<PAGE>
As filed with the Securities and Exchange Commission on April 18, 2000
Registration No. 333-88679
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 4
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
--------------
Hollywood Casino Shreveport
(Exact Name of Co-Registrants as Specified in their Charters)
<TABLE>
<S> <C> <C>
Louisiana 7011 72-1225563
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
</TABLE>
Shreveport Capital Corporation
(Exact Name of Co-Registrants as Specified in their Charters)
<TABLE>
<S> <C> <C>
Louisiana 7011 75-2830167
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
and the following Guarantors
HWCC-Louisiana, Inc. HCS I, Inc. HCS II, Inc.
(Exact Name of Co-Registrant (Exact Name of Co-Registrant (Exact Name of Co-Registrant
as Specified in its Charter) as Specified in its Charter) as Specified in its Charter)
Louisiana Louisiana Louisiana
(State or Other Jurisdiction of (State or Other Jurisdiction of (State or Other Jurisdiction of
Incorporation or Organization) Incorporation or Organization) Incorporation or Organization)
75-2478868 75-2830161 75-2830163
(I.R.S. Employer Identification (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
No.)
7011 7011 7011
(Primary Standard Industrial (Primary Standard Industrial (Primary Standard Industrial
Classification Code) Classification Code) Classification Code)
</TABLE>
William D. Pratt
Two Galleria Tower, Suite 2200 Executive Vice President, Secretary and
13455 Noel Road General Counsel
Dallas, Texas 75240 Two Galleria Tower, Suite 2200
(972) 392-7777 13455 Noel Road
Dallas, Texas 75240
(Address, Including Zip Code, and (972) 392-7777
Telephone Number, including Area Code,
of Co-Registrants' Principal Executive (Name and Address, Including Zip Code,
Offices) and Telephone Number, Including Area
Code, of Agent For Service)
--------------
With a copy to:
Michael A. Saslaw, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telephone: (214) 746-7700
Facsimile: (214) 746-7777
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to the Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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 thereafter shall 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 Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
Subject to Completion Dated April 18, 2000
[HOLLYWOOD CASINO SHREVEPORT LOGO APPEARS HERE]
Offer to Exchange All Outstanding
Original 13% First Mortgage Notes due 2006
with Contingent Interest
for
Registered 13% First Mortgage Notes due 2006
with Contingent Interest
of
Hollywood Casino Shreveport
and
Shreveport Capital Corporation
any securities exchange and,
. The exchange offer will expire therefore, no active public
at 5:00 p.m., New York City market is anticipated.
time, on , 2000, unless we
extend this date.
. If you are a broker-dealer that
receives registered notes for
your own account in exchange
for your original notes
pursuant to the exchange offer,
where your original notes were
acquired by you as a result of
market-making activities or
other trading activities, you
must acknowledge that you will
deliver a prospectus in
connection with any resale of
your registered notes. This
prospectus, as it may be
amended or supplemented from
time to time, may be used by
you in connection with resales
of registered notes received in
exchange for your original
notes where your original notes
were acquired as a result of
market-making activities or
other trading activities.
. If you decide to participate in
this exchange offer, the
registered notes you receive
will be the same as your
original notes, except that,
unlike your original notes, you
will be able to offer and sell
the registered notes freely to
any potential buyer in the
United States.
. We will not receive any
proceeds from the exchange
offer.
. If you fail to tender your
original notes, you will
continue to hold unregistered
securities and it may be
difficult for you to transfer
them.
. No public market currently
exists for the notes. We do not
intend to list the notes on
We urge you to read the "Risk Factors" section of this prospectus beginning on
page 10, which describes information you should consider before participating
in the exchange offer.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
----------------
The information in this prospectus is not complete 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 buy these securities in any state where the offer or sale is not
permitted.
The date of this prospectus is , 2000.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because it is a summary, it does not contain all information about us and this
offering that should be considered before deciding to exchange your original
notes. We urge you to read the entire prospectus carefully, including the text
under the section entitled "Risk Factors."
We are constructing and will own a themed hotel and casino destination resort
in Shreveport, Louisiana, which is approximately 180 miles east of Dallas,
Texas. Portions of Shreveport are separated from Bossier City by the Red River
and, for convenience, we refer to the Shreveport/Bossier City market as the
"Shreveport market." We have hired a general manager for the resort who has
extensive experience operating casinos in the Shreveport market.
As of December 31, 1999, we have spent approximately $34.8 million of the
$230.0 million budgeted for the project. Construction progress to date includes
substantially all of the site preparation work, the pouring of concrete for the
first fifteen floors of the hotel tower and the first three floors of the
parking garage, the completion of the hull and three floors of the casino barge
and the movement of the barge from its shipyard to a site in Shreveport. In
addition, we have commenced construction of the basin that will hold the casino
barge. These expenditures also include $5.0 million that we paid to the City of
New Orleans in August 1999 as part of an agreement reached with the City of New
Orleans allowing the relocation of the license to the Shreveport market. The
budget includes project costs, the first three payments of fixed interest on
the notes, significant construction contingencies and fees and expenses. We
intend to open the resort in early November 2000, although the actual opening
date may be delayed due to poor weather or the occurrence of other events
discussed under "Risk Factors."
The resort will be operated by Hollywood Casino's subsidiary, HWCC-
Shreveport, Inc. ("HWCC Shreveport") under a management contract and will
feature Hollywood Casino's unique Hollywood theme.
We and Hollywood Casino are substantially leveraged and we have no history of
earnings since becoming a development stage entity on September 22, 1998. Our
earnings were insufficient to cover fixed charges by $5.3 million for the year
ended December 31, 1999 and by $35,000 for the period from September 22, 1998
through December 31, 1998. We will not generate any revenues until the
Shreveport resort is opened.
We were originally formed in 1992 as a Louisiana partnership among previous
owners, including Hilton New Orleans Corporation and New Orleans Paddlewheels
Inc., to own and operate a riverboat casino in New Orleans. Those owners
discontinued the New Orleans operations in October 1997 and sold their
partnership interests in us to HWCC-Louisiana, Inc. and Sodak Louisiana, L.L.C.
in September 1998 for the purpose of developing and operating a new casino
under our gaming license in Shreveport. HWCC-Louisiana subsequently acquired
Sodak Louisiana's interest in us in April 1999 and Hollywood Casino now owns
and controls all of the voting and capital interest in us through its
subsidiaries, HWCC-Louisiana, HCS I, Inc. and HCS II, Inc. We formed Shreveport
Capital Corporation in July 1999 and we own all of its issued and outstanding
capital stock.
1
<PAGE>
The following chart sets forth the organizational structure of Hollywood
Casino Corporation, our parent company ("Hollywood Casino"), and its
subsidiaries involved in the ownership, development and operation of the
Shreveport resort:
[ORGANIZATIONAL CHART APPEARS HERE]
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* General partnership interest.
** Upon a sale or other disposition of Hollywood Casino Shreveport, Shreveport
Paddlewheels will be entitled to a residual interest equal to 10% of the net
proceeds of such sale or disposition after the repayment of any outstanding
indebtedness and the return of contributed capital.
Address and Telephone Number
Until completion of the Shreveport resort, our principal executive offices
will be located at Two Galleria Tower, Suite 2200, 13455 Noel Road, Dallas,
Texas 75240, and our telephone number will be (972) 392-7777.
2
<PAGE>
The Exchange Offer
Securities to be On August 10, 1999, we issued $150.0 million
Exchanged............... aggregate principal amount of 13% first mortgage
notes in the original offering in a transaction
exempt from the registration requirements of the
Securities Act of 1933. Based on information
provided by the initial purchasers of those notes,
we understand that the initial purchasers
subsequently resold all of the notes they purchased
in transactions exempt from the registration
requirements of the Securities Act. The terms of the
original notes and the registered notes will be the
same, except that, unlike the original notes, you
will be able to offer and sell the registered notes
freely to any potential buyer in the United States.
For more details, see the section entitled
"Description of the Registered Notes."
The Exchange Offer....... You must properly tender your original notes in
accordance with the procedures described on page 65
of this prospectus. We will exchange all original
notes that you properly tender and do not withdraw.
If we exchange your original notes, we will issue
registered notes within four business days after the
expiration date of the exchange offer.
Registration Rights In connection with the original sale and issuance of
Agreement................ the notes, the issuers and the guarantors entered
into a registration rights agreement with the
initial purchasers requiring the issuers to make the
exchange offer. The registration rights agreement
further provides that the issuers, together with the
guarantors, must use their reasonable best efforts
to:
. file a registration statement with respect to
the exchange offer on or before October 9,
1999;
. cause the registration statement with respect
to the exchange offer to be declared
effective on or before January 7, 2000;
. consummate the exchange offer within 30
business days after the registration
statement with respect to the exchange offer
becomes effective; and
. file a shelf registration statement for the
resale of the original notes with respect to
any original notes for which we cannot effect
an exchange offer within the above time
period or if any holders of original notes
are legally prohibited from participating in
the exchange offer.
Because the registration statement with respect to
the exchange offer was not declared effective on or
before January 7, 2000, we are paying liquidating
damages in the form of additional interest until
such time as the exchange offer is declared
effective. The liquidating damages were .005% of the
outstanding note balance per week ($7,500) effective
January 7, 2000 until April 6, 2000 when they
increased to .01% of the outstanding note balance
per week ($15,000). The liquidating damages are
subject to additional increases of .005% every 90
days.
Ability to Resell Based on interpretations by the staff of the SEC set
Registered Notes........ forth in published no-action letters, we believe you
may offer for resale, resell and otherwise freely
transfer the registered notes without further
registering those notes or delivering a prospectus
to a buyer if:
3
<PAGE>
. you acquire the registered notes in the
ordinary course of your business;
. you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate
in the distribution of registered notes; and
. you are not related to us.
However, the SEC has not specifically considered
this exchange offer in the context of a no-action
letter and we cannot be sure that the staff of the
SEC would make the same determination with respect
to the exchange offer as in other circumstances.
Furthermore, you must, unless you are a broker-
dealer, acknowledge that you are not engaged in, and
do not intend to engage in, a distribution of your
registered notes and have no arrangement or
understanding to participate in a distribution of
registered notes. If you are a broker-dealer that
receives registered notes for your own account
pursuant to the exchange offer you must acknowledge
that you deliver a prospectus in connection with any
resale of your registered notes. If you are a
broker-dealer who acquired original notes directly
from us and not as a result of market-making
activities or other trading activities, you may not
rely on the SEC staff's interpretations discussed
above or participate in the exchange offer and must
deliver a prospectus in order to resell the
registered notes.
The exchange offer is not being made to:
. holders of original notes in any jurisdiction
in which the exchange offer or its acceptance
would not comply with the securities or blue
sky laws of that jurisdiction; and
. holders of original notes who we control.
No Minimum Required...... There is no minimum amount of original notes that
you must tender in the exchange offer.
Procedures for
Exchanging Your If you wish to exchange your original notes for
Original Notes.......... registered notes you must transmit to State Street
Bank and Trust Company, our exchange agent, on or
before the expiration date either:
. a properly completed and executed letter of
transmittal, which we have provided to you
with this prospectus, or a facsimile of the
letter of transmittal, together with your
original notes and any other documentation
requested by the letter of transmittal;
. a computer generated message, in which you
acknowledge and agree to be bound by the
terms of the letter of transmittal,
transmitted by means of the Depository Trust
Company's Automated Tender Offer Program
system; or
. a notice of guaranteed delivery, in
accordance with the procedures described
under the heading "Description of the
Exchange Offer--Guaranteed Delivery
Procedures."
4
<PAGE>
By agreeing to be bound by the terms of the letter
of transmittal, you will be deemed to have made the
representations described on page 65 under the
heading "Description of the Exchange Offer--
Procedures for Tendering Your Notes."
Guaranteed Delivery If you wish to exchange your original notes for
Procedures.............. registered notes and time will not permit the
documents required by the letter of transmittal to
reach the exchange agent before the expiration date
of the exchange offer, or you cannot complete the
procedure for book-entry transfer on a timely basis,
you must exchange your original notes according to
the guaranteed delivery procedures described on page
67 under the heading "Description of the Exchange
Offer--Guaranteed Delivery Procedures."
Special Procedures for
Beneficial Owners....... If you are a beneficial owner whose original notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
you wish to exchange your original notes for
registered notes, you should contact the registered
holder promptly and instruct the registered holder
to exchange the original notes for you. If you wish
to exchange your original notes for registered notes
on your own behalf, you must either make appropriate
arrangements to register ownership of the original
notes in your name or obtain a properly completed
bond power from the registered holder.
The transfer of registered ownership may take
considerable time and you may not be able to be
complete the transfer before the expiration date of
the exchange offer.
Expiration Date.......... The exchange offer will expire at 5:00 p.m., New
York City time, on , 2000 or such later date and
time to which it is extended.
Withdrawal Rights........ Unless we extend the date, you may withdraw your
tendered original notes at any time before 5:00
p.m., New York City time, on the expiration date of
the exchange offer.
Interest on the
Registered Notes and Interest on your registered notes will accrue from
the Original Notes...... the date of the original issuance of the original
notes or from the date of the last periodic payment
of interest on the original notes, whichever is
later. Interest will be paid on registered notes
issued in the exchange offer, not on original notes
that are tendered and accepted for exchange.
Exchange Agent........... State Street Bank and Trust Company is serving as
exchange agent in connection with the exchange
offer.
Material Federal Income
Tax Consequences........ Based on an opinion from Weil, Gotshal & Manges LLP,
our tax counsel, the exchange of your original notes
for registered notes in connection with the exchange
offer will not constitute a sale or an exchange for
federal income tax purposes. You will not owe any
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<PAGE>
additional federal income taxes by reason of the
exchange of your original notes for registered
notes. For more information, see "United States
Federal Income Tax Consequences."
Effect of Not If you fail to tender your original notes, you will
Tendering............... continue to hold unregistered securities and it may
be difficult for you to transfer them.
Please review the information beginning on page 62 under the heading
"Description of the Exchange Offer" for more detailed information concerning
the exchange offer.
The Registered Notes
Securities Offered...... $150.0 million principal amount of 13% first mortgage
notes due 2006 with contingent interest.
The Issuers............. Hollywood Casino Shreveport, a Louisiana general
partnership, and Shreveport Capital Corporation, a
Louisiana corporation and wholly owned subsidiary of
Hollywood Casino Shreveport.
Shreveport Capital serves as co-issuer of the notes
in order to facilitate the offering of the original
notes and resale of the notes as we believe that some
prospective purchasers of the notes may be restricted
by state law or regulations from purchasing debt
securities of partnerships, such as us, unless the
debt securities are jointly issued by a corporation.
Maturity Date........... August 1, 2006.
Interest Payment February 1 and August 1 of each year, beginning on
Dates.................. February 1, 2000.
Fixed Interest.......... Fixed interest will be payable at an annual rate of
13%.
Contingent Interest..... Contingent interest will accrue on the registered
notes after the Shreveport resort begins operating.
Contingent interest will be payable on each interest
payment date after the Shreveport resort begins
operating. The amount of contingent interest will be
equal to 5% of our consolidated cash flow for the
applicable period up to a maximum of $100.0 million
for any four consecutive fiscal quarters. The payment
of any or all of an installment of contingent
interest may be deferred under circumstances
described in the section entitled "Description of the
Registered Notes--Principal, Maturity and Interest."
Guarantors.............. The payment of the registered notes will be jointly
and severally and fully and unconditionally
guaranteed on a senior secured basis by HWCC-
Louisiana, HCS I, HCS II and any material restricted
subsidiaries that Hollywood Casino Shreveport may
form in the future. This means that each guarantee is
secured by a lien on the respective guarantor's
assets that will be senior in right of payment to the
claims of any other creditors of the guarantors.
Ranking................. The registered notes will be senior secured
obligations of the issuers. The registered notes will
rank equal in right of payment with all of the
issuers' existing and future senior indebtedness and
will rank senior in right of payment to all of the
issuers' existing and future subordinated
indebtedness. On the closing date of the original
offering, the issuers had
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<PAGE>
$7.0 million of indebtedness outstanding in addition
to the registered notes, $5.0 million of which was
repaid promptly after the closing of the original
offering and $2.0 million of which will be paid in
installments after we open the Shreveport resort.
Security................ The registered notes will be secured by:
. a first priority security interest in the net
proceeds of the original offering;
. a first priority security interest in
substantially all of the assets that will
comprise the Shreveport resort, other than
assets secured by up to $35.0 million in
furniture, fixtures and equipment financing;
. a first priority security interest in
substantially all of the issuers' other
assets, other than the equity escrow account;
. a collateral assignment of the issuers'
interests in the principal agreements pursuant
to which the Shreveport resort will be
constructed, operated and managed; and
. a collateral assignment of certain licenses
and permits relating to the construction,
operation and management of the Shreveport
resort.
The guarantees will be secured by a first priority
security interest in substantially all of the
guarantors' assets, including a pledge of the capital
stock of HCS I and HCS II and the partnership
interests in Hollywood Casino Shreveport held by HCS
I and HCS II, but excluding $2.5 million being held
to fund HWCC-Louisiana's obligation to Sodak Gaming
in connection with the acquisition of Sodak
Louisiana.
We may incur up to $10.0 million of additional debt
for working capital and general purposes. This debt
may be secured by certain of our existing or future
assets.
Completion Capital Hollywood Casino will contribute to Hollywood Casino
Agreement.............. Shreveport up to $5.0 million in cash if at any time
there are insufficient funds available to enable the
Shreveport resort to be operating by April 30, 2001.
In addition, if the Shreveport resort is not
operating by April 30, 2001, Hollywood Casino will
contribute $5.0 million in cash less any amounts
previously contributed under the Completion Capital
Agreement.
Optional Redemption..... At any time on or after August 1, 2003, the issuers
may, at their option, redeem some or all of the
registered notes at the prices provided in the
section entitled "Description of the Registered
Notes--Optional Redemption."
In addition, at any time on or before August 1, 2002,
the issuers may redeem up to 35% of the original
aggregate principal amount of the registered notes at
a price equal to 113% of their aggregate principal
amount plus accrued and unpaid interest with the
proceeds of certain equity offerings of Hollywood
Casino yielding at least $20.0 million of the net
proceeds that are contributed to Hollywood Casino
Shreveport;
7
<PAGE>
provided, however, that at least 65% of the original
aggregate principal amount of the registered notes
remains outstanding immediately after any redemption.
Gaming Redemption....... The notes will be subject to mandatory disposition
and redemption requirements following certain
determinations by any gaming authority.
Change of Control....... If a change of control occurs, the issuers must offer
to repurchase the registered notes at a price equal
to 101% of their aggregate principal amount plus
accrued and unpaid interest.
Asset Sales and Events If Hollywood Casino Shreveport sells a significant
of Loss................ amount of assets or experiences events of loss and it
does not apply the proceeds as designated, the
issuers will be required to offer to repurchase the
registered notes at a price equal to 100% of their
aggregate principal amount plus accrued and unpaid
interest.
Basic Covenants of the
Indenture..............
The issuers will issue the registered notes under an
indenture that will, among other things, restrict the
ability of Hollywood Casino Shreveport to:
. borrow money;
. pay distributions on its equity interests or
prepay debt;
. make investments;
. use its assets as security in other
transactions; and
. sell assets or enter into mergers or
consolidations.
In addition, the indenture will restrict the ability
of HWCC-Louisiana, HCS I, HCS II and Shreveport
Capital to acquire additional assets, become liable
for additional obligations or engage in any
significant business activities.
Hollywood Casino Shreveport will be permitted to pay
dividends or distributions with up to 50% of the
funds remaining in the cash collateral accounts at
the time construction of the Shreveport resort is
completed, less amounts paid to holders in connection
with an optional offer to repurchase registered notes
made within nine months of completing construction.
Cash Collateral and
Disbursement
Agreement.............. All of the $145.7 million of the net proceeds of the
original offering has been deposited in one of the
accounts described below. The funds in these accounts
are security for the issuers' obligations under the
registered notes. The funds in the accounts will be
disbursed in accordance with the terms of the Cash
Collateral and Disbursement Agreement.
Construction
Disbursement
Account............
$113.4 million of the net proceeds of the original
offering were deposited in the construction
disbursement account. These funds will be used for
the development, construction, equipping and opening
of the Shreveport resort.
Interest Reserve $27.3 million of the net proceeds of the original
Account............ offering were deposited in the interest reserve
account. These funds will be used to purchase
government securities in an amount sufficient to pay
the first three payments of fixed interest on the
registered notes.
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<PAGE>
Completion Reserve
Account............
$5.0 million of the net proceeds of the original
offering were deposited in the completion reserve
account. These funds will be used to complete the
Shreveport resort if there are insufficient funds in
the construction disbursement account.
Form of Registered The registered notes will be represented by a
Notes.................. permanent global note in definitive, fully registered
form. The global note will be registered in the name
of a nominee of The Depository Trust Company and will
be deposited with State Street Bank and Trust
Company, as custodian for The Depository Trust
Company's nominee.
Use of Proceeds......... We will not receive any cash proceeds from the
issuance of the registered notes in connection with
the exchange offer.
Please review the information beginning on page 70 under the heading
"Description of the Registered Notes" for more detailed information concerning
the notes.
Risk Factors
We urge you to carefully review the risk factors for a discussion of factors
you should consider before exchanging your original notes for registered notes.
9
<PAGE>
RISK FACTORS
We urge you to carefully consider the following factors, as well as the other
matters described in this prospectus, before exchanging your original notes for
registered notes. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also impair our business operations.
If any of the following risks materialize, our business could be harmed and the
market price of our notes may decline.
Leverage--We have a substantial amount of debt, which could materially
adversely affect our financial condition, results of operations and prospects
and prevent us from fulfilling our obligations under the notes.
We currently have a large amount of indebtedness. As of December 31, 1999, we
had $151.8 million of indebtedness outstanding compared to $45.7 million of
partners' capital and our earnings were insufficient to cover fixed charges by
$5.3 million.
The indenture governing the notes permits us to incur additional debt based
on our performance, as well as categories of additional debt such as up to
$35.0 million to finance the purchase of furniture, fixtures and equipment and
up to $10.0 million for working capital and general purposes. After we commence
operations at the Shreveport resort, the indenture will permit us to incur
additional indebtedness if our fixed charge coverage ratio under the indenture
for our most recently ended four fiscal quarters would be at least 2.0 to 1
after we incur the additional indebtedness. We do not currently satisfy this
ratio. If new debt is added to our current debt levels, the related risks could
intensify.
This large amount of indebtedness could, for example:
. make it more difficult for us to satisfy our obligations under the
registered notes or other indebtedness and, if we fail to comply
with the requirements of the indebtedness, could result in an event
of default;
. require us to dedicate a substantial portion of our cash flow from
operations to required payments on indebtedness, thereby reducing
the availability of cash flow for working capital, capital
expenditures and other general business activities;
. limit our ability to obtain additional financing in the future for
working capital, capital expenditures and other general corporate
activities;
. limit our flexibility in planning for, or reacting to, changes in
our business and the industry in which we operate;
. detract from our ability to successfully withstand a downturn in our
business or the economy generally; and
. place us at a competitive disadvantage against other less leveraged
competitors.
The occurrence of any one of these events could have a material adverse
effect on our business, financial condition, results of operations, prospects
and ability to satisfy our obligations under the notes. For more information on
the terms of the notes, see the discussion under the section entitled
"Description of the Registered Notes."
Construction Uncertainties--The construction of the Shreveport resort involves
many uncertainties that could affect the final cost and time required to
complete the project.
Construction of the Shreveport resort involves the following material risks,
any of which could affect the final cost and time of completion of the project:
. adverse weather or water conditions, especially during the period
when the components of the riverboat will be transported up the Red
River on barges;
. fire, flood or other natural disasters;
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<PAGE>
. shortages of materials and skilled labor;
. labor disputes, including work stoppages involving contractors,
subcontractors or others that we will rely on to construct the
Shreveport resort;
. engineering problems;
. delay in obtaining governmental permits and approvals, including
approval of plans, specifications and construction by the U.S. Army
Corps of Engineers, the United States Coast Guard, the Louisiana
Gaming Control Board and other state and local authorities;
. environmental issues; and
. geological, construction, demolition, excavation, regulatory or
equipment problems.
Although we have entered into a guaranteed maximum price contract for the
construction of the land-based resort facilities and have entered into a fixed
price contract for the construction of the riverboat, we cannot guarantee that
the occurrence of one or more of the foregoing events will not affect the
ultimate cost of the project. These contracts are subject to modification based
on the occurrence of a number of events, such as design change orders that we
decide to implement or construction delays not within the contractor's control,
that may cause increased costs in excess of our contingencies. As a result, we
cannot be sure that construction costs will not exceed budgeted amounts. Any
significant cost overruns or delays in completing the Shreveport resort could
have a material adverse effect on our business, financial condition, results of
operations and prospects and our ability to service our obligations under the
notes.
Independent Construction Consultant--The independent construction consultant
may fail to perform its obligations.
We have retained CCM Consulting Group to serve as the independent
construction consultant in accordance with the requirements of the cash
collateral and disbursement agreement governing the release of proceeds from
the original offering. The independent construction consultant will monitor the
construction process and verify that there are sufficient funds to complete the
construction of each component of the project within our budget. However, the
independent construction consultant will not audit or otherwise verify that
either our original schedule or budget are sufficient to complete construction
of the Shreveport resort. Construction could be delayed and additional
construction expenses could be incurred if the independent construction
consultant determines that there are insufficient funds to complete each
component of the project within the budget and decides to delay or prohibit
disbursement of funds. Moreover, if the independent construction consultant
fails to perform its responsibilities as required, funds could be disbursed
from the construction account without having satisfied all applicable
requirements.
Financing Uncertainties--We may be unable to obtain our planned furniture,
fixtures and equipment financing.
We have obtained a binding commitment to finance up to $30.0 million of
furniture, fixtures and equipment for the Shreveport resort; however, we have
not yet entered into a definitive agreement for this financing. The commitment
of funds is conditioned on executing a definitive agreement and we cannot
assure you that we will reach a definitive agreement and that the funds will be
made available to us. If we are not able to obtain these funds, we will have to
find alternative financing. We cannot assure you that we will be able to secure
alternative financing on favorable terms, or at all, or that there will be no
resulting delay in opening the Shreveport resort. Our inability to obtain
additional financing could prevent us from completing and opening the
Shreveport resort, which could have a material adverse effect on our business,
financial condition, results of operations and prospects and our ability to
service our obligations under the notes.
Ability to Service Debt--We may not be able to generate significant cash flow
to meet our debt service obligations.
We cannot assure you that our future cash flow will be sufficient to meet the
payment obligations under the notes remaining after the first three payments of
fixed interest, which will be paid with funds already
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reserved for that purpose. Our ability to generate cash flow from operations to
make scheduled payments on our debt obligations as they become due will depend
on our future financial performance, which will be affected by a range of
economic, competitive and business factors. We cannot control many of these
factors, such as general economic and financial conditions in the gaming
industry and the economy at large or competitive initiatives of our
competitors. If we do not generate sufficient cash flow from operations, we may
have to undertake alternative financing plans, such as refinancing or
restructuring our debt, selling assets, reducing or delaying capital
investments or seeking to raise additional capital. We cannot assure you that
any refinancing would be possible, that any assets could be sold, or, if sold,
of the timing of the sales and the amount of proceeds realized from the sales,
or that additional financing could be obtained on acceptable terms, if at all.
Our inability to generate sufficient cash flow or refinance our indebtedness on
commercially reasonable terms would have a material adverse effect on our
business, financial condition, results of operations and prospects and our
ability to satisfy our obligations under the notes.
Shreveport Capital and Guarantors--None of the guarantors or Shreveport Capital
will contribute to amounts required to be paid on the notes.
Shreveport Capital only served as a co-issuer of the notes in order to
facilitate the original offering. It will not have any material assets and its
only operations will be to serve as co-issuer of the notes. Therefore, you
should not expect Shreveport Capital to contribute to the amounts required to
be paid on the notes. HWCC-Louisiana, HCS I and HCS II are guaranteeing the
notes. HWCC-Louisiana will not have any operations other than serving as
guarantor of the notes and its only material assets will be the common stock of
HCS I and HCS II. HCS I's only asset will be its partnership interest in us and
its only operations will be to serve as our managing general partner and to act
as guarantor of the notes. HCS II's only asset will be its partnership interest
in us and its only operations will be to act as guarantor of the notes. You
should not expect any of these guarantors to contribute to the payments on the
notes.
Limits on Collateral--The trustee's ability to realize on the collateral
securing the notes may be limited and the amount distributed to investors may
not be sufficient to satisfy our obligation under the notes.
Subject to permitted liens, the notes will be secured by substantially all of
our assets and the assets of the guarantors. For more information, see the
discussion under the section entitled "Description of the Registered Notes--
Security." By law, our gaming and liquor licenses may not legally be
transferred or pledged as collateral to secure the notes. In addition, the
indenture will permit us to incur up to $10.0 million of additional debt for
working capital and general purposes that may be secured by any or all of our
existing or future assets, other than the amounts in the cash collateral
accounts. Also, the collateral will not include:
. furniture, fixtures and equipment that will be acquired with up to
$35.0 million of furniture, fixture and equipment financing,
. funds in the equity escrow account or
. the $2.5 million to fund HWCC-Louisiana's obligation to Sodak
Gaming, Inc. in connection with the acquisition of Sodak Louisiana.
The trustee's ability to foreclose on the collateral upon an event of default
and acceleration of the notes will be limited by the Louisiana Riverboat
Economic Development and Gaming Control Act, which generally requires that
persons who own or operate a riverboat casino, receive payments under a casino
management agreement or purchase, possess or sell gaming equipment, hold a
valid riverboat gaming license. No person may hold a riverboat gaming license
in Louisiana unless the person is found qualified or suitable by the Louisiana
Gaming Control Board. In order for the trustee to be found qualified or
suitable, the Louisiana Gaming Control Board would have discretionary authority
to require the trustee and any or all of the holders of the notes to file
applications and be investigated and found qualified or suitable as an owner or
operator of gaming establishments or supplier of gaming equipment. If the
trustee is unable or chooses not to qualify, be found suitable or be licensed
to own, operate or sell the assets, it will have to retain an entity licensed
to own, operate or sell the assets, which will also be subject to approval by
the Louisiana Gaming Control Board. In
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addition, in any foreclosure, public or private sale or subsequent resale by
the trustee, licensing requirements under the Louisiana Riverboat Economic
Development and Gaming Control Act may limit the number of potential bidders
and may delay any sale, which could have an adverse effect on the sale price of
the collateral. Therefore, the economic benefits of realizing on the collateral
may, without appropriate approvals, be limited.
In addition to being subject to gaming law restrictions, the trustee's
ability to foreclose upon and sell collateral will be subject to the procedural
restrictions of state real estate law and the Uniform Commercial Code or, in
the case of the gaming vessel, state ship mortgage and federal admiralty law
statutes. The right of the trustee to repossess and dispose of the collateral
upon an event of default and acceleration of the notes is also likely to be
significantly impaired by applicable bankruptcy law if a bankruptcy proceeding
were to be commenced by or against us before, or possibly even after, the
trustee has repossessed and disposed of the collateral.
We cannot assure you that upon an event of default and acceleration of the
notes that the proceeds of any sale of collateral in whole under the indenture
and the related security documents would be sufficient to satisfy our
obligations under the notes. If the proceeds are insufficient, the deficiency
would represent an unsecured obligation and we cannot assure you that you would
recover the deficiency. The value of the collateral at any time will depend on
market and other economic conditions, including the availability of suitable
buyers for the collateral.
Mechanics' and Maritime Liens--Parties who have provided services or supplies
in connection with the construction of our resort may have a lien on the
project senior to the lien of the mortgage securing the notes.
Louisiana law provides contractors, subcontractors, laborers, architects,
material suppliers and others with a lien on the property improved by their
services or supplies in order to secure their right to be paid. If these
parties are not paid in full, they may seek foreclosure on their liens. In
Louisiana, the priority of all mechanics' liens related to a particular
construction project relates back to the date on which work on the project
first commenced by any contractor. If a mortgage is recorded before the
commencement of work on a construction project, the mortgage lien is superior
to the liens of those providing services or supplies in connection with the
construction project, other than laborers. Further, Louisiana law affords a
mechanism whereby a mortgage holder can confirm and assure itself that its
mortgage will be superior to claims of contractors, subcontractors, suppliers
and others providing goods or services in connection with the project, provided
the mortgage is recorded before work commences. This mechanism was followed by
the holder of the first mortgage on the immovable (real) property forming part
of the construction project, and the mortgage holder has obtained title
insurance insuring the priority of the lien of its mortgage over the lien
rights of those providing services or supplies in connection with the
construction of the resort, including liens of laborers. Based on discussions
with Louisiana counsel, while pre-construction activities for the development
of the Shreveport resort began before the mortgage securing the notes was
recorded, these activities should not constitute work within the meaning of
Louisiana law. If a court were to hold that work on the project "commenced,"
within the meaning of Louisiana law, before the proper recordation of the
mortgage securing the notes, contractors, subcontractors, laborers, architects,
material suppliers and others providing goods or services in connection with
the construction of the Shreveport resort who otherwise comply with the
applicable requirements of Louisiana law might have a lien on the project
senior in priority to the lien on the mortgage securing the notes until they
are paid in full, but in that event the mortgage holder should have recourse
against the issuer of the title insurance policy insuring the priority of the
mortgage if the holder were to suffer losses or damages as a result of any
"mechanic's lien" gaining priority over the mortgage. Nonetheless, neither we
nor the title insurance company believe that work on the project commenced
within the meaning of applicable law before recording the mortgage securing the
notes. We have followed, and continue to follow, these procedures.
The disbursement agreement also requires procedures intended to ensure the
proper payment to these parties. Additionally, as a condition to the
disbursement of funds for the construction of the resort, lien releases are
required from all contractors, subcontractors and suppliers who have provided
work, materials and services. Furthermore, in connection with the consummation
of the original offering, we obtained a title insurance policy
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for the benefit of the holders of the notes to insure the priority of the lien
held by holders of the notes and to insure against any loss occurring as a
result of a mechanic's lien. Nevertheless, if there is a liquidation, proceeds
from the sale of collateral might be used to pay the holders of any mechanic's
liens then in existence before holders of the notes if work on the project was
deemed to have commenced within the meaning of Louisiana law before the record
date of the mortgage. Again, however, the mortgage holder should have recourse
against the issuer of the title policy insuring the priority of the mortgage in
that event.
With respect to any vessel, or any interests in vessels, which serve as
collateral for the notes, parties providing construction related goods and
services, as well as tort and other claimants, could have priority over the
lien of the collateral documents encumbering the vessel, to the extent these
parties remain unpaid.
Leverage of Hollywood Casino--Due to its high degree of leverage, Hollywood
Casino may not be able to make the $5.0 million payment required under the
completion capital agreement.
Hollywood Casino is highly leveraged. At December 31, 1999, Hollywood Casino
had total long-term indebtedness, exclusive of our long-term indebtedness, of
$386.7 million and stockholders' deficit of $74.2 million. On a pro forma basis
for financing transactions completed in May 1999, Hollywood Casino's earnings
would have been insufficient to cover fixed charges for the 12 months ended
December 31, 1999, by $45.2 million. For more information regarding
consolidated selected financial information of Hollywood Casino, see page S-1
of this prospectus.
Hollywood Casino will be obligated under the completion capital agreement to
contribute to us up to $5.0 million in cash if at any time there are
insufficient funds available to complete the development, construction,
equipping and opening of the Shreveport resort so that it is operating by April
30, 2001. In addition, the completion capital agreement requires that Hollywood
Casino contribute up to $5.0 million in cash less any amounts previously
contributed under the completion capital agreement if the Shreveport resort is
not operating by April 30, 2001. Hollywood Casino is subject to an indenture
governing $360.0 million of its outstanding indebtedness, which limits
Hollywood Casino's ability to contribute equity or otherwise advance funds to
us. Although Hollywood Casino is currently permitted under that indenture to
directly or indirectly invest in or advance certain funds to us for the
construction of the Shreveport resort, there can be no guarantee that Hollywood
Casino will have the financial resources or otherwise be able to perform its
obligations under the completion capital agreement or otherwise provide
financial support to us if unanticipated events occur.
Bankruptcy of Hollywood Casino--If there is a bankruptcy proceeding against
Hollywood Casino, Hollywood Casino's creditors may seek recourse against our
assets.
Hollywood Casino and certain of its affiliates are involved in activities
that are related to our business and assets. For example, HWCC-Shreveport, a
subsidiary of Hollywood Casino, provides management services to us pursuant to
a management agreement. In addition, we and the guarantors draw upon the gaming
experience of Hollywood Casino. As a result, each of our directors and
executive officers, with the exception of Juris Basens, also holds a comparable
position with Hollywood Casino. In the event that Hollywood Casino or one of
its affiliates is the subject of a proceeding under the United States
Bankruptcy Code, the creditors of that entity or the trustee in bankruptcy may
argue that the assets and liabilities of the various affiliated entities,
including us, should be consolidated and our assets made available for
satisfaction of claims against the entity in bankruptcy. Although we believe we
are separate and distinct legal entities from Hollywood Casino and its
affiliates, we cannot guarantee that if there is a bankruptcy case involving
Hollywood Casino or one of its affiliates involved in activities related to our
business and assets, a bankruptcy court would not order consolidation of our
assets with those of the entity in bankruptcy.
No Recourse Against Hollywood Casino or Shreveport Paddlewheels--Neither
Hollywood Casino nor Shreveport Paddlewheels are obligated to make any payments
on the notes.
The completion capital agreement between Hollywood Casino and us is not a
guarantee of the notes. Furthermore, you should not expect Hollywood Casino,
Shreveport Paddlewheels or any of their respective
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affiliates, other than us and the guarantors, to participate in servicing any
of the payments due on the notes. None of Hollywood Casino, Shreveport
Paddlewheels or any of their respective affiliates, other than us and the
guarantors, has any obligation to make any payments of any kind to the holders
of the notes.
Adverse Tax Treatment--The notes will bear original issue discount, could be
classified as equity for federal income tax purposes and may be subject to
other rules which would result in the interest payments not being deductible
from our income and could affect timing, amounts and character of income
includible by holders of the notes.
The notes provide for the payment of both fixed interest and contingent
interest. Contingent interest will be calculated based on a percentage of our
cash flow. By reason of the application of certain Treasury Regulations
applicable to contingent payment debt obligations, the notes will be
considered to have been issued with original issue discount for federal income
tax purposes. As a result, a holder may be required to include amounts in
income for federal income tax purposes before the receipt of cash payments
attributable to the income. The notes and the indenture will contain terms
typically included in instruments evidencing indebtedness and are intended to
create a debtor-creditor relationship between us and the holders of the notes.
We will treat the notes as our indebtedness for federal income tax purposes.
However, this treatment is not binding on the Internal Revenue Service or any
court and we cannot guarantee that the Internal Revenue Service will not
successfully argue, or that a court will not hold, that the notes should be
treated as equity for federal income tax purposes. If any portion of the notes
is treated for federal income tax purposes as equity rather than indebtedness,
the interest on that portion of the notes would not be deductible for federal
income tax purposes. In addition, if the notes are treated as "applicable high
yield discount obligations" for federal income tax purposes, a portion of the
interest deductions on the notes may be disallowed, and the balance may be
deferred until paid in cash. The disallowance or deferral of interest
deductions for any reason could have a material adverse effect on our after-
tax cash flow and the after-tax cash flow of the guarantors to the extent that
these deductions otherwise would have reduced or eliminated our (and the
guarantors') taxable income and resulting tax liability. In addition,
(1) if any portion of the notes is treated for federal income tax
purposes as equity of a corporate issuer (e.g., equity of us if we are a
"publicly traded partnership" for federal income tax purposes or of a
guarantor), the interest payments made on that portion will be taxable
to the recipient as dividends, rather than interest, to the extent of
the corporation's, or the publicly traded partnership's, current and
accumulated earnings and profits; and
(2) if any portion of the notes is treated as equity of us and we are
not a "publicly traded partnership" for federal income tax purposes,
then, in lieu of recognizing interest income for federal income tax
purposes, the holders of that portion of the notes would be taxable on a
share of our income for federal income tax purposes. This could
adversely affect the timing, character and amounts includible in income
of a holder of notes, and may result in certain holders, such as tax-
exempt holders or non-U.S. holders, having different tax results, or,
possibly greater tax liability, than anticipated.
Land Lease Risks--The termination of the land lease for the Shreveport resort
could have an adverse effect on the notes.
The land on which the Shreveport resort will be built is subject to a lease
with the City of Shreveport that commenced on the date construction began on
the Shreveport resort and ending on the ten-year anniversary of the opening
date of the Shreveport resort, with options to renew the lease for eight
additional successive terms of five years each. The leasehold interest is
collateral for the notes. Our leasehold is subject and subordinate to the
lessor's interest in the real estate subject to the leasehold. The lease may
be terminated by the city as a result of, among other things, a default by us
under the lease, failure to commence construction by November 19, 1999 or
failure to substantially complete construction within 18 months after
commencement, subject to extension by the Louisiana Gaming Control Board. If
the City of Shreveport terminates the lease, we will lose possession of the
land subject to the lease and the improvements on the land, thereby
extinguishing
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the trustee's security interest in the lease and the improvements, as well as
making it impossible for us to operate the Shreveport resort. Moreover, the
termination of the lease for the Shreveport resort would require us to
terminate or attempt to relocate these operations, which would have a material
adverse effect on our business, financial condition, results of operations and
prospects and our ability to satisfy our obligations under the notes because we
will not be able to relocate the hotel facility and will lose any amounts
invested in the facility that are not recoverable from the City of Shreveport
as compensation.
Risk of New Venture--We have no operating history and no history of earnings.
The venture is a start-up development business. We have no history of
operations, no history of earnings and no prior experience in operating in the
Shreveport market. As a new development, the Shreveport resort will be subject
to all of the following material difficulties associated with establishing a
new business enterprise:
. hiring and retaining skilled employees;
. licensing, permitting and operating problems;
. competing with established operators;
. unanticipated structural or engineering problems with the riverboat
casino, the basin or the land-based resort facilities; and
. operating a new venture in a jurisdiction where we have not
previously conducted business.
Under the terms of the management agreement, we will rely on members of
management of HWCC-Shreveport, all of whom, with the exception of Juris Basens,
are currently executive officers of Hollywood Casino, to operate the Shreveport
resort. These individuals, with the exception of Juris Basens, have not
previously managed operations in the Shreveport market or in Louisiana. There
can be no assurance that HWCC-Shreveport will be able to successfully operate
the casino or that our operations will be profitable or generate sufficient
operating cash flow to enable us to satisfy our obligations under the notes.
Any failure to successfully operate the casino could have a material adverse
effect on our business, financial condition, results of operations and
prospects and our ability to satisfy our obligations under the notes.
Dependence Upon Single Gaming Site--Economic and competitive conditions in
Shreveport, among others, could adversely affect the Shreveport resort.
We will be entirely dependent upon the operation of the Shreveport resort to
generate all of our future cash flow. Therefore, we will be subject to the
following material risks not faced by a geographically diversified gaming
company:
. local economic and competitive conditions;
. changes in local and state governmental laws and regulations;
. natural and other disasters;
. a decline in the number of residents near or visitors to the
Shreveport market; or
. a decrease in gaming activities in the Shreveport market.
Any of the factors outlined above as well as other unforeseen factors could
have a material adverse effect on our business, financial condition, results of
operations and prospects and our ability to satisfy our obligations under the
notes.
Completion of Restaurant and Entertainment Promenade--Completion and operation
of the planned restaurant and entertainment promenade is beyond our control and
the failure to complete it or any significant delay in opening it may adversely
affect our operations.
A principal part of the Shreveport resort will be the extensive "New Orleans
style" outdoor restaurant and entertainment promenade that will contain
approximately 42,000 square feet of dining and entertainment space.
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This portion of the Shreveport resort will be adjacent to another 55,000 square
feet of restaurant, retail and entertainment space. Our business plan assumes
that the restaurant and entertainment promenade and the adjacent development
will attract additional customers to the Shreveport resort. However, we will
neither develop the restaurant and entertainment promenade nor will we develop
or own the adjacent development, and the completion of the Shreveport resort is
not contingent on their completion. The developers' ability to develop the
restaurant and entertainment promenade and adjacent development is subject to a
number of contingencies and risks, including the ability to obtain financing.
No financing has been obtained to date.
Although the developers have entered into letters of intent with several bars
and restaurants and various undertakings to effect the development of the
restaurant and entertainment promenade and adjacent development, several of
these agreements and undertakings are conditioned on various matters, including
that the developers obtain funding for the development of the project. The
developers' failure to develop the restaurant and entertainment promenade or
the adjacent development could delay the opening of the restaurant and
entertainment promenade, which could have a material adverse effect on our
business, financial condition, results of operations, and prospects and our
ability to satisfy our obligations under the notes, or require us to seek
alternative developers or develop the promenade ourself.
Competition--The Shreveport resort will compete with several other casinos in
the Shreveport market and other forms of gaming.
Upon completion of the Shreveport resort, we will compete directly with
Binion's Horseshoe, Harrah's, the Isle of Capri and Casino Magic in the
Shreveport market. We believe that these competitors have higher profile brand
names in the Shreveport market and may have greater financial resources than
us. There can be no assurance that we will be able to effectively compete
against these four established casinos, three of which have been in operation
since 1994, or that the Shreveport market is large enough to allow more than
four casinos to operate profitably. Furthermore, the Louisiana Gaming Control
Board has granted 14 of the 15 legislatively approved riverboat gaming licenses
in Louisiana. On July 20, 1999, the Louisiana Gaming Control Board announced
that it will be accepting bid proposals for the fifteenth license. The
remaining riverboat gaming license could ultimately be granted in, or one or
more of the current operators in other parts of Louisiana could relocate to,
the Shreveport market which would directly increase competition in the
Shreveport market.
The Louisiana Riverboat Economic Development and Gaming Control Act provides
that the designated gaming area shall not exceed the lesser of 60% percent of
the total square footage of the passenger access area of the vessel or 30,000
square feet at each casino. The facilities of three of the four competitors in
the Shreveport market arguably contain less than the total amount of gaming
space permitted. If these competitors were to increase the size of their
facilities, they would be able to add more gaming positions, which would
directly increase competition in the Shreveport market.
Also, we cannot assure you that we will be able to effectively compete
against any other future gaming operations that Louisiana or other authorities
may authorize in the gaming market in which the Shreveport resort will operate.
For example, in 1997, the Louisiana legislature adopted legislation permitting
up to 15,000 square feet of slot machine gaming at pari-mutuel wagering
facilities located in parishes in Louisiana that approve slot machine gaming in
a referendum election. Shortly thereafter, a referendum election was held that
approved slot machine gaming at Louisiana Downs, which is located in Bossier
City, approximately nine miles from the site of the Shreveport resort. During
the 1999 regular legislative session, the Louisiana legislature passed
legislation regarding the imposition, collection and disposition of taxes on
slot machines to be located at Louisiana Downs. We believe slot machine gaming
at Louisiana Downs could commence sometime later this year.
Casino gaming is currently prohibited in several jurisdictions adjacent to
Louisiana. As a result, we anticipate that a significant portion of our
customers will be residents of these jurisdictions, primarily Texas. Although
casino gaming is currently not permitted in Texas and the Texas Attorney
General has issued an opinion that gaming in Texas would require an amendment
to the Texas Constitution, the Texas Legislature has considered proposals to
authorize casino gaming in the past. The legalization of casino gaming in
Texas, or in other nearby jurisdictions, would have a material adverse effect
on our business, financial condition, results of operations and prospects and
our ability to satisfy our obligations under the notes.
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We will compete to a lesser extent with gaming operations in other
jurisdictions and with other forms of gaming, including lottery gaming, horse
and dog racing, as well as other forms of entertainment.
Reliance on Services under the Management Agreement and License Agreement and
Personnel of Hollywood Casino--We depend on the key personnel of Hollywood
Casino for our success and the loss of their services or increased demands on
their time could have a negative impact on us.
Hollywood Casino Personnel. HWCC-Shreveport, a wholly owned subsidiary of
Hollywood Casino, will operate the Shreveport resort under the terms of a
management agreement. The success of the Shreveport resort will be largely
dependent upon the efforts and skills of Jack E. Pratt and Edward T. Pratt III,
both of whom are executive officers of HWCC-Shreveport and are also currently
executive officers of Hollywood Casino. We have granted HWCC-Shreveport
significant independence in operating matters, including day-to-day financial
control and authority over hiring and training personnel. The loss of either of
these executives could have a material adverse effect on us. There can be no
assurance that HWCC-Shreveport will be able to hire and retain suitable
replacements if it loses any of their services.
Also, Messrs. J. Pratt and E. Pratt III will be simultaneously operating
Hollywood Casino's other properties in Aurora, Illinois and Tunica County,
Mississippi and the addition of a third property will place considerable
demands on them. Neither Hollywood Casino nor either of Messrs. J. Pratt or E.
Pratt III is required to dedicate any specific amount of time to the
development and operation of the Shreveport resort and they will be
concurrently undertaking other projects, such as potential construction of new
facilities at its Aurora casino. There can be no assurance that the time and
attention of these executives will not be diverted from time to time by the
other operational and managerial demands placed on them by Hollywood Casino.
Termination of Management Agreement and License Agreement. We are only able
to terminate the management agreement under the limited circumstances described
on page 49. As a result, we are dependent on the management of HWCC-Shreveport
for the successful operation of the Shreveport resort. If we are not satisfied
with their performance, we will be unable to terminate the management agreement
unless one of the circumstances that allows us to terminate the agreement
occurs.
If HWCC-Shreveport terminates the management agreement and the cash flow for
the Shreveport resort is in excess of $1 for the immediately preceding fiscal
quarter, we will be obligated to pay HWCC-Shreveport an amount equal to two
times the sum of the basic management fee and incentive fee for the immediately
preceding 12 months, or preceding fiscal year, as the case may be, plus any
other amounts owed to HWCC-Shreveport.
Upon termination of the management agreement for any reason, the license
agreement will also terminate and we will only be permitted to use the
Hollywood Casino trademarks and service marks for six months following the
termination. The termination of the management agreement and the loss of the
right to use the Hollywood Casino trademarks and service marks could have a
material adverse effect on our operations.
Management--Members of our management have operated a hotel and casino that
filed for bankruptcy.
Jack E. Pratt, Edward T. Pratt, Jr., William D. Pratt, Edward T. Pratt, III
and Charles F. LaFrano III, all members of our management, have been involved
in the operation of Greate Bay Hotel and Casino and PRT Funding Corp. PRT
Funding Corp. filed a petition for relief under Chapter 11 of the United States
Bankruptcy Code on May 25, 1999 and Greate Bay Hotel and Casino filed a
petition for relief under Chapter 11 of the United States Bankruptcy Code on
January 5, 1998. Greate Bay Hotel and Casino operates the Sands Hotel and
Casino in Atlantic City and was previously a wholly owned subsidiary of Greate
Bay Casino Corporation. Greate Bay Casino Corporation was previously an
approximately 80% owned subsidiary of Hollywood Casino until its capital stock
was issued as a dividend to Hollywood Casino's stockholders in 1996. The Pratt
family currently owns approximately 36% of Greate Bay Casino Corporation, which
has an indirect 79% ownership interest in, but no operating or management
control of Greate Bay Hotel and Casino. In addition, Jack E. Pratt,
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Edward T. Pratt, Jr. and William D. Pratt currently own another entity which
holds the remaining 21% indirect ownership interest in Greate Bay Hotel and
Casino.
Difficulty in Attracting and Retaining Qualified Employees--We will face
difficulties in attracting and retaining qualified employees for the casino.
The operation of the Shreveport resort will require qualified executives,
managers and a number of skilled employees with gaming industry experience and
qualifications to obtain the requisite riverboat gaming licenses. Currently,
there is a shortage of skilled labor in the gaming industry in general. We
believe this shortage will make it increasingly difficult and expensive to
attract and retain qualified employees, a situation which will be more acute in
the Shreveport market where four other casinos are currently operating.
Moreover, in connection with obtaining Harrah's consent and agreement to
operating adjacent to its facility, we agreed that we would not hire any
Harrah's employees for 180 days after commencing casino operations.
Consequently, we may incur higher labor costs to attract a sufficient number of
qualified gaming employees from existing gaming operations in the Shreveport
market. When we are operating at full capacity, we expect to employ
approximately 1,700 persons.
Regulatory Compliance--We and our affiliates must adhere to various
regulations.
We and the guarantors are subject to a variety of regulations in Louisiana.
If current interpretations of gaming laws and regulations are modified, or if
additional gaming regulations are adopted, operational requirements, costs and
other restrictions could be imposed on us and the guarantors, any one or more
of which could have a material adverse effect on us. From time to time, various
proposals have been introduced in the Louisiana legislature that, if enacted,
would affect the tax, regulatory, operational or other aspects of the gaming
industry. There can be no assurance that any proposed legislation will not be
enacted and, if enacted, the effect that the legislation would have on our
business, financial condition, results of operations and prospects and our
ability to satisfy our obligations under the notes.
Licenses--We and our affiliates must maintain licenses to continue casino
operations.
Hollywood Casino, HWCC-Shreveport, HWCC-Louisiana, HCS I, HCS II, Shreveport
Paddlewheels and Hollywood Casino Shreveport, as well as some of their
respective key employees and other parties engaging in activities related to
the casino, including the disbursement agent, are required to obtain and hold
various licenses, permits and approvals in Louisiana. The failure to obtain or
retain any of these licenses, permits or approvals in Louisiana, such as the
riverboat gaming license, could have a material adverse effect on our ability
to operate the Shreveport resort. Generally, regulatory authorities have broad
discretion in granting, conditioning, renewing, suspending and revoking
licenses, permits and approvals.
In some circumstances, the suspension or revocation of a gaming license in
one jurisdiction may trigger the suspension or revocation of a license or
affect eligibility for a license in another jurisdiction and we could
accordingly be adversely affected by regulatory actions in other jurisdictions
directed principally at Hollywood Casino or its subsidiaries or its employees.
Gaming Taxes--Any increase in federal, Louisiana or Shreveport taxes could have
a negative impact on us.
From time to time, various legislators have proposed the imposition of a
federal tax on gross gaming revenues. In March 1996, tax legislation was
introduced in Congress which included a proposal to impose a 15% federal tax on
taxable gaming services, defined as gross gaming receipts less total gaming
payoffs. Although no action has been taken on this legislation, we cannot
assure you that this tax or any similar tax will not be imposed in the future.
In addition, we will be subject to an 18.5% tax on net gaming proceeds and
other fees in Louisiana, as well as normal federal and state income taxes, and
these taxes and fees are subject to increase at any time. The introduction of
new taxes or the increase in the rates of existing taxes could have a material
adverse effect on our business, financial condition, results of operations and
prospects and our ability to satisfy our obligations under the notes.
19
<PAGE>
Anti-Gaming Initiatives--Anti-gaming initiatives have been proposed in
Louisiana in the past.
The regulatory environment in Louisiana may change in the future and any
change could have a material adverse effect on our results of operations. In
1996, the State of Louisiana adopted a statute in connection with which votes
were held locally where gaming operations were conducted and which, had the
continuation of gaming been rejected by the voters, might have resulted in the
termination of operations at the end of their current license terms. All
parishes where riverboat gaming operations are currently conducted voted to
continue gaming, but there can be no guarantee that similar referenda might not
produce unfavorable results in the future. Proposals to amend or supplement the
Louisiana Riverboat Economic Development and Gaming Control Act are frequently
introduced in the Louisiana State legislature. In addition, the State
legislature, from time to time, considers proposals to repeal the act. If these
proposals were approved or if legislation were enacted prohibiting gaming in
Louisiana, it would have a material adverse effect on our business, financial
condition, results of operations and prospects and our ability to satisfy our
obligations under the notes.
Business Interruptions--We may temporarily lose the service of the casino.
Our profitability is dependent upon the continued operations of the riverboat
casino. Any temporary closure of the riverboat casino would negatively impact
our profitability. The riverboat casino could be lost from service for a number
of reasons, including casualty, forces of nature or extended or extraordinary
maintenance or inspection. The vessel will be subject to U.S. Coast Guard
regulations requiring periodic hull inspections every three to five years,
which could result in a temporary loss from service of the vessel. Also, a
flood or severe weather conditions could adversely affect gaming operations.
Moreover, floods or severe weather could cause substantial damage to the area
surrounding our facility which could temporarily reduce access to the casino.
Upon completion of the Shreveport resort, we will maintain business
interruption insurance on our operations in amounts we consider adequate, but
there an be no assurance that we will be able to maintain this insurance in the
future in sufficient amounts on commercially reasonable terms, or at all. An
extended loss of service of the casino would have a material adverse effect on
our business, financial condition, results of operations and prospects and our
ability to meet our obligations under the notes.
Gaming Redemptions--You may be required to dispose of your notes or redeem your
notes if any gaming authority finds you unsuitable to hold them.
If any gaming authority requires that a person who is a holder or the
beneficial owner of a note be licensed, qualified or found suitable under any
applicable gaming law, the holder or beneficial owner, as the case may be, will
be required to apply for a license, qualification or finding of suitability
within the time period required by the gaming authority. If the holder or
beneficial owner fails to apply for the license, qualification or finding of
suitability within the required time period, the holder or beneficial owner, as
the case may be, will be required to dispose of its notes within the time
specified by the gaming authority and we will have the right to redeem the
notes of the holder or beneficial owner, subject to approval of any applicable
gaming authority, at the least of:
(1) the principal amount of the notes;
(2) the amount that the holder or beneficial owner paid for the notes; or
(3) the fair market value of the notes.
Immediately upon the imposition of a requirement to dispose of notes by a
gaming authority, the holder or beneficial owner of the notes will, to the
extent required by applicable law, have no further right:
(1) to exercise, directly or indirectly, through any trustee or nominee
or any other person or entity, any right conferred by the notes; or
(2) to receive any interest, dividends, economic interests or any other
distributions or payments with respect to the notes or any remuneration in
any form with respect to the notes from us or the trustee.
20
<PAGE>
Any holder or beneficial owner of notes that is required to apply for a
license, qualification or finding of suitability must pay all fees and costs of
any investigation by the applicable gaming authorities. We will notify the
trustee in writing of any redemption as soon as is practicable. The trustee
will be required to report the names of the record holders of the notes to any
gaming authority when required by law.
Change of Control--We may not have the ability to raise the funds necessary to
finance the change of control offer required by the indenture.
If a change of control were to occur, we may be required to make an offer to
purchase all of the outstanding registered notes at a price equal to 101% of
their principal amount, plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase. There can be no assurance that we
would have enough funds to pay for all of the notes that are tendered under the
offer to purchase. If we were required to purchase the notes, we would in all
likelihood require third party financing. However, we cannot assure you that we
would be able to obtain financing on acceptable terms, if at all. The failure
to comply with the indenture's requirements with respect to change of control
events will constitute an event of default under the indenture. If a default
under the indenture occurs, the indebtedness under the notes could be
accelerated and we would likely be forced to seek protection under the United
States bankruptcy laws. The specific events of defaults and related remedies
are described under "Description of the Registered Notes--Events of Default and
Remedies."
Fraudulent Conveyance--Federal and state statutes allow courts, under specific
circumstances, to void guarantees or other debt and require noteholders to
return payments received from guarantors or debtors.
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer laws, guarantees or other
debt obligations could be voided, or claims in respect of guarantees or debt
obligations could be subordinated to all other debts of that guarantor or
debtor if, among other things, the guarantor or debtor, at the time it incurred
the indebtedness evidenced by its guarantees or debt obligations, incurred the
indebtedness with the intent to hinder, delay or defraud creditors or received
less than reasonably equivalent value or fair consideration for the incurrence
of the guarantees or debt and:
. was insolvent;
. was rendered insolvent by reason of the incurrence;
. was engaged in a business or transaction for which the guarantor's or
debtor's remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay as they mature.
In this event, any payment by a guarantor or debtor in connection with the
guarantees or debt obligations could be voided and required to be returned to
the guarantor or debtor or to a fund for the benefit of the creditors of that
guarantor or debtor.
The measures of insolvency for purposes of these fraudulent transfer laws
vary depending upon the law applied to determine whether a fraudulent transfer
has occurred. Generally, however, a guarantor or debtor would be considered
insolvent if:
. the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets;
. the present fair saleable value of its assets were less than the
amount that would be required to pay the probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature; or
. it could not pay its debts as they came due.
On the basis of our and HWCC-Louisiana's historical information, ours and the
guarantors' equity capitalizations and other factors, we and the guarantors
believe that we will not be insolvent, will not have
21
<PAGE>
unreasonably small capital for the business in which we are engaged and will
not have incurred debts beyond our ability to pay as our debts mature. We
cannot assure you what standard a court would apply in making its determination
or that a court would agree with our and the guarantors' conclusions.
Lack of Public Market--You cannot be sure that an active trading market will
develop for the registered notes.
The registered notes are a new issue of securities for which there is no
established market. The registered notes will not be listed on any securities
exchange, although the registered notes initially will be eligible for trading
in the PORTAL Market. If the registered notes are traded after their initial
issuance, they may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities,
our performance and other factors. The initial purchasers have advised us that
they intend to make a market in the registered notes, as permitted by
applicable laws and regulations; however, the initial purchasers are not
obligated to make a market in the registered notes, and they may discontinue
their market making activities at any time without notice. Therefore, we cannot
assure you that an active market for the registered notes will develop or, if
developed, that it will continue.
Failure to Exchange Original Notes--You may suffer adverse consequences if you
fail to exchange your original notes.
If you do not exchange your original notes for registered notes in connection
with the exchange offer, you will continue to be subject to the provisions of
the indenture regarding transfer and exchange of the original notes and the
restrictions on transfer of the original notes. In general, the original notes
may not be offered or sold, unless registered under the Securities Act and
applicable state securities laws. We do not currently intend to register the
original notes.
22
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the exchange of the original notes
for registered notes. In consideration for issuing the registered notes as
contemplated in this prospectus, we will receive in exchange original notes in
like principal amount, which will be cancelled and as such will not result in
any increase in our indebtedness.
The net proceeds from the offering of the original notes were $145.7 million.
The net proceeds were deposited in the cash collateral accounts as follows: (1)
$113.4 million was deposited into a construction disbursement account and will
be used to partially fund the development, construction and opening of the
Shreveport resort; (2) $27.3 million was deposited into an interest reserve
account and will be used to purchase an amount of government securities
sufficient to pay the first three payments of fixed interest on the notes; and
(3) $5.0 million was deposited into a completion reserve account to be held as
a reserve in case there are insufficient funds in the construction disbursement
account to complete the Shreveport resort.
Hollywood Casino previously contributed an aggregate of $50.0 million in
equity to HWCC-Louisiana, which in turn contributed it indirectly to us for the
development and construction of the Shreveport resort. Approximately $5.3
million was spent on the project before the offering of the original notes and
the remaining $44.7 million was deposited in an equity escrow account. The
disbursement of funds from the construction disbursement account will be
subject to the satisfaction of other conditions contained in the disbursement
agreement. Pending their disbursement, the proceeds in the cash collateral
accounts will be invested in government securities. See the section entitled
"Description of the Registered Notes--Cash Collateral and Disbursement
Agreement" for more information.
We have a financing arrangement from Bank of America NT&SA and BA Leasing &
Capital Corporation to obtain $30.0 million in financing for furniture,
fixtures and equipment.
In August 1999 we made a $5.0 million payment to the City of New Orleans in
connection with the settlement of tax claims.
The following table shows the sources and uses of the proceeds from the
offering of the original notes (in millions):
<TABLE>
<CAPTION>
Sources
-------
<S> <C>
First Mortgage Notes.............. $150.0
Financing for furniture, fixtures
and equipment.................... 30.0
Equity contribution............... 50.0
------
TOTAL........................... $230.0
======
</TABLE>
<TABLE>
<CAPTION>
Uses
----
<S> <C>
Construction costs............... $104.1
Furniture, fixtures and
equipment....................... 42.4
Design, engineering and project
management ..................... 9.1
Contingency/completion reserve
account......................... 26.4
Working capital and preopening
expenses(1)..................... 11.0
Net interest expense(2).......... 24.9
License payment.................. 5.0
Estimated financing fees and
expenses........................ 7.1
------
TOTAL.......................... $230.0
======
</TABLE>
- --------
(1) Includes preopening costs, opening bankroll and general working capital.
(2) Includes pre-funding of three payments of fixed interest on the registered
notes and one quarterly interest payment on the furniture, fixtures and
equipment financing and is net of estimated interest income to be earned on
cash deposited in the cash collateral accounts.
23
<PAGE>
CAPITALIZATION
The following table shows our cash position and capitalization as of December
31, 1999. The information regarding long-term debt does not give effect to
approximately $30 million of furniture, fixtures and equipment financing that
we will incur during the construction of the Shreveport resort. HWCC-Louisiana
has loaned Shreveport Paddlewheels $1.0 million, which Shreveport Paddlewheels
contributed as $1.0 million in equity to us. Shreveport Paddlewheels received
credit for an additional $1.0 million capital contribution in return for
guarantees provided by New Orleans Paddlewheels. See the discussion under the
section entitled "Material Contracts--Joint Venture Agreement of Hollywood
Casino Shreveport". The information provided below should be read in
conjunction with our financial statements, together with the related notes to
the financial statements, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
-----------------------
(in thousands)
<S> <C>
Cash and cash equivalents
(including restricted cash).. $166,324
========
Long-term debt
First Mortgage Notes........ $150,000
Other(1).................... 1,759
--------
Total long-term debt........ 151,759
--------
Partners' capital--
Partners' capital
contributions.............. 50,000
Accumulated deficit during
the development stage...... (4,330)
--------
Total partners' capital... 45,670
--------
Total capitalization.... $197,429
========
</TABLE>
- --------
(1) Consists of what was originally a $2.0 million contingent obligation to
Hilton New Orleans incurred in connection with the relocation of our
license from New Orleans to Shreveport, net of a discount of $241,000. This
obligation will be paid upon the earlier of the termination of construction
of the Shreveport resort or in monthly installments of $200,000 commencing
with the opening of the Shreveport resort.
24
<PAGE>
SELECTED FINANCIAL INFORMATION
The following selected financial information of Hollywood Casino Shreveport
for the year ended December 31, 1999, for the period from September 22, 1998
through December 31, 1998, for the period from January 1, 1998 through
September 21, 1998 and for the year ended December 31, 1997 and of HWCC-
Louisiana, Inc. for each of the three years in the period ended December 31,
1999 are derived from the audited financial statements. The following selected
financial information of Hollywood Casino Shreveport and of HWCC-Louisiana,
Inc. for the years 1996 and 1995, are derived from their unaudited financial
statements and, in our opinion, include the normal recurring entries necessary
for a fair presentation of the information. Selected financial information for
Sodak Louisiana is not presented below as its only significant operating
activity was its equity in the losses of what was then QNOV and its only
significant asset was its investment in what was then QNOV. On April 23, 1999,
HWCC-Louisiana acquired Sodak Louisiana and its interest in what was then QNOV.
Accordingly, for periods after April 23, 1999, HWCC-Louisiana's balance sheet
and statement of operations data is presented on a consolidated basis including
Sodak Louisiana and Hollywood Casino Shreveport.
The ownership of Hollywood Casino Shreveport was transferred on September
22, 1998, and since then it has been in the development stage with respect to
the Shreveport resort. Under its previous owners, Hollywood Casino Shreveport
(then known as QNOV) operated a riverboat casino in New Orleans until October
1997. From October 1997 until September 21, 1998, QNOV had no operations and
was seeking new owners. HWCC-Louisiana was formed in April 1993 and its
operations have related solely to acquiring a gaming license to develop and own
a riverboat casino in Louisiana. HWCC-Louisiana incurred costs associated with
its unsuccessful efforts to obtain licenses in Lake Charles and Bossier City,
Louisiana. Costs relating to the proposed Bossier City project amounted to
$25,000 during the first half of 1998 and $12,000 (net of a $15,000 gaming
license application refund) during 1998, $558,000 during 1997, $47,000 during
1996 and $384,000 during 1995. HWCC-Louisiana's principal activities are to act
as a holding company.
The following financial information should be read in conjunction with the
text under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and HWCC-Louisiana's and Sodak Louisiana's
financial statements and unaudited quarterly financial statements and the notes
relating to those financial statements included in this prospectus.
25
<PAGE>
HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARY
<TABLE>
<CAPTION>
Period from Period from
September 22, January 1,
Year Ended 1998 through 1998 through Year Ended December 31,
December 31, December 31, September 21, --------------------------------------
1999 1998 1998 1997 1996 1995
------------ ------------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Casino.................. $ -- $ -- $ -- $45,803,000 $ 65,941,000 $69,059,000
Beverage................ -- -- -- 2,904,000 4,103,000 4,368,000
Other................... -- -- 89,000 1,664,000 2,920,000 2,569,000
------------ ----------- ---------- ----------- ------------ -----------
-- -- 89,000 50,371,000 72,964,000 75,996,000
Less promotional
allowances............. -- -- -- (2,916,000) (4,111,000) (4,301,000)
------------ ----------- ---------- ----------- ------------ -----------
Net revenues............ -- -- 89,000 47,455,000 68,853,000 71,695,000
------------ ----------- ---------- ----------- ------------ -----------
Expenses:
Departmental............ -- -- 76,000 22,888,000 33,360,000 35,478,000
Admission fees.......... -- -- -- 6,432,000 9,323,000 9,787,000
Property operations..... -- -- 155,000 6,989,000 11,029,000 10,496,000
Vessel rent............. -- -- (21,000) 2,827,000 4,516,000 --
General and
administrative......... -- -- 986,000 2,468,000 3,699,000 3,207,000
Management fees......... -- -- -- 2,519,000 3,622,000 3,774,000
Development and
preopening............. 991,000 90,000 -- -- -- --
Write down of assets.... -- -- -- -- 12,200,000 --
License transfer costs.. -- -- -- -- 10,500,000 --
Depreciation and
amortization........... 2,000 -- -- 1,547,000 2,866,000 5,347,000
------------ ----------- ---------- ----------- ------------ -----------
Total expenses......... 993,000 90,000 1,196,000 45,670,000 91,115,000 68,089,000
------------ ----------- ---------- ----------- ------------ -----------
(Loss) income from
operations............. (993,000) (90,000) (1,107,000) 1,785,000 (22,262,000) 3,606,000
------------ ----------- ---------- ----------- ------------ -----------
Nonoperating (expense)
income:
Interest income......... 3,644,000 55,000 241,000 583,000 -- --
Interest expense, net of
capitalized interest of
$1,052,000 in 1999..... (6,946,000) -- (50,000) (88,000) (687,000) (3,378,000)
Gain on sale of vessel.. -- -- -- -- 8,524,000 --
------------ ----------- ---------- ----------- ------------ -----------
Total nonoperating
(expense) income....... (3,302,000) 55,000 191,000 495,000 7,837,000 (3,378,000)
------------ ----------- ---------- ----------- ------------ -----------
Net (loss) income before
extraordinary item..... (4,295,000) (35,000) (916,000) 2,280,000 (14,425,000) 228,000
Extraordinary item-loss
from early
extinguishment of
debt................... -- -- -- -- (1,005,000) --
------------ ----------- ---------- ----------- ------------ -----------
Net (loss) income....... $ (4,295,000) $ (35,000) $ (916,000) $ 2,280,000 $(15,430,000) $ 228,000
============ =========== ========== =========== ============ ===========
Ratio of earnings to
fixed charges (1)...... -- -- -- 2.22 X -- 1.04 X
<CAPTION>
1999 1998 1997 1996 1995
------------ ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets............ $216,979,000 $10,691,000 $6,438,000 $22,572,000 $ 64,324,000
Long-term debt.......... 151,759,000 - - - 36,944,000
Partners' capital
(deficiency)........... 45,670,000 4,965,000 (6,218,000) (4,534,000) 16,896,000
</TABLE>
- --------
(1) For the purposes of computing the ratio, "earnings" represents losses
before taxes plus fixed charges exclusive of capitalized interest, and
"fixed charges" consists of interest, whether expensed or capitalized,
amortization of debt expense and, where applicable, an estimated portion of
rentals representing interest costs. Earnings were not sufficient to cover
fixed charges by $5,347,000 for the year ended December 31, 1999, by
$35,000 for the period from September 22, 1998 through December 31, 1998,
by $916,000 for the period from January 1, 1998 through September 21, 1998
and by $14,425,000 for the year ended December 31, 1996.
26
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1999 (1) 1998 1997 1996 1995
----------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Development expenses......... $(1,024,000) $(39,000) $(644,000) $(47,000) $(384,000)
General and administrative
expenses.................... (10,000) -- -- -- --
Depreciation expense......... (2,000) -- -- -- --
Interest expense, net of
capitalized interest of
$1,052,000 in 1999.......... (6,946,000) -- -- -- --
Interest income.............. 3,701,000 -- -- -- --
----------- -------- --------- -------- ---------
Loss before taxes and other
items....................... (4,281,000) (39,000) (644,000) (47,000) (384,000)
Provision for taxes.......... -- -- -- -- --
Pre-acquisition losses....... 12,000 -- -- -- --
Equity in losses of Hollywood
Shreveport Casino........... -- (17,000) -- -- --
----------- -------- --------- -------- ---------
Net loss..................... $(4,269,000) $(56,000) $(644,000) $(47,000) $(384,000)
=========== ======== ========= ======== =========
Ratio of earnings to fixed
charges(2).................. -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
---------------------------------------------------------
1999 (1) 1998 1997 1996 1995
------------ ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets............ $219,428,000 $2,705,000 $ 42,000 $ 47,000 $ 1,000
Long-term debt.......... 151,359,000 -- -- -- --
Shareholder's equity
(deficit).............. 46,000,000 1,369,000 (1,075,000) (431,000) (384,000)
</TABLE>
- --------
(1) Consolidated to include the results of operations and balance sheet data of
Hollywood Casino Shreveport. Losses of Sodak Louisiana, L.L.C. from its
equity interest in Hollywood Casino Shreveport for the period prior to its
April 23, 1999 acquisition by HWCC-Louisiana, Inc. are presented as pre-
acquisition losses and reduce the consolidated net loss of HWCC-Louisiana,
Inc.
(2) Earnings were not sufficient to cover fixed charges by $5,321,000 $39,000
$644,000, $47,000 and $384,000 for the years ended December 31, 1999,1998,
1997, 1996 and 1995, respectively.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with our financial statements and
the notes relating to those statements included in this prospectus.
Forward Looking Statements
This discussion and analysis, as well as portions of this prospectus that
describe our future business plans and construction schedule, contain forward-
looking statements about our financial condition, results of operations and
business. You can find many of these statements by looking for words like
"believes," "expects," "anticipates," "estimates," "intends," "may," "will,"
"could," "pro forma," or similar expressions used in this prospectus. These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties, including, among other things, those discussed above.
All forward-looking statements speak only as of the date of this prospectus.
Because these statements are subject to risks and uncertainties, actual results
may differ materially from those expressed or implied by the forward-looking
statements. You are cautioned to consider these statements accordingly, which
speak only as of the date of this prospectus.
We do not undertake any responsibility to release publicly any revisions to
these forward-looking statements to take into account events or circumstances
that occur after the date of this prospectus. Additionally, we do not undertake
any responsibility to update you on the occurrence of any unanticipated events
which may cause actual results to differ from those expressed or implied by the
forward-looking statements contained in this prospectus.
History and Development Activities
A predecessor to Hilton New Orleans Corporation and New Orleans Paddlewheels
Inc. formed a joint venture in 1992 under the name "Queen of New Orleans at the
Hilton Joint Venture" which operated a riverboat casino in downtown New Orleans
until October 1997, when it discontinued all gaming operations. Before
discontinuing operations, the joint venture obtained approval from the
Louisiana Gaming Control Board in October 1996 to relocate the riverboat
license to downtown Shreveport.
Subsequent to receiving approval to relocate the license, the joint venture
made the decision not to conduct gaming operations in Shreveport. The partners
of the joint venture sought to transfer the license to operate in Shreveport to
another interested party. Under Louisiana gaming regulations, the license to
operate a riverboat gaming operation is not transferable; however, the
ownership of an entity holding such a license is transferable, subject to the
approval of the Louisiana Gaming Control Board. Accordingly, the acquisition by
HWCC-Louisiana, Sodak Louisiana and Shreveport Paddlewheels, L.L.C. of the
license to operate in Shreveport was structured as an acquisition of the
interests of the joint venture's partners. The joint venture discontinued its
riverboat casino operations in New Orleans in October 1997 while it continued
negotiations to transfer its interests to a new group of partners. The joint
venture liquidated its assets other than its license to operate and satisfied
all but one of its obligations so that when its partners withdrew on September
22, 1998 transferring their interests to our new partners, its only remaining
asset was the license to operate in Shreveport, its only liability was a $5.0
million obligation to the City of New Orleans (see below) and all equity
accounts of the existing partners were reduced to a zero balance.
When the former joint venture partners proposed moving to Shreveport, they
negotiated a settlement with the City of New Orleans to pay $10.0 million with
respect to claims asserted by the City in connection with the relocation. This
settlement was expensed by the joint venture in 1997 and was to be paid after
opening in Shreveport. When the former joint venture partners decided not to
relocate to Shreveport, the status of the obligation became uncertain. During
September 1998, our new partners entered into a Compromise Agreement with the
former joint venture partners and the City of New Orleans under which it was
agreed that Hilton New
28
<PAGE>
Orleans would pay $5.0 million to the City with the joint venture being
released from any further relocation claims. Hilton New Orleans' payment was
reflected as a capital contribution prior to the withdrawal of the former joint
venture partners. The remaining $5 million obligation continued to be reflected
as a liability and was, in effect, assumed by our partners since, as part of
the Compromise Agreement, we agreed to pay the City of New Orleans the
remaining $5.0 million upon securing financing for our new riverboat casino in
Shreveport. In the event financing was not obtained, we would not be required
to make any payment. We also contingently agreed to reimburse $2.0 million of
the amount Hilton New Orleans paid to the City of New Orleans commencing with
the opening of the Shreveport resort or if construction of the Shreveport
resort were to be terminated.
Upon obtaining their ownership interests, each of HWCC-Louisiana and Sodak
Louisiana made capital contributions to us of $2.5 million consisting of a
combination of cash and deemed contributions of capital expenditures made in
connection with the Shreveport resort prior to September 1998. Since September
1998, we have been in a development stage, initially engaged in and arranging
for the design, preliminary site work, construction and financing of and, since
August 1999, constructing our new riverboat casino resort to operate in
Shreveport.
HWCC-Louisiana was formed in April 1993 and its operations have related
solely to acquiring a gaming license to develop and own a riverboat casino in
Louisiana. Hollywood Casino and certain of its subsidiaries historically
provided services to HWCC-Louisiana and paid direct costs on behalf of HWCC-
Louisiana, primarily related to the unsuccessful efforts to obtain licenses in
Lake Charles and Bossier City, Louisiana. Since the last quarter of 1997, HWCC-
Louisiana's operations have related primarily to the design, preliminary site
work, construction and financing of the Shreveport resort. Until September
1998, when HWCC-Louisiana acquired the partnership interest in QNOV, HWCC-
Louisiana either expensed or capitalized its historical development costs as
appropriate and recorded an intercompany liability to Hollywood Casino. In
April 1999, Hollywood Casino made a capital contribution to HWCC-Louisiana of
$1.4 million, the proceeds of which were used by HWCC-Louisiana to repay the
$1.4 million of accumulated intercompany liabilities.
On March 31, 1999, HWCC-Louisiana entered into an agreement with Sodak Gaming
to acquire Sodak Louisiana and its partnership interest in QNOV for the $2.5
million Sodak Louisiana had previously contributed to QNOV. HWCC-Louisiana paid
$1,000 on April 23, 1999 at the closing of the acquisition, with the remainder
to be paid on a contingent basis six months after the opening of the Shreveport
resort. The acquisition was accounted for under the purchase method of
accounting. Until such time as the opening of the Shreveport resort becomes
more certain, the contingent portion of the purchase price has not been
recorded as a liability. This $2,499,000 represents the difference between the
amount Sodak Louisiana spent on the Shreveport resort ($2.5 million) and the
amount HWCC-Louisiana paid to obtain their joint venture interest ($1,000). By
not recording the liability, HWCC-Louisiana is treating this difference as a
reduction to reflect its costs to date in the Shreveport resort. Effective as
of the April 23, 1999 closing, Sodak Louisiana became a consolidated subsidiary
of HWCC-Louisiana. In July 1999, Sodak Louisiana was merged into HWCC-Louisiana
and the name of QNOV was changed to Hollywood Casino Shreveport.
Also, in July 1999, HWCC-Louisiana formed two subsidiaries, HCS I and HCS II,
and contributed $1,000 of capital to each entity, along with 99% of its
interest in us to HCS I and its remaining 1% interest in us to HCS II.
Collectively, HCS I and HCS II will be allocated 100% of our profits and
losses. HCS I is our managing general partner. Shreveport Paddlewheels is our
third partner and its interest in us is a residual interest entitling it to 10%
of the net proceeds of a sale or disposition of us by HCS I and HCS II after
payment of outstanding debt and the return of contributed capital. Shreveport
Paddlewheels is also entitled to receive a payment equal to approximately 1% of
our net revenues which terminates upon the occurrence of an event giving rise
to an obligation to pay Shreveport Paddlewheels' 10% residual interest. In
addition, under a marine services agreement, Shreveport Paddlewheels will be
entitled to receive a fee equal to $360,000 per year for so long as Shreveport
Paddlewheels or its affiliate has a joint venture interest in us. In addition,
Shreveport Paddlewheels is entitled to receive an amount equal to the appraised
value of its future fees under the marine services agreement if an event occurs
that gives rise to payment of Shreveport Paddlewheels' 10% residual interest.
Upon payment of the appraised value and residual interest, Shreveport
Paddlewheels will no longer be entitled to any future amounts. The interests in
earnings and other cash distributions as described above were
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negotiated by our partners and reflect, in part, their respective capital
contributions. HWCC-Louisiana, through its effective ownership of HCS I, HCS II
and Sodak Louisiana, contributed a total of $49 million to us while Shreveport
Paddlewheels contributed $1 million with proceeds of a loan from HWCC-
Louisiana.
Additionally, in July 1999, we formed a new, wholly owned subsidiary,
Shreveport Capital. We contributed $1,000 of capital to Shreveport Capital.
Shreveport Capital was formed for the sole purpose of being a co-issuer with
respect to the original notes.
Through December 31, 1999, Hollywood Casino Shreveport has expended
approximately $34.8 million in connection with the development of the
Shreveport resort.
Results of Operations
Our previous owners were, until October 1997, engaged in the operation of a
riverboat casino in New Orleans. From that time until September 21, 1998, they
were completing negotiations to transfer their ownership interests in us to new
partners. Since September 22, 1998, our new partners have been engaged in
designing, securing financing for and constructing the Shreveport resort.
Because the New Orleans operations were in a different geographic market, with
different management, utilizing a different theme and with only limited
ancillary facilities, the results of operations prior to September 22, 1998 are
not relevant to and have the potential to materially mislead investors with
respect to future operations to be conducted in Shreveport. Accordingly,
management's discussion of the results of operations will be divided into two
sections: (1) Hollywood Casino Shreveport/HWCC-Louisiana for the development
period subsequent to September 22, 1998 and (2) New Orleans operations with
respect to the period prior to September 22, 1998.
Hollywood Casino Shreveport. We have incurred a total of $1.1 million of
development and preopening costs in connection with the Shreveport resort,
including $991,000 during 1999 and $90,000 during 1998. During 1999, such costs
consisted primarily of salaries, legal and professional fees and licensing
costs. During 1998, such costs primarily related to community relations
activities and organizational costs. In August 1999, we issued the original
notes. As a result, we incurred $6.9 million of interest expense, net of
capitalized interest of $1.1 million, during the year ended December 31, 1999.
Interest expense also includes $293,000 of amortization expense with respect to
$5.2 million of deferred financing costs incurred in connection with the debt
offering. Unexpended proceeds from the debt offering and from $45.0 million in
capital contributions by HWCC-Louisiana and Shreveport Paddlewheels during 1999
generated interest income of $3.6 million during 1999 compared with $55,000
during the period from September 22, 1998 through December 31, 1998.
HWCC-Louisiana. HWCC-Louisiana is a guarantor of the notes. Before October
1997, HWCC-Louisiana engaged in development activities related to obtaining
gaming licenses in Lake Charles and Bossier City, Louisiana. Since October
1997, HWCC-Louisiana's operations have related primarily to the acquisition of
the partnership interests in Hollywood Casino Shreveport and winding up its
efforts in Bossier City, and in the future it will act solely as a holding
company. Therefore, a comparison of the results of operations for HWCC-
Louisiana with respect to development activities in connection with the
abandoned projects is not meaningful and is not presented. HWCC-Louisiana's
total expenses with respect to the abandoned projects were approximately $1.0
million through December 31, 1998.
Costs incurred by HWCC-Louisiana in connection with the Shreveport resort
amounted to $49,000 during 1999, $27,000 during 1998 and $86,000 during 1997.
The 1999 costs are exclusive of those we incurred which are now included in
HWCC-Louisiana's consolidated results of operations. These costs consist
primarily of professional fees, travel and reimbursements to Hollywood Casino
and its subsidiaries for the use of their personnel. HWCC-Louisiana also
incurred general and administrative expenses of $10,000 during 1999. The
preopening and general and administrative costs were more than offset by
interest income earned on advances and temporary cash investments amounting to
$74,000 during 1999.
During the year ended December 31, 1998, HWCC-Louisiana recorded a loss of
$17,000 with respect to its equity interest in Hollywood Casino Shreveport,
representing one-half of the total losses experienced by Hollywood Casino
Shreveport for that period. As previously discussed, HWCC-Louisiana acquired
Sodak Louisiana's interest in us on April 23, 1999 and is now reflecting our
earnings and losses on a consolidated basis.
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New Orleans Operations. During the period from January 1, 1998 through
September 21, 1998, our previous owners were in the process of negotiating the
sale of their interests in us to HWCC-Louisiana and Sodak Louisiana. Operating
costs during this 1998 period consisted primarily of general and administrative
costs of $986,000 including salaries and legal and professional fees associated
with the efforts to transfer the ownership interests in us. Property operations
costs during the 1998 period amounted to $155,000 and included costs associated
with leased office space, utilities and maintenance for the leased vessel.
Interest income amounting to $241,000 was earned primarily on funds escrowed
toward the joint venture's payment of obligations to the City of New Orleans.
The interest income was partially offset by interest expense of $50,000 owing
to a joint venture partner in connection with termination costs of the joint
venture's docking site lease.
The joint venture operated its riverboat casino in New Orleans until October
1997. For the fiscal year 1997, the joint venture earned net revenues of $47.5
million and incurred operating expenses of $45.7 million, resulting in income
from operations of $1.8 million. Net interest income of $495,000 primarily
earned on temporary cash investments also contributed toward a net income
during 1997 of $2.3 million.
Liquidity and Capital Resources
As currently planned, the Shreveport resort will consist of a riverboat
casino with approximately 1,370 slot machines and 75 table games, a 405-room,
all suite, art deco style hotel, and approximately 42,000 square feet of
restaurant and entertainment facilities. Construction of the Shreveport resort
is expected to be completed in early November 2000. We are using the $150.0
million in proceeds from the August 1999 original offering of the original
notes, together with the $50.0 million of capital contributions to us and $30.0
million in furniture, fixture and equipment financing to provide the estimated
$230.0 million needed to develop, construct, equip and open the Shreveport
resort. The $230.0 million estimated cost includes financing costs and the $5.0
million payment made in August 1999 to the City of New Orleans related to
moving the license to Shreveport. On July 16, 1999, we entered into a binding
commitment with Bank of America NT&SA and BA Leasing & Capital Corporation to
obtain the $30.0 million in financing for furniture, fixtures and equipment.
The funds provided by these sources are expected to be sufficient to develop
and commence operations of the Shreveport resort and to provide a reserve for
the first three scheduled payments of fixed interest on the notes, including
the interest payment made on February 1, 2000. The net proceeds of the original
offering were deposited into a construction disbursement account, an interest
reserve account and a completion reserve account. The proceeds in the interest
reserve account were invested in U.S. government securities that mature just
before each payment date and the remaining proceeds were invested in U.S.
government securities. In addition, Hollywood Casino has entered into a
completion capital agreement providing for the contribution of up to an
additional $5.0 million in cash if at any time there are insufficient funds
available to enable the Shreveport resort to be operating by April 30, 2001. In
addition, if the Shreveport resort is not operating by April 30, 2001,
Hollywood Casino will contribute to us on that date $5.0 million in additional
equity less any amounts previously contributed under the completion capital
agreement. In the absence of construction overruns, we believe that once the
Shreveport resort is opened, cash flow from operations will be sufficient to
meet the liquidity and capital resource needs of the resort for the next 24
months.
We have entered into a ground lease with the city of Shreveport for the land
on which the Shreveport resort will be built which contains an initial term of
10 years with subsequent renewals for up to an additional 40 years. Base rental
payments under the lease began when construction commenced and will be $10,000
per month during the construction period increasing to $450,000 per year upon
opening and continuing at that amount for the remainder of the initial ten-year
lease term. During the first five-year renewal term, the base rent will be
$402,500. The annual base rental payment will be $462,875 for the second five-
year renewal term, $532,306 for the third five-year renewal term, $612,152 for
the fourth five-year renewal term and $703,975 for the fifth five-year renewal
term with no further increases. In addition to the base rent, we will pay
monthly percentage rent equal to the greater of (1) $500,000 per year or (2)
the sum of 1% of adjusted gross revenues of the Shreveport resort and the
amount by which 50% of the net income from the parking facilities exceeds a
specified parking income credit.
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In connection with the Compromise Agreement as discussed above, we agreed to
make a $5.0 million payment to the City of New Orleans upon issuing the
original notes. This payment was made in August 1999. HWCC-Louisiana and Sodak
Louisiana also agreed to contingently reimburse Hilton New Orleans $2.0 million
of the amount it paid to the City of New Orleans. The reimbursement is to be
paid upon the earlier of the termination of the construction of the Shreveport
resort or in monthly installments of $200,000, without interest, commencing
with the opening of the Shreveport resort. The $2.0 million liability, net of a
discount in the original amount of $308,000, and the associated project costs
were recorded upon the issuance of the original notes.
The operations of the Shreveport resort will be managed by HWCC-Shreveport
under the terms of a management agreement. Under the terms of the management
agreement, we will pay HWCC-Shreveport basic and incentive management fees for
its services. The basic fee will equal approximately 2% of the Shreveport
resort's net revenues and the incentive fee will equal the sum of (1) 5% of the
Shreveport resort's earnings before interest, taxes, depreciation and
amortization as defined in the agreement ("EBITDA") between $25.0 million and
$35.0 million, (2) 7% of the Shreveport resort's EBITDA between $35.0 million
and $40.0 million, and (3) 10% of the Shreveport resort's EBITDA over $40.0
million. In addition, we will reimburse HWCC-Shreveport for expenses incurred
in connection with services provided under the management agreement.
HCS I and HCS II have assumed an obligation of HWCC-Louisiana to cause us to
pay Shreveport Paddlewheels an amount equal to approximately 1% of our net
revenues in exchange for the assignment by Shreveport Paddlewheels of its joint
venture interest in us to HWCC-Louisiana and Sodak Louisiana in connection with
the September 1998 reconstitution. We will also be obligated to pay Shreveport
Paddlewheels a $30,000 monthly fee for marine services and to reimburse
Shreveport Paddlewheels for its direct expenses, if any, incurred with respect
to those services. The payments to Shreveport Paddlewheels are to be made for
so long as they remain our joint venture partner.
Third parties could assert obligations against us for liabilities that have
arisen or that might arise against our predecessors or the partners of our
predecessors with respect to any period prior to September 22, 1998. Management
believes that if such a claim arises, it would be adequately covered under
either existing indemnification agreements with the former partners or
insurance policies maintained by the predecessors or their partners.
We have also entered into an agreement to sub-lease the retail portion of the
Shreveport resort to Red River Entertainment. We expect to receive rental
payments under the sub-lease of approximately $250,000 annually, plus an amount
equal to the sum of (1) 50% of the retail facility's first $550,000 of net cash
flow, (2) 25% of the next $65,000 of the retail facility's net cash flow and
(3) 40% of the retail facility's annual net cash flow above $615,000.
Market Risk
The only financing arrangement that we currently contemplate that will be
subject to fluctuating market interest rates is the $30.0 million Bank of
America commitment to finance the lease of our furniture, fixtures and
equipment. The interest we will pay under this arrangement will be variable and
will reset quarterly. If the interest rate increases by 100 basis points, or
1%, then interest expense will increase by $300,000. The furniture, fixture and
equipment financing was entered into for non-trading purposes as a source of
funding for the Shreveport resort and management believes that this financing
has no other material market risks other than interest rate risk. Such interest
rate risk is beyond management's control; however, the resulting obligation
could be prepaid should increases in the underlying interest rate result in an
excessive financing cost to us.
The First Mortgage Notes issued by us to finance construction of the
Shreveport resort include interest at the rate of 13% payable semiannually as
well as contingent interest once we open. The contingent interest will be equal
to 5% of our consolidated cash flow for the applicable period subject to a
maximum contingent interest of $5 million for any four consecutive fiscal
quarters. Accordingly, our maximum potential interest with respect to the First
Mortgage Notes for a fiscal year could be $24.5 million, resulting in an
effective annual interest rate of 16.33%. This maximum would assume that our
consolidated cash flow was at least $100 million. The contingent component of
interest under the First Mortgage Notes was negotiated with our lenders
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as part of determining the fixed rate component of interest. Management
believes that because the contingent
interest component is determined by our cash flows and can only be paid if we
meet certain coverage ratios, our liquidity and capital resources will not be
compromised by the payment, if any, of contingent interest.
Changes in the market interest rate would also impact the fair market value
of our outstanding fixed rate debt instruments. Management estimates that an
increase of 1% in the market interest rate would result in a decrease in the
fair market value of our debt securities in the amount of approximately $6.5
million.
Seasonality
We have no operating history. We anticipate that activity at the Shreveport
resort may be modestly seasonal, with stronger results expected during the
third fiscal quarter. In addition, our operations may be impacted by adverse
weather conditions. Accordingly, our results of operations may fluctuate from
quarter to quarter and the results for any fiscal quarter may not be indicative
of results for future fiscal quarters.
Year 2000 Issues
At the beginning of the year 2000, computer programs that had date sensitive
software might have recognized a date using "00" as the year 1900 rather than
2000. This type of error could have resulted in a system failure or
miscalculations causing disruptions of operations including, among other
things, a temporary inability to process transactions or engage in similar
normal business activities.
We continue to depend on the computer systems of Hollywood Casino for our
administrative, financial and construction management operations. Management of
Hollywood Casino conducted a program to prepare its computer systems and
applications as well as its non-information technology, embedded microchip,
systems for the Year 2000. The initial stage of the program consisted of
identifying those systems which might be at risk. All identified systems were
categorized as:
. those necessary for regulatory compliance purposes;
. essential systems; and
. non-essential systems.
Within the essential systems group, an additional rating factor of one to
five was assigned to each system with a factor of one indicating the greatest
significance. Readiness of information technology and non-information
technology systems for the Year 2000 was investigated or determined by means of
vendor certification or internal testing. The essential and regulatory systems
were determined to be Year 2000 compliant and the two major information
technology systems identified as not Year 2000-compliant were replaced.
Both we and Hollywood Casino also initiated formal communication with all of
our material third party suppliers with which we continue to do business to
determine the extent to which our operating and information systems could have
been vulnerable to those third parties' failure to resolve their Year 2000
compliance issues. These suppliers notified us that they were Year 2000
compliant.
As a result of these planning and implementation efforts, we experienced no
significant disruptions to any of our computer systems and non-information
technology systems and believe that all such systems have successfully
responded to the Year 2000 change. We also encountered no significant Year 2000
problems with our vendors or suppliers. We and Hollywood Casino are continuing
to monitor our systems and communicate with our suppliers and vendors to ensure
that any latent Year 2000 problems that might arise are promptly addressed.
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BUSINESS
General
Hollywood Casino Shreveport is a Louisiana general partnership which is
currently constructing a highly themed hotel and casino destination resort in
Shreveport, Louisiana, approximately 180 miles east of Dallas, Texas. The
resort will feature the largest riverboat in the Shreveport market, an
extensive land-based pavilion and an all-suite hotel. Our Shreveport resort
will also feature a newly constructed restaurant and entertainment promenade
and three parking facilities containing approximately 2,000 parking spaces.
Based on management's extensive gaming experience and the experience of our
General Manager in the Shreveport market, we believe we have designed a premier
facility that surpasses the scope and quality of all of the Shreveport market's
existing riverboat facilities. Our resort will be located adjacent to Harrah's
casino and will form the only casino "cluster" in the Shreveport market,
allowing patrons to park once and easily walk between the two facilities. Our
resort will enjoy high visibility and convenient access from Interstate 20, the
highway that connects Shreveport/Bossier City to the attractive feeder markets
of Dallas/Fort Worth and East Texas. Construction of the Shreveport resort
began in August 1999 and we intend to open the resort in early November 2000.
Hollywood Casino will operate the Shreveport resort, which will feature the
unique Hollywood theme that has been successfully implemented at Hollywood
Casino's other properties. The Hollywood theme incorporates the excitement and
glamour of the motion picture industry by incorporating designs inspired by
famous movies, displays of motion picture memorabilia and movie-themed gaming,
entertainment and dining areas. Hollywood Casino, through its wholly owned
subsidiaries, develops, owns and operates themed casino entertainment
facilities under the service mark Hollywood Casino(R). Hollywood Casino
currently owns and operates two highly successful casinos, one in Aurora,
Illinois and another in Tunica County, Mississippi. We believe that both of
these casinos have been highly successful as evidenced by the market share they
have historically captured in their respective gaming markets. Prior to 1999,
both of Hollywood Casino's facilities generated gaming revenues in excess of
their "fair share" of the gaming revenues in their respective markets. Based on
information contained in published reports for the year ended December 31,
1999, management believes its Aurora casino generated 117.5% of its fair share
in the Chicago market and, despite intensified competition and a hold
percentage for table games significantly below historical averages, its Tunica
casino generated just under 100% of its fair share in the Tunica market. "Fair
share" for a particular casino is calculated by dividing the relative share of
its gaming revenues in its market area by its relative share of the total
gaming positions in that market. Industry convention defines each slot machine
in a casino as having one gaming position and each table game in a casino as
having six gaming positions. For example, a casino with 10% of the total gaming
revenues in its market and 10% of the gaming positions is said to have its
"fair share" of the market. If instead the same casino had 12% of the gaming
revenues in its market with only 10% of the total gaming positions, it would
have a "fair share" of 120%.
The Shreveport Resort
The Pavilion
Our approximately 170,000 square foot pavilion will be the centerpiece of our
integrated resort, providing easy access to the hotel, casino and numerous
entertainment amenities. Patrons will enter our resort either through an
elegant porte cochere or a movie-themed walkway connecting our land-based
pavilion to our parking garage. Our elaborate pavilion will feature a dramatic
60-foot high atrium, will be lavishly appointed with marble, chandeliers and
columns and will enable our patrons to see the casino floor from almost
anywhere in the pavilion. Escalators located in the center of the atrium will
provide convenient access to all three levels of the casino.
Our facility will provide patrons with a wide range of restaurant and
entertainment alternatives. Our pavilion will house three restaurants, a highly
themed entertainment lounge and a premium players' club. The Fairbanks
steakhouse will feature a Mediterranean style dining room with vaulted ceilings
and will seat approximately 150 people. The "Gold Room," an elegant and private
dining room within Fairbanks, will offer
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the ultimate in guest service for our premium players. The Hollywood Epic
Buffet, which will seat approximately 340 people, will be modeled after
memorable Hollywood movie sets, which we intend to change frequently in order
to maintain an exciting and original dining environment for our patrons. The
Hollywood DinerSM, which will seat approximately 225 people, will feature a
stained wood and ceramic tile setting surrounded by movie memorabilia from the
1940s, 1950s and 1960s. The entertainment lounge, which will seat approximately
160 people, will feature a tropical themed entertainment showroom complete with
palm trees and decorative painted ceilings. Our premium players' club, the
Director's ClubSM, will seat approximately 50 people in an intimate art deco
setting among walls lined with autographed photographs of movie stars.
In addition to the restaurants and lounges, the pavilion will include a deli
and ice cream shop, VIP check-in, premium quality bar, several meeting rooms
and the Hollywood Casino Studio Store(R), a highly themed retail shopping
facility that will sell movies on video tape and other media, soundtracks and
logo merchandise from major motion picture studios.
The Riverboat Casino
Our resort will feature the largest riverboat in the market with
approximately 1,370 slot machines and 75 table games on three levels. Our
riverboat casino will be attached to our pavilion by 85-foot wide seamless
entrances and will feature up to 20-foot high ceilings on all three levels,
enabling us to provide our patrons with the feel of a "land-based" casino. The
interior of our casino will blend the Hollywood theme with the exciting
atmosphere of a modern casino, complete with memorable movie props, distinctive
signage, state-of-the-art gaming equipment and Las Vegas style gaming displays.
Our riverboat casino will float in a concrete and steel basin that will raise
the riverboat nearly 20 feet above the river. The basin will virtually
eliminate variation in the water height surrounding the riverboat and will
allow the casino to be permanently moored to our land-based pavilion. Our
computerized pumping system is designed to regulate the water level of the
basin to a variance of no more than three inches.
Art Deco Style Hotel
Our all suite, art deco style hotel will offer luxurious suites through its
approximately 380 single room suites and 25 multiple room suites. The single
room suites will be elegantly furnished and will be approximately 510 square
feet in size, containing a spacious living area, a writing desk and an
oversized marble bath, with a separate bathtub and shower. Master suites will
be approximately 1,000 square feet in size and will include all of the
amenities of our single room suites, plus a living room, wet bar, powder room
and separate his and her bathrooms. The two presidential suites will be
approximately 2,000 square feet in size and will include all of the amenities
of the master suites, plus a second bedroom, a dining room and separate his and
her closets.
The Restaurant and Entertainment Promenade
Our resort will feature an extensive restaurant and entertainment development
that will be designed as a "New Orleans style" outdoor walking promenade. The
development will be located across the street from our pavilion, adjacent to
our parking garage. It will contain approximately 42,000 square feet of dining
and live entertainment space and will feature nationally and regionally
renowned establishments. Our restaurant and entertainment promenade will be
developed by Red River Entertainment, which includes the principal developer of
Beale Street in Memphis, Tennessee. Additionally, an affiliate of Red River
Entertainment has announced plans to develop approximately 55,000 square feet
of additional restaurant, retail and entertainment space adjacent to the
promenade. We believe the overall restaurant, retail and entertainment
development, which will total nearly 100,000 square feet, will attract
additional visitors to our casino.
Parking
We will offer a choice of three parking facilities, which will include two
parking lots and an eight-story parking garage connected directly to our land-
based pavilion. The three parking facilities together will provide parking
spaces for approximately 2,000 cars, including valet parking for approximately
420 cars. All of our parking facilities will be located within one block of our
facility, providing customers with convenient access to our resort.
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Marketing Strategy
We and Hollywood Casino will use the same marketing strategy for the
Shreveport resort that Hollywood Casino has effectively utilized to open and
operate its existing facilities in Aurora, Illinois and Tunica County,
Mississippi. The successful implementation of Hollywood Casino's marketing
strategies has been an important factor in both the Aurora and the Tunica
casinos historically capturing gaming revenues in excess of their "fair share"
of the gaming revenues in each of their respective markets. Based on
information contained in published reports for the year ended December 31,
1999, management believes its Aurora casino generated 117.5% of its fair share
in the Chicago market and, despite intensified competition and a hold
percentage for table games significantly below historical averages, its Tunica
casino generated just under 100% of its fair share in the Tunica market.
One of the principal elements of our strategy is to develop the premier
gaming and entertainment facility in the Shreveport market. In order to fully
capitalize on the potential of the Shreveport market, we intend to develop a
resort that:
. incorporates the largest riverboat in the market;
. has the greatest number of slot machines and table games in the
market;
. has a seamless entry from the land-based pavilion to the gaming
vessel giving our riverboat casino a "land-based" feel;
. utilizes Hollywood Casino's unique and proven theme;
. delivers superior dining and entertainment amenities; and
. generates additional appeal through our restaurant and entertainment
facilities.
We believe that the combination of our superior quality facility and the
execution of Hollywood Casino's proven marketing strategies will enable the
Shreveport resort to become one of the leading riverboat casinos in the
Shreveport market. Our marketing programs will consist of a variety of highly
targeted advertising, direct mail and promotional programs designed to attract
both initial and repeat customers to our Shreveport resort. Principal elements
of our marketing strategy include the following:
Maximizing the Number of Initial Visitors to our Resort. We will be
conducting an extensive preopening campaign to market our facility to potential
customers. We will advertise through a variety of media, including television
commercials, print advertising and billboards. The goal of this advertising
program is to increase the awareness of residents in the Dallas/Fort Worth and
East Texas markets of our high quality Shreveport resort. As part of this
advertising campaign, we will begin aggressively soliciting hotel reservations
approximately six months in advance of the opening of our facility. We will
also conduct a highly targeted direct mail program by sending promotional
material regarding our Shreveport resort to potential customers. Our market
research will identify residents in the Dallas/Fort Worth and East Texas
markets who have the demographic profile to become valuable customers. We will
have a casino-marketing representative in Dallas dedicated to generating high-
end business for our Shreveport casino. We have already identified several
experienced potential candidates for this position.
During the year ended December 31, 1999, approximately 12 million people
visited the Shreveport market. We believe that the superior quality of our
gaming and entertainment product, combined with our extensive preopening
marketing campaign, will draw a significant number of these potential customers
to our Shreveport facility.
Turn Initial Visitors into High Value Customers. Once patrons visit our
facility, we intend to provide them with a superior gaming, lodging and
entertainment experience in order to transform these visitors into repeat
customers. In addition to providing our customers with a superior gaming
experience, we intend to utilize a player's card program and casino information
technology to create highly focused marketing programs for our customers.
Hollywood Casino has extensive experience utilizing sophisticated casino
information technology, and we will be utilizing the same proprietary system
that Hollywood Casino successfully employs at its existing properties.
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We intend to implement an aggressive program to solicit visitors to join our
player's card program. All of our hotel guests will be immediately entered into
our player's card program, and promotional booths located throughout the resort
will offer promotional rewards for patrons that sign up for our player's card.
The computer technology we will utilize will also include a "hot player's
system," whereby the computer system will immediately send a casino host to an
active customer who is not a member of our player's card program. The casino
hosts will provide these active customers with various complementaries based
upon their level of play and will enroll these customers in our player's card
program. Once a customer joins our player's card program, they will be entered
into our computer data base system.
We will use a sophisticated casino technology system to create extensive
player incentive, promotion and reward programs for members of our player's
card program who have been identified as high value customers. This computer
technology will include table game and slot machine monitoring systems that
will enable our casino to track and rate patron play through the use of our
player's card. When patrons use the casino player's card at slot machines or
table games, the information will be immediately available to our management,
allowing us to implement marketing programs that recognize and reward patrons
during their visits to the casino. These promotions and complementaries will
include free or discounted food and beverages, hotel accommodations, special
player events, admissions to headliner entertainment, retail merchandise and
sweepstake giveaways.
The online nature of the computer monitoring system will provide management
with the unique opportunity to immediately reward our active customers with
promotions and complementaries during that customer's "same-visit" to our
facility. We will also utilize our extensive data base system to monitor an
ongoing direct mail program to encourage repeat visitations by our high value
customers. The sophisticated computer technology will enable us to target
specific direct mail promotions to each of our customers based upon their level
of play.
The Shreveport Market
The Shreveport market is currently the eighth largest gaming market in the
United States and the largest in Louisiana. Since the commencement of riverboat
gaming in the Shreveport market in 1994, gaming revenues have experienced
steady and significant growth. In 1999, gaming revenues in the Shreveport
market increased 7.1% to approximately $641 million. The Shreveport market is
the only riverboat gaming market in Louisiana that currently permits continuous
dockside gaming without requiring cruising or simulated cruising schedules,
which will allow our casino to operate 24 hours a day with uninterrupted
access. Louisiana is a limited riverboat license jurisdiction and currently
only four riverboat casinos operate in the Shreveport market.
There are approximately 7.1 million adults residing within an approximately
200-mile radius of Shreveport. The interstate highway system connecting
Shreveport with Dallas/Fort Worth and East Texas provides the Shreveport market
with the ability to draw customers from an extended area. Dallas is located
approximately 180 miles west of Shreveport and can be reached by car in less
than three hours. In addition, the Shreveport Regional Airport currently has 41
in-bound flights per day from various locations, including 16 from Dallas and
seven from Houston with flight times under 60 minutes. The Shreveport Regional
Airport has recently completed an approximately $25 million expansion and
renovation project including a new terminal and additional parking facilities.
Based on our experience in the industry and the historical experience of the
Shreveport market, we believe that the Shreveport market has not reached its
full potential due to its limited supply of gaming capacity and high quality
amenities. We believe the Shreveport market has the potential to grow
significantly as additional gaming capacity, high quality hotel accommodations
and entertainment amenities are added. We believe these additions will enable
the Shreveport market to increase its penetration of its principal feeder
markets and will broaden the appeal of the Shreveport market to higher income
customers and patrons desiring overnight accommodations. All of the existing
four operators in the Shreveport market have completed or are in the process of
completing improvements to their facilities, including adding hotel rooms. We
believe that by opening the premier hotel, gaming and entertainment facility in
the market, we will further accelerate the
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development of the Shreveport market. In comparison to the other gaming markets
listed in the chart below, the Shreveport market has the second highest win per
gaming position but the fewest gaming positions relative to its adult
population. Accordingly, we believe that the Shreveport market is capacity
constrained and that the existing operators have penetrated only a limited
portion of the large adult population surrounding the Shreveport market.
<TABLE>
<CAPTION>
Principal Market Total 1999 Total Population Win Per
Population Gaming Win Gaming Per Gaming Gaming
Gaming Market (1) (in millions)(2) (in millions) Positions Position Position
------------------ ---------------- ------------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Connecticut(3).... 11.2 $1,649 11,896 939 $138,615
Chicago........... 8.5 1,771 14,583 581 121,443
Shreveport........ 7.2 641 5,751 1,255 111,540
Pro Forma(4)..... 7.2 -- 7,566 954 --
Cincinnati........ 5.3 453 4,432 1,188 102,146
Tunica............ 4.9 1,164 20,494 238 56,783
St. Louis......... 2.8 622 10,015 276 62,060
Kansas City....... 1.9 497 9,287 202 53,480
</TABLE>
- --------
Sources: Urban Systems, Inc., state gaming records and SEC filings by operators
in the listed markets. Population statistics and gaming positions are
as of December 31, 1999.
(1) These markets were chosen because management believes that they are the
most comparable gaming markets for which public information is available
and which draw a majority of their customers from major metropolitan areas.
The Lake Charles market was excluded because sufficient market data was not
publicly available.
(2) Represents the adult population located within a specific distance from
each gaming market. The distances vary based upon the proximity of a
particular gaming market to its principal customer base. We have defined
the principal customer base for the Connecticut, Chicago, Cincinnati, St.
