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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 12, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
PENINSULA GAMING COMPANY, LLC
(Exact name of registrant as specified in its charter)
(FOR CO-REGISTRANTS, PLEASE SEE TABLE OF OTHER REGISTRANTS ON THE FOLLOWING
PAGE)
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DELAWARE 7993 42-1483875
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
</TABLE>
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3RD STREET ICE HARBOR
P. O. BOX 1750
DUBUQUE, IOWA 52004-1683
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
NATALIE A. BAUM
3RD STREET ICE HARBOR
P. O. BOX 1750
DUBUQUE, IOWA 52004-1683
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPY TO:
RONALD S. BRODY, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK
(212) 506-2500
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ______________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ______________
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
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12 1/4% Senior Secured Notes
due July 1, 2006,........................ $71,000,000 100%(1) $71,000,000 $19,738
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(1) Calculated based on the book value of the securities to be received by the
registrant in the exchange in accordance with Rule 457(f)(2) under the
Securities Act of 1933.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the subsidiary guarantees.
------------------------
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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TABLE OF OTHER REGISTRANTS
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STATE OF PRIMARY STANDARD
INCORPORATION I.R.S. EMPLOYER INDUSTRIAL
OR IDENTIFICATION CLASSIFICATION
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER ORGANIZATION NO. CODE NUMBER
- -------------------------------------------------------- -------------- ---------------- -----------------------
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Peninsula Gaming Corp. ................................. Delaware 52-2192665 7993
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PENINSULA GAMING CORP.
3RD STREET ICE HARBOR
P.O. BOX 1750
DUBUQUE, IOWA 52004-1683
(Address, including zip code, and telephone number, including area code,
of each of the co-registrant's principal executive offices)
------------------------
NATALIE A. BAUM
3RD STREET ICE HARBOR
P.O. BOX 1750
DUBUQUE, IOWA 52004-1683
(Name, address, including zip code, and telephone number, including area code,
of agent for service for each of the co-registrants)
COPY TO:
RONALD S. BRODY, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK
(212) 506-2500
------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 12, 1999
THE INFORMATION IN THIS PROSPECTUS IS INCOMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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PROSPECTUS
PENINSULA GAMING COMPANY, LLC
AND
PENINSULA GAMING CORP.
OFFER TO EXCHANGE UP TO $71,000,000 OF OUR
SERIES B 12 1/4% SENIOR SECURED NOTES DUE 2006,
FOR ALL OF OUR OUTSTANDING
SERIES A 12 1/4% SENIOR SECURED NOTES DUE 2006
------------------------
- The exchange offer expires at 5:00 p.m., New York City time, on
, 1999, unless extended.
- The exchange offer is subject only to the conditions that the exchange
offer will not violate any applicable law or any interpretation of
applicable law by the staff of the Securities and Exchange Commission.
- All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged.
- Tenders of outstanding notes may be withdrawn at any time before 5:00
p.m., New York City time, on the expiration date of the exchange offer.
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes.
- We will not receive any proceeds from the exchange offer.
- The terms of the new notes to be issued are substantially identical to
your notes, except that the new notes will not have transfer restrictions,
and you will not have registration rights.
- There is no established trading market for the new notes, and we do not
intend to apply for listing of the new notes on any securities exchange.
------------------------
FOR A DISCUSSION OF FACTORS THAT YOU SHOULD CONSIDER BEFORE YOU PARTICIPATE
IN THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS
PROSPECTUS.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL AND COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
NEITHER THE IOWA RACING AND GAMING COMMISSION NOR ANY OTHER REGULATORY
AGENCY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
The date of this prospectus is , 1999.
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TABLE OF CONTENTS
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PAGE
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Forward-looking Statements................................................................................. i
Prospectus Summary......................................................................................... 1
Risk Factors............................................................................................... 12
The Transactions........................................................................................... 23
Use of Proceeds............................................................................................ 23
Capitalization............................................................................................. 24
Selected Combined Financial Data........................................................................... 25
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 27
Business................................................................................................... 32
Quantitative and Qualitative Disclosure About Market Risk.................................................. 37
Regulatory Matters......................................................................................... 38
Management................................................................................................. 43
Principal Securityholders.................................................................................. 46
Certain Relationships and Related Transactions............................................................. 48
The Exchange Offer......................................................................................... 51
Description of the Notes................................................................................... 62
Description of Certain Indebtedness........................................................................ 100
Description of PGCL Membership Interests................................................................... 101
Description of PGP Membership Interests.................................................................... 102
Specific Federal Income Tax Considerations................................................................. 109
Plan of Distribution....................................................................................... 113
Legal Matters.............................................................................................. 113
Independent Auditors....................................................................................... 113
Index to Combined Financial Statements..................................................................... F-1
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------------------------
You should rely only on the information contained in this prospectus. We
have not authorized any other person to provide you with different or additional
information. If anyone provides you with different or additional information,
you should not rely on it. The information in this prospectus is accurate as of
the date on the front cover.
FORWARD-LOOKING STATEMENTS
Throughout this prospectus we make "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking
statements include the words "may," "will," "estimate," "intend," "continue,"
"believe," "expect" or "anticipate" and other similar words. The forward-looking
statements contained in this prospectus are generally located in the material
set forth under the headings "Prospectus Summary," "Risk Factors,"
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business," but may be found in other locations
as well. These forward-looking statements generally relate to plans and
objectives for future operations and are based upon management's reasonable
estimates of future results or trends. Although we believe that the plans and
objectives reflected in or suggested by such forward-looking statements are
reasonable, such plans or objectives may not be achieved. Actual results may
differ from projected results due, but not limited, to unforeseen developments,
including developments relating to the following:
- the availability and adequacy of our cash flow to satisfy our obligations,
including payment of the notes and additional funds required to support
capital improvements and development,
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- economic, competitive, demographic, business and other conditions in our
local and regional markets, including competition in the Dubuque gaming
market,
- changes or developments in the laws, regulations or taxes in the gaming
industry, including riverboat gaming and liquor regulation under Iowa law,
- actions taken or omitted to be taken by third parties, including
customers, suppliers, competitors, members and shareholders, as well as
legislative, regulatory, judicial and other governmental authorities,
- changes in business strategy, capital improvements, development plans,
including those due to environmental remediation concerns, or changes in
personnel or their compensation, including federal, state and local
minimum wage requirements,
- the loss of any license or permit, including the failure to obtain an
unconditional renewal of a required gaming license on a timely basis,
- the termination of our operating agreement with the Dubuque Racing
Association, Ltd. or the failure of the Dubuque Racing Association, Ltd.
to continue as our "qualified sponsoring organization,"
- the loss of our riverboat casino or land-based facilities due to casualty,
weather, mechanical failure or any extended or extraordinary maintenance
or inspection that may be required, and
- other factors discussed under "Risk Factors" or elsewhere in this
prospectus.
You should read this prospectus completely and with the understanding that
actual future results may be materially different from what the issuers of the
notes expect. We will not update forward-looking statements even though our
situation may change in the future.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE COMBINED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. ALL HISTORICAL FINANCIAL INFORMATION CONTAINED IN THIS PROSPECTUS
RELATES TO OUR PREDECESSOR COMPANIES, GREATER DUBUQUE RIVERBOAT ENTERTAINMENT
COMPANY, L.C. ("GDREC") AND HARBOR COMMUNITY INVESTMENT, L.C. ("HCI"), ON A
COMBINED BASIS. AS A RESULT OF THE CONSUMMATION OF THE TRANSACTIONS OUTLINED
UNDER "THE TRANSACTIONS," CERTAIN OF SUCH PREDECESSOR COMPANIES HISTORICAL
FINANCIAL INFORMATION MAY NOT BE MEANINGFUL TO AN UNDERSTANDING OF OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. REFERENCES TO "WE," "US" AND "OUR"
GENERALLY REFER TO PENINSULA GAMING COMPANY, LLC ("PGCL") AND PENINSULA GAMING
CORP. ("PGC") ON A COMBINED BASIS AND DO NOT REFER TO PENINSULA GAMING PARTNERS,
LLC ("PGP"), THE DIRECT PARENT OF PGCL AND THE INDIRECT PARENT OF PGC. PGC IS A
CO-ISSUER OF THE NOTES AND WAS FORMED TO FACILITATE THE OFFERING OF THE NOTES
AND HAS NO ASSETS OR OPERATIONS. UNLESS THE CONTEXT OTHERWISE REQUIRES,
REFERENCES TO THE "SECURITIES" REFER TO THE NOTES. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" BEFORE
INVESTING IN THE SECURITIES.
THE EXCHANGE OFFER
We sold $71 million of our 12 1/4% Senior Secured Notes due 2006 to
Jefferies & Co., Inc., as an initial purchaser, in a private placement of our
notes on July 15, 1999. The initial purchaser resold those notes in reliance on
Rule 144A, and other exemptions under the Securities Act of 1933.
On July 15, 1999, we also entered into a registration rights agreement with
the initial purchaser in which we agreed, among other things, to:
- file a registration statement with the Securities and Exchange Commission
relating to the exchange offer on or before October 13, 1999;
- deliver to you this prospectus;
- cause the registration statement, which includes this prospectus, to
become effective on or before December 13, 1999; and
- complete the exchange offer within 180 days after the registration
statement becomes effective.
You are entitled to exchange your notes for new registered 12 1/4% Senior
Secured Notes due 2006, with substantially identical terms as your notes, except
for transfer restrictions and registration rights. If we do not complete the
exchange offer on or before 180 days after the registration statement becomes
effective, the interest rate on your notes will be increased. You should read
the discussion under the heading "The Exchange Offer--Purpose and Effect;
Registration Rights" and "Description of the Notes" for further information
regarding the new notes that we are offering in exchange for your notes.
We believe that you may resell the new notes issued in the exchange offer
without compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933, subject to the conditions described under "The
Exchange Offer." You should read that section for further information regarding
the exchange offer.
THE COMPANY
We own and operate the Diamond Jo riverboat casino (the "Diamond Jo"), one
of only two licensed gaming operations in Dubuque, Iowa. We are the leading
gaming facility in our market, having captured approximately 60% of Dubuque's
casino gaming revenues since 1995, our first full year of operations. Our net
revenues in 1998 increased 7.6% from 1997 to $45.8 million, and our EBITDA (as
defined) increased 9.6% to $16.1 million for the same period. We attribute our
success to our competitive position and our unique local gaming operations,
offering the most gaming positions and
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the only table games, video poker and video keno within 60 miles of Dubuque.
Further, we believe that additional competitors are effectively precluded from
entering our market due to constraints imposed by existing laws on the
availability of gaming licenses.
We anticipate continued growth through a combination of targeted marketing
initiatives, enhanced by our new electronic player tracking system, and locally
funded development programs, including the $27 million redevelopment project in
Dubuque's Ice Harbor, where the Diamond Jo is located. This project is designed
to establish the Ice Harbor as a community center and tourist destination.
Additionally, we intend to construct a hotel contiguous to the Diamond Jo to
capitalize on increased customer traffic anticipated from the Ice Harbor
redevelopment project and to expand our geographic reach. We believe that these
developments will provide us with opportunities to significantly expand our
customer base, resulting in increased revenues and EBITDA.
The Diamond Jo is a three-story, approximately 51,900 square foot riverboat
casino that has capacity for 1,390 patrons and features a spacious two-story
atrium. We offer our customers a selection of 650 slot machines and 39 table
games in approximately 17,800 square feet of gaming space. Adjacent to the
Diamond Jo is a two-story, approximately 33,000 square foot dockside pavilion,
featuring the recently renovated 116-seat Lighthouse Grill restaurant, the
175-seat Lucky Jo Saloon, the 30-seat Java Jo Coffee Bar, a gift shop, and the
205-seat Harbor View Room, a full service banquet facility. Approximately 1,000
conveniently located parking spaces are available to our patrons, including
valet parking. Our facilities are open seven days a week, and the Diamond Jo
functions primarily as a dockside riverboat with continuous boarding. The
Diamond Jo is centrally located in the Ice Harbor in downtown Dubuque and is
accessible from each of the major highways in the area. On average, more than
30,000 vehicles pass our site per day. Several cruise ships that operate on the
Mississippi River also stop at the Ice Harbor frequently during the summer
months. We share our dockside pavilion with the Iowa Welcome Center, featuring a
museum, historical exhibits and shops.
FAVORABLE OPERATING ENVIRONMENT
LIMITED COMPETITION. Our principal competition is the only other licensed
gaming facility in Dubuque, the Dubuque Greyhound Park (the "DGP"). The DGP is
located approximately three miles north of the Diamond Jo and offers 600 slot
machines along with live and simulcast greyhound racing and simulcast horse
racing on a limited basis. It is owned and operated by the Dubuque Racing
Association, Ltd. ("DRA"), a not-for-profit corporation. Under Iowa law, table
games, video poker, video keno and other electronic games of skill are not
permitted at the DGP.
STRONG DUBUQUE MARKET. We currently draw approximately 95% of our patrons
from within a 100-mile radius of the Diamond Jo, an area of approximately 2.8
million residents with an average household income of approximately $48,200.
Dubuque is situated at the intersection of Illinois, Iowa and Wisconsin, acts as
the region's trade hub and has a diverse employer base. Casino gaming revenues
in Dubuque have grown at a compound annual rate of 7.5% since 1996, and there
are no betting or loss limits in Iowa. Dubuque contains several tourist
attractions, drawing more than one million visitors annually. Galena, Illinois,
a historic community located 15 miles east of Dubuque, draws more than two
million visitors annually.
OPERATING STRATEGY
Key elements of our operating strategy include the following:
MAINTAIN LOYAL LOCAL CUSTOMER BASE. We believe that the Diamond Jo is among
the principal entertainment venues for residents in and around Dubuque. In order
to maintain and enhance goodwill within the Dubuque area, we sponsor numerous
community events. We believe we are Dubuque's largest sponsor of such events,
which include air shows, hydroplane races, concerts and holiday celebrations,
such as Memorial Day and 4th of July fireworks. We also regularly adjust our
overall
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game mix to appeal to our target market. Our win per gaming position increased
by 8.9% in 1998 from 1997, which we believe is primarily due to our success in
changing our game mix during the year. To maintain our strong customer base, we
have also implemented extensive employee incentives and training programs
designed to provide a high level of personalized service to our customers.
IMPROVE PROFITABILITY PER CUSTOMER THROUGH TARGETED MARKETING. We have
developed marketing and promotional strategies designed to reward frequent
gaming customers. Patrons of the Diamond Jo are offered membership to our
players' club, known as the Diamond Club, which includes bimonthly mailings,
gaming incentives, and food and beverage discounts. In September 1998, we
installed a state-of-the-art electronic player tracking system to monitor slot
machine activity in real time, as well as the frequency and level of play for
our more than 100,000 Diamond Club members. This system enables us to focus our
marketing efforts on our most valued customers and increase revenues from our
existing customer base. Better tracking of, and communication with, our VIP
players through our new electronic player tracking system, among other things,
resulted in our win per admission increasing 7.3% for the six months ended June
30, 1999 compared to the same period in 1998.
ATTRACT NEW CUSTOMERS. In order to attract new customers and create a high
level of brand recognition, we frequently use billboard, print, radio and
television advertising throughout the Dubuque area. In addition, the City of
Dubuque's planned $27 million Ice Harbor redevelopment project should enable us
to significantly expand our customer base. This recently commenced redevelopment
project, which the City of Dubuque expects will be completed in several phases
over the next four years, includes plans for a historic steamboat, a promenade,
a docking facility, a museum, a wetland habitat (with several large aquariums
and an educational center) and an amphitheater. This redevelopment project is
designed to enhance the attractiveness of the Ice Harbor as a community center
and tourist destination, which we believe should lead to increased foot traffic
around the site of, and increased admissions to, the Diamond Jo. To further
capitalize on the Ice Harbor redevelopment project, we intend to develop a hotel
contiguous to our riverboat casino and dockside pavilion. The hotel is expected
to contain 100 to 150 guest rooms and offer meeting space to attract
professional and civic organizations for conferences, banquets and other events.
The hotel should enable us to extend our geographic reach and target certain
tourist markets, including more than two million annual visitors to Galena,
Illinois.
TERMS OF THE EXCHANGE OFFER
The exchange offer relates to the exchange of up to $71.0 million aggregate
principal amount of outstanding old notes for an equal aggregate principal
amount of registered new notes. The new notes will be obligations of Peninsula
Gaming Company, LLC and its wholly-owned subsidiary, Peninsula Gaming Corp., and
will be governed by the same indenture that governs the outstanding old notes.
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NEW NOTES.................... We are offering registered 12 1/4% Senior Secured Notes due
2006 for your notes. The terms of the registered new notes
and your notes are substantially identical, except:
- the new notes will be registered under the Securities Act
of 1933;
- the new notes will not bear any legends restricting
transfer; and
- except under limited circumstances, your rights under the
registration rights agreement, including your right to
receive additional interest, will terminate.
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THE EXCHANGE OFFER........... We are offering to exchange $1,000 in principal amount of
the new notes for each $1,000 in principal amount of your
old notes. As of the date of this prospectus, $71.0 million
aggregate principal amount of the old notes is outstanding.
EXPIRATION DATE.............. You have until 5:00 p.m., New York City time, on ,
1999 to validly tender your old notes if you want to
exchange your old notes for new notes. We may extend that
date under certain conditions.
CONDITIONS OF THE EXCHANGE
OFFER; EXTENSIONS;
AMENDMENTS................... You are not required to tender any minimum principal amount
of your old notes in order to participate in the exchange
offer. If you validly tender and do not validly withdraw
your old notes, your old notes will be exchanged for new
notes as long as the exchange offer does not violate any
applicable law or any interpretation of applicable law by
the staff of the Securities and Exchange Commission.
We may delay or extend the exchange offer and, if either of
the above conditions is not met, we may terminate the
exchange offer. We will notify you of any delay, extension
or termination of the exchange offer.
We may also waive any condition or amend the terms of the
exchange offer. If we materially amend the exchange offer,
we will notify you.
INTEREST..................... The first interest payment date on your old notes is January
1, 2000. Interest has accrued on your old notes since July
15, 1999, but not yet been paid. If your old notes are
exchanged for new notes, you will not receive any accrued
interest on your old notes. You will receive interest on
your new notes from July 15, 1999.
PROCEDURES FOR TENDERING OLD
NOTES; SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............ If you want to participate in the exchange offer, you must
transmit a properly completed and signed letter of
transmittal, and all other documents required by the letter
of transmittal, to the exchange agent. Please send these
materials to the exchange agent at the address set forth in
the accompanying letter of transmittal prior to 5:00 p.m.,
New York City time, on the expiration date. You must also
send one of the following:
- certificates of your old notes;
- a timely confirmation of book-entry transfer of your old
notes into the exchange agent's account at The Depository
Trust Company; or
- the items required by the guaranteed delivery procedures
described below.
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If you are a beneficial owner of your old notes and your old
notes are registered in the name of a nominee, such as a
broker, dealer, commercial bank or trust company, and you
wish to tender your old notes in the exchange offer, you
should instruct your nominee to promptly tender the old
notes on your behalf.
If you are a beneficial owner and you want to tender your
old notes on your own behalf, you must, before completing
and executing the letter of transmittal and delivering your
old notes, make appropriate arrangements to either register
ownership of your old notes in your name or obtain a
properly completed bond power from the registered holder of
your old notes.
By executing the letter of transmittal, you will represent
to us that:
- you are not our "affiliate" (as defined in Rule 405 under
the Securities Act of 1933);
- you will acquire the new notes in the ordinary course of
your business;
- you are not a broker-dealer that acquired your notes
directly from us in order to resell them pursuant to Rule
144A under the Securities Act of 1933 or any other
available exemption under the Securities Act of 1933;
- if you are a broker-dealer that acquired your notes as a
result of market-making or other trading activities, you
will deliver a prospectus in connection with any resale of
new notes; and
- you are not participating, do not intend to participate
and have no arrangement or understanding with any person to
participate in the distribution of the new notes.
If your old notes are not accepted for exchange for any
reason, we will return your old notes to you at our expense.
GUARANTEED DELIVERY
PROCEDURES................... If you wish to tender your old notes and:
- your old notes are not immediately available;
- you are unable to deliver on time your old notes or any
other document that you are required to deliver to the
exchange agent; or
- you cannot complete the procedures for delivery by
book-entry transfer on time;
then you may tender your old notes according to the
guaranteed delivery procedures that are discussed in the
letter of transmittal and in "The Exchange Offer--Guaranteed
Delivery Procedures."
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ACCEPTANCE OF OLD NOTES AND
DELIVERY OF NEW NOTES........ We will accept all old notes that you have properly tendered
on time when all conditions of the exchange offer are
satisfied or waived. The new notes will be delivered
promptly after we accept the old notes.
WITHDRAWAL RIGHTS............ 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 AGENT........... Firstar Bank, N.A. (formerly known as Firstar Bank of
Minnesota, N.A.) is the exchange agent. Its address and
telephone number are set forth in "The Exchange Offer--The
Exchange Agent; Assistance."
FEES AND EXPENSES............ We will pay all expenses relating to the exchange offer and
compliance with the registration rights agreement. We will
also pay certain transfer taxes, if applicable, relating to
the exchange offer.
RESALES OF NEW NOTES......... We believe that the new notes may be offered for resale,
resold and otherwise transferred by you without further
compliance with the registration and prospectus delivery
requirements of the Securities Act of 1933 if:
- you are not our "affiliate" (as defined in Rule 405 under
the Securities Act of 1933);
- you acquire the new notes in the ordinary course of your
business;
- you are not a broker-dealer that purchased old notes from
us to resell them pursuant to Rule 144A under the Securities
Act of 1933 or any other available exemption under the
Securities Act of 1933; and
- you are not participating, and have no arrangement or
understanding with any person to participate, in a
distribution (within the meaning of the Securities Act of
1933) of the new notes.
You should read the information under the heading "The
Exchange Offer--Resales of the New Notes" for a more
complete description of why we believe that you can freely
transfer new notes received in the exchange offer without
registration or delivery of a prospectus.
All broker-dealers that are issued new notes for their own
accounts in exchange for old notes that were acquired as a
result of market-making or other trading activities must
acknowledge that they will deliver a prospectus meeting the
requirements of the Securities Act of 1933 in connection
with any resale of the new notes. If you are a broker-dealer
and are required to deliver a prospectus, you may use this
prospectus for an offer to resell, a resale or other
transfer of the new notes.
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FEDERAL INCOME TAX
CONSEQUENCES................. The issuance of the new notes will not constitute a taxable
exchange for U.S. federal income tax purposes. You will not
recognize any gain or loss upon receipt of the new notes in
exchange for old notes. See "Specific Federal Income Tax
Consequences."
REGISTRATION RIGHTS
AGREEMENT.................... In connection with the sale of the old notes, we entered
into a registration rights agreement with the initial
purchasers of the old notes that grants the holders of the
old notes registration rights. As a result of making and
consummating this exchange offer, we will have fulfilled
most of our obligations under the registration rights
agreement. If you do not tender your old notes in the
exchange offer, you will not have any further registration
rights under the registration rights agreement or otherwise
unless you were not eligible to participate in the exchange
offer or do not receive freely transferrable new notes in
the exchange offer. See "The Exchange Offer--Purpose and
Effect; Registration Rights."
</TABLE>
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
If you do not exchange your old notes for new notes in the exchange offer,
your old notes will continue to be subject to the restrictions on transfer
contained in the legend on the old notes. In general, the old notes may not be
offered or sold unless they are registered under the Securities Act of 1933.
However, you may offer or sell your old notes under an exemption from, or in a
transaction not subject to, the Securities Act of 1933 and applicable state
securities laws. We do not currently anticipate that we will register the old
notes under the Securities Act of 1933.
7
<PAGE>
TERMS OF THE NEW NOTES
<TABLE>
<S> <C>
ISSUERS...................... Peninsula Gaming Company, LLC and its wholly-owned
subsidiary Peninsula Gaming Corp.
NOTES OFFERED................ $71,000,000 in principal amount of 12 1/4% Senior Secured
Notes due 2006.
MATURITY..................... July 1, 2006
INTEREST PAYMENT DATES....... Semiannually, beginning on January 1, 2000.
GUARANTEES................... Subject to certain exceptions, if we create or acquire new
subsidiaries, they will guarantee our obligations under the
notes.
RANKING...................... The notes will rank senior in right of payment to any of our
subordinated indebtedness and will rank equally with any of
our senior indebtedness.
OPTIONAL REDEMPTION.......... On or after July 1, 2003, all or some of the notes are
redeemable at our option at the following premiums, plus
interest:
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD BELOW PERCENTAGE
- --------------------------------------------------------------- -----------
<S> <C>
On or after July 1, 2003....................................... 108.00%
On or after July 1, 2004....................................... 105.33%
July 1, 2005 and thereafter.................................... 102.67%
</TABLE>
<TABLE>
<S> <C>
Prior to July 1, 2002, we may redeem up to 35% of the
principal amount of the notes at our option with the net
proceeds of certain equity offerings at 112.25% of their
face amount, plus interest.
REQUIRED REGULATORY
REDEMPTION................... The notes may be redeemed pursuant to certain required
regulatory redemptions.
CHANGE OF CONTROL OFFER...... Upon a change of control, holders of the notes will be given
the opportunity to sell us all or part of their notes at
101% of their face amount, plus interest.
CERTAIN INDENTURE
PROVISIONS................... The indenture governing the notes will limit what we may do.
For example, the provisions of the indenture will limit our
ability to among other things:
- incur more debt;
- pay dividends, redeem stock, or make other distributions;
- issue stock of subsidiaries;
- make investments;
- create liens;
- enter into transactions with affiliates;
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
- merge or consolidate; and
- transfer or sell assets.
In addition, the indenture governing the notes will prohibit
Peninsula Gaming Corp. from holding any assets, becoming
liable for any obligations (other than the notes) or
engaging in any business activity. These covenants are
subject to a number of important exceptions. See
"Description of Notes--Certain Covenants."
</TABLE>
9
<PAGE>
SUMMARY COMBINED FINANCIAL AND OPERATING DATA
The summary combined financial data set forth below for the years ended
December 31, 1996, 1997 and 1998 have been derived from the combined financial
statements of the predecessor companies included elsewhere in this prospectus,
which have been audited by Deloitte & Touche LLP, independent auditors, whose
report thereon is included with such combined financial statements. The summary
combined financial data for the six months ended June 30, 1998 and 1999, for the
last twelve months ended June 30, 1999, and at June 30, 1999 have been derived
from the unaudited combined financial statements of the predecessor companies
which, in the opinion of management, are prepared on a basis consistent with the
audited combined financial statements of the predecessor companies which appear
elsewhere in this prospectus and include all adjustments (consisting only of
normal and recurring adjustments) necessary for a fair presentation of our
financial position and results of operations at such dates and for such periods.
Financial and operating results for the six months ended June 30, 1998 and 1999
are not necessarily indicative of the results that may be expected for the full
fiscal year. The information presented below should be read in conjunction with,
and is qualified in its entirety by reference to, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the combined
financial statements and the notes thereto appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
TWELVE
MONTHS
SIX MONTHS ENDED ENDED
FISCAL YEARS ENDED DECEMBER 31, JUNE 30, JUNE 30,
---------------------------------------- ---------------------- ------------
1996 1997 1998 1998 1999 1999
------------ ------------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
STATEMENT OF OPERATIONS DATA:
Net Revenues..................... $ 42,252 $ 42,621 $ 45,849 $ 22,067 $ 22,903 $ 46,685
Operating expenses............... 30,708 28,089 30,670 14,576 15,887 31,981
Depreciation and amortization.... 2,026 1,826 1,895 898 1,066 2,063
Income from operations........... 9,518 12,706 13,284 6,593 5,950 12,641
OTHER FINANCIAL DATA:
Adjusted EBITDA(1)............... $ 14,013 $ 14,702 $ 16,107 $ 7,723 $ 7,641 $ 16,025
Adjusted EBITDA margin........... 33.2% 34.5% 35.1% 35% 33.4% 34.3%
Capital expenditures............. $ 17,812 $ 918 $ 1,393 $ 594 $ 358 $ 1,157
OPERATING DATA:
Number of admissions............. 1,109,399 1,111,155 1,142,008 546,035 527,289 1,123,262
Win per position per day......... $ 119 $ 117 $ 128 $ 124 $ 128 $ 130
Win per admission................ $ 36 $ 37 $ 39 $ 39 $ 42 $ 40
PRO FORMA DATA(2):
Ratio of EBITDA to net interest expense(3)......................................................... 1.9x
Ratio of net debt to EBITDA(4)..................................................................... 4.2x
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1999
----------------------
<S> <C> <C>
AS
ACTUAL ADJUSTED(2)
--------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................. $ 5,118 $ 3,969
Total assets.............................................................................. 27,177 86,657
Total debt................................................................................ 7,223 70,657
Preferred Membership Interests(5)......................................................... -- 7,000
Common membership interests(5)............................................................ 17,043 9,000
</TABLE>
10
<PAGE>
- ------------------------
(1) EBITDA represents earnings before interest, income taxes, depreciation and
amortization and excludes non-recurring charges and loss on sale of assets
for all periods presented. EBITDA for 1996 excludes $2.4 million of
operating lease expense related to the Diamond Jo prior to its purchase.
EBITDA is presented to enhance the understanding of our financial
performance and our ability to service our indebtedness, including the
notes. We understand that it is used by certain investors as one measure of
cash flow and enables a comparison of our performance with the performance
of other companies that report EBITDA. EBITDA is not a measurement
determined in accordance with generally accepted accounting principles
("GAAP") as an indicator of financial performance and should not be
considered an alternative to, or more meaningful than, net income or income
from operations, as an indicator of our operating performance, or cash flows
from operating activities as a measure of liquidity. Our definition of
EBITDA may not be the same as that used by other companies.
(2) Pro Forma Data and As Adjusted Balance Sheet Data give effect to (1) the
sale of our notes and the sale of PGP's convertible preferred membership
interests of PGP, (2) the capital contribution of the holders of common and
convertible preferred membership interests of PGP and (3) the application of
the net proceeds therefrom to consummate the acquisition of the Diamond Jo.
See "The Transactions," "Certain Relationships and Related
Transactions--Equity Contribution," "Description of PGCL Membership
Interests" and "Description of PGP Membership Interests."
(3) Pro Forma EBITDA is equal to EBITDA less $0.2 million of executive
compensation expense that will be incurred annually. Pro Forma net interest
expense is $8.5 million and is defined as total interest expense less
interest income and amortization of deferred financing costs and original
issue discount.
(4) Pro Forma net debt is defined as Adjusted total debt less As Adjusted cash
and cash equivalents in excess of cage cash. Pro Forma EBITDA is equal to
EBITDA less $0.2 million of executive compensation expense that will be
incurred annually.
(5) PGCL issued $7.0 million of preferred membership interests to GDREC and
received a $9.0 million capital contribution from PGP ($6.0 million of which
was contributed to the capital of PGP through the sale of common membership
interests and $3.0 million of which was contributed to the capital of PGP
through the sale of convertible preferred membership interests). See "The
Transactions," "Certain Relationships and Related Transactions--Equity
Contribution," "Description of PGCL Membership Interests" and "Description
of PGP Membership Interests."
11
<PAGE>
RISK FACTORS
You should consider carefully the risk factors below as well as the other
information in this prospectus before tendering your old notes in the exchange
offer.
OLD NOTES SUBJECT TO TRANSFER RESTRICTIONS--YOU MAY NOT BE ABLE TO SELL YOUR OLD
NOTES IF YOU DO NOT EXCHANGE THEM FOR REGISTERED NEW NOTES IN THE EXCHANGE
OFFER.
If you do not exchange your old notes for new notes in the exchange offer,
your old notes will continue to be subject to the restrictions on transfer as
stated in the legend on the old notes. In general, you may not offer or sell the
old notes unless they are:
- registered under the Securities Act of 1933;
- offered or sold pursuant to an exemption from the Securities Act of 1933
and applicable state securities laws; or
- offered or sold in a transaction not subject to the Securities Act of 1933
and applicable state securities laws.
We do not currently anticipate that we will register the old notes under the
Securities Act of 1933. In addition, holders who do not tender their old notes,
except for certain instances involving the initial purchaser or holders of old
notes who are not eligible to participate in the exchange offer or who do not
receive freely transferrable new notes pursuant to the exchange offer, will not
have any further registration rights under the registration rights agreement or
otherwise and will not have rights to receive additional interest.
LIMITED MARKET FOR OLD NOTES--THE MARKET FOR OLD NOTES MAY BE SIGNIFICANTLY MORE
LIMITED AFTER THE EXCHANGE OFFER.
If old notes are tendered and accepted for exchange pursuant to the exchange
offer, the trading market for old notes that remain outstanding may be
significantly more limited. As a result, the liquidity of the old notes not
tendered for exchange may be adversely affected. The extent of the market for
old notes and the availability of price quotations would depend upon a number of
factors, including the number of holders of old notes remaining outstanding and
the interest of securities firms in maintaining a market in the old notes. An
issue of securities with a similar outstanding market value available for
trading, which is called the "float," may command a lower price than would be
comparable to an issue of securities with a greater float. As a result, the
market price for old notes that are not exchanged in the exchange offer may be
affected adversely as old notes exchanged pursuant to the exchange offer reduce
the float. The reduced float also may make the trading price of the old notes
that are not exchanged more volatile.
DEPENDENCE UPON A SINGLE GAMING SITE--OUR RESULTS OF OPERATIONS ARE DEPENDENT
SOLELY ON THE DIAMOND JO.
Our profitability is entirely dependent upon the Diamond Jo. If we are
closed or if access to the Diamond Jo is limited in any significant way, our
results of operations could be materially adversely affected. We will have
little or no operating revenues for any period that the Diamond Jo is not in
service. Our riverboat could be out of service due to, among other things,
casualty, mechanical failure or extended or extraordinary maintenance or
inspection. In addition, our riverboat is subject to United States Coast Guard
regulations which, among other things, govern its design, facilities and
operations. Our riverboat must hold, and currently possesses, a Certificate of
Inspection and a Certificate of Documentation from the United States Coast
Guard. Loss of the Certificate of Inspection would preclude our use of the
Diamond Jo as an operating riverboat. The United States Coast Guard requires
periodic hull inspections. Our next hull inspection is expected to take place by
April 2000. A
12
<PAGE>
traditional dry dock hull inspection would result in the temporary loss of
service of our riverboat for up to approximately two weeks. The United States
Coast Guard, upon request and approval of such request, allows for an underwater
hull inspection instead of the traditional out of water dry dock inspection. An
underwater hull inspection does not result in any loss of services of the
riverboat. If the Coast Guard approves our request for an underwater hull
inspection, we will be required to perform another hull inspection within thirty
30 months from the date of such underwater hull inspection. At that time, we may
again seek approval from the Coast Guard for an underwater hull inspection in
order to avoid any loss of services of the riverboat.
The Diamond Jo is subject to the risk of severe weather, including snow,
high wind, blizzard and flooding. Severe weather conditions could cause
significant physical damage to the Diamond Jo and, for a period of time, result
in reduced hours of operation or access to the Diamond Jo or the complete
closure of the Diamond Jo. Severe weather may also cause the closure of highways
which provide access to the Diamond Jo. This would reduce the number of people
visiting the Diamond Jo. Any of these events could have a material adverse
effect on us. Although we maintain insurance policies, insurance proceeds may
not adequately compensate us for all economic consequences of any loss. Should a
loss occur, we could lose both our invested capital and anticipated profits from
the Diamond Jo.
We are also vulnerable to any negative economic, competitive, demographic or
other condition affecting the City of Dubuque and, to a lesser extent,
surrounding cities. If the local economy suffers a downturn or if any of the
area's larger employers, such as John Deere Dubuque Works, lay off workers, the
Diamond Jo may be adversely affected as the disposable income of consumers in
the area declines. Any of the foregoing factors could limit or result in a
decrease in the number of patrons at the Diamond Jo or a decrease in the amount
that patrons are willing to wager.
SUBSTANTIAL LEVERAGE--OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR
FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We will have a significant amount of debt. In addition, subject to certain
exceptions set forth in the indenture governing the notes, we may incur
additional debt in the future, including indebtedness under our proposed $10.0
million credit facility. Our substantial debt will have important consequences
to you and significant effects on our future operations. Our substantial debt
may, among other things:
- increase our vulnerability to adverse economic and industry conditions or
a downturn in our business,
- limit our ability to fund or obtain additional financing for future
working capital, capital expenditures, and development projects, including
our planned hotel,
- limit our ability to fund a change of control offer,
- limit our flexibility in planning for, or reacting to, changes in our
business and industry,
- place us at a competitive disadvantage relative to the DGP and certain of
our other competitors that have less debt,
- limit our ability to borrow additional funds, and
- result in an event of default if we fail to comply with the financial and
other restrictive covenants contained in the indenture governing the notes
or in any new credit facility.
13
<PAGE>
ABILITY TO SERVICE DEBT--TO SERVICE OUR DEBT, WE WILL REQUIRE A SIGNIFICANT
AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR
CONTROL.
Our ability to service our obligations depends upon our future operating
performance, which will be subject to general economic conditions, industry
cycles and financial, business, regulatory and other factors affecting our
operations, many of which are beyond our control. Our business might not
continue to generate sufficient cash flow from operations in the future to
service our indebtedness or to satisfy our preferred membership interests and
other obligations, and we may be required, among other things, to seek
additional financing, to refinance or restructure all or a portion of such
obligations, to sell selected assets, or to reduce or delay planned capital
expenditures. Such measures might not be sufficient to enable us to service the
notes and satisfy our other obligations. In addition, any such financing,
refinancing or sale of assets might not be available to us on economically
favorable terms, if at all. We cannot assure you that our operating results,
cash flow and capital resources will be sufficient to satisfy our payment
obligations in the future, including under the notes. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
COMPETITION--INCREASED COMPETITION MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.
The gaming industry is highly competitive. As new gaming opportunities arise
in existing gaming jurisdictions, in new gaming jurisdictions and on Native
American-owned lands, new or expanded operations by others can be expected to
increase competition in our industry and could limit new opportunities for us or
result in the saturation of certain gaming markets, including the market in
which we operate. Casino gaming does not have a long operating history in the
jurisdiction where we operate our gaming facility and other nearby jurisdictions
and, therefore, the effects of competition in these jurisdictions cannot be
predicted with any degree of certainty.
Our gaming operations are highly dependent upon the Dubuque area. We believe
that the primary competitive factors in Dubuque are location, availability and
convenience of parking, number and types of slot machines and gaming tables,
types and pricing of amenities, services, entertainment and overall atmosphere.
Since July 1997, our only competitor in the Dubuque area has been the DGP.
The DRA owns the DGP, which is located three miles from us. The DGP offers
certain amenities which we do not have, including live greyhound racing from May
through October and simulcast greyhound racing all year, as well as simulcast
horse racing on a limited basis. As a not-for-profit organization, the DRA
distributes a percentage of its cash flow from the DGP to the City of Dubuque
and local charities and, through such contributions, has developed a strong
relationship with the local community and city officials. The DRA also has no
long-term indebtedness and therefore may be able to react more quickly than us
to changes in our market. The DGP is also not subject to Iowa's cruising laws,
which require us to cruise 100 times per year for a minimum of two hours per
cruise. Although Iowa law currently prohibits the DGP from conducting certain
gaming operations, including table games, video poker, video keno and other
electronic games of skill, Iowa gaming laws may be amended in the future,
permitting the DGP to operate such gaming activities. We may face increased
competition from the DGP in the future, due to changes in Iowa gaming laws or a
variety of other factors which could have a material adverse effect on us.
Pursuant to our operating agreement with the DRA, hereinafter referred to as
the "DRA operating agreement," (1) we currently restrict the number of slot
machines at the DGP to 600 provided that we do not increase the number of slot
machines at the Diamond Jo to more than 650, and (2) we require that the
weighted average theoretical slot payback percentage at the DGP not exceed ours
by more than 0.5%. Although these restrictions terminate on March 31, 2002,
neither we nor the DRA may increase the number of slot machines unless the Iowa
Racing and Gaming
14
<PAGE>
Commission (the "Gaming Commission") determines, among other things, that such
increase would not have a detrimental impact on the DRA's or our financial
viability, as applicable. If we or the DRA increase the weighted average
theoretical slot payback percentage or the number of slot machines, this could
increase competition. All of the restrictions under the DRA operating agreement
will terminate if we or any of our affiliates operate another gaming facility in
Dubuque County or the adjoining counties in Illinois or Wisconsin.
We also currently face limited competition from numerous other gaming
facilities located approximately 60 to 120 miles from us. These facilities
include the Miss Marquette, located in Marquette, Iowa; the Mississippi Belle
II, located in Clinton, Iowa; the Meskwaki Casino, a Native American gaming
establishment located in Tama, Iowa; certain other Native American gaming
establishments in Wisconsin and Minnesota; the Lady Luck Bettendorf, located in
Bettendorf, Iowa; the President Casino, located in Davenport, Iowa; and the
Casino Rock Island, located in Rock Island, Illinois. Under existing Iowa law,
the number of riverboat gaming licenses in Iowa is limited to ten, subject to
certain exceptions. There are currently nine licensed riverboat gaming
facilities operating in Iowa, and the Gaming Commission recently granted a
gaming license for a riverboat to be located south of Des Moines, Iowa,
approximately 250 miles from us, although that boat is not yet in operation.
Legislation was recently enacted in Illinois to provide for dockside gaming in
Illinois and to relocate an existing but non-operating riverboat gaming license
to Cook County, Illinois (outside the city limits of the City of Chicago).
Should Iowa or any neighboring state adopt more favorable gaming laws or laws
authorizing new or additional gaming facilities, such events could increase the
competition that we face.
In addition to competing with gaming facilities in Iowa, Illinois, Wisconsin
and Minnesota, we compete to some extent with gaming facilities nationally,
other forms of gaming on both a local and national level, including
state-sponsored lotteries, charitable gaming and pari-mutuel wagering, and other
forms of entertainment, including motion pictures, sporting events and other
recreational activities. It is possible that these secondary competitors could
reduce the number of visitors to the Diamond Jo or the amount they are willing
to wager, which could have a material adverse effect on us. See
"Business--Competition."
GAMING REGULATIONS--CHANGES IN GAMING LAWS AND OUR GAMING LICENSE STATUS MAY
HAVE A MATERIAL ADVERSE EFFECT ON US.
We are subject to regulation by the State of Iowa and, to a lesser extent,
by federal law. We are subject to regulations that apply specifically to the
gaming industry and casinos, in addition to regulations applicable to businesses
generally. Legislative or administrative changes in applicable legal
requirements, including legislation to prohibit casino gaming, have been
proposed from time to time. It is possible that the applicable requirements to
operate an Iowa gaming facility will become more stringent and burdensome, and
that taxes, fees and expenses may increase. It is also possible that the number
of authorized gaming licenses in Iowa may increase, which would intensify the
competition that we face. Our failure to comply with detailed regulatory
requirements may be grounds for the suspension or revocation of one or more of
our licenses which would have a material adverse effect on us. See "Regulatory
Matters."
Under Iowa law and regulations, the ownership and operation of casino
facilities in Iowa are subject to regulation by the Gaming Commission. The
Gaming Commission requires various licenses, findings of suitability,
registrations, permits and approvals to be held by us and our affiliates in
order to conduct gaming operations. The Gaming Commission may, among other
things, limit, condition, suspend or revoke a license to operate a gaming
facility for any of the various reasons set forth in Iowa law and regulations.
For example, Iowa law and regulations require the Gaming Commission to revoke a
license if, among other things, the licensee has been suspended from operating a
gambling operation in another jurisdiction, the licensee has made a false
statement of a material fact to the Gaming
15
<PAGE>
Commission, or the licensee lacks financial responsibility sufficient for the
enterprise it conducts. Substantial fines or forfeiture of assets for violations
of gaming laws or regulations may be levied against us, our affiliates and the
persons involved in such violations. In addition, the actions of persons
associated with us and our management and employees, over whom we may have no
control, could jeopardize any licenses held by us in Iowa. The suspension or
revocation of any of our licenses, the levying of substantial fines on us or the
forfeiture of our assets would have a material adverse effect on us.
We have obtained all governmental licenses, findings of suitability,
registrations, permits and approvals necessary for the operation of the Diamond
Jo. However, gaming licenses and related approvals are deemed to be privileges
under Iowa law and regulations, and we can give no assurance that any additional
licenses, permits and approvals that may be required will be given or that
existing ones will not be revoked. Renewal is subject to, among other things,
continued satisfaction of suitability requirements. In addition, as a condition
to the issuance of our gaming license, we have committed to spend up to a
maximum of $11.5 million to develop a hotel contiguous to the Diamond Jo. Such
development process must be commenced by December 2000. Failure to satisfy such
conditions could result in the revocation of our gaming license, which would
prevent us from operating the Diamond Jo as a casino and would have a material
adverse effect on us. We can give no assurance that we will be successful in
satisfying such conditions, including obtaining the capital necessary to build
the hotel and, accordingly, we can give no assurance that we will successfully
renew our gaming license in a timely manner, or at all.
Proposals to amend or supplement Iowa's gaming statutes are frequently
introduced in the Iowa state legislature. In addition, the state legislature
from time to time considers proposals to amend or repeal existing laws and
regulations, which could effectively prohibit riverboat gaming in the State of
Iowa, limit the expansion of existing operations or otherwise adversely affect
our operations.
REQUIRED REGULATORY REDEMPTION--THE SECURITIES WILL BE REDEEMABLE IN ACCORDANCE
WITH CERTAIN REQUIRED REGULATORY REDEMPTIONS.
We are required to notify the Gaming Commission as to the identity of (and
may be required to submit background information regarding) each owner, partner
or any other person who has a beneficial interest of five percent (5%) or more,
direct or indirect, in PGCL. The Gaming Commission may also request that we
provide them with a list of persons holding beneficial ownership interests in
PGCL of less than five percent (5%). For purposes of these rules, "beneficial
interest" includes all direct and indirect forms of ownership or control, voting
power or investment power held through any contract, lien, lease, partnership,
stockholding, syndication, joint venture, understanding, relationship, present
or reversionary right, title or interest, or otherwise. The Gaming Commission
may determine that holders of the securities have a "beneficial interest" in
PGCL.
If any gaming authority, including the Gaming Commission, requires any
person, including a record or beneficial owner of the securities, to be
licensed, qualified or found suitable, such person must apply for a license,
qualification or finding of suitability within the time period specified by such
gaming authority. Such person would be required to pay all costs of obtaining
such license, qualification or finding of suitability. If a record or beneficial
owner of any of the securities is required to be licensed, qualified or found
suitable and is not licensed, qualified or found suitable by such gaming
authority within the applicable time period, such securities will be subject to
certain regulatory redemption procedures. See "Regulatory Matters--Regulatory
Requirements Applicable to Owners of the Securities and Others," "Description of
PGCL--Membership Interests--PGCL Operating Agreement," "Description of
Notes--Redemption" and "Description of PGP Membership Interests-- PGP Operating
Agreement."
16
<PAGE>
DRA OPERATING AGREEMENT--OUR OPERATIONS ARE SUBJECT TO THE DRA OPERATING
AGREEMENT. IF THE DRA OPERATING AGREEMENT IS TERMINATED OR NOT EXTENDED, WE MAY
NOT BE ABLE TO OPERATE THE DIAMOND JO.
Under Iowa law, a license to operate a riverboat casino is granted to a
not-for-profit "qualified sponsoring organization," which may either operate the
riverboat itself or enter into an agreement with another party that must obtain
its own operator's license. We have entered into such an agreement with the DRA,
which holds the "qualified sponsoring organization" license for the Diamond Jo.
Under the DRA operating agreement, we are not required to pay any amounts to the
DRA for the right to operate the Diamond Jo unless the DRA's gaming revenues
from the DGP fall below specified amounts, in which case our required payments
would be significant. In addition, beginning April 1, 2000, we will be required
to pay to the DRA $0.50 per patron on the Diamond Jo, without regard to the
revenues of the DGP. If the DRA operating agreement is terminated or not
extended, we may not be able to operate the Diamond Jo. See "Reauthorization of
Gaming in Dubuque County, Iowa." For additional information concerning the DRA
operating agreement, see "Certain Relationships and Related
Transactions--Relationship with the Dubuque Racing Association."
REAUTHORIZATION OF GAMING IN DUBUQUE COUNTY, IOWA--THE DUBUQUE COUNTY ELECTORATE
MUST VOTE IN 2002 AND EVERY EIGHT YEARS THEREAFTER WHETHER TO CONTINUE TO ALLOW
RIVERBOAT GAMING IN DUBUQUE COUNTY, IOWA. IF RIVERBOAT GAMING IS DISCONTINUED,
THIS WILL HAVE A MATERIAL ADVERSE EFFECT ON US.
Under Iowa law, a license to conduct gaming may be issued in a county only
if the county electorate has approved such gaming, and a reauthorization
referendum requiring majority approval must be held every eight years. On May
17, 1994, the electorate of Dubuque County, Iowa, which includes the City of
Dubuque, approved gaming by approximately 80% of the votes cast. If any such
reauthorization referendum is defeated, a previously issued gaming license will
remain valid for a total of nine years from the date of original issuance of the
license, subject to earlier nonrenewal or revocation under Iowa law and
regulations.
If a gaming reauthorization referendum to be submitted to the Dubuque County
electorate in the general election to be held in 2002 (the "2002 Referendum")
fails, our license which was issued on July 15, 1999 (the "date of licensure"
under Iowa law) and the DRA's sponsoring license will remain valid for nine
years from their respective dates of original issuance. Although Iowa law and
regulations are unclear as to whether the original issuance date of the DRA's
license is our date of licensure or on or before March 18, 1993 (the date the
DRA first received its gaming license as the qualified sponsoring organization
of the Diamond Jo), the Gaming Commission administrator has indicated to us in
writing that, in his opinion, the original issuance date of the DRA's sponsoring
license will be our date of licensure. We can give no assurance, however, that
such interpretation will be followed by the Gaming Commission or other
governmental authorities. If the 2002 Referendum fails and the original issuance
date of the DRA's license is determined to be on or before March 18, 1993, it is
unlikely that we would be able to conduct gaming operations on the Diamond Jo.
If the 2002 Referendum fails and the original issuance date of the DRA's license
is determined to be our date of licensure, we would be able to conduct gaming
operations on the Diamond Jo until 2008; PROVIDED, that the DRA operating
agreement is not terminated, as more fully discussed below.
If the 2002 Referendum fails, the DRA operating agreement does not currently
permit us to exercise our option to extend the term of such agreement without
the DRA's consent. However, the term of the DRA operating agreement was recently
extended through March 31, 2002, with two three-year renewal options thereafter,
subject to the satisfaction of certain conditions.
17
<PAGE>
RISKS RELATED TO HOTEL/ICE HARBOR DEVELOPMENT--THERE CAN BE NO ASSURANCE THAT
EITHER THE HOTEL OR THE ICE HARBOR REDEVELOPMENT PROJECT WILL BE COMPLETED ON
TIME, IF AT ALL, WHICH, IN THE CASE OF THE HOTEL, COULD RESULT IN OUR INABILITY
TO RENEW OUR GAMING LICENSE.
As a condition to the grant of our gaming license, we are required by the
Gaming Commission to spend up to a maximum of $11.5 million toward the
development and construction of a hotel contiguous to the Diamond Jo unless the
costs of such development and construction exceed $11.5 million. To the extent
such costs exceed $11.5 million, we would be required to build a hotel only if
another entity, such as the City of Dubuque, funded such excess costs. The
development and construction of this hotel is expected to require additional
financing. There can be no assurance that such financing will be available to us
on satisfactory terms or, if necessary, that such financing will be approved by
the Gaming Commission or other governmental authorities. In addition, certain
covenants in the indenture governing the notes may restrict our ability to
obtain any such additional financing. Any such additional financing may also
cause us to become more leveraged, which could adversely affect our ability to
satisfy our debt service requirements with respect to the notes and our ability
to redeem preferred membership interests. In addition, the hotel development
project will be subject to various development and construction risks, including
but not limited to environmental problems, risks of delays in obtaining
necessary permits, licenses, and approvals, disruption to existing operations,
changes in law applicable to the project, shortages of materials and skilled
labor, labor disputes, work stoppages, engineering or geological problems, fire
and other natural disasters, weather interferences and other delays, any or all
of which could substantially increase costs or significantly delay or prevent
completion of such project. Moreover, it is possible that construction near the
Diamond Jo could adversely affect our operating results by discouraging patrons
from entering our facilities during the construction phase. Although our
financial commitment to build the hotel is limited to a maximum of $11.5
million, assuming we are able to build a hotel within such budgetary
constraints, our inability to commence the construction process by December 2000
may result in a refusal by the Gaming Commission to renew our gaming license,
which would prevent us from conducting gaming operations on the Diamond Jo. See
"Business--Properties."
We expect to develop a hotel concurrently with the proposed Ice Harbor
redevelopment project sponsored by the City of Dubuque together with individual
and corporate donors. We can give no assurance that funds necessary for the Ice
Harbor redevelopment project will be obtained or that this project will be
completed, as planned, within the next four years, if at all. Further, even if
the Ice Harbor redevelopment project is completed, we can give no assurance that
it will be successful in establishing the Ice Harbor as a community center and
tourist destination. If any of the foregoing were to occur, additional visitors
may not be attracted to the Ice Harbor.
LIQUOR REGULATION--REVOCATION OF OUR LIQUOR LICENSE, WHICH IS SUBJECT TO
EXTENSIVE REGULATION, COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
The sale of alcoholic beverages by us will be subject to licensing, control
and regulation by state and local agencies in Iowa (the "Liquor Agencies").
Subject to certain exceptions, all persons who have a financial interest in us,
by ownership, loan or otherwise, must be disclosed in an application filed with,
and are subject to investigation by, the Liquor Agencies. All liquor licenses
are subject to annual renewal, are revocable and are not transferable. Persons
who have a direct or indirect interest in any Iowa liquor licensee, other than
hotel and restaurant liquor licensees, may be prohibited from purchasing or
holding the notes. The Liquor Agencies have broad powers to limit, condition,
suspend or revoke any liquor license. Any disciplinary action with respect to
our liquor licenses could, and any failure to renew or revocation of our liquor
license would, have a material adverse effect on us.
18
<PAGE>
ENVIRONMENTAL MATTERS--WE ARE SUBJECT TO ENVIRONMENTAL LAWS AND POTENTIAL
EXPOSURE TO ENVIRONMENTAL LIABILITIES.
We are subject to various federal, state and local environmental laws,
ordinances and regulations, including those governing the remediation of soil
and groundwater contaminated by petroleum products or hazardous substances or
wastes, and the health and safety or our employees. Under certain of these laws,
ordinances or regulations, a current or previous owner or operator of property
may be liable for the costs of removal or remediation of certain hazardous
substances or petroleum products on, under, or in its property, without regard
to whether the owner or operator knew of, or caused, the presence of the
contaminants, and regardless of whether the practices that resulted in the
contamination were legal at the time they occurred. The presence of, or failure
to remediate properly, such substances may adversely affect the ability to sell
or rent such property or to borrow funds using such property as collateral.
Additionally, the owner of a site may be subject to claims by third parties
based on damages and costs resulting from environmental contamination emanating
from a site. We do not anticipate any material adverse effect on our earnings or
competitive position relating to environmental matters, but it is possible that
future developments could lead to material costs of environmental compliance for
us or materially impact our ability to construct a hotel.
We have reviewed environmental assessments (in some cases including soil and
groundwater testing) relating to certain of our currently owned and leased
properties in Dubuque, Iowa, and certain other properties we may lease from the
City of Dubuque or other parties, including property adjacent to the Diamond Jo
on which we propose to construct a hotel. As a result, we have become aware that
there is contamination present on some of these properties apparently due to
past industrial activities. With respect to parcels we currently own or lease,
we believe, based on the types and amount of contamination identified, the
anticipated uses of the property and the potential that the contamination, in
some cases, may have migrated onto our properties from nearby properties, that
any cost to clean up these properties will not result in a material adverse
effect on our earnings. With respect to the properties we may lease in
connection with the planned hotel, further investigations are underway to
determine the extent to which such properties are contaminated. We intend to
negotiate agreements with the owner(s) of such properties that will, among other
things, address in a satisfactory manner the responsibility for any
environmental cleanup or remediation that such properties may require. There can
be no assurance, however, that we will be able to negotiate such an arrangement
or that we may not be required to contribute toward cleaning up contamination on
the properties we own or lease. Any required remediation may materially and
adversely impact our plans and ability to build a hotel or may impact the City
of Dubuque's planned redevelopment project by, among other things, increasing
costs and delaying the initiation of such projects until such remediation is
complete. In addition, remediation may partially block access to the Diamond Jo,
thereby reducing the number of patrons that visit us.
TAXATION--AN INCREASE IN THE TAXES AND FEES THAT WE PAY COULD HAVE A MATERIAL
ADVERSE EFFECT ON US.
We believe that one of the primary reasons that jurisdictions have legalized
gaming is the prospect of significant additional revenue for such jurisdictions.
As a result, gaming companies, including us, are typically subject to
significant taxes and fees relating to their gaming operations, which are
subject to increase at any time. Currently, we are taxed at an effective rate of
approximately 20% of our adjusted gross receipts by the State of Iowa and we pay
the City of Dubuque a fee equal to $0.50 per patron. In addition, all Iowa
riverboats share equally in certain costs of the Gaming Commission and related
entities to administer gaming in Iowa, which is currently approximately $316,000
per year per riverboat. In addition, there have been proposals from time to time
to tax all gaming establishments, including riverboat casinos, at the federal
level. Any material increase in taxes or fees, or in costs of the Gaming
Commission and related entities, would have a material adverse affect on us. See
"Regulatory Matters."
19
<PAGE>
DIFFICULTY IN ATTRACTING AND RETAINING QUALIFIED EMPLOYEES--WE BELIEVE THAT
THERE IS A SHORTAGE OF SKILLED LABOR IN THE GAMING INDUSTRY WHICH WILL MAKE IT
MORE DIFFICULT FOR US TO RETAIN QUALIFIED EMPLOYEES. AN INCREASE IN LABOR COSTS
COULD REDUCE OUR INCOME FROM OPERATIONS.
The operation of our business requires qualified executives, managers and
skilled employees with gaming industry experience. We believe that a shortage of
skilled labor exists in the gaming industry which will make it increasingly
difficult and expensive to attract and retain qualified employees. Moreover, the
low unemployment rate in the Dubuque area contributes to the limited pool of
skilled labor available to us. Increasing competition in our market is expected
to lead to higher costs in order to retain and attract qualified employees.
While we believe that we will be able to attract and retain qualified employees,
there can be no assurance that we will be able to do so.
We are dependent upon the available labor pool of unskilled and semi-skilled
employees. We are also subject to the Fair Labor Standards Act, which governs
such matters as minimum wage, overtime and other working conditions. In
addition, Iowa law effectively requires that we pay employees 25% more than the
federally mandated minimum wage rates. Changes in applicable state or federal
laws and regulations, particularly those governing minimum wages, could increase
labor costs, which could have a material adverse effect on our income from
operations.
POSSIBLE CONFLICTS OF INTEREST--POSSIBLE CONFLICTS OF INTEREST BETWEEN VARIOUS
ENTITIES COULD HAVE A MATERIAL ADVERSE EFFECT ON HOLDERS OF THE SECURITIES.
PGP, the parent and sole manager of PGCL, is primarily responsible for
managing the Diamond Jo. Neither PGP nor any of its affiliates is restricted
from managing other gaming operations, including new gaming ventures or
facilities that may compete with us, except that certain restrictions under the
DRA operating agreement will terminate if we or any of our affiliates operate
another gaming facility in Dubuque County or the adjoining counties of Illinois
or Wisconsin. Such activities could require significant amounts of time of PGP's
officers and managers. While we believe that any new ventures will not detract
from PGP's ability to manage and operate the Diamond Jo, there can be no
assurance that such ventures will not have a material adverse effect on PGCL or
PGP.
M. Brent Stevens and Andrew R. Whittaker, managers of PGP, are a managing
director and executive vice president, respectively, of Jefferies & Company,
Inc., the initial purchaser of the old notes. Mr. Stevens owns 22.5% of the
voting common membership interests of PGP. In addition, the initial purchaser
and certain of its affiliates, officers and employees are members of, and
control, PGP Investors, LLC, a Delaware limited liability company, which owns
39.0% of the voting common membership interests of PGP. As a result of the
above, the initial purchaser and certain of its affiliates, officers and
employees control us. There can be no assurance that all of our interests will
be aligned in the future. See "Principal Securityholders."
ABILITY TO REALIZE ON COLLATERAL--GAMING OR OTHER REGULATIONS MAY DELAY OR
OTHERWISE IMPEDE THE TRUSTEE'S ABILITY TO FORECLOSE ON THE COLLATERAL SECURING
THE NOTES.
Under the indenture governing the notes, if an event of default (as defined
under the caption "Description of Notes") and certain other conditions occur,
the trustee may accelerate the notes and, among other things, initiate a
proceeding to foreclose on the collateral securing the notes and take control of
our gaming operations. However, Iowa law and regulations or other laws may
impede the trustee's ability to take such actions. See "Description of
Notes--Security--Certain Gaming Law Limitations."
In addition, the trustee's ability to foreclose on the collateral securing
the notes will also be subject to provisions contained in an intercreditor
arrangement with the lenders under our proposed credit facility and certain
limitations arising under applicable bankruptcy and insolvency laws. See
20
<PAGE>
"Description of Certain Indebtedness--Intercreditor Agreement" and "Description
of Notes-- Security--Certain Bankruptcy Limitations."
COLLATERAL VALUE--THE VALUE OF THE COLLATERAL SECURING THE NOTES MAY BE LESS
THAN THE AMOUNT DUE ON THE NOTES.
The liquidation value of the collateral securing the notes is unlikely to
produce proceeds in an amount sufficient to pay the principal of, premium, if
any, and accrued and unpaid interest and liquidated damages, if any, on the
notes. The ability of the trustee to foreclose on any of such collateral will be
subject to the provisions of the documents creating the trustee's security
interest in such collateral, as well as the considerations discussed in the
preceding section. In addition, there can be no assurance that the security
interest in the cash that constitutes collateral can be perfected under
applicable laws.
Furthermore, assets subject to capitalized lease obligations and purchase
money indebtedness will not be included in the collateral securing the notes;
and the liens on the collateral securing the notes will be effectively
subordinated to liens securing up to $10.0 million principal amount of
indebtedness that may be incurred under our proposed credit facility. As a
result, upon any distribution to our creditors or the creditors of any future
subsidiary guarantors in bankruptcy, liquidation, reorganization or similar
proceedings, our lenders under the new credit facility, capitalized lease
obligations and purchase money indebtedness will be entitled to be repaid in
full before any payment is made to you from the proceeds of the assets securing
such indebtedness.
In addition, the trustee under the indenture governing the notes and the
lenders under our proposed credit facility will enter into an intercreditor
agreement to govern the relationships among them and their obligations and
rights with respect to the collateral securing the notes and such new credit
facility. Financing by multiple lenders with security interests in common
collateral may result in increased complexity and lack of flexibility in debt
restructurings or other work-outs relating to us. See "Description of Certain
Indebtedness--Intercreditor Agreement" and "Description of Notes-- Security."
INABILITY TO REPURCHASE NOTES WHEN REQUIRED--AN ISSUER MAY NOT BE ABLE TO
REPURCHASE THE NOTES WHEN IT IS REQUIRED TO DO SO.
There can be no assurance that the issuers of the notes will have sufficient
funds to consummate a required regulatory redemption, an excess cash flow offer,
an excess proceeds offer, or a repurchase upon a change of control, or that any
such redemption or repurchase, if consummated, would not have a material adverse
effect on our business. See "Description of Notes--Redemption," "--Repurchase
Upon Change of Control," "--Excess Cash Flow Offer," "--Limitation on Asset
Sales," "Description of PGP Membership Interests--Convertible Preferred
Membership Interests--Repurchase Upon Change of Control" and "--PGP Operating
Agreement."
HOLDING COMPANY STRUCTURE--PGP IS DEPENDENT UPON DISTRIBUTIONS FROM PGCL TO
SATISFY ITS OBLIGATIONS AND/OR MAKE DISTRIBUTIONS.
The only asset of PGP is its interest in PGCL, and the operations of PGP
will be conducted exclusively through PGCL and its future sister subsidiaries,
if any. Accordingly, PGP's cash flow and the consequent ability of PGP to
satisfy its obligations and/or make distributions on its membership interests is
dependent upon earnings of PGCL and its future sister subsidiaries, if any, and
their ability to distribute those earnings to PGP, whether by distributions,
loans or otherwise. The payment of distributions or the making of loans to PGP
may be subject to statutory or contractual limitations and are subject to
various business considerations. However, the indenture governing the notes
restricts, and any future credit agreement would be expected to restrict,
distributions to PGP from PGCL. Any right
21
<PAGE>
of PGP to receive assets upon a liquidation or reorganization of PGCL will be
effectively subordinated to the membership interests of PGCL that rank senior to
the common membership interests of PGCL held by PGP and the claims of PGCL's
creditors, including under the notes.
PUBLICLY TRADED PARTNERSHIP CLASSIFICATION--WE MAY BE SUBJECT TO CORPORATE LEVEL
FEDERAL INCOME TAX IF WE BECOME A PUBLICLY TRADED PARTNERSHIP.
We may be classified as a publicly traded partnership for U.S. federal
income tax purposes if either (1) the notes are classified as equity, rather
than debt, for U.S. federal income tax purposes and are deemed to be "publicly
traded" or (2) our equity interests are deemed to be "publicly traded." As a
publicly traded partnership, we would become subject to U.S. federal income tax
as a corporation which, in turn, may, among other things, materially adversely
affect our ability to make payments on the notes. In connection with the
original issuance of the old notes, Mayer, Brown & Platt delivered its opinion
to the effect that, for U.S. federal income tax purposes, (i) the notes will be
treated as indebtedness and (ii) we will not be treated as a publicly traded
partnership taxable as a corporation. Such opinion was based on certain factual
representations and assumptions. See "Specific United States Federal Income Tax
Considerations--U.S. Federal Tax Characterization of the Notes and PGCL."
Notwithstanding such opinion, the Internal Revenue Service may successfully
assert that we are subject to U.S. federal income taxation as a publicly traded
partnership.
YEAR 2000 COMPLIANCE--ALTHOUGH WE BELIEVE THAT WE ARE YEAR 2000 COMPLIANT, WE
CAN GIVE NO ASSURANCE THAT YEAR 2000 ISSUES WILL NOT NEGATIVELY AFFECT US.
The potential for system and processing failures of date-related data
resulting from computer-controlled systems using two digits rather than four to
define the applicable year is commonly referred to as the "Year 2000" problem.
For example, computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This problem could
result in system failure or miscalculations causing, in addition to significant
problems with suppliers or vendors, disruptions of our operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in similar normal business activities. We believe that we have taken
adequate steps to address the Year 2000 problem and do not anticipate that the
Year 2000 problem will have a material adverse effect on our operations. While
we believe our planning efforts are adequate to address Year 2000 concerns,
there can be no assurance that we will achieve the predicted estimates, and
actual results could differ materially from those planned or anticipated. For
additional information, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Readiness."
22
<PAGE>
THE TRANSACTIONS
On July 15, 1999, we completed the acquisition of (1) the Diamond Jo,
pursuant to an asset purchase agreement, dated as of January 15, 1999, as
amended, between PGP and GDREC, and (2) certain related real property, pursuant
to a real property purchase agreement, dated as of January 15, 1999, between PGP
and HCI, for an aggregate purchase price of $77.0 million, subject to customary
post-closing adjustments. The purchase price was financed from (1) the issuance
and sale by PGCL of $7.0 million of preferred membership interests to GDREC, (2)
a capital contribution of $9.0 million from PGP (consisting of capital
contributions of $6.0 million from common members of PGP and $3.0 million of
proceeds from the issuance and sale by PGP of convertible preferred membership
interests) and (3) the net proceeds of the offering of the notes. Prior to the
consummation of the transactions contemplated by the acquisition agreements, PGP
assigned such agreements to PGCL. See "Certain Relationships and Related
Transactions--Equity Contribution," "Description of PGCL Membership Interests"
and "Description of PGP Membership Interests."
Pursuant to the acquisition agreements, GDREC and HCI have agreed to
indemnify us for losses we incur as a result of breaches of their
representations and warranties and for certain other matters. With certain
exceptions, these indemnification obligations are limited in amount, are secured
by the preferred membership interests in a face amount of $3.0 million and
expire after specified periods of time. To the extent not used to satisfy such
indemnification obligations, we must redeem $3.0 million of preferred membership
interests on or prior to January 15, 2001. See "Description of PGCL Membership
Interests--Preferred Membership Interests."
For a description of the properties that we acquired and the leases that we
entered into in connection with the transactions contemplated by the acquisition
agreements, see "Business-- Properties."
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. In consideration
for issuing the new notes, we will receive outstanding old notes in like
original principal amount at maturity. All old notes received in the exchange
offer will be canceled.
23
<PAGE>
CAPITALIZATION
The following table sets forth, at June 30, 1999, (1) the actual combined
capitalization of GDREC and HCI, which collectively comprise the Diamond Jo and
related real property that we acquired in July 1999, and (2) our capitalization,
as adjusted to give effect to such acquisitions, the offering of the notes and
the equity contribution from PGP and the application of the net proceeds
therefrom. The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
JUNE 30, 1999
(DOLLARS IN THOUSANDS)
Cash and cash equivalents(1).......................................... $ 5,118 $ 3,969
--------- -----------
--------- -----------
Debt:
Senior Secured Notes(2)............................................... $ -- $ 70,181
Notes payable(3)...................................................... 6748 --
Capital lease obligations............................................. 476 476
--------- -----------
Total debt........................................................ 7,224 70,657
Preferred membership interests(4)..................................... -- 7,000
Common membership interests(4)........................................ 17,043 9,000
--------- -----------
Total capitalization.............................................. $ 24,267 $ 86,657
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) In connection with the acquisition of the Diamond Jo, we acquired $2.0
million of cash and cash equivalents from GDREC. Additionally, approximately
$2.0 million of the net proceeds from the offering of the notes and the
equity contribution received from PGP (which included, among other things,
the proceeds from the sale of PGP's convertible preferred membership
interests) after deduction for capitalized debt issuance costs and
acquisition and start-up costs shall be used for general corporate purposes.
(2) Reflects $71.0 million aggregate principal amount of notes less original
issue discount of approximately $0.8 million.
(3) Concurrently with the closing of the offering of the notes, GDREC repaid all
of its notes payable with the proceeds from the sale of the Diamond Jo.
(4) PGCL issued $7.0 million of preferred membership interests to GDREC and
received a $9.0 million equity contribution from PGP ($6.0 million of which
was contributed to the capital of PGP by common members of PGP and $3.0
million of which was contributed to the capital of PGP through the sale of
PGP's convertible preferred membership interests). See "The Transactions,"
"Certain Relationships and Related Transactions--Equity Contribution,"
"Description of PGCL Membership Interests" and "Description of PGP
Membership Interests."
24
<PAGE>
SELECTED COMBINED FINANCIAL DATA
The selected combined financial data set forth below at December 31, 1997,
and 1998 and for the years ended December 31, 1996, 1997 and 1998 have been
derived from the combined financial statements of the predecessor companies
included elsewhere in this prospectus, which have been audited by Deloitte &
Touche LLP, independent auditors, whose report thereon is included with such
combined financial statements. The selected financial data at and for the years
ended December 31, 1994 and 1995 have been derived from the accounting records
of GDREC, and the balance sheet data at December 31, 1996 has been derived from
the combined accounting records of the predecessor companies, GDREC and HCI. The
selected combined financial data at and for the six months ended June 30, 1998
and 1999 are derived from the unaudited combined financial statements of the
predecessor companies, which, in the opinion of management, are prepared on a
basis consistent with the audited combined financial statements which appear
elsewhere in this prospectus and include all adjustments (consisting only of
normal and recurring adjustments) necessary for a fair presentation of the
combined financial position and results of operations of GDREC and HCI at such
dates and for such periods. Financial and operating results for the six months
ended June 30, 1998 and 1999 are not necessarily indicative of the results that
may be expected for the full fiscal year. The information presented below should
be read in conjunction with, and is qualified in its entirety by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the combined financial statements and the notes thereto
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Casino......................................... $ 14,965 $ 30,493 $ 40,267 $ 40,572 $ 44,167 $ 21,238 $ 21,993
Food and beverage.............................. 489 1,457 2,104 2,034 1,960 927 1,060
Other.......................................... 67 191 308 395 275 131 106
Less: Promotional allowances................... (105) (408) (427) (380) (553) (229) (256)
--------- --------- --------- --------- --------- --------- ---------
Net revenues................................... 15,416 31,733 42,252 42,621 45,849 22,067 22,903
--------- --------- --------- --------- --------- --------- ---------
Expenses:
Casino......................................... 6,820 14,157 16,014 16,335 17,273 8,371 9,008
Food and beverage.............................. 548 1,681 2,980 2,557 2,830 1,343 1,572
Boat operations................................ 764 1,505 1,997 2,005 2,056 1,008 964
Other.......................................... 15 67 86 76 68 33 27
Selling, general and administrative............ 3,938 8,076 9,573 6,946 7,515 3,588 3,691
Depreciation and amortization.................. 636 1,133 2,026 1,826 1,895 898 1,066
Non-recurring expenses(1)...................... 55 101 58 170 928 233 625
--------- --------- --------- --------- --------- --------- ---------
Total expenses................................. 12,776 26,720 32,734 29,915 32,565 15,474 16,953
--------- --------- --------- --------- --------- --------- ---------
Income From Operations......................... 2,640 5,013 9,518 12,706 13,284 6,593 5,950
Other income (expense):
Interest income................................ 13 16 81 222 142 64 73
Interest expense............................... (1,017) (1,007) (1,813) (1,772) (1,142) (664) (319)
Loss on sale of assets......................... -- -- (6,878) (88) (74) (48) (98)
--------- --------- --------- --------- --------- --------- ---------
Total other expense............................ (1,004) (991) (8,610) (1,638) (1,074) (648) (344)
--------- --------- --------- --------- --------- --------- ---------
Net income..................................... $ 1,636 $ 4,022 $ 908 $ 11,068 $ 12,210 5,945 5,606
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed charges(2).......... 2.4x 4.6x 1.5x 6.5x 10.8x 9.3x 16.1x
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Adjusted EBITDA(3)............................. $ 3,331 $ 8,113 $ 14,013 $ 14,702 $ 16,107 $ 7,723 $ 7,641
Cash flows from operating activities........... 3,416 6,067 10,140 12,522 14,638 7,314 6,965
Cash flows from investing activities........... 2,078 3,257 (18,162) 4,196 (1,793) (518) 189
Cash flows from financing activities........... 452 2,760 10,249 (15,114) (12,806) (6,863) (7,857)
</TABLE>
<TABLE>
<CAPTION>
AT JUNE
AT DECEMBER 31, 30,
----------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998
--------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.......................................... $ 2,176 $ 2,528 $ 6,661 $ 6,255 $ 6,767 $ 6,264
Total assets............................................ 14,684 21,713 33,440 28,915 29,252 28,526
Current liabilities..................................... 3,768 6,607 8,325 6,829 8,133 8,855
Total debt.............................................. 9,137 11,118 23,132 15,100 9,822 12,839
Total members' equity................................... 4,187 8,000 7,528 11,513 16,697 12,856
<CAPTION>
<S> <C>
1999
---------
<S> <C>
BALANCE SHEET DATA:
Current assets.......................................... $ 5,118
Total assets............................................ 27,177
Current liabilities..................................... 6,620
Total debt.............................................. 7,223
Total members' equity................................... 17,043
</TABLE>
- ------------------------
(1) Consists of non-recurring charges related to sale of business and certain
litigation involving the prior owners of the Diamond Jo and GDREC.
(2) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes plus fixed charges. Fixed charges
include interest expense on all indebtedness, amortization of deferred
financing costs and one-third of rental expense on operating leases
representing that portion of rental expense deemed to be attributable to
interest.
(3) EBITDA represents earnings before interest, income taxes, depreciation and
amortization and excludes non-recurring charges and loss on sale of assets
for all periods presented. EBITDA for 1995 and 1996 excludes $1.9 million
and $2.4 million, respectively, of operating lease expense related to the
Diamond Jo prior to its purchase. EBITDA is presented to enhance the
understanding of our financial performance and our ability to service our
indebtedness, including the notes. We understand that it is used by certain
investors as one measure of cash flow and enables a comparison of our
performance with the performance of other companies that report EBITDA.
EBITDA is not a measurement determined in accordance with GAAP as an
indicator of financial performance and should not be considered an
alternative to, or more meaningful than, net income or income from
operations as an indicator of our operating performance, or cash flows from
operating activities as a measure of liquidity. Our definition of EBITDA may
not be the same as that used by other companies.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
"SELECTED COMBINED FINANCIAL DATA" AND THE COMBINED FINANCIAL STATEMENTS AND THE
RELATED NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN STATEMENTS
CONTAINED IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS CONSTITUTE "FORWARD- LOOKING STATEMENTS" WITHIN THE
MEANING OF THE LITIGATION REFORM ACT, WHICH INVOLVE RISKS AND UNCERTAINTIES. SEE
"FORWARD-LOOKING STATEMENTS."
We own and operate the Diamond Jo casino, the only riverboat gaming facility
in Dubuque, Iowa. The Diamond Jo opened in May 1994 with a small riverboat
gaming facility that included 332 slot machines and 17 table games. During 1994,
Iowa changed certain restrictions on gaming including (1) allowing slot machines
at racetracks, (2) requiring riverboats to make only 100 cruises per year
enabling them to operate predominantly dockside, (3) eliminating loss and
betting limits and (4) eliminating the space restrictions on gaming vessels that
could be used for gaming purposes. In October 1995, the Diamond Jo doubled its
size by replacing its smaller riverboat casino with the current riverboat
casino. Our current riverboat casino contains 650 slot machines and 39 table
games.
We derive approximately 96% of our net revenues from casino operations,
while the rest is derived primarily from food and beverage sales. Casino
operating expenses, which consist primarily of payroll and gaming taxes,
constitute approximately 40% of our casino revenues. Certain additional expenses
may be payable under the DRA operating agreement. See "Certain Relationships and
Related Transactions--Relationship with Dubuque Racing Association." Our
business activities since inception have been financed from (1) cash flow from
operations, (2) equity and other capital contributions of our members and (3)
secured financing.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1999 and 1998, Dubuque was a two-casino
market consisting of the Diamond Jo and the DGP. Casino gaming win in the
Dubuque market increased 9.3% to $38.3 million for the six months ended June 30,
1999 from $35.0 million for the six months ended June 30, 1998. We believe this
increase was primarily due to an increase in the number of slot machines at the
DGP from an average of 545 during the six month period ended June 30, 1998 to
600, an increase in popular nickel machines at the DGP from 58 to 104 and
changes in our game mix. Admissions to casinos in the Dubuque market decreased
.8% to 955,738 for the six months ended June 30, 1999 from 963,530 for the six
months ended June 30, 1998, primarily due to unusually inclement weather during
January 1999. For the six months ended June 30, 1999, our share of the Dubuque
market casino gaming win decreased 3.1% to 57.4% from 60.6% and casino
admissions decreased 1.5% to 55.2% from 56.7%, in each case, for the six months
ended June 30, 1998. We believe our market share decrease was primarily due to
the DGP reconfiguring its floor plan and increasing the number of its slot
machines from an average of approximately 545 during the six month period ended
June 30, 1998 to 600 at June 30, 1999, the maximum number the DGP is presently
contractually permitted to have.
Net revenues increased 3.8% to $22.9 million for the six months ended June
30, 1999 from $22.1 million for the six months ended June 30, 1998 due primarily
to improved marketing efforts, better tracking of, and communication with, our
VIP players through our new electronic player tracking system and a continued
review and change in our game mix. Our admissions for the six months ended June
30, 1999 decreased 3.4% to 527,289 from 546,035 for the six months ended June
30, 1998 primarily as a result of unusually inclement weather during January
1999. For the six months ended June 30, 1999, our win per admission increased
7.3% to $41.71 from $38.89 for the six months ended June 30, 1998 Our gaming
positions were unchanged at 949 at each of June 30, 1999 and June 30, 1998.
Consistent with an increase in net revenues, win per gaming position increased
3.6% to $128.04
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for the six months ended June 30, 1999 from $123.64 for the six months ended
June 30, 1998. Our casino revenues also increased 3.6% to $22.0 million for the
six months ended June 30, 1999 from $21.2 million for the six months ended June
30, 1998. Casino revenues were derived 80.9% from slot machines and 19.1% from
table games for the six months ended June 30, 1999 compared to 80.3% from slot
machines and 19.7% from table games, respectively, for the six months ended June
30, 1998. The increase in casino revenues was due primarily to an increase in
slot revenues of 4.3% to $17.8 million for the six months ended June 30, 1999
from $17.1 million for the six months ended June 30, 1998. We believe that such
increases in slot revenues, casino revenues and win per gaming position were due
primarily to the same reasons net revenues increased for the six months ended
June 30, 1999 over the corresponding period of the prior year. Food and beverage
revenues and other revenues increased 10.2% to $1.2 million for the six months
ended June 30, 1999 compared to $1.1 million for the six months ended June 30,
1998, primarily due to an increase in food and beverage sales. Promotional
allowances increased by 11.7% to $0.26 million for the six months ended June 30,
1999 compared to $0.23 million for the six months ended June 30, 1998 due to an
increase in complimentary food and beverage provided to our Diamond Club
members. Promotional allowances represent the estimated value of goods and
services provided free of charge to casino patrons under our various marketing
programs.
Casino operating expenses increased 7.6% to $9.0 million or 41.0% of casino
revenues for the six months ended June 30, 1999 from $8.4 million or 39.4% of
casino revenues for the six months ended June 30, 1998. This increase of $0.6
million was due primarily to increased rental expense related to vendor
participation slot machines and higher gaming taxes as a result of higher
revenues. Food and beverage expenses increased 17.1% to $1.6 million for the six
months ended June 30, 1999 from $1.3 million for the six months ended June 30,
1998. We believe this increase was due to an increase in food cost due to
increased patronage at our bars and restaurants, an increase in food product
quality and an increase in payroll expenses. Selling, general and administrative
expenses increased 2.9% to $3.7 million for the six months ended June 30, 1999
from $3.6 million for the six months ended June 30, 1998, primarily due to an
increase in insurance costs as well as an increase in management bonus expenses.
Included in the six months ended June 30, 1999 and 1998 operating expenses were
non-recurring expenses of $0.6 million and $0.2 million, respectively, related
to the sale of the business and certain litigation involving the prior owners of
the Diamond Jo and GDREC.
Depreciation and amortization expense increased 18.7% to $1.1 million for
the six months ended June 30, 1999 from $0.9 million for the six months ended
June 30, 1998. This increase was due to the addition of our new electronic
player tracking system and the replacement/upgrade of slot machines. Net
interest expense was $0.2 million for the six months ended June 30, 1999 and
$0.6 million for the six months ended June 30, 1998. The reduction of interest
expense was due to a decline in outstanding debt and more favorable interest
rates on outstanding loans. Loss on disposal of assets was $0.1 million for the
six months ended June 30, 1999 and less than $0.1 million for the six months
ended June 30, 1998. These losses were attributable primarily to the
replacement/upgrade of slot machines.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
In 1998, Dubuque was a two-casino market consisting of the Diamond Jo and
the DGP. In 1997, Dubuque was a three-casino market for the months of January
through June and a two casino market for the months of July through December.
The third casino, the Silver Eagle, ceased operations in July 1997 due in part,
we believe, to competitive pressures and the effects of restrictive Illinois
gaming regulations. Casino gaming win in the Dubuque market increased 9.6% to
$73.5 million in 1998 from $67.1 million in 1997. We believe this increase was
primarily due to increased advertising and promotions by the Diamond Jo and the
DGP. Admissions to casinos in the Dubuque market of 2.0 million in 1998
increased 1.9% from admissions in 1997. Our share of the Dubuque market casino
gaming win and admissions were substantially unchanged at 60.0% and 56.7%,
respectively, in 1998, and 60.5% and 56.2%, respectively, in 1997.
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Net revenues increased 7.6% to $45.8 million in 1998 from $42.6 million in
1997. Our admissions of 1.1 million in 1998 increased 2.8% from admissions in
1997. In 1998, win per admission increased 5.9% to $38.67 from $36.51 in 1997 as
a result of increased marketing expenditures, our new electronic player tracking
system and changes in our game mix, including hold percentages. Our gaming
positions were 949 at the end of both 1998 and 1997. In 1998, win per gaming
position increased 8.9% to $127.51 from $117.13 in 1997 as a result of the
foregoing reasons. Our casino revenues increased 8.9% to $44.2 million in 1998
from $40.6 million in 1997. Casino revenues were derived 80.9% from slot
machines and 19.1% from table games in 1998 compared to 79.3% and 20.7%,
respectively, in 1997. Slot revenues increased 10.9% to $35.7 million in 1998
from $32.2 million in 1997. This increase was primarily due to a 18.6% increase
in slot machine coin-in, which was partially offset by a decrease in the slot
machine hold percentage. We lowered the slot machine hold percentages to
encourage longer play from, and to enhance the overall gaming experience for,
our current customer base which we believe has resulted in increased slot
revenue. Table revenues were substantially unchanged at $8.5 million in 1998
compared to $8.4 million in 1997. Food and beverage and other revenues decreased
8.0% to $2.2 million in 1998 from $2.4 million in 1997 due to lower food and
beverage prices designed to attract more gaming customers. Promotional
allowances increased 45.6% to $0.6 million in 1998 from $0.4 million in 1997 due
to increased complimentary food and beverage provided to our Diamond Club
members.
Casino operating expenses increased 5.7% to $17.3 million in 1998 from $16.3
million in 1997, but decreased as a percentage of casino revenues to 39.1% in
1998 from 40.3% in 1997. The increase of $1.0 million was due primarily to
higher gaming taxes associated with the increased casino revenues that we
generated in 1998 as compared to 1997. Food and beverage expenses increased $0.3
million in 1998 due to an emphasis on serving higher quality food and beverages.
Selling, general and administrative expenses increased 8.2% to $7.5 million in
1998 from $6.9 million in 1997. The increase of $0.6 million was primarily the
result of higher employee benefit costs. Included in 1998 and 1997 operating
expenses were non-recurring expenses of $0.7 million and $0.1 million,
respectively, related to the sale of the business and $0.2 million and $0.1
million, respectively, related to certain litigation involving the prior owners
of the Diamond Jo and GDREC.
Depreciation and amortization expense increased 3.8% to $1.9 million in 1998
from $1.8 million in 1997. The increase in depreciation and amortization expense
was primarily due to the purchase of our new electronic player tracking system.
Net interest expense was $1.0 million and $1.5 million in 1998 and 1997,
respectively. The reduction of interest expense was due to a decline in
outstanding debt and more favorable interest rates on outstanding loans. Loss on
disposal of assets, which was primarily related to the replacement/upgrade of
slot machines, was substantially unchanged at $0.1 million.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
In 1997, Dubuque was a three-casino market for the months of January through
June and a two-casino market for the months of July through December. In 1996,
Dubuque was a two-casino market for the months of January through May and a
three-casino market for the months of June through December. After initially
closing in December 1995, the Silver Eagle reopened in May 1996 and then
permanently closed in July 1997. Casino gaming win in the Dubuque market
increased 5.8% to $67.1 million in 1997 from $63.4 million in 1996. We believe
this increase was primarily due to a 1.4% increase in casino admissions in the
Dubuque market to 2.0 million in 1997 from 1.9 million in 1996. Our share of the
Dubuque market casino gaming win and admissions were 60.5% and 56.2%,
respectively, in 1997 and 63.6% and 56.9%, respectively, in 1996. We believe our
market share declined in 1997 compared to 1996 as a result of an increase in the
number of slot machines at the DGP to 555 from 526.
Net revenues were substantially unchanged at $42.6 million in 1997 compared
to $42.3 million in 1996. Our admissions for 1997 and 1996 were substantially
unchanged at 1.1 million. In 1997, win per
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admission was substantially unchanged at $36.51 compared to $36.30 in 1996. Our
gaming positions were 949 at the end of 1997 and 923 at the end of 1996. In
1997, win per gaming position decreased slightly to $117.13 from $119.20 in 1996
as a result of the increased number of gaming positions. Our casino revenues
were substantially unchanged at $40.6 million in 1997 compared to $40.3 million
in 1996. Casino revenues were derived 79.3% from slot machines and 20.7% from
table games for 1997 compared to 75.8% and 24.2%, respectively, for 1996. We
believe the change in revenues derived from slot machines and table games is
reflective of the increasing popularity of slot machines among our customer
base. Slot revenues increased 5.4% to $32.2 million in 1997 compared to $30.5
million in 1996. This increase was primarily due to a 8.3% increase in slot
machine coin-in, which was partially offset by a decrease in the slot machine
hold percentage. The increase in slot machine coin-in was the result of our
emphasis on lower denomination slot machines which received higher levels of
customer play. Table revenues decreased 13.9% to $8.4 million in 1997 from $9.7
million in 1996. The decrease in table revenues was due to a 14.1% decrease in
table game hold percentages. We believe the decline in table game hold
percentage was due to the increased sophistication of players of table games.
Food and beverage revenues, other revenues and promotional allowances were
substantially unchanged at $2.0 million in 1997 and 1996.
Casino operating expenses increased 2.0% to $16.3 million or 40.3% of casino
revenues in 1997 from $16.0 million or 39.8% of casino revenues in 1996. The
increase of $0.3 million was due primarily to increases in wages for casino
employees. Food and beverage expenses decreased $0.4 in 1997 million due to our
focus on controlling food costs. Selling, general and administrative expenses
decreased 27.4% to $6.9 million in 1997 from $9.6 million in 1996. This decrease
was primarily related to the elimination of the operating lease for our current
riverboat prior to its purchase in August 1996. Included in 1997 operating
expenses are non-recurring expenses of $0.1 million, related to the sale of the
business. Included in both 1997 and 1996 operating expenses are non-recurring
expenses of $0.1 million related to certain litigation involving the prior
owners of the Diamond Jo and GDREC.
Depreciation and amortization expense decreased 9.8% to $1.8 million in 1997
from $2.0 million in 1996. The decrease in depreciation and amortization expense
was due to the disposal of our original riverboat in December 1996. Net interest
expense was $1.5 million and $1.7 million in 1997 and 1996, respectively. The
reduction in interest expense was due to a decline in outstanding debt and more
favorable interest rates on outstanding loans. Loss on disposal of assets was
$0.1 million and $6.9 million in 1997 and 1996, respectively. The loss in 1997
was attributable almost entirely to the replacement/upgrade of slot machines
while the loss in 1996 was attributable primarily to the sale of our original
riverboat.
LIQUIDITY AND CAPITAL RESOURCES
During 1998, we generated $14.6 million in cash flows from operations as
compared to $12.5 million in 1997. The increase in cash flows from operations
was due to an increase in net income of $1.1 million and changes in working
capital of $0.9 million due to increases in accounts payable and accrued
expenses.
Net cash flows used for investing activities were $1.8 million in 1998. The
primary uses of funds were for maintenance capital expenditures. Net cash flows
provided by investing activities were $4.2 million in 1997. The majority of the
proceeds were from the payment of a note receivable from a related party
relating to the sale of our original riverboat in 1996.
Cash flows used by financing activities in 1998 were $12.8 million comprised
primarily of $5.8 million of payments on long-term debt and $7.0 million of
member distributions. Cash flows used by financing activities for 1997 were
$15.1 million comprised primarily of $8.0 million of payments on long-term debt
and $6.6 million of member distributions.
We believe that cash on hand and cash generated from operations will be
sufficient to satisfy our working capital requirements, maintenance capital
expenditures and other cash obligations. However,
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we cannot assure you that this will be the case. If cash on hand and cash
generated from operations are insufficient to meet these obligations, we may
have to refinance our debt or sell certain of our assets to meet our
obligations. See "Risk Factors--Ability to Service Debt," "--DRA Operating
Agreement" and "--Taxation."
Under the terms of the indenture governing the notes, we have the ability to
obtain a new credit facility in the future to borrow up to $10.0 million if we
determine that the availability of such a facility would benefit our operations.
We expect to finance the future construction of our planned hotel out of cash
from operations and may secure additional financing through a portion of our new
credit facility. We expect that the total cost to build the hotel will not
exceed $11.5 million. There can be no assurance, however, that we will be able
to enter into such a credit facility on commercially reasonable terms. See "Risk
Factors--Risks Related to Hotel/Ice Harbor Development Plans."
SEASONALITY AND INFLATION
Our business is subject to seasonal fluctuations in the Iowa gaming
business, which is typically weaker from November through February as a result
of adverse weather conditions, and typically stronger from March through
October. In general, our payroll and general and administrative expenses are
affected by inflation. Although inflation has not had a material effect on our
business to date, we could experience the effects of inflation in future
periods.
YEAR 2000 READINESS
We have reviewed our computer systems, and we believe that our operations,
other than those of our vendors and suppliers, are Year 2000 compliant. The
software programs on which we rely for financial and gaming operations are Year
2000 compliant. We have updated or replaced our significant hardware.
We recently surveyed our vendors and suppliers to ascertain their Year 2000
compliance and to determine what precautions, if any, we must take to ensure
that Year 2000 issues do not interrupt our operations in early 2000. We have
received responses from a majority of our vendors and suppliers that they are
Year 2000 compliant. We believe that the vendors and suppliers who have not
responded to our surveys are not significant to our operations or may be
replaced. Although any of our suppliers or vendors could be affected by the Year
2000 issues, two areas of concern are payroll and electricity.
We rely on a third-party payroll service provider for timely payment of our
employees' wages. A failure of the computer systems of our payroll service
provider could result in unpaid wages, with a potential material adverse effect
on our operations. In December 1999, we intend to set aside sufficient cash
reserves to cover several weeks of payroll expense, which we would disburse to
our employees if Year 2000 problems prevent our payroll services provider from
making such payments.
We rely on a local utility for our electricity supply. However, we have the
capacity to generate electricity sufficient for our operating needs by running
generators powered by the riverboat's diesel engines. The Diamond Jo does not
cruise in the winter months, so our fuel consumption at that time of year is
minimal. We intend to store sufficient fuel by December 1999 to allow us to
generate electricity for our operations for several weeks, should our local
supplier of electricity fail to provide service at the beginning of next year.
In accordance with Coast Guard directives, we were required to prepare a
detailed contingency plan for dealing with Year 2000 issues by July of this
year. We have completed this plan and submitted it to the Coast Guard. The plan,
as required, addresses all of our major operations, including mechanical and
electrical systems.
The cost of our Year 2000 compliance program has not been material. We do
not anticipate future costs to materially affect our operations. See "Risk
Factors--Year 2000 Compliance."
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BUSINESS
GENERAL
We own and operate the Diamond Jo riverboat casino, one of only two licensed
gaming operations in Dubuque, Iowa. We are the leading gaming facility in our
market, having captured approximately 60% of Dubuque's casino gaming revenues
since 1995, our first full year of operations. Our net revenues in 1998
increased 7.6% from 1997 to $45.8 million, and our EBITDA increased 9.6% to
$16.1 million for the same period. We attribute our success to our competitive
position and our unique local gaming operations, offering the most gaming
positions and the only table games, video poker and video keno within 60 miles
of Dubuque. Further, we believe that additional competitors are effectively
precluded from entering our market due to constraints imposed by existing laws
on the availability of gaming licenses.
We anticipate continued growth through a combination of targeted marketing
initiatives, enhanced by our new electronic player tracking system, and locally
funded development programs, including the $27 million redevelopment project in
Dubuque's Ice Harbor, where the Diamond Jo is located. This project is designed
to establish the Ice Harbor as a community center and tourist destination.
Additionally, we intend to construct a hotel contiguous to the Diamond Jo to
capitalize on increased customer traffic anticipated from the Ice Harbor
redevelopment project and to expand our geographic reach. We believe that these
developments will provide us with opportunities to significantly expand our
customer base, resulting in increased revenues and EBITDA.
THE DIAMOND JO
The Diamond Jo is a three-story, approximately 51,900 square foot riverboat
casino, replicating a classic 19th century paddlewheel. The riverboat has the
capacity for 1,390 patrons, features a spacious two-story atrium, and offers 650
slot machines and 39 table games in approximately 17,800 square feet of gaming
space. Adjacent to the Diamond Jo is a two-story, approximately 33,000 square
foot dockside pavilion, featuring the recently renovated 116-seat Lighthouse
Grill restaurant, the 175-seat Lucky Jo Saloon, the 30-seat Java Jo Coffee Bar,
a gift shop, and the 205-seat Harbor View Room, a full service banquet facility.
Approximately 1,000 convenient parking spaces are available to our patrons,
including valet parking. The Diamond Jo is open seven days a week (7 a.m. to 2
a.m. on Sunday, Monday, and Tuesday; 8 a.m. to 4 a.m. on Wednesday and Thursday;
and 24 hours on Friday and Saturday) and functions primarily as a dockside
riverboat with continuous boarding. The Diamond Jo is required by Iowa law to
cruise only 100 times per year, for a minimum of two hours per cruise, which we
satisfy by conducting a two-hour cruise at 7:00 a.m. on weekdays during the
spring and summer months.
The Diamond Jo operates from, and the dockside pavilion is located in,
Dubuque's Ice Harbor, a waterfront development on the Mississippi River in
downtown Dubuque. The Diamond Jo is centrally located in the Ice Harbor in
downtown Dubuque and is accessible from each of the major highways in the area.
On average, more than 30,000 vehicles pass our site per day. We share our
dockside pavilion with the Spirit of Dubuque dinner-boat and the Iowa Welcome
Center, featuring a museum, historical exhibits, shops, and an observation deck.
The Mississippi River Museum is located within a five-minute walk from our site.
Several cruise ships that operate on the Mississippi River, such as the Delta
Queen and the Mississippi Queen, stop at the Ice Harbor regularly during the
summer months. We believe that the Diamond Jo is among the principal
entertainment venues for residents in and around Dubuque.
CITY OF DUBUQUE
Dubuque is situated at the intersection of Illinois, Iowa and Wisconsin and
acts as the region's trade hub. Dubuque has a diverse employer base, which
includes John Deere Dubuque Works, Farmland Foods, Flexsteel Industries, CIGNA
Corporation and Eagle Manufacturing, as well as local
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schools and hospitals. The Diamond Jo currently draws approximately 95% of its
patrons from within a 100-mile radius of the Diamond Jo, an area of
approximately 2.8 million residents with an average household income of
approximately $48,200. Casino gaming revenues in Dubuque have grown at a
compound annual rate of 7.5% since 1996, and there are no betting or loss limits
in Iowa. We believe that visitors to Dubuque and Galena, a historic community
located 15 miles east of Dubuque, offer us a potential additional source of
revenues. Dubuque contains several tourist attractions, drawing more than one
million visitors annually, and Galena draws more than two million visitors
annually.
In an effort to revitalize and enhance downtown Dubuque and to honor and
preserve the Mississippi River, the Dubuque County Historical Society's
Mississippi River Museum, the City of Dubuque, and the Dubuque Area Chamber of
Commerce Foundation and numerous private corporations, foundations and
individuals, as well as state and federal agencies, have recently commenced a
redevelopment project around the Ice Harbor in downtown Dubuque. This project is
expected to restore beauty and excitement to the Ice Harbor through the
development of eight different projects. 17.3 million has been funded to date
for this planned $27 million redevelopment project. Plans for the redevelopment
project, which the City of Dubuque expects will be completed in several phases
over the next four years, include the following:
- a retired steamboat where visitors will learn about navigation and how the
Mississippi River system of locks and dams works (recently put in place);
- a one-third mile promenade along the perimeter of the Fourth Street
Peninsula with decorative paving, historic lighting, benches, and
landscaping (construction to begin in October 1999);
- a 500-foot walkway along the Ice Harbor from the River Museum to the
Rivers Edge Plaza (construction to begin in June 2000);
- an eight-mile extension of the existing 18-mile Heritage Trail system with
links to riverfront parks and other attractions (construction to begin in
June 2000);
- a 5,000 square foot landscaped open area to be used as a dock for large
boats and a site for relaxation and river watching (construction to begin
in April 2001);
- a 70,000 square foot museum (construction to begin in 2000);
- an outdoor wetland habitat for wildlife with several large aquariums and a
unique educational center (construction to begin in July 2000); and
- a 7,500 square foot amphitheater with seating for 1,000 people for
festivals, music and drama to be constructed on the levee at the historic
Star Brewery (construction to begin in July 2001).
This redevelopment project is designed to enhance the attractiveness of the
Ice Harbor as a community center and tourist destination, which we believe
should lead to increased foot traffic around the site of, and increased
admissions to, the Diamond Jo. To further capitalize on the Ice Harbor
redevelopment project, we intend to develop a hotel contiguous to our riverboat
casino and dockside pavilion. The hotel is expected to contain 100 to 150 guest
rooms and offer meeting space to attract professional and civic organizations
for conferences, banquets and other events. The hotel should enable us to extend
our geographic reach and target certain tourists markets, including more than
two million annual visitors to Galena.
CASINO OPERATIONS
We regularly adjust our overall game mix to appeal to our target market,
based on, among other factors, the coin-in, hold percentage, location and age of
our various slot machines. Approximately 70% of the Diamond Jo's gaming
positions are slot machines. The 650 slot machines, all of which have bill
validators, include denominations of $0.05 to $25.00, with more than 97% of the
machines $1.00 or
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lower in denomination. At any one time, approximately 20% to 25% of our slot
machines are video poker, video keno, and other electronic games of skill. Since
January 1996, we have replaced or installed conversion packages on approximately
413 slot machines. The recent authorization in Iowa of wide area progressives,
networks of slot machines throughout several casinos resulting in higher
jackpots, has allowed us to further improve our product mix with the
introduction of 8 linked slot machines. The 39 table games offered by the
Diamond Jo include three craps, two roulette, 25 blackjack, two Caribbean Stud,
two Let-It-Ride, and five poker tables, primarily with low betting limits.
During 1998, slot machines accounted for 80.9% of our gaming revenues,
generating an average win per slot machine per day of approximately $150. Table
games accounted for 19.1% of our gaming revenues in 1998, generating an average
win per table per day of approximately $586. Our win per gaming position
increased by 8.9% in 1998 from 1997, which we believe reflects our success in
changing our game mix during the year.
MARKETING STRATEGY
We have developed marketing and promotional strategies designed to attract
new customers and reward frequent gaming customers. In order to attract new
customers and create a high level of brand recognition, we frequently use
billboard, print, radio, and television advertising throughout the Dubuque area
as well as promotional offerings. In addition, in order to maintain and enhance
goodwill within the Dubuque area, we sponsor numerous community events. We
believe we are Dubuque's largest sponsor of such events, which include air
shows, hydroplane races, concerts and holiday celebrations, such as Memorial Day
and 4th of July fireworks. We have also implemented extensive employee
incentives and training programs designed to provide a high level of
personalized service to our customers. Patrons of the Diamond Jo are offered
membership to our players' club, known as the Diamond Club, which includes
bimonthly mailings, gaming incentives, and food and beverage discounts. In
September 1998, we installed a state-of-the-art electronic player tracking
system to monitor slot machine activity in real time, as well as the frequency
and level of play for our more than 100,000 Diamond Club members. This system
enables us to focus our marketing efforts on our most valued customers and
increase revenues from our existing customer base. Better tracking of, and
communications with, our VIP players through our new electronic player tracking
system, among other things, resulted in our win per admission increasing 7.3%
for the six months ended June 30, 1999 compared to the same period in 1998.
COMPETITION
GENERAL. Riverboat gaming licenses in the State of Iowa are granted to
not-for-profit "qualified sponsoring organizations" which may operate the
riverboats themselves or may enter into agreements with other parties to operate
the riverboats. The granting of new licenses requires regulatory approval, which
includes, among other things, satisfactory feasibility studies. The DRA is the
not-for-profit organization that holds the Diamond Jo's qualified sponsoring
organization gaming license and has contracted with us to operate the Diamond
Jo. See "Regulatory Matters" and "Certain Relationships and Related
Transactions--Relationship with Dubuque Racing Association."
In 1998, the Gaming Commission adopted a rule that limits the number of
riverboat gaming licenses in Iowa to ten, subject to certain exceptions
(including licenses issued to purchasers of existing licensed facilities and
licenses issued to replace an existing facility if its license is surrendered,
not renewed, or revoked) and prohibits the transfer of a license outside the
county in which the riverboat operated on May 1, 1998. There are currently nine
licensed riverboat gaming facilities operating in Iowa, and the Gaming
Commission recently approved a gaming license for a riverboat to be located
south of Des Moines, Iowa, approximately 250 miles from us, that is not yet in
operation. The rule also prohibits existing licensees from increasing the number
of table games or slot machines at their gaming facilities without prior Gaming
Commission approval. The 1999 legislature considered, but did not
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adopt, proposals to further limit the number of riverboats and expansion of
existing boats and to make other changes in Iowa's gaming laws.
The Dubuque gaming market borders other neighboring gaming markets. These
neighboring markets include: (1) Elgin and Aurora, Illinois to the east; (2)
Marquette, Iowa and Native American gaming in Wisconsin and Minnesota to the
north; (3) Des Moines, Iowa and Native American gaming in Tama, Iowa to the
west; and (4) Clinton, Iowa and the Quad Cities (Bettendorf and Davenport, Iowa
and Moline and Rock Island, Illinois) to the south. We believe that the Diamond
Jo competes only indirectly with gaming facilities in these neighboring markets.
See "Risk Factors--Competition."
DUBUQUE. The Diamond Jo's principal competition is the only other licensed
gaming facility in Dubuque, the DGP. The DGP, which opened its casino in 1995,
is located three miles north of the Diamond Jo and offers 600 slot machines and
live greyhound racing from May through October of each year with simulcasts from
other greyhound tracks. The DGP also offers, on a limited basis, simulcasts of
horse races. The DGP is owned and operated by the DRA. As a not-for-profit
organization, the DRA distributes a percentage of its cash flow to the City of
Dubuque and local charities. The DRA operating agreement allows us to restrict
the number of slot machines at the DGP to 600 if we do not increase the number
of slot machines at the Diamond Jo to more than 650. In addition, subject to
certain conditions, the DRA operating agreement allows us to require that the
weighted average theoretical slot payback percentage at the DGP not exceed ours
by more than 0.5%. We have elected to apply both of these restrictions to the
DGP. Under Iowa law, table games, video poker, video keno and other electronic
games of skill are not permitted at the DGP and, subject to certain conditions,
we may prevent the DGP from having these games even if they were allowed to
operate them under Iowa law. See "Risk Factors--DRA Operating Agreement" and
"Certain Relationships and Related Transactions--Relationship with Dubuque
Racing Association."
The Diamond Jo competed with the Silver Eagle, which was located five miles
east of us in East Dubuque, Illinois, through substantially all of 1995 and from
May 1996 to July 1997, the date on which the Silver Eagle ceased operations. We
believe the Silver Eagle ceased operations as a result of competitive pressures
from (1) the Diamond Jo, which commenced operations of a larger riverboat during
1995, (2) the DGP, which commenced operations during 1995, and (3) relaxation of
Iowa gaming laws in 1995, permitting riverboat casinos in Iowa, such as the
Diamond Jo, to operate predominately dockside while Illinois legislation
required riverboat casinos in Illinois, such as the Silver Eagle, to operate
only while cruising. Legislation was recently enacted in Illinois to provide for
dockside gaming in Illinois (which dockside gaming is limited to ten licenses,
nine of which are currently active and the tenth of which, we believe, will be
located in Rosemont, Illinois) and to relocate the existing but inactive
riverboat gaming license to Cook County, Illinois (outside the city limits of
the City of Chicago). We believe that additional competitors are effectively
precluded from entering our market, due to constraints imposed by existing laws
on the availability of gaming licenses. See "Risk Factors--Competition."
Since 1995, our first full year of operations, we have consistently captured
approximately 60% of the casino gaming revenues in Dubuque.
EMPLOYEES
We maintain a staff of approximately 475 to 500 full-time equivalent
employees, depending upon the time of the year. None of our employees are
covered by a collective bargaining agreement. The Company has not experienced
any labor problems resulting in a work stoppage, and believes it maintains good
relations with its employees.
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LEGAL PROCEEDINGS
Except as described below, we are not a party to, and none of our property
is the subject of, any pending legal proceedings other than litigation arising
in the normal course of business. We believe such litigation is either covered
by insurance or not material. We are not assuming liability for any litigation
involving the Diamond Jo or any of the related real property pursuant to our
acquisition of the Diamond Jo from GDREC and of such real property from HCI.
Such acquisitions are referred to herein as, the "acquisition of the Diamond
Jo."
The footnotes to the historical financial statements included in this
prospectus contain references to expenses associated with certain GDREC
ownership litigation. We are not a party to such litigation, and, under the
terms of our acquisition agreements, we have not assumed any liabilities in
connection with such litigation.
On June 3, 1999, GDREC filed an arbitration demand with the American
Arbitration Association concerning certain rights, privileges and preferences
relating to the preferred membership interests we issued in connection with our
acquisition of the Diamond Jo (including, without limitation, with respect to
preferences as to distributions and upon liquidation). Prior to consummation of
the acquisition of the Diamond Jo, however, GDREC's claims arising out of such
arbitration demand were resolved, and on July 15, 1999, the arbitration demand
was withdrawn by GDREC.
PROPERTIES
The properties acquired by us upon consummation of the acquisition of the
Diamond Jo are located within the historic Ice Harbor district on the west bank
of the Mississippi River in Dubuque, Iowa. These properties consist of several
parcels of real property owned by HCI. We own a fee interest in (1) the dockside
pavilion, consisting of approximately 33,000 square feet, (2) surface parking
lots within close proximity to the dockside pavilion, and (3) the walkway
connecting the dockside pavilion to the dock to which the Diamond Jo is moored.
In addition to the properties we purchased, we currently lease (1) property
used as a patio located between the dockside pavilion and the Diamond Jo and (2)
property used as surface parking consisting of approximately 445 parking spaces
that are in close proximity to the Diamond Jo, a portion of which is expected to
be used for construction of the new hotel. These leased properties are currently
owned by the City of Dubuque and leased to the DRA, which in turn subleases
these properties to us. The sublease requires us to pay one dollar ($1.00) per
year as rent. In connection with the acquisition of the Diamond Jo, we are
acquiring GDREC's interests in this sublease. The terms of the DRA lease with
the City of Dubuque and our sublease with the DRA have each been extended
through December 31, 2008.
The DRA is also party to a parking agreement by and among the City of
Dubuque, GDREC and other parties, which governs the use of the parking spaces we
currently sublease from the DRA. Pursuant to this parking agreement, our patrons
have the non-exclusive right to use the approximately 445 parking spaces
currently subleased from the DRA. This agreement also gives our patrons and
employees the non-exclusive right to use approximately 335 additional parking
spaces that are owned by the City of Dubuque and are located in close proximity
to the Diamond Jo. In exchange for these parking rights and the extension of the
sublease with the DRA, we are required, under certain circumstances, to share
costs of maintaining the subleased parking lots. In the future, we may amend the
parking agreement to reallocate parking spaces that may be affected by the
construction of our planned hotel.
The Gaming Commission approved our application for a license to operate a
gaming riverboat on May 20, 1999, effective upon the transfer of the Diamond Jo
to us. As a condition to the grant of our gaming license, we are required by the
Gaming Commission to spend up to a maximum of
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$11.5 million to develop and construct a hotel contiguous to the Diamond Jo. It
is contemplated that the hotel will contain 100 to 150 guest rooms and offer
meeting space for conferences, banquets and other events. Although construction
of the new hotel is expected to result in the loss of certain existing parking
spaces, we believe there will be adequate alternatives available to address our
parking needs. Our ability to develop and construct the hotel will, among other
things, depend upon the availability of sufficient financing and our receipt of
necessary permits and licenses. We intend to commence construction of the hotel
by the end of December 2000. We presently have neither commitments for any
financing nor the requisite permits, licenses or approvals necessary for
construction of the proposed hotel, and no assurance can be given that such
financing, permits, licenses and approvals will be timely received, if at all.
See "Risk Factors--Risks Related to Hotel/Ice Harbor Development."
In connection with our commitment to develop and construct the hotel, we are
currently negotiating a lease (the "City Lease") with the City of Dubuque for
(1) certain real property on which we plan to construct the hotel, and (2) a
parcel of real property presently used as a patio for the dockside pavilion.
These properties are currently subject to the DRA sublease described above and,
assuming we enter into the City Lease, will be excluded from the DRA sublease
and instead will be leased by us directly from the City of Dubuque. Subject to
approval of the DRA and the Gaming Commission, we expect that the City Lease
will provide for a minimum lease term of thirty-nine (39) years and annual rent
of One Dollar ($1.00) through December 31, 2004. Thereafter, through the end of
the lease term annual rent is expected to be based on a percentage of the excess
by which the appraised value of the leased property exceeds the appraised value
of certain real estate to be deeded by HCI to the City of Dubuque on or prior to
the closing of the acquisition of the Diamond Jo. We will pay all property taxes
for properties leased from the City of Dubuque. We can give no assurances that
we will be able to enter into the City Lease on the terms described above or on
terms satisfactory to us.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We have $71 million principal amount of notes outstanding under our
indenture. We have no variable rate debt. Our fixed debt instruments are not
generally affected by a change in the market rates of interest and therefore,
such instruments generally do not have an impact on future earnings. However, as
our fixed rate debt matures, future earnings and cash flows may be impacted by
changes in interest rates related to debt incurred to fund repayments under
maturing facilities. Additionally, should we assume variable rate debt in the
future, we will be subject to market risk, which is the risk of loss from
changes in market prices and interest rates.
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REGULATORY MATTERS
GENERAL
We are subject to regulation by the State of Iowa and, to a lesser extent,
by federal law. We are subject to regulations that apply specifically to the
gaming industry and casinos, in addition to regulations applicable to businesses
generally. Legislative or administrative changes in applicable legal
requirements, including legislation to prohibit casino gaming, have been
proposed from time to time. It is possible that the applicable requirements to
operate an Iowa gaming facility will become more stringent and burdensome, and
that taxes, fees and expenses may increase. It is also possible that the number
of authorized gaming licenses in Iowa may increase, which would intensify the
competition that we face. Our failure to comply with detailed regulatory
requirements may be grounds for the suspension or revocation of one or more of
our licenses which would have a material adverse effect on us. See "Risk
Factors--Gaming Regulations."
IOWA RIVERBOAT GAMING REGULATION
Our operations are subject to Chapter 99F of the Iowa Code and the
regulations promulgated thereunder and the licensing and regulatory control of
the Gaming Commission.
Under Iowa law, the legal age for gaming is 21, and wagering on a "gambling
game" is legal when conducted by a licensee on an "excursion gambling boat." An
"excursion gambling boat" is a self-propelled excursion boat, and a "gambling
game" is any game of chance authorized by the Gaming Commission. While dockside
casino gaming is currently authorized by the Gaming Commission, a licensed
excursion gambling boat is required to conduct at least one two-hour excursion
cruise each day for at least 100 days during the excursion season to operate
during the off-season. The excursion season is from April 1st through October
31st of each calendar year. The excursions conducted by the Diamond Jo during
the 1998 cruising season satisfied the requirements of Iowa law for the conduct
of off-season operations.
The legislation permitting riverboat gaming in Iowa authorizes the granting
of licenses to "qualified sponsoring organizations." A "qualified sponsoring
organization" is defined as a nonprofit corporation organized under Iowa law,
whether or not exempt from federal taxation, or a person or association that can
show to the satisfaction of the Gaming Commission that the person or association
is eligible for exemption from federal income taxation under SectionSection
501(c)(3), (4), (5), (6), (7), (8), (10) or (19) of the Internal Revenue Code (a
"not-for-profit corporation"). The not-for-profit corporation may operate the
riverboat itself, or it may enter into an agreement with another party (a "boat
operator") to operate the riverboat on its behalf. A boat operator must be
approved and licensed by the Gaming Commission. The DRA, a not-for-profit
corporation organized for the purpose of operating a pari-mutuel greyhound
racing facility in Dubuque, Iowa, first received a riverboat gaming license in
1990 and has served as the "qualified sponsoring organization" of the Diamond Jo
since March 18, 1993. The DRA subsequently entered into the DRA operating
agreement with GDREC, authorizing GDREC to operate riverboat gaming operations
in Dubuque. The DRA operating agreement was approved by the Gaming Commission on
March 18, 1993. The term of the DRA operating agreement currently runs until
March 31, 2002, with two three-year renewal options thereafter, subject to the
satisfaction of certain conditions. We will assume the rights and obligations of
GDREC under the DRA operating agreement. See "Certain Relationships and Related
Transactions--Relationship with Dubuque Racing Association."
Under Iowa law, a license to conduct gaming may be issued in a county only
if the county electorate has approved such gaming. The electorate of Dubuque
County, Iowa, which includes the City of Dubuque, approved gaming on May 17,
1994 by referendum, including gaming conducted by the Diamond Jo. Approximately
80% of the votes cast approved gaming at such time. However, the 2002 Referendum
must be held at the general election in 2002, and a reauthorization referendum
must be
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held each eight years thereafter. Each such referendum requires the vote of a
majority of the votes cast. If any such reauthorization referendum is defeated,
Iowa law provides that any previously issued gaming license will remain valid
for a total of nine years from the date of original issuance of the license,
subject to earlier nonrenewal or revocation under Iowa law and regulations
applicable to all licenses.
For a discussion of possible adverse consequences to us if the 2002
Referendum does not pass, see "Risk Factors--DRA Operating Agreement" and
"--Reauthorization of Gaming in Dubuque County, Iowa."
Proposals to amend or supplement Iowa's gaming statutes are frequently
introduced in the Iowa state legislature. In addition, the state legislature
from time to time considers proposals to amend or repeal Iowa law and
regulations, which could effectively prohibit riverboat gaming in the State of
Iowa, limit the expansion of existing operations or otherwise affect our
operations. Although we do not believe that a prohibition of riverboat gaming in
Iowa is likely, we can give no assurance that changes in Iowa gaming laws will
not occur or that such changes will not have a material adverse effect on our
business. See "Risk Factors--Gaming Regulations."
The Gaming Commission adopted in 1998 a rule that prohibits licensees,
including the Diamond Jo, from increasing the number of gaming tables and gaming
machines without Gaming Commission approval. This approval is based on several
factors, including whether the increase will (1) positively impact the community
in which the licensee operates, (2) result in permanent improvements and
land-based developments and (3) have a detrimental impact on the financial
viability of other licensees operating in the same market. As a result of this
rule, we may be unable to increase the number of gaming positions on the Diamond
Jo.
Substantially all of the Diamond Jo's material transactions are subject to
review and approval by the Gaming Commission. All contracts or business
arrangements, verbal or written, with any related party or in which the term
exceeds three years or the total value of the contract exceeds $50,000 must be
submitted in advance to the Gaming Commission for approval. Additionally,
contracts negotiated between the Diamond Jo and a related party must be
accompanied by economic and qualitative justification.
We must submit detailed financial, operating and other reports to the Gaming
Commission. We must file monthly gaming reports indicating adjusted gross
receipts received from gambling games and the total number and amount of money
received from admissions. Additionally, we must file annual financial statements
covering all financial activities related to our operations for each fiscal
year. We must also keep detailed records regarding our equity structure and
owners.
Iowa has a graduated wagering tax on riverboat gambling equal to five
percent (5%) of the first one million dollars of adjusted gross receipts, ten
percent (10%) on the next two million dollars of adjusted gross receipts and
twenty percent (20%) on adjusted gross receipts of more than three million
dollars. In addition, Iowa riverboats share equally in certain costs of the
Gaming Commission and related entities to administer gaming in Iowa, which is
currently approximately $316,000 per year per riverboat. Further, the Diamond Jo
pays to the City of Dubuque a fee equal to $.50 per passenger. See "Risk
Factors--Taxation."
If the Gaming Commission decides that a gaming law or regulation has been
violated, the Gaming Commission has the power to assess fines, revoke or suspend
licenses or to take any other action as may be reasonable or appropriate to
enforce the gaming rules and regulations. In addition, renewal is subject to,
among other things, continued satisfaction of suitability requirements.
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REGULATORY REQUIREMENTS APPLICABLE TO OWNERS OF THE SECURITIES AND OTHERS
We are required to notify the Gaming Commission as to the identity of (and
may be required to submit background information regarding) each director,
corporate officer and owner, partner, joint venturer, trustee or any other
person who has a beneficial interest of five percent (5%) or more, direct or
indirect, in PGCL. The Gaming Commission may also request that we provide them
with a list of persons holding beneficial ownership interests in PGCL of less
than five percent (5%). For purposes of these rules, "beneficial interest"
includes all direct and indirect forms of ownership or control, voting power or
investment power held through any contract, lien, lease, partnership,
stockholding, syndication, joint venture, understanding, relationship, present
or reversionary right, title or interest, or otherwise. The Gaming Commission
may determine that holders of the notes, PGCL's common membership interests and
preferred membership interests, and PGP's common membership interests and
convertible preferred membership interests have a "beneficial interest" in us.
The Gaming Commission may limit, make conditional, suspend or revoke the license
of a licensee in which a director, corporate officer or holder of a beneficial
interest in such person includes or involves any person or entity which is found
to be ineligible as a result of want of character, moral fitness, financial
responsibility, or professional qualifications or due to failure to meet other
criteria employed by the Gaming Commission.
If any gaming authority, including the Gaming Commission, requires any
person, including a record or beneficial owner of the securities, to be
licensed, qualified or found suitable, such person must apply for a license,
qualification or finding of suitability within the time period specified by such
gaming authority. Such person would be required to pay all costs of obtaining
such license, qualification or finding of suitability. If a record or beneficial
owner of any of the notes or any membership interest of PGP or PGCL is required
to be licensed, qualified or found suitable and is not licensed, qualified or
found suitable by such gaming authority within the applicable time period, such
notes or membership interests will be subject to certain regulatory redemption
procedures. See "Risk Factors--Required Regulatory Redemption," "Description of
PGCL Membership Interests--PGCL Operating Agreement," "Description of
Notes--Redemption" and "Description of PGP Membership Interests--PGP Operating
Agreement."
As of the date of this prospectus, the Gaming Commission has not required
the securityholders to apply for a finding of suitability to own the securities.
However, the Gaming Commission could require a holder of the securities to
submit such an application in the future.
FEDERAL REGULATION OF SLOT MACHINES
We are required to make annual filings with the U.S. Attorney General in
connection with the sale, distribution or operation of slot machines. All
requisite filings for the most recent year and the current year have been made.
POTENTIAL CHANGES IN TAX AND REGULATORY REQUIREMENTS
From time to time, federal and state legislators and officials have proposed
changes in tax law, or in the administration of such laws, affecting the gaming
industry. The Gaming Commission and the Iowa legislature consider from time to
time limitations on the expansion of gaming in Iowa and other changes in gaming
laws and regulations. See "Business--Competition." Proposals at the national
level have included a federal gaming tax and limitations on the federal income
tax deductibility of the cost of furnishing complimentary promotional items to
customers, as well as various measures which would require withholding on
amounts won by customers or on negotiated discounts provided to customers on
amounts owed to gaming companies. It is not possible to determine with certainty
the likelihood of possible changes in tax or other laws or in the administration
of such laws. Such changes, if adopted, could have a material adverse effect on
our financial results.
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The United States Congress created a national commission, the National
Gaming Impact Study Commission, which generally has the duty to conduct a
comprehensive legal and factual study of gambling in the United States and
existing federal, state and local policies and practices with respect to the
legalization or prohibition of gambling activities, to formulate and propose
changes in such policies and practices and to recommend legislation and
administrative actions for such changes. The national commission issued its
report to President Clinton, Congress, state governors and Native American
tribal leaders on June 18, 1999. Any of the recommendations made by the national
commission could result in the enactment of new laws and/or the adoption of new
regulations which could adversely impact the gaming industry in general. We are
unable at this time to determine the ultimate disposition of any of the
recommendations that the national commission made.
LIQUOR REGULATIONS
The sale of alcoholic beverages by us is or will be subject to the
licensing, control and regulation by the Liquor Agencies, which include the City
of Dubuque and the Alcoholic Beverage Division of the Iowa Department of
Commerce. The applicable liquor laws allow the sale of liquor during legal hours
which are Monday through Saturday from 6 a.m. to 2 a.m. the next day and Sunday
from 8 a.m. to 2 a.m. on Monday. Subject to certain exceptions, all persons who
have a financial interest in us, by ownership, loan or otherwise, must be
disclosed in an application filed with, and are subject to investigation by, the
Liquor Agencies. Persons who have a direct or indirect interest in any Iowa
liquor license, other than hotel or restaurant liquor licenses, may be
prohibited from purchasing or holding the notes. All licenses are subject to
annual renewal, are revocable and are not transferable. The Liquor Agencies have
the full power to limit, condition, suspend or revoke any such license or to
place a liquor licensee on probation with or without conditions. Any such
disciplinary action could (and revocation would) have a material adverse effect
upon the operations of our business. Certain of our owners, officers and
managers must be investigated by the Liquor Agencies in connection with our
liquor permits. Changes in licensed positions must be approved by the Liquor
Agencies.
UNITED STATES COAST GUARD
The Diamond Jo is also regulated by the United States Coast Guard, whose
regulations affect boat design and stipulate on-board facilities, equipment and
personnel (including requirements that each vessel be operated by a minimum
complement of licensed personnel), in addition to restricting the number of
persons who can be aboard the boat at any one time. Our riverboat must hold, and
currently possesses, a Certificate of Inspection and a Certificate of
Documentation from the United States Coast Guard. Loss of the Certificate of
Inspection would preclude our use of the Diamond Jo as an operating riverboat.
In addition, the riverboat is subject to United States Coast Guard regulations
requiring periodic hull inspections. Our next hull inspection is expected to
take place by April 2000. A traditional dry dock hull inspection would result in
the temporary loss of service of the riverboat for up to approximately two
weeks. The United States Coast Guard, upon request and approval of such request,
allows for an underwater hull inspection instead of the traditional out of water
dry dock inspection. An underwater hull inspection does not result in any loss
of services of the riverboat. If the Coast Guard approves our request for an
underwater hull inspection, we will be required to perform another hull
inspection within thirty 30 months from the date of such underwater hull
inspection. At that time, we may again seek approval from the Coast Guard for an
underwater hull inspection in order to avoid any loss of services of the
riverboat.
All of our shipping employees employed on United States Coast Guard
regulated vessels, even those who have nothing to do with the actual operation
of the vessel, such as dealers, cocktail hostesses and security personnel, may
be subject to maritime law, which, among other things, exempts those employees
from state limits on workers' compensation awards. We maintain workers'
compensation insurance in compliance with applicable Iowa law.
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THE SHIPPING ACT OF 1916; THE MERCHANT MARINE ACT OF 1936
The Shipping Act of 1916, as amended, and the Merchant Marine Act of 1936,
as amended, and applicable regulations thereunder contain provisions which would
prevent persons who are not citizens of the United States from holding in the
aggregate more than 25% of our outstanding membership interests, directly or
indirectly. PGCL's and PGP's respective operating agreements contain
prohibitions against any purchase or transfer of PGCL's or PGP's respective
membership interests to any person or entity if, following such purchase or
transfer, more than 25% of PGCL's membership interests are owned, directly or
indirectly, by persons who are not citizens of the United States. Any such
purchase or transfer in violation of PGCL's or PGP's respective operating
agreements is null and void, and PGCL and PGP will not recognize the purchaser,
transferee or purported beneficial owner as a direct or indirect holder of an
interest in PGCL or PGP, respectively, for any purpose. To the extent required
by maritime laws, the managing member, managers and the officers of PGP and PGCL
shall be citizens of the United States. See "Description of PGCL Membership
Interests--PGCL Operating Agreement" and "Description of PGP Membership
Interests--PGP Operating Agreement."
OTHER REGULATIONS
We are subject to federal, state and local environmental and safety and
health laws, regulations and ordinances that apply to non-gaming businesses
generally, such as the Clean Air Act, Federal Water Pollution Control Act,
Occupational Safety and Health Act, Resource Conservation Recovery Act, Oil
Pollution Act and Comprehensive Environmental Response, Compensation and
Liability Act, each as amended. We have not incurred, and do not expect to
incur, material expenditures with respect to such laws. There can be no
assurances, however, that we will not incur material liability pursuant to such
laws in the future. See "Risk Factors--Environmental Matters."
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MANAGEMENT
OFFICERS OF PGCL AND MANAGERS OF PGP
PGP is our parent and sole manager. The following table sets forth the names
and ages of the executive officers of PGCL and of the managers and executive
officers of PGP.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- ----------------------------------------------------------------
<S> <C> <C>
M. Brent Stevens................ 38 Manager of PGP; Director of PGC; Chief Executive Officer of PGP
and PGCL; President and Treasurer of PGC
Natalie A. Baum................. 29 Chief Financial Officer and Controller of PGCL
Michael S. Luzich............... 45 Manager of PGP; Director of PGC; Vice President of Corporate
Development and Secretary of PGP; Vice President and Secretary
of PGC; Secretary of PGCL
Terrance W. Oliver.............. 50 Manager of PGP
William L. Westerman............ 67 Manager of PGP
Andrew R. Whittaker............. 37 Manager of PGP
</TABLE>
MANAGEMENT PROFILES
Following is a brief description of the business experience of each of the
executive officers of PGCL and of the managers and executive officers of PGP
listed in the preceding table.
M. BRENT STEVENS, MANAGER OF PGP; CHIEF EXECUTIVE OFFICER OF PGP AND PGCL;
DIRECTOR OF PGC; PRESIDENT AND TREASURER OF PGC. Mr. Stevens is a managing
director of Jefferies & Company, Inc., which he joined in 1990.
NATALIE A. BAUM, CHIEF FINANCIAL OFFICER AND CONTROLLER OF PGCL. Ms. Baum
joined the Diamond Jo in November 1996 and was formerly employed by Aerie Hotels
and Resorts in Oak Brook, Illinois as Corporate Accounting Manager. She was
responsible for the corporate accounting functions of the Silver Eagle, the
Eagle Ridge Inn and Resorts, located in Galena, Illinois and the Essex Hotel,
located in Chicago, Illinois. She served as Internal Audit Manager for the
Silver Eagle and was a member of a development team that successfully pursued a
riverboat gaming license in Indiana.
MICHAEL S. LUZICH, MANAGER, VICE PRESIDENT OF CORPORATE DEVELOPMENT AND
SECRETARY OF PGP; DIRECTOR, VICE PRESIDENT AND SECRETARY OF PGC; SECRETARY OF
PGCL. Mr. Luzich is the founder and President of the Cambridge Investment
Group, L.L.C., an investment and development company located in Las Vegas,
Nevada. Prior to October 1995, Mr. Luzich was a founding partner and director of
Fitzgeralds New York, Inc. and Fitzgeralds Arizona Management, Inc., which are
development companies responsible, respectively, for the Turning Stone Casino
near Syracuse, New York, for the Oneida Tribe and the Cliff Castle Casino near
Sedona, Arizona, for the Yavapai-Apachi Tribe.
TERRANCE W. OLIVER, MANAGER OF PGP. Since 1993, Mr. Oliver has served as a
director of and consultant to Mikohn Gaming Corporation, a gaming equipment
manufacturer headquartered in Las Vegas. From 1988 until 1993, Mr. Oliver served
as Chairman of the Board to the predecessor company of Mikohn. From 1984 until
1996, Mr. Oliver was a founding shareholder, board member and executive officer
of Fitzgeralds Gaming Corporation. Mr. Oliver retired as the Chief Operating
Officer of Fitzgeralds Gaming Corporation in 1996.
WILLIAM L. WESTERMAN, MANAGER OF PGP. Since 1992, Mr. Westerman has assumed
the positions of Chairman of the Board, Chief Executive Officer and President of
Riviera, Inc. and Chairman of the Board and Chief Executive Officer of Riviera
Operating Corporation. From July 1, 1991 until his appointment as Chairman of
the Board, Mr. Westerman served as a consultant to Riviera, Inc. From
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1973 until June 30, 1991, Mr. Westerman held various positions with Cellu-Craft
Inc. and Alusuisse Flexible Packaging, manufacturers of flexible packaging used
primarily for food products, including serving as President and Chief Executive
Officer of Cellu-Craft Inc. and President of Alusuisse Flexible Packaging, a
wholly owned subsidiary of Alusuisse, which purchased Cellu-Craft Inc. on June
30, 1989.
ANDREW R. WHITTAKER, MANAGER OF PGP. Mr. Whittaker is an executive vice
president of Jefferies & Company, Inc., which he joined in 1990.
EMPLOYMENT AND CONSULTING AGREEMENTS
JAMES P. RIX, FORMERLY CHIEF OPERATING OFFICER OF PGCL. Mr. Rix resigned as
our Chief Operating Officer, effective November 20, 1999. Mr. Rix entered into
an employment agreement with us which has a term of three years, commencing July
15, 1999. Under the terms of his employment agreement, Mr. Rix was paid a
signing bonus of $100,000 and was entitled to receive an annual base salary of
$250,000 and, subject to certain conditions, an annual performance based bonus.
Mr. Rix's employment agreement provides for severance payments upon the
occurrence of certain events specified in his agreement. Mr. Rix has agreed to
certain restrictions which will limit his ability to compete with us for a
one-year period following his termination of employment.
NATALIE A. BAUM. Ms. Baum has entered into an employment agreement with us
which has a term of two years commencing July 15, 1999 and which renews
automatically for successive one year terms, unless terminated by her or us for
reasons specified in her employment agreement. Under the terms of her employment
agreement, Ms. Baum is entitled to a signing bonus of $25,000, an annual base
salary of $82,500 and a yearly performance based bonus of at least $20,000. Ms.
Baum is further entitled to at least a 5% annual salary increase, the actual
amount of such increase to be determined by the board of managers of PGP. Ms.
Baum has agreed to certain restrictions which will limit her ability to compete
with us for a one-year period following her termination of employment.
MICHAEL S. LUZICH. PGP has entered into a consulting agreement with Mr.
Luzich, pursuant to which Mr. Luzich, in consideration for certain corporate
development and consulting services to be rendered thereunder, is entitled to
receive compensation consisting of base salary and incentive payments in an
aggregate annual amount not to exceed $340,000. The consulting agreement has a
one year term and, subject to the occurrence of certain termination events, is
renewable automatically for successive one year terms. Mr. Luzich is entitled to
reimbursement of reasonable business expenses as approved by the board of
managers of PGP and incurred in connection with the performance of his services.
EXECUTIVE COMPENSATION
We were not organized until 1999. Based on existing agreements with members
of our senior management, only Mr. Rix and Ms. Baum will receive compensation in
excess of $100,000 during 1999.
Subject to the approval of the holders of at least 85% of the voting common
membership interests of PGP, PGP's board of managers may, from time to time,
issue additional incentive based equity interests in PGP at no less than fair
market value.
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SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by or
paid to each of our Chief Executive Officer and to each of our executive
officers for all services rendered since the date of consummation of the
acquisition on July 15, 1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------
-------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) BONUS ($) ($) (#) ($)
- -------------------------- ----------- ---------- ----------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
M. Brent Stevens.......... 1999 -- -- -- -- --
CHIEF EXECUTIVE OFFICER
Natalie A. Baum........... 1999 14,278.86(1) 20,000(2) -- -- 25,000(3)
CHIEF FINANCIAL OFFICER
James P. Rix.............. 1999 43,269.21(4) -- 501.38(5) -- 100,000(6)
FORMERLY, CHIEF
OPERATING OFFICER
</TABLE>
- ------------------------
(1) Represents salary actually paid to Ms. Baum as of September 15, 1999.
(2) Ms. Baum is entitled to a minimum bonus of $20,000 pursuant to the terms of
her employment agreement.
(3) Ms. Baum received a $25,000 signing bonus upon commencement of her
employment.
(4) Represents salary actually paid to Mr. Rix as of September 22, 1999, the
date of his resignation as our Chief Operating Officer.
(5) Represents reimbursement of club membership dues.
(6) Mr. Rix received a $100,000 signing bonus upon commencement of his
employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We have no standing Compensation Committees. All compensation decisions are
made by PGP, our parent and sole manager. The managers of PGP each participate
in the determination of executive officer compensation.
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PRINCIPAL SECURITYHOLDERS
All of PGCL's outstanding common membership interests are owned by PGP, its
parent and sole manager. All of PGC's outstanding common stock is owned by PGCL.
The table below sets forth certain information regarding the beneficial
ownership of the voting common membership interests of PGP by (a) each person or
entity known by us to own beneficially 5% or more of the common membership
interests of PGP, (b) each manager and executive officer of PGP and (c) all
managers and executive officers of PGP as a group. GDREC holds 100% of our
issued and outstanding preferred membership interests, which, subject to limited
exceptions, will have no voting rights, except as required by applicable law. On
July 15, 1999, PGP issued 500,000 convertible preferred membership interests;
each of which is initially convertible into one PGP non-voting common membership
interest, representing 33.33% of the fully diluted common membership interests
of PGP on such date. PGP does not have outstanding any of its non-voting common
membership interests. See "Description of PGCL Membership Interests" and
"Description of PGP Membership Interests." Unless otherwise indicated, the
address of each manager or executive officer of PGP is c/o Peninsula Gaming
Company, LLC, 3rd Street Ice Harbor, P.O. Box 1750, Dubuque, IA 52004-1683.
<TABLE>
<CAPTION>
VOTING COMMON
MEMBERSHIP INTERESTS PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS
- -------------------------------------------------- ------------------------------- -----------
<S> <C> <C>
M. Brent Stevens.................................. 225,000(2) 22.50%
11100 Santa Monica, 10th Floor
Los Angeles, CA 90071
PGP Investors, LLC(3)............................. 413,333(4) 41.33%
11100 Santa Monica, 10th Floor
Los Angeles, CA 90071
Michael S. Luzich................................. 300,000 30.00%
James P. Rix(5)................................... 46,667 4.67%
Terrance Oliver................................... 15,000 1.50%
Natalie A. Baum................................... 0 0%
William L. Westerman.............................. 0 0%
2901 Las Vegas Blvd., South
Las Vegas, NV 89109
Andrew R. Whittaker............................... 20,000(4) 2.00%
11100 Santa Monica, 10th Floor
Los Angeles, CA 90071
All managers and executive officers as a group (6 1,000,000 100.00%
persons)(6).....................................
</TABLE>
- ------------------------
(1) The voting and investment power with regard to the PGP common membership
interests are restricted by the operating agreement of PGP. See "Description
of PGP Membership Interests--Common Membership Interests."
(2) Mr. Stevens holds 225,000 PGP common membership interests directly and
413,333 PGP common membership interests indirectly through PGP Investors,
LLC. Mr. Stevens is the sole managing member of PGP Investors and exercises
voting and investment power over the PGP common membership interests owned
by PGP Investors. Mr. Stevens does not own any membership interests in PGP
Investors, LLC.
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<PAGE>
(3) Mr. Stevens and Mr. Whittaker, managers of PGP, are a managing director and
executive vice president, respectively, of Jefferies & Company, Inc., the
initial purchaser in the offering of the old notes on July 15, 1999. In
addition, Jefferies & Company, Inc. and certain of its affiliates, officers
and employees are members of, and control, PGP Investors, LLC.
(4) Mr. Whittaker holds an economic interest in 20,000 PGP common membership
interests indirectly through his membership in PGP Investors, but does not
exercise voting or investment power with respect to, and disclaims a
beneficial ownership interest in, these PGP common membership interests.
(5) Under the terms of PGP's operating agreement, as a result of Mr. Rix's
resignation from his position as Chief Operating Officer of PGCL, PGP has
the right (but not the obligation) to purchase all of Mr. Rix's common
membership interests for the lesser of $280,000 or the fair market value of
his common membership interests as determined by PGP's board of managers.
(6) Includes 413,333 PGP common membership interests held by PGP Investors, LLC,
over which Mr. Stevens exercises voting and investment power.
47
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH DUBUQUE RACING ASSOCIATION
The DRA is a not-for-profit corporation organized for the purpose of
operating the DGP, a pari-mutuel greyhound racing facility in Dubuque, Iowa. On
February 22, 1993, the DRA entered into the DRA operating agreement which
authorizes us to operate riverboat gaming operations in Dubuque. The DRA
operating agreement has since been amended several times. The present term of
the DRA operating agreement is through March 31, 2002. We have the right to
renew the DRA operating agreement for two succeeding three-year periods through
2008, subject to certain conditions, including that (1) the 2002 Referendum
passes (see "Risk Factors--DRA operating agreement" and "Regulatory
Matters--Iowa Riverboat Gaming Regulation"), (2) we materially comply with the
DRA operating agreement, (3) we continue to operate the Diamond Jo or a
replacement boat of equal or greater size or total gaming positions, which is
approved by the Gaming Commission, (4) both we and the DRA retain our gaming
licenses with the Gaming Commission, and (5) neither we nor any of our
affiliates operate another gaming facility in Dubuque County or the adjoining
counties of Illinois or Wisconsin. An extension of the term of the DRA operating
agreement through March 31, 2008, irrespective of the above conditions, was
recently unanimously approved in concept by the board of directors of the DRA,
conditioned on its review of final documentation and approval by the Gaming
Commission. This extension is also subject to approval of related amendments to
the DRA's lease with the City, our sublease with the DRA and the related parking
agreement by the DRA, the Gaming Commission and the City of Dubuque. See
"Business--Properties."
Beginning April 1, 2000, we will be required to make a $0.50 per admission
payment to the DRA, without regard to our revenues or profits. Based on 1998
admissions, such payment would amount to approximately $570,000. Under the DRA
operating agreement, subject to certain conditions, we are required to pay the
DRA, for the right to operate the Diamond Jo, an amount equal to 32% of the
first $30 million of our total gaming revenues, plus 8% of the next $12 million
of total gaming revenues, plus (under certain circumstances) 8% of the next $4
million of total gaming revenues, but only if such amount is greater than the
DRA's gaming revenues from the DGP. This formula is subject to change if the DRA
ceases to operate the DGP or if we operate a riverboat smaller than the current
Diamond Jo. We currently make no payments to the DRA because the DRA's revenues
from the DGP are greater than the specified percentage of our total gaming
revenues.
The DRA operating agreement allows us to restrict the number of slot
machines at the DGP to 600; PROVIDED, that we do not increase the number of slot
machines at the Diamond Jo to more than 650. In addition, we may require that
the weighted average theoretical slot payback percentage at the DGP not exceed
ours by more than 0.5% so long as the rates we set are reasonable and in good
faith. Additionally, we cannot require the DRA to change rates on its machines
more than four times per contract year. We have elected to apply both of these
restrictions to the DGP. These restrictions terminate on the earlier of (1) our
operation of a replacement riverboat that is not of equal or greater size than
the Diamond Jo or on which we operate fewer total gaming positions than on the
Diamond Jo and (2) March 31, 2002. Without these restrictions, either we or the
DRA may, (a) increase the number of slot machines upon a determination by the
Gaming Commission, among other things, that such additional slot machines would
not have a detrimental impact on the DRA's or our financial viability, as
applicable, and (b) increase the weighted average theoretical slot payback
percentage, either of which actions, if taken by the DRA, could result in
increased competition from the DGP. Iowa law currently prohibits pari-mutuels,
such as the DGP, from operating table games, and we believe that table games
will not become permissible at racetracks in Iowa. If changes to Iowa law prior
to April 1, 2000 permit pari-mutuels to operate table games, under the DRA
operating agreement, we are entitled to prohibit the DRA from operating table
games at the DGP. In such case, our ability to prohibit table games at the DGP
will terminate on the earlier of (1) our operation of a replacement riverboat
that is not of equal or greater size to the Diamond Jo or on which we operate
fewer total gaming positions
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<PAGE>
than on the Diamond Jo and (2) July 11, 2000. The above restrictions are subject
to the express approval and regulatory supervision of the Gaming Commission.
Additionally, all of the restrictions under the DRA operating agreement will
terminate if we or any of our affiliates operate another gaming facility in
Dubuque County or the adjoining counties of Illinois or Wisconsin. Under the DRA
operating agreement, we have the right to sell the Diamond Jo and related
facilities, subject to the approval of the Gaming Commission, as long as the
acquiror agrees to abide by the terms of the DRA operating agreement.
For a discussion of certain risks relating to the DRA operating agreement,
see "Risk Factors-- DRA Operating Agreement."
MANAGING MEMBER INDEMNIFICATION
Pursuant to our and PGP's operating agreements, we and PGP have agreed,
subject to certain exceptions, to indemnify and hold harmless our members, PGP
and PGP members, as the case may be, from liabilities incurred as a result of
their positions as our sole manager and as members of us or PGP, as the case may
be.
EQUITY CONTRIBUTION
The common members of PGP have made a capital contribution of $6.0 million
to PGP in exchange for their common membership interests. PGP immediately
contributed this $6.0 million and the $3.0 million raised in the offering of the
old notes through the sale of PGP's convertible preferred membership interests
to PGCL, in exchange for common membership interests in PGCL. PGCL used this
capital contribution from PGP to finance in part the acquisition of the Diamond
Jo. Additionally, we issued $7.0 million face amount of preferred membership
interests to GDREC in connection with the acquisition of the Diamond Jo. See
"Description of PGCL Membership Interests" and "Description of PGP Membership
Interests."
OPERATING AGREEMENT OF PGP
Pursuant to PGP's operating agreement, the management of PGP is vested in a
board of managers comprised of five individuals, two of whom must be independent
managers. At any time that M. Brent Stevens, together with any entity controlled
by Mr. Stevens, beneficially holds at least 5% of the voting common membership
interests of PGP, Mr. Stevens is entitled to designate three of PGP's managers,
including one of the two independent managers. The two independent managers
shall serve as members of the independent committee. Under PGP's operating
agreement, PGP Advisors, LLC, a Delaware limited liability company, of which Mr.
Stevens is the sole managing member, may from time to time render certain
financial advisory and consulting services to PGP and will be entitled to
receive commercially reasonable fees for such services consistent with industry
practices. Subject to the terms of the indenture governing the notes, such fees
will be paid by us as distributions to PGP.
At any time that Michael Luzich, together with any entity controlled by Mr.
Luzich, beneficially holds at least 5% of the voting common membership interests
of PGP, Mr. Luzich is entitled to designate two of PGP's managers, including the
other independent manager.
Presently, PGP's board of managers is comprised of five managers. A manager
may resign at any time, and the member who designates a manager may remove or
replace that manager from the board of managers at any time.
OPERATING AGREEMENT OF PGCL
Pursuant to the terms of PGCL's operating agreement, if we repay, redeem or
refinance 90% or more of the notes on or prior to July 1, 2003, certain members
of management, including
49
<PAGE>
Messrs. Luzich and Stevens, will be entitled to receive, at Mr. Stevens'
discretion, an aggregate of $1.5 million payable by PGCL.
ENGAGEMENT OF MANAGEMENT CONSULTANT
We have engaged Riviera Gaming Management, Inc. to assist, on an interim
basis, with certain transitional matters, including the selection of a new chief
operating officer to oversee our riverboat casino operations. Riviera Gaming
Management, Inc., a wholly-owned subsidiary of Riviera Holdings Corporation,
which owns the Riviera Hotel & Casino in Las Vegas, Nevada, will be paid
customary fees and expenses in connection with this engagement. Mr. Westerman, a
manager on the board of managers of PGP, is Chairman of the Board of Riviera,
Inc., an affiliate of Riviera Gaming Management, Inc.
50
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT; REGISTRATION RIGHTS
On July 15, 1999, we sold the old notes in a private placement to Jefferies
& Co., Inc., as the initial purchaser. The initial purchaser then resold the old
notes under an offering circular dated July 8, 1999 in reliance on Rule 144A,
and other available exemptions under the Securities Act of 1933, as amended. On
July 15, 1999, we also entered into a registration rights agreement with the
initial purchaser pursuant to which we agreed, among other things, to:
- file a registration statement with the Securities and Exchange Commission
relating to the exchange offer under the Securities Act of 1933 no later
than October 13, 1999;
- use our best efforts to cause the exchange offer registration statement to
be declared effective under the Securities Act of 1933 on or before
December 13, 1999;
- use our commercially reasonable efforts to commence the exchange offer
within 30 days after the exchange offer registration statement is declared
effective by the Securities and Exchange Commission;
- keep the exchange offer open for acceptance for at least 30 days after
notice of the exchange offer is mailed to holders of the old notes;
- keep the exchange offer registration statement effective until
consummation of the exchange offer;
- cause the exchange offer to be consummated not later than 30 business days
following the date of the effectiveness of the exchange offer registration
statement;
- promptly after the close of the exchange offer, accept for exchange all
old notes validly tendered for exchange prior to the expiration of the
exchange offer;
- promptly after the close of the exchange offer, deliver all validly
tendered old notes to the Firstar Bank, N.A., the trustee, and cause the
trustee to promptly deliver new notes to each holder equal in aggregate
principal amount to the old notes tendered for exchange by such holder.
Under the registration rights agreement, we agreed to file a shelf
registration statement if:
- we or the holders of a majority in aggregate principal amount of the old
notes determine, in our or their reasonable judgment, that they will not
receive new notes that they may resell to the public without volume
restriction under the Securities Act of 1933 and without similar
restriction under applicable blue sky or state securities laws;
- we are not permitted to effect the exchange offer under applicable law or
applicable interpretations of law by the Securities and Exchange
Commission staff;
- for any reason, the exchange offer is not consummated by January 11, 2000;
or
- within six months of the consummation of the exchange offer, any holder of
old notes notifies us that it:
(1) is not entitled to participate in the exchange offer; or
(2) may not resell the new notes acquired by it in the exchange offer to
the public without restriction under applicable state and federal securities
laws.
If we have not yet filed an exchange offer registration statement and we are
required to file a shelf registration statement, we must file the shelf
registration statement prior to October 13, 1999. If we have filed an exchange
offer registration statement and we are required to file a shelf registration
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<PAGE>
statement, we must use our commercially reasonable efforts to file the shelf
registration statement relating to the old notes on or before the 20th day after
the obligation to file the shelf registration statement arises. We will use our
best efforts to cause the shelf registration statement to be declared effective
as promptly as practicable after the filing thereof.
If the shelf registration statement is filed, we will use our best efforts
to keep the shelf registration statement continuously effective, supplemented
and amended until the second anniversary of the effective date of the shelf
registration statement or a shorter period that will terminate when all the
notes covered by the shelf registration statement have been sold pursuant to the
shelf registration statement or a subsequent shelf registration statement
covering all of the old notes has been declared effected under the Securities
Act.
A holder who sells old notes pursuant to the shelf registration statement
generally will be required to be named as a selling securityholder in the
prospectus and to deliver a copy of the prospectus to purchasers. If we are
required to file a shelf registration statement, we will provide to each holder
of the old notes copies of the prospectus that is a part of the shelf
registration statement and notify each such holder when the shelf registration
statement becomes effective. Such holder will be subject to some of the civil
liability provisions under the Securities Act of 1933 in connection with these
sales and will be bound by the provisions of the registration rights agreement
that are applicable to such holder (including certain indemnification and
contribution obligations).
The registration rights agreement requires us to pay the holders of the
notes additional interest if a registration default exists. A registration
default will exist if:
- we fail to file any of the registration statements required by the
registration rights agreement on or prior to the date specified for such
filing;
- any of such registration statements is not declared effective by the
Securities and Exchange Commission on or prior to the date specified for
such effectiveness;
- we have not exchanged new notes for all validly tendered old notes within
30 days after the exchange offer is declared effective by the Securities
and Exchange Commission; or
- the shelf registration statement is declared effective but thereafter,
during the period for which we are required to maintain the effectiveness
of the shelf registration statement, it ceases to be effective or usable
in connection with the resale of the new notes covered by the shelf
registration statement, and we fail to file and have declared effective a
subsequent shelf registration statement.
If a registration default exists, the Issuers will pay liquidated damages to
each holder of registrable notes, during the first 90-day period immediately
following the occurrence of such registration default in an amount equal to $.05
per week per $1,000 principal amount of notes held by such Holder. Thereafter,
the weekly liquidated damages amount will increase by $.05 per $1,000 principal
amount of the notes following each subsequent 90-day period following such
registration default up to a maximum of $.20 per week per $1,000 principal
amount of notes, until the registration default is cured. All accrued liquidated
damages will be paid in the same manner as interest payments on the notes on
semiannual damages payment dates that correspond to interest payment dates for
the notes. Following the cure of a registration default, the accrual of
liquidated damages will cease.
The exchange offer is intended to satisfy our exchange offer obligations
under the registration rights agreement. The above summary of the registration
rights agreements is not complete and is subject to, and qualified by reference
to, all of the provisions of the registration rights agreement. A copy of the
registration rights agreement is filed as an exhibit to the registration
statement that includes this prospectus.
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<PAGE>
If you participate in the exchange offer, you will, with limited exceptions,
receive notes that are freely tradeable and not subject to restrictions on
transfer. You should read this prospectus under the heading "--Resales of the
New Notes" for more information relating to your ability to transfer new notes.
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or the acceptance of the exchange offer would not be in compliance with
the securities laws or blue sky laws of such jurisdiction.
EXPIRATION DATE; EXTENSIONS
The expiration date at the exchange offer is , 1999 at 5:00
p.m., New York City time. We may extend the exchange offer in our sole
discretion. If we extend the exchange offer, the expiration date will be the
latest date and time to which the exchange offer is extended. We will notify the
exchange agent of any extension by oral or written notice and will make a public
announcement of the extension no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
We expressly reserve the right, in our sole and absolute discretion:
- to delay accepting any old notes;
- to extend the exchange offer;
- if any of the conditions under "--Conditions of the Exchange Offer" have
not been satisfied, to terminate the exchange offer; and
- to waive any condition or otherwise amend the terms of the exchange offer
in any manner.
If the exchange offer is amended in a manner we deem to constitute a
material change, we will promptly disclose the amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
old notes. Any delay in acceptance, extension, termination or amendment will be
followed promptly by an oral or written notice of the event to the exchange
agent. We will also make a public announcement of the event. Without limiting
the manner in which we may choose to make any pubic announcement and subject to
applicable law, we have no obligation to publish, advertise or otherwise
communicate any such pubic announcement other than by issuing a release to a
national news service.
TERMS OF THE EXCHANGE OFFER
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the accompanying letter of transmittal, to exchange
$1,000 in principal amount of new notes for each $1,000 in principal amount of
outstanding old notes. We will accept for exchange any and all old notes that
are validly tendered on or before 5:00 p.m., New York City time, on the
expiration date. Tenders of the old notes may be withdrawn at any time before
5:00 p.m., New York City time, on the expiration date. The exchange offer is not
conditioned upon any minimum principal amount of old notes being tendered for
exchange. However, the exchange offer is subject to the terms of the
registration rights agreement and the satisfaction of the conditions described
under "--Conditions of the Exchange Offer." Old notes may be tendered only in
multiples of $1,000. Holders may tender less than the aggregate principal amount
represented by their old notes if they appropriately indicate this fact on the
letter of transmittal accompanying the tendered old notes or indicate this fact
pursuant to the procedures for book-entry transfer described below.
As of the date of this prospectus, $71.0 million in aggregate principal
amount of the old notes were outstanding. Solely for reasons of administration,
we have fixed the close of business on , 1999 as the record date for
purposes of determining the persons to whom this prospectus and the letter
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<PAGE>
of transmittal will be mailed initially. Only a holder of the old notes (or such
holder's legal representative or attorney-in-fact) whose ownership is reflected
in the records of Firstar Bank, N.A., as registrar, or whose notes are held of
record by the depositary, may participate in the exchange offer. There will be
no fixed record date for determining the eligible holders of the old notes who
are entitled to participate in the exchange offer. We believe that, as of the
date of this prospectus, no holder is our "affiliate" (as defined in Rule 405
under the Securities Act of 1933).
We will be deemed to have accepted validly tendered old notes when, as and
if we give oral or written notice of our acceptance to the exchange agent. The
exchange agent will act as agent for the tendering holders of old notes and for
purposes of receiving the new notes from us. If any tendered old notes are not
accepted for exchange because of an invalid tender or otherwise, certificates
for the unaccepted old notes will be returned, without expense, to the tendering
holder as promptly as practicable after the expiration date.
Holders of old notes do not have appraisal or dissenters' rights under
applicable law or the indenture as a result of the exchange offer. We intend to
conduct the exchange offer in accordance with the applicable requirements of the
Securities Exchange Act of 1934 and the rules and regulations under the
Securities Exchange Act of 1934, including Rule 14e-1.
Holders who tender their old notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of old
notes pursuant to the exchange offer. We will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
exchange offer. See "--Fees and Expenses."
NEITHER WE NOR OUR MANAGING MEMBER MAKES ANY RECOMMENDATION TO HOLDERS OF
OLD NOTES AS TO WHETHER TO TENDER ANY OF THEIR OLD NOTES PURSUANT TO THE
EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO
PARTICIPATE IN THE EXCHANGE OFFER AND, IF THE HOLDER CHOOSES TO PARTICIPATE IN
THE EXCHANGE OFFER, THE AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES TO TENDER, AFTER
READING CAREFULLY THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING
WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND
REQUIREMENTS.
CONDITIONS OF THE EXCHANGE OFFER
You must tender your old notes in accordance with the requirements of this
prospectus and the letter of transmittal in order to participate in the exchange
offer.
Notwithstanding any other provision of the exchange offer, or any extension
of the exchange offer, we will not be required to accept for exchange any old
notes, and we may terminate or amend the exchange offer if we are not permitted
to effect the exchange offer under applicable law or any interpretation of
applicable law by the staff of the Securities and Exchange Commission. If we
determine in our sole discretion that any of these events or conditions has
occurred, we may, subject to applicable law, terminate the exchange offer and
return all old notes tendered for exchange or may waive any condition or amend
the terms of the exchange offer.
We expect that the above conditions will be satisfied. The above conditions
are for our sole benefit and may be waived by us at any time in our sole
discretion. Our failure at any time to exercise any of the above rights will not
be a waiver of those rights and each right will be deemed an ongoing right that
may be asserted at any time. Any determination by us concerning the events
described above will be final and binding upon all parties.
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<PAGE>
INTEREST
Each new note will bear interest from the most recent date to which interest
has been paid or duly provided for on the old note surrendered in exchange for
such new note or, if no interest has been paid or duly provided for on such old
note, from July 15, 1999. Holders of the old notes whose old notes are accepted
for exchange will not receive accrued interest on their old notes for any period
from and after the last interest payment date to which interest has been paid or
duly provided for on their old notes prior to the original issue date of the new
notes or, if no such interest has been paid or duly provided for, will not
receive any accrued interest on their old notes, and will be deemed to have
waived the right to receive any interest on their old notes accrued from and
after such interest payment date or, if no such interest has been paid or duly
provided for, from and after July 15, 1999.
PROCEDURES FOR TENDERING OLD NOTES
The tender of a holder's old notes and our acceptance of old notes will
constitute a binding agreement between the tendering holder and us upon the
terms and conditions of this prospectus and the letter of transmittal. Unless a
holder tenders old notes according to the guaranteed delivery procedures or the
book-entry procedures described below, the holder must transmit the old notes,
together with a properly completed and executed letter of transmittal and all
other documents required by the letter of transmittal, to the exchange agent at
its address before 5:00 p.m., New York City time, on the expiration date. The
method of delivery of old notes, letters of transmittal and all other required
documents is at the election and risk of the tendering holder. If delivery is by
mail, we recommend delivery by registered mail, properly insured, with return
receipt requested. Instead of delivery by mail, we recommend that each holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure timely delivery.
Any beneficial owner of the old notes whose old notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender old notes in the exchange offer should contact that
registered holder promptly and instruct that registered holder to tender on its
behalf. If the beneficial owner wishes to tender directly, it must, prior to
completing and executing the letter of transmittal and tendering old notes, make
appropriate arrangements to register ownership of the old notes in its name.
Beneficial owners should be aware that the transfer of registered ownership may
take considerable time.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the old notes by causing DTC to
transfer the old notes into the exchange agent's account in accordance with
DTC's procedures for such transfer. To be timely, book-entry delivery of old
notes requires receipt of a confirmation of a book-entry transfer before the
expiration date. Although delivery of the old notes may be effected through
book-entry transfer into the exchange agent's account at DTC, the letter of
transmittal, properly completed and executed, with any required signature
guarantees and any other required documents or an agent's message (as described
below), must in any case be delivered to and received by the exchange agent at
its address on or before the expiration date, or the guaranteed delivery
procedure set forth below must be complied with.
DTC has confirmed that the exchange offer is eligible for DTC's Automated
Tender Offer Program. Accordingly, participants in DTC's Automated Tender Offer
Program may, instead of physically completing and signing the applicable letter
of transmittal and delivering it to the exchange agent, electronically transmit
their acceptance of the exchange offer by causing DTC to transfer old notes to
the exchange agent in accordance with DTC's Automated Tender Offer Program
procedures for transfer. DTC will then send an agent's message to the exchange
agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, which states
that DTC has received an express acknowledgment from a participant in DTC's
Automated Tender Offer Program that is tendering old
55
<PAGE>
notes that are the subject of such book-entry confirmation; that the participant
has received and agrees to be bound by the terms of the applicable letter of
transmittal or, in the case of an agent's message relating to guaranteed
delivery, that the participant has received and agrees to be bound by the
applicable notice of guaranteed delivery; and that we may enforce such agreement
against that participant.
Each signature on a letter of transmittal or a notice of withdrawal must be
guaranteed unless the old notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Delivery Instructions"; or
- for the account of an eligible institution (as described below).
If a signature on a letter of transmittal or a notice of withdrawal is
required to be guaranteed, the signature must be guaranteed by a participant in
a recognized Medallion Signature Program (a "Medallion Signature Guarantor"). If
the letter of transmittal is signed by a person other than the registered holder
of the old notes, the old notes surrendered for exchange must be endorsed by the
registered holder, with the signature guaranteed by a Medallion Signature
Guarantor. If any letter of transmittal, endorsement, bond power, power of
attorney or any other document required by the letter of transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should sign in that capacity when signing. Such person must submit
to us evidence satisfactory, in our sole discretion, of his or her authority to
so act unless we waive such requirement.
As used in this prospectus with respect to the old notes, a "registered
holder" is any person in whose name the old notes are registered on the books of
the registrar. An "eligible institution" is a firm that is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or any other "eligible guarantor institution"
as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
We will determine in our sole discretion all questions as to the validity,
form, eligibility (including time of receipt), acceptance and withdrawal of old
notes tendered for exchange. Our determination will be final and binding. We
reserve the absolute right to reject old notes not properly tendered and to
reject any old notes if acceptance might, in our judgment or our counsel's
judgment, be unlawful. We also reserve the absolute right to waive any defects
or irregularities or conditions of the exchange offer as to particular old notes
at any time, including the right to waive the ineligibility of any holder who
seeks to tender old notes in the exchange offer.
Our interpretation of the terms and conditions of the exchange offer,
including the letter of transmittal and its instructions, will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of old notes for exchange must be cured within such
period of time as we determine. Neither our company nor the exchange agent is
under any duty to give notification of defects in such tenders or will incur any
liability for failure to give such notification. The exchange agent will use
reasonable efforts to give notification of defects or irregularities with
respect to tenders of old notes for exchange but will not incur any liability
for failure to give such notification. Tenders of old notes will not be deemed
to have been made until such irregularities have been cured or waived.
By tendering, you will represent to us that, among other things:
- you are not our "affiliate" (as defined in Rule 405 under the Securities
Act of 1933);
- you will acquire the new notes in the ordinary course of your business;
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<PAGE>
- you are not a broker-dealer that acquired your notes directly from us in
order to resell them pursuant to Rule 144A under the Securities Act of
1933 or any other available exemption under the Securities Act of 1933;
- if you are a broker-dealer that acquired your notes as a result of
market-making or other trading activities, you will deliver a prospectus
in connection with any resale of new notes; and
- you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate in the
distribution of the new notes.
In connection with a book-entry transfer, each participant will confirm that
it makes the representations and warranties contained in the letter of
transmittal.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your old notes and:
- your old notes are not immediately available;
- you are unable to deliver on time your old notes or any other document
that you are required to deliver to the exchange agent; or
- you cannot complete the procedures for delivery by book-entry transfer on
time;
you may tender your old notes according to the guaranteed delivery procedures
described in the letter of transmittal. Those procedures require that:
- tender must be made by or through an eligible institution and a notice of
guaranteed delivery must be signed by the holder;
- on or before the expiration date, the exchange agent must receive from the
holder and the eligible institution a properly completed and executed
notice of guaranteed delivery by mail or hand delivery setting forth the
name and address of the holder, the certificate number or numbers of the
tendered old notes and the principal amount of tendered old notes; and
- properly completed and executed documents required by the letter of
transmittal and the tendered old notes in proper form for transfer or
confirmation of a book-entry transfer of such old notes into the exchange
agent's account at DTC must be received by the exchange agent within four
business days after the expiration date of the exchange offer.
Any holder who wishes to tender old notes pursuant to the guaranteed
delivery procedures must ensure that the exchange agent receives the notice of
guaranteed delivery and letter of transmittal relating to such old notes before
5:00 p.m., New York City time, on the expiration date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the exchange offer, we
will accept old notes that are properly tendered in the exchange offer prior to
5:00 p.m., New York City time, on the expiration date. The new notes will be
delivered promptly after acceptance of the old notes. For purposes of the
exchange offer, we will be deemed to have accepted validly tendered old notes
when, as and if we have given notice to the exchange agent.
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<PAGE>
WITHDRAWAL RIGHTS
Tenders of the old notes may be withdrawn by delivery of a written or
facsimile transmission notice to the exchange agent at its address set forth
under "--The Exchange Agent; Assistance" at any time before 5:00 p.m., New York
City time, on the expiration date. Any such notice of withdrawal must:
- specify the name of the person having deposited the old notes to be
withdrawn;
- identify the old notes to be withdrawn, including the certificate number
or numbers and principal amount of such old notes, or, in the case of old
notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which old notes were tendered, including any
required signature guarantees, or be accompanied by a bond power in the
name of the person withdrawing the tender, in satisfactory form as
determined by us in our sole discretion, executed by the registered
holder, with the signature guaranteed by a Medallion Signature Guarantor,
together with the other documents required upon transfer by the indenture;
and
- specify the name in which the old notes are to be re-registered, if
different from the person who deposited the old notes.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by us, in our sole discretion. Any
old notes withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer and will be returned to the holder
without cost as soon as practicable after withdrawal. Properly withdrawn old
notes may be retendered pursuant to the procedures described under "--Procedures
for Tendering Old Notes" at any time on or before the expiration date.
THE EXCHANGE AGENT; ASSISTANCE
Firstar Bank, N.A. is the exchange agent. All tendered old notes, executed
letters of transmittal and other related documents should be directed to the
exchange agent. Questions and requests for assistance and requests for
additional copies of the prospectus, the letter of transmittal and other related
documents should be addressed to the exchange agent as follows:
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT COURIER:
<S> <C>
Firstar Bank, N.A. Firstar Bank, N.A.
101 East Fifth Street 101 East Fifth Street
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
</TABLE>
BY TELEPHONE OR FACSIMILE:
Phone: (651) 229-2600 Facsimile: (651) 229-6415
FEES AND EXPENSES
We will bear the expenses of soliciting old notes for exchange. The
principal solicitation is being made by mail by the exchange agent. Additional
solicitation may be made by telephone, facsimile or in person by officers and
regular employees of our company and our affiliates and by persons so engaged by
the exchange agent.
We will pay the exchange agent reasonable and customary fees for its
services and will reimburse the exchange agent for its reasonable out-of-pocket
expenses in connection with its services and pay other registration expenses,
including fees and expenses of the trustee under the indenture, filing fees,
blue sky fees and printing and distribution expenses.
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We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptance of the exchange offer.
We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. If, however, a transfer tax is imposed for
any reason other than the exchange of old notes pursuant to the exchange offer,
then the amount of those transfer taxes, whether imposed on the registered
holder or any other persons, will be payable by the tendering holder. If
satisfactory evidence of payment of those taxes or exemption is not submitted
with the letter of transmittal, the amount of those transfer taxes will be
billed directly to such tendering holder.
ACCOUNTING TREATMENT
The new notes will be recorded at the same carrying value as the old notes,
as reflected in our accounting records on the date of the exchange. Accordingly,
we will recognize no gain or loss for accounting purposes. The expenses of the
exchange offer will be amortized over the term of the new notes.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
As a result of this exchange offer, we will have fulfilled most of our
obligations under the registration rights agreement. Holders who do not tender
their old notes, except for certain instances involving the initial purchasers
or holders of old notes who are not eligible to participate in the exchange
offer or who do not receive freely transferrable new notes pursuant to the
exchange offer, will not have any further registration rights under the
registration rights agreement or otherwise and will not have rights to receive
additional interest. Accordingly, any holder who does not exchange its old notes
for new notes will continue to hold the untendered old notes and will be
entitled to all the rights and subject to all the limitations applicable under
the indenture, except to the extent that such rights or limitations, by their
terms, terminate or cease to have further effectiveness as a result of the
exchange offer.
Any old notes that are not exchanged for new notes pursuant to the exchange
offer will remain restricted securities within the meaning of the Securities Act
of 1933. In general, such old notes may be resold only:
- to our company or any of our subsidiaries;
- inside the United States to a "qualified institutional buyer" in
compliance with Rule 144A under the Securities Act of 1933;
- inside the United States to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933) or an "accredited investor" that, prior to such transfer, furnishes
or has furnished on its behalf by a U.S. broker-dealer to the trustee
under the indenture a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the new notes, the
form of which letter can be obtained from the trustee;
- outside the United States in compliance with Rule 904 under the Securities
Act of 1933;
- pursuant to the exemption from registration provided by Rule 144 under the
Securities Act of 1933, if available; or
- pursuant to an effective registration statement under the Securities Act
of 1933.
Each accredited investor that is not a qualified institutional buyer and
that is an original purchaser of any of the old notes from the initial
purchasers will be required to sign a letter confirming that it is
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an accredited investor under the Securities Act of 1933 and that it acknowledges
the transfer restrictions summarized above.
RESALES OF THE NEW NOTES
We are making the exchange offer in reliance on the position of the staff of
the Securities and Exchange Commission as set forth in interpretive letters
addressed to third parties in other transactions. However, we have not sought
our own interpretive letter. Although there has been no indication of any change
in the staff's position, we cannot assure you that the staff of the Securities
and Exchange Commission would make a similar determination with respect to the
exchange offer as it has in its interpretive letters to third parties. Based on
these interpretations by the staff, and except as provided below, we believe
that new notes may be offered for resale, resold and otherwise transferred by a
holder who participates in the exchange offer and is not a broker-dealer without
further compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933. In order to receive new notes that are freely
tradeable, a holder must acquire the new notes in the ordinary course of its
business and may not participate, or have any arrangement or understanding with
any person to participate, in the distribution (within the meaning of the
Securities Act of 1933) of the new notes. Holders wishing to participate in the
exchange offer must make the representations described in "--Procedures for
Tendering Old Notes" above.
