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FILED PURSUANT TO RULE NO. 424(b)(4)
REGISTRATION NO. 333-38093
PROSPECTUS
ISLE OF CAPRI BLACK HAWK L.L.C.
ISLE OF CAPRI BLACK HAWK CAPITAL CORP.
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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 JANUARY 21, 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 22, 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
January 21, 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 the Registration Rights Agreement (as
defined herein) between the Issuers and the Initial Purchaser (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, 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.
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).
The financial statements of Casino America are publicly available through
the offices of the Commission and can also be obtained by contacting Casino
America at 711 Washington Loop, Biloxi, Mississippi 39530, phone number 601-
436-7000. The financial statements of Nevada Gold are publicly available
through the offices of the Commission and can also be obtained by contacting
Nevada Gold at 3040 Post Oak Blvd., Suite 675, Houston, Texas 77056, telephone
number 713-621-2245. Neither Casino America nor Nevada Gold is a guarantor of
the Notes or has any fiduciary obligation to the Holders.
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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 13.
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 September 30, 1997, gaming revenues in the City of Black Hawk, which
accounted for 72.5% of gaming revenues in the Black Hawk Market, grew at a rate
of 6.6% 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)
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$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. Each of these facilities is wholly owned by
Casino America and were developed by Casino America or, in two cases, Casino
America in conjunction with joint venture partners (the interests of which were
purchased by Casino America in 1996 with financing from a debt offering).
Casino America has never sponsored programs with offerings made to other
investors.
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
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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 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 presently intends to add
between $2.7 million and $3.0 million to the development and construction
budget for the Isle-Black Hawk pending such determination, to be drawn first
from accrued and future interest earnings on amounts in the Construction
Disbursement Account, with the remainder, if necessary, to be drawn from the
Completion Reserve Account, to provide for an expected 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
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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 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 Issuers 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
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<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
4
<PAGE>
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."
(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 Holders of Old Notes must complete and sign
Tendering.............. 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 January 21, 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
at page 104; 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
Affiliates............. The New Notes are without recourse to the members of
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
Offer.................. Beginning with the first Operating Year 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
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 30, 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
Account................ 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. Any delay in the estimated completion date of
the Isle-Black Hawk could adversely affect the
Company's ability to make fixed interest payments
commencing with the payment due August 31, 1999, and
may result in a default on the interest payments on
the New 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 25, 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 delay in the estimated completion date of the Isle-Black Hawk could
adversely affect the Company's ability to make fixed interest payments
commencing with the payment due August 31, 1999, and may result in a default
on the interest payments on the New Notes. 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
13
<PAGE>
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
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,
a "Black Hawk Brewery" casino and a Swiss-themed "St. Moritz" casino/resort.
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 media has reported that a formal application for permitting,
zoning and platting, as well as development plans, have been submitted to the
City of Black Hawk for a large "St. Moritz" casino and resort hotel to be
located directly off of Route 119 (the main access route connecting the City
of Black Hawk with Interstate 70). Plans for this casino and resort hotel
include 260 hotel rooms, 1100 gaming positions and amenities such as tennis
courts and a swimming pool, which would make this project the largest in
Colorado. Media reports have also speculated that the project would be managed
by a national hotel and resort operator. 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.
Finally, if the proposed St. Moritz casino and resort hotel is completed
directly off of Route 119, it may give potential gaming patrons the option of
bypassing Mill and Main Streets altogether.
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 Prospectus 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 Prospectus,
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.
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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 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
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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 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
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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 New 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 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. 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 Agreement. 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 New 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 New 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, OCTOBER 26,
1997 1997
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
INCOME STATEMENT DATA:
Net loss........................................... $ (53) $ (788)
BALANCE SHEET DATA:
Cash............................................... 682 739
Total assets....................................... 90,082 92,355
Long-term debt, including current maturities....... 75,000 75,000
Total liabilities.................................. 75,131 78,138
Members' equity.................................... 14,952 14,217
</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 presently intends to add between
$2.7 million and $3.0 million to the development and construction budget for
the Isle-Black Hawk, to be drawn first from accrued and future interest
earnings on amounts in the Construction Disbursement Account, with the
remainder, if necessary, to be drawn from the Completion Reserve Account, to
provide for an expected increase in the "guaranteed maximum price" under the
Design/Build Agreement due to the discovery of a
29
<PAGE>
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 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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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
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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
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<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, 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 media has reported
that a formal application for permitting, zoning and platting, as well as
development plans, have been submitted to the City of Black Hawk for a large
"St. Moritz" casino and resort hotel to be located directly off of Route 119
(the main access route connecting the City of Black Hawk with Interstate 70).