Louis and Kansas City markets to be within a 100 mile radius, and the
principal customer base for the Shreveport and Tunica markets to be within
a 200 mile radius.
(3) Includes estimates for table game revenues and the number of table games
for one of the two Connecticut casinos.
(4) Gives pro forma effect to the anticipated gaming positions of our
Shreveport resort as if it had been open as of December 31, 1999.
Competition
Upon opening our Shreveport resort, we will compete directly with Binion's
Horseshoe, Harrah's, the Isle of Capri and Casino Magic in the Shreveport
market.
We believe that the casinos in the Shreveport market compete primarily based
upon the following factors:
. Location;
. Ease of access to customers;
. Comfort and spaciousness of the facility;
. Extent and quality of non-gaming amenities;
. Theming of the facility; and
. Marketing and promotional programs
We believe that we have designed the Shreveport resort to be one of the
leading facilities in the Shreveport market. We believe that the principal
factors that will make the Shreveport resort a strong competitor are the
following:
. The location of our facility, which will be easily accessible from
the interstate highway and will be located next door to Harrah's
thus forming the first casino "cluster" in the market;
. We will operate the largest riverboat in the market;
. The unique design of our facility that will enable our dockside
casino to be directly connected to our land-based pavilion;
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. Our 405-room art-deco style hotel;
. Our unique Hollywood theme; and
. Numerous restaurant, entertainment and dining amenities that we will
provide our customers
Our principal competitive disadvantage is that we are the last entrant into
the Shreveport market and therefore do not currently have our own customer
base. This is in contrast to our competitors who have all operated in the
Shreveport market for several years and have developed their own customer base.
We believe that we will be able to overcome this disadvantage for the following
three reasons:
. We believe that the opening of the Shreveport resort will further
accelerate the development of the Shreveport market;
. We are developing what we believe is the premier gaming and
entertainment facility in the market; and
. We will be utilizing the same marketing strategies that Hollywood
Casino has utilized to successfully open and operate its existing
facilities in Aurora, Illinois and Tunica Country, Mississippi.
The Louisiana Gaming Control Board has granted approval to applicants for 14
of the 15 legislatively approved riverboat gaming licenses. On July 20, 1999,
the Louisiana Gaming Control Board announced that it will be accepting bid
proposals for the fifteenth license. If the fifteenth and final riverboat
gaming license is granted, it may be located in the Shreveport market, which
will increase competition in the market and could negatively impact the
Shreveport resort. Also, while we do not believe we face significant
competition from casinos outside of the Shreveport market, the Shreveport
resort will compete indirectly with four existing riverboats in the Lake
Charles, Louisiana area, a land-based casino owned by the Coushatta Native
American tribe between Lafayette and Baton Rouge, Louisiana and two riverboats
in Baton Rouge.
The Louisiana Riverboat Economic Development and Gaming Control Act provides
that the designated gaming area shall not exceed the lesser of 60% of the total
square footage of the passenger access area of the vessel or 30,000 square feet
at each casino. The total amount of gaming space in a casino is determined by
measuring the area inside the interior walls of the riverboat and excluding any
space in which gaming activities may not be conducted, such as bathrooms,
stairwells, cage and beverage areas and emergency evacuation routes. The
facilities of three of our four competitors in the Shreveport market arguably
contain less than the total amount of gaming space permitted. If these
competitors were to increase the size of their facilities, they would be able
to add more gaming positions, which would directly increase competition in our
market.
Also, we cannot be sure that we will be able to effectively compete against
any other future gaming operations that Louisiana or other authorities may
authorize in the gaming market in which our Shreveport resort will operate. For
example, in 1997, the Louisiana legislature adopted legislation permitting up
to 15,000 square feet of slot machine gaming at pari-mutuel wagering facilities
located in parishes in Louisiana that approve slot machine gaming in a
referendum election. Shortly thereafter, a referendum election was held that
approved slot machine gaming at Louisiana Downs, which is located in Bossier
City, approximately nine miles from the site of the Shreveport resort. During
the 1999 regular legislative session, the Louisiana legislature passed
legislation regarding the imposition, collection and disposition of taxes on
slot machines to be located at Louisiana Downs. We believe slot machine gaming
at Louisiana Downs could commence sometime later this year.
Casino gaming is currently prohibited in several jurisdictions adjacent to
Louisiana. As a result, we anticipate that a significant portion of our
customers will be residents of these jurisdictions, primarily Texas. Although
casino gaming is currently not permitted in Texas and the Texas Attorney
General has issued an opinion that gaming in Texas would require an amendment
to the Texas Constitution, the Texas Legislature has considered proposals to
authorize casino gaming in the past. The legalization of casino gaming in
Texas, or in other nearby jurisdictions, would have a material adverse effect
on our business, financial condition, results of operations and prospects and
the Issuers' ability to satisfy their obligations under the notes.
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We will compete to a lesser extent with gaming operations in other
jurisdictions and with other forms of gaming, including lottery gaming, horse
and dog racing, as well as other forms of entertainment.
The Design Process
We have been planning the Shreveport resort since 1997. Hollywood Casino's
experienced design, development and construction staff, together with a number
of outside construction, design and architectural firms, have completed
extensive and detailed engineering and architectural plans for the development
of the Shreveport resort.
Our extensive design and engineering team includes:
. Pre-construction design and architectural services by Broadmoor
Design. Broadmoor Design Group, a division of Broadmoor, is based in
New Orleans, Louisiana. Broadmoor has provided construction
services, architectural design, and design/build services since
1973. Broadmoor has been involved in the design and construction of
eight notable riverboat casino projects. Based on information
supplied by Broadmoor, the following is a list of representative
projects: Hilton's New Orleans Flamingo riverboat, Hilton's Kansas
City Flamingo riverboat, Hyatt's Grand Victoria riverboat casino and
Hilton's Queen of New Orleans riverboat.
. Riverboat casino design by Rodney E. Lay & Associates. Rodney Lay is
located in Jacksonville, Florida, and has provided full service ship
designs since 1959. Rodney Lay has designed 24 notable riverboat and
dockside casinos. Based on information supplied by Rodney Lay, the
following is a list of representative projects: Hollywood Tunica,
Empress I, II and III, Trump Casino, Showboat Mardi Gras, Alton
Belle Casino II, Argosy III and IV and Players I and II.
. Riverboat basin design by Brown Cunningham Gannuch. BCG is located
in Louisiana, and has over 20 years of experience in providing
professional engineering, architectural, design, surveying and
construction management services primarily on municipal
infrastructure projects. BCG has extensive experience in the
inspection of U.S. Army Corps of Engineers navigation and flood
protection projects.
. Interior design by Wilson & Associates, Inc. Wilson & Associates is
an international interior architectural design firm specializing in
commercial projects such as hotels, restaurants, casinos and
executive offices. Over the past 20 years, Wilson has completed
hundreds of design projects. Based on information supplied by
Wilson, the following is a list of representative projects: the
Atlantis Hotel & Casino, Beau Rivage Hotel & Casino, Caesars Palace
Las Vegas, Caesars Atlantic City and The Palace of the Lost City.
. Parking design by International Parking Design. IPD is an
experienced architectural firm specializing in parking design and
engineering and parking consulting services. IPD has been the prime
architect for over 200 parking structures and parking consultant on
an additional 3,000 projects.
We engaged Broadmoor in October 1997 to perform pre-construction services.
Broadmoor has worked closely with our design team to ensure that the design
concepts can be built in accordance with our construction budget and
anticipated schedule. We have invested approximately $5.3 million in this
thorough design process, and have substantially completed detailed plans for
the construction of every significant element of the Shreveport resort.
The Construction Process
We have entered into a guaranteed maximum price contract with Broadmoor
Anderson for $68.7 million for the construction of the land-based facilities at
our Shreveport resort. Broadmoor Anderson is a joint venture between Broadmoor
and Roy Anderson Corp., both of which have extensive construction experience
and have
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collectively completed more than 60 gaming and hospitality projects. As
required by the contract, Broadmoor Anderson provided to us a payment and
performance bond for the entire contract price. In addition, we have signed a
fixed price contract with Leevac Shipyards, Inc. for $34.4 million for the
construction of the riverboat casino. As required by the contract, Leevac
provided to us a payment and performance bond for the entire contract price.
Since 1991, Leevac has constructed 12 riverboat casinos.
We have retained First American Title Insurance Company to act as a
disbursement agent to ensure that the funds contributed to construct our resort
are disbursed in accordance with the terms of the disbursement agreement. In
addition, we have engaged CCM Consulting Group to serve as independent
construction consultant on behalf of the holders of the notes. The disbursement
agreement contains conditions for and sequencing of funding construction costs
and procedures for approving construction change orders and amendments to the
construction budget and schedule. The conditions under the disbursement
agreement generally provide that funds will be disbursed to us only if we and
CCM certify to the disbursement agent that there are sufficient available funds
to complete the resort in accordance with our budget.
Gaming Regulation
Louisiana
The ownership and operation of a riverboat gaming vessel is governed by the
Louisiana Riverboat Economic Development and Gaming Control Act. As of May 1,
1996, gaming activities are regulated by the Louisiana Gaming Control Board.
The Louisiana Gaming Control Board is responsible for issuing the riverboat
gaming license and enforcing the laws, rules and regulations relative to
riverboat gaming activities. The Louisiana Gaming Control Board is empowered to
issue up to 15 riverboat gaming licenses to conduct gaming activities on a
riverboat of new construction in accordance with applicable law. However, no
more than six riverboat gaming licenses may be granted to riverboats operating
from any one parish. Shreveport and Bossier City are located in two adjacent
parishes, portions of which are separated by the Red River. On July 20, 1999,
the Louisiana Gaming Control Board announced that it will be accepting bid
proposals for the fifteenth license.
The laws and regulations of Louisiana seek to:
. prevent unsavory or unsuitable persons from having any direct or
indirect involvement with gaming at any time or in any capacity;
. establish and maintain responsible accounting practices and
procedures;
. maintain effective control over the financial practices of riverboat
gaming licensees, including establishing procedures for reliable
record keeping and making periodic reports to the Louisiana Gaming
Control Board;
. prevent cheating and fraudulent practices;
. provide a source of state and local revenues through fees; and
. ensure that riverboat gaming licensees, to the extent practicable,
employ and contract with Louisiana residents, women and minorities.
The Louisiana Riverboat Economic Development and Gaming Control Act specifies
certain restrictions and conditions relating to the operation of riverboat
gaming, including but not limited to the following:
. in parishes bordering the Red River, such as our property in
Shreveport, gaming may be conducted dockside; however, in all other
authorized locations gaming is not permitted while a riverboat is
docked, other than for forty-five minutes between excursions, unless
dangerous weather or water conditions exist as certified by the
riverboat's master;
. each round trip riverboat cruise may not be less than three nor more
than eight hours in duration, subject to specified exceptions;
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. agents of the Louisiana Gaming Control Board are permitted on board
at any time during gaming operations;
. gaming devices, equipment and supplies may be purchased or leased
only from permitted suppliers;
. gaming may only take place in the designated gaming area while the
riverboat is upon a designated river or waterway;
. gaming equipment may not be possessed, maintained, or exhibited by
any person on a riverboat except in the specifically designated
gaming area, or a secure area used for inspection, repair, or
storage of such equipment;
. wagers may be received only from a person present on a licensed
riverboat;
. persons under 21 are not permitted on gaming vessels;
. except for slot machine play, wagers may be made only with tokens,
chips, or electronic cards purchased from the licensee aboard a
riverboat;
. licensees may only use docking facilities and routes for which they
are licensed and may only board and discharge passengers at the
riverboat's licensed berth;
. licensees must have adequate protection and indemnity insurance as
determined by the Louisiana Gaming Control Board;
. licensees must have all necessary federal and state licenses,
certificates and other regulatory approvals prior to operating a
riverboat; and
. gaming may only be conducted in accordance with the terms of the
riverboat gaming license, the Louisiana Riverboat Economic
Development and Gaming Control Act and the rules and regulations
adopted by the Louisiana Gaming Control Board.
No person may receive any percentage of the profits from our operations in
Louisiana without first being found suitable. In September 1998, we, our
officers, key personnel, partners and persons holding a 5% or greater interest
in us were found suitable by the Louisiana Gaming Control Board and our license
was renewed in September 1999. A riverboat gaming license is deemed to be a
privilege under Louisiana law and as such may be denied, revoked, suspended,
conditioned or limited at any time by the Louisiana Gaming Control Board. In
issuing a riverboat gaming license, the Louisiana Gaming Control Board must
find that the applicant is a person of good character, honesty and integrity
and that the applicant is a person whose prior activities, criminal record, if
any, reputation, habits and associations do not pose a threat to the public
interest of the State of Louisiana or to the effective regulation and control
of gaming, or create or enhance the dangers of unsuitable, unfair or illegal
practices, methods, and activities in the conduct of gaming or the carrying on
of business and financial arrangements in connection therewith. The Louisiana
Gaming Control Board will not grant any riverboat gaming licenses unless it
finds that:
. the applicant is capable of conducting gaming operations, which
means that the applicant can demonstrate the capability, either
through training, education, business experience, or a combination
of the above, to operate a gaming casino;
. the proposed financing of the riverboat and the gaming operations is
adequate for the nature of the proposed operation and from a source
suitable and acceptable to the Louisiana Gaming Control Board;
. the applicant demonstrates a proven ability to operate a vessel of
comparable size, capacity and complexity to a riverboat in its
application for a riverboat gaming license so as to ensure the
safety of its passengers;
. the applicant designates the docking facilities to be used by the
riverboat;
. the applicant shows adequate financial ability to construct and
maintain a riverboat;
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. the applicant submits a detailed plan of design of the riverboat in
its application for a riverboat gaming license;
. the applicant has a good faith plan to recruit, train and upgrade
minorities in all employment classifications; and
. the applicant is of good moral character.
The Louisiana Gaming Control Board may not award a riverboat gaming license
to any applicant who fails to provide information and documentation to reveal
any fact material to qualifications or who supplies information which is untrue
or misleading as to a material fact pertaining to the qualification criteria;
who has been convicted of or pled nolo contendere to an offense punishable by
imprisonment of more than one year; who is currently being prosecuted for or
regarding whom charges are pending in any jurisdiction of an offense punishable
by more than one year imprisonment; or if any holder of 5% or more in the
profits and losses of the applicant has been convicted of or pled guilty or
nolo contendere to an offense which at the time of conviction is punishable as
a felony.
The transfer of a riverboat gaming license is prohibited. The sale,
assignment, transfer, pledge, or disposition of securities which represent 5%
or more of the total outstanding shares issued by a holder of a riverboat
gaming license is subject to prior Louisiana Gaming Control Board approval. A
security issued by a holder of a riverboat gaming license must generally
disclose these restrictions.
Section 2501 of the regulations enacted by the Louisiana State Police
Riverboat Gaming Division under the Louisiana Riverboat Economic Development
and Gaming Control Act requires prior written approval of the Louisiana Gaming
Control Board of all persons involved in the sale, purchase, assignment, lease,
grant or foreclosure of a security interest, hypothecation, transfer,
conveyance or acquisition of an ownership interest, other than in a
corporation, or economic interest of 5% or more in any licensee.
Section 2523 of the regulations requires notification to and prior approval
from the Louisiana Gaming Control Board of the application for, receipt,
acceptance or modification of a loan; use of any cash, property, credit, loan
or line of credit, or guarantee or granting of other forms of security for a
loan by a licensee or person acting on a licensee's behalf.
Exceptions to prior written approval apply to, among others, any transaction
for less than $2.5 million in which all of the lending institutions are
federally regulated, or if the transaction involves publicly registered debt
and securities sold pursuant to a firm underwriting agreement.
The failure of a licensee to comply with the requirements listed above may
result in the suspension or revocation of that licensee's riverboat gaming
license. Additionally, if the Louisiana Gaming Control Board finds that the
individual owner or holder of a security of a corporate licensee or
intermediary company or any person with an economic interest in a licensee is
not qualified under the Louisiana Riverboat Economic Development and Gaming
Control Act, the Louisiana Gaming Control Board may require, under penalty of
suspension or revocation of the riverboat gaming license, that the person not
receive dividends or interest on securities of the corporation; exercise
directly or indirectly a right conferred by securities of the corporation;
receive remuneration or economic benefit from the licensee; or continue in an
ownership or economic interest in the licensee.
A licensee must periodically report the following information to the
Louisiana Gaming Control Board, which is not confidential and is to be
available for public inspection: the licensee's net gaming proceeds from all
authorized games; the amount of net gaming proceeds tax paid; and all quarterly
and annual financial statements presenting historical data that are submitted
to the Louisiana Gaming Control Board, including annual financial statements
that have been audited by an independent certified public accountant.
The Louisiana Gaming Control Board has adopted rules governing the method for
approval of the area of operations and the rules and odds of authorized games
and devices permitted, and prescribing grounds and procedures for the
revocation, limitation or suspension of licenses and permits.
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On April 19, 1996, the Louisiana legislature adopted legislation requiring
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit licensed riverboat gaming, licensed video poker
gaming, and licensed land-based gaming in Louisiana parishes. The applicable
local election took place on November 5, 1996, and the voters in the parishes
in which riverboats are currently located voted to continue licensed riverboat
gaming. However, it is noteworthy that the current legislation does not provide
for any moratorium on future local elections on gaming.
As a result of the Justice Department's November 1998 indictment of former
Louisiana Governor Edwin Edwards and certain other persons, on charges relating
to, among other things, riverboat gaming licenses in Louisiana, the Louisiana
regulators are applying greater scrutiny to the suitability and business
practices of the licensee.
Federal
In 1997, the U.S. Congress created the National Gambling Impact Study
Commission to conduct a comprehensive study of all matters relating to the
economic and social impact of gaming in the United States. In accordance with
the legislation creating the commission, the commission recently released a
report on its findings and issued its recommendations for the future of gaming
in the United States. Overall, the commission determined that, with only a few
exceptions such as Internet gambling, gaming is an issue to be settled at state
and local levels rather than by the federal government. Over the course of its
two year study, the commission discovered a lack of information regarding the
costs and benefits of gaming. Consequently, the commission recommended a pause
in the expansion of gaming operations to provide time to develop impartial,
objective research on the impact of gaming.
Non-Gaming Regulation
We are subject to federal, state and local safety and health laws,
regulations and ordinances that apply to non-gaming businesses generally, such
as the Clean Air Act, Clean Water Act, Occupational Safety and Health Act,
Resource Conservation Recovery Act and the Comprehensive Environmental
Response, Compensation and Liability Act. We have not made, and do not
anticipate making, material expenditures with respect to the environmental laws
and regulations. However, the coverage and attendant compliance costs
associated with the laws, regulations and ordinances may result in future
additional costs to our operations. For example, in 1990 the U.S. Congress
enacted the Oil Pollution Act to consolidate and rationalize mechanisms under
various oil spill response laws. The Department of Transportation has proposed
regulations requiring owners and operators of certain vessels, including us, to
establish through the U.S. Coast Guard evidence of financial responsibility in
the amount of $5.5 million for clean-up of oil pollution. This requirement
would be satisfied by either proof of adequate insurance, including self-
insurance, or the posting of a surety bond or guaranty.
The riverboats operated by us must comply with U.S. Coast Guard requirements
as to boat design, on-board facilities, equipment, personnel and safety. Each
of them must hold a Certificate of Inspection or must be approved by the
American Bureau of Shipping for stabilization and flotation, and may also be
subject to local zoning and building codes. The U.S. Coast Guard requirements
establish design standards, set limits on the operation of the vessels and
require individual licensing of all personnel involved with the operation of
the vessels. Loss of a vessel's Certificate of Inspection or American Bureau of
Shipping approval would preclude its use as a floating casino.
All of our shipboard employees, even those who have nothing to do with the
marine operations of the vessel, like dealers, waiters and security personnel,
may be subject to the Jones Act which, among other things, exempts those
employees from state limits on workers' compensation awards.
We will also be required to obtain normal and customary permits needed to
construct and open the resort.
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History and Corporate Organization
In 1992, a predecessor to Hilton New Orleans and New Orleans Paddlewheels
formed the Queen of New Orleans at the Hilton Joint Venture, or QNOV. QNOV
owned and operated a riverboat casino adjacent to the Hilton Hotel in downtown
New Orleans. In October 1996, QNOV sought and obtained approval from the
Louisiana Gaming Control Board to relocate its riverboat gaming license to
Shreveport. In October 1997, the owners of QNOV ceased operations in New
Orleans. Other than holding its riverboat gaming license, QNOV had no business
operations and remained a dormant entity until September 1998, when Hilton New
Orleans and New Orleans Paddlewheels withdrew as partners and Shreveport
Paddlewheels, Sodak Louisiana and HWCC-Louisiana obtained the gaming license to
operate in Shreveport by acquiring the ownership interests in QNOV. In April
1999, HWCC-Louisiana acquired Sodak Louisiana for $2.5 million, which will be
payable six months after the Shreveport resort opens. In July 1999, Sodak
Louisiana was merged into HWCC-Louisiana and the name of QNOV was changed to
Hollywood Casino Shreveport.
Also, in July 1999, HWCC-Louisiana formed two subsidiaries, HCS I and HCS II,
and contributed 99% of its interest in us to HCS I and its remaining 1%
interest in us to HCS II. Collectively, HCS I and HCS II will be allocated 100%
of our profits and losses. HCS I is our managing general partner. Shreveport
Paddlewheels is our third partner and its interest in us is a residual interest
entitling it to 10% of the net proceeds of a sale or disposition of us by HCS I
and HCS II after payment of outstanding debt and the return of contributed
capital. As a result of agreements between our new partners, Shreveport
Paddlewheels is entitled to receive an amount equal to approximately 1% of our
net revenues. In addition, under a marine services agreement, Shreveport
Paddlewheels is entitled to receive a fee equal to $360,000 per year.
Concurrently with the closing of the offering of the original notes, Hollywood
Casino contributed $44.7 million of capital to HWCC-Louisiana of which $43.7
million was indirectly contributed to us and $1.0 million was loaned to
Shreveport Paddlewheels to finance its $1.0 million contribution to us. That
loan is secured by a pledge of Shreveport Paddlewheels' interests in us and a
collateral assignment of the agreement providing for the payment to Shreveport
Paddlewheels of approximately 1% of our net revenues. The loan is non-interest
bearing until the opening of the resort and then will bear interest at the
prime rate. As of the closing of the original offering, Shreveport Paddlewheels
contributed $2.0 million of capital to us, of which $1.0 million was loaned by
HWCC-Louisiana to Shreveport Paddlewheels and the other $1.0 million
represented a credit to capital in consideration of a guarantee provided by New
Orleans Paddlewheels on behalf of Shreveport Paddlewheels. This guarantee was a
promise to pay $1.5 million of the $2.0 million that we agreed to pay to Hilton
New Orleans in connection with payments Hilton New Orleans made to the City of
New Orleans until we received our financing for the Shreveport resort. Once we
received financing for the Shreveport resort, the guarantee made by New Orleans
Paddlewheels terminated and was replaced by our obligation to repay Hilton New
Orleans $2.0 million. No payments were made to New Orleans Paddlewheels in
return for their guarantee.
The Shreveport resort will be operated by Hollywood Casino, through its
wholly owned subsidiary HWCC-Shreveport, in connection with a management
agreement we entered into with HWCC-Shreveport. The management agreement
provides that we will pay a management fee to HWCC-Shreveport of 2% of net
revenues plus an increasing percentage (5-10%) of the Shreveport resort's
EBITDA above $25.0 million. For a more detailed description of the management
agreement, see the discussion under the section entitled "Material Contracts--
Management Agreement."
Trademarks
Under a trademark license agreement, we will use the service mark "Hollywood
Casino," which is registered by Hollywood Casino with the United States Patent
and Trademark Office, and other "Hollywood-formative" marks, which are either
registered or are the subject of pending registration applications with the
United States Patent and Trademark Office. The terms of this agreement are
described under the section entitled "Material Contracts--Trademark License
Agreement." Hollywood Casino considers its rights to the "Hollywood Casino"
service mark to be well established and to have significant competitive value
to its business. The loss of its right to use the "Hollywood Casino" service
mark or to prevent others from using the same or a deceptively similar mark
could have a material adverse effect on us and Hollywood Casino.
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Planet Hollywood International, Inc. and Planet Hollywood (Region IV), Inc.
filed in 1996 a complaint in the United State District Court for the Northern
District of Illinois, Eastern Division, against Hollywood Casino and certain of
its subsidiaries and affiliates seeking a declaratory judgment that it is
entitled to use the name "Planet Hollywood" for a casino and damages. In its
complaint, Planet Hollywood alleged, among other things, that Hollywood Casino
had, in operating the Hollywood Casino concept, infringed on their trademark,
service mark and trade dress and had engaged in unfair competition and
deceptive trade practices. Hollywood Casino filed counterclaims seeking a
declaratory judgment that Planet Hollywood is not entitled to use the name
"Planet Hollywood" for a casino and damages. The counterclaims alleged, among
other things, that Planet Hollywood had, through its planned use of its mark in
connection with casino services, infringed on Hollywood Casino's service marks
and trade dress and had engaged in unfair competition. The trial commenced on
July 19, 1999 and was completed on July 26, 1999. On August 25, 1999, Hollywood
Casino and the other defendants filed a motion to dismiss the declaratory
judgment claims of all parties asserting, among other things, that as a result
of Planet Hollywood's reported deteriorating financial condition and perceived
inability to enter into the casino business, there was no longer any actual
case or controversy. On October 12, 1999, Planet Hollywood (Region IV), Inc.
filed a petition for reorganization under Chapter 11 of the United States
Bankruptcy Code. On December 3, 1999 the judge entered a judgment in favor of
Hollywood Casino with respect to the damage claims brought by Planet Hollywood
and granted Hollywood Casino's motion to dismiss the declaratory judgment
claims of all parties. Planet Hollywood has filed a notice of appeal of the
judgement with the Seventh Circuit Court of Appeals.
Property
We lease the land on which our Shreveport resort will be located from the
City of Shreveport under a ground lease initially ending on the tenth
anniversary of the opening date of our resort, with options to renew the lease
for eight additional successive terms of five years each. Rent due under the
ground lease will become payable on the date construction commences. The terms
of the lease are described under the section entitled "Material Contracts--
Lease with the City of Shreveport."
Employees
At February 29, 2000, we had nine employees, including Juris Basens. Upon the
opening of our Shreveport resort, we expect to employ approximately 1,700
persons.
Legal Proceedings
The issuers are not involved in any material litigation. However, claims and
legal actions may arise in connection with the construction of the Shreveport
resort and in the ordinary course of business.
Third parties could assert obligations against us for liabilities that have
arisen or that might arise against our predecessors or the partners of our
predecessors with respect to any period before September 22, 1998. Management
believes that in the event such a claim arises, it would be adequately covered
under either existing indemnification agreements with the former partners or
insurance policies maintained by our predecessors or their partners.
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MATERIAL CONTRACTS
Land-Based Facilities Construction Contract
We have entered into a guaranteed maximum price contract with Broadmoor
Anderson for $68.7 million for the construction of the land-based facilities at
our Shreveport resort. The guaranteed maximum price may be adjusted if we
request certain changes to the construction plans or specifications that
qualify as a "change order." Changes that will result in a change order, and
therefore, will require adjustment of the guaranteed maximum price, include
changes in scope, systems, kind and quality of materials, finishes or
equipment. Broadmoor Anderson is a joint venture between Broadmoor and Roy
Anderson Corp., both of which have extensive construction experience and have
completed numerous gaming projects. As required by the contract, Broadmoor
Anderson provided a payment and performance bond for the entire contract price.
Subject to change orders and events outside its control, if Broadmoor Anderson
fails to substantially complete construction of the land-based facilities by
October 9, 2000, Broadmoor Anderson will be obligated to pay us $35,000 for
each and every day that substantial completion of construction is not achieved,
up to a maximum amount of $1.0 million. Substantial completion is defined under
the contract as the stage in the progress of the work when the work or any
designated portion of the work is sufficiently complete so that we can occupy
or utilize the work for our intended use. We may terminate the contract at any
time, without cause. If we do so, we will pay Broadmoor Anderson for all work
completed before our termination of the contract, costs incurred by reason of
the termination and reasonable overhead and profit on the work not completed.
Vessel Construction Contract
We have entered into a vessel construction contract with Leevac Shipyards,
Inc., under which Leevac will construct the vessel that will be used at our
Shreveport resort. We will pay Leevac $34.4 million, subject to adjustment for
any construction modifications or delays caused by natural forces, fire,
explosion, or persons not under the control of Leevac and not caused or
contributed to by Leevac or any of its subcontractors as well as other delays
not within Leevac's control, payable in an initial down payment of 10% of the
contract price and in subsequent installments upon completion of various stages
of work on the vessel. As required by the contract, Leevac provided a payment
and performance bond for the entire contract price. Subject to change orders
and events outside its control, Leevac must deliver the vessel in structurally
complete condition on June 15, 2000 and must complete all necessary work so
that the vessel is ready for gaming operations by October 2, 2000. If Leevac
fails to deliver and complete construction of the vessel on these dates, Leevac
will be obligated to pay us $50,000 per day for each and every day the delivery
of the vessel is late, up to a maximum of $600,000. We may terminate the
contract at any time without cause by giving seven days' prior written notice
to Leevac. If this occurs, we will pay Leevac for all work completed before our
termination of the contract.
Joint Venture Agreement of Hollywood Casino Shreveport
HCS I, HCS II and Shreveport Paddlewheels have entered into a Third Amended
and Restated Joint Venture Agreement of Hollywood Casino Shreveport, formerly
known as the Queen of New Orleans at the Hilton Joint Venture and QNOV. In the
joint venture agreement, the parties agreed to develop, construct, own and
operate a riverboat gaming casino and hotel and agreed that HCS I shall have
sole and exclusive control of our business.
HWCC-Louisiana and Sodak Louisiana, a former partner in QNOV, each
contributed $2.5 million of capital to us before September 1998. Shreveport
Paddlewheels contributed an additional $1.0 million to us when we received our
initial funding for the construction and development of the Shreveport resort.
As the agreement requires, HWCC-Louisiana loaned Shreveport Paddlewheels the
$1.0 million for its contribution, which is secured by a pledge of Shreveport
Paddlewheels' partnership interest and a collateral assignment of the agreement
providing for the payment to Shreveport Paddlewheels of approximately 1% of our
net revenues. Also, Shreveport Paddlewheels has been credited with another $1.0
million capital contribution to us in recognition of guarantees provided by New
Orleans Paddlewheels. As a result, Shreveport Paddlewheels will be entitled to
the return of $2.0 million of capital on any sale of our partnership, but will
not be entitled to any profits or losses from our operations. The joint venture
agreement also provides a mechanism to admit other parties to our partnership.
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We are required to make tax distributions to HCS I and HCS II at least once a
year. In addition, our profits and losses are to be allocated 99% to HCS I and
1% to HCS II. After commencement of operations, and upon a sale or other
disposition of our partnership (including upon a sale by the trustee following
any foreclosure), (1) HCS I, HCS II and Shreveport Paddlewheels will be
entitled to residual interests equal to 89.1%, 0.9% and 10%, respectively, of
the net proceeds of the sale or disposition after payment of outstanding debt
and the return of contributed capital and (2) Shreveport Paddlewheels is
entitled to receive an additional amount representing the appraised value of
its future fees under the marine services agreement.
Assignment of Joint Venture Interest
HWCC-Louisiana, Sodak Louisiana, New Orleans Paddlewheels and Shreveport
Paddlewheels have entered into an Amended and Restated Assignment of Joint
Venture Interest pursuant to which New Orleans Paddlewheels and Shreveport
Paddlewheels have assigned their interests in us to HWCC-Louisiana and Sodak
Louisiana. Under the agreement, Shreveport Paddlewheels is entitled to receive
an amount equal to approximately 1% of the net revenues of Hollywood Casino
Shreveport, until Shreveport Paddlewheels no longer holds its residual
interest. HCS I and HCS II have assumed HWCC-Louisiana's obligations under this
agreement.
Management Services Agreement
We have entered into a management agreement with HWCC-Shreveport, a direct
subsidiary of Hollywood Casino, which will result in the executives of
Hollywood Casino effectively operating and managing the Shreveport resort. Each
of the executive officers of HWCC-Shreveport, with the exception of Juris
Basens, is currently an executive officer of Hollywood Casino. Under the terms
of the management agreement, HWCC-Shreveport will have uninterrupted control of
the operations of the Shreveport resort during the term of the management
agreement, including, but not limited to the following:
. Pre-opening sales office set-up, together with a pre-opening
marketing plan to be approved in advance by us;
. With the exception of the general manager, sole and absolute
discretion to hire, supervise, direct the work of, discharge and
determine the compensation and other benefits of all employees at
the Shreveport resort;
. Coordination of initial inventory purchases;
. Establishment of operating policies and procedures for the
Shreveport resort;
. Establishment of security systems for assets, personnel and patrons
of the Shreveport resort;
. Establishment of accounting and internal control systems and
procedures;
. Establishment of a preventative maintenance program;
. Establishment of risk management policies and procedures; and
. Training of all staff.
Management Fees. We will pay HWCC-Shreveport a basic and an incentive
management fee for its services. The basic management fee will be equal to 2%
of the net revenues from casino operations, hotel operations and all other
facilities and amenities at the Shreveport resort managed by HWCC-Shreveport,
less particular items specified in the management agreement. The incentive fee
will be equal to the sum of:
. 5% of EBITDA in excess of $25 million and up to $35 million;
. 7% of EBITDA in excess of $35 million and up to $40 million; and
. 10% of EBITDA in excess of $40 million.
For purposes of calculating the incentive fee, "EBITDA" is reduced by the
basic management fee but not the marine services fee or the approximately 1% of
our net revenues payable to Shreveport Paddlewheels.
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The payment of management fees to the manager of the Shreveport resort will
be subordinated to all payments on the notes. In addition, management fees may
not be paid if there is a default under the notes or if the payment would cause
our fixed charge coverage ratio under the indenture to be less than 1.5 to 1.
We will also reimburse HWCC-Shreveport for its expenses incurred in connection
with the services provided under the management agreement.
Term. The term of the management agreement began in September 1998, when the
Louisiana Gaming Control Board approved the development of the Shreveport
resort, and will continue until we no longer hold a riverboat gaming license in
Louisiana, subject to earlier termination as provided below.
Termination. Each party has the right to terminate the management agreement
if (1) the other party materially breaches the agreement, (2) any statute,
regulation, rule or ruling renders the conduct of gaming in the United States
or at the Shreveport resort illegal, (3) the Louisiana Gaming Control Board
deems HWCC- Shreveport unsuitable or (4) the U.S. Patent and Trademark Office
rescinds the "Hollywood Casino" trademark. In addition, each party has the
right to terminate the management agreement if, in its good faith judgment,
certain facts occur which would jeopardize any gaming license or application
for a gaming license of such terminating party or its affiliates anywhere in
the United States. In this case, the non-terminating party may purchase all of
the terminating party's (or its affiliate's) interest in us at a mutually
agreed upon purchase price.
We may terminate the management agreement if, after completion of the first
full year after opening, for any two consecutive fiscal years the operating
cash flow margin is less than 75% of the operating cash flow margin of our
competitors.
If we fail to furnish the funds required for HWCC-Shreveport to properly
manage the Shreveport resort or fail to compensate or reimburse HWCC-Shreveport
in accordance with the management agreement, HWCC-Shreveport may (1) advance
the necessary funds in the form of a loan or (2) terminate the management
agreement. In addition, HWCC-Shreveport may terminate the management agreement,
in its sole discretion, if there is a voluntary or involuntary assignment,
transfer or disposition of our interest in the management agreement of the
Shreveport resort and (1) the assignee, purchaser, or recipient has not agreed
to be bound by the management agreement or (2) HWCC-Shreveport has not given
permission. We are required to notify HWCC-Shreveport at least 60 days before
any contemplated assignment, transfer or disposition. HWCC-Shreveport may
withhold its permission if it has good faith opinion that the action would
jeopardize, restrict, limit or create a right of cancellation of any approval,
consent or licensing of HWCC-Shreveport or its affiliates by any gaming
authorities. If HWCC-Shreveport terminates the management agreement due to any
of the foregoing reasons, and the cash flow for the Shreveport resort is in
excess of $1 for the immediately preceding fiscal quarter, we will be obligated
to pay HWCC-Shreveport an amount equal to two times the sum of the basic
management fee and incentive fee for the immediately preceding 12 months, plus
any other amounts owed to HWCC-Shreveport.
Technical Services Agreement
In connection with the management agreement, we have also entered into a
technical services agreement with HWCC-Shreveport, under which HWCC-Shreveport
is currently performing various advisory services in connection with the design
and construction of the Shreveport resort and will continue to do so until it
is substantially completed. As remuneration, we will reimburse HWCC-Shreveport
on a monthly basis for all expenses incurred in connection with its services.
Lease with the City of Shreveport
We have entered into a lease with the City of Shreveport for the land on
which our Shreveport resort will be constructed. The initial term of the lease
will begin on the day that construction of our resort begins and end ten years
after the date the resort opens. We have options to renew the lease on the same
terms for eight
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successive terms of five years each. Thereafter, we will have the option to
extend the lease under the then prevailing market rates and terms for ground
leases in the Shreveport/Bossier City area to owners and operators of riverboat
casinos.
The City of Shreveport may terminate the lease as a result of, among other
things, a default by us under the lease or failure to substantially complete
construction within 18 months of commencement, subject to extensions by the
Louisiana Gaming Control Board. We have the right to terminate the lease at any
time if operation of the Shreveport resort becomes uneconomic.
Base rental payments under the lease will be $10,000 per month during the
construction period increasing to $450,000 per year upon opening and continuing
at that amount for the remainder of the initial lease term. During the first
five-year renewal term, the annual base rental payment will be $402,500. The
annual base rental payment will be $462,875 for the second five-year renewal
term, $532,306 for the third five-year renewal term, $612,152 for the fourth
five-year renewal term and $703,975 for the fifth five-year renewal term with
no further increases. In addition to the base rent, we will pay monthly
percentage rent of not less than $500,000 per year, equal to 1% of monthly
adjusted gross revenues and the amount, if any, by which the monthly parking
facilities' net income exceeds the parking income credit.
Retail Lease
In connection with the ground lease, we have entered into a retail space
lease with Red River Entertainment under which we have leased approximately
42,000 square feet of retail space to Red River Entertainment. The initial term
of the lease is the same period as our lease with the City of Shreveport. Red
River Entertainment has three five-year options to renew the lease upon 180
days prior notice to us. Red River Entertainment will pay $6 per square foot
annually, payable monthly. In addition, Red River Entertainment will pay us a
percentage rent equal to the sum of:
. 50% of the net cash flow generated by the retail space which does
not exceed $550,000 per year;
. 25% of the net cash flow generated by the retail space in excess of
$550,000 and which does not exceed $615,000 during the year; and
. 40% of the net cash flow generated by the retail space in excess of
$615,000 in that year.
Trademark License Agreement
We have entered into a trademark license agreement with Hollywood Casino,
under which Hollywood Casino granted a license to us to use all of Hollywood
Casino's service marks and trademarks for an initial term of five years, with
automatic renewals each year for an additional one year period. In connection
with the trademark license agreement, we may only use the trademarks in Bossier
and Caddo Parishes, Louisiana, the parishes encompassing Shreveport and Bossier
City. We will pay royalties in the amount of $100 per year to Hollywood Casino
for the use of the license. Upon termination of the management agreement for
any reason, the license agreement will also terminate and we will only be
permitted to use the Hollywood Casino trademarks for six months following such
termination.
Tax Sharing Agreement
HWCC-Louisiana, HCS I and HCS II have entered into a tax sharing agreement
with Hollywood Casino. Hollywood Casino is the parent company of a group of
companies which includes HWCC-Louisiana, HCS I and HCS II and files
consolidated federal income tax returns. Under the terms of the tax sharing
agreement, each of HWCC-Louisiana, HCS I and HCS II will pay Hollywood Casino
an amount equal to its separate tax liability. The separate tax liability of
each of HWCC-Louisiana, HCS I and HCS II will be that amount of federal income
tax that it would owe if it filed a tax return independent of the Hollywood
Casino group of companies. If the calculation of the separate tax liability for
any year results in a net operating loss, Hollywood Casino will credit the
amount of the loss against any amount which HWCC-Louisiana, HCS I and HCS II
might otherwise have to pay Hollywood Casino in any future tax year or refund
HWCC-Louisiana, HCS I and
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HCS II amounts previously paid by HWCC-Louisiana, HCS I and HCS II under the
tax sharing agreement, provided that HWCC-Louisiana, HCS I and HCS II remain a
part of the Hollywood Casino group of companies. The obligation of HWCC-
Louisiana, HCS I and HCS II to make tax payments under the tax sharing
agreement continues regardless of whether there has been a default in the
payment of the notes.
In the event that HWCC-Louisiana, HCS I or HCS II are required to file a
consolidated, combined, unitary or similar tax return for state or local income
or franchise tax purposes, the tax sharing agreement will be amended so as to
apply the principles set forth therein to such tax return, and the definition
of "Tax Amount" in the indenture will include amounts sufficient to permit
HWCC-Louisiana, HCS I and HCS II to satisfy their respective obligations under
the tax sharing agreement as so amended.
Compromise Agreement; Side Agreement
HWCC-Louisiana entered into a compromise agreement with Hilton New Orleans
Corporation, New Orleans Paddlewheels and the City of New Orleans, in
connection with which Hilton New Orleans agreed to pay the City of New Orleans
$5.0 million in settlement of tax claims made by the City of New Orleans
against our predecessor and HWCC-Louisiana and Sodak agreed to pay an
additional $5.0 million to the City of New Orleans contingently upon receipt of
the first proceeds of construction financing representing approximately 70% of
the total project cost for the Shreveport resort. HCS I and HCS II assumed this
obligation of HWCC-Louisiana and Sodak Louisiana. The $5.0 million payment to
the City of New Orleans was made in August 1999.
Loan and Settlement Agreement
In connection with the compromise agreement, New Orleans Paddlewheels,
Shreveport Paddlewheels, HWCC-Louisiana, Sodak Louisiana and Hilton New Orleans
have entered into a loan and settlement agreement. Under this agreement, HWCC-
Louisiana and Sodak Louisiana agreed that we would contingently reimburse a
$2.0 million payment made by Hilton New Orleans to the City of New Orleans upon
the earlier of the termination of the construction of the Shreveport resort or
in ten monthly installments of $200,000 beginning with the opening of the
Shreveport resort. This obligation arose upon the completion of the offering of
the original notes and HCS I and HCS II assumed the obligations of HWCC-
Louisiana to cause us to pay the $2.0 million under the agreement.
Marine Services Agreement
We have entered into a marine services agreement with Shreveport
Paddlewheels, in connection with which Shreveport Paddlewheels will provide
consulting services concerning marine regulatory matters in connection with the
construction, development and operation of our riverboat casino. We will pay
Shreveport Paddlewheels a consulting fee of $30,000 per month plus reasonable
expenses, beginning on the opening date of our Shreveport resort. The marine
services agreement terminates immediately if neither Shreveport Paddlewheels
nor one of its affiliates owns an interest in the Shreveport resort.
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MANAGEMENT
We draw upon the gaming experience of Hollywood Casino, which, through HWCC-
Shreveport, will develop, manage and oversee the operation of the Shreveport
resort. The name, age and respective position of each director and executive
officer, each of whom, with the exception of Juris Basens, holds a comparable
position with Hollywood Casino, are as follows:
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<C> <C> <S>
Jack E. Pratt........... 72 Chief Executive Officer and Chairman of the Board
of Directors
Edward T. Pratt, Jr. ... 76 Vice Chairman of the Board of Directors
William D. Pratt........ 71 Executive Vice President, Secretary, General
Counsel and Director
Edward T. Pratt III..... 44 President
Paul C. Yates........... 38 Executive Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary
Charles F. LaFrano III.. 45 Vice President and Assistant Secretary
Juris Basens............ 45 Vice President and General Manager
</TABLE>
Set forth below is a description of the backgrounds of our directors and
executive officers. Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt
are brothers and Edward T. Pratt III is the son of Edward T. Pratt, Jr. There
is no other family relationship between any of the directors and any of the
executive officers or any of our subsidiaries or affiliates. Our officers are
elected by the Board of Directors and hold office until their respective
successors are duly elected and qualified.
Jack E. Pratt has been Chief Executive Officer of HWCC-Louisiana and HWCC-
Shreveport since June 16, 1999 and of HCS I, HCS II and Shreveport Capital
since July 21, 1999. He also served as Chairman of the Board of Directors and
President of HWCC-Louisiana from April 1993 to June 15, 1999 and as Chairman of
the Board of Directors and President of HWCC-Shreveport from November 1997 to
June 15, 1999. Mr. Pratt has been Chief Executive Officer and Chairman of the
Board of Hollywood Casino since 1993. From 1990 to May 1995, he also served as
President of Hollywood Casino. Mr. Pratt has served as a director of Greate Bay
Casino Corporation for more than five years. He also served as Chairman of the
Board of Directors and Chief Executive Officer of Greate Bay for more than five
years prior to his resignation from such positions on January 2, 1998. Mr.
Pratt served as Chairman of the Board of Directors and Chief Executive Officer
of GB Holdings, Inc. and Greate Bay Hotel and Casino, Inc. and as Chairman of
the Board of Directors, President and Chief Executive Officer of GB Property
Funding until his resignation from such positions on January 2, 1998. On
January 5, 1998, these Greate Bay subsidiaries filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code. Mr. Pratt served until his
resignation from such positions in January 1998 as Chairman of the Board of
Directors and Chief Executive Officer of Pratt Casino Corporation, Chairman of
the Board of Directors, President and Chief Executive Officer of PRT Funding
Corp. and Chairman of the Board of Directors and President of New Jersey
Management, Inc. On May 25, 1999, Pratt Casino, PRT Funding and New Jersey
Management filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code.
Edward T. Pratt, Jr. has been Vice Chairman of the Board of Directors of
HWCC-Louisiana and HWCC-Shreveport since June 16, 1999 and of HCS I, HCS II and
Shreveport Capital since July 21, 1999. He also served as Vice President,
Treasurer and a director of HWCC-Louisiana from April 1993 to June 15, 1999 and
as Vice President, Treasurer and a director of HWCC-Shreveport from November
1997 to June 15, 1999. Mr. Pratt has been Vice President, Treasurer and Vice
Chairman of the Board of Directors of Hollywood Casino since 1990 and has
served for more than five years as Treasurer and Vice Chairman of the Board of
Directors of Greate Bay. Mr. Pratt also served until his resignation from such
positions on January 2, 1998 as Vice Chairman of the Board of Directors of GB
Holdings and of GB Property Funding and as a director of Great Bay Hotel and
Casino. On January 5, 1998, these Greate subsidiaries filed petitions for
relief under Chapter 11 of the United States Bankruptcy Code. Mr. Pratt has
been Chief Financial Officer, Principal Accounting Officer and a director of
Pratt Casino, PRT Funding and New Jersey Management since January 2, 1998 and
also
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served as Vice Chairman of the Board of Directors of Pratt Casino and PRT
Funding from September 1993 to January 1, 1998 and as Executive Vice President,
Treasurer and a director of New Jersey Management for more than five years
prior to January 1, 1998. On May 25, 1999, Pratt Casino, PRT Funding and New
Jersey Management filed petitions for relief under Chapter 11 of the United
States Bankruptcy Code.
William D. Pratt has been Executive Vice President, Secretary, General
Counsel and a director of HWCC-Louisiana and HWCC-Shreveport since June 16,
1999 and of HCS I, HCS II and Shreveport Capital since July 21, 1999. He also
served as Vice President, Secretary and a director of HWCC-Louisiana from April
1993 to June 15, 1998 and as Vice President, Secretary and a director of HWCC-
Shreveport from November 1997 to June 15, 1999. Mr. Pratt has served as
Executive Vice President, Secretary, General Counsel and a director of
Hollywood Casino since 1990 and has served as Executive Vice President,
Secretary, General Counsel and director of Greate Bay for more than five years.
Mr. Pratt also served until his resignation from such positions on January 2,
1998 as Executive Vice President, General Counsel and Secretary of GB Holdings
and GB Property Funding and as a director of Greate Bay Hotel and Casino. On
January 5, 1998, these Greate Bay subsidiaries filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code. Mr. Pratt also served until
his resignation from such positions in January 1998 as Executive Vice
President, Secretary, General Counsel and a director of Pratt Casino and PRT
Funding and as Vice President, Secretary and a director of New Jersey
Management. On May 25, 1999, Pratt Casino, PRT Funding and New Jersey
Management filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code.
Edward T. Pratt III has been President of HWCC-Louisiana and HWCC-Shreveport
since June 16, 1999 and of HCS I, HCS II and Shreveport Capital since July 21,
1999. From October 1998 to June 15, 1999, he also served as Vice President of
HWCC-Louisiana and HWCC-Shreveport. Mr. Pratt has served on the Board of
Directors of Hollywood Casino since 1992. From 1992 to July 1993, he served as
Vice President, from July 1993 to May 1995, he served as Executive Vice
President, and in May 1995, Mr. Pratt was elected President and Chief Operating
Officer of Hollywood Casino. Mr. Pratt served as Executive Vice President--
Development and Corporate Affairs of Greate Bay for more than five years until
November 1995 when he was elected President and Chief Operating Officer of
Greate Bay. He also served until his resignation from such positions on
January 2, 1998 as President, Chief Operating Officer and a director of GB
Holdings and as Executive Vice President and a director of GB Property Funding.
On January 5, 1998, these Greate Bay subsidiaries filed petitions for relief
under Chapter 11 of the United States Bankruptcy Code. Mr. Pratt has been
Executive Vice President and Secretary of Pratt Casino, PRT Funding and New
Jersey Management since January 2, 1998 and also served as President, Chief
Operating Officer and a director of Pratt Casino and as Executive Vice
President and a director of PRT Funding from September 1993 to January 1, 1998.
On May 25, 1999, Pratt Casino, PRT Funding and New Jersey Management filed
petitions for relief under Chapter 11 of the United States Bankruptcy Code.
Paul C. Yates has been Executive Vice President, Chief Financial Officer and
Assistant Secretary of HWCC -Louisiana and HWCC-Shreveport since June 16, 1999
and Treasurer of HWCC-Louisiana and HWCC-Shreveport since July 21, 1999 and has
been Executive Vice President, Chief Financial Officer, Treasurer and Assistant
Secretary of HCS I, HCS II and Shreveport Capital since July 21, 1999. Mr.
Yates has also served as Executive Vice President and Chief Financial Officer
of Hollywood Casino since May 1998. Prior to August 1997, Mr. Yates served as a
Managing Director of Bear, Stearns & Co. Inc., a leading national investment
banking firm, for a period of more than five years. Bear, Stearns & Co. served
as an underwriter with respect to Hollywood Casino's October 1995 offering of
its 12 3/4% Senior Secured Notes, Hollywood Casino's May 1999 offering of its
11 1/4% Senior Secured Notes due 2007 and Floating Rate Senior Secured Notes
due 2006 and was an initial purchaser of the original notes offered in the
original offering.
Charles F. LaFrano III has been Vice President and Assistant Secretary of
HWCC-Louisiana and HWCC-Shreveport since October 1998 and of HCS I, HCS II and
Shreveport Capital since July 21, 1999. Mr. LaFrano has also served as Vice
President of Finance of Hollywood Casino since 1994 and has served as Vice
President of Greate Bay for more than five years. Mr. LaFrano served until his
resignation from such positions on January 2, 1998 as Vice President and
Assistant Secretary of GB Holdings and GB Property Funding. On January 5, 1998,
these Greate Bay subsidiaries filed petitions for relief under Chapter 11 of
the United States
53
<PAGE>
Bankruptcy Code. Mr. LaFrano served until his resignation from such positions
in January 1998 as Vice President and Assistant Secretary of Pratt Casino and
PRT Funding. On May 25, 1999, Pratt Casino and PRT Funding filed petitions for
relief under Chapter 11 of the United States Bankruptcy Code.
Juris Basens has been Vice President and General Manager of HCS I and Vice
President of HWCC- Shreveport since September 1999. Prior to such time, Mr.
Basens served as Vice President and General Manager of Casino Magic in Bossier
City, Louisiana, for a period of approximately two years. Mr. Basens also
served as Vice President and Chief Operating Officer of Casino Magic Corp. for
approximately one year. Prior to July 1996, Mr. Basens served as Vice President
and Chief Operating Officer of Casino America, Inc.
Compensation of Our Executive Officers
Each of the foregoing executive officers, with the exception of Juris Basens,
is also a full-time salaried employee of Hollywood Casino and will not be
compensated by us but will provide management services to us with respect to
the operation of the Shreveport resort.
Hollywood Casino Executive Compensation
The following table provides certain summary information concerning
compensation Hollywood Casino paid or accrued to or on behalf of its Chief
Executive Officer and each of its four other most highly compensated executive
officers determined as of the end of the last fiscal year for the fiscal years
ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Annual Compensation Long-term
------------------------------ Compensation
Other Annual Awards/ All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation(1)
- --------------------------- ---- -------- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Pratt(2)......... 1999 $645,000 $284,749 $-- 450,000 $29,610
Chief Executive Officer
and 1998 643,729 170,208 -- 150,000 19,270
Chairman of the Board 1997 643,235 228,476 -- 150,000 33,920
Edward T. Pratt III(2)... 1999 425,000 284,749 -- 450,000 4,000
President and Chief
Operating 1998 423,860 170,208 -- 150,000 4,000
Officer 1997 423,840 228,476 -- 150,000 3,500
Edward T. Pratt, Jr.(2).. 1999 325,000 122,145 -- -- 4,000
Vice President,
Treasurer and 1998 323,425 73,012 -- -- 4,000
Vice Chairman of the
Board 1997 324,312 101,545 -- -- 3,500
William D. Pratt(2)...... 1999 295,000 122,145 -- -- 16,815
Executive Vice
President, 1998 293,373 73,012 -- -- 11,240
Secretary and General
Counsel 1997 294,195 101,545 -- -- 11,547
Paul C. Yates(3)......... 1999 250,000 114,510 -- 50,000 1,442
Executive Vice President
and 1998 164,113 75,000 -- 150,000 --
Chief Financial Officer
</TABLE>
- --------
(1) Includes matching contributions by Hollywood Casino to The Hollywood Casino
Corporation Retirement Savings Plan (the "Savings Plan") on behalf of the
named executive officer. See "--Employee Retirement Savings Plan." Amounts
provided above for Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt
also include pension benefit accruals on their behalf. See also "--
Employment Contracts."
(2) Jack E. Pratt held and Edward T. Pratt, Jr., William D. Pratt and Edward T.
Pratt III concurrently hold positions as officers of Greate Bay Casino
Corporation. Through September 1998, Greate Bay reimbursed Hollywood Casino
for that portion of salary, bonus and other compensation which relates to
services provided by Greate Bay. Effective October 1, 1998, Greate Bay pays
Hollywood Casino a monthly service fee which approximates its portion of
shared overhead costs.
(3) Mr. Yates began his employment in May 1998 and, therefore, the amounts
reflected above for 1998 represent only the period from the commencement of
his employment through the end of the year.
54
<PAGE>
Option Grants in Last Fiscal Year
The following table contains information concerning the grant of stock
options under the Hollywood Casino Corporation 1996 Long-Term Incentive Plan
(the "1996 Plan") to the named executive officers. No grants of stock options
under the 1992 Hollywood Casino Corporation Stock Option Plan (the "1992 Plan")
were made to the named executive officers during the fiscal year ended December
31, 1999.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year-Individual Grants Potential Realizable
------------------------------------------------------------ Value at Assumed
% of Annual Rates of Stock
Total Options Price Appreciation for
Options/ Granted to Market Price Option Term
SAR'S Employees in Exercise or on Date of Expiration -----------------------
Name Granted(1) Fiscal Year Base Price Grant Date 5% 10%
---- ---------- ------------- ----------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack E. Pratt........... 450,000 35.0 $1.25 $1.25 4/5/04 $ 155,408 $343,412
Edward T. Pratt III..... 450,000 35.0 1.25 1.25 4/5/04 155,408 343,412
Edward T. Pratt, Jr. ... -- -- -- -- -- -- --
William D. Pratt........ -- -- -- -- -- -- --
Paul C. Yates........... 50,000 3.9 1.25 1.25 4/5/09 25,444 59,295
</TABLE>
- --------
(1) Options are granted "at market" on the date of grant and first become
exercisable six months from the date of grant for Jack E. Pratt and Edward
T. Pratt III. The options granted to Mr. Yates were awarded on April 6,
1999 and become exercisable as follows: 10,000 shares on or after
December 1, 1999 and 10,000 shares on or after each December 1 of 2000,
2001, 2002 and 2003.
Option Exercises and Holdings
The following table provides information, with respect to the named executive
officers, concerning options outstanding under the 1992 Plan and the 1996 Plan
during the last fiscal year and unexercised options held as of the end of the
fiscal year. There were no in the money options at fiscal year end as the
market price was less than the exercise price in all cases.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
<TABLE>
<CAPTION>
Value of Unexercised
in the Money Options
at Fiscal Year-End
Value Realized (Market Price of Shares
(Market Price Number of Unexercised at Fiscal Year End($4.31)
Shares at Exercise Options at Fiscal Year End Less Exercise Price)
Acquired Less ------------------------------ -------------------------
Name on Exercise Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Pratt........... -- $ -- 900,000 -- $2,165,625 $ --
Edward T. Pratt III..... -- -- 900,000 -- 2,165,625 --
Edward T. Pratt, Jr. ... -- -- -- -- -- --
William D. Pratt........ -- -- -- -- -- --
Paul C. Yates........... -- -- 60,000 140,000 150,938 363,125
</TABLE>
On June 19, 1998, the Hollywood Casino Board of Directors approved the
repricing of all options granted under the Hollywood Casino Corporation 1996
Non-Employee Director Stock Option Plan (the "Directors Plan") before January
1, 1998. The exercise price on these options was reset at $1.75 per share, the
market value of the stock of Hollywood Casino at the date of repricing. All of
the options repriced remain fully vested. The following table presents
information concerning the repricing of options to all of the executive
officers and directors since their inception.
55
<PAGE>
Ten Year Option Repricing Table
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price of Option Term
Underlying Stock Exercise Price New Remaining at
Date of Options at Time at Time of Exercise Date of
Name Repricing Required of Repricing Repricing Price Repricing
---- --------- ---------- ------------ -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
James A. Colquitt....... 6/19/98 10,000 $1.75 $6.25 $1.75 8 yr.
James A. Colquitt....... 6/19/98 2,500 1.75 3.88 1.75 8 yr., 7 mo.
Theodore H. Strauss..... 6/19/98 10,000 1.75 6.25 1.75 8 yr.
Theodore H. Strauss..... 6/19/98 2,500 1.75 3.88 1.75 8 yr., 7 mo.
Oliver B. Revell III.... 6/19/98 10,000 1.75 2.81 1.75 9 yr., 3 mo.
</TABLE>
Compensation Committee Interlocks and Insider Participation
The compensation committee of the Hollywood Casino Board of Directors is
comprised of William D. Pratt, James A. Colquitt and Theodore H. Strauss. Mr.
Pratt also serves as an executive officer and director of Greate Bay. Mr.
Strauss is a Senior Managing Director of Bear, Stearns & Co., which served as
underwriters with respect to Hollywood Casino's offering of its 12 3/4% Senior
Secured Notes and was an initial purchaser of Hollywood Casino's 1999 offering
of $360.0 million Senior Secured Notes.
Compensation of Directors
Hollywood Casino's non-employee directors receive an annual fee of $50,000
for service on the Board of Directors as well as grants of stock options under
the Director's Plan. Directors who are Hollywood Casino officers, employees or
otherwise affiliated with Hollywood Casino are not presently expected to
receive compensation for their services as directors. Directors are entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the Hollywood Casino Board of
Directors or committees of the Hollywood Casino Board of Directors.
Employment Contracts
Jack E. Pratt, Chairman of the Board and Chief Executive Officer, Edward T.
Pratt, Jr., Vice Chairman of the Board, Vice President and Treasurer, and
William D. Pratt, Executive Vice President, Secretary and General Counsel, are
under employment contracts with Hollywood Casino and have provided services to
Greate Bay under intercompany service and allocation agreements ratified by the
respective non-interested directors of the Board of Directors. Their employment
contracts were executed during October 1989 and originally expired on September
30, 1992, but have subsequently been extended by amendment through December 31,
2003 with respect to Jack E. Pratt and to December 31, 2002 with respect to
Edward T. Pratt, Jr. and William D. Pratt. Services to Greate Bay will continue
to be provided pursuant to intercompany service agreements. The terms of the
contracts may be extended again by mutual agreement of the parties and the
extended term, or any further extension thereof, will be followed immediately
by a four-year period as consultants to Hollywood Casino. Upon expiration of
the consulting term, each of the Pratt brothers will be entitled to receive a
lifetime pension benefit and his designated beneficiary is entitled to receive
a death benefit, throughout the term of the employment, consulting and pension
benefit periods.
The terms of the employment contracts provide for an annual base salary in
the first year for Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt of
$350,000, $223,000 and $191,000, respectively, subject to annual review and
increase by the compensation committee of the Hollywood Casino Board of
Directors. Compensation under the consulting and pension benefit provisions of
the employment contracts of each of the Pratt brothers will be 75% of their
respective highest annual salaries during the employment term of each contract.
The death benefit is derived by multiplying each Pratt brother's highest annual
salary during his employment term by 50%. The benefit will be paid annually to
his designated beneficiary for a period of
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<PAGE>
ten years after his death. The estimated annual pension benefit payable to Jack
E. Pratt, Edward T. Pratt, Jr. and William D. Pratt is currently $500,000,
$250,000 and $227,000, respectively.
Edward T. Pratt III, President and Chief Operating Officer, is under an
employment contract with Hollywood Casino dated as of January 1, 2000 in such
capacities continuing through December 31, 2003 unless sooner terminated by
either party. The terms of Mr. Pratt's agreement provide for a minimum annual
base salary effective January 1, 2000 of $468,000, subject to annual review and
increase by the compensation committee of the Hollywood Casino Board of
Directors. If a change in control occurs, the agreement provides that if Mr.
Pratt's employment were to be terminated, he would receive the greater of the
remaining compensation under his employment contract or three times his then
annual base salary, payable in a lump sum or in equal monthly installments over
the applicable period.
Paul C. Yates, Executive Vice President and Chief Financial Officer, is under
an employment contract with Hollywood Casino dated as of January 1, 2000
continuing through December 31, 2002, unless sooner terminated by either party.
The terms of Mr. Yates agreement provide for a minimum annual base compensation
of $275,000 during 2000 and increasing to an annual base compensation of
$300,000 effective January 1, 2001 for the remainder of the term of the
contract. In addition, Mr. Yates participates in Hollywood Casino's incentive
bonus plans; however, the employment agreement provides for a minimum annual
bonus of $75,000. If a change in control occurs, the agreement provides that if
Mr. Yates' employment were to be terminated, he would receive the remaining
compensation and minimum bonus under his employment agreement payable in a lump
sum or in equal monthly installments over the applicable period.
HWCC Development Corporation entered into an employment agreement with Juris
Basens which was subsequently assigned to us. Under the employment agreement,
Mr. Basens will serve as our Vice President and General Manager until August
30, 2002. Mr. Basens will receive an annual base salary of $225,000 and a
minimum incentive bonus of $8,333 per month until December 31, 2000 and a
minimum annual bonus of $150,000 for each calendar year thereafter. Mr. Basens
also received a one-time signing bonus of $75,000. On September 16, 1999,
Hollywood Casino granted Mr. Basens stock options to purchase 50,000 shares of
class A common stock of Hollywood Casino pursuant to the 1996 Plan at an
exercise price of $2.50 per share, the market value on the date of grant, that
will vest in increments of 12,500 shares on each September 16 in the years 2000
through 2003.
Stock Option Plans
The Hollywood Casino Corporation 1996 Long-Term Incentive Plan. During 1996,
Hollywood Casino's stockholders approved the adoption of the Hollywood Casino
Corporation 1996 Long-Term Incentive Plan. Hollywood Casino has reserved
3,000,000 shares of its class A common stock for grants of nonqualified stock
options, stock options qualified for special tax treatment under the Code and
restricted stock awards (collectively, "awards") to its employees and those of
its subsidiaries.
Awards under the 1996 Plan, together with the exercise price, vesting
schedule and restrictions and conditions, if any, are determined by a committee
of the Hollywood Casino Board of Directors. However, any common stock acquired
pursuant to an award to a director, executive officer or 10% or greater
stockholder must be held by that participant for at least six months from the
date of the award, unless the committee determines that a disposition would not
violate the federal securities laws. The exercise price must be at least 100%,
or at least 110% in the case of incentive stock options granted to certain
employees who own greater than 10% of Hollywood Casino's outstanding common
stock, of the fair market value of the common stock on the date of grant and
may be paid in cash or in shares of Hollywood Casino common stock valued at
fair market value on the date of exercise.
No participant in the 1996 Plan may currently receive awards during any
fiscal year covering an aggregate of more than 500,000 shares of common stock.
The grant of incentive stock options is also subject to a $100,000 calendar
year limit for each participant. Upon termination of a participant's employment
for any reason, the participant will forfeit the nonvested portions of all
awards he or she holds. Awards which have not yet vested are not transferable
or assignable other than by will, by the laws of descent and distribution or as
57
<PAGE>
otherwise allowed by the 1996 Plan. The 1996 Plan also provides that if a
change in control occurs, all unmatured installments of awards will become
fully accelerated and exercisable in full.
The Hollywood Casino Corporation 1996 Non-Employee Director Stock
Plan. During 1996, Hollywood Casino's stockholders approved the adoption of the
Hollywood Casino Corporation 1996 Non-Employee Director Stock Plan. Hollywood
Casino has reserved 150,000 shares of its class A common stock for grants of
nonqualified stock options to its directors who are not employees ("outside
directors") in order to attract and retain these individuals and encourage
their performance.
Under the Directors' Plan, an option to purchase 10,000 shares of common
stock of Hollywood Casino was granted to each outside director upon adoption of
the Directors' Plan in 1996. Each person becoming an outside director of
Hollywood Casino after adoption of the Directors' Plan will automatically
receive an option to purchase 10,000 shares on the date that person becomes a
director. Additionally, outside directors will receive a nonqualified option to
purchase 2,500 shares of Hollywood Casino common stock on January 15 of each
year. The exercise price for all options under the Directors' Plan is 100% of
the fair market value of the common stock on the date of grant and may be paid
in cash or in shares of Hollywood Casino common stock valued at fair market
value on the date of exercise. An outside director may also elect to receive
all or part of his or her retainer fee in the form of common stock based on the
market value of the common stock as of the end of the period for which such fee
applies. Common stock received in lieu of a retainer fee is fully vested upon
receipt.
Options granted under the Directors' Plan extend for ten years from and may
be exercised any time after six months from the date of grant. Upon termination
of a participant's service as a director due to death or total disability,
outstanding options may be exercised for a period of 12 months after the
termination unless the original expiration date of the option is sooner. Upon
termination of a participant's service as a director for reason of retirement,
outstanding options may be exercised for a period of three months after
retirement. Options granted under the Directors' Plan are not transferable or
assignable other than by will, by the laws of descent and distribution or as
otherwise allowed by the Directors' Plan.
The 1992 Hollywood Casino Corporation Stock Option Plan. During 1992,
Hollywood Casino reserved 1,197,000 shares of its class B common stock for the
purpose of establishing the Hollywood Casino Corporation 1992 Stock Option Plan
for its key executives. After the completion of its initial public offering in
June 1993, all stock options outstanding under the 1992 Plan became exercisable
for class A common stock and any options granted under the 1992 Plan after that
date are to purchase class A common stock.
Options granted under the 1992 Plan vest in equal annual installments over a
period of three years. In the event of the death, disability or retirement of a
participant in the 1992 Plan, the participant's options will accelerate and be
exercisable in full. If the participant's employment with Hollywood Casino is
terminated for cause, the options held by that participant will automatically
terminate. Options granted under the 1992 Plan are not assignable except by
will, the laws of descent and distribution or pursuant to a qualified domestic
relations order. The 1992 Plan provides that if any person or group, other than
certain members of the Pratt family, becomes the beneficial owner of 51% or
more of the total voting power of each class of Hollywood Casino's capital
stock, subject to particular exceptions, the vesting of all outstanding options
will accelerate and be exercisable in full. The exercise of incentive stock
options granted under the 1992 Plan is subject to a $100,000 calendar-year
limit for each option holder based on the fair market value of the Hollywood
Casino's common stock at the time the option was granted. The exercise price of
options granted under the 1992 Plan may be paid in cash or in shares of class A
common stock valued at fair market value on the date of exercise.
Employee Retirement Savings Plan
During 1993, Hollywood Casino adopted The Hollywood Casino Corporation
Retirement Savings Plan, a qualified defined contribution plan for the benefit
of all of its employees who satisfy certain eligibility
58
<PAGE>
requirements. The Savings Plan is qualified under the requirements of Section
401(k) of the Internal Revenue Code allowing participating employees to benefit
from the tax deferral opportunities provided therein. All of their employees
who have completed one year of service and who have attained the age of 21, are
eligible to participate in the Savings Plan.
The Savings Plan provides for Hollywood Casino to make matching contributions
based upon certain criteria, including levels of participation by our
employees. Hollywood Casino accrued matching contributions totaling
approximately $652,000 for the year ended December 31, 1999.
Hollywood Casino's Design and Construction Team
Edward T. Pratt III is responsible for supervising the design, development,
construction and opening of the Shreveport resort. Mr. Pratt has over 20 years
of experience managing the construction of casino and hotel properties. Mr.
Pratt has been involved in numerous construction projects at Hollywood Casino
and its affiliates, including Hollywood Casino's dockside gaming facility and
hotel tower in Tunica County, Mississippi and its riverboat facility and
entertainment complex in Aurora, Illinois. Mr. Pratt has also been involved in
the construction of numerous hotel properties. Representative projects are the
Maxim's de Paris Hotels in New York City (now the Peninsula Hotel) and Palm
Springs, California and the Sheraton Hotel in Orlando.
Edwin C. Hanson III is the Vice President of Architecture and Construction of
HWCC Development Corporation, Hollywood Casino's development subsidiary, and
joined Hollywood Casino and its affiliates in March 1988. In this capacity, Mr.
Hanson is the principal employee responsible for supervising the construction
process, including developing initial plans and budgets, managing the bidding
process, selecting and hiring team consultants and contractors and transferring
projects to operations staff upon completion. Mr. Hanson has been involved with
numerous construction projects at Hollywood Casino and its affiliates,
including the construction of Hollywood Casino's dockside gaming facility and
hotel tower in Tunica County, Mississippi and its riverboat facility and
entertainment complex in Aurora, Illinois and renovations of the Sands Hotel
and Casino in Atlantic City, New Jersey. Prior to joining Hollywood Casino, Mr.
Hanson worked in the design and construction industry for nearly ten years and
was involved in a number of hotel and condominium projects. A representative
project is Trump's Castle Hotel and Casino in Atlantic City.
Charles F. LaFrano III is primarily responsible for the financial management
and cost control of Hollywood Casino's construction and development projects,
including conceptual cost estimates and project and construction cost
accounting. Mr. LaFrano has been involved with previous construction projects
at Hollywood Casino and its affiliates, including Hollywood Casino's dockside
gaming facility and hotel tower in Tunica County, Mississippi and its riverboat
facility and entertainment complex in Aurora, Illinois.
Samuel G. Bocchicchio is the Vice President of Design and Development of HWCC
Development and joined Hollywood Casino and its affiliates in January 1983. In
this capacity, Mr. Bocchicchio is primarily responsible for incorporating the
Hollywood theme into the designs and developments of Hollywood Casino, as well
as marketing materials, signage and other external communications. Mr.
Bocchicchio has been involved with designing the casino and hotel facilities at
all of Hollywood Casino's Tunica and Aurora facilities, as well as the Sands
Hotel and Casino in Atlantic City, New Jersey.
P. Sean Lavelle is the Vice President of Design and Procurement of HWCC
Development and joined Hollywood Casino and its affiliates in March 1999. In
this capacity, Mr. Lavelle is primarily responsible for developing the themed
identity program and managing the development process for new construction,
renovations and capital improvements for Hollywood Casino and its affiliates.
Mr. Lavelle also served as the Director of Design and Construction of Hollywood
Casino from 1992 to 1997 and was involved in the interior design of Hollywood
Casino's Aurora and Tunica County facilities. In addition, he served as Project
Manager of Hollywood Casino's affiliates from 1985 to 1989. Prior to joining
Hollywood Casino, Mr. Lavelle was responsible for developing and managing a
variety of projects, including capital improvements for 27 properties owned by
Richfield Hospitality Services, Inc. in 1997 and 1998 and the Grand Wailea
Resort and Spa in Wailea, Maui from 1989 to 1991.
59
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the common stock of Hollywood Casino by (1) each person who is
known by Hollywood Casino to own beneficially more than 5% of its common stock,
(2) each of Hollywood Casino's directors and named executive officers and (3)
all of Hollywood Casino's current directors and named executive officers as a
group. Hollywood Casino owns beneficially and of record all of the issued and
outstanding equity of HWCC-Shreveport, HWCC-Louisiana, HCS I and HCS II,
Shreveport Capital Corporation and the partnership interests (subject to
Shreveport Paddlewheels' residual interest) in Hollywood Casino Shreveport.
<TABLE>
<CAPTION>
Shares of
Common Stock Percentage of
Beneficial Owner Beneficially Owned(1) Outstanding Common Stock
- ---------------- --------------------- ------------------------
<S> <C> <C>
Jack E. Pratt.................. 8,669,377(2) 33.5%
Edward T. Pratt III............ 3,272,525(3) 12.7%
Edward T. Pratt, Jr............ 1,096,544 4.4%
William D. Pratt............... 1,385,747(4) 5.6%
Paul C. Yates.................. 234,000(5) *
Theodore H. Strauss............ 66,000(6) *
James A. Colquitt.............. 30,000(6) *
Oliver B. Revell III........... 17,500(6) *
All directors and officers as a
group (9 individuals)......... 14,807,693(7) 54.9%
</TABLE>
- --------
* Less than 1%
(1) Except as otherwise described, each individual has the sole power to vote
and dispose of the common stock beneficially owned by him.
(2) Mr. Pratt's address is Two Galleria Tower, Suite 2200, 13455 Noel Road,
Dallas, Texas 75240. Beneficial ownership is attributable to the following:
(a) C. A. Pratt Partners, Ltd., a Texas limited partnership of which Jack
E. Pratt is the General Partner, owns 1,642,001 shares, or 6.6%, of
Hollywood Casino's outstanding stock, (b) the MEP Family Partnership and
the CLP Family Partnership, both Texas general partnerships for which Mr.
Pratt is the Managing General Partner, own 14,000 and 7,000 shares,
respectively, both less than 1% of Hollywood Casino's outstanding stock,
(c) 1,109,632 shares, or 4.4%, of Hollywood Casino's outstanding stock
owned of record either by adult children of Mr. Pratt or by family trusts
and subject to a proxy giving him the right to vote such shares and
prohibiting the transfer of such shares without his approval and (d)
975,134 shares, or 3.9%, of Hollywood Casino's outstanding common stock
held by Mr. Pratt as custodian for his minor children. Also includes
options to purchase 900,000 shares of Hollywood Casino's common stock
exercisable within 60 days of the date hereof under the Hollywood Casino
Corporation 1996 Long-Term Incentive Plan (the "1996 Plan").
(3) Mr. Pratt's address is Two Galleria Tower, Suite 2200, 13455 Noel Road,
Dallas, Texas 75240. Beneficial ownership is attributable to 1,438,812
shares, or 5.8%, of Hollywood Casino's common stock owned of record by
siblings of Mr. Pratt and subject to a proxy giving him the right to vote
such shares and prohibiting the transfer of such shares without his
approval. Also includes options to purchase 900,000 shares of Hollywood
Casino's common stock exercisable within 60 days of the date hereof under
the 1996 Plan.
(4) Beneficial ownership is attributable to the following: (a) 381,088 shares,
or 1.5%, of Hollywood Casino's outstanding stock owned of record by adult
children of Mr. Pratt and subject to a proxy giving him the right to vote
such shares and prohibiting the transfer of such shares without his
approval and (b) WDP Jr. Family Trust, for which Mr. Pratt is the Managing
Trustee, owns 200,294 shares, less than 1% of Hollywood Casino's
outstanding stock.
(5) Includes options to purchase 94,000 shares of Hollywood Casino's common
stock exercisable within 60 days of the date hereof under the 1996 Plan.
(6) Includes 20,000 shares of Hollywood Casino's common stock for each of Mr.
Strauss and Mr. Colquitt and 15,000 shares of Hollywood Casino's common
stock for Mr. Revell subject to options exercisable within 60 days of the
date hereof under the Hollywood Casino Corporation 1996 Non-Employee
Director Stock Plan.
(7) Includes 1,963,000 shares of Hollywood Casino's common stock subject to
options exercisable within 60 days of the date hereof.
60
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Agreement
We have entered into a management agreement with HWCC-Shreveport. Under this
agreement, HWCC-Shreveport will manage the day-to-day operations of our
Shreveport resort. The terms of the management agreement are described in the
section entitled "Material Contracts--Management Agreement." We believe that
the terms of the agreement are at least as favorable as those that could be
obtained from third parties.
Technical Services Agreement
We have also entered into a technical services agreement with HWCC-Shreveport
to provide certain construction and project supervision services prior to the
opening of the Shreveport casino. The terms of the technical services agreement
are described in the section entitled "Material Contract--Technical Services
Agreement." We believe that the terms of the agreement are at least as
favorable as those that could be obtained from third parties.
Tax Sharing Agreement
The guarantors have entered into a tax sharing agreement with Hollywood
Casino and its other domestic corporate subsidiaries. Under this agreement,
Hollywood Casino will file consolidated federal income tax returns that include
the guarantors as part of a group of companies and each of the guarantors has
agreed to pay Hollywood Casino for its portion of the group's tax liability.
The terms of the tax sharing agreement are described in the section entitled
"Material Contracts--Tax Sharing Agreement." We believe that the terms of the
agreement are at least as favorable as those that could be obtained from third
parties.
Trademark License Agreement
We have entered into a trademark license agreement with Hollywood Casino.
Under this agreement, we will have the right to use the "Hollywood" name and
certain other trademarks in connection with our Shreveport resort. The terms of
the trademark license agreement are described in the section entitled "Material
Contracts--Trademark License Agreement." We believe that the terms of the
agreement are at least as favorable as those that could be obtained from third
parties.
Marine Services Agreement
We have entered into an agreement with Shreveport Paddlewheels to provide
certain marine services. The terms of the marine services agreement are
described in the section entitled "Material Contracts--Technical Services
Agreement." We believe that the terms of the agreement are at least as
favorable as those that could be obtained from third parties.
Assignment of Joint Venture Agreement
In connection with the assignment of all of New Orleans Paddlewheels' and a
portion of Shreveport Paddlewheels' interest in QNOV to HWCC-Louisiana and
Sodak Louisiana, we and those parties entered into an assignment agreement that
provides for, among other things, the payment to Shreveport Paddlewheels of an
amount equal to approximately 1% of our net revenues. The terms of the
assignment agreement are described in the section entitled "Material
Contracts--Assignment of Joint Venture Interest." HCS I and HCS II have assumed
HWCC-Louisiana's obligations under this agreement. We believe that the terms of
the agreement are at least as favorable as those that could be obtained from
third parties.
Loan and Settlement Agreement
In connection with the compromise agreement, New Orleans Paddlewheels,
Shreveport Paddlewheels, HWCC-Louisiana, Sodak Louisiana and Hilton New Orleans
have entered into a loan and settlement agreement. Under this agreement, HWCC-
Louisiana and Sodak Louisiana agreed that we would reimburse a $2.0 million
payment made by Hilton New Orleans to the City of New Orleans upon the earlier
of the termination of the construction of the Shreveport resort or in ten
monthly installments of $200,000, commencing with the opening of the Shreveport
resort. HCS I and HCS II have assumed HWCC-Louisiana's obligations to cause us
to pay the $2.0 million under this agreement. We believe that the terms of the
agreement are at least as favorable as those that could be obtained from third
parties.
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DESCRIPTION OF THE EXCHANGE OFFER
Purpose and Effect
On August 10, 1999, we sold the original notes to the initial purchasers. In
connection with the sale of the original notes, we entered a registration
rights agreement with the initial purchasers requiring us to register the notes
with the SEC and offer to exchange the registered notes for original notes. A
copy of the registration rights agreement has been filed as an exhibit to the
registration statement of which this prospectus is a part and we urge you to
read the text of the registration rights agreement. We expressly qualify all of
our discussions of the registration rights agreement by the terms of the
agreement itself. As a result of the timely filing and the effectiveness of the
registration statement, we will not owe liquidated damages provided for in the
registration rights agreement.
The registration rights agreement further provides that we will use our
reasonable best efforts to, among other things, cause to be filed with the SEC
this registration statement under the Securities Act with respect to an offer
to exchange your original notes for newly issued registered notes. Except as
discussed below, upon the completion of the exchange offer we will have no
further obligations to register your original notes. Any original notes not
tendered will continue to be subject to particular restrictions on transfer.
Accordingly, the liquidity of the market for the original notes could be
adversely affected upon consummation of the exchange offer.
In order to participate in the exchange offer, we require that you represent
to us that:
. you are acquiring the registered notes in the ordinary course of
your business;
. you are not engaging in, and do not intend to engage, in a
distribution of the registered notes;
. you do not have an arrangement or understanding with any person to
participate in the distribution of the registered notes;
. you are not our "affiliate," or an "affiliate" of the guarantors,
meaning that you, directly, or indirectly through one or more
intermediaries, do not control or are not controlled by or under
common control with, us or the guarantors; and
. if you are a broker-dealer, you will receive registered notes for
your own account, your registered notes will be acquired as a result
of market-making activities or other trading activities, and you
acknowledge that you will deliver a prospectus in connection with
any resale of your registered notes.
You may be entitled to "shelf" registration rights. In accordance with the
registration rights agreement, we are required to file a shelf registration
statement covering your original notes for a continuous offering of your
original notes if:
. we determine that we are not permitted to effect the exchange offer
because of any change in law or applicable interpretations of the
staff of the SEC; or
. any holder of Transfer Restricted Securities notifies us within 20
business days following the date the exchange offer is consummated
that:
(1) it is prohibited by law or SEC policy from participating in the
exchange offer; or
(2) it may not resell the registered notes acquired by it in the
exchange offer to the public without delivering a prospectus and
that this prospectus is not appropriate or available for such
resales; or
(3) it is a broker-dealer and owns original notes acquired directly
from us or any of our affiliates; or
. we do not consummate the exchange offer within 30 business days
after the exchange offer becomes effective.
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For purposes of the foregoing, "Transfer Restricted Securities" means each
original note until the earliest to occur of:
. the date on which the original note has been exchanged in the
exchange offer for a registered note which is entitled to be resold
to the public without complying with the prospectus delivery
requirements of the Securities Act,
. the date on which the original note has been disposed of in
accordance with a Shelf Registration Statement and the purchasers
thereof have been issued a registered note, or
. the date on which the registered note is distributed to the public
pursuant to the resale exemption contained in Rule 144 under the
Securities Act and each registered note held by a broker-dealer
until the date on which the registered note is disposed of by a
broker-dealer pursuant to the "Plan of Distribution" contemplated by
this registration statement, including the delivery of the
prospectus contained herein.
If we are obligated to file a shelf registration statement, we will be
required to keep the shelf registration statement effective for at least two
years until . Other than as described above, you will not have the right to
participate in the shelf registration or require that we register your original
notes in accordance with the Securities Act.
Based on interpretations of the SEC's staff set forth in no-action letters
issued to third parties unrelated to us and the guarantors, we believe that,
with the exceptions set forth below, your registered notes issued in connection
with the exchange offer in exchange for your original notes may be offered for
resale, resold, and otherwise transferred by you without compliance with the
registration and prospectus delivery requirements of the Securities Act if:
. the registered notes acquired in connection with the exchange offer
are being obtained in the ordinary course of your business;
. you are not engaging in and do not intend to engage in a
distribution of the registered notes;
. you do not have an arrangement or understanding with any person to
participate in a distribution of the registered notes; and
. you are not our "affiliate," or an "affiliate" of the guarantors.
If you tender in the exchange offer for the purpose of participating in a
distribution of the registered notes, you cannot rely on this interpretation by
the SEC's staff and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with your secondary resale
transaction. If you are a broker-dealer that receives registered notes for your
own account in exchange for your original notes, where such original notes were
acquired by you as a result of market-making activities or other trading
activities, you must acknowledge that you will deliver a prospectus in
connection with any resale of your registered notes. See the discussion under
the section entitled "Plan of Distribution." If you are a broker-dealer who
acquired original notes directly from us and not as a result of market-making
activities or other trading activities, you may not rely on the SEC's
interpretations discussed above or participate in the exchange offer and must
comply with the prospectus delivery requirements of the Securities Act in order
to sell your original notes.
Consequences of Failure to Exchange
Following the completion of the exchange offer, except as provided above and
in the registration rights agreement we refer to, you will not have any further
registration rights and your original notes will continue to be subject to
certain restrictions on transfer. Accordingly, if you do not participate in the
exchange offer, your ability to sell your original notes could be adversely
affected. You may suffer adverse consequences if you fail to exchange your
original notes. See the discussion under the section entitled "Risk Factors--
Failure to Exchange Original Notes."
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Terms of the Exchange Offer
Upon the terms and subject to the conditions discussed in this prospectus and
in the letter of transmittal, we will accept any validly tendered original
notes which are not withdrawn before 5:00 p.m., New York City time, on the
expiration date of the exchange offer. We will issue $1,000 principal amount of
registered notes in exchange for each $1,000 principal amount of your original
notes. You may tender some or all of your notes in the exchange offer. However,
you may tender your original notes only in integral multiples of $1,000 in
principal amount.
The form and terms of the registered notes will be the same as the form and
terms of your original notes except that:
. interest on the registered notes will accrue from the last interest
payment date on which interest was paid on your original notes, or,
if no interest was paid, from the date of the original issuance of
your original notes; and
. the registered notes have been registered under the Securities Act
and will not bear a legend restricting their transfer.
This prospectus, together with the letter of transmittal you received with
this prospectus, is being sent to the Depository Trust Company's (DTC) nominee
and to others believed to have beneficial interests in the original notes. You
do not have any appraisal or dissenters' rights under the General Corporation
Law of the State of Delaware or under the indenture governing your original
notes. We intend to conduct the exchange offer in accordance with the
requirements of the Securities Act and the rules and regulations of the SEC
under the Securities Act.
We will have accepted your validly tendered original notes when we have given
oral or written notice to the exchange agent. The exchange agent will act as
agent for the tendering holders for the purpose of receiving the registered
notes from us. If the exchange agent does not accept any tendered original
notes for exchange because of an invalid tender or for any other valid reason,
the exchange agent will return the certificates, without expense, to the
tendering holder as promptly as practicable after the expiration date of the
exchange offer.
If you participate in the exchange offer, you will not be required to pay
brokerage commissions, fees, or, subject to the instructions in the letter of
transmittal, transfer taxes in connection with the exchange of your original
notes for registered notes. We will pay all charges and expenses, other than
particular applicable taxes you may incur in connection with the exchange
offer.
Expiration Date; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., New York City time, on ,
2000, unless we, in our sole discretion, extend it. In no event do we intend to
extend the expiration date beyond the thirtieth business day following the
initial mailing of this prospectus. We will hold the exchange offer open for at
least 20 business days. If we decide to extend the exchange offer, we will
notify the exchange agent and each registered holder by oral or written notice
before 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We reserve the right, in our sole discretion:
. to delay accepting your original notes;
. to extend the exchange offer;
. to terminate the exchange offer if any of the conditions were not
satisfied by giving oral or written notice of delay, extension or
termination to the exchange agent; or
. to amend the terms of the exchange offer in any manner.
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If we make a material or fundamental change to the terms of the exchange
offer, we will file a post effective amendment to the registration statement of
which this prospectus is a part.
Procedures for Tendering Your Notes
Only you may tender your original notes in the exchange offer. Except as
stated under the heading "--Book Entry Transfer," to tender in the exchange
offer, you must:
. complete, sign and date the enclosed letter of transmittal, or a
copy of it;
. have the signature on the letter of transmittal guaranteed, if
required by the letter of transmittal; and
. mail, fax or otherwise deliver the letter of transmittal or copy to
the exchange agent on or before the expiration date.
In addition, either:
. the exchange agent must receive certificates for your original notes
and the letter of transmittal on or before the expiration date;
. the exchange agent must receive a timely confirmation of a book-
entry transfer of your original notes, if that procedure is
available, into the account of the exchange agent at the DTC under
the procedure for book-entry transfer described below before the
expiration date of the exchange offer; or
. you must comply with the guaranteed delivery procedures described
below.
For your original notes to be tendered effectively, the exchange agent must
receive the letter of transmittal and other required documents at the address
provided under "--Exchange Agent" before the expiration date of the exchange
offer at the address provided under "--Exchange Agent."
If you do not withdraw your tender before the expiration date, it will
constitute an agreement between you and us in accordance with the terms and
conditions in this prospectus and in the letter of transmittal.
The method of delivery to the exchange agent of your original notes, your
letter of transmittal and all other required documents is at your election and
risk. Instead of delivery by mail, we recommend that you use an overnight or
hand delivery service. In all cases, you should allow sufficient time to assure
delivery to the exchange agent before the expiration date of the exchange
offer. Do not send either a letter of transmittal or your original notes
directly to us. You may request your broker, dealer, commercial bank, trust
company or nominee to make the exchange on your behalf.
Procedure if your Original Notes are not Registered in your Name
Any beneficial owner whose original notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender the original notes in the exchange offer should contact the
registered holder promptly and instruct the registered holder to tender the
original notes on the beneficial owner's behalf. If the beneficial owner wishes
to tender on the owner's own behalf, the owner must, before completing and
executing a letter of transmittal and delivering the owner's original notes,
either make appropriate arrangements to register ownership of the original
notes in the beneficial owner's name or obtain a properly completed bond power
or other proper endorsement from the registered holder. We strongly urge you to
act immediately since the transfer of registered ownership may take
considerable time.
Signature Requirements and Signature Guarantees
Unless you are a registered holder who requests that the registered notes be
mailed to you and issued in your name, or unless you are a member of, or
participant in, the Securities Transfer Agents Medallion Program,
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the New York Stock Exchange Medallion Signature Program, the Stock Exchange
Medallion Program, or an "Eligible Guarantor Institution" which includes banks,
brokers, dealers, municipal securities brokers and dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, each an "Eligible Institution," you must
guarantee your signature on a letter of transmittal or a notice of withdrawal
by an Eligible Guarantor Institution.
If a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation, or other person acting in a fiduciary or representative capacity
signs the letter of transmittal or any notes or bond powers on your behalf,
that person must indicate their capacity when signing, and submit satisfactory
evidence to us with the letter of transmittal demonstrating their authority to
act on your behalf.
Conditions to the Exchange Offer
We will decide all questions as to the validity, form, eligibility,
acceptance, and withdrawal of tendered original notes and our determination
will be final and binding on you. We reserve the absolute right to reject any
and all original notes not properly tendered or the acceptance of which would
be unlawful in the opinion of our counsel. We also reserve the right to waive
any defects, irregularities, or conditions of tender as to particular original
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in a letter of transmittal, will be final and
binding on all parties. You must cure any defects or irregularities in
connection with tenders of original notes as we shall determine. Although we
intend to notify holders of defects or irregularities with respect to tenders
of original notes, we, the exchange agent, or any other person will not incur
any liability for failure to give this notification. Tenders of original notes
will not be deemed to have been made until any defects or irregularities have
been cured or waived. Any original notes received by the exchange agent that
are not properly tendered and as to which defects or irregularities have not
been cured or waived will be returned by the exchange agent to the tendering
holders, unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date of the exchange offer.
We reserve the right to purchase or to make offers for any original notes
that remain outstanding after the expiration date of the exchange offer or to
terminate the exchange offer and, to the extent permitted by law, purchase
original notes in the open market, in privately negotiated transactions or
otherwise. The terms of any of these purchases or offers could differ from the
terms of the exchange offer.
These conditions are for our sole benefit and we may assert them at any time
or for any reason. We may waive in whole or in part at any time and from time
to time these conditions in our sole discretion. Our failure to exercise any of
our rights will not be a waiver of our rights and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to
time.
We will not accept for exchange any original notes tendered, and no
registered notes will be issued in exchange for any original notes, if at the
time any stop order is threatened or in effect with respect to the registration
statement or the qualification of the indenture relating to the registered
notes under the Trust Indenture Act. We are required to use every reasonable
effort to obtain the withdrawal of any stop order at the earliest possible
time.
In all cases, the issuance of registered notes will be made only after timely
receipt by the exchange agent of certificates for original notes or a timely
book-entry confirmation of the original notes into the exchange agent's account
at DTC's book-entry transfer facility, a properly completed and duly executed
letter of transmittal or, with respect to DTC and its participants, electronic
instructions of the holder agreeing to be bound by the letter of transmittal,
and any other required documents. If we do not accept any tendered original
notes for a valid reason or if you submit original notes for a greater
principal amount than you desire to exchange, we will return the unaccepted or
non-exchanged original notes to you at our expense. In the case of original
notes tendered by book-entry transfer into the exchange agent's account at
DTC's book-entry transfer facility under the book-entry transfer procedures
described below, the non-exchanged original notes will be credited to an
account maintained with the book-entry transfer facility. This will occur as
promptly as practicable after the expiration or termination of the exchange
offer for the original notes.
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Notwithstanding any other provision of the exchange offer, we will not be
required to accept for exchange, or to issue registered notes in exchange for,
any original notes and may terminate or amend the exchange offer if at any time
before the acceptance of the original notes for exchange or the exchange of the
registered notes for the original notes, we determine that the exchange offer
violates applicable law, any applicable interpretation of the staff of the SEC
or any order of any governmental agency or court of competent jurisdiction.
Book-Entry Transfer
The exchange agent will make requests to establish accounts at DTC's book-
entry transfer facility for purposes of the exchange offer within two business
days after the date of this prospectus. Any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of original notes being tendered by causing the book-entry transfer
facility to transfer the original notes into the exchange agent's account at
the book-entry transfer facility in accordance with the appropriate procedures
for transfer. However, although delivery of original notes may be effected
through book-entry transfer at the book-entry transfer facility, a letter of
transmittal or copy of the letter of transmittal, with any required signature
guarantees and any other required documents, must, except as provided in the
following paragraph, be transmitted to and received by the exchange agent on or
before the expiration date of the exchange offer or the guaranteed delivery
procedures below must be complied with.
DTC's Automated Tender Offer Program, referred to by us as ATOP, is the only
method of processing the exchange offer through DTC. To accept the exchange
offer through ATOP, participants in DTC must send electronic instructions to
DTC through DTC's communication system instead of sending a signed, hard copy
letter of transmittal. DTC is obligated to communicate those electronic
instructions to the exchange agent. To tender notes through ATOP, the
electronic instructions sent to DTC and transmitted by DTC to the exchange
agent must contain the participant's acknowledgment of its receipt of and
agreement to be bound by the letter of transmittal for the original notes.
Guaranteed Delivery Procedures
If a registered holder of original notes desires to tender any original notes
and the original notes are not immediately available, or time will not permit
the holder's original notes or other required documents to reach the exchange
agent before the expiration date of the exchange offer, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if:
. the tender is made through an Eligible Institution;
. before the expiration date of the exchange offer, the exchange agent
received from the Eligible Institution a properly completed and duly
executed letter of transmittal and notice of guaranteed delivery, in
form provided by us the notice of guaranteed delivery must state the
name and address of the holder of the original notes and the amount
of original notes tendered, that the tender is being made and
guaranteeing that within three New York Stock Exchange trading days
after the date of execution of the notice of guaranteed delivery,
the certificates for all physically tendered original notes, in
proper form for transfer, or a book-entry confirmation and any other
documents required by the letter of transmittal will be deposited by
the Eligible Institution with the exchange agent; and
. the certificates for all physically tendered original notes, in
proper form for transfer, or a book-entry confirmation and all other
documents required by the applicable letter of transmittal are
received by the exchange agent within three New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed
Delivery.
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Withdrawal Rights
You may withdraw your tender of original notes at any time before 5:00 p.m.,
New York City time, on the expiration date of the exchange offer.
For a withdrawal to be effective, a written or, for a DTC participant,
electronic ATOP transmission notice of withdrawal, must be received by the
exchange agent at its address provided in this prospectus before 5:00 p.m., New
York City time, on the expiration date of the exchange offer.
The notice of withdrawal must:
. specify the name of the person who deposited the original notes to
be withdrawn;
. identify the original notes to be withdrawn, including the
certificate number or numbers and principal amount of the original
notes;
. be signed by the holder in the same manner as the original signature
on the letter of transmittal by which the original notes were
tendered or be accompanied by documents of transfer sufficient to
have the trustee of the original notes register the transfer of the
original notes into the name of the person withdrawing the tender;
and
. specify the name in which any original notes are to be registered,
if different from that of the holder who tendered the original
notes.
We will determine all questions as to the validity, form and eligibility of
your notice and our determination will be final and binding on all parties. Any
original notes withdrawn will not be considered to have been validly tendered.
We will return any original notes which have been tendered but not exchanged
without cost to the holder as soon as practicable after withdrawal, rejection
of tender or termination of the exchange offer. Properly withdrawn original
notes may be retendered by following one of the above procedures before the
expiration date.
Exchange Agent
You should direct all executed letters of transmittal to State Street Bank
and Trust Company, the exchange agent for the exchange offer. Questions,
requests for assistance and requests for additional copies of the prospectus or
a letter of transmittal should be directed to the exchange agent addressed as
follows:
By Mail: Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 2 Avenue de Lafayette
Boston, Massachusetts 02102 Fifth Floor, Corporate Trust Window
Attention: Mackenzie Elijah Boston, Massachusetts 02111-1724
Attention: Mackenzie Elijah
By Hand in New York (as Drop Agent)
State Street Bank and Trust Company By Hand in Boston:
61 Broadway State Street Bank and Trust Company
15th Floor, Corporate Trust Window 2 Avenue de Lafayette
New York, New York 10006 Fifth Floor, Corporate Trust Window
Boston, Massachusetts 02111-1724
Facsimile Transmission Number
(for Eligible Institutions Only) Confirm by telephone:
(617) 662-1452 (617) 662-1525
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Fees and Expenses
We currently do not intend to make any payments to brokers, dealers or others
to solicit acceptances of the exchange offer. The principal solicitation is
being made by mail. However, additional solicitations may be made in person or
by telephone by our officers and employees.
Our estimated cash expenses incurred in connection with the exchange offer
will be paid by us and are estimated to be $100,000 in the aggregate. This
amount includes fees and expenses of the trustee for the original and
registered notes, accounting, legal, printing and related fees and expenses.
Transfer Taxes
If you tender original notes for exchange you will not be obligated to pay
any transfer taxes. However, if you instruct us to register registered notes in
the name of, or request that your original notes not tendered or not accepted
in the exchange offer be returned to, a person other than you, you will be
responsible for the payment of any transfer tax owed.
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DESCRIPTION OF THE REGISTERED NOTES
You can find the definitions of certain terms used in this description under
the caption "Certain Definitions." In this description, (1) the word "issuers"
refers collectively to Hollywood Casino Shreveport and Shreveport Capital and
not to any of their respective subsidiaries and (2) the words "we," "us" and
"our" refer only to Hollywood Casino Shreveport and not to any of our
subsidiaries. Capitalized terms in this description are defined in this section
under the caption "Certain Definitions" below.
The issuers will issue the registered notes under an indenture among
themselves and State Street Bank and Trust Company, as trustee. The original
notes and the registered notes are collectively referrred to as the "notes."
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
notes are secured obligations of the issuers. The collateral documents referred
to under the caption "Security" define the terms of the agreements that will
secure the registered notes.
Shreveport Capital is our wholly owned subsidiary and was incorporated solely
for the purpose of serving as a co-issuer of the notes in order to facilitate
the original offering and subsequent resales of the notes. We believe that
certain prospective purchasers of the notes may be restricted in their ability
to purchase debt securities of partnerships, such as us, unless the debt
securities are jointly issued by a corporation. Shreveport Capital will not
have any operations or any material assets and will not have any revenues. As a
result, prospective investors should not expect Shreveport Capital to
contribute to the amounts required to be paid on the notes.
The following description is a summary of the material provisions of the
indenture, the registration rights agreement and the collateral documents. It
does not restate any of those agreements in its entirety. We urge you to read
the indenture, the registration rights agreement and the collateral documents
because they, and not this description, define your rights as holders of the
notes. Copies of the indenture, the registration rights agreement and the
collateral documents are available as provided in this prospectus under the
caption "Where You Can Find More Information."
Brief Description of the Notes and the Guarantees
The notes:
. are 13% first mortgage notes due 2006 with contingent interest in
the aggregate original principal amount of $150.0 million;
. are senior secured obligations of the issuers;
. are secured by a first priority security interest in substantially
all of the issuers' existing and future assets, other than amounts
in the Equity Escrow Account, up to $35.0 million of FF&E acquired,
leased or refinanced by us with FF&E Financing and certain licenses
which may not be pledged under applicable law;
. rank pari passu in right of payment to all of the issuers' existing
and future senior indebtedness;
. rank senior in right of payment to any of the issuers' existing and
future subordinated indebtedness; and
. are guaranteed by the guarantors, as described below.
The notes are guaranteed by HWCC-Louisiana, HCS I and HCS II and will be
guaranteed by all of our future material Restricted Subsidiaries. We do not
currently have any Restricted Subsidiaries, other than Shreveport Capital.
Each guarantee:
. is a senior secured obligation of the respective guarantor;
. is secured by a first priority security interest in all of the
guarantors' existing and future assets, other than $2.5 million in
cash held by HWCC-Louisiana which will be used by HWCC-Louisiana to
fulfill its obligations under the Membership Interest Purchase
Agreement;
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. ranks pari passu in right of payment to all of the guarantors'
existing and future senior indebtedness; and
. ranks senior in right of payment to any of the guarantor's existing
and future subordinated indebtedness.
Principal, Maturity and Interest
The indenture provides for the issuance by the issuers of notes with a
maximum aggregate principal amount of $150.0 million. The issuers issued notes
in denominations of $1,000 and integral multiples of $1,000. The notes will
mature on August 1, 2006.
Fixed interest on the notes will accrue at the rate of 13% per year and will
be payable semi-annually in arrears on each February 1 and August 1, each being
an "Interest Payment Date", beginning on February 1, 2000, to the holders of
record of notes on the immediately preceding January 15 and July 15, each being
a "Record Date". Fixed interest will accrue from the date of original issuance
of the notes or, if fixed interest has already been paid, from the date it was
most recently paid. Fixed interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
In addition, the notes will accrue Contingent Interest after the Shreveport
resort begins Operating. Contingent Interest will be calculated to accrue, each
being an "Accrual Period", as follows:
(1) in the case of the First Accrual Period, from and including the date
on which the Shreveport resort begins Operating to, and including, the
earlier of:
(a) the end of the First Accrual Period if the corresponding
principal amount of the notes has not become due and payable; or
(b) the date of payment if the corresponding principal amount of the
notes has become due and payable, whether at stated maturity, upon
acceleration, upon any mandatory or optional redemption or otherwise,
(2) in the case of each Semiannual Period following the First Accrual
Period from, but not including, the end of the First Accrual Period or the
end of the immediately preceding Semiannual Period, as applicable, to, and
including, the end of each such Semiannual Period if the corresponding
principal amount of the notes has not become due and payable.
(3) in the case of any Interim Period following the First Accrual Period
from, but not including, the end of the First Accrual Period or most recent
Semiannual Period, as applicable, to, and including, the date of payment if
the corresponding principal amount of the notes has become due and payable,
whether at stated maturity, upon acceleration, upon any mandatory or
optional redemption or otherwise.
Contingent Interest will be payable semiannually. On each Interest Payment
Date after the First Accrual Period, Contingent Interest with respect to the
Accrual Period completed immediately before that Interest Payment Date will be
payable to the holders of notes on the Record Date immediately preceding the
applicable Interest Payment Date, unless all or a portion of such Contingent
Interest is permitted to be deferred. The issuers may defer payment of all or a
portion of accrued Contingent Interest then otherwise due and payable, and may
continue to defer the payment of accrued Contingent Interest which has already
been deferred if, and only to the extent that:
(1) the payment of that portion of Contingent Interest on the applicable
Interest Payment Date will cause our Adjusted Fixed Charge Coverage Ratio
for our four consecutive fiscal quarters ending immediately before the
applicable Interest Payment Date to be less than 1.5 to 1.0, but may not
defer the portion, which, if paid, would not cause the Adjusted Fixed
Charge Coverage Ratio to be less than 1.5 to 1.0; and
(2) the principal amount of the notes corresponding to that Contingent
Interest has not then matured and become due and payable, whether at stated
maturity, upon acceleration, upon any mandatory or optional redemption or
otherwise.
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Contingent Interest that is deferred will become due and payable, in whole or
in part, upon the earlier of:
(1) the next succeeding Interest Payment Date on which all or a portion
of that Contingent Interest is not permitted to be deferred; and
(2) the maturity of the corresponding principal amount of the notes,
whether at stated maturity, upon acceleration, upon any mandatory or
optional redemption or otherwise.
No interest will accrue on deferred Contingent Interest.
No Recourse Against Shreveport Paddlewheels, L.L.C.
Neither Shreveport Paddlewheels, L.L.C. nor any of its affiliates, other than
us, will have any obligation to make any payments of any kind that become due
on the notes.
Methods of Receiving Payments on the Notes
If a holder of notes has given wire transfer instructions to the issuers, the
issuers will pay all principal, interest, premium and liquidated damages, if
any, on that holder's notes in accordance with those instructions. All other
payments on notes will be made at the office or agency of the paying agent and
registrar within the City and State of New York, unless the issuers elect to
make interest payments by check mailed to the holders of notes at their
addresses provided in the register of holders.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. The issuers may
change the paying agent or registrar without prior notice to the holders of
notes, and either of the issuers may act as paying agent or registrar.
Transfer and Exchange
A holder of notes may transfer or exchange notes in accordance with the
indenture. The registrar and the trustee may require a holder of notes, among
other things, to furnish appropriate endorsements and transfer documents and
the issuers may require a holder of notes to pay any taxes and fees required by
law or permitted by the indenture. The issuers are not required to transfer or
exchange any note selected for redemption. Also, the issuers are not required
to transfer or exchange any note for a period of 15 days before a selection of
notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
Guarantees
Each of HWCC-Louisiana, HCS I, HCS II and all of our future Restricted
Subsidiaries that at any time has Total Assets in excess of $2.5 million will
jointly and severally and fully and unconditionally guarantee the issuers'
payment obligations under the notes. The obligations of each guarantor under
its guarantee will be limited as necessary to prevent that guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk Factors--
Fraudulent Conveyance."
Security
The notes will be secured by a first priority security interest in
substantially all of the issuers' assets other than funds and securities in the
Equity Escrow Account, whether now owned or subsequently acquired, including,
without limitation, and subject to the liens permitted by the collateral
documents:
(1) a pledge of any funds and securities deposited and held in the Cash
Collateral Accounts until the time as the funds and securities are
disbursed in accordance with the terms of the Cash Collateral and
Disbursement Agreement;
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(2) a leasehold mortgage on all of the real property comprising the
Shreveport resort, including all additions and improvements and component
parts related to it and issues and profits from it;
(3) a security interest in all furniture, fixtures and equipment which
are part of the Shreveport resort, other than up to $35.0 million of FF&E
acquired, leased or refinanced through FF&E Financing;
(4) a first priority security interest in the riverboat which will be a
part of the Shreveport resort;
(5) a first priority security interest in all of the issuers' accounts
receivable, general intangibles, inventory and other personal property not
contemplated by clause (3) above;
(6) a collateral assignment of our interests in the Completion Capital
Agreement, the License Agreement, the Management Agreement and the
principal agreements entered into by us in connection with the development,
construction, ownership or operation of the Shreveport resort; and
(7) to the extent permitted by law, a pledge of all licenses and permits
relating to the Shreveport resort.
The guarantees will be secured by a first priority security interest in
substantially all of the guarantors' existing and future assets, including a
pledge of the capital stock of HCS I and HCS II and the partnership interests
in us held by HCS I and HCS II, but excluding the $2.5 million in cash that
HWCC-Louisiana will use to fund its remaining obligation to Sodak Gaming in
connection with the acquisition of Sodak Louisiana under the Membership
Interest Purchase Agreement.
The above mentioned liens and security interests may be subordinate or junior
to mechanics' liens which, under applicable Louisiana law, may have priority
over the leasehold mortgage on the Shreveport resort and the security interest
in the riverboat that will be part of the Shreveport resort. However, we have
obtained title insurance on all of the Shreveport resort other than the
riverboat that will be a part of the Shreveport resort in favor of the trustee
that ensures against losses from the enforcement of mechanics' liens. In
addition, secured lenders of indebtedness incurred to purchase FF&E may be
granted a security interest in the FF&E for the sole purpose of perfecting such
lenders' security interests in such FF&E. Furthermore, we may incur up to $10.0
million in aggregate principal amount of Indebtedness for working capital and
other general corporate purposes that may be secured by a Pari Passu Lien on
the Pari Passu Collateral.
Subject to the terms of any intercreditor agreement relating to Pari Passu
Collateral, if an event of default occurs, the trustee may, in addition to any
rights and remedies available to it under the indenture and the collateral
documents, take any action as it deems advisable to protect and enforce its
rights in the collateral, including the institution of sale or foreclosure
proceedings. Subject to the terms of any intercreditor agreement relating to
Pari Passu Collateral, the proceeds received by the trustee from any sale or
foreclosure will be applied first to pay the expenses of the sale or
foreclosure and fees or any other amounts then payable to the trustee under the
indenture, and thereafter to pay amounts due and payable with respect to the
notes.
So long as no default or event of default has occurred and be continuing, and
subject to certain terms and conditions in the indenture and the collateral
documents, the issuers and their Subsidiaries and the guarantors will be
entitled to receive the benefit of all cash dividends, interest and other
payments made upon or with respect to the collateral pledged by them and to
exercise any voting and other consensual rights pertaining to the collateral
pledged by them. Upon the occurrence and during the continuance of a default or
event of default:
(1) all rights of the issuers and their Subsidiaries and the guarantors
to exercise their voting or other consensual rights will cease, and all
rights will become vested in the trustee which, to the extent permitted by
law, will have the sole right to exercise these rights;
(2) all rights of the issuers and their Subsidiaries and the guarantors
to receive all cash dividends, interest and other payments made upon or
with respect to the collateral will cease and cash dividends, interest and
other payments will be paid to the trustee; and
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(3) the trustee may sell the collateral or any part thereof in accordance
with the terms of the collateral documents.
