction
schedule, the preliminary, unsubstantiated estimates provided by Haselden
indicate that the foregoing developments may lead to a price increase and
schedule extension that could be material. The Company and Haselden are
working to determine the extent of the necessary changes and which party
should bear any increased cost or schedule delays. In the meantime, based on
preliminary discussions with Haselden, the Company intends to add
approximately $2.2 million to the development and construction budget for the
Isle-Black Hawk pending such determination, to be drawn first from interest
earnings in the Construction Disbursement Account with the remainder (expected
to be approximately 1.6 million) to be allocated from the Completion Reserve
Account to the Construction Disbursement Account, to provide for a possible
increase in the "guaranteed maximum price" under the Design/Build Agreement
ultimately resulting from the foregoing, and has revised its estimate of the
date of substantial completion of the Isle-Black Hawk from "late 1998 or early
1999" to "early 1999." The Company believes that sufficient funds remain to
enable the Isle-Black Hawk to be developed as planned and open for business
within the anticipated time frame.
CAPITALIZATION TRANSACTIONS
The Company was organized as a limited liability company under the laws of
Colorado in April 1997, by Casino America of Colorado, Inc. and Blackhawk
Gold, Ltd. Since its organization, the Company has been in the development
stage, and its activities have been limited to applying for necessary permits,
licenses and approvals; arranging for the design and construction of the Isle-
Black Hawk; arranging for the financing for the Isle-Black Hawk; coordinating
the contribution to the Company of certain real estate parcels and other
capital contributions; and conducting excavation activities at the site in
preparation for construction. Simultaneously with the consummation of the Old
Notes Offering, (a) Casino America of Colorado, Inc. assigned to the
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Company the contractual right to purchase the Casino America Parcel, $100,000
of the purchase price of which was previously paid by Casino America on behalf
of Casino America of Colorado, Inc., (b) Casino America of Colorado, Inc.
contributed sufficient cash to the Company to enable the Company to purchase
the Casino America Parcel for the remaining unpaid purchase price of $6.4
million, (c) Blackhawk Gold, Ltd. transferred to the Company the Blackhawk Gold
Parcel, (d) the Company exercised and closed the purchase right referred to in
clause (a) above and (e) Casino America of Colorado, Inc. contributed to the
Company cash in the amount of $0.7 million. Casino America of Colorado, Inc.
owns 60% of the Company and Blackhawk Gold, Ltd. owns 40% of the Company. See
"Material Agreements--Operating Agreement."
CASINO AMERICA
Casino America is a leading developer, owner and operator of dockside and
riverboat casinos and related facilities in the United States, owning and
operating five dockside or riverboat casinos at four facilities. All of Casino
America's properties are based on a tropical island theme and operate under the
"Isle of Capri Casino" name. Casino America owns and operates a dockside casino
and 367-room hotel in Biloxi, Mississippi, a dockside casino and recreational
vehicle park in Vicksburg, Mississippi, a dockside riverboat casino and hotel
in Bossier City, Louisiana, and two riverboat casinos operating from a single
facility on a site one mile from Lake Charles, Louisiana where it also recently
opened a 241-room hotel. Casino America also owns and operates Pompano Park, a
harness racing track in Pompano Beach, Florida, midway between Miami and West
Palm Beach off of Interstate 95. For the fiscal year ended April 27, 1997,
Casino America had total revenues of $375.6 million, earnings before net
interest, income taxes, depreciation and amortization, pre-opening expenses,
settlement expenses, valuation charges, extraordinary items and equity in
income of unconsolidated joint ventures ("Adjusted EBITDA") of $69.2 million,
and a net loss of $21.1 million, which included certain settlement expenses and
valuation charges. Excluding these expenses, fees and charges, and also
excluding certain pre-opening costs for the Lake Charles operation and an
extraordinary after-tax charge resulting from the refinancing of debt, Casino
America would have had a net loss of $0.2 million for the fiscal year ended
April 27, 1997. For the six months ended October 26, 1997, Casino America had
total revenues of $218.0 million, adjusted EBITDA of $46.4 million and net
income of $4.0 million. The term "EBITDA," while commonly used, is not defined
by GAAP. EBITDA is not calculated the same by all companies and should not be
considered an accurate comparative measure or considered without referring to
GAAP financial information and should not be construed as an alternative either
to income from operations or cash flows from operating activities.
Casino America's business strategy, which has been implemented in its
existing operations, emphasizes the operation and development of value-oriented
gaming facilities and complementary amenities with a tropical island theme
using the "Isle of Capri Casino" brand name. Casino America believes that the
use of the "Isle of Capri Casino" name and associated theme creates a readily
identifiable brand image connoting excitement, quality and value, which Casino
America complements by emphasizing customer service and non-gaming
entertainment amenities. Casino America seeks to encourage repeat visitors to
its gaming facilities by identifying slot-oriented customers and active casino
patrons through its use of database marketing. Casino America believes that its
strategy fosters customer loyalty, enhances Casino America's ability to compete
effectively in its existing markets, and facilitates the efficient and cost-
effective development of gaming facilities in new markets. The Company will
rely on Casino America, in its capacity as the Manager of the Isle-Black Hawk,
to implement a business strategy for the Isle-Black Hawk consistent with Casino
America's other operations and tailored for the Black Hawk Market.
The following summarizes the casino properties owned and managed by Casino
America at June 29, 1997:
<TABLE>
<CAPTION>
CASINO
SQUARE SLOT TABLE HOTEL
FOOTAGE MACHINES GAMES ROOMS
------- -------- ----- -----
<S> <C> <C> <C> <C>
Biloxi....................................... 32,500 1,160 42 367
Vicksburg.................................... 24,000 802 43 --
Bossier City................................. 30,000 1,052 48 225
Lake Charles(1).............................. 48,900 1,834 93 241
------- ----- --- ---
Total...................................... 135,400 4,848 226 833
======= ===== === ===
</TABLE>
--------
(1) Represents two casino vessels.
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<PAGE>
Set forth below is certain summary financial information of Casino America.
Such financial information has been derived from Casino America's consolidated
financial statements and should be read in conjunction with such financial
statements, including the notes thereto, which are publicly available from the
Commission and can also be obtained by contacting Casino America at its
address set forth in this Prospectus. Casino America is not a guarantor of the
Notes, is not obligated to provide any financial support to the Company except
as required pursuant to the Completion Capital Commitment, and does not intend
to do so.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
------------------------------- ENDED
APRIL 30, APRIL 30, APRIL 27, OCTOBER 26,
1995 1996 1997 1997
--------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
----------------------
Revenue:
Casino.......................... $117,613 $123,936 $322,677
Rooms, food, beverage and other. 5,311 27,719 50,815
Management fees--joint ventures. 4,613 6,308 2,110
-------- -------- --------
Total revenue................. 127,537 157,963 375,602
Operating expenses................ 107,383 155,585 347,079
Operating income.................. 20,154 2,378 28,523
Net interest expense.............. (10,046) (13,924) (38,711)
Equity in income (loss) of
unconsolidated joint ventures.... 19,904 16,434 (166)
-------- -------- --------
Income (loss) before income taxes. 30,012 4,888 (10,354)
-------- -------- --------
Net income (loss) before
extraordinary.................... 18,069 1,555 (8,794)
======== ======== ========
Extraordinary loss, net of taxes.. -- -- (12,257)
Net income (loss)................. 18,069 1,555 (21,051)
BALANCE SHEET DATA (AT END OF
PERIOD):
-----------------------------
Current assets.................... 25,361 27,379 78,415
Total assets...................... 211,899 226,474 528,421
Long-term debt, including current
portion.......................... 138,857 139,778 379,522
Stockholders' equity.............. 42,015 50,270 77,973
</TABLE>
NEVADA GOLD
Nevada Gold was originally formed in 1977 for the principal purpose of
operating and managing mining activities primarily in the western United
States. During 1993, in connection with the acquisition of a controlling
interest in Nevada Gold by affiliates of its management, Nevada Gold's primary
focus was redirected toward the assembly and development of gaming and real
estate properties in Colorado. Nevada Gold's current business activities
consist of its ownership of Blackhawk Gold, Ltd. (which, on the Closing Date,
will hold a 40.8% interest in the Company), the development of residential
real estate in and around Black Hawk and the leasing to third parties of
certain mining property.
In its audited financial statements for the fiscal years ended March 31,
1996 and 1997, Nevada Gold reported total assets of $5.0 million total
liabilities of $2.6 million and $2.2 million, respectively, and net losses
from operations of $0.6 million and $1.6 million, respectively. The report of
Nevada Gold's independent accountants on its 1997 financial statements
contained a qualification regarding Nevada Gold's ability to continue as a
going concern. However, in connection with the Old Notes Offering, Nevada Gold
and Blackhawk Gold, Ltd. agreed not to incur any additional indebtedness, and
concurrently with the consummation of the Old Notes Offering, Nevada Gold and
Blackhawk Gold repaid all of their outstanding indebtedness, financed
primarily by borrowings from Casino America of Colorado, Inc., certain sales
of Blackhawk Gold, Ltd.'s interest to Casino America of
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<PAGE>
Colorado, Inc. and payment of $0.4 million in mortgage note indebtedness from
the proceeds of the Old Notes Offering. Consequently, such "going concern"
qualification was removed from their audit opinion. See "Risk Factors--Certain
Bankruptcy Considerations" and "Material Agreements--Members Agreement--
Transactions at Closing." The financial statements of Nevada Gold are publicly
available through the offers of the Commission and can also be obtained upon
contacting Nevada Gold.
INTELLECTUAL PROPERTY
Pursuant to a license agreement, Casino America will license the use at the
Isle-Black Hawk of (a) the following trademarks: Isle of Capri(R), Island
Gold(R), Calypso's(R), Farradday's(TM) and Isle Style(TM) and (b) the trademark
Isle of Capri parrot logo. In addition, the license agreement will provide that
additional trademarks acquired or developed by Casino America and used at its
other facilities will be subject to the license agreement. Each of the
foregoing names and logo are registered trademarks of Casino America, except
for Farradday's(TM), and Isle Style(TM), each of which is covered by a
trademark application filed by Casino America.
PROPERTY
The Company is the owner of a 9.12 acre undeveloped parcel at the southeast
section of the intersection of Mill and Main Street in Black Hawk, Colorado.
EMPLOYEES
The Company anticipates having an average of approximately 825 full-time
equivalent employees subject to seasonal fluctuation, with the highest number
of employees during the summer season.
LEGAL PROCEEDINGS
Neither of the Issuers is subject to any legal proceedings.
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<PAGE>
MATERIAL AGREEMENTS
Set forth below are summaries of the material terms of certain material
agreements to which the Company is or will be a party. The following summaries
do not purport to be complete and are qualified in their entirety by reference
to the relevant agreements. Copies of such agreements in preliminary or
executed form are available upon request to the Company.
OPERATING AGREEMENT
The rights and obligations of Casino America of Colorado, Inc. ("Casino
Colorado") and Blackhawk Gold, Ltd. ("Blackhawk Gold") (collectively, the
"Members") are governed in part by the Amended and Restated Operating Agreement
of the Company ("Operating Agreement") dated as of July 29, 1997. The Operating
Agreement provides that it will become effective upon consummation of the
Capitalization Transactions.
Members and Membership Interests. Casino Colorado and Blackhawk Gold
respectively hold 60% and 40% of the membership interests (the "Membership
Interests") in the Company. Each corporation that serves as a Member must
designate one or more individuals to act as such Member's representative.
Casino Colorado has selected John M. Gallaway as its representative and
Blackhawk Gold has selected H. Thomas Winn as its representative.
Any transfer of a Membership Interest must be approved by Colorado gaming
authorities and such transferee must obtain a license to hold an ownership
interest in a gaming license in Colorado. Any transfer in violation of such law
is void unless the Company is no longer subject to such law or the applicable
gaming commission waives such noncompliance. If the applicable gaming
commission determines that a Member is unsuitable to own an interest in the
Company, then the Company may buy, and the Member is required to sell, such
Member's Membership Interest.
In addition to Colorado gaming restrictions, the Operating Agreement sets
forth other transfer restrictions. A Member may transfer all or any part of its
Membership Interests to (i) its affiliates, (ii) another Member, (iii) the
Company, (iv) an entity or person approved by all the Members, (v) to another
person as part of a merger, reorganization, consolidation or sale of all or
substantially all of the assets of a person or entity that controls such Member
or (vi) a creditor as a pledge securing an obligation (collectively, "Permitted
Transferees"). If a Member wishes to transfer its Membership Interest to
persons or entities other than Permitted Transferees, it must obtain a bona
fide offer and then offer its Membership Interests to the Company upon the same
terms. If the Company accepts the offer, it must purchase all, but not less
than all, of the offered Membership Interest within 30 days of the offer. If
the Company does not accept the offer, the other Members (not including
previous transferees not admitted as substitute Members discussed below) have
the right to purchase, in whole and not in part, such offered Membership
Interest pro rata in proportion to their Ownership Interests within 60 days of
the date of offer to the Company.
A transferee of a Membership Interest (including a Permitted Transferee) may
only become a substitute Member upon the written approval of all remaining
Members. If a transferee does not obtain such approval, such transferee will
not have the right to participate in the management of the business and affairs
of the Company or become a Member. Such transferee will only be entitled to
receive the share of profits or other compensation by way of return of
contribution to which a Member would otherwise be entitled. Except as otherwise
provided in the Members Agreement, no Member is required to make an additional
capital contribution. See "--Members Agreement--Contributions."
Management. The Company will be managed by its managers (the "Managers"). The
initial Managers are designated in the Operating Agreement as John M. Gallaway
and Allan B. Solomon of Casino America and H. Thomas Winn of Nevada Gold.
Generally, each Member may elect one Manager. However, so long as Casino
Colorado or its affiliates own more than 50% of the Membership Interests of all
the Members of the Company (a
41
<PAGE>
"Majority in Interest"), Casino Colorado or its affiliates will be entitled to
elect a majority of the Managers. Managers are elected at annual meetings of
Members for one-year terms. Each Member may remove, replace, fill a vacancy or
designate a temporary replacement for the Manager or Managers elected by it.
Except as provided in the next sentence, actions of the Managers will be by a
majority vote of the Managers present at duly convened meetings at which a
quorum (i.e., a majority of the Managers) is present. A vote of all the Members
and Managers is required for certain events including the addition of a
substitute Member, any non-pro rata distribution to Members, material
amendments to the Operating Agreement, a merger or a sale of all or
substantially all the assets of the Company.
Dissolution and Liquidation. The Company will be dissolved upon the earliest
to occur of: (i) an event of withdrawal with respect to a Member which,
pursuant to the Operating Agreement, terminates such Member's Ownership
Interest, unless there is at least one remaining Member; (ii) the unanimous
agreement of the Members; or (iii) December 31, 2096. Events of withdrawal
include certain unapproved membership interest transfers, voluntary withdrawals
and certain other events described in the Operating Agreement. The Operating
Agreement also states that the bankruptcy of a Member will only be an event of
withdrawal of a Member if there is at least one solvent member remaining. The
Operating Agreement provides that the Company will be liquidated upon the
occurrence of any event requiring dissolution of the Company.
Indemnification. No member has any liability for the debts and obligations of
the Company. Each member, manager, employee or agent of the Company is entitled
to indemnification from the Company with respect to any proceeding asserted
against such member, manager, employee or agent due to his or its status as
such other than for certain violations of the Operating Agreement by such
Person member. Each Member agreed to indemnify the Company and each Member for
damages resulting from its violation of the Operating Agreement.
MEMBERS AGREEMENT
On July 29, 1997, Casino Colorado, Casino America, Blackhawk Gold, and Nevada
Gold entered into a members agreement (the "Members Agreement") regarding
certain matters relating to the development of the Isle-Black Hawk, management
of the Company, additional capital contributions and other matters.
Contributions. Upon consummation of the Old Notes Offering, Blackhawk Gold
contributed to the Company the Blackhawk Gold Parcel and Casino Colorado
contributed to the Company: (i) the right to acquire the Casino America Parcel
($0.1 million of the purchase price of which was previously paid by Casino
America on behalf of Casino Colorado), (ii) cash necessary to purchase the
Casino America Parcel, (iii) a plan for the development of the Isle-Black Hawk,
(iv) cash in the amount of $0.7 million and (v) the benefit to the Company of
the Completion Capital Commitment and the Managers Subordination Agreement. In
addition, Casino Colorado was deemed to have contributed an amount equal to
development costs paid by Casino America on behalf of Casino Colorado to third
parties in the amount of $0.3 million. No additional capital contributions are
permitted to be made unless agreed by all Members, except for payments under
the Completion Capital Commitment and except that the Company may require by a
vote of a Majority in Interest additional contributions to the Company, (i) if
required by law, (ii) as reasonably required in connection with the development
and construction of a hotel, but only to the extent that the funds available
from the Completion Capital Commitment and the proceeds of the Offering are
insufficient, (iii) for the replacement of furniture, fixtures and equipment or
(iv) to implement the development plan or other reasonable capital expenditures
for Isle-Black Hawk not to exceed an aggregate of $4.0 million. If a member
fails to make a Capital Contribution the remaining Members may either increase
their own capital contribution to make up such deficiency and receive
additional Membership Interests or loan such deficiency to the Company at a
rate of interest equal to the higher of 14.5% or Casino America's highest cost
of funds plus two percentage points. Blackhawk Gold will have the option to
purchase from Casino Colorado any Membership Interest acquired by Casino
Colorado as a result of an additional capital contribution at a purchase price
equal to the amount that Casino Colorado paid for such Membership Interest plus
interest at a rate equal to the higher of 14.5% or Casino America's highest
cost
42
<PAGE>
of funds plus two percent from the date that Casino Colorado acquired such
Membership Interest, provided that this option may be exercised only if, after
giving effect to such purchase, Casino Colorado would continue to hold a 55%
or greater Membership Interest in the Company.
Transactions at Closing. Effective on the Closing Date, Casino Colorado
loaned Blackhawk Gold $0.5 million cash in exchange for a promissory note from
Nevada Gold and Blackhawk Gold, as co-obligors. The note bears interest at the
higher of 14.5% or Casino America's highest cost of funds plus two percentage
points and all principal and interest will be due and payable three years from
such closing date. This note is secured by a pledge of Blackhawk Gold's entire
Membership Interest and will contain a covenant prohibiting Blackhawk Gold and
Nevada Gold from incurring any indebtedness other than this $0.5 million loan
and accounts payable in the ordinary course of business. See "Business--Nevada
Gold." Additionally, on the Closing Date Blackhawk Gold sold 4.2% of its
Membership Interests to Casino Colorado for $0.7 million cash. Blackhawk Gold
will have the option to buy back such 4.2% Membership Interest within 180 days
from the Closing Date for $0.7 million plus interest to the date of repurchase
at the rate of the higher of 14.5% or Casino America's highest cost of funds
plus two percent if, after giving effect to such purchase, Casino Colorado
would continue to hold a 55% or greater Membership Interest in the Company.
Substantially all the $1.2 million proceeds from the $0.5 million loan and the
$0.7 million sale of Membership Interests have been paid directly to creditors
of Nevada Gold in full payment of Nevada Gold's outstanding obligations to
such creditors as of such Closing Date. Blackhawk Gold also has the right to
sell an additional 4.8% of its Membership Interests to Casino Colorado for
$0.8 million. Pursuant to such provision, on November 13, 1997, Casino
Colorado purchased a 0.8% membership interest from Blackhawk Gold for
$133,333.33. Blackhawk Gold will have the option for 180 days thereafter to
buy back such 4.8% Membership Interest for $0.8 million plus interest through
the date of repurchase at the rate of the higher of 14.5% or Casino America's
highest cost of funds plus two percent if, after giving effect to such
purchase, Casino Colorado would continue to hold a 55% or greater Membership
Interest in the Company. The foregoing transactions allowed Nevada Gold's
independent auditors to remove the "going concern" qualification set forth in
such independent auditors' report accompanying Nevada Gold's recently filed
annual financial statements.
Mandatory Distributions. Subject to the terms of the Indenture, the Company
will make quarterly distributions of cash from operations subject to certain
adjustments, to the Members in proportion to their Membership Interests from
cash available for distribution (which excludes certain reserves that the
Company is required to maintain under the Operating Agreement) in an amount
equal to the maximum amount that may be distributed pursuant to the terms of
the Indenture. The calculation and payment of such distributions will be made
after giving effect to all required payments of Contingent Interest. If Casino
America is required to make any capital contributions under the Completion
Capital Commitment, Casino Colorado will receive additional Membership
Interests and, except as provided in the next sentence, Casino Colorado will
be entitled to receive all distributions with respect to all Membership
Interests up to the aggregate amount of such payments before any distributions
are made to any other Member. Blackhawk Gold may exercise its rights to
purchase a portion of such additional Membership Interest from Casino
Colorado, as provided under the Members Agreement, the proceeds from which
will reduce the amount of priority distributions to which Casino Colorado
would otherwise be entitled.
Transfer of Membership Interests. If Casino America reasonably determines,
based on communications with regulatory authorities, that Blackhawk Gold's
interest in the Company will cause Casino America or its affiliates (including
the Company) a licensing problem in any jurisdiction including Colorado, and
such licensing problem cannot be resolved, Casino America can require
Blackhawk Gold to sell its ownership interest in the Company to an acceptable
party or to Casino Colorado. In the event of a sale to Casino Colorado, the
purchase price will equal the capital account balance of Blackhawk Gold in the
Company.
Non-competition. During the term of the Agreement, no member or any of its
Affiliates will seek to manage, develop or engage in casino gaming operations
in Gilpin County, Colorado, except in connection with the Isle-Black Hawk.
Each member and their affiliates are permitted to continue existing gaming
operations and (subject to the foregoing) develop new gaming operations, and
in so doing may solicit customers in competition with the
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<PAGE>
gaming market in Gilpin Country, Colorado. Blackhawk Gold and its affiliates
are expressly permitted to pursue commercial and residential real estate
activities in, or in the vicinity of, the gaming district of Black Hawk,
Colorado, provided that certain of such activities do not include any state
regulated gaming activities. Casino Colorado has the right to participate in
such activities upon satisfaction of certain notice and contribution
requirements.
Other. In connection with any liquidation of the Company's assets, the
Members have agreed to cause the real property of the Company to be listed for
sale at its book value as reflected on the Company's books and records. Each
member has a right of first refusal to purchase such real property, for cash,
on the same terms as proposed by a third party purchaser in such liquidation.
Management. The Members Agreement provides that the parties thereto will
cause the Managers appointed by them not to cause the Company to effect any of
the following actions without the unanimous consent of each of the other
Managers and the unanimous consent of the Members: (i) the making of material
changes to the development plan; (ii) the adoption of any annual budget
following the opening of the casino calling for capital expenditures for such
budgeted year of greater than $4.0 million; (ii) a call for additional capital
contributions in excess of those described under the caption "--Contributions,"
or (iv) the approval of the principal terms of any refinancing of the Notes or
the incurrence of indebtedness outside of the normal operating requirements of
the project in an outstanding amount which at any time exceeds $1.0 million,
subject to certain exceptions.
MANAGEMENT AGREEMENT
Casino America (the "Manager") and the Company entered into a Management
Agreement dated as of April 25, 1997 which was subsequently amended and
restated (the "Management Agreement"), and which became effective upon the
consummation of the Capitalization Transactions.
Duties of the Manager. Prior to the opening of the Isle-Black Hawk, the
Manager will be responsible for developing and implementing all pre-opening
activities. After the Isle-Black Hawk commences operations, the Manager will
manage the daily operations of the Isle-Black Hawk, including among other
things, the (i) exclusive supervision and direction of the activities of the
Isle-Black Hawk; (ii) development and effectuation of an annual plan for the
Isle-Black Hawk, consisting of forecasts of monthly income and expenses,
monthly cash flow projections and working capital requirements, a budget
covering estimated capital expenditures, and an annual marketing plan; (iii)
development of an operating policy; (iv) supervision of advertising, sales and
business promotion; (v) supervision, hiring and discharge of all personnel;
(vi) maintenance of the property; and (vii) maintenance of all books of
accounts of the Isle-Black Hawk and the submission of all requisite
informational and/or tax returns.
Compensation. The Manager will be paid an annual management fee equal to 2%
of Revenues (as defined herein) plus 10% of Operating Income (as defined
herein); provided that such management fee shall not exceed 4% of Revenues.
"Revenues" means all revenues, less sales tax on such revenues, determined on
an annual basis received from the following sources: (i) gross gaming receipts
from the Isle-Black Hawk, less 50% of applicable gaming and admission taxes
from the operation of the Isle-Black Hawk; (ii) hotel operations (if any);
(iii) food and beverage operations; (iv) parking fees; (v) revenues generated
from gift shops and arcades; and (vi) other revenues, fees and income, which
are attributable to the Isle-Black Hawk. "Operating Income" means the income of
the Isle-Black Hawk before any management fee paid to the Manager,
distributions to Members, interest, depreciation, amortization and write-off of
start-up and pre-opening expenses and income taxes. The management fee will be
paid ten days after the end of each month. The Manager may withhold funds
received for the Company's account in payment of the management fee. The
Management Agreement provides that the Company shall reimburse the Manager for
any tax liability incurred by the Manager in respect of any accrued but unpaid
management fees (which reimbursements shall be deducted from the amount of such
accrued but unpaid fees). All amounts due to Casino America under the
Management Agreement will be subordinated to all obligations under the Notes.
In addition, the Manager will be entitled to receive reimbursement for certain
44
<PAGE>
expenses incurred by it as the actual cost or fair market value thereof,
including, subject to certain limitations, compensation paid to employees of
the Manager that perform services in connection with the Isle-Black Hawk.
Term. The Management Agreement will terminate upon the earliest to occur of
(i) the election of either party if the other party fails to perform any
material obligation under the Management Agreement, (ii) the mutual agreement
of the parties, (iii) the inability of either party to obtain or maintain
licenses necessary to carry out their obligations under the Management
Agreement, (iv) the occurrence of certain bankruptcy events with respect to the
Manager or (v) December 31, 2096.
Indemnification; Casualty. The Manager agrees to indemnify the Company
against all losses, liabilities, claims, demands, legal proceedings or costs
not covered by insurance and which the Company may sustain, incur or assume as
a result of any allegation, claim, civil or criminal action to the extent
arising out of (i) claims by employees of the Manager, (ii) the breach of the
Management Agreement by the Manager or its agents, or (iii) the acts of
failures to act of the Manager or its agents in a manner consistent with
commercial standards of reasonableness required by the Management Agreement,
provided that such loss, liability or cost did not result from the negligence
of the Company, its agents (other than the Manager) or employees and provided
further that no indemnification is provided for consequential or punitive
damages.
If the property used in the Isle-Black Hawk is damaged or destroyed, the
Company is required to repair or restore such property, to the extent of
insurance proceeds. If insurance proceeds are insufficient and the Company no
longer wishes to operate the Isle-Black Hawk, the Manager has the option to
obtain a license to operate the Isle-Black Hawk. If the Isle-Black Hawk itself
is damaged or destroyed, the Company may either restore or repair the Isle-
Black Hawk to the extent of insurance proceeds, or refuse to do so, in which
case the Management Agreement terminates.
Proprietary Information; Trademark. All specifically identifiable proprietary
information developed by the Manager for the Company shall be the property of
both the Manager and the Company. All proprietary information previously
developed by the Manager at the Manager's expense, including without
limitation, customer lists, gaming and marketing strategies and other similar
information shall remain the property of the Manager.
LICENSE AGREEMENT
Casino America and the Company entered into a License Agreement dated July
29, 1997 pursuant to which Casino America will license to the Company the use
at the Isle-Black Hawk of the trademarks Isle of Capri(R), Island Gold(R),
Calypso's(R), Farradday's(TM) and Isle Style(TM) and the registered trademark
Isle of Capri parrot logo and any future trademarks utilized by the Manager at
its other gaming facilities. No license fee is payable thereunder. See
"Material Agreements--License Agreements." The license is non-exclusive, non-
sublicensable and non-transferable other than to the Trustee. The marks subject
to the license must be used solely in connection with the operation of the
Isle-Black Hawk. All use of the marks inures to the benefit of Casino America,
and Casino America retains all right, title and interest to the marks. The
right to use the marks terminates upon the termination of the Management
Agreement except that if the termination of the Management Agreement occurs
after the institution of foreclosure proceedings by the Trustee, the right to
use the marks terminates six months after the termination of the Management
Agreement. The right to use the marks may be terminated earlier if the use of
the marks does not conform to quality standards.
LAND PURCHASE CONTRACT
On June 5, 1997, Roman Entertainment Corporation of Colorado ("Roman") and
Casino America entered into a Purchase and Sale Agreement (the "Land Purchase
Contract") providing for the purchase by Casino America of the Casino America
Parcel which consists of two contiguous parcels of real estate comprising an
aggregate of 2.87 acres. The Casino America Parcel constitutes a portion of the
land on which the Isle-Black Hawk will be constructed. The Land Purchase
Contract provides that Casino America's rights thereunder may be assigned to
the Company.
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<PAGE>
The purchase price for the Casino America Parcel was $6.5 million in cash,
payable (a) $0.1 million on execution and delivery of the Land Purchase
Contract (which amount has been paid), and (b) the balance at the closing. In
addition to the purchase price, the buyer (i.e., the Company) was required to
pay all transfer, sales and use taxes (if any), all recording fees, document
preparation fees and similar fees, and to procure its own title insurance and
surveys. Escrow fees and costs were shared equally between the parties.
Except as set forth in the special warranty deed to be delivered at closing,
the purchase and sale of the Casino America Parcel is on an "as is, where is"
basis. Roman disclaims all representations and warranties with respect to, and
specifically places the buyer on notice of, any environmental matters
affecting the Casino America Parcel.
EXCHANGE COMMITMENT LETTER
By letter dated June 5, 1997, the city of Black Hawk agreed to exchange a
8,169 square foot parcel of frontage property where a portion of the Isle-
Black Hawk is to be developed, for a 2,657 square foot parcel owned by Nevada
Gold. Upon the consummation of the Old Notes Offering, Blackhawk Gold, Ltd.
effected the parcel exchange. The city of Black Hawk's obligation to effect
the exchange was conditioned on (a) the exchange occurring on or before
December 31, 1997, (b) the Blackhawk Gold parcel being conveyed to the city of
Black Hawk by special warranty deed free and clear of all liens and
encumbrances and other title defects affecting merchantability, as determined
by the city of Black Hawk in its sole discretion and (c) the completion of the
contribution of real estate parcels as contemplated by the Capitalization
Transactions.
DESIGN/BUILD AGREEMENT
The Design/Build Agreement provides that Haselden, itself and through
various subcontractors, has agreed to design and construct the Isle-Black Hawk
and perform all necessary excavation and other site work as well as provide
certain non-gaming furniture, fixtures and equipment. The Isle-Black Hawk will
be constructed to allow a hotel to be developed on top of the facility which
meets the design requirements set forth in the Design/Build Agreement.
Pursuant to the terms of the Design/Build Agreement, the Company may elect to
add a hotel to the Isle-Black Hawk by providing Haselden with written notice
on or prior to March 1, 1998. If such notice is delivered, the scheduled
completion date for the hotel (the "Hotel Substantial Completion Date") will
be 120 days after the Casino Substantial Completion Date and is not expected
to materially disrupt the operations of the Isle-Black Hawk. The construction
of the Isle-Black Hawk (and the hotel if applicable) may be delayed without
any cost to Haselden if such delays result from Excusable Events.
The Design/Build Agreement provides for a "guaranteed maximum price" of
$47.3 million (exclusive of construction of a hotel) which is fully supported
by a payment and performance bond from Haselden and a site specific errors and
omissions policy in the amount of $5.0 million, subject to a $25,000
deductible payable by Haselden which covers errors and omissions of all
professional architects and engineers working on the project. The payment and
performance bond does not cover professional design or engineering errors or
omissions. The "guaranteed maximum price" is subject to increases if plans or
specifications change or if the project (i) encounters certain unforeseen
geological or excavation conditions, (ii) is delayed by the Company without
the fault or negligence of Haselden, (iii) is delayed because of a change in
law or (iv) is delayed because a notice to proceed is issued by the Company on
or after August 30, 1997, any or all of which may increase the actual price
paid for the development of the Isle-Black Hawk. The "guaranteed maximum
price" may be also decreased if changes in design and specifications provide
cost savings. Additionally, to discourage delays, liquidated damages will be
payable by Haselden for each day that substantial completion of the Isle-Black
Hawk is delayed (other than by an Excusable Event) past the Casino Substantial
Completion Date by (i) $0 per day for the first fourteen days of the delay,
(ii) $12,000 per day for the next fourteen days and (iii) $18,000 for each day
thereafter. To encourage early completion of the Isle-Black Hawk, incentive
fees will be payable to Haselden in
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the amount of $10,000 for each day that the Isle-Black Hawk is substantially
completed before the seventh day prior to the Casino Substantial Completion
Date. The Design/Build Agreement also provides incentives for Haselden to limit
construction costs by sharing costs savings between the Company and Haselden as
follows: (i) the first $500,000 of savings accrues entirely to the Company,
(ii) the next $500,000 of savings are split 80% to the Company and 20% to
Haselden, (iii) the next $1,000,000 of savings are split 70% to the Company and
30% to Haselden and (iv) any additional savings are split 60% to the Company
and 40% to Haselden.
If the Company elects to have Haselden build the hotel, the "guaranteed
maximum price," exclusive of other price adjustments, will increase to $53.6
million. The payment and performance bond to be provided by Haselden, which
will not cover professional design or engineering errors or omissions, will be
increased to fully support the $53.6 million price. In addition to the possible
increases and decreases referred to above, the "guaranteed maximum price" will
be increased or decreased based upon the aggregate amount that the actual cost
to complete certain allowance items is above or below $2.6 million. To
discourage delays of completion of the hotel, liquidated damages will be
payable by Haselden in the amount $1,000 for each day that substantial
completion of the hotel is delayed (other than by an Excusable Event) beyond
the Hotel Substantial Completion Date. Similarly, to encourage early completion
of the hotel, incentive fees of $1,000 for each day that the hotel is
substantially completed prior to the Hotel Substantial Completion Date will be
payable to Haselden. The Company will not exercise the Hotel Option unless the
Company believes that it is able to complete construction of the hotel within
the overall project budget, the sources for which may include other sources of
funds. Such sources may include cost savings achieved through value
engineering, interest earned from the investment of amounts in the Construction
Disbursement Account and the Completion Reserve Account and the availability of
contractor's funds represented by the contractor's contingency allowance due to
favorable site and construction conditions which would be verified in part by
the Company prior to the Hotel Option being exercised. The Company has also
budgeted for the acquisition of $10.3 million of furniture, fixtures and
equipment in addition to $2.9 million of furniture, fixtures and equipment
acquired under the Design/Build Agreement. Such $13.2 million of furniture,
fixtures and equipment is expected to be separately financed with FF&E
Financing and such financing is expected to be secured by the furniture,
fixtures and equipment purchased. See "Use of Proceeds--Sources and Uses of
Funds."
No subcontract will be awarded by Haselden unless such subcontract is
competitively bid upon by at least three bona fide bidders and the lowest
bidder is selected. All subcontracts must be written on a "lump sum basis" and
not on a "cost plus", "cost of work" or "reimbursable" basis. If Haselden
becomes aware of any circumstances that may cause a delay in the construction
schedule, it must immediately notify the Company. Haselden has notified the
Company of a potential delay. See "Summary--Recent Developments." The Company
then, at no additional cost to the Company, may require Haselden to exert its
best efforts to avoid any delay in the construction schedule. If Haselden is
not in default under the contract, the Company may, at its own expense, direct
Haselden to require multiple shifts and overtime to expedite completion of
construction. Development and construction costs will be funded from draws
against the Cash Collateral Account in accordance with the terms of the Cash
Collateral and Disbursement Agreement. All contracts relating to the
construction of the Isle-Black Hawk including the Design/Build Agreement, will
be assigned as security for the Notes. See "Description of the New Notes--
Security." In turn, any subcontractors with subcontracts greater than $100,000,
will post a bond with Haselden guaranteeing timely completion of their
respective subcontracting work.
SUBDIVISION AGREEMENT
As a condition to the issuance of a building permit for the project, the
Company will be required to execute a Subdivision Agreement (the "Subdivision
Agreement") with the city of Black Hawk pursuant to which the Company will be
required to make certain improvements to the portion of Main Street that
adjoins the Company's property and to Mill Street.
On July 16, 1997, the city council of Black Hawk resolved that it will
approve the Subdivision Agreement and the final plat for the property in the
form submitted by the Company, provided certain conditions are met on
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or before December 31, 1997, including the acquisition by the Company of the
Casino America Parcel and the Blackhawk Gold Parcel. Accordingly, the Company
anticipates that it will enter into the Subdivision Agreement with the city of
Black Hawk, substantially in the form of the submitted agreement, following the
Closing Date. The principal terms of the Subdivision Agreement are as follows:
Public Improvements. The Subdivision Agreement requires the Company to
construct certain improvements to Mill Street which include, but are not
limited to, the construction of an additional lane to the existing bridge and
other necessary improvements as determined by the city of Black Hawk. The
Company is also required to construct an approximately 700 foot long, three-
lane concrete road on the portion of Main Street that abuts the property, a
cul-de-sac at the east end of the road and related curbs, gutters, street
lighting, signage, retaining walls, landscaping and other improvements to Main
Street as determined by the city of Black Hawk. The Company will also be
responsible for constructing the conduits for and bringing in all required
utilities along the portion of Main Street that abuts the property, and for
necessary traffic signals. Upon completion of the improvements, the Company
must convey marketable title to such improvements to the city of Black Hawk,
free and clear of all liens or encumbrances, including the Indenture. The
Company will be required to warrant the improvements for one year after
completion (except water improvements, which the Company will warrant for three
years). Subject to a provision for force majeure, the Company is required to
complete the improvements by January 1, 1999.
Estimated Costs of the Improvements. The Subdivision Agreement requires the
Company to bear the costs of the improvements, which the Company estimates to
be approximately $1.8 million. In addition, the Company will be required to
reimburse the city of Black Hawk for certain costs in connection with the
project and to pay $60,000 for a traffic study. The Company is exploring the
possibility of financing the improvements through the issuance of municipal
bonds by the Black Hawk Business Improvement District, which financing may
provide for a portion of the costs to be assessed to other property owners
whose properties abut the portion of Main Street to be improved. However, no
assurances can be given that the Company will be successful in obtaining any
such financing or in having a portion of the costs assessed to others.
Performance Guarantee. The Subdivision Agreement requires that the Company's
obligations be secured by an irrevocable letter of credit, which the Company is
required to provide within 90 days after execution of the Subdivision Agreement
and prior to commencement of work on the improvements. The amount of the letter
of credit is 110% of the estimated costs of the improvements (approximately
$2.0 million), but the city of Black Hawk may require that the amount be
increased based on the final construction documents or to take into account any
increases in prices to which the improvements may be subject. The city of Black
Hawk may draw down on the letter of credit to complete the improvements in the
event the Company does not complete them by January 1, 1999, subject to the
provision for force majeure. Upon completion of the improvements, the city of
Black Hawk will retain for one year the portion of the letter of credit
covering at least 20% of the costs of improvements.
Miscellaneous. The city of Black Hawk's remedies for breach of the
Subdivision Agreement include, but are not limited to, refusing to issue a
building permit or certificate of occupancy, the revocation of a building
permit previously issued or the drawing down of the letter of credit. The
Company is required to indemnify the city of Black Hawk and its representatives
against any claims arising from acts of the Company or its agents.
GAMING AND LIQUOR REGULATORY MATTERS
Operating Restrictions. Colorado gaming law permits legalized limited gaming
in the cities of Central City, Black Hawk and Cripple Creek, Colorado. "Limited
gaming" is defined as the use of slot machines and the card games of blackjack
and poker, each with a maximum single bet of five dollars. Gaming is confined
to the commercial districts of Black Hawk, Central City and Cripple Creek as
those commercial districts are defined in city ordinances. Gaming is restricted
to structures that conform to the architectural styles and designs that were
common to the areas prior to World War I, as determined by the municipal
governing bodies. No more than
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35% of the square footage of any building and no more than 50% of any one floor
of such building may be used for gaming. Gaming operations are prohibited
between the hours of 2:00 a.m. and 8:00 a.m. No limits are imposed on total
patron losses and casinos are not allowed to extend credit to the patrons.
Persons under the age of 21 are prohibited from participating in gaming or
lingering in gaming areas of a casino. Colorado law requires licensees to
maintain detailed books and records that accurately account for all monies and
business transactions. Books and records must be furnished upon demand to the
Colorado authorities. Detailed and extensive playing procedures, standards,
requirements and rules of play are established for poker, blackjack and slot
machines. Licensees must, in addition, adopt comprehensive internal control
procedures governing their gaming operations. Such procedures must be approved
in advance by the Colorado authorities and include the areas of accounting,
surveillance, security, cashier operations, key control and fill and drop
procedures, among others. No gaming may be conducted in Colorado unless all
appropriate licenses are approved by and obtained from the Colorado Limited
Gaming Control Commission (the "Colorado Commission"). Violations of Colorado
gaming laws or regulations are criminal offenses and the person or entity
violating the same may, in addition, be subject to fines and have its gaming
license suspended or revoked.
License Information Requirements. The Colorado Commission may issue the
following five types of licenses: (i) slot machine manufacturer or distributor;
(ii) operator; (iii) retail gaming; (iv) support; and (v) key employee. The
first three licenses are issued for a one-year period and require annual
renewal. However, support licenses and key employee licenses are issued for two
year periods and are renewable. The Colorado Commission has broad discretion to
condition, suspend, revoke, limit or restrict a license at any time and also
has the authority to impose fines.
A slot machine manufacturer or distributor license is required for all
persons who manufacture, import or distribute slot machines in Colorado, or who
otherwise act as slot machine manufacturers or distributors. No manufacturer or
distributor may have an interest in an operator, allow its officers or others
with a substantial interest in it to have an interest in an operator, employ
any person who is employed by an operator or allow an operator or any person
with a substantial interest in the operator to have an interest in it. An
operator license is required for all persons who permit slot machines on their
premises or who engage in the business of placing and operating slot machines
on the premises of a retailer. A retail gaming license is required for all
persons permitting or conducting gaming on their premises and such license may
be granted only to a retailer. No person may have an ownership interest in more
than three retail licenses. All natural persons employed in the field of gaming
must hold either a support or key employee license. Every retail gaming
licensee must have a key employee licensee in charge of all gaming activities
available at all times when gaming is being conducted. The Colorado Commission
may determine that any employee of a licensee is a key employee and, therefore,
require that such person apply for licensing as a key employee.
An applicant for any type of Colorado license must provide the following
information: (i) personal background information; (ii) financial information;
(iii) participation in legal or illegal activities in Colorado or other
jurisdictions, including foreign countries; (iv) criminal record information;
(v) information concerning all pecuniary and equity interests in the applicant;
and (vi) other information as requested or required. Prior to licensure,
applicants must satisfy the Colorado Commission that they are suitable for
licensing and are of good moral character. The Colorado legislature has defined
unsuitability or unsuitable in relation to a person as the inability to be
licensed by the Colorado Commission because of prior acts, associations or
financial conditions, and, in relation to acts or practices, those which
violate or would violate the statutes or rules or are or would be contrary to
the declared legislative purposes of the Colorado Act. Without limiting the
foregoing, a person cannot be licensed if such person has served a sentence
upon conviction of a felony or fraud-related misdemeanor within ten years or
has been convicted of a gambling-related offense, or is currently under a
prosecution or is associated with organized crime or has refused to cooperate
in certain governmental investigations. Applicants have the burden of proving
their qualifications to the Colorado Commission and must submit to and pay the
full cost of any background investigations as may be ordered by the Colorado
Commission. There is no limit on the cost of such background investigations and
no guaranty that any applicant will receive licensing from the Colorado
Commission.
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The current practice of the Colorado authorities is to require the following
persons and entities to complete background investigation forms, and to provide
comprehensive information and to submit to a full background investigation: (a)
persons or entities owning (either directly or on a pass-through basis) 5% or
more of a privately traded entity licensee, (b) persons or entities owning
(either directly or on a pass-through basis) 10% or more of a publicly traded
entity licensee, (c) directors and officers of the licensees and (d) in certain
circumstances, directors and officers of entities described at (a) and (b)
above. But, the Colorado authorities retain the discretion to require any
person or entity with an interest in a licensee (directly or on a pass-through
basis) to submit such information and undergo such investigation. The purpose
of the investigation is to determine each such person's or entity's
qualifications and suitability for licensure. In addition, all persons loaning
monies, goods or real or personal property to a licensee or applicant, or
having any interest in a licensee or applicant, or entering into any agreement
with a licensee or applicant, must provide any information if so requested by
the Colorado authorities, including submission to a full background
investigation if ordered by the Colorado authorities.
Persons found unsuitable by the Colorado Commission may be required
immediately to terminate any interest in, association or agreement with or
relationship to a licensee. A finding of unsuitability with respect to any
officer, director, employee, associate, lender or beneficial owner of a
licensee or applicant also may jeopardize the licensee's license or the
applicant's license application. A license grant may be conditioned upon the
termination of any relationship with unsuitable persons.
Licensees have a continuing duty to report to the Colorado Commission
information concerning persons with a financial or equity interest in the
licensee, or who have the ability to control or exercise a significant
influence over the licensee, or who loan money to the licensee. Therefore, the
requisite information regarding the holders of the Notes will have to be
periodically reported to the Colorado authorities.
As a general rule, under the Colorado law and regulations, it is a criminal
violation for any person to have a legal, beneficial, voting or equitable
interest, or right to receive profits, in more than three retail gaming
licenses in Colorado. The Colorado Commission has ruled that a person does not
have an interest in a licensee for purposes of the multiple-license prohibition
if: (i) such person has less than a 5% interest in an institutional investor
which has an interest in a publicly traded licensee or publicly traded company
affiliated with a licensee (such as the Company); (ii) a person has a 5% or
more financial interest in an institutional investor, but the institutional
investor has less than a 5% interest in a publicly traded licensee or publicly
traded company affiliated with a licensee; (iii) an institutional investor has
less than 5% financial interest in a publicly traded licensee or publicly
traded company affiliated with a licensee; (iv) an institutional investor
possesses securities in a fiduciary capacity for another person, and does not
exercise voting control over 5% or more of the outstanding voting securities of
a publicly traded licensee or of a publicly traded company affiliated with a
licensee; (v) a registered broker or dealer retains possession of securities of
a publicly traded licensee or of a publicly traded company affiliated with a
licensee for its customers in street name or otherwise, and exercises voting
rights for less than 5% of the publicly traded licensee's voting securities or
of a publicly traded company affiliated with licensee; (vi) a registered broker
or dealer acts as a market maker for the stock of a publicly traded licensee or
of a publicly traded company affiliated with a licensee and possesses a voting
interest in less than 5% of the stock of the publicly traded licensee or of a
publicly traded company affiliated with a licensee; (vii) an underwriter is
holding securities of a publicly traded licensee or of a publicly traded
company affiliated with a licensee as part of an underwriting for no more than
90 days if it exercises voting rights with respect to less than 5% of the
outstanding securities of a publicly traded licensee or a publicly traded
company affiliated with a licensee; (viii) a stock clearinghouse holds voting
securities for third parties, if it exercises voting rights with respect to
less than 5% of the outstanding securities of a publicly traded licensee or of
a publicly traded company affiliated with a licensee; or (ix) a person owns
less than 5% of the voting securities of the publicly traded licensee or
publicly traded company affiliated with a licensee. Hence, the business
opportunities of the Company and its stockholders in Colorado are limited to
such interests that comply with the statute and Commission's rules.
Conveyance of Licensor. With limited exceptions applicable to licensees that
are publicly traded entities, no person may sell, lease, purchase, convey or
acquire any interest in a retail gaming or operator license or business
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without the prior approval of the Colorado Commission. Also, no person may own
gaming equipment without being licensed. Such prohibition could impair the
ability of the holders of the Notes to liquidate the assets of the Company upon
any foreclosure of the liens securing the Notes.
There cannot be a change in control of the Company without the Colorado
Commission's prior approval. Also, there can be no change in the membership
interests of the Company without the Colorado Commission's prior approval.
All agreements, contracts, leases or arrangements in violation of applicable
Colorado law or regulations are void and unenforceable. The Colorado Commission
or Division Director may require changes in gaming contracts (which are any
agreements with a licensee, such as the Notes) or termination of a gaming
contract.
Rule 4.5. In addition to the other requirements of the gaming laws, the
Colorado Commission has enacted a special rule, Rule 4.5, which imposes
additional requirements on publicly traded corporations holding gaming licenses
in Colorado and on gaming licensees in Colorado owned directly or indirectly by
publicly traded corporations. The term "publicly traded corporation" is a
specially defined term and may include limited liability companies, trusts,
partnerships and other business organizations, and may even include entities
exempted from the registration requirements of the securities laws under
certain circumstances.
Under Rule 4.5, licensees to whom Rule 4.5 applies must include in their
articles of organization or similar charter documents certain specified
provisions that: restrict the rights of the licensee to issue voting interests
or securities except in accordance with the Colorado gaming laws; limit the
rights of persons to transfer voting interests or securities of a licensee
except in accordance with the Colorado gaming laws; and provide that holders of
voting interests or securities of a licensee found unsuitable by the Colorado
Commission may be required to sell their interests or securities back to the
issuer at the lesser of, in general terms, the holder's investment or the
market price as of the date of the finding of unsuitability. Alternatively, and
with authorization by the Colorado Commission, the holder may in limited
circumstances transfer the voting interests or securities to a suitable person
(as determined by the Colorado Commission). Until the voting interests or
securities are held by suitable persons, the issuer may not pay dividends or
interest on them, the interests or securities may not be voted, or entitled to
any vote, and they may not be included in the voting or securities of the
issuer, and the issuer may not pay any remuneration in any form to the holder
of the securities or interests.
Pursuant to Rule 4.5, persons who acquire direct or indirect beneficial
ownership of (i) 5% or more of any class of a publicly traded corporation
involved in gaming in Colorado or (ii) 5% or more of the beneficial interest in
a gaming licensee directly or indirectly through any class of voting securities
of any holding company or intermediary company of a licensee (all such persons
hereinafter referred to as "qualifying persons"), must notify the Colorado
authorities within 10 days of such acquisition, are required to submit all
requested information and are subject to a finding of suitability. Licensees
also must notify any qualifying persons of these requirements. A qualifying
person whose interests equal 10% or more must apply to the Colorado Commission
for a finding of suitability within 45 days after acquiring such securities.
Licensees must also notify any qualifying persons of these requirements.
Whether or not notified, qualifying persons are responsible for complying with
these requirements.
A qualifying person who is an institutional investor under Rule 4.5 and whose
interests equal 15% or more must apply to the Colorado Commission for a finding
of suitability within 45 days after acquiring such interests. A qualifying
person who is an institutional investor and whose interests equal 10% or more,
but less than 15%, may not be required to apply for suitability, provided such
person fulfills certain reporting requirements.
Pursuant to Rule 4.5, persons found unsuitable by the Colorado Commission
must be removed from any position as an officer, director, or employee of a
licensee, or from a holding or intermediary company thereof. Such unsuitable
persons also are prohibited from any beneficial ownership of the voting
securities of any such entities. Licensees, or affiliated entities of
licensees, are subject to sanctions for paying dividends to persons found
unsuitable by the Colorado Commission, or for recognizing voting rights of, or
paying a salary or any
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remuneration for services to, unsuitable persons. Licensees or their
affiliated entities also may be sanctioned for failing to pursue efforts to
require unsuitable persons to relinquish their interests. The Colorado
Commission may determine that anyone with a material relationship to a
licensee, or affiliated company, must apply for a finding of suitability.
Taxes. The Colorado Amendment further provides that, in addition to any
other applicable license fees, up to a maximum of 40% of the adjusted gross
proceeds of gaming operations ("AGP") may be payable by a licensee for the
privilege of conducting gaming. AGP is generally defined as the total amounts
wagered less all payments to players. With respect to games of poker, AGP
means those sums wagered in a hand retained by the licensee as compensation,
which must be consistent with the minimum and maximum amounts established by
the Colorado Commission. Currently, the gaming tax on AGP is: 2% on the first
$2 million of AGP; 4% on AGP from $2 million to $4 million; 14% on AGP from $4
million to $5 million; 18% on AGP from $5 million to $10 million; and 20% on
AGP over $10 million. The gaming tax is paid monthly, with licensees required
to file returns by the 15th of the following month. Each year, the Colorado
Commission establishes the gaming tax for the following 12 months.
Annual Device Fees. The Colorado Commission requires all gaming licensees to
pay an annual device fee for each slot machine, blackjack table and poker
table. The current annual state device fee, established October 1, 1996, is
$75. The municipalities of Central City, Black Hawk and Cripple Creek also
assess and collect their own device fees. The current annual device fee in
Black Hawk is $750 per device. There is no statutory limit on state or city
device fees, which may be increased at the discretion of the state or city.
The state device fee is not prorated; a device used at any time during the
year is assessed the full state fee. Local device fees may be prorated
according to device usage; the city of Black Hawk currently prorates device
fees such that any device used at any time during a calendar quarter is
subject to the device fee for such calendar quarter. In addition, a business
improvement fee of $100 per device and a transportation impact fee of $77 per
device also may apply depending upon the location of the licensed premises.
The Isle-Black Hawk is currently not subject to the business improvement fee
of $100 per device.
Alcohol. The sale of alcoholic beverages in gaming establishments is subject
to strict licensing, control, and regulation by state and local authorities.
Alcoholic beverage licenses are revocable and non-transferable. State and
local licensing authorities have full power to deny, limit, condition, suspend
or revoke any such licenses. Persons or entities which directly or on a pass-
through basis own 10% or more of a licensee will be required to complete
applications and submit certain personal and financial information, and be
subject to investigation. Violation of the state alcoholic beverage laws may
constitute a criminal offense, and violators may be subject to criminal
prosecution, incarceration and fines.
There are various classes of alcoholic beverage licenses under the Colorado
Liquor Code. A retail gaming tavern license or a hotel and restaurant liquor
license may be issued to persons who are licensed pursuant to Colorado law. A
retail gaming tavern licensee may sell malt, vinous or spirituous liquors only
by individual drinks for consumption on the premises and must also make
available sandwiches or light snacks or contract with concessionaires to
provide food services within the same building as the licensed premises. A
hotel and restaurant liquor license requires the service of meals and that
meals equal a fixed minimum percent of food and beverage sales. In no event
may any person hold more than or have an interest in more than three retail
gaming tavern licenses. Also, a person may not have an interest in more than
one type of liquor license. An application for an alcoholic beverage license
in Colorado requires notice, posting and a public hearing before the local
liquor licensing authority. The Department's Liquor Enforcement Division also
must approve the application.