Any holder of old notes:
- who is our "affiliate" (as defined in Rule 405 under the Securities Act of
1933);
- who did not acquire the new notes in the ordinary course of its business;
- who is a broker-dealer that purchased old notes from us to resell them
pursuant to Rule 144A under the Securities Act of 1933 or any other
available exemption under the Securities Act of 1933; or
- who intends to participate in the exchange offer for the purpose of
distributing (within the meaning of the Securities Act of 1933) new notes;
will be subject to separate restrictions. Each holder in any of the above
categories:
- will not be able to rely on the interpretations of the staff of the
Securities Act of 1933 in the above-mentioned interpretive letters;
- will not be permitted or entitled to tender old notes in the exchange
offer; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933 in connection with any sale or other transfer
of old notes, unless such sale is made pursuant to an exemption from such
requirements.
In addition, if you are a broker-dealer holding old notes acquired for your
own account, then you may be deemed a statutory "underwriter" within the meaning
of the Securities Act of 1933 and must deliver a prospectus meeting the
requirements of the Securities Act of 1933 in connection with any resales of
your new notes. Each broker-dealer that receives new notes for its own account
pursuant to the exchange offer must acknowledge that it acquired the old notes
for its own account as a result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act of 1933 in connection with any resale of
those new notes. The letter of transmittal states that, by making the above
acknowledgment and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933.
Based on the position taken by the staff of the Securities and Exchange
Commission in the interpretive letters referred to above, we believe that
broker-dealers that acquired old notes for their
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own accounts, as a result of market-making or other trading activities
("Participating Broker-Dealers"), may fulfill their prospectus delivery
requirements with respect to the new notes received upon exchange of old notes
(other than old notes that represent an unsold allotment from the original sale
of the old notes) with a prospectus meeting the requirements of the Securities
Act of 1933, which may be the prospectus prepared for an exchange offer so long
as it contains a description of the plan of distribution with respect to the
resale of such new notes. Accordingly, this prospectus, as it may be amended or
supplemented, may be used by a Participating Broker-Dealer during the period
referred to below in connection with resales of new notes received in exchange
for old notes where such old notes were acquired by the Participating
Broker-Dealer for its own account as a result of market-making or other trading
activities. Subject to the provisions of the registration rights agreement, we
have agreed that this prospectus may be used by a Participating Broker-Dealer in
connection with resales of such new notes. See "Plan of Distribution." However,
a Participating Broker-Dealer that intends to use this prospectus in connection
with the resale of new notes received in exchange for old notes pursuant to the
exchange offer must notify us, or cause us to be notified, on or before the
expiration date of the exchange offer, that it is a Participating Broker-Dealer.
Such notice may be given in the space provided for that purpose in the letter of
transmittal or may be delivered to the exchange agent at the address set forth
under "--The Exchange Agent; Assistance." Any Participating Broker-Dealer that
is our "affiliate" may not rely on such interpretive letters and must comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933 in connection with any resale transaction.
Each Participating Broker-Dealer that tenders old notes pursuant to the
exchange offer will be deemed to have agreed, by execution of the letter of
transmittal, that upon receipt of notice from us of the occurrence of any event
or the discovery of any fact that makes any statement contained in this
prospectus untrue in any material respect or that causes this prospectus to omit
to state a material fact necessary in order to make the statements contained
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of other events specified in the registration rights
agreement, such Participating Broker-Dealer will suspend the sale of new notes
pursuant to this prospectus until we have amended or supplemented this
prospectus to correct such misstatement or omission and have furnished copies of
the amended or supplemented prospectus to the Participating Broker-Dealer or we
have given notice that the sale of the new notes may be resumed, as the case may
be.
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DESCRIPTION OF THE NOTES
The old notes were, and the new notes will be, issued as a single series of
securities pursuant to an indenture, dated as of July 15, 1999, among Peninsula
Gaming Company, LLC and Peninsula Gaming Corp., as issuers, and Firstar Bank,
N.A. (formerly known as Firstar Bank of Minnesota, N.A.), as trustee. The form
and terms of the new notes are substantially identical to the form and terms of
the old notes, except that the new notes:
- will be registered under the Securities Act of 1933; and
- will not bear any legends restricting transfer.
The new notes will be issued solely in exchange for an equal principal
amount of old notes, in registered form, without coupons and in denominations of
$1,000 and integral multiples thereof. As of the date of this prospectus, $71.0
million aggregate principal amount of old notes is outstanding.
In the following summaries:
- "new notes" refers to the registered notes being offered by this
prospectus;
- "old notes" refers to your old notes that may be exchanged for new notes
in the exchange offer;
- "notes" refers collectively to the new notes and the old notes;
- "Peninsula Gaming Company" refers only to Peninsula Gaming Company, LLC.
and not to its wholly-owned subsidiary Peninsula Gaming Corp.;
- "PGC" refers to Peninsula Gaming Corp., our only wholly-owned subsidiary.
PGC was incorporated solely for the purpose of serving as a co-issuer of
the notes in order to facilitate the offering of the notes. PGC does not
have any operations or assets and does not have any revenues. Investors
should not expect PGC 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 PGC."
The following summaries of certain provisions of the indenture, the Security
Documents (defined below) and the registration rights agreement among the
issuers of the notes and the initial purchaser are not complete and are subject
to all the provisions of the indenture, the Security Documents and the
Registration rights agreement, including the definitions therein of certain
terms used below. The terms of the new notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939, as amended. The new notes are subject to all such terms,
and the holders of the notes are referred to the indenture and the Trust
Indenture Act for a statement thereof. Wherever we refer to particular sections
or defined terms used in the indenture, such sections or defined terms are
automatically incorporated into this prospectus. We have filed a copy of the
indenture with the Securities and Exchange Commission and the indenture is
incorporated by reference into the registration statement. We will provide
copies of the indenture, the Security Documents and the registration rights
agreement upon request. The meanings of some of the terms that are important in
understanding the following summaries are set forth below under the subheading
"Certain Definitions."
Under certain circumstances, the Company may designate certain Subsidiaries
formed or acquired after the Issue Date as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to any of the restrictive
covenants set forth in the indenture.
PRINCIPAL, MATURITY AND INTEREST
The indenture does not limit the aggregate principal amount of notes that
may be issued thereunder and provides that, subject to the covenant in the
indenture described under "--Certain
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Covenants--Limitation on Incurrence of Indebtedness," additional notes may be
issued thereunder from time to time, without the consent of the Holders of
previously issued notes, in an aggregate principal amount to be determined from
time to time by the Issuers; PROVIDED, that additional notes may not be issued
with original issue discount as determined under section 1271 ET SEQ. of the
Internal Revenue Code of 1986, as amended (the "Code"). The notes will mature on
July 1, 2006. Interest on the notes is payable semiannually on July 1 and
January 1 of each year, commencing on January 1, 2000, to Holders of record on
the immediately preceding June 15 and December 15, respectively. The notes bear
interest at 12 1/4% per annum from the date of original issuance. Interest on
the notes accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of original issuance. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day months. The
notes are payable both as to principal and interest at the office or agency of
the Issuers maintained for such purpose within the City of New York or, at the
option of the Issuers, payment of interest may be made by check mailed to the
Holders at their respective addresses set forth in the register of Holders.
Until otherwise designated by the Issuers, the Issuers' office or agency will be
the office of the Trustee maintained for such purpose. If a payment date is a
Legal Holiday, payment may be made at that place on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening period.
The Trustee is presently our Paying Agent and Registrar. The Issuers may
change the Paying Agent or Registrar without prior notice to Holders and,
subject to certain exceptions, the Issuers or any of their respective
Subsidiaries may act as Paying Agent or Registrar.
REDEMPTION
AT THE OPTION OF THE COMPANY. Except as set forth below, the notes are not
redeemable at the Issuers' option prior to July 1, 2003. Thereafter, the notes
will be subject to redemption at the option of the Issuers, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest thereon, if any, to the applicable date of redemption, if
redeemed during the 12-month period beginning on July 1 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2003.............................................................................. 108.00%
2004.............................................................................. 105.33%
2005 and thereafter............................................................... 102.67%
</TABLE>
Notwithstanding the foregoing, at any time or from time to time prior to
July 1, 2002, the Issuers may redeem, at their option, up to 35% of the
aggregate principal amount of the notes then outstanding at a redemption price
of 112.25% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, through the applicable date of redemption, with the net cash
proceeds of one or more Equity Offerings; PROVIDED, that (i) such redemption
shall occur within 60 days of the date of closing of such Equity Offering and
(ii) at least 65% of the aggregate principal amount of notes issued on or after
the Issue Date remains outstanding immediately after giving effect to each such
redemption.
The restrictions on the optional redemption contained in the notes do not
limit the Company's right to separately make open market, privately negotiated
or other purchases of the notes from time to time.
REQUIRED REGULATORY REDEMPTION. Notwithstanding any other provisions
hereof, notes to be redeemed pursuant to a Required Regulatory Redemption are
redeemable by the Issuers, in whole or in part, at any time upon not less than
20 Business Days nor more than 60 days notice (or such earlier date as may be
ordered by any Governmental Authority) at a price equal to the lesser of (i) the
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Holder's cost thereof and (ii) 100% of the principal amount thereof, plus in
either case accrued and unpaid interest thereon, if any, to the date of
redemption (or such earlier period as ordered by a Governmental Authority).
Under the indenture, the Issuers are not required to pay or reimburse any Holder
or beneficial owner of the notes for the expenses of any such Holder or
beneficial owner related to the application for any Gaming License,
qualification or finding of suitability in connection with a Required Regulatory
Redemption. Such expenses of any such Holder or beneficial owner will,
therefore, be the obligation of such Holder or beneficial owner.
MANDATORY. The notes are not entitled to any mandatory redemption (except
for a Required Regulatory Redemption) or have the benefit of any sinking fund.
REDEMPTION PROCEDURES. 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 deems to be fair and
appropriate; PROVIDED, that notes in denominations of $1,000 or less may not be
redeemed in part. Except in the case of a Required Regulatory Redemption
requiring less notice, notice of redemption will be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each Holder
to be redeemed at such Holder's registered address. If any note is to be
redeemed in part only, the notice of redemption that relates to such note will
state the portion of the principal amount thereof to be redeemed. A new note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original note. On and after
the date of redemption, interest will cease to accrue on notes or portions
thereof called for redemption, unless the Issuers default in making such
redemption payment.
SUBSIDIARY GUARANTORS
The repayment of the notes is unconditionally and irrevocably guaranteed,
jointly and severally, by all future Restricted Subsidiaries. On the Issue Date,
the Company had no Subsidiaries other than PGC (which is a co-issuer and
co-obligor of the notes). The indenture provides that, so long as any notes
remain outstanding, any future Restricted Subsidiary shall enter into a
Subsidiary Guaranty.
If all of the Capital Stock of any Subsidiary Guarantor is sold by the
Company or any of its Subsidiaries to a Person (other than the Company or any of
its Subsidiaries) and the Net Proceeds from such Asset Sale are used in
accordance with the terms of the covenant described under "--Limitation on Asset
Sales," then such Subsidiary Guarantor shall be released and discharged from all
of its Obligations under its Subsidiary Guaranty and the indenture.
The Obligations of each Subsidiary Guarantor under its Subsidiary Guaranty
are limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the Obligations of such other Subsidiary
Guarantor under its Subsidiary Guaranty, result in the Obligations of such
Subsidiary Guarantor under its Subsidiary Guaranty not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law and not rendering a
Subsidiary Guarantor insolvent.
SECURITY
The Company will assign and pledge, or cause to be assigned and pledged, as
collateral (the "Collateral") to the Trustee, for the benefit of the Trustee and
the Holders, as security for the Issuers' obligations with respect to the notes
all of its interest in:
(i) the riverboat and the land-based facility comprising the Diamond Jo,
including without limitation all leased property;
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(ii) all real property and all additions or improvements thereon;
(iii) substantially all of its furniture, fixtures and equipment,
inventory, accounts, contract rights and other general intangibles,
trademarks and trade names; and
(iv) the Company's cash that is deposited in certain designated deposit
accounts.
Notwithstanding the foregoing, the Collateral shall not include the Excluded
Assets. In addition, there can be no assurance that the security interest in the
cash that constitutes collateral can be perfected under applicable laws.
The security interest in favor of the Trustee and the Holders was created in
the riverboat Collateral pursuant to a first preferred ship mortgage (the "Ship
Mortgage"), in real property Collateral pursuant to a mortgage (the "Shore
Mortgage" and, together with the Ship Mortgage, the "Mortgages"), and in all
other Collateral pursuant to a security agreement from the Company (and any
future Subsidiary Guarantors) in favor of the Trustee (the "Security Agreement"
and, together with the Mortgages, the "Security Documents"). The Trustee's
security interest in the Collateral is subordinated to a lien securing
Indebtedness outstanding under the Senior Credit Facility. In connection with
incurring any such Indebtedness, the Trustee is permitted to enter into an
Intercreditor Agreement substantially in the form of the Intercreditor Agreement
attached as an exhibit to the indenture.
The proceeds of any sale of the Collateral by the Trustee following an Event
of Default may not be sufficient to satisfy payments due on the notes. No
appraisals of any of the Collateral have been prepared in connection with the
offering of the notes. Moreover, the amount to be received upon such sale will
be dependent upon numerous factors, including the condition, age and useful life
of the Collateral at the time of such sale, as well as the timing and manner of
such sale. By its nature, all or some of the Collateral is illiquid and may have
no readily ascertainable market value. Additionally, due to certain applicable
gaming, real estate, bankruptcy, securities and other laws, the ability of the
Trustee on behalf of the Holders to exercise certain remedies under the
indenture and the Security Documents may be materially and adversely affected.
Accordingly, there can be no assurance that the Collateral, if saleable, can be
sold in a short period of time on commercially reasonable terms, if at all. See
"Risk Factors--Collateral."
If an Event of Default occurs and is continuing, the Trustee, on behalf of
the Holders, in addition to any rights or remedies available to it under the
indenture and the Security Documents, may, subject to the Intercreditor
Agreement, take such action as it deems advisable to protect and enforce its
rights in the Collateral, including the institution of sale or foreclosure
proceedings. While Indebtedness is outstanding under the Senior Credit Facility,
rights of the Holders and the Trustee are subject to the terms of the
Intercreditor Agreement. The proceeds received by the Trustee from any such sale
or foreclosure will, subject to the Intercreditor Agreement, be applied by the
Trustee first to pay the expenses of such sale or foreclosure and fees and other
amounts then payable to the Trustee under the indenture, and thereafter to pay
amounts due and payable with respect to the notes.
CERTAIN GAMING LAW LIMITATIONS. The Trustee's ability to foreclose upon the
Collateral is limited by relevant gaming laws, which generally require that
Persons who own or operate a casino or purchase or sell gaming equipment hold a
valid gaming license or permit and require the approval of the Gaming Commission
for any transfer of a Gaming License. No Person can hold a gaming license in the
State of Iowa unless that Person is found qualified and suitable by the relevant
Gaming Authorities. In order for the Trustee to be found qualified and suitable,
such Gaming Authorities would have discretionary authority to require the
Trustee and any or all of the Holders to file applications, be investigated and
be found qualified or suitable as an owner or operator of gaming establishments.
The applicant for qualification, a finding of suitability or licensing must pay
all costs of such investigation. If the Trustee is unable or chooses not to
qualify, be found suitable, or be licensed to own or operate such assets, it
would have to retain an entity so qualified, suitable or licensed to own or
operate such
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assets or another entity that could obtain the appropriate license to own or
operate such assets. This licensing process requires a considerable amount of
time, taking several months at a minimum. In addition, in any foreclosure sale
or subsequent resale by the Trustee, licensing requirements under the relevant
gaming laws may limit the number of potential bidders and may delay any sale,
either of which events could have an adverse effect on the sale price of such
Collateral. Therefore, the practical value of realizing on the Collateral may,
without the appropriate Gaming Authority approval or timeliness, be limited.
Moreover, if a Default occurred after a disapproval of gaming in the 2002
Referendum, the Gaming Authority might be legally prohibited from permitting the
existing license to be transferred or from issuing a new license for the Diamond
Jo. See "Risk Factors--Reauthorization of Gaming in Dubuque County, Iowa."
CERTAIN BANKRUPTCY LIMITATIONS. The right of the Trustee to repossess and
dispose of the Collateral upon the occurrence of an Event of Default is likely
to be significantly impaired by applicable bankruptcy laws if a bankruptcy
proceeding were to be commenced by or against either of the Issuers prior to the
Trustee having repossessed and disposed of the Collateral. Under the Bankruptcy
Code, a secured creditor is prohibited from repossessing its security from a
debtor in a bankruptcy case, or from disposing of security repossessed from such
debtor, without bankruptcy court approval. Moreover, the Bankruptcy Code permits
the debtor to continue to retain and to use collateral owned as of the date of
the bankruptcy filing (and the proceeds, products, offspring, rents or profits
of such collateral to the extent provided by the security documents with respect
to such collateral and by applicable non-bankruptcy law) even though the debtor
is in default under the applicable debt instruments; PROVIDED, that the secured
creditor is given "adequate protection." The meaning of the term "adequate
protection" may vary according to circumstances. In view of the lack of a
precise definition of the term "adequate protection" and the broad discretionary
powers of a bankruptcy court, it is impossible to predict how long payments
under the notes could be delayed following commencement of a bankruptcy case,
whether or when the Trustee could repossess or dispose of the Collateral or
whether or to what extent Holders would be compensated for any delay in payment
or loss of value of the Collateral through the requirement of "adequate
protection." Furthermore, in the event a bankruptcy court determines the value
of the Collateral is not sufficient to repay all amounts due on the notes, the
Holders would hold secured claims only to the extent of the value of the
Collateral to which the Holders are entitled, and would hold unsecured claims
with respect to such shortfall. Applicable federal bankruptcy laws do not permit
the payment and/or accrual of post-petition interest, costs and attorneys' fees
during a debtor's bankruptcy case unless the claims are oversecured or the
debtor is solvent at the time of reorganization. In addition, if either Issuer
becomes the subject of a bankruptcy case, the bankruptcy court, among other
things, may avoid certain transfers made by the entity that is the subject of
the bankruptcy filing, including, without limitation, transfers held to be
fraudulent conveyances or preferences.
Further, certain limitations exist under the Merchant Marine Act of 1936 on
the ability of non-U.S. citizens to realize upon collateral consisting of
vessels documented under the laws of the United States. To the extent that the
Holders are non-U.S. citizens, such limitation could adversely affect the
ability of the Trustee to complete a foreclosure on the Collateral. This
ownership limitation may also reduce the number of potential purchasers of the
riverboat Collateral if the Trustee seeks to sell the riverboat Collateral as a
means of repaying the notes. The Trustee may be required to foreclose through a
federal admiralty court proceeding. Such a proceeding would entail compliance
with notice and other procedural requirements, and could require posting of a
substantial bond.
REPURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Issuers will offer to
repurchase all of the notes then outstanding (the "Change of Control Offer") at
a purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase (the "Change of
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Control Payment"). Within 30 days following any Change of Control, the Issuers
must mail or cause to be mailed a notice to each Holder stating, among other
things:
(i) the purchase price and the purchase date, which will be no earlier
than 30 days nor later than 45 days from the date such notice is mailed (the
"Change of Control Payment Date");
(ii) that any Holder electing to have notes purchased pursuant to a
Change of Control Offer will be required to surrender the notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
notes completed, to the paying agent with respect to the notes (the "Paying
Agent") at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment
Date; and
(iii) that the Holder will be entitled to withdraw such election if the
Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have such notes
purchased.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the notes in connection with a Change of Control. To the extent
that the provisions of any securities laws or regulations conflict with the
"Change of Control" provisions of the indenture, the Issuers will comply with
the applicable securities laws and regulations and shall not be deemed to have
breached their obligations under the "Change of Control" provisions of the
indenture by virtue thereof.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (i) accept for payment the notes or portions thereof tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all notes or portions
thereof so tendered and not withdrawn, and (iii) deliver or cause to be
delivered to the Trustee the notes so accepted, together with an Officers'
Certificate stating that the notes or portions thereof tendered to the Issuers
are accepted for payment. The Paying Agent will promptly mail to each Holder of
notes so accepted payment in an amount equal to the purchase price for such
notes, and the Trustee will authenticate and mail (or cause to be transferred by
book entry) to each Holder a new note equal in principal amount to any
unpurchased portion of the notes surrendered, if any; PROVIDED, that each such
new note will be in the principal amount of $1,000 or an integral multiple
thereof. The Issuers will announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the indenture
does not contain provisions that permit the Holders to require that the Issuers
repurchase or redeem the notes in the event of a takeover, recapitalization or
similar restructuring.
There can be no assurance that sufficient funds will be available at the
time of any Change of Control Offer to make required repurchases.
The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by the Issuers,
and purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.
The use of the term "all or substantially all" in provisions of the
indenture such as in the definition of "Change of Control" and under "--Merger,
Consolidation or Sale of Assets" has no clearly established meaning under New
York law (which governs the indenture) and has been the
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subject of limited judicial interpretation in only a few jurisdictions.
Accordingly, there may be a degree of uncertainty in ascertaining whether any
particular transaction would involve a disposition of "all or substantially all"
of the assets of a Person. As a consequence, in the event the Holders elect to
exercise their rights under the indenture and the Issuers elect to contest such
election, there could be no assurance as to how a court would interpret the
phrase under New York law, which may have the effect of preventing the Trustee
or the Holders from successfully asserting that a Change of Control has
occurred.
Management of the Company has no present intention to engage in a
transaction involving a Change of Control, although it is possible that the
Company could determine to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the indenture, but that
would increase the amount of Indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to incur additional Indebtedness are contained in the
covenant described under "--Limitation on Incurrence of Indebtedness." Such
restrictions can only be waived with the consent of the holders of a majority in
principal amount of the notes then outstanding. Except for the limitations
contained in such covenant, however, the indenture will not contain any
covenants or protections that may afford Holders protection in the event of a
highly leveraged transaction.
EXCESS CASH FLOW OFFER
Within 120 days after the end of each Hotel Operating Year, the Issuers will
make an offer to all Holders (the "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 Excess Cash Flow for such Operating Year (the
"Excess Cash Flow Offer Amount"), at a purchase price in cash equal to 101% of
the principal amount of the notes to be purchased, plus accrued and unpaid
interest to the date fixed for the closing of the Excess Cash Flow Offer. The
indenture provides that each Excess Cash Flow Offer will remain open for a
period of 20 Business Days and no longer, unless a longer period is required by
law (the "Excess Cash Flow Offer Period"). Promptly after the termination of the
Excess Cash Flow Offer Period, the Issuers will purchase and mail or deliver
payment for the Excess Cash Flow Offer Amount for the notes or portions thereof
tendered, PRO RATA or by such other method as may be required by law, or, if
less than the Excess Cash Flow Offer Amount has been tendered, all notes
tendered pursuant to the Excess Cash Flow Offer. The principal amount of notes
to be purchased pursuant to an Excess Cash Flow Offer may be reduced by the
principal amount of notes acquired by the Issuers through purchase or redemption
(other than pursuant to a Change of Control Offer or Excess Proceeds Offer)
surrendered to the Trustee for cancellation. If the aggregate amount of notes
tendered pursuant to any Excess Cash Flow Offer is less than the Excess Cash
Flow Offer Amount, the Company may, subject to the other provisions of the
indenture and the Collateral Documents, use any remaining Excess Cash Flow for
general corporate purposes.
Each Excess Cash Flow Offer will be conducted in compliance with applicable
regulations under the Federal securities laws, including Exchange Act Rule
14e-1. To the extent that the provisions of any securities laws or regulations
conflict with the Excess Cash Flow Offer provisions of the indenture, the
Issuers will comply with the applicable securities laws and regulations and
shall not be deemed to have breached their obligations under the Excess Cash
Flow Offer provisions of the indenture by virtue thereof.
The indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, create or suffer to exist or become effective
any restriction that would impair the ability of the Issuers to make an Excess
Cash Flow Offer or, if such Excess Cash Flow Offer is made, to pay for the notes
tendered for purchase.
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There can be no assurance the Hotel will become Operating or, once
Operating, that sufficient funds will be available at the time of any Excess
Cash Flow Offer to make required repurchases.
CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly
(i) declare or pay any dividend or make any distribution on account of
any Equity Interests of the Company or any of its Subsidiaries or make any
other payment to any Excluded Person or Affiliate thereof (other than (a)
dividends or distributions payable in Equity Interests (other than
Disqualified Capital Stock) of the Company or (b) amounts payable to the
Company or any Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interest of the Company, any Subsidiary or any other Affiliate of the
Company (other than any such Equity Interest owned by the Company or any
Restricted Subsidiary);
(iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of the Company or any
Subsidiary Guarantor that is subordinated in right of payment to the notes
or such Subsidiary Guarantor's Subsidiary Guaranty thereof, as the case may
be, prior to any scheduled principal payment, sinking fund payment or other
payment at the stated maturity thereof; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
such Restricted Payment:
(a) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof, and
(b) immediately after giving effect to such Restricted Payment on a PRO
FORMA basis, the Company could incur at least $1.00 of additional
Indebtedness under the Interest Coverage Ratio test set forth in the
covenant described under "--Limitation on Incurrence of Indebtedness," and
(c) such Restricted Payment (the value of any such payment, if other
than cash, being determined in good faith by the Managers of the Company and
evidenced by a resolution set forth in an Officers' Certificate delivered to
the Trustee), together with the aggregate of all other Restricted Payments
made after the Issue Date (including Restricted Payments permitted by
clauses (i) and (ii) of the next following paragraph and excluding
Restricted Payments permitted by the other clauses therein), is less than
the sum of:
(1) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing immediately after the Issue Date to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, 100% of such
deficit), plus
(2) 100% of the aggregate net cash proceeds (or of the net cash
proceeds received upon the conversion of non-cash proceeds into cash)
received by the Company from the issuance or sale, other than to a
Subsidiary, of Equity Interests of the Company (other than Disqualified
Capital Stock) after the Issue Date and on or prior to the time of such
Restricted Payment, plus
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(3) 100% of the aggregate net cash proceeds (or of the net cash
proceeds received upon the conversion of non-cash proceeds into cash)
received by the Company from the issuance or sale, other than to a
Subsidiary, of any convertible or exchangeable debt security of the
Company that has been converted or exchanged into Equity Interests of the
Company (other than Disqualified Capital Stock) pursuant to the terms
thereof after the Issue Date and on or prior to the time of such
Restricted Payment (including any additional net proceeds received by the
Company upon such conversion or exchange), plus
(4) the aggregate Return from Unrestricted Subsidiaries after the
Issue Date and on or prior to the time of such Restricted Payment.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would not
have been prohibited by the provisions of the indenture;
(ii) the redemption, purchase, retirement or other acquisition of any
Equity Interests of the Company or Indebtedness of the Company or any
Restricted Subsidiary in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary) of, other Equity
Interests of the Company (other than Disqualified Capital Stock);
(iii) with respect to each tax year that the Company qualifies as a Flow
Through Entity, and for so long as no Event of Default exists or would occur
as a consequence thereof, the payment of Permitted Tax Distributions;
PROVIDED, that (A) prior to the first payment of Permitted Tax Distributions
during the calendar year the Company provides an Officers' Certificate and
Opinion of Counsel to the effect that the Company and each Subsidiary in
respect of which such distributions are being made qualify as Flow Through
Entities for Federal income tax purposes and for the states in respect of
which such distributions are being made and (B) at the time of such
distribution, the most recent audited financial statements of the Company
provided to the Trustee pursuant to the covenant described under the caption
"--Reports," provide that the Company and each such Subsidiary were treated
as Flow Through Entities for the period of such financial statements;
(iv) the redemption, repurchase or payoff of any Indebtedness of the
Company or a Restricted Subsidiary with proceeds of any Refinancing
Indebtedness permitted to be incurred pursuant to the provision described
under "--Limitation on Incurrence of Indebtedness";
(v) distributions to PGP for (A) reasonable tax preparation, accounting,
legal and administrative fees and expenses incurred on behalf of the Issuers
or in connection with PGP's ownership of the Issuers, consistent with
industry practice and (B) compensation to PGP executive officers pursuant
to, and in accordance with, consulting agreements in effect on the Issue
Date;
(vi) payments on or with respect to the redemption of Seller Preferred
in an aggregate amount not to exceed $3.0 million;
(vii) reasonable and customary directors fees to, and indemnity provided
on behalf of, the Managers of PGP and the Company, and customary
reimbursement of travel and similar expenses incurred in the ordinary course
of business;
(viii) payment of a fee to certain members of management of PGCL and
PGP, including Mr. Luzich and Mr. Stevens, in the aggregate amount of $1.5
million, which fee shall be paid, at the discretion of Mr. Stevens, in the
event that we redeem or refinance 90% or more of the notes on or prior to
July 1, 2003; and
(ix) Restricted Payments in an aggregate amount not to exceed $1.0
million.
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Not later than the date of making any Restricted Payment, the Company will
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements.
LIMITATION ON INCURRENCE OF INDEBTEDNESS. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, (i)
create, incur, issue, assume, guaranty or otherwise become directly or
indirectly liable with respect to, contingently or otherwise (collectively,
"incur"), any Indebtedness (including, without limitation, Acquired Debt) or
(ii) issue any Disqualified Capital Stock; PROVIDED, that the Company may incur
Indebtedness (including, without limitation, Acquired Debt) and issue shares of
Disqualified Capital Stock (and a Restricted Subsidiary may incur Acquired Debt)
if (a) no Default or Event of Default shall have occurred and be continuing at
the time of, or would occur after giving effect on a PRO FORMA basis to such
incurrence or issuance, and (b) the Interest Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Capital Stock is issued would have
been not less than 2.0 to 1.0 for the period from the Issue Date through, but
not including, January 1, 2003, and 2.25 to 1.0 thereafter, in each case,
determined on a PRO FORMA basis (including a PRO FORMA application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Capital Stock had been issued, as the case may be, at the beginning
of such four-quarter period; PROVIDED, that in the case of Indebtedness (other
than Indebtedness outstanding under the Senior Credit Facility, Purchase Money
Obligations, Capital Lease Obligations or Acquired Debt), the Weighted Average
Life to Maturity and final stated maturity of such Indebtedness is equal to or
greater than the Weighted Average Life to Maturity and final stated maturity of
the notes.
Notwithstanding the foregoing, the foregoing limitations will not prohibit
the incurrence of:
(i) Indebtedness under the Senior Credit Facility; PROVIDED,that the
aggregate principal amount of Indebtedness so incurred on any date, together
with all other Indebtedness incurred pursuant to this clause (i) and
outstanding on such date, shall not exceed (a) $10.0 million if such date is
on or prior to the 90th day following the date on which the Hotel is first
Operating, or $5.0 million if such date is after such 90th day, less (b) the
aggregate amount of commitment reductions contemplated by clause (iii) under
the caption "--Limitation on Asset Sales;"
(ii) Capital Lease Obligations or Purchase Money Obligations; PROVIDED,
that the aggregate principal amount of Indebtedness so incurred on any date,
together with all other Indebtedness incurred pursuant to this clause (ii)
and outstanding on such date, shall not exceed $2.5 million, at any time;
(iii) performance bonds, appeal bonds, surety bonds, insurance
obligations or bonds and other similar bonds or obligations (including
Obligations under bankers acceptances and letters of credit) incurred in the
ordinary course of business (including, without limitation, to maintain any
licenses or permits);
(iv) Hedging Obligations incurred to fix the interest rate on any
variable rate Indebtedness otherwise permitted by the indenture; PROVIDED,
that the notional principal amount of each such Hedging Obligation does not
exceed the principal amount of the Indebtedness to which such Hedging
Obligation relates;
(v) Indebtedness of the Company or any Subsidiary Guarantor owed to and
held by a Subsidiary Guarantor or the Company, as the case may be, that is
unsecured and subordinated in right of payment to the notes or the
Subsidiary Guaranty, as the case may be; PROVIDED, that any subsequent
issuance or transfer of any Capital Stock that results in any such
Subsidiary Guarantor ceasing to be a Subsidiary Guarantor or any transfer of
such Indebtedness (other than to the
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Company or a Subsidiary Guarantor) shall be deemed, in each case, to
constitute the incurrence of such Indebtedness by the Company or such
Subsidiary Guarantor;
(vi) Indebtedness outstanding on the Issue Date, including the notes
outstanding on the Issue Date;
(vii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds
in the ordinary course of business;
(viii) any Subsidiary Guaranty of the notes; and
(ix) Indebtedness issued in exchange for, or the proceeds of which are
substantially contemporaneously used to extend, refinance, renew, replace,
or refund (collectively, "Refinance"), Indebtedness incurred pursuant to the
Interest Coverage Ratio test set forth in the immediately preceding
paragraph, clause (vi) above or this clause (ix) (the "Refinancing
Indebtedness"); PROVIDED, that (a) the principal amount of such Refinancing
Indebtedness does not exceed the principal amount of Indebtedness so
Refinanced (plus any required premiums and out-of-pocket expenses reasonably
incurred in connection therewith), (b) the Refinancing Indebtedness has a
final scheduled maturity that equals or exceeds the final stated maturity,
and a Weighted Average Life to Maturity that is equal to or greater than the
Weighted Average Life to Maturity, of the Indebtedness being Refinanced and
(c) the Refinancing Indebtedness ranks, in right of payment, no more
favorable to the notes or applicable Subsidiary Guaranty, as the case may
be, than the Indebtedness being Refinanced.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any
Restricted Subsidiary to, make any Asset Sale unless
(i) the Company or such Restricted Subsidiary receives consideration at
the time of such Asset Sale not less than the fair market value of the
assets subject to such Asset Sale;
(ii) at least 75% of the consideration for such Asset Sale is in the
form of cash or Cash Equivalents or liabilities of the Company or any
Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the notes or any Subsidiary Guaranty) that are assumed by
the transferee of such assets (PROVIDED, that following such Asset Sale
there is no further recourse to the Company or its Restricted Subsidiaries
with respect to such liabilities); and
(iii) within 270 days of such Asset Sale, the Net Proceeds thereof are
(a) invested in assets related to the business of the Company or its
Restricted Subsidiaries (which, in the case of an Asset Sale of the Diamond
Jo or any replacement Gaming Vessel (a "Replacement Vessel"), must be a
Gaming Vessel having a fair market value, as determined by an independent
appraisal, at least equal to the fair market value of the Diamond Jo or such
Replacement Vessel immediately preceding such Asset Sale), (b) applied to
repay Indebtedness under Purchase Money Obligations incurred in connection
with the assets so sold, (c) applied to repay Indebtedness under the Senior
Credit Facility and permanently reduce the commitment thereunder in the
amount of the Indebtedness so repaid or (d) to the extent not used as
provided in clauses (a), (b), or (c) or any combination thereof, applied to
make an offer to purchase notes as described below (an "Excess Proceeds
Offer"); PROVIDED, that the Company will not be required to make an Excess
Proceeds Offer until the amount of Excess Proceeds is greater than $5.0
million.
The provisions in clauses (i) and (ii) above shall not apply to an Event of
Loss.
Pending the final application of any Net Proceeds, the Company may
temporarily reduce Indebtedness under the Senior Credit Facility or temporarily
invest such Net Proceeds in Cash Equivalents.
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Net Proceeds not invested or applied as set forth in the preceding clauses
(a), (b) or (c) constitute "Excess Proceeds." If the Company elects, or becomes
obligated to make an Excess Proceeds Offer, the Issuers will offer to purchase
notes having an aggregate principal amount equal to the Excess Proceeds (the
"Purchase Amount"), at a purchase price equal to 100% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, to the purchase date.
The Issuers must commence such Excess Proceeds Offer not later than 30 days
after the expiration of the 270 day period following the Asset Sale that
produced such Excess Proceeds. If the aggregate purchase price for the notes
tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds,
the Company and its Restricted Subsidiaries may use the portion of the Excess
Proceeds remaining after payment of such purchase price for general corporate
purposes.
The indenture provides that each Excess Proceeds Offer will remain open for
a period of 20 Business Days and no longer, unless a longer period is required
by law (the "Excess Proceeds Offer Period"). Promptly after the termination of
the Excess Proceeds Offer Period, the Issuers will purchase and mail or deliver
payment for the Purchase Amount for the notes or portions thereof tendered, PRO
RATA or by such other method as may be required by law, or, if less than the
Purchase Amount has been tendered, all notes tendered pursuant to the Excess
Proceeds Offer. The principal amount of notes to be purchased pursuant to an
Excess Proceeds Offer may be reduced by the principal amount of notes acquired
by the Issuers through purchase or redemption (other than pursuant to a Change
of Control Offer or an Excess Cash Flow Offer) subsequent to the date of the
Asset Sale and surrendered to the Trustee for cancellation.
Each Excess Proceeds Offer will be conducted in compliance with applicable
regulations under the Federal securities laws, including Exchange Act Rule
14e-1. To the extent that the provisions of any securities laws or regulations
conflict with the "Asset Sale" provisions of the indenture, the Issuers will
comply with the applicable securities laws and regulations and shall not be
deemed to have breached their obligations under the "Asset Sale" provisions of
the indenture by virtue thereof.
The indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, create or suffer to exist or become effective
any restriction that would impair the ability of the Issuers to make an Excess
Proceeds Offer upon an Asset Sale or, if such Excess Proceeds Offer is made, to
pay for the notes tendered for purchase.
There can be no assurance that sufficient funds will be available at the
time of any Excess Proceeds Offer to make required repurchases.
LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset (including, without limitation, all real,
tangible or intangible property) of the Company or any Restricted Subsidiary,
whether now owned or hereafter acquired, or on any income or profits therefrom,
or assign or convey any right to receive income therefrom, except Permitted
Liens.
LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS. The Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions to the Company or any
of its Restricted Subsidiaries (a) on such Restricted Subsidiary's Capital
Stock or (b) with respect to any other interest or participation in, or
measured by, such Restricted Subsidiary's profits, or
(ii) pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries, or
(iii) make loans or advances to the Company or any of its Restricted
Subsidiaries, or
(iv) transfer any of its assets to the Company or any of its Restricted
Subsidiaries,
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except, with respect to clauses (i) through (iv) above, for such encumbrances or
restrictions existing under or by reason of:
(a) a Senior Credit Facility containing dividend or other payment
restrictions that are not more restrictive in any material respect than
those contained in the indenture on the Issue Date;
(b) the indenture, the Security Documents and the notes;
(c) applicable law or any applicable rule or order of any Governmental
Authority;
(d) Acquired Debt; PROVIDED, that such encumbrances and restrictions are
not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired;
(e) customary non-assignment and net worth provisions of any contract,
lease or license entered into in the ordinary course of business;
(f) customary restrictions on the transfer of assets subject to a
Permitted Lien imposed by the holder of such Lien;
(g) the agreements governing permitted Refinancing Indebtedness;
PROVIDED, that such restrictions contained in any agreement governing such
Refinancing Indebtedness are no more restrictive in any material respect
than those contained in any agreements governing the Indebtedness being
refinanced; and
(h) any restrictions with respect to a Restricted Subsidiary imposed
pursuant to a binding agreement that has been entered into for the sale or
disposition of all or substantially all of the Equity Interests or assets of
such Restricted Subsidiary; PROVIDED, that such restrictions only apply to
the Equity Interests or assets of such Restricted Subsidiary being sold.
MERGER, CONSOLIDATION OR SALE OF ASSETS. Neither Issuer may consolidate or
merge with or into (regardless of whether such Issuer is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets (determined on a
consolidated basis for the Company and its Restricted Subsidiaries) in one or
more related transactions to, any other Person, unless:
(i) such Issuer is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than such Issuer) or to
which such sale, assignment, transfer, lease, conveyance or other
disposition has been made is a corporation organized and existing under the
laws of the United States of America, any state thereof or the District of
Columbia;
(ii) the Person formed by or surviving any such consolidation or merger
(if other than such Issuer) or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition has been made assumes all
the Obligations of such Issuer, pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee, under the notes, the indenture,
the Security Documents and the Registration rights agreement;
(iii) immediately after giving effect to such transaction on a PRO FORMA
basis, no Default or Event of Default exists;
(iv) such transaction would not result in the loss or suspension or
material impairment of any Gaming License unless a comparable replacement
Gaming License is effective prior to or simultaneously with such loss,
suspension or material impairment; and
(v) such Issuer, or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made, (a) has Consolidated Net
Worth (immediately after the transaction but prior to any purchase
accounting adjustments resulting from the transaction) equal to or greater
than the Consolidated
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Net Worth of such Issuer immediately preceding the transaction and (b) will
be permitted, at the time of such transaction and after giving PRO FORMA
effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, to incur at least $1.00 of additional
Indebtedness pursuant to the Interest Coverage Ratio test set forth in the
covenant described under "--Limitation on Incurrence of Indebtedness."
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which such Issuer is not the surviving Person, such surviving Person or
transferee shall succeed to, and be substituted for, and may exercise every
right and power of, such Issuer under, and such Issuer shall be discharged from
its Obligations under, the indenture, the notes, the Security Documents and the
Registration rights agreement, with the same effect as if such successor Person
had been named as such Issuer herein or therein.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guaranty with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), except for:
(i) Affiliate Transactions that, together with all related Affiliate
Transactions, have an aggregate value of not more than $1.0 million;
PROVIDED, that such transactions are conducted in good faith and on terms
that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction at such time by the Company or such Restricted Subsidiary on an
arm's-length basis from a Person that is not an Affiliate of the Company or
such Restricted Subsidiary;
(ii) Affiliate Transactions that, together with all related Affiliate
Transactions, have an aggregate value of not more than $5.0 million;
PROVIDED, that (a) a majority of the disinterested Managers of the Company
or, if none, a disinterested committee appointed by the Managers of the
Company for such purpose, determine that such transactions are conducted in
good faith and on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction at such time by the Company or such Restricted
Subsidiary on an arm's-length basis from a Person that is not an Affiliate
of the Company or such Restricted Subsidiary and (b) prior to entering into
such transaction the Company shall have delivered to the Trustee an
Officers' Certificate certifying to such effect; or
(iii) Affiliate Transactions for which the Company delivers to the
Trustee an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing.
Notwithstanding the foregoing, the following will be deemed not to be
Affiliate Transactions:
(a) transactions between or among the Issuers and/or any or all of the
Subsidiary Guarantors;
(b) Restricted Payments permitted by the provisions of the indenture
described above under "--Limitations on Restricted Payments"; and
(c) reasonable and customary compensation paid to officers, employees or
consultants of PGP, the Company or any Restricted Subsidiary, in each case
for services provided to the Company or any Restricted Subsidiary, as
determined in good faith by the Managers or senior executives of the
Company.
RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY STOCK. The Company will not,
and will not permit any Restricted Subsidiary to, issue or sell any Equity
Interests (other than directors' qualifying shares) of any Restricted Subsidiary
to any Person other than the Company or a Wholly Owned Subsidiary of the
Company; PROVIDED, that the Company and its Restricted Subsidiaries may sell all
(but not less than
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all) of the Capital Stock of a Restricted Subsidiary owned by the Company and
its Restricted Subsidiaries if the Net Proceeds from such Asset Sale are used in
accordance with the terms of the covenant described under "--Limitation on Asset
Sales."
RULE 144A INFORMATION REQUIREMENT. The Issuers (and the Subsidiary
Guarantors) will furnish to the Holders or beneficial holders of notes, upon
their written request, and to prospective purchasers thereof designated by such
Holders or beneficial holders, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act for so long as is required for an
offer or sale of the notes to qualify for an exemption under Rule 144A.
SUBSIDIARY GUARANTORS. The Issuers will cause each Restricted Subsidiary to
(i) execute and deliver to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee, pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Issuers' Obligations under
the notes and the indenture on the terms set forth in the indenture and (ii)
deliver to the Trustee an Opinion of Counsel that such supplemental indenture
has been duly authorized, executed and delivered by such Restricted Subsidiary
and constitutes a legal, valid, binding and enforceable obligation, of such
Restricted Subsidiary, in each case subject to customary qualifications.
Thereafter, such Restricted Subsidiary shall be a Subsidiary Guarantor for all
purposes of the indenture.
ADDITIONAL COLLATERAL. The Company will, and will cause each of the
Subsidiary Guarantors to, grant to the Trustee a first priority security
interest in all Collateral, whether owned on the Issue Date or thereafter
acquired, and to execute and deliver all documents and to take all action
reasonably necessary to perfect and protect such a security interest in favor of
the Trustee.
RESTRICTIONS ON ACTIVITIES OF PGC. PGC may not hold any assets, become
liable for any obligations or engage in any business activities; PROVIDED, that
PGC 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.
LIMITATION ON LINES OF BUSINESS. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly engage to any
material extent in any line or lines of business activity other than that which,
in the reasonable good faith judgment of the Managers of the Company, is a
Related Business.
REPORTS. Regardless of whether required by the rules and regulations of the
Securities and Exchange Commission (the "Commission"), so long as any notes are
outstanding, the Company will furnish to the Trustee and Holders, within 15 days
after the Company is or would have been required to file such with the
Commission, (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including for each a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's independent certified public accountants and (ii) all
information that would be required to be contained in a filing with the
Commission on Form 8-K if the Company were required to file such reports. From
and after the time the Company files a registration statement with the
Commission with respect to the notes, the Company will file such information
with the Commission so long as the Commission will accept such filings.
EVENTS OF DEFAULT AND REMEDIES
Each of the following constitutes an Event of Default under the indenture:
(i) default for 30 days in the payment when due of interest on the
notes;
(ii) default in payment of principal (or premium, if any) on the notes
when due at maturity, redemption, by acceleration or otherwise;
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(iii) default in the performance or breach of the covenants in the
indenture described under "--Repurchase Upon Change of Control,"
"--Limitation on Restricted Payments," "--Limitation on Asset Sales," or
"--Merger, Consolidation or Sale of Assets;"
(iv) failure by the Issuers or any Subsidiary Guarantor for 60 days
after notice to comply with any other agreements in the indenture or the
notes;
(v) a default occurs under (after giving effect to any waivers,
amendments, applicable grace periods or any extension of any maturity date)
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed
by the Issuers or any Restricted Subsidiary (or the payment of which is
guaranteed by the Issuers or any Restricted Subsidiary), whether such
Indebtedness or guaranty now exists or is created after the Issue Date, if
(a) either (1) such default results from the failure to pay principal of or
interest on such Indebtedness or (2) as a result of such default the
maturity of such Indebtedness has been accelerated, and (b) the principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness with respect to which such a payment default (after the
expiration of any applicable grace period or any extension of the maturity
date) has occurred, or the maturity of which has been so accelerated,
exceeds $5.0 million in the aggregate;
(vi) failure by the Issuers or any Subsidiary to pay final judgments
(other than to the extent of any judgment as to which a reputable insurance
company has accepted liability) aggregating in excess of $5.0 million, which
judgments are not discharged, bonded or stayed within 60 days after their
entry;
(vii) the cessation of substantially all gaming operations of the
Company for more than 60 days, except as a result of an Event of Loss;
(viii) any revocation, suspension, expiration (without previous or
concurrent renewal) or loss of any Gaming License of the Company for more
than 90 days;
(ix) any event of default under a Security Document; and
(x) certain events of bankruptcy or insolvency with respect to the
Issuers or any of the Subsidiary Guarantors.
If an Event of Default occurs and is continuing, the Trustee may declare by
written notice to the Issuers, or the Holders of at least 25% in principal
amount of the then outstanding notes may declare by written notice to the
Issuers and the Trustee all the notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding notes will become
due and payable without further action or notice. Holders may not enforce the
indenture or the notes except as provided in the indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
notes may direct the Trustee in its exercise of any trust or power.
The Holders of a majority in aggregate principal amount of the notes then
outstanding, by written notice to the Trustee, may on behalf of the Holders of
all of the notes (i) waive any existing Default or Event of Default and its
consequences under the indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the notes or a Default or an
Event of Default with respect to any covenant or provision which cannot be
modified or amended without the consent of the Holder of each outstanding note
affected, and/or (ii) rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree if all existing Events
of Default (except nonpayment of principal or interest that has become due
solely because of the acceleration) have been cured or waived.
The Issuers are required, upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or Event
of Default and what action the Issuers are taking or propose to take with
respect thereto.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator, stockholder, member or
controlling person of either of the Issuers or any Subsidiary Guarantor, as
such, will have any liability for any obligations of either of the Issuers or
any Subsidiary Guarantor under the notes, the indenture, the Security Documents
or the registration rights agreement or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a
note waives and releases all such liability. The waiver and release is part of
the consideration for issuance of the notes and the Subsidiary Guarantees. Such
waiver may not be effective to waive liabilities under the federal securities
laws, and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of their
obligations discharged with respect to the outstanding notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding notes to
receive payments in respect of the principal of, premium, if any, and interest
on such notes when such payments are due from the trust referred to below, (ii)
the Issuers' obligations concerning issuing temporary notes, registration of
notes, mutilated, destroyed, lost or stolen notes and the maintenance of an
office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and the
Issuers' and the Subsidiary Guarantors' obligations in connection therewith and
(iv) the Legal Defeasance provisions of the indenture.
In addition, the Issuers may, at their option and at any time, elect to have
their obligations released with respect to certain material covenants that are
described herein ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default" will no longer constitute
an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Issuers must irrevocably deposit with the Trustee, in trust, or
the benefit of the Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Issuers must specify whether the notes are
being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Issuers shall have delivered
to the Trustee an Opinion of Counsel confirming that (a) the Issuers have
received from, or there has been published by, the Internal Revenue Service
a ruling or (b) since the Issue Date, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such Opinion of 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 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;
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(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit);
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the indenture) to which the Issuers or any of the
Subsidiaries is a party or by which the Issuers or any of the Subsidiaries
is bound;
(vi) the Issuers must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Issuers with the intent of
preferring the Holders over the other creditors of the Issuers with the
intent of defeating, hindering, delaying or defrauding creditors of the
Issuers or others; and
(vii) each of the Issuers must deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating, subject to certain
factual assumptions and bankruptcy and insolvency exceptions, that all
conditions precedent provided for in the indenture relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange notes in accordance with the indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
indenture. The Issuers will not be required to transfer or exchange any note
selected for redemption. The Issuers will not be required to transfer or
exchange any note for a period of 15 days before a selection of notes to be
redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the two succeeding paragraphs, the indenture and the
notes may be amended or supplemented with the consent of the Holders of at least
a majority in aggregate principal amount of the notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for notes) and any existing Default or Event of Default (except certain payment
defaults) or compliance with any provision of the indenture or the notes may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the then outstanding notes (including consents obtained in connection
with a tender offer or exchange offer for notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting Holder):
(i) reduce the principal amount of notes whose Holders must consent to
an amendment, supplement or waiver;
(ii) reduce the principal of, or the premium (including, without
limitation, redemption premium) on, or change the fixed maturity of, any
note; alter the provisions with respect to the payment on redemption of the
notes; or alter the price at which repurchases of the notes may be made
pursuant to an Excess Proceeds Offer or Change of Control Offer;
(iii) reduce the rate of or change the time for payment of interest,
including default interest, on any note;
(iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on, or redemption payment with respect to,
any note (except a rescission of acceleration of
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the notes by the Holders of at least a majority in aggregate principal
amount of the notes and a waiver of the payment default that resulted from
such acceleration);
(v) make any note payable in money other than that stated in the notes;
(vi) make any change in the provisions of the indenture relating to
waivers of past Defaults with respect to, or the rights of Holders to
receive, payments of principal of or interest on the notes;
(vii) waive a redemption payment with respect to any note;
(viii) adversely affect the contractual ranking of the notes or
Subsidiary Guarantees; or
(ix) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of the Holders, the
Issuers, the Subsidiary Guarantors 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 any of the Issuers' or the Subsidiary
Guarantors' obligations to Holders in the case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders or that does not adversely affect the legal rights of any such Holder
under the indenture or the notes, to release any Subsidiary Guaranty permitted
to be released under the terms of the indenture, or to comply with requirements
of the Commission in order to effect or maintain the qualification of the
indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions; PROVIDED, that, if the Trustee acquires any conflicting interest,
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue, or resign.
The Holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs (and is not cured), the Trustee is required, in the exercise of its
power, to use the degree of care of a prudent person in the conduct of his or
her own affairs. Subject to such provisions, the Trustee is under no obligation
to exercise any of its rights or powers under the indenture at the request of
any Holder, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full definition of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"2002 REFERENDUM" means a gaming reauthorization referendum to be submitted
to the Dubuque County, Iowa electorate in the general election to be held in
2002.
"ACQUIRED DEBT" means Indebtedness of a Person existing at the time such
Person is merged with or into the Company or a Restricted Subsidiary or becomes
a Restricted Subsidiary, other than Indebtedness incurred in connection with, or
in contemplation of, such Person merging with or into the Company or a
Restricted Subsidiary or becoming a Restricted Subsidiary.
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"ACQUISITION" means the Company's acquisition on the Issue Date of the
Diamond Jo from Greater Dubuque Riverboat Entertainment Company, L.C. ("GDREC"),
pursuant to that certain Asset Purchase Agreement, dated as of January 15, 1999,
as amended, between PGP (formerly AB Capital, LLC) and GDREC (the "Asset
Acquisition Agreement"), and certain related real property from Harbor Community
Investment, L.C. ("HCI"), pursuant to that certain Real Property Purchase
Agreement, dated as of January 15, 1999, between PGP (formerly AB Capital, LLC)
and HCI.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, will mean
(a) the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise or (b) beneficial
ownership of 10% or more of the voting securities of such Person.
Notwithstanding the foregoing, the Initial Purchaser shall be deemed not to be
an Affiliates of PGP, the Company or any Restricted Subsidiary.
"APPLICABLE CAPITAL GAIN TAX RATE" means a rate equal to the sum of (a) the
highest marginal federal income tax rate applicable to net capital gain of an
individual who is a citizen of the United States plus (b) the greater of (i) an
amount equal to the sum of the highest marginal state and local income tax rates
applicable to net capital gain of an individual who is a resident of the State
of California and (ii) an amount equal to the sum of the highest marginal state
and local income tax rates applicable to net capital gain of an individual who
is a resident of the State of Iowa, multiplied by a factor equal to 1 minus such
highest marginal federal income tax rate described in (a) above.
"APPLICABLE INCOME TAX RATE" means a rate equal to the sum of (a) the
highest marginal federal ordinary income tax rate applicable to an individual
who is a citizen of the United States plus (b) the greater of (i) an amount
equal to the sum of the highest marginal state and local ordinary income tax
rates applicable to an individual who is a resident of the State of California
and (ii) an amount equal to the sum of the highest marginal state and local
ordinary income tax rates applicable to an individual who is a resident of the
State of Iowa, multiplied by a factor equal to 1 minus such highest marginal
federal income tax rate described in (a) above.
"ASSET SALE" means any (i) direct or indirect sale, assignment, transfer,
lease, conveyance, or other disposition (including, without limitation, by way
of merger or consolidation) (collectively, a "transfer"), other than in the
ordinary course of business, of any assets of the Company or any Restricted
Subsidiary; (ii) direct or indirect issuance or sale of any Capital Stock of any
Restricted Subsidiary (other than directors' qualifying shares), in each case to
any Person (other than the Company or a Restricted Subsidiary); or (iii) Event
of Loss. For purposes of this definition, (a) any series of transactions that
are part of a common plan shall be deemed a single Asset Sale and (b) the term
"Asset Sale" shall not include (1) any exchange of gaming equipment or
furniture, fixtures or other equipment for replacement items in the ordinary
course of business, (2) any series of transactions that have a fair market value
(or result in gross proceeds) of less than $1.0 million or (3) any disposition
of all or substantially all of the assets of the Company that is governed under
and complies with the terms of the covenant described under "--Certain
Covenants--Merger, Consolidation or Sale of Assets."
"BENEFICIAL OWNER" has the meaning attributed to it in Rules 13d-3 and 13d-5
under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, codified at 11
U.S.C. Section101-1330, as amended.
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"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, as to any Person, the obligations of such
Person under a lease that are required to be classified and accounted for as
capital lease obligations under GAAP, and the amount of such obligations at any
date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"CAPITAL STOCK" means, (i) with respect to any Person that is a corporation,
any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, (ii) with respect to a limited
liability company, any and all membership interests, and (iii) with respect to
any other Person, any and all partnership or other equity interests of such
Person.
"CASH EQUIVALENT" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $250.0 million and commercial paper issued by others rated at least
A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2
or the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition; (iii) investments in
money market funds substantially all of whose assets comprise securities of the
type described in clauses (i) and (ii) above and (iv) repurchase obligations for
underlying securities of the types and with the maturities described above.
"CHANGE OF CONTROL" means the occurrence of any of the following events:
(i) any merger or consolidation of the Company or PGP with or into any
Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company or PGP,
on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s),
any "person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable) (other than
an Excluded Person) is or becomes the "beneficial owner," directly or
indirectly, of more than 50% of the total voting power in the aggregate of
the Voting Stock of the transferee(s) or surviving entity or entities,
(ii) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable)
(other than an Excluded Person) is or becomes the "beneficial owner,"
directly or indirectly, of more than 50% of the total voting power in the
aggregate of the Voting Stock of the Company or PGP,
(iii) after any bona fide underwritten registered public offering of
Capital Stock of the Company, during any period of 24 consecutive months
after the Issue Date, individuals who at the beginning of any such 24-month
period constituted the Managers of the Company (together with any new
Managers whose election by such Managers or whose nomination for election by
the Members was approved by a vote of a majority of the Managers then still
in office who were either Managers at the beginning of such period or whose
election or nomination for election was previously so approved, including
new Managers designated in or provided for in an agreement regarding the
merger, consolidation or sale, transfer or other conveyance, of all or
substantially all of the assets of the Company, if such agreement was
approved by a vote of such majority of Managers) cease for any reason to
constitute a majority of the Managers of the Company then in office,
(iv) the Company adopts a plan of liquidation, or
(v) the first day on which the Company fails to own 99% of the issued
and outstanding Equity Interests of PGC.
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A "Change of Control" shall not occur solely by reason of a Permitted C-Corp
Conversion.
"COMPANY" means Peninsula Gaming Company, LLC, a Delaware limited liability
company.
"CONSOLIDATED EBITDA" means, with respect to any Person (the referent
Person) for any period, consolidated income (loss) from operations of such
Person and its subsidiaries for such period, determined in accordance with GAAP,
plus (to the extent such amounts are deducted in calculating such income (loss)
from operations of such Person for such period, and without duplication) (a)
amortization, depreciation and other non-cash charges (including, without
limitation, amortization of goodwill, deferred financing fees, and other
intangibles but excluding (i) non-cash charges incurred after the Issue Date
that require an accrual of or a reserve for cash charges for any future period
and (ii) normally recurring accruals such as reserves against accounts
receivables), and (b) non-capitalized transaction costs incurred in connection
with actual or proposed financings, acquisitions or divestitures, including the
offering of the notes; PROVIDED, that (i) the income from operations of any
Person that is not a Wholly Owned Subsidiary of the referent Person or that is
accounted for by the equity method of accounting will be included only to the
extent of the amount of dividends or distributions paid during such period to
the referent Person or a Wholly Owned Subsidiary of the referent Person, (ii)
the income from operations of any Person acquired in a pooling of interests
transaction for any period ending prior to the date of such acquisition will be
excluded, and (iii) the income from operations of any Restricted Subsidiary will
not be included to the extent that declarations of dividends or similar
distributions by that Restricted Subsidiary are not at the time permitted,
directly or indirectly, by operation of the terms of its organizational
documents or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
owners.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, (a) the consolidated interest expense of such Person and its
subsidiaries for such period, whether paid or accrued (including amortization of
original issue discount, noncash interest payment, and the interest component of
Capital Lease Obligations), to the extent such expense was deducted in computing
Consolidated Net Income of such Person for such period less (b) amortization
expense, write-off of deferred financing costs and any charge related to any
premium or penalty paid, in each case accrued during such period in connection
with redeeming or retiring any Indebtedness before its stated maturity, as
determined in accordance with GAAP, to the extent such expense, cost or charge
was included in the calculation made pursuant to clause (a) above.
"CONSOLIDATED NET INCOME" means, with respect to any Person (the referent
Person) for any period, the aggregate of the Net Income of such Person and its
subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; PROVIDED, that (i) the Net Income of any Person relating to any
portion of such period that such Person (a) is not a Wholly Owned Subsidiary of
the referent Person or (b) is accounted for by the equity method of accounting
will be included only to the extent of the amount of dividends or distributions
paid to the referent Person or a Wholly Owned Subsidiary of the referent Person
during such portion of such period, (ii) the Net Income of any Person acquired
in a pooling of interests transaction for any period ending prior to the date of
such acquisition will be excluded, and (iii) the Net Income of any Restricted
Subsidiary will not be included to the extent that declarations of dividends or
similar distributions by that Restricted Subsidiary are not at the time
permitted, directly or indirectly, by operation of the terms of its
organizational documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its owners.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the total
stockholders' (or members') equity of such Person determined on a consolidated
basis in accordance with GAAP, adjusted to exclude (to the extent included in
calculating such stockholders' (or members') equity), (i) the amount of any such
stockholders' (or members') equity attributable to Disqualified Capital Stock or
treasury stock of such Person and its consolidated subsidiaries, and (ii) all
upward revaluations and other write-ups in the book value of any asset of such
Person or a consolidated subsidiary of such Person subsequent to the Issue Date,
and (iii) all Investments in subsidiaries of such Person that are not
consolidated subsidiaries and in Persons that are not subsidiaries of such
Person.
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"DEFAULT" means any event that is, or after notice or the passage of time or
both would be, an Event of Default.
"DISQUALIFIED CAPITAL STOCK" means any Equity Interest that (i) either by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable) is or upon the happening of an event would be required
to be redeemed or repurchased prior to the final stated maturity of the notes or
is redeemable at the option of the holder thereof at any time prior to such
final stated maturity, or (ii) is convertible into or exchangeable at the option
of the issuer thereof or any other Person for debt securities.
"EQUITY HOLDER" means (a) with respect to a corporation, each holder of
stock of such corporation, (b) with respect to a limited liability company or
similar entity, each member of such limited liability company or similar entity,
(c) with respect to a partnership, each partner of such partnership, (d) with
respect to any entity described in clause (a)(iv) of the definition of "Flow
Through Entity", the owner of such entity, and (e) with respect to a trust
described in clause (a)(v) of the definition of "Flow Through Entity", the
persons treated for federal income tax purposes as the owners thereof.
"EQUITY INTERESTS" means Capital Stock or warrants, options or other rights
to acquire Capital Stock (but excluding any debt security that is convertible
into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means (i) an underwritten offering of Qualified Capital
Stock of the Company pursuant to a registration statement filed with and
declared effective by the Commission in accordance with the Securities Act or
(ii) an offering of Qualified Capital Stock of the Company pursuant to an
exemption from the registration requirements of the Securities Act.
"EVENT OF LOSS" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"EXCESS CASH FLOW" means, with respect to any Hotel Operating Year, the
Consolidated EBITDA of the Company for such Hotel Operating Year, less the sum
of (i) Consolidated Interest Expense of the Company that is paid in cash during
such Hotel Operating Year, (ii) up to $4.0 million in capital expenditures of
the Company and its Subsidiaries that are actually paid during such Hotel
Operating Year, (iii) principal payments made during such Hotel Operating Year
on Indebtedness permitted to be incurred pursuant to the covenant described
above under the caption "--Incurrence of Indebtedness" and (iv) Restricted
Payments identified in clauses (iii), (v), (vi), (vii) or (viii) of the second
sentence under the caption "Limitation on Restricted Payments" that are made
during such Hotel Operating Year.
"EXCLUDED ASSETS" means (i) cash, other than cash in bank and similar
accounts; (ii) assets securing Purchase Money Obligations or Capital Lease
Obligations permitted to be incurred under the indenture; (iii) any agreements,
permits, licenses or the like that cannot be subject to a Lien under the
Security Documents without the consent of third parties, which consent is not
obtained by the Company; and (iv) all Gaming Licenses; PROVIDED, that Excluded
Assets does not include the proceeds of assets under clause (ii), (iii) or (iv)
or of any other Collateral to the extent such proceeds do not constitute
Excluded Assets.
"EXCLUDED PERSON" means (i) M. Brent Stevens, Michael S. Luzich and any
Affiliate or Manager of PGP on the Issue Date (collectively, the "Existing
Holders"), (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners or owners of which consist solely of the
Existing Holders and members of the immediate family of the Existing Holders or
(iii) any partnership the sole general partners of which consist solely of the
Existing Holders and members of the immediate family of the Existing Holders.
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"FLOW THROUGH ENTITY" means an entity that (a) for Federal income tax
purposes constitutes (i) an "S corporation" (as defined in Section 1361(a) of
the Code), (ii) a "qualified subchapter S subsidiary" (as defined in Section
1361(b)(3)(B) of the Code), (iii) a "partnership" (within the meaning of Section
7701(a)(2) of the Code) other than a "publicly traded partnership" (as defined
in Section 7704 of the Code), (iv) an entity that is disregarded as an entity
separate from its owner under the Code, the Treasury regulations or any
published administrative guidance of the Internal Revenue Service, or (v) a
trust, the income of which is includible in the taxable income of the grantor or
another person under sections 671 through 679 of the Code (the entities
described in the immediately preceding clauses (i), (ii), (iii), (iv) and (v), a
"Federal Flow Through Entity") and (b) for state and local jurisdictions in
respect of which Permitted Tax Distributions are being made, is subject to
treatment on a basis under applicable state or local income tax law
substantially similar to a Federal Flow Through Entity.
"GAAP" means generally accepted accounting principles, as in effect from
time to time, set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession, and in the rules and regulations of the
Commission.
"GAAP" means gaap as in effect on the Issue Date.
"GAMING AUTHORITIES" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or foreign government, any state, province or city or other political
subdivision, whether now or hereafter existing, or any officer or official
thereof, including, without limitation, the Gaming Commission and any other
agency with authority to regulate any gaming operation (or proposed gaming
operation) owned, managed or operated by the Company or any of its Subsidiaries.
"GAMING COMMISSION" means the Iowa Racing and Gaming Commission, or any
successor Gaming Authority.
"GAMING LICENSES" means every material license, material franchise, material
registration, material qualification, findings of suitability or other material
approval or authorization required to own, lease, operate or otherwise conduct
or manage riverboat, dockside or land-based gaming activities in any state or
jurisdiction in which the Company or any of its Restricted Subsidiaries conducts
business (including, without limitation, all such licenses granted by the Gaming
Commission under Chapter 99F of the Iowa Code, and the rules and regulations
promulgated thereunder), and all applicable liquor licenses.
"GAMING VESSEL" means a riverboat casino (i) which is substantially similar
in size and space to the Diamond Jo, (ii) with at least the same overall
qualities and amenities as the Diamond Jo, and (iii) that is developed,
constructed and equipped to be in compliance with all federal, state and local
laws, including, without limitation, the cruising requirements of Chapter 99F of
the Iowa Code. In the event the laws of the State of Iowa change to permit the
development and operation of additional land-based casinos, the term "Gaming
Vessel" shall be deemed to include a land-based casino meeting the requirements
of clauses (i), (ii) and (iii) above.
"GOVERNMENT SECURITIES" means (i) direct obligations of the United States of
America for the timely payment of which its full faith and credit is pledged or
(ii) obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the timely payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as
custodian with respect to any such Government Security or a specific payment of
principal of or interest on any such Government Security held by such custodian
for the account of the holder of such depository receipt; PROVIDED, that (except
as required by law) such custodian is not
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authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
Government Security or the specific payment of principal of or interest on the
Government Security evidenced by such depository receipt.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.
"GUARANTY" or "GUARANTEE," used as a noun, means any guaranty (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness or other Obligation. "guarantee" or "guaranty" used
as a verb, has a correlative meaning.
"HEDGING OBLIGATIONS" means, with respect to any Person, the Obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"HOLDER" means the Person in whose name a note is registered in the register
of the notes.
"HOTEL" means a hotel to be constructed by the Company or a Subsidiary of
the Company in or around Dubuque, Iowa, which is expected to be contiguous to
the Diamond Jo.
"HOTEL OPERATING YEAR" means (i) the four consecutive fiscal quarter period
of the Company beginning on the first day of the fiscal quarter commencing
immediately after the date that the Hotel first becomes Operating, and (ii) each
succeeding four consecutive fiscal quarter period.
"INDEBTEDNESS" of any Person means (without duplication) (i) all liabilities
and obligations, contingent or otherwise, of such Person (a) in respect of
borrowed money (regardless of whether the recourse of the lender is to the whole
of the assets of such Person or only to a portion thereof), (b) evidenced by
bonds, debentures, notes or other similar instruments, (c) representing the
deferred purchase price of property or services (other than trade payables on
customary terms incurred in the ordinary course of business), (d) created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (e) representing Capital Lease
Obligations, (f) under bankers' acceptance and letter of credit facilities, (g)
to purchase, redeem, retire, defease or otherwise acquire for value any
Disqualified Capital Stock, or (h) in respect of Hedging Obligations; (ii) all
Indebtedness of others that is guaranteed by such Person; and (iii) all
Indebtedness of others that is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; PROVIDED, that the amount of such
Indebtedness shall (to the extent such Person has not assumed or become liable
for the payment of such Indebtedness) be the lesser of (1) the fair market value
of such property at the time of determination and (2) the amount of such
Indebtedness. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date. The
principal amount outstanding of any Indebtedness issued with original issue
discount is the accreted value of such Indebtedness.
"INTEREST COVERAGE RATIO" means, for any period, the ratio of (i)
Consolidated EBITDA of the Company for such period, to (ii) Consolidated
Interest Expense of the Company for such period. In calculating Interest
Coverage Ratio for any period, PRO FORMA effect shall be given to the
incurrence,
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assumption, guarantee, repayment, repurchase, redemption or retirement by the
Company or any of its Subsidiaries of any Indebtedness subsequent to the
commencement of the period for which the Interest Coverage Ratio is being
calculated, as if the same had occurred at the beginning of the applicable
period. For purposes of making the computation referred to above, acquisitions
that have been made by the Company or any of its Restricted Subsidiaries,
including all mergers and consolidations, subsequent to the commencement of such
period shall be calculated on a PRO FORMA basis, assuming that all such
acquisitions, mergers and consolidations had occurred on the first day of such
period and Consolidated EBITDA for such period shall be calculated without
giving effect to clause (ii) of the proviso set forth in the definition of
Consolidated EBITDA. Without limiting the foregoing, the financial information
of the Company with respect to any portion of such period that falls before the
Issue Date shall be adjusted to give PRO FORMA effect to the issuance of the
notes and the application of the proceeds therefrom as if they had occurred at
the beginning of such period.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans,
guarantees, advances or capital contributions (excluding (i), payroll
commission, travel and similar advances to officers and employees of such Person
made in the ordinary course of business and (ii) bona fide accounts receivable
arising from the sale of goods or services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, and any
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"IOWA CODE" means the Code of Iowa (1999), as amended from time to time.
"ISSUE DATE" means the date upon which the notes are first issued.
"ISSUERS" means PGC and the Company.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed.
"LIEN" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"MANAGERS" means, with respect to any Person (i) if such Person is a limited
liability company, the board member, board members, manager or managers
appointed pursuant to the operating agreement of such Person as then in effect
or (ii) otherwise, the members of the Board of Directors or other governing body
of such Person.
"MEMBERS" means the holders of all of the Voting Stock of the Company.
"NET INCOME" means, with respect to any Person for any period, (a) the net
income (loss) of such Person for such period, determined in accordance with
GAAP, excluding (to the extent included in calculating such net income) (i) any
gain or loss, together with any related taxes paid or accrued on such gain or
loss, realized in connection with any Asset Sales and dispositions pursuant to
sale-leaseback transactions, (ii) any extraordinary gain or loss, together with
any taxes paid or accrued on such gain or loss and (iii) amortization of
goodwill arising on the Issue Date from the Acquisition and related
transactions, reduced by (b) the maximum amount of Permitted Tax Distributions
for such period.
"NET PROCEEDS" means the aggregate proceeds received in the form of cash or
Cash Equivalents in respect of any Asset Sale (including issuance or other
payments in an Event of Loss and payments in respect of deferred payment
obligations and any cash or Cash Equivalents received upon the sale or
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disposition of any non-cash consideration received in any Asset Sale, in each
case when received), net of:
(i) the reasonable and customary direct out-of-pocket costs relating to
such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), other than any such costs
payable to an Affiliate of the Company,
(ii) taxes required to be paid by the Company, any of its Subsidiaries,
or any Equity Holder of the Company (or, in the case of any Company Equity
Holder that is a Flow Through Entity, the Upper Tier Equity Holder of such
Flow Through Entity) in connection with such Asset Sale in the taxable year
that such sale is consummated or in the immediately succeeding taxable year,
the computation of which shall take into account the reduction in tax
liability resulting from any available operating losses and net operating
loss carryovers, tax credits and tax credit carry forwards, and similar tax
attributes,
(iii) amounts required to be applied to the permanent repayment of
Indebtedness in connection with such Asset Sale, and
(iv) appropriate amounts provided as a reserve by the Company or any
Restricted Subsidiary, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or such
Restricted Subsidiary, as the case may be, after such Asset Sale (including,
without limitation, as applicable, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations arising from such Asset Sale).
"OBLIGATION" means any principal, premium, interest, penalty, fee,
indemnification, reimbursement, damage and other obligation and liability
payable under the documentation governing any liability.
"OPERATING" means the Hotel is in a condition (including installation of
furnishings, fixtures and equipment) to receive customers in the ordinary course
of business, and is open to the general public and operating in accordance with
applicable law.
"OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably
acceptable to the Trustee. Such counsel may be an employee of or counsel to
either of the Issuers, any Subsidiary of either of the Issuers or the Trustee.
"PERMITTED C-CORP CONVERSION" means a transaction resulting in the Company
becoming subject to tax under subchapter C of the Code (a "C Corporation");
PROVIDED, that:
(i) the C Corporation resulting from such transaction (a) is a
corporation organized and existing under the laws of any state of the United
States or the District of Columbia, (b) assumes all of the obligations of
the Company under the notes, the Security Documents and the indenture
pursuant to a supplemental indenture in form reasonably satisfactory to the
Trustee and (c) 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;
(ii) the Company shall have provided to the Trustee 30 days' advance
notice of such transaction and evidence reasonably satisfactory to the
Trustee regarding the maintenance of the perfection, priority and proof of
the security interest of the Trustee in the Collateral;
(iii) after giving effect to such transaction no Default or Event of
Default exists;
(iv) such transaction would not (a) 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 or (b) require any holder or beneficial
owner of notes to obtain a Gaming License or be qualified or found suitable
under the laws of any applicable gaming jurisdiction; and
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(v) prior to consummation of such transaction, the Company shall have
delivered to the Trustee (a) an Opinion of Counsel to the effect that the
holders of the outstanding notes will not recognize income gain or loss for
federal income tax purposes as a result of such Permitted C-Corp Conversion
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 Permitted
C-Corp Conversion had not occurred and (b) an Officers' Certificate as to
compliance with all of the above conditions.
"PERMITTED INVESTMENTS" means:
(i) Investments in the Company or in any Wholly Owned Subsidiary;
(ii) Investments in Cash Equivalents;
(iii) Investments in a Person, if, as a result of such Investment, such
Person (a) becomes a Wholly Owned Subsidiary, or (b) is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of
its assets to, or is liquidated into, the Company or a Wholly Owned
Subsidiary;
(iv) Hedging Obligations;
(v) Investments as a result of consideration received in connection with
an Asset Sale made in compliance with the covenant described under the
caption "--Limitation on Asset Sales";
(vi) Investments existing on the Issue Date;
(vii) Investments paid for solely with Capital Stock (other than
Disqualified Capital Stock) of the Company;
(viii) credit extensions to gaming customers in the ordinary course of
business, consistent with industry practice;
(ix) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company (a) in
satisfaction of judgments or (b) pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of trade creditors or
customers; and
(x) loans or other advances to employees of the Company and its
Subsidiaries made in the ordinary course of business in an aggregate amount
not to exceed $0.5 million at any one time outstanding.
"PERMITTED LIENS" means:
(i) Liens arising by reason of any judgment, decree or order of any
court for an amount and for a period not resulting in an Event of Default
with respect thereto, so long as such Lien is being contested in good faith
and is adequately bonded, and any appropriate legal proceedings that may
have been duly initiated for the review of such judgment, decree or order
shall not have been finally adversely terminated or the period within which
such proceedings may be initiated shall not have expired;
(ii) security for the performance of bids, tenders, trade, contracts
(other than contracts for the payment of money) or leases, surety and appeal
bonds, performance and return-of-money bonds and other obligations of a like
nature incurred in the ordinary course of business, consistent with industry
practice;
(iii) Liens (other than Liens arising under ERISA) for taxes,
assessments or other governmental charges not yet delinquent or that are
being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of the Company in
accordance with gaap;
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(iv) Liens of carriers, warehousemen, mechanics, landlords, material
men, suppliers, repairmen or other like Liens arising by operation of law in
the ordinary course of business consistent with industry practices (other
than Liens arising under ERISA) and Liens on deposits made to obtain the
release of such Liens if (a) the underlying obligations are not overdue for
a period of more than 30 days or (b) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect
thereto are maintained on the books of the Company in accordance with gaap;
(v) easements, rights of way, zoning and similar restrictions and other
similar encumbrances or title defects incurred in the ordinary course of
business, consistent with industry practices that, in the aggregate, are not
substantial in amount, and that do not in any case materially detract from
the value of the property subject thereto (as such property is used by the
Company or a Subsidiary) or interfere with the ordinary conduct of the
business of the Company or any of its Subsidiaries; PROVIDED, that such
Liens are not incurred in connection with borrowing money or any commitment
to loan money or extend credit;
(vi) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security legislation or otherwise arising from statutory or
regulatory requirements of the Company or any of its Subsidiaries;
(vii) Liens securing Refinancing Indebtedness incurred in compliance
with the indenture to refinance Indebtedness secured by Liens; PROVIDED, (a)
such Liens do not extend to any additional property or assets; (b) if the
Liens securing the Indebtedness being refinanced were subordinated to or
PARI PASSU with the Liens securing the notes, the Subsidiary Guarantees or
any intercompany loan, as applicable, such new Liens are subordinated to or
PARI PASSU with such Liens to the same extent, and any related subordination
or intercreditor agreement is confirmed; and (c) such Liens are no more
adverse to the interests of Holders than the Liens replaced or extended
thereby;
(viii) Liens that secure Acquired Debt or Liens on property of a Person
existing at the time such Person is merged into or consolidated with, or
such property was acquired by, the Company or any Restricted Subsidiary;
PROVIDED, that such Liens do not extend to or cover any Person, property or
assets other than those of the Person or property being acquired and were
not put in place in anticipation of such acquisition;
(ix) Liens that secure Purchase Money Obligations or Capital Lease
Obligations permitted to be incurred under the indenture; PROVIDED that such
Liens do not extend to or cover any property or assets other than those
being acquired, leased or developed;
(x) whether or not existing on the Issue Date, Liens securing
Obligations under the indenture, the notes, the Subsidiary Guarantees or the
Security Documents;
(xi) Liens securing Indebtedness of the Company or any of its
Subsidiaries incurred pursuant to clause (i) under the caption "--Limitation
on Incurrence of Indebtedness";
(xii) with respect to any vessel included in the Collateral, certain
maritime liens, including liens for crew's wages and salvage;
(xiii) leases or subleases granted in the ordinary course of business
not materially interfering with the conduct of the business of the Company
or any of the Restricted Subsidiaries;
(xiv) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by the Company or
any of its Subsidiaries in the ordinary course of business;
(xv) Liens incurred in the ordinary course of business securing Hedging
Obligations, which Hedging Obligations relate to Indebtedness that is
otherwise permitted under the indenture;
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(xvi) Liens existing on the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date;
(xvii) Liens on a pledge of the Capital Stock of any Unrestricted
Subsidiary securing any Indebtedness of such Unrestricted Subsidiary; and
(xviii) Liens securing reimbursement obligations with respect to
commercial letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof.
"PERMITTED TAX DISTRIBUTIONS" in respect of the Company and each Subsidiary
that qualifies as a Flow Through Entity means, with respect to any taxable year,
the sum of: (i) the product of (a) the excess of (1) all items of taxable income
or gain (other than capital gain) allocated by the Company to Equity Holders for
such year over (2) all items of taxable deduction or loss (other than capital
loss) allocated to such Equity Holders by the Company for such year and (b) the
Applicable Income Tax Rate, plus (ii) the product of (a) the net capital gain
(i.e., net long-term capital gain over net short-term capital loss), if any,
allocated by the Company to Equity Holders for such year and (b) the Applicable
Capital Gain Tax Rate, plus (iii) the product of (a) the net short-term capital
gain (i.e., net short-term capital gain in excess of net long-term capital
loss), if any, allocated by the Company to Equity Holders for such year and (b)
the Applicable Income Tax Rate, minus (iv) the aggregate Tax Loss Benefit Amount
for the Company for such year; PROVIDED, that in no event shall the Applicable
Income Tax Rate or the Applicable Capital Gain Tax Rate exceed the greater of
(1) the highest aggregate applicable effective marginal rate of federal, state,
and local income to which a corporation doing business in the State of
California would be subject in the relevant year of determination (as certified
to the Trustee by a nationally recognized tax accounting firm) plus 5% and (2)
60%. For purposes of calculating the amount of the Permitted Tax Distributions,
the proportionate part of the items of taxable income, gain, deduction or loss
(including capital gain or loss) of any Subsidiary that is a Flow Through Entity
shall be included in determining the taxable income, gain, deduction or loss
(including capital gain or loss) of the Company.
Estimated tax distributions shall be made within thirty days following March
15, May 15, August 15, and December 15 based upon an estimate of the excess of
(x) the tax distributions that would be payable for the period beginning on
January 1 of such year and ending on March 31, May 31, August 31, and December
31 if such period were a taxable year (computed as provided above) over (y)
distributions attributable to all prior periods during such taxable year.
The amount of the Permitted Tax Distribution shall be re-computed promptly
after (i) the filing by the Company and each Subsidiary that is treated as a
Flow Through Entity of their respective annual income tax returns and (ii) an
appropriate federal or state taxing authority finally determines that the amount
of the items of taxable income, gain, deduction, or loss of the Company or any
Subsidiary that is treated as a Flow Through Entity for any taxable year or the
aggregate Tax Loss Benefit Amounts carried forward to such taxable year should
be changed or adjusted (each of clauses (i) and (ii) a "Tax Calculation Event").
To the extent that the Permitted Tax Distributions previously paid to an Equity
Holder in respect of any taxable year are either greater than (a "Tax
Distribution Overage") or less than (a "Tax Distribution Shortfall") the
Permitted Tax Distributions with respect to such taxable year, as determined by
reference to the computation of the amount of the items of income, gain,
deduction, or loss of the Company and each Subsidiary in connection with a Tax
Calculation Event, the amount of the estimated Permitted Tax Distributions to be
made to such Equity Holder on the estimated tax distribution date immediately
following such Tax Calculation Event shall be reduced or increased as
appropriate to the extent of the Tax Distribution Overage or the Tax
Distribution Shortfall. To the extent that a Tax Distribution Overage remains
after the estimated tax distribution date immediately following such Tax
Calculation Event, the amount of the estimated Permitted Tax Distribution to be
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made to such Equity Holder on the subsequent estimated tax distribution date
shall be reduced to the extent of such Tax Distribution Overage.
Prior to making any Permitted Tax Distributions, the Company shall require
each Equity Holder to agree that promptly after the second estimated tax
distribution date following a Tax Calculation Event, such Equity Holder shall
reimburse the Company to the extent of any remaining Tax Distribution Overage.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other entity.
"PGC" means Peninsula Gaming Corp., a Delaware corporation.
"PGP" means Peninsula Gaming Partners, LLC, a Delaware limited liability
company, the direct parent and sole manager of the Company, and the indirect
parent of PGC.
"PURCHASE MONEY OBLIGATIONS" means Indebtedness representing, or incurred to
finance (or to Refinance Indebtedness incurred to finance), the cost (i) of
acquiring any assets (including furniture, fixtures or equipment) and (ii) of
construction or build-out of facilities (including Purchase Money Obligations of
any other Person at the time such other Person is merged with or into or is
otherwise acquired by the Issuers); PROVIDED, that (a) the principal amount of
such Indebtedness does not exceed 80% of such cost, including construction
charges, (b) any Lien securing such Indebtedness does not extend to or cover any
other asset or property other than the asset or property being so acquired,
constructed or built and (c) such Indebtedness is (or the Indebtedness being
Refinanced was) incurred, and any Liens with respect thereto are granted, within
180 days of the acquisition or commencement of construction or build-out of such
property or asset.
"QUALIFIED CAPITAL STOCK" means, with respect to any Person, Capital Stock
of such Person other than Disqualified Capital Stock.
"RELATED BUSINESS" means the gaming, entertainment and hotel businesses
conducted (or proposed to be conducted) by the Company and its Subsidiaries as
of the Issue Date and any and all other businesses that in the good faith
judgment of the Managers of the Company are materially related or incidental
businesses (including, without limitation, food and beverage distribution
operations).
"RELATED PERSON" means any Person who controls, is controlled by or is under
common control with an Excluded Person; PROVIDED, that for purposes of this
definition "control" means the beneficial ownership of more than 50% of the
total voting power of the Voting Stock of a Person.
"REQUIRED REGULATORY REDEMPTION" means a redemption by the Issuers of any
Holder's notes pursuant to, and in accordance with, any order of any
Governmental Authority with appropriate jurisdiction and authority relating to a
Gaming License, or to the extent necessary in the reasonable, good faith
judgment of the Managers of the Company to prevent the loss, failure to obtain
or material impairment or to secure the reinstatement of, any Gaming License,
where such redemption or acquisition is required because the Holder or
beneficial owner of notes is required to be found suitable or to otherwise
qualify under any gaming or similar laws and is not found suitable or so
qualified within 30 days after being requested to do so (or such lesser period
that may be required by any Governmental Authority).
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means a Subsidiary other than an Unrestricted
Subsidiary.
"RETURN FROM UNRESTRICTED SUBSIDIARIES" means (a) 50% of any dividends or
distributions received by the Company or a Restricted Subsidiary from an
Unrestricted Subsidiary, to the extent that such
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dividends or distributions were not otherwise included in Consolidated Net
Income of the Company, plus (b) to the extent not otherwise included in
Consolidated Net Income of the Company, an amount equal to the net reduction in
Investments in Unrestricted Subsidiaries resulting from (i) repayments of the
principal of loans or advances or other transfers of assets to the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the sale or
liquidation of any Unrestricted Subsidiaries, plus (c) to the extent that any
Unrestricted Subsidiary of the Company is designated to be a Restricted
Subsidiary, the fair market value of the Company's Investment in such Subsidiary
on the date of such designation.
"SELLER PREFERRED" means $7.0 million face amount of the Company's
redeemable preferred membership interests to be issued to GDREC on the Issue
Date pursuant to the terms of the Asset Acquisition Agreement.
"SENIOR CREDIT FACILITY" means any revolving credit agreement or similar
instrument, including, without limitation, working capital, construction
financing or equipment purchase lines of credit, entered into by the Company
governing the terms of a BONA FIDE borrowing from (i) a third party financial
institution that is primarily engaged in the business of commercial lending or
(ii) a vendor or other provider of financial accommodations in connection with
the purchase of equipment, in either case for valid business purposes, including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith and, in each case, as amended, renewed,
refunded, replaced or refinanced from time to time; PROVIDED, that such
agreements or instruments (x) have terms and conditions (including with respect
to the applicable interest rates and fees) customary for similar facilities
extended to borrowers comparable to the Company, and (y) do not permit the
Company to incur Indebtedness in an aggregate principal amount at any time
outstanding in excess of $10.0 million.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity (including a limited liability company) of
which more than 50% of the total voting power of shares of Voting Stock thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other subsidiaries of that Person or a combination thereof
and (ii) any partnership in which such Person or any of its subsidiaries is a
general partner.
"SUBSIDIARY" means any subsidiary of the Company.
"SUBSIDIARY GUARANTY" means an unconditional and irrevocable guaranty by a
Subsidiary Guarantor of the Obligations of the Issuers under the notes and the
indenture, on a senior unsecured basis, as set forth in the indenture, as
amended from time to time in accordance with the terms thereof.
"SUBSIDIARY GUARANTOR" means any Subsidiary that has executed and delivered
in accordance with the indenture a Subsidiary Guaranty, and such Person's
successors and assigns.
"TAX LOSS BENEFIT AMOUNT" means with respect to any taxable year, the amount
by which the Permitted Tax Distributions would be reduced were a net operating
loss or net capital loss from a prior taxable year of the Company ending
subsequent to the Issue Date carried forward to the applicable taxable year;
PROVIDED, that for such purpose the amount of any such net operating loss or net
capital loss shall be used only once and in each case shall be carried forward
to the next succeeding taxable year until so used. For purposes of calculating
the Tax Loss Benefit Amount, the proportionate part of the items of taxable
income, gain, deduction, or loss (including capital gain or loss) of any
Subsidiary that is a Flow Through Entity for a taxable year of such Subsidiary
ending subsequent to the Issue Date shall be included in determining the amount
of net operating loss or net capital loss of the Company.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that, at or prior to the time
of determination, shall have been designated by the Managers of the Company as
an Unrestricted Subsidiary; PROVIDED, that
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such Subsidiary does not hold any Indebtedness or Capital Stock of, or any Lien
on any assets of, the Company or any Restricted Subsidiary. If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary as of such date. The
Managers of the Company may at any time designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; PROVIDED, that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the Interest Coverage
Ratio test set forth in the covenant described under the caption "--Limitation
on Incurrence of Indebtedness" calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Default or Event of Default would be in existence following such
designation. The Company shall be deemed to make an Investment in each
Subsidiary designated as an Unrestricted Subsidiary immediately following such
designation in an amount equal to the Investment in such Subsidiary and its
subsidiaries immediately prior to such designation. Any such designation by the
Managers of the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Managers giving effect to such
designation and an Officers' Certificate certifying that such designation
complies with the foregoing conditions and is permitted by the covenant
described above under the caption "--Limitation on Incurrence of Indebtedness."
"UPPER TIER EQUITY HOLDER" means, in the case of any Flow Through Entity the
Equity Holder of which is, in turn, a Flow Through Entity, the person that is
ultimately subject to tax on a net income basis on the items of taxable income,
gain, deduction, and loss of the Company and its Subsidiaries that are Flow
Through Entities.
"VOTING STOCK" means, with respect to any Person, (i) one or more classes of
the Capital Stock of such Person having general voting power to elect at least a
majority of the Board of Directors, managers or trustees of such Person
(regardless of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency)
and (ii) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (i) above.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years (rounded to the nearest one-twelfth) obtained
by dividing (i) the then outstanding principal amount of such Indebtedness into
(ii) the total of the product obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect thereof,
by (b) the number of years (calculated to the nearest one-twelfth) that will
elapse between such date and the making of such payment.
"WHOLLY OWNED SUBSIDIARY" of any Person means a subsidiary of such Person
all the Capital Stock of which (other than directors' qualifying shares) is
owned directly or indirectly by such Person; provided, that with respect to the
Company, the term Wholly Owned Subsidiary shall exclude Unrestricted
Subsidiaries.
BOOK-ENTRY, DELIVERY AND FORM
The old notes offered and sold to qualified institutional buyers (as defined
under Rule 144A of the old notes are currently represented by one or more fully
registered global notes without interest coupons. The new notes issued in
exchange for the old notes will be represented by one or more fully registered
global notes, without interest coupons and will be deposited upon issuance with
the Trustee as custodian for The Depository Trust Company ("DTC"), in New York,
New York, and registered in the name of DTC or its nominee, in each case, for
credit to an account of a direct or indirect participant as described below.
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Except as set forth below, the global notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Notes for Certificated Notes."
The notes (including beneficial interests in the global notes) are subject
to certain restrictions on transfer and bear a restrictive legend as described
under "Notice to Investors." In addition, transfer of beneficial interests in
the global notes are subject to the applicable rules and procedures of DTC and
its direct or indirect participants, which may change from time to time.
The notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Issuers that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
DTC has also advised us that pursuant to procedures established by it, (i)
upon deposit of the global notes, DTC will credit the accounts of Participants
designated by the Initial Purchaser with portions of the principal amount of
global notes and (ii) ownership of such interests in the global notes will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to Participants) or by Participants and
the Indirect Participants (with respect to other owners of beneficial interests
in the global notes).
Investors in the global notes may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations that are Participants in such system. All interests in a global
note may be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in a global note to such persons may be limited to
that extent. Because DTC can act only on behalf of Participants, which in turn
act on behalf of Indirect Participants and certain banks, the ability of a
person having a beneficial interest in a global note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interest, may be affected by the lack of a physical
certificate evidencing such interest. For certain other restrictions on the
transferability of the notes, see "--Exchange of Book-Entry Notes for
Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal, premium, liquidated damages, if any,
and interest on a global note registered in the name of DTC or its nominee will
be payable by the Trustee to DTC or its
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nominee in its capacity as the registered Holder under the indenture. Under the
terms of the indenture, the Issuers and the Trustee will treat the persons in
whose names the notes, including the global notes, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, none of the Issuers, the Trustee or any agent
of the Issuers or the Trustee have or will have any responsibility or liability
for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the global notes, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the global notes or
(ii) any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants.
DTC has advised the Issuers that its current practices, upon receipt of any
payment in respect of securities such as the notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the global notes as shown on the records of DTC. Payments by
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Issuers. None of the Issuers or
the Trustee will be liable for any delay by DTC or its Participants in
identifying the beneficial owners of the notes, and the Issuers and the Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee as the registered owner of the notes for all purposes.
Interests in the global notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will, therefore,
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its Participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Issuers that it will take any action permitted to be
taken by a Holder of notes only at the direction of one or more Participants to
whose account DTC interests in the global notes are credited and only in respect
of such portion of the aggregate principal amount of the notes as to which such
Participant or Participants has or have given direction. However, if there is an
Event of Default under the notes, DTC reserves the right to exchange global
notes for legended notes in certificated form, and to distribute such notes to
its Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources believed to be reliable, but the Issuers take no
responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the global notes among Participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Initial Purchaser nor
the Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants of their respective obligations under the
rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A global note is exchangeable for definitive notes in registered
certificated form if (i) DTC (a) notifies the Issuers that it is unwilling or
unable to continue as depositary for the global note and the Issuers thereupon
fail to appoint a successor depositary within 90 days or (b) has ceased to be a
clearing agency registered under the Exchange Act, or (ii) the Issuers, at their
option, notify the Trustee in writing that they elect to cause the issuance of
the notes in certificated form. In addition, beneficial interests in a global
note may be exchanged for certificated notes upon request but only upon at least
20 days' prior written notice given to the Trustee by or on behalf of DTC in
accordance with
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customary procedures. In all cases, certificated notes delivered in exchange for
any global note or beneficial interest therein will be registered in the names,
and issued in any approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures) and will bear the
restrictive legend referred to in "Notice to Investors" unless the Issuers
determine otherwise in compliance with applicable law.
CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest in a
global note may, upon request to the Trustee, exchange such beneficial interest
for notes in certificated form (a "Certificated Note"). Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). All such Certificated Notes would be subject to the legend
requirements described herein under "Notice to Investors." In addition, if (i)
the Issuers notify the Trustee in writing that DTC (x) is no longer willing or
able to act as a depositary and the Issuers are unable to locate a qualified
successor within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act or (ii) the Issuers, at their option, notify the Trustee
in writing that they elect to cause the issuance of notes in the form of
Certificated Notes under the indenture, then, upon surrender by the global note
Holder of its global note, notes in such form will be issued to each person that
the global note Holder and the DTC identify as being the beneficial owner of the
related notes.
None of the Issuers or the Trustee will be liable for any delay by the
global note Holder or DTC in identifying the beneficial owners of notes and the
Trustee may conclusively rely on, and will be protected in relying on,
instructions from the global note Holder or DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the notes represented by
a global note (including principal, premium, if any, interest and liquidated
damages, if any, thereon) be made by wire transfer of immediately available next
day funds to the accounts specified by the global note Holder. With respect to
Certificated Notes, the Issuers will make all payments of principal, premium, if
any, interest and liquidated damages, if any, thereon by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. The Issuers expect that secondary trading in the
Certificated Notes will also be settled in immediately available funds.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITY
We expect to enter into a new $10.0 million credit facility which will be
secured by substantially all of our current and future assets, other than
certain excluded assets. The lien on the collateral securing the new credit
facility will be senior to the lien on the collateral securing the notes. We
expect that the new credit facility will contain customary conditions to closing
and to borrowing and will contain representations and warranties customary in
other gaming-related financings. We also expect that the new credit facility
will contain certain financial covenants and restrictions on, among other
things, indebtedness, investments, distributions and mergers. There can be no
assurance that we will be able to enter into the new credit facility on terms
satisfactory to us or at all. The establishment of the new credit facility is
subject to approval of the Gaming Commission.
INTERCREDITOR AGREEMENT
In connection with entering into our new credit facility, we expect the
trustee under the indenture governing the notes will enter into an intercreditor
agreement with the lender under such credit facility. We anticipate that the
intercreditor agreement will provide, among other things, that (1) the lender's
lien on the collateral securing the new credit facility will be senior to the
lien on the collateral securing the notes, (2) during any insolvency
proceedings, the lender under such credit facility and the trustee under the
indenture governing the notes will coordinate their efforts to give effect to
the relative priority of their respective security interests in the collateral,
and (3) following an event of default (as defined in the intercreditor
agreement), all decisions with respect to such collateral, including the time
and method of any disposition thereof, will be made in accordance with the terms
of such intercreditor agreement.
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DESCRIPTION OF PGCL MEMBERSHIP INTERESTS
All of PGCL's outstanding common membership interests are owned by its
parent, PGP, and all of PCGL's outstanding preferred membership interests are
owned by GDREC. All of PGC's outstanding common stock is owned by PGCL. See "The
Transactions." The following summary of certain material terms and provisions of
the membership interests of PGCL does not purport to be complete and is
qualified in its entirety by reference to the operating agreement of PGCL,
copies of which are available upon request.
COMMON MEMBERSHIP INTERESTS OF PGCL
PGP, as the holder of all of PGCL's issued and outstanding common membership
interests, is entitled to vote on all matters to be voted on by holders of
common membership interests of PGCL and, subject to certain limitations
contained in PGCL's operating agreement and the indenture governing the notes,
is entitled to dividends and other distributions if, as and when declared by
PGCL's managers out of funds legally available therefor.
PREFERRED MEMBERSHIP INTERESTS OF PGCL
GDREC, as the holder of all of PGCL's preferred membership interests, is
entitled to receive, subject to certain restrictions contained in the indenture
governing the notes, out of funds legally available therefor, cumulative
preferred distributions payable semiannually at an annual rate of 9% of the
original face amount thereof. Other than certain limited consent rights and as
required by law, holders of PGCL's preferred membership interests have no voting
rights.
Subject to certain limitations contained in the indenture governing the
notes, to the extent not used for any indemnification obligations of HCI and
GDREC under the acquisition agreements, PGCL must redeem $3.0 million in
original face amount of its preferred membership interests on January 15, 2001
at a redemption price of $3.0 million, plus any accrued and unpaid preferred
distributions through the date of redemption. Certain managers of PGP, who
collectively have the ability to control us, have guaranteed our obligation to
redeem up to $3.0 million of such preferred membership interests, plus any
accrued and unpaid preferred distributions through the date of redemption. The
balance of preferred membership interests not required to be redeemed by us on
January 15, 2001 must be redeemed by us 90 days after the seventh anniversary of
the closing date of the acquisition at a redemption price of $4.0 million, plus
any accrued and unpaid preferred distributions through the date of redemption.
Under the terms of the acquisition agreements, preferred membership
interests in an original face amount of $3.0 million are currently being held in
escrow until January 15, 2001 as security for certain indemnification
obligations of GDREC and HCI thereunder. See "The Transactions."
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DESCRIPTION OF PGP MEMBERSHIP INTERESTS
The following summary of certain material terms and provisions of the
membership interests of PGP does not purport to be complete and is qualified in
its entirety by reference to the operating agreement of PGP, copies of which are
available upon request to PGP. Each purchaser of convertible preferred
membership interests hereby acknowledges and agrees that such membership
interests are subject to the provisions set forth below and all of the other
terms and conditions contained in PGP's operating agreement.
COMMON MEMBERSHIP INTERESTS
PGP has one class of voting common membership interests and one class of
non-voting common membership interests. Except as set forth under "--Voting" and
"--PGP Operating Agreement-- Required Regulatory Redemptions or Repurchases"
below, voting and non-voting common membership interests will be entitled to
identical rights and privileges (including, without limitation, rights to PRO
RATA distributions). $6.0 million of voting common membership interests are
outstanding. No non-voting common membership interests are outstanding. See "The
Transactions" and "Certain Relationships and Related Transactions--Equity
Contribution."
RANKING. Upon any liquidation, dissolution or winding up of PGP, the
holders of voting and non-voting common membership interests will be entitled to
share ratably with each other in the distribution of all of the assets of PGP,
after any required distribution to the holders of preferred membership interests
of PGP or other securities senior in right of payment to the common membership
interests, and after satisfaction of all of PGP's liabilities. See "Risk
Factors--Holding Company Structure."
ALLOCATION OF INCOME. Profits and losses of PGP will be allocated to each
holder of membership interests, whether common or preferred, PRO RATA according
to the percentage of membership interests held by such holder.
DISTRIBUTIONS. The holders of voting and non-voting common membership
interests are entitled to distributions if, as and when declared by the managers
of PGP, out of assets legally available therefor, subject to the restrictions
imposed by the indebtedness of PGP, if any, outstanding from time to time. Under
the indenture governing the notes, we may make Permitted Tax Distributions (as
defined in the section "Description of Notes") to PGP to enable PGP to
distribute to holders of PGP membership interests funds sufficient to pay tax
liabilities attributable to the holders' ownership of such interests. PGP
intends to distribute the proceeds (or a portion thereof) from Permitted Tax
Distributions PRO RATA to holders of PGP membership interests, if and when
received from PGCL, in amounts sufficient to enable holders of PGP membership
interests to pay tax liabilities attributable to the holders' ownership of such
interests.
In addition, subject to the terms of the indenture governing the notes, we
may make, from time to time, distributions to PGP in excess of Permitted Tax
Distributions. PGP may, in turn, from time to time, distribute to holders of
common membership interests amounts in excess of Permitted Tax Distributions;
PROVIDED, that in the case of any distributions made during any period that any
convertible preferred membership interests remain outstanding, such
distributions may not exceed the aggregate net income of PGP (I.E., aggregate
income of PGP less aggregate deductions and losses of PGP) previously allocated
to holders of such common membership interests.
REDEMPTIONS. Except as set forth below under "--PGP Operating
Agreement--Redemption Upon Termination" and "--Required Regulatory Redemptions
or Repurchases," the common membership interests may not be redeemed so long as
any convertible preferred membership interests are outstanding.
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VOTING. Each holder of voting common membership interests is entitled to
vote on all matters to be voted on by the members of PGP, PRO RATA according to
the percentage of common membership interests held by such holder.
Except as required by law and with respect to certain other limited matters,
holders of non-voting common membership interests are not entitled to vote.
Pursuant to PGP's operating agreement, the management of PGP is vested in a
board of managers comprised of five individuals, two of whom must be independent
managers. As long as M. Brent Stevens, together with any entity controlled by
Mr. Stevens, beneficially holds at least 5% of the voting common membership
interests of PGP, Mr. Stevens is entitled to designate three of PGP's managers,
including one of the two independent managers. Additionally, as long as Michael
Luzich, together with any entity controlled by Mr. Luzich, beneficially holds at
least 5% of the voting common membership interests of PGP, Mr. Luzich is
entitled to designate two of PGP's managers, including the other independent
manager.
RIGHTS OF FIRST REFUSAL AND CO-SALE RIGHTS. PGP's operating agreement
limits the transfer of common membership interests owned by its members. Certain
of these restrictions grant first to Mr. Stevens and Mr. Luzich, and second to
PGP, rights of first refusal and, if none of Mr. Stevens, Mr. Luzich and PGP
exercise their rights of first refusal and purchase the common membership
interests being transferred, grant all other common members co-sale rights on
the subsequent transfer of common membership interests.
REGISTRATION RIGHTS. Except under certain circumstances, including, without
limitation, an underwriter's cut-back and registration of shares to be offered
pursuant to an employee benefit plan, an exchange offer or certain merger
transactions, whenever PGP at any time after an initial public offering and in
connection with a secondary offering proposes to register any of its common
membership interests (or upon a Permitted C-Corp Conversion (as defined in the
section "Description of Notes"), shares of its common stock) under the
Securities Act, PGP will notify each holder of non-voting common membership
interests of the proposed filing and, if so requested by such holders, PGP will
use its good faith efforts to register non-voting common membership interests
(or non-voting common stock, as applicable) under the Securities Act.
CONVERTIBLE PREFERRED MEMBERSHIP INTERESTS
In connection with the acquisition of the Diamond Jo, PGP issued an
aggregate of $3.0 million face amount of its convertible preferred membership
interests in this offering. See "Certain Relationships and Related
Transactions--Equity Contribution."
CONVERSION RIGHTS AND ADJUSTMENTS. Each convertible preferred membership
interest is initially be convertible at any time at the option of the holder
thereof into one non-voting common membership interests of PGP, subject to
certain adjustment.
For a description of the non-voting common membership interests of PGP into
which the convertible preferred membership interests are convertible, see
"--Common Membership Interests."
ALLOCATION OF INCOME. Profits and losses of PGP will be allocated to each
holder of membership interests, whether common or preferred, PRO RATA according
to the percentage of membership interests held by such holder.
DISTRIBUTIONS. The holders of convertible preferred membership interests
are not entitled to any distributions on the convertible preferred membership
interests, except that under the indenture governing the notes, we may make
Permitted Tax Distributions to PGP to enable PGP to distribute to holders of PGP
membership interests funds sufficient to pay tax liabilities attributable to the
holders' ownership of such interests. PGP intends to distribute the proceeds (or
a portion thereof) from
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Permitted Tax Distributions PRO RATA to holders of PGP membership interests, if
and when received from PGCL, in amounts sufficient to enable holders of PGP
membership interests to pay tax liabilities attributable to the holders'
ownership of such interests.
In addition, subject to the terms of the indenture governing the notes and
PGP's indebtedness, if any, we may make, from time to time, distributions to PGP
in excess of Permitted Tax Distributions. PGP may, in turn, from time to time,
distribute to holders of common membership interests amounts in excess of a PRO
RATA portion of Permitted Tax Distributions, provided that aggregate
distributions made to holders of common membership interests may not exceed the
aggregate net income of PGP (I.E., aggregate income of PGP less aggregate
deductions and losses of PGP) previously allocated to holders of such common
membership interests. Holders of convertible preferred membership interests are
not be entitled to receive any distributions in excess of a PRO RATA portion of
Permitted Tax Distributions, but their rights to share in the assets of PGP upon
redemption or liquidation will be generally preserved as reflected in their
capital account balances.
VOTING RIGHTS. The holders of convertible preferred membership interests
have no voting rights, except as required by law and as set forth below.
The operating agreement of PGP provides that PGP may not, without the
consent or approval of a majority-in-interest of the holders of convertible
preferred membership interests, (1) amend, modify or revise the operating
agreement if such amendment, modification or revision would adversely affect the
rights, privileges or preferences of the convertible preferred membership
interests thereunder or (2) issue any membership interests ranking on
liquidation senior to or PARI PASSU with the convertible preferred membership
interests. In addition, without the consent of all holders of convertible
preferred membership interests, PGP may not merge or consolidate with any
corporation, partnership or other entity and may not sell, lease or convey all
or substantially all of its assets to any entity, unless PGP shall be the
surviving entity, or the successor entity that acquires all or substantially all
of the assets of PGP shall expressly assume all obligations of PGP with respect
to the convertible preferred membership interests.
REDEMPTION. Except as set forth below under "--PGP Operating
Agreement--Required Regulatory Redemptions or Repurchases," the convertible
preferred membership interests are not subject to redemption and have no stated
maturity.
LIQUIDATION PREFERENCE. Upon any liquidation, dissolution or winding up of
PGP, the holders of convertible preferred membership interests, before any
distribution to common membership interests or other securities junior in right
of payment to the convertible preferred membership interests, are entitled to be
paid out of the assets of PGP available for distribution to its members an
amount equal to (the "Preferred Liquidation Preference") the greater of:
(1) the member's tax "capital account" (which for an initial holder of a
convertible preferred membership interest, will be the member's tax basis in
its membership interest, as described in "Certain United States Federal
Income Tax Considerations--U.S. Federal Income Tax Consequences For U.S.
Holders of Convertible Preferred Membership Interests and Non-Voting Common
Membership Interests of PGP--Basis in Membership Interests," less the
liabilities of PGP allocated to the members that are included in the
calculation of such tax basis); and
(2) the member's initial tax "capital account" attributable to the
member's convertible preferred membership interest (aggregating $3.0 million
for all convertible preferred membership interests at issuance), less the
excess (if any) of (i) the amount of cash previously distributed to the
member and all previous owners of the same membership interest over (ii) the
aggregate net income of PGP (i.e., aggregate income of PGP less aggregate
deductions and losses of PGP) previously allocated to the member and to all
previous owners of the same membership interest; PROVIDED HOWEVER, that in
the case of a liquidation of PGP, the amount payable under this
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clause (2) would be subject to further reduction in the event that PGP is
unable to make special allocations of gross income to holders of convertible
preferred membership interests, as further described in PGP's operating
agreement.
If the assets of PGP available for distribution to the holders of
convertible preferred membership interests are insufficient to pay each holder
its applicable stated liquidation value, the holders of outstanding convertible
preferred membership interests shall share ratably in such distribution of
assets. See "Risk Factors--Holding Company Structure."
REPURCHASE UPON CHANGE OF CONTROL. Upon a Change of Control (as defined in
the section "Description of Notes"), all or part of the convertible preferred
membership interests of PGP shall be redeemable by PGP, at the option of the
holders thereof, at a redemption price equal to the Preferred Liquidation
Preference out of funds held by PGP legally available therefor. PGP 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 convertible
preferred membership interests in connection with a Change of Control. Except as
set forth in this paragraph, PGP is not required to offer to purchase the
convertible preferred membership interests in the event of a takeover,
recapitalization or similar event. There can be no assurance that sufficient
funds will be available at the time of any Change of Control to make required
repurchases.
PGP OPERATING AGREEMENT
REQUIREMENTS IMPOSED BY APPLICABLE GAMING LAWS. The operating agreement of
PGP provides that the members of PGP that are required to be licensed by the
Gaming Commission in order to own a beneficial interest in PGP or actively
engage in the management of PGP are required to timely submit all information
and timely perform any and all acts required to be performed in connection with
obtaining a gaming license issued by the Gaming Commission. We are required to
notify the Gaming Commission as to the identity of (and may be required to
submit background information regarding) each director, corporate officer and
owner, partner, joint venturer, trustee or any other person who has a
"beneficial interest" of five percent (5%) or more, direct or indirect, in PGCL.
The Gaming Commission may also request that we provide them with a list of
persons holding beneficial ownership interests in PGCL of less than five percent
(5%). The Gaming Commission may determine that holders of PGP's membership
interests have a "beneficial interest" in PGCL. See "Regulatory Matters--
Regulatory Requirements Applicable to the Owners of the Securities and Others."
To the extent any such holders fail to comply with the terms and provisions
of PGP's operating agreement relating to the submission of such information and
performance of such actions, such holder is required to indemnify PGP against
and hold PGP harmless from any loss, liability or damages suffered by PGP
resulting from such failure.
If any gaming authority requires a record or beneficial owner of the PGP
membership interests to be licensed, qualified or found suitable, such holder
must apply for a license, qualification or finding of suitability within the
time period specified by such gaming authority. Such owner would be required to
pay all costs of obtaining such license, qualification or finding of
suitability.
REQUIRED REGULATORY REDEMPTIONS OR REPURCHASES. Under the operating
agreement of PGP, all of the membership interests of PGP will be subject to
redemption or repurchase if:
(1) the holder of such membership interests is required by any gaming
authority to divest itself of such interests,
(2) the holder's ownership of such membership interests, as determined
by PGP in its reasonable good faith judgement, could reasonably be expected
to result in the revocation of or imposition of burdensome terms or
conditions on, interfere with, threaten, delay the issuance of or otherwise
impair, in each case, in any material respect any of our gaming licenses,
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(3) the holder of such membership interests is licensed to hold such
interests and such gaming license is subsequently revoked or such holder
fails to have any gaming license required for it to hold such interest and
such failure continues for 30 consecutive days,
(4) the holder of such membership interests is found not to be suitable
(or found to be unsuitable) or to otherwise qualify under any applicable
gaming laws and PGP determines, in its reasonable good faith judgement, that
such unsuitability or inability to be qualified could reasonably be expected
to prevent or materially impair the acquisition or retention by us of any
gaming license, or
(5) the holder of such membership interests fails to comply with certain
of such holder's obligations with respect to gaming laws as set forth in
PGP's operating agreement.
Upon the occurrence of any of the events described in clauses (1) through
(5) above with respect to a holder of common membership interests (hereinafter,
an "Unsuitable Common Member"), PGP shall have the right to purchase (which
right shall be assignable by PGP) upon 5 days notice to such Unsuitable Common
Member and for 10 days thereafter, such common membership interests for an
amount equal to the lesser of (a) such Unsuitable Common Member's capital
contribution in respect of such common membership interests and (b) the current
fair market value of such common membership interests as determined by the board
of managers of PGP in its reasonable good faith judgement. If PGP elects not to
exercise such option, PGP shall promptly notify the holders of voting common
membership interests (other than the Unsuitable Common Member), who shall each,
for a period of ten (10) days following its receipt of such notice, have the
right to purchase, on a PRO RATA basis, all (but not less than all) of the
common membership interests of such Unsuitable Common Member at the fair market
value thereof as determined by the board of managers of PGP in its reasonable
good faith judgement. If the other holders of voting common membership interests
(other than the Unsuitable Common Member) elect not to exercise such option, PGP
must promptly purchase the common membership interests of such Unsuitable Common
Member for an amount equal to the lesser of (x) such Unsuitable Common Member's
capital contribution in respect of such common membership interests and (y) the
current fair market value of such common membership interests as determined by
the board of managers of PGP in its reasonable good faith judgement.
Upon the occurrence of any of the events described in clauses (1) through
(5) above with respect to a holder of convertible preferred membership interests
(hereinafter, an "Unsuitable Preferred Member"), PGP shall have the right to
purchase (which right shall be assignable by PGP) upon 5 days notice to such
Unsuitable Preferred Member and for ten 10 days thereafter, such convertible
preferred membership interests for an amount equal to the lesser of (a) the
Preferred Liquidation Preference and (b) the current fair market value of such
convertible preferred membership interests as determined by the board of
managers of PGP in its reasonable good faith judgement. If PGP elects not to
exercise such option, PGP shall promptly notify the holders of voting common
membership interests, who shall each, for a period of ten (10) days following
its receipt of such notice, have the right to purchase, on a PRO RATA basis, all
(but not less than all) of the convertible preferred membership interests of
such Unsuitable Preferred Member at the fair market value thereof as determined
by the board of managers of PGP in its reasonable good faith judgement. If the
holders of voting common membership interests elect not to exercise such option,
PGP must promptly purchase the convertible preferred membership interests of
such Unsuitable Preferred Member for an amount equal to the lesser of (x) the
Preferred Liquidation Preference and (y) the current fair market value of such
convertible preferred membership interests as determined by the board of
managers of PGP in its reasonable good faith judgement.
The purchase price to be paid by PGP to an Unsuitable Common Member or an
Unsuitable Preferred Member may be paid, at the option of PGP, in cash or a
promissory note with principal and interest payable annually and amortized over
not more than seven years and bearing interest at a rate per annum equal to the
sum of the prime lending rate published by the Wall Street Journal at the date
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of redemption plus 2%. No Unsuitable Common Member or Unsuitable Preferred
Member shall be entitled to any compensation from us, PGP or any member of PGP
by reason of the redemption or repurchase of such member's membership interests.
For additional information regarding required regulatory redemptions, see
"Risk Factors-- Required Regulatory Redemption" and "Regulatory
Matters--Regulatory Requirements Applicable to the Owners of the Securities and
Others."
REDEMPTION UPON TERMINATION. If any officer or employee of PGP or PGCL
(other than Mr. Stevens or Mr. Luzich) is terminated by or resigns from PGP or
PGCL for any reason, and such officer or employee holds common membership
interests, preferred membership interests or other interests of PGP, PGP shall
have the right to purchase all such interests from such officer or employee for
an amount equal to the lesser of (a) the capital contribution made or other
consideration paid by such officer or employee in respect of such interests and
(b) the current fair market value of such interests as determined by the board
of managers of PGP in its reasonable good faith judgement.
CERTAIN TRANSFER RESTRICTIONS. The Transfer Agent will not register any
purchase or transfer of membership interests of PGP, and any purchase or
transfer or purported purchase or transfer and registration of such interests
will be void AB INITIO and of no effect, unless:
(i) in the determination of the managing member of PGP (subject to a
concurring determination by a majority of the members of the Independent
Committee), such transfer is pursuant to certain "safe harbors" contained in
PGP's operating agreement intended to ensure that PGP does not become a
"publicly traded partnership" under the Code, or
(ii) prior to the effectiveness of such transfer, the transferring
member delivers to the managing member of PGP an opinion of counsel
reasonably satisfactory to the managing member of PGP and a majority of the
members of the Independent Committee to the effect that such transfer will
not result in PGP being treated as a "publicly traded partnership" under the
Code.
The "safe harbors" referred to in clause (i) of the preceding sentence
include:
(i) transfers by a member and certain related persons in one or more
transactions during any 30 calendar day period of, in the aggregate, more
than 2% of the total interests in the capital or profits of PGP;
(ii) subject to certain notice requirements, transfers during any
calendar year of interests aggregating not more than 10% of the total
interests in the capital or profits of PGP (x) among holders of membership
interests or (y) between holders of membership interests and PGP, in each
case pursuant to certain procedures established by PGP, including procedures
for establishing on the last day of each calendar quarter the price at which
such membership interests may trade; and
(iii) transfers during any calendar year not described in clause (ii) of
this sentence aggregating not more than 2% of the total interests in the
capital or profits of PGP, subject to designation by the managing member of
PGP.
To the extent any person that has not been licensed and has not otherwise
satisfied all applicable suitability and other requirements imposed by
applicable gaming laws acquires (including upon conversion of the convertible
preferred membership interests into non-voting common membership interests),
directly or indirectly, in one or more transactions, equal to or in excess of
five percent (5%) of the issued and outstanding membership interests of PGP
(such excess amount, a "Disqualified Interest"), such transactions, solely to
the extent relating to the acquisition by such person of such Disqualified
Interest, shall be void AB INITIO and of no effect.
Any purchase or transfer or purported purchase or transfer of PGP membership
interests will be void AB INITIO and of no effect, if such purchase or transfer
would result in more than 25% of PGCL's
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membership interests being owned, directly or indirectly, by persons who are not
citizens of the United States. See "Regulatory Matters--The Shipping Act of
1916; The Merchant Marine Act of 1936."
Transfers of membership interests of PGP are subject to certain additional
conditions contained in PGP's operating agreement, including, but not limited
to, (1) delivery by the transferring member of an opinion of counsel reasonably
acceptable to the board of managers of PGP that such transfer does not violate
any federal or state securities laws or any applicable gaming laws and (2) such
transferee's written agreement to be bound to the terms and provisions of PGP's
operating agreement and to execute Annex B hereto and such other documents and
instruments as the board of managers of PGP may deem necessary or appropriate
for admission of such transferee as a substitute member of PGP.
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SPECIFIC FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations of the issuance of the new notes and the exchange offer and of
the ownership of notes by a beneficial owner who holds notes as capital assets
(generally, property held for investment) within the meaning of the Internal
Revenue Code of 1986, as amended (the "Code"). "U.S. holder" means a beneficial
owner of the securities who is a citizen or resident of the United States, a
corporation or partnership created or organized in the United States or under
the law of the United States or of any State or political subdivision of the
foregoing, any estate, the income of which is includable in gross income for
U.S. federal income tax purposes regardless of its source, or a trust 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. "Non-U.S. holder" means a
beneficial owner of the securities who is not a U.S. holder. This summary does
not discuss all aspects of United States federal income taxation which may be
important to particular holders in light of their individual investment
circumstances, such as investors subject to special tax rules (e.g., financial
institutions, regulated investment companies, insurance companies,
broker-dealers, and tax-exempt organizations) or to persons that will hold the
securities as a part of a straddle, hedge, or synthetic security transaction for
United States federal income tax purposes or that have a functional currency
other than the United States dollar, all of whom may be subject to tax rules
that differ significantly from those summarized below. In addition, this summary
does not discuss the foreign, state or local tax considerations. The discussion
set forth below is based upon the Code, Treasury Regulations promulgated
thereunder, and administrative and judicial interpretations of the foregoing as
of the date hereof. Any of such authorities may be repealed, revoked or modified
so as to result in federal income tax consequences different from those
discussed below, possibly with retroactive effect. Persons considering the
exchange of a new note for an old note pursuant to the exchange offer should
consult their own tax advisors concerning the federal income tax consequences of
the exchange in light of their particular situations as well as any consequences
arising under the laws of any other taxing jurisdiction.
U.S. FEDERAL TAX CHARACTERIZATION OF THE NOTES AND PGCL
The proper U.S. federal income tax characterization of a particular
instrument as debt or equity is a question of fact, the resolution of which is
based primarily upon the substance of the instrument and the transaction
pursuant to which it is issued, rather than merely upon the form of the
transaction or the manner in which the instrument is labeled. Among the factors
set forth by the Internal Revenue Service and the courts to be taken into
account in determining, for U.S. federal income tax purposes, whether or not an
instrument constitutes indebtedness, is whether the issuer of the instrument is
adequately capitalized such that principal and interest are reasonably expected
to be repaid. If the notes are classified as equity, rather than indebtedness,
for U.S. federal income tax purposes and are deemed to be "publicly traded," we
would be classified as a publicly traded partnership under the Code. In
addition, we would also be classified as a publicly traded partnership under the
Code if our equity interests are deemed to be "publicly traded." As a publicly
traded partnership, we would become subject to U.S. federal income tax as a
corporation which, in turn, may, among other things, materially adversely affect
our ability to make payments on the notes.
In connection with the original issuance of the old notes, Mayer, Brown &
Platt delivered its opinion to the effect that, for U.S. federal income tax
purposes, (i) the notes will be treated as indebtedness, and (ii) we will not be
treated as a publicly traded partnership subject to U.S. federal income tax as a
corporation. Such opinion was based on certain factual representations and the
assumption that the terms of our operating agreement will be complied with,
including compliance with restrictions and, in certain circumstances,
prohibitions, on transfers of our membership interests except pursuant to
certain "safe harbors" provided in Treasury regulations regarding
characterization of partnerships as publicly traded partnerships.
107
<PAGE>
Our operating agreement provides that unless a proposed transfer of our
membership interests is pursuant to such a "safe harbor," we must receive an
opinion of counsel prior to such proposed transfer to the effect that such
transfer will not cause us to become a publicly traded partnership. Our
operating agreement further provides that we may not recognize any transfers of
our membership interests that are not made pursuant to such safe harbors or
without the delivery of such opinion. Notwithstanding the opinion of Mayer,
Brown & Platt, the Internal Revenue Service (the "IRS") may be able to
successfully assert that the notes constitute equity, rather than indebtedness,
for U.S. federal income tax purposes, and are "publicly traded," or that our
equity interests are "publicly traded," and that as a result thereof, we are
subject to U.S. federal income taxation as a publicly traded partnership under
the Code.
The remainder of this discussion assumes, in accordance with counsel's
opinions, that for U.S. federal income tax purposes, the notes will be treated
as indebtedness, and PGCL will be treated as a partnership that is not a
publicly traded partnership.
CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of a new note for an old note pursuant to the exchange offer
will not be taxable to an exchanging holder for U.S. federal income tax
purposes. As a result, for U.S. federal income tax purposes, (i) an exchanging
holder will not recognize any gain or loss on the exchange, (ii) an exchanging
holder will be required to include interest on a new note in gross income in the
manner described below, (iii) the holding period for the new note will include
the holding period for the old note, and (iv) the holder's tax basis in the new
note will be the same as its basis in the old note.
U.S. FEDERAL INCOME TAX CONSEQUENCES FOR U.S. HOLDERS OF THE NOTES
STATED INTEREST. A U.S. holder will be required to include stated interest
on the notes in its income when received or accrued in accordance with the
holder's method of tax accounting.
DISPOSITION OF NOTES. Upon the sale, exchange or other taxable disposition
of a note, a U.S. holder will recognize gain or loss, if any, generally equal to
the difference between the amount realized on the sale, exchange or retirement
(other than any amount attributable to accrued but unpaid stated interest, which
will be taxable as such) and such holder's adjusted tax basis in the note. Any
such gain or loss would generally be long-term capital gain or loss if the note
has been held for more than one year at the time of the disposition.
LIQUIDATED DAMAGES. The treatment described above regarding inclusions in
gross income in respect of the notes is based in part upon our determination
that, as of the date of issuance of the notes, the possibility is remote that
liquidated damages would be paid in respect of the old notes in the event of a
registration default as described above under "The Exchange Offer--Purpose and
Effect; Registration Rights." The IRS may take a different position, which could
affect the timing and character of income reported by U.S. holders of the notes.
While not free from doubt, if such liquidated damages are in fact paid, we
believe the liquidated damages would be taxable to a U.S. holder as ordinary
income in accordance with the holder's regular method of tax accounting.
PURCHASERS OF NOTES AT OTHER THAN ORIGINAL ISSUANCE. The above summary does
not discuss special rules that may affect the treatment of U.S. holders that
acquired notes other than at original issuance, including those provisions of
the Code relating to the treatment of "market discount" and "acquisition
premium." Any U.S. holder should consult its tax advisor as to the consequences
to the purchaser of the acquisition, ownership and disposition of notes.
108
<PAGE>
U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS OF THE NOTES
Under present U.S. federal income tax law, and subject to the discussion
below concerning backup withholding:
(a) no withholding of U.S. federal income tax will be required with
respect to the payment by us or any paying agent of principal or interest on
a note owned by a Non-U.S. holder, provided (i) that the beneficial owner
does not actually or constructively own 10% or more than a 10% interest in
our capital or profits within the meaning of section 871(h)(3) of the Code
and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to us through stock ownership
and (iii) the beneficial owner satisfies the statement requirement
(described generally below) set forth in section 871(h) and section 881(c)
of the Code and the regulations thereunder and
(b) no withholding of U.S. federal income tax will be required with
respect to any gain or income realized by a Non-U.S. holder upon the sale,
exchange or retirement of a note.
To satisfy the requirement referred to in (a)(iii) above, the beneficial
owner of such note. or a financial institution holding the note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of ours with a statement to the effect that the beneficial owner is not a
U.S. person. Currently these requirements will be met if (1) the beneficial
owner provides his name and address, and certifies, under penalties of perjury,
that he is not a U.S. person (which certification may be made on an IRS Form
W-8BEN) or (2) a financial institution holding the note on behalf of the
beneficial owner certifies, under penalties of perjury, that such statement has
been received by it and furnishes a paying agent with a copy thereof. Under
Treasury regulations, which are anticipated to become effective for payments of
interest made after December 31, 2000 (the "Final Regulations"), the statement
requirement referred to in (a)(iii) above may also be satisfied with other
documentary evidence with respect to an offshore account or through certain
foreign intermediaries.
If a Non-U.S. holder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of premium, if any, and
interest made to such Non-U.S. holder will be subject to a 30% withholding tax
unless the beneficial owner of the note provides us or our paying agent, as the
case may be, with a properly executed (1) IRS Form 1001 (if delivered on or
prior to December 31, 1999) or IRS Form W-8BEN (or successor form) claiming an
exemption from withholding tax or a reduction in withholding tax under the
benefit of a tax treaty or (2) IRS Form 4224 (if delivered on or prior to
December 31, 1999) or IRS Form W-8ECI (or successor form) stating that interest
paid on the note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States. Under the Final Regulations, a Non-U.S. holder (or its agent,
where applicable) that files (i) an IRS Form 1001, must file a replacement IRS
Form W-8BEN by or before January 1, 2001, or (ii) an IRS Form 4224, must file a
replacement IRS Form W-8ECI by the expiration of IRS Form 4224 (one calendar
year from the date it was filed). Forms W-8BEN and W-8ECI are effective for the
calendar year in which they are signed and for the succeeding three calendar
years.
If a Non-U.S. holder is engaged in a trade or business in the United States
and interest on the note is effectively connected with the conduct of such trade
or business, the Non-U.S. holder, although exempt from the withholding tax
discussed above, will be subject to U.S. federal income tax on such interest on
a net income basis at applicable graduated rates. In addition, if such holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30%
(or lower treaty rate) of its effectively connected earnings and profits for the
taxable year, subject to adjustments. For this purpose, such interest on a note
will be included in such foreign corporation's effectively connected earnings
and profits.
109
<PAGE>
Any gain or income realized upon the sale, exchange or retirement of a note
generally will not be subject to U.S. federal income tax unless (i) such gain or
income is effectively connected with a trade or business in the United States of
the Non-U.S. holder, or (ii) in the case of a Non-U.S. holder who is an
individual, such individual is present in the United States for 183 days or more
in the taxable year of such sale, exchange or retirement, and certain other
conditions are met. Any such gain that is effectively connected with the conduct
of a United States trade or business by a Non-U.S. holder will be subject to
United States federal income tax on a net income basis at applicable graduated
rates and, if such Non-U.S. holder is a corporation, such gain may also be
subject to the 30% United States branch profits tax described above.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal, any premium or interest paid on a note, the proceeds of the sale of a
note before maturity within the United States and certain other note amounts,
and "backup withholding" at a rate of 31 percent will apply if a non-exempt
beneficial owner of a note fails to provide the certification described below.
Each beneficial owner of a note (other than an exempt beneficial owner, such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust or individual retirement account) will be required to provide, under
penalties of perjury, a certificate containing the beneficial owner's name,
address, correct U.S. federal taxpayer identification number and a statement
that the beneficial owner is not subject to backup withholding. Should a
non-exempt beneficial owner fail to provide the required certification, 31
percent of the amount otherwise payable to the beneficial owner will be withheld
from payment and remitted to the IRS as a credit against the beneficial owner's
federal income tax liability.
Under current law, information reporting and backup withholding will not
apply to payments of principal, premium (if any) and interest made by us or a
paying agent to a Non-U.S. holder on a note; PROVIDED the certification
described under "U.S. Federal Income Tax Consequences for Non-U.S. Holders"
above is received and the payor does not have actual knowledge that the
beneficial owner is a U.S. holder. However, the Final Regulations substantially
revise the procedures that withholding agents and payees must follow to comply
with, or establish an exemption from, these information reporting and backup
withholding provisions. Each beneficial owner of notes should consult such
owner's tax advisor regarding the tax consequences to such owner of the Final
Regulations.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH HOLDER
OF OLD NOTES SHOULD CONSULT ITS TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES
TO IT OF THE EXCHANGE OFFER, INCLUDING THE APPLICATION OF AND EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
110
<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 new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for old notes where such old
notes were acquired as a result of market-making activities or other trading
activities.
We will receive no proceeds in connection with the exchange offer or any
sale of new notes by broker-dealers. New notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the new notes or a combination
of these methods of resale, at market prices prevailing at the time of resale,
at prices related to prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
that may receive compensation in the form of commissions or concessions from the
broker-dealers or the purchasers of any new notes. Any broker-dealer that
resells new notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
new notes may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, and any profit on any resale of new notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act of 1933. The letter of
transmittal states that by acknowledging that it will deliver, and by
delivering, a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act of 1933.
LEGAL MATTERS
Mayer, Brown & Platt, New York, will pass on the validity of, and certain
legal matters concerning, the new notes.
INDEPENDENT AUDITORS
The combined financial statements of Greater Dubuque Riverboat Entertainment
Company, L.C. and Harbor Community Investment, L.C. as of December 31, 1997 and
1998 and for each of the three years in the period ended December 31, 1998 and
the balance sheet of Peninsula Gaming Company, LLC as of July 15, 1999 included
in this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein and elsewhere in the
registration statement, and have been so included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
Deloitte & Touche
Armstrong Center
Suite 500
222 Third Avenue, S.E.
Cedar Rapids, IA 52401
111
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
FINANCIAL STATEMENTS OF GDREC AND HCI
Independent Auditors' Report........................................................ F-2
Combined Balance Sheets at December 31, 1997 and 1998 and June 30, 1999
(unaudited)....................................................................... F-3
Combined Statements of Income for the years ended December 31, 1996, 1997 and 1998,
and for the six months ended June 30, 1998 (unaudited) and June 30, 1999
(unaudited)....................................................................... F-4
Combined Statements of Changes in Members' Equity for the years ended December 31,
1996, 1997 and 1998 and the six months ended June 30, 1999 (unaudited)............ F-5
Combined Statements of Cash Flows for the year ended December 31, 1996, 1997 and
1998 and the six months ended June 30, 1998 (unaudited) and June 30, 1999
(unaudited)....................................................................... F-6
Notes to Combined Financial Statements.............................................. F-7
BALANCE SHEET OF PENINSULA GAMING COMPANY LLC
Independent Auditors' Report........................................................ F-18
Balance Sheet at July 15, 1999...................................................... F-19
Note to Balance Sheet............................................................... F-20
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF THE COMPANY................... PF-1
Unaudited Pro Forma Combined Balance Sheet at June 30, 1999......................... PF-2
Unaudited Pro Forma Combined Statement of Income for the year ended
December 31, 1998................................................................. PF-3
Unaudited Pro Forma Combined Statement of Income for the six months ended
June 30, 1999..................................................................... PF-4
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members
Greater Dubuque Riverboat Entertainment Company, L.C
and Harbor Community Investment, L.C.
Dubuque, Iowa
We have audited the accompanying combined balance sheets of Greater Dubuque
Riverboat Entertainment Company, L.C. and Harbor Community Investment, L.C.,
both of which are under common ownership and common management, as of December
31, 1997 and 1998, and the related combined statements of income, changes in
members' equity, and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Greater
Dubuque Riverboat Entertainment Company, L.C. and Harbor Community Investment,
L.C. as of December 31, 1997 and 1998, and the combined results of their
operations and their combined cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Cedar Rapids, Iowa
March 31, 1999
F-2
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C> <C>
JUNE 30,
1997 1998 1999
------------- ------------- -------------
<CAPTION>
(NOTE 2)
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 5,782,377 $ 5,820,717 $ 5,118,094
Investments available for sale (Note 3)........................... 509,363
Accounts receivable............................................... 175,837 101,289 123,867
Inventory......................................................... 77,604 80,242 83,329
Prepaid expenses.................................................. 219,455 255,648 212,310
------------- ------------- -------------
Total current assets.......................................... 6,255,273 6,767,259 5,537,600
------------- ------------- -------------
PROPERTY AND EQUIPMENT--Net (Note 4)................................ 22,371,993 22,281,527 21,494,458
------------- ------------- -------------
OTHER ASSETS (Note 5)............................................... 287,748 203,446 145,276
------------- ------------- -------------
TOTAL............................................................... $ 28,915,014 $ 29,252,232 $ 27,177,334
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................. $ 248,803 $ 420,266 $ 207,062
Accrued payroll and payroll taxes................................. 930,015 935,174 1,532,618
Other accrued expenses............................................ 1,123,161 1,377,597 1,171,392
Current maturities of long-term liabilities
(Notes 6 and 7)................................................. 4,527,274 5,399,565 3,708,551
------------- ------------- -------------
Total current liabilities..................................... 6,829,253 8,132,602 6,619,623
------------- ------------- -------------
LONG-TERM LIABILITIES:
Notes payable, net of current maturities (Note 6)................. 10,572,799 4,056,691 3,204,141
Capital lease obligations, net of current maturities (Note 7)..... 365,931 310,804
------------- ------------- -------------
Total long-term liabilities................................... 10,572,799 4,422,622 3,514,945
------------- ------------- -------------
Total liabilities............................................. 17,402,052 12,555,224 10,134,568
------------- ------------- -------------
COMMITMENTS AND CONTINGENCIES
(Notes 9 and 11)
MEMBERS' EQUITY (Note 12):
Member interest................................................... 4,100,000 4,100,000 4,100,000
Unrealized gain on investments available for sale................. 1,508
Retained earnings................................................. 7,412,962 12,595,500 12,942,766
------------- ------------- -------------
Total members' equity......................................... 11,512,962 16,697,008 17,042,766
------------- ------------- -------------
TOTAL............................................................... $ 28,915,014 $ 29,252,232 $ 27,177,334
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to combined financial statements.
F-3
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Casino............................... $ 40,267,077 $ 40,571,618 $ 44,166,688 $ 21,237,844 $ 21,992,638
Food and beverage.................... 2,104,085 2,034,238 1,959,797 927,083 1,060,090
Other................................ 307,517 395,192 276,124 130,641 105,840
Less--promotional allowances......... (426,910) (379,938) (553,123) (229,016) (255,777)
------------- ------------- ------------- ------------- -------------
Net revenues....................... 42,251,769 42,621,110 45,849,486 22,066,552 22,902,791
------------- ------------- ------------- ------------- -------------
EXPENSES:
Casino............................... 16,013,531 16,334,849 17,272,814 8,371,204 9,007,588
Food and beverage.................... 2,980,277 2,556,795 2,830,575 1,342,537 1,572,301
Boat operations...................... 1,996,886 2,005,068 2,056,377 1,008,132 963,999
Other................................ 85,924 75,800 67,907 33,000 26,774
Selling, general and
administrative..................... 9,573,537 6,946,529 7,515,115 3,588,443 3,690,813
Depreciation and amortization........ 2,025,706 1,826,179 1,894,763 897,900 1,065,896
Sale of business expenses
(Note 13).......................... 93,350 716,655 181,474 326,620
Ownership litigation (Note 11)......... 58,318 76,833 211,388 51,104 298,537
------------- ------------- ------------- ------------- -------------
Total expenses......................... 32,734,179 29,915,403 32,565,594 15,473,794 16,952,528
------------- ------------- ------------- ------------- -------------
INCOME FROM
OPERATIONS........................... 9,517,590 12,705,707 13,283,892 6,592,758 5,950,263
------------- ------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest income...................... 80,510 222,238 141,967 64,212 72,423
Interest expense..................... (1,812,756) (1,772,165) (1,142,122) (664,266) (319,202)
Loss on sale of assets (Note 4)...... (6,877,512) (88,014) (73,726) (48,312) (97,750)
------------- ------------- ------------- ------------- -------------
Total other expense................ (8,609,758) (1,637,941) (1,073,881) (648,366) (344,529)
------------- ------------- ------------- ------------- -------------
NET INCOME............................. $ 907,832 $ 11,067,766 $ 12,210,011 $ 5,944,392 $ 5,605,734
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
See notes to combined financial statements.
F-4
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
INVESTMENTS TOTAL
MEMBER MEMBER AVAILABLE RETAINED MEMBERS'
UNITS INTEREST FOR SALE EARNINGS EQUITY
----------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996................... 116 $ 4,600,000 $ 3,400,250 $ 8,000,250
Net income............................... 907,832 907,832
Member distributions..................... (1,379,986) (1,379,986)
--- ------------ ------------- -------------
BALANCE, DECEMBER 31, 1996................. 116 4,600,000 2,928,096 7,528,096
Net income............................... 11,067,766 11,067,766
Member distributions..................... (6,582,900) (6,582,900)
Retired units............................ (4) (500,000) (500,000)
--- ------------ ------------- -------------
BALANCE, DECEMBER 31, 1997................. 112 4,100,000 7,412,962 11,512,962
Net income............................... 12,210,011 12,210,011
Member distributions..................... (7,027,473) (7,027,473)
Unrealized gain on securities available
for sale............................... $ 1,508 1,508
--- ------------ ------------- ------------- -------------
BALANCE, DECEMBER 31, 1998................. 112 $ 4,100,000 $ 1,508 $ 12,595,500 $ 16,697,008
Net income (unaudited)................... 5,605,734 5,605,734
Member distributions (unaudited)......... (5,258,468) (5,258,468)
Change in unrealized gain on securities
available for sale (unaudited)......... (1,508) (1,508)
--- ------------ ------------- ------------- -------------
BALANCE, JUNE 30, 1999 (unaudited)......... 112 $ 4,100,000 $ -- $ 12,942,766 $ 17,042,766
--- ------------ ------------- ------------- -------------
--- ------------ ------------- ------------- -------------
</TABLE>
See notes to combined financial statements.
F-5
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- ----------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................... $ 907,832 $11,067,766 $12,210,011 $5,944,392 $5,605,734
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 2,025,706 1,826,179 1,894,763 897,900 1,065,897
Loss on sale of assets.......................... 6,877,512 88,014 73,726 48,312 97,750
Changes in assets and liabilities:
Accounts receivable............................. (102,540) 41,587 74,548 24,414 (22,578)
Inventory....................................... (22,371) 1,135 (2,638) (3,576) (3,085)
Prepaid expenses................................ 209,194 (23,760) (36,193) (96,578) 43,338
Other assets.................................... 58,896 (454) (7,483) (29,983)
Accounts payable................................ (579,381) (51,077) 171,463 166,130 (213,204)
Accrued expenses................................ 764,740 (427,731) 259,595 362,790 391,240
----------- ----------- ----------- ---------- ----------
Net cash provided by operating activities....... 10,139,588 12,521,659 14,637,792 7,313,801 6,965,092
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.... 92,798 107,510 76,552 35,455
Purchase of property and equipment.............. (17,811,668) (918,496) (1,392,968) (594,329) (358,011)
Payment on notes receivable..................... 149,959 4,522,041
Proceeds from sale of available for sale
securities.................................... 512,000
Purchase of securities available for sale....... (507,855)
Purchase of certificate of deposit.............. (500,000)
Proceeds from maturity of certificate of
deposit....................................... 500,000
----------- ----------- ----------- ---------- ----------
Net cash provided (used) by investing
activities.................................... (18,161,709) 4,196,343 (1,793,313) (517,777) 189,444
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term liabilities............... (5,409,711) (8,031,439) (5,753,666) (2,260,996) (2,598,691)
Proceeds from long-term liabilities............. 17,423,595
Payments for debt refinancing costs............. (385,000) (25,000)
Member units retired............................ (500,000)
Member distributions............................ (1,379,986) (6,582,900) (7,027,473) (4,601,577) (5,258,468)
----------- ----------- ----------- ---------- ----------
Net cash provided (used) by financing
activities.................................... 10,248,898 (15,114,339) (12,806,139) (6,862,573) (7,857,159)
----------- ----------- ----------- ---------- ----------
NET INCREASE IN CASH............................ 2,226,777 1,603,663 38,340 (66,549) (702,623)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR............................. 1,951,937 4,178,714 5,782,377 5,782,377 5,820,717
----------- ----------- ----------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR................................... $ 4,178,714 $ 5,782,377 $ 5,820,717 $5,715,828 $5,118,094
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION--Cash paid during the year for
interest...................................... $ 1,673,052 $ 1,854,368 $ 1,148,868 $ 682,880 $ 340,164
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Unrealized gain on sale of securities available
for sale...................................... 1,508
Change in unrealized gain on securities
available for sale............................ 1508
Capital lease obligation incurred to acquire
equipment..................................... 475,780
Notes receivable obtained as a result of sale of
fixed asset................................... 4,672,000
</TABLE>
See notes to combined financial statements.
F-6
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Greater Dubuque Riverboat Entertainment Company, L.C. ("GDREC"), which is
licensed by the Iowa Racing and Gaming Commission ("IRGC"), is an Iowa limited
liability company with 52 members (who collectively own 112 units). GDREC was
organized and incorporated during May 1994 for the purpose of developing and
holding the ownership interest in a riverboat gaming operation located in
Dubuque, Iowa (the "Diamond Jo Casino").
The same members own Harbor Community Investment, L.C. ("HCI") which was
formed April 8, 1996 to own and lease land and buildings in an area of Dubuque,
Iowa known as the Ice Harbor.
The combined financial statements, therefore, include the accounts and
operations of GDREC and HCI. These two entities are collectively referred to as
the Company. All material intercompany balances and transactions have been
eliminated in the combined financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONCENTRATION OF RISKS--The Company's management estimates that regular
customers are concentrated within 100 miles of the facility representing
approximately 95% of the Company's customer base at December 31, 1996, 1997 and
1998. The remaining 5% includes groups, tourists and highway travelers that live
beyond 100 miles.
CASH AND CASH EQUIVALENTS--The Company considers all cash on hand and in
banks, certificates of deposit and other highly liquid debt instruments
purchased with original maturities of three months or less to be cash
equivalents.
INVESTMENTS AVAILABLE FOR SALE--The Company accounts for its investments
using Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). This
standard requires that certain debt and equity securities be adjusted to market
value at the end of each accounting period. Unrealized market value gains and
losses are charged to earnings if the securities are traded for short-term
profit. Otherwise, such unrealized gains and losses are charged or credited to a
separate component of members' equity.
Gains and losses on the sale of available for sale securities are determined
using the specific identification method. The amortization of premiums and the
accretion of discounts are recognized in interest income using the interest
method over the period to maturity.
ACCOUNTS RECEIVABLE--Bad debts are charged to operations in the year in
which the account is determined uncollectible.
INVENTORIES--Inventories consisting principally of food, beverages, and
operating supplies are stated at the lower of cost (first-in, first-out method)
or market.
PROPERTY AND EQUIPMENT--Property and equipment is carried at cost and
capitalized lease assets are stated at their fair value at the inception of the
lease. Major renewals are capitalized, while
F-7
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
maintenance and repairs are expensed when incurred. Depreciation and
amortization are computed by the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Land improvements.............................................. 20-40 years
Building....................................................... 40 years
Riverboat and improvements..................................... 18-20 years
Leasehold improvements......................................... 20-40 years
Furniture, fixtures and equipment.............................. 3-10 years
Computer equipment............................................. 5 years
Vehicles....................................................... 5 years
</TABLE>
INTANGIBLE ASSETS--Intangible assets subject to amortization include loan
commitment fees and organization costs. Loan commitment fees are being amortized
straight-line over the life of the related loan. Organization costs are being
amortized straight-line over a period of 60 months.
LONG-LIVED ASSETS--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, among other things, that an entity review its
long-lived assets and certain related intangibles for impairment whenever event
or changes in circumstances indicate that the carrying amount of an asset may
not be fully recoverable. Under the standard, if the sum of the expected future
undiscounted cash flows is less than the carrying amount of the asset, an
impairment loss is recognized. The impairment is measured based on the estimated
fair value of the asset. The Company does not believe that any such events or
changes have occurred.
FINANCIAL INSTRUMENTS--The carrying amount for financial instruments
included among cash and cash equivalents, accounts receivable, accounts payable
and security deposits approximates their fair value based on the short maturity
of those instruments. The carrying amount of notes payable approximates their
estimated fair value based on the credit, interest rate and terms of the
obligations.
INCOME TAXES--The Company is a limited liability Company. In lieu of
corporation income taxes, the members of a limited liability company are taxed
on their proportionate share of the Company's taxable income. Therefore, no
provision or liability for federal income taxes has been included in the
financial statements.
GAMING REVENUE--Gaming revenue is the net win from gaming activities, which
is the difference between gaming wins and losses.
PROMOTIONAL ALLOWANCES--Food, beverage, and other items furnished without
charge to customers are included in gross revenues at a value which approximates
retail and then deducted as complimentary services to arrive at net revenues.
The cost of such complimentary services is charged to
F-8
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
operating expenses in the department that provided the service. Such estimated
costs of providing complimentary services for the years ending December 31,
1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Food and beverage................ $ 214,928 $ 198,194 $ 255,354 $ 119,029 $ 118,247
Other............................ 21,607 10,530 14,264 6,773 7,801
</TABLE>
ADVERTISING--The Company's policy is to expense all advertising costs as
incurred.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS--The Financial Accounting Standards Board
has issued a new standard, "Reporting Comprehensive Income" ("SFAS 130"). SFAS
130 requires the presentation and disclosure of comprehensive income, which is
defined as the change in a company's equity resulting from nonowner transactions
and events. SFAS 130 became effective December 15, 1997 and requires the
reclassification of all prior periods presented. The Company has adopted the
provisions of SFAS 130; however, the statement provides that an enterprise that
has no items of other comprehensive income for any period presented need only
report net income. The Company has no significant comprehensive income items for
any period presented; accordingly, the presentation and disclosure requirements
of SFAS 130 are not deemed necessary.
The FASB has also issued Statement 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131, which became
effective for fiscal years beginning after December 15, 1997, requires
publicly-held companies to report financial and descriptive information
concerning their reportable operating segments. An operating segment is designed
as a component of a business which (i) earns revenues and incurs expenses, (ii)
has its operating results reviewed on a regular basis by the company's chief
operating decision maker to determine how the company's resources should be
allocated and to assess its performance and (iii) has separate financial
information available. The Company's operations consist of its casino and
related facilities. The Company is considered a single operating unit due to the
dependence of the food and beverage and other operations on casino patrons. Such
noncasino activities are considered ancillary to the gaming business, are
reviewed as such by management and can not reasonably be presented as separate
operating segments. Accordingly, additional segment information is not presented
herein.
In June 1998, the FASB issued a new statement, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), effective for fiscal years
beginning after June 15, 2000. SFAS 133 requires, among other things, that
derivatives be recorded on the balance sheet at fair value. Changes in the fair
value of derivatives may, depending on circumstances, be recognized in earnings
or deferred as a component of shareholders' equity until a hedged transaction
occurs. In June 1999, the FASB issued Statement No. 137, Accounting for
Derivative Instruments and Hedging Activities--Deferral of
F-9
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the Effective Date of FASB Statement No. 133. Under the new effective date, the
Company currently expects to adopt FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities, in year 2001. The effect on the
Company's financial position and results of operations is not expected to be
material.
REPORTING ON THE COSTS OF START-UP ACTIVITIES--In April 1998, the American
Institute of Certified Public Accountants issued the Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires
that costs of start-up activities and organization costs be expensed as incurred
and is effective for the Company in 1999. The Company does not have significant
deferred start-up costs as of December 31, 1998, therefore the adoption of SOP
98-5, will not have a material impact on the Company's combined results of
operation or financial Position.
UNAUDITED INTERIM FINANCIAL STATEMENTS--The interim financial statements and
the related information in the notes as of June 30, 1999 and for the six months
ended June 30, 1998 and 1999 are unaudited. Such interim financial statements
have been prepared on the same basis as the audited financial statements and, in
the opinion of management, reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial position,
the results of operations and cash flows for the interim periods presented. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
3. INVESTMENTS AVAILABLE FOR SALE
Investments available for sale consist of shares of a bond fund. These
shares have an original cost of $507,855 and a fair market value of $509,363 as
of December 31, 1998. The unrealized gain for these securities was $1,508 as of
December 31, 1998. These securities are being accounted for in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities".
F-10
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30, 1999
1997 1998 (NOTE 2)
------------- ------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Land............................................ $ 1,457,649 $ 1,461,943 $ 1,461,943
Building........................................ 3,696,371 3,818,613 3,795,675
Riverboats and improvements..................... 13,990,129 14,018,301 14,076,310
Furniture, fixtures and equipment............... 5,766,823 6,274,535 6,394,099
Computer equipment.............................. 290,847 426,738 411,764
Vehicles........................................ 29,609 66,127 66,127
Equipment held under capital lease
obligations................................... 775,780 775,780
------------- ------------- -------------
Subtotal........................................ 25,231,428 26,842,037 26,981,698
Accumulated depreciation........................ (2,859,435) (4,560,510) (5,487,240)
------------- ------------- -------------
Property and equipment, net..................... $ 22,371,993 $ 22,281,527 $ 21,494,458
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
During 1996, the Company sold its original casino riverboat to a third party
for a note receivable with a face value of $4,672,000 resulting in a loss of
approximately $6,884,000. Losses on sale of assets in 1997 and 1998 relate
primarily to the sale of slot machines.
5. OTHER ASSETS
Other assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30, 1999
1997 1998 (NOTE 2)
---------- ---------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Loan fees.............................................. $ 385,000 $ 410,000 $ 410,000
Deposits and other..................................... 84,415 91,898 91,898
---------- ---------- -------------
Subtotal............................................... 469,415 501,898 501,898
Accumulated amortization............................... (181,667) (298,452) (356,622)
---------- ---------- -------------
Other assets, net...................................... $ 287,748 $ 203,446 $ 145,276
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
F-11
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. NOTES PAYABLE
Notes payable is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30, 1999
1997 1998 (NOTE 2)
------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to bank, due in monthly installments
of $355,000, including interest at a variable
rate of 2% above the 90-day LIBOR index rate
(current effective rate of 7.2% at December 31,
1998). Final payment is due August 1, 2000...... $ 9,946,402 $ 5,376,689 $ 3,409,144
Note payable to bank, due in monthly installments
of $26,630, including interest at a fixed rate
of 8.9% for the first 60 months, then .75% above
the prime interest rate as noted in the money
section of the Wall Street Journal. The note
matures September 18, 2006. The note payable is
secured by a real estate mortgage dated
September 18, 1996.............................. 1,930,430 1,776,394 1,695,048
Note payable due in monthly installments of
$90,652, including interest at a fixed rate of
11.75% through December 1, 1999. The note
payable is secured by slot machines financed by
the note
agreement....................................... 1,930,542 1,021,641 525,748
Note payable, interest only payments due monthly
at a fixed rate of 8.5% for the first six years
and for the last four years 1% over prime or
8.5%, whichever is greater through May 1, 2006,
at which time the remaining balance becomes due.
The note payable is secured by the real estate
purchased....................................... 1,044,130 968,563 938,707
Note payable, due in monthly installments of
$5,634, including interest at a fixed rate of
10.5% through September 1, 1999................. 248,569 203,120 179,069
------------- ------------ -------------
15,100,073 9,346,407 6,747,716
Less current maturities........................... 4,527,274 5,289,716 3,543,575
------------- ------------ -------------
Long-term debt.................................... $ 10,572,799 $ 4,056,691 $ 3,204,141
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
F-12
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. NOTES PAYABLE (CONTINUED)
During April 1998, the Company refinanced the note payable due August 1,
2000 to revise the previously stated fixed interest rate of 10% to a variable
interest rate of 2% above the 90-day LIBOR index rate. The note is
collateralized by the Diamond Jo Casino riverboat. The note agreement contains
various restrictive and financial covenants, which, among others, requires the
Company to maintain a tangible net worth of not less than $7.5 million,
restricts the Company's total debt service coverage ratio and facility debt
service coverage ratios to not be greater than 1.5 to 1.0. The Company was in
compliance with these covenants at December 31, 1998.
Principal payments on long-term debt for the years ended December 31 are due
as follows:
<TABLE>
<S> <C>
1999............................................................ $5,289,716
2000............................................................ 1,663,448
2001............................................................ 203,667
2002............................................................ 213,723
2003............................................................ 239,242
Thereafter...................................................... 1,736,611
---------
$9,346,407
---------
---------
</TABLE>
7. CAPITAL LEASE OBLIGATION
Capital lease obligation at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Liability under capital leases, due in monthly installments of
$21,356 for 24 months and $5,267 for one month, including
interest at a fixed rate of 9%. Final payment is due 25 months
after the initial payment is made. Payments are anticipated to
begin in August 1999 after final acceptance of the system. The
leases are collateralized by equipment with a net book value of
$736,990 at December 31, 1998.................................... $ 475,780
Less current portion............................................. (109,849)
---------
$ 365,931
---------
---------
</TABLE>
Future minimum lease payments under capital lease at December 31, 1998 were
as follows:
<TABLE>
<S> <C>
1999............................................................. $ 129,217
2000............................................................. 258,435
2001............................................................. 134,485
---------
Total minimum lease payments..................................... 522,137
Less amounts representing interest............................... (46,357)
---------
Present value of future minimum lease payments................... 475,780
Less current portion............................................. (109,849)
---------
Long-term capital lease obligation............................... $ 365,931
---------
---------
</TABLE>
F-13
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE BENEFIT PLAN
The Company started a qualified defined contribution plan under section
401(k) of the Internal Revenue Code during 1996. Under the plan, eligible
employees may elect to defer up to 15% of their salary, subject to Internal
Revenue Service limits. The Company may make a matching contribution to each
participant based upon a percentage set by the Company, prior to the end of each
plan year. Company matching contributions to the plan were $57,981, $191,100 and
$240,459 for the years ended
December 31, 1996, 1997 and 1998, respectively. Company matching contributions
to the plan for the periods ended June 30, 1998 and 1999 were $112,111
(unaudited) and $106,249 (unaudited), respectively.
9. LEASING ARRANGEMENTS
The Company leases various equipment under noncancelable operating leases.
The equipment leases require fixed monthly payments to be made ranging from $351
to $4,155 and certain other gaming machines and tables require contingent
monthly rental payments based on usage of the equipment. The leases expire on
various dates in 1999 and 2000. Rent expense was $153,790, $262,536 and $403,148
for the years ended December 31, 1996, 1997 and 1998, respectively, including
contingent rentals of $73,011, $103,506 and $226,374, respectively. Rent expense
for the periods ended June 30, 1998 and 1999 were $132,418 (unaudited) and
$542,068 (unaudited), respectively, including contingent rentals of $42,115
(unaudited) and $452,004 (unaudited), respectively.
The future minimum rental payments required under these leases during the
years ended December 31, 1998 are summarized as follows:
<TABLE>
<S> <C>
1999............................................................... $ 21,590
2000............................................................... 5,478
2001............................................................... 415
2002............................................................... 415
2003............................................................... 415
Thereafter......................................................... 3,735
---------
$ 32,048
---------
---------
</TABLE>
10. UNINSURED CASH BALANCES
The Company maintains deposit accounts at several local banks. At various
times during the fiscal year and at December 31, 1998, the balances at
individual banks exceeded the maximum amount insured by the FDIC. Management
believes credit risk related to the uninsured balances is minimal.
11. COMMITMENTS AND CONTINGENCIES
During the 1997 fiscal year, the Company underwent a sales and use tax audit
by the Iowa Department of Revenue. At December 31, 1997, a liability of
approximately $178,000 was assessed, including total tax, penalty and interest
due. This amount was paid during 1998, however, the Company is vigorously
contesting the assessment.
A lawsuit has also been filed by one of the three original "active"
unit-holders (see Note 12) regarding a number of claims, some of which have been
narrowed by the court. The primary claim is in
F-14
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
regards to quantum merit for the value of the services rendered to the Company.
The court has narrowed that claim to those services rendered up to and including
the licensure of the Company in the Spring of 1993. An estimate of potential
liability, if any, as a result of the lawsuit was not possible as of the date of
this report.
The Company has incurred various legal expenses related to this lawsuit of
$58,318, $76,833 and $211,388 for the years ended December 31, 1996, 1997 and
1998, respectively. Legal expenses related to this lawsuit for the 6-month
periods ended June 30, 1998 and 1999 were $51,104 (unaudited) and $298,537
(unaudited), respectively.
The Company is involved in various other legal actions arising in the normal
course of business. In the opinion of management, such matters will not have a
material effect upon the financial position of the Company.
12. MEMBERS' EQUITY
Transfers of member interests are limited in that, in accordance with
Greater Dubuque Riverboat Entertainment Co., L.C.'s operating agreement, any
sale, exchange or transfer of a member's interest in the Company shall not be
effective unless the transaction is approved by:
1. The Manager, in writing, and
2. By a vote of the members holding a majority of the remaining units
and by a majority vote of the remaining members at a meeting of the members.
This limitation does not include the granting of a security interest,
pledge, lien, or encumbrance against any membership interest.
The profits, losses, and distributions of the Company are allocated among
the members in proportion to each member's respective percentage of Units of
Ownership when compared with total Units of Ownership issued. An exception to
this is that there is an initial unequal division of distributions in that 95%
of distributions are paid to non-developer "passive" members, and 5% to
developer "active" members until such time as said non-developer members have
received an amount equal to their original purchase price for Units of Ownership
purchased, plus 10%. Thereafter, any and all distributions are to be
proportionate to Units owned.
13. SALE OF BUSINESS EXPENSES
During 1997, the Company's ownership made a decision to pursue the sale of
GDREC and HCI. The sales process has resulted in the Company incurring various
expenses related to a valuation of the business, retaining the services of an
investment banker, environmental and market studies, legal and travel.
Sale of business expenses were $93,350 and $716,655 for the years ended
December 31, 1997 and 1998, respectively. Sale of business expenses for the six
month periods ended June 30, 1998 and 1999 were $181,474 (unaudited) and
$326,620 (unaudited).
F-15
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
14. DUBUQUE RACING ASSOCIATION, LTD. CONTRACT
Dubuque Racing Association, Ltd. (the "Association"), a qualified sponsoring
organization, presently holds a license to conduct gambling games under Chapter
99F and other Iowa statutes.
The Association owns Dubuque Greyhound Park, a traditional greyhound race
track with 600 slot machines and amenities including a gift shop, restaurant and
clubhouse.
In February of 1993, the Company entered into a contract (the "Operating
Agreement") with the Association relating to the operation of an excursion
gambling riverboat for three excursion seasons commencing April 1, 1993, under
gambling licenses held jointly.
In July of 1995, the Operating Agreement with the Association was amended.
Certain provisions of the amendment are as follows:
1. The Company shall have the option to renew and extend the Operating
Agreement for three consecutive three year terms. The option has been
exercised and the Operating Agreement has been extended to March 31, 2002.
2. Under the terms of the Operating Agreement, subject to certain
conditions, the Association shall receive the greater of the Association's
gaming revenues from the greyhound park for the period, or a percentage of
the total combined gaming revenues of the Association's from the greyhound
park and the Greater Dubuque Riverboat Entertainment Company, L.C., as
follows:
a. 32% of the first $30,000,000 of total combined gaming revenues,
plus
b. 8% of the total combined gaming revenues over $30,000,000, but
less than $42,000,000.
c. 8% of total combined gaming revenues between $42,000,000 and
$46,000,000 during any period for which no excursion boat gambling or
land based gambling operation is carried on from a Wisconsin or Illinois
gambling operation in Grant County, Wisconsin, or Jo Davies County,
Illinois.
Gaming revenues under this contract means adjusted gross receipts, less
gaming taxes.
3. Commencing April 1, 2000, and continuing thereafter, the Company
shall additionally pay the Association the sum of $.50 for each patron
admitted on the boat, which, based upon recent annual attendance, would
approximate $500,000 annually.
4. In the event the Company shall desire to sell or lease the excursion
gambling boat, its furnishings and gambling equipment and/or its interest in
any ticket sale facility or other buildings located in the Dubuque Ice
Harbor used in connection with the operation of an excursion gambling boat,
to a third party that does not agree to operate said asset subject to the
terms and conditions of the Operating Agreement, and obtains an acceptable
offer from said third party for the purchase or lease of the excursion
gambling boat and its furnishings, equipment, and/or its interest in said
building, the Association shall have the option to purchase or lease the
excursion gambling boat, its furnishings, equipment, and/or the Company's
interest in the building or its lease of the same for the amount of the
acceptable offer made by a third party and upon the same terms and
conditions as set forth in a third party offer.
F-16
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
14. DUBUQUE RACING ASSOCIATION, LTD. CONTRACT (CONTINUED)
Gaming revenues for the Association were $20,605,290, $25,840,009 and
$29,379,820 for December 31, 1996, 1997 and 1998, respectively, and therefore
payments made to the Association for the years ended December 31, 1996, 1997 and
1998 under the Operating Agreement were $0.
15. SUBSEQUENT EVENT (UNAUDITED)
In January 1999, the membership of the Company approved an agreement to sell
all of the Company's operating assets used in connection with the gaming
excursion riverboat business to Peninsula Gaming Partners, LLC or its designee
("PGP") for approximately $77,000,000. Pursuant to the terms of the acquisition
documents, PGP deposited $2,500,000 in an escrow account at a bank in Dubuque,
Iowa, to be applied against the total purchase price upon final closing of the
sale. On May 20, 1999, PGP's application for a gaming license to operate the
Diamond Jo was approved by the Iowa Racing and Gaming Commission, effective upon
the transfer of ownership of the Diamond Jo. The acquisition was consummated on
July 15, 1999.
F-17
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Peninsula Gaming Company, LLC
We have audited the accompanying balance sheet of Peninsula Gaming Company,
LLC as of July 15, 1999. This balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
balance sheet 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 balance sheet is free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. 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, such balance sheet presents fairly, in all material
respects, the financial position of Peninsula Gaming Company, LLC at July 15,
1999 in conformity with generally accepted accounting principles.
September 23, 1999
F-18
<PAGE>
PENINSULA GAMING COMPANY, LLC
BALANCE SHEET
JULY 15, 1999
<TABLE>
<S> <C>
ASSETS--Receivable from Peninsula Gaming Partners, LLC.......................... $9,000,000
---------
---------
STOCKHOLDER'S EQUITY--Common membership interests............................... $9,000,000
---------
---------
</TABLE>
See note to balance sheet
F-19
<PAGE>
PENINSULA GAMING COMPANY, LLC
NOTE TO BALANCE SHEET
JULY 15, 1999
1. ORGANIZATION AND BUSINESS PURPOSE
Peninsula Gaming Company, LLC (the "Company") is a wholly-owned subsidiary
of Peninsula Gaming Partners, LLC ("PGP"). The company is a Delaware limited
liability company formed on January 26, 1999 for the purpose of purchasing
assets comprising the Diamond Jo Casino and related real property. To date, the
Company has had no significant activities.
The common membership interests of the Company are wholly-owned by PGP. The
Company and PGP completed the sale of $71,000,000 of 12 1/4% Senior Secured
Notes due 2006 and $3,000,000 in convertible preferred membership interests,
respectively, during July 1999. Concurrently with the sale of the securities,
the Company received a $9.0 million capital contribution from PGP ($6.0 million
of which was contributed to the capital of PGP by common members of PGP and $3.0
million of which was contributed to the capital of PGP through the sale by PGP
of convertible preferred membership interests as previously described). The $9.0
million receivable from PGP was classified as an asset due to the subsequent
payment of the receivable by PGP. The proceeds from the above transactions were
used to complete the purchase of certain assets comprising the Diamond Jo casino
and related real property.
* * * * *
F-20
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information (the
"Unaudited Pro Forma Combined Financial Information") of Peninsula Gaming
Company, LLC (the "Company") has been derived from the application of pro forma
adjustments to the combined historical financial statements of Greater Dubuque
Riverboat Entertainment Company, L.C. ("GDREC") and Harbor Community Investment,
L.C. ("HCI") included elsewhere herein, after giving effect to our acquisition
of the Diamond Jo casino from GDREC and related real property from HCI. The
Unaudited Pro Forma Combined Financial Information gives effect to the
acquisition as if such event had occurred on June 30, 1999 for purposes of the
unaudited pro forma combined balance sheet at June 30, 1999 and on January 1,
1998 and January 1, 1999, for purposes of the unaudited pro forma combined
statements of income for the year ended December 31, 1998 and the six months
ended June 30, 1999, respectively. The pro forma adjustments are described in
the accompanying notes.
The Unaudited Pro Forma Combined Financial Information is presented for
informational purposes only and does not purport to (i) represent what the
combined financial position or results of operations for the Company would
actually have been if the acquisition had occurred on the dates specified or
(ii) project the financial position or results of operations for the Company at
any future date or for any future periods. The foregoing constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which involve risks and uncertainties. See "Forward-Looking
Statements." The Unaudited Pro Forma Combined Financial Information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the combined historical financial
statements of GDREC and HCI, and the notes thereto, included elsewhere herein.
The acquisition was accounted for under the purchase method of accounting.
The purchase price for the acquisition, including the related fees and expenses,
has been allocated to the tangible and identifiable intangible assets or
liabilities of the acquired businesses based upon the Company's preliminary
estimates of their fair value with the remainder allocated to goodwill. The
allocation of the purchase price for the acquisition is subject to revision when
additional information concerning asset and liability valuation becomes
available. The pro forma adjustments directly attributable to the acquisition
include adjustments to interest expense related to the issuance of the notes,
estimated transaction fees and expenses, and changes in amortization of
intangible assets relating to the allocation of the purchase price. These
amounts are assumed solely for the purpose of presenting the Unaudited Pro Forma
Combined Financial Information set forth below and actual amounts may differ
from assumptions set forth below.
PF-1
<PAGE>
PENINSULA GAMING COMPANY, LLC
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------------------
PRO FORMA
HISTORICAL(1) ADJUSTMENTS PRO FORMA
------------ ----------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $5,118,094 ($1,148,836)(2) $3,969,258
Accounts receivable................................................... 123,867 (123,867)(3) --
Inventory............................................................. 83,329 83,329
Prepaid expenses...................................................... 212,310 (212,310)(3) --
------------ ----------- ----------
Total current assets................................................ 5,537,600 (1,485,013) 4,052,587
Property and equipment--Net............................................. 21,494,458 21,494,458
Goodwill................................................................ 53,897,993(4) 53,897,993
Other Assets............................................................ 145,276 7,066,655(5) 7,211,931
------------ ----------- ----------
TOTAL................................................................... $27,177,334 5$9,479,635 $86,656,969
------------ ----------- ----------
------------ ----------- ----------
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...................................................... $ 207,062 $(207,062)(3) --
Accrued payroll & payroll taxes....................................... 1,532,618 (1,532,618)(3) --
Other accrued expenses................................................ 1,171,392 (1,171,392)(3) --
Current maturities of long-term liabilities........................... 3,708,551 (3,543,575)(3) $ 164,976
------------ ----------- ----------
Total current liabilities........................................... 6,619,623 (6,454,647) 164,976
LONG-TERM LIABILITIES:
Notes payable, net of current......................................... 3,204,141 (3,204,141)(3) --
Senior secured notes.................................................. 70,181,189(6) 70,181,189
Capital lease obligations, net........................................ 310,804 310,804
------------ ----------- ----------
Total long-term liabilities......................................... 3,514,945 66,977,048 70,491,993
------------ ----------- ----------
Total liabilities................................................... 10,134,568 60,522,401 70,656,969
------------ ----------- ----------
Preferred membership interest, redeemable............................... 7,000,000(7) 7,000,000
MEMBERS' EQUITY
Member interest....................................................... 4,100,000 4,900,000(7) 9,000,000
Retained earnings..................................................... 12,942,766 (12,942,766)(7) --
------------ ----------- ----------
Total members' equity................................................. 17,042,766 (8,042,766) 9,000,000
------------ ----------- ----------
TOTAL................................................................... $27,177,334 5$9,479,635 $86,656,969
------------ ----------- ----------
------------ ----------- ----------
</TABLE>
- ------------------------
(1) Represents the combined historical financial statements of GDREC and HCI.