Subject to the terms of any intercreditor agreement relating to Pari Passu
Collateral, under the terms of the indenture and the collateral documents, the
trustee will determine the circumstances and manner in which the collateral
will be disposed of, including, but not limited to, the determination of
whether to release all or any portion of the collateral from the Liens created
by the collateral documents and whether to foreclose on the collateral
following a default or event of default. Moreover, upon the full and final
payment and performance of all obligations of the issuers and the guarantors
under the indenture and the notes, the collateral documents will terminate and
the collateral will be released. The proceeds of any sale of the collateral
pursuant to the indenture and the related collateral documents following an
event of default may not be sufficient to satisfy payments due on the notes.
Certain Gaming Law Limitations
The trustee's ability to foreclose upon the collateral will be limited by
relevant gaming laws, which generally require that persons who own or operate a
casino or purchase, possess or sell gaming equipment hold a valid gaming
license. No person can hold a license in the State of Louisiana unless the
person is found qualified or suitable by the relevant gaming authorities. In
order for the trustee or a purchaser at or after foreclosure to be found
qualified or suitable, the gaming authorities would have discretionary
authority to require the trustee, any or all of the holders of the notes and
any such purchaser to file applications, be investigated and be found qualified
or suitable as an owner or operator of gaming establishments. The applicant for
qualification, a finding of suitability or licensing must pay a filing fee and
all costs of any investigation. If the trustee is unable or chooses not to
qualify, be found suitable or licensed to own, operate or sell such assets, it
would have to retain or sell to an entity licensed to operate or sell such
assets, which would also be subject to the approval of the Louisiana Gaming
Control Board. In addition, in any foreclosure sale or subsequent resale by the
trustee, licensing requirements under the relevant gaming laws may limit the
number of potential bidders and may delay any sale, either of which events
would have an adverse effect on the sale price of the collateral. Therefore,
the practical value of realizing on the collateral may, without the appropriate
approvals, be limited.
Certain Bankruptcy Limitations
The right of the trustee to repossess and dispose of the collateral upon the
occurrence of an event of default is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or
against either of the issuers or a guarantor before the trustee has repossessed
and disposed of the collateral. Under bankruptcy law, a secured creditor such
as the trustee is prohibited from repossessing its security from a debtor in a
bankruptcy case, or from disposing of security repossessed from the debtor,
without bankruptcy court approval. Moreover, bankruptcy law permits the debtor
to continue to retain and to use collateral, and the proceeds, products,
offspring, rents or profits of the collateral, even though the debtor is in
default under the applicable debt instruments, provided that the secured credit
is given "adequate protection." The meaning of the term "adequate protection"
may vary according to circumstances, but it is intended in general to protect
the value of the secured creditor's interest in the collateral and may include,
if approved by the court, cash payments or the granting of additional security
for any diminution in the value of the collateral as a result of the stay of
repossession or the disposition or any use of the collateral by the debtor
during the pendency of the bankruptcy case. The court has broad discretionary
powers in all these matters, including the valuation of collateral. In
addition, since the enforcement of the Lien of the trustee in cash, deposit
accounts and cash equivalents, other than the Cash Collateral Accounts, may be
limited in a bankruptcy proceeding, the holders of the notes may not have any
consent rights with respect to the use of those funds by either of the issuers
or any of their Subsidiaries during the pendency of the proceeding. In view of
these considerations, it is impossible to predict how long payments under the
notes could be delayed following commencement of a bankruptcy case, whether or
when the trustee could repossess or dispose of the collateral or whether or to
what extent holders of the notes would be compensated for any delay in payment
or loss of value of the collateral.
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Completion Capital Agreement
We and Hollywood Casino, HWCC-Louisiana, HCS I, HCS II have entered into a
Completion Capital Agreement that provides that if:
(1) we have provided the trustee and the Independent Construction
Consultant with a written notice that there are not sufficient available
funds to complete the Shreveport resort so that it will be Operating by
April 30, 2001;
(2) (a) the Independent Construction Consultant has provided the trustee
and us with a written notice that there will not be sufficient available
funds to complete the Shreveport resort so that it will be Operating by
April 30, 2001 and (b) within 60 days of us receiving the notice, we have
not provided evidence satisfactory to the Independent Construction
Consultant that there will be sufficient additional funds to complete the
Shreveport resort so that it will be Operating by April 30, 2001; or
(3) after having expended the funds in the Equity Escrow Account, no
disbursement has occurred pursuant to the Cash Collateral and Disbursement
Agreement for 90 consecutive days;
then Hollywood Casino will pay into the Construction Disbursement Account the
lesser of:
(a) $5.0 million less any amounts previously paid into the Construction
Disbursement Account pursuant to this paragraph or
(b) the amount the Independent Construction Consultant provides to the
trustee in a certificate stating the amount necessary to cause the
Shreveport resort to be Operating by April 30, 2001.
In addition, if the Shreveport resort is not Operating by April 30, 2001,
Hollywood Casino will pay $5.0 million in cash, less any amounts previously
paid into the Construction Disbursement Account pursuant to the provisions of
the previous paragraph, into the Construction Disbursement Account.
Furthermore, Hollywood Casino will be required to pay $5.0 million in cash,
less any amounts previously paid into the Construction Disbursement Account
pursuant to the provisions of the previous paragraph, into the Construction
Disbursement Account upon:
(1) the commencement of a voluntary bankruptcy case by us on or prior
to April 30, 2001,
(2) the commencement of an involuntary bankruptcy case against us
which is not dismissed, bonded or discharged on or before to the
earlier of
(a) 60 days after the commencement and
(b) April 30, 2001 or
(3) the entry of an order for relief against us on or before April
30, 2001, under any bankruptcy law in effect at any time. Hollywood
Casino has agreed that it will not assert any defenses or setoffs to
the payment of those amounts.
Optional Redemption
At any time before August 1, 2002, the issuers may on any one or more
occasions redeem up to 35% of the aggregate principal amount of notes issued
under the indenture at a redemption price of 113% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages, if any, to
the redemption date, with the net cash proceeds of a Qualified Equity Offering;
provided, however, that:
(1) at least 65% of the aggregate principal amount of notes originally
issued under the indenture remains outstanding immediately after the
occurrence of any redemption (excluding notes held by us and our
Subsidiaries); and
(2) the redemption must occur within 60 days of the date of the closing
of the Qualified Equity Offering.
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Except pursuant to the preceding paragraph, the notes will not be redeemable
at the issuers' option before August 1, 2003.
On or after August 1, 2003, the issuers may redeem all or a part of the notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices,
expressed as percentages of principal amount, provided below plus accrued and
unpaid interest and liquidated damages, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 1 of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.............................. 106.50%
2004.............................. 103.25%
2005 and thereafter............... 100.00%
</TABLE>
Mandatory Redemption
The issuers are not required to make mandatory redemption or sinking fund
payments with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each holder of notes will have the right to
require the issuers to repurchase all or any part of that holder's notes
pursuant to a "Change of Control Offer" on the terms provided in the indenture.
In the Change of Control Offer, the issuers will offer payment (a "Change of
Control Payment") in cash equal to 101% of the aggregate principal amount of
notes repurchased plus accrued and unpaid interest and liquidated damages, if
any, to the date of purchase. Within ten days following any Change of Control,
the issuers will mail a notice to each holder of notes describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase notes the on "Change of Control Payment Date" specified in the
notice, which date will be no earlier than 30 days and no later than 60 days
from the date the notice is mailed, pursuant to the procedures required by the
indenture and described in the notice.
On the Change of Control Payment Date, the issuers will, to the extent
lawful:
(1) accept for payment all notes or portions of notes properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all notes or portions of notes so tendered;
and
(3) deliver or cause to be delivered to the trustee the notes so accepted
together with an officers' certificate stating the aggregate principal
amount of notes or portions of notes being purchased by the issuers.
The paying agent will promptly mail to each holder who tendered notes the
Change of Control Payment for those notes, and the trustee will promptly
authenticate and mail or cause to be transferred by book entry to each holder a
new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided, however, that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000. The issuers will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require the issuers to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control, the indenture does not
contain provisions that permit the holders of notes to require that the issuers
repurchase or redeem notes in the event of a takeover, recapitalization or
similar transaction. No assurance can be given that the issuers will have
sufficient funds at the time of a Change of Control in order to consummate a
Change of Control Offer.
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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 listed
in the indenture applicable to a Change of Control Offer made by the issuers
and purchases all notes validly tendered and not withdrawn under the Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the direct
or indirect sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of Hollywood Casino and its Subsidiaries taken
as a whole. Although there is a limited body of case law interpreting the
phrase "substantially all," there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a holder of notes to
require the issuers to repurchase notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of Hollywood
Casino Corporation and its Subsidiaries taken as a whole to another Person or
group may be uncertain.
Asset Sales
We will not, and will not permit any of our Restricted Subsidiaries to,
consummate an Asset Sale unless:
(1) the Shreveport resort is Operating;
(2) we, or the Restricted Subsidiary, as the case may be, receive
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
(3) the fair market value is determined by our Board of Directors and
evidenced by a resolution of that Board of Directors set forth in an
officers' certificate delivered to the trustee; and
(4) at least 75% of the consideration received by us or the Restricted
Subsidiary is in the form of cash. For purposes of this provision and not
for purposes of the definition of "Net Proceeds" (except to the extent
provided in that definition with respect to the conversion of non-cash
proceeds to cash), each of the following will be deemed to be cash:
(a) any liabilities (as shown on our or the Restricted Subsidiary's
most recent balance sheet) of us or any Restricted Subsidiary, other
than contingent liabilities and liabilities that are by their terms
subordinated to the notes or any Restricted Subsidiary's guarantee,
that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases us or the Restricted
Subsidiary from further liability; and
(b) any securities, notes or other obligations received by us or any
Restricted Subsidiary from the transferee that are contemporaneously,
subject to ordinary settlement periods, converted by us or the
Restricted Subsidiary into cash, to the extent of the cash received in
that conversion.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale, we
or the Restricted Subsidiary may apply the Net Proceeds to make a capital
expenditure, improve real property or acquire long-term assets that are used or
useful in a line of business permitted by the covenant entitled "--Line of
Business"; provided, however, that we or the Restricted Subsidiary, as the case
may be, grant to the trustee, on behalf of the holders of notes, and, if the
Asset Sale relates to Pari Passu Collateral, the holders of any Indebtedness
secured by the Pari Passu Collateral, a first priority perfected security
interest, subject to Permitted Liens, on any property or assets acquired or
constructed with the Net Proceeds of any Asset Sale on the terms provided in
the indenture, the intercreditor agreement entered into by us with respect to
the Pari Passu Collateral in accordance with the indenture and the collateral
documents. Pending the final application of any Net Proceeds, we or the
applicable Restricted Subsidiary may invest the Net Proceeds in Cash
Equivalents which will be held in an account in which the trustee will have a
first priority perfected security interest, subject to Permitted Liens, for the
benefit of the holders of notes and, if the Asset Sale relates to Pari Passu
Collateral, the holders of any Indebtedness secured by the Pari Passu
Collateral on a pari passu basis with the notes.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." Within
ten days following the date that the aggregate amount of Excess
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Proceeds exceeds $5.0 million, the issuers will make an "Asset Sale Offer" to
all holders of notes and all holders of other Indebtedness that is pari passu
with the notes and secured by Pari Passu Collateral containing provisions
similar to those provided in the indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets to purchase the maximum
principal amount of notes and any other Indebtedness that may be purchased out
of the Excess Proceeds, pro rata in proportion to the respective principal
amounts of the notes and the other Indebtedness. The offer price in any Asset
Sale Offer will be equal to 100% of principal amount plus accrued and unpaid
interest and liquidated damages, if any, to the date of purchase, and will be
payable in cash. If any Excess Proceeds remain after consummation of an Asset
Sale Offer, the issuers may use the Excess Proceeds for any purpose not
otherwise prohibited by the indenture and the collateral documents. If the
aggregate principal amount of notes and other Indebtedness tendered pursuant to
an Asset Sale Offer exceeds the amount of Excess Proceeds, the trustee will
select the notes and the other Indebtedness to be purchased on a pro rata basis
based on the principal amount of notes and such other Indebtedness tendered.
Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall
be reset at zero.
Events of Loss
Within 360 days after any Event of Loss with respect to any collateral with a
fair market value, or replacement cost, if greater, in excess of $1.0 million,
we or our affected Restricted Subsidiary, as the case may be, may apply the Net
Loss Proceeds from such Event of Loss to the rebuilding, repair, replacement or
construction of improvements to the Shreveport resort, with no concurrent
obligation to make any purchase of any notes; provided, however, that:
(1) we deliver to the trustee within 60 days of the Event of Loss a
written opinion from a reputable contractor that the Shreveport resort with
at least the Minimum Facilities can be rebuilt, repaired, replaced or
constructed and Operating within 360 days of the Event of Loss;
(2) an Officers' Certificate certifying that we have available from Net
Loss Proceeds or other sources sufficient funds to complete the rebuilding,
repair, replacement or construction described in clause (1) above; and
(3) the Net Loss Proceeds are less than $75.0 million.
Any Net Loss Proceeds that are not reinvested or not permitted to be
reinvested as provided in the first sentence of this covenant will be deemed
"Excess Loss Proceeds." Within ten days following the date that the aggregate
amount of Excess Loss Proceeds exceeds $5.0 million, we will make an "Event of
Loss Offer" to all holders of notes and holders of other Indebtedness that is
pari passu with the notes and secured by Pari Passu Collateral containing
provisions similar to those provided in the indenture with respect to offers to
purchase or redeem with the proceeds of Events of Loss to purchase the maximum
principal amount of notes and any other Indebtedness that may be purchased out
of the Excess Loss Proceeds, pro rata in proportion to the respective principal
amounts of the notes and such other Indebtedness. The offer price in any Event
of Loss Offer will be equal to 100% of principal amount plus accrued and unpaid
interest and liquidated damages, if any, to the date of purchase, and will be
payable in cash. If any Excess Loss Proceeds remain after consummation of an
Event of Loss Offer, the issuers may use them for any purpose not otherwise
prohibited by the indenture and the collateral documents. If the aggregate
principal amount of notes tendered pursuant to an Event of Loss Offer exceeds
the Excess Loss Proceeds, the trustee will select the notes and the other
Indebtedness to be purchased on a pro rata basis based on the principal amount
of notes and other Indebtedness tendered. Upon completion of any Event of Loss
Offer, the amount of Excess Loss Proceeds will be reset at zero.
If, before the date on which the Shreveport resort becomes Operating, the Net
Loss Proceeds to be used for rebuilding, repair, replacement or construction of
the Shreveport resort exceed $5.0 million, then the Net Loss Proceeds will be
deposited into an account in which the trustee will be granted a first priority
perfected security interest, subject to Permitted Liens; provided, however,
that any Net Loss Proceeds will be disbursed in a manner consistent with the
Plans and the revised budget for the Shreveport resort. Pending their final
application, all Net Loss Proceeds will be invested in Cash Equivalents held in
an account in which the trustee
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has a first priority perfected security interest, subject to Permitted Liens,
for the benefit of the holders of notes and, if the Event of Loss relates to
Pari Passu Collateral, the holders of any Indebtedness secured by the Pari
Passu Collateral on a pari passu basis with the notes. These pledged funds and
securities will be released to us to pay for or reimburse us for the actual
cost of a permitted use of Net Loss Proceeds as provided above, or the Event of
Loss Offer, pursuant to the terms of the collateral documents. We or the
applicable Restricted Subsidiary will grant to the trustee, on behalf of the
holders of notes and, if the Event of Loss relates to Pari Passu Collateral,
the holders of any Indebtedness secured by the Pari Passu Collateral, a first
priority perfected security interest, subject to Permitted Liens, on any
property or asset rebuilt, repaired, replaced or constructed with the Net Loss
Proceeds on the terms provided in the indenture, the intercreditor agreement
entered into by us with respect to the Pari Passu Collateral in accordance with
the indenture and the collateral documents.
In the event of an Event of Loss pursuant to clause (3) of the definition of
"Event of Loss" with respect to any property or assets that have a fair market
value (or replacement cost, if greater) in excess of $5.0 million, we or the
affected Restricted Subsidiary, as the case may be, will be required to receive
consideration:
(1) at least equal to the fair market value (evidenced by a resolution
of our Board of Directors provided in an officers' certificate
delivered to the trustee) of the property or assets subject to the
Event of Loss and
(2) with respect to any "Event of Loss" of any portion of the hotel,
riverboat casino or parking structure and restaurant and entertainment
promenade that are a part of the Shreveport resort, at least 90% of
which is in the form of Cash Equivalents.
Compliance with Securities Laws
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 these laws and regulations are applicable in connection with each
repurchase of notes pursuant to a Change of Control Offer, an Asset Sale Offer,
Event of Loss Offer and any offer made to the holders of notes pursuant to
clause (7) of the second paragraph under the covenant entitled "Restricted
Payments." To the extent that the provisions of any securities laws or
regulations conflict with the Change of Control, Asset Sales or Event of Loss
provisions of the indenture or the provisions of clause (7) of the second
paragraph under the covenant entitled "Restricted Payments," the issuers will
comply with the applicable securities laws and regulations and will not be
deemed to have breached their obligations under these provisions of the
indenture by virtue of any conflict.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are listed; or
(2) if the notes are not so listed, on a pro rata basis, by lot or by any
method as the trustee deems fair and appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days
before the redemption date to each holder of notes to be redeemed at its
registered address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note must state the portion of the principal amount of the note
to be redeemed. A new note in principal amount equal to the unredeemed portion
of the original note will be issued in the name of the holder upon cancellation
of the original note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
notes or portions of them called for redemption.
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Certain Covenants
Restricted Payments
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of our or any of our Restricted Subsidiaries' Equity Interests,
including, without limitation, any payment in connection with any merger or
consolidation involving us or any of our Restricted Subsidiaries, or to the
direct or indirect holders of our or any of our Restricted Subsidiaries'
Equity Interests in any capacity, other than dividends or distributions
payable in Equity Interests, other than Disqualified Stock, or dividends or
distributions payable to us or one of our Restricted Subsidiaries;
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving us) any of our Equity Interests or of any direct or indirect
parent of us;
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is pari
passu with or subordinated to the notes, except (a) a payment of interest
or principal at the Stated Maturity of the Indebtedness and (b) a payment
at any time of interest or principal on Indebtedness permitted by clauses
(8) or (10) of the second paragraph under the covenant entitled "Incurrence
of Indebtedness and Issuance of Preferred Equity"; or
(4) make any Restricted Investment
all payments and other actions enumerated in clauses (1) through (4) above
being collectively referred to as "Restricted Payments," unless, at the time of
and after giving effect to the Restricted Payment:
(1) the Shreveport resort is Operating;
(2) no default or event of default will have occurred and be continuing
or would occur as a consequence of the Restricted Payment; and
(3) we would, at the time of such Restricted Payment and after giving pro
forma effect to the Restricted Payment as if it had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test provided in the first paragraph of the covenant
entitled "--Incurrence of Indebtedness and Issuance of Preferred Equity;"
and
(4) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by us and our Restricted Subsidiaries after
the date of the indenture (excluding Restricted Payments permitted by
clauses (2) through (5) and (7) through (9) of the next succeeding
paragraph), is less than the sum, without duplication, of:
(a) 50% of our Consolidated Net Income for the period, taken as one
accounting period, from the date of the indenture to the end of our
most recently ended fiscal quarter for which internal financial
statements are available at the time of the Restricted Payment (or, if
the Consolidated Net Income for that period is a deficit, less 100% of
such deficit), plus
(b) 100% of the aggregate net cash proceeds we received since the
date of the indenture as a contribution to our common equity capital,
other than amounts contributed directly or indirectly by Hollywood
Casino to us which are deposited into the Equity Escrow Account and
pursuant to the Completion Capital Agreement, plus
(c) 50% of any cash dividends we received or any of our Restricted
Subsidiaries after the date of the indenture from one of our
Unrestricted Subsidiaries, to the extent the dividends were not
otherwise included in our Consolidated Net Income for that period, plus
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(d) to the extent that any Restricted Investment that was made after
the date of the indenture is sold for cash or otherwise liquidated or
repaid for cash, the sum of
(1) 50% of the cash proceeds with respect to such Restricted
Investment in excess of the aggregate amount invested in that
Restricted Investment, less the cost of disposition, if any, and
(2) the aggregate amount invested in that Restricted Investment;
plus
(e) to the extent that any Subsidiary that was designated as an
Unrestricted Subsidiary after the date of the indenture is redesignated
as a Restricted Subsidiary, the lesser of
(1) the amount of the Investment in the Subsidiary treated as a
Restricted Payment at and since the time that the Subsidiary was
designated as an Unrestricted Subsidiary, as determined by the
last paragraph of this covenant, and
(2) the fair market value of the Investment in the Subsidiary as
of the date that it is redesignated as a Restricted Subsidiary.
With respect to any payments made pursuant to (a) clauses (1) through (4),
(7) and (8) below, so long as no default has occurred and is continuing or
would be caused by the payments, (b) clause (5) below, regardless of whether
any default or event of default has occurred and is continuing or would be
caused by the payments and (c) clauses (6) and (9) below, so long as no default
or event of default in the payment when due of any principal, interest, premium
or liquidated damages on the notes has occurred or be continuing or would be
caused by the payments, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration the payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness of ours or any
of our Restricted Subsidiaries that is a guarantor or of any of our Equity
Interests in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to one of our Subsidiaries) of,
our Equity Interests (other than Disqualified Stock); provided, however,
that the amount of any net cash proceeds that are utilized for any
redemption, repurchase, retirement, defeasance or other acquisition will be
excluded from clause (4)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of pari
passu or subordinated Indebtedness of us or any of our Restricted
Subsidiaries that is a guarantor with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
(4) the payment to the Manager of:
(a) cost reimbursements in the amounts permitted by the Technical
Services Agreement and the Management Agreement and
(b) management fees in the amounts permitted by the Management
Agreement, the terms of the Manager Subordination Agreement and the
requirement that all payments are made in compliance with the covenant
entitled "Restriction on Payment of Management Fees";
(5) the payment to (a) HCS I or HCS II of any amounts that they may be
required to pay to Paddlewheels pursuant to the Assignment Agreement and
(b) Paddlewheels of amounts required to be paid to it by us pursuant to the
terms of the Assignment Agreement and the Marine Services Agreement;
(6) any redemption required pursuant to the provisions of the indenture
described under the caption "--Mandatory Disposition Pursuant to Gaming
Laws" above;
(7) the payment of dividends or distributions by us (a) within nine
months after the Shreveport resort begins Operating of an amount equal to
(i) 50% of the Remaining Construction Amounts, less (ii) the amount paid by
the issuers to holders of notes pursuant to the Construction Repurchase
Offer; provided, however, that (A) no payment may be made pursuant to this
clause (7) before the time that the Construction Repurchase Offer has been
consummated and (B) the Construction Repurchase Offer may
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only be commenced after the Shreveport resort begins Operating and all
Project Costs have been invoiced and paid, other than those amounts
required to be retained pursuant to the Cash Collateral and Disbursement
Agreement, and (b) of amounts required to be paid pursuant to the terms of
the License Agreement;
(8) payments by us to any of our Affiliates with respect to
reimbursements for costs incurred by these Affiliates in connection with
the provision or procurement of goods or services by the Affiliates to us
in the ordinary course of business; and
(9) payments by us to HWCC-Louisiana, HCS I and HCS II in amounts equal
to the Tax Amount.
The amount of all Restricted Payments, other than cash, will be the fair
market value on the date of the Restricted Payment of the assets or securities
proposed to be transferred or issued to or by us or the Restricted Subsidiary,
as the case may be, pursuant to the Restricted Payment. The fair market value
of any assets or securities that are required to be valued by this covenant
shall be determined by our Board of Directors whose resolution with respect
thereto shall be delivered to the trustee. Our Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted Payment, we will deliver to the trustee an officers' certificate
stating that the Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this "Restricted Payments" covenant
were computed, together with a copy of any fairness opinion or appraisal
required by the indenture.
Incurrence of Indebtedness and Issuance of Preferred Equity
We will not, and will not permit any of our Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness, including Acquired Debt, and we will
not issue any Disqualified Stock and will not permit any of our Subsidiaries to
issue any shares of preferred equity; provided, however, that, the issuers may
incur Indebtedness, including Acquired Debt, or issue Disqualified Stock, if:
(1) the Shreveport resort is Operating; and
(2) the Fixed Charge Coverage Ratio for our most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which the additional Indebtedness is
incurred or the Disqualified Stock is issued would have been at least 2.0
to 1, determined on a pro forma basis, including a pro forma application of
the net proceeds from the Indebtedness or Disqualified Stock, as if the
additional Indebtedness had been incurred or the preferred equity or
Disqualified Stock had been issued, as the case may be, at the beginning of
the four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of any
of the following items of Indebtedness so long as no default or event of
default has occurred and is continuing (collectively, "Permitted Debt"):
(1) the incurrence by us and our Restricted Subsidiaries of (a)
Indebtedness represented by the notes to be issued on the date of the
indenture and the notes to be issued in exchange for the notes pursuant to
the registration rights agreement and (b) their respective obligations
arising under the collateral documents to the extent these obligations
would represent Indebtedness;
(2) the incurrence by us or any of our Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the indenture to be
incurred under the first paragraph of this covenant or clauses (1), (2),
(8) and (10) of this paragraph;
(3) the incurrence by us or any of our Restricted Subsidiaries of
intercompany Indebtedness between or among us and any of our Restricted
Subsidiaries as provided in the covenant entitled "Advances to Restricted
Subsidiaries"; provided, however, that:
(a) this Indebtedness must be expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the notes;
and
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(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any the Indebtedness being held by a Person other than us or
any of our Restricted Subsidiaries or (ii) any sale or other transfer
of any Indebtedness to a Person other than us or any of our Restricted
Subsidiaries will be deemed, in each case, to constitute an incurrence
of Indebtedness by us or that Restricted Subsidiary, as the case may
be, that was not permitted by this clause (3);
(4) the incurrence by us or any of our Restricted Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate risk with respect to any floating rate Indebtedness that is permitted
by the terms of this indenture to be outstanding;
(5) the guarantee by us or any of our Restricted Subsidiaries of
Indebtedness permitted to be incurred by another provision of this
covenant;
(6) the incurrence by us or any of our Restricted Subsidiaries of
Indebtedness in respect of performance, surety or appeal bonds in the
ordinary course of business;
(7) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness
or an issuance of Disqualified Stock for the purposes of this covenant;
provided, however, in each case, that the amount thereof is included in our
Fixed Charges or the applicable Restricted Subsidiary as accrued;
(8) the incurrence by us of FF&E Financing; provided, however, that
(a) the principal amount of the Indebtedness does not exceed the
cost, including sales and excise taxes, installation and delivery
charges and other direct costs of, and other direct expenses paid or
charged in connection with, the purchase, of the FF&E purchased or
leased with the proceeds thereof,
(b) no Indebtedness incurred under the notes is utilized for the
purchase or lease of such FF&E and
(c) the aggregate principal amount of the Indebtedness, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause, does not
exceed $35.0 million outstanding at any time;
(9) the guarantee by us of Indebtedness incurred by any minority or women
owned business enterprise that provides goods or services to us; provided,
however, that:
(a) the Indebtedness is directly related to the construction,
development or operation of the Shreveport resort and
(b) the total amount of guarantees for which we have become and may
become obligated pursuant to this clause may not exceed an aggregate of
$200,000;
(10) the incurrence by us or any of our Restricted Subsidiaries of
Indebtedness, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause, in an aggregate principal amount not to exceed $10.0 million at any
one time outstanding for working capital purposes and other general
purposes;
(11) the incurrence by us of Indebtedness to Hilton New Orleans
Corporation, a Louisiana corporation, pursuant to the terms of the Loan and
Settlement Agreement in an amount not to exceed $2.0 million; and
(12) the incurrence by us of Indebtedness to the City of New Orleans
pursuant to the Compromise Agreement in the amount of $5.0 million, which
was paid promptly after the issuance of the notes.
We will not incur any Indebtedness, including Permitted Debt, that is
contractually subordinated in right of payment to any other of our Indebtedness
unless that Indebtedness is also contractually subordinated in right of payment
to the notes on substantially identical terms; provided, however, that none of
our Indebtedness will be deemed to be contractually subordinated in right of
payment to any other of our Indebtedness solely by virtue of being unsecured.
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For purposes of determining compliance with this "Incurrence of Indebtedness
and Issuance of Preferred Equity" covenant, if an item of proposed Indebtedness
meets the criteria of more than one of the categories of Permitted Debt
described in clauses (1) through (11) above, or is entitled to be incurred
pursuant to the first paragraph of this covenant, we will be permitted to
classify that item of Indebtedness on the date of its incurrence in any manner
that complies with this covenant.
If any Indebtedness that may be incurred under this covenant may be secured
by a Pari Passu Lien on the Pari Passu Collateral, upon the request of the
issuers, the trustee is authorized to enter into an intercreditor agreement
with the holder or holders of that Indebtedness, referred to as a "Pari Passu
Debtholder, " in substantially the form attached as an exhibit to the indenture
that provides the following:
(a) the Lien of the trustee on the Pari Passu Collateral will be equal in
priority, regardless of the time or method of attachment or perfection, to
the Lien in favor of, or for the benefit of, the Pari Passu Debtholder for
the sum of:
(1) a principal amount of such Indebtedness not to exceed the
principal amount permitted by the indenture to be secured by a Pari
Passu Lien and
(2) any other Obligations in respect of the principal amount of the
Indebtedness;
(b) the intercreditor agreement is solely for the purpose of establishing
the relative interests of the Pari Passu Debtholder, the trustee and the
holders of notes and is not for the benefit of any other party;
(c) the holders, or their representatives, of a majority in interest of
the aggregate principal amount of the notes (for these purposes, the
trustee acting pursuant to the indenture will represent the holders of
notes) and other Indebtedness secured by the Pari Passu Lien at the time
outstanding will have the sole right to take, enforce or exercise any right
or remedy to take or exercise any action or election or to refrain from
taking or exercising any action with respect to any of the Pari Passu
Collateral or the collateral documents relating to the Pari Passu
Collateral; provided, however, that the Pari Passu Debtholder may take or
exercise any action or election or refrain from taking or exercising any
action with respect to any collateral that is not Pari Passu Collateral or
under any document that does not apply to the Pari Passu Collateral;
provided, further, that the trustee will have no duty or obligation to any
Pari Passu Debtholder in taking or exercising any action or election or in
refraining from taking or exercising any action with respect to any of the
Pari Passu Collateral or the collateral documents;
(d) each of the trustee and the Pari Passu Debtholder agree that any
money or funds realized with respect to the Pari Passu Collateral in
connection with the enforcement or exercise of any right or remedy with
respect to any Pari Passu Collateral following the acceleration of the
notes will be distributed as follows: first, to the payment of all
reasonable expenses in connection with the collection, realization or
administration of funds or the exercise of rights or remedies; second, to
each holder of Indebtedness secured by a Pari Passu Lien on the Pari Passu
Collateral, a proportion of the remaining money or funds in the same
proportion as the total outstanding obligations so secured held by the
holder bears to the total outstanding obligations so secured until all the
secured obligations have been paid in full; and third, us or to whoever may
be lawfully entitled to receive the same as a court of competent
jurisdiction may direct;
(e) the trustee and the Pari Passu Debtholder agree that any amounts in
the Cash Collateral Accounts and all current and future assets of HWCC-
Louisiana, HCS I and HCS II, including, without limitation, the shares of
HCS I and HCS II owned by HWCC-Louisiana and the interests in us owned by
HCS I and HCS II, but excluding the $2.5 million in cash to be used by
HWCC-Louisiana to fund its obligations under the Membership Interest
Purchase Agreement, will be held for the sole benefit of the holders of
notes; and
(f) each of the trustee, the holders of notes and the Pari Passu
Debtholders will have the right to alter or amend their respective
agreements and documents with us in accordance with their terms and to
release any collateral from their respective Liens in accordance with the
terms of their respective agreements.
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Liens
We will not, and will not permit any of our Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien of any kind on
any asset now owned or subsequently acquired, or any proceeds, income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
us or any of our Restricted Subsidiaries, or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to us or any of our Restricted Subsidiaries;
(2) make loans or advances to us or any of our Restricted Subsidiaries;
or
(3) transfer any of its properties or assets to us or any of our
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) the notes, the indenture, the guarantees or the collateral documents;
(2) applicable law;
(3) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(4) Permitted Refinancing Indebtedness; provided, however, that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(5) the acquisition of the Capital Stock of any Person, or property or
assets of any Person by us or any Restricted Subsidiary, if the
encumbrances or restrictions (a) existed at the time of the acquisition and
were not incurred in contemplation thereof and (b) are not applicable to
any Person or the property or assets of any Person other than the Person
acquired or the property or assets of the Person acquired;
(6) purchase money obligations or capital lease obligations for FF&E
acquired with FF&E Financing that impose restrictions of the type described
in clause (3) of the first paragraph of this covenant on the FF&E so
acquired;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(8) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to such Lien;
(9) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements, asset sale agreements, stock sale
agreements and other similar agreements entered into in the ordinary course
of business; and
(10) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, Consolidation or Sale of Assets
Neither we nor any guarantor may, directly or indirectly
(1) consolidate or merge with or into another Person (whether or not we
or the guarantor is the surviving entity) or
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(2) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of our and our Restricted Subsidiaries' properties or
assets, taken as a whole, in one or more related transactions, to another
Person; unless:
(a) either (1) we or the guarantor, as applicable, is the surviving
entity or (2) the Person formed by or surviving the consolidation or
merger, if other than us or the guarantor, or to which the sale,
assignment, transfer, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(b) the Person formed by or surviving the consolidation or merger, if
other than us or the guarantor, or the Person to which the sale,
assignment, transfer, conveyance or other disposition shall have been
made assumes all of our of the guarantor's obligations, as applicable,
under the notes, the indenture, the registration rights agreement, the
guarantee and the collateral documents pursuant to agreement reasonably
satisfactory to the trustee;
(c) immediately after the transaction no default or event of default
exists;
(d) the transaction would not result in the loss or suspension or
material impairment of any of our or any of our Restricted
Subsidiaries' Gaming Licenses unless a comparable replacement Gaming
License is effective before or simultaneously with the loss, suspension
or material impairment;
(e) if we consolidate or merge, we or the Person formed by or
surviving the consolidation or merger (if other than us) or to which
the sale, assignment, transfer, conveyance or other disposition shall
have been made will, or, in the case of a consolidation or merger of a
guarantor or the sale, assignment, transfer, conveyance or other
disposition of the property or assets of the guarantor, we will, on the
date of the transaction after giving pro forma effect to the
transaction and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test provided in the first paragraph
of the covenant entitled "--Incurrence of Indebtedness and Issuance of
Preferred Equity"; and
(f) the transaction would not require any holder or beneficial owner
of notes to obtain a Gaming License or be qualified or found suitable
under the law of any applicable gaming jurisdiction; provided, however,
that the holder or beneficial owner would not have been required to
obtain a Gaming License or be qualified or found suitable under the
laws of any applicable gaming jurisdiction in the absence of the
transaction.
In addition, neither we nor any guarantor may, directly or indirectly, lease
all or substantially all of our or its properties or assets, in one or more
related transactions, to any other Person. This "Merger, Consolidation or Sale
of Assets" covenant will not apply to a sale, assignment, transfer, conveyance
or other disposition of assets between or among us and any of our Restricted
Subsidiaries.
Notwithstanding the foregoing, we may reorganize as a corporation or other
business entity in accordance with the procedures established in the indenture,
provided that we have delivered to the trustee an opinion of counsel in the
United States reasonably acceptable to the trustee confirming that the
reorganization is not adverse to holder of the notes, it being recognized that
the reorganization will not be deemed adverse to the holders of the notes
solely because:
(1) of the accrual of deferred tax liabilities resulting from the
reorganization or
(2) the successor or surviving corporation is either subject to income
tax as a corporate entity or is considered to be an "includible
corporation" of an affiliated group of corporations within the meaning of
the Internal Revenue Code of 1986, as amended, or any similar state or
local law.
Transactions with Affiliates
We will not, and will not permit any of our Restricted Subsidiaries to, make
any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or
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enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate, each being an "Affiliate Transaction," unless:
(1) the Affiliate Transaction is on terms that are no less favorable to
us or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by us or the Restricted Subsidiary
with an unrelated Person; and
(2) we deliver to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of our Board of Directors included in an
officers' certificate certifying that the Affiliate Transaction
complies with this covenant and that the Affiliate Transaction has been
approved unanimously by the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, other than in connection with the Software Agreement, an
opinion as to the fairness to the holders of notes of such Affiliate
Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) payments made pursuant to the Completion Capital Agreement,
Management Agreement, License Agreement, Tax Sharing Agreement, Technical
Services Agreement, Assignment Agreement and Marine Services Agreement;
(2) purchases of goods and services in the ordinary course of business;
(3) transactions between or among us and/or our Restricted Subsidiaries;
(4) Restricted Payments that are permitted by the covenant entitled
"Restricted Payments;"
(5) reasonable fees and compensation (including, without limitation,
bonuses, retirement plans and securities, stock options and stock ownership
plans) paid or issued to and indemnities provided on behalf of our or our
Restricted Subsidiaries, officers, directors, employees or consultants in
the ordinary course of business; and
(6) any other transactions that do not involve, in the aggregate for all
transactions, the payment of more than $250,000 in consideration in any one
calendar year.
Construction
We will construct the Shreveport resort, including the furnishing, fixturing
and equipping of the resort, with diligence and continuity in a good and
workmanlike manner substantially in accordance with the Plans.
Limitations on Use of Proceeds
We were required to deposit $113.4 million of the net proceeds of the
original offering into the Construction Disbursement Account, $5.0 million of
the net proceeds of the original offering into the Completion Reserve Account
and approximately $27.3 million of the net proceeds of the original offering in
the Interest Reserve Account. The funds in the Cash Collateral Accounts will be
invested solely in Government Securities; provided, however, that, after the
date of the indenture, funds in the Interest Reserve Account may be invested in
Pledged Securities so long as, on the date of any such investments, such
Pledged Securities have a value on such date which, in the opinion of a
nationally recognized firm of independent public accountants, is at least equal
to 125.0% of
(1) the amount of the first three payments of fixed interest that are
unpaid or
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(2) the pro rata portion of those interest payments equal to the
percentage of the interest payments to be secured by the Pledged
Securities. All funds in the Cash Collateral Accounts will be disbursed
only in accordance with the Cash Collateral and Disbursement Agreement.
Limitation on Status as Investment Company
The issuers and our Subsidiaries are prohibited from being required to
register as an "investment company," within the meaning of the Investment
Company Act of 1940, or from otherwise becoming subject to regulation under the
Investment Company Act of 1940.
Sale and Leaseback Transactions
We will not, and will not permit any of our Restricted Subsidiaries to, enter
into any sale and leaseback transaction; provided, however, that we may enter
into a sale and leaseback transaction if:
(1) we could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction under
clause (2) of the first paragraph of the covenant entitled "--Incurrence of
Indebtedness and Issuance of Preferred Equity" and (b) incurred a Lien to
secure the Indebtedness pursuant to the covenant entitled "--Liens";
(2) the gross cash proceeds of the sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by our
Board of Directors and included in an officers' certificate delivered to
the trustee, of the property that is the subject of the sale and leaseback
transaction; and
(3) the transfer of assets in the sale and leaseback transaction is
permitted by, and we apply the proceeds of the transaction in compliance
with, the covenant entitled "--Repurchase at the Option of Holders--Asset
Sales."
Additional Subsidiary Guarantees
If we or any of our Restricted Subsidiaries acquires or creates a Restricted
Subsidiary after the date of the indenture that at any time has Total Assets of
$2.5 million or more, then that newly acquired or created Restricted Subsidiary
must become a guarantor and execute a supplemental indenture and collateral
documents pledging all of their assets and securing the guarantee and deliver
an Opinion of Counsel to the trustee within ten business days of the date on
which it was acquired or created. Any Restricted Subsidiary that becomes a
guarantor will remain a guarantor unless we designate that guarantor to be an
Unrestricted Subsidiary in accordance with the indenture or is otherwise
released from its obligations as a guarantor as provided in the indenture.
Designation of Restricted and Unrestricted Subsidiaries
Our Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate fair market value of all of our and our Restricted Subsidiaries'
outstanding Investments in the Restricted Subsidiary so designated will be
deemed to be an Investment made as of the time of the designation and will
reduce the amount available for Restricted Payments under the first paragraph
of the covenant entitled "--Restricted Payments" or for future Investments
under one or more clauses of the definition of Permitted Investments, as we
determine. That designation will only be permitted if the Restricted Payment
would be permitted at that time and if the Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. Our Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the
redesignation would not cause a default.
Limitation on Issuances and Sales of Equity Interests in Subsidiaries
All of our Restricted Subsidiaries, other than Shreveport Capital, shall be
wholly owned by us, by one or more of our Restricted Subsidiaries or by us and
one or more of its Restricted Subsidiaries.
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We will not, and will not permit any of our Restricted Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Equity Interests in
any of our Restricted Subsidiaries to any Person, other than us or one of our
Restricted Subsidiaries, unless:
(1) the transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests in the Restricted Subsidiary; and
(2) the cash Net Proceeds from the transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant entitled
"Repurchase at the Option of Holders--Asset Sales."
In addition, we will not permit any of our Restricted Subsidiaries to issue
any of its Equity Interests to any Person other than to us or one or more of
our Restricted Subsidiaries.
Line of Business
We will not, and will not permit any of our Subsidiaries to, engage in any
business or investment activities other than a Permitted Business. Neither we
nor any of our Subsidiaries may conduct a Permitted Business in any gaming
jurisdiction in which we or such Subsidiary is not licensed on the date of the
indenture if the holders of the notes would be required to be licensed as a
result of that business or investment; provided, however, that the provisions
described in this sentence will not prohibit us or any of our Subsidiaries from
conducting a Permitted Business in any jurisdiction that does not require the
licensing or qualification of all the holders, but reserves the discretionary
right to require the licensing or qualification of any holders. We will not,
and will not permit any of our Subsidiaries to, engage in any business,
development or investment activity other than at or in conjunction with the
Shreveport resort until the Shreveport resort is Operating.
Advances to Restricted Subsidiaries
All advances, other than equity contributions, to Restricted Subsidiaries
made by us after the date of the indenture will be evidenced by intercompany
notes in our favor. These intercompany notes will be pledged pursuant to the
collateral documents to the trustee as collateral to secure the notes. Each
intercompany note will be payable upon demand and will bear interest at a rate
equal to the then current fair market interest rate.
Insurance
Until the notes have been paid in full, we will, and will cause our
Restricted Subsidiaries to, maintain insurance with carriers against such risks
and in such amounts as is customarily carried by similar businesses with such
deductibles, retentions, self insured amounts and coinsurance provisions as are
customarily carried by similar businesses of similar size, including, without
limitation, property and casualty. Customary insurance coverage will be deemed
to include, without limitation, the following:
(1) workers' compensation insurance to the extent required to comply with
all applicable state, territorial or United States laws and regulations, or
the laws and regulations of any other applicable jurisdiction;
(2) comprehensive general liability insurance with minimum limits of $1.0
million;
(3) umbrella or excess liability insurance providing excess liability
coverages over and above the foregoing underlying insurance policies up to
a minimum limit of $25.0 million;
(4) business interruption insurance at all times on and after the
Shreveport resort is Operating; and
(5) property insurance protecting the property against losses or damages
as is customarily covered by an "all-risk" policy or a property policy
covering "special" causes of loss for a business of similar type and size;
provided, however, that the insurance will provide coverage of not less
than the lesser of (a) 120% of the outstanding principal amount of the
notes plus accrued and unpaid fixed interest and (b) 100% of actual
replacement value, as determined at each policy renewal based on the F.W.
Dodge Building Index or some other recognized means, of any improvements
customarily insured consistent with industry standards and, in each case,
with a deductible no greater than 2% of the insured value of the
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Shreveport resort or any greater amount as is available on commercially
reasonable terms, other than earthquake or flood insurance, for which the
deductible may be up to 10% of the replacement value.
All insurance required by this covenant, except worker's compensation, will
name us and the trustee as additional insureds or loss payees, as the case may
be, with losses in excess of $1.0 million payable jointly to us and the
trustee, unless a default or event of default has occurred and is then
continuing, in which case all losses are payable solely to the trustee, with no
recourse against the trustee for the payment of premiums, deductibles,
commissions or club calls, and for at least 30 days notice of cancellation. All
of these insurance policies will be issued by carriers having an A.M. Best &
Company, Inc. rating of A or higher and a financial size category of not less
than X, or if the carrier is not rated by A.M. Best & Company, Inc., having the
financial stability and size deemed appropriate by an opinion from a reputable
insurance broker. We will deliver to the trustee on each anniversary of the
closing date a certificate of an insurance agent describing the insurance
policies obtained by us and our Restricted Subsidiaries, together with an
officer's certificate stating that the policies comply with this covenant and
the related applicable provisions of the collateral documents.
Amendments to Certain Agreements
Neither of the issuers nor any of our Restricted Subsidiaries will amend,
waive or modify, or take or refrain from taking any action that has the effect
of amending, waiving or modifying any provision of any of the collateral
documents, Completion Capital Agreement, Management Agreement, License
Agreement, Tax Sharing Agreement, Technical Services Agreement, Assignment
Agreement, Marine Services Agreement, Side Agreement and Contribution and
Assumption Agreement; provided, however, that (1) any of these agreements may
be amended or modified so long as the terms of the agreement as so amended or
modified are no less favorable to the holders of the notes than the terms of
the agreement as of the date of the indenture and (2) any of the collateral
documents may be amended, waived or modified as provided below under the
caption "--Amendment, Supplement and Waiver."
Restriction on Payment of Management Fees
We will not, directly or indirectly, pay to the Manager or any of our
Affiliates any Management Fees, except pursuant to the Management Agreement in
accordance with the indenture. Amounts payable pursuant to the Management
Agreement may not be prepaid, and no payment of Management Fees, either current
or accrued, will be made:
(1) if at the time of payment of such Management Fee, a default or an
event of default has occurred and be continuing or shall occur as a result
thereof; or
(2) to the extent the payment would cause our Fixed Charge Coverage Ratio
for the most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
the Management Fee is proposed to be paid to be less than 1.5 to 1
(calculated on a pro forma basis after adding back Management Fees that
were deducted from Consolidated Cash Flow during that period and deducting
from Consolidated Cash Flow Management Fees to be paid pursuant to this
provision); provided, however, that, with respect to periods following the
date the Shreveport resort first becomes Operating and before the time when
internal financial statements are available for four full fiscal quarters
following the date the Shreveport resort first becomes Operating, the Fixed
Charge Coverage Ratio will be calculated with respect to the number of full
fiscal quarters, but in no event less than one full fiscal quarter, for
which internal financial statements are available following the date the
Shreveport resort first becomes Operating.
Any Management Fees not permitted to be paid pursuant to this covenant will
be deferred and will accrue and may be paid only at the time that they would
otherwise be permitted to be paid under the indenture. The right to receive
payment of the Management Fee will be subordinate in right of payment to the
right of the holders of notes to receive payments pursuant to the notes.
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Further Assurances
The issuers will, and will cause each of our Restricted Subsidiaries to do,
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register, as applicable, any and all further acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations of each of the above, termination statements,
notices of assignment, transfers, certificates assurances and other instruments
as may be required from time to time in order to:
(1) carry out more effectively the purposes of the collateral documents;
(2) subject to the Liens created by any of the collateral documents any
of the properties, rights or interests required to be encumbered thereby;
(3) perfect and maintain the validity, effectiveness and priority of any
of the collateral documents and the Liens intended to be created thereby;
and
(4) better assure, convey, grant, assign, transfer, preserve, protect and
confirm to the trustee any of the rights granted now or in the future
intended by the parties thereto to be granted to the trustee under any
other instrument executed in connection therewith or granted to us under
the collateral documents or under any other instrument executed in
connection therewith.
Restrictions on Activities of HWCC-Louisiana, HCS I, HCS II and Shreveport
Capital
None of HWCC-Louisiana HCS I, HCS II or Shreveport Capital may:
(1) hold any material assets; provided, however, that
(a) HWCC-Louisiana may hold shares of HCS I and HCS II and the $2.5
million in cash that it will use to fund its obligations under the
Membership Interest Purchase Agreement until such obligations are paid
pursuant to the Membership Interest Purchase Agreement and
(b) HCS I and HCS II may each hold interests in us;
(2) consolidate or merge with or into any other Person, other than as
permitted in the covenant entitled "Merger, Consolidation or Sale of
Assets";
(3) become liable or pay for any obligations; provided, however, that
each of them may become liable for or pay for
(a) (1) its obligations under the indenture, the notes, the
guarantees, the registration rights agreement, the collateral documents
and any performance, surety or appeal bonds incurred in the ordinary
course of business, (2) any judgments and (3) its obligations under the
Membership Interest Purchase Agreement, Tax Sharing Agreement,
Assignment Agreement, Compromise Agreement, Loan and Settlement
Agreement, Joint Venture Agreement, Side Agreement and Contribution and
Assumption Agreement and
(b) Shreveport Capital may be a co-obligor with respect to
Indebtedness if we are also an obligor of that Indebtedness and the net
proceeds of the Indebtedness are received by us or one or more of our
Restricted Subsidiaries other than Shreveport Capital; or
(4) engage in any significant business activities, other than those that
are reasonably necessary for HCS I to take in its capacity as our managing
general partner.
Payments for Consent
The issuers will not, and will not permit any of our Restricted Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration to or for
the benefit of any holder of notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the indenture or the
notes unless the consideration is offered to be paid and is paid to all holders
of notes that consent, waive or agree to amend in the time frame provided in
the solicitation documents relating to the consent, waiver or agreement.
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Reports
Whether or not required by the SEC, so long as any notes are outstanding, the
issuers and the Guarantors will furnish to the holders of notes, within 15 days
following the time periods specified in the SEC's rules and regulations:
(1) all consolidated quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the issuers were required to file these Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on
the annual financial statements by the issuers' certified independent
accountants; and
(2) all current reports that would be required to be filed with the SEC
on Form 8-K if the issuers were required to file Form 8-K.
If we have designated any of our Subsidiaries as Unrestricted Subsidiaries,
then the consolidated quarterly and annual financial information required by
the preceding paragraph will include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of the issuers
and our Restricted Subsidiaries separate from the financial condition and
results of operations of our Unrestricted Subsidiaries as required by the rules
and regulations of the SEC.
In addition, following the consummation of the exchange offer contemplated by
the registration rights agreement, whether or not required by the SEC, the
issuers and Guarantors will file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the SEC for public availability
within the time periods specified in the SEC's rules and regulations, unless
the SEC will not accept the filing, and make this information available to
securities analysts and prospective investors upon request. In addition, the
issuers have agreed that, for so long as any notes remain outstanding, they
will furnish to the holders of notes and to securities analysts and prospective
investors, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
Cash Collateral and Disbursement Agreement
Pursuant to the Disbursement Agreement entered into among the issuers, First
American Title Insurance Company, as disbursement agent, and State Street Bank
and Trust Company, as trustee, the $145.7 million of net proceeds of the
original offering were placed into a construction disbursement account,
completion reserve account or interest reserve account and invested in
Government Securities. All funds and securities in each of these accounts will
be pledged as security for the repayment of the notes and will be distributed
by the disbursement agent pursuant to the Disbursement Agreement.
Construction Disbursement Account
The issuers have deposited $113.4 million of the net proceeds of the original
offering into the construction disbursement account. The disbursement agent
will invest these funds in Government Securities which will be held in the
construction disbursement account until the funds are needed to pay for the
development, construction, equipping and opening of the Shreveport resort. All
of the funds and securities in the construction disbursement account will be
pledged to the trustee for the benefit of the noteholders. Subject to certain
exceptions provided the in the Cash Collateral and Disbursement Agreement, the
disbursement agent will authorize the disbursement of funds from the
construction disbursement account only upon the satisfaction of the certain
disbursement conditions provided in the Cash Collateral and Disbursement
Agreement. These conditions include the requirement that we deliver to the
Disbursement Agent and the Independent Construction Consultant a certificate
certifying:
. the purposes to which the requested funds will be applied;
. that the construction performed to date is substantially in
accordance with the plans and the requested disbursement is
appropriate in light of the budget;
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. that we do not have any reason to believe that construction will not
terminate on or before the operating deadline;
. that we do not have any knowledge, notice or claim of any mechanics'
liens either filed or threatened against the Shreveport resort which
have not been insured or otherwise bonded over;
. that the budget shows the anticipated costs of completing the
Shreveport resort, and that there are funds available to complete
the construction of each component of the Shreveport resort within
the budget;
. that no event of default exists under the indenture and we are in
compliance in all material respects with each representation,
warranty and covenant contained in the indenture;
. that no circumstances have occurred which would provide us with any
defenses against the obligations evidenced by the notes or permit us
to assert any right to set off any amounts against these
obligations;
. that all equity contributions required to have been made under the
Cash Collateral and Disbursement Agreement on or before the date of
the requested funds have been made; and
. that all permits and approvals necessary as of the date of the
requested funds have been obtained and are in full force and effect.
In addition, before any funds may be disbursed, the disbursement agent will
be required to receive from the Independent Construction Consultant a
certification certifying that it has reviewed the disbursement request, has
visited the project site within the last month and concurs with certain of the
certifications made by us in the disbursement request. In addition, before any
funds will be disbursed, the Independent Construction Consultant must certify
that (1) the disbursement request is appropriate in light of the percentage of
construction completed and (2) there are sufficient available funds to complete
the construction of each component of the Shreveport resort within the budget
for the resort.
Interest Reserve Account
We deposited $27.3 million of the net proceeds of the original offering into
the interest reserve account. These funds will be sufficient to purchase
Government Securities which, upon receipt of scheduled interest and principal
payments, will provide for the payment in full of the first three payments of
fixed interest on the notes. All funds and securities in the interest reserve
account will be pledged to the trustee for the benefit of the noteholders.
Completion Reserve Account
We deposited $5.0 million of the net proceeds of the original offering into
the completion reserve account. The Disbursement Agent will invest these funds
in Government Securities which will be held in the completion reserve account
until the funds are needed to pay for the development, construction, equipping
and opening of the Shreveport resort. All funds and securities in the
completion reserve account will be pledged to the trustee for the benefit of
the holders of the notes. The Disbursement Agent will authorize the
disbursement of funds from the completion reserve account only upon the
satisfaction of the disbursement conditions provided in the Cash Collateral and
Disbursement Agreement. These conditions include that there are insufficient
funds in the construction disbursement account to make the disbursement.
Excess Funds
If (1) any funds remain in the Construction Disbursement Account or the
Completion Reserve Account upon the completion of the Shreveport resort as
described in the Cash Collateral and Disbursement Agreement or (2) funds remain
in the interest reserve account after the third interest payment has been made
on the notes and, in each case, there is no event of default under the
indenture, the Disbursement Agent will disburse the remaining funds into any
account specified by us for use in any manner permitted by the indenture.
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Events of Default and Remedies
Each of the following is an event of default under the indenture:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the notes; provided, however, that
payments of Contingent Interest that are permitted to be deferred as
provided in the indenture will not become due for this purpose until the
payment is required to be made pursuant to the terms of the indenture;
(2) default in payment when due of the principal of, or premium, if any,
on the notes;
(3) (a) default in the payment of principal of, premium, if any, and
interest on notes required to be purchased with respect to a Change of
Control Offer, Asset Sale Offer or Event of Loss Offer, when due and
payable; and
(b) failure to perform or comply with the provisions described under
(1) "--Certain Covenants--Merger, Consolidation or Sale of Assets"
or "--Limitation on Use of Proceeds" or
(2) "--Certain Covenants--Restricted Payments," but only if the
failure under this clause (2) is caused by a Restricted Payment
described in the first set of clauses (1) through (3) of the first
paragraph of the covenant entitled "--Certain Covenants--Restricted
Payments;"
(4) failure by
(a) either of the issuers or any of our Restricted Subsidiaries for
60 days after notice thereof to comply with the any of the other
agreements in the indenture not set forth in clause (3) above or
(b) us for 30 days after notice thereof to comply with any of the
agreements in the Cash Collateral and Disbursement Agreement;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by us or any of our Restricted
Subsidiaries, or the payment of which is guaranteed by us or any of our
Restricted Subsidiaries, whether the Indebtedness or guarantee now exists,
or is created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on Indebtedness before the expiration of the grace
period provided in the Indebtedness on the date of the default, a
"Payment Default"; or
(b) results in the acceleration of the Indebtedness before its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5.0 million or
more;
(6) failure by either of the issuers or any of our Restricted
Subsidiaries to pay final judgments aggregating in excess of $5.0 million,
which judgments are not paid, discharged or stayed for a period of 60 days;
(7) breach by either of the issuers or any guarantor in any material
respect of any representation or warranty or agreement in any of the
collateral documents or in any certificates delivered in connection with
the collateral documents, the repudiation by any of them of any of its
obligations under any of the collateral documents, the unenforceability of
the collateral documents against any of them for any reason which continues
for 30 days after written notice from the trustee or holders of at least
25% in outstanding principal amount of notes or the loss of the perfection
or priority of the Liens granted by any of them pursuant to the collateral
documents for any reason;
(8) except as permitted by the indenture, any guarantee by a guarantor
with Total Assets of $5.0 million or more shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to
be in full force and effect or any guarantor with Total Assets of $5.0
million or more, or any Person acting on behalf of any guarantor, shall
deny or disaffirm its obligations under its guarantee;
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(9) certain events of bankruptcy or insolvency with respect to either of
the issuers or any of our Restricted Subsidiaries;
(10) default by Hollywood Casino in the performance of its obligations
provided in, or repudiation of its obligations under, the Completion
Capital Agreement;
(11) if HWCC-Louisiana, HCS I, HCS II and us ever fail to own
collectively 100% of the issued and outstanding Equity Interests of
Shreveport Capital; or
(12) the failure of the Shreveport resort to be Operating by the
Operating Deadline or any revocation, suspension or loss of any gaming
license which results in the cessation or suspension of business at the
Shreveport resort for a period of more than 90 consecutive days; provided,
however, that, in any event, there shall not be an event of default under
this clause if the suspension of business results from an Event of Loss and
we are complying with the covenant entitled "Repurchase at the Option of
Holders--Event of Loss."
In the case of an event of default arising from certain events of bankruptcy
or insolvency with respect to either of the issuers or any of our Restricted
Subsidiaries that is a Significant Subsidiary or any group of our Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding notes will become due and payable immediately without further
action or notice. If any other event of default occurs and is continuing, the
trustee or the holders of at least 25% in principal amount of the then
outstanding notes may declare all the notes to be due and payable immediately.
Holders of notes 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 trustee may withhold from
holders of notes notice of any continuing default or event of default (except a
default or event of default relating to the payment of principal or interest or
liquidated damages) if it determines that withholding notice is in their
interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing default or event of default and its consequences under
the indenture, except a continuing default or event of default in the payment
of interest or liquidated damages on, or the principal of, the notes.
In the case of any event of default occurring by reason of any willful action
or inaction taken or not taken by or on behalf of the issuers with the
intention of avoiding payment of the premium that the issuers would have had to
pay if the issuers then had elected to redeem the notes pursuant to the
optional redemption provisions of the indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the notes. If an event of default occurs before August
1, 2003, by reason of any willful action or inaction taken or not taken by or
on behalf of the issuers with the intention of avoiding the prohibition on
redemption of the notes before August 1, 2003, then the premium specified in
the indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the notes.
The issuers are required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any default or
event of default, the issuers are required to deliver to the trustee a
statement specifying the default or event of default.
No Personal Liability of Directors, Officers, Employees, Partners and
Stockholders
No director, officer, employee, partner, incorporator or stockholder of
either of the issuers or any guarantor, as such, shall have any liability for
any obligations of either of the issuers or any of the Guarantors under the
notes, the indenture, the guarantees, the collateral documents or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each holder of notes by accepting a note waives and releases all liability. The
waiver and release are part of the consideration for issuance of the notes. The
waiver may not be effective to waive liabilities under the federal securities
laws.
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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 and all
obligations of the Guarantors discharged with respect to their guarantees
("Legal Defeasance") except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and liquidated damages,
if any, on such notes when such payments are due from the trust referred to
below;
(2) the issuers' obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee, and
the issuers' and the guarantor's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, the issuers may, at their option and at any time, elect to have
the obligations of the issuers and the Guarantors released with respect to
certain covenants that are described in the indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants 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 addition, the Liens securing the collateral will be released upon
Covenant Defeasance or Legal Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the issuers must irrevocably deposit with the trustee, in trust, for
the benefit of the holders of notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in the amounts that will
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, and fixed
interest, the maximum remaining amount payable as Contingent Interest, and
premium and liquidated damages, if any, on the outstanding notes on the
stated maturity or on the applicable redemption date, as the case may be,
and the issuers must specify whether the notes are being defeased to
maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the issuers shall have delivered to
the trustee an Opinion of Counsel reasonably acceptable to the trustee
confirming that
(a) the issuers have received from, or there has been published by,
the Internal Revenue Service a ruling or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the
holders of the outstanding notes will not recognize income, gain or
loss for federal income tax purposes as a result of the 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 the Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the issuers shall have delivered
to the trustee an Opinion of Counsel reasonably acceptable to the trustee
confirming that the holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of the
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 the Covenant Defeasance had not occurred;
(4) no default or event of default shall have occurred and be continuing
either:
(a) on the date of the deposit (other than a default or event of
default resulting from the borrowing of funds to be applied to the
deposit) or
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(b) insofar as events of default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after
the date of deposit;
(5) the 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 either of the
issuers or any of our Restricted Subsidiaries is a party or by which either
of the issuers or any of our Restricted Subsidiaries is bound;
(6) the issuers must have delivered to the trustee an opinion of counsel
to the effect that, assuming no intervening bankruptcy of either of the
issuers or any guarantor between the date of the deposit and the 91st day
following the deposit and assuming that no holder is an "insider" of either
of the issuers under applicable bankruptcy law, after the 91st day
following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(7) 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 of notes over the other creditors of either of the
issuers with the intent of defeating, hindering, delaying or defrauding
creditors of either of the issuers or others; and
(8) the issuers must deliver to the trustee an officers' certificate and
an Opinion of Counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been complied with.
Notwithstanding the above, the trustee shall pay us from time to time upon
our request any cash or Government Securities held by it as provided in the
third paragraph of this section 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 clause (1) of the third paragraph of this section), are in
excess of the amount thereof that would then be required to be deposited to
effect a Legal Defeasance or Covenant Defeasance.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the indenture,
the notes, the guarantees or the collateral documents may be amended or
supplemented by the issuers, the Guarantors and the trustee with the consent of
the holders of at least a majority in principal amount of the notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, notes), and any
existing default or compliance with any provision of the indenture, the notes,
the Guarantees or the collateral documents may be waived with the consent of
the holders of a majority in principal amount of the then outstanding notes
(including, without limitation, consents obtained in connection with a purchase
of, or 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):
(1) reduce the principal amount of notes whose holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes, other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders";
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a default or event of default in the payment of principal of,
or interest or premium, or liquidated damages, if any, on the notes, except
a rescission of acceleration of the notes by the holders of at least a
majority in aggregate principal amount of the notes and a waiver of the
payment default that resulted from such acceleration;
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(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to
waivers of past defaults or the rights of holders of notes to receive
payments of principal of, or interest or premium or liquidated damages, if
any, on the notes;
(7) waive a redemption payment with respect to any note, other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders";
(8) release any guarantor from any of its obligations under its guarantee
or the indenture, except in accordance with the terms of the indenture;
(9) release all or substantially all of the collateral from the Lien of
the indenture or the collateral documents, except in accordance with the
provisions thereof; or
(10) make any change in the preceding amendment and waiver provisions.
Any amendment to, or waiver of, the provisions of any of the collateral
documents relating to the covenant entitled "Liens" or the security provisions
of the indenture will require the consent of the holders of at least 85% in
principal amount of the notes then outstanding.
Notwithstanding the preceding, without the consent of any holder of notes,
the issuers, the Guarantors and the trustee may amend or supplement the
indenture, the notes, the guarantees or the collateral documents:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of the either of the issuers'
obligations to holders of notes in the case of a merger or consolidation or
sale of all or substantially all of that issuers' assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of that holder;
(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act; or
(6) to enter into additional or supplemental collateral documents or an
intercreditor agreement with a Pari Passu Debtholder.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect as to
all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated (except lost, stolen or
destroyed notes that have been replaced or paid and notes for whose
payment money has theretofore been deposited in trust and thereafter
repaid to the issuers) have been delivered to the trustee for
cancellation; or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within
one year and the issuers or any guarantor have irrevocably deposited or
caused to be deposited with the trustee as trust funds in trust solely
for the benefit of the holders of notes, cash in U.S. dollars, non-
callable Government Securities, or a combination thereof, in those
amounts that will be sufficient without consideration of any
reinvestment of interest, to pay and discharge the entire indebtedness
on the notes not delivered to the trustee for cancellation for
principal, fixed interest, the maximum amount payable as Contingent
Interest and premium and liquidated damages, if any, to the date of
maturity or redemption;
(2) no default or event of default shall have occurred and be continuing
on the date of the deposit or shall occur as a result of the deposit and
the deposit will not result in a breach or violation of, or constitute
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a default under, any other instrument to which either of the issuers or any
guarantor is a party or by either of the issuers or any guarantor is bound;
(3) the issuers and each guarantor has paid or caused to be paid all sums
payable by them under the indenture; and
(4) the issuers have delivered irrevocable instructions to the trustee
under the indenture to apply the deposited money toward the payment of the
notes at maturity or the redemption date, as the case may be.
In addition, the issuers must deliver an officers' certificate and an
Opinion of Counsel to the trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
Notwithstanding the above, the trustee shall pay us from time to time upon
our request any cash or Government Securities held by it as provided in this
section which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification delivered to the
trustee, are in excess of the amount thereof that would then be required to be
deposited to effect a Satisfaction and Discharge.
Concerning the Trustee
If the trustee becomes a creditor of either of the issuers or any guarantor,
the indenture limits its right to obtain payment of claims in certain cases,
or to realize on certain property received in respect of any such claim as
security or otherwise. The trustee will be permitted to engage in other
transactions. However, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an event of default
shall occur and be continuing, the trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to these provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request of any holder of notes, unless the holder shall have offered to the
trustee security and indemnity satisfactory to it against any loss, liability
or expense.
Book-Entry, Delivery and Form
Except as provided below, your notes will be issued in registered, global
form in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof.
The notes will be represented by a note in registered, global form without
interest coupons (the "Global Note"). The Global Note 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 in DTC as described below.
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures
are solely within the control of DTC and are subject to changes by them. We
take no responsibility for these operations and procedures and urges investors
to contact the DTC or its participants directly to discuss these matters.
DTC has advised us 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 its Participants. The Participants include securities brokers
and dealers (including the initial purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons
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who are not Participants may beneficially own securities held by or on behalf
of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in, 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:
(1) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the initial purchasers with portions of the
principal amount of the Global Note; and
(2) ownership of these interests in the Global Note will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants
and the Indirect Participants (with respect to other owners of beneficial
interest in the Global Notes).
Investors in the Global Note who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in the Global Note who
are not Participants may hold their interests therein indirectly through
organizations which 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
interests in the Global Note to such persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants, the ability of a person having beneficial interests
in the Global Note to pledge such interests to persons that do not participate
in the DTC system, or otherwise take actions in respect of such interests, may
be affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interest in the Global Note 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 of, and interest and premium and
liquidated damages, if any, on the Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered holder
under the indenture. Under the terms of the indenture, the Company and the
trustee will treat the persons in whose names the new notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
payments and for all other purposes. Consequently, neither we, the trustee nor
any of our trustee's agents has or will have any responsibility or liability
for:
(1) 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 interest 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
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment in
respect of securities such as the registered notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not
receive payment on such payment date. Each relevant Participant is credited
with an amount proportionate to its beneficial ownership of an interest in the
principal amount of the relevant security as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of new notes will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the trustee or us.
Neither we nor the trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the registered notes, and
we and the trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
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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 us that it will take any action permitted to be taken by a
holder of registered notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes 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 such direction.
However, if there is an event of default under the registered notes, DTC
reserves the right to exchange the Global Note for legended registered notes in
certificated form, and to distribute such registered notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Note among participants in DTC, it is under no
obligation to perform or to continue to perform these procedures, and may
discontinue them at any time. Neither we nor the trustee nor any of their
respective agents will have any responsibility for the performance by DTC or
its respective participants or indirect participants of its respective
obligations under the rules and procedures governing its operations.
Transfers of Interests in Global Notes for Certificated Notes
An entire Global Note may be exchanged for definitive registered notes in
registered, certificated form without interest coupons ("Certificated Notes")
if:
(1) DTC (a) notifies the issuers that it is unwilling or unable to
continue as Depositary for the Global Notes and the issuers thereupon fail
to appoint a successor Depositary within 120 days or (b) has ceased to be a
clearing agency registered under the Exchange Act,
(2) the issuers, at their option, notify the trustee in writing that it
elects to cause the issuance of Certificated Notes or
(3) there shall have occurred and be continuing a default or an event of
default with respect to the registered notes. In any such case, the issuers
will notify the trustee in writing that, upon surrender by the Direct and
Indirect Participants of their interest in the Global Note, Certificated
Notes will be issued to each person that such Direct and Indirect
Participants and the DTC identify as being the beneficial owner of the
related notes.
In addition, beneficial interests in the Global Note held by any Direct or
Indirect Participant may be exchanged for Certificated Notes upon request to
DTC, by such Direct Participant (for itself or on behalf of an Indirect
Participant), to the trustee in accordance with customary DTC procedures.
Certificated Notes delivered in exchange for any beneficial interest in any
Global Note will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of such Direct or Indirect
Participants in accordance with DTC's customary procedures.
Neither the issuers nor the trustee will be liable for any delay by the
holder of the Global Note or DTC in identifying the beneficial owners of notes,
and the issuers and the trustee may conclusively rely on, and will be protected
in relying on, instructions from the holder of the Global Note or DTC for all
purposes.
Same Day Settlement and Payment
The indenture will require that payments in respect of the notes represented
by the Global Note, including principal, premium, if any, interest and
liquidated damages, if any, be made by wire transfer of immediately available
same day funds to the accounts specified by the holder of interests in such
Global Note. With respect to Certificated Notes, issuers will make all payments
of principal, premium, if any, interest and liquidated damages, if any, by wire
transfer of immediately available same day 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 registered notes represented by the
Global Notes are expected to be eligible to trade in the PORTAL
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market and to trade in DTC's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in such registered notes will,
therefore, be required by DTC to be settled in immediately available funds. The
issuers expect that secondary trading in the Certificated Notes will also be
settled in immediately available funds.
Certain Definitions
Provided below are certain defined terms used in the indenture. Reference is
made to the indenture for a full disclosure of all these terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Adjusted Fixed Charge Coverage Ratio" means, with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to Adjusted Fixed Charges of such
Person and its Restricted Subsidiaries for such period (calculated in the same
manner as the Fixed Charge Coverage Ratio is calculated).
"Adjusted Fixed Charges" means, with respect to any Person for any period,
the Fixed Charges of such Person and its Restricted Subsidiaries for such
period, plus any Contingent Interest to the extent paid in such period.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that Paddlewheels shall
not be deemed to be our "Affiliate." For purposes of this definition,
"control," as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided, however, that beneficial
ownership of 10% or more of the voting securities of a Person shall be deemed
to be control. For purposes of this definition, the terms "controlling,"
"controlled by" and "under common control with" shall have correlative
meanings.
"Assignment Agreement" means the Amended and Restated Assignment of Joint
Venture Interest dated as of September 22, 1998, among Sodak Louisiana, L.L.C.,
a Louisiana limited liability company, HWCC-Louisiana, Paddlewheels and New
Orleans Paddlewheels, Inc., a Louisiana corporation, as in effect on the date
of the indenture or as amended or modified pursuant to the provisions of the
covenant entitled "Amendment to Certain Agreements."
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights; provided that the sale, conveyance or other disposition of all or
substantially all of our assets and Restricted Subsidiaries taken as a
whole will be governed by the provisions of the indenture described above
under the caption "--Repurchase at the Option of Holders--Change of
Control" and the provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of our Restricted
Subsidiaries or the sale of Equity Interests by us in any of our
Subsidiaries.
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Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
(2) a transfer of assets between or among us and our Restricted
Subsidiaries;
(3) an issuance of Equity Interests by one of our Restricted Subsidiaries
to us or to another Restricted Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents; and
(6) a Restricted Payment or Permitted Investment that is permitted by the
covenant entitled "Certain Covenants--Restricted Payments."
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction, including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a
corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the Board of Directors of the
corporation;
(2) with respect to a partnership, the Board of Directors of the managing
general partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance
with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Collateral Accounts" means, collectively, the Construction Disbursement
Account, the Completion Reserve Account, the Interest Reserve Account and the
Segregated Account.
"Cash Collateral and Disbursement Agreement" means the Cash Collateral and
Disbursement Agreement dated the date of the indenture, among the issuers, the
trustee and the Disbursement Agent in connection with the Shreveport resort.
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"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof, provided
that the full faith and credit of the United States is pledged in support
thereof, having maturities of not more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits, in
each case, with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition, other than by way of merger or consolidation, in one or a
series of related transactions, of all or substantially all of the assets
of Hollywood Casino and its Subsidiaries taken as a whole;
(2) the liquidation or dissolution of, or the adoption of a plan relating
to the liquidation or dissolution of, either of the Issuers or Hollywood
Casino or any successor thereto;
(3) Hollywood Casino becoming aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy vote, written
notice or otherwise) the acquisition by any Person or related group, within
the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or
any successor provision to either of the foregoing, including any "group"
acting for the purpose of acquiring, holding or disposing of securities
within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than
any of the Principals, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business combination
or purchase of beneficial ownership, within the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision, of 30% or more of the total
voting power entitled to vote in the election of the Board of Directors of
Hollywood Casino or such other Person surviving the transaction and, at
such time, the Principals collectively shall fail to beneficially own,
directly or indirectly, securities representing greater than the combined
voting power of Hollywood Casino's or such other Person's Voting Stock as
is beneficially owned by such person or group;
(4) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Hollywood Casino's Board of
Directors, together with any new directors whose election or appointment by
such board or whose nomination for election by the stockholders of
Hollywood Casino was approved by a vote of a majority of the directors then
still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved,
ceasing for any reason to constitute a majority of the Hollywood Casino's
Board of Directors then in office;
(5) Hollywood Casino consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into, Hollywood
Casino, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of Hollywood Casino is converted into or exchanged
for cash, securities or other property, other than any such transaction
where the Voting Stock of Hollywood Casino outstanding immediately prior to
such transaction is converted into or exchanged for Voting Stock
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(other than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person immediately after giving effect to such
issuance;
(6) the first day on which Hollywood Casino ceases to Beneficially Own
100% of our outstanding Equity Interests', other than our Equity Interests
owned by Paddlewheels on the date of the indenture; or
(7) the termination or repudiation by the Manager of the Management
Agreement.
"Completion Capital Agreement" means the Completion Capital Agreement dated
as of the date of the indenture, among Hollywood Casino, HWCC-Louisiana, HCS I,
HCS II and us, as in effect on the date of the indenture or as amended or
modified pursuant to the provisions of the covenant entitled "Amendments to
Certain Agreements."
"Completion Reserve Account" means the completion reserve account to be
maintained by the Disbursement Agent and pledged to the trustee pursuant to the
terms of the Cash Collateral and Disbursement Agreement, into which $5.0
million of the proceeds of the original offering were deposited.
"Compromise Agreement" means the Compromise Agreement dated as of September
15, 1998, among QNOV, Hilton New Orleans Corporation, New Orleans Paddlewheels,
Inc., the City of New Orleans and Hilton Hotels Corporation.
"Consolidated Cash Flow" means, with respect to any specified Person for any
period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized
by such Person or any of its Restricted Subsidiaries in connection with an
Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits or the Tax Amount of
such Person and its Restricted Subsidiaries for such period, to the extent
that such provision for taxes or Tax Amount was deducted in computing such
Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized, including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received pursuant
to Hedging Obligations, to the extent that any such expense was deducted in
computing such Consolidated Net Income; plus
(4) any pre-opening expenses to the extent that such preopening expenses
were deducted in computing Consolidated Net Income on a consolidated basis
and determined in accordance with GAAP; plus
(5) depreciation, amortization, including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period, and other non-cash expenses, excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense, other than pre-opening expenses, that was paid in a prior
period, of such Person and its Restricted Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income; minus
(6) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
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Notwithstanding the preceding, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash expenses
of, and of our Restricted Subsidiaries shall be added to Consolidated Net
Income to compute our Consolidated Cash Flow only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to us by such Restricted Subsidiary without prior governmental
approval, that has not been obtained, and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its equityholders.
"Consolidated Net Income" means, with respect to any specified Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that:
(1) the Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
specified Person or a Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental
approval, that has not been obtained, or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded;
(5) the Net Income of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to the specified Person or one of its Restricted
Subsidiaries; and
(6) for purposes of calculating our Consolidated Net Income and our
Restricted Subsidiaries for any period, Net Income will be reduced by the
amount of any Paddlewheels Revenue Participation payable with respect to
such period.
"Construction Disbursement Account" means the construction disbursement
account to be maintained by the Disbursement Agent and pledged to the trustee
pursuant to the terms of the Cash Collateral and Disbursement Agreement, into
which $113.4 million of the net proceeds of the original offering were
deposited.
"Construction Disbursement Budget" means itemized schedules setting forth on
a line item basis all of the costs (including financing costs) estimated to be
incurred in connection with the financing, design, development, construction
and equipping of the Shreveport resort, as such schedules are delivered to the
Disbursement Agent on the date of the indenture and as amended from time to
time in accordance with the terms of the Cash Collateral and Disbursement
Agreement.
"Construction Repurchase Offer" means an offer by the issuers at their sole
discretion to all holders of notes to purchase the maximum principal amount of
notes that may be purchased with 50% of the Remaining Construction Amounts;
provided, however, that:
(1) the price for any notes to be purchased pursuant to such offer will
be paid in cash and will be equal to the sum of
(a) 100% of the principal amount thereof,
(b) accrued and unpaid interest on such notes and
(c) accrued liquidated damages on such notes, if any;
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(2) such offer will be conducted in the manner described under
"Compliance with Securities Laws;" and
(3) if the principal amount of notes tendered in such offer exceed the
offer amount, the trustee shall select the notes to be purchased in the
manner described under "--Selection and Notice."
"Contingent Interest" means:
(1) for the purpose of the First Accrual Period and any Semiannual
Period, the product of 5% multiplied by our Consolidated Cash Flow for such
First Accrual Period or Semiannual Period, as applicable;
(2) for the purpose of any Interim Period occurring after the date that
internal financial statements for the prior two fiscal quarters are
available, the product of
(a) 5% multiplied by our Consolidated Cash Flow for those two fiscal
quarters and
(b) a fraction, the numerator of which is the number of days from the
end of the most recent Semiannual Period to the date of payment and the
denominator of which is 180;
(3) for the purpose of an Accrual Period that ends prior to the
completion of the First Accrual Period or for any Interim Period occurring
prior to the date that internal financial statements for the immediately
preceding two fiscal quarters are available, the product of
(a) 5% multiplied by our Consolidated Cash Flow for all completed
calendar months during such period for which financial statements are
available and
(b) a fraction, the numerator of which is the number of days from the
date the Shreveport resort begins Operating to the date of payment and
the denominator of which is the aggregate number of days for all
completed months included in such period;
in each case, multiplied by a fraction, the numerator of which is the principal
amount of notes outstanding on the close of business on that Record Date and
the denominator of which is $150.0 million; provided, however, that Contingent
Interest that accrues in respect of any four consecutive fiscal quarters,
excluding any Contingent Interest deferred from prior periods, shall not exceed
the product of
(a) 5% multiplied by $100.0 million and
(b) a fraction, the numerator of which is such principal amount of
outstanding notes and the denominator of which is $150.0 million.
"Contribution and Assumption Agreement" means the Contribution and Assumption
Agreement dated as of July 21, 1999, among HWCC-Louisiana, HCS I, HCS II and
Paddlewheels, as in effect on the date of the indenture or as amended or
modified pursuant to the provisions of the covenant entitled "Amendments to
Certain Agreements."
"Disbursement Agent" means First American Title Insurance Company.
"Disqualified Stock" means any Capital Stock that, by its terms, or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof, or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require us to repurchase such Capital Stock
upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
we may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
entitled "--Certain Covenants--Restricted Payments."
"Eligible Institution" means a domestic commercial banking institution that
has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, whose debt is rated "A" or higher according to
S&P or Moody's at the time any investment or rollover therein is made.
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"Equity Escrow Account" means the account into which $44.7 million in cash
was deposited on the date of the indenture representing equity contributions
made to us by HCS I, HCS II and Paddlewheels.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"Event of Loss" means, with respect to any asset, any
(1) loss, destruction or damage of such asset,
(2) condemnation, seizure or taking by exercise of the power of
eminent domain or otherwise of such property or asset, or confiscation
of such asset or the requisition of the use of such asset or
(3) settlement in lieu of clause (2) above.
"FF&E" means furniture, fixtures or equipment used in the ordinary course of
our businesses and our Restricted Subsidiaries.
"FF&E Financing" means the incurrence of Indebtedness, the proceeds of which
are utilized solely to finance the acquisition of (or entry into a capital
lease by us or a Restricted Subsidiary with respect to) FF&E.
"Final Plans" with respect to any particular work or improvement means Plans
which
(1) have received final approval from all governmental authorities
required to approve such Plans prior to completion of the work or
improvements and
(2) contain sufficient specificity to permit the completion of the
work or improvement.
"First Accrual Period" means the period beginning on the date the Shreveport
resort begins Operating through and including the next June 30 or December 31,
as applicable.
"Fixed Charge Coverage Ratio" means with respect to any specified Person for
any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person for
such period. In the event that the specified Person or any of its Restricted
Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any
Indebtedness, other than ordinary working capital borrowings, or issues,
repurchases or redeems preferred equity subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated and on or
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or
such issuance, repurchase or redemption of preferred equity, and the use of the
proceeds therefrom as if the same had occurred at the beginning of the
applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated on a
pro forma basis in accordance with Regulation S-X under the Securities Act,
but without giving effect to clause (3) of the proviso set forth in the
definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted Subsidiaries
following the Calculation Date.
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"Fixed Charges" means, with respect to any specified Person for any period,
the sum, without duplication, of:
(1) the consolidated interest expense, excluding Contingent Interest, if
any, paid or accrued, of such Person and its Restricted Subsidiaries for
such period, whether paid or accrued, including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net of the effect
of all payments made or received pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
guaranteed by that Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon; plus
(4) the product of
(a) all dividends, whether paid or accrued and whether or not in
cash, on any series of preferred equity of such Person or any of its
Restricted Subsidiaries, other than dividends on Equity Interests
payable solely in Equity Interests of us, other than Disqualified
Stock, or to us or one of our Restricted Subsidiaries, times
(b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of that Person, or, in the case of a Person that is
a partnership or limited liability company, the combined federal, state
and local income tax rate that was or would have been used to calculate
the Tax Amount of that Person, expressed as a decimal, in each case, on
a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Gaming Facility" means any building, riverboat, barge or other structure
used or expected to be used to enclose space in which a gaming operation is
conducted and either is wholly or partially owned, directly or indirectly, by
us or any of our Restricted Subsidiaries or any portion or aspect of which is
managed or used, or expected to be managed or used, by us or any of our
Restricted Subsidiaries.
"Gaming Law" means the gaming laws of any jurisdiction or jurisdictions to
which either of the issuers or any of our Subsidiaries is, or may at any time
after the date of the indenture, be subject.
"Gaming License" means any license, permit, franchise or other authorization
from any gaming authority necessary on the date of the indenture or at any time
thereafter to own, lease, operate or otherwise conduct the business of either
of the issuers or any of our Restricted Subsidiaries.
"Government Securities" means securities that are:
(1) direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged; or
(2) 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 also includes a depository receipt issued by a bank, as
defined in Section 3(a)(2) of the Securities Act of 1933, as custodian
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with respect to any such Government Security or a specific payment of
principal of or interest on any such Government Security held by the custodian
for the account of the holder of such depository receipt; provided, however,
that, except as required by law, the custodian is not authorized to make any
deduction from the amount payable to the holder of the 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 the depository receipt.
"HCS I" means HCS I, Inc., a Louisiana corporation.
"HCS II" means HCS II, Inc., a Louisiana corporation.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Hollywood Casino" means Hollywood Casino Corporation, a Delaware
corporation.
"Indebtedness" means, with respect to any specified Person, any indebtedness
of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) obligations evidenced by bonds, notes, debentures or similar
instruments or letters of credit, or reimbursement agreements in respect
thereof;
(3) banker's acceptances;
(4) Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable;
(6) any Hedging Obligations;
(7) all Indebtedness of others secured by a Lien on any asset of the
specified Person, whether or not such Indebtedness is assumed by the
specified Person; provided, however, that the amount of such Indebtedness
shall be limited to the lesser of the fair market value of the assets or
property to which such Lien attaches and the amount of the Indebtedness so
incurred; and
(8) to the extent not otherwise included, the Guarantee by the specified
Person of any indebtedness of any other Person;
and any and all deferrals, renewals, extensions, refinancings and refundings,
whether direct or indirect, thereof and any amendments, modifications or
supplements thereto, if and to the extent any of the preceding items, other
than letters of credit and Hedging Obligations, would appear as a liability
upon a balance sheet of the specified Person prepared in accordance with GAAP.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
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"Independent Construction Consultant" means the independent construction
consultant retained in connection with the construction of the Shreveport
resort, or any successor independent construction consultant appointed by the
trustee pursuant to the terms of the Cash Collateral and Disbursement
Agreement.
"Intercompany Notes" means the intercompany notes issued by our Restricted
Subsidiaries in favor of us or a Guarantor to evidence advances by us or that
Guarantor.
"Interim Period" means any period, other than the First Accrual Period, that
begins on any January 1 and ends before the next June 30 and any period that
begins on any July 1 and ends before the next December 31.
"Interest Reserve Account" means the interest reserve account to be
maintained by the Disbursement Agent and pledged to the trustee pursuant to the
terms of the Cash Collateral and Disbursement Agreement, into which $27.3
million of the proceeds of the original offering were deposited.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons, including Affiliates, in the forms
of loans, including guarantees or other obligations, advances or capital
contributions (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If we or any
of our Restricted Subsidiaries sells or otherwise disposes of any Equity
Interests of any of our direct or indirect Restricted Subsidiaries such that,
after giving effect to any such sale or disposition, such Person is no longer
our Restricted Subsidiary, we shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant entitled
"--Certain Covenants--Restricted Payments." The acquisition by us or any of our
Restricted Subsidiaries of a Person that holds an Investment in a third Person
shall be deemed to be an Investment by us or such Restricted Subsidiary in such
third Person in an amount equal to the fair market value of the Investment held
by the acquired Person in such third Person in an amount determined as provided
in the final paragraph of the covenant entitled "Certain Covenants--Restricted
Payments."
"Joint Venture Agreement" means the Third Amended and Restated Joint Venture
Agreement of Hollywood Casino Shreveport dated as of July 21, 1999, among
Paddlewheels, HCS I and HCS II, as in effect on the date of the indenture.
"License Agreement" means the License Agreement dated as of the date of the
indenture, between Hollywood Casino Corporation and us, as in effect on the
date of the indenture or as amended or modified pursuant to the provisions of
the covenant entitled "Amendments to Certain Agreements."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code, or equivalent statutes, of any jurisdiction.
"Loan and Settlement Agreement" means the Loan and Settlement Agreement dated
as of January 16, 1998, among New Orleans Paddlewheels, Inc., Paddlewheels,
HWCC-Louisiana, Sodak Louisiana, L.L.C. and Hilton New Orleans Corporation, as
in effect on the date of the indenture.
"Management Agreement" means the Management Services Agreement dated as of
September 22, 1998, between us and the Manager relating to the management of
the Shreveport resort, as in effect on the date of the indenture or as amended
or modified pursuant to the provisions of the covenant entitled "Amendments to
Certain Agreements."
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"Management Fees" means any fees payable to the Manager pursuant to the
Management Agreement.
"Manager" means HWCC-Shreveport, Inc., a Louisiana corporation.
"Manager Subordination Agreement" means the Manager Subordination Agreement
dated as of the date of the indenture, among us, the Manager and the trustee.
"Marine Services Agreement" means the Marine Services Agreement dated as of
September 22, 1998, between us and Paddlewheels, as in effect on the date of
the indenture or as amended or modified pursuant to the provisions of the
covenant entitled "Amendments to Certain Agreements."
"Membership Interest Purchase Agreement" means the Purchase Agreement dated
as of March 31, 1999, among HWCC-Louisiana, Sodak Gaming and Sodak Louisiana,
L.L.C., as in effect on the date of the indenture.
"Minimum Facilities" means, with respect to the Shreveport resort, a
riverboat casino which has in operation at least 1,600 gaming positions, a
hotel which has at least 350 hotel rooms, two restaurants with seating for at
least 500 people, two bars, an entertainment lounge and parking for at least
1,800 vehicles.
"Net Income" means, with respect to any specified Person:
(1) the net income or loss of such Person, determined in accordance with
GAAP and before any reduction in respect of preferred equity dividends or
distributions, excluding, however:
(a) any gain, but not loss, together with any related provision for
taxes or Tax Amount on such gain, but not loss, realized in connection
with:
(I) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions); or
(II) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries;
and
(b) any extraordinary gain, but not loss, together with any related
provision for taxes or Tax Amount on such extraordinary gain, but not
loss; less
(2) in the case of any Person that is a partnership or limited liability
company, the Tax Amount of such Person for such period.
"Net Loss Proceeds" means the aggregate cash proceeds received by us or any
of our Restricted Subsidiaries in respect of any Event of Loss, including,
without limitation, insurance proceeds from condemnation awards or damages
awarded by any judgment, net of the direct costs in recovery of such Net Loss
Proceeds, including, without limitation, legal, accounting, appraisal and
insurance adjuster fees and any relocation expenses incurred as a result
thereof, amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Event of
Loss, and any taxes or the portion of the Tax Amount attributable to such Event
of Loss paid or payable as a result thereof.
"Net Proceeds" means the aggregate cash proceeds received by us or any of our
Subsidiaries in respect of any Asset Sale, including, without limitation, any
cash received upon the sale or other disposition of any non-cash consideration
received in any Asset Sale, net of the direct costs relating to such Asset
Sale, including, without limitation, legal, accounting and investment banking
fees, sales commissions, relocation expenses incurred as a result thereof and
taxes or the portion of the Tax Amount attributable to such Asset Sale paid or
payable as a result thereof, in each case, after taking into account any
available tax credits or deductions and any tax sharing arrangements, and
amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets that were the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
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"Non-Recourse Debt" means Indebtedness:
(1) as to which neither we nor any of our Restricted Subsidiaries:
(a) provides credit support of any kind, including any undertaking,
agreement or instrument that would constitute Indebtedness
(b) are directly or indirectly liable as a guarantor or otherwise or
(c) constitutes the lender;
(2) no default with respect to which, including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary, would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the notes) of us or any of our
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of us or any of our Restricted
Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Operating" means, with respect to the Shreveport resort, the first time
that:
(1) all Gaming Licenses have been granted and have not been revoked or
suspended;
(2) all Liens, other than Liens created by the collateral documents or
Permitted Liens, related to the development, construction and equipping of,
and beginning operations at, the Shreveport resort have been discharged or,
if payment is not yet due or if such payment is contested in good faith by
us, sufficient funds remain in the Construction Disbursement Account to
discharge such Liens and we have taken any action, including the
institution of legal proceedings necessary to prevent the sale of any or
all of the Shreveport resort or the real property on which the Shreveport
resort will be constructed;
(3) the Independent Construction Consultant shall deliver a certificate
to the trustee certifying that the Shreveport resort is substantially
complete in all material respects in accordance with the Final Plans with
respect to the Minimum Facilities;
(4) the Shreveport resort is in a condition, including installation of
furnishings, fixtures and equipment, to receive customers in the ordinary
course of business;
(5) the Minimum Facilities are open to the general public and operating
in accordance with applicable law; and
(6) a permanent or temporary certificate of occupancy has been issued for
the Shreveport resort by the appropriate governmental authorities.
"Operating Deadline" means April 30, 2001.
"Paddlewheels" means Shreveport Paddlewheels, L.L.C., a Louisiana limited
liability company.
"Paddlewheels Revenue Participation" means the amount payable by us to
Paddlewheels equal to 1% of the Complex Net Revenues, as defined in the
Assignment Agreement, pursuant to the terms of the Assignment Agreement.
"Pari Passu Collateral" means the collateral owned by us, excluding the
funds held in the Cash Collateral Accounts.
"Pari Passu Lien" means a Lien on the Pari Passu Collateral that ranks pari
passu with the Lien of the trustee for the ratable benefit of the holders of
notes pursuant to the intercreditor agreement in substantially the form
attached as an exhibit to the indenture.
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"Permitted Business" means the gaming business and other businesses necessary
for, incident to, connected with, arising out of, or developed or operated to
permit or facilitate the conduct or pursuit of the gaming business, including
developing and operating lodging facilities, restaurants, sports or
entertainment facilities, transportation services or other related activities
or enterprises and any additions or improvements thereto, and potential
opportunities in the gaming business.
"Permitted Investments" means:
(1) any Investment in us or in any of our Restricted Subsidiaries;
(2) any Investment in Cash Equivalents, Government Securities or Pledged
Securities;
(3) any Investment by us or any of our Restricted Subsidiaries in a
Person, if as a result of such Investment:
(a) such Person becomes our Restricted Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, us or any of our Restricted Subsidiaries;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant entitled "Repurchase at the Option of
Holders--Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of our
Equity Interests, other than Disqualified Stock;
(6) Hedging Obligations;
(7) one or more Investments by us in any entities the sole purpose of
which is to develop, construct and/or operate golf courses; provided,
however, that:
(a) the aggregate amount of all such Investments does not exceed $3.0
million and
(b) the development, construction and operation of such golf course
would satisfy the provisions of the covenant entitled "Line of
Business";
(8) any Investment by us or any of our Restricted Subsidiaries in persons
required in order to secure liquor and/or other licenses or permits under
applicable law incident to the operation by us or any of our Restricted
Subsidiaries of a Permitted Business; provided, however, that the aggregate
amount of such Investment shall at no time exceed $100,000;
(9) any Investment made in settlement of gambling debts incurred by
patrons of any casino owned or operated by us or any of our Restricted
Subsidiaries which settlements have been entered into in the ordinary
course of business; and
(10) Investments not otherwise permitted by the foregoing clauses (1)
through (9) in an aggregate outstanding amount of not more than $250,000.
"Permitted Liens" means:
(1) Liens on the assets of the issuers and the guarantors created by the
indenture and the collateral documents securing the notes and the
guarantees;
(2) Liens on property of a Person existing at the time such Person is
merged into or consolidated with us or any of our Restricted Subsidiaries;
provided, however, that such Liens were in existence before the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with us
or any of our Restricted Subsidiaries;
(3) Liens on property existing at the time of acquisition thereof by us
or any of our Restricted Subsidiaries; provided, however, that such Liens
were in existence before the contemplation of such acquisition;
(4) Liens existing on the date of the indenture;
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<PAGE>
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided, however, that any reserve or other appropriate provision as shall
be required in conformity with GAAP shall have been made therefor;
(7) Liens on FF&E to secure Indebtedness permitted by clause (6) of the
second paragraph of the covenant entitled "--Incurrence of Indebtedness and
Issuances of Preferred Equity";
(8) Pari Passu Liens on the Pari Passu Collateral to secure Indebtedness
permitted by clause (8) of the second paragraph of the covenant entitled
"--Incurrence of Indebtedness and Issuances of Preferred Equity;"
(9) pledges or deposits in the ordinary course of business to secure
lease obligations or nondelinquent obligations under workers' compensation,
unemployment insurance or similar legislation;
(10) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with our or any of our Subsidiaries'
business or assets incurred in the ordinary course of business;
(11) ground leases in respect of real property on which facilities owned
or leased by us or any of our Restricted Subsidiaries is located;
(12) Liens on assets of Unrestricted Subsidiaries that secure Non-
recourse Debt of Unrestricted Subsidiaries;
(13) Liens arising from UCC financing statements regarding property
leased by us or any of our Restricted Subsidiaries;
(14) Liens incurred and pledges made in the ordinary course of business
in connection with workers" compensation, unemployment insurance and social
security benefits; and
(15) without limiting our ability or the ability of any of our
Subsidiaries to create, incur, assume or suffer to exist any Lien otherwise
permitted under any of the foregoing clauses, any extension, renewal or
replacement, in whole or in part, of any Lien described in the foregoing
clauses; provided, however, that any such extension, renewal or replacement
Lien is limited to the property or assets covered by the Lien extended,
renewed or replaced or substitute property or assets, the value of which is
(and, for property or assets having an aggregate fair market value of more
than $100,000, as determined by our Board of Directors to be) not
materially greater than the value of the property or assets for which the
substitute property or assets are substituted.
"Permitted Refinancing Indebtedness" means any Indebtedness of us or any of
our Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of us or any of our Restricted Subsidiaries, other than
intercompany Indebtedness; provided, however, that:
(1) the principal amount, or accreted value, if applicable, of such
Permitted Refinancing Indebtedness does not exceed the principal amount, or
accreted value, if applicable, of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded, plus all accrued interest thereon
and the amount of all expenses and premiums incurred in connection
therewith; provided, if such Indebtedness is secured by a Lien described in
clause (7) of the definition of "Permitted Liens," then the principal
amount, or accreted value, if applicable, of such Permitted Refinancing
Indebtedness will not exceed the then current fair market value of the
asset so encumbered;
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
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(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
notes on terms at least as favorable to the holders of notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by us or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Plans" means all drawings, plans and specifications, prepared by or on
behalf of us, as the same may be amended or supplemented from time to time as
specified in the Cash Collateral and Disbursement Agreement and, if required,
submitted to and approved by the appropriate regulatory authorities, which
describe and show the Shreveport resort and the labor and materials necessary
for the construction thereof.
"Pledged Securities" means:
(1) Government Securities having a maturity date on or before the date on
which the payments of interest on the notes to which such Government
Securities are pledged occur;
(2) any certificate of deposit maturing not more than 270 days after the
date of acquisition issued by, or time deposit of, an Eligible Institution;
(3) commercial paper maturing not more than 270 days after the date of
acquisition issued by a corporation other than an Affiliate of ours with a
rating at the time any investment therein is made, of "A-1" or higher
according to Standard & Poor's Ratings Services or "P-1" or higher
according to Moody's Investors Service, Inc.;
(4) any banker's acceptances or money market deposit accounts issued or
offered by an Eligible Institution; and
(5) any fund investing exclusively in investments of the types described
in clauses (1) through (4) above; and
in the case of clauses (2) through (4) above, which have a maturity date on or
before the date on which the payments of interest on the notes to which such
securities are pledged occur.
"Principals" means:
(1) Jack Pratt, Edward T. Pratt, Jr., William D. Pratt, Crystal A. Pratt,
Marina A. Pratt and Edward T. Pratt, III, their respective estates and
members of the immediate family, including adopted children, of any of them
who acquire Voting Stock of Hollywood Casino from any such estates;
(2) C.A. Pratt Partners, Ltd., a Texas limited partnership; provided,
however, that, in each case, the majority of the voting equity interest of
the partnership is Beneficially Owned by a Person named in clause (1); and
(3) The WDP, Jr. Family Trust; provided, however, that a Person named in
clause (1) is:
(a) the Beneficial Owner of a majority of the Voting Stock of
Hollywood Casino held by such trust, or
(b) if the trust is irrevocable, the trustee of the irrevocable trust
is a Person named in clause (1).
"Qualified Equity Offering" means an offering of Hollywood Casino's common
stock which results in net proceeds to Hollywood Casino of at least $20.0
million, but only to the extent that the net proceeds of the offering are
contributed directly or indirectly as equity by Hollywood Casino to us.
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"Remaining Construction Amounts" means an amount equal to the aggregate of
amounts remaining in the Construction Disbursement Account, the Completion
Reserve Account and the Segregated Account on the date the Shreveport resort
becomes Operating, less the amount of the Remaining Costs.
"Remaining Costs" has the meaning ascribed thereto in the Cash Collateral
and Disbursement Agreement.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Segregated Account" has the meaning ascribed thereto in the Cash Collateral
and Disbursement Agreement.
"Semiannual Period" means each period that begins on January 1 and ends on
the next June 30 or each period that begins on July 1 and ends on the next
December 31.
"Side Agreement" means the Side Agreement dated as of January 16, 1998,
among Queen of New Orleans at the Hilton Joint Venture, HWCC-Louisiana and
Sodak Louisiana, L.L.C., as in effect on the date of the indenture or as
amended or modified pursuant to the provisions of the covenant entitled
"Amendments to Certain Agreements."
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Sodak Gaming" means Sodak Gaming, Inc., a South Dakota corporation.
"Software Agreement" means the Software License and Maintenance Agreement
entered into between us and Advanced Casino Systems Corporation.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled,
without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person, or a combination thereof; and
(2) any partnership
(a) the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or one or more
Subsidiaries of such Person, or any combination thereof.
"Tax Amount" means payments by us to HCS I and HCS II in amounts sufficient
to permit HCS I and HCS II to fulfill the obligations with respect to all
taxes of HWCC-Louisiana, HCS I and HCS II; provided, however, that so long as
HWCC-Louisiana, HCS I and HCS II file a consolidated, combined, unitary or
similar federal, state or local income or franchise tax return with Hollywood
Casino, the payment by us with respect to such taxes shall be an amount
sufficient to permit HWCC-Louisiana, HCS I and HCS II to fulfill their
117
<PAGE>
respective obligations under the Tax Sharing Agreement solely with respect to
their respective obligations thereunder that are attributable to our income.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated the date of the
indenture, between Hollywood Casino and its domestic corporate Subsidiaries,
including HWCC-Louisiana, HCS I and HCS II as in effect on the date of the
indenture or as amended or modified pursuant to the provisions of the covenant
entitled "Amendments to Certain Agreements."
"Technical Services Agreement" means the Technical Services Agreement dated
as of September 22, 1998, between the Manager and us, as in effect on the date
of the indenture or as amended or modified pursuant to the provisions of the
covenant entitled "Amendments to Certain Agreements."
"Total Assets" means, with respect to any Person, the aggregate of all assets
of such Person and its subsidiaries as would be shown on the balance sheet of
such Person prepared in accordance with GAAP.
"Unrestricted Subsidiary" means any of our Subsidiaries other than Shreveport
Capital that is designated by our Board of Directors as an Unrestricted
Subsidiary pursuant to a resolution, but only to the extent that such
Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding
with us or any of our Restricted Subsidiaries unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to
us or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not our Affiliates;
(3) is a Person with respect to which neither we nor any of our
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of us or any of our Restricted
Subsidiaries.
Any designation of our Subsidiaries as an Unrestricted Subsidiary shall be
evidenced to the trustee by filing with the trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the preceding conditions and was
permitted by the covenant entitled "Certain Covenants--Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the preceding
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 one of our Restricted
Subsidiaries as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Equity," we shall be in default of such
covenant. Our Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that such
designation shall be deemed to be an incurrence of Indebtedness by any of our
Restricted Subsidiaries of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if:
(1) such Indebtedness is permitted under the covenant entitled "--
Incurrence of Indebtedness and Issuance of Preferred Equity," calculated on
a pro forma basis as if such designation had occurred at the beginning of
the four-quarter reference period and
(2) no default or event of default would be in existence following such
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by
(b) the number of years, calculated to the nearest one-twelfth, that
will elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material United States federal
income tax consequences relevant to the exchange of your original notes for
registered notes. This discussion is a summary for general information purposes
only, and does not consider all aspects of federal income taxation that may be
relevant to a particular investor in light of his, her or its personal
circumstances.
This discussion is based upon the United States federal tax law now in
effect, which is subject to change, possibly retroactively. The description
does not consider the effect of any applicable foreign, state, local or other
tax laws or estate or gift tax consequences.
We urge you to consult your own tax advisors regarding the particular United
States federal tax consequences to you of exchanging your original notes for
registered notes, as well as any tax consequences that may arise under the laws
of any foreign, state, local or other taxing jurisdiction.
Exchange of Original Notes for Registered Notes
Based on an opinion from Weil, Gotshal & Manges LLP, our tax counsel, the
exchange of your original notes for registered notes pursuant to the exchange
offer will not constitute a sale or an exchange for federal income tax
purposes. Accordingly, not only will the exchange offer have no federal income
tax consequences to you if you exchange your original notes for registered
notes (i.e., you will not recognize gain or loss for federal income tax
purposes, there will be no change in your tax basis, and your holding period
will carry over to the registered notes), but the federal income tax
consequences of holding and disposing of the registered notes will also be the
same as those that would apply to your original notes.
PLAN OF DISTRIBUTION
If you are a broker-dealer that receives registered notes for your own
account in exchange for your original notes pursuant to the exchange offer,
where your original notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, you must acknowledge that
you will deliver a prospectus in connection with any resale of your registered
notes. This prospectus, as it may be amended or supplemented from time to time,
may be used by you in connection with resales of registered notes received in
exchange for your original notes where your original notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that, for a period of one year after the consummation of the exchange offer, we
will make this prospectus, as amended or supplemented, available to you for use
in connection with any such resale. In addition, until , 2000, if you effect
a transaction in the registered notes you may be required to deliver a
prospectus.
Neither we nor the guarantors will receive any proceeds from any sale of
registered notes by broker-dealers. If you are a broker-dealer, registered
notes you receive for your own account in connection with 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 registered notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. You may make resales directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such registered notes. If you are a broker-dealer that resells registered notes
that we received by you for your own account in connection with the exchange
offer and you participate in a distribution of your registered notes, you may
be deemed to be an "underwriter" within the meaning of the Securities Act, and
any profit on any resale of registered notes and any commissions or concessions
received by you may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging that you
will deliver and by delivering a prospectus, you will not be deemed to admit
that you are an "underwriter" within the meaning of the Securities Act.
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For a period of one year after the registration statement is declared
effective, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to you, if you are a broker-dealer
that requests these documents in the letter of transmittal or otherwise. We
have agreed to pay all expenses incident to the exchange offer, including the
expenses of one counsel for the holders of the notes, other than commissions or
concessions of any broker-dealers and will indemnify you, including any broker-
dealers, against certain liabilities, including certain liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the registered notes offered by this prospectus will be
passed upon for the issuers by Weil, Gotshal & Manges LLP, Dallas, Texas and
New York, New York.
EXPERTS
The financial statements of Hollywood Casino Shreveport as of December 31,
1999 and 1998 and for each of the periods during the three years ended December
31, 1999; HWCC-Louisiana, Inc. as of December 31, 1999 and 1998 and for each of
the three years in the period ended December 31, 1999 and Sodak Louisiana,
L.L.C. as of December 31, 1998 and 1997, for the year ended December 31, 1998
and for the period from inception (October 20, 1997) through December 31, 1997,
included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and are
included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
The issuers and guarantors are not currently subject to the periodic
reporting and other information requirements of the Exchange Act. The issuers
and guarantors have agreed that, whether or not required to do so by the rules
and regulations of the SEC, so long as any registered notes remain outstanding,
they will furnish to the trustee and deliver or cause to be delivered to
holders of the registered notes, beginning with respect to the fiscal quarter
ending September 30, 1999, (1) all consolidated quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if we were required to file such forms and, with respect to
the annual information only, a report thereon by our certified independent
accountants and (2) all reports that would be required to be filed with the SEC
on form 8-K if the issuers were required to file such reports. From and after
the time a registration statement with respect to the registered notes is
declared effective by the SEC, the issuers will file such information with the
SEC, provided the SEC will accept such filing. Anyone who receives this
prospectus may obtain a copy of the indenture, each of the collateral documents
and the registration rights agreement without charge by writing to the issuers
and the guarantors, c/o William D. Pratt, Executive Vice President, Secretary
and General Counsel, Hollywood Casino Shreveport, Two Galleria Tower, 13455
Noel Road, Suite 2200, Dallas, Texas 75240.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Hollywood Casino Shreveport and Subsidiary:
Independent Auditors' Report............................................ F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998............ F-3
Consolidated Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997 and for the Period from September 22, 1998 Through
December 31, 1999...................................................... F-4
Consolidated Statement of Changes in Partners' Capital for the Period
from January 1, 1997 Through September 21, 1998 and for the Period from
September 22, 1998 Through December 31, 1999........................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997 and for the Period from September 22, 1998 Through
December 31, 1999...................................................... F-6
Notes to Consolidated Financial Statements ............................. F-7
HWCC-Louisiana, Inc. and Subsidiaries:
Independent Auditors' Report............................................ F-16
Consolidated Balance Sheets as of December 31, 1999 and 1998............ F-17
Consolidated Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997.................................................... F-18
Consolidated Statement of Changes in Shareholder's Equity (Deficit) for
the Three Years Ended December 31, 1999................................ F-19
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997.................................................... F-20
Notes to Consolidated Financial Statements.............................. F-21
Sodak Louisiana, L.L.C.
Independent Auditors' Report............................................ F-30
Balance Sheets as of December 31, 1998 and 1997......................... F-31
Statements of Operations for the Year Ended December 31, 1998 and for
the Period from Inception (October 20, 1997) Through December 31,
1997................................................................... F-32
Statement of Changes in Shareholder's Equity for the Period from
Inception (October 20, 1997) through December 31, 1998................. F-33
Statements of Cash Flows for the Year Ended December 31, 1998 and the
Period from Inception (October 20, 1997) Through December 31, 1997..... F-34
Notes to Financial Statements........................................... F-35
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Hollywood Casino Shreveport:
We have audited the accompanying balance sheets of Hollywood Casino
Shreveport (a development stage general partnership for periods subsequent to
September 22, 1998 and formerly known as QNOV) as of December 31, 1999 and
1998, and the related statements of operations, changes in partners' capital,
and cash flows for each of the periods during the three years ended
December 31, 1999 and for the period from September 22, 1998 through December
31, 1999. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Hollywood Casino Shreveport as of December
31, 1999 and 1998, and the results of its operations and its cash flows for
each of the periods during the three years ended December 31, 1999 and for the
period from September 22, 1998 to December 31, 1999, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
February 25, 2000
F-2
<PAGE>
HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARY
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
CONSOLIDATED BALANCE SHEETS (NOTE 1)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents......................... $ 19,014,000 $ 3,734,000
Interest receivable............................... 1,432,000 --
Prepaid expenses and other current assets......... 620,000 --
------------ -----------
Total current assets............................ 21,066,000 3,734,000
------------ -----------
Property and Equipment:
Furniture and equipment........................... 23,000 --
Construction in progress.......................... 43,654,000 6,957,000
------------ -----------
43,677,000 6,957,000
Less accumulated depreciation..................... (2,000) --
------------ -----------
43,675,000 6,957,000
------------ -----------
Cash restricted for construction project............ 147,310,000 --
------------ -----------
Deferred financing costs, net....................... 4,928,000 --
------------ -----------
$216,979,000 $10,691,000
============ ===========
Liabilities and Partners' Capital
Current Liabilities:
Current maturities of long-term debt.............. $ 400,000 $ --
Accounts payable.................................. 11,648,000 726,000
Interest payable.................................. 7,637,000 --
Other accrued liabilities......................... 35,000 5,000,000
Due to affiliates................................. 230,000 --
------------ -----------
Total current liabilities....................... 19,950,000 5,726,000
------------ -----------
Long-term debt...................................... 151,359,000 --
------------ -----------
Commitments and Contingencies (Note 5)
Partners' Capital:
Partners' capital contributions................... 50,000,000 5,000,000
Accumulated deficit during the development stage.. (4,330,000) (35,000)
------------ -----------
Total partners' capital............................. 45,670,000 4,965,000
------------ -----------
$216,979,000 $10,691,000
============ ===========
</TABLE>
The accompanying footnotes to consolidated financial statements are an integral
part of these consolidated balance sheets.