Recent Developments. In 1994, Colorado voters refused by a margin of 93% to
7% to permit gaming in Manitou Springs (located near Colorado Springs and
Cripple Creek) or slot machines in airports. On November 5, 1996, Colorado
voters defeated by a margin of 69% to 31% a proposal to allow gaming in the
community of Trinidad, located on the New Mexico border. There can be no
assurance, of course, that additional gaming will not be authorized.
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In 1997 the state legislature passed, but the Governor vetoed, a bill that
would have permitted video lottery terminals in dog and horse race tracks under
certain terms and conditions. Video lottery terminals are games of chance,
similar to slot machines, in which the player pushes a button that causes a
random set of numbers or characters to be displayed on a video screen.
Depending on the display, the player may be awarded a ticket, which can be
exchanged for cash or playing credit. There can be no assurance that similar
legislation permitting video lottery terminals in dog and horse race tracks or
other venues will not be considered in the future.
Federal legislation was recently enacted that established a National Gambling
Impact and Policy Commission to study the economic impact of gambling on the
United States, the individual states and Native American tribes. Additional
federal regulation may occur due to the initiation of hearings by the
Commission. Any new Federal or state legislation could have a material adverse
effect on the Company.
The Company currently holds no gaming or liquor licenses and will therefore
have to make applications for both types of licenses in connection with the
opening and operation of the Isle-Black Hawk. While the Company believes that
it will be able to obtain such licenses, no assurances can be given that such
licenses will be issued or granted, or, if issued and granted, not subject to
additional material restrictions or subsequently revoked. The failure or
inability to obtain any such licenses in a timely manner, the imposition of
additional material restrictions in connection therewith, or the subsequent
revocation of any such license, would materially and adversely affect the Isle-
Black Hawk and the Issuers.
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MANAGEMENT
The Company has hired the Manager to manage its operations. Certain officers
and employees of the Company and the Manager must be licensed by the Colorado
authorities to determine suitability. There can be no assurance that any or
all of the necessary officers and employees of the Company and the Manager
will be deemed suitable for licensing. Subject to such approval, set forth
below are the managers and the executive officers of the Company and the
directors and executive officers of Capital, together with their respective
ages as of the date of this Prospectus. The Issuers do not compensate such
managers, directors and executive officers nor are the Issuers party to any
employment contract with any of such managers, directors or executive
officers.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- ---------------------------------------------------------
<S> <C> <C>
Bernard Goldstein....... 68 Chief Executive Officer of the Company and of Capital
John M. Gallaway........ 59 President and Chief Operating Officer of the Company and
of Capital; Manager of the Company; Director of Capital
Allan B. Solomon........ 61 Executive Vice President, General Counsel and Secretary
of the Company and of Capital; Manager of the Company;
Director of Capital
H. Thomas Winn.......... 57 Vice President of the Company and of Capital; Manager of
the Company; Director of Capital
Rexford A. Yeisley...... 50 Vice President, Chief Financial Officer, Treasurer and
Assistant Secretary of the Company and of Capital
Timothy M. Hinkley...... 42 Senior Vice President of Operations of the Company and of
Capital
</TABLE>
Bernard Goldstein. Mr. Goldstein has been Chairman of the Board of Casino
America since June 1992 and Chief Executive Officer of Casino America since
September 1995. From June 1992 until February 1993 and from September 1995
until December 1995, Mr. Goldstein was also President and Chief Executive
Officer of Casino America. Mr. Goldstein has been active in the development of
the riverboat gaming industry in a number of states and was Chairman of the
Board of Steamboat Development Corporation and Steamboat Southeast, Inc., both
of which were involved in the first legalized riverboat gaming ventures in the
United States. In addition to his involvement in the riverboat gaming
industry, Mr. Goldstein has been involved in scrap metal recycling since 1951
and barge-line transportation since 1960.
John M. Gallaway. Mr. Gallaway has been President of Casino America since
December 1995 and Chief Operating Officer of Casino America since July 1996.
From July 1995 to November 1995, Mr. Gallaway was a professor at the
University of Houston. Mr. Gallaway was Deputy Managing Director, Gaming, of
Sun International, a company engaged in owning and operating casinos and
resorts, from September 1992 to August 1994. Prior to that, from 1984 to 1992,
Mr. Gallaway was President and General Manager of TropWorld Casino Resort in
Atlantic City and, from 1981 to 1984, he was President and General Manager of
the Tropicana Hotel in Las Vegas.
Allan B. Solomon. Mr. Solomon has been Secretary and a director of Casino
America since June 1992, served as the Chief Financial Officer and Treasurer
of Casino America from June 1992 to October 6, 1993, and was Chairman of its
Executive Committee from January 1993 to April 1995. Mr. Solomon became
General Counsel of Casino America in May 1994 and became Executive Vice
President in April 1995. Mr. Solomon is President of Allan B. Solomon, P.A.,
and was a partner in the Florida law firm of Broad and Cassel from 1986 to May
1994.
H. Thomas Winn. Mr. Winn has been the Chairman, CEO and President of Nevada
Gold since January 1994. He has also been a Director of Nevada Gold since
1994. Mr. Winn served as Chairman of Aaminex Capital Corporation from 1983
through 1994. Aaminex Capital Corporation is a financial consulting and
venture capital firm, involved in real estate, mining and environmental
activities. Mr. Winn has formed numerous investment limited partnerships and
capital formation ventures.
54
<PAGE>
Rexford A. Yeisley. Mr. Yeisley has been Chief Financial Officer of Casino
America since December 1995. Mr. Yeisley was Senior Vice President and Chief
Financial Officer of Six Flags Theme Parks, Inc. from 1991 to 1995, and from
1987 to 1991, Mr. Yiesley was Vice President and Chief Financial Officer of
that company.
Timothy M. Hinkley. Mr. Hinkley has been Senior Vice President of Operations
for Casino America since April 1997. Mr. Hinkley was General Manager and Vice
President of the Isle of Capri Casino Crowne Plaza Resort in Biloxi,
Mississippi from May 1992 to April 1997. Prior to that, from 1990 to 1992, Mr.
Hinkley was Vice President of Food and Beverage and Entertainment of Steamboat
Development Corporation, a riverboat gaming company in Iowa.
CERTAIN TRANSACTIONS
Casino America and the Company entered into an Amended and Restated
Management Agreement dated as of July 29, 1997 which became effective upon the
consummation of the Capitalization Transactions. The term of the Management
Agreement expires on December 31, 2096, unless terminated earlier in accordance
with its terms. In consideration of the services provided under the Management
Agreement, the Company has agreed to pay Casino America, as Manager, a fee
equal to 2% of Revenues (as defined in the Management Agreement) plus 10% of
Operating Income (as defined in the Management Agreement), up to a maximum of
4% of Revenues. See "Material Agreements--Management Agreement."
Casino America and the Company entered into a License Agreement dated July
29, 1997 which became effective on the Closing Date and pursuant to which
Casino America licensed to the Company the use of the trademarks Isle of
Capri(R), Island Gold(R), Calypso's(R), Farradday's(TM) and Isle Style(TM), the
trademark Isle of Capri parrot logo and any future trademarks utilized by the
Manager at its other gaming facilities. No license fee is payable thereunder.
The license terminates upon the occurrence of certain events, such as
termination of the Management Agreement. See "Material Agreements--License
Agreements."
Of the net proceeds of the Old Notes Offering, $0.4 million was used to
discharge mortgage indebtedness secured by a portion of the Blackhawk Gold
Parcel. Nevada Gold was the obligor under the mortgage indebtedness. Nevada
Gold beneficially owns a 40% interest in the Company. See "Principal Security
Holders." H. Thomas Winn, a Manager and Vice President of the Company, is the
Chief Executive Officer and a stockholder of Nevada Gold.
The Company presently expects, at a future date in connection with the
equipping of the Isle-Black Hawk, to purchase up to 300 slot machines from the
inventory of Casino America, provided that such purchase is permitted by
applicable gaming law. The terms of such purchase are expected to be no less
favorable to the Company than if the purchase were made from unaffiliated
parties. See also "Business--Capitalization Transactions."
55
<PAGE>
PRINCIPAL SECURITY HOLDERS
Casino America and Nevada Gold beneficially own a 60% and a 40% interest,
respectively, in the Company. For a period of six months after the closing date
of the Old Notes Offering, Nevada Gold will have an option to purchase up to
4.2% of Casino America of Colorado, Inc.'s interests in the Company pursuant to
the terms of the Members Agreement. See "Material Agreements--Members
Agreement." The following table sets forth certain information, as of August
25, 1997, with respect to the beneficial ownership of Casino America common
stock by (i) each manager of the Company, (ii) each executive officer of the
Company and (iii) all executive officers and Managers of the Company as a
group:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CASINO
AMERICA PERCENTAGE OF
COMMON STOCK CASINO AMERICA
BENEFICIALLY COMMON STOCK
NAME OF BENEFICIAL OWNER OWNED OUTSTANDING
- ------------------------ ------------ --------------
<S> <C> <C>
Bernard Goldstein................................. 2,986,501(1) 12.8%
John M. Gallaway.................................. 69,000(2) *
Allan B. Solomon.................................. 438,670(3) 1.9%
Rexford A. Yeisley................................ 16,000(4) *
Timothy M. Hinkley................................ 33,374(5) *
All current executive officers and Managers as a
group (five persons)............................. 3,543,545 15.2%
</TABLE>
The Company is the sole shareholder of Capital.
- --------
*Less than one percent.
(1) Includes 40,000 shares that are issuable upon the exercise of stock options
that are exercisable within 60 days.
(2) Includes 60,000 shares that are issuable upon the exercise of stock options
that are exercisable within 60 days.
(3) Includes 156,250 shares that are issuable upon the exercise of stock
options that are exercisable within 60 days.
(4) Includes 15,000 shares that are issuable upon the exercise of stock options
that are exercisable within 60 days.
(5) Consists of 33,374 shares that are issuable upon the exercise of stock
options that are exercisable within 60 days.
56
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Issuers to satisfy their obligations
pursuant to the Registration Rights Agreement. See "--Registration Rights."
The Issuers are making the Exchange Offer in reliance upon the position of
the staff of the Commission set forth in certain no-action letters addressed to
other parties in other transactions. However, the Issuers have not sought their
own no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Based on these interpretations by the
staff of the Commission, the New Notes issued pursuant to the Exchange Offer
may be offered for resale, resold and otherwise transferred by holders thereof
(other than (i) any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act, (ii) the Initial Purchaser or
any Holder who acquired the Old Notes directly from the Company solely in order
to resell pursuant to Rule 144A of the Securities Act or any other available
exemption under the Securities Act, or (iii) a broker-dealer who acquired the
Old Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and such holder is not participating and has
no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such New Notes. Any
Holder who tenders Old Notes in the Exchange Offer for the purpose of
participating in a distribution of the New Notes could not rely on such
interpretations by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless such sale is made
pursuant to an exemption from such requirements.
Holders of Old Notes not tendered will not have any further registration
rights and the Old Notes not exchanged will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the markets for the Old
Notes could be adversely affected.
NEITHER THE MANAGERS OF THE COMPANY, THE BOARD OF DIRECTORS OF CAPITAL NOR
EITHER OF THE ISSUERS MAKES ANY RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD
NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED
TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN
DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE
AGGREGATE AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL AND CONSULTING THEIR ADVISERS, IF ANY, BASED ON THEIR OWN
FINANCIAL POSITION AND REQUIREMENTS.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the issuance of the Old Notes, the Issuers and the Initial
Purchaser entered into the Registration Rights Agreement. Holders of the New
Notes (other than as set forth below) are not entitled to any registration
rights with respect to the New Notes.
Pursuant to the Registration Rights Agreement, the Issuers agreed to file
with the Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the New Notes. Upon
the effectiveness of the Registration Statement, the Issuers will offer to the
Holders of Transfer Restricted Securities pursuant to the Exchange Offer who
are able to make certain representations the opportunity to exchange their
Transfer Restricted Securities (as defined herein) for New Notes. If (i) the
Issuers are not required to file the Exchange Offer Registration Statement or
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any Holder of Transfer
57
<PAGE>
Restricted Securities notifies the Issuers prior to the 20th day following
consummation of the Exchange Offer that (A) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the New Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales
or (C) that it is a broker-dealer and owns New Notes acquired directly from the
Issuers or an affiliate of the Issuers, the Issuers will file with the
Commission a Shelf Registration Statement to cover resales of the New Notes by
the Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement, and keep the
same effective for a period of two years after effectiveness (or for such
shorter period that will terminate when all of the New Notes covered by the
Shelf Registration Statement have been sold pursuant thereto or cease to be
outstanding). The Issuers will use their best efforts to cause the applicable
registration statement to be declared effective as promptly as practicable by
the Commission. For purposes of the foregoing, "Transfer Restricted Securities"
means each Note until (i) the date on which such Note has been exchanged by a
person other than a broker-dealer for a New Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Note for a
New Note, the date on which such New Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Note has been effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement or (iv)
the date on which such Note is distributed to the public pursuant to Rule 144
under the Act. The Registration Rights Agreement provides that the company may,
on one occasion, by notice to all persons to whom it has provided a copy of the
resale prospectus contained in the Shelf Registration Statement, suspend the
use thereof for a period not to exceed 20 consecutive days in the event that,
in the opinion of counsel to the Company, there are material non-public
circumstances that would render such resale prospectus materially inaccurate or
misleading.
The Registration Rights Agreement provides that (i) the Issuers will file the
Registration Statement with the Commission on or prior to 60 days after the
Closing Date, (ii) the Issuers will use their best efforts to have the
Registration Statement declared effective by the Commission on or prior to 120
days after the Closing Date, (iii) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Issuers will commence the
Exchange Offer and use their best efforts to issue on or prior to 45 business
days after the Effectiveness Target Date, New Notes in exchange for all Old
Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to
file the Shelf Registration Statement, the Issuers will use their best efforts
to file the Shelf Registration Statement with the Commission on or prior to 45
days after such filing obligation arises and to cause the Shelf Registration to
be declared effective by the Commission on or prior to 120 days after such
obligation arises. If (i) the Issuers fail to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (ii) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (iii) the Issuers fail to
consummate the Exchange Offer within 45 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (iv)
the Shelf Registration Statement or the Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (i)
through (iv) above, a "Registration Default"), then the Issuers will pay
Liquidated Damages to each Holder, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default in an
amount equal to $.05 per week per $1,000 principal amount of the Notes held by
such Holder; provided, however, upon the occurrence of an event described in
clause (iv) above with respect to the failure of a Shelf Registration Statement
to be effective or usable in connection with resales of Transfer Restricted
Securities, only those holders whose Notes were registered pursuant to such
Shelf Registration Statement will be entitled to collect Liquidated Damages.
The amount of the Liquidated Damages will increase by an additional $.05 per
week per $1,000 principal amount of Notes with respect to each subsequent 90-
day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $.25 per week per $1,000 principal amount of
Notes. All accrued Liquidated Damages will be paid by the Issuers on each
Interest Payment Date in the same manner as interest payments are made.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
58
<PAGE>
The Holders will be required to make certain representations to the Issuers
(as described in the Registration Rights Agreement) in order to participate in
the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Notes included in the
Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus and
in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Issuers will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York time, on , 1998; provided, however, that if the Issuers,
in the Company's sole discretion, have extended the period of time for which
the Exchange Offer is open, the term "Expiration Date" means the latest time
and date to which the Exchange Offer is extended. The Exchange Offer may not be
extended beyond 45 business days from the date of this Prospectus. The Issuers
may extend the Exchange Offer at any time and from time to time by giving oral
or written notice to the Exchange Agent and by timely public announcement.
Without limiting the manner in which the Issuers may choose to make any public
announcement and subject to applicable law, the Issuers shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
During any extension of the Exchange Offer, all Old Notes previously tendered
pursuant to the Exchange Offer will remain subject to the Exchange Offer. The
Issuers intend to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations thereunder.
As of the date of this Prospectus, $75,000,000 aggregate principal amount of
the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1997, to all Holders
of Old Notes known to the Issuers. The Issuers' obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain conditions as
set forth under "--Certain Conditions to the Exchange Offer" below.
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and rights to receive Liquidated Damages. See "--
Registration Rights; Liquidated Damages." The Old Notes were, and the New Notes
will be, issued under and entitled to the benefits of the Indenture.
Old Notes tendered in the Exchange Offer must be in denominations of the
principal amount of $1,000 and any integral multiple thereof. Any Old Notes not
accepted for exchange for any reason will be returned without expense to the
tendering Holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Issuers expressly reserve the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer." The
Issuers will give oral or written notice of any amendment, nonacceptance or
termination to the Holders of the Old Notes as promptly as practicable. Any
amendment to the Exchange Offer will not limit the right of Holders to withdraw
tendered Old Notes prior to the Expiration Date. See "--Withdrawal Rights."
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Issuers of Old Notes by a Holder thereof as set forth below
and the acceptance thereof by the Issuers will constitute a binding agreement
between the tendering Holder and the Issuers upon the terms and subject to the
conditions set forth in this Prospectus and in the Issuing Letter of
Transmittal. Except as set forth
59
<PAGE>
below, a Holder who wishes to tender Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to IBJ Schroder Bank & Trust Company (the "Exchange Agent") at one
of the addresses set forth below under "Exchange Agent" on or prior to the
Expiration Date. In addition, either (i) certificates for such Old Notes must
be received by the Exchange Agent along with the Letter of Transmittal, or (ii)
a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Issuers (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the
Holder must comply with the guaranteed delivery procedures described below. THE
METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO THE ISSUERS.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust
companies having an office or correspondent in the United States (collectively,
"Eligible Institutions"). If Old Notes are registered in the name of a person
other than the signer of the Letter of Transmittal, the Old Notes surrendered
for exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Issuers in its sole discretion, duly executed by the registered Holder with the
signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Issuers in their sole discretion, which determination shall be final and
binding. The Issuers reserve the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Issuers or
its counsel, be unlawful. The Issuers also reserve the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any Holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Issuers shall be final and binding on all parties. Unless
waived, all defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Issuers
shall determine. Neither the Issuers, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur
any liability for failure to give such notification. The Exchange Agent intends
to use reasonable efforts to give notification of such defects and
irregularities.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered Holder or Holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or
60
<PAGE>
representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuers, proper evidence satisfactory to the Issuers of
their authority to so act must be submitted.
By tendering, each Holder will represent to the Issuers that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder and such person has no
arrangement with any person to participate in the distribution of the New
Notes. If any Holder or any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Issuers, is engaged in or intends
to engage in or has an arrangement or understanding with any person to
participate in a distribution of such New Notes to be acquired pursuant to the
Exchange Offer, or acquired the Old Notes as a result of market making or other
trading activities, such Holder or any such other person (i) could not rely on
the applicable interpretations of the staff of the Commission and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuers will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "--Certain Conditions to the Exchange Offer." For purposes of
the Exchange Offer, the Issuers shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Issuers has given oral or
written notice thereof to the Exchange Agent, with written confirmation of any
oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Accordingly, registered Holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the most recent date to
which interest has been paid on the Old Notes, or, if no interest has been paid
on the Old Notes, from the Closing Date. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange
will not receive any payment in respect of accrued interest or Liquidated
Damages, if any, on such Old Notes otherwise payable on any interest payment
date the record date for which occurs on or after consummation of the Exchange
Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely Book-
Entry Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, (ii) a properly completed and duly executed
Letter of Transmittal and (iii) all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer, or if Old Notes are submitted for a greater amount than
the Holder desires to exchange, such unaccepted or nonexchanged Old Notes will
be returned without expense to the tendering Holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry procedures
described below, such nonexchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) designated by the tendering
Holder as promptly as practicable after the expiration or termination of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this
61
<PAGE>
Prospectus, and any financial institution that is a participant in the Book-
Entry Transfer Facility's systems may make book-entry delivery of Old Notes by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, with
any required signature guarantees and any other required documents, must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent has received from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form of the corresponding exhibit to
the Registration Statement of which this Prospectus constitutes a part (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the Holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date. For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the amount of such Old Notes), and (where certificates
for Old Notes have been transmitted) specify the name in which such Old Notes
are registered, if different from that of the withdrawing Holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old
Notes have been tendered pursuant to the procedure for book-entry transfer
described above, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of such facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Issuers, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Notes which have been tendered for exchange but which
are not exchanged for any reason will be returned to the Holder thereof without
cost to such Holder (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Old Notes
will be credited to an account with such Book-Entry Transfer Facility specified
by the Holder) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Old Notes" above at any time on or prior to the Expiration Date.
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CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Issuers shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of the Issuers to accept for exchange or exchange some or all of
the Old Notes pursuant to the Exchange Offer; or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the
Issuers might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the sole judgment of the
Issuers, might result in the holders of New Notes having obligations with
respect to resales and transfers of New Notes which are greater than those
described in the interpretation of the Commission referred to on the cover
page of this Prospectus, or would otherwise make it inadvisable to proceed
with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Issuers to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Issuers and its subsidiaries taken as a whole that, in the
sole judgment of the Issuers, is or may be adverse to the Issuers, or the
Issuers shall have become aware of facts that, in the sole judgment of the
Issuers, have or may have an adverse effect on the value of the Old Notes
or the New Notes.
Holders of Old Notes will have registration rights and the right to Liquidated
Damages as described under "--Registration Rights; Liquidated Damages" if the
Issuers fails to consummate the Exchange Offer.
To the knowledge of the Issuers as of the date of this Prospectus, none of
the above events has occurred.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by the Issuers regardless of the circumstances giving rise to any such
condition or may be waived by the Issuers in whole or in part at any time and
from time to time in their sole discretion. The failure by the Issuers at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
In addition, the Issuers will not accept for exchange any Old Notes tendered,
and no New Notes will be issued in exchange for any such Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939.
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EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters for Transmittal and Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the addresses
set forth below. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
By Mail, Overnight Courier or Hand:
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
Attn: Stuart A. Rothenberg
Telephone Number:
(212) 858-2000
By Facsimile:
(212) 858-2952
DELIVERY OF A LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Issuers will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Issuers will, however, pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for reasonable out-of-pocket
expenses in connection therewith. The Issuers will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Notes, and in handling tenders for
their customers. The expenses to be incurred in connection with the Exchange
Offer, including the fees and expenses of the Exchange Agent and printing,
accounting, registration, and legal fees, will be paid by the Issuers and are
estimated to be approximately $ .
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
the Issuers to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, the Old Notes may
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not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Issuers do not
currently anticipate that will register the Old Notes under the Securities Act.
Based upon no-action letters issued by the staff of the Commission to third
parties, the Issuers believe the New Notes issued pursuant to the Exchange
Offer in exchange for the Old Notes may be offered for resale, resold or
otherwise transferred by a Holder thereof (other than any (i) Holder which is
an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act, (ii) the Initial Purchaser or any Holder who acquired the Old
Notes directly from the Issuers solely in order to resell pursuant to Rule 144A
of the Securities Act or any other available exemption under the Securities Act
or (iii) a broker-dealer who acquired the Old Notes as a result of market
making or other trading activities) without compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and
such holder is not participating and has no arrangement or understanding with
any person to participate in a distribution (within the meaning of the
Securities Act) of such New Notes. However, the Issuers have not sought their
own no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each Holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of New Notes, and has no arrangement or understanding to
participate in a distribution of New Notes. If any Holder is an affiliate of
the Issuers, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, or acquired the Old Notes as a result of market
or other trading activities, such Holder (i) could not rely on the relevant
determinations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied with.
The Issuers has agreed to register or qualify the sale of the New Notes in such
jurisdictions only in limited circumstances and subject to certain conditions.
ACCOUNTING TREATMENT
The exchange of the New Notes for the Old Notes will have no impact on the
Issuers's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. Expenses of the Exchange
Offer and expenses related to the Old Notes will be amortized, pro rata, over
the term of the New Notes.
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DESCRIPTION OF THE NEW NOTES
GENERAL
The terms of the Notes include those stated in the Indenture and the
Collateral Documents and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes
are subject to all such terms, and Holders of Notes are referred to the
Indenture, the Collateral Documents and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture and the
Collateral Documents, while discussing all material terms thereof, does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions."
The New Notes will be senior secured obligations of the Issuers, will rank
pari passu in right of payment with any existing and future senior Indebtedness
of the Issuers and will rank senior in right of payment to all subordinated
Indebtedness of the Issuers. The New Notes will be without recourse to the
Members.
Capital is a wholly owned subsidiary of the Company and was incorporated
solely for the purpose of serving as a co-issuer of the Notes in order to
facilitate the Offering. Capital will not have any substantial operations or
assets and will not have any revenues. As a result, prospective investors
should not expect Capital to participate in servicing the principal, interest,
Liquidated Damages, if any, premium or any other payment obligations on the
Notes. See "--Certain Covenants--Restrictions on Activities of Capital."
PRINCIPAL, MATURITY AND INTEREST
The New Notes will be limited in aggregate principal amount to $75.0 million
and will mature on August 31, 2004. Fixed Interest on the New Notes will accrue
at the rate of 13% per annum ("Fixed Interest") and will be payable semi-
annually in arrears on February 28 and August 31 of each year, commencing on
February 28, 1998, to Holders of record on the immediately preceding February
15 and August 15, respectively. Fixed Interest on the New Notes will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from the date of original issuance. Fixed Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
In addition, the New Notes will bear Contingent Interest, calculated as
described below, from the date on which Isle-Black Hawk becomes Operating to
the date of payment of the New Notes. Installments of accrued or deferred
Contingent Interest will become due and payable semi-annually on each February
28 and August 31 after the date on which the Isle-Black Hawk becomes Operating
to the Holders of record at the close of business on the preceding February 15
or August 15; unless all or a portion of such installment of Contingent
Interest is permitted to be deferred on such date; and provided, that no
Contingent Interest is payable with respect to any period prior to the date on
which the Isle-Black Hawk becomes Operating. Additionally, all installments of
accrued or deferred Contingent Interest will become due and payable (and may
not be further deferred) with respect to any principal amount of the New Notes
that matures (whether at stated maturity, upon acceleration, upon redemption,
upon maturity of repurchase obligation or otherwise) upon such maturity of such
principal amount of the New Notes.
The Company, at its option, may defer payment of all or a portion of any
installment of Contingent Interest then otherwise due if, and only to the
extent that, (i) the payment of such portion of Contingent Interest will cause
the Company's Adjusted Fixed Charge Coverage Ratio for the Company's most
recently completed Semiannual Period prior to such interest payment date to be
less than 1.5 to 1.0 on a pro forma basis after giving effect to the assumed
payment of such Contingent Interest (but may not defer such portion, which, if
paid, would not cause such Adjusted Fixed Charge Coverage Ratio to be less than
1.5 to 1.0) and (ii) the principal amount of the Notes corresponding to such
Contingent Interest has not then matured and become due and payable (at stated
maturity, upon acceleration, upon redemption, upon maturity of repurchase
obligation or otherwise). The aggregate amount of Contingent Interest payable
in a Semiannual Period will be reduced pro rata for reductions
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in the outstanding principal amount of the Notes prior to the close of business
on the record date immediately preceding such payment of Contingent Interest.
Contingent Interest that is deferred shall become due and payable, in whole or
in part, on the earlier of (i) the next succeeding interest payment date on
which all or a portion of such Contingent Interest is not permitted to be
deferred, and (ii) upon the maturity of the corresponding principal amount of
the Notes (whether at stated maturity, upon acceleration, upon redemption, upon
maturity of repurchase obligation or otherwise). No interest will accrue on any
Contingent Interest deferred and which does not become due and payable. To the
extent permitted by law, interest will accrue on overdue Fixed Interest or
Contingent Interest at the same rate as the Fixed Interest plus 1% per annum.
Each installment of Contingent Interest is calculated to accrue (an "Accrual
Period") from, but not including, the most recent date to which Contingent
Interest has been paid or provided for or through which Contingent Interest had
been calculated and deferred (or from and including the date on which the Isle-
Black Hawk becomes Operating if no installment of Contingent Interest has been
paid, provided for or deferred) to, and including, either (a) the last day of
the next Semiannual Period if the corresponding principal amount of the Notes
has not become due and payable or (b) the date of payment if the corresponding
principal amount of the Notes has become due and payable (whether at stated
maturity or upon acceleration, redemption or maturity of repurchase obligation
or otherwise). With respect to each Accrual Period, interest will accrue daily
on the principal amount of each Note outstanding during such period as follows:
(i) for any portion of an Accrual Period which consists of all or part of a
Semiannual Period that ends during such Accrual Period, 1/180th of the
Contingent Interest with respect to such principal amount for such Semiannual
Period until fully accrued and (ii) for any other portion of an Accrual Period,
1/180th of the Contingent Interest with respect to such principal amount for
the Semiannual Period that began and last ended after the date on which the
Isle-Black Hawk becomes Operating.
Any reference in this Prospectus to "accrued and unpaid interest" on the
Notes includes the amount of Fixed Interest, unpaid Contingent Interest and
Liquidated Damages, if any, due and payable thereon.
Principal of and premium, if any, interest and Liquidated Damages, if any, on
the Notes will be payable at the office or agency of the Issuers maintained for
such purpose within the City and State of New York or, at the option of the
Issuers, payment of interest and Liquidated Damages, if any, may be made by
check mailed to the Holders of Notes at their respective addresses set forth in
the register of Holders of Notes; provided that all payments with respect to
Notes the Holders of which have given wire transfer instructions to the Company
will be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof. Until otherwise designated by
the Issuers, the Issuers' office or agency in New York will be the office of
the Trustee maintained for such purpose. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.
SECURITY
The Notes will be secured by a first lien on the Note Collateral owned by the
Issuers or any of their respective subsidiaries, whether now owned or hereafter
acquired. The Note Collateral will include, without limitation and subject to
Permitted Liens, (i) a pledge of the Government Securities and any funds
deposited and held in the Interest Reserve Account until such time as such
funds are disbursed in accordance with the terms of the Cash Collateral and
Disbursement Agreement, (ii) a pledge of the funds held in the Construction
Disbursement Account, including, without limitation, approximately $52.9
million of the net proceeds of the Old Notes Offering, and a pledge of the
funds held in the Completion Reserve Account, including, without limitation,
approximately $5.0 million of the net proceeds of the Old Notes Offering, which
proceeds will be invested in Investment Grade Securities and held in such
accounts until disbursed in accordance with the terms of the Cash Collateral
and Disbursement Agreement, (iii) the fee simple interest in all of the real
property comprising the Isle-Black Hawk, additions and improvements and
component parts related thereto, issues and profits therefrom, and, except as
set forth below, furniture, fixtures, machinery and equipment forming a part
thereof or used in connection therewith, (iv) all of the Issuers' and their
respective subsidiaries' accounts receivable, general
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intangibles, inventory and other personal property and (v) to the extent
permitted by law, certain construction contracts (including the Design/Build
Agreement), operating agreements, the Management Agreement, other agreements,
licenses and permits entered into by, or granted to, the Issuers and their
respective subsidiaries in connection with the development, construction,
ownership and operation of the Isle-Black Hawk. Such liens and security
interests may be subordinate or junior to mechanic's liens, which under
applicable Colorado law may have priority over the lien on the real property
comprising the Isle-Black Hawk in favor of the Trustee and additions,
improvements and component parts relating thereto. The Company will not be
obtaining title insurance to insure against losses from the enforcement of such
mechanic's liens. See "Risk Factors--Mechanic's Liens." In addition, the
Holders of the Notes will not have a lien on FF&E acquired with or leased
through FF&E Financing or any Gaming License or Liquor Licenses.
If an Event of Default occurs and is continuing, the Trustee, on behalf of
the Holders, in addition to any rights or remedies available to it under the
Indenture and the Collateral Documents, may take such action as it deems
advisable to protect and enforce its rights in the Note Collateral, including
the institution of sale or foreclosure proceedings. The proceeds received by
the Trustee from any such sale or foreclosure will be applied by the Trustee
first to pay the expenses of such sale or foreclosure and fees or any other
amounts then payable to the Trustee under the Indenture or to the Disbursement
Agent under the Cash Collateral and Disbursement Agreement, and thereafter to
pay amounts due and payable with respect to the Notes.
The proceeds of any sale of the Note Collateral pursuant to the Indenture and
the related Collateral Documents following an Event of Default may not be
sufficient to satisfy payments due on the Notes. In addition, the ability of
the Holders to realize upon the Note Collateral may be limited pursuant to
gaming laws, in the event of a bankruptcy and pursuant to other applicable
laws, including securities laws, all as described below. See "--Remedies Upon
Default Under Notes"; "Risks Factors--Ability to Realize on Collateral;
Bankruptcy Considerations"; and "Risk Factors--Fraudulent Conveyance
Considerations."
Certain Gaming Law Limitations
The Trustee's ability to foreclose upon the Note Collateral will be limited
by relevant gaming laws, which generally require that persons who own or
operate a casino or purchase, possess or sell gaming equipment hold a valid
gaming license. No person can hold a gaming license in the State of Colorado
unless the person is found qualified or suitable by the relevant Gaming
Authorities. This prohibition may restrict the Trustee's ability to enforce
certain provisions contained in, or take certain actions permitted by, the
Collateral Documents, which the Trustee would otherwise be authorized to do by
serving as the Issuers' attorney-in-fact or otherwise, as provided in the
Collateral Documents. In addition, in order for the Trustee or a purchaser at
or after foreclosure to be found qualified or suitable, such Gaming Authorities
would have discretionary authority to require the Trustee, any or all of the
Holders and any such purchaser to file applications, be investigated and be
found qualified or suitable as an owner or operator of gaming establishments.
The applicant for qualification, a finding of suitability or licensing must pay
filing fees and all costs of any such investigation. If the Trustee is unable
or chooses not to qualify, be found suitable, or be licensed to own, operate or
sell such assets, it would have to retain or sell to an entity licensed to
operate or sell such assets. In any case, only an operator licensed by the
relevant Gaming Authority may operate a Gaming Facility and such operator must
have a right to possession of the premises. Otherwise, the gaming activities
must cease until the operator is appropriately licensed. In addition, in any
foreclosure sale or subsequent resale by the Trustee, licensing requirements
under the relevant gaming laws may limit the number of potential bidders and
may delay any sale, either of which events would have an adverse effect on the
sale price of the Note Collateral. Therefore, the practical value of realizing
on the Note Collateral may, without the appropriate approvals, be limited.
Certain Bankruptcy Limitations
The right of the Trustee to repossess and dispose of the Note Collateral upon
the occurrence of an Event of Default is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be
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commenced by or against the Issuers prior to the Trustee having repossessed and
disposed of the Note Collateral. Under the Bankruptcy Code, a secured creditor
such as the Trustee is prohibited from repossessing its security from a debtor
in a bankruptcy case, or from disposing of security repossessed from such
debtor, without bankruptcy court approval. Moreover, the Bankruptcy Code
permits the debtor to continue to retain and to use collateral, including
making asset sales under certain circumstances (and the proceeds, products,
offspring, rents or profits of such collateral) even though the debtor is in
default under the applicable debt instruments, provided that the secured
creditor is given "adequate protection." The meaning of the term "adequate
protection" may vary according to circumstances, but it is intended in general
to protect the value of the secured creditor's interest in the collateral and
may include, if approved by the court, cash payments or the granting of
additional security for any diminution in the value of the collateral as a
result of the stay of repossession or the disposition or any use of the
collateral by the debtor during the pendency of the bankruptcy case. The court
has broad discretionary powers in all these matters, including the valuation of
the Note Collateral or other Collateral that may be substituted therefor. In
addition, since the enforcement of the Lien of the Trustee in cash, deposit
accounts and cash equivalents may be limited in a bankruptcy proceeding, the
Holders may not have any consent rights with respect to the use of those funds
by the Issuers or any of their Subsidiaries during the pendency of the
proceeding. In view of these considerations, it is impossible to predict how
long payments under the Notes could be delayed following commencement of a
bankruptcy case, whether the terms of the Notes could be altered in a
bankruptcy case, whether or when the Trustee could repossess or dispose of the
Note Collateral or whether or to what extent Holders of the Notes would be
compensated for any delay in payment or loss of value of the Note Collateral.
COMPLETION CAPITAL COMMITMENT
Pursuant to a Completion Capital Commitment entered into by Casino America in
favor of the Trustee for the benefit of the Holders (the "Completion Capital
Commitment"), Casino America agreed for the benefit of Casino America of
Colorado, Inc. that, upon the occurrence of each Contribution Event (as defined
herein), Casino America will pay into the Construction Disbursement Account an
amount in cash as determined by the Trustee, based upon the Construction
Disbursement Budget, to be reasonably necessary to cause a Contribution Event
to no longer exist; provided, however, that the aggregate amount of all such
payments shall not exceed $5.0 million; and provided, further, that upon the
occurrence of the Contribution Event described in clause (iv) of the definition
thereof, Casino America will pay $5.0 million in cash into the Construction
Disbursement Account, less any amounts previously paid into the Construction
Disbursement Account pursuant to the occurrence of other Contribution Events.
"Contribution Event" means that (i) there are insufficient Available Funds (as
defined herein) to complete the development, construction and equipping of the
Isle-Black Hawk so that the Isle-Black Hawk is Operating on or before April 1,
1999, subject only to Permitted Liens; (ii) the Company, or any of its
representatives or agents, has provided the Trustee with a written notice that
it is unlikely that there will be sufficient Available Funds to complete the
development, construction and equipping of the Isle-Black Hawk so that the
Isle-Black Hawk is Operating on or before April 1, 1999, subject only to
Permitted Liens; (iii) (a) the Independent Construction Consultant, or any of
its representatives or agents, has provided the Trustee and the Company with a
written notice that it is unlikely that there will be sufficient Available
Funds (without giving effect to the amount of Additional Revenues (as defined
herein)), to complete the development, construction and equipping of the Isle-
Black Hawk so that the Isle-Black Hawk is Operating on or before April 1, 1999,
subject only to Permitted Liens and (b) within ten days of the Company
receiving notice thereof, the Company has not provided evidence satisfactory to
the Trustee that there shall be sufficient Additional Revenues, together with
the other Available Funds, to complete the development, construction and
equipping of the Isle-Black Hawk so that the Isle-Black Hawk is Operating on or
before April 1, 1999, subject only to Permitted Liens; or (iv) the Isle-Black
Hawk is not Operating on or before April 1, 1999. In addition, Casino America
will be required to pay $5.0 million, less any amounts previously paid pursuant
to one or more Contribution Events described above, into the Construction
Disbursement Account upon the commencement of any voluntary bankruptcy case by
the Company, or within 60 days after the commencement of an involuntary
bankruptcy case against the Company, if such involuntary case is not dismissed
in its entirety by a final, non-appealable court order during such 60-day
period or if the Company consents to the entry of an order for relief
commencing a bankruptcy case prior to the commencement of such 60-day period;
and Casino America shall not assert any
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defenses or setoffs to the payment of such funds. "Additional Revenues" means
revenue (including, without limitation, investment income (loss) less any
losses or costs associated therewith, earned on amounts in the Cash Collateral
Accounts other than the Interest Reserve Account) generated by, or other funds
of, the Company (other than from disposition of its assets), but only to the
extent that such revenue or funds are held by the Company, free and clear of
any claims of any other parties whatsoever, other than the Trustee and Holders;
provided, however, that as of any date of measurement, Additional Revenue also
shall include investment income (loss), less any losses or costs associated
therewith, which the Company reasonably determines will be earned on funds in
the Cash Collateral Accounts (other than the Interest Reserve Account) until
the date that the Isle-Black Hawk becomes Operating. "Available Funds" means,
at any time, (i) the amounts initially deposited in the Construction
Disbursement Account and the Completion Reserve Account, less disbursements
made from the Construction Disbursement Account and the Completion Reserve
Account, (ii) so long as there is no Default or Event of Default, Additional
Revenue, and (iii) Realized Savings (as defined herein) theretofore achieved.
"Realized Savings" means the excess of the amount budgeted in the Construction
Disbursement Budget for a line item over the amount of funds expended or owed
by the Company to complete the tasks set forth in such line item and for the
materials and services used to complete such tasks, so long as the terms for
such tasks are final and unconditional (other than satisfactory completion of
such tasks); provided, however, that Realized Savings (a) for any line item
shall be deemed to be zero if such savings are obtained in a manner that
materially detracts from the overall value, quality and amenities of the Isle-
Black Hawk, and (b) shall be reduced to the extent previously reallocated in
the Construction Disbursement Agreement. The Completion Capital Commitment will
expire upon the later of (i) the final disbursement of amounts in the Cash
Collateral Accounts in accordance with the Cash Collateral and Disbursement
Agreement and (ii) April 1, 1999, if the Isle-Black Hawk is Operating on such
date.
OPTIONAL REDEMPTION
Except as described below, the Notes will not be redeemable at the Issuers'
option prior to August 31, 2001. Thereafter, the Notes will be subject to
redemption at the option of the Issuers, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 31 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.......................... 106.500%
2002.......................... 103.250%
2003.......................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to August 31, 2000, the
Issuers may redeem up to 35% in aggregate principal amount of Notes originally
issued under the Indenture (including any Notes exchanged therefor) at a
redemption price of 113% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon, to the redemption
date, with the net proceeds of a Public Equity Offering; provided that at least
$48.75 million in aggregate principal amount of Notes remains outstanding
immediately after the occurrence of each such redemption; and provided,
further, that the call for such redemption shall occur within 45 days of the
date of the closing of such Public Equity Offering.
GAMING REDEMPTION
Notwithstanding any other provision hereof, if any Gaming Authority requires
that a Holder or beneficial owner of Notes must be licensed, qualified or found
suitable under any applicable gaming law and such Holder or beneficial owner
fails to apply for a license, qualification or finding of suitability within 30
days after being requested to do so by such Gaming Authority (or such lesser
period that may be required by such Gaming Authority), or if such Holder or
such beneficial owner is notified by such Gaming Authority that such Holder or
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beneficial owner will not be so licensed, qualified or found suitable, the
Issuers will have the right, at their option, (i) to require such Holder or
beneficial owner to dispose of such Holder's or beneficial owner's Notes within
30 days (or such earlier date as may be ordered by such Gaming Authority) of
(x) the termination of the period described above for such Holder or beneficial
owner to apply for a license, qualification or finding of suitability or (y)
receipt of the notice from such Gaming Authority that such Holder or beneficial
owner will not be licensed, qualified or found suitable by such Gaming
Authority or (ii) to redeem the Notes of such Holder or beneficial owner at a
redemption price equal to the lesser of the principal amount thereof or the
price at which such Holder or beneficial owner acquired such Notes, together
with, in either case, accrued and unpaid interest and Liquidated Damages, if
any, thereon to the earlier of the date of redemption or such earlier date as
may be required by such Gaming Authority or the date of the finding of
unsuitability by such Gaming Authority, which may be less than 30 days
following the notice of redemption, if so ordered by such Gaming Authority.
Immediately upon a determination by any Gaming Authority that a Holder or
beneficial owner of Notes will not be licensed, qualified or found suitable by
such Gaming Authority, such Holder or beneficial owner shall have no further
rights with respect to the Notes (i) to exercise, directly or indirectly,
through any trustee, nominee or any other Person or entity, any right conferred
by the Notes or (ii) to receive any interest or any other distribution or
payment with respect to the Notes, or any remuneration in any form from the
Issuers for services rendered or otherwise, except the redemption price of the
Notes. Under the Indenture, the Issuers are not required to pay or reimburse
any Holder or beneficial owner of Notes who is required to apply for such
license, qualification or finding of suitability for the costs of the licensure
or investigation for such qualification or finding of suitability. Such expense
will, therefore, be the obligation of such Holder or beneficial owner. See
"Risk Factors--Gaming Regulation" and "Gaming and Liquor Regulatory Matters."
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Issuers are not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date (except in the case of redemption required by
any Gaming Authority, which may be less than 30 days) to each Holder of Notes
to be redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called for redemption.
REPURCHASE AT THE OPTION OF HOLDERS
Change in Control
Upon the occurrence of a Change in Control, each Holder will have the right
to require the Issuers to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change in Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of repurchase (the
"Change in Control Payment"). Within ten days following any Change in Control,
the Issuers will mail a notice to each Holder describing the transaction or
transactions that constitute the Change in Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier
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than 30 days and no later than 60 days from the date such notice is mailed (the
"Change in Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Issuers will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change in Control.
On the Change in Control Payment Date, the Issuers will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change in Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change in Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Issuers. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change in Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Issuers will
publicly announce the results of the Change in Control Offer on or as soon as
practicable after the Change in Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change in Control, the Indenture does not
contain provisions that permit the Holders to require that the Issuers
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The source of funds for any repurchase of Notes upon a Change in Control will
be the Issuers' cash or cash generated from operations or other sources,
including borrowings (if available and permitted pursuant to the terms of the
Indenture) or sales of assets; however, there can be no assurance that
sufficient funds will be available at the time of any Change in Control to make
any required purchases of Notes. Any failure by the Issuers to repurchase Notes
tendered pursuant to a Change in Control Offer will constitute an Event of
Default. See "Risk Factors--Ability to Fund Repurchase Upon a Change in
Control."
Notwithstanding the foregoing, the Issuers will not be required to make a
Change in Control Offer upon a Change in Control if a third party makes the
Change in Control Offer in the manner, at the times and otherwise in compliance
with the requirements set forth in the Indenture applicable to a Change in
Control Offer made by the Issuers and purchases all Notes validly tendered and
not withdrawn under such Change in Control Offer.
The definition of Change in Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Issuers and their Subsidiaries, taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder to require the Issuers to repurchase
Notes as a result of a sale, lease, transfer, conveyance or other disposition
of less than all of the assets of the Issuers and their Subsidiaries, taken as
a whole, to another Person or group may be uncertain.
Asset Sales
Subject to the terms of the Collateral Documents, the Indenture will provide
that the Company will not, and will not permit any of its Subsidiaries to,
consummate an Asset Sale, unless (i) the Company (or the Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (evidenced by a resolution of the Managers set
forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 80%
of the consideration therefor received by the Company or such Subsidiary is in
the form of Cash Equivalents; provided that the amount of (x) any liabilities
(as shown on the Company's or such Subsidiary's most recent balance sheet) of
the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes) that are assumed
by the transferee of any such assets pursuant to a customary novation agreement
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that releases the Company or such Subsidiary from further liability and (y) any
securities or other obligations received by the Company or any such Subsidiary
from such transferee that are promptly (but in any event within 30 days)
converted by the Company or such Subsidiary into cash (to the extent of the
cash received), shall be deemed to be Cash Equivalents for purposes of this
provision.
Within 180 days after the receipt of any Net Proceeds from an Asset Sale, the
Company or such Subsidiary, as the case may be, may (i) apply such Net Proceeds
to the making of a capital expenditure or the acquisition of long- term assets,
in either case, which shall be owned by the Company or such Subsidiary and be
used by or useful to the Company or such Subsidiary in any line of business in
which the Company or such Subsidiary is permitted to be engaged pursuant to the
covenant described under "--Certain Covenants--Line of Business" or (ii)
contractually commit to apply such Net Proceeds to the payment of the costs of
construction of real property improvements or the costs of capital expenditures
which, in each case, shall be Note Collateral and shall be owned by the Company
or such Subsidiary and be used by or useful to the Company or such Subsidiary
in any line of business in which the Company or such Subsidiary is permitted to
be engaged pursuant to the covenant described under "--Certain Covenants--Line
of Business"; provided, that the Company or such Subsidiary, as the case may
be, grants to the Trustee, on behalf of the Holders, a first priority perfected
security interest on any such properties or assets acquired or constructed with
the Net Proceeds of any such Asset Sale on the terms set forth in the Indenture
and the Collateral Documents. Pending the final application of any such Net
Proceeds, the Company or such Subsidiary shall invest such Net Proceeds in Cash
Equivalents which shall be pledged to the Trustee as security for the Notes.
Any Net Proceeds from Asset Sales that do not constitute Note Collateral and
that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $5.0 million, the Issuers will be required to
make an offer to all Holders (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, which date shall be no less than 30 nor more
than 60 days after the date of the Asset Sale Offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may, subject to the provisions of the Indenture and the
Collateral Documents, use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased in the manner described above under "--Selection and
Notice." Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
Event of Loss
The Indenture provides that within 360 days after any Event of Loss with
respect to any Note Collateral comprising the Isle-Black Hawk with a fair
market value (or replacement cost, if greater) in excess of $1.0 million, the
Company or the affected Subsidiary of the Company, as the case may be, may
apply the Net Loss Proceeds from such Event of Loss to the rebuilding, repair,
replacement or construction of improvements to the Isle-Black Hawk, with no
concurrent obligation to make any purchase of any Notes; provided that (i) the
Company delivers to the Trustee within 60 days of such Event of Loss a written
opinion from a reputable architect that the Isle-Black Hawk with at least the
Minimum Facilities can be rebuilt, repaired, replaced or constructed and
Operating within 180 days of such Event of Loss, (ii) an Officers' Certificate
certifying that the Company has available from Net Loss Proceeds or other
sources sufficient funds to complete such rebuilding, repair, replacement or
construction and (iii) the Net Loss Proceeds are less than $25.0 million. If
the Net Loss Proceeds to be used for such rebuilding, repair, replacement or
construction exceed $12.0 million, then such Net Loss Proceeds shall be
deposited in the Construction Disbursement Account and disbursed in accordance
with the Cash Collateral and Disbursement Agreement. Any Net Loss Proceeds from
an Event of Loss with respect to any Note Collateral comprising the Isle-Black
Hawk on the date that it becomes Operating that are not reinvested or not
permitted to be reinvested as provided in the first sentence of this paragraph
will be deemed "Excess Loss Proceeds." When the aggregate amount of Excess Loss
Proceeds exceeds $10.0 million, the Issuers shall
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<PAGE>
make an offer to all Holders (an "Event of Loss Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Loss
Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase, which date shall not be less
than 30 nor more than 60 days from the date of such Event of Loss Offer, in
accordance with the procedures set forth in the Indenture. If the aggregate
principal amount of Notes tendered pursuant to an Event of Loss Offer exceeds
the Excess Loss Proceeds, the Trustee will select the Notes to be purchased in
the manner described above under "--Selection and Notice." To the extent that
the aggregate amount of Notes tendered pursuant to any Event of Loss Offer is
less than the Excess Loss Proceeds, the Company may, subject to the other
provisions of the Indenture and the Collateral Documents, use any remaining
Excess Loss Proceeds for general corporate purposes. Upon completion of any
such Event of Loss Offer, the amount of Excess Loss Proceeds shall be reset at
zero. Pending any permitted rebuilding, repair, replacement or construction or
the completion of any Event of Loss Offer, the Company or the affected
Subsidiary, as the case may be, shall pledge to the Trustee as additional Note
Collateral any Net Loss Proceeds or other cash on hand required for such
permitted rebuilding, repair, replacement or construction pursuant to the terms
of the Collateral Documents relating to the Isle-Black Hawk. Such pledged funds
will be released to the Company to pay for or reimburse the Company for the
actual cost of such permitted rebuilding, repair, replacement or construction,
or such Event of Loss Offer, pursuant to the terms of the Collateral Documents
relating to the Isle-Black Hawk. Pending the final application of the Net Loss
Proceeds, such proceeds shall be invested in Cash Equivalents which shall be
pledged to the Trustee as security for the Notes. The Indenture will also
require the Company or such Subsidiary to grant to the Trustee, on behalf of
the Holders, a first priority lien, subject to Permitted Liens, on any
properties or assets rebuilt, repaired, replaced or constructed with such Net
Loss Proceeds on the terms set forth in the Indenture and the Collateral
Documents.
The Indenture provides that with respect to any Event of Loss pursuant to
clause (iv) of the definition of "Event of Loss" that has a fair market value
(or replacement cost, if greater) in excess of $5.0 million, the Company (or
the affected Subsidiary, as the case may be) will be required to receive
consideration (i) at least equal to the fair market value (evidenced by a
resolution of the Managers set forth in an Officers' Certificate delivered to
the Trustee) of the assets subject to an Event of Loss and (ii) at least 90% of
which is in the form of Cash Equivalents.
Excess Cash Purchase Offer
The Indenture provides that within 120 days after each Operating Year of the
Company, beginning with the first Operating Year after the Isle-Black Hawk
becomes Operating, the Issuers shall make an offer to all Holders (an "Excess
Cash Flow Offer") to purchase the maximum principal amount of Notes that is an
integral multiple of $1,000 that may be purchased with 50% of the Company's
Excess Cash Flow in respect of the Operating Year then ended (the "Excess Cash
Flow Offer Amount"), at a purchase price in cash equal to 101% of the principal
amount of Notes to be purchased, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date fixed for the closing of such Excess
Cash Flow Offer (the "Excess Cash Flow Purchase Price"), in accordance with the
procedures set forth in the Indenture. The Excess Cash Flow Offer will be
required to remain open for 20 Business Days following its commencement and no
longer, except to the extent that a longer period is required by applicable
law. Upon the expiration of such period, the Company will apply the Excess Cash
Flow Offer Amount to the purchase of all Notes tendered at the Excess Cash Flow
Purchase Price. If the aggregate principal amount of Notes tendered pursuant to
any Excess Cash Flow Offer exceeds the Excess Cash Flow Offer Amount with
respect thereto, the Trustee will select the Notes to be repurchased in the
manner described below under the caption "--Selection and Notice." To the
extent that the aggregate principal amount of Notes tendered pursuant to any
Excess Cash Flow Offer is less than the Excess Cash Flow Offer Amount with
respect thereto, the Company may, subject to the other provisions of the
Indenture, use any remaining Excess Cash Flow for general corporate purposes.
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CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any other payment or distribution on account of the Company's or any of
its Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of the Company's or any of its Subsidiaries' Equity
Interests in any capacity (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company by a Wholly Owned Subsidiary or a
Substantially Owned Subsidiary); (ii) purchase, redeem or otherwise acquire or
retire for value (including, without limitation, in connection with any merger
or consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company or other Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is pari passu with or subordinated to the Notes (other than
Notes), in each case except a payment of interest (other than interest payable
in Indebtedness incurred pursuant to clause (x) of the second paragraph of the
covenant described below under "--Incurrence of Indebtedness and Issuance of
Preferred Stock") or a payment of principal on Indebtedness on or after the due
date thereof in accordance with the payment provisions thereof in each case as
such Indebtedness was permitted pursuant to the covenant described below under
"--Incurrence of Indebtedness and Issuance of Preferred Stock"; or (iv) make
any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the Company's most recently completed four full fiscal
quarters, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
clause (ii) of the first paragraph of the covenant described below under
"--Incurrence of Indebtedness and Issuance of Preferred Stock," except that
with respect to any Restricted Payment made to Casino America as a
repayment of amounts advanced to the Company by Casino America pursuant to
the Completion Capital Commitment, the Fixed Charge Coverage Ratio
applicable to such Restricted Payment shall be 2.0 to 1.0 and shall
otherwise be calculated in accordance with the provisions of clauses (i)
and (ii) of the first paragraph of the covenant described below under "--
Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after
the date of the Indenture (excluding Restricted Payments permitted by
clause (ii) of the next succeeding paragraph), is less than the sum of (i)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing prior to the date of the Indenture to the end of the Company's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since the date of the Indenture of Equity
Interests of the Company (other than Disqualified Stock) or of Disqualified
Stock or debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (B) the initial amount of such Restricted
Investment.