See the combined financial statements and notes thereto included elsewhere
herein.
(2) Represents (a) the elimination of cash in excess of $2.0 million retained by
GDREC and the elimination of cash retained by HCI, (b) the recording of net
proceeds for the issuance of the notes of approximately $70.2 million less
estimated expenses of $4.1 million, (c) the payment of $70.0 million of cash
to GDREC and HCI pursuant to the acquisition agreements, and (d) the receipt
of $9.0 million from the issuance of common and convertible preferred
membership interests by PGP.
(3) Represents the elimination of assets and liabilities not purchased or
assumed under the acquisition agreements.
(4) Represents goodwill resulting from the acquisition which will be amortized
over a forty year period. The purchase price allocation is based upon
preliminary estimates of fair value and is subject to revision when
additional information concerning asset and liability valuation becomes
available.
(5) Represents (a) estimated capitalized debt issuance costs of $4.1 million
related to the issuance of the notes, (b) elimination of assets not
purchased under the acquisition agreements of $0.1 million, and (c) $3.1
million of acquisition and start-up costs that will be expensed on our
financial statements for the period from the start of operations to
September 30, 1999.
(6) Represents the issuance of the notes in an original principal amount of
$71.0 million less original issue discount of approximately $0.8 million.
(7) Adjustments, in accordance with purchase accounting, to reflect the
elimination of members' equity, PGCL's issuance of preferred membership
interests to GDREC and the capital contribution from Peninsula Gaming
Partners, LLC.
PF-2
<PAGE>
PENINSULA GAMING COMPANY, LLC
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL(1) ADJUSTMENTS PRO FORMA
------------ ----------- ----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------
REVENUES:
Casino........................................................... $44,166,688 $44,166,688
Food and beverage................................................ 1,959,797 1,959,797
Other............................................................ 276,124 276,124
Less--promotional allowances..................................... (553,123) (553,123)
------------ ----------
Net revenues................................................. 45,849,486 45,849,486
EXPENSES:
Casino........................................................... 17,272,814 17,272,814
Food and beverage................................................ 2,830,575 2,830,575
Boat operations.................................................. 2,056,377 2,056,377
Other............................................................ 67,907 67,907
Selling, general and administrative.............................. 7,515,115 $ 200,000(2) 7,715,115
Depreciation and amortization.................................... 1,894,763 (116,785)(3) 1,777,978
Goodwill amortization............................................ 1,347,450(4) 1,347,450
Sale of business expenses........................................ 716,655 (716,655)(5) --
Ownership litigation............................................. 211,388 (211,388)(5) --
------------ ----------- ----------
Total expenses............................................... 32,565,594 502,622 33,068,216
------------ ----------- ----------
INCOME FROM OPERATIONS............................................. 13,283,892 (502,622) 12,781,270
------------ ----------- ----------
OTHER INCOME (EXPENSE):
Interest income.................................................. 141,967 141,967
Interest expense................................................. (1,142,122) (8,259,569)(6) (9,401,691)
Loss on sale of assets........................................... (73,726) (73,726)
------------ ----------
Total other expense.......................................... (1,073,881) (8,259,569) (9,333,450)
------------ ----------- ----------
NET INCOME....................................................... $12,210,011 ($8,762,191) $3,447,820
------------ ----------- ----------
------------ ----------- ----------
</TABLE>
- ------------------------------
(1) Represents the combined historical financial statements of GDREC and HCI.
See the combined financial statements and notes thereto included elsewhere
herein.
(2) Represents increased executive compensation expenses that will be incurred
annually from the consummation date of the acquisition.
(3) Represents the elimination of amortization expense related to intangible
assets not purchased.
(4) Represents the amortization of goodwill related to the acquisition
agreements over a forty year period.
(5) Represents the elimination of non-recurring expenses.
(6) Represents (a) the elimination of interest expense of $1.1 million, (b) an
increase in interest expense of $8.7 million on the notes calculated at an
assumed 12.25% interest rate per annum, and (c) the amortization of $4.1
million of deferred financing costs and original issue discount of
approximately $0.8 million over a period of seven years.
PF-3
<PAGE>
PENINSULA GAMING COMPANY, LLC
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL(1) ADJUSTMENTS PRO FORMA
------------ ----------- ----------
<S> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------
REVENUES:
Casino............................................................... $21,992,638 $21,992,638
Food and beverage.................................................... 1,060,090 1,060,090
Other................................................................ 105,840 105,840
Less--promotional allowances......................................... (255,777) (255,777)
------------ ----------
Net revenues..................................................... 22,902,791 22,902,791
EXPENSES:
Casino............................................................... 9,007,588 9,007,588
Food and beverage.................................................... 1,572,301 1,572,301
Boat operations...................................................... 963,999 963,999
Other................................................................ 26,774 26,774
Selling, general and administrative.................................. 3,690,813 100,000(2) 3,790,813
Depreciation and amortization........................................ 1,065,896 (58,393)(3) 1,007,503
Goodwill amortization................................................ 673,725(4) 673,725
Sale of business expenses............................................ 326,620 (326,620)(5) --
Ownership litigation................................................. 298,537 (298,537)(5) --
------------ ----------- ----------
Total expenses................................................... 16,952,528 90,175 17,042,703
------------ ----------- ----------
INCOME FROM OPERATIONS................................................. 5,950,263 (90,175) 5,860,088
------------ ----------- ----------
OTHER INCOME (EXPENSE):
Interest income...................................................... 72,423 72,423
Interest expense..................................................... (319,202) (4,381,643)(6) (4,700,845)
Loss on sale of assets............................................... (97,750) (97,750)
------------ ----------- ----------
Total other expense.............................................. (344,529) (4,381,643) (4,726,172)
------------ ----------- ----------
NET INCOME............................................................. $5,605,734 ($4,471,818) $1,133,916
------------ ----------- ----------
------------ ----------- ----------
</TABLE>
- ------------------------------
(1) Represents the combined historical financial statements of GDREC and HCI.
See the combined financial statements and notes thereto included elsewhere
herein.
(2) Represents increased executive compensation expenses that will be incurred
annually from the consummation date of the acquisition.
(3) Represents the elimination of amortization expense related to intangible
assets not purchased.
(4) Represents the amortization of goodwill related to the acquisition
agreements over a forty year period.
(5) Represents the elimination of non-recurring expenses.
(6) Represents (a) the elimination of interest expense of $0.3 million, (b) an
increase in interest expense of $4.3 million on the notes calculated at an
assumed 12.25% interest rate per annum, and (c) the amortization of $4.1
million of deferred financing costs and original issue discount of
approximately $0.8 million over a period of seven years.
PF-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF MEMBERS AND MANAGERS
Peninsula Gaming Company, LLC ("PGCL") is a limited liability company
organized under the laws of the state of Delaware. Section 18-108 of the
Delaware Limited Liability Company Act (the "Act") provides that, subject to
such standards and restrictions, if any, as are set forth in its limited
liability company agreement, a limited liability company may, and shall have the
power to, indemnify and hold harmless any member or manager or other person from
and against any and all califs and demands whatsoever.
Section 4.3 of the Amended and Restated Operating Agreement of Peninsula
Gaming Company LLC (the "Operating Agreement") provides that, to the fullest
extent permitted under applicable law, no member or managing member of PGCL
shall be deemed to violate the Operating Agreement or be liable, responsible or
accountable in damages or otherwise to any other member or managing member or
PGCL for any action or failure to act, unless such violation or liability is
attributable to such member's or managing member's gross negligence, willful
misconduct, bad faith or a continuing material breach of the Operating
Agreement. Without limiting the generality of the foregoing, each such member or
managing member shall, in the performance of its duties, be fully protected in
relying in good faith upon the records of PGCL and upon information, opinions,
reports or statements presented to such member or managing member by any other
person as to matters such member or managing member reasonably believes are
within such other person's professional or expert competence and that has been
selected with reasonable care by or on behalf of PGCL.
Section 4.4 of the Operating Agreement provides that, to the fullest extent
permitted under applicable law, PGCL shall severally indemnify and hold harmless
any person (an "INDEMNIFIED PARTY") who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
any action by or in the right of PGCL) by reason of or arising from any acts or
omissions (or alleged acts or omissions) on behalf of PGCL or in furtherance of
the interests of PGCL arising out of the Indemnified Party's activities as a
member, managing member, officer, employee, trustee or agent of PGCL against
losses, damages or expenses (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by such Indemnified
Party in connection with such action, suit or proceeding and for which such
Indemnified Party has not otherwise been reimbursed, so long as such Indemnified
Party did not act in bad faith or in a manner constituting gross negligence or
willful misconduct. The termination of any action, suit or proceeding by
judgment, order, settlement or upon a plea of NOLO CONTENDERE or its equivalent
shall not of itself (except insofar as such judgment, order, settlement or plea
shall itself specifically provide) create a presumption that the Indemnified
Party acted in bad faith or in a manner constituting gross negligence or willful
misconduct.
Section 5.4 of the Operating Agreement provides that no officer of PGCL
shall be liable to PGCL or to the members of PGCL for acts or omissions of such
officer in connection with the business or affairs of PGCL, including, without
limitation, any breach of fiduciary duty of such officer as an officer of PGCL,
any mistake of judgment of such officer as an officer of PGCL and any business
decision of such officer as an officer of PGCL, except for acts or omissions of
such officer of PGCL that a final adjudication establishes involved breach of
such officer's duty of loyalty to PGCL or its members, intentional misconduct,
fraud or a knowing violation of the law that was material to the cause of action
subject to such final adjudication.
Section 5.4 of the Operating Agreement provides further that,
notwithstanding any other term or provision thereof, PGCL and/or its successor,
trustee or receiver may indemnify, defend and hold
II-1
<PAGE>
harmless each of its officers and every individual who at any time was but
ceased to be an officer of PGCL, and the heirs and personal representative of
every officer of PGCL and of every such individual, against all claims, demands,
actions, losses, liabilities, damages, costs and expenses, which after the date
of Operating Agreement arise out of PGCL or its business or affairs, including
reasonable attorneys' fees incurred in defending all such matters.
Section 5.4 of the Operating Agreement provides further that, the
satisfaction of the indemnification obligations of PGCL under SECTION 5.4
thereof shall be from and limited to the assets of PGCL, and no member shall
have any personal liability for the satisfaction of any such indemnification
obligation.
Section 5.4 of the Operating Agreement provides further that, no amendment
or repeal of any term or provision of SECTION 5.4 thereof that otherwise would
restrict or limit any right or protection of an officer of PGCL or other
individuals thereunder shall apply to or have any effect on any such right or
protection of any officer of PGCL existing at the time of such amendment or
repeal or of any individual who at any time before such amendment or repeal was
but ceased to be an officer of PGCL, or of the heirs and personal representative
of any such officer of PGCL or other individual.
PGCL's managers and officers are insured by insurance policies obtained by
PGCL against certain liabilities for actions taken in such capacities, including
liabilities sunder the Securities Act of 1933.
Peninsula Gaming Corp. ("PGC") is a corporation organized under the laws of
the State of Delaware. Section 145 of the Delaware General Corporation Law
("DGCL") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful; and
further that a corporation may indemnify such person against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper. To the extent that a director, officer, employee or agent of
a corporation has been successful on the merits or otherwise in defense of any
such action, suit or proceeding, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Article Sixth, Section 2 of the Certificate of Incorporation of PGC (the
"Certificate of Incorporation") provides that DGCL shall indemnify, in
accordance with its by-laws, to the fullest extent permitted from time to time
by the PGCL or any other applicable laws as presently or hereafter in effect,
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including, without limitation, an
action by or in the right of PGC, by reason of his acting as a director or
officer of PGC (and PGC, in the discretion of the board of directors of PGC, may
so indemnify a
II-2
<PAGE>
person by reason of the fact that he is or was an employee or agent of PGC or is
or was serving at the request of PGC in any other capacity for or on behalf of
PGC) against any liability or expense actually and reasonably incurred by such
person in respect thereof; PROVIDED, HOWEVER, the Corporation shall be required
to indemnify an officer or director in connection with an action, suit or
proceeding (or part thereof) initiated by such person only if such action, suit
or proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation. Such indemnification is not exclusive of any other right to
indemnification provided by law or otherwise. The right to indemnification
conferred by this Section (2) shall be deemed to be a contract between the
Corporation and each person referred to herein.
Section 6.1 of the by-laws of PGC (the "By-laws") provides that, subject to
Section 6.3 of Article VI thereof, PGC shall indemnify, to the fullest extent
permitted by applicable law, now or hereafter in effect, any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of PGC) by reason of the
fact that he is or was a director or executive officer of PGC, or is or was a
director or executive officer of PGC serving at the request of PGC as a director
or executive officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of PGC, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful;
provided, however, PGC shall be required to indemnify an officer or director in
connection with an action, suit or proceeding initiated by such person only if
(i) such action, suit or proceeding was authorized by the board of directors of
PGC or (ii) the indemnification does not relate to any liability arising under
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any of the
rules or regulations promulgated thereunder. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of PGC, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
Section 6.2 of the By-laws provides that, subject to Section 6.3 of Article
VI thereof, PGC shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of PGC to procure a judgment in its favor by reason of
the fact that he is or was a director or executive officer of PGC, or is or was
a director or executive officer of PGC serving at the request of PGC as a
director or executive officer of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of PGC; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to PGC unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 6.3 of the By-laws provides that any indemnification under Article
VI thereof (unless ordered by a court) shall be made by PGC only as authorized
in the specific case upon a determination that indemnification of the director
or executive officer is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.1 or Section 6.2 of
Article VI thereof, as the case may be. Such determination shall be made (i) by
the board of directors of PGC by a majority
II-3
<PAGE>
vote of directors who were not parties to such action, suit or proceeding (even
if such majority vote constitutes less than a quorum), or (ii) if the majority
vote of disinterested directors so directs (even if such majority vote
constitutes less than a quorum), by independent legal counsel in a written
opinion, or (iii) by the stockholders. To the extent, however, that a director
or executive officer of PGC has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 102 of the DGCL allows a corporation to eliminate or limit the
personal liability of a director of a corporation to the corporation or to any
of its stockholders for monetary damage for a breach of fiduciary duty as a
director, except in the case where the director (i) breaches his duty of loyalty
to the corporation or its stockholders, (ii) fails to act in good faith, engages
in intentional misconduct or knowingly violates a law, (iii) authorizes the
payment of a dividend or approves a stock purchase or redemption in violation of
Section 174 of the DGCL or (iv) obtains an improper personal benefit.
Article Sixth, Section 1 of the Certificate of Incorporation provides that
directors of PGC shall have no personal liability to PGC or its stockholders for
monetary damages for breach of fiduciary duty as a director; PROVIDED that
nothing contained in Article Sixth thereof shall eliminate or limit the
liability of a director (i) for any breach of a director's duty of loyalty to
PGC or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law, (iii) under Section
174 of the DGCL, or (iv) for any transaction from which a director derived an
improper personal benefit. If the DGCL is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then by
virtue of Article Sixth thereof the liability of a director of PGC shall be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended.
Section 145 of the DGCL provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interest of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful; and further that a corporation may indemnify such person
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper. To the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any such action, suit or proceeding, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
II-4
<PAGE>
Article Sixth, Section 2 of the Certificate of Incorporation provides that,
directors of PGC shall have no personal liability to PGC or its stockholders for
monetary damages for breach of fiduciary duty as a director; PROVIDED that
nothing contained in this Article Sixth thereof shall eliminate or limit the
liability of a director (i) for any breach of a director's duty of loyalty to
PGC or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law, (iii) under Section
174 of the DGCL, or (iv) for any transaction from which a director derived an
improper personal benefit. If the DGCL is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then by
virtue of Article Sixth of the Certificate of Incorporation of PGC the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as so
amended.
Section 145 of the DGCL further provides that a corporation shall have power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against any liability asserted against such
person and incurred by such person in such capacity, arising out of such
person's status as such, whether or not the corporation would otherwise have the
power to indemnify such person under Section 145.
Article Sixth, Section 6 of the Certificate of Incorporation provides that
PGC may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of PGC, or is or was serving at the request
of PGC as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not PGC would have the power to indemnify him
against such liability under the provisions of Article Sixth thereof, the DGCL,
or otherwise.
Section 6.8 of the By-laws provides that PGC may purchase and maintain
insurance on behalf of any person who is or was a director or executive officer
of PGC, or is or was a director or executive officer of PGC serving at the
request of PGC as a director or executive officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not PGC would have
the power or the obligation to indemnify him against such liability under the
provisions of Article VI thereof.
All of PGC's directors and officers are insured by insurance policies
obtained by PGC against certain liabilities for actions taken in such
capacities, including liabilities sunder the Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
See index to exhibits, which is incorporated by reference.
ITEM 22. UNDERTAKINGS
Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) that, individually or in the aggregate,
represent a fundamental change in the information set forth in the
II-5
<PAGE>
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination
of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
in Item 20 or otherwise, the registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(6) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form within one business day of receipt of such request and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this registration statement through the date of responding
to the request.
(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this registration statement when
it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
registrants has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York on October 11, 1999.
<TABLE>
<S> <C> <C>
PENINSULA GAMING COMPANY, LLC
By: /s/ M. BRENT STEVENS
-----------------------------------------
M. Brent Stevens
CHIEF EXECUTIVE OFFICER
PENINSULA GAMING CORP.
By: /s/ M. BRENT STEVENS
-----------------------------------------
M. Brent Stevens
PRESIDENT
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Ronald S.
Brody the true and lawful attorney-in-fact and agent of the undersigned, with
full power of substitution and resubstitution, for and in the name, place and
stead of the undersigned, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement
and to file the same, with all exhibits thereto, and any and all documents in
connection therewith, with the Securities and Exchange Commission, and hereby
grants unto said attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chief Executive Officer of
/s/ M. BRENT STEVENS PGCL and Peninsula October 11, 1999
- ------------------------------ Gaming Partners, LLC
M. Brent Stevens ("PGP")
Manager of PGP, the
Managing Member of PGCL
President, Treasurer and
Director of PGC
/s/ NATALIE A. BAUM October 11, 1999
- ------------------------------ Chief Financial Officer of
Natalie A. Baum PGCL
Vice President of
/s/ MICHAEL S. LUZICH Corporate Development, October 11, 1999
- ------------------------------ Secretary and Manager of
Michael S. Luzich PGP
Vice President, Secretary
and Director of PGC
Secretary of PGCL
/s/ TERRANCE W. OLIVER
- ------------------------------ Manager of PGP October 11, 1999
Terrance W. Oliver
/s/ WILLIAM L. WESTERMAN
- ------------------------------ Manager of PGP October 11, 1999
William L. Westerman
/s/ ANDREW R. WHITTAKER
- ------------------------------ Manager of PGP October 11, 1999
Andrew R. Whittaker
</TABLE>
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
1 Purchase Agreement, dated July 8, 1999, by and among Peninsula Gaming Company, LLC, Peninsula Gaming
Corp., Peninsula Gaming Partners, LLC, and Jefferies & Company, Inc.
3.1A Certificate of Formation of Peninsula Gaming Company, LLC
3.1B Amendment to Certificate of Formation of Peninsula Gaming Company, LLC
3.2 Operating Agreement of Peninsula Gaming Company, LLC
3.3 Articles of Incorporation of Peninsula Gaming Corp.
3.4 By-laws of Peninsula Gaming Corp.
4.1 Specimen Certificate of Common Stock
4.2 Indenture, dated July 15, 1999, by and among Peninsula Gaming Company, LLC, Peninsula Gaming Corp. and
Firstar Bank of Minnesota, N.A., as trustee
4.5 Registration Rights Agreement, dated July 15, 1999, by and among Peninsula Gaming Company, LLC,
Peninsula Gaming Corp. and Jefferies & Company, Inc.
5 Opinion of Mayer, Brown & Platt as to the legality of the securities being registered
10.1A Asset Purchase Agreement, dated January 15, 1999, by and among Greater Dubuque Riverboat Entertainment
Company, L.C. and AB Capital, L.L.C.
10.1B Amendment to Asset Purchase Agreement, dated February 1, 1999, by and among Greater Dubuque Riverboat
Entertainment Company, L.C. and AB Capital, L.L.C.
10.2A Real Property Purchase Agreement, dated January 15, 1999, by and among Harbor Community Investment, L.C.
and AB Capital, L.L.C.
10.2B First Amendment to Real Property Purchase Agreement, dated July 15, 1999, by and among Harbor Community
Investment, L.C. and AB Capital, L.L.C.
10.3 Assignment Agreement, dated July 1, 1999, by and among Peninsula Gaming Partners, LLC (formerly AB
Capital, LLC) and Peninsula Gaming Company, LLC
10.4 Employment Agreement, dated April 15, 1999, by and among James P. Rix, AB Capital, L.L.C. and Peninsula
Gaming Company, LLC
10.5 Employment Agreement, dated July 15, 1999, by and among Natalie Baum and AB Capital, L.L.C.
10.6 Indemnification Agreement, dated June 7, 1999, by and among James P. Rix, AB Capital, L.L.C. and
Peninsula Gaming Company, LLC
10.7 Indemnification Agreement, dated June 7, 1999, by and among Natalie Baum and AB Capital, L.L.C. and
Peninsula Gaming Company, LLC
10.8 Bill of Sale, dated July 15, 1999, by and among Greater Dubuque Riverboat Entertainment Company, L.C.
and Peninsula Gaming Company, LLC
10.9A Operating Agreement, dated February 22, 1993, by and among Dubuque Racing Association, Ltd. and Greater
Dubuque Riverboat Entertainment Company, L.C.
10.9B Amendment to Operating Agreement, dated February 22, 1993, by and among Dubuque Racing Association, Ltd.
and Greater Dubuque Riverboat Entertainment Company, L.C.
10.9C Amendment to Operating Agreement, dated March 4, 1993, by and among Dubuque Racing Association, Ltd. and
Greater Dubuque Riverboat Entertainment Company, L.C.
10.9D Third Amendment to Operating Agreement, dated March 11, 1993, by and among Dubuque Racing Association,
Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
10.9E Fourth Amendment to Operating Agreement, dated March 11, 1993, by and among Dubuque Racing Association,
Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.
<S> <C>
10.9F Fifth Amendment to Operating Agreement, dated April 9, 1993, by and among Dubuque Racing Association,
Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.
10.9G Sixth Amendment to Operating Agreement, dated November 29, 1993, by and among Dubuque Racing
Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.
10.9H Seventh Amendment to Operating Agreement, dated April 6, 1994, by and among Dubuque Racing Association,
Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.
10.9I Eighth Amendment to Operating Agreement, dated April 29, 1994, by and among Dubuque Racing Association,
Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.
10.9J Ninth Amendment to Operating Agreement, dated July 11, 1995, by and among Dubuque Racing Association,
Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.
10.9K Tenth Amendment to Operating Agreement, dated July 15, 1999, by and among Dubuque Racing Association,
Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.
10.10 Operating Agreement Assignment, dated July 15, 1999, by and among Greater Dubuque Riverboat
Entertainment Company, L.C. and Peninsula Gaming Company, LLC
10.11 First Preferred Ship Mortgage, dated July 15, 1999, by Peninsula Gaming Company, LLC in favor of Firstar
Bank of Minnesota, N.A., as trustee
10.12 Mortgage, Leasehold Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement
dated July 15, 1999, by Peninsula Gaming Company, LLC in favor of Firstar Bank of Minnesota, N.A., as
trustee
10.13 Ice Harbor Parking Agreement Assignment, dated July 15, 1999, by and among Greater Dubuque Riverboat
Entertainment Company, L.C. and Peninsula Gaming Company, LLC
10.14 First Amendment to Sublease Agreement, dated July 15, 1999, by and among Dubuque Racing Association,
Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.
10.15 Sublease Assignment, dated July 15, 1999, by and among Greater Dubuque Entertainment Company, L.C. and
Peninsula Gaming Company, LLC
10.16 Iowa Racing and Gaming Commission Gaming License, dated July 15, 1999
10.17 Assignment of Iowa IGT Declaration and Agreement of Trust, dated July 15, 1999 by and among Greater
Dubuque Riverboat Entertainment Company, L.C. and Peninsula Gaming Company, LLC
12.1 Computation of ratio of earnings to fixed charges
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Mayer, Brown & Platt (contained in Exhibit 5)
24.1 Powers of attorney (contained on the signature page to this registration statement)
25.1 Form T-1 Statement of eligibility under the Trust Indenture Act of 1939 of Firstar Bank, N.A.
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------------
Exhibit 1
PENINSULA GAMING COMPANY, LLC
PENINSULA GAMING CORP.
PENINSULA GAMING PARTNERS, LLC
71,000 Units consisting of
$71,000,000 12.25% Senior Secured Notes due 2006
with 500,000 Convertible Preferred Membership Interests
PURCHASE AGREEMENT
July 8, 1999
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
Peninsula Gaming Company, LLC, a Delaware limited liability company
(the "Company"), Peninsula Gaming Corp., a Delaware corporation and a wholly
owned subsidiary of the Company ("PGC") and Peninsula Gaming Partners, LLC, a
Delaware limited liability company and direct and indirect parent of the Company
and PGC, respectively ("PGP" and, together with the Company and PGC, the
"Issuers"), hereby agree with you as follows:
1. Issuance of Securities. The Company and PGC (collectively, the
"Note Issuers") propose to issue and sell to Jefferies & Company, Inc. (the
"Initial Purchaser") $71,000,000 aggregate principal amount of 12.25% Senior
Secured Notes due 2006, Series A of the Note Issuers (the "Series A Notes"). The
Series A Notes will be issued pursuant to an indenture (the "Indenture"), to be
dated as of July 15, 1999, by and among the Note Issuers, any future subsidiary
guarantors (the "Guarantors"), and Firstar Bank of Minnesota, N.A., as trustee
(the "Trustee"). The Guarantors will unconditionally guarantee the obligations
under the Notes (defined below) and the Indenture (collectively, the
"Guaranty"). The obligations under the Notes will be secured by mortgages on,
security interests in or pledges of (the "Security Interests") certain assets
(the "Collateral") of the Company and certain of its future subsidiaries
(collectively, the "Grantors") as set forth in the Offering Circular (defined
below).
PGP proposes to issue and sell to the Initial Purchaser 500,000
convertible preferred membership interests of PGP (the "Convertible Preferred
Membership Interests"). The Convertible Preferred Membership Interests will be
convertible into non-voting common membership interests of PGP (the "Common
Membership Interests"). The Convertible Preferred
<PAGE>
Membership Interests and the Common Membership Interests are to be issued
pursuant to the provisions of PGP's operating agreement (the "PGP Operating
Agreement"), the terms and provisions of which are more fully described in the
Offering Circular.
The Series A Notes and the Convertible Preferred Membership
Interests will be sold in units (the "Units"), each unit consisting of $1,000
principal amount of Series A Notes and 7.042 Convertible Preferred Membership
Interests. The Series A Notes and Convertible Preferred Membership Interests
will be separately transferable immediately upon issuance.
The Units will be offered and sold to the Initial Purchaser pursuant
to an exemption from the registration requirements under the Securities Act of
1933, as amended (the "Act"). The Issuers have prepared a preliminary offering
circular, dated July 1, 1999 (the "Preliminary Offering Circular"), and a final
offering circular, dated July 8, 1999 (the "Offering Circular"), relating to the
offer and sale of the Units (the "Offering").
Upon original issuance thereof, and until such time as the same is
no longer required under the applicable requirements of the Act, the Series A
Notes and the certificates representing, the Convertible Preferred Membership
Interests and the Common Membership Interests shall bear the legends set forth
in the Offering Circular:
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions hereof, (a) the Note Issuers shall issue and sell to the
Initial Purchaser (and, in order to induce the Initial Purchaser to purchase the
Series A Notes, the Grantors shall grant the Security Interests), and the
Initial Purchaser agrees to purchase from the Note Issuers, $70,000,000
aggregate principal amount of the Series A Notes and (b) PGP shall issue and
sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from
PGP, 500,000 Convertible Preferred Membership Interests. The purchase price for
each Unit shall be $1,030.72, representing 98.847% of the principal amount of
each Series A Note and $42.25 for each Convertible Preferred Membership
Interest, less the Initial Purchaser's discount of $39.437 per unit.
3. Terms of Offering. The Initial Purchaser has advised the Issuers
that the Initial Purchaser will make offers to sell (the "Exempt Resales") some
or all of the Units purchased by the Initial Purchaser hereunder (and in certain
cases, Notes and/or Convertible Preferred Membership Interests) on the terms set
forth in the Offering Circular, as amended or supplemented, solely to (a)
persons whom the Initial Purchaser reasonably believes to be "qualified
institutional buyers" as defined in Rule 144A under the Act ("QIBs") and (b) a
limited number of institutional "accredited investors," as defined in Rule
501(a)(l), (2), (3) or (7) under the Act ("Accredited Investors" and, together
with QIBs, "Eligible Initial Purchasers").
Holders of the Series A Notes (including subsequent transferees)
will have the registration rights set forth in the registration rights agreement
(the "Registration Rights Agreement"), to be executed on and dated as of the
Closing Date (as defined below). Pursuant to
2
<PAGE>
the Registration Rights Agreement, the Note Issuers will agree, among other
things, to file with the Securities and Exchange Commission (the "Commission")
(a) a registration statement under the Act (the "Exchange Offer Registration
Statement") relating to, among other things, the 12.25% Senior Secured Notes due
2006, Series B, of the Note Issuers (the "Series B Notes" and, together with the
Series A Notes, each with the Guaranty endorsed thereon, if any, the "Notes"),
identical in all material respects to the Series A Notes (except that the Series
B Notes shall have been registered pursuant to such registration statement) to
be offered in exchange for the Series A Notes (such offer to exchange being
referred to as the "Registered Exchange Offer"), and/or (b) under certain
circumstances, a shelf registration statement pursuant to Rule 415 under the Act
(the "Shelf Registration Statement") relating to the resale by certain holders
of the Series A Notes.
Holders of the Convertible Preferred Membership Interests will have
not have any registration rights. Holders of the Common Membership Interests
will have the registration rights set forth in the PGP Operating Agreement.
On the Closing Date, the Company will enter into certain security
and pledge agreements, mortgages and certain other documents (collectively, the
"Security Documents") that will provide for the grant of the Security Interests
in the Collateral to the Trustee, as collateral agent (in such capacity, the
"Collateral Agent"), for the benefit of the holders of the Notes. The Security
Interests will secure the payment and performance when due of all of the
obligations of the Note Issuers, the Guarantors, if any, and the Grantors under
the Indenture, the Notes and the Security Documents.
Pursuant to the terms of the Asset Purchase and Sale Agreement dated
as of January 15, 1999, as amended (the "Asset Acquisition Agreement"), by and
between Greater Dubuque Riverboat Entertainment Company, L.C., an Iowa limited
liability company ("GDREC"), and PGP (formerly AB Capital, LLC), PGP or its
permitted designee will purchase (the "Asset Acquisition") certain assets from
GDREC, including the assets comprising the Diamond Jo riverboat casino located
in Dubuque, Iowa (the "Diamond Jo"). Pursuant to the terms of the Real Property
Purchase and Sale Agreement dated as of January 15,1999 (the "Property
Acquisition Agreement" and, together with the Asset Acquisition Agreement, the
"Acquisition Agreements"), by and between Harbor Community Investment, L.C., an
Iowa limited liability company ("HCI"), and PGP (formerly AB Capital, LLC), PGP
or its permitted designee will purchase (the "Real Property Acquisition")
certain related real property (the "Real Property") adjacent to the Diamond Jo
from HCI. PGP will assign the Acquisition Agreements to the Company on or prior
to the Closing Date. Upon consummation of the Asset Acquisition and the Real
Property Acquisition (collectively, the "Acquisitions"), the Company will own
the Diamond Jo and the Real Property. In connection with the Acquisitions, PGP
will contribute $9,000,000 in cash to the operating capital of the Company (the
"Capital Contribution"), $6,000,000 of which will be contributed to the capital
of PGP by members of PGP on the Closing Date and $3,000,000 of which will be
raised in the Offering through the sale of the Convertible Preferred Membership
Interests. On the Closing Date, PGP will contribute the Capital Contribution to
the Company. The Company will apply the proceeds of the offering of the Series A
Notes and the Capital Contribution to pay the purchase price in connection
3
<PAGE>
with the Real Property Acquisition, to partially pay the purchase price in
connection with the Asset Acquisition, to pay related fees and expenses, and for
general corporate purposes, all on the Closing Date. The remaining $7,000,000 of
the purchase price in connection with the Asset Acquisition will take the form
of preferred membership interests in the Company (the "Company Preferred
Membership Interests"), which will be issued to GDREC on the Closing Date (the
"Preferred Payment").
This Agreement, the Indenture, the Registration Rights Agreement,
the Security Documents, the Notes, the Acquisition Agreements, the PGP Operating
Agreement and all other documents or instruments executed by the Issuers in
connection with the transactions contemplated hereby and thereby are referred to
herein as the "Documents." The transactions contemplated by the Documents,
including without limitation the Preferred Payment, the Offering, the Capital
Contribution, and the use of the proceeds therefrom as described in the Offering
Circular, including the Acquisitions, are collectively referred to herein as the
"Transactions." The Units, the Notes, the Convertible Preferred Membership
Interests and the Common Membership Interests are referred to herein as the
"Securities". Unless the context requires otherwise, all agreements,
representations and warranties of the Issuers set forth in this Agreement are
made after giving pro forma effect to the Transactions.
4. Delivery and Payment. Delivery to the Initial Purchaser of and
payment for the Units shall be made at a Closing (the "Closing") to be held at
10:00 a.m., New York City time, on July 15, 1999 (the "Closing Date") at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022-3897. The Closing Date and the location of delivery of and the
form of payment for the Units may be varied by agreement between the Initial
Purchaser and the Issuers.
The Issuers shall deliver to the Initial Purchaser one or more
certificates representing the Units, comprised of the Series A Notes and the
Convertible Preferred Membership Interests, each in definitive form, registered
in such names and denominations as the Initial Purchaser may request, against
payment by the Initial Purchaser of the purchase price therefor by immediately
available Federal funds bank wire transfer to such bank account as the Issuers
shall designate to the Initial Purchaser at least two business days prior to the
Closing.
The certificates representing the Units in definitive form shall be
made available to the Initial Purchaser for inspection at the New York offices
of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York 10022-3897 (or such other place as shall be reasonably acceptable to the
Initial Purchaser) not later than 10:00 a.m. one business day immediately
preceding the Closing Date.
5. Agreement of the Issuers. The Issuers, jointly and severally,
hereby agree:
(a) To (i) advise the Initial Purchaser promptly after
obtaining actual knowledge (and, if requested by the Initial Purchaser,
confirm such advice in writing) of (A)
4
<PAGE>
the issuance by any state securities commission of any stop order
suspending the qualification or exemption from qualification of any of the
Securities for offer or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any state securities commission or other
regulatory authority, or (B) the happening of any event that makes any
statement of a material fact made in the Offering Circular untrue or that
requires the making of any additions to or changes in the Offering
Circular in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, (ii) use their
commercially reasonable efforts to prevent the issuance of any stop order
or order suspending the qualification or exemption from qualification of
any of the Securities under any state securities or Blue Sky laws, and
(iii) if at any time any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption
from qualification of any of the Securities under any such laws, use their
commercially reasonable efforts to obtain the withdrawal or lifting of
such order at the earliest possible time.
(b) To (i) furnish the Initial Purchaser, without charge, as
many copies of the Offering Circular, and any amendments or supplements
thereto, as the Initial Purchaser may reasonably request, and (ii)
promptly prepare, upon the Initial Purchaser's reasonable request, any
amendment or supplement to the Offering Circular that the Initial
Purchaser, upon advice of legal counsel, determines may be necessary in
connection with Exempt Resales (and the Issuers hereby consent to the use
of the Preliminary Offering Circular and the Offering Circular, and any
amendments and supplements thereto, by the Initial Purchaser in connection
with Exempt Resales).
(c) Not to amend or supplement the Offering Circular prior to
the Closing Date unless the Initial Purchaser shall previously have been
advised thereof and shall not have objected thereto within two business
days after being furnished a copy thereof.
(d) So long as the Initial Purchaser shall hold any of the
Securities, (i) if any event shall occur as a result of which, in the
reasonable judgment of the Issuers or the Initial Purchaser, upon advice
of legal counsel, it becomes necessary or advisable to amend or supplement
the Offering Circular in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
if it is necessary to amend or supplement the Offering Circular to comply
with Applicable Law (as defined below), forthwith to prepare an
appropriate amendment or supplement to the Offering Circular (in form and
substance reasonably satisfactory to the Initial Purchaser) so that (A) as
so amended or supplemented, the Offering Circular will not include an
untrue statement of material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (B) the
Offering Circular will comply with Applicable Law, and (ii) if in the
reasonable judgment of the Issuers it becomes necessary or advisable to
amend or supplement the Offering Circular so that the Offering Circular
will contain all of the information specified in, and meet the
requirements of, Rule 144A(d)(4) of the Act, forthwith to prepare an
appropriate
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amendment or supplement to the Offering Circular (in form and substance
reasonably satisfactory to the Initial Purchaser) so that the Offering
Circular, as so amended or supplemented, will contain the information
specified in, and meet the requirements of, such Rule.
(e) To cooperate with the Initial Purchaser and the Initial
Purchaser's counsel in connection with the qualification of the Securities
under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser may request and continue such qualification in effect so long as
reasonably required for Exempt Resales; provided, that the Issuers shall
not be required in connection therewith to file any general consent to
service of process or to qualify as a foreign corporation in any
jurisdiction where it is not now so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject.
(f) Whether or not any of the Transactions are consummated or
this Agreement is terminated, to pay (i) all costs, expenses, fees and
taxes incident to and in connection with: (A) the preparation, printing
and distribution of the Preliminary Offering Circular and the Offering
Circular and all amendments and supplements thereto (including, without
limitation, financial statements and exhibits), and all other agreements,
memoranda, correspondence and other documents prepared and delivered in
connection herewith, (B) the printing, processing and distribution
(including, without limitation, word processing and duplication costs) and
delivery of, each of the Documents, (C) the issuance and delivery of the
Securities, including the fees of the Trustee, (D) the qualification of
the Securities for offer and sale under the securities or Blue Sky laws of
the several states (including, without limitation, the fees and
disbursements of the Initial Purchaser's counsel relating to such
registration or qualification, (E) furnishing such copies of the
Preliminary Offering Circular and the Offering Circular, and all
amendments and supplements thereto, as may reasonably be requested for use
by the Initial Purchaser, and (F) the preparation of the Securities, (ii)
all fees and expenses of the counsel and accountants of the Issuers, (iii)
all expenses and listing fees in connection with the application for
quotation of the Notes in the NASD Automated Quotation System - PORTAL
("PORTAL"), (iv) all fees and expenses (including fees and expenses of
counsel) of the Issuers in connection with approval of the Notes by DTC
for "book-entry" transfer, (v) all fees charged by rating agencies in
connection with the rating of the Notes and (vi) all out-of-pocket fees
and expenses (including reasonable fees and expenses of counsel) incurred
by the Initial Purchaser in connection with the preparation, negotiation
and execution of the Documents and the consummation of the Transactions.
(g) PGP shall contribute the proceeds from the sale of the
Convertible Preferred Membership Interests together with an additional
$6,000,000 to the Company, and the Company will use the Capital
Contribution and the proceeds from the sale of the Series A Notes in the
manner described in the Offering Circular under the caption "Use of
Proceeds."
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(h) To the extent it may lawfully do so, not to insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension, usury or other law, wherever enacted, now or at
any time hereafter in force, that would prohibit or forgive the payment of
all or any portion of the principal of or interest on the Notes, or that
may affect the covenants or the performance of the Indenture (and, to the
extent it may lawfully do so, each of the Company and PGC hereby expressly
waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the
execution of any power granted to the Trustee in the Indenture or the
Collateral Agent in the Security Documents but shall suffer and permit the
execution of every such power as though no such law had been enacted).
(i) To do and perform all things required to be done and
performed under the Documents prior to and after the Closing Date.
(j) Not to, and to ensure that no affiliate (as defined in
Rule 501(b) of the Act) of any of the Issuers will, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) that would be integrated with the sale
of the Units, the Series A Notes or the Preferred Membership Interests in
a manner that would require the registration under the Act of the sale to
the Initial Purchaser or to the Eligible Initial Purchasers of the Units,
the Series A Notes or the Preferred Membership Interests.
(k) For so long as any of the Notes remain outstanding, during
any period in which any of the Note Issuers is not subject to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to make available, upon request, to any owner of the Notes in
connection with any sale thereof and any prospective Eligible Initial
Purchasers of such Notes from such owner, the information required by Rule
144A(d)(4) under the Act.
(1) To comply with the representation letter of the Issuers to
DTC relating to the approval of the Notes by DTC for "book entry"
transfer.
(m) To use their commercially reasonable efforts to effect the
inclusion of the Notes in PORTAL.
(n) For so long as the Notes are outstanding, and whether or
not required to do so by the rules and regulations of the Commission, (i)
to furnish to the Trustee and deliver or cause to be delivered to the
holders of the Notes and the Initial Purchaser (A) all quarterly and
annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were
required to file such Forms, including for each, a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report thereon by the
Company's independent certified public accountants, and (B) all reports
that would be
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<PAGE>
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports, and (ii) from and after the time the
Exchange Offer Registration Statement or the Shelf Registration Statement
(or such other registration statement with respect to the Notes) is filed
with the Commission, to file such information with the Commission so long
as the Commission will accept such filings.
(o) Except in connection with the Registered Exchange Offer or
the filing of the Shelf Registration Statement, not to, and not to
authorize or permit any person acting on their behalf to, (i) distribute
any offering material in connection with the offer and sale of the
Securities other than the Preliminary Offering Circular and the Offering
Circular and any amendments and supplements to the Offering Circular
prepared in compliance with Section 5(d) hereof, or (ii) solicit any offer
to buy or offer to sell the Securities by means of any form of general
solicitation or general advertising (including, without limitation, as
such terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(p) Not to, directly or indirectly, without the prior consent
of the Initial Purchaser, offer, sell, grant any option to purchase, or
otherwise dispose (or announce any offer, sale, grant of any option to
purchase or other disposition) of any securities of any of the Issuers for
a period of six months after the date of the Offering Circular, except as
contemplated by the Registration Rights Agreement, the Offering Circular
and the PGP Operating Agreement (including, without limitation, grants of
options to purchase Common Membership Interests to managers and/or members
of management of PGP and/or the Company).
(q) To take all actions necessary to assure that a sufficient
number of Common Membership Interests will be available for issuance upon
the exercise of the Convertible Preferred Membership Interests.
(r) At any time prior to the completion of the resale by the
Initial Purchaser of the Units, the Notes or the Preferred Membership
Interests, to notify the Initial Purchaser promptly in writing upon
becoming aware if any of the Issuers or any of their Affiliates becomes a
party in interest or a disqualified person with respect to any employee
benefit plan. The terms "ERISA," "Affiliates," "party in interest,"
"disqualified person" and "employee benefit plan" shall have the meanings
as set forth in Section 6(ee) hereof.
6. Representations and Warranties of the Issuers. Each of the
Issuers, jointly and severally, represents and warrants to the Initial Purchaser
that as of the Closing Date:
(a) The Preliminary Offering Circular as of its date did not,
and the Offering Circular, as of its date does not and as of the Closing
Date will not, and each supplement or amendment thereto as of its date
will not, contain any untrue statement of a material fact or omit to state
any material fact (except, in the case of the Preliminary Offering
Circular, for
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<PAGE>
pricing terms and other financial terms intentionally left blank)
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No injunction or
order has been issued that either (i) asserts that any of the Transactions
is subject to the registration requirements of the Act, or (ii) would
prevent or suspend the issuance or sale of any of the Securities or the
use of the Preliminary Offering Circular, the Offering Circular, or any
amendment or supplement thereto, in any jurisdiction. Each of the
Preliminary Offering Circular and the Offering Circular, as of their
respective dates contained, and the Offering Circular, as amended or
supplemented, as of the Closing Date will contain, all the information
specified in, and meet the requirements of, Rule 144A(d)(4) under the Act.
Except as disclosed in the Offering Circular, there are no related party
transactions that would be required to be disclosed in the Offering
Circular if the Offering Circular were a prospectus included in a
registration statement on Form S-l filed under the Act.
(b) There are no securities of any of the Issuers registered
under the Exchange Act or listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in a United
States automated inter-dealer quotation system. The Series A Notes are
eligible for resale pursuant to Rule 144A.
(c) Each of the Issuers (i) has been duly organized, is
validly existing and is in good standing under the laws of its
jurisdiction of organization, (ii) has all requisite power and authority
to carry on its business and to own, lease and operate its properties and
assets as described in the Offering Circular, and (iii) is duly qualified
or licensed to do business and is in good standing as a foreign limited
liability company or corporation, as the case may be, authorized to do
business in each jurisdiction in which the nature of such businesses or
the ownership or leasing of such properties requires such qualification,
except where the failure to be so qualified could not, singly or in the
aggregate, reasonably be expected to have a material adverse effect on (A)
the properties, business, prospects, operations, earnings, assets,
liabilities or condition (financial or otherwise) of either the Issuers,
taken as a whole, or the Note Issuers, taken as a whole, (B) the ability
of any of the Issuers to perform their obligations in all material
respects under any of the Documents, (C) the enforceability of any of the
Security Documents or the attachment, perfection or priority of any of the
Security Interests intended to be created thereby in any portion of the
Collateral or (D) the validity of any of the Documents or the consummation
of any of the Transactions (each, a "Material Adverse Effect").
(d) Immediately following the Closing, (i) the Company will
have no direct or indirect subsidiaries other than PGC, (ii) PGC will have
no direct or indirect subsidiaries, and (iii) PGP will have no direct or
indirect subsidiaries other than the Company and PGC. Except as disclosed
in the Offering Circular, there are no outstanding (A) securities
convertible into or exchangeable for any capital stock of PGC or any
membership interests of either of the Company or PGP, (B) options,
warrants or other rights to purchase or subscribe for capital stock of PGC
or any membership interests of either of the Company or
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<PAGE>
PGP or securities convertible into or exchangeable for capital stock of
PGC or any membership interests of either of the Company or PGP, or (C)
contracts, commitments, agreements, understandings, arrangements, calls or
claims of any kind relating to the issuance of any capital stock of PGC or
any membership interests of either of the Company or PGP, any such
convertible or exchangeable securities or any such options, warrants or
rights. Except as disclosed in the Offering Circular, immediately
following the Closing, none of the Issuers will directly or indirectly own
any capital stock or other equity interest in any person.
(e) All of the outstanding shares of capital stock or
membership interests, as the case may be, of each of the Issuers have been
duly authorized and validly issued, are fully paid and nonassessable, and
were not issued in violation of, and are not subject to, any preemptive or
similar rights. The Company Preferred Membership Interests have been duly
authorized and, when issued and delivered to GDREC, will be validly
issued, fully paid and nonassessable and not issued in violation of, or
subject to, any preemptive or similar rights. The common membership
interests of the Company (the "Company Common Membership Interests") have
been duly authorized and, when issued and delivered to PGP in exchange for
the Capital Contribution, will be validly issued, fully paid and
nonassessable and not issued in violation of, or subject to, any
preemptive or similar rights. All of the outstanding shares of capital
stock of PGC are owned directly by the Company, free and clear of all
Liens (as defined in the Indenture) other than Permitted Liens (as defined
in the Indenture) and all outstanding membership interests of the Company
are owned directly by PGP, free and clear of all Liens other than
Permitted Liens, except for the Preferred Membership Interests which will
be owned by GDREC upon consummation of the Acquisitions. The table under
the caption "Capitalization" in the Offering Circular (including the
footnotes thereto) sets forth, as of its date, (i) the pro forma
capitalization of the Company after giving effect to the Acquisitions and
(ii) the pro forma as adjusted capitalization of the Company after giving
effect to the Transactions. The membership interests of the Company and
PGP and the capital stock of PGC conform in all material respect to the
description thereof in the Offering Circular. Except as set forth in such
table, immediately following the Closing, none of the Issuers will have
any liabilities, absolute, accrued, contingent or otherwise other than (A)
liabilities that are reflected in the Financial Statements (defined
below), or (B) liabilities incurred subsequent to the date thereof in the
ordinary course of business, consistent with past practice, that could
not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(f) Except for this Agreement and the Registration Rights
Agreement, and as disclosed in the Offering Circular, none of the Issuers
has entered into any agreement (i) to register any of its securities under
the Act, or (ii) to purchase or offer to purchase any securities of any of
the Issuers or any of their respective affiliates.
(g) Each of the Issuers has all requisite power and authority
to enter into, deliver and perform its obligations under the Documents to
which it is a party and to
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<PAGE>
consummate the Transactions contemplated thereby. Each of the Documents
has been duly authorized by each of the Issuers that is or will be a party
thereto, and this Agreement is, and, when executed and delivered on the
Closing Date, each other Document will be, a legal, valid and binding
obligation of each of the Issuers that is or will be a party thereto,
enforceable in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
receivership, moratorium, fraudulent conveyance or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (whether applied by a court of law or equity)
and the discretion of the court before which any proceeding therefor may
be brought. Each of the Acquisition Agreements has been duly authorized by
PGP (formerly AB Capital, LLC), and each of the Acquisition Agreements is
a legal, valid and binding obligation of PGP, enforceable against PGP in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, receivership,
moratorium, fraudulent conveyance or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) general
principles of equity (whether applied by a court of law or equity) and the
discretion of the court before which any proceeding therefor may be
brought. When each of the Acquisition Agreements is assigned to the
Company, each of the Acquisition Agreements will be a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, receivership,
moratorium, fraudulent conveyance or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) general
principles of equity (whether applied by a court of law or equity) and the
discretion of the court before which any proceeding therefor may be
brought. When executed and delivered, each of the Documents will conform
in all material respects to the description thereof in the Offering
Circular. On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as
amended (the "TIA"), applicable to an indenture that is required to be
qualified under the TIA.
(h) The Series A Notes have been duly authorized by each of
the Note Issuers for issuance and sale to the Initial Purchaser pursuant
to this Agreement and, when executed and authenticated in accordance with
the terms of the Indenture and delivered to and paid for by the Initial
Purchaser in accordance with the terms hereof, will be legal, valid and
binding obligations of each of the Note Issuers, enforceable against each
of the Note Issuers in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, receivership, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (whether applied by a
court of law or equity) and the discretion of the court before which any
proceeding therefor may be brought. The Series B Notes have been duly
authorized by each of the Note Issuers and, when executed, authenticated
and delivered in accordance with the terms of the Indenture and the
Registration Rights Agreement, will be legal, valid and binding
obligations of each of the Note Issuers, enforceable against each of the
Note Issuers in accordance with their terms, except that the
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<PAGE>
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, receivership, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (whether applied by a
court of law or equity) and the discretion of the court before which any
proceeding therefor may be brought. The Notes rank and will rank on a
parity with all senior indebtedness of each of the Note Issuers that is
outstanding on the date hereof or that may be incurred hereafter, and
senior to all other indebtedness of each of the Note Issuers that is
outstanding on the date hereof or that may be incurred hereafter, and will
conform in all material respects to the description thereof contained in
the Offering Circular.
(i) The Convertible Preferred Membership Interests have been
duly authorized by PGP for issuance and sale to the Initial Purchaser
pursuant to this Agreement and, when issued and delivered in accordance
with the terms hereof, the Convertible Preferred Membership Interests will
be validly issued, fully paid and nonassessable, will not be issued in
violation of, and will not be subject to any preemptive or similar rights,
and will conform in all material respects to the description thereof
contained in the Offering Circular. Each Convertible Preferred Membership
Interest is initially convertible into 7.042 Common Membership Interests.
The Common Membership Interests issuable upon conversion of the
Convertible Preferred Membership Interests have been duly authorized upon
such conversion and, when issued upon such conversion, will be validly
issued, fully paid and nonassessable, will not be issued in violation of,
and will not be subject to any preemptive or similar rights, and will
conform in all material respects to the description thereof contained in
the Offering Circular.
(j) The Company is not in violation of its certificate of
formation or operating agreement (the "Company Charter Documents"), PGC is
not in violation of its charter or by-laws (the "PGC Charter Documents")
and PGP is not in violation of its certificate of formation or operating
agreement (the "PGP Documents" and, together with the Company Charter
Documents and the PGC Charter Documents, the "Charter Documents"). None of
the Issuers is (i) in violation of any Federal, state, local or foreign
statute, law (including, without limitation, common law and Chapter 99F of
the Code of Iowa (1999), as amended from time to time, including the rules
and regulations promulgated thereunder) or ordinance, or any judgment,
decree, rule, regulation or order (collectively, "Applicable Law") of any
government, governmental or regulatory agency or body (including, without
limitation, the Iowa Racing and Gaming Commission (the "IRGC")), court,
arbitrator or self-regulatory organization, domestic or foreign (each, a
"Governmental Authority"), or (ii) in breach of or default under any bond,
debenture, note or other evidence of indebtedness, indenture, mortgage,
deed of trust, lease or any other agreement or instrument to which any of
them is a party or by which any of them or their respective property is
bound (collectively, "Applicable Agreements"), other than as disclosed in
the Offering Circular or breaches or defaults that could not, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
There exists no condition that, with the passage of time or otherwise,
would constitute (i) a violation of such Charter Documents or Applicable
Laws or (ii) a breach of
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or default under any Applicable Agreement or (iii) result in the
imposition of any penalty or the acceleration of any indebtedness, other
than breaches, penalties or defaults that could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect. All
Applicable Agreements are in full force and effect and are legal, valid
and binding obligations, and no default has occurred or is continuing
thereunder, other than such defaults that could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(k) Neither the execution, delivery or performance of the
Documents nor the consummation of the Transactions shall conflict with,
violate, constitute a breach of or a default (with the passage of time or
otherwise) under, require the consent of any person (other than consents
already obtained) under, result in the imposition of a Lien on any assets
of any of the Issuers (except pursuant to the Documents), or result in an
acceleration of indebtedness under or pursuant to (i) the Charter
Documents, (ii) any Applicable Agreement, other than such breaches,
violations or defaults as disclosed in the Offering Circular or that could
not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect, or (iii) any Applicable Law. After giving effect to the
Transactions, no Default or Event of Default (each, as defined in the
Indenture) will exist.
(l) No permit, certificate, authorization, approval, consent,
license or order of, or filing, registration, declaration or qualification
with, any Governmental Authority (collectively, "Permits") and no approval
or consent of any other person, is required in connection with, or as a
condition to, the execution, delivery or performance of any of the
Documents or the consummation of any of the Transactions, other than such
Permits (i) as have been made or obtained on or prior to the Closing Date,
(ii) as are not required to be made or obtained on or prior to the Closing
Date that will be made or obtained when required, or (iii) the failure of
which to make or obtain could not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(m) Except as disclosed in the Offering Circular, there is no
action, claim, suit, demand, hearing, notice of violation or deficiency,
or proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), domestic or foreign (collectively,
"Proceedings"), pending or to the actual knowledge of the Issuers after
reasonable inquiry, threatened, that either (i) seeks to restrain, enjoin,
prevent the consummation of, or otherwise challenge any of the Documents
or any of the Transactions, or (ii) could, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. None of the
Issuers is subject to any judgment, order, decree, rule or regulation of
any Governmental Authority that could, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(n) Immediately following the Closing, each of the Issuers and
each of their respective directors, members, managers, officers, employees
and agents (collectively, the "Regulated Persons") shall have, and will be
in compliance with the terms and conditions
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of, all Permits (including, without limitation, Permits with respect to
engaging in gaming operations) necessary or advisable to own, lease and
operate the properties and to conduct the businesses described in the
Offering Circular other than those the failure of which to have could not,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Immediately following the Closing, all such Permits will
be valid and in full force and effect. To the actual knowledge of the
Issuers, after reasonable inquiry, no event has occurred which allows, or
after notice or lapse of time would allow, the imposition of any material
penalty, revocation or termination by the issuer thereof or which results,
or after notice or lapse of time would result, in any material impairment
of the rights of the holder of any such Permits. None of the Issuers has
actual knowledge, after reasonable inquiry, that any Issuer is considering
limiting, conditioning, suspending, modifying, revoking or not renewing
any such Permit.
(o) To the actual knowledge of the Issuers, after reasonable
inquiry, (i) no Governmental Authority is investigating any Regulated
Person (other than ordinary course reviews by the IRGC or the Division of
Criminal Investigation of the State of Iowa, incident to the gaming
activities of the Company), and (ii) there is no basis for the IRGC to
deny the renewal of the current Permits held by any of them.
(p) Immediately following the Closing, each of the Issuers (i)
will have good title, free and clear of all Liens (other than Permitted
Liens), to all property and assets described in the Offering Circular as
being owned by it, and (ii) will enjoy peaceful and undisturbed possession
under all leases to which it is a party as lessee.
(q) Immediately following the Closing, (i) the assets of the
Company will include all of the assets and properties that will be used
in, or are otherwise material to, the conduct of the businesses of the
Company as proposed to be conducted, and such assets are in working
condition, except where the failure of such assets to be in working
condition could not, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect, (ii) PGC will have no assets and (iii) PGP
will have no assets other than the Company Common Membership Interests
received in exchange for the Capital Contribution.
(r) Immediately following the Closing, each of the Issuers
shall maintain reasonably adequate insurance covering its properties,
operations, personnel and businesses against such losses and risks in
accordance with customary industry practice.
(s) The provisions of the Security Agreement (as defined in
the Offering Circular), when executed and delivered by the parties
thereto, will create in favor of the Trustee, a legal, valid and
enforceable Lien on, and security interest in all of the right, title and
interest of the Company in the Collateral described therein. When
financing statements have been filed in the appropriate offices in
accordance with the terms thereof, the Security Agreement shall constitute
a fully perfected first priority Lien on, and security interest in, all
right, title and interest of the Company in such of the Collateral
described therein as may be
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perfected by the filing of financing statements, subject to no Liens other
than Permitted Liens. The provisions of the Shore Mortgage (as defined in
the Offering Circular), when executed and delivered by the parties
thereto, will create in favor of the Trustee, a legal, valid and
enforceable Lien on all of the right, title and interest of the Company in
the property described therein. When the Shore Mortgage is duly recorded
in the offices of the County Recorder or the applicable land records of
the county in which such property is located, and the mortgage recording
fees and taxes in respect thereof are paid and compliance is otherwise
made with the formal requirements of state law applicable to the recording
of real estate mortgages generally, such Shore Mortgage shall constitute a
fully perfected first priority Lien on such of the property thereunder as
may be perfected trough the recording of a Mortgage, subject only to
Permitted Liens. The provisions of the Ship Mortgage (as defined in the
Offering Circular), when executed and delivered by the parties thereto,
will create in favor of the Trustee, a valid and enforceable mortgage on
all of the right, title and interest of the Company in the ship described
therein. When the Ship Mortgage is duly recorded in the offices of the
United States Coast Guard National Vessel Documentation Center and the
recording fees and taxes in respect thereof are paid and compliance is
otherwise made with the formal requirements of law applicable to the
recording of ship mortgages generally, such Ship Mortgage shall constitute
a fully perfected first preferred mortgage on the ship as may be perfected
trough the recording of a Ship Mortgage, subject only to Permitted Liens.
(t) All material Tax returns required to be filed by each of
the Issuers have been filed and all such returns are true, complete, and
correct in all material respects. All material Taxes that are due or
claimed to be due from each of the Issuers have been paid other than those
(i) currently payable without penalty or interest or (ii) being contested
in good faith and by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP. To the actual
knowledge of the Issuers, after reasonable inquiry, there are no proposed
Tax assessments against the Issuers that could singly or in the aggregate
have a Material Adverse Effect. The accruals and reserves on the books and
records of the Issuers in respect of any material Tax liability for any
Taxable period not finally determined are adequate to meet any assessments
of Tax for any such period. For purposes of this Agreement, the term "Tax"
and "Taxes" shall mean all Federal, state, local and foreign taxes, and
other assessments of a similar nature (whether imposed directly or trough
withholding), including any interest, additions to tax, or penalties
applicable thereto.
(u) The Company owns, or is licensed under, and has the right
to use, all patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "Intellectual
Property") necessary for the conduct of, its businesses, free and clear of
all Liens, other than Permitted Liens. To the actual knowledge of the
Issuers, after reasonable inquiry, (i) no claims have been asserted by any
person challenging the use of any such Intellectual Property by any of the
Issuers or questioning the validity or effectiveness of any license or
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agreement related thereto, (ii) there is no valid basis for any such claim
(other than any claims that could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect), and (iii) the
use of such Intellectual Property by any of the Issuers will not infringe
on the Intellectual Property rights of any other person.
(v) Each of the Issuers maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
material transactions are executed in accordance with management's general
or specific authorization, (ii) material transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles of the United States,
consistently applied ("GAAP"), and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any material differences.
(w) The audited combined financial statements and related
notes of GDREC and HCI contained in the Offering Circular (the "Audited
Financial Statements") and the unaudited combined financial statements and
related notes of GDREC and HCI contained in the Offering Circular (the
"Interim Financial Statements" and, together with the Audited Financial
Statements, the "Financial Statements") present fairly the combined
financial position, results of operations and cash flows of GDREC and HCI,
as of the respective dates and for the respective periods to which they
apply, and have been prepared in accordance with GAAP and the requirements
of Regulation S-X that would be applicable if the Offering Circular were a
prospectus included in a registration statement on Form S-1 filed under
the Act. The summary historical combined financial data included in the
Offering Circular have been prepared on a basis consistent with that of
the Financial Statements and present fairly the financial position and
results of operations of GDREC and HCI as of the respective dates and for
the respective periods indicated. All other financial, statistical, and
market and industry-related data included in the Offering Circular are
fairly and accurately presented and are based on or derived from sources
the Issuers believe to be reliable and accurate. Deloitte & Touche LLP are
independent auditors with respect to the Issuers.
(x) The unaudited pro forma financial information and related
notes of the Company contained in the Offering Circular (the "Pro Forma
Financial Information") have been prepared on a basis consistent with the
historical financial statements of GDREC and HCI and give effect to
assumptions used in the preparation thereof on a reasonable basis and in
good faith and present fairly the historical and proposed Transactions
contemplated by the Offering Circular; and the Pro Forma Financial
Information have been prepared in accordance with GAAP and the
requirements of Regulation S-X related to pro forma financial statements
that would be applicable if the Offering Circular were a prospectus
included in a registration statement on Form S-1 filed under the Act.
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(y) Subsequent to the respective dates as of which information
is given in the Offering Circular, except as adequately disclosed in the
Offering Circular, (i) none of the Issuers has incurred any liabilities,
direct or contingent, that are material, singly or in the aggregate, to
any of them, or has entered into any material transactions not in the
ordinary course of business, (ii) there has not been any decrease in the
capital stock or membership interests, as the case may be, or any increase
in long-term indebtedness or any material increase in short-term
indebtedness of any of the Issuers, or any payment of or declaration to
pay any dividends or any other distribution with respect to any of the
Issuers, and (iii) there has not been any material adverse change in the
properties, business, prospects, operations, earnings, assets, liabilities
or condition (financial or otherwise) of any of the Issuers (each of
clauses (i), (ii) and (iii), a "Material Adverse Change"). To the actual
knowledge of the Issuers after reasonable inquiry, there is no event that
is reasonably likely to occur, which if it were to occur, could, singly or
in the aggregate, reasonably be expected to have a Material Adverse
Effect, except such events that have been adequately disclosed in the
Offering Circular.
(z) No "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Act (i)
has imposed (or has informed any of the Issuers that it is considering
imposing) any condition (financial or otherwise) on the Issuers' retaining
any rating assigned to any of the Issuers or any securities of any of the
Issuers, or (ii) has indicated to any of the Issuers that it is
considering (A) the downgrading, suspension, or withdrawal of, or any
review for a possible change that does not indicate the direction of the
possible change in, any rating so assigned, or (B) any change in the
outlook for any rating of any of the Issuers or any securities of any of
the Issuers.
(aa) All indebtedness represented by the Series A Notes is
being incurred for proper purposes and in good faith. On the Closing Date
(after giving effect to the Transactions), the Company will be solvent,
and will have on the Closing Date (after giving effect to the
Transactions) sufficient capital for carrying on its business and will be
on the Closing Date (after giving effect to the Transactions) able to pay
its debts as they mature.
(bb) None of the Issuers or, to their actual knowledge after
reasonable inquiry, anyone acting on their behalf has (i) taken, directly
or indirectly, any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of any of the
Issuers to facilitate the sale or resale of any of the Securities, (ii)
sold, bid for, purchased, or paid anyone any compensation for soliciting
purchases of, any of the Securities, or (iii) except as disclosed in the
Offering Circular, paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of any of the
Issuers.
(cc) Without limiting clause (1) above, no registration under
the Act, and no qualification of the Indenture under the TIA is required
for the sale of the Units to the Initial Purchaser as contemplated hereby
or for the Exempt Resales, assuming (i) that the
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purchasers in the Exempt Resales are Eligible Initial Purchasers, (ii) the
accuracy of the Initial Purchaser's representations contained herein
regarding the absence of general solicitation in connection with the sale
of the Units to the Initial Purchaser and in the Exempt Resales, and
(iii) the accuracy of the representations made by each Accredited Investor
who purchases the Units pursuant to an Exempt Resale as set forth in the
letters of representation in the form of Annex A to the Offering Circular.
No form of general solicitation or general advertising was used by any of
the Issuers or any of their respective affiliates or, to the actual
knowledge of the Issuers after, reasonable inquiry, any of their
respective representatives in connection with the offer and sale of any of
the Units or in connection with Exempt Resales. Except as disclosed in the
Offering Circular, no securities of the same class as any of the
Securities have been offered, issued or sold by any of the Issuers or any
of their respective affiliates within the six-month period immediately
prior to the date hereof.
(dd) None of the Issuers or any of their respective
"Affiliates" is a "party in interest" or a "disqualified person" with
respect to any employee benefit plans. To the actual knowledge of the
Issuers, after reasonable inquiry, no condition exists or event or
transaction has occurred in connection with any employee benefit plan that
could result in any of the Issuers or any such "Affiliate" incurring any
liability, fine or penalty that could, singly or in the aggregate, have a
Material Adverse Effect. None of the Issuers or any trade or business
under common control with the Issuers (for purposes of Section 414(c) of
the Code) maintains any employee pension benefit plan that is subject to
Title IV of the Employee Retirement Income Act of 1974, as amended, or the
rules and regulations promulgated thereunder ("ERISA").
The terms "employee benefit plan," "employee pension benefit
plan," and "party in interest" shall have the meanings assigned to such
terms in Section 3 of ERISA. The term "Affiliate" shall have the meaning
assigned to such term in Section 407(d)(7) of ERISA, and the term
"disqualified person" shall have the meaning assigned to such term in
section 4975 of the Internal Revenue Code of 1986, as amended, or the
rules, regulations and published interpretations promulgated thereunder
(the "Code")
(ee) None of the Transactions will violate or result in a
violation of Section 7 of the Exchange Act (including, without limitation,
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System). None of the Issuers is subject to regulation, or shall
become subject to regulation upon the consummation of the Transactions,
under the Investment Company Act of 1940, as amended, and the rules and
regulations and interpretations promulgated thereunder, or the Public
Utility Holding Company Act of 1935, as amended.
(ff) None of the Issuers has dealt with any broker, finder,
commission agent or other person (other than the Initial Purchaser) in
connection with the Transactions, and none of the Issuers is under any
obligation to pay any broker's fee or commission in
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connection with such transactions (other than commissions and fees to the
Initial Purchaser as set forth in the Offering Circular).
(gg) None of the Issuers is engaged in any unfair labor
practice. Except as disclosed in the Offering Circular, there is (i) no
unfair labor practice complaint or other proceeding pending or, to the
actual knowledge of the Issuers, after reasonable inquiry, threatened
against any of the Issuers before the National Labor Relations Board or
any state, local or foreign labor relations board or any industrial
tribunal, and no grievance or arbitration proceeding arising out of or
under any collective bargaining agreement is so pending or threatened,
(ii) no strike, labor dispute, slowdown or stoppage is pending or, to the
actual knowledge of the Issuers after reasonable inquiry, threatened
against any of the Issuers, and (iii) no union representation question
existing with respect to the employees of any of the Issuers, and, to the
actual knowledge of the Issuers after reasonable inquiry, no union
organizing activities are taking place that, could, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(hh) Except as would not have a Material Adverse Effect or as
disclosed in the Offering Circular, (i) the Company is not in violation of
any federal, state or local laws and regulations (collectively,
"Environmental Laws") relating to pollution or protection of human health
or the environment or the use, treatment, storage, disposal, transport or
handling, emission, discharge, release or threatened release of toxic or
hazardous substances, materials or wastes, or petroleum and petroleum
products ("Materials of Environmental Concern"), including, without
limitation, noncompliance with or lack of any permits or other
environmental authorizations; (ii) there are no past, present or
reasonably foreseeable circumstances that would be reasonably expected to
lead to any such violation in the future; (iii) the Company has not
received any communication from any person or entity alleging any such
violation; (iv) there is no pending or, to the actual knowledge of the
Issuers after reasonable inquiry, threatened claim, action, investigation
or notice by any person or entity against the Company or against any
person or entity for whose acts or omissions the Company is or may
reasonably be expected to be liable, either contractually or by operation
of law, alleging liability for investigatory, cleanup, or other response
costs, natural resources or property damages, personal injuries,
attorney's fees or penalties relating to any Materials of Environmental
Concern or any violation or potential violation of any Environmental Law
(collectively, "Environmental Claims"), and (v) to the actual knowledge of
the Issuers after reasonable inquiry, there are no actions, activities,
circumstances, conditions, events or incidents that could form the basis
of any such Environmental Claim.
In the ordinary course of business, the Company (i) conducts a
periodic review of the effect of Environmental Laws on its business,
operations and properties, and the Company has identified and evaluated
associated costs and liabilities, and any capital or operating
expenditures, required for cleanup, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities, and any potential liabilities to
third parties; and (ii) has conducted environmental
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investigations of, and has reviewed information regarding, its business,
properties and operations, and those of other properties within the
vicinity of its businesses, properties and operations; on the basis of
such reviews, investigations and inquiries, the Company has reasonably
concluded that, except as disclosed in the Offering Circular, any costs
and liabilities associated with such matters would not have a Material
Adverse Effect on the Company.
(ii) No statement, representation or warranty made by any of
the Issuers or, to the actual knowledge of the Issuers after reasonable
inquiry, any other person (other than the Initial Purchaser) in any of the
Documents or in any certificate or document required to be delivered was
or will be, when made, inaccurate, untrue or incorrect in any material
respect. Each certificate signed by any officer of any of the Issuers and
delivered to the Initial Purchaser or counsel for the Initial Purchaser in
connection with the Transactions shall be deemed to be a representation
and warranty by each of the Issuers to the Initial Purchaser as to the
matters covered thereby.
7. Representations and Warranties of the Initial Purchaser. The
Initial Purchaser represents and warrants that:
(a) It is a QIB.
(b) It (i) is not acquiring the Units with a view to any
distribution thereof that would violate the Act or the securities laws of
any state of the United States or any other applicable jurisdiction, and
(ii) will be soliciting offers for the Units only from, and will be
reoffering and reselling the Units only to (A) persons in the United
States whom it reasonably believes to be QIBs in reliance on the exemption
from the registration requirements of the Act provided by Rule 144A or
(B) a limited number of Accredited Investors that execute and deliver to
each of the Issuers and the Initial Purchaser a letter containing certain
representations and agreements in the form attached as Annex A to the
Offering Circular.
(c) No form of general solicitation or general advertising in
violation of the Act has been or will be used by such Initial Purchaser or
any of its representatives in connection with the offer and sale of any of
the Units.
(d) In connection with the Exempt Resales, it will solicit
offers to buy the Units only from, and will offer and sell the Units only
to, Eligible Initial Purchasers who, in purchasing such Units, will be
deemed to have represented and agreed (i) if such Eligible Initial
Purchasers are QIBs, that they are purchasing the Units for their own
accounts or accounts with respect to which they exercise sole investment
discretion and that they or such accounts are QIBs, (ii) that the Units,
the Series A Notes and the Convertible Preferred Membership Interests will
not have been registered under the Act and may be resold, pledged or
otherwise transferred, prior to the date that is two years (or such other
period that may
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hereafter be provided under Rule 144(k) as permitting resales of
restricted securities by non-affiliates without restriction) after the
later of the original issue date of the Units and the last date on which
any of the Issuers or any of their respective affiliates was the owner of
the Units, the Series A Notes and the Convertible Preferred Membership
Interests only (A) to the Issuers, (B) pursuant to a registration
statement which has been declared effective under the Act, (C) for so long
as the Units, the Series A Notes and the Convertible Preferred Membership
Interests are eligible for resale pursuant to Rule 144A under the Act, to
a person who the seller reasonably believes is a QIB that purchases for
its own account or the account of a QIB to whom notice is given that the
transfer is being made in reliance on Rule 144A, (D) to an institutional
"accredited investor" within the meaning of subparagraph (a)( 1), (2), (3)
or (7) of Rule 501 under the Act that is acquiring the Units for its own
account or the account of such an institutional "accredited investor," for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Act or (E) pursuant
to another available exemption from the registration requirements of the
Act, and (iii) that the holder will, and each subsequent holder is
required to, notify any purchaser from it of the security evidenced
thereby of the resale restrictions set forth in (ii) above.
(e) It has all requisite power and authority to enter into,
deliver and perform its obligations under this Agreement and the
Registration Rights Agreement and each of this Agreement and the
Registration Rights Agreement has been duly authorized by it.
8. Indemnification.
(a) Each of the Issuers shall, jointly and severally, without
limitation as to time, indemnify and hold harmless the Initial Purchaser
and each person, if any, who controls (within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act) the Initial Purchaser (any
of such persons being hereinafter referred to as a "controlling person"),
and the respective officers, directors, partners, employees,
representatives and agents of the Initial Purchaser and any such
controlling person (collectively, the "Indemnified Parties"), to the
fullest extent lawful, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of
preparation and reasonable attorneys' fees) and expenses (including,
without limitation, costs and expenses incurred in connection with
investigating, preparing, pursuing or defending against any of the
foregoing) (collectively, "Losses"), as incurred, arising out of or based
upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Circular or the Offering
Circular (or any amendment or supplement thereto), or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (ii) any act,
omission, transaction or event contemplated by the Documents; provided
that (i) the Issuers shall not be liable to any Indemnified Party for any
Losses that arise from the gross negligence or willful misconduct of such
Indemnified Party, and (ii) the Issuers will not be liable in any such
case to the extent that any such Loss is judicially determined by a court
of competent jurisdiction (which determination is not
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subject to appeal) to have resulted from any untrue statement or alleged
untrue statement or omission or alleged omission made in the Offering
Circular or any supplements or amendments thereto in reliance upon and in
conformity with written information provided by and concerning the Initial
Purchaser specifically for use therein. The Issuers hereby acknowledge
that the only information so provided by the Initial Purchaser is the
information concerning the Initial Purchaser contained in the third, fifth
and sixth paragraphs under the caption "Plan of Distribution" in the
Offering Circular. The Issuers shall not be liable under this Section 8
for any settlement of any claim or action effected without their prior
written consent, which consent shall not be unreasonably withheld. This
indemnity, as to the Preliminary Offering Circular, shall not inure to the
benefit of the Initial Purchaser with respect to Losses incurred pursuant
to a third party claim by a purchaser of the Securities if the Initial
Purchaser failed to send or give a copy of the Offering Circular (as the
same may be amended or supplemented) to such person at or prior to the
written confirmation of the sale of the Securities to such person, and the
untrue statement or alleged untrue statement or omission or alleged
omission of a material fact in such preliminary Offering Circular was
corrected in the Offering Circular. The Issuers shall notify the Initial
Purchaser promptly of the institution, threat or assertion of any
Proceeding of which any of the Issuers is aware in connection with the
matters addressed by this Agreement which involves any of the Issuers and
any of the Indemnified Parties.
(b) If any Proceeding shall be brought or asserted against any
person entitled to indemnification hereunder, such Indemnified Party shall
give prompt written notice to the Issuers; provided, that the failure to
so notify the Issuers shall not relieve any of the Issuers from any
obligation or liability except to the extent (but only to the extent) that
it shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal) that such Issuer has been
prejudiced by such failure.
None of the Issuers shall consent to entry of any judgment in
or enter into any settlement of any pending or threatened Proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Party is a party thereto) unless such
judgment or settlement includes, as an unconditional term thereof, the
giving by the claimant or plaintiff to each Indemnified Party of a
release, in form and substance reasonably satisfactory to the Initial
Purchaser, from all Losses that may arise from such Proceeding or the
subject matter thereof (whether or not any Indemnified Party is a party
thereto).
(c) If the indemnification provided for in this Section 8 is
unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section
8 would otherwise apply by its terms (other than by reason of exceptions
provided in this Section 8), then the Issuers, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such Losses (i) in such proportion
as is appropriate to reflect the relative benefits received by the
Issuers, on the one hand, and the Initial Purchaser, on the other hand,
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from the Offering, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above
but also the relative fault of the Issuers, on the one hand, and the
Initial Purchaser, on the other hand, in connection with the actions,
statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations. The relative benefits received by the
Issuers, on the one hand, and the Initial Purchaser, on the other hand,
shall be deemed to be in the same proportion as the total net proceeds
from the Offering (before deducting expenses) received by the Issuers, and
the total discounts and commissions received by the Initial Purchaser,
bear to the total price of the Units in Exempt Resales in each case as set
forth in the table on the cover page of the Offering Circular. The
relative fault of the Issuers, on the one hand, and the Initial Purchaser,
on the other hand, shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to
information supplied by the Issuers, on the one hand, or the Initial
Purchaser, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The amount paid or payable by an Indemnified Party as a
result of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any Proceeding, to the
extent such party would have been indemnified for such fees or expenses if
the indemnification provided for in this Section 8 was available to such
party.
Each party hereto agrees that it would not be just and
equitable if contribution pursuant to this Section 8(c) were determined by
pro rata allocation or by any other method of allocation that does not
take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 8(c), the Initial Purchaser shall not be required to contribute,
in the aggregate, any amount in excess of the amount by which the total
discounts and commissions received by the Initial Purchaser with respect
to the Units purchased by it exceeds the amount of any damages that the
Initial Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(d) The indemnity and contribution agreements contained in
this Section 8 are in addition to any liability that the Issuers may
otherwise have to the Indemnified Parties.
9. Conditions.
(a) The obligations of the Initial Purchaser to purchase the
Units under this Agreement are subject to the satisfaction or waiver of
each of the following conditions:
(i) All the representations and warranties of each of
the Issuers in each of the Documents to which it is a party shall be true
and correct in all material
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respects (other than representations and warranties with a materiality
qualifier, which shall be true and correct as written) at and as of the
Closing Date after giving effect to the Transactions with the same force
and effect as if made on and as of such date. On or prior to the Closing
Date, each of the Issuers and, to the actual knowledge of the Issuers,
after reasonable inquiry, each other party to the Documents (other than
the Initial Purchaser) shall have performed or complied in all material
respects with all of the agreements and satisfied in all material respects
all conditions on their respective parts to be performed, complied with or
satisfied pursuant to the Documents (other than conditions to be satisfied
by such other parties, which the failure to so satisfy could not
reasonably be expected to have a Material Adverse Effect).
(ii) The Offering Circular shall have been printed and
copies made available to the Initial Purchaser not later than 12:00 noon,
New York City time, on the first business day following the date of this
Agreement or at such later date and time as the Initial Purchaser may
approve.
(iii) No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the
Closing Date that would prevent or materially interfere with the
consummation of any of the Transactions; and no stop order suspending the
qualification or exemption from qualification of any of the Securities in
any jurisdiction shall have been issued and no Proceeding for that purpose
shall have been commenced or, to the actual knowledge of the Issuers after
reasonable inquiry, be pending or contemplated as of the Closing Date.
(iv) No action shall have been taken and no Applicable
Law shall have been enacted, adopted or issued that would, as of the
Closing Date, prevent the consummation of any of the Transactions. Except
as disclosed in the Offering Circular, no Proceeding shall be pending or,
to the actual knowledge of each of the Issuers after reasonable inquiry,
threatened other than Proceedings that (A) if adversely determined could
not, singly or in the aggregate, adversely affect the issuance or
marketability of the Securities, and (B) could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(v) Since the date as of which information is given in
the Offering Circular, there shall not have been any Material Adverse
Change.
(vi) The Notes shall have (A) been designated PORTAL
securities in accordance with the rules and regulations adopted by the
NASD relating to trading in the PORTAL market, and (B) received a rating
of B and B2 from Standard & Poor's Corporation and Moody's Investors
Services, Inc., respectively.
(vii) On or after the date hereof, (i) there shall not
have occurred any downgrading, suspension or withdrawal of, nor shall any
notice have been given of any
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potential or intended downgrading, suspension or withdrawal of, or of any
review (or of any potential or intended review) for a possible change that
does not indicate the direction of the possible change in, any rating of
any of the Issuers or any securities of any of the Issuers (including,
without limitation, the placing of any of the foregoing ratings on credit
watch with negative or developing implications or under review with an
uncertain direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under
the Act, (ii) there shall not have occurred any change, nor shall any
notice have been given of any potential or intended change, in the outlook
for any rating of any of the Issuers or any securities of any of the
Issuers by any such rating organization and (iii) no such rating
organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which the
Notes were marketed.
(viii) The Initial Purchaser shall have received on the
Closing Date:
(A) certificates dated the Closing Date, signed by (1)
the Chief Executive Officer, and (2) the principal financial or
accounting officer of each of the Issuers, on behalf of such Issuer,
(x) confirming the matters set forth in paragraphs (i), (iii), (iv),
(v), (vii) and (xiii) of this Section 9(a), and (y) certifying as to
such other matters as the Initial Purchaser may reasonably request,
(B) a certificate dated the Closing Date, signed by the
(1) Chief Executive Officer and (2) the principal financial or
accounting officer of each of the Issuers, on behalf of such Issuer
stating that the industry, statistical and market-related data
included in the Offering Circular has been reviewed by such persons
and, to the actual knowledge of such persons, after reasonable
inquiry, subject to the risks and limitations described in the
Preliminary Offering Circular and the Offering Circular, is true and
accurate in all material respects and is based on or derived from
sources which the Issuers believe to be reliable and accurate, which
certificate shall be in form and substance reasonably satisfactory
to counsel for the Initial Purchaser and may specifically reference
certain industry, statistical and market-related data contained in
the Offering Circular,
(C) a certificate, dated the Closing Date, signed by the
Secretary of each of the Issuers, certifying such matters as the
Initial Purchaser may reasonably request, and
(D) a certificate of solvency, dated the Closing Date,
signed by the principal financial or accounting officer of the
Company substantially in the form previously approved by the Initial
Purchaser.
(ix) The Initial Purchaser shall have received:
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<PAGE>
(A) the opinions (in form and substance satisfactory to
the Initial Purchaser and counsel to the Initial Purchaser) of
Mayer, Brown & Platt, special counsel to the Issuers, dated the
Closing Date, in the form of Exhibit A hereto;
(B) the tax opinion (in form and substance reasonably
satisfactory to the Initial Purchaser and counsel to the Initial
Purchaser) of Mayer, Brown and Platt, addressed to the Initial
Purchaser, stating that based upon current law, including relevant
statutes, regulations and judicial and administrative precedents,
and upon assumptions and subject to qualifications made therein, for
United States federal income tax purposes (1) the Company is, and
will be, classified as a partnership and not as an association or a
publicly traded partnership taxable as a corporation, (2) PGP is,
and will be, classified as a partnership and not as an association
or a publicly traded partnership taxable as a corporation, (3) the
Series A Notes will be classified as indebtedness, and (4) the
statements in the Offering Circular under the heading "Certain
United States Federal Income Tax Considerations" and "Risk
Factors-Publicly Traded Partnership Classification" to the extent
that they describe matters of law or legal conclusions, are correct
in all material respects;
(C) the opinions (in form and substance reasonably
satisfactory to the Initial Purchaser and counsel to the Initial
Purchaser) of Lane & Waterman, special Iowa counsel to the Issuers,
dated the Closing Date, substantially in the form of Exhibit B
hereto;
(D) the opinions (in form and substance reasonably
satisfactory to the Initial Purchaser and counsel to the Initial
Purchaser) of Mitchell, Silberberg & Knupp, LLP, special counsel to
the Issuers, dated the Closing Date, substantially in the form of
Exhibit C;
(E) reliance letters from each counsel or special
counsel to each of the Issuers, GDREC and HCI (in form and substance
satisfactory to the Initial Purchaser and counsel to the Initial
Purchaser), dated the Closing Date, permitting the Initial Purchaser
to rely on all other opinions rendered by such counsel in connection
with any of the Transactions; and
(F) an opinion, dated the Closing Date, of Skadden,
Arps, Slate, Meagher & Flom LLP, and Dorsey & Whitney LLP, each in
form and substance reasonably satisfactory to the Initial Purchaser
covering such matters as are customarily covered in such opinions.
(x) The Initial Purchaser shall have received from each
of Deloitte & Touche LLP and Honkamp Krueger & Co. P.C., both independent
public accountants, with respect to the Issuers, (A) a customary comfort
letter, dated the date of the Offering Circular, in form and substance
reasonably satisfactory to the Initial Purchaser, with respect
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<PAGE>
to the financial statements and certain financial information contained in
the Offering Circular, and (B) a customary comfort letter, dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchaser, to the effect that each of Deloitte & Touche LLP and Honkamp
Krueger & Co. P.C. reaffirm the statements made in its letter furnished
pursuant to clause (A), except that the specified date referred to shall
be a date not more than five days prior to the Closing Date.
(xi) The Documents shall have been executed and
delivered by all parties thereto and the Initial Purchaser shall have
received a fully executed original of each Document.
(xii) The Initial Purchaser shall have received copies
of all opinions, certificates, letters and other documents delivered under
or in connection with the Transactions.
(xiii) Each of the Transactions shall have been
consummated on terms that conform in all material respects to the
description thereof in the Offering Circular. The terms of each Document
shall conform in all material respects to the description thereof in the
Offering Circular.
(xiv) The Initial Purchaser shall have received (except
with respect to Permitted Liens (as defined in the Indenture)) copies of
duly executed payoff letters, UCC-3 termination statements (subject to the
reasonable payoff and delivery requirements of each creditor), mortgage
releases and other collateral releases and terminations, each in form and
substance reasonably satisfactory to the Initial Purchaser evidencing (A)
the termination of each agreement and instrument relating to any
indebtedness secured by the Collateral and (B) the release of each item of
Collateral securing such indebtedness and the termination of all Liens
created thereunder, and each such payoff letter, release and termination
shall be in full force and effect.
(xv) The Issuers shall have furnished to the Initial
Purchaser the Security Documents duly executed by the Company, together
with:
(A) duly executed financing statements, appropriate for
filing in all jurisdictions that may be deemed necessary or
desirable in order to perfect the Liens created by the Security
Documents, covering the Collateral;
(B) contemplated requests for information, listing all
effective financing statements filed as of the date thereof in the
jurisdictions referred to in the prior subparagraph that name any of
the Issuers, GDREC or HCI as debtor, together with copies of such
financing statements (none of which shall cover the Collateral
described in the Security Documents (unless such financing
statements evidence Permitted Liens or are to be terminated pursuant
to the terms thereof));
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<PAGE>
(C) reasonable evidence that all other actions necessary
or desirable to perfect and protect the Liens created by the
Security Documents and contemplated thereby have been taken;
(D) the Shore Mortgage, duly executed by the Company,
together with:
(1) evidence that counterparts of the Shore Mortgage
have been duly executed for recording on or after the date of
the Closing Date in all filing or recording offices that the
Trustee may deem reasonably necessary or desirable in order to
create a valid first priority and subsisting Lien on the
property described therein in favor of the Trustee and the
holders of the Notes and that all filing and recording taxes
and fees have been paid;
(2) a fully paid title insurance policy or written
commitment for such policy (the "Mortgage Policy") in form and
substance, with endorsements and in amounts reasonably
acceptable to the Trustee, issued, coinsured and reinsured by
title insurers reasonably acceptable to the Trustee, insuring
the Shore Mortgage to be a valid first priority and subsisting
Lien on the property described therein, free and clear of all
defects (including, but not limited to, mechanics' and
materialmen's Liens) and encumbrances, excepting only Liens
permitted by the Indenture, and providing for such other
affirmative insurance and such coinsurance and direct access
reinsurance as the Trustee may deem reasonably necessary or
desirable;
(3) a non-encroachment letter from IIW Engineers and
Surveyors, P.C., Dubuque, Iowa, certifying to the absence of
encroachments upon the real property. The Company shall
further provide a survey, certified to the Trustee and issuer
of the Mortgage Policy in a manner satisfactory to the Trustee
by a land surveyor duly registered and licensed in the State
in which the property described in such survey is located and
reasonably acceptable to the Trustee, showing all buildings
and other improvements, any off-site improvement, the location
of any easements, parking spaces, rights of way, building
set-back lines and other dimensional regulations and the
absence of encroachments, either by such improvement or onto
such property, and other defects, other than encroachments and
other defects reasonably acceptable to the Trustee, within
thirty (30) days of Closing in accordance with the terms of
the Ship Mortgage.
(4) such consents and agreements of lessors and other
third parties, as the Trustee may deem reasonably necessary or
desirable;
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<PAGE>
(5) such evidence of the insurance required by the terms
of the Shore Mortgage and the Security Agreement; and
(6) such evidence that all other action that the Trustee
may deem necessary or desirable in order to create a valid
first priority and subsisting Lien has been taken;
(E) the Ship Mortgage, duly executed by the Company,
together with:
(1) evidence that counterparts of the Ship Mortgage have
been duly executed for recording on or after the date of the
Closing Date with the United States Coast Guard National
Vessel Documentation Center, in order to create a valid first
preferred mortgage under the Ship Mortgage Act on the Ship in
favor of the Trustee and the holders of the Notes and that all
filing and recording taxes and fees will be paid upon
recording of such Ship Mortgage;
(2) such evidence that all other action that the Trustee
may deem necessary or desirable in order to create a valid
first preferred mortgage on the Ship has been taken; and
(3) such evidence of the insurance required by the terms
of the Ship Mortgage and the Security Agreement.
(xvi) Counsel to the Initial Purchaser shall have been
furnished with such documents as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 9 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations,
warranties or conditions herein contained.
(b) The obligation of each of the Issuers to sell the Units
under this Agreement is subject to the satisfaction or waiver of each of
the following conditions:
(i) The Initial Purchaser shall have delivered payment
to the Issuers for the Units pursuant to Sections 2 and 4 of this
Agreement.
(ii) All of the representations and warranties of the
Initial Purchaser in this Agreement shall be true and correct in all
material respects at and as of the Closing Date, with the same force and
effect as if made on and as of such date.
(iii) No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the
Closing Date that would prevent or interfere with the issuance and sale of
the Units; and no stop order suspending the
29
<PAGE>
qualification or exemption from qualification of any of the Units in any
jurisdiction shall have been issued and no Proceeding for that purpose
shall have been commenced or be pending or contemplated as of the Closing
Date.
(iv) The Acquisitions shall have been consummated in
accordance with the terms and provisions of the Acquisition Agreements.
10. Termination. The Initial Purchaser may terminate this Agreement
at any time prior to the Closing Date by written notice to the Issuers if any of
the following has occurred:
(a) since the date as of which information is given in the
Offering Circular, any material adverse effect or development involving a
prospective material adverse effect on the properties, business,
prospects, operations, earnings, assets, liabilities or condition
(financial or otherwise), taken as a whole, of any of the Issuers, whether
or not arising in the ordinary course of business, that could, in the
Initial Purchaser's judgment, be reasonably expected to (i) make it
impracticable or inadvisable to proceed with the offering or delivery of
the Units on the terms and in the manner contemplated in the Offering
Circular, or (ii) materially impair the investment quality of any of the
Notes;
(b) the failure of any of the Issuers to satisfy the
conditions contained in Section 9(a) hereof on or prior to the fifth
business day following the date of this Agreement;
(c) any outbreak or escalation of hostilities or other
national or international calamity or crisis or material adverse change in
economic conditions in or the financial markets of the United States or
elsewhere, if the effect of such outbreak, escalation, calamity, crisis or
material adverse change in the economic conditions in or in the financial
markets of the United States or elsewhere could be reasonably expected to
make it, in the Initial Purchaser's judgment, impracticable or inadvisable
to market or proceed with the offering or delivery of the Units on the
terms and in the manner contemplated in the Offering Circular or to
enforce contracts for the sale of any of the Units;
(d) the suspension or limitation of trading generally in
securities on the New York Stock Exchange, the American Stock Exchange or
the NASDAQ National Market or any setting of limitations on prices for
securities on any such exchange or NASDAQ National Market;
(e) the enactment, publication, decree or other promulgation
after the date hereof of any Applicable Law that in the Initial
Purchaser's counsel's opinion materially and adversely affects, or could
be reasonably expected to materially and adversely affect, the properties,
business, prospects, operations, earnings, assets, liabilities or
condition (financial or otherwise) of any of the Issuers, taken as a
whole;
30
<PAGE>
(f) any securities of any of the Issuers shall have been
downgraded or placed on any "watch list" for possible downgrading by any
"nationally recognized statistical rating organization", as such term is
defined for purposes of Rule 431 (g)(2) under the Act; or
(g) the declaration of a banking moratorium by any
Governmental Authority; or the taking of any action by any Governmental
Authority after the date hereof in respect of its monetary or fiscal
affairs that in the Initial Purchaser's opinion could reasonably be
expected to have a material adverse effect on the financial markets in the
United States or elsewhere.
The indemnities and contribution and expense reimbursement
provisions and other agreements, representations and warranties of each of the
Issuers set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Initial Purchaser, (ii) acceptance of the Units, and payment for them
hereunder, and (iii) any termination of this Agreement. Without limiting the
foregoing, except as set forth in Section 11 hereof, notwithstanding any
termination of this Agreement, the Issuers shall be jointly and severally liable
(i) for all expenses that they have agreed to pay pursuant to Section 5(f)
hereof and (ii) pursuant to Section 8 hereof.
11. Default by Initial Purchaser. If the Initial Purchaser shall
willfully or through gross negligence breach its obligations to purchase the
Units that it has agreed to purchase hereunder on the Closing Date and
arrangements satisfactory to the Issuers for the purchase of such Units are not
made within 36 hours after such default, this Agreement shall terminate without
liability on the part of any of the Issuers. Nothing herein shall relieve the
defaulting Initial Purchaser from liability for its default.
12. Miscellaneous.
(a) Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Issuers, c/o the Company at
3rd Street Ice Harbor, P.O. Box 1683, Dubuque, Iowa, 52004-1683,
Attention: M. Brent Stevens, with a copy to Mayer, Brown & Platt, 1675
Broadway, New York, New York 10019-5820, Attention: Ronald S. Brody, Esq.
and (ii) if to the Initial Purchaser, to Jefferies & Company, Inc., 11100
Santa Monica Boulevard, 10th Floor, Los Angeles, California 90025,
Attention: Jerry M. Gluck, Esq., with a copy to Skadden, Arps, Slate,
Meagher & Flom LLP, 300 South Grand Avenue, Suite 3400, Los Angeles,
California 90071, Attention: Michael A. Woronoff, Esq. (provided that any
notice pursuant to Section 8 hereof will be mailed, delivered, telegraphed
or telecopied and confirmed to the party to be notified and its counsel),
or in any case to such other address as the person to be notified may have
requested in writing.
(b) This Agreement has been and is made solely for the benefit
of and shall be binding upon each of the Issuers, the Initial Purchaser
and, to the extent provided in
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Section 8 hereof, the controlling persons officers, directors, partners,
employees, representatives and agents referred to in Section 8, and their
respective heirs, executors, administrators, successors and assigns, all
as and to the extent provided in this Agreement, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include a purchaser of any of the Units
from the Initial Purchaser merely because of such purchase.
Notwithstanding the foregoing, it is expressly understood and agreed that
each purchaser who purchases Series A Notes from the Initial Purchaser is
intended to be a beneficiary of the Issuers' covenants contained in the
Registration Rights Agreement to the same extent as if the Notes were sold
and those covenants were made directly to such purchaser by each of the
Issuers, and each such purchaser shall have the right to take action
against each of the Issuers to enforce, and obtain damages for any breach
of, those covenants.
(c) This Agreement shall be construed and interpreted, and the
rights of the parties shall be determined in accordance with the laws of
the State of New York, including without limitation, Sections 5-1401 and
5-1402 of the New York General Obligations Laws and New York Civil
Practice Laws and Rules 327(b). Each of the Issuers hereby irrevocably
submits to the jurisdiction of any New York state court sitting in the
Borough of Manhattan in the City of New York or any Federal court sitting
in the Borough of Manhattan in the City of New York in respect of any
suit, action or proceeding arising out of or relating to this Agreement,
and irrevocably accepts for itself and in respect of its property,
generally and unconditionally, jurisdiction of the aforesaid courts. Each
of the Issuers irrevocably waives, to the fullest extent it may
effectively do so under applicable law, trial by jury and any objection
that it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any claim that
any such suit, action or proceedings brought in such court has been
brought in an inconvenient forum. Each of the Issuers irrevocably
consents, to the fullest extent it may effectively do so under applicable
law, to the service of process of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to the Issuers at the address set
forth herein, such service to become effective 30 days after such mailing.
Nothing herein shall affect the right of the Initial Purchaser to serve
process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any of the Issuers in any other
jurisdiction.
(d) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
(e) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the
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<PAGE>
remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(g) This Agreement may be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may be
given, provided that the same are in writing and signed by each of the
signatories hereto.
33
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Issuers and the Initial Purchaser.
Very truly yours,
PENINSULA GAMING COMPANY, LLC
By:
----------------------------
Name:
Title:
PENINSULA GAMING CORP.
By:
----------------------------
Name:
Title:
PENINSULA GAMING PARTNERS, LLC
By:
----------------------------
Name:
Title:
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By:
--------------------------
Name:
Title:
<PAGE>
EXHIBIT A
Form of Opinion of Mayer, Brown & Platt
1. Each of the Issuers has been duly incorporated or organized, as applicable,
and is validly existing as a corporation or limited liability company, as
applicable, in good standing under the laws of the State of Delaware.
2. Each of the Issuers has corporate or limited liability company power and
authority, as applicable, to (a) own, lease and operate its properties and to
conduct its business as currently conducted as described in the Offering
Circular, and (b) consummate the Transactions and enter into and perform its
obligations under each of the Documents to which it is a party.
3. Each of the Issuers is duly qualified as a foreign corporation or limited
liability company, as applicable, to transact business and is in good standing
in each jurisdiction in which such qualification is required, except where the
failure to be so qualified or to be in good standing would not result in a
Material Adverse Effect.
4. The total authorized membership interests of the Company consists
of__________ common membership interests and ________ preferred membership
interests, the total authorized capital stock of PGC consists of__________
shares of common stock and the total authorized membership interests of PGP
consists of__________ voting common membership interests, ______ non-voting
common membership interests and ___________ convertible preferred membership
interests. Each membership interest of each of the Company and PGP that is
issued and outstanding is duly authorized and validly issued, fully paid and
nonassessable and each share of capital stock of PGC that is issued and
outstanding is duly authorized and validly issued, fully paid and nonassessable.
The authorized membership interests of the Company and PGP and the authorized
capital stock of PGC conform as to legal matters in all material respects to the
descriptions thereof contained in the Offering Circular. Immediately following
the Closing, (a) the only direct or indirect subsidiary of the Company will be
PGC, PGC will have no direct or indirect subsidiaries and the only direct or
indirect subsidiary of PGP will be the Company and PGC, (b) except as set forth
in clause (a) above, none of the Issuers will directly or indirectly own any
capital stock or other equity interest in, or be a partner of, any other person
and (c) the Company will directly own 100% of the outstanding shares of capital
stock of PGC, PGP will directly own 100% of the outstanding common membership
interests of the Company, free and clear of all Liens, and all of such shares of
capital stock or membership interests were not issued in violation of, or
subject to, any preemptive or similar rights.
5. To such counsel's knowledge, without special inquiry beyond that stated in
the opinion, except for the Convertible Preferred Membership Interests and as
disclosed in the Offering Circular, there are no outstanding (a) securities
convertible into or exchangeable for any membership interests of either the
Company or PGP or the capital stock of PGC, (b) options, warrants or other
rights to purchase or subscribe for membership interests of either the Company
<PAGE>
or PGP or the capital stock of PGC or (c) contracts, commitments, agreements,
understandings, arrangements, calls or claims of any kind relating to the
issuance of any membership interests of either the Company or PGP or capital
stock of PGC, any such convertible or exchangeable securities, or any such
options, warrants or rights.
6. Each of the Issuers has duly authorized, executed and delivered the Purchase
Agreement.
7. Each of the Company and PGC has duly authorized, executed and delivered the
Registration Rights Agreement and (assuming the due authorization, execution and
delivery thereof by the Initial Purchaser) the Registration Rights Agreement
constitutes a valid and binding agreement of each of the Company and PGC,
enforceable against each of the Company and PGC in accordance with its terms,
except as the enforcement thereof may be limited by (i) applicable bankruptcy,
insolvency, fraudulent conveyance, equitable subordination, reorganization,
readjustment of debt, moratorium or other similar laws affecting creditor's
rights generally, (ii) the effect of general principles of equity (regardless of
whether considered in a proceeding at law or in equity); or (iii) limitations on
the availability or enforceability of the remedies of specific performance or
injunctive relief contained in the Documents, all of which may be limited by
equitable principles or applicable laws, rule, regulations, court decisions and
constitutional requirements.
8. Each of the Company and PGC has duly authorized, executed and delivered the
Indenture and (assuming the due authorization, execution and delivery thereof by
the Trustee) the Indenture constitutes a valid and binding agreement of each of
the Company and PGC, enforceable against each of the Company and PGC in
accordance with its terms, except as the enforcement thereof may be limited by
(i) applicable bankruptcy, insolvency, fraudulent conveyance, equitable
subordination, reorganization, readjustment of debt, moratorium or other similar
laws affecting creditor's rights generally, (ii) the effect of general
principles of equity (regardless of whether considered in a proceeding at law or
in equity); or (iii) limitations on the availability or enforceability of the
remedies of specific performance or injunctive relief contained in the
Documents, all of which may be limited by equitable principles or applicable
laws, rule, regulations, court decisions and constitutional requirements.
9. The Series A Notes are in the form contemplated by the Indenture, have been
duly authorized, executed and delivered by each of the Company and PGC and, when
authenticated by the Trustee in the manner provided in the Indenture and
delivered against payment of the purchase price therefor, will constitute valid
and binding obligations of each of the Company and PGC, enforceable against each
of the Company and PGC in accordance with their terms, except as the enforcement
thereof may be limited by (i) applicable bankruptcy, insolvency, fraudulent
conveyance, equitable subordination, reorganization, readjustment of debt,
moratorium or other similar laws affecting creditor's rights generally, (ii) the
effect of general principles of equity (regardless of whether considered in a
proceeding at law or in equity); or (iii) limitations on the availability or
enforceability of the remedies of specific performance or injunctive relief
contained in the Documents, all of which may be limited by equitable principles
or applicable
A-2
<PAGE>
laws, rule, regulations, court decisions and constitutional requirements, and
will be entitled to the benefits of the Indenture. The Series B Notes have been
duly authorized by each of the Company and PGC and, when issued and executed by
each of the Company and PGC and authenticated by the Trustee in the manner
provided in the Indenture (assuming the due authorization, execution and
delivery of the Indenture by the Trustee) and delivered in the registered
exchange offer contemplated by the Registration Rights Agreement, will
constitute valid and binding obligations of each of the Company and PGC,
enforceable against each of the Company and PGC in accordance with their terms,
except as the enforcement thereof may be limited by (i) applicable bankruptcy,
insolvency, fraudulent conveyance, equitable subordination, reorganization,
readjustment of debt, moratorium or other similar laws affecting creditor's
rights generally, (ii) the effect of general principles of equity (regardless of
whether considered in a proceeding at law or in equity); or (iii) limitations on
the availability or enforceability of the remedies of specific performance or
injunctive relief contained in the Documents, all of which may be limited by
equitable principles or applicable laws, rule, regulations, court decisions and
constitutional requirements, and will be entitled to the benefits of the
Indenture.
10. The Convertible Preferred Membership Interests have been duly authorized
and, when issued and delivered against payment of the purchase price therefor,
will be validly issued, fully paid and nonassessable and, to such counsel's
knowledge, without special inquiry beyond that stated in the opinion, not issued
in violation of, or subject to, any preemptive right or similar rights.
11. The Common Membership Interests which will be issuable upon conversion of
the Convertible Preferred Membership Interests have been duly authorized and
reserved for issuance upon conversion of the Convertible Preferred Membership
Interests and, when issued upon conversion of the Convertible Preferred
Membership Interests as provided in the operating agreement of PGP, will be
validly issued, fully paid and nonassessable and, to such counsel's knowledge,
without special inquiry beyond that stated in the opinion, not issued in
violation of, or subject to, any preemptive or similar rights.
12. The form of certificates evidencing the Convertible Preferred Membership
Interests and Common Membership Interests is in due and proper form and complies
in all material respects with the requirements of the Delaware General
Corporation Law.
13. Except as disclosed in the Offering Circular, there is no Proceeding before
or by any Governmental Authority now pending or, to such counsel's knowledge,
without special inquiry beyond that stated in the opinion, threatened either (a)
that seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge any of the Documents or any of the transactions contemplated thereby
or (b) that could, singly or in the aggregate, have a Material Adverse Effect.
14. The terms of the Securities, the Indenture, the Registration Rights
Agreement, the Acquisition Agreements and the PGP operating agreement conform in
all material respects to the
A-3
<PAGE>
descriptions thereof contained in the Offering Circular. The information in the
Offering Circular under "Risk Factors-Inability to Repurchase Securities When
Required," "Business-Legal Proceedings," "Management-Employment Agreements,"
"Principal Securityholders," "Certain Relationships and Related
Transactions-Managing Member Indemnification," "-Operating Agreement of PGP,"
"Description of PGCL Membership Interests," "Description of Units," "Description
of Notes," "Description of PGP Membership Interests" and "Notice to Investors"
to the extent that it constitutes matters of law, summaries of legal matters,
summaries of securities, instruments, agreements or other documents, summaries
of proceedings or legal conclusions, is complete and correct in all material
respects.
15. None of the Issuers is in violation of or is in default under its Charter
Documents.
16. No authorizations, approval, consent, license or order of, or filing,
registration or qualification with, any Governmental Authority (other than those
which have been obtained) is required in connection with, or as a condition to,
the execution, delivery or performance of the Documents or for the consummation
of the Transactions. Without limiting the foregoing, assuming (a) that the
Eligible Purchasers who buy the Units in the Exempt Resales are QIBs or
Accredited Investors, (b) the accuracy of the representations and warranties of
the Initial Purchaser and the Issuers contained in the Purchase Agreement, (c)
the accuracy of the representations made by each Accredited Investor that
purchases the Units pursuant to an Exempt Resale as set forth in the letters of
representation in the form of Annex A to the Offering Circular, (d) the Initial
Purchaser's compliance with the offering and transfer procedures and
restrictions described in the Offering Circular and (e) the proceeds of the sale
of the Units are utilized as described in the Offering Circular, the offer, sale
and delivery of the Securities to the Initial Purchaser in the manner
contemplated by the Purchase Agreement and the Offering Circular and the initial
resale of the Securities by the Initial Purchaser in the manner contemplated by
the Purchase Agreement do not require registration under the Securities Act of
1933, as amended, and the Indenture does not require qualification under the
Trust Indenture Act of 1939, as amended, it being understood that such counsel
need not express any opinion as to any subsequent resales of any Securities.
17. No securities of any of the Issuers are of the same class (within the
meaning of Rule 144A under the Act) as the Securities and listed on a national
securities exchange registered under Section 6 of the Exchange Act, or quoted in
a U.S. automated inter-dealer quotation system.
18. To such counsel's knowledge, without special inquiry beyond that stated in
the opinion, there are no contracts, agreements or understandings, other than
the Registration Rights Agreement, between any of the Issuers and any person
granting such person the right to require any of the Issuers to file a
registration statement under the Act with respect to any securities of any of
the Issuers or to require any of the Issuers to include such securities with the
Notes registered pursuant to any registration statement.
A-4
<PAGE>
19. Neither the execution or delivery of any of the Documents nor the
consummation of any of the Transactions will conflict with, violate, constitute
a breach of or a default (with the passage of time or otherwise) under, require
the consent of any person (other than consents already obtained) under, or
result in the imposition of a Lien on any properties of any of the Issuers or
any of their respective subsidiaries (other than as contemplated by the Security
Documents) or an acceleration of indebtedness pursuant to, (a) the Charter
Documents, (b) any Applicable Agreement, other than such breaches, violations or
defaults as disclosed in the Offering Circular or that could not, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect, or (c)
subject to the assumptions set forth in the second sentence of paragraph 16
hereof, any laws, rules and regulations of the State of New York or of the
United States of America which, in the experience of such counsel, are normally
applicable to transactions of the type contemplated by this Agreement
(including, without limitation, Regulations T, U or X of the Board of Governors
of the Federal Reserve System).
20. None of the Issuers are subject to regulation, or shall become subject to
regulation solely by reason of the consummation of the Transactions under the
Investment Company Act of 1940, as amended, and the rules and regulations and
interpretations promulgated thereunder, or the Public Utility Holding Company
Act of 1935, as amended.
Such counsel shall state that in such counsel's capacity as special
counsel to the Issuers, such counsel has participated in conferences with
representatives of the Issuers, representatives of the accountants of the
Issuers, your representatives and counsel, at which conferences the contents of
the Offering Circular and related matters were discussed and, although such
counsel has not independently verified and is not passing upon and assumes no
responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Circular (except as set forth above), nothing has come
to such counsel's attention that causes such counsel to believe that the
Offering Circular as of its date contained, or on the Closing Date contains, an
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no view with
respect to the financial statements and notes thereto or other financial data
included in the Offering Circular or excluded therefrom).
In rendering such opinion, such counsel may (i) rely with respect to
matters of fact upon the representations and warranties of the Issuers set forth
herein, upon certificates of officers of the Issuers and upon information
obtained from public officials, (ii) assume that all documents submitted to such
counsel conform to the originals thereof, and that the signatures on all
documents examined by such counsel are genuine, (iii) state that such counsel's
opinion is limited to the federal law of the United States and the laws of the
State of New York and the General Corporation Law of the State of Delaware, and
(iv) make any such other customary assumptions and qualifications as may be
reasonably acceptable to the Initial Purchaser. The opinion of Mayer Brown &
Platt described in this Exhibit A shall be rendered at the request of the
Issuers to, and may be relied upon solely by, the Initial Purchaser and shall so
state therein.
A-5
<PAGE>
Additionally, such counsel need express no opinion on (a) any New York or
federal law, rule or regulation relating to (i) pollution, protection of the
environment, (ii) zoning, and use, building construction, (iii) labor, employee
rights and benefits, or occupational safety and health or (iv) utility
regulation, (b) anti-trust laws, (c) except to the extent set forth in
paragraphs 17, 20 and 21 and the paragraph immediately preceding this paragraph,
state securities laws, including "blue sky" laws of the State of New York, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Public Utility Holding Company Act of 1935, as amended, and the
Investment Company Act of 1940, as amended, (d) gaming or liquor laws, (e)
maritime laws and (f) laws affecting real estate or the perfection or priority
of security interests granted under the Security Documents.
A-6
<PAGE>
EXHIBIT B
Form of Opinion of Lane & Waterman
1. Assuming the due authorization, execution and delivery of each of the
Security Documents by the Company, each of the Security Documents constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited by
(i) applicable bankruptcy, insolvency, fraudulent conveyance, equitable
subordination, reorganization, readjustment of debt, moratorium or other similar
laws affecting creditor's rights generally, (ii) the effect of general
principles of equity (regardless of whether considered in a proceeding at law or
in equity); or (iii) limitations on the availability or enforceability of the
remedies of specific performance or injunctive relief contained in the
Documents, all of which may be limited by equitable principles or applicable
laws, rule, regulations, court decisions and constitutional requirements.
2. Except as disclosed in the Offering Circular, there is no Proceeding before
or by any Governmental Authority now pending or to the best of such counsel's
knowledge, without special inquiry beyond that stated in the opinion, threatened
either (a) that seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge any of the Documents or any of the Transactions or (b) that
could, singly or in the aggregate, have a Material Adverse Effect.
3. The terms of the Security Documents conform in all material respects to the
descriptions thereof contained in the Offering Circular. The information in the
Offering Circular under "Offering Circular Summary-The Company," "-Favorable
Operating Environment," "Risk Factors-Dependence Upon a Single Gaming Site,"
"-Competition," "-Gaming Regulations," "-Required Regulatory Redemption," "-DRA
Operating Agreement," "-Reauthorization of Gaming in Dubuque County, Iowa,"
"-Risk Related to Hotel/Ice Harbor Development," "-Liquor Regulation,"
"-Environmental Matters," "-Taxation," "-Difficulty in Attracting and Retaining
Qualified Employees," "-Ability to Realize on Collateral," "-Collateral Value,"
"The Transactions," the second paragraph of "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business-The
Diamond Jo," "-The City of Dubuque," "-Casino Operations," "-Competition,"
"-Legal Proceedings," "-Properties," "Regulatory Matters" and "Certain
Relationships and Related Transactions-Relationship with Dubuque Racing
Association" to the extent that it constitutes matters of law, summaries of
legal matters, summaries of securities, instruments, agreements or other
documents, summaries of proceedings or legal conclusions, is complete and
correct in all material respects.
4. There are no legal or governmental proceedings nor any contracts or other
documents of which such counsel is aware, which would be required by the Act to
be described in a prospectus that have not been described in the Offering
Circular.
5. None of the Issuers are in violation of or are in default under, to the best
of such counsel's knowledge, any Applicable Law or Applicable Agreement (to the
extent they are a party thereto),
B-1
<PAGE>
except for such violations or defaults that could not, singly or in the
aggregate, have a Material Adverse Effect.
6. No authorization, approval, consent, license or order of, or filing,
registration or qualification with, any Governmental Authority (including,
without limitation, any Iowa gaming authority or regulatory body), other than
have been obtained on or before the Closing Date, is required in connection
with, or as a condition to, the execution, delivery or performance of the
Documents or for the consummation of the Transactions.
7. Neither the execution or delivery of any of the Documents nor the
consummation of any of the Transactions will conflict with, violate, constitute
a breach of or a default (with the passage of time or otherwise) under, require
the consent of any person (other than consents already obtained) under, or
result in the imposition of a Lien on any properties of any of the Issuers or
any of their respective subsidiaries or an acceleration of indebtedness pursuant
to, (a) any Applicable Agreement or (b) any Applicable Law (including, without
limitation any applicable provision of law or regulation of the State of Iowa
and Title 46 of the United States Code or the regulations thereunder (the "Ship
Act")).
8. Each of the Issuers possesses all Permits required or necessary to own or
lease, as appropriate, and to operate its properties and to carry on its
business as now or proposed to be conducted as set forth in the Offering
Circular, except where the failure to obtain such Permits would not,
individually or in the aggregate, have a Material Adverse Effect. Each of the
Issuers has fulfilled and performed all of its obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit. To the best of such
counsel's knowledge, none of the Issuers have received any notice of any
proceeding relating to revocation or modification of any such Permit, except
where such revocation or modification would not, individually or in the
aggregate, have a Material Adverse Effect. The execution, delivery and
performance by each of the Issuers of the Documents, to the extent they are a
party thereto, and the consummation by each of the Issuers of the Transactions
will not result in the condition, termination, suspension or revocation of any
Permit of any of the Issuers or result in any other impairment of the rights of
the holder of any such Permit.
9. Each of the Company and the DRA possesses a validly authorized and issued
riverboat gaming license from the State of Iowa and is in good standing with
Iowa gaming regulators.
10. All leases, contracts and agreements, including those referred to in the
Offering Circular to which any of the Issuers is a party or by which any of them
is bound are valid and enforceable against such Issuer, are, to such counsel's
knowledge, without special inquiry beyond that stated in the opinion, valid and
enforceable against the other party or parties thereto, and are in full force
and effect.
B-2
<PAGE>
11. Neither the Trustee nor any present or future owner of a Note is or will be
required to qualify to do business as a foreign corporation in the State of Iowa
or to comply with the requirements of any foreign lender statute, or is or will
become subject to any income, franchise or similar tax imposed by the State of
Iowa or any subdivision thereof, solely by reason of the execution, delivery and
performance of the Documents and the acquisition and retention of the Liens
created and perfected under the Security Documents.
12. The Company has duly authorized, executed and delivered each of the Security
Documents, and each of the Security Documents constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as the enforcement thereof may be limited by (i) applicable
bankruptcy, insolvency, fraudulent conveyance, equitable subordination,
reorganization, readjustment of debt, moratorium or other similar laws affecting
creditor's rights generally, (ii) the effect of general principles of equity
(regardless of whether considered in a proceeding at law or in equity); or (iii)
limitations on the availability or enforceability of the remedies of specific
performance or injunctive relief contained in the Documents, all of which may be
limited by equitable principles or applicable laws, rule, regulations, court
decisions and constitutional requirements.
13. The Shore Mortgage creates in favor of the Trustee a valid and enforceable
mortgage lien on, and security interest in, the right, title and interest of the
Company in the Mortgaged Property (as defined in the Shore Mortgage), all as
security for the payment of the Obligations (as such term is defined in the
Shore Mortgage). The Shore Mortgage is in appropriate form for recording in the
office of the County Recorder of Dubuque County, Iowa (the county in which the
Land (as such term is defined in the Shore Mortgage) is located), both as a
mortgage and as a "fixture filing" within the meaning of the Iowa UCC (as
defined below). Upon such recordation, the mortgage Lien of the Shore Mortgage
will be perfected with respect to the Company's right, title and interest in and
to the Land and Improvements (as such terms is defined in the Shore Mortgage)
and Proceeds (as such terms is defined in the Shore Mortgage) thereof now owned
or hereafter acquired by the Company, and no other filing or recording of the
Shore Mortgage or any other instrument will be necessary to continue the
perfection of the mortgage Lien of the Shore Mortgage. Upon such recordation,
the security interest in Fixtures (as such term is defined in the Shore
Mortgage), and Proceeds of Fixtures (as such term is defined in the Shore
Mortgage) will be perfected, and no other filing or recording of the Shore
Mortgage or any other instrument will be necessary to continue the perfection of
such security interest of the Shore Mortgage in Fixtures and Proceeds of
Fixtures.
14. The Security Agreement creates a valid security interest in favor of the
Trustee in all right, title and interest of the Company in the Collateral under
Article 9 of the Iowa Uniform Commercial Code (the "Iowa UCC"), all as security
for the payment of the Secured Obligations (as such term is defined in the
Security Agreement). The Financing Statement (as such term in defined in the
Shore Mortgage), is in appropriate form for filing with the Iowa Secretary of
State pursuant to the Iowa UCC. Upon the filing of the Financing Statement in
the office of the Iowa Secretary of State, the security interest created by the
Security Agreement in those items and
B-3
<PAGE>
types of such Collateral in which a security interest may be perfected by filing
Iowa UCC financing statements with the Iowa Secretary of State will be
perfected.
15. The Company is a citizen of the United States within the meaning of Section
2 of the Shipping Act of 1916, as amended, and is qualified to engage in
operating its Vessel (as defined in the Ship Mortgage) in the coastwise trade of
the United States.
16. The Company is the sole owner of the whole of the Vessel and has good and
marketable title to the Vessel; the Company is eligible under the relevant laws
of the United States to own and document the Vessel under the laws and flag of
the United States of America, and to operate the Vessel in the trade in which it
is authorized to engage; the Vessel is free and clear of any Lien except the
Ship Mortgage and such Liens of the character permitted under the Ship Mortgage;
the Vessel is documented in the name set forth opposite its official number
specified in the Ship Mortgage.
17. Upon due filing of the Ship Mortgage with the United States Coast Guard,
Vessel Documentation Office, St. Louis, Missouri, the Ship Mortgage will
constitute a valid first "preferred mortgage" on the Vessel within the meaning
of the Ship Act in favor of the Trustee. No other filing, recordings, re-filing
(periodic or otherwise) or other action will be necessary under the Ship Act to
create, perfect or maintain the Ship Mortgage as a "preferred mortgage" within
the meaning of the Ship Act.
18. No documentary, stamp or intangible tax, transfer tax or similar charge is
payable under Iowa law in connection with the execution, delivery, filing,
recordation or performance of the Security Documents in the State of Iowa.
However, such counsel advises you that statutory filing fees are payable,
calculated on a per document or per page basis, or a combination thereof
19. The Security Documents contain terms and provisions necessary to permit the
Trustee, following the occurrence of an Event of Default (as such term is
defined in the Indenture), to exercise the rights and remedies commonly and
customarily available to secured lenders in the State of Iowa holding mortgages
and security interests in properties similar to the Mortgaged Property and
Collateral under the laws of the State of Iowa in transactions involving
substantial amounts of credit.
20. Certain of the Documents provide that they are governed by the laws of the
State of New York. An Iowa court or a federal court in Iowa applying Iowa
principles of choice of law, in a properly presented case, would uphold the
aforesaid choice-of-law provision. Moreover, in the event that the laws of the
State of Iowa were applied to govern such Documents, such Documents will not
violate any applicable laws (including usury laws) of the State of Iowa.
Such counsel shall state that in such counsel's capacity as special
counsel to the Issuers, such counsel has participated in conferences with
representatives of the Issuers, representatives of the accountants of the
Issuers, your representatives and counsel, at which conferences the
B-4
<PAGE>
contents of the Offering Circular and related matters were discussed and,
although such counsel has not independently verified and is not passing upon and
assumes no responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Circular (except as set forth above),
nothing has come to such counsel's attention that causes such counsel to believe
that the Offering Circular as of its date contained, or on the Closing Date
contains, an untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express no view with
respect to the financial statements and notes thereto or other financial data
included in the Offering Circular).
In rendering such opinion, such counsel may (i) rely with respect to
matters of fact upon the representations and warranties of the Issuers set forth
herein, upon certificates of officers of the Issuers and upon information
obtained from public officials, (ii) assume that all documents submitted to such
counsel conform to the originals thereof, and that the signatures on all
documents examined by such counsel are genuine, (iii) state that such counsel's
opinion is limited to the federal law of the United States and the laws of the
State of Iowa, and (iv) make any such other customary assumptions and
qualifications as may be reasonably acceptable to the Initial Purchaser. The
opinion described in this Exhibit B shall be rendered at the request of the
Issuers to, and may be relied upon solely by, the Initial Purchaser and shall so
state therein.
B-5
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Issuers and the Initial Purchaser.
Very truly yours,
PENINSULA GAMING COMPANY, LLC
By: /s/ M. Brent Stevens
----------------------------
Name:
Title:
PENINSULA GAMING CORP.
By: /s/ M. Brent Stevens
----------------------------
Name:
Title:
PENINSULA GAMING PARTNERS, LLC
By: /s/ M. Brent Stevens
----------------------------
Name:
Title:
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By: /s/ Nauman Toor
----------------------------
Name: NAUMAN TOOR
Title: SENIOR VICE PRESIDENT
[Purchase Agreement]
<PAGE>
Exhibit 3.1A
State of Delaware PAGE 1
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, LLC",
FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY OF JANUARY, A.D. 1999, AT 1:15
O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
2997238 8100 AUTHENTICATION: 9757746
991202272 DATE: 05-20-99
<PAGE>
1-26-99
CERTIFICATE OF FORMATION
OF
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, LLC
This Certificate of Formation of Greater Dubuque Riverboat
Entertainment Company, LLC (the "Company"), dated as of January 26, 1999 is
being duly executed and filed by Edward A. Davis, an Authorized Person, to
form a limited liability company under the Delaware Limited Liability Company
Act, Del. Code, tit. 6, Section 18-101 et seq., as amended from time to time
(the "Act").
1. Name. The name of the limited liability company formed hereby is
Greater Dubuque Riverboat Entertainment Company, LLC.
2. Registered Office. The address of the registered office of the
Company in the Stare of Delaware is The Corporation Trust Company,
1209 Orange Street, Wilmington, Delaware 19801.
3. Registered Agent. The name and address of the registered agent for
service of process on the Company in the State of Delaware is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware
19801.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation as of the date first above written.
AUTHORIZED PERSON
/s/ Edward A. Davis
----------------------
Edward A. Davis
Exhibit 3.1B
State of Delaware
PAGE 1
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, LLC", CHANGING ITS NAME
FROM "GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, LLC" TO "PENINSULA GAMING
COMPANY, LLC", FILED IN THIS OFFICE ON THE SIXTH DAY OF APRIL, A.D. 1999, AT 2
O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
2997238 8100 AUTHENTICATION: 9757746
991202272 DATE: 05-20-99
<PAGE>
4-6-99
CERTIFICATE OF AMENDMENT
OF
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, LLC
1. The name of the limited liability company is Greater Dubuque
Riverboat Entertainment Company, LLC.
2. The Certificate of Formation of the limited liability company is
hereby amended as follows:
The name of the limited liability company formed hereby is
"Peninsula Gaming Company, LLC."
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment of Greater Dubuque Riverboat Company, LLC this sixth day of April,
1999.
AUTHORIZED PERSON
/s/ Edward A. Davis
----------------------
Edward A. Davis
Exhibit 3.2
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
PENINSULA GAMING COMPANY, LLC
<PAGE>
Table of Contents
Page
----
ARTICLE I
GENERAL PROVISIONS
1.1 Formation and Filing ............................................ 1
1.2 Name and Principal Place of Business ............................ 2
1.3 Registered Agent and Registered Office .......................... 2
1.4 Term ............................................................ 2
1.5 Purpose ......................................................... 2
1.6 Definitions ..................................................... 3
ARTICLE II
MEMBERSHIP MATTERS
2.1 Common Member ................................................... 12
2.2 Preferred Member ................................................ 12
2.3 Limitation on Liability ......................................... 12
2.4 Title to Company Property ....................................... 12
2.5 Business Transactions Involving Member .......................... 12
2.6 Iowa Gaming Licenses ............................................ 12
2.7 Voting By Members ............................................... 13
ARTICLE III
GAMING CONTROL
3.1 Applicability ................................................... 14
3.2 Licensing ....................................................... 14
3.3 Sale, Assignment, Transfer, Pledge or Other Disposition ......... 14
3.4 Revocability of License ......................................... 14
3.5 Restrictive Legend .............................................. 14
3.6 Acceptance of Gaming Law Restrictions ........................... 15
3.7 Gaming Taxes, Assessments, Privilege Fees, Etc. ................. 15
3.8 Limitation on Payments and Distributions ........................ 15
<PAGE>
Table of Contents
continued
Page
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ARTICLE IV
MANAGEMENT OF THE COMPANY
4.1 Management Rights ............................................... 16
4.2 No Management by Other Members .................................. 16
4.3 Limited Liability ............................................... 16
4.4 Indemnification ................................................. 17
4.5 General Obligations ............................................. 17
4.6 Scope of Duties ................................................. 17
ARTICLE V
COMPANY OFFICERS
5.1 Officers, Employees and Agents .................................. 18
5.2 Removal and Resignation ......................................... 18
5.3 Vacancies ....................................................... 18
5.4 Limitation of Liability and Indemnification of Company Officers . 18
ARTICLE VI
CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
6.1 Common Membership Interest ...................................... 19
6.2 Preferred Membership Interest ................................... 19
6.3 GDREC Capital Contribution ...................................... 19
6.4 Additional Capital Contributions ................................ 20
6.5 Issuance of Interests ........................................... 20
ARTICLE VII
ALLOCATIONS
7.1 Allocation of Profits and Losses ................................ 20
7.2 Changes in Percentage Interests ................................. 21
7.3 Tax Allocations ................................................. 21
7.4 Qualified Income Offset, Minimum Gain Chargeback ................ 22
<PAGE>
Table of Contents
continued
Page
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7.5 Tax Credits ..................................................... 22
7.6 Allocations in Event of Recharacterization ...................... 22
7.7 Allocations upon Liquidation or Cessation of Business Activities 22
ARTICLE VIII
DISTRIBUTIONS
8.1 Distribution Policy ............................................. 24
8.2 Distributions on Dissolution .................................... 25
8.3 Treatment of Taxes Withheld; Distributions With Respect to
Certain State and Local Taxes ................................... 25
8.4 Mandatory Distributions ......................................... 25
8.5 Refinancings or Redemptions of Indebtedness ..................... 27
ARTICLE IX
REDEMPTION OF PREFERRED MEMBERSHIP INTERESTS
9.1 Mandatory Partial Redemption .................................... 28
9.2 Mandatory Final Redemption ...................................... 28
9.3 Optional Redemption ............................................. 28
9.4 Required Regulatory Redemptions or Repurchases .................. 28
ARTICLE X
TAX MATTERS AND ELECTIONS
10.1 Designation of Tax Matters Partner .............................. 30
10.2 Powers and Duties of Tax Matters Partner ........................ 30
10.3 Expenses Regarding Tax Matters .................................. 30
10.4 Basis Election .................................................. 30
10.5 Established Securities Markets .................................. 31
10.6 Election to be Taxed as a Corporation ........................... 31
<PAGE>
Table of Contents
continued
Page
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ARTICLE XI
DISSOLUTION AND TERMINATION
11.1 Events Causing Dissolution ...................................... 31
11.2 Liquidating Trustee ............................................. 31
11.3 Liquidation ..................................................... 32
11.4 Liabilities ..................................................... 32
11.5 Distribution of Proceeds upon Liquidation ....................... 32
11.6 Deficit Capital Accounts ........................................ 33
11.7 Certificate of Cancellation ..................................... 33
ARTICLE XII
TRANSFERS OF INTERESTS
12.1 Restrictions on Transfer ........................................ 33
12.2 Admission of Transferee as a Member ............................. 33
12.3 Entity Member Transfers ......................................... 34
12.4 Restrictive Legend .............................................. 34
12.5 Limitation on Foreign Ownership ................................. 35
12.6 Limitation on Activities ........................................ 35
12.7 Restrictions to Avoid Publicly Traded Partnership Status ........ 35
12.8 Disqualified Interest ........................................... 36
ARTICLE XIII
LIABILITY
13.1 Liability of the Members ........................................ 37
13.2 Waiver of Partition and Nature of Interest in the Company ....... 37
ARTICLE XIV
BOOKS, RECORDS, ACCOUNTING AND REPORTS
14.1 Books and Records ............................................... 37
14.2 Accounting and Fiscal Year ...................................... 38
<PAGE>
Table of Contents
continued
Page
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14.3 The Company Accountant .......................................... 38
14.4 Reserves ........................................................ 38
ARTICLE XV
EXPENSES
15.1 Reimbursement ................................................... 38
15.2 Out-of-pocket Expenses .......................................... 38
ARTICLE XVI
SECURITIES LAWS MATTERS
16.1 Securities Law Representations and Warranties ................... 39
ARTICLE XVII
POWER OF ATTORNEY
17.1 Power of Attorney ............................................... 42
ARTICLE XVIII
MISCELLANEOUS
18.1 Further Assurances ............................................. 43
18.2 Severability ................................................... 43
18.3 Amendments ..................................................... 43
18.4 Amendments to Comply with Gaming or Similar Laws ............... 43
18.5 Entire Agreement; Purchase Agreement ........................... 43
18.6 Governing Law .................................................. 44
18.7 Dispute Resolution ............................................. 44
18.7.1 Agreement to Negotiate ............................. 44
18.7.2 Procedure for Arbitration .......................... 45
18.8 Attorney Fees .................................................. 45
18.9 Captions ....................................................... 45
18.10 Creditors Not Benefited ....................................... 45
<PAGE>
Table of Contents
continued
Page
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18.11 Indemnification of Organizer .................................. 45
18.12 Counterparts .................................................. 46
18.13 Binding Effect ................................................ 46
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THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of Peninsula
Gaming Company, LLC, a Delaware limited liability company (the "Company"), is
made and entered into to be effective for all purposes as of July 15, 1999 by
Peninsula Gaming Partners, LLC, a Delaware limited liability company ("PGP"),
Greater Dubuque Riverboat Entertainment Company, L.C., an Iowa limited liability
company ("GDREC"), and such other Persons as may from time to time be admitted
as members of the Company in accordance with the terms of this Agreement and the
Delaware Act. As used in this Agreement, the term "Member" shall mean any one of
PGP, GDREC or any other Person or entity who is admitted as and continues to be
a Common Member or Preferred Member of the Company in accordance with this
Agreement and the Delaware Act, and the term "Members" (whether one or more)
shall mean PGP, GDREC and all other Persons who are admitted as and continue to
be Common Members or Preferred Members of the Company in accordance with this
Agreement and the Delaware Act.
RECITALS
WHEREAS, PGP is party to a limited liability company agreement, adopted as
of January 29, 1999 and amended and restated as of April 5, 1999, with respect
to the conduct of the affairs of the Company and the rights and obligations of
Members with regard to their interests in the Company (the "Existing Operating
Agreement").
WHEREAS, PGP and GDREC desire to amend and restate the Existing Operating
Agreement as set forth herein in order to, among other things, provide for the
admission of GDREC as a Preferred Member of the Company;
NOW, THEREFORE, the undersigned hereby amend and restate the Existing
Operating Agreement and adopt the following as their "limited liability company
agreement" (as that term is used in the Delaware Act):
ARTICLE I
GENERAL PROVISIONS
1.1 Formation and Filing. The Managing Member caused the Company to be
formed as a limited liability company under the Delaware Limited Liability
Company Act, 6 Del.C ss.ss. 18-101, et. seq. (as amended from time to time, the
"Delaware Act") as of January 26, 1999 (the "Formation Date"). The Managing
Member's actions in causing the formation of the Company are hereby ratified,
adopted and approved, and the Managing Member is hereby authorized to file and
record any amendments to the Certificate of Formation and such other documents
as may be required or appropriate under the Delaware Act or the laws of any
other jurisdiction in which the Company may conduct business or own property.
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1.2 Name and Principal Place of Business:
(i) The name of the Company is "Peninsula Gaming Company, LLC." The
Managing Member may change the name of the Company or adopt such trade or
fictitious names for use by the Company as the Managing Member may from time to
time determine. All business of the Company shall be conducted under such name,
and title to all assets or property owned by the Company shall be held in such
name.
(ii) After the Purchase Agreement Closing Date, the principal place of
business of the Company shall be at 400 East Third Street, Dubuque, Iowa 52001,
or at such other place or places as the Managing Member may from time to time
designate.
1.3 Registered Agent and Registered Office: The name of the Company's
registered agent for service of process shall be The Corporation Trust Company
(the "Registered Agent"), and the address of the Company's Registered Agent and
the address of the Company's registered office in the State of Delaware shall be
1209 Orange Street, Wilmington, Delaware 19801 (the "Registered Office"). The
Registered Agent and the Registered Office of the Company may be changed from
time to time by the Managing Member.
1.4 Term: The term of the Company is deemed to have commenced on the
Formation Date and shall continue until 11:59 p.m. E.S.T. on December 31, 2048,
unless sooner terminated or further extended pursuant to the provisions of this
Agreement by the Members.
1.5 Purpose: The Company has been formed for the purpose of:
(i) acquiring an excursion gambling boat from GDREC, and either directly
acquiring certain real property owned by Harbor Community Investment, L.C., an
Iowa limited liability company, or through an affiliate acquiring such real
property, and to conduct gaming operations thereon to the extent allowed by, and
in conformance with, applicable law;
(ii) acquiring and/or developing any facilities that are related to,
necessary for the operation of, compatible with or enhance the gaming operation
to be conducted by the Company, including parking areas, entertainment and
lodging facilities, food and beverage service, docking facilities, shopping
centers, movie theaters, bowling alleys, storage and maintenance facilities; and
(iii) engaging in any other lawful business activities determined by the
Managing Member to be necessary, convenient or advisable in connection with or
incidental to the foregoing.
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1.6 Definitions. As used in this Agreement, the following terms shall,
unless the context otherwise requires, have the meanings given to them below:
"Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account, after giving effect
to the following adjustments: (a) such Capital Account shall be credited with
any amounts that such Member is obligated to restore pursuant to this Agreement
or otherwise and any amounts that such Member is deemed to be obligated to
restore pursuant to the penultimate sentence of Treas. Reg. Section
1.704-2(g)(1) or the penultimate sentence of Treas. Reg. Section 1.704-2(i)(5);
and (b) such Capital Account shall be debited with such Member's share of the
items described in Treas. Reg. Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treas. Reg. Section 1.704-1 (b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Aggregate Capital Contribution" means the total amount of Capital
Contributions made to the Company by all the Members or any one Member (or, in
the event a Member has acquired an Interest other than directly from the
Company, such Member's Capital Contribution and the ratable portion of the
Capital Contribution of the predecessor holder of the Interest acquired by such
Member), as the case may be.
"Agreement" means this operating agreement (including the Exhibits and
schedules hereto), as originally executed and as amended from time to time, and
the terms "hereof", "hereto" and "hereunder", when used in reference to this
Agreement, refer to this Agreement as a whole, unless the context otherwise
requires.
"Bankruptcy" or "Bankrupt" means with respect to any Member, such Member
making an assignment for the benefit of creditors, becoming a party to any
liquidation or dissolution action or proceeding with respect to such Member or
any bankruptcy, reorganization, insolvency or other proceeding for the relief of
financially distressed debtors with respect to such Member, or a receiver,
liquidator, custodian, or trustee being appointed for such Member or a
substantial part of such Member's assets and, if any of the same occur
involuntarily, the same not being dismissed, stayed or discharged within one
hundred (120) days of its filing; or the entry of an order for relief against
such Member under Title 11 of the United States Code. A Member shall be deemed
Bankrupt if the Bankruptcy of such Member shall have occurred and be continuing.
"Beneficial Interest" of any Person means all direct or indirect forms of
ownership or control, voting power or investment power of such Person, whether
held through a contract, lien, lease, partnership, stockholding, syndication,
joint venture, understanding, relationship, present or reversionary right, title
or interest, or otherwise.
"Capital Account" means, with respect to any Member, the Aggregate Capital
Contribution made by such Member to the Company, (i) reduced by (A) any Losses
(or items thereof) allocated to such Member and (B) any distributions made to
such Member, and
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(ii) increased by any Profits (or items thereof) allocated to such Member. The
Capital Account of any Member shall reflect all prior adjustments to the Capital
Account of any predecessor holder of such Member's Interest in the Company or
portion thereof. Any other item which is required to be reflected in a Member's
Capital Account under Section 7.3 or otherwise under this Agreement shall be so
reflected.
"Capital Contribution" means, with respect to any Member, the amount of
money and the Fair Market Value of any property other than money (reduced by the
amount of liabilities assumed by the Company with respect to such property)
contributed to the Company with respect to the Interest held by such Member
pursuant to Article VI of this Agreement.
"Certificate of Formation" means the Certificate of Formation of the
Company, filed on January 26, 1999 with the office of the Secretary of State of
Delaware, as the same may be amended or otherwise modified from time to time in
accordance with the Delaware Act.
"Claimant" has the meaning given to it in Section 18.7.1.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time (or any corresponding provisions of succeeding law).
"Common Member" means PGP and any other Person admitted as a Common Member
in accordance with the terms of this Agreement.
"Common Membership Interest" means, as to any Common Member, such Common
Member's Interest.
"Common Member Percentage Interest" means, as to any Common Member, the
percentage that such Common Member's Interest bears to the aggregate Interests
of all Common Members, as reflected on Schedule A.
"Company Accountant" has the meaning given to it in Section 14.3.
"Company Asset" means the interest of the Company in any entity or
security (whether in corporate securities, equity, debt or hybrid securities,
partnership or joint venture interests, other contractual rights or otherwise),
or group of related entities or securities, and any business and other assets,
or group of related businesses and other assets, owned, directly or indirectly,
by the Company.
"Debt" means (i) any indebtedness for borrowed money or for the deferred
purchase price of property or evidenced by a note, bonds, or other instruments,
(ii) obligations as lessee under capital leases, (iii) obligations secured by
any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
existing on any asset owned or held by the Company whether or not the Company
has assumed or become liable for the obligations secured thereby, and (iv)
obligations under direct or indirect guarantees of (including
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obligations (contingent or otherwise) to assure a creditor against loss in
respect of indebtedness or obligations of the kinds referred to in clauses (i),
(ii) and (iii) above, provided that Debt shall not include obligations in
respect of any accounts payable that are incurred in the ordinary course of the
Company's business and are not delinquent or are being contested in good faith
by appropriate proceedings.
"Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for Federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for Federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Managing Member.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del.C.
ss. 18-101, et. seq., as amended from time to time.
"Disqualified Interest" has the meaning given such term in Section 12.9.
"Distribution Date" has the meaning given such term in Section 11.4.
"Escrow Agreement" means the Escrow Agreement dated as of January 15, 1999
entered into between PGP and GDREC in connection with the acquisition by the
Company of substantially all of the assets of GDREC.
"Fair Market Value" means the price that would be paid for a given asset
in an arm's length transaction between a willing buyer and a willing seller as
determined by the Managing Member in its reasonable good faith judgement and
approved by a majority of the Independent Committee.
"Final Redemption Date" has the meaning given to such term in Section 9.2.
"Fiscal Year" means (i) the period commencing on the effective date of
this Agreement and ending on December 31, 1999, (ii) any subsequent twelve (12)
month period commencing on January 1st and ending on December 31st, or (iii) any
portion of the period described in clause (ii) for which the Company is required
to allocate Profits, Losses and other items of Company income, gain, loss or
deduction pursuant to Article VII.
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or
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foreign government, any state, province or any city or other political
subdivision or otherwise, whether now or hereafter in existence, or any officer
or official thereof, including, without limitation, the IRGC, and any other
agency with authority to regulate any gaming operation (or proposed gaming
operation) owned, managed or operated by the Company, PGP or any of their
respective subsidiaries.
"Gaming Laws" means the gaming laws of any jurisdiction or jurisdictions
to which the Company or any of its subsidiaries is, or may at any time become,
subject, including, without limitation, Chapter 99F of the Iowa Code, as
amended, and the rules and regulations adopted by the IRGC.
"Gaming License" means every material license, material franchise,
material registration, material qualification, findings of suitability or other
material approval or authorization required to own, lease, operate or otherwise
conduct or manage riverboat, dockside or land-based gaming activities in any
state or jurisdiction in which the Company or any of its subsidiaries conducts
business (including, without limitation, all such licenses granted by the IRGC
under Chapter 99F of the Iowa Code and the rules and regulations promulgated
thereunder), and all applicable liquor licenses.
"GDREC" means Greater Dubuque Riverboat Entertainment Company, L.C., an
Iowa limited liability company.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for Federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross Fair Market Value of such asset;
(b) The Gross Asset Value of all property of the Company shall be
adjusted to equal the respective gross Fair Market Values of such
property, as of the following times: (i) the acquisition of an additional
Interest in the Company by any new or existing Member in exchange for more
than a de minimis Capital Contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of property of the
Company as consideration for an Interest; and (iii) the Liquidation of the
Company; provided, however, that adjustments pursuant to clauses (i) and
(ii) above shall be made only if the Managing Member reasonably
determines, and a majority of the Independent Committee agrees, that such
adjustments are necessary or appropriate to reflect the relative economic
Interests of the Members;
(c) The Gross Asset Value of any property of the Company distributed
to any Member shall be adjusted to equal the gross Fair Market Value of
such property on the date of distribution;
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(d) The Gross Asset Values of assets of the Company shall be
increased (or decreased) to reflect any adjustments to the adjusted basis
of such assets pursuant to section 734(b) or section 743(b) of the Code,
but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Treas. Reg. ss.
1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not
be adjusted pursuant to this subsection (d) to the extent the Managing
Member determines that an adjustment pursuant to subsection (b) hereof is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this subsection (d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
paragraph (a), (b), or (d) hereof, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"HCI" means Harbor Community Investment, L.C., an Iowa limited liability
company.
"Indemnified Party" has the meaning given to such term in Section 4.4.
"Indenture" means the indenture governing the Notes.
"Independent Committee" means a committee composed of the disinterested,
independent Managers (as such term is defined in the Amended and Restated
Operating Agreement of PGP dated as of July 15 1999 (the "PGP Operating
Agreement")) that are appointed to serve as independent managers of PGP pursuant
to Section 3.1(c) of the PGP Operating Agreement.
"Initial Distribution Period" has the meaning given such term in Section
8.1.2.
"Interest" means, with respect to any Person, the Beneficial Interest or
other interest of such Person in the Company at any particular time under this
Agreement, including the right of such Person to any and all benefits to which
such Person may be entitled as provided in this Agreement, together with the
obligations of such Person to comply with all the terms and provisions of this
Agreement.
"Investment Company" has the meaning given such term in Section 4.5(c).
"Iowa Gaming License" has the meaning given such term in Section 2.6.
"IRGC" means the Iowa Racing and Gaming Commission.
"Liquidation" means (i) when used with reference to the Company, the
earlier of (a) the date upon which the Company is terminated under Section
708(b)(1) of the Code or
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(b) the date upon which the Company ceases to be a going concern, and (ii) when
used with reference to any Member, the earlier of (a) the date upon which there
is a Liquidation of the Company or (b) the date upon which such Member's entire
Interest in the Company is terminated other than by transfer, assignment or
other disposition to a Person other than the Company.
"Managing Member" means PGP, or such other Person appointed as the
managing member of the Company pursuant to the terms hereof.
"Mandatory Redemption Purchase Price" has the meaning given to such term
in Section 9.1.
"Member" shall have the meaning given to such term in the introductory
paragraph of this Agreement.
"Minimum Partial Redemption" has the meaning given to such term in Section
10.1.
"Minimum Preferred Liquidation Preference" means, with respect to any
Preferred Member, the excess of:
(i) the sum of such Preferred Member's initial Capital Account
attributable to his Preferred Membership Interest and any cumulative
unpaid Preferred Distributions attributable to such Preferred
Membership Interest, less any applicable reductions or offsets, over
(ii) any portion of the Mandatory Redemption Purchase Price or
Optional Redemption Purchase Price paid pursuant to section 9.1 or
9.3, respectively, to such Preferred Member and to any previous
holders of such Preferred Membership Interests.
"Net Cash From Operations" means the gross cash proceeds from Company
operations less the portion thereof used to pay or establish Reserves, all as
determined by the Managing Member. Net Cash From Operations shall not be reduced
by depreciation, amortization, cost recovery deductions, or similar allowances,
but shall be increased by any reductions of Reserves previously established.
"Notes" means the 12 1/4% Senior Secured Notes due 2006 offered on July 8,
1999 by the Company and Peninsula Gaming Corp, a Delaware corporation and wholly
owned subsidiary of the Company.
"Optional Redemption Purchase Price" has the meaning given to such term in
Section 9.3.
"Organizer" has the meaning given to such term in Section 18.12.
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"Person" means any individual, partnership, corporation, limited liability
company, trust, estate, association, unincorporated organization or other entity
or association.
"PGP" means Peninsula Gaming Partners, LLC, a Delaware limited liability
company.
"Preferred Distribution" has the meaning given to such term in Section
8.1.2.
"Preferred Distribution Date" has the meaning given to such term in
Section 8.1.2.
"Preferred Member" shall mean GDREC (upon its admission as a Preferred
Member), and any other Person admitted as a Preferred Member of the Company in
accordance with the terms of this Agreement.
"Preferred Membership Interest" means, as to any Preferred Member, such
Preferred Member's Interest.
"Preferred Member Percentage Interest" means, as to any Preferred Member,
the percentage that such Preferred Member's Interest bears to the aggregate
Interests of all Preferred Members, as reflected on Schedule A.
"Profits" or "Losses" means, for each period taken into account under
Article III, an amount equal to the Company's taxable income or taxable loss for
such period, determined in accordance with Federal income tax principles, with
the following adjustments:
(a) There shall be added to such taxable income or taxable loss an
amount equal to any income received by the Company during such period
which is wholly exempt from Federal income tax (e.g., interest income
which is exempt from Federal income tax under section 103 of the Code);
(b) Any expenditures of the Company described in section
705(a)(2)(B) of the Code or treated as section 705(a)(2)(B) expenditures
pursuant to Treas. Reg. ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Profits or Losses, shall be subtracted from such
taxable income or loss;
(c) In the event the Gross Asset Value of any Company Asset is
adjusted pursuant to this Agreement, the amount of such adjustment shall
be taken into account as gain or loss from the disposition of such asset
for purposes of computing Profits or Losses, and shall be allocated in
accordance with the provisions of Article VII;
(d) Gain or loss resulting from any disposition of property or
assets of the Company with respect to which gain or loss is recognized for
Federal income tax purposes shall be computed by reference to the Gross
Asset Value of such property
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or assets disposed of, notwithstanding that the adjusted tax basis of such
property or assets differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year
or other period; and
(f) To the extent an adjustment to the adjusted tax basis of any
Company Asset pursuant to section 734(b) or section 743(b) of the Code is
required pursuant to Treas. Reg. ss. 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution
other than in Liquidation of a Member's Interest in the Company, the
amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and
shall be taken into account for purposes of computing Profits or Losses;
provided, however, that an adjustment pursuant to this clause (f) shall
not be made to the extent that such adjustment has been taken into account
pursuant to clause (c) of this defined term.
"Purchase Agreement" means the Asset Purchase and Sale Agreement dated as
of January 15, 1999, as amended, entered into between POP (f/k/a AB Capital,
LLC) and GDREC in connection with the acquisition by PGP or its designee of
substantially all of the assets of GDREC.
"Purchase Agreement Closing Date" means the date on which the transactions
contemplated by the Purchase Agreement are consummated.
"Real Property Purchase Agreement" means the Real Property Purchase and
Sale Agreement dated as of January 15, 1999 entered into between PGP (f/k/a AB
Capital, LLC) and Harbor Community Investment, L.C. in connection with the
acquisition by PGP or its designee of certain real property described therein.
"Recipient" has the meaning given to such term in Section 18.7.1.
"Redemption Date" has the meaning given to such term in Section 9.1.
"Regulations" means the income tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
Application of the requirements and the definitions set forth in said
Regulations to the provisions of this Agreement shall be made by substituting
"Member" for "Partner" and "Company" for "Partnership."
"Reserves" means the amount of cash that the Managing Member from time to
time determines to be reasonably necessary or advisable as reserves for: (a)
payment of Company
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Debts, including any amounts required under any loan agreement or bond indenture
to be retained by the Company; (b) payment of Preferred Distributions and any
redemption obligations of the Company with respect to the Preferred Membership
Interests; (c) working capital requirements in connection with the management
and operation of the Company, including, but not limited to, payments to
consultants, advisors and other professionals retained by the Company from time
to time; (d) acquisition of new properties or expansion of the Company's
business; and (e) other contingencies related to the business of the Company.
"Rights" means any securities convertible into or exchangeable for Common
Membership Interests.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Semi-Annual Distribution Period" has the meaning given to such term in
Section 8.1.2.
"Stevens" means M. Brent Stevens.
"Tax Distributions" has the meaning given to such term in Section 8.4.
"Tax Matters Partner" has the meaning given to such term in Section 10.2.
"Transfer" means, when used as a noun, any sale, hypothecation,
participation, pledge, assignment, attachment, disposal, loan, gift, levy or
other transfer, when used as a verb, to sell, hypothecate, pledge, assign,
dispose, loan, gift, levy or otherwise transfer, and when used as a gerund,
selling, hypothecating, pledging, assigning, disposing of, lending, giving,
levying or otherwise transferring.
"Transferee" means a Person to whom a Transferring Member Transfers all or
any portion of such Transferring Member's Interest and who has not been admitted
as a Member in accordance with the terms and conditions of this Agreement.
"Unit" means any Common Membership Interest or any Preferred Membership
Interest.
"Unsuitable Member" has the meaning given to such term in Section 9.4.
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ARTICLE II
MEMBERSHIP MATTERS
2.1 Common Member. PGP is the single and sole Common Member of the Company
and shall be shown as such on the books and records of the Company. Except as
expressly permitted by this Agreement, no other Person shall be admitted as a
Common Member of the Company without the approval of the Managing Member.
2.2 Preferred Member. As of the date hereof, the Company has no Preferred
Members. Upon consummation of the transfer of assets contemplated by the
Purchase Agreement on the Purchase Agreement Closing Date, GDREC shall be
admitted as a Preferred Member of the Company and shall be shown as such on the
books and records of the Company. Except as expressly permitted by this
Agreement, no other Person shall be admitted as a Preferred Member of the
Company without the approval of the Managing Member; provided, however, that if
an additional Person is admitted as a Preferred Member, so long as GDREC is a
Preferred Member, no Preferred Member shall hold interests of the Company
ranking senior to or pari passu with GDREC's interests in respect of
distributions or liquidation without the consent or approval of GDREC.
2.3 Limitation on Liability. Members shall not be liable under a judgment,
decree or order of any court, or in any other manner, for a debt, obligation or
liability of the Company, except as provided by law or as specifically provided
otherwise herein. No Member shall be required to make any contribution to the
Company by reason of any negative balance in the Member's Capital Account nor
shall any negative balance in a Member's Capital Account create any liability on
the part of the Member to any third party.
2.4 Title to Company Property. All real, personal, tangible and intangible
property owned by the Company shall be deemed owned by the Company as an entity
and no Member, individually, shall have any ownership of such property. Each
Member's Interest in the Company shall be personal property for all purposes.
2.5 Business Transactions Involving Member. Any Member may lend money to,
provide services to and transact other business with the Company and shall have
the same rights and obligations with respect to such matters as a Person who is
not a Member.
2.6 Iowa Gaming Licenses. (a) The Company is required to notify the IRGC
as to the identity of (and may be required to submit background information
regarding) each director, corporate officer and owner, partner, joint venturer,
trustee or any other Person, including any Member, who has a Beneficial Interest
of five percent (5%) or more, direct or indirect, in the Company or PGP. The
IRGC may also request a list of Persons, including Members, holding a Beneficial
Interest of less than five percent (5%) in the Company or PGP.
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(b) Holders of Units of the Company that are required to be licensed or
found suitable by a Gaming Authority (including the IRGC) in order to own a
Beneficial Interest in the Company or actively engage in the management of the
Company shall timely submit all information and perform in a timely fashion any
and all acts required to be submitted or performed in connection with obtaining
a Gaming License issued by such Gaming Authority (including the IRGC). All
holders of Units shall also timely submit all information and perform in a
timely fashion any and all acts required to be submitted and performed in
connection with the license required of the Company or any of its subsidiaries
to operate an excursion gambling boat and of the Members to hold Beneficial
Interests in an Iowa gaming licensee (an "Iowa Gaming License"). The holders of
Units acknowledge that this Agreement is subject to review by the IRGC and any
other applicable Gaming Authority, and that the Company and/or any holder of
Units may be required to make available, upon written request by the IRGC or
such Gaming Authority or any of their duly authorized representatives,
information in respect of such holders, including background information of such
holders and their respective directors, officers, owners, partners, joint
venturers or trustees. To the extent that any holder of Units receives such a
request, such holder agrees to provide copies of such documents to the Company
in order to respond to such request. If any Gaming Authority, including the
IRGC, requires a record or beneficial owner of Units to be licensed, qualified
or found suitable, such owner must apply for a Gaming License, qualification or
finding of suitability within the time period specified by such Gaming
Authority. Such owner shall pay all costs of obtaining such Gaming License,
qualification or finding of suitability. In the event that any holder of Units,
or any of such holder's subcontractors, agents, or advisors should fail to
comply with the terms and provisions of this Agreement relating to the retention
and production of documents or any requirement to be licensed, qualified or
found suitable, such holder of Units (i) agrees to indemnify and make whole the
Company from any loss as the result of the refusal or non-compliance in
maintaining or producing documents in accordance with the provisions herein and
(2) acknowledges that the Units of such holder will be subject to mandatory
redemption by the Company as set forth in Section 9.4.
2.7 Voting By Members. In respect of any action that must be approved by a
vote of the Common Members under this Agreement, each Common Member, upon and
after becoming a Common Member of the Company, shall have voting power equaling
its Common Member Percentage Interest. Except with respect to certain consent
rights described in Sections 2.2, 18.3 and 18.5, Preferred Members shall have no
voting rights hereunder. In respect of any action that must be consented to by
the Preferred Members pursuant to Sections 2.2. 18.3 or 18.5, each Preferred
Member, upon and after becoming a Preferred Member of the Company, shall have
voting power equaling its Preferred Member Percentage Interest. In the event new
Preferred Members are admitted, any actions pursuant to Sections 2.2, 18.3
and/or 18.5 must be consented to by GDREC voting as a separate class of
Preferred Members.
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ARTICLE III
GAMING CONTROL
3.1 Applicability. This Agreement is governed by and subject to all
applicable Gaming Laws.
3.2 Licensing. Any manager or holder of Interests (including their
respective officers, directors, partners, managers, employees and equity
interest holders) required by the IRGC or any other Gaming Authority to hold an
Iowa Gaming License or any other Gaming License required by applicable Gaming
Laws shall first procure and thereafter maintain in full force and effect an
Iowa Gaming License or such other Gaming License before such manager and/or
holder of Interests shall exercise influence over the conduct of the gaming
operations of the Company or PGCL. All licensing fees and related costs and
expenses reasonably incurred prior to the Purchase Agreement Closing Date by any
manager or Member in connection with an investment in the Company and approved
by the Board of Managers shall be reimbursed by the Company promptly following
the Purchase Agreement Closing Date; provided, however, that if, following the
Purchase Agreement Closing Date, any Gaming Authority requires a manager or
Member to be licensed, qualified or found suitable, such manager or Member must
pay all costs of obtaining such license, qualification or finding of
suitability.
3.3 Sale, Assignment, Transfer, Pledge or Other Disposition.
Notwithstanding any provision to the contrary in this Agreement, the Transfer or
issuance of Units or the grant or issuance of options or other Rights shall be
ineffective unless the Transferee or the holder of such Right obtains an Iowa
Gaming License (and any other applicable Gaming License) or it is determined by
the IRGC (and any other applicable Gaming Authority), that no such Iowa Gaming
License (or other applicable Gaming License) need be obtained in connection with
such Transfer, grant or issuance.
3.4 Revocability of License. The Members agree that any license,
determination of suitability or other approval issued to any Member or other
Person in connection with the operation of the business of the Company or this
Agreement shall be deemed to be a revocable privilege and no holder thereof
shall be deemed to have acquired any vested rights therein or thereunder.
3.5 Restrictive Legend. If the Company issues any certificate evidencing
ownership of an Interest in the Company, such certificate shall, in addition to
any other restrictive legend that may be imposed, bear the following legend:
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF ANY
OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN REGULATORY RESTRICTIONS IMPOSED BY
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GAMING AUTHORITIES HAVING JURISDICTION OVER THE BUSINESS OPERATIONS
OF THE COMPANY, INCLUDING, WITHOUT LIMITATION. THE IOWA RACING AND
GAMING COMMISSION. AS SET FORTH IN THE COMPANY'S OPERATING
AGREEMENT, ANY VIOLATION OF THESE RESTRICTIONS MAY RESULT IN, AMONG
OTHER THINGS, A REDEMPTION OR REPURCHASE OF SUCH SECURITIES. IF AT
ANY TIME SUCH GAMING AUTHORITIES FIND THAT AN OWNER OF SUCH
SECURITIES IS UNSUITABLE TO CONTINUE TO HAVE AN INVOLVEMENT IN
GAMING IN THE STATE OF IOWA OR ANY OTHER JURISDICTION IN WHICH THE
COMPANY OPERATES ITS BUSINESS, SUCH OWNER MUST DISPOSE OF SUCH
SECURITIES AS PROVIDED BY THE LAWS OF THE STATE OF IOWA AND THE
REGULATIONS OF THE IOWA RACING AND GAMING COMMISSION THEREUNDER AND
ALL OTHER APPLICABLE LAWS.
3.6 Acceptance of Gaming Law Restrictions. The Members agree that any
license, determination of suitability or other approval issued to any Member or
other Person in connection with the operation of the business of the Company or
this Agreement shall be deemed to be a revocable privilege and no holder thereof
shall be deemed to have acquired any vested rights therein or thereunder.
3.7 Gaming Taxes, Assessments, Privilege Fees, Etc. The Company shall pay
all gaming taxes, assessments, privilege fees and similar charges required to be
paid to the State of Iowa and any county, city, town or municipality thereof
arising out of the gaming operations of the Company.
3.8 Limitation on Payments and Distributions. Neither the Company nor any
holder of Interests shall make any payments or distributions of any kind at any
time to (or enter into any agreement requiring a payment or distribution of any
kind to) William P. Alfredo, Robert C. Nordgren or any of their respective
affiliates, related parties, immediate family members, agents, representatives,
successors or assigns. The Company and each Member hereby acknowledges that no
obligation of any kind is owed by the Company to, and the Company has not
entered into nor has any Member caused the Company to enter into any agreement
with, any of the Persons referred to in the immediately preceding sentence.
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ARTICLE IV
MANAGEMENT OF THE COMPANY
4.1 Management Rights. The Members hereby delegate all their power and
authority to the Managing Member, except for such power and authority expressly
retained by the Members pursuant to the terms of this Agreement. It shall be the
duty and responsibility of the Managing Member solely and exclusively to manage
and control the business and affairs of the Company. Subject to the terms of
this Agreement, the Managing Member shall have all the rights and powers of a
manager as provided in the Delaware Act and as otherwise provided by law. The
Managing Member may delegate its authorities and responsibilities for management
of the business affairs of the Company to third parties, but such delegation
shall not relieve the Managing Member of any of its obligations hereunder and
shall not be in violation of applicable Gaming Laws. In furtherance of this
right of delegation, the Managing Member may appoint, subject to applicable
Gaming Laws, individuals with such titles as it may elect, including but not
limited to, the titles of Chief Executive Officer, Chief Operating Officer,
President, Vice President, Treasurer and Secretary, to act on behalf of the
Company with such power and authority as the Managing Member may delegate in
writing to such Person. The Managing Member is hereby granted (i) the right,
power and authority to do on behalf of the Company all things which, in its
judgment, are necessary, proper or desirable to carry out the aforementioned
duties and responsibilities, including but not limited to the right, power and
authority from time to time to incur Company expenses; to employ and dismiss
from employment any and all employees, agents, independent contractors,
attorneys and accountants; to establish employee benefits plans providing for
the payment of deferred compensation; to enter into leases for real or personal
property; to purchase equipment; and to manage all other aspects of running the
business of the Company; and (ii) such other rights, powers and authorities of a
manager as provided in the Delaware Act and as otherwise provided by law.
4.2 No Management by Other Members. Except as otherwise provided herein,
no Member other than the Managing Member shall take part in the management,
operation or control of the business and affairs of the Company. Except as
expressly delegated by the Managing Member, no Member shall be an agent of the
Company or have any right, power or authority to transact any business in the
name of the Company or to act for or on behalf of the Company.
4.3 Limited Liability. To the fullest extent permitted under applicable
law, no Member or Managing Member shall be deemed to violate this Agreement or
be liable, responsible or accountable in damages or otherwise to any other
Member or Managing Member or the Company for any action or failure to act,
unless such violation or liability is attributable to such Member's or Managing
Member's gross negligence, willful misconduct, bad faith or a continuing
material breach of this Agreement. Without limiting the generality of the
foregoing, each such Member or Managing Member shall, in the performance of its
duties, be fully protected in relying in good faith upon the records of the
Company and upon
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information, opinions, reports or statements presented to such Member or
Managing Member by any other Person as to matters such Member or Managing Member
reasonably believes are within such other Person's professional or expert
competence and that has been selected with reasonable care by or on behalf of
the Company.
4.4 Indemnification. To the fullest extent permitted under applicable law,
the Company shall severally indemnify and hold harmless any Person (an
"Indemnified Party") who was or is a party, or is threatened to be made a party,
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including any action by or in
the right of the Company) by reason of or arising from any acts or omissions (or
alleged acts or omissions) on behalf of the Company or in furtherance of the
interests of the Company arising out of the Indemnified Party's activities as a
Member, Managing Member, officer, employee, trustee or agent of the Company
against losses, damages or expenses (including attorneys' fees, judgments, fines
and amounts paid in settlement) actually and reasonably incurred by such
Indemnified Party in connection with such action, suit or proceeding and for
which such Indemnified Party has not otherwise been reimbursed, so long as such
Indemnified Party did not act in bad faith or in a manner constituting gross
negligence or willful misconduct. The termination of any action, suit or
proceeding by judgment, order, settlement or upon a plea of nolo contendere or
its equivalent shall not of itself (except insofar as such judgment, order,
settlement or plea shall itself specifically provide) create a presumption that
the Indemnified Party acted in bad faith or in a manner constituting gross
negligence or willful misconduct.
4.5 General Obligations. The Managing Member shall:
(a) Take or cause to be taken all actions that may be necessary or
appropriate for the development, maintenance, preservation and
operation of the properties of the Company as a gaming casino
and in accordance with the terms and provisions of this
Agreement and applicable laws and regulations;
(b) At all times conduct the affairs of the Company, or cause the
affairs of the Company to be conducted, in such a manner that
the Company shall be able to service all Debts and financial
obligations of the Company; and
(c) Use reasonable best efforts to assure that the Company shall
not (x) be deemed an "Investment Company" as such term is
defined in the Investment Company Act of 1940, as amended, or
(y) become a "publicly traded partnership" within the meaning
of section 7704 of the Code.
4.6 Scope of Duties. The Managing Member shall not be required to devote
its full time to the business or affairs of the Company but shall devote the
time reasonably necessary
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to perform the duties of the Managing Member under this Agreement and to manage
and operate prudently the Company's business and properties.
ARTICLE V
COMPANY OFFICERS
5.1 Officers, Employees and Agents. The Managing Member shall have the
right at any time and from time to time to appoint such officers, employees and
agents of the Company as the business of the Company may require, as determined
in the discretion of the Managing Member, provided, however, that any officer
required to be licensed by the IRGC shall apply for and obtain the requisite
license prior to performing his duties for the Company. Officers, employees and
agents of the Company, if any, shall have the duties and powers as may be
prescribed by the Managing Member.
5.2 Removal and Resignation. Any officer may be removed, either with or
without cause, by the Managing Member at any time (subject, in each case, to the
rights, if any, of an officer under any contract of employment). Any officer may
resign at any time by giving written notice to the Managing Member, without
prejudice, however, to the rights, if any, of the Company under any contract to
which such officer is a party. Any such resignation shall take effect on the
date of the Managing Member's receipt of such notice or at any later time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
5.3 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled by the Managing
Member.
5.4 Limitation of Liability and Indemnification of Company Officers.
(a) No officer of the Company shall be liable to the Company or to
the Members for acts or omissions of such officer of the Company in connection
with the business or affairs of the Company, including, without limitation, any
breach of fiduciary duty of such officer as an officer of the Company, any
mistake of judgment of such officer as an officer of the Company and any
business decision of such officer as an officer of the Company, except for acts
or omissions of such officer of the Company that a final adjudication
establishes involved breach of such officer's duty of loyalty to the Company or
its Members, intentional misconduct, fraud or a knowing violation of the law
that was material to the cause of action subject to such final adjudication.
(b) Notwithstanding any other term or provision of this Agreement,
the Company and/or its successor, trustee or receiver may indemnify, defend and
hold harmless every officer of the Company and every individual who at any time
was but ceased to be an officer of the Company, and the heirs and personal
representative of
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every officer of the Company and of every such individual, against all claims,
demands, actions, losses, liabilities, damages, costs and expenses, which after
the date of this Agreement arise out of the Company or its business or affairs,
including reasonable attorneys' fees incurred in defending all such matters.
(c) The satisfaction of the indemnification obligations of the
Company under this Section 5.4 shall be from and limited to the assets of the
Company, and no Member shall have any personal liability for the satisfaction of
any such indemnification obligation.
(d) No amendment or repeal of any term or provision of this Section
5.4 that otherwise would restrict or limit any right or protection of an officer
of the Company or other individuals under this Section 5.4 shall apply to or
have any effect on any such right or protection of any officer of the Company
existing at the time of such amendment or repeal or of any individual who at any
time before such amendment or repeal was but ceased to be an officer of the
Company, or of the heirs and personal representative of any such officer of the
Company or other individual.
ARTICLE VI
CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
6.1 Common Membership Interest. The Company is wholly-owned by the Common
Members. Each Common Member and its Common Member Percentage Interest is listed
on Schedule A hereto. If, following the date hereof, any Person is admitted as a
Common Member or the Common Member Percentage Interest of any Common Member
changes, the Managing Member shall amend Schedule A to reflect such new
information. On the Purchase Agreement Closing Date, PGP shall make the Capital
Contribution set forth next to its name on Schedule B hereto and shall receive a
Common Membership Interest in the Company.
6.2 Preferred Membership Interest. GDREC shall be admitted as a Preferred
Member upon the consummation of the transfer of assets contemplated by the
Purchase Agreement on the Purchase Agreement Closing Date. Upon its admission as
a Preferred Member, GDREC shall have the Preferred Member Percentage Interest
listed on Schedule A hereto. If, following the Purchase Agreement Closing Date,
any Person is admitted as a Preferred Member or the Preferred Member Percentage
Interest of any Preferred Member changes, the Managing Member shall amend
Schedule A to reflect such new information.
6.3 GDREC Capital Contribution. On the Purchase Agreement Closing Date,
GDREC shall contribute or cause to be contributed to the Company the assets
listed next
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to its name on Schedule B hereto and shall receive a Preferred Membership
Interest in the Company.
6.4 Additional Capital Contributions: In the event that the Managing
Member determines that funds are required by the Company for any Company
purpose, the Managing Member may (i) make a Capital Contribution with respect to
such funds, (ii) request, but not require, any other Common Member to advance,
as an additional Capital Contribution, any or all of the funds so required or
(iii) obtain such funds from any third party upon such terms and conditions as
the Managing Member deems appropriate.
6.5 Issuance of Interests. Interests in the Company (including any right
to or attribute of such Interest, or any right to or in the capital, profits or
distributions of the Company) may only be issued in a transaction or
transactions that are not required to be registered under the Securities Act
and, to the extent such offerings or sales are not required to be registered
under the Securities Act by reason of Regulation S of the Securities Act, that
would not be required to be registered under the Securities Act if the interests
so offered or sold were offered and sold within the United States. Any issuance
or purported issuance of Interests in the Company (including any right to or
attribute of such Interest, or any right to or in the capital, profits or
distributions of the Company) in contravention of this Section 6.5 shall be null
and void ab initio and of no effect.