F-3
<PAGE>
HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARY
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE 1)
<TABLE>
<CAPTION>
Period from Period from Period from
September 22, September 22, January 1,
1998 through Year Ended 1998 through 1998 through Year Ended
December 31, December 31, December 31, September 21, December 31,
1999 1999 1998 1998 1997
------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Casino................ $ $ $ $ $45,803,000
Beverage.............. -- -- -- -- 2,904,000
Other................. -- -- -- 89,000 1,664,000
----------- ----------- -------- ----------- -----------
-- -- -- 89,000 50,371,000
Less--promotional
allowances............. -- -- -- -- (2,916,000)
----------- ----------- -------- ----------- -----------
Net revenues............ -- -- -- 89,000 47,455,000
----------- ----------- -------- ----------- -----------
Expenses:
Casino................ -- -- -- -- 22,612,000
Admission fees........ -- -- -- -- 6,432,000
Other departmental.... -- -- -- 76,000 276,000
Property operations... -- -- -- 155,000 6,989,000
Vessel rent........... -- -- -- (21,000) 2,827,000
General and
administrative....... -- -- -- 986,000 2,468,000
Management fees....... -- -- -- -- 2,519,000
Development costs..... 240,000 150,000 90,000 -- --
Preopening expenses... 841,000 841,000 -- -- --
Depreciation.......... 2,000 2,000 -- -- 1,547,000
----------- ----------- -------- ----------- -----------
Total expenses.......... 1,083,000 993,000 90,000 1,196,000 45,670,000
----------- ----------- -------- ----------- -----------
Operating (loss)
income................. (1,083,000) (993,000) (90,000) (1,107,000) 1,785,000
----------- ----------- -------- ----------- -----------
Non-operating income
(expense):
Interest income......... 3,699,000 3,644,000 55,000 241,000 583,000
Interest expense, net of
capitalized interest of
$1,052,000 in 1999..... (6,946,000) (6,946,000) -- (50,000) (88,000)
----------- ----------- -------- ----------- -----------
Total non-operating
(expense) income....... (3,247,000) (3,302,000) 55,000 191,000 495,000
----------- ----------- -------- ----------- -----------
Net (loss) income..... $(4,330,000) $(4,295,000) $(35,000) $ (916,000) $ 2,280,000
=========== =========== ======== =========== ===========
</TABLE>
The accompanying footnotes to consolidated financial statements are an integral
part of these consolidated financial statements.
F-4
<PAGE>
HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARY
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (NOTE 1)
For the Period from January 1, 1997 through September 21, 1998
and for the Period from September 22, 1998 through December 31, 1999
<TABLE>
<CAPTION>
Partners' Capital
---------------------------------------------------------------------------------------
Hilton New Orleans HWCC- Sodak Shreveport
New Orleans Paddlewheels, Louisiana, Louisiana, HCS I, HCS II, Paddlewheels,
Corp. (1) Inc. (1) Inc. L.L.C. (2) Inc. Inc. L.L.C
----------- ------------- ---------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1,
1997................... $(2,267,000) $(2,267,000) $ -- $ -- $ -- $ -- $ --
Net income.............. 1,140,000 1,140,000 -- -- -- -- --
Distributions........... (1,982,000) (1,982,000) -- -- -- -- --
----------- ----------- ---------- ---------- ----------- -------- ----------
Balances, December 31,
1997................... (3,109,000) (3,109,000) -- -- -- -- --
Net loss................ (458,000) (458,000) -- -- -- -- --
Cash distributions...... (3,000,000) (3,000,000) -- -- -- -- --
Assumption of
partnership
obligation............. 5,000,000 -- -- -- -- -- --
Non-cash distributions
of net liabilities..... 4,448,000 3,686,000 -- -- -- -- --
Reallocation of
partners' accounts..... (2,881,000) 2,881,000 -- -- -- -- --
----------- ----------- ---------- ---------- ----------- -------- ----------
Balances, September 21,
1998................... -- -- -- -- -- -- --
Contributed capital..... 2,500,000 2,500,000 -- -- --
----------- ----------- ---------- ---------- ----------- -------- ----------
Balances, December 31,
1998................... -- -- 2,500,000 2,500,000 -- -- --
Merger of Sodak
Louisiana, L.L.C. (2).. -- -- 2,500,000 (2,500,000) -- -- --
Contribution of interest
(3).................... -- -- (5,000,000) -- 4,950,000 50,000 --
Contributed capital..... -- -- -- -- 43,560,000 440,000 1,000,000
Assignment of interest.. -- -- -- -- (990,000) (10,000) 1,000,000
----------- ----------- ---------- ---------- ----------- -------- ----------
Balances, December 31,
1999................... $ -- $ -- $ -- $ -- $47,520,000 $480,000 $2,000,000
=========== =========== ========== ========== =========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Deficit Accumulated During Development Stage
----------------------------------------------------------
HWCC- Sodak Shreveport
Louisiana, Louisiana, HCS II, Paddlewheels,
Inc. L.L.C. (2) HCS I, Inc. Inc. L.L.C
---------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balances, September 22,
1998................... $ -- $ -- $ -- $ -- $ --
Net loss................ (17,000) (18,000) -- -- --
------- ------- ----------- -------- -----
Balances, December 31,
1998................... (17,000) (18,000) -- -- --
Merger of Sodak
Louisiana, L.L.C. (2).. (30,000) 30,000 -- -- --
Contribution of interest
(3).................... 60,000 -- (59,000) (1,000) --
Net loss................ (13,000) (12,000) (4,227,000) (43,000) --
------- ------- ----------- -------- -----
Balances, December 31,
1999................... $ -- $ -- $(4,286,000) $(44,000) $ --
======= ======= =========== ======== =====
</TABLE>
- --------
(1) Hilton New Orleans Corporation and New Orleans Paddlewheels, Inc. withdrew
as partners and transferred their interests to HWCC-Louisiana, Inc., Sodak
Louisiana, L.L.C. and Shreveport Paddlewheels, L.L.C. during September
1998. At the time of their withdrawal, the joint venture had no recorded
assets or liabilities, all such amounts having been distributed to the
withdrawing partners, and the joint venture became a development stage
general partnership.
(2) Sodak Louisiana, L.L.C. became a wholly owned subsidiary of HWCC-
Louisiana, Inc. on April 23, 1999 and was merged into HWCC-Louisiana, Inc.
on July 9, 1999.
(3) On July 21, 1999, HWCC-Louisiana, Inc. contributed its ownership interest
in Hollywood Casino Shreveport to its wholly owned subsidiaries, HCS I,
Inc. and HCS II, Inc.
The accompanying footnotes to consolidated financial statements are an integral
part of these consolidated financial statements.
F-5
<PAGE>
HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARY
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 1)
<TABLE>
<CAPTION>
Period from Period from Period from
September 22, September 22, January 1,
1998 through Year Ended 1998 through 1998 through Year Ended
December 31, December 31, December 31, September 21, December 31,
1999 1999 1998 1998 1997
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net (loss) income....... $ (4,330,000) $ (4,295,000) $ (35,000) $ (916,000) $ 2,280,000
Adjustments to reconcile
net (loss) income to
cash provided by (used
in) operating
activities:
Depreciation and
amortization,
including accretion of
discount.............. 362,000 362,000 -- -- 1,547,000
Increase in interest
receivable............ (1,432,000) (1,432,000) -- -- --
Provision for doubtful
accounts.............. -- -- -- -- 33,000
Decrease in accounts
receivable............ -- -- -- -- 298,000
Increase (decrease) in
accounts payable and
accrued liabilities... 14,320,000 13,594,000 726,000 -- (8,654,000)
Net change in other
current assets and
liabilities........... (390,000) (390,000) -- (2,009,000) 321,000
Net change in other
assets and
liabilities........... -- -- -- 2,847,000 380,000
------------- ------------- ----------- ----------- -----------
Cash provided by (used
in) operating
activities............. 8,530,000 7,839,000 691,000 (78,000) (3,795,000)
------------- ------------- ----------- ----------- -----------
Investing Activities:
Purchase of property and
equipment.............. (36,985,000) (35,028,000) (1,957,000) -- --
Proceeds from disposal
of vessel.............. -- -- -- -- 10,000,000
Increase in cash
restricted for
construction project... (147,310,000) (147,310,000) -- -- --
------------- ------------- ----------- ----------- -----------
Cash (used in) provided
by investing
activities............. (184,295,000) (182,338,000) (1,957,000) -- 10,000,000
------------- ------------- ----------- ----------- -----------
Financing Activities:
Capital contributions... 50,000,000 45,000,000 5,000,000 -- --
Partner distributions... -- -- -- (6,000,000) (3,964,000)
Proceeds from issuance
of long-term debt...... 150,000,000 150,000,000 -- -- --
Repayments of long-term
debt................... -- -- -- -- (6,000,000)
Deferred financing
costs.................. (5,221,000) (5,221,000) -- -- --
------------- ------------- ----------- ----------- -----------
Cash provided by (used
in) financing
activities............. 194,779,000 189,779,000 5,000,000 (6,000,000) (9,964,000)
------------- ------------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents............ 19,014,000 15,280,000 3,734,000 (6,078,000) (3,759,000)
Cash and cash
equivalents at
beginning of period.... -- 3,734,000 -- 6,078,000 9,837,000
------------- ------------- ----------- ----------- -----------
Cash and cash
equivalents at end of
period................. $ 19,014,000 $ 19,014,000 $ 3,734,000 $ -- $ 6,078,000
============= ============= =========== =========== ===========
</TABLE>
The accompanying footnotes to consolidated financial statements are an integral
part of these consolidated financial statements.
F-6
<PAGE>
HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARY
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization, Business and Basis of Presentation
Hollywood Casino Shreveport ("HCS") is currently a development stage general
partnership registered in the state of Louisiana. The original partnership
agreement was amended on September 22, 1998 to include as partners in what has
since been referred to herein as HCS the following companies: HWCC-Louisiana,
Inc. ("HCL"), a Louisiana corporation wholly owned by Hollywood Casino
Corporation ("HCC"); Sodak Louisiana, L.L.C. ("Sodak"), a Louisiana limited
liability company; and Shreveport Paddlewheels, L.L.C. ("Paddlewheels"), a
Louisiana limited liability company. The general partnership had originally
been formed in May 1992 for the purpose of developing and operating a riverboat
casino in New Orleans, Louisiana. Originally named Queen of New Orleans at the
Hilton Joint Venture ("QNOV"), the partnership was 50%-owned by Hilton New
Orleans Corporation ("Hilton") and 50%-owned by New Orleans Paddlewheels, Inc.
("NOP"). Hilton and NOP are collectively referred to herein as the "former
partners." QNOV commenced operations in New Orleans in February 1994.
During October 1996, QNOV received approval from state gaming authorities to
relocate its license to operate to the City of Shreveport, Louisiana,
approximately 180 miles east of Dallas, Texas. Subsequent to receiving approval
to relocate the license, QNOV made the decision in 1997 not to conduct gaming
operations in Shreveport. The former partners sought to transfer the license to
operate in Shreveport to another interested party. Under Louisiana gaming
regulations, the license to operate a riverboat gaming operation is not
transferable; however, the ownership of an entity licensed to operate is
transferable, subject to the approval of the Louisiana Gaming Control Board
(the "LGCB"). Accordingly, the transfer of the license to operate in Shreveport
was structured as the acquisition of the interests of the former partners in
QNOV. QNOV discontinued its riverboat casino operations in New Orleans in
October 1997 while it continued negotiations to transfer its interests to a new
group of partners. The former partners disposed of QNOV's assets other than its
license to operate and satisfied all but one of its obligations so that when
the former partners withdrew on September 22, 1998, QNOV's only asset was its
license to operate in Shreveport, its only liability was a $5,000,000
obligation to the City of New Orleans (see below) and all equity accounts of
the former partners of QNOV were reduced to a zero balance.
When the former partners of QNOV proposed moving to Shreveport, they
negotiated a settlement with the City of New Orleans to pay $10,000,000 with
respect to claims asserted by the City in connection with the relocation. This
liability was recorded by QNOV during 1997 and was to be paid after opening in
Shreveport. When the former partners' decided not to relocate to Shreveport,
the status of the obligation became uncertain. During September 1998, the
former partners of QNOV and the partners of HCS entered into a Compromise
Agreement with the City of New Orleans under which it was agreed that Hilton
would pay $5,000,000 to the City with QNOV being released from any further
relocation claims. QNOV reflected Hilton's payment as a capital contribution
prior to the withdrawal of the former partners from QNOV. The remaining
$5,000,000 obligation continued to be reflected as a liability and was, in
effect, assumed by the partners of HCS since, as part of the Compromise
Agreement, the partners of HCS agreed that HCS would pay the City of New
Orleans the remaining $5,000,000 upon securing financing for construction of
HCS's new riverboat casino in Shreveport. In the event financing was not
obtained, HCS would not be required to make any payment.
The partners of HCS have treated this obligation to pay the City of New
Orleans as part of the cost of acquiring their partnership interests. The
acquisition of the partnership interests by the new partners and the subsequent
acquisition by HCL of Sodak's interest in HCS (see below) resulted in HCS
becoming substantially wholly owned by HCL. Furthermore, as noted above, the
$5,000,000 obligation was to be paid with proceeds from the project financing
sought by HCS. Accordingly, HCL's cost of acquiring the HCS partnership
interests was "pushed down" to HCS and the $5,000,000 obligation was included
in other accrued liabilities on the
F-7
<PAGE>
HOLLYWOOD CASINO SHREVEPORT
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
accompanying balance sheet at December 31, 1998. A corresponding $5,000,000
adjustment to the recorded value of project costs has also been included in
construction in progress (see Note 2) on the accompanying consolidated balance
sheets at December 31, 1999 and 1998. The $5,000,000 obligation was paid by HCS
in August 1999 upon the issuance of the First Mortgage Notes (see Note 3).
The former partners had originally proposed a plan to jointly construct a
hotel in Shreveport with another casino operator to support their riverboat
casino project. When the former partners decided in 1997 not to relocate, all
such plans were abandoned and all associated costs were written off. Upon
admission of the new partners, HCS proceeded with entirely new plans to
develop, own and operate a riverboat gaming complex to be constructed in
Shreveport. In order to open the new facility, the partners of HCS had to
obtain financing for the project and will have to maintain licensing by the
LGCB and incur all the risks inherent in the construction of a new facility.
Upon completion, the new riverboat casino will operate under a different name,
with a different theme, in a different geographic market and with different
management and employees. Accordingly, the accompanying financial statements
reflect the operations and cash flows of HCS for the period from September 22,
1998 through December 31, 1999 as a development stage entity. HCS currently has
no operating activities other than development, financing and construction
activities with respect to the Shreveport resort. As currently planned, the
Shreveport resort will consist of a three-level riverboat casino with
approximately 1,370 slot machines and 75 table games; a 405-room, all suite,
art deco style hotel; and approximately 42,000 square feet of restaurant and
entertainment facilities.
Riverboat gaming operations in Louisiana are subject to regulatory control by
the LGCB. HCS's current license to operate the Shreveport resort expires on
October 15, 2004.
It was originally anticipated that HCS would develop the Shreveport resort
with each of HCL and Sodak having a 50% interest in the development and
subsequent operations. Paddlewheels was to have a residual interest after the
commencement of operations and in the event that the project was ever sold
amounting to 10% plus any capital contributions made by Paddlewheels to HCS. On
March 31, 1999, HCL entered into a definitive agreement with Sodak's parent to
acquire Sodak for the $2,500,000 Sodak had contributed to HCS, with $1,000 to
be paid at closing and the remainder to be paid six months after the opening of
the Shreveport resort. The revised structure of the partnership was approved by
the LGCB on April 20, 1999. As a result of the acquisition, HCL obtained an
effective 100% ownership interest in HCS with Paddlewheels retaining their
residual interest. During July 1999, Sodak was merged into HCL.
Also during July 1999, HCL formed two new, wholly owned subsidiaries, HCS I,
Inc. and HCS II, Inc., both Louisiana corporations. HCL contributed $1,000 of
capital to each entity, along with 99% of its interest in HCS to HCS I, Inc.
and the remaining 1% to HCS II, Inc. In addition, the HCS joint venture
agreement was amended and restated on July 21, 1999, to reflect, among other
things, the admission of HCS I, Inc. and HCS II, Inc. as partners of HCS and
the withdrawal of HCL as managing partner of HCS. As a result, HCS I, Inc. now
has an effective 99% interest in HCS and has become its managing general
partner. HCS II, Inc. now has an effective 1% interest in HCS. Paddlewheels
retained its 10% residual interest in HCS. HCS I, Inc. and HCS II, Inc. have
assumed HCL's obligation to cause HCS to pay Paddlewheels the 1% of "complex
net revenues" (see Note 5). The revised partnership structure was approved by
the LGCB on July 20, 1999. HCL contributed an additional $300,000 to HCS
through HCS I, Inc. and HCS II, Inc. in July 1999. Upon the issuance of the
First Mortgage Notes (see Note 3), HCL contributed an additional $43,700,000 to
HCS through HCS I, Inc. and HCS II, Inc. HCL also loaned $1,000,000 to
Paddlewheels which Paddlewheels contributed to HCS. The source of funds for
HCL's capital contributions and loan to Paddlewheels was capital contributions
from HCC, its parent.
F-8
<PAGE>
HOLLYWOOD CASINO SHREVEPORT
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Additionally, in July 1999, HCS formed a new, wholly owned subsidiary,
Shreveport Capital Corporation, a Louisiana corporation. HCS contributed $1,000
of capital to Shreveport Capital Corporation. Shreveport Capital Corporation
was formed for the sole purpose of being a co-issuer with respect to the First
Mortgage Notes and is not expected to have any operating activities, acquire
any assets or incur any liabilities.
The total estimated cost of the Shreveport resort is $230,000,000. Equity
contributions from HCL and Paddlewheels have provided $50,000,000 of the funds
necessary. During August 1999, HCS successfully completed the issuance of
$150,000,000 of 13% First Mortgage Notes with contingent interest (the "First
Mortgage Notes") due 2006 (see Note 3); it is expected that a commitment for
$30,000,000 of furniture, fixture and equipment financing will provide the
remaining funds for the project (see Note 5). Construction began in August 1999
with a planned opening date in early November 2000.
The accompanying financial statements for periods subsequent to July 1999 are
consolidated to include HCS's wholly owned subsidiary, Shreveport Capital
Corporation. All intercompany transactions and balances have been eliminated in
consolidation.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed in the preparation of the
accompanying financial statements of HCS are discussed below. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that effect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and cash equivalents--
Cash and cash equivalents are comprised of cash and investments with original
maturities of three months or less, such as commercial paper, certificates of
deposit and fixed repurchase agreements.
Property and equipment--
Furniture and equipment is being depreciated using the straight line method
over the estimated useful life of five years. QNOV's property and equipment
used in their New Orleans operations was fully depreciated during 1997.
Construction in progress--
Costs associated with the construction of the Shreveport resort, including
the applicable interest on construction financing of $1,052,000 at December 31,
1999, are being capitalized and, commencing with the completion of the
Shreveport resort, will be amortized over the estimated useful lives of the
resulting assets. Capitalized costs will be allocated to the individual
components of property and equipment and other assets when such assets are
ready to be placed in service.
Preopening costs--
Preopening costs include, among other things, organizational costs, marketing
and promotional costs, hiring and training of new employees and other operating
costs incurred prior to the opening of the project. Such costs are accounted
for under the provisions of Statement of Position 98-5 issued by the American
Institute of Certified Public Accountants which requires that such costs be
expensed as incurred.
F-9
<PAGE>
HOLLYWOOD CASINO SHREVEPORT
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred financing costs--
The costs of issuing long-term debt, including all underwriting, licensing,
legal and accounting fees, have been deferred and are being amortized over the
term of the related debt issue using the straight-line method which
approximates the effective interest method. Amortization of such costs amounted
to $293,000 during the year ended December 31, 1999 and is included in interest
expense on the accompanying consolidated statement of operations.
Employee stock options--
HCS has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 allows an entity to continue to measure compensation cost for
employee stock-based compensation plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("Opinion 25"). Entities electing to
remain with the accounting under Opinion 25 are required to make pro forma
disclosures of net income as if the fair value based method of accounting under
SFAS 123 had been applied. HCL has elected to account for employee stock-based
compensation under Opinion 25. During September 1999, HCC issued stock options
to an employee of HCS for 50,000 shares of HCC common stock at an exercise
price of $2.50 per share, the market price on the date of grant. Pro forma
compensation expense for the period from the grant date (September 16, 1999)
through December 31, 1999 is not material.
Cash restricted for construction project--
Cash restricted for construction project consists of investments in
government securities which are to be used for specified purposes and which
were purchased with net proceeds from the First Mortgage Notes (see Note 3) as
required by the indenture for the First Mortgage Notes. Such restricted cash
includes (i) funds to be used for construction which are subject to meeting
certain conditions prior to their disbursement, (ii) funds to be used to make
the first three semiannual interest payments with respect to the First Mortgage
Notes and (iii) funds to be used to complete and open the Shreveport resort in
the event the construction funds in (i) above are not sufficient. Interest
earned, but not yet received, on such investments is included in interest
receivable on the accompanying consolidated balance sheet at December 31, 1999.
Upon receipt, interest is included in cash restricted for construction project.
At December 31, 1999, cash restricted for construction project is comprised
of the following:
<TABLE>
<S> <C>
Construction reserve........................................ $ 114,964,000
Interest reserve............................................ 27,275,000
Completion reserve.......................................... 5,071,000
-------------
$ 147,310,000
=============
</TABLE>
Long-lived assets--
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and 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 changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. As
a result of its review, HCS does not believe that any such changes have
occurred.
F-10
<PAGE>
HOLLYWOOD CASINO SHREVEPORT
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Casino revenues, promotional allowances and departmental expenses--
QNOV recognized the net win from gaming activities (the difference between
gaming wins and losses) as casino revenues. Casino revenues are net of accruals
for anticipated payouts of progressive jackpots.
The estimated value of beverages, admissions and other items which were
provided to customers without charge has been included in revenues and a
corresponding amount has been deducted as promotional allowances. The costs of
such complimentaries have been included as casino expenses on the accompanying
statement of operations for the year ended December 31, 1997. The cost of
complimentaries allocated from the beverage department to the casino department
during the year ended December 31, 1997 was $1,320,000.
HCS anticipates that once it begins operations, its accounting policies with
respect to the recognition of casino revenues, promotional allowances and
departmental expenses will be consistent with those used by QNOV.
Income taxes--
HCS is a partnership and its tax attributes, including income and expense
items, are passed through to its partners. Accordingly, the accompanying
consolidated financial statements do not reflect state or federal income taxes.
Recent Accounting Pronouncement--
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements" which
summarizes the application of generally accepted accounting principles to
revenue recognition in financial statements. HCS does not believe the adoption
of Staff Accounting Bulletin 101 will have a significant impact on its
consolidated financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued a new
statement, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which has been amended to be 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 partners' capital until a hedged transaction occurs.
HCS does not believe the adoption of SFAS 133 will have a significant impact on
its financial position or results of operations.
(3) Long-term Debt
Long-term debt at December 31, 1999 consists of the following:
<TABLE>
<S> <C>
13% First Mortgage Notes, with contingent interest, due
2006(a).................................................... $150,000,000
Note payable, net of discount of $241,000 (b)............... 1,759,000
------------
Total indebtedness.......................................... 151,759,000
Less-current maturities..................................... (400,000)
------------
Total long-term debt........................................ $151,359,000
============
</TABLE>
- --------
(a) In August 1999, HCS and Shreveport Capital Corporation issued the First
Mortgage Notes. Fixed interest on the First Mortgage Notes at the annual
rate of 13% is payable on each February 1 and August 1, beginning February
1, 2000. In addition, contingent interest will accrue on the First Mortgage
Notes and will be payable on each interest date after the Shreveport resort
begins operations. The amount of contingent interest will be equal to 5% of
the consolidated cash flow of HCS for the applicable period subject to a
maximum contingent interest of $5,000,000 for any four consecutive fiscal
quarters.
F-11
<PAGE>
HOLLYWOOD CASINO SHREVEPORT
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The First Mortgage Notes are secured by, among other things, (i) a first
priority security interest in the net proceeds from the issue of the First
Mortgage Notes; (ii) a first priority security interest in substantially
all of the assets that will comprise the Shreveport resort other than up to
$35,000,000 in assets secured by equipment financing; (iii) a collateral
assignment of the Shreveport resort's interest in the principal agreements
under which it will be constructed, operated and managed and (iv) a
collateral assignment of certain licenses and permits with respect to the
construction, operation and management of the Shreveport resort. In
addition, the First Mortgage Notes are guaranteed on a senior secured basis
by HCL, HCS I, Inc. and HCS II, Inc. (collectively, the "Guarantors"). Such
guarantees are secured by a first priority secured interest in
substantially all of the Guarantors' assets, including a pledge of the
capital stock of HCS I, Inc. and HCS II, Inc. and their partnership
interests in HCS. The security interest does not include $2,500,000 held by
HCL to fund its acquisition of Sodak.
The First Mortgage Notes may be redeemed at any time on or after August 1,
2003 at 106.5% of the then outstanding principal amount, decreasing to
103.25% and 100% on August 1, 2004 and 2005, respectively. HCS may also
redeem up to 35% of the First Mortgage Notes at a redemption price of 113%
plus accrued interest at any time prior to August 1, 2002 with the net cash
proceeds of an equity offering by HCC resulting in at least $20,000,000,
but only to the extent that such proceeds are contributed by HCC as equity
to HCS.
The indenture to the First Mortgage Notes contains various provisions
limiting the ability of HCS to borrow money, pay distributions on its
equity interests or prepay debt, make investments, create liens, sell its
assets or enter into mergers or consolidations. In addition, the indenture
restricts the ability of the Guarantors and Shreveport Capital Corporation
to acquire additional assets, become liable for additional obligations or
engage in any significant business activities.
(b) The partners of HCS agreed that HCS would contingently reimburse Hilton for
$2,000,000 of the amount it paid to the City of New Orleans under the
Compromise Agreement (see Note 1); such repayment is to be made upon the
earlier of the termination of construction of the Shreveport resort or in
monthly installments of $200,000, without interest, commencing with the
opening of the Shreveport resort. The $2,000,000 liability, net of a
discount in the original amount of $308,000, and the related adjustment to
the recorded value of project costs were recorded upon the issuance of the
First Mortgage Notes in August 1999.
Scheduled payments of long-term debt as of December 31, 1999 are set forth
below:
<TABLE>
<S> <C>
2000............................................................ $ 400,000
2001............................................................ 1,600,000
2002............................................................ --
2003............................................................ --
2004............................................................ --
Thereafter...................................................... 150,000,000
------------
$152,000,000
============
</TABLE>
(4) Transactions with Affiliates
HCS
The operations of the Shreveport resort will be managed by HWCC-Shreveport,
Inc., a wholly owned subsidiary of HCC, under the terms of a management
agreement. The management agreement became effective when the LGCB approved the
development of the Shreveport resort and will remain in effect as long as HCS
holds its license, unless the management agreement is terminated earlier in
accordance with its terms. Under the terms of the management agreement, HCS
will pay HWCC-Shreveport basic and incentive management
F-12
<PAGE>
HOLLYWOOD CASINO SHREVEPORT
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
fees for its services. The basic fee will be equal to 2% of gross revenues, as
defined in the agreement, from the operation of the Shreveport resort. The
incentive fee will be equal to the sum of (i) 5% of earnings before interest,
taxes, depreciation and amortization ("EBITDA"), as defined in the agreement,
in excess of $25,000,000 and up to $35,000,000; (ii) 7% of EBITDA in excess of
$35,000,000 and up to $40,000,000; and (iii) 10% of EBITDA over $40,000,000. In
addition, HCS will reimburse HWCC-Shreveport for expenses incurred in
connection with services provided under the management agreement.
HCS has also entered into a Technical Services Agreement with HWCC-Shreveport
to provide certain construction and project supervision services prior to the
opening of the Shreveport resort. HCS will reimburse HWCC-Shreveport for
expenses incurred in connection with services provided under the Technical
Services Agreement. Such costs amounted to $291,000 for the year ended December
31, 1999 and for the period from September 28, 1998 through December 31, 1999.
Amounts payable under the agreement amounting to $56,000 are included in due to
affiliates on the accompanying consolidated balance sheet at December 31, 1999.
HCS has also entered into a Marine Services Agreement with Paddlewheels to
provide certain marine services for so long as Paddlewheels remains a joint
venture partner in HCS. The Marine Services Agreement became effective on
September 22, 1998 and, in addition to the reimbursement of Paddlewheels for
its direct expenses incurred, if any, HCS will pay a monthly fee of $30,000
effective with the opening of the Shreveport resort. No payments have been made
under the agreement through December 31, 1999.
QNOV
QNOV leased the front apron of the Lower Poydras Street Wharf and a portion
of the Upper Poydras Street Wharf from International Rivercenter ("IRC"), a
partnership in which Hilton Hotels Corporations ("HHC"), the ultimate parent of
Hilton, was a limited partner. Total expense in 1997 for this lease was
$1,467,000. Additional rent was due under the wharf lease for each passenger
over a base number of passengers of 1,100,000 annually. The incremental rate
was $1.00 for each passenger in excess of the base number increasing by $.10
for each 125,000 incremental passengers. While in operation during 1997, the
casino's incremental passengers totaled approximately 173,000, resulting in
$195,000 of additional rental expense.
QNOV leased office space from Queen of Jefferson, Inc. an affiliated company
of NOP. Total expense for this lease was $9,000 for the 1998 period through
September 22 and $103,000 for 1997.
QNOV's casino was operated by Hilton pursuant to a Casino Management
Agreement. As a management fee, Hilton received 3% of gross revenues (excluding
interest income) of the casino, payable monthly. Fees pursuant to this
agreement totaled $1,511,000 in 1997. Also, as a vessel rental fee, Hilton
received 6.25% of gaming revenues of the casino, payable monthly. Fees pursuant
to the agreement totaled $2,519,000 in 1997.
The riverboat vessel was operated by NOP pursuant to a Vessel Management
Agreement. NOP was entitled to a management fee of 2% of gross revenues
(excluding interest income) of the casino, payable monthly. Fees pursuant to
this agreement totaled $1,008,000 in 1997.
NOP was also responsible for the Marine Department payroll. QNOV reimbursed
NOP for salaries, wages and benefits for these individuals amounting to
$2,071,000 in 1997.
Marketing services were provided to QNOV by Visitor Marketing, Inc., an
affiliate of NOP. Payment for these services totaled $863,000 for the year
ended December 31, 1997.
F-13
<PAGE>
HOLLYWOOD CASINO SHREVEPORT
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
QNOV purchased rooms, food and beverage items, and other services totaling
approximately $2,000,000 in 1997 from New Orleans Hilton Riverside, a hotel
owned by IRC. Certain employees of QNOV were eligible to participate in an
employee investment plan whereby HHC contributed certain percentages of
employee contributions. Expenses for this plan totaled $188,000 in 1997.
(5)Commitments
For so long as it remains a joint venture partner in HCS, Paddlewheels will
receive, among other things, an amount equal to 1% of the net revenues, as
defined, of the Shreveport resort in exchange for the assignment by
Paddlewheels of its joint venture interest in HCS to HCL and Sodak.
HCC has entered into a completion capital agreement providing for the
contribution of up to an additional $5,000,000 in cash if at any time there are
insufficient funds available to enable the Shreveport resort to be operating by
April 30, 2001. In addition, if the Shreveport resort is not operating by April
30, 2001, HCC will contribute to HCS through HCL, HCS I, Inc. and HCS II, Inc.
on that date $5,000,000 in additional equity less any amounts previously
contributed under the completion capital agreement.
In May 1999, HCS entered into a ground lease with the City of Shreveport for
the land on which the Shreveport resort will be built. The term of the lease
began when construction commenced and will end on the tenth anniversary of the
date the Shreveport resort opens. HCS has options to renew the lease on the
same terms for up to an additional forty years. The lease may be further
renewed after that time at prevailing rates and terms for similar leases. The
City of Shreveport may terminate the lease as a result of, among other things,
a default by HCS under the lease or the failure to substantially complete
construction within the time period established by the LGCB. HCS may terminate
the lease at any time if the operation of the Shreveport resort becomes
uneconomic. Base rental payments under the lease are $10,000 per month during
the construction period increasing to $450,000 per year upon opening and
continuing at that amount for the remainder of the initial ten-year lease term.
During the first five-year renewal term, the base annual rental will be
$402,500. Subsequent renewal period base rental payments will increase by 15%
during each of the next four five-year renewal terms with no further increases.
In addition to the base rent, HCS will pay monthly percentage rent of not less
than $500,000 per year equal to 1% of monthly adjusted gross revenues and the
amount, if any, by which monthly parking facilities net income exceeds the
parking income credit, as all such terms are defined in the lease agreement.
Payments under the ground lease amounted to $56,000 for the period through
December 31, 1999 and are included in construction in progress in the
accompanying consolidated balance sheet at December 31, 1999.
HCS has entered into a lease commitment agreement with a third party lessor
for up to $30,000,000 to be used to acquire furniture, fixtures and equipment
for the Shreveport resort. Borrowings under the lease commitment may be made
monthly during the construction period in specified minimum amounts and will
accrue interest at the rate of LIBOR plus 4%. During the construction period,
HCS will only pay interest on outstanding borrowings as well as a fee of .5%
per annum on the undrawn portion of the commitment. Upon opening of the
Shreveport resort, the outstanding borrowings will become payable quarterly
including interest over a three year period to fully amortize the loan. The
lease will be treated as a capital lease for financial reporting purposes.
Borrowings under the lease commitment will be collateralized by the furniture,
fixture and equipment purchased. Covenants under the lease financing will be
substantially similar to those included in the indenture for the First Mortgage
Notes (see Note 3). No charges were incurred under the commitment through
December 31, 1999.
F-14
<PAGE>
HOLLYWOOD CASINO SHREVEPORT
A Development Stage General Partnership for Periods Subsequent to September 22,
1998
(Formerly Known as QNOV)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Third parties could assert obligations against HCS for liabilities that have
arisen or that might arise against QNOV or the former partners with respect to
any period prior to September 22, 1998. Management believes in the event such a
claim arises, it would be adequately covered under either existing
indemnification agreements with the former partners or insurance policies
maintained by QNOV or the former partners.
(6) Supplemental Cash Flow Information
HCS paid no interest or taxes during the years ended December 31, 1999 or
1998 or during the period from September 22, 1998 through December 31, 1999.
Interest paid during the year ended December 31, 1997 amounted to $2,000.
The issuance of a note to Hilton by HCS at a discounted face amount of
$1,692,000 (see Note 3(b)) and the associated project costs have been excluded
from the accompanying consolidated statements of cash flows for the year ended
December 31, 1999 and for the period from September 22, 1998 through
December 31, 1999 as a non-cash transaction.
Included in QNOV's liabilities at December 31, 1997 was a liability to Hilton
for $750,000. The $750,000 was incurred with respect to the termination of the
lease for docking facilities for QNOV's New Orleans berth (see Note 4). Hilton
settled the $750,000 obligation to IRC in exchange for an obligation by QNOV to
Hilton for such amount. The obligation accrued interest at the rate of 8.66%
per annum. The obligation to Hilton, together with accrued interest in the
amount of $50,000, was forgiven prior to September 22, 1998 and has been
reflected as a capital transaction with Hilton on the accompanying financial
statements.
Other liabilities to the former partners were incurred by QNOV during 1998
prior to the transfer of interests on September 22, 1998. Such general and
administrative costs included, among other things, payroll and related benefit
costs, office rental and legal fees with respect to the liquidating QNOV's
assets and settling its liabilities. Such obligations were forgiven prior to
September 22, 1998 and have been reflected as capital transactions on the
accompanying financial statements.
The capital transactions described in the prior two paragraphs have been
excluded from the accompanying statements of cash flows for the year ended
December 31, 1998 as non-cash transactions.
F-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
To HWCC-Louisiana, Inc.:
We have audited the accompanying balance sheets of HWCC-Louisiana, Inc. (the
"Company") as of December 31, 1999 and 1998, and the related statements of
operations, changes in shareholder's equity (deficit), and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of HWCC-Louisiana, Inc. as of December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
February 25, 2000
F-16
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED BALANCE SHEETS (NOTE 1)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 21,580,000 $ 68,000
Interest receivable............................... 1,432,000 --
Prepaid expenses and other current assets......... 649,000 --
------------ -----------
Total current assets............................ 23,661,000 68,000
------------ -----------
Investment in Hollywood Casino Shreveport (Note 1).. -- 2,483,000
------------ -----------
Property and Equipment:
Furniture and equipment........................... 24,000 1,000
Construction in progress.......................... 42,571,000 153,000
------------ -----------
42,595,000 154,000
Less accumulated depreciation..................... (2,000) --
------------ -----------
42,593,000 154,000
------------ -----------
Cash Restricted for Construction Project............ 147,310,000 --
------------ -----------
Other Assets:
Note receivable, net of discount.................. 936,000 --
Deferred financing costs.......................... 4,928,000 --
------------ -----------
5,864,000 --
------------ -----------
$219,428,000 $ 2,705,000
============ ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
(DEFICIT)
Current Liabilities:
Current maturities of long-term debt.............. $ 400,000 $ --
Accounts payable.................................. 11,663,000 15,000
Interest payable.................................. 7,637,000 --
Other accrued liabilities......................... 35,000 --
Due to affiliates................................. 334,000 1,321,000
------------ -----------
Total current liabilities....................... 20,069,000 1,336,000
------------ -----------
Long-term debt...................................... 151,359,000 --
------------ -----------
Commitments and Contingencies (Note 7)
Minority Interest................................... 2,000,000 --
------------ -----------
Shareholder's Equity (Deficit):
Common stock, $1 par value per share, 1,000,000
shares authorized, 1,000 shares issued and
outstanding...................................... 1,000 1,000
Additional paid-in capital........................ 51,400,000 2,500,000
Accumulated deficit............................... (5,401,000) (1,132,000)
------------ -----------
46,000,000 1,369,000
------------ -----------
$219,428,000 $ 2,705,000
============ ===========
</TABLE>
The accompanying footnotes to financial statements are an
integral part of these balance sheets.
F-17
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE 1)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1999 1998 1997
----------- -------- ---------
<S> <C> <C> <C>
Development and preopening expenses:
Travel.................................... $ (59,000) $(31,000) $(109,000)
Consulting and other professional
services................................. (401,000) -- (205,000)
Salaries and related costs................ (299,000) -- --
License fees.............................. (115,000) -- --
Public relations.......................... (60,000) -- --
Lobbying.................................. -- (15,000) (96,000)
Write off deferred project costs.......... -- (10,000) (139,000)
Other, net of reimbursements.............. (90,000) 17,000 (95,000)
----------- -------- ---------
Total development and preopening
expenses................................. (1,024,000) (39,000) (644,000)
General and administrative expenses......... (10,000) -- --
Amortization expense........................ (2,000) -- --
----------- -------- ---------
Loss from operations........................ (1,036,000) (39,000) (644,000)
Interest expense, net of capitalized
interest of $1,052,000 in 1999............. (6,946,000) -- --
Interest income............................. 3,701,000 -- --
----------- -------- ---------
Loss before taxes and other items........... (4,281,000) (39,000) (644,000)
Income tax benefit.......................... -- -- --
----------- -------- ---------
Loss before other items..................... (4,281,000) (39,000) (644,000)
Pre-acquisition losses (Note 1)............. 12,000 -- --
Equity in losses of Hollywood Casino
Shreveport (Note 1)........................ -- (17,000) --
----------- -------- ---------
Net loss................................ $(4,269,000) $(56,000) $(644,000)
=========== ======== =========
</TABLE>
The accompanying footnotes to consolidated financial statements are an
integral part of these consolidated financial statements.
F-18
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (DEFICIT) (NOTE 1)
For the Three Years Ended December 31, 1999
<TABLE>
<CAPTION>
Common Stock
------------- Additional Accumulated
Shares Amount Paid-in Capital Deficit
------ ------ --------------- -----------
<S> <C> <C> <C> <C>
----- ------ ----------- -----------
Balances, January 1, 1997........... 1,000 $1,000 $ -- $ (432,000)
Net loss.......................... -- -- -- (644,000)
----- ------ ----------- -----------
Balances, December 31, 1997......... 1,000 1,000 -- (1,076,000)
Capital contribution.............. -- -- 2,500,000 --
Net loss.......................... -- -- -- (56,000)
----- ------ ----------- -----------
Balances at December 31, 1998....... 1,000 1,000 2,500,000 (1,132,000)
Capital contribution.............. -- -- 48,900,000 --
Net loss.......................... -- -- -- (4,269,000)
----- ------ ----------- -----------
Balances, December 31, 1999......... 1,000 $1,000 $51,400,000 $(5,401,000)
===== ====== =========== ===========
</TABLE>
The accompanying footnotes to consolidated financial statements are an
integral part of these consolidated financial statements.
F-19
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 1)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1999 1998 1997
------------- ----------- ---------
<S> <C> <C> <C>
Operating Activities:
Net loss.............................. $ (4,269,000) $ (56,000) $(644,000)
Adjustments to reconcile net loss to
cash provided by operating
activities:
Amortization expense, including
accretion of discount.............. 333,000 -- --
Pre-acquisition losses.............. 12,000 -- --
Write off deferred project costs.... -- 10,000 139,000
Equity in losses of Hollywood Casino
Shreveport......................... -- 17,000 --
(Increase) decrease in receivables.. (1,432,000) 40,000 5,000
Increase in other current assets.... (649,000) -- --
(Decrease) increase in due to
affiliate.......................... (987,000) 204,000 639,000
Increase in accounts payable and
accrued liabilities................ 18,818,000 15,000 --
------------- ----------- ---------
Cash provided by operating activities... 11,826,000 230,000 139,000
------------- ----------- ---------
Investing Activities:
Increase in cash from acquisition
(Note 1)............................. 1,474,000 -- --
Investment in Hollywood Casino
Shreveport........................... -- (2,500,000) --
Increase in cash restricted for
construction project................. (147,310,000) -- --
Loan to joint venture partner......... (1,000,000) -- --
Purchase of property and equipment.... (38,157,000) (163,000) (140,000)
------------- ----------- ---------
Cash used in investing activities....... (184,993,000) (2,663,000) (140,000)
------------- ----------- ---------
Financing Activities:
Issuance of long-term debt............ 150,000,000 -- --
Deferred financing costs.............. (5,221,000) -- --
Investment by joint venture partner... 1,000,000 -- --
Capital contributions................. 48,900,000 2,500,000 --
------------- ----------- ---------
Cash provided by financing activities... 194,679,000 2,500,000 --
------------- ----------- ---------
Net increase (decrease) in cash......... 21,512,000 67,000 (1,000)
Cash and cash equivalents at beginning
of year................................ 68,000 1,000 2,000
------------- ----------- ---------
Cash and cash equivalents at end of
year................................... $ 21,580,000 $ 68,000 $ 1,000
============= =========== =========
</TABLE>
The accompanying footnotes to consolidated financial statements are an
integral part of these consolidated financial statements.
F-20
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization, Business and Basis of Presentation
HWCC-Louisiana, Inc. ("HCL") is a Louisiana corporation and wholly owned
subsidiary of Hollywood Casino Corporation ("HCC"). HCL was formed in April
1993 for the purpose of obtaining a license to develop and own a riverboat
casino in Louisiana. HCL's initial efforts to obtain sites in Lake Charles and
Bossier City, Louisiana proved unsuccessful. In September 1998, HCL, Sodak
Louisiana, L.L.C. ("Sodak") and Shreveport Paddlewheels, L.L.C.
("Paddlewheels") acquired the interests of Queen of New Orleans at the Hilton
Joint Venture ("QNOV"). QNOV was a general partnership which owned and operated
a riverboat gaming facility in New Orleans, Louisiana. QNOV ceased operating
the riverboat casino in October 1997 having requested and obtained approval
from the Louisiana Gaming Control Board (the "LGCB") to move its licensed site
to the City of Shreveport, approximately 180 miles east of Dallas, Texas.
Subsequent to receiving approval to relocate the license, QNOV made the
decision not to conduct gaming operations in Shreveport. The partners of QNOV
sought to transfer the license to operate in Shreveport to another interested
party. Under Louisiana gaming regulations, the license to operate a riverboat
gaming operation is not transferrable; however, the ownership of a license to
operate is transferrable, subject to the approval of the LGCB. Accordingly, the
acquisition by HCL, Sodak and Paddlewheels of the license to operate in
Shreveport was structured as an acquisition of the interests of QNOV's
partners. The former partners disposed of QNOV's assets other than its license
to operate and satisfied all but one of its obligations so that when the former
partners withdrew on September 22, 1998 transferring their interests to HCL,
Sodak and Paddlewheels, QNOV's only asset was its license to operate in
Shreveport, its only liability was a $5,000,000 obligation to the city of New
Orleans (see below) and all equity accounts of the former partners of QNOV were
reduced to a zero balance. HCL, Sodak and Paddlewheels obtained the necessary
approvals from the LGCB to proceed with the project in Shreveport. In June
1999, HCL obtained approval to change the name of the partnership to Hollywood
Casino Shreveport ("HCS").
When the former partners of QNOV proposed moving to Shreveport, they
negotiated a settlement with the City of New Orleans to pay $10,000,000 with
respect to claims asserted by the City in connection with the relocation.
During September 1998, the partners of HCS, the former partners of QNOV and the
City of New Orleans entered into a Compromise Agreement under which one of
QNOV's former partners agreed to pay $5,000,000 to the City and QNOV was
released from any further relocation claims. The remaining $5,000,000
obligation continued to be reflected as a liability and was, in effect, assumed
by the partners of HCS since, as part of the Compromise Agreement, the partners
of HCS agreed to pay the remaining $5,000,000 to the City upon securing
financing for their planned Shreveport resort. In the event financing was not
obtained, HCS's partners would not be required to make any payment. As a result
of HCL's acquisition of Sodak's interest in HCS (see below), HCS has become
substantially wholly owned by HCL. HCL has treated this $5,000,000 obligation
as part of the cost of acquiring their interest in HCS and has included the
cost as an adjustment to construction in progress on the accompanying
consolidated balances sheet at December 31, 1999. The obligation was paid in
August 1999 upon issuance of the First Mortgage Notes (see Note 4).
For the period from September 22, 1998 until April 23, 1999, HCL's investment
in HCS was accounted for under the equity method of accounting. It was
originally anticipated that HCS would develop the Shreveport resort with each
of HCL and Sodak having a 50% after the commencement of operations and interest
in the development and subsequent operations. Paddlewheels was to have a
residual interest after the commencement of operations and in the event that
the project was ever sold amounting to 10% plus any capital contributions made
by Paddlewheels to HCS or otherwise credited to their account (see Note 6). On
March 31, 1999, HCL entered into a definitive agreement with Sodak's parent to
acquire Sodak for the $2,500,000 Sodak had contributed to HCS, with $1,000 to
be paid at closing and the remainder to be paid six months after the opening of
the Shreveport resort. The revised structure of the partnership was approved by
the LGCB on April 20, 1999. As a result, HCL obtained an effective 100%
ownership interest in HCS with Paddlewheels retaining their 10% residual
interest. The acquisition was accounted for under the purchase method of
accounting. Accordingly, effective as of the April 23, 1999 closing of HCL's
acquisition of Sodak, Sodak became a consolidated subsidiary of HCL.
F-21
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In July 1999, HCL formed two new, wholly owned subsidiaries, HCS I, Inc. and
HCS II, Inc., both Louisiana corporations. HCL contributed $1,000 of capital to
each entity along with 99% of its interest in HCS to HCS I, Inc. and the
remaining 1% of its interest to HCS II, Inc. In addition, the HCS joint venture
agreement was amended and restated on July 21, 1999, to reflect, among other
things, the admission of HCS I, Inc. and HCS II, Inc. as partners of HCS and
the withdrawal of HCL as managing partner of HCS. As a result, HCS I, Inc. now
has an effective 99% interest in HCS, and has become its managing general
partner. HCS II, Inc. now has an effective 1% interest in HCS. HCS I, Inc. and
HCS II, Inc. currently have no other operating activities or assets other than
their ownership interests in HCS. HCS I, Inc. and HCS II, Inc. have assumed
HCL's obligation to cause HCS to pay Paddlewheels the 1% of "complex net
revenues" (see Note 7). Paddlewheels retained its 10% residual interest in HCS.
The revised partnership structure was approved by the LGCB on July 20, 1999.
Additionally, in July 1999, HCS formed a new, wholly owned subsidiary,
Shreveport Capital Corporation ("SCC"), a Louisiana corporation. HCS
contributed $1,000 of capital to SCC. SCC was formed for the sole purpose of
being a co-issuer with respect to the First Mortgage Notes and is not expected
to have any operating activities, acquire any assets or incur any liabilities.
As currently planned, the Shreveport resort will consist of a three-level
riverboat casino with approximately 1,370 slot machines and 75 table games; a
405-room, all suite, art deco style hotel; and approximately 42,000 square feet
of restaurant and entertainment facilities. The total estimated cost of the
Shreveport resort is $230,000,000. Equity contributions from HCC have provided
$50,000,000 of the funds necessary. During August 1999, HCS successfully
completed the issuance of $150,000,000 of 13% First Mortgage Notes with
contingent interest (the "First Mortgage Notes") due 2006 (see Note 4); it is
expected that a commitment for $30,000,000 of furniture, fixture and equipment
financing will provide the remaining funds for the project (see Note 7).
Construction began in August 1999 with a planned opening date in early November
of 2000.
Riverboat gaming operations in Louisiana are subject to regulatory control by
the LGCB. HCS's current license to operate the Shreveport resort expires on
October 15, 2004.
The accompanying consolidated balance sheet as of December 31, 1999 reflects
(i) the April 23, 1999 acquisition of Sodak and the resulting consolidation of
Sodak and HCS with HCL and (ii) the formation of HCS I, Inc. HCS II, Inc. and
SCC. The accompanying consolidated statement of operations for the year ended
December 31, 1999 reflects the consolidated operations of HCL and its
subsidiaries, including Sodak and HCS, for the period from January 1, 1999 with
the pre-acquisition losses of Sodak from its investment in HCS reflected as a
nonoperating item. Sodak had no operations during the period presented. All
intercompany balances and transactions have been eliminated in consolidation.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed in the preparation of the
accompanying financial statements of HCL are discussed below. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that effect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and cash equivalents--
Cash and cash equivalents are comprised of cash and investments with original
maturities of three months or less, such as commercial paper, certificates of
deposit and fixed repurchase agreements.
F-22
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and equipment--
Furniture and equipment is being depreciated using the straight line method
over the estimated useful life of five years.
Construction in progress--
Costs associated with the construction of the Shreveport resort are being
deferred. Construction costs, including the applicable interest on construction
financing of $1,052,000 at December 31, 1999, are being capitalized and,
commencing with the opening of the Shreveport resort, will be amortized over
the estimated useful lives of the resulting assets. Capitalized costs will be
allocated to the individual components of property and equipment when such
assets are ready to be placed in service.
Preopening costs--
Preopening costs include, among other things, organizational costs, marketing
and promotional costs, hiring and training of new employees and other operating
costs incurred prior to the opening of the project. Such costs are accounted
for under the provisions of Statement of Position 98-5 issued by the American
Institute of Certified Public Accountants which requires that such costs be
expensed as incurred.
Deferred financing costs--
The costs of issuing long-term debt, including all underwriting, licensing,
legal and accounting fees, have been deferred and are being amortized over the
term of the related debt issue using the straight-line method which
approximates the effective interest method. Amortization of such costs amounted
to $293,000 during the year ended December 31, 1999 and is included in interest
expense on the accompanying consolidated statement of operations.
Employee stock options--
HCL has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 allows an entity to continue to measure compensation cost for
employee stock-based compensation plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("Opinion 25"). Entities electing to
remain with the accounting under Opinion 25 are required to make pro forma
disclosures of net income as if the fair value based method of accounting under
SFAS 123 had been applied. HCL has elected to account for employee stock-based
compensation under Opinion 25. During September 1999, HCC issued stock options
to an employee of HCS for 50,000 shares of HCC common stock at an exercise
price of $2.50 per share, the market price on the date of grant. Pro forma
compensation expense for the period from the grant date (September 16, 1999)
through December 31, 1999 is not material.
Cash restricted for construction project--
Cash restricted for construction project consists of investments in
government securities which are to be used for specified purposes and which
were purchased with net proceeds from the First Mortgage Notes (see Note 4) as
required by the indenture for the First Mortgage Notes. Such restricted cash
includes (i) funds to be used for construction which are subject to meeting
certain conditions prior to their disbursement, (ii) funds to be used to make
the first three semiannual interest payments with respect to the First Mortgage
Notes and (iii) funds to be used to complete and open the Shreveport resort in
the event the construction funds in (i) above are not sufficient. Interest
earned, but not yet received, on such investments is included in interest
receivable on the accompanying consolidated balance sheet at December 31, 1999.
Upon receipt, interest is included in cash restricted for construction project.
F-23
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 1999, cash restricted for construction project is comprised
of the following:
<TABLE>
<S> <C>
Construction reserve............................................. $114,964,000
Interest reserve................................................. 27,275,000
Completion reserve............................................... 5,071,000
------------
$147,310,000
============
</TABLE>
Long-lived assets--
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and 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 changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. As
a result of its review, HCL does not believe that any such changes have
occurred.
Income taxes--
HCL is included in the consolidated federal income tax return of HCC.
Pursuant to an agreement between HCL and HCC, HCL's provision for taxes is
based on the amount of tax that would be provided if a separate federal income
tax return were to be filed.
Recent accounting pronouncement--
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements" which
summarizes the application of generally accepted accounting principles to
revenue recognition in financial statements. HCL does not believe the adoption
of Staff Accounting Bulletin 101 will have a significant impact on its
consolidated financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued a new
statement, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which has been amended to be 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 fair value of
derivatives may, depending on circumstances, be recognized in earnings or
deferred as a component of shareholder's equity until a hedged transaction
occurs. HCL does not believe the adoption of SFAS 133 will have a significant
impact on its consolidated financial position or results of operations.
(3) Acquisition of Sodak Louisiana, L.L.C.
As discussed in Note 1, HCL acquired Sodak on April 23, 1999 for a cash
payment of $1,000 and contingent consideration of $2,499,000 to be paid six
months after the Shreveport resort opens. Until such time as the Shreveport
resort opens, the $2,499,000 difference between Sodak's basis in the assets
acquired and the $1,000 paid by HCL will be treated as an adjustment to reduce
the recorded amount of project costs to the amount paid with respect to such
costs in accordance with Accounting Principles Board Statement Number 16,
"Business Combinations." Sodak had no operating activities prior to the
acquisition date other than equity from its investment in HCS and its only
asset was its investment in HCS. When the likelihood of completing and opening
of the Shreveport resort can be considered probable, the contingent
consideration will be recorded and project costs increased to reflect the
additional cost incurred by HCL. The following condensed pro forma
consolidated statement of operations of HCL for the year ended December 31,
1998 is presented to reflect the activities of HCL and Sodak on a consolidated
basis as if the acquisition of Sodak had occurred on January 1, 1998.
F-24
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Pro Forma Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
-----------------
<S> <C>
Interest income............................................ $ 55,000
Preopening expenses........................................ (90,000)
Development expenses....................................... (39,000)
------------
Net loss................................................... $ (74,000)
============
During July 1999, Sodak was merged into HCL and HCL contributed its ownership
in HCS to HCS I, Inc. and HCS II, Inc. As a result of these transactions, HCS
I, Inc., HCS II, Inc. and Paddlewheels are the only partners in HCS.
(4) Long-term Debt
Long-term debt at December 31, 1999 consists of the following:
13% First Mortgage Notes, with contingent interest, due
2006(a)................................................... $150,000,000
Note payable, net of discount of $241,000(b)............... 1,759,000
------------
Total indebtedness......................................... 151,759,000
Less-current maturities.................................... (400,000)
------------
Total long-term debt...................................... $151,359,000
============
</TABLE>
- --------
(a) In August 1999, HCS and SCC issued the First Mortgage Notes. Fixed interest
on the First Mortgage Notes at the annual rate of 13% is payable on each
February 1 and August 1, beginning February 1, 2000. In addition,
contingent interest will accrue on the First Mortgage Notes and will be
payable on each interest date after the Shreveport resort begins
operations. The amount of contingent interest will be equal to 5% of the
consolidated cash flow of HCS for the applicable period subject to a
maximum contingent interest of $5,000,000 for any four consecutive fiscal
quarters.
The First Mortgage Notes are secured by, among other things, (i) a first
priority security interest in the net proceeds from the issue of the First
Mortgage Notes; (ii) a first priority security interest in substantially
all of the assets that will comprise the Shreveport resort other than up to
$35,000,000 in assets secured by equipment financing; (iii) a collateral
assignment of the Shreveport resort's interest in the principal agreements
under which it will be constructed, operated and managed and (iv) a
collateral assignment of certain licenses and permits with respect to the
construction, operation and management of the Shreveport resort. In
addition, the First Mortgage Notes are guaranteed on a senior secured basis
by HCL, HCS I, Inc. and HCS II, Inc. (collectively, the "Guarantors"). Such
guarantees are secured by a first priority secured interest in
substantially all of the Guarantors' assets, including a pledge of the
capital stock of HCS I, Inc. and HCS II, Inc. and their partnership
interests in HCS. The security interest does not include $2,500,000 held by
HCL to fund its acquisition of Sodak.
The First Mortgage Notes may be redeemed at any time on or after August 1,
2003 at 106.5% of the then outstanding principal amount, decreasing to
103.25% and 100% on August 1, 2004 and 2005, respectively. HCS may also
redeem up to 35% of the First Mortgage Notes at a redemption price of 113%
plus accrued interest at any time prior to August 1, 2002 with the net cash
proceeds of an equity offering by HCC resulting in at least $20,000,000,
but only to the extent that such proceeds are contributed by HCC as equity
to HCS.
F-25
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The indenture to the First Mortgage Notes contains various provisions
limiting the ability of HCS to borrow money, pay distributions on its
equity interests or prepay debt, make investments, create liens, sell its
assets or enter into mergers or consolidations. In addition, the indenture
restricts the ability of the Guarantors and SCC to acquire additional
assets, become liable for additional obligations or engage in any
significant business activities.
(b) The partners of HCS agreed that HCS would contingently reimburse one of
QNOV's former partners for $2,000,000 of the amount it paid to the City of
New Orleans under the Compromise Agreement (see Note 1); such repayment is
to be made upon the earlier of the termination of construction of the
Shreveport resort or in monthly installments of $200,000, without interest,
commencing with the opening of the Shreveport resort. The $2,000,000
liability, net of a discount in the original amount of $308,000, and the
related adjustment to the recorded value of project costs were recorded
upon the issuance of the First Mortgage Notes in August 1999.
Scheduled payments of long-term debt as of December 31, 1999 are set forth
below:
<TABLE>
<S> <C>
2000............................................................ $ 400,000
2001............................................................ 1,600,000
2002............................................................ --
2003............................................................ --
2004............................................................ --
Thereafter...................................................... 150,000,000
------------
$152,000,000
============
</TABLE>
(5)Income Taxes
HCL's benefit for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1999 1998 1997
----------- ------- ---------
<S> <C> <C> <C>
Deferred benefit (provision):
Federal..................................... $ 1,362,000 $ 8,000 $ 170,000
State....................................... 338,000 1,000 40,000
Change in valuation allowance................ (1,700,000) (9,000) (210,000)
----------- ------- ---------
$ -- $ -- $ --
=========== ======= =========
</TABLE>
A reconciliation between the calculated tax benefit on losses based on the
statutory rates in effect and the effective tax rates for the years ended
December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1999 1998 1997
----------- ------- ---------
<S> <C> <C> <C>
Calculated income tax benefit at statutory
rate....................................... $ 1,451 000 $ 9,000 $ 219,000
Change in valuation allowance............... (1,700,000) (9,000) (210,000)
State income taxes, net of federal
provision.................................. 223,000 1,000 26,000
Lobbying.................................... -- -- (31,000)
Other....................................... 26,000 (1,000) (4,000)
----------- ------- ---------
Tax benefit as shown on statement of
operations................................. $ -- $ -- $ --
=========== ======= =========
</TABLE>
Deferred taxes result from differences in the timing of deductions taken
between tax and financial reporting purposes for the write off of deferred
project costs.
F-26
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 1999 and 1998, HCL had net operating loss carryforwards
("NOL's") totaling approximately $3,980,000 and $837,000, respectively, which
do not begin to expire until 2012. Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes", requires that the benefit of such NOL's
be recorded as an asset and, to the extent that management can not assess that
the utilization of all or a portion of such deferred tax asset is more likely
than not, a valuation allowance should be recorded. Based on the losses
incurred to date and the lack of any current operating income, management has
provided a valuation allowance for the entire deferred tax asset for all
periods presented.
The components of HCL's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1999 1998
----------- ---------
<S> <C> <C>
Deferred tax asset--
Net operating loss carryforward...................... $ 1,571,000 $ 343,000
Preopening expenses.................................. 460,000 --
Write off of deferred project costs.................. 49,000 49,000
Other................................................ 12,000 --
----------- ---------
Net deferred tax asset................................ 2,092,000 392,000
Valuation allowance................................... (2,092,000) (392,000)
----------- ---------
$ -- $ --
=========== =========
</TABLE>
(6) Transactions with Affiliates
HCC and certain of its subsidiaries provide services to HCL and pay direct
costs on HCL's behalf. Services provided include personnel for project,
administrative and other purposes. HCL either expenses or capitalizes such
costs in accordance with its normal capitalization policies as described in
Note 2. Amounts payable to HCC and its subsidiaries for services and for the
payment of third party costs are included in due to affiliates on the
accompanying consolidated balance sheets. During April 1999, HCC made a capital
contribution to HCL of $1,400,000. Proceeds from the capital contribution were
used to repay HCC and its subsidiaries with respect to such advances.
The operations of the Shreveport resort will be managed by HWCC-Shreveport,
Inc., a wholly owned subsidiary of HCC, under the terms of a management
agreement. The management agreement became effective when the LGCB approved the
development of the Shreveport resort and will remain in effect for so long as
HCS holds its license, unless the management agreement is terminated earlier in
accordance with its terms. Under the terms of the management agreement, HCS
will pay HWCC-Shreveport basic and incentive management fees for its services.
The basic fee will be equal to 2% of gross revenues, as defined in the
agreement, from the operation of the Shreveport resort. The incentive fee will
be equal to the sum of (i) 5% of earnings before interest, taxes, depreciation
and amortization ("EBITDA"), as defined in the agreement, in excess of
$25,000,000 and up to $35,000,000; (ii) 7% of EBITDA in excess of $35,000,000
and up to $40,000,000; and (iii) 10% of EBITDA over $40,000,000. In addition,
HCS will reimburse HWCC-Shreveport for expenses incurred in connection with
services provided under the management agreement.
HCS has also entered into a Technical Services Agreement with HWCC-Shreveport
to provide certain construction and project supervision services prior to the
opening of the Shreveport resort. HCS will reimburse HWCC-Shreveport for
expenses incurred in connection with services provided under the Technical
Services Agreement. Such costs amounted to $291,000 for the year ended
December 31, 1999; no such costs were incurred during 1998. Amounts payable
under the agreement amounting to $56,000 are included in due to affiliates on
the accompanying consolidated balance sheet at December 31, 1999.
F-27
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
HCL is billed by subsidiaries of HCC for certain administrative and other
services performed by their employees on behalf of HCL. Such charges amounted
to $170,000 during the year ended December 31, 1999; no such charges were
incurred prior to 1999. Amounts payable amounting to $64,000 are included in
due to affiliates on the accompanying consolidated balance sheet at
December 31, 1999.
HCS has also entered into an agreement with Paddlewheels to provide certain
marine services for so long as Paddlewheels remains a joint venture partner in
HCS. The Marine Services Agreement became effective on September 22, 1998 and,
in addition to the reimbursement of Paddlewheels for its direct expenses
incurred, if any, HCS will pay a monthly fee of $30,000 effective with the
opening of the Shreveport resort. No payments have been made under the
agreement through December 31, 1999.
(7) Commitments
HCL agreed that upon obtaining construction financing for the Shreveport
resort, it would loan $1,000,000 to Paddlewheels which Paddlewheels would use
to make a $1,000,000 capital contribution to HCS. HCL loaned the $1,000,000 to
Paddlewheels and Paddlewheels made its capital contribution to HCS in August
1999; the $1,000,000 is included in minority interest in the accompanying
consolidated balance sheet of HCL at December 31, 1999. The loan to
Paddlewheels accrues interest at the rate of prime commencing with the opening
of the Shreveport resort and will be payable monthly. Because the loan does not
bear interest prior to completion of the Shreveport resort, HCL recorded a
discount on the note which is being accreted during the construction period and
which will result in a note receivable balance of $1,000,000 at the projected
completion date. Principle on the loan is payable on the tenth anniversary of
the opening of the Shreveport resort.
Paddlewheels was also given credit for an additional $1,000,000 capital
contribution at the time construction financing was obtained and the $5,000,000
liability described in Note 1 was paid. Such credit was in recognition of
guarantees provided by an affiliate of Paddlewheels necessary to obtain LGCB
approval for the Shreveport resort. The additional $1,000,000 credit to
Paddlewheels's capital account results in an additional $1,000,000 minority
interest on HCL's consolidated balance sheet and has been treated as an
additional project cost.
For so long as it remains a joint venture partner in HCS, Paddlewheels will
also receive, among other things, an amount equal to 1% of "complex net
revenues" of the Shreveport resort as defined, which approximates net revenues,
in exchange for the assignment by Paddlewheels and its affiliates of their
joint venture interest in HCS to HCL and Sodak.
HCC has entered into a completion capital agreement providing for the
contribution of up to an additional $5,000,000 in cash if any time there are
insufficient funds available to enable the Shreveport resort to be operating by
April 30, 2001. In addition, if the Shreveport resort is not operating by April
30, 2001, HCC will contribute to HCS through HCL, HCS I, Inc. and HCS II, Inc.
on that date $5,000,000 in additional equity less any amounts previously
contributed under the completion capital agreement.
In May 1999, HCS entered into a ground lease with the city of Shreveport for
the land on which the Shreveport resort will be built. The term of the lease
begins when construction commences and ends on the tenth anniversary of the
date the Shreveport resort opens. HSC has options to renew the lease on the
same terms for up to an additional forty years. The lease may be further
renewed after that time at prevailing rates and terms for similar leases. The
City of Shreveport may terminate the lease as a result of, among other things a
default by HCS under the lease or the failure to substantially complete
construction within the time period established by the LGCB. HCS may terminate
the lease at any time if the operation of the Shreveport resort becomes
uneconomic. Base rental payments under the lease are $10,000 per month during
the construction period increasing to $450,000 per year upon opening and
continuing at that amount for the remainder of the initial ten-year lease term.
During the first five-year renewal term, the base annual rental will be
$402,500.
F-28
<PAGE>
HWCC-LOUISIANA, INC. AND SUBSIDIARIES
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Subsequent renewal period base rental payments will increase by 15% during each
of the next four five-year renewal terms with no further increases. In addition
to the base rent, HCS will pay monthly percentage rent of not less than
$500,000 per year equal to 1% of monthly adjusted gross revenues and the
amount, if any, by which monthly parking facilities net income exceeds the
parking income credit, as all such terms are defined in the lease agreement.
Payments under the ground lease amounted to $56,000 for the period through
December 31, 1999 and are included in construction in progress on the
accompanying consolidated balance sheet at December 31, 1999.
HCS has entered into a lease commitment with a third party lessor for up to
$30,000,000 to be used to acquire furniture, fixtures and equipment for the
Shreveport resort. Borrowings under the lease commitment may be made monthly
during the construction period in specified minimum amounts and will accrue
interest at the rate of LIBOR plus 4%. During the construction period, HCS will
only pay interest on outstanding borrowings as well as a fee of .5% per annum
on the undrawn portion of the commitment. Upon opening of the Shreveport
resort, the outstanding borrowings will become payable quarterly including
interest over a three year period to fully amortize the loan. The lease will be
treated as a capital lease for financial reporting purposes. Borrowings under
the lease commitment will be collateralized by the furniture, fixtures and
equipment purchased. Covenants under the lease financing will be substantially
similar to those included in the indenture for the First Mortgage Notes (see
Note 4). No charges were incurred under the commitment through
December 31, 1999.
Third parties could assert obligations against HCS for liabilities that have
arisen or that might arise against QNOV or QNOV's partners with respect to any
period prior to September 22, 1998. Management believes in the event such a
claim arises, it would be adequately covered under either existing
indemnification agreements with QNOV's partners or insurance policies
maintained by QNOV or its partners.
(8) Supplemental Cash Flow Information
HCL paid no interest or income taxes during the years ended December 31,
1999, 1998 or 1997.
In connection with the acquisition of Sodak, HCL assumed the following
liabilities:
<TABLE>
<S> <C>
Fair value of non-cash assets acquired......................... $ 1,465,000
Cash acquired.................................................. 1,525,000
Contingent liability for purchase.............................. (2,499,000)
Pre-acquisition losses attributable to joint venture partner... 12,000
Cash paid for capital stock.................................... (1,000)
-----------
Liabilities assumed............................................ $ 502,000
===========
</TABLE>
The issuance of a note to a former partner of QNOV at a discounted face
amount of $1,692,000 (see Note 4(b)) and the associated project costs have been
excluded from the accompanying consolidated statement of cash flows for the
year ended December 31, 1999 as a non-cash transaction.
The additional $1,000,000 credit to Paddlewheels' capital account (see Note
7) and corresponding addition to construction in progress have been excluded
from the accompanying consolidated statement of cash flows for the year ended
December 31, 1999 as a non-cash transaction.
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Sodak Louisiana, L.L.C.:
We have audited the accompanying balance sheets of Sodak Louisiana, L.L.C.
(the "Company") as of December 31, 1998 and 1997, and the related statements of
operations, changes in shareholder's equity, and cash flows for the year ended
December 31, 1998 and the period from inception (October 20, 1997) through
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Sodak Louisiana, L.L.C. as of December 31,
1998 and 1997, and the results of its operations and its cash flows for the
year ended December 31, 1998 and the period from inception (October 20, 1997)
through December 31, 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
November 5, 1999
F-30
<PAGE>
SODAK LOUISIANA, L.L.C.
(wholly owned by Sodak Gaming, Inc.)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Assets
Current Asset:
Cash................................................ $ 1,000 $1,000
Investment in Hollywood Casino Shreveport............ 2,482,000 --
---------- ------
$2,483,000 $1,000
========== ======
Shareholders' Equity
Shareholders' Equity:
Common Stock, 1,000 shares authorized, 1,000 shares
issued and outstanding............................. $ 1,000 $1,000
Additional paid-in capital.......................... 2,500,000 --
Accumulated deficit................................. (18,000) --
---------- ------
$2,483,000 $1,000
========== ======
</TABLE>
The accompanying footnotes to financial statements are an
integral part of these balance sheets.
F-31
<PAGE>
SODAK LOUISIANA, L.L.C.
(wholly owned by Sodak Gaming, Inc.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
Inception
Year Ended (October 20, 1997)
December 31, Through
1998 December 31, 1997
------------ ------------------
<S> <C> <C>
Equity in losses of Hollywood Casino
Shreveport................................... $(18,000) $--
Income tax benefit............................ -- --
-------- ----
Net loss.................................... $(18,000) $--
======== ====
</TABLE>
The accompanying footnotes to financial statements are an
integral part of these balance sheets.
F-32
<PAGE>
SODAK LOUISIANA, L.L.C.
(wholly owned by Sodak Gaming, Inc.)
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
For the Period from Inception (October 20, 1997) through December 31, 1998
<TABLE>
<CAPTION>
Common Stock
------------- Additional Accumulated
Shares Amount Paid-in Capital Deficit
------ ------ --------------- -----------
<S> <C> <C> <C> <C>
Capital contribution.................. 1,000 $1,000 $ -- $ --
----- ------ ---------- --------
Balances, December 31, 1997........... 1,000 1,000 -- --
Capital contribution.................. -- -- 2,500,000 --
Net loss.............................. -- -- -- (18,000)
----- ------ ---------- --------
Balances, December 31, 1998........... 1,000 $1,000 $2,500,000 $(18,000)
===== ====== ========== ========
</TABLE>
The accompanying footnotes to financial statements are an
integral part of these financial statements.
F-33
<PAGE>
SODAK LOUISIANA, L.L.C.
(wholly owned by Sodak Gaming, Inc.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Inception
Year Ended (October 20, 1997)
December 31, Through
1998 December 31, 1997
------------ ------------------
<S> <C> <C>
Operating Activities:
Net loss...................................... $ (18,000) $ --
Adjustments to reconcile net loss to cash
provided by operating activities:
Equity in losses of Hollywood Casino
Shreveport.................................. 18,000 --
----------- ------
Cash provided by operating activities......... -- --
----------- ------
Cash Used in Investing Activities:
Investment in Hollywood Casino Shreveport..... (2,500,000) --
----------- ------
Cash Provided by Financing Activities:
Capital contributions......................... 2,500,000 1,000
----------- ------
Net increase in cash............................ -- 1,000
Cash at beginning of period..................... 1,000 --
----------- ------
Cash at end of period........................... $ 1,000 $1,000
=========== ======
</TABLE>
The accompanying footnotes to financial statements are an
integral part of these financial statements.
F-34
<PAGE>
SODAK LOUISIANA, L.L.C.
(wholly owned by Sodak Gaming, Inc.)
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Business
Sodak Louisiana, L.L.C. ("Sodak") was a Louisiana limited liability company
which, prior to April 23, 1999, was a wholly owned subsidiary of Sodak Gaming,
Inc. Sodak was formed in October 1997 for the purpose of participating in a
joint venture to obtain a license to develop and own a riverboat casino in
Louisiana. In September 1998, Sodak, together with HWCC-Louisiana, Inc.
("HCL"), a Louisiana corporation and wholly owned subsidiary of Hollywood
Casino Corporation ("HCC"), and Shreveport Paddlewheels, L.L.C.
("Paddlewheels"), a Louisiana limited liability company, acquired the interests
of Queen of New Orleans at the Hilton Joint Venture ("QNOV"). QNOV was a
general partnership which owned and operated a riverboat gaming facility in New
Orleans, Louisiana. QNOV ceased operating the riverboat casino in October 1997
having requested and obtained approval from the Louisiana Gaming Control Board
(the "LGCB") to move its licensed site to the city of Shreveport, approximately
180 miles east of Dallas, Texas. Subsequent to receiving approval to relocate
the license, QNOV made the decision not to conduct gaming operations in
Shreveport. The partners of QNOV sought to transfer the license to operate in
Shreveport to another interested party. Under Louisiana gaming regulations, the
license to operate a riverboat gaming operation is not transferrable; however,
the ownership of a license to operate is transferrable, subject to approval of
the LGCB. Accordingly, the acquisition by Sodak, HCL, and Paddlewheels of the
license to operate in Shreveport was structured as an acquisition of the
interests of QNOV's partners. The former partners disposed of QNOV's assets
other than its license to operate and satisfied all but one of its obligations
so that when the former partners withdrew on September 22, 1998 transferring
their interests to Sodak, HCL and Paddlewheels, QNOV's only asset was its
license to operate in Shreveport, its only liability was a $5,000,000
obligation to the City of New Orleans in settlement of certain relocation
claims (see Note 4) and all equity accounts of the former partners were reduced
to a zero balance. Sodak, HCL and Paddlewheels received assignments of
interests from the former partners and obtained the necessary approvals from
the LGCB to proceed with the project in Shreveport. In June 1999, the new
partners obtained approval to change the name of the partnership to Hollywood
Casino Shreveport ("HCS").
As currently planned, the Shreveport resort will consist of a three-level
riverboat casino with approximately 1,370 slot machines and 75 table games; a
405-room, all suite, art deco style hotel; and approximately 42,000 square feet
of restaurant and entertainment facilities.
Riverboat gaming operations in Louisiana are subject to regulatory control by
the LGCB. HCS's current license to operate the Shreveport resort expires on
October 15, 2004.
The accompanying financial statements of Sodak include its 50% interest in
HCS under the equity method of accounting. The net assets of HCS at December
31, 1998 consisted of unexpended cash of $3,734,000 and capitalized project
costs of $1,957,000 net of accounts payable of $726,000. For the period ended
December 31, 1998, HCS expensed $90,000 of preopening costs and earned interest
income of $55,000.
It was originally anticipated that HCS would develop the Shreveport resort
with each of Sodak and HCL having a 50% interest in the development and
subsequent operations. Paddlewheels was to have a residual interest in the
event that the project was ever sold amounting to 10% plus any capital
contributions made by Paddlewheels to HCS. On March 31, 1999, Sodak Gaming,
Inc. entered into a definitive agreement with HCL to sell Sodak to HCL for the
$2,500,000 Sodak had contributed to HCS, with $1,000 to be paid at closing and
the remainder to be paid six months after the opening of the Shreveport resort.
The revised structure of the partnership was approved by the LGCB on April 20,
1999. Accordingly, effective as of April 23, 1999, Sodak became a wholly-owned
subsidiary of HCL. During July 1999, Sodak was merged into HCL.
(2) Summary of Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect the reported amounts of assets and
F-35
<PAGE>
SODAK LOUISIANA, L.L.C.
(wholly owned by Sodak Gaming, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(3) Income Taxes
Sodak was included in the consolidated federal income tax return of Sodak
Gaming, Inc. Pursuant to an agreement between Sodak and Sodak Gaming, Inc.,
Sodak's provision for taxes was based on the amount of tax that would have been
provided had a separate federal income tax return been filed.
Sodak's benefit for income taxes consisted of the following:
<TABLE>
<CAPTION>
Period from
Inception
Year Ended (October 20, 1997)
December 31, Through
1998 December 31, 1997
------------ ------------------
<S> <C> <C>
Deferred benefit:
Federal.................................... $ 3,000 $--
State...................................... 1,000 --
Change in valuation allowance................ (4,000) --
------- ----
$ -- $--
======= ====
</TABLE>
A reconciliation between the calculated tax benefit on losses based on the
statutory rates in effect and the effective tax rates for the year ended
December 31, 1998 and for the period from inception (October 20,1997) through
December 31, 1997 follows:
<TABLE>
<CAPTION>
Period from
Inception
Year Ended (October 20, 1997)
December 31, Through
1998 December 31, 1997
------------ ------------------
<S> <C> <C>
Calculated income tax benefit at statutory
rate..................................... $ 3,000 $--
Change in valuation account............... (3,000) --
------- ----
Tax benefit as shown on statement of
operations............................... $ -- $--
======= ====
</TABLE>
At December 31, 1998, Sodak had a net operating loss carryforward ("NOL")
representing Sodak's only deferred tax asset and totaling approximately $18,000
which does not expire until 2013. Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes", requires that the benefit of such NOL
be recorded as an asset and, to the extent that management can not assess that
the utilization of all or a portion of such deferred tax asset is more likely
than not, a valuation allowance should be recorded. Based on the losses
incurred to date and the lack of any current operating income, management
provided a valuation allowance for the entire deferred tax asset for all
periods presented.
The acquisition of Sodak by HCL could result in a "change in control", as
defined in Section 382 of the Internal Revenue Code of 1986, as amended, which
would limit the ability of HCL to utilize Sodak's NOL.
F-36
<PAGE>
SODAK LOUISIANA, L.L.C.
(wholly owned by Sodak Gaming, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(4) Commitments
As discussed in Note 1, QNOV's partners previously conducted riverboat gaming
operations in New Orleans. When the former partners of QNOV proposed moving to
Shreveport, they negotiated a settlement with the City of New Orleans to pay
$10,000,000 with respect to claims asserted by the City in connection with the
relocation. During September 1998, the partners of HCS, the former partners of
QNOV and the City of New Orleans entered into a Compromise Agreement under
which one of QNOV's former partners agreed to pay $5,000,000 to the City and
QNOV was released from any further relocation claims. As part of the Compromise
Agreement, the partners of HCS agreed to pay the city $5,000,000 contingent
upon securing financing to construct the Shreveport resort. In the event
financing was not obtained, HCS's partners would not be required to make any
payment.
In addition, HCS entered into an agreement with the QNOV partner to
contingently repay the partner $2,000,000 of the amount it paid to the City;
such repayment is to be made upon the earlier of the termination of
construction of the Shreveport resort or in monthly installments of $200,000
commencing with the opening of the Shreveport resort. The resulting contingent
liability in the amount of $2,000,000 was not reflected by HCS at December 31,
1998 as the obligation was not incurred until funding for the project had been
obtained. The liability and associated project costs were recorded at such time
as funding was obtained.
For so long as it remains a joint venture partner in HCS, Paddlewheels will
receive, among other things, an amount equal to 1% of the net revenues, as
defined, of the Shreveport resort in exchange for the assignment by
Paddlewheels of its joint venture interest in HCS to Sodak and HCL.
(5) Supplemental Cash Flow Information
Sodak paid no interest or income taxes during the year ended December 31,
1998 or the period from inception (October 20, 1997) through December 31, 1997.
F-37
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
OF HOLLYWOOD CASINO CORPORATION
The following selected consolidated financial information of Hollywood Casino
Corporation for each of the five years in the period ended December 31, 1999 is
derived from its audited, consolidated financial statements. The financial
information for 1996 and 1995 includes the operating results of Greate Bay
Casino Corporation. On December 31, 1996, Hollywood Casino distributed its
approximate 80% ownership interest in Greate Bay to its stockholders. In 1998,
our results of operations were negatively impacted by a significant increase in
gaming taxes imposed by the Illinois legislature. Gaming taxes incurred by the
Aurora casino increased by $11.6 million in 1998. Holders of our notes will not
have any claims against the net assets of Hollywood Casino.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1999 1998 1997(1) 1996 1995
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues................ $307,377 $268,760 $267,757 $530,580 $539,943
-------- -------- -------- -------- --------
Expenses:
Departmental............... 221,969 197,836 185,753 426,769 396,157
General and
administrative............ 19,239 17,778 16,790 37,169 36,914
Management and consulting
fees...................... 939 1,200 3,927 -- --
Depreciation and
amortization.............. 15,673 16,562 18,901 40,836 40,955
Preopening................. 841 -- -- -- --
Development................ 946 779 1,480 1,065 6,765
Termination of management
and consulting contracts.. 40,389 -- -- -- --
Write down of assets....... 13,322 -- 19,678 22,141 --
-------- -------- -------- -------- --------
Total expenses............ 313,318 234,155 246,529 527,980 480,791
-------- -------- -------- -------- --------
(Loss) income from
operations................. (5,941) 34,605 21,228 2,600 59,152
-------- -------- -------- -------- --------
Non-operating income
(expenses):
Interest income............ 7,868 2,844 1,896 3,101 3,708
Interest expense........... (45,540) (30,260) (30,437) (59,090) (55,558)
Tax settlement costs....... -- (1,087) -- -- --
Equity in losses of
unconsolidated affiliate.. (141) -- -- -- --
(Loss) gain on disposal of
assets.................... (567) (61) 552 (1,841) (514)
-------- -------- -------- -------- --------
Total non-operating
expenses, net............. (38,380) (28,564) (27,989) (57,830) (52,364)
-------- -------- -------- -------- --------
(Loss) income before income
taxes, extraordinary and
other items................ (44,321) 6,041 (6,761) (55,230) 6,788
Income tax provision........ (1,196) (816) (5,359) (63) (268)
-------- -------- -------- -------- --------
(Loss) income before
extraordinary and other
items...................... (45,517) 5,225 (12,120) (55,293) 6,520
Minority interest in
earnings of Limited
Partnership................ (5,801) (6,494) (5,012) -- --
-------- -------- -------- -------- --------
(Loss) income before
extraordinary items........ (51,318) (1,269) (17,132) (55,293) 6,520
Extraordinary items:
Early extinguishment of
debt, net of related tax
benefits(2)............... (30,353) (336) (215) -- (23,808)
-------- -------- -------- -------- --------
Net (loss) income........... $(81,671) $ (1,605) $(17,347) $(55,293) $(17,288)
======== ======== ======== ======== ========
Basic (loss) income per
common share(3):
(Loss) income before
extraordinary items....... $ (2.05) $ (.05) $ (.69) $ (2.24) $ .27
Extraordinary items........ (1.22) (.01) (.01) -- (.97)
-------- -------- -------- -------- --------
Net (loss) income.......... $ (3.27) $ (.06) $ (.70) $ (2.24) $ (.70)
======== ======== ======== ======== ========
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1999 1998 1997(1) 1996 1995
------ ----- ------- ------ -----
(in thousands)
<S> <C> <C> <C> <C> <C>
Diluted (loss) income per common
share(3):
(Loss) income before extraordinary
items.................................. $(2.05) $(.05) $(.69) $(2.24) $ .26
Extraordinary items..................... (1.22) (.01) (.01) -- (.96)
------ ----- ----- ------ -----
Net (loss) income....................... $(3.27) $(.06) $(.70) $(2.24) $(.70)
====== ===== ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
---------------------------------------------
1999 1998 1997(1) 1996(1) 1995
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets................... $525,817 $270,740 $276,218 $308,158 $514,463
Total debt, including capital
lease obligations............. 538,458 227,529 226,922 232,046 496,847
Shareholders' (deficit)
equity........................ (74,157) 7,512 9,117 38,836 (57,233)
</TABLE>
- --------
(1) Restated to reflect the modification of Hollywood Casino's income tax
treatment resulting from its distribution of the common stock of Greate
Bay.
(2) Includes the following items: (i) for 1999, costs associated with the May
1999 issuance of Hollywood Casino's $310,000,000 of 11 1/4% and $50,000,000
of floating rate Senior Secured Notes, (ii) for 1998 and 1997, costs
associated with mandatory semi-annual offers to repurchase Hollywood
Casino's 12 3/4% Senior Secured Notes, net of related tax benefit, and
(iii) for 1995, costs associated with the October 1995 issuance of
Hollywood Casino's 12 3/4% Senior Secured Notes.
(3) During 1997, Hollywood Casino adopted the provisions of Financial
Accounting Standards No. 128, "Earnings per Share." The earnings per share
calculation has been restated for all prior periods presented.
S-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must
not rely on any unauthorized information. This prospectus does not offer to
sell or buy any securities in any jurisdiction where it is unlawful. The
information in this prospectus is current as of the date hereof.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 23
Capitalization........................................................... 24
Selected Financial Information........................................... 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 28
Business................................................................. 34
Management............................................................... 52
Security Ownership of Certain Beneficial Owners and Management........... 60
Certain Relationships and Related Transactions........................... 61
Description of the Exchange Offer........................................ 62
Description of the Registered Notes...................................... 70
United States Federal Income Tax Consequences............................ 120
Plan of Distribution..................................................... 120
Legal Matters............................................................ 121
Experts.................................................................. 121
Where You Can Find More Information...................................... 121
Index to Financial Statements............................................ F-1
Selected Consolidated Financial Information of Hollywood Casino
Corporation............................................................. S-1
</TABLE>
Until , 2000, all dealers effecting transactions in the registered notes,
whether or not participating in this distribution may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[HOLLYWOOD SHREVEPORT LOGO APPEARS HERE]
Hollywood Casino Shreveport
Shreveport Capital Corporation
Offer to Exchange all Outstanding
Original 13% First Mortgage Notes due 2006
for
Registered 13% First Mortgage Notes due 2006
-------------------------
PROSPECTUS
-------------------------
, 2000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers.
Hollywood Casino Shreveport
Not applicable.
Shreveport Capital Corporation
Shreveport Capital Corporation ("Shreveport Capital") is incorporated under
the laws of the State of Louisiana. Section 83 of the Louisiana Business
Corporation Law (the "LBCL") provides that a Louisiana corporation may
indemnify any person against whom an action, suit or proceeding is brought or
threatened (by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or agent of another business, corporation,
partnership or other enterprise) against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any 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. In
the case of actions by or in the right of the corporation, the indemnity is
limited to expenses (including attorneys' fees and amounts paid in settlement
not exceeding, in the judgment of the board of directors, the estimated amount
expenses of litigating the action to conclusion) actually and reasonably
incurred in connection with a defense or settlement; provided that no indemnity
may be made in respect of any matter in which the person shall have been
adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable for willful or intentional misconduct in performance of
his duty to the corporation, unless and only to the extent that the court
determines upon application that such person is fairly and reasonably entitled
to such indemnity.
To the extent a person has been successful on the merits or otherwise in
defense of any action, suit or proceeding or in defense of any claim, issue or
matter therein, the statute provides that he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith. Section 83 also provides for, among other things,
procedures for indemnification, advancement of expenses, non-exclusivity of the
provisions of Section 83 with respect to indemnification and advancement of
expenses, and insurance (including self-insurance) with respect to liabilities
incurred by directors, officers and others.
Section 24(C)(4) of the LBCL provides that a corporation may eliminate or
limit the liability of a director or officer to the corporation or its
shareholders for monetary damages for breach of fiduciary duty, except for
liability (i) for breach of any of the director's or officer's duty of loyalty
to the corporation or its shareholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) under Section 92(D) of the LBCL (relating to unlawful dividends and
unlawful stock repurchases and redemptions); and (iv) for any transaction from
which the director or officer derived an improper personal benefit.
Shreveport Capital's Articles of Incorporation and Bylaws provide for the
indemnification of directors and officers of Shreveport Capital to the fullest
extent permitted by law. In addition, the Bylaws provide for the
indemnification of expenses actually and reasonably incurred by (i) a director
or officer of any subsidiary of Shreveport Capital, (ii) a fiduciary with
respect to any employee benefit plan of Shreveport Capital, or (iii) a
director, officer, partner, employee or agent of another corporation,
partnership, joint venture, trust or other for-profit or non-profit entity or
enterprise, if such position is or was held at the request of Shreveport
Capital.
The above discussion of the Articles of Incorporation and Bylaws of
Shreveport Capital and of Sections 83 and 24(C)(4) of the LBCL is not intended
to be exhaustive and is qualified in its entirety by the Articles of
Incorporation and Bylaws of Shreveport Capital and the LBCL.
II-1
<PAGE>
HWCC-Louisiana, Inc.
The Bylaws of HWCC-Louisiana, Inc., a Louisiana corporation ("HWCC-
Louisiana"), provide for indemnification of directors and officers to the
fullest extent permitted by the LBCL, as it currently exists or may hereafter
be amended. In addition, the Bylaws provide for the indemnification of expenses
actually and reasonably incurred by a director, officer, partner, employee or
agent of another business, nonprofit or foreign corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, if such position is or was held at the request of HWCC-
Louisiana.
The above discussion of the Bylaws of HWCC-Louisiana and of Sections 83 and
24(C)(4) of the LBCL is not intended to be exhaustive and is qualified in its
entirety by the Bylaws of HWCC-Louisiana and the LBCL.
HCS I, Inc.
The Articles of Incorporation and Bylaws of HCS I, Inc., a Louisiana
corporation ("HCS I"), provide for the indemnification of directors and
officers of HCS I to the fullest extent permitted by law. In addition, the
Bylaws provide for the indemnification of expenses actually and reasonably
incurred by (i) a director or officer of any subsidiary of HCS I, (ii) a
fiduciary with respect to any employee benefit plan of HCS I, or (iii) a
director, officer, partner, employee or agent of another corporation,
partnership, joint venture, trust or other for-profit or non-profit entity or
enterprise, if such position is or was held at the request of HCS I.
The above discussion of the Articles of Incorporation and Bylaws of HCS I and
of Sections 83 and 24(C)(4) of the LBCL is not intended to be exhaustive and is
qualified in its entirety by the Articles of Incorporation and Bylaws of HCS I
and the LBCL.
HCS II, Inc.
The Articles of Incorporation and Bylaws of HCS II, Inc., a Louisiana
corporation ("HCS II"), provide for the indemnification of directors and
officers of HCS II to the fullest extent permitted by law. In addition, the
Bylaws provide for the indemnification of expenses actually and reasonably
incurred by (i) a director or officer of any subsidiary of HCS II, (ii) a
fiduciary with respect to any employee benefit plan of HCS II, or (iii) a
director, officer, partner, employee or agent of another corporation,
partnership, joint venture, trust or other for-profit or non-profit entity or
enterprise, if such position is or was held at the request of HCS II.
The above discussion of the Articles of Incorporation and Bylaws of HCS II
and of Sections 83 and 24(C)(4) of the LBCL is not intended to be exhaustive
and is qualified in its entirety by the Articles of Incorporation and Bylaws of
HCS II and the LBCL.
ITEM 21. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
3.1 --Third Amended and Restated Joint Venture Agreement of Hollywood
Casino Shreveport by and among Shreveport Paddlewheels, L.L.C.,
HCS I, Inc. and HCS II, Inc., dated as of July 21, 1999.+
3.2 --August 1999 Amendment to Third Amended and Restated Joint
Venture Agreement between Shreveport Paddlewheels, L.L.C., HCS I,
Inc. and HCS II, Inc.+
3.3 --Articles of Incorporation of Shreveport Capital Corporation.+
3.4 --Bylaws of Shreveport Capital Corporation.+
3.5 --Articles of Incorporation of HWCC-Louisiana, Inc., as amended.+
3.6 --Bylaws of Hollywood Casino--Lake Charles, Inc. (now known as
HWCC-Louisiana, Inc.).+
3.7 --Articles of Incorporation of HCS I, Inc.+
3.8 --Bylaws of HCS I, Inc.+
3.9 --Articles of Incorporation of HCS II, Inc.+
3.10 --Bylaws of HCS II, Inc.+
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
4.1 --Indenture among Hollywood Casino Shreveport and Shreveport
Capital Corporation as Co-Issuers, and HWCC-Louisiana, Inc., HCS
I, Inc. and HCS II, Inc., as Guarantors, and State Street Bank
and Trust Company, as Trustee, dated as of August 10, 1999.+
4.2 --Registration Rights Agreement, dated as of August 10, 1999, by
and among Hollywood Casino Shreveport, Shreveport Capital
Corporation, the Guarantors named therein and the Initial
Purchasers.+
4.3 --Collateral Assignment of Contracts and Documents dated August
10, 1999 between Hollywood Casino Shreveport and State Street
Bank and Trust Company, as Trustee.+
4.4 --Security Agreement dated August 10, 1999 between Hollywood
Casino Shreveport and State Street Bank and Trust Company, as
Trustee.+
4.5 --Partnership Interest Pledge Agreement dated August 10, 1999 made
by HCS I, Inc. in favor of State Street Bank and Trust Company,
as Trustee and Secured Party.+
4.6 --Cash Collateral and Disbursement Agreement dated August 10, 1999
between Hollywood Casino Shreveport, Shreveport Capital
Corporation, First American Title Insurance Company, as
Disbursement Agent and State Street Bank and Trust Company, as
Trustee.+
4.7 --Stock Pledge Agreement dated August 10, 1999 made by HWCC-
Louisiana, Inc. in favor of State Street Bank and Trust Company,
as Trustee.+
4.8 --Security Agreement dated August 10, 1999 made by Shreveport
Capital Corporation, HWCC-Louisiana, Inc., HCS I, Inc. and HCS
II, Inc. to State Street Bank and Trust Company, as Trustee and
Secured Party.+
4.9 --Security Agreement--Vessel Construction dated August 10, 1999
between Hollywood Casino Shreveport and State Street Bank and
Trust Company, as Trustee.+
4.10 --Mortgage, Leasehold Mortgage and Assignment of Leases and Rents
made by Hollywood Casino Shreveport in favor of State Street
Bank and Trust Company, as Mortgagee, dated August 10, 1999.+
4.11 --Partnership Interest Pledge Agreement dated August 10, 1999 made
by HCS II, Inc. in favor of State Street Bank and Trust Company,
as Trustee and Secured Party.+
4.12 --First Amendment to Security Agreement dated August 10, 1999
between HWCC-Shreveport, Inc. and State Street Bank and Trust
Company, as Trustee.+
4.13 --First Amendment to Cash Collateral and Disbursement Agreement
dated January 1, 2000 among Shreveport Capital Corporation,
Hollywood Casino Shreveport, First American Title Insurance
Company, as Disbursement Agent and State Street Bank and Trust
Company, as Trustee.*
5.1 --Opinion of Weil, Gotshal & Manges LLP.+
8.1 --Opinion of Weil, Gotshal & Manges LLP.+
10.1 --Membership Interest Purchase Agreement, dated as of March 31,
1999, by and among HWCC-Louisiana, Inc., Sodak Gaming, Inc. and
Sodak Louisiana, L.L.C.(1)
10.2 --Completion Capital Agreement, dated as of August 10, 1999, by
and among Hollywood Casino Shreveport, HWCC-Louisiana, Inc., HCS
I, Inc., HCS II, Inc. and Hollywood Casino Corporation.(2)
10.3 --Manager Subordination Agreement, dated as of August 10, 1999, by
and among State Street Bank and Trust Company, as trustee, HWCC-
Shreveport, Inc. and Hollywood Casino Shreveport.(2)
10.4 --Management Services Agreement, dated as of September 22, 1998,
by and between QNOV and HWCC-Shreveport, Inc.(3)
10.5 --Amendment to Management Services Agreement, dated as of August
2, 1999, by and between Hollywood Casino Shreveport (formerly
QNOV) and HWCC-Shreveport, Inc.(3)
10.6 --Technical Services Agreement, dated as of September 22, 1998, by
and between QNOV and
HWCC-Shreveport, Inc.+
10.7 --Vessel Construction Contract, dated July 16, 1999, by and
between Leevac Shipyards, Inc. and Hollywood Casino Shreveport.+
10.8 --Employment Agreement, dated August 4, 1999, by and between HWCC
Development Corporation and Juris Basens.+
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.9 --Assignment and Assumption Agreement, dated September 1, 1999, by
and between HWCC Development Corporation and Hollywood Casino
Shreveport.+
10.10 --Compromise Agreement, dated September 15, 1998, by and among
Hilton New Orleans Corporation, New Orleans Paddlewheels, Inc.,
Queen of New Orleans at the Hilton Joint Venture and the City of
New Orleans.+
10.11 --Loan and Settlement Agreement, dated January 16, 1998, by and
among New Orleans Paddlewheels, Inc., Shreveport Paddlewheels,
L.L.C., HWCC-Louisiana, Inc., Sodak Louisiana L.L.C. and Hilton
New Orleans Corporation.+
10.12 --Retail Space Lease, executed as of June 3, 1999 by and between
QNOV and Red River Entertainment Company, L.L.C.+
10.13 --Ground Lease, dated May 19, 1999, by and between the City of
Shreveport, Louisiana and QNOV.+
10.14 --License Agreement, dated August 10, 1999, by and between
Hollywood Casino Corporation and Hollywood Casino Shreveport.+
10.15 --Construction Agreement, dated July 30, 1999, by and between
Hollywood Casino Shreveport and Broadmoor Anderson.+
10.16 --Amended and Restated Federal Income Tax Sharing Agreement dated
August 10, 1999 among Hollywood Casino Corporation, HWCC
Development Corporation, Hollywood Management, Inc., HWCC-
Tunica, Inc., HWCC-Golf Course Partners, Inc., Hollywood Casino-
Aurora, Inc., HWCC-Shreveport, Inc., HWCC-Argentina, Inc., HWCC-
Louisiana, Inc., HWCC-Holdings, Inc., HWCC-Aurora Management,
Inc., HWCC-Transportation, Inc., HCS I, Inc. and HCS II, Inc.+
10.17 --Marine Services Agreement dated September 22, 1998 between QNOV
and Shreveport Paddlewheels, L.L.C.+
10.18 --Side Agreement dated January 16, 1998 between Queen of New
Orleans at the Hilton Joint Venture, HWCC-Louisiana, Inc. and
Sodak Louisiana, L.L.C.+
10.19 --Loan Agreement dated August 10, 1999 between Shreveport
Paddlewheels, L.L.C. and HWCC-Louisiana, Inc.+
10.20 --Promissory Note dated August 10, 1999 in the original principal
amount of $1,000,000 made by Shreveport Paddlewheels, L.L.C., as
Borrower to HWCC-Louisiana, Inc., as Lender.+
10.21 --Security Agreement dated August 10, 1999 made by Shreveport
Paddlewheels, L.L.C., as Debtor, in favor of HWCC-Louisiana,
Inc., as Secured Party.+
10.22 --Guaranty Agreement dated August 10, 1999 made by New Orleans
Paddlewheels, L.L.C. in favor of HWCC-Louisiana, Inc.+
10.23 --Amended and Restated Assignment of Joint Venture Agreement dated
September 22, 1998 between Sodak Louisiana, L.L.C., HWCC-
Louisiana, Inc., New Orleans Paddlewheels, Inc. and Shreveport
Paddlewheels, L.L.C.+
10.24 --Contribution and Assumption Agreement dated July 21, 1999 among
HWCC-Louisiana, Inc., HCS I, Inc., HCS II, Inc. and Shreveport
Paddlwwheels, L.L.C.+
10.25 --First Amendment to Vessel Construction Contract, effective as of
September 1, 1999 between Hollywood Casino Shreveport and Leevac
Shipyards, Inc.*
10.26 --First Amendment to Supplementary Conditions to General
Conditions of the Owner-Contractor Agreement dated December 10,
1999 between Hollywood Casino Shreveport and Broadmoor
Anderson.*
10.27 --Form of Participation Agreement and related agreements among
Hollywood Casino Shreveport, First Security Bank, National
Association, the several lenders party thereto, First Security
Trust Company of Nevada, as Administrative Agent, and Bank of
America, National Association, as Arranger and Documentation
Agent.*
21.2 --Subsidiaries of HWCC-Louisiana, Inc.+
21.3 --Subsidiaries of HCS I, Inc.+
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
21.4 --Subsidiaries of HCS II, Inc.+
23.1 --Consent of Deloitte & Touche LLP.*
23.2 --Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1).
25.1 --Statement of Eligibility and Qualification of State Street Bank
and Trust Company, as trustee under the Indenture listed in
Exhibit 4.1 hereto on Form T-1.+
27.1 --Financial Data Schedule--Hollywood Casino Shreveport.*
27.2 --Financial Data Schedule--HWCC-Louisiana, Inc.*
99.1 --Form of Letter of Transmittal.+
99.2 --Form of Notice of Guaranteed Delivery.+
</TABLE>
- --------
*Filed herewith.
+Previously filed.
++To be filed by amendment.
(1) Incorporated by reference to the exhibits filed in Hollywood Casino
Corporation's Annual Report on Form 10-K for the year ended December 31,
1998 as filed on April 15, 1999.
(2) Incorporated by reference to the exhibits filed in Form S-4 Registration
Statement (Registration 333-83081) for Hollywood Casino Corporation as
filed with the SEC on August 13, 1999.
(3) Incorporated by reference to the exhibits filed in Hollywood Casino
Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30,
1999 as filed with the SEC on August 16, 1999.
(b) Financial Statement Schedules:
All schedules have been omitted since the required information is either
not present or not in amounts sufficient to require submission of the
schedule, or because the information required is included in the
consolidated financial statements or notes thereof.
ITEM 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.
(3) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Co-Registrants' annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the 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.
(4) 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 under
Item 20 above, or otherwise, the Co-Registrants have been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Co-Registrants of expense incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suite or proceeding) is asserted against the registrant 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 Act
and will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on April 18, 2000.
HOLLYWOOD CASINO SHREVEPORT
By: HCS I, INC.
/s/ Paul C. Yates
By: ______________________________
Paul C. Yates
Executive Vice President,
Chief Financial Officer,
Treasurer and Assistant
Secretary
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
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer April 18, 2000
______________________________________ and Chairman of the Board
Jack E. Pratt of Directors
* Vice Chairman of the Board April 18, 2000
______________________________________ of Directors
Edward T. Pratt, Jr.
* Executive Vice President, April 18, 2000
______________________________________ Secretary, General
William D. Pratt Counsel and Director
* President April 18, 2000
______________________________________
Edward T. Pratt III
/s/ Paul C. Yates Executive Vice President, April 18, 2000
______________________________________ Chief Financial Officer,
Paul C. Yates Treasurer and Assistant
Secretary
* Vice President and April 18, 2000
______________________________________ Assistant Secretary
Charles F. LaFrano III
</TABLE>
/s/ Paul C. Yates
*By: ____________________________
Paul C. Yates
Attorney-in-fact
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on April 18, 2000.
SHREVEPORT CAPITAL CORPORATION
/s/ Paul C. Yates
By: _________________________________
Paul C. Yates
Executive Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
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
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer April 18, 2000
______________________________________ and Chairman of the Board
Jack E. Pratt of Directors
* Vice Chairman of the Board April 18, 2000
______________________________________ of Directors
Edward T. Pratt, Jr.
* Executive Vice President, April 18, 2000
______________________________________ Secretary, General
William D. Pratt Counsel and Director
* President April 18, 2000
______________________________________
Edward T. Pratt III
/s/ Paul C. Yates Executive Vice President, April 18, 2000
______________________________________ Chief Financial Officer,
Paul C. Yates Treasurer and Assistant
Secretary
* Vice President and April 18, 2000
______________________________________ Assistant Secretary
Charles F. LaFrano III
</TABLE>
/s/ Paul C. Yates
*By: ____________________________
Paul C. Yates
Attorney-in-fact
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on April 18, 2000.
HCS I, INC.
/s/ Paul C. Yates
By: _________________________________
Paul C. Yates
Executive Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
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
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer April 18, 2000
______________________________________ and Chairman of the
Jack E. Pratt Board of Directors
* Vice Chairman of the April 18, 2000
______________________________________ Board of Directors
Edward T. Pratt, Jr.
* Executive Vice President, April 18, 2000
______________________________________ Secretary, General
William D. Pratt Counsel and Director
* President April 18, 2000
______________________________________
Edward T. Pratt III
/s/ Paul C. Yates Executive Vice President, April 18, 2000
______________________________________ Chief Financial Officer,
Paul C. Yates Treasurer and Assistant
Secretary
* Vice President and April 18, 2000
______________________________________ Assistant Secretary
Charles F. LaFrano III
</TABLE>
/s/ Paul C. Yates
*By: ____________________________
Paul C. Yates
Attorney-in-fact
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on April 18, 2000.
HCS II, INC.
/s/ Paul C. Yates
By: _________________________________
Paul C. Yates
Executive Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
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
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer April 18, 2000
______________________________________ and Chairman of the
Jack E. Pratt Board of Directors
* Vice Chairman of the April 18, 2000
______________________________________ Board of Directors
Edward T. Pratt, Jr.
* Executive Vice President, April 18, 2000
______________________________________ Secretary, General
William D. Pratt Counsel and Director
* President April 18, 2000
______________________________________
Edward T. Pratt III
/s/ Paul C. Yates Executive Vice President, April 18, 2000
______________________________________ Chief Financial Officer,
Paul C. Yates Treasurer and Assistant
Secretary
* Vice President and April 18, 2000
______________________________________ Assistant Secretary
Charles F. LaFrano III
</TABLE>
/s/ Paul C. Yates
*By: ____________________________
Paul C. Yates
Attorney-in-fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on April 18, 2000.
HWCC-LOUISIANA, INC.
/s/ Paul C. Yates
By: _________________________________
Paul C. Yates
Executive Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
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
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer April 18, 2000
______________________________________ and Chairman of the
Jack E. Pratt Board of Directors
* Vice Chairman of the April 18, 2000
______________________________________ Board of Directors
Edward T. Pratt, Jr.
* Executive Vice President, April 18, 2000
______________________________________ Secretary, General
William D. Pratt Counsel and Director
* President April 18, 2000
______________________________________
Edward T. Pratt III
/s/ Paul C. Yates Executive Vice President, April 18, 2000
______________________________________ Chief Financial Officer,
Paul C. Yates Treasurer and Assistant
Secretary
* Vice President and April 18, 2000
______________________________________ Assistant Secretary
Charles F. LaFrano III
</TABLE>
/s/ Paul C. Yates
*By: ____________________________
Paul C. Yates
Attorney-in-fact
II-10
<PAGE>
EXHIBIT 4.13
FIRST AMENDMENT TO CASH COLLATERAL AND
DISBURSEMENT AGREEMENT
----------------------
THIS FIRST AMENDMENT TO CASH COLLATERAL AND DISBURSEMENT AGREEMENT (this
"Amendment") is made and entered into as of the 1st day of January, 2000, to be
effective for all purposes as of August 10, 1999 (the "Effective Date"), by and
among SHREVEPORT CAPITAL CORPORATION, HOLLYWOOD CASINO SHREVEPORT, FIRST
AMERICAN TITLE INSURANCE COMPANY and STATE STREET BANK AND TRUST COMPANY.
RECITALS
--------
WHEREAS, the parties previously have entered a Cash Collateral and
Disbursement Agreement dated August 10, 1999 (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as set forth in this
Amendment;
AGREEMENT
---------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Amendment to Section 5. Effective as of the Effective Date, Section 5
----------------------
of the Agreement is hereby amended by deleting the reference to
"September 1, 1999" in the first sentence thereof and replacing it with
a reference to "February 1, 2000".
2. Choice of Law. The existence, validity, construction, operation and
-------------
effect of any and all terms and provisions of this Amendment shall be
determined in accordance with and governed by the laws of the State of
New York.
3. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
[The remainder of this page is intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
SHREVEPORT CAPITAL CORPORATION
By: /s/ Paul C. Yates
-------------------------------------
Name: Paul C. Yates
Title: Executive Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
HOLLYWOOD CASINO SHREVEPORT
By: HCS I, Inc., its managing general
partner
By: /s/ Paul C. Yates
-----------------------------
Name: Paul C. Yates
Title: Executive Vice President,
Chief Financial Officer,
Treasurer and Assistant
Secretary
FIRST AMERICAN TITLE INSURANCE COMPANY
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
STATE STREET BANK AND TRUST COMPANY
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
<PAGE>
EXHIBIT 10.25
FIRST AMENDMENT TO VESSEL CONSTRUCTION CONTRACT
by and between
HOLLYWOOD CASINO SHREVEPORT, Owner
and
LEEVAC SHIPYARDS, INC., Builder
THIS FIRST AMENDMENT TO VESSEL CONSTRUCTION CONTRACT, entered into
effective as of the 1st day of September, 1999, shall modify, delete from and
add and replace by substitution, Article 9 of the Vessel Construction Contract,
which Article 9 shall read as follows:
"Article 9 - Risks and Insurance
---------
9.1 BUILDER'S RISK AND LIABILITY INSURANCE
9.1.1 Until Delivery and Acceptance of the Vessel, Owner shall, at
its own expense, insure the Vessel and all Materials,
Components and equipment to be use therein, and the Owner
furnished Materials, Components and equipment from time to
time delivered to either of the Shipyards. The amount of
insurance, shall be at least equal to the Contract Sum plus
the value of all Owner furnished Materials, Components and
equipment.