Plans for this casino and resort hotel include 260 hotel rooms, 1100 gaming
positions and amenities such as a tennis court and a swimming pool, which
would make this project the largest in Colorado. Media reports have also
speculated that the project would be managed by a national hotel and resort
operator. If the proposed St. Moritz casino and hotel resort is completed
directly off of Route 119, it may give gaming patrons the option of bypassing
Mill and Main Streets altogether.
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
35
<PAGE>
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 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.
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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.
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 30, 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 presently intends to add
between $2.7 million and $3.0 million to the development and construction
budget for the Isle-Black Hawk pending such determination, to be drawn first
from accrued and future interest earnings on amounts in the Construction
Disbursement Account with the remainder, if necessary, to be drawn from the
Completion Reserve Account, to provide for an expected increase in the
"guaranteed maximum price" under the Design/Build Agreement ultimately
resulting from the foregoing, and accordingly the Company 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.
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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 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.
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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.
Each of the above listed facilities is wholly owned by Casino America and
developed by Casino America, or in two cases, Casino America in conjunction
with joint venture partners (the interests of which were purchased by Casino
America in 1996 with financing from a debt offering). Casino America has never
sponsored programs with offerings made to other investors.
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 $194,968
Rooms, food, beverage and other. 5,311 27,719 50,815 23,042
Management fees--joint ventures. 4,613 6,308 2,110 --
-------- -------- -------- --------
Total revenue................. 127,537 157,963 375,602 218,010
Operating expenses................ 107,383 155,585 347,079 188,051
Operating income.................. 20,154 2,378 28,523 29,959
Net interest expense.............. (10,046) (13,924) (38,711) (24,634)
Equity in income (loss) of
unconsolidated joint ventures.... 19,904 16,434 (166) --
-------- -------- -------- --------
Minority Interest................. -- -- -- 321
Income (loss) before income taxes. 30,012 4,888 (10,354) 7,164
-------- -------- -------- --------
Net income (loss) before
extraordinary.................... 18,069 1,555 (8,794) 4,025
-------- -------- -------- --------
Extraordinary loss, net of taxes.. -- -- (12,257) --
Net income (loss)................. 18,069 1,555 (21,051) 4,025
======== ======== ======== ========
BALANCE SHEET DATA (AT END OF
PERIOD):
-----------------------------
Current assets.................... 25,361 27,379 78,415 66,531
Total assets...................... 211,899 226,474 528,421 611,748
Long-term debt, including current
portion.......................... 138,857 139,778 379,522 447,104
Stockholders' equity.............. 42,015 50,270 77,973 82,109
</TABLE>
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<PAGE>
The financial statements of Casino America are publicly available through
the offices of the Commission and can also be obtained by contacting Casino
America at the address set forth in "Available Information" at the beginning
of this Prospectus.
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. Nevada Gold has never sponsored programs with
offerings made to other investors.
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 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 offices of the Commission and can also be obtained by contacting
Nevada Gold at the address set forth in "Available Information" at the
beginning of this Prospectus..
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
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<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
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<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 the
Registration Statement required by the Registration Rights Agreement on or
before the date specified for such filing, (ii) such Registration Statement 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 January 21, 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 December 22, 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") the
address 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 have 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 Registered or Certified Mail: By Hand or Overnight Delivery:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Transfer Window
Attn: Reorganization Operations Subcellar One
Dept.
By Facsimile:
(For Eligible Institutions Only)
IBJ Schroder Bank & Trust Company
Attn: Reorganization Operations Dept.
(212) 858-2611
Confirm by telephone:
(212) 858-2103
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.