ARTICLE VII
ALLOCATIONS
7.1 Allocation of Profits and Losses.
7.1.1 Except as otherwise provided in this Article VII, Profits and
Losses for any Fiscal Year shall be allocated to the Members as follows:
(a) First, to the Preferred Members in proportion to their
respective Preferred Member Percentage Interests, until the aggregate Profits
allocated with respect to the Preferred Members (taking into account allocations
of Profits to all previous holders of such Preferred Membership Interests)
pursuant to this Section 7.1.1 (a) for the period commencing with the effective
date of this Agreement and ending on the last day of such Fiscal Year equal the
cumulative Preferred Distribution paid to such Preferred Members (taking into
account Preferred Distributions paid to all previous holders of such Preferred
Membership Interests) for the period commencing with the effective date of this
Agreement and ending on the last day of such Fiscal Year and
(b) Thereafter, to the Common Members, in proportion to their
respective Common Member Percentage Interests as of the end of the Fiscal Year.
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7.1.2 Except as otherwise provided in this Article VII, Losses for
any Fiscal Year shall be allocated to the Common Members in proportion to their
respective Common Member Percentage Interests as of the end of such Fiscal Year.
7.1.3 The Losses allocated pursuant to Section 7.1.2 shall not
exceed the maximum amount of Losses that can be so allocated without causing any
Member to have an Adjusted Capital Account Deficit at the end of any fiscal
period. In the event that some but not all of the Members would have Adjusted
Capital Account Deficits as a consequence of an allocation of Losses pursuant to
this Section 7.1, the limitation set forth in this Section 7.1.3 shall be
applied on a Member by Member basis so as to allocate the maximum permissible
Losses to each Member under Treas. Reg. Section 1.704-1(b)(2)(ii)(d). All
Losses in excess of the limitation set forth in this Section 7.1.3 shall be
allocated proportionately among the Common Members. Notwithstanding the
provisions of Section 7.1.1, 100% of the Profits shall be allocated, prior to
any other allocations of Profits, to the Members up to the aggregate of, and in
proportion to, any Losses previously allocated to each Member in accordance with
this Section 7.1.3 in the reverse order in which such Losses were allocated.
7.2 Changes in Percentage Interests. If during any Fiscal Year there is a
change in the Common Member Percentage Interests, then items of income, gain,
loss and deduction for such Taxable Year shall be allocated according to the
varying interests of the Common Members pursuant to the
interim-closing-of-the-books method under Code Section 706 and the Regulations
promulgated thereunder.
7.3 Tax Allocations. Items of taxable income, gain, loss and deduction
shall be determined in accordance with Code Section 703, and except as otherwise
provided in this Article VII, the Members' distributive shares of such items for
purposes of Code Section 702 shall be determined according to their respective
shares of Profits or Losses to which such items relate. In accordance with
Section 704(c) of the Code and the regulations thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Members so as to
take account of any variation between the adjusted basis of such property to the
Company for Federal income tax purposes and its Gross Asset Value as of the date
of contribution. In the event the Gross Asset Value of any Company Asset is
adjusted pursuant to this Agreement, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for Federal income tax
purposes and its Gross Asset Value in the same manner as under Section 704(c) of
the Code and the Regulations thereunder. The Company shall make curative
allocations under the traditional method with curative allocations set forth in
Treas. Reg. ss. 1.704-3(c) to the extent necessary to fully offset the effect of
the ceiling rule on the allocations pursuant to this Section 7.3. Such curative
allocations shall be made at the time of the disposition of property, the
allocations with respect to which were affected by the ceiling rule. Such
curative allocations shall first be allocations of the gain or loss recognized
by the Company on such disposition. To the
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extent such gain or loss is insufficient to fully offset the effect of the
ceiling rule with respect to such property, allocations in the amount of such
shortfall shall be made of other items of Company income, gain or loss of
similar character recognized upon the disposition of all or substantially all of
the assets of the Company. Any elections or other decisions relating to such
allocations shall be made by the Managing Member in any manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant to
this Section 7.3 are solely for purposes of Federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, other items, or distributions
pursuant to any provision of this Agreement.
7.4 Qualified Income Offset, Minimum Gain Chargeback. Notwithstanding
anything to the contrary in this Agreement, Profits and Losses shall be
allocated as though this Agreement contained (and there is hereby incorporated
herein by reference) a qualified income offset provision which complies with
Treas. Reg. ss. 1.704-l(b)(2)(ii)(d) and minimum gain chargeback and partner
minimum gain chargeback provisions which comply with the requirements of
Treasury Regulation Section 1.704-2.
7.5 Tax Credits. All tax credits of the Company for a Fiscal Year shall be
allocated among the Members in the same ratio as Profits were allocated for such
Fiscal Year, or if there were no Profits for such Fiscal Year, such tax credits
shall be allocated to the Members in accordance with their respective Percentage
Interests.
7.6 Allocations in Event of Recharacterization. If transactions between
the Company and a Member are recharacterized, imputed or otherwise treated in a
manner the effect of which is to increase or decrease the taxable income,
deduction or loss of the Company, and correspondingly decrease or increase the
taxable income, deduction or loss of one or more Common Members, the allocations
set forth in this Article VII shall be adjusted to eliminate, to the greatest
extent possible, the consequences of such recharacterization or imputation.
7.7 Allocations upon Liquidation or Cessation of Business Activities.
Notwithstanding anything to the contrary in Section 7.1 if the Company is to be
liquidated pursuant to Article XI hereof or the Company has not conducted any
substantial business activities during the 90 days immediately preceding the
last day of a Fiscal Year (a "Termination Year"), and there is a reasonable
likelihood that the Company will not resume the conduct of any substantial
business activities during the Fiscal Year immediately succeeding such
Termination Year, and if as of the date of liquidation or the last day of such
Termination Year, as applicable, the Capital Account balance of a Preferred
Member is (after making all other adjustments as required under this Agreement
to the Capital Account balance of such Preferred Member, but before taking into
account any adjustments pursuant to this Section 7.7) less than the Minimum
Preferred Liquidation Preference of such Preferred Member, then the Company
shall make to such Preferred Member a special allocation of gross income (a
"Special Gross
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Income Allocation") earned by the Company in the Fiscal Year of liquidation or
such Termination Year, or any preceding Fiscal Year (beginning with the
immediately preceding Fiscal Year), in an amount equal to the amount necessary
(after taking into account any further adjustments resulting from such gross
income allocation) to make the Capital Account balance of such Preferred Member
equal to the Minimum Preferred Liquidation Preference as of such date of
liquidation or final day of such Termination Year, as applicable, provided,
however, that if at any time before the filing of its federal income tax return
for such preceding Fiscal Year, and any other applicable state and local income
tax returns for such year, a liquidation of the Company is anticipated to occur
during the Fiscal Year in which such income tax returns are due to be filed, the
Company shall not file such returns until the 15th day of the seventh month of
the Company's Fiscal Year in which such income tax returns are due to be filed,
provided, further, that if the liquidation of the Company has not occurred by
the 15th day of the 6th month, the Company shall make a reasonable estimate of
the special allocation of gross income required to be made pursuant to this
Section 7.7 for purposes of preparing and filing its federal, state, and local
income tax returns described in the immediately preceding proviso. In the event
the aggregate amount of Special Gross Income Allocations required to be made to
all Preferred Members is greater than the aggregate amount of gross income
earned by the Company in the Fiscal Year of liquidation or in such Termination
Year and, if applicable in the case of a liquidation of the Company, the
immediately preceding Fiscal Year ("Company Aggregate Gross Income"), the
Company Aggregate Gross Income shall be allocated to all Preferred Members
ratably in proportion to their respective Preferred Member Percentage Interests
(but, in the case of any particular Preferred Member, not in any amount that
would result in such holder's Capital Account balance exceeding such holder's
Minimum Preferred Liquidation Preference). In addition, if after allocation of
all Company Aggregate Gross Income pursuant to the immediately preceding
sentence, the Capital Account balance of any Preferred Member has not been
increased to the amount of such Preferred Member's Minimum Preferred Liquidation
Preference as of such date of liquidation or final day of such Termination Year,
as applicable, then the Company shall amend its federal income tax return and
any other applicable state and local tax returns for Fiscal Years preceding such
Fiscal Year (beginning with the federal income tax return for the most recent
Fiscal Year, and to the extent required, continuing to all previous Fiscal Years
for which the applicable statute of limitations for amendments has not expired)
to the extent necessary to make the Special Gross Income Allocations required to
be made by this Section 7.7. Notwithstanding anything to the contrary in this
Section 7.7, the Special Gross Income Allocations required to be made pursuant
to this Section 7.7 shall not exceed the amount by which a ratable portion of
the net proceeds of liquidation available for distribution to such Preferred
Member pursuant to Section 11.5(c) exceeds the Capital Account of such Preferred
Member before the adjustments otherwise required by this Section 7.7.
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ARTICLE VIII
DISTRIBUTIONS
8.1 Distribution Policy.
8.1.1 Except as otherwise provided in Sections 8.1. 8.2 and 8 4
distributions of Net Cash From Operations, securities or other property shall be
made by the Company to the Common Members in proportion to their respective
Common Member Percentage Interests, at such time and from time to time as
determined by the Managing Member in its sole and absolute discretion.
8.1.2 Except as otherwise provided in Section 8.2, with respect to
each semi-annual distribution period (hereinafter referred to as a "Semi-Annual
Distribution Period") ending on or prior to the Final Redemption Date, GDREC
shall be entitled to receive, to the extent of available Net Cash From
Operations, cumulative distributions in an amount equal to nine percent (9%) per
annum, without compounding, of the Aggregate Capital Contribution of GDREC
(which as of the Purchase Agreement Closing Date shall equal $7,000,000) (a
"Preferred Distribution") provided, that Preferred Membership Interests shall
not accrue Preferred Distributions to the extent redeemed in accordance with the
terms and provisions of this Agreement. The Semi-Annual Distribution Periods
shall commence on January 15 and July 15 of each year and shall end on the day
next preceding the first day of the next Semi-Annual Distribution Period;
provided, however, that the initial distribution period shall consist of the
period from and including the Purchase Agreement Closing Date to and including
January 15, 2000 (the "Initial Distribution Period"). All Preferred
Distributions described in this Section 8.1.2 shall be payable on each January
15 and July 15 of each year (each of such dates being a "Preferred Distribution
Date"), commencing January 15, 2000, with respect to the Semi-Annual
Distribution Period then ended. Such Preferred Distributions shall be payable to
the holders of record, as they appear on the books and records of the Company at
the close of business on each January 1 and July 1 prior to the applicable
Preferred Distribution Date. Each of such Preferred Distributions shall be fully
cumulative and shall accrue (whether or not declared), without interest, from
the first day of the Semi-Annual Distribution Period, except that, with respect
to the Initial Distribution Period, Preferred Distributions shall accrue from
the Purchase Agreement Closing Date, and shall be computed on the basis of a
360-day year consisting of twelve thirty day months. Notwithstanding any
provision to the contrary in this Agreement, no Preferred Distributions shall be
paid to GDREC or on the Preferred Membership Interests (whether or not declared)
if such payment would violate the terms and covenants of the Company's debt
financing arrangements related to the transaction contemplated by the Purchase
Agreement. In the event of a refinancing or redemption of Debt as set forth in
Section 8.5, any new Debt incurred to refinance or redeem the Notes shall be on
terms (including but not limited to the aggregate principal amount of such Debt)
no less favorable, with respect to payment of the Preferred Distributions and
the redemption of
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the Preferred Membership Interests held by GDREC, than those contained in the
Notes and the Indenture; provided that in connection with such refinancing or
redemption, accrued Preferred Distributions shall be paid.
8.1.3. Except as otherwise provided herein, the Preferred Members
shall not be entitled to participate in any distribution by the Company to the
Common Members and, except as otherwise provided herein, the Managing Member
shall determine the order and priority of distributions in its absolute
discretion.
In addition, subject to the limitations in Section 8.1.1 and the
terms of the Indenture, the Company may make, from time to time, distributions
to holders of its Common Membership Interests; provided, however, that, other
than (i) distributions permitted by the second sentence of the covenant entitled
"Limitation on Restricted Payments" set forth in the Indenture, and (ii)
distributions permitted by Sections 3.5 and 3.6 of the PGP Operating Agreement
as limited by Section 8.4(b) hereof, the Company will not be permitted to make
distributions to Common Members unless the Company, at the time of its
determination to make any such distributions and the payment thereof, has
satisfied its payment obligations relating to the Preferred Distributions and
the redemption of the Preferred Membership Interests.
8.2 Distributions on Dissolution. If the Company is dissolved,
distributions shall be made in accordance with Section 11.5.
8.3 Treatment of Taxes Withheld: Distributions With Respect to Certain
State and Local Taxes. All allocations and distributions made under this
Agreement by the Company to any Common Member or Preferred Member shall be
subject to withholding or deduction for any taxes as may be required by
applicable law, and the Company shall make such withholding or deduction
accordingly. All such withholdings or deductions shall be treated as amounts
distributed to such Member pursuant to this Article VIII and shall be debited to
its Capital Account accordingly. Notwithstanding anything to the contrary
herein, in the event that any state, local or other income tax imposed on the
Company as an entity for any Fiscal Year is reduced by reason of the holding of
a Common Membership Interest by any Member, an amount equal to the reduction
attributable to such Member shall be distributed to such Member within 60 days
after the end of the Fiscal Year and the expense attributable to such tax shall
be allocated among the other Members.
8.4 Mandatory Distributions.
(a) To the extent of available Net Cash From Operations and subject
to the terms of the Indenture, the Common Members shall be entitled to receive
cash distributions from Net Cash From Operations for each Fiscal Year in amounts
sufficient to enable the Common Members to discharge any Federal, state and
local tax liability for such taxable year (excluding penalties) arising as a
result of their Interest in the
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Company, determined by assuming the applicability to each Member of the highest
combined effective marginal federal, state and local income tax rates applicable
to any individual actually obligated to report on any tax returns income derived
from the Company. To the extent distributions otherwise payable to a Member
pursuant to this Article VIII (excluding for these purposes any amounts
distributed to Common Members under this Section 8.4) are insufficient to cover
such tax liabilities and subject to the terms of the Indenture, the Company
shall make cash distributions (the "Tax Distributions") in amounts, that when
added to the cash distributions otherwise payable, shall equal such tax
liability. The amount of such tax liability shall be calculated (x) taking into
account the deductibility (to the extent allowed) of state and local income
taxes for Federal income tax purposes, and (y) taking into account the amount of
net cumulative tax loss previously allocated to such Member in prior Fiscal
Years and not used in prior Fiscal Years to reduce taxable income for the
purpose of making distributions under this Section 8.4 (based on the assumption
that taxable income or tax loss from the Company is each Member's only taxable
income or tax loss). Tax Distributions shall be debited against such Member's
Capital Account. To the extent this Section 8.4 results in distributions other
than in the ratios required by Section 8.1.1 the first distributions that are
not made pursuant to Section 8.1.1 shall be made so as to cause the aggregate
distributions pursuant to Section 8.1.1, including those made pursuant to this
Section 8.4, to be, as nearly as possible, in the ratio required by Section
8.1.1.
In addition, in the event that aggregate income and, without duplication,
Profits of the Company for any Fiscal Year are required, under the provisions of
Section 704(c) of the Code or by Section 7.7 of this Agreement, to be allocated
to the Preferred Members in amounts such that the aggregate income and Profits
allocated with respect to the Preferred Members (taking into account allocations
of income and Profits to all previous holders of Preferred Membership Interests)
for the period commencing with the effective date of this Agreement and ending
on the last day of such Fiscal Year exceed the cumulative Preferred Distribution
paid to such Preferred Members (taking into account Preferred Distributions paid
to all previous holders of Preferred Membership Interests) for the period
commencing with the effective date of this Agreement and ending on the last day
of such Fiscal Year, then to the extent of available Net Cash From Operations
and subject to the terms of the Indenture, the Preferred Members shall be
entitled to receive cash distributions from Net Cash From Operations in amounts
sufficient to enable the Preferred Members to discharge any Federal, state, and
local tax liability for such Fiscal Year (excluding penalties) arising as a
result of the allocation of such income and Profits to Preferred Members under
the provisions of Section 704(c) of the Code or by Section 7.7 of this
Agreement, determined by assuming the applicability to each Preferred Member of
the highest combined effective marginal federal, state and local income tax
rates applicable to an individual that is resident in the State of Iowa (the
"Effective Tax Rate") and assuming that the amount of income of the Company
allocated to each Preferred Member for such Fiscal Year does not exceed the
lesser of (i) the actual amount of income of the Company allocated to such
Preferred Member and (ii) a ratable portion (determined on the basis of the
Preferred Membership Interest of each Preferred
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Member) of the entire Company Profits for such Fiscal Year; provided, however,
that the amount distributed to a Preferred Member pursuant to this Section
8.4(a) for any Fiscal Year shall not exceed the excess of (A) the product of (i)
the aggregate income of the Company allocated with respect to such Preferred
Member and all previous holders of the same Preferred Membership Interest for
the period commencing with the effective date of this Agreement and ending on
the last day of such Fiscal Year and (ii) the Effective Tax Rate over (B) the
cumulative Preferred Distribution paid to such Preferred Member and all previous
holders of the same Preferred Membership Interest for the period commencing with
the effective date of this Agreement and ending on the last day of such Fiscal
Year. The amount of such tax liability shall be calculated taking into account
the deductibility (to the extent allowed) of state and local income taxes for
Federal income tax purposes. Any such cash distributions made to Preferred
Members pursuant to this Section 8.4(a) shall be debited against such Member's
Capital Account, and credited against and shall reduce, dollar for dollar, any
cumulative unpaid Preferred Distributions or Preferred Distributions required to
be made in any succeeding Semi-Annual Distribution Period.
(b) To the extent of available Net Cash From Operations and subject
to the terms of the Indenture, PGP shall be entitled to receive cash
distributions from Net Cash From Operations for each Fiscal Year in amounts
sufficient to enable PGP to satisfy its obligations under the PGP Operating
Agreement, including, without limitation, Sections 3.5 and 3.6 thereof;
provided, however, that in no event shall such annual cash distributions in
respect of Sections 3.5 and 3.6 of the PGP Operating Agreement exceed five
percent (5%) of the Company's earnings before interest, income taxes,
depreciation and amortization ("EBITDA") determined on a basis consistent with
the Company's presentation of its financial statements.
8.5 Refinancings or Redemptions of Indebtedness. If the Company repays,
redeems or refinances ninety percent (90%) or more of the Notes on or prior to
July 1, 2003, the Company shall pay certain members of senior management of the
Company and/or PGP a refinancing fee in consideration for their services in
connection with such refinancing or redemption in an aggregate amount not to
exceed $1,500,000, such refinancing fee to be allocated at Stevens' discretion.
In the event of a refinancing or redemption of the Notes as set forth in this
Section 8.5, any new Debt incurred to refinance or redeem the Notes shall be on
terms (including but not limited to the aggregate principal amount of such Debt)
no less favorable with respect to payment of the Preferred Distributions and the
redemption of the Preferred Membership Interests held by GDREC, than those
contained in the Notes and the Indenture; provided that in connection with such
refinancing or redemption, accrued Preferred Distributions shall be paid.
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ARTICLE IX
REDEMPTION OF PREFERRED MEMBERSHIP INTERESTS
9.1 Mandatory Partial Redemption. Subject to the provisions of the Escrow
Agreement and the Purchase Agreement, including, without limitation the right of
the Company to reduce or offset the Preferred Membership Interests to satisfy
indemnification obligations of GDREC and HCI under the Purchase Agreement and
the Real Property Purchase Agreement, at any time on or prior to the eighteenth
month anniversary of the Purchase Agreement Closing Date (the "Redemption
Date"), the Company shall purchase and redeem a portion of the Preferred
Membership Interests in an original face amount of $3,000,000, less any
applicable reductions or offsets (the "Minimum Partial Redemption") at a
purchase price (the "Mandatory Redemption Purchase Price") equal to the face
amount of the Preferred Membership Interests to be redeemed, less any applicable
reductions or offsets, plus all accrued and unpaid Preferred Distributions in
respect of such redeemed Preferred Membership Interests through, but not
including, the Redemption Date. All Preferred Membership Interests redeemed
pursuant to this Section 9.1 shall be permanently retired.
9.2 Mandatory Final Redemption. The original face amount of Preferred
Membership Interests outstanding (the "Remaining Preferred Interests")
immediately following the purchase and redemption (or, if applicable, reduction
or setoff) of the Minimum Partial Redemption in accordance with the provisions
of Section 9.1 hereof shall be purchased and redeemed by the Company on the date
occurring seven (7) years and ninety (90) days after the Purchase Agreement
Closing Date (the "Final Redemption Date") at a purchase price equal to the
original face amount of outstanding Remaining Preferred Interests, plus all
accrued and unpaid Preferred Distributions in respect of such Remaining
Preferred Interests through, but not including, the Final Redemption Date. All
Preferred Membership Interests redeemed pursuant to this Section 9.2 shall be
permanently retired.
9.3 Optional Redemption. The Preferred Membership Interests shall be
redeemable, at the option of the Managing Member, in whole or in part, at any
time or from time to time after the issuance thereof at a purchase price equal
to the original face amount of Preferred Membership Interests to be redeemed,
plus all accrued and unpaid Preferred Distributions in respect of such redeemed
Preferred Membership Interests through, but not including, the date of
redemption thereof, less any applicable reductions or offsets (the "Optional
Redemption Purchase Price"). All Preferred Membership Interests redeemed
pursuant to this Section 9.3 shall be permanently retired.
9.4 Required Regulatory Redemptions or Repurchases. The Preferred
Membership Interests and the Common Membership Interests will be subject to
redemption or repurchase as set forth below if:
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(1) the holder of such Interest is required by any Gaming Authority
to divest itself of such Interest,
(2) the holder of such Interest is licensed to hold Interests and
such Gaming License is subsequently revoked or such holder fails to have
any Gaming License required for it to be a holder of Interests and such
failure continues for 30 consecutive days,
(3) the holder of such Interest (i) takes any action or omits or
fails to take any action, in each case in contravention of any gaming laws
or governmental authorities or (ii) is found not to be suitable (or found
to be unsuitable) or to otherwise qualify under any applicable gaming laws
and, with respect to each of clauses (i) or clause (ii) above, as
applicable, the Company determines, in its reasonable good faith
judgement, that such actions, omissions, failures, unsuitability or
inability to be qualified could reasonably be expected to prevent or
materially impairs the acquisition or retention by the Company of any
Gaming License, or
(4) the holder of such Interests fails to comply with its
obligations under Section 2.6 of this Agreement.
Upon the occurrence of any of the events described in clauses (1) through
(4) above with respect to a holder of an Interest, including a Preferred
Membership Interest (hereinafter, an "Unsuitable Member"), the Company shall
have the right to purchase (which right shall be assignable by the Company),
upon 5 days' notice to such applicable Unsuitable Member and for 10 days
thereafter, such Interest for an amount equal to the lesser of (a) such holder's
capital contribution in respect of such Interest or (b) the current fair market
value of such Interest as determined by the Managing Member in its reasonable
good faith judgement.
The purchase price to be paid by the Company to an Unsuitable Member may
be paid, at the option of the Company, in cash or a promissory note with the
principal and interest payable annually and amortized over not more than seven
years and bearing interest at a rate per annum equal to the sum of the prime
lending rate published by the Wall Street Journal at the date of redemption plus
2%. No Unsuitable Member shall be entitled to any compensation from PGP, any
direct or indirect subsidiary of PGP, or any member of PGP or the Company, by
reason of the redemption or repurchase of such Preferred Membership Interest.
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ARTICLE X
TAX MATTERS AND ELECTIONS
10.1 Designation of Tax Matters Partner. The Members hereby unanimously
designate PGP as the "Tax Matters Partner" of the Company as defined in Section
6231 of the Code. Any future alternative Tax Matters Partner shall be elected by
the Members in accordance with the terms of this Agreement.
10.2 Powers and Duties of Tax Matters Partner. The Tax Matters Partner
shall have such powers and perform such duties as provided in Sections 6221
through 6233 of the Code with respect to a Tax Matters Partner. However, the Tax
Matters Partner will not make an election pursuant to (i) Regulation
ss.301.7701-3 to treat the Company as an association taxable as a corporation or
(ii) Code Section 761 for the Company not to be treated as a partnership, in
either case, without the consent of all Members and the approval of a majority
of the members of the Independent Committee. During any Company income tax audit
or other income tax controversy with any governmental agency, the Tax Matters
Partner shall keep the Members informed of all material facts and developments
on a timely basis, and shall consult with the Members at their request. The Tax
Matters Partner shall not be authorized to enter into a settlement which binds
the Members or the Company without the advance written consent of the Members,
except for settlements for de minimis amounts (e.g., not exceeding $10,000 in
the aggregate). The Tax Matters Partner shall take all actions necessary to
cause each qualifying Member to be a "notice partner" within the meaning of
Section 6231(a)(8) of the Code.
10.3 Expenses Regarding Tax Matters. All reasonable expenses incurred by
the Tax Matters Partner with respect to any tax matter which does or may affect
the Company, or any Member by reason thereof, including but not limited to
expenses incurred by the Tax Matters Partner acting in its capacity as Tax
Matters Partner in connection with Company-level administrative or judicial tax
proceedings, shall be paid for out of Company assets. If the Members are
permitted by the Company or permitted under the Code to participate in
Company-level administrative or judicial tax proceedings, the Company shall be
responsible for all expenses incurred by them in connection with such
participation. The cost of any adjustments to the members and the cost of any
resulting audits or adjustments of the Members' tax returns will be borne solely
by the Members and the cost of any adjustments to the Company and the cost of
any resulting audits or adjustments of the Company's tax returns will be borne
solely by the Company.
10.4 Basis Election. In the event that a distribution of any of the
Company's property is made in the manner provided in Section 734 of the Code, or
where a transfer of an Interest in the Company permitted by this Agreement is
made in the manner provided in Section 743 of the Code, then, upon the written
request of any Member, the Company shall file an election under Section 754 of
the Code and the Regulations
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thereunder and a corresponding election under the applicable section of state
and local law. Each Member shall provide the Company with all information
necessary to give effect to any election under Section 754 of the Code.
10.5 Established Securities Markets. Each Member hereby represents and
warrants to the Company and to all of the other Members that such Member has not
acquired nor will such Member Transfer any Interest in the Company (including
any right to or attribute of such Interest, or right to or in the capital,
profits or distributions of the Company), or cause any Interest in the Company
(including any right to or attribute of such Interest, or right to or in the
capital, profits or distributions of the Company), to be marketed on or through
an "established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of section 7704(b) of the Code or the
Regulations thereunder, including, without limitation, an over-the-counter
market or an interdealer quotation system that regularly disseminates firm buy
or sell quotations.
10.6 Election to be Taxed as a Corporation. No officer or manager of the
Company, and not less than all Members (subject to the approval of a majority of
the members of the Independent Committee) shall have the power to make an
election to treat the Company as an association taxable as a corporation for
federal, state and local income tax purposes (including an election under
Regulation ss.301.7701-3(c)).
ARTICLE XI
DISSOLUTION AND TERMINATION
11.1 Events Causing Dissolution. The Company shall be dissolved and its
business wound up upon the earlier to occur of any of the following events:
(a) The expiration of the term of the Company;
(b) The sale or disposition of substantially all of the property and
assets owned by the Company, if the Managing Member approves such
dissolution;
(c) The entry of a decree of judicial dissolution under Section
18-802 of the Delaware Act.
The death, disability, Bankruptcy or dissolution of a Member shall not cause the
dissolution of the Company. No Member has any right to resign, retire or
withdraw from the Company and any attempt to do so shall be NULL and VOID
11.2 Liquidating Trustee. Upon the occurrence of an event of dissolution,
as described in Section 11.1, the Managing Member is approved to carry out the
winding up
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of the Company and shall promptly notify the Members of such dissolution and
shall constitute the "liquidating trustee" as defined in Section 18-101 of the
Delaware Act.
11.3 Liquidation.
(a) Upon the occurrence of an event of dissolution as described in
Section 11.1 a liquidator unanimously selected by the Managing Member shall sell
the Company's assets, and thereafter cease to engage in any further business,
except to the extent necessary to perform existing obligations, and shall wind
up the Company's affairs and liquidate its assets
(b) During the course of liquidation, the Common Members shall
continue to share Profits and Losses as provided in Article VII. but there shall
be no cash distributions to the Members until the Distribution Date (as defined
in Section 11.4).
11.4 Liabilities. Liquidation shall continue until the Company's affairs
are in such condition that there can be a final accounting, showing that all
fixed or liquidated obligations and liabilities of the Company are satisfied or
can be adequately provided for under this Agreement. The assumption or guarantee
in good faith by one or more financially responsible Persons shall be deemed to
be an adequate means of providing for such obligations and liabilities. When the
Managing Member has determined that there can be a final accounting, the
Managing Member shall establish a date (not to be later than the end of the
taxable year of the liquidation, i.e., the time at which the Company ceases to
be a going concern as provided in Section 1.704-1 (b)(2)(ii)(g) of the
Regulations, or, if later, ninety (90) days after the date of such liquidation)
for the distribution of the proceeds of liquidation of the Company (the
"Distribution Date"). The net proceeds of liquidation of the Company shall be
distributed to the Members as provided in Section 11.5 not later than the
Distribution Date.
11.5 Distribution of Proceeds upon Liquidation. Subject to Section 18-803
of the Delaware Act, upon final liquidation of the Company, but not later than
the Distribution Date, the net proceeds of liquidation shall be distributed in
the following order of priority:
(a) to creditors with respect to any unpaid expenses, or any
outstanding loan or advance, including under the Notes;
(b) to the Members in respect of costs and expenses incurred by such
Members in connection with the winding up the affairs of the Company,
discharging the liabilities of the Company, distributing the assets of the
Company or dissolving the Company in accordance with this Article XI
(c) to the Preferred Members, ratably in accordance with, and to the
extent of; their positive Capital Account balances, as determined after taking
into account
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all Capital Account adjustments for the Fiscal Year of the Company during which
the liquidation of the Company occurs (other than such Capital Account
adjustments made by reason of this clause (c)); and
(d) to the Common Members in accordance with their positive Capital
Account balances, as determined after taking into account all Capital Account
adjustments for the Fiscal Year of the Company during which the liquidation of
the Company occurs (other than such Capital Account adjustments made by reason
of this clause (d)).
11.6 Deficit Capital Accounts. If any Member's Capital Account has a
deficit balance (after giving effect to all contributions, distributions, and
allocations for all Fiscal Years, including the Fiscal Year during which such
liquidation occurs), such Member shall have no obligation to contribute to the
capital of the Company with respect to such deficit, and such deficit shall not
be considered a debt owed to the Company or to any other Person for any purposes
whatsoever.
11.7 Certificate of Cancellation. Upon dissolution and liquidation of the
Company, the Managing Member shall cause a Certificate of Cancellation to be
executed and filed with the office of the Secretary of State of Delaware in
accordance with Section 18-203 of the Delaware Act.
ARTICLE XII
TRANSFERS OF INTERESTS
12.1 Restrictions on Transfer. No Member shall have the right to Transfer
all or any part of its Interest in the Company without the approval of the
Managing Member, and any purported Transfer of all or any part of an interest in
the Company in contravention hereof shall be null and void and of no force and
effect.
12.2 Admission of Transferee as a Member. No Transferee of all or any
portion of any Member's Interest in the Company shall be admitted as a
substitute or additional member of the Company unless (i) the Transfer to such
Transferee is in full compliance with the provisions of this Agreement, (ii)
such Transfer has been approved in writing by the Managing Member (which
approval may be withheld in its sole and absolute discretion) and (iii) such
Transferee shall have executed and delivered to the Company such instruments as
the Managing Member reasonably deems necessary or desirable to effectuate the
admission of such Transferee as a Member of the Company and to confirm the
agreement of such Transferee to be bound by all the terms, conditions and
provisions of this Agreement.
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12.3 Entity Member Transfers. If any Member is a closely-held corporation,
limited liability company or unincorporated association or partnership, then, in
any single transaction or series of related transactions, the original issuance
or Transfer of any stock or interest in such corporation, limited liability
company, association or partnership constituting in the aggregate in excess of
fifty percent (50%) of all such stock or interests then outstanding shall be
deemed a Transfer of such Member's Interest within the meaning of this
Agreement, except as provided below in this Section 12.3. If any Member is a
publicly-traded corporation, limited liability company, association or
partnership, meaning for the purposes of this Agreement that such corporation,
limited liability company, association or partnership has effected a bona fide
initial public offering of any class of its equity securities that were
registered for such purpose with the Securities and Exchange Commission under
the Securities Act on Form S-1 (or any successor of such form), then, in any
single transaction or series of related transactions, the original issuance or
Transfer of any stock or interest in such corporation, limited liability
company, association or partnership constituting in the aggregate in excess of
eighty percent (80%) of all such stock or interests then outstanding shall be
deemed a Transfer of such Member's Interest within the meaning of this
Agreement, except as provided below in this Section 12.3. Notwithstanding the
foregoing, in no event shall any public offering of securities of any class of
any Member that is registered with the Securities and Exchange Commission under
the Securities Act constitute or be deemed a Transfer of an Interest within the
meaning of this Agreement.
Notwithstanding any other term or provision of this Section 12.3, in no
event shall the Transfer by any Person to any of the Persons listed in
subparagraphs (a) and (b) below of this Section 12.3 of any stock or interest in
any corporation, limited liability company, association or partnership that is a
Member, whether or not closely-held or publicly-traded, be deemed a Transfer of
such Member's Interest within the meaning of this Agreement:
(a) To any one or more entities that directly, or indirectly
through one or more intermediaries, control, or are controlled
by, or are under common control with, the current or any
future record or beneficial holder of such stock or interest;
or
(b) To a revocable living trust for the benefit of the current or
any future record or beneficial holder of such stock or
interest.
12.4 Restrictive Legend. In addition to any other restrictive legend that
may be imposed on any certificate evidencing ownership of any Interest, such
certificate shall bear the following legend:
THE TRANSFER OF ANY SECURITIES EVIDENCED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS CONTAINED IN THE COMPANY'S OPERATING
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AGREEMENT, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY UPON
REQUEST.
12.5 Limitation on Foreign Ownership. Notwithstanding any provision to the
contrary in this Agreement, no Person, including existing Members, shall be
permitted to purchase Interests and no Member shall be permitted at any time and
under any circumstances to Transfer its Interest, or any portion thereof if;
following such purchase or Transfer, more than 25% of the Interests in the
Company are owned, directly or indirectly, by Persons who are not citizens of
the United States. Any such purchase or Transfer or purported purchase or
Transfer shall be null and void and the Company shall not recognize the
transferee, purchaser, purported transferee or purported beneficial owner of
such Interest as a direct or indirect holder or owner of an Interest in the
Company for any purpose. To the extent required by maritime laws, the Managing
Member and the officers of the Company shall be citizens of the United States.
12.6 Limitation on Activities. Notwithstanding any provision to the
contrary in this Agreement, without the written consent of the Managing Member,
no Member shall at any time engage in (or acquire or hold, directly or
indirectly, a controlling interest in any Person engaged in) any gaming business
or related activity that competes with the business of the Company, whether as
presently or hereafter conducted.
12.7 Restrictions to Avoid Publicly Traded Partnership Status. A Member
shall not Transfer (which term shall include, for purposes of this Section 12.7,
a redemption of Interests by the Company or the entering into of a financial
instrument or contract the value of which is determined in whole or in part by
reference to the Company) all or any part of its Interest in the Company
(including any right to or attribute of such Interest, or any right to or in the
capital, profits or distributions of the Company), and any such Transfer or
purported Transfer shall be null and void ab initio and of no effect, and the
Company shall not recognize the transferee, purported transferee or purported
beneficial owner of such Interest as a direct or indirect holder or owner of an
Interest in the Company for any purpose, unless prior to the effectiveness of
such Transfer, the Member delivers to the Managing Member an opinion of counsel
reasonably satisfactory to the Managing Member and a majority of the members of
the Independent Committee to the effect that such Transfer will not result in
the Company being treated as a "publicly traded partnership" under Section 7704
of the Code, the regulations thereunder and any administrative rulings or
policies with respect thereto. For purposes of the preceding sentence, a
Transfer will not include transfers which, in the determination of the Managing
Member, and subject to a concurring determination by a majority of the members
of the Independent Committee, constitute (i) transfers in which the basis of the
interest in the hands of the transferee is determined, in whole or in part, by
reference to its basis in the hands of the transferor or is determined under
Section 732 of the Code, (ii) transfers at death, (iii) transfers to a spouse,
brother, sister, ancestor or lineal descendant of the transferring Member, (iv)
transfers involving the issuance by the Company of interests in the capital or
profits of the Company in exchange for consideration, (v)
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transfers involving distributions from a retirement plan or individual
retirement account, (vi) block transfers where a Member and related persons
(within the meaning of Sections 267(b) and 707(b)(1) of the Code), in one or
more transactions during any 30 calendar day period, transfer in the aggregate
more than 2% of the total interests in Company capital or profits, (vii)
transfers pursuant to a right under a redemption or repurchase agreement
described in Regulation ss. 1.7704-1(e)(vii) that is exercisable only upon the
death, disability or mental incompetence of the Member or upon the retirement or
termination of services of an individual who actively participated in the
management of the Company or performed services on a full-time basis for the
Company, (viii) transfers through a "qualified matching service," as defined by
Regulation ss.1.7704-1(g) or (ix) transfers by one or more Members of interests
representing more than 50% of the total interests in Company capital and profits
in one transaction or a series of related transactions. Transfers which would be
null and void under the provisions of this Section 12.8 will be permitted in the
order requested as soon as the opinion referred to in this Section 12.8 is
delivered to the Managing Member. References in this Section 12.8 to a specific
percentage of Company capital or profits shall be deemed to be a reference to
such percentage of Company capital or profits determined in accordance with
Regulation ss. 1.7704-1(k).
Neither the Members nor the Company shall participate in the establishment
of an "established securities market" or a "secondary market" (or the
substantial equivalent thereof) within the meaning of Section 7704 of the Code
for the Transfer of any Interest in the Company (including any right to or
attribute of such Interest, or any right to or in the capital, profits or
distributions of the Company) or recognize any Transfers made thereon, and any
Transfer or purported Transfer thereon shall be null and void ab initio and of
no effect.
Notwithstanding any other provision of this Agreement, upon the receipt by
the Managing Member of an opinion of counsel to the Company reasonably
satisfactory to the Managing Member and a majority of the members of the
Independent Committee to the effect that the removal of one or more of the
foregoing restrictions contained in this Section 12.8 will not result in the
Company being treated as a "publicly traded partnership" under Section 7704 of
the Code, the regulations thereunder and any administrative rulings or policies
with respect thereto, then the restriction or restrictions so specified in such
opinion shall no longer constitute provisions of this Agreement, and shall no
longer prevent the Transfer of any Interest.
12.8 Disqualified Interest. No Person is permitted at any time to hold,
directly or indirectly, a Beneficial Interest that is equal to or in excess of
five percent (5%) of the issued and outstanding Interests of the Company without
having been found suitable or qualified to hold a Gaming License by applicable
Gaming Authorities, including the IRGC. To the extent any holder of Interests
that has not been licensed and has not otherwise satisfied all applicable
suitability and other requirements imposed by applicable Gaming Laws acquires,
directly or indirectly, in one or more transactions a
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Beneficial Interest equal to or in excess of five percent (5%) of the issued and
outstanding Interests of the Company (such excess amount, a "Disqualified
Interest"), such transactions, solely to the extent relating to the acquisition
by such holder of such Disqualified Interest, shall be void ab initio and of no
effect.
ARTICLE XIII
LIABILITY
13.1 Liability of the Members. Except as otherwise expressly provided in
the Delaware Act, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Member shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a Member. Except as otherwise expressly provided in the Delaware Act, the
liability of each Member shall be limited to the amount of capital
contributions, if any, required to be made by such Member in accordance with the
provisions of this Agreement, but only when and to the extent the same shall
become due pursuant to the provisions of this Agreement.
13.2 Waiver of Partition and Nature of Interest in the Company. Except as
otherwise expressly provided in this Agreement, each of the Members hereby
irrevocably waives any right or power that such Member might have to cause the
Company or any of its assets to be partitioned, to cause the appointment of a
receiver for all or any portion of the assets of the Company, to compel any sale
of all or any portion of the assets of the Company pursuant to any applicable
law, or to file a complaint or to institute any proceeding at law or in equity
to cause the termination, dissolution and liquidation of the Company. Each of
the Members has been induced to enter into this Agreement in reliance upon the
waivers set forth in this Section 13.2, and without such waivers, no Member
would have entered into this Agreement. No Member shall have any interest in any
specific assets of the Company. The interest of all Members in this Company are
personal property.
ARTICLE XIV
BOOKS, RECORDS, ACCOUNTING AND REPORTS
14.1 Books and Records. The Company shall maintain, or cause to be
maintained, in a manner customary and consistent with generally accepted
accounting principles, practices and procedures, a comprehensive system of
office records, books and accounts (which records, books and accounts shall be
and remain the property of the Company) in which shall be entered fully and
accurately each and every financial transaction with respect to the ownership
and operation of the property of the Company. Such books and records of account
shall be prepared and maintained at the principal
37
<PAGE>
place of business of the Company or such other place or places as may from time
to time be determined by the Managing Member. Each Member or its duly authorized
representative shall have the right to inspect, examine and copy such books and
records of account at the Company's office during reasonable business hours. A
reasonable charge for copying books and records may be charged by the Company.
14.2 Accounting and Fiscal Year. The books of the Company shall be kept on
the accrual basis and the Company shall report its operations for tax purposes
on the accrual method. The fiscal year of the Company shall end on December 31
of each year, unless a different fiscal year shall be required by the Code.
14.3 The Company Accountant. The Company shall retain as the regular
accountant and auditor for the Company (the "Company Accountant") a nationally
recognized accounting firm designated by the Managing Member and approved by a
majority of the Independent Committee. The fees and expenses of the Company
Accountant shall be a Company expense.
14.4 Reserves. The Members may, subject to such conditions as they shall
determine, establish reserves for the purpose and requirements as they may deem
appropriate.
ARTICLE XV
EXPENSES
15.1 Reimbursement. Each Member and its Affiliates shall bear their own
costs and expenses, other than costs and expenses actually and reasonably
incurred by the Common Members and their Affiliates in connection with the
formation and organization of the Company and the ongoing business and affairs
of the Company, which costs and expenses shall be borne by the Common Members in
proportion to their respective Common Member Percentage Interests.
15.2 Out-of-pocket Expenses. The Members have agreed to pay their own
respective out-of-pocket and other incidental expenses such as travel, lodging,
entertainment, telephone, overnight courier and postage. No Member will make a
claim against the other Members as a result of these expenses.
38
<PAGE>
ARTICLE XVI
SECURITIES LAWS MATTERS
16.1 Securities Law Representations and Warranties. Each Member hereby
represents and warrants to the Company and to all of the other Members all of
the following:
(a) Such member is acquiring such Member's Interest for investment
and not with a view to the sale or distribution of any part
thereof.
(b) Such member has no present intention to sell or otherwise
distribute any part of such Member's Interest.
(c) The Company has advised such Member (i) that such Member's
Interest has not been registered under the Securities Act, as
the offering and sale of such Member's Interest is to be
effected in accordance with an exemption from the registration
requirements of the Securities Act and similar exemptions
under applicable state securities law, and (ii) that, in this
connection, the Company is relying in part on the
representations and warranties of such Member set forth
herein.
(d) Such Member shall make no disposition of all or any portion of
such Member's Interest unless and until (i) such Member has
notified the Company of the proposed disposition, (ii) such
Member has furnished the Company with an opinion of legal
counsel to the effect that such disposition will not require
registration of such Member's Interest under the Securities
Act, (iii) such opinion of legal counsel has been concurred
with by the Company's legal counsel, and (iv) the Company has
advised such Member of such concurrence.
(e) Such Member has received all such information as such Member
deems necessary and appropriate to enable such Member to
evaluate the financial risk inherent in acquiring such
Member's Interest, and such Member acknowledges receipt of
satisfactory and complete information covering the business
and financial condition of the Company in response to all
inquiries in respect thereof.
(f) Such Member has had the opportunity to consult with such
Member's investment counselors, attorneys, accountants and
other
39
<PAGE>
advisors regarding the terms and conditions of this Agreement
and its tax and legal consequences.
(g) Such Member has either or both of the following:
(i) a pre-existing business or personal relationship with
the Company and/or one (1) or more of its Managers; or
(ii) sufficient sophistication to make an informed investment
decision based on such Member's personal knowledge of
the business and affairs of the Company, based on such
additional information as such Member may have requested
and received from the Company and based on the
independent inquiries and investigation undertaken by
such Member.
(h) Such Member understands that such Member's investment in such
Member's Interest is speculative and risky.
(i) Such Member understands that such Member has no assurance that
the Company will be a financial success or that such Member's
investment in such Member's Interest will be recovered.
(j) Such Member has the financial ability to bear the economic
risk of such Member's investment in such Member's Interest,
has adequate means for providing for such Member's current
needs and personal contingencies and has no need for liquidity
with respect to such Member's Interest.
(k) Neither the Company, nor any of the other Members nor any
employee, agent or affiliate of the Company or of any of the
other Members has made any representation or warranty to such
Member.
(I) The Company used no general solicitation or general
advertising in connection with the Company's offer to sell (if
any) or the Company's sale of such Member's Interest to such
Member.
(m) Such Member recognizes that such Member's Interest is
unregistered under the Securities Act and must be held
indefinitely unless it is subsequently registered under the
Securities Act or an exemption from such registration is
available.
40
<PAGE>
(n) Such Member understands that the Company is under no
obligation to register such Member's Interest under the
Securities Act or to comply with any exemption from such
registration.
(o) Such Member understands and agrees that, in addition to any
other restrictive legend that may be imposed on any
certificate evidencing ownership of such Member's Interest,
such certificate shall bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NO SUCH SECURITY NOR ANY INTEREST OR PARTICIPATION
THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
(p) Such Member understands that Rule 144 under the Securities Act
presently does not apply and may never apply to the Company's
securities because the Company does not now, and may never,
file reports required by the Exchange Act, and has not made,
and may never make, publicly available the information
required by Rule 15c2-11 of the Exchange Act. Furthermore,
such Member understands that if Rule 144 were available, sales
of Company securities made in reliance thereon could be made
only in certain limited amounts, after certain holding
periods, and only when specified current information about the
Company had been made available to the public, all in
accordance with the terms and in satisfaction of the
conditions of Rule 144. Such Member understands that, in the
case of Company securities to which Rule 144 is not
applicable, compliance with some other exemption under the
Securities Act will be required in order for any re-sale or
other Transfer of such Company securities to be effected
legally.
41
<PAGE>
ARTICLE XVII
POWER OF ATTORNEY
17.1 Power of Attorney. Except as otherwise provided in this Agreement,
each Member hereby irrevocably constitutes and appoints Stevens (the
"Attorney-in-Fact") his or its true and lawful attorney, for it and in its or
his name, place and stead and for its, his or its use and benefit to sign and
acknowledge, file and record:
(a) The Certificate of Formation, as well as any and all
amendments thereto;
(b) Any certificates, instruments, and documents, including
fictitious business name statements, as may be appropriate
under the laws of any state or other jurisdiction in which the
Company currently conducts or intends to conduct business in
connection with the use of the name of the Company by the
Company;
(c) Any other instrument which may be required to be filed by or
on behalf of the Company under the laws of any state or by any
governmental agency;
(d) Any and all amendments of the instruments described in, or
required to effectuate or perfect, any of the preceding
subparagraphs; and
(e) Except as otherwise provided in this Agreement, any documents
which may be required to effect the continuation of the
Company, the admission of an additional or substituted Member,
or the dissolution and termination of the Company.
The foregoing grant of authority: (i) is a special power of attorney
coupled with an interest, is irrevocable, and shall survive the death of any
Member; (ii) may be exercised by the Attorney-in-Fact for each of the
undersigned by a facsimile signature by the Attorney-in-Fact or by listing the
names of all of the undersigned executing any instrument with a single signature
of Stevens acting as Attorney-in-Fact for all of them; and (iii) shall survive
the delivery of an assignment by a Member of all or any of its, his or its
Interest, and any Transferee does hereby constitute and appoint M. Brent Stevens
his or its attorney in the same manner and force and for the same purposes as
the assignor.
The undersigned authorizes such Attorney-in-Fact to take such further
action which such Attorney-in-Fact shall consider necessary or advisable in
connection with any of the foregoing, hereby gives such Attorney-in-Fact full
power and authority to do and
42
<PAGE>
perform each and every act or thing whatsoever required or advisable to be done
in and about the foregoing as fully as the undersigned might or could do if
personally present, and hereby ratifies and confirms all that such
Attorney-in-Fact shall lawfully do or cause to be done by virtue hereof. In the
event of any conflict between the provisions of this Agreement and any document
executed or filed by Stevens pursuant to the Power of Attorney granted in this
Section 17.1, this Agreement shall govern.
ARTICLE XVIII
MISCELLANEOUS
18.1 Further Assurances: Each Member agrees to execute, acknowledge,
deliver, file, record and publish such further instruments and documents, and do
all such other acts and things as may be required by law, or as may be required
to carry out the intent and purposes of this Agreement.
18.2 Severability: In case any one or more of the provisions contained in
this Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and other application thereof shall not in
any way be affected or impaired thereby.
18.3 Amendments. Except as otherwise provided herein, this Agreement may
be amended, modified or revised, in whole or in part' upon the approval of the
Managing Member and the approval of all of the members of the Independent
Committee; provided, however, that no amendment, modification or revision of
this Agreement shall be effective without the consent or approval of the
Preferred Members if and to the extent that such amendment, modification or
revision would adversely affect the Preferred Members' rights, privileges or
preferences hereunder. In the event new Preferred Members are admitted, any
amendment, modification or revision of this Agreement that would adversely
affect GDREC's rights, privileges or preferences hereunder shall require GDREC's
consent and approval.
18.4 Amendments to Comply with Gaming or Similar Laws. Notwithstanding the
provisions of Section 18.3 of this Agreement, (i) the Members hereby agree that
this Agreement may be amended by the Managing Member as necessary to comply with
the requirements of applicable Gaming Laws that regulate or otherwise pertain to
the business of the Company, and (ii) Sections 3.8. 1 8.5(a) and this Section
18.4 shall not be amended without the prior consent of the IROC.
18.5 Entire Agreement: Purchase Agreement.
(a) The Company and each Member hereby ratifies and confirms the
rights, duties and obligations of the Company (as PGP's designee) set forth in
the
43
<PAGE>
Purchase Agreement and, notwithstanding any other provision in this Agreement to
the contrary, the Company (as PGP's designee) and each Member hereby
acknowledges and agrees to comply with all provisions thereunder, and in the
event that there are any inconsistencies between the terms of the Purchase
Agreement and this Agreement, the terms and provisions of the Purchase Agreement
shall govern. This Section 18.5(a) shall not be amended without the prior
consent of the IRGC and GDREC.
(b) This Agreement, including all Exhibits hereto, constitutes the
entire agreement of the parties hereto with respect to the matters hereof and,
with the exception of applicable provisions of the Purchase Agreement,
supersedes any prior oral and written understandings or agreements.
18.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to conflict of
law principles thereof.
18.7 Dispute Resolution. The parties hereto hereby agree that any
controversy, dispute or claim arising out of or relating to this Agreement or
any breach of this Agreement shall be resolved in accordance with the terms and
provisions of this Section 18.7.
18.7.1 Agreement to Negotiate. Before submitting any controversy,
dispute or claim arising out of or relating to this Agreement or any breach of
this Agreement to arbitration, the following procedures shall be followed:
(a) The party desiring to submit any such controversy,
dispute or claim to arbitration ("Claimant") first shall
give written notice thereof to the other party
("Recipient") setting forth in detail the pertinent
facts and circumstances relating to such controversy,
dispute or claim;
(b) Recipient shall have a period of fifteen (15) days in
which to consider the controversy, dispute or claim that
is the subject of the notice and to furnish in writing
to Claimant a written statement of Recipient's position
with respect thereto;
(c) Within seven (7) days of Claimant's receipt of
Recipient's written statement, Claimant and Recipient
shall meet with a mediator, whose identity shall be
mutually agreed upon by Claimant and Recipient, in an
effort to resolve amicably any difference that may exist
between the respective positions of Claimant and
Recipient, and, if such resolution
44
<PAGE>
is not achieved, either or both of Claimant and
Recipient shall have the right to submit the matter to
arbitration.
18.7.2 Procedure for Arbitration. Any controversy, dispute or claim
arising out of or relating to this Agreement or any breach of this Agreement,
including any dispute concerning the termination of this Agreement, that has not
been resolved in accordance with Section 18.7.1 shall be settled by arbitration
in Clark County, Nevada in accordance with the commercial arbitration rules of
the American Arbitration Association then existing. In arbitration, this
Agreement (including this provision providing for arbitration in the event of
any controversy, dispute or claim arising out of or relating to this Agreement
or any breach of this Agreement that has not been resolved in accordance with
Section 18.7.1) shall be specifically enforceable. Judgement upon any award
rendered by an arbitrator may be entered in any court having jurisdiction. The
prevailing party to an arbitration proceeding commenced hereunder shall be
entitled as a part of the arbitration award to the costs and expenses (including
reasonable attorneys' fees) of investigating, preparing and pursuing an
arbitration claim as such costs and expenses are awarded by the arbitrator.
18.8 Attorney Fees. If the Company or any Member obtains a judgment
against any Member by reason of the breach of this Agreement or the failure to
comply with the terms hereof; reasonable attorneys' fees and costs as fixed by
the court shall be included in such judgment.
18.9 Captions. All titles or captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way define,
limit, extend, or describe the scope of this Agreement or the intent of any
provision in this Agreement.
18.10 Creditors Not Benefited. Nothing contained in this Agreement is
intended or shall be deemed to benefit any creditor of the Company or any
member, and no creditor of the Company shall be entitled to require the Company
or the Members to solicit or accept any capital contribution for the Company or
to enforce any right which the Company or any Member may have against any Member
under this Agreement.
18.11 Indemnification of Organizer. The Common Members hereby agree to
indemnify and hold harmless the person or persons who sign the Company's
Certificate of Formation, as filed with the Secretary of State of Delaware (the
"Organizer") for all other acts taken by the Organizer as organizer. The Common
Members agree to pay all costs and expense incurred by the Organizer in
organizing the Company including any claims brought against the Organizer
including any damages, court costs, attorneys fees and other costs related to
the Organizer's defense of any claim brought or judgment rendered against the
Organizer for the Organizer's actions as organizer.
45
<PAGE>
18.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
18.13 Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective personal
representatives, heirs, successors and permitted assigns; provided, however,
that (i) nothing contained in this Section 18.13 shall be construed to permit
any attempted assignment or other transfer which would be prohibited or void
pursuant to any other provision of this Agreement, and (ii) notwithstanding any
provision to the contrary in this Agreement, neither the Company nor any Member
shall be required to take any action or omit to take any action inconsistent
with the requirements of applicable law or as required in connection with legal
process.
* * * * *
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth below next to its signature.
PENINSULA GAMING PARTNERS, LLC
a Delaware limited liability company
Date: 7/15/99 By: /s/ Brent Stevens
-------------------------------------------
Name: M. Brent Stevens
Title: Manager
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT
COMPANY, L.C., an Iowa limited liability
company
Date: 7/15/99 By: /s/ Don Iverson
-------------------------------------------
Name: Don Iverson
Title: Chairman
<PAGE>
SCHEDULE A
MEMBERSHIP INTERESTS
COMMON MEMBERS COMMON MEMBER PERCENTAGE INTEREST
- -------------- ---------------------------------
Peninsula Gaming Partners, LLC 100%
PREFERRED MEMBERS PREFERRED MEMBER PERCENTAGE INTEREST
- ----------------- ------------------------------------
Greater Dubuque Riverboat 100%
Entertainment Company, L.C.
<PAGE>
SCHEDULE B
CAPITAL CONTRIBUTIONS
Peninsula Gaming Partners, LLC
$9,000,000 in cash.
Greater Dubuque Riverboat Entertainment Company, L.C.
A portion of Seller's Assets (as such term is defined in the Purchase Agreement)
having a Fair Market Value equal to $7,000,000.
Exhibit 3.3
State of Delaware PAGE 1
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "PENINSULA GAMING CORPORATION", FILED IN THIS OFFICE ON THE
THIRTEENTH DAY OF APRIL, A.D. 1999, AT 12 O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
--------------------------------
Edward J. Freel, Secretary of
State
3031528 8100 AUTHENTICATION: 9772190
991213528 DATE: 05-27-99
<PAGE>
4-13-99
CERTIFICATE OF INCORPORATION
OF
PENINSULA GAMING CORPORATION
FIRST: The name of the Corporation is Peninsula Gaming Corporation
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The nature of the business or purpose to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, par value $.01
per share.
FIFTH: The name and mailing address of the incorporator is as follows:
Edward A. Davis
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
SIXTH: (1) Directors of the Corporation shall have no personal liability
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided that nothing contained in this Article
SIXTH shall eliminate or limit the liability of a director (i) for any breach of
a director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violations of law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware, or (iv) for any transaction from which a director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then by virtue of this Article
SIXTH the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as so amended.
(2) The Corporation shall indemnify, in accordance with the By-laws of the
Corporation, to the fullest extent permitted from time to time by the General
Corporation Law of the State of
<PAGE>
Delaware or any other applicable laws as presently or hereafter in effect, any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including, without limitation, an
action by or in the right of the Corporation), by reason of his acting as a
director or officer of the Corporation (and the Corporation, in the discretion
of the Board of Directors, may so indemnify a person by reason of the fact that
he is or was an employee or agent of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of the
Corporation) against any liability or expense actually and reasonably incurred
by such person in respect thereof; provided, however, the Corporation shall be
required to indemnify an officer or director in connection with an action, suit
or proceeding (or part thereof) initiated by such person only if such action,
suit or proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. Such indemnification is not exclusive of any other right to
indemnification provided by law or otherwise. The right to indemnification
conferred by this Section (2) shall be deemed to be a contract between the
Corporation and each person referred to herein.
(3) If a claim under Section (2) of this Article SIXTH is not paid in full
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where any undertaking required by
the By-laws of the Corporation has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the General Corporation Law of the State of Delaware and Section 2 of this
Article SIXTH for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors, legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, legal
counsel, or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
(4) Indemnification shall include payment by the Corporation of expenses
in defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the person indemnified to
repay such payment of it is ultimately determined that such person is not
entitled to indemnification under this Article SIXTH, which undertaking may be
accepted without reference to the financial ability of such person to make such
repayment.
(5) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article SIXTH shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute,
-2-
<PAGE>
provision of this Certificate of Incorporation, by-law, agreement, contract,
vote of stockholders or disinterested directors, or otherwise.
(6) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article SIXTH, the General Corporation Law of the State
of Delaware, or otherwise.
(7) No amendment to or repeal of all or any part of this Article SIXTH
shall adversely affect any right or protection existing at the time of such
repeal or amendment.
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, adopt, alter,
amend or repeal the By-laws of the Corporation.
EIGHTH: Meetings of the stockholders may be held within or without the
State of Delaware, as may be designated by or in the manner provided in the
By-laws. The books of the Corporation may be kept (subject to the provisions of
any law or regulation) outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors or in the By-laws
of the Corporation. Elections of directors need not be by written ballot unless
the By-laws of the Corporation shall so provide.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
TENTH: The Corporation elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a Corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand as of April 9, 1999.
/s/ Edward A. Davis
----------------------------------------
Edward A. Davis
Sole Incorporator
-3-
Exhibit 3.4
========================================================
BY-LAWS
OF
PENINSULA GAMING CORPORATION
========================================================
<PAGE>
TABLE OF CONTENTS
Page
----
I. OFFICES ............................................................. 1
II. STOCKHOLDERS ........................................................ 1
Section 2.1. Time and Place of Meetings and Annual Meetings ..... 1
Section 2.2. Time and Place of Special Meetings ................. 1
Section 2.3. Notice of Meetings ................................. 2
Section 2.4. Quorum ............................................. 2
Section 2.5. Voting ............................................. 2
Section 2.6. Informal Action By Stockholders .................... 3
Section 2.7. List of Stockholders Entitled to Vote .............. 3
Section 2.8. Stock Ledger ....................................... 3
III. DIRECTORS ........................................................... 3
Section 3.1. General Powers ..................................... 3
Section 3.2. Number and Election of Directors ................... 3
Section 3.3. Vacancies .......................................... 3
Section 3.4. Place of Meetings .................................. 4
Section 3.5. Regular Meetings ................................... 4
Section 3.6. Notice of Meetings ................................. 4
Section 3.7. Special Meetings ................................... 4
Section 3.8. Quorum ............................................. 4
Section 3.9. Organization ....................................... 4
Section 3.10. Action without Meeting ............................. 5
Section 3.11. Attendance by Telephone ............................ 5
Section 3.12. Removal ............................................ 5
Section 3.13. Compensation of Directors .......................... 5
IV. OFFICERS. ........................................................... 5
Section 4.1. Enumeration ........................................ 5
Section 4.2. Term of Office ..................................... 5
Section 4.3. Chairman of the Board .............................. 6
Section 4.4. President .......................................... 6
Section 4.5. Vice President ..................................... 6
Section 4.6. Secretary .......................................... 6
Section 4.7. Assistant Secretary ................................ 7
Section 4.8. Treasurer .......................................... 7
Section 4.9. Assistant Treasurer ................................ 7
Section 4.10. Other Officers ..................................... 7
-i-
<PAGE>
Page
----
Section 4.11. Salaries ........................................... 8
Section 4.12. Voting Securities Held by the Corporation .......... 8
V. CERTIFICATES OF STOCK ............................................... 8
Section 5.1. Form ............................................... 8
Section 5.2. Transfer ........................................... 8
Section 5.3. Replacement ........................................ 9
Section 5.4. Record Date ........................................ 9
Section 5.5. Beneficial Owners .................................. 9
VI. INDEMNIFICATION OF DIRECTORS AND OFFICERS ........................... 10
Section 6.1. Power to Indemnify in Actions, Suits or Proceedings
other Than Those by or in the Right of the
Corporation ........................................ 10
Section 6.2. Power to Indemnify in Actions, Suits or
Proceedings by or in the Right of the Corporation .. 10
Section 6.3. Authorization of Indemnification ................... 11
Section 6.4. Good Faith Defined ................................. 11
Section 6.5. Indemnification by a Court ......................... 11
Section 6.6. Expenses Payable in Advance ........................ 12
Section 6.7. Nonexclusivity of Indemnification and Advancement
of Expenses ........................................ 12
Section 6.8. Insurance .......................................... 12
Section 6.9. Certain Definitions ................................ 12
Section 6.10. Survival of Indemnification and Advancement of
Expenses ........................................... 13
Section 6.11. Limitation on Indemnification ...................... 13
VII. GENERAL PROVISIONS .................................................. 13
Section 7.1. Fiscal Year ........................................ 13
Section 7.2. Corporate Seal ..................................... 13
Section 7.3. Notices ............................................ 13
Section 7.4. Waiver of Notice ................................... 14
Section 7.5. Resignations and Removals .......................... 14
Section 7.6. Disbursements ...................................... 14
Section 7.7. Transactions with Interested Parties ............... 14
VIII AMENDMENTS .......................................................... 15
IX SUBJECT TO CERTIFICATE OF INCORPORATION ............................. 15
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BY-LAWS
OF
PENINSULA GAMING CORPORATION
PREAMBLE
These By-laws are subject to, and governed by, the General Corporation Law
of the State of Delaware (the "GCL") and the certificate of incorporation of
PENINSULA GAMING CORPORATION, a Delaware corporation (the "Corporation") then in
effect (the "Certificate"). In the event of a direct conflict between the
provisions of these By-laws and the mandatory provisions of the GCL or the
provisions of the Certificate, such provisions of the GCL or the Certificate, as
the case may be, will be controlling.
I.
OFFICES
The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware and the name and address of
its registered agent is The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware 19801. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
II.
STOCKHOLDERS
Section 2.1. Time and Place of Meetings and Annual Meetings. All meetings
of the stockholders for the election of directors or for any other purpose shall
be held at such time and place, within or without the State of Delaware, as
shall be designated by the Board of Directors. In the absence of any such
designation by the Board of Directors, each such meeting shall be held at the
principal office of the Corporation. An annual meeting of stockholders shall be
held for the purpose of electing directors and transacting such other business
as may properly be brought before the meeting. The date of the annual meeting
shall be determined by the Board of Directors.
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Section 2.2. Time and Place of Special Meetings. Unless otherwise
prescribed by law or by the Certificate of Incorporation, Special Meetings of
Stockholders, for any purpose or purposes, may be called by either (i) the
Chairman or (ii) the President, and shall be called by any such officer at the
request in writing of two members of the Board of Directors or at the request in
writing of stockholders holding fifty percent (50%) of the Common Stock of the
Corporation issued and outstanding and entitled to vote generally in the
election of directors pursuant to the Certificate of Incorporation. Such request
shall state the purpose of the proposed meeting.
All special meetings of the stockholders shall be held at such place,
within or without the State of Delaware, as shall be designated by the Board of
Directors. In the absence of any such designation by the Board of Directors,
each such meeting shall be held at the principal office of the Corporation.
Section 2.3. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and time of the meeting shall be given not
less than ten (10) nor more than sixty (60) days before the date of the meeting,
to each stockholder entitled to vote at such meeting. The notice of any special
meeting of stockholders shall state the purpose or purposes for which the
meeting is called.
Section 2.4. Quorum. The holders of a majority of the Common Stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by law. If a quorum is not
present or represented, the holders of the stock present in person or
represented by proxy at the meeting and entitled to vote thereat shall have
power, by the affirmative vote of the holders of a majority of such stock, to
adjourn the meeting to another time and/or place, without notice other than
announcement at the meeting, until a quorum shall be presented or represented.
At such adjourned meeting, at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 2.5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by a majority of votes cast by holders of the
stock represented and entitled to vote thereon, with each such holder having the
number of votes per share and voting as a member of such classes of stockholders
as may be provided in the Certificate of Incorporation, unless the question is
one upon which, by express provision of law or of the Certificate of
Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question. Such votes may
be cast in person or by proxy but no proxy shall be voted on or after one year
from its date, unless such proxy provides for a longer period. The Board of
Directors, in its discretion, or the officer of the Corporation presiding at a
meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
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Section 2.6. Informal Action By Stockholders. Any action required to be
taken at a meeting of the stockholders, or any other action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by stockholders
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all members having a right
to vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
Section 2.7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 2.8. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 2.7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
III.
DIRECTORS
Section 3.1. General Powers. The business and affairs of the Corporation
shall be managed and controlled by or under the direction of a Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Certificate of Incorporation
or by these By-Laws directed or required to be exercised or done by the
stockholders.
Section 3.2. Number and Election of Directors. The number of directors of
the Corporation shall be fixed from time to time by the vote of a majority of
the entire Board of Directors, but such number shall in no case be less than one
(1) nor more than nine (9) members. Except as provided in Section 3.3 of this
Article, directors shall be elected by a plurality of the votes cast at Annual
Meetings of Stockholders, and each director so elected shall hold office until
the next Annual Meeting and until his successor is duly elected and qualified,
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or until his earlier resignation or removal. Any director may resign at any time
upon notice to the Corporation. Directors need not be stockholders.
Section 3.3. Vacancies. Except as provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the number of directors may be filled by a majority of the Directors
then in office though less than a quorum, and each Director so chosen shall hold
office until his successor is elected and qualified or until his earlier
resignation or removal. If there are no Directors in office, then an election of
Directors may be held in the manner provided by law.
Section 3.4. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 3.5. Regular Meetings. The Board of Directors shall hold a regular
meeting, to be known as the annual meeting, immediately following each annual
meeting of the stockholders. Other regular meetings of the Board of Directors
shall be held at such time and at such place as shall from time to time be
determined by the Board.
Section 3.6. Notice of Meetings. Notice of any regular or special meeting
of directors shall be given to each director by the Secretary or by the
directors calling the meeting. The notices of all meetings shall state the
place, date, hour and purpose(s) of the meeting. Notice shall be duly given to
each director (i) by giving notice to such director in person or by telephone or
(ii) by sending a telegram or telex, or delivering written notice by hand, to
his last known business or home address in each case at least two days in
advance of a regular meeting and 72 hours in advance of a special meeting.
Section 3.7. Special Meetings. Special meetings of the Board of Directors
may be called by the any director or the President. Two days written or
telephonic notice of special meetings need be given.
Section 3.8. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 3.9. Organization. The Chairman of the Board, if elected, shall
act as chairman at all meetings of the Board of Directors. If a Chairman of the
Board is not elected or, if elected, is not present, the President, or if the
President is not present, a Director chosen by a majority of the Directors
present, shall act as chairman at meetings of the Board of Directors.
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Section 3.10. Action without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 3.11. Attendance by Telephone. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or of any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 3.12. Removal. Except as otherwise provided in the Certificate of
Incorporation, any one or more or all of the directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors.
Section 3.13. Compensation of Directors. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
Corporation or any of its parent or subsidiary corporations or any of its
stockholders in any other capacity and receiving compensation for such service.
IV.
OFFICERS
Section 4.1. Enumeration. The officers of the Corporation shall be chosen
by the Board of Directors and may include a Chairman of the Board, President, a
Secretary and a Treasurer, and may include multiple members of these offices,
with such members sharing the same powers and authorities as specified in these
By-laws. The Board of Directors may also elect one or more Vice Chairmen, one or
more Senior or other Vice Presidents, one or more Assistant Secretaries and
Assistant Treasurers and such other officers and agents as it shall deem
appropriate. Any number of offices may be held by the same person. The officers
of the Corporation need not be stockholders of the Corporation nor, except in
the case of the Chairman of the Board of Directors, need such officers be
directors of the Corporation.
Section 4.2. Term of Office. The officers of the Corporation shall be
elected at the annual meeting of the Board of Directors and shall hold office
until their successors are elected and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board of
Directors. Any vacancy occurring in any office of the Corporation required by
this Article shall be filled by the Board of Directors, and any vacancy in any
other office may be filled by the Board of Directors. Each successor shall hold
office for the
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unexpired term of his predecessor and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
Section 4.3. Chairman of the Board. The Chairman of the Board if any, when
elected, shall have general supervision, direction and control of the business
and affairs of the Corporation, subject to the control of the Board of
Directors, shall preside at meetings of stockholders and shall have such other
functions, authority and duties as customarily appertain to the Chairman of the
Board of a business corporation or as may be prescribed by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws.
Section 4.4. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of Directors. If there be no Chairman of the Board of Directors, the
President shall be the Chief Executive Officer of the Corporation. The President
shall also perform such other duties and may exercise such other powers as from
time to time may be assigned to him by these By-Laws or by the Board of
Directors.
Section 4.5. Vice President. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice President or the Vice Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Each
Vice President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President.
Section 4.6. Secretary. The Secretary shall keep a record of all
proceedings of the stockholders of the Corporation and of the Board of
Directors, and shall perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice, if any, of all
meetings of the stockholders and shall perform such other duties as may be
prescribed by the Board of Directors, the Chairman of the Board or the
President. The
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Secretary shall have custody of the corporate seal of the Corporation and the
Secretary, or in the absence of the Secretary any Assistant Secretary, shall
have authority to affix the same to any instrument requiring it, and when so
affixed it may be attested by the signature of the Secretary or an Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest such affixing of the
seal. The Secretary shall also keep a register of the post office address of
each stockholder which shall be furnished to the Secretary by such stockholder,
sign with the President or Vice President, certificates for shares of the
Corporation, the issuance of which shall be authorized by resolution of the
Board of Directors, and have general charge of the stock transfer books of the
Corporation.
Section 4.7. Assistant Secretary. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may from time to
time be prescribed by the Board of Directors, the Chairman of the Board, the
President or the Secretary.
Section 4.8. Treasurer. The Treasurer shall be the chief financial officer
of the Company and shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors. The Treasurer shall disburse the
funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the Chairman of the
Board, the President and the Board of Directors, at its regular meetings or when
the Board of Directors so requires, an account of all transactions as Treasurer
and of the financial condition of the Corporation. The Treasurer shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board or the President.
Section 4.9. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or m the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as may from time to time be prescribed by the Board of Directors, the
Chairman of the Board, the President or the Treasurer.
Section 4.10. Other Officers. The President or Board of Directors may
appoint other officers and agents for any Group, Division or Department into
which this Corporation may be divided by the Board of Directors, with titles as
the President or Board of Directors may from time to time deem appropriate. All
such officers and agents shall receive such compensation, have such tenure and
exercise such authority as the President or Board of Directors may specify.
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All appointments made by the President hereunder and all the terms and
conditions thereof must be reported to the Board of Directors.
In no case shall an officer or agent of any one Group, Division or
Department have authority to bind another Group, Division or Department of the
Company or to bind the Corporation except as to the business and affairs of the
Group, Division or Department of which he or she is an officer or agent.
Section 4.11. Salaries. The salaries of the elected officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
Section 4.12. Voting Securities Held by the Corporation. Unless otherwise
provided by the Board of Directors, powers of attorney, proxies, waivers of
notice of meeting, consents and other instruments relating to securities owned
by the Corporation may be executed in the name of and on behalf of the
Corporation by the President or any Vice President and any such officer may, in
the name of and on behalf of the Corporation, take all such action as any such
officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
powers incidental to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors, may, by resolution, from time to time confer like powers
upon any other person or persons.
V.
CERTIFICATES OF STOCK
Section 5.1. Form. The shares of the Corporation shall be represented by
certificates. Certificates of stock in the Corporation, if any, shall be signed
by or in the name of the Corporation by the Chairman of the Board or the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation. Where a certificate
is countersigned by a transfer agent, other than the Corporation or an employee
of the Corporation, or by a registrar, the signatures of the Chairman of the
Board, the President or a Vice President and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary may be facsimiles. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, the
certificate may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were such officer, transfer agent or
registrar at the date of its issue.
Section 5.2. Transfer. Except as otherwise established by rules or
regulations adopted by the Board of Directors, upon surrender to the Corporation
or the transfer agent of the
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Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate of stock or uncertificated
shares in place of any certificate therefor issued by the Corporation to the
person entitled thereto, cancel the old certificate and record the transaction
on its books.
Section 5.3. Replacement. In case of the loss, destruction or theft of a
certificate for any stock of the Corporation, a new certificate of stock or
uncertificated shares in place of any certificate therefor issued by the
Corporation may be issued upon satisfactory proof of such loss, destruction or
theft and upon such terms as the Board of Directors may prescribe. The Board of
Directors may in its discretion require the owner of the lost, destroyed or
stolen certificate, or his legal representative, to give the Corporation a bond,
in such sum and in such form and with such surety or sureties as it may direct,
to indemnify the Corporation against any claim that may be made against it with
respect to a certificate alleged to have been lost, destroyed or stolen.
Section 5.4. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty (60) days nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
Section 5.5. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law. The
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Corporation shall not be required to register any transfer of shares made in
violation of any agreement among a stockholder or investor in the Corporation
and the Corporation, or recognize as a holder of any such shares any transferee
in such a violative transaction.
VI.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 6.1. Power to Indemnify in Actions. Suits or Proceedings other
Than Those by or in the Right of the Corporation. Subject to Section 6.3 of this
Article VI, the Corporation shall indemnify, to the fullest extent permitted by
applicable law, now or hereafter in effect, any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director or executive officer of the Corporation, or is
or was a director or executive officer of the Corporation serving at the request
of the Corporation as a director or executive officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided, however, the
Corporation shall be required to indemnify an officer or director in connection
with an action, suit or proceeding initiated by such person only if (i) such
action, suit or proceeding was authorized by the Board or (ii) the
indemnification does not relate to any liability arising under Section 16(b) of
the Securities Exchange Act of 1934, as amended, or any of the rules or
regulations promulgated thereunder. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 6.2. Power to Indemnify in Actions. Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 6.3 of this Article VI, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or executive officer of the Corporation, or is
or was a director or executive officer of the Corporation serving at the request
of the Corporation as a director or executive officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually reasonably incurred by him
in connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
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to the best interests of the Corporation; except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 6.3. Authorization of Indemnification. Any indemnification under
this Article VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or executive officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 6.1 or Section 6.2 of this Article VI, as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote of
directors who were not parties to such action, suit or proceeding (even if such
majority vote constitutes less than a quorum), or (ii) if the majority vote of
disinterested directors so directs (even if such majority vote constitutes less
than a quorum), by independent legal counsel in a written opinion, or (iii) by
the stockholders. To the extent, however, that a director or executive officer
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding described above, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith, without the necessity of authorization in the specific case.
Section 6.4. Good Faith Defined. For purposes of any determination under
Section 6.3 of this Article VI, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 6.4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the Corporation as a director or executive officer. The provisions of this
Section 6.4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 6.1 or 6.2 of this Article VI, as the
case may be.
Section 6.5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 6.3 of this Article VI, and
notwithstanding the absence of any determination thereunder, any director or
executive officer may apply to any court of competent jurisdiction in the State
of Delaware for indemnification to the extent otherwise permissible
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<PAGE>
under Sections 6.1 and 6.2 of this Article VI. The basis of such indemnification
by a court shall be a determination by such court that indemnification of the
director or executive officer is proper in the circumstances because he has met
the applicable standards of conduct set forth in Section 6.1 or 6.2 of this
Article VI, as the case may be. Neither a contrary determination in the specific
case under Section 6.3 of this Article VI nor the absence of any determination
thereunder shall be a defense to such application or create a presumption that
the director or executive officer seeking indemnification has not met any
applicable standard of conduct. Notice of any application for indemnification
pursuant to this Section 6.5 shall be given to the Corporation promptly upon the
filing of such application. If successful, in whole or in part, the director or
executive officer seeking indemnification shall also be entitled to be paid the
expense of prosecuting such application.
Section 6.6. Expenses Payable in Advance. Expenses (including attorneys'
fees) incurred by a director or executive officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
executive officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the Corporation as authorized in this
Article VI.
Section 6.7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VI shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any By-Law, agreement, contract, vote of stockholders or disinterested
directors or pursuant to the direction (howsoever embodied) of any court of
competent jurisdiction or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, it being the
policy of the Corporation that indemnification of the persons specified in
Sections 6.1 and 6.2 of this Article VI shall be made to the fullest extent
permitted by law. The provisions of this Article VI shall not be deemed to
preclude the indemnification of any person who is not specified in Sections 6.1
or 6.2 of this Article VI but whom the Corporation has the power or obligation
to indemnify under the provisions of the GCL, or otherwise.
Section 6.8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or executive officer
of the Corporation, or is or was a director or executive officer of the
Corporation serving at the request of the Corporation as a director or executive
officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VI.
Section 6.9. Certain Definitions. For purposes of this Article VI,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
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<PAGE>
separate existence had continued, would have had power and authority to
indemnify its directors or executive officers, so that any person who is or was
a director or executive officer of such constituent corporation, or is or was a
director or executive officer of such constituent corporation serving at the
request of such constituent corporation as a director or executive officer of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, shall stand in the same position under the provisions of this
Article VI with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued. For purposes of this Article VI, references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the Corporation" shall include any
service as a director or executive officer of the Corporation which imposes
duties on, or involves services by, such director or executive officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article VI.
Section 6.10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VI shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or executive officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 6.11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VI to the contrary, except for proceedings to enforce
rights to indemnification (which shall be governed by Section 6.5 hereof), the
Corporation shall not be obligated to indemnify any director or executive
officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
VII
GENERAL PROVISIONS
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 7.2. Corporate Seal. The corporate seal shall be in such form as
may be approved from time to time by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 7.3. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or
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<PAGE>
stockholder, such notice may be given by mail, addressed to such director,
member of a committee or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Written notice may also be given personally or by telegram, telex
or cable.
Section 7.4. Waiver of Notice. Whenever any notice is required to be given
under law or the provisions of the Certificate of Incorporation or these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent to notice.
Section 7.5. Resignations and Removals. Any director or any officer,
whenever elected or appointed, may resign at any time by serving written notice
of such resignation on the President or the Secretary, and such resignation
shall be deemed to be effective as of the close of business on the date said
notice is received by the President or Secretary. No formal action shall be
required of the Board of Directors or the stockholders to make any such
resignation effective. Except as the Board of Directors may otherwise determine,
no officer who resigns or is removed shall have any right to any compensation as
an officer for any period following his resignation or removal, or any right to
damages on account of such removal, whether his compensation be by the month or
by the year or otherwise, unless such compensation is expressly provided in a
duly authorized written agreement with the Corporation.
Section 7.6. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
Section 7.7. Transactions with Interested Parties. No contract or
transaction between the Corporation and one or more of the directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors, officers or employees, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board of
Directors or a committee of the Board of Directors which authorizes the contract
or transaction or solely because his or their votes are counted for such
purpose, if:
(a) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(b) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and
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<PAGE>
the contract or transaction is specifically approved in good faith by vote
of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
VIII.
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may be
adopted by the Board of Directors. The fact that the power to amend, alter,
repeal or adopt the By-Laws has been conferred upon the Board of Directors shall
not divest the stockholders of the same powers.
IX.
SUBJECT TO CERTIFICATE OF INCORPORATION
These By-Laws and the provisions hereof are subject to the terms and
conditions of the Certificate of Incorporation of the Corporation (including any
certificates of designations filed thereunder), and in the event of any conflict
between these By-Laws and the Certificate of Incorporation, the Certificate of
Incorporation shall control.
-15-
Exhibit 4.1
- --------------------------------------------------------------------------------
- ------ ------
NUMBER SHARES
- ------ ---------------------------------------------------- ------
0 Incorporated under the laws of the State of Delaware
- ------ ---------------------------------------------------- ------
----------------------------
Peninsula Gaming Corporation
----------------------------
Total Authorized Issue See Reverse for
2,000 Shares $.01 Par Value Certain Definitions
Common Stock
SPECIMEN
This is to Certify that _________________________ is the owner of
____________________ fully paid and non-assessable shares of the above
Corporation transferable only on the books of the Corporation by the holder
thereof in person or by a duly authorized Attorney upon surrender of this
Certificate properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized
officers.
Dated
__________________ ______________________
- --------------------------------------------------------------------------------
CORPKIT, NEW YORK
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT -- __________ Custodian __________
(Cust) (Minor)
under Uniform Gifts to Minors Act _____________
(State)
Additional abbreviations may also be used though not in the above list.
For value received _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocable constitute and
appoint ___________________________ Attorney to transfer the said Shares on the
books of the within named Corporation with full power of substitution in the
premises.
Dated _______________________
In presence of
_________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NO SUCH SECURITY NOR ANY INTEREST OR PARTICIPATION THEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
Exhibit 4.2
PENINSULA GAMING COMPANY, LLC
PENINSULA GAMING CORP.
as Issuers
and the Subsidiary Guarantors referred to herein
12 1/4% Senior Secured Notes due 2006
------------------------------------------------
INDENTURE
Dated as of July 15, 1999
------------------------------------------------
FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Indenture
Act Section Section
- --------------- ---------
310(a)(1) ......................................................... 7.10
310(a)(2) ......................................................... 7.10
310(a)(3) ......................................................... N/A
310(a)(4) ......................................................... N/A
310(a)(5) ......................................................... 7.10
310(b) ............................................................ 7.8;7.10
310(c) ............................................................ N/A
311(a) ............................................................ 7.11
311(b) ............................................................ 7.11
311(c) ............................................................ N/A
312(a) ............................................................ 2.5
312(b) ............................................................ 12.3
312(c) ............................................................ 12.3
313(a) ............................................................ 7.6
313(b)(1) ......................................................... 7.6
313(b)(2) ......................................................... 7.6
313(c) ............................................................ 7.6
313(d) ............................................................ 7.6
314(a) ............................................................ 4.3;4.4
314(b) ............................................................ 11.1
314(c)(1) ......................................................... 12.4
314(c)(2) ......................................................... 12.4
314(c)(3) ......................................................... N/A
314(d) ............................................................ 11.4
314(e) ............................................................ 12.5
314(f) ............................................................ N/A
315(a) ............................................................ 7.1
315(b) ............................................................ 7.5
315(c) ............................................................ 7.1
315(d) ............................................................ 7.1
315(e) ............................................................ 6.11
316(a)(last sentence) ............................................. 2.9
316(a)(1)(A) ...................................................... 6.5
316(a)(1)(B) ...................................................... 6.4
316(a)(2) ......................................................... N/A
316(b) ............................................................ 6.7;9.2
316(c) ............................................................ 9.4
317(a)(1) ......................................................... 6.8
317(a)(2) ......................................................... 6.9
317(b) ............................................................ 2.4
<PAGE>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
318(a) ............................................................ 12.1
318(b) ............................................................ N/A
318(c) ............................................................ 12.1
N/A means not applicable.
*This Cross-Reference Table is not part of the Indenture.
2
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS AND INCORPORATION BY REFERENCE .................... 1
Section 1.1 Definitions .......................................... 1
Section 1.2 Other Definitions .................................... 22
Section 1.3 Incorporation by Reference of Trust Indenture Act .... 23
Section 1.4 Rules of Construction ................................ 24
ARTICLE II - THE NOTES .................................................... 24
Section 2.1 Form and Dating ...................................... 24
Section 2.2 Execution and Authentication ......................... 25
Section 2.3 Registrar, Paying Agent and Depositary ............... 26
Section 2.4 Paying Agent to Hold Money in Trust .................. 26
Section 2.5 Holder Lists ......................................... 26
Section 2.6 Transfer and Exchange ................................ 27
Section 2.7 Replacement Notes .................................... 31
Section 2.8 Outstanding Notes .................................... 31
Section 2.9 Treasury Notes ....................................... 31
Section 2.10 Temporary Notes ...................................... 31
Section 2.11 Cancellation ......................................... 32
Section 2.12 Defaulted Interest ................................... 32
Section 2.13 Legends .............................................. 33
Section 2.14 Deposit of Moneys .................................... 33
Section 2.15 CUSIP Numbers ........................................ 34
ARTICLE III - REDEMPTION .................................................. 34
Section 3.1 Notices to Trustee ................................... 34
Section 3.2 Selection of Notes to Be Redeemed .................... 34
Section 3.3 Notice of Redemption ................................. 35
Section 3.4 Effect of Notice of Redemption ....................... 36
Section 3.5 Deposit of Redemption Price .......................... 36
Section 3.6 Notes Redeemed in Part ............................... 36
Section 3.7 Optional Redemption .................................. 36
Section 3.8 Required Regulatory Redemption ....................... 37
Section 3.9 No Mandatory Redemption .............................. 37
ARTICLE IV - COVENANTS .................................................... 38
Section 4.1 Payment of Notes ..................................... 38
Section 4.2 Maintenance of Office or Agency ...................... 38
Section 4.3 Reports .............................................. 39
Section 4.4 Compliance Certificate ............................... 40
Section 4.5 Taxes ................................................ 40
Section 4.6 Stay, Extension and Usury Laws ....................... 41
Section 4.7 Limitation on Restricted Payments .................... 41
Section 4.8 Limitation on Restrictions on Subsidiary Dividend .... 44
Section 4.9 Limitation on Incurrence of Indebtedness ............. 45
Section 4.10 Limitation on Asset Sales ............................ 47
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<PAGE>
Section 4.11 Limitation on Transactions With Affiliates ........... 50
Section 4.12 Limitation on Liens .................................. 51
Section 4.13 Limited Liability Company and Corporate Existence .... 51
Section 4.14 Repurchase Upon a Change of Control .................. 52
Section 4.15 Maintenance of Properties ............................ 54
Section 4.16 Maintenance of Insurance ............................. 54
Section 4.17 Restriction on Sale and Issuance of Subsidiary Stock . 54
Section 4.18 Limitation on Lines of Business ...................... 54
Section 4.19 Restrictions on Activities of PGC .................... 54
Section 4.20 Excess Cash Flow Offer ............................... 55
ARTICLE V - SUCCESSORS .................................................... 57
Section 5.1 When the Issuers May Merge, etc. ..................... 57
Section 5.2 Successor Substituted ................................ 58
ARTICLE VI - DEFAULTS AND REMEDIES ........................................ 58
Section 6.1 Events of Default .................................... 58
Section 6.2 Acceleration ......................................... 60
Section 6.3 Other Remedies ....................................... 61
Section 6.4 Waiver of Past Defaults .............................. 61
Section 6.5 Control by Majority .................................. 62
Section 6.6 Limitation on Suits .................................. 62
Section 6.7 Rights of Holders to Receive Payment ................. 62
Section 6.8 Collection Suit by Trustee ........................... 62
Section 6.9 Trustee May File Proofs of Claim ..................... 63
Section 6.10 Priorities ........................................... 63
Section 6.11 Undertaking for Costs ................................ 64
ARTICLE VII - TRUSTEE ..................................................... 64
Section 7.1 Duties of Trustee .................................... 64
Section 7.2 Rights of Trustee .................................... 65
Section 7.3 Individual Rights of Trustee ......................... 66
Section 7.4 Trustee's Disclaimer ................................. 66
Section 7.5 Notice of Defaults ................................... 67
Section 7.6 Reports by Trustee to Holders ........................ 67
Section 7.7 Compensation and Indemnity ........................... 68
Section 7.8 Replacement of Trustee ............................... 69
Section 7.9 Successor Trustee by Merger, etc. .................... 70
Section 7.10 Eligibility; Disqualification ........................ 70
Section 7.11 Preferential Collection of Claims Against the Issuers 71
ARTICLE VIII- DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE 71
Section 8.1 Discharge: Option to Effect Legal or Covenant
Defeasance ........................................... 71
Section 8.2 Legal Defeasance and Discharge ....................... 71
Section 8.3 Covenant Defeasance .................................. 72
Section 8.4 Conditions to Legal or Covenant Defeasance ........... 72
Section 8.5 Deposits to be Held in Trust Other Miscellaneous
Provisions ........................................... 74
Section 8.6 Repayment to the Issuers ............................. 74
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<PAGE>
Section 8.7 Reinstatement ........................................ 75
ARTICLE IX - AMENDMENTS ................................................... 75
Section 9.1 Without Consent of Holders ........................... 75
Section 9.2 With Consent of Holders .............................. 76
Section 9.3 Compliance with Trust Indenture Act .................. 77
Section 9.4 Revocation and Effect of Consents .................... 77
Section 9.5 Notation on or Exchange of Notes ..................... 78
Section 9.6 Trustee to Sign Amendments, etc. ..................... 78
ARTICLE X - SUBSIDIARY GUARANTEES ......................................... 78
Section 10.1 Subsidiary Guaranty .................................. 78
Section 10.2 Execution and Delivery of the Subsidiary Guarantees .. 80
Section 10.3 Limitation on Subsidiary Guarantor's Liability ....... 81
Section 10.4 Rights under the Subsidiary Guarantees ............... 81
Section 10.5 Primary Obligations .................................. 81
Section 10.6 Guaranty by Future Subsidiaries ...................... 82
Section 10.7 Release of Subsidiary Guarantors ..................... 83
ARTICLE XI - SECURITY INTEREST ............................................ 83
Section 11.1 Grant of Security Interest ........................... 83
Section 11.2 Suits to Protect the Collateral ...................... 84
Section 11.3 Further Assurances and Security ...................... 85
Section 11.4 Release of Collateral ................................ 85
Section 11.5 Certificate of the Issuers ........................... 86
Section 11.6 Reliance on Opinion of Counsel ....................... 86
Section 11.7 Purchaser May Rely ................................... 86
Section 11.8 Payment of Expenses .................................. 87
Section 11.9 Authorization of Receipt of Funds by the Trustee
Under the Security Documents ......................... 87
ARTICLE XII - MISCELLANEOUS ............................................... 87
Section 12.1 Trust Indenture Act Controls ......................... 87
Section 12.2 Notices .............................................. 87
Section 12.3 Communication by Holders with Other Holders .......... 89
Section 12.4 Certificate and Opinion as to Conditions Precedent ... 89
Section 12.5 Statements Required in Certificate or Opinion ........ 89
Section 12.6 Rules by Trustee and Agents .......................... 90
Section 12.7 Legal Holidays ....................................... 90
Section 12.8 No Recourse Against Others ........................... 90
Section 12.9 Governing Law ........................................ 90
Section 12.10 No Adverse Interpretation of Other Agreements ........ 91
Section 12.11 Successors ........................................... 91
Section 12.12 Severability ......................................... 91
Section 12.13 Counterpart Originals ................................ 91
Section 12.14 Table of Contents, Headings, etc. .................... 91
EXHIBIT A - Form of Note .................................................. A-1
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<PAGE>
EXHIBIT B - Certificate to Be Delivered upon Exchange or Registration of
Transfer of Notes ............................................. B-1
EXHIBIT C - Form of Subsidiary Guaranty ................................... C-1
EXHIBIT D - Form of Intercreditor Agreement ............................... D-1
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<PAGE>
This Indenture, dated as of July 15, 1999, is entered into by and among
Peninsula Gaming Company, LLC, a Delaware limited liability company (the
"Company"), and Peninsula Gaming Corp., a Delaware corporation ("PGC," and
together with the Company, the "Issuers"), any future Subsidiary Guarantors (as
defined below) and Firstar Bank of Minnesota, N.A., a National Association, as
trustee (the "Trustee").
The Issuers and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders (as defined below) of the
Issuers' 12 1/4% Senior Secured Notes due 2006.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Acquired Debt" means Indebtedness of a Person existing at the time such
Person is merged with or into the Company or a Restricted Subsidiary or becomes
a Restricted Subsidiary, other than Indebtedness incurred in connection with, or
in contemplation of, such Person merging with or into the Company or a
Restricted Subsidiary or becoming a Restricted Subsidiary.
"Acquisition" means the Company's acquisition on the Issue Date of the
Diamond Jo from Greater Dubuque Riverboat Entertainment Company, L.C. ("GDREC"),
pursuant to that certain Asset Purchase Agreement, dated as of January 15, 1999,
as amended, between PGP (formerly AB Capital, LLC) and GDREC (the "Asset
Acquisition Agreement"), and certain related real property from Harbor Community
Investment, L.C. ("HCI"), pursuant to that certain Real Property Purchase
Agreement, dated as of January 15, 1999, between PGP (formerly AR Capital, LLC)
and HCI.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
(a) the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise or (b) beneficial
ownership of 10% or more of the voting securities of such Person.
Notwithstanding the foregoing, the Initial Purchaser shall be deemed not to be
an Affiliate of PGP, the Company or any Restricted Subsidiary.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Capital Gain Tax Rate" means a rate equal to the sum of (a)
the highest marginal federal income tax rate applicable to net capital gain of
an individual who is a citizen of the United States plus (b) the greater of (i)
an amount equal to the sum of the highest marginal state and local income tax
rates applicable to net capital gain of an individual who is a resident of the
State of
1
<PAGE>
California and (ii) an amount equal to the sum of the highest marginal state and
local income tax rates applicable to net capital gain of an individual who is a
resident of the State of Iowa, multiplied by a factor equal to 1 minus such
highest marginal federal income tax rate described in (a) above.
"Applicable Income Tax Rate" means a rate equal to the sum of (a) the
highest marginal Federal ordinary income tax rate applicable to an individual
who is a citizen of the United States plus (b) the greater of (i) an amount
equal to the sum of the highest marginal state and local ordinary income tax
rates applicable to an individual who is a resident of the State of California
and (ii) an amount equal to the sum of the highest marginal state and local
ordinary income tax rates applicable to an individual who is a resident of the
State of Iowa, multiplied by a factor equal to 1 minus such highest marginal
federal income tax rate described in (a) above.
"Asset Sale" means any (i) direct or indirect sale, assignment, transfer,
lease, conveyance, or other disposition (including, without limitation, by way
of merger or consolidation) (collectively, a "transfer"), other than in the
ordinary course of business, of any assets of the Company or any Restricted
Subsidiary; (ii) direct or indirect issuance or sale of any Capital Stock of any
Restricted Subsidiary (other than directors' qualifying shares), in each case to
any Person (other than the Company or a Restricted Subsidiary); or (iii) Event
of Loss. For purposes of this definition, (a) any series of transactions that
are part of a common plan shall be deemed a single Asset Sale and (b) the term
"Asset Sale" shall not include (1) any exchange of gaming equipment or
furniture, fixtures or other equipment for replacement items in the ordinary
course of business, (2) any series of transactions that have a fair market value
(or result in gross proceeds) of less than $1.0 million or (3) any disposition
of all or substantially all of the assets of the Company that is governed under
and complies with the terms of Article V.
"Bankruptcy Law" means title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
"beneficial owner" has the meaning attributed to it in Rules 13d-3 and
13d-5 under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Board of Directors" means the board of directors or any duly constituted
committee thereof of any corporation or of a corporate general partner of a
partnership and any similar body empowered to direct the affairs of any other
entity.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP, and the amount of such obligations at
any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
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"Capital Stock" means, (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, (ii) with respect to a
limited liability company, any and all membership interests, and (iii) with
respect to any other Person, any and all partnership or other equity interests
of such Person.
"Cash Equivalent" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $250.0 million and commercial paper issued by others rated at least
A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2
or the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition; (iii) investments in
money market funds substantially all of whose assets comprise securities of the
type described in clauses (i) and (ii) above and (iv) repurchase obligations for
underlying securities of the types and with the maturities described above.
"Change of Control" means the occurrence of any of the following events:
(i) any merger or consolidation of the Company or PGP with or into
any Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company or PGP,
on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s),
any "person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable) (other
than an Excluded Person) is or becomes the "beneficial owner," directly or
indirectly, of more than 50% of the total voting power in the aggregate of
the Voting Stock of the transferee(s) or surviving entity or entities,
(ii) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable)
(other than an Excluded Person) is or becomes the "beneficial owner,"
directly or indirectly, of more than 50% of the total voting power in the
aggregate of the Voting Stock of the Company or PGP,
(iii) after any bona fide underwritten registered public offering of
Capital Stock of the Company, during any period of 24 consecutive months
after the Issue Date, individuals who at the beginning of any such
24-month period constituted the Managers of the Company (together with any
new Managers whose election by such Managers or whose nomination for
election by the Members was approved by a vote of a majority of the
Managers then still in office who were either Managers at the beginning of
such period or whose election or nomination for election was previously so
approved, including new Managers designated in or provided for in an
agreement regarding the merger, consolidation or sale, transfer or other
conveyance, of all or substantially all of the assets of the Company,
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if such agreement was approved by a vote of such majority of Managers)
cease for any reason to constitute a majority of the Managers of the
Company then in office,
(iv) the Company adopts a plan of liquidation, or
(v) the first day on which the Company fails to own 99% of the
issued and outstanding Equity Interests of PGC.
A "Change of Control" shall not occur solely by reason of a Permitted
C-Corp Conversion.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all assets (real or personnel, tangible or intangible)
of the Issuers or any Subsidiary (whether owned on the date hereof or hereafter
acquired) including, without limitation, all assets defined as "Collateral" in
any of the Security Documents, provided, that in no event shall Collateral
include Excluded Assets.
"Commission" means the United States Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act, or if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Exchange Act, the Securities
Act or the TIA, as the case may be, then the body performing such duties at such
time.
"Company" means the party named as such above, until a successor replaces
such Person in accordance with the terms of this Indenture, and thereafter means
such successor.
"Consolidated EBITDA" means, with respect to any Person (the referent
Person) for any period, consolidated income (loss) from operations of such
Person and its subsidiaries for such period, determined in accordance with GAAP,
plus (to the extent such amounts are deducted in calculating such income (loss)
from operations of such Person for such period, and without duplication) (a)
amortization, depreciation and other non-cash charges (including, without
limitation, amortization of goodwill, deferred financing fees, and other
intangibles but excluding (i) non-cash charges incurred after the Issue Date
that require an accrual of or a reserve for cash charges for any future period
and (ii) normally recurring accruals such as reserves against accounts
receivables) and (b) non-capitalized transaction costs incurred in connection
with actual or proposed financings, acquisitions or divestitures, including the
offering of the Notes; provided, that (i) the income from operations of any
Person that is not a Wholly Owned Subsidiary of the referent Person or that is
accounted for by the equity method of accounting will be included only to the
extent of the amount of dividends or distributions paid during such period to
the referent Person or a Wholly Owned Subsidiary of the referent Person, (ii)
the income from operations of any Person acquired in a pooling of interests
transaction for any period ending prior to the date of such acquisition will be
excluded, and (iii) the income from operations of any Restricted Subsidiary will
not be included to the extent that declarations of dividends or similar
distributions by that Restricted Subsidiary are not
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at the time permitted, directly or indirectly, by operation of the terms of its
organizational documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its owners.
"Consolidated Interest Expense" means, with respect to any Person for any
period, (a) the consolidated interest expense of such Person and its
subsidiaries for such period, whether paid or accrued (including amortization of
original issue discount, noncash interest payment, and the interest component of
Capital Lease Obligations), to the extent such expense was deducted in computing
Consolidated Net Income of such Person for such period less (b) amortization
expense, write-off of deferred financing costs and any charge related to any
premium or penalty paid, in each case accrued during such period in connection
with redeeming or retiring any Indebtedness before its stated maturity, as
determined in accordance with GAAP, to the extent such expense, cost or charge
was included in the calculation made pursuant to clause (a) above.
"Consolidated Net Income" means, with respect to any Person (the referent
Person) for any period, the aggregate of the Net Income of such Person and its
subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; provided, that (i) the Net Income of any Person relating to any
portion of such period that such Person (a) is not a Wholly Owned Subsidiary of
the referent Person or (b) is accounted for by the equity method of accounting
will be included only to the extent of the amount of dividends or distributions
paid to the referent Person or a Wholly Owned Subsidiary of the referent Person
during such portion of such period, (ii) the Net Income of any Person acquired
in a pooling of interests transaction for any period ending prior to the date of
such acquisition will be excluded, and (iii) the Net Income of any Restricted
Subsidiary will not be included to the extent that declarations of dividends or
similar distributions by that Restricted Subsidiary are not at the time
permitted, directly or indirectly, by operation of the terms of its
organizational documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its owners.
"Consolidated Net Worth" means, with respect to any Person, the total
stockholders' (or members') equity of such Person determined on a consolidated
basis in accordance with GAAP, adjusted to exclude (to the extent included in
calculating such stockholders' (or members') equity), (i) the amount of any such
stockholders' (or members') equity attributable to Disqualified Capital Stock or
treasury stock of such Person and its consolidated subsidiaries, and (ii) all
upward revaluations and other write-ups in the book value of any asset of such
Person or a consolidated subsidiary of such Person subsequent to the Issue Date,
and (iii) all Investments in subsidiaries of such Person that are not
consolidated subsidiaries and in Persons that are not subsidiaries of such
Person.
"Corporate Trust Office" shall be at the address of the Trustee specified
in Section 12.1 or such other address as the Trustee may specify by notice to
the Issuers.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
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"Default" means any event that is, or after notice or the passage of time
or both would be, an Event of Default.
"Depositary" means the Person specified in Section 2.3 as the Depositary
with respect to the Notes issuable in global form, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Diamond Jo" means the riverboat casino and related facilities that will
be purchased, pursuant to the Asset Acquisition Agreement, by the Company on the
Issue Date, located in Dubuque, Iowa, as more fully described in the Security
Documents.
"Disqualified Capital Stock" means any Equity Interest that (i) either by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable) is or upon the happening of an event would be required
to be redeemed or repurchased prior to the final stated maturity of the Notes or
is redeemable at the option of the holder thereof at any time prior to such
final stated maturity, or (ii) is convertible into or exchangeable at the option
of the issuer thereof or any other Person for debt securities.
"DTC" means The Depository Trust Company.
"Equity Holder" means (a) with respect to a corporation, each holder of
stock of such corporation, (b) with respect to a limited liability company or
similar entity, each member of such limited liability company or similar entity,
(c) with respect to a partnership, each partner of such partnership, (d) with
respect to any entity described in clause (a)(iv) of the definition of "Flow
Through Entity", the owner of such entity, and (e) with respect to a trust
described in clause (a)(v) of the definition of "Flow Through Entity", the
persons treated for Federal income tax purposes as the owners thereof.
"Equity Interests" means Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means (i) an underwritten offering of Qualified Capital
Stock of the Company pursuant to a registration statement filed with and
declared effective by the Commission in accordance with the Securities Act or
(ii) an offering of Qualified Capital Stock of the Company pursuant to an
exemption from the registration requirements of the Securities Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Loss" means, with respect to any property or asset, any (a)
loss, destruction or damage of such property or asset or (b) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Issuers pursuant
to the Registration Rights Agreement to exchange Notes for Exchange Securities.
"Exchange Securities" has the meaning provided for such term in the
Registration Rights Agreement.
"Excess Cash Flow" means, with respect to any Hotel Operating Year, the
Consolidated EBITDA of the Company for such Hotel Operating Year, less the sum
of (i) Consolidated Interest Expense of the Company that is paid in cash during
such Hotel Operating Year, (ii) up to $4.0 million in capital expenditures of
the Company and its Subsidiaries that are actually paid during such Hotel
Operating Year, (iii) principal payments made during such Hotel Operating Year
on Indebtedness permitted to be incurred pursuant to Section 4.9 hereof and (iv)
Restricted Payments identified in Section 4.7(b) (iii), (v), (vi), (vii) or
(viii) hereof that are made during such Hotel Operating Year.
"Excluded Assets" means (i) cash, other than cash in bank and similar
accounts; (ii) assets securing Purchase Money Obligations or Capital Lease
Obligations permitted to be incurred under this Indenture; (iii) any agreements,
permits, licenses or the like that cannot be subject to a Lien under the
Security Documents without the consent of third parties, which consent is not
obtained by the Company; and (iv) all Gaming Licenses; provided, that Excluded
Assets does not include the proceeds of assets under clause (ii), (iii) or (iv)
or of any other Collateral to the extent such proceeds do not constitute
Excluded Assets.
"Excluded Person" means (i) M. Brent Stevens, Michael S. Luzich and any
Affiliate or Manager of PGP on the Issue Date (collectively, the "Existing
Holders"), (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners or owners of which consist solely of the
Existing Holders and members of the immediate family of the Existing Holders or
(iii) any partnership the sole general partners of which consist solely of the
Existing Holders and members of the immediate family of the Existing Holders.
"Flow Through Entity" means an entity that (a) for Federal income tax
purposes constitutes (i) an "S corporation" (as defined in Section 1361(a) of
the Code), (ii) a "qualified subchapter S subsidiary" (as defined in Section
1361(b)(3)(B) of the Code), (iii) a "partnership" (within the meaning of Section
7701 (a)(2) of the Code) other than a "publicly traded partnership" (as defined
in Section 7704 of the Code), (iv) an entity that is disregarded as an entity
separate from its owner under the Code, the Treasury regulations or any
published administrative guidance of the Internal Revenue Service, or (v) a
trust, the income of which is includible in the taxable income of the grantor or
another person under sections 671 through 679 of the Code (the entities
described in the immediately preceding clauses (i), (ii), (iii), (iv) and (v), a
"Federal Flow Through Entity") and (b) for state and local jurisdictions in
respect of which Permitted Tax Distributions are being made, is
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subject to treatment on a basis under applicable state or local income tax law
substantially similar to a Federal Flow Through Entity.
"gaap" means generally accepted accounting principles, as in effect from
time to time, set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession, and in the rules and regulations of the
Commission.
"GAAP" means gaap as in effect on the Issue Date.
"Gaming Authorities" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or city or other
political subdivision, whether now or hereafter existing, or any officer or
official thereof, including, without limitation, the Gaming Commission and any
other agency with authority to regulate any gaming operation (or proposed gaming
operation) owned, managed or operated by the Company or any of its Subsidiaries.
"Gaming Commission" means the Iowa Racing and Gaming Commission, or any
successor Gaming Authority.
"Gaming Licenses" means every material license, material franchise,
material registration, material qualification, findings of suitability or other
material approval or authorization required to own, lease, operate or otherwise
conduct or manage riverboat, dockside or land-based gaming activities in any
state or jurisdiction in which the Company or any of its Restricted Subsidiaries
conduct business (including, without limitation, all such licenses granted by
the Gaming Commission under Chapter 99F of the Iowa Code, and the rules and
regulations promulgated thereunder), and all applicable liquor licenses.
"Gaming Vessel" means a riverboat casino (i) which is substantially
similar in size and space to the Diamond Jo, (ii) with at least the same overall
qualities and amenities as the Diamond Jo, and (iii) that is developed,
constructed and equipped to be in compliance with all federal, state and local
laws, including, without limitation, the cruising requirements of Chapter 99F of
the Iowa Code. In the event the laws of the State of Iowa change to permit the
development and operation of additional land-based casinos, the term "Gaming
Vessel" shall be deemed to include a land-based casino meeting the requirements
of clauses (i), (ii) and (iii) above.
"Government Securities" means (i) direct obligations of the United States
of America for the timely payment of which its full faith and credit is pledged
or (ii) obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section
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3(a)(2) of the Securities Act), as custodian with respect to any such Government
Security or a specific payment of principal of or interest on any such
Government Security held by such custodian for the account of the holder of such
depository receipt; provided, that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Security or the specific payment of principal of or interest on
the Government Security evidenced by such depository receipt.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.
"guaranty" or "guarantee," used as a noun, means any guaranty (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness or other Obligation. "guarantee" or "guaranty" used
as a verb, has a correlative meaning.
"Hedging Obligations" means, with respect to any Person, the Obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means the Person in whose name a Note is registered in the
register of the Notes.
"Hotel" means a hotel to be constructed by the Company or a Subsidiary of
the Company in or around Dubuque, Iowa, which is expected to be contiguous to
the Diamond Jo.
"Hotel Operating Year" means (i) the four consecutive fiscal quarter
periods of the Company beginning on the first day of the fiscal quarter
commencing immediately after the date that the Hotel first becomes Operating,
and (ii) each succeeding four consecutive fiscal quarter period.
"Indebtedness" of any Person means (without duplication) (i) all
liabilities and obligations, contingent or otherwise, of such Person (a) in
respect of borrowed money (regardless of whether the recourse of the lender is
to the whole of the assets of such Person or only to a portion thereof), (b)
evidenced by bonds, debentures, notes or other similar instruments, (c)
representing the deferred purchase price of property or services (other than
trade payables on customary terms incurred in the ordinary course of business),
(d) created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e) representing
Capital Lease Obligations, (f) under bankers' acceptance and letter of credit
facilities, (g) to purchase, redeem, retire, defease or otherwise acquire for
value any
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Disqualified Capital Stock, or (h) in respect of Hedging Obligations; (ii) all
Indebtedness of others that is guaranteed by such Person; and (iii) all
Indebtedness of others that is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; provided, that the amount of such
Indebtedness shall (to the extent such Person has not assumed or become liable
for the payment of such Indebtedness) be the lesser of (1) the fair market value
of such property at the time of determination and (2) the amount of such
Indebtedness. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date. The
principal amount outstanding of any Indebtedness issued with original issue
discount is the accreted value of such Indebtedness.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Initial Purchaser" means Jefferies & Company, Inc.
"Intercreditor Agreement" means that certain Intercreditor Agreement among
the Trustee and one or more Lenders, substantially in the form attached hereto
as Exhibit D, which may be entered into after the Issue Date in accordance with
Section 7.1(g) hereof, including any amended or supplemented agreement or any
replacement or substitute agreement, in each case substantially in the form of
Exhibit D attached hereto.
"Interest Coverage Ratio" means, for any period, the ratio of (i)
Consolidated EBITDA of the Company for such period, to (ii) Consolidated
Interest Expense of the Company for such period. In calculating Interest
Coverage Ratio for any period, pro forma effect shall be given to the
incurrence, assumption, guarantee, repayment, repurchase, redemption or
retirement by the Company or any of its Subsidiaries of any Indebtedness
subsequent to the commencement of the period for which the Interest Coverage
Ratio is being calculated, as if the same had occurred at the beginning of the
applicable period. For purposes of making the computation referred to above,
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including all mergers and consolidations, subsequent to the
commencement of such period shall be calculated on a pro forma basis, assuming
that all such acquisitions, mergers and consolidations had occurred on the first
day of such period and Consolidated EBITDA for such period shall be calculated
without giving effect to clause (ii) of the proviso set forth in the definition
of Consolidated EBITDA. Without limiting the foregoing, the financial
information of the Company with respect to any portion of such period that falls
before the Issue Date shall be adjusted to give pro forma effect to the issuance
of the Notes and the application of the proceeds therefrom as if they had
occurred at the beginning of such period.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans,
guarantees, advances or capital contributions (excluding (i) payroll commission,
travel and similar advances to officers and employees of such
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Person made in the ordinary course of business and (ii) bona fide accounts
receivable arising from the sale of goods or services in the ordinary course of
business consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, and any
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Iowa Code" means the Code of Iowa (1999), as amended from time to time.
"Issue Date" means the date upon which the Notes are first issued.
"Issuers" means the parties named as such above, until successors replace
such Persons in accordance with the terms of this Indenture, and thereafter
means such successors.
"Issuers Order" means a written request or order signed in the name of the
Company and PGC by each of their respective Managers, Chairmen of the Board,
Presidents, Chief Executive Officers or Senior or Executive Vice Presidents, and
by each of their respective Managers, Chairmans of the Board, Presidents, Chief
Executive Officers, Senior or Executive Vice Presidents, Treasurers, Secretaries
or Assistant Treasurers or Assistant Secretaries and delivered to the Trustee.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed.
"Lender" means a Person that is not an Affiliate of the Company and is a
lender under the Senior Credit Facility.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Liquidated Damages" has the meaning set out in the Registration Rights
Agreement.
"Managers" means, with respect to any Person (i) if such Person is a
limited liability company, the board member, board members, manager or managers
appointed pursuant to the operating agreement of such Person as then in effect
or (ii) otherwise, the members of the Board of Directors or other governing body
of such Person.
"Members" means the holders of all of the Voting Stock of the Company.
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"Net Income" means, with respect to any Person for any period, (a) the net
income (loss) of such Person for such period, determined in accordance with
GAAP, excluding (to the extent included in calculating such net income) (i) any
gain or loss, together with any related taxes paid or accrued on such gain or
loss, realized in connection with any Asset Sales and dispositions pursuant to
sale-leaseback transactions, (ii) any extraordinary gain or loss, together with
any taxes paid or accrued on such gain or loss and (iii) amortization of
goodwill arising on the Issue Date from the Acquisition and related
transactions, reduced by (b) the maximum amount of Permitted Tax Distributions
for such period.
"Net Proceeds" means the aggregate proceeds received in the form of cash
or Cash Equivalents in respect of any Asset Sale (including issuance or other
payments in an Event of Loss and payments in respect of deferred payment
obligations and any cash or Cash Equivalents received upon the sale or
disposition of any non-cash consideration received in any Asset Sale, in each
case when received), net of: (i) the reasonable and customary direct
out-of-pocket costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees and sales commissions), other than
any such costs payable to an Affiliate of the Company, (ii) taxes required to be
paid by the Company, any of its Subsidiaries, or any Equity Holder of the
Company (or, in the case of any Company Equity Holder that is a Flow Through
Entity, the Upper Tier Equity Holder of such Flow Through Entity) in connection
with such Asset Sale in the taxable year that such sale is consummated or in the
immediately succeeding taxable year, the computation of which shall take into
account the reduction in tax liability resulting from any available operating
losses and net operating loss carryovers, tax credits and tax credit
carryforwards, and similar tax attributes, (iii) amounts required to be applied
to the permanent repayment of Indebtedness in connection with such Asset Sale,
and (iv) appropriate amounts provided as a reserve by the Company or any
Restricted Subsidiary, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or such Restricted
Subsidiary, as the case may be, after such Asset Sale (including, without
limitation, as applicable, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations arising from such Asset Sale).
"Notes" means the 12 1/4% Senior Secured Notes due 2006 authenticated and
issued by the Issuers pursuant to this Indenture, including the Exchange
Securities.
"Obligation" means any principal, premium, interest, penalty, fee,
indemnification, reimbursement, damage and other obligation and liability
payable under the documentation governing any liability.
"Officers" means the Managers, Chairman of the Board, the President, the
Chief Financial Officer, the Chief Operating Officer, the Treasurer, any
Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or
Senior Vice President of either of the Issuers.
"Officers' Certificate" means a certificate signed on behalf of the
Company and PGC by two Officers of each of the Company and PGC, in each case,
one of whom must be the Manager,
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Chairman of the Board, President, Chief Executive Officer, Chief Financial
Officer, Treasurer, Controller or a Senior or Executive Vice President of the
Company and PGC, respectively.
"Operating" means the Hotel is in a condition (including installation of
furnishings, fixtures and equipment) to receive customers in the ordinary course
of business, and is open to the general public and operating in accordance with
applicable law.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee. Such counsel may be an employee of or counsel to
either of the Issuers, any Subsidiary of either of the Issuers or the Trustee.
"Permitted C-Corp Conversion" means a transaction resulting in the Company
becoming subject to tax under subchapter C of the Code (a "C Corporation")
provided, that:
(i) the C Corporation resulting from such transaction (a) is a
corporation organized and existing under the laws of any state of the United
States or the District of Columbia, (b) assumes all of the obligations of the
Company under the Notes, the Security Documents and the Indenture pursuant to a
supplemental indenture in form reasonably satisfactory to the Trustee and (c)
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;
(ii) the Company shall have provided to the Trustee 30 days' advance
notice of such transaction and evidence reasonably satisfactory to the
Trustee regarding the maintenance of the perfection, priority and proof of
the security interest of the Trustee in the Collateral;
(iii) after giving effect to such transaction no Default or Event of
Default exists;
(iv) such transaction would not (a) 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 or (b) require any holder or
beneficial owner of Notes to obtain a Gaming License or be qualified or
found suitable under the laws of any applicable gaming jurisdiction; and
(v) prior to consummation of such transaction, the Company shall
have delivered to the Trustee (a) an Opinion of Counsel to the effect that
the holders of the outstanding Notes will not recognize income gain or
loss for Federal income tax purposes as a result of such Permitted C-Corp
Conversion 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 Permitted C-Corp Conversion had not occurred and (b) an Officers'
Certificate as to compliance with all of the above conditions.
"Permitted Investments" means:
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(i) Investments in the Company or in any Wholly Owned Subsidiary;
(ii) Investments in Cash Equivalents;
(iii) Investments in a Person, if, as a result of such Investment,
such Person (a) becomes a Wholly Owned Subsidiary, or (b) is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or
a Wholly Owned Subsidiary;
(iv) Hedging Obligations;
(v) Investments as a result of consideration received in connection
with an Asset Sale made in compliance with Section 4.10;
(vi) Investments existing on the Issue Date;
(vii) Investments paid for solely with Capital Stock (other than
Disqualified Capital Stock) of the Company;
(viii) credit extensions to gaming customers in the ordinary course
of business, consistent with industry practice;
(ix) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Company
(a) in satisfaction of judgments or (b) pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
trade creditors or customers; and
(x) loans or other advances to employees of the Company and its
Subsidiaries made in the ordinary course of business in an aggregate
amount not to exceed $0.5 million at any one time outstanding.
"Permitted Liens" means:
(i) Liens arising by reason of any judgment, decree or order of any
court for an amount and for a period not resulting in an Event of Default
with respect thereto, so long as such Lien is being contested in good
faith and is adequately bonded, and any appropriate legal proceedings that
may have been duly initiated for the review of such judgment, decree or
order shall not have been finally adversely terminated or the period
within which such proceedings may be initiated shall not have expired;
(ii) security for the performance of bids, tenders, trade, contracts
(other than contracts for the payment of money) or leases, surety and
appeal bonds, performance and
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return-of-money bonds and other obligations of a like nature incurred in
the ordinary course of business, consistent with industry practice;
(iii) Liens (other than Liens arising under ERISA) for taxes,
assessments or other governmental charges not yet delinquent or that are
being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of the Company
in accordance with gaap;
(iv) Liens of carriers, warehousemen, mechanics, landlords, material
men, suppliers, repairmen or other like Liens arising by operation of law
in the ordinary course of business consistent with industry practices
(other than Liens arising under ERISA) and Liens on deposits made to
obtain the release of such Liens if (a) the underlying obligations are not
overdue for a period of more than 30 days or (b) such Liens are being
contested in good faith and by appropriate proceedings and adequate
reserves with respect thereto are maintained on the books of the Company
in accordance with gaap;
(v) easements, rights of way, zoning and similar restrictions and
other similar encumbrances or title defects incurred in the ordinary
course of business, consistent with industry practices that, in the
aggregate, are not substantial in amount, and that do not in any case
materially detract from the value of the property subject thereto (as such
property is used by the Company or a Subsidiary) or interfere with the
ordinary conduct of the business of the Company or any of its
Subsidiaries; provided, that such Liens are not incurred in connection
with borrowing money or any commitment to loan money or extend credit;
(vi) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security legislation or otherwise arising from statutory
or regulatory requirements of the Company or any of its Subsidiaries;
(vii) Liens securing Refinancing Indebtedness incurred in compliance
with this Indenture to refinance Indebtedness secured by Liens; provided,
(a) such Liens do not extend to any additional property or assets; (b) if
the Liens securing the Indebtedness being refinanced were subordinated to
or pari passu with the Liens securing the Notes, the Subsidiary Guarantees
or any intercompany loan, as applicable, such new Liens are subordinated
to or pari passu with such Liens to the same extent, and any related
subordination or intercreditor agreement is confirmed; and (c) such Liens
are no more adverse to the interests of Holders than the Liens replaced or
extended thereby;
(viii) Liens that secure Acquired Debt or Liens on property of a
Person existing at the time such Person is merged into or consolidated
with, or such property was acquired by, the Company or any Restricted
Subsidiary; provided, that such Liens do not extend to or cover any
Person, property or assets other than those of the Person or property
being acquired and were not put in place in anticipation of such
acquisition;
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(ix) Liens that secure Purchase Money Obligations or Capital Lease
Obligations permitted to be incurred under this Indenture; provided that
such Liens do not extend to or cover any property or assets other than
those being acquired, leased or developed;
(x) whether or not existing on the Issue Date, Liens securing
Obligations under this Indenture, the Notes, the Subsidiary Guarantees or
the Security Documents;
(xi) Liens securing Indebtedness of the Company or any of its
Subsidiaries incurred pursuant to Section 4.9(b)(i);
(xii) with respect to any vessel included in the Collateral, certain
maritime Liens, including Liens for crew's wages and salvage;
(xiii) leases or subleases granted in the ordinary course of
business not materially interfering with the conduct of the business of
the Company or any of the Restricted Subsidiaries;
(xiv) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered into by the
Company or any of its Subsidiaries in the ordinary course of business;
(xv) Liens incurred in the ordinary course of business securing
Hedging Obligations, which Hedging Obligations relate to Indebtedness that
is otherwise permitted under this Indenture;
(xvi) Liens existing on the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date;
(xvii) Liens on a pledge of the Capital Stock of any Unrestricted
Subsidiary securing any Indebtedness of such Unrestricted Subsidiary; and
(xviii) Liens securing reimbursement obligations with respect to
commercial letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof.
"Permitted Tax Distributions" in respect of the Company and each
Subsidiary that qualifies as a Flow Through Entity means, with respect to any
taxable year, the sum of: (i) the product of (a) the excess of (1) all items of
taxable income or gain (other than capital gain) allocated by the Company to
Equity Holders for such year over (2) all items of taxable deduction or loss
(other than capital loss) allocated to such Equity Holders by the Company for
such year and (b) the Applicable Income Tax Rate, plus (ii) the product of (a)
the net capital gain (i.e., net long-term capital gain over net short-term
capital loss), if any, allocated by the Company to Equity Holders for such year
and (b) the Applicable Capital Gain Tax Rate, plus (iii) the product of (a) the
net short-term capital gain
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(i.e., net short-term capital gain in excess of net long-term capital loss), if
any, allocated by the Company to Equity Holders for such year and (b) the
Applicable Income Tax Rate, minus (iv) the aggregate Tax Loss Benefit Amount for
the Company for such year; provided, that in no event shall the Applicable
Income Tax Rate or the Applicable Capital Gain Tax Rate exceed the greater of
(1) the highest aggregate applicable effective marginal rate of Federal, state,
and local income to which a corporation doing business in the State of
California would be subject in the relevant year of determination (as certified
to the Trustee by a nationally recognized tax accounting firm) plus 5% and (2)
60%. For purposes of calculating the amount of the Permitted Tax Distributions,
the proportionate part of the items of taxable income, gain, deduction or loss
(including capital gain or loss) of any Subsidiary that is a Flow Through Entity
shall be included in determining the taxable income, gain, deduction or loss
(including capital gain or loss) of the Company.
Estimated tax distributions shall be made within thirty days following
March 15, May 15, August 15, and December 15 based upon an estimate of the
excess of (x) the tax distributions that would be payable for the period
beginning on January 1 of such year and ending on March 31, May 31, August 31,
and December 31 if such period were a taxable year (computed as provided above)
over (y) distributions attributable to all prior periods during such taxable
year.
The amount of the Permitted Tax Distribution shall be re-computed promptly
after (i) the filing by the Company and each Subsidiary that is treated as a
Flow Through Entity of their respective annual income tax returns and (ii) an
appropriate Federal or state taxing authority finally determines that the amount
of the items of taxable income, gain, deduction, or loss of the Company or any
Subsidiary that is treated as a Flow Through Entity for any taxable year or the
aggregate Tax Loss Benefit Amounts carried forward to such taxable year should
be changed or adjusted (each of clauses (i) and (ii) a "Tax Calculation Event").
To the extent that the Permitted Tax Distributions previously paid to an Equity
Holder in respect of any taxable year are either greater than (a "Tax
Distribution Overage") or less than (a "Tax Distribution Shortfall") the
Permitted Tax Distributions with respect to such taxable year, as determined by
reference to the computation of the amount of the items of income, gain,
deduction, or loss of the Company and each Subsidiary in connection with a Tax
Calculation Event, the amount of the estimated Permitted Tax Distributions to be
made to such Equity Holder on the estimated tax distribution date immediately
following such Tax Calculation Event shall be reduced or increased as
appropriate to the extent of the Tax Distribution Overage or the Tax
Distribution Shortfall. To the extent that a Tax Distribution Overage remains
after the estimated tax distribution date immediately following such Tax
Calculation Event, the amount of the estimated Permitted Tax Distribution to be
made to such Equity Holder on the subsequent estimated tax distribution date
shall be reduced to the extent of such Tax Distribution Overage.
Prior to making any Permitted Tax Distributions, the Company shall require
each Equity Holder to agree that promptly after the second estimated tax
distribution date following a Tax Calculation Event, such Equity Holder shall
reimburse the Company to the extent of any remaining Tax Distribution Overage.
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"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other entity.
"PGC" means the party named as such above, until a successor replaces such
Person in accordance with the terms of this Indenture, and thereafter means such
successor.
"PGP" means Peninsula Gaming Partners, LLC, a Delaware limited liability
company, the direct parent and sole manager of the Company, and indirect parent
of PGC.
"Purchase Money Obligations" means Indebtedness representing, or incurred
to finance (or to Refinance Indebtedness incurred to finance), the cost (i) of
acquiring any assets (including furniture, fixtures or equipment) and (ii) of
construction or build-out of facilities (including Purchase Money Obligations of
any other Person at the time such other Person is merged with or into or is
otherwise acquired by the Issuers); provided, that (a) the principal amount of
such Indebtedness does not exceed 80% of such cost, including construction
charges, (b) any Lien securing such Indebtedness does not extend to or cover any
other asset or property other than the asset or property being so acquired,
constructed or built and (c) such Indebtedness is (or the Indebtedness being
Refinanced was) incurred, and any Liens with respect thereto are granted, within
180 days of the acquisition or commencement of construction or build-out of such
property or asset.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means, with respect to any Person, Capital Stock
of such Person other than Disqualified Capital Stock.
"Refinancing Fee" means a payment in the aggregate amount of $1.5 million
to be received by certain member of the management of the Company and PGP,
including Michael Luzich, James Rix and M. Brent Stevens, at the discretion of
Mr. Stevens, in the event that the Issuers repay, redeem or refinance 90% or
more of the Notes on or prior to July 1, 2003.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Issue Date, by and among the Issuers and the Initial Purchaser
as such agreement may be amended, modified or supplemented from time to time.
"Related Business" means the gaming, entertainment and hotel businesses
conducted (or proposed to be conducted) by the Company and its Subsidiaries as
of the Issue Date and any and all other businesses that in the good faith
judgment of the Managers of the Company are materially related or incidental
businesses (including, without limitation, food and beverage distribution
operations).
"Required Regulatory Redemption" means a redemption by the Issuers of any
Holder's Notes pursuant to, and in accordance with, any order of any
Governmental Authority with appropriate
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jurisdiction and authority relating to a Gaming License, or to the extent
necessary in the reasonable, good faith judgment of the Managers of the Company
to prevent the loss, failure to obtain or material impairment or to secure the
reinstatement of, any Gaming License, where such redemption or acquisition is
required because the Holder or beneficial owner of Notes is required to be found
suitable or to otherwise qualify under any gaming or similar laws and is not
found suitable or so qualified within 30 days after being requested to do so (or
such lesser period that may be required by any Governmental Authority).
"Responsible Officer" when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee located at the
Corporate Trust Office (or any successor group of the Trustee) or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the designated officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Securities" means Notes that bear or are required to bear the
legends relating to restrictions on transfer set forth on Exhibit A hereto.
"Restricted Subsidiary" means a Subsidiary other than an Unrestricted
Subsidiary.
"Return from Unrestricted Subsidiaries" means (a) 50% of any dividends or
distributions received by the Company or a Restricted Subsidiary from an
Unrestricted Subsidiary, to the extent that such dividends or distributions were
not otherwise included in Consolidated Net Income of the Company, plus (b) to
the extent not otherwise included in Consolidated Net Income of the Company, an
amount equal to the net reduction in Investments in Unrestricted Subsidiaries
resulting from (i) repayments of the principal of loans or advances or other
transfers of assets to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries or (ii) the sale or liquidation of any Unrestricted
Subsidiaries, plus (c) to the extent that any Unrestricted Subsidiary of the
Company is designated to be a Restricted Subsidiary, the fair market value of
the Company's Investment in such Subsidiary on the date of such designation.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or under any similar rule or regulation hereafter
adopted by the Commission.
"Security Agreement" means the Security Agreement dated the date hereof,
executed by the Company in favor of the Trustee for the Trustee's benefit and
the benefit of the Holders.
"Securities Act" means the Securities Act of 1933, as amended.
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"Security Documents" means the Security Agreement, the Ship Mortgage, the
Shore Mortgage and any other mortgage, deed of trust, security agreement or
similar instrument securing the Issuers' Obligations under this Indenture or the
Notes.
"Seller Preferred" means $7.0 million face amount of the Company's
redeemable preferred membership interests to be issued to GDREC on the Issue
Date pursuant to the terms of the Asset Acquisition Agreement.
"Senior Credit Facility" means any revolving credit agreement or similar
instrument, including, without limitation, working capital, construction
financing or equipment purchase lines of credit, entered into by the Company
governing the terms of a bona fide borrowing from (i) a third party financial
institution that is primarily engaged in the business of commercial lending or
(ii) a vendor or other provider of financial accommodations in connection with
the purchase of equipment, in either case for valid business purposes, including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith and, in each case, as amended, renewed,
refunded, replaced or refinanced from time to time; provided, that such
agreements or instruments (x) have terms and conditions (including with respect
to the applicable interest rates and fees) customary for similar facilities
extended to borrowers comparable to the Company, and (y) do not permit the
Company to incur Indebtedness in an aggregate principal amount at any time
outstanding in excess of $10.0 million.
"Ship Mortgage" means the First Preferred Ship Mortgage dated the date
hereof, executed by the Company in favor of the Trustee for the Trustee's
benefit and the benefit of the Holders.
"Shore Mortgage" means the Shore Mortgage dated the date hereof, executed
by the Company in favor of the Trustee for the Trustee's benefit and the benefit
of the Holders.
"subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity (including a limited liability company) of
which more than 50% of the total voting power of shares of Voting Stock thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other subsidiaries of that Person or a combination thereof
and (ii) any partnership in which such Person or any of its subsidiaries is a
general partner.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guaranty" means an unconditional and irrevocable guaranty by a
Subsidiary Guarantor of the Obligations of the Issuers under the Notes and the
Indenture, on a senior secured basis, as set forth in this Indenture, as amended
from time to time in accordance with the terms thereof.
"Subsidiary Guarantor" means any Subsidiary that has executed and
delivered in accordance with this Indenture a Subsidiary Guaranty, and such
Person's successors and assigns.
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"Tax Loss Benefit Amount" means with respect to any taxable year, the
amount by which the Permitted Tax Distributions would be reduced were a net
operating loss or net capital loss from a prior taxable year of the Company
ending subsequent to the Issue Date carried forward to the applicable taxable
year; provided, that for such purpose the amount of any such net operating loss
or net capital loss shall be used only once and in each case shall be carried
forward to the next succeeding taxable year until so used. For purposes of
calculating the Tax Loss Benefit Amount, the proportionate part of the items of
taxable income, gain, deduction, or loss (including capital gain or loss) of any
Subsidiary that is a Flow Through Entity for a taxable year of such Subsidiary
ending subsequent to the Issue Date shall be included in determining the amount
of net operating loss or net capital loss of the Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss.77aaa-77bbbb), as amended, as in effect on the date hereof until such time
as this Indenture is qualified under the TIA, and thereafter as in effect on the
date on which this Indenture is qualified under the TIA, unless the context
requires reference thereto as in effect from time to time.
"transfer" has the meaning given to such term in the definition of the
term "Asset Sale."
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary that, at or prior to the
time of determination, shall have been designated by the Managers of the Company
as an Unrestricted Subsidiary; provided, that such Subsidiary does not hold any
Indebtedness or Capital Stock of, or any Lien on any assets of, the Company or
any Restricted Subsidiary. If, at any time, any Unrestricted Subsidiary would
fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary as of such date. The Managers of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under the Interest Coverage Ratio test set forth in
Section 4.9 calculated on a pro forma basis as if such designation had occurred
at the beginning of the four-quarter reference period, and (ii) no Default or
Event of Default would be in existence following such designation. The Company
shall be deemed to make an Investment in each Subsidiary designated as an
Unrestricted Subsidiary immediately following such designation in an amount
equal to the Investment in such Subsidiary and its subsidiaries immediately
prior to such designation. Any such designation by the Managers of the Company
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the resolution of the Managers giving effect to such designation and an
Officers' Certificate certifying that such designation complies with the
foregoing conditions and is permitted by Section 4.9 hereof.
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"Upper Tier Equity Holder" means, in the case of any Flow Through Entity
the Equity Holder of which is, in turn, a Flow Through Entity, the person that
is ultimately subject to tax on a net income basis on the items of taxable
income, gain, deduction, and loss of the Company and its Subsidiaries that are
Flow Through Entities.
"Voting Stock" means, with respect to any Person, (i) one or more classes
of the Capital Stock of such Person having general voting power to elect at
least a majority of the Board of Directors, managers or trustees of such Person
(regardless of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency)
and (ii) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (i) above.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years (rounded to the nearest
one-twelfth) obtained by dividing (i) the then outstanding principal amount of
such Indebtedness into (ii) the total of the product obtained by multiplying (a)
the amount of each then remaining installment, sinking fund, serial maturity or
other required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means a subsidiary of such Person
all the Capital Stock of which (other than directors' qualifying shares) is
owned directly or indirectly by such Person; provided, that with respect to the
Company, the term Wholly Owned Subsidiary shall exclude Unrestricted
Subsidiaries.
Section 1.2 Other Definitions.
Term Defined in Section
---- ------------------
"Affiliate Transaction" ................. 4.11
"Change of Control Offer" ............... 4.14
"Change of Control Payment" ............. 4.14
"Change of Control Payment Date" ........ 4.14
"Covenant Defeasance" ................... 8.3
"Definitive Notes" ...................... 2.1
"Events of Default" ..................... 6.1
"Excess Cash Flow Offer" ................ 4.20
"Excess Cash Flow Offer Amount" ......... 4.20
"Excess Cash Flow Offer Period" ......... 4.20
"Excess Proceeds" ....................... 4.10
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Term Defined in Section
---- ------------------
"Excess Proceeds Offer" ................. 4.10
"Excess Proceeds Offer Period" .......... 4.10
"Excess Proceeds Payment Date" .......... 4.10
"Global Notes" .......................... 2.1
"incur" ................................. 4.9
"Legal Defeasance" ...................... 8.2
"Paying Agent" .......................... 2.3; 8.5 (solely for
purposes of Section
8.5)
"Purchase Amount" ....................... 4.10
"Refinance" ............................. 4.9
"Refinancing Indebtedness" .............. 4.9
"Registrar" ............................. 2.3
"Replacement Vessel" .................... 4.10
"Restricted Payments" ................... 4.7
"Security Interest" ..................... 11.1
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Issuers, the Subsidiary Guarantors and
any successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute, or defined by Commission rule under
the TIA have the meanings so assigned to them.
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Section 1.4 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision, and the terms "Article," "Section," "Exhibit" and
"Schedule," unless otherwise specified or indicated by the context in
which used, mean the corresponding Article or Section of, or the
corresponding Exhibit or Schedule to, this Indenture;
(f) references to agreements and other instruments include
subsequent amendments, supplements and waivers to such agreements or
instruments but only to the extent not prohibited by this Indenture; and
(g) provisions apply to successive events and transactions.
ARTICLE II
THE NOTES
Section 2.1 Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A attached hereto, the terms of which are
incorporated in and made a part of this Indenture. Each Note shall include the
Subsidiary Guaranty in the form of Exhibit C attached hereto, executed by each
of the Subsidiary Guarantors existing on the date of issuance of such Note, the
terms of which are incorporated in and made a part of this Indenture. The Notes
may have notations, legends or endorsements required by law, stock exchange
rule, agreements to which either of the Issuers is subject or usage. Each Note
shall be dated the date of its authentication. The Notes shall be issued in
denominations of $1,000 and integral multiples thereof.
The Notes will be issued (a) in global form (the "Global Notes"),
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnotes 1 and 5 thereto) and (b) upon the initial issuance
thereof and under certain other circumstances, in definitive form (the
"Definitive
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Notes"), substantially in the form of Exhibit A attached hereto (excluding the
text referred to in footnotes 1 and 5 thereto). Each Global Note shall represent
the aggregate amount of outstanding Notes from time to time endorsed thereon;
provided, that the aggregate amount of outstanding Notes represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee, in accordance with instructions given by the
Holder thereof, as required by Section 2.6.
Section 2.2 Execution and Authentication.
The Notes shall be executed on behalf of each of the Issuers, by manual or
facsimile signature, by its Manager, Chairman of the Board, its President or one
of its Vice Presidents and attested by another Officer by manual or facsimile
signature. If an Officer whose signature is on a Note no longer holds that
office at the time the Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature of the Trustee shall be conclusive evidence that the
Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A attached hereto.
The Trustee shall, upon an Issuers Order, authenticate for original issue
Notes in any aggregate principal amount. Subject to Section 4.9, the aggregate
principal amount of Notes that may be authenticated and delivered under this
Indenture is unlimited; provided, that additional Notes issued after the Issue
Date may not be issued with original issue discount as determined under section
1271 et seq. of the Code.
The Trustee may appoint an authenticating agent acceptable to the Issuers
to authenticate Notes. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authenticating by the Trustee includes
authenticating by such agent. An authenticating agent has the same rights as an
Agent to deal with the Issuers or an Affiliate of either of the Issuers.
The Issuers, the Trustee and any agent of either of the Issuers or the
Trustee may treat the Person in whose name any Note is registered as the owner
of such Note for the purpose of receiving payment of principal of and (subject
to the provisions of this Indenture and the Notes with respect to record dates)
interest on such Note and for all other purposes whatsoever, regardless of
whether such Note is overdue, and none of the Issuers, the Trustee or any agent
of any of the Issuers or the Trustee shall be affected by notice to the
contrary.
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Section 2.3 Registrar, Paying Agent and Depositary.
The Issuers shall maintain (a) an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and (b) an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Issuers initially appoint the Trustee as Registrar and Paying Agent. The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuers may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuers may change any
Paying Agent or Registrar without notice to any Holder. The Issuers shall notify
the Trustee of the name and address of any Agent not a party to this Indenture.
If the Issuers fail to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may
act as Paying Agent or Registrar, except that for purposes of Articles III and
VIII and Sections 4.1, 4.10 and 4.14, neither the Company nor any of its
Subsidiaries shall act as Paying Agent.
The Issuers shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent.
The Issuers initially appoint DTC to act as Depositary with respect to the
Global Notes. The Trustee shall act as custodian for the Depositary with respect
to the Global Notes.
Section 2.4 Paying Agent to Hold Money in Trust.
The Issuers shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes and shall notify the
Trustee in writing of any default by either of the Issuers in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Issuers at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary
of the Company) shall have no further liability for the money delivered to the
Trustee. If the Company or a Subsidiary of the Company acts as Paying Agent
(subject to Section 2.3), it shall segregate and hold in a separate trust fund
for the benefit of the Holders all money held by it as Paying Agent.
Section 2.5 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss.312(a). If the Trustee is
not the Registrar, the Issuers shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names
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and addresses of the Holders, including the aggregate principal amount of Notes
held by each such Holder, and the Issuers shall otherwise comply with TIA
ss.312(a).
Section 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request (1) to register
the transfer of the Definitive Notes or (2) to exchange such Definitive
Notes for an equal principal amount of Definitive Notes of other
authorized denominations, the Registrar shall register the transfer or
make the exchange as requested if its requirements for such transactions
are met; provided, that the Definitive Notes so presented (A) have been
duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by his
attorney, duly authorized in writing; and (B) in the case of a Restricted
Security, such request shall be accompanied by the following additional
documents:
(i) if such Restricted Security is being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification to that effect (in substantially
the form of Exhibit B attached hereto); or
(ii) if such Restricted Security is being transferred to a QIB
in accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a certification to
that effect (in substantially the form of Exhibit B attached
hereto); or
(iii) if such Restricted Security is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit B attached hereto) and an opinion of counsel
reasonably acceptable to the Issuers and the Registrar to the effect
that such transfer is in compliance with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a
Global Note. A Definitive Note may be exchanged for a beneficial interest
in a Global Note only upon receipt by the Trustee of a Definitive Note,
duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
(i) written instructions directing the Trustee to make an
endorsement on the appropriate Global Note to reflect an increase in
the aggregate principal amount of the Notes represented by such
Global Note, and
(ii) if such Definitive Note is a Restricted Security, a
certification (in substantially the form of Exhibit B attached
hereto) and, if applicable, a legal
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opinion, in each case similar to that required pursuant to clauses
(i), (ii) or (iii) of Section 2.6(a), as applicable;
in which case the Trustee shall cancel such Definitive Note and cause the
aggregate principal amount of Notes represented by the appropriate Global
Note to be increased accordingly. If no Global Note is then outstanding,
the Issuers shall issue and the Trustee shall authenticate a new Global
Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through
the Depositary in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer
comparable to those set forth herein to the extent required by the
Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note. Upon receipt by the Trustee of 20 days prior written
transfer instructions (or such other form of instructions as is customary
for the Depositary) from the Depositary (or its nominee) on behalf of any
Person having a beneficial interest in a Global Note, the Trustee shall,
in accordance with the standing instructions and procedures existing
between the Depositary and the Trustee, cause the aggregate principal
amount of Global Notes to be reduced accordingly and, following such
reduction, the Issuers shall execute and the Trustee shall authenticate
and deliver to the transferee a Definitive Note in the appropriate
principal amount; provided, that in the case of a Restricted Security,
such instructions shall be accompanied by the following additional
documents:
(i) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial owner, a
certification to that effect (in substantially the form of Exhibit B
attached hereto); or
(ii) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a certification to
that effect (in substantially the form of Exhibit B attached
hereto); or
(iii) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit B attached hereto) and an opinion of counsel
reasonably acceptable to the Issuers and to the Registrar to the
effect that such transfer is in compliance with the Securities Act.
Definitive Notes issued in exchange for a beneficial interest in a Global
Note shall be registered in such names and in such authorized
denominations as the Depositary shall instruct the Trustee.
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(e) Transfer and Exchange of Global Notes. Notwithstanding any other
provision of this Indenture, the Global Note may not be transferred as a
whole except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary; provided, that if:
(i) the Depositary (a) notifies the Issuers that the
Depositary is unwilling or unable to continue as Depositary and a
successor Depositary is not appointed by the Company within 90 days
after delivery of such notice, or (b) has ceased to be a clearing
agency registered under the Exchange Act; or
(ii) the Issuers, at their sole discretion, notify the Trustee
in writing that they elect to cause the issuance of Definitive Notes
under this Indenture,
then the Issuers shall execute and the Trustee shall authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
aggregate principal amount of the Global Note in exchange for such Global
Note.
(f) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in the Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or cancelled, the Global Note
shall be returned to (or retained by) and cancelled by the Trustee. At any
time prior to such cancellation, if any beneficial interest in the Global
Note is exchanged for Definitive Notes, redeemed, repurchased or
cancelled, the aggregate principal amount of Notes represented by such
Global Note shall be reduced accordingly and an endorsement shall be made
on such Global Note by the Trustee to reflect such reduction.
(g) General Provisions Relating to Transfers and Exchanges. To
permit registrations of transfers and exchanges, the Issuers shall execute
and the Trustee shall authenticate Definitive Notes and Global Notes at
the Registrar's request. All Definitive Notes and Global Notes issued upon
any registration of transfer or exchange of Definitive Notes or Global
Notes shall be legal, valid and binding obligations of the Issuers,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Definitive Notes or Global Notes surrendered upon such
registration of transfer or exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange, but the Issuers may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange (without transfer to
another person) pursuant to Sections 2.10, 3.7, 3.8, 4.10, 4.14 and 9.5).
The Issuers shall not be required to (i) issue, register the
transfer of or exchange Notes during a period beginning at the opening of
business 15 days before the day of any
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selection of Notes for redemption under Section 3.2 and ending at the
close of business on the day of selection; or (ii) register the transfer
of or exchange any Note so selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part; or (iii)
register the transfer of or exchange a Note between a record date and the
next succeeding interest payment date.
Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Issuers may deem and treat the Person
in whose name any Note is registered as the absolute owner of such Note
for all purposes, and none of the Trustee, any Agent or the Issuers shall
be affected by notice to the contrary.
(h) Exchange of Notes for Exchange Securities. Notes may be
exchanged for Exchange Securities pursuant to the terms of the Exchange
Offer. The Trustee and Registrar shall make the exchange as follows:
The Issuers shall present the Trustee with an Officers' Certificate
certifying the following:
(i) upon issuance of the Exchange Securities, the transactions
contemplated by the Exchange Offer have been consummated; and
(ii) the principal amount of Notes properly tendered in the
Exchange Offer that are represented by a Global Note and the
principal amount of Notes properly tendered in the Exchange Offer
that are represented by Definitive Notes; the name of each Holder of
such Definitive Notes; the principal amount properly tendered in the
Exchange Offer by each such Holder; and the name and address to
which Definitive Notes for Exchange Securities shall be registered
and sent for each such Holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (1) to the effect that the Exchange Securities have
been registered under Section 5 of the Securities Act and this Indenture
has been qualified under the TIA and (2) with respect to the matters set
forth in Section 6(p) of the Registration Rights Agreement and (iii) an
Issuers Order, shall authenticate (1) a Global Note for Exchange
Securities in aggregate principal amount equal to the aggregate principal
amount of Notes represented by a Global Note indicated in such Officers'
Certificate as having been properly tendered and (2) Definitive Notes
representing Exchange Securities registered in the names of, and in the
principal amounts indicated in such Officers' Certificate.
The Trustee shall deliver such Definitive Notes for Exchange
Securities to the Holders thereof as indicated in such Officers'
Certificate.
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Section 2.7 Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Issuers and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, the Issuers shall issue and the Trustee shall authenticate a
replacement Note if the Trustee's requirements for replacements of Notes are
met. If required by the Trustee or the Issuers, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Issuers to protect the Issuers, the Trustee, any Agent or any authenticating
agent from any loss that any of them may suffer if a Note is replaced. The
Issuers or the Trustee may charge for their expenses in replacing a Note.
Every replacement Note is an obligation of the Issuers and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.8 Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section 2.8 as not outstanding.
If a Note is replaced pursuant to Section 2.7, the replaced Note ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.1,
it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.9, a Note does not cease to be outstanding because
either of the Issuers or an Affiliate of either of the Issuers holds the Note.
Section 2.9 Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by either
of the Issuers or any Affiliate of either of the Issuers shall be considered as
though not outstanding, except that for purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that a Responsible Officer of the Trustee knows to be so owned shall
be considered as not outstanding.
Section 2.10 Temporary Notes.
Pending the preparation of Definitive Notes, the Issuers (and the
Subsidiary Guarantors) may execute, and upon an Issuers Order, the Trustee shall
authenticate and deliver, temporary Notes that
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are printed, lithographed, typewritten, mimeographed or otherwise reproduced, in
any authorized denomination, substantially of the tenor of the Definitive Notes
in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Notes may determine, as conclusively evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuers (and the Subsidiary Guarantors)
shall cause Definitive Notes to be prepared without unreasonable delay. The
Definitive Notes shall be printed, lithographed or engraved, or provided by any
combination thereof, or in any other manner permitted by the rules and
regulations of any principal national securities exchange, if any, on which the
Notes are listed, all as determined by the Officers executing such Definitive
Notes. After the preparation of Definitive Notes, the temporary Notes shall be
exchangeable for Definitive Notes upon surrender of the temporary Notes at the
office or agency maintained by the Issuers for such purpose pursuant to Section
4.2, without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Notes, the Issuers (and the Subsidiary Guarantors) shall execute,
and the Trustee shall authenticate and make available for delivery, in exchange
therefor the same aggregate principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.
Section 2.11 Cancellation.
The Issuers at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment and not
previously received by the Trustee. The Trustee and no one else shall cancel all
Notes surrendered for registration of transfer, exchange, payment, replacement
or cancellation and shall retain or destroy cancelled Notes in accordance with
its normal practices (subject to the record retention requirement of the
Exchange Act) unless the Issuers direct the Notes to be returned to them. The
Issuers may not issue new Notes to replace Notes that have been redeemed or paid
or that have been delivered to the Trustee for cancellation. All such Notes
shall be cancelled by the Trustee and returned to the Issuers pursuant to a
written order signed by one Officer of each of the Issuers.
Section 2.12 Defaulted Interest.
If the Issuers default in a payment of interest on the Notes, they shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, which date shall be at the earliest practicable
date but in all events at least ten Business Days prior to the payment date, in
each case at the rate provided in the Notes and in Section 4.1. The Issuers
shall, with the consent of the Trustee, fix or cause to be fixed each such
special record date and payment date. At least 30 days before the special record
date, the Issuers (or the Trustee, in the name of and at the expense of the
Issuers, upon 15 days written notice to the Trustee) shall mail to the Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
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Section 2.13 Legends.
(a) Except as permitted by subsections (b) or (c) of this Section
2.13, each Note shall bear legends relating to restrictions on transfer
pursuant to the securities laws in substantially the form set forth on
Exhibit A attached hereto.
(b) Upon any sale or transfer of a Restricted Security (including
any Restricted Security represented by a Global Note) pursuant to Rule 144
under the Securities Act or pursuant to an effective registration
statement under the Securities Act:
(i) in the case of any Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Restricted Security for a Definitive Note that does
not bear the legends required by subsection (a) above; and
(ii) in the case of any Restricted Security represented by a
Global Note, such Restricted Security shall not be required to bear
the legends required by subsection (a) above, but shall continue to
be subject to the provisions of Section 2.6(c); provided, that with
respect to any request for an exchange of a Restricted Security that
is represented by a Global Note for a Definitive Note that does not
bear the legends required by subsection (a) above, which request is
made in reliance upon Rule 144, the Holder thereof shall certify in
writing to the Registrar that such request is being made pursuant to
Rule 144.
(c) The Issuers (and the Subsidiary Guarantors) shall issue and the
Trustee shall authenticate Exchange Securities in exchange for Notes
accepted for exchange in the Exchange Offer. The Exchange Securities shall
not bear the legends required by subsection (a) above unless the Holder of
such Notes is either:
(i) a broker-dealer who purchased such Notes directly from the
Issuers to resell pursuant to Rule 144A or any other available
exemption under the Securities Act,
(ii) a Person participating in the distribution of the Notes,
or
(iii) a Person who is an affiliate (as defined in Rule 144) of
either of the Issuers.
Section 2.14 Deposit of Moneys.
Subject to Section 3.5, prior to 10:00 a.m. on each date on which the
principal of, premium, if any, and interest on the Notes are due, the Issuers
shall deposit with the Trustee or Paying Agent in immediately available funds
money sufficient to make cash payments, if any, due on such date
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in a timely manner which permits the Trustee or such Paying Agent to remit
payment to the Holders on such date.
Section 2.15 CUSIP Numbers.
The Issuers in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Issuers will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE III
REDEMPTION
Section 3.1 Notices to Trustee.
If the Issuers elect or are required to redeem Notes pursuant to Section
3.7 or 3.8, they shall furnish to the Trustee, at least 35 days but not more
than 60 days before a redemption date (except in the case of a Required
Regulatory Redemption requiring less notice), an Officers' Certificate setting
forth (a) the clause of Section 3.7 or 3.8 pursuant to which the redemption
shall occur, (b) the redemption date, (c) the principal amount of Notes to be
redeemed and (d) the redemption price.
Section 3.2 Selection of Notes to Be Redeemed.
If less than all the Notes are to be redeemed pursuant to Section 3.7, the
Trustee shall select the Notes to be redeemed 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, pro rata, by lot or by
such method as the Trustee deems to be fair and appropriate; provided, that
Notes in denominations of $1,000 or less may not be redeemed in part.
The Trustee shall promptly notify the Issuers in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected for redemption shall be in amounts of $1,000 or whole multiples
of $1,000. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
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Section 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date
(except in the case of a Required Regulatory Redemption requiring less notice),
the Issuers shall mail a notice of redemption by first class mail to each Holder
whose Notes are to be redeemed at such Holder's registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part only, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date, upon cancellation of the original Note, a new Note or
Notes in principal amount equal to the unredeemed portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Issuers default in making such redemption
payment, interest on Notes or portions of Notes called for redemption
shall cease to accrue on and after the redemption date;
(g) the paragraph of the Notes and/or the section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) the CUSIP number of the Notes to be redeemed.
At the Issuers' request, the Trustee shall give the notice of redemption
in the name of the Issuers and at the Issuers' expense; provided that the
Issuers shall deliver to the Trust at least 35 days (unless a shorter period is
acceptable to the Trustee) prior to the redemption date, an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the preceding paragraph.
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Section 3.4 Effect of Notice of Redemption.
Once notice of redemption has been mailed to the Holders in accordance
with Section 3.3, Notes called for redemption become due and payable on the
redemption date at the redemption price. At any time prior to the mailing of a
notice of redemption to the Holders pursuant to Section 3.3, the Issuers may
withdraw, revoke or rescind any notice of redemption delivered to the Trustee
without any continuing obligation to redeem the Notes as contemplated by such
notice of redemption.
Section 3.5 Deposit of Redemption Price.
At or before 10:00 a.m. on the redemption date, the Issuers shall deposit
with the Trustee (to the extent not already held by the Trustee) or with the
Paying Agent money in immediately available funds sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall return to the Issuers any money
deposited with the Trustee or the Paying Agent by the Issuers in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
Interest on the Notes to be redeemed shall cease to accrue on the
applicable redemption date, regardless of whether such Notes are presented for
payment, if the Issuers make or deposit the redemption payment in accordance
with this Section 3.5. If any Note called for redemption shall not be paid upon
surrender for redemption because of the failure of the Issuers to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and to the extent lawful on
any interest not paid on such unpaid principal, in each case at the rate
provided in the Notes.
Section 3.6 Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Issuers shall issue
and the Trustee shall authenticate for the Holder at the expense of the Issuers
a new Note equal in principal amount to the unredeemed portion of the Note
surrendered.
Section 3.7 Optional Redemption.
(a) Except as set forth in Section 3.7(b), the Notes are not
redeemable at the Issuers' option prior to July 1, 2003. Thereafter, the
Notes will be subject to redemption at the option of the Issuers, in whole
or in part, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest
thereon, if any, to the applicable redemption date, if redeemed during the
12-month period beginning on July 1 of the years indicated below:
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Year Percentage
---- ----------
2003 108.00%
2004 105.33%
2005 and thereafter 102.67%
(b) Notwithstanding Section 3.7(a), at any time or from time to time
prior to July 1, 2002, the Issuers may redeem, at their option, up to 35%
of the aggregate principal amount of the Notes then outstanding, at a
redemption price of 112.25% of the principal amount thereof, plus accrued
and unpaid interest thereon, if any, through the applicable redemption
date, with the net cash proceeds of one or more Equity Offerings;
provided, that (i) such redemption shall occur within 60 days of the date
of closing of such Equity Offering and (ii) at least 65% of the aggregate
principal amount of Notes issued on or after the Issue Date remains
outstanding immediately after giving effect to each such redemption.
Section 3.8 Required Regulatory Redemption.
Notwithstanding any other provisions hereof, Notes to be redeemed pursuant
to a Required Regulatory Redemption will be redeemable by the Issuers, in whole
or in part, at any time upon not less than 20 Business Days nor more than 60
days notice (or such earlier date as may be ordered by any Governmental
Authority) at a price equal to the lesser of (a) the Holder's cost thereof and
(b) 100% of the principal amount thereof, plus in either case accrued and unpaid
interest thereon, if any, to the date of redemption (or such earlier period as
ordered by a Governmental Authority). The Issuers are not required to pay or
reimburse any Holder or beneficial owner of the Notes for the expenses of any
such Holder or beneficial owner related to the application for any Gaming
License, qualification or finding of suitability in connection with a Required
Regulatory Redemption. Such expenses of any such Holder or beneficial owner
will, therefore, be the obligation of such Holder or beneficial owner. Any
Required Regulatory Redemption shall be made in accordance with the provisions
of Sections 3.3, 3.4 and 3.5 unless other procedures are required by any
Governmental Authority.
Section 3.9 No Mandatory Redemption.
The Issuers shall not be required to make mandatory redemption payments
with respect to the Notes (except for a Required Regulatory Redemption). The
Notes shall not have the benefit of any sinking fund.
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ARTICLE IV
COVENANTS
Section 4.1 Payment of Notes.
The Issuers shall pay the principal and premium, if any, of, and interest
on, the Notes on the dates and in the manner provided in the Notes. Principal,
premium, if any, and interest shall be considered paid on the date due if the
Paying Agent, other than the Company or a Subsidiary of the Company, holds on or
before that date money deposited by the Issuers in immediately available funds
and designated for and sufficient to pay all principal, premium, if any, and
interest then due. Such Paying Agent shall return to the Issuers, no later than
three Business Days following the date of payment, any money that exceeds such
amount of principal, premium, if any, and interest then due and payable on the
Notes. The Issuers shall pay any and all amounts, including, without limitation,
Liquidated Damages, if any, on the dates and in the manner required under the
Registration Rights Agreement.
The Issuers shall pay interest (including post-petition interest) on
overdue principal at the rate equal to 1% per annum in excess of the then
applicable interest rate on the Notes to the extent lawful; it shall pay
interest (including post-petition interest) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.2 Maintenance of Office or Agency.
The Issuers shall maintain an office or agency (which may be an office of
the Trustee, Registrar or co-registrar) in the Borough of Manhattan, the City of
New York, where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Issuers in respect of the
Notes and this Indenture may be served. The Issuers shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Issuers shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
The Issuers may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, that no
such designation or rescission shall in any manner relieve the Issuers of their
obligation to maintain an office or agency for such purposes. The Issuers shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Issuers hereby designate the Corporate Trust Office of the Trustee as
one such office or agency of the Issuers in accordance with Section 2.3.
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Section 4.3 Reports.
(a) The Company shall file with the Trustee, within 15 days after
the date of filing with the Commission, copies of the reports, information
and other documents (or copies of such portions of any of the foregoing as
the Commission may by rules and regulations prescribe) that the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act. If the Company is not subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall file with the
Trustee all such reports, information and other documents as it would be
required to file if it were subject to the requirements of Section 13 or
15(d) of the Exchange Act, with the period applicable to such report,
information or other document pursuant to the Exchange Act. From and after
the time the Company files a registration statement with the Commission
with respect to the Notes, the Company shall file such information with
the Commission; provided, that the Company shall not be in default of the
provisions of this Section 4.3 for any failure to file reports with the
Commission solely by refusal by the Commission to accept the same for
filing. The Company shall deliver (or cause the Trustee to deliver) copies
of all reports, information and documents required to be filed with the
Trustee pursuant to this Section 4.3 to the Holders at their addresses
appearing in the register of Notes maintained by the Registrar. The
Company shall also comply with the provisions of TIA ss.314(a).
(b) If the Company is required to furnish annual, quarterly or
current reports to its members pursuant to the Exchange Act, the Company
shall cause any annual, quarterly, current or other financial report
furnished by it generally to its members to be filed with the Trustee and
mailed to the Holders by the Company at their addresses appearing in the
register of Notes maintained by the Registrar. If the Company is not
required to furnish annual, quarterly or current reports to its
stockholders pursuant to the Exchange Act, the Company shall cause the
financial statements of the Company and its consolidated Subsidiaries,
including any notes thereto (and, with respect to annual reports, an
auditors' report by an accounting firm of established national
reputation), and a "Management's Discussion and Analysis of Financial
Condition and Results of Operations," comparable to that which would have
been required to appear in annual or quarterly reports filed under Section
13 or 15(d) of the Exchange Act to be so filed with the Trustee and mailed
to the Holders by the Company promptly, but in any event, within 90 days
after the end of each of the fiscal years of the Company and within 45
days after the end of each of the first three quarters of each such fiscal
year.
(c) So long as is required for an offer or sale of the Notes to
qualify for an exemption under Rule 144A, the Issuers (and the Subsidiary
Guarantors) shall, upon written request, provide the information required
by clause (d)(4) thereunder to each Holder and to each beneficial owner
and prospective purchaser of Notes identified by any Holder of Restricted
Securities.
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Section 4.4 Compliance Certificate.
(a) The Issuers shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate (provided that one
of the signatories to such Officers' Certificate shall be the Company's
principal executive officer, principal financial officer or principal
accounting officer and another of the signatories to such Officers'
Certificate shall be PGC's principal executive officer, principal
financial officer or principal accounting officer) stating that a review
of the activities of the Issuers and their Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determine whether each has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that each of
the Issuers and their Subsidiaries has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not
in default in the performance or observance of any of the terms,
provisions and conditions hereof or thereof (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of
Default of which he may have knowledge and what action each is taking or
proposes to take with respect thereto).
(b) The year-end financial statements delivered pursuant to Section
4.3 shall be accompanied by a written statement of the independent public
accountants of the Issuers (which shall be a firm of established national
reputation reasonably satisfactory to the Trustee) which states that in
making the examination necessary for certification of such financial
statements nothing has come to their attention which would lead them to
believe that either of the Issuers or any of their Subsidiaries has
violated any provisions of this Indenture or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) So long as any of the Notes are outstanding, the Issuers shall
deliver to the Trustee forthwith upon any Officer becoming aware of (i)
any Default or Event of Default or (ii) any event of default under any
mortgage, indenture or instrument referred to in Section 6.1 (a)(v), an
Officers' Certificate specifying such Default, Event of Default or other
event of default and what action the Issuers are taking or propose to take
with respect thereto.
Section 4.5 Taxes.
(a) The Issuers shall, and shall cause their Subsidiaries to, file
all tax returns required to be filed and to pay prior to delinquency all
material taxes, assessments and governmental levies except as contested in
good faith and by appropriate proceedings and for which reserves have been
established in accordance with GAAP.
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(b) The Company shall not recognize any transfers of its Equity
Interests, except pursuant to, and in accordance with the provisions of,
the Amended and Restated Operating Agreement of the Company, as in effect
on the date hereof.
Section 4.6 Stay, Extension and Usury Laws.
Each Issuer (and each Subsidiary Guarantor) covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension, usury or other law, wherever enacted, now or at any time hereafter in
force, that would prohibit or forgive the payment of all or any portion of the
principal of or interest on the Notes, or that may affect the covenants or the
performance of this Indenture, and each Issuer (and each Subsidiary Guarantor)
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee but shall suffer and permit the execution of every such power as
though no such law has been enacted.
Section 4.7 Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly
(i) declare or pay any dividend or make any distribution on
account of any Equity Interests of the Company or any of its
Subsidiaries or make any other payment to any Excluded Person or
Affiliate thereof (other than (1) dividends or distributions payable
in Equity Interests (other than Disqualified Capital Stock) of the
Company or (2) amounts payable to the Company or any Restricted
Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interest of the Company, any Subsidiary or any other
Affiliate of the Company (other than any such Equity Interest owned
by the Company or any Restricted Subsidiary);
(iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness of
the Company or any Subsidiary Guarantor that is subordinated in
right of payment to the Notes or such Subsidiary Guarantor's
Subsidiary Guaranty thereof, as the case may be, prior to any
scheduled principal payment, sinking fund payment or other payment
at the stated maturity thereof; or
(iv) make any Restricted Investment
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(all such payments and other actions set forth in clauses (i) through (iv)
above being collectively referred to as "Restricted Payments"), unless, at
the time of such Restricted Payment:
(i) no Default or Event of Default has occurred and is
continuing or would occur as a consequence thereof, and
(ii) immediately after giving effect to such Restricted
Payment on a pro forma basis, the Company could incur at least
$1.00 of additional Indebtedness under the Interest Coverage
Ratio test set forth in Section 4.9 and
(iii) such Restricted Payment (the value of any such payment,
if other than cash, being determined in good faith by
the Managers of the Company and evidenced by a
resolution set forth in an Officers' Certificate
delivered to the Trustee), together with the aggregate
of all other Restricted Payments made after the Issue
Date (including Restricted Payments permitted by clauses
(i) and (ii) of Section 4.7(b) and excluding Restricted
Payments permitted by the other clauses of Section
4.7(b)), is less than the sum of:
(1) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing immediately
after the Issue Date to the end of the Company's most recently
ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit,
100% of such deficit), plus
(2) 100% of the aggregate net cash proceeds (or of the
net cash proceeds received upon the conversion of non-cash
proceeds into cash) received by the Company from the issuance
or sale, other than to a Subsidiary, of Equity Interests of
the Company (other than Disqualified Capital Stock) after the
Issue Date and on or prior to the time of such Restricted
Payment, plus
(3) 100% of the aggregate net cash proceeds (or of the
net cash proceeds received upon the conversion of non-cash
proceeds into cash) received by the Company from the issuance
or sale, other than to a Subsidiary, of any convertible or
exchangeable debt security of the Company that has been
converted or exchanged into Equity Interests of the Company
(other than Disqualified Capital Stock) pursuant to the terms
thereof after the Issue Date and on or prior to
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the time of such Restricted Payment (including any additional
net proceeds received by the Company upon such conversion or
exchange), plus
(4) the aggregate Return from Unrestricted Subsidiaries
after the Issue Date and on or prior to the time of such
Restricted Payment.
(b) The foregoing provisions shall not prohibit:
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at said date of declaration such payment
would not have been prohibited by the provisions of this Indenture;
(ii) the redemption, purchase, retirement or other acquisition
of any Equity Interests of the Company or Indebtedness of the
Company or any Restricted Subsidiary in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a
Subsidiary) of, other Equity Interests of the Company (other than
Disqualified Capital Stock);
(iii) with respect to each tax year that the Company qualifies
as a Flow Through Entity, and for so long as no Event of Default
exists or would occur as a consequence thereof, the payment of
Permitted Tax Distributions; provided, that (1) prior to the first
payment of Permitted Tax Distributions during the calendar year, the
Company provides an Officers' Certificate and Opinion of Counsel to
the effect that the Company and each Subsidiary in respect of which
such distributions are being made qualify as Flow Through Entities
for Federal income tax purposes and for the states in respect of
which such distributions are being made and (2) at the time of such
distribution, the most recent audited financial statements of the
Company provided to the Trustee pursuant to the covenant described
in Section 4.3, provide that the Company and each such Subsidiary
were treated as Flow Through Entities for the period of such
financial statements;
(iv) the redemption, repurchase or payoff of any Indebtedness
of the Company or a Restricted Subsidiary with proceeds of any
Refinancing Indebtedness permitted to be incurred pursuant to
Section 4.9;
(v) distributions to PGP for (1) reasonable tax preparation,
accounting, legal and administrative fees and expenses incurred on
behalf of the Issuers or in connection with PGP's ownership of the
Issuers, consistent with industry practice and (2) compensation to
PGP executive officers pursuant to, and in accordance with,
consulting agreements in effect on the Issue Date;
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(vi) payments on or with respect to the redemption of Seller
Preferred in an aggregate amount not to exceed $3.0 million;
(vii) reasonable and customary directors fees to, and
indemnity provided on behalf of, the Managers of PGP and the
Company, and customary reimbursement of travel and similar expenses
incurred in the ordinary course of business;
(viii) payment of the Refinancing Fee; and
(ix) Restricted Payments in an aggregate amount not to exceed
$1.0 million.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon
which the calculations required by this Section 4.7 were computed, which
calculations may be based upon the Company's latest available financial
statements.
Section 4.8 Limitation on Restrictions on Subsidiary Dividends.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(a) pay dividends or make any other distributions to the Company or
any of its Restricted Subsidiaries (i) on such Restricted Subsidiary's
Capital Stock or (ii) with respect to any other interest or participation
in, or measured by, such Restricted Subsidiary's profits, or
(b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, or
(c) make loans or advances to the Company or any of its Restricted
Subsidiaries, or
(d) transfer any of its assets to the Company or any of its
Restricted Subsidiaries,
except, with respect to clauses (a) through (d) above, for such encumbrances or
restrictions existing under or by reason of:
(1) a Senior Credit Facility containing dividend or
other payment restrictions that are not more restrictive in
any material respect than those contained in this Indenture on
the Issue Date;
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(2) this Indenture, the Security Documents and the
Notes;
(3) applicable law or any applicable rule or order of
any Governmental Authority;
(4) Acquired Debt; provided, that such encumbrances and
restrictions are not applicable to any Person, or the
properties or assets of any Person, other than the Person, or
the property or assets of the Person, so acquired;
(5) customary non-assignment and net worth provisions of
any contract, lease or license entered into in the ordinary
course of business;
(6) customary restrictions on the transfer of assets
subject to a Permitted Lien imposed by the holder of such
Lien;
(7) the agreements governing permitted Refinancing
Indebtedness; provided, that such restrictions contained in
any agreement governing such Refinancing Indebtedness are no
more restrictive in any material respect than those contained
in any agreements governing the Indebtedness being refinanced;
and
(8) any restrictions with respect to a Restricted
Subsidiary imposed pursuant to a binding agreement that has
been entered into for the sale or disposition of all or
substantially all of the Equity Interests or assets of such
Restricted Subsidiary; provided, that such restrictions only
apply to the Equity Interests or assets of such Restricted
Subsidiary being sold.