The Builder and all specified OCIP non-enrolled
Subcontractors and sub-Subcontractors shall purchase and
maintain insurance covering the type of claims set forth
below which may arise out of or result from the Builder's
operations under the Contract, whether such operations be by
Builder or by any non-enrolled Subcontractor or sub-
Subcontractor or by anyone directly or indirectly employed by
any of them or by anyone for whose acts any of them may be
liable:
9.1.1.1 Claims under workers' or Worker's Compensation,
disability benefit and other similar employee benefit
acts which are applicable to the Work to be
performed.
9.1.1.2 Claims for damages because of bodily injury,
occupational sickness or disease, or death of the
Builder's employees.
9.1.1.3 Claims for damages because of bodily injury, sickness
or disease, or death of any person other than the
Builder's employees.
<PAGE>
9.1.1.4 Claims for damages insured by usual personal injury
liability coverage which are sustained (1) by a
person as a result of an offense directly or
indirectly related to employment of such person by
the Builder, or (2) by another person.
9.1.1.5 Claims for damages, other than to the Work itself,
because of injury to or destruction of tangible
property including loss of use resulting therefrom.
9.1.1.6 Claims for damages because of bodily injury, death of
a person or property damage arising out of ownership,
maintenance or use of a motor vehicle.
9.1.1.7 Claims involving contractual liability insurance
applicable to the Builder's obligations under Article
21.
9.1.1.8 Claims involving damage to the Work itself.
9.1.2. All insurance policies obtained by Builder pursuant to its
obligations under this Article 9, shall contain waivers of
subrogation in favor of the Owner and Owner's Indemnitees,
and in the event that Owner obtains financing, any lender or
lenders, all without liability for the payment of any premium
and shall name Owner, Owner's Indemnitees and Owner's lender
or lenders as additional assureds.
9.1.3 The insurance required by this Article 9 hereof shall include
the following types and amounts of insurance.
9.1.3.1 Builder's Risk
Until the Vessel has been completed, physically
delivered and Delivery and Acceptance by Owner has
occurred, the Vessel and all Materials, Components,
outfitting, equipment, and appliances to be installed
in the Vessel, including all Materials, Components,
outfitting, equipment and appliances provided by
Owner and delivered to any of the Shipyards for and
to be used in the construction thereof, shall be
declared under the Builder's Risk Policy in force and
effect at the time the Vessel's keel or bottom plate
is laid, with an assigned value equal to the Contract
Sum plus the value of all such Owner furnished
Materials, Components and equipment.
Such Builder's Risk Policy shall be on a form
substantially similar to AIG's all risk form
including hull and machinery and Protection and
-2-
<PAGE>
Indemnity with limits of $25,000,000, including
United States Longshoreman and Harbor Workers and
Jones Act with a deductible not greater than $25,000,
including movement of the Work between the Shipyards
and the Site Delivery Point.
Builder and its Subcontractors shall be named as
additional assureds under the Builder's Risk Policy,
with waivers of subrogation. The Builder's Risk
Policy shall not provide coverage to Builder's or
Subcontractors' machinery, tools or equipment.
Any loss insured under Owner's Builder's Risk Policy
or any other property insurance shall be adjusted by
Owner as fiduciary and made payable to Owner as
fiduciary for any insured thereunder, as their
interests appear. Any dispute as to Owner's
adjustment or intended payment shall be resolved in
accordance with Article 22.
9.1.3.2 Other Insurance
The Builder shall be responsible for initiating,
maintaining and supervising all safety precautions
and programs in connection with the performance of
the Contract.
Builder shall also purchase and maintain, at its
expense, during the performance of Builder's
obligation under the Contact, Workmen's Compensation
Insurance, at statutory amounts, with Longshoreman &
Harbor Workers Compensation Act coverage endorsement,
Employer's Liability Insurance in the amount of at
least One Million ($1,000,000) Dollars and Commercial
General Liability Insurance against property damage,
death, personal injury and maintain completed
operations coverage, in the amount of not less than
One Million ($1,000,000) Dollars per occurrence,
endorsed to provide specific coverage for the
Builder's obligations to Owner under the Contract,
including but not limited to those under Article 21
of the Agreement and any "watercraft exclusion" for
non-owned vessels deleted.
All OCIP non-enrolled Subcontractors and sub-
Subcontractors shall also purchase and maintain, at
their expense, during the performance of Builder's
obligation under the Contract, Workmen's Compensation
Insurance, at statutory amounts, with Longshoreman &
Harbor Workers Compensation Act coverage endorsement,
Employer's Liability Insurance in the amount of at
least One Million ($1,000,000) Dollars and Commercial
General Liability Insurance against property damage,
death, personal injury and completed operations
coverage in
-3-
<PAGE>
the amount of not less than One Million ($1,000,000)
Dollars per occurrence, endorsed to provide specific
coverage for the Builder's obligations to Owner under
the contract, including but not limited to those
under Article 21 of the Agreement and any "watercraft
exclusion" for non-owned vessels deleted.
Additionally, Builder shall purchase and maintain at
its expense, during the performance of the Contract
the following:
(i) Protection and Indemnity Insurance only as to
Builder's vessels, including Jones Act
coverage, with a limit of no less than One
Million ($1,000,000) Dollars;
(j) Automobile Liability Insurance covering the use
of all owned, non-owned and hired vehicles with
bodily injury and property limit of no less
than One Million ($1,000,000) Dollars;
(k) Pollution Liability Insurance with a limit of
no less than Five Million ($5,000,000); and
(l) Umbrella Liability coverage with a limit of not
less than Fifty Million ($50,000,000) Dollars
excess over and above the primary insurance
limits stated above. All umbrella coverage will
include blanket contractual liability - all
written and oral contracts; premises operations
liability; explosion, collapse; personal injury
liability; independent contractors coverage;
broad form property damage liability; cross-
liability coverage and products and operations
coverage with watercraft exclusion removed.
Additionally, all OCIP non-enrolled Subcontractors and sub-
Subcontractors shall purchase and maintain at their expense,
during the performance of the Contract the following:
(a) If furnishing any vessel, Protection and
Indemnity Insurance, including Jones Act
coverage, with a limit of no less than One
Million ($1,000,000) Dollars; and
(b) Automobile Liability Insurance covering the use
of all owned, non-owned and hired vehicles with
a bodily injury and property limit of no less
than One Million ($1,000,000) Dollars.
9.1.3.3 Insurers' Form and Proof
-4-
<PAGE>
(a) Certificates of Insurance acceptable to Owner
shall be delivered to Owner prior to the
commencement of the Work. These Certificates
and the insurance policies required by this
Article 9 shall contain a provision that the
coverages afforded under the policies will not
be canceled or allowed to expire until at least
thirty (30) days written notice has been given
to the Owner. If any of the foregoing insurance
coverages are required to remain in force after
final payment and are reasonably available, an
additional certificate evidencing continuation
of such coverage shall be submitted.
Information concerning reduction of coverage
shall be furnished by the Builder with
reasonable promptness.
(b) The Owner and the Builder shall cooperate in
connection with the collection of any insurance
monies that may be due in the event of loss and
the Owner the Builder shall execute and deliver
such proofs of loss and other instruments which
may be required for the purpose of obtaining
recovery of any such insurance monies.
9.1.3.4 OCIP non-enrolled Subcontractor Insurance
Builder shall additionally require that (a) OCIP non-
enrolled Subcontractors and sub-Subcontractors whose
contracts are valued at Two Million ($2,000,000)
Dollars or more carry commercial general liability
insurance in the amount of Five Million ($5,000,000)
Dollars and (b) OCIP non-enrolled Subcontractors and
sub-Subcontractors whose contracts are valued at less
than Two Million ($2,000,000) Dollars carry no less
than One Million ($1,000,000) in commercial general
liability insurance.
9.1.3.5 Maintenance of insurance by the Builder as specified
in this Article 9 shall in no way be interpreted as
relieving the Builder of any responsibility whatever
and the Builder may carry, at his own expense, such
additional insurance as it deems necessary.
9.2 PERFORMANCE BOND AND PAYMENT BOND
9.2.1 Within three (3) business days after Owner's receipt of the
proceeds of the financing necessary to construct its
riverboat casino complex in Shreveport, Builder shall deliver
to Owner a payment and performance bond of a surety company
licensed to do business in the State of Louisiana,
conditioned on completion of the Work in accordance with the
Contract, free and clear of all
-5-
<PAGE>
mechanics and other liens. Such bond shall be written to 100%
of the Contract Sum, executed on a form and by such company,
as Owner shall approve. The cost of the bond shall be
included in the Contract Sum. The Builder shall furnish the
bond to Owner. Upon the request of any person or entity
appearing to be a potential beneficiary of such bond, the
Builder shall promptly furnish a copy of the bond or permit a
copy to be made.
9.3 Notwithstanding any of the provisions of this Agreement with respect
to any contractual obligation of the Builder and any Subcontractor or
sub-Subcontractor to provide insurance on behalf of Owner, any other
insurance maintained by Owner shall be excess and non-contributing
with such insurance required by Builder and any Subcontractor.
9.4 Owner has determined that a prearranged owner controlled insurance
program (an "OCIP") covering certain enrolled Subcontractors and sub-
Subcontractors will be most efficient. In connection therewith, the
Owner, at its cost and expense, shall provide an OCIP covering such
enrolled Subcontractors and sub-Subcontractors. Such OCIP shall
afford coverage no less than that required by the Contract Documents,
unless the Builder consents to a lesser coverage, which consent shall
not be unreasonably withheld, conditioned or delayed. Builder shall
deduct from the Contract Sum, and the Contract Sum will thereby be
reduced by, the cost of insurance required of each OCIP enrolled
Subcontractor and sub-Subcontractor (the "Insurance Deduction"). In
consideration for Builder's agreement to an OCIP, Owner agrees to pay
to Builder an amount equal to twenty-five percent (25%) of the
difference between the premium paid by Owner for the OCIP and the
Insurance Deduction (the "Builder's Share of Insurance Savings").
Such payment shall be made by Owner to Builder within thirty (30)
days from the date that the Builder's Share of Insurance Savings is
determined and agreed upon by Owner and Builder.
9.5. All insurance specified in this Article 9 shall be limited in scope,
coverage and amount to the liabilities and risk specifically assigned
and assumed by each party and, where applicable, the "additional
assureds" and "waiver of subrogation" endorsements shall be subject
to, limited by and shall afford no coverage greater than that
required by the indemnification contained in Article 21.
9.6 OCIP enrolled Subcontractors and sub-Subcontractors will be those
generating payroll at the Bossier/Shreveport sites and Builder's
Shipyards in Jennings, Louisiana, and Orange, Texas. OCIP enrolled
Subcontractors and sub-Subcontractors will need to identify their
insurance costs for the above coverage via insurance worksheet and
instructions provided in the pre-bid booklet. Their contracts, and
the Contract Sum, will be reduced by the agreed upon insurance cost.
An average rate will be developed and used to compute the Insurance
Deduction. If an adjustment to the Insurance Deduction is necessary
because of a change such as increased payroll, such an adjustment
will be made prior to final payment to the
-6-
<PAGE>
Builder . OCIP enrolled Subcontractors and sub-Subcontractors are
responsible for providing proof of automobile liability for owned,
hired, and non-owned vehicles for a limit of One Million ($1,000,000)
Dollars. OCIP enrolled Subcontractors and sub-Subcontractors must
also provide evidence of off site Workers Compensation insurance at
statutory limits and, General Liability insurance in an amount of not
less than One Million ($1,000,000) Dollars."
All other provisions of the Vessel Construction Contract shall remain in full
force and effect as written.
Owner and Builder acknowledge and agree that this First Amendment to Vessel
Construction Contract is subject to the review and approval of the Louisiana
Authorities.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Vessel Construction Contract to be executed by their proper authorized
representative, thereunto duly authorized.
LEEVAC SHIPYARDS, INC.
Name:
-----------------------------
Title:
-----------------------------
Date:
-----------------------------
HOLLYWOOD CASINO SHREVEPORT,
A LOUISIANA PARTNERSHIP
BY: HCS I, INC., its Managing General Partner
Name:
----------------------------------
Title:
----------------------------------
Date:
----------------------------------
-7-
<PAGE>
EXHIBIT 10.26
FIRST AMENDMENT TO SUPPLEMENTARY CONDITIONS TO GENERAL CONDITION OF THE
OWNER-CONTRACTOR AGREEMENT
by and between
HOLLYWOOD CASINO SHREVEPORT, Owner
and
BROADMOOR ANDERSON, Contractor
THIS FIRST AMENDMENT TO SUPPLEMENTARY CONDITIONS shall modify, delete from
and add and replace by substitution to the "General Conditions of the Contract
for Construction", AIA Document A201, Fourteenth Edition, AIA, 1997. Where any
Article, Paragraph, Subparagraph or Clause of the General Conditions or any part
thereof is modified or deleted by this First Amendment to Supplementary
Conditions, the unaltered provisions of that Article, Paragraph, Subparagraph or
Clause shall remain in effect and except as amended hereby, the Contract shall
remain in full force and effect as written.
ARTICLE 11
----------
INSURANCE BONDS
---------------
11.6.1 The following is inserted as a new Subparagraph 11.6.1:
"11.6.1 In the event that Owner determines that a prearranged
owner controlled insurance program (an "OCIP") covering the
----
Contractor, its Subcontractors and the Sub-subcontractors will be
most efficient, the Owner, at its cost and expense, shall provide
an OCIP covering the Contractor, its Subcontractors and the Sub-
subcontractors. Such OCIP shall afford coverage no less than that
required by the Contract Documents, unless the Contractor consents
to a lesser coverage, which consent shall not be unreasonably
withheld, conditioned or delayed. In such event, as required by
Paragraph 11.6, Contractor and each Subcontractor and Sub-
subcontractor shall deduct the cost of insurance required of them
by the Contract (the "Insurance Deduction"), together with the
-------------------
Contractor's Fee calculated on the cost of such insurance, from
the Contract Sum and the Guaranteed Maximum Price pursuant to one
or more Change Orders. In consideration for Contractor's agreement
to an OCIP, Owner agrees to pay to Contractor an amount equal to
twenty-five percent (25%) of the difference between the premium
paid by Owner for the OCIP and the Insurance Deduction (the
"Contractor's Share of Insurance Savings"). Such payment shall be
---------------------------------------
made by Owner to Contractor within thirty (30) days from the date
that the Contractor's Share of Insurance Savings is determined and
agreed upon by Owner and Contractor.
This First Amendment to Supplementary Conditions to General Conditions of
the Owner-Contractor Agreement is entered into effective as of the 10/th/ day of
December, 1999.
<PAGE>
"OWNER" "CONTRACTOR"
HOLLYWOOD CASINO SHREVEPORT BROADMOOR ANDERSON
BY: HCS I, INC., its managing BY: ROY ANDERSON CORP,
general partner its venturer
BY: /s/ Paul C. Yates BY: /s/ Roy Anderson, III
------------------------- -------------------------------
ITS: Executive Vice President Roy Anderson, III
------------------------- its President
BY: BROADMOOR, its venturer
BY: /s/ John Stewart
-------------------------------
John Stewart its President
-2-
<PAGE>
EXHIBIT 10.27
--------------------------------------
FORM OF PARTICIPATION AGREEMENT
dated as of March 31, 2000
among
HOLLYWOOD CASINO SHREVEPORT,
as Lessee,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but solely
as Lessor and Trustee,
THE PERSONS LISTED ON SCHEDULE II,
as Lenders,
FIRST SECURITY TRUST COMPANY OF NEVADA,
as Administrative Agent
and
BANK OF AMERICA, NATIONAL ASSOCIATION,
as Arranger and Documentation Agent
--------------------------------------
Acquisition Financing for Equipment Associated with
Hollywood Casino and Hotel in Shreveport, Louisiana
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS
IN SECTION 7.1 THAT APPLY TO CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES
THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR
PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF ANY INDEMNIFIED
PERSONS IDENTIFIED HEREIN.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS........................................................................1
ARTICLE II EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL
PROVISIONS.........................................................................2
SECTION 2.1 Effectiveness of Agreement.........................................................2
SECTION 2.2 Advances...........................................................................4
SECTION 2.3 Notes..............................................................................4
SECTION 2.4 Procedures for Advance; Use of Proceeds............................................4
SECTION 2.5 Postponement of Advance............................................................5
SECTION 2.6 Obligations Several................................................................6
SECTION 2.7 Timing of Loans to Lessor and Payments to the Lenders..............................6
SECTION 2.8 Lenders' Instructions to Administrative Agent......................................7
SECTION 2.9 Computations.......................................................................7
SECTION 2.10 Commitment Fee.....................................................................7
SECTION 2.11 Records............................................................................7
SECTION 2.12 Legal and Tax Representation.......................................................8
SECTION 2.13 Amortization, Schedule.............................................................8
SECTION 2.14 Replacement of Equipment...........................................................8
ARTICLE III CONDITIONS TO ADVANCES.............................................................8
SECTION 3.1 Conditions Precedent to Each Advance Date..........................................8
SECTION 3.2 Conditions Precedent to Initial Advance Date......................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES....................................................13
SECTION 4.1 Representations and Warranties of Lessee..........................................13
SECTION 4.2 Representations and Warranties of Each Lender.....................................17
SECTION 4.3 Representations and Warranties of Bank............................................19
SECTION 4.4 Representations and Warranties of Administrative Agent............................20
ARTICLE V COVENANTS OF LESSEE...............................................................21
SECTION 5.1 Further Assurances................................................................21
SECTION 5.2 Consolidation, Merger, Sale, etc..................................................22
SECTION 5.3 Existence.........................................................................23
SECTION 5.4 Liens.............................................................................24
SECTION 5.5 Compliance Certificate............................................................24
SECTION 5.6 Investigation by Governmental Authorities.........................................24
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 5.7 Books and Records.................................................................24
SECTION 5.8 Payment of Taxes, etc.............................................................24
SECTION 5.9 Inspection........................................................................25
SECTION 5.10 Compliance with Laws......................................................25
SECTION 5.11 Maintenance of Insurance..................................................25
SECTION 5.12 Change of Name or Principal Place of Business.............................25
SECTION 5.13 Financial and Other Information...........................................26
SECTION 5.14 Securities................................................................27
SECTION 5.15 Gaming Equipment Costs....................................................27
SECTION 5.16 Stay, Extension and Usury Laws............................................28
SECTION 5.17 Restricted Payments.......................................................28
SECTION 5.18 Dividend and Other Payment Restrictions
Affecting Subsidiaries....................................................28
SECTION 5.19 Incurrence of Indebtedness and Issuance of Preferred Equity...............28
SECTION 5.20 Asset Sales...............................................................29
SECTION 5.21 Transactions with Affiliates..............................................29
SECTION 5.22 Line of Business..........................................................29
SECTION 5.23 Sale and Leaseback Transactions...........................................30
SECTION 5.24 Limitation on Issuances and Sales of Equity Interests in
Subsidiaries..............................................................30
SECTION 5.25 Restriction on Payment of Management Fees.................................30
SECTION 5.26 Landlord Waiver and Consent...............................................30
SECTION 5.27 Final Appraisal...........................................................30
ARTICLE VI COVENANTS OF LESSOR, TRUSTEE, ADMINISTRATIVE
AGENT AND LENDERS.................................................................31
SECTION 6.1 Covenants of Lessor, Trustee, Administrative Agent and the Lenders................31
SECTION 6.2 Restrictions On and Effect of Transfer............................................33
SECTION 6.3 Participations....................................................................35
SECTION 6.4 Required Transfers................................................................36
SECTION 6.5 Distribution and Receipt of Payments..............................................36
ARTICLE VII GENERAL INDEMNITY..........................................................................37
SECTION 7.1 General Indemnification...........................................................37
ARTICLE VIII GENERAL TAX INDEMNITY......................................................................39
SECTION 8.1 General Tax Indemnity.............................................................39
SECTION 8.2 Exclusions from General Tax Indemnity.............................................40
SECTION 8.3 Contests..........................................................................41
SECTION 8.4 Payments..........................................................................42
SECTION 8.5 Reports...........................................................................42
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 8.6 Withholding Tax Exemption.........................................................43
ARTICLE IX MISCELLANEOUS.....................................................................43
SECTION 9.1 Survival of Agreements............................................................43
SECTION 9.2 No Broker, etc....................................................................43
SECTION 9.3 Amendments........................................................................43
SECTION 9.4 Cumulative Remedies; No Waiver....................................................44
SECTION 9.5 Nature of Lenders' Obligations....................................................44
SECTION 9.6 Notices...........................................................................45
SECTION 9.7 Execution of Operative Documents..................................................45
SECTION 9.8 No Third Parties Benefitted.......................................................45
SECTION 9.9 Confidentiality...................................................................46
SECTION 9.10 Integration.................................................................46
SECTION 9.11 Severability of Provisions..................................................46
SECTION 9.12 Headings....................................................................47
SECTION 9.13 Time of the Essence.........................................................47
SECTION 9.14 Gaming Authorities..........................................................47
SECTION 9.15 Release of Lien.............................................................47
SECTION 9.16 Transaction Costs...........................................................47
SECTION 9.17 Successors and Assigns......................................................48
SECTION 9.18 Final Agreement.............................................................48
SECTION 9.19 Reproduction of Documents...................................................48
SECTION 9.20 Governing Law...............................................................48
SECTION 9.21 Compliance with Law.........................................................49
SECTION 9.22 Waiver of Right to Trial by Jury............................................49
SECTION 9.23 Nonrecourse to Paddlewheels.................................................50
SECTION 9.24 Payments Set Aside..........................................................50
SECTION 9.25 No Marshaling/Other Loans and Set-Off.......................................50
SECTION 9.26 Trust Agreement.............................................................50
SECTION 9.27 Purported Oral Amendments...................................................50
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule I -- Categories of Equipment
Schedule II -- Lender Commitments
Schedule III -- Notice Information, Funding Offices and Wire Instructions
Schedule IV -- Recordings, Filings and Registrations
Schedule V -- Required Licenses
Schedule VI -- Amortization Schedule
Schedule VII -- Disclosure Schedule
Appendix 1 -- Definitions
Exhibit A -- Form of Lease
Exhibit B -- Form of Loan Agreement
Exhibit C -- Form of Trust Agreement
Exhibit D -- Form of Security Agreement
Exhibit E -- Form of Advance Request
Exhibit F -- Form of Bill of Sale
Exhibit G -- Form of Certificate of Acceptance
Exhibit H -- Form of Investor's Letter
Exhibit I -- Form of Purchase Order Assignment
Exhibit J-1 -- Form of Opinion of Counsel for Lessee
Exhibit J-2 -- Form of Opinion of Louisiana Counsel to Lessee
Exhibit J-3 -- Form of Opinion of Special Louisiana Counsel to Lenders
Exhibit J-4 -- Form of Opinion of Special Counsel to Trustee
Exhibit K -- Form of Manager Subordination Agreement
Exhibit L -- Form of Construction Progress Report
</TABLE>
-iv-
<PAGE>
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT (this "Agreement"), dated as of March 31,
---------
2000, is entered into by and among HOLLYWOOD CASINO SHREVEPORT, a Louisiana
general partnership, as Lessee; FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity, except as
expressly stated herein, but solely in its capacities as Lessor and Trustee; the
persons listed on Schedule II hereto, as Lenders; FIRST SECURITY TRUST COMPANY
-----------
OF NEVADA, a Nevada banking corporation, as Administrative Agent; and BANK OF
AMERICA, NATIONAL ASSOCIATION, a national banking association, in its capacities
as Arranger and Documentation Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Lease, Lessor will lease to
Lessee, and Lessee will lease from Lessor, the Equipment on a "lease intended as
security" basis; and
WHEREAS, Lessor will apply Advances it receives from the Lenders in
its capacity as Borrower under the Loan Agreement to finance the acquisition of
the Equipment subject to the terms of the Lease; and
WHEREAS, the Lenders are willing, on the terms and conditions
hereinafter set forth (including Article III), to provide financing to Lessor in
-----------
an aggregate principal amount not to exceed the Aggregate Commitment Amount to
fund payment of Equipment Costs; and
WHEREAS, to secure such financing by the Lenders, Administrative
Agent, on behalf of the Lenders, will have the benefit of a Lien from Lessor on
all of Lessor's right, title and interest in and to the Equipment and other
Collateral and an assignment of Lessor's rights in the Operative Documents; and
NOW, THEREFORE, in consideration of the mutual terms and conditions
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Unless the context shall otherwise require, capitalized terms used but
not defined herein (including those used in the foregoing recitals) shall have
the meanings specified in Appendix 1 hereto for all purposes hereof; and the
----------
rules of interpretation set forth in Appendix 1 hereto shall apply to this
----------
Agreement.
ARTICLE II
-1-
<PAGE>
EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL PROVISIONS
--------------------------------------------------------
SECTION 1.1 Effectiveness of Agreement. This Agreement shall become
--------------------------
effective on the date on which all of the following conditions shall have been
satisfied or waived in writing by the applicable parties (the "Closing Date"):
------------
(1) Authorization, Execution and Delivery of Certain of the
-------------------------------------------------------
Operative Documents. This Agreement and the Lease, Trust Agreement, Loan
-------------------
Agreement, Notes and Security Agreement shall have been duly authorized,
executed and delivered by each of the parties thereto, and each thereof
shall be in full force and effect.
(2) Organizational and Authorization Documents and Certificates
-----------------------------------------------------------
of Good Standing. Administrative Agent shall have received from each of
----------------
Lessee , HCS I and HCS II, as applicable:
(1) certificates of existence and good standing issued by
the Secretary of State of the State of Louisiana with respect to HCS I
and HCS II, each dated within thirty Business Days of the Closing
Date;
(2) a copy of the articles of incorporation and by-laws and
all modifications thereto, certified to be true and complete by a
Responsible Official of HCS I;
(3) a certificate of a Responsible Official of HCS I
certifying as to (A) resolutions of its Board of Directors duly
authorizing the execution, delivery and performance by HCS I, in its
capacity as managing general partner of Lessee, of each of the
Operative Documents to which Lessee is a party, (B) the incumbency and
signature of Persons authorized to execute and deliver documents and
agreements on behalf of HCS I, and (C) the accuracy of all
representations and warranties made by Lessee and the absence of
defaults under the Operative Documents;
(4) a copy of Lessee's partnership agreement as filed with
the Louisiana Secretary of State, and as recorded in the official
mortgage records of each of Caddo Parish, Louisiana, and Bossier
Parish, Louisiana, and all modifications to any of the foregoing, all
certified to be true and complete by HCS I, as managing general
partner of Lessee;
(3) Representations and Warranties. Each of the representations
------------------------------
and warranties made by or on behalf of Lessee, Bank in its individual
capacity and in its capacities as Trustee, Lessor and Borrower,
Administrative Agent in its individual capacity and in its capacity as
Administrative Agent, and each Lender under the Operative Documents shall
be true in all material respects as of the Closing Date and no Default or
Event of Default shall exist under any Operative Document (either before or
after giving
-2-
<PAGE>
effect to the transactions contemplated by the Operative
Documents).
(4) No Material Adverse Effect. Since December 31, 1999, there
--------------------------
shall not have occurred any Material Adverse Effect.
(5) Opinions of Counsel. Administrative Agent, Trustee and each
-------------------
Lender shall have received the legal opinions set forth below, each dated
as of Closing Date and addressed to Administrative Agent, Trustee and each
Lender:
(1) from Weil, Gotshal & Manges LLP, counsel to Lessee, as
to the matters set forth in the form of Exhibit J-l;
-----------
(2) from Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P., special Louisiana counsel to Lessee, as to the
matters set forth in the form of Exhibit J-2;
-----------
(3) from McGlinchey Stafford, special Louisiana counsel the
Lenders, as to matters set forth in the form of Exhibit J-3; and
-----------
(4) from Ray, Quinney & Nebeker, special counsel to
Trustee, as to the matters set forth in the form of Exhibit J-4.
-----------
(6) Projections. A certificate of a Responsible Official of
-----------
Lessee that attached thereto is a true and correct copy of the Projections
and affirming, to the best of Lessee's knowledge, that the representation
set forth in Section 4.1(f) is true.
--------------
(7) Indenture, etc. Administrative Agent shall have received
---------------
(with copies for Trustee and each Lender) true and correct copies of (i)
the Indenture, (ii) the Ground Lease, (iii) the Management Agreement and
(iv) all mortgages, pledge agreements, security agreements and other
collateral documents executed and delivered by Lessee and its Affiliates in
connection with the Indenture, together with all exhibits and schedules and
all amendments and modifications to each of the foregoing documents; all of
the foregoing to be certified as true and complete by a Responsible
Official of Lessee.
(8) Bank's Certificate. Lessee, Administrative Agent and each
------------------
Lender shall have received a certificate of an authorized officer of Bank
certifying as to (i) the due authorization of the execution, delivery and
performance by Bank, in its capacities as Trustee and Lessor, of each
Operative Document to which Bank, in its capacities as Trustee or Lessor,
is or will be a party, (ii) its articles of association, certified as of a
recent date by an appropriate officer of Bank, (iii) its by-laws and (iv)
the incumbency and signature of persons authorized to execute and deliver
on its behalf, as Trustee and as Lessor, the Operative Documents to which
Bank is a party as Trustee or Lessor.
-3-
<PAGE>
(9) Proceedings Satisfactory, etc. All proceedings taken in
------------------------------
connection with the Closing Date and all documents relating thereto shall
be reasonably satisfactory to Lessee, Bank, in its capacities as Lessor
and/or Trustee, Administrative Agent, Arranger, the Required Lenders, and
their respective counsel, and each such Person shall have received copies
of such documents as they may reasonably request in connection therewith,
all in form and substance reasonably satisfactory to each such Person.
(10) Transaction Costs. Lessee shall have paid all Transaction
-----------------
Costs to the extent invoiced to it at least three (3) Business Days prior
to the Closing Date to the parties to whom such Transaction Costs are
payable. Such payment shall be made by wire transfer of immediately
available funds. In addition, Lessee shall have paid to (a) the Arranger,
the arrangement fee specified in the Arranger Fee Letter, (b)
Administrative Agent, the agency fee provided in the Agent Fee Letter and
(c) Trustee, the initial acceptance fee and annual administration fee as
specified in the Trustee Fee Letter.
SECTION II.2 Advances.
--------
(11) Subject to the terms and conditions hereinafter set forth,
and in reliance on the representations and warranties contained herein or
made pursuant hereto, upon receipt of an Advance Request, on the applicable
Advance Date, each Lender shall finance a portion of the applicable Advance
by making a Loan to Lessor (in accordance with Lessor's payment
instructions set forth on Schedule III) in an amount in immediately
------------
available funds equal to such Lender's Commitment Percentage of the
aggregate amount of the requested Advance. Notwithstanding any other
provision hereof, no Lender shall be permitted or required to fund any Loan
to the extent that, after giving effect thereto, the aggregate amount
advanced would exceed such Lender's Commitment, and the aggregate original
principal amount of all Loans made since the Closing Date would exceed the
Aggregate Commitment Amount. No amounts paid or prepaid with respect to
the Loans may be readvanced.
(12) Funding. Lessor shall give prompt notice to the Lenders,
-------
Lessee and Administrative Agent in the event any Lender does not fund the
full amount to be funded by such Lender on any Advance Date as described in
Section 2.2(a).
---------------
SECTION 1.2 Notes. Each amount made available by a Lender pursuant to
-----
Section 2.2(a) shall be evidenced by one or more Notes issued by Lessor payable
- --------------
to the order of such Lender in a maximum principal amount equal to such Lender's
Commitment and shall be repayable in accordance with the terms of the Loan
Agreement.
SECTION 1.3 Procedures for Advance; Use of Proceeds.
---------------------------------------
(1) Request. With respect to the funding of each Advance, Lessee
-------
shall deliver to Lessor and Administrative Agent, not later than 10:00
a.m., San Francisco, California time, three (3) Business Days prior to the
proposed Advance Date, an
-4-
<PAGE>
irrevocable written notice substantially in the form of Exhibit E (an
---------
"Advance Request"), specifying (i) the proposed Advance Date, (ii) a
---------------
description (including model, make and serial number, if available) of each
item of Equipment to be transferred to Lessor and leased to Lessee on such
Advance Date, (iii) the Equipment Cost for each such item of Equipment, and
(iv) wire instructions for the disbursement of the proceeds of such
Advance. Concurrently with such Advance Request, Lessee shall deliver to
Administrative Agent true and correct copies of the vendors' invoices for
each item of Equipment to be delivered on such Advance Date. All Equipment
identified in an Advance Request shall be items of personal property
described in one or more of the Categories of Equipment specified in
Schedule I hereto.
----------
(2) Funding. On each scheduled Advance Date, upon (i) receipt by
-------
Lessor of all amounts to be paid by the Lenders pursuant to Section 2.2(a)
--------------
and (ii) satisfaction or waiver of each of the conditions set forth in
Section 3.1 (and, in the case of the initial Advance, Section 3.2), as
----------- -----------
evidenced by a certificate of Lessee, (A) Lessor shall purchase the
Equipment described in the related Advance Request, and Lessee shall
deliver a Purchase Order Assignment to Lessor, or Lessee shall deliver or
cause to be delivered to Lessor a Bill of Sale conveying to Lessor, all of
such Person's right, title and interest in such Equipment, (B) Lessee shall
lease such Equipment from the Lessor pursuant to the Lease, and (C) Lessor
shall pay to Lessee (or such Person as Lessee may direct), from funds made
available by the Lenders pursuant to Section 2.2(a) and the Loan Agreement,
--------------
the amount specified in such Advance Request in immediately available funds
remitted by wire transfer in accordance with such Advance Request.
(3) Number, Amount and Dates of Advances. There shall not be
------------------------------------
more than (i) two (2) Advances in any calendar month or (ii) ten (10)
Advances in the aggregate. Each Advance shall be in an amount not less
than $1,000,000 or the remaining available Commitments, if less. No
Advance shall be made on or after the expiration of the Commitment Period,
or such earlier date as the Commitments are terminated, and no Advance may
occur when the Commitments are suspended.
(4) Use of Proceeds. Proceeds from all Advances shall be used
---------------
solely for the purpose of funding Equipment Costs.
(5) Interest Rate. Each determination of an Interest Rate
-------------
pursuant to any provision of the Loan Agreement shall be conclusive and
binding on Trustee, Lessor, Lessee and the Lenders in the absence of
manifest error.
SECTION 1.4 Postponement of Advance. If the Lenders make a Loan
-----------------------
requested pursuant to an Advance Request and the conditions precedent to such
Advance have not been satisfied or otherwise waived in writing on the date
specified in such Advance Request, Lessee shall pay to Lessor, for the benefit
of each Lender, interest on the amount funded by each Lender at a rate equal to
the sum of the Alternate Base Rate plus two percent (2.00%) (determined as of
the date of such funding) for the period from the date of each such Loan to the
date the proceeds of such
-5-
<PAGE>
Loan are returned to such Lender or such Advance Date
shall have occurred, less any interest earned by Lessor on behalf of the Lenders
by investing such funded amounts. Lessor (or its assignee) shall not be
required to invest such funds in interest-bearing investments, but Lessor (or
its assignee) shall upon direction of Lessee (or, if an Event of Default exists,
the Required Lenders), invest such funds in Cash Equivalents to the extent it is
practicably able to do so. Such interest shall be due and payable by Lessee
upon the occurrence of such Advance Date or upon return of such Loan proceeds to
the Lenders. Such payment of interest shall be an additional condition
precedent to such requested Advance. If any Advance Date shall not have
occurred by the third Business Day following the original requested date
therefor and the conditions precedent to such Advance have not been satisfied
due to an action or omission of Lessee or any other Person other than the
Participants, then all such interest shall be due and payable on such third
Business Day following the requested Advance Date, and Lessor shall refund to
each Lender all amounts funded by such Lender and all accrued interest allocable
to such Lender. No additional Advance Request shall be required if an Advance
Date is postponed and thereafter consummated.
SECTION 1.5 Obligations Several. The obligations of the Lenders hereto
-------------------
or elsewhere in the Operative Documents shall be several and not joint; and no
party shall be liable or responsible for the acts or defaults of any other party
hereunder or under any other Operative Document.
SECTION 1.6 Timing of Loans to Lessor and Payments to the Lenders.
-----------------------------------------------------
(1) Timing of Loans to Lessor. Subject to timely delivery of an
-------------------------
Advance Request pursuant to Section 2.4(a) and the other terms and
-------------
conditions of the Operative Documents, each Lender shall make its
Commitment Percentage of the requested Advance (by way of a Loan pursuant
hereto and the Loan Agreement) available to Lessor by 11:00 a.m. San
Francisco time, on the requested Advance Date, and Lessor will forward any
such amounts so received to Lessee (or its designee(s) as set forth in such
Advance Request), not later than 1:00 p.m. San Francisco time, on such
Advance Date.
(2) Payments to Lenders. So long as there are obligations
-------------------
outstanding under the Operative Documents, Lessor has assigned all payments
of Rent to Trustee, which in turn has assigned all such payments of Rent to
Administrative Agent, on behalf of the Lenders, pursuant to Section 2.1 of
-----------
the Security Agreement, and each of the Lenders and Administrative Agent
has appointed Bank, as Trustee and Lessor, as its agent to receive such
payments of Rent under Section 7.1 of the Loan Agreement. Any payments
-----------
received by Administrative Agent (or Trustee/Lessor) from or on behalf of
Lessee not later than 11:00 a.m., San Francisco time, shall be paid by
Administrative Agent (or Trustee/Lessor) to the Lenders in immediately
available funds no later than 1:00 p.m. San Francisco time, on the same
day, and any payments received by Administrative Agent (or Trustee/Lessor)
from or on behalf of Lessee after 11:00 a.m., San Francisco time, shall be
paid by Administrative Agent or Trustee/Lessor to the Lenders as soon after
receipt as practicable, but not later than 11:00 a.m., San Francisco
-6-
<PAGE>
time, on the next succeeding Business Day. Rent and all other payments due
to Lessor, Trustee, Administrative Agent or any Lender under the Operative
Documents shall be paid in immediately available funds, at any such
Person's respective office specified in Schedule III or at such other
------------
office as such Person may from time to time specify to Lessor, Trustee,
Administrative Agent and Lessee in a notice pursuant hereto. All such
payments shall be received by Trustee/Lessor (in its individual or trust
capacity), Administrative Agent or such Lender, as applicable, not later
than 11:00 a.m., San Francisco time, on the date due. Funds received after
such time shall for all purposes of the Operative Documents be deemed to
have been received on the next succeeding Business Day.
(3) Agency. So long as the Notes remain outstanding, Rent shall
------
be paid to Administrative Agent, through Trustee as its agent, as Lessor's
assignee under the Operative Documents.
SECTION 1.7 Lenders' Instructions to Administrative Agent. By making
---------------------------------------------
its Loan pursuant to Section 2.2(a) and the Loan Agreement, each Lender agrees
--------------
that such act shall constitute, without further act, (i) evidence that the
applicable conditions precedent set forth in Article III have been satisfied or
-----------
waived; provided that any Lender's failure to raise the issue of noncompliance
--------
with respect to any such condition as to any third party shall not be deemed to
be a waiver of such condition unless such Lender shall have acknowledged such
waiver in writing, and (ii) authorization and direction by such Lender to Lessor
to make an Advance to or for the benefit of Lessee pursuant to Section 2.2(a)
--------------
and the Loan Agreement in reliance upon Lessee's certificate delivered pursuant
to Section 3.1(h).
--------------
SECTION 1.8 Computations.
------------
(1) Determination of Interest. All computations of accrued
-------------------------
amounts pursuant to the Operative Documents shall be made on the basis of
actual number of days elapsed in a 360-day year, unless otherwise
specifically stated to the contrary in any such Operative Document.
(2) Dollars. All payments required to be made by Lessee, Lessor,
-------
Trustee, or Administrative Agent, including any Advance or any payment of
Rent, shall be made only in Dollars in immediately available funds.
SECTION 1.9 Commitment Fee. Lessee agrees to pay to Administrative
--------------
Agent for the account of each Lender, for the period (including any portion
thereof when its Commitment is suspended by reason of Lessee's inability to
satisfy any condition of Article III) commencing on the Closing Date and
-----------
continuing through the last day of the Commitment Period, a commitment fee at a
per annum rate equal to one-half percent (0.50%) of the average daily unused
portion of each such Lender's Commitment. The commitment fee shall be payable
by Lessee in arrears on the last Business Day of each calendar quarter during
the Commitment Period, and on the last day of the Commitment Period.
-7-
<PAGE>
SECTION 1.10 Records. Each Lender is hereby authorized to record the
-------
date and amount of each Loan advanced by it, each continuation thereof, and the
date and amount of each payment or prepayment thereof, on the schedule annexed
to and constituting a part of its Note, and any such recordation shall
constitute prima facie evidence, absent manifest error, of the accuracy of the
----- -----
information so recorded, provided that the failure to make any such recordation
--------
or any error in such recordation shall not affect Lessor's or Lessee's
obligations under the Operative Documents or under such Note.
SECTION 1.11 Legal and Tax Representation. Lessee acknowledges and
----------------------------
agrees that none of Administrative Agent, Documentation Agent, Arranger,
Trustee, Lessor or any Lender has made any representation or warranty concerning
the tax, accounting or legal characteristics of the Lease or any of the other
Operative Documents, and that Lessee has obtained and relied on such tax,
accounting and legal advice regarding the Lease and the other Operative
Documents as it deems appropriate. Each of Trustee, Lessor and each Lender
acknowledges and agrees that it has obtained and relied on the Operative
Documents and the various items delivered in connection therewith, and on such
tax, accounting and legal advice regarding the Lease and the other Operative
Documents as it deems appropriate without reliance on Trustee, Lessor, Arranger,
Administrative Agent or any other Lender. Without in any way limiting the
foregoing or Section 3.8 of the Lease, each of the parties hereto acknowledges
-----------
and agrees that Lessee shall be the owner of the Equipment for Federal income
tax purposes.
SECTION 1.12 Amortization, Schedule. Schedule VI sets forth the
---------------------- -----------
mandatory principal amortization schedule for the Loans (the "Amortization
------------
Schedule"). Lenders will receive principal payments on each Payment Date during
- --------
the Base Period so as to cause all of the Loans to amortize in an amount on each
Payment Date equal to the product of (w) the percentage set forth opposite each
Payment Date on the Amortization Schedule and (x) Lessor's Cost. Each Note or
the Notes will reflect mandatory principal amortization equal to the product of
(y) such Lender's Commitment Percentage and (z) the aggregate amount payable to
the Lenders on such Payment Date pursuant to the preceding sentence.
SECTION 1.13 Replacement of Equipment. Trustee, Lessor and
------------------------
Administrative Agent shall release from the lien of the Security Agreement and
the Lease items of Equipment which Lessee has elected to replace under Section
-------
7.3 or 9.1 of the Lease, upon satisfaction by Lessee of the conditions contained
- --- ---
in Section 9.1(b) of the Lease.
--------------
ARTICLE III
CONDITIONS TO ADVANCES
----------------------
SECTION 1.14 Conditions Precedent to Each Advance Date. The obligation
-----------------------------------------
of Lessor, Trustee and each Lender to perform their respective obligations on
each Advance Date shall be subject to the fulfillment to the satisfaction of, or
the waiver in writing by, Trustee and each Lender of the conditions precedent
set forth in this Section 3.1 on or before each such
-----------
-8-
<PAGE>
Advance Date (except that the obligation of any party hereto shall not be
subject to such party's own performance or compliance).
(1) Advance Request. With respect to any Advance, Administrative
---------------
Agent and Lessor shall have received and promptly distributed to each
Lender, at least three (3) Business Days before each Advance Date, an
Advance Request duly executed by Lessee, in accordance with Section 2.4(a).
--------------
Each of the delivery of the Advance Request and the acceptance by Lessee of
the proceeds of such Advance shall constitute a representation and warranty
by Lessee that on the date of such Advance (both immediately before and
after giving effect to such Advance and the application of the proceeds
thereof) the statements made in Section 3.1(c) and in such Advance Request,
-------------
are true and correct.
(2) Funding. Each Lender shall have funded the full amount to be
-------
funded by such Lender on such Advance Date as described in Article II.
----------
(3) Accuracy of Representations and Warranties, No Default, etc.
------------------------------------------------------------
On each Advance Date, the following statements shall be true and correct:
(1) All of the representations and warranties of the parties
hereto contained herein and in each of the other Operative Documents
are true and correct on and as of such Advance Date in all material
respects as though made on and as of that date, except to the extent
that such representations and warranties relate solely to an earlier,
date, in which case such representations and warranties shall have
been true and correct in all material respects on and as of such
earlier date;
(2) Except as set forth in the Disclosure Schedule, no
labor controversy, litigation, arbitration or governmental
investigation or proceeding shall be pending or, to the knowledge of
Lessee, threatened against Lessee, the Manager, HCS I and/or HCS II
which would reasonably be expected to have a Material Adverse Effect
or which would reasonably be expected to enjoin, prohibit, limit or
restrain the making of the requested Advance; and
(3) No Default or Event of Default exists.
(4) Bill of Sale or Purchase Order Assignment. Lessee shall have
-----------------------------------------
delivered or caused to be delivered to Lessor (either concurrently or in
connection with a prior Advance Date) a fully executed Bill of Sale or
Purchase Order Assignment (as applicable) with respect to the items of
Equipment identified in such Advance Request.
(5) Certificates of Acceptance. Lessee shall have delivered to
--------------------------
Lessor a fully-executed Certificate of Acceptance substantially in the form
of Exhibit G with respect to each item of Equipment identified in such
---------
Advance Request.
-9-
<PAGE>
(6) Financing Statements; Supplemental Searches; Consents and
---------------------------------------------------------
Waivers. Lessor shall have received (i) from Lessee to the extent not
-------
theretofore delivered pursuant to Section 3.2(d) or this Section, duly
--------------
executed UCC Financing Statements (or amendments to financing statements,
as applicable) covering all Equipment to be transferred to Lessor and
leased to Lessee on such Advance Date, identifying Lessee as debtor,
Trustee, as Lessor, as secured party and Administrative Agent, on behalf of
the Lenders, as assignee of secured party, and such financing statements
(or amendments) shall have been filed in each applicable jurisdiction, (ii)
if required by Trustee/Lessor (acting at the direction of the Required
Lenders), such Searches acceptable to the Required Lenders and their
counsel as to Lessee, HCS I and HCS II and the applicable Equipment (to the
extent then obtained by any such party) from each appropriate state and
county or parish filing or recording office, each dated as close to the
applicable Advance Date as practicable, which Searches shall evidence
Lessee's ownership of any of the applicable Equipment free and clear of all
Liens other than Permitted Liens, and (iii) such releases of liens,
----- ----
termination statements, and mortgagee consents as may be necessary to
ensure (A) a first priority security interest in the Equipment which may be
deemed "fixtures" and thereby subject to prior Liens and (B) subject to
applicable Gaming Laws, the ability of Trustee/Lessor and the other
Participants to obtain access to the Resort and remove the Equipment
therefrom in connection with exercising their rights and remedies under the
Operative Documents. All fees and Taxes with respect to the recording or
filing of any of the foregoing shall have been paid in full, and
satisfactory evidence thereof shall have been delivered to Trustee/Lessor
and Administrative Agent, or arrangements for payment shall have been made
to the satisfaction of Trustee/Lessor and Administrative Agent.
(7) No Casualty. No Casualty shall have occurred with respect to
-----------
any item of Equipment being delivered and accepted on such Advance Date.
(8) Officer's Certificates. Administrative Agent shall have
----------------------
received (with copies for Trustee/Lessor and each Lender) certificates of a
Responsible Official of Lessee stating that (i) all of the representations
and warranties of Lessee contained herein and in each of the other
Operative Documents are true and correct on and as of such Advance Date in
all material respects as though made on and as of that date, except to the
extent that such representations and warranties relate solely to an earlier
date, in which case such representations and warranties shall have been
true and correct in all material respects on and as of such earlier date,
(ii) that insurance complying with Article IX of the Lease is in full
----------
force and effect and (iii) all applicable conditions precedent to the
relevant Advance have been satisfied, or waived in writing by each Lender,
Lessor, Trustee and Administrative Agent, on or prior to such Advance Date.
(9) Taxes. All Taxes other than Charges due and payable by
-----
Lessee on or prior to such Advance Date in connection with the execution,
delivery, recording and filing of any of the Operative Documents, in
connection with the filing of any of the
-10-
<PAGE>
financing statements or as otherwise required to be paid by Lessee pursuant to
the terms of the Operative Documents shall have been paid in full.
(10) [Reserved].
(11) Construction Certificate. Administrative Agent shall have
------------------------
received (with copies for Trustee/Lessor and each Lender), at least three
(3) Business Days prior to the applicable Advance Date, the most recent
Construction Progress Report issued by CCM Consulting Group.
(l2) Third Party Approvals. All material third party approvals
---------------------
necessary for the operation and use of the Equipment and for Lessee to
perform its obligations with respect to the Lease shall have been obtained.
(13) Litigation. No law or regulation shall prohibit, and no
----------
order, judgment or decree of any Governmental Authority shall, and no
action or proceeding shall be pending or threatened which would reasonably
be expected to, enjoin, prohibit, limit or restrain the making of such
Advance.
(14) No Material Adverse Effect. Since December 31, 1999, there
--------------------------
shall not have occurred any Material Adverse Effect.
(15) Further Assurances, etc. Administrative Agent shall have
------------------------
received such other and further instruments, duly executed, acknowledged
(if appropriate) and delivered, as Administrative Agent (acting at the
direction of the Required Lenders) reasonably shall have requested in
connection with such Advance and this Agreement.
(16) Transaction Costs. Lessee shall have paid all Transaction
-----------------
Costs to the extent invoiced three (3) Business Days prior to such Advance
Date to the parties to whom such Transaction Costs are payable (or shall
have requested payment thereof or reimbursement therefor pursuant to the
Advance Request). Such payment shall be made by wire transfer of
immediately available funds.
(17) Trustee/Lessor's and Administrative Agent's Certificate.
-------------------------------------------------------
Each Lender shall have received a certificate from an officer of
Trustee/Lessor and an officer of Administrative Agent confirming its
receipt of (or requesting a waiver of the receipt of) the documents
specified in Sections 3.1(a), (d), (e), (h), (j) and (k).
--------------- --- --- --- --- ---
SECTION 1.15 Conditions Precedent to Initial Advance Date. In addition
--------------------------------------------
to the conditions precedent set forth in Section 3.1, the obligation of
-----------
Trustee/Lessor and each Lender to perform their respective obligations on the
Initial Advance Date shall be subject to the fulfillment to the satisfaction of,
or the waiver in writing by, each Lender of the conditions precedent set forth
in this Section 3.2 on or before the Initial Advance Date (except that the
-----------
obligation of any party hereto shall not be subject to such party's own
performance or
-11-
<PAGE>
compliance).
(1) Preliminary Appraisal Report. Administrative Agent shall
----------------------------
have received (with copies for Trustee/Lessor and each Lender), and the
Lenders shall have approved, a preliminary appraisal report with respect to
the Equipment intended to be financed hereunder, prepared by a qualified
appraiser satisfactory to the Lenders, establishing (on the basis of a
review of invoices, purchase contracts, equipment lists and the like) an
aggregate fair market value of such Equipment as of the Initial Advance
Date (assuming such Equipment will be delivered on the Initial Advance
Date) and as of the Maturity Date. Such preliminary appraisal shall be
prepared at the cost and expense of Lessee.
(2) Construction Plans. If required by the Required Lenders,
------------------
Administrative Agent shall have received a copy of the Construction Plans
for the Resort.
(3) Searches. Not later than three (3) days prior to the Closing
--------
Date, Administrative Agent shall have received (with copies for
Trustee/Lessor and each Lender) reports (each, a "Search") acceptable to
------
the Lenders and their counsel, of judgment liens, revenue liens, tax liens,
Uniform Commercial Code filings and other encumbrances of record with
respect to Lessee, HCS I and HCS II with the applicable filing offices in
the States of Louisiana and Texas (as applicable), and such reports shall
show no Liens other than Permitted Liens on or affecting the Equipment.
(4) Filings and Recordings. All filings, registrations and
----------------------
recordings set forth on Schedule IV (or as otherwise reasonably required by
-----------
the Required Lenders) shall have been made, or shall have been arranged to
be made promptly thereafter, in the appropriate places or offices and all
fees and taxes with respect to any recordings, filings or registrations
made pursuant to this Section 3.2(d) shall have been paid in full, and
--------------
satisfactory evidence thereof shall have been delivered to Administrative
Agent, or arrangements for such payment shall have been made to the
satisfaction of Administrative Agent.
(5) Insurance. Trustee/Lessor and Administrative Agent shall
---------
have received (with copies for each Lender) evidence of each of the
insurance policies required to be maintained pursuant to the Lease, setting
forth the respective coverages, limits of liability, carrier, policy number
and period of coverage, accompanied by affidavits, certificates, paid bills
or other documents evidencing that all premium payments are current.
(6) Consents and Approvals. All material necessary consents,
----------------------
approvals and authorizations of, and declarations, registrations and
filings with, Governmental Authorities and any other applicable Persons
required to consummate the transactions contemplated by this Agreement
shall have been obtained or made by Lessee and shall be in full force and
effect.
-12-
<PAGE>
(7) Further Assurances, etc. Administrative Agent shall have
------------------------
received (with copies for Trustee/Lessor and each Lender) such other and
further instruments, duly executed, acknowledged (if appropriate) and
delivered, as it (acting at the direction of the Required Lenders)
reasonably shall have requested in connection with the Initial Advance Date
and the applicable Operative Documents.
(8) Manager Subordination Agreement. The Manager Subordination
-------------------------------
Agreement shall have been (or shall concurrently be) executed and delivered
by each of the parties thereto.
(9) Gaming Authority Approval. Each of Lessee and each
-------------------------
Participant shall have received such approvals as it deems appropriate that
the relevant Gaming Authorities have approved the transactions contemplated
by this Agreement and the other Operative Documents (including the
financing of Lessee's acquisition of Gaming Equipment contemplated
hereunder and thereunder) to the extent that any such approval is required
by applicable Gaming Laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 1.16 Representations and Warranties of Lessee. Lessee represents
----------------------------------------
and warrants to each of the other parties hereto as follows:
(1) Due Organization, etc.
----------------------
(1) Lessee is a general partnership duly organized and
validly existing under the laws of the State of Louisiana, and is duly
qualified or licensed and in good standing and authorized to do
business in all jurisdictions where failure to so qualify could
reasonably be expected to have a Material Adverse Effect, and has the
requisite power and authority to execute, deliver and perform its
obligations under each of the Operative Documents to which it is a
party and each other agreement, instrument and document executed and
delivered by it on any Advance Date in connection with or as
contemplated by each such Operative Document. The "principal place of
business" and "chief executive office" (as such terms are used in
Section 9-103(3) of the UCC) of Lessee is located at Two Galleria
Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, Texas 75240, and
after the Resort is Operating, the principal place of business will be
located at 451 Clyde Font Parkway, Shreveport, Louisiana 71101. Upon
acceptance thereof for lease under the Lease, the Equipment will be
located at 451 Clyde Fant Parkway, Shreveport, Louisiana 71101.
(1) Each of HCS I and HCS II is a corporation duly
organized,
-13-
<PAGE>
validly existing and in good standing under the laws of the State of
Louisiana, and is duly qualified or licensed and in good standing as a
foreign corporation authorized to do business in all jurisdictions
where failure to so qualify could reasonably be expected to have a
Material Adverse Effect, and HCS I, as managing general partner of
Lessee, has the requisite corporate power and authority to execute and
deliver, on behalf of Lessee, each of the Operative Documents to which
Lessee is a party and each other agreement, instrument and document
executed and delivered by Lessee on any Advance Date in connection
with or as contemplated by each such Operative Document. The
"principal place of business" and "chief executive office" (as such
terms are used in Section 9-103(3) of the UCC) of each of HCS I and
HCS II is located at Two Galleria Tower, Suite 2200, 13455 Noel Road,
LB 48, Dallas, Texas 75240, and after the Resort is Operating, the
principal place of business will be located at 451 Clyde Fant Parkway,
Shreveport, Louisiana 71101.
(2) Authorization; No Conflict; No Approvals, etc. The execution
----------------------------------------------
and delivery by Lessee of each of the Operative Documents to which it is a
party, and the performance by Lessee of its Obligations under such
Operative Documents, have been duly authorized by all necessary partnership
action (including any necessary partner action) on its part, and do not and
will not: (i) contravene any Applicable Laws currently in effect
applicable to or binding on it or the Equipment; (ii) violate any provision
of its partnership agreement or the articles of incorporation or by-laws of
HCS I or HCS II; (iii) result in a breach of or constitute a default under
(with or without the giving of notice or lapse of time or both) any
indenture, mortgage, deed of trust, lease, loan or credit agreement, or any
other agreement or instrument to which Lessee, HCS I or HCS II is a party
or by which Lessee, HCS I or HCS II or any of their respective properties
may be bound or affected, except for such breaches or defaults which,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect; or (iv) require any Governmental Approval by any
Governmental Authority, except for (A) the filings and recordings listed on
Schedule IV to perfect the rights of the Participants intended to be
-----------
created by the Operative Documents and (B) the required licenses and
approvals listed on Schedule V and none of Lessee, HCS I or HCS II is in
----------
default under or in violation of its respective partnership agreement,
charter or by-laws, as applicable.
(3) Enforceability. Each Operative Document to which Lessee is a
--------------
party constitutes the legal, valid and binding obligation of Lessee,
enforceable against Lessee in accordance with the terms thereof, except as
such enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(4) Litigation. Except as set forth in the Disclosure Schedule,
----------
there is no action, suit or proceeding, or any governmental investigation
or any arbitration, in each
-14-
<PAGE>
case pending or, to the knowledge of Lessee, threatened against Lessee, HCS
I or HCS II or the Equipment or before any Governmental Authority (i) which
challenges the validity of the Operative Documents to which Lessee is a
party or any action taken or to be taken pursuant to the Operative
Documents to which Lessee is a party, or (ii) which if adversely determined
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(5) Managing General Partner. HCS I is the managing general
------------------------
partner of Lessee. Except as set forth in the Disclosure Schedule, there
are no outstanding subscriptions, options, warrants, calls, rights
(including preemptive rights) or other arrangements or commitments of any
nature relating to any Equity Interest in Lessee.
(6) Projections. As of the Closing Date, to the knowledge of
-----------
Lessee, the assumptions set forth in the Projections are reasonable and
consistent with each other and with all facts known to Lessee, and the
Projections were reasonably based on such assumptions at the time such
Projections were prepared. Nothing in this Section 4.1(f) shall be
--------------
construed as a representation or covenant that the Projections, in fact,
will be achieved.
(7) No Other Agreements. None of Lessee, HCS I or HCS II is a
-------------------
party to any agreement to sell any interest in the Equipment or any portion
thereof (except as otherwise contemplated in the Operative Documents).
(8) Compliance With Law. With respect to the Equipment and the
-------------------
operation of the Resort, Lessee, HCS I and HCS II have at all times
complied and are in compliance with all Applicable Laws, except for any
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
(9) Investment Company Act. Lessee is not an "investment
----------------------
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
(10) Public Utility Holding Company. Lessee is not subject to
------------------------------
regulation as a "holding company," an "affiliate" of a "holding company,"
or a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
(11) Subjection to Government Regulation. Except in the case of
-----------------------------------
the ownership of, or the holding of an interest in, the Equipment following
the exercise of remedies under the Lease, no Participant will become
subject to ongoing regulation of its operations by a Governmental Authority
(excluding foreign Governmental Authorities) solely by reason of entering
into the Operative Documents or the consummation of the transactions
contemplated thereby; provided, however, that the Louisiana Gaming Control
-------- -------
Board may at any time require Trustee, Lessor or any Lender to file an
application with
-15-
<PAGE>
it for a finding of suitability to be affiliated with Lessee as set forth
in the Operative Documents. The exercise of remedies by any Participant
under any of the Operative Documents with respect to the Collateral will
not require the approval of or filing with any Gaming Authority except as
otherwise disclosed on Schedule V hereto.
--------
(l2) Securities Laws. Neither Lessee nor anyone authorized to act
---------------
on its behalf has, directly or indirectly, offered or sold any interest in
the Notes, the Equipment, the Lease or any of the Operative Documents in
violation of Section 5 of the Securities Act or any state securities laws.
(13) Federal Reserve Regulations. Lessee is not engaged
---------------------------
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulation U of the Board of Governors). No part of
any Advance will be used directly or indirectly for the purpose of
purchasing or carrying any such margin stock, to extend credit to others
for the purpose of purchasing or carrying any such margin stock or for any
other purpose violative of or inconsistent with any of the provisions of
Regulation T, U or X of the Board of Governors.
(14) Taxes. Lessee, HCS I and HCS II have filed all tax returns
-----
and reports required by law to have been filed by each of them and have
paid all material taxes and governmental charges thereby shown to be owing,
except any such taxes or charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on their books.
(15) Accuracy of Information. All material factual information
-----------------------
heretofore or contemporaneously furnished by or on behalf of Lessee in
writing to the Participants and the Arranger for purposes of or in
connection with this Agreement or any transaction contemplated hereby is,
and all other such factual information hereafter furnished by or on behalf
of Lessee to the Participants and the Arranger will be, true and accurate
in every material respect on the date as of which such information is dated
or certified and (except as to factual information hereafter furnished) as
of the date of execution and delivery of this Agreement by the Participants
and the Arranger, and such information is not, or shall not be, as the case
may be, incomplete by omitting to state any material fact necessary to make
such information not misleading.
(16) Licenses, Registrations and Permits. As of any date on which
-----------------------------------
this representation is made, all licenses, registrations and permits
required of Lessee as of such date by any Governmental Authority having
jurisdiction over Lessee shall have been obtained for (i) the use and
occupancy of the Resort if on or at any time prior to such date the Resort
is or was Operating, and (ii) the installation and operation of the
Equipment on the Resort, except where the failure to obtain the same would
not reasonably be expected to have, individually or the aggregate, a
Material Adverse Effect.
-16-
<PAGE>
(17) Gaming Licenses. All Gaming Licenses required to be held by
---------------
Lessee, its Restricted Subsidiaries, HCS I and HCS II for the conduct of
their respective businesses on or with respect to the Resort, as then
conducted as of each date this representation is made, are current and
valid, except where the failure to obtain or maintain the same would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. Upon Opening of the Resort, Lessee, its
Restricted Subsidiaries, HCS I and HCS II will hold all Gaming Licenses
necessary for the operation of the Casino.
(18) Title to Property. Lessee has good and indefeasible
-----------------
leasehold title to the land and buildings constituting the Resort, subject
to "Permitted Encumbrances" (as such term is defined in the Ground Lease).
(19) Insurance. From and after the Initial Advance Date, Lessee
---------
has obtained or caused to be obtained insurance coverage covering the
Equipment which meets in all respects the requirements of the Lease, and
such coverage is in full force and effect.
(20) Defaults. No event has occurred and is continuing that is a
--------
Default or Event of Default, nor is Lessee in default under any instrument
evidencing any Indebtedness, or under any material agreement relating
thereto or under any indenture, mortgage, deed of trust, security
agreement, lease, franchise or other agreement or other instrument to which
Lessee is a party or by which Lessee or any of its material assets is
subject or bound, including the Indenture, which would reasonably be
expected to result in a Material Adverse Effect.
(21) Perfection of Security Interests. Upon the filing of
--------------------------------
appropriate UCC Financing Statements with the Secretary of State of Texas
and the Clerks of Court of each of Bossier Parish and Caddo Parish,
Louisiana, Trustee/Lessor, for the benefit of the Lenders, will have an
enforceable, perfected first priority Lien of record in the Priority
Collateral (and a perfected Lien, which may or may not be a first priority
Lien, in the balance of the Lessee Collateral) granted pursuant to the
Lease as against all Persons, including Lessee and its creditors, subject
to Permitted Liens.
(22) No Change in Name or Entity. As of the date hereof, Lessee
---------------------------
has not, prior to the date of this Agreement, changed its name or been the
surviving entity of a merger or consolidation.
(23) Purchase Price. The fair market value of the items of
--------------
Equipment accepted on each Advance Date is approximately equal to the sum
of the invoice cost for the items of Equipment identified in the applicable
Advance Request plus any Charges properly attributable thereto.
-17-
<PAGE>
(24) Purchase Contracts. Each purchase order with respect to
------------------
which a Purchase Order Assignment applies is assignable by Lessee (or an
affiliate thereof) in the manner required by this Agreement.
(25) No Transfer Taxes. No sales, use, exercise, transfer or
-----------------
other tax, fee or imposition shall result from the sale, transfer or
purchase of any item of Equipment or any Loan pursuant to Article II,
----------
except such taxes, fees or impositions that have been paid or will be paid
in full on or prior to the applicable Advance Date.
SECTION 1.17 Representations and Warranties of Each Lender. Each Lender
---------------------------------------------
represents and warrants, severally and only as to itself, to each of the other
parties hereto as follows:
(1) Due Organization, etc. It is duly organized and validly
----------------------
existing under the laws of the jurisdiction of its organization and has the
requisite power and authority to enter into and perform its obligations as
a Lender under each Operative Document to which it is or will be a party
and each other agreement, instrument and document to be executed and
delivered by it in connection herewith or therewith.
(2) Authorization; No Conflict. The execution and delivery by it
--------------------------
of, the consummation by it of the transactions provided for in, and the
compliance by it with each of the provisions applicable to it of, each
Operative Document to which it is or is to be a party, as Lender, have been
duly authorized by all necessary action on its part; and neither the
execution and delivery thereof, nor the consummation of the transactions
contemplated thereby, nor compliance by it, as Lender, with any of the
terms and provisions thereof (i) requires any approval of its stockholders,
partners or members, as the case may be, or approval or consent of any
trustee or holders of any of its indebtedness or obligations, (ii)
contravenes or will contravene any Applicable Laws currently in effect
applicable to or binding on it (except no representation or warranty is
made as to any Applicable Laws to which it or the Equipment, directly or
indirectly, may be subject because of the lines of business or other
activities of Lessee) or (iii) results in any breach of, or constitutes any
default under, any indenture, mortgage, chattel mortgage, deed of trust,
lease, conditional sales contract, loan or credit arrangement, other
material agreement or instrument, corporate charter, by-laws, partnership
agreement, operating agreement or other agreement or instrument to which it
is a party or by which it or its properties may be bound or affected.
(3) ERISA. It is purchasing its interest in its Note with assets
-----
that are either (i) not assets of any Plan, Multiemployer Plan or Benefit
Arrangement (or its related trust) which is subject to Title I of ERISA or
Section 4975 of the Code, or (ii) assets of any Plan, Multiemployer Plan or
Benefit Arrangement (or its related trust) which is subject to Title I of
ERISA or Section 4975 of the Code, but for which there is available an
exemption from the prohibited transaction rules under Section 406(a) of
ERISA and Section 4975 of the Code and such exemption is immediately
applicable to
-18-
<PAGE>
each transaction contemplated by the Operative Documents to the extent that
any other party to such transaction is a "party in interest" as defined in
Section 3(14) of ERISA, or a "disqualified person" as defined in Section
4975(e)(2) of the Code, with respect to such plan assets.
(4) Investment in Notes. It is acquiring its Note for its own
-------------------
account for investment and not with a view to any distribution (as such
term is used in Section 2(11) of the Securities Act) thereof, and if in the
future it should decide to dispose of all or any portion of its interest in
its Note or other Operative Documents, it understands that it may do so
only in compliance with the Securities Act, and the rules and regulations
of the Commission thereunder, and any applicable state securities laws.
Neither it nor anyone authorized to act on its behalf has taken or will
take any action which would subject the issuance or sale of any Note, the
Trust Estate (including the Equipment constituting a part thereof), the
Collateral or the Lease to the registration requirements of Section 5 of
the Securities Act. Subject to the foregoing, it is understood among the
parties that the disposition of each Lender's property shall be at all
times within its control.
(5) Lessor Liens. The Equipment is free and clear of all Lessor
------------
Liens attributable to it.
SECTION 1.18 Representations and Warranties of Bank. First Security
--------------------------------------
Bank, National Association, in its individual capacity ("Bank"), represents and
----
warrants to each of the other parties hereto as follows:
(1) Chief Executive Office. Bank's "chief executive office" and
----------------------
"principal place of business" as such terms are used in Section 9-103(3) of
the UCC and the place where the documents, accounts and records relating to
the transactions contemplated by the Operative Documents are kept is
located at 79 South Main Street, Salt Lake City, Utah 84111.
(2) Due Organization, etc. Bank is a national banking
----------------------
association duly organized and validly existing in good standing under the
laws of the United States of America and has full power and authority to
execute, deliver and perform its obligations (i) in its individual capacity
under the Trust Agreement and, to the extent it is a party hereto in its
individual capacity, this Agreement, and (ii) as Trustee and Lessor under
the Trust Agreement, under this Agreement and each other Operative Document
to which it is or will be a party as Trustee or Lessor.
(3) Due Authorization; Enforceability. The Operative Documents
---------------------------------
to which Bank individually or in its capacities as Trustee or Lessor is or
will be a party have been or will be, on the date required to be delivered
hereby, duly authorized, executed and delivered by or on behalf of Bank (in
its individual capacity or in its capacities as Lessor or Trustee, as
applicable) and are, or upon execution and delivery by Bank will be, legal,
-19-
<PAGE>
valid and binding obligations of Bank (in its individual capacity or in its
capacities as Lessor or Trustee, as applicable), enforceable against it in
such capacities in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, or similar
laws affecting creditors' rights generally and by general equitable
principles.
(4) No Conflict. The execution and delivery by (i) Bank, in its
-----------
individual capacity, of the Trust Agreement and, to the extent it is a
party hereto in its individual capacity, this Agreement, and (ii) Bank, in
its capacity as Trustee or Lessor, as applicable, of each Operative
Document to which Bank, in its capacities as Lessor or Trustee, is or will
be a party, are not and will not be, and the performance by Bank, in its
individual capacity or as Trustee or Lessor, as the case may be, of its
obligations under each are not and will not be inconsistent with the
articles of association or by-laws of Bank, do not and will not contravene
any Applicable Laws of the United States of America or the State of Utah
relating to the banking or trust powers of Bank, and do not and will not
result in a breach of or constitute a default under (with or without the
giving of notice or lapse of time or both) any indenture, mortgage, deed of
trust, lease, loan or credit agreement or any other agreement or instrument
to which Bank is a party or by which it or its properties may be bound or
affected.
(5) No Approvals, etc. Neither the execution and delivery by
------------------
Bank in its individual capacity or as Trustee or Lessor, as the case may
be, of any of the Operative Documents to which it is a party requires any
Governmental Approval by any Governmental Authority under any Applicable
Laws of the United States of America or the State of Utah relating to the
banking or trust powers of Bank.
(6) Litigation. There is no action, proceeding or investigation
----------
pending or threatened against Bank (in its individual capacity or as
Trustee or Lessor) which questions the validity of the Operative Documents
or which is reasonably likely to result, individually or in the aggregate,
in any material adverse effect on the ability of Bank (in its individual
capacity or as Trustee or Lessor) to perform its obligations (in any such
capacity) under the Operative Documents to which it is a party.
(7) Lessor Liens. The Equipment is free and clear of all Lessor
------------
Liens attributable to Bank (in its individual capacity).
(8) Securities Act. Neither Bank (in its individual capacity or
--------------
as Trustee or Lessor) nor anyone authorized to act on its behalf has,
directly or indirectly, in violation of Section 5 of the Securities Act or
any state securities laws, offered or sold any interest in the Notes, the
Equipment or the Lease, or in any security or lease the offering of which,
for purposes of the Securities Act or any state securities laws, would be
deemed to be part of the same offering as the offering of the
aforementioned securities or leases, or solicited any offer to acquire any
of the aforementioned securities or leases.
-20-
<PAGE>
SECTION 1.19 Representations and Warranties of Administrative Agent.
------------------------------------------------------
First Security Trust Company of Nevada, in its individual capacity, hereby
represents and warrants to each of the other parties hereto as follows:
(1) Due Organization, etc. Administrative Agent is duly
----------------------
organized and validly existing under the laws of the jurisdiction of its
organization and has the requisite power and authority to execute, deliver
and perform its obligations under the Operative Documents to which it is or
will be a party.
(2) Due Authorization; Enforceability. The Operative Documents
---------------------------------
to which Administrative Agent is or will be a party have been or will be,
on the date required to be delivered hereby, duly authorized, executed and
delivered by Administrative Agent, and are, or, upon execution and delivery
will be, legal, valid and binding obligations of Administrative Agent,
enforceable against it in accordance with their respective terms, except as
such enforcement may be limited by applicable bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and by general equitable
principles.
(3) No Conflict. Neither the execution and delivery by
-----------
Administrative Agent of the Operative Documents to which it is or will be a
party, either in its individual capacity or as Administrative Agent, or
both, nor performance of its obligations thereunder in either such
capacity, results or will result in a breach of, or constitutes or will
constitute a default under (with or without the giving of notice or lapse
of time or both), or violates or will violate the terms, conditions or
provisions of: (i) the articles of incorporation of Administrative Agent;
(ii) any agreement to which Administrative Agent, either in its individual
capacity or as Administrative Agent, or both, is now a party or by which it
or any of its properties, either in its individual capacity or as
Administrative Agent, or both, is bound or affected, where such breach,
default or violation would be reasonably likely to materially and adversely
affect the ability of Administrative Agent, either in its individual
capacity or as Administrative Agent, or both, to perform its obligations
under any Operative Document to which it is or will be a party, either in
its individual capacity or as Administrative Agent, or both; or (iii) any
Applicable Laws of the United States of America or the State of Nevada
relating to the banking or trust powers of Administrative Agent, where such
conflict, breach, default or violation would be reasonably likely to
materially and adversely affect the ability of Administrative Agent, either
in its individual capacity or as Administrative Agent, or both, to perform
its obligations under any Operative Document to which it is or will be a
party in any such capacity.
(4) No Approvals, etc. No Governmental Approval by any
------------------
Governmental Authority under any Applicable Laws of the United States of
America or the State of Nevada relating to the banking or trust powers of
Administrative Agent is or will be required in connection with the
execution and delivery by Administrative Agent, in its individual capacity
or as Administrative Agent, or both, of the Operative Documents to which it
is party or the performance by Administrative Agent, in its individual
capacity
-21-
<PAGE>
or as Administrative Agent, or both, of its obligations under such
Operative Documents.
ARTICLE V
COVENANTS OF LESSEE
-------------------
SECTION 1.20 Further Assurances. Lessee, at its own cost and expense,
------------------
will cause to be promptly and duly taken, executed, acknowledged and delivered
all such further acts, documents and assurances as the Required Lenders
reasonably may request from time to time in order to carry out more effectively
the intent and purposes of this Agreement and the other Operative Documents to
which Lessee is a party and the transactions contemplated thereby. Lessee, at
its own cost and expense, will cause all financing statements, fixture filings
and other documents, to be recorded or filed at such places and times and in
such manner, and will take all such other actions or cause such actions to be
taken, as may be necessary or as may be reasonably requested by the Required
Lenders in order to establish, preserve, protect and perfect the title of Lessor
to the Equipment and Lessor's and Trustee's rights under this Agreement and the
other Operative Documents and to perfect, preserve and protect the first and
prior Lien of the Security Agreement on the Trust Estate in favor of
Administrative Agent for the benefit of the Lenders.
SECTION 1.21 Consolidation, Merger, Sale, etc.
---------------------------------
(1) Consolidation, Merger or Sale of Assets. Lessee may not,
---------------------------------------
directly or indirectly, (a) consolidate or merge with or into another
Person (whether or not Lessee is the surviving entity) or (b) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
and its Restricted Subsidiaries' properties or assets, taken as a whole, in
one or more related transactions, to another Person; unless:
(1) either (A) Lessee is the surviving entity or (B) the
Person formed by or surviving any such consolidation or merger (if
other than Lessee) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any State
thereof or the District of Columbia;
(2) the Person formed by or surviving any such
consolidation or merger (if other than Lessee), or the Person to which
such sale, assignment, transfer, conveyance or other disposition shall
have been made, assumes all the obligations of Lessee under this
Agreement and all other applicable Operative Documents, pursuant to
agreements reasonably satisfactory to the Required Lenders;
(3) immediately after such transaction no Default or Event
of Default exists;
(4) such transaction would not result in the loss or
suspension
-22-
<PAGE>
or material impairment of any of Lessee's or any of its Restricted
Subsidiaries' Gaming Licenses unless a comparable replacement Gaming
License is effective prior to or simultaneously with such loss,
suspension or material impairment;
(5) Lessee or the Person formed by or surviving any such
consolidation or merger (if other than Lessee), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been
made, will, on the date of such transaction, after giving pro forma
effect to such transaction and any related financing transactions as
if the same had occurred at the beginning of the applicable four-
quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to Section 5.19(b); and
---------------
(6) such transaction would not require any Participant to
obtain a Gaming License or be qualified or found suitable under the
law of any applicable gaming jurisdiction; provided, however, that
-------- -------
such Participant would not have been required to obtain a Gaming
License or be qualified or found suitable under the laws of any
applicable gaming jurisdiction in the absence of such transaction.
In addition, Lessee may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person.
Notwithstanding the foregoing, Lessee may reorganize as a
corporation or other business entity in accordance with the procedures
established in Section 5.2(b), provided that Lessee has delivered to
-------------- --------
Administrative Agent (with original counterparts for Trustee/Lessor and
each Lender) an opinion of counsel in the United States reasonably
acceptable to the Required Lenders confirming that the reorganization is
not adverse to the Participants (it being recognized that the
reorganization will not be deemed adverse to the Participants solely
because (x) of the accrual of deferred tax liabilities resulting from the
reorganization or (y) the successor or surviving corporation (1) is subject
to income tax as a corporate entity or (2) is considered to be an
"includible corporation" of an affiliated group of corporations within the
meaning of the Code, or any similar state or local law).
(2) Successor Corporation Substituted. Upon any consolidation or
---------------------------------
merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of Lessee in
accordance with Section 5.2(a), the successor corporation formed by such
--------------
consolidation or into or with which Lessee is merged, or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made,
shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Agreement and the other Operative
Documents referring to the "Lessee" shall refer instead to the successor
corporation and not to Lessee), and may exercise every right and power of,
Lessee under this Agreement and the other Operative Documents with the same
-23-
<PAGE>
effect as if such successor Person had been named as Lessee herein;
provided, however, that (i) the surviving entity or acquiring corporation
-------- -------
shall (A) assume all of the Obligations of Lessee incurred under this
Agreement and the other Operative Documents, (B) acquire and own and
operate, directly or through Subsidiaries, all or substantially all of the
properties and assets then constituting the assets of Lessee or any of its
Restricted Subsidiaries, as the case may be, (C) have been issued Gaming
Licenses to operate the acquired casino operations and entities
substantially in the manner and scope operated prior to such transaction,
which Gaming Licenses are in full force and effect and (D) be in compliance
fully with Section 5.2(a) and (ii) Lessee shall deliver to Administrative
--------------
Agent (with copies for Trustee/Lessor and each Lender) a certificate signed
by a Responsible Official of Lessee and an opinion of counsel acceptable to
the Required Lenders, subject to customary assumptions and exclusions,
stating that the proposed transaction complies with this Section 5.2;
-----------
provided, further, however, that Lessee shall not be relieved from the
-------- -------
obligation to pay its Obligations (including Rent) under this Agreement,
the Lease and the other Operative Documents except in the case of a sale of
all of one or Lessee's assets that meets the requirements of Section
-------
5.2(a).
SECTION 1.22 Existence. Subject to Section 5.2, Lessee shall do or cause
--------- -----------
to be done all things necessary to preserve and keep in full force and effect
(a) its partnership existence and the corporate, partnership or other existence
of each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of Lessee or any such
Subsidiary and (b) the rights (charter and statutory), licenses and franchises
of Lessee and its Subsidiaries; provided, however, that Lessee shall not be
-------- -------
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Subsidiaries, if Lessee's Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of Lessee and its Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect to the
Participants.
SECTION 1.23 Liens. Lessee shall not incur or suffer or permit to exist
-----
any Lien on any of the Equipment or the other Collateral other than Permitted
Liens.
SECTION 1.24 Compliance Certificate. Within 120 days after the close of
----------------------
each fiscal year of Lessee, Lessee shall deliver to each Participant a
certificate (a "Compliance Certificate"), in form reasonably acceptable to the
----------------------
Required Lenders, signed by a Responsible Official of Lessee, to the effect that
the signer is familiar with or has reviewed the relevant terms of this
Agreement, the Lease and each other Operative Document to which Lessee is a
party and has made, or caused to be made, under his or her supervision, a review
of the transactions contemplated hereby and thereby, as well as the condition of
the Equipment, during the preceding fiscal year, and that such review has not
disclosed the existence during such fiscal year of any condition or event which
constitutes a Lease Event of Default or Casualty (except as described therein),
nor does the signer have knowledge, after due inquiry, of the existence, as of
the date of such certificate, of any condition or event which constitutes a
Lease Default, a Lease Event of Default or Casualty or, if any such condition or
event existed or exists, specifying the nature and period of existence thereof
and what action Lessee has taken, is taking or proposes to take with
-24-
<PAGE>
respect thereto.
SECTION 1.25 Investigation by Governmental Authorities. Lessee shall
-----------------------------------------
deliver to Administrative Agent promptly upon Lessee's receiving written notice
of the intent by a Governmental Authority to (a) revoke or suspend any Gaming
License necessary for the ownership or operation of the Casino or gaming
operations in respect thereof, (b) restrict or modify any such Gaming License if
the effect of any such restriction or modification would reasonably be expected
to have, individually or in the aggregate with other restrictions or
modifications, a Material Adverse Effect, (c) take an action which would
constitute a requisition of title to any of the Equipment, (d) investigate the
Equipment for a material violation of any Applicable Laws with respect to the
Equipment, including any Environmental Law, under which liability may be imposed
upon any Participant or Lessee, or (e) investigate the Equipment (other than
routine fire, life-safety and similar inspections) for any violation of
Applicable Laws under which criminal liability may be imposed upon any
Participant or Lessee.
SECTION 1.26 Books and Records. Lessee will, at all times, maintain
-----------------
books and records separate from those of any other Person in accordance with
GAAP.
SECTION 1.27 Payment of Taxes, etc. Lessee shall pay, and shall cause
----------------------
each of its Subsidiaries to pay, prior to delinquency, (a) all sales, use,
excise and other taxes, assessments and governmental charges or levies imposed
upon the Lessee Collateral except such as are contested in good faith and by
------
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Participants, and (b) all lawful claims
that, if unpaid, might by law become a Lien upon the Lessee Collateral, other
than those arising from Permitted Liens.
SECTION 1.28 Inspection. Lessee shall permit the Participants, or any
----------
agents or representatives of any thereof, upon reasonable prior notice, at any
time during regular business hours of Lessee and as often as reasonably
requested (but not so as to materially interfere with the business of Lessee),
to examine and make copies of, and abstracts from, the records and books of
account of Lessee and its Restricted Subsidiaries and to discuss the affairs,
finances and accounts of Lessee and its Restricted Subsidiaries with any of
Lessee's or any of HCS I's or HCS II's officers, managers, key employees or
accountants, provided that Lessee shall be afforded reasonable prior notice of,
--------
and an opportunity to participate in, any such discussions with Lessee's
accountants. Lessee shall, upon reasonable prior notice from any Participant
(except that no notice shall be required if a Lease Event of Default has
occurred and is continuing), permit the Participants and their respective
authorized representatives to inspect the Equipment during normal business hours
of Lessee, provided that such inspections shall not unreasonably interfere with
--------
Lessee's business operations at the Resort. Without in any way limiting any of
the foregoing rights of the Participants to conduct inspections from time to
time, Lessee agrees to reimburse Administrative Agent for the reasonable costs
and expenses of conducting one such inspection per calendar year (should
Administrative Agent (at the direction of the Required Lenders) elect to conduct
such inspection); provided, however, that all inspections by the Participants
-------- -------
conducted after the occurrence and during the continuance of a Lease Event of
Default shall be at the sole
-25-
<PAGE>
cost and expense of Lessee.
SECTION 1.29 Compliance with Laws. Lessee shall comply, and shall cause
--------------------
each of its Restricted Subsidiaries to comply, within the time period, if any,
given for such compliance by the relevant Governmental Authority or Authorities
with enforcement authority, with all Applicable Laws noncompliance with which
would reasonably be expected to have a Material Adverse Effect, except that
------
Lessee and its Related Subsidiaries need not comply with any Applicable Law then
being contested by any of them in good faith by appropriate proceedings.
SECTION 1.30 Maintenance of Insurance. Lessee shall maintain insurance
------------------------
coverage covering the Equipment which meets in all respects the requirements of
Article IX of the Lease, and such coverage shall remain in full force and effect
- ----------
so long as any Loan remains outstanding.
SECTION 1.31 Change of Name or Principal Place of Business. Lessee shall
---------------------------------------------
furnish to Administrative Agent notice, on or before the thirtieth (30th) day
before effecting same, of any relocation of its chief executive office,
principal place of business or the office where it keeps its records concerning
its accounts or contract rights relating to the Equipment or the Equipment or
Lessee changes its name, identity, organizational structure or taxpayer
identification number provided that no such prior notice shall be required in
--------
connection with Lessee's relocation of its chief executive office and principal
place of business to 451 Clyde Fant Parkway, Shreveport, Louisiana 71101 upon
the opening of the Resort.
SECTION 1.32 Financial and Other Information. Lessee shall deliver to
-------------------------------
Administrative Agent the following financial and other information (with copies
for Trustee/Lessor and each Lender):
(1) Financial Reports. Whether or not required by the
-----------------
Commission, so long as any Obligations are outstanding, Lessee will furnish
to the Participants, within 15 days following the time periods specified in
the Commission's rules and regulations: (i) all consolidated quarterly and
annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if Lessee were required
to file such Forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect to the
annual information only, a report on the annual financial statements by
Lessee's certified independent accountants; and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if
Lessee were required to file such reports. In addition, within 15 days
after filing such documents with the Commission, Lessee shall furnish to
the Participants the items in (i) and (ii) of this paragraph with respect
to HCS I, HCS II, any Restricted Subsidiary of Lessee, and HWCC-Louisiana.
(2) Unrestricted Subsidiaries. If Lessee has designated any of
-------------------------
its Subsidiaries as Unrestricted Subsidiaries, then the consolidated
quarterly and annual financial information required by the preceding
paragraph will include a reasonably
-26-
<PAGE>
detailed presentation, either on the face of the financial statements or in
the footnotes thereto, and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, of the financial condition
and results of operations of Lessee and its Restricted Subsidiaries
separate from the financial condition and results of operations of Lessee's
Unrestricted Subsidiaries as required by the rules and regulations of the
Commission.
(3) Operating Report. From and after the Resort becomes
----------------
Operating, within 30 days after the end of each calendar month, a summary
unaudited statement of operations of Lessee for such month, in a form
reasonably acceptable to the Required Lenders, together with a written
report as to current operating data and a narrative statement discussing
any significant trends reflected therein.
(4) Default. As soon as possible and in any event within seven
-------
(7) Business Days after the occurrence of each Default or Event of Default
under any Operative Document a statement of a Responsible Official of
Lessee setting forth the details of such Default or Event of Default and
the action that Lessee (or any other applicable party) proposes to take
with respect thereto.
(5) Condition. Promptly after becoming aware thereof, written
---------
notice of any Material Adverse Effect.
(6) Proceedings. Promptly after becoming aware thereof, written
-----------
notice of the commencement or existence of any proceeding against Lessee,
its Restricted Subsidiaries, HCS I, HCS II or Manager by or before any
Governmental Authority that might, in the reasonable judgment of Lessee,
reasonably be expected to result in a Material Adverse Effect.
(7) Environmental. Promptly after the occurrence of any
-------------
Environmental Violation or written notice alleging Environmental Violation,
a statement of a Responsible Official of Lessee setting forth the details
of such violation or alleged violation and the action that Lessee proposes
to take with respect thereto.
(8) Annual Projections. As soon as possible and in any event no
------------------
later than the required delivery date specified for delivery of Lessee's
annual reports described in subsection (a) above, financial projections of
--------------
Lessee and its Subsidiaries for the fiscal year immediately following the
fiscal year covered by such annual financial statements, setting forth, in
reasonable detail, a statement, on a monthly basis, of the projected
consolidated expenses and cash flows of Lessee and its Subsidiaries.
(9) Public Information. To the extent applicable, promptly after
------------------
the same are available, copies of each annual report, proxy or financial
statement or other report or communication sent to the stockholders of HCS
I or HCS II, as the case may be, and copies of all annual, regular,
periodic and special reports and registration statements
-27-
<PAGE>
which Lessee, HCS I or HCS II may file or be required to file with the
Commission under Section 13 or 15(d) of the Exchange Act and not otherwise
required to be delivered to the Participants pursuant to other provisions
of this Section 5.13
------------
(10) Amendments, Modifications, etc. Promptly after the effective
-------------------------------
date thereof, copies of any and all material amendments, modifications and
waivers pertaining in any manner to the Indenture or any of the documents
relating thereto.
(11) Other Information. Promptly upon written request therefor,
-----------------
any other information in respect of Lessee, its Restricted Subsidiaries,
HCS I, HCS II or the Manager (to the extent readily available to Lessee at
no or nominal cost), reasonably requested by any Participant.
SECTION 1.33 Securities. Neither Lessee nor anyone authorized to act on
----------
behalf of Lessee will take any action which would subject the issuance or sale
of the Notes, the Equipment or the Lease, or in any security or lease the
offering of which, for purposes of the Securities Act or any state securities
laws, would be deemed to be part of the same offering as the offering of the
aforementioned securities or leases, to the registration requirements of Section
5 of the Securities Act or any state securities laws.
SECTION 1.34 Gaming Equipment Costs. As of the date of the last Advance,
----------------------
Lessee shall have caused the aggregate amount disbursed hereunder with respect
to Equipment Costs for Gaming Equipment to be not less than one-quarter of the
total amount disbursed to or for the benefit of Lessee hereunder.
SECTION 1.35 Stay, Extension and Usury Laws. Lessee 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 or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Agreement and
the other Operative Documents; and Lessee (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 or therein granted to any Participant, but
shall suffer and permit the execution of every such power as though no such law
has been enacted.
SECTION 1.36 Restricted Payments. Lessee shall not, and shall not permit
-------------------
any of its Restricted Subsidiaries to, directly or indirectly: (a) declare or
pay any dividend or make any other payment or distribution on account of
Lessee's or any of its Restricted Subsidiaries' Equity Interests (including any
payment in connection with any merger or consolidation involving Lessee or any
of its Restricted Subsidiaries) or to the direct or indirect holders of Lessee's
or any of its Restricted Subsidiaries' Equity Interests in any capacity (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of Lessee or dividends or distributions payable to Lessee or
a Restricted Subsidiary of Lessee); (b) purchase, redeem or otherwise acquire or
retire for value (including without limitation in connection with any merger
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<PAGE>
or consolidation involving Lessee) any Equity Interests of Lessee or any direct
or indirect parent of Lessee; (c) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is pari passu with or subordinated to the obligations of
Lessee hereunder and under the Lease, except (i) a payment of interest or
principal at the stated maturity thereof and (ii) a payment at any time of
interest or principal on Indebtedness permitted by clauses (h) or (j) of the
second paragraph of Section 4.09 of the Indenture as in effect as of the Closing
Date; or (d) make any Restricted Investment (all such payments and other actions
set forth in clauses (a) through (d) above being collectively referred to as
----------- ---
"Restricted Payments"), unless such Restricted Payment is permitted under
- --------------------
Section 4.07 of the Indenture as in effect on the Closing Date.
SECTION 1.37 Dividend and Other Payment Restrictions Affecting
-------------------------------------------------
Subsidiaries. Lessee shall not, and shall not permit any of its Restricted
- ------------
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to: (a) pay dividends or make any other distributions on
its Capital Stock to Lessee or any of its Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its profits,
or pay any Indebtedness owed to Lessee or any of its Restricted Subsidiaries;
(b) make loans or advances to Lessee or any of its Restricted Subsidiaries; or
(c) transfer any of its properties or assets to Lessee or any of its Restricted
Subsidiaries other than as may be permitted under Section 4.08 of the Indenture
as in effect on the Closing Date.
SECTION 1.38 Incurrence of Indebtedness and Issuance of Preferred Equity.
-----------------------------------------------------------
(1) Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently
or otherwise, with respect to (collectively, "incur") any Indebtedness
-----
(including Acquired Debt), and Lessee shall not issue any Disqualified
Stock and shall not permit any of its Subsidiaries to issue any shares of
preferred equity; provided, however, that Lessee may incur Indebtedness
-------- -------
(including Acquired Debt) or issue Disqualified Stock, if (a) the Resort is
Operating; and (b) the Fixed Charge Coverage Ratio for Lessee's most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued
would have been at least 2.0 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the preferred equity or
Disqualified Stock had been issued, as the case may be, at the beginning of
such four-quarter period; provided, however, that the foregoing shall not
-------- -------
prohibit the incurrence of any Permitted Debt so long as no Lease Default
or Lease Event of Default shall have occurred and be continuing.
(2) Lessee will not incur any Indebtedness (including Permitted
Debt) that is contractually subordinated in right of payment to any other
Indebtedness of Lessee unless such Indebtedness is also contractually
subordinated in right of payment to its
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<PAGE>
Obligations (including payment of Rent) to the Participants under the
Operative Documents on substantially identical terms; provided, however,
-------- -------
that no Indebtedness of Lessee shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of Lessee solely
by virtue of being unsecured.
SECTION 1.39 Asset Sales. Lessee shall not, and shall not permit any of
-----------
its Restricted Subsidiaries to, consummate an Asset Sale unless permitted to do
so under the provision of Section 4.10 of the Indenture as in effect on the
Closing Date.
SECTION 1.40 Transactions with Affiliates. Lessee shall not, and shall
----------------------------
not permit any of its Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"),
---------------------
unless: (a) such Affiliate Transaction is on terms that are no less favorable
to Lessee or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by Lessee or such Restricted Subsidiary
with an unrelated Person; or (b) is otherwise permitted (or not prohibited, as
the case may be) by the provisions of Section 4.12 of the Indenture as in effect
on the Closing Date.
SECTION 1.41 Line of Business. Lessee shall not, and shall not permit
----------------
any Subsidiary to, engage in any business or investment activities other than a
Permitted Business. Neither Lessee nor any of its Subsidiaries may conduct a
Permitted Business in any gaming jurisdiction in which Lessee or such Subsidiary
is not licensed as of the Closing Date if any of the Participants shall be
required to be licensed as a result thereof ; provided, however, that the
-------- -------
provisions described in this sentence shall not prohibit Lessee or any of its
Subsidiaries from conducting a Permitted Business in any jurisdiction that does
not require the licensing or qualification of all the Participants, but reserves
the discretionary right to require the licensing or qualification of any of the
Participants. Lessee shall not, and shall not permit any of its Subsidiaries
to, engage in any business, development or investment activity other than at or
in conjunction with the Resort until the Resort is Operating.
SECTION 1.42 Sale and Leaseback Transactions. Lessee will not, and will
-------------------------------
not permit any of its Restricted Subsidiaries to, enter into any sale and
leaseback transaction in violation of Section 4.20 of the Indenture as in effect
on the Closing Date.
SECTION 1.43 Limitation on Issuances and Sales of Equity Interests in
--------------------------------------------------------
Subsidiaries. All of Lessee's Restricted Subsidiaries, other than Shreveport
- ------------
Capital, shall be wholly owned by Lessee, by one or more of its Restricted
Subsidiaries or by Lessee and one or more of its Restricted Subsidiaries.
Lessee will not, and will not permit any of its Restricted Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Equity Interests in
any Restricted Subsidiary of Lessee to any Person (other than Lessee or a
Restricted Subsidiary of Lessee), unless (a) such transfer, conveyance, sale,
lease or other disposition is of all the Equity Interests in such Restricted
Subsidiary and (b) the cash net proceeds from such transfer,
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<PAGE>
conveyance, sale, lease or other disposition are applied in accordance with the
Indenture as in effect on the Closing Date. In addition, Lessee shall not permit
any of its Restricted Subsidiaries to issue any of its Equity Interests to any
Person other than to Lessee or one or more of its Restricted Subsidiaries.
SECTION 1.44 Restriction on Payment of Management Fees. Lessee shall
-----------------------------------------
not, directly or indirectly, pay to the Manager or any of its Affiliates any
Management Fees, except pursuant to the Management Agreement (as the same is in
effect on the Closing Date) in accordance with (a) Section 4.30 of the Indenture
as in effect on the Closing Date and (b) the Manager Subordination Agreement.
SECTION 1.45 Landlord Waiver and Consent. Lessee shall use commercially
---------------------------
reasonably efforts to obtain, within forty-five (45) days after the Closing
Date, an executed landlord consent and waiver from the City of Shreveport,
Louisiana (which landlord consent and waiver shall be in the form contemplated
by, and comply with the requirements of, Section 4.09 of the Ground Lease).
SECTION 1.46 Final Appraisal. Lessee shall provide, at its sole cost, to
---------------
Administrative Agent (with copies for Trustee/Lessor and each Lender) (a)
concurrently with the Advance Request pertaining to the Final Advance Date or
(b), if Lessee fails to designate a Final Advance Date, not later than ten (10)
days following the last day of the Commitment Period a final appraisal report
with respect to the Equipment, prepared by the appraiser that provided the
preliminary appraisal report described in Section 3.2(a), establishing (a) that
--------------
the fair market value of all of the Equipment on an installed, "in use" basis is
at least equal to the Purchase Price for such Equipment and (b) the estimated
value of such Equipment as of the last day of the Commitment Period, which final
appraisal report shall be otherwise reasonably satisfactory to the Required
Lenders.
ARTICLE VI
COVENANTS OF LESSOR, TRUSTEE, ADMINISTRATIVE AGENT AND LENDERS
--------------------------------------------------------------
SECTION 1.47 Covenants of Lessor, Trustee, Administrative Agent and the
----------------------------------------------------------
Lenders.
- -------
(1) Discharge of Liens. Each of the Lenders, Administrative
------------------
Agent, Lessor and Trustee covenants as to itself, and not jointly with any
other Person, that it will not, directly or indirectly, create, incur,
assume or permit to exist at any time, and will, at its own cost and
expense, take such action as may be necessary to promptly discharge, or to
cause to be discharged, any Lessor Liens attributable to it, and will
indemnify the Trust Estate in the amount of any diminution of the value
thereof and any costs and expenses associated therewith as a result of its
failure to comply with its obligations under this Section 6.1(a).
--------------
Notwithstanding the foregoing, none of the Lenders, Administrative Agent,
Lessor or Trustee, as the case may be, shall be required to so discharge
any such
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<PAGE>
Lessor Lien while the same is being contested in good faith by appropriate
proceedings diligently prosecuted so long as such proceedings shall not
involve any risk of invalidity or the loss of priority of the Lien of the
Lease or any risk of the sale, forfeiture, foreclosure or loss of, and
shall not interfere with the use or disposition of, any part of the
Equipment, the Lease or the Trust Estate or title thereto or any interest
therein or the payment of Rent; provided, however, that each Lender, Lessor
--------- -------
and Trustee each shall discharge any such Lessor Lien, whether or not
subject to contest as provided above, upon the purchase of the Equipment by
Lessee pursuant to the Lease.
(2) Quiet Enjoyment. Subject to the provisions of Section 3.5 of
--------------- -----------
the Lease, the rights of Lessor contained in Article X of the Lease and the
---------
other terms of the Operative Documents to which Lessee is a party, Lessee
shall peaceably and quietly have, hold and enjoy the Equipment free of any
claim or other action by Lessor or anyone claiming by, through or under
Lessor (other than Lessee) with respect to any matters arising from and
after the date any such Equipment becomes subject to the Lease. Such right
of quiet enjoyment is independent of, and shall not affect Lessor's (or any
other applicable Participant's) rights otherwise to initiate legal action
to enforce the obligations of Lessee under the Lease or any of the other
Operative Documents.
(3) Trust Agreement. Without prejudice to any right under the
---------------
Trust Agreement of Trustee to resign, or the Lenders' right under the Trust
Agreement to remove Trustee, Lessor and Trustee hereby agree with Lessee,
the Lenders and Administrative Agent (i) not to terminate or revoke the
trust created by the Trust Agreement except as permitted by Article IV of
----------
the Trust Agreement prior to the later of the Lease Termination Date or the
payment in full of the Obligations under the Notes, (ii) not to amend,
supplement or otherwise modify or consent to any amendment, supplement or
modification of any provision of the Trust Agreement prior to the Lease
Termination Date in any manner which would have a Material Adverse Effect
on the rights of any party thereto, and (iii) to comply with all of the
terms of the Trust Agreement applicable to it except for such
nonperformance that would not adversely affect any such party.
(4) Successor Trustee. Trustee or any successor may resign or be
-----------------
removed by the Lenders and a successor Trustee may be appointed, and a
Person may become Trustee under the Trust Agreement, only in accordance
with the provisions of Article III of the Trust Agreement. Notwithstanding
-----------
anything to the contrary contained in this Agreement or the Trust
Agreement, so long as no Lease Event of Default shall be continuing, the
appointment of a successor Trustee shall be subject to the consent of
Lessee (such consent not to be unreasonably withheld or delayed). In
addition, so long as there exists no Lease Event of Default, Lessee may
request Administrative Agent to remove Trustee in accordance with Section
-------
3.10 of the Trust Agreement. Upon receipt of such request, Administrative
----
Agent shall survey the Lenders to determine whether to proceed to remove
Trustee. If Required Lenders consent to such removal, Trustee shall be
removed in accordance with Section 3.10 of the Trust Agreement.
------------
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<PAGE>
(5) Indebtedness; Other Business. Trustee on behalf of the Trust
----------------------------
shall not contract for, create, incur or assume any indebtedness, or enter
into any business or other activity, other than pursuant to or under the
Operative Documents and, for the benefit of Lessor, Lessee, Administrative
Agent and the Lenders, agrees to be bound by Section 1.2(b) of the Trust
--------------
Agreement.
(6) Change of Principal Place of Business. Trustee shall give
-------------------------------------
prompt notice to Lenders, Lessor, Lessee and Administrative Agent if
Trustee's principal place of business or chief executive office, or the
office where the records concerning the accounts or contract rights
relating to the Equipment or the transactions contemplated by the Operative
Documents are kept, shall cease to be located at 79 South Main Street, Salt
Lake City, Utah 84111, or if it shall change its name, identity or
corporate structure.
(7) Loan Agreement. Trustee, Administrative Agent, Lessor,
--------------
Lessee, and each Lender hereby agree that, so long as the Lease is in
effect, Trustee shall not consent to or permit any amendment of the terms
and provisions of the Loan Agreement or any Note, whether or not any Lease
Event of Default shall have occurred and be continuing, if any such
amendment or action would have the effect of increasing the obligations of
Lessee or decreasing the rights of Lessee, in each case without the prior
written consent of Lessee, except that without such consent, Trustee may
waive performance by Administrative Agent of obligations to Trustee the
non-performance of which do not adversely affect Lessee. Each Lender
agrees to comply with Section 7.7 of the Loan Agreement.
-----------
(8) Distribution. Administrative Agent agrees to distribute any
------------
amount stated to be distributable by Administrative Agent to Lessee in the
Lease or any other Operative Document in accordance with the terms of such
document.
(9) Lease Financing Party Removal. Notwithstanding any other
-----------------------------
provision of this Agreement or any other Operative Document to the
contrary, if any Gaming Authority requires any of Lessor, Trustee, the
Lenders or the Arranger (or any successors thereto) (each, a "Lease
-----
Financing Party") to be licensed, qualified or found suitable under any
---------------
applicable Gaming Law, the Lease Financing Party shall apply for a license,
qualification or a finding of suitability within the time period required
by the Gaming Authority. If the Lease Financing Party fails to apply for
such license, qualification or finding of suitability within the required
time period, such Lease Financing Party shall be required to dispose of its
Notes within the time specified by the Gaming Authority and Lessee shall
have the right to cause the redemption of the Notes of such Lease Financing
Party, subject to approval of any applicable Gaming Authority, pursuant to
which redemption Lessee shall pay to such Lease Financing Party, in cash,
all outstanding principal amounts, accrued interest, fees and other amounts
payable to it under its Notes and the other Operative Documents.
Immediately upon the imposition of a requirement to dispose of Notes by a
Gaming Authority, such Lease Financing Party
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<PAGE>
shall, to the extent required by applicable law, have no further right (x)
to exercise, directly or indirectly, through any trustee or nominee or any
other Person or entity, any right conferred by the Notes or (y) to receive
any interest, dividends, economic interests or any other distributions or
payments with respect to the Notes or any remuneration in any form with
respect to the Notes from Lessee, Lessor or Trustee. Any Lease Financing
Party that is required to apply for a license, qualification or finding of
suitability must pay all fees and costs of any investigation by the
applicable Gaming Authorities. Lessee is not required to pay or reimburse
any Lease Financing Party who is required to apply for such license,
qualification or finding of suitability for the costs of the licensure or
investigation for such qualification or finding of suitability.
Administrative Agent shall notify the Lease Financing Parties in writing of
any such redemption as soon as practicable, provided, however, that until
-------- -------
such time as Administrative Agent receives notice from Lessee of such
redemption, Administrative Agent shall be entitled to treat the subject
Lease Financing Party as having all of its rights under the Operative
Documents. Administrative Agent shall report the names of the record Lease
Financing Parties to any Gaming Authority when required by law.
SECTION 1.48 Restrictions On and Effect of Transfer. No Lender shall
--------------------------------------
assign or delegate all or any portion of its right, title or interest in, to or
under any of the Operative Documents, its Commitment, the Loans or any Note,
except that (x) any Lender may pledge, assign or grant a security interest in
its interest to the Federal Reserve Board or any other central bank authority
with respect to such Lender, (y) upon satisfaction of the conditions set forth
in clauses (a) through (c) and (f) of this Section 6.2, any Lender may transfer
---------- --- --- -----------
all or any ratable portion of its interest to an Affiliate or to any other
existing Lender or any Affiliate of such Lender and, upon compliance with any
applicable provisions of Section 6.3(a), may sell, assign or otherwise transfer
--------------
a participation in its interest in any of the foregoing; provided, that no
--------
Participating Entity (as hereinafter defined) shall become, by means of such
transfer, a Lender under the Operative Documents, and Lessee shall be entitled
to continue to deal for all purposes under the Operative Documents exclusively
with the Lender who has transferred such participation, and (z) any Lender may
assign and delegate any ratable portion or all of such right, title and interest
upon the satisfaction of each of the following conditions (which conditions will
not be applicable to a transfer pursuant to clause (x) or (y) of this Section
---------- --- -------
6.2, unless otherwise provided above):
- ---
(1) Assumption of Obligations. Any transferee pursuant to this
-------------------------
Section 6.2 shall have executed and delivered to Administrative Agent,
-----------
Lessor and Trustee a letter in substantially the form of the Investor's
Letter attached hereto as Exhibit H, and thereupon the obligations of the
---------
transferring Lender under the Operative Documents shall be proportionately
released and reduced to the extent of such transfer. Upon any such transfer
as herein provided, (i) the transferring Lender shall still be entitled to
the benefit of Article VII, and (ii) the transferee shall be deemed to be
-----------
bound by all obligations (whether or not yet accrued) under, and to have
become a party to, all Operative Documents to which its transferor was a
party, shall be deemed the pertinent "Lender" for all purposes of the
Operative Documents and shall be deemed to have made
-34-
<PAGE>
that portion of the payments pursuant to this Agreement and the other
Operative Documents previously made or deemed to have been made by the
transferor represented by the interest being conveyed; and each reference
herein and in the other Operative Documents to the pertinent "Lender" shall
thereafter be deemed a reference to the transferee, to the extent of such
transfer, for all purposes. Upon any such transfer, Administrative Agent
shall promptly provide to Lessee, Lessor, Trustee and each Lender revised
Schedules I, II, and III to this Agreement, as applicable, to reflect the
----------- -- ---
relevant information for such new Lender and the Commitment of such new
Lender (and the revised Commitment of the transferor Lender if it shall not
have transferred its entire interest).
(2) Employee Benefit Plans. No Lender may make any such
----------------------
assignment, conveyance or transfer to, or in connection with, any
arrangement or understanding in any way involving any Plan, Multiemployer
Plan or Benefit Arrangement (or its related trust), as defined in Section
3(3) of ERISA, or with the assets of any such Plan, Multiemployer Plan or
Benefit Arrangement (or its related trust), within the meaning of Section
4975(e)(1) of the Code (other than a governmental plan, as defined in
Section 3(32) of ERISA), with respect to which Lessee or such Lender or any
of their Affiliates is a party in interest within the meaning of ERISA
Section 3(14) or a "disqualified person" within the meaning of Section
4975(e)(2) of the Code.
(3) Amounts. Any transfer of Notes shall be in a principal
-------
amount which is equal to or greater than $2,000,000, or, if less, the full
amount of such Lender's Loans or Commitment.
(4) Financial Condition of Transferee. So long as the
---------------------------------
Commitments are outstanding, no transfer by a Lender shall be effective
unless the transferee is (A) a bank or other financial institution with a
combined capital, surplus and undivided profits of at least $100,000,000,
or (B) a Subsidiary of such a bank or financial institution, provided that
-- --------
such bank or financial institution furnishes a guaranty with respect to the
Subsidiary transferee's obligations as a Lender, (C) any other Person,
provided the transferee's obligations as a Lender are guarantied by the
--------
transferor Lender.
(5) Effect. From and after any transfer of its Notes, the
------
transferring Lender shall be released, but only to the extent assumed by
the transferee in writing, from its liabilities and obligations hereunder
and under the other Operative Documents to which such transferor is a party
in respect of obligations to be performed on or after the date of such
transfer. Upon any transfer by a Lender as above provided, any such
transferee shall be deemed a "Lender" for all purposes of such documents
and each reference herein to a Lender shall thereafter be deemed a
reference to such transferee for all purposes, except as the context may
otherwise require.
(6) Confirmation Notice; Costs. Any Lender having effected a
--------------------------
transfer of its interest under this Section 6.2 shall give written notice
-----------
thereof to Lessee,
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<PAGE>
Lessor, Administrative Agent and Trustee within fifteen (15) Business Days
following such transfer, setting forth the name of the transferee, the
percentage of interest retained by such Lender, if any, and the date on
which such transfer became effective. All reasonable out-of- pocket costs
incurred by Lessor, Trustee or Administrative Agent in connection with any
such disposition by a Lender under this Section 6.2 shall be borne by such
-----------
Lender. In the event of a transfer under this Section 6.2(a), any expenses
--------------
incurred by the transferee in connection with its review of the Operative
Documents and its investigation of the transactions contemplated thereby
shall be borne by such transferee or the relevant Lender, as they may
determine, but shall not be considered costs and expenses which Lessee is
obligated to pay or reimburse under Section 9.16.