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The foregoing provisions will not prohibit (i) the payment of any dividend or
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) so long
as no Default or Event of Default has occurred and is continuing, the
defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness, including the Notes; (iv) so long as the Company is
treated as a pass through entity for United States federal income tax purposes,
distributions to equity holders of the Company in an amount not to exceed the
Tax Amount for such period and so long as the Tax Distribution Condition is
satisfied at the time of such distributions; (v) so long as no Default or Event
of Default has occurred and is continuing, payment to Casino America of amounts
owing to it pursuant to the Management Agreement as in effect on the date of
the Indenture (other than amounts owing to it pursuant to Section 11 thereof,
"Indemnification"), subject to the terms of the Manager Subordination Agreement
relating thereto between Casino America and the Trustee; and (vi) any
redemption required pursuant to the provisions of the Indenture described under
"--Gaming Redemption" above.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Managers set forth in an
Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the assets or securities proposed to be transferred or issued by the
Company or such Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed,
together with a copy of any fairness opinion or appraisal required by the
Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise (collectively, "incur"), with respect to any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of Disqualified
Stock; provided, however, that, so long as no Default or Event of Default has
occurred and is continuing, the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock if:
(i) the Isle-Black Hawk is Operating;
(ii) the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have
been at least 2.25 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued,
as the case may be, at the beginning of such four-quarter period; and
(iii) the Weighted Average Life to Maturity of such Indebtedness is
greater than the remaining Weighted Average Life to Maturity of the Notes.
So long as no Default or Event of Default has occurred and is continuing,
the foregoing provisions under this covenant will not apply to:
(i) the incurrence by the Company and its Subsidiaries of Indebtedness
represented by the Notes or obligations arising under the Collateral
Documents, to the extent that such obligations would constitute
Indebtedness;
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(ii) the incurrence by the Company of Permitted Refinancing Indebtedness
in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund, Indebtedness that was
permitted by the Indenture to be incurred;
(iii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Substantially Owned Subsidiaries; provided, however, that (a) such
Indebtedness is expressly subordinate to the payment in full of all
Obligations with respect to the Notes, (b)(1) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Substantially Owned Subsidiary
and (2) any sale or other transfer of any such Indebtedness to a Person
that is not either the Company or a Substantially Owned Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Subsidiary, as the case may be, and (c) if any
Subsidiary is the obligor on such Indebtedness, such Indebtedness is
represented by a Subsidiary Intercompany Note that is pledged to the
Trustee as security for the Notes;
(iv) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate risk with
respect to any floating rate Indebtedness that is permitted by the terms of
the Indenture to be outstanding;
(v) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in an
aggregate principal amount (or accreted value, as applicable) at any time
outstanding not to exceed $5.0 million for working capital or other
corporate purposes;
(vi) the incurrence by the Company of Indebtedness solely in respect of
standby letters of credit or surety bonds (a) required to be issued under
the Subdivision Agreement in an amount not to exceed 110% of the cost of
the work to be performed thereunder or (b) required to be issued pursuant
to excavation activities to be undertaken pursuant to the Design/Build
Agreement in an amount not to exceed $1.1 million;
(vii) the incurrence by the Company of Indebtedness solely in respect of
performance or similar bonds or standby letters of credit; provided that
any such bond or standby letter of credit is incurred in the ordinary
course of the Company's business in an aggregate amount not to exceed $2.0
million at any one time outstanding; and provided, further, that any such
bond or standby letter of credit is incurred on terms customary for
operations similar to the Company's;
(viii) the incurrence by the Company of FF&E Financing; provided,
however, that (a) the principal amount of such Indebtedness does not exceed
the cost (including sales and excise taxes, installation and delivery
charges and other direct costs of, and other direct expenses paid or
charged in connection with, such purchase) of the FF&E purchased or leased
with the proceeds thereof, (b) no Indebtedness incurred under the Notes is
utilized for the purchase or lease of such FF&E and (c) the aggregate
principal amount of such Indebtedness does not exceed $15.0 million
outstanding at any time;
(ix) bond or surety obligations posted by the Company or any of its
Subsidiaries in order to prevent the loss or material impairment of or to
obtain a Gaming License or as otherwise required by an order of any Gaming
Authority to the extent required by applicable law and consistent in
character and amount with customary industry practice so long as such
Indebtedness does not result in, and is not secured by, a Lien on any of
the Note Collateral;
(x) the incurrence by the Company of Indebtedness in an aggregate
principal amount not to exceed $10.0 million in original principal amount
("PIK Debt") which is expressly subordinate to the payment in full of all
Obligations with respect to the Notes; provided that any interest which is
payable on account of such PIK Debt shall be paid solely in the form of
additional PIK Debt until the first time that the Company is able to
satisfy the Fixed Charge Coverage Ratio test set forth in clause (ii) of
the first paragraph of this covenant, calculated after giving pro forma
effect to the incurrence of such PIK Debt and any PIK Debt payable in
respect of such PIK Debt as if all such amounts had been outstanding at the
beginning of the four-quarter period applicable to such Indebtedness
pursuant to such clause (ii); provided, further, that the Weighted Average
Life to Maturity of such Indebtedness is greater than the remaining
Weighted Average Life to Maturity of the Notes; and provided, further, that
the Company may not incur Indebtedness pursuant
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to the terms of this paragraph (x) prior to the time that Casino America
has fulfilled all of its obligations under the Completion Capital
Commitment or the Completion Capital Commitment shall have expired in
accordance with the terms thereof; and
(xi) the incurrence by the Company of Indebtedness in an aggregate
principal amount not to exceed $2.0 million, the proceeds of which are to
be used to purchase a 0.25 acre parcel of property located on the corner of
Mill Street and Main Street in Black Hawk, Colorado adjacent to the site of
the Isle-Black Hawk, provided that such property shall be conveyed free and
clear of Liens and, upon the acquisition thereof, shall constitute Note
Collateral promptly upon the purchase thereof pursuant to the Collateral
Documents.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any proceeds,
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital
Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Subsidiaries, (ii) make loans or advances to the Company or any of
its Subsidiaries or (iii) transfer any of its properties or assets to the
Company or any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) the Indenture, the Notes or the
Collateral Documents, (b) applicable law, (c) by reason of customary non-
assignment provisions in leases entered into in the ordinary course of business
and (d) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced.
Merger, Consolidation or Sale of Assets
The Indenture provides that neither Issuer may consolidate or merge with or
into (whether or not such Issuer is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) such Issuer is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than such Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
such Issuer) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of such Issuer under the Notes, the Collateral Documents and the
Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no
Default or Event of Default exists; (iv) such transaction would not result in
the loss or suspension or material impairment of any Gaming License unless a
comparable replacement Gaming License is effective prior to or simultaneously
with such loss, suspension or material impairment; (v) except in the case of a
merger of such Issuer with or into a Wholly Owned Subsidiary of such Issuer,
such Issuer or the entity or Person formed by or surviving any such
consolidation or merger (if other than such Issuer), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (a) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of such Issuer immediately
preceding the transaction and (b) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness
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pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under "--Incurrence of Indebtedness
and Issuance of Preferred Stock"; and (vi) such transaction would not require
any Holder or beneficial owner of Notes to obtain a Gaming License or be
qualified or found suitable under the law of any applicable gaming
jurisdiction; provided that such Holder or beneficial owner would not have been
required to obtain a Gaming License or be qualified or found suitable under the
laws of any applicable gaming jurisdiction in the absence of such transaction.
Neither the foregoing restrictions nor any other provision in the Indenture
shall restrict or prohibit the Company from engaging in a transaction solely
constituting a Permitted C-Corp. Conversion.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that would have been obtained in
a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Managers
set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested Managers and (b) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment
banking firm of national standing; provided that (w) payments made pursuant to
the Management Agreement as in effect on the date of the Indenture, (x) any
employment or indemnification agreement entered into by the Company or any of
its Subsidiaries in the ordinary course of business on terms customary in the
gaming industry, (y) transactions between or among the Issuers and/or their
Subsidiaries and (z) Restricted Payments that are permitted by the provisions
of the Indenture described above under "--Restricted Payments," in each case,
shall not be deemed Affiliate Transactions.
Construction
The Indenture provides that the Company will cause construction of the Isle-
Black Hawk, including the furnishing, fixturing and equipping thereof, to be
prosecuted with diligence and continuity in a good and workmanlike manner
substantially in accordance with the Plans and Contracts to which the Company
is a party and within the budget for the project set forth in the Cash
Collateral and Disbursement Agreement.
Limitations on Use of Proceeds
The Indenture provides that the Company will cause the net proceeds of the
Offering to be deposited in the Cash Collateral Accounts, of which
approximately $14.1 million will be deposited in the Interest Reserve Account
and invested solely in Government Securities, approximately $52.9 million will
be deposited in the Construction Disbursement Account and invested solely in
Investment Grade Securities and $5.0 million will be deposited in the
Completion Reserve Account and invested solely in Investment Grade Securities,
in each case, to be disbursed only in accordance with the Cash Collateral and
Disbursement Agreement.
Limitation on Status as Investment Company
The Indenture prohibits the Issuers and their Subsidiaries from being
required to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming subject
to regulation under the Investment Company Act of 1940.
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Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company may enter into a sale and leaseback transaction if (i) the
Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the first paragraph of the covenant described above under "--Incurrence of
Additional Indebtedness and Issuance of Preferred Stock" and (b) incurred a
Lien to secure such Indebtedness pursuant to the covenant described above under
"--Liens," (ii) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value (as determined in good faith by the
Managers and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described above under "--Repurchase at the Option
of Holders--Asset Sales."
Restrictions on Preferred Stock of Subsidiaries
The Indenture provides that the Company will not permit any of its
Subsidiaries to issue any preferred stock, or permit any Person to own or hold
an interest in any preferred stock of any such Subsidiary, except for preferred
stock issued to the Company or a Wholly Owned Subsidiary of the Company.
Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Subsidiaries
The Indenture provides that the Issuers (i) will not, and will not permit any
of their Wholly Owned Subsidiaries to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Subsidiary of the
Issuers to any Person (other than the Issuers or a Wholly Owned Subsidiary of
the Issuers), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Subsidiary and (b)
the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
"--Asset Sales" and (ii) will not permit any of their Wholly Owned Subsidiaries
to issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Issuers or a Wholly Owned Subsidiary of the Issuers.
Line of Business
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, engage in any business or investment activities other than the
Gaming Business. Neither the Company nor any of its Subsidiaries will be
permitted by the Indenture to conduct a Gaming Business in any gaming
jurisdiction in which the Company or such Subsidiary is not licensed on the
date of the Indenture if the holders of the Notes would be required to be
licensed as a result thereof; provided that the provisions described in this
sentence will not prohibit the Company or any of its Subsidiaries from
conducting a Gaming Business in any jurisdiction that does not require the
licensing or qualification of all the Holders, but reserves the discretionary
right to require the licensing or qualification of any Holders. Notwithstanding
any other provision of the Indenture, the Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business, development or
investment activity other than at or in conjunction with the Isle-Black Hawk
until the Isle-Black Hawk is Operating.
Restrictions on Activities of Capital
The Indenture provides that Capital may not hold any assets, become liable
for any obligations or engage in any business activities; provided, that
Capital may be a co-obligor of the Notes pursuant to the terms of the Indenture
and any activities directly related or necessary in connection therewith.
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Provision of Certificate Regarding Gaming Licensing Issues and Liquor
Licensing Issues
The Indenture provides that, upon the earlier of (i) substantial completion
of site preparation activities, including excavation, on the real property
comprising the Isle-Black Hawk or (ii) March 1, 1998, the Company will provide
to the Trustee an Officer's Certificate certifying that, after due inquiry,
such Officer is not aware of any issues raised by any Gaming Authority or
Liquor Licensing Authority which could have a material adverse effect on the
ability of any applicant for a Gaming License or a Liquor License required for
the Company to own, operate or conduct the Gaming Business or any business
related thereto, including liquor distribution, at the Isle-Black Hawk to
become licensed, qualified or found suitable by the applicable Gaming Authority
or Liquor Licensing Authority.
Advances to Subsidiaries
The Indenture provides that all advances to Subsidiaries made by the Company
from time to time after the date of the Indenture will be evidenced by
unsecured Subsidiary Intercompany Notes in favor of the Company that will be
pledged to the Trustee as Note Collateral to secure the Notes. Each Subsidiary
Intercompany Note will be payable upon demand and will bear interest at the
same rate as the Notes. A form of Subsidiary Intercompany Note will be attached
as an exhibit to the Indenture. Repayments of principal with respect to any
Subsidiary Intercompany Note will be required to be pledged to the Trustee as
Note Collateral to secure the Notes until such amounts are advanced to a
Subsidiary in accordance with the Indenture.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, beginning with respect to the Company's fiscal
quarter ended October 26, 1997, and continuing for so long as any Notes are
outstanding, the Issuers will furnish to the holders (i) all consolidated
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuers
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes the
financial position and results of operations of the Company and its
Subsidiaries and, with respect to the annual information only, a report thereon
by the Issuers' certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Issuers were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Issuers will file
a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors
upon request. In addition, the Issuers have agreed that, for so long as any
Notes remain outstanding, they will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Insurance
The Indenture provides that, until the Notes have been paid in full, the
Company will, and will cause its Subsidiaries to, maintain insurance with
responsible carriers against such risks and in such amounts as is customarily
carried by similar businesses with such deductibles, retentions, self insured
amounts and coinsurance provisions as are customarily carried by similar
businesses of similar size, including, without limitation, property and
casualty, and, with respect to insurance on the Note Collateral, shall have
provided insurance certificates evidencing such insurance to the Trustee on or
prior to the Closing Date and shall thereafter provide such certificates prior
to the anniversary or renewal date of each such policy, which certificate shall
expressly state the expiration date for each policy listed. Customary insurance
coverage shall be deemed to include the following:
(i) workers' compensation insurance to the extent required to comply with
all applicable state, territorial or United States laws and regulations, or
the laws and regulations of any other applicable jurisdiction;
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(ii) comprehensive general liability insurance with minimum limits of
$1.0 million;
(iii) umbrella or excess liability insurance providing excess liability
coverages over and above the foregoing underlying insurance policies up to
a minimum limit of $25.0 million;
(iv) business interruption insurance at all times on and after the Isle-
Black Hawk is Operating; and
(v) property insurance protecting the property against loss or damage by
fire, lightning, windstorm, tornado, water damage, vandalism, riot,
earthquake, civil commotion, malicious mischief, hurricane and such other
risks and hazards as are from time to time covered by an "all-risk" policy
or a property policy covering "special" causes of loss. Such insurance
shall provide coverage in the amount of not less than the lesser of 120% of
the outstanding principal amount of the Notes plus accrued and unpaid
interest and 100% of actual replacement value (as determined at each policy
renewal based on the F.W. Dodge Building Index or some other recognized
means) of any improvements customarily insured consistent with industry
standards and with a deductible no greater than 2% of the insured value of
the Isle-Black Hawk or such greater amount as is available on commercially
reasonable terms (other than earthquake or flood insurance, for which the
deductible may be up to 10% of such replacement value).
All insurance required under the Indenture (except worker's compensation)
shall name the Company and the Trustee as additional insureds or loss payees,
as the case may be, with losses in excess of $1.0 million payable jointly to
the Company and the Trustee (unless a Default or Event of Default has occurred
and is then continuing, in which case all losses are payable solely to the
Trustee), with no recourse against the Trustee for the payment of premiums,
deductibles, commissions or club calls, and for at least 30 days notice of
cancellation. All such insurance policies will be issued by carriers having an
A.M. Best & Company, Inc. rating of A or higher and a financial size category
of not less than X, or if such carrier is not rated by A.M. Best & Company,
Inc., having the financial stability and size deemed appropriate by an opinion
from a reputable insurance broker. The Indenture will provide that the Company
will deliver to the Trustee on the Closing Date and each anniversary thereafter
a certificate of an insurance agent stating that the insurance policies
obtained by the Company and its Subsidiaries comply with this covenant and the
related applicable provisions of the Collateral Documents.
Collateral Documents
The Indenture provides that neither the Issuers nor any of their Subsidiaries
will amend, waive or modify, or take or refrain from taking any action that has
the effect of amending, waiving or modifying any provision of the Collateral
Documents, to the extent that such amendment, waiver, modification or action
could have an adverse effect on the rights of the Trustee or the Holders;
provided, that: (i) the Note Collateral may be released or modified as
expressly provided in the Indenture and in the Collateral Documents; (ii) the
Plans and contracts to which the Company is a party and the Construction
Disbursement Budget may be amended as expressly provided in the Cash Collateral
and Disbursement Agreement; and (iii) the Indenture and any of the Collateral
Documents may be otherwise amended, waived or modified as set forth below under
"--Amendment, Supplement and Waiver."
Restriction on Payment of Management Fees
The Company shall not, directly or indirectly, pay to Casino America or any
of its Affiliates any Management Fees except pursuant to the Management
Agreement as in effect on the date of, and in accordance with, the Indenture.
Amounts payable pursuant to the Management Agreement shall not be prepaid, and
no payment of Management Fees, either current or accrued, shall be made if at
the time of payment of such Management Fees (i) a Default or an Event of
Default shall have occurred and be continuing or shall occur as a result
thereof or (ii) the Company's Fixed Charge Coverage Ratio for its most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such Management Fee is
proposed to be paid would have been less than 1.5 to 1.0 (calculated on a pro
forma basis after deducting Management Fees to the extent paid in cash and not
deferred and any Management Fees deferred from a prior period proposed to be
paid in cash during such period, but excluding any Management Fees deferred
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or accrued and not paid in cash during such period). With respect to periods
following the date the Isle-Black Hawk first becomes Operating and prior to the
time when internal financial statements are available for four full fiscal
quarters following the date the Isle-Black Hawk first becomes Operating, such
Fixed Charge Coverage Ratio shall be calculated only with respect to the number
of full fiscal quarters (but in no event less than one full fiscal quarter) for
which internal financial statements are available following the date the Isle-
Black Hawk first becomes Operating. Any Management Fees not permitted to be
paid pursuant to this covenant will be deferred and will accrue and may be paid
only at such time that they would otherwise be permitted to be paid hereunder.
The right to receive payment of the Management Fee shall be subordinate in
right of payment to the right of the Holders to receive payments pursuant to
the Notes. The terms of the Management Agreement cannot be amended to increase
amounts to be paid thereunder, or in any other manner which would be adverse to
the Company or the Holders, including without limitation, to amend the method
of computing the Management Fee; provided, however, that the foregoing shall
not prohibit any amendment required under any Gaming Law or by any Gaming
Authority.
Additional Subsidiary Guarantees
The Indenture provides that if either of the Issuers shall acquire or create
a Subsidiary after the date of the Indenture, then such newly acquired or
created Subsidiary shall execute a Guarantee and deliver an opinion of counsel,
in accordance with the terms of the Indenture.
Further Assurances
The Indenture provides that the Issuers will (and will cause each of their
Subsidiaries to) do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register, as applicable, any and all such further
acts, deeds, conveyances, security agreements, mortgages, assignments, estoppel
certificates, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, certificates, assurances and
other instruments as may be required from time to time in order (i) to carry
out more effectively the purposes of the Collateral Documents, (ii) to subject
to the Liens created by any of the Collateral Documents any of the properties,
rights or interests required to be encumbered thereby, (iii) to perfect and
maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby and (iv) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm to the
Trustee any of the rights granted now or hereafter intended by the parties
thereto to be granted to the Trustee or under any other instrument executed in
connection therewith or granted to the Issuers under the Collateral Documents
or under any other instrument executed in connection therewith.
CASH COLLATERAL AND DISBURSEMENT AGREEMENT
Pursuant to the Cash Collateral and Disbursement Agreement entered into among
the Issuers, the Trustee, the Independent Construction Consultant and the
Disbursement Agent in connection with the Isle-Black Hawk, the net proceeds of
the Old Notes Offering in the amount of approximately $72.0 million was placed
into the Cash Collateral Accounts to be invested in Investment Grade Securities
or Government Securities, to be disbursed by the Disbursement Agent pursuant to
the Cash Collateral and Disbursement Agreement.
Interest Reserve Account
Of such net proceeds of the Old Notes Offering deposited in the Cash
Collateral Accounts, approximately $14.1 million was deposited in the Interest
Reserve Account. Funds and other assets held in the Interest Reserve Account
will be pledged to the Trustee for the benefit of itself and the Holders. Such
funds will be in an amount sufficient to purchase Government Securities which,
upon receipt of scheduled interest and principal payments therefrom, as set
forth in an Officer's Certificate delivered by the Company's Chief Financial
Officer, will provide for payment in full of the interest payments due on the
Notes through February 28, 1999. The Disbursement Agent shall purchase
Government Securities with such funds and the Issuers shall pledge such
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Government Securities to the Trustee, for the benefit of itself and the Holders
pursuant to the Cash Collateral and Disbursement Agreement. The precise amount
of securities to be acquired, however, will depend upon the interest rates on
Government Securities prevailing on the Closing Date. The Government Securities
will be held by the Disbursement Agent in the Interest Reserve Account.
Pursuant to the Cash Collateral and Disbursement Agreement, immediately prior
to the date of each of the first three interest payments due on the Notes, the
Disbursement Agent shall release from the Interest Reserve Account funds
sufficient to pay interest then due. In the event that any funds remain in the
Interest Reserve Account after all such interest payments are made, the Trustee
will release such funds to the Construction Disbursement Account.
Interest earned on the Government Securities will be added to the Interest
Reserve Account. In the event that the aggregate amount of funds and Government
Securities held in the Interest Reserve Account exceeds the amount sufficient
in the opinion of the Chief Financial Officer of the Company as set forth in an
Officer's Certificate to provide for payment in full of the interest payments
due on the Notes through February 28, 1999, the Disbursement Agent will deposit
such excess amount into the Construction Disbursement Account.
The Indenture provides that the Disbursement Agent may, pursuant to the terms
of the Cash Collateral and Disbursement Agreement, (i) invest up to $5.0
million of the funds deposited into the Interest Reserve Account in Government
Securities having a maturity date on or before the date which is one business
day prior to February 28, 1998, (ii) invest up to $4.6 million of the funds
deposited into the Interest Reserve Account in Government Securities having a
maturity date on or before the date which is one business day prior to August
31, 1998 and (iii) invest up to $4.5 million of the funds deposited into the
Interest Reserve Account in Government Securities having a maturity date on or
before the date which is one business day prior to February 28, 1999.
Completion Reserve Account
Approximately $5.0 million of the net proceeds of the Old Notes Offering was
deposited in the Completion Reserve Account. Funds held in the Completion
Reserve Account will be pledged to the Trustee for the benefit of itself and
the Holders and invested in Investment Grade Securities by the Disbursement
Agent in accordance with the Company's instructions until needed from time to
time in the event there are insufficient funds to complete the construction of
the Isle-Black Hawk, including if the Company exercises the Hotel Option. All
such funds will be held in the Completion Reserve Account until disbursed in
accordance with the Cash Collateral and Disbursement Agreement. The
Disbursement Agent will authorize the disbursement of funds from the Completion
Reserve Account to the Construction Disbursement Account only upon the
satisfaction of the disbursement conditions set forth in the Cash Collateral
and Disbursement Agreement. Such conditions generally include the requirement
that the Company deliver to the Disbursement Agent and the Independent
Construction Consultant a certificate certifying (i) that the funds will be
applied in accordance with the terms of the Indenture, (ii) that such funds
will be used for the sole purposes allowed pursuant to the Cash Collateral and
Disbursement Agreement with respect to funds in the Construction Disbursement
Account, (iii) the circumstances causing the cost of completing the Isle-Black
Hawk to exceed the amounts previously forecast in the Construction Disbursement
Budget therefor, and that such circumstances were not reasonably expected as of
the last date of amendment of the Construction Disbursement Budget (or if none,
the date of issuance of the Notes), (iv) to an amendment to the Construction
Disbursement Budget that confirms the revised estimated costs to complete the
Isle-Black Hawk (which amendment shall satisfy the conditions for Construction
Disbursement Budget amendments as provided below), (v) that, after giving
effect to the requested disbursements, the funds in the Construction
Disbursement Account will be sufficient to complete the Isle-Black Hawk in
accordance with the Construction Disbursement Budget, as amended, on or before
the Operating Deadline without giving effect to the hotel, if the Company has
not exercised the Hotel Option, and, if the Company exercises the Hotel Option,
by the Hotel Substantial Completion Date and (vi) that no Default or Event of
Default under the Cash Collateral and Disbursement Agreement or the Indenture
have occurred and are continuing. In addition, the Disbursement Agent shall
have received from the Independent Construction Consultant a certification
stating that the Independent Construction Consultant has reviewed such
disbursement request, that the Independent Construction
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Consultant has inspected the Isle-Black Hawk during the previous month and that
the Independent Construction Consultant concurs with certain of the
certifications made by the Company in such disbursement request. Following
disbursement of funds from the Completion Reserve Account to the Construction
Disbursement Account, the Company must comply with all requirements of the Cash
Collateral and Disbursement Agreement relating to disbursement of funds from
the Construction Disbursement Account.
Construction Disbursement Account
Approximately $52.9 million of the net proceeds of the Old Notes Offering
(net of initial disbursements made on the Closing Date) was deposited in the
Construction Disbursement Account, to be held in escrow and invested in
Investment Grade Securities by the Disbursement Agent in accordance with the
Company's instructions until needed from time to time to fund the development,
construction and opening of the Isle-Black Hawk and to pay other operating
expenses of the Company. All such funds will be held in the Construction
Disbursement Account and pledged to the Trustee for the benefit of itself and
the Holders, until disbursed in accordance with the Cash Collateral and
Disbursement Agreement. Subject to certain exceptions set forth in the Cash
Collateral and Disbursement Agreement, the Disbursement Agent will disburse
funds from the Construction Disbursement Account for the payment of such costs
only upon the satisfaction of the disbursement conditions set forth in the Cash
Collateral and Disbursement Agreement. Such conditions generally include the
requirements that the Company deliver to the Disbursement Agent and the
Independent Construction Consultant a certificate certifying (i) that no
Default or Event of Default exists under the Indenture or the Cash Collateral
and Disbursement Agreement, (ii) that such request is in compliance with the
Cash Collateral and Disbursement Agreement, as then in effect, (iii) the
conformity with the Plans of the construction undertaken to the date of the
request, (iv) with respect to Hard Costs (as defined in the Cash Collateral and
Disbursement Agreement), that such disbursements are appropriate based on
invoices tendered for work that has been completed and the amount of stored
materials, and that the lien releases accompanying the certificate are all of
the lien releases required by the Cash Collateral and Disbursement Agreement,
(v) the purposes to which the requested funds will be applied following
disbursement (which may include operating expenses and other working capital
requirements of the Company), (vi) that the Construction Disbursement Budget as
in effect continues to portray accurately in all material respects all costs to
be incurred in completing the Isle-Black Hawk (giving effect to the exercise of
the Hotel Option, if made) and (vii) that, after giving effect to the requested
disbursement, the funds in the Construction Disbursement Account will be
sufficient to complete the Isle-Black Hawk in accordance with the aggregate
amounts (and line items) set forth in the Construction Disbursement Budget, as
amended to date, on or before the Operating Deadline. In addition, the
Disbursement Agent shall have received from the Independent Construction
Consultant (without giving effect to the hotel, and, if the Company exercises
the Hotel Option, by the Hotel Substantial Completion Date) a certification
stating that the Independent Construction Consultant has reviewed such
disbursement request, that the Independent Construction Consultant has
inspected the Isle-Black Hawk during the previous month and that the
Independent Construction Consultant concurs with certain of the certifications
made by the Company in such disbursement request.
The Cash Collateral and Disbursement Agreement will permit advance
disbursements up to $1.5 million in the aggregate outstanding at any time,
notwithstanding the fact that not all certifications or lien releases have been
obtained or other disbursement conditions have not been so satisfied. The
conditions for such advance disbursements generally include the requirements
that the Company deliver to the Disbursement Agent and the Independent
Construction Consultant a certificate certifying (i) that no Default or Event
of Default exists under the Indenture or the Cash Collateral and Disbursement
Agreement, (ii) the purposes to which the requested funds will be applied
following disbursement, (iii) that, after giving effect to the requested
disbursement, the remaining amounts in the line item not yet disbursed are
sufficient to cover all costs within such line item to be paid or incurred on
or before the Operating Deadline (without giving effect to the hotel, and, if
the Company exercises the Hotel Option, by the Hotel Substantial Completion
Date) and (iv) that, after giving effect to the requested disbursement, no more
than $1.5 million of such advances shall be outstanding. In addition, the
Disbursement Agent shall have received from the Independent Construction
Consultant a certification stating that the Independent Construction Consultant
has reviewed such disbursement request, that the Independent Construction
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Consultant has inspected the Isle-Black Hawk during the previous month and that
the Independent Construction Consultant concurs with certain of the
certifications made by the Company in such disbursement request. Advance
disbursements may remain outstanding so long as there is no Default or Event of
Default under the Cash Collateral and Disbursement Agreement or the Indenture.
The Cash Collateral and Disbursement Agreement will provide that the
Construction Disbursement Budget may be amended only upon the satisfaction of
certain conditions set forth in the Cash Collateral and Disbursement Agreement,
including in connection with an exercise of the Hotel Option. Such conditions
generally include that the Company deliver to the Disbursement Agent and the
Independent Construction Consultant a certificate certifying (i) as to a
description of the circumstances giving rise to the amendment, and that (except
with respect to the exercise of the Hotel Option) the circumstances were not
reasonably expected as of the date of the last amendment of the Construction
Disbursement Budget (or if none, the date of issuance of the Notes), (ii) that
after giving effect to the amendment, the Construction Disbursement Budget will
in all material respects accurately portray all costs to be incurred in
completing the Isle-Black Hawk, including in connection with any exercise of
the Hotel Option, (iii) that after giving effect to the amendment, the funds in
the Construction Disbursement Account (together with, in the case of the
exercise of the Hotel Option, the funds in the Completion Reserve Account) will
be sufficient to complete the Isle-Black Hawk in accordance with the aggregate
amounts (and line items) set forth in the Construction Disbursement Budget on
or before the Operating Deadline (without giving effect to the hotel, and, if
the Company exercises the Hotel Option, by the Hotel Substantial Completion
Date) and (iv) that no Default or Event of Default exists or will exist under
the Cash Collateral and Disbursement Agreement. In addition, the Disbursement
Agent shall have received from the Independent Construction Consultant a
certification stating that the Independent Construction Consultant has reviewed
such proposed Construction Disbursement Budget amendment, that the Independent
Construction Consultant has inspected the Isle-Black Hawk during the previous
month and that the Independent Construction Consultant concurs with certain of
the certifications made in the Construction Disbursement Budget amendment
certification submitted by the Company to the Disbursement Agent and the
Independent Construction Consultant. In addition, the Cash Collateral and
Disbursement Agreement will provide that construction line items may only be
reduced upon delivery to the Disbursement Agent, in form satisfactory to the
Disbursement Agent, of evidence that the completion of the work represented by
such line item will be completed for a total cost less than the amount set
forth in the Construction Disbursement Budget, and that any such savings (i)
are not obtained in a manner that materially detracts from the overall value,
quality or amenities of the Isle-Black Hawk and (ii) shall be reallocated (by
amendment to the Construction Disbursement Budget) to other line items. The
Cash Collateral and Disbursement Agreement provides for the amendment of the
Construction Disbursement Budget upon the exercise of the Hotel Option in the
event that the Company demonstrates that sufficient funds are available
therefor.
In making the certifications called for above, the Independent Construction
Consultant may rely (so long as such reliance is in good faith) upon
certificates from the material contractors, architects and engineers involved
in the construction of the Isle-Black Hawk confirming the fundamental facts
necessary for such certifications. In addition, except to the extent the
Independent Construction Consultant has actual knowledge, the Independent
Construction Consultant shall not be responsible for matters pertaining to:
Historical Architectural Review Commission, Gaming Authorities, Gaming
Licenses, Liens encumbering the Isle-Black Hawk (except in connection with the
responsibilities of the Independent Construction Consultant set forth in the
Cash Collateral and Disbursement Agreement, and whether the Isle-Black Hawk is
in a condition to receive customers in the ordinary course of business.
The Cash Collateral and Disbursement Agreement also provides that if any
funds remain in the Construction Disbursement Account or the Completion Reserve
Account on the date that the Isle-Black Hawk has been Operating for at least 30
consecutive days and (i) there is no ongoing construction in connection with
the Isle-Black Hawk or, included in connection with the hotel if the Company
has exercised the Hotel Option and (ii) there exists no Default or Event of
Default under the Indenture, the Disbursement Agent shall, upon the direction
of the Company, subject to certain exceptions set forth in the Cash Collateral
and Disbursement Agreement,
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disburse all remaining funds, if any, in the Completion Reserve Account and in
the Construction Disbursement Account to any account or accounts specified by
the Company.
Events of Default Under the Cash Collateral and Disbursement Agreement
The Cash Collateral and Disbursement Agreement also provides that an event of
default shall exist thereunder if any of the following shall occur: (i) a
Default or Event of Default occurs and is continuing under the Indenture; (ii)
the Independent Construction Consultant, after appropriate consultation with
the Company, is unable to deliver a certificate in connection with a requested
disbursement or an amendment to the Construction Disbursement Budget; (iii) the
Independent Construction Consultant reviewing prior disbursements reports an
exception and such exception continues for a period of ten days; (iv) any
representation, warranty, certification or statement by the Issuers in the Cash
Collateral and Disbursement Agreement or any certificate required to be
delivered therein is untrue in any material respect on the date given or made
and such untruthfulness continues for a period of five business days after
notice thereof; (v) if at any time the amount remaining in the Construction
Disbursement Account and the Completion Reserve Account is less than the amount
required in the Construction Disbursement Budget to cause the Isle-Black Hawk
to be Operating on or before the Operating Deadline without giving effect to
the hotel if the Company has not exercised the Hotel Option; or if the Company
exercises the Hotel Option, by the Hotel Substantial Completion Date and such
deficiency continues for a period of 30 days; and (vi) the Issuers fail to
deliver certain other documents necessary to perfect the Trustee's security
interest in the Cash Collateral and Disbursement Agreement and investments
therein and such failure continues for a period of five days. If an event of
default exists under the Cash Collateral and Disbursement Agreement, the
Disbursement Agent will not be permitted to authorize the disbursement of funds
from the Construction Disbursement Account or the Completion Reserve Account
until such event of default is cured, provided that, subject to direction of
the Trustee, the Disbursement Agent may continue to disburse funds from the
Construction Disbursement Account or the Completion Reserve Account, (a) in an
amount up to $2.0 million if necessary to prevent the condition of the Isle-
Black Hawk from deteriorating or to preserve work completed on the Isle-Black
Hawk, (b) to pay for work already completed or materials already purchased or
(c) to pay for retainage amounts if an event of default continues for more than
three months.
All funds in the Cash Collateral Accounts will be pledged as security for the
repayment of the Notes.
EVENT OF DEFAULT
The Indenture will provide that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
the Issuers to comply with the provisions described under "--Mandatory
Redemption," "--Repurchase at the Option of Holders--Change of Control," "--
Asset Sales" or "--Event of Loss," "--Restricted Payments," "--Incurrence of
Indebtedness and Issuance of Preferred Stock," "--Merger, Consolidation or Sale
of Assets," "--Limitation on Use of Proceeds" or "--Restriction on Activities
of Capital"; (iv) failure by the Issuers for 30 days after notice to comply
with any of its other agreements in the Indenture or the Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness
or guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by the Issuers or
any of their Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) breach by the Issuers of any material representation or
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warranty set forth in the Collateral Documents, or default by the Issuers in
the performance of any covenant set forth in the Collateral Documents, or
repudiation by the Issuers of their obligations under the Collateral Documents
or the unenforceability of the Collateral Documents against the Issuers for any
reason; (viii) certain events of bankruptcy or insolvency with respect to the
Issuers or any of their Subsidiaries; (ix) revocation, termination, suspension
or other cessation of effectiveness of any Gaming License which results in the
cessation or suspension of gaming operations for a period of more than 90
consecutive days at any Gaming Facility; (x) default by Casino America in the
performance of its obligations set forth in the Completion Capital Commitment
or repudiation of its obligations under the Completion Capital Commitment; or
(xi) the failure of the Isle-Black Hawk to be Operating by the Operating
Deadline or to remain Operating thereafter, except (i) as the hours of
operation of the Isle-Black Hawk may be limited by any Gaming Authority or
Gaming Law or (ii) for a period of time not to exceed 20 days during any 30-day
period and not to exceed 45 days during any one-year period; provided, however,
that, in any event, there shall not be an Event of Default under this clause
(xi)(ii) if the failure to remain Operating during such period results from an
Event of Loss pursuant to the terms of the Indenture.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the Notes then outstanding may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Issuers, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. The Holders may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power. In the event the Trustee is
required by the Holders or otherwise required by the Indenture or the
Collateral Documents to take any action which may reasonably result in
environmental-related liability to the Trustee, the Trustee may require
additional indemnities regarding such liability. If such indemnities are not
obtained, the Trustee may resign.
In the case of any Event of Default occurring by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Issuers with the
intention of avoiding payment of the premium that the Issuers would have had to
pay if the Issuers then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest or Liquidated Damages, if any, on, or the principal of, the Notes.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
REMEDIES UPON DEFAULT UNDER NOTES
Enforcement of rights under certain of the Collateral Documents would require
that the Trustee initiate a foreclosure against the Note Collateral. Such
foreclosure would be subject to certain notice and other procedural limitation.
ENFORCEMENT OF SECURITY DOCUMENTS
If an Event of Default occurs under the Indenture, the Trustee, acting on
behalf of the Holders, may enforce its rights and remedies under the Indenture
and the Collateral Documents. These remedies include foreclosing upon and
selling the Note Collateral, including commencing a judicial proceeding to seek
a monetary judgment against the Company and foreclosing on the Deed of Trust.
Foreclosing on the Deed of Trust can be
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accomplished either through a summary proceeding involving the trustees named
in the Deed of Trust (the public trustee and the Trustee) upon presentation of
the "original evidence of debt" (as required by Colorado law) or by judicial
foreclosure. A judicial foreclosure can be more time consuming and more costly
to pursue than a public trustee foreclosure. Once an order for sale is obtained
in a judicial foreclosure, however, the procedure and rights regarding cure,
bidding, public sale and redemption are similar to those in a public trustee
foreclosure. These remedies, however, may be pursued simultaneously or seriatim
in Colorado.
In certain instances, it may be necessary to pursue a judicial foreclosure.
For example, the Deed of Trust will indicate that a legended and originally
executed Indenture held by the Trustee will be the "original evidence of debt"
for purposes of Colorado law. In the event that the public trustee refuses to
acknowledge such Indenture as the "original evidence of debt" and, instead,
requires the delivery of all original outstanding Notes, the Trustee may be
required to resort to the institution of judicial foreclosure proceedings if
all such Notes, or adequate indemnities, are not delivered. Judicial
foreclosure proceedings are independent actions brought in a court of law and
are governed by the traditional rules of evidence. As a result, in a judicial
foreclosure, the Trustee, while not necessarily having to present the "original
evidence of debt," would need to prove to the court under the traditional rules
of evidence the existence and owing of the debt. In such case, the Deed of
Trust and Indenture are likely to constitute evidence of the debt. Judicial
foreclosure could also be necessitated by such matters as the discovery of
defects in the Deed of Trust, issues regarding priority, challenges to title to
the property, or the existence of a dispute which may lead to the sale being
enjoined or otherwise challenged.
The Deed of Trust purports to provide the Trustee with certain rights and
remedies, such as allowing the Trustee to take possession of the encumbered
property, to collect rents immediately upon default, without the appointment of
a receiver, and to obtain the appointment of a receiver, as a matter of right,
upon ex parte application. Certain remedies, however, such as purported waivers
of rights of redemption or cure prior to default, are against public policy in
Colorado and are thus limited or unenforceable. Applicable law also may impose
a duty of good faith and fair dealing on the Trustee, which may need to be
considered in the exercise of rights and remedies on default. Certain other
provisions or remedies under the Deed of Trust may be additionally qualified or
limited by applicable law, which will not interfere with the practical
realization of the benefits of the security interest intended, provided the
Trustee acts in good faith and in a commercially reasonable manner.
Due to the legal restrictions on the ability to engage in gaming activities
in gaming jurisdictions and the state restrictions on the retail sale of
alcoholic beverages, the Trustee may incur delays or possibly frustration in
its efforts to sell all or a portion of the Note Collateral. Operators of
gaming facilities and liquor licensed establishments are required to be
licensed by Gaming Authorities and Liquor Licensing Authorities, respectively,
and may be required by Gaming Authorities and Liquor Licensing Authorities to
file applications, to be investigated and to be found suitable as owners,
operators or landlords of a gaming establishment and a retail liquor licensed
establishment. Such requirements for approval by Gaming Authorities and Liquor
License Authorities may delay or preclude a sale of the Note Collateral to a
potential buyer at a foreclosure sale or sales. This may effectively limit the
number of potential bidders and may delay such sales, either of which could
adversely affect the sale price of the Note Collateral. In addition, the
disposition of Note Collateral consisting of gaming devices, including slot
machines, will require licensure of the person in possession or buyer by the
applicable Gaming Authority. Also, gaming activities must cease if the operator
does not have a right to possession of the premises and is not licensed or
found suitable by Gaming Authorities. Moreover, the gaming industry and retail
liquor sale industry could become subject to a different or additional
regulations during the term of the Notes, which could further adversely affect
the practical rights and remedies that the Trustee would have upon the
occurrence of an event of default under the Notes or the Indenture.
In addition to being subject to gaming law and liquor law restrictions, the
Trustee's ability to foreclose upon and sell Note Collateral will be subject to
the procedural and other restrictions of state real estate law or the Uniform
Commercial Code. In addition, certain direct or indirect leasehold interests,
contracts and other assets may not be sold without the consent of certain third
parties.
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The ability to foreclose upon and dispose of Note Collateral directly or
indirectly securing the Notes is also likely to be significantly impaired or
delayed by applicable bankruptcy laws if a bankruptcy case were to be commenced
by or against the Issuers. Under applicable bankruptcy laws, the Trustee and
the Holders would be prohibited from foreclosing upon, taking possession or
disposing of the Note Collateral absent bankruptcy court approval. Moreover,
the Issuers would be permitted to retain and use Note Collateral as long as the
Trustee and the Holders are being provided "adequate protection" in the form of
a cash payment or periodic cash payments or an additional or replacement lien
or in some other form approved by the court in its discretion. While this
requirement is generally intended to protect the value of the security, it
cannot be predicted what form of "adequate protection" might be approved by the
court in the particular case. The court has broad discretionary powers in all
these matters, including the valuation of Note Collateral. In view of these
considerations, it is not possible to predict for how long payments on the
Notes would be delayed following the filing of a bankruptcy case, whether or
when the Trustee could foreclose upon or take possession of or sell the Note
Collateral or to what extent the Holders would be compensated for any delay in
payment or loss of value of the Note Collateral.
After application of proceeds of any foreclosure sale to the Indebtedness,
the Trustee may be entitled to a deficiency judgment under certain
circumstances. There can be no assurance, however, that the Trustee would be
successful in obtaining any deficiency judgment, what the amount of any such
judgment if obtained might be, or that the Issuers would be able to satisfy any
such judgment, if obtained.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND MEMBERS
No director, officer, employee, incorporator or member of the Issuers shall
have any liability for any obligations of the Issuers under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of their
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such Notes when such payments are due from
the trust referred to below, (ii) the Issuers' obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and the Issuers'
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Issuers may, at their option and at any time,
elect to have their obligations released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to the Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders, cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Issuers must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Issuers shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (a) the Issuers
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have received from, or there has been published by, the Internal Revenue
Service a ruling or (b) since the date of the Indenture, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Issuers shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the Indenture) to which
the Issuers or any of their Subsidiaries is a party or by which the Issuers or
any of their Subsidiaries is bound; (vi) the Issuers must have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) the Issuers must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuers with
the intent of preferring the Holders over other creditors of the Issuers with
the intent of defeating, hindering, delaying or defrauding creditors of the
Issuers or others; and (viii) the Issuers must deliver to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Issuers may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Issuers are not required to transfer or exchange any Note selected for
redemption. Also, the Issuers are not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Notes).
Without the consent of the Holders of at least 66 2/3% in aggregate principal
amount of the Notes then outstanding, an amendment or waiver may not affect the
Liens in favor of the Trustee and the Holders created under the Collateral
Documents in a manner adverse to the Holders (other than pursuant to the
release of Note Collateral in accordance with the provisions of the Indenture
and of the applicable Collateral Documents) or release all or substantially all
of the Note Collateral.
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an
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amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under "--Repurchase at the Option of Holders"), (iii) reduce
the rate of or change the time for payment of interest on any Note, (iv) waive
a Default or Event of Default in the payment of principal of or premium, or
Liquidated Damages, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders to receive
payments of principal of or premium or Liquidated Damages, if any, or interest
on the Notes, (vii) waive a redemption payment with respect to any Note (other
than a payment required by one of the covenants described above under "--
Repurchase at the Option of Holders") or (viii) make any change in the
foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder, the Issuers
and the Trustee may amend or supplement the Indenture or the Notes to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Issuers' obligations to the Holders in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights
under the Indenture or the Collateral Documents of any such Holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability
or expense.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes will initially be issued
in the form of one Global Note (the "Global Note"). The Global Note will be
deposited on the Expiration Date with, or on behalf of, The Depository Trust
Company (the "Depositary") and registered in the name of Cede & Co., as nominee
of the Depositary (such nominee being referred to herein as the "Global Note
Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depositary is a limited purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in
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accounts of its Participants. The Depositary's Participants include securities
brokers and dealers, banks and trust companies, clearing corporations and
certain other organizations. Access to the Depositary's system is also
available to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants
may beneficially own securities held by or on behalf of the Depositary only
thorough the Depositary's Participants or the Depositary's Indirect
Participants.
The Issuers expects that pursuant to procedures established by the Depositary
(i) upon deposit of the Global Note, the Depositary will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of the Global Note and (ii) ownership of the Notes evidenced by the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depositary (with respect to
the interests of the Depositary's Participants), the Depositary's Participants
and the Depositary's Indirect Participants. Prospective purchasers are advised
that the laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer Notes evidenced by the Global Note will be limited to such
extent. For certain other restrictions on the transferability of the Notes, see
"Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of
any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by
the Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Issuers nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Issuers and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Issuers nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Issuers believe, however, that it is currently the policy
of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in the
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Notes in the form of Certificated Securities. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of,
and cause the same to be delivered to, such person or persons (or the nominee
of any thereof). All such certificated Notes would be subject to the legend
requirements described herein under "Notice to Investors." In addition, if (i)
the Issuers notify the Trustee in writing that the Depositary is no longer
willing or able to act as a depositary and the Issuers are unable to locate a
qualified successor within 90 days or (ii) the Issuers, at their option, notify
the Trustee in writing that they elect to cause the issuance of Notes in the
form of Certificated Securities under the Indenture, then, upon surrender by
the Global Note Holder of its Global Note, Notes in such form will be issued to
each person that the Global Note Holder and the Depositary identify as being
the beneficial owner of the related Notes.
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Neither the Issuers nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Issuers and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same Day Settlement and Payment
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. With respect to
Certificated Securities, the Issuers will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof
or, if no such account is specified, by mailing a check to each such Holder's
registered address.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Subsidiary of such specified Person, including, without
limitation, Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Subsidiary of such
specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Adjusted Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person and its
Subsidiaries for such period to Adjusted Fixed Charges of such Person and its
Subsidiaries for such period (calculated in the same manner as the Fixed Charge
Coverage Ratio is calculated).
"Adjusted Fixed Charges" means with respect to any Person for any period, the
Fixed Charges of such Person and its Subsidiaries for such period plus the
Contingent Interest of such Person and its Subsidiaries for such period.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback)
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole, will be governed by the provisions of the Indenture described above
under "--Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under "--Merger, Consolidation or Sale of Assets"
and not by the provisions of the Asset Sale covenant) and (ii) the issue or
sale by the Company or any of its Subsidiaries of Equity Interests of any of
the Company's Subsidiaries, in the case of either clause (i) or (ii), whether
in a single transaction or a series of related transactions (a) that have a
fair market value in excess of $250,000 or (b) for net proceeds in excess of
$250,000. Notwithstanding the foregoing: (i) a transfer of assets by the
Company to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the
Company or to another Wholly Owned Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Subsidiary to the Company or to another
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Wholly Owned Subsidiary, (iii) a Restricted Payment that is permitted by the
covenant described above under "--Restricted Payments" and (iv) a transfer of
all Public Improvements (as defined in the Subdivision Agreement) and all
installed physical facilities (as described in the Subdivision Agreement)
required to be transferred by the Company to the city of Black Hawk, Colorado
pursuant to the terms of the Subdivision Agreement will not be deemed to be
Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance
with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock, (ii)
in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Collateral Accounts" means collectively, the Interest Reserve Account,
the Completion Reserve Account, the Construction Disbursement Account and the
Disbursed Funds Account (as defined in the Cash Collateral and Disbursement
Agreement).
"Cash Collateral and Disbursement Agreement" means the Cash Collateral and
Disbursement Agreement among the Issuers, the Trustee, the Independent
Construction Consultant and the Disbursement Agent, in connection with the
Isle-Black Hawk.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than six months
from the date of acquisition, (iii) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight
bank deposits, in each case with any domestic commercial bank having capital
and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within six months after the date of
acquisition and (vi) investment funds investing solely in securities of the
types described in (ii), (iii), (iv) or (v) above if such fund has net assets
of at least $500 million.
"Cash Collateral Accounts" means collectively, the Interest Reserve Account,
the Completion Reserve Account, the Construction Disbursement Account and the
Disbursed Funds Account (as defined in the Cash Collateral and Disbursement
Agreement) and any replacements of or substitutes for such Accounts.
"Casino America" means Casino America, Inc., a Delaware corporation.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole, to any "person" (as
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such term is used in Section 13(d)(3) of the Exchange Act) other than Casino
America or any of its Affiliates or (ii) the expiration or termination of the
Management Agreement or the replacement of Casino America or any of its
Affiliates as manager under the Management Agreement with any Person other than
a successor to Casino America, (iii) the adoption of a plan relating to the
liquidation or dissolution of the Company or Casino America or any successor
thereto, (iv) the liquidation or dissolution of the Company or Casino America
or any successor thereto, (v) prior to the consummation of an Initial Public
Offering, the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that Casino America and
Nevada Gold, or a successor to Casino America or Nevada Gold, cease to
collectively control a majority of the voting power of the Company, (vi) after
an Initial Public Offering, the Company's becoming aware of (by way of a report
or any other filing pursuant to Section 13(d) of the Exchange Act, proxy vote,
written notice or otherwise) the acquisition by any Person or related group
(within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act, or any successor provision to either of the foregoing, including any
"group" acting for the purpose of acquiring, holding or disposing of securities
within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than
Casino America and Nevada Gold, or a successor to Casino America or Nevada
Gold, in a single transaction or in a related series of transactions, by way of
merger, consolidation or other business combination or purchase of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any
successor provision) of 50% or more of the total voting power entitled to vote
in the election of the Managers or Board of Directors of such other Person
surviving the transaction and, at such time, Casino America and Nevada Gold, or
a successor to Casino America or Nevada Gold, shall fail to beneficially own,
directly or indirectly, securities representing greater than the combined
voting power of the Company's or such other Person's Capital Stock as is
beneficially owned by such Person or group; (vii) the first day on which the
Company fails to own 100% of the issued and outstanding Equity Interests of
Capital; and (viii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Managers (together with any new
managers or board members, as the case may be, whose election or appointment by
such committee or whose nomination for election by the members or shareholders
of the Company, as the case may be, was approved by a vote of a majority of the
managers or board members, as the case may be, then still in office who were
either managers or board members at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Managers then in office; provided,
however, that a Change of Control shall not occur solely by reason of a
Permitted C-Corp. Conversion.
"Closing Date" means the closing date for the sale and original issuance of
the Notes.
"Collateral Documents" means, collectively, the Deed of Trust by the Issuers
to the Public Trustee of the County of Gilpin, Colorado, the Security Agreement
by the Issuers in favor of the Trustee, the Assignments of Patent, Trademark
and Copyright, the Collateral Assignments by the Issuers in favor of the
Trustee, the Cash Collateral and Disbursement Agreement, Issuer Pledge
Agreement by the Company in favor of the Trustee, the Pledge and Assignment by
the Issuers in favor of the Trustee, the Manager Subordination Agreement,
Uniform Commercial Code financing statements and fixture filings, and any other
agreements, instruments, documents, pledges or filings that evidence, set forth
or limit the Lien of the Trustee in the Note Collateral (as such terms are
defined in the Indenture).
"Company" means Isle of Capri Black Hawk L.L.C., a Colorado limited liability
company.
"Completion Capital Commitment" means the Completion Capital Commitment dated
as of the date of the Indenture executed by Casino America in favor of the
Trustee for the benefit of the Holders.
"Completion Reserve Account" means the account to be maintained by the
Disbursement Agent and pledged to the Trustee, pursuant to the terms of the
Cash Collateral and Disbursement Agreement, into which approximately $5.0
million of the proceeds of the Offering will be deposited.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in
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connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) Consolidated Interest Expense of such
Person and its Subsidiaries for such period, to the extent that any such
expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its Subsidiaries for such period to the
extent that such depreciation and amortization were deducted in computing such
Consolidated Net Income, in each case, on a consolidated basis and determined
in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes
on the income or profits of, and the depreciation and amortization of, a
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in the same proportion)
that the Net Income of such Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, (i) the consolidated interest expense of such
Person and its Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization or original issue discount, non-
cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), (ii) the consolidated interest expense of such Person
and its Subsidiaries that was capitalized during such period, (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Subsidiaries or secured by a Lien on assets of such Person
or one of its Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) to the extent not included above, Contingent Interest, whether
paid or accrued, to the extent such expense was deducted in computing
Consolidated Net Income.
"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, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary
or that is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions paid in cash to
the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income
of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary of such Net
Income is not at the date of determination permitted without any prior such
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded and (iv) the cumulative effect of a
change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that
by its terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year of
such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, less (x) all write-ups
(other than write-ups resulting from foreign currency translations and write-
ups of tangible assets of a going concern business made within 12 months after
the acquisition of such business) subsequent to
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the date of the Indenture in the book value of any asset owned by such Person
or a consolidated Subsidiary of such Person, (y) all investments as of such
date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries
(except, in each case, Permitted Investments) and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the foregoing determined in accordance with GAAP.
"Construction Disbursement Budget" means itemized schedules setting forth on
a line item basis all of the costs (including financing costs) estimated to be
incurred in connection with the financing, design, development, construction
and equipping of the Isle-Black Hawk, as such schedules are delivered to the
Disbursement Agent on the Closing Date and as amended from time to time in
accordance with the terms of the Cash Collateral and Disbursement Agreement.