Section 4.9 Limitation on Incurrence of Indebtedness.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, (i) create, incur,
issue, assume, guaranty or otherwise become directly or indirectly liable
with respect to, contingently or otherwise (collectively, "incur"), any
Indebtedness (including, without limitation, Acquired Debt) or (ii) issue
any Disqualified Capital Stock; provided, that the Company may incur
Indebtedness (including, without limitation, Acquired Debt) and issue
shares of Disqualified Capital Stock (and a Restricted Subsidiary may
incur Acquired Debt) if (1) no Default or Event of Default shall have
occurred and be continuing at the time of, or would occur after giving
effect on a pro forma basis to such incurrence or issuance, and (2) the
Interest Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are
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available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Capital Stock is issued
would have been not less than 2.0 to 1.0 for the period from the Issue
Date through, but not including, January 1, 2003, and 2.25 to 1.0
thereafter, in each case, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Capital Stock had been
issued, as the case may be, at the beginning of such four-quarter period;
provided, that in the case of Indebtedness (other than Indebtedness
outstanding under the Senior Credit Facility, Purchase Money Obligations,
Capital Lease Obligations or Acquired Debt), the Weighted Average Life to
Maturity and final stated maturity of such Indebtedness is equal to or
greater than the Weighted Average Life to Maturity and final stated
maturity of the Notes.
(b) Notwithstanding the foregoing, the limitations of Section 4.9(a)
shall not prohibit the incurrence of:
(i) Indebtedness under the Senior Credit Facility; provided,
that the aggregate principal amount of Indebtedness so incurred on
any date, together with all other Indebtedness incurred pursuant to
this clause (i) and outstanding on such date, shall not exceed (a)
$10.0 million if such date is on or prior to the 90th day following
the date on which the hotel is first Operating, or $5 million if
such date is after such 90th day, less (b) the aggregate amount of
commitment reductions contemplated by clause (iii) under Section
4.10(a);
(ii) Capital Lease Obligations or Purchase Money Obligations;
provided, that the aggregate principal amount of Indebtedness so
incurred on any date, together with all other Indebtedness incurred
pursuant to this clause (ii) and outstanding on such date, shall not
exceed $2.5 million, at any time;
(iii) performance bonds, appeal bonds, surety bonds, insurance
obligations or bonds and other similar bonds or obligations
(including Obligations under bankers acceptances and letters of
credit) incurred in the ordinary course of business (including,
without limitation, to maintain any licenses or permits);
(iv) Hedging Obligations incurred to fix the interest rate on
any variable rate Indebtedness otherwise permitted by this
Indenture; provided, that the notional principal amount of each such
Hedging Obligation does not exceed the principal amount of the
Indebtedness to which such Hedging Obligation relates;
(v) Indebtedness of the Company or any Subsidiary Guarantor
owed to and held by a Subsidiary Guarantor or the Company, as the
case may be, that is unsecured and subordinated in right of payment
to the Notes or the Subsidiary Guaranty, as the case may be;
provided, that any subsequent issuance or transfer of any Capital
Stock that results in any such Subsidiary Guarantor ceasing to be a
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Subsidiary Guarantor or any transfer of such Indebtedness (other
than to the Company or a Subsidiary Guarantor) shall be deemed, in
each case, to constitute the incurrence of such Indebtedness by the
Company or such Subsidiary Guarantor;
(vi) Indebtedness outstanding on the Issue Date, including the
Notes outstanding on the Issue Date;
(vii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business;
(viii) any Subsidiary Guaranty of the Notes; and
(ix) Indebtedness issued in exchange for, or the proceeds of
which are substantially contemporaneously used to extend, refinance,
renew, replace, or refund (collectively, "Refinance"), Indebtedness
incurred pursuant to the Interest Coverage Ratio test set forth in
Section 4.9(a), Section 4.9(b)(vi) or this clause (ix) (the
"Refinancing Indebtedness") provided, that (1) the principal amount
of such Refinancing Indebtedness does not exceed the principal
amount of Indebtedness so Refinanced (plus any required premiums and
out-of-pocket expenses reasonably incurred in connection therewith),
(2) the Refinancing Indebtedness has a final scheduled maturity that
equals or exceeds the final stated maturity, and a Weighted Average
Life to Maturity that is equal to or greater than the Weighted
Average Life to Maturity, of the Indebtedness being Refinanced and
(3) the Refinancing Indebtedness ranks, in right of payment, no more
favorable to the Notes or applicable Subsidiary Guaranty, as the
case may be, than the Indebtedness being Refinanced.
Section 4.10 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale unless:
(i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Sale not less than the fair
market value of the assets subject to such Asset Sale;
(ii) at least 75% of the consideration for such Asset Sale is
in the form of cash or Cash Equivalents or liabilities of the
Company or any Restricted Subsidiary (other than liabilities that
are by their terms subordinated to the Notes or any Subsidiary
Guaranty) that are assumed by the transferee of such assets
(provided, that following such Asset Sale there is no further
recourse to the Company or its Restricted Subsidiaries with respect
to such liabilities); and (iii) within 270 days of
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such Asset Sale, the Net Proceeds thereof are (1) invested in assets
related to the business of the Company or its Restricted
Subsidiaries (which, in the case of an Asset Sale of the Diamond Jo
or any replacement Gaming Vessel (a "Replacement Vessel"), must be a
Gaming Vessel having a fair market value, as determined by an
independent appraisal, at least equal to the fair market value of
the Diamond Jo or such Replacement Vessel immediately preceding such
Asset Sale); (2) applied to repay Indebtedness under Purchase Money
Obligations incurred in connection with the assets so sold; (3)
applied to repay Indebtedness under the Senior Credit Facility and
permanently reduce the commitment thereunder in the amount of the
Indebtedness so repaid; or (4) to the extent not used as provided in
clauses (1), (2), or (3) or any combination thereof, applied to make
an offer to purchase Notes as described below (an "Excess Proceeds
Offer") provided, that the Company shall not be required to make an
Excess Proceeds Offer until the amount of Excess Proceeds is greater
than $5.0 million.
The provisions in clauses (i) and (ii) above shall not apply to an
Event of Loss. Pending the final application of any Net Proceeds, the
Company may temporarily reduce Indebtedness under the Senior Credit
Facility or temporarily invest such Net Proceeds in Cash Equivalents.
Net Proceeds not invested or applied as set forth in the preceding
clauses (1), (2) or (3) constitute "Excess Proceeds." If the Company
elects, or becomes obligated to make an Excess Proceeds Offer, the Issuers
shall offer to purchase Notes having an aggregate principal amount equal
to the Excess Proceeds (the "Purchase Amount"), at a purchase price equal
to 100% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the purchase date. The Issuers must commence
such Excess Proceeds Offer not later than 30 days after the expiration of
the 270 day period following the Asset Sale that produced such Excess
Proceeds. If the aggregate purchase price for the Notes tendered pursuant
to the Excess Proceeds Offer is less than the Excess Proceeds, the Company
and its Restricted Subsidiaries may use the portion of the Excess Proceeds
remaining after payment of such purchase price for general corporate
purposes.
Each Excess Proceeds Offer shall remain open for a period of 20
Business Days and no longer, unless a longer period is required by law
(the "Excess Proceeds Offer Period"). Promptly after the termination of
the Excess Proceeds Offer Period (the "Excess Proceeds Payment Date"), the
Issuers shall purchase and mail or deliver payment for the Purchase Amount
for the Notes or portions thereof tendered, pro rata or by such other
method as may be required by law, or, if less than the Purchase Amount has
been tendered, all Notes tendered pursuant to the Excess Proceeds Offer.
The principal amount of Notes to be purchased pursuant to an Excess
Proceeds Offer may be reduced by the principal amount of Notes acquired by
the Issuers through purchase or redemption (other than pursuant to a
Change of Control Offer or an Excess Cash Flow Offer) subsequent to the
date of the Asset Sale and surrendered to the Trustee for cancellation.
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Each Excess Proceeds Offer shall be conducted in compliance with all
applicable laws, including, without limitation, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable federal and
state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this Section 4.10, the
Issuers shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached their obligations under this
Section 4.10 by virtue thereof. The Company shall not, and shall not
permit any of its Restricted Subsidiaries to, create or suffer to exist or
become effective any restriction that would impair the ability of the
Issuers to make an Excess Proceeds Offer upon an Asset Sale or, if such
Excess Proceeds Offer is made, to pay for the Notes tendered for purchase.
(b) The Issuers shall, no later than 30 days following the
expiration of the 270-day period following the Asset Sale that produced
Excess Proceeds, commence the Excess Proceeds Offer by mailing to the
Trustee and each Holder, at such Holder's last registered address, a
notice, which shall govern the terms of the Excess Proceeds Offer, and
shall state:
(i) that the Excess Proceeds Offer is being made pursuant to
this Section 4.10, the principal amount of Notes which shall be
accepted for payment and that all Notes validly tendered shall be
accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase;
(iii) that any Notes not tendered or accepted for payment
pursuant to the Excess Proceeds Offer shall continue to accrue
interest in accordance with the terms thereof;
(iv) that, unless the Issuers default in the payment of the
purchase price with respect to any Notes tendered, Notes accepted
for payment pursuant to the Excess Proceeds Offer shall cease to
accrue interest after the Excess Proceeds Payment Date;
(v) that Holders electing to have Notes purchased pursuant to
an Excess Proceeds Offer shall be required to surrender their Notes,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Company prior to the close of
business on the third Business Day immediately preceding the Excess
Proceeds Payment Date;
(vi) that Holders shall be entitled to withdraw their election
if the Issuers receive, not later than the close of business on the
second Business Day preceding the Excess Proceeds Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes the Holder
delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased;
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(vii) that Holders whose Notes are purchased only in part
shall be issued Notes representing the unpurchased portion of the
Notes surrendered; provided that each Note purchased and each new
Note issued shall be in a principal amount of $1,000 or whole
multiples thereof; and
(viii) the instructions that Holders must follow in order to
tender their Notes.
On or before the Excess Proceeds Payment Date, the Issuers shall (i)
accept for payment the Notes or portions thereof (or an allocable amount
thereof) tendered pursuant to the Excess Proceeds Offer, (ii) deposit with
the Paying Agent money sufficient to pay the purchase price of all Notes
or portions thereof so accepted and (iii) deliver to the Trustee the Notes
so accepted, together with an Officers' Certificate stating that the Notes
or portions thereof (or an allocable amount thereof) tendered to the
Issuers are accepted for payment. The Paying Agent shall promptly mail to
each Holder of Notes so accepted payment in an amount equal to the
purchase price of such Notes, and the Trustee shall promptly authenticate
and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. After payment to the Holders
of the purchase price of all Notes or portions thereof so accepted, the
Paying Agent shall deliver promptly to the Issuers the balance, if any, of
any money so deposited by the Issuers with the Paying Agent remaining
after such payment to the Holders
The Issuers shall make a public announcement of the results of the
Excess Proceeds Offer as soon as practicable after the Excess Proceeds
Payment Date. For the purposes of this Section 4.10, the Trustee shall act
as the Paying Agent.
Section 4.11 Limitation on Transactions With Affiliates.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guaranty with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), except for:
(i) Affiliate Transactions that, together with all related
Affiliate Transactions, have an aggregate value of not more than
$1.0 million; provided, that such transactions are conducted in good
faith and on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction at such time by the Company or
such Restricted Subsidiary on an arm's-length basis from a Person
that is not an Affiliate of the Company or such Restricted
Subsidiary;
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(ii) Affiliate Transactions that, together with all related
Affiliate Transactions, have an aggregate value of not more than
$5.0 million; provided, that (1) a majority of the disinterested
Managers of the Company or, if none, a disinterested committee
appointed by the Managers of the Company for such purpose, determine
that such transactions are conducted in good faith and on terms that
are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction at such time by the Company or such Restricted
Subsidiary on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary and (2) prior
to entering into such transaction the Company shall have delivered
to the Trustee an Officers' Certificate certifying to such effect;
or
(iii) Affiliate Transactions for which the Company delivers to
the Trustee an opinion as to the fairness to the Company or such
Restricted Subsidiary from a financial point of view issued by an
accounting, appraisal or investment banking firm of national
standing.
(b) Notwithstanding the foregoing, the following will be deemed not
to be Affiliate Transactions: (i) transactions between or among the
Issuers and/or any or all of the Subsidiary Guarantors; (ii) Restricted
Payments permitted by Section 4.7; and (iii) reasonable and customary
compensation paid to officers, employees or consultants of PGP, the
Company or any Restricted Subsidiary, in each case for services provided
to the Company or any Restricted Subsidiary, as determined in good faith
by the Managers or senior executives of the Company.
Section 4.12 Limitation on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien on any
asset (including, without limitation, all real, tangible or intangible property)
of the Company or any Restricted Subsidiary, whether now owned or hereafter
acquired, or on any income or profits therefrom, or assign or convey any right
to receive income therefrom, except Permitted Liens.
Section 4.13 Limited Liability Company and Corporate Existence.
Subject to Article V, the Issuers shall do or cause to be done all things
necessary to preserve and keep in full force and effect (a) their limited
liability company and corporate existence, as applicable, and the corporate,
partnership or other existence of each of the Subsidiaries, in accordance with
their respective organizational documents (as the same may be amended from time
to time) and (b) their (and the Subsidiaries') rights (charter and statutory),
licenses (including gaming and related licenses) and franchises; provided, that
the Issuers shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any Subsidiary,
if the Managers or Board of Directors, on behalf of both Issuers, shall
determine in good faith that
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the preservation thereof is no longer desirable in the conduct of the business
of the Company and its Subsidiaries taken as a whole and that the loss thereof
is not adverse in any material respect to the Holders.
Section 4.14 Repurchase Upon a Change of Control.
(a) Upon the occurrence of a Change of Control, the Issuers shall
offer to purchase all of the Notes then outstanding as described below
(the "Change of Control Offer") at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the date of repurchase (the "Change of Control Payment").
(b) The Change of Control Offer shall be made in compliance with all
applicable laws, including, without limitation, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this Section 4.14, the
Issuers shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this
Section 4.14 by virtue thereof.
(c) Within 30 days following any Change of Control, the Issuers
shall commence the Change of Control Offer by mailing to each Holder a
notice, which shall govern the terms of the Change of Control Offer, and
shall state:
(i) that the Change of Control Offer is being made pursuant to
this Section 4.14 and that all Notes tendered will be accepted for
payment;
(ii) the purchase price and the purchase date, which shall be
a Business Day no earlier than 30 days nor later than 45 days from
the date such notice is mailed (the "Change of Control Payment
Date");
(iii) that any Note not tendered for payment pursuant to the
Change of Control Offer shall continue to accrue interest in
accordance with the terms thereof;
(iv) that, unless the Issuers default in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest on the
Change of Control Payment Date;
(v) that any Holder electing to have Notes purchased pursuant
to a Change of Control Offer shall be required to surrender such
Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes completed, to the Paying Agent at the
address specified in the notice prior to the close of business on
the third Business Day preceding the Change of Control Payment Date;
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(vi) that any Holder shall be entitled to withdraw such
election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes
such Holder delivered for purchase, and a statement that such Holder
is withdrawing his election to have such Notes purchased;
(vii) that a Holder whose Notes are being purchased only in
part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased
portion must be equal to $1,000 in principal amount or an integral
multiple thereof;
(viii) the instructions that Holders must follow in order to
tender their Notes; and
(ix) the circumstances and relevant facts regarding such
Change of Control.
(d) On the Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment the Notes or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect
of all Notes or portions thereof so tendered and not withdrawn, and (iii)
deliver or cause to be delivered to the Trustee the Notes so accepted,
together with an Officers' Certificate stating that the Notes or portions
thereof tendered to the Issuers are accepted for payment. The Paying Agent
shall promptly mail to each Holder of Notes so accepted payment in an
amount equal to the purchase price for such Notes, and the Trustee shall
authenticate and mail (or cause to be transferred by book entry) to each
Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any, provided, that each such new Note will be
in the principal amount of $1,000 or an integral multiple thereof.
(e) The Issuers shall make a public announcement of the results of
the Change of Control Offer on or as soon as practicable after the Change
of Control Payment Date. For the purposes of this Section 4.14, the
Trustee shall act as the Paying Agent.
(f) The Issuers shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with
the requirements set forth in this Section 4.14 and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
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Section 4.15 Maintenance of Properties.
The Company shall, and shall cause each of its Subsidiaries to, maintain
their properties and assets in normal working order and condition as on the date
of this Indenture (reasonable wear and tear excepted) and make all necessary
repairs, renewals, replacements, additions, betterments and improvements
thereto, as shall be reasonably necessary for the proper conduct of the business
of the Issuers and the Subsidiaries taken as a whole; provided, that nothing
herein shall prevent the Issuers or any of the Subsidiaries from discontinuing
any maintenance of any such properties if the Company determines that such
discontinuance is desirable in the conduct of the business of the Issuers and
the Subsidiaries taken as a whole.
Section 4.16 Maintenance of Insurance.
The Company shall, and shall cause each of its Subsidiaries to, maintain
liability, casualty and other insurance (including self-insurance consistent
with prior practice) with responsible insurance companies in such amounts and
against such risks as is in accordance with customary industry practice in the
general areas in which the Issuers and the Subsidiaries operate.
Section 4.17 Restriction on Sale and Issuance of Subsidiary Stock.
The Company shall not, and shall not permit any Restricted Subsidiary to,
issue or sell any Equity Interests (other than directors' qualifying shares) of
any Restricted Subsidiary to any Person other than the Company or a Wholly Owned
Subsidiary of the Company; provided, that the Company and its Restricted
Subsidiaries may sell all (but not less than all) of the Capital Stock of a
Restricted Subsidiary owned by the Company and its Restricted Subsidiaries if
the Net Proceeds from such Asset Sale are used in accordance with the terms of
Section 4.10.
Section 4.18 Limitation on Lines of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly engage to any material extent in any
line or lines of business activity other than that which, in the reasonable good
faith judgment of the Managers of the Company, is a Related Business.
Section 4.19 Restrictions on Activities of PGC.
PGC may not hold any assets, become liable for any obligations or engage
in any business activities; provided, that PGC may be a co-obligor of the Notes
pursuant to the terms of this Indenture and any activities directly related or
necessary in connection therewith.
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Section 4.20 Excess Cash Flow Offer.
(a) Within 120 days after the end of each Hotel Operating Year, the
Issuers shall make an offer to all Holders (the "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 Excess Cash Flow for
such Operating Year (the "Excess Cash Flow Offer Amount"), at a purchase
price in cash equal to 101% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest to the date fixed for the
closing of the Excess Cash Flow Offer.
Each Excess Cash Flow Offer shall remain open for a period of 20
Business Days and no longer, unless a longer period is required by law
(the "Excess Cash Flow Offer Period"). Promptly after the termination of
the Excess Cash Flow Offer Period, the Issuers shall purchase and mail or
deliver payment for the Excess Cash Flow Offer Amount for the Notes or
portions thereof tendered, pro rata or by such other method as may be
required by law, or, if less than the Excess Cash Flow Offer Amount has
been tendered, all Notes tendered pursuant to the Excess Cash Flow Offer.
The principal amount of Notes to be purchased pursuant to an Excess Cash
Flow Offer may be reduced by the principal amount of Notes acquired by the
Issuers through purchase or redemption (other than pursuant to a Change of
Control Offer or an Excess Proceeds Offer) surrendered to the Trustee for
cancellation.
Each Excess Cash Flow Offer shall be conducted in compliance with
all applicable laws, including, without limitation, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable federal
and state securities laws. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this
Section 4.20. the Issuers shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached their obligations
under this Section 4.20 by virtue thereof. The Company shall not, and
shall not permit any of its Restricted Subsidiaries to, create or suffer
to exist or become effective any restriction that would impair the ability
of the Issuers to make an Excess Cash Flow Offer or, if such Excess Cash
Flow Offer is made, to pay for the Notes tendered for purchase.
(b) Within 120 days after the end of each Hotel Operating Year, the
Issuers shall commence the Excess Cash Flow Offer by mailing to the
Trustee and each Holder, at such Holder's last registered address, a
notice, which shall govern the terms of the Excess Cash Flow Offer, and
shall state:
(i) that the Excess Cash Flow Offer is being made pursuant to
this Section 4.20, the principal amount of Notes which shall be
accepted for payment and that all Notes validly tendered shall be
accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase;
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(iii) that any Notes not tendered or accepted for payment
pursuant to the Excess Cash Flow Offer shall continue to accrue
interest in accordance with the terms thereof;
(iv) that, unless the Issuers default in the payment of the
purchase price with respect to any Notes tendered, Notes accepted
for payment pursuant to the Excess Cash Flow Offer shall cease to
accrue interest after the Excess Cash Flow Payment Date;
(v) that Holders electing to have Notes purchased pursuant to
an Excess Cash Flow Offer shall be required to surrender their
Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, to the Company prior to the
close of business on the third Business Day immediately preceding
the Excess Cash Flow Payment Date;
(vi) that Holders shall be entitled to withdraw their election
if the Issuers receive, not later than the close of business on the
second Business Day preceding the Excess Cash Flow Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes the Holder
delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part
shall be issued Notes representing the unpurchased portion of the
Notes surrendered; provided that each Note purchased and each new
Note issued shall be in a principal amount of $1,000 or whole
multiples thereof; and
(viii) the instructions that Holders must follow in order to
tender their Notes.
On or before the Excess Cash Flow Payment Date, the Issuers shall
(i) accept for payment the Notes or portions thereof (or an allocable
amount thereof) tendered pursuant to the Excess Cash Flow Offer, (ii)
deposit with the Paying Agent money sufficient to pay the purchase price
of all Notes or portions thereof so accepted and (iii) deliver to the
Trustee the Notes so accepted, together with an Officers' Certificate
stating that the Notes or portions thereof (or an allocable amount
thereof) tendered to the Issuers are accepted for payment. The Paying
Agent shall promptly mail to each Holder of Notes so accepted payment in
an amount equal to the purchase price of such Notes, and the Trustee shall
promptly authenticate and mail to such Holders new Notes equal in
principal amount to any unpurchased portion of the Notes surrendered.
After payment to the Holders of the purchase price of all Notes or
portions thereof so accepted, the Paying Agent shall deliver promptly to
the Issuers the balance, if any, of any money so deposited by the Issuers
with the Paying Agent remaining after such payment to the Holders
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The Issuers shall make a public announcement of the results of the
Excess Cash Flow Offer as soon as practicable after the Excess Cash Flow
Payment Date. For the purposes of this Section 4.20, the Trustee shall act
as the Paying Agent.
ARTICLE V
SUCCESSORS
Section 5.1 When the Issuers May Merge, etc.
Neither Issuer shall consolidate or merge with or into (regardless of
whether such Issuer is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries) in one or more related transactions to, any other Person, unless:
(a) such Issuer is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than such Issuer) or
to which such sale, assignment, transfer, lease, conveyance or other
disposition has been made is a corporation organized and existing under
the laws of the United States of America, any state thereof or the
District of Columbia;
(b) the Person formed by or surviving any such consolidation or
merger (if other than such Issuer) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition has been made
assumes all the Obligations of such Issuer, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the
Notes, this Indenture, the Security Documents and the Registration Rights
Agreement;
(c) immediately after giving effect to such transaction on a pro
forma basis, no Default or Event of Default exists;
(d) such transaction would not result in the loss or suspension or
material impairment of any Gaming License unless a comparable replacement
Gaming License is effective prior to or simultaneously with such loss,
suspension or material impairment; and
(e) such Issuer, or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition has been made, (i) has Consolidated
Net Worth (immediately after the transaction but prior to any purchase
accounting adjustments resulting from the transaction) equal to or greater
than the Consolidated Net Worth of such Issuer immediately preceding the
transaction and (ii) will be permitted, at the time of such transaction
and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, to incur
at least $1.00 of additional Indebtedness pursuant to the Interest
Coverage Ratio test set forth in Section 4.9(a).
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The Issuers shall deliver to the Trustee prior to the consummation of any
proposed transaction an Officers' Certificate to the foregoing effect, an
Opinion of Counsel, stating that all conditions precedent to the proposed
transaction provided for in this Indenture have been complied with, and a
written statement from a firm of independent public accountants of established
national reputation reasonably satisfactory to the Trustee stating that the
proposed transaction complies with clause (e) of this Section 5.1.
For purposes of this Section 5.1, the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the properties
and assets of one or more Subsidiaries of either of the Issuers, which
properties and assets, if held by such Issuer instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of such
Issuer on a consolidated basis, shall be deemed to be the sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the properties and assets of such Issuer.
Section 5.2 Successor Substituted.
In the event of any transaction (other than a lease) contemplated by
Section 5.1 in which such Issuer is not the surviving Person, the successor
formed by such consolidation or into or with which such Issuer is merged or to
which such sale, assignment, transfer, conveyance or other disposition is made,
or formed by such reorganization, as the case may be, shall succeed to, and be
substituted for, and may exercise every right and power of, such Issuer under,
and such Issuer shall be discharged from its Obligations under, this Indenture,
the Notes, the Security Documents and the Registration Rights Agreement, with
the same effect as if such successor Person had been named as such Issuer herein
or therein.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
(a) Each of the following shall constitute an "Event of Default"
under this Indenture:
(i) the Issuers default in the payment of interest on any Note
when the same becomes due and payable and the Default continues for
a period of 30 days;
(ii) the Issuers default in the payment of the principal (or
premium, if any) on any Note when the same becomes due and payable
at maturity, upon redemption, by acceleration, in connection with an
Excess Proceeds Offer or a Change of Control Offer or otherwise;
(iii) either of the Issuers default in the performance of or
breaches the provisions of Sections 4.7, 4.10 or 4.14, or 5.1;
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(iv) either of the Issuers or any Subsidiary Guarantor fails
to comply with any of its other agreements or covenants in, or
provisions of, the Notes or this Indenture and the Default continues
for 60 days after written notice thereof has been given to the
Issuers by the Trustee or to the Issuers and the Trustee by the
Holders of at least 25% in aggregate principal amount of the then
outstanding Notes, such notice to state that it is a "Notice of
Default";
(v) a default occurs under (after giving effect to any
waivers, amendments, applicable grace periods or any extension of
any maturity date) any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Issuers or any Restricted
Subsidiary (or the payment of which is guaranteed by the Issuers or
any Restricted Subsidiary), whether such Indebtedness or guaranty
now exists or is created after the Issue Date, if (1) either (A)
such default results from the failure to pay principal of or
interest on such Indebtedness or (B) as a result of such default the
maturity of such Indebtedness has been accelerated, and (2) the
principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness with respect to which such a
payment default (after the expiration of any applicable grace period
or any extension of the maturity date) has occurred, or the maturity
of which has been so accelerated, exceeds $5.0 million in the
aggregate;
(vi) a final non-appealable judgment or judgments for the
payment of money (other than to the extent of any judgment as to
which a reputable insurance company has accepted liability) is or
are entered by a court or courts of competent jurisdiction against
either of the Issuers or any Subsidiary and such judgment or
judgments remain undischarged, unbonded or unstayed for a period of
60 days after entry, provided that the aggregate of all such
judgments exceeds $5.0 million;
(vii) the cessation of substantially all gaming operations of
the Company for more than 60 days, except as a result of an Event of
Loss;
(viii) any revocation, suspension, expiration (without
previous or concurrent renewal) or loss of any Gaming License for
more than 90 days;
(ix) any event of default under a Security Document;
(x) either of the Issuers or any Subsidiary Guarantor pursuant
to or within the meaning of any Bankruptcy Law:
(1) commences a voluntary case,
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(2) consents to the entry of an order for relief against
it in an involuntary case,
(3) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(4) makes a general assignment for the benefit of its
creditors,
(5) admits in writing its inability to pay debts as the
same become due; and
(xi) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(1) is for relief against either of the Issuers or any
Subsidiary Guarantor in an involuntary case,
(2) appoints a Custodian of either of the Issuers or any
Subsidiary Guarantor or for all or substantially all of their
property,
(3) orders the liquidation of either of the Issuers, or
any Subsidiary Guarantor,
and the order or decree remains unstayed and in effect for 60 days.
(b) The Issuers shall, upon becoming aware that a Default or Event
of Default has occurred, deliver to the Trustee a statement specifying
such Default or Event of Default and what action the Issuers are taking or
propose to take with respect thereto.
Section 6.2 Acceleration.
Subject to the terms of the Intercreditor Agreement, if an Event of
Default (other than an Event of Default specified in clause (x) or (xi) of
Section 6.1(a)) occurs and is continuing, the Trustee by written notice to the
Issuers, or the Holders of at least 25% in principal amount of the then
outstanding Notes by written notice to the Issuers and the Trustee, may declare
the unpaid principal of and any accrued interest on all the Notes to be due and
payable. Upon such declaration the principal and interest shall be due and
payable immediately. If an Event of Default specified in clause (x) or (xi) of
Section 6.1(a) occurs, all outstanding Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. At any time after a declaration of acceleration, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in aggregate principal amount of the
Notes outstanding, by written notice to the Issuers and the Trustee, may rescind
and
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annul such declaration and its consequences if (a) the Issuers have paid or
deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced
by the Trustee and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest
(including any interest accrued subsequent to an Event of Default specified in
clause (x) or (xi) of Section 6.1(a)) on all Notes, (iii) the principal of and
premium, if any, on any Notes that have become due otherwise than by such
declaration or occurrence of acceleration and interest thereon at the rate borne
by the Notes, and (iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Notes; (b) all Events of
Default, other than the non-payment of principal of and interest on the Notes
that have become due solely by such declaration or occurrence of acceleration,
have been cured or waived; and (c) the rescission would not conflict with any
judgment, order or decree of any court of competent jurisdiction.
Section 6.3 Other Remedies.
If an Event of Default occurs and is continuing, subject to the terms of
the Intercreditor Agreement, the Trustee may pursue any available remedy (under
this Indenture or otherwise) to collect the payment of principal or interest on
the Notes or to enforce the performance of any provision of the Notes, this
Indenture or the Security Documents.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. All remedies are cumulative to the
extent permitted by law.
Section 6.4 Waiver of Past Defaults.
Holders of a majority of the aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of the Holders
of all of the Notes (a) waive any existing Default or Event of Default and its
consequences under this Indenture except a continuing Default or Event of
Default in the payment of the principal of, or interest on, any Note or a
Default or an Event of Default with respect to any covenant or provision which
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected, and/or (b) rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
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Section 6.5 Control by Majority.
The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, that the Trustee determines may be unduly prejudicial to
the rights of other Holders, or that may involve the Trustee in personal
liability.
Section 6.6 Limitation on Suits.
A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Section 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal and interest on the Note, on or
after the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
Section 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a)(i) or 6.1(a)(ii) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Issuers for the whole amount of
principal and interest remaining unpaid on the Notes and interest
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on overdue principal (and premium, if any) and, to the extent lawful, interest
on overdue interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel.
Section 6.9 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Issuers (or any
other obligor under the Notes), their creditors or their property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel, and any other amounts due the Trustee under
Section?. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section ? out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10 Priorities.
Subject to the terms of the Intercreditor Agreement, if the Trustee
collects any money pursuant to this Article VI, it shall pay out the money in
the following order:
First: to the Trustee and its agents and attorneys for amounts due
under Section?, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively;
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Third: without duplication, to Holders for any other Obligations
owing to the Holders under the Notes, this Indenture, the Security
Documents or the Registration Rights Agreement; and
Fourth: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee, upon written notice to the Issuers, may fix a record date and
payment date for any payment to Holders.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.6, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE VII
TRUSTEE
Section 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(i) The duties of the Trustee shall be determined solely by
the express provisions of this Indenture, and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and the Security Documents, and no others, and no implied
covenants or obligations shall be read into this Indenture against
the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture and the Security Documents. However, the Trustee
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shall examine the certificates and opinions to determine whether
they conform to the requirements of this Indenture and the Security
Documents.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b)
of this Section 7.1.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
(d) Regardless of whether therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b), (c) and (e) of this Section 7.1.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may
refuse to perform any duty or exercise any right or power unless it
receives security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Issuers. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) The Trustee is hereby authorized and directed to enter into the
Intercreditor Agreement upon execution thereof by the other parties
thereto.
Section 7.2 Rights of Trustee.
(a) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith
in reliance on such Officers' Certificate or Opinion of
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Counsel. The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture and the
Security Documents, any demand, request, direction or notice from the
Issuers shall be sufficient if signed by an Officer of each of the
Issuers, on behalf of the respective Issuer.
(f) Except with respect to Section 4.1, the Trustee shall have no
duty to inquire as to the performance of the Issuers' covenants in Article
IV. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring
pursuant to Sections 6.1(a)(i), 6.1(a)(ii) and 4.1, or (ii) any Default or
Event of Default of which the Trustee shall have received written
notification or a Responsible Officer of the Trustee shall have obtained
actual knowledge.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with either Issuer or an Affiliate of
either Issuer with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
Section 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuers' use of the proceeds from the Notes or any money
paid to the Issuers or upon the Issuers' direction under any provision hereof,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
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Section 7.5 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if the
Trustee has actual knowledge thereof (within the meaning of Section 7.2(f), the
Trustee shall mail to the Holders a notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in the payment of principal of, premium, if any, or interest on any
Note, the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interest of the Holders.
Section 7.6 Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall mail to the Holders a brief report
dated as of such reporting date that complies with TIA ss.313(a) (but if no
event described in TIA ss.313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA ss.313(b). The Trustee shall also transmit by mail all
reports as required by TIA ss.313(c).
Commencing at the time this Indenture is qualified under the TIA, a copy
of each report at the time of its mailing to the Holders shall be filed with the
Commission and each stock exchange on which the Notes are listed. The Issuers
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
At the express direction of the Company and at the Company's expense, the
Trustee will provide any Gaming Authority with:
(a) copies of all notices, reports and other written communications
that the Trustee gives to Holders;
(b) a list of all of the Holders promptly after the original
issuance of the Notes and periodically thereafter if the Company so
directs;
(c) notice of any Default or Event of Default under this Indenture,
any acceleration of the Indebtedness evidenced hereby, the institution of
any legal actions or proceedings before any court or governmental
authority in respect of a Default or Event of Default hereunder;
(d) notice of the removal or resignation of the Trustee within five
Business Days of the effectiveness thereof;
(e) notice of any transfer or assignment of rights under this
Indenture known to the Trustee within five Business Days thereof; and
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(f) a copy of any amendment to the Notes or this Indenture within
five Business Days of the effectiveness thereof.
To the extent requested by the Company and at the Company's expense,
the Trustee shall cooperate with any Gaming Authority in order to provide such
Gaming Authority with the information and documentation requested and as
otherwise required by applicable law.
Section 7.7 Compensation and Indemnity.
The Issuers shall pay to the Trustee from time to time such compensation
as shall be agreed to in writing by the Issuers and the Trustee for its
acceptance of this Indenture and services hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuers shall reimburse the Trustee promptly upon request for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel, except such disbursements, advances and expenses as may be attributable
to its negligence or bad faith.
Except as set forth below, the Issuers, jointly and severally, shall
indemnify the Trustee, any predecessor and their respective officers, directors,
agents and employees against any and all losses, liabilities, damages, claims or
expenses incurred by it without negligence or bad faith on its part arising out
of or in connection with the acceptance or administration of its duties under
this Indenture and the Security Documents (including the costs and expenses of
enforcing this Indenture or the Security Documents against either of the Issuers
and defending itself against any claim (regardless of whether asserted by either
of the Issuers or any Holder or any other person) or liability in connection
with the exercise or performance of any of its powers or duties hereunder),
except as set forth below. The Trustee shall notify each of the Issuers promptly
of any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Issuers shall not relieve the Issuers of their obligations hereunder.
Each of the Issuers shall defend the claim and the Trustee shall cooperate in
the defense. In the event that a conflict of interest or conflicting defenses
would arise in connection with the representation of the Issuers and the Trustee
by the same counsel, the Trustee may have separate counsel and the Issuers shall
pay the reasonable fees and expenses of such counsel. The Issuers need not pay
for any settlement made without their consent, which consent shall not be
unreasonably withheld.
The obligations of the Issuers under this Section ? shall survive the
satisfaction and discharge of this Indenture.
The Issuers need not reimburse any expense or indemnify against any loss
or liability incurred by the Trustee through its own negligence or bad faith.
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To secure the Issuers' payment obligations in this Section ?, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal of (and premium, if
any) and interest on particular Notes. Such Lien shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(a)(x) or (xi) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section ? shall survive the termination of this
Indenture.
Section 7.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8 and upon the Issuers' receipt of
notice from the successor Trustee of such appointment.
The Trustee may resign at any time and be discharged from the trust hereby
created by so notifying the Issuers. The Holders of a majority in principal
amount of the then outstanding Notes may remove the Trustee by so notifying the
Trustee and the Issuers. The Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property;
(d) the Trustee becomes incapable of acting; or
(e) the Trustee is found unsuitable or unqualified by any Gaming
Authority.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
If any Gaming Authority requires the Trustee to be approved, licensed or
qualified and the Trustee fails or declines to do so, such approval, license or
qualification shall be obtained upon the request of, and at the expense of, the
Company, unless the Trustee declines to do so, in which case the Trustee shall
be replaced in accordance with this Section 7.8, or, if the Trustee's
relationship with the Company may, in the Company's discretion, jeopardize any
material Gaming License or
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franchise or right or approval granted thereto, the Trustee shall resign, and,
in addition, the Trustee may, at its option, resign if the Trustee in its sole
discretion determines not to be so approved, licensed or qualified.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Holder who has been a Holder
for at least six months fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuers. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to the
Holders. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, provided that all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section?.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the
Issuers' obligations under Section ? shall continue for the benefit of the
retiring Trustee, and the Issuers shall pay to any such replaced or removed
Trustee all amounts owed under Section ? upon such replacement or removal.
Section 7.9 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation or
banking association, the successor corporation without any further act shall be
the successor Trustee.
Section 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that shall (a) be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof or of the District of Columbia authorized under
such laws to exercise corporate trustee power, (b) be subject to supervision or
examination by Federal or state or the District of Columbia authority, and (c)
have a combined capital and surplus of at least $100.0 million as set forth in
its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss.ss.310(a)(1), 310(a)(2) and 310(a)(5). The Trustee is subject to TIA
ss.310(b); provided, however, that there shall be excluded from the operations
of TIA ss.310(b)(l) any indenture or indentures under
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which other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA ss.310(b)(1) are met.
Section 7.11 Preferential Collection of Claims Against the Issuers.
The Trustee is subject to TIA ss.311(a), excluding any creditor
relationship listed in TIA ss.311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss.311(a) to the extent indicated therein. The
provisions of TIA ss.311 shall apply to the Issuers, as obligors on the Notes.
ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1 Discharge; Option to Effect Legal or Covenant Defeasance.
This Indenture shall cease to be of further effect (except that the
Issuers' and the Subsidiary Guarantors' obligations under Section ? and the
Trustee's and the Paying Agent's obligations under Sections 8.6 and 8.7 shall
survive) when all outstanding Notes theretofore authenticated and issued have
been delivered (other than destroyed, lost or stolen Notes that have been
replaced or paid) to the Trustee for cancellation and the Issuers or the
Subsidiary Guarantors have paid all sums payable hereunder. In addition, the
Issuers may elect at any time to have Section 8.2 or Section 8.3, at the
Issuers' option, of this Indenture applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article VIII.
Section 8.2 Legal Defeasance and Discharge.
Upon the Issuers' exercise under Section 8.1 of the option applicable to
this Section 8.2, except as set forth below, the Issuers and the Subsidiary
Guarantors shall be deemed to have been discharged from their respective
obligations with respect to all outstanding Notes on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). Following such
Legal Defeasance, (a) the Issuers shall be deemed to have paid and discharged
the entire indebtedness outstanding hereunder, and this Indenture shall cease to
be of further effect as to all outstanding Notes and Subsidiary Guarantees, and
(b) the Issuers and the Subsidiary Guarantors shall be deemed to have satisfied
all other of their respective obligations under the Notes, the Subsidiary
Guarantees and this Indenture (and the Trustee, on demand of and at the expense
of the Issuers, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder:
(i) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest (and Liquidated Damages, if
any) on such Notes when such payments are due from the trust described in
Section 8.5;
(ii) the Issuers' obligations under Sections 2.4, 2.6, 2.7, 2.l0,
4.2, 8.5, 8.6 and 8.7; and
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(iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Issuers' and the Subsidiary Guarantors'
obligations in connection therewith.
Subject to compliance with the provisions of this Article VIII, the Company may
exercise its option under this Section 8.2 notwithstanding the prior exercise of
its option under Section 8.3.
Section 8.3 Covenant Defeasance.
Upon the Issuers' exercise under Section 8.1 of the option applicable to
this Section 8.3, the Company and the Subsidiary Guarantors shall be released
from their respective obligations under the covenants contained in Sections 4.3,
4.4, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19 and
4.20 and Article V on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. Following such Covenant Defeasance, (a) none
of the Issuers or any Subsidiary Guarantor need comply with, and none of them
shall have any liability in respect of, any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document, but,
except as specified above, the remainder of this Indenture, the Notes and the
Subsidiary Guarantees shall be unaffected thereby, and (b) Sections 6.1(a)(iii)
through 6.1(a)(ix) shall not constitute Events of Default with respect to the
Notes.
Section 8.4 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.2 or 8.3 to the outstanding Notes:
(a) the Issuers shall irrevocably have deposited or caused to be
deposited with the Trustee (or other trustee satisfying the requirements
of Section 7.10 who shall agree to comply with the provisions of this
Article VIII applicable to it), 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 such 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;
(b) in the case of Legal Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel confirming that (i) the
Issuers have received from, or there has been published by, the Internal
Revenue Service a ruling or (ii) since the Issue Date, there has
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been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such Legal Defeasance and will be
subject 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;
(c) in the case of Covenant Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel 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;
(d) 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);
(e) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the Issuers
or any of the Subsidiaries is a party or by which the Issuers or any of
the Subsidiaries is bound;
(f) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the
intent of preferring the Holders over the other creditors of the Issuers
with the intent of defeating, hindering, delaying or defrauding other
creditors of the Issuers or others;
(g) each of the Issuers shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating, subject to
certain factual assumptions and bankruptcy and insolvency exceptions, that
all conditions precedent provided for in, in the case of the Officers'
Certificate, clauses (a) through (f) of this paragraph and, in the case of
the Opinion of Counsel, clauses (b), (c) and (e) of this paragraph, have
been complied with; and
(h) in the event all or any portion of the Notes are to be redeemed
through such irrevocable trust, the Issuers must make arrangements
satisfactory to the Trustee, at the time of such deposit, for the giving
of notice of such redemption or redemptions by the Trustee in the name and
at the expense of the Issuers.
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Section 8.5 Deposits to be Held in Trust: Other Miscellaneous Provisions.
Subject to Section 8.6, all cash in U.S. dollars and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.5, the "Paying Agent") pursuant to Section 8.4 in respect of the outstanding
Notes shall be held in trust and applied by the Paying Agent, in accordance with
the provisions of such Notes and this Indenture, to the payment, either directly
or through any other Paying Agent as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest (and Liquidated Damages, if any).
The Issuers shall pay and, jointly and severally, indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the
Government Securities deposited pursuant to Section 8.4 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.
Section 8.6 Repayment to the Issuers.
(a) The Trustee or the Paying Agent shall deliver or pay to the
Issuers from time to time upon the request of the Issuers any cash in U.S.
dollars or non-callable Government Securities held by it as provided in
Section 8.4 which in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.4(a)), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
(b) Any cash in U.S. dollars and non-callable Government Securities
(including the proceeds thereof) deposited with the Trustee or any Paying
Agent, or then held by the Issuers, in trust for the payment of the
principal of, premium, if any, or interest (and Liquidated Damages, if
any) on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable
shall be paid to the Issuers on their request; and the Holder of such Note
shall thereafter look only to the Issuers for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, shall at
the expense of the Issuers cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining will be
repaid to the Issuers.
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Section 8.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any cash in U.S. dollars
or non-callable Government Securities in accordance with Section 8.2 or 8.3, as
the case may be, of this Indenture by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, or if any event occurs at any time in the period ending on the
91st day after the date of deposit pursuant to Section 8.2 or 8.3 which event
would constitute an Event of Default under Section 6.1(a)(x) or (xi) had Legal
Defeasance or Covenant Defeasance, as the case may be, not occurred, then the
Issuers' and the Subsidiary Guarantors' obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 8.2 or 8.3 until such time as the Trustee or Paying Agent is
permitted to apply such money in accordance with Section 8.2 or 8.3, as the case
may be; provided, however, that, if the Issuers make any payment of principal
of, premium, if any, or interest (and Liquidated Damages, if any) on any Note
following the reinstatement of their obligations, the Issuers shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the cash in U.S. dollars or non-callable Government Securities held by the
Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS
Section 9.1 Without Consent of Holders.
(a) The Issuers, the Subsidiary Guarantors and the Trustee may amend
or supplement this Indenture and the Notes without the consent of any
Holder:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(iii) to comply with Article V and Section 10.6;
(iv) to make any change that would provide any additional
rights or benefits to the Holders or that does not adversely affect
the legal rights hereunder or thereunder of any Holder;
(v) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the
TIA; or
(vi) to release any Subsidiary Guaranty of the Notes permitted
to be released under Section 10.7.
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Upon the request of the Issuers, accompanied by a resolution of the Board
of Directors or Managers, as the case may be, of each of the Issuers authorizing
the execution of any such supplemental indenture or amendment, and upon receipt
by the Trustee of the documents described in Section 9.6 required or requested
by the Trustee, the Trustee shall join with the Issuers in the execution of any
supplemental indenture or amendment authorized or permitted by the terms of this
Indenture and shall make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to enter
into such supplemental indenture or amendment that affects its own rights,
duties or immunities under this Indenture or otherwise.
Section 9.2 With Consent of Holders.
(a) Subject to Sections 6.4, 6.7 and 9.2(e), the Issuers and the
Trustee, as applicable, may amend, or waive any provision of, this
Indenture or the Notes, with the written consent of the Holders of at
least a majority in aggregate principal amount of the then outstanding
Notes (including consents obtained in connection with a tender offer or
exchange offer for Notes).
(b) Upon the request of the Issuers, accompanied by a resolution of
the Board of Directors or Managers, as the case may be, of each of the
Issuers authorizing the execution of any such supplemental indenture or
amendment, and upon filing with the Trustee of evidence satisfactory to
the Trustee of the consent of the Holders as aforesaid, and upon receipt
by the Trustee of the documents described in Section 9.6, the Trustee
shall join with the Issuers in the execution of such supplemental
indenture or amendment unless such supplemental indenture or amendment
affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion,
but shall not be obligated to, enter into such supplemental indenture.
(c) It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed
supplemental indenture or amendment, but it shall be sufficient if such
consent approves the substance thereof.
(d) After a supplemental indenture or amendment under this Section
9.2 becomes effective, the Issuers shall mail to the Holders of each Note
affected thereby a notice briefly describing the amendment or waiver. Any
failure of the Issuers to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such
supplemental indenture, amendment or waiver.
(e) Notwithstanding any other provision hereof, without the consent
of each Holder affected, an amendment or waiver under this Section 9.2 may
not (with respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
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(ii) reduce the principal of, or the premium (including,
without limitation, redemption premium) on, or change the fixed
maturity of, any Note; alter the provisions with respect to the
payment on redemption of the Notes; or alter the price at which the
Issuers shall offer to purchase such Notes pursuant to Section 4.10,
4.14 or 4.20;
(iii) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on, or redemption
payment with respect to, any Note (other than a Default in the
payment of an amount due as a result of an acceleration if the
Holders rescind such acceleration pursuant to Section 6.2);
(v) make any Note payable in money other than that stated in
the Notes;
(vi) make any change in Section 6.4 or 6.7 or in this Section
9.2 with respect to the requirement for the consent of any affected
Holder;
(vii) waive a redemption payment with respect to any Note; or
(viii) make any change adversely affecting the contractual
ranking of the Obligations of the Company under the Notes, this
Indenture or of the Subsidiary Guarantors under their respective
Subsidiary Guarantees.
Section 9.3 Compliance with Trust Indenture Act.
If, at the time of an amendment to this Indenture or the Notes, this
Indenture shall be qualified under the TIA, every amendment to this Indenture or
the Notes shall be set forth in a supplemental indenture that complies with the
TIA as then in effect.
Section 9.4 Revocation and Effect of Consents.
Until a supplemental indenture, an amendment or waiver becomes effective,
a consent to it by a Holder of a Note is a continuing consent by the Holder and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. A supplemental indenture, amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Issuers may fix a record date for determining which Holders must
consent to such supplemental indenture, amendment or waiver. If the Issuers fix
a record date, the record date shall be fixed at (a) the later of 30 days prior
to the first solicitation of such consent or the date of the most
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recent list of Holders furnished to the Trustee prior to such solicitation
pursuant to Section 2.5, or (b) such other date as the Issuers shall designate.
Section 9.5 Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about a supplemental
indenture, amendment or waiver on any Note thereafter authenticated. The Issuers
in exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment or waiver.
Section 9.6 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article IX if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental indenture, the Trustee shall be entitled to receive,
if requested, an indemnity reasonably satisfactory to it and to receive and,
subject to Section 7.1, shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that it
is not inconsistent herewith, and that it shall be valid and binding upon the
Issuers in accordance with its terms. The Issuers may not sign an amendment or
supplemental indenture until the Managers of the Company and the Board of
Directors of PGC approves it.
ARTICLE X
SUBSIDIARY GUARANTEES
Section 10.1 Subsidiary Guaranty.
(a) For good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, subject to Section 10.3, each Subsidiary
Guarantor, jointly and severally, hereby unconditionally guarantees to
each Holder and the Trustee, irrespective of the validity or
enforceability of this Indenture, the Notes, the Security Documents, the
Registration Rights Agreement or the Obligations of the Issuers hereunder
or thereunder:
(i) the due and punctual payment of the principal and premium,
if any, of, and interest on, the Notes (including, without
limitation, interest after the filing of a petition initiating any
proceedings referred to in clause (x) or (xi) of Section 6.1(a)),
whether at maturity or on an interest payment date, by acceleration,
call for redemption or otherwise;
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(ii) the due and punctual payment of interest on the overdue
principal and premium, if any, of, and interest on, the Notes, if
lawful;
(iii) the due and punctual payment and performance of all
other Obligations of the Issuers under the Notes, this Indenture,
the Security Documents and the Registration Rights Agreement, all in
accordance with the terms set forth herein and in the Notes, the
Security Documents and the Registration Rights Agreement; and
(iv) in case of any extension of time of payment or renewal of
any Notes or any of such other Obligations hereunder or under the
Notes, the Security Documents or the Registration Rights Agreement,
the due and punctual payment or performance thereof in accordance
with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
(b) Failing payment when due by the Issuers of any amount so
guaranteed for whatever reason, the Subsidiary Guarantors shall be jointly
and severally obligated to pay the same immediately.
(c) Each Subsidiary Guarantor hereby agrees that (i) its obligations
hereunder shall be unconditional, irrespective of the validity, regularity
or enforceability of the Notes, this Indenture, the Security Documents,
the Registration Rights Agreement or the Obligations of the Issuers
hereunder or thereunder, the absence of any action to enforce the same,
any waiver or consent by any Holder with respect to any provisions hereof
or thereof, any releases of Collateral, any amendment of this Indenture,
the Notes or the Security Documents, any delays in obtaining or realizing
upon or failure to obtain or realize upon the Collateral, the recovery of
any judgment against either of the Issuers or any of their Subsidiaries,
any action to enforce the same, or any other circumstance that might
otherwise constitute a legal or equitable discharge or defense of a
guarantor and (ii) each Subsidiary Guaranty will not be discharged except
by complete performance of the Obligations of the Issuers under the Notes,
this Indenture, the Security Documents and the Registration Rights
Agreement.
(d) Each Subsidiary Guarantor hereby agrees that it shall not be
entitled to and irrevocably waives diligence, presentment, demand of
payment, filing of claim with a court in the event of insolvency or
bankruptcy of either of the Issuers, any Subsidiary Guarantor, any other
Subsidiary of the Issuers or any other obligor under the Notes, any right
to require a proceeding first against either of the Issuers, any
Subsidiary Guarantor, any other Subsidiary of the Issuers or any other
obligor under this Indenture, the Notes or the Security Documents,
protest, notice and all demands whatsoever.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Issuers, any Subsidiary Guarantor, any other
Subsidiary of the Issuers or any other
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obligor under this Indenture, the Notes or the Security Documents, or any
trustee, liquidator or other similar official, any amount paid by the
Issuers, any Subsidiary Guarantor, any other Subsidiary of the Issuers or
any other obligor under this Indenture, the Notes or the Security
Documents to the Trustee or such Holder, the Subsidiary Guarantees, to the
extent theretofore discharged, shall be reinstated in full force and
effect.
(f) Each Subsidiary Guarantor agrees that, as between the Subsidiary
Guarantors, on the one hand, and the Holders and the Trustee, on the other
hand, (i) the maturity of the Obligations of the Issuers guaranteed hereby
may be accelerated as provided in Section 6.2 for the purposes of the
Subsidiary Guarantees, notwithstanding any stay, injunction or other
prohibition preventing such acceleration as to the Issuers of the
Obligations guaranteed hereby, and (ii) in the event of any declaration of
acceleration of those Obligations as provided in Section 6.2, those
Obligations (regardless of whether due and payable) will forthwith become
due and payable by each of the Subsidiary Guarantors for the purpose of
the Subsidiary Guarantees.
Section 10.2 Execution and Delivery of the Subsidiary Guarantees.
(a) To evidence the Subsidiary Guarantees set forth in Section 10.1,
the Issuers and each Subsidiary Guarantor hereby agrees that
(i) a notation of the Subsidiary Guarantees substantially as
set forth on Exhibit C hereto shall be endorsed on each Note
authenticated and delivered by the Trustee,
(ii) such endorsement shall be executed on behalf of each
Subsidiary Guarantor by its Manager, Chairman of the Board,
President, Chief Financial Officer, Chief Operating Officer,
Treasurer, Secretary or any Vice President and
(iii) a counterpart signature page to this Indenture shall be
executed on behalf of each Subsidiary Guarantor by its Manager,
Chairman of the Board, President or one of its Vice Presidents and
attested to by another officer acknowledging such Subsidiary
Guarantor's agreement to be bound by the provisions hereof and
thereof.
(b) Each Subsidiary Guarantor hereby agrees that its Subsidiary
Guaranty set forth in Section 10.1 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guaranty.
(c) If an officer whose signature is on this Indenture no longer
holds that office at the time the Trustee authenticates the Notes on which
a Subsidiary Guaranty is endorsed, the Subsidiary Guaranty shall
nevertheless be valid.
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(d) The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantees set forth in this Indenture on behalf of the
Subsidiary Guarantors.
Section 10.3 Limitation on Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guaranty by such
Subsidiary Guarantor pursuant to its Subsidiary Guaranty not constitute a
fraudulent transfer or conveyance for purposes of any federal or state law. To
effectuate the foregoing intention, the Holders and the Subsidiary Guarantors
hereby irrevocably agree that the Obligations of each Subsidiary Guarantor under
its Subsidiary Guaranty shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and to any collections from or payments made by or on behalf of any
other Subsidiary Guarantor in respect of the Obligations of such other
Subsidiary Guarantor under its Subsidiary Guaranty, result in the Obligations of
such Subsidiary Guarantor under its Subsidiary Guaranty not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law and not
rendering a Subsidiary Guarantor insolvent.
Section 10.4 Rights under the Subsidiary Guarantees.
(a) No payment by any Subsidiary Guarantor pursuant to the
provisions hereof shall entitle such Subsidiary Guarantor to any payment
out of any Collateral or give rise to any claim of the Subsidiary
Guarantors against the Trustee or any Holder.
(b) Each Subsidiary Guarantor waives notice of the issuance, sale
and purchase of the Notes and notice from the Trustee or the Holders from
time to time of any of the Notes of their acceptance and reliance on its
Subsidiary Guaranty.
(c) No set-off, counterclaim, reduction or diminution of any
obligation or any defense of any kind or nature (other than performance by
the Subsidiary Guarantors of their obligations hereunder) that any
Subsidiary Guarantor may have or assert against the Trustee or any Holder
shall be available hereunder to such Subsidiary Guarantor.
(d) Each Subsidiary Guarantor shall pay all costs, expenses and
fees, including all reasonable attorneys' fees, that may be incurred by
the Trustee in enforcing or attempting to enforce the Subsidiary
Guarantees or protecting the rights of the Trustee or the Holder, if any,
in accordance with this Indenture.
Section 10.5 Primary Obligations.
The Obligations of each Subsidiary Guarantor hereunder shall constitute a
guaranty of payment and not of collection. Each Subsidiary Guarantor agrees that
it is directly liable to each Holder hereunder, that the Obligations of each
Subsidiary Guarantor hereunder are independent of
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the Obligations of the Issuers or any other Subsidiary Guarantor, and that a
separate action may be brought against each Subsidiary Guarantor, whether such
action is brought against either of the Issuers or any other Subsidiary
Guarantor or whether either of the Issuers or any other Subsidiary Guarantor is
joined in such action. Each Subsidiary Guarantor agrees that its liability
hereunder shall be immediate and shall not be contingent upon the exercise or
enforcement by the Trustee or the Holders of whatever remedies they may have
against either of the Issuers or any other Subsidiary Guarantor or the
enforcement of any lien or realization upon any security the Trustee may at any
time possess. Each Subsidiary Guarantor agrees that any release that may be
given by the Trustee or the Holders to either of the Issuers or any other
Subsidiary Guarantor shall not release such Subsidiary Guarantor.
Section 10.6 Guaranty by Future Subsidiaries.
The Issuers shall cause each Person that becomes a Restricted Subsidiary
after the Issue Date (regardless of whether through formation, acquisition,
merger or otherwise) to, concurrently with so becoming a Restricted Subsidiary
to
(a) become a Subsidiary Guarantor hereunder and execute and deliver
to the Trustee an endorsement of its Subsidiary Guaranty in the form of
Exhibit C attached hereto and a supplemental indenture in form reasonably
satisfactory to the Trustee, pursuant to which such Restricted Subsidiary
shall unconditionally guarantee all of the Issuers' Obligations under the
Notes, this Indenture, the Security Documents and the Registration Rights
Agreement as set forth in Section 10.1,
(b) execute Security Documents (substantially in the form of the
Security Documents entered into on the Closing Date) necessary to grant to
the Trustee a valid, enforceable, perfected Lien on the Collateral
described therein, and
(c) deliver to the Trustee an Opinion of Counsel, in form reasonably
satisfactory to the Trustee, to the effect that (i) such supplemental
indenture, Subsidiary Guaranty and Security Documents have been duly
authorized, executed and delivered by such Restricted Subsidiary and (ii)
such supplemental indenture, Subsidiary Guaranty and Security Documents
constitute legal, valid, binding and enforceable obligations of such
Restricted Subsidiary, subject to customary exceptions for bankruptcy,
fraudulent transfer and equitable principles.
Each Note issued after the date of execution by any Subsidiary Guarantor
of a Subsidiary Guaranty shall be endorsed with a form of Subsidiary Guaranty
that has been executed by such Subsidiary Guarantor. However, the failure of any
Note to have endorsed thereon a Subsidiary Guaranty executed by such Subsidiary
Guarantor shall not affect the validity or enforceability of such Subsidiary
Guaranty against such Subsidiary Guarantor.
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Section 10.7 Release of Subsidiary Guarantors.
If all of the Capital Stock of any Subsidiary Guarantor is sold by the
Company or any of the Subsidiaries to a Person (other than the Company or any of
its Subsidiaries) and the Net Proceeds from such Asset Sale are used in
accordance with Section 4.10, then such Subsidiary Guarantor shall be released
and discharged from all of its obligations under its Subsidiary Guaranty of the
Notes and this Indenture.
ARTICLE XI
SECURITY INTEREST
Section 11.1 Grant of Security Interest.
(a) In order to secure the performance of the Issuers' obligation to
pay the principal amount of, premium, if any, and interest on the Notes
when and as the same shall be due and payable, whether at maturity or on
an interest payment date, by acceleration, call for redemption, repurchase
or otherwise, and interest on the overdue principal of and premium, if
any, and interest, if lawful, on the Notes and performance of all other
Obligations of the Issuers to the Holders and the Trustee under this
Indenture and the Notes, according to their terms hereunder or thereunder,
the Company pursuant to the Security Documents has unconditionally and
absolutely granted to the Trustee for the benefit of itself and all
Holders, a security interest in the Collateral, whether owned on the Issue
Date or thereafter acquired, subject to the limitations set forth in
Section 4.12 (the "Security Interest"). The Trustee's security interest in
the Collateral will be subordinated to a lien securing Indebtedness
outstanding under the Senior Credit Facility. Prior to the effectiveness
of such Senior Credit Facility, with incurring any such Indebtedness, the
Trustee will be permitted to enter into an Intercreditor Agreement with
the Lenders under such Senior Credit Facility substantially in the form of
Exhibit D attached hereto.
(b) The Security Interest as now or hereafter in effect shall be
held for the Trustee and for the equal and ratable benefit and security of
the Notes without preference, priority or distinction of any thereof over
any other by reason, or difference in time, of issuance, sale or
otherwise, and for the enforcement of the payment of principal of,
premium, if any, and interest on the Notes in accordance with their terms.
(c) The Company represents and warrants that it has executed and
delivered, filed and recorded and/or shall, and shall cause each
Restricted Subsidiary to, execute and deliver, file and record, all
instruments and documents, and has done or will do or cause to be done all
such acts and other things as are necessary or proper, or as may be
required by the Security Documents, to subject the Collateral to the Lien
of the Security Documents. The Company shall, and shall cause each
Restricted Subsidiary to, execute and deliver, file and record all
instruments and do all acts and other things as may be reasonably
necessary or
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advisable to perfect, maintain and protect the Security Interest and shall
pay all filing, recording, mortgage or other taxes or fees incidental
thereto.
(d) The Company shall, and shall cause each Restricted Subsidiary
to, furnish to the Trustee (i) promptly after the recording or filing, or
re-recording or re-filing of the Security Documents and other security
filings, an Opinion of Counsel (who may be counsel for the Company)
stating that in the opinion of such counsel the Security Documents and
other security filings have been properly recorded, filed, re-recorded or
re-filed so as to make effective and perfect the Security Interest
intended to be created thereby and reciting the details of such action;
and (ii) at least annually on the anniversary date of the execution and
delivery of this Indenture, an Opinion of Counsel (who may be counsel for
the Company), dated as of such date, either stating that in the opinion of
such counsel such action with respect to the recording, registering,
filing, re-recording or re-filing of the Security Documents and other
security filings, financing statements, continuation statements or other
instruments of further assurance has been taken as is necessary to
maintain the Lien and Security Interest of the Security Documents and
other security filings, financing statements, continuation statements or
other instruments of further assurance and reciting the details of such
action, or stating that in the opinion of such counsel no such action is
necessary to maintain such Lien and Security Interest, and stating what
actions it then believes are necessary to maintain the effectiveness of
such Lien and Security Interest during the next year, subject to customary
assumptions and exclusions. In giving the opinions required by this
Section 11.1(d), such counsel may rely, to the extent recited in such
opinions, on (i) certificates of relevant public officials; (ii)
certificates of an officer or officers of the Company; (iii) photocopies
of filed and recorded documents certified by public officials as being
accurate copies of such documents; (iv) the opinions of other counsel
reasonably acceptable to the Trustee with respect to matters governed by
law of any jurisdiction other than the state in which such counsel is
licensed to practice law; and (v) title insurance policies and
commitments. In addition, such opinions may contain such qualifications,
exceptions and limitations as are appropriate for similar opinions
relating to the nature of the Collateral.
Section 11.2 Suits to Protect the Collateral.
Subject to the terms of the Intercreditor Agreement, the Trustee may, in
its sole discretion and without the consent of the Holders, on behalf of the
Holders, take all actions it deems necessary or appropriate in order to (a)
enforce any of the terms of the Security Documents and (b) collect and receive
any and all amounts payable in respect of the Obligations of the Issuers and the
Guarantors hereunder and under the Notes, the Security Documents and the
Registration Rights Agreement. To the extent permitted under the Security
Documents and this Indenture, the Trustee shall have power to institute and
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of this Indenture or the Security Documents and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its interests and the
interest of the Holders in the Collateral and in the proceeds,
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profits, rents, revenues and other income arising therefrom (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the Security
Interest thereunder or be prejudicial to the interest of the Holders or of the
Trustee).
Section 11.3 Further Assurances and Security.
(a) The Company represents and warrants that at the time the
Security Documents and this Indenture are executed, the Company and its
Restricted Subsidiaries will have full right, power and lawful authority
to grant, bargain, sell, release, convey, hypothecate, assign, mortgage,
pledge, transfer and confirm, absolutely, the Collateral, in the manner
and form done, or intended to be done, in the Security Documents, free and
clear of all Liens, except for Permitted Liens.
(b) The Company will, and will cause each Subsidiary Guarantor to
(i) grant to the Trustee a security interest in all Collateral, whether
owned on the Issue Date or thereafter acquired, (ii) execute, acknowledge
and deliver to the Trustee, at the Company's expense, at any time and from
time to time such further assignments, transfer, assurances or other
instruments as may, in the opinion of the Trustee, be required to
effectuate the terms of this Indenture or the Security Documents; and
(iii) do or cause to be done all such acts and things as may be necessary
or proper, or as may be required by the Trustee, to assure and confirm to
the Trustee that the Security Interest in the Collateral contemplated
hereby and by the Security Documents shall be perfected and superior to
and prior to the rights of all third persons, and subject to no other
Liens, other than as provided herein and therein.
Section 11.4 Release of Collateral.
(a) Collateral shall be released from the Liens created by the
Security Documents from time to time at the sole cost and expense of the
Issuers:
(i) upon payment in full of the Notes and all other
Obligations under this Indenture, the Notes, the Security Documents
and the Registration Rights Agreement then due and owing,
(ii) unless an Event of Default shall have occurred and be
continuing, upon the (A) sale or other disposition of such
Collateral pursuant to an Asset Sale made in accordance with Section
4.10 hereof, (B) sale or other disposition of such Collateral
meeting the conditions of (b)(1) of the definition of Asset Sale, or
(C) transfer or exchange of such Collateral in the ordinary course
of business,
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(iii) upon the written consent of the Holders of at least a
majority of the aggregate principal amount of the then outstanding
Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes),
(iv) as required pursuant to the terms of the Intercreditor
Agreement, or
(v) upon a Legal Defeasance or Covenant Defeasance;
provided, that the Trustee shall not release any Lien on any Collateral
unless and until it shall have received an Officers' Certificate
certifying that all conditions precedent hereunder have been met and such
other documents required by Section 11.5 hereof. Upon compliance with the
above provisions, the Trustee shall execute, deliver or acknowledge any
necessary or proper instruments of termination, satisfaction or release to
evidence the release of any Collateral permitted to be released pursuant
to this Indenture or the Security Documents.
(b) The release of any Collateral from the terms of the Security
Documents shall not be deemed to impair the security under this Indenture
in contravention of the provisions hereof and of the Security Documents if
and to the extent the Collateral is released pursuant to the terms of this
Indenture and the Security Documents.
Section 11.5 Certificates of the Issuers.
The Issuers shall furnish to the Trustee, prior to each proposed release
of Collateral, all documents required by TIA ss.314(d). The Trustee may, to the
extent permitted by Sections 7.1 and 7.2 hereof, accept as conclusive evidence
of compliance with the foregoing provisions the appropriate statements contained
in such instruments. Any certificate or opinion required by TIA ss.314(d) may be
made by an Officer of each of the Issuers, except in cases where TIA ss.314(d)
requires that such certificate or opinion be made by an independent engineer,
appraiser or other expert within the meaning of TIA ss.314(d).
Section 11.6 Reliance on Opinion of Counsel.
The Trustee shall, before taking any action under this Article XI, be
entitled to receive an Opinion of Counsel, stating the legal effect of such
action, the steps necessary to consummate the same and to perfect the Trustee's
priority with respect to any Lien in connection therewith and that such action
will not be in contravention of the provisions thereof or this Indenture and
such opinion shall be full protection to the Trustee for any action taken or
omitted to be taken in reliance thereon.
Section 11.7 Purchaser May Rely.
A purchaser in good faith of the Collateral or any part thereof or
interest therein which is purported to be transferred, granted or released by
the Trustee as provided in this Article XI shall not be bound to ascertain, and
may rely on the authority of the Trustee to execute, transfer, grant or
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release, or to inquire as to the satisfaction of any conditions precedent to the
exercise of such authority, or to see to the application of the purchase price
therefor.
Section 11.8 Payment of Expenses.
On demand of the Trustee, the Issuers forthwith shall jointly and
severally pay or satisfactorily provide for the payment of all reasonable
expenditures incurred by the Trustee under this Article XI, including, without
limitation, the costs of title insurance, surveys, attorneys' fees and expenses,
recording fees and taxes, transfer taxes, taxes on indebtedness and other
expenses incidental thereto and all such sums shall be a Lien upon the
Collateral prior to the Notes and shall be secured thereby.
Section 11.9 Authorization of Receipt of Funds by the Trustee Under the
Security Documents.
The Trustee is authorized to receive any funds for the benefit of the
Holders distributed under the Security Documents, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture and the Security Documents.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA ss.318(c), the imposed duties shall control.
Section 12.2 Notices.
Any notice or communication by the Issuers or the Trustee to others is
duly given if in writing and delivered in person or mailed by first-class mail
(registered or certified, return receipt requested), telecopier or overnight air
courier guaranteeing next day delivery, to the others' addresses:
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<PAGE>
If to the Issuers:
Peninsula Gaming Company, LLC
Peninsula Gaming Corp.
c/o Peninsula Gaming Company, LLC
3rd Street Ice Harbor
P.O. Box 1683
Dubuque, Iowa, 52004-1683
Attention: Chief Financial Officer
Telecopier No.: (319) 557-0549
If to the Trustee:
Firstar Bank of Minnesota, N.A.
101 East 5th Street
St. Paul, MN 55101
Attention: Corporate Trust Department
Telecopier No.: (651) 229-6415
The Issuers or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; upon receipt, if deposited in the mail, postage prepaid; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
All notices and communications to the Trustee shall be deemed to have been duly
given only if actually received by the Trustee.
Any notice or communication to a Holder shall be mailed by first-class
mail, to his address shown on the register kept by the Registrar. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice communication is mailed in the manner provided above within
the time prescribed, it is duly given, regardless of whether the addressee
receives it.
If the Issuers mail a notice or communication to Holders, they shall mail
a copy to the Trustee and each Agent at the same time.
88
<PAGE>
Section 12.3 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA ss.312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Issuers, the
Trustee, the Registrar and any other person shall have the protection of TIA
ss.312(c).
Section 12.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers to the Trustee to take any
action under this Indenture, the Issuers shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
Section 12.5 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss.314(a)(4)) shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of such Person, such
condition or covenant has been complied with,
provided that with respect to matters of fact, an Opinion of Counsel may rely
upon an Officers' Certificate or a certificate of a public official.
89
<PAGE>
Section 12.6 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.7 Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
Section 12.8 No Recourse Against Others.
No director, officer, employee, incorporator, stockholder, member or
controlling person of either of the Issuers or any Subsidiary Guarantor, as
such, shall have any liability for any obligations of either of the Issuers or
any Subsidiary Guarantor under the Notes, this Indenture, the Security Documents
or the Registration Rights Agreement or for any claim based on, in respect of,
or by reason of such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release shall be
part of the consideration for the issuance of the Notes and the Subsidiary
Guarantees. Notwithstanding the foregoing, nothing in this provision shall be
construed as a waiver or release of any claims under the Federal securities
laws.
Section 12.9 Governing Law.
This Agreement shall be construed and interpreted and the rights of the
parties shall be determined in accordance with the laws of the State of New
York, as applied to contracts made and performed within the State of New York,
including, without limitation, Sections 5-1401 and 5-1402 of the New York
General Obligations Laws and New York Civil Practice Laws and Rules 327(b). Each
of the Issuers hereby irrevocably submits to the jurisdiction of any New York
state court sitting in the Borough of Manhattan in the City of New York or any
Federal court sitting in the Borough of Manhattan in the City of New York in
respect of any suit, action or proceeding arising out of or relating to this
Indenture, and irrevocably accepts for itself and in respect of its property,
generally and unconditionally, jurisdiction of the aforesaid courts. Each of the
Issuers irrevocably waives, to the fullest extent it may effectively do so under
applicable law, trial by jury and any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding brought
in such court has been brought in an inconvenient forum. Each of the Issuers
irrevocably consents, to the fullest extent it may effectively do so under
applicable law, to the service of process of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Issuers at the address set forth herein,
such service to become effective 30 days after such mailing. Nothing herein
shall affect the right of any holder
90
<PAGE>
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against either of the Issuers in any other
jurisdiction.
Section 12.10 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Issuers or their Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
Section 12.11 Successors.
All agreements of either of the Issuers and any Subsidiary Guarantors in
this Indenture and the Notes shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
Section 12.12 Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 12.13 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 12.14 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
(Signature pages follow.)
91
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Indenture as of the date first written above.
Company:
PENINSULA GAMING COMPANY, LLC
By:
-------------------------------
Name:
Title:
Attest:
- -------------------------------
Name:
PENINSULA GAMING CORP.
By:
-------------------------------
Name:
Title:
Attest:
- -------------------------------
Name:
FIRSTAR BANK OF MINNESOTA, N.A.,
as Trustee
By:
-------------------------------
Name:
Title: Vice President
<PAGE>
EXHIBIT A
(Face of Security)
Unless and until it is exchanged in whole or in part for notes in definitive
form, this Note may not be transferred except as a whole by The Depository Trust
Company (the "Depositary") to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor depositary or a nominee of such
successor depositary. Unless this certificate is presented by an authorized
representative of the Depositary to the Issuers or their agent for registration
of transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or such other name as may be requested by an authorized
representative of the Depositary (and any payment hereon is made to Cede & Co.
or such other entity as may be requested by an authorized representative of the
Depositary), any transfer, pledge or other use hereof for value or otherwise by
or to any person is wrongful inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.(1)
This security has not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any state securities laws. Neither this
security nor any interest or participation herein may be reoffered, sold,
assigned, transferred, pledged, encumbered or otherwise disposed of in the
absence of such registration or unless such transaction is exempt from, or not
subject to, registration.(2)
The holder of this security by its acceptance hereof agrees to offer, sell or
otherwise transfer such security, prior to the date which is two years (or such
other period that may hereafter be provided under Rule 144(k) as permitting
resales of restricted securities by nonaffiliates without restriction) after the
later of the original issue date of this security and the last date on which the
Issuers or any affiliate of the Issuers was the owner of this security (or any
predecessor of such security) only (a) to the Issuers, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) for so long as the notes are eligible for resale pursuant to Rule 144A
under the Securities Act, to a person it reasonably believes is a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act that
purchases for its own account or for the account of a qualified institutional
buyer to whom notice is given that the transfer is being made in reliance on
Rule 144A, (d) to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that
is acquiring the security for its own account, or for the account of such an
institutional "accredited investor," for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act or (e) pursuant to another available exemption from the
registration requirements of the Securities Act, subject to the Issuers' and the
Trustee's right prior to any such offer, sale or transfer pursuant to clauses
(d) or (e) to require the delivery of an opinion of counsel, certification
and/or other information satisfactory to each of them, and in each of the
foregoing cases, a certificate of transfer in the form appearing on the other
side of this security is completed and delivered by the transferor to the
Trustee.(3)
- ----------
(1) This paragraph should be included only if the Now is issued in global
form.
(2) This paragraph should be included only if the Note is a Restricted
Security.
(3) This paragraph should be included only if the Note is a Restricted
Security.
A-l
<PAGE>
PENINSULA GAMING COMPANY, LLC
PENINSULA GAMING CORP.
12 1/4% Senior Secured Note due 2006
No.
$ _____
CUSIP NO.
Peninsula Gaming Company, LLC, a Delaware limited liability company (the
"Company"), and Peninsula Gaming Corp., a Delaware corporation ("PGC," and
together with the Company, the "Issuers"), as obligors, for value received
promise to pay to _________________________ or registered assigns, the principal
sum of__________________ Dollars on July 1, 2006.
Interest Payment Dates: July 1 and January 1 and on the maturity date.
Record Dates: June 15 and December 15 (regardless of whether a Business
Day).
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
A-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Indenture as of the date first written above.
Company:
PENINSULA GAMING COMPANY, LLC
By: /s/ Brent Stevens
-------------------------------
Name: Brent Stevens
Title:
Attest:
/s/ Michael S. Luzich
- -------------------------------
Name: Michael S. Luzich
PENINSULA GAMING CORP.
By: /s/ Brent Stevens
-------------------------------
Name: Brent Stevens
Title:
Attest:
/s/ Michael S. Luzich
- -------------------------------
Name: Michael S. Luzich
FIRSTAR BANK OF MINNESOTA, N.A.,
as Trustee
By: /s/ Frank Leslie
-------------------------------
Name: Frank Leslie
Title: Vice President
[Indenture]
<PAGE>
(Back of Security)
PENINSULA GAMING COMPANY, LLC
PENINSULA GAMING CORP.
12 1/4% Senior Secured Note due 2006
1. Interest. Peninsula Gaming Company, LLC, a Delaware limited liability
company (the "Company"), and Peninsula Gaming Corp., a Delaware corporation
("PGC," and together with the Company, the "Issuers"), as obligors, promise to
pay interest on the principal amount of this Note at the rate and in the manner
specified below.
The Issuers shall pay, in cash, interest on the principal amount of this
Note, at the rate of 12 1/4% per annum. The Issuers shall pay interest
semiannually on July 1 and January 1 of each year, and on the maturity date,
commencing on January 1, 2000, or if any such day is not a Business Day, on the
next succeeding Business Day (each an "Interest Payment Date").
Interest shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from July 15, 1999. To
the extent lawful, the Issuers shall pay interest on overdue principal at the
rate of 1% per annum in excess of the then applicable interest rate on the
Notes; the Issuers shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) at the same rate to the extent
lawful.
2. Method of Payment. The Issuers shall pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the record date next preceding the Interest Payment Date,
even if such Notes are cancelled after such record date and on or before such
Interest Payment Date. The Holder must surrender this Note to a Paying Agent to
collect principal payments. The Issuers shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Issuers may pay principal and interest
by check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee shall act as Paying
Agent and Registrar. The Issuers may change any Paying Agent, Registrar or
co-registrar without notice to any Holder. Subject to certain exceptions, the
Issuers or any of their Subsidiaries may act in any such capacity.
4. Indenture. The Issuers have issued the Notes under an Indenture dated
as of July 15, 1999 (the "Indenture") among the Issuers, the Subsidiary
Guarantors referred to therein and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (the "TIA") (15 U.S. Code ss.ss.77aaa-77bbbb)
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA and thereafter as in effect on the date the Indenture is
so qualified. The Notes are subject to all such terms, and Holders are referred
to the Indenture and the TIA for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the Notes.
Terms
A-4
<PAGE>
not otherwise defined herein shall have the meanings assigned in the Indenture.
The aggregate principal amount of Notes that may be authenticated and delivered
under the Indenture is unlimited.
5. Optional Redemption. Except as set forth below, the Notes are not
redeemable at the Issuers' option prior to July 1, 2003. Thereafter, the Notes
will be subject to redemption at the option of the Issuers, in whole or in part,
at the redemption prices (expressed as percentages of principal amount) set
forth below, plus accrued and unpaid interest thereon, if any, to the applicable
redemption date, if redeemed during the 12-month period beginning on July 1 of
the years indicated below:
Year Percentage
---- ----------
2003 ...................... 108.00%
2004 ...................... 105.33%
2005 and thereafter ....... 102.67%
Notwithstanding the foregoing, at any time or from time to time prior to
July 1,2002, the Issuers may redeem, at their option, up to 35% of the aggregate
principal amount of the Notes then outstanding, at a redemption price of 112.25%
of the principal amount thereof, plus accrued and unpaid interest thereon, if
any, through the applicable redemption date, with the net cash proceeds of one
or more Equity Offerings; provided, that (a) such redemption shall occur within
60 days of the date of closing of such Equity Offering and (b) at least 65% of
the aggregate principal amount of Notes issued on or after the Issue Date
remains outstanding immediately after giving effect to each such redemption.
6. Mandatory Redemption. The Issuers shall not be required to make
mandatory redemption payments with respect to the Notes (except for a Required
Regulatory Redemption). The Notes shall not have the benefit of any sinking
fund.
7. Denominations. Transfer. Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar and the Issuers need not exchange or
register the transfer (a) of any Note or portion of a Note selected for
redemption or (b) of any Notes for a period of 15 days before a selection of
Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
8. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes, subject to the provisions of the Indenture with
respect to the record dates for the payment of interest.
9. Amendments and Waivers. Subject to certain exceptions, the Indenture or
the Notes may be amended with the written consent of the Holders of at least a
majority in principal aggregate amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or
A-5
<PAGE>
exchange offer for Notes) and any existing Default or Event of Default (except
certain payment defaults) or compliance with any provision of the Indenture or
this Note may be waived with the consent of the Holders of a majority in
aggregate principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes). Without
the consent of any Holders, the Indenture and the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
assumption of any of the Issuers' or the Subsidiary Guarantors' obligations to
the Holders in the case of a merger or consolidation, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to make
any change that would provide any additional rights or benefits to the Holders
or that does not adversely affect the legal rights under the Indenture or this
Note of any Holder, to release any Subsidiary Guaranty of the Notes permitted to
be released under the terms of the Indenture or to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the TIA.
10. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee may declare by written notice to the Issuers or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare by written notice to the Issuers and the Trustee all the Notes to be due
and payable immediately, except that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all outstanding Notes shall
become due and payable immediately without further action or notice. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Issuers must furnish an annual compliance
certificate to the Trustee.
11. Trustee Dealings with the Issuers. The Trustee under the Indenture, in
its individual or any other capacity, may make loans to, accept deposits from,
and perform services for either of the Issuers or their respective Affiliates,
and may otherwise deal with either of the Issuers or their respective
Affiliates, as if it were not Trustee.
12. No Recourse Against Others. No director, officer, employee,
incorporator, stockholder, member or controlling person of either of the Issuers
or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of either of the Issuers or any Subsidiary Guarantor under the
Notes, the Indenture, the Security Documents or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes and the Subsidiary Guarantees.
Notwithstanding the foregoing, nothing in this provision shall be construed as a
waiver or release of any claims under the Federal securities laws.
13. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
14. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint
A-6
<PAGE>
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
15. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and have directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
16. Governing Law. This Note and the Indenture shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York, including without limitation, Section 5-1401 and
5-1402 of the New York General Obligations Law and New York Civil Practice Laws
and Rule 327(b).
17. Holders' Compliance with Registration Rights Agreement. Each Holder of
a Note, by his acceptance thereof, acknowledges and agrees to the provisions of
the Registration Rights Agreement, dated as of July 15, 1999, by and among the
Issuers and the Purchaser (as defined therein) (the "Registration Rights
Agreement"), including but not limited to the obligations of the Holders with
respect to a registration and the indemnification of the Issuers and the
Purchasers (as defined therein) to the extent provided therein.(4)
The Issuers shall furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to: Peninsula Gaming Company, LLC, 3rd Street Ice Harbor,
P.O. Box 1683, Dubuque, Iowa, 52004-1683, Attention: ____________________.
- ----------
(4) This paragraph should not be included in the Exchange Securities.
A-7
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to:
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax ID. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________ as agent to transfer
this Note on the books of the Issuers. The agent may substitute another to act
for him.
_______________________________________________________________________________
Date: _____________
Your Signature: _______________________________________
(Sign exactly as your name appears on
the face of this Note)
Tax Identification Number: ______________________
Signature Guaranty*
___________________________
* NOTICE: The signature must be guaranteed by an institution which is
a member of one of the following recognized signature
guarantee programs:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
A-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by the
Issuers pursuant to Section 4.10, Section 4.14 or Section 4.20 of the Indenture,
as the case may be, state the amount you elect to have purchased (if all, write
"ALL"):
$ _________________
Date: _______________________
Your Signature: _______________________________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guaranty*
________________________
* NOTICE: The signature must be guaranteed by an institution which is
a member of one of the following recognized signature
guarantee programs:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES(5)
The following exchanges of a part of this Global Note for Definitive Notes
have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Principal Amount of this Signature of
in Principal Amount in Principal Amount Global Note following authorized
Date of Exchange of this Global Note of this Global Note such decrease (or increase) officer of Trustee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------
(5) This should only be included if the Note is issued in global form.
A-10
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
Re: 12 1/4% Senior Secured Notes due 2006 (the "Notes") of Peninsula Gaming
Company, LLC and Peninsula Gaming Corp.
This Certificate relates to $____________________________ principal amount
of Notes held in *|_| book-entry or *|_| definitive form by
_______________________ (the "Transferor").
The Transferor, by written order, has requested the Trustee:
|_| to deliver in exchange for its beneficial interest in the Global Note held
by the depository, a Note or Notes in definitive, registered form of
authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Note (or the portion thereof indicated
above); or
|_| to exchange or register the transfer of a Note or Notes. In connection
with such request and in respect of each such Note, the Transferor does
hereby certify that Transferor is familiar with the Indenture relating to
the above captioned Notes and, the transfer of this Note does not require
registration under the Securities Act of 1933, as amended (the "Securities
Act") because such Note:
|_| is being acquired for the Transferor's own account, without
transfer;
|_| is being transferred pursuant to an effective registration
statement;
|_| is being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act), in reliance on such
Rule 144A;
|_| is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;**
|_| is being transferred pursuant to Rule 144 under the Securities
Act;** or
|_| is being transferred pursuant to another exemption from the
registration requirements of the Securities Act (explain:
__________________________________________________________
________________________________________________________).**
______________________________
[INSERT NAME OF TRANSFEROR]
B-1
<PAGE>
By: __________________________
Date: _______________________
* Check applicable box.
** If this box is checked, this certificate must be accompanied by an
opinion of counsel to the effect that such transfer is in compliance
with the Securities Act.
B-2
<PAGE>
EXHIBIT C
[Form of Subsidiary Guaranty]
GUARANTY
For good and valuable consideration received from the Issuers by the
undersigned (hereinafter referred to as the "Subsidiary Guarantors," which term
includes any successor or additional Subsidiary Guarantors), the receipt and
sufficiency of which is hereby acknowledged, subject to Section 10.3 of the
Indenture, each Subsidiary Guarantor, jointly and severally, hereby
unconditionally guarantees, irrespective of the validity or enforceability of
the Indenture, the Notes, the Security Documents, the Registration Rights
Agreement or the Obligations of any party under the Notes, the Indenture, the
Security Documents or the Registration Rights Agreement, (a) the due and
punctual payment of the principal and premium, if any, of and interest on the
Notes (including, without limitation, interest after the filing of a petition
initiating any proceedings referred to in Sections 6.l(a)(x) or (xi) of the
Indenture), whether at maturity or on an Interest Payment Date, by acceleration,
call for redemption or otherwise, (b) the due and punctual payment of interest
on the overdue principal and premium, if any, of and interest, if any, on the
Notes, if lawful, (c) the due and punctual payment and performance of all other
Obligations of the Company under such documents, all in accordance with the
terms set forth in the Indenture, the Notes, the Security Documents and the
Registration Rights Agreement and (d) in case of any extension of time of
payment or renewal of any Notes or any of such other Obligations under the
Indenture, the Notes, the Security Documents or the Registration Rights
Agreement, the due and punctual payment or performance thereof in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
No director, officer, employee, incorporator, stockholder, members or
controlling person of the Subsidiary Guarantor, as such, shall have any
liability under this Subsidiary Guaranty for any obligations of the Subsidiary
Guarantor under the Notes, the Indenture, the Security Documents or the
Registration Rights Agreement or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of the Notes by
accepting a Note waives and releases all such liability.
__________________________________
By: ____________________________
Name: __________________________
Title: _________________________
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EXHIBIT D
[Form of Intercreditor Agreement]
INTERCREDITOR AGREEMENT
between
[NAME OF SENIOR LENDER]
and
FIRSTAR BANK OF MINNESOTA, N.A.
Dated as of _______, ____
- --------------------------------------------------------------------------------
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FORM OF
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT dated as of ______, ____ (this
"Agreement") is made by and among Firstar Bank of Minnesota, N.A., solely in its
capacity as trustee under the Indenture (as defined below) and under the
Security Documents (as defined in the Indenture) (the "Trustee") and [Name of
Credit Facility Lender] (the "Credit Facility Lender"), as lender under the
Credit Facility (as defined in the Indenture).
RECITAL
A. Peninsula Gaming, LLC, a Delaware limited liability company
("Borrower"), Peninsula Gaming Corp., a Delaware corporation ("PGC" and,
together with Borrower, the "Issuers"), the guarantors named therein (the
"Guarantors") and the Trustee entered into an Indenture, dated as of July ___,
1999 (the "Indenture"), pursuant to which indebtedness was incurred by the
Issuers, the repayment of which is guaranteed by the Guarantors and secured by
security interests in and liens on certain now owned and hereafter acquired
assets and properties described in the Security Documents (the "Indenture
Collateral").
B. As of_________________, Borrower and the Credit Facility Lender entered
into a Credit Agreement (as such may be amended, restated, supplemented or
otherwise modified from time to time after the date hereof, the "Credit Facility
Agreement"), pursuant to which the Credit Facility Lender agreed, upon the terms
and conditions stated therein, to make loans and advances to, or to issue
letters of credit (or guaranties in respect thereof) for the account of,
Borrower, in an aggregate principal and undrawn amount not to exceed the Maximum
Amount (as defined below), the repayment of which is secured by security
interests in and liens on the Indenture Collateral pursuant to the Credit
Facility Agreement and the collateral security documents, vessel mortgage,
instruments and guaranties executed and delivered in connection therewith by one
or more of Borrower and any Guarantor, together with such other agreements,
instruments and certificates entered into in connection with the Credit Facility
Agreement (as such may be amended, restated, supplemented or otherwise modified
from time to time after the date hereof, together with the Credit Facility
Agreement, the "Credit Facility Loan Documents").
C. One of the conditions of the Credit Facility Agreement is that the
priority of the security interests and liens on the Collateral under the Credit
Facility Loan Documents be senior to the security interests in and liens on the
Indenture Collateral in the manner and to the extent provided for in this
Agreement.
D. The Trustee and the Credit Facility Lender desire to enter into this
Agreement concerning their respective rights with respect to the priority of
their respective security interests in and liens on the Collateral.
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E. The terms of the Indenture permit Borrower to enter into the Credit
Facility Agreement and, in connection therewith, authorize and direct the
Trustee to enter into an intercreditor agreement substantially in the form of
this Agreement.
NOW, THEREFORE, the Parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Terms Defined Above and in the Recitals. As used in this
Agreement, the following terms shall have the respective meanings indicated in
the initial paragraph of this Agreement and in the above Recitals:
"Agreement"
"Borrower"
"Credit Facility Lender"
"Credit Facility Agreement"
"Credit Facility Loan Documents"
"Guarantors"
"Indenture"
"Indenture Collateral"
"Trustee"
Section 1.2 Other Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Collateral" shall mean all of the Indenture Collateral in which the
Credit Facility Lender is granted a security interest or lien to secure the
Credit Facility Indebtedness.
"Credit Facility Indebtedness" shall mean all present and future
Obligations, contingent or otherwise, of Borrower and the Guarantors to the
Credit Facility Lender arising under or pursuant to the Credit Facility Loan
Documents, including, in each case, interest, fees, and expenses accruing after
the initiation of any Insolvency Proceeding (irrespective of whether allowed as
a claim in such proceeding), and including the secured claims of the Credit
Facility Lender and the Lenders under the Credit Facility Agreement in respect
of the Collateral in any Insolvency Proceeding.
"Enforcement Action" shall mean, with respect to any Party, (a)
commencement of any action, whether judicial or otherwise, for the enforcement
of such Party's rights and remedies as a secured creditor with respect to the
Collateral, including, without limitation, commencement of any receivership or
foreclosure proceedings against, or any other sale of, collection on, or
disposition of, any Collateral; or (b) notifying any third party account debtors
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of Borrower or any of its subsidiaries to make payment directly to such Party or
to any of its agents or other Persons acting on its behalf.
"Enforcement Event" shall mean the occurrence and continuance of an
"Event of Default" as defined under Section 6.1 of the Indenture.
"Enforcement Event Notice" shall have the meaning ascribed thereto
in Section 3.2.
"Entitled Party" shall have the meaning ascribed thereto in Section
4.1(a).
"Event of Default" shall have the meaning ascribed thereto in the
Credit Facility Agreement.
"Financing Documents" shall mean the Indenture Documents and the
Credit Facility Loan Documents.
"Foreclosure Action" shall mean any action to foreclose upon or
enforce a Lien against any of the Collateral, including (a) commencing judicial
or non-judicial foreclosure proceedings, (b) exercising any rights afforded to
secured creditors in a case under the Bankruptcy Law with respect to the
Collateral, or (c) taking any action under the Bankruptcy Law that directly
relates to or directly affects any such Collateral, other than any such action
that relates to or affects all or substantially all of the property of the
bankruptcy estate.
"Fully Paid" shall mean the payment in cash or cash equivalents in
full of all Obligations (other than indemnity obligations that survive payment
in full) under the Financing Documents, as the case may be, and in the case of
the Credit Facility Loan Documents, at such time when there shall no longer be
any obligation to make loans or advances or issue letters of credit (or
guaranties in respect thereof) thereunder and there shall no longer be any
letter of credit (or guaranty in respect thereof) outstanding thereunder or such
letter of credit (or guaranty in respect thereof) shall have been fully cash
collateralized (in accordance with the provisions of the Credit Facility Loan
Documents).
"Indenture Documents" shall mean the Indenture, the Notes, the
Security Documents and the Registration Rights Agreement, and such other
agreements, instruments and certificates executed and delivered (or issued) by
the Issuers or the Guarantors pursuant to the Indenture, as any or all of the
same may be amended, restated, supplemented or otherwise modified from time to
time.
"Insolvency Proceeding" shall mean any proceeding for the purposes
of dissolution, winding up, liquidation, arrangement or reorganization of
Borrower, any Guarantor, or any other subsidiary of Borrower, or their
respective successors or assigns, whether in bankruptcy, insolvency,
arrangement, reorganization or receivership proceedings, or upon an assignment
for the benefit of creditors or any other marshaling of the assets and
liabilities of
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Borrower, any Guarantor, or any other subsidiary of Borrower, or their
respective successors or assigns.
"Lien Priority" shall mean, with respect to any Lien in and to the
Collateral, the order of priority of such Lien as specified in Sections 2.1 and
2.2.
"Maximum Amount" shall mean Indebtedness under the Credit Facility
Loan Documents that the Credit Facility Lender in good faith believes, at the
time such Indebtedness is incurred, Borrower is permitted to incur pursuant to
Section 4.9(a) of the Indenture (together with all interest, fees, and expenses
payable thereon or with respect thereto). In no event may the Maximum Amount
exceed $___________(1) principal amount plus interest, fees and expenses payable
thereon or with respect thereto.
"Party" shall mean any signatory to this Agreement.
"Secured Liabilities" shall mean the Subordinated Lien Indebtedness
and the Credit Facility Indebtedness.
"Subordinated Lien Indebtedness" shall mean all present and future
Obligations, contingent or otherwise, of Borrower and the Guarantors to the
Trustee or Holders arising under or pursuant to the Indenture Documents,
including, in each case, interest, fees and expenses accruing after the
initiation of any Insolvency Proceeding (irrespective of whether allowed as a
claim in such proceeding), and including the secured claims of the Trustee or
the Holders in respect of the Collateral in any Insolvency Proceeding.
"Trigger Date" means the earlier of (i) the date on which an event
contemplated by clause (b) or (c) (i), (ii) or (iii) or (iv) of the definition
of Trigger Event occurs, (ii) the date on which an Enforcement Event Notice is
delivered and (iii) the final maturity date of the Credit Facility Indebtedness
(after giving effect to any extensions granted thereunder).
"Trigger Event" shall mean any of:
(a) the occurrence of an Event of Default,
(b) the acceleration of the maturity of or demand for payment
with respect to the Credit Facility Indebtedness by the Credit Facility Lender
pursuant to the Credit Facility Agreement, or
(c) the commencement of any action or proceeding by the Credit
Facility Lender, whether judicial or otherwise (but excluding demands for
payment or notices of
- ----------
(1) $10 million if the intercreditor agreement is entered into on or prior to
the 90th day following the date on which the Hotel is first Operating; $5
million if entered into after such 90th day.
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default), for the enforcement of the Credit Facility Lender's rights and
remedies under any of the Credit Facility Loan Documents, including (i)
commencement of any receivership or Foreclosure Action against or any other sale
of, collection on or disposition of any Collateral, including any notification
to third parties to make payment directly to the Credit Facility Lender, (ii)
exercise of any right of set-off, (iii) commencement of any Insolvency
Proceeding, and (iv) commencement of any judicial action or proceeding against
the Borrower or any Guarantor to recover all or any part of the Credit Facility
Indebtedness.
Section 1.3 Indenture Definitions. All other capitalized terms that are
used but not defined herein shall have the respective meaning indicated in the
Indenture.
Section 1.4 Miscellaneous. All definitions herein (whether set forth
herein directly or by reference to definitions in other documents) shall be
equally applicable to both the singular and the plural forms of the terms
defined. The words "hereof," "herein" or "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. Article and section references are
to articles and sections of this Agreement unless otherwise specified. The term
"including" shall mean "including without limitation."
ARTICLE II
LIEN PRIORITY
Section 2.1 Agreement to Subordinate Liens. The Trustee hereby agrees that
the Liens of the Trustee for the benefit of itself and the Holders in and to the
Collateral are and shall be junior to and subordinate in priority to the Liens
of the Credit Facility Lender in and to the Collateral securing the Credit
Facility Indebtedness up to, but not in excess of, the Maximum Amount; provided,
that the rights of the Credit Facility Lender under this Agreement shall be void
and of no further force and effect if, and only to the extent, that the Liens of
the Credit Facility Lender in and to the Collateral are avoided, disallowed, set
aside or otherwise invalidated in any action or proceeding by a court, tribunal
or administrative agency of competent jurisdiction and such avoidance,
disallowance, set aside or other invalidation is permanent and is not later
reversed. The subordination of the Liens of the Trustee for the benefit of
itself and the Holders in and to the Collateral in favor of the Credit Facility
Lender provided for herein shall not be deemed to (a) subordinate the Liens of
the Trustee to the Liens of any other Person or (b) subordinate the Subordinated
Lien Indebtedness to any other Indebtedness of the Borrower or any of the
Guarantors, including, the Credit Facility Indebtedness, or (c) subordinate the
Liens of the Trustee for the benefit of itself and the Holders in and to any
Indenture Collateral other than the Collateral.
Section 2.2 Non-Contest; Excluded Assets. Each Party agrees that it will
not attack or contest the validity, perfection, priority or enforceability of
the Liens of the other Party or finance or urge any other Person to do so,
provided that either Party may enforce its rights and
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privileges hereunder without being deemed to have violated this provision. Any
provision contained in this Agreement to the contrary notwithstanding, the terms
and conditions of this Agreement shall not apply to any property or assets
(including property or assets that do not constitute Collateral) as to which one
Party has a Lien and as to which the other Party does not have a Lien.
Section 2.3 Exercise of Rights.
(a) The Trustee may exercise, and nothing herein shall constitute a
waiver of, any right it may have at law or equity to receive notice of, or
to commence or join with any creditor in commencing any Insolvency
Proceeding; provided, that the exercise of any such right by the Trustee
shall be (i) subject to the Lien Priority and application of proceeds of
Collateral as provided in Section 3.4 and (ii) subject to the provisions
of Sections 3.1 and 3.2.
(b) Notwithstanding any other provision hereof, the Trustee may make
such demands or file such claims as may be necessary to prevent the waiver
or bar of such claims under applicable statutes of limitations or other
statutes, court orders or rules of procedure.
Section 2.4 Priority of Liens. Irrespective of the order of recording of
mortgages, financing statements, security agreements or other instruments, and
irrespective of the descriptions of Collateral contained in the Financing
Documents, including any financing statements, the Parties agree among
themselves that their respective Liens in the Collateral shall be governed by
the Lien Priority, which shall be controlling in the event of any conflict
between this Agreement and any of the Financing Documents.
ARTICLE III
ACTIONS OF THE PARTIES
Section 3.1 Limitation on Certain Actions. Subject to Section 3.2, until
the earlier of (a) the date on which all Credit Facility Indebtedness is Fully
Paid and (b) the first date following the Trigger Date on which the Maximum
Amount of Credit Facility Indebtedness is Fully Paid, the Trustee will not,
without the prior written consent of the Credit Facility Lender, take any
Enforcement Action.
Section 3.2 Standstill Period. If an Enforcement Event has occurred and is
continuing, the Trustee, on behalf of the holders of the Notes, may give the
Credit Facility Lender written notice thereof (an "Enforcement Event Notice").
If (a) such Enforcement Event is continuing for more than 180 consecutive days
after the delivery of such Enforcement Event Notice (the "Expiry Date"), (b) the
Credit Facility Lender has not, on or before the Expiry Date, commenced (and
notified the Trustee that the Credit Facility Lender has commenced) one or
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more Enforcement Actions, and (c) Borrower or the Guarantor against which the
Trustee's proposed Enforcement Action is to be taken is not the subject of an
Insolvency Proceeding, then the Trustee may, subject to the Lien Priority and
the application of all proceeds of the Collateral in accordance with Section
3.4, take one or more Enforcement Actions. If (i) the Credit Facility Lender has
commenced any Enforcement Action on or prior to the Expiry Date and, at any time
after the Expiry Date, is no longer pursuing one or more Enforcement Actions,
(ii) no Insolvency Proceeding is pending against Borrower or the Guarantor
against which the Trustee's proposed Enforcement Action is to be taken, and
(iii) the Enforcement Event that was the subject of, or existing on the date of,
the Enforcement Event Notice is then continuing, then the Trustee may, subject
to the Lien Priority and the prior application of all proceeds of the Collateral
in accordance with Section 3.4, take one or more Enforcement Actions. Except as
expressly provided for in this Agreement, nothing in this Agreement shall
prevent the Parties hereto from exercising any other remedy, or taking any other
action, under any of the Financing Documents.
Section 3.3 Foreclosure. Any Party taking a permitted Foreclosure Action
may enforce its Financing Documents independently as to Borrower and each
Guarantor and independently of any other remedy or security such Party at any
time may have or hold in connection with its Secured Liabilities, and, except as
provided herein, it shall not be necessary for such Party to marshal assets in
favor of any other Party hereto or any other Person or to proceed upon or
against or exhaust any other security or remedy before proceeding to enforce the
Financing Documents. Each of the Trustee (for so long as the Credit Facility
Indebtedness is not Fully Paid) and the Credit Facility Lender (for so long as
the Trustee and the holders of the Notes are owed any Subordinated Lien
Indebtedness) expressly waives any right to require the other Party to marshal
assets in favor of any Party or to proceed against any Collateral provided by
Borrower or any Guarantor, or any other property, assets, or collateral provided
by Borrower, any Guarantor, or any other Person, and agrees that the Party
taking such permitted Foreclosure Action may proceed against Borrower, any
Guarantor, any Collateral or other property, assets, or other collateral
provided by any of them or by any other Person, in such order as it shall
determine in its sole and absolute discretion. The foregoing notwithstanding:
(a) with respect to the sale or other disposition of any Collateral governed by
Article 9 of the Uniform Commercial Code, the Party conducting such sale or
other disposition agrees in favor of the other Party that every aspect of such
sale or other disposition, including the method, manner, time, place, and terms,
must be commercially reasonable, (b) with respect to the sale or other
disposition of any other Collateral, the Party conducting such sale or other
disposition agrees in favor of the other Party that such sale or other
disposition shall be conducted according to the normal practices of commercial
real property secured lenders generally, (c) with respect to the sale or other
disposition of any Collateral by either Party, such Party agrees to provide the
other Party with such written notice as it is required by applicable law
(including, if applicable, the Uniform Commercial Code) to provide to Borrower
or the Guarantors (without regard to whether Borrower or the Guarantors have
waived their entitlement to receive such notice), and (d) the Credit Facility
Lender agrees that, at such time as all Credit Facility Indebtedness is Fully
Paid, the Credit Facility Lender thereupon promptly shall cease all further
Foreclosure Actions.
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Section 3.4 Distribution. Each Party agrees that, upon any distribution as
a result of a Foreclosure Action, or the receipt of any other payment or
distribution with respect to the Collateral, the proceeds thereof shall be
distributed in the order of, and in accordance with, the following priorities:
(a) FIRST:
(i) if the Foreclosure Action is taken by the Credit Facility
Lender, to the payment of all reasonable costs and expenses, commissions
and taxes of the Credit Facility Lender incurred in connection with taking
any such Foreclosure Action or other realization, including all reasonable
expenses (including attorneys fees and expenses), liabilities and advances
made or incurred by the Credit Facility Lender in connection therewith;
(ii) if the Foreclosure Action is taken and entitled to be taken
hereunder by the Trustee, to the payment of all reasonable costs and
expenses, commissions and taxes of the Trustee incurred in connection with
taking any such Foreclosure Action or other realization, including all
reasonable expenses (including attorneys fees and expenses), liabilities
and advances made or incurred by the Trustee in connection therewith;
(b) SECOND, to the Credit Facility Lender, until the earlier of (i)
the Credit Facility Indebtedness being Fully Paid and (ii) the first time
following the Trigger Date at which the Maximum Amount of Credit Facility
Indebtedness is Fully Paid;
(c) THIRD, to the Trustee, until all Subordinated Lien Indebtedness
is Fully Paid;
(d) FOURTH, to the Credit Facility Lender until all outstanding
Credit Facility Indebtedness in excess of the Maximum Amount is Fully
Paid.
Section 3.5 Notice of Certain Events. Each Party agrees that it will
notify the other, in writing, (a) if it receives actual notice of the occurrence
of a Trigger Event or Enforcement Event, not later than 30 days after the date
of any such occurrence, and (b) at least 15 days prior to exercising any
remedies with respect to any portion of the Collateral. Notwithstanding the
foregoing, (a) the Credit Facility Lender shall not be obligated to provide such
prior written notice if exigent circumstances require that the Credit Facility
Lender act immediately in order to preserve, protect, or obtain possession or
control over the Collateral or any portion thereof; provided, that, if such
exigent circumstances require the Credit Facility Lender to so act immediately,
the Credit Facility Lender agrees to provide the Trustee with written notice as
soon as practicable following the Credit Facility Lender first exercising any of
its secured creditor remedies with respect to the Collateral, and (b) no Party
shall incur any liability to the other under this Section 3.5 as a result of the
failure of such Party to provide any such notice so
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long as the failure to so provide such notice was not the result of wilful
misconduct, bad faith or gross negligence.
ARTICLE IV
ENFORCEMENT OF PRIORITIES
Section 4.1 In Furtherance of Lien Priorities. Each Party agrees as
follows:
(a) All payments or distributions of or with respect to the
Collateral that are received by any Party contrary to the provisions of
this Agreement (including, without limitation, payments or distributions
in connection with any Insolvency Proceeding) shall be segregated from
other funds and property held by such Party and shall be held in trust for
the Party entitled thereto in accordance with the provisions of Section
3.4 hereof (the "Entitled Party") and such Party shall forthwith pay over
such remaining proceeds to the Entitled Party in the same form as so
received (with any necessary endorsement) to be applied (in the case of
cash) or held as Collateral (in the case of non-cash property or
securities) in accordance with the provisions hereof and the provisions of
the applicable Financing Documents.
(b) After the earlier of (i) the date on which all Credit Facility
Indebtedness is Fully Paid and (ii) the first date following the Trigger
Date on which the Maximum Amount of Credit Facility Indebtedness is Fully
Paid, the Credit Facility Lender will promptly execute and deliver all
further instruments and documents, and take all further acts that may be
necessary, or that the Trustee may reasonably request, to permit the
Trustee to evidence the termination of the Lien Priority hereunder, or in
furtherance thereof; provided, that the Credit Facility Lender shall not
be required to pay over any payment or distribution, execute any
instruments or documents, or take any other action referred to in this
clause (b) to the extent that such action would contravene any law, order
or other legal requirement, and in the event of a controversy or dispute,
the Credit Facility Lender may interplead any payment or distribution in
any court of competent jurisdiction.
(c) Each Party is hereby authorized to demand specific performance
of this Agreement, whether or not Borrower or any Guarantor shall have
complied with any of the provisions hereof applicable to it, at any time
when any other Party shall have failed to comply with the provisions of
this Agreement applicable to it, provided that the remedy of specific
performance shall not be available, and the asserting Party shall be free
to assert any and all legal defenses it may possess, if such remedy would
result in, or otherwise constitute, a violation of the Employee Retirement
Income Security Act of 1974, as amended. Each Party hereto hereby
irrevocably waives any defense based on the adequacy of a remedy at law,
which might be asserted as a bar to such remedy of specific performance.
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(d) This Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Secured
Liabilities is, other than as a result of any intentional fraud or gross
negligence of the applicable Party, rescinded or must otherwise be
returned by the applicable Party upon the insolvency, bankruptcy or
reorganization of Borrower or any Guarantor or otherwise, all as though
such payment had not been made.
Section 4.2 Perfection of Possessory Security Interests. For the limited
purpose of perfecting the security interests of the Parties in those types or
items of Collateral in which a security interest only may be perfected by
possession or control, each Party hereby appoints the other as its
representative for the limited purpose of possessing on its behalf any such
Collateral that may come into the possession or control of such other Party from
time to time, and each Party agrees to act as the other's representative for
such limited purpose of perfecting the other's security interest by possession
or control through a representative, provided that neither Party shall incur any
liability to the other by virtue of acting as the other's representative
hereunder. In this regard, any Party that is in possession or control of any
such item of Collateral agrees that if it elects to relinquish possession or
control of such item of Collateral it shall deliver possession or control
thereof to the other Party; provided, that no Party shall be required to deliver
any such item of Collateral or take any other action referred to in this section
to the extent that such action would contravene any law, order or other legal
requirements, and in the event of a controversy or dispute, such Party may
interplead any item of Collateral in any court of competent jurisdiction.
Section 4.3 Control of Dispositions of Collateral and Effect thereof on
Junior Liens.
(a) Each Party hereby agrees that any Uniform Commercial Code
collection, sale, or other disposition of Collateral by the Credit
Facility Lender shall be free and clear of any Lien of the Trustee in such
Collateral; provided that the Trustee shall retain a Lien (having the same
priority as the Lien it previously had on the item of Collateral that was
collected, sold or otherwise disposed of) on the proceeds of such
collection, sale, or other disposition (except to the extent such proceeds
are applied to the Credit Facility Indebtedness in accordance with Section
3.4).
(b) To the extent reasonably requested by either Party, the other
Party will cooperate in providing any necessary or appropriate releases to
permit a collection, sale, or other disposition of Collateral, as provided
in subsection (a) of this Section 4.3, by the Party holding the senior
Lien therein free and clear of the other Party's junior Lien.
ARTICLE V
MISCELLANEOUS
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Section 5.1 Rights of Subrogation. The Trustee agrees that no payment or
distribution to the Credit Facility Lender pursuant to the provisions of this
Agreement shall entitle the Trustee to exercise any rights of subrogation in
respect thereof until the first date following the Trigger Date on which the
Maximum Amount of Credit Facility Indebtedness shall have been Fully Paid.
Section 5.2 Further Assurances. The Parties will, at their own expense and
at any time and from time to time, promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that any Party may reasonably request, in order to protect any
right or interest granted or purported to be granted hereby or to enable any
Party to exercise and enforce its rights and remedies hereunder; provided, that
no Party shall be required to pay over any payment or distribution, execute any
instruments or documents, or take any other action referred to in this Section
5.2 to the extent that such action would contravene any law, order or other
legal requirement binding upon such Party, and in the event of a controversy or
dispute, any Party may interplead any payment or distribution in any court of
competent jurisdiction, without further responsibility in respect of such
payment or distribution under this Section 5.2.
Section 5.3 Defenses Similar to Suretyship Defenses. All rights,
interests, agreements and obligations of each of the Parties under this
Agreement, shall remain in full force and effect irrespective of:
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Liabilities, or any other
amendment or waiver of or any consent to departure from the Financing
Documents, provided that this clause (a) shall not apply to, and the
Trustee's Liens in the Collateral shall not be subordinated in priority by
virtue of this Agreement to, the Credit Facility Lender's Liens therein if
and to the extent that the Credit Facility Indebtedness is increased,
without the express written consent of the Trustee, to an amount in excess
of the Maximum Amount: or
(b) any exchange, release, non-enforcement or non-perfection of any
Party's Liens with respect to any Collateral, or any release, amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Secured Liabilities; or
(c) any failure by any Party to marshal assets in favor of any other
Party or any other Person or to proceed upon or against or exhaust any
security or remedy before proceeding to enforce the Financing Documents.
Section 5.4 Waiver. Except as otherwise provided in Section 2.1 and the
other provisions hereof, to the maximum extent permitted by applicable law, the
Trustee hereby waives, solely with respect to the Collateral to which the Lien
Priority relates, any failure, omission, delay or lack on the part of the Credit
Facility Lender to enforce, assert or exercise any right, power or remedy
conferred on the Credit Facility Lender in any of the Credit Facility
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Loan Documents or the inability of the Credit Facility Lender to enforce any
provision of the Credit Facility Loan Documents or this Agreement.
Section 5.5 Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by any Party shall in any event be
effective unless the same shall be in writing and signed by each Party, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
Section 5.6 Addresses for Notices. All demands, notices and other
communications provided for hereunder shall be in writing and, if to the
Trustee, mailed or sent by telecopy or delivered to it, addressed to it as
follows:
Firstar Bank of Minnesota, N.A.
101 East 5th Street
St. Paul, MN 55101
Attention: Corporate Trust Department
Telephone:
Facsimile: (651) 229-6415
and if to the Credit Facility Lender, mailed or sent by telecopy or delivered to
it, addressed to it as follows:
[Name of Senior Lender]
[address]
[address]
Attention:
Telephone:
Facsimile:
or as to any Party at such other address as shall be designated by such Party in
a written notice to the other parties complying as to delivery with the terms of
this Section. All such demands, notices and other communications shall be
effective: when mailed, two business days after deposit in the mails, postage
prepaid; when sent by telecopy, when receipt is acknowledged by the receiving
telecopy equipment (or at the opening of the next business day if receipt is
after normal business hours); or when delivered, as the case may be, addressed
as aforesaid.
Section 5.7 No Waiver of Remedies. No failure on the part of any Party to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
D-13
<PAGE>
Section 5.8 Continuing Agreement. This Agreement is a continuing agreement
and shall (a) be binding upon the Parties and their successors and assigns
(including, without limitation, all parties that become lenders or participants
under the Credit Facility), and (b) inure to the benefit of and be enforceable
by the Parties and their respective successors, transferees and assigns.
Section 5.9 Governing Law; Entire Agreement. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New York
including, without limitation, Section 5-1401 of the New York General
Obligations Law, except as otherwise preempted by applicable federal law. This
Agreement constitutes the entire agreement and understanding among the Parties
with respect to the subject matter hereof and supersedes any prior agreements,
written or oral, with respect thereto.
Section 5.10 Counterparts. This Agreement may be executed in any number of
counterparts, and it is not necessary that the signatures of all Parties be
contained on any one counterpart hereof, each counterpart will be deemed to be
an original, and all together shall constitute one and the same document.
Section 5.11 No Third Party Beneficiary. This Agreement is solely for the
benefit of the Parties (and their successors and assigns) and the holders of the
Secured Liabilities (including the Credit Facility Lender and the Holders). No
other Person (including Borrower, any Guarantor or any subsidiary or affiliate
of Borrower) shall be deemed to be a third party beneficiary of this Agreement
or shall have any rights to enforce any provisions hereof.
Section 5.12 Headings. The headings of the articles and sections of this
Agreement are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions hereof.
Section 5.13 Severability. If any of the provisions in this Agreement
shall, for any reason, be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement and shall not invalidate the Lien Priority or any
other priority set forth in this Agreement.
Section 5.14 Trustee Status. Notwithstanding any term herein to the
contrary, it is hereby expressly agreed and acknowledged that the subordination
and related agreements set forth herein by the Trustee are made solely in its
capacity as trustee and collateral agent under the Indenture Documents and with
respect to the Notes issued under the Indenture (and not in its individual
commercial capacity, except to the extent that it is or becomes the holder of
any such Note). The Trustee shall not have any duties, obligations, or
responsibilities to the Credit Facility Lender under this Agreement except as
expressly set forth herein. Nothing in this Agreement shall be construed to
operate as a waiver by the Trustee, with respect to Borrower or any holder of
any Subordinated Lien Indebtedness, of the benefit of any exculpatory
provisions, presumptions, indemnities, protections, benefits, immunities or
reliance rights contained in the Indenture, and, by its acknowledgment hereof,
Borrower expressly agrees that as between itself
D-14
<PAGE>
and the Trustee, the Trustee shall have such benefit with respect to all actions
or omissions by the Trustee pursuant to this Agreement. For all purposes of this
Agreement, Trustee may (a) rely in good faith, as to matters of fact, on any
representation of fact believed by Trustee to be true (without any duty of
investigation) and that is contained in a written certificate of any authorized
representative of Borrower or of the Credit Facility Lender, (b) rely in good
faith, as to matters of law, on any advice received from its legal counsel or an
opinion of its counsel, counsel to Borrower or counsel to the Credit Facility
Lender, and shall have no liability for any action or omission taken in reliance
thereon, and (c) assume in good faith (without any duty of investigation), and
rely upon, the genuineness, due authority, validity, and accuracy of any
certificate, instrument, notice, or other document believed by it in good faith
to be genuine and presented by the proper person.
D-15
<PAGE>
IN WITNESS WHEREOF each Party has caused this Agreement to be duty
executed and delivered as of the date first above written.
CREDIT
FACILITY LENDER: [NAME OF SENIOR LENDER]
By:
---------------------------
TRUSTEE: FIRSTAR BANK OF MINNESOTA, N.A.,
solely in its capacity as Trustee (and not individually)
By:
---------------------------
Name:
Title:
D-16
<PAGE>
ACKNOWLEDGMENT
The undersigned hereby acknowledges that (a) it has received a copy
of the foregoing Intercreditor Agreement and consents thereto, and agrees to
recognize all rights granted hereby to the parties thereto, and will not do any
act or perform any obligation which is not in accordance with the agreements set
forth in such Intercreditor Agreement and (b) it is not an intended beneficiary
or third party beneficiary under the Intercreditor Agreement.
Dated as of _________________, ____.
PENINSULA GAMING, LLC
a Delaware limited liability company
By:
---------------------------
Name:
Title:
D-17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Indenture as of the date first written above.
Company:
PENINSULA GAMING COMPANY, LLC
By: /s/ Brent Stevens
-------------------------------
Name: Brent Stevens
Title:
Attest:
/s/ Michael S. Luzich
- -------------------------------
Name: Michael S. Luzich
PENINSULA GAMING CORP.
By: /s/ Brent Stevens
-------------------------------
Name: Brent Stevens
Title:
Attest:
/s/ Michael S. Luzich
- -------------------------------
Name: Michael S. Luzich
FIRSTAR BANK OF MINNESOTA, N.A.,
as Trustee
By: /s/ Frank Leslie
-------------------------------
Name: Frank Leslie
Title: Vice President
[Indenture]
Exhibit 4.5
PENINSULA GAMING COMPANY, LLC
PENINSULA GAMING CORP.
$71,000,000 12 1/4% Senior Secured Notes due 2006
REGISTRATION RIGHTS AGREEMENT
July 15, 1999
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
Peninsula Gaming Company, LLC and Peninsula Gaming Corp.
(collectively, the "Issuers"), are issuing and selling to Jefferies & Company,
Inc. (the "Purchaser"), upon the terms set forth in a purchase agreement, dated
as of July 8, 1999 (the "Purchase Agreement"), $71,000,000 aggregate principal
amount of their 12 1/4% Senior Secured Notes due 2006, Series A, including any
future guarantees to be endorsed thereon (the "Notes"). As an inducement to the
Purchaser to enter into the Purchase Agreement, the Issuers jointly and
severally agree with the Purchaser, for the benefit of the holders of the
Securities (defined below) (including, without limitation, the Purchaser), as
follows:
1. Definitions
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See Section 6.
Agreement: This Registration Rights Agreement.
Applicable Period: See Section 2(f).
<PAGE>
Business Days: Any day other than (i) Saturday or Sunday, or (ii) a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to be closed.
Closing Date: July 15, 1999.
DTC: See Section 6(i).
Effectiveness Date: The 150th day following the Closing Date.
Effectiveness Period: See Section 3(a).
Event: See Section 4(a).
Event Date: See Section 4(a).
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
Exchange Offer Registration Statement: See Section 2(a).
Exchange Securities: 12 1/4% Senior Secured Notes due 2006, Series B, of
the Issuers, including any existing or future guarantees endorsed or to be
endorsed thereon, identical in all respects to the Notes, except for references
to series and restrictive legends.
Filing Date: The 90th day following the Closing Date.
Holder: Each holder of Registrable Securities.
Indenture: The Indenture, dated the date hereof, by and among the Issuers,
the guarantors referred to therein and Firstar Bank of Minnesota, N.A., as
trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time, in accordance with the terms thereof
Initial Shelf Registration: See Section 3(a).
Losses: See Section 8(a).
NASD: The National Association of Securities Dealers, Inc.
Participating Broker-Dealer: See Section 2(f).
2
<PAGE>
Person: An individual, trustee, corporation, limited liability company,
partnership, joint stock company, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof,
union, business association, firm or other entity.
Private Exchange: See Section 2(g).
Private Exchange Securities: See Section 2(g).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities covered by such Registration
Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Registrable Securities: (i) Notes, (ii) Private Exchange Securities and
(iii) Exchange Securities received in the Exchange Offer that may not be sold
without restriction under federal or state securities law.
Registration Statement: Any registration statement of the Issuers that
covers any of the Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule (other than Rule 144A) or regulation
hereafter adopted by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be amended
from time to time, or any similar rule (other than Rule 144) or regulation
hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
SEC: The Securities and Exchange Commission.
Securities: The Notes, the Private Exchange Securities and the Exchange
Securities, collectively.
3
<PAGE>
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(i).
Shelf Registration: The Initial Shelf Registration and any Subsequent
Shelf Registration.
Special Counsel: Counsel chosen by the holders of a majority in aggregate
principal amount of Securities.
Subsequent Shelf Registration: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if any, the trustee under
any indenture governing the Exchange Securities or the Private Exchange
Securities.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Issuers are sold to an underwriter for reoffering to the
public.
Weekly Liquidated Damages Amount: means, with respect to any Event, an
amount per week per $1,000 principal amount of Registrable Securities equal to
$.05 for the first 90-day period immediately following the applicable Event
Date, increasing by an additional $.05 per week per $1,000 principal amount of
Registrable Securities with respect to each subsequent 90-day period, up to a
maximum amount of $.20 per week per $1,000 principal amount of Registrable
Securities.
2. Exchange Offer
(a) The Issuers shall:
(i) prepare and file with the SEC promptly after the date hereof,
but in no event later than the Filing Date, a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer (the "Exchange Offer") to the
Holders to issue and deliver to such Holders, in exchange for the Notes, a like
aggregate principal amount of Exchange Securities,
(ii) use their best efforts to cause the Exchange Offer Registration
Statement to become effective as promptly as practicable after the filing
thereof, but in no event later than the Effectiveness Date,
(iii) keep the Exchange Offer Registration Statement effective until
the consummation of the Exchange Offer pursuant to its terms, and
4
<PAGE>
(iv) unless the Exchange Offer would not be permitted by a policy of
the SEC, commence the Exchange Offer and use their commercially reasonable
efforts to issue, on or prior to 30 days after the date on which the Exchange
Offer Registration Statement is declared effective, Exchange Securities in
exchange for all Notes tendered prior thereto in the Exchange Offer.
The Exchange Offer shall not be subject to any conditions, other
than that the Exchange Offer does not violate applicable law or any applicable
interpretation of the staff of the SEC.
(b) The Exchange Securities shall be issued under, and entitled to the
benefits of, the Indenture or a trust indenture that is identical to the
Indenture (other than such changes as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification thereof under
the TIA).
(c) In connection with the Exchange Offer, the Issuers shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal that is an exhibit to the Exchange Offer Registration Statement, and
any related documents;
(ii) keep the Exchange Offer open for not less than 30 days after
the date notice thereof is mailed to the Holders (or longer if required by
applicable law);
(iii) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(iv) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last Business Day on which the
Exchange Offer shall remain open; and
(v) otherwise comply in all material respects with all laws
applicable to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer, the
Issuers shall:
(i) accept for exchange all Notes validly tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted
for exchange; and
5
<PAGE>
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder of Notes, Exchange Securities equal in aggregate principal amount to the
Notes of such Holder so accepted for exchange.
(e) Interest on each Exchange Security and Private Exchange Security will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the date of original issue of the Notes. Each Exchange Security and
Private Exchange Security shall bear interest at the rate set forth thereon;
provided, that interest with respect to the period prior to the issuance thereof
shall accrue at the rate or rates borne by the Notes surrendered in exchange
therefor from time to time during such period.
(f) The Issuers shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
containing a summary statement of the positions taken or policies made by the
staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 1 3d-3 under the
Exchange Act) of Exchange Securities received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution"
section shall also allow the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including (without
limitation) all Participating Brokers-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities. The Issuers shall use their commercially reasonable efforts
to keep the Exchange Offer Registration Statement effective and to amend and
supplement the Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirement of the Securities Act for such period of time as
such Persons must comply with such requirements in order to resell the Exchange
Securities (the "Applicable Period").
(g) If, prior to consummation of the Exchange Offer, the Purchaser holds
any Notes acquired by it and having the status as an unsold allotment in the
initial distribution, the Issuers shall, upon the request of the Purchaser,
simultaneously with the delivery of the Exchange Securities in the Exchange
Offer, issue (pursuant to the same indenture as the Exchange Securities) and
deliver to the Purchaser, in exchange for the Notes held by the Purchaser (the
"Private Exchange"), a like principal amount of debt securities of the Issuers
that are identical to the Exchange Securities (the "Private Exchange
Securities"). The Private Exchange Securities shall bear the same CUSIP number
as the Exchange Securities.
(h) The Issuers may require each Holder participating in the Exchange
Offer to represent to the Issuers that, at the time of the consummation of the
Exchange Offer, (i) any Exchange Securities received by such Holder in the
Exchange Offer will be acquired in the ordinary course of its business, (ii)
such Holder will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Securities within the meaning of
the Securities Act or resale of the Exchange Securities in violation of the
Securities Act, (iii) if such Holder is not a broker-dealer, that it is not
engaged in and does not intend to engage in, the
6
<PAGE>
distribution of the Exchange Securities, (iv) if such Holder is a broker-dealer
that will receive Exchange Securities for its own account in exchange for Notes
that were acquired as a result of market-making or other trading activities,
that it will deliver a prospectus, as required by law, in connection with any
resale of such Exchange Securities, and (v) if such Holder is an affiliate of
the Issuers, that it will comply with the registration and prospectus delivery
requirements of the Securities Act applicable to it.
(i) If (i) prior to the consummation of the Exchange Offer, either of the
Issuers or the Holders of a majority in aggregate principal amount of
Registrable Securities determines in their reasonable judgment that (A) the
Exchange Securities would not, upon receipt, be tradeable by the Holders thereof
without restriction under the Securities Act and the Exchange Act and without
material restrictions under applicable Blue Sky or state securities laws, or (B)
the interests of the Holders under this Agreement, taken as a whole, would be
materially adversely affected by the consummation of the Exchange Offer, (ii)
applicable interpretations of the staff of the SEC would not permit the
consummation of the Exchange Offer prior to the Effectiveness Date, (iii)
subsequent to the consummation of the Private Exchange, the Purchaser so
requests, (iv) the Exchange Offer is not consummated within 180 days of the
Closing Date for any reason or (v) in the case of any Holder not permitted to
participate in the Exchange Offer or of any Holder participating in the Exchange
Offer that receives Exchange Securities that may not be sold without restriction
under state and federal securities laws (other than due solely to the status of
such Holder as an affiliate of either of the Issuers within the meaning of the
Securities Act) and, in either case contemplated by this clause (v), such Holder
notifies the Issuers within six months of consummation of the Exchange Offer,
then the Issuers shall promptly deliver to the Holders (or in the case of any
occurrence of the event described in clause (v) hereof, to any such Holder) and
the Trustee notice thereof (the "Shelf Notice") and shall as promptly as
possible thereafter file an Initial Shelf Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is required to be delivered pursuant to Section 2(i)(i),
(ii), (iii) or (iv), then this Section 3 shall apply to all Registrable
Securities. Otherwise, upon consummation of the Exchange Offer in accordance
with Section 2, the provisions of this Section 3 shall apply solely with respect
to (i) Notes held by any Holder thereof not permitted to participate in the
Exchange Offer and (ii) Exchange Securities that are not freely tradeable as
contemplated by Section 2(i)(v) hereof; provided in each case that the relevant
Holder has duly notified the Issuers within six months of the Exchange Offer as
required by Section 2(i)(v).
(a) Initial Shelf Registration. The Issuers shall prepare and file with
the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Securities (the
"Initial Shelf Registration"). If the Issuers have not yet filed an Exchange
Offer Registration Statement, the Issuers shall file with the SEC the Initial
Shelf Registration on or prior to the Filing Date. Otherwise, the Issuers shall
use their commercially reasonable efforts to file the Initial Shelf Registration
within 20 days of the delivery of the
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<PAGE>
Shelf Notice or as promptly as possible following the request of the Purchaser.
The Initial Shelf Registration shall be on Form 5-1 or another appropriate form
permitting registration of such Registrable Securities for resale by such
Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Issuers shall (i) not
permit any securities other than the Registrable Securities to be included in
any Shelf Registration, and (ii) use their best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act as promptly
as practicable after the filing thereof, and to keep the Initial Shelf
Registration continuously effective under the Securities Act until the date that
is 24 months after the date it is declared effective (subject to extension
pursuant to the last paragraph of Section 6 hereof) (the "Effectiveness
Period"), or such shorter period ending when (i) all Registrable Securities
covered by the Initial Shelf Registration have been sold in the manner set forth
and as contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Registrable Securities has been declared
effective under the Securities Act. No Holder shall be entitled to include any
of its Registrable Securities in any Shelf Registration pursuant to this
Agreement unless such Holder furnishes to the Issuers and the Trustee in
writing, within 30 days after receipt of a request therefor, such information as
the Issuers and the Trustee, after conferring with counsel with regard to
information relating to Holders that would be required by the SEC to be included
in such Shelf Registration or Prospectus included therein, may reasonably
request for inclusion in any Shelf Registration or Prospectus included therein.
(b) Subsequent Shelf Registrations. If any Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the Registrable Securities registered thereunder),
the Issuers shall use their commercially reasonable efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within 30 days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional "shelf'
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Issuers shall use their best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Subsequent Shelf Registration continuously
effective for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Initial Shelf Registration,
and any Subsequent Shelf Registration, was previously effective.
4. Liquidated Damages.
(a) The Issuers acknowledge and agree that the Holders will suffer
damages, and that it would not be feasible to ascertain the extent of such
damages with precision, if the Issuers fail to fulfill their obligations
hereunder. Accordingly, in the event of such failure, the Issuers agree to pay
liquidated damages to each Holder under the circumstances and to the extent set
forth below:
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<PAGE>
(i) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed with the SEC on or prior to the Filing
Date; or
(ii) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date; or
(iii) if the Issuers have not exchanged Exchange Securities for all
Notes validly tendered in accordance with the terms of the Exchange Offer within
30 days after the date on which an Exchange Offer Registration Statement is
declared effective by the SEC; or
(iv) if a Shelf Registration is filed and declared effective by the
SEC but thereafter ceases to be effective without being succeeded within 30 days
by a Subsequent Shelf Registration filed and declared effective;
(each of the foregoing an "Event," and the date on which the Event occurs being
referred to herein as an "Event Date").
Upon the occurrence of any Event, the Issuers shall pay, or cause to be
paid, in addition to amounts otherwise due under the Indenture and the
Registrable Securities, as liquidated damages, and not as a penalty, to each
Holder for each weekly period beginning on the Event Date an amount equal to the
Weekly Liquidated Damages Amount per $1,000 principal amount of Registrable
Securities held by such Holder; provided, that such liquidated damages will, in
each case, cease to accrue (subject to the occurrence of another Event) on the
date on which all Events have been cured. An Event under clause (i) above shall
be cured on the date that either the Exchange Offer Registration Statement or
the Initial Shelf Registration is filed with the SEC; an Event under clause (ii)
above shall be cured on the date that either the Exchange Offer Registration
Statement or the Initial Shelf Registration is declared effective by the SEC; an
Event under clause (iii) above shall be cured on the earlier of the date (A) the
Exchange Offer is consummated with respect to all Notes validly tendered or (B)
the Issuers deliver a Shelf Notice to the Holders; and an Event under clause
(iv) above shall be cured on the earlier of (A) the date on which the applicable
Shelf Registration is no longer subject to an order suspending the effectiveness
thereof or proceedings relating thereto or (B) a new Subsequent Shelf
Registration is declared effective.
(b) The Issuers shall notify the Trustee within five Business Days after
each Event Date. The Issuers shall pay the liquidated damages due on the
Registrable Securities by depositing with the Trustee, in trust, for the benefit
of the Holders thereof, by 12:00 noon, New York City time, on or before the
applicable semi-annual interest payment date for the Registrable Securities,
immediately available funds in sums sufficient to pay the liquidated damages
then due. The liquidated damages amount due shall be payable on each interest
payment date to the record Holder entitled to receive the interest payment to be
made on such date as set forth in the Indenture.
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<PAGE>
5. Gaming Consents.
Prior to consummating the Exchange Offer or filing the Initial Shelf
Registration, as the case may be, the Issuers shall use their commercially
reasonable efforts to make or obtain all Permits necessary or desirable for the
consummation of the transactions contemplated hereby.
6. Registration Procedures
In connection with the registration of any Securities pursuant to Sections
2 or 3 hereof, each of the Issuers shall effect such registrations to permit the
sale of such Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Issuers shall:
(a) Prepare and file with the SEC, as soon as practicable after the date
hereof but in any event on or prior to the Filing Date, a Registration Statement
or Registration Statements as prescribed by Section 2 or 3, and use their best
efforts to cause each such Registration Statement to become effective and remain
effective as provided herein; provided that, if (i) such filing is pursuant to
Section 3 or (ii) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the Issuers
shall, if requested, furnish to and afford the Holders of the Registrable
Securities covered by such Registration Statement, their Special Counsel, each
Participating Broker-Dealer, the managing underwriters, if any, and their
counsel a reasonable opportunity to review and make available for inspection by
such Persons copies of all such documents (including copies of any documents to
be incorporated by reference therein and all exhibits thereto) proposed to be
filed, such financial and other information and books and records of the
Issuers, and cause the members, managers, officers, directors and employees of
the Issuers, counsel to the Issuers and independent certified public accountants
of the Issuers, to respond to such inquiries, as shall be reasonably necessary,
in the opinion of the respective counsel to such Holders, Participating
Broker-Dealer and underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act. The Issuers may require each Holder to agree to
keep confidential any non-public information relating to the Issuers received by
such Holder and not disclose such information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality provisions of
this Section 6(a)) until such information has been made generally available to
the public unless the release of such information is required by law or
necessary to respond to inquiries of regulatory authorities (including the
National Association of Insurance Commissioners, or similar organizations or
their successors). The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the filing of such
document, if the Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement, their Special
Counsel, any Participating Broker-Dealer or the managing underwriters, if any,
or their counsel shall reasonably object.
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(b) Provide an indenture trustee for the Registrable Securities or the
Exchange Securities, as the case may be, and cause the Indenture (or other
indenture relating to the Registrable Securities) to be qualified under the TIA
not later than the effective date of the first Registration Statement; and in
connection therewith, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use their commercially reasonable efforts to cause
such trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the SEC to
enable such indenture to be so qualified in a timely manner.
(c) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods required
hereby; cause the related Prospectus to be supplemented by any Prospectus
supplement required by Applicable Law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto with respect to the
disposition of all securities covered by such Registration Statement, as so
amended, or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration Statement or
Prospectus as so amended.
(d) Furnish to such selling Holders and Participating Broker-Dealers who
so request (i) upon the Issuers' receipt, a copy of the order of the SEC
declaring such Registration Statement and any post-effective amendment thereto
effective and (ii) such reasonable number of copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
any documents incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such Registration
Statement (including each preliminary Prospectus), and such reasonable number of
copies of the final Prospectus as filed by the Issuers pursuant to Rule 424(b)
under the Securities Act, in conformity with the requirements of the Securities
Act, and (iv) such other documents (including any amendments required to be
filed pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Issuers hereby consent to the use of the Prospectus by each of the
selling Holders of Registrable Securities or each such Participating
Broker-Dealer, as the case may be, and the underwriters or agents, if any, and
dealers (if any), in connection with the offering and sale of the Registrable
Securities covered by, or the sale by Participating Broker-Dealers of the
Exchange Securities pursuant to, such Prospectus and any amendment thereto.
(e) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, notify the selling Holders of Registrable Securities, their
Special Counsel, each Participating Broker-Dealer and the managing underwriters,
if any, promptly (but in any event within two Business Days), and confirm such
notice in writing, (A) when a Prospectus has been filed, and, with respect to a
Registration Statement or
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any post-effective amendment, when the same has become effective under the
Securities Act, (B) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any Prospectus or the initiation of any proceedings for
that purpose, (C) if, at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Securities, the representations and warranties of the Issuers contained in any
agreement (including any underwriting agreement) contemplated by Section 6(n)
below cease to be true and correct in any material respect, (D) of the receipt
by the Issuers of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
contemplation, initiation or threatening of any proceeding for such purpose, (E)
of the happening of any event that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (F) of the Issuers' reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(f) Use their commercially reasonable efforts to register or qualify, and,
if applicable, to cooperate with the selling Holders of Registrable Securities,
the underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, Securities to be included in a Registration Statement for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating Broker-Dealer or
the managing underwriters reasonably request in writing; and, if Securities are
offered other than through an Underwritten Offering, the Issuers shall cause
their counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 6(f) at the expense
of the Issuers; keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Securities
covered by the applicable Registration Statement, provided, however, that
neither of the Issuers shall be required to (i) qualify generally to do business
in any jurisdiction where it is not then so qualified, (ii) take action that
would subject it to general service of process in any jurisdiction where it is
not so subject or (iii) take action that would subject it to taxation in respect
of doing business in any such jurisdiction where it is not then so subject.
(g) Use their commercially reasonable efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Securities for
sale in any jurisdiction, and, if any such order is issued, to use their
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commercially reasonable efforts to obtain the withdrawal of any such order at
the earliest possible time.
(h) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Securities, (i) promptly incorporate in a Prospectus or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein as required to comply with any
Applicable Law and (ii) make all required filings of such Prospectus or such
post-effective amendment as soon as practicable after the Issuers have received
notification of such matters required by Applicable Law to be incorporated in
such Prospectus or post-effective amendment.
(i) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company ("DTC"); and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriters, if any, or Holders may reasonably request.
(j) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
6(e)(E) or 6(e)(F) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder
or to the purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Use their commercially reasonable efforts to cause the Securities
covered by a Registration Statement to be rated with the appropriate rating
agencies, if appropriate, if so requested by the holders of a majority in
aggregate principal amount of Securities covered by such Registration Statement
or the managing underwriters, if any.
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(l) Prior to the effective date of the first Registration Statement
relating to the Securities, (i) provide the applicable trustee with printed
certificates for the Securities in a form eligible for deposit with DTC and (ii)
provide a CUSIP number for each of the Securities.
(m) Use their commercially reasonable efforts to cause all Securities
covered by such Registration Statement to be listed on each securities exchange,
if any, on which similar debt securities issued by the Issuers are then listed.
(n) If a Shelf Registration is filed pursuant to Section 3, enter into
such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of Registrable Securities being sold) in order to expedite or
facilitate the registration or the disposition of such Registrable Securities,
and in such connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration, (i) make
such representations and warranties to the Holders and the underwriters, if any,
with respect to the business of the Issuers and their respective subsidiaries,
if any, and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, in
form, substance and scope as are customarily made by issuers to underwriters in
Underwritten Offerings, and confirm the same if and when reasonably requested;
(ii) obtain opinions of counsel to the Issuers and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the Holders of a majority
in aggregate principal amount of the Registrable Securities being sold),
addressed to each selling Holder and each of the underwriters, if any, covering
the matters customarily covered in opinions requested in Underwritten Offerings;
(iii) obtain "cold comfort" letters and updates thereof (which letters and
updates (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters) from the independent certified public accountants of the
Issuers (and, if necessary, any other independent certified public accountants
of any subsidiary of the Issuers or of any business acquired by the Issuers for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the underwriters
and each selling Holder, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with Underwritten Offerings and such other matters as reasonably requested by
underwriters; and (iv) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in principal amount of the
Registrable Securities being sold and the managing underwriters, if any, to
evidence the continued validity of the representations and warranties of the
Issuers and their respective subsidiaries made pursuant to clause (i) above and
to evidence compliance with any conditions contained in the underwriting
agreement or other similar agreement entered into by the Issuers.
(o) Comply with all applicable rules and regulations of the SEC and make
generally available to their respective security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated
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under the Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing on the first day of the fiscal quarter following
each fiscal quarter in which Registrable Securities are sold to underwriters in
a firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Issuers after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(p) Upon consummation of an Exchange Offer or Private Exchange, obtain an
opinion of counsel to the Issuers (in form, scope and substance reasonably
satisfactory to the Purchaser), addressed to all Holders participating in the
Exchange Offer or Private Exchange, as the case may be, to the effect that (i)
the Issuers have duly authorized, executed and delivered the Exchange Securities
or the Private Exchange Securities, as the case may be, and the Indenture, (ii)
the Exchange Securities or the Private Exchange Securities, as the case may be,
and the Indenture constitute legal, valid and binding obligations of the
Issuers, enforceable against the Issuers in accordance with their respective
terms, except as such enforcement may be subject to (A) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and (B) general principles of equity (regardless
of whether such enforcement is sought in a proceeding in equity or at law), and
(iii) all obligations of the Issuers under the Exchange Securities or the
Private Exchange Securities, as the case may be, and the Indenture are secured
by Liens on the assets securing the obligations of the Issuers under the Notes.
(a) If an Exchange Offer or Private Exchange is to be consummated, upon
delivery of the Registrable Securities by such Holders to the Issuers (or to
such other Person as directed by the Issuers) in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the Issuers
shall mark, or caused to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, and in no
event shall such Registrable Securities be marked as paid or otherwise
satisfied.
(r) Cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD.
(s) Use their commercially reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities covered by a
Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable
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Securities or Exchange Securities as the Issuers may, from time to time,
reasonably request in writing. The Issuers may exclude from such registration
the Registrable Securities of any seller or Exchange Securities of any
Participating Broker-Dealer who fails to furnish such information within a
reasonable time (which time in no event shall exceed 15 days) after receiving
such request.
Each Holder and each Participating Broker-Dealer agrees by acquisition of
such Registrable Securities or Exchange Securities of any Participating
Broker-Dealer that, upon receipt of written notice from the Issuers of the
happening of any event of the kind described in Section 6(e)(B), 6(e)(D),
6(e)(E) or 6(e)(F), such Holder will forthwith discontinue disposition (in the
jurisdictions specified in a notice of a 6(e)(D) event, and elsewhere in a
notice of a 6(e)(B), 6(e)(E) or 6(e)(F) event) of such Securities covered by
such Registration Statement or Prospectus until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 6(j),
or until it is advised in writing (the "Advice") by the Issuers that offers or
sales in a particular jurisdiction may be resumed or that the use of the
applicable Prospectus may be resumed, as the case may be, and has received
copies of any amendments or supplements thereto. If the Issuers shall give such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of such
Securities covered by such Registration Statement shall have received (i) the
copies of the supplemented or amended Prospectus contemplated by Section 6(j) or
(ii) the Advice.
7. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation:
(i) all registration and filing fees including, without limitation,
(A) fees with respect to filings required to be made with the NASD and (B)
reasonable fees and expenses of compliance with state securities or Blue Sky
laws (including, without limitation, reasonable fees and disbursements of
counsel in connection with Blue Sky qualifications of the Registrable Securities
or Exchange Securities and determination of the eligibility of the Registrable
Securities or Exchange Securities for investment under the laws of such
jurisdictions (x) where the Holders are located, in the case of the Exchange
Securities, or (y) as provided in Section 6(f), in the case of Registrable
Securities or Exchange Securities to be sold by a Participating Broker-Dealer
during the Applicable Period);
(ii) reasonable printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities or Exchange
Securities in a form eligible for deposit with DTC and of printing prospectuses
if the printing of prospectuses is requested by the managing underwriters, if
any, or, in respect of Registrable Securities or Exchange Securities to be sold
by a Participating Broker-Dealer during the Applicable Period, by the Holders of
a
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majority in aggregate principal amount of the Registrable Securities included in
any Registration Statement or of such Exchange Securities, as the case may be);
(iii) messenger, telephone, duplication, word processing and
delivery expenses incurred by the Issuers in the performance of their
obligations hereunder;
(iv) reasonable fees and disbursements of counsel for the Issuers;
(v) reasonable fees and disbursements of all independent certified
public accountants referred to in Section 6(n)(iii) (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance);
(vi) reasonable fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an offering
pursuant to Section 3 of Schedule E to the By-laws of the NASD, but only where
the need for such a "qualified independent underwriter" arises due to a
relationship with the Issuers;
(vii) Securities Act liability insurance, if the Issuers so desire
such insurance;
(viii) reasonable fees and expenses of all other Persons retained by
the Issuers; internal expenses of the Issuers (including, without limitation,
all salaries and expenses of officers and employees of the Issuers performing
legal or accounting duties); and the expense of any annual audit; and
(ix) reasonable rating agency fees and the fees and expenses
incurred in connection with the listing of the Securities to be registered on
any securities exchange.
(b) The Issuers shall reimburse the Holders for the reasonable fees and
disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Securities to be included in any Registration Statement and
other reasonable and necessary out-of-pocket expenses of the Holders incurred in
connection with the registration of the Registrable Securities.
8. Indemnification
(a) Indemnification by the Issuers. The Issuers shall, without limitation
as to time, indemnify and hold harmless each Holder and each Participating
Broker-Dealer, each Person who controls each such Holder (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act) and the
officers, directors, partners, employees, representatives and agents of each
such Holder, Participating Broker-Dealer and controlling person, to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
reasonable attorneys' fees) and expenses (including, without limitation, costs
and expenses incurred in connection with investigating, preparing,
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pursuing or defending against any of the foregoing) (collectively, "Losses"), as
incurred, based upon or arising out of any untrue or alleged untrue statement of
a material fact contained in any Registration Statement, Prospectus or form of
prospectus, or in any amendment or supplement thereto, or in any preliminary
prospectus, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such Losses are based upon information relating to such Holder
or Participating Broker-Dealer and furnished in writing to the Issuers by such
Holder or Participating Broker-Dealer expressly for use therein. The Issuers
shall also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers, directors, agents and employees and each Person who controls such
Persons (within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Holders or the Participating Broker-Dealer.
(b) Indemnification by Holders of Registrable Securities. In connection
with any Registration Statement, Prospectus or form of prospectus, any amendment
or supplement thereto, or any preliminary prospectus in which a Holder is
participating, such Holder shall furnish to the Issuers in writing such
information as the Issuers reasonably request for use in connection with any
Registration Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without limitation
as to time, indemnify and hold harmless the Issuers, their respective members,
managers, directors, officers, agents and employees, each Person, if any, who
controls either of the Issuers (within the meaning of Section 15 of the
Securities Act and Section 20(a) of the Exchange Act), and the members,
managers, directors, officers, agents or employees of such controlling persons,
to the fullest extent lawful, from and against all Losses arising out of or
based upon any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, Prospectus or form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent, but only
to the extent, that such untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact is contained in
or omitted from any information so furnished in writing by such Holder to the
Issuers expressly for use therein. In no event shall the liability of any
selling Holder be greater in amount than the dollar amount of the proceeds (net
of payment of all expenses) received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall promptly notify the party or
parties from which such indemnity is sought (the "indemnifying parties") in
writing; provided, that the failure to so notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation or liability except to
the extent (but only to the extent) that it shall be finally determined by a
court of competent
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jurisdiction (which determination is not subject to appeal) that the
indemnifying parties have been prejudiced materially by such failure.
The indemnifying party shall have the right, exercisable by giving written
notice to an indemnified party, within 20 business days after receipt of written
notice from such indemnified party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided, that an indemnified party
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless: (i) the
indemnifying party has agreed to pay such fees and expenses; or (ii) the
indemnifying party shall have failed promptly to assume the defense of such
Proceeding or shall have failed to employ counsel reasonably satisfactory to
such indemnified party; or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party or any of its affiliates or controlling persons, and such
indemnified party shall have been advised by counsel that there may be one or
more defenses available to such indemnified party that are in addition to, or in
conflict with, those defenses available to the indemnifying party or such
affiliate or controlling person (in which case, if such indemnified party
notifies the indemnifying parties in writing that it elects to employ separate
counsel at the expense of the indemnifying parties, the indemnifying parties
shall not have the right to assume the defense thereof and the reasonable fees
and expenses of such counsel shall be at the expense of the indemnifying party;
it being understood, however, that, the indemnifying party shall not, in
connection with any one such Proceeding or separate but substantially similar or
related Proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party).
No indemnifying party shall be liable for any settlement of any such
Proceeding effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such
Proceeding, each indemnifying party jointly and severally agrees, subject to the
exceptions and limitations set forth above, to indemnify and hold harmless each
indemnified party from and against any and all Losses by reason of such
settlement or judgment. The indemnifying party shall not consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such Proceeding for
which such indemnified party would be entitled to indemnification hereunder
(whether or not any indemnified party is a party thereto).
(d) Contribution. If the indemnification provided for in this Section 8 is
unavailable to an indemnified party or is insufficient to hold such indemnified
party harmless for any Losses in respect of which this Section 8 would otherwise
apply by its terms (other than by reason of exceptions provided in this Section
8), then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall have a joint and several obligation to contribute to
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the amount paid or payable by such indemnified party as a result of such Losses,
in such proportion as is appropriate to reflect the relative benefits received
by the indemnifying party, on the one hand, and such indemnified party, on the
other hand, from the offering of the Notes, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party, on the one hand,
and such indemnified party, on the other hand, in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such statement or
omission. The amount paid or payable by an indemnified party as a result of any
Losses shall be deemed to include any legal or other fees or expenses incurred
by such party in connection with any Proceeding, to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided
for in Section 8(a) or 8(b) was available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8(d), an indemnifying party that
is a selling Holder shall not be required to contribute, in the aggregate, any
amount in excess of such Holder's Maximum Contribution Amount. A selling
Holder's "Maximum Contribution Amount" shall equal the excess of (i) the
aggregate proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 8 are
in addition to any liability that the indemnifying parties may have to the
indemnified parties.
9. Rule l44 and Rule 144A
Each of the Issuers covenants that it shall (a) file the reports required
to be filed by it (if so required) under the Securities Act and the Exchange Act
in a timely manner and, if at any time any such Person is not required to file
such reports, it will, upon the request of any Holder, make publicly available
other information necessary to permit sales pursuant to Rule 144 and Rule 144A
and (b) take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act pursuant to the
exemptions provided by Rule 144 and Rule 144A.
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Upon the request of any Holder, each of the Issuers shall deliver to such Holder
a written statement as to whether it has complied with such information
requirements.
10. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf Registration are
to be sold in an Underwritten Offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Securities included in such offering.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Registrable Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
11. Miscellaneous
(a) Remedies. In the event of a breach by either of the Issuers of any of
their respective obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights provided herein, in the Indenture or, in
the case of the Purchaser, in the Purchase Agreement, or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Issuers agree that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by either
of them of any of the provisions of this Agreement and hereby further agree
that, in the event of any action for specific performance in respect of such
breach, they shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither of the Issuers has entered into,
as of the date hereof, and shall enter into, after the date of this Agreement,
any agreement with respect to any of their respective securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Issuers have obtained the written consent of Holders of at
least a majority of the then outstanding aggregate principal amount of
Registrable Securities; provided, that Sections 6(a) and 8 shall not be amended,
modified or supplemented, and waivers or consents to departures from this
proviso may not be given, unless the Issuers have obtained the written consent
of each Holder. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders
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may be given by Holders of at least a majority in aggregate principal amount of
the Registrable Securities being sold by such Holders pursuant to such
Registration Statement, provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(d) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, certified
first-class mail, return receipt requested, next-day air courier or facsimile:
(i) if to a Holder, at the most current address given by such Holder
to the Issuers in accordance with the provisions of this Section 11(d), which
address initially is, with respect to each Holder, the address of such Holder
maintained by the Registrar under the Indenture, with a copy to Skadden, Arps,
Slate, Meagher & Flom, 300 South Grand Avenue, Los Angeles, California 90071,
telecopy number (213) 687-5600, Attention: Michael A. Woronoff, Esq.; and
(ii) if to the Issuers, initially at 3rd Street Ice Harbor, P.O. Box
1750, Dubuque, Iowa 52004-1683, Attention: Managing Member, telecopy number
(319) 557-0549, and thereafter at such other address, notice of which is given
in accordance with the provisions of this Section 11(d).
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW
AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(b). EACH OF THE ISSUERS HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITT1NG IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUERS
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE ISSUERS
IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE ISSUERS AT THE ADDRESS SET FORTH HEREIN,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE ISSUERS IN ANY OTHER JURISDICTION.
(i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Issuers in respect of
securities sold
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pursuant to the Purchase Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(k) Attorneys' Fees. In any Proceeding brought to enforce any provision of
this Agreement, or where any provision hereof is validly asserted as a defense,
the prevailing party, as determined by the courts, shall be entitled to recover
reasonable attorneys' fees in addition to its costs and expenses and any other
available remedy.
(1) Securities Held by Either of the Issuers or their Respective
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by either of the Issuers or their respective affiliates (as such
term is defined in Rule 405 under the Securities Act) (other than Holders deemed
to be such affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
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REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PENINSULA GAMING COMPANY, LLC
By: /s/ Brent Stevens
-------------------------------------
Name: Brent Stevens
Title:
PENINSULA GAMING CORP.
By: /s/ Brent Stevens
-------------------------------------
Name: Brent Stevens
Title:
ACCEPTED AND AGREED TO:
JEFFERIES & COMPANY, INC.
By: Nauman Toor
--------------------------------
Name: Nauman Toor
Title: Senior Vice President
[Registration Rights Agreement]
<PAGE>
Exhibit 5
MAYER, BROWN & PLATT
1675 Broadway
New York, New York 10019
___________________, 1999
Peninsula Gaming Company, LLC
3rd Street Ice Harbor
P.O. Box 1750
Dubuque, Iowa 52004-1683
Re: Registration Statement on Form S-4 Relating to
Senior B 12 1/4 SEnior Secured Notes due 2006,
Ladies and Gentlemen:
We have acted as counsel to Peninsula Gaming Company, LLC, a Delaware
limited liability company and Peninsula Gaming Corp., a Delaware corporation
(collectively, the "Company"), in connection with the preparation and filing
with the Securities and Exchange Commission under the Securities Act of 1933,
as amended, of a registration statement on Form S-4 (the "Registration
Statement") relating to the Company's Series B 12 1/4 Senior Secured Notes due
2006. The New Notes will be offered in exchange for any and all of the
Company's outstanding Series A 12 1/4 Senior Secured Notes due 2006 (the "Old
Notes"). The Old Notes were issued, and the New Notes will be issued, under an
indenture, dated as of July 15, 1999 (the "Indenture"), among the Company and
Firstar Bank, N.A. (formerly known as Firstar Bank of Minnesota, N.A.), as
trustee.
In rendering the opinions set forth below, we have examined and relied
upon such documents, corporate records, certificates of public officials and
certificates as to factual matters executed by officers of the Company as we
have deemed necessary or appropriate. We have assumed the authenticity,
accuracy and completeness of all documents, records and certificates submitted
to us as originals, the conformity to the originals of all documents, records
and certificates submitted to us as copies and the authenticity, accuracy and
completeness of the originals of all documents, records and certificates
submitted to us as copies. We have also assumed the legal capacity and
genuineness of the signatures of persons signing all documents in connection
with the opinions set forth below. We express no opinion as to, or the effect
or applicability of, any laws other than the laws of the State of New York and
the Federal laws of the United States of America. We assume no responsibility
with respect to the application to the subject transactions, or the effect
thereon, of the laws of any other jurisdiction.
Based upon the foregoing, we are of the opinion that the New Notes have
been duly authorized for issuance by the Company and,upon the due execution,
authentication, issuance and delivery thereof in accordance with the terms of
the Indenture, the New Notes will constitute valid and legally binding
obligations of the Company, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the enforceability of
creditors' rights generally and to court decisions with respect thereto and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
This opinion is being rendered only to you for your exclusive benefit and
is intended to be relied upon by you in connection with the exchange offer
pursuant to the Registration Statement. This opinion is not to be quoted in
whole or in part or otherwise referred to, nor is it to be filed with any
governmental agency or any other person, firm or entity without our prior
written consent. This opinion may
<PAGE>
not be used for any other purpose, or relied on by any other person, firm or
entity for any purpose, without our prior written consent. Notwithstanding the
foregoing, we hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Registration Statement.
Very truly yours,
Mayer, Brown & Platt
Exhibit 10.1A
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is made and
entered into as of the 15 day of January, 1999 ("Effective Date"), by and
between GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited
liability company ("Seller") and AB CAPITAL, L.L.C., a Delaware limited
liability company or its permitted designee ("Buyer").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
Seller desires to sell, transfer, assign and convey to Buyer, and Buyer desires
to purchase and acquire from Seller, the operating assets of Seller used in
connection with Seller's gaming excursion riverboat business (the "Business")
berthed in Dubuque, Iowa; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Buyer is entering into the Real Property Purchase and Sale Agreement with Harbor
Community Investment, L.C., an Iowa Limited Liability Company ("HCI"), pursuant
to which, among other things, Buyer has agreed to purchase and acquire from HCI,
and HCI has agreed to sell, transfer, assign and convey to Buyer, certain real
property of HCI, the purchase and sale of which is a condition to closing the
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration the receipt and
sufficiency of which hereby are acknowledged, Seller and Buyer hereby agree as
follows:
1. Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, Seller hereby agrees to sell, transfer, assign and convey to
Buyer, and Buyer hereby agrees to purchase and acquire from Seller, all of the
following (collectively, the "Seller's Assets"):
(a) The gaming excursion riverboat, Diamond Jo (Official No. 973800)
and Diamond Jo II (Official No. 973801), that is operated from Dubuque,
Iowa, together with all fixtures and improvements located on or used in
connection with the riverboat (the "Diamond Jo Riverboat");
(b) All owned or leased (to the extent assignable) slots, video
poker, video keno, wheel of fortune and other video gaming devices, slot
stands, black jack tables, Caribbean Stud tables, roulette tables, crap
tables, poker tables, keno, coin counting and wrapping equipment, and all
other gaming equipment and paraphernalia used or held for use directly or
indirectly in the Business as itemized on attached Schedule 1 (b)
(collectively the "Gaming Equipment");
(c) All tangible personal property used or held for use directly or
indirectly in the operation of the Business, including, without
limitation, computer equipment,
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computer software to the extent owned or assignable under existing
arrangements, and all service equipment, kitchen equipment, decorations,
china, glasswares, linens, silverware, owned uniforms in use or held for
future use, furniture, furnishings and other equipment and vehicles (the
"Personal Property");
(d) All inventories, including all food and beverages, maintenance
and housekeeping supplies, and other supplies of all kinds, subject to
such depletion and including such re-supplies as shall occur and be made
in the ordinary course of business (the "Inventories");
(e) All documents and books and records related to the Seller's
Assets or the operations of the Business, including, without limitation,
customer lists and player lists, casino files, copies of accounting
records and copies of financial statements (the "Records");
(f) All rights under agreements, contracts, options and leases of
whatever nature, including, without limitation, the DRA Operating
Agreement and the Third Party Confidentiality Agreement, and all other
property and rights of every kind and nature owned or held by Seller on
the Closing Date (which agreements, contracts, options or leases, to the
extent involving payment obligations, individually or in the aggregate, in
excess of $10,000, are listed on Schedule 1(f));
(g) All intangible property owned or leased by Seller, including,
without limitation, goodwill, operating and training manuals, federal,
state, and local certifications and other permits (to the extent
assignable), manuals and plans relating to the Business or its operations,
customer lists, supplier lists and other documents relating to the
operation of the Seller's Assets, trademarks and trade names, mailing
lists used in the Business and all contract rights, leases, and other
items of intangible personal property relating to the ownership or
operation of the Business (the "Intangibles");
(h) All other assets that are used or held for use directly or
indirectly in connection with the maintenance and operation of the
Seller's gaming business, whether located within the Seller's portside
facility, on the Diamond Jo Riverboat or off the Diamond Jo Riverboat; and
(i) Cash on hand in the amount of $2,000,000.00.
2. Excluded Assets. Seller shall not sell, convey, transfer or assign to
Buyer, and Buyer shall not purchase or acquire from Seller, any of the assets
described below (the "Excluded Assets"), and Buyer shall not assume any
liability or obligation directly or indirectly related thereto:
(a) Seller's cash on hand and bank deposits at the time of Closing
in excess of $2,000,000.00;
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(b) All refundable income taxes, accounts receivable and
intercompany loans receivable;
(c) The Seller's corporate records, including, but not limited to,
the Seller's minute book, membership book, financial
statements, income tax returns, and any other record or
document that does not relate to the operational aspect of the
Business;
(d) All items of personal property owned by guests, employees or
other persons furnishing goods or services to the Business;
(e) Refunds, rebates or other claims, or any interest thereon, for
periods or events occurring before the Closing Date or
refunds, rebates or other claims arising from insurance
policies that are terminated by Seller as of the Closing Date;
and
(f) All employee benefit plans of Seller (collectively "Seller's
Plans"), including, but not limited to, any defined
contribution plan, employee welfare benefit plan, life
insurance, death or dismemberment benefit, hospital and
physician benefit and medical, dental and eye vision plans.
3. Purchase Price. The total purchase price that shall be paid by Buyer to
Seller for the Seller's Assets (the "Purchase Price") shall be Seventy-Two
Million Dollars ($72,000,000.00), subject to adjustment based on (i) the
prorations set forth in Section 10.5, and (ii) the Closing Statements. On the
Closing Date, the Purchase Price will be paid in the following manner: (i) Seven
Million Dollars ($7,000,000.00) original face amount of preferred membership
interests in Buyer ("Preferred Membership Interests"), and (ii) $65,000,000.0O
in cash.
3.1 Preferred Membership Interests. The Preferred Membership
Interests shall be evidenced by the membership interest certificates
substantially in the form of Exhibit A attached hereto, to be issued by Buyer to
Seller on the Closing Date in accordance with Section 3 and this Section 3.1.
The Preferred Membership Interests shall (i) entitle the Seller, or any
subsequent holder thereof, to receive Preferred Distributions commencing the
Closing Date at an annual rate of nine percent (9%) of the original face amount
thereof, which distributions shall be cumulative and paid semi-annually (the
"Preferred Distributions"), and (ii) on the eighteenth (18th) month anniversary
of the Closing Date (the "Redemption Date"), be redeemed in part by Buyer in an
original face amount of Three Million Dollars ($3,000,000.00) (the "Minimum
Partial Redemption") at a purchase price (the "Mandatory Redemption Purchase
Price") equal to the sum of Three Million Dollars ($3,000,000.00), plus any
accrued and unpaid Preferred Distributions; provided however, that, subject to
Section 18.2 and Section 4.13 (as limited by Section 18.3), the Mandatory
Redemption Purchase Price shall be reduced or set off by the full amount of any
Claims (as defined in Section 4.13) and Damages (as defined in Section 18.1)
required to be paid by Seller to Buyer under this
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Agreement. The semi-annual payment of the Preferred Distributions and the
Minimum Partial Redemption of the Preferred Membership Interests on the
Redemption Date shall be subject to the terms and covenants of the Buyer's debt
financing arrangements related to the transaction contemplated by this
Agreement; provided, however, that such debt financing arrangements shall permit
the redemption of the Minimum Partial Redemption and the Preferred Distributions
related thereto on the Redemption Date. Mr. Brent Stevens, Mr. Mike Luzich, Mr.
Chris Konoff and Mr. Andrew Whittaker (individually referred to as "Guarantor"
and collectively referred to as "Guarantors") are members of, or are an
affiliate of, the Buyer, and in return and as an inducement for Seller to enter
into the transactions contemplated by this Agreement, the Guarantors, jointly
and severally, hereby absolutely and unconditionally guarantee to Seller the
payment on the Redemption Date of the Minimum Partial Redemption and any and all
accrued and unpaid Preferred Distributions (the "Guaranty"), subject to any
reduction or set off of any Claims and Damages required to be paid by Seller to
Buyer under this Agreement. The Guaranty is an absolute, unconditional and
continuing guaranty of payment and performance of the obligations of the Buyer
under this Section 3.1 regarding the payment on the Redemption Date of the
Minimum Partial Redemption and the Preferred Distributions, and the obligations
of the Guarantors hereunder shall not be released, in whole or in part, by any
action or thing which might be deemed a legal or equitable discharge of a surety
or guarantor, other than irrevocable payment and performance in full of all
obligations regarding the Guaranty. The Guarantors are executing this Agreement
for the purpose of agreeing to and guaranteeing the obligations of the Guaranty
of this Section 3.1. Buyer shall make a good faith effort to provide terms in
its debt financing arrangements that will allow the payment of the Preferred
Distributions on the scheduled Preferred Distribution Date. In the event a
semi-annual Preferred Distribution payment is not made on the scheduled
Preferred Distribution date due to Buyer's inability to make such payments under
its debt financing arrangements, the Buyer shall make such Preferred
Distribution payments at the earliest time that Buyer is permitted to do so
under such debt financing arrangements, but in no event later than the Final
Redemption Date (as defined below). Seller shall have all legal remedies
available to it in the event that (i) Buyer has acted in bad faith associated
with Buyer's failure to pay the Preferred Distributions on the scheduled
Preferred Distribution date or at the earliest time that Buyer is permitted to
do so under its debt financing arrangements, or (ii) all unpaid Preferred
Distributions or all outstanding Preferred Membership Interests have not been
paid or redeemed by Buyer by the Final Redemption Date (as defined below). The
entire outstanding balance of the Preferred Membership Interests shall be
redeemed by Buyer on the date seven (7) years and ninety (90) days after the
Closing Date (the "Final Redemption Date") at a purchase price equal to the sum
of Four Million Dollars ($4,000,000.00), plus any accrued and unpaid Preferred
Distributions, plus any Preferred Membership Interests that were not redeemed on
the Redemption Date and all Preferred Distributions related thereto. The
Preferred Membership Interests shall, at all times during which the Preferred
Membership Interests shall be outstanding, be preferred equity interests in the
operating entity holding the IRGC excursion gambling boat license for Dubuque,
Iowa. In order to further ensure the payment of the Preferred Membership
Interests and the related Preferred Distributions, Buyer shall at the Closing
Date, have at least Six Million Dollars ($6,000,000.00) of membership
equity/capital contributed to the Buyer by its members exclusive of any
Preferred Membership
4
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Interests to be issued to Seller. Three Million Dollars ($3,000,000.00) of the
Preferred Membership Interests shall be held in escrow subject to the terms of
the Preferred Membership Interest Escrow Agreement, attached hereto as Exhibit
C, and shall be subject to reduction or set-off in accordance with the
provisions of this Section 3.1, Section 18.2 and Section 4.3 (as limited by
Section 18.3).
3.2 Escrow. On the Effective Date, the Buyer shall deposit Two
Million Five Hundred Thousand Dollars ($2,500,000.00) (the "Escrow") in an
interest bearing escrow account (with interest accruing thereon to the credit of
the party hereto that ultimately will receive the Escrow in accordance with the
terms hereof) to be held by American Trust & Savings Bank, Dubuque, Iowa
("Escrow Holder") in accordance with the provisions of this Section 3.2, and as
set forth in the Escrow Agreement attached hereto as Exhibit D. The Escrow, and
the interest earned thereon, shall be applied to and credited against the
Purchase Price on the Closing Date. Buyer shall complete and file with the Iowa
Racing and Gaming Commission ("IRGC") by February 1, 1999, Buyer's application
for a license to conduct gambling games on an excursion gambling boat at
Dubuque, Iowa. For purposes of this Agreement, Buyer's application for a license
to conduct gambling games shall be considered complete when the IRGC deems the
application to be complete enough to commence background investigations of the
applicant; provided, however, that should the IRGC request additional
information in connection with Buyer's gambling license application then that
previously required (including, without limitation, all requisite "Class A"
background applications for Mr. Brent Stevens, Mr. Mike Luzich, Mr. Chris Konoff
and Mr. Andrew Whittaker, a "D Business Entity Application", an "IRGC Excursion
Gambling Boat License Application" and fully executed copies of this Agreement
and the Real Property Purchase Agreement), on or prior to the date of this
Agreement, Buyer's obligation to file its gambling license application by
February 1, 1999 shall be extended by a period of time reasonably acceptable to
Buyer and Seller to accommodate such requests for additional information (the
"Extended Filing Date"). Seller shall provide and furnish the information and/or
materials set forth on Schedule 3.2 to assist Buyer in completing the gaming
license application. In the event Buyer has not filed its gambling license
application with the IRGC by February 1, 1999 or by the Extended Filing Date, if
applicable, this Agreement shall be terminated and the Escrow Holder shall
deliver to Seller the Escrow, and all interest accrued thereon, as liquidated
damages and not as a penalty. Upon the termination of this Agreement by Seller
in accordance with the provisions of Section 16 due to (i) the failure by Buyer
to satisfy on or prior to the Closing Date any of the conditions set forth in
Sections 9.1, 9.2, 9.3, 9.4 and 9.5, (ii) Buyer's failure to obtain the
necessary approvals or consents of the IRGC required for the consummation of the
transactions contemplated by this Agreement, (including but without limitation,
approval of Buyer's license to conduct gambling games on an excursion gambling
boat at Dubuque, Iowa) by July 15, 1999, or (iii) Buyer's inability to obtain
financing to close this transaction upon the terms and conditions set forth in
this Agreeement by July 15, 1999, the Escrow Holder shall deliver the Escrow,
and all interest accrued thereon, to Seller. For purposes of the immediately
preceding sentence, Buyer's failure to obtain the necessary IRGC approvals or
consents shall not be deemed to have occurred until such time that Buyer has met
with appropriate officials or representatives of the IRGC on at least two (2)
separate occasions
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<PAGE>
(if necessary) at scheduled IRGC meetings (not including any postponements,
continuations or cancellations thereof) to discuss the approval and consent by
the IRGC of Buyer's license application and Buyer's license application has been
denied by the IRGC after such second meeting. Notwithstanding the foregoing,
Buyer shall be deemed to have failed to obtain the necessary approvals and
consents from the IRGC if the Buyer has not obtained such approvals and consents
by July 15, 1999. In the event that this Agreement is terminated pursuant to
Section 16.1 (g) hereof due to a material adverse change in the financial
markets which materially prevents Buyer from obtaining reasonable financing, the
Escrow Holder shall deliver the Escrow, and all accrued interest thereon, to
Seller. Upon the termination of this Agreement in accordance with the provisions
of Section 16 hereof by either Buyer or Seller for any reason other than those
specifically described in this Section 3.2, or as set forth in other provisions
of this Agreement, the Escrow Holder shall deliver the Escrow to Buyer.