------------
(7) Lessee Consent. Any transferee of an interest transferred
--------------
pursuant to this Section 6.2 shall have obtained the prior written consent
-----------
of Lessee to such transfer, which consent shall not be unreasonably
withheld or delayed, provided that Lessee shall have no such consent right
--------
during the continuance of a Default or Event of Default and provided
--------
further that no such consent shall be required for any transfer made
-------
pursuant to clauses (x) and (y) above.
----------- ---
Notwithstanding any transfer pursuant to this Section 6.2, the transferor shall
-----------
continue to be entitled to all benefits accrued and all rights vested prior to
such transfer, including rights to indemnification under this Agreement or any
other Operative Document.
SECTION 1.49 Participations.
--------------
(1) Participations. Each Lender covenants and agrees that it
--------------
will not grant participations in its Notes and other Operative Documents to
any Person (a "Participating Entity") unless such Person (i) is a bank or
---------------------
other financial institution and (ii) represents and warrants, in writing,
to such Lender for the benefit of the Lenders, Lessor, Trustee,
Administrative Agent and Lessee that no part of the funds used by it to
acquire an interest in the Notes and other Operative Documents constitutes
assets of any Plan, Multiemployer Plan or Benefit Arrangement (or its
related trust). Any such transferor Lender shall require any transferee of
its interest in the Notes and the other Operative Documents to make the
representations and warranties set forth in the preceding sentence, in
writing, to such transferor Lender for its benefit and the benefit of the
Lenders, Lessor, Trustee, Administrative Agent and Lessee. In the event of
any such sale by a Lender of a participating interest to a Participating
Entity such Lender's obligations under this Agreement and under the other
Operative Documents shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the
holder of its Notes for all purposes under this Agreement and under the
other Operative Documents, and Lessor, Trustee, Administrative Agent and,
except as set forth in Section 6.3(b), Lessee shall continue to deal solely
--------------
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and under the other Operative Documents,
and, as between such Lender and such Participating Entity, such Lender
shall retain the sole right to enforce the obligations of
-36-
<PAGE>
Lessee under the Operative Documents and to approve any amendment,
modification or waiver of any provision of any Operative Document.
(2) Transferee Indemnities. Each Participating Entity shall be
----------------------
entitled to the benefits of Sections 2.9, 2.10, 2.11 and 2.12 of the Loan
------------ ---- ---- ----
Agreement and Articles VII and VIII with respect to its participation in
------------ ----
its transferor's Notes and the other Operative Documents, and Loans and
Advances outstanding from time to time; provided, that no Participating
--------
Entity in respect of its participation shall be entitled to receive any
greater amount pursuant to such Sections than the transferor Lender would
have been entitled to receive in respect of the amount of the participation
in the Notes and other Operative Documents transferred by such transferor
Lender to such Participating Entity had no such transfer of a participation
occurred.
SECTION 1.50 Required Transfers. If, at any time during the Lease Term,
------------------
any Lender shall request from Lessor, Trustee or Lessee reimbursement for any
costs pursuant to Section 2.9, 2.10 or 2.11 of the Loan Agreement (which cost
----------- ---- ----
Lessee is obligated to pay as Supplemental Rent under Section 3.2 of the Lease),
-----------
such Lender shall, upon request of Lessee or Administrative Agent, attempt in
good faith to promptly sell to a Person who would qualify under Section 6.3(a)
-------------
of this Agreement, the Notes and interests in the other Operative Documents held
by such Lender, the Commitment of such Lender and any other interests of such
Lender hereunder and under the other Operative Documents, in accordance with
this Section 6.4, in exchange for an amount equal to the outstanding principal
-----------
amount of such Lender's Notes, together with all interest accrued thereon and
unpaid to the date of such purchase and all other amounts then due and payable
hereunder or under the other Operative Documents to such Lender (including any
requested reimbursement amounts).
SECTION 1.51 Distribution and Receipt of Payments. Bank, in its
------------------------------------
capacities as Trustee and Lessor, hereby appoints Administrative Agent (for the
benefit of the Lenders) agent for purposes of receiving proceeds of Advances,
payments under the Lease and the other Operative Documents and making
distributions to the Lenders, Lessee and other Persons under this Agreement and
the other Operative Documents. Bank, as Trustee and/or Lessor, may at any time
by notice in writing terminate Administrative Agent's appointment hereby as
agent of collection and payment of the payments under the Operative Documents,
in which event Lessee and the Lenders, as the case may be, upon receipt of a
copy of such notice, shall pay any and all payments payable to Bank, as Trustee
and/or Lessor, hereunder and under the other Operative Documents directly to
Bank, as Trustee and/or Lessor, at the account set forth in Schedule III.
------------
ARTICLE VII
GENERAL INDEMNITY
-----------------
SECTION 1.52 General Indemnification. Lessee agrees to assume liability
-----------------------
for, and to indemnify, protect, defend, save and keep harmless each Indemnitee,
on an After-Tax Basis, from and against any and all Claims that may be imposed
on, incurred by or asserted against such
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<PAGE>
Indemnitee (whether because of action or omission by such Indemnitee or
otherwise), whether or not such Indemnitee shall also be indemnified as to any
such Claim by any other Person and whether or not such Claim arises or accrues
prior to the Closing Date or after the Lease Termination Date, in any way
relating to or arising out of (a) any of the Operative Documents or any of the
transactions contemplated thereby or any investigation, litigation or proceeding
in connection therewith, and any amendment, modification or waiver in respect
thereof; or (b) the Resort or any part thereof or interest therein; or (c) the
acquisition, mortgaging, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, purchase, ownership,
possession, rental, lease, sublease, repossession, maintenance, repair,
alteration, modification, addition or substitution, storage, transfer of title,
redelivery, use, financing, refinancing, operation, condition, sale (including
any transfer pursuant to Section 5.2 of the Lease or any sale pursuant to
-----------
Section 5.1 of the Lease), return or other disposition of all or any part of any
- -----------
interest in the Equipment or the imposition of any Lien (or incurring of any
liability to refund or pay over any amount as a result of any Lien) thereon
(other than Lessor's Liens), including: (i) Claims or penalties arising from any
violation of law or in tort (strict liability or otherwise), (ii) latent or
other defects, whether or not discoverable, and (iii) any Claim for patent,
trademark or copyright infringement (other than, with respect to any Indemnitee,
any Claim for patent, trademark or copyright infringement that arises as a
result of the actions of such Indemnitee); or (d) any activity, occurrence or
condition that violates or results in non-compliance with any Environmental Law
or Environmental Permit arising out of or in any way relating to the Resort or
any part thereof or interest therein, including Claims for investigation costs,
cleanup costs, response costs, remediation and removal costs, costs of
corrective action, costs of financial assurance, and all other damages, costs,
fees, and expenses, fines and penalties, including natural resource damages, and
any mitigative action required by or under Environmental Laws; (e) subject to
Article VI, the offer, issuance, sale or delivery of the Notes; (f) the breach
- ----------
or alleged breach by Lessee of any representation or warranty made by it or
deemed made by it in any Operative Document; (g) subject to Article VI, the
----------
transactions contemplated hereby or by any other Operative Document, in respect
of the application of Parts 4 and 5 of Subtitle B of Title I of ERISA and any
prohibited transaction described in Section 4975(c) of the Code to any Plan; or
(h) any other agreement entered into or assumed by Lessee in connection with the
Equipment; provided, however, that Lessee shall not be required to indemnify
-------- -------
under this Section 7.1 for any of the following: (1) as to an Indemnitee, any
-----------
Claim to the extent resulting from the willful misconduct or gross negligence of
such Indemnitee and, if such Indemnitee is Bank, ordinary negligence for the
handling of funds (other than willful misconduct or gross negligence imputed to
such Indemnitee by reason of its participation in the transactions contemplated
hereby) or the breach by such Indemnitee of any representation, warranty or
covenant of such Indemnitee set forth in any Operative Document, (2) as to an
Indemnitee, any Claim resulting from a transfer by such Indemnitee of all or any
part of its interest in the Notes, the Lease, the other Operative Documents or
the Equipment, other than any such transfer either required by the Lease
(including a transfer as a result of a Casualty or a transfer pursuant to
Section 5.1 or 5.2 of the Lease) or any other Operative Document or while a
- ----------- ---
Lease Event of Default shall have occurred and be continuing, (3) any Claims in
respect of Taxes (such Claims to be subject to Article VIII), other than a
------------
payment necessary to make payments under this Section 7.1 on an After-Tax Basis,
-----------
provided, that this exclusion does not apply to any taxes or penalties included
- --------
in Claims against
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which the Indemnitee is provided an indemnification under subsection (f) of this
Section 7.1, (4) as to an Indemnitee, any Claim resulting from Lessor Liens
which such Indemnitee is responsible for discharging under the Operative
Documents and (5) except as may be otherwise provided herein or in any other
Operative Document, as to any Indemnitee, any claim to the extent resulting from
its required compliance with Applicable Laws (including Gaming Laws). Lessee
shall be entitled to credit against any payments due under this Section 7.1 any
insurance recoveries received by an Indemnitee in respect of the related Claim
under or from insurance paid for by Lessee or assigned to Lessor or Trustee by
Lessee.
If Lessee shall obtain actual knowledge of any Claim indemnified
against under this Section 7.1, Lessee shall give prompt notice thereof to the
-----------
appropriate Indemnitee or Indemnitees, and if any Indemnitee shall obtain actual
knowledge of any Claim indemnified under this Section 7.1, such Indemnitee shall
-----------
give prompt notice thereof to Lessee, provided that failure to so notify Lessee
--------
shall release Lessee from its obligations to indemnify hereunder only if and to
the extent that such failure results in a forfeiture by Lessee of substantive
rights and defenses. With respect to any amount that Lessee is requested by an
Indemnitee to pay by reason of this Section 7.1, such Indemnitee shall, if so
-----------
requested by Lessee and prior to any payment, submit such additional information
to Lessee as Lessee may reasonably request and which is reasonably available to
such Indemnitee to substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee for which the Indemnitee is indemnified under this Section 7.1, such
-----------
Indemnitee shall notify Lessee of the commencement thereof, and Lessee shall be
entitled, at its expense, acting through its counsel, to participate in, and, to
the extent that Lessee desires to, assume and control the defense thereof;
provided, however, that Lessee shall have acknowledged in writing its obligation
- -------- -------
to fully indemnify such Indemnitee in respect of such action, suit or proceeding
to the extent required under this Section 7.1; and provided, further, that
----------- --------- -------
Lessee shall not be entitled to assume and control the defense of any such
action, suit or proceeding if and to the extent that, (A) in the reasonable
opinion of such Indemnitee, (x)(i) such action, suit or proceeding involves any
risk of imposition of criminal liability or (ii) such action, suit or proceeding
involves any material risk of material civil liability on such Indemnitee or
will involve a material risk of the sale, forfeiture or loss of, or the creation
of any Lien (other than a Permitted Lien) on, the Equipment, or the Trust Estate
or any part thereof, unless, in the case of this clause (x)(ii), Lessee shall
--------------
have posted a bond or other security satisfactory to the relevant Indemnitee in
respect to such risk, (y) the control of such action, suit or proceeding would
involve a bona fide conflict of interest or (z) Lessee's choice of counsel for
such action, suit or proceeding is not acceptable to such Indemnitee, (B) such
proceeding involves Claims not fully indemnified by Lessee which Lessee and the
Indemnitee have been unable to sever from the indemnified Claim(s), (C) a Lease
Default or a Lease Event of Default has occurred and is continuing or (D) such
action, suit or proceeding involves matters which extend beyond or are unrelated
to the transactions contemplated by the Operative Documents and if determined
adversely could be materially detrimental to the interests of such Indemnitee
notwithstanding indemnification by Lessee. Indemnitee, on the one hand, and
Lessee, on the other hand, each may participate in a reasonable manner at its
own expense and with its own counsel in any proceeding conducted by the other in
accordance with the foregoing.
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<PAGE>
Each Indemnitee shall, at Lessee's expense, supply Lessee with such
information and documents reasonably requested by Lessee as are necessary or
advisable for Lessee to participate in any action, suit or proceeding to the
extent permitted by this Section 7.1. Unless a Lease Event of Default shall
-----------
have occurred and be continuing, no Indemnitee shall enter into any settlement
or other compromise with respect to any Claim which is entitled to be
indemnified under this Section 7.1 without the prior written consent of Lessee,
-----------
which consent shall not be unreasonably withheld or delayed, unless such
Indemnitee waives its right to be indemnified under this Section 7.1 with
-----------
respect to such Claim.
Any amount payable to an Indemnitee pursuant to this Section 7.1 shall
-----------
be paid to such Indemnitee promptly upon receipt of a written demand therefor
from such Indemnitee, accompanied by a written statement describing the basis
for such indemnity and the computation of the amount so payable and, if
requested by Lessee, such determination shall be verified by a nationally
recognized independent accounting firm mutually acceptable to Lessee and the
Indemnitee, at Lessee's expense.
ARTICLE VII
GENERAL TAX INDEMNITY
---------------------
SECTION 1.53 General Tax Indemnity. Except as otherwise provided in this
---------------------
Section 8.1, Lessee shall pay, on an After-Tax Basis, and, on written demand,
- -----------
shall indemnify and hold each Indemnitee harmless from and against, any and all
fees (including documentation, recording, license and registration fees), taxes
(including income (whether net, gross or adjusted gross, whether domestic or
foreign), gross receipts, sales, rental, use, turnover, value-added, property,
excise and stamp taxes), levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever, together with any penalties, fines or
interest thereon or additions thereto (any of the foregoing being referred to
herein as "Taxes" and individually as a "Tax") imposed on or with respect to any
----- ---
Indemnitee, the Equipment or any portion thereof, any Operative Document or
Lessee or any sublessee or user of the Equipment, by any foreign authority, the
United States or by any state or local government or other taxing authority in
the United States in connection with or in any way relating to (i) the
acquisition, mortgaging, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, purchase, ownership,
possession, rental, lease, sublease, repossession, maintenance, repair,
alteration, modification, addition or substitution, storage, transfer of title,
redelivery, use, financing, refinancing, operation, condition, sale, return or
other application or disposition of all or any part of the Equipment or the
imposition of any Lien (or incurrence of any liability to refund or pay over any
amount as a result of any Lien) thereon, (ii) Rent or the receipts or earnings
arising from or received with respect to the Equipment or any part thereof, or
any interest therein or any applications or dispositions thereof, (iii) any
other amount paid or payable pursuant to the Notes or any other Operative
Documents or the property, or the income or other proceeds with respect to the
property, held in the Trust Estate, (iv) the Equipment or any part thereof or
any interest therein, (v) all or any of the Operative Documents, any other
documents
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<PAGE>
contemplated thereby and any amendments and supplements thereto, and (vi)
otherwise with respect to or in connection with the transactions contemplated by
the Operative Documents; provided, that Lessee's indemnification obligation
--------
hereunder in respect of any Tax shall be net of any foreign, federal, state or
local income tax benefits which are recognized by the relevant Tax Indemnitee as
a result of the imposition of such Tax).
SECTION 1.54 Exclusions from General Tax Indemnity. Section 8.1 shall
------------------------------------- -----------
not apply to:
(1) Taxes on, based on, or measured by or with respect to the net
income of an Indemnitee (including minimum Taxes, capital gains Taxes,
Taxes on or measured by items of tax preference or alternative minimum
Taxes) other than (A) any such Taxes that are, or are in the nature of,
sales, use, rental (other than Taxes imposed on net rental income) or
property Taxes, (B) withholding Taxes imposed by the United States or the
State of Louisiana (I) on payments with respect to the Notes, or (II) on
Rent, to the extent the net payment of Rent after deduction of such
withholding Taxes would be less than amounts currently payable with respect
to the Notes and (C) any such Taxes imposed on such Indemnitee by any state
(other than the State of Louisiana) or local taxing authority in such state
to the extent such Taxes are imposed as a result of Lessee moving the
Equipment or any part thereof to such state;
(2) Taxes that are based on, measured by or imposed with respect
to the fees or other compensation received by a Person acting as Lessor,
Trustee or Administrative Agent (in their respective individual capacities)
or any Affiliate of any thereof for acting as trustees or agents under the
Trust Agreement or the Loan Agreement, respectively;
(3) Taxes that result from any act, event or omission, or which
are attributable to any period of time, that occurs after the earliest of
(A) the expiration of the Lease Term with respect to the Equipment and, if
the Equipment is required to be returned to Lessor in accordance with the
Lease, such return and (B) the discharge in full of Lessee's obligations to
pay the Lease Balance, or any amount determined by reference thereto, with
respect to the Equipment and all other amounts due under the Lease and
other Operative Documents, unless such Taxes (and interest, penalties and
late charges related thereto) relate to acts, events or matters occurring
prior to the earliest of such times or are imposed on or with respect to
any payments due under the Operative Documents after such expiration or
discharge;
(4) Taxes imposed on an Indemnitee that result from any voluntary
sale, assignment, transfer or other disposition by such Indemnitee or any
related Indemnitee of any interest in the Equipment or any part thereof, or
any interest therein or any interest or obligation arising under the
Operative Documents or any Notes, or from any sale, assignment, transfer or
other disposition of any interest in such Indemnitee or any related
Indemnitee, it being understood that each of the following shall not be
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<PAGE>
considered a voluntary sale: (A) any substitution, replacement or removal
of any of the Equipment by Lessee shall not be treated as a voluntary
action of any Tax Indemnitee, (B) any sale or transfer resulting from the
exercise by Lessee of any early termination option, (C) any transfer under
Section 5.2 of the Lease and (D) any sale or transfer while a Lease Event
-----------
of Default shall have occurred and be continuing under the Lease; or
(5) Taxes imposed on a Lender which is not organized under the
Laws of the United States of America or any State thereof to the extent
such Lender's compliance with Section 8.6 of this Agreement at the time
-----------
such Lender becomes a party to this Agreement fails to establish a complete
exemption from such withholding or to the extent such failure to establish
a complete exemption from such withholding thereafter is attributable to
the actions of such Lender.
SECTION 1.55 Contests. If any Claim shall be made against any Indemnitee
--------
or if any proceeding shall be commenced against any Indemnitee (including a
written notice of such proceeding) for any Taxes as to which Lessee may have an
indemnity obligation pursuant to Section 8.1, or if any Indemnitee shall
-----------
determine that any Taxes as to which Lessee may have an indemnity obligation
pursuant to Section 8.1 may be payable, such Indemnitee shall promptly notify
-----------
Lessee in writing. Lessee shall be entitled, at its expense, acting through
counsel reasonably acceptable to such Indemnitee, to participate in, and, to the
extent that Lessee desires to, assume and control the defense thereof; provided,
---------
however, that Lessee shall have acknowledged in writing its obligation to
- -------
indemnify fully such Indemnitee in respect of such action, suit or proceeding to
the extent required under this Article VIII; and, provided, further, that Lessee
------------ -----------------
shall not be entitled to assume and control the defense of any such action, suit
or proceeding if and to the extent that (A) Lessee is not able to provide such
Indemnitee with a legal opinion of counsel reasonably acceptable to such
Indemnitee that such action, suit or proceeding does not involve (x) a risk of
imposition of criminal liability or (y) any material risk of material civil
liability on such Indemnitee and will not involve a material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than a Permitted Lien)
on the Equipment, or the Trust Estate or any part thereof, unless, in the case
of this clause (y), Lessee contemporaneously with such opinion shall have posted
----------
a bond or other security satisfactory to the relevant Indemnitee in respect to
such risk, (B) the control of such action, suit or proceeding would involve a
bona fide conflict of interest, (C) such proceeding involves Claims not fully
indemnified by Lessee which Lessee and the Indemnitee have been unable to sever
from the indemnified claim(s), (D) a Lease Default or Lease Event of Default has
occurred and is continuing or (E) such action, suit or proceeding involves
matters which extend beyond or are unrelated to the transactions contemplated by
the Operative Documents and if determined adversely could be materially
detrimental to the interests of such Indemnitee notwithstanding indemnification
by Lessee. Indemnitee, on the one hand, and Lessee, on the other hand, may
participate in a reasonable manner, each at its own expense and with its own
counsel in any proceeding conducted by the other in accordance with the
foregoing.
Each Indemnitee shall, at Lessee's expense, supply Lessee with such
information and documents reasonably requested by Lessee as are necessary or
advisable for Lessee to
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participate in any action, suit or proceeding to the extent permitted by this
Section 8.3. Unless a Lease Default or Lease Event of Default shall have
- -----------
occurred and be continuing, no Indemnitee shall enter into any settlement or
other compromise with respect to any Claim which is entitled to be indemnified
under this Section 8.3 without the prior written consent of Lessee, which
-----------
consent shall not be unreasonably withheld or delayed, unless such Indemnitee
waives its right to be indemnified under this Section 8.3 with respect to such
-----------
Claim.
Notwithstanding anything contained herein to the contrary, an
Indemnitee will not be required to contest (and Lessee shall not be permitted to
contest) (a) a Claim with respect to the imposition of any Tax if such
Indemnitee shall waive its right to indemnification under this Section 8.3 with
-----------
respect to such Claim (and any related claim with respect to other taxable years
the contest of which is precluded or otherwise adversely affected as a result of
such waiver) and (b) any Claim if the subject matter thereof shall be of a
continuing nature and shall have previously been decided adversely. Each
Indemnitee and Lessee shall consult in good faith with each other concerning
each step and decision regarding the conduct of such contest controlled by
either, including the forum in which the Claim is most likely to be favorably
resolved.
SECTION 1.56 Payments. Any Tax indemnifiable under this Article VIII
-------- ------------
shall be paid directly when due to the applicable taxing authority if direct
payment is practicable and permitted. If direct payment to the applicable taxing
authority is not permitted or is otherwise not made, any amount payable to an
Indemnitee pursuant to Section 8.1 shall be paid within thirty (30) days after
-----------
receipt of a written demand therefor from such Indemnitee accompanied by a
written statement describing in reasonable detail the amount so payable, but not
before the date that the relevant Taxes are due. Any payments made pursuant to
Section 8.3 directly to the Indemnitee entitled thereto or Lessee, as the case
- -----------
may be, shall be made in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the order
of the payee by certified mail, postage prepaid at its address as set forth in
this Agreement. Upon the request of any Indemnitee with respect to a Tax that
Lessee is required to pay, Lessee shall furnish to such Indemnitee the original
or a certified copy of a receipt for Lessee's payment of such Tax or such other
evidence of payment as is reasonably acceptable to such Indemnitee.
SECTION 1.57 Reports. If any report, return or statement is required to
-------
be filed with respect to any Taxes that are subject to indemnification under
this Article VIII, Lessee shall, if Lessee is permitted by Applicable Laws,
------------
timely prepare and file such report, return or statement; provided, however,
--------- -------
that if Lessee is not permitted by Applicable Laws to file any such report,
Lessee will promptly so notify the appropriate Indemnitee, in which case such
Indemnitee will file any such report after preparation thereof by Lessee.
SECTION 1.58 Withholding Tax Exemption. At least ten (10) Business Days
-------------------------
prior to the first date on which any payment is due under any Note for the
account of any Lender which is a "foreign corporation, partnership or trust"
within the meaning of the Code, and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Section 1441 or 1442 of the Code, such
Lender agrees that it will have delivered to each of Lessee, Lessor, Trustee and
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Administrative Agent two (2) duly completed copies of United States Internal
Revenue Service form W-8BEN or W-8EC1, in either case with completed and
accurate taxpayer identifying numbers, certifying in either case that such
Lender is entitled to receive payments under the Operative Documents without
deduction or withholding of any United States federal income taxes in accordance
with Section 7.10 of the Loan Agreement.
------------
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 1.59 Survival of Agreements. The representations, warranties,
----------------------
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery and the termination or expiration of
this Agreement and any of the other Operative Documents, the transfer of the
Equipment to or by Lessor or Trustee as provided herein or in any other
Operative Documents, any disposition of any interest of Lessor or Trustee in the
Equipment, and the purchase and sale of the Notes, payment therefor and any
disposition thereof, and shall be and continue in effect notwithstanding any
investigation made by any party hereto or to any of the other Operative
Documents or the fact that any such party may waive compliance with any of the
other terms, provisions or conditions of any of the Operative Documents.
SECTION 1.60 No Broker, etc. Except for Lessee's engagement of Bank of
---------------
America as Arranger in connection with the transactions contemplated hereby,
none of the parties has authorized, retained or employed any broker, finder or
financial advisor to act on its behalf in connection with this Agreement, nor
authorized any broker, finder or financial advisor retained or employed by any
other Person so to act, nor incurred any fees or commissions to which Trustee or
any Lender might be subjected by virtue of its entering into the transactions
contemplated by this Agreement. Bank of America's sole compensation for acting
hereunder, other than as a Lender, is the receipt of the amounts provided for in
the Operative Documents and in the Arranger Fee Letter. Any party who is in
breach of this representation shall indemnify and hold the other parties
harmless from and against all liabilities arising out of such breach of this
representation.
SECTION 1.61 Amendments. Neither this Agreement nor any of the other
----------
Operative Documents, nor any of the terms hereof or thereof, may be terminated,
amended, supplemented, waived or modified orally, but only by an instrument in
writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification shall be sought and consented to
by the Required Lenders; and no such termination, amendment, supplement, waiver
or modification shall be effective unless a signed copy thereof shall have been
delivered to Trustee, Lessor, Lessee, Administrative Agent and the Lenders.
Trustee, Lessor and Lessee shall not be permitted to amend, modify or supplement
the Lease or any other Operative Document without the written consent of the
Required Lenders; provided, that without the prior written consent of each
--------
Lender, Trustee shall not:
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<PAGE>
(1) modify any of the provisions of this Section 9.3, change the
-----------
definition of "Required Lenders", or modify or waive any provision of any
Operative Document requiring action by any of the foregoing, or release any
Collateral (except as otherwise specifically provided in any Operative
Document);
(2) reduce the amount or change the time of payment of (or waive
a default in any payment of) any amount of principal owing or payable under
any Note or interest owing or payable on any Note, reduce the amount or
change the time of payment of (or waive a default in any payment of) any
fee, or modify any of the provisions of Section 2.2 of the Trust Agreement;
-----------
(3) modify, amend, waive or supplement any of the provisions of
Sections 3.1, 3.2, 3.4, 4.1, 5.1 and 5.2 of the Lease;
------------ --- --- --- --- ---
(4) reduce, modify, amend or waive any indemnities in favor of
any Lender;
(5) reduce the amount or change the time of payment of Rent or
the Lease Balance;
(6) consent to any assignment of the Lease releasing Lessee from
its obligations to pay Rent or the Lease Balance or changing the absolute
and unconditional character of such obligations, except as permitted by
this Agreement;
(7) permit the creation of any Lien on the Trust Estate or any
part thereof except as contemplated by the Operative Documents, or deprive
any Lender of the benefit of the security interest and Lien secured by the
Trust Estate.
SECTION 1.62 Cumulative Remedies; No Waiver. The rights, powers,
------------------------------
privileges and remedies of the Participants provided herein or in any Note or
other Operative Document are cumulative and not exclusive of any right, power,
privilege or remedy provided by law or equity. No failure or delay on the part
of any Participant in exercising any right, power, privilege or remedy may be,
or may be deemed to be, a waiver thereof; nor may any single or partial exercise
of any right, power, privilege or remedy preclude any other or further exercise
of the same or any other right, power, privilege or remedy. The terms and
conditions of Section 2.1 and Article III hereof are inserted for the sole
----------- -----------
benefit of the Participants; the same may be waived in whole or in part, with or
without terms or conditions, in respect of any Advance without prejudicing any
Participant's rights to assert them in whole or in part in respect of any other
Advance.
SECTION 1.63 Nature of Lenders' Obligations. The obligations of the
------------------------------
Lenders hereunder are several and not joint or joint and several. Nothing
contained in this Agreement or any other Operative Document and no action taken
by the Participants or any of them pursuant hereto or thereto may, or may be
deemed to, make the Lenders a partnership, an association, a joint venture or
other entity, either among themselves or with Lessee or any Affiliate of Lessee.
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Each Lender's obligation to make any Loan pursuant hereto or the Loan Agreement
is several and not joint or joint and several, and in the case of the initial
Loans only is conditioned upon the performance by all other Lenders of their
obligations to make initial Loans. A default by any Lender will not increase
the Commitment Percentage of any other Lender. Any Lender not in default may,
if it desires, assume in such proportion as the nondefaulting Lenders agree the
obligations of any Lender in default, but no Lender is obligated to do so.
SECTION 1.64 Notices. Except as otherwise expressly provided in the
------- ------
Operative Documents, all notices, requests, demands, directions and other
communications provided for hereunder or under any other Operative Document must
be in writing and must be mailed, telegraphed, telecopied, dispatched by
commercial courier or delivered to the appropriate party at the address set
forth in Schedule III or, as to any party to any Operative Document, at any
------------
other address as may be designated by it in a written notice sent to all other
parties to such Operative Document in accordance with this Section. Except as
------
otherwise expressly provided in any Operative Document, if any notice, request,
demand, direction or other communication required or permitted by any Operative
Document is given by mail, it will be effective on the earlier of receipt or the
fourth Business Day after deposit in the United States mail with first class or
airmail postage prepaid; if given by telegraph or cable, when delivered to the
telegraph company with charges prepaid; if given by telecopier, when receipt is
confirmed (whether electronically or otherwise) by the notifying party; if
dispatched by commercial courier, on the scheduled delivery date; or if given by
personal delivery, when delivered.
SECTION 1.65 Execution of Operative Documents. Unless Trustee otherwise
--------------------------------
specifies with respect to any Operative Document, (a) this Agreement and any
other Operative Document may be executed in any number of counterparts and any
party hereto or thereto may execute any counterpart, each of which when executed
and delivered will be deemed to be an original (except to the extent set forth
in Section 15.3 of the Lease), and all of which counterparts of this Agreement
------------
or any other Operative Document, as the case may be, when taken together will be
deemed to be but one and the same instrument, and (b) execution of any such
counterpart may be evidenced by a telecopier transmission of the signature of
such party. The execution of this Agreement or any other Operative Document by
any party hereto or thereto will not become effective until counterparts hereof
or thereof, as the case may be, have been executed by all the parties hereto or
thereto.
SECTION 1.66 No Third Parties Benefitted. This Agreement is made for the
---------------------------
purpose of defining and setting forth certain obligations, rights and duties of
Lessee, Lessor, Trustee, Administrative Agent and the Lenders in connection with
the Advances and Loans, as the case may be, and is made for the sole benefit of
Lessee, Lessor, Trustee, Administrative Agent and the Lenders, and Trustee's,
Lessor's, Lessee's, Administrative Agent's and the Lenders' permitted successors
and assigns. Except as provided in Sections 6.2 and 6.3, no other Person shall
------ ------------ ---
have any rights of any nature hereunder or by reason hereof.
SECTION 1.67 Confidentiality. Each Participant agrees to hold all
---------------
confidential information that it may receive from Lessee pursuant to this
Agreement or other Operative
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<PAGE>
Documents in confidence, except for disclosure: (a) to other Participants; (b)
------
to legal counsel and accountants for Lessee or any Participant; (c) to other
professional advisors to Lessee or any Participant, provided that the recipient
--------
has accepted such information subject to a confidentiality agreement
substantially similar to this Section; (d) to regulatory officials having
jurisdiction over that Participant; (e) to any Gaming Authority having
regulatory jurisdiction over Hollywood Casino, Lessee, HCS I, HCS II, or any of
their respective Subsidiaries, provided that each Lender agrees to notify Lessee
--------
of any such disclosure unless prohibited by Applicable Laws; (f) as required by
Applicable Laws or legal process, provided that such Lender agrees to notify
Lessee of any such disclosures unless prohibited by Applicable Laws or in
connection with any legal proceeding to which that Lender and Lessee are adverse
parties; and (g) to another financial institution in connection with a
disposition or proposed disposition to that financial institution of all or part
of that Lender's interests hereunder or a participation interest in its Notes,
provided that the recipient has accepted such information subject to a
- --------
confidentiality agreement substantially similar to this Section. For purposes of
the foregoing, "confidential information" shall mean any information respecting
Lessee, HCS I or HCS II, or their respective Subsidiaries, reasonably considered
by Lessee to be confidential, other than (i) information previously filed with
any Governmental Authority and available to the public, (ii) information
previously published in any public medium from a source other than, directly or
indirectly, that Lender, and (iii) information previously disclosed by Hollywood
Casino, Lessee, HCS I, HCS II, or any of their respective Subsidiaries to any
Person not associated with such Person without a confidentiality agreement or
obligation substantially similar to this Section. Nothing in this Section shall
be construed to create or give rise to any fiduciary duty on the part of Trustee
or the Lenders to Lessee or any of its Affiliates.
SECTION 1.68 Integration. This Agreement, together with the other
-----------
Operative Documents to which Lessor, Lessee, Trustee, Administrative Agent, the
Lenders or any of them are party, the Arranger Fee Letter, the Administrative
Agent Fee Letter and the Trustee Fee Letter, constitute the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. In the
event of any conflict between the provisions of this Agreement and those of any
other Operative Document, the provisions of this Agreement shall control and
govern; provided that the inclusion of supplemental rights or remedies in favor
--------
of Lessor, Trustee, Administrative Agent or the Lenders in any other Operative
Document shall not be deemed a conflict with this Agreement. Each Operative
Document was drafted with the joint participation of the respective parties
thereto and shall be construed neither against nor in favor of any party, but
rather in accordance with the fair meaning thereof.
SECTION 1.69 Severability of Provisions. Any provision in any Operative
--------------------------
Document that is held to be inoperative, unenforceable or invalid as to any
party or in any jurisdiction shall, as to that party or jurisdiction, be
inoperative, unenforceable or invalid without affecting the remaining
provisions, or the operation, enforceability or validity of that provision as to
any other party or in any other jurisdiction, and to this end the provisions of
all Operative Documents are declared to be severable.
-47-
<PAGE>
SECTION 1.70 Headings. Article and Section headings in this Agreement
--------
and the other Operative Documents are included for convenience of reference only
and are not part of this Agreement or the other Operative Documents for any
other purpose.
SECTION 1.71 Time of the Essence. Time is of the essence of the
-------------------
Operative Documents.
SECTION 1.72 Gaming Authorities. Arranger, Trustee, Lessor,
------------------
Administrative Agent and each of the Lenders agree to cooperate with all Gaming
Authorities in connection with the administration of their regulatory
jurisdiction over Lessee, its Restricted Subsidiaries, HCS I and HCS II
including the provision of such documents or other information as may be
requested by any such Gaming Authorities relating to Lessee, any of its
Restricted Subsidiaries, HCS I or HCS II, or to the Operative Documents.
SECTION 1.73 Release of Lien. Each Lender hereby instructs each of
---------------
Trustee and Lessor to release the Lien created by the Lease against the
Equipment at the expense of Lessee promptly upon Lessee's payment in full, in
immediately available funds, of the Lease Balance and of all other amounts then
due and owing under the Operative Documents or in the event such Equipment is
released from the Trust Estate in accordance with the Operative Documents.
Each Lender, at the expense of Lessee, will promptly and duly execute
and deliver all documents and take such further action as may be necessary or
advisable to release, in accordance with the preceding paragraph, the applicable
Liens, including, if requested by Lessee, the recording or filing of any
document evidencing the release of such Liens in accordance with the Applicable
Laws of the appropriate jurisdictions.
SECTION 1.74 Transaction Costs. Lessee shall pay all Transaction Costs
-----------------
whether or not the transactions contemplated hereby are consummated. In
addition, Lessee agrees to pay or reimburse, on demand, (a) Administrative Agent
and Lessor for all their reasonable out-of-pocket costs and expenses, including
reasonable attorneys' fees, incurred in connection with (i) entering into, or
the giving or withholding of, any future amendments, supplements, waivers or
consents with respect to the Operative Documents; and (ii) any Casualty or
termination of the Lease or any other Operative Documents; and (b)
Administrative Agent, Lessor, Trustee and each Lender for all their reasonable
out-of-pocket costs and expenses, including reasonable attorneys' fees, incurred
in connection with (i) the negotiation and documentation of any restructuring or
"workout," whether or not consummated, of any Operative Document; (ii) the
enforcement or attempted enforcement, or preservation of any rights or remedies
under the Operative Documents; and (iii) any transfer by an Indemnitee of any
interest in the Loan or the Notes during the continuance of an Event of Default.
The foregoing costs and expenses shall include filing fees, recording fees,
appraisal fees, search fees, other out-of-pocket expenses, and the reasonable
fees and out-of-pocket expenses of any legal counsel (including reasonably
allocated costs of legal counsel employed by any Participant), independent
public accountants and other outside experts retained by any Participant,
whether or not such costs and expenses are incurred or suffered by any
Participant in connection with or during the course of any bankruptcy or
insolvency
-48-
<PAGE>
proceedings of Lessee, any of its Restricted Subsidiaries, HCS I or HCS II,
provided, however, that in the case of costs and expenses to be paid pursuant to
- -------- -------
clause (a), Lessee shall only be obligated to pay the reasonable costs and
- ----------
expenses of a single counsel to Administrative Agent, Trustee and Lessor. Such
costs and expenses shall also include, in the case of any amendment or waiver of
any Operative Document requested by Lessee, the reasonable administrative costs
of Trustee reasonably attributable thereto. Lessee shall pay any and all
documentary and other taxes pursuant to Article 8. Any amount payable to any
---------
Participant under this Section shall bear interest from the second Business Day
following the date of demand for payment at the Overdue Rate.
SECTION 1.75 Successors and Assigns. This Agreement shall be binding
----------------------
upon the parties hereto and their respective successors and assigns, and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
SECTION 1.76 Final Agreement. THIS AGREEMENT, TOGETHER WITH THE
---------------
OPERATIVE DOCUMENTS AND THE FEE LETTERS, REPRESENT THE ENTIRE FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY AND THE
OTHER OPERATIVE DOCUMENTS. THIS AGREEMENT CANNOT BE MODIFIED, SUPPLEMENTED,
AMENDED, RESCINDED OR CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, EXCEPT BY AN INSTRUMENT IN WRITING
SIGNED BY TEE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
SECTION 1.77 Reproduction of Documents. This Agreement, all documents
-------------------------
constituting Schedules or Exhibits hereto, and all documents relating hereto
received by a party hereto, including: (a) consents, waivers and modifications
that may hereafter be executed; (b) documents received by Lessor or Trustee in
connection with Lessor's receipt and/or acquisition of the Equipment; and (c)
financial statements, certificates, and other information previously or
hereafter furnished to Lessor or Trustee may be reproduced by Lessor or Trustee
by any photographic, photostatic, microfilm, micro-card, miniature photographic
or other similar process. Each of the Lenders agrees and stipulates that, to
the extent permitted by law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by Lessor or Trustee in the regular course of business)
and that, to the extent permitted by law, any enlargement, facsimile, or further
reproduction of such reproduction shall likewise be admissible in evidence;
provided, however, that no such reproduction shall be presented or accepted in
- -------- -------
lieu of the original of such reproduction for purposes of Article 9 of the UCC
or any other applicable laws regarding chattel paper.
SECTION 1.78 Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN, AND
-------------
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
OF SUCH STATE, EXCEPT TO
-49-
<PAGE>
THE EXTENT THAT THE EXERCISE OF CERTAIN DEFAULT RIGHTS OR REMEDIES HEREUNDER OR
UNDER THE OTHER OPERATIVE DOCUMENTS MAY REQUIRE COMPLIANCE WITH LAWS (INCLUDING
WITHOUT LIMITATION THE GAMING LAWS) OF THE STATE OF LOUISIANA.
SECTION 1.79 Compliance with Law. It is the intent of Lessee and the
-------------------
Participants to conform to and contract in strict compliance with applicable
usury law from time to time in effect. All agreements among any of the
Participants and Lessee (of any other party liable with respect to any of the
Obligations under the Operative Documents) are hereby limited by the provisions
of this paragraph which shall override and control all such agreements, whether
now existing or hereafter arising and whether written or oral. In no way, nor
in any event or contingency (including but not limited to prepayment, default,
demand for payment, or acceleration of the maturity of any obligation), shall
the interest taken, reserved, contracted for, charged or received under this
Agreement or otherwise, exceed the maximum nonusurious amount permissible under
applicable law. If, from any possible construction of any document, interest
would otherwise be payable in excess of the maximum nonusurious amount, any such
construction shall be subject to the provisions of this Section and such
document shall be automatically reformed and the interest payable shall be
automatically reduced to the maximum nonusurious amount permitted under
applicable law, without the necessity of execution of any amendment or new
document. If any Lender shall ever receive anything of value which is
characterized as interest under applicable law and which would apart from this
provision be in excess of the maximum lawful nonusurious amount, an amount equal
to the amount which would have been excessive interest shall, without penalty,
be applied to the reduction of the principal amount owing on the Obligations
evidenced hereby in the inverse order of their maturity and not to the payment
of interest, or refunded to Lessee or the other payor thereof if and to the
extent such amount which would have been excessive exceeds such unpaid
principal. The right to accelerate maturity of the Obligations pursuant to any
Operative Document does not include the right to accelerate any interest which
has not otherwise accrued on the date of such acceleration, and the Lenders do
not intend to charge or receive any unearned interest in the event of
acceleration. All interest paid or agreed to be paid to the Lenders shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full stated term (including any renewal or extension) of
such Obligations so that the amount of interest on account of such Obligations
does not exceed the maximum nonusurious amount permitted by applicable law. As
used in this paragraph, the term "applicable law" shall mean such laws as they
now exist or may be changed or amended or come into effect in the future.
SECTION 1.80 Waiver of Right to Trial by Jury. EACH PARTY TO THIS
--------------------------------
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY OPERATIVE DOCUMENT OR IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO ANY OPERATIVE DOCUMENT, OR THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
-50-
<PAGE>
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 1.81 Nonrecourse to Paddlewheels. Notwithstanding anything to the
contrary contained in this Agreement or any other Operative Document,
Paddlewheels shall have no liability for the payment of Rent by Lessee under the
Lease or performance of any covenant, representation, warranty or obligation of
Lessee under any Operative Document.
SECTION 1.82 Payments Set Aside. To the extent that Lessee makes a payment
to Trustee, Lessor, Administrative Agent or the Lenders, or Lessor, Trustee,
Administrative Agent or the Lenders exercise their right of set-off, and such
payment or the proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any discretion) to be repaid to a trustee, receiver or
any other party, in connection with any insolvency of Lessee, HCS I, HCS II or
any Subsidiary of Lessee, then (a) to the extent of such recovery the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
set-off had not occurred, and (b) each Lender severally agrees to pay to
Administrative Agent upon demand its pro rata share of any amount so recovered
for distribution by Administrative Agent in accordance with the Loan Agreement.
SECTION 1.83 No Marshaling/Other Loans and Set-Off. Notwithstanding any
provisions in documents related to other credit facilities or other agreements
between any Lender and Lessee, no Lender hereunder may be compelled to marshal
any collateral or other assets it may hold from or for the benefit of Lessee.
Any Lender may make other extensions of credit, or renew or extend any existing
extensions of credit to Lessee or have other relationships with Lessee. No
Lender shall have any right or interest in any property taken as collateral for
such other extensions of credit or in any property or deposit in the possession
or control of any other Lender that may be or become collateral for or otherwise
available for payment of the obligations hereunder by reason of the inclusion of
any "cross-reference" provisions in the documentation associated with such other
extensions of credit, provided, however, if any Lender with such rights elects
to exercise any right of set-off, banker's lien or counterclaim, all Lenders
shall be entitled to a pro rata share of the proceeds realized as a result of
such exercise. Lessee expressly consents to the foregoing.
SECTION 1.84 Trust Agreement. The provisions of Section 5.1 of the Trust
Agreement limiting the reimbursement and indemnification obligations of the
Lenders are incorporated by reference into this Agreement.
SECTION 1.85 Purported Oral Amendments. LESSEE EXPRESSLY ACKNOWLEDGES THAT
THIS AGREEMENT AND THE OTHER OPERATIVE
-51-
<PAGE>
DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF
WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION
9.3. LESSEE AGREES THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF
PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF TRUSTEE,
LESSOR, ADMINISTRATIVE AGENT OR ANY LENDER THAT DOES NOT COMPLY WITH SECTION 9.3
TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THIS AGREEMENT OR
THE OTHER OPERATIVE DOCUMENTS.
[Signature pages follow]
-52-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
HOLLYWOOD CASINO SHREVEPORT,
a Louisiana general partnership, as Lessee
By: HCS I, Inc., a Louisiana corporation,
its managing general partner
By _________________________________
Name: Paul C. Yates
Title: Executive Vice President and
Chief Financial Officer
S-1
<PAGE>
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity except
as expressly stated herein, but solely
as Lessor and Trustee
By _________________________________
---------------------------------
[Printed Name and Title]
S-2
<PAGE>
FIRST SECURITY TRUST COMPANY OF NEVADA,
not in its individual capacity except as
expressly stated herein, but solely as
Administrative Agent
By _________________________________
---------------------------------
[Printed Name and Title]
S-3
<PAGE>
BANK OF AMERICA, NATIONAL ASSOCIATION,
not in its individual capacity except as
expressly stated herein, but solely as
Arranger and Documentation Agent
By _________________________________
---------------------------------
[Printed Name and Title]
S-4
<PAGE>
BANC OF AMERICA LEASING & CAPITAL, LLC,
as a Lender
By _________________________________
---------------------------------
[Printed Name and Title]
S-5
<PAGE>
BANK OF AMERICA, NATIONAL ASSOCIATION,
as a Lender
By _________________________________
---------------------------------
[Printed Name and Title]
S-6
<PAGE>
HIBERNIA NATIONAL BANK,
as a Lender
By _________________________________
---------------------------------
[Printed Name and Title]
S-7
<PAGE>
TEXAS CAPITAL BANK N.A.,
as a Lender
By _________________________________
---------------------------------
[Printed Name and Title]
S-8
<PAGE>
SCHEDULE I TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
HOLLYWOOD CASINO SHREVEPORT
CATEGORIES OF EQUIPMENT
-----------------------
Gaming Equipment:
Slot Machines
Table Games
Cage Equipment
Operating Equipment:
Kitchen Equipment
Distributed Audio System
CCTV Equipment
Telephone System
Computers and Peripherals
Switchgear and Generators
Fire Pumps
HVAC Equipment
Elevators
Escalators
Exterior Signage
Interior Signage
Furniture and Furnishings:
Guestrooms
Casino
Food & Beverage
Public Areas
Back of House
<PAGE>
SCHEDULE II TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
HOLLYWOOD CASINO SHREVEPORT
LENDER COMMITMENTS
------------------
- ---------------------------------------------------------------------------
Lender Commitment
------ ----------
- ---------------------------------------------------------------------------
Banc of America Leasing & Capital $13,000,000
- ---------------------------------------------------------------------------
Bank of America $ 5,000,000
- ---------------------------------------------------------------------------
Hibernia National Bank $10,000,000
- ---------------------------------------------------------------------------
Texas Capital Bank $ 2,000,000
- ---------------------------------------------------------------------------
Total Commitments $30,000,000
- ---------------------------------------------------------------------------
<PAGE>
SCHEDULE III TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
HOLLYWOOD CASINO SHREVEPORT
NOTICE INFORMATION, FUNDING
---------------------------
OFFICES AND WIRE INSTRUCTIONS
-----------------------------
LESSEE
------
HOLLYWOOD CASINO SHREVEPORT
Address for all communications (except wire transfers)
Hollywood Casino Shreveport
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
Attn: Paul C. Yates
Phone: (972) 392-7777
Facsimile: ______________________
E-mail: _______________________________
Address for wire transfers:
Bank: ______________________________
ABA Routing #: ______________________________
Account #: ______________________________
Account Name: ______________________________
Attn: ______________________________
Reference: ______________________________
<PAGE>
TRUSTEE/LESSOR
--------------
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but
solely as Trustee and/or Lessor
Address for all communications (except wire transfers)
First Security Bank, National Association, as Trustee and Lessor
79 South Main Street, Third Floor
Salt Lake City, Utah 84111
Attn: Corporate Trust Services
Phone: (801) 246-5630
Facsimile: (801) 246-5053
E-mail: [email protected]
Address for wire transfers:
Bank: First Security Bank, National Association
ABA Routing #: 124-0000-12
Account #: 051-0922115
Account Name: Corporate Trust Services
Attn: Corporate Trust/DeAnn Madsen (801) 246-5809
Reference: Hollywood Casino Shreveport Acct. No. 36317
<PAGE>
AGENT
-----
FIRST SECURITY TRUST COMPANY OF NEVADA,
as Administrative Agent
Address for all communications (except wire transfers):
First Security Bank Trust Company of Nevada, as Administrative Agent
c/o First Security Bank, N.A.
79 South Main Street, Third Floor
Salt Lake City, Utah 84111
Attn: Corporate Trust Services
Phone: (801) 246-5630
Facsimile: (801) 246-5053
E-mail: [email protected]
Address for wire transfers:
Bank: First Security Bank, National Association
ABA Routing #: 124-0000-12
Account #: 051-0922115
Account Name: Corporate Trust Services
Attn: Corporate Trust/DeAnn Madsen (801) 246-5809
Reference: Hollywood Casino Shreveport Acct. No. 36318
<PAGE>
LENDERS
-------
1. BANC OF AMERICA LEASING & CAPITAL, LLC
Address for all communications (except wire transfers):
Banc of America Leasing & Capital, LLC
555 California Street, 4th Floor
CA5-705-04-01
San Francisco, California 94104
Credit Contact:
Attn: Bassam Wehbe, Principal
Phone: (415) 765-7378
Facsimile: (415) 765-7418
E-mail: [email protected]
Operations Contact:
Attn: Anita Garfagnoli, Manager Lease Administration
Phone: (415) 765-1803
Facsimile: (415) 765-7373
E-mail: [email protected]
Address for wire transfers:
Bank: Bank of America, N.A.
Address: San Francisco Main Branch #656
ABA Routing #: 121 000 358
Account #: 125 780 3258
Account Name: BALLC
Attn: Dick Walter (415) 765-7476
Reference: Hollywood Casino Shreveport
<PAGE>
2. BANK OF AMERICA, NATIONAL ASSOCIATION
Credit Contact:
Attn: Scott Faber, Managing Director
Phone: (213) 228-2768
Facsimile: (213) 228-3145
E-mail: [email protected]
Address for Credit:
Bank of America, National Association
555 South Flower Street, 11th Floor
CA9-706-11-01
Los Angeles, California 90071
Operations Contact:
Attn: Curtis Laney, Sr. Customer Services Specialist
Phone: (925) 675-8398
Facsimile: (925) 969-2851
E-mail: [email protected]
Address for Operations:
Bank of America, National Association
1850 Gateway Blvd.
CA4-706-05-11
Concord, California 94520
Address for wire transfers:
Bank: Bank of America, N.A.
Address: ____________________________
ABA Routing #: 111-000-012
Account #: 37508-36479 Credit Services West
Account Name: Hollywood Casino Shreveport
Attn: Curtis Laney
Reference: _______________________
<PAGE>
3. HIBERNIA NATIONAL BANK
Address for all communications (except wire transfers):
Hibernia National Bank
333 Travis Street, 3rd Floor
Shreveport, Louisiana 71101
Credit Contact:
Attn: Chris K. Haskew, Vice President
Phone: (318) 674-3796
Fax: (318) 674-3758
E-mail: [email protected]
Operations Contact:
Attn: Debra Huckabee, Administrative Assistant
Phone: (318) 674-3877
Fax: (318) 674-3758
E-mail: [email protected]
Address for wire transfers:
Bank: Hibernia National Bank
Address: New Orleans, Louisiana
ABA Routing #: 065000090
Account #: 6250-36615
Account Name: Wire Suspense
Attn: Call Debra at Ext 4-3877
Reference: Hollywood Casino Shreveport
<PAGE>
4. TEXAS CAPITAL BANK N.A.
Credit Contact:
Attn: Sean P. Cleveland, Vice President
Phone: (214) 932-6674
Facsimile: (214) 932-6604
E-mail: [email protected]
Attn: Tim Monter, Senior Vice President
Phone: (214) 932-6675
Facsimile: (214) 932-6604
E-mail: [email protected]
Address for Credit:
Texas Capital Bank N.A.
2100 McKinney, Suite 900
Dallas, Texas 75201
Operations Contact
Attn: Renee Santo, Asst. Vice President Business
Banking Services
Phone: (972) 560-4524
Facsimile: (972) 991-4318
E-mail: [email protected]
Address for Operations:
Texas Capital Bank N.A.
4230 LBJ Freeway, Suite 155
Dallas, Texas 75244
Address for wire transfers:
Bank: Texas Capital Bank
Address: 4230 LBJ Freeway, Suite 155, Dallas,
Texas 75244
ABA Routing #: 111017979
Account #: _______________________
Account Name: Hollywood Casino Shreveport
Attn: Renee Santo, Leasing Division
Reference: _________________________
<PAGE>
SCHEDULE IV TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
HOLLYWOOD CASINO SHREVEPORT
RECORDINGS, FILINGS AND REGISTRATIONS
-------------------------------------
Hollywood Casino Shreveport
- ---------------------------
UCC filings with Secretary of State of the State of Texas
UCC filings with the Clerk of Court of either Caddo or Bossier parishes
Trustee/Lessor
- --------------
UCC filings with the Clerk of Court of either Caddo or Bossier parishes
UCC filings with the Secretary of State of the State of Utah
<PAGE>
SCHEDULE V TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
HOLLYWOOD CASINO SHREVEPORT
REQUIRED LICENSES
-----------------
Pursuant to Gaming Laws in Louisiana, the transactions
evidenced by the Operative Documents require the approval of the Louisiana
Gaming Control Board ("LGCB"), which approval has been obtained.
The exercise of remedies by any Participant under any of the
Operative Documents with respect to the Collateral will be limited by Gaming
Laws in Louisiana, which generally require that persons who own or operate a
riverboat casino, receive payments under a casino management agreement or
purchase, possess or sell gaming equipment, hold a valid riverboat gaming
license. No person may hold a riverboat gaming license in Louisiana unless the
person is found qualified or suitable by the LGCB. In order for a Participant to
be found qualified or suitable, the LGCB would have discretionary authority to
require such Participant to file applications and be investigated and found
qualified or suitable as an owner or operator of gaming establishments or
supplier of gaming equipment. If such a Participant is unable or chooses not to
qualify, be found suitable or be licensed to own, operate or sell the
Collateral, it will have to retain an entity licensed to own, operate or sell
the Collateral, which will also be subject to approval by the LGCB. In addition,
in any foreclosure sale or subsequent resale by a Participant, licensing
requirements under Gaming Laws in Louisiana may limit the number of potential
bidders and may delay any sale, which could have an adverse effect on the sale
price of the Collateral.
<PAGE>
SCHEDULE VI TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
HOLLYWOOD CASINO SHREVEPORT
AMORTIZATION SCHEDULE
---------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Lessor's Cost: $30,000,000/1/
- ----------------------------------------------------------------------------------------------------------------
Payment Payment Amount Payment % of Lessor's Cost Lease Balance/2/
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0 30,000,000
- ----------------------------------------------------------------------------------------------------------------
1 2,500,000 8.3333333% 27,500,000
- ----------------------------------------------------------------------------------------------------------------
2 2,500,000 8.3333333% 25,000,000
- ----------------------------------------------------------------------------------------------------------------
3 2,500,000 8.3333333% 22,500,000
- ----------------------------------------------------------------------------------------------------------------
4 2,500,000 8.3333333% 20,000,000
- ----------------------------------------------------------------------------------------------------------------
5 2,500,000 8.3333333% 17,500,000
- ----------------------------------------------------------------------------------------------------------------
6 2,500,000 8.3333333% 15,000,000
- ----------------------------------------------------------------------------------------------------------------
7 2,500,000 8.3333333% 12,500,000
- ----------------------------------------------------------------------------------------------------------------
8 2,500,000 8.3333333% 10,000,000
- ----------------------------------------------------------------------------------------------------------------
9 2,500,000 8.3333333% 7,500,000
- ----------------------------------------------------------------------------------------------------------------
10 2,500,000 8.3333333% 5,000,000
- ----------------------------------------------------------------------------------------------------------------
11 2,500,000 8.3333333% 2,500,000
- ----------------------------------------------------------------------------------------------------------------
12 2,500,000 8.3333333% -
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------
/1/ Or as much as may be advanced under the Loan Agreement.
/2/ Assumes $30,000,000 principal amount advanced under Loan Agreement.
<PAGE>
SCHEDULE VII TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
HOLLYWOOD CASINO SHREVEPORT
DISCLOSURE SCHEDULE
-------------------
Pursuant to the terms of the Third Amended and Restated Joint
Venture Agreement of Hollywood Casino Shreveport (Formerly known as the "Queen
of New Orleans at the Hilton Joint Venture" and "QNOV") dated July 21, 1999,
among Shreveport Paddlewheels, L.L.C. ("Shreveport Paddlewheels"), HCS I and HCS
II, as amended by the August 1999 Amendment to the Third Amended and Restated
Joint Venture Agreement of Hollywood Casino Shreveport (Formerly known as the
"Queen of New Orleans at the Hilton Joint Venture" and "QNOV") dated August 2,
1999, among Shreveport Paddlewheels, HCS I and HCS II, including, without
limitation, Section 10.5 thereof, upon the occurrence of certain sales of
Lessee, Shreveport Paddlewheels is entitled to payment of (a) 10% of the net
proceeds of such sale, after payment of outstanding debt and return of
contributed capital and (b) the appraised value of future fees under a Marine
Services Agreement dated September 22, 1999, between Shreveport Paddlewheels and
Lessee.
In The Committee on Equity in Gaming and Tourism and James
Pannell v. Mayor Keith Hightower, No. 447273-B, First Judicial District Court,
Caddo Parish, Louisiana, the plaintiffs have sought, among other things, a writ
of mandamus directing Shreveport Mayor Keith Hightower to find Lessee in
non-monetary default of that certain Ground Lease dated May 19, 1999 between the
City of Shreveport and Lessee (the "Ground Lease") as a result of Lessee's
alleged failure to satisfy certain minority and women owned business procurement
goals set forth in the Ground Lease. Plaintiffs recently sought and obtained
approval to dismiss their mandamus claims and seek declaratory judgment relief.
<PAGE>
APPENDIX 1
to
Participation Agreement
-----------------------
DEFINITIONS AND INTERPRETATION
1. Interpretation. In each Operative Document, unless a clear contrary
intention appears:
(1) the singular number includes the plural number and vice versa;
(2) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by the Operative Documents, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually;
(3) reference to any gender includes each other gender;
(4) except as specified in clause (v) below, reference to any
agreement (including any Operative Document), document or instrument means
such agreement, document or instrument as amended, restated, modified or
supplemented and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms of the other Operative Documents, and
reference to any promissory note includes any promissory note which is an
extension or renewal thereof or a substitute or replacement therefor;
(5) any reference to the Indenture or the Management Agreement that
includes the modifier "as in effect on the Closing Date" (or words to a
similar effect) shall mean and refer to the Indenture or the Management
Agreement, as the case may be, as it exists on the Closing Date, without
giving effect to any subsequent amendment, modification (including any
waiver of any applicable term or condition) or termination thereof unless
the Required Lenders have independently consented to any such amendment,
modification (including any waiver of any applicable term) or termination
in writing, in which case such reference to the Indenture shall mean the
Indenture as so amended, modified (including any waiver of any applicable
term) or terminated;
(6) reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part,
which is in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision of
any Applicable Law means that section or other provision of such Applicable
Law from time to time in effect and constituting the substantive amendment,
modification, codification, replacement or reenactment of such section
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or other provision;
(7) reference in any Operative Document to any Article, Section,
Appendix, Schedule or Exhibit means such Article or Section thereof or
Appendix, Schedule or Exhibit thereto;
(8) "hereunder", "hereof", "hereto" and words of similar import shall
be deemed references to an Operative Document as a whole and not to any
particular Article, Section or other provision thereof;
(9) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term, and, for purposes of each Operative Document, the rule of ejusdem
generis shall not be applicable to limit a general statement, which is
followed by or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned; and
(10) relative to the determination of any period of time, "from" means
"from and including" and "to" means "to but excluding".
2. Accounting and Financial Determinations. Unless otherwise specified, all
accounting terms used in each Operative Document shall be interpreted, all
accounting determinations and computations thereunder shall be made, and all
financial statements required to be delivered thereunder shall be prepared, in
accordance with GAAP.
3. Legal Representation of the Parties. The Operative Documents were
negotiated by the parties thereto with the benefit of legal representation and
any rule of construction or interpretation otherwise requiring the Operative
Documents to be construed or interpreted against any party shall not apply to
any construction or interpretation hereof or thereof.
A. Defined Terms.
(1) The following terms (together with any component defined terms and
any cross-referenced terms used therein), when used in the Operative
Documents, shall have the meanings specified for such terms (and the same
shall be true for any such component and cross-referenced defined terms) in
the Indenture as in effect on the Closing Date:
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"Acquired Debt" "Affiliate"
"Asset Sale" "Attributable Debt"
"Bankruptcy Law" "Cash Equivalents"
"Disqualified Stock" "Fixed Charge Coverage Ratio"
"GAAP" "Membership Interest Purchase
"Permitted Business" Agreement"
"Operating"
"Permitted Debt" "Restricted Investment"
"Restricted Subsidiary"
"Unrestricted Subsidiary"
(2) Unless a clear contrary intention appears, terms defined herein shall
have the respective meanings indicated below when used in each Operative
Document:
"Additional Costs" means the amounts payable pursuant to Sections 2.9,
2.10, 2.11 and 2.12 of the Loan Agreement and the other amounts due and payable
by the Borrower under any Loan Document other than principal and interest on the
Notes.
"Administrative Agent" means First Security Trust Company of Nevada, or
each other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 7.9 of the Loan Agreement.
"Administrative Agent Fee Letter" means the letter agreement, dated as
of March 31, 2000, between Lessee and Administrative Agent.
"Administrative Agent-Related Persons" means First Security Trust
Company of Nevada, and any successor agent arising under Section 7.9 of the Loan
Agreement, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Advance" means, as the context may require, the advance of funds by
the Lenders to Lessor, and the advance by Lessor to, or for the benefit of,
Lessee pursuant to Articles II and III of the Participation Agreement to finance
the acquisition of the Equipment.
"Advance Date" means the actual date on which an Advance is made
pursuant to the Participation Agreement.
"Advance Request" is defined in Section 2.4(a) of the Participation
Agreement.
"Affiliate Transaction" is defined in Section 5.21 of the Participation
Agreement.
"After-Tax Basis" means, with respect to any payment to be received
(taking into account any tax savings or reductions in the amount of any Tax not
indemnifiable hereunder as a result of circumstances giving rise to a Tax for
which an indemnity payment has been made), the
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amount of such payment increased so that, after deduction of the amount of all
taxes required to be paid by the recipient with respect to the receipt by the
recipient of such amounts, such increased payment (as so reduced) is equal to
the payment otherwise required to be made. In making a determination of the
increased payment, it shall be assumed that the Indemnitee was subject to
taxation at the highest marginal Federal rates and applicable state and local
income tax rates applicable to widely-held corporations for the year in which
such income is taxed.
"Aggregate Commitment Amount" means $30,000,000.
"Alteration" means a Permitted Alteration or a Required Alteration.
"Alternate Base Rate" means, for any day, an interest rate per annum
(rounded upwards, if necessary, to the highest 1/8 of 1%) equal to the higher of
(A) the rate of interest in effect for such day as publicly announced by Bank of
America in San Francisco, California from time to time as its reference rate for
calculating interest on certain loans (the "Reference Rate"), which need not be
the lowest interest rate charged by Bank of America and (B) Federal Funds
Effective Rate most recently determined by Administrative Agent plus 1/2 of 1%
per annum. "Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the weighted
average of the rate on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on the
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by Administrative Agent
from three federal funds brokers of recognized standing selected by it. For
purposes of this Agreement, any change in the Alternate Base Rate due to a
change in the Federal Funds Effective Rate or the Reference Rate shall be
effective on the effective date of such change.
"Alternate Base Rate Loan" means a Loan bearing interest by reference
to the Alternate Base Rate.
"Amortization Schedule" is defined in Section 2.13 of the Participation
Agreement.
"Applicable Law" means all existing and future applicable laws, rules,
regulations (including Environmental Laws) statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by, any Governmental Authority, and applicable judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal or agency of competent jurisdiction
(including those pertaining to health, safety or the environment (including
wetlands) and those pertaining to the construction or operation of facilities).
"Arrangement Fee" means the arrangement fee payable to the Arranger in
the amount set forth in the Arranger Fee Letter.
"Arranger" means Bank of America.
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"Arranger Fee Letter" means the letter agreement, dated as of July 16,
1999, between the Arranger and Lessee.
"Assigned Agreements" means each of the Participation Agreement, the
Lease, the Security Documents, the Bills of Sale, the Purchase Order
Assignments, the Certificates of Acceptance, and each other document assigned to
Administrative Agent (on behalf of the Lenders) as Collateral pursuant to the
Security Agreement.
"Bank" is defined in Section 4.3 of the Participation Agreement.
"Bank of America" means Bank of America, National Association, a
national banking association.
"Base Period" means the period commencing on and including the last day
of the Interim Period and ending on the Maturity Date, unless earlier
terminated.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of an ERISA
Group.
"Bill of Sale" means a bill of sale, substantially in the form of
Exhibit F to the Participation Agreement, to be delivered to Trustee pursuant to
the provisions of the Participation Agreement.
"Board" means the Board of Governors of the Federal Reserve System of
the United States (or any successor).
"Board of Directors" means: (a) with respect to a corporation, the
Board of Directors of the corporation; (b) with respect to a partnership, the
Board of Directors of the managing general partner of the partnership; and (c)
with respect to any other Person, the board or committee of such Person serving
a similar function.
"Borrower" means Trustee, not in its individual capacity, but solely in
its trust capacity under the Trust Agreement, as the borrower under the Loan
Agreement, and as Lessor under the Lease.
"Business Day" means any day other than a Saturday or Sunday or other
day on which commercial banks in Shreveport, Louisiana are closed, and, as
applicable, any day on which commercial banks in Dallas, Texas, Salt Lake City,
Utah, San Francisco, California, New York, New York, and solely with respect to
the definition of LIBO Rate, London, England, are authorized or required by law
to close.
"Capital Adequacy Regulation" means any guideline, request or directive
of any central
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bank or other Governmental Authority, or any other law, rule or regulation,
whether or not having the force of law, in each case, regarding capital adequacy
of any bank or of any Person controlling a bank.
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real (immovable), personal (movable), or mixed) by that Person
as lessee which, in conformity with GAAP, is, or is required to be, accounted
for as a capital lease on the balance sheet of that Person.
"Capitalized Lease Obligations" means all obligations under Capital
Leases of any Person, in each case taken at the amount thereof accounted for as
liabilities in accordance with GAAP.
"Capital Stock" means: (a) in the case of a corporation, corporate
stock; (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Casino" means any area, room or rooms wherein gaming is conducted at
the Resort and includes any bar, cocktail lounge or other facilities housed
therein, as well as the area occupied by the games.
"Casualty" means as to an item of Equipment, an event or occurrence in
which an item of Equipment is lost, stolen, totally destroyed, irreparably
damaged from any cause whatsoever, damaged beyond economic repair, or rendered
permanently unfit for normal use for any reason whatsoever (other than
obsolescence) or damaged so as to result in an insurance settlement on the basis
of a total loss or a constructive or compromised total loss, or taken or
requisitioned by Condemnation.
"Casualty Item Amount" means the product of the Lease Balance on the
date of determination times a fraction the numerator of which is the Equipment
Cost of such item of Equipment suffering the Casualty and the denominator of
which is Lessor's Cost for all Equipment then subject to the Lease.
"Casualty Recoveries" means the proceeds of any recovery in respect of
any Casualty from insurance, a Governmental Authority or otherwise.
"Category of Equipment" means, individually, each of the categories of
Equipment set forth in Schedule I to the Participation Agreement.
"Certificate of Acceptance" means each Certificate of Acceptance, fully
executed by Lessee, accepting Equipment under the Lease, substantially in the
form of Exhibit G to the Participation Agreement.
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"Change of Control" means the occurrence of the following:
(3) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Hollywood Casino and
its Subsidiaries taken as a whole;
(4) the liquidation or dissolution of, or the adoption of a plan relating
to the liquidation or dissolution of, either of Lessee or Hollywood Casino or
any successor thereto;
(5) Hollywood Casino becoming aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy vote, written notice
or otherwise) the acquisition by any Person or related group (within the meaning
of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor
provision to either of the foregoing, including any "group" acting for the
purpose of acquiring, holding or disposing of securities within the meaning of
Rule 13d-5(b)(1) under the Exchange Act), other than any of the Principals, in a
single transaction or in a related series of transactions, by way of merger,
consolidation or other business combination or purchase of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provision) of 30% or more of the total voting power entitled to vote in the
election of the Board of Directors of Hollywood Casino or such other Person
surviving the transaction and, at such time, the Principals collectively shall
fail to beneficially own, directly or indirectly, securities representing
greater than the combined voting power of Hollywood Casino's or such other
Person's voting stock as is beneficially owned by such Person or group;
(6) during any period of two consecutive years, individuals who at the
beginning of such period constituted Hollywood Casino's Board of Directors
(together with any new directors whose election or appointment by such board or
whose nomination for election by the stockholders of Hollywood Casino was
approved by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) ceasing for any reason to constitute a
majority of Hollywood Casino's Board of Directors then in office;
(7) Hollywood Casino consolidates with, or merges with or into, any Person,
or any Person consolidates with, or merges with or into, Hollywood Casino, in
any such event pursuant to a transaction in which any of the outstanding voting
stock of Hollywood Casino is converted into or exchange for cash, securities or
other property, other than any such transaction where the voting stock of
Hollywood Casino outstanding immediately prior to such transaction is converted
into or exchanged for voting stock (other than Disqualified Stock) of the
surviving or transferee Person constituting a majority of the
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outstanding shares of such voting stock of such surviving or transferee
Person immediately after giving effect to such issuance;
(8) the first day on which Hollywood Casino ceases to beneficially own
all of the outstanding Equity Interests of Lessee (other than the Equity
Interests of Lessee owned by Paddlewheels as of the Closing Date);
(9) the termination or repudiation by the Manager of the Management
Agreement; or
(10) any event or circumstance constituting a "change in control" or
other similar occurrence under documentation evidencing or governing any
Indebtedness of Lessee, HCS I or HCS II of $5,000,000 or more which results
in an obligation of Lessee, HCS I or HCS II to prepay, purchase, offer to
purchase, redeem or defease such Indebtedness.
"Charges" means freight, installation and applicable sales or use taxes
(or similar taxes, subject to the approval of the Required Lenders) imposed upon
an item of Equipment.
"Claims" means liabilities, obligations, damages, losses, demands,
penalties, fines, claims, actions, suits, administrative and judicial
proceedings (including informal proceedings), judgments, orders, enforcement
actions of any kind and settlements, and any costs, fees, expenses and
disbursements (including legal fees and expenses and costs of investigation
which, in the case of counsel or investigators retained by an Indemnitee, shall
be reasonable) of any kind and nature whatsoever related to any of the foregoing
imposed on, incurred by or asserted against an Indemnitee.
"Closing Date" is defined in Section 2.1 of the Participation
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended or replaced
and in effect from time to time.
"Collateral" means, as used in all Operative Documents other than the
Security Agreement (which contains an independent definition of "Collateral"),
all of the Trust Estate now owned or hereafter acquired by Trustee, upon which a
Lien is purported to be created by the Security Documents.
"Commission" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.
"Commitment" means (i) with respect to each Lender, the obligation of
the Lender to make Loans to Lessor at the request of Lessee in an aggregate
principal amount not to exceed the amount set forth opposite the Lender's name
on Schedule II to the Participation Agreement, and (ii) with respect to Lessor,
the obligation of Lessor to make Advances (to the extent Lessor
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receives Loans from the Lenders) to or for the benefit of Lessee.
"Commitment Percentage" means, as to any Lender at a particular time
when the Commitments are then in effect, the percentage set forth opposite such
Lender's name under the heading "Commitment Percentage" on Schedule II to the
Participation Agreement or, if the Commitments are not then in effect, the
percentage of the aggregate Loans represented by such Lender's Loans to Lessor.
"Commitment Period" means the period commencing on (and including) the
Closing Date and ending on (and excluding) the earliest of (a) December 31,
2000, (b) the Final Advance Date and (c) the date on which the Commitments shall
have been fully utilized.
"Compliance Certificate" is defined in Section 5.5 of the Participation
Agreement.
"Condemnation" means any condemnation, expropriation, requisition,
confiscation, seizure or other taking or sale of the use, access, occupancy,
servitude, or easement rights or title to the Equipment or any part thereof,
wholly or partially (temporarily or permanently), by or on account of any actual
or threatened expropriation or eminent domain proceeding or other taking of
action by any Person having the power of expropriation or eminent domain or
otherwise, or any transfer made in lieu of any such proceeding or action. A
"Condemnation" shall be deemed to have occurred on the earliest of the dates
that use, occupancy or title vests in the condemning authority.
"Construction Plans" means all drawings, plans and specifications
relating to the Resort prepared by or for Lessee in connection with the
construction financing provided pursuant to the Indenture and related documents,
as the same may be amended or supplemented from time to time.
"Construction Progress Report" means a report substantially in the form
of Exhibit M to the Participation Agreement, to be appropriately completed and
delivered to Administrative Agent from time to time pursuant to Section 3.1(k)
of the Participation Agreement.
"Corporate Trust Department" means the principal corporate trust office
of Trustee, located at 79 South Main Street, 3rd Floor, Salt Lake City, Utah
84111, Attention: Corporate Trust Department, or such other office at which the
corporate trust business of Trustee is administered and which Trustee specifies
by notice in writing to Lessor, Lessee, Administrative Agent and each Lender.
"Default" means any event or condition which, with the lapse of time or
the giving of notice, or both, would constitute an Event of Default.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule VII, as the same may be updated from time to time in connection with an
Advance Request; provided, however, that for purposes of any requested Advance,
no such update shall be deemed to have
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cured any breach of warranty or representation resulting from the inaccuracy or
incompleteness of the Disclosure Schedule, unless and until the Required Lenders
shall have accepted in writing such update to the Disclosure Schedule.
"Documentation Agent" means Bank of America, in its capacity as
documentation agent. The Documentation Agent shall have no rights, duties or
obligations under this Agreement or the other Operative Documents.
"Dollars" and "$" mean dollars in lawful currency of the United States
of America.
"Environmental Laws" means any and all laws, ordinances, rules,
regulations, judicial decisions, administrative orders and other requirements of
any applicable Governmental Authority relating to environmental matters,
pollution, or hazardous substances, including: the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C.ss.ss. 9601-9657; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C.ss.ss. 6901 et seq.;
the Hazardous Materials Transportation Act (49 U.S.C. ss.ss. 1801 et seq.); the
Louisiana Environmental Quality Act, La. R.S. 30:2001-2376; the Louisiana Air
Control Law, La. R.S. 30:2051-2063, the Louisiana Water Control Law, La. R.S.
30: 2071-2088; the Louisiana Hazardous Waste Control Law, La. R.S. 30:2171-2207;
the Louisiana Inactive and Abandoned Hazardous Waste Site Law, La. R.S.
30:2221-2226; the Liability for Hazardous Substance Remedial Action, La. R.S.
30:2271-2290; any other laws that may form the basis of any claim, action,
demand, suit, proceeding, hearing, or notice of violation that is based on or
related to the generation, manufacture, processing, distribution, use,
existence, treatment, storage, disposal, transport, or handling, or the
emission, discharge, release, or threatened release into the environment, of any
hazardous substance, or other threat to the environment.
"Environmental Permits" means all applicable authorizations, consents,
licenses, approvals and permits required under Environmental Laws in connection
with the construction, operation and occupancy of the Resort.
"Environmental Violation" means any activity, occurrence or condition
that violates or results in non-compliance with any Environmental Law in which
damages and penalties in excess of $2,500,000 are reasonably expected to be
imposed in Lessee's judgment.
"Equipment" means, individually, each item of equipment set forth in a
Certificate of Acceptance and in each case as generally described on Schedule I
to the Participation Agreement, and, collectively, each of the foregoing,
together with all substitutions therefor, replacements thereof and additions
thereto from time to time pursuant to the Operative Documents.
"Equipment Cost" means the invoice cost of each item of Equipment, plus
up to an additional twenty percent (20%) thereof for Charges.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for,
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Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any applicable regulations issued pursuant thereto, as amended or
replaced and as in effect from time to time.
"ERISA Affiliate" means, with respect to any Person, each Person
(whether or not incorporated) which is required to be aggregated with such
Person pursuant to the requirements of Section 414(b) or (c) of the Code.
"ERISA Group" means, with respect to any Person, such Person and its
ERISA Affiliates.
"Event of Default" means a Lease Event of Default or a Loan Event of
Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Commission thereunder.
"Excluded Amounts" means
(11) all indemnity payments and expenses to which Trustee,
Lessor, Bank, Administrative Agent or any Lender (or the respective
successors, assigns, agents, officers, directors or employees of any
such Person) is entitled pursuant to the Operative Documents;
(12) any amounts payable under any Operative Documents to
reimburse Trustee, Lessor, Bank, Administrative Agent or any Lender
(including the reasonable expenses of Trustee, Lessor, Bank,
Administrative Agent and any Lender incurred in connection with any
such payment) for performing any of the obligations of Lessee under and
as permitted by any Operative Document;
(13) any insurance proceeds under policies maintained by
Trustee, Lessor, Bank, Administrative Agent or any Lender and not
required to be maintained by Lessee under the Lease;
(14) any insurance proceeds (or corresponding amounts with
respect to risks that are self-insured by Lessee and the amounts of any
policy deductibles) under liability policies payable to Trustee in its
individual capacity, Administrative Agent or any Lender (or the
respective successors, assigns, agents, officers, directors or
employees of Bank, Administrative Agent or of any Lender);
(15) any amount payable in respect of Transaction Costs; and
(16) any payments of interest on payments referred to in
clauses (a) through (e) above.
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"Fee Letters" means, collectively, the Administrative Agent Fee Letter,
the Arranger Fee Letter and the Trustee Fee Letter.
"Final Advance Date" means the Advance Date specified by Lessee in
writing to be the final Advance Date under the Lease.
"Gaming Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States federal government, any foreign government, any State,
province or city or other political subdivision or otherwise, whether now or
hereafter in existence, or any officer or official thereof (including without
limitation the Louisiana Gaming Control Board and the Louisiana Department of
Public Safety and Corrections, Office of State Police, Riverboat Gaming
Division), with authority to regulate any gaming operation (or proposed gaming
operation) owned, managed or operated by any of Lessee, Hollywood Casino, the
Manager or any of the their respective Subsidiaries, provided, however, that for
purposes hereof, the City of Shreveport, Louisiana, in its capacity as the
ground lessor under the Ground Lease, shall not be considered a "Gaming
Authority."
"Gaming Equipment" means (a) slot machines and other devices which
constitute gaming devices (as defined in applicable Gaming Laws), and (b)
related equipment and apparatus, all as more fully described in the preliminary
appraisal delivered pursuant to Section 3.2(a) of the Participation Agreement,
together with all substitutions therefor, replacements thereof and additions
thereto from time to time pursuant to the Operative Documents.
"Gaming Laws" means the gaming laws of any jurisdiction or
jurisdictions to which Lessee or any of its Subsidiaries is, or may at any time
after the Closing Date, be subject, including without limitation the Louisiana
Riverboat Economic Development and Gaming Control Act, La. R.S. ss.ss. 27:41 et
seq., and the regulations promulgated thereunder, together with any local rules,
regulations or ordinances applicable to the conduct of games of chance at the
Resort.
"Gaming License" means any license, permit, franchise or other
authorization from any Gaming Authority necessary on the Closing Date or at any
time thereafter to own, lease, operate or otherwise conduct the business of
Lessee, the Manager or any of the Restricted Subsidiaries.
"Governmental Authority" means any foreign, Federal, State, county,
parish or local government, any political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Ground Lease" means that certain Ground Lease dated as of May 19, 1999
by and between the City of Shreveport, as landlord, and Lessee (formerly known
as QNOV), as tenant, as the same may be amended, restated, modified or
supplemented from time to time.
"Hazardous Materials" means hazardous wastes, hazardous substances,
hazardous constituents, toxic substances or related materials, whether solids,
liquids or gases, including but
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not limited to substances defined as "hazardous wastes," "hazardous substances,"
"toxic substances," "pollutants," "contaminants," chemicals known to cause
cancer or reproductive toxicity, "radioactive materials," or other similar
designations in, or otherwise subject to regulation under any Environmental Laws
now or hereafter in effect.
"HCS I means HCS I, Inc., a Louisiana corporation, the managing general
partner of Lessee, and its permitted successors and assigns.
"HCS II" means HCS II, Inc., a Louisiana corporation, and its permitted
successors and assigns.
"Hollywood Casino" means Hollywood Casino Corporation, a Delaware
corporation.
"HWCC-Louisiana" means HWCC-Louisiana, Inc., a Louisiana corporation.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of
(a) borrowed money;
(b) obligations evidenced by bonds, notes, debentures or
similar instruments or letters of credit (or reimbursement agreements
in respect thereof);
(c) banker's acceptances;
(d) Capitalized Lease Obligations;
(e) the balance deferred and unpaid of the purchase price of
any property, except any such balance that constitutes an accrued
expense or trade payable;
(f) 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;
(g) all Indebtedness of others secured by a Lien on any asset
of the specified Person (whether or not such Indebtedness is assumed by
the specified Person); provided, however, that the amount of such
Indebtedness shall be limited to the lesser of the fair market value of
the assets or property to which such Lien attaches and the amount of
the Indebtedness so incurred; and
(h) to the extent not otherwise included, the direct or
indirect guarantee by the specified Person of any Indebtedness of any
other Person;
and any and all deferrals, renewals, extensions, refinancings and
refundings (whether
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direct or indirect) thereof and any amendments, modifications or
supplements thereto, if and to the extent any of the preceding items
(other than letters of credit and hedging obligations described in
clause (f)) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP.
The amount of any Indebtedness outstanding as of any date
shall be:
(1) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount; and
(2) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indemnified Liabilities" means all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including all reasonable fees and expenses of legal counsel) of
any kind or nature whatsoever which may at any time be imposed on, incurred by
or asserted against any Administrative Agent-Related Person in any way relating
to or arising out of any Operative Document or any document contemplated by or
referred to in any Operative Document, or the transactions contemplated by any
Operative Document, or any action taken or omitted by any Administrative
Agent-Related Person under or in connection with any of the foregoing.
"Indemnitee" means Trustee, in its individual and in its trust
capacity, Lessor, in its individual capacity and in its capacities as Borrower
and Lessor, each Lender, Administrative Agent, any additional separate or
co-trustee appointed in accordance with the terms of the Trust Agreement and the
respective successors, assigns, directors, shareholders, partners, officers,
employees and agents of each of the foregoing.
"Indenture" means the Indenture dated as of August 10, 1999, executed
by and among Lessee and Shreveport Capital, as Issuers, HWCC-Louisiana, HCS I
and HCS II, as Guarantors, and the Indenture Trustee, as the same may be
amended, restated, modified or supplemented from time to time.
"Indenture Security Documents" means the "Collateral Documents" as such
term is used and defined in the Indenture.
"Indenture Trustee" means State Street Bank and Trust Company, as
trustee for the benefit of the noteholders under the Indenture, including any
successor or replacement trustee permitted under the Indenture.
"Insurance Requirements" means all terms and conditions of any
insurance policy required by the Lease to be maintained by Lessee and all
requirements of the issuer of any such policy.
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<PAGE>
"Instructing Party" is defined in Section 2.1 of the Trust Agreement.
"Interest Period" means (a) for the Interim Period, each period
beginning on (and including) the date of the relevant Advance and ending on (but
excluding) the last Business Day of the calendar month in which the relevant
Advance is made and each consecutive one-month period thereafter during the
Interim Period, with each such period ending on the last Business Day of the
applicable calendar month, and (b) for the Base Period, the period beginning on
(and including) the last Business Day of the Interim Period and ending on (but
excluding) the last Business Day of the third calendar month thereafter and each
consecutive three-month period thereafter, with each such period ending on the
last Business Day of a calendar month; provided, however, that notwithstanding
the foregoing, (i) no Interest Period during the Interim Period may end later
than the last day of the Interim Period and (ii) no Interest Period may end
later than the Maturity Date.
"Interest Rate" means with respect to any day in any Interest Period
the rate per annum at which interest accrues
(a) on a Loan maintained from time to time during such
Interest Period as an Alternate Base Rate Loan, at a rate equal to the
Alternate Base Rate then in effect plus two percent (2.00%); or
(b) on a Loan maintained as a LIBO Rate Loan, during such
Interest Period applicable thereto, at a rate equal to the LIBO Rate
then in effect plus four percent (4.00%).
"Interim Period" means the period commencing on (and including) the
Initial Advance Date and ending on (and excluding) the earlier of (a) the date
upon which the Resort begins Operating and (b) December 31, 2000.
"Initial Advance Date" means the date of the initial Advance with
respect to any Equipment.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, together with the rules and regulations promulgated thereunder.
"Investor's Letter" means the Investor's Letter, dated as of the
Closing Date, in substantially the form of Exhibit H to the Participation
Agreement.
"Lease" means the Lease Intended as Security, dated as of the Closing
Date, between Lessor and Lessee, substantially in the form of Exhibit A to the
Participation Agreement, as the same may be amended, restated, modified or
supplemented from time to time.
"Lease Balance" means, as of any date of determination, the sum of the
aggregate outstanding principal amount of the Notes.
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"Lease Default" means any event, condition or failure which, with the
lapse of time or the giving of notice, or both, would constitute a Lease Event
of Default.
"Lease Event of Default" means any event, condition or failure
designated as a "Lease Event of Default" in Article X of the Lease.
"Lease Financing Party" is defined in Section 6.1(i) of the
Participation Agreement.
"Lease Term" is defined in Section 2.3 of the Lease.
"Lease Termination Date" means the last day of the Lease Term, or any
other date on which the Lease is terminated, including pursuant to Article V or
X of the Lease.
"Lender" means a holder of a Note.
"Lending Office" means, as to any Lender, the office or offices of such
Lender specified as its "Lending Office" on Schedule III of the Participation
Agreement, or such other office as such Lender may from time to time notify the
Borrower and Administrative Agent.
"Lessee" means Hollywood Casino Shreveport, a Louisiana general
partnership, as lessee and debtor under the Lease.
"Lessee Collateral" is defined in Section 14.1 of the Lease.
"Lessor" means the lessor or secured party under the Lease, which
initially shall be Trustee.
"Lessor Lien" means any Lien on or against any or all of the Equipment,
the Lease, the Trust Estate or any payment of Rent which results from (a) any
act of, or any Claim against, Trustee, in its individual capacity, Lessor, in
its capacity as Lessor, any Lender or Administrative Agent, in its individual
capacity, in any case unrelated to the transactions contemplated by the
Operative Documents, (b) any Tax owed by any such Person, except for any Tax
required to be paid by Lessee under the Operative Documents, including any Tax
for which Lessee is obligated to indemnify such Person, or (c) any act or
omission of such Person which is prohibited by the Operative Documents.
"Lessor's Cost" means the aggregate Equipment Cost paid with proceeds
of any Advance.
"LIBO Rate" shall mean with respect to any Interest Period at any time,
the applicable London interbank offered rate for deposits in U.S. dollars
appearing on Telerate Page 3750 as of 11:00 a.m. (London time) two (2) Business
Days prior to the first day of such Interest Period, and having a maturity
approximately equal to such Interest Period; or if no London interbank offered
rate of such maturity then appears on Telerate Page 3750, then the rate equal to
the London interbank offered rate for deposits in U.S. dollars maturing
immediately before or immediately
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after such maturity, whichever is higher, as determined by Administrative Agent
from Telerate Page 3750; or if Telerate Page 3750 is not available, the
applicable LIBO Rate for the relevant Interest Period shall be the rate
determined by Administrative Agent to be the arithmetic average of the rates at
which Bank of America offers to place deposits in U.S. dollars with first-class
banks in the London interbank market at approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of such Interest Period, in the
approximate amount of Bank of America's and/or its Affiliate's relevant portion
of the aggregate outstanding principal amount of the Notes and having a maturity
approximately equal to such Interest Period.
"LIBO Rate Loans" means Loans bearing interest by reference to the LIBO
Rate.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such in Schedule III to the Participation Agreement, or such other
office of a Lender designated from time to time by notice from such Lender to
Trustee, Lessor and Administrative Agent, whether or not outside the United
States.
"License Revocation" means (a) the revocation, failure to renew or
suspension of any casino, gambling or gaming license issued by any Gaming
Authority with respect to the Casino, (b) the appointment by any Gaming
Authority of a receiver, supervisor or similar official with respect to the
Casino or (c) the involuntary closure of the Casino pursuant to an order of any
Gaming Authority.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
pledge, charge, deposit arrangement, security interest, encumbrance, privilege,
lien (statutory or otherwise), easement, servitude or charge of any kind in
respect of such asset, including any irrevocable license, conditional sale or
other title retention agreement, any lease in the nature thereof, or any other
right of or arrangement with any creditor to have its claim satisfied out of any
specified property or asset with the proceeds therefrom prior to the
satisfaction of the claims of the general creditors of the owner thereof,
whether or not filed, recorded or otherwise perfected under applicable law, or
the filing of, or agreement to execute as "debtor", any financing or
continuation statement under the Uniform Commercial Code of any jurisdiction or
any federal, state or local lien imposed pursuant to any Environmental Law.
"Loan" is defined in Section 2.1 of the Loan Agreement.
"Loan Agreement" means the Loan Agreement, dated as of the Closing
Date, among Lessor, as the Borrower, and the Lenders, substantially in the form
of Exhibit B to the Participation Agreement, as the same may be amended,
restated, modified or supplemented from time to time.
"Loan Default" means any event, act or condition which with notice or
lapse of time, or both, would constitute a Loan Event of Default.
"Loan Documents" means the Loan Agreement, the Notes, the Security
Documents and
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all other documents and instruments executed and delivered in connection with
each of the foregoing.
"Loan Event of Default" is defined in Article VI of the Loan Agreement.
"Management Agreement" means the Management Services Agreement dated as
of September 22, 1998, between Lessee and the Manager relating to the management
of the Resort, as amended by that certain Amendment to Management Services
Agreement dated as of August 2, 1999, between Lessee and the Manager, as the
same may be amended, restated, modified or supplemented from time to time.
"Management Fees" means any fees payable to the Manager pursuant to the
Management Agreement.
"Manager" means HWCC-Shreveport, Inc., a Louisiana corporation.
"Manager Subordination Agreement" means a subordination agreement among
the Manager, Lessee and Lessor, dated as of the Closing Date, substantially in
the form of Exhibit K to the Participation Agreement, as the same may be
amended, restated, modified or supplemented from time to time.
"Material Adverse Effect" means, with respect to Lessee, any change or
changes, effect or effects or condition or conditions that individually or in
the aggregate are or are likely to be materially adverse to (i) the assets,
business, operations or financial condition of Lessee and its Subsidiaries on a
consolidated basis, (ii) the ability of Lessee to perform its Obligations under
the Operative Documents to which it is a party, (iii) the validity or
enforceability of any of the Operative Documents or any rights or remedies under
any thereof or (iv) the value of the Collateral, taken as a whole, or worth of
the Collateral as collateral security, taken as a whole.
"Maturity Date" means the third anniversary of the first day of the
Base Period.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of an
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of such ERISA Group during such
five year period.
"Non-Casualty Loss" is defined in Section 9.2(a) of the Lease.
"Non-Casualty Recoveries" means the proceeds of any recovery in respect
of any Non-Casualty Loss from insurance, a Governmental Authority or otherwise.
"Note" is defined in Section 2.2(a) of the Loan Agreement.
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"Obligations" means all obligations (monetary or otherwise) of Lessee
under the Operative Documents.
"Operating Deadline" means April 30, 2001.
"Operative Documents" means the following:
(a) the Participation Agreement;
(b) the Notes;
(c) the Lease;
(d) the Trust Agreement;
(e) the Loan Agreement;
(f) the Security Agreement; and
(g) the Manager Subordination Agreement.
"Other Taxes" means any present or future stamp or documentary taxes,
or any other excise or property taxes, charges or similar levies, which arise
from any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, any Operative Document.
"Overdue Rate" means the lesser of (i) the highest interest rate
permitted by Applicable Law and (ii) an interest rate per annum equal to the
Interest Rate plus three percent (3.00%) per annum.
"Paddlewheels" means Shreveport Paddlewheels, L.L.C., a Louisiana
limited liability company.
"Participants" means, collectively, Trustee, Lessor, Administrative
Agent, each Lender and, where the context requires, any one or more of them.
"Participating Entity" is defined in Section 6.3(a) of the
Participation Agreement.
"Participation Agreement" means the Participation Agreement, dated as
of the Closing Date, among Lessee, Lessor, Trustee, Lenders, Documentation Agent
and Administrative Agent, as the same may be amended, restated, modified or
supplemented from time to time.
"Payment Date" means the last Business Day of each Interest Period.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERSA.
"Pension Plan" means, with respect to any Person, a "pension plan" as
such term is defined in section 3(2) of ERISA which is subject to Title IV of
ERISA and to which such Person may have any liability or contingent liability,
including, but not limited to, liability by reason of
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having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason or being deemed to be
a contributing sponsor under section 4069 of ERISA.
"Periodic Rent" means (a) with respect to each Interest Period during
the Interim Period, an amount equal to the aggregate of interest due for such
Interest Period on each Loan at the applicable Interest Rate in effect for such
Loan, and (b) during the Base Period, an installment of rent consisting of the
interest determined pursuant to clause (a) above plus the amortization amount,
if any, payable on the Notes pursuant to the Amortization Schedule by Lessor to
the Lenders on the applicable Payment Date for any such Interest Period.
"Permitted Alteration" is defined in Section 7.2(b) of the Lease.
"Permitted Contest" means actions taken by a Person to contest in good
faith, by appropriate proceedings initiated timely and diligently prosecuted,
the legality, validity or applicability to the Equipment or any location whereon
or wherein the Equipment or any portion thereof are located or to be located, or
any interest therein of any Person of (a) any law, regulation, rule, judgment,
order, or other legal provision or judicial or administrative requirements, (b)
any term or condition of, or any revocation or amendment of, or other proceeding
relating to, any authorization or other consent, approval or other action by any
Governmental Authority or (c) any Lien or Tax, if the initiation and prosecution
of such contest would not: (i) result in, or materially increase the risk of,
the imposition of any criminal liability on any Indemnitee; (ii) materially and
adversely affect the security interests created by the Operative Documents or
the rights and interests of Lessor in or to any of the Equipment or the right of
Lessor, Trustee, Administrative Agent or any Lender to receive payment of all or
any portion of the principal of or interest on any Note, any Rent, the Lease
Balance or any other amount payable under the Operative Documents; (iii) permit,
or pose a material risk of, the sale or forfeiture of, or foreclosure on, any of
the Equipment or (iv) materially and adversely affect the fair market value,
utility or remaining useful life of the Equipment or any interest therein or the
continued economic operation thereof; provided, further, that in any event
adequate reserves in accordance with GAAP are maintained by such Person against
any adverse determination of such contest.
"Permitted Liens" means (i) the respective rights and interests of
Lessee, the Lenders and Trustee, as provided in any of the Operative Documents;
(ii) materialmen's, mechanics', workers', artisan's, repairmen's, employees' or
other like Liens securing payment of the price of goods or services rendered in
the ordinary course of business for amounts the payment of which is not overdue
for more than 60 days or is being contested pursuant to a Permitted Contest;
(iii) Lessor Liens; (iv) Liens for current Taxes which are not delinquent for
more than 60 days or the validity of which is being contested pursuant to a
Permitted Contest; (v) the rights of any sublessee or assignee under a sublease
or an assignment permitted by the terms of the Lease; (vi) Liens arising out of
judgments or awards not constituting an Event of Default (other than judgment
Liens paid or fully covered by insurance that are not outstanding for more than
60 days) with respect to which appeals or other proceedings for review are being
prosecuted pursuant to a Permitted
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Contest; (vii) easements, servitudes, rights of way and other encumbrances on
title to real (immovable) property not interfering in any material respect with
the rights of Lessor under the Lease; (viii) Liens securing indebtedness of
Lessee to vendors under any purchase contract until such time as the full amount
owed by Lessee under such purchase contract has been paid in full or, in the
event of a dispute with respect to any amount owed by Lessee under such purchase
contract, so long as the disputed amount is being contested pursuant to a
Permitted Contest; (ix) Liens granted by Lessee in favor of the Indenture
Trustee pursuant to the Indenture and the Indenture Security Documents as in
effect on the Closing Date with respect to any of the Lessee Collateral that is
not part of the Priority Collateral; and (x) the lessor's lien (if any) of the
City of Shreveport, as lessor, under the Ground Lease.
"Person" means any individual, corporation, partnership, limited
liability company, limited liability partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, governmental authority
or any other legal entity.
"Plan" means, with respect to any Person, an employee benefit or other
plan (other than a Multiemployer Plan) established or maintained by such Person
or any member of such Person's ERISA Group and which is covered by Title IV of
ERISA.
"Principals" means:
(1) Jack Pratt, Edward T. Pratt, Jr., William D. Pratt,
Crystal A. Pratt, Maria A. Pratt and Edward T. Pratt III, their
respective estates and members of the immediate family (including
adopted children) of any of them who acquire voting stock of Hollywood
Casino from any such estates;
(2) C.A. Pratt Partners, Ltd., a Texas limited partnership;
provided, however, that, in each case, the majority of the voting
equity interest of the partnership is beneficially owned by a Person
named in clause (1); and
(3) The WDP, Jr. Family Trust; provided, however, that a
Person named in clause (1) is:
(a) the beneficial owner of a majority of voting
stock of Hollywood Casino held by such trust, or
(b) if the trust is irrevocable, the trustee of the
irrevocable trust is a Person named in clause (1).
"Priority Collateral" means any and all Equipment and all proceeds (as
such term is used and defined in the UCC) thereof or arising therefrom.
"Projections" means the pro forma financial information provided by
Lessee and its Affiliates as contained in the "Information Materials" (i.e., the
"bank book") delivered to the
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Lenders.
"Purchase Order Assignment" means a Purchase Order Assignment between
Lessee and Lessor, substantially in the form of Exhibit I to the Participation
Agreement.
"Rent" means Periodic Rent and Supplemental Rent.
"Required Alteration" is defined in Section 7.2(a) of the Lease.
"Required Lenders" means, as of the date of the determination, Lenders
having aggregate investments in the transactions contemplated by the Operative
Documents (as measured by the outstanding principal amount of the Loans then
outstanding) in excess of 50% of all such investments.
"Requirements of Law" means, as to any Person, any current or
hereinafter enacted law (statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental Authority, in each case
applicable to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Resort" means the establishment featuring a riverboat casino, hotel
and related amenities in Shreveport, Louisiana being developed by Lessee.
"Responsible Official" means (a) when used with reference to a Person
other than Lessee or an individual, any officer or manager of such Person,
general partner of such Person, officer of a corporate or limited liability
company general partner of such Person, officer of a corporate or limited
liability company general partner of a partnership that is a general partner of
such Person, or any other responsible official thereof duly acting on behalf
thereof, (b) when used with reference to Lessee, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice President, in each case of HCS I, or any successor
managing general partner of Lessee, and (c) when used with reference to a Person
who is an individual, such Person. Trustee, Lessor, Administrative Agent, and
the Lenders shall be entitled to conclusively rely upon any document or
certificate that is signed or executed by a Responsible Official of Lessee or
any of its Subsidiaries as having been authorized by all necessary corporate,
limited liability company, partnership and/or other action on the part of Lessee
or such Subsidiary.
"Restricted Payment" is defined in Section 5.17 of the Participation
Agreement.
"Search" is defined in Section 3.2(c) of the Participation Agreement.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"Security Agreement" means the Security Agreement and Assignment of
Lease, dated as
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of the Closing Date, between Lessor, as Borrower, and Administrative Agent,
substantially in the form of Exhibit D to the Participation Agreement, as the
same may be amended, restated, modified or supplemented from time to time.
"Security Documents" means the collective reference to the Security
Agreement and all other security documents hereafter delivered to Administrative
Agent granting a Lien on any asset or assets of any Person to secure the
obligations and liabilities of Lessor under the Loan Agreement and/or under any
of the other Loan Documents, as the same may be amended, restated, modified or
supplemented from time to time.
"Shreveport Capital" means Shreveport Capital Corporation, a Louisiana
corporation.
"Sublease" has the meaning set forth in Article IV of the Lease.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which more than 50% of the
outstanding ownership interests, at the time any determination is being made, is
directly or indirectly owned by such Person, by such Person and one or more of
its Subsidiaries or by one or more of such Person's Subsidiaries.
"Supplemental Rent" means, any and all amounts, liabilities and
obligations (i) which Lessor assumes or agrees or is otherwise obligated or
designated to pay under the Loan Agreement or any other Operative Document
(whether or not designated as Supplemental Rent) to Trustee, Administrative
Agent, the Lenders or any other Person, including Additional Costs and damages
for breach of any representations, warranties or agreements or (ii) which Lessee
agrees or is otherwise obligated or designated to pay (other than Periodic Rent)
under the Lease or any other Operative Document (whether or not designed as
Supplemental Rent) to Lessor or Trustee as Lessor's designee.
"Taxes" and "Tax" are defined in Section 8.1 of the Participation
Agreement.
"Transaction Costs" means reasonable legal and other fees, costs and
expenses incurred by the Arranger, Trustee, Lessor, Administrative Agent and the
Lenders in connection with the consummation and closing of the transactions
contemplated by the Operative Documents, and the preparation, negotiation,
execution and delivery of the Operative Documents, including (i) fees of Trustee
and Trustee's legal counsel; (ii) allocated time charges and expenses of the
Bank of America Legal Department and reasonable fees and expenses of Sheppard,
Mullin, Richter & Hampton LLP and McGlinchey Stafford, APPLC, special counsel to
Administrative Agent; (iii) all reasonable filing and recording fees, and other
search costs required by the Operative Documents; and (iv) without duplication
of any of the foregoing, fees owing to the Arranger pursuant to the Arranger Fee
Letter.
"Trust" is defined in Section 1.1 of the Trust Agreement.
"Trust Agreement" means the Trust Agreement dated as of the Closing
Date, between
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Lessee and Bank, in its capacities as Lessor and Trustee, substantially in the
form of Exhibit C to the Participation Agreement, as the same may be amended,
restated, modified or supplemented from time to time.
"Trust Estate" means all estate, right, title and interest of Lessor
in, to and under the Equipment, the Trust Agreement, the Lease and all of the
other Operative Documents, including (i) all amounts (other than Excluded
Amounts) of Rent and other payments due or to become due of any kind for or with
respect to the Equipment or payable under any of the foregoing, (ii) any or all
payments or proceeds received by Lessor after the termination of the Lease with
respect to the Equipment as the result of the sale, lease or other disposition
thereof, and (iii) proceeds of the Loans, together with any other moneys,
proceeds or property at any time received by Lessor under or in connection with
the Operative Documents.
"Trustee" means First Security Bank, National Association, a national
banking association, not in its individual capacity, but solely as Trustee under
the Trust Agreement, and any successor or replacement Trustee expressly
permitted under the Operative Documents.
"Trustee Fee Letter" means the letter agreement, dated as of March 31,
2000, between Lessee and Trustee.
"UCC Financing Statements" means, collectively, the financing
statements executed and delivered by Lessor, as debtor, in favor of
Administrative Agent, as secured party, for the benefit of the Lenders, and the
financing statements executed and delivered by Lessee, as debtor, in favor of
Lessor, as secured party, and assigned by Lessor to Administrative Agent, as
assignee, for the benefit of the Lenders.
"Uniform Commercial Code" and "UCC" means the Uniform Commercial Code
as in effect in any applicable jurisdiction (in Louisiana, Chapter 9 of the
Louisiana Commercial Laws, La. R.S.ss.ss. 10:9-101 et seq.).
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
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================================================================================
LEASE INTENDED AS SECURITY
dated as of March 31, 2000
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity
except as expressly stated herein,
but solely as Trustee and Lessor,
and
HOLLYWOOD CASINO SHREVEPORT,
as Lessee.
================================================================================
ALL RIGHT, TITLE AND INTEREST OF TRUSTEE AND LESSOR UNDER THIS LEASE AND THE
PROPERTY RIGHTS SUBJECT HERETO HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A LIEN
AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY TRUST COMPANY OF NEVADA, AS
ADMINISTRATIVE AGENT ("ADMINISTRATIVE AGENT"), UNDER THAT CERTAIN SECURITY
AGREEMENT AND ASSIGNMENT OF LEASE DATED AS OF MARCH 31, 2000, FOR THE BENEFIT OF
THE ADMINISTRATIVE AGENT AND THE LENDERS REFERRED TO IN SUCH SECURITY AGREEMENT
AND ASSIGNMENT OF LEASE. THIS LEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS.
TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM
IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE "ORIGINAL
EXECUTED COUNTERPART NO. 1", WHICH SHALL BE IDENTIFIED AS THE COUNTERPART
CONTAINING THE RECEIPT THEREFOR EXECUTED BY ADMINISTRATIVE AGENT ON OR FOLLOWING
THE SIGNATURE PAGE THEREOF.
THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART NO. ___.
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ARTICLE I DEFINITIONS; LESSEE LIABILITY......................................................1
ARTICLE II LEASE OF EQUIPMENT; LEASE TERM.....................................................1
SECTION 2.1 Acceptance and Lease of Equipment......................................................1
SECTION 2.2 Acceptance Procedure...................................................................1
SECTION 2.3 Lease Term.............................................................................2
ARTICLE III RENT; QUIET ENJOYMENT; NET LEASE...................................................2
SECTION 3.1 Periodic Rent..........................................................................2
SECTION 3.2 Supplemental Rent......................................................................2
SECTION 3.3 Place and Manner of Payment............................................................2
SECTION 3.4 Late Payment...........................................................................2
SECTION 3.5 Quiet Enjoyment; Discharge of Liens....................................................2
SECTION 3.6 Net Lease; No Setoff, Etc..............................................................3
SECTION 3.7 No Bar.................................................................................4
SECTION 3.8 Intent of the Parties..................................................................4
ARTICLE IV POSSESSION AND SUBLEASING..........................................................5
SECTION 4.1 Possession and Subleasing..............................................................5
ARTICLE V LEASE TERMINATION..................................................................5
SECTION 5.1 Early Termination......................................................................5
SECTION 5.2 Termination and Transfer...............................................................6
ARTICLE VI DISCLAIMER AND ASSIGNMENT OF WARRANTIES............................................6
SECTION 6.1 Disclaimer of Warranties...............................................................6
SECTION 6.2 Assignment of Warranties...............................................................7
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ARTICLE VII MAINTENANCE AND REPAIR;ALTERATIONS AND ADDITIONS............................................7
SECTION 7.1 Maintenance and Repair; Compliance With Law............................................7
SECTION 7.2 Alterations............................................................................8
SECTION 7.3 Replacement and Substitution...........................................................8
SECTION 7.4 Removal................................................................................8
SECTION 7.5 Maintenance and Repair Reports.........................................................8
ARTICLE VIII USE.........................................................................................9
SECTION 8.1 Use....................................................................................9
ARTICLE IX CASUALTY; REPLACEMENT; INSURANCE...................................................9
SECTION 9.1 Casualty...............................................................................9
SECTION 9.2 Non-Casualty Losses...................................................................11
SECTION 9.3 Required Coverages....................................................................11
SECTION 9.4 Delivery of Insurance Certificates....................................................12
ARTICLE X LEASE EVENTS OF DEFAULT...........................................................13
SECTION 10.1 Lease Events of Default...............................................................13
SECTION 10.2 Remedies..............................................................................15
SECTION 10.3 Waiver of Certain Rights..............................................................16
SECTION 10.4 Power of Attorney.....................................................................16
SECTION 10.5 Remedies Cumulative; No Waiver; Consents..............................................17
ARTICLE XI ADDITIONAL LOUISIANA PROVISIONS...................................................17
SECTION 11.1 Additional Louisiana Provisions.......................................................17
ARTICLE XII LESSOR'S RIGHT TO CURE.....................................................................19
SECTION 12.1 Lessor's Right to Cure Lessee's Lease Defaults........................................19
ARTICLE XIII LESSOR ASSIGNMENTS.........................................................................20
SECTION 13.1 Lessor Assignments....................................................................20
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ARTICLE XIV GRANT OF SECURITY INTEREST.................................................................20
SECTION 14.1 Grant of Security Interest............................................................20
SECTION 14.2 Retention of Title or Proceeds in the Case of Default.................................20
ARTICLE XV WARRANTY OF TITLE..........................................................................21
SECTION 15.1 Warranty of Title.....................................................................21
ARTICLE XVI MISCELLANEOUS..............................................................................21
SECTION 16.1 Governing Law.........................................................................21
SECTION 16.2 Notices...............................................................................21
SECTION 16.3 Counterparts..........................................................................21
SECTION 16.4 Severability..........................................................................22
SECTION 16.5 Successors and Assigns................................................................22
SECTION 16.6 Parties in Interest...................................................................22
SECTION 16.7 Limitation of Liability...............................................................22
SECTION 16.8 Nonrecourse to Paddlewheels...........................................................22
SECTION 16.9 Captions; Table of Contents...........................................................23
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LEASE INTENDED AS SECURITY
--------------------------
This LEASE INTENDED AS SECURITY (as amended, restated, supplemented, or
otherwise modified from time to time, this "Lease"), dated as of March 31, 2000,
is between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual
capacity, except as expressly stated herein, but solely as Trustee and Lessor
under the Trust Agreement and this Lease ("Lessor"), and HOLLYWOOD CASINO
SHREVEPORT, a Louisiana general partnership, as Lessee ("Lessee").
In consideration of the mutual agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, hereby
agree as follows:
ARTICLE I
DEFINITIONS; LESSEE LIABILITY
For all purposes hereof, capitalized terms used herein and not
otherwise defined shall have the meanings assigned thereto in Appendix 1 to that
certain Participation Agreement, dated as of March 31, 2000 (as amended,
restated, supplemented, or otherwise modified from time to time, the
"Participation Agreement"), among Lessee; Lessor, as Trustee and Lessor; the
Lenders identified therein; First Security Trust Company of Nevada, as
Administrative Agent; and Bank of America, National Association, as Arranger and
Documentation Agent. Except as set forth in Section 16.8 below, all obligations
imposed on the "Lessee" in this Lease shall be the full recourse liability of
Lessee.
ARTICLE II
LEASE OF EQUIPMENT; LEASE TERM
SECTION 1.1 Acceptance and Lease of Equipment. With respect to each
Advance under Section 2.4(b) of the Participation Agreement, on the Advance Date
for that Advance, subject to satisfaction or waiver of the conditions precedent
set forth in Article III of the Participation Agreement, Lessor shall lease to
Lessee hereunder, and Lessee shall lease from Lessor hereunder, the Equipment
accepted on that Advance Date by Lessee under a Certificate of Acceptance
pursuant to the Participation Agreement for the Lease Term.
SECTION 1.2 Acceptance Procedure. Lessee hereby agrees that the
execution and delivery by Lessee on any Advance Date of a Certificate of
Acceptance pursuant to Section 3.1(e) of the Participation Agreement
(appropriately completed) shall, without further act, irrevocably constitute
acceptance by Lessee on behalf of itself and Lessor of the Equipment which is
the
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subject thereof for all purposes of this Lease and the other Operative
Documents.