"Construction Disbursement Account" means the account, to be maintained by
the Disbursement Agent and pledged to the Trustee, pursuant to the terms of the
Cash Collateral and Disbursement Agreement, into which approximately $52.9
million of the net proceeds of the Offering will be deposited.
"Contingent Interest" means with respect to any principal amount of the New
Notes as of any date after the Isle-Black Hawk becomes Operating, an amount
equal to the product of (i) 5% of the Company's Consolidated Cash Flow for the
Semiannual Period last completed times (ii) a fraction, the numerator of which
is the amount of such principal and the denominator of which is $75.0 million.
"Deed of Trust" means the Deed of Trust to Public Trustee, Security
Agreement, Fixture Filing and Assignment of Rents, Leases and Leasehold
Interests dated as of August 20, 1997, by the Company to the Public Trustee of
the County of Gilpin, Colorado in favor of the Trustee.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disbursement Agent" means IBJ Schroder Bank & Trust Company, as disbursement
agent.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the New Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Loss" means, with respect to any property or asset (tangible or
intangible, real or personal), any of the following: (i) any loss, destruction
or damage of such property or asset; (ii) any institution of any proceedings
for the condemnation or seizure of such property or asset or for the exercise
of any right of eminent domain; (iii) any actual condemnation, seizure or
taking by exercise of the power of eminent domain or otherwise of such property
or asset, or confiscation of such property or asset or the requisition of the
use of such property or asset; or (iv) any settlement in lieu of clauses (ii)
or (iii) above.
"Excess Cash Flow" means, with respect to the Company for any Operating Year,
the Consolidated Cash Flow of the Company and its Subsidiaries for such
Operating Year, minus (i) cash interest expense (including the portion of any
payments associated with Capital Lease Obligations) of the Company and its
Subsidiaries that is actually paid during such Operating Year, minus (ii) up to
$3.5 million in capital expenditures of the Company and its Subsidiaries paid
to maintain or improve the Isle-Black Hawk that are actually paid during such
Operating Year (excluding any capital expenditures made with the proceeds from
the sale of the New Notes), minus (iii) principal payments on Indebtedness
permitted to be incurred pursuant to the covenant described above under "--
Incurrence of Indebtedness and Issuance of Preferred Stock", minus (iv) amounts
paid during such Operating Year in the event that the Company exercises the
Hotel Option or commences construction of a hotel as part of
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the Isle-Black Hawk, in each case which hotel will constitute Note Collateral;
provided, however, that all amounts deducted pursuant to this clause (iv) shall
not exceed $6.3 million in aggregate for all Operating Years and minus (v) to
the extent such amounts were not included in computing Consolidated Cash Flow,
amounts distributed to Members during such Operating Year pursuant to clause
(iv) of the penultimate paragraph under "Certain Covenants--Restricted
Payments" so long as such distributions, at the time of such distributions,
were permitted to be distributed pursuant to the terms of the Indenture.
"Favorable Private Letter Ruling" means a private letter ruling, reasonably
satisfactory to the Trustee, issued by the United States Internal Revenue
Service to the Company to the effect that the Company will not be a publicly
traded partnership taxable as a corporation for United States federal income
tax purposes as a result of the issuance by the Company of the Notes.
"Favorable Tax Opinion" means a written opinion, reasonably satisfactory to
the Trustee, addressed and delivered to the Trustee by a nationally recognized
law firm to the effect that the Company will not be a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes as a result of the issuance by the Company of the Notes.
"FF&E" means furniture, fixtures or equipment used in the ordinary course of
the business of the Company and its Subsidiaries.
"FF&E Financing" means the incurrence of Indebtedness, the proceeds of which
are utilized solely to finance or refinance the acquisition of (or entry into a
capital lease by the Company or a Subsidiary with respect to) FF&E.
"Final Plans" with respect to any particular work or improvement means Plans
which (i) have received final approval from all governmental authorities
required to approve such Plans prior to completion of the work or improvements
and (ii) contain sufficient specificity to permit the completion of the work or
improvement.
"Financial Assurances" shall mean a letter of credit, a surety or performance
bond or other similar financial guaranty of a Qualified Financial Institution
in form and substance reasonably satisfactory to the Trustee in an amount not
less than the aggregate amounts previously distributed, plus the contemplated
distribution, to any Requesting Member pursuant to clause (iv) of the
penultimate paragraph under "Certain Covenants--Restricted Payments" from and
after the date of the Indenture (the "Assurance Amount") pursuant to which such
Qualified Financial Institution guarantees payment to the Company (and the
Company agrees to demand such payment) for so long as any Notes are outstanding
of the Assurance Amount upon the occurrence of (i) the earliest to occur of (x)
the payment of federal income taxes by the Company, (y) the entry of a final
judicial determination that the Company is not a "pass-through entity" for
federal income tax purposes or (z) the accrual by the Company for the payment
of federal income taxes as required in accordance with generally accepted
accounting principles; and (ii) failure by the Company to receive reimbursement
of the Assurance Amount in cash previously distributed to such Requesting
Member (or successor thereto) within thirty days after the occurrence of any
event referred to in clause (i) above.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Subsidiaries for such period to the Fixed Charges of such Person and its
Subsidiaries for such period. In the event that the Issuers or any of their
Subsidiaries incur, assume, guarantee or redeem any Indebtedness (other than
revolving credit borrowings) or issues preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that
have been made by the Issuers or any of their Subsidiaries, including through
mergers or consolidations and including any related
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financing transactions, during the four-quarter reference period or subsequent
to such reference period and on or prior to the Calculation Date shall be
deemed to have occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Subsidiaries following the
Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, without
duplication, the sum of (i) Fixed Interest, (ii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Subsidiaries or secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iii)
the product of (a) all dividend payments, whether or not in cash, on any series
of preferred stock of such Person or any of its Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Issuers, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States federal or foreign government, any state, province or any city or other
political subdivision or otherwise, and whether now or hereafter in existence,
or any officer or official thereof, including the Colorado Limited Gaming
Control Commission and any other applicable gaming regulatory authority with
authority to regulate any gaming operation (or proposed gaming operation)
owned, managed or operated by the Company, Casino America or Nevada Gold or any
of their respective Subsidiaries.
"Gaming Business" means the gaming business and includes all businesses
either licensed or unlicensed by a Gaming Authority necessary for, incident to
or connected with or arising out of the operation of a gaming establishment or
facility (including developing and operating lodging, retail and restaurant
facilities, sports or entertainment facilities, transportation services or
other related activities or enterprises and any additions or improvements
thereto) and any businesses incident and useful to the gaming business,
including, without limitation, food and beverage distribution operations to the
extent that they are operated in connection with a gaming business.
"Gaming Facility" means any tangible building or other structure used or
expected to be used to enclose space in which a Gaming Business is conducted
and (i) wholly or partially owned, directly or indirectly, by the Company or
any Subsidiary or (ii) any portion or aspect of which is managed or used, or
expected to be managed or used, by the Company or a Subsidiary; provided that
the term Gaming Facility does not include any real property whether or not such
building or other structure is located thereon or adjacent thereto or any
furniture, fixtures and equipment, including gaming equipment, used in
connection with any Gaming Business.
"Gaming Law" means the gaming laws of any jurisdiction or jurisdictions to
which the Company or any of its Subsidiaries is, or may at any time after the
date of the Indenture, be subject.
"Gaming License" means any license, permit, franchise or other authorization
from any Gaming Authority required on the date of the Indenture or at any time
thereafter to own, lease, operate or otherwise conduct the Gaming Business of
the Company, including all licenses granted under the gaming laws of any
jurisdiction to which the Company is, or may at any time after the date of the
Indenture, be subject.
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"Government Securities" means the securities purchased by the Company upon
consummation of the offering and deposited in the Interest Reserve Account and
in which the Trustee has a first priority perfected security interest which are
comprised of (i) direct obligations of the United States of America for the
timely payment of which its full faith and credit is pledged or (ii)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended), as custodian with respect to any such Government Security or a
specific payment of principal of or interest on any such Government Security
held by such custodian for the account of the holder of such depository
receipt; provided, that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
Government Security or the specific payment of principal of or interest on the
Government Security evidenced by such depository receipt.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holders" means the record holders from time to time of the Notes.
"Hotel Option" means the Company's option, subject to the terms and
conditions set forth in the Design/Build Agreement, to build a hotel in
connection with the development of the Isle-Black Hawk.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money (including
accrued and unpaid Contingent Interest) or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing indebtedness (other than letters of credit, performance or
other surety bonds and Hedging Obligations) would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
"Independent Construction Consultant" means the independent construction
consultant to be retained in connection with the construction of the Isle-Black
Hawk, or any successor independent construction consultant appointed by the
Trustee pursuant to the terms of the Cash Collateral and Disbursement
Agreement.
"Interest Reserve Account" means the account to be maintained by the
Disbursement Agent and pledged to the Trustee pursuant to the terms of the Cash
Collateral and Disbursement Agreement into which approximately $14.1 million of
the proceeds of the Offering will be deposited and used to purchase the
Government Securities.
"Investment Grade Securities" means any Investment in (i) marketable direct
obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within five years from the
date of acquisition thereof, (ii) marketable direct obligations issued by any
state of the United States of America maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings
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obtainable from both Standard & Poor's Corporation and Moody's Investors
Service, Inc., (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from both Standard & Poor's Corporation and Moody's
Investors Service, Inc., (iv) certificates of deposit maturing within two years
from the date of the Indenture issued by, or bank accounts maintained with,
commercial banks organized under the laws of the United States of America or
any state thereof or the District of Columbia, each having combined capital and
surplus of not less than $500 million and having a rating of "A1" or better
from Standard & Poor's Corporation or "P1" or better from Moody's Investors
Service, Inc., (v) bonds issued by corporations organized under the laws of the
United States or any state thereof, maturing within two years from the date of
the Indenture and having a rating of "BBB-" or better by Standard and Poor's
Corporation or "Baa3" or better by Moody's Investors Service, Inc. or (vi)
money market funds organized under the laws of the United States or any state
thereof that invest solely in any of the types of investments permitted under
this definition; provided that any such Investment Grade Securities which are
purchased with a portion of the net proceeds from the sale of the Notes are
deposited in either the Construction Disbursement Account or the Completion
Reserve Account and the Trustee has a first priority perfected security
interest in such Investment Grade Securities.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons in the forms of direct or indirect loans (including
guarantees of Indebtedness or other obligations), advances (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business), capital contributions, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided that
an acquisition of assets, Equity Interests or other securities by the Company
for consideration consisting of common equity securities of the Company shall
not be deemed to be an Investment. If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interests of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of.
"Isle-Black Hawk" means the pending project to develop, construct, equip and
operate the Isle of Capri Casino and related amenities, as described in this
Offering Circular.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquor License" means any license, permit, franchise or other authorization
from any Liquor Licensing Authority necessary or required on the date of the
Indenture or at any time thereafter to own, lease, operate or otherwise conduct
the lodging, retail, restaurant or other entertainment facilities of the
Company in the manner described in this Offering Circular, including all
licenses granted under the liquor licensing laws of any jurisdiction to which
the Company is, or may at any time after the date of the Indenture, be subject.
"Liquor Licensing Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States federal or a foreign government, any state, province or any
city or other political subdivision or otherwise, and whether now or hereafter
in existence, or any officer or official thereof, including the Colorado Liquor
Enforcement Division and the city of Black Hawk Liquor Licensing Authority and
any other applicable liquor licensing regulatory authority with authority to
regulate any liquor licensed operation (or proposed liquor licensed operation)
owned, managed or operated by the Company, Casino America or Nevada Gold or any
of their respective Subsidiaries.
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"Management Agreement" means the Amended and Restated Management Agreement
dated as of July 29, 1997, between the Company and Casino America relating to
the management of the Isle-Black Hawk.
"Management Fees" means any amounts payable to Casino America pursuant to
Section 9.1 of the Management Agreement.
"Managers" means (i) for so long as the Company is a limited liability
company, the Managers appointed pursuant to the Operating Agreement or (ii)
otherwise, the Board of Directors of the Company.
"Manager Subordination Agreement" means the Manager Subordination Agreement
dated as of the date of the Indenture among the Company, Casino America and the
Trustee.
"Members " means the members of the Company.
"Minimum Facilities" means, with respect to the Isle-Black Hawk, a casino
which has in operation at least 1,025 slot machines and ten table games,
related amenities (including a restaurant, buffet restaurant, a bar and an
event area) and has parking for at least 900 vehicles, including parking for up
to 150 vehicles which may be temporarily unavailable in the event that the
Company exercises the Hotel Option.
"Net Income" means, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of preferred stock dividends, excluding, however, (i) any gain (but not loss),
together with any related provision for taxes on such gain (but not loss),
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries,
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss), (iii) in the case of any Person that is treated as a pass-through entity
for United States federal income tax purposes, the provision for taxes based on
income or profits of such Person and its Subsidiaries for such period that
would be applicable if such Person were taxable as a subchapter "C" corporation
and (iv) solely for the purpose of calculating the Fixed Charge Coverage Ratio
to determine compliance by the Issuers with the covenants described under "--
Incurrence of Indebtedness and Issuance of Preferred Stock," "--Restricted
Payments" and "--Restriction on Payment of Management Fees," pre-opening
expenses as determined in accordance with GAAP incurred by such Person in
connection with the opening of the Isle-Black Hawk up to a maximum of $2.5
million.
"Net Loss Proceeds" means the aggregate cash proceeds received by the Company
or any of its Subsidiaries in respect of any Event of Loss, including, without
limitation, insurance proceeds from condemnation awards or damages awarded by
any judgment, net of the direct costs in recovery of such Net Loss Proceeds
(including, without limitation, legal, accounting, appraisal and insurance
adjuster fees and any relocation expenses incurred as a result thereof),
amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets that were the subject of such Event of Loss, and
any taxes paid or payable as a result thereof.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-
cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(to the extent, in the case of revolving credit Indebtedness, such Indebtedness
is permanently reduced) secured by a Lien on the asset or assets that were the
subject of such Asset Sale and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP;
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provided, that the Trustee for the benefit of the Holders shall hold a
perfected first priority security interest in such aggregate cash proceeds.
"Nevada Gold" means Nevada Gold, Inc., a Nevada corporation.
"Note Collateral" means all assets, now owned or hereafter acquired, of the
Issuers or any of their respective Subsidiaries, that are pledged or assigned,
or required to be pledged or assigned under the Indenture or the Collateral
Documents, to the Trustee pursuant to the Collateral Documents, which will
initially include all real estate, improvements and all personal property owned
by the Issuers and all accounts held by or for the benefit of the Issuers,
together with all proceeds thereof (including, without limitation, the proceeds
of Asset Sales), in each case excluding FF&E acquired with FF&E Financing,
gaming and liquor licenses, and certain other exceptions.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Operating" means, with respect to the Isle-Black Hawk, the first time that
(i) all Gaming Licenses have been granted and have not been revoked or
suspended, (ii) all Liens (other than Liens created by the Collateral Documents
or Permitted Liens) related to the development, construction and equipping of,
and beginning operations at, the Isle-Black Hawk have been discharged or, if
payment is not yet due or if such payment is contested in good faith by the
Issuers, sufficient funds remain in the Construction Disbursement Account to
discharge such Liens and the Issuers have taken any action (including the
institution of legal proceedings) necessary to prevent the sale of any or all
of the Isle-Black Hawk or the real property on which the Isle-Black Hawk will
be constructed, (iii) the Independent Construction Consultant, the general
contractor and the architect of the Isle-Black Hawk shall have delivered a
certificate to the Trustee certifying that the Isle-Black Hawk is substantially
complete in all material respects in accordance with the Final Plans with
respect to the Minimum Facilities and all applicable building and other laws,
ordinances and regulations, (iv) the Isle-Black Hawk is in a condition
(including installation of furnishings, fixtures and equipment) to receive
customers in the ordinary course of business, (v) the Minimum Facilities are
open to the general public and operating in accordance with all applicable laws
and (vi) a temporary certificate of occupancy has been issued for the Isle-
Black Hawk by the appropriate governmental authorities.
"Operating Deadline" means June 15, 1999.
"Operating Year" means the four consecutive fiscal quarter period of the
Company beginning immediately after the date that the Isle-Black Hawk first
becomes Operating, and each succeeding four consecutive fiscal quarter period
thereafter that begins immediately after each anniversary of the date the Isle-
Black Hawk becomes Operating.
"Permitted C-Corp. Conversion" shall mean a transaction resulting in the
Company becoming a subchapter "C" corporation pursuant to the United States
Internal Revenue Code; provided, that in connection with such transaction, (i)
the subchapter "C" corporation resulting from such transaction is a corporation
organized and existing under the laws of any state of the United States or the
District of Columbia and the beneficial holders of the Equity Interests of the
subchapter "C" corporation resulting from such transaction shall be the same,
and shall be in the same percentages, as the beneficial holders of the Equity
Interests of the Company immediately prior to such transaction; (ii) the
subchapter "C" corporation resulting from such transaction assumes all the
obligations of the Company under the Notes, the Collateral Documents and the
Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) the Trustee is provided 45 days' advance
notice of such transaction and evidence reasonably satisfactory to the Trustee
(which shall include but not to be limited to title insurance and/or an opinion
of counsel) regarding the maintenance of the perfection, priority and proof of
the security interest of the Trustee in the Note Collateral; (iv) after giving
effect to such transaction no Default or Event of Default exists; (v) 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
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prior to or simultaneously with such loss, suspension or material impairment;
(vi) the subchapter "C" corporation resulting from such transaction will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and after giving pro forma effect as if the transaction had
occurred at the beginning of the applicable four-quarter period, the Fixed
Charge Coverage Ratio after the transaction of the subchapter "C" corporation
resulting from such transaction shall be equal to or greater than the Fixed
Charge Coverage Ratio of the Company immediately preceding the transaction;
(vii) such transaction would not require any Holder or beneficial owner of
Notes to obtain a Gaming License or be qualified or found suitable under the
law of any applicable gaming jurisdiction; provided that such Holder or
beneficial owner would not have been required to obtain a Gaming License or be
qualified or found suitable under the laws of any applicable gaming
jurisdiction in the absence of such transaction; (viii) the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee to the effect that the Holders will not recognize
income gain or loss for federal income tax purposes as a result of such
Permitted C-Corp. Conversion; and (ix) the Issuers shall have delivered to the
Trustee an Officers' Certificate as to compliance with all of the above
conditions.
"Permitted Investments" means (i) any Investment in the Issuers or in a
Wholly Owned Subsidiary of the Issuers that is engaged in the Gaming Business
and that is evidenced by Capital Stock or Subsidiary Intercompany Notes that
are pledged to the Trustee as Note Collateral; (ii) any Investment in Cash
Equivalents; (iii) any Investment by the Issuers or any Subsidiary of the
Issuers in a Person that is evidenced by Capital Stock or Subsidiary
Intercompany Notes that are pledged to the Trustee as Note Collateral, if as a
result of such Investment (a) such Person becomes a Wholly Owned Subsidiary of
the Issuers engaged in the Gaming Business or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Issuers or a Wholly Owned
Subsidiary of the Issuers and that is engaged in the Gaming Business; (iv) any
Restricted Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with the
covenant described above under "--Repurchase at the Option of Holders--Asset
Sales"; (v) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Issuers; and (vi) after
the Isle-Black Hawk is Operating, any purchases from time to time by the
Company of Notes.
"Permitted Liens" means (i) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Issuers or any
Subsidiary of the Issuers; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Issuers; (ii) Liens on property existing at the time of acquisition thereof by
the Issuers or any Subsidiary of the Issuers (other than materials, supplies or
FF&E acquired in connection with developing, constructing or equipping of, or
commencing operations at, the Isle-Black Hawk), provided that such Liens were
in existence prior to the contemplation of such acquisition; (iii) Liens
existing on the date of the Indenture and previously disclosed to the Trustee
in writing; (iv) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded; provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (v) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other like Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
an appropriate process of law, and for which a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made, and, with
respect to such Liens arising in connection with the Isle-Black Hawk, (a) the
work or supplies provided which gave rise to such lien were contemplated by the
Design/Build Agreement; (b) there is no Default or Event of Default under the
Cash Collateral and Disbursement Agreement and (c) the payment for such work or
supplies is payable under the payment bond obtained by Haselden pursuant to the
Design/Build Agreement; (vi) Liens on FF&E to secure Indebtedness permitted by
clauses (ii) and (viii) of the second paragraph of the covenant described under
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock"; (vii) Liens securing obligations in respect of the Indenture or the
Notes; (viii) pledges or deposits in the ordinary course of business to secure
lease obligations or nondelinquent obligations under workers' compensation,
unemployment insurance or similar legislation; (ix)
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easements, rights-of-way, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances not interfering in any material
respect with the business or assets of the Company or any Subsidiary incurred
in the ordinary course of business; and (x) Liens arising from filing Uniform
Commercial Code financing statements for a precautionary purpose in connection
with true leases of personal property that are otherwise permitted under the
Indenture and under which the Issuers or any Subsidiary is lessee.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the lesser of (a) the original
principal amount of (or accreted value, if applicable) the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith) and (b) to the extent
such Indebtedness is secured by a Lien described in clause (vi) of the
definition of Permitted Liens above, the then current fair market value of the
asset so encumbered; (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment to,
the Notes on terms at least as favorable to the Holders as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred
by the Company.
"Person" means an individual, partnership, limited liability company,
corporation, trust or unincorporated organization and a government agency or a
political subdivision thereof.
"Plans" means the plans, specifications, working drawings, change orders,
correspondence and related items, which may be amended by the Company, as the
case may be, as necessary or appropriate, that collectively: (i) provide for
and detail the manner of development, construction and equipping of the Isle-
Black Hawk; (ii) call for construction which will permit the Isle-Black Hawk to
be Operating on or prior to the Operating Deadline, subject only to Permitted
Liens; (iii) call for construction which will cause the Isle-Black Hawk to be
Operating for a total cost consistent with its Construction Disbursement Budget
(as defined in the Cash Collateral and Disbursement Agreement) and the line
items set forth therein; (iv) provide for and detail the manner of development,
construction and equipping of, and the related budget for, the hotel which may
be built in connection with the Isle-Black Hawk pursuant to the Company's
exercise of the Hotel Option, in accordance with the Construction Disbursement
Budget, as amended, and the line items set forth therein; (v) to the extent
such Plans are amended, in the reasonable, professional judgment of the
Independent Construction Consultant, continue to represent a logical evolution
consistent with previous Plans; and (vi) together with any amendments, are
consistent with the description of the Isle-Black Hawk contained herein, and
are consistent with all governmental approvals and requirements, including,
without limitation, the Black Hawk Building Department, Historical Architecture
Review Commission, Gaming Authorities, and the Subdivision Agreement.
"Public Equity Offering" means an underwritten public offering of common
Capital Stock of the Company registered under the Securities Act (other than a
public offering registered on Form S-8 under the Securities Act) that results
in proceeds of at least $25.0 million to the Company.
"Qualified Financial Institution" shall mean any domestic commercial bank
having capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of "B" or better.
"Requesting Member" shall mean a member of the Company that seeks to obtain a
distribution from the Company pursuant to clause (iv) of the penultimate
paragraph under "Certain Covenants--Restricted Payments."
106
<PAGE>
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Semiannual Period" means the two fiscal quarter periods ending during the
January or July immediately preceding the applicable interest payment date.
"Significant Subsidiary" means any Subsidiary that would be a significant
subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Subdivision Agreement" means the Subdivision Agreement to be entered into
after the issuance of the Notes, between the Company and the city of Black
Hawk, Colorado.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Intercompany Notes" means the intercompany notes senior to any
subordinated debt of, and pari passu with all existing senior Indebtedness of
the issuing Subsidiary, issued by Subsidiaries of the Company in favor of the
Company to evidence advances by the Company, in each case, in the form attached
as an exhibit to the Indenture.
"Substantially Owned Subsidiary" of any Person means a Subsidiary of such
Person at least 80% of the outstanding Capital Stock or other ownership
interest of which (other than directors' qualifying shares) shall at the time
be owned by such Person or by one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
"Tax Amount" means, with respect to any period, without duplication, the
amount of taxable income in respect of the income of the Company of any Member
multiplied by the highest marginal combined federal, state and local tax rates
applicable to corporations for such period.
"Tax Distribution Condition" means any of the following: (i) the Company
shall be the subject of a Favorable Private Letter Ruling, a copy of which has
been sent to the Trustee and which shall remain in full force and effect; (ii)
the Trustee shall have received a Favorable Tax Opinion which shall be
confirmed as of the date of any distribution pursuant to clause (iv) of the
penultimate paragraph under "Certain Covenants--Restricted Payments"; or (iii)
the party proposing to receive a distribution in an amount not to exceed the
Tax Amount shall have provided Financial Assurances to the Trustee.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person all
of the outstanding Capital Stock or other ownership interests of which (other
than directors' qualifying shares) shall at the time be owned by such Person or
by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly
Owned Subsidiaries of such Person.
107
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of all material federal income tax
consequences expected to result from the acquisition, ownership and disposition
of the New Notes acquired in the Exchange Offer by holders of the New Notes,
but does not purport to be a complete analysis of all potential tax effects.
This summary is based on current provisions of the Internal Revenue Code of
1986, as amended (the "Code"), applicable Treasury Regulations, judicial
authority, and current administrative rulings and pronouncements of the
Internal Revenue Service (the "Service"). There can be no assurance that the
Service will not take a contrary view, and no ruling from the Service has been
or will be sought. Legislative, judicial, or administrative changes or
interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or
may not be retroactive and could affect the tax consequences to holders.
The tax treatment of a holder of New Notes may vary depending upon such
holder's particular situation. Certain holders (including, but not limited to,
certain financial institutions, insurance companies, broker-dealers, tax-exempt
organizations, foreign corporations, persons who are not citizens or residents
of the United States, and persons holding the New Notes as part of a
"straddle," "hedge" or "conversion transaction") may be subject to special
rules not discussed below. The discussion is limited to holders ("Holders") who
are "U.S. Holders" who will hold the New Notes as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Code. A
U.S. Holder is a beneficial owner of a New Note who or which is for U.S.
federal income tax purposes (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision thereof,
(iii) an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or (iv) a "U.S. Trust." A U.S. Trust is (a) for
taxable years beginning after December 31, 1996, or if the trustee of a trust
elects to apply the following definition to an earlier taxable year ending
after August 20, 1996, any trust if, and only if, (i) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (ii) one or more U.S. persons have the authority to control all
substantial decisions of the trust and (b) for all other taxable years, any
trust whose income is includible in gross income for U.S. federal income tax
purposes regardless of its source. The term U.S. Holder also includes certain
former U.S. citizens whose income and gain on the New Notes will be subject to
U.S. taxation.
The New Notes provide for both Fixed Interest payments and Contingent
Interest payments. The New Notes have legal and other economic terms typically
associated with indebtedness and are intended to create a debtor-creditor
relationship between the Company and the Holders. Accordingly, the Company will
treat the New Notes as indebtedness and will treat both Fixed and Contingent
Interest as interest for Federal income tax purposes. Such treatment is not
binding on the Service (or the courts), and there can be no assurance that the
Service will not successfully argue (or that a court will not hold) that the
New Notes should be characterized, in whole or in part, as equity for Federal
income tax purposes. If the Company's treatment of the New Notes were not
upheld, all or a portion of the interest payments on the New Notes would be
recharacterized, possibly either as distributions received from a corporation
with respect to corporate stock or as distributions from a partnership. A
recharacterization could affect the timing, character and amount of income
includible in the Holders' income, and the Holders could face other adverse tax
consequences. The following discussion assumes that the New Notes are treated
as indebtedness and both Fixed Interest and Contingent Interest are treated as
interest.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE NEW NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL,
OR FOREIGN TAX LAWS.
CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
An exchange of New Notes for Old Notes in satisfaction of a Holder's
registration rights as provided herein should not be treated as an exchange for
federal income tax purposes because the New Notes should not be considered to
differ materially in kind or extent from the Old Notes. As a result, (i) an
Exchanging Holder will
108
<PAGE>
not recognize any gain or loss on the Exchange; (ii) the holding period on the
New Note will include the holding period for the Old Note; (iii) the basis of
the New Note will be the same as the basis for the Old Note; and (iv) the
original issue discount on the New Note will be the same as on the Old Note.
The Exchange Offer will result in no Federal income tax consequences to a
nonexchanging Holder of Old Notes.
LIQUIDATED DAMAGES
The Company intends to take the position that the Liquidated Damages
described above under "Description of New Notes--Registration Rights;
Liquidated Damages" will be taxable to the Holder as ordinary income in
accordance with the Holder's method of accounting for federal income tax
purposes. The Service may take a different position, however, which could
affect the timing of both the Holder's income and the Company's deduction with
respect to the Liquidation Damages.
RECOGNITION OF INTEREST INCOME
Certain Treasury Regulations (the "Contingent Payment Regulations") govern
the treatment of debt instruments issued on or after August 13, 1996 that
provide for one or more contingent payments. Because the New Notes provide for
one or more contingent payments of interest, the Contingent Payment Regulations
will apply to the New Notes. Under the Contingent Payment Regulations, the
Company must construct a projected payment schedule for the New Notes and
holders generally must recognize interest income on a constant yield basis
(similar to the method prescribed for including original issue discount ("OID")
in income) based on the projected payment schedule, with certain adjustments if
actual payments differ from projected payments.
In particular, the projected payment schedule will be determined by including
all noncontingent payments and the "expected value" of all contingent payments
on the New Notes. The projected payment schedule must produce the "comparable
yield," which is the yield at which the Company would issue a fixed rate debt
instrument with terms and conditions similar to those of the New Notes. The
amount of interest that accrues each accrual period is the product of the
"comparable yield" and the New Note's "adjusted issue price" at the beginning
of each accrual period (generally, the six month period ending on each interest
payment date). The "adjusted issue price" of a New Note is equal to the price
first paid for a substantial amount of the New Notes, increased by interest
previously accrued on the New Note (determined without adjustments), and
decreased by the amount of any noncontingent payments and the projected amount
of any contingent payments previously made on the New Note. Except for
adjustments made for differences between actual and projected payments, the
amount of interest included in income by a holder of New Note is the sum of the
"daily portions" of interest income with respect to the New Note for each day
during the taxable year (or portion thereof) on which such holder held such New
Note. The "daily portions" of interest income are determined by allocating to
each day in any accrual period a ratable portion of the interest income
allocable to that accrual period. If actual payments differ from projected
payments, then holders will generally be required in any given taxable year
either to include additional interest in gross income (in case the actual
payments exceed projected payments in such taxable year) or to reduce the
amount of interest income otherwise accounted (in case the actual payments are
less than the projected payments in such taxable year).
Thus, under the rules described in the preceding paragraph, depending on the
"comparable yield" and "expected value" used to determine the projected payment
schedule, holders of New Notes may be required to include amounts in income
prior to the receipt of cash payments attributable to such income. The Company
will provide to holders the projected payment schedule for the New Notes. The
projected payment schedule for the New Notes will consist of all Fixed Interest
payments, all scheduled principal payments and a projected amount and time for
each Contingent Interest payment. The yield, timing and amounts set forth on
the projected payment schedule are for federal income tax purposes only and are
not assurances by the Company with respect to any aspect of the New Notes.
Holders will generally be bound by the projected payment schedule. However, the
Service will not respect a projected payment schedule which it determines to be
unreasonable. Holders are
109
<PAGE>
strongly urged to consult their tax advisors with respect to the application of
the contingent payment rules described above to the New Notes.
If the New Notes are sold or otherwise disposed of when there are remaining
contingent payments under the projected payment schedule, then any gain
recognized under such sale or other disposition will be ordinary interest
income. Any loss recognized will be ordinary loss to the extent the holders'
total interest inclusions on a New Note exceed the total amount of ordinary
loss the holder took into account pursuant to the adjustments described in the
second preceding sentence.
It is possible that the New Notes may be subject to the provisions of the
Code dealing with high yield discount obligations in which case the members of
the Company may not be entitled to claim a deduction with respect to a certain
portion of the interest payments (the "Disqualified Portion"). Under certain
circumstances, this could result in the Company making additional distributions
to its members, which could reduce the amount of cash available to the Company
to meet its obligations under the New Notes.
SALE, RETIREMENT OR OTHER TAXABLE DISPOSITION
Except as provided for above, a holder of a New Note in general will
recognize gain or loss upon the sale, redemption, retirement, or other taxable
disposition of such New Note in an amount equal to the difference between (i)
the amount of cash and the fair market value of property received in exchange
therefor (except to the extent attributable to the payment of accrued interest
or OID, which generally will be taxable to the holder as ordinary income) and
(ii) the holder's adjusted tax basis in such New Note. A holder's adjusted tax
basis in a New Note generally will be equal to the price paid for such New
Note, increased by the amount of OID, if any included in gross income prior to
the date of disposition, and decreased by the amount of any cash payments of
such OID on such New Note received prior to disposition. To the extent not
treated as ordinary income or loss as described above, any gain or loss
recognized on the sale, redemption, retirement, or other taxable dispositions
of a New Note generally will be capital gain or loss. The recently enacted
Taxpayer Relief Act of 1997 made certain changes to the Code with respect to
taxation of capital gains of taxpayers other than corporations that are U.S.
Holders. In general, the maximum tax rate for non-corporate taxpayers on long-
term capital gains has been lowered to 20% from the previous 28% rate for most
capital assets (including the New Notes) held for more than 18 months. For
taxpayers in the 15% regular tax bracket, the maximum tax rate on long-term
capital gains is now 10%. Capital gain on such assets having a holding period
of more than one year but not more than 18 months will be subject to a maximum
tax rate of 28%.
PUBLICLY TRADED PARTNERSHIP
In general, a partnership is not a taxable entity for United States federal
income tax purposes. Instead, each partner, in determining its United States
federal income tax liability, if any, takes into account its allocable share of
items of income, gain, loss, deduction, and credit of the partnership. Certain
partnerships ("publicly traded partnerships"), however, are treated as
corporations for federal tax purposes if interests in the partnership are
traded on an established securities market or on a secondary market (or a
substantial equivalent thereof). Treasury Regulations provide generally that,
for this purpose, an "interest in a partnership" includes any financial
instrument or contract the value of which is determined in whole or in part by
reference to the partnership (including the results of partnership operations).
The Treasury Regulations make an exception to this rule, however, for any
financial instrument or contract that (i) is treated as debt for federal tax
purposes and (ii) is not convertible into or exchangeable for an interest in
the capital or profits of the partnership and does not provide for a payment of
equivalent value. The Company believes that the New Notes are properly treated
as debt for federal income tax purposes and, although the New Notes provide for
Contingent Interest, that such New Notes do not provide for payments that are
equivalent in value to an interest in partnership capital or profits.
Therefore, the Company intends to report as a partnership, rather than as a
publicly traded partnership taxable as a corporation, for federal income tax
purposes. There can be no assurance, however, that the Service would not be
successful in taking a contrary position, in which case, the Company would be
treated as a corporation for federal tax purposes, a portion of the interest on
the New Notes would be nondeductible for tax purposes and the amount
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<PAGE>
of the Company's after-tax cash flow available to meet its obligations under
the New Notes would be reduced. In order to mitigate such risk, the Indenture
provides that the Company may not distribute to the Company's equity holders
tax payment distributions in certain circumstances as described under
"Description of the New Notes--Certain Covenants--Restricted Payments" unless
the equity holder has provided Financial Assurances to the Trustee or unless
there has been obtained a Favorable Private Letter Ruling or Favorable Tax
Opinion with respect to such risk. See "Description of the New Notes--Certain
Covenants--Restricted Payments."
BACKUP WITHHOLDING
A holder of New Notes may be subject to backup withholding at the rate of 31%
with respect to interest paid on, OID accrued on and gross proceeds from a sale
or other disposition of, the New Notes unless (i) such holder is a corporation
or comes within certain other exempt categories and, when required,
demonstrates this fact or (ii) provides a correct taxpayer identification
number, certifies as to no loss of exemption from backup withholding and
otherwise complies with applicable requirements of the backup withholding
rules. A holder of New Notes who does not provide the Company with his or her
correct taxpayer identification number may be subject to penalties imposed by
the Service. Final Treasury regulations published on October 14, 1997 may
affect the procedures for certifying an exemption from backup withholding.
Holders should consult their own tax advisors regarding the possible
application of backup withholding.
The Company will report to the holders of the New Notes and the Service the
amount of any "reportable payments" (including any OID accrued on the New
Notes) and any amount withheld with respect to the New Notes during the
calendar year.
111
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account as a result of
market-making activities or other trading activities in connection with the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Issuers have agreed that for a period of one year from the date
that this Registration Statement is declared effective by the Commission, it
will make available a prospectus meeting the requirements of the Securities Act
to any broker-dealer for use in connection with any such resale.
The Issuers will receive no proceeds in connection with the Exchange Offer.
New Notes received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such New Notes. Any broker-dealer that resells New Notes that
were received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such New Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of New Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the New Notes will be passed upon for
the Issuers by Mayer, Brown & Platt, Chicago, Illinois.
EXPERTS
The consolidated financial statements of Isle of Capri Black Hawk L.L.C. at
August 24, 1997 and for the period from April 25, 1997 (Date of Inception)
through August 24, 1997, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as
stated in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
112
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT AUDITORS............................................. F-2
FINANCIAL STATEMENTS:
Balance Sheet............................................................ F-3
Statement of Operations.................................................. F-4
Statement of Members' Equity............................................. F-5
Statement of Cash Flows.................................................. F-6
NOTES TO FINANCIAL STATEMENTS.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheet of Isle of Capri
Black Hawk L.L.C. (a development stage company) as of August 24, 1997, and the
related consolidated statements of operations, members' equity and cash flows
for the period April 25, 1997 (inception) through August 24, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Isle of Capri Black Hawk
L.L.C. at August 24, 1997, and the results of its operations and its cash
flows for the period from April 25, 1997 (inception) through August 24, 1997,
in conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
October 14, 1997
F-2
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AUGUST 24,
1997
------------
ASSETS
<S> <C>
Current assets
Cash............................................................ $ 682,463
Accrued interest receivable..................................... 37,721
Preopening costs................................................ 1,901
------------
Total current assets.......................................... 722,085
------------
Property and equipment
Land and land improvements...................................... 14,544,328
Construction in progress........................................ 636,535
------------
Property and equipment............................................ 15,180,863
------------
Other assets
Restricted cash................................................. 69,798,703
Deferred financing costs, net................................... 4,380,470
------------
74,179,173
------------
Total assets.................................................. $ 90,082,121
============
LIABILITIES AND MEMBERS' EQUITY
Liabilities and members' equity
Current liabilities:
Accounts payable-related parties................................ $ 3,627
Accrued liabilities:
Interest...................................................... 106,849
Other......................................................... 20,133
------------
Total current liabilities......................................... 130,609
------------
Long-term debt.................................................... 75,000,000
Members' equity
Member's capital -- Casino America of Colorado, Inc............. 8,169,125
Member's capital -- Blackhawk Gold, Ltd......................... 6,782,387
------------
Total members' equity......................................... 14,951,512
------------
Total liabilities and members' equity............................. $ 90,082,121
============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 25, 1997 (DATE OF INCEPTION) THROUGH AUGUST 24, 1997
<TABLE>
<S> <C>
Interest expense, net of capitalized interest of $22,971............. $(90,746)
Interest income...................................................... 37,721
--------
Net loss........................................................... $(53,025)
========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
<TABLE>
<CAPTION>
CASINO AMERICA BLACKHAWK TOTAL
OF COLORADO, INC. GOLD, LTD MEMBERS' EQUITY
----------------- ----------- ---------------
<S> <C> <C> <C>
Balance, April 25, 1997
(inception).................... -- -- --
Capital contribution-
development costs............ 316,636 -- 316,636
Capital contribution-cash..... 7,083,880 484 7,084,364
Capital contribution-land..... 100,000 7,503,537 7,603,537
Equity transfer............... 700,000 (700,000) --
Net loss...................... (31,391) (21,634) (53,025)
----------- ----------- ------------
Balance, August 24, 1997........ $ 8,169,125 $ 6,782,387 $ 14,951,512
=========== =========== ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD APRIL 25, 1997 (DATE OF INCEPTION) THROUGH AUGUST 24, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................ $ (53,025)
Adjustments to reconcile net loss to net cash used in operating
activities:
Amortization of deferred financing costs...................... 6,869
Changes in current assets and liabilities:
Increase in preopening costs................................ (1,901)
Accounts receivable......................................... (37,721)
Accounts payable and accrued liabilities.................... 83,877
-----------
Net cash used in operating activities......................... (1,901)
-----------
Cash flows from investing activities:
Purchase of land................................................ (6,400,000)
Purchase of property and equipment.............................. (557,701)
Increase in restricted cash..................................... (69,798,703)
-----------
Net cash used in investing activities......................... (76,756,404)
-----------
Cash flows from financing activities:
Proceeds from borrowings........................................ 72,000,000
Deferred financing costs........................................ (1,247,133)
Principal payment on land mortgage.............................. (396,463)
Capital contribution received................................... 7,084,364
-----------
Net cash provided by financing activities..................... 77,440,768
-----------
Net increase in cash.............................................. 682,463
Cash, beginning of period......................................... --
-----------
Cash, end of period............................................... $ 682,463
===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt issued for:
Underwriting discount on first mortgage notes................. 3,000,000
Capital contributions:
Land, net of mortgage of $396,463............................. 7,603,537
Financing fees................................................ 136,579
Property and equipment........................................ 180,057
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and basis of presentation
On April 25, 1997 ("Date of Inception"), Isle of Capri Black Hawk L.L.C.
(the "Company") (formerly ICB L.L.C.), a Colorado limited liability company,
was formed. The Company is owned by Casino America of Colorado, Inc. ("Casino
America of Colorado"), a wholly owned subsidiary of Casino America, Inc.
("Casino America"), and Blackhawk Gold, Ltd. ("Blackhawk Gold"), a wholly
owned subsidiary of Nevada Gold and Casinos, Inc. ("Nevada Gold"). The Company
is a Development Stage Company and has not commenced gaming operations. The
principal purpose of the Company is to develop and operate a casino
entertainment complex in Black Hawk, Colorado, which is anticipated to open in
late 1998 or early 1999.
On August 20, 1997, the Company and Isle of Capri Capital Corp., a wholly
owned subsidiary of the Company that has no operations, assets or liabilities,
issued $75,000,000 of 13% First Mortgage notes (the "Notes") due 2004 in order
to finance the construction and development of a casino entertainment complex
in Black Hawk, CO.
The Operating Agreement ("the Agreement") signed April 25, 1997, provides
that the Company will continue until December 31, 2096, or until such date
that dissolution may occur. Pursuant to the Agreement, Casino America of
Colorado contributed cash and Blackhawk Gold contributed cash and land to the
Company. Casino America of Colorado, Inc. had an ownership interest of 59.2%
and Blackhawk Gold, Ltd. had an ownership interest of 40.8% at August 24,
1997. Profits and losses of the Company will be allocated in proportion to
their ownership interests.
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as revenues and expenses during the reporting
period. Actual amounts when ultimately realized could differ from those
estimates.
Cash and cash equivalents
The Company considers cash and all highly liquid investments with a maturity
at the time of purchase of three months or less to be cash equivalents. At
August 24, 1997, there were no cash equivalents.
Preopening costs
Pre-opening costs include costs such as salaries, recruiting and training
associated with activities necessary to open the casino entertainment complex.
These costs are initially capitalized and then expensed when the related
business commences operations. From inception to date, the Company has been
solely devoted to developing the Isle Black-Hawk.
Income Taxes
No provision for Federal or state income taxes is recorded in the Financial
Statements as income taxes are the responsibilities of the individual members.
Certain significant risks and uncertainties
Gaming regulation licensing. The Company's ability to conduct gaming
operations in the State of Colorado depends on the licensability or
qualification of the Company, Casino America, and Nevada Gold. Such licensing
and qualifications will be reviewed periodically by the gaming authorities in
Colorado.
F-7
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
Competition. The Black Hawk/Central City, Colorado market already has many
established casinos. The market is highly competitive and other development
projects are currently being planned.
Construction risks. Any construction project entails significant
construction risks, including, but not limited to, cost overruns, delays in
receipt of governmental approvals, shortages of materials or skilled labor,
labor disputes, unforeseen environmental or engineering problems, work
stoppages, fire and other natural disasters, construction scheduling problems
and weather interference, any of which, if it occurred, could delay
construction or result in substantial increases in costs to the Company.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the assets' carrying amounts. An
impairment loss is measured by comparing the fair value of the asset to its
carrying amount.
Revenue and promotional allowances
Casino revenues will be the net win from gaming activities which is the
difference between gaming wins and losses. Casino revenues will be presented
net of accruals for the anticipated payouts of progressive electronic gaming
device jackpots. Revenue will not include the retail amount of food, beverage,
and other items provided gratuitously to customers. The cost of providing such
complimentary services will be included in casino expense.
2. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost except for land contributed by
Blackhawk Gold, Ltd. which is stated at appraised value. Depreciation will be
computed, upon the commencement of gaming operations, using the straight-line
method over the estimated useful lives of the property and equipment.
3. OTHER ASSETS
Restricted cash. Represents cash proceeds from the Notes held in trust by
IBJ Schroder Bank and Trust in New York, as trustee. These funds are held in
three separate accounts (Construction Disbursement, Completion Reserve,
Interest Reserve) with usage restricted by the Indenture. The Construction
Disbursement Account, approximately $50.7 million, will be used for the
development, construction and opening of the casino entertainment complex. The
Completion Reserve Account, approximately $5.0 million, will be used in the
event these are insufficient funds in the Construction Disbursement Account to
complete the casino entertainment complex. The Interest Reserve Account,
approximately $14.1 million, will be used to pay the first three fixed
interest payments on the notes,
Deferred financing costs. These costs will be amortized over the life of the
bonds commencing on the date of issuance, August 20, 1997.
4. LONG-TERM DEBT
Long-term debt consists of $75,000,000 in 13.0% first mortgage notes with
contingent interest due August 31, 2004. The Notes were issued under an
indenture dated August 20, 1997, between the Company and Capital Corp. as co-
issuers. The notes accrue interest at the rate of 13.0% per annum, payable
semiannually on February 28 and August 31 of each year, commencing February
28, 1998. Additionally, contingent interest is payable on the notes on each
interest date, in an aggregate principal amount equal to 5% of the Company's
Consolidated Cash Flow, provided that no Contingent Interest shall be payable
prior to commencement to operations.
F-8
<PAGE>
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after August 1, 2001 at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest to the redemption date, if redeemed during the 12-month period
beginning on August 31 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.......................... 106.5%
2002.......................... 103.2%
2003.......................... 100.0%
</TABLE>
Beginning with the first operating year after the Company begins gaming
operations, the Company will be required to offer to purchase, at a price of
101% of the aggregate principal amount thereof, the maximum principal amount
of the Notes that may be purchased with 50% of the Company's excess cash flow
(as defined).
Substantially all of the Company's assets are pledged as collateral for
long-term debt. At August 24, 1997, the Company was in compliance with all
debt covenants.
5. RELATED PARTY TRANSACTIONS
Completion Capital Commitment. Casino America has provided a Completion
Capital Commitment pursuant to which it has committed to contribute to the
Company up to $5.0 million in the event that such amounts are necessary to
cause the Company to commence operations on or before April 1, 1999, or if the
Company has not begun operating by such date.
Management Agreement. On April 25, 1997, the Company entered into a
Management Agreement (the "Management Agreement") with Casino America which in
exchange for a fee will manage the company. The management fee will be equal
to two percent of revenues (as defined in the Management Agreement), plus ten
percent of operating income, but not to exceed four percent of revenues. The
management fee will go into effect upon commencement of casino operations.
F-9
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE ISSUERS OR THE EXCHANGE AGENT. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
ANY OF THE NEW NOTES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... ii
Summary................................................................... 1
Risk Factors.............................................................. 13
Use of Proceeds........................................................... 26
Selected Financial Data................................................... 28
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 29
Business.................................................................. 31
Material Agreements....................................................... 41
Gaming and Liquor Regulatory Matters...................................... 48
Management................................................................ 54
Certain Transactions...................................................... 55
Principal Security Holders................................................ 56
The Exchange Offer........................................................ 57
Description of the New Notes.............................................. 66
Certain Federal Income Tax Considerations................................. 108
Plan of Distribution...................................................... 112
Legal Matters............................................................. 112
Independent Public Accountants............................................ 112
Index to Financial Statements............................................. F-1
</TABLE>
$75,000,000
LOGO
ISLE OF CAPRI BLACK HAWK L.L.C.
ISLE OF CAPRI BLACK HAWK CAPITAL CORP.
13% SERIES B FIRST MORTGAGE NOTES DUE 2004
WITH CONTINGENT INTEREST
PROSPECTUS
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OTHERS
(a) The Operating Agreement requires the Company to indemnify each member,
manager, employee or agent with respect to any proceeding asserted against
such member, manager, employee or agent due to his or its status as such other
than for certain violations of the Operating Agreement.
(b) Sections 7-109-102 and 7-109-107 of the Colorado Business Corporation
Act ("CBCA") permit indemnification of directors, officers, employees,
fiduciaries and agents of Capital under certain conditions and subject to
certain limitations. The indemnity may be granted if the individual incurred
liability in a proceeding because he was a director, officer, employee,
fiduciary or agent of Capital and (a) acted in good faith, (b) reasonably
believed that his conduct was in Capital's best interest and (c) in the case
of criminal proceeding, had no reasonable cause to believe that his conduct
was unlawful. No indemnity is permitted if the individual is adjudged liable
to Capital. Capital is not permitted under the CBCA to indemnify any
individual unless authorized in the specific case after a determination by a
disinterested quorum of the board, by independent legal counsel selected by a
disinterested quorum of the board or by the shareholders. Notwithstanding, the
foregoing, a director, officer, employee, fiduciary or agent of Capital is
entitled to indemnification if he is wholly successful, on the merits or
otherwise, in the defense if any proceeding to which he is made party.
(c) The Purchase Agreement and Registration Rights Agreement (the forms of
which are included as exhibits to this registration statement) provide for
indemnification under certain circumstances of the registrants and their
directors and officers by the Initial Purchaser and the holders of the Notes.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
The exhibits filed as part of this registration statement are as follows;
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
* 1 Purchase Agreement among Isle of Capri Black Hawk L.L.C., Isle of
Capri Black Hawk Capital Corp. and Jefferies & Company, Inc.
3.1 Articles of Organization of Isle of Capri Black Hawk L.L.C.
* 3.2 Articles of Incorporation of Isle of Capri Black Hawk Capital Corp.
* 3.3 Bylaws of Isle of Capri Black Hawk Capital Corp.
* 4.1 Indenture among Isle of Capri Black Hawk L.L.C., Isle of Capri Black
Hawk Capital Corp. and IBJ Schroder Bank & Trust Company, as Trust-
ee.
* 4.2 Form of 13% Series A First Mortgage Note due 2004 With Contingent
Interest.
* 4.3 Cash Collateral and Disbursement Agreement among IBJ Schroder Bank &
Trust Company, as the Disbursement Agent, IBJ Schroder Bank & Trust
Company, as the Trustee, CRSS Constructors, Inc., as the Independent
Construction Consultant, Isle of Capri Black Hawk L.L.C., as the
Company and an Issuer and Isle of Capri Black Hawk Capital Corp., as
Co-Issuer.
* 4.4 Registration Rights Agreement among Isle of Capri Black Hawk L.L.C.,
Isle of Capri Black Hawk Capital Corp., and Jefferies & Company,
Inc.
* 4.5 Deed Of Trust To Public Trustee, Security Agreement, Fixture Filing
and Assignment of Rents, Leases and Leasehold Interests, by Isle of
Capri Black Hawk L.L.C. and Isle of Capri Capital Corp. to the Pub-
lic Trustee of Gilpin County, Colorado for the benefit of IBJ Schro-
der Bank & Trust Company.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
* 4.6 Assignment of Rents, Leases and Leasehold Interests by Isle of Capri
Black Hawk L.L.C. and Isle of Capri Capital Corp. for the benefit of
IBJ Schroder Bank & Trust Company.
* 4.7 Security Agreement by Isle of Capri Black Hawk L.L.C. and Isle of
Capri Capital Corp. for the benefit of IBJ Schroder Bank & Trust
Company.
* 4.8 Issuer Pledge Agreement by Isle of Capri Black Hawk L.L.C. in favor
of IBJ Schroder Bank & Trust Company.
* 4.9 Collateral Assignment by Isle of Capri Black Hawk L.L.C. and Isle of
Capri Capital Corp. in favor of IBJ Schroder Bank & Trust Company.
* 4.10 Pledge and Assignment by Isle of Capri Black Hawk L.L.C. and Isle of
Capri Capital Corp. in favor of IBJ Schroder Bank & Trust Company.
* 4.11 Consent to Assignment of Construction Agreement by Haselden Con-
struction, Inc. in favor of IBJ Schroder Bank & Trust Company.
* 4.12 Consent to Assignment of Management Agreement by Casino America,
Inc. in favor of IBJ Schroder Bank & Trust Company.
* 4.13 Consent to Assignment of License Agreement by Casino America, Inc.
in favor of IBJ Schroder Bank & Trust Company.
* 4.14 Manager Subordination Agreement by Casino America, Inc. in favor of
IBJ Schroder Bank & Trust Company.
* 4.15 Environmental Indemnity by Isle of Capri Black Hawk L.L.C. in favor
of IBJ Schroder Bank & Trust Company.
* 4.16 Assignment of Trademark by Isle of Capri Black Hawk L.L.C. and Isle
of Capri Capital Corp. in favor of IBJ Schroder Bank & Trust Compa-
ny.
* 4.17 Assignment of Copyright by Isle of Capri Black Hawk L.L.C. and Isle
of Capri Capital Corp. in favor of IBJ Schroder Bank & Trust Compa-
ny.
* 4.18 Assignment of Patent by Isle of Capri Black Hawk L.L.C. and Isle of
Capri Capital Corp. in favor of IBJ Schroder Bank & Trust Company.
* 4.19 Completion Capital Commitment of Casino America.
5 Opinion of Mayer, Brown & Platt
*10.1 Operating Agreement among Isle of Capri Black Hawk L.L.C., Casino
America of Colorado, Inc. and Blackhawk Gold, Ltd.
*10.2 Members Agreement between Casino America of Colorado, Inc. and
Blackhawk Gold, Ltd.
*10.3 Management Agreement between Casino America, Inc. and Isle of Capri
Black Hawk L.L.C.
*10.4 License Agreement between Casino America, Inc. and Isle of Capri
Black Hawk L.L.C.
*10.5 Land Purchase Contract between Roman Entertainment Corporation of
Colorado and Casino America, Inc.
10.6 Exchange Commitment Letter between the City of Black Hawk and
Blackhawk Gold, Ltd.
10.7 Design/Build Agreement between Haselden Construction, Inc. and Isle
of Capri Black Hawk L.L.C.