3.3 Assumed Obligations. In addition to the payment of the Purchase
Price, Buyer shall, as part of the Closing, assume the specific liabilities,
obligations, contracts, agreements and purchase orders related to the Business
as set forth on Schedule 3.3 (collectively, the "Assumed Obligations").
Notwithstanding any other provisions in this Agreement to the contrary, Buyer
shall assume the Assumed Obligations only to the extent arising or accruing from
and after the Closing Date, and Buyer shall have no duty or obligation
whatsoever with respect to any duties or obligations of Seller or any member of
Seller arising or accruing before the Closing Date (all of which shall be the
sole responsibility and liability of Seller). Notwithstanding any other
provisions in this Agreement to the contrary, Seller shall have no duty or
obligation whatsoever with respect to any duties or obligations of Buyer arising
or accruing under any Assumed Obligations after the Closing Date (all of which
shall be the sole responsibility and liability of Buyer). Except for the Assumed
Obligations, Buyer shall not assume or become obligated or liable with respect
to any obligation or liability of Seller, including, but not limited to, any
liability or obligations of Seller related to any litigation to which Seller is
a party. Subject to the terms and conditions of this Agreement, Buyer and Seller
shall execute and deliver on the Closing Date an Assignment and Assumption
Agreement in the form of Exhibit E attached hereto and incorporated herein by
this reference, (the "Assignment and Assumption Agreement"), pursuant to which
Buyer shall assume the Assumed Obligations and Seller shall assign the Assumed
Obligations. Seller is not in material breach or violation of or default under
any terms of any Assumed Obligation. On or prior to the Closing Date, Seller
shall obtain the necessary consents or approvals required in connection with the
Seller's assignment of the Assumed Obligations.
3.4. Excluded Obligations. Notwithstanding any other provision of
this Agreement to the contrary, except for the Assumed Obligations, Buyer shall
not assume or become obligated or liable with respect to any obligation of
Seller, including, without limitation, the following (collectively, the
"Excluded Obligations"):
(a) obligations and liabilities of Seller now existing or that
may arise before the Closing Date with respect to any account payable or other
payables related to the
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Business, except to the extent that Buyer receives a credit with respect thereto
on the Closing Statements;
(b) obligations and liabilities of Seller now existing or that
hereafter may exist with respect to any litigation of Seller, whether or not
described on Schedule 4.6.1;
(c) obligations and liabilities accrued as of the Closing Date
to employees and former employees of Seller, including, without limitation, any
compensation, severance pay, accrued vacation time, personal time, sick-leave
time, salary, bonus, fringe benefits of any kind, welfare benefits, pension
benefits, and other benefits or claims, including, without limitation, welfare
payments and obligations under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA");
(d) obligations and liabilities of Seller incurred in
connection with or relating to the transfer of the Seller's Assets, including,
without limitation, state and local gaming fees and taxes, any federal, state,
or local transfer or other tax incurred by reason of such transfer, except for
sales taxes as described in Section 3.5;
(e) liabilities for federal, state, or local income, sales or
other taxes, except as provided in Section 3.5;
(f) obligations and liabilities of Seller relating to workers
compensation claims, liquor liability claims, employment practices liability
claims and all other claims of employees, agents or representatives of Seller
prior to the Closing Date;
(g) any other obligation or liability of Seller arising or
relating to the period before the Closing Date; and
(h) obligations and liabilities of Seller now existing or that
hereafter may exist with respect to the Seller's Plans.
Seller shall indemnify, defend, and hold harmless Buyer from all of
the liabilities and obligations of Seller not expressly assumed by Buyer under
this Agreement and all claims, suits, actions, losses, damages, costs and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, arising therefrom or from any failure by Seller or the members of
Seller to pay or discharge such liabilities and obligations (including, without
limitation, any Excluded Obligation) as and when they become due. Buyer shall
indemnify, defend, and hold harmless Seller from all of the Assumed Obligations
and all claims, suits, actions, losses, damages, costs and expenses, including,
without limitation, reasonable attorneys' fees, arising therefrom or from any
failure by Buyer to pay or discharge the Assumed Obligations as and when they
become due after the Closing Date.
3.5 Sales Tax. Buyer shall pay all state and local sales taxes due
as a result of the consummation of the sale of the Seller's Assets. Buyer agrees
to indemnify and hold
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Seller harmless for any claims, damages, liabilities, penalties and fines
related to any state and local sales tax and the pay off costs, expenses and
legal fees incurred in any audit, administrative review or subsequent legal
action related to qualification for such exemption, and Seller shall use its
best efforts to cooperate with Buyer relating to achieving such qualification.
The Seller has not made more than one other sale of a vessel or any gaming
equipment during the twelve (12) month period ending on the Effective Date.
Seller shall be responsible for and shall pay all gaming taxes related to
operations of the Business prior to Closing and shall be responsible and pay all
transfer taxes related to the sale of the Seller's Assets pursuant to the terms
of this Agreement other than state and local sales taxes described in this
Section 3.5.
3.6 Employees and Employee Benefits.
3.6.1 Buyer agrees to offer to retain the twelve (12)
employees of Seller listed on Schedule 3.5.1 for a period of not less than six
(6) months from the Closing Date on terms comparable to current terms of
employment with Seller. Seller agrees that Buyer may interview Seller's key
employees. Access to employees and agents of Seller shall be subject to
reasonable notice by Buyer to Seller and the prior approval of James Rix,
Seller's Chief Operating Officer, or a person designated by James Rix to make
such approval on behalf of James Rix, which approval shall not be withheld
unreasonably.
3.6.2 Seller shall provide Buyer with an accurate and complete
list of all employees whose employment was terminated during the one (1) year
period immediately preceding the Closing Date. Buyer agrees that Buyer shall
offer employment commencing on the day after the Closing Date to at least that
number of Seller's employees such that an insufficient number of employees will
experience an "employment loss" as defined in the U.S. Worker Adjustment and
Retraining Notification Act ("WARN"), as amended, 29 U.S.C. Section 2101, et.
seq., or similar Iowa law, and the Seller will not have experienced a "plant
closing" or "mass layoff" as defined in the WARN Act or similar Iowa law, on
account of Buyer's purchase of the Seller's Assets to trigger any 60 day notice
requirement under the WARN Act on or before the Closing Date. Buyer shall be
solely responsible and liable for providing any required notice of termination
to Seller's employees and otherwise complying with the provisions of the WARN
Act or other applicable law.
3.6.3 Buyer agrees to the continuation of, or the replacement
with plans providing a comparable benefit to, the defined contribution plan,
employee welfare benefit plans and the life insurance, death and dismemberment
benefit, hospital and physician benefit, medical, dental and eye vision plans
for employees as described on Schedule 3.6.3 for a period of not less than one
(1) year from the Closing Date.
3.7 Allocation of Purchase Price. Buyer and Seller acknowledge that
the purchase and sale contemplated by this Agreement constitutes an "applicable
asset acquisition" within the meaning of Section 1060(c) of the Internal Revenue
Code of 1986, as amended. Buyer shall deliver to Seller a proposed allocation of
the Purchase Price among the Seller's
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Assets (the "Allocation") as soon as practicable after the date of this
Agreement. Such Allocation shall be based on the results of a professional
appraisal performed by an appraisal firm acceptable to Buyer and Seller, the
fees and expenses of which shall be borne equally by Buyer and Seller. Neither
Buyer nor Seller will take a position inconsistent with the allocation of the
Purchase Price as determined pursuant to this Section 3.7; provided, however,
that, if the Internal Revenue Service takes a position with respect to either
Buyer or Seller that is inconsistent with such allocation, then either Buyer or
Seller, as the case may be, may take a protective position adopting the Internal
Revenue Service's contention until the controversy has been resolved.
3.8 Transfer Documents. On the Closing Date, Seller shall sell,
assign, transfer and convey the Seller's Assets to Buyer by deed, bill of sale,
assignments and such other applicable title transfer documents as may be
required to sell, assign, transfer and convey marketable title thereto, or a
valid and subsisting leasehold estate in any Seller's Assets held under a lease.
At the Closing, Seller shall deliver to Buyer control and possession of all the
Seller's Assets.
3.9 Unpaid Assessments. If, on the Closing Date, Seller's Assets or
any part thereof are or will be subject to assessments that are to become due
and payable after the Closing Date, all such assessments shall be obligations
and liabilities of Seller and shall be paid by Seller on or prior to the Closing
Date, or, at the election of Seller, offset against the Purchase Price;
provided, that there shall be no obligation, liability or offset for any unpaid
portion of assessments which will benefit the Buyer after the Closing Date. All
assessments which Seller's Assets are subject to as of the Closing Date are
listed as liabilities on Schedule 3.9 hereto (which schedule shall be updated as
of the Closing Date). On the Closing Date, Buyer and Seller shall prorate the
unpaid assessments based on the benefits received or to be received by the
respective party prior to or subsequent to the Closing Date.
4. Representations and Warranties of Seller. Seller represents and
warrants to Buyer as follows, which representations and warranties are true and
accurate on the date hereof, and shall be true and accurate on the Closing Date.
The following representations and warranties of Seller shall survive the Closing
for a period of eighteen (18) months, except for the representations and
warranties in Section 4.1 (Organization, Standing and Authority of Seller),
Section 4.3 (Marketable Title) and Section 4.8 (Taxes) which shall survive
Closing indefinitely and for representations and warranties in Section 4.6
(Litigation) which shall survive Closing for the applicable statutes of
limitation and appeal period of any litigation associated with Seller.
4.1 Organization, Standing and Authority of Seller. Seller is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Iowa. Seller is duly licensed and qualified to do
business in the State of Iowa. Seller has the power and authority to execute,
deliver and perform this Agreement and has taken all action required by law for
such execution, delivery and performance. This Agreement is a valid and legally
binding agreement of Seller enforceable in accordance with its terms except to
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the extent that enforcement thereof may be limited by (a) bankruptcy,
reorganization, moratorium, fraudulent conveyance or similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). There are no contractual or other limitations
on Seller's power to enter into this Agreement and to consummate the
transactions contemplated hereby other than the requirement to obtain the
approval of the IRGC.
4.2 No Conflict. The execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated by
this Agreement are not contrary to the Articles of Organization or Operating
Agreement of Seller. Except as set forth on Schedule 4.2, the execution,
delivery or performance of this Agreement by Seller and the consummation of the
transactions contemplated by this Agreement will not (a) with the passage of
time, the giving of notice or otherwise, result in a violation or breach of, or
constitute a default under, any term or provision of any indenture, mortgage,
deed of trust, lease, instrument, contract, agreement or other restriction to
which Seller is a party or to which any of Seller's Assets is subject, (b)
result in the creation of any lien or other charge on any of the Seller's Assets
or have a material adverse effect on the Business, (c) result in an acceleration
or termination of any note, loan or security agreement or similar agreement or
instrument to which Seller is a party or by which any of Seller's Assets are
bound, or (d) result in a violation of any order, judgment, decree, rule,
regulation or law applicable to Seller. Seller shall remove any restrictions on
performance of this Agreement by Seller as listed on Schedule 4.2 on or before
the Closing Date.
4.3 Marketable Title; Seller's Assets. Seller has good and
marketable title to the Seller's Assets, including, without limitation, all
leasehold estates and all other tangible and intangible assets, free and clear
of Encumbrances (as defined below) except for Encumbrances (a) that are
reflected in the Seller's financial statements, (b) that constitute statutory
liens arising in the ordinary course of business or (c) that have been consented
to in writing by Buyer (collectively, the "Permitted Liens"). The Permitted
Liens do not in any way detract from or interfere with the use or operation of
the Seller's Assets in the ordinary course of business. Seller and Buyer
acknowledge that a portion of the Purchase Price shall be used to pay off and
release all liens, defects of title, pledges, security interests, charges,
claims and encumbrances of any kind whatsoever (collectively "Encumbrances") on
the Seller's Assets. Upon consummation of the transactions contemplated hereby,
Buyer shall receive the Seller's Assets free and clear of any Encumbrances.
Seller's Assets include all assets and all contract rights and other intangible
property used to conduct the Business as such Business was conducted by Seller
as of the Effective Date. To the best of Seller's knowledge, there are no
physical or mechanical defects in or to the vessels that constitute the Diamond
Jo Riverboat. The vessels that constitute the Diamond Jo Riverboat are, to the
best of Seller's knowledge, structurally sound and in seaworthy condition and
repair and are in substantial compliance with all applicable governmental laws,
rules and regulations, and have been operated and maintained in all material
respects consistent with sound maritime practices. Seller has no builders or
manufacturers specifications for the Diamond Jo Riverboat. All required
quarterly
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and annual Coast Guard inspections of the Diamond Jo Riverboat have been
satisfactorily completed and the Diamond Jo Riverboat has in place a current
Certificate of Inspection and Seller is not in receipt of any notice or other
written indication of noncompliance from the Coast Guard or other federal or
local governmental authority.
4.4 Leases. Seller has received no notice of any material default
under or breach of, or of any event that would constitute a material default
under or breach of, any of the covenants, conditions, restrictions, rights of
way, leases or easements affecting the Seller's Assets or any portion thereof,
and no such material default or breach exists. All leases pursuant to which any
of the Seller's Assets are held are listed on Schedule 4.4 and are valid,
subsisting and enforceable leases and, except as set forth on Schedule 4.4,
Seller is not in material default under any of such leases, and there are no
oral or written modifications or amendments to any of such leases. As of the
Closing Date, Seller will have obtained the necessary consents for all leases to
be assigned and transferred to Buyer under this Agreement. Except as set forth
on Schedule 4.4, Seller is not a lessor, sub-lessor or grantor under any lease,
sub-lease, consent, license or other instrument granting to another person or
entity any right to the possession, use, occupancy or enjoyment of any of the
real property used by Seller in the conduct of the Business.
4.5 DRA Operating Agreement. Seller has delivered to Buyer a true
and complete copy of the Operating Agreement between Seller and Dubuque Racing
Association, Ltd. (the "DRA"), dated February 23, 1993, as subsequently amended
(the "DRA Operating Agreement"). Seller has received no notice of any material
default under or breach of, or of any event that would constitute a material
default under or breach of the DRA Operating Agreement and no such material
default or breach exists. For so long as Buyer agrees to operate the Business
subject to the terms and conditions of the DRA Operating Agreement, DRA will
have no right of first refusal or option to purchase any of the Seller's Assets
after the Closing Date. On or prior to the Closing Date, Seller shall have made
all payments required to be made by Seller under the DRA Operating Agreement and
that are due and payable on or prior to the Closing Date.
4.6 Litigation. Except as set forth on Schedule 4.6.1, Seller is not
a party to any suit, claim, action or proceeding pending or, to the best of
Seller's knowledge, threatened by or before any court, administrative or
regulatory body, or governmental agency, or to any investigation pending or, to
the best of Seller's knowledge, threatened by any governmental agency which
there is a substantial likelihood of a judgment, order, decree, liability or
other determination adversely affecting the consummation by Seller of the
transactions contemplated by this Agreement or affecting Seller or any of the
Seller's Assets or the Business. Except as set forth on Schedule 4.6.2, neither
Seller nor any of the Seller's Assets is subject to any order, writ, injunction
or decree of any court, administrative body or regulatory body or governmental
agency.
4.7 Financial Statements; Financial Condition. Exhibit F attached
hereto and incorporated herein by this reference sets forth copies of Seller's
audited financial
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statements for the calendar years 1994, 1995, 1996 and 1997 ("Seller's Financial
Statements"). The Seller's Financial Statements, including, without limitation,
the unaudited balance sheet of Seller, dated as of September 30, 1998, a true
and complete copy of which was delivered to Buyer on or prior to the date
hereof, (i) are complete, in accordance with the books and records of Seller,
(ii) accurately reflect the assets, liabilities and financial condition and
results of operations indicated thereby, and (iii) have been prepared in
accordance with GAAP consistently applied and contain or reflect all necessary
adjustments for a fair presentation of Seller's financial condition and the
results of operations for the periods covered by the Seller's Financial
Statements. Seller is not in default with respect to any material term or
condition of any indebtedness or liability. Except as set forth on Schedule 4.7,
since the date of Seller's Balance Sheet dated as of December 31, 1997, none of
the following has occurred or arisen in the operation of the Business:
(a) Any change, event or condition that has had or reasonably may be
expected to have, in any one case or in the aggregate, a material adverse effect
on Seller, the Business or any of the Seller's Assets;
(b) Any casualty, loss, damage or destruction to any of the Seller's
Assets;
(c) (i) Except for normal, periodic increases in the ordinary course
of business and consistent with past practices, increase in compensation payable
by Seller to any officer, employee or other representative or agent of Seller
(collectively "Personnel"), and (ii) employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or agreed to by Seller for
any Personnel except pursuant to the existing plans and arrangements described
on Schedule F;
(d) Except as set forth on Schedule 4.7, addition to, modification
of or prepayments of any kind with respect to, the employee benefit plans, of
Seller effecting Personnel other than (i) contributions made for that portion of
Seller's 1998 and 1999 fiscal year through the Closing Date, in accordance with
normal practices of Seller, or (ii) the extension of coverage to other Personnel
who become eligible after December 31, 1997;
(e) Sale, assignment or transfer of any of the properties or assets
of Seller, other than in the ordinary course of business that is consistent with
past practices;
(f) Any new Encumbrance on any of Seller's Assets or the Business
(g) Receipt of any notice or any indication by Seller from any of
Seller's suppliers to the effect that such supplier may stop or decrease the
rate of supplying equipment or other products or services to Seller;
(h) amendment, cancellation or early termination of any material
contract or agreement, permit or license or other instrument relating to
Seller's Assets or the conduct of
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the Business, other than in the ordinary course of business and consistent with
past practices; or
(i) incurrence of any liability or other obligation not in the
ordinary course of business or involving payments in excess of $25,000 in the
aggregate.
Seller's books of account reflect substantially all of the Seller's
items of income and expense and substantially all of the Seller's assets,
liabilities and accruals, reflect all material items of Seller's income and
expenses, and are prepared and maintained in form and substance adequate for
preparing audited financial statements in accordance with GAAP.
4.8 Taxes. Seller has timely filed or will timely file or cause to
be timely filed all tax returns required by applicable law to be filed before or
as of the Closing Date. All such tax returns and amendments thereto are or will
be true, complete and correct. All taxes payable by Seller, or otherwise arising
from, imposed in connection with, or applicable to the Seller's Assets, the
operations and/or the Business, in respect to any period ending before or as of
the Closing Date, have been or will have been paid on or before the Closing
Date, or, where payment is not yet due, Seller has established, or will
establish or cause to be established on or before the Closing Date, an adequate
accrual for the payment of all such Taxes. Except as set forth on Schedule 4.8,
no tax audits are pending or being conducted with respect to Seller. Seller has
not received notice from the Internal Revenue Service that it intends to audit
Seller for any open year, nor is there an audit currently in progress other than
as set forth on Schedule 4.8. Seller shall withhold proper and accurate amounts
from Seller's employee payrolls for all periods prior to the Closing Date in
material compliance with all tax withholding provisions, including, without
limitation, income tax withholding, social security and unemployment taxes of
applicable local, state and federal laws.
4.9 Employees; ERISA. Schedule 4.9 contains a complete list of the
names of all officers, directors, and employees of Seller, together with the
date of hire of each of such persons and the annual or hourly rate of
compensation, the job title, job description, job classification, and benefit
plan participation of each of such persons on the date of this Agreement. Except
for the obligations set forth in Section 3.6, Buyer shall not have any liability
or obligation whatsoever by reason of the past service, or prior employment by
Seller, of any person, including, without limitation, any liability for past due
compensation, severance pay, sick-leave time, vacation time, personal time,
accrued bonuses or profit sharing under any bonus or profit-sharing program of
Seller, and Seller shall pay all compensation, accrued bonuses and profit
sharing as of the Closing Date in a manner reasonably consistent with past
practices. True and correct copies of the following items have been previously
delivered to Buyer: (a) all profit-sharing, deferred-compensation, bonus,
commission, pension, retirement, welfare or incentive plan or contract to which
Seller is a party or by which Seller is bound; (b) written or other formal
personnel policies; and (c) plans or agreements under which fringe benefits,
including, without limitation, vacation plans or programs, sick leave plans,
hospitalization or other medical insurance plans or programs and related
benefits afforded to any of Seller's employees (all of such plans and agreements
described in the immediately
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preceding clauses (a), (b) and (c), collectively "Employee Benefit Programs").
Buyer shall have no liability, cost or obligation whatsoever under or by reason
of any severance pay, compensation, accrued vacation time, personal time,
bereavement time, sick-leave time, salary, bonus, fringe benefit, welfare
benefit, pension benefit or other employee benefit or claim of any kind
affecting the employees of Seller prior to the Closing Date. Seller shall have
no liability, cost or obligation whatsoever under or by reason of any
compensation, benefit plan, or bonus or profit sharing program of Buyer
affecting the employees of Buyer after the Closing Date. Seller is, and on the
Closing Date Seller shall have been, in material compliance with all federal and
state laws respecting employment and employment practices, terms and conditions
of employment and wages and hours, and Seller is not, and on the Closing Date
Seller shall not have been, engaged in any unfair labor practice.
4.10 Trademarks. Schedule 4.10 is a schedule listing all tradenames,
trademarks, service marks, trademark licenses, franchises, trademark or
tradename registrations and other assets of a like kind, which is, in whole or
in part, used in connection with the operation of the Business (collectively,
the "Trademarks"). To the best of Seller's knowledge, the Trademarks do not
conflict with the rights of any person, except as set forth on Schedule 4.10.
Seller has not sold or exchanged for consideration any of Seller's customer and
mailing lists used in connection with the Business. Seller has not been charged
with infringement of, nor, to the best of Seller's knowledge, is Seller
threatened to be charged with infringement of, nor has Seller infringed upon,
any unexpired patent, trademark, trademark registration, trade name, service
mark, copyright, copyright registration or other proprietary right of any party.
Seller owns (free of any right or claim of others), or is licensed or otherwise
has the unencumbered right to use, all Trademarks and material technology,
know-how, processes, methods and designs used in the conduct of the business of
the Business as presently being conducted.
4.11 General Compliance with Laws. Except as set forth on Schedule
4.11, Seller is in substantial compliance with all statutes, laws, ordinances
and regulations applicable to Seller or Seller's operations and properties,
including, without limitation, Title 31 of the USCA relating to cash reporting
of transactions. Seller has received no notification alleging any violation
thereof. Seller has not violated any statute, law, ordinance or regulation
applicable to Seller's operations and properties that would (i) materially
affect the consummation of the transactions contemplated by this Agreement or
(ii) materially adversely affect the Business or any of Seller's Assets. The
operations of the Business have not been and are not now in violation of any
federal, state or local law, regulation or order that could have a material
adverse effect on the Business or the ownership of Seller's Assets. Schedule
4.11 contains a list of all licenses, permits, registrations, certificates,
authorizations, consents, filings or declarations, each of which are required by
governmental or regulatory authorities (collectively "Permits"), obtained by
Seller in connection with the operation of the Business and the ownership of
Seller's Assets. All Permits listed on Schedule 4.11 are in full force and
effect and Seller is in substantial compliance therewith. Except as set forth on
Schedule 4.11, the Permits listed on Schedule 4.11, constitute all of the
Permits necessary for the conduct of the Business as presently conducted or
operated by Seller and the ownership of the Seller's
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Assets. No suspension, cancellation, or termination of any Permit has been made
or threatened by any governmental authority to the effect that the conduct of
the Business fails to comply in any material respect with any law, rule,
regulation or ordinance or that any Permit not listed on Schedule 4.11 is
necessary for the operation of the Business or the ownership of Seller's Assets.
4.12 ADA Compliance. All of the Seller's Assets materially comply
with the provisions of the Americans with Disabilities Act.
4.13 Environmental Conditions. Seller's activities on all property
owned or leased by Seller materially comply with all applicable Environmental
Laws. Except as set forth on Schedule 4.13, Seller has not caused any Release or
threatened Release of any Hazardous Material in, on, under or from any property
owned or leased by Seller. Except as set forth on Schedule 4.13, no judicial or
administrative enforcement action, proceeding, claim, order, directive, notice
of inspection, or notice of noncompliance by any governmental authority pursuant
to any applicable environmental law (together, "Claim") has been made, or is
pending or, to the best of Seller's knowledge, has been threatened against
Seller with respect to either the property owned or leased by Seller or Seller's
operations thereon. Seller has not received any notice from any governmental
authority regarding the compliance or noncompliance of any real property owned
by Seller with any Environmental Law. Seller has not granted or allowed access
to or use of any part of the real property owned by Seller to any individual or
entity to conduct any activity that has caused or threatens to cause the release
of any Hhazardous Mmaterial in or on any of the real property owned by Seller.
Except as provided above, Seller makes no representation or warranty regarding
the compliance of the property owned or leased by Seller with any applicable
environmental laws or with respect to the environmental condition or status of
such property. Seller makes no representation or warranty regarding the
activities, operations or use by any predecessor of Seller of any property owned
or leased by Seller. In addition to any indemnification obligation under Section
18.2, for the eighteen (18) month period commencing the Closing Date, Seller
shall indemnify Buyer for any out of pocket costs or expenses actually incurred
by Buyer during such eighteen (18) month period with respect to any third party
environmental Claim to the extent the event or loss giving rise to the Claim
occurred prior to the Closing Date and to the extent that Buyer has not received
contribution, indemnification or other payment therefor from another party. With
the exception of radiator fluids, waste oils, greases and similar materials
generated in the maintenance of motors used to propel vehicles and vessels,
which materials have all been properly disposed of off-site and otherwise
handled in accordance with applicable Environmental Laws, Seller has used no
quantity of any Hazardous Material and has conducted no Hazardous Material
Activity in, on, under or from any real property or facility (including the
Diamond Jo) used or operated by Seller in connection with the operation of the
Business. Seller has not placed, maintained or caused to exist any underground
storage tank, asbestos containing material, polychlorinated byphenyl, in the
form of electrical transformers, or landfill or dump on any real property or
facility (including the Diamond Jo) used or operated by Seller in connection
with the operation of the Business.
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The Buyer's right to indemnification under this Section 4.13 shall
be limited as follows: (i) the obligation to indemnify for environmental Claims
includes only indemnification for third party Claims for remediation arising
from actual orders received from the Iowa Department of Natural Resources or the
Federal Environmental Protection Agency, and (ii) except for breaches of
representations contained in this Section 4.13 regarding Seller's activities,
the obligation to indemnify for environmental Claims does not include Claims
arising from property leased from the City of Dubuque, Iowa nor Claims arising
from the lot on which the Ice Harbor Mall is located. Buyer shall not be
entitled to make a Claim for indemnification against Seller pursuant to this
Section 4.13 unless such individual third party environmental Claim, together
with all other environmental Claims, exceeds $200,000.00 (in which case all such
Claims will be paid), provided, however, in no event shall the aggregate of
Claims under this Section 4.13 plus the indemnifiable damages under Section 18.2
exceed $3,000,000.00. Any indemnification obligation of Seller pursuant to this
Section 4.13 shall be applied and offset against the Preferred Membership
Interests as set forth in Section 3.1.
For purposes of this Section 4.13, the following terms shall have
the meanings set forth below:
"Environmental Laws" means any and all federal, state and/or local
laws, regulations and legal requirements that exist on the Closing Date
pertaining to (i) the protection of health, safety and the indoor and outdoor
environment, (ii) the conservation, management or use of natural resources and
wildlife, (iii) the protection or use of surface water and groundwater, (iv) the
management, manufacture, possession, presence, use, generation, transportation,
treatment, storage, disposal, Release, threatened Release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Material or (v)
pollution (including, without limitation, any Release to air, land, surface
water and groundwater), and includes, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. 6901 et seq.;
the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. 6901 et seq.; the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 U.S.C. 1251 et seq.; the Clean Air Act of 1966, as
amended, 41 U.S.C. 7401 et seq.; the Toxic Substances Control Act of 1976, 15
U.S.C. 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. App.
1801 et seq; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. 651 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et seq.; the
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et
seq.; the National Environmental Policy Act of 1969, 42 U.S.C. 4321 et seq.; the
Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300(f) et seq.; any
similar, implementing or successor law to any of the foregoing and any
amendment, rule, regulation, order or directive issued thereunder.
"Hazardous Material Activity" means any activity, event or
occurrence involving a Hazardous Material, including, without limitation, the
manufacture, possession, presence, use, generation, transportation, treatment,
storage, disposal, Release, threatened
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Release, abatemnent, removal, remediation, handling of or corrective or response
action to any Hazardous Material.
"Hazardous Material" means any substance, chemical, compound,
product, solid gas, liquid, waste, byproduct, pollutant, contaminant or material
that is hazardous or toxic, and includes, without limitation, (i) asbestos,
polycholorinated biphenyls and petroleum; and (ii) any such material classified
or regulated as "hazardous" or "toxic" or as a "contaminant" or "pollutant"
under the laws of the State of Iowa or any Environmental Law.
"Release" means any soiling, migrating, seeping, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of any Hazardous Material into the indoor or outdoor environment,
including, without limitation, the abandonment or discarding of barrels, drums,
containers, tanks and other receptacles containing or previously containing any
Hazardous Material.
4.14 Labor Disputes and Complaints. Except as set forth on Schedule
4.14, no person, party or labor organization, including, without limitation,
governmental agency of any kind, has made, brought, commenced, or to the best of
Seller's knowledge, threatened any claim or action, within the last two (2)
years, regarding a labor dispute, unfair labor practice, employee representation
proceeding, wage and hour claim, occupational safety and health claims, employee
arbitration, worker's compensation claims or any other labor dispute proceeding
or investigation, with respect to Seller, the Business or any of Seller's
Assets. Seller has not entered into a binding agreement with organized labor
that would cover the employees of Seller. Seller is in material compliance with
all applicable laws respecting employment practices, terms and conditions of
employment and wages and hours. Seller is not subject to any pending or
threatened grievance, labor dispute, strike or work stoppage that affects or
that may affect adversely the Business or any of the Seller's Assets, and there
is no charge or complaint against Seller or any of the Seller's Assets by or
before the National Labor Relations Board, or before any court or other
tribunal, involving any charge of any unfair labor practice.
4.15 Consents. Except for (i) the consent and approval of the IRGC
and other governmental agencies or authorities in connection with the operation
of the Business, (ii) the consent and approval of the Dubuque Racing
Association, Ltd. to the assignment of the Dock Sublease, and (iii) and as set
forth on Schedule 4.15 (which consents shall be obtained by Seller prior to
Closing) and except for consents and approvals already obtained by Seller: (a)
no consent, approval or agreement of any person, entity, party, court, agency or
government is required to be obtained by Seller in connection with the execution
and delivery of this Agreement or the performance of the terms of this Agreement
or the consummation of the transactions contemplated by this Agreement; (b)
Seller's execution and delivery of this Agreement and the performance by Seller
of Seller's obligations under this Agreement do not and will not require any
registration with, consent or approval of, notice to or any action by any person
or governmental authority; and (c) Seller is not required to obtain any permit
of any kind from any regulatory or governmental authority in order to consummate
the
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transactions contemplated by this Agreement. Seller shall use its best efforts
to obtain before the Closing Date all requisite consents, approvals and
agreements of third parties, including, without limitation, governmental or
other regulatory agencies, foreign or domestic, required to be received by or on
the part of Seller for the execution and delivery of this Agreement and the
performance of its terms.
4.16 Brokerage and Finder's Fees. Except as set forth on Schedule
4.16, neither Seller nor anyone on Seller's behalf has any actual or potential
liability to any broker, finder or agent, and Seller has not agreed to pay any
brokerage fee, finder's fee or commission, with respect to the transactions
contemplated by this Agreement. Seller shall indemnify, hold harmless and defend
Buyer against all claims and liabilities asserted against Buyer, any of the
Seller's Assets, or any combination of them, by any person acting or claiming to
act as a broker or finder on behalf of Seller.
4.17 Options. Except as set forth in the DRA Operating Agreement,
there are no rights of first refusal, options or similar rights granted with
respect to any of the Seller's Assets.
4.18 Affiliate Contracts. Except for employment agreements and
except as specifically identified on Schedule 4.18, there does not exist any
contract, agreement or other arrangement between Seller and (a) any affiliate of
Seller, (b) any entity in which Seller directly or indirectly owns more than a
five percent (5%) interest or (c) any of the managers or members of the Seller.
4.19 Restrictive Agreements. Except for the DRA Operating Agreement
and the excursion gambling riverboat license issued by the IRGC, there are no
contracts or agreements to which Seller is a party or under which the operation
of any of the Seller's Assets is in any way bound that in any way excludes or
restricts the use of the Seller's Assets in competing in any geographic area or
business sector.
4.20 Utilities Access. The Diamond Jo Riverboat has access to all
water, sewer, electric, natural gas, telephone and drainage facilities and all
other utilities to conduct the Business as presently conducted, and such access
has been provided in material compliance with all requirements of applicable
law, rules, ordinances, and regulations.
4.21 Public Improvements. Except as set forth on Schedule 4.21, to
the best of Seller's knowledge, there are no current or proposed plans to widen,
modify, or realign any street or highway and no existing, proposed, or, to the
best of Seller's knowledge, threatened eminent domain proceedings, or private
purchase in lieu of such proceedings, that would affect the Business in any way,
and except as previously disclosed to Buyer, there are no presently planned
public improvements that would or could result in the creation of a special
assessment or similar lien on the Business.
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4.22 Complimentaries. Seller is not committed to any complimentary
arrangement for food or beverage for any guest or client of the Business as of
the Closing Date, or for any period thereafter, except in accordance with prior
practices and disclosed on Schedule 4.22.
4.23 Customer Database. No employee, representative, agent, or
member of Seller has delivered, and Seller shall not permit any employee,
representative, agent, or member of Seller to deliver, Seller's customer
database files and records to a third party or allow a third party access to
Seller's customer database files and records. Seller's customer data base files
and records employ an electronic player tracking system that collects and stores
information about the guests and clients of the Business, including, without
limitation, gambling preferences, profits and losses and complementary
arrangements. Seller's customer data base files and records are updated and
maintained by Seller regularly and shall be updated and maintained by Seller
through the Closing Date consistent with past practices.
4.24 Material Purchase Orders. Buyer shall acquire all rights and
assume all obligations under all open material purchase orders made in the
ordinary course of business consistent with past practice and existing as of the
Closing Date; provided, however, that Seller shall provide Buyer notice of, and
an opportunity to disapprove, every material purchase order that is in excess of
$50,000.00 and is not in the ordinary course of business as contemplated by and
reflected in the Seller's 1998 and 1999 budgets.
4.25 Adverse Agreements. Seller is not a party to any undisclosed
agreement or instrument or subject to any undisclosed charter or other
restriction or any undisclosed judgment, order, writ, injunction, decree, or
award that materially adversely affects or in the future could materially
adversely affect the Business or any of the Seller's Assets.
4.26 Adverse Facts and Circumstances. Except as set forth on
Schedule 4.26 and except for facts or circumstances with respect to legislative
or regulatory actions upon which Buyer has conducted and relied upon its own due
diligence, Seller does not know of any fact or circumstance that is reasonably
likely to have any material adverse effect on (i) the Business, (ii) the
condition, financial or otherwise, or prospects of Seller, (iii) any of Seller's
Assets. or Seller's rights, title, and interest thereto, or (iv) Seller's
ability to transfer the Seller's Assets on the Closing Date to Buyer free and
clear of all Encumbrances of any kind.
4.27 Accuracy of Information. No statements, representations, and
warranties made by Seller in this Agreement and in the Schedules and Exhibits
attached hereto contain any untrue statement of material fact or omitted a
material fact necessary to make the statements or facts contained therein not
materially misleading, and all lists contained in the Schedules attached hereto
are materially complete and correct. None of the information supplied or to be
supplied in writing on or before the Closing Date by Seller or on behalf of
Seller to Buyer or Buyer's agents or representatives in connection with this
Agreement did contain or will contain, at the respective times when such
information was or is delivered, any untrue statement of a material fact, or
omitted or will omit to state any material fact required to
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be stated therein or necessary in order to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading. If at any time after the delivery and before the Closing Seller
becomes aware that any of such information has become untrue or misleading, in
any material respect, Seller promptly shall notify Buyer in writing of such
occurrence.
4.28 Approval of Agreement by Members. This Agreement and each of
the transactions contemplated hereby have been duly approved by Seller's members
at a meeting duly held by Seller prior to the date of this Agreement.
4.29 Maintenance of Insurance. Seller carries insurance (including
self insurance) in such amounts and covering such risks as set forth on Schedule
4.29. Seller is not in default under any of such policies or binders, nor has
Seller failed to give any notice or to present any claim under any such policy
or binder in a due and timely fashion, except where such failure to comply
therewith would not reasonably be expected to have a material adverse effect on
the Business or on any of the Seller's Assets, which insurance is adequate for
the operation of the Business as presently conducted and consistent with
insurance customarily maintained by operators of river boat casinos in the river
boat industry. Schedule 4.29 contains a complete and accurate list in all
material respects of all policies or binders of fire, liability, title, worker's
compensation, liquor liability and other forms of insurance (showing as to each
policy or binder the carrier, policy number, coverage limits, expiration dates,
annual premiums and a general description of the type of coverage provided)
maintained by Seller with respect to the Business or any of Seller's Assets, all
of which policies and binders are in full force and effect on the Closing Date.
All of such policies and binders are sufficient in all material respects to
comply with the terms of all agreements or contracts to which Seller is a party
or with respect to which any of the Seller's Assets are bound. There are no
outstanding unpaid claims under any such policies or binders.
4.30 Disclosure of Confidential Information. Except as required by
law or legal process and except in accordance with the terms and provisions of
those certain confidentiality agreements between Seller and the parties
identified on Schedule 4.30 (the "Third Party Confidentiality Agreements"),
Seller has not disclosed (whether orally or in writing) to any person or entity
(other than Buyer) any confidential information of Seller, including without
limitation, information about future business plans and opportunities, business
secrets or methods, business policies, reports, lists of names of suppliers,
customers and guests or any other confidential information or trade secret of
any type or description. Seller shall be responsible for obtaining any consents
or approvals in connection with the assignment of the Third Party
Confidentiality Agreements to Buyer in accordance with the terms and conditions
of this Agreement.
4.31 Competing Interests. Except as set forth on Schedule 4.31,
neither Seller nor any of Seller's members, affiliates or related parties has
any direct or indirect ownership interest greater than five percent (5%) in any
corporation, partnership, limited
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liability company, trust or other business entity that is a vendor of any of
Seller's Assets to Seller or with which Seller is affiliated or has a business
relationship.
5. Representations and Warranties of Buyer. Buyer represents and warrants
to Seller as follows, each of which is true and accurate on the date hereof and
shall be true and accurate on the Closing Date. The following representations
and warranties of Buyer shall survive the Closing for a period of eighteen (18)
months.
5.1 Organization, Standing and Authority of Buyer. Buyer is a
limited liability company, duly organized, validly existing and in good standing
under the laws of the State of Delaware. Buyer has the power to execute and
deliver this Agreement and has taken all action required by law for such
execution, delivery and performance. This Agreement is a valid and legally
binding agreement of Buyer enforceable in accordance with its terms except to
the extent that enforcement thereof may be limited by (a) bankruptcy,
reorganization, moratorium, fraudulent conveyance or similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). Except as set forth on Schedule 5.5, there are
no contractual or other limitations on Buyer's power to enter into this
Agreement or to consummate any of the transactions contemplated by this
Agreement other than the requirement to obtain the consent of the IRGC.
5.2 No Conflict. The execution, delivery and performance of this
Agreement by Buyer, and the consummation of the transactions contemplated by
this Agreement, are not contrary to the articles of organization or operating
agreement of Buyer. Except as set forth on Schedule 5.2, the execution,
delivery, performance or consummation of this Agreement by Buyer will not (a)
with the passage of time, the giving of notice or otherwise, result in a
violation or breach of, or constitute a default under, any term or provision of
any indenture, mortgage, deed of trust, lease, instrument, contract, agreement
or other restriction to which Buyer is a party or to which any of Buyer's
property is subject, (b) result in the creation of any lien or other charge on
any of the assets of Buyer, (c) result in an acceleration or termination of any
loan or security interest agreement or similar agreement or instrument to which
Buyer is a party or (d) result in a violation of any order, judgment, decree,
rule, regulation or law applicable to Buyer.
5.3 Litigation. Except as set forth on Schedule 5.3, Buyer is not a
party to any suit, claim, action or proceeding now pending or threatened before
any court, administrative body or regulatory body, or by any governmental
agency, or any investigation now pending or, to the best of Buyer's knowledge,
threatened by any governmental agency in which there is a substantial likelihood
of a judgment, order, decree, liability or other determination affecting the
consummation by Buyer of the transactions contemplated by this Agreement.
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5.4 Compliance with Laws. Buyer has not violated any statute, law,
ordinance or regulation applicable to Buyer's operations and properties that
would materially affect the consummation of the transactions contemplated by
this Agreement.
5.5 Consents. Except as set forth on Schedule 5.5, and except with
respect to such consents and licenses required to be obtained from the IRGC or
other governmental agencies or authorities in connection with the operation of
the Business after the Closing Date, (a) no consent, approval or agreement of
any person, entity, party, court or government is required to be obtained by
Buyer or the Members of Buyer in connection with the execution and delivery of
this Agreement or the performance of the terms of this Agreement or the
consummation of the transactions contemplated by this Agreement; (b) Buyer's
obligations under this Agreement do not and will not require any registration
with, consent or approval of, notice to or any action by any person or
governmental authority; and (c) Buyer is not required to obtain any permit of
any kind from any regulatory or governmental authority in order to consummate
the transactions contemplated by this Agreement. Buyer shall use its best
efforts to obtain before the Closing Date all requisite consents of third
parties, including, without limitation, governmental or other regulatory
agencies, foreign or domestic, required to be received by or on the part of
Buyer for the execution and delivery of this Agreement and the performance of
its terms.
5.6 Brokerage and Finder's Fees. Except as set forth on Schedule
5.6, neither Buyer nor anyone on Buyer's behalf has any liability to any broker,
finder or agent, and Buyer has not agreed to pay any brokerage fee, finder's fee
or commission, with respect to the transactions contemplated by this Agreement.
Buyer shall indemnify and hold harmless Seller from and against all claims or
liabilities asserted against Seller by any person acting or claiming to act as a
broker or finder on behalf of Buyer.
6. Seller's Pre-Closing Obligations.
6.1. Seller's Covenants. From the date hereof to the Closing Date,
Seller shall continue to conduct Seller's business in the ordinary course of
business, consistent with past practices, in accordance with standards of
operation existing as of the date hereof and in accordance with Seller's annual
budget or budgets, copies of which have been or will be provided to Buyer on or
prior to the Effective Date. Except for transactions provided for herein, and
without limiting the generality of the foregoing, Seller shall not directly or
indirectly:
(a) Merge or consolidate with or into any corporation, limited
liability company or other entity, or amend its Articles of Organization or
Operating Agreement;
(b) Change or agree to change in any material manner the Business;
(c) Sell, transfer or otherwise dispose of any of the Seller's
Assets outside the ordinary course of business;
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(d) Sell, assign, transfer or otherwise dispose of the Trademarks;
(e) Except in the ordinary course of business, modify, amend, alter
or terminate any existing material agreement or enter into any material
agreement that extends by its terms beyond the Closing Date or that could not
reasonably be fully performed before the Closing Date;
(f) Fail to pay when due all sums owed to third parties under any
material agreement or otherwise fail to perform fully all of the terms and
covenants imposed on Seller under any material agreement;
(g) Except (i) as otherwise contemplated herein, (ii) as
contemplated in the Seller's 1999 budget, true and complete copies of which are
attached hereto as Schedule 6.1(g), or (iii) as may be necessary pursuant to
Section 6.1(a) hereof, enter into any transaction material in nature or amount
other than in the ordinary course of business, consistent with past practice, or
create or enter into any additional purchase orders that exceed $50,000;
(h) Fail to keep the Seller's Assets insured, or fail to maintain
insurance coverage in accordance with customary industry practice;
(i) Fail to use its best efforts to maintain possession and control
of all of the Seller's Assets, fail to keep in faithful service Seller's
employees, fail to preserve the goodwill of Seller's suppliers, customers and
others having business relations with Seller, or do anything to impair Buyer's
ability to keep and preserve, after the Closing Date, Seller's business existing
on the date hereof;
(j) Fail to maintain the Seller's Assets in its present repair,
order and condition (reasonable wear and use and damage by fire or other
casualty excepted);
(k) Fail to maintain books, accounts and records concerning the
Seller's Assets in the usual regular and ordinary manner on a basis consistent
with that heretofore employed;
(l) Sell, mortgage, lease, buy or otherwise acquire any real estate
or any interest therein, including any leasehold interest, or extend the term of
any leasehold interest;
(m) Fail to materially comply with all laws applicable to any of the
Seller's Assets or to the conduct of the Business;
(n) Fail to furnish to Buyer all information and data presently
available to Seller or Seller's agents that is reasonably necessary or desirable
in order to assist Buyer to secure the permits, licenses, liquor licenses and
approvals required to operate the Business;
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(o) Fail to purchase and replenish existing inventories and
expenditures for normal and customary business operations as reasonably may be
required for the continued operation of the gaming operations of the Business in
accordance with practices in existence as of the date hereof;
(p) Fail to pay all applicable state and local gaming and liquor
fees and taxes due on or before the Closing Date with respect to the gaming
operations required to be paid in order to maintain any license or permit
necessary for the operation thereof;
(a) Reduce hours of operation;
(r) Change credit policies for customers;
(s) Fail to maintain a level of marketing and other advertising
reasonably comparable to that existing during the three (3) year period
immediately preceding the date of this Agreement;
(t) Except for regular pay increases in the ordinary course of
business (not to exceed 3.5% in the aggregate in any given twelve (12) month
period), increase the rate of compensation payable or to become payable by
Seller to any employee of Sellers, or except for any bonus, profit sharing or
other plans and agreements in existence as of the Effective Date, make, accrue
or become liable for any bonus, profit sharing, termination or incentive payment
to any employee of Seller; or
(u) Mortgage, pledge or subject to any encumbrance of any kind any
of the Seller's Assets.
6.2 Pre-Closing Assistance. Before the Closing Date, at the request
of Buyer, Seller shall use its best efforts to provide reasonably requested
information to Buyer for the purpose of assisting Buyer in obtaining Buyer's
financing, provided, however, that Seller shall have no liability whatsoever for
or associated with such financing other than with respect to any written
information of Seller (related to Seller's current operations and not related to
any proposed or projected operations of Buyer) furnished to Buyer in connection
with such financing. Prior to the Closing Date, Seller shall cause its senior
members of management, including James P. Rix, to be available at such time
reasonably requested by Buyer to provide information in the preparation of any
documentation and any road show presentations related to Buyer's financing and
to attend any such road show or other presentation. Buyer's accountants, at
Seller's cost and expense, shall prepare audited financial statements for
Seller's 1998 fiscal year. Buyer shall be responsible for bringing Seller's 1996
and 1997 audited financial statements in compliance with Regulation S-X as
promulgated by the Securities and Exchange Commission. Buyer agrees to indemnify
and hold harmless Seller and any representative or agent of Seller, including,
but not limited to, James P. Rix, from any liability, claim, expense or cost
associated with assisting Buyer in obtaining Buyer's financing, provided,
however, that such indemnity shall not apply to the extent such liability,
claim, cost
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or expense (i) relates to any written information of Seller (related to Seller's
current operations and not related to any proposed or projected operations of
Buyer) furnished to Buyer in connection with such financing, and (ii) arises out
of or results from any malfeasance, fraud, willful misconduct or gross
negligence of Seller or any of Seller's representatives or agents.
7. Conditions Precedent to Closing of Buyer and Seller. The obligations of
Buyer and Seller under this Agreement are subject to the satisfaction of the
following conditions at or before the Closing Date; provided, however, that
satisfaction of any of the following conditions may be waived by the mutual
written agreement of Buyer and Seller.
7.1 Execution and Delivery. All Schedules, together with backup
documentation, Exhibits and other documents to be signed and delivered by each
party hereto to the other shall have been signed and delivered to the other
party hereto.
7.2 Threatened or Pending Litigation. No suit, action, or other
proceeding shall be threatened or pending by or before any court or governmental
agency seeking to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of any of the transactions
contemplated hereby, or which affects or could affect the value of any of the
Seller's Assets or the Business.
7.3 Related Transaction. The consummation of that certain Real
Property Purchase and Sale Agreement between Buyer and Harbor Community
Investment, L.C. ("HCI"), dated the ____ day of January 1999 (the "Real Property
Agreement"), a related transaction, and the simultaneous closing of said real
property acquisition.
7.4 IRGC Approval. Buyer and Seller shall have obtained the approval
of this Agreement by the IRGC.
8. Conditions Precedent to Closing of Buyer. The obligations of Buyer
under this Agreement are subject to satisfaction of the following conditions at
or before the Closing Date; provided, however, that satisfaction of any of the
following conditions may be waived by Buyer.
8.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement shall be true and accurate
in all material respects as if made on and as of the Closing Date.
8.2 Performance of Covenants. Seller shall have duly performed all
obligations, covenants and agreements undertaken by Seller under this Agreement
and substantially complied with all terms and conditions applicable to Seller
hereunder to be performed or complied with before the Closing Date, including
without limitation, Seller's obligations under Sections 10.3. 10.5. 13.6. 13.10
and 14.
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8.3 Adverse Changes. Since January 1, 1999, there shall have
occurred (a) no material loss, damage or destruction to any of the Seller's
Assets, and (b) no other event or condition that materially adversely affects or
threatens to materially adversely affect the ability of Buyer to exercise full
rights of ownership with respect to the Business or any of the Seller's Assets.
8.4 Asset Sales. None of the Seller's Assets shall have been sold or
otherwise transferred except in the ordinary course of business, consistent with
past practice and Seller shall have in place the CDS Oasis Slot System to be
assigned to Buyer at Closing.
8.5 Opinion. Buyer shall have received from Seller's counsel an
opinion, dated the Closing Date, in form and substance satisfactory to Buyer and
its respective counsel that:
(a) Seller is duly organized, validly existing and in good
standing under the laws of the State of Iowa, and Seller has the power and
authority to (i) consummate the transactions contemplated by this Agreement,
(ii) execute and deliver this Agreement and the other agreements, documents,
instruments and certificates required to be delivered by Seller thereby and
perform its duties and obligations required to be performed thereunder, and
(iii) own and use its assets and conduct the Business as presently conducted.
(b) This Agreement is a valid and legally binding agreement of
Seller and on the Closing Date will be enforceable against Seller in accordance
with its terms except to the extent that enforcement thereof may be limited by
(a) bankruptcy, reorganization, moratorium, fraudulent conveyance or similar
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
(c) Except as disclosed on Schedule 4.6.1 of the Asset
Purchase and Sale Agreement, such counsel does not know of any suit, action,
arbitration, legal, administrative or other proceeding or governmental
investigation pending or threatened against or affecting Seller seeking to
enjoin the consummation of the transactions contemplated by this Agreement or if
which determined adversely to Seller would have a material adverse effect on
Seller, the Business or any of the Seller's Assets.
(d) Except as disclosed on Schedule 4.2 of the Asset Purchase
and Sale Agreement, neither the execution nor the delivery of this Agreement nor
the consummation of the transactions contemplated by this Agreement will
constitute a default, or any event that would with notice or lapse of time, or
both, constitute a default, under, or violation or breach of (i) Seller's
Articles of Organization, Operating Agreement or, to the best of such counsel's
knowledge, any indenture, license, permit, lease, franchise, mortgage instrument
or other material agreement to which Seller is a party or by which Seller or
Seller's properties may be bound; (ii) any existing federal or Iowa
constitution, statute, regulation or law to which Seller or any of the Seller's
Assets are subject; or (iii) to the best of such
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counsel's knowledge, any existing judicial or administrative decrees, writ,
judgment or order to which Seller or any of its Assets or subject.
(e) To the knowledge of such counsel, except for the approval
of the IRGC and the approval of the members of Seller and except as set forth on
Schedule 4.15, no consent, approval, waiver, license or authorization by any
person, entity or governmental authority under any federal or Iowa statute or
regulation is required in connection with the execution, delivery and
performance by Seller of this Agreement, or any other agreements, documents,
instruments and certificates required to be delivered by Seller thereby.
(f) Seller's counsel shall provide a normal and customary
Securities Exchange Act of 1934 Section l0b-5 opinion that is customary and
normal in transactions similar to the transaction contemplated by this
Agreement, such opinion subject to review and approval by the Seller's
securities counsel and Buyer's securities counsel, or in the event that Buyer
determines to engage Seller's counsel in connection with the subject securities
transaction, Seller's counsel shall provide a normal and customary Securities
Exchange Act of 1934 Section 10b-5 opinion that is customary and normal in
securities transactions, such opinion subject to review and approval by Seller's
securities counsel and Buyer's securities counsel.
8.6 Officer's Certificate. Buyer shall have received a certificate
from Seller, dated as of the Closing Date and executed by the Chief Operating
Officer of Seller, to the effect that (a) all of the conditions contained in
Sections 7 and 8 have been satisfied; (b) all of the representations and
warranties of Seller contained in this Agreement are true and accurate as of the
Closing Date; and (c) all of the covenants and agreements of Seller contained in
this Agreement and required to be performed before the Closing have been
performed and Seller is not in breach or default of any of Seller's obligations
or representations or warranties contained in this Agreement.
8.7 Attorney General Letter. Buyer shall have received a copy of a
letter from the Iowa Attorney General's office to the Executive Director of the
IRGC to the effect that under Iowa law, in the event that the Dubuque County
Referendum in 2002 does not approve the continuation of riverboat gaming in
Dubuque County, Iowa, a licensee will continue to have the right and the legal
ability to continue the gaming operation on the Diamond Jo Riverboat at the
present site for a period of time of nine (9) years from the date the licensee's
license was originally issued. Seller shall use its best efforts to assist Buyer
in obtaining a copy of the AG Letter.
8.8 Extension of Dubuque City Lease. That certain Lease Agreement
dated as of February 28, 1990, between Dubuque Racing Association ("DRA"), as
Lessee and the City of Dubuque, Iowa, as Lessor, pursuant to which the DRA
subleased the property to Seller, as Lessee, ("Dubuque City Lease") shall have
been extended through the year 2008.
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8.9 Licenses. Buyer shall have received necessary gaming and liquor
licenses including, but not limited to, a gaming license from the IRGC to
operate a gaming excursion riverboat at Dubuque, Iowa, registrations with the
United States Department of Justice to own and hold gaming devices, applications
with the City of Dubuque, Iowa, the Iowa Department of Commerce, Alcoholic
Beverages Division and the Bureau of Alcohol, Tobacco and Firearms of the U.S.
Department of Justice for all applicable registrations and licenses necessary to
sell alcoholic beverages. In the event that Buyer has not received the foregoing
gaming licenses by July 15, 1999 or the foregoing alcoholic beverage licenses by
July 15, 1999, pursuant to Sections 16.1 and 16.2, this Agreement shall
terminate and the Escrow, and all interest earned thereon, shall be delivered to
Seller.
8.10 Material Limitation. No statute, rule, regulation, executive
order or final decree or preliminary or permanent injunction shall have been
enacted, entered or promulgated that would (a) impose any material limitation on
the ability of Buyer to exercise full rights of ownership with respect to any of
the Seller's Assets, or (b) impose any new or increased fee or tax applicable to
the Business or any of Seller's Assets. In the event the transaction
contemplated by this Agreement does not close by July 15, 1999 due to a material
limitation, as set forth in this Section 8.10, this Agreement shall terminate
and the Escrow, and all interest earned thereon, shall be delivered to Seller.
8.11 Consents. All material notices, consents, approvals and
authorizations to and from any governmental authority or other person or entity
necessary to permit Seller to transfer all of the Seller's Assets to Buyer in
the manner contemplated by this Agreement and to permit Buyer to operate the
Business as presently conducted after the Closing Date, shall have been
obtained.
8.12 1998 Financial Statements. Seller shall have delivered to Buyer
audited financial statements of Seller for the fiscal year ended December 31,
1998.
8.13 Business Interruption Insurance. On or prior to the Effective
Date, Seller shall have obtained, at its sole cost and expense through the
Closing Date, business interruption insurance in such amounts and on terms and
conditions reasonably acceptable to Buyer.
8.14 City Leases. On or prior to the Closing Date, lease agreements,
extensions or similar documents covering all real property owned by the City of
Dubuque that was leased to DRA and subleased to Seller for use in the Business
prior to Closing including, but not limited to, assignment of all parking rights
granted by the City of Dubuque, shall have been finalized, such agreements,
extensions or documents to include terms and conditions satisfactory to Buyer.
Buyer agrees that it will not as a result of an executed City Lease adjust the
Purchase Price or any of the economics of this Agreement and acknowledges that
the only remedy available to Buyer for a City Lease that is unsatisfactory to
Buyer is termination of this Agreement.
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9. Conditions Precedent to Obligations of Seller. The obligations of
Seller under this Agreement are subject to satisfaction of the following
conditions at or before the Closing Date; provided, however, that satisfaction
of any of the following conditions may be waived by Seller.
9.1 Accuracy of Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall be true and accurate
in all material respects as if made at and as of the Closing Date.
9.2 Performance of Covenants. Buyer shall have duly performed all
obligations, covenants and agreements undertaken by Buyer herein and complied
with all terms and conditions applicable to Buyer hereunder to be performed or
complied with before the Closing Date.
9.3 Opinion. Seller shall have received from Buyer's counsel an
opinion, dated the Closing Date, in form and substance satisfactory to Seller
and its respective counsel that:
(a) Buyer is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and Buyer has the power and
authority to (i) consummate the transactions contemplated by this Agreement,
(ii) execute and deliver this Agreement and the other agreements, documents,
instruments and certificates required to be delivered by Buyer thereby and
perform its duties and obligations required to be performed thereunder, and
(iii) own and use the Seller's Assets and conduct the Business as presently
conducted.
(b) This Agreement is a valid and legally binding agreement of
Buyer and on the Closing Date will be enforceable against Buyer in accordance
with its terms except to the extent that enforcement thereof may be limited by
(a) bankruptcy, reorganization, moratorium, fraudulent conveyance or similar
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
(c) Such counsel does not know of any suit, action,
arbitration, legal, administrative or other proceeding or governmental
investigation pending or threatened against or affecting Buyer seeking to enjoin
the consummation of the transactions contemplated by this Agreement or if which
determined adversely to Buyer would have a material adverse effect on Buyer.
(d) To the knowledge of such counsel, neither the execution
nor the delivery of this Agreement nor the consummation of the transactions
contemplated by this Agreement will constitute a default, or any event that
would with notice or lapse of time, or both, constitute a default, under, or
violation or breach of (i) Buyer's Articles of Organization and Operating
Agreement, or any indenture, license, permit, lease, franchise, mortgage
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instrument or other material agreement to which Buyer is a party or by which
Buyer or Buyer's properties may be bound; (ii) any existing federal or state
constitution, statute, regulation or law to which Buyer is subject; or (iii) any
existing judicial or administrative decrees, writ, judgment or order to which
Buyer is subject.
(e) To the knowledge of such counsel, except for the approval
of the IRGC, no consent, approval, waiver, license or authorization by any
person, entity or governmental authority under any statute or regulation is
required in connection with the execution, delivery and performance by Buyer of
this Agreement, any other agreements, documents, instruments and certificates
required to be delivered by Buyer thereby.
9.4 Litigation. On the Effective Date, (i) Buyer shall have executed
and delivered to Seller in escrow as provided below, a complete release of
Seller, Joseph P. Zwack and all representatives and agents of Seller, from any
litigation and any claims related to the February 1998 proposed sales
transaction between Seller and Buyer (the "Release"), (ii) Buyer and Seller
shall have executed and delivered to each other a Standstill Agreement in form
and substance acceptable to Buyer and Seller pursuant to which, among other
things, Buyer shall agree not to continue or to commence prosecuting the
foregoing litigation until the earlier to occur of (x) the termination of this
Agreement, or (y) July 15, 1999, and Seller shall agree not to assert in any
future proceeding any equitable "laches" argument (i.e., that Buyer has "sat on
its rights") during the period of negotiations, execution, and performance under
this Agreement, but Seller shall not be precluded, in any subsequent litigation,
from seeking any monetary or other equitable relief, for actions taken during
the period of negotiation, execution, and performance under this Agreement, and
(iii) Buyer shall have paid to Seller in escrow all of Seller's and Zwack's
out-of-pocket legal costs and expenses associated with the litigation regarding
this matter in an amount not to exceed $12,000.00 (the "Litigation Expenses").
The Release and the Litigation Expenses shall be held in escrow in accordance
with the terms and provisions of the Escrow Agreement. The Release and the
Litigation Expenses shall be released from escrow and delivered to Seller (i)
upon Closing, (ii) in the event of Buyer's material breach of any provision of
this Agreement resulting in termination of this Agreement, (iii) in the event
that Buyer is unable to obtain financing to close the transaction contemplated
by this Agreement by July 15, 1999 resulting in termination of this Agreement,
or (iv) in the event that Buyer fails to file its license application by
February 1, 1999 or fails to receive a license from the IRGC by July 15, 1999
resulting in termination of this Agreement.
9.5 Officer's Certificate. Seller shall have received a certificate
from Buyer, dated as of the Closing Date and executed by an officer of Buyer, to
the effect that (a) all of the conditions contained in Sections 7 and 9 have
been satisfied; (b) all of the representations and warranties of Buyer contained
in this Agreement are true and accurate as of the Closing Date; and (c) all of
the covenants and agreements of Buyer contained in this Agreement and required
to be performed before the Closing have been performed and Buyer is not in
breach or default of any of Buyer's obligations or representations or warranties
contained in this Agreement.
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9.6 Consents. All material notices, consents, approvals,
authorizations and waivers to or from any governmental authority or other person
or entity necessary to permit Seller to transfer all of the Seller's Assets to
Buyer in the manner contemplated by this Agreement shall have been obtained.
9.7 Financing Letter. Seller shall have received from Buyer's
investmnent banker, Jefferies & Company, Inc., a letter addressed to the Seller,
issued on the Effective Date, indicating that, subject to certain customary
terms and conditions, Jefferies & Company, Inc. is highly confident that the
Buyer will be able to obtain financing on terms that allow the Buyer to proceed
with the transaction contemplated herein.
10. Closing. Provided that all of the conditions to the close of the
transaction contemplated by this Agreement as set forth in this Section 10 have
been satisfied, the transaction shall close on the date selected by Buyer that
is at least three (3) but no more than thirty (30) business days after Buyer is
approved by the IRGC to operate an excursion gaming riverboat from Dubuque,
Iowa, but not later than July 15, 1999, unless waived by Seller and Buyer, and
all other conditions contained in Sections 7, 8 and 9 are satisfied or waived
(the "Closing Date"). Buyer shall give Seller written notice specifying the
Closing Date not less than five (5) business days prior thereto.
10.1 Conditions to the Closing. The transaction contemplated by this
Agreement shall not close unless and until:
(a) All parties have delivered all sums and documents required
as provided in Sections 10.3 and 10.4;
(b) All of the conditions set forth in Sections 7, 8 and 9
have been waived or satisfied as provided by this Agreement; and
(c) The Closing Statements have been prepared and delivered in
accordance with the provisions of Section 13.10.
10.2 Delivery of Documents and Delivery of Funds. On the Closing
Date, Buyer shall deliver to Seller all items set forth in Section 10.4, and
Seller shall deliver to Buyer all items set forth in Section 10.3.
10.3 Seller's Deliveries. At the Closing, Seller shall deliver to
Buyer each of the following:
(a) Bills of Sale for the vessels that constitute the
Diamond Jo Riverboat;
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(b) Current U.S. Coast Guard Certificates of Documentation;
(c) Current U.S. Coast Guard Certificates of Inspection;
(d) Current Federal Communications Commission ship-to-shore
radio licenses;
(e) Assignments of all material agreements, including
without limitation, the Third Party Confidentiality
Agreements;
(f) Bill(s) of sale for the Seller's Assets;
(g) Seller's assignment of the Assumed Obligations in
substantially the form of Exhibit A attached hereto; and
(h) Such other documents required to be delivered under this
Agreement.
10.4 Buyer's Deliveries; Payment. At the Closing, Buyer shall
deliver to Seller each of the following:
(a) Application of Documentation for Diamond Jo Riverboat;
(b) Citizenship Declaration for Buyer;
(c) Buyer's assumption of the Assumed Obligations in
substantially the form of Exhibit A attached hereto;
(d) Preferred Membership Interests; and
(e) Cash by wire transfer of funds for the balance of the
Purchase Price.
10.5 Prorations. The following matters and items shall be
apportioned between the parties hereto or, where applicable, credited in total
to a particular party hereto, as of the Closing Date:
(a) Taxes, including, without limitation, real estate, personal
property, business, prepaid gaming and occupation taxes, if any (based on the
most current available information), and water and sewer charges shall be
prorated as of the Closing Date, or charged on the basis of applicable
governmental records, and shall be readjusted when the actual bills are
available pursuant to Section 13.10. Such taxes assessed for the fiscal year
shall be prorated as of the date on which billings are received with respect
thereto, with Seller being
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responsible for the taxes accrued with respect to all periods before the Closing
Date, and Buyer being responsible for all subsequent periods.
(b) Telephone and utility services shall be prorated as of the
Closing Date. All deposits, if any, made by Seller as security under any public
service contract shall be credited to Seller if the same remain on deposit for
the benefit of Buyer. Where possible, cut-off meter readings shall be secured
for all utilities as of the Closing Date.
(c) Any amount prepaid or payable under any lease or option
agreement and any accrued rental and any percentage rental under space leases
shall be prorated as and when collected. All security deposits held by Seller,
including customer deposits held in the casino cage, shall be transferred to
Buyer, and all obligations with respect to such security deposits shall be
assumed by Buyer on the Closing Date.
(d) Fees paid or payable for transferable licenses shall be prorated
as of the Closing Date.
(e) With respect to the Seller's Assets and business operations then
sold and conveyed to Buyer, Seller's insurance shall be canceled on the Closing
Date, and Seller shall retain all prepaid premiums and be responsible for any
additional premiums due on or after the Closing Date due to any insurance audit
or retrospective rating adjustments that were incurred prior to Closing and any
payment of claims within the applicable deductibles required to be paid
thereunder. Buyer shall arrange for immediate effectiveness of Buyer's own
insurance coverage as of the Closing Date.
(f) All Excluded Obligations not paid by Seller on or prior to the
Closing Date shall be deducted from the Purchase Price.
(g) On the Closing Date, such other items shall be prorated as are
provided for in this Agreement or as are normally prorated and adjusted in the
sale of a casino business, including, without limitation, all deposits and
prepaid items that inure to the benefit of Buyer (including, but not limited to,
prepaid insurance) and the interest on the Assumed Obligations and on any other
obligations being assumed by Buyer hereunder as of the Closing Date.
In making apportionments, all prepaid rents and similar items shall be
prorated on the basis of the number of days of occupancy before and after the
time set for such adjustments to be made, and all prepaid taxes, charges and
impositions shall be prorated on the basis of the number of days of the
applicable tax year, or on the basis of unit costs or, if this is not
practicable, on the basis of the number of days before and after that time.
11. Closing Documents. As soon as practicable after the date of this
Agreement, Seller shall prepare and submit to Buyer the form of the documents to
be delivered on the Closing Date, including, without limitation, bills of sale,
assignments, assumptions, novations and other title transfer instruments,
together with such other documentation as may be required
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to consummate the transactions contemplated by this Agreement on the Closing
Date. On the Closing Date, Seller shall deliver to Buyer final, executed bill(s)
of sale, assignments and other title transfer instruments or documents required
to consummate the transactions contemplated by this Agreement on the Closing
Date on behalf of Seller, and Buyer shall deliver to Seller final, executed
assumption, novation or other agreements or documents required to consummate the
transactions contemplated by this Agreement on the Closing Date on behalf of
Buyer. All instruments required to be recorded shall be in recordable form at
the time of delivery by Seller or Buyer, as the case may be.
12. Further Assurances. At any time and from time to time after the
Closing Date, at the request of Buyer, Seller shall execute and deliver such
further instruments of transfer and assignment and take such other actions as
Buyer reasonably may require to more effectively transfer and assign to and vest
in Buyer the Seller's Assets including, without limitation, (i) to endorse,
without recourse, all checks in the name of Seller, the proceeds of which Buyer
is entitled to hereunder, (ii) to institute and prosecute, in the name of Seller
or otherwise, all proceedings that Buyer may deem appropriate in order to
collect, assert or enforce any claim, right or title of any kind to any of the
Seller's Assets, and (iii) to defend and compromise all actions, suits and
proceedings with respect to any of the Seller's Assets. Seller further agrees
that Buyer shall retain for its own account all amounts collected pursuant to
the foregoing powers, and Seller shall pay or transfer to Buyer, if and when
received, all amounts that are received by Seller on or after the Closing Date
with respect to any of the Seller's Assets.
13. Transfer of Operations.
13.1 Possession of Diamond Jo Riverboat. Seller shall give, assign
and transfer to Buyer complete possession of the Diamond Jo Riverboat at the
Closing Date. Buyer and Seller shall pre-close the transaction not later than
the day immediately preceding the Closing Date. At such pre-closing, Buyer and
Seller shall deliver for inspection all documents required of either party,
except to the extent that any delivery is waived by either party, in accordance
with this Agreement, to complete the transfer of ownership of the Seller's
Assets from Seller to Buyer following the procedures set forth herein to the
extent applicable. Except as provided below, the bars and restaurant and the
casino on the Diamond Jo Riverboat shall be operated by Seller for Seller's
benefit until the Closing Date.
13.2 Chip Redemption. After the Closing Date, Seller shall maintain
a chip redemption center at the portside property and shall redeem Seller's
outstanding chips and tokens in the possession of third parties (the "Chips")
presented to Seller for a period of one hundred twenty (120) days (or such other
period of time as may be approved by the IRGC). Seller shall apply accepted
industry standards in identifying and accepting Chips for redemption. Seller
shall be solely responsible for obtaining the approval of the IRGC for the plan
of redemption described in this Section 13.2 and shall be solely responsible for
publication of the notices and disposition of the Chips as may be required by
the regulations of the IRGC.
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13.3 Transfer of Gaming Operations. With the exception of the slot
machines, the transfer of the gaming operations associated with the Business,
including the Gaming Equipment, shall take place at the first time after the
Closing Date that the drop boxes for the gaming tables are collected for
counting. Seller shall control and Buyer shall review and verify the physical
count of the drop boxes and gaming tables. All of Seller's Cash in the casino
cages or banks shall be counted.
13.4 Slot Drops. At the Closing Date, the cash or tokens in the
hoppers, buckets (or slot drops) and the bill acceptors in all slot machines
shall be collected and counted (by emptying and counting the cash in the loads
of all machines) by Seller and verified by Buyer.
13.5 Progressive Jackpots. Buyer shall receive a credit (less any
seed money deposited in any progressive slot machine or table game by Seller) on
the Closing Statements and shall assume and be responsible for the accrued
liability shown by the progressive meter readings on all progressive slot
machines (including video poker) and all progressive table games as of the
Closing Date.
13.6 Transition Plan. As soon as practicable but in no event later
than five (5) days before Closing, Buyer and Seller shall agree on a transition
plan containing full details of the procedures for the transfer of the
operations of the Diamond Jo Riverboat embodying the understandings set forth in
this Section 13.
13.7 Promotions. Buyer understands that Seller, in the ordinary
course of business, has conducted special events or promotions designed to
attract customers to the Diamond Jo Riverboat, one or more of which special
events or promotions involved the issuance of discount or other customer
entitlement coupons. Buyer agrees to accept and honor all such valid and
unexpired discount or entitlement coupons tendered to the Diamond Jo Riverboat
after the Closing Date in accordance with the terms thereof. All such special
events or promotions involving the use of discount or entitlement coupons are
identified on Schedule 13.6 and copies of all such discount or entitlement
coupons have been provided to Buyer.
13.8 Slot Machine Wide Area Progressive Liability. In the event that
Seller participates in slot machine wide area progressive networks, on the
Closing Date, Buyer shall assume such contracts but shall have the option to
require Seller to deliver an appropriate termination notice consistent with the
terms of any or all of such wide area network contracts. Buyer shall assume all
liability associated with the wide area progressive network contracts.
13.9 Seller's Post Closing Access. For a period of not more than one
hundred twenty (120) days after the Closing Date, Buyer shall make available to
Seller and Seller's representatives, on a rent-free basis, an exclusive license
to use a secured office sufficient for two or three persons for the purpose of
permitting Seller to complete Seller's audit for 1998, if not previously
completed, and to complete Seller's partial year audit for 1999, and for such
other post-closing activities as are reasonably necessary after the Closing
Date. Buyer agrees to
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staff and provide Seller with access to the existing Diamond Jo Riverboat data
processing equipment for a period of ninety (90) days after the Closing Date.
Buyer further agrees to assist Seller in processing final payrolls, accounts
payable and general ledger runs for Seller on the system at no cost to Seller,
and Seller shall allow Buyer to use the same programs at no cost to Buyer for
Buyer's own transitional use during such ninety (90) period, provided that such
use by Buyer and Seller is not in violation of any applicable software license.
13.10 Closing Statements. Seller shall prepare and deliver to Buyer
on the Closing Date a preliminary closing statement (a "Preliminary Closing
Statement") as of the Closing Date, which shall show the net amount due either
to Seller or Buyer based on (a) items for which a specific credit is provided
for in this Agreement and (b) items not described in Section 10.5 that normally
are prorated and adjusted in the sale of a casino business, which statement
shall be in form and substance acceptable to Buyer. Such net amount shall be
added to or subtracted from the payment of the cash balance of the Purchase
Price to be paid to Seller pursuant to Section 3 on the Closing Date. Within
sixty (60) days after the Closing Date, Buyer shall deliver a final closing
statement (a "Final Closing Statement") to Seller setting forth the final
determination of all items to be included in the Closing Statements. To the
extent that amounts are determined to be owing by Seller to Buyer or by Buyer to
Seller which are not disputed, such amounts shall be settled in cash between
Buyer and Seller. Should Buyer and Seller disagree on the amount due either
Buyer or Seller as reflected in the Preliminary Closing Statement, or the Final
Closing Statement, any such dispute shall be resolved by Buyer's and Seller's
accountants (whose mutual decisions shall be final and binding on each of Buyer
and Seller); provided, however, that should such accountants be unable to
resolve any dispute with respect to the Preliminary Closing Statement within ten
(10) business days of the Closing Date or any dispute with respect to the Final
Closing Statement within ten (10) business days following the Seller's receipt
of the Final Closing Statement from Buyer, such disputes, as the case may be,
shall be resolved by arbitration in the manner provided in Section 37 of this
Agreement. In the event that Buyer's and Seller's accountants are the same
accounting firm, Seller shall be allowed to appoint its own representative to
represent the Buyer with respect to the dispute which representative shall be a
nationally recognized public accounting firm. If at any time within ninety (90)
days after the Closing Date either Buyer or Seller discovers items that should
have been included in the Closing Statements but were omitted therefrom, then
such items shall be adjusted in the same manner as if their existence had been
known at the time of the preparation of the Closing Statements, and any payment
owing as a result thereof shall be made as provided above in this Section 13.
13.11 No Control. Before the Closing Date, Buyer shall not directly
or indirectly control, supervise, direct or interfere with the Seller's Assets
or the operation of the Business or attempt any of the foregoing. Until the
Closing Date, the operations and affairs of Seller are the sole responsibility
of Seller and under Seller's complete control.
14. IRGC Requests for Information. Buyer and Seller shall make available,
upon written request by the IRGC or any of its duly authorized representatives,
the contracts, books, documents and records that are necessary to ascertain the
nature and extent of the agreement
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between Buyer and Seller in connection with the licensing of Buyer. To the
extent that either party hereto receives such a request, the other party hereto
shall provide copies of such documents to the other in order to respond to such
request.
15. Risk of Loss of Seller's Assets. Between the date of this Agreement
and the Closing Date, Seller assumes all risk of destruction, loss or damage to
the Seller's Assets due to fire or other casualty, and Seller, at Seller's sole
expense, shall, until the Closing Date, keep all of the Seller's Assets fully
insured as presently maintained by Seller. If any of the Seller's Assets is
damaged by fire or other casualty, Buyer and Seller shall have the following
rights and obligations:
(a) If the damage is not substantial (as hereinafter defined), Buyer
shall take title to the Seller's Assets without abatement of the Purchase Price
and be entitled to receive the insurance proceeds arising out of such damage to
the extent Seller has not theretofore used such proceeds to repair such damage.
If the insurance proceeds arising from such damage are not sufficient to repair
such damage or are not paid to Buyer on or prior to the Closing Date, Buyer
shall receive at the Closing a credit against the Purchase Price equal to the
estimated cost of repairing such damage in excess of the insurance proceeds paid
to Buyer, as such amount shall be determined by a qualified independent third
party selected by Buyer and Seller; provided, however, that to the extent any
such insurance proceeds are not actually received by Buyer on or prior to the
Closing Date, the Purchase Price shall be abated by the full amount of the
unpaid portion of the insurance proceeds and Buyer shall assign all of its
rights to such unpaid insurance proceeds to Seller.
(b) If the damage is substantial (as hereinafter defined), Buyer
shall have the option of canceling this Agreement within sixty (60) days of
receiving notice of such damage, or Buyer may accept the Seller's Assets and
thereupon be entitled to receive the insurance proceeds arising out of such
damage (including, without limitation, business interruption insurance proceeds
to the extent the Business is interrupted after the Closing Date), and the
Purchase Price shall be abated to the extent such damage is not covered by the
insurance proceeds, such abatement to be based on the difference between the
amount of the insurance proceeds and the estimated cost to restore the damaged
Seller's Assets as prepared by a qualified independent third party selected by
Buyer and Seller.
(c) If damage occurs, then such damage shall be deemed "substantial"
if the same cannot be substantially repaired or restored within ninety (90) days
after such damage occurs.
(d) Buyer shall receive credit against the Purchase Price for the
fair market value of any Seller's Assets not covered by insurance, which is
lost, damaged, destroyed or stolen between the date of this Agreement and the
Closing Date.
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16. Termination.
16.1 Grounds for Termination. This Agreement may be terminated at
any time before the Closing Date:
(a) By mutual written agreement of Buyer and Seller;
(b) By Seller if (i) the Buyer fails to deliver the Escrow
amount to Seller by the Effective Date, or (ii) Buyer
fails to file its gambling license application with the
IRGC by February 1, 1999;
(c) By Seller or Buyer if Buyer has not obtained the
approval or consent by the IRGC of Buyer's license to
operate an excursion gambling boat at Dubuque, Iowa by
July 15, 1999;
(d) By Seller if any of the conditions set forth in Section
7 or in Section 9 is not satisfied and has not been
waived by Seller;
(e) By Buyer if any of the conditions set forth in Section 7
or in Section 8 is not satisfied and has not been waived
by Buyer;
(f) By Buyer if there shall have been (A) an outbreak or
escalation of hostilities between the United States and
any foreign power, or (B) an outbreak or escalation or
any other insurrection or armed conflict involving the
United States or any other national or internal calamity
or emergency, and, such outbreak, escalation,
insurrection or armed conflict has materially adversely
impacted the financial, banking and capital markets of
the United States in a manner that has materially
adversely changed the ability of Buyer to obtain
reasonable financing for the transaction contemplated by
this Agreement. Notwithstanding anything in this
Agreement to the contrary, in the event of a material
disruption or material adverse change in the financial,
banking or capital markets of the United States which
causes the Buyer to terminate this Agreement, the Escrow
Holder shall deliver the Escrow, and all interest earned
thereon, to the Seller;
(g) By Buyer if there has been a material disruption or
material adverse change in the financial, banking or
capital markets of the United States and such material
disruption or material adverse change has imposed a
material adverse change in the ability of Buyer to
obtain reasonable financing for the transaction
contemplated by this Agreement. Notwithstanding anything
in
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this Agreement to the contrary, in the event of a
material disruption or material adverse change in the
financial, banking or capital markets of the United
States which causes the Buyer to terminate this
Agreement, tile Escrow Holder shall deliver the Escrow,
and all interest earned thereon, to the Seller;
(h) By Seller in the event of a material breach of any
provision of this Agreement by Buyer; or
(i) By Buyer in the event of a material breach of any
provision of this Agreement by Seller.
16.2 Automatic Termination. This Agreement shall automatically
terminate in the event that the transaction contemplated by this Agreement has
not closed by July 15, 1999. The Escrow, and all interest earned thereon, shall
be delivered to Seller, as liquidated damages and not as a penalty, in the event
that the Closing has not occurred by July 15, 1999; provided, however, the
Escrow, together with all interest earned thereon, shall be fully refunded to
Buyer if the Closing has not occurred as a result of: (i) the failure to
satisfy any condition to Closing or obligation of Seller set forth in Sections
7, 8 (except subsections 8.9 and 8.10 thereof), 10.3, 10.5, 11, 13.6, 13.10 and
14 of this Agreement arising out of or resulting from an act or omission of
Seller and, in each such case, not within the control of Buyer, or (ii) a breach
of this Agreement by Seller (which breach could reasonably be expected to have
an adverse effect on the Business, the ownership of Seller's Assets or the
ability of Buyer to consummate the transactions contemplated hereby).
16.3 Effect of Termination. If this Agreement is terminated as
permitted in Sections 16.1 or 16.2, then such termination shall be without
liability to either party hereto and any of its respective shareholders,
members, officers, directors, managers, employees, agents, consultants and
representatives; provided, however, that, if such termination results from the
failure of either party hereto to satisfy a condition to the performance of the
obligations under this Agreement of the other party hereto, failure to perform a
covenant of this Agreement or breach by either party hereto of this Agreement or
any representation or warranty or agreement contained herein, or the failure to
consummate and close the transaction by July 15, 1999, then the non-breaching
party hereto shall have the remedies set forth in Section 17.
17. Remedies. The following shall be the exclusive remedies of the parties
hereto in the event of a breach of this Agreement.
17.1 Buyer's Remedies. If Seller materially breaches this Agreement
before the Closing Date, (i) Buyer may terminate this Agreement and recover the
full amount of the Escrow from Escrow Holder, and (ii) Buyer shall have all
legal and equitable remedies available to it.
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17.2 Seller's Remedies. In the event that: (a) Buyer fails to file
its completed license application with the IRGC by February 1, 1999; (b) Buyer
has not been able to obtain its IRGC license by July 15, 1999; (c) Buyer fails
to obtain financing to close this transaction on the terms and conditions set
forth in this Agreement by July 15, 1999; (d) Buyer is not able to consummate
the transactions contemplated by this Agreement by July 15, 1999, substantially
due to a material limitation described in Section 8.10; or (e) in the event the
Agreement is terminated pursuant to Sections 16.1(f) or 16.1(g); then, and only
in such events, Seller may, as its sole remedy therefor, terminate this
Agreement, and Escrow Holder shall deliver to Seller the Escrow and all accrued
interest thereon. If Buyer materially breaches this Agreement other than as
specifically provided in the preceding sentence, (i) Seller may terminate this
Agreement and Escrow Holder shall deliver to Seller the Escrow and all accrued
interest thereon, and (ii) Seller shall have all other legal and equitable
remedies available to it.
17.3 Attorneys' Fees. If a dispute arises with respect to this
Agreement, then the party prevailing in such dispute shall be entitled to
recover all expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred in ascertaining such party's rights and in preparing to
enforce and/or defend and in enforcing and/or defending such party's rights
under this Agreement, whether or not it was necessary for such party to
institute suit.
18. Indemnification.
18.1 Buyer's Indemnification. Subject to the provisions of Section
17, for a period of eighteen (18) months after the Closing Date, Buyer shall
indemnify, defend and hold harmless Seller and/or any of Seller's officers,
directors, managers, employees or agents (including, but not limited to,
Seller's financial advisor, Wasserstein Perella & Co., Inc.), from and against
any and all incidents, claims, demands, actions, causes of action, suits,
obligations, liabilities, losses, costs, damages or expenses, costs of
investigation and defense, counsel or attorneys' fees, whether under retainer or
salary or otherwise, including, without limitation, interest, penalties and
court costs (collectively, "Damages"), suffered or incurred by Seller and/or any
or all of Seller's officers, directors, managers, employees or agents, which
directly or indirectly arise, result from or relate to (a) any breach of, or any
failure by Buyer to perform, any of Buyer's representations, warranties,
covenants or agreements contained in this Agreement, (b) matters that occur or
arise as a result of Buyer's action or failure to take action after the Closing
Date, except as to such incidents, claims, demands, actions, causes of action,
suits, obligations, liabilities, losses, costs, damages or expenses that are
caused or claimed to be caused by or are a result of the acts or omissions of
Seller or Seller's respective agents or employees, (c) any and all claims of any
kind and description of employees that relate to their, hiring, employment
and/or termination by Buyer, provided that the facts or events giving rise to
such claims occurred after the Closing Date, (d) any and all debts, obligations
and liabilities of Seller specifically assumed by Buyer hereunder and any
Damages resulting from the operation of the Business by Buyer after the Closing
Date, (e) actions or failure to act by Buyer or Buyer's representatives during
the inspection and due diligence of the Business, (f) all obligations and
liabilities arising after the Closing Date related to the contracts, leases and
agreements assumed by the Buyer, and (g) any and all claims made by any broker,
finder or
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agent claiming a fee or commission through Buyer. Notwithstanding any provision
of this Section 18.1 to the contrary, the obligations of Buyer to indemnify the
Seller for any and all debts, obligations and liabilities of Seller arising from
or related to the assumption of the DRA Operating Agreement, the City Leases or
the CDS Agreement, which obligations, solely to the extent arising on or after
the Closing Date, were specifically assumed by Buyer hereunder, shall extend for
the length of the remaining term of such agreements and shall not be limited to
claims made prior to the eighteenth (18th) month period following the Closing
Date. If and to the extent Seller notifies Buyer in writing of a claim for
indemnification on or prior to the eighteenth (18th) month period after the
Closing Date, Buyer shall continue to be obligated to provide indemnification
hereunder with respect to such claim until such time that such claim is resolved
and satisfied.
18.2 Seller's Indemnification. Subject to the provisions of Section
17, for a period of eighteen (18) months after the Closing Date, Seller shall
indemnify, defend and hold harmless Buyer and/or any or all of their officers,
directors, managers, employees or agents from and against any and all Damages
suffered or incurred by Buyer and/or any or all of their officers, directors,
managers, employees or agents, which directly or indirectly arise, result from
or relate to (a) any breach of, or any failure by Seller to perform, any of
Seller's representations, warranties, covenants or agreements contained in this
Agreement, which shall survive Closing in accordance with the terms of Section
4, (b) matters that occur or arise as a result of action or failure to take
action by Seller or any of Seller's agents, employees or members before the
Closing Date, except as to such incidents, claims, demands, actions, causes of
action, suits, obligations, liabilities, losses, costs, damages or expenses that
are caused solely by or are a direct result solely of the acts or omissions of
Buyer or Buyer's agents or employees, (c) any and all claims of any kind and
description of employees that relate to their hiring, employment and/or
termination by Seller, provided that the facts or events giving rise to such
claims occurred before the Closing Date, (d) any and all debts, obligations and
liabilities of Seller not specifically assumed by Buyer hereunder, including,
without limitation, the Excluded Obligations, and (e) any and all claims made by
any broker, finder or agent claiming a fee or commission through Seller.
Notwithstanding the foregoing, (a) the indemnification obligations of Seller for
breaches of representations and warranties regarding Organization and Standing
(Section 4.1), Title (Section 4.3) and Taxes (Section 4.8) shall continue
indefinitely beyond the eighteen (18) month indemnification period and the
indemnification obligation regarding litigation shall continue for the
applicable statutes of limitation and appeal period related thereto, and (b) if
and to the extent Buyer notifies Seller in writing of a claim for
indemnification on or prior to the eighteenth (18th) month period after the
Closing Date, Seller shall continue to be obligated to provide indemnification
hereunder with respect to such claim until such time that such claim is resolved
and satisfied.
18.3 Limitations on Indemnification. Notwithstanding any other
provision hereof or of any applicable law, Buyer shall not be entitled to make a
claim as a result of a breach of representation, warranty or covenant which
survives the Closing pursuant to Section 4 hereof against Seller unless such
claim, together with all other claims of Buyer under Section 18.2 hereunder, as
well as all claims under the Real Property Agreement, exceed in the
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aggregate $200,000 (in which case Buyer shall be entitled to the entirety of
such claims); provided, however, that (i) such $200,000 minimum threshold with
respect to indemnifiable Damages shall not apply to any claim for
indemnification made by Buyer under this Agreement with respect to (w) the
breach or inaccuracy of any of the representations or warranties contained in
Section 4.1 (Organization, Standing and Authority), Section 4.3 (Title), Section
4.6 (Litigation) or Section 4.8 (Taxes), (x) the gross negligence, willful
misconduct or fraud of Seller, (y) any Excluded Obligation, or (z) the failure
of Seller to pay the amount of any adjustment to the Purchase Price in
accordance with the provisions of this Agreement (the items described in the
immediately preceding clauses (w), (x), (y) and (z), collectively, the "Seller
Retained Liabilities"), and (ii) except with respect to an indemnification
obligation in respect of a Seller Retained Liability, Seller's indemnification
obligations for Damages under Section 18.2 of this Agreement (including, without
limitation, indemnification obligations with respect to environmental claims
under Section 4.13) shall not exceed in the aggregate (including claims made
under the Real Property Agreement) $3,000,000. The amount of any indemnifiable
Damages under Section 18.2 shall be reduced by (i) any insurance proceeds
actually received with respect thereto (it being understood that after the
satisfaction in full of indemnifiable Damages hereunder, Buyer shall assign to
Seller all of its rights to unpaid insurance proceeds with respect to insurance
coverage, but only to the extent applicable to such Damages), and (ii) the value
of tax benefits actually obtained by Buyer, including without limitation, by way
of exclusion from income, deduction, credit or refund for other taxable periods
as a result of any adjustment. Notwithstanding anything to the contrary in this
Agreement or in the Real Property Agreement, Buyer shall be entitled to satisfy
any claim for indemnification under this Agreement or the Real Property
Agreement, except any indemnification obligation in respect of a Seller Retained
Liability which shall be paid in cash or applied as an offset to the Purchase
Price, by applying and offsetting such indemnification obligation against the
Three Million Dollars of Preferred Membership Interests held in escrow pursuant
to the terms of this Agreement and the Real Property Agreement.
19. No-Shop Agreement. From the date of this Agreement until the earliest
to occur of (a) the date on which this Agreement is terminated, (b) the Closing
Date, (c) July 15, 1999, or (d) such date mutually agreed upon by Buyer and
Seller, neither Seller, Seller's members, Seller's authorized agents nor any of
Seller's affiliates shall, directly or indirectly, solicit, initiate or
encourage the submission of inquiries, proposals or offers from any corporation,
partnership, person or other entity or group relating to any acquisition or
purchase of assets of, or any equity interest in, Seller or of all or any
portion of the Seller's Assets or any tender or exchange offer, merger,
consolidation, business combination, recapitalization, spin-off, liquidation,
dissolution or similar transaction involving, directly or indirectly, Seller
(each an "Acquisition Proposal"). Seller shall immediately notify Buyer of any
contact from any person other than Buyer regarding the possible sale of transfer
of any interest in Seller or of all or any portion of the Seller's Assets and
the identity of the purchaser and the material terms and conditions of any
Acquisition Proposal. Seller shall cease immediately and cause to be terminated
any and all existing discussions or negotiations with any parties (other than
Buyer) conducted heretofore with respect to any Acquisition Proposal and request
that all confidential information furnished on behalf of Seller be returned.
Seller acknowledges and
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agrees that, upon any violation by Seller or an authorized agent of Seller of
this Section 19, Seller shall pay the Buyer an amount (the "Break Up Fee") equal
to the sum of (A) the greater of (x) Five Million Dollars ($5,000,000.00) or (y)
the positive difference, if any, between the aggregate consideration paid or to
be paid pursuant to any Acquisition Proposal completed by Seller at any time
during the one (1) year period following the date of termination of this
Agreement and the Purchase Price; and (B) the costs and expenses incurred by
Buyer and Buyer's financing sources in connection with the negotiation,
preparation and execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, including without limitation, fees and
expenses of legal counsel, investment bankers, brokers and other agents,
representatives or consultants; provided that in the event a member who is not
an authorized agent of Seller violates the first sentence of this Section 19,
Buyer acknowledges that such member, but not the Seller, shall be liable for the
payment of the Break Up Fee and Buyer shall have no recourse against Seller for
such violation. Any amounts required to be paid by Seller to Buyer under this
Section 19 shall be immediately due and payable upon Seller's failure to
substantially comply in any respect with this Section 19 (it being understood
that, solely with respect to the amount to be paid under the immediately
preceding clause (A), upon Seller's breach of this Section 19, $5,000,000 shall
be immediately due and payable, and, upon consummation of an Acquisition
Proposal, any amount due and owing in excess of $5,000,000 shall be immediately
due and payable). In addition to receipt of the Break Up Fee, Buyer shall have
available to it all legal remedies in the event of a breach or violation of this
Section 19 by Seller.
20. Assignment. Third Parties. Binding Effect. Neither party hereto may
assign this Agreement or any of its rights or obligations hereunder without the
prior written consent of the other party. Nothing contained in this Agreement,
express or implied, is intended to confer upon any person or entity, other than
the parties hereto and their successors in interest, any right or remedy under
or by reason of this Agreement unless so stated expressly herein to the
contrary. All covenants, agreements, representations and warranties of the
parties hereto contained herein shall be binding on and inure to the benefit of
Buyer and Seller and their successors and assigns.
21. Expenses. Except as otherwise provided herein, Buyer and Seller shall
bear all of their own respective expenses, including, without limitation,
counsel and accountants' fees, in connection with the transactions contemplated
by this Agreement.
22. Notices. Any notice or communication to be given under the terms of
this Agreement ("Notice") shall be in writing and shall be personally delivered
or sent by facsimile, overnight delivery or registered or certified mail, return
receipt requested. Notice shall be effective (a) if personally delivered, when
delivered; (b) if by facsimile, on the day of transmission thereof on a proper
facsimile machine with confirmed answer back; (c) if by overnight delivery, on
the day after delivery thereof to a reputable overnight courier service; and (d)
if mailed, at midnight on the third business day after deposit in the mail,
postage prepaid. Notices shall be addressed as follows:
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To Buyer at: AB Capital, L.L.C.
With a copy to: Ronald S. Brody, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Fax No. (212) 849-5600
To Seller at: James Rix, General Manager
Greater Dubuque Riverboat
Entertainment Company, L.C.
P.O. Box 1683
Dubuque, Iowa 52004
Fax No. (319) 557-0549
With copy to: Douglas Gross, Esq.
Brown, Winick, Graves, Gross,
Baskerville and Schoenebaum, P.L.C.
601 Locust Street, Suite 1100
Des Moines, Iowa 50309
Fax No. (515) 283-0231
or at such other address as either Buyer or Seller from time to time may
designate by Notice hereunder.
23. Captions. The captions appearing at the commencement of the Sections
hereof are descriptive only and/or for convenience in reference to this
Agreement and in no way whatsoever define, limit or describe the scope or intent
of this Agreement or in any way affect this Agreement.
24. Waivers and Amendments. The parties hereto may amend this Agreement in
any respect only by mutual written agreement. The waiver of either party hereto
of any breach of any term, covenant or condition of this Agreement shall not be
deemed a continuing waiver of such term, covenant or condition, or a waiver of
any subsequent breach of the same or any other term, covenant or condition of
this Agreement.
25. Further Assurances. Each of the parties hereto shall cooperate in the
effectuation of the transactions contemplated hereby and to execute any and all
additional documents or to take such additional actions as may be reasonably
necessary or appropriate for such purpose.
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26. Schedules and Exhibits. The Schedules and Exhibits described herein
form a part of this Agreement for contractual purposes. Schedules and Exhibits
may be separately bound and initialed by the parties hereto, and such Schedules
and Exhibits as referred to in this Agreement are incorporated in this
Agreement for all purposes. All Schedules and Exhibits referred to in this
Agreement are by reference specifically incorporated in this Agreement and are
made a part hereof as though set forth herein, whether or not attached hereto at
the time of execution of this Agreement.
27. Severability. If any term, provision, covenant or condition of this
Agreement, or any application thereof, is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remaining
provisions, covenants and conditions of this Agreement, and all applications
thereof, not held invalid, void or unenforceable, shall continue in full force
and effect and shall in no way be affected, impaired or invalidated thereby.
28. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Iowa.
29. Gender and Number. Whenever used in this Agreement and as required by
context, the masculine gender includes the feminine and/or neuter, and the
singular number includes the plural.
30. Time is of the Essence. Time is of the essence of this Agreement and
in the performance and enforcement of each of the promises, covenants,
representations and warranties of Buyer and Seller contained herein. For the
purpose of computing any period of time prescribed herein or relating hereto,
the first day shall be excluded. If the period of time is six (6) days or more,
weekends and public holidays shall be included. An act required to be performed
on a day shall be performed at or before the close of business on such day. If
an act is required to be performed on a certain day, and such day is not a
regular business day, then the time of performance or measurement shall be
extended to and include the next regular business day.
31. Entire and Sole Agreement. Subject to the provisions of Section 9.4
hereof, this Agreement, including all Schedules and Exhibits hereto, and all
documents and instruments to be delivered on or before the Closing Date pursuant
to its terms, constitutes the entire agreement between the parties hereto and
supersedes all agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. The parties hereto further acknowledge and agree that, in entering into
this Agreement and in delivering the documents and instruments to be delivered
on or before the Closing Date, the parties hereto have not in any way relied,
and shall not in any way rely, on any oral agreement, representation, warranty,
statement, agreement in principle, promise or understanding not specifically set
forth in this Agreement, in the Schedules or Exhibits hereto or in such
documents or instruments.
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32. Publicity. Except as may be required in connection with the
submissions or approvals by the parties hereto to the IRGC or as otherwise
required by law, before the Closing no party hereto shall make or cause to be
made any press release or public announcement with respect to any of the
transactions contemplated by this Agreement or the execution of this Agreement
or otherwise communicate with any news media with respect thereto without the
prior written consent of the other party hereto. If any such announcement is so
required by law, then Buyer and Seller shall cooperate as to the timing and
contents of any such press release or public announcement.
33. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
34. Authority. Each entity signing this Agreement, and each agent,
officer, director, manager or employee signing this Agreement on behalf of such
an entity, represents and warrants that this Agreement is duly authorized by and
binding on such entity.
35. Facsimile Transmission. The facsimile transmission by one party hereto
of a signed copy of the signature page of this Agreement to the other party
hereto or such party's agent, followed by a facsimile transmission of an
acknowledgment of receipt thereof, shall constitute the delivery of this
Agreement. Each party hereto shall confirm such delivery by mailing or
personally delivering to the other party hereto or such party's agent an
executed original of this Agreement in its entirety.
36. IRGC Approval. This Agreement is subject to the approval of the IRGC.
Approval of this Agreement by the IRGC shall not in any manner constitute
approval of the Buyer's application to operate an excursion gaming riverboat
from Dubuque, Iowa. The terms of this Agreement, including, but not limited to,
Sections 3.1, 3.2, 7, 8, 9 (including 9.4), 16 and 17 shall be effective and
enforceable on the approval of this Agreement by the IRGC.
37. Arbitration. Any and all questions, disputes or controversies arising
in connection with this Agreement (with the exception of any remedy seeking
equitable relief which shall not be subject to this Section 37), its
interpretation, application, performance, nonperformance or any instructions
executed and delivered hereunder (collectively "Disputes") shall, at the demand
of any party hereto, be determined by arbitration. Buyer and Seller shall
appoint an arbitrator ("Arbitrator") who is licensed by the American Arbitration
Association ("AAA") to arbitrate such Disputes. In the event Buyer and Seller
cannot agree on the selection of the Arbitrator, each party shall select one
Arbitrator who shall together select the Arbitrator who shall arbitrate the
matter. Buyer and Seller shall, within twenty (20) days thereafter, present
their positions with respect to the Disputes to the Arbitrator together with
such other materials as the Arbitrator deems appropriate. The Arbitrator shall
after the submission of the evidentiary materials, submit a written decision on
each Dispute to the Seller and Buyer. Any determination by the Arbitrator with
respect to any Disputes shall be final and binding on each party to this
Agreement. The forum for any arbitration will be Chicago,
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Illinois. The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the AAA as in effect for commercial arbitrations conducted
by the AAA. Seller and Buyer agree that the costs of the Arbitrator shall be
borne as determined by the Arbitrator. Judgment upon the award of the Arbitrator
may be entered in any Court having jurisdiction thereof.
IN WITNESS WHEREOF, Buyer and Seller have duly executed and delivered this
Agreement as of the date first written above.
BUYER: SELLER:
AB CAPITAL, L.L.C. GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C., an Iowa
limited-liability company
By: /s/ Brent Stevens By: /s/ Donald Iverson
-------------------------------- ------------------------------------
Donald Iverson
Chairman
Each of the undersigned executes this Agreement for the purpose of guaranteeing
and agreeing to the obligations contained in Section 3.1 of this Agreement.
/s/ Brent Stevens
- ----------------------------------- ----------------------------------------
Mike Luzich
/s/ Chris Konoff /s/ Andrew Whittaker
- ----------------------------------- ----------------------------------------
Chris Konoff Andrew Whittaker
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Illinois. The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the AAA as in effect for commercial arbitrations conducted
by the AAA. Seller and Buyer agree that the costs of the Arbitrator shall be
borne as determined by the Arbitrator. Judgment upon the award of the Arbitrator
may be entered in any Court having jurisdiction thereof.
IN WITNESS WHEREOF, Buyer and Seller have duly executed and delivered this
Agreement as of the date first written above.
BUYER: SELLER:
AB CAPITAL, L.L.C. GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C., an Iowa
limited-liability company
By: By:
-------------------------------- ------------------------------------
Donald Iverson
Chairman
Each of the undersigned executes this Agreement for the purpose of guaranteeing
and agreeing to the obligations contained in Section 3.1 of this Agreement.
/s/ Mike Luzich
- ----------------------------------- ----------------------------------------
Brent Stevens Mike Luzich
- ----------------------------------- ----------------------------------------
Chris Konoff Andrew Whittaker
47
Exhibit 10.1B
AMENDMENT TO ASSET PURCHASE AND SALE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AND SALE AGREEMENT (the "Amendment") is
executed as of the 1st day of February, 1999, by and among GREATER DUBUQUE
RIVERBOAT ENTERTAINMENT COMPANY, L.C. ("GDREC") and AB CAPITAL, L.L.C.
("Buyer"), and amends that certain Asset Purchase and Sale Agreement (the "Asset
Purchase Agreement") dated January 15, 1999, which was previously executed by
and among such parties.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
is hereby acknowledged, the parties hereby amend the Asset Purchase Agreement as
set forth below.
1. Capitalized terms used but not defined herein shall have the meanings
set forth in the Asset Purchase Agreement.
2. The first sentence of Section 19 of the Asset Purchase Agreement is
hereby deleted in its entirety and replaced with the following:
"19. No-Shop Agreement. From the date of this Agreement until the earliest
to occur of (a) the date on which this Agreement is terminated, (b) the
Closing Date, (c) July 15, 1999, or (d) such date mutually agreed upon by
Buyer and Seller, neither Seller, Seller's members, Seller's authorized
agents nor any of Seller's affiliates shall, directly or indirectly,
solicit, initiate or encourage the submission of inquiries, proposals or
offers from any corporation, partnership, person or other entity or group
relating to any acquisition or purchase of assets of, or any equity
interest in, Seller or of all or any portion of the Seller's Assets or any
tender or exchange offer, merger, consolidation, business combination,
recapitalization, spin-off, liquidation, dissolution or similar
transaction involving, directly or indirectly, Seller (each an
"Acquisition Proposal") or accept any Acquisition Proposal (other than any
Acquisition Proposal proposed by Buyer)."
3. The parties to the Asset Purchase Agreement hereby acknowledge and
agree that, notwithstanding anything to the contrary in the Asset Purchase
Agreement, the Intangibles included in Seller's Assets include, without
limitation, the name "Greater Dubuque Riverboat Entertainment Company" and that,
as of Closing of the Asset Purchase Agreement, Buyer shall be entitled to use
such name as its own.
4. Except as expressly amended hereby, the terms and conditions of the
Asset Purchase Agreement remain in full force and effect as stated therein. If
there are conflicts between the terms of the Asset Purchase Agreement and the
terms of this Amendment, the terms of this Amendment control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this AMENDMENT
TO ASSET PURCHASE AND SALE AGREEMENT as of the day and year first above written.
AB Capital, L.L.C. Greater Dubuque Riverboat
Entertainment Company, L.C.
By: /s/ Brent Stevens By: /s/ Donald Iverson
--------------------------- ------------------------------------
Brent Stevens Donald Iverson
Chairman - Management Committee
Its: Managing Member
Exhibit 10.2A
REAL PROPERTY PURCHASE AND SALE AGREEMENT
THIS REAL PROPERTY PURCHASE AND SALE AGREEMENT (this "Agreement") is made
and entered into as of the 15 day of January, 1999 (the "Effective Date"), by
and between HARBOR COMMUNITY INVESTMENT, L.C., an Iowa limited-liability company
("Seller") and AB CAPITAL, L.L.C., a Delaware limited liability company or its
permitted designee ("Buyer").
WHEREAS, Seller is the owner of the following interests in real property,
together with all of the appurtenances belonging to or otherwise related to such
real properties (collectively the "Real Property"):
(i) The real property interest described on Schedule A-1 attached and
incorporated herein by this reference (the "Portside Facility"); and
(ii) The real property interest described on Schedule A-2 attached and
incorporated herein by this reference ("HCI Parking Lots").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
Seller desires to sell, transfer, assign and convey to Buyer, and Buyer desires
to purchase and acquire from Seller, all of Seller's rights, title and interests
in and to the Real Property.
WHEREAS, concurrently with execution and delivery of this Agreement, Buyer
is entering into the Asset Purchase and Sale Agreement with Greater Dubuque
Riverboat Entertainment Company, L.C., an Iowa Limited Liability Company
("GDREC"), pursuant to which, among other things, Buyer has agreed to purchase
and acquire from GDREC, and GDREC has agreed to sell, transfer, assign and
convey to Buyer, certain assets of GDREC, the purchase and sale of which is a
condition of closing the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration for the mutual covenants and agreements
contained herein and for other good and valuable consideration the receipt and
sufficiency of which hereby are acknowledged, Seller and Buyer hereby agree as
follows:
1. Purchase And Sale of the Real Property. Except as otherwise provided
below and subject to the terms and conditions set forth in this Agreement,
Seller hereby agrees to sell, transfer, assign and convey to Buyer, and Buyer
hereby agrees to purchase and acquire from Seller, all of Seller's rights, title
and interests in and to the Real Property.
2. Purchase Price. The purchase price to be paid by Buyer to Seller for
Buyer's purchase and acquisition of the Real Property shall be Five Million
Dollars ($5,000,000.00) (the "Purchase Price"). On the Closing Date, the entire
Purchase Price will be paid in cash to Seller.
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3. Assumed Obligations. In addition to the payment of the Purchase Price,
Buyer shall, as part of the Closing, assume the specific liabilities,
obligations, contracts and agreements of Seller listed on Schedule 3
(collectively, the "Assumed Obligations"). Notwithstanding any other provisions
in this Agreement to the contrary, Buyer shall assume the Assumed Obligations
only to the extent arising or accruing from and after the Closing Date, and
Buyer shall have no duty or obligation whatsoever with respect to any duties or
obligations of Seller arising or accruing before the Closing Date (all of which
shall be the sole responsibility and liability of Seller). Notwithstanding any
other provision in this Agreement to the contrary, Seller shall have no duty or
obligation whatsoever with respect to any duties or obligations of Buyer arising
or accruing under any of the Assumed Obligations after the Closing Date (all of
which shall be the sole responsibility and liability of Buyer). Except for the
Assumed Obligations, Buyer shall not assume or become obligated or liable with
respect to any obligation or liability of Seller, including, but not limited to,
any liability or obligation of Seller related to any litigation to which Seller
is a party. Subject to the terms and conditions of this Agreement, Buyer and
Seller shall execute and deliver on the Closing Date an Assignment and
Assumption Agreement substantially in the form of Exhibit C attached hereto and
incorporated herein by this reference (the "Assignment and Assumption
Agreement") pursuant to which Buyer shall assume the Assumed Obligations and
Seller shall assign the Assumed Obligations. Seller is not in material breach or
violation of or default under any terms of any Assumed Obligation. On or prior
to the Closing Date, Seller shall obtain the necessary consents or approvals
required in connection with the Seller's assignment of the Assumed Obligations.
3.1 Excluded Obligations. Notwithstanding any other provision of
this Agreement to the contrary, except for the Assumed Obligations, Buyer shall
not assume or become obligated or liable with respect to any obligation of
Seller, including, without limitation, the following (collectively, "Excluded
Obligations"):
(i) obligations or liabilities of Seller now existing or that
hereafter may exist with respect to any litigation of Seller;
(ii) except as otherwise provided herein, obligations and
liabilities of Seller incurred in connection with or relating to the transfer of
the Real Property, including, without limitation, federal, state and local
transfer taxes or other taxes incurred by reason of such transfer; and
(iii) any other obligation or liability of Seller arising or
relating to the period before the Closing Date.
4. Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer as of the date of this Agreement and as of the Closing Date as
follows. The following representations and warranties of Seller shall survive
the Closing for a period of eighteen (18) months, except for the representations
and warranties in Section 4.1 (Organization, Standing and Authority of Seller),
Section 4.2 (Marketable Title) and Section 4.6 (Taxes) which shall survive the
Closing indefinitely and Section 4.3 (Litigation) which shall survive the
Closing for the applicable statutes of limitation and appeal period of any
litigation associated with Seller.
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4.1 Organization, Standing and Authority of Seller. Seller is a
limited liability company duly organized, validly existing and in good standing
and qualified to do business in the State of Iowa. Seller is not in violation of
its Articles of Organization, Operating Agreement or other organizational
documents in any manner that would adversely affect the validity, binding nature
or enforceability of Seller's obligations under this Agreement or, after the
Closing Date, Buyer's title to all of the Real Property. Seller has the power
and authority to execute, deliver and perform this Agreement and has taken all
action required bylaw for such execution, delivery and performance. This
Agreement is a valid and legally binding agreement of Seller enforceable in
accordance with its terms except to the extent that enforcement thereof may be
limited by (a) bankruptcy, reorganization, moratorium, fraudulent conveyance or
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). There are no contractual or
other limitations on Seller's power to enter into this Agreement and to
consummate the transactions contemplated hereby.
4.2 Marketable Title. Seller is the sole and exclusive fee title
holder of and has good and marketable title, or with respect to leasehold
interests the sole and exclusive lessee other than GDREC, to the Real Property
and of all rights, title and interests in and to all of the appurtenances
belonging or appertaining to the Real Property. On the Closing Date, the Real
Property shall be free and clear of all liens, defects of title, pledges,
security interests, conditional sales agreements, charges, easements, rights of
way, covenants, conditions, encumbrances, and claims of any kind or nature
whatsoever, other than the Leases (as defined in Section 4.17) and easements,
rights of way, covenants and conditions identified in the Abstract (as defined
in Section 10.2) (collectively the "Encumbrances") provided, however, Buyer
acknowledges that a portion of the proceeds from the Purchase Price shall be
used to pay the Notes and real estate purchase contracts referred to on Schedule
4.2. Upon consummation of the transactions contemplated hereby, Buyer shall
receive the Real Property free and clear of all Encumbrances.
4.3 Fixtures. All fixtures attached to all structures located on any
and all of the Real Property are or on the Closing Date will be free from all
liens and encumbrances, other than the Leases (as defined in Section 4.24) and
easements, rights of way, covenants and conditions identified in the Abstract
(as defined in Section 10.2), provided, however, Buyer acknowledges that a
portion of the proceeds from the Purchase Price shall be used to pay the Notes
and real estate purchase contracts referred to on Schedule 4.2. Without limiting
the generality of the foregoing, fixtures include plumbing, flagpoles, pumps,
shrubbery and outdoor statuary.
4.4 Litigation. Except as set forth on Schedule 4.4, there are no
pending, and Seller has no knowledge of any threatened, annexation, condemnation
or other proceeding, suit, action, claim, proceeding or litigation against or
affecting any part of the Real Property. Except as set forth on Schedule 4.4, no
actions, suits, claims or proceedings of any kind are pending or, to the best of
Seller's knowledge, threatened against Seller or the Real Property that,
individually or in the aggregate, could have an adverse effect on the Real
Property or the purchase and sale of the Real Property contemplated by this
Agreement, whether at law or in equity, or before or by any
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court or governmental, administrative or regulatory agency, authority or body or
before any arbitrator of any kind, and no investigations are being conducted or,
to the best of Seller's knowledge, threatened that could lead to any such
action, suit or proceeding. Except as set forth on Schedule 4.4, Seller is not
subject to any order, writ, injunction or decree of any federal, state or local
court, department, agency or instrumentality or of any arbitrator. Seller agrees
to indemnify, defend and hold Buyer harmless from any suits, claims, damages or
liabilities relating to any action on Schedule 4.4.
4.5 No Conflict. The execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated by
this Agreement are not contrary to the Articles of Organization or Operating
Agreement of Seller. Except as set forth on Schedule 4.5, the execution,
delivery or performance of this Agreement by Seller and the consummation of the
transactions contemplated by this Agreement will not (a) with the passage of
time, the giving of notice or otherwise, result in a violation or breach of, or
constitute a default under, any term or provision of any agreement, indenture,
mortgage, deed of trust, lease, instrument, contract or other restriction, to
which Seller is a party or by which any of the Real Property is bound, provided,
however, Buyer acknowledges that a portion of the proceeds from the Purchase
Price shall be used to pay the Notes and real estate purchase contracts referred
to on Schedule 4.5, which if not paid would result in acceleration of the
amounts owed under those Notes and contracts, (b) result in the creation of any
Encumbrance on any of the Real Property, (c) except as noted in the first
proviso above, result in an acceleration or termination of any note, loan or
security agreement or other agreement or instrument intended, as security for an
obligation of Seller, or (d) result in a violation of an order, judgment,
decree, rule, regulation, or law applicable to Seller. Seller shall remove any
restriction on performance of this Agreement as listed on Schedule 4.5 on or
before the Closing Date.
4.6 No Violation of Law, Order, Rule or Regulation. Neither the
execution by Seller of this Agreement nor the consummation of the purchase and
sale of the Real Property contemplated by this Agreement will result in a
violation of any applicable law, order, rule or regulation of any governmental
authority.
4.7 Improvement Liens or Special Assessments. Seller has not
received any notice and nor has any knowledge of any pending or threatened
improvement lien or special assessment to be made against any of the Real
Property by any governmental authority.
4.8 Taxes. Seller has timely filed (or has had timely filed on its,
behalf) or will timely file or cause to be timely filed all tax returns required
by applicable law to be filed before or as of the Closing Date. All such tax
returns and amendments thereto are or will be true, complete and correct. All
taxes due and payable by Seller, or otherwise arising from, imposed in
connection with, or applicable to the assets, operations and/or the business of
Seller, in respect to any period ending before or as of the Closing Date, have
been or will have been paid on or before the Closing Date, or, where payment is
not yet due, Seller has established, or will establish or cause to be
established on or before the Closing Date, an adequate accrual for the payment
of all taxes. Except as set forth on Schedule 4.8, no tax audits are pending or
being conducted with respect to the Seller. Seller has not received notice from
any taxing authority that it intends to audit Seller
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for any open year, nor is there any audit currently in progress other than as
set forth on Schedule 4.8. Seller has paid all taxes required to be paid to any
taxing authority that could in any way now or hereafter constitute a lien
against the Real Property or any part thereof (except for real property taxes
for the current year that are not currently due and payable to be prorated as
provided in Section 10.11 below), and Seller has not received any notice from
any taxing authority or governmental agency asserting that Seller has failed to
file or that Seller has filed improperly any foreign, federal, state or local
tax return or report pertaining to the Real Property (except with respect to
current real property taxes not yet delinquent) that now or hereafter could
constitute or result in a lien against the Real Property or any part thereof. No
action or proceeding is pending or, to the best of the Seller's knowledge,
threatened by a governmental agency or authority for the assessment or
collection of taxes against Seller or the Real Property.
4.9 No Options. Except for that certain right of first refusal
granted to Dubuque Racing Association ("DRA") under the Operating Agreement
between Seller and DRA dated February 22, 1993, as amended (the "DRA Operating
Agreement"), no person, firm, corporation or other entity of any kind has any
right of first refusal or similar right or option to acquire from Seller or use
the Real Property or any part thereof.
4.10 Compliance With Laws. Except as set forth on Schedule 4.10 and
except for environmental matters which are addressed in Section 4.22 hereof,
Seller is in substantial compliance with all statutes, laws, ordinances and
regulations applicable to Seller or the Real Property, and Seller has received
no notice that the present use of the Real Property violates any applicable
federal, state or local laws, zoning or building ordinances or codes, or health,
safety or fire ordinances, and the Real Property is zoned for the purposes for
which the Real Property currently is being used. Seller has not violated any
statute, law, ordinance or regulation applicable to Seller's use of the Real
Property that would (i) materially affect the consummation of the transactions
contemplated by this Agreement or (ii) materially adversely affect the ownership
or use of the Real Property by Buyer.
4.11 No Mechanic's or Materialman's Liens. No labor has been
performed on, and no material has been furnished for, the Real Property or any
part thereof, for which Seller has not heretofore fully paid, or for which a
mechanic's or materialman's lien or any other lien can be claimed by any person,
party or entity.
4.12 No Condemnation or Zoning Proceedings. Seller has no knowledge
of nor has it received notice of any pending or threatened condemnation or
zoning proceeding that would affect the use of the Real Property, nor has Seller
gained knowledge of or received notice of any pending or threatened special
assessment proceeding in relation to the Real Property or any part thereof.
4.13 Encumbrances. At the Closing, the Real Property will not be
encumbered by any obligation, written or oral, to pay or reimburse any party
claiming by or through Seller for the testing, analysis, engineering or
construction of improvements for the benefit of any of the Real Property or for
legal fees that Seller has incurred before the Closing. This representation and
warranty shall not create any liability on the part of Seller for, and Buyer
will hold Seller harmless
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from, the claims of any person resulting from the testing, analysis or
engineering studies undertaken by Buyer as part of its due diligence.
4.14 Not a Foreign Person. Seller is not, and Seller shall not be at
the time of the Closing, a foreign person as defined in Section 1445 of the
Internal Revenue Code of 1986, as amended (the "IRC").
4.15 Payment of Fees, Costs and Expenses. At the Closing, all fees,
costs and expenses then due for permits required by a state or local government
entity that governs the Real Property shall have been fully paid by Seller. To
the extent any such fees, costs or expenses apply to periods of time after the
Closing Date and provided Buyer will receive the benefit thereof, such fees,
costs and/or expenses shall be prorated as provided in Section 11 below.
4.16 Licenses and Permits. Schedule 4.16 contains a list of all
licenses, permits, registrations and certificates obtained by Seller from
governmental agencies for the operation and ownership of any of the Real
Properties. Such licenses, permits, registrations and certificates constitute
all licenses, permits, registrations and certificates from governmental agencies
necessary for the operation of each of the Real Properties as now conducted by
Seller. No suspension, cancellation or termination of any of the licenses,
permits or certificates referred to in this Section 4.16 has been made or
threatened by any governmental authority to the effect that the operation of the
Real Properties fails to comply in any material respect with any law, rule,
regulation or ordinance or that any license, permit or certificate not listed on
Schedule 4.16 is necessary with respect to Seller's operation or ownership of
the Real Property.
4.17 Consents. Except as set forth on Schedule 4.17 (which consents
shall be obtained by Seller on or before Closing) and except for the consents
already obtained by Seller, (a) no consent, approval or agreement of any person,
entity, party, court or government is required to be obtained by Seller in
connection with the execution and delivery of this Agreement or the performance
of the terms of this Agreement or the consummation of the transactions
contemplated by this Agreement; (b) Seller's execution and delivery of this
Agreement and the performance by Seller of Seller's obligations under this
Agreement do not and will not require any registration with, consent or approval
of, notice to or any action by any person or governmental authority; and (c)
neither Seller nor Buyer is required to obtain any permit of any kind from any
regulatory or governmental authority in order to consummate the transactions
contemplated by this Agreement. Seller shall use its best efforts to obtain
before the Closing Date all requisite consents, approvals and agreements of
third parties, including, without limitation, governmental or other regulatory
agencies, foreign or domestic, required to be received by or on the part of the
Seller for the execution and delivery of this Agreement and the performance of
its terms.
4.18 Brokerage and Finder's Fees. Except as set forth in Schedule
4.18, neither Seller nor anyone on Seller's behalf has any actual or potential
liability to any broker, finder or agent, and Seller has not agreed to pay any
brokerage fee, finder's fee or commission, with respect to the transactions
contemplated by this Agreement. Seller shall indemnify and hold harmless Buyer
against all claims and liabilities asserted against Buyer, any of the Real
Property,
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or any combination of them, by any person acting or claiming to act as a broker
or finder on behalf of Seller.
4.19 Utilities Access. Water, sewer, electric, natural gas,
telephone and drainage facilities and all other utilities required for the
normal operation of each of the Real Properties as they are presently used are
installed in and to each of the Real Properties, are connected with valid
permits (except that the failure to hold such a permit that does not materially
adversely effect the Real Property shall not be a breach hereof) and are
adequate to service the Real Properties as presently operated and to permit
material compliance with all requirements of presently applicable laws, rules
and regulations.
4.20 Public Improvements. Except as set forth on Schedule 4.20, to
the best of Seller's knowledge, there are no current or proposed plans to widen,
modify or realign any street or highway and no existing, proposed or threatened
imminent domain proceedings, or private purchase in lieu of such proceedings,
that would effect any of the Real Property in any way whatsoever, and there are
no presently-planned public improvements that would or could result in the
creation of special assessment or a similar lien on any of the Real Property.
4.21 Adverse Agreements. Seller is not a party to any undisclosed
agreement or instrument or subject to any undisclosed charter or other
restriction or any undisclosed judgment, order, writ, injunction, decree or
award that materially adversely effects or in the future could materially
adversely effect the operation of any of the Real Property or any other party
thereof.
4.22 Environmental Conditions. As of the date of this Agreement and
as of the Closing Date:
(a) Seller's activities on the Real Property materially comply
with all applicable Environmental Laws. Except as set forth on Schedule 4.22(a),
Seller has not received any communication (written or oral) from a governmental
authority that alleges that Seller or GDREC is not in full compliance with any
applicable Environmental Law.
(b) Except as set forth on Schedule 4.22(b), Seller has not
caused any Release or threatened Release of any Hazardous Material in, on, under
or from any of the Real Property and has not at any time before the date of this
Agreement and will not have at any time before the Closing conducted any
activity at or on any of the Real Property that has caused a release of any
Hazardous Material in, on, under or from any of the Real Property.
(c) Seller has not at any time before the date of this
Agreement and will not have at any time before the Closing, manufactured,
processed, treated, disposed of, or otherwise deposited, or generated in, on or
under any of the Real Property or at any other location any Hazardous Material.
To the best of Seller's knowledge, none of the Real Property contains any
underground storage tank.
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(d) Except as set forth on Schedule 4.22(d), no judicial or
administrative enforcement action, proceeding, suit, arbitration, claim, order,
directive, notice of inspection, notice of abatement, notice of noncompliance,
or investigation by any governmental authority pursuant to any applicable
environmental law or relating to the presence, Release or threatened Release of
any Hazardous Material or the alleged or actual violation of any Environmental
Law (together, "Claim") has been made, or is pending or, to the best of Seller's
knowledge, has been threatened against Seller with respect to the Real Property
or Seller's operations thereon by any governmental authority pursuant to any
applicable Environmental Law.
(e) Seller has not granted or allowed access to or use of any
part of the Real Property owned by Seller to any individual or entity to conduct
any activity that has caused or threatens to cause the Release of any Hazardous
Material on any of the Real Property.
(f) There is no existing restriction on the ownership,
occupancy or use of the Real Property in connection with any Environmental Law
or any Release, threatened Release or disposal of a Hazardous Material.
(g) True and correct copies of all environmental audits,
reports, test results and studies in the possession of Seller and inspection
reports from any applicable regulatory authority which concern the Real Property
have been delivered to Buyer.
Except as provided above, Seller makes no representation or warranty
regarding the compliance of the Real Property with any applicable Environmental
Laws or with respect to the environmental condition or status of the Real
Property. Seller makes no representation or warranty regarding the activities,
operations or use by any predecessor of Seller of the Real Property. In addition
to any indemnification obligation under Section 15.2. for the eighteen (18)
month period commencing the Closing Date, Seller shall indemnify Buyer for any
out of pocket costs or expenses actually incurred by Buyer during such eighteen
(18) month period with respect to any third party environmental Claim to the
extent the event giving rise to the Claim occurred prior to the Closing Date and
to the extent that Buyer has not received contribution, indemnification or other
payment therefor from another party. The Buyer's right to indemnification under
this Section 4.22 shall be limited as follows: (i) the obligation to indemnify
from environmental Claims includes only indemnification for third party Claims
for remediation arising from actual orders received from the Iowa Department of
Natural Resources or the Federal Environmental Protection Agency, and (ii)
except for breaches of representations contained in this Section 4.22 regarding
Seller's activities, the obligation to indemnify for environmental Claims does
not include Claims arising from property leased from the City of Dubuque, Iowa
nor Claims arising from the lot on which the Ice Harbor Mall is located. Buyer
shall not be entitled to make a Claim for indemnification against Seller
pursuant to this Section 4.22 unless such individual third party environmental
Claim, together with all other environmental Claims, exceeds $200,000.00 (in
which case all such Claims will be paid); provided, however, in no event shall
the aggregate of Claims under this Section 4.22 plus the indemnifiable Damages
under Section 15.2, exceed $3,000,000.00. Any indemnification obligation of
Seller pursuant to this Section 4.22 shall be applied and offset against the
Preferred Membership Interests set forth in Section 3.1 of the Asset Purchase
Agreement (as defined below in Section 7.3).
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For purposes of this Section 4.22 the following terms shall the meanings
set forth below:
"Environmental Laws" means any and all federal, state and/or local
laws, regulations and legal requirements that exist on the Closing Date
pertaining to (i) the protection of health, safety and the indoor and outdoor
environment, (ii) the conservation, management or use of natural resources and
wildlife, (iii) the protection or use of surface water and groundwater, (iv) the
management, manufacture, possession, presence, use, generation, transportation,
treatment, storage, disposal, Release, threatened Release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Material or (v)
pollution (including, without limitation, any Release to air, land, surface
water and groundwater), and includes, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. 6901 et seq.;
the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. 6901 et seq.; the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 U.S.C. 1251 et seq.; the Clean Air Act of 1966, as
amended, 41 U.S.C. 7401 et seq.; the Toxic Substances Control Act of 1976, 15
U.S.C. 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. App.
1801 et seq.; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. 651 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et seq.; the
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et
seq.; the National Environmental Policy Act of 1969, 42 U.S.C. 4321 et seq.;
the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300(f) et seq.; any
similar, implementing or successor law to any of the foregoing and any
amendment, rule, regulation, order or directive issued thereunder.
"Hazardous Material" means any substance, chemical, compound,
product, solid gas, liquid, waste, byproduct, pollutant, contaminant or material
that is hazardous or toxic, and includes, without limitation, (i) asbestos,
polycholorinated biphenyls and petroleum; and (ii) any such material classified
or regulated as "hazardous" or "toxic" or as a "contaminant" or "pollutant"
under the laws of the State of Iowa or any Environmental Law.
"Release" means any soiling, migrating, seeping, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of any Hazardous Material into the indoor or outdoor environment,
including, without limitation, the abandonment or discarding of barrels, drums,
containers, tanks and other receptacles containing or previously containing any
Hazardous Material.
4.23 Accuracy of Information. No statements, representations and
warranties made by Seller in this Agreement and in the schedules and exhibits
attached hereto contain any untrue statement of material fact or omitted any
material facts necessary to make the statements or facts contained therein not
materially misleading, and all lists contained in the schedules attached hereto
are materially complete and correct. None of the information supplied or to be
supplied on or before the Closing Date by or on behalf of Seller to Buyer in
connection with this
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Agreement, the transactions contemplated hereby or the negotiations leading up
to the execution and delivery of this Agreement did contain or will contain, at
the respective times when such information was or is delivered, any untrue
statement of a material fact, or omitted or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading. If at any time after delivery but before the Closing, Seller
becomes aware that any such information has become untrue or misleading, in any
material respect, Seller shall promptly notify Buyer in writing of such
occurrence.
4.24 Leases. (a) Except as set forth in Schedule 4.24 ("Leases"),
Seller has not entered into any and there are no leases relating to any portion
of the Real Property and no person, other than the tenants under the Leases
("Tenants"), has any right of possession to the Real Property or any part
thereof, (b) except as set forth in the Leases, no rent concessions to Tenants
are currently in effect, no rent has been paid more than thirty (30) days in
advance by any Tenant, and no Tenant has any claim against Seller for any
security deposit or other deposits; (c) no Lease grants any Tenant any right to
purchase all or any portion of the Real Property; (d) except for oral leases,
each of the Leases has been validly executed by Seller; (e) Seller has not given
any Tenant under any Lease a notice of default under such applicable Lease nor
any notice of the occurrence of any event that with the passage of time or the
giving of notice or both could become an event of default under such Lease; (f)
to Seller's knowledge, no default or breach exists on the part of any Tenant
under any Lease, nor has there been any occurrence or omission which, with the
giving of notice or the passage of time or both, could constitute such a
default; (g) to Seller's knowledge, there do not exist any set-offs, defenses or
claims in favor of any Tenant under a Lease and no such claims have been
asserted, with the result that each Tenant is fully obligated to pay, and is
paying, the rent and other charges due thereunder, and is fully obligated to
perform, and is performing, all other obligations of such Tenant under such
Lease; (h) Seller as landlord has fully completed all construction obligations
and all tenant improvements specified in the Leases to be the responsibility of
the landlord thereunder; and (i) Seller has not received any notice of any
default or breach on the part of the landlord under any of the Leases, nor does
there exist any default or breach on the part of the landlord under any of the
Leases.
4.25 Adverse Facts and Circumstances. Except as set forth on
Schedule 4.25 and except for facts and circumstances with respect to legislative
or regulatory actions or with respect to environmental matters, upon which Buyer
has conducted and relied, or will conduct and rely, upon its own due diligence,
Seller does not know of any fact or circumstance that is reasonably likely to
have any material adverse effect on (i) the business of Seller, (ii) the
condition, financial or otherwise, or prospects of Seller, (iii) any of the Real
Property or Seller's right, title and interest thereto, or (iv) Seller's ability
to transfer the Real Property on the Closing Date to Buyer free and clear of all
Encumbrances of any kind.
4.26 Approval of Agreement by Members. This Agreement and each of
the transactions contemplated hereby have been duly approved by Seller's members
at a meeting duly held by Seller prior to the date of this Agreement.
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4.27 Maintenance of Insurance. Seller carries insurance (including
self insurance) in such amounts and covering such risks as set forth on Schedule
4.27. Seller is not in default under any of such policies or binders, nor has
Seller failed to give any notice or to present any claim under any such policy
or binder in a due and timely fashion, except where such failure to comply
therewith would not reasonably be expected to have a material adverse effect on
the Real Property, which insurance is adequate for the ownership and use of the
Real Property and consistent with insurance customarily maintained for similar
properties. Schedule 4.27 contains a complete and accurate list in all material
respects of all policies or binders of fire, liability, title and other forms of
insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums and a general description of
the type of coverage provided) maintained by Seller with respect to the Real
Property, all of which policies and binders are in fill force and effect on the
Closing Date. All of such policies and binders are sufficient in all material
respects to comply with the terms of all agreements or contracts to which Seller
is a party or with respect to which the Real Property is bound. There are no
outstanding unpaid claims under any such policies or binders.
4.29 No Employees. Seller has no employees, has had no employees
during the last twelve (12) months and is not a party to any collective
bargaining agreement.
5. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller as follows, each of which is true and accurate on the date of
this Agreement and as of the Closing Date. The following representations and
warranties of Buyer shall survive the Closing for a period of eighteen (18)
months.
5.1 Organization, Standing and Authority of Buyer. Buyer is a
limited liability company, duly organized, validly existing and in good standing
under the laws of the State of Delaware. Buyer has the power to execute and
deliver this Agreement and has taken all action required by law for such
execution and delivery. This Agreement is a valid and legally binding agreement
of Buyer enforceable in accordance with its terms except to the extent that
enforcement thereof may be limited by (a) bankruptcy, reorganization,
moratorium, fraudulent conveyance or similar laws now or hereafter in effect
relating to creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity). Except as set forth on Schedule 5.1, there are no contractual or other
limitations on Buyer's power to enter into this Agreement or to consummate any
of the transactions contemplated by this Agreement.
5.2 No Conflict. The execution, delivery, performance and
consummation of this Agreement by Buyer will not (a) conflict with the Articles
of Organization and Operating Agreement of Buyer, and (b) except as set forth on
Schedule 5.2, (i) with the passage of time, the giving of notice or otherwise,
result in a violation or breach of, or constitute a default under, any term or
provision of any indenture, mortgage, deed of trust, lease, instrument,
contract, agreement or other restriction to which Buyer is a party or to which
any of Buyer's property is subject, (ii) result in the creation of any lien or
other charge on any of the assets of Buyer, (iii) result in an acceleration or
termination of any loan or security interest agreement or similar
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agreement or instrument to which Buyer is a party or (iv) result in a violation
of any order, judgment, decree, rule, regulation or law applicable to Buyer.
5.3 Litigation. Except as set forth on Schedule 5.3, no actions,
suits or proceedings of any kind are pending, or to the best of Buyer's
knowledge, threatened, against Buyer that, individually or in the aggregate,
could have an adverse effect on the purchase and sale of the Real Property
contemplated by this Agreement, whether at law or in equity, or before or by any
court or governmental agency, authority or body or before any arbitrator of any
kind.
5.4 No Violation of Law, Order, Rule or Regulation. Neither the
execution by Buyer of this Agreement nor the consummation of the purchase and
sale of the Real Property contemplated by this Agreement will result in a
violation of any applicable law, order, rule or regulation of any governmental
authority.
5.5 Consents. Except as set forth on Schedule 5.5 (a) no consent,
approval or agreement of any person, entity, party, court or government is
required to be obtained by Buyer or the members of Buyer in connection with the
execution and delivery of this Agreement or the performance of terms of this
Agreement or the consummation of the transactions contemplated by this
Agreement; (b) Buyer's execution and delivery of this Agreement and the
performance by Buyer of Buyer's obligations under this Agreement do not and will
not require any registration with, consent or approval of, notice to or any
action by any person or governmental authority; and (c) neither Buyer nor Seller
is required to obtain any permit of any kind from any regulatory or governmental
authority in order to consummate the transactions contemplated by this
Agreement.
5.6 Brokerage and Finder's Fees. Except as set forth on Schedule
5.6, neither Buyer nor anyone on Buyer's behalf has any actual or potential
liability to any broker, finder or agent, and Buyer has not agreed to pay any
brokerage fee, finder's fee or commission, with respect to the transactions
contemplated by this Agreement. Buyer shall indemnify and hold harmless Seller
against all claims and liabilities asserted against Seller by any person acting
or claiming to act as a broker or finder on behalf of Buyer.
5.7 Accuracy of Information. The statements, representations and
warranties made ,by Buyer in this Agreement are true. To the best of Buyer's
knowledge, none of the information supplied or to be supplied on or before the
Closing Date by or on behalf of Buyer to Seller in connection with this
Agreement, the transactions contemplated hereby or the negotiations leading up
to the execution and delivery of this Agreement did contain or will contain, at
the respective times when such information was or is delivered, any untrue
statement of material fact, omitted or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading. If at any time after delivery but before the Closing, Buyer
becomes aware that any such information has become untrue and misleading, and
any material respect, Buyer shall promptly notify Seller in writing of such
occurrence.
6. Covenants of Seller. Seller hereby covenants and agrees to all of the
following:
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(a) No Encumbrances. Except for the encumbrances currently present
on the Real Property as set forth on Schedule 6.1, Seller shall not cause title
to the Real Property to become encumbered after the date of this Agreement.
Between the date of this Agreement and the Closing, Seller shall not mortgage,
pledge or subject to any lien, charge or encumbrance of any kind any of the Real
Property, exclusive of liens arising in the ordinary course of business as to
which there is no known default; and Seller shall not permit any of the Real
Property to be subject to any obligation or liability (absolute or contingent)
except liabilities and obligations incurred in accordance herewith.
(b) Maintenance. Between the date of this Agreement and the Closing,
Seller shall maintain the Real Property in its present repair, order and
condition (reasonable wear and use excepted).
(c) Dumping; Removal. Seller shall permit no dumping of any material
on any of the Real Property and in the event that on or before the Closing Date
any dumping occurs on any of the Real Property, with or without Seller's
permission, Seller immediately upon being notified or otherwise becoming aware
that such dumping has occurred on any of the Real Property shall remove
therefore all materials dumped thereon.
(d) Insurance. Between the date of this Agreement and the Closing,
Seller, at Seller's sole expense, shall keep all of the Real Property fully
insured on a basis presently maintained by Seller.
(e) Payment of Taxes. On or before the Closing Date, Seller shall
have paid all taxes required to be paid to any taxing authority that could in
any way on the Closing Date or thereafter constitute a lien against the Real
Property or any part thereof (except for real property taxes for the current
year that are not currently due and payable on the Closing Date which shall be
prorated as provided in Section 10.11 below).
(f) Compliance with Law. Between the date of this Agreement and the
Closing, Seller shall materially comply with all laws applicable to the use of
any of the Real Property or to the conduct of the respective businesses
conducted with relation to the Real Property.
(g) Fees for Permits, Etc. Before the Closing, Seller shall pay all
fees, costs and expenses then due for permits required by a state or local
government entity that governs the Real Property.
(h) No Disruption. Between the date of this Agreement and the
Closing, Seller shall not, and shall not agree to, take, cause to be taken or,
to the extent reasonably within Seller's control, permit or suffer to be taken,
any action that would cause or tend to cause the purchase and sale of the Real
Property contemplated by this Agreement not to be fulfilled.
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6.1 Pre-Closing Assistance. Before the Closing Date, at the request
of Buyer, Seller shall use its best efforts to provide reasonably requested
information to Buyer for the purpose of assisting Buyer in obtaining Buyer's
financing, provided, however, that Seller shall have no liability whatsoever for
or associated with such financing other than with respect to any written
information of Seller (related to Seller's current operations and not related to
any proposed or projected operations of Buyer) furnished to Buyer in connection
with such financing. Prior to the Closing Date, Seller shall cause its Manager
to be available at such time reasonably requested by Buyer to provide
information in the preparation of any documentation and any road show
presentations related to the Buyer's financing. Buyer's accountants, at Seller's
cost and expense, shall prepare audited financial statements for Seller's 1998
fiscal year. Buyer shall be responsible for brining the Seller's 1996 and 1997
audited financial statements in compliance with Regulation S-X as promulgated by
the Securities and Exchange Commission. Buyer agrees to indemnify and hold
harmless Seller and any representative or agent of Seller from any liability,
claim, expense or cost associated with assisting Buyer in obtaining Buyer's
financing, provided, however, that such indemnity shall not apply to the extent
such liability, claim, cost or expense (i) relates to any written information of
Seller (related to Seller's current operations and not related to any proposed
or projected operations of Buyer) furnished to Buyer in connection with such
financing; and (ii) arises out of or results from any malfeasance, fraud,
willful misconduct or gross negligence of Seller or any of Seller's
representatives or agents.
7. Conditions Precedent to Closing of Buyer and Seller. The obligations of
Buyer and Seller under this Agreement are subject to full satisfaction of the
following conditions at or before the Closing Date; provided, however, that
satisfaction of any of the following conditions may be waived by the mutual
written agreement of Buyer and Seller.
7.1 Threatened or Pending Litigation. Other than set forth on
Schedule 4.3, no suit, action or other proceeding shall be threatened or pending
before any court or governmental agency seeking to restrain or prohibit or to
obtain damages or other relief in connection with this Agreement or the
consummation of any of the transactions contemplated hereby.
7.2 Execution and Delivery. All Schedules, Exhibits and other
documents to be signed and delivered at or before the Closing by each party
hereto.
7.3 Related Transaction. The consummation of that certain Asset
Purchase and Sale Agreement between Buyer and GDREC, dated the _____ day of
January, 1999 (the "Asset Purchase Agreement"), a related transaction, and the
simultaneous closing of said asset sale.
8. Conditions Precedent to Buyer's Obligations. Buyer's obligations under
this Agreement to close the purchase and sale of the Real Property are subject
to the satisfaction of all of the following conditions at or before the Closing
Date; provided, however, that satisfaction of any of the following conditions
may be waived Buyer.
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8.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects as if made at and as of the Closing Date.
8.2 Seller's Performance. On the Closing Date, all of the covenants,
conditions, agreements, requirements and obligations of Seller contained in this
Agreement and required to be performed before the Closing by Seller shall have
been duly performed, and Seller shall have materially complied with all terms
and conditions applicable to Seller under this Agreement.
8.3 Adverse Changes. Since January 1, 1999, there shall have
occurred no material loss, damage or destruction to any of the Real Property or
any other event that materially adversely affects or threatens to materially
adversely affect the ability of Buyer to use the Real Property in the manner
presently used by the Seller.
8.4 Opinion of Counsel for Seller. Buyer shall have received from
Seller's counsel an opinion (the "Seller's Opinion"), dated the Closing Date, in
form and substance satisfactory to Buyer and its respective counsel, that:
(a) Seller is duly organized, validly existing and in good
standing under the laws of the State of Iowa, and Seller has the power and
authority to (i) consummate the transactions contemplated by this Agreement,
(ii) execute and deliver this Agreement and any other agreements, documents,
instruments and certificates required to be delivered by Seller thereby and
perform its duties and obligations required to be performed thereunder; and
(iii) own and use the Real Property as presently conducted.
(b) This Agreement is a valid and legally binding agreement of
Seller and on the Closing Date will be enforceable against Seller in accordance
with its terms except to the extent that enforcement thereof may be limited by
(a) bankruptcy, reorganization, moratorium, fraudulent conveyance or similar
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
(c) Except as set forth on Schedule 4.4 of the Real Property
Purchase and Sale Agreement, such counsel does not know of any suit, action,
arbitration, legal, administrative or other proceeding or governmental
investigation pending or threatened against or affecting Seller seeking to
enjoin the consummation of the transactions contemplated by this Agreement or if
which determined adversely to Seller would have a material adverse effect on
Seller or the Real Property.
(d) Except as set forth on Schedule 4.5 of the Real Property
Purchase and Sale Agreement, to the knowledge of such counsel, neither the
execution nor the delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will constitute a default, or any
event that would with notice or lapse of time, or both, constitute a default,
under, or violation or breach of (i) Seller's Articles of Organization,
Operating Agreement
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or any indenture, license, permit, lease, franchise, mortgage instrument or
other material agreement to which Seller is a party or by which Seller or
Seller's properties may be bound, of which such counsel is aware; (ii) any
existing federal or Iowa constitution, statute, regulation or law to which
Seller or the Real Property are subject; or (iii) any existing judicial
administrative decree, writ, judgment or order to which Seller or the Real
Property is subject.
(e) To the knowledge of such counsel, except for the approval
of the members of Seller and except as set forth on Schedule 4.17, no consent,
approval, waiver, license or authorization by any person, entity or governmental
authority under any federal or Iowa statute or regulation is required in
connection with the execution, delivery and performance by Seller of this
Agreement, or any other agreements, documents, instruments and certificates.
required to be delivered by Seller thereby.
8.5 Officer's Certificate. Buyer shall have received a certificate
from Seller, dated as of the Closing Date and executed by the Chief Operating
Officer of Seller to the effect that (a) all of the conditions contained in
Sections 7 and 8 have been satisfied; (b) all of the representations and
warranties of Seller contained in this Agreement are true and accurate as of the
Closing Date; and (c) all of the covenants and agreements of Seller contained in
this Agreement and required to be performed before the Closing have been
performed and Seller is not in breach or default of any of Seller's obligations
or representations or warranties contained in this Agreement.
8.6 Abstract of Title. At the Closing, Seller shall deliver to Buyer
a written abstract of title to the Real Property.
8.7 Title Matters. All title matters shall have been satisfied in
accordance with Section 10.4 and, other than the payment of the title insurance
premium by Buyer, Chicago Title Company shall be irrevocably committed to issue
the Title Policies pursuant to Section 10.5.
8.8 Material Limitation. No statute, rule, regulation, executive
order or final decree or preliminary or permanent injunction shall been enacted,
entered or promulgated that would (a) impose any material limitation on the
ability of Buyer to exercise full rights of ownership with respect to any of the
Real Property; or (b) impose any new or increased fee or tax applicable to the
Real Property.
8.9 Consents. All material notices, consents, approvals and
authorizations to and from any governmental authority or other person or entity
necessary to permit Seller to transfer the Real Property to Buyer in the manner
contemplated by this Agreement and to permit Buyer to own and operate the Real
Property as presently conducted after the Closing Date, shall have been
obtained.
9. Conditions Precedent to Seller's Obligations. Seller's obligations
under this Agreement to close the purchase and sale of the Real Property are
subject to the satisfaction of all of the following conditions at or before the
Closing Date; provided, however, the satisfaction of any of the following
conditions may be waived by the Seller.
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9.1 Accuracy of Representations and Warranties. All representations
and warranties of Buyer contained in this Agreement shall be true and correct in
all material respects as if made at and as of the Closing Date.
9.2 Buyer's Performance. On the Closing Date, all of the covenants,
conditions, agreements, requirements and obligations of Buyer contained in this
Agreement and required to be performed before the Closing by Buyer shall have
been performed, and Buyer shall have materially complied with all terms or
conditions of this Agreement applicable to Buyer.
9.3 Opinion of Counsel for Buyer. Seller shall have received from
Buyer's counsel an opinion, dated the Closing Date, in form and substance
satisfactory to Seller and its respective counsel, that:
(a) Buyer is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and Buyer has the power and
authority to (i) consummate the transactions contemplated by this Agreement,
(ii) execute and deliver this Agreement and any other agreements, documents,
instruments and certificates required to be delivered by Buyer thereby and
perform its duties and obligations required to be performed thereunder; and
(iii) own and use the Real Property as presently conducted.
(b) This Agreement is a valid and legally binding agreement of
Buyer and on the Closing Date will be enforceable against Buyer in accordance
with its terms except to the extent that enforcement thereof may be limited by
(a) bankruptcy, reorganization, moratorium, fraudulent conveyance or similar
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
(c) Such counsel does not know of any suit, action,
arbitration, legal, administrative or other proceeding or governmental
investigation pending or threatened against or affecting Buyer seeking to enjoin
the consummation of the transactions contemplated by this Agreement or if which
determined adversely to Buyer would have a materially adverse effect on Buyer.
(d) To the knowledge of such counsel, neither the execution
nor the delivery of this Agreement nor the consummation of the transactions
contemplated by this Agreement will constitute a default, or any event that
would with notice or lapse of time, or both, constitute a default, under, or
violation or breach of: (i) Buyer's Articles of Organization, Operating
Agreement or any indenture, license, permit, lease, franchise, mortgage
instrument or other material agreement to which Buyer is a party or by which
Buyer or Buyer's properties may be bound, of which such counsel is aware; (ii)
any existing federal or state constitution, statute, regulation or law to which
Buyer is subject; or (iii) any existing judicial or administrative decree, writ,
judgment or order to which Buyer is subject.
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(e) To the knowledge of such counsel, no consent, approval,
waiver, license or authorization by any person, entity or governmental authority
under any statute or regulations required in connection with the execution,
delivery and performance by Buyer of this Agreement any other agreements,
documents, instruments and certificates required to be delivered by Buyer
thereby.
9.4 Litigation. On the Effective Date, (i) Buyer shall have executed
and delivered to Seller, and shall have caused Cambridge Iowa Gaming Company,
L.L.C. to have executed and delivered to Seller, a complete release of Seller,
GDREC, Joseph P. Zwack, and all representatives and agents of Seller from any
litigation and any claims related to the February, 1998 proposed sales
transaction between Seller and Buyer (the "Release"), (ii) Buyer shall have
executed and delivered to Seller a Stand Still Agreement pursuant to which Buyer
shall agree not to continue or to commence prosecuting the foregoing litigation
until the earlier to occur of (x) the termination of this Agreement, or (y) July
15, 1999, and (iii) Buyer shall have paid to Seller in escrow all of Seller's
and Zwack's legal costs and expenses associated with the litigation regarding
this matter in an amount not to exceed $12,000.00 (the "Litigation Expenses").
The Release and the Litigation Expenses shall be held in escrow in accordance
with the terms and conditions of the Escrow Agreement. The Release and the
Litigation Expenses shall be released from the Escrow and delivered to Seller
(i) upon Closing; (ii) in the event of Buyer's breach of any provision of this
Agreement resulting in termination of this Agreement, (iii) in the event that
Buyer is unable to obtain financing to close the transaction contemplated by
this Agreement by July 15, 1999 resulting in termination of this Agreement, or
(iv) in the event that Buyer fails to file its license application by February
1, 1999 or fails to receive a license from the IRGC by July 15, 1998, resulting
in termination of this Agreement.
9.5 Officer's Certificate. Seller shall have received a Certificate
from Buyer, dated as of the Closing Date, and executed by an officer of Buyer,
to the effect that (a) all of the conditions contained in Section 7 and 9 have
been satisfied; (b) all of the representations and warranties of Buyer contained
in this Agreement are true and accurate as of the Closing Date; and (c) all of
the covenants and agreements of Buyer contained in this Agreement and required
to be performed before the Closing have been performed, and Buyer is not in
breach or default of any of Buyer's obligations, representations or warranties
contained in this Agreement.
9.6 Consents. All material notices, consents, approvals,
authorizations and waivers to or from any governmental authority or other person
or entity necessary to permit Seller to transfer all of the Real Property to
Buyer in the manner contemplated by this Agreement shall have been obtained.
10. Closing and Title Matters.
10.1 Closing. Provided that all of the conditions to the close of
the transaction contemplated by this Agreement as set forth in Sections 7, 8 and
9 have been satisfied, the transaction shall close on the date selected by Buyer
that is at least three (3) but no more than thirty (30) business days after all
conditions contained in Sections 7, 8 and 9 are satisfied or
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waived, but in no event later than July 15, 1999 (the "Closing Date"). Buyer
shall give Seller written notice specifying the Closing Date not less than five
(5) business days prior thereto.
10.2 Seller's Deliveries. On or before the Closing Date, Seller
shall deliver the following:
(a) A General Warranty Deed or Deeds (the "Deed") executed by
Seller, which conveys title to the Portside Facility and the HCI Parking Lots.
(b) Written abstracts of title to the Real Property (the
"Abstract");
(c) All such other documents properly executed by Seller, as
appropriate, as may be necessary and desirable in the
reasonable review of Buyer to effect all of the intent
and purposes of this Agreement in relation to the Real
Property, including, but not limited to, assignments of
leases and subleases, assignments of agreements and any
other documents necessary to transfer all or any portion
of the Real Property, each of which documents and
assignments shall be in form reasonably acceptable to
Buyer and Buyer's legal counsel (the "Miscellaneous
Documents");
(d) A Real Estate Transfer -- Declaration of Value in the
form required by Iowa law from Seller;
(e) A Real Estate Transfer -- Groundwater Hazard Statement
(DNR form - September 1991) in the form required by Iowa
law from Seller;
(f) Information regarding Seller, as indicated in Treasury
Regulation Section 1.6045-4(h), to comply with the
information reporting provisions of Section 6045 of the
IRC and the Treasury Regulations promulgated thereunder;
(c) The opinion of counsel for Seller;
(d) All of such other documents properly executed by Seller
pertaining to the Real Property as necessary to effect all of the intents and
purposes of this Agreement in relation to the Real Property;
(e) A Non-Foreign Seller Affidavit (the "FIRPTA Affidavit")
from Seller, stating (i) that Seller is not a nonresident alien for the purposes
of United States income taxation, a foreign corporation, a foreign partnership,
a foreign trust or a foreign estate (ii) what the United States taxpayer
identification number of Seller is and (iii) such other information as may be
required by regulations promulgated pursuant to the Foreign Investment in Real
Property Tax Act.; and
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(f) The Assignment and Assumption Agreement, duly executed by
Seller.
10.3 Buyer's Deliveries. On or before the Closing Date, Buyer shall
deliver:
(a) The Purchase Price;
(b) The Assignment and Assumption Agreement, duly executed by
Buyer; and
(c) The opinion of counsel for Buyer.
10.4 Unacceptable Title Matters; Disapproved Title Matters. Not
later than the date thirty (30) days after the date of this Agreement, Seller
will deliver the Abstract to Buyer. Buyer and Chicago Title Insurance Company
shall have the opportunity to review the Abstract and all documents described
therein. Within fifteen (15) days after the date Buyer and Chicago Title
Insurance Company receive the Abstract, Buyer shall have the right to object in
writing to any item contained in the Abstract deemed by Buyer or Chicago Title
Insurance Company to be unacceptable (an "Unacceptable Title Matter"). Upon
Buyer's making of such an objection to an Unacceptable Title Matter, such
Unacceptable Title Matter shall be deemed to have been disapproved by Buyer
("Disapproved Title Matter,"). Disapproved Title Matters shall be deemed to
include all of the following: any lien, security interest, mortgage, deed of
trust, long term sales contract or similar encumbrance on the Real Property and
any right to the Real Property of any person in possession of the Real Property
other than persons allowed to use any of the Real Property pursuant to any of
the Leases, subleases or agreements of Seller. The Real Property shall be
conveyed by Seller to Buyer subject to the Leases. Notwithstanding the
foregoing, Buyer shall not have the right to object to any of the following: (i)
municipal and zoning ordinances; (ii) recorded building and use restrictions and
covenants (provided Buyer's use of the Property as presently being used is not
prevented or restricted); (iii) recorded easements for public utilities serving
the Real Property; and (iv) general real estate taxes not yet due and payable.
Buyer's failure to make an objection to an Unacceptable Title Matter shall be
deemed to be Buyer's approval of that Unacceptable Title Matter and shall
constitute Buyer's agreement that the Real Property shall be conveyed by Seller
to Buyer subject to that Unacceptable Title Matter. Seller shall have fifteen
(15) days within which either to discharge at Seller's sole cost and expense a
Disapproved Title Matter from the record title of the Real Property or to agree
in writing that such discharge shall occur at Seller's sole cost and expense
before the Closing Date. Seller's discharge of such Disapproved Title Matter
from the record title of the Real Property or Seller's agreeing in writing that
such discharge shall occur at Seller's sole cost and expense before the Closing
Date shall constitute an express condition precedent to the performance of
Buyer's obligations under this Agreement. If within such fifteen (15) days
Seller cannot or will not discharge any Disapproved Title Matter from the record
title of the Real Property or does not agree in writing that such discharge
shall occur at Seller's sole cost and expense before the Closing Date, then
Buyer may either (a) waive such Disapproved Title Matter and consummate
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the transactions contemplated by this Agreement in accordance with its terms, or
(b) terminate this Agreement. If Seller within such fifteen (15) days agrees in
writing that such discharge shall occur at Seller's sole cost and expense before
the Closing Date but Seller nevertheless fails to cause such discharge on or
before the Closing Date, then, notwithstanding any other provision of this
Agreement, Buyer may terminate this Agreement.
10.5 Title Insurance. Within three (3) days after receipt of the
Abstract, Buyer will order for its approval title commitments (the "Title
Commitments") for all the Real Property from Chicago Title Insurance Company
(National Office -- LA and Minneapolis, MN) (the "Title Company"). Buyer will be
responsible for the costs and expenses of these Title Commitments but not for
the title abstracts upon which said Title Commitments will be based. At the
Closing, the Title Company shall issue to Buyer title insurance policies ("Title
Policies") for each of the Real Property insuring Buyer in the aggregate in an
amount of not less than the Purchase Price that title to the Real Property is
vested in Buyer on the Closing Date, subject only to covenants, conditions and
restrictions, if any, and any other matters of record appearing in the Title
Commitments that Buyer has approved ("Permitted Title Exceptions"). Buyer shall
be liable for and shall pay for the entire costs of such policy and any
endorsements thereto.
10.6 Charges to Seller. On or before the Closing Date, Seller shall
pay the following:
(a) The cost of updating the Abstract;
(b) The tax on the transfer of real property provided for in
applicable Iowa law;
(c) Any and all other real property taxes prorated to the
Closing Date that result from or otherwise are related to the purchase and sale
of the Real Property contemplated by this Agreement;
(d) All other taxes, if any, for the fiscal year then pending
in relation to the Real Property, which taxes shall be prorated between Seller
and Buyer as of the Closing Date; and
(e) All other charges allocated to Seller pursuant to this
Agreement and other normal seller closing costs, if any, as reasonably
determined in accordance with custom in Dubuque County, Iowa.
10.7 Charges to Buyer. At or before the Closing, Buyer shall pay the
following:
(a) The cost of the title insurance requested by Buyer;
(b) The cost of recording the Deeds and any other documents
to be recorded in accordance with the terms of this
Agreement;
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(c) All taxes, if any, for the fiscal year then pending in
relation to the Real Property, which taxes shall be prorated between Seller and
Buyer as of the Closing Date; and
(d) All other charges allocated to Buyer pursuant to this
Agreement and other normal Buyer closing costs, if any, as reasonably determined
in accordance with custom in Dubuque County, Iowa.
10.8 Conditions Precedent to Buyer's Obligations. Buyer's
obligations under this Agreement to close the purchase and sale of the Real
Property are subject to all of the terms and provisions of Sections 7 and 8.
10.9 Conditions Precedent to Seller's Obligations. Seller's
obligations under this Agreement to close the purchase and sale of the Real
Property are subject to all of the terms and provisions of Section 7 and 9.
10.10 Obligations at the Closing. At the Closing, the parties shall:
(a) Cause the Deed and the Assignment and Assumption Agreement
(or a separate assignment of leases, if any) to be recorded in the office of the
County Recorder of Dubuque County, Iowa, and upon such recordation the
beneficial ownership and the risk of loss of the Real Property shall pass from
Seller to Buyer;
(b) Deliver to Buyer those documents set forth in Section 10.2
and other instruments conveying title to the Real Property to Buyer; and
(c) Deliver to Seller the Purchase Price and those documents
set forth in Section 10.3.
10.11 Prorations. The following matters and items shall be
apportioned between the parties hereto or, where applicable, credited in total
to a particular party hereto, as of the Closing Date.
(a) Taxes, including, without limitation, real estate,
personal property, business, and occupation taxes, if any (based on the most
current available information), and water and sewer charges shall be prorated as
of the Closing Date, or charged on the basis of applicable governmental records,
and shall be readjusted when the actual bills are available, if necessary.
(b) Telephone and telex contracts and contracts for the supply
of heat, steam, electric power, gas, lighting and any other utility service
shall be prorated as of the Closing Date. All deposits, if any, made by Seller
as security under any such public service contract shall be credited to Seller
if the same remain on deposit for the benefit of Buyer. Where possible, cut-off
meter readings shall be secured for all utilities as of the Closing Date.
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(c) Any amount paid or payable under any lease or option
agreement and any accrued rental and any percentage rental under all leases
shall be prorated as and when collected. All security deposits held by Seller
shall be transferred to Buyer, and all obligations with respect to such security
deposits shall be assumed by Buyer on the Closing Date.
(d) Fees paid or payable for transferable licenses shall be
prorated as of the Closing Date.
(e) With respect to the Real Property, Seller's insurance
shall be canceled on the Closing Date, and Seller shall retain all prepaid
premiums. Buyer shall arrange for immediate effectiveness of Buyer's own
insurance coverage as of the Closing Date.
(f) On the Closing Date, such other items shall be prorated as
are provided for in this Agreement or as are normally prorated and adjusted in
the sale of real property, including, without limitation, all deposits and
prepaid items that inure to the benefit of Buyer (including, but not limited to,
prepaid insurance) and the interest on the Assumed Obligations and on any other
obligations being assumed by Buyer hereunder as of the Closing Date.
In making apportionments, all rents and similar items shall be prorated on the
basis of the number of days of occupancy before and after the time set for such
adjustments to be made, and all prepaid taxes, charges and impositions shall be
prorated on the basis of the number of days of the applicable tax year, or on
the basis of unit costs or, if this is not practicable, on the basis of the
number of days before and after that time.
11. Closing Documents. As soon as practicable after the date of this
Agreement, Seller shall prepare and submit to Buyer for Buyer's reasonable
approval the form of the documents to be delivered on the Closing Date. On the
Closing Date, Seller shall deliver to Buyer all final title transfer instruments
and documents required to consummate the transactions contemplated by this
Agreement to occur on the Closing Date on behalf of Seller, and Buyer shall
deliver all final assumption or other agreements or documents required to
consummate the transactions contemplated by this Agreement to occur on the
Closing Date on behalf of Buyer. All instruments required to be recorded shall
be in recordable form at the time of delivery by Seller or Buyer, as the case
may be.
11.1 Further Assurances. At any time and from time to time after the
Closing Date at the request of Buyer and for no additional consideration, Seller
shall execute and deliver such further instruments of transfer and assignment
and take such other actions as Buyer reasonably may require to more effectively
transfer and assign to and vest in Buyer all of the interests in the Real
Property.
12. Risk of Loss of Real Property. Between the date of this Agreement and
the Closing Date, Seller assumes all risk of destruction, loss or damage to the
Real Property due to any casualty. If any of the Real Property is damaged by any
casualty, Buyer and Seller shall have the following rights and obligations:
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(a) If the damage is not substantial (as hereinafter defined), Buyer
shall take title to the Real Property without abatement of the Purchase Price
and be entitled to receive the insurance proceeds arising out of such damage, to
the extent Seller has not theretofore used such proceeds to repair such damage
without the approval of Buyer. On the Closing Date, if Seller has not repaired
such damage, Seller shall execute whatever instruments are necessary to enable
Buyer to receive the insurance proceeds arising from such damage. If the
insurance proceeds arising from such damage are not sufficient to repair such
damage, Buyer shall receive at the Closing, a credit against the Purchase Price
equal to the estimated cost of repairing such damage in excess of the insurance
proceeds paid to Buyer, as such amount shall be determined by a qualified
independent third party selected by Buyer and Seller.
(b) If the damage is substantial (as hereinafter defined), Buyer
shall have the option of canceling this Agreement within sixty (60) days of
receiving notice of such damage, or Buyer may accept the Real Property and
thereupon be entitled to receive the insurance proceeds arising out of such
damage, and the Purchase Price shall be abated to the extent such damage is not
covered by the insurance proceeds, such abatement to be based on the difference
between the amount of the insurance proceeds and the estimated cost to restore
the damage as prepared by a qualified independent third party selected by Buyer
and Seller.
(c) If damage occurs, then such damage shall be deemed "substantial"
if the same cannot be substantially repaired or restored within ninety (90) days
after such damage occurs.
(d) Buyer shall receive credit against the Purchase Price for the
fair market value of any part of the Real Property to be sold hereunder not
covered by insurance, which is damaged or destroyed between the date of this
Agreement and the Closing Date.
13. Termination.
13.1 Grounds for Termination. This Agreement may be terminated at
any time before the Closing Date:
(a) By mutual written agreement of Buyer and Seller;
(b) By Seller if any of the conditions set forth in Section 7
and 9 is not satisfied and has not been waived by Seller;
(c) By Buyer if any of the conditions set forth in Sections 7
and 8 is not satisfied and has not been waived by Buyer;
(d) By Buyer under the terms and provisions of Section 10.4;
(e) By Buyer under the terms and provisions of Section 16. or
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(f) By Buyer or Seller if the Asset Purchase Agreement is
terminated.
13.2 Automatic Termination. This Agreement shall automatically
terminate in the event that the transaction contemplated by this Agreement has
not closed by July 15, 1999.
13.3 Effect of Termination. If this Agreement is terminated as
permitted in Section 13.1 or 13.2, then such termination shall be without
liability to either party hereto and any of its respective shareholders,
members, officers, directors, managers, employees, agents, consultants and
representatives; provided, however, that, if such termination results from the
failure of either party hereto to satisfy a condition to the performance of the
obligations under this Agreement of the other party hereto, failure to perform a
covenant of this Agreement or breach by either party hereto of this Agreement or
any representation or warranty or agreement contained herein, then the
non-breaching party hereto shall have the remedies set forth in Section 14.
14. Remedies. Except as set forth in Section 16, the following shall be
the exclusive remedies of the parties hereto in the event of a breach of this
Agreement.
14.1 Buyer's Remedies.
14.1.1 If Seller materially breaches this Agreement before the
Closing Date, Buyer may terminate this Agreement and Buyer shall have all legal
and equitable remedies available to it.
14.2 Seller's Remedies.
14.2.1 If Buyer materially breaches this Agreement before the
Closing Date, or if Buyer is not able to close the transaction contemplated by
this Agreement by July 15, 1999, Seller may terminate this Agreement or forfeit
this Agreement pursuant to Iowa Code Chapter 656 (1998), and Seller shall have
all legal and equitable remedies available to it. Forfeiture under Iowa Code
Chapter 656 shall not apply following the Closing.
14.3 Attorneys' Fees. If a dispute arises with respect to this
Agreement, then the party prevailing in such dispute shall be entitled to
recover all expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred in ascertaining such party's rights and in preparing to
enforce and/or defend and in enforcing and/or defending such party's rights
under this Agreement, whether or not it was necessary for such party to
institute suit.
15. Indemnification.
15.1 Buyer's Indemnification. Subject to the provisions of Section
14, for the period of eighteen (18) months following the Closing Date, Buyer
shall indemnify, defend and hold harmless Seller and/or any or all of Seller's
officers, directors, managers, employees or agents from and against any and all
incidents, claims, demands, actions, causes of action, suits, obligations,
liabilities, losses, costs, damages or expenses, costs of investigation, and
defense,
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counsel or attorneys' fees, whether under retainer or salary or otherwise,
including, without limitation, interest, penalties and court costs
(collectively, "Damages"), suffered or incurred by Seller and/or any or all of
Seller's officers, directors, managers, employees or agents, which directly or
indirectly arise, result from or relate to (a) any breach of, or any failure by
Buyer to perform, any of Buyer's representations, warranties, covenants or
agreements contained in this Agreement; (b) matters that occur or arise as a
result of Buyer's action or failure to take action after the Closing, except as
to such incidents, claims, demands, actions, causes of action, suits,
obligations, liabilities, losses, costs, damages or expenses that are caused or
claimed to be caused by or are a result of the acts or omissions of Seller or
Seller's respective agents or employees, (c) any and all debts, obligations and
liabilities of Seller specifically assumed by Buyer hereunder, and (d) actions
or failure to act by Buyer or Buyer's representatives during the inspection and
due diligence of the Real Property, (e) all obligations and liabilities arising
after the Closing Date related to the Leases assumed by Buyer; and (f) any and
all claims made by any broker, finder or agent claiming a fee or commission
through Buyer. Notwithstanding any provision of this Section 15.1 to the
contrary, the obligations of Buyer to indemnify the Seller for any and all
debts, obligations and liabilities of Seller specifically assumed by Buyer
hereunder shall extend for the length of the period of the debt, obligation or
liability. If and to the extent Seller notifies Buyer in writing of a claim for
indemnification on or prior to the eighteen (18th) month period after the
Closing Date, Buyer shall continue to be obligated to provide indemnification
hereunder with respect to such claim until such time that such claim is resolved
and satisfied.
15.2 Seller's Indemnification. Subject to the provisions of Section.
14, for the period of eighteen (18) months after the Closing Date, Seller shall
indemnify, defend and hold harmless Buyer and/or any or all of their officers,
directors, managers, employees or agents from and against any and all Damages
suffered or incurred by Buyer and/or any or all of their officers, directors,
managers, employees or agents, which directly or indirectly arise, result from
or relate to (a) any breach of, or any failure by Seller to perform, any of
Seller's representations, warranties, covenants or agreements contained in this
Agreement; (b) matters that occur or arise as a result of action or failure to
take action by Seller before the Closing Date, except as to such incidents,
claims, demands, actions, causes of action, suits, obligations, liabilities,
losses, costs, damages or expenses that are caused solely by or are a direct
result solely of the acts or omissions of Buyer or Buyer's respective agents or
employees, (c) any and all debts, obligations and liabilities of Seller not
specifically assumed by Buyer hereunder, and (d) any and all claims made by any
broker, finder or agent claiming a fee or commission through Seller.