SECTION 1.3 Lease Term. The term of this Lease (the "Lease Term") shall
consist of the Interim Period and the Base Period, subject to Article V and
Article X.
ARTICLE III
RENT; QUIET ENJOYMENT; NET LEASE
SECTION 1.4 Periodic Rent. During the Lease Term, Lessee shall pay to
Lessor Periodic Rent on each Payment Date in the amount determined in accordance
with the definition of "Periodic Rent".
SECTION 1.5 Supplemental Rent. During the Lease Term, Lessee shall pay
to Lessor, or to whomever shall be entitled to payment thereof as expressly
provided herein or in any other Operative Document (and Lessor hereby directs
Lessee, on behalf of Lessor, so to pay any such other Person) any and all
Supplemental Rent promptly as the same shall become due and payable, and, in the
event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor
shall have all rights, powers and remedies provided for herein or by law or in
equity or otherwise in the case of nonpayment of Periodic Rent. Lessee hereby
reaffirms its obligation to pay as Supplemental Rent (i) an amount equal to
Additional Costs as the same become due and payable and (ii) all amounts
determined to be due and payable pursuant to Section 5.1 of the Trust Agreement
in accordance with its terms.
SECTION 1.6 Place and Manner of Payment. Rent and all other sums due to
Lessor, Administrative Agent or any Lender hereunder shall be paid in accordance
with Section 2.7 of the Participation Agreement.
SECTION 1.7 Late Payment. If any Periodic Rent shall not be paid when
due, Lessee shall pay to Lessor, or if any Supplemental Rent payable to or on
behalf or for the account of Lessor (as Lessor or Trustee), any Lender,
Administrative Agent or any other Indemnitee is not paid when due, Lessee shall
pay to whomever shall be entitled thereto, in each case as Supplemental Rent,
interest at the Overdue Rate on such overdue amount from and including the due
date (not taking into account any grace period) thereof to but excluding the
Business Day of payment thereof.
SECTION 1.8 Quiet Enjoyment; Discharge of Liens. Subject to the rights
of Lessor contained in Article X and the other terms of the Operative Documents
to which Lessee is a party, Lessee shall peaceably and quietly have, hold and
enjoy the Equipment for the Lease Term, free of any claim or other action by
Lessor or anyone claiming by, through or under Lessor (other than Lessee) with
respect to any matters arising from and after the Initial Advance Date. Such
right of quiet enjoyment shall be independent of, and shall not affect Lessor's
rights otherwise to initiate legal action to enforce, the obligations of Lessee
under this Lease. Lessor shall at all
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times comply with Section 6.1 of the Participation Agreement regarding the
discharge of Lessor Liens attributable to it.
SECTION 1.9 Net Lease; No Setoff, Etc. THIS LEASE SHALL CONSTITUTE A
NET LEASE AND, NOTWITHSTANDING ANY OTHER PROVISION OF THIS LEASE TO THE
CONTRARY, IT IS INTENDED THAT PERIODIC RENT AND SUPPLEMENTAL RENT SHALL BE PAID
WITHOUT COUNTERCLAIM, SETOFF, DEDUCTION OR DEFENSE OF ANY KIND AND WITHOUT
ABATEMENT, SUSPENSION, DEFERMENT, DIMINUTION OR REDUCTION OF ANY KIND, AND
LESSEE'S OBLIGATION TO PAY ALL SUCH AMOUNTS, THROUGHOUT THE LEASE TERM IS
ABSOLUTE AND UNCONDITIONAL. The obligations and liabilities of Lessee hereunder
shall in no way be released, discharged or otherwise affected for any reason,
including, without limitation, to the maximum extent permitted by law: (a) any
defect in the condition, merchantability, design, construction, quality or
fitness for use of any item of Equipment, or any failure of any item of
Equipment to comply with all Applicable Laws, including any inability to use any
item of Equipment by reason of such noncompliance; (b) any damage to,
abandonment, loss, destruction, requisition, taking or contamination of or
release of Hazardous Materials from any item of Equipment other than Lessor's
Liens; (c) any restriction, prevention or curtailment of or any interference
with the construction or any use of any item of Equipment; (d) the attachment of
any Lien of any third party to any item of Equipment other than Lessor's Liens;
(e) any prohibition or restriction of or interference with Lessee's use of any
or all of the Equipment by any Person; (f) any change, waiver, extension,
indulgence or other action or omission or breach in respect of any obligation or
liability of or by Lessor as Trustee or Lessor, Administrative Agent or any
Lender; (g) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceedings relating to Lessee, Lessor as
Trustee or Lessor, Administrative Agent, any Lender or any other Person, or any
action taken with respect to this Lease by any trustee, receiver or keeper of
Lessee, Lessor as Trustee or Lessor, Administrative Agent, any Lender or any
other Person, or by any court, in any such proceeding; (h) any claim that Lessee
has or might have against any Person, including, without limitation, Lessor as
Trustee or Lessor, Administrative Agent or any Lender; (i) other than Lessor's
obligations under Section 3.5 of this Lease and Section 6.1(b) of the
Participation Agreement, any failure on the part of Lessor as Trustee or Lessor,
to perform or comply with any of the terms of this Lease, any other Operative
Document or of any other agreement whether or not related to the transactions
contemplated by the Operative Documents; (j) any invalidity or unenforceability
or disaffirmance against or by Lessee of this Lease or any provision hereof or
any of the other Operative Documents or any provision of any thereof; (k) the
impossibility of performance by Lessee or Lessor, or both; (l) any action by any
court, administrative agency or other Governmental Authority; or (m) any other
cause, whether similar or dissimilar to the foregoing, whether or not Lessee
shall have notice or knowledge of any of the foregoing. Except as specifically
set forth in Articles V or X of this Lease, this Lease shall be noncancellable
by Lessee for any reason whatsoever, and Lessee, to the extent permitted by
Applicable Laws and Gaming Laws, waives all rights now or hereafter conferred by
statute or otherwise to quit, terminate or surrender this Lease, or to any
diminution, abatement or reduction of Rent payable by Lessee hereunder. If for
any reason whatsoever this Lease shall be terminated in whole or in
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part by operation of law or otherwise, except as expressly provided in
Articles V or X of this Lease, Lessee shall, unless prohibited by Applicable
Laws, nonetheless pay to Lessor (or, in the case of Supplemental Rent, to
whomever shall be entitled thereto) an amount equal to each Rent payment at the
time and in the manner that such payment would have become due and payable under
the terms of this Lease if it had not been terminated in whole or in part, and
in such case, so long as such payments are made and no Lease Event of Default
shall have occurred and be continuing, Lessor will deem this Lease to have
remained in effect. Each payment of Rent made by Lessee hereunder shall be final
and, absent manifest error in the determination of the amount thereof, Lessee
shall not seek or have any right to recover all or any part of such payment from
Lessor, Administrative Agent or any party to any agreements related thereto for
any reason whatsoever. Lessee assumes the sole responsibility for the condition,
use, operation, maintenance and management of the Equipment, and Lessor shall
have no responsibility in respect thereof and shall have no liability for damage
to the property of Lessee or any sublessee of Lessee on any account or for any
reason whatsoever other than by reason of Lessor's willful misconduct or gross
negligence or breach of any of its obligations under any Operative Document.
SECTION 1.10 No Bar. Notwithstanding the foregoing, nothing set forth
herein shall bar, limit, preclude, prevent, stay or otherwise adversely affect
Lessee's right or ability to bring and pursue any action for monetary damages
against Lessor, as Lessor and/or Trustee, or any other Person for any breach or
alleged breach of its obligations hereunder or under any other Operative
Document.
SECTION 1.11 Intent of the Parties. Lessor and Lessee further intend
and agree that this Lease is a financing transaction and that, for the purpose
of securing Lessee's obligations for the repayment of the Advances from Lessor
to Lessee and from the Lenders to Lessor for the benefit of Lessee, (i) this
Lease shall also be deemed to be a security agreement and financing statement
within the meaning of Article 9 of the UCC; (ii) the conveyance provided for
hereby shall be deemed to be a grant by Lessee to Lessor, for the benefit of the
Lenders, of a security interest in all of Lessee's present and future right,
title and interest in the Equipment, including but not limited to Lessee's
leasehold estate therein and all proceeds of the conversion, voluntary or
involuntary, of the foregoing into cash, investments, securities or other
property, whether in the form of cash, investments, securities or other property
to secure such Advances, effective on the date hereof, to have and to hold such
interests in the Equipment unto Lessor, for the benefit of the Lenders and their
respective successors and assigns, forever, provided always that these presents
are upon the express condition that, if all amounts due under this Lease and the
other Operative Documents shall have been paid and satisfied in full, then this
instrument and the estate hereby granted shall cease and become void without
further action by any party and Lessor shall, for the consideration set forth in
Section 5.2 plus the payment of reimbursable costs and expenses, convey the
Equipment to Lessee as herein set forth; (iii) the possession by Lessor or its
assigns of notes and such other items of property of Lessee as constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
"possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9-305 of the UCC; and (iv) notifications to Persons
holding such property, and acknowledgments, receipts or confirmations from
financial intermediaries, bankers or agents (as applicable) of Lessee shall be
deemed to have been given
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for the purpose of perfecting such security interest under Applicable Law.
Lessor and Lessee shall, to the extent consistent with this Lease, take such
actions, and execute, deliver, file and record such other documents and
financing statements, as may be necessary to ensure that the security interest
in the Equipment created in accordance with this Lease will be deemed to be a
perfected security interest with priority over all Liens, other than Permitted
Liens, under Applicable Law and will be maintained as such throughout the Lease
Term.
ARTICLE IV
POSSESSION AND SUBLEASING
SECTION 1.12 Possession and Subleasing. LESSEE SHALL NOT, WITHOUT THE
PRIOR WRITTEN CONSENT OF LESSOR, SUBLEASE ANY OR ALL OF THE EQUIPMENT OR ASSIGN,
TRANSFER OR ENCUMBER ITS RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER, AND ANY
ATTEMPTED SUBLEASE, ASSIGNMENT, TRANSFER OR ENCUMBERING BY LESSEE SHALL BE NULL
AND VOID, except as provided hereinafter in this Article IV or pursuant to a
transaction permitted under Section 5.2 of the Participation Agreement. Lessee
may, with Lessor's and the Required Lenders' prior written consent, sublease the
Equipment as an integrated whole, if such sublease permitted by this Article IV
(a "Sublease") (a) is expressly subject and subordinate to all of the provisions
of this Lease and the rights and interests of Lessor, Administrative Agent and
the Lenders hereunder in respect of the Equipment covered by such Sublease upon
the occurrence of an Event of Default thereunder or hereunder, (b) expressly
requires the Equipment subject thereto to be returned as directed by Lessor or
the Required Lenders upon notice to such sublessee that an Event of Default has
occurred and is continuing and (c) expressly prohibits any further sublease or
assignment of the Equipment subject thereto. Lessee shall remain primarily
liable for its obligations under this Lease notwithstanding the existence of any
such Sublease. All of Lessee's right, title and interest in, to and under such
Sublease shall be pledged by Lessee to Lessor, as collateral for Lessee's
obligations under this Lease, and Lessee shall, at its expense, do any further
act, and execute, acknowledge, deliver, file, register and record any further
documents, which Lessor or any Lender may reasonably request in order to create,
perfect, preserve and protect Lessor's security interest in such Sublease. If so
requested by Lessor, Administrative Agent or any Lender, Lessee shall, within 15
days after the execution of any such Sublease, deliver a conformed copy thereof
to Lessor, Administrative Agent or such Lender as applicable.
ARTICLE V
LEASE TERMINATION
SECTION 1.13 Early Termination. On any date after the commencement of
the Base Period, Lessee may, at its option, upon at least 30 days advance
written notice to Lessor, purchase all (but not less than all) of the Equipment
for an amount equal to the sum of (i) accrued and
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unpaid Rent payable on or before such date, (ii) the Lease Balance (after giving
effect to any payments pursuant to clause (i)) and (iii) all other fees and
expenses and other amounts (including all Supplemental Rent) then due and
payable pursuant to this Lease and the other Operative Documents.
SECTION 1.14 Termination and Transfer. Upon payment in full in cash of
(a) all amounts then due and owing hereunder on the Lease Termination Date and
(b) $1.00, Lessor shall release the Equipment then subject to this Lease on the
Lease Termination Date from the Lien created by this Lease and transfer all of
Lessor's right, title and interest thereto to Lessee ("AS IS" and without any
representations or warranties and with the disclaimers set forth in Section 6.1,
except that such Equipment is free and clear of Lessor Liens), all at Lessee's
sole cost and expense.
ARTICLE VI
DISCLAIMER AND ASSIGNMENT OF WARRANTIES
SECTION 1.15 Disclaimer of Warranties. The Equipment, upon delivery
thereof to Lessee and execution by Lessee of a Certificate of Acceptance
therefor, is leased by Lessor to Lessee "AS IS" in its present or then
condition, as the case may be, subject to (a) any rights of any parties in
possession thereof, (b) the state of the title thereto existing at the time
Lessor acquired its interest in the Equipment, (c) any state of facts which a
physical inspection might show, (d) all Applicable Laws, and (e) any violations
of Applicable Laws which may exist at the time any such Equipment is accepted by
Lessee for lease hereunder. Lessee's execution and delivery to Lessor of a
Certificate of Acceptance for any Equipment shall be deemed to mean that Lessee
has examined such Equipment (insofar as Lessor is concerned) and has found the
same to be satisfactory. NEITHER LESSOR (AS TRUSTEE OR LESSOR), ADMINISTRATIVE
AGENT NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER, AS TO THE TITLE TO THE EQUIPMENT OR TO THE VALUE, MERCHANTABILITY,
HABITABILITY, CONDITION, QUALITY, DESCRIPTION, OR FITNESS FOR ANY PARTICULAR USE
OF THE SAME, OR ANY PART THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT OR ANY PART
THEREOF, AND NEITHER LESSOR (AS TRUSTEE OR LESSOR), ADMINISTRATIVE AGENT NOR ANY
LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT AND/OR
REDHIBITORY DEFECTS THEREIN OR THE FAILURE OF THE EQUIPMENT, OR ANY PART
THEREOF, TO COMPLY WITH ANY APPLICABLE LAWS, except that Lessor hereby
represents and warrants that the Equipment is and shall be free of Lessor Liens
(such Lessor representation and warranty being made by (x) the Bank individually
with respect to any Lessor Liens attributable to the Bank, and (y) Bank, as
Trustee and as Lessor, with respect to any Lessor Liens attributable to
Trustee). Lessee acknowledges and agrees that (i) the Equipment is of a size,
design, capacity and manufacture selected by
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Lessee, (ii) Lessee is satisfied that the same is suitable for its purposes, and
(iii) neither Lessor (as Trustee or Lessor), Administrative Agent nor any Lender
is a manufacturer thereof or a dealer in the property of such kind. Lessee has
been afforded full opportunity to inspect the Equipment, is satisfied with the
results of its inspections and is entering into this Lease solely on the basis
of the results of its own inspections, and all risks incident to the matters
discussed in the preceding sentence, as between Lessor (as Trustee or Lessor),
Administrative Agent and the Lenders, on the one hand, and Lessee, on the other,
are to be borne by Lessee. The provisions of this Article VI have been
negotiated, and, except to the extent otherwise expressly stated, the foregoing
provisions are intended to be a complete exclusion and negation of any
representations or warranties by any of Lessor (as Trustee or Lessor),
Administrative Agent or the Lenders, express or implied, with respect to the
Equipment (or any interest therein), that may arise pursuant to any law now or
hereafter in effect, or otherwise.
SECTION 1.16 Assignment of Warranties. Lessor hereby assigns to Lessee,
to the extent assignable, all of its present and future interest, if any, in any
warranties, covenants and representations of any manufacturer or vendor of any
item of Equipment; provided that such assignment shall be effective only when no
Event of Default has occurred and is continuing; and provided, further, that any
action taken by Lessee by reason thereof shall be at the expense of Lessee and
shall be consistent with Lessee's obligations pursuant to this Lease. So long as
no Lease Event of Default shall have occurred and be continuing, upon Lessee's
reasonable request and at Lessee's sole expense, Lessor shall enforce any
non-assignable warranties, covenants and representations of any manufacturer or
vendor of any item of Equipment, provided Lessee, at all times relevant to any
such enforcement, shall cooperate with Lessor in any manner reasonably requested
by Lessor.
ARTICLE VII
MAINTENANCE AND REPAIR;
ALTERATIONS AND ADDITIONS
SECTION 1.17 Maintenance and Repair; Compliance With Law.
(1) Without limiting Lessee's obligations under Section 5.11
of the Participation Agreement, Lessee, at its own expense, shall at
all times maintain the Equipment in good and safe order, operating
condition and repair (ordinary wear and tear excepted), substantially
in conformance with the maintenance and repair standards and procedures
as are set forth in the manufacturer's manuals pertaining to the
Equipment (and in any event to at least as high a standard of
maintenance and repair as Lessee and/or its Affiliates observe with
respect to similar equipment owned or leased by Lessee or any such
Affiliate) and as otherwise required to enforce claims against each
vendor or manufacturer of each item of Equipment and in compliance in
all material respects with Applicable Laws and the standards imposed by
insurance policies required to be maintained hereunder with respect to
the Equipment.
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(2) In addition, Lessee shall make all necessary or
appropriate repairs, replacements, substitutions and modifications in
respect of the Equipment (or any component thereof) which may be
required to keep the Equipment in the condition required above.
SECTION 1.18 Alterations.
(1) If any item of Equipment or individual component thereof
is required to be altered, added to, replaced, improved or modified in
order to comply with Applicable Laws (a "Required Alteration"), Lessee
shall notify Lessor and diligently proceed to make such Required
Alteration at its own expense.
(2) Lessee, at its own expense, may make any alteration,
addition, replacement, improvement or modification to any item of
Equipment (a "Permitted Alteration"), or remove any part that becomes
worn out, broken or obsolete, if Lessee continues to be in compliance
with Section 7.1 and such action, when completed, will be of such
character as not to materially adversely affect (i) the current fair
market value of the item of Equipment, (ii) the originally anticipated
use or function thereof, as applicable, and (iii) the originally
anticipated residual value of the item of Equipment.
(3) All Alterations shall be completed in a commercially
reasonable manner and shall not, when completed, violate the terms of
any restriction, easement, servitude, condition, covenant or other
matter affecting the Equipment.
(4) Neither Lessor (as Trustee and/or Lessor) nor
Administrative Agent need inquire into or confirm that Alterations were
made in conformity with the requirements of this Section 7.2.
SECTION 1.19 Replacement and Substitution. Lessee may replace an item
of Equipment subject to this Lease with a replacement item of equipment that
meets the suitability standards set forth in Section 9.1(b). Lessee may request
the replacement of an item of Equipment by delivery of a replacement notice to
Lessor at least 10 days prior to the date of the proposed substitution. Upon a
permitted substitution of Equipment pursuant to this Section 7.3, Lessor, as
Lessor and Trustee, shall execute and deliver to Lessee a bill of sale (without
representations or warranties, except that the substituted item is free and
clear of all Lessor Liens) and such other documents as may be required to
release the substituted item from the terms of this Lease and the other
Operative Documents and transfer title to same to Lessee, all at Lessee's
expense. Leased items of Equipment that have been substituted or replaced
pursuant to this Section 7.3 shall become the property of Lessee, and title
thereto shall automatically vest in Lessee upon such permitted substitution or
replacement.
SECTION 1.20 Removal. No Required Alteration may be removed or severed
from the item of Equipment to which it is attached (unless no longer required by
Applicable Laws so
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long as clauses (i) and (iii) below are satisfied). A Permitted Alteration (or
component thereof) may be removed by Lessee at its expense if (i) it is readily
removable without causing material damage to the item of Equipment to which it
is attached, (ii) the removal does not violate Applicable Laws and (iii) no
Default or Event of Default is continuing.
SECTION 1.21 Maintenance and Repair Reports. Lessee shall keep
maintenance and repair reports in sufficient detail, and as customary for owners
or operators of casinos, to indicate the nature and date of major work done.
Such reports shall be kept on file by Lessee at its offices during the Lease
Term, and shall be made available to Lessor, as Lessor and Trustee, upon
reasonable request. Lessee shall give notice to Lessor and Administrative Agent
of any Condemnation or Casualty the cost to repair which is reasonably expected
by Lessee to exceed $500,000 promptly after Lessee has knowledge thereof.
ARTICLE VIII
USE
SECTION 1.22 Use. Lessee shall use and operate the Equipment in
material compliance with any and all Applicable Laws. Lessee shall procure and
maintain in effect all material licenses, registrations, certificates, permits,
approvals and consents required of it by Applicable Laws or any Governmental
Authority in connection with the ownership, delivery, installation, use and
operation of the Equipment. The Equipment will at all times be and remain in the
possession and control of Lessee, subject, however, to Articles IV and X. The
Equipment shall in no event be located outside of (i) the Resort except to the
extent necessary to effect maintenance, repair or servicing thereof and provided
Lessee shall have given Lessor prior written notice of any such relocation, (ii)
the State of Louisiana, without prior written notice to Lessor and the taking
(before such relocation) of all actions necessary to maintain the perfection of
the security interest of Lessor, as Lessor and Trustee, and Administrative Agent
therein, and (iii) the continental United States.
ARTICLE IX
CASUALTY; REPLACEMENT; INSURANCE
SECTION 1.23 Casualty.
(1) If a Casualty occurs with respect to an item or items of
Equipment, Lessee shall (i) give prompt written notice of such
occurrence and the date thereof to Lessor and (ii) if such Casualty
causes damage in an aggregate amount in excess of $500,000, either (A)
replace such item or items of Equipment with respect to which the
Casualty has occurred pursuant to the following provisions of Section
9.1(b) or (B) purchase such item or items of Equipment from Lessor, no
later than the next
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Payment Date occurring at least 120 days after such Casualty (but in no
event later than the Lease Termination Date), at a purchase price equal
to the Casualty Item Amount.
(2) If any item of Equipment is to be replaced, no later than
the earlier of (i) 120 days after the occurrence of a Casualty or (ii)
the Lease Termination Date, Lessee will substitute equipment meeting
the suitability standards set forth in this Section 9.1(b) for the item
of Equipment suffering the Casualty. To be suitable as a replacement,
such replacement item of equipment must be of the same general type,
year of construction (or a later year of construction), function,
utility, state of repair and operating condition as the item of
Equipment suffering the Casualty, must have a fair market value of not
less than the fair market value (immediately preceding the Casualty
assuming that such item of Equipment had been maintained in accordance
with Article VII) of the item of Equipment suffering the Casualty, and
be free and clear of all Liens other than Permitted Liens. Lessee shall
cause a Bill of Sale and a Certificate of Acceptance to be executed and
delivered to Lessor in order to subject such replacement item of
Equipment to this Lease, and upon such execution and delivery and the
receipt by Lessor, as Trustee or Lessor, Administrative Agent and the
Lenders of (i) a certificate of insurance in accordance with Section
9.4 evidencing Lessee's compliance with the insurance provisions of
Section 9.3 with respect to such replacement item of Equipment, and
(ii) evidence to the effect that properly prepared financing statements
have been filed and recorded in all public offices where necessary to
perfect the security interest of Lessor in the replacement item of
equipment, and that no other filing or recording or giving of notice
with or to any other Governmental Authority is necessary to perfect the
security interest of Lessor, as Lessor and Trustee, in such replacement
item of equipment. Such replacement item of equipment shall be deemed
an item of Equipment for all purposes hereof.
(3) If no Lease Event of Default has occurred and is
continuing and Lessee elects to replace any item of Equipment suffering
a Casualty, Lessee shall be entitled to receive from Lessor the
Casualty Recoveries with respect thereto, to be used to reimburse
Lessee for the cost of replacement of such item of Equipment after
Lessee fully applies the Casualty Recoveries properly received by it in
replacement of such item of Equipment pursuant to Section 9.1(d).
Lessor, subject to the rights of any insurer insuring such item of
Equipment as provided herein, promptly shall execute and deliver to
Lessee, or to its assignee or nominee, a quitclaim bill of sale
(without representations or warranties except that such item of
Equipment is free and clear of Lessor Liens) for such item of
Equipment, and such other documents as may be required to release such
item of Equipment from the terms of this Lease and the other Operative
Documents, in such form as may reasonably be requested by Lessee. All
fees, costs and expenses relating to a substitution as described herein
shall be borne by Lessee.
(4) All Casualty Recoveries in excess of $500,000 in respect
of a Casualty to any item or items of Equipment shall be paid directly
to Lessor to be held as cash collateral for the Obligations, subject to
the release of proceeds provisions contained
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herein, or if paid to Lessee, such excess funds shall be immediately
paid by Lessee to Lessor. If a Lease Event of Default has occurred and
is continuing (whether prior to or after delivery of any such Casualty
Recoveries to Lessor), Lessor may retain all Casualty Recoveries as
cash collateral or, if no Lease Event of Default has occurred and is
continuing, Lessee shall be entitled to apply all Casualty Recoveries
in accordance with Section 9.1(c), and any balance remaining after
compliance with Section 9.1(c) shall be retained by or returned to
Lessee. Lessee shall not be entitled to any Casualty Recoveries in
excess of $500,000 until it applies all amounts received in relation to
such Casualty Recovery of less than or equal to such amount in repair
or replacement of the affected item of Equipment. If Lessor receives
Casualty Recoveries in an amount that is less than $500,000, so long as
no Lease Event of Default has occurred and is continuing, Lessor shall
promptly remit such funds to Lessee. Notwithstanding any Casualty, all
of Lessee's Obligations under this Lease (including its obligation to
make all payments of Rent as they become due) shall continue unabated
and in full force and effect as provided in this Lease.
SECTION 1.24 Non-Casualty Losses.
(1) If any item of Equipment suffers any condemnation, loss,
physical harm or damage not constituting a Casualty (a "Non-Casualty
Loss"), Lessee shall repair such item of Equipment.
(2) All Non-Casualty Recoveries in excess of $500,000 in
respect of any Non-Casualty Loss to an item or items of Equipment
(including any component thereof) shall be paid directly to Lessor to
be held as cash collateral for the Obligations, subject to the release
of proceeds provisions contained herein. Non-Casualty Recoveries held
by Lessor shall be disbursed by Lessor to Lessee from time to time (but
no more frequently than once per calendar month) to pay Lessee for the
costs of repairing and rebuilding the affected portions of the
Equipment as required under Section 9.2(a), subject to such reasonable
disbursement conditions as Lessor may impose, including presentation of
invoices and other supporting documentation reflecting such costs and
delivery of Lien waivers; provided, however, Lessor shall have no
obligation to disburse any Non-Casualty Recoveries at any time that
Lessor shall reasonably determine (i) that such Non-Casualty Recoveries
are not sufficient to repair and rebuild the affected portions of the
Equipment as required by Section 9.2(a) (unless additional funds which
are, in the sole discretion of Lessor, sufficient to so repair and
rebuild the affected portions of the Equipment have been deposited with
Lessor) or (ii) that Lessee is not diligently performing its
obligations under Section 9.2(a). Notwithstanding the foregoing
provisions of this Section 9.2(b), and provided no Lease Event of
Default has occurred and is continuing, if the aggregate amount of
Non-Casualty Recoveries attributable to any Non-Casualty Loss is
$500,000 or less, Lessee may receive such Non-Casualty Recoveries
directly, without delivery to Lessor, provided such Non-Casualty
Recoveries are applied in accordance with the requirements of Section
9.2(a). If Lessor receives Non-Casualty Recoveries in an amount that is
less than $500,000, so long as no Lease
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Event of Default has occurred and is continuing, Lessor shall promptly
remit such funds to Lessee. Notwithstanding any Non-Casualty Loss, all
of Lessee's obligations under this Lease (including its obligation to
make all payments of Rent as they become due) shall continue unabated
and in full force and effect as provided in this Lease.
SECTION 1.25 Required Coverages. Lessee will keep the Equipment insured
by financially sound and reputable insurers against loss or damage of the kinds
and in the amounts customarily insured against by similar Persons engaged in
similar operations and carry such other insurance as is usually carried by such
Persons, provided that in any event Lessee shall maintain:
(1) Casualty Insurance. Insurance against all risks of loss or
damage covering the Equipment and each part thereof with deductibles
and in such minimum amounts as are consistent with industry standards;
provided, however, that at no time shall the amount of coverage, on a
replacement cost basis, be less than one hundred ten percent of the
then outstanding Lease Balance.
(2) Comprehensive General Liability Insurance. Combined single
limit insurance against claims for bodily injury, death or third-party
property damage occurring on, in or about the Equipment in an amount at
least equal to $75,000,000 per occurrence with such deductibles as are
carried by similarly situated Persons involved in operating similar
facilities and equipment.
(3) Other Insurance. Such other insurance including workmen's
compensation and business interruption insurance, in each case as
generally carried by owners of similar equipment in the State of
Louisiana, in such amounts and against such risks as are then customary
for equipment similar in use.
Such insurance shall be written by reputable insurance companies that are
financially sound and solvent and otherwise reasonably appropriate considering
the amount and type of insurance being provided by such companies. In the case
of liability insurance maintained by Lessee, each policy shall name Bank,
individually and as Trustee and Lessor, Administrative Agent and the Lenders, as
additional insureds. In the case of casualty and property insurance maintained
by Lessee, each policy shall name Bank, as Trustee and Lessor, Administrative
Agent and the Lenders as sole loss payees. Each policy referred to in this
Section 9.3 shall provide that: (i) it will not be canceled or its limits
reduced, or allowed to lapse without renewal, except after not less than thirty
(30) days prior written notice to each additional insured; (ii) the interests of
Bank, individually and as Trustee and Lessor, Administrative Agent and all
Lenders shall not be invalidated by any act or negligence of Lessee or any
Person having an interest in the Resort or any item of Equipment; (iii) such
insurance is primary with respect to any other insurance carried by or available
to Bank, individually and as Trustee and Lessor, Administrative Agent and all
Lenders; (iv) the insurer shall waive any right of subrogation, setoff,
counterclaim, or other deduction, whether by attachment or otherwise, against
Administrative Agent or Lessor individually and as Trustee and Lessor; and (v)
such policy shall contain a severability of interest clause providing for
coverage of Bank, individually and as Trustee and Lessor, Administrative Agent
and each
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Lender as if separate policies had been issued to each of them, with the
understanding that the inclusion of more than one insured will not operate to
increase the limit of liability of such policy beyond the amount set forth in
Section 9.3(b). Lessee will notify Lessor and Administrative Agent promptly of
any policy cancellation, reduction in policy limits, modification or amendment.
Unless a Lease Event of Default shall have occurred and be continuing, no
Participant shall enter into any settlement or other compromise with respect to
any insured loss without the prior written consent of Lessee, which consent
shall not be unreasonably withheld or delayed.
SECTION 1.26 Delivery of Insurance Certificates. On or before the
Closing Date and thereafter not less than thirty (30) days prior to the
expiration date of the expiring policies which are required to be maintained
pursuant to Section 9.3 and upon written request of Lessor after a Lease Event
of Default, Lessee shall deliver to Lessor and Administrative Agent certificates
of insurance reasonably satisfactory to Lessor and Administrative Agent
evidencing the existence of all insurance required to be maintained hereunder
and setting forth the respective coverages, limits of liability, carrier, policy
number and period of coverage.
ARTICLE X
LEASE EVENTS OF DEFAULT
SECTION 1.27 Lease Events of Default. The occurrence of any one or more
of the following events, whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body, shall constitute a
"Lease Event of Default":
(1) Any payment (i) of Periodic Rent shall not be paid when
due and such failure shall continue unremedied for a period of five (5)
Business Days or (ii) of Supplemental Rent or any other amount (other
than Periodic Rent) payable by Lessee hereunder or under any other
Operative Document shall not be paid within thirty (30) days of written
demand therefor;
(2) Lessee shall default in the performance of its obligations
under Section 5.13(d) of the Participation Agreement;
(3) Failure by Lessee for thirty (30) days after notice
thereof to comply with any of the other agreements in any Operative
Document not set forth in clauses (a) and (b) above;
(4) Default under any agreement, 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 Lessee or
any of its Restricted Subsidiaries (or the
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payment of which is guaranteed by Lessee or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the Closing Date, if that default:
(1) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period (if any) provided in such agreement, security agreement,
mortgage, indenture or instrument governing such Indebtedness on the
date of such default (a "Payment Default"); or
(2) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated (or otherwise has occurred),
aggregates $5,000,000 or more;
(5) Failure by Lessee or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $5,000,000, which judgments are not
paid, discharged or stayed for a period of sixty (60) days;
(6) (i) breach by Lessee in any material respect of any representation
or warranty or agreement or covenant in any of the Operative Documents or in any
certificate, letter, or other writing or instrument furnished or delivered in
connection therewith, (ii) the repudiation by Lessee of any of its Obligations
under any of the Operative Documents, (iii) the unenforceability of any of the
Operative Documents against Lessee for any reason which continues for thirty
(30) days after written notice from Lessor, as Lessor and/or Trustee, or
Administrative Agent or (iv) Lessee, HCS I or HCS II of any Affiliate or any of
them shall, directly or indirectly, contest in any manner the effectiveness,
validity, binding nature or enforceability of any Lien granted under any
Operative Document; or any of the Liens securing the obligations of Lessee or
Lessor, as Trustee and/or Lessor, under the Operative Documents shall, in whole
or in part, cease to be a perfected Lien (and, in the case of the Priority
Collateral and Liens granted by Lessor, as Trustee and Lessor, pursuant to the
Security Documents, a perfected first priority Lien), subject only to Permitted
Liens;
(7) Lessee, any of its Restricted Subsidiaries, HCS I or HCS II: (i)
commences a voluntary case or proceeding or files any petition under any
bankruptcy, insolvency or similar law or seeks dissolution, liquidation or
reorganization or the appointment of a receiver, keeper, trustee, custodian or
liquidator for itself or a substantial portion of its property, assets or
business or to effect a plan or other arrangement with its creditors; (ii)
consents to the entry of an order for relief against it in an involuntary case
or proceeding under any bankruptcy, insolvency or similar law; (iii) consents to
the appointment of a custodian of it or for all or substantially all of its
property, assets or business; (iv) makes a general assignment for the benefit of
its creditors; or (v) generally
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is not paying its debts as they become due;
(8) A court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against Lessee, any of its Restricted
Subsidiaries, HCS I or HCS II in any involuntary case or proceeding; (ii)
appoints a custodian of Lessee, any of its Restricted Subsidiaries, HCS I or HCS
II for all or substantially all of the property, assets or business of Lessee,
any such Restricted Subsidiary, HCS I or HCS II; or (iii) orders the liquidation
of Lessee, any of its Restricted Subsidiaries, HCS I or HCS II; and the order or
decree remains unstayed and in effect for sixty (60) consecutive days;
(9) Default by Hollywood Casino in the performance of its obligations
set forth in, or repudiation of its obligations under, the "Completion Capital
Agreement" (as defined in the Indenture); (1)
(10) If HWCC-Louisiana, HCS I, HCS II or Lessee ever fail to own
collectively 100% of the issued and outstanding Equity Interests of Shreveport
Capital;
(11) The failure of the Resort to be Operating by the Operating
Deadline;
(12) There has occurred (i) any License Revocation which results in the
cessation or suspension of gaming business at the Casino for a period of more
than five (5) consecutive days or (ii) any other event which results in the
cessation or suspension of business at the Resort for a period of more than (a)
twenty (20) consecutive days if Lessee is not diligently and continuously
proceeding to cure or remedy the event giving rise to such cessation or
suspension of business; or (b) forty-five (45) consecutive days; provided,
however, that there shall not be a Lease Event of Default under this clause (ii)
if the suspension of business results from a Casualty and Lessee is complying
with Article IX;
(13) Any Pension Plan maintained by Lessee or any of its ERISA
Affiliates is determined to have a material "accumulated funding deficiency" as
that term is defined in Section 302 of ERISA and such event would reasonably be
expected to result in a Material Adverse Effect or if Lessee or any of its ERISA
Affiliates fails to otherwise comply with ERISA so that grounds exist to permit
the appointment of a trustee under ERISA to administer its Pension Plans or to
allow the PBGC to institute proceedings to appoint a trustee to administer its
Pension Plans;
(14) To the extent not covered elsewhere in this Section 10.1, any
Event of Default under, and as defined in, the Indenture (or under any
documentation evidencing a refinancing or replacement of the indebtedness
created thereunder) has occurred and is continuing; or
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(15) There shall have occurred a Change of Control.
SECTION 1.28 Remedies. If any Lease Event of Default exists and is
continuing, Lessor shall have the rights, options and remedies of a secured
party at law and in equity and, without limiting the foregoing, Lessor, so long
as such Lease Event of Default is continuing, may exercise in any order one or
more or all of the following remedies, to the extent permitted by Applicable
Laws (it being understood that no remedy herein conferred is intended to be
exclusive of any other remedy or remedies, but each and every remedy shall be
cumulative and shall be in addition to every other remedy given herein or now or
hereafter existing at law or in equity or by statute), as Lessor, in its sole
discretion, shall determine, without limiting any other right or remedy Lessor,
as Lessor and/or Trustee, may have on account of such Lease Event of Default:
(1) Lessor may proceed by appropriate court action or actions,
either at law or in equity, to enforce performance by Lessee of the
applicable covenants of this Lease or to recover damages for the breach
thereof; or (1)
(2) Lessor may by notice in writing to Lessee terminate this
Lease, but Lessee shall remain liable as hereinafter provided; and
Lessor may, at its option, do any one or more of the following: (i)
declare the Lease Balance, all accrued but unpaid Rent (to the extent
of the accrued unpaid interest on the Notes), and all other amounts
then payable by Lessee under this Lease and the other Operative
Documents to be immediately due and payable, and recover any other
damages and expenses (including, without limitation, the costs and
expenses described in Sections 7.1 and 9.16 of the Participation
Agreement) in addition thereto which Lessor shall have sustained by
reason of such Lease Event of Default; (ii) enforce the Lien given
hereunder pursuant to the UCC or any other applicable law; and (iii)
enter upon the premises where any item of Equipment may be and either
remove such Equipment (or any portion thereof), with any damage to the
improvements upon which the Equipment may be attached to be borne by
Lessee, or take possession of the Equipment; or
(3) Lessor may require Lessee immediately to purchase the
Equipment (or the remaining portion thereof) in accordance with the
provisions of Section 5.1.
If a Lease Event of Default is continuing, amounts received by Lessor from the
deposit of Casualty Recoveries and Non-Casualty Recoveries with Lessor pursuant
to Article IX will be applied against Lessee's liabilities hereunder. If, as a
consequence of the exercise by Lessor of its remedies pursuant to this Section
10.2, the Lease Balance and all other amounts due and owing from Lessee under
this Lease and the other Operative Documents have been paid in full, then Lessor
shall remit to Lessee any excess amounts received by Lessor.
If any Lease Event of Default with respect to Lessee described in
Section 10.1(f) or 10.1(g) shall have occurred and be continuing, then the
entire outstanding Lease Balance, and all accrued Rent and other amounts payable
under the Operative Documents, shall automatically and immediately become due
and payable, without presentment, demand, notice, declaration, protest
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or requirements of any kind, all of which are hereby expressly waived.
SECTION 1.29 Waiver of Certain Rights. If this Lease shall be
terminated pursuant to Section 10.2, Lessee waives, to the fullest extent
permitted by law, (a) any notice of the institution of legal proceedings to
obtain possession; (b) any right of redemption or repossession; (c) the benefit
of any laws now or hereafter in force exempting property from liability for rent
or for debt or limiting Lessor with respect to the election of remedies; and (d)
any other rights which might otherwise limit or modify any of Lessor's rights or
remedies under this Article X.
SECTION 1.30 Power of Attorney. Lessee unconditionally and irrevocably
appoints Lessor, as Lessor and Trustee, as its true and lawful attorney-in-fact,
with full power of substitution, to the extent permitted by Applicable Laws, in
its name and stead and on its behalf, for the purpose of effectuating any sale,
assignment, transfer or delivery hereunder, if a Lease Event of Default occurs
and is continuing, whether pursuant to foreclosure or power of sale or
otherwise, and in connection therewith to execute and deliver all such deeds,
bills of sale, assignments, releases (including releases of this Lease on the
records of any Governmental Authority) and other proper instruments as Lessor
may reasonably consider necessary or appropriate. Lessee ratifies and confirms
all that such attorney or any substitute shall lawfully do by virtue hereof. If
requested by Lessor or any purchaser, Lessee shall ratify and confirm any such
lawful sale, assignment, transfer or delivery by executing and delivering to
Lessor or such purchaser, all deeds, bills of sale, assignments, releases and
other proper instruments to effect such ratification and confirmation as may be
designated in any such request.
SECTION 1.31 Remedies Cumulative; No Waiver; Consents. To the extent
permitted by, and subject to the mandatory requirements of, Applicable Laws,
each and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically 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
Lessor, 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 right, power or remedy. No delay or omission by Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of Lessee or to be an acquiescence therein. Lessor's consent
to any request made by Lessee shall not be deemed to constitute or preclude the
necessity for obtaining Lessor's consent, in the future, to all similar
requests. No express or implied waiver by Lessor of any Lease Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Lease Event of Default. To the extent permitted by Applicable Laws, Lessee
hereby waives any right now or hereafter conferred by statute or otherwise that
may require Lessor to sell, lease or otherwise use the Equipment in mitigation
of Lessor's damages upon the occurrence and during the continuance of a Lease
Event of Default or that may otherwise limit or modify any of Lessor's rights or
remedies under this Article X.
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ARTICLE XI
ADDITIONAL LOUISIANA PROVISIONS
SECTION 1.32 Additional Louisiana Provisions.
(1) The term "Louisiana Collateral" as used herein shall refer
to all portions of the Lessee Collateral and the proceeds thereof that
are from time to time located in the State of Louisiana or are
otherwise subject to Louisiana law at all times during which such
portions or proceeds thereof are located in Louisiana or are otherwise
mandatorily subject to the application of Louisiana law under the
Applicable Laws of other states. This Article XI shall apply to all
Louisiana Collateral and all proceeds thereof at all times during which
such Louisiana Collateral or the proceeds thereof are located in
Louisiana or are otherwise subject to the application of Louisiana law
in any respect.
(2) Contemporaneously with the execution of this Lease, Lessee
has completed and signed one or more appropriate Louisiana UCC-1
Financing Statements with regard to the Lessee Collateral and the
proceeds thereof. Lessee hereby authorizes Lessor, as Trustee and
Lessor, at Lessee's expense, to file multiple originals, or
photocopies, carbon copies or facsimile copies of such Louisiana UCC-1
Financing Statements with the appropriate filing officer or officers in
the State of Louisiana, pursuant to the provisions of Chapter 9 of the
Louisiana Commercial Laws.
(3) Lessee shall give Lessor thirty (30) days written notice
prior to any change in Lessee's employer identification number by
Lessee and shall give Lessor written notice of any change in Lessee's
employer identification number that is not made by Lessee within thirty
(30) days after such change. In the event of any change whatsoever in
Lessee's employer identification number, Lessee will execute and file
any new financing statements or other documents that are necessary or
desirable, as determined by Lessor, in its sole discretion, to preserve
and continue Lessor's security interests under this Lease within thirty
(30) days after such change.
(4) During the continuance of any Lease Event of Default,
Lessor shall have the following rights and remedies with respect to the
Louisiana Collateral, which rights and remedies are in addition to and
are not in lieu or limitation of any other rights and remedies that may
be provided in this Lease or any of the other Operative Documents,
under Chapter 9 of the Louisiana Commercial Laws (La. R.S. ss.ss.
10:9-101 et seq.), the Louisiana Lease of Movables Act (La. R.S.ss.ss.
------
9:3301 et seq.), under the Uniform Commercial Code of any State other
------
than Louisiana, or at law or equity generally:
(1) Lessor may cause the Louisiana Collateral, or any
part or parts thereof, to be immediately seized wherever
found, and sold, whether in term
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of court or in vacation, under ordinary or executory process,
in accordance with applicable Louisiana law, to the highest
bidder for cash, with or without appraisement, without the
necessity of making additional demand, or of notifying Lessee,
or placing Lessee in default.
(2) For purposes of foreclosure under Louisiana
executory process procedures, Lessee confesses judgment and
acknowledges to be indebted unto and in favor of Lessor up to
the full amount of the Obligations of Lessee under this Lease
and all other Operative Document, in principal, interest,
costs, expenses, reasonable attorneys' fees and other fees and
charges. To the extent permitted under applicable Louisiana
law, Lessee waives: (a) the benefit of appraisal as provided
in Articles 2332, 2336, 2723 and 2724 of the Louisiana Code of
Civil Procedure and all other laws with regard to appraisal
upon judicial sale; (b) the demand and three (3) days' delay
as provided under Articles 2639 and 2721 of the Louisiana Code
of Civil Procedure; (c) the notice of seizure as provided
under Articles 2293 and 2721 of the Louisiana Code of Civil
Procedure; (d) the three (3) days' delay provided under
Articles 2331 and 2722 of the Louisiana Code of Civil
Procedure; and (e) all other benefits provided under Articles
2331, 2722 and 2723 of the Louisiana Code of Civil Procedure
and all other similar provisions of the Louisiana Code of
Civil Procedure not specifically listed hereinabove.
(3) Should any of the Louisiana Collateral be seized
as an incident to an action for the recognition or enforcement
of the Obligations of Lessee under this Lease or any other
Operative Document, by executory process, sequestration,
attachment, writ of fieri facias or otherwise, Lessee
------------
agrees that the court issuing any such order shall, if
requested by Lessor, appoint Lessor or any Person named by
Lessor at the time such seizure is requested, or at any time
thereafter, as keeper of the Louisiana Collateral as provided
under La. R.S.ss.ss. 9:5136 et seq. Lessee agrees to pay the
------
reasonable fees of such keeper, which fees to the keeper shall
also be a part of the Obligations of Lessee under this Lease.
(4) Should it become necessary for Lessor to
foreclose against the Louisiana Collateral, all declarations
of fact that are made in an authentic act passed before a
Notary Public in the presence of two witnesses, by a person
declaring such facts to lie within his or her knowledge, shall
constitute authentic evidence for purposes of executory
process and also for purposes of La. R.S.ss. 9:3509.1, La.
R.S.ss. 9:3504(D)(6) and La. R.S.ss. 10:9-508, as applicable.
(5) Anything to the contrary contained in this Lease
notwithstanding, the perfection of the security interests in the
Louisiana Collateral granted in this Lease and the Lessor's remedies in
the courts sitting in and for the State of Louisiana with respect to
the Louisiana Collateral shall be governed by Louisiana law, with
California law
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governing the remaining provisions of this Lease, its application to
the Lessee Collateral and the proceeds thereof, and all rights and
obligations of the parties hereunder in all other respects.
ARTICLE XII
LESSOR'S RIGHT TO CURE
SECTION 1.33 Lessor's Right to Cure Lessee's Lease Defaults. Lessor,
upon five (5) Business Days prior notice (except that in any circumstance in
which there is a risk of imminent harm to any Person or property or any
possibility of criminal liability to any Lender, no notice shall be required),
without waiving or releasing any Obligation of Lessee or any Lease Event of
Default, may (but shall be under no obligation to) remedy any Lease Event of
Default for the account and at the sole cost and expense of Lessee, including
the failure by Lessee to maintain the insurance required by Article IX, and may,
to the fullest extent permitted by law, and notwithstanding any right of quiet
enjoyment in favor of Lessee, possess the Equipment for such purpose and take
all such action thereon as may be reasonably necessary or appropriate therefor.
No such entry shall be deemed an eviction of Lessee. All reasonable
out-of-pocket costs and expenses so incurred (including reasonable fees and
expenses of counsel, including allocated time charges of internal counsel),
together with interest thereon at the Overdue Rate from the date on which such
sums or expenses are paid by Lessor, shall be paid by Lessee to Lessor on
demand.
ARTICLE XIII
LESSOR ASSIGNMENTS
SECTION 1.34 Lessor Assignments. All of the right, title or interest
and obligations of Lessor, as Lessor and Trustee, in and to this Lease, and the
rights, benefits, advantages and obligations of Lessor hereunder, including the
rights to receive payment of Rent and all other payments hereunder, and the
rights, titles and interests of Lessor, as Lessor and Trustee, in and to the
Equipment, will be assigned or transferred by Lessor, as Lessor and/or Trustee,
only in accordance with the provisions set forth in the Trust Agreement.
ARTICLE XIV
GRANT OF SECURITY INTEREST
SECTION 1.35 Grant of Security Interest. Title to the Equipment is held
by Lessor, as Lessor and Trustee, as collateral security for the Obligations of
Lessee hereunder and under the other Operative Documents to which it is a party
until such time as Lessee has fulfilled all of its Obligations hereunder and
under such other Operative Documents. Lessee hereby assigns,
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grants and pledges to Lessor, as Lessor and Trustee, and the Lenders, a security
interest and Lien in all of its right, title and interest in, to and under,
whether now or hereafter existing or acquired, (a) the Equipment, whether or not
fixtures of the property subject to the Ground Lease, (b) each of the items,
accounts, and agreements listed in Section 2.1 of the Security Agreement, and
(c) all products, accessions, rents, issues, profits, returns, income and
proceeds of and from any and all of the foregoing (including proceeds which
constitute property of the types described in the foregoing clauses (a) and (b),
and, to the extent not otherwise included, all payments under insurance (whether
or not Lessor in any capacity is the loss payee thereof), or any indemnity,
warranty or guaranty payable by reason of loss or damage to or otherwise with
respect to any of the foregoing) (collectively, the "Lessee Collateral"), to
secure the payment of all sums due hereunder and under the Operative Documents
to which it is a party and the performance of all obligations hereunder and the
other Operative Documents to which it is a party.
SECTION 1.36 Retention of Title or Proceeds in the Case of Default. If
Lessee would be entitled to any amount (including any Casualty Recoveries or
Non-Casualty Recoveries) or title to any item of Equipment hereunder but for the
continuance of any Lease Event of Default or event which with the giving of
notice and/or passage of time could become a Lease Event of Default, Lessor, as
Lessor and Trustee, shall hold such amount, or portion of the item of Equipment,
as part of the Lessee Collateral and shall be entitled to apply such amounts
against any amounts due hereunder; provided that Lessor shall distribute such
amount, or transfer the Equipment, to Lessee in accordance with the other terms
of this Lease if and when no Lease Event of Default or event which with the
giving of notice and/or passage of time could become a Lease Event of Default is
continuing.
ARTICLE XV
WARRANTY OF TITLE
SECTION 1.37 Warranty of Title. Nothing contained in this Lease shall
be construed as constituting the consent or request of Lessor, as Trustee and/or
Lessor, expressed or implied, to or for the performance by any contractor,
mechanic, laborer, materialman, supplier or vendor of any labor or services or
for the furnishing of any materials for any construction, alteration, addition,
repair or demolition of or to the Resort, the Equipment, or any part thereof.
NOTICE IS HEREBY GIVEN THAT NEITHER LESSOR, AS TRUSTEE AND/OR LESSOR,
ADMINISTRATIVE AGENT NOR ANY LENDER IS OR SHALL BE LIABLE FOR ANY LABOR,
SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE
HOLDING THE EQUIPMENT OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO
MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH
TO OR AFFECT THE INTEREST OF LESSOR, AS TRUSTEE AND/OR LESSOR, ADMINISTRATIVE
AGENT OR ANY LENDER IN AND TO THE EQUIPMENT.
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ARTICLE XVI
MISCELLANEOUS
SECTION 1.38 Governing Law. THIS LEASE AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF CALIFORNIA OTHER THAN CHOICE OF LAWS AND CONFLICTS
RULES OF SUCH STATE, EXCEPT AS TO MATTERS RELATING TO PERFECTION AND THE EFFECT
OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST AND LIENS CREATED
HEREUNDER OR REMEDIES PROVIDED WITH RESPECT TO THE EQUIPMENT, WHICH SHALL BE
GOVERNED BY THE LAWS OF THE STATE WHERE THE EQUIPMENT IS LOCATED AND TO THE
EXTENT THAT THE EXERCISE OF CERTAIN RIGHTS OR REMEDIES HEREUNDER OR UNDER THE
OPERATIVE DOCUMENTS MAY REQUIRE COMPLIANCE WITH LAWS (INCLUDING, WITHOUT
LIMITATION, THE GAMING LAWS) OF THE STATE OF LOUISIANA.
SECTION 1.39 Notices. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be in writing and shall be delivered and shall be deemed to have
been given in accordance with Section 9.6 of the Participation Agreement.
SECTION 1.40 Counterparts. This Lease has been executed in several
counterparts. One counterpart has been prominently marked "Lessor's Copy" and
the other counterparts have been prominently marked "Lessee 's Copy" or "Copy."
Only the counterpart marked "Lessor's Copy" shall evidence a monetary obligation
of Lessee or shall be deemed to be an original or to be chattel paper for
purposes of the UCC, and such copy shall be held by Lessor, as Lessor and
Trustee, as part of the Trust Estate.
SECTION 1.41 Severability. Whenever possible, each provision of this
Lease shall be interpreted in such manner as to be effective and valid under
Applicable Laws; but if any provision of this Lease shall be prohibited by or
invalid under Applicable Laws, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Lease.
SECTION 1.42 Successors and Assigns. This Lease shall be binding upon
the parties hereto and their respective successors and assigns and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
SECTION 1.43 Parties in Interest. Except as expressly provided herein,
none of the provisions of this Lease is intended for the benefit of any Person
except the parties hereto, their successors and permitted assigns; provided that
each of Lessor, as Trustee and Lessor, and Lessee agrees that Administrative
Agent and the Lenders shall benefit from all of the provisions of this
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Lease applicable to them.
SECTION 1.44 Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Lease is executed and delivered by
Bank, not individually or personally but solely as Trustee of the Trust and as
Lessor, in the exercise of the power and authority conferred and vested in it
under the Trust Agreement, as Trustee and Lessor; (b) each of the
representations, undertakings and agreements herein made on the part of Lessor
is made and intended not as a personal representation, undertaking and agreement
by but is made and intended for the purpose for binding only Lessor, as Trustee
and Lessor; (c) nothing herein contained shall be construed as creating any
liability on Bank, individually or personally, to perform any covenant,
expressed or implied, contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any other Person claiming by,
through or under this Lease; and (d) under no circumstances shall Bank be
personally liable for the payment of any indebtedness or expenses of Lessor, as
Lessor and/or Trustee, or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by Lessor, as Lessor and
Trustee, under this Lease or any of the other Operative Documents; provided that
Bank shall be liable in its individual capacity for its own willful misconduct
or gross negligence (or negligence in the handling of funds), for any Taxes
based on or measured by any fees, commission or compensation received by it for
acting as Trustee, for any breach by it of Section 3.5 and for any failure to
discharge Lessor's Liens attributable to it as required by Section 6.1 of the
Participation Agreement. SECTION 1.1
SECTION 1.45 Nonrecourse to Paddlewheels. Notwithstanding anything to
the contrary contained in this Lease, Paddlewheels shall have no liability for
the payment of Rent by, or performance of any other covenant, representation,
warranty or obligation of, Lessee hereunder.
SECTION 1.46 Captions; Table of Contents. Section captions and the
table of contents used in this Lease (including the Schedules, Exhibits and
Annexes hereto) are for convenience of reference only and shall not affect the
construction of this Lease.
(Signature pages follow)
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its
individual capacity, except as
expressly stated herein, but
solely as Trustee and Lessor
By:_________________________
Name Printed:
Title:
S-1
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HOLLYWOOD CASINO SHREVEPORT, a Louisiana general partnership,
as Lessee
By: HCS I, Inc., a Louisiana corporation, its managing
general partner
By:________________________________
Paul C. Yates,
Executive Vice President and
Chief Financial Officer
S-2
<PAGE>
Execution Copy
================================================================================
LOAN AGREEMENT
dated as of March 31, 2000
among
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely
as Trustee and Lessor under the Trust Agreement
for the Lenders named therein, as Borrower,
FIRST SECURITY TRUST COMPANY OF NEVADA,
as Administrative Agent
BANK OF AMERICA, NATIONAL ASSOCIATION,
as Arranger and Documentation Agent
and
THE PERSONS NAMED ON SCHEDULE I,
as Lenders
================================================================================
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT CONTAINS INDEMNIFICATION
PROVISIONS IN SECTION 7.7 THAT APPLY TO CLAIMS, LIABILITIES, LOSSES,
DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED
FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY
NEGLIGENCE OF ANY INDEMNIFIED PERSONS IDENTIFIED HEREIN.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS...............................................................................1
SECTION 1.1. Defined Terms......................................................................1
ARTICLE II AMOUNT AND TERMS OF COMMITMENTS;REPAYMENT AND PREPAYMENT OF LOANS.........................1
SECTION 2.1. Commitment; Term...................................................................1
SECTION 2.2. Notes2
SECTION 2.3. Procedure for Borrowing............................................................2
SECTION 2.4. Prepayments; Lease Termination Payments............................................2
SECTION 2.5. Interest Rates.....................................................................3
SECTION 2.6. Determination of Interest Rate.....................................................3
SECTION 2.7. Pro Rata Treatment Among Loans.....................................................3
SECTION 2.8. Payment from Trust Estate Only.....................................................4
SECTION 2.9. Taxes4
SECTION 2.10. Illegality.........................................................................5
SECTION 2.11. Increased Costs and Reduction of Return............................................6
SECTION 2.12. Funding Losses.....................................................................6
SECTION 2.13. Inability to Determine Rates.......................................................7
SECTION 2.14. Lender Certificate.................................................................7
SECTION 2.15. Notice of Certain Costs............................................................7
SECTION 2.16. Survival...........................................................................7
ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATIONOF INCOME FROM THE TRUST ESTATE......................8
SECTION 3.1. Rent Distribution..................................................................8
SECTION 3.2. Distribution of Mandatory Prepayments..............................................8
SECTION 3.3. Distribution of Payments After Loan Event of Default...............................9
SECTION 3.4. Other Payments....................................................................10
SECTION 3.5. Distribution of Excluded Amounts..................................................10
ARTICLE IV CONDITIONS PRECEDENT.....................................................................10
ARTICLE V AFFIRMATIVE COVENANTS OF THE BORROWER....................................................10
SECTION 5.1. Performance by the Borrower.......................................................10
ARTICLE VI LOAN EVENTS OF DEFAULT; REMEDIES.........................................................11
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.1. Loan Events of Default............................................................11
SECTION 6.2. Remedies..........................................................................12
ARTICLE VII ADMINISTRATIVE AGENT.....................................................................13
SECTION 7.1. Appointment and Authorization.....................................................13
SECTION 7.2. Delegation of Duties..............................................................13
SECTION 7.3. Liability of Administrative Agent.................................................13
SECTION 7.4. Reliance by Administrative Agent..................................................14
SECTION 7.5. Notice of Default.................................................................14
SECTION 7.6. Credit Decision...................................................................15
SECTION 7.7. Indemnification of Administrative Agent...........................................15
SECTION 7.8. Administrative Agent in Individual Capacity.......................................16
SECTION 7.9. Successor Agent...................................................................16
SECTION 7.10. Withholding Tax...................................................................16
SECTION 7.11. Concerning the Trust Estate.......................................................18
SECTION 7.12. Documentation Agent...............................................................19
ARTICLE VIII MISCELLANEOUS............................................................................19
SECTION 8.1. Amendments and Waivers............................................................19
SECTION 8.2. Notices...........................................................................19
SECTION 8.3. Successors and Assigns: Transfers and Participations. 19
SECTION 8.4. Counterparts......................................................................20
SECTION 8.5. GOVERNING LAW.....................................................................20
SECTION 8.6. Compliance with Law...............................................................20
SECTION 8.7. Survival and Termination of Agreement.............................................21
SECTION 8.8. Entire Agreement..................................................................21
SECTION 8.9. Severability......................................................................21
</TABLE>
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<PAGE>
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT (as amended, restated, modified and supplemented
from time to time, this "Loan Agreement"), dated as of March 31, 2000, is
entered into by and among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual capacity, except as specifically provided herein, but solely as
Trustee and Lessor under the Trust Agreement of even date herewith (the
"Borrower"); FIRST SECURITY TRUST COMPANY OF NEVADA, as Administrative Agent;
BANK OF AMERICA, NATIONAL ASSOCIATION, as Arranger and Documentation Agent; and
the Persons named on Schedule I hereto, as Lenders.
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower desires to pay costs associated with the
acquisition of Equipment and to pay certain costs and expenses related thereto,
all as more particularly described in the Participation Agreement of even date
herewith and in each of the other Operative Documents; and
WHEREAS, the Borrower desires to borrow from the Lenders certain costs
associated with the acquisition of the Equipment;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION1~1 Defined Terms. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in Appendix 1 to the
Participation Agreement dated as of the date hereof among Hollywood Casino
Shreveport, a Louisiana general partnership, as Lessee; the Borrower, as Trustee
and Lessor; Administrative Agent; the Arranger, Documentation Agent and the
Lenders identified therein (as amended, supplemented or otherwise modified from
time to time, the "Participation Agreement") for all purposes hereof.
ARTICLE II
AMOUNT AND TERMS OF COMMITMENTS;
REPAYMENT AND PREPAYMENT OF LOANS
SECTION 1 1 Commitment; Term. Subject to the terms and conditions hereof
and of the Participation Agreement, each Lender severally, but not jointly,
agrees to make loans to the
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Borrower ("Loans") from time to time through the Commitment Period for the
purpose of enabling Borrower, as Trustee and Lessor, to pay for Equipment Costs,
in an aggregate principal amount at any one time outstanding not to exceed the
amount of such Lender's Commitment.
SECTION 1 1 Notes.
(1) The Loans made by each Lender shall be evidenced by a promissory note
of the Borrower, substantially in the form of Exhibit A hereto (as amended,
modified, supplemented, extended or renewed from time to time, a "Note"), with
appropriate insertions as to payee and principal amount, duly executed by the
Borrower and payable to the order of such Lender and in a maximum principal
amount equal to such Lender's Commitment. Each Note shall be dated the Closing
Date and delivered to the related Lender in accordance with Section 2.3 of the
Participation Agreement. Each Note shall (i) be stated to mature on the Maturity
Date and (ii) bear interest on the unpaid principal amount thereof from time to
time outstanding at the applicable interest rate per annum determined as
provided in, and payable as specified in, Section 2.6.
(2) Upon the consummation of each Advance, each Lender shall, and is hereby
authorized by the Borrower and Lessee to, record in its records the amount of
the Loan advanced by such Lender on such Advance Date, the date and amount of
each continuation or conversion of such Loan, the length of each Interest Period
with respect thereto and the date and amount of each payment of principal and/or
interest relating thereto; provided, that the failure to make any such
recordation shall not affect the obligation of the Borrower under the Notes or
the corresponding obligation of Lessee to pay Rent. In all events, prior to any
transfer of its Note, a Lender shall indicate in writing to its transferee the
date, amount and maturity of each Loan made by it which is still outstanding and
the amounts of accrued but unpaid interest thereon.
SECTION 1 1 Procedure for Borrowing.
(1) Subject to the terms and conditions of the Participation Agreement and
this Loan Agreement, the Borrower shall borrow under the Commitments on each
Advance Date upon receipt by Administrative Agent from Lessee of the Advance
Request in accordance with Section 2.4(a) of the Participation Agreement.
(2) Any Advance Request shall be delivered to the Trustee (as Trustee,
Lessor and Borrower), Administrative Agent and the Lenders in accordance with
Section 2.4 of the Participation Agreement. Each Lender will fund its pro rata
share of the Advance in accordance with Section 2.2 of the Participation
Agreement.
SECTION II.1. Prepayments; Lease Termination Payments.
(3) Borrower shall repay in full the unpaid principal amount of each Loan
(including any Additional Costs) upon the Maturity Date.
(4) On each Payment Date during the Base Period, the Borrower shall make a
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mandatory repayment of a portion of the outstanding principal amount of each
Note in an amount determined pursuant to Section 2.13 of the Participation
Agreement.
(5) No other principal amortization of the Loans will be required prior to
the Maturity Date thereof, except that upon the occurrence of (i) a Casualty
that results in a purchase by Lessee of the Equipment suffering the Casualty,
(ii) Lessee exercising the early termination option to purchase all of the
Equipment pursuant to Section 5.1 of the Lease or (iii) a Lease Event of Default
that results in Borrower, as Lessor and Trustee, exercising its right to have
Lessee purchase all of the Equipment, the Borrower shall prepay the aggregate
outstanding principal amount of the Loans or in the event of a Casualty, an
amount equal to the Casualty Item Amount, together with interest accrued to the
date of such prepayment on the principal amount so prepaid, plus, Additional
Costs, if any.
SECTION 1 1 Interest Rates. The Loans shall accrue interest at the
applicable Interest Rate from time to time in effect. The Interest Period for
which a LIBO Rate applies shall be three months unless the duration is shortened
as required by the definition of "Interest Period". Interest accrued on each
Loan shall be payable in arrears on each Payment Date.
If all or a portion of the principal amount of or interest on the Notes
shall not be paid when due (whether at the Maturity Date thereof, by
acceleration or otherwise), such overdue amount shall, without limiting the
rights of any Lender under Section 6.2, bear interest at the Overdue Rate, in
each case from the date first due until paid in full (as well after as before
judgment) payable on demand.
SECTION 1 1 Determination of Interest Rate.
(1) During such time as a LIBO Rate applies to any of the Notes, interest
in respect of such Notes shall be calculated on the basis of a 360 day year and
the actual number of days elapsed. During such time as the Alternate Base Rate
applies to any of the Notes, interest in respect of such Notes shall be
calculated on the basis of a 365 (or 366, as applicable) day year and the actual
number of days elapsed. Administrative Agent shall, as soon as practicable, but
in no event later than 11:00 a.m., San Francisco time, one Business Day prior to
the first day of each Interest Period, notify the Borrower, who shall notify
Administrative Agent, Lessee and the Lenders of the LIBO Rate. Any change in the
Interest Rate on the Loans resulting from a change in the Alternate Base Rate
shall become effective as of the opening of business on the day on which such
Alternate Base Rate changes as provided herein.
(2) Except as provided in Section 2.10 or Section 2.13, all Loans shall be
LIBO Rate Loans. LIBO Rate Loans shall be made by each Lender at its LIBOR
Office. At the end of each Interest Period, all LIBO Rate Loans shall
automatically be continued.
SECTION 1 1 Pro Rata Treatment Among Loans. Except as otherwise expressly
set forth in Article III, each payment (including each prepayment) by the
Borrower on account of principal of and interest on the Loans shall be made pro
rata among the Loans. Administrative Agent will apply any prepayments in
reduction of Loans so that the Borrower's funding losses under
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Section 2.12 are minimized. All payments (including prepayments) to be made by
the Borrower hereunder and under the Notes shall be made without set-off or
counterclaim and shall be made to Administrative Agent, for the account of the
Lenders, at Administrative Agent's office referred to in Schedule III of the
Participation Agreement, in lawful money of the United States of America and in
immediately available funds. Administrative Agent shall distribute such payments
to each Lender at its Lending Office, promptly upon receipt in like funds as
received.
SECTION 1 1 Payment from Trust Estate Only. All payments to be made by the
Borrower in respect of the Loans and this Loan Agreement shall be made only from
the income and the proceeds from the Trust Estate and only to the extent that
the Borrower shall have received sufficient income or proceeds from the Trust
Estate to make such payments in accordance with the terms of Article III. Each
Lender agrees that it will look solely to the income and proceeds from the Trust
Estate to the extent available for distribution to such Lender as herein
provided and that neither the Borrower nor Administrative Agent is or shall be
personally liable to any Lender for any amount payable hereunder or under any
Note except as specifically provided for in the Trust Agreement or the
Participation Agreement. The provisions of this Section 2.8 shall apply whether
or not a Loan Event of Default shall have occurred and be continuing.
SECTION 1 1 Taxes.
(1) Subject to subsection (b) below, any and all payments by the Borrower
to each Lender or Administrative Agent under this Loan Agreement and any other
Operative Document shall be made free and clear of, and without deduction or
withholding for any Taxes. In addition, the Borrower shall pay all Other Taxes.
(2) The Borrower agrees to indemnify and hold harmless each Lender and
Administrative Agent for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by any Lender or Administrative Agent and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted, other than Taxes or Other Taxes described in Section 8.2 of
the Participation Agreement. Payment under this indemnification shall be made
within 30 days after the date any applicable Lender or Administrative Agent
makes written demand therefor.
(3) If the Borrower shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or Administrative Agent, then:
(1) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender or Administrative Agent, as the case may be, receives an amount
equal to the sum it would have received had no such deductions or
withholdings been made; (1)
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(2) the Borrower shall make such deductions and withholdings;
(3) the Borrower shall pay the full amount deducted or withheld to the
relevant taxing authority or other authority in accordance with Applicable
Law; and
(4) the Borrower shall also pay to Administrative Agent for the
account of each Lender, at the time interest is paid, all additional
amounts which the respective Lender specifies as necessary to preserve the
after-tax yield the Lender would have received if such Taxes or Other Taxes
had not been imposed.
(4) Within 30 days after the date of any payment by the Borrower of Taxes
or Other Taxes, the Borrower shall furnish Administrative Agent the original or
a certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to Administrative Agent.
(5) If the Borrower is required to pay additional amounts to any Lender or
Administrative Agent pursuant to subsection (c) of this Section, then such
Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by the Borrower which may thereafter
accrue, if such change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
SECTION 1 1 Illegality.
(1) If any Lender determines that the introduction of any Requirements of
Law, or any change in any Requirements of Law, or in the interpretation or
administration of any Requirements of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Lender or its applicable Lending Office to make LIBO Rate Loans, then,
on notice thereof by such Lender to the Borrower through Administrative Agent,
any obligation of that Lender to make LIBO Rate Loans shall be suspended until
that Lender notifies Administrative Agent and the Borrower that the
circumstances giving rise to such determination no longer exist.
(2) If a Lender determines that it is unlawful to maintain any LIBO Rate
Loan in accordance with clause (a) above, the Borrower shall, upon its receipt
of notice of such fact and demand from such Lender (with a copy to
Administrative Agent), prepay in full such LIBO Rate Loans of that Lender then
outstanding, together with interest accrued thereon, either on the last day of
the Interest Period thereof, if the Lender may lawfully continue to maintain
such LIBO Rate Loans to such day, or immediately, if the Lender may not lawfully
continue to maintain such LIBO Rate Loans; provided that before making any such
demand, such Lender agrees to use reasonable efforts to designate a different
Lending Office if such designation would make it lawful for such Lender to make
or maintain LIBO Rate Loans. If the Borrower is required to so prepay any LIBO
Rate Loan, then concurrently with such prepayment, the Borrower shall borrow
from the affected Lender, in the amount of such repayment, an Alternate Base
Rate Loan. (1)
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SECTION II.2. Increased Costs and Reduction of Return.
(3) If any Lender determines that, due to either (i) the introduction of or
any change in or in the interpretation of any law or regulation or (ii) the
compliance by that Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Lender of agreeing to make, or making,
funding or maintaining, any LIBO Rate Loans by an amount which such Lender deems
material, then the Borrower shall be liable for, and shall from time to time,
upon notice and demand (with a copy of such notice and demand to be sent to
Administrative Agent), pay to Administrative Agent for the account of such
Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs; provided that before making any such demand, such Lender agrees
to use reasonable efforts to designate a different Lending Office if such
designation would allow such Lender to continue to make or maintain LIBO Rate
Loans or materially reduce the amount of such cost.
(4) If any Lender shall have determined that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by such Lender (or
its Lending Office) or any Person controlling such Lender with any Capital
Adequacy Regulation, affects or would affect the amount of capital required or
expected to be maintained by such Lender or any corporation controlling such
Lender and (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy and such Lender's desired return on
capital) determines that the amount of such capital is increased as a
consequence of its Commitments, Loans, credits or obligations under this Loan
Agreement, then, upon notice and demand of such Lender to the Borrower through
Administrative Agent, the Borrower shall pay to such Lender, from time to time
as specified by such Lender, additional amounts sufficient to compensate such
Lender for such increase; provided that before making any such demand, such
Lender agrees to use reasonable efforts to designate a different Lending Office
if such designation would allow such Lender to continue to make or maintain LIBO
Rate Loans or materially reduce the amount of such cost.
SECTION 1 1 Funding Losses. The Borrower shall reimburse each Lender and
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of:
(1) the failure of the Borrower to make on a timely basis any payment of
principal of any LIBO Rate Loan;
(2) the failure of the Borrower to borrow or convert a Loan after the
Borrower has given (or is deemed to have given) an Advance Request;
(3) the failure of the Borrower to make any required prepayment;
(4) the prepayment or other payment (including after acceleration thereof)
of a LIBO
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Rate Loan on a day that is not the last day of the
relevant Interest Period; or
(5) the automatic conversion of any LIBO Rate Loan to an Alternate Base
Rate Loan on a day that is not the last day of the relevant Interest Period;
including any such loss or expense arising by reason of the liquidation or
re-employment of deposits or other funds obtained by it to make, continue or
maintain its LIBO Rate Loans or from fees payable to terminate the deposits from
which such funds were obtained; provided, however, that such Lender shall have
delivered to the Borrower a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest error.
SECTION 1 1 Inability to Determine Rates. If Administrative Agent
determines that for any reason adequate and reasonable means do not exist for
determining the LIBO Rate for any requested Interest Period with respect to a
proposed LIBO Rate Loan, or that the LIBO Rate applicable for any requested
Interest Period with respect to a proposed LIBO Rate Loan does not adequately
and fairly reflect the cost to the Lenders of funding such Loan, Administrative
Agent will promptly so notify the Borrower and each Lender. Thereafter, the
obligation of the Lenders to make or maintain LIBO Rate Loans hereunder shall be
suspended until Administrative Agent revokes such notice in writing. The Lenders
shall make, convert or continue the Loans, as proposed by the Borrower, in the
amount specified in the applicable notice submitted by the Borrower, but such
Loans shall be made, converted or continued as Alternate Base Rate Loans instead
of LIBO Rate Loans.
SECTION 1 1 Lender Certificate. A certificate as to any additional amounts
payable pursuant to Section 2.10 or 2.11, showing in reasonable detail the
calculation thereof, submitted by any Lender through Administrative Agent shall
be conclusive in the absence of manifest error, provided that the determination
of such amounts shall be made in good faith and in a manner generally consistent
with such Lender's standard practices.
SECTION 1 1 Notice of Certain Costs. Notwithstanding anything to the
contrary contained in this Agreement, to the extent any notice required by
Section 2.9 through Section 2.12 is given by any Lender more than ninety (90)
days after such Lender has knowledge (or should have had knowledge) of the
occurrence of the event giving rise to the additional cost, reduction in
amounts, loss, tax or other additional amounts described in such Sections, such
Lender shall not be entitled to compensation under such Sections for any such
amounts incurred or accruing prior to the giving of such notice to the Borrower.
SECTION 1 1 Survival. The agreements and obligations of the Borrower in
this Article II shall survive the payment of all other Obligations for a period
of nine (9) months thereafter.
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
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SECTION 1 1 Rent Distribution. Except as otherwise provided in Section 3.3
and subject to Section 3.5, each payment of Rent, as well as any payment of
interest on overdue installments of Rent under the Lease, and any other monies
paid over by Lessee or the Borrower (as Borrower, Trustee and/or Lessor) to
Administrative Agent for such purpose, shall be distributed as promptly as
possible (it being understood that any payments of Rent received by or on behalf
of Administrative Agent under the Lease on a timely basis and in accordance with
the provisions of the Lease shall be distributed on the date received in the
funds so received) in the following order of priority:
first, an amount equal to the aggregate amount of the payment
of interest, as well as any interest on (to the extent permitted by
Applicable Laws) overdue interest, then due and payable on the Notes
shall be distributed and paid to the Lenders; and
second, an amount equal to the aggregate amount of the payment
of principal on the Notes then due and payable shall be distributed and
paid to the Lenders.
SECTION III.3. Distribution of Mandatory Prepayments.
-------------------------------------
(1) Except as otherwise provided in Section 3.2(b) and Section 3.3, the
amount of any prepayment received pursuant to Section 2.4 shall in each case be
distributed and paid in the following order of priority:
first, an amount equal to the aggregate amount of accrued
interest, as well as any interest on (to the extent permitted by
Applicable Laws) overdue interest then due and payable on the Notes,
plus Additional Costs, if any, shall be distributed and paid to the
Lenders; and
second, an amount equal to the aggregate amount of the payment
of principal on the Notes then due and payable shall be distributed and
paid to the Lenders.
(2) Any Casualty Recovery or Non-Casualty Recovery that is not required to
be paid to Lessee pursuant to the Lease, solely because a Lease Event of Default
has occurred and is continuing, shall be held by Borrower, as Trustee, as
security for the obligations of Lessee under the Lease and the other Operative
Documents and invested in Cash Equivalents and at such time as there shall not
be continuing any such Lease Event of Default, such portion shall be paid to
Lessee, unless Administrative Agent (as assignee of the Borrower) shall have
theretofore declared the Lease to be terminated pursuant to Section 10.2
thereof, in which event such portion shall be distributed forthwith upon such
declaration in accordance with the provisions of Section 3.3 hereof.
SECTION 1 1 Distribution of Payments After Loan Event of Default.
(1) Except as otherwise provided in Section 3.4(b), all payments received
and amounts (other than Excluded Amounts) realized by Administrative Agent after
a Loan Event of
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Default shall have occurred and be continuing, as well as all payments or
amounts then held or thereafter received by Administrative Agent as part of the
Trust Estate while such Loan Event of Default shall be continuing, shall be
distributed forthwith by Administrative Agent in the following order of
priority:
first, so much of such payments or amounts as shall be
required to reimburse Administrative Agent or the Trustee for any tax,
expense or other loss incurred by Administrative Agent or the Trustee
(to the extent not previously reimbursed and to the extent incurred in
connection with its duties as Administrative Agent or the Trustee,
respectively) and any, unpaid ongoing fees of Administrative Agent or
the Trustee shall be distributed to Administrative Agent or the
Trustee, as the case may be;
second, so much of such payments or amounts as shall be
required to reimburse the then existing or prior Lenders (so long as
the Loan Events of Default that have occurred and are continuing arise
solely from a Lease Event of Default) for payments made by them to
Administrative Agent or Borrower, as Lessor, Trustee or Borrower
pursuant to Section 7.7 (to the extent not previously reimbursed), and
to pay such then existing or prior Lenders (so long as the Loan Event
of Default that has occurred and is continuing arises solely from a
Lease Event of Default) the amounts payable to them pursuant to any
expense reimbursement or indemnification provisions of the
Participation Agreement, the Lease or this Loan Agreement, shall be
distributed to each such Person, without priority of one over the
other, in accordance with the amount of such payment or payments
payable to each such Person;
third, so much of such amount as shall be required to pay in
full the aggregate unpaid principal amount of the Notes, together with
any Additional Costs and the accrued but unpaid interest on the Notes
to the date of distribution, shall be distributed to the Lenders
holding Notes, and in case the amount so to be distributed shall be
insufficient to pay in full the Notes as aforesaid, then, pro rata
among such Lenders, without priority of one such Lender over the other,
in the proportion that the unpaid principal amount of the Notes held by
each Lender bears to the aggregate unpaid principal amount of the
Notes; and
fourth, the balance, if any, of such payments or amounts
remaining thereafter shall be promptly distributed to, or as directed
by, the Borrower.
(2) During the occurrence and continuance of any Loan Event of Default, all
amounts (other than Excluded Amounts) received or realized by Administrative
Agent and otherwise distributable pursuant to Section 3.1 or 3.2 shall be
distributed as provided in Section 3.3(a).
SECTION III.4. Other Payments.
(3) Any payments received by Administrative Agent for which no provision as
to the application thereof is made in the Operative Documents or elsewhere in
this Article III shall be distributed forthwith by Administrative Agent in the
order of priority set forth in Section 3.1.
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(4) All payments received and amounts realized by Administrative Agent
under the Lease or otherwise with respect to the Equipment, to the extent
received or realized at any time after payment in full of the principal of and
interest on all Loans, as well as any other amounts remaining as part of the
Trust Estate after payment in full of the principal of and interest on (and any
Additional Costs in respect of) all Loans issued hereunder, shall be distributed
forthwith by Administrative Agent in the order of priority set forth in Section
3.3(a) omitting clause "third" of such Section 3.3(a).
(5) Except after a Loan Event of Default has occurred and is continuing,
any payment received by Administrative Agent for which provision as to the
application thereof is made in an Operative Document but not elsewhere in this
Article III shall be distributed forthwith by Administrative Agent to the Person
for the purpose for which such payment was made in accordance with the terms of
such Operative Document.
SECTION 1 1 Distribution of Excluded Amounts. All amounts constituting
Excluded Amounts received by Administrative Agent shall be distributed to the
Person or Persons entitled thereto.
ARTICLE IV
CONDITIONS PRECEDENT
The agreement of each Lender to make the Loan requested to be made by
it on any Advance Date is subject to the satisfaction on such Advance Date of
the applicable conditions precedent set forth in Article III of the
Participation Agreement.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE BORROWER
SECTION 1 1 Performance by the Borrower. Subject to Section 2.8, so long as
any Note remains outstanding and unpaid or any other amount is owing to any
Lender hereunder, the Borrower will promptly pay all amounts payable by it under
this Loan Agreement and the Notes in accordance with the terms hereof and
thereof and shall duly perform each of its obligations under this Loan Agreement
and the Notes.
ARTICLE VI
LOAN EVENTS OF DEFAULT; REMEDIES
SECTION 1 1 Loan Events of Default. Each of the following events shall
constitute a
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"Loan Event of Default" (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any Governmental Authority) and each such Loan Event of
Default shall continue so long as, but only as long as, it shall not have been
remedied:
(1) the Borrower shall fail to pay any principal of or interest on any
Note, or any other amount due hereunder or under any Note, when due and such
failure shall continue for a period of five (5) Business Days;
(2) the failure by the Borrower in any material respect to timely perform
any other covenant or condition herein or in any other Operative Document to
which the Borrower is a party and such failure shall continue for a period of
thirty (30) days after written notice thereof to the Borrower and Lessee from
Administrative Agent; or
(3) [Reserved];
(4) the filing by the Borrower of any petition for dissolution or
liquidation of the Borrower; or the commencement by the Borrower of a voluntary
case under any applicable bankruptcy, insolvency or other similar law for the
relief of debtors, foreign or domestic, now or hereafter in effect; or the
Borrower shall have consented to the entry of an order for relief in an
involuntary case under any such law; or the failure of the Borrower generally to
pay, or the admission by the Borrower in writing that it is unable to pay, its
debts as such debts become due (within the meaning of Bankruptcy Law); or the
failure by the Borrower promptly to satisfy or discharge any execution,
garnishment or attachment of such consequence as will impair its ability to
carry out its obligations under the Operative Documents; or the appointment of
or taking possession by a receiver, keeper, custodian or trustee (or other
similar official) for the Borrower or any substantial part of its property; or a
general assignment by the Borrower for the benefit of creditors; or the entry by
the Borrower into an agreement of composition with its creditors; or the
Borrower shall have taken any action in furtherance of any of the foregoing; or
the filing against the Borrower of an involuntary petition in bankruptcy which
results in an order for relief being entered or, notwithstanding that an order
for relief has not been entered, the petition is not dismissed within 60 days of
the date of the filing of the petition; or the filing under any law relating to
bankruptcy, insolvency or relief of debtors of any petition against the Borrower
which either (i) results in a finding or adjudication of insolvency of the
Borrower or (ii) is not dismissed within 60 days of the date of the filing of
such petition; or
(5) a Lease Event of Default shall occur and be continuing.
SECTION 1 1 Remedies.
(1) Upon the occurrence of a Loan Event of Default hereunder, (i) if such
event is a Loan Event of Default specified in clause (d) of Section 6.1 or
clauses (f) or (g) of Section 10.1 of the Lease, the Commitments (if not
theretofore terminated) shall automatically terminate and the outstanding
principal amount of the Loans hereunder (with accrued interest thereon) and all
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other amounts owing under this Loan Agreement and the Notes shall immediately
become due and payable, and (ii) if such event is any other Loan Event of
Default, upon the written instructions of the Required Lenders, Administrative
Agent shall, by notice of default to the Borrower, terminate the Commitments (if
not theretofore terminated), and declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Loan Agreement and the
Notes to be due and payable forthwith, whereupon the same shall immediately
become due and payable; provided that the sole remedies of Administrative Agent
upon the occurrence of a Loan Event of Default specified in clause (b), (c) (but
only to the extent the representation was made in the Borrower's individual
capacity) or (d) of Section 6.1 that does not also constitute a Lease Event of
Default shall be to cause the Lenders to remove and replace the Borrower as the
Trustee and as the Lessor and to bring suit against Borrower for damages. Except
as expressly provided above in this Article VI, presentment, demand, protest and
all other notices of any kind are hereby expressly waived.
(2) Upon the occurrence of any Loan Event of Default and at any time
thereafter so long as any Loan Event of Default shall be continuing,
Administrative Agent may, and upon the written instructions of the Required
Lenders shall, exercise any or all of the rights and powers and pursue any and
all of the remedies available to it hereunder and (subject to the terms thereof)
under the other Operative Documents and the Lease and shall have and may
exercise any and all rights and remedies available under the Uniform Commercial
Code or any provision of applicable law.
(3) Upon the occurrence of any Loan Event of Default and at any time
thereafter so long as any Loan Event of Default shall be continuing,
Administrative Agent may proceed to protect and enforce this Loan Agreement, the
Notes, the other Operative Documents and the Lease by suit or suits or
proceedings in equity, at law or in bankruptcy, and whether for the specific
performance of any covenant or agreement herein contained or in execution or aid
of any power herein granted, or for foreclosure hereunder, or for the
appointment of a receiver or receivers or keeper or keepers for the Equipment,
or for the recovery of judgment for the indebtedness secured thereby or for the
enforcement of any other proper, legal or equitable remedy available under
Applicable Laws.
(4) Borrower shall be liable for any and all accrued and unpaid amounts due
hereunder before, after or during the exercise of any of the foregoing remedies,
including all reasonable legal fees and other reasonable costs and expenses
incurred by Administrative Agent or any Lender by reason of the occurrence of
any Loan Event of Default or the exercise of remedies with respect thereto.
(5) Except as expressly provided above, no remedy under this Section 6.2 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy provided under this Section 6.2 or under the other Operative
Documents or otherwise available at law or in equity. The exercise by
Administrative Agent or any Lender of any one or more of such remedies shall not
preclude the simultaneous or later exercise of any other remedy or remedies. No
express or implied waiver by Administrative Agent or any Lender of any Loan
Event of Default shall in any way be, or be construed to be, a waiver of any
future or subsequent Loan Event of Default.
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<PAGE>
The failure or delay of Administrative Agent or any Lender in exercising any
rights granted it hereunder upon any occurrence of any of the contingencies set
forth herein shall not constitute a waiver of any such right upon the
continuation or recurrence of any such contingencies or similar contingencies
and any single or partial exercise of any particular right by Administrative
Agent or any Lender shall not exhaust the same or constitute a waiver of any
other right provided herein.
(6) No failure to exercise and no delay in exercising, on the part of
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
ARTICLE VII
ADMINISTRATIVE AGENT
SECTION 1 1 Appointment and Authorization. Each Lender hereby irrevocably
(subject to Section 7.9) appoints, designates and authorizes Administrative
Agent to take such action on its behalf under the provisions of this Loan
Agreement and the Notes and to exercise such powers and perform such duties as
are expressly delegated to Administrative Agent by the terms of this Loan
Agreement and the other Operative Documents, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Loan Agreement or in any other Operative Document,
Administrative Agent shall not have any duties or responsibilities except those
expressly set forth herein or in any other Operative Document, nor shall
Administrative Agent have or be deemed to have any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Loan Agreement or any other
Operative Document or shall otherwise exist against Administrative Agent.
SECTION 1 1 Delegation of Duties. Administrative Agent may execute any of
its duties under this Loan Agreement or any other Operative Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties. Administrative
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
SECTION 1 1 Liability of Administrative Agent. None of Administrative
Agent-Related Persons shall (i) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Loan Agreement or any
other Operative Document or the transactions contemplated hereby (except for its
own gross negligence or willful misconduct or as otherwise provided in the
Security Agreement), or (ii) be responsible in any manner to any of the Lenders
for any recital, statement, representation or warranty made by the Borrower or
any Subsidiary or Affiliate of the Borrower, or any officer of any thereof,
contained in this Loan Agreement or in any other Operative Document, or in any
certificate, report, statement or other document referred
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to or provided for in, or received by, Administrative Agent under, or in
connection with, this Loan Agreement or any other Operative Document, or for the
value of or title to any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Loan Agreement or any other
Operative Document, or for any failure of the Borrower or any other party to any
Operative Document to perform its obligations hereunder or thereunder. No
Administrative Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Loan Agreement or any other
Operative Document, or to inspect the properties, books or records of the
Borrower or any of the Borrower's Subsidiaries or Affiliates.
SECTION VII.5. Reliance by Administrative Agent.
(1) Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Borrower), independent accountants and other experts selected by Administrative
Agent. Administrative Agent shall be fully justified in failing or refusing to
take any action under this Loan Agreement or any other Operative Document unless
it shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Loan Agreement or any other Operative
Document in accordance with a request of the Required Lenders and any action
taken upon consent of the Required Lenders and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of the Lenders.
(2) Each Lender that has executed this Loan Agreement shall be deemed to
have consented to, approved or accepted, or to be satisfied with, each document
or other matter either sent by Administrative Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by, or acceptable or satisfactory to, such Lender.
SECTION 1 1 Notice of Default. Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Loan Default or Loan Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to Administrative Agent directly for the account of
the Lenders, unless Administrative Agent shall have received written notice from
a Lender, Borrower (as Trustee and/or Lessor) or Lessee referring to this Loan
Agreement, describing such Loan Default or Loan Event of Default and stating
that such notice is a "notice of default". Administrative Agent will notify the
Lenders of its receipt of any such notice. Administrative Agent shall take such
action with respect to such Loan Default or Loan Event of Default as may be
requested by the Required Lenders; provided, however, that unless and until
Administrative Agent has received any such request, Administrative Agent may
(but shall not be obligated to) take such action regarding such Loan
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Default or Loan Event of Default as it shall deem advisable or in the best
interest of the Lenders.
SECTION 1 1 Credit Decision. Each Lender acknowledges that none of the
Administrative Agent-Related Persons has made any representation or warranty to
it, and that no act by Administrative Agent hereafter taken, including any
review of the affairs of Lessee, its Subsidiaries, HCS I or HCS II, shall be
deemed to constitute any representation or warranty by any Administrative
Agent-Related Person to any Lender. Each Lender represents to Administrative
Agent that it has, independently and without reliance upon any Administrative
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of any investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Lessee, its Subsidiaries, HCS I and HCS II, the value of and
title to any Collateral, and all applicable bank regulatory laws relating to the
transactions contemplated hereby and by the other Operative Documents, and made
its own decision to enter into this Loan Agreement and to extend credit to the
Borrower hereunder and otherwise to Lessee under the other Operative Documents.
Each Lender also represents that it will independently and without reliance upon
any Administrative Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Loan Agreement and the other Operative Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Lessee. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by Administrative Agent herein
or in any other Operative Documents, Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of Lessee which may come into the
possession of any of the Administrative Agent-Related Persons.
SECTION 1 1 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify,
upon demand, any Administrative Agent-Related Person (to the extent not
reimbursed by or on behalf of Lessee and without limiting the obligation of
Lessee to do so), pro rata, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the payment
to any Administrative Agent-Related Person of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse
Administrative Agent, upon demand, for its ratable share of any costs or
out-of-pocket expenses (including reasonable attorney costs) incurred by
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Loan Agreement, any other Operative
Document, or any document contemplated by or referred to herein or therein, to
the extent that Administrative Agent is not reimbursed for such expenses by or
on behalf of the Borrower or Lessee. The undertaking in this Section shall
survive the payment of all obligations hereunder and the resignation or
replacement of Administrative Agent.
SECTION 1 1 Administrative Agent in Individual Capacity. First Security
Trust
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Company of Nevada and its Affiliates may make loans to, issue letters of credit
for the account of, accept deposits from, and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Lessee
and its Affiliates as though First Security Trust Company of Nevada were not
Administrative Agent hereunder and without notice to or consent of the Lenders.
The Lenders acknowledge that, pursuant to such activities, First Security Trust
Company of Nevada or its Affiliates may receive information regarding Lessee or
its Affiliates (including information that may be subject to confidentiality
obligations in favor of Lessee or such Affiliate) and acknowledge that
Administrative Agent shall be under no obligation to provide such information to
them.
SECTION 1 1 Successor Agent. Administrative Agent may, and at the request
of the Required Lenders shall, resign as Administrative Agent upon thirty (30)
days notice to the Lenders, Borrower and Lessee. If Administrative Agent resigns
under this Agreement, Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders. If no successor agent is appointed prior to the
effective date of the resignation of Administrative Agent, Administrative Agent
may appoint, after consulting with the Lenders, the Borrower and Lessee, a
successor agent from among the Lenders. Upon the acceptance of its appointment
as successor agent hereunder, such successor agent shall succeed to all the
rights, powers and duties of the retiring Administrative Agent and the term
"Administrative Agent" shall mean such successor agent and the retiring
Administrative Agent's appointment, powers and duties as Administrative Agent
shall thereupon be terminated. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this Article
VII shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Administrative Agent under this Loan Agreement. If no successor
agent has accepted appointment as Administrative Agent by the date which is
thirty (30) days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Required Lenders shall perform all of the
duties of Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above.
SECTION VII.16. Withholding Tax.
(1) If any Lender is a "foreign corporation, partnership or trust" within
the meaning of the Code and such Lender claims exemption from, or a reduction
of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Lender
agrees with and in favor of Administrative Agent, to deliver to Administrative
Agent:
(1) two (2) properly completed and executed copies of United States
Internal Revenue Service form W-8BEN or W-8ECI, in either case with
taxpayer identifying numbers, certifying in either case that such Lender is
entitled to receive payments of interest and a return of principal on its
Loans, as applicable, under the Operative Documents without deduction or
withholding of any United States federal income taxes; and
(2) such other form or forms as may be required under the Code or
other laws
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of the United States as a condition to exemption from, or reduction of,
United States withholding tax.
Each Lender which so delivers form W-8BEN or W-8ECI shall further deliver to
each of Lessee, Borrower and Administrative Agent two (2) additional copies of
such form (or a successor form) on or before the date that such form expires
(currently, three successive calendar years for form W-8ECI) or becomes obsolete
or within thirty (30) days after the occurrence of any event requiring a change
in the most recent forms so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by Lessee,
Borrower or the Administrative Agent, in each case certifying that such Lender
is entitled to receive payments under the Operative Documents without deduction
or withholding of any United States federal income taxes, unless an event
(including any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender advises Lessee,
Borrower and Administrative Agent that it is not capable of receiving payments
without any withholding of United States federal income tax. Such Lender agrees
to promptly notify Agent of any change in circumstances which would modify or
render invalid any claimed exemption or reduction.
(2) If any such Lender claims exemption from, or reduction of, withholding
tax and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the obligations of the Borrower to such Lender, such
Lender agrees to notify Administrative Agent of the percentage amount in which
it is no longer the beneficial owner of obligations of the Borrower to such
Lender. To the extent of such percentage amount, Administrative Agent will treat
such Lender's form W-8BEN or W-8ECI, as applicable, as no longer valid.
(3) If any Lender is entitled to a reduction in the withholding tax
applicable to it, Administrative Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to Administrative Agent, then
Administrative Agent may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(4) If the IRS or any other Governmental Authority of the United States or
any other jurisdiction asserts a claim that Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify Administrative Agent of a change in
circumstances which rendered the exemption from, or deduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify
Administrative Agent fully for all amounts paid, directly or indirectly, by
Administrative Agent, including any taxes imposed by any jurisdiction on the
amounts payable to Administrative Agent under this Section, together with all
costs and expenses (including reasonable attorney costs and the allocated
reasonable cost of internal legal counsel services and all reasonable
disbursements of internal counsel). The obligation of the Lenders under this
subsection shall survive the payment of all obligations and
-17-
<PAGE>
the resignation or replacement of Administrative Agent.
SECTION VII.7. Concerning the Trust Estate.
(5) Administrative Agent accepts the agency applicable to it and agrees to
cause the Bank (or its successor), as Borrower, Lessor and Trustee, to receive
all payments and proceeds pursuant to the Operative Documents and disburse such
payments or proceeds in accordance with the Operative Documents.
(6) Upon discharge of the indebtedness secured by the Security Documents or
security interest or Lien provided therein, Administrative Agent shall execute
and deliver, and shall cause Borrower, as Trustee, Lessor and Borrower, to
execute and deliver, at Lessee's cost and expense, such satisfactions and
terminations of said Liens as may be required. Upon satisfaction of the Lien or
security interest provided for in any such instrument, such instrument shall be
deemed withdrawn from the Collateral.
(7) In the event that the Required Lenders shall notify Administrative
Agent that an event of default under a Security Document has occurred,
Administrative Agent shall take such action with respect thereto as the Required
Lenders may require by written instructions, but Administrative Agent shall not
be required to take any action not expressly set forth in such written
instructions.
(8) Administrative Agent shall not have any duty or obligation to manage,
operate, control, use, sell, dispose of or otherwise deal with the Equipment or
any other part of the Collateral or to otherwise take or refrain from taking any
action under, or in connection with, the Security Documents, except as expressly
provided by the terms of this Loan Agreement or other Operative Documents or as
expressly provided in written instructions from the Required Lenders received
pursuant to the terms of Section 7.11(c) hereof.
(9) Except in accordance with written instruction furnished pursuant to
Section 7.11(c) hereof, and without limiting the generality of Section 7.11(d)
hereof, Administrative Agent shall have no duty (i) to see to any recording,
filing or depositing of any security instrument or amendment thereof, (ii) to
see to any insurance on the Equipment or to effect or maintain any such
insurance, (iii) to see to the payment or discharge of any tax, assessment, or
other governmental charge or any Lien or encumbrance of any kind owing with
respect to, assessed or levied against, any part of the Trust Estate or
Collateral, (iv) to confirm or verify any notices or reports of Lessee other
than to furnish (to the extent not otherwise furnished) the Lenders with a copy
of each notice or report furnished to Administrative Agent by Lessee pursuant to
a security instrument or (v) to inspect the Equipment at any time or ascertain
or inquire as to the performance or observance of Lessee's covenants under any
security instrument.
(10) In accepting the agency hereby created, Administrative Agent acts
solely as Administrative Agent hereunder and not in its individual capacity, and
all Persons, other than the Lenders, having any claim against Administrative
Agent by reason of the transactions
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<PAGE>
contemplated hereby shall look only to the Trust Estate for payment or
satisfaction thereof.
(11) The agency created hereby shall be terminated by notice given by
Administrative Agent to the Lenders at any time upon the final disposition or
release of all Collateral and the final distribution by Administrative Agent of
all monies or other property or proceeds received pursuant to the Operative
Documents in accordance with their terms.
SECTION 1 1 Documentation Agent. The "Documentation Agent" shall not have
any right, power, obligation, liability, responsibility or duty under this Loan
Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, none of the Lenders so identified as "Documentation Agent" shall
have or be deemed to have any fiduciary relationship with any other Lender. Each
Lender acknowledges that it has not relied, and will not rely, on any Lender so
identified in deciding to enter into this Loan Agreement or in taking or not
taking action hereunder.
ARTICLE VIII
MISCELLANEOUS
SECTION 1 1 Amendments and Waivers. Neither this Loan Agreement, any Note
nor any terms hereof or thereof may be amended, supplemented or modified except
in accordance with the provisions of the Participation Agreement.
SECTION 1 1 Notices. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be delivered in accordance with, and shall be deemed to have been
given as provided in, Section 9.6 of the Participation Agreement; provided, that
any notice, request, demand or other communication to or upon Administrative
Agent or the Lenders pursuant to Section 2.3 shall not be effective until
received.
SECTION VIII.8. Successors and Assigns: Transfers and Participations.
(1) This Loan Agreement shall be binding upon and inure to the benefit of
the Borrower, as Trustee, Lessor and Borrower, the Lenders, Administrative
Agent, all future holders of the Notes and their respective successors and
assigns.
(2) Any transfer by a Lender of its Note or any sale by a Lender of any
participating interest in the Loans evidenced by its Note shall comply with
Sections 6.2, 6.3 and 6.4 of the Participation Agreement. Any Lender
transferring its Note shall pay, or cause the transferee to pay, the costs and
expenses (including reasonable counsel fees) incurred by Administrative Agent in
connection with such transfer.
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<PAGE>
SECTION 1 1 Counterparts. This Loan Agreement may be executed by one or
more of the parties to this Loan Agreement on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Loan
Agreement signed by all the parties hereto shall be lodged with the Borrower and
Administrative Agent.
SECTION 1 1 GOVERNING LAW. THIS LOAN AGREEMENT AND THE NOTES HAVE BEEN
DELIVERED IN, AND THIS LOAN AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS LOAN AGREEMENT AND THE NOTES SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF CALIFORNIA, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE,
EXCEPT AS TO MATTERS RELATING TO PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST CREATED BY THE SECURITY DOCUMENTS, WHICH
SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE COLLATERAL IS LOCATED, AND
TO THE EXTENT THAT THE EXERCISE OF CERTAIN RIGHTS OR REMEDIES HEREUNDER OR UNDER
THE OTHER OPERATIVE DOCUMENTS MAY REQUIRE COMPLIANCE WITH GAMING LAWS.
SECTION 1 1 Compliance with Law. It is the intent of the Borrower, each
Lender and all other Participants to conform to and contract in strict
compliance with applicable usury law from time to time in effect. All agreements
between the Lenders or any other holder of any Note and the Borrower (of any
other party liable with respect to any Obligations under the Operative
Documents) are hereby limited by the provisions of this paragraph which shall
override and control all such agreements, whether now existing or hereafter
arising and whether written or oral. In no way, nor in any event or contingency
(including but not limited to prepayment, default, demand for payment, or
acceleration of the maturity of any obligation), shall the interest taken,
reserved, contracted for, charged or received under this Loan Agreement or
otherwise, exceed the maximum nonusurious amount permissible under applicable
law. If, from any possible construction of any document, interest would
otherwise be payable in excess of the maximum nonusurious amount, any such
construction shall be subject to the provisions of this paragraph and such
document shall be automatically reformed and the interest payable shall be
automatically reduced to the maximum nonusurious amount permitted under
applicable law, without the necessity of execution of any amendment or new
document. If any Lender shall ever receive anything of value which is
characterized as interest under applicable law and which would apart from this
provision be in excess of the maximum lawful nonusurious amount, an amount equal
to the amount which would have been excessive interest shall, without penalty,
be applied to the reduction of the principal amount owing on the indebtedness
evidenced hereby or by the Notes in the inverse order of their maturity and not
to the payment of interest, or refunded to the Borrower or the other payor
thereof if and to the extent such amount which would have been excessive exceeds
such unpaid principal. The right to accelerate maturity of the Loans and the
indebtedness owing hereunder or pursuant to any other Operative Document does
not include the right to accelerate any interest which has not otherwise accrued
on the date of such acceleration, and the holders of the Notes do not intend to
charge or receive any unearned interest in the event of acceleration. All
interest paid or agreed to be paid to the holders of the Notes shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full stated term (including any renewal or extension) of such
indebtedness so that the amount of
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<PAGE>
interest on account of such indebtedness does not exceed the maximum nonusurious
amount permitted by applicable law. As used in this paragraph, the term
"applicable law" shall mean such laws as they now exist or may be changed or
amended or come into effect in the future.
SECTION 1 1 Survival and Termination of Agreement. All covenants,
agreements, representations and warranties made herein or in any certificate,
document or statement delivered pursuant hereto or in connection herewith, shall
survive the execution and delivery of this Loan Agreement and the Notes and
shall continue in full force and effect so long as any Note or any amount
payable to any Lender under or in connection with this Loan Agreement or the
Notes is unpaid, at which time this Loan Agreement shall terminate, it being
expressly understood that the obligations of the Borrower, as the case may be,
to Administrative Agent and each Lender under Article II and the obligations of
the Lenders to Administrative Agent under Section 7.7 shall survive the payment
in full of the Notes.
SECTION 1 1 Entire Agreement. This Loan Agreement and the other Operative
Document sets forth the entire agreement of the parties hereto with respect to
its subject matter, and supersedes all previous understandings, written or oral,
with respect thereto.
SECTION 1 1 Severability. Any provision of this Loan Agreement or of the
Notes which is prohibited, unenforceable or not authorized in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or thereof or affecting the validity, enforceability
or legality of any such provision in any other jurisdiction.
[Signature pages follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its
individual capacity, except as
specifically provided herein,
but solely as Lessor, as
Trustee and as Borrower
By:__________________________
Name:
Title:
S-1
<PAGE>
FIRST SECURITY TRUST COMPANY OF
NEVADA, as Administrative Agent
By:______________________________
Name:
Title:
S-2
<PAGE>
BANC OF AMERICA LEASING & CAPITAL, LLC, as a Lender
By:______________________________
Name:
Title:
S-3
<PAGE>
BANK OF AMERICA, NATIONAL ASSOCIATION,
as a Lender
By:_____________________________
Name:
Title:
S-4
<PAGE>
HIBERNIA NATIONAL BANK,
as a Lender
By:___________________________
Name:
Title:
S-5
<PAGE>
TEXAS CAPITAL BANK, N.A.,
as a Lender
By:______________________________
Name:
Title:
S-6
<PAGE>
EXHIBIT A
TO LOAN AGREEMENT
FORM OF NOTE
NOTE NO. ___
U.S. $_______________
Dated as of ________________, ____
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity but solely as Trustee under the
Trust Agreement for the Lenders named therein (the "Borrower"), promises to pay
--------
to the order of [NAME OF LENDER] (the "Lender"), the principal sum of
------
__________________________ United States Dollars ($___________) or, if less, the
aggregate unpaid principal amount of all Loans made by the Lender to, or for the
benefit of, the Borrower, or purchased by the Lender, as recorded either on the
grid attached to this Note or in the records of the Lender; provided, however,
that the failure to make any such recordation or any error in such recordation
shall not in any way affect the Borrower's obligation to repay this Note. The
principal amount of each Loan evidenced hereby shall be payable on or prior to
the Maturity Date as provided in that certain Loan Agreement, dated as of March
__, 2000, among the Borrower, First Security Trust Company of Nevada, as
administrative agent (the "Administrative Agent"), and the various lenders named
--------------------
therein (as amended, restated, modified or supplemented from time to time, the
"Loan Agreement").
- ---------------
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding at the rates per annum, on the dates
specified in, and in accordance with the terms of the Loan Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Lender pursuant to the Loan Agreement.
This Note is one of the Notes referred to in, and evidences indebtedness
incurred under, the Loan Agreement, to which reference is made for a statement
of the terms and conditions on which the Borrower is required to make
prepayments and repayments of principal of the indebtedness evidenced by this
Note and on which such indebtedness may be declared to be immediately due and
payable. Capitalized terms used herein without definition shall have the
meanings provided in the Loan Agreement (or in any applicable document
incorporated into the Loan Agreement by reference). This Note is secured
pursuant to the Security Documents made
A-1
<PAGE>
by the Borrower in favor of the Administrative Agent referred to in the Loan
Agreement and reference is hereby made to the Loan Agreement and such Security
Documents for a statement of the terms and provisions of such security.
Anything to the contrary herein notwithstanding, the Borrower's liability
for any sums due hereunder shall be limited in accordance with Section 2.8 of
-----------
the Loan Agreement.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest, and notice of dishonor, notice
of the existence, creation or nonpayment of all or any of the Loans and all
other notices whatsoever.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
(signature page follows)
A-2
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Note to be executed in its
corporate name by its duly authorized officer as of the date hereof.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in
its individual capacity but solely as Trustee, as
Borrower
By: ________________________________
Name:
Title:
A-3
<PAGE>
GRID ATTACHED TO NOTE
DATED AS OF ______________, _____ OF
FIRST SECURITY BANK, NATIONAL ASSOCIATION
AS TRUSTEE
PAYABLE TO THE ORDER OF [INSERT LENDER'S NAME]
Loans made by the Lender to the Trustee, as Borrower, and payments of principal
of such Loans.
<TABLE>
<CAPTION>
======= ================================ =============================== ======================= ============== =================
Principal Principal Amount Interest
Amount Interest Bearing Paid
Period Principal Notation
Date -------- (If Applicable) ------------------------------------------------------- Amount Total Made By
Advances Base Rate LIBO Rate Base LIBO Rate
Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------- -------------------------------- ----------------- ------------- ----------- ----------- -------------- -----------------
- ------- -------------------------------- ------------------------------- ----------------------- -------------- -----------------
======= ================================ =============================== ======================= ============== =================
- ------- -------------------------------- ------------------------------- ----------------------- -------------- -----------------
======= ================================ =============================== ======================= ============== =================
- ------- -------------------------------- ------------------------------- ----------------------- -------------- -----------------
======= ================================ =============================== ======================= ============== =================
- ------- -------------------------------- ------------------------------- ----------------------- -------------- -----------------
======= ================================ =============================== ======================= ============== =================
- ------- -------------------------------- ------------------------------- ----------------------- -------------- -----------------
======= ================================ =============================== ======================= ============== =================
</TABLE>
A-4
<PAGE>
AMORTIZATION SCHEDULE ATTACHED TO NOTE
DATED ________________, ____ OF
FIRST SECURITY BANK, NATIONAL ASSOCIATION
AS TRUSTEE
PAYABLE TO THE ORDER OF [INSERT LENDER'S NAME]
Principal
Date Repayment Amount
---- ----------------
A-5
<PAGE>
================================================================================
TRUST AGREEMENT
dated as of March 31, 2000
between
HOLLYWOOD CASINO SHREVEPORT,
as Grantor,
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Trustee and Lessor
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I THE TRUST ESTATE ............................................................ 1
SECTION 1.1. Appointment, Authorization and Direction to Trustee ................... 1
SECTION 1.2. Declaration and Purpose ............................................... 1
ARTICLE II COLLECTIONS AND DISTRIBUTIONS .............................................. 2
SECTION 2.1. Collections and Remittances by the Trustee ........................... 2
SECTION 2.2. Distribution of Payments ............................................. 3
SECTION 2.3. Effect of Sales by the Bank, as Trustee and Lessor ................... 3
ARTICLE III CERTAIN PROVISIONS RESPECTING THE BANK, AS TRUSTEE ....................... 3
SECTION 3.1. Acceptance of Trusts and Duties ...................................... 3
SECTION 3.2. Limitation of Power .................................................. 3
SECTION 3.3. Notice of Event of Default ........................................... 4
SECTION 3.4. Action Upon Instructions ............................................. 4
SECTION 3.5. Certain Duties and Responsibilities of the Bank, as Trustee and Lessor 5
SECTION 3.6. Certain Rights of Bank, as Trustee and/or Lessor ..................... 6
SECTION 3.7. NO REPRESENTATIONS OR WARRANTIES AS TO THE EQUIPMENT OR DOCUMENTS .... 8
SECTION 3.8. Status of Moneys Received ............................................ 8
SECTION 3.9. Permitted Activities ................................................. 8
SECTION 3.10. Resignation or Removal of the Bank, as Trustee and Lessor ............ 8
SECTION 3.11. Estate and Rights of Successor Trustee and Lessor .................... 9
SECTION 3.12. Merger or Consolidation of Trustee and Lessor ........................ 9
SECTION 3.13. Co-Trustees .......................................................... 9
SECTION 3.14. Doing Business in Other Jurisdictions ................................ 10
SECTION 3.15. Books and Records .................................................... 10
ARTICLE IV TERMINATION OF AND AMENDMENTS TO TRUST .................................... 10
SECTION 4.1. Termination ........................................................... 10
SECTION 4.2. Distribution of Trust Estate Upon Termination ......................... 11
SECTION 4.3. Amendments ............................................................ 11
ARTICLE V MISCE11ANEOUS ............................................................... 11
SECTION 5.1. Compensation and Indemnification ..................................... 11
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 5.2. Notices .............................................................. 12
SECTION 5.3. GOVERNING LAW ........................................................ 12
SECTION 5.4. Tax Reports; Information Reporting; Withholding Taxes ................ 12
SECTION 5.5. Headings ............................................................. 13
SECTION 5.6. Successors and Assigns ............................................... 13
SECTION 5.7. Severability ......................................................... 13
SECTION 5.8. Only Written Waivers ................................................. 13
SECTION 5.9. Counterparts ......................................................... 13
SECTION 5.10. Rights in Trust Agreement ............................................ 13
SECTION 5.11. Payment of Fees, Costs and Expenses .................................. 13
SECTION 5.12. Identification of Trust .............................................. 14
</TABLE>
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<PAGE>
TRUST AGREEMENT
---------------
THIS TRUST AGREEMENT (as amended, restated, modified and supplemented
from time to time, this "Trust Agreement") dated as of March 31, 2000, is
entered into by and between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association (in its individual capacity, the "Bank"; the Bank,
not in its individual capacity, but as Trustee, and any institution that shall
act as a successor trustee in accordance with the terms of Section 3.10, the
"Trustee", and in its capacity as Lessor under the Lease, the "Lessor"); and
Hollywood Casino Shreveport, as Lessee under the Lease and grantor (the
"Grantor"). For purposes hereof, capitalized terms used in this Trust Agreement
without specific definition herein shall have the meanings assigned thereto in
Appendix 1 to the Participation Agreement, dated as of March 31, 2000, among the
Trustee; the Lessor; the Lenders and Administrative Agent; the Grantor as
Lessee; and Bank of America, National Association, as Arranger and Documentation
Agent.