10.8 Subdivision Agreement to be entered into between the City of Black
Hawk and Isle of Capri Black Hawk L.L.C.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*21 List of Subsidiaries
23.1 Consent of Mayer, Brown & Platt (included in opinion filed as Ex-
hibit 5)
23.2 Consent of Ernst & Young LLP
24 Powers of Attorney (included as part of the signature page hereof).
25 Statement of Eligibility of Trustee
99 Form of Letter of Transmittal
</TABLE>
- --------
*Previously filed
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted
because they are not required, amounts which would have otherwise be required
to be shown with respect to any item are not material, are inapplicable or the
required information has already been provided elsewhere in the registration
statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
II-3
<PAGE>
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 437(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4,10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail to other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) The registrant has not entered into any arrangement or understanding with
any person to distribute the securities to be received in the Exchange Offer
and to the best of the registrant's information and belief, each person
participating in the Exchange Offer is acquiring the securities in its ordinary
course of business and has no arrangement or understanding with any person to
participate in the distribution of the securities to be received in the
Exchange Offer. In this regard, the registrant will make each person
participating in the Exchange Offer aware (through the Exchange Offer
Prospectus or otherwise) that if the Exchange Offer is being registered for the
purpose of secondary resales, any securityholder using the exchange offer to
participate in a distribution of the securities to be acquired in the
registered exchange offer (1) could not rely on the staff position enunciated
in Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (2) must comply with registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. The registrant acknowledges that such a secondary resale
transaction should be covered by an effective registration statement containing
the selling securityholder information required by Item 507 of Regulation S-K.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BILOXI,
STATE OF MISSISSIPPI, ON DECEMBER 5, 1997.
Isle of Capri Black Hawk L.L.C. Isle of Capri Black Hawk Capital
Corp.
/s/ John M. Gallaway
By: _______________________________
/s/ John M. Gallaway
John M. Gallaway By: _________________________________
President and Chief Operating John M. Gallaway
Officer President and Chief
Operating Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John M. Gallaway, his true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capabilities, to sign any and
all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and any and all
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or nominee, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to registration statement has been signed by the following
persons in the capacities indicated on December 5, 1997.
SIGNATURE TITLE DATE
Chief Executive
* Officer of the
- ------------------------------------- Company and of
BERNARD GOLDSTEIN Capital
President and Chief
* Operating Officer
- ------------------------------------- of the Company and
JOHN M. GALLAWAY of Capital; Manager
of the Company;
Director of Capital
Executive Vice
* President, General
- ------------------------------------- Counsel and
ALLAN B. SOLOMON Secretary of the
Company and of
Capital; Manager of
the Company;
Director of Capital
Vice President of
* the Company and of
- ------------------------------------- Capital; Manager of
H. THOMAS WINN the Company;
Director of Capital
Vice President,
* Chief Financial
- ------------------------------------- Officer, Treasurer
REXFORD A. YEISLEY and Assistant
Secretary of the
Company and of
Capital
Senior Vice
* President of
- ------------------------------------- Operations of the
TIMOTHY M. HINKLEY Company and of
Capital
/s/ John M. Gallaway
*By
----------------------------------
Name: John M. Gallaway, as
Attorney-in-Fact
II-5
<PAGE>
-----------------------
Mail to: Secretary of State For office use only 031
Corporate Section
1560 Broadway, Suite 200 19971066760
Denver, CO 80202 $ 50.00
(303) 894-2261 SECRETARY OF STATE
Fax (303) 894-2242 01-25-97 16:39:30
-----------------------
MUST BE TYPED
FILING FEE: $50.00
MUST SUBMIT TWO COPIES
ARTICLES OF ORGANIZATION
Please include a typed
self-addressed envelope
I/We the undersigned natural person(s) of the age of eighteen years or more,
acting as organizer(s) of a limited liability company under the Colorado Limited
Liability Company Act, adopt the following Articles of Organization for such
limited liability company:
FIRST: The name of the limited liability company is ICB L.L.C
-------------------------
SECOND: Principal place of business (if known):
------------------------------
----------------------------------------------------------------------
THIRD: The street address of the initial registered office of the limited
liability company is: 1675 Broadway, Denver, Colorado 80202
-------------------------------------------------
The mailing address (if different from above) of the initial
registered office of the limited liability company is:
----------------
----------------------------------------------------------------------
The name of its proposed registered agent in Colorado at that address
is: The Corporation Company
-------------------------------------------------------------------
FOURTH: The management is vested in managers (check if appropriate)
---
FIFTH: The names and business addresses of the initial manager or managers or
if the management is vested in the members, rather than managers, the
names and addresses of the member of members are:
NAME ADDRESS (include zip codes)
Anthony O. Brown 500 Skokie Blvd., Ste. 575, Northbrook,
- -------------------------------- IL 60062
Mark W. Coffin 4400 One Houston Center, 1221 McKinney
- -------------------------------- --------------------------------------
Houston, TX 77010
SIXTH: The name and address of each organizer is:
NAME ADDRESS (include zip codes)
Michael J. Perlowski 190 South LaSalle Street
- -------------------------------- --------------------------------------
Chicago, IL 60603
- -------------------------------- --------------------------------------
Signed Signed /s/ Michael J. Perlowski
Organizer:
Organizer:
<PAGE>
- --------------------------------------------------------------------------------
STATE OF COLORADO
DEPARTMENT OF STATE
I hereby certify that this is a true and complete copy of the document
filed in this office and admitted to record in
File 19971066760
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------
DATED July 10, 1997
-------- --
Victoria Buckley
------------------
Secretary of State
By /s/Amy M. Evans
----------------
- ------------------------------------------------------------------------------
[SEAL OF STATE OF COLORADO 1876 APPEARS HERE]
<PAGE>
EXHIBIT 3.1
FIRST AMENDMENT TO ARTICLES OF ORGANIZATION
OF
ICB L.L.C.
A COLORADO LIMITED LIABILITY COMPANY
Pursuant to the provisions of the Colorado Limited Liability Company Act,
ICB, L.L.C., a Colorado limited liability company (the "Company"), hereby amends
it Articles of Organization as set forth herein:
A. The name of the Company shall be:
ISLE OF CAPRI BLACK HAWK, L.L.C.
B. Article VII, "Transfer Restrictions" shall be added and shall read as
follows:
The company shall not issue any voting securities or other interests,
except in accordance with the provisions of the Colorado Limited Gaming Act and
the regulations promulgated thereunder. The issuance of any voting securities or
other voting interests in violation thereof shall be void and such voting
securities or other voting interests shall be deemed not to be issued and
outstanding until (a) the company shall cease to be subject to the jurisdiction
of the Colorado Limited Gaming Control Commission, or (b) the Colorado Limited
Gaming Control Commission shall, by affirmative action, validate said issuance
or waive any defect in issuance.
No voting securities or other voting interests issued by the company and no
interest, claim or charge therein or thereto shall be transferred in any manner
whatsoever except in accordance with the provisions of the Colorado Limited
Gaming Act and the regulations promulgated thereunder. Any transfer in
violation thereof shall be void until (a) the company shall cease to be subject
to the jurisdiction of the Colorado Limited Gaming Control Commission, or (b)
the Colorado Limited Gaming Control Commission shall, by affirmative action,
validate said transfer or waive any defect in said transfer.
If the Colorado Limited Gaming Control Commission at any time determines
that a holder of voting securities or other voting interests of this company is
unsuitable to hold such securities or other voting interests, then the company
may, within sixty (60) days after the finding of unsuitability, purchase such
voting securities or other voting interests of such unsuitable person at the
lesser of (i) the cash equivalent of such person's investment in the company, or
(ii) the current market price as of the date of the finding of unsuitability
unless such voting securities or other voting interests are transferred to a
suitable person (as determined by the Commission) within sixty (60) days after
the finding of unsuitability. Until such voting securities or other voting
interests are owned by persons found by the Commission to be suitable to own
them, (a) the company shall be required or permitted to pay any dividend or
interest with regard to the voting securities or other voting interests (b) the
holder of such voting
<PAGE>
securities or other voting interests shall not be entitled to vote on any matter
as the holder of the voting securities or other voting interests, and such
voting securities or other voting interest shall not for any purposes be
included in the voting securities or other voting interests of the company
entitled to vote, and (c) the company shall not pay any remuneration in any form
to the holder of the voting securities or other voting interest except in
exchange for such voting securities or other voting interests as provided in
this paragraph.
IN WITNESS WHEREOF, the undersigned, constituting all of the Members and
Managers of the Company, have signed this First Amendment to Articles of
Organization this 23rd day of July, 1997 and affirm, under penalty of perjury,
that the facts stated herein are true.
ICB L.L.C.
/s/ John Gallaway
-------------------------------
John Gallaway, Manager
/s/ Allan Solomon
-------------------------------
Allan Solomon, Manager
/s/ H. Thomas Winn
-------------------------------
H. Thomas Winn, Manager
<PAGE>
Exhibit 5
---------
December 5, 1997
Isle of Capri Black Hawk L.L.C.
Isle of Capri Black Hawk Capital Corp.
c/o Casino America, Inc., as Manager
711 Washington Loop
Biloxi, Mississippi 39350
Re: $75 million 13% Series B First Mortgage Notes due 2004
Gentlemen:
We have acted as counsel to Isle of Capri Black Hawk L.L.C., a Colorado
limited liability company, and Isle of Capri Black Hawk Capital Corp., a
Colorado corporation (collectively, the "Issuers"), in connection with the
registration under the Securities Act of 1933, as amended (the "Act"), of an
Exchange Offer (the "Exchange Offer") relating to $75 million principal amount
of 13% Series A First Mortgage Notes due 2004 (the "Series A Notes"). The Series
A Notes were issued under an Indenture between the Issuers and IBJ Schroder Bank
& Trust Company, as trustee. We have participated in the preparation and filing
with the Securities and Exchange Commission under the Act of a registration
statement on Form S-4 (the "Registration Statement"), Registration No.
333-38093, relating to $75 million principal amount of 13% Series B First
Mortgage Notes due 2004 (the "Series B Notes") with respect to the proposed
Exchange Offer for Series A Notes. In this connection, we have examined such
corporate and other records, instruments, certificates and documents as we have
considered necessary to enable us to render this opinion.
Based on the foregoing, it is our opinion that, upon completion of the
Exchange Offer, the Series B Notes will have been duly authorized for issuance
and, when duly executed, authenticated, issued and delivered, will constitute
valid and legally binding obligations of the Issuers, entitled to the benefits
of the Indenture, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditor's
rights and to general equitable principles (whether considered in a proceeding
at law or in equity).
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the caption "Legal Matters".
Very truly yours,
/s/ MAYER, BROWN & PLATT
----------------------------
MAYER, BROWN & PLATT
<PAGE>
EXHIBIT 10.6
[LETTERHEAD OF BLACK HAWK APPEARS HERE]
201 Selak Street
P.O. Box 17 June 5, 1997
Black Hawk, CO 80422
Nevada Gold & Casinos, Inc.
303/582-5221 3040 Post Oak Boulevard, Suite 675
303/582-0429 FAX Houston, TX 77056
Casino America, Inc.
2200 Corporate Boulevard NW, Suite 310
Boca Raton, FL 33431
Gentlemen:
Mayor
Kathryn E. Eccker The City of Black Hawk agrees to exchange Parcel E-
2, which is described in Exhibit A which is
attached hereto and incorporated by this reference,
for Parcel D, which is described in Exhibit B which
Aldermen is attached hereto and incorporated by this
George H. Armbright reference, subject to the terms and conditions of
Kathleen Doles this letter.
Tom Kerr
Hal Midcap Parcel D must be conveyed to the City of Black Hawk
Al Price my special warranty deed, free and clear of all
David D. Spellman liens and encumbrances and other title defects that
affect the merchantability of Parcel D as
determined by the City in its sole discretion.
The City agrees to convey Parcel E-2 by special
warranty deed only if the real property located
immediately adjacent to Parcel E-2 (Lots 9 through
21, Block 51 and Lots 1 and 2, Block 52 of the City
of Black Hawk) is held in common ownership at the
time of the exchange.
City Manager
Lynnette Hailey The exchange of real property described in this
letter must occur on or before December 31, 1997,
at which time the agreement of the City of Black
Hawk (which is limited to the terms of this letter)
will terminate. Please note that, any attempt to
record this letter in the real estate records of
Building Official Gilpin County, Colorado, shall result in the
Steve Farris automatic termination of the City's agreement as
provided herein.
City Attorney
James S. Maloney If you have any questions concerning this
agreement, please feel free to call. We look
City Clerk forward to working with you on this exchange and
Penny Round your future projects in the City.
Finance Director Sincerely,
Randy Eckhardt
/s/ Lynnette Hailey
Fire Chief
Brian Lesher Lynnette Hailey
City Manager
Planning Director
Mark Kieffer enclosures
Police Chief cc: Mayor and Aldermen
Arthur M. Hutchinson Jim Maloney, City Attorney
Public Works Director
Vince Auriemma
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF PARCEL E2
A PARCEL OF LAND IN SECTION 7, TOWNSHIP 3 SOUTH, RANGE 72 WEST OF THE 6th
PRINCIPAL MERIDIAN, CITY OF BLACK HAWK, COUNTY OF GILPIN, STATE OF COLORADO,
MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE SOUTHERLY
RIGHT OF WAY OF MAIN STREET AND THE NORTHWEST CORNER OF LOT 9, BLOCK 51, CITY OF
BLACK HAWK, FROM WHENCE TRIANGULATION STATION NO. 7 BEARS N73(degrees)38'12"W A
DISTANCE OF 6,265.04 FEET; THENCE N11(degrees)05'15"E A DISTANCE OF 15.00 FEET;
THENCE S78(degrees)54'45"E A DISTANCE OF 568.45 FEET TO A POINT ON THE NORTHERLY
LINE OF LOT 2, BLOCK 52; THENCE S83(degrees)38'00"W A DISTANCE OF 50.01 FEET TO
THE NORTHWEST CORNER OF LOT 1, BLOCK 52 AND THE NORTHEAST CORNER OF LOT 21,
BLOCK 51; THENCE N78(degrees)54'45"W A DISTANCE OF 520.75 FEET TO THE POINT OF
BEGINNING, CONTAINING 8,169 SQUARE FEET.
CERTIFICATION
I, LARRY F. FISHER, A REGISTERED PROFESSIONAL LAND SURVEYOR IN THE STATE OF
COLORADO DO HEREBY CERTIFY THAT THE LEGAL DESCRIPTION, HEREIN, IS TRUE AND
ACCURATE, TO THE BEST OF MY KNOWLEDGE AND BELIEF.
DATED THIS 14TH DAY OF NOVEMBER, 1996
/s/ Larry F. Fisher
-------------------------------------
LARRY F. FISHER P.L.S. 22094
[SEAL OF COLORADO APPEARS HERE]
1
<PAGE>
EXHIBIT D
[CLEAR MOUNTAIN SURVEYING, INC. LOGO APPEARS HERE]
LEGAL DESCRIPTION OF PARCEL "D"
A PARCEL OF LAND IN SECTION 7, TOWNSHIP 3 SOUTH, RANGE 72 WEST OF THE 6th
PRINCIPAL MERIDIAN, CITY OF BLACK HAWK, COUNTY OF GILPIN, STATE OF COLORADO,
BEING A PART OF THE WABASH LODE SURVEY NO. 42, MORE PARTICULARLY DESCRIBED AS
FOLLOWS: BEGINNING AT CORNER 2 OF THE WABASH LODE U.S. SURVEY NUMBER 42 AND FROM
WHENCE TRIANGULATION STATION NO. 7 BEARS N 74 (degrees) 03'40"W A DISTANCE OF
6,017.53 FEET; THENCE S71(DEGREES)56'13"E A DISTANCE OF 50.00 FEET TO CORNER 3-4
OF SAID WABASH LODE; THENCE S18(DEGREES)06'46"W ALONG LINE OF SAID WABASH LODE A
DISTANCE OF 57.53 FEET TO THE NORTHERLY RIGHT OF WAY OF MAIN STREET; THENCE
N61(DEGREES)58'59"W ALONG SAID RIGHT OF WAY A DISTANCE OF 50.76 FEET TO LINE 1-2
OF SAID WABASH LODE; THENCE DEPARTING FROM SAID RIGHT OF WAY AND ALONG SAID LINE
1-2 N18(DEGREES)06'46"E A DISTANCE OF 48.76 FEET TO THE POINT OF BEGINNING,
CONTAINING 2,657 SQUARE FEET.
CERTIFICATION
I, LARRY F. FISHER, A REGISTERED PROFESSIONAL LAND SURVEYOR IN THE STATE OF
COLORADO DO HEREBY CERTIFY THAT THE LEGAL DESCRIPTION, HEREIN, IS TRUE AND
ACCURATE, TO THE BEST OF MY KNOWLEDGE AND BELIEF.
DATED THIS 25TH DAY OCTOBER, 1996
/s/ LARRY F. FISHER
---------------------------------
LARRY F. FISHER P.L.S. 22094
[SEAL OF P.L.S. APPEARS HERE]
<PAGE>
DESIGN-BUILD AGREEMENT
BY AND BETWEEN
ISLE OF CAPRI BLACK HAWK L.L.C., AS OWNER
AND
HASELDEN CONSTRUCTION, INC., AS CONTRACTOR
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
RECITALS..................................................................... 1
ARTICLE 1: CONTRACTOR'S SERVICES............................................ 1
1.1 GENERAL DESCRIPTION OF THE WORK............................. 1
1.2 INTENT OF AGREEMENT......................................... 2
1.3 PRIORITY OF DOCUMENTS....................................... 2
1.4 GENERAL REQUIREMENTS........................................ 2
1.4.1 Performance of the Work.......................... 2
1.4.2 Professional Standards........................... 2
1.4.3 Licensing and Other Qualifications............... 2
1.4.4 Sufficient Personnel............................. 3
1.4.5 Contractor's Key Personnel....................... 3
1.5 NATURE OF DESIGN-BUILD AGREEMENT............................ 3
1.5.1 Design and Engineering Generally................. 3
1.5.2 Previous Design Work............................. 3
1.6 DESIGN AND ENGINEERING WORK................................. 4
1.6.1 Schematic Design Documents....................... 4
1.6.2 Design Development Documents..................... 4
1.6.3 Construction Documents........................... 4
1.6.4 Consistency...................................... 5
1.6.5 Approval......................................... 5
1.6.6 Replacement...................................... 5
1.6.7 Design Schedule.................................. 5
1.6.8 Compliance with Laws............................. 5
1.7 CHANGES IN THE WORK......................................... 5
1.7.1 Changes.......................................... 5
1.7.2 Contract Adjustments............................. 6
1.7.3 No Contractor Changes............................ 6
1.7.4 Change Orders.................................... 6
1.7.5 Construction Change Directive.................... 6
1.7.6 Necessity for Prior Written Authorization........ 8
1.7.7 Disputes Reflecting Changes in the Work.......... 8
1.7.8 Compliance with Construction Documents........... 8
1.7.9 Effect of Changes in the Work on Surety Bonds.... 8
1.7.10 Authorized Change Order Signatory................ 9
1.7.11 Restriction on Time Extension.................... 9
1.8 CONTRACTOR'S REPRESENTATIONS
1.9 "AS-BUILT" DRAWINGS......................................... 9
1.9.1 Maintenance of Drawings at the Site.............. 9
1.9.2 Mylar Drawings and "As-Built" Survey............. 9
1.10 FINANCING CONTINGENCY...................................... 9
1.11 NOTEHOLDERS' INTEREST IN THE WORK..........................10
</TABLE>
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1.12 HOTEL ALTERNATE............................................10
ARTICLE 2: CONSTRUCTION OF THE WORK;
SUBSTANTIAL COMPLETION; EXCUSABLE EVENTS;
WORKMANSHIP; COMPLIANCE WITH LAWS............................................11
2.1 SCHEDULES AND SUBMITTALS....................................11
2.1.1 The Schedule......................................11
2.1.2 Submission of Shop Drawings, Details, Samples.....11
and Data
2.1.3 Submission of other Necessary Materials...........11
2.1.4 Material Purchasing Schedule......................11
2.1.5 Information as to Progress of Work................12
2.1.6 Revisions to Schedule Due to Owner's Suspension
of Work...........................................12
2.2 TIME AND PROSECUTION OF WORK................................12
2.2.1 Time of the Essence...............................12
2.2.2 Notice to Proceed.................................12
2.2.3 Substantial Completion of Casino..................13
2.2.4 Substantial Completion of Hotel...................13
2.2.5 Owner's Right to Direct Overtime and Multiple.....13
Shifts
2.2.6 Owner's Right to Request Expedite.................13
2.2.7 Owner's Right to Require Additional Labor.........13
2.3 SUBSTANTIAL COMPLETION OF WORK..............................14
2.3.1 Definition of Substantial Completion..............14
2.3.2 Further Conditions on Substantial Completion......14
2.4 DELAYED/EARLY COMPLETION....................................15
2.4.1 Liquidated Damages................................15
2.4.2 Early Completion Incentive........................15
2.5 EXCUSABLE EVENTS............................................16
2.5.1 Adjustments in Schedule Because of................16
Excusable Event
2.5.2 Adjustments in Guaranteed Maximum Price
Because of Excusable Event......................17
2.5.3 Excusable Events Defined..........................18
2.5.4 Rights Limited....................................18
2.5.5 Contractor's Acknowledgment of Extreme Weather
Conditions......................................18
2.6 WORKMANSHIP AND PERFORMANCE OF WORK.........................19
2.6.1 Site Conditions...................................19
2.6.2 Local Conditions..................................19
2.6.3 Contractor's Responsibility for Proper Layout.....20
2.6.4 Contractor's Workmanship Standard.................20
2.6.5 Contractor's Work in Areas Prepared by Others.....20
2.6.6 Owner's Inspection Rights.........................20
2.6.7 Storage on Site...................................20
2.6.8 Owner's Access to the Work........................21
</TABLE>
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2.6.9 Rejected Workmanship and Material During Construction.............. 21
2.6.10 Removal or Tearing Out Work to Inspect............................. 21
2.6.11 Responsibility..................................................... 21
2.6.12 Control............................................................ 21
2.7 COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS................................... 22
2.7.1 Taxes.............................................................. 22
2.7.2 Legal Requirements................................................. 22
2.7.3 Permits and Licenses............................................... 22
2.7.4 Building Inspections............................................... 22
2.7.5 Corrections of Legal Violations.................................... 22
2.7.6 Ownership of Design Documents...................................... 22
2.7.7 Patents and Other Proprietary Rights............................... 23
2.8 CONTRACTOR'S SUBCONTRACTORS..................................................... 23
2.8.1 Bidding Process.................................................... 23
2.8.2 Identification of Subcontractors................................... 24
2.8.3 Rejection by Owner of Subcontractors............................... 24
2.8.4 Liquidated Damages In Subcontracts................................. 25
2.9 LABOR........................................................................... 25
2.9.1 Contractor's Duty to Staff the Work................................ 25
2.9.2 Owner's Approval of Labor Force.................................... 25
2.9.3 Notice of Occurrence With Respect to Employees..................... 25
2.10 MAINTENANCE OF THE SITE AND PROTECTION OF PERSONS AND PROPERTY.................. 25
2.10.1 Safety............................................................. 26
2.10.2 Safety of Persons and Property..................................... 26
2.10.3 Placement of Signs................................................. 27
2.10.4 Orderly Maintenance of Site........................................ 27
2.10.5 Liability for Work in Place and on the Site........................ 27
2.10.6 No Unreasonable Interference with Owner's Operations............... 27
2.10.7 Protection of and No Interference with Adjoining Properties........ 28
2.11 USE OF OWNER'S FACILITIES....................................................... 28
2.11.1 Prohibition of Use Without Consent................................. 28
2.11.2 Indemnification Against Loss....................................... 28
ARTICLE 3: REPRESENTATIVES OF OWNER AND CONTRACTOR................................................ 28
3.1 DESIGNATION OF OWNER'S AGENT AND CONTRACTOR'S AGENT............................... 28
3.2 RIGHTS OF OWNER'S AGENT........................................................... 29
ARTICLE 4: OWNER'S RIGHT TO OUTSIDE INSPECTION..................................................... 29
4.1 RIGHT TO DESIGNATE................................................................ 29
4.2 LIMITATION OF OWNER'S LIABILITY................................................... 30
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ARTICLE 5: OWNER'S RIGHT OF ENTRY AND OCCUPANCY FOLLOWING SUBSTANTIAL COMPLETION...................... 30
5.1 RIGHT TO ENTER........................................................................ 30
5.2 NO INTERFERENCE WITH CONTRACTOR'S REMAINING WORK...................................... 30
5.3 OWNER APPROVALS....................................................................... 30
5.4 OWNER INFORMATION..................................................................... 31
ARTICLE 6: PUNCH LISTS AND FINAL COMPLETION........................................................... 31
6.1 PREPARATION OF PUNCH LIST........................................................... 31
6.2 FINAL COMPLETION.................................................................... 32
ARTICLE 7: CONTRACTOR'S WARRANTY OF CONSTRUCTION...................................................... 32
7.1 WARRANTY............................................................................ 32
7.1.1 Warranty with Respect to Professional Services.......................... 32
7.1.2 Warranty with Respect to Construction Work.............................. 32
7.1.3 Warranty With Respect to Materials and Equipment........................ 32
7.1.4 Period of Warranty...................................................... 32
7.2 EXTENT OF WARRANTY.................................................................... 32
7.3 NON-APPLICABILITY OF WARRANTY......................................................... 33
7.4 SURVIVAL OF WARRANTY.................................................................. 33
7.5 ASSIGNMENT OF WARRANTIES.............................................................. 33
7.6 MANUALS AND TRAINING.................................................................. 33
ARTICLE 8: CONTRACT SUM............................................................................... 34
8.1 TOTAL COMPENSATION.................................................................... 34
8.1.1 Cost of the Work......................................................... 34
8.1.2 Contractor's Fee......................................................... 34
8.2 CONTRACTOR'S GUARANTEED MAXIMUM PRICE................................................. 34
8.2.1 Guaranteed Maximum Price................................................ 34
8.2.2 Owner Furnished FF&E Excluded........................................... 34
8.3 EXCESS AND SAVINGS.................................................................... 35
8.3.1 Excess Cost Above Guaranteed Maximum Price.............................. 35
8.3.2 Savings Below Guaranteed Maximum Price.................................. 35
8.4 COST OF THE WORK...................................................................... 35
8.4.1 Salaries or Wages....................................................... 35
8.4.2 Overtime Payments....................................................... 36
8.4.3 Contractor Self-Perform Trade Work...................................... 36
8.4.4 Cost of Employee Benefits............................................... 36
8.4.5 Travel and Subsistence Expenses......................................... 36
8.4.6 Cost of Material and Supplies........................................... 36
8.4.7 Design Fees............................................................. 36
8.4.8 Subcontractor's Payments................................................ 36
8.4.9 Cost of Tools, Equipment and Facilities................................. 37
8.4.10 Cost of Major Construction Equipment.................................... 37
8.4.11 Insurance Premiums...................................................... 37
8.4.12 Taxes................................................................... 37
</TABLE>
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8.4.13 Fees, Royalties and Deposits................................................ 37
8.4.14 Uninsurable Losses.......................................................... 37
8.4.15 Communication Expenses...................................................... 37
8.4.16 General Conditions.......................................................... 37
8.4.17 Clean-up.................................................................... 38
8.4.18 Emergency................................................................... 38
8.4.19 Other Agreement Cost........................................................ 38
8.4.20 Pre-Approved Cost........................................................... 38
8.5 CREDITS TO COST OF THE WORK............................................................ 38
8.5.1 Proceeds of Sale............................................................ 38
8.5.2 Discounts and Refunds....................................................... 38
8.5.3 Material Retained by Contractor............................................. 38
8.5.4 Deposits.................................................................... 38
8.5.5 Proceeds of Sale of Excess Equipment........................................ 38
8.5.6 Proceeds of Existing Property and Furniture................................. 38
8.5.7 COST NOT TO BE REIMBURSED............................................................ 39
8.5.8 Office Personnel Expenses................................................... 39
8.5.9 Office Expenses............................................................. 39
8.5.10 Capital Expenses............................................................ 39
8.5.11 Unpermitted Rental Cost..................................................... 39
8.5.12 Overhead and General Expenses............................................... 39
8.5.13 Warranty and Corrective Work................................................ 39
8.5.14 Preconstruction............................................................. 39
8.5.15 Unincluded Items............................................................ 39
8.5.16 Excluded Items.............................................................. 39
8.5.17 Guaranteed Maximum Price Excess............................................. 39
8.6 AUDIT.................................................................................. 39
8.6.1 Right to Conduct Audit...................................................... 39
8.6.2 Imposition of Requirement on Subcontractors................................. 40
ARTICLE 9: PAYMENT OF COMPENSATION.................................................................... 40
9.1 APPLICATIONS FOR PROGRESS PAYMENTS.................................................... 40
9.1.1 Time of Submission.......................................................... 40
9.1.2 Contents of Application for Payment and Attachments......................... 40
9.1.3 Failure to Submit Proper or Timely Application for Payment.................. 42
9.2 CONTRACTOR'S ARCHITECT CERTIFICATE.................................................... 42
9.3 DEDUCTIONS............................................................................ 42
9.4 WITHHOLDING........................................................................... 42
9.4.1 Right to Withhold........................................................... 42
9.4.2 Conditions for Release of Withheld Amounts.................................. 43
9.5 RETAINAGE............................................................................. 44
9.5.1 Achievement of Final Completion............................................. 44
9.5.2 Final Inspection............................................................ 44
9.5.3 Certificate of Occupancy.................................................... 44
</TABLE>
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<CAPTION>
<C> <S> <C>
9.5.4 Remaining Obligations...........................................44
9.5.5 No Further Retainage Withheld...................................44
9.6 PAYMENT OF CONTRACTOR'S FEE................................................44
9.7 PAYMENT OF PROGRESS PAYMENTS...............................................45
9.8 FINAL PAYMENT..............................................................45
9.9 PAYMENT NOT ACCEPTANCE.....................................................45
9.10 RELEASE OF CLAIMS..........................................................45
9.11 CONTRACTOR'S LIABILITY FOR EXCESS OVER GUARANTEED
MAXIMUM PRICE..............................................................46
9.12 CONTINGENT ASSIGNMENT OF SUBCONTRACTS......................................46
9.12.1 Assignment of Contractor's Interest in Subcontracts
and Suppliers Contracts......................................46
9.13 INTEREST RATE..............................................................46
ARTICLE 10: INDEMNIFICATION...............................................................46
10.1 Indemnity..................................................................46
10.2 No Limitation..............................................................47
10.3 Liens......................................................................47
10.4 Lost Profits...............................................................47
ARTICLE 11: INSURANCE.....................................................................47
11.1 CONTRACTOR'S INSURANCE.....................................................47
11.1.1 Contractor's Insurance Certificates..............................47
11.1.2 Contractor's Liability Insurance.................................48
11.2 SCHEDULE OF INSURANCE COVERAGE.............................................48
11.2.1 Worker's Compensation Insurance..................................48
11.2.2 Commercial General Liability Insurance...........................48
11.2.3 Comprehensive Automobile Liability Insurance.....................49
11.2.4 Umbrella Liability Insurance.....................................49
11.3 OWNER'S BUILDER'S RISK INSURANCE...........................................49
11.3.1 Builder's Risk Policy............................................49
11.3.2 Deductible.......................................................50
11.3.3 Property of Others...............................................50
11.3.4 Builder's Risk Limits of Liability...............................50
11.3.5 Builder's Risk Deductibles.......................................50
11.3.6 Owner's Use of Project...........................................50
11.4 PROJECT ERRORS AND OMISSIONS INSURANCE.....................................50
11.5 NO COVERAGE CHANGES........................................................51
11.6 LIMITED WAIVERS OF SUBROGATION.............................................51
11.6.1 Owner's Limited Waiver of Subrogation............................51
11.6.2 Contractor's Limited Waiver of Subrogation.......................51
11.6.3 Conditions on Waivers of Subrogation.............................52
ARTICLE 12: DEFAULT.......................................................................52
12.1 Termination by Owner for Cause.............................................52
12.2 Termination by Contractor for Cause........................................53
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ARTICLE 13: TERMINATION BY OWNER WITHOUT CAUSE..........................................................................54
ARTICLE 14: INDEPENDENT CONTRACTOR......................................................................................54
ARTICLE 15: PAYMENT AND PERFORMANCE BOND................................................................................54
15.1 Payment and Performance Bonds.........................................................................54
ARTICLE 16: DISPUTES....................................................................................................54
16.1 Dispute Resolution....................................................................................54
ARTICLE 17: HAZARDOUS SUBSTANCES........................................................................................55
17.1 Hazardous Substances..................................................................................55
ARTICLE 18: MISCELLANEOUS PROVISIONS....................................................................................56
18.1 GOVERNING LAW.........................................................................................56
18.2 ASSIGNMENT AND SUCCESSORS.............................................................................56
18.2.1 No Assignment by Contractor...............................................................56
18.2.2 Assignment By Owner.......................................................................56
18.2.3 Agreement Binding on Successors and Assigns...............................................56
18.3 NOTICES...............................................................................................57
18.4 CUMULATIVE RIGHTS AND REMEDIES........................................................................57
18.5 WAIVER................................................................................................57
18.6 CAPTIONS OR HEADINGS..................................................................................58
18.7 COMPLIANCE WITH NOTEHOLDERS' REQUIREMENTS.............................................................58
18.8 CALENDAR DAYS.........................................................................................58
18.9 PARTIES TO ACT REASONABLY.............................................................................58
18.10 SEVERABILITY OF PROVISIONS............................................................................58
18.11 ENTIRE AGREEMENT......................................................................................59
18.12 NO THIRD PARTY BENEFICIARIES..........................................................................59
18.13 AUTHORITY TO EXECUTE..................................................................................59
18.14 INCORPORATION BY REFERENCE............................................................................59
EXHIBIT..................................................................................................................60
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<PAGE>
DESIGN-BUILD AGREEMENT
THIS DESIGN-BUILD AGREEMENT (hereinafter referred to as the
"Agreement") is made and entered into this 22nd day of July, 1997 by and between
HASELDEN CONSTRUCTION, INC., a Colorado corporation ("Contractor"), and ISLE OF
CAPRI BLACK HAWK L.L.C., a Colorado limited liability company ("Owner").
Capitalized terms used herein shall have the meanings ascribed to such terms in
Exhibit A attached hereto.
RECITALS
--------
WHEREAS, Owner holds, or proposes to hold, fee simple title to tracts
of land in Gilpin County, State of Colorado as more particularly described on
Exhibit B attached hereto (the "Site") and intends to have designed and
constructed thereon the Project;
WHEREAS, Contractor has agreed, as set forth in this Agreement, to
provide all architectural, engineering, interior design, excavation, site
grading and preparation, landscaping, general contracting services, materials,
furnishings, tools, equipment, labor, and all other professional and non-
professional services required to complete the Work described in this Agreement,
and has agreed further that Owner's cost for all such Work shall in no event
exceed the Guaranteed Maximum Price established in this Agreement; and
WHEREAS, Contractor has agreed, as set forth in this Agreement, to
provide and perform all of the Work by hiring its own architectural, engineering
and excavation firm(s), by retaining other consultants and subcontractors, and
by performing other portions of the Work on an "in-house" basis, all as provided
more specifically in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises set
forth in this Agreement and the faithful performance by each of them, the
parties agree as follows:
ARTICLE 1: CONTRACTOR'S SERVICES
1.1 GENERAL DESCRIPTION OF THE WORK
The "Work" shall mean and refer to all architectural, engineering,
design, excavation, site grading and preparation, landscaping, general
contracting, construction and other services which are necessary or appropriate
to execute and complete the Project in accordance with this Agreement, and shall
include, without limitation, all services which are specifically required by
this Agreement. Contractor agrees to provide all Work for a cost to Owner not to
exceed the Guaranteed Maximum Price set forth herein. Completion of the Work
shall occur in two phases: first the Casino and then the Hotel. The parties
contemplate that work on these two phases may at times proceed simultaneously in
accordance with the Schedule, and that segregation of the Work into the two
phases is only for the purpose of determining when the Casino and the Hotel are
Substantially Complete.
1
<PAGE>
1.2 INTENT OF AGREEMENT
The intent of the Agreement is to include all items and services
necessary for the proper execution and completion of the Work by the Contractor,
including, without limitation, all such items and services which are consistent
with, contemplated by, or reasonably inferable from the Agreement, whether or
not such items and services are specifically mentioned therein. The documents
comprising the Agreement are complementary, and what is required by one shall be
as binding as if required by all.
1.3 PRIORITY OF DOCUMENTS
In the event of a conflict or inconsistency among the documents
comprising the Agreement, the following order of precedence shall govern the
interpretation of such documents:
(a) Modifications to this Agreement;
(b) this Agreement (excluding the Project Concept Documents and
the Construction Documents);
(c) the Construction Documents; and
(d) the Project Concept Documents.
1.4 GENERAL REQUIREMENTS
1.4.1 Performance of the Work. The Contractor hereby covenants and
agrees that it shall duly and properly perform and complete the Work in
accordance with the Agreement and all applicable Laws. The Contractor further
covenants and agrees that it shall provide and pay for all items or services
necessary for the proper execution and completion of the Work and the Project,
whether temporary or permanent and whether or not incorporated or to be
incorporated into the Work, including, but not limited to, all design,
engineering, procurement, installation and construction services, all
administration, management, training and coordination services, all labor,
materials, furnishings, equipment, supplies, insurance, bonds, permits,
licenses, tests, inspections, tools, machinery, water, heat, utilities and
transportation, and all other items, facilities and services.
1.4.2 Professional Standards. The Contractor's services, including,
without limitation, its design and engineering services, shall be performed (i)
with care and diligence, (ii) in accordance with generally accepted professional
standards, and (iii) as expeditiously and economically as is consistent with the
best interests of the Owner and with the preceding standards of professional
skill, care and diligence.
1.4.3 Licensing and Other Qualifications. The Contractor covenants and
agrees that all persons who will perform or be in charge of the professional
architectural and design work for the Project shall have experience with the
type of project being undertaken and shall be duly
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licensed to practice under the Laws of the jurisdiction in which the Project is
located, and that all engineering services provided hereunder shall be performed
by an engineer, or engineers, licensed to practice under the Laws of the
jurisdiction in which the Project is located. Similarly, all construction
services shall be undertaken and performed by qualified construction contractors
and suppliers.
1.4.4 Sufficient Personnel. The Contractor shall, at all times during
the term of this Agreement, keep sufficient personnel employed so that the
services to be performed by the Contractor hereunder are completed in an
efficient, prompt, economical and professional manner.
1.4.5 Contractor's Key Personnel. Attached hereto as Exhibit C is a
list of the Contractor's key personnel who will be responsible for supervising
the performance of the Contractor's services hereunder. The Contractor shall not
remove any such personnel from the Project without the Owner's prior written
consent, which consent shall not be unreasonably withheld. If any such
individual is so removed, any replacement personnel shall be subject to the
prior written approval of the Owner, which approval shall likewise not be
unreasonably withheld.
1.5 NATURE OF DESIGN-BUILD AGREEMENT
1.5.1 Design and Engineering Generally. This Agreement expressly
contemplates that all services necessary to conceive, design, erect and complete
all Work, including without limitation construction, excavation, design,
architectural and engineering services, shall be the responsibility of
Contractor under this comprehensive Agreement. It is expected that Contractor
will retain various architects, engineers, consultants and other professionals
to assist it in designing, inspecting and completing the Work. The services of
such architects, engineers, consultants and other professionals shall be the
sole responsibility of the Contractor pursuant to Contractor's contracts or
subcontracts with such professionals, and Contractor shall be responsible to
Owner, as set forth more specifically in this Agreement, for all acts, services,
duties, responsibilities and omissions of such professionals; it being expressly
understood that Owner shall not have responsibility for any aspect of the design
or engineering of the Project (excluding the design related to the Owner
Furnished FF&E), nor shall Owner have any duties to architects, engineers,
consultants or other professionals retained by Contractor (including without
limitation, architects previously retained by Owner to assist in the planning,
design and development of the Project).
1.5.2 Previous Design Work. It is expressly understood and
acknowledged that Owner previously retained Parkhill-Ivins Architects, P.C.
(hereinafter "Contractor's Architect") to develop preliminary designs for the
Project. Contractor has agreed to retain Contractor's Architect to perform
certain design, architectural and other professional services in connection with
Contractor's design-build responsibilities under this Agreement. It is expressly
understood and agreed that Owner shall have no duties, responsibilities or
liability to Contractor for any professional services performed by Contractor's
Architects for Owner, including without limitation, responsibilities,
liabilities or duties with respect to any design drawings, engineering studies,
site plans, cost analyses, material specifications, or any other professional
services rendered by Contractor's Architect on behalf of Owner. Owner shall make
available to Contractor all design
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drawings, material specifications, engineering analyses, site plans, material
specifications and other documents prepared by Contractor's Architect as part of
its preliminary design work on behalf of Owner, but it is expressly understood
and agreed that all such documents are provided for informational purposes only,
without any warranty or representation whatsoever with respect to their accuracy
or completeness, and that upon execution of this Agreement all design,
engineering architectural and other professional services necessary to complete
the Work shall be the responsibility of Contractor, as set forth in this
Agreement, including design, engineering, architectural and other professional
services rendered by Contractor's Architect for or on behalf of Owner prior to
the execution of this Agreement.
1.6 DESIGN AND ENGINEERING WORK
1.6.1 Schematic Design Documents. Based on the Project Concept
Documents, the Contractor shall prepare, for review and approval by the Owner,
complete "Schematic Design Documents" consisting of drawings and other documents
illustrating the scale and relationship of the various components of the
Project, and outlining the general nature of the structural elements of the
Project. Without altering, modifying or otherwise revising the Guaranteed
Maximum Price, the Contractor shall also submit, for the Owner's review, an
estimated Project budget which reflects the preceding documents. The Owner's
written approval of the Schematic Design Documents must be obtained by the
Contractor prior to the Contractor commencing any work on the Design Development
Documents.
1.6.2 Design Development Documents. Based on the approved Schematic
Design Documents, the Contractor shall prepare, for review and approval by the
Owner, complete "Design Development Documents" consisting of drawings and other
documents which fix and describe the size and character of the Project as to
architectural, structural, mechanical, plumbing and electrical systems,
materials and such other elements as may be appropriate. Without altering,
modifying or otherwise revising the Guaranteed Maximum Price, the Contractor
shall also submit, for the Owner's review, a further refinement of the Project
budget which reflects the preceding documents. The Owner's written approval of
the Design Development Documents must be obtained by the Contractor prior to the
Contractor commencing any work on the Construction Documents.
1.6.3 Construction Documents. Based on the approved Design Development
Documents, the Contractor shall prepare, for review and approval by the Owner,
complete "Construction Documents" consisting of working drawings and
specifications setting forth in detail the requirements for the construction of
the Project. The Construction Documents shall include all drawings and
specifications, and such content and detail, as is necessary to obtain required
permits and regulatory approvals and to properly complete the construction of
the Project, and shall provide information customarily necessary for the use of
such documents by those in the building trades. Without altering, modifying or
otherwise revising the Guaranteed Maximum Price, the Contractor shall also
submit, for the Owner's review, a further refinement of the Project budget which
reflects the preceding documents. The Owner's written approval of the
Construction Documents must be obtained by the Contractor prior to the
Contractor commencing any construction services or activities in relation to the
Project.
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1.6.4 Consistency. The Contractor acknowledges and agrees that (i) the
Schematic Design Documents must be consistent with, and develop in detail, the
intent of the Project Concept Documents and provide for a first-class Project,
(ii) the Design Development Documents must, in turn, be consistent with, and
develop in detail, the intent of the approved Schematic Design Documents and
provide for a first-class Project, and (iii) the Construction Documents must, in
turn, be consistent with, and develop in detail, the intent of the approved
Design Development Documents and provide for a first-class Project.
1.6.5 Approval. Within seven (7) days after the Owner's receipt from
the Contractor of the Schematic Design Documents and the corresponding budget
estimate, and within ten (10) days after the Owner's receipt from the Contractor
of the Design Development Documents and the Construction Documents,
respectively, and the corresponding budget refinements, the Owner shall either
(A) provide written notification to the Contractor that the Owner approves such
Documents, or (B) provide written notification to the Contractor that such
Documents are incomplete and/or do not comply with the requirements of Section
1.6.4. In the event the Owner provides written approval as set forth in the
preceding clause (A), the Contractor shall proceed with the next phase of the
Project. In the event the Owner provides written notice as set forth in the
preceding clause (B), the Contractor shall immediately correct any
incompleteness and/or noncompliance with respect to such Documents. Upon
completing the correction of the Documents, the Contractor shall resubmit the
applicable materials to the Owner and the foregoing procedures shall be repeated
until the Owner provides written approval as to the Documents in question.
1.6.6 Replacement. Once the Construction Documents have been approved
by the Owner, the Owner and the Contractor shall execute a complete set of the
same. Upon such execution, the Project Concept Documents shall be deemed deleted
from this Agreement, and the approved and executed Construction Documents shall
thereupon be deemed as having been incorporated into this Agreement in their
place.
1.6.7 Design Schedule. The Contractor shall complete the various
design documents by the dates set forth in the Schedule.
1.6.8 Compliance with Laws. The Contractor covenants and agrees that
the Construction Documents shall be accurate and free from any errors or
omissions, and shall be in compliance with and accurately reflect all applicable
Laws, including, without limitation, any and all Laws related to gaming and/or
gaming facilities. The Contractor shall, at no expense to the Owner, promptly
modify any such documents which are not in accordance with such legal
requirements or are inaccurate or contain errors or omissions.
1.7 CHANGES IN THE WORK
1.7.1 Changes. Changes in the Work may be accomplished after execution
of this Agreement, and without invalidating this Agreement, by Change Order or
Construction Change Directive. A Change Order shall be based upon agreement
between the Owner and Contractor; a Construction Change Directive may be issued
by the Owner alone and may or may not be agreed
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to by the Contractor. Changes in the Work shall be performed under applicable
provisions of the Agreement, and the Contractor shall proceed promptly, unless
otherwise provided in the Change Order or Construction Change Directive.
1.7.2 Contract Adjustments. Notwithstanding anything to the contrary
contained in this Agreement, the Guaranteed Maximum Price and the Substantial
Completion Dates may only be adjusted by Change Order or Construction Change
Directive.
1.7.3 No Contractor Changes. Except as otherwise expressly permitted
in this Agreement, the Contractor shall not initiate changes in the scope of the
Work; it being acknowledged and agreed by the Contractor that the Work can be
successfully completed within the Guaranteed Maximum Price and by the
Substantial Completion Dates.
1.7.4 Change Orders. (a) The Owner may request changes in the Work
within the general scope of this Agreement consisting of additions, deletions or
other revisions. If the Owner so desires to change the Work, it shall submit a
change request to the Contractor in writing. Within seven (7) days of its
receipt of any such request, the Contractor shall submit a detailed proposal to
the Owner stating (i) the increase or decrease, if any, in the Guaranteed
Maximum Price which would result from such change, and (ii) the effect, if any,
upon the Substantial Completion Dates by reason of such proposed change. If the
Owner agrees within the Contractor's proposal, the Owner and the Contractor
shall execute a document reflecting the requested change in the Work and the
proposed adjustments, if any, in the Guaranteed Maximum Price and the
Substantial Completion Dates (a "Change Order"). In the event the Owner
disagrees with the Contractor's proposal in relation to the requested change,
the Owner may either (i) notify the Contractor that the Owner has decided to
withdraw its requested change, or (ii) issue a Construction Change Directive as
permitted in the following Section 1.7.5.
(b) In the event the Owner requests a major change in the scope of the Work
and the Owner ultimately decides not to proceed with such requested change, the
Owner shall nevertheless reimburse the Contractor, as a Cost of the Work, for
design fees (as defined in Section 8.4.7) which are incurred by the Contractor
in preparing design documents reflecting such requested change; provided,
however, no such reimbursement shall be made unless the Contractor previously
notified the Owner that the requested change was a major change.
1.7.5 Construction Change Directive. (a) In the event the Owner
disagrees with the Contractor's proposal in relation to the Owner's request for
a change in the Work, the Owner may issue a written order directing a change in
the Work (a "Construction Change Directive"), the Guaranteed Maximum Price and
the Substantial Completion Dates being adjusted, if at all, as hereinafter
provided:
1.7.5.1 (x) If the "actual cost" in performing the Work is
increased by any such change, the Guaranteed Maximum Price shall be
increased (without duplication) so as to reflect the "actual cost" to the
Contractor (or to any tier or level of subcontractor) in performing the
Work attributable to the change plus a percentage fee for overhead and
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profit. As to the Contractor, the percentage fee shall equal the
Contractor's Fee applied against the "actual cost" incurred by the
Contractor for such additional Work. As to any tier or level of
subcontractor, the percentage fee shall equal fifteen percent (15%) of the
"actual cost" incurred by any such subcontractor for such additional Work.
(y) If the "actual cost" in performing the Work is decreased by
any such change, the Guaranteed Maximum Price shall be decreased (without
duplication) so as to reflect the "actual cost" which would have been
incurred by the Contractor (or by any tier or level of subcontractor) in
the absence of such change, plus percentage fees calculated as described in
the preceding Section 1.7.5.1(x).
(z) For the purposes of this Section 1.7.5, "actual cost" in
relation to the Contractor shall be defined and limited to the Cost of the
Work, and "actual cost" in relation to any subcontractor shall be defined
and limited to the cost of the following:
(a) Costs of labor, including social security, old age and
unemployment insurance, fringe benefits required by
agreement or custom, and workers' or workmen's
compensation insurance;
(b) costs of materials, supplies and equipment, including
cost of transportation, whether incorporated or
consumed;
(c) reasonable rental costs of machinery and equipment,
exclusive of hand tools, whether rented from the
Contractor or others; and
(d) costs of premiums for all bonds and insurance, permit
fees, and sales, use or similar taxes related to the
Work.
"Actual cost" shall not be deemed to include any item which could be
considered overhead.
1.7.5.2 (a) The Owner shall propose a basis for adjustment, if any,
in the Substantial Completion Dates in the Construction Change Directive it
issues to the Contractor. If the Contractor does not agree with such proposed
adjustment, then any such adjustment in the Schedule shall be determined in
accordance with the dispute resolution provision in this Agreement.
(b) Upon receipt of the Construction Change Directive, the Contractor shall
promptly proceed with the change in the Work involved. When adjustments in the
Guaranteed Maximum Price and the Schedule are determined as provided in this
Section 1.7.5, such determination shall be effective immediately and shall be
recorded by execution of a Change Order.
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1.7.6 Necessity for Prior Written Authorization. Contractor waives any
right to compensation for any Change in the Work or any extra work performed
without prior written authorization or written direction from Owner. If extra
work was ordered by the Owner and the Contractor performed the same (but did not
receive a written Change Order or Construction Change Directive), the Contractor
shall be deemed to have waived any claim for extra compensation therefore.
1.7.7 Disputes Reflecting Changes in the Work. If a dispute arises as
to whether any task or work ordered by Owner is or is not a Change in the Work,
Contractor will make known its claim to Owner in writing no later than ten (10)
days following receipt of the order to undertake such work or task and, until
instructed in writing by Owner to cease such task or work, will immediately
comply with Owner's written instructions to perform such task or work. In the
event Contractor does not inform Owner in writing within said ten (10) days of
its claim that the task ordered by Owner constituted a Change in the Work and
its claim for an adjustment to the Guaranteed Maximum Price and/or the Schedule,
Contractor shall be barred from ever asserting such a claim in the future and
Contractor waives any right to thereafter request an adjustment in the
Guaranteed Maximum Price or Schedule. In the event Contractor, within said ten
(10) day period, informs Owner in writing of its claim that the task ordered by
Owner constitutes a Change in the Work, Contractor shall keep written records of
the labor, materials and equipment used to perform such disputed task or work
and shall submit said records to Owner weekly, and the dispute between Owner and
Contractor as to whether the work ordered by Owner is or is not a Change in the
Work shall be determined pursuant to the dispute resolution provisions of this
Agreement. In the event it is determined by dispute resolution that such work
did constitute a Change in the Work, adjustments to the Guaranteed Maximum Price
and the Schedule shall be determined in the manner set forth in Section 1.7.5.
Notwithstanding the outcome of such determination, Contractor hereby waives any
right which it might otherwise have to be compensated (and, such expenses shall
not constitute Cost of the Work) for such work performed on any day for which
the records specified in this Section 1.7.7 are not kept as provided herein.
1.7.8 Compliance with Construction Documents. Contractor shall not
execute any modifications, changes or alterations to the Construction Documents
or to the Work at the request of any person, including without limitation
Contractor's Architect or any subcontractor of Contractor, unless such
modification, change or alteration shall be authorized in writing by Owner as
provided in this Section 1.7.
1.7.9 Effect of Changes in the Work on Surety Bonds. Any Change in the
Work shall not operate to release any surety on any bond furnished by Contractor
hereunder. Contractor agrees that in the event any change to the Work results in
an increase to the Guaranteed Maximum Price, Contractor shall obtain an increase
in the amount of any labor and material bond and performance bonds obtained and
furnished by Contractor in an amount equal to the increase to the Guaranteed
Maximum Price and the cost of increasing said bond amounts shall be incorporated
into the Cost of the Work of performing such Change in the Work.
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1.7.10 Authorized Change Order Signatory. All Change Orders or
Construction Change Directives issued by Owner under this Agreement shall be in
writing and shall only be effective if executed on behalf of Owner by Ed Reese,
or by Owner's Agent executing Ed Reese's name as his attorney-in-fact, or by
such other person as Ed Reese may designate from time to time by giving notice
of the designation of such other person.
1.7.11 Restriction on Time Extension. With respect to all Changes in
the Work, Change Orders and Construction Change Directives, Contractor shall not
claim any extensions to the Schedule for changes to the Work which do not affect
the total duration of the Work.
1.8 CONTRACTOR'S REPRESENTATIONS
Contractor acknowledges and hereby affirms and represents to Owner
that Contractor, to the best of its ability (i) has developed a clear
understanding of the Work that is to be performed by Contractor pursuant to this
Agreement, (ii) will resolve and eliminate all discrepancies and ambiguities
from the scope of the Work to the fullest extent and so as to ensure that no
such discrepancies or ambiguities shall arise or be present in the Construction
Documents, (iii) has familiarized itself with the Site and all conditions
affecting said Site, and (iv) has made all other necessary inspections,
sightings and investigations which Contractor, in its sole and absolute
discretion, thought or deemed desirable or necessary for Contractor to represent
to Owner herewith that Contractor is able to fully and completely perform its
obligations under this Agreement, including without limitation, to fully and
completely perform the Work within the Guaranteed Maximum Price and by the
Substantial Completion Dates. The preceding terms and provisions of this Section
1.8 shall not limit or restrict the Contractor's rights set forth in Section
2.6.1.