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 have 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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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>
FINANCIAL STATEMENTS AUGUST 24, 1997 (AUDITED)............................. F-2
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 AUDITED FINANCIAL STATEMENTS...................................... F-7
FINANCIAL STATEMENTS OCTOBER 26, 1997 (UNAUDITED).......................... F-10
Balance Sheet............................................................ F-10
Statement of Operations.................................................. F-11
Statement of Members' Equity............................................. F-12
Statement of Cash Flows.................................................. F-13
NOTES TO UNAUDITED FINANCIAL STATEMENTS.................................... F-14
</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>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
OCTOBER 26, 1997
----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 739,000
Accrued interest receivable.............................. 351,000
-----------
Total current assets................................... 1,090,000
-----------
Property, plant and equipment:
Land and land improvements............................... 14,544,000
Construction in progress................................. 4,973,000
-----------
Property and equipment, net................................ 19,517,000
-----------
Other assets:
Restricted cash.......................................... 67,337,000
Deferred financing costs................................. 4,411,000
-----------
Total Assets........................................... $92,355,000
===========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Accounts payable--trade.................................. $ 1,339,000
Accounts payable--related parties........................ 28,000
Accrued liabilities
Interest............................................... 1,751,000
Other.................................................. 20,000
-----------
Total current liabilities............................ 3,138,000
-----------
Long-term debt............................................. 75,000,000
Members' equity
Member's capital--Casino America of Colorado, Inc........ 7,735,000
Member's capital--Blackhawk Gold, Ltd.................... 6,482,000
-----------
Total members' equity................................ 14,217,000
-----------
Total liabilities and members' equity................ $92,355,000
===========
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-10
<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 OCTOBER 26, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Interest expense, net of capitalized interest of $408,000......... $(1,469,000)
Interest income................................................... 681,000
-----------
Net loss........................................................ $ (788,000)
===========
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-11
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
CASINO AMERICA OF BLACKHAWK TOTAL
COLORADO, INC. GOLD, LTD. MEMBERS' EQUITY
----------------- ---------- ---------------
<S> <C> <C> <C>
Balance, April 25, 1997
(date of inception) $ -- $ -- $ --
Capital contribution
development costs............. 317,000 -- 317,000
Capital contribution--cash..... 7,084,000 -- 7,084,000
Capital contribution--land..... 100,000 7,504,000 7,604,000
Equity transfer................ 700,000 (700,000) --
Net loss....................... (466,000) (322,000) (788,000)
---------- ---------- -----------
Balance, October 26, 1997........ $7,735,000 $6,482,000 $14,217,000
========== ========== ===========
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-12
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE PERIOD APRIL 25, 1997 (DATE OF INCEPTION) THROUGH OCTOBER 26, 1997
<TABLE>
<S> <C>
Cash flows from operating activities
Net loss....................................................... $ (788,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Amortization of deferred financing costs..................... 126,000
Changes in current assets and liabilities:
Accounts payable and accrued liabilities................... 2,331,000
------------
Net cash provided by operating activities.................... 1,669,000
------------
Cash flows from investing activities:
Purchase of land............................................... (6,400,000)
Purchase of property, plant and equipment...................... (4,509,000)
Increase in restricted cash.................................... (67,337,000)
------------
Net cash used in investing activities........................ (78,246,000)
------------
Cash flows from financing activities:
Proceeds from borrowings....................................... 72,000,000
Deferred financing costs....................................... (1,372,000)
Principal payment on land mortgage............................. (396,000)
Capital contribution received.................................. 7,084,000
------------
Net cash provided by financing activities.................... 77,316,000
------------
Net increase in cash............................................. 739,000
Cash, beginning of period........................................ --
------------
Cash, end of period.............................................. $ 739,000
============
Supplemental schedule of noncash investing and financing
activities:
Debt issued for:
Underwriting fees on first mortgage notes.................... $ 3,000,000
Capital contributions:
Land, net of mortgage of $396,000............................ 7,604,000
Financing fees............................................... 137,000
Property and equipment....................................... 180,000
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-13
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 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
early 1999.
On August 20, 1997, the Company and Isle of Capri Capital Corp. ("Capital
Corp."), a wholly owned subsidiary of the Company that had no operations,
assets or liabilities, issued $75,000,000 of 13% First Mortgage Notes due 2004
with Contingent Interest (the "Notes") in order to finance the construction
and development of a casino entertainment complex in Black Hawk, Colorado.
The rights and obligations of Casino America of Colorado and Blackhawk Gold
are governed in part by the Amended and Restated Operating Agreement of the
Company (the "Agreement") dated as of July 29, 1997. The Agreement 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, land purchase rights and development costs and
Blackhawk Gold contributed cash and land to the Company. Casino America of
Colorado had an ownership interest of 59.2% and Blackhawk Gold had an
ownership interest of 40.8% at October 26, 1997. Currently, Casino America of
Colorado owns 60% and Blackhawk Gold owns 40% of the Company. Profits and
losses of the Company will be allocated in proportion to their ownership
interests.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, considered necessary
for a fair presentation have been included. Operating results for the period
from April 25, 1997 through October 26, 1997 are not necessarily indicative of
the results that may be expected for the fiscal year ending April 26, 1998.