Notwithstanding the foregoing, (a) the indemnification obligations of Seller for
breaches of representations and warranties regarding Organization and Standing
(Section 4.1), Title (Section 4.2) and Taxes (Section 4.6) shall continue
indefinitely beyond the eighteen (18) month indemnification period and the
indemnification obligation regarding litigation (Section 4.3) shall continue for
the applicable statutes of limitation and appeal period related thereto, and (b)
if and to the extent Buyer notifies Seller in writing of a claim for
indemnification on or prior to the eighteenth (18th) month period after the
Closing Date, Seller shall continue to be obligated to provide indemnification
hereunder with respect to such claim until such time that such claim is resolved
and satisfied.
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15.3 Limitation on Indemnification. Notwithstanding any other
provision hereof or of any applicable law, Buyer shall not be entitled to make a
claim against the Seller as a result of a breach of representation, warranty or
covenant which survives the Closing pursuant to Section 4 hereof against Seller
unless such Claim, together with all other Claims of Buyer under Section 15.2
hereof, as well as all Claims under the Asset Purchase Agreement, exceed in the
aggregate $200,000.00 (in which case Buyer shall be entitled to the entirety of
such Claims); provided, however, that (i) such $200,000.00 minimum threshold
with respect to indemnifiable Damages shall not apply to any Claim for
indemnification made by Buyer under this Agreement with respect to (w) the
breach or inaccuracy of any of the representations or warranties contained in
Section 4.1 (Organization, Standing in Authority), Section 4.2 (Title), Section
4.3 (Litigation) or Section 4.6 (Taxes), (x) the gross negligence, willful
misconduct or fraud of Seller, (y) any Excluded Obligation, or (z) the failure
of Seller to pay the amount of any adjustment to the Purchase Price in
accordance with the provisions of this Agreement (the items described in the
immediately preceding clauses (w), (x), (y) and (z), collectively, the "Seller
Retained Liabilities" and (ii) except with respect to an indemnification
obligation in respect to a Seller Retained Liability, Seller's indemnification
obligation for Damages under Section 15.2 of this Agreement (including, without
limitation, indemnification obligations with respect to environmental Claims
under Section 4.22) shall not exceed in the aggregate (including Claims made
under the Asset Purchase Agreement) $3,000,000.00. The amount of any
indemnifiable Damages under Section 15.2 shall be reduced by (i) any insurance
proceeds actually received with respect thereto (it being understood that after
the satisfaction for indemnifiable Damages, hereunder, Buyer shall assign to
Seller all of its right to unpaid insurance proceeds with respect to insurance
coverage, but only to the extent applicable to such Damages), and (ii) the value
of tax benefits actually obtained by Buyer, including without limitation by way
of exclusion from income, deduction, credit or refund, or other taxable periods
as a result of any adjustment. Notwithstanding anything to the contrary in this
Agreement or in the Asset Purchase Agreement, Buyer shall be entitled to satisfy
any Claim for indemnification under this Agreement or the Asset Purchase
Agreement, except any indemnification obligation with respect of a Seller
Retained Liability which shall be paid in cash or applied as an offset to the
Purchase Price, by applying and offsetting such indemnification obligation
against the Three Million Dollars ($3,000,000.00) of Preferred Membership
Interests held in escrow pursuant to the terms of this Agreement and the Asset
Purchase Agreement.
16. Condemnation. Notwithstanding any other term or provision of this
Agreement, in the event at any time before the Closing of any threatened,
contemplated, commenced or consummated proceeding in eminent domain respecting
any portion of the Real Property such that the balance thereof would not be
deemed by Buyer to be sufficient to be used for Buyer's purposes, Buyer may, at
its option, by written notice to Seller given within ten (10) days after Buyer
is notified of such threatened, contemplated, commenced or consummated,
proceeding, (a) terminate this Agreement by providing to Seller written notice
to that effect or (b) elect to continue this Agreement and to close the purchase
and sale of the Real Property contemplated by this Agreement, without any right
to deduction or set-off, in which event Seller shall, at the Closing, pass to
Buyer all of Seller's rights, title and interests in and to any condemnation
award. If Buyer has elected to continue this Agreement under clause (b) above in
this Section 16 then all negotiations and discussions with the condemning
authority shall be conducted jointly by Seller and Buyer.
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17. No-Shop Agreement. From the date of this Agreement to the earliest to
occur of (a) the date on which this Agreement is terminated, (b) the Closing
Date, (c) July 15, 1999, or (d) such date mutually agreed upon by Buyer and
Seller, neither Seller, Seller's members, Seller's authorized agents nor any of
Seller's affiliates shall, directly or indirectly, solicit, initiate or
encourage the submission of inquiries, proposals or offers from any corporation,
partnership, person or other entity or a group relating to any acquisition or
purchase of the Real Property, or any equity interest in Seller or of all or any
portion of the Real Property or any tender or exchange offer, merger,
consolidation. business combination, recapitalization, spin-off, liquidation,
dissolution or similar transaction involving, directly or indirectly, Seller
(each in an "Acquisition Proposal") or accept an Acquisition Proposal (other
than an Acquisition Proposal proposed by Buyer). Seller shall immediately notify
Buyer of any contact from any person other than Buyer regarding the possible
sale or transfer of any interest in Seller or of all or any portion of the Real
Property and the identity of the purchaser and the material terms and conditions
of any Acquisition Proposal. Seller shall cease immediately and cause to be
terminated any and all existing discussions or negotiations with any parties
(other than Buyer) conducted heretofore with respect to any Acquisition Proposal
and request that all confidential information furnished on behalf of Seller be
returned. Buyer shall have available to it all legal remedies in the event of a
breach or violation of this Section 17 by Seller.
18. Miscellaneous.
18.1 Notices. Any notice or communication to be given under the
terms of this Agreement ("Notice") shall be in writing and shall be personally
delivered or sent by facsimile, overnight delivery or registered or certified
mail, return receipt requested. Notice shall be effective (a) if personally
delivered, when delivered; (b) if by facsimile, on the day of transmission
thereof on a proper facsimile machine with confirmed answer back; (c) if by
overnight delivery, on the day after delivery thereof to a reputable overnight
courier service; and (d) if mailed, at midnight on the third business day after
deposit in the mail, postage prepaid. Notices shall be addressed as follows:
To Buyer at: AB Capital, L.L.C.
c/o Jefferies & Company, Inc.
11100 Santa Monica Blvd.
Los Angeles, CA 90025
Attention: Brent Stevens
Fax No. (310) 575-5165
With a copy to: Ronald S. Brody, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Fax No. (212) 849-5600
With a copy to: John E. Hatherley, Esq.
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Mitchell, Silberberg & Knupp, LLP
11377 West Almond Blvd.
Los Angeles, CA 90064-1683
Fax No. 310-312-3798
To Seller at: Donald Iverson, Manager
Harbor Community Investment, L.C.
P.O. Box 1683
Dubuque, Iowa 52004
Fax No. (319) 557-0549
With copy to: Douglas Gross, Esq.
Brown, Winick, Graves, Gross,
Baskerville and Schoenebaum, P.L.C.
601 Locust Street, Suite 1100
Des Moines, Iowa 50309
Fax No. (515) 283-0231
or at such other address as either Buyer or Seller from time to time may
designate by Notice hereunder.
18.2 Assignment, Third Parties, Binding Effect. Neither party may
assign this Agreement without the prior written consent of the other. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person or entity, other than the parties hereto and their successors in
interest, any right or remedy under or by reason of this Agreement unless so
stated herein expressly to the contrary. All covenants, agreements,
representations and warranties of the parties hereto contained herein shall be
binding on and inure to the benefit of Buyer and Seller and their successors and
assigns.
18.3 Expenses. Except as otherwise provided herein, Buyer and Seller
shall bear all of their own respective expenses, including, without limitation,
counsel and accountants' fees, in connection with the transactions contemplated
by this Agreement.
18.4 Captions. The captions appearing at the commencement of the
Sections hereof are descriptive only and/or for convenience in reference to this
Agreement and in no way whatsoever define, limit or describe the scope or intent
of this Agreement or in any way affect this Agreement.
18.5 Waivers and Amendments. By mutual written agreement only, the
parties hereto may amend this Agreement in any respect. The waiver of either
party hereto of any breach of any term, covenant or condition of this Agreement
shall not be deemed a continuing waiver of such term, covenant or condition, or
a waiver of any subsequent breach of the same or any other term, covenant or
condition of this Agreement. No oral statements or representations made before
or after the date of this Agreement by either party hereto are binding on such
party, and neither party hereto shall have the right to rely on such oral
statements or representations.
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18.6 Further Assurances. Each of the parties hereto shall cooperate
in the effectuation of the transactions contemplated hereby and to execute any
and all additional documents or to take such additional actions as may be
reasonably necessary or appropriate for such purpose.
18.7 Severability. If any term, provision, covenant or condition of
this Agreement, or any application thereof, is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remaining
provisions, covenants and conditions of this Agreement, and all applications
thereof, not held invalid, void or unenforceable, shall continue in full force
and effect and shall in no way be affected, impaired or invalidated thereby.
18.8 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Iowa and, in the event there is any litigation
with respect to any term or condition of this Agreement, the obligations of
Buyer and Seller hereunder shall be deemed performed at, and the venue for such
litigation shall be, in the State of Iowa, and each party hereto waives any
objection to the venue for any such litigation.
18.9 Gender and Number. Whenever used in this Agreement and as
required by context, the masculine gender includes the feminine and/or neuter,
and the singular number includes the plural.
18.10 Time is of the Essence. Time is of the essence of this
Agreement and in the performance and enforcement of each of the promises,
covenants, representations and warranties of Buyer and Seller contained herein.
For the purpose of computing any period of time prescribed herein or relating
hereto, the first day shall be excluded. If the period of time is six (6) days
or more, weekends and public holidays shall be included. An act required to be
performed on a day shall be performed at or before the close of business on such
day. If an act is required to be performed on a certain day, and such day is not
a regular business day, then the time of performance or measurement shall be
extended to and include the next regular business day.
18.11 Calculation of Time. All periods of time referred to in this
Agreement shall include all Saturdays, Sundays and state or national holidays,
unless the period of time specifies business days, provided that, if the date on
which to perform any act or give any notice with respect to this Agreement falls
on a Saturday, Sunday or state or national holiday, then such act or notice may
be timely performed or given on the next succeeding day that is not a Saturday,
Sunday or state or national holiday.
18.12 Publicity. Except as may be required in connection with the
submissions or approvals by the parties hereto to the Iowa Racing and Gaming
Commission or as otherwise required by law, before the Closing no party hereto
shall make or cause to be made any press release or public announcement with
respect to any of the transactions contemplated by this Agreement or the
execution of this Agreement or otherwise communicate with any news media with
respect thereto without the prior written consent of the other party hereto. If
any such
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announcement is so required by law, then Buyer and Seller shall cooperate as to
the timing and contents of any such press release or public announcement.
18.13 Entire and Sole Agreement. This Agreement, and all documents
and instruments to be delivered on or before the Closing Date pursuant to its
terms, constitutes the entire agreement between the parties hereto and
supersedes all agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. The parties hereto further acknowledge and agree that, in entering into
this Agreement and in delivering the documents and instruments to be delivered
on or before the Closing Date, the parties hereto have not in any way relied,
and shall not in any way rely, on any oral agreement, representation, warranty,
statement, agreement in principle, promise or understanding not specifically set
forth in this Agreement, in the Schedules or Exhibits hereto or in such
documents or instruments.
18.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18.15 Facsimile Transmission. The facsimile transmission by one
party hereto of a signed copy of the signature page of this Agreement to the
other party hereto or such party's agent, followed by a facsimile transmission
of an acknowledgement of receipt thereof, shall constitute the delivery of this
Agreement. Each party hereto shall confirm such delivery by mailing or
personally delivering to the other party hereto or such party's agent an
executed original of this Agreement in its entirety.
IN WITNESS WHEREOF, Buyer and Seller have duly executed and delivered this
Agreement as of the date first written above.
BUYER: SELLER:
AB CAPITAL, L.L.C. HARBOR COMMUNITY INVESTMENT, L.C.,
an Iowa limited-liability company
By: /s/ Brent Stevens By: /s/ Donald Iverson
---------------------------- -----------------------------------
Brent Stevens Donald Iverson
Manager
31
Exhibit 10.2B
FIRST AMENDMENT TO
REAL PROPERTY PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO REAL PROPERTY PURCHASE AND SALE AGREEMENT
("First Amendment") is made as of July 15, 1999 by and between HARBOR COMMUNITY
INVESTMENT, L.C., an Iowa limited liability company ("Seller"), and AB CAPITAL,
LLC, a Delaware limited liability company, or its permitted designee ("Buyer"),
with reference to the following facts:
A. Buyer and Seller have heretofore entered into that certain Real
Property Purchase and Sale Agreement dated as of January 15, 1999 (the "Real
Property Agreement"), pursuant to which Seller has agreed to sell and Buyer has
agreed to purchase certain real property described therein.
B. Concurrently with the execution and delivery of the Agreement, Buyer
entered into an Asset Purchase and Sale Agreement (the "Asset Agreement") with
Greater Dubuque Riverboat Entertainment Company, L.C. ("GDREC") pursuant to
which, among other things, Buyer agreed to purchase from GDREC, and GDREC agreed
to sell to Buyer certain assets of GDREC, the purchase and sale of which is a
condition of closing the transactions contemplated by the Asset Agreement.
NOW THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Buyer and Seller agree as follows:
1. Any defined terms set forth in this First Amendment shall, unless
otherwise provided herein, have the same meanings as the defined terms set forth
in the Real Property Agreement.
2. Buyer and Seller agree that, at any time prior to January 15,
2001 (the "Transfer Period"), Buyer or Buyer's designee shall have the absolute
right, in its sole and absolute discretion, to direct Seller, by written notice
(the "Transfer Notice") to Seller in accordance with the notice provisions
contained in the Asset Agreement, to transfer title to all or a portion of the
parcels of real property described on Exhibit A attached hereto and hereby
incorporated herein (the "Additional Property") directly to the City of Dubuque
("City") or to a third party designated by the City. Such transfer shall take
place upon Seller, not later than (30) thirty days from receipt by Seller of any
such Transfer Notice, delivering to the City or its designee one or more general
warranty deeds executed by Seller in favor of the City with respect to the
Additional Property described in such Transfer Notice, subject to any easements,
restrictions or covenants of record. In respect of the period commencing on the
date hereof and terminating on the earlier to occur of (i) the date of Seller's
receipt of a Transfer Notice and (ii) the expiration of the Transfer Period,
Buyer agrees to reimburse Seller for the applicable portion of real property
taxes, special assessments, liability insurance premiums for general liability
insurance, general maintenance costs and other out of pocket costs and expenses
reasonably incurred by Seller, consistent with past practices and in respect of
the Additional Property. In the event a Transfer Notice is not delivered to
Seller by
<PAGE>
Buyer on or prior to the expiration of the Transfer Period, this First Amendment
shall be deemed terminated and of no further force and effect. Notwithstanding
any provision to the contrary set forth herein, Buyer shall not have any
obligation to acquire Additional Property or to direct Seller to transfer
Additional Property to the City or its designee.
3. Seller makes no representations or warranties regarding the
condition of the Additional Property, and the City or other transferee hereunder
shall take the Additional Property "as is - where is," with all fault and
defects, including environmental defects or concerns, if any. Seller shall
reserve the right to note this provision on the face of any such deed.
4. The provisions of this First Amendment shall survive the Closing
Date and the transfer of properties and assets to be sold pursuant to the Real
Property Agreement and the Asset Agreement.
5. Except as specifically set forth herein, the Real Property
Agreement, as amended by this First Amendment, remains in full force and effect.
6. This First Amendment may be executed in any number of
counterparts. Each counterpart shall be deemed an original instrument, but all
such counterparts together shall constitute one agreement. This First Amendment
shall be effective upon receipt by Buyer and/or Seller from the other party
hereto of a facsimile transmission of the signatures required to execute this
First Amendment. If either Buyer or Seller executes this First Amendment
utilizing a facsimile transmission, such party shall mail executed copies of
this First Amendment not later than one (1) business day after facsimile
transmission of signatures.
IN WITNESS WHEREOF, Buyer and Seller have executed this First
Amendment as of the day and year set forth above.
BUYER: SELLER:
HARBOR COMMUNITY INVESTMENT, PENINSULA GAMING COMPANY, LLC
L.C., an Iowa limited liability company (f/k/a AB CAPITAL, LLC), a Delaware
limited liability company
By: /s/ Donald Iverson By: /s/ Michael S. Luzich
------------------------------ ------------------------------
Donald Iverson, Manager Michael S. Luzich
Exhibit 10.3
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement"), dated July 1, 1999, is by
and between Peninsula Gaming Partners, LLC, a Delaware limited liability company
("PGP") (formerly AB Capital, LLC) and Peninsula Gaming Company, LLC, a Delaware
limited liability company ("PGCL").
WHEREAS, PGP is party to (i) that certain Asset Purchase and Sale
Agreement, dated as of January 15, 1999, between PGP and Greater Dubuque
Riverboat Entertainment Company, L.C. (the "Asset Purchase Agreement"), and (ii)
that certain Real Property Purchase and Sale Agreement, dated January 15, 1999,
between PGP and Harbor Community Investment, L.C. (the "Real Property
Agreement"), and
WHEREAS, PGP is permitted to assign its rights and duties under the Asset
Purchase Agreement and the Real Property Agreement, and
WHEREAS, PGP and PGCL desire to assign PGP' rights and duties under such
agreements to PGCL,
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PGP hereby assigns all of its rights and obligations under the Asset
Purchase Agreement and the Real Property Agreement to PGCL.
2. PGCL hereby accepts such assignment and assumes all of PGP's
obligations under the Asset Purchase Agreement and the Real Property Agreement
from and and after the date hereof.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
PENINSULA GAMING PARTNERS, LLC
By: /s/ M. Brent Stevens
------------------------------------
M. Brent Stevens
Chief Executive Officer
PENINSULA GAMING PARTNERS, LLC
By: /s/ M. Brent Stevens
------------------------------------
M. Brent Stevens
Chief Executive Officer
Assignment of Asset Purchase and Real Property Purchase Agreements
Exhibit 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this day
15th of April, 1999, by and between JAMES RIX (hereinafter referred to as
"EMPLOYEE") and AB CAPITAL, L.L.C. and PENINSULA GAMING, L.L.C, a Delaware
limited liability companies and, after closing, the entity holding the Riverboat
Gaining License in Dubuque, Iowa, (hereinafter referred to as "EMPLOYER") as of
the Closing Date (as defined in the Asset Purchase and Sale Agreement (the
"Asset Purchase Agreement"), dated January 15, 1999, between Greater Dubuque
Riverboat Entertainment Company, LC, an Iowa limited liability company
("GDREC"), and EMPLOYER).
WHEREAS, EMPLOYER has entered into that certain Asset Purchase and Sale
Agreement dated January 15, 1999, by and between GDREC and EMPLOYER, pursuant to
which GDREC will sell to EMPLOYER all of its assets to its riverboat gambling
business in Dubuque, Iowa (the "GDREC Sales Transaction");
WHEREAS, EMPLOYEE is currently employed by GDREC as its Chief Operating
Officer and such employment will terminate effective the closing date of the
GDREC Sales Transaction;
WHEREAS, EMPLOYER agrees to employ EMPLOYEE as its Chief Operating Officer
and EMPLOYEE agrees to such employment and to serve as the Chief Operating
Officer of EMPLOYER effective upon closing of the GDREC Sales Transaction.
NOW, THEREFORE, in consideration of the promises made in this Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are acknowledged by the parties, the parties agree as follows:
1. TERM OF AGREEMENT: The term of EMPLOYEE'S employment and consulting
relationship if exercised pursuant to section five (5) of this Agreement, shall
be for three (3) years (the "Term") commencing the closing date of the GDREC
Sales Transaction (the "Employment Date"), unless earlier terminated as provided
in this Agreement. EMPLOYER and EMPLOYEE each acknowledges that until the
consummation of the GDREC Sales Transaction, EMPLOYEE shall be an employee of
GDREC and EMPLOYER shall not directly or indirectly control, supervise or
interfere with EMPLOYEE'S duties as an employee of GDREC of the operations of
GDREC's business or attempt any of the foregoing.
2. TERMINATION: The EMPLOYER may terminate this Agreement at any time for
"Good Cause" and the EMPLOYEE may terminate this Agreement for "Good Reason";
provided, however, that in the case of such termination, the terminating party
shall give sixty (60) days advance written notice to the other party, utilizing
hand delivery or restricted certified mail. If certified mail is used, such
notices will be deemed to have been given on the date it is deposited in any
United States Post Office mail receptacle, properly addressed and bearing proper
postage.
Upon such notice of termination, EMPLOYEE shall continue to render
services to
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EMPLOYER until the date of termination unless: (a) EMPLOYER directs EMPLOYEE to
cease rendering services at an earlier date; or (b) EMPLOYER and EMPLOYEE agree
that EMPLOYEE will cease rendering services at an earlier date.
Salary and severance shall be paid following notice of termination only as
follows:
a. EMPLOYEE shall be entitled to his regular pro-rated salary following
notice of termination for so long as EMPLOYEE is permitted to and
actually continues to render services to EMPLOYER during the 60-day
period following such notice.
b. If EMPLOYEE is directed by EMPLOYER to cease work prior to
expiration of the 60-day period EMPLOYEE shall be entitled to his
regular pro-rated salary until the end of the 60-day period.
c. If EMPLOYEE is terminated other than for Good Cause or if EMPLOYEE
terminates for Good Reason (in each case, a "Termination"), prior to
the expiration of the term of this Agreement, EMPLOYEE shall be
entitled to receive severance from EMPLOYER (i) the balance of
EMPLOYEE's compensation for the remaining term of the Agreement, as
defined in paragraphs 1 and 5 of this Agreement, and (ii) a
pro-rated portion of any incentive bonus earned or accrued by the
EMPLOYEE pursuant to the provisions of the incentive bonus plan
identified in Section 4(c), as of the date of termination.
3. DUTIES: EMPLOYEE shall carry out the duties and responsibilities of the
Chief Operating Officer of the EMPLOYER which shall include managing the
day-to-day operations of EMPLOYER, assisting EMPLOYER in performing post-closing
responsibilities, and assisting in the development of the operating plan,
including budgets and long term strategy. Employee shall report directly to
Brent Stevens, the Chief Executive Officer of A.B. Capital, L.L.C.
4. COMPENSATION AND BENEFITS:
(a) On the Employment Date, EMPLOYER shall pay EMPLOYEE, as a signing
bonus for entering into this Agreement, One Hundred Thousand Dollars
($100,000.00).
(b) EMPLOYEE shall be paid by EMPLOYER as compensation for his services,
a base annual salary of Two Hundred Fifty Thousand Dollars
($250,000.00) per annum.
(c) Commencing eighteen (18) months from the Employment Date, the
EMPLOYEE is entitled to, and the EMPLOYER hereby agrees to pay
EMPLOYEE, annual incentive performance bonuses (the "Incentive
Bonus") as specified in the attached Exhibit A so long as EMPLOYER
meets the jointly developed EBITDA budgeted figures for the just
concluded calendar year.
(d) EMPLOYEE shall be entitled to all current benefits accorded full
time employees of EMPLOYER in accordance with the terms of the
EMPLOYER'S personnel
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policies.
5. CONSULTING OPTION. Until the expiration or termination of this
Agreement, at the end of each of the first and second years of the Term,
EMPLOYEE and EMPLOYER shall have the option to convert the employment
arrangement contemplated by this Agreement into a nonexclusive consulting
arrangement or maintain the existing employment agreement. EMPLOYEE shall
provide the EMPLOYER with written notice at least ninety (90) days prior to the
expiration of such employment year of the intent to exercise such an option or
to extend the existing employment agreement. EMPLOYER shall have thirty (30)
days to give the EMPLOYEE written notice of the EMPLOYER's acceptance or
rejection of the EMPLOYEE's preference. Failure to reach a mutual agreement
shall result in the selection of the consulting option. The consulting
arrangement provided for by this Section 5 shall be effective and commence at
the beginning of the year during the term for which notice is given. If the
option is exercised by EMPLOYEE, EMPLOYEE agrees to, at the request of EMPLOYER,
act as a consultant with respect to the EMPLOYER's excursion boat gambling
business at Dubuque, Iowa during the employment/consulting year (the "Consulting
Services"), consistent with the EMPLOYEE's availability and knowledge. In
consideration of any Consulting Services to be provided by EMPLOYEE hereunder,
and in lieu of the compensation pursuant to Section 4 hereof, in the first
consulting year, EMPLOYER shall pay EMPLOYEE a consulting fee of (i) One Hundred
Thousand Dollars ($100,000.00) per annum for the first year in which EMPLOYEE is
engaged as a consultant and (ii) Seventy-Five Thousand Dollars ($75,000.00) per
annum for the second year in which EMPLOYEE is engaged as a consultant, in each
case, payable in equal quarterly installments at the beginning of each quarter
of such year. EMPLOYER shall also reimburse and pay EMPLOYEE for any and all
reasonable expenses incurred by EMPLOYEE in performing the Consulting Services,
including, but not limited to, reimbursement of travel expenses in the event
that EMPLOYEE agrees to perform Consulting Services at a location other than
EMPLOYER's place of business in Dubuque, Iowa. While EMPLOYEE is engaged as a
consultant during the term of this Agreement, EMPLOYEE shall (i) be an
independent contractor with full power and authority to select the means, manner
and method of performing the Consulting Services without direction or control of
EMPLOYER, (ii) not be an agent or employee of the EMPLOYER, and (iii) have no
right or power to bind the Company under any agreement or to transact any
business or make any representations or promises in the EMPLOYER's name or on
its behalf, except insofar as he is expressly authorized to do so in writing by
the EMPLOYER. In his capacity as a consultant hereunder, EMPLOYEE shall be
entitled during the term to provide consulting services to other persons or
entities that are not directly competing with the EMPLOYER, engaged in the
casino or gaming business located within a 50 mile radius of Dubuque, Iowa.
6. NON-COMPETITION AGREEMENT:
(a) Both parties acknowledge that the EMPLOYEE's position is one of
considerable responsibility and requires considerable training,
relationships and contacts with customers, clients and potential
customers and clients, and experience that it will take a
substantial amount of EMPLOYER's time to replace an employee who has
received such training, relationships, contacts and experience as
are typically afforded by EMPLOYER; and
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(b) As a condition of employment/engagement and continued
employment/engagement of EMPLOYEE by EMPLOYER, the parties mutually
agree that confidentiality is required in connection with the
business of EMPLOYER and in connection with the operations and the
names of EMPLOYER's customers and clients, and that accordingly, it
is vital that EMPLOYER be protected from direct competition from key
employees whose employment might be terminated by or from EMPLOYER,
said protection required during employment and for a reasonable
period of time after termination thereof.
(c) It is hereby agreed by and between the parties that, as a part of
the valuable consideration of the employment/engagement and
continued employment/engagement of EMPLOYEE by EMPLOYER:
(i) That EMPLOYEE shall treat and keep confidential all material
matters relating directly to the business of EMPLOYER,
including the content of all information contained in the
following that was not previously known by the EMPLOYEE, not
generally available to the public, and material to the
EMPLOYER's business: manuals, memoranda, production,
marketing, promotional and training materials, financial
statements, sales and operations records, business methods,
systems and forms, production records, billing rates, cost
rates, employee salaries and work histories, client lists,
mailing lists, processes, inventions, formulas, job production
and cost records, special terms with clients consistent with
the above qualifications. Notwithstanding the above, EMPLOYEE
shall treat and keep confidential all player development lists
and all proprietary customer information, without exception.
The EMPLOYEE further agrees to keep confidential and not to
keep and/or use any papers, records, or any information
relative to the matters referred to in the preceding sentence,
nor shall EMPLOYEE furnish, make available or otherwise
divulge any such information to any person during or after his
employment by EMPLOYER, unless specifically instructed to do
so in writing signed by the Chief Operating Officer of
EMPLOYER.
(ii) That if for any reason EMPLOYEE shall voluntarily or
involuntarily terminate his employment or EMPLOYER shall
terminate EMPLOYEE, it is specifically agreed and understood
that EMPLOYEE, for a period of one (1) year from the date of
termination shall not, within a radius of fifty (50) miles of
Dubuque, Iowa (the "Territory"), directly be connected with
any casino located within the Territory.
(iii) That if for any reason EMPLOYEE shall voluntarily or
involuntarily terminate his employment or EMPLOYER shall
terminate EMPLOYEE, it is specifically agreed and understood
that EMPLOYEE, for a period of one (1) year from the date of
termination, shall not, directly in any capacity whatsoever,
hire or solicit for employment any employee of EMPLOYER.
(d) The terms and provisions of this Section 6 shall be binding upon
EMPLOYEE whether EMPLOYEE is employed by EMPLOYER or engaged as a
consultant by EMPLOYER pursuant to the terms of this Agreement.
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7. INDEMNIFICATION: EMPLOYER shall indemnify, defend and hold and save
EMPLOYEE, his heirs, administrators or executors and each of them harmless from
any and all actions and causes of action, claims, demands, liabilities, losses,
damages or expenses, of whatsoever kind and nature, including judgments,
interest and attorney fees and all other reasonable costs, expenses and charges
which EMPLOYEE, his heirs, administrators or executors and each of them shall or
may at any time or from time to time, subsequent to the effective date of this
Agreement sustain or incur, or become subject to by reason of any claim or
claims against EMPLOYEE, his heirs, administrators or executors and each of them
while acting within the scope of his employment except for gross negligence,
misconduct or criminal acts or omissions on the part of the EMPLOYEE, and
provided that EMPLOYEE, his heirs, administrators or executors or one of them
properly and promptly notifies EMPLOYER of adverse claims or threatened or
actual lawsuits. EMPLOYEE, his heirs, administrators or executors as
appropriate, shall provide complete cooperation to EMPLOYER, its attorneys and
agents in such case to the extent possible.
8. ENTIRE AGREEMENT: This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreement between the parties.
9. DEFINITIONS:
(a) "Good Cause" shall mean (i) EMPLOYEE's death, (ii) EMPLOYEE becoming
physically or mentally disabled (a "Disability"), which Disability
renders EMPLOYEE unable to perform, as certified by a mutually
agreeable competent medical physician, a substantial portion of
EMPLOYEE's duties hereunder, (iii) EMPLOYEE's commission of an act
of embezzlement, fraud, misappropriation against EMPLOYER, (iv)
EMPLOYEE's conviction of, or entry of a plea of guilty or nolo
contendere or its equivalent to, a felony, (v) EMPLOYEE's engagement
of conduct injurious to EMPLOYER or having an adverse effect on
EMPLOYER's reputation or business operations, all of which threatens
or is likely to threaten the licensed status of the EMPLOYEE or the
EMPLOYER, (vi) EMPLOYEE's continued neglect or failure to discharge
EMPLOYEE's duties or responsibilities or the repeated taking of any
action prohibited by EMPLOYEE's immediate supervisor, the managing
member or the board of managers of EMPLOYER, materially affecting
the fundamental operating results of the EMPLOYER, (vii) the
revocation, suspension for more than thirty (30) days, or voluntary
relinquishment of any gaming license necessary for the performance
of EMPLOYEE's duties hereunder, or (viii) EMPLOYEE's breach or
violation of any material term or material provision of this
Agreement; provided, however, that in the case of clauses (v), (vi),
(vii) and (viii) of this Section 9(a), EMPLOYEE shall be entitled to
thirty (30) days notice of termination, during which thirty (30) day
period EMPLOYEE shall have the right to remedy any such breach or
default.
(b) The term "Good Reason" shall mean (a) the failure of the EMPLOYER to
pay the EMPLOYEE any portion of the EMPLOYEE'S base salary,
Incentive Bonus or other compensation or benefits within ten (10)
days of the time in which such amount is due and payable to the
EMPLOYEE; (b) a material change in the duties of the EMPLOYEE
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as defined in Section 3 of this Agreement; (c) misrepresentation by
EMPLOYER of any material fact relating to the conditions of
Employment; (d) a failure by the EMPLOYER to provide a reasonable
working environment; and/or (e) a failure by EMPLOYER to comply with
the provisions of this Agreement.
10. AMENDMENTS: This Agreement may be modified or amended, if the
amendment is made in writing and is signed by both parties.
11. SEVERABILITY: If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. If a court finds that any provision of this
Agreement is invalid or unenforceable, but that by limiting such provision it
would become valid and enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
12. WAIVER OF CONTRACTUAL RIGHT: The failure of either party to enforce
any provision of this Agreement shall not be construed as a waiver or limitation
of that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement.
13. APPLICABLE LAW: This Agreement shall be governed by the laws of the
State of Iowa.
14. REPRESENTATION: The undersigned parties (a) each acknowledge that they
have reviewed the terms of this Agreement, have consulted with their respective
legal counsel regarding the terms of this Agreement, and agree that the terms of
this Agreement are fair to each party and (b) each further acknowledges that
each are executing this Agreement under their own free will without any duress
from either party. The undersigned person executing this Agreement for and on
behalf of EMPLOYER represents that its execution hereof is authorized under
EMPLOYER's Articles of Organization and Operating Agreement, and that the
undersigned is fully authorized to sign this Agreement for and on behalf of
EMPLOYER, and that EMPLOYEE may rely upon this representation.
15. ASSIGNABILITY. This Agreement shall not be assigned without the
approval of the parties.
IN WITNESS WHEREOF, EMPLOYER and EMPLOYEE have duly executed and delivered
this Agreement as of the date first written above.
EMPLOYEE: EMPLOYEE:
By: /s/ M. Brent Stevens /s/ James P. Rix
-------------------------------------- --------------------------------
M. Brent Stevens, Managing Member James P. Rix
On behalf of the board of Managers for
AB CAPITAL, L.L.C. and
PENINSULA GAMING, L.L.C
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Exhibit 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into by
and between NATALIE BAUM (hereinafter referred to as "EMPLOYEE") and AB Capital,
LLC, a Delaware limited liability company, or its assignee (hereinafter referred
to as "EMPLOYER") as of the Closing Date (as defined in the Asset Purchase and
Sale Agreement (the "Asset Purchase Agreement"), dated January 15, 1999, between
Greater Dubuque Riverboat Entertainment Company, LC and the Company).
WHEREAS, EMPLOYER agrees to employ EMPLOYEE as its Chief Financial Officer
and Controller and EMPLOYEE agrees to accept such employment and serve as the
Chief Financial Officer and Controller.
NOW, THEREFORE, in consideration of the promises made in this Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are acknowledged by the parties, the parties agrees as follows:
1. TERM OF AGREEMENT. The term of the Agreement shall be from the Closing
Date (as defined in the Asset Purchase Agreement) through and including the
second anniversary thereof (the "Initial Term"). This Agreement shall
automatically renew and continue for successive one-year terms commencing at the
end of the Initial Term and every year thereafter, unless either party gives the
other party written notice of the party's intention not to renew this Agreement
for a further one-year term at least ninety (90) days prior to the expiration of
any one-year term, unless terminated by agreement of the parties or pursuant to
Section 2 of this Agreement (the Initial Term, together with any subsequent
renewal period, hereinafter referred to as the "Term").
2. TERMINATION. This Agreement may be terminated at any time before any
expiration date by the agreement of the parties, and may be terminated by
EMPLOYEE upon ninety (90) days advance written notice to the Chief Operating
Officer. In addition, this Agreement may be terminated by the EMPLOYER
immediately upon the occurrence of any of the following events (a) EMPLOYEE'S
death, (b) EMPLOYEE becoming physically or mentally disabled (a "Disability"),
which Disability renders EMPLOYEE unable to perform, as certified by a mutually
agreeable competent medical physician, a substantial portion of EMPLOYEE'S
duties hereunder, (c) EMPLOYEE'S commission of an act of embezzlement, fraud,
misappropriation against the Company, (d) EMPLOYEE'S conviction of, or entry of
a plea of guilty or nolo contendere or its equivalent of, a felony, (e)
EMPLOYEE'S continued neglect or failure to discharge EMPLOYEE'S duties or
responsibilities or the repeated taking of any action prohibited by EMPLOYEE'S
immediate supervisor, the managing member or the board of managers of the
Company, (f) EMPLOYEE'S engagement of conduct injurious to the Company or having
an adverse effect on the Company's reputation or business operations, which
threatens or is likely to threaten the licensed status of the EMPLOYEE or the
EMPLOYER, (g) the revocation, suspension for more than thirty (30) days, or
voluntary
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relinquishment of any gaming license necessary for the performance of EMPLOYEE'S
duties hereunder, or (h) EMPLOYEE'S breach or violation of any material term or
material provision of this Agreement; provided, however, that, in the case of
clauses (e), (f), (g) and (h) of this Section 2, EMPLOYEE shall be entitled to
thirty (30) days notice of termination, during which thirty (30) day period
EMPLOYEE shall have the right to remedy any such breach or default.
3. DUTIES. EMPLOYEE shall carry out the duties and responsibilities
generally as identified as the Comptroller or Chief Financial Officer of the
Company, consistent with the terms of the Position Description appended to the
Agreement as Exhibit A and which may be amended from time to time, consistent
with the above-defined general responsibilities by the EMPLOYER'S Chief
Operating Officer or Board of Directors Managing Member.
4. COMPENSATION AND BENEFITS.
a. EMPLOYEE shall be paid by EMPLOYER (i) as compensation for her
services for the 1999 calendar year the base annual salary of Eighty-Two
Thousand Five Hundred Dollars ($82,500) and (ii) as a bonus, upon
execution of this Agreement by EMPLOYEE, the amount of Twenty-Five
Thousand Dollars ($25,000). EMPLOYEE'S base annual salary shall be
reviewed on an annual basis and adjusted upward annually by not less than
five percent (5%) of the prior year's compensation. In addition to the
base salary, upon completion of each year of service with the EMPLOYER,
EMPLOYEE shall be entitled to receive a cash bonus payable by the EMPLOYER
based on EMPLOYEE'S performance during the previous employment year, which
shall be not less than Twenty Thousand Dollars ($20,000.00). If this
Agreement is terminated prior to completion of any term, EMPLOYEE shall be
eligible for a prorated bonus at termination.
b. To the extent not inconsistent with EMPLOYEE'S status as a
salaried employee under a continuing contract, EMPLOYEE shall be entitled
to all benefits accorded full time employees of EMPLOYER in accordance
with the terms of the EMPLOYER'S personnel policies.
5. SALE OF EMPLOYER'S BUSINESS. In the event the controlling interest in
the EMPLOYER or the EMPLOYER'S assets and operations are transferred or sold to
an unrelated entity at any time during any term of this Agreement, EMPLOYEE
shall receive at the time of such sale as severance pay an amount equal to
twelve (12) months' base salary.
6. INDEMNIFICATION. EMPLOYER shall indemnify, defend and hold and save
EMPLOYEE, her heirs, administrators or executors and each of them harmless from
any and all actions and causes of action, claims, demand, liabilities, losses,
damages or expenses, of whatsoever kind and nature, including judgments,
interest and reasonable attorney's fees and all other reasonable costs, expenses
and charges which EMPLOYEE, her heirs, administrators or executors and each of
them shall or may at any time or from time to time, subsequent to the effective
date of this Agreement, sustain or incur, or become subject to by reason of any
claim or claims against EMPLOYEE, her heirs, administrators or executors and
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each of them while acting within the scope of her employment, except for
negligence, misconduct or criminal acts or omissions on the part of the
EMPLOYEE, and provided that EMPLOYEE, her heirs, administrators or executors or
one of them properly and promptly notifies EMPLOYER of adverse claims or
threatened or actual lawsuits. EMPLOYEE, her heirs, administrators or executors
as appropriate, shall provide complete cooperation to EMPLOYER, its attorneys
and agents in such case to the extent possible.
7. NON-COMPETITION AGREEMENT.
a. Both parties acknowledge that the EMPLOYEE'S position is one of
considerable responsibility and requires considerable training,
relationships and contacts with customers, clients and potential customers
and clients, and experience that it will take a substantial amount of
EMPLOYER'S time to replace an employee who has received such training,
relationships, contacts and experience as are typically afforded by
EMPLOYER; and
b. As a condition of employment and continued employment of EMPLOYEE
by EMPLOYER, the parties mutually agree that confidentiality of
proprietary matters is required in connection with the business of
EMPLOYER and in connection with the operations and the names of EMPLOYER'S
customers and clients, and that accordingly, it is vital that EMPLOYER be
protected from direct or indirect competition from key employees whose
employment might be terminated by or from EMPLOYER, said protection
required during employment and for a reasonable period of time after
termination thereof.
c. It is hereby agreed by and between the parties that, as a part of
the valuable consideration of the employment and continued employment of
EMPLOYEE by EMPLOYER:
(1) That EMPLOYEE shall treat and keep secret all proprietary
matters relating directly or indirectly to the business of
EMPLOYER, including but not limited to, the content of all
manuals, memoranda, production, marketing, promotional and
training materials, financial statements, sales and operations
records, business methods, systems and forms, production
records, billing rates, cost rates, employee salaries and work
histories, customer and client lists, mailing lists,
processes, inventions, formulas, job production and cost
records, special terms with customers and clients or any other
proprietary information relative to the past, present or
prospective customers and operations as completely
confidential information entrusted to her solely for use in
her capacity as an employee of EMPLOYER. EMPLOYEE further
agrees not to keep and/or use any papers, records, or any
information whatsoever relative to any of the matters referred
to in the preceding sentence, nor shall EMPLOYEE furnish, make
available or otherwise divulge such information to any person
during or after her employment by
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EMPLOYER, unless specifically instructed to do so in writing
signed by the Chief Operating Officer or Managing Member of
EMPLOYER.
(2) That if for any reason EMPLOYEE shall voluntarily or
involuntarily terminate her employment or EMPLOYER shall
terminate EMPLOYEE, it is specifically agreed and understood
that EMPLOYEE, for a period of one (1) year from the date of
termination, shall not, within a radius of fifty (50) miles of
Dubuque, Iowa (the "Territory"), directly or indirectly engage
in, be interested in, or in any manner whatsoever be connected
with any casino located within the Territory.
(3) That if for any reason EMPLOYEE shall voluntarily or
involuntarily terminate her employment or EMPLOYER shall
terminate EMPLOYEE, it is specifically agreed and understood
that EMPLOYEE, for a period of one (1) year from the date of
termination, shall not, directly or indirectly, in any
capacity whatsoever, hire or solicit for employment any
employee of EMPLOYER.
8. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement contains the
entire agreement of the parties and here are no other promises or conditions in
any other agreement whether oral or written. This Agreement supersedes any prior
written or oral agreement between the parties. Notwithstanding Section 5 of this
Agreement, this Agreement shall inure to the benefit of EMPLOYER'S successors
and assigns.
9. AMENDMENTS. This Agreement may be modified or amended, if the amendment
is made in writing and is signed by both parties.
10. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. If a court finds that any provision of this
Agreement is invalid or unenforceable, but that by limiting such provision it
would become valid and enforceable, then such provision shall be deemed to be
written, construed and enforced as so limited.
11. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce
any provision of this Agreement shall not be construed as a waiver or limitation
of that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement.
12. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of Iowa.
13. REPRESENTATION. The undersigned persons executing this Agreement for
and on behalf of EMPLOYER as its sole Managing Member represent that he is fully
authorized to sign this Agreement for and on behalf of EMPLOYER, and that
EMPLOYEE may rely upon this representation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective the day and year first above written.
EMPLOYER: EMPLOYEE:
AB CAPITAL, LLC
By /s/ M. Brent Stevens /s/ Natalie Baum
--------------------------------- --------------------------------------
M. Brent Stevens, Managing Member Natalie Baum
5
Exhibit 10.6
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") has been executed as of
the 7th day of June, 1999, by and between AB CAPITAL, L.L.C., a limited
liability company created under the laws of the state of Delaware ("AB
Capital"), PENINSULA GAMING COMPANY, L.L.C., a limited liability company created
under the laws of the state of Delaware ("Peninsula") (AB Capital and Peninsula
collectively referred to herein as the "Buyers") and JAMES RIX of Dubuque, Iowa
("Rix").
WHEREAS, Buyers are in the process of obtaining financing for the purchase
of a gambling excursion boat located in Dubuque, Iowa, the purchase of which
shall be in accordance certain Asset Purchase and Sale Agreement by and between
Buyers and Greater Dubuque Riverboat Entertainment Company, L.C., a limited
liability company created under the laws of the state of Iowa ("GDREC"); and
WHEREAS, Buyers have requested that Rix attend road show financing
presentations to be made to potential bondholders to make a presentation and
answer questions related to the historical operation of the business owned and
operated by GDREC; and
WHEREAS, Rix has agreed to attend road show financing presentations to
make a presentation and answer questions related to the historical operation of
GDRBEC on the condition that Buyer agree to indemnify Rix in accordance with the
terms and conditions more specifically stated herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Term and Termination. This Agreement shall become effective
immediately and shall terminate and become null and void on the day following
the last day of any statute of limitations that applies to claims that may be
made by & on behalf of any person or entity who, either directly or indirectly,
receives information from Buyers regarding the sale of bonds by the Buyers;
provided however, that this Agreement shall continue in full force and effect
after such date if, prior to such date, Rix has sent written notice to Buyers
that a claim has been made which, in Rix's opinion, falls within the claims for
which Buyers are obligated to indemnify and hold Rix harmless under Section 3
below. In the event the termination date is extended beyond the end of the
statute of limitations, this Agreement shall remain in full force and effect
until Rix has been fully indemnified or until entry of a final judgment denying
Rix's claim for indemnification.
Section 2. Rix. In consideration of the indemnification and hold harmless
provision contained in Section 3 below, Rix shall be available at such time
reasonably requested by Buyers to attend and participate in all road show
financing presentations conducted by Buyers.
Section 3. Indemnification. Buyers agree, jointly and severally, to
indemnify and hold Rix harmless from any and all liabilities, claims, expenses
or costs associated with assisting Buyers in obtaining Buyers' financing;
provided that Buyers' indemnification obligation provided herein shall not
<PAGE>
apply to the extent such liability, claim, cost or expense (i) relates to any
written information regarding GDREC or written biographical information related
to Rix (written biographical information related to Rix that is included in the
Buyer's offering circular or any written information related to GDREC's
current or historical operations and not related to any proposal or projected
operations of Buyers) furnished to Buyers from GDREC or Rix or their agents in
connection with such financing, and (ii) arises out of or results from any
malfeasance, fraud, willful misconduct or gross negligence of Rix.
Section 4. Headings. All captions and section headings contained herein
have been included for the purpose of reference only and the same shall not
limit or otherwise affect the meaning hereof.
Section 5. Governing Law. This Agreement and the rights and obligations of
the parties hereto shall in all respects be governed by and construed and
enforced in accordance with the internal laws of the State of Iowa.
Section 6. Binding Effect. All of the covenants, stipulations, promises
and agreements contained in this Agreement by or on behalf of Buyers shall be
binding upon Buyers' successors and assigns and shall inure to the benefit of
Rix, his personal representatives and heirs.
Section 7. Severability. If any one or more of the provisions contained in
this Agreement shall be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not be affected or impaired thereby, and this Agreement shall be
interpreted and construed in such manner as the intentions of the parties will
be carried out as nearly as may be possible.
Section 8. Modifications. This Agreement shall not be modified nor shall
any provision hereof be deemed waived except by written instrument signed by the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first mentioned above.
AB CAPITAL, L.L.C. PENINSULA GAMING COMPANY, L.L.C.
By: /s/ Brent Stevens By: /s/ Brent Stevens
------------------------------ ----------------------------------
Its: Member Its: Manager
----------------------------- ---------------------------------
/s/ James Rix
- ----------------------------------
James Rix
Exhibit 10.7
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") has been executed as of
the 7th day of June, 1999, by and between AB CAPITAL, L.L.C., a limited
liability company created under the laws of the state of Delaware ("AB
Capital"), PENINSULA GAMING COMPANY, L.L.C., a limited liability company created
under the laws of the state of Delaware ("Peninsula") (AB Capital and Peninsula
collectively referred to herein as the "Buyers") and NATALIE BAUM of Dubuque,
Iowa ("Baum").
WHEREAS, Buyers are in the process of obtaining financing for the purchase
of a gambling excursion boat located in Dubuque, Iowa, the purchase of which
shall be in accordance with that certain Asset Purchase and Sale Agreement by
and between Buyers and Greater Dubuque Riverboat Entertainment Company, L.C., a
limited liability company created under the laws of the state of Iowa ("GDREC");
and
WHEREAS, Buyers have requested that Baum attend road show financing
presentations to be made to potential bondholders to make a presentation and
answer questions related to the historical operation of the business owned and
operated by GDREC; and
WHEREAS, Baum has agreed to attend road show financing presentations to
make a presentation and answer questions related to the historical operation of
GDREC on the condition that Buyers agree to indemnify Baum in accordance with
the terms and conditions more specifically stated herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Term and Termination. This Agreement shall become effective
immediately and shall terminate and become null and void on the day following
the last day of any statute of limitations that applies to claims that may be
made by or on behalf of any person or entity who, either directly or indirectly,
receives information from Buyers regarding the sale of bonds by the Buyers;
provided however, that this Agreement shall continue in full force and effect
after such date if, prior to such date, Baum has sent written notice to Buyers
that a claim has been made which, in Baum's opinion, falls within the claims for
which Buyers are obligated to indemnify and hold Baum harmless under Section 3
below. In the event the termination date is extended beyond the end of the
statute of limitations, this Agreement shall remain in full force and effect
until Baum has been fully indemnified or until entry of a final judgment denying
Baum's claim for indemnification.
Section 2. Baum. In consideration of the indemnification and hold harmless
provision contained in Section 3 below, Baum shall be available at such time
reasonably requested by Buyers to attend and participate in all road show
financing presentations conducted by Buyers.
Section 3. Indemnification. Buyers agree, jointly and severally, to
indemnify and hold Baum harmless from any and all liabilities, claims, expenses
or costs associated with assisting
<PAGE>
Buyers in obtaining Buyers' financing; provided that Buyers' indemnification
obligation provided herein shall not apply to the extent such liability, claim,
cost or expense (i) relates to any written information regarding GDREC or
written biographical information related to Baum (written biographical
information related to Baum that is included in the Buyer's offering circular or
any written information related to GDREC's current or historical operations and
not related to any proposed or projected operations of Buyers) furnished to
Buyers from GDREC or Baum or their agents in connection with such financing, and
(ii) arises out of or results from any malfeasance, fraud, willful misconduct or
gross negligence of Baum.
Section 4. Headings. All captions and section headings contained herein
have been included for the purpose of reference only and the same shall not
limit or otherwise affect the meaning hereof.
Section 5. Governing Law. This Agreement and the rights and obligations of
the parties hereto shall in all respects be governed by and construed and
enforced in accordance with the internal laws of the State of Iowa.
Section 6. Binding Effect. All of the covenants, stipulations, promises
and agreements contained in this Agreement by or on behalf of Buyers shall be
binding upon Buyers' successors and assigns and shall inure to the benefit of
Baum, her personal representatives and heirs.
Section 7. Severability. If any one or more of the provisions contained in
this Agreement shall be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not be affected or impaired thereby, and this Agreement shall be
interpreted and construed in such manner as the intentions of the parties will
be carried out as nearly as may be possible.
Section 8. Modifications. This Agreement shall not be modified nor shall
any provision hereof be deemed waived except by written instrument signed by the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first mentioned above.
AB CAPITAL, L.L.C. PENINSULA GAMING COMPANY, L.L.C.
By: /s/ Brent Stevens By: /s/ Brent Stevens
------------------------------ ----------------------------------
Its: Member and CEO Its: Manager
----------------------------- ---------------------------------
/s/ Natalie Baum
- ----------------------------------
Natalie Baum
Exhibit 10.8
BILL OF SALE
Greater Dubuque Riverboat Entertainment Company, L.C. ("Seller"), in
consideration of the sum of One Dollar ($1.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
does hereby sell, assign, transfer and set over unto Peninsula Gaming Company,
LLC ("Buyer") the following described property, to-wit:
All of Seller's rights in and to the Seller's Assets (as defined in that
certain Asset Purchase and Sale Agreement executed on January 15, 1999 by
and between Seller and AB Capital, L.L.C. (k/k/a Peninsula Gaming
Partners, LLC) (the "Asset Purchase Agreement") to the extent that title
to such assets may be transferred by Bill of Sale.
Seller and Buyer acknowledge that the conveyance contemplated herein is intended
to effectuate the provisions of the Asset Purchase Agreement and that all
capitalized terms contained herein that are not otherwise defined shall have the
meanings assigned thereto in the Asset Purchase Agreement. Notwithstanding any
provision of this Bill of Sale to the contrary, nothing contained herein shall
be construed to convey title to any Excluded Assets as defined in the Asset
Purchase Agreement.
Executed as of the 15th day of July, 1999.
GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C.
By: /s/ Donald Iverson
--------------------------------------
Donald Iverson, Chairman,
Managing Committee
<PAGE>
STATE OF New York )
) ss
COUNTY OF New York )
On this 15 day of July, 1999, before me, the undersigned, a Notary Public
in and for said state, personally appeared Donald Iverson, to me known to be the
identical persons named in and who executed the foregoing instrument, and
acknowledged that such person, as the Chairman of the Management Committee of
Greater Dubuque Riverboat Entertainment Company, L.C., executed the instrument
as the voluntary act and deed of himself and of the company.
/s/ Linda Hoyt
----------------------------------------
Notary public in an for said State
LINDA HOYT
NOTARY PUBLIC, State of New York
No. 31-4768864
Qualified in New York County
Commission Expires March 30, 2000
Exhibit 10.9A
OPERATING AGREEMENT
This OPERATING AGREEMENT is made this 22nd day of February, 1993, between
DUBUQUE RACING ASSOCIATION, LTD., an Iowa nonprofit corporation, (hereinafter
referred to as "DRA") and GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.,
an Iowa limited liability company, (hereinafter referred to as "Greater
Dubuque").
RECITALS:
A. Chapter 99F of the Iowa Code, together with rules and regulations of
the Iowa Racing and Gaming Commission, authorizes excursion boat gambling in the
State of Iowa.
B. DRA, a qualified sponsoring organization, presently holds a license to
conduct gambling games under Chapter 99F and other Iowa statutes referred to
therein.
C. DRA and Greater Dubuque will jointly file an application with the Iowa
Racing and Gaming Commission for the purpose of obtaining the necessary licenses
to conduct gambling games and operate an excursion gambling boat pursuant to the
terms of this Agreement.
D. The parties, through their joint efforts and subject to the terms and
conditions of this Operating Agreement, wish to conduct riverboat gambling in
the Dubuque, Iowa area.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. TERM. This Agreement shall become effective immediately and shall
terminate at 11:59 p.m. on March 31, 1996. Greater Dubuque shall have the option
to renew and extend this operating Agreement for two (2) consecutive 3-year
terms; commencing April 1, 1996 and April 1, 1999, under the same terms and
conditions as during the initial term. If Greater Dubuque elects to exercise its
first 3-year renewal option, it shall do so by notice in writing to DRA prior to
September 1, 1995. If Greater Dubuque elects to exercise its second 3-year
renewal option commencing April 1, 1999, it shall do so by notice in writing to
DRA prior to September 1, 1998. Notwithstanding the foregoing, if Greater
Dubuque is in default on the last day of the term of this Agreement or on the
last day of the initial 3-year renewal term, Greater Dubuque shall not have the
right to renew and extend this Operating Agreement for any subsequent period.
Also, Greater Dubuque shall not be entitled to renew this Operating Agreement
for the second 3-year renewal term commencing April 1, 1999, unless it has
previously exercised its option to renew for the prior 3-year renewal term
commencing April 1, 1996.
<PAGE>
During the term of this Agreement and during any 3-year renewal term, both
parties shall in good faith endeavor to maintain in good standing their
respective gambling licenses under Chapter 99F of the Iowa Code. However, if the
gambling license of one or both parties expires and is not renewed by the Iowa
Racing and Gaming Commission for reasons other than the fault, negligence or
omission of said party or one of its officers, directors, employees or agents,
then said failure to obtain renewal of said gambling license shall not
constitute a breach of this Agreement.
Nothing herein will preclude the parties from mutually agreeing to
terminate this Operating Agreement or from entering into a new or amended
agreement at any time.
Excursion riverboat operations shall begin as soon as practicable in the
April 1, 1993 - March 31, 1994 excursion gambling boat season. The parties at
this time have targeted June 1, 1993 or before as the beginning date of such
operations but mutually recognize that certain other events beyond their control
may result in operations commencing after June 1, 1993.
2. DECISION-MAKING RESPONSIBILITIES. Greater Dubuque shall consult with
DRA and secure the consent of DRA on all matters of policy, including without
limitation the following:
(a) Setting ticket price levels and admission price levels;
(b) Determining the number and types of gaming devices, the total square
footage of the casino area, and the furnishing of the excursion
gambling boat;
(c) Determining matters of policy relating to advertising, marketing,
hiring of Greater Dubuque employees, public relations,
entertainment, pricing, quality, and passenger relations with
regard to excursion gambling boat operations;
(d) Setting the number of excursions per year and approving the length
of each excursion;
(e) Setting routes and docking sites for the excursion gambling boat;
(f) Determining policies relating to the issuance of complimentary
passes for admission to the excursion gambling boat;
(g) Determining all other policies relating to the operation of the
excursion gambling boat or the conducting of gambling games.
-2-
<PAGE>
DRA and Greater Dubuque shall each form a separate committee consisting of not
more than three (3) individuals for the purpose of consulting and reaching
mutual agreement (subject to final approval by the DRA Board) with regard to the
above referred to matters and any other matters of policy. If the parties cannot
agree on a matter of policy, the issue shall be submitted to arbitration under
the provisions of paragraph 6 herein.
All day-to-day operational matters pertaining to the excursion gambling
boat operation shall be the responsibility of Greater Dubuque and shall be
carried out by Greater Dubuque without the necessity of consulting with DRA.
3. CONDITIONS PRECEDENT TO CONTRACT. This Operating Agreement shall be
effective only if all of the following conditions are satisfied:
(a) The filing by no later than February 22, 1993, of a joint
application by DRA and Greater Dubuque with the Iowa Racing and
Gaming Commission for licenses to conduct gambling games and to
operate an excursion gambling boat.
(b) Approval of the joint application referred to in subparagraph 3(a)
above by the Iowa Racing and Gaming Commission at its March 1993
meeting and the subsequent issuance of the required licenses.
(c) Approval of this Operating Agreement, and any amendments thereto, by
the Iowa Racing and Gaming Commission.
(d) Greater Dubuque obtaining adequate financing, including invested
equity capital, and providing evidence thereof acceptable to DRA
prior to the filing of the joint application for licenses referred
to in subparagraph 3(a) above.
(e) Termination no later than May 1, 1993, of the existing Sublease
Agreement between DRA, as lessor, and Dubuque Casino Belle, Inc., as
lessee, dated July 2, 1990. It is DRA's position that said Sublease
will automatically terminate effective March 31, 1993, by reason of
the termination of the DRA - Dubuque Casino Belle, Inc. Operating
Agreement.
(f) Amendment of the DRA - City of Dubuque Lease Agreement covering the
dock site and parking facilities for the purpose of (1) permitting
the subleasing of the property by DRA to Greater Dubuque and (2)
permitting, if necessary, the construction of a physical facility
for ticket sales upon the leased
-3-
<PAGE>
premises or upon some other premises, not currently leased,
acceptable to Greater Dubuque and DRA.
(g) The execution of a Sublease Agreement between DRA, as lessor, and
Greater Dubuque, as lessee, to be effective no later than May 1,
1993, and covering the premises presently leased by DRA to Dubuque
Casino Belle, Inc. Said Sublease Agreement shall be subject to the
approval of the City of Dubuque. Through this sublease, Greater
Dubuque will be provided with a dock site, berthing location, and a
parking area, which parking area is identified as Parking Lot #1 and
Parking Lot #2 under the Ice Harbor Parking Agreement dated July 2,
1990, with the City of Dubuque and other parties. The Sublease shall
also provide, if necessary, a location to construct a ticket sale
facility.
If it is necessary for Greater Dubuque to construct a facility for
ticket sales, the particulars of such facility, including its size
and design, shall be mutually agreed upon by the parties prior to
construction. The cost of construction and all related expenses,
including utility hookups, shall be divided between Greater Dubuque
and DRA as they mutually agree prior to commencement of
construction. If the parties cannot agree, then the issue of
cost-sharing shall be submitted to arbitration under the provisions
of paragraph 6 herein.
(h) Greater Dubuque obtaining by no later than February 22, 1993, signed
contracts, acceptable to both Greater Dubuque and DRA, in respect to
the purchase or lease/purchase of gaming equipment and an excursion
gambling boat having a passenger capacity acceptable to DRA.
(i) Greater Dubuque, prior to May 1, 1993, giving written notice to all
applicable parties to the Ice Harbor Parking Agreement dated July 2,
1990, stating that Greater Dubuque adopts and assumes all rights and
obligations that are applicable to an excursion gambling boat
operator under said Agreement.
If any of the foregoing conditions are not satisfied, this Operating Agreement
shall be null and void unless the unsatisfied condition is waived in writing by
both parties.
4. FINANCIAL MATTERS. All revenues resulting from the operation of the
excursion gambling boat shall initially be collected by Greater Dubuque and
shall be paid and divided between the parties on the following basis:
-4-
<PAGE>
(a) Payments to DRA.
(1) Greater Dubuque shall initially pay no admission fee to DRA.
Greater Dubuque shall pay to DRA an admission fee only if
mutually agreed to by the parties in the future.
Greater Dubuque shall be responsible for payment of any and
all fees owing to the State of Iowa and local governments
under Section 99F.10 of the Iowa Code or under any other state
or local law, regulation or ordinance. Greater Dubuque shall
indemnify and hold DRA harmless from any and all claims
relating to fees owing to the State of Iowa or local
governments under Section 99F.10 of the Iowa Code or under any
other state or local law, regulation, or ordinance.
(2) During each April 1 - March 31 excursion season, Greater
Dubuque shall pay to DRA a percentage of "net gambling
receipts" from gambling games, which percentage shall be as
follows:
8% of the first $5,000,000
10% of the next $5,000,000
12.5% of the next $5,000,000
15% of all "net gambling receipts"
in excess of $15,000,000.
For this purpose, the term "net gambling receipts" includes
gross receipts from gambling games, less amounts returned as
winnings to players and the state wagering tax imposed by
Section 99F.11 of the Iowa Code. This payment shall be made to
DRA weekly and within the time period required for remission
of the wagering tax to the State of Iowa under Section 99F.11
of the Iowa Code or under any other state or local law,
regulation or ordinance. Greater Dubuque shall be responsible
for remittance of all wagering taxes owing to the State of
Iowa under Section 99F.11 of the Iowa Code or under any other
state or local law, regulation or ordinance. Greater Dubuque
shall indemnify and hold DRA harmless from and against any and
all claims relating to wagering or other taxes owing to the
State of Iowa or any local government under Section 99F.11 of
the Iowa Code or under any other state or local law,
regulation, or ordinance.
-5-
<PAGE>
(3) For each April 1 - March 31 excursion season, the minimum
payment to DRA under subparagraphs (a)(1) [if applicable] and
(a)(2) above shall be $1,000,000, and any amount required to
satisfy the minimum shall be payable by Greater Dubuque within
15 days after the end of each April 1 - March 31 excursion
season. Any required payment under this subparagraph shall be
reduced by an appropriate proration if fewer than 12 months of
operation are carried out during the April 1, 1993 - March 31,
1994 initial excursion season.
The minimum payment to DRA under this subparagraph, as set
forth above, shall be reduced for any April 1 - March 31
excursion season during which:
(A) Either excursion boat gambling or a land-based slot or
casino operation is carried on by an operator licensee
under the laws of Illinois and/or Wisconsin; and
(B) The Illinois and/or Wisconsin licensed operator is a
business entity other than Greater Dubuque or a
corporation or business entity owned or controlled by
Greater Dubuque, even though Greater Dubuque or a
corporation or business entity owned or controlled by
Greater Dubuque is also an Illinois and/or Wisconsin
licensed operator carrying on excursion boat gambling or
land-based slot or casino operations under the laws of
Illinois and/or Wisconsin at locations other than Jo
Daviess County, Illinois and Grant County, Wisconsin;
and
(C) The Illinois and/or Wisconsin licensed operator
maintains an excursion boat gambling dock site in Jo
Daviess County, Illinois and/or Grant County, Wisconsin
or, in the case of land-based slot or casino operations,
carries on said operations in Jo Daviess County,
Illinois and/or Grant County, Wisconsin; and
(D) The Illinois and/or Wisconsin licensed operator conducts
either excursion boat gambling or a land-based slot or
casino operation from Jo Daviess County, Illinois and/or
Grant County, Wisconsin
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<PAGE>
during the period from May 1 through October 31.
If all of the above conditions exist, the $1,000,000 payment
otherwise guaranteed by Greater Dubuque to DRA shall be
reduced by $83,333.33 for each full calendar month that the
Illinois and/or Wisconsin licensed operator conducts excursion
boat gambling or land-based slot or casino gambling from Jo
Daviess County, Illinois and/or Grant County, Wisconsin, from
May 1 through October 31.
(b) Revenues retained by Greater Dubuque. Except for amounts due DRA
under subparagraphs (a)(1), (a)(2), and (a)(3) above,
(1) Greater Dubuque shall be entitled to retain all net gambling
receipts; and
(2) Greater Dubuque shall be entitled to retain all other
receipts, including but not limited to those from food and
beverage concessions, entertainment, sale of arts, crafts and
gifts, and sale of tickets.
(c) Parking revenues. Net revenues, if any, from parking of vehicles at
the dock site shall be paid and divided between Greater Dubuque and
DRA as determined by mutual agreement. Both parties acknowledge that
presently no charge is made for parking of vehicles and that any
future agreement between the parties relating to net revenues from
parking may be subject to the consent of the City of Dubuque.
5. LAND-BASED CASINO OPERATION. In the event land-based casino or slot
operations become authorized under Iowa law, DRA may elect to conduct such
operations. If DRA elects to conduct such operations, then the parties agree as
follows:
(a) DRA shall give written notice to Greater Dubuque, informing Greater
Dubuque of its intention to conduct a land-based casino and/or slot
operation. Within 60 days thereafter, Greater Dubuque may elect by
written notice to DRA to manage such operation, in which event DRA
and Greater Dubuque shall enter into a management agreement. Under
the management agreement, Greater Dubuque shall be responsible for
furnishing all equipment and for the supervision of the operation,
including all employee costs. Greater Dubuque shall pay DRA a
percentage of net gambling receipts derived from
-7-
<PAGE>
the land-based casino and/or slot operation, which percentage
payment shall be mutually agreed upon by the parties. If the parties
cannot agree, the issue of said percentage payment amount shall be
submitted to arbitration under the provisions of paragraph 6 herein.
(b) If Greater Dubuque does not elect to manage such land-based casino
or slot operation within the 60-day period referred to in
subparagraph (a) above, then DRA shall have the right, without
Greater Dubuque's consent, to manage such operation itself or enter
into a management agreement with a third party of DRA's choosing.
6. LIMITED ARBITRATION. Certain paragraphs of this Agreement require that
matters which cannot be mutually agreed upon by the parties shall be submitted
to arbitration pursuant to the provisions of this paragraph 6. In such event,
the matter, dispute or issue shall be resolved through arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
and the arbitration decision shall be binding upon both parties. As to all other
issues, matters and disputes which are not required to be resolved through
arbitration, each party shall have all legal and equitable rights and remedies
as provided by law.
7. RIGHT OF FIRST REFUSAL. In the event Greater Dubuque shall desire to
sell or lease the excursion gambling boat and its furnishings and gambling
equipment (hereinafter referred to as "furnishings and equipment") and/or its
interest in any ticket sale facility (hereinafter referred to as the "building")
constructed by it and obtains a bona fide offer from a third party for the
purchase or lease of the excursion gambling boat and its furnishings and
equipment and/or for its interest in said building, then DRA shall be given
written notice of any such offer, including a copy of such offer and any related
purchase or lease document; and DRA shall have the option to purchase or lease
the excursion gambling boat and its furnishings and equipment and/or Greater
Dubuque's interest in the building for the amount of the bona fide offer made by
the third party and upon the same terms and conditions as set forth in the third
party offer. DRA shall have 90 days following receipt of such written notice of
the third party offer in which to exercise its option to purchase or lease,
notice of which exercise by DRA shall be given in writing to Greater Dubuque
within said 90-day period.
If the bona fide offer to purchase or lease received by Greater Dubuque
from a third party relates only to the excursion gambling boat and its
furnishings and equipment and DRA exercises its option to purchase said boat and
its furnishings and equipment under this paragraph, then DRA shall also have the
right and option, at the same time, to purchase Greater Dubuque's interest in
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<PAGE>
the building. If the parties cannot reach an agreement as to the fair market
value of Greater Dubuque's interest in the building, then one appraiser shall be
chosen by Greater Dubuque and one appraiser shall be chosen by DRA to value
Greater Dubuque's interest in the building. The two appraisers shall together
determine the fair market value of Greater Dubuque's interest in the building,
which value shall be the amount paid to Greater Dubuque if DRA exercises its
option to purchase. In the event the two appraisers cannot agree on a fair
market value, then they shall jointly choose a third appraiser whose decision as
to fair market value shall be binding. "Fair market value", as used herein with
respect to Greater Dubuque's interest in the building, shall mean fair market
value determined as though Greater Dubuque's interest in the building and the
land on which it is situated is a fee simple interest. Using such approach, the
appraiser or appraisers shall state the fair market value of the land and the
building separately, and DRA shall pay Greater Dubuque only the amount
separately stated for the building. The cost of all appraisals shall be paid 50%
by DRA and 50% by Greater Dubuque.
In the event DRA exercises its option to purchase or lease under the terms
of this paragraph 7, closing of the purchase or lease shall occur as soon as
possible and by no later than 90 days following exercise of DRA's option.
By this Agreement it is intended that DRA shall have a right of first
refusal with respect to Greater Dubuque's proposed sale or lease of the
excursion gambling boat and its furnishings and equipment and/or Greater
Dubuque's interest in the ticket sale facility. Both parties acknowledge that
any such sale or lease may be subject to the approval of the Iowa Racing and
Gaming Commission.
If DRA fails to exercise its option to purchase or lease within the 90-day
period referred to above, then Greater Dubuque shall be free to proceed with the
proposed sale or lease to a third party upon the terms set forth in the bona
fide offer.
DRA's right of first refusal and options under this paragraph shall be
effective only during the term of this Agreement and any renewal term as
referred to in paragraph 1 herein and shall not be effective following
expiration of said term or renewal term. DRA's exercise or nonexercise of its
right of first refusal and options under this paragraph shall not relieve
Greater Dubuque from performing any obligation which it is otherwise required to
perform under the terms of this Agreement. Greater Dubuque's attempted or actual
sale or lease of the excursion gambling boat and its furnishings and equipment
or its interest in the building during the unexpired term of this Operating
Agreement or during the unexpired term of any renewal period shall constitute a
breach of this Agreement unless consented to in writing by DRA.
-9-
<PAGE>
8. RESPONSIBILITY FOR OPERATIONS. With regard to all operations and
activities relating to the excursion gambling boat and dock site facilities, the
parties agree as follows:
(a) Greater Dubuque shall be in possession of the excursion gambling
boat and in charge of operating, on a day-to-day basis, the boat and
all other on-board entities, including personnel, docking, embarking
and disembarking of boat passengers.
(b) Greater Dubuque will hire all gaming and nongaming employees and
will be responsible for their supervision and direction. All of said
individuals shall be considered as employees of Greater Dubuque, and
Greater Dubuque shall be responsible for payment of all payroll
taxes and government reporting with respect to Greater Dubuque's
employment of said individuals.
(c) Greater Dubuque shall be responsible for complying with all
requirements of Chapter 99F of the Iowa Code and all rules and
regulations of the Iowa Racing and Gaming Commission except those
which require compliance solely by DRA.
(d) Greater Dubuque shall indemnify and hold harmless DRA from and
against any and all liabilities, obligations, claims, damages,
causes of action, costs and expenses imposed upon, incurred by, or
asserted against DRA by reason of any accident, injury to or death
of persons, or loss of or damage to property occurring on the
excursion gambling boat or upon the building premises. The
respective duties and responsibilities of the parties with respect
to the dock site (other than the building premises) and the parking
area shall be covered under the Sublease Agreement to be entered
into between DRA, as lessor, and Greater Dubuque, as lessee.
(e) Greater Dubuque shall procure and maintain, at Greater Dubuque's
expense, comprehensive public liability insurance insuring both
Greater Dubuque and DRA in an amount not less than $10,000,000
single limit. Said liability insurance policy shall apply with
respect to the excursion gambling boat and any building premises. A
copy of said policy or policies shall be provided to DRA. Liability
insurance in an amount not less than $5,000,000 single limit shall
also be obtained by Greater Dubuque to cover the dock site and the
parking area and shall be more specifically covered
-10-
<PAGE>
under the Sublease between DRA, as lessor, and Greater Dubuque, as
lessee.
(f) Greater Dubuque shall be responsible for maintaining adequate
security on the excursion gambling boat and on the building
premises. The Sublease Agreement between DRA, as lessor, and Greater
Dubuque, as lessee, shall also require Greater Dubuque to maintain
adequate security upon the dock site and parking area covered under
the Sublease.
(g) Matters and policies relating to public parking in the dock and
surrounding area are controlled by the Ice Harbor Parking Agreement
dated July 2, 1990, the terms of which are incorporated herein by
reference.
(h) Cooperative advertising and joint marketing efforts will be jointly
conducted by Greater Dubuque and DRA. To facilitate such cooperative
advertising and joint marketing efforts, each party will appoint a
separate committee of not more than three (3) individuals, who will
jointly negotiate and agree upon such cooperative advertising and
joint marketing efforts, which agreement shall be subject to final
approval by the DRA Board of Directors. Nothing herein shall prevent
either party from conducting individual advertising and marketing on
said party's own behalf.
9. RIGHTS OF DRA DURING CONTRACT TERM. During the term of this Agreement,
one or more DRA designated representatives shall have the right at any time to
inspect the excursion gambling boat, the building, the boat docking facility,
and any other premises upon one day's advance notification to Greater Dubuque.
It is mutually intended that the excursion gambling boat and dock site facility
premises shall be kept clean and in good repair and that operations in general
shall be conducted on a first class basis.
10. RELATIONSHIP AND DUTIES WITH RESPECT TO THE STATE OF IOWA AND THE
RACING AND GAMING COMMISSION.
(a) Both parties acknowledge that with the filing of an application for
licenses, the applicant must pay a nonrefundable application fee to
the Racing and Gaming Commission of $25,000, which shall be paid
one-half (1/2) by DRA and one-half (1/2) by Greater Dubuque. All
additional fees assessed by the State in connection with the
processing of the application and investigative matters, including
any investigative fee payable to the Department of Public Safety,
shall be paid by the party to which such fees are allocable. Each
party will be
-11-
<PAGE>
responsible for its own legal fees and other expenses relating to
the licensing process.
(b) Greater Dubuque and DRA will comply with all standards adopted by
the Iowa Racing and Gaming Commission relating to boat operations,
facilities, conducting gambling games, wagering rules, and all other
applicable federal, state, and local laws.
(c) Greater Dubuque and DRA shall prepare and file all reports,
including financial reports, as required of them, respectively, by
Iowa law and rules and regulations of the Iowa Racing and Gaming
Commission. In addition, each party shall keep such books and
records and have audits performed as required of them, respectively,
by Iowa law and the Iowa Racing and Gaming Commission. Any and all
reports, financial records, books, data, and audit information
prepared by one party to this Agreement, regardless of whether or
not required by state law, shall be furnished to the other party
voluntarily and upon request. By this provision it is intended that
any and all data related directly or indirectly to the excursion
gambling boat operation shall be available to each party.
(d) Both parties shall fully cooperate with the Iowa Racing and Gaming
Commission and with any other state agencies relating to the
licensing procedure and all other matters covered under the terms of
this Agreement.
(e) DRA and Greater Dubuque shall procure and maintain all such surety
bonds which they each may be required by law to provide.
11. COVENANTS OF GREATER DUBUQUE AND DRA. During the term of the
Agreement, each party covenants as follows:
(a) Greater Dubuque agrees that it will not, without the consent of DRA,
operate an excursion gambling boat from dock sites in Dubuque
County, Iowa, Jo Daviess County, Illinois, or Grant County,
Wisconsin under the laws of said jurisdictions other than under the
terms of this Agreement, and Greater Dubuque shall not contract with
any other nonprofit corporation holding a gambling license for
excursion gambling boat operations in Dubuque County, Iowa, for as
long as this Agreement is in effect.
(b) Greater Dubuque agrees that the excursion gambling boat to be
operated under the terms of this Agree-
-12-
<PAGE>
ment shall not be used by Greater Dubuque for the benefit of any
other licensed holder or for any purpose other than riverboat
gambling without DRA's approval.
(c) DRA covenants and agrees that during the term of this Agreement it
will not conduct excursion gambling boat operations with any
excursion gambling boat licensed operator other than Greater Dubuque
without Greater Dubuque's consent.
12. DEFAULT. The occurrence of any one or more of the following events
shall constitute a default by a party hereunder:
(a) Failure of the party to perform or comply with any of the duties and
obligations imposed upon said party under the terms of this
Agreement.
(b) The suspension or revocation of the party's license under Chapter
99F of the Iowa Code by the State of Iowa or the Iowa Racing and
Gaming Commission.
(c) Failure of the party to follow and comply with any applicable
federal, state, municipal or other local laws, ordinances, rules and
regulations, including, without limitation, any and all laws and
regulations of the State of Iowa and the Iowa Racing and Gaming
Commission relating to excursion boat gambling.
(d) The party's adjudication as a bankrupt or as insolvent, or the
appointment of a receiver, or an assignment for the benefit of
creditors by or on behalf of either party.
(e) Liquidation or dissolution of the party, which liquidation or
dissolution is not caused by the other party.
If one of the foregoing acts of default occurs and is not remedied by the
defaulting party within 30 days after the giving of written notice by the
nondefaulting party of said default, then the nondefaulting party shall have all
legal and equitable rights and remedies provided at law, including termination
of this contract, specific performance, or injunctive relief. The remedies of
the nondefaulting party shall be cumulative and the exercise of any one or more
remedies provided at law shall not be construed as a waiver of any other
remedies. Further, no course of dealing between the parties or failure on the
part of a nondefaulting party to exercise any right or remedy shall operate as a
waiver of such right to claim a default in the future.
-13-
<PAGE>
Neither party shall be liable under this Agreement or deemed in default of
this Agreement for any loss, damage, delay or failure of performance of any part
of this Agreement resulting, directly or indirectly, from any force majeure
event, including without limitation lightning; power surges, fluctuations or
failures; strikes or labor disputes; floods; acts of God; the elements, war,
civil disturbances, and acts of civil or military authorities, or the public
enemy; fuel or energy shortages; condemnation or taking by eminent domain;
restraining order or injunction issued by a court upon the application or
petition of a nonparty to this Agreement; damage or destruction of a party's
boat, building or other propriety or of the property it contains, in whole or in
part, except to the extent of any responsibility a party may have under this
Agreement for negligence or willful misconduct.
13. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices, requests, demands, and other communications
hereunder shall be deemed to have been given if delivered in person
or if sent by certified mail, postage prepaid, to the other party at
the following addresses (or such other address as may be designated
in writing):
To DRA: Dubuque Racing Association, Ltd.
Attention: General Manager
P. 0. Box 3190
Dubuque, IA 52004-3190
To Greater Greater Dubuque Riverboat
Dubuque: Entertainment Company
Attention: Joseph P. Zwack
1890 John F. Kennedy Road
Dubuque, IA 52002
(b) Relationship of Parties. Nothing in this Agreement shall be
construed to create a partnership between the parties, a
relationship of employer and employee between the parties, or a
relationship of principal and agent between the parties.
(c) Nonassignability. Neither party may assign any of its rights, duties
or obligations under this Agreement, in whole or in part, to any
other person, firm, corporation or entity without the written
consent of the other party. However, it is agreed that either party
may assign its rights under this Agreement for the sole purpose of
securing and collateralizing a loan owing by said party to a lender.
(d) Successors and Assigns. This Agreement and all of the obligations,
duties and rights of the parties
-14-
<PAGE>
hereunder shall inure to and be binding upon the heirs, successors
and assigns of the parties to the extent that assignment is
permitted under paragraph 13(c) above.
(e) Governing Law. This Agreement and all rights and duties hereunder,
including, but not limited to, all matters of construction, validity
and performance, shall be governed by the laws of the State of Iowa.
(f) Complete Agreement. This Agreement embodies all of the
representations, warranties and agreements of the parties and
supersedes all prior oral and written proposals and communications.
(g) Construction. This Agreement shall be construed to comply with all
applicable Iowa laws, Commission rules, and regulations relating to
excursion boat gambling and may be amended from time to time in
order to comply with such laws, Commission rules, and regulations.
(h) Amendment. This Agreement may be amended or modified at any time but
only by a writing signed by both parties.
(i) Headings. Paragraph headings herein are for reference purposes only.
Dated this 22nd day of February, 1993.
DUBUQUE RACING ASSOCIATION, LTD.
By /s/ Norma Denlinger
-------------------------------------
Norma Denlinger, President
By /s/ Sharon Finnin
-------------------------------------
Sharon Finnin, Treasurer
GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C.
By /s/ Joseph P. Zwack
-------------------------------------
Joseph P. Zwack, Managing Member
-15-
<PAGE>
Exhibit 10.9B
AMENDMENT TO OPERATING AGREEMENT
This AMENDMENT TO OPERATING AGREEMENT is made and entered into this 22nd
day of February, 1993, between DUBUQUE RACING ASSOCIATION, LTD., an Iowa
nonprofit corporation, (hereinafter referred to as "DRA") and GREATER DUBUQUE
RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company,
(hereinafter referred to as "Greater Dubuque").
RECITALS:
A. On this date, February 22, 1993, DRA and Greater Dubuque have signed an
Operating Agreement setting forth their respective rights, duties and
obligations with regard to excursion gambling boat gambling under Chapter 99F of
the Iowa Code.
B. DRA and Greater Dubuque have jointly agreed to amend and modify the
terms of the Operating Agreement referred to in Recital A above.
NOW, THEREFORE, IT IS AGREED that the February 22, 1993 Operating
Agreement between the parties is amended as follows:
1. Subparagraph (d) of paragraph 3 (Conditions Precedent to Contract) is
amended to read as follows:
(d) Greater Dubuque obtaining adequate financing, including invested
equity capital, and providing evidence thereof acceptable to DRA by
no later than March 4, 1993.
2. Subparagraph (h) of paragraph 3 (Conditions Precedent to Contract) is
amended to read as follows:
(h) Greater Dubuque obtaining by no later than March 4, 1993, signed
contracts, acceptable to both Greater Dubuque and DRA, in respect to
the purchase or lease/purchase of gaming equipment and an excursion
gambling boat having a passenger capacity acceptable to DRA.
Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement shall remain in full force and effect.
Dated this 22nd day of February, 1993.
DUBUQUE RACING ASSOCIATION, LTD.
By /s/ Norma Denlinger
-------------------------------------
Norma Denlinger, President
By /s/ Sharon Finnin
-------------------------------------
Sharon Finnin, Treasurer
GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C.
By /s/ Joseph P. Zwack
-------------------------------------
Joseph P. Zwack, Managing Member
<PAGE>
Exhibit 10.9C
AMENDMENT TO OPERATING AGREEMENT
This AMENDMENT TO OPERATING AGREEMENT is made and entered into this 4th
day of March, 1993, between DUBUQUE RACING ASSOCIATION, LTD., an Iowa nonprofit
corporation, (hereinafter referred to as "DRA") and GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company, (hereinafter
referred to as "Greater Dubuque").
RECITALS:
A. On February 22, 1993, DRA and Greater Dubuque signed an operating
Agreement setting forth their respective rights, duties and obligations with
regard to excursion gambling boat gambling under Chapter 99F of the Iowa Code.
An Amendment to said Operating Agreement was also signed on February 22, 1993,
amending paragraphs 3(d) and 3(h) of said Agreement.
B. DRA and Greater Dubuque have jointly agreed to amend and modify the
terms of the Operating Agreement, as previously amended, referred to in Recital
A above.
NOW, THEREFORE, IT IS AGREED that the February 22, 1993 Operating
Agreement, as previously amended, is further amended as follows:
1. Subparagraph (d) of paragraph 3 (Conditions Precedent to Contract)
is amended to read as follows:
(d) Greater Dubuque obtaining adequate financing, including invested
equity capital, and providing evidence thereof acceptable to DRA by
no later than March 11, 1993.
2. Subparagraph (h) of paragraph 3 (Conditions Precedent to Contract)
is amended read as follows:
(h) Greater Dubuque obtaining by no later than March 11, 1993, signed
contracts, acceptable to both Greater Dubuque and DRA, in respect to
the purchase or lease/purchase of gaming equipment and an excursion
gambling boat having a passenger capacity acceptable to DRA.
Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement shall remain in full force and effect. The
Amendment to Operating Agreement dated February 22, 1993 shall have no further
force or effect.
Dated this 4th day of March, 1993.
DUBUQUE RACING ASSOCIATION, LTD. GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C.
By /s/ Norma Denlinger
-------------------------------- By /s/ Joseph P. Zwack
Norma Denlinger, President -------------------------------------
Joseph P. Zwack, Managing Member
By /s/ Sharon Finnin
--------------------------------
Sharon Finnin, Treasurer
<PAGE>
Exhibit 10.9D
THIRD AMENDMENT TO OPERATING AGREEMENT
This THIRD AMENDMENT TO OPERATING AGREEMENT is made and entered into this
11th day of March, 1993, between DUBUQUE RACING ASSOCIATION, LTD., an Iowa
nonprofit corporation, (hereinafter referred to as "DRA") and GREATER DUBUQUE
RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company,
(hereinafter referred to as "Greater Dubuque").
RECITALS:
A. The existing Operating Agreement entered into between the parties on
February 22, 1993, and subsequently amended, does not contain certain
administratively-required provisions under Administrative Rule 20.11(3), and the
parties wish to comply with said Administrative Rule.
B. DRA and Greater Dubuque have jointly agreed to amend and modify the
Operating Agreement referred to in the recital above so as to comply with the
Administrative Rule there specified.
NOW, THEREFORE, IT IS AGREED that the February 22, 1993 Operating
Agreement between the parties, as previously amended, is hereby further amended
so as to add the following subparagraphs to Paragraph 13 MISCELLANEOUS
PROVISIONS:
(j) The operator, Greater Dubuque, and its officers, directors, members,
partners, and shareholders shall receive no share, percentage, or
proportion of the money received for admissions to the gambling
excursion boat.
(k) No duty relating to casino gambling may be subcontracted.
(l) Any future amendments to the Operating Agreement shall be subject to
the approval of the Iowa Racing and Gaming Commission.
Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement and existing Amendments thereto shall
remain in full force and effect.
Dated this 11th day of March, 1993.
DUBUQUE RACING ASSOCIATION, LTD. GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C.
By /s/ Norma Denlinger
----------------------------- By /s/ Joseph P. Zwack
Norma Denlinger, President ----------------------------------
Joseph P. Zwack
Managing Member
By /s/ Ronald Spillane
-----------------------------
Ronald Spillane, Secretary
Exhibit 10.9E
FOURTH AMENDMENT TO OPERATING AGREEMENT
This FOURTH AMENDMENT TO OPERATING AGREEMENT is made and entered into this
11th day of March, 1993, between DUBUQUE RACING ASSOCIATION, LTD., an Iowa
nonprofit corporation, (hereinafter referred to as "DRA") and GREATER DUBUQUE
RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company,
(hereinafter referred to as "Greater Dubuque").
RECITALS:
A. On February 22, 1993, DRA and Greater Dubuque signed an Operating
Agreement setting forth their respective rights, duties and obligations with
regard to excursion gambling boat operations under Chapter 99F of the Iowa Code.
Amendments to said Operating Agreement were signed on February 22, 1993, March
4, 1993, and March 11, 1993, amending said Operating Agreement.
B. DRA and Greater Dubuque have jointly agreed to further amend and modify
the terms of the Operating Agreement, as previously amended, referred to in
Recital A above.
NOW, THEREFORE, IT IS AGREED that the February 22, 1993 Operating
Agreement, as previously amended, is further amended as follows:
1. The last subparagraph of paragraph 1 is amended to read as follows:
Excursion riverboat operations shall begin on August 1, 1993. It is
mutually intended that the required licenses to be issued by the Iowa
Racing and Gaming Commission shall be effective as of August 1, 1993.
Greater Dubuque agrees that DRA may contract with a third-party operator
for excursion gambling boat operations during the period from April 1,
1993 through July 31, 1993.
2. Paragraph 3 is amended in its entirety to read as follows:
3. CONDITIONS PRECEDENT TO CONTRACT. This Operating Agreement shall
be effective only if all of the following conditions are satisfied:
(a) The filing by no later than February 22, 1993, of a joint
application by DRA and Greater Dubuque with the Iowa Racing
and Gaming Commission for licenses to conduct gambling games
and to operate an excursion gambling boat.
<PAGE>
(b) Approval of the joint application referred to in subparagraph
3(a) above by the Iowa Racing and Gaming Commission at its
March 1993 meeting and the subsequent issuance of required
licenses, which licenses shall be effective as of August 1,
1993.
(c) Approval of this Operating Agreement, and any amendments
thereto, by the Iowa Racing and Gaming Commission.
(d) Greater Dubuque obtaining adequate financing, including
invested equity capital, and providing evidence thereof
acceptable to DRA by no later than April 9, 1993.
(e) Termination no later than the close of business on July 31,
1993, of the existing Sublease Agreement between DRA, as
lessor, and Dubuque Casino Belle, Inc., as lessee, dated July
2, 1990. It is DRA's position that said Sublease will
automatically terminate effective March 31, 1993, by reason of
the termination of the DRA - Dubuque Casino Belle, Inc.
Operating Agreement.
(f) Amendment of the DRA - City of Dubuque Lease Agreement
covering the dock site and parking facilities for the purpose
of (1) permitting the subleasing of the property by DRA to
Greater Dubuque and (2) permitting, if necessary, the
construction of a physical facility for ticket sales upon the
leased premises or upon some other premises, not currently
leased, acceptable to Greater Dubuque and DRA.
(g) The execution of a Sublease Agreement between DRA, as lessor,
and Greater Dubuque, as lessee, to be effective no later than
August 1, 1993, and covering the premises presently leased by
DRA to Dubuque Casino Belle, Inc. Said Sublease Agreement
shall be subject to the approval of the City of Dubuque.
Through this sublease, Greater Dubuque will be
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<PAGE>
provided with a dock site, berthing location, and a parking
area, which parking area is identified as Parking Lot #1 and
Parking Lot #2 under the Ice Harbor Parking Agreement dated
July 2, 1990, with the City of Dubuque and other parties. The
Sublease shall also provide, if necessary, a location to
construct a ticket sale facility.
If it is necessary for Greater Dubuque to construct a facility
for ticket sales, the particulars of such facility, including
its size and design, shall be mutually agreed upon by the
parties prior to construction. The cost of construction and
all related expenses, including utility hookups, shall be
divided between Greater Dubuque and DRA as they mutually agree
prior to commencement of construction. If the parties cannot
agree, then the issue of cost-sharing shall be submitted to
arbitration under the provisions of paragraph 6 herein.
(h) Greater Dubuque obtaining by no later than April 9, 1993,
signed contracts, acceptable to both Greater Dubuque and DRA,
in respect to the purchase or lease/purchase of gaming
equipment and an excursion gambling boat having a passenger
capacity acceptable to DRA.
(i) Greater Dubuque, prior to July 1, 1993, giving written notice
to all applicable parties to the Ice Harbor Parking Agreement
dated July 2, 1990, stating that effective August 1, 1993,
Greater Dubuque adopts and assumes all rights and obligations
that are applicable to an excursion gambling boat operator
under said Agreement.
If any of the foregoing conditions are not satisfied, this Operating
Agreement shall be null and void unless the unsatisfied condition is
waived in writing by both parties.
3. Paragraph 4(a)(3) is amended to read as follows:
-3-
<PAGE>
4(a) (3) For each April 1 - March 31 excursion season, beginning with
the excursion season ending March 31, 1994, the minimum
payment to DRA under subparagraphs (a)(1) [if applicable] and
(a)(2) above shall be $1,000,000, and any amount required to
satisfy the minimum shall be payable by Greater Dubuque within
15 days after the end of each April 1 - March 31 excursion
season.
The minimum payment to DRA under this subparagraph, as set
forth above, shall be reduced for any April 1 - March 31
excursion season, including the initial excursion season
ending March 31, 1994, during which:
(A) Either excursion boat gambling or a land-based slot or
casino operation is carried on by an operator licensee
under the laws of Illinois and/or Wisconsin; and
(B) The Illinois and/or Wisconsin licensed operator is a
business entity other than Greater Dubuque or a
corporation or business entity owned or controlled by
Greater Dubuque, even though Greater Dubuque or a
corporation or business entity owned or controlled by
Greater Dubuque is also an Illinois and/or Wisconsin
licensed operator carrying on excursion boat gambling or
land-based slot or casino operations under the laws of
Illinois and/or Wisconsin at locations other than Jo
Daviess County, Illinois and Grant County, Wisconsin;
and
(C) The Illinois and/or Wisconsin licensed operator
maintains an excursion boat gambling dock site in Jo
Daviess County, Illinois and/or Grant County, Wisconsin
or, in the case of land-based slot or casino operations,
carries on said operations in Jo Daviess County,
Illinois and/or Grant County, Wisconsin; and
(D) The Illinois and/or Wisconsin licensed operator conducts
either excursion boat gambling or a land-based slot or
casino operation from Jo Daviess County, Illinois and/or
Grant County, Wisconsin
-4-
<PAGE>
during the period from May 1 through October 31.
If all of the above conditions exist, the $1,000,000 payment
otherwise guaranteed by Greater Dubuque to DRA shall be
reduced by $83,333.33 for each full calendar month that the
Illinois and/or Wisconsin licensed operator conducts excursion
boat gambling or land-based slot or casino gambling from Jo
Daviess County, Illinois and/or Grant County, Wisconsin, from
May 1 through October 31.
4. Paragraph 13 is amended by adding the following new subparagraph (m):
(m) Simultaneously with the signing of this Fourth Amendment to
the Operating Agreement, Greater Dubuque is paying to DRA a
$20,000.00 fee, which shall be nonrefundable. If all
conditions set forth at paragraph 3 above are satisfied and
excursion gambling boat operations are commenced on August 1,
1993, then said $20,000.00 payment shall be credited against
the payment due DRA under paragraph 4(a) above for the initial
excursion gambling season ending March 31, 1994.
Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement and existing Amendments thereto shall
remain in full force and effect.
Dated this 11th day of March, 1993.
DUBUQUE RACING ASSOCIATION, LTD.
By /s/ Norma Denlinger
-------------------------------------
Norma Denlinger, President
By /s/ Ron Spillane
-------------------------------------
Ron Spillane, Treasurer
GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C.
By /s/ Joseph P. Zwack
-------------------------------------
Joseph P. Zwack, Managing Member
-5-
Exhibit 10.9F
FIFTH AMENDMENT TO OPERATING AGREEMENT
This FIFTH AMENDMENT TO OPERATING AGREEMENT is made and entered into this
9th day of April, 1993, between DUBUQUE RACING ASSOCIATION, LTD., an Iowa
nonprofit corporation, (hereinafter referred to as "DRA") and GREATER DUBUQUE
RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company,
(hereinafter referred to as "Greater Dubuque").
RECITALS:
A. On February 22, 1993, DRA and Greater Dubuque signed an Operating
Agreement setting forth their respective rights, duties and obligations with
regard to excursion gambling boat operations under Chapter 99F of the Iowa Code.
Amendments to said Operating Agreement were signed on February 22, 1993, March
4, 1993, and March 11, 1993, amending said Operating Agreement.
B. DRA and Greater Dubuque have jointly agreed to further amend and modify
the terms of the Operating Agreement, as previously amended, referred to in
Recital A above.
NOW, THEREFORE, IT IS AGREED that the February 22, 1993 Operating
Agreement, as previously amended, is further amended as follows:
1. The last paragraph of paragraph 1 is amended to read as follows:
Excursion riverboat operations shall begin on August 1, 1993. It is
mutually intended that the required licenses to be issued by the Iowa
Racing and Gaming Commission shall be effective as of August 1, 1993.
Greater Dubuque agrees that DRA may contract with a third-party operator
for excursion gambling boat operations during the period from April 1,
1993 through July 31, 1993. If for any reason, including any force majeure
event under paragraph 12, Greater Dubuque does not commence riverboat
operations by August 1, 1993, as required above, Greater Dubuque agrees to
pay DRA liquidated damages of $1,250.00 per day for each day following
July 31, 1993 that the commencement of excursion gambling boat operations
is delayed. This liquidated damages payment of $1,250.00 per day will not
be credited against the guaranteed minimum payment to DRA under paragraph
4(a)(3) of this Agreement and shall not constitute a waiver, in whole or
in part, of any other rights or remedies which DRA has under this
Agreement.
2. Subparagraph (h) of paragraph 3 (Conditions Precedent to Contract) is
amended to read as follows:
(h) Greater Dubuque obtaining by no later than April 9, 1993, a
signed contract,
<PAGE>
acceptable to both Greater Dubuque and DRA, in respect to the
purchase or lease/purchase of an excursion gambling boat
having a passenger capacity acceptable to DRA.
At such time as Greater Dubuque obtains a signed contract for
the purchase or lease/purchase of gaming equipment, a copy of
such contract shall be provided immediately to DRA.
3. Paragraph 3 is amended to add the following as a new subparagraph (j):
(j) Greater Dubuque will provide status and progress reports to
DRA at least every two weeks. If at any time DRA believes that
Greater Dubuque is not making reasonable progress including,
without limitation, the obtaining of construction financing
and a shipyard contract, then DRA may, in its discretion,
elect to terminate this Agreement. In the event of such
termination by DRA under this paragraph 3(j), both parties
will be released from any further obligation under this
Agreement, except that DRA will retain the $20,000.00
nonrefundable fee paid pursuant to paragraph 13(m) herein.
Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement and existing Amendments thereto shall
remain in full force and effect.
Dated this 9th day of April, 1993.
DUBUQUE PACING ASSOCIATION, LTD.
By /s/ Norma M. Denlinger
---------------------------------
Norma Denlinger, President
By /s/ Ron Spillane
---------------------------------
Ron Spillane, Secretary
GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT CORP., L.C.
By /s/ Joseph P. Zwack
---------------------------------
Joseph P. Zwack, Managing Member
-2-
Exhibit 10.9G
SIXTH AMENDMENT TO OPERATING AGREEMENT
This SIXTH AMENDMENT TO OPERATING AGREEMENT is made and entered into this
29th day of November, 1993, between DUBUQUE RACING ASSOCIATION, LTD., an Iowa
nonprofit corporation, (hereinafter referred to as "DRA") and GREATER DUBUQUE
RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company,
(hereinafter referred to as "Greater Dubuque").
RECITALS:
A. On February 22, 1993, DRA and Greater Dubuque signed an Operating
Agreement setting forth their respective rights, duties and obligations with
regard to excursion gambling boat operations under Chapter 99F of the Iowa Code.
Amendments to said Operating Agreement were signed on February 22, 1993, March
4, 1993, March 11, 1993, and April 9, 1993, amending said Operating Agreement.
B. DRA and Greater Dubuque have jointly agreed to further amend and modify
the terms of the Operating Agreement, as previously amended, referred to in
Recital A above.
NOW, THEREFORE, IT IS AGREED that the February 22, 1993 Operating
Agreement, as previously amended, is further amended by revising the last
paragraph of paragraph 1 to read as follows:
Excursion riverboat operations shall begin on August 1, 1993. It is
mutually intended that the required licenses to be issued by the Iowa
Racing and Gaming Commission shall be effective as of August 1, 1993.
Greater Dubuque agrees that DRA may contract with a third-party operator
for excursion gambling boat operations during the period from April 1,
1993 through July 31, 1993. If for any reason, including any force majeure
event under paragraph 12, Greater Dubuque does not commence riverboat
operations by August 1, 1993, as required above, Greater Dubuque agrees to
pay DRA liquidated damages of $1,250.00 per day for each day following
July 31, 1993 that the commencement of excursion gambling boat operations
is delayed. This liquidated damages payment of $1,250.00 per day will not
be credited against the guaranteed minimum payment to DRA under paragraph
4(a)(3) of this Agreement and shall not constitute a waiver, in whole or
in part, of any other rights or remedies which DRA has under this
Agreement. The $1,250.00 payment shall be promptly remitted by DRA to the
City of Dubuque, Iowa and Dubuque County, Iowa as follows:
<PAGE>
City of Dubuque $1,025.00
Dubuque County 225.00
---------
Total $1,250.00
Both parties acknowledge that the $1,250.00 per day liquidated damages
payment shall be remitted by DRA to the City of Dubuque, Iowa and Dubuque
County, Iowa for the purpose of reimbursing the City of Dubuque and
Dubuque County for the following estimated damages to be incurred by said
public bodies by reason of the failure of riverboat gambling operations to
commence by August 1, 1993:
(a) Loss of one-half (1/2) of one percent (1%) of adjusted gross
gambling receipts owing by Greater Dubuque to the City of
Dubuque, Iowa under ss.99F.11(1) of the Code of Iowa.
(b) Loss of one-half (1/2) of one percent (1%) of adjusted gross
gambling receipts owing by Greater Dubuque to Dubuque County,
Iowa under ss.99F.11(1) of the Code of Iowa.
(c) Loss of fifty cents (50(cent)) per person tax owing by Greater
Dubuque to the City of Dubuque, Iowa under ss.99F.10(3) of the
Code of Iowa for each person embarking upon the excursion
gambling boat.
At such time as excursion gambling boat operations are commenced by
Greater Dubuque, the $1,250.00 per day payment referred to herein shall
cease and the amounts owing to the City of Dubuque, Iowa and Dubuque
County, Iowa under ss.ss.99F.10 and 99F.11 of the Code of Iowa shall be
paid directly by Greater Dubuque, as required by paragraph 4(a)(1) and
paragraph 4(a)(2) of this Agreement.
Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement and existing Amendments thereto shall
remain in full force and effect.
Dated this 29th day of November, 1993.
DUBUQUE RACING ASSOCIATION, LTD.
By /s/ Norma Denlinger
---------------------------------------
Norma Denlinger, President
-2-
<PAGE>
By /s/ Ron Spillane
---------------------------------------
Ron Spillane, Secretary
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT
CORP., L. C.
By /s/ Joseph P. Zwack
---------------------------------------
Joseph P. Zwack, Managing Member
-3-
<PAGE>
Exhibit 10.9H
SEVENTH AMENDMENT TO OPERATING AGREEMENT
This SEVENTH AMENDMENT TO OPERATING AGREEMENT is made and entered into
this 6th day of April, 1994, between DUBUQUE RACING ASSOCIATION, LTD., an Iowa
nonprofit corporation, (hereinafter referred to as "DRA") and GREATER DUBUQUE
RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company,
(hereinafter referred to as "Greater Dubuque").
RECITALS:
A. On February 22, 1993, DRA and Greater Dubuque signed an Operating
Agreement setting forth their respective rights, duties and obligations with
regard to excursion gambling boat operations under Chapter 99F of the Iowa Code.
Amendments to said Operating Agreement were signed on February 22, 1993, March
4, 1993, March 11, 1993, April 9, 1993, and November 29, 1993, amending said
Operating Agreement.
B. DRA and Greater Dubuque have jointly agreed to further amend and modify
the terms of the Operating Agreement, as previously amended, referred to in
Recital A above.
NOW, THEREFORE, IT IS AGREED that notwithstanding the provisions of
paragraph 4(a)(3) of the Operating Agreement, the $500,000.00 minimum payment
owing to DRA for the April 1, 1993 - March 31, 1994 excursion season shall be
due and payable on May 1, 1994.
Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement and existing Amendments thereto shall
remain in full force and effect.
Dated this 6th day of April, 1994.
DUBUQUE RACING ASSOCIATION, LTD.
By /s/ Terry Harrmann
-----------------------------------
Terry Harrmann, President
By /s/ Ron Spillane
-----------------------------------
Ron Spillane, Secretary
GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT CORP., L.C.
By /s/ Joseph P. Zwack
-----------------------------------
Joseph P. Zwack, Managing Member
Exh 10.9I
EIGHTH AMENDMENT TO OPERATING AGREEMENT
This EIGHTH AMENDMENT TO OPERATING AGREEMENT is made and entered into this
29th day of April, 1994, between DUBUQUE RACING ASSOCIATION, LTD., an Iowa
nonprofit corporation, (hereinafter referred to as "DRA") and GREATER DUBUQUE
RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company,
(hereinafter referred to as "Greater Dubuque").
RECITALS:
A. On February 22, 1993, DRA and Greater Dubuque signed an operating
Agreement setting forth their respective rights, duties and obligations with
regard to excursion gambling boat operations under Chapter 99F of the Iowa Code.
Amendments to said Operating Agreement were signed on February 22, 1993, March
4, 1993, March 11, 1993, April 9, 1993, November 29, 1993, and April 6, 1994
amending said Operating Agreement.
B. DRA and Greater Dubuque have jointly agreed to further amend and modify
the terms of the Operating Agreement, as previously amended, referred to in
Recital A above.
NOW, THEREFORE, IT IS AGREED that the February 22, 1993 Operating
Agreement, as previously amended, is further amended as follows:
1. Paragraph 4(a)(3) is amended to read as follows:
For each April 1 - March 31 excursion season, beginning with the
excursion season ending March 31, 1994, the minimum payment to DRA under
subparagraphs (a) (1) [if applicable] and (a)(2) above shall be
$1,000,000. Any amount required to satisfy the minimum shall be payable by
Greater Dubuque within 15 days after the end of each April 1 - March 31
excursion season, subject to an exception for the April 1, 1993 - March
31, 1994 excursion season as set forth below.
The minimum payment to DRA under this subparagraph, as set forth above,
shall be reduced for any April 1 - March 31 excursion season, including
the initial excursion season ending March 31, 1994, during which:
(A) Either excursion boat gambling or a land-based slot or casino
operation is carried on by an operator licensee under the laws of
Illinois and/or Wisconsin; and
(B) The Illinois and/or Wisconsin licensed operator is a business entity
other than Greater Dubuque or a corporation or business entity owned
or controlled by Greater Dubuque, even though Greater Dubuque or
<PAGE>
a corporation or business entity owned or controlled by Greater
Dubuque is also an Illinois and/or Wisconsin licensed operator
carrying on excursion boat gambling or land-based slot or casino
operations under the laws of Illinois and/or Wisconsin at locations
other than Jo Daviess County, Illinois and Grant County, Wisconsin;
and
(C) The Illinois and/or Wisconsin licensed operator maintains an
excursion boat gambling dock site in Jo Daviess County, Illinois
and/or Grant County, Wisconsin or, in the case of land-based slot
or casino operations, carries on said operations in Jo Daviess
County, Illinois and/or Grant County, Wisconsin; and
(D) The Illinois and/or Wisconsin licensed operator conducts either
excursion boat gambling or a land-based slot or casino operation
from Jo Daviess County, Illinois and/or Grant County, Wisconsin
during the period from May 1 through October 31.
If all of the above conditions exist, the $1,000,000 payment otherwise
guaranteed by Greater Dubuque to DRA shall be reduced by $83,333.33 for
each full calendar month that the Illinois and/or Wisconsin licensed
operator conducts excursion boat gambling or land-based slot or casino
gambling from Jo Daviess County, Illinois and/or Grant County, Wisconsin,
from May 1 through October 31.
Notwithstanding the foregoing, the parties mutually agree that the
$500,000.00 minimum payment owing to DRA for the April 1, 1993 - March 31,
1994 excursion season shall be due and payable as follows:
(i) The unpaid principal amount from time to time owing shall draw and
accrue interest at the rate of 5.15% per annum from and after May 1,
1994.
(ii) Greater Dubuque shall make a principal payment to DRA of
$125,000.00, plus interest, on each of the following dates:
October 1, 1994
April 1, 1995
October 1, 1995
April 1, 1996.
(iii) Greater Dubuque may prepay the unpaid principal balance at any time
without DRA's consent.
-2-
<PAGE>
The above payment schedule and terms shall be evidenced by a promissory
note executed by Greater Dubuque, as maker, and payable to the order of
DRA, as payee, and dated May 1, 1994.
2. Paragraph 7 is amended by adding the following as a new subparagraph:
In the event Greater Dubuque sells (subject to the foregoing
conditions and restrictions) the excursion gambling boat or any of its
furnishings and equipment, whether during the term of this Agreement or
thereafter, it is agreed that any proceeds of sale shall first be applied
to pay any and all obligations owing by Greater Dubuque to DRA, whether or
not referred to in this Agreement. Such obligations shall include, but not
be limited to, any amounts owing to DRA under paragraph 4 of this
Agreement for any preceding period and for any unexpired term of this
Operating Agreement or for any unexpired term of any renewal period. All
such obligations owing by Greater Dubuque to DRA shall be paid from said
proceeds of sale prior to the making of any distributions, loans or
payments to investors or members of Greater Dubuque and also prior to the
repayment by Greater Dubuque of any loans or other obligations owing to
any investor, member or managing agent of Greater Dubuque.
3. By reason of this Eighth Amendment to Operating Agreement, the Seventh
Amendment to operating Agreement dated April 6, 1994 is hereby cancelled and
superseded.
Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement and existing Amendments thereto shall
remain in full force and effect.
Dated this 29th day of April, 1994.
DUBUQUE RACING ASSOCIATION, LTD
By /s/ Terry O. Harrmann
---------------------------------
Terry O. Harrmann, President
By /s/ Ronald A. Spillane
---------------------------------
Ronald A. Spillane, Secretary
GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C.
By /s/ Joseph P. Zwack
---------------------------------
Joseph P. Zwack, Managing Member
-3-
Exhibit 10.9J
NINTH AMENDMENT TO OPERATING AGREEMENT
This NINTH AMENDMENT TO OPERATING AGREEMENT is made and entered into this
______ day of July, 1995, between DUBUQUE RACING ASSOCIATION, LTD., an Iowa
nonprofit corporation, (hereinafter referred to as "DRA") and GREATER DUBUQUE
RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company,
(hereinafter referred to as "Greater Dubuque").
RECITALS:
A. On February 22, 1993, DRA and Greater Dubuque signed an Operating
Agreement setting forth their respective rights, duties and obligations with
regard to excursion gambling boat operations under Chapter 99F of the Iowa Code.
Amendments to said Operating Agreement were signed on February 22, 1993, March
4, 1993, March 11, 1993 (two amendments signed on 3/11/93), April 9, 1993,
November 29, 1993, April 6, 1994, and April 29, 1994, amending said Operating
Agreement. (The term "Operating Agreement" as used hereafter shall refer to the
original Operating Agreement as amended by all prior amendments and by this
Ninth Amendment, except where reference is made to the "original" Operating
Agreement, or to the Operating Agreement as amended previous to this Ninth
Amendment.)
B. Subsequent to the adoption of the original Operating Agreement, the
Iowa legislature amended Chapter 99F, providing for the licensing of pari-mutuel
racing licensees to conduct gambling games within their racetrack enclosures,
and providing certain requirements for the ownership and control of such
operations by the pari-mutuel racing licensee.
C. Greater Dubuque has submitted an application dated May 18, 1995 to the
Iowa Racing and Gaming Commission to bring a new and substantially larger
excursion gambling riverboat to Dubuque.
D. DRA plans to operate gambling games at a racetrack enclosure at
Dubuque Greyhound Park upon approval of the Iowa Racing and Gaming Commission.
E. The respective plans of both parties have substantial financial effects
upon the other parties.
F. DRA and Greater Dubuque have entered into negotiations for the purposes
of adjusting their relationship in order to accomplish their respective goals
over the remaining term of the
- 1 -
<PAGE>
Operating Agreement and extensions thereof, and to resolve the major outstanding
issues between them.
G. DRA and Greater Dubuque have jointly agreed to further amend the terms
of the Operating Agreement, as previously amended.
NOW, THEREFORE, IT IS AGREED that the February 22, 1993 Operating
Agreement, as previously amended, is further amended as follows:
1. For purposes of this Ninth Amendment to Operating Agreement:
(a) the term "New Boat" shall mean one or more of the following as
specified elsewhere in this Ninth Amendment:
(1) The excursion gambling riverboat(1), identified and equipped as
described in Greater Dubuque's application dated May 18, 1995 to the
Iowa Racing and Gaming Commission; OR
(2) An excursion gambling riverboat, approved by the Iowa Racing and
Gaming Commission, that is operated under the Operating Agreement,
as a replacement of the boat described in subparagraph 1(a)(1) above
and which is of equal or greater size than the boat described in
subparagraph 1(a)(1) above. "Size" for purposes of this provision
shall mean: (1) total passenger capacity or (2) total gaming
positions. This definition is not a consent by DRA to any such
replacement boat, which shall be subject to Iowa Racing and Gaming
Commission approval.
Any other boat is not a "New Boat" and is subject to subparagraphs
4(a)(2), 4(a)(3), and 4(a)(5) of the Operating Agreement. There shall be
only one boat (New Boat or otherwise) under the Operating Agreement at any
point in time.
(b) "Land-based casino" shall mean the operation by DRA of any games
permitted by the Iowa Code, regulations thereunder, and the Iowa
Racing and Gaming Commission; it shall not include pari-mutuel dog
racing or the revenues therefrom.
- ----------
(1) Excursion gambling boat or riverboat shall mean a self-propelled
excursion boat on which lawful gambling is authorized and licensed by the Iowa
Racing and Gaming Commission.
- 2 -
<PAGE>
2. Paragraph 1 of the Operating Agreement is amended by adding the
following as new subparagraphs immediately after the first subparagraph:
"Greater Dubuque shall have the option to renew and extend the
Operating Agreement, for a third consecutive three-year term commencing
April 1, 2002, provided that: (1) Greater Dubuque exercised its option for
a second 3-year renewal term commencing April 1, 1999 and materially
performed during said option period according to the terms of the
Operating Agreement, (2) a county referendum re-authorizing riverboat
gambling operations is approved by the voters of Dubuque County pursuant
to Iowa Code ss.99F.7(10)(c), if such requirement remains in effect at
that time; (3) Greater Dubuque continues to operate a New Boat, as defined
in subparagraphs 1(a)(1) and 1(a)(2) of this Ninth Amendment, at the time
the additional option period provided below would commence, (4) both DRA
and Greater Dubuque remain as licensed entities in good standing with the
Iowa Racing and Gaming Commission and are in compliance with all material
terms of the Operating Agreement, and (5) neither Greater Dubuque nor a
corporation or business entity owned or controlled by Greater Dubuque, its
owners, or its successors or assigns, is the operator of any gambling
operation in Dubuque County, Iowa, Jo Daviess County, Illinois, or Grant
County, Wisconsin, other than gambling operations conducted on Greater
Dubuque's excursion gambling riverboat operating under the Operating
Agreement. If Greater Dubuque elects to exercise the third option period,
commencing April 1, 2002, it shall deliver written notice of such intent
to DRA not later than September 4, 2001.
Greater Dubuque shall have the option to renew and extend the
Operating Agreement, for a fourth consecutive three-year term commencing
April 1, 2005, provided that: (1) Greater Dubuque exercised its option for
a third 3-year renewal term commencing April 1, 2002, and has materially
performed during said option period according to the terms of the
Operating Agreement, (2) a county referendum re-authorizing riverboat
gambling operations is or was approved by the voters of Dubuque County
pursuant to Iowa Code ss. 99F.7(l0)(c), if such requirement remains in
effect at that time; (3) Greater Dubuque continues to operate the New
Boat, as defined in subparagraphs 1(a)(1) and 1(a)(2) of this Ninth
Amendment, at the time the additional option period provided below would
commence, (4) both DRA and Greater Dubuque remain as licensed entities in
good standing with the Iowa Racing and Gaming Commission and are in
compliance with all material terms of the Operating Agreement, and (5)
neither Greater Dubuque nor a corporation or business entity owned or
controlled by Greater Dubuque, its owners, or its successors or assigns,
is the operator of any gambling operation in Dubuque County, Iowa, Jo
- 3 -
<PAGE>
Daviess County, Illinois, or Grant County, Wisconsin, other than gambling
operations conducted on Greater Dubuque's excursion gambling riverboat
operating under this Operating Agreement. If Greater Dubuque elects to
exercise the fourth option period, commencing April 1, 2005, it shall
deliver written notice of such intent to DRA not later than September 1,
2004."
3. Paragraph 2 of the Operating Agreement is deleted and in lieu thereof
is substituted the following:
"2. DECISION MAKING RESPONSIBILITIES. Except for those decisions which
require DRA's approval pursuant to either statute or the Rules of the Iowa
Racing and Gaming Commission, all decisions pertaining to the excursion
gambling boat operation shall be the sole responsibility of Greater
Dubuque and shall be carried out by Greater Dubuque without the necessity
of consulting with DRA.
Except as provided in the Operating Agreement and except for its
interest and/or rights as a co-licensee pursuant to Iowa law, DRA shall
have no rights to, claims upon, or participation in, directly or
indirectly, the ownership, operation, control, financing, or management of
any excursion gambling boat of which Greater Dubuque is the licensed
operator or any equipment or other facilities used therein now or in the
future, or to the revenues derived therefrom, and further agrees that the
ownership, operation, control, financing, and management of any excursion
gambling boat of which Greater Dubuque is the licensed operator or any
equipment or other facilities used therein, and the revenues derived
therefrom are the sole and complete rights of Greater Dubuque."
4. Subparagraph 4(a)(2) is amended by adding the following prefatory
paragraph at the start thereof:
"THE PROVISIONS OF SUBPARAGRAPHS 4(a)(2) AND 4(a)(3) SHALL APPLY ONLY WHEN
THE PROVISIONS OF SUBPARAGRAPH 4(a)(4) ARE NOT APPLICABLE."
5. Subparagraph 4(a)(3) is amended by adding the following prefatory
paragraph at the start thereof:
"THE PROVISIONS OF SUBPARAGRAPHS 4(a)(2) AND 4(a)(3) SHALL APPLY ONLY WHEN
THE PROVISIONS OF SUBPARAGRAPH 4(a)(4) ARE NOT APPLICABLE."
6. Subparagraphs 4(a)(4) and 4(a)(5) of the Operating Agreement are
created as follows:
- 4 -
<PAGE>
"(4) This subparagraph 4(a)(4) shall commence to apply on the date that
DRA's land-based casino operations are open to the general public;
provided, however, that:
(i) if Greater Dubuque's New Boat, as defined in subparagraph
1(a)(1) of this Ninth Amendment, is not open to the general public
for riverboat casino gambling in Dubuque on or before December 31,
1995, then this subparagraph 4(a)(4) shall cease to apply and
subparagraphs 4(a)(2) and (4)(a)(3) shall apply commencing January
1, 1996, and continuing until such time as Greater Dubuque's New
Boat, as defined in subparagraph 1(a)(1) of this Ninth Amendment, is
open to the general public for riverboat casino gambling; and
(ii) if Greater Dubuque shall at any time thereafter operate under
the Operating Agreement a boat other than a New Boat as defined in
subparagraphs 1(a)(1) or 1(a)(2) of this Ninth Amendment, then this
subparagraph 4(a)(4) shall not apply and subparagraphs 4(a)(2) and
(4)(a)(3) shall apply commencing at the time Greater Dubuque ceases
operation of a New Boat,(2) and continuing until such time as
Greater Dubuque opens a New Boat, as defined in subparagraphs
1(a)(1) and 1(a)(2) of this Ninth Amendment, in Dubuque to the
general public for riverboat casino gambling under the Operating
Agreement.
(iii) if DRA shall not commence operation of, or shall close,
temporarily or permanently,(3) the operation of a land-based casino,
then this subparagraph 4(a)(4) shall not apply and subparagraphs
4(a)(2) and (4)(a)(3) shall apply according to their terms
commencing at the time DRA no longer offers land-based gambling
games until such time as DRA may resume operation of a land-based
casino.
During periods when this subparagraph 4(a)(4) applies, DRA shall receive the
greater of DRA gaming revenues for such period, or of the following amounts:
- ----------
(2) For purposes of this clause, regular business closing hours and
reasonable and temporary business shutdowns of a New Boat, as defined in
subparagraphs 1(a), taken for legitimate business purposes or due to acts of
God, shall not be considered a cessation of operations of a New Boat.
(3) Regular business closing hours and reasonable and temporary business
shutdowns taken for legitimate business purposes or due to acts of God shall not
be considered a closing for purposes of this clause.
- 5 -
<PAGE>
(i) Thirty-two percent (32%) of the first thirty million dollars
($30,000,000.00) of the total gaming revenues, plus
(ii) Eight percent (8%) of total gaming revenues over thirty million
dollars ($30,000,000.00) and less than or equal to forty-two
million dollars ($42,000,000.00), and zero percent (0%) of total
gaming revenues in excess of forty-two million dollars
($42,000,000.00), plus
(iii) For any periods during which the conditions of subparagraph
4(a)(4)(iii)(A), below, exist, eight percent (8%) of total gaming
revenues over forty-two million dollars ($42,000,000.00) and less
than or equal to forty-six million dollars ($46,000,000.00), and
zero percent (0%) of total gaming revenues in excess of forty-six
million dollars ($46,000,000.00):
(A) No excursion boat gambling or land based gambling
operation is carried on by an operator licensee under
the laws of Illinois and/or Wisconsin, with a gambling
dock site or land based gambling site in Jo Daviess
County, Illinois and/or Grant County, Wisconsin;
provided however, that any such operation carried on by
Greater Dubuque or a corporation or business entity
owned or controlled by Greater Dubuque, its owners, or
its successors or assigns, with or without DRA's consent
under paragraph 11 of the Operating Agreement, shall be
treated for purposes of this paragraph as if no such
operation existed.
(iv) Notwithstanding any other provisions of the Operating
Agreement, however, in no event shall DRA receive from total gaming
revenues for each April 1 - March 31 contract year (or portion
thereof) an amount less than DRA gaming revenues for that contract
year or portion thereof.
(v) In addition to any sums from total gaming revenues or DRA gaming
revenues to which DRA is
- 6 -
<PAGE>
entitled under this subparagraph 4(a)(4), commencing April 1, 2000,
and continuing thereafter, Greater Dubuque shall additionally pay to
DRA the sum of $.50 for each patron admitted on to the New Boat, as
defined in subparagraphs 1(a)(1) and 1(a)(2) of this Ninth
Amendment.
"DRA gaming revenues" as used in this subparagraph 4(a)(4) means
adjusted gross receipts less gaming taxes from all DRA land-based casino
operations; "Greater Dubuque gaming revenues" as used in this subparagraph
4(a)(4) means adjusted gross receipts less gaming taxes from all Greater
Dubuque casino operations at any location; "total gaming revenues" as used
in this subparagraph 4(a)(4) means DRA gaming revenues plus Greater
Dubuque gaming revenues; "adjusted gross receipts" means the gross
receipts less winnings paid to wagerers.
From the date DRA's land-based casino is open to the general public
and through March 31, 1996, payments due under the above formula shall be
calculated every f our weeks and paid within ten (10) days of the end of
each four week period. Commencing at the start of the April 1, 1996 -
March 31, 1997 contract year, and continuing thereafter for periods when
this subparagraph 4(a)(4) is applicable, DRA and Greater Dubuque shall
settle the account every four weeks on an annualized basis in accordance
with the following procedure:
Step 1: At the end of each four week period the total gaming
revenues shall be annualized based on a 52-week year at the end of each
four-week period. "Annualized" for this paragraph shall mean dividing the
contract year to date total gaming revenues by a fraction with a numerator
being the weeks of the current contract year that are included in the
four-week settlements year to date and a denominator of 52.
Step 2: The appropriate percentages, as described under (i)-(iv)
above, shall be applied to the annualized total gaming revenues.
Step 3: DRA's gaming revenues shall be annualized using the same
procedure as in Step 1.
Step 4: The computed amount due to DRA under Step 2 shall be reduced
by the annualized DRA land-based casino revenues.
Step 5: The remaining amount from Step 4 shall be multiplied by a
fraction with the numerator being the number of weeks year to date in the
contract year
- 7 -
<PAGE>
and the denominator being 52. The resulting amount, if a positive number,
shall be the amount remitted by Greater Dubuque within ten (10) days of
the end of each four week period. The resulting amount, if a negative
number, shall be the amount refunded by DRA to Greater Dubuque within ten
(10) days of the end of each four week period; provided, however, that DRA
shall make no overage payments to the extent that, at the time such
payment would otherwise be made, it would exceed the amount of net
payments received by DRA from Greater Dubuque from total gaming revenues
for the contract year (April 1-March 31) to date. Any necessary
adjustments at the end of the contract year shall be made not later than
the next following tenth day of April.
To facilitate the account-settling procedure described herein,
within seven days of the end of each four week period DRA and Greater
Dubuque shall forward to each other copies of all Weekly Adjusted Gross
Revenue Tax/Tax Transmittal Reports submitted to the Iowa Racing and
Gaming Commission which reflect combined gaming revenues collected during
the preceding four week period.
Greater Dubuque shall be responsible for remittance of all wagering
taxes owing to the State of Iowa as a result of Greater Dubuque gambling
boat operations under any federal, state, or local law, regulation, or
ordinance. DRA shall be responsible for remittance of all wagering taxes
owing to the State of Iowa as a result of DRA's land-based casino
operations under any federal, state, or local law, regulation, or
ordinance. Greater Dubuque and DRA shall indemnify and hold each other
harmless from and against any and all claims relating to said taxes
arising from their respective operations.
(5) During periods when subparagraph 4(a)(4) is not applicable, the
provisions of subparagraphs 4(a)(2) and 4(a)(3), shall apply in lieu of
the provisions of subparagraph 4(a)(4)."
7. paragraph 5 of the Operating Agreement is deleted and in lieu thereof
is substituted the following:
"5. Greater Dubuque consents to DRA's application for a license to conduct
gambling games at a racetrack enclosure submitted to the Iowa Racing and
Gaming Commission on March 31, 1995; said consent is not a consent or
approval of any future application by DRA to conduct additional gambling
games; Greater Dubuque further acknowledges and agrees that, as of the
date this Ninth Amendment to Operating Agreement is approved by both
parties, except with respect to the use of DRA
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<PAGE>
land-based casino revenues in determining the total gaming revenues as
provided in subparagraph 4(a)(4) of the Operating Agreement (when
subparagraph 4(a)(4) is applicable), Greater Dubuque shall have no rights
to, claims upon, or participation in, directly or indirectly, the
ownership, operation, control, financing, and management of any land-based
casino operations at Dubuque. Greyhound Park of which DRA is the licensee
or any equipment or other facilities used therein now or in the future, or
to the revenues derived therefrom, and further agrees that the ownership,
operation, control, financing, and management of DRA land-based casino
operations or any equipment or other facilities used therein, and the
revenues derived therefrom are the sole and complete rights of DRA.
Notwithstanding any other provisions of the Operating Agreement in
no event shall DRA pay to Greater Dubuque any net sums from DRA land-based
casino revenues.
The execution of this Ninth Amendment to Operating Agreement by DRA
and Greater Dubuque shall act as a rescission and revocation, nunc pro
tunc as of the date any such election or option was or could have been
made, of all prior elections or options, (i) which Greater Dubuque has or
could have made with respect to the ownership, operation, control,
financing, and management of DRA's land-based casino operations or any
equipment or other facilities used therein now or in the future under the
text of paragraph 5 of the Operating Agreement as it existed prior to this
Ninth Amendment; and (ii) which DRA has or could have made with respect to
the ownership, operation, control, financing, and management of Greater
Dubuque's excursion gambling boat operations or any equipment or other
facilities used therein now or in the future under the text of the
Operating Agreement as it existed prior to this Ninth Amendment."
8. Paragraph 7 of the Operating Agreement is deleted and the following
substituted therefor:
"7. SALE OF ASSETS/RIGHT OF FIRST REFUSAL. Greater Dubuque and/or
Greater Dubuque's unit holders shall have the absolute right to (i) sell
to a licensable third party, subject to the approval of the Iowa Racing
and Gaming Commission, all or substantially all of the units of Greater
Dubuque or all or substantially all of the assets of Greater Dubuque if
said third party agrees to operate an excursion gambling boat subject to
the terms and conditions of the Operating Agreement and (ii) sell the
excursion gambling boat to any other party provided Greater
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<PAGE>
Dubuque replaces the excursion gambling boat with a substitute excursion
gambling boat to be operated by Greater Dubuque under the Operating
Agreement, and subject to approval by the Iowa Racing and Gaming
Commission. For purposes of this clause, "all or substantially all of the
assets of Greater Dubuque" shall mean not less than all of the following:
(i) Greater Dubuque's excursion gambling boat operated under the Operating
Agreement, (ii) Greater Dubuque's interest (whether as lessee, owner, or
otherwise) in "the building," as defined in the immediately following
paragraph, and (iii) Greater Dubuque's interest in the Operating
Agreement.
In the event Greater Dubuque shall desire to sell or lease the
excursion gambling boat and its furnishings and gambling equipment
(hereinafter referred to as "furnishings and equipment") and/or its
interest in any ticket sale facility or other buildings located in the
Dubuque Ice Harbor used in connection with the operation of an excursion
gambling boat and parking rights associated with said facilities
(hereinafter referred to as the "building") constructed and/or purchased
by it, to a third party that does not agree to operate said asset subject
to the terms and conditions of the Operating Agreement, and obtains an
acceptable offer from said third party for the purchase or lease of the
excursion gambling boat and its furnishings and equipment and/or for its
interest in said building, then DRA shall be given written notice of any
such offer, including an executed copy of such offer and any related
purchase or lease document; and DRA shall have the option to purchase or
lease the excursion gambling boat and its furnishings and equipment and/or
Greater Dubuque's interest (including Greater Dubuque's right of first
refusal under its lease with Dubuque Community Investment Co., L.C.), in
the building or its lease of same for the amount of the acceptable offer
made by the third party and upon the same terms and conditions as set
forth in the third party offer. DRA shall have 90 days following receipt
of such written notice of the third party offer in which to exercise its
option to purchase or lease, notice of which exercise by DRA shall be
given in writing to Greater Dubuque within said 90-day period.
If the acceptable offer to purchase or lease received by Greater
Dubuque from a third party that does not agree to operate said asset
subject to the terms and conditions of the Operating Agreement relates
only to the excursion gambling boat and its furnishings and equipment,
Greater Dubuque does not intend to obtain a substitute excursion gambling
boat, and DRA exercises its option to purchase said boat and its
furnishings and equipment under this paragraph, then
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<PAGE>
DRA shall also have the right and option, at the same time, to purchase
Greater Dubuque's interest in the building. If the parties cannot reach an
agreement as to the fair market value of Greater Dubuque's interest in the
building, then one appraiser shall be chosen by Greater Dubuque and one
appraiser shall be chosen by DRA to value Greater Dubuque's interest in
the building. The two appraisers shall together determine the fair market
value of Greater Dubuque's interest in the building, which value shall be
the amount paid to Greater Dubuque if DRA exercises its option to
purchase. In the event the two appraisers cannot agree on a fair market
value; then they shall jointly choose a third appraiser whose decision as
to fair market value shall be binding. The cost of all appraisals shall be
paid 50% by DRA and 50% by Greater Dubuque.
"Acceptable offer" as used in this paragraph means an offer
acceptable to Greater Dubuque, in its sole and absolute discretion.
In the event DRA exercises its option to purchase or lease under the
terms of this paragraph 7, closing of the purchase or lease shall occur as
soon as possible and by no later than 90 days following exercise of DRA's
option unless a delay is caused by title problems which are corrected
within a reasonable period of time.
If DRA fails to exercise its option to purchase or lease within the
90-day period referred to above, then Greater Dubuque shall be free to
proceed with the proposed sale or lease to a third party upon the terms
set forth in the acceptable offer.
Pursuant to Article 19 of the lease agreement between Greater
Dubuque and Dubuque Community Investment Co., L.C., for the building,
Greater Dubuque has a right of first refusal to purchase the building
should Dubuque Community Investment Co., L.C., desire to sell the building
to a third party that does not agree to operate the building subject to
the terms and conditions of the Operating Agreement. Greater Dubuque
hereby agrees to exercise said right of first refusal should Dubuque
Community Investment Co., L.C., receive an acceptable offer to purchase
the building from a third party that does not agree to operate the
building subject to the terms and conditions of the operating Agreement.
Both parties acknowledge that any sale or assignment of lease made
pursuant to this paragraph may be subject to the approval of the Iowa
Racing and Gaming Commission.
In the event Greater Dubuque sells (subject to the foregoing
conditions and restrictions) the excursion
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<PAGE>
gambling boat or any of its furnishings and equipment, whether during the
term of the Operating Agreement or thereafter, it is agreed that any
proceeds of sale shall first be applied to pay any and all obligations
owing by Greater Dubuque to DRA, whether or not referred to in the
Operating Agreement. Such obligations shall include, but not be limited
to, any amounts owing to DRA under paragraph 4 of the Operating Agreement
for any preceding period and for any unexpired term of the Operating
Agreement or for any unexpired term of any renewal period. All such
obligations owing by Greater Dubuque to DRA shall be paid from said
proceeds of sale prior to the making of any distributions, loans or
payments to investors or members of Greater Dubuque and also prior to the
repayment by Greater Dubuque of any loans or other obligations owing to
any investor, member or managing agent of Greater Dubuque.
DRA's right of first refusal and options under this paragraph shall
be effective only during the term of the Operating Agreement and any
renewal term as referred to in paragraph 1 herein and shall not be
effective following expiration of said term or renewal term. DRA's
exercise or non-exercise of its right of first refusal and options under
this paragraph shall not relieve Greater Dubuque from performing any
obligation which it is otherwise required to perform under the terms of
the Operating Agreement.
9. Paragraph 8(h) of the Operating Agreement is deleted and in lieu
thereof is substituted the following:
"(h) For any periods during which subparagraph 4(a)(4) of the Operating
Agreement is applicable, Greater Dubuque and DRA shall enter into a
non-exclusive joint marketing plan to conduct cooperative advertising and
marketing efforts. As part of and to facilitate said plan, the following
provisions apply:
(1) Greater Dubuque may elect to require that the posted overall
weighted average of theoretical payback percentage(4), determined in
accordance with paragraph 25.11(2)(b) of the Iowa Racing and Gaming
Commission regulations (491 IAC P. 25.11(2)(b)) on all DRA machine games
of chance shall not exceed by more than one-half of one percentage point
the posted overall weighted average of theoretical payback percentage on
all Greater Dubuque machine games of chance. If Greater
- ----------
(4) "Theoretical payback percentage" means the theoretical percentage of
coins which will be won by a player during a cycle of play on a machine.
- 12 -
<PAGE>
Dubuque makes such election, the following provisions shall apply:
(i) Greater Dubuque shall set its rates A) in good faith, B) in
accordance with reasonable commercial standards, and C) not for the
purpose of engaging in predatory pricing practices to the detriment
of DRA.
(ii) Greater Dubuque may not require DRA to change rates on its
machines more than four times per contract year.
(iii) Greater Dubuque shall give at least 30 days written notice of
any intended rate changes to DRA; Greater Dubuque shall provide to
DRA upon request the initial posted overall weighted average of
theoretical payback percentage on all Greater Dubuque machine games
of chance on the New Boat as defined in subparagraph 1(a)(1) of this
Ninth Amendment, and DRA may not be required to change its posted
weighted average of theoretical payback percentage on all DRA games
of chance until at least thirty days have elapsed after the
commencement of the operations of DRA's land-based casino or Greater
Dubuque's New Boat, whichever is later.
(iv) The parties shall implement the changes concurrently, and after
any required regulatory approvals.
This provision shall expire on the earlier of the following dates: (1) at
any time that Greater Dubuque shall commence operation of a New Boat as
defined in paragraph 1(a)(2) of this Ninth Amendment or a boat which is
not a New Boat, or (2) March 31, 2002.
(2) Greater Dubuque may elect to limit DRA from increasing, or seeking
approval to increase, the total number of machine games of chance in all
DRA casino operations to more than 600 slot machines before April 1, 2002;
in return for this right, Greater Dubuque shall not increase or seek
approval to increase, the number of machine games of chance in all Greater
Dubuque casino operations to more than 650 slot machines before April 1,
2002. This provision shall expire on the earlier of the following dates:
(1) at any time that Greater Dubuque shall commence operation of a New
Boat as defined in paragraph 1(a)(2) of this Ninth Amendment or a boat
which is not a New Boat, or (2) March 31, 2002.
(3) Greater Dubuque may elect to preclude DRA from installing table games
at any land-based casino
- 13 -
<PAGE>
operations of which DRA is the licensee, if such installation shall become
lawful under the laws of Iowa, before April 1, 2000. This provision shall
expire on the fifth anniversary of the approval of this Ninth Amendment by
the respective parties, or when Greater Dubuque shall commence operation
of a boat which is not a New Boat, whichever is earlier.
(4) This subparagraph 8(h) is subject to the express approval and
regulatory supervision of the Iowa Racing and Gaming Commission. The
parties shall submit reports annually (or more frequently, as the
Commission may require), to the Iowa Racing and Gaming Commission on the
administration of subparagraphs (l)-(5). Greater Dubuque shall hold
harmless and indemnify DRA from any liability arising by virtue of its
compliance with any elections made under this subparagraph 8(h). In the
event the Iowa Racing and Gaming Commission ceases to monitor party
compliance, or the number of or payout rate of gaming machines at licensed
gaming facilities, the provisions of subparagraphs (1)-(5) herein shall be
null and void and of no force or effect.
(5) Nothing herein shall prevent either party from conducting individual
advertising and marketing on said party's own behalf.
(6) This subparagraph 8(h) shall become null and void in its entirety if
Greater Dubuque or a corporation or business entity owned or controlled by
Greater Dubuque, its owners, or its successors or assigns, is the owner or
operator of any gambling operations in Dubuque County, Iowa, Jo Daviess
County, Illinois, or Grant County, Wisconsin, other than gambling
operations conducted on Greater Dubuque's excursion gambling riverboat
operating under this Operating Agreement; the circumstances under which
this subparagraph 8(h) shall become null and void include, but are not
limited to, Greater Dubuque's operation of any gambling operations at any
land-based facility or any non-excursion boat facility."
10. Paragraph 9 of the Operating Agreement is deleted.
11. Subparagraph 10(c) of the Operating Agreement is deleted and the
following substituted:
"(c) Copies of (i) all Weekly Adjusted Gross Revenue Tax/Tax Transmittal
Reports which are submitted to the Iowa Racing and Gaming Commission and
(ii) all weighted average theoretical payback percentage notices which are
required to be posted at land-based casinos and on excursion gambling
boats pursuant to Rule 25.11(2)(b) of the Iowa Racing and Gaming
Commission shall be exchanged weekly."
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<PAGE>
12. Paragraph 11 of the Operating Agreement is amended by adding the
following as new subparagraphs (d) and (e):
"(d) DRA consents to and approves Greater Dubuque's application for the
New Boat submitted to the Iowa Racing and Gaming Commission on May 18,
1995; said consent is not a consent or approval of any future application
by Greater Dubuque to conduct additional gambling games or to replace
excursion gambling boats. DRA agrees that its consent is not required with
respect to Greater Dubuque's financing for the New Boat if the same is
approved by the Racing and Gaming Commission. Greater Dubuque agrees that
DRA's rights under the Operating Agreement are not and may not be
subordinated, waived, assigned, or affected in any manner by Greater
Dubuque's credit arrangements, unless by a separately signed instrument
approved by DRA's Board of Directors.
(e) DRA consents to any agreements entered into between Greater Dubuque
and the City of Dubuque regarding parking rights in the Ice Harbor
District for the benefit of the Portside facility, that do not conflict
with DRA's current lease of same."
13. Release, hold harmless, and indemnification: This Ninth Amendment to
the Operating Agreement shall constitute an accord and satisfaction of all
claims arising put of the parties' different interpretations of paragraph 5 of
the original Operating Agreement and any claims relating thereto. This Ninth
Amendment shall also constitute a full resolution of the matters currently
disputed between the parties in the matter submitted to the American Arbitration
Association as In the Matter of Greater Dubuque Riverboat Entertainment Company,
L.C. and Dubuque Racing Association, Ltd., AAA Case No. 57 104 0087 94, and
Greater Dubuque and DRA shall jointly request the dismissal of such arbitration
claim and shall share equally in the payment of any remaining fees owing to the
American Arbitration Association and/or the arbitrator in this matter, and
otherwise each side shall bear its own costs and attorneys fees in connection
with such proceeding.
DRA and Greater Dubuque hereby release and discharge each other from any
and all liability whatsoever, including all claims, demands, and causes of
action affecting either of them, which either may have or claim to have by
reason of or arising under the language of paragraph 5 of the Operating
Agreement as it existed prior to this Ninth Amendment. Greater Dubuque shall
defend, hold harmless, and indemnify DRA from and against any and all claims
against DRA caused by or arising under the original language of paragraph 5 of
the Operating Agreement (prior to this Amendment) or from the deletion of said
language by this Amendment, which are made by any officer, director, agent, unit
holder, partner (general or limited), manager, contractor, vendor, or supplier
of Greater Dubuque or by any party claiming
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<PAGE>
rights by virtue of any contract with Greater Dubuque with respect to the
ownership, operation, control, financing, management, or sale of equipment to
land-based casino operations conducted by DRA. DRA shall defend, hold harmless,
and indemnify Greater, Dubuque from and against any and all claims against
Greater Dubuque caused by or arising under the original language of paragraph 5
of the Operating Agreement (prior to this Amendment) or from the deletion of
said language by this Amendment, which are made by any officer, director, agent,
unit holder, partner (general or limited), manager, contractor, vendor, or
supplier of DRA or by any party claiming rights by virtue of any contract with
DRA with respect to the ownership, operation, control, financing, management, or
sale of equipment to land-based casino operations conducted by DRA.
DRA and Greater Dubuque each execute this Ninth Amendment as a release and
a compromise settlement of disputed claims, liability for which is expressly
denied by each released party, and the resolution of these claims does not
constitute an admission of liability on the part of either entity. DRA and
Greater Dubuque each execute this release solely in reliance upon their own
respective knowledge, belief and judgment and not upon any representations made
by the other party.
14. Paragraph 13 is amended by adding the following additional
subparagraphs:
"(n) Nothing in the Operating Agreement shall preclude either party in
good faith from making any communication to, or taking any position
before, the Iowa Racing and Gaming Commission with respect to the
other party's current or future operations under the Operating
Agreement or changes thereto on matters not specifically consented
to in the Operating Agreement."
15. This Ninth Amendment to the Operating Agreement shall be effective
only if all of the following conditions are satisfied not later than August 21,
1995:
a. Approval on such conditions as the Iowa Racing and Gaming Commission
may require of DRA's application to conduct gambling games at the
Dubuque Greyhound Park by the Iowa Racing and Gaming Commission.
b. Approval of this Ninth Amendment to the Operating Agreement by the
Iowa Racing and Gaming Commission.
c. Final approval by the Iowa Racing and Gaming Commission of Greater
Dubuque's May 18, 1995 application to bring a new and substantially
larger gambling riverboat to Dubuque.
Both parties shall use their best efforts to secure their respective approvals,
and approval of this Ninth Amendment to the
- 16 -
<PAGE>
Operating Agreement, at the earliest practicable dates, from the Iowa Racing and
Gaming Commission.
If any of the foregoing conditions are not satisfied, this Ninth Amendment
to the Operating Agreement shall be null and void.
16. Operation by Greater Dubuque of any gambling operations other than on
an excursion gambling riverboat is not authorized under the Operating Agreement.
17. If any provision of this Ninth Amendment shall be declared by any
court or regulatory authority of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of the Operating Agreement shall not be
affected and shall remain in full force and effect.
18. Each party shall provide the other a certified resolution approving
this Ninth Amendment upon execution thereof, and in any event not later than
August 4, 1995.
19. In subparagraph 4(b), the phrase "subparagraphs (a)(1), (a)(2), and
(a)(3)" is deleted and the phrase "subparagraph 4(a)" is substituted therefor.
Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement and existing Amendments thereto shall
remain in full force and effect.
Dated this 11th day of July, 1995.
DUBUQUE RACING ASSOCIATION, LTD.
By /s/ Lawrence Cremer
----------------------------------------
Lawrence Cremer, President
By /s/ Ronald A. Spillane
----------------------------------------
Ronald A. Spillane, Secretary
GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C.
By /s/ C Bolin
----------------------------------------
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<PAGE>
JOINDER
[ILLEGIBLE] Community Investment Co., L.C., acknowledges receipt of
[ILLEGIBLE] of the foregoing instrument and joins in the Operating [ILLEGIBLE]
for the sole purpose of agreeing to the provisions of [ILLEGIBLE] 7 thereof as
amended by paragraph 8 of this Ninth [ILLEGIBLE]
DUBUQUE COMMUNITY INVESTMENT CO., L.C.
By /s/ Daryl Biechler
----------------------------------------
Daryl Biechler, Managing Member
Exh 10.9K
TENTH AMENDMENT TO OPERATING AGREEMENT
THIS TENTH AMENDMENT TO OPERATING AGREEMENT is made and entered into
effective as of the 15th day of July, 1999, by and between DUBUQUE RACING
ASSOCIATION, LTD., an Iowa non-profit corporation, (hereinafter referred to as
"DRA") and GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa
limited liability company, (hereinafter referred to as "Greater Dubuque").
WHEREAS, on February 22, 1993, DRA and Greater Dubuque signed an Operating
Agreement setting forth their respective rights, duties and obligations with
regard to excursion gambling boat operations under Chapter 99F of the Iowa Code.
Amendments to said Operating Agreement were signed on February 22, 1993, March
4, 1993, March 11, 1993, (two amendments signed on 3/11/93), April 9, 1993,
November 29, 1993, April 6, 1994, April 29, 1994, and July 11, 1995. (The term
"Operating Agreement" as used hereafter shall refer to the original Operating
Agreement as amended by all prior amendments and by this Tenth Amendment, except
where reference is made to the "original" Operating Agreement, or to the
Operating Agreement as amended previous to this Tenth Amendment.)
WHEREAS, DRA and Greater Dubuque have jointly agreed to further amend the
terms of the Operating Agreement, as previously amended.
NOW, THEREFORE, IT IS AGREED that the February 22, 1993 Operating
Agreement, as previously amended, is further amended as follows:
1. Paragraph 1 of the Operating Agreement is amended by deleting Paragraph
1 in its entirety and substituting in lieu thereof the following:
"1. TERM This Agreement shall become effective immediately and
shall terminate at 11:59 p.m. on December 31, 2008.
During the term of this Agreement, both parties shall in good
faith endeavor to maintain in good standing their respective
riverboat gambling licenses under Chapter 99F of the Iowa Code.
However, if the riverboat gambling license of one or both parities
expires and is not renewed by the Iowa Racing and Gaming Commission
for reasons other than the fault, negligence or omission of said
party or one of its officers, directors, employees or agents, then
said failure to obtain renewal of said riverboat gambling license
shall not constitute a breach of this Agreement.
Nothing herein will preclude the parties from mutually
agreeing to terminate this Operating Agreement or from entering into
a new amended agreement at any time.
During the term of the Operating Agreement, Greater Dubuque
shall continue to operate a New Boat, as defined in subparagraphs 1
(a)(1) and 1(a)(2) of the Ninth Amendment to this Operating
Agreement. During the term of the Operating Agreement, neither
Greater Dubuque nor a corporation or business entity owned or
controlled by Greater Dubuque, its owners, or its successors or
assigns, is the operator of any gambling operation in Dubuque
County, Iowa, Jo Daviess County, Illinois, or Grant County,
Wisconsin, other than gambling operations conducted on Greater
Dubuque's excursion gambling riverboat operating under this
Operating Agreement."
<PAGE>
2. Paragraph 8 of the Operating Agreement is amended by adding the
following as new subparagraph 8(i):
(i) "Greater Dubuque and DRA shall enter into a joint campaign
effort related to the 2002 county referendum to reauthorize gambling
games in Dubuque County. The joint campaign effort shall urge
Dubuque County voters to vote in favor of approving reauthorization
for (i) riverboat gambling operations in Dubuque County, and (ii)
gambling operations at dog tracks in Dubuque County. Greater Dubuque
shall commit to spend no less than $200,000 to the joint campaign
effort. DRA shall assist Greater Dubuque with any additional
fundraising activities for the joint campaign effort."
3. This Tenth Amendment is subject to and conditioned upon the following:
(a) The extension of that certain Lease Agreement dated February
28, 1990 between the City of Dubuque as Lessor and Dubuque
Racing Association, Ltd. as Lessee through December 31, 2008;
and
(b) The extension of that certain Ice Harbor Parking Agreement
dated July 2, 1990, by and among the City of Dubuque, Dubuque
Racing Association, Ltd., Dubuque Casino Belle, Inc. and
Robert River Rides, Inc. through December 31, 2008, and
pursuant to Paragraph 19 of the Parking Agreement, Greater
Dubuque Riverboat Entertainment Company, L.C., or its
assignee, shall be accorded the benefits of such Parking
Agreement originally given to Dubuque Casino Belle, Inc. under
the Parking Agreement; and
(c) The effective execution of the First Amendment to Sublease
Agreement between Dubuque Racing Association, Ltd., as Lessor,
and Greater Dubuque Riverboat Entertainment Company, L.C., as
Lessee; and
(d) The effective execution by all parties of the Seventh
Amendment to that certain Lease Agreement dated February 28,
1990 between the City of Dubuque, as Lessor, and Dubuque
Racing Association, Ltd., as Lessee, providing Dubuque Racing
Association, Ltd., with lease rights in river and harbor
frontage adjoining Lot A and Lot B and making certain other
changes in the Lease.
4. This Tenth Amendment to the Operating Agreement shall be effective upon
the approval of this Tenth Amendment to the Operating Agreement by the Iowa
Racing and Gaming Commission. Both parties shall use their best efforts to
secure their respective approvals and approval of this Tenth Amendment to the
Operating Agreement, at the earliest practicable dates, from the Iowa Racing and
Gaming Commission.
5. If any provision of this Tenth Amendment shall be declared by any court
or regulatory authority of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of the Operating Agreement shall not be
affected and shall remain in full force and effect.
6. Each party shall provide the other a certified resolution approving
this Tenth Amendment upon execution thereof, and in any event not later than
July ____, 1999.
7. Except as specifically amended above, all of the provisions of this
February 22, 1993 Operating Agreement and existing Amendments thereto shall
remain in full force and effect.
<PAGE>
Dated this 15th day of July, 1999.
DUBUQUE RACING ASSOCIATION, LTD
By /s/ Bruce W. Wentworth
---------------------------------------------
Bruce W. Wentworth, General Manager
By /s/ Daniel Hammel
---------------------------------------------
Daniel Hammel, DRA President
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
By
---------------------------------------------
James P. Rix, Chief Operating Officer
By /s/ Donald C. Iverson
---------------------------------------------
Donald C. Iverson, Chairman
Exh 10.10
OPERATING AGREEMENT ASSIGNMENT
THIS OPERATING AGREEMENT ASSIGNMENT, made and entered into effective as of
July 15, 1999 (the "Effective Date"), by and between Greater Dubuque Riverboat
Entertainment Company, L.C., an Iowa limited liability company, (hereinafter
called the "Assignor"), and Peninsula Gaming Company, LLC, a Delaware limited
liability company (hereinafter called "Assignee").
1. OPERATING AGREEMENT. Assignor and Assignee acknowledge that Assignor is
a party to a certain Operating Agreement dated February 22, 1993, as amended, by
and between Dubuque Racing Association, Ltd, ("DRA") and Greater Dubuque
Riverboat Entertainment Company, L.C. (the "Operating Agreement"), setting forth
the rights, duties and obligations of the parties with regard to excursion
gambling boat operations under Chapter 99F of the Iowa Code.
2. ASSIGNMENT. As of the Effective Date, Assignor hereby sells, assigns,
transfers and conveys unto Assignee, its successors and assigns, all of
Assignor's right, title and interest in and to the Operating Agreement. By its
execution hereof, Assignee agrees to assume and be bound by and timely perform,
observe, discharge and otherwise comply with each and every one of Assignor's
duties, obligations, covenants and undertakings under the Operating Agreement
accruing on or after the Effective Date.
3. INDEMNIFICATION. Assignor covenants to hold Assignee harmless from and
indemnify Assignee against any claim, loss, damage, cost and expense (including
reasonable attorneys' fees and court costs) that Assignee may incur from and
after the Effective Date as a result of the failure of Assignor to perform any
of its obligations with respect to the Operating Agreement up to the Effective
Date. Assignee covenants to hold Assignor harmless from and indemnify Assignor
against any claim, loss, damage, cost or expense (including reasonable
attorneys' fees and court costs) that Assignor may incur from and after the
Effective Date as a result of the failure of Assignee to perform any of its
obligations with respect to the Operating Agreement from and after the Effective
Date.
4. ASSIGNMENT. Assignor and Assignee acknowledge that DRA's consent to
this Assignment does not constitute a waiver of DRA's right to require approval
of any further assignment, in accordance with the Operating Agreement.
5. GOVERNING LAW. This Assignment shall be governed by and construed under
the laws of the State of Iowa.
6. BINDING EFFECT. The terms of this Assignment shall bind the parties
hereto and their successors in interest.
1
<PAGE>
7. MODIFICATION. This Assignment shall not be modified except if done in
writing and signed by both parties.
8. CONDITION PRECEDENT. The obligations of Assignor and Assignee under
this Assignment are subject to the closing of the sale and purchase by Assignee
of substantially all of the assets of Assignor pursuant to that certain Asset
Purchase and Sale Agreement, dated January 15, 1999, between Assignor and
Assignee.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the day and year first above written.
Peninsula Gaming Company, L.L.C. Greater Dubuque Riverboat
Entertainment Company, L.C.
By: /s/ Michael Luzich By: /s/ Don Iverson
----------------------------- -------------------------------
Its: Its: Chairman, Management Comm.
----------------------------- ------------------------------
ASSIGNOR ASSIGNOR
2
<PAGE>
CONSENT
Dubuque Racing Association, Ltd. ("DRA"), a party to that certain Operating
Agreement dated February 22, 1993, as amended, with Greater Dubuque Riverboat
Entertainment Company, L.C., setting forth the respective rights, duties, and
obligations of the parties with regard to excursion gambling boat operations
under Chapter 99F of the Iowa Code, hereby consents to the assignment of the
Operating Agreement by Greater Dubuque Riverboat Entertainment Company, L.C. to
Peninsula Gaming Company, LLC. Further, DRA is not aware of any current default
on the Operating Agreement nor is DRA aware of any condition which would lead to
a default.
DUBUQUE RACING ASSOCIATION, LTD.
By: /s/ Dan Hammel Date Signed: 7-15-99
----------------------- ---------
Its: President
----------------------
Exhibit 10.11
OMB-APPROVED
2115-0110
- --------------------------------------------------------------------------------
DEPARTMENT OF OPTIONAL APPLICATION FOR FILING
TRANSPORTATION (SEE INSTRUCTIONS AND PRIVACY ACT
U.S. COAST GUARD ON REVERSE)
CG-5542 (REV. 9-92)
THIS SECTION FOR COAST GUARD USE ONLY
NATIONAL VESSEL DOCUMENTATION CENTER
USCG
RECEIVED/FILED
19 JUL '99 -10: 24 AM
RECORDED: BOOK 99-83 PAGE 387
____________________________________
DOCUMENTATION OFFICER
RECORDED
PORT
BOOK
PAGE
BY
- --------------------------------------------------------------------------------
1. NAME OF VESSEL (ATTACH SCHEDULE IF MORE THAN ONE VESSEL)
See Attached Schedule A
2. OFFICIAL NUMBER
OR OTHER UNIQUE IDENTIFIER
See Attached Schedule A
- --------------------------------------------------------------------------------
3. INSTRUMENT TYPE: (CHECK ALL THAT APPLY)
|X| PREFERRED MORTGAGE |_| ASSUMPTION |_| AMENDMENT
|_| CHATTEL MORTGAGE |_| SUPPLEMENT |_| SUBORDINATION
|_| OTHER (DESCRIBE) |_| ASSIGNMENT
- --------------------------------------------------------------------------------
4. NAME(S) AND ADDRESS(ES) OF GRANTOR(S) (MORTGAGOR(S), ASSIGNOR(S), ASSUMING
PARTY(IES), OR OTHER(S) -SEE
INSTRUCTIONS)
Peninsula Gaming Company, LLC
3rd Street Ice Harbor
P.O. Box 1683
Dubuque, Iowa 52004-1683
INTEREST OWNED IN VESSEL OR HELD IN MORTGAGE AFFECTED BY ATTACHED INSTRUMENT
100%. (100% UNLESS OTHERWISE STATED)
- --------------------------------------------------------------------------------
5. NAME(S) AND ADDRESS(ES) OF GRANTEE(S) (MORTGAGEE(S), ASSIGNEE(S), OR
OTHER(S) - SEE INSTRUCTIONS)
Firstar Bank of Minnesota, N.A.
Attention: Corporate Trust Department
101 East 5th Street
St. Paul, Minnesota 55101
PERCENTAGE OF VESSEL MORTGAGED OR MORTGAGE ASSIGNED 100%. (100% UNLESS OTHERWISE
STATED)
- --------------------------------------------------------------------------------
6. AMOUNT
$140,000,000.00
7. IDENTIFICATION ON INSTRUMENT ASSUMED, ASSIGNED, AMENDED, SUPPLEMENTED,
SUBORDINATED, OR OTHERWISE MODIFIED:
RECORDED BOOK: PAGE: FILE/RECORDED DATE: TIME:
OTHER IDENTIFYING DATA:
- --------------------------------------------------------------------------------
8. CERTIFICATION AND ATTESTATION:
I (WE) HEREBY CERTIFY THAT THE FACTS RECITED HEREIN ARE TRUE AND CORRECT. I
(WE) UNDERSTAND THAT THE U.S. COAST GUARD WILL RELY ON THOSE RECITATIONS IN
INDEXING THE ATTACHED INSTRUMENT.
SIGNATURE(S): (SEE INSTRUCTIONS)
FOR THE GRANTOR(S) FOR THE GRANTEE(S)
PENINSULA GAMING COMPANY, LLC FIRSTAR BANK OF MINNESOTA, N.A.
/s/ Michael S. Luzich /s/ Frank P. Leslie
------------------------------- ------------------------------------
Michael S. Luzich, Secretary Frank P. Leslie, III, Vice President
STATE: New York
COUNTY: New York
SUBSCRIBED AND SWORN BEFORE ME ON: July 15, 1999
/s/ Mark Alvey
-----------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES: _____________
(DATE)
MARK W. ALVEY
Notary Public, State of New York
No. 01AL5065300
Qualified In Nassau County
Commission Expires Sept. 3, 2000
WARNING: FALSE STATEMENT MAY RESULT IN FINE OR IMPRISONMENT PURSUANT TO TITLE
18 USC.
- --------------------------------------------------------------------------------
PREVIOUS EDITION OBSOLETE SN. 7530-01-GF3-2550
<PAGE>
SCHEDULE A
Vessel Official Number
- ------ ---------------
Diamond Jo 973800
Diamond Jo II 973801
NATIONAL VESSEL DOCUMENTATION CENTER
USCG
RECEIVED/FILED
19 JUL '99 -10: 24 AM
RECORDED: BOOK _________ PAGE ______
____________________________________
DOCUMENTATION OFFICER
<PAGE>
NATIONAL VESSEL DOCUMENTATION CENTER
USCG
RECEIVED/FILED
19 JUL '99 -10: 24 AM
RECORDED: BOOK _________ PAGE ______
____________________________________
DOCUMENTATION OFFICER
FIRST PREFERRED SHIP MORTGAGE
ON THE WHOLE OF THE
DIAMOND JO
(Official Number 973800)
and the
DIAMOND JO II
(Official Number 973801)
PENINSULA GAMING COMPANY, LLC
3rd Street Ice Harbor
P.O. Box 1683
Dubuque, Iowa 52004-1683,
Owner and Mortgagor
In Favor of
FIRSTAR BANK OF MINNESOTA, N.A.,
in its capacity as Trustee under
the Indenture dated as of
July 15, 1999
among the Trustee, the Mortgagor,
Peninsula Gaming Corp. and certain
Subsidiary Guarantors referred to therein
101 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Dated as of July 15, 1999
Discharge Amount: $140,000,000 Together
With Interest, Expenses, Fees
and Performance of Mortgage Covenants
PREPARED BY:
Dorsey & Whitney LLP
801 Grand, Suite 3900
Des Moines, IA 50309
Telephone: 515-283-1000
Fax: 515-283-1060
Execution Copy
<PAGE>
FIRST PREFERRED SHIP MORTGAGE
FIRST PREFERRED SHIP MORTGAGE (the "Mortgage")
made as of the 15th day of July, 1999, by:
PENINSULA GAMING COMPANY, LLC
3rd Street Ice Harbor
P.O. Box 1683
Dubuque, Iowa 52004-1683
a limited liability company organized and existing under the laws of Delaware
(the "Shipowner") in favor of
FIRSTAR BANK OF MINNESOTA, N.A., AS TRUSTEE
101 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
a national banking association, as Trustee (the "Mortgagee") under the Indenture
(the "Indenture") dated as of July 15, 1999, among the Mortgagee, the Shipowner,
Peninsula Gaming Corporation, a Delaware corporation and wholly-owned subsidiary
of the Shipowner, and the Subsidiary Guarantors referred to therein. Capitalized
terms not otherwise defined herein shall have the meanings set forth for such
terms in the Indenture.
WHEREAS:
1. The Shipowner is the sole owner of the Diamond Jo, having its hailing
port as Dubuque, Iowa, and is documented under the laws and flag of the United
States, with Official Number 973800. The Shipowner is the sole owner of the
Diamond Jo II, having its hailing port as Dubuque, Iowa, and is documented under
the laws and flag of the United States, with Official Number 973801. The Diamond
Jo and the Diamond Jo II shall be referred to herein as the "Vessels."
2. The Shipowner has duly authorized the creation of an issue of 12 1/4%
Senior Secured Notes Due 2006 (the "Notes") which are more fully described in
the Indenture.
3. In order to induce the purchase of the Notes and in order to secure (i)
the due and punctual payment of the principal of, and interest on, the Notes and
such other securities as may be issued from time to time under the Indenture and
the payment of any fees, expenses and all other amounts at any time and from
time to time payable by the Shipowner with respect to the Notes, or under the
Indenture, or any of the Security Documents (collectively, the "Transaction
Documents") and (ii) all the obligations of the Shipowner under this Mortgage
(all such obligations recited in subsections (i) and (ii) of this Recital 3
being the "Secured Obligations"), the Shipowner has duly
NATIONAL VESSEL DOCUMENTATION CENTER
USCG
RECEIVED/FILED
19 JUL '99 -10: 24 AM
RECORDED: BOOK _________ PAGE ______
____________________________________
DOCUMENTATION OFFICER
Execution copy -2-
<PAGE>
authorized the execution and delivery of this Mortgage under and pursuant to 46
United States Code, Sections 31301 through 31343, as amended from time to time
(the "Ship Mortgage Act").
4. For purposes of this Mortgage and in order to comply with Section
31321(b)(3) of the Ship Mortgage Act, the parties to this Mortgage hereby
declare that the maximum amount of Indebtedness that is now or will in the
future be owed under the Secured Obligations at any one time is $140,000,000
plus interest (including, without limitation, interest after the filing of a
petition initiating a proceeding referred to in Section 6.8 of the Indenture),
whether or not such interest constitutes an allowed claim for purposes of such
proceeding, expenses and fees incurred by the Trustee and/or the holders of the
Notes and performance of the covenants of this Mortgage and the Transaction
Documents.
5. The interest of the Shipowner in the Vessels and the interest mortgaged
by this Mortgage is that of one-hundred percent (100%).
NOW, THEREFORE, in consideration of the premises and the purchase of the
Notes and in order to secure the payment of the Secured Obligations and the
performance and observance of all of the agreements, covenants and provisions
contained in this Mortgage and in each other Transaction Document, the receipt
and adequacy of which are hereby acknowledged, THE SHIPOWNER HAS GRANTED,
CONVEYED, MORTGAGED, PLEDGED, HYPOTHECATED, CONFIRMED, ASSIGNED, TRANSFERRED AND
SET OVER, AND BY THESE PRESENTS DOES GRANT, CONVEY, MORTGAGE, PLEDGE,
HYPOTHECATE, CONFIRM, ASSIGN, TRANSFER AND SET OVER, UNTO THE MORTGAGEE in its
capacity as the Trustee for the benefit of the Holders, the WHOLE of the
Vessels, together with all of their boilers, engines, machinery, masts, spars,
sails, boats, anchors, cables, chains, rigging, tackle, motors, tools, booms,
cranes, pumps, pipes, tanks, fixtures, supplies, gaming machinery accessories
relating to the gaming operations, including but not limited to communication
systems, visual and electronic surveillance systems and transportation systems,
tools, utensils, food and beverage, liquor, uniforms, linens, housekeeping and
maintenance supplies, fuel, all gaming equipment and devices, gaming and
financial equipment, computer equipment, calculators, adding machines, video
game and slot machines, and any other electronic equipment of every nature used
in connection with the operation of the Vessels, all machinery, equipment,
engines, appliances and fixtures for generating or distributing air, water,
heat, electricity, light, fuel or refrigeration, or for ventilating or sanitary
purposes, or for the exclusion of vermin or insects, or for the removal of dust,
refuse or garbage, all wall-beds, wall-safes, built-in furniture and
installations, shelving, lockers, partitions, doorstops, vaults, motors,
elevators, dumb-waiters, awnings, window shades, venetian blinds, light
fixtures, fire hoses and brackets and boxes for the same, fire sprinklers,
alarm, surveillance and security systems, computers, drapes, drapery rods and
brackets, mirrors, mantels, screens, linoleum, carpets and carpeting, plumbing,
bathtubs, sinks, basins, pipes, faucets, water closets, laundry equipment,
washers, dryers, ice-boxes and heating units, all kitchen and restaurant
equipment, including but not limited to silverware, dishes, menus, cooking
utensils, stoves, refrigerators, ovens, ranges, dishwashers, disposals, water
heaters, incinerators, furniture, futures and furnishings, all cocktail lounge
supplies, including but not limited to bars, glassware, bottles and tables used
in connection
Execution Copy -3-
<PAGE>
with the Vessels, all specifically designed installations and furnishings, and
all furniture, furnishings and personal property of every nature whatsoever now
or hereafter owned or leased by Shipowner or in which Shipowner has any rights
or interest and located in or on, or attached to, or used or intended to be used
or which are now or may hereafter be appropriated for use on or in connection
with the operation of the Vessels, or in connection with any construction being
conducted or which may be conducted thereon, and all extensions, additions,
accessions, improvements, betterments, renewals, substitutions, and replacements
to any of the foregoing, all of which (to the fullest extent permitted by law)
shall be conclusively deemed appurtenances of the Vessels, and all other
appurtenance to the Vessels appertaining or belonging, whether now owned or
hereafter acquired, whether on board or not, and all additions, improvements and
replacements hereafter made in or to the Vessels (all to be included in the term
"Vessels");
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee and its successors and assigns, to its and its
successors and assigns own use and benefit forever;
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the property above
described is to be held subject to the further covenants, conditions,
provisions, terms and uses set forth in the attached Annex I;
PROVIDED, HOWEVER, that these presents are upon the condition that, if the
Shipowner or any of its successors or assigns shall pay or cause to be paid the
Secured Obligations in accordance with the terms hereof and of the other
Transaction Documents, and shall perform and observe all of the agreements,
covenants and provisions contained herein and in the other Transaction
Documents, this Mortgage and the estate and rights hereby granted shall cease to
be binding and be void (other than indemnity obligations which shall survive
payment).
Execution copy -4-
<PAGE>
IN WITNESS WHEREOF, the Shipowner has executed this Mortgage on the day
and year first above written.
PENINSULA GAMING COMPANY, LLC
By: /s/ Brent Stevens
-------------------------------------
Name: Brent Stevens
Title:
[First Preferred Ship Mortgage]
<PAGE>
ACKNOWLEDGMENT
STATE OF California
COUNTY OF Los Angeles
On July 9, 1999, the person named above acknowledged execution of the
foregoing instrument in their stated capacity for the purpose therein contained.
/s/ Elisabeth Howard
-----------------------------------------
NOTARY PUBLIC
My commission expires: 11/21/2001
[SEAL]
ELISABETH HOWARD
Comm. # 1162205
NOTARY PUBLIC - CALIFORNIA
Los Angeles County
My Comm. Expires Nov. 21, 2001
NATIONAL VESSEL DOCUMENTATION CENTER
USCG
RECEIVED/FILED
19 JUL '99 -10: 24 AM
RECORDED: BOOK _________ PAGE ______
____________________________________
DOCUMENTATION OFFICER
[First Preferred Ship Mortgage]
<PAGE>
ANNEX I
TO
FIRST PREFERRED SHIP MORTGAGE
made as of the 15th day of July, 1999
by PENINSULA GAMING COMPANY, LLC
regarding the WHOLE of the
DIAMOND JO
(Official Number 973800)
and the
DIAMOND JO II
(Official Number 973801)
ARTICLE I
COVENANTS OF THE SHIPOWNER
The Shipowner covenants and agrees with the Mortgagee as follows:
Section 1.1 Subject to applicable grace or cure periods (if any), the
Shipowner will pay the Secured Obligations payable by it and will observe,
perform and comply with the covenants, terms and conditions herein and in the
other Transaction Documents, express or implied, on its part to be observed,
performed or complied with.
Section 1.2 The Shipowner was duly organized and is now duly existing as a
limited liability company under the laws of the State of Delaware; it is duly
authorized to mortgage the Vessels, all company action necessary and required by
law for the execution and delivery of this Mortgage has been duly and
effectively taken; and the Shipowner shall at all times maintain its existence
and right to carry on its business. The Shipowner is and will remain a citizen
of the United States of America within the meaning of Title 46, Section 802, of
the United States Code, entitled to own and document the Vessels and to engage
in the trade in which the Vessels are operating under the laws of the United
States of America.
Section 1.3 The Shipowner lawfully owns the whole of and is lawfully
possessed of the Vessels free from any lien, mortgage, tax or other encumbrance
whatsoever (except for liens created by the Security Documents, Permitted Liens
(as defined in the Indenture) and liens for current crew's wages, salvage and
those liens which arise during normal operations which will be paid in the
ordinary course of business and maritime liens which have not been recorded on
the General Index or Abstract of Title of the Vessels or judicially asserted, if
any (collectively, the "Permitted Encumbrances"), and will warrant and defend
the title and possession thereto and to every part thereof for the benefit of
the Mortgagee against the claims and demands of all Persons whomsoever, except
claims and demands relating to Permitted Encumbrances.