1.9 "AS-BUILT" DRAWINGS
1.9.1 Maintenance of Drawings at the Site. During the course of
performing the Work, Contractor shall maintain on the Site a complete set of the
Construction Documents and shall update such Construction Documents on a
continuous basis to reflect "as-built" changes to the Work, the cost of such
maintenance to be part of the Cost of the Work.
1.9.2 Mylar Drawings and "As-Built" Survey. Contractor, as part of the
Cost of the Work and prior to final payment, shall transfer such "as-built"
changes to the Work from the Construction Documents kept at the Site to (i) a
true and complete final set of "as-built" Mylar drawings (and in electronic
format), capable of being reproduced, and (ii) a complete set of an original
"as-built" survey for the Site and the Project, indicating the actual location
of the improvements as constructed and as situated on the Site.
1.10 FINANCING CONTINGENCY
Contractor expressly acknowledges that Owner (in conjunction with its
wholly-owned subsidiary) intends to finance the Project by issuing secured first
mortgage notes (the "Notes"). This Agreement, and the obligations of Owner and
Contractor to perform hereunder, are
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contingent upon the receipt by the Owner, through the sale of the Notes, all
funds necessary to fully complete the Project. If Owner notifies Contractor on
or before August 31, 1997 that, in Owner's sole judgment and discretion, the
foregoing contingency has occurred or has been satisfied (a "Satisfaction
Notice"), then this Agreement shall remain in full force and effect. In the
absence of a Satisfaction Notice by Owner on or before August 31, 1997 the
foregoing contingency shall be deemed unsatisfied, and this Agreement shall
thereupon terminate and be of no further force or effect and the parties hereto
shall have no further rights, duties or obligations hereunder; provided,
however, the Owner shall reimburse the Contractor for those costs which have
been incurred by the Contractor and are enumerated in Article 13.
1.11 NOTEHOLDERS' INTEREST IN THE WORK
Contractor expressly understands, acknowledges and agrees that the
holders from time to time of the Notes, or any notes issued in exchange therefor
("Noteholders"), may have certain interests, secured and unsecured, in the
Project and the successful completion of the Project, as may be set forth more
specifically in said Noteholder's indenture and collateral documents executed
pursuant thereto. Payment to the Contractor for the Work shall be made from a
Construction Disbursement Account established pursuant to a "Cash Collateral &
Disbursement Agreement" utilizing proceeds from the sale of the Notes.
Contractor expressly acknowledges and agrees that a consultant (the "Independent
Consultant") shall be appointed on behalf of the Noteholders to review and
inspect the Work, review payment applications, and control and authorize
disbursements from the Construction Disbursement Account. Contractor also
acknowledges and agrees that the Noteholders may appoint or select such agents
or representatives ("Noteholders' Representatives") to protect the interests of
the Noteholders with respect to the Work. In connection with the foregoing, the
Contractor covenants and agrees (i) that, if requested by the Owner, it shall
execute the documentation establishing the Construction Disbursement Account,
and (ii) that notwithstanding the terms and provisions of this Agreement, the
terms and provisions of the Cash Collateral & Disbursement Agreement and the
Construction Disbursement Account shall govern in relation to matters dealing
with the design and construction of the Project, including without limitation,
matters relevant to progress payments, retainage, and inspection and approval of
the Work by the Independent Consultant.
1.12 HOTEL ALTERNATE
Notwithstanding anything to the contrary contained in this Agreement,
the Hotel shall not be deemed a part of the Work or the Project unless the Owner
provides written notice to the Contractor on or before March 1, 1998 stating
that it so desires to add the Hotel to the Work and to the Project. If the Owner
provides such notice to the Contractor on or before March 1, 1998, the Hotel
shall thereafter be deemed a part of the Work and the Project, the terms and
provisions of this Agreement shall apply to the Hotel and the Guaranteed Maximum
Price shall be increased by an amount equal to Six Million Two Hundred Twenty
Three Thousand Four Hundred Thirty Two And No/100 Dollars ($6,223,432.00). In
the event the Owner fails to provide such a notice on or before March 1, 1998,
the Hotel shall not be deemed a part of the Work or the Project and the terms
and
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provisions in this Agreement applicable to the Hotel shall have no force or
effect as they relate solely to the Hotel.
ARTICLE 2: CONSTRUCTION OF THE WORK;
SUBSTANTIAL COMPLETION; EXCUSABLE EVENTS;
WORKMANSHIP; COMPLIANCE WITH LAWS
2.1 SCHEDULES AND SUBMITTALS
2.1.1 The Schedule. Attached to this Agreement as Exhibit E is a
critical path method schedule for the performance of the Work by the Contractor
(the "Schedule"). Contractor shall supplement this Schedule continuously
throughout the term of this Agreement by providing to Owner delivery dates for
materials and equipment to be used in the construction of the Work. Contractor
agrees to be bound by the Schedule and to perform all Work in strict compliance
with the Schedule.
2.1.2 Submission of Shop Drawings, Details, Samples and Data. Within a
reasonable time following the Contractor's receipt of the Notice to Proceed, the
Contractor shall prepare and make available to Owner, or Owner's Agent, at the
Site for Owner's information and not for approval, all shop drawings, details,
samples, equipment data or other submittal information as required for the
performance of the Work and thereafter shall continue to so make available for
Owner's information and not for approval, any amendments and modifications made
thereto or any new drawings, details, samples, equipment data or other submittal
information prepared by Contractor with respect to the Work. All items required
to be made available by Contractor pursuant to this Section 2.1.2 shall be made
available to Owner ten (10) business days prior to the commencement of that
portion of the Work encompassed by said items and the making available of such
items (and their review by Owner, to the extent such review is to be undertaken
by Owner, shall not relieve Contractor from responsibility for errors and
omissions in the data or material made available).
2.1.3 Submission of other Necessary Materials. Contractor agrees to
make available at the Site, at no additional cost, all drawings, samples, sample
models, schedules, catalog cuts, test results, certificates and other
documentation necessary and incidental to the proper coordination and
performance of the Work. Such items shall be made available in a timely manner
so that the orderly progress and timely completion of the Work will not be
delayed in accordance with the Schedule. The review of such items by Owner, or
Owner's Agent, to the extent such review is to be undertaken by Owner, or
Owner's Agent, shall not relieve Contractor from responsibility for errors and
omissions in the data or material submitted.
2.1.4 Material Purchasing Schedule. Upon the request of Owner,
Contractor shall prepare a material purchasing schedule, and update it monthly
or otherwise as mutually agreed to by Contractor and Owner, or Owner's Agent, of
all equipment and materials to be furnished and incorporated into the Work by
Contractor, giving the following information:
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2.1.4.1 Identification of the item;
2.1.4.2 Date and amount of purchase;
2.1.4.3 Manufacturer and manufacturer's location;
2.1.4.4 Shipping date;
2.1.4.5 Current status of manufacture;
2.1.4.6 Date delivery is due at Site.
Contractor shall adhere to and comply with the approved material
purchasing schedule in undertaking the Work.
2.1.5 Information as to Progress of Work. Contractor agrees that it
shall keep Owner continually informed as to the progress of the Work and, upon
its own initiative, shall confer with Owner and shall plan and execute the Work
in coordinated sequence so as to insure the timely and efficient completion of
the Work. Contractor shall notify Owner when portions of its Work are
Substantially Complete or ready for any required inspection.
2.1.6 Revisions to Schedule Due to Owner's Suspension of Work. If
Owner decides to suspend the Work in order to accommodate its own interests,
Contractor shall, upon receipt of written notice from Owner or Owner's Agent,
immediately discontinue further progress of the Work until such time as Owner
advises Contractor in writing to resume, which Contractor shall promptly do upon
receipt of such written notice from Owner. In the event the suspension in the
Work was for a period of seven (7) days or less, Contractor hereby releases and
discharges Owner from any liability for damages or expenses of whatever kind or
nature whatsoever which may be caused to or sustained by Contractor by reason of
such suspension in the Work so long as Owner extends the Schedule and the
Substantial Completion Dates for the timely performance by Contractor of the
Work by a period of one weekday (excluding Saturday, Sunday, and legal holidays)
for each weekday (excluding Saturday, Sunday, and legal holidays) lost on
account of such Owner suspension in the Work. In the event the interruption in
the prosecution of the Work was for a period longer than seven (7) days,
Contractor, upon demonstrating that such delay did in fact cause an increase in
the Cost of the Work, shall be entitled, in addition to an adjustment of the
Schedule and the Substantial Completion Dates, to an increase in the Guaranteed
Maximum Price in the manner set forth in Section 1.7.5.
2.2 TIME AND PROSECUTION OF WORK
2.2.1 Time of the Essence. Time is of the essence of this Agreement.
Contractor agrees to punctually and diligently perform all parts of the Work in
accordance with the Schedule.
2.2.2 Notice to Proceed. Upon the waiver or satisfaction by the Owner
of the contingency set forth in Section 1.10 by issuance of the Satisfaction
Notice, the Owner shall provide written notice to the Contractor directing the
Contractor to commence the performance of the Work (the "Notice to Proceed").
The date upon which the Contractor receives the Notice to Proceed shall be
deemed the commencement date and shall be the date from which the various
milestone dates, such as the Substantial Completion Dates, will be measured.
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2.2.3 Substantial Completion of Casino. The Contractor shall commence
the Work upon its receipt of the Notice to Proceed, and shall successfully
achieve Substantial Completion of the Casino on or before the Casino Substantial
Completion Date.
2.2.4 Substantial Completion of Hotel. The Contractor shall
successfully achieve Substantial Completion of the Hotel on or before the Hotel
Substantial Completion Date.
2.2.5 Owner's Right to Direct Overtime and Multiple Shifts. If
Contractor is not in default under any of the provisions of the Agreement and
if, in order to expedite the completion of the Work, Owner directs Contractor to
work overtime or multiple shifts, Contractor shall work said overtime or
multiple shifts and Owner shall pay for said overtime only the actual extra cost
over the rate for regular time of said overtime. Extra cost for such overtime
work shall be authorized only by Change Order or Construction Change Directive.
2.2.6 Owner's Right to Request Expedite. If at any time Contractor
becomes aware of circumstances relating to the Work that may cause a delay in
the Schedule, including without limitation delays in the manufacture and/or
delivery of materials or equipment, Contractor shall immediately give written
notice of such circumstances to Owner or Owner's Agent. Upon receipt of such
notice, the Owner may direct the Contractor to exert its best efforts, and to
expedite any matters, so as to avoid any such delay in the Schedule.
2.2.7 Owner's Right to Require Additional Labor. In the event that
Contractor should:
(a) fail or refuse to prosecute the Work in strict accordance with the
Schedule, or
(b) fail or refuse to supply sufficient skilled workmen, or
(c) fail to cause materials or equipment to be delivered to the Site
in accordance with the material purchasing schedule, or
(d) fail to commence, perform, finish or deliver different parts of
the Work in accordance with the Schedule, or
(e) otherwise default in its obligations under this Agreement,
then Owner, in addition to any other rights Owner may have under this Agreement,
upon seven (7) days prior written notice to Contractor, shall have the right to
require Contractor to furnish additional labor and to expedite materials and
equipment and, if such additional labor is not available, Owner shall have the
right to require Contractor to work overtime or multiple shifts (and/or weekends
and holidays) to such an extent as will be sufficient in the opinion of Owner,
to expedite and complete the Work in accordance with the Schedule.
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2.3 SUBSTANTIAL COMPLETION OF WORK
2.3.1 Definition of Substantial Completion. For the purposes of this
Agreement, the terms "Substantially Completed", "Substantially Complete" and
"Substantial Completion", when applied to the Casino or the Hotel, shall be
deemed to have occurred upon the latest to occur of the following events:
(i) The Casino or the Hotel, as the case may be, is sufficiently
complete such that it is ready for occupancy, utilization and
continuous commercial operation for the uses and purposes
intended, subject to minor punch list items (the noncompletion of
which does not interfere with the occupancy, use or continuous
commercial operation of the facility in question);
(ii) Certificates of occupancy have been issued by the
appropriate Governmental Authorities for the Casino or the Hotel,
as the case may be;
(iii) Issuance of any other certificate, permit, license, or
similar document from any appropriate Governmental Authority
having jurisdiction thereof which constitutes a prerequisite
legal requirement to the lawful opening to the public or
commencement of occupancy of the Casino or the Hotel, as the case
may be; excluding from the foregoing any certificate, permit,
license, or similar document or approval required to conduct
casino gaming operations at the Project, which shall be the sole
responsibility of Owner;
(iv) Receipt by Owner of a certificate of substantial completion
from Contractor's Architect certifying that all Work as to the
Hotel or the Casino, as the case may be, has been completed in
accordance with the Construction Documents, subject only to the
completion of minor punch list items; and
(v) If required by the Cash Collateral & Disbursement Agreement,
receipt by Owner of a certificate of substantial completion from
the Independent Consultant certifying that all Work as to the
Hotel or the Casino, as the case may be, has been completed in
accordance with the Construction Documents, subject only to the
completion of minor punch list items.
2.3.2 Further Conditions on Substantial Completion. Contractor hereby
acknowledges its agreement and understanding that Substantial Completion of the
Casino and the Hotel shall in any event require that all systems reasonably
necessary for the operation of either facility shall be installed and fully
operational, including but not limited to, heating, ventilating, air
conditioning, life safety, systems controls, fire sprinkler, vertical
transportation, electrical and plumbing.
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2.4 DELAYED/EARLY COMPLETION
2.4.1 Liquidated Damages. Contractor expressly acknowledges that Owner
will incur substantial costs, lost revenues and damages for each day that
Substantial Completion of the Casino or the Hotel is delayed, including but not
limited to, interest charges, obligations to Noteholders, lack of gaming
proceeds, lack of hotel revenues, personnel and administrative costs, loss of
profits, loss of goodwill, loss of market position, and other direct and
indirect losses. In view of the difficulty or impossibility of determining what
Owner's damages will be should Contractor fail to achieve Substantial Completion
of the Casino or the Hotel on or before the respective Substantial Completion
Dates, Contractor agrees to pay Owner as liquidated damages, and not as a
penalty, the following amounts:
(i) For each day Substantial Completion of the Casino is delayed
beyond the Casino Substantial Completion Date, the sum of:
. $0.00 per day for the first fourteen (14) days of delay;
. $12,000 per day for any days of delay during the next fourteen
(14) days; and
. $18,000 per day for any days of delay after such initial
twenty-eight (28) day period.
(ii) For each day Substantial Completion of the Hotel is delayed
beyond the Hotel Substantial Completion Date, the sum of $1,000 for each
day of delay.
No liquidated damages due from the Contractor shall constitute a Cost of the
Work. Contractor hereby specifically acknowledges that it has reviewed together
with Owner all the aspects of Owner's damages, including without limitation,
Owner's daily interest carrying charges, and all data and information supporting
or reflecting such damages, and agrees, represents and confirms that the daily
liquidated damage amounts provided herein represents Owner's and Contractor's
best estimate of a realistic and accurate daily damage to Owner in the event of
Contractor's failure to Substantially Complete any portion of the Project as
provided in the Schedule. The preceding liquidated damages, if any, shall be due
and payable by the Contractor upon demand by the Owner.
2.4.2 Early Completion Incentive. Conversely, if the Contractor
achieves Substantial Completion of the Casino or the Hotel, as the case may be,
prior to their respective Substantial Completion Dates, the Owner shall pay the
Contractor an incentive fee as follows:
(i) For each day Substantial Completion of the Casino precedes the
Casino Substantial Completion Date, the sum of:
. $0.00 per day for the first seven (7) days which precede the
Casino Substantial Completion Date; and
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. $10,000 per day for each day which precedes the seventh (7th)
day before the Casino Substantial Completion Date.
(ii) For each day Substantial Completion of the Hotel precedes the
Hotel Substantial Completion Date, the sum of $1,000 per day.
The preceding incentive fees, if any, shall be paid with the final payment to
the Contractor.
2.5 EXCUSABLE EVENTS
2.5.1 Adjustments in Schedule Because of Excusable Event. Except as
otherwise specifically provided in this Agreement or as a result of Changes in
the Work as permitted in Section 1.7 of this Agreement, an extension in the
Substantial Completion Dates shall only be granted under the following
circumstances: (a) a delay occurs in the progress of the Work as a result of an
Excusable Event, and (b) the Contractor has complied with the terms and
conditions of the following Sections:
(a) The Contractor, within seven (7) days of the date upon which
the Contractor has knowledge of the Excusable Event,
notifies the Owner, in writing, of the cause of the event
and the approximate number of days the Contractor expects to
be delayed as a result of such event; and the Contractor
makes a request for an extension of time to the Owner, in
writing, within seven (7) days after the cessation of the
Excusable Event specifying the number of days the Contractor
believes that its activities were in fact delayed as a
result of the event. Compliance with this Section is a
condition precedent to receipt of an extension in the
Substantial Completion Dates. In the event of a failure to
comply with this Section, the Contractor shall not be
entitled to an extension of time;
(b) The Contractor can demonstrate, to the reasonable
satisfaction of the Owner, that the activity claimed to have
been delayed was in fact delayed by the Excusable Event, and
that the delay in such activity will result in a delay in
Substantial Completion of the Casino and/or the Hotel beyond
the applicable Substantial Completion Date; and
(c) The initial notice provided by the Contractor under Clause
(a) above describes the efforts of the Contractor that have
been (or are going to be) undertaken by the Contractor to
overcome or remove the Excusable Event and to minimize the
potential adverse effect on the time for performance of the
Work resulting from such Excusable Event.
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Upon satisfaction by the Contractor of the terms and conditions in the preceding
clauses, the Owner and the Contractor will use good faith efforts to agree on
the extent to which the Work has been delayed on account of any such Excusable
Event. Once the parties have mutually agreed as to the extent of such delay,
they shall enter into a Change Order reflecting their agreement as to the
adjustment in the Schedule and the Substantial Completion Dates.
2.5.2 Adjustments in Guaranteed Maximum Price Because of Excusable
Event. Except as otherwise specifically provided in this Agreement or as a
result of changes in the Work as permitted in Section 1.7 of this Agreement, an
increase in the Guaranteed Maximum Price shall only be granted under the
following circumstances: (a) a demonstrable increase in the Contractor's cost of
performing the Work results from the occurrence of an Excusable Event which is
identified in Section 2.5.3.1, 2.5.3.4, 2.5.3.5 or 2.5.3.6, and (b) the
Contractor has complied with the terms and conditions of the following Sections:
(a) The Contractor, within seven (7) days of the date upon which
the Contractor has knowledge of the Excusable Event,
notifies the Owner, in writing, of the cause of the event
and the approximate additional costs the Contractor will
incur as a result of such event; and the Contractor makes a
request for an increase in the Guaranteed Maximum Price to
the Owner, in writing, within seven (7) days after the
cessation of such Excusable Event specifying the additional
cost the Contractor believes it incurred as a result of such
event. Compliance with this Section is a condition precedent
to receipt of an increase in the Guaranteed Maximum Price.
In the event of a failure to comply with this Section, the
Contractor shall not be entitled to an increase in the
Guaranteed Maximum Price;
(b) The Contractor can demonstrate, to the reasonable
satisfaction of the Owner, that the Excusable Event did in
fact cause an increase in the Contractor's cost of
performing the Work; and
(c) The initial notice provided by the Contractor under Clause
(a) above describes the efforts of the Contractor that have
been (or are going to be) undertaken by the Contractor to
overcome or remove the Excusable Event and to minimize the
potential adverse effect on the cost for performance of the
Work resulting from such Excusable Event.
Upon satisfaction by the Contractor of the terms and conditions in the preceding
Clauses, the Owner and the Contractor will use good faith efforts to agree on
the extent to which the Contractor's costs for performing the Work have been
increased as a result of any such Excusable Event. Once the parties have
mutually agreed as to the Contractor's increased costs, they shall enter into a
Change Order reflecting their agreement as to the adjustment in the Guaranteed
Maximum Price.
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2.5.3 Excusable Events Defined. The occurrence of any of the following
events shall constitute an "Excusable Event":
2.5.3.1 Delays resulting from the acts or omissions of the Owner, to
the extent such delays arise from circumstances beyond the reasonable control
and without the fault or negligence of the Contractor, its subcontractors or
other persons for whom either may be liable;
2.5.3.2 Any of the following acts, events, conditions or occurrences
to the extent that the same are beyond the Contractor's reasonable control,
which could not have been either foreseen or avoided by the exercise of due
diligence, and which has an adverse effect on the Contractor's ability to
perform its obligations hereunder: acts of God, fires, explosions, floods,
earthquakes, tornadoes, epidemics, civil disturbances, war, riots, sabotage,
restraints or injunctions issued by a Governmental Authority, and nationwide
strikes or labor disputes (a "Force Majeure Event");
2.5.3.3 The discovery of any Pre-Existing Hazardous Substance at
the Site;
2.5.3.4 The occurrence of a Change in Law;
2.5.3.5 The Owner fails to issue the Notice to Proceed on or
before August 30, 1997;
2.5.3.6 The discovery of any Unforeseeable Conditions at the
Site as described in Section 2.6.1(b); and
2.5.3.7 Delays resulting from the occurrence of an Extreme Weather
Day; provided, however, no adjustment in the Substantial Completion Dates shall
be permitted until fifteen (15) Extreme Weather Days which actually delayed the
Work have occurred (it being expressly agreed by the Contractor that all delays
arising from the occurrence of such initial fifteen (15) days shall be borne by
the Contractor alone).
2.5.4 Rights Limited. The rights and remedies set forth in this
Section 2.5 shall be the Contractor's sole and exclusive rights and remedies in
the event of an occurrence of an Excusable Event, and the Contractor hereby
waives all other rights and remedies at law and/or in equity that it might
otherwise have against the Owner on account of an Excusable Event.
2.5.5 Contractor's Acknowledgment of Extreme Weather Conditions.
Contractor recognizes and acknowledges that the Work is to be conducted in a
mountainous region of Colorado where extremes in all forms of weather,
temperature and precipitation can be reasonably expected, and that Contractor
has taken into account the possibility of such extremes in weather, temperature
and precipitation in agreeing to the Guaranteed Maximum Price, Schedule and
Substantial Completion Dates. Therefore, the Contractor shall not be entitled to
an adjustment in the Guaranteed Maximum Price as a result of weather conditions,
and shall only be entitled to a
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Schedule adjustment for weather conditions to the extent expressly permitted in
Sections 2.5.1 and 2.5.3.
2.6 WORKMANSHIP AND PERFORMANCE OF WORK
2.6.1 Site Conditions. (a) The Contractor agrees that it has satisfied
itself as to what the Contractor anticipates will be the character, quality and
quantity of soil, surface and subsurface materials or obstacles that may be
encountered by the Contractor at the Site, and that the entire cost risk of such
matters (as well as any other concealed, latent or unknown conditions) shall be
borne by the Contractor as part of the Guaranteed Maximum Price and that the
Contractor shall not be entitled to an extension in the Substantial Completion
Dates as a result of the same. In furtherance of the foregoing, the Contractor
agrees that it shall have no claim for any increase in the Guaranteed Maximum
Price, or any extension in the Substantial Completion Dates, in the event that
soil, surface or subsurface conditions which differ from what had been
anticipated by the Contractor, or other concealed, unknown or latent conditions,
are encountered or discovered at the Site in the performance of the Work (even
if such conditions are materially different from what the Contractor had
anticipated and/or such conditions are of an unusual nature, differing from
those that could be reasonably anticipated). Notwithstanding the foregoing, the
responsibility for remediating any Pre-Existing Hazardous Substances which are
encountered at the Site shall be as provided in Section 17.1.
(b) Notwithstanding anything to the contrary contained in the preceding
Section 2.6.1(a), if the Contractor encounters conditions at the Site which are
concealed or unknown physical conditions which the Contractor reasonably
believes are Unforeseeable Conditions, then notice by the Contractor as to the
same shall be given to the Owner. If the Owner and the Contractor thereafter
mutually determine that such concealed or unknown physical conditions are in
fact Unforeseeable Conditions, then the Contractor will be entitled to seek an
equitable adjustment in the Guaranteed Maximum Price or the Substantial
Completion Dates, or both, as provided in Section 2.5.
2.6.2 Local Conditions. The Contractor represents that it has taken
steps reasonably necessary to ascertain the nature and location of the Work, and
that it has investigated and satisfied itself as to the general and local
conditions which can affect the Site and/or the performance of the Work,
including but not limited to (1) conditions bearing upon transportation,
disposal, handling, and storage of materials and equipment; (2) the availability
of labor, water, electric power, and roads; (3) uncertainties of weather at the
Site; and (4) the character of equipment and facilities needed preliminary to
and during the performance of the Work. Any failure by the Contractor to take
the actions described and acknowledged in this Section will not relieve the
Contractor from responsibility for estimating properly the difficulty and cost
of successfully performing the Work, or for proceeding to successfully perform
the Work without additional expense to the Owner; provided, however, the terms
and provisions of this Section shall not be construed to limit or restrict the
Contractor's rights set forth in the preceding Section 2.6.1(b) regarding
Unforeseeable Conditions. Notwithstanding the foregoing, the responsibility for
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remediating any Pre-Existing Hazardous Substances which are encountered at the
Site shall be as provided in Section 17.1.
2.6.3 Contractor's Responsibility for Proper Layout. Contractor shall
be strictly responsible for the proper layout, location, performance, and
accuracy of the lines and levels required for the proper performance of the Work
and for any loss or damage to the Owner resulting from the Contractor's failure
to set out or perform the Work correctly and coordinate its work with the Work
of others. Contractor shall so lay out and perform the Work that actual final
conditions and details result in alignment of finish surfaces in accordance with
the Construction Documents.
2.6.4 Contractor's Workmanship Standard. Every part of the Work shall
be executed by Contractor in strict accordance with the provisions of this
Agreement and in a thorough, sound, workmanlike, substantial manner and in
accordance with the highest construction industry standards. All material and
equipment used in the Work shall be furnished in ample quantities to facilitate
the proper and expeditious execution of the Work and shall be new and the best
of their respective kinds, except such materials as may be expressly and
specifically provided for in the Construction Documents to be otherwise.
2.6.5 Contractor's Work in Areas Prepared by Others. With respect to
any portion of the Work which requires tasks or functions to be performed on
areas constructed or prepared by others, or which includes installation of
materials or equipment furnished by others, Contractor hereby agrees that use of
such items or commencement of the Work by Contractor on such areas shall be
deemed to be and constitute acceptance thereof by Contractor, and Contractor
hereby agrees that it shall be responsible and liable for any loss, expense or
damage attributable to such areas or items, and agrees to protect such areas,
and to inventory, handle, store and install such items with such skill and less
care as to insure compliance with this Agreement.
2.6.6 Owner's Inspection Rights. Contractor shall furnish to Owner
ample facilities at all times for inspecting materials at the Site, or at shops,
or at any place where materials required for the performance of the Work may be
in storage in the course of preparation, process, manufacture or treatment.
Contractor shall furnish to Owner, as often as requested, full reports of the
progress of the Work at any place where materials may be in the course or
preparation, process or manufacture, in such detail as may be required by Owner,
including any purchase orders, schedules, plans, drawings, or diagrams utilized
in the course of preparation, process or manufacture of such materials.
2.6.7 Storage on Site. Contractor shall provide, locate and relocate
and/or maintain adequate sheds and/or tool boxes on the Site as may be
reasonably designated by Owner. Owner shall not be responsible for any of
Contractor's (or its subcontractors' or materialmen's) clothing, tools,
materials, equipment or other items lost, damaged, stolen or destroyed at the
Site or elsewhere, it being the agreement of the parties hereto that all
preparation for the Work, including without limitation the delivery of material
to the Site, shall be at the risk of Contractor alone and Contractor shall
assume the risk for all loss occasioned by fire, theft, mysterious disappearance
or
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other damage to such items except to the extent such loss is compensated by
insurance required to be provided by Owner pursuant to this Agreement.
2.6.8 Owner's Access to the Work. Owner, the Independent Consultant,
any Governmental Authority, or any other party designated by Owner shall, at all
times, have access to the Work wherever it is in preparation or progress, and
Contractor shall provide sufficient, safe and proper facilities, labor and
material reasonably needed for such access and for inspection by such parties.
2.6.9 Rejected Workmanship and Material During Construction. Owner,
Independent Consultant and any Governmental Authority shall have the right to
reject materials, equipment, fixtures, furniture, workmanship or other Work,
including without limitation, architectural and engineering work, which are
defective or not in conformity with the requirements applicable to the Work and
to require their correction. Rejected workmanship shall be satisfactorily
corrected and rejected materials shall be satisfactorily replaced with proper
materials. The cost of such rejected workmanship and its correction and the cost
of such rejected materials shall be borne by Contractor from its own funds and
shall not constitute Cost of the Work. If Contractor does not commence to
correct such defective workmanship or replace the rejected materials within five
(5) days, Owner may, without prejudice to any other rights or remedies the Owner
may have under this Agreement, correct such deficiencies and deduct an amount
equal to the expenditures incurred by the Owner in doing so from amounts due to
the Contractor.
2.6.10 Removal or Tearing Out Work to Inspect. Should it be
considered necessary or advisable by Owner, Independent Consultant or any
Governmental Authority to make an examination of the Work already completed by
the Contractor by removing or tearing out same, Contractor shall, upon request,
promptly furnish all necessary facilities, labor and materials therefor. If such
Work is found to be defective or nonconforming in any material respect,
Contractor shall bear all the expenses of such examination and of satisfactory
reconstruction from its own funds and such expenses shall not constitute Cost of
the Work. If, however, such Work is found to meet the requirements of this
Agreement, Contractor shall be compensated for such examination and replacement
by an equitable adjustment (if one is appropriate or necessary) in the
Guaranteed Maximum Price and the Schedule by means of a Change Order.
2.6.11 Responsibility. The Contractor shall be responsible to the
Owner for acts and omissions of the Contractor, subcontractors,
subsubcontractors, architects, engineers, suppliers and their respective agents
and employees, and any other persons performing portions of the Work.
2.6.12 Control. The Contractor shall be solely responsible for and
shall have control over all construction means, methods, techniques, sequences
and procedures, and for coordinating all portions of the Work.
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2.7 COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS
2.7.1 Taxes. The Contractor shall pay all sales, value added,
consumer, use, excise and other taxes, duties and tariffs (whether direct or
indirect) relating to, or incurred in connection with, the performance of the
Work, including, without limitation, all duties, tariffs and taxes (whether
foreign or otherwise) related to the import/export of machinery, equipment,
materials and supplies utilized in the performance of the Work. Notwithstanding
the foregoing, any use tax imposed by the City of Black Hawk, Colorado in
relation to the performance of the Work shall be borne by the Owner, and shall
be paid directly to the City by the Owner upon submission of an invoice and
other supporting documentation from the Contractor.
2.7.2 Legal Requirements. The Contractor shall comply, and shall
cause its subcontractors, sub-subcontractors and others performing portions of
the Work to comply, with all existing and future Laws which are applicable to
the Work, the Project and/or the Site, and shall give all notices pertaining
thereto.
2.7.3 Permits and Licenses. The Contractor shall secure and pay for
any and all permits, licenses, governmental fees, inspections, certifications,
authorizations and approvals necessary for the proper execution and completion
of the Work, including, without limitation, building permits and certificates of
occupancy. Notwithstanding the foregoing, the Owner shall secure and/or pay for
those permits and licenses set forth on Exhibit F attached hereto.
2.7.4 Building Inspections. Contractor shall promptly notify the
respective regulatory departments or official bodies when any portion of the
Work is ready for inspection and Contractor shall, at once, undertake all tasks
required to obtain approvals of such Work, to remove any violations therefrom or
to comply with such inspections, without any additional charge to Owner.
2.7.5 Corrections of Legal Violations. Upon discovering or being
advised that any portion of the Work is or may be in violation of any Laws,
Contractor shall immediately notify the Owner in writing and shall immediately
correct such violation. The cost of such corrective work shall be from
Contractor's own funds, and such costs and expenses shall not constitute Cost of
the Work and Owner, after giving Contractor written notice and five (5) days to
cure the problem, shall have the right to make all required payments to correct
such violations, and any monies expended by the Owner in correcting such
violations may be deducted from payments due to the Contractor.
2.7.6 Ownership of Design Documents. The Construction Documents, and
any other drawings, specifications, designs, plans and other documents, prepared
by or on behalf of the Owner and/or the Contractor shall be deemed the property
of the Owner. Neither the Contractor, nor the Contractor's Architect or any
other party, shall own or claim a copyright in such documents, and the Owner
shall be deemed the author of them and will retain all common law, statutory and
other reserved rights, in addition to the copyright. All copies of them shall be
returned or suitably accounted for to the Owner upon completion of the Project.
The preceding documents and copies thereof are to be used by the Owner solely
with respect to the completion of the Project or for any
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additions, improvements, changes or alterations to the Project after its
completion; provided, however, the Owner shall indemnify the Contractor and the
Contractor's Architect from any liability which may arise from the misuse or
incorrect use of such documents by the Owner. Such documents are not to be used
by the Contractor on other projects or for any other purpose without the prior
written consent of the Owner. The Contractor is granted a limited license to use
and reproduce applicable portions of such documents appropriate to and for use
in the performance of the Contractor's services under this Agreement. Submittal
or distribution to meet official regulatory requirements in connection with this
Project is not to be construed as publication in derogation of the Owner's
copyright or other reserved rights.
2.7.7 Patents and Other Proprietary Rights. The Contractor shall pay
all royalties and other fees for any patents, trademarks, copyrights or other
proprietary rights necessary for the execution and completion of the Work. The
Contractor shall indemnify, defend and hold harmless the Owner from and against
any and all losses, damages or expenses, including, without limitation, court
costs and reasonable attorneys' fees, arising or resulting from any claim or
legal action that any materials, supplies, equipment, processes or other
portions of the Work furnished by the Contractor under this Agreement
constitutes an infringement of any patent, trademark, copyright or other
proprietary rights. If any such item is held to constitute an infringement, and
the use of such item is enjoined, the Contractor shall, at its own expense,
either procure the right to use the infringing item, or replace the same with a
substantially equal but non-infringing item, or modify the same to be non-
infringing, provided that any substitute or modified item shall meet all the
requirements and be subject to all the provisions of this Agreement. The terms
and provisions of this Section shall survive the termination or expiration of
this Agreement.
2.8 CONTRACTOR'S SUBCONTRACTORS
2.8.1 Bidding Process. In relation to its subcontracting, the
Contractor hereby agrees as follows: (i) no construction trade related to the
Work shall be performed unless and until such construction trade has been
submitted to a competitive bidding process whereby no less than three (3) bona-
fide bidders participate in the bidding for such trade, (ii) all such
construction trades shall be awarded to the lowest bidder, and (iii) all
subcontracts awarded by the Contractor for the Work shall be written on a "lump
sum basis" and not on a "cost plus", "cost of the work" or "reimbursable" basis.
Notwithstanding the foregoing or anything to the contrary contained in this
Section 2.8, the parties hereby agree as follows:
(i) Parkhill-Ivins Architects, P.C. shall perform all professional
architectural services required under this Agreement, provided the
subcontract between Contractor and Parkhill-Ivins shall be subject to the
Owner's prior written approval;
(ii) Kiewit Western Co. shall perform all excavation services required
under this Agreement, provided the subcontract between Contractor and
Kiewit Western Co. shall be subject to the Owner's prior written approval;
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(iii) U.S. Engineering shall perform all mechanical services required
under this Agreement, provided the subcontract between Contractor and U.S.
Engineering shall be subject to the Owner's prior written approval;
(iv) Rocky Mountain Prestressing shall preform all pre-cast concrete
services required under this Agreement, provided the subcontract between
Contractor and Rocky Mountain Prestressing shall be subject to the Owner's
prior written approval;
(v) Riviera Electric, Inc. shall perform all electrical services
required under this Agreement, provided the subcontract between Contractor
and Riviera Electric, Inc. shall be subject to the Owner's prior written
approval;
(vi) Contractor shall have the right, but not the obligation, to
retain Diversified Builders to perform all drywall services required under
this Agreement, provided any such subcontract shall be subject to the
Owner's prior written approval;
(vii) The Contractor may be a participant in the bidding for any
construction trade; provided (a) the Contractor may not perform any such
trade work unless it submitted the lowest bid, (b) the Contractor's bid
must be on a lump sum basis, and (c) if the Contractor is awarded any such
work because it submitted the lowest bid, the Contractor shall perform all
work outlined in its proposal for an amount equivalent to its lump sum bid
and shall not charge the Owner for any such work as a Cost of the Work
(other than as a Cost of the Work which is payment toward the Contractor's
lump sum bid); and
(viii) No affiliate of the Contractor shall be deemed a bona-fide
bidder for purposes of the foregoing bidding process.
2.8.2 Identification of Subcontractors. Upon completion of the
foregoing bidding process, the Contractor shall furnish to Owner for Owner's
approval, which approval shall not be unreasonably withheld, a list of all
architects, engineers, consultants, purchasing agents, material suppliers or
other subcontractors to be used by Contractor to perform the Work. Owner will
give Contractor written notice of rejection of any such architect, engineer,
consultant, purchasing agent, material supplier or other subcontractor
unacceptable to Owner within seven business days. Contractor shall not permit
any such architect, engineer, consultant, purchasing agent, material supplier or
other subcontractor which either did not appear on such initial list or was
rejected by Owner to perform any of the Work without obtaining Owner's prior
written approval. In the event Owner has not rejected such architect, engineer,
consultant, purchasing agent, material supplier or other subcontractor, such
architect, engineer, consultant, purchasing agent, material supplier or other
subcontractor may be used by Contractor in accordance with the terms of this
Agreement, to perform any such portion of the Work such architect, engineer,
consultant, purchasing agent, material supplier or other subcontractor is
qualified to perform.
2.8.3 Rejection by Owner of Subcontractors. In the event Owner
rejects an architect, engineer, consultant, purchasing agent, material supplier
or other subcontractor as Owner
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is permitted to do herein, and if, as a result of such rejection, Contractor is
required to accept an architect, engineer, consultant, purchasing agent,
material supplier or other subcontractor whose subcontract amount differs from
that of the rejected one, the difference in cost occasioned by such rejection
shall result in an increase or decrease in the Guaranteed Maximum Price,
approved by Change Order. Once approved by Owner, Contractor shall make no
substitution for any architect, engineer, consultant, purchasing agent, material
supplier or other subcontractor previously approved by Owner for a specified
portion of the Work unless such substitution is again approved by Owner.
Contractor shall require all architects, engineers, consultants, purchasing
agents, material suppliers and other subcontractors to be bound by and comply
with the provisions of this Agreement which relate to their scope, quality and
the schedule of performance of the Work in the same manner that Contractor is
bound to Owner hereunder.
2.8.4 Liquidated Damages In Subcontracts. Contractor shall use its
best efforts to require all subcontracts and purchase orders to include
liquidated damage provisions, providing for liquidated damages in an amount
proportionate to the cost of the Work to be performed by any such party relative
to the Guaranteed Maximum Price.
2.9 LABOR
2.9.1 Contractor's Duty to Staff the Work. Contractor shall supply
and cause its subcontractors to supply a sufficient and adequate number of
properly skilled workmen and competent supervisors to insure the prompt and
efficient performance of the Work.
2.9.2 Owner's Approval of Labor Force. Employment of labor by
Contractor shall be undertaken under conditions which are satisfactory to Owner.
Contractor shall remove, or cause to have removed, from the Site, any employee
or employees who are considered unsatisfactory by Owner, in its reasonable
discretion, provided that such removal is not in violation of EEOC rules and
regulations or any labor contact relating to construction of the Project.
2.9.3 Notice of Occurrence With Respect to Employees. Contractor
shall give to Owner actual notice, immediately after Contractor has knowledge
thereof, of any occurrence, on the Site or otherwise, resulting in (i) bodily
injury or death or (ii) property damage. Said actual notice shall be followed by
written notice from Contractor to Owner of said occurrence within five business
days of the giving of actual notice. Contractor shall notify the local police of
any occurrence requiring an official police record. The notice of Contractor to
Owner should indicate whether the police were notified and, if so, the number of
the police report, if available or if obtainable.
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2.10 MAINTENANCE OF THE SITE AND PROTECTION OF PERSONS AND PROPERTY
2.10.1 Safety
2.10.1.1 Safety Programs. The Contractor shall be
responsible for initiating, maintaining and supervising all safety precautions
and programs in connection with the performance of this Agreement, including,
without limitation, appropriate precautions and programs for areas in and around
the Site.
2.10.1.2 Applicable Laws. The Contractor shall give notices
and comply with all applicable Laws bearing on the safety of persons or property
or their protection from damage, injury or loss, including, without limitation,
the Federal Occupational Safety and Health Act.
2.10.2 Safety of Persons and Property.
2.10.2.1 Safety Precautions. The Contractor shall take all
reasonable precautions for the safety of, and shall provide all reasonable
protection to prevent damage, injury or loss to:
(a) employees and subcontractors or other persons performing
the Work and all other persons who may be affected
thereby;
(b) the Work and materials and equipment to be incorporated
therein, whether in storage on or off the site, under
care, custody or control of the Contractor or
subcontractors; and
(c) other property at the Site or adjacent thereto, such as
trees, shrubs, lawns, walks, pavements, roadways,
structures and utilities.
2.10.2.2 Safeguards. The Contractor shall erect and maintain,
as required by existing conditions and the performance of this Agreement, all
reasonable safeguards for safety and protection, including posting danger signs
and other warnings against hazards, promulgating safety regulations, and
notifying Owners and users of adjacent sites and utilities.
2.10.2.3 Dangerous Materials. When use or storage of
explosives or other dangerous materials or equipment or unusual methods are
necessary for execution of the Work, the Contractor shall exercise utmost care
and carry on such activities only under the supervision of properly qualified
personnel.
2.10.2.4 Injury and Damage. Contractor shall protect the Work,
employees of Owner, all hotel guests and casino patrons and all other persons
from risk of death,
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injury or bodily harm arising out of, or in any way connected with, the Work and
shall remedy all damage or loss to any property, in whole or in part, caused by
or attributable to Contractor, Contractor's Architect, or any purchasing agent,
subcontractor, supplier, materialman or manufacturer employed or retained by
Contractor, or any other person or persons employed by them, or any of them, or
anyone else for whose acts any of them may be liable.
2.10.2.5 Safety Personnel. The Contractor shall designate a
responsible member of the Contractor's organization at the Site whose duty shall
be the prevention of accidents.
2.10.2.6 Loading. The Contractor shall not load or permit any
part of the construction or Site to be loaded so as to endanger the safety of
persons or property.
2.10.2.7 Emergencies. In an emergency affecting safety of
persons or property, the Contractor shall act, at the Contractor's discretion,
to prevent threatened damages, injury or loss.
2.10.2.8 Security. The Contractor shall take all precautions
and measures as may be reasonably necessary to secure the Site at all hours,
including evenings, holidays and non-work hours. Such precautions may include
the provision of security guards.
2.10.3 Placement of Signs. Contractor shall not place or permit its
subcontractors to place any temporary or permanent signs on any portion of the
Site or the Work except upon prior written authorization of Owner.
2.10.4 Orderly Maintenance of Site. At all times during the course of
construction, Contractor shall maintain the Site in a clean, safe and orderly
condition. Rubbish, waste material and surplus material shall be collected or
removed by Contractor daily or more often as Owner may require. Upon completion
of the Casino and the Hotel, as the case may be, the Contractor shall remove
from the applicable area all temporary structures, debris and waste placed or
created by Contractor or resulting from the Work and shall clean all surfaces,
fixtures, equipment and parts of the Work. If Contractor fails to perform a
clean up function within seven (7) days after written notification by Owner to
do so, Owner may proceed with such functions as Owner adjudges necessary and in
the manner Owner may deem expedient, and the Owner shall have the absolute right
to deduct the cost thereof from payments due to the Contractor. Written
notification by Owner to Contractor's project manager or superintendent of the
required cleanup functions provided in this Section 2.10.4 shall be considered
proper notice to Contractor.
2.10.5 Liability for Work in Place and on the Site. Contractor shall
be liable for any loss or damage to any portion of the Work in place or to any
equipment, machinery, apparatus, tools and materials on the Site prior to their
installation. Owner shall not be obligated to protect any of the Work, said
obligation being that of the Contractor.
2.10.6 No Unreasonable Interference with Owner's Operations. To the
extent construction is continuing on any portion of the Project after the Casino
is open to the public,
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Contractor shall fully cooperate with Owner with respect to Owner's proposed
operations of the Casino and shall perform the remaining Work so as to minimize
any unreasonable interference or conflicts with Owner and its employees, guests
and casino patrons and its casino business (including utilization of parking
lots and adjoining streets) and in a manner designed to accomplish and complete
all Work within the Schedule. Contractor shall not commit or permit any act
which will unreasonably interfere with the performance of the Work or with the
operations by Owner of the Project.
2.10.7 Protection of and No Interference with Adjoining Properties.
Contractor shall not obstruct, or permit any subcontractor, purchasing agent,
employee or representative of Contractor to obstruct, any adjoining streets, and
shall not allow any automobiles, trucks, trailers, construction equipment,
materials or supplies belonging to Contractor or any subcontractor, purchasing
agent, employee or representative of Contractor, or be parked or stored on
adjoining streets in locations where parking is prohibited by any governmental
entity having jurisdiction over the Work, nor shall Contractor's Work,
construction equipment, or use of the adjoining streets or the Site disrupt the
orderly flow of vehicles or traffic on adjoining streets or pedestrian traffic.
Contractor shall not, during the course of its construction activities,
interfere with, or permit any architect, subcontractor, purchasing agent,
employee or representative of Contractor to interfere with, the provision of
water, sewer, electricity, gas, telephone and other utility services to
adjoining or neighboring properties (except as such may be necessary in order to
cause such services to be connected).
2.11 USE OF OWNER'S FACILITIES
2.11.1 Prohibition of Use Without Consent. Contractor shall not use
Owner's tools, materials, vehicles, equipment, labor, facilities (including
sanitary facilities), hoists, elevators, scaffolding or any other property of
Owner without the prior written consent of Owner.
2.11.2 Indemnification Against Loss. In the event, following
obtaining Owner's prior written consent, Contractor shall use Owner's tools,
materials, vehicles, equipment, labor, facilities (including sanitary
facilities), hoists, elevators, ladders, scaffolding, or any other property of
Owner, Contractor shall accept full responsibility therefor, shall reimburse
Owner at a predetermined rate (said reimbursement to constitute a Cost of the
Work) and shall indemnify and hold Owner harmless from any and all liability to
persons or property arising out of or in connection with such use.
ARTICLE 3: REPRESENTATIVES OF OWNER AND CONTRACTOR
3.1 DESIGNATION OF OWNER'S AGENT AND CONTRACTOR'S AGENT
Each party hereby agrees to designate, in writing, to the other party
one individual (the "Agent") who shall be authorized to act on such party's
behalf with respect to this Agreement and to make decisions during the course
of the Work. Further, each party acknowledges its understanding that, except
for Change Orders which shall be required to be executed in the manner
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previously provided in this Agreement, the decisions made by its Agent shall be
binding on such party provided such decisions are expressed in writing and
signed by such Agent. In the event Contractor receives written notification
(other than a Change Order request) from any person other than the designated
Owner's Agent, Contractor, prior to complying therewith, shall have the
obligation to request Owner's Agent to verify in writing that such written
direction binds Owner pursuant to this Agreement. The Agent of each party may
be changed at any time, and from time to time, by giving written notice signed
by such representative of such change to the other party. Initially, the Owner's
Agent shall be:
Edward F. Reese, Jr.
Casino America, Inc.
711 Washington Loop
Biloxi, MS 39530-3848
and the Contractor's Agent shall be:
Ed J. Haselden, Pres.
Haselden Construction Inc.
2134 South Valentia Street
Denver, Colorado 80231
3.2 RIGHTS OF OWNER'S AGENT
Owner's Agent shall have all the rights of access, inspection,
investigation, observation and similar rights provided in this Agreement to be
exercised by Owner, but Owner's Agent shall be under no obligation to visit the
Site or to take any such action with respect to the Work. Further, such visits
and actions, if made, shall not impose any obligations upon Owner and shall not
in any way limit, reduce, diminish or otherwise qualify the obligations of
Contractor hereunder or be deemed a waiver of any rights of Owner under this
Agreement to object to or otherwise seek changes in the work not done in
accordance with the Construction Documents, nor shall the making of any such
action by Owner's Agent without any objection be construed as approval by Owner
of any work in progress.
ARTICLE 4: OWNER'S RIGHT TO OUTSIDE INSPECTION
4.1 RIGHT TO DESIGNATE
In addition to Owner's right to designate the Owner's Agent and the
rights of such Owner's Agent to have access to and inspect the Project from time
to time as provided in Article 3 above, Owner shall have the additional right,
but not the obligation, during the design and construction of the Work, to hire
outside architects, engineers, testing agencies and laboratories, and other like
parties to inspect the Work to determine whether it is being performed in
accordance with the Construction Documents, in a good and workmanlike manner, in
a manner which will cause the construction to be solid, sound structures fit for
their intended uses hereunder, and in total
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compliance with this Agreement, and to inspect all material and equipment stored
or warehoused off the Site.
4.2 LIMITATION OF OWNER'S LIABILITY
Contractor's duties, liabilities or obligations pursuant to this
Agreement shall not be relieved, diminished, reduced or otherwise limited by
virtue of the appointment by Owner of any such outside party or the performance
by such outside party or the Independent Consultant of any of its duties or
inspections, it also being the agreement and understanding of the parties hereto
that such outside parties and the Independent Consultant shall have no duty or
obligation whatsoever toward Contractor.
ARTICLE 5: OWNER'S RIGHT OF ENTRY AND OCCUPANCY FOLLOWING
SUBSTANTIAL COMPLETION
5.1 RIGHT TO ENTER
In addition to Owner's right of inspection throughout the period of
design and construction of the Work, Owner shall have the right to enter upon
and occupy the Casino and the Hotel after their respective dates of Substantial
Completion. Following Owner's entry, and in exercising its right of occupancy,
Owner shall have the right to take or cause to be taken any actions within the
occupied portion of the Project deemed necessary or desirable by Owner, in
Owner's total and absolute discretion, in carrying on, operating, using and
occupying such portion of the Project.
5.2 NO INTERFERENCE WITH CONTRACTOR'S REMAINING WORK
The entry and occupancy by Owner of the Casino or the Hotel shall not
be deemed an acceptance of the Work. Owner, in entering upon and occupying any
portion of the Project prior to Contractor's total and final completion of all
of its construction obligations with respect to the Work, shall not unreasonably
or materially interfere (it being recognized by Contractor that any entry or
occupancy by Owner prior to total and final completion of the Work will have
some affect on Contractor's operations on the Site) with the remaining
construction Work.
5.3 OWNER APPROVALS
The Contractor acknowledges and agrees that any review, approval,
comment or evaluation by the Owner of any plans, drawings, specifications or
other documents prepared by or on behalf of the Contractor shall be solely for
the Owner's determining for the Owner's own satisfaction the suitability of the
Project for the purposes intended therefor by the Owner, and may not be relied
upon by the Contractor, its subcontractors or any other third party as a
substantive review thereof. The Owner, in reviewing, approving, commenting on
or evaluating any plans, drawings, specifications or other documents, shall have
no responsibility or liability for the accuracy or completeness of such
documents, for any defects, deficiencies or inadequacies therein or for any
failure of such documents to comply with the requirements set
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forth in this Agreement; the responsibility for all of the foregoing matters
being the sole obligation of the Contractor. In no event shall any review,
approval, comment or evaluation by the Owner relieve the Contractor of any
liability or responsibility under this Agreement, it being understood that the
Owner is at all times ultimately relying upon the Contractor's skill, knowledge
and professional training and experience in preparing any plans, drawings,
specifications or other documents.
5.4 OWNER INFORMATION
Any information or documentation provided by the Owner to the
Contractor relating to the Project and/or existing conditions upon, about,
beneath or adjacent to the Site, including, without limitation, any information
pertaining to subsurface conditions, borings, test pits, tunnels and other
conditions affecting the Site, is provided only for the convenience of the
Contractor. The Owner makes no representation or warranty as to, and assumes no
responsibility whatsoever with respect to, the sufficiency, completeness or
accuracy of such information and makes no guarantee, either express or implied,
that the conditions indicated in such information or documentation are
representative of those existing at the Site or existing throughout the
performance of the Work, and there is no guarantee against unanticipated or
undisclosed conditions.
ARTICLE 6: PUNCH LISTS AND FINAL COMPLETION
6.1 PREPARATION OF PUNCH LIST
Contractor shall submit a list (a "Punch List") at the time it submits
application for certificate of Substantial Completion for the Casino and the
Hotel. Owner shall have the obligation to supplement and amend each such Punch
List and attach such amended and supplemental Punch Lists to the certificates of
Substantial Completion. Following the date any portion of the Project is
Substantially Completed, Owner shall have the right to amend and supplement the
Punch List, setting forth items which need completion in accordance with the
Construction Documents and good workmanship. All such Punch Lists shall be
submitted to Contractor as soon as practicable but in no event later than twenty
(20) days following the date of Substantial Completion of the portion of the
Project to which such Punch Lists have reference. Contractor agrees that as
soon as reasonably possible, but in any event within twenty (20) days after
receipt of any such Punch List, Contractor shall complete, or commence and
diligently pursue the completion of, all of the items set forth therein. If
Contractor shall fail to complete, or fail to commence and thereafter fail to
diligently pursue the completion of, as the case may be, such items within the
prescribed time period, Owner, after giving written notice and two (2) days to
cure, shall have the right, but not the obligation, to cause such items to be
completed and to deduct from any amount due Contractor the cost of completing
such items.
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6.2 FINAL COMPLETION
For purposes of this Agreement, the terms "Finally Completed",
"Finally Complete", and "Final Completion" shall be deemed to have occurred upon
the completion by Contractor of all of the Punch List items enumerated on the
Punch Lists and final acceptance of the Work by Owner.
ARTICLE 7: CONTRACTOR'S WARRANTY OF CONSTRUCTION
7.1 WARRANTY
Contractor hereby makes the following warranties and guarantees with
respect to the Work undertaken by Contractor pursuant to this Agreement:
7.1.1 Warranty with Respect to Professional Services. All design,
architectural, engineering and other professional services to be provided by
Contractor as part of the Work shall be performed (i) by duly licensed and
certified Colorado architects and engineers, (ii) with due diligence and to a
professional standard of competence, quality and technical accuracy, and (iii)
in strict conformity with all the requirements of this Agreement.
7.1.2 Warranty with Respect to Construction Work. All construction
work to be provided by Contractor as part of the Work shall be constructed,
supplied and installed by qualified, careful and efficient workers, performed in
a good and workmanlike manner, free from defects in design, workmanship and
material, and in strict conformity with the Construction Documents and with all
the requirements of this Agreement.
7.1.3 Warranty With Respect to Materials and Equipment. All
materials, supplies and equipment to be furnished by Contractor in connection
with the Work will be of good quality and new, free of faults, defects and
deficiencies, and will be safe for its intended purpose.