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
October 26, 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's sole
business activity has been developing the casino entertainment complex in
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.
F-14
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
DEVELOPMENT STAGE COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Certain significant risks and uncertainties
Gaming regulation licensing. The Company's ability to conduct gaming
operations in the State of Colorado depends on the licensing or qualification
of the Company, Casino America, and Nevada Gold. No Colorado gaming license
has been issued to the Company, to date. Such licensing and qualifications
will be reviewed periodically by the gaming authorities in Colorado.
Competition. The Black Hawk/Central City, Colorado market has many
established casinos. The market is highly competitive and other significant
development projects are currently being planned or are under construction.
Construction risks. Construction projects entail significant risks,
including, but not limited to, costs 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 and/or
result in substantial increases in costs to the Company. State 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.
NOTE 2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost except for land contributed
by Blackhawk Gold, which is stated at its 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, plant and
equipment.
NOTE 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 use restricted by an indenture between the Company and
trustee, dated August 20, 1997 in connection with the issuance of the Notes
(the "Indenture"). Amounts in the Construction Disbursement Account,
approximately $48.2 million, will be used for the development, construction
and opening of the casino entertainment complex by the Company in Black Hawk,
Colorado. Amounts in the Completion Reserve Account, approximately $5.0
million, will be used in the event there are insufficient funds in the
Construction Disbursement Account to complete the casino entertainment
complex. Amounts in the Interest Reserve Account, approximately $14.1 million,
will be used to pay the first three fixed interest payments on the Notes,
which were issued pursuant to the Indenture.
Deferred financing costs--are being amortized over the life of the bonds
commencing on the date of issuance, August 20, 1997.
F-15
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
DEVELOPMENT STAGE COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. LONG-TERM DEBT
Long-term debt consists of $75,000,000 in 13% First Mortgage Notes with
contingent interest, due August 31, 2004. The Notes were issued under the
Indenture dated August 20, 1997, between the Company and Capital Corp. as co-
issuers and the trustee. Interest on the Notes is 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
payment date, in an aggregate principal amount of 5% of the Company's
Consolidated Cash Flow (as defined in the Indenture), provided that no
Contingent Interest shall be payable prior to commencement of operations and
may, under certain circumstances, be deferred.
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 and thereafter............................................ 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 the 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.
Substantially all of the Company's assets are pledged as collateral for
long-term debt. At October 26, 1997, the Company was in compliance with all
debt covenants.
On October 17, 1997, the Company filed a Registration Statement on Form S-4
(registration number 333-38093) relating to an exchange offer for the Notes.
NOTE 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, which was subsequently amended and restated (the
"Management Agreement"), with Casino America, which will manage the casino
entertainment complex in exchange for a fee. The management fee will be equal
to two percent of revenues, 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.
NOTE 6. SUBSEQUENT EVENTS
On July 29, 1997, Casino America of Colorado, Casino America, Blackhawk Gold
and Nevada Gold entered into a Members Agreement (the "Members Agreement")
which addressed the development of the Isle-Black Hawk, management of the
Company, additional capital contributions, and other matters. Pursuant to the
Members Agreement, Blackhawk Gold has the right to sell up to 4.8% ownership
in the Company to Casino America of Colorado, for up to $0.8 million. On
November 13, 1997, pursuant to that provision, Casino America of Colorado
purchased a .8% membership interest from Blackhawk Gold for $133,333.
Blackhawk Gold will have the option for 180 days following the purchase to buy
back the .8% interest for $133,333 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 2%.
F-16
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
DEVELOPMENT STAGE COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The general contractor (the "Contractor") for the Isle-Black Hawk
construction project, 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,
the Contractor 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. The Contractor's position is
that it is entitled to an increase in the guaranteed maximum price under the
Design/Build Agreement, pursuant to which the Isle-Black Hawk is being
constructed, and an extension to the construction schedule. Although the
Company and the Contractor have not yet agreed to the amount of a price
adjustment or revision to the construction schedule, the preliminary,
unsubstantiated estimates provided by the Contractor indicate that the
foregoing developments may lead to a price adjustment and schedule extension
that could be material. The Company and the Contractor 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 the Contractor, the Company presently intends to add between
$2.7 million and $3.0 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, if necessary, to be drawn from the Completion Reserve Account
to the Construction Disbursement Account, to provide for an expected 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.
F-17
<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
December 22, 1997