NATIONAL VESSEL DOCUMENTATION CENTER
USCG
RECEIVED/FILED
19 JUL '99 -10: 24 AM
RECORDED: BOOK _________ PAGE ______
____________________________________
DOCUMENTATION OFFICER
Execution Copy -7-
<PAGE>
Section 1.4 The Vessels are duly documented in the name of the Shipowner
under the laws and flag of the United States of America, entitled to engage in
the operations conducted by the Shipowner, and the Shipowner will, at its own
expense, cause the Vessels to remain so documented. The Shipowner will cause
this Mortgage immediately after its execution and delivery to be filed for
recordation in accordance with the Ship Mortgage Act, and will comply with and
satisfy all of the provisions of United States law and all other provisions and
requirements of law from time to time in force so as to establish and maintain
the lien of this Mortgage, as at any time amended, supplemented or assigned as a
first "preferred mortgage" lien under the Ship Mortgage Act upon the Vessels and
upon all additions, improvements and replacements hereafter made on or to the
Vessels or any part thereof for the amount of the Secured Obligations. The
Shipowner will furnish to Mortgagee, from time to time, such proofs as Mortgagee
may reasonably request with respect to the Shipowner's compliance with the
foregoing covenant.
Section 1.5 (a) The Shipowner will not cause or permit the Vessels to be
operated in any manner contrary to law, and the Shipowner will not engage in any
unlawful trade or violate any law or carry any cargo that will expose the
Vessels to penalty, forfeiture or capture, and will not do, or suffer or permit
to be done, anything which can or may injuriously affect the documentation of
the Vessels under the laws and regulations of the United States and will at all
times keep the Vessels duly documented thereunder.
(b) The Shipowner shall comply with and satisfy all applicable
laws and regulations of the United States and of the State of Iowa or any other
jurisdiction in which the Vessels are or may be operating pursuant to the terms
of the Indenture, specifically including, but not limited to, the Gaming Laws,
the requirements of Iowa Code Chapter 99F which if not complied with, could
reasonably be expected to materially and adversely affect the Shipowner's
financial condition or its ability to fulfill its obligations under this
Mortgage or any other Transaction Document.
(c) The Shipowner will not operate any Vessel outside of the
navigation limits of the insurance carried pursuant to Section 1.15.
Section 1.6 The Shipowner will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on the Vessels or any income therefrom, subject to
Section 1.9.
Section 1.7 Neither the Shipowner, any charterer, the Master of the
Vessels nor any other person has or shall have any right, power or authority to
create, incur or permit to be placed or imposed or continued upon the Vessels
any lien whatsoever other than the Permitted Encumbrances or as contemplated by
the Intercreditor Agreement.
Section 1.8 The Shipowner will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the Vessels with her
papers and will cause such certified
Execution Copy -8-
<PAGE>
copy and the Vessels' Certificates of Documentation to be exhibited to (i) any
and all persons having business therewith which might give rise to any lien
thereon other than the Permitted Encumbrances and (ii) to any representative of
the Mortgagee; and will place and keep prominently displayed in each of the
Vessels a framed printed notice in plain type reading as follows:
NOTICE OF MORTGAGE
The Vessels are covered by a First Preferred Ship Mortgage under 46 U.S.C.
Section 31301 et seq. to Firstar Bank of Minnesota, N.A., as Trustee under
the Indenture dated as of July 15, 1999 with Peninsula Gaming Company, LLC
and Peninsula Gaming Corp. Under the terms of the Mortgage, neither the
Shipowner, any charterer, the Master of the Vessels nor any other person
has any right, power or authority to create, incur or permit to be imposed
upon the Vessels any lien whatsoever other than the Permitted Encumbrances
(as defined in the First Preferred Ship Mortgage) or as contemplated by
the Intercreditor Agreement.
Section 1.9 Except for the lien of this Mortgage, the Shipowner will not
permit any lien to be continued other than the Permitted Encumbrances. In the
event any lien other than the Permitted Encumbrances or as provided in the
Intercreditor Agreement is placed on or attaches to any of the Vessels, the
Shipowner shall cause said lien to be discharged or otherwise make provision for
the satisfaction or discharge of said lien within thirty days; provided,
however, that the Shipowner shall have the right to contest, at its own expense,
by appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity (or the applicability to the Shipowner, the Vessels or
this Mortgage) of any tax, assessment, governmental charge, fine, penalty or
document or instrument securing any of the Secured Obligations or creating a
lien in favor of the Trustee and/or the Holders; provided further that (a) the
Shipowner gives the Mortgagee timely notice of its intention to contest the
same, (b) the commencement of such proceedings shall suspend the collection or
enforcement of the matter under contest, or, if the commencement of such
proceedings does not suspend such collection or enforcement, the Shipowner shall
have made payment of any item sought to be collected with or without protest,
(c) there shall be no impairment of the lien of this Mortgage or any other
Transaction Document or undue interference with the normal conduct of the
Shipowner's riverboat gaming operation on the Vessels or at the Mortgaged
Property (as defined in the Shore Mortgage) where such Vessels are operating,
(d) neither the Vessels nor the Mortgaged Property, nor any part thereof or
interest therein, would be in any immediate danger of being sold, forfeited or
lost, (e) neither the Mortgagee, nor any Holder would be potentially subjected
to criminal, or in imminent danger of civil, liability for failure to comply
therewith pending the outcome of such proceedings, (f) in the case of taxes,
assessments, charges, fines, penalties or other impositions, the Shipowner shall
have either (i) paid the amount in dispute prior to instituting such contest, in
which event the notice requirement of clause (a) above shall be satisfied by
giving notice prior to initiating such contest rather than prior to making
payment, or (ii) furnished reasonable security during the pendency of such
proceedings, and (g) if such contest be finally resolved against the Shipowner,
the Shipowner shall promptly pay the amount required to be paid, together with
all interest and penalties accrued thereon, or comply with the applicable
Execution Copy -9-
<PAGE>
requirement. The Shipowner shall indemnify and save the Mortgagee and each
Holder harmless from and against any liability, loss, damage, cost or expense of
any kind (including reasonable attorneys, fees and expenses) that may be imposed
upon the Mortgagee or such Holder in connection with any such contest and any
determination resulting therefrom.
Section 1.10 (a) If a complaint be filed against either of the Vessels or
either of the Vessels be otherwise attached, arrested, levied upon or taken into
custody under process or color of legal authority for any cause whatsoever, the
Shipowner will promptly notify the Mortgagee by telecopier or by telephone, with
confirmation in writing sent by overnight delivery service, at the address
specified in Section 3.5 of this Annex I, and within 15 days from the time of
such complaint, attachment, arrest or seizure will cause the Vessels to be
released and all liens thereon other than the Permitted Encumbrances to be
discharged (subject to the provisions of Section 1.9 hereof) and will promptly
notify the Mortgagee hereof in the manner aforesaid.
(b) If the Shipowner shall fail or neglect to furnish proper
security or otherwise to release the Vessels from complaint, arrest, levy,
seizure or attachment, the Mortgagee or any person acting on behalf of the
Mortgagee may furnish security to release the Vessels and by so doing shall not
be deemed to cure the default of the Shipowner.
Section 1.11 (a) The Shipowner will at all times and without cost or
expense to the Mortgagee maintain and preserve, or cause to be maintained and
preserved, the Vessels in good running order and repair, so that the Vessels
shall be, insofar as due diligence can make her so, tight, staunch, strong and
well and sufficiently tackled, appareled, furnished, equipped and in every
respect seaworthy.
(b) The Mortgagee shall have the right at any time, on
reasonable notice, to inspect or survey the Vessels to ascertain their condition
and to satisfy itself that the Vessels are being properly repaired and
maintained and the Shipowner shall cause to be made all such repairs, without
expense to the Mortgagee, as such inspection or survey may show to be required.
The Shipowner shall also permit the Mortgagee to inspect the Vessels' logs,
whenever requested, on reasonable notice, and shall furnish the Mortgagee with
full information regarding any material casualties or other accidents or damage
to the Vessels.
(c) The Vessels shall, and the Shipowner covenants that they
will, at all times comply with all applicable laws, treaties and conventions of
the United States, and rules and regulations issued thereunder, and shall have
on board as and when required thereby valid certificates showing compliance
therewith.
(d) The Shipowner will not make, or permit to be made, any
substantial change in the structure, type or speed of the Vessels or change in
their rig, without first receiving the written approval thereof of the
Mortgagee.
Execution Copy -10-
<PAGE>
Section 1.12 The Shipowner will permit the Mortgagee or any agents or
representatives thereof from time to time upon prior reasonable notice full and
complete access to the Vessels for the purpose of inspecting the Vessels and her
cargo and papers and, at the reasonable request of the Mortgagee, the Shipowner
will deliver for inspection copies of any and all contracts and documents
relating to the Vessels, whether on board or not.
Section 1.13 The Shipowner will not transfer or change the flag of the
Vessels unless and until, upon 30 days' prior written notice to the Mortgagee,
all filings, recordations or other actions necessary to perfect and protect the
lien created by this Mortgage and to enable the Mortgagee to exercise and
enforce its rights and remedies hereunder with respect to the Vessels after
giving effect to such transfer or change of flag shall have been completed
(including, without limitation, opinions of counsel as to the perfected status
of the Mortgagee after giving effect to such transfer or change of flag).
Section 1.14 Except to the extent expressly permitted by the Indenture,
the Shipowner will not sell, mortgage, charter or in any way transfer the
Vessels or any interest therein without the written consent of the Mortgagee
first had and obtained, and any such written consent to any one sale, mortgage,
demise charter or transfer shall not be construed to be a waiver of this
provision with respect to any subsequent proposed sale, mortgage, charter or
transfer. Any such sale, mortgage, charter or transfer of the Vessels or any
interest therein shall be subject to the provisions of this Mortgage and the
lien hereof and to the provisions of the Indenture.
Section 1.15 (a) (i) Unless such types of insurance are no longer
commercially available, the Shipowner will at all times and at its own cost and
expense cause to be carried and maintained in respect of the Vessels insurance
payable in United States Dollars in such amounts against such risks (including
navigating risk and marine hull and machinery (including excess value)
insurance, marine protection and indemnity insurance and public liability
insurance), in such form (including, without limitation, the form of the loss
payable clause and the designation of named assureds) and with such insurance
companies, underwriters, funds, mutual insurance associations or clubs as shall
be selected by the Shipowner in compliance with Section 4.16 of the Indenture.
(ii) In the case of all marine hull and machinery
policies, the Shipowner will cause the Mortgagee to be named an additional
insured and will (and cause its insurance broker to) cause the insurers under
such policies to waive any liability of the Mortgagee and the Holders for
premiums payable under such policies. In the case of all protection and
indemnity insurance, if obtainable, the Shipowner will cause the Mortgagee to be
named as an additional insured unless it cannot be provided that the Mortgagee
shall not be liable under such policies for payment of any premium, club call,
assessment or advance. Notwithstanding the foregoing, at no time shall there be
recourse against the Mortgagee under such policies for payment of any premium,
club call, assessment, advance or commission.
(iii) The Shipowner will cause the firm of insurance
brokers referenced in Section 1.15(a)(iv) of this Mortgage to agree to advise
the Mortgagee forthwith by
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telecopier, to its address specified in Section 3.5 of this Mortgage, of any
lapse of any such insurance by expiration, termination, failure to renew or
otherwise and of any default in payment of any premium and of any other act or
omission on the part of the Shipowner of which such brokers have knowledge and
which might invalidate or render unenforceable, in whole or in part, any
insurance on the Vessels. Absent actual knowledge, the Mortgagee shall not be
deemed to have knowledge of any such lapse of insurance in the absence of
receipt of notice from such brokers. The Shipowner will also cause such brokers
to agree to mark their records and to advise the Mortgagee, by telecopier,
addressed as provided above in this subsection, at least five business days
prior to the expiration date of any insurance carried pursuant to this Mortgage,
that such insurance has been renewed or replaced with new insurance which
complies with the provisions of this Section 1.15. In addition, the Shipowner
will endeavor to or use its best efforts to cause each insurance company,
underwriter, club or fund (or an authorized agent thereof) with respect to all
insurance required hereby to agree in writing for the benefit of the Mortgagee
that each policy or contract issued by such insurance company, underwriter, club
or fund shall not lapse or be canceled for any reason whatsoever without at
least thirty (30) days, prior notice to the Mortgagee by telecopier or cable
addressed as provided above in this subsection (iii).
(iv) The Shipowner will deliver to the Mortgagee, within
120 days after the end of each fiscal year, a certificate from a firm of
independent insurance brokers appointed by the Shipowner and acceptable to the
Mortgagee confirming that the insurance carried and maintained in respect of the
Vessels complies with the requirements of this Mortgage.
(b) For the purposes of insurance against total loss, the
Vessels, their equipment, appurtenances, etc., shall be insured for and valued
at an amount at least equal to the fair market value thereof. Protection and
indemnity insurance in respect of the Vessels shall be in the highest amount
from time to time commercially reasonable for vessels of the same type, size,
age and flag as the Vessels, but in any event shall be in an amount for each
occurrence of not less than the declared value of the Vessels under their hull
and machinery insurance.
(c) Unless otherwise required by the Mortgagee by notice to
the Mortgagor, which notice shall be given only upon receipt of instructions
from the Holders of a majority in principal amount of the Notes as set forth in
Section 6.5 of the Indenture, although the following insurance is payable to the
Mortgagee, (i) any loss under any insurance on the Vessels with respect to
protection and indemnity risks and public liability may be paid directly to the
Shipowner to reimburse it for any loss, damage or expense incurred by it and
covered by such insurance or directly to the person to whom any liability
covered by such insurance has been incurred and (ii) in the case of any loss
(other than (A) a loss covered by clause (i) of this subsection or by Section
1.15(d) or (B) a loss in excess of $1,000,000 per occurrence) under any
insurance with respect to the Vessels involving any damage to the Vessels, the
Mortgagee may pay directly for the repair, salvage or other charges involved or,
if the Shipowner shall have first fully repaired the damage or paid all of the
salvage or other charges, may pay the Shipowner as reimbursement therefor.
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(d) In the event of an actual, constructive or compromised
total loss of the Vessels, all insurance or other payments for such loss shall
be treated as proceeds of an Asset Sale (as defined in the Indenture) and paid
to the Mortgagee and deposited by the Mortgagee in the Collateral Account to be
distributed or disbursed in accordance with Section 4.10 of the Indenture.
(e) The Shipowner will cause all policies and certificates of
entry with respect to insurance required hereby to contain a loss payable clause
which shall (i) in the case of protection and indemnity insurance and public
liability insurance, provide for payment to the Shipowner or its order unless
and until the underwriters or associations receive notice from the Mortgagee
that there has occurred and is continuing an Event of Default hereunder, in
which event all payments shall be made to the Mortgagee as proceeds of an Asset
Sale for deposit in the Collateral Account, and (ii) in the case of all other
insurance, provide for payment in accordance with the terms of subsections (c)
and (d) of this Section 1.15. In addition (unless all or substantially all of
the insurance required by this Section 1.15 is placed in the United States
market), the Shipowner will, at its own cost and expense, assign to the
Mortgagee all of the Shipowner's right, title and interest in and to each policy
and contract of insurance (including all entries in protection and indemnity
associations) with respect to the insurance required hereby and furnish, or
cause its brokers to furnish, written notice of such assignment to all insurers,
underwriters, clubs and associations with respect to such insurance.
(f) In the event that any claim or Lien is asserted against
the Vessels for loss, damage or expense which is covered by insurance required
hereunder, and it is necessary for the Shipowner to obtain a bond or supply
other security to prevent arrest of the Vessels or to release the Vessels from
arrest on account of such claim or lien, the Mortgagee, on request of the
Shipowner or its agent, may assign to any person, firm or corporation executing
a surety or guarantee bond or other agreement to save or release the Vessels
from such arrest, all right, title and interest of the Mortgagee in and to said
insurance covering said loss, damage or expense, as collateral security to
indemnify against liability under said bond or other agreement.
(g) The Shipowner will deliver to the Mortgagee copies of all
cover notes, binders, policies and certificates of entry in protection and
indemnity associations, and all endorsements and riders amendatory thereof, in
respect of insurance maintained in connection with the Vessels.
(h) The Shipowner agrees that it will not do or permit or
willingly allow to be done any act by which any insurance required by the terms
of this Mortgage may be suspended, impaired or canceled, and that it will not
permit or allow the Vessels to undertake any voyage or run any risk or transport
any cargo which may not be permitted by the policies in force, without having
previously insured the Vessels by additional coverage to extend to such voyages,
risks or cargoes.
Section 1.16 The Shipowner will reimburse the Mortgagee promptly, with
interest at a rate equal to the rate applicable to the Notes, for any and all
expenditures which the Mortgagee may from time to time make, lay out or expend
in providing such protection in respect of insurance, discharge
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or purchase of liens, taxes, dues, assessments, governmental charges, fines and
penalties lawfully imposed, repairs, attorneys' fees and other matters as the
Shipowner is obligated herein to provide, but fails to provide. Such obligation
of the Shipowner to reimburse the Mortgagee shall be an additional Indebtedness
due from the Shipowner, secured by this Mortgage, and shall be payable by the
Shipowner on demand. The Mortgagee, though privileged so to do, shall be under
no obligation to the Shipowner to make any such expenditures, nor shall the
making thereof relieve the Shipowner of any default in that respect.
Section 1.17 The Shipowner will fully perform any and all charter parties
which are or may be entered into with respect to the Vessels.
Section 1.18 In the event that at any time and from time to time this
Mortgage, any other Transaction Document or any provisions hereof or thereof
shall be deemed invalidated in whole or in part by reason of any present or
future law or any decision of any court, or if the documents at any time held by
the Mortgagee shall be deemed by the Mortgagee for any reason insufficient to
carry out the true intent and spirit of this Mortgage and each other Transaction
Document, then the Shipowner, forthwith upon the reasonable request of the
Mortgagee, will execute and deliver, on its own behalf, such other and further
assurances and documents as may be reasonably necessary to more effectively
subject the Vessels to secure the payment of the Secured Obligations, as
provided in this Mortgage and each other Transaction Document and the
performance of the terms and provisions of this Mortgage and each other
Transaction Document and do such things as the Mortgagee in its sole discretion
may reasonably deem to be necessary to carry out the true intent of this
Mortgage.
Section 1.19 In the event of the requisition (whether of title or use),
condemnation, sequestration, seizure or forfeiture of the Vessels by any
governmental or purported authority or by anyone else, any payments in respect
thereof shall be paid to the Mortgagee and applied in accordance with the terms
of Section 1.15(d).
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.1 In case any one or more of the following events, herein termed
"Events of Default", shall have occurred and be continuing:
(a) if any "Event of Default", as said term is defined in the
Indenture, shall have occurred and be continuing; or
(b) if the Shipowner shall default in the use and punctual
performance or observance of any of the provisions of Sections 1.2, 1.4, 1.5,
1.9, 1.10, 1.13, 1.14 and 1.15; or
(c) if the Shipowner shall fail to perform or observe any
other term, covenant or agreement contained in this Mortgage on its part to be
performed or observed and if such
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failure shall remain unremedied for the lesser of the cure period provided for
herein and 60 days after written notice thereof shall have been given to the
Shipowner by the Mortgagee;
(d) if any representation and warranty made in this Mortgage
is untrue in any material respect, as of the time when the same shall have been
made;
(e) The Shipowner shall (i) abandon either Vessel without due
cause; or (ii) cease to be a citizen of the United States of America within the
meaning of Tide 46, Section 802 of the United States Code entitled to engage in
the trade in which such Vessel is operating; or
(f) The title or ownership of either Vessel shall be
requisitioned, purchased or taken by the government of any country or by any
department, agency or representative thereof and there shall not have been paid
to Mortgagee an amount in cash in United States dollars equal to the fair value
of such Vessel within ninety (90) days after such event occurs;
then, in each and every such case, the Mortgagee shall have the
right to:
(1) declare immediately due and payable all of the Secured
Obligations (in which case all of the same shall be immediately
due), bring suit at law, in equity or in admiralty, as it may be
advised, to recover judgment for the Secured Obligations and collect
the same out of any and all property of the Shipowner, whether
covered by this Mortgage or otherwise;
(2) exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of applicable law,
including, but not limited to, the provisions of the Ship Mortgage
Act;
(3) take and enter into possession of the Vessels, at any
time, wherever the same may be, without legal process (except to the
extent required by applicable law), and, except to the extent caused
by the Mortgagee's gross negligence or bad faith, without being
responsible for loss or damage, and the Shipowner or other person in
possession forthwith upon demand of the Mortgagee, shall surrender
to the Mortgagee possession of the Vessels, and the Mortgagee may,
without being responsible for loss or damage, except to the extent
caused by the Mortgagee's gross negligence or bad faith, hold, lay
up, lease, charter, operate or otherwise use the Vessels for such
time and upon such terms as it may deem to be for its best
advantage, and demand, collect and retain all hire, freights,
earnings, issues, revenues, income, profits, return premiums,
salvage awards or recoveries, recoveries in general average, and all
other sums due or to become due in respect of the Vessels or in
respect of any insurance thereon from any person whomsoever,
accounting only for the net profits if any, arising from such use of
the Vessels and charging upon all receipts from the use of the
Vessels or from the sale thereof by court proceedings or pursuant to
subsection (4) next following, all costs, expenses, charges, damages
or
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losses by reason of such use; and if at any time the Mortgagee shall
avail itself of the right herein given it to take the Vessels, the
Mortgagee shall have the right to dock the Vessels at any dock, pier
or other premises of the Shipowner without charge, or to dock her at
any other place at the cost and expense of the Shipowner, and/or
(4) take and enter into possession of the Vessels, upon
reasonable notice, wherever the same may be, without legal process
(except to the extent required by applicable law), and if it seems
desirable to the Mortgagee and without being responsible for loss or
damage, except to the extent caused by the Mortgagee's gross
negligence or bad faith, sell the Vessels, at any place and at such
time as the Mortgagee may specify and in such manner and such place
(whether by public or private sale) as the Mortgagee may deem
advisable (without necessity of bringing the Vessels to the place
designated for such sale), free from any claim by the Shipowner in
admiralty, in equity, at law or by statute, after first giving
notice of the time and place of any public sale with a general
description of the property in the following manner:
(i) by publishing such notice for 10 consecutive days in a daily
newspaper of general circulation published in Dubuque, Iowa;
(ii) if the place of sale should not be Dubuque, Iowa, then also by
publication of a similar notice in a daily newspaper, if any, published at
the place of sale; and
(iii) by mailing a similar notice to the Shipowner at its last known
address on the day of first publication and notice of the time and place
of any private sale by mailing such notice to the Shipowner at its last
known address.
The notice provisions contained in this Section are not exclusive,
and to the extent that Mortgagee elects to foreclose or enforce its
interests in a court of admiralty, Mortgagee will comply with the notice
provisions required by any applicable federal statutes and procedural
rules. Mortgagee may adjourn any such sale from time to time by
announcement at the time and place appointed for such sale or for such
adjourned sale, and without further notice or publication Mortgagee may
make any such sale at the time and place to which the same shall be so
adjourned. Any such sale may be conducted without bringing the Vessel to
be sold to the place designated for such sale and in such manner as
Mortgagee may deem to be commercially reasonable and for its best
advantage.
Section 2.2 Any sale of the Vessels made in pursuance of the Mortgage
shall operate to divest all right, title and interest of any nature whatsoever
of the Shipowner therein and thereto and shall bar any claim from the Shipowner,
its successors and assigns, and all persons claiming by, through or under them.
No purchaser shall be bound to inquire whether notice has been given, or whether
any default has occurred, or as to the property of the sale, or as to the
application of the proceeds thereof. In the case of any such sale, the Mortgagee
shall be entitled to bid for the purchase
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of the Vessels and, for the purpose of making settlement or payment for the
property purchased, to use and apply the Secured Obligations in order that there
may be credited against the amount remaining due and unpaid thereon the sums
payable out of the net proceeds of such sale with respect to the Secured
Obligations after allowing for the costs and expense of sale and other charges;
and thereupon such purchaser shall be credited, on account of such purchase
price, with the net proceeds that shall have been so credited with respect to
the Secured Obligations. At any such sale, the Mortgagee may bid for and
purchase such property and upon compliance with the terms of sale may hold,
retain and dispose of such property without further accountability therefor.
Section 2.3 The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner to execute and deliver to any purchaser aforesaid, and is hereby
vested with full power and authority to make, in the name and on behalf of the
Shipowner, a good conveyance of the title to the Vessels so sold. In the event
of any sale of either or both of the Vessels under any power herein contained,
the Shipowner will, if and when required by the Mortgagee, execute such form of
conveyance of the Vessels and other related documents as the Mortgagee may
direct or approve.
Section 2.4 The Shipowner hereby irrevocably appoints the Mortgagee
attorney-in-fact in the name of the Shipowner with full authority in the place
and stead of the Shipowner from time to time upon the occurrence and during the
continuance of an Event of Default, to demand, collect, receive, compromise and
sue for, so far as may be permitted by law, all freights, hire, earnings,
issues, revenues, income and profits of the Vessels and all amounts due from
underwriters under any insurance thereon as payments of losses or as return
premiums or otherwise, salvage awards and recoveries, recoveries in general,
average or otherwise, and all other sums due or to become due at the time of the
occurrence of any Event of Default, or in respect of any insurance thereon, from
any person whomsoever, and to make, give and execute in the name of the
Shipowner acquittances, receipts, releases or other discharges for the same,
whether under seal or otherwise, and to endorse and accept in the name of the
Shipowner all checks, notes, drafts, warrants, agreements and other instruments
in writing with respect to the foregoing, or in respect of any actions in law or
in equity, in contract or in negligence, against third parties, to file suit
against said third parties for damage sustained by the Vessels while under the
care and custody of said third parties and prosecute through judgment or
settlement, the Mortgagee to have by assignments, all rights and remedies that
would be afforded to the Shipowner under principles and theories of privity,
standing and jurisdiction.
Section 2.5 Whenever any right to enter and take possession of the Vessels
accrues to the Mortgagee, it may require the Shipowner to deliver, and the
Shipowner shall on demand, at its own cost and expense, deliver to the Mortgagee
the Vessels as demanded. If any legal proceedings shall be taken to enforce any
fight under this Mortgage, the Mortgagee shall be entitled as a matter of right
to the appointment of a receiver of the Vessels and of the freights, hire,
earnings, issues, revenues, income and profits due or to become due and arising
from the operation thereof.
Section 2.6 Upon the occurrence and during the continuance of an Event of
Default, the Shipowner authorizes and empowers the Mortgagee or its appointees
or any of them to appear in the name of the Shipowner, its successors and
assigns, in any court of any country or nation of the
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world where a suit is pending against the Vessels because of or on account of an
alleged lien against the Vessels from which the Vessels have not been released
and to take such proceedings as to them or any of them may seem proper towards
the defense of such suit and the purchase or discharge of such lien, and all
expenditures made or incurred by them or any of them for the purpose of such
defense or purchase or discharge shall be a debt due from the Shipowner, its
successors and assigns, to the Mortgagee, and shall be secured by the lien of
this Mortgage in like manner and extent as if the amount and description thereof
were written herein.
Section 2.7 The Shipowner covenants that, at any time that any Secured
Obligations shall be due and payable (whether by acceleration or otherwise), the
Mortgagee may demand the payment thereof, and in case the Shipowner shall fail
to pay the same forthwith upon such demand, the Mortgagee shall be entitled to
recover judgment for the whole amount so due and unpaid, together with such
further amounts as shall be sufficient to cover the reasonable compensation to
the Mortgagee's agents, attorneys and counsel and any necessary advances,
expenses and liabilities made or incurred by it hereunder. All moneys collected
by the Mortgagee under this Section 2.7 shall be applied by the Mortgagee in
accordance with the provisions of Section 2.11.
Section 2.8 Each and every power and remedy herein given to the Mortgagee
shall be cumulative and shall be in addition to every other power and remedy
herein given or now or hereafter existing at law, in equity, in admiralty or by
statute, and each and every power and remedy whether herein given or otherwise
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Mortgagee, and the exercise or the beginning of
the exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other power or remedy. No
delay or omission by the Mortgagee in the exercise of any right or power or in
the pursuance of any remedy accruing upon any Event of Default shall impair any
such right, power or remedy or be construed to be a waiver of any such Event of
Default or to be an acquiescence therein; nor shall the acceptance by the
Mortgagee of any security or of any payment of or on account of the Secured
Obligations after any Event of Default or of any payment on account of any past
Event of Default be construed to be a waiver of any right to take advantage of
any future Event of Default or of any past Event of Default not completely cured
thereby.
Section 2.9 If at any time after an Event of Default and prior to the
actual sale of the Vessels by the Mortgagee or prior to any foreclosure
proceedings, the Shipowner offers completely to cure all Events of Default and
to pay all expenses, advances and damages to the Mortgagee consequent on such
Events of Default, with interest at the rate provided in Section 1.16 hereof,
then the Mortgagee may, but shall be under no obligation to, accept such offer,
cure and payment and restore the Shipowner to its former position, but such
action shall not affect any subsequent Event of Default or impair any rights
consequent thereon.
Section 2.10 In case the Mortgagee shall have proceeded to enforce any,
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee,
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then and in every such case the Shipowner and the Mortgagee shall be restored to
their former positions and rights hereunder with respect to the property subject
or intended to be subject to this Mortgage and all rights, remedies and powers
of the Mortgagee shall continue as if no such proceedings had been taken.
Section 2.11 The proceeds of any sale of the Vessels and the net earnings
of any charter operation or other use of the Vessels by the Mortgagee under any
of the powers herein specified in this Article II, as well as any and all other
moneys received by the Mortgagee pursuant to or under any of the provisions of
Article I hereof or this Article II or in any proceedings pursuant to this
Article II, shall be held and applied by the Mortgagee from time to time as set
forth in the Indenture, any other provision in this Mortgage to the contrary
notwithstanding. In the event that the proceeds and amounts referred to above
received by the Mortgagee are insufficient to pay in full all Secured
Obligations, the Mortgagee shall be entitled to collect the balance from the
Shipowner or from any other person or entity liable therefor.
Section 2.12 Unless and until one or more Events of Default shall occur
and be continuing, the Shipowner (a) shall be suffered and permitted to retain
actual possession and use of the Vessels and (b) shall have the right, from time
to time, in its discretion, and without application to the Mortgagee, and
without obtaining a release therefrom by the Mortgagee, to dispose of, free from
the lien hereof, any boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, cables, chains, tackle, apparel, furniture, fittings, equipment
or any other appurtenances of the Vessels that are no longer useful, necessary,
profitable or advantageous in the operation of the Vessels, by first or
simultaneously replacing the same by new boilers, engines, machinery, masts,
spars, sails, rigging, boats, anchors, cables, chains, tackle, apparel,
furniture, fittings, equipment or other appurtenances of substantially equal
value to the Shipowner, which shall forthwith become subject to the Lien of this
Mortgage as a first preferred mortgage thereon unless otherwise permitted by the
Indenture.
ARTICLE III
SUNDRY PROVISIONS
Section 3.1 All of the covenants, promises, stipulations and agreements of
the Shipowner in this Mortgage contained shall bind the Shipowner and its
successors and assigns and shall inure to the benefit of the Mortgagee and its
successors and assigns (including successor trustees under the Indenture). In
the event of any assignment of this Mortgage, the term "Mortgagee" as used in
this Mortgage shall be deemed to mean any such assignee.
Section 3.2 Wherever and whenever herein any right, power or authority is
granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder. Without limitation of the foregoing, in each
instance where the Mortgagee has engaged a consultant to advise the Mortgagee in
connection with the exercise of any such rights, powers and authority, the
Mortgagee shall be entitled to rely
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upon the advice of such consultant and when so relying shall conclusively be
deemed to have acted in a reasonable manner.
Section 3.3 In the event that any provision of this Mortgage shall be
deemed invalid or unenforceable by reason of any present or future law or any
decision of any court of competent jurisdiction, the validity and enforceability
of any other provision hereof shall not be affected thereby. Any such invalidity
or unenforceability of any provision of this Mortgage in any jurisdiction or
nation shall not render such provision invalid or unenforceable under the laws
of any other jurisdiction or nation.
Section 3.4 Anything herein to the contrary notwithstanding, it is
intended that nothing herein shall waive the preferred status of this Mortgage
and that, if any provision of this Mortgage or portion hereof shall be construed
to waive the preferred status of this Mortgage, then such provision to such
extent shall be void and of no effect and shall cease to be a part of this
Mortgage without affecting the remaining provisions, which shall remain in full
force and effect.
Section 3.5 The Shipowner irrevocably submits itself to the non-exclusive
jurisdiction of the courts of the States of Iowa and New York or any federal
court sitting in Iowa or New York and any appellate court of any thereof, for
the purposes of any suit, action or other proceeding arising out of, or relating
to, this Mortgage or any of the transactions contemplated hereby, hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard in such court and hereby, to the fullest extent it may effectively do
so, irrevocably waives, and agrees not to assert, by way of motion, as a defense
or otherwise, in any such suit, action or proceeding any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
whatsoever, that such suit, action or proceeding is brought in an inconvenient
forum, that the venue of such suit, action or proceeding is improper or that
this Mortgage or the subject matter hereof may not be enforced in or by-such
courts. The Shipowner hereby irrevocably consents to the service of any and all
process in any suit, action or proceeding by the mailing (certified mail, return
receipt requested) or delivery of copies of such process to the Shipowner at 3rd
Street Ice Harbor, P.O. Box 1683, Dubuque, Iowa 52004-1683, Attention: Chief
Financial Officer. The Shipowner agrees that all notices to the Mortgagee
hereunder shall be validly given only if delivered at or mailed (certified mail,
return receipt requested) to the Mortgagee at 101 East 5th Street, St. Paul,
Minnesota 55101, Attention: Corporate Trust Department. The Shipowner further
agrees that a final judgment in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Section 3.5 shall affect
the right of the Mortgagee to serve legal process in any other manner permitted
by law or affect the right of the Mortgagee to bring any action or proceeding
against the Shipowner or its property in the courts of any other jurisdiction.
Section 3.6 This Mortgage may be executed in any number of counterparts,
each which shall be an original, but such counterparts shall together constitute
but one and the same instrument.
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Section 3.7 The term "Dollars" or the symbol as used herein shall mean
Dollars in any coin or currency of the United States of America which at the
time of payment shall be legal tender for public and private debts.
Section 3.8 If the Shipowner shall pay and discharge all Secured
Obligations secured hereby by well and truly paying or causing to be paid all
Secured Obligations, as and when the same become due and payable, and if the
Shipowner shall also pay or cause to be paid all other sums payable hereunder by
the Shipowner, then the Mortgage and the lien, rights and interest panted shall
cease, determine and become null and void, and the Mortgagee shall, at the
request and cost and expense of the Shipowner, execute and deliver such
instrument or instruments of satisfaction as may be reasonably necessary to
satisfy and discharge the Lien hereof; and forthwith the estate, right, title
and interest of the Mortgagee in and to all property subject to this Mortgage
shall thereupon cease, determine and become null and void; provided that the
indemnity provisions provided in Section 3.11 shall survive.
Section 3.9 The powers conferred on the Mortgagee by this Mortgage,
including without limitation the provisions of Sections 1.11(d), 1.13, 1.14,
1.15, 2.1, 2.2, 2.4, 2.5 and 2.6 hereof, are solely to protect its interest and
the interests of the Holders in the Vessels and shall not impose any duty upon
it to exercise such provisions. Except for the safe custody of any part of the
Vessels in its possession (subject to standards of care governing the Mortgagee
hereunder) and the accounting for moneys actually received by it hereunder, the
Mortgagee shall have no duty as to any part of the Vessels whether or not the
Mortgagee or any Holder has or is deemed to have knowledge of such matters, or
as to the taking of any necessary steps to preserve rights against any parties
or any other rights pertaining to the Vessels.
Section 3.10 The provisions of Article IX of the Indenture regarding
amendments are specifically incorporated in this Mortgage by reference, with the
same force and effect as if the same were set out in this Mortgage in full. All
references in such incorporated provisions to "Company" shall without further
reference mean and refer to the Shipowner; and all references in such
incorporated provisions to "this Indenture" shall without further reference mean
and refer to this Mortgage; and all references in such incorporated provisions
to "Trustee" shall without further reference mean and refer to Mortgagee.
Section 3.11 The Shipowner hereby agrees to indemnify and defend
Mortgagee, and its directors, officers, agents and employees, and each Holder
and saves each of them harmless from and against any and all liability, loss,
damages, judgments, claims and expenses, including reasonable attorneys' fees
and expenses, disbursements, bond expenses, printing and automated document
preparation and retention expenses and other ordinary litigation expenses,
incurred in connection with any action or proceeding to foreclose this Mortgage
or in or to which the Mortgagee or any Holder may be made a party due to the
existence of this Mortgage or to which action or proceeding the Mortgagee or any
Holder may become a party for the purpose of protecting the Vessels or the lien
of this Mortgage. All sums paid by the Mortgagee or any Holder to prosecute or
defend the rights herein set forth shall be deemed a part of the Secured
Obligations and shall be paid
Execution Copy -21-
<PAGE>
by the Shipowner to the Mortgagee or such Holder within ten days after written
demand, and if not paid within that period, shall accrue interest from and
including the date of disbursement or advance by the Mortgagee or such Holder to
and including the date of payment by the Shipowner at the interest rate then
applicable to the Notes.
Section 3.12 The Mortgage shall be governed by and construed according to
the provisions in the Ship Mortgage Act, or when applicable, by the Great
Maritime Laws of the United States.
Section 3.13 Notwithstanding any other provision of this Agreement, the
terms and provisions of this Agreement shall be subject and subordinate to the
terms of the Indenture. To the extent that the Indenture provides the Grantor
with a particular cure or notice period, or establishes any limitations or
conditions on the Trustee's actions with regard to a particular set of facts,
the Grantor shall be entitled to the same cure periods and notice periods and
the Trustee shall be subject to the same limitations and conditions in place of
the cure periods, notice periods, limitations and conditions provided for under
the Indenture; provided, however, that such cure periods, notice periods,
limitations and conditions shall not be cumulative as between the Indenture and
this Agreement. In the event of any conflict or inconsistency between the
provisions of this Agreement and those of the Indenture, including, without
limitation, any conflicts or inconsistencies in any definitions herein or
therein, the provisions or definitions of the Indenture shall govern.
Execution Copy -22-
<PAGE>
END OF ANNEX I
TO
FIRST PREFERRED SHIP MORTGAGE
made as of the 15th day of July, 1999
by PENINSULA GAMING COMPANY, LLC
regarding the WHOLE of the
DIAMOND JO (973800)
and
DIAMOND JO 11(973801)
Execution copy -23-
<PAGE>
SAMPLE
SATISFACTION/RELEASE OF MORTGAGE
OR CLAIM OF LIEN
VESSEL NAME AND
OFFICIAL NUMBER: Diamond Jo Official No. 973800
Name of mortgagor, if any: Greater Dubuque Riverboat Entertainment Company, L.C.
Name of mortgagee OR CLAIMANT:
National City Bank of Michigan/Illinois (f/k/a First of America Bank - Illinois
N.A.)
Amount of Mortgage or Claim of Lien: $14,000,000
Recorded in Book No. 96-73, Page No. 469
Mortgagee hereby affirms that the indebtedness referenced above is to be removed
from the record of subject vessel.
National City Bank (f/k/a First of America Bank - Illinois N.A.)
Signature /s/ Tim Fogerty Date 7/14/99
----------------------- --------------
Print name and title, if any, of person signing:
Tim Fogerty Vice President
STATE OF Il COUNTY/JUDICIAL DISTRICT Peoria
On this date the individual named above personally appeared before me and
acknowledged that this instrument was signed and sealed as a free and voluntary
act and deed for the uses and purposes therein mentioned.
7/14/99 /s/ Jennifer L. Landwehr
- ---------------- --------------------------------------
DATE Signature of NOTARY PUBLIC
State of Il
Date Commission Expires 11-9-99
AFFIX
NOTARY SEAL
"OFFICIAL SEAL"
Jennifer L. Landwehr
Notary Public, State of Illinois
My Commission Expires 11/9/99
Complete and submit an original and one copy along with all other applicable
forms to:
NATIONAL VESSEL DOCUMENTATION CENTER FAX (304)271-2405
2039 STONEWALL JACKSON DR.
FALLING WATERS, WV 25419
NATIONAL VESSEL DOCUMENTATION CENTER
19 JUL '99 -10: 24 AM
RECORDED: BOOK 99-83 PAGE 385
/s/ [ILLEGIBLE]
------------------------------------
DOCUMENTATION OFFICER
<PAGE>
NATIONAL VESSEL DOCUMENTATION CENTER
U.S. COAST GUARD
THEREBY CERTIFY THIS TO BE A TRUE
COPY OF THE RECORDS OF THIS OFFICE.
/s/ [ILLEGIBLE] 7/27/99
------------------------------------
DOCUMENTATION OFFICER DATE
SAMPLE
SATISFACTION/RELEASE OF MORTGAGE
OR CLAIM OF LIEN
VESSEL NAME AND
OFFICIAL NUMBER: Diamond Jo II Official No. 973801
Name of mortgagor, if any: Greater Dubuque Riverboat Entertainment Company, L.C.
Name of mortgagee OR CLAIMANT:
National City Bank of Michigan/Illinois (f/k/a First of America Banks - Illinois
N.A.)
Amount of Mortgage or Claim of Lien: $14,000,000
Recorded in Book No. 96-73, Page No. 470
Mortgagee hereby affirms that the indebtedness referenced above is to be removed
from the record of subject vessel.
National City Bank (f/k/a First of America Bank - Illinois N.A.)
Signature /s/ Tim Fogerty Date 7/14/99
----------------------- --------------
Print name and title, if any, of person signing:
Tim Fogerty Vice President
STATE OF Il COUNTY/JUDICIAL DISTRICT Peoria
On this date the individual named above personally appeared before me and
acknowledged that this instrument was signed and sealed as a free and voluntary
act and deed for the uses and purposes therein mentioned.
7/14/99 /s/ Jennifer L. Landwehr
- ---------------- --------------------------------------
DATE Signature of NOTARY PUBLIC
State of Il
Date Commission Expires 11-9-99
AFFIX
NOTARY SEAL
"OFFICIAL SEAL"
Jennifer L. Landwehr
Notary Public, State of Illinois
My Commission Expires 11/9/99
Complete and submit an original and one copy along with all other applicable
forms to:
NATIONAL VESSEL DOCUMENTATION CENTER FAX (304)271-2405
2039 STONEWALL JACKSON DR.
FALLING WATERS, WV 25419
NATIONAL VESSEL DOCUMENTATION CENTER
USCG
RECEIVED/FILED
19 JUL '99 -10: 24 AM
RECORDED: BOOK 99-83 PAGE 388
/s/ [ILLEGIBLE]
------------------------------------
DOCUMENTATION OFFICER
<PAGE>
SAMPLE
SATISFACTION/RELEASE OF MORTGAGE
OR CLAIM OF LIEN
VESSEL NAME AND
OFFICIAL NUMBER: Diamond Jo Official No. 973800
Name of mortgagor, if any: Greater Dubuque Riverboat Entertainment Company, L.C.
Name of mortgagee OR CLAIMANT:
Finova Capital Corporation
Amount of Mortgage or Claim of Lien: $3,458,518
Recorded in Book No. 96-89, Page No. 363
Mortgagee hereby affirms that the indebtedness referenced above is to be removed
from the record of subject vessel.
National City Bank (f/k/a First of America Bank - Illinois N.A.)
Signature /s/ Anthony Holland Date 7-15-99
----------------------- --------------
Print name and title, if any, of person signing:
ANTHONY HOLLAND, DIRECTOR, CONT. ADMIN
STATE OF New Jersey COUNTY/JUDICIAL DISTRICT Bergen
On this date the individual named above personally appeared before me and
acknowledged that this instrument was signed and sealed as a free and voluntary
act and deed for the uses and purposes therein mentioned.
7-15-99 /s/ Laura A. Keating
- ---------------- --------------------------------------
DATE Signature of NOTARY PUBLIC
AFFIX LAURA A. KEATING
NOTARY SEAL Notary Public of New Jersey
Commission Expires 10/6/2002
State of ______________
Date Commission Expires ___________
Complete and submit an original and one copy along with all other applicable
forms to:
NATIONAL VESSEL DOCUMENTATION CENTER FAX (304)271-2405
2039 STONEWALL JACKSON DR.
FALLING WATERS, WV 25419
NATIONAL VESSEL DOCUMENTATION CENTER
19 JUL '99 -10: 24 AM
RECORDED: BOOK 99-83 PAGE 383
/s/ [ILLEGIBLE]
------------------------------------
DOCUMENTATION OFFICER
<PAGE>
SAMPLE
SATISFACTION/RELEASE OF MORTGAGE
OR CLAIM OF LIEN
VESSEL NAME AND
OFFICIAL NUMBER: Diamond Jo Official No. 973800
Name of mortgagor, if any: Greater Dubuque Riverboat Entertainment Company, L.C.
Name of mortgagee OR CLAIMANT:
Finova Capital Corporation
Amount of Mortgage or Claim of Lien: $3,458,518
Recorded in Book No. 96-01, Page No. 604
Mortgagee hereby affirms that the indebtedness referenced above is to be removed
from the record of subject vessel.
Signature /s/ Anthony Holland Date 7-15-99
----------------------- --------------
Print name and title, if any, of person signing:
ANTHONY HOLLAND, DIRECTOR, CONT. ADMIN
STATE OF New Jersey COUNTY/JUDICIAL DISTRICT Bergen
On this date the individual named above personally appeared before me and
acknowledged that this instrument was signed and sealed as a free and voluntary
act and deed for the uses and purposes therein mentioned.
7-15-99 /s/ Laura A. Keating
- ---------------- --------------------------------------
DATE Signature of NOTARY PUBLIC
AFFIX LAURA A. KEATING
NOTARY SEAL Notary Public of New Jersey
Commission Expires 10/6/2002
State of ______________
Date Commission Expires ___________
Complete and submit an original and one copy along with all other applicable
forms to:
NATIONAL VESSEL DOCUMENTATION CENTER FAX (304)271-2405
2039 STONEWALL JACKSON DR.
FALLING WATERS, WV 25419
NATIONAL VESSEL DOCUMENTATION CENTER
19 JUL '99 -10: 24 AM
RECORDED: BOOK 99-83 PAGE 384
/s/ [ILLEGIBLE]
------------------------------------
DOCUMENTATION OFFICER
Exhibit 10.12
THIS INSTRUMENT WAS PREPARED BY, AND WHEN RECORDED SHOULD BE RETURNED TO: Steven
J. Dickinson, Dorsey & Whitney LLP, 801 Grand, Suite 3900, Des Moines, Iowa
50309, (515) 283-1000
MORTGAGE,
LEASEHOLD MORTGAGE,
ASSIGNMENT OF RENTS,
SECURITY AGREEMENT
AND
FIXTURE FINANCING STATEMENT
FROM
PENINSULA GAMING COMPANY, LLC
TO
FIRSTAR BANK OF MINNESOTA, N.A., AS TRUSTEE
NOTICE: This Mortgage secures credit in the amount of $140,000,000. Loans and
advances up to this amount, together with interest, are senior to indebtedness
to other creditors under subsequently recorded and filed mortgages and liens.
This Mortgage contains an after-acquired property clause.
Execution Copy
<PAGE>
This Mortgage (the "Shore Mortgage") is made as of July 15, 1999, by
Peninsula Gaining Company, LLC, a Delaware limited liability company (the
"Company"), in favor of Firstar Bank of Minnesota, N.A., as trustee (the
"Trustee") under the Indenture dated as of July 15, 1999 (the "Indenture") among
the Company, Peninsula Gaining Corp., a Delaware corporation, the Trustee and
certain Subsidiary Guarantors, as defined therein.
RECITALS
WHEREAS, the Company is the sole owner of (i) a fee simple interest
(the "Fee Simple Interest") for certain premises located in Dubuque County, Iowa
and more particularly described on Exhibit A attached hereto, and (ii) leasehold
interests (the "Leasehold Interests") created under leases with respect to
certain premises located in Dubuque County, Iowa and more particularly described
on Exhibit B attached hereto (collectively, the "Leases") (such Leasehold
Interests and Fee Simple Interest are hereinafter referred to as the "Real
Property"); and
WHEREAS, pursuant to the Indenture the Company has issued its
12 1/4% Senior Secured Notes due 2006 (together with any replacements thereof as
provided in the Indenture and as the same may be amended or supplemented from
time to time hereafter, the "Notes") in the initial aggregate principal amount
of $71,000,000, subject to increase as provided in the Indenture and maturing on
July 1, 2006. The Indenture provides that to secure performance by the Company
of its obligations under the Indenture, including payment of the Notes, the
Company will execute and deliver this Shore Mortgage to the Trustee. The
Indenture, this Shore Mortgage, the Security Documents (as defined in the
Indenture) and any other document referred to in or made with reference to the
Notes are hereby incorporated by reference, and are sometimes collectively
referred to as "Transaction Documents."
GRANTING CLAUSES
NOW, THEREFORE, in consideration of ten dollars and other good and
valuable consideration, the receipt of and sufficiency of which are hereby
acknowledged, and to secure
(i) the payment when due of indebtedness evidenced by the Notes in
the maximum principal sum of $140,000,000 payable to the order of the Holders,
bearing interest as set forth in the Indenture and maturing on July 1, 2006,
such date being the "Maturity Date," and any notes exchanged for the Notes or
issued in replacement of the Notes (in each case pursuant to the terms of the
Indenture), including, without limitation, all accrued and unpaid interest
thereon, and premiums and penalties, if any, thereon, including late payment
charges and Additional Interest (as defined in Section 5.2 hereof),
(ii) the payment by the Company if and when due of (a) the Change of
Control payment (as defined in Section 4.14 of the Indenture), in an amount not
to exceed such amount calculated in accordance with Section 4.14 of the
Indenture, and (b) amounts due in connection with an Excess Proceeds Offer (as
defined in Section 4.10 of the Indenture) in an amount not to
Execution Copy -1-
<PAGE>
exceed such amount calculated in accordance with Section 4.10 of the Indenture,
in either case together with interest thereon as set forth in the Indenture, and
premiums and penalties, if any, thereon, including Additional Interest,
(iii) all other sums that may or shall become due hereunder, in
connection with the Notes or under the other Transaction Documents, including
the costs and expenses of enforcing any provision of any of the foregoing
documents or any extensions or modifications of the Notes or any substitutions
therefor,
(iv) the reimbursement to the Trustee of all monies which may be
advanced as herein provided and of any and all costs and expenses (including
reasonable attorneys' fees and expenses) incurred or paid on account of any
litigation at law or in equity that may arise in respect of this Shore Mortgage
or the obligations secured hereby or the lands and premises and other property
herein mentioned or in obtaining possession of said lands and premises and other
property after any sale that may be made as hereinafter provided,
(v) the payment by the Company to the Trustee of all sums, if any,
as may be duly expended or advanced by the Trustee in the performance of any
obligation of the Company as provided hereunder,
(vi) the payment of any and all other indebtedness that this Shore
Mortgage by its terms secures and
(vii) the performance and observance of the covenants, agreements
and obligations of the Company contained herein and in the other Transaction
Documents
(all obligations and sums included in the foregoing clauses (i), (ii), (iii),
(iv), (v), (vi) and (vii) being hereinafter collectively referred to as the
"Secured Obligations"), and in order to charge with such performance and with
such payments said lands and premises and other property hereinafter described
and the rents, revenues, issues, income and profits thereof, the Company does
hereby mortgage, affect, hypothecate, to inure to the use and benefit of the
Trustee (as trustee under the Indenture), and its successors and assigns, all
right, title and interest of the Company now or hereafter owned or leased, in,
to or under, or derived from each and all of the following properties, estates,
rights, titles and interests (collectively, the "Mortgaged Property"):
(a) the Real Property and all tenements, hereditaments,
appurtenances, estates and rights in and to any of the Real Property
and all component parts of the Real Property, including without
limitation all of the Company's right, title and interest as tenant
under the Leases;
(b) all buildings, improvements and other structures now or
hereafter located on any of the Real Property (the "Improvements");
Execution Copy -2-
<PAGE>
(c) all of the Company's right, title and interest in and to
all servitudes, easements, rights-of-way, gores of land, streets,
ways, alleys, passages, sewer rights, waters, water courses, water
rights and powers, and all estates, rights, title, interests,
privileges, liberties, prescriptions, advantages and appurtenances
of any nature whatsoever, in any way belonging, relating or
pertaining to any of the Real Property or the Improvements;
(d) all of the Company's right, title and interest in and to
any right to purchase, or to use and occupy, any land adjacent to
any of the Real Property and any land lying in the bed of any
street, road or avenue, opened or proposed, in front of or adjoining
any of the Real Property;
(e) all of the Company's right, title and interest, to all
machinery, apparatus, equipment, fittings, fixtures and other
property of every kind and nature whatsoever now or hereafter
located upon any of the Real Property or the Improvements, and all
component parts of any building or other construction located on any
of the Real Property or appurtenances thereto, and used in
connection with the operation and occupancy of any of the Real
Property or the Improvements, and all building equipment, material
and supplies of any nature whatsoever now or hereafter located in or
upon any of the Real Property or the Improvements, including,
without limitation, all metals, lumber and lumber products, bricks,
stones, building blocks, sand, cement, roofing materials, paint,
doors, windows, hardware, wires, wiring and other building materials
and any building equipment, materials and supplies obtained for use
in connection with any of the Real Property or the Improvements and
all additions, replacements, modifications and alterations of any of
the foregoing, including, but without limiting the generality of the
foregoing, all heating, lighting incinerating and power equipment,
engines, pipes, tanks, motors, conduits, switchboards, plumbing,
lifting, cleaning, fire prevention, fire extinguishing,
refrigerating, ventilating and communications apparatus, air cooling
and air conditioning apparatus, elevators, ducts and compressors and
all other equipment and fixtures (collectively, the "Fixtures"). The
Company acknowledges that all Fixtures are part and parcel of the
real estate and appropriated to the use of the real estate and,
whether or not affixed or annexed to the Improvements, shall for the
purpose of this Shore Mortgage be deemed conclusively to be real
estate and mortgaged hereby;
(f) all of the Company's right, title and interest to all
plans and specifications for the Real Property and the Improvements,
all contracts with architects and engineers responsible for the
design of the Improvements, the preparation or evaluation of any of
such plans and specifications or the supervision of the construction
of any of the Improvements, all contracts to which the Company is
now or hereafter a party providing for the connection therewith or
Execution Copy -3-
<PAGE>
the furnishing or installation of any Fixtures or other personal
property in connection therewith, all contracts to which the Company
is now or hereafter a party providing for the management of the
construction of any of the Improvements, all rights of the Company
as a third party beneficiary under all contracts and subcontracts
pertaining to the Real Property or the Improvements as to which the
Company is not a party, all payment and performance bonds relating
to the Real Property or the Improvements and all other contracts and
agreements related to the design, management, construction,
equipping and development of the Real Property or the Improvements
(collectively, the "Construction Documents");
(g) all of the Company's right, title and interest to all
awards or payments, and any interest paid or payable with respect
thereto, that may be made with respect to all or any portion of the
Real Property, the Improvements or the Fixtures, whether from the
exercise of right of condemnation, eminent domain or similar
proceedings (including any transfer made in lieu of the exercise of
said right), or from any taking for public use, or for any other
injury to or decrease in the value of all or any portion of the Real
Property, the Improvements or the Fixtures, or as a result of the
exercise by any governmental authority of any right or option to
purchase any of the Real Property, all of the foregoing to be held,
applied and paid in accordance with the provisions of this Shore
Mortgage (collectively, the "Eminent Domain Awards");
(h) all of the Company's right, title and interest to all
proceeds of, and any unearned premiums on, any insurance policies
covering all or any portion of the Real Property, the Improvements
or the Rents (as hereinafter defined), including, without
limitation, the right to receive and apply the proceeds of any
insurance, judgments, or settlements made in lieu thereof, for
damage to all or any portion of the Real Property or the
Improvements and any interest actually paid with respect thereto,
all of the foregoing to be held, applied and paid in accordance with
the provisions of this Shore Mortgage (collectively, the "Insurance
Proceeds");
(i) all of the Company's right, title and interest as lessor
or landlord to all leases and other agreements affecting the use or
occupancy of any of the Real Property or the Improvements now in
effect or hereafter entered into (including, without limitation,
subleases (including subleases of the Leases, licenses, concessions,
tenancies and other occupancy agreements covering or encumbering all
or any portion of the Real Property or the Improvements), but
excluding any licenses and permits to the extent not assignable
under applicable law, including without limitation, liquor and
gaming licenses, together with any modifications, extensions or
renewals of the same (collectively, excluding the Leases, the "Space
Leases") and the rents, revenues, issues, income, products and
profits of the Real
Execution Copy -4-
<PAGE>
Property and the Improvements, including, without limitation, any
security deposits or other funds deposited with the Company pursuant
to the Space Leases (collectively, the "Rents"), together with any
guarantees of the Space Leases or Rents delivered to the Company
from time to time, and any modifications, extensions and renewals of
any such guarantees, together with the right, but not the
obligation, to exercise options, to give consents and to collect,
receive and receipt for the Rents and apply the Rents to the payment
of the Secured Obligations and to demand, sue for and recover the
Rents (when due and payable), subject to a license in favor of the
Company in respect thereof prior to the occurrence of an Event of
Default (as defined in Section 5.1 hereof); and
(j) any and all other, further or additional rights, title,
estates and interests of the Company in and to any of the Real
Property or the Improvements or the Fixtures, and all renewals,
substitutions and replacements of and all additions and
appurtenances to any of the Real Property or the Improvements or the
Fixtures or constructed, assembled or placed on any of the Real
Property or the Improvements, and all conversions of the assemblage,
placement or conversion, as the case may be, and in each such case
without any further mortgage, conveyance, assignment or other act by
the Company, shall become subject to the lien of this Shore Mortgage
as fully and completely, and with the same effect, as though now
owned by the Company, the Company expressly agreeing that if the
Company shall at any time acquire any other right, title, estate or
interest in and to any of the Real Property, the Improvements or the
Fixtures, the lien of this Shore Mortgage shall automatically attach
to and encumber such other right, title, estate or interest as a
first lien thereon.
AND, as additional security, the Company hereby grants to the
Trustee a continuing security interest in (a) the Fixtures, (b) the Construction
Documents, (c) the Insurance Proceeds, (d) the Eminent Domain Awards, (e) the
Space Leases, (f) the Rents, (g) all proceeds of the foregoing and (h) all
proceeds of any of the Real Property and the Improvements (collectively, the
"Security Interests Property") and this Shore Mortgage shall be effective as a
security agreement pursuant to the Uniform Commercial Code as enacted and in
effect in the state in which any of the Real Property is located (the "Code").
HABENDUM
TO HAVE AND TO HOLD the Mortgaged Property, the rights and
privileges hereby conveyed or assigned, or intended so to be, unto the Trustee
(as trustee under the Indenture), its successors and assigns, forever for the
uses and purposes and subject to the terms and conditions herein set forth.
SUBJECT, HOWEVER, to Permitted Liens (as defined in the Indenture).
Execution Copy -5-
<PAGE>
PROVIDED NEVERTHELESS, should the Company pay and perform all the
Secured Obligations in accordance with the Indenture and the Security Documents,
then these presents will be of no further force and effect, and this Shore
Mortgage shall be satisfied by the Trustee, at the expense of the Company.
The Company FURTHER agrees as follows:
Execution Copy -6-
<PAGE>
ARTICLE I
COVENANTS
Section 1.1 Performance of Obligations. The Company shall pay and
perform the Secured Obligations. Time is of the essence hereof.
Section 1.2 Further Assurances. If the Trustee requests, the Company
shall sign and deliver and cause to be recorded as the Trustee shall reasonably
direct any further mortgages, instruments of further assurance, certificates and
other documents as the Trustee may consider reasonably necessary or desirable in
order to perform, perfect, continue, and preserve the obligations of the Company
under the Transaction Documents. The Company further agrees to pay to the
Trustee, upon demand, all costs and expenses incurred by the Trustee in
connection with the preparation, execution, recording, filing and refiling of
any such documents, including attorneys' fees and title opinion or title
insurance costs.
Section 1.3 Operation and Maintenance; Compliance with Laws. The
Company shall cause the Mortgaged Property to be maintained in normal working
order and condition, reasonable wear and tear excepted, and the Company shall
make all necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, as shall be reasonably necessary for the proper conduct of
the business of the Company. The Company shall comply or cause compliance with
all laws, ordinances and regulations of any governmental authority with
reference to the Mortgaged Property and the manner of using or operating the
same, including any Environmental Laws or Regulations and Accessibility
Regulations, as hereafter defined, and with any restrictive covenants affecting
the title to the Mortgaged Property, and with the terms of all insurance
policies relating to the Mortgaged Property.
Section 1.4 Payment of Utilities, Impositions, Liens. The Company
shall pay or cause to be paid when due all charges or fees for utilities and
services supplied to the Mortgaged Property. The Company, at least five (5) days
before any penalty attaches thereto, shall pay and discharge, or cause to be
paid and discharged, all taxes, assessments and governmental charges or levies
(collectively, "Impositions") imposed upon or against it, its income or profits,
the Mortgaged Property or rents therefrom, or upon or against the Secured
Obligations, or upon or against the interest of the Trustee in the Mortgaged
Property or the Secured Obligations, except Impositions measured by the income
of the Trustee. The Company shall provide evidence of such payment at the
Trustee's request. This Shore Mortgage is and shall be maintained by the Company
as a valid first mortgage lien and first security interest in the Mortgaged
Property, subject only to the Permitted Liens (as defined in the Indenture) and
such other matters as may be expressly permitted under the Indenture. Except as
otherwise provided in the Indenture, the Company shall not, directly or
indirectly, create or suffer, or permit to be created or suffered, against the
Mortgaged Property or any part thereof, and the Company will promptly discharge
any Lien (as defined in the Indenture) or other Imposition that may affect the
Mortgaged Property or any part thereof, or any interest therein, except the
Permitted Liens. If any Lien not permitted hereunder is filed, the Company will
cause the same to be discharged promptly by payment or
Execution Copy -7-
<PAGE>
bonding or otherwise to the satisfaction of the Trustee and will exhibit to the
Trustee evidence of payment, discharge, bonding or other disposition
satisfactory to the Trustee.
Section 1.5 Intentionally omitted.
Section 1.6 Insurance. The Company shall maintain insurance on the
Mortgaged Property as specified in Section 4.16 of the Indenture. Such insurance
shall include, unless waived in writing by the Trustee, the following:
(a) Unless such types of insurance are no longer reasonably
commercially available, the Company shall maintain all insurance
required by the Indenture and in addition, with respect to the Real
Property and the Improvements, as follows: (i) special causes of
loss insurance (formerly known as all-risk insurance), flood and
sprinkler leakage, if applicable, in an amount sufficient to prevent
the Company from being or becoming a co-insurer within the terms of
the policy or policies providing such insurance, and in any event
for not less than the full replacement value of the Improvements and
the Fixtures, as reasonably determined by the Trustee; (ii) business
interruption insurance for loss occasioned by the perils commonly
insured in a special causes of loss policy for a period ending no
earlier than the Maturity Date and in an aggregate amount not less
than the real estate taxes, additional interest and other
assessments for the Real Property and the Improvements and all other
continuing expenses of the Mortgaged Property including, without
limitation, all payments required to be made by the Company under
the Leases; (iii) commercial general liability insurance, including
blanket contractual liability, completed operations and personal
injury coverage, with a combined single limit for any one occurrence
of at least $1,000,000 and an aggregate limit of at least
$2,000,000; (iv) worker's compensation and employer's liability
insurance, subject to statutory limits or better, in respect of any
work or other operations on, about or in connection with the Real
Property and the Improvements; and (v) such other insurance with
respect to the Real Property and the Improvements in such amounts as
the Trustee, from time to time, may reasonably request against such
other insurable hazards which are commonly insured against in
respect of property similar to the Real Property and the
Improvements (and, with respect to clause (v) only, provided that
such insurance is available at commercially reasonable rates).
(b) The insurance maintained by the Company under clauses (i),
(ii) and, if appropriate, (v) of subparagraph (a) of this Paragraph
shall bear a standard noncontributory endorsement in favor of the
Trustee. The insurance maintained by the Company under clause (iii)
and, if appropriate, (v) above shall name the Trustee as an
additional insured. All insurance maintained by the Company shall
provide that no cancellation, material change or reduction in the
coverage or amounts thereof shall be effective until at least thirty
(30) days or, in the case of
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non-payment of premiums, ten (10) days, after written notice to the
Trustee thereof.
(c) The Company shall furnish the Trustee with certificates
evidencing all such policies, endorsements and renewals and evidence
of payment of premiums therefor and, certified copies of all such
policies, endorsements and renewals certified by the insurance
carrier. In this regard, the Company further covenants and agrees
that, in any suit or action for damages arising from the alleged
negligence of the Company in which action the Trustee or any Holder
is included or made a defendant, the Company agrees to assume all of
the burden, cost and expense of the defense or settlement of such
action or claim and will pay any judgment which may be obtained
against the Trustee or any Holder.
(d) The Company shall not carry separate or additional
insurance concurrent in form or contributing, in the event of loss,
with that required hereunder unless endorsed in favor of the Trustee
as loss payee or additional insured, as applicable, and designating
that such insurance shall contain endorsements providing coverage
secondary to the insurance required to be carried hereunder. Nothing
contained herein shall prohibit the Company from holding or
obtaining an owner's policy of title insurance covering the Real
Property.
(e) Each policy of insurance required by this Shore Mortgage
(hereinafter collectively referred to as the "Policies") shall be
carried with a company which is licensed to do business in the state
in which the Real Property is located and is rated A-minus-12 or
higher by Best's Rating Guide, or an equivalent rating, with such
other publication of a similar nature as shall be in current use,
except that the Company may obtain such insurance from Lloyds of
London or from a protection and indemnity club which is comparable
in financial strength to insurance companies rated A-minus-12. All
policies of insurance placed with a mutual company shall be
nonassessable. All policies of insurance at any time carried by the
Company on the Mortgaged Property (whether carried pursuant to the
requirements of this Shore Mortgage or otherwise) shall name the
Trustee as joint payee for all payments made by such insurance
company. The Company shall pay the premiums for the Policies as the
same become due and payable. Not later than thirty (30) days prior
to the expiration date of each of the Policies, the Company will
deliver to the Trustee a renewal policy or policies (or binder(s)
evidencing-same) marked "premium paid" or accompanied by other
evidence of payment of premium satisfactory to the Trustee.
(f) In the event of any insured loss, the Company hereby
authorizes and directs any insurance company concerned to make
payment of such loss (only with respect to the insurance policies
described in subparagraphs 1.6(a)(i),
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l.6(a)(ii) (provided, however, in the case of l.6(a)(ii) only, any
such payments shall be made to the Trustee only after an Event of
Default has occurred, as defined in Section 5.1 hereof, which has
not been waived in writing by the Holders under the Indenture) and,
as applicable, 1.6(a)(v)) directly and solely to the Trustee to be
applied as hereinafter provided. The Company, acting in its
reasonable judgment, shall make any necessary proof of loss and
shall adjust and compromise all claims under all policies and shall
cause the applicable insurance company to make payment thereof as
herein provided; and the Company shall sign all receipts, vouchers,
releases and other instruments which may be reasonably necessary or
desirable in aid of such payment. The Insurance Proceeds paid to the
Trustee shall be held as trust funds, and the Trustee shall dispose
of such proceeds, as provided in Section 3.1 hereof. In the event
that any Insurance Proceeds are paid by check to the Company or to
the Company and the Trustee as joint payees, the Company agrees that
it shall endorse such check over to the Trustee.
(g) In the event that the Company fails to keep the Real
Property and the Improvements insured in compliance with this
Section, the Trustee may, but shall not be obligated to, obtain
insurance and pay the premiums therefor, and the Company shall, on
demand, reimburse the Trustee for all sums advanced and expenses
incurred in connection therewith. Such sums and expenses, together
with interest thereon at the Additional Interest Rate, shall be
deemed part of the Secured Obligations and secured by the lien of
this Shore Mortgage.
(h) Subject to the provisions of Section 3.1 hereof, nothing
contained in this Section or elsewhere in this Shore Mortgage shall
relieve the Company of its duty to maintain, repair, replace or
restore the Improvements or the Fixtures or rebuild the
Improvements, from time to time, in accordance with the applicable
provisions of the Transaction Documents, and nothing in this Section
or elsewhere in this Shore Mortgage shall relieve the Company of its
duty to pay the Secured Obligations, which shall be absolute,
regardless of the occurrence of damage to or destruction of or
condemnation of all or any portion of the Mortgaged Property.
Section 1.7 Books and Records; Financial Information. The Company
shall (i) keep complete and accurate books and records with respect to the
Mortgaged Property; (ii) permit the Trustee to inspect such books and records
during normal business hours and make copies thereof at the Trustee's expense;
and (iii) provide the Trustee such information as the Trustee may from time to
time reasonably request concerning the operations and financial affairs of the
Company and the Mortgaged Property, including, if requested, audited annual
financial statements and quarterly operating statements.
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Section 1.8 Mortgage, Sale, Lease of the Mortgaged Property.
(a) The Company will not, now or in the future, mortgage,
pledge or encumber or place any Lien or encumbrance (or permit the
same to exist) on the Mortgaged Property, or any part thereof,
without the prior written consent of the Trustee, except for
Permitted Liens.
(b) The Company shall not sell, convey, transfer or otherwise
alienate in any manner, whether directly or indirectly, any right,
title or interest in the Mortgaged Property, or any part thereof
except as expressly permitted under the Indenture, without obtaining
in each such instance the prior written consent of the Trustee.
(c) Except as otherwise expressly permitted under the
Transaction Documents or as otherwise expressly permitted hereunder,
the Company shall not, without the Trustee's prior consent, which
consent will not be unreasonably withheld, enter into any agreement
with or conveyance to any other person or entity permitting the use
of any excess development rights that might otherwise be used by the
Company in expanding, altering, reconstructing, replacing or
otherwise improving the Improvements or making any other
improvements on the Mortgaged Property, or otherwise permit or
suffer any change of the zoning of the Mortgaged Property or the use
that may be made thereof.
Section 1.9 Environmental - ADA. The Company agrees:
(a) Except for substances normally used for maintenance or
operation of the Mortgaged Property which are used, stored and
disposed of in accordance with all applicable Environmental
Regulations, The Company shall not, nor shall it permit others to,
place, store, locate, generate, produce, create, process, treat,
handle, transport, incorporate, discharge, emit, spill, release,
deposit or dispose of any Hazardous Substance in, upon, under, over
or from the Mortgaged Property. The Company shall cause all
Hazardous Substances found on or under the Mortgaged Property, which
are not permitted under the foregoing sentence, and which exist in
quantities which violate applicable Environmental Laws or
Regulations, to be properly removed therefrom and properly disposed
of at the Company's cost and expense. The Company shall not install
or permit to be installed any underground storage tank on or under
the Mortgaged Property. If the Trustee shall reasonably request, the
Company shall at its cost obtain and deliver to the Trustee an
environmental review, audit, assessment and/or report relating to
the Mortgaged Property or shall have any previously delivered
materials updated and/or amplified, by an engineer or scientist
acceptable to the Trustee.
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(b) the Company shall comply with all Accessibility
Regulations which are applicable to the Mortgaged Property. If the
Trustee shall reasonably request, the Company shall at its cost
obtain and deliver to the Trustee an Accessibility Regulation
compliance report relating to the Mortgaged Property or shall have
any previously delivered materials updated and/or amplified, by a
qualified consultant acceptable to the Trustee.
(c) the Company shall, promptly after obtaining actual
knowledge thereof, give notice to the Trustee of: (i) any activity
in violation of any applicable Environmental Laws or Regulations
relating to the Mortgaged Property, (ii) any governmental or
regulatory actions instituted or threatened under any Environmental
Laws or Regulations or any Accessibility Regulations affecting the
Mortgaged Property, (iii) all claims made or threatened by any third
party against the Mortgaged Property relating to any Hazardous
Substance or a violation of any Environmental Laws or Regulations or
any Accessibility Regulations, (iv) discovery by any the Company of
any occurrence or condition on or under the Mortgaged Property or on
or under any real property adjoining or in the vicinity of the
Mortgaged Property which could subject the Company, the Trustee or
the Mortgaged Property to a claim under any Environmental Laws or
Regulations or Accessibility Regulations. Any such notice shall
include copies of any written materials received by the Company.
(d) Any investigation, remedial or corrective action, taken
with respect to the Mortgaged Property shall be done under the
supervision of a qualified consultant, engineer or scientist
acceptable to the Trustee who shall, at the Company's cost and at
the completion of such investigation or action, provide a written
report of such investigation or action to the Trustee.
(e) If the Mortgaged Property has, or is suspected to have,
asbestos or asbestos containing materials ("ACM") which, due to its
condition, location and/or planned building renovation or
demolition, is recommended to be abated by repair, encapsulation,
removal or other action, the Company shall promptly carry out the
recommended abatement action. If the recommended abatement includes
removal of ACM, the Company shall cause the same to be removed and
disposed of offsite by a licensed and experienced asbestos removal
contractor, all in accordance with Environmental Laws or
Regulations. Upon completion of the recommended abatement action,
the Company shall deliver to the Trustee a certificate, signed by an
officer of the Company and the consultant overseeing the abatement
action, certifying to the Trustee that the work has been completed
in compliance with all applicable laws, ordinances, codes and
regulations (including without limitation those regarding
notification, removal and disposal) and that no airborne fibers
beyond permissible exposure limits remain on site. The Company shall
develop and implement an Operations and Maintenance Program (as
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contemplated by Environmental Protection Agency guidance document
entitled "Managing Asbestos In Place: A Building Owner's Guide to
Operations and Maintenance Programs for Asbestos-Containing
Materials") for managing in place any ACM in the Mortgaged Property.
The Company shall deliver a complete copy of such Operations and
Maintenance Program to the Trustee and certify to the Trustee that
such Program has been implemented.
(f) After an Event of Default, or if at any time there is a
reasonable basis to believe that a violation of Environmental Laws
or Regulations may have occurred on the Mortgaged Property, the
Trustee shall have the right, after ten (10) days' prior written
notice to the Company, to have an environmental review, audit,
assessment, testing program and/or report with respect to the
Mortgaged Property performed or prepared by an environmental
engineering firm selected by the Trustee. The Company shall
reimburse the Trustee for the cost incurred for each such action
within ten (10) days following demand therefor by the Trustee. The
amount shall accrue interest at the Additional Interest Rate (as
defined in Section 5.2) from and including the date of disbursement
by the Trustee through the date of payment by the Company.
For purposes of this Shore Mortgage, the following definitions shall apply:
"Environmental Laws or Regulations" means and includes the Federal
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA" or the Federal Superfund Act) as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. ss.ss. 9601
et seq.; the Federal Resource Conservation and Recovery Act of 1976
("RCRA"), 42 U.S.C. ss.ss. 6901 et seq.; Chapter 455B of the Iowa Code;
the Clean Water Act, 33 U.S.C. ss.ss. 1321 et seq.; and the Clean Air Act,
42 U.S.C. ss.ss. 7401 et seq., all as the same may be from time to time
amended, and any other federal, state, county, municipal, local or other
statute, code, law, ordinance, regulation, requirement or rule which may
relate to or deal with human health or the environment, including, without
limitation, all regulations promulgated by a regulatory body pursuant to
any such statute, code, law or ordinance.
"Hazardous Substances" means asbestos, asbestos containing
materials, urea formaldehyde, polychlorinated biphenyls, nuclear fuel or
materials, chemical waste, radioactive materials, explosives, known
carcinogens, petroleum products including but not limited to crude oil or
any fraction thereof, natural gas, natural gas liquids, gasoline or
synthetic gas, and any other waste, material, substance, pollutant or
contaminant which would subject the owner of the Mortgaged Property to any
damages, penalties, liabilities, or obligations under any applicable
Environmental Laws or Regulations.
"Accessibility Regulations" means any law ordinance or regulation
relating to accessibility of facility or property for disabled,
handicapped and/or physically challenged
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persons, including, without limitation, the Americans With Disabilities
Act of 1991, as amended.
Section 1.10 The Leases. With respect to each Lease, the Company
hereby covenants and agrees that:
(a) The Company will promptly pay when due and payable the
rentals, additional rents and other charges mentioned in and payable
under the Lease within the grace and cure periods provided in the
Lease.
(b) The Company will promptly perform and observe all of the
terms, covenants and conditions required to be performed and
observed by the Company, as lessee under the Lease, within the grace
and cure periods provided in the Lease, and will do all things
reasonably necessary to preserve and to keep unimpaired its rights
under the Lease. The Company will enforce or cause to be enforced
the obligations of the lessor under the Lease, to the end that the
Company may enjoy all of the material rights granted to it as lessee
under the Lease.
(c) The Company will promptly notify the Trustee of any
material default by the Company in the performance or observance of
any of the terms, covenants or conditions on the part of the Company
to be performed or observed under the Lease.
(d) The Company will (i) promptly notify the Trustee of the
receipt by the Company of any notice from the lessor under the Lease
of a default by the Company in the performance or observance of any
of the terms, covenants or conditions on the part of the Company to
be performed or observed under the Lease, (ii) promptly notify the
Trustee of the receipt by the Company of any notice from the lessor
under the Lease to the Company of termination of the Lease pursuant
to the provisions thereof and (iii) promptly cause a copy of each
such notice received by the Company from the lessor under the Lease
to be delivered to the Trustee.
(e) Except as otherwise expressly permitted under the
Transaction Documents or as otherwise expressly permitted hereunder,
the Company will not, without the prior consent of the Trustee (i)
terminate, cancel, modify, supplement or surrender or suffer or
permit any termination, modification or surrender of the Lease, (ii)
fail or refuse to take timely and appropriate action to renew the
Lease pursuant to the applicable provisions thereof, (iii) consent
or refuse to consent to any action taken or to be taken by the
lessor or anyone else under the Lease, the result of which would
materially diminish or impair the security of this Shore Mortgage
(as determined by the Trustee), (iv) further encumber the Leasehold
Interests, notwithstanding any such right given to the Company under
the Lease,
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or (v) subordinate or consent to the subordination of the Lease to
any mortgage on the lessor's interest in the premises demised by the
Lease.
(f) Supplementing the provisions of subparagraph (e) above, if
the Lease is rejected or disaffirmed by the lessor thereunder (or by
any receiver, trustee, custodian or other party who succeeds to the
rights of such lessor, such receiver, trustee, custodian or other
party being collectively, the "acting lessor") pursuant to any
bankruptcy, insolvency, reorganization, moratorium or similar law
(any such law hereinafter collectively referred to as a "Bankruptcy
Law"), the Company covenants that it will not elect to treat the
Lease as terminated under 11 U.S.C. ss.365(h) or any similar or
successor law or right, and hereby assigns to the Trustee the sole
and exclusive right to make or refrain from making any such
election, and the Company agrees that any such election, if made by
the Company, shall be void and of no force or effect.
(g) If the lessor or acting lessor under the Lease rejects or
disaffirms the Lease pursuant to any Bankruptcy Law and the Trustee
elects to have the Company remain in possession under any legal
right the Company may have to occupy the premises leased pursuant to
the Lease, then (i) the Company shall remain in such possession and
shall perform all acts necessary for the Company to retain its right
to remain in such possession for the unexpired term of the Lease
(including all renewals thereof) whether such acts are required
under the then existing terms and provisions of the Lease or
otherwise, and (ii) all of the terms and provisions of this Shore
Mortgage and the lien created hereby shall remain in full force and
effect and shall be extended automatically to such possession,
occupancy and interest of the Company.
(h) The Company will from time to time, after demand of the
Company, use reasonable efforts to obtain and deliver to the Trustee
a written statement from the lessor under the Lease, duly
acknowledged, and certifying to the Company and the Holders (i) that
the Lease is then in full force and effect and has not been modified
(or, if modified, setting forth all modifications), (ii) the date to
which the rent, additional rent and other charges thereunder have
been paid, (iii) whether or not, to the best knowledge of lessor
under the Lease, the Company is in default under the Lease, and, if
the Company is in default, the specific nature of all such defaults
and (iv) as to any other matters reasonably requested by the Trustee
and reasonably related to the Lease.
(i) The Company shall deliver to the Trustee an original Non
Disturbance and Attornment Agreement from the holder of any mortgage
encumbering the real property affected by the Leasehold Interest, in
a form previously agreed to by the Trustee.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Company makes the following representations and warranties:
Section 2.1 Existence and Powers. The Company is a limited liability
company duly created and validly existing and in good standing under the laws of
the State of Delaware. The Company has the power to own its property and to
carry on its business and to execute and perform the Transaction Documents. The
Company has obtained all licenses and permits necessary to conduct its business
in the manner presently conducted.
Section 2.2 Ownership, Liens, Compliance with Laws. The Company owns
the Mortgaged Property free from all Liens and encumbrances except for the
Permitted Liens. All applicable zoning and environmental, land use, subdivision,
building, fire, safety or health laws, ordinances and regulations affecting the
Mortgaged Property permit the current use and occupancy thereof, and the Company
has obtained all consents, permits and licenses required for such use. The
Company will comply with and satisfy all applicable formalities and provisions
of the laws and regulations of the United States of America and the laws of the
State of Iowa in order to perfect, establish and maintain this Shore Mortgage,
and any supplement or amendment hereto.
Section 2.3 Authority, Consents. The execution, delivery and
performance of the Transaction Documents have been duly authorized by all
necessary action of the Company. Except for consents and approvals previously
obtained, no consent or approval of, or exemption by, any person or entity,
governmental or private, is required to authorize the execution, delivery and
performance of the Transaction Documents or the validity thereof.
Section 2.4 Binding Agreement. The Transaction Documents are the
valid and legally binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except to the extent limited
by bankruptcy, insolvency or similar laws affecting the rights of creditors
generally.
Section 2.5 No Conflict, Default. The execution, delivery and
performance by the Company of the Transaction Documents will not violate or
cause default under or permit acceleration of any agreement to which the Company
is a party or by which it or the Mortgaged Property is bound. To the Company's
knowledge, it is not in default (beyond any applicable grace period) in the
performance of any agreement, order, writ, injunction, decree or demand to which
it is a party or by which it is bound.
Section 2.6 Litigation. There is no litigation, arbitration or other
proceeding in process or to the Company's knowledge pending or threatened
against the Mortgaged Property or the Company which is reasonably likely to have
a materially adverse effect on the ability of the
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Company to fulfill its obligations under the Transaction Documents or on the
condition, financial or otherwise, of the Company's business, properties or
assets.
Section 2.7 Use. The Mortgaged Property is not homestead property
nor is it agricultural property in agricultural use.
Section 2.8 Utilities. The Mortgaged Property is serviced by all
necessary public utilities, and all such utilities are operational and have
sufficient capacity.
Section 2.9 Environmental. To the Company's knowledge:
(a) There is not located on, in, about, or under the Mortgaged
Property any Hazardous Substances except for Hazardous Substances of
the type ordinarily used, stored, or manufactured in connection with
the ownership or operation of the Mortgaged Property as it is
presently operated and such existing Hazardous Substances have been
used, stored and manufactured in compliance with all Environmental
Laws or Regulations.
(b) The Mortgaged Property is not presently used, and has not
in the past been used as a landfill, dump, disposal facility,
gasoline station or for the storage, generation, production,
manufacture, processing, treatment, disposal, handling,
transportation, or deposit of any Hazardous Substances.
(c) There has not in the past been, and no present threat now
exists of, a spill, discharge, emission or release of a Hazardous
Substance in, upon, under, over or from the Mortgaged Property or
from any other property which would have an impact on the Mortgaged
Property.
(d) There are no past or present investigations,
administrative proceedings, litigation, regulatory hearings or other
action completed, proposed, threatened or pending, alleging
noncompliance with or violation of any Environmental Laws or
Regulations respecting the Mortgaged Property, or relating to any
required environmental permits covering the Mortgaged Property.
(e) The Company has disclosed to the Trustee all reports and
investigations commissioned by the Company and relating to Hazardous
Substances and the Land and the Improvements.
(f) There are not now, nor have there ever been, any above
ground or underground storage tanks located in or under the
Mortgaged Property. There are no wells on or under the Mortgaged
Property.
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Section 2.10 First Mortgage Lien. This Shore Mortgage constitutes a
valid mortgage and, upon proper recording hereof, will constitute a valid and
perfected first priority mortgage lien, and security interest in the Mortgaged
Property (subject only to the Permitted Liens and any mortgage filed pursuant to
the provisions of the Intercreditor Agreement), and there are no defenses or
offsets to the Company's obligations pursuant to this Shore Mortgage or the
other Transaction Documents, including without limitation, the Company's
applicable obligations to pay and perform the Secured Obligations.
Section 2.11 Tax Liens; Bankruptcy. There are no federal, state or
local tax claims or liens assessed or filed against the Company or the Mortgaged
Property for taxes which are due and payable, unsatisfied of record or docketed
in any court of the state in which the Real Property is located or in any other
court located in the United States, and no petition in bankruptcy has ever been
filed by the Company, or, to the Company's knowledge, against the Company, and
the Company has never made any assignment for the benefit of creditors or taken
advantage of any insolvency act or any act for the benefit of debtors.
Section 2.12 Damage; Eminent Domain Proceedings. The Mortgaged
Property has not been damaged or destroyed by fire or other casualty, and no
condemnation or eminent domain proceedings have been commenced and none are
pending with respect to the Mortgaged Property, and, to the Company's knowledge,
no such condemnation or eminent domain proceedings are about to be commenced.
Section 2.13 Leases. The Leases are now valid and subsisting leases
and are in full force and effect in accordance with the terms thereof and have
not been modified, and all of the rental, additional rental and other charges
payable under the Leases prior to the execution hereof have been paid, and all
of the material terms, conditions and agreements contained in the Leases have
been performed by the Company, and no material default exists under any of the
Leases. This Shore Mortgage is lawfully executed and delivered in conformity
with the Leases and is and will be kept a valid first priority lien on and
collateral assignment of the interest of the Company therein.
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ARTICLE III
CASUALTY - CONDEMNATION
Section 3.1 Damage or Destruction. During the period the
indebtedness remains outstanding, in the event that the Real Property, the
Improvements, or the Fixtures shall be damaged or destroyed in whole or in part,
by fire or other casualty covered by insurance, the Company shall give prompt
written notice thereof to the Trustee. At such time as such damage, destruction
or casualty shall occur, the Insurance Proceeds shall be treated as proceeds of
an Asset Sale (as defined in the Indenture) and shall be payable to the Trustee
and shall be released, applied and/or distributed in accordance with Sections
4.10 and 11.4 of the Indenture. Upon the occurrence of an Event of Default which
has not been waived in writing by the Holders in accordance with Section 6.4 of
the Indenture, the Trustee shall have the right to apply such Insurance Proceeds
in accordance with Section 6.10 of the Indenture.
Section 3.2 Condemnation.
(a) During the period the indebtedness remains outstanding, in
the event that the Mortgaged Property, or any part thereof, shall be
taken in condemnation proceedings or by exercise of the right of
eminent domain, or by conveyance in lieu of condemnation, or as a
result of the exercise by any governmental authority of any right or
option to purchase (hereinafter collectively called "Proceedings"),
the Trustee shall have the right to participate in any such
Proceedings at the Company's expense, including reasonable
attorneys' fees and disbursements, and any Eminent Domain Awards
that may be made or any proceeds thereof shall be deposited with the
Trustee and held in trust by the Trustee and distributed in the
manner herein set forth. The parties agree to execute any and all
further documents that may be required in order to facilitate
collection of any Eminent Domain Award and the making of any such
deposit.
(b) During the period the indebtedness remains outstanding, if
there occurs a Proceeding, any Eminent Domain Awards payable in
connection therewith shall be considered a Asset Sale (as defined in
the Indenture) and shall be released, applied and/or distributed in
accordance with Sections 4.10 and 11.4 of the Indenture.
(c) Upon the occurrence of an Event of Default which has not
been waived in writing by the Holders in accordance with Section 6.4
of the Indenture, the Trustee shall have the right to apply such
Eminent Domain Awards in accordance with Section 6.10 of the
Indenture.
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ARTICLE IV
LEASES AND RENTS
Section 4.1 Space Leases, Rents and Cash Collateral.
(a) As additional collateral security for payment of the
Secured Obligations, and as cumulative of any and all rights and
remedies herein provided, the Company hereby bargains, sells,
transfers, assigns and sets over to the Trustee for the benefit of
the Holders, any and all Space Leases and Rents and any and all cash
collateral to be derived from the Mortgaged Property, or the use and
occupation thereof, or under any contract or bond relating to the
construction or reconstruction of the Mortgaged Property, including
all Rents, royalties, revenues rights, deposits (including security
deposits) and benefits accruing to the Company under all Space
Leases, and the right to receive the same and apply them against the
Secured Obligations or against the Company's other obligations
hereunder or the Company's obligations under the Transaction
Documents, together with all Space Leases, contracts, bonds, leases
and other documents evidencing the same now or hereafter in effect
and all right of the Company thereunder. Nothing contained in the
preceding sentence shall be construed to bind the Trustee to the
performance of any of the provisions of any such Space Lease,
contract, bond, lease or other documents or otherwise impose any
obligation upon the Trustee, except that the Trustee shall be
accountable for any money actually received pursuant to such
assignment to the extent of its disposition thereof in a manner
inconsistent with this Shore Mortgage or the Transaction Documents.
The Company shall deliver to the Trustee upon the Trustee's request
an executed counterpart of each such Space Lease, contract, bond or
other documents. The assignment of said Space Leases, Rents, income
profits, proceeds and cash collateral, and any of the aforesaid
rights with respect thereto and to the contracts, bonds, leases and
other documents evidencing the same, is intended to be and is an
absolute present assignment from the Company to the Trustee and not
merely the passing of a security interest.
(b) So long as there shall exist no Event of Default hereunder
which has not been waived in writing by the Holders in accordance
with the Indenture, the Company shall have the right and license to
exercise all rights, options and privileges extended to the lessor
under the terms of the Space Leases, including, without limitation,
the right to collect all Rents. The Company agrees to hold the same
in trust and to use the same, first, in payment of the Secured
Obligations, second, the Taxes and insurance premiums payable
hereunder and all other charges on or against the Mortgaged Property
and, third, to the expenses of the Company's business in or on the
Mortgaged Property.
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(c) In the event of any such Event of Default which has not
been so waived, the right and license set forth in subparagraph (b)
of this Section shall be automatically revoked, and, thereafter, the
Trustee shall have the right and authority to exercise any of the
rights or remedies referred to or set forth herein. In addition,
upon such an Event of Default, the Company shall promptly pay to the
Trustee (i) all rent prepayments and security or other deposits paid
to the Company pursuant to any Space Leases and (ii) all charges for
services or facilities or for escalations which were paid pursuant
to any Space Leases to the extent allocable to any period from and
after such Event of Default and any such sums received by the
Trustee shall be applied by the Trustee in accordance with Section
6.10 of the Indenture.
(d) If the Company is not required to surrender possession of
the Mortgaged Property hereunder in the event of any such Event of
Default which has not been so waived, the Company will pay monthly
in advance to the Trustee, or to any receiver appointed to collect
same, the income, profits or proceeds received by the Company under
any of the Space Leases.
(e) The Company will upon the Trustee's request execute,
acknowledge and deliver to the Trustee, in form approved by the
Trustee, one or more general or specific assignments of the lessor's
interest under any Space Lease (which are consistent with the
foregoing provisions). The Company will, on demand, pay to the
Trustee, or reimburse the Trustee for the payment of, all costs or
expenses incurred in connection with the preparation or recording of
any such assignment.
(f) The Company will (i) perform or cause to be performed the
lessor's obligations under any Space Lease, (ii) enforce the
performance by the lessee under its respective Space Lease of all of
said lessee's material obligations thereunder and (iii) give the
Trustee prompt notice and a copy of any notice of default, event of
default, termination or cancellation sent or received by the
Company.
(g) Except to the extent expressly permitted herein or under
the other Transaction Documents, the Company will not, without the
Trustee's written consent, (i) assign, mortgage, pledge or otherwise
transfer, dispose of or encumber, whether by operation of law or
otherwise, any Space Lease or the Rents or other income thereunder
or therefrom, (ii) accept or permit the acceptance of a prepayment
of any Rents for more than one month in advance of the due dates
therefor, (iii) amend, modify or otherwise alter any Space Lease or
(iv) cancel, terminate or accept a surrender of any Space Lease.
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(h) The Company will from time to time, promptly upon the
Trustee's request, prepare and deliver to the Trustee such
information concerning the Space Leases as the Trustee shall
request.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.1 Events of Default. Each of the following shall
constitute an Event of Default hereunder:
(a) the occurrence of an "Event of Default" as defined in
Section 6.1 of the Indenture; or
(b) the failure of the Company to observe and perform any
covenant, condition or agreement on its part to be observed or
performed in this Shore Mortgage (other than an occurrence which may
sooner constitute an "Event of Default" under the Indenture)
including, without limitation, the covenants contained in Article I
herein for a period of thirty (30) days after written notice
specifying such failure and requesting that it be remedied, given to
the Company by the Trustee, unless the Trustee agrees in writing to
an extension of such time prior to its expiration.
Section 5.2 Remedies. Upon the occurrence of an Event of Default,
all Secured Obligations, at the option of the Trustee, shall be accelerated and
become immediately due and payable upon notice to the Company. The outstanding
principal amount and the interest accrued thereon of the Secured Obligations
shall be due and payable without presentment, demand or further notice of any
kind, all of which are hereby expressly waived by the Company. The Company will
pay to the Trustee the entire Secured Obligations or portions thereof, as
applicable, and to the extent permitted by law, the premiums and penalties, if
any, provided in this Shore Mortgage and each other Transaction Document, as
applicable, and such payment shall be applied in accordance with Section 6.10 of
the Indenture.
In the event of any Event of Default, whether or not an acceleration
shall occur, the Trustee shall have the right to proceed to protect and enforce
its rights by one or more of the following remedies:
(a) THE TRUSTEE SHALL HAVE THE RIGHT TO BRING SUIT either for
damages, specific performance of any agreement contained in any
Transaction Document, or for the foreclosure of this Shore Mortgage,
or for the enforcement of any other appropriate legal or equitable
remedy.
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(b) THE TRUSTEE SHALL HAVE THE RIGHT TO OBTAIN A RECEIVER at
any time after an Event of Default, whether or not an action for
foreclosure has been commenced. Any court having jurisdiction shall
at the request of the Trustee following an Event of Default appoint
a receiver to take immediate possession of the Mortgaged Property
and to rent or operate the same as he may deem best for the interest
of all parties concerned, and such receiver shall be liable to
account to the Company only for the net profits, after application
of rents, issues and profits upon the costs and expenses of the
receivership and upon the Secured Obligations.
The Trustee shall have the right, at any time to advance money to
the receiver to pay any part or all of the items which the receiver
should otherwise pay if cash were available from the Mortgaged
Property and sums so advanced, with interest ("Additional Interest")
at the per annum rate equal to the interest rate then borne by the
Notes (the "Additional Interest Rate"), shall be secured hereby, or
if advanced during the period of redemption shall be a part of the
sum required to be paid to redeem from the sale.
(c) THE TRUSTEE SHALL HAVE THE RIGHT TO COLLECT THE RENTS from
the Mortgaged Property and apply the same in the manner hereinbefore
provided with respect to a receiver. For that purpose, the Trustee
may enter and take possession of the Mortgaged Property and manage
and operate the same and take any action which, in the Trustee's
judgment, is necessary or proper to collect the Rents and to
conserve the value of the Mortgaged Property. The Trustee may also
take possession of, and for these purposes use, any and all of the
Security Interests Property. The expense (including any receiver's
fees, attorneys' fees, costs and agent's compensation) incurred
pursuant to the powers herein contained shall be secured by this
Shore Mortgage. The Trustee shall not be liable to account to the
Company for any action taken pursuant hereto other than to account
for any Rents actually received by the Trustee. Enforcement hereof
shall not cause the Trustee to be deemed a Trustee in possession
unless the Trustee elects in writing to be a Trustee in possession.
(d) THE TRUSTEE SHALL HAVE THE RIGHT TO ENTER AND TAKE
POSSESSION of the Mortgaged Property and manage and operate the same
in conformity with all applicable laws and take any action which, in
the Trustee's judgment, is necessary or proper to conserve the value
of the Mortgaged Property.
(e) THE TRUSTEE SHALL HAVE ALL OF THE RIGHTS AND REMEDIES
PROVIDED IN THE IOWA UNIFORM COMMERCIAL CODE, Iowa Code Chapter 554,
including the right to proceed under the Iowa Uniform Commercial
Code provisions governing default as to any Security Interests
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Property separately from the real estate included within the
Mortgaged Property, or to proceed as to all of the Mortgaged
Property in accordance with its rights and remedies in respect of
said real estate. If the Trustee should elect to proceed separately
as to such Security Interests Property, the Company agrees to make
such Security Interests Property available to the Trustee at a place
or places acceptable to the Trustee, and if any notification of
intended disposition of any of such Security Interests Property is
required by law, such notification shall be deemed reasonably and
properly given if given at least ten (10) days before such
disposition in the manner hereinafter provided.
(f) THE TRUSTEE SHALL HAVE THE RIGHT TO FILE PROOF OF CLAIM
and other documents as may be necessary or advisable in order to
have its claims allowed in any receivership, insolvency, bankruptcy,
reorganization, arrangement, adjustment, composition or other
judicial proceedings affecting the Company, its creditors or its
property, for the entire amount due and payable by the Company under
the Secured Obligations, this Shore Mortgage and any other
instrument securing the Secured Obligations, at the date of the
institution of such proceedings, and for any additional amounts
which may become due and payable by the Company after such date.
Each remedy herein specifically given shall be in addition to every other right
now or hereafter given or existing at law or in equity, and each and every right
may be exercised from time to time and as often and in such order as may be
deemed expedient by the Trustee and the exercise or the beginning of the
exercise of one right shall not be deemed a waiver of the right to exercise at
the same time or thereafter any other right. The Trustee shall have all rights
and remedies available under the law in effect now and/or at the time such
rights and remedies are sought to be enforced, whether or not they are available
under the law in effect on the date hereof.
Section 5.3 Expenses of Exercising Rights, Powers and Remedies. The
reasonable expense (including any receiver's fees, attorneys' fees, appraisers'
fees, environmental engineers' and/or consultants' fees, costs incurred for
documentary and expert evidence, stenographers' charges, publication costs,
costs (which may be estimated as to items to be expended after entry of the
decree of foreclosure) of procuring all abstracts of title, continuations of
abstracts of title, title searches and examinations, title insurance policies
and commitments and extensions therefor, Torrens duplicate certificates of
title, UCC and chattel lien searches, and similar data and assurances with
respect to title as the Trustee may deem reasonably necessary either to
prosecute any foreclosure action or to evidence to bidders at any sale which may
be had pursuant to any foreclosure decree the true condition of the title to or
the value of the Mortgaged Property, and agent's compensation) incurred by the
Trustee after the occurrence of any Event of Default under this Shore Mortgage
and/or in pursuing the rights, powers and remedies contained in this Shore
Mortgage shall be immediately due and payable by the Company, with interest
thereon at the Additional Interest Rate, and shall be added to the indebtedness
secured by this Shore Mortgage.
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Section 5.4 Restoration of Position. In case the Trustee shall have
proceeded to enforce any right under this Shore Mortgage by foreclosure, sale,
entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then, and in
every such case, the Company and the Trustee shall be restored to their former
positions and rights hereunder with respect to the Mortgaged Property subject to
the lien hereof.
Section 5.5 Marshalling. The Company, for itself and on behalf of
all persons, parties and entities which may claim under the Company, hereby
waives all requirements of law relating to the marshalling of assets, if any,
which would be applicable in connection with the enforcement by the Trustee of
its remedies for an Event of Default hereunder, absent this waiver. The Trustee
shall not be required to sell or realize upon any portion of the Mortgaged
Property before selling or realizing upon any other portion thereof.
Section 5.6 Waivers. No waiver of any provision hereof shall be
implied from the conduct of the parties. Any such waiver must be in writing and
must be signed by the party against which such waiver is sought to be enforced.
The waiver or release of any breach of the provisions set forth herein to be
kept and performed shall not be a waiver or release of any preceding or
subsequent breach of the same or any other provision. No receipt of partial
payment after acceleration of any of the Secured Obligations shall waive the
acceleration. No payment by the Company or receipt by the Trustee of a lesser
amount than the full amount secured hereby shall be deemed to be other than on
account of the sums due and payable hereunder, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment be deemed
an accord and satisfaction, and the Trustee may accept any check or payment
without prejudice to the Trustee's right to recover the balance of such sums or
to pursue any other remedy provided in this Shore Mortgage. The consent by the
Trustee to any matter or event requiring such consent shall not constitute a
waiver of the necessity for such consent to any subsequent matter or event.
Section 5.7 The Trustee's Right to Cure Defaults. If the Company
shall fail to comply with any of the terms hereof with respect to the procuring
of insurance, the payment of taxes, assessments and other charges, the keeping
of the Mortgaged Property in repair, the payment and satisfaction of Liens and
encumbrances against the Mortgaged Property, the payment or performance of the
Leases, the payment of any other sum or deposit required under this Shore
Mortgage, or any other term herein contained, the Trustee may make advances or
take other actions to perform the same without releasing the Company from any
Secured Obligations and may enter upon the Mortgaged Property for any such
purpose and take all such action thereon as the Trustee or any of its duly
appointed agents may deem necessary or appropriate therefor. The Company agrees
to repay upon demand all sums so advanced and all sums expended by the Trustee
in connection with such performance, including without limitation attorneys'
fees, with Additional Interest at the Additional Interest Rate from the dates
such advances are made, and all sums so advanced and/or expenses incurred, with
Additional Interest at the Additional Interest Rate, shall be secured hereby as
Secured Obligations, but no such
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advance and/or incurring of expense by the Trustee, shall be deemed to relieve
the Company from any default hereunder, or to release the Company from any
Secured Obligations. The Trustee shall not be bound to inquire into the validity
of any Imposition or lien which the Company fails to pay as and when required by
this Shore Mortgage and which the Company does not contest in strict accordance
with the terms of this Shore Mortgage.
Section 5.8 Suits and Proceedings. The Trustee shall have the power
and authority, upon prior notice to the Company to institute and maintain any
suits and proceedings as the Trustee may deem advisable to (i) prevent any
impairment of the Mortgaged Property by any acts which may be unlawful or any
violation of this Shore Mortgage, (ii) preserve or protect its interest in the
Mortgaged Property, or (iii) restrain the enforcement of or compliance with any
legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if, in the sole opinion of the Trustee,
the enforcement of or compliance with such enactment, rule or order might impair
the security hereunder or be prejudicial to the Trustee's interest.
Section 5.9 Waiver of Redemption Rights; Alternative Foreclosure
Procedures. It is agreed that if this Shore Mortgage covers any parcel of less
than ten (10) acres of land, and in the event of the foreclosure of this Shore
Mortgage and sale of the property by sheriff's sale in such foreclosure
proceedings, the time of one (1) year for redemption from said sale provided by
the statutes of the State of Iowa with respect to such parcel shall be reduced
to six (6) months provided the Trustee in such action files an election to waive
any deficiency judgment against the Company which may arise out of the
foreclosure proceedings; all to be consistent with the provisions of Chapter 628
of the Iowa Code.
It is further agreed that the period of redemption after a
foreclosure of this Shore Mortgage shall be reduced to sixty (60) days if all of
the three following contingencies develop with respect to any parcel of real
estate included in the Mortgaged Property: (1) the real estate is less than ten
(10) acres in size; (2) the court finds affirmatively that the said real estate
has been abandoned by the owners and those persons personally liable under this
Shore Mortgage at the time of such foreclosure; and (3) the Trustee in such
action files an election to waive any deficiency judgment against the Company or
its successor in interest in such action. Entry of appearance by pleading or
docket entry by or on behalf of the Company shall create a presumption that the
property is not abandoned. Any such redemption period shall be consistent with
all of the provisions of Chapter 628 of the Code of Iowa.
This Section shall not be construed to limit or otherwise affect any
other redemption provisions contained in Chapter 628 of the Iowa Code. This
Section also shall not be construed to limit the Trustee's right to elect
foreclosure without redemption or to elect foreclosure by nonjudicial procedure
as set forth in Chapters 654 and 655A of the Iowa Code. The Company agrees that,
in the event of a foreclosure of the Mortgage, under any provision of Iowa law,
the Trustee shall be entitled to sole possession and use of the Mortgaged
Property during any redemption period.
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Section 5.10 Application of Proceeds. The proceeds from the
foreclosure, sale or lease or any recovery pursuant to Iowa Code Chapter 554 or
hereunder shall be applied to the payment of the Secured Obligations in
accordance with the Indenture if such Secured Obligations have been deemed due
and payable upon the Event of Default. Any surplus of the proceeds shall be paid
to the Company.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Binding Effect; Survival; Number; Gender. This Shore
Mortgage shall be binding on and inure to the benefit of the parties hereto,
their successors and assigns. All representations and warranties contained
herein or otherwise heretofore made by the Company to the Trustee shall survive
the execution, delivery and foreclosure hereof. The singular of all terms used
herein shall include the plural, the plural shall include the singular, and the
use of any gender herein shall include all other genders, where the context so
requires or permits.
Section 6.2 Severability. The unenforceabiity or invalidity of any
provision of this Shore Mortgage as to any persons or circumstances shall not
render that provision unenforceable or invalid as to any other persons or
circumstances.
Section 6.3 Notices. All notices and demands required or permitted
to be given to or made upon any party hereto under any Transaction Document
shall be in writing and shall be personally delivered or sent by certified mail,
postage prepaid, return receipt requested or by a nationally recognized courier,
or by telecopier, and shall be deemed to be given for purposes of this Shore
Mortgage on the day that such writing is delivered or sent to the intended
recipient thereof in accordance with the provisions of this Section. Notices
shall be given to or made upon the respective parties hereto at their respective
addresses set forth below:
If to the Company:
Peninsula Gaining Company, LLC
3rd Street Ice Harbor
P.O. Box 1683
Dubuque, Iowa 52004-1683
Attention: James P. Rix
Telephone: (319) 583-7005
Telecopier:(319) 557-0549
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If to the Trustee:
Firstar Bank of Minnesota, N.A.
101 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Either party may change the address for notices by a notice given not less than
five (5) business days prior to the effective date of the change.
Section 6.4 Survival of Warranties, Etc. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Shore Mortgage.
Section 6.5 Applicable Law. This Shore Mortgage shall be construed
and enforceable in accordance with, and be governed by, the internal laws of the
State of Iowa, without regard to principles of conflict of laws.
Section 6.6 Waiver of Jury Trial. EACH OF THE COMPANY AND THE
TRUSTEE, BY ITS ACCEPTANCE OF THIS SHORE MORTGAGE, IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS SHORE MORTGAGE AND ANY OF THE OTHER SECURITY DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
Section 6.7 Effect. This Shore Mortgage is in addition to and not in
substitution for any other guaranties, covenants, obligations or other rights
now or hereafter held by the Trustee from any other person or entity in
connection with the Secured Obligations.
Section 6.8 Assignability. The Trustee shall have the right to
assign this Shore Mortgage, in whole or in part or sell participation interests
herein, to any person obtaining an interest in the Secured Obligations.
Section 6.9 Headings. Headings of the Sections of this Shore
Mortgage are inserted for convenience only and shall not be deemed to constitute
a part hereof.
Section 6.10 Security Interest.
(a) An express security interest is hereby granted to the
Trustee in respect to any part of the Mortgaged Property which under
Iowa law might now or hereafter be construed or considered as
personal property or fixtures, or otherwise be considered collateral
subject to the Iowa Uniform Commercial Code, including without
limitation the collateral described in granting clauses (e) hereof,
and this Shore Mortgage shall constitute a security agreement in
respect thereto.
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(b) Upon the occurrence of an Event of Default hereunder in
addition to the other rights and remedies available to it, the
Trustee may exercise all other rights and remedies with respect to
such property that are available to a secured party under the Iowa
Uniform Commercial Code. The Company agrees to pay any reasonable
attorney fees and legal expenses incurred by the Trustee in
enforcing or protecting its rights under the security interest
created hereunder. In the event notice of intended disposition of
such property is required by law in any particular instance, the
Company agrees that notice given in the manner and place provided in
Section 6.3 hereunder and sent ten (10) days prior to a disposition
of collateral is commercially reasonable notification within the
meaning of the Iowa Uniform Commercial Code. Information concerning
the security interests may be obtained from the Secured Party (the
Trustee) at the address set forth in Section 6.3 hereof and the
mailing address of the Debtor (Company) is also set forth in Section
6.3 hereof.
(c) The Company warrants and agrees that no financing
statement or security agreement covering any of the Mortgaged
Property is or will be placed on file in any public office or
delivered to any secured party except pursuant hereto, except for
Permitted Encumbrances and Permitted Liens.
Section 6.11 Fixture Filing. From the date of its recording, this
Shore Mortgage shall be effective as a financing statement filed as a fixture
filing with respect to the collateral described in the Granting Clauses hereof
which are fixtures within the meaning of the Iowa Uniform Commercial Code, and
for this purpose the name and address of the Debtor is the name and address of
the Company, as set out in Section 6.3 herein, and the name and address of the
Secured Party is the name and address of the Trustee, as set out in Section 6.3
hereof. Pursuant to the provisions of Section 554.9403 subparagraph 6 of the
Iowa Code, such fixture filing remains in effect until this Shore Mortgage is
released or satisfied of record or its effectiveness otherwise terminates as to
the Land.
Section 6.12 Defined Terms. All capitalized terms used in this Shore
Mortgage and not defined herein shall have the meanings ascribed to them in the
Indenture.
Section 6.13 Discharge of Lien. In accordance with Section 11.4 of
the Indenture and upon the observance and performance of each and every covenant
and condition set forth herein and in the Indenture and the Notes, then and in
that case all property, rights and interest hereby conveyed or assigned or
pledged shall revert to the Company, and the estate, right, title and interest
of the Trustee therein shall thereupon cease, terminate and become void; and
this Shore Mortgage, and the covenants of the Company contained herein, shall be
discharged and the Trustee in such case on demand of the Company and at the
Company's cost and expense, shall execute and deliver to the Company a proper
instrument or proper instruments acknowledging the satisfaction and termination
of this Shore Mortgage, and shall convey, assign and transfer or
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cause to be conveyed, assigned or transferred, and shall deliver or cause to be
delivered, to the Mortgagor, all property, including money, then held by the
Trustee hereunder.
Section 6.14 Conflicts with Security Agreement. In the event of a
conflict between the provisions of the Security Agreement and the provisions of
this Shore Mortgage, the Shore Mortgage shall govern in all matters relating to
the validity and enforceability of the Lien created hereby on the Real Property,
the Improvements, the Fixtures, the Leases and the Rents and (except as
expressly set forth to the contrary herein or in the Security Agreement), the
Security Agreement shall govern in all other respects.
Section 6.15 Shore Mortgage Absolute. The obligations of the Company
under this Shore Mortgage are independent of the obligations of Company under
the other Transaction Documents, and a separate action or actions may be brought
and prosecuted against Company to enforce this Shore Mortgage, irrespective of
whether any action is brought against Company under such other Transaction
Documents. All rights of Trustee and the mortgage, assignment and security
interest hereunder, and all obligations of Company hereunder, shall be absolute
and unconditional, irrespective of:
(a) any lack of validity or enforceability of any other
Transaction Document or any other agreement or instrument relating
thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of Company under
the other Transaction Documents or any other amendment or waiver of
or any consent to any departure from the other Transaction
Documents, including, without limitation, any increase in such
obligations resulting from the extension of additional credit to the
Company or otherwise;
(c) any taking, exchange, release or non-perfection of any
other collateral, or any taking, release or amendment or waiver of
or consent to departure from any guaranty, for all or any other of
the obligations of the Company under the other Transaction
Documents;
(d) any manner of application of collateral, or proceeds
thereof, to all or any of the obligations of Company under the other
Transaction Documents, or any manner of sale or other disposition of
any collateral for all or any of such obligations or any other
assets of the Company;
(e) any change, restructuring or termination of the corporate
restructure or existence of the Company; or
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(f) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Company or a third
party the Company of a security interest or mortgage.
Section 6.16 Interaction with Indenture. All terms, covenants,
conditions, provisions and requirements of the Indenture are incorporated by
reference in this Shore Mortgage. Notwithstanding any other provision of this
Shore Mortgage, the terms and provisions of this Shore Mortgage shall be subject
and subordinate to the terms of the Indenture. To the extent that the Indenture
provides the Company with a particular cure or notice period, or establishes any
limitations or conditions on the Trustee's actions with regard to a particular
set of facts, the Company shall be entitled to the same cure periods and notice
periods, and Trustee shall be subject to the same limitations and conditions,
under this Shore Mortgage, as under the Indenture, in place of the cure periods,
notice periods, limitations and conditions provided for under this Shore
Mortgage; provided, however, that such cure periods, notice periods, limitations
and conditions shall not be cumulative as between the Indenture and this Shore
Mortgage. In the event of any conflict or inconsistency between the provisions
of this Shore Mortgage and those of the Indenture, including, without
limitation, any conflicts or inconsistencies in any definitions herein or
therein, the provisions or definitions of the Indenture shall govern.
Section 6.17 Excluded Assets. Notwithstanding anything to the
contrary contained herein, if a portion of the Mortgaged Property becomes an
Excluded Asset (as defined in the Indenture) after the Issue Date (as defined in
the Indenture), the Trustee shall, simultaneous with the granting of the
applicable Permitted Lien, without the payment of any partial release for, or
any other prepayment with respect to, the Notes, release the Lien in favor of
the Trustee in such Excluded Asset in accordance with the provisions of Section
11.4 of the Indenture. Once any Excluded Asset is released, such Excluded Asset
shall be expressly excluded from and shall no longer be deemed Mortgaged
Property under this Shore Mortgage and shall not be subject to any of the
representations, covenants or obligations under this Shore Mortgage.
Section 6.18 Indemnity. The Company hereby agrees to indemnify,
defend and hold the Trustee (and its directors, officers, agents and employees)
and each Holder harmless from and against any and all loss, liability, damage,
claim, judgment or expense (including reasonable attorneys' fees and expenses,
bond expenses, printing and automated document preparation and retention
expenses and other ordinary litigation expenses) incurred by it (or such
director, officer, agent or employee) in connection with the acceptance or
administration of the Trustee's duties under this Shore Mortgage, any action or
proceeding to foreclose this Shore Mortgage or in or to which the Trustee or any
Holder may be made a party due to the existence of this Shore Mortgage or the
other Transaction Documents or to which action or proceeding the Trustee or any
Holder may become a party for the purpose of protecting the lien of this Shore
Mortgage. All sums paid by the Trustee or any Holder to prosecute or defend the
rights herein set forth shall be deemed a part of the Secured Obligations and
shall be paid by the Company to the Trustee or such Holder within ten (10) days
after written demand, and if not paid within that period, shall accrue interest
from and including the date of disbursement or advance by the
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Trustee or such Holder to and including the date of payment by the Company at
the Additional Interest Rate.
Section 6.19. Survey. The Company covenants and agrees to obtain a
survey with respect to the Real Property, certified to Chicago Title Insurance
Company and the Trustee, within 30 days following the date of this Mortgage and
further covenants and agrees that (a) to the extent that such survey reveals
that the legal description for all or any portion of the Real Property does not
correspond to the legal description used in the Exhibits to this Mortgage, the
Company and Trustee will cooperate to amend this Mortgage to correct such legal
description, (b) to the extent that such survey reveals any encroachment by a
structure on the Real Property onto an adjoining property or any easement or
other use right on the Real Property that would interfere with the use of the
affected parcel of Real Property for its intended purpose, the Company will
promptly take the necessary steps to remedy the situation, including removing
the encroachment, obtaining a release or modification of the easement or use
right or obtaining a valid easement to maintain the encroachment, and (c) the
Company will deliver to the Trustee, within 30 days of the date of delivery of
the survey to the Trustee, an endorsement or endorsements to the title insurance
policy in favor of the Trustee, removing the survey exception from such policy
and adding to the policy any of the following provisions that were not included
in the policy delivered to the Trustee on the date of this Shore Mortgage:
access, tax parcel, contiguity, creditors rights, "same as survey", lender's
comprehensive (ALTA form 9), zoning and subdivision.
Section 6.20. Hotel Construction. The Company agrees that, prior to
the commencement of construction of a hotel on the Real Property, the Company
will deliver to the Trustee (a) a title insurance policy or commitment, which
shall not contain a survey exception and which shall be in form and substance
acceptable to the Trustee, from Chicago Title Insurance Company or another
insurance company of equal standing, showing that the City of Dubuque has
merchantable title to the parcel of the Real Property on which the hotel is to
be built, subject to a lease of such parcel to the Company for a period of not
less than 20 years, (b) a survey of the parcel, certified to the Trustee and the
title insurance company, showing the legal description thereof and the absence
of any encroachments, easements or other matters that would interfere with the
construction or operation of the hotel on such parcel, (c) a sworn estimate of
construction cost from the architect or engineer for the hotel project, and (d)
a signed loan agreement or other financing arrangements sufficient to pay for
the estimated costs of the hotel.
Section 6.21. Acquisition of Adjacent Parcel. The Company has agreed
to acquire a parcel of real estate adjacent to Parcels A and C listed in Exhibit
A hereto, upon the completion of platting of said parcel. Said parcel is to be
identified as Lot 1 in Adam's Company's Third Addition in the City of Dubuque,
Iowa, assuming the Dubuque City Counsel approves the plat in its presently
proposed form. The Company agrees that, upon completion of the acquisition of
said parcel, the Company (a) will cause said parcel to be included in the title
insurance policy for the parcels described in Exhibit A, or by a separate policy
substantially equivalent to the policy insuring the parcels in Exhibit, at the
Company's option, (b) will deliver
Execution Copy -32-
<PAGE>
to the Trustee a survey of the parcel, certified to the Trustee and the title
insurance company, showing the legal description thereof and the absence of any
encroachments, easements or other matters that would interfere with the use of
such parcel, and (c) will execute and deliver to the Trustee an amendment to
this Shore Mortgage, in form and substance acceptable to the Trustee, subjecting
to this Mortgage such additional parcel.
Execution Copy -33-
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Shore Mortgage as
of the date first written above.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
THIS NOTICE APPLIES TO ALL AGREEMENTS ENTERED INTO TO WHICH THE COMPANY AND THE
TRUSTEE ARE PARTIES.
PENINSULA GAMING COMPANY, LLC
By __________________________
Attest:
__________________________
Execution Copy -34-
<PAGE>
STATE OF ________________)
)ss:
COUNTY OF _______________)
On this ____ day of ________________, A.D., 19__ before me, a Notary
Public in and for the State of ________, personally appeared _________________,
to me personally known, who being by me duly sworn did say that the person is
(a) (the) _________________ of Peninsula Gaining Company, LLC, a Delaware
limited liability company, executing the foregoing instrument, that the
instrument was signed on behalf of the said limited liability company by
authority of the limited liability company and the said ______________
acknowledged the execution of said instrument to be the voluntary act and deed
of said limited liability company by it voluntarily executed.
_____________________________________
Notary Public in the State of _______
Execution Copy -35-
<PAGE>
EXHIBIT A
Legal Description of Fee Simple Interests
PARCEL A
Lot 3 of Adams Company's 2nd Addition in the City of Dubuque, Dubuque
County, Iowa, according to the recorded plat thereof.
PARCEL B
Lots 7 and 8 of Ice Harbor Development, in the City of Dubuque,
Dubuque County, Iowa, according to the recorded plat thereof.
PARCEL C
Lot 1 of Adams Company's lst Addition in the City of Dubuque, Dubuque
County, Iowa, according to the recorded plat thereof.
<PAGE>
EXHIBIT B
The Leases and the Real Property
Subject to Leasehold Interests
Lots 5 and 6 of Ice Harbor Development in the City of Dubuque, Iowa.
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Shore Mortgage as of the date
first written above.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
THIS NOTICE APPLIES TO ALL AGREEMENTS ENTERED INTO TO WHICH THE COMPANY AND THE
TRUSTEE ARE PARTIES.
PENINSULA GAMING COMPANY, LLC
By /s/ M. Brent Stevens
--------------------------
M. Brent Stevens, CEO
Attest:
/s/ Michael S. Luzich,
- ----------------------
Michael S. Luzich
Secretary
<PAGE>
STATE OF CALIFORNIA )
)ss:
COUNTY OF LOS ANGELES)
On this 9th day of July, A.D., 1999 before me, a Notary Public in and for
the State of CA, personally appeared M. Brent Stevens, to me personally known,
who being by me duly sworn did say that the person is the CEO of Peninsula
Gaming Company, LLC, a Delaware limited liability company, executing the
foregoing instrument, that the instrument was signed on behalf of the said
limited liability company by authority of the limited liability company and the
said CEO acknowledged the execution of said instrument to be the voluntary act
and deed of said limited liability company by it voluntarily executed.
[NOTARY SEAL] /s/ Elizabeth Howard
--------------------------------
Notary Public in the State of CA
Exhibit 10.13
ICE HARBOR PARKING AGREEMENT ASSIGNMENT
THIS ICE HARBOR PARKING AGREEMENT ASSIGNMENT, made and entered into
effective as of July 15, 1999 (the "Effective Date"), by and between Greater
Dubuque Riverboat Entertainment Company, L.C., an Iowa limited liability
company, (hereinafter called the "Assignor"), and Peninsula Gaming Company, LLC,
a Delaware limited liability company (hereinafter called "Assignee").
1. PARKING RIGHTS AGREEMENT. Assignor and Assignee acknowledge that
Assignor is an assignee of Dubuque Casino Belle ("DCB") to that certain Ice
Harbor Parking Agreement dated July 2, 1990, by and among DCB, the City of
Dubuque, Dubuque Racing Association, Ltd., the Dubuque Historical Society, and
Robert River Rides, Inc. regarding the parking rights of the parties in the Ice
Harbor area in Dubuque, Iowa (the "Parking Rights Agreement").
2. ASSIGNMENT. As of the Effective Date, Assignor hereby sells, assigns,
transfers and conveys unto Assignee, its successors and assigns, all of
Assignor's right, title and interest in and to the Parking Rights Agreement. By
its execution hereof, Assignee agrees to assume and be bound by and timely
perform, observe, discharge and otherwise comply with each and every one of
Assignor's duties, obligations, covenants and undertakings under the Parking
Rights Agreement accruing on or after the Effective Date.
3. INDEMNIFICATION. Assignor covenants to hold Assignee harmless from and
indemnify Assignee against any claim, loss, damage, cost and expense (including
reasonable attorneys' fees and court costs) that Assignee may incur from and
after the Effective Date as a result of the failure of Assignor to perform any
of its obligations as lessee with respect to the Parking Rights Agreement up to
the Effective Date. Assignee covenants to hold Assignor harmless from and
indemnify Assignor against any claim, loss, damage, cost or expense (including
reasonable attorneys' fees and court costs) that Assignor may incur from and
after the Effective Date as a result of the failure of Assignee to perform any
of its obligations with respect to the Parking Rights Agreement from and after
the Effective Date.
4. GOVERNING LAW. This Assignment shall be governed by and construed under
the laws of the State of Iowa.
5. BINDING EFFECT. The terms of this Assignment shall run with the land
and bind the parties hereto and their successors in interest.
6. MODIFICATION. This Assignment shall not be modified except if done in
writing and signed by both parties.
1
<PAGE>
7. CONDITION PRECEDENT. The obligations of Assignor and Assignee under
this Assignment are subject to the closing of the sale and purchase by Assignee
of substantially all of the assets of Assignor pursuant to that certain Asset
Purchase and Sale Agreement, dated January 15, 1999, between Assignor and
Assignee.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the day and year first above written.
Peninsula Gaming Company, L.L.C. Greater Dubuque Riverboat
Entertainment Company, L.C.
By: /s/ Michael J. Luzich By: /s/ Don Iverson
-------------------------------- --------------------------------
Its: Manager of the Managing Member Its: Chairman, Management Committee
------------------------------- -------------------------------
ASSIGNEE ASSIGNOR
2
<PAGE>
CONSENT
The City of Dubuque, Iowa (the "City"), a party to that certain Ice Harbor
Parking Rights Agreement, dated July 2, 1990, among the City, Dubuque Racing
Association, Ltd., the Dubuque Historical Society, Robert River Rides, Inc. and
Greater Dubuque Riverboat Entertainment Company, L.C., assignee of Dubuque
Casino Belle, regarding the parking rights of the parties in the Ice Harbor area
in Dubuque, Iowa, hereby consents to the assignment of the Ice Harbor Parking
Rights Agreement by Greater Dubuque Riverboat Entertainment Company, L.C. to
Peninsula Gaming Company, LLC ("Assignee").
CITY OF DUBUQUE, IOWA
By: /s/ Terry Duggan Date Signed: 7-6-99
---------------------- ------------
Its: Mayor
---------------------
3
Exhibit 10.14
FIRST AMENDMENT
TO
SUBLEASE AGREEMENT
THIS FIRST AMENDMENT TO SUBLEASE AGREEMENT (the "First Amendment") is made
and entered into effective as of the 15th day of July, 1999, by and between
DUBUQUE RACING ASSOCIATION, LTD., an Iowa non-profit corporation (the "Lessor")
and GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited
liability company (the "Lessee").
WHEREAS, pursuant to that certain Sublease Agreement, dated October 18,
1993 (the "Sublease Agreement"), the Lessor subleased to Lessee certain parking
and dock facilities located in the Ice Harbor area in Dubuque, Iowa; and
WHEREAS, the Lessor and Lessee desire to amend certain provisions of the
Sublease Agreement.
NOW, THEREFORE, the Lessor and Lessee mutually agree as follows:
1. Paragraph 1 of the Sublease Agreement is hereby amended by deleting
Paragraph 1 in its entirety and substituting in lieu thereof the following:
"1. Term. The term of this Sublease shall commence on the 18th day
of October, 1993 and shall terminate at 11:59 p.m. on December 31, 2008.
Notwithstanding the foregoing, a default by Lessor or Lessee under
that certain Operating Agreement between the parties dated February 22,
1993, as amended (the "Operating Agreement"), shall be deemed a default
under this Sublease. The defaulting party shall have thirty (30) days
after receipt of written notice from the nondefaulting party to cure the
default. In the event such default under the Operating Agreement has not
been cured within the thirty (30) day cure period, Lessor or Lessee, as
applicable, shall have all rights available to such party pursuant to
paragraph 10 of this Sublease as if such default was a default under this
Sublease. This Sublease shall automatically terminate immediately upon the
termination of the Operating Agreement. In addition, it is agreed that
either party may elect to terminate this Sublease upon thirty (30) days'
advance written notice to the other party in the event either Lessor's or
Lessee's license to conduct riverboat gambling under the provisions of
Chapter 99F of the Iowa Code is suspended, revoked, surrendered, or
expires without renewal."
2. Subparagraph 4(e) of the Sublease Agreement is hereby amended by
deleting subparagraph 4(e) in its entirety and substituting in lieu thereof the
following:
"The Lessee agrees that, at all times during the Sublease term, the
Lessee shall, at its own expense, maintain, preserve and keep the leased
premises in good repair and in good working order and condition,
including, but not limited to, snow removal, mowing, landscaping, sweeping
of parking areas, lighting, cleaning, removal of litter, and repair and
replacement of surfaces. Notwithstanding the foregoing, upon receipt by
Lessee of a legal opinion from the legal counsel of Lessor that the
current maintenance responsibilities of Lessee with respect to the leased
premises may jeopardize Lessor's federal tax exempt status, Lessee's
responsibility for the maintenance, preservation and upkeep of the leased
premises shall immediately terminate and all such responsibilities shall
be with the Lessor. In the event of a shift of responsibility of the
maintenance of the leased premises, Lessor shall charge Lessee and Lessee
shall pay to Lessor an annual maintenance fee to be determined by Lessor,
provide, however, such maintenance fee shall not exceed $30,000 per year."
<PAGE>
3. Paragraph 5 of the Sublease Agreement is hereby amended by adding the
following to the end of the first sentence:
"provided, however, Lessee shall have the absolute right to assign
and transfer this Sublease, and all of its rights and obligations
thereunder, to a third party that has been licensed by the Iowa Racing and
Gaming Commission to operate an excursion gambling boat at Dubuque, Iowa,
if said third party agrees to operate and comply with the terms and
conditions of this Sublease and the terms and conditions of the Operating
Agreement between Lessor and Lessee."
4. This First Amendment is subject to and conditioned upon the following:
(a) The extension of that certain Lease Agreement dated February 28,
1990 between the City of Dubuque as Lessor and Dubuque Racing
Association, Ltd. as Lessee through December 31, 2008; and
(b) The extension of that certain Ice Harbor Parking Agreement dated
July 2, 1990, by and among the City of Dubuque, Dubuque Racing
Association, Ltd., Dubuque Casino Belle, Inc. and Robert River
Rides, Inc. through December 31, 2008, and pursuant to Paragraph 19
of the Parking Agreement, Greater Dubuque Riverboat Entertainment
Company, L.C., or its assignee, shall be accorded the benefits of
such Parking Agreement originally give to Dubuque Casino Belle, Inc.
under the Parking Agreement; and
(c) The effective execution by all parties of the Tenth Amendment to the
Operating Agreement between Dubuque Racing Association, Ltd. and
Greater Dubuque Riverboat Entertainment Company, L.C.; and
(d) The effective execution by all parties of the Seventh Amendment to
that certain Lease Agreement dated February 28, 1990, between the
City of Dubuque, as Lessor, and Dubuque Racing Association, Ltd., as
Lessee, providing Dubuque Racing Association, Ltd., with lease
rights in river and harbor frontage adjoining Lot A and Lot B and
making certain other changes in said Lease.
5. Except as expressly modified herein, the terms of the Sublease
Agreement shall remain in full force and effect.
6. This First Amendment and the Sublease Agreement shall be binding on and
benefit the parties and their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
effect as of the date and year first above written.
LESSOR: LESSEE:
Dubuque Racing Association, Ltd. Greater Dubuque Riverboat
Entertainment Company, L.C.
By: /s/ Bruce W. Wentworth By: /s/ Don Iverson
---------------------------- ----------------------------
Bruce W. Wentworth Don Iverson
General Manager Chairman, Management Committee
<PAGE>
CONSENT
The City of Dubuque, Iowa, a municipal corporation, does hereby consent to
the terms and provisions of the foregoing First Amendment to Sublease Agreement
between Dubuque Racing Association, Ltd., as Lessor, and Greater Dubuque
Riverboat Entertainment Company, L.C., as Lessee.
Dated this _______ day of July, 1999.
CITY OF DUBUQUE, IOWA
By: ______________________________
Mayor
Attest:
__________________________
Clerk
Exhibit 10.15
SUBLEASE ASSIGNMENT
THIS SUBLEASE ASSIGNMENT AGREEMENT, made and entered into effective as of
July 15, 1999 (the "Effective Date"), by and between Greater Dubuque Riverboat
Entertainment Company, L.C., an Iowa limited liability company, (hereinafter
called the "Assignor"), and Peninsula Gaming Company, LLC, a Delaware limited
liability company (hereinafter called "Assignee").
1. SUBLEASE. Assignor and Assignee acknowledge that Assignor is lessee
under a certain Sublease dated October 18, 1993, by and between Dubuque Racing
Association, Ltd. ("Lessor") and Greater Dubuque Riverboat Entertainment
Company, L.C. ("Lessee"), as amended by a certain First Amendment to Sublease
Agreement dated July ___,1999, for certain parking and dock facilities located
in the Ice Harbor area in Dubuque, Iowa (the "Sublease").
2. ASSIGNMENT. As of the Effective Date, Assignor hereby sells, assigns,
transfers and conveys unto Assignee, its successors and assigns, all of
Assignor's right, title and interest in and to the Sublease. By its execution
hereof, Assignee agrees to assume and be bound by and timely perform, observe,
discharge and otherwise comply with each and every one of Assignor's duties,
obligations, covenants and undertakings under the Sublease accruing on or after
the Effective Date.
3. INDEMNIFICATION. Assignor covenants to hold Assignee harmless from and
indemnify Assignee against any claim, loss, damage, cost and expense (including
reasonable attorneys' fees and court costs) that Assignee may incur from and
after the Effective Date as a result of the failure of Assignor to perform any
of its obligations as lessee with respect to the Sublease up to the Effective
Date. Assignee covenants to hold Assignor harmless from and indemnify Assignor
against any claim, loss, damage, cost or expense (including reasonable
attorneys' fees and court costs) that Assignor may incur from and after the
Effective Date as a result of the failure of Assignee to perform any of its
obligations with respect to the Sublease from and after the Effective Date.
4. ASSIGNMENT AND SUBLETTING. Assignor and Assignee acknowledge that
Lessor's consent to this Assignment does not constitute a waiver of Lessor's
right to require approval of any further assignment or subletting, in accordance
with the Sublease.
5. GOVERNING LAW. This Assignment shall be governed by and construed under
the laws of the State of Iowa.
6. BINDING EFFECT. The terms of this Assignment shall run with the land
and bind the parties hereto and their successors in interest.
1
<PAGE>
7. MODIFICATION. This Assignment shall not be modified except if done in
writing and signed by both parties.
8. CONDITION PRECEDENT. The obligations of Assignor and Assignee under
this Assignment are subject to the closing of the sale and purchase by Assignee
of substantially all of the assets of Assignor pursuant to that certain Asset
Purchase and Sale Agreement, dated January 15, 1999, between Assignor and
Assignee.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the day and year first above written.
Peninsula Gaming Company, L.L.C. Greater Dubuque Riverboat
Entertainment Company, L.C.
By: /s/ Michael S. Luzich By: /s/ Don Iverson
-------------------------------- --------------------------------
Its: Its: Chairman, Management Committee
------------------------------- -------------------------------
ASSIGNEE ASSIGNOR
2
<PAGE>
CONSENT
Dubuque Racing Association, Ltd. ("DRA"), lessor under that certain
Sublease dated October 18, 1993, as amended, with Greater Dubuque Riverboat
Entertainment Company, L.C., for certain parking and dock facilities located in
the Ice Harbor area in Dubuque, Iowa, hereby consents to the assignment of the
Sublease by Greater Dubuque Riverboat Entertainment Company, L.C. to Peninsula
Gaming Company, LLC ("Assignee"). Further, DRA is not aware of any current
default on the Sublease nor is DRA aware of any condition which would lead to a
default.
DUBUQUE RACING ASSOCIATION, LTD.
By: /s/ Dan Howard Date Signed: 7-15-99
----------------------------- -----------------
Its: President
----------------------------
Acknowledged and consented to by:
CITY OF DUBUQUE, IOWA
By:_____________________________
Its:____________________________
<PAGE>
CONSENT
Dubuque Racing Association, Ltd. ("DRA"), lessor under that certain
Sublease dated October 18, 1993, as amended, with Greater Dubuque Riverboat
Entertainment Company, L.C., for certain parking and dock facilities located in
the Ice Harbor area in Dubuque, Iowa, hereby consents to the assignment of the
Sublease by Greater Dubuque Riverboat Entertainment Company, L.C. to Peninsula
Gaming Company, LLC ("Assignee"). Further, DRA acknowledges said Sublease is
currently not in default nor is DRA aware of any condition which would lead to a
default.
DUBUQUE RACING ASSOCIATION, LTD.
By: Date Signed:
----------------------------- -----------------
Its:
----------------------------
Acknowledged and consented to by:
CITY OF DUBUQUE, IOWA
By: /s/ Terry Duggan
-----------------------------
Its: Mayor
----------------------------
3
<PAGE>
Exhibit 10.16
[GRAPHIC OMITTED]
State of Iowa
This Is To Acknowledge That
DUBUQUE RACING ASSOCIATION
and
PENINSULA GAMING COMPANY, LLC
have been licensed by the
IOWA RACING AND GAMING COMMISSION
to conduct Excursion Boat Gambling
on the Dubuque Diamond Jo at Dubuque, Iowa
from July 15, 1999 to March 31, 2000
Pursuant to Iowa Code Chapter 99F
/s/ W.R. Hansen
------------------------------------------
Chair
/s/ Jack P. Ketterer
------------------------------------------
Administrator
Exhibit 10.17
ASSIGNMENT OF IOWA IGT DECLARATION
AND
AGREEMENT OF TRUST
THIS ASSIGNMENT OF IOWA IGT DECLARATION AND AGREEMENT OF TRUST (the
"Assignment") is made and entered into effective as of July 15, 1999 (the
"Effective Date"), by and between Greater Dubuque Riverboat Entertainment
Company, L.C., an Iowa limited liability company, (hereinafter called the
"Assignor"), and Peninsula Gaming Company, LLC (hereinafter called "Assignee").
1. IGT TRUST AGREEMENT. Assignor and Assignee acknowledge that Assignor is
a party to that certain Iowa IGT Declaration and Agreement of Trust dated
October 28, 1998, by and among IGT and certain Iowa excursion gambling boat and
racetrack enclosure gaming licensees, including Greater Dubuque Riverboat
Entertainment Company, L.C., (the "IGT Trust Agreement").
2. ASSIGNMENT. As of the Effective Date, Assignor hereby sells, assigns,
transfers and conveys unto Assignee, its successors and assigns, all of
Assignor's right, title and interest in and to the IGT Trust Agreement. By its
execution hereof, Assignee agrees to assume and be bound by and timely perform,
observe, discharge and otherwise comply with each and every one of Assignor's
duties, obligations, covenants and undertakings under the IGT Trust Agreement
accruing on or after the Effective Date.
3. INDEMNIFICATION. Assignor covenants to hold Assignee harmless from and
indemnify Assignee against any claim, loss, damage, cost and expense (including
reasonable attorneys' fees and court costs) that Assignee may incur from and
after the Effective Date as a result of the failure of Assignor to perform any
of its obligations with respect to the IGT Trust Agreement up to the Effective
Date. Assignee covenants to hold Assignor harmless from and indemnify Assignor
against any claim, loss, damage, cost or expense (including reasonable
attorneys' fees and court costs) that Assignor may incur from and after the
Effective Date as a result of the failure of Assignee to perform any of its
obligations with respect to the IGT Trust Agreement from and after the Effective
Date.
4. GOVERNING LAW. This Assignment shall be governed by and construed under
the laws of the State of Iowa.
5. TIME OF ESSENCE. Time shall be of the essence in the performance of
each and every covenant by Assignee pursuant to the terms of this Assignment.
6. BINDING EFFECT. The terms of this Assignment shall bind the parties
hereto and their successors in interest.
1
<PAGE>
7. MODIFICATION. This Assignment shall not be modified except if done in
writing and signed by both parties.
8. CONDITION PRECEDENT. The obligations of Assignor and Assignee under
this Assignment are subject to the closing of the transaction set forth in that
certain Asset Purchase and Sale Agreement, dated January 15, 1999, by and
between the Assignor and Assignee, as designee of AB Capital, LLC.
9. ENTIRE AGREEMENT. This Assignment contains the entire agreement between
the parties regarding the assignment of the IGT Trust Agreement.
10. CONFLICT. In no way or manner shall this Assignment modify the terms
of the IGT Trust Agreement. In the event of a conflict between the terms of this
Assignment and the IGT Trust Agreement, the IGT Trust Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the day and year first above written.
Peninsula Gaming Company, L.L.C. Greater Dubuque Riverboat
Entertainment Company, L.C.
By /s/ Michael S. Luzich By /s/ Don Iverson
---------------------------- ---------------------------------
Its Its Chairman
---------------------------- --------------------------------
ASSIGNEE ASSIGNOR
2
<PAGE>
CONSENT OF IGT
IGT, as administrator under that certain Iowa IGT Declaration and
Agreement of Trust dated October 28, 1998, with Greater Dubuque Riverboat
Entertainment Company, L.C. ("GDREC") I hereby consents to the foregoing
Assignment between Greater Dubuque Riverboat Entertainment Company, L.C. as
Assignor and Peninsula Gaming Company, LLC as Assignee.
IGT, Administrator
By: /s/ Ward W. Chilton Date Signed: July 15, 1999
---------------------------------- -----------------------
Its: Ward W. Chilton, Vice President
---------------------------------
3
<PAGE>
ASSIGNMENT OF IOWA IGT AGREEMENT
FOR
WIDE AREA PROGRESSIVE SYSTEMS
THIS ASSIGNMENT OF IOWA IGT AGREEMENT FOR WIDE AREA PROGRESSIVE SYSTEMS
(the "Assignment") is made and entered into effective as of July 15, 1999 (the
"Effective Date"), by and between Greater Dubuque Riverboat Entertainment
Company, L.C., an Iowa limited liability company, (hereinafter called the
"Assignor"), and Peninsula Gaming Company, LLC (hereinafter called "Assignee").
1. IGT AGREEMENT. Assignor and Assignee acknowledge that Assignor is a
party to that certain Iowa IGT Agreement for Wide Area Progressive Systems dated
October 28, 1998, by and among IGT, the Iowa Multi-Link System Trust, and
certain Iowa excursion gambling boat and racetrack enclosure gaming licensees,
including Greater Dubuque Riverboat Entertainment Company, L.C., (the "IGT
Agreement"), for participation in the computerized multi-link system of slot
machines (the "System").
2. ASSIGNMENT. As of the Effective Date, Assignor hereby sells, assigns,
transfers and conveys unto Assignee, its successors and assigns, all of
Assignor's right, title and interest in and to the IGT Agreement. By its
execution hereof, Assignee agrees to assume and be bound by and timely perform,
observe, discharge and otherwise comply with each and every one of Assignor's
duties, obligations, covenants and undertakings under the IGT Agreement accruing
on or after the Effective Date.
3. INDEMNIFICATION. Assignor covenants to hold Assignee harmless from and
indemnify Assignee against any claim, loss, damage, cost and expense (including
reasonable attorneys' fees and court costs) that Assignee may incur from and
after the Effective Date as a result of the failure of Assignor to perform any
of its obligations with respect to the IGT Agreement up to the Effective Date.
Assignee covenants to hold Assignor harmless from and indemnify Assignor against
any claim, loss, damage, cost or expense (including reasonable attorneys' fees
and court costs) that Assignor may incur from and after the Effective Date as a
result of the failure of Assignee to perform any of its obligations with respect
to the IGT Agreement from and after the Effective Date.
4. GOVERNING LAW. This Assignment shall be governed by and construed under
the laws of the State of Iowa.
5. TIME OF ESSENCE. Time shall be of the essence in the performance of
each and every covenant by Assignee pursuant to the terms of this Assignment.
6. BINDING EFFECT. The terms of this Assignment shall bind the parties
hereto and their successors in interest.
1
<PAGE>
7. MODIFICATION. This Assignment shall not be modified except if done in
writing and signed by both parties.
8. CONDITION PRECEDENT. The obligations of Assignor and Assignee under
this Assignment are subject to the closing of the transaction set forth in that
certain Asset Purchase and Sale Agreement, dated January 15, 1999, by and
between the Assignor and Assignee, as designee of AB Capital, LLC.
9. ENTIRE AGREEMENT. This Assignment contains the entire agreement between
the parties regarding the assignment of the IGT Agreement.
10. CONFLICT. In no way or manner shall this Assignment modify the terms
of the IGT Agreement. In the event of a conflict between the terms of this
Assignment and the IGT Agreement, the IGT Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the day and year first above written.
Peninsula Gaming Company, L.L.C. Greater Dubuque Riverboat
Entertainment Company, L.C.
By /s/ Michael S. Luzich By /s/ Don Iverson
-------------------------------- -------------------------------
Its Its Chairman
------------------------------- ------------------------------
ASSIGNEE ASSIGNOR
2
<PAGE>
CONSENT OF IGT
IGT, a party under that certain Iowa IGT Agreement for Wide Area
Progressive Systems dated October 28, 1998, with Greater Dubuque Riverboat
Entertainment Company, L.C. ("GDREC"), for the participation of GDREC in the
computerized multi-link system of slot machines, hereby consents to the
foregoing Assignment between Greater Dubuque Riverboat Entertainment Company,
L.C. as Assignor and Peninsula Gaming Company, LLC as Assignee.
IGT
By: /s/ Ward W. Chilton Date Signed: July 15, 1999
------------------------------------- ----------------
Its: Ward W. Chilton, Vice President
------------------------------------
3
<PAGE>
Exhibit 12.1
Computation of Historical Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
---------------------------------------------- -------------------
June 30, June 30,
1994 1995 1996 1997 1998 1998 1999
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Earnings: 1,636 4,022 908 11,068 12,210 5,945 5,606
Fixed charges:
Interest charges 1,017 1,007 1,813 1,772 1,142 664 319
Amortization of deferred financing costs 140 110 139 228 104 51 53
------------------------------------------------------------------
Total fixed charges 1,157 1,117 1,952 2,000 1,246 715 372
------------------------------------------------------------------
Earnings, as adjusted 2,793 5,139 2,860 13,068 13,456 6,660 5,978
------------------------------------------------------------------
Ratio of earnings to fixed charges 2.4 4.6 1.6 6.5 10.8 9.3 16.1
------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
---------------
FIRSTAR BANK, N.A.
F.K.A. FIRSTAR BANK OF MINNESOTA, N.A.
(Exact name of Trustee as specified in its charter)
A National Banking Association 41-0122055
(State of incorporation if not a national bank) (IRS Employee
Identification No.)
101 East Fifth Street
Corporate Trust Department
St. Paul, Minnesota 55101
(Address of principal executive officers) (Zip Code)
FIRSTAR BANK OF MINNESOTA, N.A.
101 East Fifth Street
St. Paul, Minnesota 55101
(651) 229-2600
(Exact name, address and telephone number of agent for service)
---------------
PENINSULA GAMING COMPANY, LLC
PENINSULA GAMING CORP.
Delaware Applied For
Delaware Applied For
(State of incorporation or other jurisdiction) (IRS Employer
Identification No.)
3rd Street Ice Harbor
P.O. Box 1750
Dubuque, Iowa 52004-1683
(Address of principal executive offices) (Zip Code)
---------------
12 1/4% Senior Secured Notes due 2006
(Title of Indenture securities)
<PAGE>
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, DC
Federal Deposit Insurance Corporation
Washington, DC
The Board of Governors of the Federal Reserve System
Washington, DC
(b) The Trustee is authorized to exercise corporate trust powers.
GENERAL
Item 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. If the obligor or
any underwriter for the obligor is an affiliate of the Trustee,
describe each such affiliation.
None
See Note following Item 16.
Items 3-15 ARE NOT APPLICABLE BECAUSE TO THE BEST OF THE TRUSTEE'S KNOWLEDGE
THE OBLIGOR IS NOT IN DEFAULT UNDER ANY INDENTURE FOR WHICH THE TRUSTEE ACTS
AS TRUSTEE.
Item 16. LIST OF EXHIBITS. Listed below are all the exhibits filed as a
part of this statement of eligibility and qualification.
Exhibits 1-4 are incorporated by reference from filing 333-48849.
Exhibit 7 is incorporated by reference from filing 333-79659.
Exhibit 1. Copy of Articles of Association of the trustee now in
effect.
Exhibit 2. a. A copy of the certificate of the Comptroller of
Currency dated June 1, 1965, authorizing Firstar
Bank of Minnesota, N.A. to act as fiduciary.
b. A copy of the certificate of authority of the
trustee to commence business issued June 9, 1903,
by the Comptroller of the Currency to Firstar Bank
of Minnesota, N.A.
<PAGE>
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued by the Federal Reserve
Board.
Exhibit 4. Copy of the By-Laws of the trustee as now in effect.
Exhibit 5. Copy of each Indenture referred to in Item 4.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of conditions of the
trustee published pursuant to law or the requirements of
its supervising or examining authority.
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligor within three
years prior to the date of filing this statement, or what persons are owners
of 10% or more of the voting securities of the obligor, or affiliates, are
based upon information furnished to the Trustee by the obligor. While the
Trustee has no reason to doubt the accuracy of any such information, it
cannot accept any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, a national banking association organized and existing under the laws
of the United States, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City
of Saint Paul and State of Minnesota on the 20th day of September, 1999.
FIRSTAR BANK OF MINNESOTA, N.A.
(Seal) /s/ Frank P. Leslie III
--------------------------------
Frank P. Leslie III
Vice President
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, Firstar Bank of Minnesota, N.A., hereby consents that
reports of examination of the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon its request therefor.
Dated: September 20, 1999
FIRSTAR BANK OF MINNESOTA, N.A.
/s/ Frank P. Leslie III
--------------------------------
Frank P. Leslie III
Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRATION
STATEMENT ON FORM S-4 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001096051
<NAME> PENINSULA GAMING CORP.
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-15-1999
<PERIOD-END> JUL-15-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 9,000,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,000,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,000,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 9,000,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,000,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
PENINSULA GAMING COMPANY, LLC
AND
PENINSULA GAMING CORP.
OFFER TO EXCHANGE
UP TO $71,000,000 OF OUR
SERIES B 12 1/4% SENIOR SECURED NOTES DUE 2006
FOR ALL OF OUR OUTSTANDING
SERIES A 12 1/4% SENIOR SECURED NOTES DUE 2006
PURSUANT TO THE PROSPECTUS DATED , 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999 (THE "EXPIRATION DATE") UNLESS THE EXCHANGE OFFER IS
EXTENDED TO A DATE NOT LATER THAN , 1999. TENDERS OF OLD NOTES
MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
- --------------------------------------------------------------------------------
FIRSTAR BANK, N.A., EXCHANGE AGENT
BY MAIL, HAND OR OVERNIGHT COURIER:
Firstar Bank, N.A.
101 East Fifth Street
St. Paul, Minnesota 55101
BY FACSIMILE TRANSMISSION:
(651) 229-6415
CONFIRM BY TELEPHONE:
(651) 229-2600
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION
VIA TELEGRAM, TELEX OR FACSIMILE WITH CONFIRMATION, OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
1
<PAGE>
By execution hereof, the undersigned acknowledges receipt of the
Prospectus (the "Prospectus"), dated _______, 1999, of Peninsula Gaming Company,
LLC, a Delaware limited liability company, and its wholly-owned subsidiary,
Peninsula Gaming Corp., a Delaware corporation (collectively, the "Company"),
which, together with this Letter of Transmittal and the instructions hereto (the
"Letter of Transmittal"), constitutes the Company's offer (the "Exchange Offer")
to exchange $71,000,000 aggregate principal amount of its Series B 12 1/4%
Senior Secured Notes due 2006 (the "New Notes") that have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
registration statement of which the Prospectus constitutes a part, for
$71,000,000 aggregate principal amount of its outstanding Series A 12 1/4%
Senior Secured Notes due 2006 (the "Old Notes"), upon the terms and subject to
the conditions set forth in the Prospectus.
This Letter of Transmittal is to be used by Holders (as defined below)
if (i) certificates representing Old Notes are to be physically delivered to the
Exchange Agent herewith by Holders; (ii) tender of Old Notes is to be made by
book-entry transfer to the Exchange Agent's account at The Depository Trust
Company ("DTC") pursuant to the procedures set forth in the Prospectus under
"The Exchange Offer--Procedures for Tendering Old Notes" by any financial
institution that is a participant in DTC and whose name appears on a security
position listing as the owner of Old Notes (such participants, acting on behalf
of Holders, are referred to herein, together with such Holders, as "Acting
Holders"); or (iii) tender of Old Notes is to be made according to the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures." Delivery of documents to DTC does not
constitute delivery to the Exchange Agent.
If delivery of the Old Notes is to be made by book-entry transfer to
the account maintained by the Exchange Agent at DTC as set forth in (ii) in the
immediately preceding paragraph, this Letter of Transmittal need not be manually
executed; provided, however, that tenders of Old Notes must be effected in
accordance with the procedures mandated by DTC's Automated Tender Offer Program
("ATOP"). To tender Old Notes through ATOP, the electronic instructions sent to
DTC and transmitted by DTC to the Exchange Agent must contain the character by
which the participant acknowledges its receipt of and agrees to be bound by this
Letter of Transmittal.
Unless the context requires otherwise, the term "Holder" for purposes
of this Letter of Transmittal means: (i) any person in whose name Old Notes are
registered or any other person who has obtained a properly completed bond power
from the registered Holder or (ii) any participant in DTC whose Old Notes are
held of record by DTC who desires to deliver such Old Notes by book-entry
transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
The instructions included with this Letter of Transmittal must be
followed. Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 8 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
2
<PAGE>
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Old Notes will be accepted only in
authorized denominations of $1,000.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES
CERTIFICATE AGGREGATE
NUMBER(S)* PRINCIPAL
(ATTACH SIGNED AMOUNT
NAMES AND ADDRESS(ES) OF HOLDER(S) LIST IF TENDERED (IF LESS
(PLEASE FILL IN, IF BLANK) NECESSARY) THAN ALL)**
- --------------------------------------------------------- ----------------------------- -----------------------------
<S> <C> <C>
----------------------------- -----------------------------
----------------------------- -----------------------------
----------------------------- -----------------------------
----------------------------- -----------------------------
----------------------------- -----------------------------
----------------------------- -----------------------------
TOTAL PRINCIPAL AMOUNT OF NOTES TENDERED
- --------------------------------------------------------- ----------------------------- -----------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Need not be completed by Holders who wish to tender with respect to all Old Notes listed. See Instruction 2.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
/_/ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE
EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
------------------------------------------------
DTC Book-Entry Account:
---------------------------------------------------------
Transaction Code No.:
---------------------------------------------------------
3
<PAGE>
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or cannot complete the procedure for book-entry transfer on a
timely basis, may effect a tender according to the Guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures."
/_/ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Holder(s) of Old Notes:
Window Ticket No. (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Eligible Institution that Guaranteed Delivery:
DTC Book-Entry Account No.:
If Delivered by Book-Entry Transfer:
Name of Tendering Institution:
Transaction Code No.:
/_/ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------
------------------------------------------------------------------
4
<PAGE>
Ladies and Gentlemen:
Subject to the terms of the Exchange Offer, the undersigned hereby tenders
to the Company the principal amount of Old Notes indicated above. Subject to and
effective upon the acceptance for exchange of the principal amount of Old Notes
tendered in accordance with this Letter of Transmittal, the undersigned sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to the Old Notes tendered hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as the
agent of the Company and as Trustee under the Indenture for the Old Notes and
the New Notes) with respect to the tendered Old Notes with full power of
substitution to (i) deliver certificates for such Old Notes to the Company or
transfer ownership of such Old Notes on the account books maintained by DTC,
together, in either such case, with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company and (ii) present such Old
Notes for transfer on the books of the Company and receive all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, when the same are acquired by the Company. The
undersigned also acknowledges that this Exchange Offer is being made in reliance
upon an interpretation by the staff of the Securities and Exchange Commission
that the New Notes issued in exchange for the Old Notes pursuant to the Exchange
Offer may be offered for sale, resold and otherwise transferred by a holder
thereof (other than (i) a broker-dealer that purchased such Old Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders are not participating and have no
arrangement with any person to participate in the distribution of such New
Notes. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
the New Notes. If the undersigned is a broker-dealer that will receive New Notes
for its own account in exchange for Old Notes, the undersigned represents that
such Old Notes were acquired as a result of market-making activities or other
trading activities and acknowledges that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned represents that (i) any New Notes received by such Holder
will be acquired in the ordinary course of its business, (ii) such Holder will
not participate and will have no arrangements or understanding with any person
to participate in the distribution of the Old or New Notes within the meaning of
the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company, or if it is an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, it is not engaged in, and does not intend to engage in, the
distribution of the New Notes and (v) if such Holder is a broker-dealer, it will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities and
that it will be required to acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered
hereby.
5
<PAGE>
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent. If any tendered Old Notes are
not accepted for exchange pursuant to the Exchange Offer for any reason,
certificates for any such unaccepted Old Notes will be returned (except as noted
below with respect to tenders through DTC), without expense, to the undersigned
at the address shown below or at such different address as may be indicated
under "Special Issuance Instructions" as promptly as practicable after the
Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation under this Letter of Transmittal shall be
binding upon the undersigned's heirs, personal representatives, successors and
assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering Old Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned (or in either such event in the
case of Old Notes tendered by DTC, by credit to the account at DTC). Similarly,
unless otherwise indicated under "Special Delivery Instructions," please send
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and any certificates for Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature(s), unless, in either event,
tender is being made through DTC. In the event that both "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and return any Old Notes not tendered or not exchanged in
the name(s) of, and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered.
6
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES REGARDLESS
OF WHETHER OLD NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or other person
acting in a fiduciary or representative capacity, such person must set forth his
or her full title below under "Capacity" and submit evidence satisfactory to the
Company of such person's authority to so act. See Instruction 3 herein.
If the signature appearing below is not of the registered Holder(s) of the
Old Notes, then the registered Holder(s) must sign a valid proxy.
<TABLE>
<S> <C>
x Date:
---------------------------------------------------- --------------------------------------------------
x Date:
---------------------------------------------------- --------------------------------------------------
Signature(s) of Holder(s) or Authorized Signatory
Name(s): Address:
--------------------------------------------- ------------------------------------------------
--------------------------------------------- ------------------------------------------------
(Please Print) (Including Zip Code)
Capacity(ies): Area Code and Telephone No.:
---------------------------------------- -----------------------------
Social Security No(s).:
-------------------------------
</TABLE>
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- --------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number
(including area code) of Finn)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Date:
----------
7
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: PENINSULA GAMING COMPANY, LLC
- ---------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR Social Security Number
FORM W-9 TIN IN THE BOX AT RIGHT AND or
CERTIFY BY SIGNING AND Employer Identification Number
DATING BELOW _______________________
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DEPARTMENT OF THE TREASURY PART 2--Check the box if you are NOT subject to back-up withholding under the
INTERNAL REVENUE SERVICE provisions of Section 3406(a)(1)(C) of the Internal Revenue Code because
PAYOR'S REQUEST FOR (1) you have not been notified that you are subject to back-up withholding as a result
TAXPAYER IDENTIFICATION of failure to report all interest or dividends,
NUMBER (TIN) (2) the Internal Revenue Service has notified you that you are no longer subject to
back-up withholding or
(3) you are exempt. /_/
CERTIFICATE--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT
THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND
COMPLETE.
- ---------------------------------------------------------------------------------------------------------------------------------
SIGNATURE PART 3--
--------------------------------
SIGN HERE ->
DATE Check if Awaiting TIN /_/
--------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTION 4 HEREIN)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered are to be issued in the name of, or the New Notes issued pursuant
to the Exchange Offer are to be issued to the order of, someone other than the
person or persons whose signature(s) appear(s) within this Letter of Transmittal
or issued to an address different from that shown in the box entitled
"Description of Old Notes" within this Letter of Transmittal, or if Old Notes
tendered by book-entry transfer that are not accepted for purchase are to be
credited to an account maintained at DTC other than the account at DTC indicated
above.
Name:
--------------------------------------------------------------------------
(PLEASE PRINT)
Address:
------------------------------------------------------------------------
(PLEASE PRINT)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ZIP CODE
- --------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 HEREIN)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 4 HEREIN)
To be completed ONLY if certificates for Old Notes in a principal
amount not tendered or not accepted for purchase or the New Notes issued
pursuant to the Exchange Offer are to be sent to someone other than the person
or persons whose signature(s) appear(s) within this Letter of Transmittal or to
an address different from that shown in the box entitled "Description of Old
Notes" within this Letter of Transmittal or to be credited to an account
maintained at DTC other than the account at DTC indicated above.
Name:
--------------------------------------------------------------------------
(PLEASE PRINT)
Address:
------------------------------------------------------------------------
(PLEASE PRINT)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ZIP CODE
- --------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 HEREIN)
9
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
- -- Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- ----------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds,
either person(1)
4. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person (3)
for a designated ward.
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee (1)
savings trust account
(grantor is also
trustee)
b. So-called trust The actual owner (1)
account that is not a
legal or valid trust
under State law
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- ----------------------------------------------------------------
<S> <C>
8. Sole proprietorship The owner (4)
account
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)") (5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government. school
district, or prison) that
receives agricultural
program payments
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's Social Security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's Social Security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name. the number will
be considered to be that of the first name listed.
10
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(I).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount renewed is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include
the following:
- - Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or business and
you have not provided your correct taxpayer identification number to the
payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER.
WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE
PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS. ALSO SIGN AND DATE THE
FORM.
Certain payments other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES.
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.-If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.-If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
11
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER AND THE SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. The
certificates for the tendered Old Notes (or a confirmation of a book-entry into
the Exchange Agent's account at DTC of all Old Notes delivered electronically),
as well as a properly completed and duly executed copy of this Letter of
Transmittal or facsimile hereof and any other documents required by this Letter
of Transmittal must be received by the Exchange Agent at its address set forth
herein prior to 5:00 P.M., New York City time, on the Expiration Date. The
method of delivery of the tendered Old Notes, this Letter of Transmittal and all
other required documents to the Exchange Agent are at the election and risk of
the Holder and, except as otherwise provided below, the delivery will be deemed
made only when actually received by the Exchange Agent. Instead of delivery by
mail, it is recommended that the Holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Letter of Transmittal or Old Notes should be sent to the Company.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date, or who cannot complete the procedure for
book-entry transfer on a timely basis must tender their Old Notes and follow the
guaranteed delivery procedures set forth in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
(as defined below); (ii) prior to the Expiration Date, the Exchange Agent must
have received from the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within four business days after the Expiration Date, this Letter of
Transmittal (or copy thereof) together with the certificate(s) representing the
Old Notes (or a confirmation of electronic mail delivery of book-entry delivery
into the Exchange Agent's account at DTC) and any of the required documents will
be deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal (or copy thereof), as well
as all other documents required by this Letter of Transmittal and the
certificate(s) representing all tendered Old Notes in proper form for transfer
(or a confirmation of electronic mail delivery of book-entry delivery into the
Exchange Agent's account at DTC), must be received by the Exchange Agent within
four business days after the Expiration Date, all as provided in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." Any
Holder of Old Notes who wishes to tender his Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 P.M., New York
City time, on the Expiration Date.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any defects, irregularities or conditions
of tender as to particular Old Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in this Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Old Notes, nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost by the Exchange Agent to the tendering Holders of Old
Notes, unless otherwise provided in this Letter of Transmittal, as soon as
practicable following the Expiration Date.
2. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
authorized denominations of $1,000. If less than the entire principal amount of
any Old Notes is tendered, the tendering Holder should fill in
12
<PAGE>
the principal amount tendered in the third column of the chart entitled
"Description of Old Notes." The entire principal amount of Old Notes delivered
to the Exchange Agent will be deemed to have been tendered unless otherwise
indicated. If the entire principal amount of all Old Notes is not tendered, Old
Notes for the principal amount of Old Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Old Notes is not tendered, Old Notes for the principal
amount of Old Notes not tendered and a certificate or certificates representing
New Notes issued in exchange of any Old Notes accepted will be sent to the
Holder at his or her registered address, unless a different address is provided
in the appropriate box on this Letter of Transmittal or unless tender is made
through DTC, promptly after the Old Notes are accepted for exchange.
3. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or copy
hereof) is signed by the registered Holder(s) of the Old Notes tendered hereby,
the signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or copy hereof) is signed by the
registered Holder(s) of Old Notes tendered and the certificate(s) for New Notes
issued in exchange therefor is to be issued (or any untendered principal amount
of Old Notes is to be reissued) to the registered Holder, such Holder need not
and should not endorse any tendered Old Note, nor provide a separate bond power.
In any other case, such holder must either properly endorse the Old Notes
tendered or transmit a properly completed separate bond power with this Letter
of Transmittal, with the signatures on the endorsement or bond power Guaranteed
by an Eligible Institution.
If this Letter of Transmittal (or copy hereof) is signed by a person
other than the registered Holder(s) listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered Holder, in either case
signed as the name of the registered Holder or Holders appears on the Old Notes.
If this Letter of Transmittal (or copy hereof) or any Old Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 3 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal (or copy hereof) or a notice
of withdrawal, as the case may be, must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution")
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
Holder (including any participant in DTC whose name appears on a security
position listing as the owner of Old Notes) who has not completed the box set
forth herein entitled "Special Issuance Instructions" or "Special Delivery
Instructions" of this Letter of Transmittal or (ii) for the account of an
Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable spaces, the name and address to which New Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal (or in the case of tender of the Old
Notes through DTC, if different from the account maintained at DTC indicated
above). In the case of issuance in a different name, the taxpayer identification
or social security number of the person named must also be indicated.
5. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered Holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount
13
<PAGE>
of any such transfer taxes (whether imposed on the registered Holder or any
other person) will be payable by the tendering Holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering Holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
6. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify specified conditions in the Exchange Offer in the case of
any Old Notes tendered.
7. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instruction.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
specified in the Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or Old
Notes will be resolved by the Company, whose determination will be final and
binding. The Company reserves the absolute right to reject any or all Letters of
Transmittal or tenders that are not in proper form or the acceptance of which
would, in the opinion of the Company's counsel, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to the particular Old Notes covered by any Letter of Transmittal or tendered
pursuant to such Letter of Transmittal. None of the Company, the Exchange Agent
or any other person will be under any duty to give notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification. The Company's interpretation of the terms and conditions of the
Exchange Offer shall be final and binding
IMPORTANT: This Letter of Transmittal or a facsimile thereof (together
with certificates for Old Notes and all other required documents) or a Notice of
Guaranteed Delivery must be received by the Exchange Agent on or prior to 5:00
p.m., New York City time on the Expiration Date.
14
<PAGE>
(DO NOT WRITE IN SPACE BELOW)
- --------------------------------------------------------------------------------
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DELIVERY PREPARED BY CHECKED BY DATE
----------- --------------- -------------
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
Firstar Bank, N.A.
101 East Fifth Street
St. Paul, Minnesota 55101
BY FACSIMILE TRANSMISSION:
(651) 229-6415
CONFIRM BY TELEPHONE:
(651) 229-2600
15
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for tender of
Series A 12 1/4% Senior Secured Notes due 2006
of
PENINSULA GAMING COMPANY, LLC
and
PENINSULA GAMING CORP.
As set forth in the Prospectus dated , 1999 (the "Prospectus") of
Peninsula Gaming Company, LLC, a Delaware limited liability company, and its
wholly-owned subsidiary Peninsula Gaming Corp., a Delaware corporation
(collectively, the "Company"), and in the accompanying Letter of Transmittal and
instructions thereto (the "Letter of Transmittal"), this form or one
substantially equivalent hereto must be used to accept the Company's exchange
offer (the "Exchange Offer") to exchange all of its outstanding Series A 12 1/4%
Senior Secured Notes due 2006 (the "Old Notes") if (i) certificates representing
the Old Notes to be tendered for purchase and payment are not lost but are not
immediately available, (ii) time will not permit the Letter of Transmittal,
certificates representing such Old Notes or other required documents to reach
Firstar Bank, N.A. (formerly Firstar Bank of Minnesota, N.A.) (the "Exchange
Agent") on or prior to 5:00 p.m., New York City time, on the Expiration Date or
(iii) the procedures for book-entry transfer cannot be completed prior to the
Expiration Date (as defined below). This form may be delivered by an Eligible
Institution by mail or hand delivery or transmitted, via telegram, telex or
facsimile, to the Exchange Agent as set forth below. In addition, in order to
utilize the guaranteed delivery procedures to tender the Old Notes pursuant to
the Exchange Offer, a properly completed and duly executed Letter of
Transmittal, any other required documents and tendered Old Notes in proper form
for transfer (or confirmation of a book-entry transfer of such Old Notes into
the Exchange Agent's account at The Depository Trust Company) must also be
received by the Exchange Agent prior to 5:00 p.m., New York City time, within
four business days after the Expiration Date. All capitalized terms used herein
but not defined herein shall have the meanings ascribed to them in the
Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999 (THE "EXPIRATION DATE") UNLESS OTHERWISE EXTENDED.
TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE.
TO: FIRSTAR BANK, N.A., EXCHANGE AGENT
BY MAIL, HAND OR OVERNIGHT COURIER:
Firstar Bank, N.A.
101 East Fifth Street
St. Paul, Minnesota 55101
BY FACSIMILE TRANSMISSION:
(651) 229-6415
CONFIRM BY TELEPHONE:
(651) 229-2600
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA TELEGRAM,
TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on the Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus.
The undersigned understands that tenders of Old Notes will be accepted
only in authorized denominations. The undersigned understands that tenders of
Old Notes pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m.,
New York City time on the Expiration Date. Tenders of Old Notes may also be
withdrawn if the Exchange Offer is terminated without any such Old Notes being
purchased thereunder or as otherwise provided in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
Name(s) of Registered Holder(s):
-----------------------------------------------
(Please Print or Type)
Principal Amount of Old Notes Tendered:* Certificate No(s). (if available):
$
------------------------------------- ---------------------------------
$
------------------------------------- ---------------------------------
$
------------------------------------- ---------------------------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
If Old Notes will be delivered by book-entry transfer to The Depository
Trust Company ("DTC"), provide the DTC account number.
Depository Account Number:
----------------------------
PLEASE SIGN HERE
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery.
------------------------------------- ---------------------------------
------------------------------------- ---------------------------------
Signature(s) of Holder(s) or Authorized
Signatory Date
Area Code and Telephone Number:
------------------------------------
<PAGE>
If signature is by attorney-in-fact, trustee, executor, administrator,
guardian, officer or other person acting in a fiduciary or representative
capacity, such person must set forth his or her full title below.
Please print name(s) and address(es)
Name(s) of Holder(s)
-------------------------------------------
-------------------------------------------
-------------------------------------------
Title/Capacity:
-------------------------------------------
Address(es):
-------------------------------------------
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or a correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificate(s)
representing the Old Notes being tendered by this Notice of Guaranteed Delivery
in proper form for transfer (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility
of DTC) with a properly completed and duly executed Letter of Transmittal and
any other required documents, all within four (4) business days after the
Expiration Date.
Name of Firm
------------------------ -----------------------------------
(Authorized Signature)
Address Name
------------------------------ ------------------------------
Please Print or Type
Title
- ------------------------------------- ------------------------------
City, State Zip Code
Dated
-----------------------------
Telephone Number
--------------------
The institution that completes this form must communicate the guarantee
to the Exchange Agent by the Expiration Date and must deliver the
certificates representing any Old Notes (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC), the
Letter of Transmittal and any other required documents to the Exchange Agent
within the time period shown in this Notice of Guaranteed Delivery. Failure
to do so could result in a financial loss to such institution.
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES
FOR OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