7.1.4 Period of Warranty. The warranties and guarantees set forth in
this Section 7.1 shall survive termination or expiration of this Agreement, and
shall remain in full force and effect for the following periods:
(i) One year after the Casino Substantial Completion Date for Work related
to the Casino (except for public water improvements for the benefit of the City
of Black Hawk, which shall be for a period of three years); and
(ii) One year after the Hotel Substantial Completion Date for Work related
to the Hotel.
7.2 EXTENT OF WARRANTY
If, at any time prior to the expiration of the warranty periods set
forth in Section 7.1.4, Owner shall discover any breach of the Contractor's
warranties, the Contractor shall, upon written notice from the Owner and at
Contractor's sole expense, immediately correct such failure
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or breach (which corrective action shall include, without limitation, the
correction of the defective or nonconforming work, the removal and replacement
of other portions of the Work that are necessary to be removed to gain access to
the portion of the Work to be corrected, the repair or replacement of any damage
caused by said defective or nonconforming work, and any necessary removal,
disassembly, reinstallation, reconstruction, retesting and reinspection of any
part of the Work). Contractor shall indemnify, hold harmless, reimburse and
make whole Owner for any and all other damages, costs or liabilities suffered by
Owner or others to whom Owner is liable by reason of or as a result of any
breach of Contractor's warranties or the failure of Contractor to promptly and
properly correct same (including without limitation bodily injury, death, and
property damage). All defective or nonconforming materials which Owner requires
to be replaced shall be removed promptly from the Site by Contractor. All costs
and expenses incurred by Contractor in correcting or replacing any defective or
nonconforming work or in undertaking any of its various obligations delineated
in this Section shall not constitute Cost of the Work but rather shall be
undertaken by Contractor from its own funds. If Contractor fails promptly to
commence correcting any nonconformity or defect as directed by Owner, Owner may
correct such defect or nonconformity and charge the cost to the Contractor.
7.3 NON-APPLICABILITY OF WARRANTY
The obligations of Contractor's warranty shall not extend to any Owner
Furnished FF&E.
7.4 SURVIVAL OF WARRANTY
The provisions of the warranties provided in this Article 7, together
with any applicable warranties and guarantees of Contractor's subcontractors and
suppliers which Contractor has agreed to assign or otherwise give to Owner
pursuant to Section 7.5, shall survive inspection, approval, test and acceptance
of and payment for the Work and shall run to and inure to the benefit of Owner,
its successors and assigns.
7.5 ASSIGNMENT OF WARRANTIES
Contractor agrees to assign to Owner, or otherwise give Owner the
benefit of, all warranties and guarantees which Contractor has, or to which
Contractor is entitled, from Contractor's subcontractors, suppliers, materialmen
and manufacturers. Owner shall have the absolute right to assign to any party,
in whole or in part, or to otherwise give any party the benefit of all
warranties or guarantees which Owner has or to which Owner is entitled under
this Agreement without the necessity of obtaining the consent of the warranting
party, and such assignment shall not in any way diminish or abrogate such
warranties.
7.6 MANUALS AND TRAINING
Contractor shall deliver to Owner, upon the date of Substantial
Completion of any portion of the Project, all operating and training manuals
applicable to systems, equipment and
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material located in such portion of the Project and copies of the results of all
tests done by Contractor or on Contractor's behalf in conjunction with the Work.
Contractor also agrees to conduct two training sessions of a duration
satisfactory to Owner for the Project designed to train Owner's staff in the
operation and maintenance of the Project's systems following the date on which
Owner enters and takes possession of the Project.
ARTICLE 8: CONTRACT SUM
8.1 TOTAL COMPENSATION
As full and total compensation for all Work required pursuant to this
Agreement, Owner will pay to Contractor the following amount (the "Contract
Sum"):
8.1.1 Cost of the Work. All the Cost of the Work, as such costs are
enumerated in this Agreement; and
8.1.2 Contractor's Fee. A fee (except as limited by the Guaranteed
Maximum Price) in the amount of three and one-quarter percent (3-1/4%) of the
Cost of the Work (the "Contractor's Fee") for Contractor's administration of
this Agreement and as total compensation for all of Contractor's home office
overhead, indirect costs and profit.
8.2 CONTRACTOR'S GUARANTEED MAXIMUM PRICE
8.2.1 Guaranteed Maximum Price. Contractor hereby guarantees that the
sum of (i) the Cost of the Work and (ii) the Contractor's Fee shall not exceed
the total dollar amount of Forty Seven Million Three Hundred Thirty Six Thousand
One Hundred Seventy Four And No/100 Dollars ($47,336,174.00) (the "Guaranteed
Maximum Price"). Costs which would cause the Guaranteed Maximum Price to be
exceeded shall be paid by the Contractor without reimbursement by the Owner.
Except as specifically provided in Exhibit H attached hereto, the Contractor
represents there are no allowances or similar arrangements applicable to or
provided under this Agreement for any portion or phase of the Work and
Contractor agrees not to claim that any portion or phase of the Work is covered
by any allowances or similar arrangements which would permit Contractor to avoid
its obligations to fully and totally complete all of the Work required to be
completed by Contractor pursuant to this Agreement for an amount not in excess
of the Guaranteed Maximum Price.
8.2.2 Owner Furnished FF&E Excluded. Contractor and Owner acknowledge
and agree that Owner will provide certain furniture, fixtures and equipment
(hereafter referred to as "Owner Furnished FF&E") to be incorporated into the
Site which do not constitute a part of the Work, which shall not constitute Cost
of Work, and which shall not be chargeable against the Guaranteed Maximum Price.
Owner shall be solely responsible for furnishing and installing the Owner
Furnished FF&E and shall pay all costs and expenses in connection therewith. A
detailed enumeration of the Contractor supplied and installed FF&E (which is
part of the Work) and the
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Owner Furnished FF&E is set forth in the Equipment/Material Responsibility
Matrix attached hereto as Exhibit G.
8.3 EXCESS AND SAVINGS
8.3.1 Excess Cost Above Guaranteed Maximum Price. In the event that
the sum of the Cost of the Work exceeds the Guaranteed Maximum Price, such
excess shall be the sole responsibility of the Contractor and the Contractor
shall be obligated to totally complete the Work required to be performed by
Contractor pursuant to this Agreement, regardless of cost, and to bear the full
and entire burden of any costs and expenses which exceed the Guaranteed Maximum
Price from its own funds and not from the funds of Owner, and Owner shall not be
obligated to pay any portion of said excess above the Guaranteed Maximum Price.
8.3.2 Savings Below Guaranteed Maximum Price. In the event the sum of
the Cost of the Work and the Contractor's Fee is less than the Guaranteed
Maximum Price, the amount of the savings shall accrue and inure to the benefit
of the Owner and Contractor as follows:
. The first $500,000 of savings shall accrue entirely to the Owner;
. The next $500,000 of savings shall be split 80% to the Owner and 20%
to the Contractor;
. The next $1,000,000 of savings shall be split 70% to the Owner and
30% to the Contractor; and
. Any additional savings shall be split 60% to the Owner and 40% to
the Contractor.
8.4 COST OF THE WORK
The term "Cost of the Work" shall mean the costs enumerated below
which were necessarily incurred in the proper performance of the Work and
actually paid by the Contractor at rates not higher than the standard paid in
the locality of the Work except with prior consent of the Owner, excluding (i)
the items specifically denoted as not being Cost of the Work elsewhere in this
Agreement, (ii) the credits enumerated in Section 8.5, (iii) the costs
enumerated in Section 8.6, and (iv) any other costs which are not specifically
provided in this Section 8.4.
8.4.1 Salaries or Wages. Salaries or wages paid for all labor,
including part-time senior project manager, full-time project manager, part-time
accountant, project engineers, assistant superintendent, superintendent, field
engineer, foremen, timekeeper and clerk, expediter, teamsters, truck drivers,
mechanics, craft persons, laborers, and all others employed at the Site as
"general
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conditions" personnel and approved by Owner as necessary for the proper conduct
of the Work and for the time employed on the Work (excluding safety personnel),
in the direct employ of the Contractor in the proper performance of the Work
under applicable collective bargaining Agreement, or under a salary or wage
schedule agreed upon in advance by the Owner and Contractor, and including such
welfare or other benefits, if any, as may be payable with respect thereto but
only if approved in writing by Owner prior to commencement of the Work. All such
salaries shall be reasonable in light of the type and the location of work to be
performed; provided, however, the parties recognize that the part-time senior
project manger and the part-time accountant will work from the Contractor's home
office.
8.4.2 Overtime Payments. Overtime premium payments to Contractor
employees where straight time salaries and wages are reimbursable as Cost of the
Work.
8.4.3 Contractor Self-Perform Trade Work. Payments toward
Contractor's lump sum bid(s) for trade work which Contractor is self-performing
pursuant to the terms of this Agreement; it being understood that all such self-
performed work shall be compensated through the Contractor's lump sum bid(s) and
no such work shall be charged as any other Cost of the Work.
8.4.4 Cost of Employee Benefits. Cost of all employee benefits and
actual taxes incurred during the performance of the Work for such items as
unemployment compensation, payroll taxes, workmen's compensation, general
liability insurance, social security, safety expense, 401(k)/pension, medical
insurance, training fund, vacation fund, employee bonus fund, and employee
recruitment fund, insofar as such cost is based on wages, salaries, or other
remuneration paid to employees of the Contractor and included in the Cost of the
Work under Sections 8.4.1 through 8.4.2.
8.4.5 Travel and Subsistence Expenses. The proportion of reasonable
local transportation, travel and subsistence expenses of the Contractor's full
time on site employees incurred while traveling in discharge of duties connected
with the Work, said travel, transportation and subsistence activities to be made
in accordance with Haselden Construction, Inc.'s policies.
8.4.6 Cost of Material and Supplies. Cost of all structural
accessories, materials, supplies and equipment incorporated into the Work,
including costs of transportation, storage and installation thereof, less any
countercharges collected from the suppliers thereof. Storage costs may include
those expenses for storing pre-cast concrete or other materials fabricated
specifically for this Project.
8.4.7 Design Fees. All architectural, engineering and consulting
fees and expenses incurred in designing and constructing the Project and paid by
Contractor to the Contractor's Architect or such other consultants as had been
previously approved in writing by Owner.
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8.4.8 Subcontractor's Payments. Payments made by the Contractor to
subcontractors for Work performed pursuant to subcontractors under this
Agreement, less any countercharges collected from such subcontractors.
8.4.9 Cost of Tools, Equipment and Facilities. Cost, including
transportation, loading and unloading, demurrage, express, freight, cartage and
maintenance, of all materials, supplies, equipment, temporary facilities or
other structures utilized on the Site by Contractor, temporary fences, guard
rails, scaffolds, barricades, safety railings, field and office equipment.
8.4.10 Cost of Major Construction Equipment. Purchase or rental
charges of all necessary major construction tools and equipment, exclusive of
hand or small tools, used at the Site of the Work, whether purchased or rented
from the Contractor or others; expenditures for transportation and delivery
costs to and from the Site of the Work of said tools and construction equipment,
loading and unloading, assembling, erecting, installing, moving and
dismantling, and minor repairs and replacements during use on the work. Rental
charges for machinery and equipment rented from the Contractor or a subsidiary
shall not exceed eighty-five percent (85%) of the Association of Equipment
Dealers rate. Rental charges for machinery and equipment rented from a third
party unrelated to Contractor shall be reimbursed at the full rate charged by
the third party to Contractor.
8.4.11 Insurance Premiums. Cost of premiums for all insurance which
the Contractor may be required to purchase and maintain pursuant to the
provisions of this Agreement and any additional professional liability insurance
required by Owner pursuant to this Agreement; provided all general liability
insurance shall be billed at 0.7% of the Cost of the Work (excluding items in
this Section 8.4.11).
8.4.12 Taxes. Sales, use or similar taxes related to the Work and
for which the Contractor is liable.
8.4.13 Fees, Royalties and Deposits. Permit fees, licenses, tests,
royalties, and deposits lost for causes other than (i) the Contractor's
negligence, (ii) Contractor's failure to timely make any payments or (iii)
Contractor's noncompliance with its obligations pursuant to this Agreement.
8.4.14 Uninsurable Losses. Losses and expenses, not compensated by
insurance, sustained by the Contractor in connection with the Work, provided
they have resulted from causes other than the fault or neglect of the Contractor
and so long as Contractor has totally complied with the insurance obligations
imposed upon Contractor in this Agreement. Such losses shall include settlements
made with the written consent and approval of the Owner.
8.4.15 Communication Expenses. Minor expenses such as long distance
telephone calls and telephone service at the Site; express age; custom duties on
materials, drawings, or Contractor's equipment; cost of telegraph charges
incurred at the Site of the Work by Contractor in
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connection with the Work; cost of progress photographs and negatives; and
similar petty cash items in connection with the Work.
8.4.16 General Conditions. Cost of fuel, power, light, temporary
heat, winter protection, temporary covers for openings, scheduling costs and
water used during construction.
8.4.17 Clean-up. Cost of removal of all debris.
8.4.18 Emergency. Cost incurred due to an emergency affecting the
safety of persons and property on the Site.
8.4.19 Other Agreement Cost. Any and all other items elsewhere in
this Agreement specifically and expressly provided to be included in this Cost
of Work.
8.4.20 Pre-Approved Cost. Other costs incurred in the performance of
the Work if and only to the extent approved in advance in writing by the Owner.
8.5 CREDITS TO COST OF THE WORK
Cost of the Work shall be credited with (reduced by) the following
amounts:
8.5.1 Proceeds of Sale. Proceeds of sales of all tools, surplus
materials, construction equipment, and temporary structures which have been
purchased for and charged to the Work otherwise than by way of rental and
remaining after final completion, whether such sales are made to Owner,
Contractor or some other party.
8.5.2 Discounts and Refunds. Trade and time discounts, rebates and
refunds or commissions allowed to or collected by Contractor from suppliers of
materials or from subcontractors, together with all other refunds, returns, or
credits received for return of materials or on bond or insurance premiums, or
otherwise. Contractor shall notify Owner in writing of any cash discounts
applicable to the Work if the amount of the discount exceeds $1,000. To the
extent Owner makes timely payments to Contractor with respect to the items
subject to discounts, rebates and refunds so that the funds are on deposit with
and available for use by Contractor, all such savings shall accrue to the
benefit of the Owner as a reduction in the Cost of the Work; provided however,
that any cash discounts of $1,000 or less or which are received as a result of
payment by Contractor out its own funds, shall inure to the benefit of
Contractor.
8.5.3 Material Retained by Contractor. Reasonable market value at
the time of removal of all material, tools and equipment actually used on the
Work, the purchase price for which was included in the Cost of the Work and
which upon completion of the Work were retained by Contractor.
8.5.4 Deposits. The full return amount of deposits made and charged
against the Work for which Contractor obtains credit or refund.
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8.5.5 Proceeds of Sale of Excess Equipment. Proceeds of sale of any
of Owner's excess equipment which are salvageable.
8.5.6 Proceeds of Existing Property and Furniture. Proceeds of sale
of any of Owner's existing property and furniture located on the Site.
8.5.7 COST NOT TO BE REIMBURSED
Cost of the Work shall not include any of the following items:
8.5.8 Office Personnel Expenses. Salaries, expenses or other
compensation of the Contractor's personnel at the Contractor's principal office
and branch offices, except as otherwise specifically permitted in Section 8.4.
8.5.9 Office Expenses. Expenses of the Contractor's principal and
branch offices, other than the field office.
8.5.10 Capital Expenses. Any part of the Contractor's capital
expenses, including interest on the Contractor's capital employed for the Work.
8.5.11 Unpermitted Rental Cost. Except as specifically provided for
in Section 8.4.10, rental costs of machinery and equipment.
8.5.12 Overhead and General Expenses. Overhead or general expenses
of any kind, except as may be expressly included in Section 8.4.
8.5.13 Warranty and Corrective Work. All costs and expenses
associated with warranty or corrective work by Contractor.
8.5.14 Preconstruction. All preconstruction costs and expenses.
8.5.15 Unincluded Items. The cost of any item not specifically and
expressly included in the items described in Section 8.4.
8.5.16 Excluded Items. The cost of any item specifically and
expressly excluded from Cost of the Work in various provisions of this
Agreement.
8.5.17 Guaranteed Maximum Price Excess. Costs in excess of the
Guaranteed Maximum Price, if any, as such Guaranteed Maximum Price may be
adjusted under this Agreement.
8.6 AUDIT
8.6.1 Right to Conduct Audit. Owner and the Independent Consultant
will have the right to conduct an audit of all payments made and costs incurred
by Contractor during the term
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of this Agreement and for a period of three (3) years after the date of final
completion of all the Work. Contractor agrees to retain all pertinent records
applicable to the Work for said period of time. If the audit indicates that any
sums have been paid in error or upon erroneous applications, such sums shall be
adjusted by the audit and Contractor shall pay Owner all sums shown by said
audit to be due to Owner.
8.6.2 Imposition of Requirement on Subcontractors. With respect to
any subcontractors who entered into approved subcontracts with Contractor where
the basis of compensation to the subcontractor was "guaranteed maximum price,"
"cost of the work" or "cost plus", the Contractor shall include in all of its
subcontracts appropriate language requiring such subcontractors to comply with
the provisions of this Section 8.7 requiring them to submit to an audit within
three (3) years after the date of final completion of all the Work and to retain
all pertinent records as provided herein.
ARTICLE 9: PAYMENT OF COMPENSATION
9.1 APPLICATIONS FOR PROGRESS PAYMENTS
9.1.1 Time of Submission. Contractor shall prepare and present to
Owner and the Independent Consultant, for their approval and for payment, a
monthly application for payment (the "Application for Payment") for the Cost of
the Work incurred by Contractor for the previous thirty (30) days, which shall
be given under oath of the person executing the Application of Payment.
Applications for payment shall be submitted on the last day of each calendar
month and shall apply to the thirty (30) day period ending on the twenty-fifth
(25th) day of such calendar month.
9.1.2 Contents of Application for Payment and Attachments. Each such
Application for Payment shall contain or include the following:
9.1.2.1 A statement of the current Guaranteed Maximum Price,
including Change Orders approved and Construction Change Directives issued;
9.1.2.2 The dollar percentage of completion of the Contractor's Work
based on a schedule of values previously submitted to and approved by the Owner;
9.1.2.3 Acknowledgment of the total of all monies received on account
of this Agreement to and including the payment applied for in the presented
monthly Application for Payment;
9.1.2.4 The net amount of the Cost of the Work due for the current
period, after deducting the retainage provided for under Section 9.5, except no
deduction for retainage on the fees of the Contractor's Architect or its
consultants;
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9.1.2.5 A statement of any back charges and credits to which
Owner is entitled;
9.1.2.6 A statement of any claim for charges or extras due to
Contractor;
9.1.2.7 If required by Owner or Independent Consultant, the
names of all subcontractors, suppliers and materialmen who have supplied labor,
materials, equipment and services to the Site during said thirty (30) day
period, together with documentation (which may include properly certified and
correct invoices in duplicate) sufficient to establish the amount that is owed
to them by Contractor as of the end of said period. Owner and Independent
Consultant shall have the right to review at Contractor's office the addresses
and telephone numbers of all names so identified by Contractor and said
information, together with a repetition of the information contained in the
Application for Payment, upon Owner's request, shall be provided by Contractor
in a sworn statement separately from the Application for Payment within fifteen
business days from the date of Owner's request;
9.1.2.8 A lien waiver from Contractor with respect to all Work
covered by the Application for Payment; releases and lien waivers in a form and
content satisfactory to Owner and Independent Consultant from all architects,
consultants, laborers, materialmen and subcontractors performing Work or
providing materials, equipment or services and upon completion of the Work; and
a release from Contractor, and all architects, consultants, laborers,
materialmen and subcontractors, of all claims against the Owner arising under or
by virtue of this Agreement. All releases and lien waivers obtained by
Contractor from its architects, consultants, laborers, materialmen, and
subcontractors and submitted by Contractor to Owner, together with Contractor's
lien waiver submitted by Contractor to Owner, with respect to all Work covered
by the Application for Payment being processed by Owner may be contingent upon
receipt of payment pursuant to the application for Payment. All releases and
lien waivers which contain such payment contingency and which relate to Work for
which compensation has been paid by Owner to Contractor pursuant to the
Application for Payment with which they were submitted shall be resubmitted
without such contingency (i) with the immediately subsequent Application for
Payment submitted by Contractor or (ii) within thirty (30) days following the
date of payment of the Application for Payment with which they were submitted,
whichever is earlier;
9.1.2.9 With respect to Changes in the Work, Contractor's
monthly statement shall include such work only after the procedures set forth in
Section 1.7 for incorporating the change into the Work has been complied with
and shall set forth Owner's Change Order or Construction Change Directive
numbers;
9.1.2.10 With respect to materials not yet incorporated into the
Work, Contractor's monthly statement shall include such materials only to the
extent such materials are (i) needed within sixty (60) days from their delivery
for incorporation into the Work, purchased in order to obtain a price discount
at the direction of the Owner, or if otherwise approved by Owner in its sole
discretion, (ii) delivered and suitably stored at the Site or at some other
bonded location agreed to in writing by Owner, and (iii) readily and
specifically identified as belonging to the Work and not
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"commodity", "generic" or "stock" items not identified as belonging to the Work.
With respect to all materials incorporated into the Work, Contractor's monthly
statement shall include such materials only to the extent that the absolute
Ownership thereof shall have vested in Owner, and Contractor shall have
furnished to Owner, if required by Owner, the contracts, bills of sale or other
Agreement under which title thereto is claimed; and
9.1.2.11 All other information and documents, in the form required by
Owner or Independent Consultant, which Owner or Independent Consultant requires
in order to facilitate the final completion of the Work, which documents may be
according to AIA Forms G-702 and G-703.
9.1.3 Failure to Submit Proper or Timely Application for Payment. In
the event Contractor fails to prepare and present to Owner the monthly
Application for Payment in a timely manner, Owner shall only be required to make
progress payments for said payment in the event Owner's Independent Consultant
does not reject said tardy Application for Payment and makes disbursements from
the Construction Disbursement Account to Owner pursuant thereto. In the event
Contractor prepares and presents to Owner an incomplete or improper monthly
Application for Payment, Contractor shall have the right to supplement or
correct such monthly Application for Payment. In the event of such improper
Application for Payment, Owner shall not be responsible or required to make the
revised progress payment for said payment unless timely corrected by Contractor.
9.2 CONTRACTOR'S ARCHITECT CERTIFICATE
Contractor shall cause Contractor's Architect to issue a certificate
for payment (the "Certificate for Payment") certifying (i) that the portion of
the Work for which the Contractor seeks payment has been properly performed, and
(ii) that the matters set forth in Contractor's Application for Payment, and the
information and documentation submitted therewith, are valid, accurate and
complete; said Certificate for Payment to be forwarded to Owner together with
Contractor's Application for Payment. The Certificate for Payment shall cover an
inspection which was made by Contractor's Architect not more than four business
days prior to the date on which such Certificate for Payment is forwarded to
Owner.
9.3 DEDUCTIONS
Owner shall have the right to deduct from all the amounts payable to
Contractor hereunder any amounts due Owner by Contractor pursuant to any
provisions of this Agreement.
9.4 WITHHOLDING
9.4.1 Right to Withhold. Owner may withhold monthly progress
payments, in whole or in part, in order to protect Owner from loss because of
(but only to the extent of such actual or expected loss):
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9.4.1.1 Defective work not remedied, materials not furnished,
cleanup not performed or any other noncomplying aspects of the Work;
9.4.1.2 Claims, levies, attachments, liens, stop notices or
court orders filed, or which the Owner reasonably believes are likely to be
filed, including claims covered by insurance or bonds until such claims are
accepted by the insurance carrier or bond company (unless the same are caused by
the Owner's failure to make payments hereunder when properly due); provided,
however, as to mechanics' lien claims, if the Contractor furnishes a bond
satisfactory to the Owner, no funds shall be withheld as to such claim;
9.4.1.3 Failure of Contractor to make payments properly and
timely after receipt of Owner's payment to Contractor to its subcontractors or
for labor (including customary fringe benefits), materials or equipment,
transportation or shipping costs, taxes, fees or any other claims growing out of
the Work;
9.4.1.4 A determination by Owner or Independent Consultant that
the Work cannot be completed for the then remaining unpaid balance of the
Guaranteed Maximum Price and a refusal by Independent Consultant to authorize
disbursements from the Construction Disbursement Account until satisfactory
arrangements to cover the deficiency have been made;
9.4.1.5 Damage to any portion of the Work, another contractor or
to Owner;
9.4.1.6 Reasonable indication in Owner's opinion that the Work
will not be completed in compliance with the Schedule;
9.4.1.7 Unsatisfactory prosecution of the Work by Contractor;
9.4.1.8 Failure to deliver to Owner insurance certificates,
bonds, maintain on the Site the "as-built" drawings, provide final "as-built"
drawings, survey and manuals, failure to properly train Owner's employees,
failure to provide written guarantees or warranties or the failure to obtain
approvals of the Work required by any authority having jurisdiction thereof;
9.4.1.9 Filing by or against Contractor of a petition for
bankruptcy or reorganization; and
9.4.1.10 To the extent any liability, claims, judgements, or
demands which Owner has been indemnified and saved and held harmless by
Contractor under this Agreement, any money due or to become due to Contractor
sufficient to compensate Owner with respect thereto.
9.4.2 Conditions for Release of Withheld Amounts. The above right of
Owner to withhold monthly progress payments of Contractor, or for Independent
Consultant to refuse to release funds from the Construction Disbursement
Account, shall remain in effect even though the
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Contractor, if requested by Owner, has posted a full payment and performance
bond. When the above grounds are removed by Contractor, to the satisfaction of
Owner and Independent Consultant, payments for the amounts so withheld will be
made by Owner pursuant to the procedures set forth elsewhere in this Article 9.
However, as a condition to resuming such payments, Owner and Independent
Consultant may require that the Contractor furnish releases in a form
satisfactory to Owner and Independent Consultant for all claims made under
Section 9.4.1.2 and 9.4.1.3 and/or supporting invoices, receipts or other
records to substantiate the amounts owing or paid.
9.5 RETAINAGE
Owner and Independent Consultant shall have the right to retain from
the gross amount requested to be paid in each Application for Payment during the
term of this Agreement ten percent (10%) of both the Cost of the Work (excluding
fees of the Contractor's Architect and its consultants) and the Contractor's
Fee, which shall be held by Owner until such time as:
9.5.1 Achievement of Final Completion. The last portion of the Work
has been finally certified and accepted by Owner and the Independent Consultant;
and
9.5.2 Final Inspection. Final inspection of the Project has been
made and approved by Owner and Independent Consultant, which inspection shall
occur within ten business days of Contractor's filing the notice of completion;
and
9.5.3 Certificate of Occupancy. A permanent certificate of occupancy
has been issued to Owner by the appropriate Governmental Authority; and
9.5.4 Remaining Obligations. All other conditions to final payment
set forth in this Agreement have been satisfied.
9.5.5 No Further Retainage Withheld. Owner and Contractor
acknowledge that the retainage provisions of this Section 9.5 are ones which
Owner anticipates will be required by Owner's arrangements with the Noteholders'
Representatives. Owner hereby agrees to use its best efforts to negotiate with
and secure agreement from the Noteholders Representatives for (A) a retainage
provision which permits Owner, once fifty percent (50%) of the Cost of the Work,
as adjusted by Change Order or Construction Change Directive, has been paid by
Owner, and so long as (i) Owner and Independent Consultant are satisfied that
Contractor is performing the Work in accordance with this Agreement, and (ii)
Contractor passes on the reduced retainage requirements to its subcontractors,
to reduce retainage then held by the Owner to five percent (5%) of the then
expended Cost of the Work and Contractor's Fee (and to reduce retainage withheld
on future payments to the Contractor to five percent (5%)), and (B) a retainage
provision which allows release of that portion of the retainage which is held in
relation to the excavation and pre-cast concrete subcontractors upon the final
completion of each such subcontractor's work.
9.6 PAYMENT OF CONTRACTOR'S FEE
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Subject to the retainage provisions of Section 9.5, the Contractor
shall be paid its Contractor's Fee on the basis of the Cost of the Work for
which the Contractor is being paid. Such payments shall be made monthly and the
amount of the Contractors' Fee payable by Owner to Contractor shall be completed
by Contractor and included for payment in the monthly Applications for Payment,
after deducting therefrom the retainage.
9.7 PAYMENT OF PROGRESS PAYMENTS
Upon Contractor's compliance with the procedures set forth in this
Article 9 with respect to the submission of its Applications for Payment and the
Certificate for Payment by the Contractor's Architect, and only to the extent
that Owner has received disbursements from the Construction Disbursement Account
for such Work, Owner will make progress payments on account of the Cost of the
Work and Contractor's Fee to Contractor within fifteen (15) days after receipt
by Owner of the foregoing items, withholding therefrom pursuant to Section 9.5
the applicable retention amount and any other amount Owner is entitled to
withhold pursuant to this Agreement. Contractor agrees to pay to its
subcontractors, agents and consultants within a timely period following
Contractor's receipt of its progress payment from Owner, all amounts due and
payable to said subcontractors, agents and consultants which were included in
the Application for Payment for which Owner's progress payment related.
9.8 FINAL PAYMENT
Final payment, constituting the retention withheld by Owner and any
other sums and amounts owing to Contractor under the terms of this Agreement,
shall be made by Owner to Contractor within ten days after the expiration of the
conditions enumerated in Section 9.5. If a Punch List is submitted with respect
to any portion of the Project, then Contractor shall deliver, in writing, its
unconditional promise to complete said Punch List items within a reasonable time
thereafter, and Owner shall retain from said final payment in the event such
Punch List had not been totally completed as of such time a sum equal to two
hundred percent (200%) of the estimated cost of completing such Punch List items
(the "Holdback Amount"). Owner will list each Punch List item separately, and
Owner and Contractor shall agree on the estimated cost of completing each such
Punch List item, which cost shall also be listed separately. Thereafter, Owner
will pay to Contractor monthly, on the twentieth (20th) day of each month, the
amount retained for each said Punch List item completed during the previous
month.
9.9 PAYMENT NOT ACCEPTANCE
No payment made under this Agreement, nor any partial or entire use or
occupancy of the Project or any portion thereof by Owner, shall be evidence that
the Contractor has performed its obligations under this Agreement, either wholly
or in part, nor shall such payment, use or occupancy be construed as an
acceptance of Work not in accordance with this Agreement, or an approval of any
of the items in any requisition made or bill rendered.
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9.10 RELEASE OF CLAIMS
Acceptance of final payment by Contractor shall constitute a release
and waiver by Contractor of all claims that Contractor has or may have against
Owner.
9.11 CONTRACTOR'S LIABILITY FOR EXCESS OVER GUARANTEED MAXIMUM PRICE
No Application for Payment shall be submitted by Contractor to Owner
and no payments shall be required to be made by Owner to Contractor for
expenditures in excess of the Guaranteed Maximum Price, and Contractor shall be
obligated to and shall prosecute the Work to completion and shall pay from its
own funds all costs and expenses of such Work in excess of the Guaranteed
Maximum Price.
9.12 CONTINGENT ASSIGNMENT OF SUBCONTRACTS
9.12.1 Assignment of Contractor's Interest in Subcontracts and
Suppliers Contracts. Contractor hereby assigns to Owner its interest in all
subcontracts and material and supplier contracts in connection with construction
of the Project, such assignments to be effective only if Owner or its assignee
undertakes construction of the Project in case of termination of this Agreement
by reason of Contractor's nonperformance hereunder. Contractor shall cause each
subcontract and material and supplier contract to contain a clause specifically
recognizing such contingent assignment and obligating the Contractor's
Architect, subcontractors and materialmen to perform their obligations under
their respective agreements in the event this assignment become effective.
9.13 INTEREST RATE
Any amounts properly due to the Contractor or the Owner from the other
party, but which remain unpaid by such other party, shall bear interest at an
annual rate equal to ten percent (10%) from the date due until paid.
ARTICLE 10: INDEMNIFICATION
10.1 Indemnity. To the fullest extent permitted by law, the
Contractor shall indemnify, defend and hold harmless the Owner, the Independent
Consultant, the Noteholders and their respective officers, directors, employees,
agents, affiliates and representatives (the "Indemnitees"), from and against any
and all claims, demands, suits, liabilities, injuries (personal or bodily),
property damage, causes of action, losses, expenses, damages or penalties,
including, without limitation, court costs and reasonable attorneys' fees,
arising or resulting from, or occasioned by or in connection with (i) negligent
or wrongful acts or omissions of the Contractor, a subcontractor, a
subsubcontractor, anyone directly or indirectly employed by them or anyone for
whose acts they may be liable which results in bodily injury or property damage,
(ii) Contractor's failure to comply with applicable Laws, and/or (iii) any
breach, default, violation or nonperformance
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by the Contractor of any term, covenant, condition, duty or obligation provided
in this Agreement. Notwithstanding the foregoing or anything to the contrary
contained in this Agreement, the Contractor's aggregate liability to the Owner
in relation to design errors or omissions which result from the performance of
professional services hereunder as an architect or engineer shall be limited to
$5,000,000. This indemnification, defense and hold harmless obligation shall
survive the termination or expiration of this Agreement.
10.2 No Limitation. In claims against any person or entity
indemnified under the preceding Section 10.1 by an employee of the Contractor, a
subcontractor, a subsubcontractor, anyone directly or indirectly employed by
them or anyone for whose acts they may be liable, the indemnification obligation
under such Section 10.1 shall not be limited by a limitation on the amount or
type of damages, compensation or benefits payable by or for the Contractor, a
subcontractor, a subsubcontractor or any other above-referenced party under
workers' or workmen's compensation acts, disability benefit acts, other employee
benefit acts, or by common law or case law.
10.3 Liens. Contractor further agrees to indemnify, save, protect
and hold harmless the Indemnitees from and against any claim of liens or liens,
or both, for labor performed or materials furnished, or both, or to be used on
the Site, and, in case suit on any such claims or liens is brought, Contractor
shall defend said suit at its own cost and expense and shall pay and satisfy any
such lien or judgment as may be established or determined by the decision of the
court in said suit. Contractor agrees within ten days after written demand to
cause the effect of any suit or lien to be removed from the Site, by bonding or
other means acceptable to Owner. In the event Contractor shall fail to do so,
Owner is authorized to cause said lien to be removed or dismissed and the cost
thereof, together with all attorneys' fees and litigation costs and expenses,
shall be deducted by Owner from any monies due to Contractor; provided, however,
that Contractor shall not be required to pay and release any lien placed on or
accruing against the Site solely by reason of Owner's work during Owner's period
of entry and occupancy of the Project or by reason of the Owner's failure to
make payment to Contractor when properly due under this Agreement.
10.4 Lost Profits. Notwithstanding anything to the contrary in this
Article 10, Contractor shall have no indemnification duties under this Article
10 with respect to lost profits or revenues sustained by Owner as a result a
delay in the completion of the Work other than the obligation to pay liquidated
damages as set forth in this Agreement.
ARTICLE 11: INSURANCE
11.1 CONTRACTOR'S INSURANCE
11.1.1 Contractor's Insurance Certificates. Before Contractor
mobilizes its forces at the Site or commences the Work at or prepares or
delivers materials to the Site, Contractor shall provide certificates of
insurance evidencing that Contractor has obtained and maintains with insurance
companies satisfactory to Owner the insurance coverages described in this
Article 11. Within a reasonable time after Owner's request, Contractor shall
provide Owner with a copy of such
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policies. Owner, Independent Consultant and such persons or entities as may be
designated by the Noteholders' Representatives shall be named as an additional
insureds on all of Contractor's policies referred to herein (except on
Contractor's worker's compensation insurance and "errors and omissions"
insurance policies). The insurance coverage afforded under the policies
described herein shall be primary and non-contributing with respect to any
insurance carried independently by the additional insureds. All such insurance
policies shall indicate that as respects the insureds (whether named or
otherwise), cross-liability and severability of interests shall exist for all
coverages provided thereunder. All policies of insurance required under this
Article 11 shall be written on an "occurrence" basis, except the Professional
Liability Insurance, which shall be written on a "claims made" basis. The
insurance specified below shall be placed with insurance companies reasonably
acceptable to the Owner, and shall incorporate a provision requiring the giving
of notice to the additional insureds at least thirty (30) days prior to the
cancellation, non-renewal or material modification of any such policies.
11.1.2 Contractor's Liability Insurance. Contractor shall purchase
and maintain at its sole cost and expense and as a Cost of the Work, during the
term of this Agreement, insurance in the forms and minimum amounts described in
Section 11.2 to protect against claims relating to the liabilities which may
arise out of or result from Contractor's performance of its obligations under
this Agreement, whether such performance be by Contractor, its agents,
employees, Contractor's Architect and the consultants of Contractor's Architect
or any subcontractors, supplier, materialmen, or manufacturer employed by or
retained by Contractor, or any other person employed by or retained by
Contractor, or any other person employed or retained by them or any of them or
anyone for whose acts any of them may be liable. Such insurance shall be written
for not less than any limits of liability specified below or required by law,
whichever is the greater, and shall include contractual liability insurance
applicable to Contractor's obligations under this Agreement. Contractor shall,
at all times during the term of this Agreement, maintain insurance in the form
and minimum amounts with financially responsible companies having a minimum "A+"
rating by Best and qualified to transact business in the State of Colorado and,
further, which have been approved by Owner.
11.2 SCHEDULE OF INSURANCE COVERAGES
11.2.1 Worker's Compensation Insurance. A Workers' Compensation
Insurance Policy in form and substance reasonably acceptable to the Owner and in
an amount not less than the statutory limits (as may be amended from time to
time), including Employer's Liability Insurance with limits of liability of not
less than (i) U.S. $1,000,000 for bodily injury by accident, each accident, (ii)
U.S. $1,000,000 for bodily injury by disease, each employee, and (iii) U.S.
$1,000,000 aggregate liability for disease. The Workers' Compensation &
Employer's Liability Insurance Policies must each include a waiver of
subrogation endorsement in favor of the additional insureds.
11.2.2 Commercial General Liability Insurance. A Commercial General
Liability Insurance Policy written with a combined single limit of liability of
not less than $1,000,000.00 for each occurrence of bodily injury and/or property
damage and an annual aggregate of liability of not less than $2,000,000.00 for
bodily injury and/or property damage, and an annual aggregate of
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liability of not less than $2,000,000.00 for completed operations and products
liability, including the following coverages and endorsements:
11.2.2.1 Premises and Operations;
11.2.2.2 Broad Form Property Damage;
11.2.2.3 Property Damage Liability, including coverage for
explosion, collapse, and underground property damage hazards (and providing that
an unintentional failure to report hazards shall not invalidate such coverage);
11.2.2.4 Personal Injury Liability (with employee and
contractual exclusions deleted);
11.2.2.5 Independent Contractor's Protective Coverage;
11.2.2.6 Broad Form Contractual Liability;
11.2.2.7 Products/Completed Operations, for three years after
completion of the Work and its acceptance by Owner; and
11.2.2.8 A waiver of subrogation endorsement in favor of the
additional insureds.
11.2.3 Comprehensive Automobile Liability Insurance. A Comprehensive
Automobile Insurance Policy in form and substance reasonably acceptable to the
Owner and including, without limitation, a waiver of subrogation endorsement in
favor of the additional insureds. The Comprehensive Automobile Liability
Insurance Policy must provide coverage for all owned, hired, rented and non-
owned automobiles, and must be written with a combined single limit of liability
of not less than $1,000,000.00 for each occurrence of bodily injury and/or
property damage.
11.2.4 Umbrella Liability Insurance. An Umbrella Liability Insurance
Policy written in excess of the coverages provided by the insurance policies
described in Sections 11.2.2, 11.2.3 and the Employer's Liability in 11.2.1, in
form and substance reasonably acceptable to Company and including, without
limitation, a waiver of subrogation endorsement in favor of the additional
insureds. The Umbrella Liability Insurance Policy must be written with a
combined single limit not less than $10,000,000.00 for each occurrence of bodily
injury and/or property damage, and an annual aggregate of liability of not less
than $10,000,000.00 for bodily injury and/or property damage.
11.3 OWNER'S BUILDER'S RISK INSURANCE
11.3.1 Builder's Risk Policy. Before Contractor commences the Work
at or prepares or delivers material to the Site but under no circumstances
subsequent to the date of
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commencement of construction specified in the Notice to Proceed, Owner will
provide certificates of insurance evidencing that Owner has obtained and
maintains "all risk" builder's risk insurance upon the Work, subject to a
deductible amount per occurrence not to exceed ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00). Within a reasonable time after Contractor's request,
Owner will provide Contractor with a copy of such policy. The policy will insure
Owner, the Contractor and subcontractors as their interests may appear.
11.3.2 Deductible. Upon each occurrence of property damage insured
by the coverage specified in Section 11.3.1, the Contractor's liability (in
relation to the insurance deductible only) shall be limited to $5,000; it being
understood that the Owner will be responsible for any deductible amount in
excess of $5,000.
11.3.3 Property of Others. Owner will not insure nor be responsible
for any loss or damage to property of any kind owned or leased by Contractor,
Contractor's Architect or any subcontractors, or their employees, servants, or
agents.
11.3.4 Builder's Risk Limits of Liability. The policy specified in
Section 11.3.1 shall be written in an amount equal to the "completed value" of
the Work and the Owner Furnished FF&E.
11.3.5 Builder's Risk Deductibles. The policy specified in Section
11.3.1 shall provide for up to the following deductible amounts:
$ 100,000.00 All perils
250,000.00 Earthquake
250,000.00 Flood
10,000.00 Transit
11.3.6 Owner's Use of Project. If the Owner finds it necessary to
occupy or use a portion or portions of the Project prior to substantial
completion thereof, such occupancy shall commence on the date Owner notifies
Contractor and the Owner shall obtain from the insurance company or companies
providing the property insurance their consent to such occupancy by endorsement
to the policy or policies, which insurance policies shall also provide that they
will not be canceled or lapse on account of such partial occupancy.
11.4 PROJECT ERRORS AND OMISSIONS INSURANCE
In addition to the above referenced insurance coverages and policies,
Contractor shall obtain a "project specific" professional liability insurance
policy written with a limit of liability of not less than $5,000,000.00 for each
claim, and not less than $5,000,000.00 in the aggregate, for errors, omissions
or negligent acts arising out of the performance of (or the failure to perform)
professional services hereunder as an architect or engineer. Such insurance
coverage shall cover work performed by Contractor's Architect and any other
architects, engineers or structural, mechanical, electrical or other applicable
consultants, and shall be retroactive to the earlier of the
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date of this Agreement or the commencement of the services in relation to this
Project (including, without limitation, those performed by the Contractor's
Architect). Such policy must be maintained for a period of not less than five
(5) years following the date of final payment to the Contractor for all services
provided under this Agreement.
11.5 NO COVERAGE CHANGES
Each of the above required insurance policies (and the certificates
evidencing the same) shall provide that the coverage therein afforded shall not
be canceled, terminated, reduced, or not renewed except upon the giving of
written notice to (i) Owner with respect to the insurance to be obtained by
Contractor and (ii) Contractor with respect to the insurance to be obtained by
Owner at least thirty (30) days prior to the effective date of such
cancellation, termination, reduction or nonrenewal. In the event Owner or
Contractor, whichever is applicable, receives such written notice that the
coverage evidenced by any such certificate is to be canceled, terminated,
reduced, or not renewed, it shall so inform the other and the other shall
procure and furnish new certificates conforming to the above requirements as
soon as reasonably practical but in any event at least five days before the
effective date of such cancellation, termination, reduction or nonrenewal. In
the event such new certificates within the time specified are not so provided,
the party not obligated to provide such insurance may nevertheless have the
right (but not the obligation) to procure such insurance and back charge the
cost thereof to the other party.
11.6 LIMITED WAIVERS OF SUBROGATION
11.6.1 Owner's Limited Waiver of Subrogation. Owner hereby releases
and waives any and all rights of subrogation against Contractor which, in the
absence of this Section 11.6.1, would arise in favor of any insurance company
insuring Owner against loss by fire, extended coverage, casualty and loss of any
other type resulting from damage to or destruction of property and the Work or
any portion thereof, or in damage to or destruction of property of Owner located
on the Site, and Owner hereby releases and waives its right of recovery against
Contractor for loss or damage resulting from damage to or destruction of
property and the Work or any part thereof, or in damage to or destruction of the
property of Owner located on the Site, caused by fire or other hazards insured
against by extended coverage or casualty insurance as provided in this
Agreement. This waiver of subrogation shall apply only to the extent that Owner
is compensated for such loss or damage by actual receipt of proceeds from
insurance policies covering such loss or damage; it being expressly understood
and agreed that this release and waiver shall not constitute a release and
waiver by Owner of any right of subrogation or recovery against Contractor for
loss or damage, whether arising in connection with the same claim or separate
claims, in excess of insurance proceeds actually received by Owner.
11.6.2 Contractor's Limited Waiver of Subrogation. Contractor hereby
releases and waives any and all rights of subrogation against Owner which, in
the absence of this Section 11.6.2, would arise in favor of any insurance
company insuring Contractor against loss by fire, extended coverage, casualty
and loss of any other type resulting from damage to or destruction of property
and the Work or any portion thereof, or in damage to or destruction of the
property of
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Contractor located on the Site, and Contractor hereby releases and waives its
right of recovery against Owner for loss or damage resulting from damage to or
destruction of property and the Work or any portion thereof, or in damage to or
destruction of the property of Contractor located on the Site, caused by fire or
other hazards insured against by extended coverage or casualty insurance. This
waiver of subrogation shall apply only to the extent that Contractor is
compensated for such loss or damage by actual receipt of proceeds from insurance
policies covering such loss or damage; it being expressly understood and agreed
that this release and waiver shall not constitute a release and waiver by
Contractor of any right of subrogation or recovery against Owner for loss or
damage, whether arising in connection with the same claim or separate claims, in
excess of insurance proceeds actually received by Contractor.
11.6.3 Conditions on Waivers of Subrogation. The foregoing releases
and waivers of subrogation rights and releases and waivers of the rights of
Owner and of Contractor respectively are expressly conditioned upon Owner and
Contractor each being able to obtain in present and future policies required
under this Agreement of fire, extended coverage, casualty and similar insurance,
clauses which permit the insured to release and waive the insurance company's
right of subrogation against third parties responsible for loss. In the event
either Owner or Contractor at any time is unable to obtain policies containing
such subrogation waiver clauses, then and in that event such party shall give to
the other party written notice thereof and from and after the giving of such
notice, the releases and waivers herein set forth and each and all of them shall
be considered withdrawn and shall not be effective as to loss or damage arising
from risks covered by such policies.
ARTICLE 12: DEFAULT
12.1 Termination by Owner for Cause. (a) The occurrence of any one of
more of the following matters constitutes a default by the Contractor under this
Agreement (a "Contractor Default"):
(i) Contractor becomes insolvent or generally fails to pay, or admits
in writing its inability or unwillingness to pay, its debts as they become
due;
(ii) Contractor makes a general assignment for the benefit of its
creditors;
(iii) Contractor shall commence or consent to any case, proceeding or
other action (a) seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of Contractor or of Contractor's
debts under any law relating to bankruptcy, insolvency, reorganization or
relief of debts, or (b) seeking appointment of a receiver, trustee or
similar official for Contractor or for all or any part of Contractor's
property;
(iv) any case, proceeding or other action against Contractor shall be
commenced (a) seeking to have an order for relief entered against
Contractor as debtor, (b) seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of Contractor or Contractor's debts
under any law relating to bankruptcy, insolvency,
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reorganization or relief of debtors, or (c) seeking appointment of a
receiver, trustee, or similar official for Contractor or for all or any
part of Contractor's property;
(v) the breach of any material representation or warranty made by
Contractor herein;
(vi) Contractor attempts to assign, convey or transfer this Agreement
or any interest herein without the Owner's prior written consent; or
(vii) Contractor fails to observe or perform any other covenant,
agreement, obligation, duty or provision of this Agreement, and such
failure continues for thirty (30) days after Contractor's receipt of
written notice thereof from Owner.
(b) Upon the occurrence of a Contractor Default, the Owner may, without
prejudice to any other right or remedy the Owner may have at law and/or in
equity or under this Agreement, terminate this Agreement. The Owner may, without
prejudice to any other right or remedy, take possession of the Site and of all
materials, equipment, tools and machinery thereon owned by the Contractor, and
may finish the Work by whatever method the Owner may deem expedient. If the cost
of finishing the Work exceeds the unpaid balance of the Guaranteed Maximum
Price, the Contractor shall immediately pay the difference to the Owner.
12.2 Termination by Contractor for Cause. (a) The occurrence of any one
of more of the following matters, and the continuation of the same for thirty
(30) days after the Owner's receipt of written notice thereof from the
Contractor, shall constitute a default by the Owner under this Agreement (an
"Owner Default"):
(i) Owner becomes insolvent or generally fails to pay, or admits in
writing its inability or unwillingness to pay, its debts as they become
due;
(ii) Owner makes a general assignment for the benefit of its
creditors;
(iii) Owner shall commence or consent to any case, proceeding or
other action (a) seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of Owner or of Owner's debts under
any law relating to bankruptcy, insolvency, reorganization or relief of
debts, or (b) seeking appointment of a receiver, trustee or similar
official for Owner or for all or any part of Owner's property;
(iv) any case, proceeding or other action against Owner shall be
commenced (a) seeking to have an order for relief entered against Owner as
debtor, (b) seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of Owner or Owner's debts under any law relating
to bankruptcy, insolvency, reorganization or relief of debtors, or (c)
seeking appointment of a receiver, trustee, or similar official for Owner
or for all or any part of Owner's property; or
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(v) Owner fails to observe or perform any covenant, agreement,
obligation, duty or provision of this Agreement.
(b) Upon the occurrence of an Owner Default, the Contractor may terminate
this Agreement. If this Agreement is so terminated, the Contractor, as its sole
and exclusive remedy hereunder, shall be entitled to receive the following:
payment for Work properly performed to the date of termination (including all
retainage and the Contractor's Fee related thereto), reimbursement for all
cancellation charges incurred by the Contractor in relation to its
subcontractors, and reimbursement for proven loss with respect to materials,
equipment, tools, machinery and other out-of-pocket expenses.
ARTICLE 13: TERMINATION BY OWNER WITHOUT CAUSE
Owner shall have the absolute and total right to terminate this
Agreement at any time without cause if Owner decides in its sole and absolute
discretion to abandon or terminate construction of the Project for any reason
whatsoever, including, without limitation, the failure to obtain or revocation
of any license required by the Colorado Gaming Commission for operation of the
Casino, the issuance of any injunction, temporary restraining order or other
court order prohibiting, restricting or limiting Owner from proceeding with
construction of the Project, or the election by Owner not to continue the Work
because of any pending litigation relating to the construction and/or operation
of the Work, Hotel or Casino. If and only in the event Owner terminates the
Agreement pursuant to this Article 13, it will reimburse the Contractor for any
unpaid Cost of the Work which has been expended by Contractor and is due it
under Article 9, plus the unpaid balance of the Contractor's Fee computed based
on the Cost of the Work performed prior to termination of the Agreement, plus
cancellation charges incurred by Contractor in relation to its subcontractors,
and reimbursement for proven loss with respect to materials, equipment, tools,
machinery and other out-of-pocket expenses.
ARTICLE 14: INDEPENDENT CONTRACTOR
With respect to the Work, Contractor's relationship to Owner is that
of an independent contractor and nothing contained herein shall be deemed to
make Contractor the agent, employee or partner of Owner, the Independent
Consultant, or the Noteholders.
ARTICLE 15: PAYMENT AND PERFORMANCE BOND
15.1 Payment and Performance Bonds. The Contractor shall, on or before
the fifth (5th) day after issuance of the Notice to Proceed, furnish and deliver
to the Owner a payment bond and a performance bond issued by a surety authorized
to do business in the State of Colorado, covering the faithful performance and
completion of this Agreement, and covering the payment of all obligations
arising hereunder. Such bonds shall be issued in amounts equal to the Guaranteed
Maximum Price, shall be in form and substance (and issued by a surety)
satisfactory to the Owner, and shall name the Owner and the Noteholders as dual
obligees. Notwithstanding the foregoing,
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such bonds shall not apply to design errors or omissions which result from the
performance of professional services under this Agreement as an architect or
engineer.
ARTICLE 16: DISPUTES
16.1 Dispute Resolution. (a) In the event Owner and Contractor are unable
to resolve any disputes, claims, controversies or other matters related to this
Agreement (a "Dispute"), the Dispute shall be promptly submitted for resolution
to a committee of three persons, including the President of the Owner, a neutral
third party jointly selected by Owner and Contractor who shall act as
chairperson, and the President of the Contractor (collectively the "Committee").
If either the President of the Owner or the President of the Contractor is
unable to act at the time a Dispute arises, then either the Owner or the
Contractor, as applicable, shall designate a substitute. Each substitute member
designated by a party shall be reasonably acceptable to the other party. The
decision of a majority shall decide any matter presented to it.
(b) Upon arriving at its decision (which decision shall be by majority
vote as provided above) with respect to any Dispute presented to it, the
Committee will promptly send its decision in writing to the Contractor and to
the Owner. Notwithstanding the foregoing, no decision of the Committee shall be
binding upon the parties; it being expressly agreed by the parties hereto that
they shall thereafter be entitled to refer such Dispute to any court of
competent jurisdiction within the State of Colorado.
(c) Pending final resolution of a Dispute, the Contractor shall proceed
diligently with the performance of its duties and obligations under this
Agreement, and the Company shall continue to make payments as to undisputed
amounts in accordance with the terms of this Agreement.
ARTICLE 17: HAZARDOUS SUBSTANCES
17.1 Hazardous Substances. (a) If, in the course of performance of the
Work, the Contractor encounters on the Site any matter which it reasonably
believes is a Hazardous Substance, the Contractor shall immediately suspend the
Work in the area affected and report the condition to the Owner in writing. In
any such event, the obligations and duties of the parties hereto shall be as
follows:
(i) If it is determined that such condition involves a Pre-Existing
Hazardous Substance, then any required remedial actions shall be performed
by the Owner at its sole cost and expense;
(ii) If it is determined that such condition involves a Hazardous
Substance introduced to the Site after the date of this Agreement by the
Contractor, its subcontractors or any party for whom either may be liable,
then any required, necessary or appropriate remedial actions shall be
performed by the Contractor at its sole cost and expense; or
(iii) If it is determined that the condition does not involve a
Hazardous Substance, the Contractor shall, promptly after receiving written
notice from the Owner authorizing the
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Contractor to recommence site activities in the subject area, resume the
portion of the Work that had been suspended.