ARTICLE I
THE TRUST ESTATE
SECTION 1.1. Appointment, Authorization and Direction to Trustee. Grantor hereby
requests that the Bank act as Trustee of the trust created hereunder (the
"Trust") and as Lessor under the Lease and the Bank hereby accepts its
appointment as trustee of the Trust and Lessor under the Lease, effective as of
the date hereof. The Grantor authorizes and directs the Bank, as Trustee and as
Lessor, as applicable, subject to confirmation by the Lenders of the
satisfaction or waiver of all appropriate conditions set forth in the
Participation Agreement, to enter into, execute and deliver:
(1) on the Closing Date and from time to time thereafter (including on
each Advance Date), the Operative Documents to which the Trust or the Bank
as the Trustee or the Lessor is to become a party on each such date;
(2) as Lessor and Borrower, from time to time, the Notes in the manner
and subject to the terms and conditions provided in the Participation
Agreement and the Loan Agreement; and
(3) all other documents, and to do all such things and take all such
actions, as may be necessary or convenient to consummate the transactions
contemplated by the Operative Documents and to perform the terms and
conditions of this Trust Agreement, all as contemplated herein or in the
Operative Documents.
SECTION I.1. Declaration and Purpose.
(4) Bank, as Trustee and Lessor, hereby declares, undertakes and
agrees that it will and does receive, take and hold all estate, right,
title and interest of the Bank, as
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<PAGE>
Trustee and Lessor, in and to the Trust Estate in trust for the use and
benefit of the Grantor.
(5) The purpose of the Trust is to acquire and hold through bank, as
Trustee and Lessor, title to the Equipment and the remainder of the Trust
Estate as collateral security for the obligations of the Bank, as Trustee,
Lessor and Borrower under the Loan Agreement, to discharge such obligations
in accordance with the provisions of the Loan Agreement and the other
Operative Documents and to engage in activities ancillary and incidental
thereto as set forth in the Operative Documents. Except in connection with
the foregoing, the Bank in its capacities as Trustee and Lessor shall not
(i) engage in any business or activity, (ii) have any property, rights or
interest, whether real or personal, tangible or intangible, (iii) incur any
legal liability or obligation, whether fixed or contingent, matured or
unmatured, other than in the normal course of the administration of the
Trust or (iv) subject any of the Trust Estate to any mortgage, lien,
security interest or other claim or encumbrance, other than in favor of
Administrative Agent and the Lenders pursuant to the provisions of the
Operative Documents. THE TRUST IS NOT A BUSINESS TRUST. THE SOLE PURPOSE OF
THE TRUST IS TO ACQUIRE AND HOLD TITLE TO THE TRUST ESTATE AND TO COLLECT
AND CONSERVE THE VALUE THEREOF, SUBJECT TO THE RIGHTS OF ADMINISTRATIVE
AGENT, THE TRUSTEE AND LESSOR AND THE GRANTOR, FOR THE BENEFIT OF THE
LENDERS. THE BANK, AS TRUSTEE AND LESSOR, MAY NOT TRANSACT BUSINESS OF ANY
KIND WITH RESPECT TO THE TRUST ESTATE NOR SHALL THIS TRUST AGREEMENT BE
DEEMED TO BE, OR CREATE OR EVIDENCE THE EXISTENCE OF A CORPORATION DE FACTO
OR DE JURE, OR A MASSACHUSETTS TRUST, OR ANY OTHER TYPE OF BUSINESS TRUST,
ASSOCIATION OR JOINT VENTURE BETWEEN THE BANK, AS TRUSTEE AND LESSOR,
ADMINISTRATIVE AGENT AND THE LENDERS.
ARTICLE II
COLLECTIONS AND DISTRIBUTIONS
SECTION 1.2. Collections and Remittances by the Trustee. Bank, as Trustee
and as Lessor, agrees that, subject to the provisions of the Trust Agreement, it
will, during the term of the Trust, administer the Trust Estate and, at the
direction of the Grantor, or if the Loan Agreement has not been fully
discharged, Administrative Agent (acting upon the instructions of the Lenders or
the Required Lenders, as the case may be, in such capacity being hereinafter
called the "Instructing Party") take steps to collect all sums payable to the
Bank, as Trustee or Lessor, by the Grantor or any other Person under the Lease
and the other Operative Documents. The Bank, as Trustee and Lessor, agrees to
distribute all proceeds received from the Trust Estate in accordance with the
Loan Agreement and Sections 2.2 and 2.3. The Bank, as Trustee and Lessor, shall
make such distribution promptly upon receipt of such proceeds (if such proceeds
are available for distribution) by the Bank, as Trustee and/or Lessor, it being
understood and agreed that the Bank, as Trustee and Lessor, shall not be
obligated to make such distribution until the
-2-
<PAGE>
funds for such distribution have been received by the Bank, as Trustee and
Lessor, in cash or its equivalent reasonably acceptable to the Bank, as Trustee
and Lessor. All distributions to a Lender shall be made by the Bank, as Trustee
and Lessor, to the order of such Lender in the manner and at its address
referred to in Section 9.6 of the Participation Agreement.
SECTION II.2. Distribution of Payments.
(1) Payments to the Bank, as Trustee and Lessor, for the benefit of
the Lenders and Administrative Agent. Until the Loan Agreement shall have
been fully discharged pursuant to its terms, all Rent, insurance proceeds
and requisition or other payments of any kind included in the Trust Estate
(other than Excluded Amounts) payable to and received by the Bank, as
Trustee and Lessor, shall be held by Bank, as Trustee and Lessor, for the
benefit of the Lenders and Administrative Agent for distribution in
accordance with the provisions of Article III of the Loan Agreement;
provided, however, that any payments received by the Bank, as Trustee and
Lessor, from the Grantor with respect to the Trustee's fees and
disbursements, or pursuant to Section 5.1, shall be retained by the Bank,
as Trustee, and applied toward the purpose for which such payments were
made.
(2) Excluded Amounts. Any Excluded Amounts received by the Bank, as
Trustee and Lessor, at any time shall be promptly paid by the Bank, as
Trustee and Lessor, to the Person to whom such Excluded Amounts are payable
under the provisions of the Participation Agreement or any other Operative
Document.
SECTION 1.3. Effect of Sales by the Bank, as Trustee and Lessor. Any sale
of all or any part of the Trust Estate by the Bank, as Trustee and Lessor,
permitted hereunder shall bind the Lenders and shall be effective for the
benefit of the purchasers thereof and their respective successors and assigns to
divest and transfer all right, title and interest vested in the Bank, as Trustee
and Lessor, or the Lenders hereunder in the property so sold, and no purchaser
shall be required to inquire as to compliance by the Bank, as Trustee and
Lessor, with any of the terms hereof or to see to the application of any
consideration paid for such property.
ARTICLE III
CERTAIN PROVISIONS RESPECTING THE BANK, AS TRUSTEE AND LESSOR
SECTION 1.4. Acceptance of Trusts and Duties. The Bank accepts the trusts
hereby created and agrees to perform the same as herein expressed and agrees to
receive and disburse all moneys constituting part of the Trust Estate, as
Trustee and Lessor, in accordance with the terms hereof.
SECTION 1.5. Limitation of Power. The Bank, as Trustee and Lessor, shall
have no power, right, duty or authority to manage, control, possess, use, sell,
lease, dispose of or otherwise deal with the Equipment or any other property at
any time constituting a part of the
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<PAGE>
Trust Estate, or otherwise to take or refrain from taking any action under or in
connection with the Operative Documents, except (a) to execute and deliver the
Operative Documents to which the Bank, as Trustee and/or Lessor, is to be a
party, (b) to exercise and carry out or cause to be exercised and carried out
the rights, duties and obligations of the Bank, as Trustee and Lessor,
hereunder, (c) to exercise and carry out or cause to be exercised and carried
out the rights, duties and obligations of the Bank, as Trustee and/or Lessor,
under the Operative Documents, (d) to receive, collect and distribute and deal
with the sums due under the Lease and the other Operative Documents and the
proceeds thereof as provided in the Lease, the Participation Agreement, the Loan
Agreement and in this Trust Agreement, and (e) as expressly provided in written
instructions from the Instructing Party given pursuant to Section 3.3 or 3.4.
Other than as expressly provided in this Trust Agreement, the Bank, as Trustee
and Lessor, shall not have the authority to make management decisions relating
to the Trust Estate and may take only ministerial actions without the consent of
the Required Lenders (or, if required by the terms of the Operative Documents,
all of the Lenders). For purposes of this Trust Agreement, the Grantor shall not
have the right to direct the Bank, as Trustee and Lessor, to exercise and carry
out or cause to be exercised and carried out the rights, duties and obligations
of the Bank, as Trustee and Lessor, hereunder and under the Operative Documents
until the Loan Agreement and Notes have been paid and discharged in full.
SECTION 1.6. Notice of Event of Default. If a Responsible Official of the
Bank, as Trustee and Lessor, has actual knowledge of a Lease Event of Default or
Loan Event of Default, the Bank, as Trustee and Lessor, shall give prompt
written notice of such event to the Lenders, the Grantor and Administrative
Agent in the manner specified in Section 5.2. Subject to Section 3.4, the Bank,
as Trustee and Lessor, shall take such action with respect to any such event as
shall be specified in written instructions from the Instructing Party. For all
purposes of this Trust Agreement and the Lease, in the absence of such actual
knowledge, the Bank, as Trustee and Lessor, shall not be deemed to have
knowledge of a Lease Event of Default or a Loan Event of Default unless any of
its Responsible Officials is notified in writing by a Lender or Administrative
Agent. Bank, as Trustee and Lessor, shall have no obligation and shall not take
any action in the event it receives no direction from the Required Lenders (or,
if required by the terms of the Operative Documents, all of the Lenders), or
Administrative Agent, as the case may be.
SECTION 1.7. Action Upon Instructions. Subject to Sections 3.5, 3.6 and 5.1
and the Loan Agreement, upon the written instructions at any time and from time
to time of the Instructing Party, the Bank, as Trustee and Lessor, shall take
such of the following actions as may be specified in such instructions:
(1) give such notice or direction or exercise such right or power
under the Lease or any other Operative Document as shall be specified in
such instructions;
(2) approve as satisfactory to it all matters required by the terms of
any Operative Document to be satisfactory to the Bank, as Trustee and/or
Lessor;
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(3) upon expiration of the Lease Term and discharge in full of the
Loan Agreement and the Notes pursuant to its terms, convey all of the
right, title and interest of Bank, as Trustee and Lessor, in and to the
Trust Estate (including the Equipment) to the Grantor; and
(4) any other action as specified by the Instructing Party. (1)
SECTION III.3. Certain Duties and Responsibilities of the Bank, as Trustee
and Lessor.
(5) Except during the continuance of a Lease Event of Default or a
Loan Event of Default:
(1) the Bank, as Trustee and Lessor, undertakes to perform such duties
and only such duties as are specifically set forth herein and in the other
Operative Documents, and no implied covenants or obligations shall be read
into this Trust Agreement against the Bank, as Trustee and Lessor, and the
Bank, as Trustee and Lessor, agrees that it shall not, nor shall it have a
duty to, manage, control, use, sell, maintain, insure, register, lease,
operate, modify, dispose of or otherwise deal with the Equipment or any
other part of the Trust Estate in any manner whatsoever, except as required
by the Operative Documents and as otherwise provided herein; and
(2) in the absence of bad faith or gross negligence on its part, the
Bank, as Trustee and Lessor, 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 Bank, as Trustee and Lessor, and
conforming to the requirements of this Trust Agreement.
(6) No provision of this Agreement or any other Operative Document,
including, without limitation, Articles VII and VIII of the Participation
Agreement, shall be construed to relieve the Bank in its individual capacity or
the Bank, as Trustee and/or Lessor, of liability for its gross negligence or
willful misconduct or its negligence in the handling of funds, it being
understood that, without limiting the foregoing:
(1) the Bank, as Trustee and/or Lessor, shall not be liable for any
error of judgment made in good faith by an Responsible Official of the
Bank, as Trustee and/or Lessor, unless it shall be proved that the Bank, as
Trustee and/or Lessor, was grossly negligent;
(2) the Bank, as Trustee and/or Lessor, shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Instructing Party pursuant to the
express provisions hereof; it being understood that the Bank, as Trustee
and/or Lessor, shall be liable if it takes any action pursuant to
instructions from the Grantor prior to receiving notice from
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Administrative Agent that the Loan Agreement has been discharged in full
pursuant to its terms;
(3) no provision hereof shall require the Bank in its individual
capacity to expend or risk its own funds in the performance of any of its
duties hereunder or under any of the other Operative Documents, or in the
exercise of any of its rights or powers; and
(4) the Bank shall be liable for (A) any taxes on, with respect to or
measured by any amounts paid to it as compensation for services as the
Trustee or Lessor hereunder or otherwise under the Operative Documents, (B)
acts or omissions not related to the transactions contemplated by the
Operative Documents, (C) the inaccuracy of representations and warranties
made by the Bank in its individual capacity, or in its capacity as Trustee
and/or Lessor, in the Participation Agreement or any certificate or
document delivered pursuant thereto, and (D) its negligence in the handling
of funds.
(7) the Bank, as Trustee and/or Lessor, shall not be required to take any
action hereunder or under the other Operative Documents, nor shall any other
provision of this Trust Agreement or any other Operative Document be deemed to
impose a duty on the Bank, as Trustee and/or Lessor, to take any action, if the
Bank, as Trustee and/or Lessor, determines, or is advised by external counsel,
that such action is likely to result in personal liability or is contrary to
Applicable Law or the Operative Documents.
(8) Whether or not therein expressly so provided, every provision of this
Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Bank, as Trustee and/or Lessor, shall be subject to
the provisions of this Section 3.5.
SECTION III.4. Certain Rights of Bank, as Trustee and/or Lessor. Except as
otherwise provided in Section 3.5:
(9) the Bank, as Trustee or Lessor, may rely and shall be protected in
acting or refraining from acting upon any signature, resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order or other paper or document reasonably believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(10) any request, direction or authorization by any party hereto or to any
other Operative Document shall be sufficiently evidenced by a request, direction
or authorization in writing, delivered to the Bank, as Trustee or Lessor, and
signed in the name of such party by the president, any vice president, the
treasurer, the secretary or any authorized officer of such party, as the case
may be, and any resolution of the board of directors or committee thereof of
such party shall be sufficiently evidenced by a copy of such resolution
certified by the secretary or an assistant secretary of such party, as the
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case may be, to have been duly adopted and to be in full force and effect on the
date of such certification, and delivered to the Bank, as Trustee or Lessor;
(11) whenever in the administration of this Trust Agreement the Bank, as
Trustee and Lessor, deems it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Bank, as Trustee
and Lessor, may in good faith rely upon a certificate in writing, delivered to
the Bank, as Trustee and/or Lessor, and signed by the president, any vice
president, any assistant vice president, the treasurer, any assistant treasurer,
the secretary, any assistant secretary or any authorized officer of a Lender;
(12) the Bank, as Trustee and Lessor, may exercise its powers and perform
its duties by or through such attorneys, agents and representatives as it may
appoint, and it shall not be liable for the conduct or misconduct of such
attorneys, agents and representatives, provided, that the Bank, as Trustee and
Lessor, shall use due care in the appointment of such attorneys, agents and
representatives; and it shall be entitled to the advice of counsel and shall be
protected by the advice of such counsel in anything done or omitted to be done
in accordance with such advice, if such advice pertains to such matters as the
Bank, as Trustee and Lessor, may reasonably presume to be within the scope of
such counsel's area of expertise and provided such counsel is not in-house
counsel to the Bank, as Trustee and Lessor;
(13) the Bank, as Trustee and Lessor, shall not be under any obligation to
exercise any of the rights or powers vested in it by this Trust Agreement at the
request or direction of the Instructing Party, unless the Instructing Party
offers to the Bank, as Trustee and Lessor, reasonable security or indemnity
against the costs, expenses (including reasonable fees and expenses of its legal
counsel) and liabilities which may be incurred by it in compliance with such
request or direction;
(14) provided no Responsible Official of the Bank, as Trustee and Lessor,
has actual knowledge of the inaccuracy thereof, the Bank, as Trustee and Lessor,
shall not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent or other paper or document, but the Bank, as Trustee
and Lessor, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Bank, as Trustee and
Lessor, determines to make such further inquiry or investigation, it shall be
entitled to examine the books and records of the Grantor related to the
Equipment to reasonably determine whether the Grantor is in compliance with the
terms and conditions of the Lease and to examine the Equipment, by agent or
attorney, all upon the terms and conditions contained in the Lease; and
(15) without limiting the generality of Section 3.5, the Bank, as Trustee
and Lessor, shall not have any duty (i) to see to any recording or filing of the
Operative Documents or any Uniform Commercial Code financing statements or to
see to the maintenance of any such recording or filing, (ii) to see to any
insurance on the Equipment
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or to effect or maintain any such insurance, whether or not the Grantor is
in default with respect thereto, other than to forward promptly to the
Lenders copies of all certificates, reports and other written information
it receives from the Grantor pursuant to the Lease (unless the Lenders are
to receive such certificates, reports and other written information
directly from the Grantor), (iii) to see to the payment or discharge of any
tax, assessment or other government charge or any Lien owing with respect
to, assessed or levied against any part of the Trust Estate, other than
Lessor Liens attributable to it, (iv) to confirm or verify any financial
statements of the Grantor or any other Person, or (v) to inspect the
Equipment at any time or ascertain or inquire as to the performance or
observance of any of the Grantor's or any other Person's (other than its or
the Bank's, individually, or as Trustee, Lessor or Borrower) covenants
under the Operative Documents with respect to the Equipment.
SECTION 1.8. NO REPRESENTATIONS OR WARRANTIES AS TO THE EQUIPMENT OR
DOCUMENTS. THE BANK, AS TRUSTEE AND LESSOR, IS NOT A BUILDER, DEVELOPER OR
MANUFACTURER OF THE EQUIPMENT OR A DEALER IN OR VENDOR OF SIMILAR EQUIPMENT AND
HAS NOT INSPECTED THE EQUIPMENT BEFORE DELIVERY TO AND ACCEPTANCE BY THE
GRANTOR. THE BANK, AS TRUSTEE AND LESSOR, HAS NOT MADE NOR DOES IT MAKE (A) ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO ANY ENVIRONMENTAL MATTER
OR CONDITION, VALUE, DESIGN, OPERATION, CONDITION, QUALITY, DURABILITY,
SUITABILITY, MERCHANTABILITY OR FITNESS FOR USE OR FITNESS FOR A PARTICULAR
PURPOSE, ABSENCE OF LATENT OR OTHER DEFECTS WHETHER OR NOT DISCOVERABLE, ABSENCE
OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, OR ANY OTHER WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, OR (B) ANY
REPRESENTATION OR WARRANTY AS TO THE VALIDITY, LEGALITY OR ENFORCEABILITY OF THE
OPERATIVE DOCUMENTS (OTHER THAN AS TO THIS TRUST AGREEMENT AGAINST THE BANK, AS
TRUSTEE AND LESSOR), OR AS TO THE CORRECTNESS OF ANY STATEMENT CONTAINED IN ANY
THEREOF, EXCEPT AS SET FORTH IN SECTION 4.3 OF THE PARTICIPATION AGREEMENT.
SECTION 1.9. Status of Moneys Received. All moneys received by the Bank, as
Trustee and/or Lessor, or the Bank individually under or pursuant to this Trust
Agreement or any other Operative Document (other than Excluded Amounts to be
paid to the Bank in any capacity) shall constitute trust funds for the purpose
for which they were paid or are held, but need not be segregated in any manner
from any other moneys and may be deposited by the Bank, as Trustee and/or
Lessor, under such conditions as may be prescribed or permitted by Applicable
Law for trust funds, or, at the direction of the Instructing Party may be
invested in Cash Equivalents.
SECTION 1.10. Permitted Activities. The Bank or any corporation in or with
which the Bank may be interested or affiliated or any officer or director of any
such corporation may have commercial relations and otherwise deal with the
Grantor or any other Person or with any other corporation having relations with
the Grantor to the full extent permitted by Applicable Law.
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SECTION 1.11. Resignation or Removal of the Bank, as Trustee and Lessor.
The Bank, as Trustee and Lessor, or any successor thereto as Trustee and Lessor,
may resign as Trustee and Lessor at any time without cause by giving at least 60
days' prior written notice to each Lender, Administrative Agent and the Grantor,
and the Required Lenders may at any time remove the Bank, as Trustee and Lessor,
without cause, by an instrument in writing delivered to the Bank, as Trustee and
Lessor, Administrative Agent and the Grantor, such resignation or removal to be
effective on the later of the date specified in such notice or written
instrument or the date on which a successor trustee is appointed hereunder. With
the written consent of Administrative Agent and, so long as a Lease Event of
Default shall not have occurred and be continuing, the Grantor, the Required
Lenders may, at any time upon 30 days' prior written notice to Administrative
Agent and the Grantor by an instrument in writing, appoint a successor trustee
and lessor; provided, however, that any successor trustee and lessor shall be a
bank or trust company organized under the laws of the United States of America
or any state thereof that has a combined capital and surplus of at least
$100,000,000, subject to any applicable Gaming Laws. If the Required Lenders do
not appoint a successor trustee and lessor within 30 days after the giving of
notice of such resignation or removal, Administrative Agent or the Bank, as
Trustee and Lessor, may apply to any court of competent jurisdiction to appoint
a successor trustee and lessor to act until a successor or successors is
appointed by the Required Lenders as above provided. Any successor trustee and
lessor so appointed by such court shall immediately and without further act be
superseded by a successor trustee and lessor appointed by the Required Lenders
within one year from the date of the appointment by such court.
SECTION 1.12. Estate and Rights of Successor Trustee and Lessor. Any
successor trustee and lessor, whether appointed by the Required Lenders or a
court, shall execute and deliver to the predecessor Trustee and Lessor an
instrument accepting such appointment, and thereupon each successor trustee and
lessor, without further act, shall become vested with all the estates,
properties, rights, powers, duties and trusts of the predecessor Trustee and
Lessor in the trusts hereunder with like effect as if originally named Trustee
and Lessor herein, but nevertheless upon the written request of such successor
trustee and lessor, such predecessor Trustee and Lessor shall execute and
deliver an instrument transferring to such successor Trustee and Lessor, upon
the trusts herein expressed, all the estates, properties, rights, powers and
trusts of such predecessor Trustee and Lessor, and such predecessor Trustee and
Lessor shall duly assign, transfer, deliver and pay over to such successor
trustee and lessor any property or moneys then held by such predecessor Trustee
and Lessor upon the trusts herein expressed.
SECTION 1.13. Merger or Consolidation of Trustee and Lessor. Any Person
into which the Bank serving as Trustee and Lessor may be merged or with which it
may be consolidated, or any Person resulting from any merger or consolidation to
which the Bank serving as Trustee and Lessor is a party, or any Person to which
substantially all of the corporate trust business of the Bank may be
transferred, shall be a successor trustee and lessor under this Trust Agreement
without further act.
SECTION 1.14. Co-Trustees. At any time, for the purpose of meeting any
legal requirements of any jurisdiction in which any part of the Trust Estate may
at the time be located,
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the Required Lenders and the Bank, as Trustee and Lessor, jointly shall have the
power, and shall execute and deliver all instruments, to appoint one or more
Persons approved by the Required Lenders and the Bank, as Trustee and Lessor, to
act as co-trustee, or co-trustees, jointly with the Bank, as Trustee and Lessor,
or separate trustee/lessor or separate trustees/lessors, of all or any part of
the Trust Estate, and to vest in such Person or Persons, in such capacity, such
title to the Trust Estate or any part thereof, and such rights, powers, duties,
trusts or obligations as the Required Lenders and the Bank, as Trustee and
Lessor, may consider necessary or desirable. If the Required Lenders have not
joined in such appointment within 15 days after the receipt by the last of them
of a request to do so, the Bank, as Trustee and Lessor, alone shall have power
to make such appointment. The Bank, as Trustee and/or Lessor, shall not be
liable for any act or omission of any co-trustee/lessor or separate
trustee/lessor appointed under this Section 3.13.
SECTION 1.15. Doing Business in Other Jurisdictions. Notwithstanding
anything contained herein to the contrary, the Bank shall not be required to
take any action in any jurisdiction, other than in the jurisdiction of its
organization, and other than in any other jurisdiction in which Bank is
authorized to do business, if solely as a result of such action, (i) the taking
of such action would require the consent or approval or authorization or order
of or the giving of notice to, or the registration with or the taking of any
other action in respect of, any Governmental Authority of any jurisdiction,
other than the state of Bank's organization or any other jurisdiction in which
the Bank is authorized to do business; (ii) the Bank would incur any fee, tax or
other governmental charge under the laws of any jurisdiction or any political
subdivision thereof in existence on the date hereof, other than the state of the
Bank's organization or any other jurisdiction in which the Bank is authorized to
do business; or (iii) the Bank would become subject to personal jurisdiction in
any jurisdiction, other than the state of the Bank's organization or any other
jurisdiction in which the Bank is authorized to do business, for causes of
action arising from acts unrelated to the consummation of the transactions
described in the Operative Documents by the Bank; provided, that if pursuant to
the foregoing paragraph the Bank shall not be required to take an action, the
Bank shall promptly appoint an additional trustee/lessor pursuant to Section
3.10 to proceed with such action.
SECTION 1.16. Books and Records. The Bank, as Trustee and Lessor, shall be
responsible for keeping the customary books and records relating to the receipt
and disbursement of all moneys actually received and disbursed by it.
ARTICLE IV
TERMINATION OF AND AMENDMENTS TO TRUST
SECTION 1.17. Termination. The Trust created and provided for hereby shall
cease and be terminated in any one of the following events, whichever shall
first occur:
(1) If Administrative Agent, acting upon the instructions of the
Required Lenders, shall by notice in writing to the Bank, as Trustee and
Lessor, the Lenders and the Grantor, revoke and terminate the Trust on and
as of a date stated in such notice,
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which date shall not be less than ten (10) nor more than thirty (30) days
from the date of mailing such notice, then on the date specified in such
notice the Trust created and provided for hereby shall cease and terminate,
provided, however, that the Trust shall not be subject to revocation or
termination by the Lenders prior to the payment in full and discharge of
the Loans and all other indebtedness secured by the Operative Documents and
the termination of the Operative Documents and the release of the Liens
granted thereby; or
(2) the sale or other final disposition by the Bank, as Trustee and
Lessor, of all property constituting the Trust Estate and the final
disposition by the Bank, as Trustee and Lessor, of all moneys or other
property or proceeds constituting part of the Trust Estate in accordance
with the terms hereof; provided, however, that the Trust Estate shall not
be subject to sale or other final disposition by the Bank, as Trustee and
Lessor, prior to the payment in full and discharge of the Loans and all
other indebtedness secured by the Operative Documents and the release of
the Operative Documents and the Liens granted thereby and the payment in
full of the Loans; or
(3) 110 years after the date hereof.
SECTION 1.18. Distribution of Trust Estate Upon Termination. Upon any
termination of this Trust pursuant to Section 4.1, the Bank, as Trustee and
Lessor, shall convey the Trust Estate to such purchaser or purchasers thereof or
other Persons entitled thereto and for such amount and on such terms as are
specified in written instructions from Administrative Agent, acting upon the
instructions of the Required Lenders, delivered to the Bank, as Trustee and
Lessor, before the date of termination; provided that (a) if at the time of any
termination the Lease remains in force and effect, then the Trust Estate shall
be conveyed as a unit subject to the Lease and not in parcels, and (b) if such
written instructions are not delivered to the Bank, as Trustee and Lessor, on or
before the date of termination, the Bank, as Trustee and Lessor, shall transfer
title to the Trust Estate to the Lenders. Upon making such transfer or sale the
Bank, as Trustee and Lessor, shall be entitled to immediate receipt of any sums
due and owing to the Bank, as Trustee and/or Lessor, including, without
limitation, any expenses (including reasonable attorneys' fees and expenses)
incurred pursuant hereto or as compensation for services rendered hereunder and
not theretofore paid and the Bank, as Trustee and/or Lessor, shall be discharged
and free of any further liability hereunder subject to Section 3.5.
SECTION 1.19. Amendments. Subject to Section 5.8 hereof and Section 9.3 of
the Participation Agreement, at any time and from time to time, upon the written
request of the Required Lenders, (a) the Bank, as Trustee and Lessor, shall
execute a supplement hereto for the purpose of adding provisions to, or changing
or eliminating provisions of, this Trust Agreement as specified in such request,
and (b) the Bank, as Trustee and Lessor, shall enter into or consent to such
written amendment of or supplement to the other Operative Documents as the
Grantor or Administrative Agent, as the case may be, may agree to and as may be
specified in such request, or execute and deliver such written waiver or
modification of the terms of the Operative Documents as may be specified in such
request; provided, however, if in the reasonable opinion of the Bank, as Trustee
and Lessor, any document required to be executed by it pursuant to this
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Section 4.3 affects any right or duty of, or immunity or indemnity in favor of,
the Bank, as Trustee and/or Lessor, under this Trust Agreement or the other
Operative Documents, the Bank, as Trustee and Lessor, may in its reasonable
discretion decline to execute such document.
ARTICLE V
MISCELLANEOUS
SECTION 1.20. Compensation and Indemnification. Bank, as Trustee and
Lessor, shall receive reasonable compensation for its services hereunder from
the Grantor and shall be reimbursed by the Grantor for the its reasonable fees
and expenses (including the reasonable disbursements and fees of counsel). If a
Lease Event of Default or a Loan Event of Default shall have occurred and be
continuing and the Bank, as Trustee and Lessor, is required pursuant to this
Trust Agreement to take any action in connection therewith, it shall be
reimbursed by the Grantor for any expenses it may incur in relation to taking
any such action. Grantor shall reimburse and indemnify and save the Bank, as
Trustee and/or Lessor, harmless from and against any and all losses, damages,
liabilities, claims, actions, suits, obligations, penalties, demands,
disbursements and expenses, including taxes, reasonable counsel fees, and
including tort claims for which the Bank, as Trustee and/or Lessor, is strictly
liable, which may be asserted against or incurred by reason of the Bank being
the Bank, as Trustee and/or Lessor, or acting as the Trustee or Lessor hereunder
or under the other Operative Documents or the performance or enforcement of any
of the terms hereof, or arising out of or relating to this Trust Agreement or
the other Operative Documents or the Equipment, the Trust Estate or the Rent and
other sums payable therefor, or the building, manufacture, purchase,
installation, acceptance, rejection, ownership, delivery, lease, possession,
use, operation, condition, sale, return or other disposition of the Equipment or
in any way relating to or arising out of the Trust Estate or the action or the
inaction of the Bank, as Trustee and/or Lessor, hereunder or by reason of any
occurrence while so acting. In no event shall Grantor be so obligated in respect
of any such losses, damages, liabilities, claims, actions, suits, obligations,
penalties, demands, disbursements and expenses, including taxes and reasonable
counsel fees pursuant to this Section 5.1, arising from or as a result of (a)
the willful misconduct or gross negligence of the Bank or the negligence of the
Bank in handling of funds, (b) any taxes on, with respect to or measured by any
amounts paid to the Bank as compensation for services as Trustee and/or Lessor
hereunder or otherwise under the Operative Documents, or (c) the inaccuracy of
representations and warranties made by the Bank in its individual capacity, or
in its capacity as Trustee and/or Lessor, in the Participation Agreement or in
any certificate or documents delivered pursuant thereto. The provisions of this
Section 5.1 (other than the requirements for compensation of the Bank, as
Trustee and Lessor, after its resignation, which shall terminate upon the
resignation or removal of the Bank, as Trustee and Lessor) shall continue in
force and effect notwithstanding the termination of this Trust, the resignation
or removal of the Bank, as Trustee and Lessor, or the obligation of any other
party to any other Operative Document to make any payment to the Bank, as
Trustee and/or Lessor, which Grantor is required to make pursuant to this
Section 5.1.
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SECTION 1.21. Notices. All notices and communications provided for herein
shall be in writing and shall be deemed to have been given in accordance with
Section 9.6 of the Participation Agreement. Bank, as Trustee and Lessor, shall
deliver to each Lender promptly after receipt copies of all notices,
certificates and reports delivered to it pursuant to any Operative Document.
SECTION 1.22. GOVERNING LAW. THIS TRUST IS BEING CREATED IN THE STATE OF
CALIFORNIA AND THE VALIDITY, CONSTRUCTION AND ALL RIGHTS UNDER THIS TRUST SHALL
BE GOVERNED BY THE LAWS OF THAT STATE, WITHOUT REGARD TO THE CONFLICTS OF LAWS
PRINCIPLES OF SUCH STATE, EXCEPT TO THE EXTENT THAT GAMING LAWS SHALL
NECESSARILY GOVERN. IF ANY PROVISION OF THIS TRUST SHALL BE INVALID OR
UNENFORCEABLE, THE REMAINING PROVISIONS HEREOF SHALL CONTINUE TO BE FULLY
EFFECTIVE, PROVIDED THAT SUCH REMAINING PROVISIONS DO NOT INCREASE THE
OBLIGATIONS OR LIABILITIES OF THE TRUSTEE.
SECTION 1.23. Tax Reports; Information Reporting; Withholding Taxes. If any
tax report or tax return is required to be made by the Bank, as Trustee and/or
Lessor, with respect to the Trust Estate and the Grantor is not required to
prepare and file the same pursuant to the Lease, each Lender will prepare such
tax report or return in respect of its interest in the Trust and deliver a copy
thereof to the Bank, as Trustee and Lessor. The Bank, as Trustee and Lessor,
agrees to promptly forward to each Lender any communications with respect to
taxes pertaining to the Trust Estate received by the Bank, as Trustee and/or
Lessor, from tax authorities or from the Grantor.
SECTION 1.24. Headings. The headings of the various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 1.25. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns. Grantor may not assign,
transfer or otherwise dispose of its interest in the Trust, except as expressly
contemplated in the Operative Documents.
SECTION 1.26. Severability. Any provision of this Trust Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition on unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
SECTION 1.27. Only Written Waivers. No term or provision of this Trust
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party or other Person against whom
enforcement of the change, waiver, discharge or termination is sought; and any
waiver of the terms hereof shall be effective only in the specific instance and
for the specific purpose given.
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SECTION 1.28. Counterparts. This instrument may be simultaneously executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original, and such counterparts together shall constitute and be one and
the same instrument.
SECTION 1.29. Rights in Trust Agreement. Except as expressly provided to
the contrary in the Operative Documents, nothing in this Trust Agreement,
whether express or implied, shall be construed to give any Person other than the
Bank, as Trustee and Lessor, the Administrative Agent, the Grantor, and each
Lender and their respective successors and assigns, any legal or equitable
right, remedy or claim under or in respect of this Trust Agreement.
SECTION 1.30. Payment of Fees, Costs and Expenses. Grantor shall pay to the
Bank, as Trustee and Lessor, for its services hereunder such fees and expenses
as heretofore have been agreed upon by Bank and Grantor and shall also pay to
Bank, as Trustee and Lessor, such fees and expenses as may be reasonably
incurred by the Bank, as Trustee and Lessor, as a result of taking any direction
of the Instructing Party. Bank, as Trustee and Lessor, agrees that it shall have
no right against the Lenders or Administrative Agent for any fee as compensation
for its services hereunder, except as hereafter expressly agreed upon by the
Lenders, Administrative Agent and the Bank, as Trustee and Lessor.
SECTION 1.31. Identification of Trust. The name of the trust created hereby
is the HOLLYWOOD CASINO SHREVEPORT TRUST 2000-A.
[Signature pages follow]
<PAGE>
IN WITNESS WHEREOF, the Bank, individually and as Trustee and Lessor,
and the Grantor have caused this Trust Agreement to be duly executed all as of
the day and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Bank, as Trustee and as Lessor
By:__________________________________
Name:
Title:
S-1
<PAGE>
HOLLYWOOD CASINO SHREVEPORT,
a Louisiana general partnership,
as Grantor
By: HCS I, Inc., a Louisiana corporation,
its managing general partner
By ______________________________________________
Name: Paul C. Yates
Title: Executive Vice President and
Chief Financial Officer
S-2
<PAGE>
Execution Copy
================================================================================
SECURITY AGREEMENT AND ASSIGNMENT OF LEASE
dated as of March 31, 2000
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION
not in its individual capacity but solely
as Lessor, Trustee and Borrower,
and
FIRST SECURITY TRUST COMPANY OF NEVADA,
as Administrative Agent
================================================================================
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT CONTAINS INDEMNIFICATION
PROVISIONS IN SECTION 6.2 THAT APPLY TO CLAIMS, LIABILITIES, LOSSES,
DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED
FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY
<PAGE>
NEGLIGENCE OF ANY INDEMNIFIED PERSONS IDENTIFIED HEREIN.
<PAGE>
SECURITY AGREEMENT AND ASSIGNMENT OF LEASE
THIS SECURITY AGREEMENT AND ASSIGNMENT OF LEASE (this "Security
Agreement"), dated as of March 31, 2000, is made by FIRST SECURITY BANK,
NATIONAL ASSOCIATION, not in its individual capacity but solely as Lessor and
Trustee ("Grantor") under that certain Trust Agreement dated as of March 31,
2000, between HOLLYWOOD CASINO SHREVEPORT, a Louisiana general partnership and
Grantor, and as Borrower under the Loan Agreement, in favor of FIRST SECURITY
TRUST COMPANY OF NEVADA, as Administrative Agent ("Administrative Agent") for
the Lenders.
W I T N E S S E T H:
-------------------
WHEREAS, Grantor, Administrative Agent, the Arranger, the Documentation
Agent, the Lenders, and Hollywood Casino Shreveport, a Louisiana general
partnership, as Lessee ("Lessee"), have entered into that certain Participation
Agreement, dated as of March 31, 2000 (as amended, restated, modified or
supplemented from time to time, the "Participation Agreement"); and
WHEREAS, concurrently herewith pursuant to the Participation Agreement,
(i) Grantor, as Lessor and Borrower, will obtain Loans from the Lenders pursuant
to the Loan Agreement, the proceeds of which will be used to provide funding for
the purchase of certain items of Equipment, and (ii) Grantor, as lessor, and
Lessee, as lessee, will enter into the Lease; and
WHEREAS, it is a condition precedent to the consummation by the Lenders
of the transactions to be consummated on each Advance Date that Grantor execute
and deliver this Security Agreement as security for Grantor's obligations under
the Loan Agreement; and
WHEREAS, it is in the best interests of Grantor that the
transactions contemplated by the Operative Documents occur; and
WHEREAS, Grantor has duly authorized the execution, delivery
and performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
to enter into the transactions contemplated by the Operative Documents, Grantor
agrees as follows:
ARTICLE I
DEFINITIONS
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SECTION 1 1 Certain Terms. The following terms (whether or not underscored)
when used in this Security Agreement, including its preamble and recitals, shall
have the following meanings (such definitions to be equally applicable to the
singular and plural forms thereof):
"Collateral" is defined in Section 2.1.
"Secured Obligations" is defined in Section 2.2.
SECTION 1 1 Participation Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in Appendix 1 to
the Participation Agreement.
SECTION 1 1 UCC Definitions. Unless otherwise defined herein or the context
otherwise requires, terms for which meanings are provided in the UCC in effect
in the State of California are used in this Security Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 1 1 Grant of Security. Grantor hereby assigns and pledges to
Administrative Agent, and hereby grants to Administrative Agent, for the benefit
of the Lenders, a security interest in and to all of the following, whether now
existing or hereafter arising or acquired (the "Collateral"):
(1) all of Grantor's right, title and interest in, to and under each
item of Equipment;
(2) all of Grantor's right, title and interest in, to and under each
Bill of Sale and each Certificate of Acceptance;
(3) all of Grantor's right, title and interest in, to and under the
Participation Agreement and the Lease, including the security interest
granted thereunder in favor of Grantor, as Trustee and Lessor thereunder,
and including all rights to receive payments thereunder (including Rent)
other than Excluded Amounts;
(4) all of Grantor's right, title and interest in, to and under the
Security Documents and the other Operative Documents; (1)
(5) all of Grantor's right, title and interest in, to and under any
and all contracts necessary to operate and maintain the Equipment, or any
portion thereof;
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<PAGE>
(6) all books, records, writings, databases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing;
(7) to the extent not included in the foregoing, all of Grantor's
right, title and interest in, to and under any and all accounts, general
intangibles and contract rights relating to or otherwise arising out of or
in connection with the Equipment and/or the Operative Documents; and
(8) all products, accessions, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in the foregoing
clauses of this Section 2.1, and, to the extent not otherwise included, all
payments under insurance (whether or not Administrative Agent is the loss
payee thereof), or any indemnity, warranty or guaranty payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral).
Grantor hereby assigns, transfers and conveys to Administrative Agent all
payments (except Excluded Amounts) payable by Lessee under the Lease.
SECTION 1 1 Security for Obligations. This Security Agreement secures the
payment of all obligations of Grantor, as Lessor, as Borrower and as Trustee,
now or hereafter existing under the Notes, the Loan Agreement and any other
Operative Document to which it is a party, either as Lessor or Trustee, or both,
or as Borrower, whether for principal, interest, costs, fees, expenses or
otherwise, and all other obligations of Grantor, as Borrower or as Lessor or
Trustee, or both, to the Lenders with respect to the Loans howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent or now
or hereinafter existing or due or to become due (all such obligations being the
"Secured Obligations").
SECTION 1 1 Continuing Security Interest: Transfer of Notes. This Security
Agreement shall create a continuing security interest in the Collateral and
shall
(1) remain in full force and effect until the payment in full of all
Secured Obligations and the termination of any other commitments of the
Lenders to or for the benefit of Grantor or Lessee, pursuant to the
Operative Documents;
(2) be binding upon Grantor, its successors, transferees and assigns;
and
(3) inure, together with the rights and remedies of Administrative
Agent hereunder, to the benefit of Administrative Agent and its successors,
transferees and assigns.
Without limiting the generality of the foregoing clause (c), each transferee of
a Note shall, upon such transfer, become vested with all the rights and benefits
in respect thereof granted under any
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<PAGE>
Operative Document (including this Security Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer. Upon the
payment in full and performance of all Secured Obligations and the termination
of the Commitments, and any other commitments of the Lenders to Grantor, as
Lessor, Trustee and/or Borrower, the security interest granted herein shall
terminate and all rights to the Collateral shall revert to Grantor, as Lessor
and Trustee. Upon any such termination, Administrative Agent will, on behalf of
the Lenders and at Grantor's sole expense, execute and deliver to Grantor such
documents as Grantor shall reasonably request to evidence such termination.
SECTION 1 1 Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(1) Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements to the same extent as if this Security Agreement had not been
executed;
(2) the exercise by Administrative Agent of any of its rights
hereunder shall not release Grantor from any of its duties or obligations
under any such contracts or agreements included in the Collateral; and
(3) Administrative Agent shall not have any obligation or liability
under any such contracts or agreements included in the Collateral by reason
of this Security Agreement, nor shall Administrative Agent be obligated to
perform any of the obligations or duties of Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 1 1 Representations and Warranties. Grantor, as Lessor and Trustee,
and as Borrower, represents and warrants unto Administrative Agent and the
Lenders as set forth in this Article.
SECTION 1 1 1 Ownership, No Liens, etc. Grantor owns the Collateral
free and clear of any lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement, Permitted Liens (other
than Lessor's Liens) and Lessee's interest in the Equipment under the Lease.
SECTION 1 1 1 Validity, etc. The Assigned Agreements have been duly
authorized, executed and delivered by Grantor, have not been amended or
otherwise modified, and are binding upon and enforceable against Grantor thereto
in accordance with their terms, except as
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<PAGE>
such enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
SECTION 1 1 1 Authorization, Approval. etc. No authorization, approval
or other action by, and no notice to or filing with, any Governmental Authority
is required either
(1) for the grant by Grantor of the security interest
granted hereby or for the execution, delivery and performance of this
Security Agreement by Grantor; or
(2) for the perfection of or the exercise by Administrative
Agent of its rights and remedies hereunder, except for filings
specified in Schedule IV to the Participation Agreement.
SECTION 1 1 1 Compliance with Laws. Grantor is in compliance with all
Applicable Laws of every Governmental Authority, except for non-compliance which
would not reasonably be expected to have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 1 1 Certain Covenants. Grantor covenants and agrees that, so long
as any portion of the Secured Obligations shall remain unpaid or the Lenders
shall have any outstanding commitments to Grantor under the Operative Documents,
Administrative Agent may exercise, in its sole and absolute discretion, any and
all rights and powers set forth in this Section.
SECTION 1 1 1 As to Collateral. If an Event of Default has occurred
and is continuing:
(1) Administrative Agent may, at the expense of Grantor,
endeavor to collect, as and when due, all amounts due with respect to
any of the Collateral. Administrative Agent, as assignee hereunder of
the Lease, may, at any time, enforce collection of any of the
Collateral by suit or otherwise and surrender, release, or exchange
all or any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any
indebtedness thereunder or evidenced thereby.
(2) Administrative Agent is authorized to endorse, in the
name of Grantor, as Lessor and/or Trustee, any item, howsoever
received by Administrative Agent, representing any payment on or other
proceeds of any of the Collateral.
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<PAGE>
(3) If a Lease Default shall have occurred and be continuing
with respect to which Grantor, as Lessor and/or Trustee, could, at its
option, declare a Lease Event of Default, then Administrative Agent,
as assignee hereunder of the Lease, may declare, in its sole and
absolute discretion, a Lease Event of Default and may, in its sole and
absolute discretion, exercise any or all of the rights and powers and
pursue any or all of the remedies of Grantor as Lessor and/or Trustee
under and pursuant to Article X of the Lease.
SECTION 1 1 1 Transfers and Other Liens. Except as may be permitted by
the terms of the Operative Documents, Grantor, as Trustee or Lessor, or as
Borrower, shall not:
(1) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral;
(2) cancel or terminate the Assigned Agreements or consent
to or accept any cancellation or termination thereof;
(3) amend or otherwise modify the Assigned Agreements or
give any consent, waiver or approval thereunder, except pursuant to
Section 9.3 of the Participation Agreement;
(4) waive any default under or breach of the Assigned
Agreements;
(5) create or suffer to exist any Lien (including, without
limitation, any Lessor's Liens) or other charge or encumbrance upon or
with respect to any of the Collateral to secure indebtedness of any
Person or entity, except for the security interest created by this
Security Agreement, Permitted Liens or Lessee's interest in the
Equipment under the Lease; or
(6) take any other action in connection with the Assigned
Agreements which would impair the value of the interest or rights of
Grantor thereunder or which would impair the interest or rights of
Administrative Agent.
SECTION 1 1 1 Further Assurances. etc. Grantor agrees that, from time
to time and at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that may be necessary or
desirable, or that Administrative Agent may reasonably request, in order to
perfect, preserve and protect any security interest granted or purported to be
granted hereby or to enable Administrative Agent to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Grantor, as Lessor and Trustee, will:
(1) execute and file or record such instruments or notices
as may be necessary or desirable, or as Administrative Agent may
reasonably request, in order to
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<PAGE>
perfect and preserve the security interests and other rights granted
or purported to be granted to Administrative Agent hereby; and
(2) furnish to Administrative Agent, from time to time at
Administrative Agent's request, statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as Administrative Agent may reasonably
request, all in reasonable detail.
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 1 1 Administrative Agent Appointed Attorney-in-Fact. Grantor, as
Lessor and Trustee, and as Borrower, hereby irrevocably appoints Administrative
Agent as Grantor's attorney-in-fact, with full authority in the place and stead
of Grantor and in the name of Grantor, as Lessor and Trustee and/or as Borrower,
or otherwise, from time to time in Administrative Agent's discretion (acting
upon the instructions of the Required Lenders or, if required by the terms of
the Operative Documents, all of the Lenders), during the continuance of a Loan
Event of Default (subject to Section 6.2 of the Loan Agreement) to take any
action and to execute any instrument which Administrative Agent may deem
necessary or advisable to accomplish the purposes of this Security Agreement,
including, without limitation:
(1) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(2) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above;
(3) to file any claims or take any action or institute any
proceedings which Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce
the rights of Administrative Agent with respect to any of the
Collateral; and
(4) to perform the affirmative obligations of Grantor
hereunder (including all obligations of Grantor pursuant to Section
4.1.3).
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 1 1 Administrative Agent May Perform. If Grantor fails to
perform any agreement contained herein, Administrative Agent may itself perform,
or cause performance of, such
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<PAGE>
agreement, and the expenses of Administrative Agent incurred in connection
therewith shall be payable by Grantor pursuant to Section 6.2.
SECTION 1 1 Administrative Agent Has No Duty. In addition to, and not
in limitation of, Section 2.4, the powers conferred on Administrative Agent
hereunder are solely to protect Administrative Agent's interest (on behalf of
the Lenders) in the Collateral and shall not impose any duty on it to exercise
any such powers. Except for the reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Administrative Agent shall not have any duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.
SECTION 1 1 Reasonable Care. Administrative Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, that Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral if it takes such action for that purpose as Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Loan Event of Default, but failure of Administrative Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 1 1 Certain Remedies. If any Loan Event of Default shall have
occurred and be continuing:
(1) Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the UCC (whether or not the UCC applies
to the affected Collateral) and under the laws of the State wherein
the Collateral, or any part thereof, is located, and also may exercise
any and all rights and remedies of Grantor, as Lessor and/or Trustee,
under or in connection with the Collateral, including, without
limitation, any and all rights of Grantor, as Lessor and/or Trustee,
to demand or otherwise require payment of any amount under, or
performance of any provision of, the Assigned Agreements. Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days' prior notice to Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Administrative Agent shall
not be obligated to make any sale of Collateral regardless of whether
notice of sale has been given. Administrative Agent may adjourn any
public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
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(2) All payments received by Grantor, as Lessor and/or
Trustee, under or in connection with the Assigned Agreements or
otherwise in respect of the Collateral shall be received in trust for
the benefit of Administrative Agent, shall be segregated from other
funds of Grantor, and shall be forthwith paid over to Administrative
Agent in the same form as so received (with any necessary
endorsement).
(3) All cash proceeds received by Administrative Agent in
respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of Administrative
Agent, be held by Administrative Agent as collateral for, and/or then
or at any time thereafter applied (after payment of any amounts
payable to Administrative Agent pursuant to Section 6.2), in whole or
in part, by Administrative Agent against, all or any part of the
Secured Obligations in such order as Administrative Agent shall elect.
Any surplus of such cash or cash proceeds held by Administrative Agent
and remaining after payment in full of all the Secured Obligations
shall be paid over to Grantor or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 1 1 Indemnity and Expenses.
(1) Grantor agrees to, and does hereby, indemnify
Administrative Agent from and against any and all claims, losses and
liabilities arising out of or resulting from this Security Agreement
(including, without limitation, enforcement of this Security
Agreement), except claims, losses or liabilities resulting from
Administrative Agent's gross negligence or wilful misconduct.
(2) Grantor will, upon demand, pay to Administrative Agent
the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts
and agents, which Administrative Agent may incur in connection with
(1) the administration of this Security Agreement,
(2) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any of the
Collateral, (1)
(3) the exercise or enforcement of any of the rights of
Administrative Agent hereunder, or
(4) the failure by Grantor to perform or observe any of the
provisions hereof.
ARTICLE VII
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ADDITIONAL LOUISIANA PROVISIONS
SECTION 1 1 Additional Louisiana Provisions.
(1) The term "Louisiana Collateral" as used herein shall refer to all
portions of the Collateral and the proceeds thereof that are from time to time
located in the State of Louisiana or that are otherwise subject to Louisiana law
at all times during which such portions or proceeds thereof are located in
Louisiana or are otherwise mandatorily subject to the application of Louisiana
law under the Applicable Laws of other states. Article VII shall apply to all
Louisiana Collateral and all proceeds thereof at all times during which such
Louisiana Collateral or the proceeds thereof are located in Louisiana or are
otherwise subject to the application of Louisiana law in any respect.
(2) Contemporaneously with the execution of this Security Agreement,
Grantor, as Lessor and Trustee, and as Borrower, has completed and signed one or
more appropriate Louisiana UCC-1 financing statements with regard to the
Collateral and the proceeds thereof. Grantor, as Lessor and Trustee, and as
Borrower, authorizes Administrative Agent, at Grantor's expense, to file
multiple originals, or photocopies, carbon copies or facsimile copies of such
Louisiana UCC-1 financing statements with the appropriate filing officer or
officers in the State of Louisiana, pursuant to the provisions of Chapter 9 of
the Louisiana Commercial Laws.
(3) Grantor shall give Administrative Agent thirty (30) days written
notice prior to any change in Grantor's employer identification number by
Grantor and shall give Administrative Agent written notice of any change in
Grantor's employer identification number that is not made by Grantor within
thirty (30) days after such change. In the event of any change whatsoever in
Grantor's employer identification number, Grantor will execute and file any new
financing statements or any other documents that are necessary or desirable as
determined by Administrative Agent, in its sole discretion, to preserve and
continue Administrative Agent's security interests under this Security Agreement
within thirty (30) days after such change. (1)
(4) During the continuance of any Loan Event of Default,
Administrative Agent shall have the following rights and remedies with respect
to the Louisiana Collateral, which rights and remedies are in addition to and
are not in lieu or limitation of any other rights and remedies that may be
provided in this Security Agreement or any of the other Operative Documents,
under Chapter 9 of the Louisiana Commercial Laws (La. R.S. ss.ss. 10:9-101 et
seq.), under the Uniform Commercial Code of any state other than Louisiana, or
at law or equity generally:
(1) Administrative Agent may cause the Louisiana Collateral, or any
part or parts thereof, to be immediately seized wherever found, and sold,
whether in term of court
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or in vacation, under ordinary or executory process, in accordance with
applicable Louisiana law, to the highest bidder for cash, with or without
appraisement, without the necessity of making additional demand, or of notifying
Grantor, or placing Grantor in default.
(2) For purposes of foreclosure under Louisiana executory process
procedures, Grantor confesses judgment and acknowledges to be indebted unto and
in favor of Administrative Agent up to the full amount of the Secured
Obligations, in principal, interest, costs, expenses, reasonable attorneys' fees
and other fees and charges. To the extent permitted under applicable Louisiana
law, Grantor additionally waives: (a) the benefit of appraisal as provided in
Articles 2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure and
all other laws with regard to appraisal upon judicial sale; (b) the demand and
three (3) days' delay as provided under Articles 2639 and 2721 of the Louisiana
Code of Civil Procedure; (c) the notice of seizure as provided under Articles
2293 and 2721 of the Louisiana Code of Civil Procedure; (d) the three (3) days'
delay provided under Articles 2331 and 2722 of the Louisiana Code of Civil
Procedure; and (e) all other benefits provided under Articles 2331, 2722 and
2723 of the Louisiana Code of Civil Procedure and all other similar provisions
of the Louisiana Code of Civil Procedure not specifically listed hereinabove.
(3) Should any of the Louisiana Collateral be seized as an incident to
an action for the recognition or enforcement of the Secured Obligations or this
Security Agreement, or any other Operative Document, by executory process,
sequestration, attachment, writ of fieri facias or otherwise, Grantor agrees
that the court issuing any such order shall, if requested by Administrative
Agent, appoint Administrative Agent or any Person named by Administrative Agent
at the time such seizure is requested, or at any time thereafter, as keeper of
the Louisiana Collateral as provided under La. R.S. ss.ss. 9:5136 et seq.
Grantor agrees to pay the reasonable fees of such keeper, which compensation to
the keeper shall also be a part of the Secured Obligations under this Security
Agreement.
(4) Should it become necessary for Administrative Agent to foreclose
against the Louisiana Collateral, all declarations of fact that are made under
an authentic act before a Notary Public in the presence of two witnesses, by a
person declaring such facts to lie within his or her knowledge, shall constitute
authentic evidence for purposes of executory process and also for purposes of
La. R.S.ss. 9:3509.1, La. R.S.ss. 9:3504(D)(6) and La. R.S.ss. 10:9-508, as
applicable.
(5) Anything to the contrary contained in this Security Agreement
notwithstanding, the perfection of the security interests in the Louisiana
Collateral granted in this Security Agreement, and Administrative Agent's
remedies in the courts sitting in and for the State of Louisiana with respect to
the Louisiana Collateral, shall be governed by Louisiana law, with California
law governing the other provisions of this Security Agreement, its application
to the Collateral and the proceeds thereof, and all rights and obligations of
the parties thereunder in all other respects.
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ARTICLE2
MISCELLANEOUS PROVISIONS
SECTION 1 2 Operative Document. This Security Agreement is an Operative
Document executed pursuant to the Participation Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof.
SECTION 1 2 Amendments, etc. No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by Grantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by
Administrative Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 1 2 Addresses for Notices. Unless otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be delivered in accordance with, and shall be deemed to
have been given as provided in, Section 9.6 of the Participation Agreement.
SECTION 1 2 Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 1 2 Severability. Wherever possible, each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under Applicable Laws, but if any provision of this Security Agreement
shall be prohibited by or invalid under such laws, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement.
SECTION 1 2 Counterparts. This Security Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same agreement.
SECTION 1 2 Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, EXCEPT TO
THE EXTENT THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF CALIFORNIA AND TO THE EXTENT THAT GAMING
LAWS NECESSARILY CONTROL. THIS
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SECURITY AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
[signature pages follow]
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<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Lessor and Trustee
By:_______________________________
Name:_____________________________
Title:____________________________
S-1
<PAGE>
FIRST SECURITY TRUST COMPANY OF NEVADA,
as Administrative Agent under the
Participation Agreement
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
EXHIBIT E TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
(HOLLYWOOD CASINO SHREVEPORT)
ADVANCE REQUEST
---------------
dated as of ____________, 2000
TO: First Security Trust Company of Nevada, not in its individual capacity
but solely as administrative agent ("Administrative Agent") under the
--------------------
Participation Agreement dated as of March 31, 2000, among Hollywood
Casino Shreveport, as Lessee, First Security Bank, National
Association, as Lessor and Trustee, the Lenders, Arranger and
Documentation Agent identified therein and Administrative Agent (as
amended, restated, modified or supplemented from time to time, the
"Participation Agreement"). Unless the context otherwise requires,
------------------------
all capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in Appendix 1 to the Participation
Agreement.
First Security Bank, National Association, as Lessor and Trustee, and
The Lenders listed on Schedule II to the Participation Agreement.
FROM: Hollywood Casino Shreveport
RE: Advance Request
1. This irrevocable Advance Request is delivered pursuant to Section
2.4(a) of the Participation Agreement.
2. The proposed Advance Date is ____________, 2000.
3. Lessee hereby requests an Advance pursuant to the Participation
Agreement in the amount of $_____________, the amount of such
Advance represents the total Equipment Cost for the items being
acquired and funded on the proposed Advance Date.
4. Lessee requests that the disbursement be wire transferred to the
persons listed below in the amount set forth opposite its name:
Name Amount
---- ------
[_______________________] $__________________
[wire transfer instructions]
-1-
<PAGE>
5. The representations and warranties of Lessee contained in the
Participation Agreement are true and correct in all material
respects on and as of the date hereof with the same effect as if
such representations and warranties have been made on and as of
the date hereof, except to the extent such representations or
warranties relate solely to an earlier date, in which case such
representations and warranties were true and correct in all
material respects on and as of such earlier date.
6. There exists on the date hereof no Default or Event of Default,
and no such Default or Event of Default will exist after giving
effect to the Advance requested hereby.
HOLLYWOOD CASINO SHREVEPORT,
a Louisiana general partnership
By: HCS I, Inc., a Louisiana corporation,
its managing general partner
By: ___________________________________
Name: Paul C. Yates
Title: Executive Vice President and
Chief Financial Officer
-2-
<PAGE>
EXHIBIT F TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
(HOLLYWOOD CASINO SHREVEPORT)
FORM OF BILL OF SALE
--------------------
HOLLYWOOD CASINO SHREVEPORT, a Louisiana general partnership
("Seller"), is the owner of the items (together with all repairs, parts,
------
supplies, accessories, equipment and devices affixed thereto or installed
thereon, and all warranties, covenants and representations of any manufacturer
or vendor thereof) of personal property described on Annex A hereto (the
-------
"Equipment");
- ----------
Seller sells, grants, conveys, transfers and assigns title to the
Equipment to FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as lessor and trustee (as
such lessor and trustee, "Buyer") under that certain Lease Intended as Security,
-----
dated as of March 31, 2000 (the "Lease"), between Seller and Buyer; and
-----
Seller warrants to Buyer and its successors and assigns that there is
conveyed to Buyer good title to the Equipment, free and clear of all liens,
claims, rights or encumbrances of others (except the rights of Seller pursuant
------
to the Lease and Permitted Liens (as defined, by incorporation, in the Lease)),
and Seller will warrant and defend such title forever against all claims and
demands whatsoever.
This Bill of Sale shall be governed by the laws of the State of
California, without regard to conflict of law principles, except to the extent
certain rights or remedies may require compliance with Gaming Laws (as defined,
by incorporation, in the Lease).
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed
and delivered by one of its duly authorized officers this ____ day of _______,
2000.
HOLLYWOOD CASINO SHREVEPORT,
a Louisiana general partnership
By: HCS I, Inc., a Louisiana corporation,
its managing general partner
By: ________________________________
Name: Paul C. Yates
Title: Executive Vice President and
Chief Financial Officer
<PAGE>
ANNEX A TO BILL OF SALE
Description of Equipment
- ------------------------
1.
2.
3.
<PAGE>
EXHIBIT G TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
(HOLLYWOOD CASINO SHREVEPORT)
FORM OF CERTIFICATE OF ACCEPTANCE OF LESSEE
-------------------------------------------
TO: First Security Bank, National Association, not in its individual capacity,
but solely as Lessor, pursuant to that certain Participation Agreement
dated as of March 31, 2000, among Hollywood Casino Shreveport, as Lessee,
Lessor, Trustee, and the Lenders, Arranger, Documentation Agent and
Administrative Agent identified therein (as amended, restated, modified or
supplemented from time to time, the "Participation Agreement"). Unless the
-----------------------
context otherwise requires, all capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in Appendix 1 to
the Participation Agreement.
Lessee hereby certifies to you, and for the benefit of the Lenders, as
follows:
1. (i) Lessee has inspected, received, approved and accepted
delivery of all of the items of Equipment described in Schedule I
----------
to that certain Bill of Sale to Lessor and Trustee, dated the
date hereof (the "Items of Equipment"), for all purposes of the
------------------
Lease and the other Operative Documents; and
(ii) such Items of Equipment are in good operating order, repair,
condition and appearance and without any defect therein with
respect to design, manufacture, condition (reasonable wear and
tear excepted), operation or fitness for use or in any other
respect whether or not discoverable by Lessee as of the date
hereof.
2. Lessee hereby confirms acceptance of delivery on ____________,
2000 of, and hereby leases from Lessor and Trustee under the
Lease, such Items of Equipment.
3. Lessee hereby represents and warrants that no event which would
constitute a Casualty or Non-Casualty Loss has occurred and no
notice of such Casualty or Non-Casualty Loss has been given to
Lessee or any of its Affiliates with respect to any such Item of
Equipment as of the date hereof. Lessee hereby reaffirms that
each of the representations and warranties set forth at Section
4.1 of the Participation Agreement is true and correct in all
material respects as if made on the date hereof, except to the
extent any such representation and warranty relates to an earlier
date, which representation was true and correct in all material
respects as
-1-
<PAGE>
of such earlier date, including that such Items of Equipment are
free and clear of all Liens other than Permitted Liens.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
duly executed and delivered by one of its officers thereunto duly authorized
this ___ day of ________________, 2000.
HOLLYWOOD CASINO SHREVEPORT,
a Louisiana general partnership
By: HCS I, Inc., a Louisiana corporation,
its managing general partner
By: __________________________________
Name: Paul C. Yates
Title: Executive Vice President
and Chief Financial Officer
-2-
<PAGE>
EXHIBIT H TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
(HOLLYWOOD CASINO SHREVEPORT)
FORM OF INVESTOR'S LETTER
-------------------------
INVESTOR'S LETTER
_______________________, 200__
First Security Bank, National Association,
not in its individual capacity
but solely as Trustee and Lessor
79 South Main Street
Salt Lake City, Utah 84111
First Security Trust Company of Nevada,
not in its individual capacity
but solely as Administrative Agent
[Insert address -
may be same as Trustee/Lessor]
[Insert name and address of
transferring Lender]
Ladies and Gentlemen:
Unless the context otherwise requires, capitalized terms used in this
letter and not otherwise defined herein shall have the meanings assigned thereto
in Appendix 1 to that certain Participation Agreement (as amended, restated,
modified or supplemented from time to time, the "Participation Agreement"),
-----------------------
dated as of March 31, 2000, by and among Hollywood Casino Shreveport, as Lessee;
First Security Bank, National Association, in its capacity as Trustee under that
certain Trust Agreement dated as of March 31, 2000, and in its capacity as
Lessor under such Participation Agreement and the other Operative Documents; the
Lenders, Documentation Agent and Arranger identified therein, and First Security
Trust Company of Nevada, as Administrative Agent.
The undersigned has agreed to purchase from ___________________________,
effective as of ____________, 200__ (the "Effective Date"), that certain Note
--------------
numbered Note No. _______, dated as of _______________________, _____ and in an
original principal amount
<PAGE>
First Security Bank, National Association, et al.
-- --
___________, 200_
Page 2
of ______________________________ Dollars ($____________) executed by First
Security Bank, National Association, as Borrower, payable to the order of
______________________ (the "Note"), and desires that the Borrower shall execute
and deliver to the undersigned a new Note in the principal amount of
$_____________________, payable to the order of the name of the undersigned.
The undersigned hereby represents and warrants, as of the date hereof, to
the addressees hereof as follows:
(1) The Note is being purchased by the undersigned with its general
assets, and not directly or indirectly with the assets of, or in connection with
any arrangement or understanding by it in any way involving, any Plan,
Multiemployer Plan or Benefit Arrangement (or its related trust), as defined in
Section 3(3) of ERISA, or with the assets of any such Plan, Multiemployer Plan
or Benefit Arrangement (or its related trust), as defined in Section 4975(e)(1)
of the Code (other than a governmental plan, as defined in Section 3(32) of
ERISA), with respect to which Lessee or such Lender or any of their Affiliates
is a party in interest within the meaning of ERISA or a "disqualified person"
within the meaning of the Code;
(2) The Note is being acquired by the undersigned for its own account
for investment and not with a view to any distribution (as such term is used in
Section 2(11) of the Securities Act) thereof, and if in the future it should
decide to dispose of its interest in the Note, it understands that it may do so
only in compliance with the Securities Act and the rules and regulations of the
Commission thereunder and any applicable state securities laws. Neither it nor
anyone authorized to act on its behalf has taken or will take any action which
would subject the issuance or sale of any Note, the Trust Estate (including the
Equipment constituting a part thereof), the Collateral or the Lease to the
registration requirements of Section 5 of the Securities Act. No representation
or warranty contained in this clause (b) shall include or cover any action or
----------
inaction of Lessee or any Affiliate thereof, whether or not purportedly on
behalf of any Lender, Administrative Agent, Lessor/Trustee/Borrower or any of
their respective Affiliates. Subject to the foregoing, it is understood by the
undersigned and each addressee of this letter that the disposition of each
Lender's property shall be at all times within its control.
(3) Neither the undersigned nor any Person authorized to act on its
behalf has, directly or indirectly, offered to sell any interests in the Trust
Estate, the Note or any security similar thereto, to, or otherwise approved or
negotiated with respect thereto with, anyone other than the Lenders, and neither
it nor any Person authorized to act on its behalf will so offer or sell in
violation of Section 5 of the Securities Act or any securities or blue sky laws
of any applicable jurisdiction.
(4) The representations and warranties set forth in Section 4.2 of the
Participation Agreement are accurate with respect to the undersigned and, as of
the date hereof, it is entitled to
<PAGE>
First Security Bank, National Association, et al.
-- --
___________, 200_
Page 3
receive payments of the principal amount of the Loans under the Operative
Documents without deduction or withholding of any United States federal income
taxes.
(5) The undersigned agrees that it will, independently and without
reliance upon Lessor/Trustee/Borrower or any Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Operative
Documents.
The undersigned acknowledges that by execution of this letter it shall
be bound by all obligations (whether or not accrued) under, and shall have
become a party to, all Operative Documents to which its transferor was a party
to the same extent as its transferor is, or is intended to be, bound.
[To the extent legally entitled to do so, the undersigned attaches the
form(s) described in Section 8.6 of the Participation Agreement./1/]
The undersigned understands that the Note has not been and will not be
registered or qualified under the Securities Act or any securities or "blue sky"
laws of any jurisdiction and that no Lender has an obligation to effect such
registration or otherwise assist in the disposition of the Note.
The transfer hereunder shall be effective as of the Effective Date,
provided that this letter has been acknowledged by the transferring Lender and,
if required by the Participation Agreement, consented to by Lessee.
Very truly yours,
By: ________________________
Name: _______________________
Title: ______________________
ACKNOWLEDGED:
[Name of Transferring Lender]
By: ________________________
Name: _______________________
Title: ______________________
/1/ If the transferee investor is organized under the laws of a jurisdiction
outside of the United States of America.
<PAGE>
First Security Bank, National Association, et al.
-- --
___________, 200_
Page 4
<PAGE>
EXHIBIT I TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
(HOLLYWOOD CASINO SHREVEPORT)
FORM OF PURCHASE ORDER ASSIGNMENT
---------------------------------
THIS PURCHASE ORDER ASSIGNMENT (this "Assignment"), dated as of
----------
_____________, 2000, is entered into between HOLLYWOOD CASINO SHREVEPORT, a
Louisiana general partnership ("Lessee"), and FIRST SECURITY BANK, NATIONAL
------
ASSOCIATION, not in its individual capacity but solely as trustee under that
certain Trust Agreement dated as of March 31, 2000, and as lessor under the
Lease and the other Operative Documents (herein "Trustee" and "Lessor", as the
------- ------
context may require). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed thereto in Appendix 1 to the Participation
Agreement, dated as of March 31, 2000 (as amended, restated, modified or
supplemented from time to time, the "Participation Agreement"), by and among
-----------------------
Lessee, Trustee/Lessor, the Lenders, Documentation Agent and Arranger identified
therein, and First Security Trust Company of Nevada, as Administrative Agent.
PRELIMINARY STATEMENT
---------------------
1. Pursuant to the Participation Agreement, Lessee may agree to purchase
from certain vendors (each a "Seller"), certain Equipment (and/or related
------
construction and installation services) for installation at the Resort.
Lessee's purchase of any such Equipment shall be made pursuant to certain
purchase orders (the "Purchase Orders") issued from time to time pursuant to the
---------------
Purchase Contracts identified on Schedule 1 attached hereto.
----------
2. Lessee desires to lease the Equipment from the Lessor rather than
purchase the Equipment from Sellers. Lessor, in its capacity as Lessor/Trustee,
on behalf of the Lenders, is willing to acquire certain of Lessee's rights and
interests under the Purchase Orders, all on the terms and conditions hereinafter
set forth.
3. Upon purchase of the Equipment by the Lessor, Lessee shall lease the
Equipment from the Lessor under the Lease.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and in reliance on the above recitals, the Lessor and Lessee hereby
agree as follows:
SECTION 1. ASSIGNMENT
---------------------
Lessee does hereby assign and set over to Lessor, in its capacity as
Lessor/Trustee, on behalf of the Lenders, all of
-1-
<PAGE>
Lessee's title, rights and interests in and to the Purchase Orders to the extent
they relate to the Equipment identified in any applicable Advance Request and
accompanying Certificate of Acceptance and all of Lessee's rights to purchase
such identified Equipment in any applicable Advance Request and accompanying
Certificate of Acceptance, except and to the extent reserved below, including
without limitation (a) the right to purchase the Equipment pursuant to the
Purchase Orders and the right to take title to the Equipment and to be named the
purchaser in the bill or bills of sale for the Equipment to be delivered
pursuant to the Purchase Orders, (b) all claims for damages in respect of the
Equipment (including related construction and installation services) arising as
a result of any default by the Sellers under the Purchase Orders, including,
without limitation, all warranty and indemnity provisions contained in the
Purchase Orders, and all claims arising thereunder in respect of the Equipment,
and (c) any and all rights of Lessee to compel performance of the terms of the
Purchase Orders, reserving to Lessee, however, so long and only so long as the
Equipment shall be subject to the Lease and Lessee shall be entitled to
possession of the Equipment thereunder: (i) the rights to demand, accept and
retain all rights in and to all property (other than the Equipment), data and
services which the Sellers are obligated to provide, or do provide, pursuant to
the Purchase Orders, (ii) all rights, if any, in respect to spare parts as
provided in the Purchase Orders, and (iii) the right, if any, to obtain
instructions and data pursuant to the Purchase Orders.
Notwithstanding the foregoing, so long and only so long as Lessor/Trustee
shall not have notified the Sellers in writing that an Event of Default has
occurred and is continuing, Lessor/Trustee authorizes Lessee, to the exclusion
of Lessor/Trustee, to exercise, in the name of Lessee, all rights and powers of
the purchaser under the Purchase Orders and to retain any recovery or benefit
resulting from the enforcement of any warranty or indemnity under the Purchase
Orders in respect of the Equipment (including related construction and
installation services); provided, however, that Lessee may not exercise any of
-------- -------
the rights to purchase such Equipment unless, prior to the exercise thereof by
Lessor/Trustee as to the Equipment, Lessor/Trustee shall have delivered to the
Sellers written notice that Lessor/Trustee has released such rights to purchase
such Equipment. All the provisions of this Section 1 shall, to the extent
---------
inconsistent with the Lease, be governed by the Lease.
SECTION 2. ASSUMPTION OF PURCHASE OBLIGATION BY LESSOR,
--------------------------------------------------------
CONTINUING LIABILITY OF LESSEE FOR EXCLUDED EQUIPMENT
-----------------------------------------------------
Except as provided to the contrary in this Section 2, and subject to
------ ---------
Lessee's satisfaction of each of the conditions and covenants described herein,
Lessee shall not be responsible for
-2-
<PAGE>
any payment due to any applicable Seller as required in Section 4.
Notwithstanding the foregoing paragraph, none of Lessor/Trustee, the
Administrative Agent or the Lenders shall have any obligation hereunder to any
Seller (i) in respect of Equipment not delivered and accepted on or before the
last day of the Commitment Period, (ii) in respect of any Equipment with respect
to which payment therefor would cause the aggregate purchase price under all
Purchase Orders to exceed the Aggregate Commitment Amount, or (iii) in respect
of any Equipment for which sufficient funds have not been advanced to
Lessor/Trustee by the Lenders to pay the full purchase price thereof. Equipment
for which such obligations are so terminated shall be immediately excluded from
the terms and provisions of this Assignment and all other Operative Documents,
and in the event of such exclusion, Lessee agrees with Lessor/Trustee and
covenants, for the benefit of the Sellers, that Lessee will purchase from the
applicable Seller and will accept delivery of and pay for the Equipment so
excluded from this Assignment upon the same terms and conditions as those
contained in the applicable Purchase Orders. Lessee will indemnify
Lessor/Trustee, the Administrative Agent and the Lenders against any losses or
damages incurred by such parties as a result of any claims by the Sellers with
respect to the Equipment excluded from this Assignment.
Notwithstanding the foregoing or any other provision of this Assignment to
the contrary, the delivery to and acceptance by or on behalf of Lessor/Trustee
of the Equipment excluded from this Assignment pursuant to the second paragraph
of this Section 2 shall be ineffective, ab initio, to create in or transfer to
--------- -- ------
Lessor/Trustee any legal interest in such item of Equipment or to impose on
Lessor/Trustee any liability, obligation or responsibility with respect thereto.
Any right or interest in the Equipment created in or transferred to, or
purported to be created in or transferred to, Lessor/Trustee shall be held by
Lessor/Trustee solely as provided in the Operative Documents.
SECTION 3. POWER OF ATTORNEY
----------------------------
Lessee does hereby appoint Lessor/Trustee the true and lawful attorney of
Lessee, irrevocably, with full power (in the name of Lessee or otherwise) to
ask, require, demand, receive, compound and give acquittance for any and all
monies and claims for money due and to become due under, or arising out of, the
Purchase Orders to the extent that the same have been assigned by this
Assignment, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which to Lessor/Trustee may seem necessary or advisable with respect thereto;
provided; however that the exercise of the power of attorney conferred by
- -------- -------
-3-
<PAGE>
this Section 3 shall be limited so that such power shall be exercisable and
exercised only at such times when, pursuant to the terms of the Lease and this
Assignment, Lessor/Trustee is permitted to exercise such rights and remedies
under the Lease and the other Operative Documents.
SECTION 4. PURCHASE OF EQUIPMENT, LIMITATION OF
------------------------------------------------
LESSOR'S/TRUSTEE'S LIABILITY
----------------------------
On each Advance Date, Lessor/Trustee shall pay to the applicable Sellers
the unreimbursed portion of the purchase price of the Equipment to be purchased
under the Purchase Orders or, if applicable, reimburse Lessee for amounts
theretofore paid by or on behalf of Lessee under Purchase Orders for such
Equipment. All such amounts, if any, to be paid to the applicable Sellers shall
be payable in same day funds for credit to such accounts as designated in
writing by the applicable Sellers, as applicable, at least one business day
prior to the date such payment is to be made. Lessor/Trustee shall have no
obligation to make the aforesaid payments in its individual or general corporate
capacity, but such obligation shall be payable solely from funds advanced to
Lessor/Trustee by the Lenders pursuant to the Lease and the Loan Agreement.
SECTION 5. FURTHER ASSURANCES
------------------------------
At any time and from time to time, upon the written request of
Lessor/Trustee, Lessee shall promptly and duly execute and deliver any and all
such further instruments and documents and take such further action as
Lessor/Trustee may reasonably request in order to obtain the full benefits of
this Assignment and of the rights and powers herein granted.
SECTION 6. WARRANTIES AND INDEMNITEES OF LESSEE
------------------------------------------------
Lessee does hereby represent and warrant that it has not assigned or
pledged, and hereby covenants that it will not assign or pledge so long as this
Assignment shall remain in effect, the whole or any part of the rights hereby
assigned to anyone other than Lessor/Trustee.
SECTION 7. GOVERNING LAW
-------------------------
THIS ASSIGNMENT, AND ALL OF THE RIGHTS AND OBLIGATIONS HEREUNDER, INCLUDING
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
-4-
<PAGE>
THEREOF.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the date first set forth above.
FIRST SECURITY BANK, NATIONAL HOLYWOOD CASINO SHREVEPORT,
ASSOCIATION, not in its individual a Louisiana general partnership
capacity but solely as Lessor and
Trustee
By: HCS I, Inc., a Louisiana
corporation,
By: ______________________________ its managing general partner
Printed Name: ____________________
By: ___________________________________
Title: ___________________________ Name: Paul C. Yates
Title: Executive Vice President and
Chief Financial Officer
-5-
<PAGE>
EXHIBIT K TO PARTICIPATION AGREEMENT
DATED AS OF MARCH 31, 2000
(HOLLYWOOD CASINO SHREVEPORT)
MANAGER SUBORDINATION AGREEMENT
-------------------------------
This MANAGER SUBORDINATION AGREEMENT (as amended, restated,
supplemented or otherwise modified from time to time, this "Agreement") is made
as of March 31, 2000, by and among FIRST SECURITY BANK, NATIONAL ASSOCIATION,
having an office at 79 South Main Street, Salt Lake City, Utah 84111, as trustee
(in such capacity, together with its successors and assigns, the "Trustee")
under that certain Trust Agreement dated as of March 31, 2000, and as lessor
under the Participation Agreement described below (in such capacity, together
with its successors and assigns, the "Lessor"), for the benefit of itself and
the Lenders described below, HWCC-SHREVEPORT, INC., a Louisiana corporation (the
"Manager"), and HOLLYWOOD CASINO SHREVEPORT, a Louisiana general partnership
(f/k/a QNOV and Queen of New Orleans at the Hilton Joint Venture) (the
"Company").
RECITALS
1. Pursuant to (i) that certain Participation Agreement dated as of March
31, 2000 (as amended, restated, supplemented or otherwise modified from time to
time, the "Participation Agreement"), by and among the Company, as Lessee, the
Lessor /Trustee, the Lenders, Arranger and Documentation Agent identified
therein, and First Security Trust Company of Nevada, as Administrative Agent,
and the (ii) other Operative Documents executed and delivered in connection
therewith, the Company may from time to time be obligated to pay Rent to Lessor,
for the benefit of the Lenders. All terms used and not otherwise defined herein
shall have the meanings specified for such terms in Appendix 1 to the
Participation Agreement.
2. The Manager and the Company are parties to that certain Management
Services Agreement dated as of September 22, 1998 (as amended, restated,
supplemented or otherwise modified from time to time, the "Management
Agreement"), pursuant to which the Company has agreed to pay the Manager a
management fee in consideration of the Manager's services relating to the
management and operation of the Resort and reimburse the Manager for services
supplied to the Company in accordance with the terms thereof.
3. As a condition to the execution and delivery of the Operative
Documents, the parties have agreed to enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
provisions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of
-1-
<PAGE>
which are hereby acknowledged, the Lessor/Trustee, the Manager and the Company
agree as follows:
1. Subordination to Payment of Senior Debt. Notwithstanding any
---------------------------------------
other provision of the Management Agreement, all fees payable to the Manager
pursuant to the Management Agreement (other than expense reimbursement payable
to the Manager in accordance with the terms of the Management Agreement) (the
"Management Fees") are and shall be subordinate and junior in right of payment,
to the extent and in the manner hereinafter set forth, to the prior indefeasible
payment in full, satisfaction and discharge or defeasance in accordance with the
Operative Documents of all Senior Debt (as defined below).
"Senior Debt" means all Rent at any time due and owing by the Company
under the Operative Documents, including without limitation (a) with respect to
each Interest Period during the Interim Period, an amount equal to the aggregate
of interest due for such Interest Period on each Loan at the applicable Interest
Rate in effect for such Loan; (b) during the Base Period, each installment of
rent consisting of the interest determined pursuant to clause (a) above plus the
----
Amortization Amount, if any, payable on the Notes pursuant to the Amortization
Schedule by Lessor to the Lenders on the applicable Payment Date for any such
Interest Period; (c) any and all amounts, liabilities and obligations (i) which
the Company or Lessor/Trustee assumes or agrees or is otherwise obligated or
designated to pay under the Loan Agreement or any other Operative Document to
Administrative Agent, the Lenders or any other Person, including Additional
Costs and damages for breach of any representations, warranties or agreements or
(ii) which the Company agrees or is otherwise obligated or designated to pay
(other than amounts owing under clauses (a) and (b) above) under the Lease or
any other Operative Document to Lessor/Trustee; including without limitation, in
each case, the principal of, and interest on (including any interest accruing
after the commencement of any bankruptcy, insolvency or similar proceeding with
respect to the Company and any interest which would have accrued but for the
commencement of any such proceeding whether or not allowed as a claim in that
proceeding) each Loan, and all premiums, fees, charges, expenses and indemnities
arising under or in connection with the Operative Documents; and (d) any
modifications, amendments or extensions of any indebtedness or obligation
described in clauses (a), (b) or (c) above. Except as and to the extent
provided hereinafter, the Manager will not ask, demand, sue for, take or receive
from the Company, by set-off or in any other manner, direct or indirect payment
(whether in cash or property), of the whole or any part of the Management Fees,
or any transfer of any property in payment of or as security therefor, so long
as there exists an Event of Default under the Participation Agreement.
2. Distributions in Liquidation and Bankruptcy. In the event of any
-------------------------------------------
distribution, division or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the assets
of the Company or the proceeds thereof (including any assets now or hereafter
securing any Management Fees) for the benefit of creditors of the Company or to
satisfy any indebtedness of the Company, by reason of the liquidation,
dissolution or other winding-up, partial or complete, of the Company, or any
receivership, insolvency or bankruptcy proceeding, or assignment for the benefit
of creditors or marshalling of assets, or any proceeding by or against the
Company for any relief under any bankruptcy or
-2-
<PAGE>
insolvency law or laws relating to the relief of debtors, readjustment of
indebtedness, arrangements, reorganizations, compositions or extensions (each of
the foregoing, a "Liquidation Event"), then and in any such event:
(1) Lessor/Trustee, on behalf of the Lenders, shall be entitled
to receive payment in full, in cash, of all Senior Debt before the Manager
shall be entitled to receive any payment or other distributions on, or with
respect to, the Management Fees;
(2) Subject to the provisions of the Indenture-Related
Subordination Agreement (as hereinafter defined), any payment or
distribution of any kind or character, whether in cash, securities or other
property, which but for these provisions would be payable or deliverable
upon or with respect to the Management Fees shall instead be paid or
delivered directly to the Lessor/Trustee for the benefit of the Lenders for
application to the Senior Debt of the Company, whether then due or not due,
until all Senior Debt shall have first been fully and indefeasibly paid in
cash, satisfied and discharged or otherwise defeased under the Operative
Documents;
(3) Subject to similar rights heretofore granted by Manager to
the Indenture Trustee (as hereinafter defined) pursuant to the Indenture-
Related Subordination Agreement, the Manager hereby irrevocably authorizes
and empowers Lessor/Trustee as its attorney-in-fact, to demand, sue for,
collect and receive every such payment or distribution and give acquittance
therefor, and to file and vote claims (in bankruptcy proceedings or
otherwise) and take such other actions, in the Lessor/Trustee's own name or
otherwise, as the Lessor/Trustee may deem necessary or advisable for the
enforcement of these provisions. The Manager shall duly and promptly take
such action as may be reasonably requested by the Lessor/Trustee to assist
in the collection of the Management Fees for the account of the Indenture
Trustee or the Lessor/Trustee (for the benefit of the Lenders), whomever
shall then have priority, and to file appropriate proofs of claim with
respect to the Management Fees and to vote the same and to execute and
deliver to the Lessor/Trustee, on demand, such powers of attorney, proofs
of claim, assignments of claim or other instruments as may be reasonably
requested by the Lessor/Trustee to enable the Lessor/Trustee (for the
benefit of the Lenders) to enforce any and all claims upon or with respect
to the Management Fees and to collect and receive any and all payments or
distributions which may be payable or deliverable at any time upon or with
respect to the Management Fees, in each case, subject to similar rights
heretofore granted by Manager to the Indenture Trustee pursuant to the
Indenture-Related Subordination Agreement. In addition, the Manager shall
take no action (whether oral, written or otherwise) in contravention of any
action of the Lessor/Trustee duly taken and permitted hereunder. Such
appointment as attorney-in-fact pursuant to this Section 2(c) is
------------
irrevocable and coupled with an interest until payment in full and complete
performance of all Senior Debt. The Lessor/Trustee may appoint a
substitute attorney-in-fact. The Manager ratifies all actions reasonably
taken by the attorney-in-fact but, nevertheless, if the Lessor/Trustee
requests, the Manager will specifically ratify any action taken by the
-3-
<PAGE>
attorney-in-fact by executing and delivering to the attorney-in-fact or to
any entity designated by the attorney-in-fact all documents necessary to
effect such ratification;
(4) Subject to the provisions of that certain Manager
Subordination Agreement made as of August 10, 1999, by and among State
Street Bank and Trust Company, a Massachusetts trust company (the
"Indenture Trustee"), for the benefit of itself and the holders of the
"Notes" issued under the Indenture, the Manager and the Company (as
amended, supplemented or otherwise modified from time to time, the
"Indenture-Related Subordination Agreement"), the Manager will forthwith
deliver any direct or indirect payment made to the Manager upon or with
respect to the Management Fees prior to the payment in full, satisfaction
and discharge or defeasance of the Senior Debt in accordance with the
Operative Documents and following any Liquidation Event or Default or Event
of Default to the Lessor/Trustee in precisely the form received (except for
the endorsement or assignment of the Manager where necessary) for
application to the Senior Debt, whether then due or not due. Until so
delivered, the payment or distribution shall be held in trust by the
Manager as property of the Lessor/Trustee, on behalf of the Lenders. In
the event of the failure of the Manager to make any such endorsement or
assignment, the Lessor/Trustee, or any of its officers or employees, are
hereby irrevocably authorized to make the same; and
(5) Each of the parties hereby agrees that it shall be bound by
the terms and provisions hereof, notwithstanding the confirmation of a plan
of reorganization of the Company under Section 1129(b) of the Bankruptcy
Code.
3. Permitted Payments. Subject to the provisions of Paragraphs 2
------------------ ------------
and 4 of this Agreement, the Company may pay to the Manager, and the Manager may
-
accept payment of, amounts due to Manager under the Management Agreement, a true
and correct copy of which is attached hereto as Exhibit A. Any amounts not
---------
permitted to be paid pursuant to the provisions of Paragraph 4 of this Agreement
-----------
shall be deferred and shall accrue and may be paid only at such time as such
amounts would otherwise be permitted to be paid pursuant to the provisions of
this Agreement. Except as otherwise expressly provided in the Participation
Agreement, the Company and the Manager shall not change, alter, amend, waive or
otherwise modify the Management Agreement without the Lessor/Trustee's prior
written consent, other than an amendment for the purpose of identifying the
existence and operation of this Agreement and the Indenture-Related
Subordination Agreement.
1. Default on Senior Debt; Other Subordinated Obligation Payment
-------------------------------------------------------------
Restrictions.
- ------------
(1) In the event that any Default or Event of Default shall occur
and be continuing, or if any payment of Management Fees would create a
Default or Event of Default, unless and until all Senior Debt shall have
been indefeasibly paid in full, in cash, satisfied and discharged or
otherwise defeased under the Operative Documents, the right of the Manager
to receive any payments or other distributions with respect to
-4-
<PAGE>
Management Fees shall be deferred during the continuance of such Default or
Event of Default.
(2) Unless and until all Senior Debt shall have been indefeasibly
paid in full, in cash, satisfied and discharged or otherwise defeased under
the Operative Documents, the right of the Manager to receive any payments
or other distributions with respect to the Management Fees shall be
deferred if and to the extent that, as of the date which such Management
Fees are to be paid, the payment of such Management Fees would cause the
Company's Fixed Charge Coverage Ratio (as defined in the Indenture) for its
most recently ended four (4) full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such Management Fee is proposed to be paid to be less than 1.5 to 1
(calculated on a pro forma basis after adding back Management Fees that
were deducted in arriving at Consolidated Cash Flow during such period and
deducting, to arrive at Consolidated Cash Flow, Management Fees to be paid
pursuant to this Section 4(b)); provided, however, that with respect to
------------ -------- -------
periods following the date the Resort is first Operating and prior to the
time when internal financial statements are available for four (4) full
fiscal quarters following such date, such Fixed Charge Coverage Ratio shall
be calculated with respect to the actual number of full fiscal quarters
(but in no event less than one (1) full fiscal quarter) for which internal
financial statements are available following such date.
If, notwithstanding the foregoing provisions of this Paragraph 4,
-----------
the Manager shall receive any payment or distribution of any kind with
respect to the Management Fees (whether from any collateral securing the
Management Fees or otherwise) following any Event of Default until cured,
subject to the provisions of the Indenture-Related Subordination Agreement,
such payment or distribution shall be received in trust for, and shall be
delivered to, the Lessor/Trustee promptly, in precisely the form received
(except for the endorsement or assignment of the Manager where necessary)
for application to the Senior Debt, whether then due or not due. Until so
delivered, the payment or distribution shall be held in trust by the
Manager as property of the Lessor/Trustee on behalf of the Lenders, subject
to the provisions of the Indenture-Related Subordination Agreement.
(3) Manager agrees that any deferral pursuant hereto of payments
under the Management Agreement shall not constitute a default under the
Management Agreement.
(4) No amounts payable pursuant to the Management Agreement shall
be prepaid.
4. No Acceleration or Exercise of Remedies. So long as any Senior
---------------------------------------
Debt remains unpaid, the Manager will not (a) cause any portion of the
Management Fees to become due prior to the due date for such Management Fees as
set forth in the Management Agreement; (b) accept any payment, prepayment or
defeasance of any portion of the Management Fees prior
-5-
<PAGE>
to the due date for such Management Fees as set forth in the Management
Agreement or in violation of this Agreement; (c) modify or alter in any way the
provisions of the Management Agreement if the effect of such modification or
alteration is to accelerate the payment of the Management Fees due thereon; or
(d) exercise any remedies with respect to the Management Fees, or any collateral
at any time securing payment or performance thereof, unless and until, in each
such case, all of the Senior Debt shall have indefeasibly paid in full, in cash,
satisfied and discharged or otherwise defeased under the Operative Documents, or
the Lessor/Trustee, acting at the direction of the Required Lenders, shall have
otherwise consented in writing.
5. Bankruptcy. Until the Senior Debt shall have been indefeasibly
----------
paid in full, in cash, satisfied and discharged or otherwise defeased under the
Operative Documents, the Manager will not, without the prior consent of the
Lessor/Trustee, acting at the direction of the Required Lenders, commence, or
join with any other person in commencing, any proceeding against any Person with
respect to the Management Fees under any bankruptcy, reorganization,
readjustment of debt, dissolution, receivership, liquidation or insolvency law
or statute now or hereafter in effect in any jurisdiction.
6. Continuing Subordination. The subordination effected by these
------------------------
provisions is a continuing subordination and may not be modified or terminated
by the Manager or any other holder of any Management Fees until all of the
Senior Debt shall have been indefeasibly paid in full, in cash, satisfied and
discharged or otherwise defeased under the Operative Documents. At any time and
from time to time, without the consent of, or notice to, the Manager or any
other holder of the Management Fees, and without impairing or affecting the
obligations of any of them hereunder:
(1) The time for the Company's performance of, or compliance
with, any of its agreements contained in the Participation Agreement or the
other Operative Documents, or any other agreement, instrument or document
relating to the Senior Debt, may be modified or extended or such
performance or compliance may be waived;
(2) The Lessor/Trustee, acting at the direction of the Required
Lenders, may exercise or refrain from exercising any rights under the
Participation Agreement or the other Operative Documents, or any other
agreement, instrument or document relating to the Senior Debt;
(3) The Participation Agreement or any of the other Operative
Documents, or any other agreement, instrument or document relating to the
Senior Debt, may be revised, amended or otherwise modified for the purpose
of adding or changing any provisions thereof (including, but not limited
to, an increase in the interest charges), or changing in any manner the
rights of the Lessor/Trustee or the Company;
(4) Payment of the Senior Debt or any portion thereof may be
extended or refunded or any instruments evidencing such Senior Debt may be
renewed in whole or in part;
-6-
<PAGE>
(5) The maturity of the Senior Debt may be accelerated, and any
collateral security therefor or any other rights of the Lessor/Trustee may
be exchanged, sold, surrendered, released or otherwise dealt with, in
accordance with the terms of any present or future agreement with the
Company and any other agreement of subordination (and the debt covered
thereby) may be surrendered, released or discharged, or the terms thereof
modified or otherwise dealt with in any manner;
(6) Any Person liable in any manner for payment of the Senior
Debt may be released by the Lenders; and
(7) Notwithstanding the occurrence of any of the foregoing, these
subordination provisions shall remain in full force and effect with respect
to the Senior Debt, as the same shall have been extended, renewed, modified
or refunded.
7. Waivers. The Manager hereby waives, and agrees not to assert (a)
-------
any right, now or hereafter existing, to require the Lessor/Trustee to proceed
against or exhaust any collateral at any time securing the payment of the Senior
Debt, or to marshal any assets in favor of the Manager or any other holder of
any Management Fees; or (b) any notice of the incurrence of Senior Debt, it
being understood advances may be made under the Operative Documents, or any
other agreement, document or instrument now or hereafter relating to the Senior
Debt, without notice to or authorization of the Manager in reliance upon these
subordination provisions.
It is not the intent of this Agreement to cause the Manager to become
a surety. However, in the event that this Agreement may cause the Manager to be
deemed a surety, the following provisions shall apply; provided, however, that
-------- -------
nothing contained herein shall be deemed to be a guarantee by the obligor of any
obligations for the payment of the Senior Debt. The Manager hereby waives and
relinquishes all rights and remedies accorded by applicable law to sureties or
guarantors and agrees not to assert or take advantage of any such rights or
remedies, including, without limitation, (a) any right to require the
Lessor/Trustee or any of the Lenders (each a "Benefitted Party") to proceed
against the Company or any other Person or to proceed against or exhaust any
security held by a Benefitted Party at any time or to pursue any other remedy in
the power of a Benefitted Party before proceeding against the Manager or any
other Person with respect to the Management Fees, (b) the defense of the statute
of limitations or prescriptive period in any action with respect to the
Management Fees hereunder or in any action for the collection or performance of
the obligations owing on account of the Senior Debt, (c) any defense that may
arise by reason of the incapacity, lack of authority, death or disability of any
Person or the failure of a Benefitted Party to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any
Person, (d) appraisal, valuation, stay, extension, marshalling of assets,
redemption, exemption, demand, presentment, protest and notice of any kind,
including, without limitation, notice of the existence, creation or incurring of
any new or additional Senior Debt or of any action or non-action on the part of
a Benefitted Party, the Company, any endorser, guarantor or creditor of the
Company or on the part of any Person under this or any other instrument or
document in connection with any obligation or evidence of
-7-
<PAGE>
indebtedness held by a Benefitted Party as collateral or in connection with the
Senior Debt, (e) any defense based upon an election of remedies by a Benefitted
Party, including, without limitation, an election to proceed by non-judicial
rather than judicial foreclosure, which destroys or otherwise impairs the
subrogation rights of the Manager, the right of the Manager to proceed against
the Company or any other Person for reimbursement, or both, (f) any defense
based upon any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in other respects more burdensome
than that of the principal, (g) any duty on the part of a Benefitted Party to
disclose to the Manager any facts a Benefitted Party may now or hereafter know
about the Company or any other Person, regardless of whether a Benefitted Party
has reason to believe that any such facts materially increase the risk beyond
that which the Manager intends to assume, or has reason to believe that such
facts are unknown to the Manager, or has a reasonable opportunity to communicate
such facts to the Manager, because the Manager acknowledges that the Manager is
fully responsible for being and keeping informed of the financial condition of
the Company and of all circumstances bearing on the risk of non-payment of any
Senior Debt, (h) any defense arising because of the election of a Benefitted
Party, in any proceeding instituted under the Federal Bankruptcy Code, of the
application of Section 1111(b)(2) of the Federal Bankruptcy Code, (i) any
defense based upon any borrowing or grant of a security interest under Section
364 of the Federal Bankruptcy Code, (j) any claim or other right which a
Benefitted Party may now or hereafter acquire against the Company or any other
Person that arises from the existence of performance obligations under the
Operative Documents, including, without limitation, any right of subrogation,
reimbursement. No failure or delay on the Lessor/Trustee's part in exercising
any power, right or privilege under this Agreement shall impair or waive any
such power, right or privilege. The Manager acknowledges and agrees that any
nonrecourse or exculpation provided for in the Operative Documents, or any other
provision of any of the Operative Documents, limiting the Benefitted Parties'
recourse to specific collateral, or limiting the Benefitted Parties' right to
enforce a deficiency judgment against the Company, shall have absolutely no
application to the Manager's or the Company's liability under the Operative
Documents.
8. Lien Subordination. Any Lien, security interest, encumbrance,
------------------
charge or claim of the Manager on any assets or property of the Company, or any
proceeds or revenues therefrom, which the Manager may have at any time as
security for the Management Fees shall be, and hereby is, subordinated to all
Liens, security interests, or encumbrances now or hereafter granted to the
Lessor/Trustee by the Company or by law, notwithstanding the date or order of
attachment or perfection of any such Lien, security interest, encumbrance, claim
or charge or the provision of any applicable law. Until all of the Senior Debt
shall have been paid in full, in cash, or the Senior Debt is satisfied and
discharged or defeased under the Operative Documents, the Manager agrees that
the Manager will not assert or seek to enforce against the Company the
Management Fees or any interest of the Manager in any collateral for any portion
of the Management Fees and that the Lessor/Trustee may dispose of any or all of
the collateral for the Senior Debt free of any and all Liens, including, but not
limited to, Liens created in favor of the Manager, through judicial or non-
judicial proceedings, in accordance with applicable law, including taking title,
after five (5) days written notice to the Manager. The Manager hereby
acknowledges that such notice, if given five (5) days prior to such disposition
of any or all of the
-8-
<PAGE>
collateral for the Senior Debt, is sufficient and commercially reasonable. The
Manager hereby agrees that any such sale or other disposition of so much of the
collateral for the Senior Debt as is necessary to satisfy in full, in cash, all
of the Senior Debt shall be free and clear of any security interest granted to
the Manager; provided that the entire proceeds (after deducting reasonable
expenses of sale) are applied in reduction of the Senior Debt. Upon the
Lessor/Trustee's request, the Manager shall execute and deliver any releases or
other documents and agreements that Lessor/Trustee in its reasonable discretion
deems necessary to dispose of the collateral for the Senior Debt free of the
Manager's interest in same. The Manager shall retain all of its rights as a
junior secured creditor with respect to the surplus, if any, arising from any
such disposition of the collateral for the Senior Debt.
9. Default by Company Under Management Agreement. In the event of a
---------------------------------------------
default by the Company under the Management Agreement, Manager shall promptly
give written notice thereof to the Lessor/Trustee, and, subject to the
provisions of the Indenture-Related Subordination Agreement, the Lessor/Trustee
shall have the right (but not the obligation) to cure such default within the
cure periods provided to the Company under the Management Agreement. Manager
shall not take any action with respect to such default under the Management
Agreement, including, without limitation, any action to terminate the Management
Agreement, unless and until the Lessor/Trustee has received notice of such
default and failed to cure such default within the applicable cure periods
provided therefor.
10. Subrogation. The Manager hereby subordinates all rights of
-----------
subrogation to the rights of the Lessor/Trustee and the Lenders to receive
payments or distributions, and any rights of subrogation to any collateral for
the Lessor/Trustee and the Lenders, until all Senior Debt shall have been
indefeasibly paid in full, in cash, satisfied and discharged in accordance with
the Operative Documents. Upon such payment in full, the Manager shall be
subrogated to all rights of the Lessor/Trustee and the Lenders.
11. Subordination Not Impaired by the Company. No right of the
-----------------------------------------
Lessor/Trustee or any Lender to enforce the subordination of the Management Fees
shall be impaired by any act or failure to act by the Company or by the
Company's failure to comply with these provisions.
12. No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
give or confer any rights to any Person other than the Lessor/Trustee, the
Administrative Agent and the Lenders. No other Person, including the Company,
is intended to be a third party beneficiary of this Agreement.
13. Legend on Note. If any portion of the Management Fees is
--------------
evidenced by a promissory note, stock certificate or other instrument, the
Manager agrees to promptly add a legend thereto stating that the rights of any
holder thereof are subject to this Agreement.
14. Representations and Warranties. The Manager hereby represents
------------------------------
and warrants that (a) the execution and delivery of this Agreement and the
performance by the
-9-
<PAGE>
Manager of its obligations hereunder have received all necessary approvals and
do not and will not contravene or conflict with any provision of law or of any
indenture, instrument or other agreement to which the Manager is a party or by
which it or its property may be bound or affected or result in or require the
creation or imposition of any mortgage, Lien, pledge, security interest, charge
or other encumbrance in, upon or of any of its properties or assets under any
such indenture, instrument or other agreement, (b) the Manager has full power,
authority and legal right to make and perform this Agreement, (c) the Manager
has not assigned or transferred any indebtedness owing by the Company or any of
the collateral for the Management Fees and that the Manager will not assign or
transfer same, (d) this Agreement is the legal, valid and binding obligation of
the Manager, enforceable against the Manager in accordance with its terms, and
(e) the Management Fees are not subject to any other subordination agreement,
other than the Indenture-Related Subordination Agreement.
15. No Waiver. No failure on the part of the Lessor/Trustee to
---------
exercise, no delay in exercising, and no course of dealing with respect to, any
right or remedy hereunder will operate as a waiver thereof; nor will any single
or partial exercise of any right or remedy preclude any other or further
exercise thereof or the exercise of any other right or remedy. This Agreement
may not be amended or modified except by written agreement of the
Lessor/Trustee, acting at the direction of the Required Lenders, the Manager,
and the Company, and no consent or waiver hereunder shall be valid unless in
writing by the Lessor/Trustee.
16. Successors and Assigns. This Agreement, and the terms, covenants
----------------------
and conditions hereof, shall be binding upon and inure to the benefit of the
parties hereto, and their successors and assigns.
17. GOVERNING LAW. THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE
-------------
WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REFERENCE TO CHOICE OF LAW PRINCIPLES.
18. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. Severability. The invalidity, illegality or unenforceability in
------------
any jurisdiction of any provision in or obligation under this Agreement shall
not affect or impair the validity, legality or enforceability of the remaining
provisions or obligations under this Agreement or of such provision or
obligation in any other jurisdiction.
[SIGNATURE PAGE FOLLOWS]
-10-
<PAGE>
IN WITNESS WHEREOF, this Manager Subordination Agreement has been duly
executed as of the day and year first above written.
MANAGER:
HWCC-SHREVEPORT, INC.,
a Louisiana corporation
By _________________________________
Name: Paul C. Yates
Title: Executive Vice President and
Chief Financial Officer
COMPANY:
HOLLYWOOD CASINO SHREVEPORT,
a Louisiana general partnership
By: HCS I, Inc., a Louisiana corporation,
its managing general partner
By _________________________________
Name: Paul C. Yates
Title: Executive Vice President and
Chief Financial Officer
LESSOR/TRUSTEE:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity,but solely as Lessor and Trustee
By _________________________________
Name:
Title:
-11-
<PAGE>
[Signature Page to Manager Subordination Agreement]
-12-
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Amendment No. 4 to Registration Statement
No. 333-88679 of Hollywood Casino Shreveport and Shreveport Capital Corporation
of our reports dated February 25, 2000 on the consolidated financial statements
of Hollywood Casino Shreveport and HWCC-Louisiana, Inc. and of our report dated
November 5, 1999 on the financial statements of Sodak-Louisiana, L.L.C.
appearing in the Prospectus, which is part of such Registration Statement, and
the reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Dallas, Texas
April 17, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HOLLYWOOD CASINO SHREVEPORT AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001096352
<NAME> HOLLYWOOD CASINO SHREVEPORT
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> OTHER YEAR OTHER OTHER YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999 DEC-31-1998 DEC-31-1998 DEC-31-1997
<PERIOD-START> SEP-22-1998 JAN-01-1999 SEP-22-1998 JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1999 DEC-31-1999 DEC-31-1998 SEP-21-1998 DEC-31-1997
<CASH> 19,014 19,014 3,734 0 6,078
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 1,432 1,432 0 0 541
<ALLOWANCES> 0 0 0 0 220
<INVENTORY> 0 0 0 0 19
<CURRENT-ASSETS> 21,066 21,066 3,734 0 6,438
<PP&E> 43,677 43,677 6,957 0 1,939
<DEPRECIATION> 2 2 0 0 1,939
<TOTAL-ASSETS> 216,979 216,979 10,691 0 6,438
<CURRENT-LIABILITIES> 19,950 19,950 5,726 5,000 12,656
<BONDS> 151,359 151,359 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 0 0 0 0
<OTHER-SE> 45,670 45,670 4,965 (5,000) (6,218)
<TOTAL-LIABILITY-AND-EQUITY> 216,979 216,979 10,691 0 6,438
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 0 0 0 89 47,455
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 0 0 0 76 29,287
<OTHER-EXPENSES> 1,083 993 90 1,120 16,350
<LOSS-PROVISION> 0 0 0 0 33
<INTEREST-EXPENSE> 3,247 3,302 (55) (191) (495)
<INCOME-PRETAX> (4,330) (4,295) (35) (916) 2,280
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> (4,330) (4,295) (35) (916) 2,280
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> (4,330) (4,295) (35) (916) 2,280
<EPS-BASIC> 0 0 0 0 0
<EPS-DILUTED> 0 0 0 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HWCC-LOUISIANA, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001096354
<NAME> HWCC-LOUISIANA, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 21,580 68 1
<SECURITIES> 0 0 0
<RECEIVABLES> 1,432 0 40
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 23,661 68 41
<PP&E> 42,595 154 1
<DEPRECIATION> 2 0 0
<TOTAL-ASSETS> 219,428 2,705 42
<CURRENT-LIABILITIES> 20,069 1,336 1,117
<BONDS> 151,359 0 0
0 0 0
0 0 0
<COMMON> 1 1 1
<OTHER-SE> 45,999 1,368 (1,076)
<TOTAL-LIABILITY-AND-EQUITY> 219,428 2,705 42
<SALES> 0 0 0
<TOTAL-REVENUES> 0 0 0
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 1,036 39 644
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 3,245 0 0
<INCOME-PRETAX> (4,281) (39) (644)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (4,281) (56) (644)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (4,269) (56) (644)
<EPS-BASIC> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