The parties acknowledge and agree that the Contractor shall not commence or
continue any construction activities on any portion of the Site on, in or under
which remedial actions are to be (or are being) performed until such remedial
actions are to the point where construction activities will not interfere with
such remedial actions, as evidenced by appropriate certifications from the
applicable environmental engineer and/or remediation contractor and any required
approvals of any applicable governmental agencies. The Contractor agrees to use
good faith diligent efforts to continue the unaffected portions of the Work and
to adjust and reschedule its activities at the Site so as to minimize, to the
extent reasonably practicable, any adverse effect on the progress of the Work
resulting from the performance of any remedial actions.
(b) The Contractor shall not bring or store (and shall prohibit
subcontractors from bringing or storing) Hazardous Substances to or on the Site,
and shall not utilize any construction materials containing asbestos,
polychlorinated biphenyls or urea formaldehyde. As previously indicated, the
Contractor shall be responsible for the removal and cleanup of Hazardous
Substances brought to or generated at the Site by the Contractor, any
subcontractor or any party for whose actions the Contractor is responsible
pursuant to this Agreement. In this regard, the Contractor shall comply, and
shall cause its subcontractors to comply, with all environmental laws, statutes,
ordinances, codes, rules, regulations, policies and guidance documents regarding
the generation, handling, storage, treatment and disposal of Hazardous
Substances.
ARTICLE 18: MISCELLANEOUS PROVISIONS
18.1 GOVERNING LAW
This Agreement shall be construed and governed in accordance with the
laws of the State of Colorado without giving effect to choice of law principles.
18.2 ASSIGNMENT AND SUCCESSORS
18.2.1 No Assignment by Contractor. Contractor shall not, without
the prior written consent thereto of Owner, which consent Owner shall have the
right, in its sole, total and arbitrary discretion to withhold for any reason
whatsoever, assign or transfer this Agreement or any portion or part of the
Work, or assign any payments to others. Any assignment or transfer made without
the written consent of Owner, either expressly, impliedly, or by operation of
law, shall be void and of no force or effect.
18.2.2 Assignment By Owner. Owner shall have the absolute right,
without obtaining Contractor's consent or approval, to assign this Agreement and
Owner's rights thereunder (including any warranty rights) to any person or
entity which has an ownership (including without limitation a leasehold
interest) or operating interest in the Project. The Contractor shall execute any
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consent to the Owner's assignment of this Agreement to the Noteholders or to any
other party providing financing for this Project.
18.2.3 Agreement Binding on Successors and Assigns. Subject to the
foregoing, this Agreement and all of the provisions thereof shall extend to, be
binding upon, and inure to the benefit of (i) Owner and its successors and
assigns and (ii) Contractor and its successors and permitted assigns.
18.3 NOTICES
Unless otherwise herein expressly provided, all notices, orders and
other communications required or desired to be given under this Agreement shall
be in writing, signed by Owner or Contractor, or their respective duly
authorized agents or attorneys, as the case may be, and shall be deemed to have
been properly given if mailed by United States, registered or certified mail, if
hand delivered or if sent by a reputable overnight delivery service, with
postage prepaid, return receipt requested, addressed as follows:
If to Owner: Isle of Capri Black Hawk LLC
c/o Casino America, Inc.
711 Washington Loop
Biloxi, MS 39530
Attention: Edward F. Reese
with a copy to: Mayer, Brown & Platt
190 South LaSalle
Chicago, IL 60603
Attention: Timothy P. Callahan
if to Contractor: Haselden Construction, Inc.
2134 S. Valentia Street
Denver, Colorado 80231
or to such other address as may, from time to time, be designated by the party
to be addressed, by notice to the other party in the manner hereinabove
provided. Any such notice, order or other communication mailed as provided in
this Section 18.3 shall be deemed to have been given and received on the second
business day next following the postmark date of such notice, order or other
communication if sent by U.S. Mail, or on the date of actual receipt if hand
delivered or sent by overnight delivery service.
18.4 CUMULATIVE RIGHTS AND REMEDIES
Except as expressly provided herein to the contrary, no right, power
or remedy herein or otherwise conferred upon or reserved to Owner or Contractor
shall be considered to exclude,
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impair or suspend any other right, power or remedy, but the same shall be
cumulative and shall be in addition to any other right, power or remedy
available under this Agreement, at law or in equity.
18.5 WAIVER
No action, failure to act or delay in action by Owner or Contractor
shall constitute a waiver, or result in any impairment of any right, power, duty
or remedy afforded any of them under this Agreement, or result in any approval
of or acquiescence in any breach or violation by any of them of its covenants,
agreement and obligations under this Agreement, except as the affected parties
may specifically agree in writing. No waiver of any breach or violation of any
of the covenants, agreements and obligations of Owner or Contractor under this
Agreement shall be construed, taken or held to be a waiver of any other breach
or violation, or a waiver, acquiescence in or consent to any further or
succeeding breach or violation of the same covenant, agreement or obligation.
18.6 CAPTIONS OR HEADINGS
The index and the captions or headings of the Articles and Sections of
this Agreement are inserted and included solely for convenience and shall never
be considered or given any effect in construing the provisions hereof if any
question of intent should arise.
18.7 COMPLIANCE WITH NOTEHOLDERS' REQUIREMENTS
Contractor agrees to execute all documents reasonably required by
Noteholders, Noteholders' Representatives or Independent Consultant, including
without limitation an agreement by Contractor (which may be in the form of an
assignment), Contractor's Architect, and subcontractors to continue to perform
their obligations under this Agreement for the benefit of Noteholders in the
event Owner defaults in its obligations to Noteholders and Noteholders or
Noteholders' Representatives take possession of the Site during the pendency of
this Agreement; provided such assignees continue to perform the Owner's
obligations hereunder. Contractor shall use its best efforts to incorporate
into its subcontracts a provision obligating its subcontractors to continue to
perform under their subcontracts in the event Noteholders or Noteholders
Representatives take possession of the Site.
18.8 CALENDAR DAYS
As used herein, the terms "days" or "calendar days" shall mean
calendar days, the term "weekdays" or "business days" shall mean regular working
days, excluding Saturdays, Sundays and holidays.
18.9 PARTIES TO ACT REASONABLY
Owner and Contractor both acknowledge that the provisions of this
Agreement contemplate that the parties hereto will exchange information with
each other and keep each other
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informed of the progress of the Work, and in each such instance (except the
specific instances where Owner is granted an arbitrary right which Owner may
exercise for whatever reason Owner desires), the parties agree to be both
reasonable and timely so as not to unreasonably delay either party in the
performance of their respective obligations hereunder.
18.10 SEVERABILITY OF PROVISIONS
The invalidity of one or more provisions of this Agreement shall not
be deemed to invalidate or affect the enforceability of the remainder.
18.11 ENTIRE AGREEMENT
This Agreement represents the entire agreement between Owner and
Contractor with respect to the subject matter hereof and supersedes all prior
negotiations, representations and agreements with respect thereto, whether
written or oral. This Agreement may be amended only by written instrument
signed by both Owner and Contractor.
18.12 NO THIRD PARTY BENEFICIARIES
Nothing contained in this Agreement shall be construed to confer any
rights, powers or remedies upon any parties other than Owner and Contractor,
including without limitation any rights as a third party beneficiary of this
Agreement.
18.13 AUTHORITY TO EXECUTE
Each party represents and warrants to the other that this Agreement
has been duly authorized, executed and delivered by and on behalf of each such
party, and constitutes the legal, valid and binding agreement of said parties.
18.14 INCORPORATION BY REFERENCE
The recitals set forth on the first few pages of this Agreement, as
well as all Exhibits attached hereto, are hereby incorporated into this
Agreement by this reference and expressly made a part of this Agreement.
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THIS AGREEMENT IS MADE AND ENTERED INTO as of the day and year first
above written.
CONTRACTOR: OWNER:
HASELDEN CONSTRUCTION INC. ISLE OF CAPRI BLACK HAWK L.L.C.
By: /s/ Ed Haselden By: /s/ John M. Gallaway
------------------------ ------------------------
Ed Haselden John M. Gallaway
President Manager
<PAGE>
EXHIBIT A
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Definitions
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For purposes of this Agreement, the terms set forth in the following
clauses shall have the meanings ascribed to them:
"Actual cost" has the meaning set forth in Section 1.7.5.1.
"Agent" has the meaning set forth in Section 3.1.
"Application for Payment" has the meaning set forth in Section 9.1.1.
"Cash Collateral and Disbursement Agreement" has the meaning set forth in
Section 1.11.
"Casino" shall mean and refer to a first-class casino facility, which shall
include, without limitation, (i) a three level facility of approximately 98,000
gross square feet, which shall include, without limitation, a roughly 11,500
square foot entry level with a signature waterfall feature, a roughly 75,000
square foot gaming level with a casino area for over 1,000 slot machines and
table games, three food and beverage outlets, a 350 seat events center, a
customer service area and a back-of-house area, and a roughly 11,500 square foot
mezzanine for administrative offices, (ii) a four and one-half level parking
structure situated over the casino facility which is capable of operating on a
self-parking and valet basis for no less than 1000 passenger vehicles at any
single point in time, and (iii) all infrastructure, site improvements and
appurtenances related to the items in the preceding clauses (i) and (ii).
"Casino Substantial Completion Date" shall mean and refer to the date which
is four hundred seventy-six (476) days after the Contractor's receipt of the
Notice to Proceed, which date may be adjusted as provided in the Agreement.
"Certificate for Payment" has the meaning set forth in Section 9.2.
"Change in Law" shall mean and refer to the enactment, adoption,
promulgation, amendment, modification or change in interpretation by a
Governmental Authority after the date of this Agreement of any Law which is
applicable to the performance of the Work; it being expressly understood and
agreed by the parties hereto that a change in any income tax Law or any Law by
which a tax is levied or assessed on the basis of the Contractor's income,
profits, revenues or gross receipts shall not be a Change in Law.
"Change in the Work" has the meaning set forth in Section 1.7.
"Change Order" has the meaning set forth in Section 1.7.4.
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"Committee" has the meaning set forth in Section 16.1.
"Construction Change Directive" has the meaning set forth in Section 1.7.5.
"Construction Disbursement Account" has the meaning set forth in Section
1.11.
"Construction Documents" has the meaning set forth in Section 1.6.3.
"Contractor's Architect" has the meaning set forth in Section 1.5.2.
"Contractor Default" has the meaning set forth in Section 12.1.
"Contractor's Fee" has the meaning set forth in Section 8.1.2.
"Contract Sum" has the meaning set forth in Section 8.1.
"Cost of the Work" has the meaning set forth in Section 8.4.
"Design Development Documents" has the meaning set forth in Section 1.6.2.
"Dispute" has the meaning set forth in Section 16.1.
"Excusable Event" has the meaning set forth in Section 2.5.3.
"Extreme Weather Day" shall mean and refer to a day during which extremely
harsh weather conditions exist considering the geographical location of the
Site.
"Finally Completed", "Finally Complete" and "Finally Completion" has the
meaning set forth in Section 6.2.
"Force Majeure Event" has the meaning set forth in Section 2.5.3.2.
"Governmental Authority" shall mean and refer to any national, federal,
state, county, municipal or local government, agency, authority or court, or any
department, board, bureau or instrumentality thereof.
"Guaranteed Maximum Price" has the meaning set forth in Section 8.2.
"Hazardous Substance" shall mean and refer to any hazardous, toxic or
dangerous waste, substance or material defined as a "hazardous waste",
"hazardous material", "hazardous substance", "extremely hazardous waste" or
"restricted hazardous waste" in (i) any provision of Colorado law; (ii) the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Sec. 6903 et seq.); (iii) the Clean Water Act (33 U.S.C. 1251 et seq.); (iv) any
so-called "Superfund" or
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"Superlien" law; or (v) any other federal, state or local statute, law,
ordinance, code, rule or regulation.
"Holdback Amount" has the meaning set forth in Section 9.8.
"Hotel" shall mean and refer to a first-class, two-story hotel facility
over and upon the Casino, which shall include, without limitation, 119 guest
rooms.
"Hotel Substantial Completion Date" shall mean and refer to the date which
is one hundred twenty (120) days after the Casino Substantial Completion Date,
which date may be adjusted as provided in the Agreement.
"Indemnitees" has the meaning set forth in Section 10.1.
"Independent Consultant" has the meaning set forth in Section 1.11.
"Law" shall mean and refer to any constitution, charter, statute, act, law,
ordinance, regulation, code, rule, order, decree, judgment, directive, ruling,
decision, guideline, resolution or declaration of any Governmental Authority, or
any interpretation or application thereof by any such Governmental Authority.
"Modification" shall mean and refer to (i) a written amendment to this
Agreement signed by all parties hereto, or (ii) a Change Order.
"Noteholders' Representatives" has the meaning set forth in Section 1.11.
"Notes" has the meaning set forth in Section 1.10.
"Notice to Proceed" has the meaning set forth in Section 2.2.2.
"Owner Default" has the meaning set forth in Section 12.2.
"Owner Furnished FF&E" has the meaning set forth in Section 8.2.2.
"Pre-Existing Hazardous Substance" shall mean and refer to a Hazardous
Substance existing at the Site as of the date of this Agreement.
"Project" shall mean and refer to the design, engineering and construction
of the Casino and the Hotel.
"Project Concept Documents" shall mean and refer to those documents
identified or contained within Exhibit D to the Agreement, which documents
define generally the Project requirements and the concept design, scope and
intent for the Project.
63
<PAGE>
"Punch List" has the meaning set forth in Section 6.1.
"Satisfaction Notice" has the meaning set forth in 1.10.
"Schedule" shall mean and refer to the construction schedule identified and
contained within Exhibit E to the Agreement.
"Schematic Design Documents" has the meaning set forth in Section 1.6.1.
"Site" shall mean and refer to the property & structures identified or
contained within Exhibit B to the Agreement.
"Substantially Completed", "Substantially Complete" and "Substantial
Completion" has the meaning set forth in Section 2.3.1.
"Substantial Completion Dates" shall mean and refer to the Casino
Substantial Completion Date and the Hotel Substantial Completion Date.
"Unforeseeable Conditions" shall mean and refer to any one or more of the
following conditions:
(i) Crushed rock, highly fractured rock, clayey soil-like zones or
Weathered Rock which is 10 or more feet in length and 1 or more feet in
depth are encountered within the competent/hard rock strata;
(ii) Wedges into the face of the rock which extend 10 or more feet
into the rock mass from the cut line are consistently encountered;
(iii) Shafts, adits, tunnels, caverns or other mining excavations are
encountered;
(iv) The depth of the overburden soil consistently exceeds fifteen
(15) feet; or
(v) The depth of the Weathered Rock consistently exceeds fifteen
(15) feet below the bottom of the overburden soil.
"Weathered Rock" shall mean and refer to predominantly structureless
heterogeneous material showing none of the fabric of the parent rock and with
core boulders less than 50% of the mass (i.e., essentially rock which can be
excavated by hand or with a small backhoe (CAT 416) and is susceptible to
surface erosion).
"Work" has the meaning set forth in Section 1.1.
<PAGE>
EXHIBIT 10.8
SUBDIVISION AGREEMENT
---------------------
THIS SUBDIVISION AGREEMENT is made this ____ day of July, 1997, by and
between the CITY OF BLACK HAWK, COLORADO (the "City") and ISLE OF CAPRI BLACK
HAWK, LLC (the "Developer").
RECITALS:
A. The Developer is the owner of certain real property located in the City
of Black Hawk known as Isle of Capri Black Hawk Subdivision Filing No. 1, which
is more particularly described in Exhibit A attached hereto and made a part
hereof (the "Property").
B. On _______________________, 1997, the City Council of the City of Black
Hawk, after holding all necessary public hearings and having received a
recommendation of approval from the Black Hawk Planning Commission, approved the
final plat for the Property. A copy of the final plat is attached hereto as
Exhibit B and incorporated herein.
C. The approvals cited above are contingent upon the express condition
that all duties created by this Agreement are faithfully performed by the
Developer.
AGREEMENT:
----------
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained herein, the sufficiency of which are mutually acknowledged,
the parties hereto agree as follows:
1. Purpose. The purpose of this Agreement is to set forth the terms,
conditions, and fees to be paid by the Developer upon subdivision of the
Property. All conditions contained herein are in addition to any and all
requirements of the City of Black Hawk Subdivision Ordinance and Zoning
Ordinance, the City of Black Hawk Charter, any and all state statutes, and any
other sections of the City of Black Hawk Municipal Code, and are not intended to
supersede any requirements contained therein.
2. Fees. The Developer hereby agrees to pay the City actual cost to the
City of engineering, hydrological, surveying, and legal services (the "Actual
Costs") rendered in connection with the review of the subdivision of the
Property, including related administrative fees not to exceed fifteen percent
(15%) of the Actual Costs. In addition, the Developer shall reimburse the City
for the costs of making corrections or additions to the master copy of the
official City map and for the fee for recording the final plat and accompanying
documents with the Gilpin County Clerk and Recorder.
<PAGE>
3. Specific Conditions. The Developer shall construct the Public
Improvements described below according to the terms and conditions of the
Agreement.
a. The Developer shall construct Mill Street improvements which
include, but are not limited to, the construction of an
additional twelve foot (12') lane to the existing four (4) lane
Mill Street and bridge, curb and gutter on both sides of the
street, street lighting, striping, signage and other necessary
improvements to Mill Street as determined by the City and
constructed according to construction plans approved by the City.
b. The Developer shall construct the Main Street improvements which
include, but are not limited to, the construction of that portion
of Main Street that abuts the Property and is approximately seven
hundred feet (700') in length and includes three (3) full
concrete lanes and a fifty foot (50') radius cul-de-sac, a ten
foot (10') sidewalk located on the south side of Main Street, a
left-turn lane from in-bound Mill Street to Main Street,
pedestrian and vehicular street lighting, curb and gutter on both
sides of the street, striping, signage, retaining walls,
landscaping and other necessary improvements to Main Street as
determined by the City and constructed according to the City's
design for "Project No. PW-94-02 Main Street Streetscape
Improvements". The Developer shall also underground within Main
Street all required utilities including, but not limited to, a
twelve inch (12") waterline, pressure reducing valve and all
required appurtenances, an eighteen inch (18") or twenty-one inch
(21") sewer line as determined by the City, storm sewer, and all
other utilities (telephone, electric, gas, and cable T.V.) along
that portion of Main Street that abuts the Property, from the
intersection of Mill and Main Streets to the terminus of the
eastern boundary of the Main Street cul-de-sac according to City
standards. The Developer shall not engage in any construction
within the Main Street right-of-way or use the Main Street right-
of-way without prior written approval from the City, which will
not be unreasonably withheld.
c. The Developer shall construct the signals necessary at the
intersections of Main Street and Mill Street and State Highway
119 and Mill Street as determined by the City and according to
standards of the City
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<PAGE>
of Black Hawk and the Colorado Department of Transportation.
d. The Developer shall pay the City sixty thousand dollars ($60,000)
as a condition of the issuance of a building permit, which money will be used to
pay for a traffic study concerning access to the City and State Highway 119.
4. Title Policy. A title commitment for the Property shall be provided to
the City. The title commitment shall show that all property to be dedicated to
the City is or shall be, subsequent to the execution and recording of the plat,
free and clear of all liens and encumbrances (other than real estate taxes which
are not yet due and payable) which would make the dedications unacceptable as
the City in its sole discretion determines. The title policy evidenced by the
title commitment shall be provided thirty (30) days after the recording of the
final plat.
5. Breach by the Developer; the City's Remedies. In the event of a breach
of any of the terms and conditions of this Agreement by the Developer, the City
Council shall be notified immediately and the City may take such action as
permitted and/or authorized by law, this Agreement, or the ordinances and
Charter of the City; to protect lot buyers and builders; and to protect the
citizens of the City from hardship and undue risk. These remedies include, but
are not limited to:
a. the refusal to issue any building permit or certificate of
occupancy;
b. the revocation of any building permit previously issued under
which construction directly related to such building permit has
not commenced;
c. a demand that the security given for the completion of the Public
Improvements be paid or honored; or
d. any other remedy available at law.
Unless necessary to protect the immediate health, safety and welfare of the
City, or to protect the City's interest with regard to security given for the
completion of the Public Improvements, the City shall provide the Developer with
thirty (30) days written notice of its intent to take any action under this
paragraph, during which thirty (30) day period the Developer may cure the breach
described in the notice and prevent further action by the City.
6. Public Improvements and Warranty. All improvements described in
paragraph 3, water lines, sewer lines, fire hydrants,
-3-
<PAGE>
water distribution facilities, drainage structures, paved streets, including
curb and gutter, and necessary appurtenances as shown on the subdivision plat
and the associated construction documents (the "Public Improvements") as
approved by the Director of Public Works of the City, shall be installed and
completed at the expense of the Developer. The improvements required by this
Agreement and shown on the final subdivision plat submittal, as well as
associated construction documents which are subject to approval, which will not
be unreasonably withheld, by the Director of Public Works of the City prior to
the issuance of any building permit and the estimated costs of these
improvements, are set forth in Exhibit C, which is attached hereto and
incorporated by this reference. All Public Improvements covered by this
Agreement shall be made in accordance with the subdivision plat and associated
construction documents drawn according to regulations and construction standards
for such improvements and which are subject to approval, which will not be
unreasonably withheld, by the Director of Public Works of the City prior to the
issuance of any building permit.
The Developer shall warrant any and all Public Improvements which are
conveyed to the City pursuant to this Agreement for a period of one (1) year
from the date the City's Director of Public Works (except water improvements
which shall have a three (3) year warranty), certifies that the same conform
with specifications approved by the City. Specifically, but not by way of
limitation, the Developer shall warrant the following:
a. that the title conveyed shall be marketable and its transfer
rightful;
b. any and all facilities conveyed shall be free from any security
interest or other lien or encumbrance; and
c. any and all facilities so conveyed shall be free of defects in
materials or workmanship for a period of one (1) year (three (3)
years for water improvements) as stated above.
The City will accept for maintenance all Public Improvements after the
warranty period has expired provided all warranty work has been completed. The
City shall accept for snow removal purposes only all dedicated public streets
after the warranty period expires or the City issues the first certificate of
occupancy.
7. Observation. The City shall have the right to make reasonable
engineering observations at the Developer's expense as the City may request.
Observation, acquiescence in, or approval by any engineering inspector of the
construction of physical facilities at any particular time shall not constitute
the approval
-4-
<PAGE>
by the City of any portion of the construction of such Public Improvements. Such
approval shall be made by the City only after completion of construction and in
the manner hereinafter set forth.
8. Completion of Public Improvements. The obligations of the Developer
provided for in paragraphs 3 and 6 of this Agreement, including the inspections
thereof, shall be performed on or before January 1, 1999 or the issuance of a
certificate of occupancy, whichever occurs first, and proper application for
acceptance of the Public Improvements shall be made on or before such date. Upon
completion of construction by the Developer of such Public Improvements, the
City's Director of Public Works or his designee shall inspect the improvements
and certify with specificity their conformity or lack thereof to the City's
specifications. The Developer shall make all corrections necessary to bring the
improvements into conformity with the City's specifications. Once approved by
the City's Director of Public Works, the City shall accept said improvements
upon conveyance pursuant to paragraph 10; provided, however, the City shall not
be obligated to accept the Public Improvements until the Actual Costs described
in paragraph 2 of this Agreement are paid in full by the Developer.
9. Related Costs - Public Improvements. The Developer shall provide all
necessary engineering designs, surveys, field surveys, and incidental services
related to the construction of the Public Improvements at its sole cost and
expense, including reproducible "record drawings" certified accurate by a
professional engineer registered in the State of Colorado approved by the City
according to City standards.
10. Improvements to be the Property of the City. All Public Improvements
for roads, concrete curbs and gutters, storm sewers, water systems and drainage
improvements accepted by the City, shall be dedicated to the City and warranted
for a period of twelve (12) months (thirty-six (36) months for water systems)
following acceptance by the City as provided above. Upon completion of
construction and conformity with the subdivision plat and associated
construction plans, and any properly approved changes, the Developer shall
convey to the City by bill of sale all installed physical facilities.
11. Performance Guarantee. In order to secure the construction and
installation of the Public Improvements above-described for which the Developer
is responsible, the Developer shall, prior to recording the final plat in the
real estate records of Gilpin County, which recording shall occur no later than
ninety (90) days after the execution of this Agreement, furnish the City, at the
Developer's expense, with an irrevocable letter of credit in which the City is
designated as beneficiary, to secure the performance and completion of the
Public Improvements, or the City may accept at its sole discretion some other
form of security from
-5-
<PAGE>
the Developer in an amount equal to one hundred ten percent (110%) of the
estimated costs of the Public Improvements to be constructed and installed as
set forth in Exhibit C which are estimated costs which may be increased at such
time as the Director of Public Works approves the construction documents for the
Public Improvements. The Developer agrees that approval of the final plat by the
City is contingent upon the Developer's provision of an irrevocable letter of
credit to the City within ninety (90) days of the execution of this Agreement in
the amount and form provided herein. Failure of the Developer to provide an
irrevocable letter of credit to the City in the manner provided herein shall
negate the City's approval of the final plat. Letters of credit shall be
substantially in the form and content set forth in Exhibit D, attached hereto
and incorporated herein, and shall be subject to the review and approval of the
City Attorney. The Developer shall not start any construction of any public or
private improvement on the Property including, but not limited to, staking,
earth work, overlot grading, or the erection of any structure, temporary or
otherwise, until the City has received and approved the irrevocable letter of
credit, except pursuant to a bench excavation permit duly issued by the City
upon satisfaction of all City requirements for the issuance of a bench
excavation permit and the posting of an irrevocable letter of credit for a bench
excavation permit.
The estimated costs of the Public Improvements shall be a figure mutually
agreed upon by the Developer and the City's Director of Public Works based upon
the construction documents for the Public Improvements as approved by the Public
Works Director. If, however, they are unable to agree, the Director of Public
Works' estimate shall govern after giving consideration to information provided
by the Developer including, but not limited to, construction contracts and
engineering estimates. The purpose of the cost estimate is solely to determine
the amount of security. No representations are made as to the accuracy of these
estimates, and the Developer agrees to pay the Actual Costs of all such Public
Improvements.
The estimated costs of the Public Improvements may increase in the future.
Accordingly, the City reserves the right to review and adjust the cost estimate
on an annual basis. Adjusted cost estimates will be made according to changes in
the Construction Costs Index as published by the Engineering News Record. If the
City adjusts the cost estimated for the Public Improvements, the City shall give
written notice to the Developer. The Developer shall, within thirty (30) days
after receipt of said written notice, provide the City with a new or amended
letter of credit in the amount of the adjusted cost estimates. If the Developer
refuses or fails to so provide the City with a new or amended letter of credit,
the City may exercise the remedies provided for in paragraph 5 of this
Agreement; provided, however, that prior to increasing the amount of additional
security required, the City
-6-
<PAGE>
shall give credit to the Developer for all required Public Improvements which
have actually been completed so that the amount of security required at any time
shall relate to the cost of required Public Improvements not yet constructed.
In the event the Public Improvements are not constructed or completed
within the period of time specified by paragraph 8 of this Agreement or a
written extension of time mutually agreed upon by the parties to this Agreement,
the City may drawn on the letter of credit to complete the Public Improvements
called for in this Agreement. In the event the letter of credit is to expire
within fourteen (14) calendar days and the Developer has not yet provided a
satisfactory replacement, the City may draw on the letter of credit and either
hold such funds as security for performance of this Agreement, or spend such
funds to finish the Public Improvements or correct problems with the Public
Improvements as the City deems appropriate.
Upon completion or performance of such improvements, conditions, and
requirements within the required time, and the approval of the Director of
Public Works, ninety percent (90%) of the estimated costs of construction shall
be released to the Developer within ten (10) days of acceptance by the City
provided, however, the City shall retain through the one (1) year warranty
period at least twenty percent (20%) of the total construction costs of the
Public Improvements.
12. Indemnification. The Developer shall indemnify and hold harmless the
City, its officers, employees, agents or servants, from any and all suits,
actions, and claims of every nature and description caused by, arising from, or
on account of any act or omission of the Developer, or of any other person or
entity for whose act or omission the Developer is liable, with respect to
construction of the Public Improvements; and the Developer shall pay any and all
judgments rendered against the City as the result of any suit, action, or claim,
together with all reasonable expenses and attorney fees incurred by the City in
defending any such suit, action or claim.
The Developer shall pay all property taxes on the Property dedicated to the
city, and shall indemnify and hold harmless the City for any property tax
liability.
The Developer shall require that all contractors and other employees
engaged in construction of Public Improvements shall maintain adequate workers'
compensation insurance and public liability coverage and shall faithfully
comply with the provisions of the Federal Occupational Safety and Health Act.
13. Waiver of Defects. In executing this Agreement the Developer Waives all
objections it may have concerning defects, if
-7-
<PAGE>
any; in the formalities whereby it is executed, or concerning the power of the
City to impose conditions on the Developer as set forth herein, and concerning
the procedure, substance, and form of the ordinances or resolutions adopting
this Agreement.
14. Modifications. This Agreement shall not be amended except by
subsequent written agreement of the parties.
15. Release of Liability. It is expressly understood that the City cannot
be legally bound by the representations of any of its officers or agents or
their designees except in accordance with the City of Black Hawk Code of
Ordinances and the laws of the State of Colorado.
16. Captions. The captions to this Agreement are inserted only for the
purpose of convenient reference and in no way define, limit, or prescribe the
scope or intent of this Agreement or any part thereof.
17. Binding Effect. This Agreement shall be binding upon and insure to the
benefit of the parties hereto and their respective heirs, successors, and
assigns as the case may be.
18. Invalid Provision. If any provision of this Agreement shall be
determined to be void by any court of competent jurisdiction, then such
determination shall not affect any other provision hereof, and all of the other
provisions shall remain in full force and effect. It is the intention of the
parties hereto that if any provision of this Agreement is capable of two
constructions, one of which would render the provision void and the other which
would render the provision valid, then the provision shall have the meaning
which renders it valid.
19. Governing Law. The laws of the State of Colorado shall govern the
validity, performance and enforcement of this Agreement. Should either party
institute legal suit or action for enforcement of any obligation contained
herein, it is agreed that venue of such suit or action shall be in Gilpin
County, Colorado.
20. Attorney Fees. Should this Agreement become the subject of litigation
to resolve a claim of default of performance by the Developer and a court of
competent jurisdiction determines that the Developer was in default in the
performance of the Agreement, the Developer shall pay the City's attorney fees,
expenses, and court costs.
21. Notice. All notice required under this Agreement shall be in writing
and shall be hand-delivered or sent by registered or certified mail, return
receipt requested, postage prepaid, to the addresses of the parties herein set
forth. All notices so given shall be considered effective seventy-two (72) hours
after deposit
- 8-
<PAGE>
in the United States mail with the proper address as set forth below. Either
party by notice so given may change the address to which future notices shall be
sent.
Notice to the City: Public Works Director
City of Black Hawk
P.O. Box 17
Black Hawk, Colorado 80422
With copy to: James S. Maloney, Esq.
Black Hawk City Attorney
Hayes, Phillips & Maloney, P.C.
1350 17th Street, Suite 450
Denver, Colorado 80202
Notice to Developer: ______________________________
______________________________
______________________________
With copy to: ______________________________
______________________________
______________________________
22. Force Majeure. Whenever the Developer is required to complete the
construction, repair, or replacement of Public Improvements by an agreed
deadline, the Developer shall be entitled to an extension of time equal to a
delay in completing the foregoing due to unforseeable causes beyond the control
and without the fault or negligence of the Developer including, but not
restricted to, acts of God, weather, fires, and strikes.
23. Approvals. Whenever approval or acceptance of the City is necessary
pursuant to any provision of this Agreement, the City shall act reasonably and
in a timely manner in responding to such request for approval or acceptance.
24. Assignment or Assignments. There shall be no transfer or assignment of
any of the rights or obligations of the Developer under this Agreement without
the prior written approval of the City. The Developer agrees to provide the City
with at least fourteen (14) days advance written notice of the transfer or
assignment of any of the rights and obligations of the Developer under this
Agreement.
25. Recording of Agreement. This Agreements shall be recorded in the real
estate records of Gilpin County and shall be a covenant
- 9 -
<PAGE>
running with the Property in order to put prospective purchasers or other
interested parties on notice as to the terms and provisions hereof.
26. Title and Authority. The Developer expressly warrants and represents
to the City that it is the record owner of the property constituting the
Property and further represents and warrants, together with the undersigned
individual(s), that the undersigned individual(s) has or have full power and
authority to enter into this Subdivision Agreement. The Developer and the
undersigned individual(s) understand that the City is relying on such
representations and warranties in entering into this Agreement.
WHEREFORE, the parties hereto have executed this Agreement on the day and
year first above-written.
CITY OF BLACK HAWK, COLORADO
By:
------------------------------
Kathryn E. Eccker, Mayor
ATTEST:
- -------------------------------
Penny Round, City Clerk
APPROVED AS TO FORM:
- -------------------------------
James S. Maloney, City Attorney
ISLE OF CAPRI BLACK HAWK, LLC
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
- 10 -
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF _________________ )
The foregoing instrument was subscribed, sworn to, and acknowledged before
me this ____ day of _____________________, 1997, by ________________________ as
the ____________________________ of Isle of Capri Black Hawk, LLC.
My commission expires: ___________________________
(S E A L)
---------------------------------
Notary Public
- 11 -
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated October 14, 1997, in the Registration Statement
(Form S-4) and related Prospectus of Isle of Capri Black Hawk L.L.C. for the
registration of $75,000,000 of 13% First Mortgage Notes with Contingent
Interest filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
December 5, 1997
<PAGE>
------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a U.S. national bank) identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
------------------------
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
Isle of Capri Black Hawk L.L.C.
Isle of Capri Black Hawk Capital Corp.
(Exact names of registrants as specified in its charter)
Colorado 84-1422931
(State or other jurisdiction of 91-1842691
incorporation or organization) (I.R.S. employer
identification No.)
c/o Casino America, Inc. as Manager
711 Washington Loop
Biloxi, Mississippi 39530
(Address of principal executive offices) (Zip code)
13% Series B First Mortgage Notes due 2004
------------------------
------------
(Title of indenture securities)
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, Two Rector Street, New
York, New York
Federal Deposit Insurance Corporation, Washington, D.C.
Federal Reserve Bank of New York Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
The obligor is not an affiliate of the trustee.
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
2
<PAGE>
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participation
in any other securities, of the obligors are outstanding, or is
trustee for more than one outstanding series of securities under
the indenture, state whether there has been a default under any
such indenture or series, identify the indenture or series
affected, and explain the nature of any such default.
None
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
3
<PAGE>
NOTE
----
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said Item
is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee as indicated in Item
13, the obligor is not in default under any indenture under which the applicant
is trustee.
4
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 26th day
of November, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By:
-----------------------------
Assistant Vice President
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility & qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 26th day of November, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Thomas McCutcheon
-----------------------------
Assistant Vice President
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issuance by Isle of Capri Black Hawk
LLC, Isle of Capri Black Hawk Capital Corp. of its 13% Series B First Mortgage
Notes due 2004, we hereby consent that reports of examinations by Federal,
State, Territorial, or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Thomas McCutcheon
-----------------------------
Assistant Vice President
Dated: November 26, 1997
-----------------
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issuance by Isle of Capri Black Hawk
LLC, Isle of Capri Black Hawk Capital Corp., of its 13% Series B First Mortgage
Notes due 2004, we hereby consent that reports of examinations by Federal,
State, Territorial, or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By:
-----------------------------
Assistant Vice President
Dated: November 26, 1997
-----------------
<PAGE>
EXHIBIT 99
LETTER OF TRANSMITTAL
FOR TENDERS OF
$75,000,000 AGGREGATE PRINCIPAL AMOUNT OF
13% SERIES A FIRST MORTGAGE NOTES DUE 2004 WITH CONTINGENT INTEREST
ISLE OF CAPRI BLACK HAWK L.L.C.
ISLE OF CAPRI BLACK HAWK CAPITAL CORP.
PURSUANT TO THE PROSPECTUS
DATED DECEMBER , 1997 OF ISLE OF CAPRI BLACK HAWK L.L.C., ISLE OF CAPRI
BLACK HAWK CAPITAL CORP.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 (UNLESS EXTENDED, PROVIDED THAT NO EXTENSION WILL BE PERMITTED
BEYOND 45 DAYS FROM THE DATE OF THE PROSPECTUS) (THE "EXPIRATION DATE").
TENDERED OLD NOTES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE
EXPIRATION DATE OF THE EXCHANGE OFFER
Deliver to: IBJ Schroder Bank & Trust Company, Exchange Agent:
By Mail (registered or certified mail recommended), Hand or Overnight Courier:
IBJ SCHRODER BANK & TRUST COMPANY
ONE STATE STREET
NEW YORK, NEW YORK 10004
ATTENTION: STUART A. ROTHENBERG
Telephone Number:
(212) 858-2000
By Facsimile:
(212) 858-2952
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges that it has received the Prospectus, dated
December , 1998 (the "Prospectus"), of Isle of Capri Black Hawk L.L.C., a
Colorado limited liability company (the "Company"), and Isle of Capri Black
Hawk Capital Corp., a Colorado corporation and wholly owned subsidiary of the
Company ("Capital" and, together with the Company, the "Issuers"), and this
Letter of Transmittal, which may be amended from time to time (this "Letter"),
which together constitute the offer of the Issuers (the "Exchange Offer") to
exchange up to $75 million aggregate principal amount of 13% Series B First
Mortgage Notes due 2004 (the "New Notes") of the Issuers for a like principal
amount of the Issuers' issued and outstanding 13% Series A First Mortgage Notes
due 2004 (the "Old Notes" and together with the New Notes, the "Notes").
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest at a rate of 13% per annum from the
most recent date to which interest has been paid on the Notes or, if no
interest has been paid, August 20, 1997. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange
will not receive any payment in respect of interest or dividends on such Old
Notes otherwise payable on any interest payment date the record date for which
occurs on or after consummation of the Exchange Offer.
This Letter is to be used: (i) by all Holders who are not members of the
Automated Tender Offering Program ("ATOP") at the Depository Trust Company
("DTC"); (ii) by Holders who are ATOP members but choose not to use ATOP; or
(iii) if the Old Notes are to be tendered in accordance with the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 2. Delivery of this
Letter to DTC does not constitute delivery to the Exchange Agent.
Notwithstanding anything to the contrary in the registration rights
agreements, dated August 20, 1997 between the Issuers and the initial purchaser
of the Old Notes (the "Registration Rights Agreement"), the Issuers will accept
for exchange any and all Old Notes validly tendered on or prior to 5:00 p.m.,
New York City time, on , 1998 (unless the Exchange Offer is extended
by the Company) (the "Expiration Date"). Tenders of the Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
IMPORTANT: HOLDERS WHO WISH TO TENDER OLD NOTES IN THE EXCHANGE OFFER MUST
COMPLETE THIS LETTER OF TRANSMITTAL AND TENDER THE OLD NOTES TO THE EXCHANGE
AGENT AND NOT TO THE ISSUERS.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject
to certain conditions. Please see the Prospectus under the section titled "The
Exchange Offer--Conditions to the Exchange Offer."
The Exchange Offer is not being made to, nor will tenders be accepted from or
on behalf of, Holders of Old Notes in any jurisdiction in which the making or
acceptance of the Exchange Offer would not be in compliance with the laws of
such jurisdiction.
The instructions included with this Letter of Transmittal must be followed in
their entirety. Questions and request for assistance or for additional copies
of the Prospectus or this Letter of Transmittal may be directed to the Exchange
Agent at the address listed above.
2
<PAGE>
APPROPRIATE SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, on behalf of the Issuers the
principal amount of Old Notes indicated below under "Description of Old Notes,"
in accordance with and upon the terms and subject to the conditions set forth
in the Prospectus, receipt of which is hereby acknowledged, and in this Letter
of Transmittal, for the purpose of exchanging the principal amount of Old Notes
designated herein held by the undersigned and tendered hereby for an equal
principal amount of the New Notes. New Notes will be issued only in integral
multiples of $1,000 to each tendering Holder of Old Notes whose Old Notes are
accepted in the Exchange Offer. Holders may tender all or a portion of their
Old Notes pursuant to the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the Old Notes
tendered herewith in accordance with the terms of the Exchange Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Company all right, title and interest in and to all such Old Notes that are
being tendered hereby and that are being accepted for exchange pursuant to the
Exchange Offer. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the agent
of the Issuers), with respect to the Old Notes tendered hereby and accepted for
exchange pursuant to the Exchange Offer with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to deliver the Old Notes tendered hereby to the Issuers (together
with all accompanying evidences of transfer and authenticity) for transfer or
cancellation by the Issuers.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the heirs, executors, administrators, legal
representatives, successors and assigns of the undersigned. Any tender of Old
Notes hereunder may be withdrawn only in accordance with the procedures set
forth in the instructions contained in this Letter of Transmittal. See
Instruction 4 hereto.
The undersigned hereby represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes tendered
hereby and that the Issuers will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuers to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered.
The undersigned has read and agrees to all of the terms of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Issuers to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights"
section of the Prospectus.
The name(s) and address(es) of the registered Holder(s) should be printed
herein under "Description of Old Notes" (unless a label setting forth such
information appears thereunder), exactly as they appear on the Old Notes
tendered hereby. The certificate number(s) and the principal amount of Old
Notes to which this Letter of Transmittal relates, together with the principal
amount of such Old Notes that the undersigned wishes to tender, should be
indicated in the appropriate boxes herein under "Description of Old Notes."
The undersigned agrees that acceptance of any tendered Old Notes by the
Issuers and the issuance of New Notes in exchange therefor shall constitute
performance in full by the Issuers of their obligations under the Registration
Rights Agreement and that, upon the issuance of the New Notes, the Issuers will
have no further obligations or liabilities thereunder.
3
<PAGE>
The undersigned understands that the tender of Old Notes pursuant to one of
the procedures described in the Prospectus under "The Exchange Offer--
Procedures for Tendering Old Notes" and the Instructions hereto will
constitute the tendering Holder's acceptance of the terms and the conditions
of the Exchange Offer. The undersigned hereby represents and warrants to the
Issuers that the New Notes to be acquired by such Holder pursuant to the
Exchange Offer are being acquired in the ordinary course of such Holder's
business, that such Holder has no arrangement or understanding with any person
to participate in the distribution of the New Notes. The Company's acceptance
for exchange of Old Notes tendered pursuant to the Exchange Offer will
constitute a binding agreement between the tendering Holder and the Issuers
upon the terms and subject to the conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT IS NOT ENGAGED IN,
AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF THE NEW NOTES.
The undersigned also acknowledges that this Exchange Offer is being made
based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no action letters issued to third
parties in other transactions substantially similar to the Exchange Offer,
which lead the Issuers to believe that the New Notes issued in exchange for
the Old Notes pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than (i) any such holder
that is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act, (ii) the Initial Purchaser or any holder who acquired the Old
Notes directly from the Issuers solely in order to resell pursuant to Rule
144A of the Securities Act or any other available exemption under the
Securities Act, or (iii) a broker-dealer who acquired the Old Notes as a
result of market making or other trading activities), without further
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders are not participating and
have no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of such New Notes. If
the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New Notes
and has no arrangement or understanding to participate in a distribution of
New Notes. If any holder is an affiliate of the Company or is engaged in or
has any arrangement or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could
not rely on the applicable interpretations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act. If the undersigned is a broker-dealer that will receive
New Notes for its own account in exchange of Old Notes, it represents that the
Old Notes to be exchanged for the New Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
Section 2(11) of the Securities Act.
The undersigned understands that the New Notes issued in consideration of
Old Notes accepted for exchange, and/or any principal amount of Old Notes not
tendered or not accepted for exchange, will only be issued in the name of the
Holder(s) appearing herein under "Description of Old Notes." Unless otherwise
indicated under "Special Delivery Instructions," please mail the New Notes
issued in consideration of Old Notes accepted for exchange, and/or any
principal amount of Old Notes not tendered or not accepted for exchange (and
accompanying documents, as appropriate), to the Holder(s) at the address(es)
appearing herein under "Description of Old Notes." In the event that the
Special Delivery Instructions are completed, please mail the New Notes issued
in consideration of Old Notes accepted for exchange, and/or any Old Notes for
any principal amount or liquidation preference not tendered or not accepted
for exchange, in the name of the Holder(s) appearing herein under "Description
of Old Notes," and send such New Notes and/or Old Notes to the address(es) so
indicated. Any transfer of Old Notes to a different holder must be completed
according to the provisions on transfer of Old Notes contained in the
Indentures.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES
AS SET FORTH IN SUCH BOX BELOW.
4
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Signatures on this Letter of Transmittal or
notice of withdrawal, as the case maybe, must be guaranteed by an institution
which falls within the definition of "eligible guarantor institution" contained
in Rule 17Ad 15 as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended (hereinafter, an "Eligible
Institution") unless (i) the Old Notes tendered hereby are tendered by the
Holder(s) of the Old Notes who has (have) not completed the box entitled
"Special Delivery Instructions" on this Letter of Transmittal or (ii) the Old
Notes are tendered for the account of an Eligible Institution.
2. Delivery of this Letter of Transmittal and Old Notes; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be used: (i) by all Holders who
are not ATOP members, (ii) by Holders who are ATOP members but choose not to
use ATOP or (iii) if the Old Notes are to be tendered in accordance with the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures." To validly tender Old Notes, a Holder
must physically deliver a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees and
all other required documents to the Exchange Agent at its address set forth on
the cover of this Letter of Transmittal prior to the Expiration Date (as
defined below) or the Holder must properly complete and duly execute an ATOP
ticket in accordance with DTC procedures. Otherwise, the Holder must comply
with the guaranteed delivery procedures set forth in the next paragraph.
Notwithstanding anything to the contrary in the Registration Rights Agreement,
the term "Expiration Date"means 5:00 p.m., New York City time, on ,
1998 (or such later date to which the Company may, in its sole discretion,
extend the Exchange Offer). If this Exchange Offer is extended, the term
"Expiration Date" shall mean the latest time and date to which the Exchange
Offer is extended. The Company expressly reserves the right, at anytime or from
time to time, to extend the period of time during which the Exchange Offer is
open by giving oral (confirmed in writing) or written notice of such extension
to the Exchange Agent and by making a public announcement of such extension
prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC.
If a Holder of the Old Notes desires to tender such Old Notes and time will
not permit such Holder's required documents to reach the Exchange Agent before
the Expiration Date, a tender may be effected if (a) the tender is made through
an Eligible Institution (as defined in the Prospectus); (b) on or prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and Notice of Guaranteed Delivery (by telegram, facsimile
transmission, mail or hand delivery) setting forth the name and address of the
Holder of the Old Notes and the principal amount Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange trading days after the Expiration Date, any documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and (c) all other documents required by
the Letter of Transmittal are received by the Exchange Agent within three New
York Stock Exchange trading days after the Expiration Date. See "The Exchange
Offer--Guaranteed Delivery Procedures" as set forth in the prospectus.
Only a Holder of Old Notes may tender Old Notes in the Exchange Offer. The
term "Holder" as used herein with respect to the Old Notes means any person in
whose name Old Notes are registered on the books of the Trustee. If the Letter
of Transmittal or any Old Notes are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be so submitted.
5
<PAGE>
Any beneficial Holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to validly surrender those Old Notes in the Exchange Offer should contact such
registered Holder promptly and instruct such registered holder to tender on his
behalf. If such beneficial Holder wishes to tender on his own behalf, such
beneficial Holder must, prior to completing and executing the Letter of
Transmittal, make appropriate arrangements to register ownership of the Old
Notes in such beneficial holder's name. It is the responsibility of the
beneficial holder to register ownership in his own name if he chooses to do so.
The transfer of record ownership may take considerable time.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF)
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE EXCHANGING
HOLDER, but, except as otherwise provided below, the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. If sent by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery to the Exchange Agent before the Expiration Date. No Letters of
Transmittal or Old Notes should be sent to the Issuers.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Old Notes for
exchange.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and principal amount of the Old Notes to which this Letter
of Transmittal relates should be listed on a separate signed scheduled attached
hereto.
4. Withdrawal of Tender. Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must (i) be received by the Exchange Agent at the address set forth herein
prior to 5:00 p.m., New York City time, on the Expiration Date; (ii) specify
the name of the person having tendered the Old Notes to be withdrawn; (iii)
identify the Old Notes to be withdrawn; and (iv) be (a) signed by the Holder in
the same manner as the original signature on the Letter of Transmittal by which
such Old Notes were tendered (including any required signature guarantees) or
(b) accompanied by evidence satisfactory to the Company that the Holder
withdrawing such tender has succeeded to beneficial ownership of such Old
Notes. If Old Notes have been tendered pursuant to the ATOP procedure with DTC,
any notice of withdrawal must otherwise comply with the procedures of DTC. Old
Notes properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Exchange Offer; provided, however, that withdrawn Old Notes may
be retendered by again following one of the procedures described herein at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. All
questions as to the validity, form and eligibility (including time of receipt)
of notice of withdrawal will be determined by the Company, whose determinations
will be final and binding on all parties. Neither the Issuers, the Exchange
Agent, nor any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability
for failure to give any such notification. The Exchange Agent intends to use
reasonable efforts to give notification of such defects and irregularities.
5. Partial Tenders; Pro Rata Effect. Tenders of the Old Notes will be
accepted only in integral multiples of $1,000. If less than the entire
principal amount evidenced by any Old Notes is to be tendered, fill in the
principal amount that is to be tendered in the box entitled "Principal Amount
Tendered" below. The entire principal amount of all Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
6. Signatures on this Letter of Transmittal; Bond Powers and Endorsements. If
this Letter of Transmittal is signed by the registered Holder(s) of the Old
Notes tendered hereby, the signature must correspond with the name as written
on the face of the certificate representing such Old Notes without alteration,
enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
6
<PAGE>
If any of the Old Notes tendered hereby are registered in different names, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal and any necessary accompanying documents as there are
different registrations.
When this Letter of Transmittal is signed by the Holder(s) of Old Notes
listed and tendered hereby, no endorsements or separate bond powers are
required.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
7. Special Delivery Instructions. Tendering Holders should indicate in the
applicable box the name and address to which New Notes issued in consideration
of Old Notes accepted for exchange, or Old Notes for principal amounts not
exchanged or not tendered, are to be sent, if different from the name and
address of the person signing this Letter of Transmittal.
8. Waiver of Conditions. The Company reserves the absolute right to waive any
of the specified conditions in the Exchange Offer, in whole at any time or in
part from time to time, in the case of any Old Notes tendered hereby. See "The
Exchange Offer--Conditions to the Exchange Offer" in the Prospectus.
9. Transfer Taxes. The Issuers will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes for principal amounts not
exchanged are to be delivered to any person other than the Holder of the Old
Notes or if a transfer tax is imposed for any reason other than the exchange of
Old Notes pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed in the registered Holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted, the amount of such transfer taxes will be
billed directly to such tendering Holder.
10. Irregularities. All questions as to validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be resolved by the Company, in its sole discretion as agent for the
Issuers, whose determination shall be final and binding. The Company reserves
the absolute right to reject any or all tenders of any particular Old Notes
that are not in proper form, or the acceptance of which would, in the opinion
of the Company or its counsel, be unlawful. The Company also reserves the
absolute right to waive any defect, irregularity or condition of tender with
regard to any particular Old Notes. The Company's interpretation of the terms
of, and conditions to, the Exchange Offer (including the instructions herein)
will be final and binding. Unless waived, any defects or irregularities in
connection with tenders must be cured within such time as the Company shall
determine. Neither the Company nor the Exchange Agent shall be under any duty
to give notification of defects in such tenders or shall incur any liability
for failure to give such notification. The Exchange Agent intends to use
reasonable efforts to give notification of such defects and irregularities.
Tenders of Old Notes will be deemed to have been made until all defects and
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holder, unless otherwise provided by this Letter of
Transmittal, as soon as practicable following the Expiration Date.
11. Interest on Exchanged Old Securities. Holders whose Old Notes are
accepted for exchange will not receive accrued interest thereon on the date of
exchange. Instead, interest accruing from the most recent date to which
interest has been paid on the Notes or, if no interest has been paid, August
20, 1997, through the Expiration Date will be payable in accordance with the
terms of the New Notes. See "The Exchange Offer--Acceptance of Old Notes for
Exchange; Delivery of New Notes" and "Description of the New Notes" as set
forth in the Prospectus.
12. Mutilated, Lost, Stolen or Destroyed Certificates. Holders whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ALL REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY
THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
7
<PAGE>
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1 AND 7)
To be completed ONLY if the New Notes
issued in consideration of Old Notes
exchanged are to be mailed to someone
other than the undersigned or to the
undersigned at an address other than
that below.
Mail to:
Name: __________________________________
(Please Print)
Address: _______________________________
----------------------------------------
(Zip Code)
DESCRIPTION OF OLD NOTES
(SEE INSTRUCTIONS 2 AND 7)
<TABLE>
- ----------------------------------------------------------------------------------------------
<CAPTION>
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S) CERTIFICATE(S)
(PLEASE FILL IN, IN BLANK) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AGGREGATE PRINCIPAL PRINCIPAL AMOUNT OF
AMOUNT OF OLD NOTES OLD NOTES TENDERED
EVIDENCED BY (MUST BE INTEGRAL
CERTIFICATE NUMBER(S) CERTIFICATE(S) MULTIPLES OF $1,000)
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
TOTAL
</TABLE>
8
<PAGE>
(Boxes below to be checked by Eligible Institutions only)
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
DTC Account Number__________________________________________________________
Transaction Code Number_____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE WITH FOLLOWING:
Names(s) of Registered Holder(s)____________________________________________
Window Ticket Number (if any)_______________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________________
Name of Institution which Guaranteed Delivery_______________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution_______________________________________________
DTC Account Number__________________________________________________________
Transaction Code Number_____________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[_] CHECK HERE IF YOUR ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name____________________________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
9
<PAGE>
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X _______________________________ ____________
X _______________________________ ____________
SIGNATURE(S) OF OWNER(S) DATED
OF AUTHORIZED SIGNATORY
Area Code and Telephone Number: ___________________________________________
This box must be signed by registered holder(s) of Old Notes as their
name(s) appear(s) on certificate(s) for Old Notes hereby tendered or on a
security position listing, or by any person(s) authorized to become
registered holder(s) by endorsement and documents transmitted with this
Letter (including such opinions of counsel, certifications and other
information as may be required by the Issuers or the Trustee (as defined
in the Prospectus) for the Old Notes to comply with the restrictions on
transfer applicable to the Old Notes). If signature is by an attorney-in-
fact, trustee, executor, administrator, guardian, officer or other person
acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Name(s) ___________________________________________________________________
___________________________________________________________________________
(Please Print)
Capacity (full title) _____________________________________________________
Address ___________________________________________________________________
___________________________________________________________________________
(Include Zip Code)
Tax Identification or Social Security Number(s) ___________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6 TO DETERMINE IF REQUIRED)
___________________________________________________________________________
Authorized Signature
___________________________________________________________________________
Name
___________________________________________________________________________
Name of Firm
___________________________________________________________________________
Title
___________________________________________________________________________
Address
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