UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarter ended SEPTEMBER 30, 1997
Commission file number 0-8927
NEVADA GOLD & CASINOS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0142032
(state or other Jurisdiction (IRS Employer
of incorporation) Identification Number)
3040 POST OAK BLVD. SUITE 675, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
(713) 621-2245
Registrant's telephone number:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of September 30, 1997 there were 8,499,236 shares of common stock
outstanding.
<PAGE>
NEVADA GOLD & CASINOS, INC.
INDEX
PART I
ITEM 1. FINANCIAL STATEMENTS PAGE NO.
Balance Sheets as of September 30 and March 31, 1997 ........ 3
Statements of Operations for the Three Months Ended
September 30, 1997 and 1996 ............................. 4
Statements of Operations for the Six Months Ended
September 30, 1997 and 1996 ............................. 5
Statements of Cash Flows for the Six Months Ended
September 30, 1997 and 1996 ............................ 6
Notes to Interim Financial Statements ....................... 7
ITEM 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations .............................. 11
PART II
OTHER INFORMATION
Item 1 Through 6 ............................................. 14
2
<PAGE>
NEVADA GOLD & CASINOS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................ $ 48,531 $ 78,245
Short term investments ............................... 17,608 17,408
Other assets ......................................... 65,500 65,000
----------- -----------
TOTAL CURRENT ASSETS ................................. 131,639 160,653
Investment in Isle of Capri Black Hawk ............... 1,521,564 --
Property and assets held for development ............. 2,165,269 4,203,418
Mining properties & claims ........................... 480,812 480,812
Furniture, fixtures and equipment, net ............... 92,993 111,140
----------- -----------
TOTAL ASSETS ......................................... $ 4,392,277 $ 4,956,023
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities ............. $ 46,176 $ 325,893
Short term notes payable ............................. 176,000 1,504,367
Current portion of long term debt .................... 70,371 112,492
----------- -----------
TOTAL CURRENT LIABILITIES ............................ 292,548 1,942,752
----------- -----------
LONG TERM DEBT
Mortgages payable, net of current portion ............ 147,912 176,632
Notes payable, net of current portion ................ 526,758 32,268
----------- -----------
TOTAL LONG TERM DEBT ................................. 674,670 208,900
----------- -----------
TOTAL LIABILITIES .................................... 967,218 2,151,652
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 500,000 shares
authorized, 141,290 and 90,100 shares outstanding
at September 30, and March 31, 1997, respectively 1,412,900 901,000
Common stock, $.12 par value, 10,000,000 shares
authorized, 8,499,236 and 8,349,046 shares
outstanding at September 30, and March 31, 1997,
respectively ..................................... 1,019,908 1,001,886
Additional paid in capital ........................... 6,176,502 5,956,959
Accumulated deficit prior to development
stage (12/27/93) ................................. (2,296,077) (2,296,077)
Accumulated deficit during development stage ......... (2,888,174) (2,759,397)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ........................... 3,425,059 2,804,371
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ........................................... $ 4,392,277 $ 4,956,023
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
---------------------------
1997 1996
---------- -----------
REVENUES
Royalty income ............................... $ -- $ --
Other income ................................. 540,754 8,505
---------- -----------
TOTAL REVENUES ............................... 540,754 8,505
---------- -----------
EXPENSES
General & administrative ..................... 215,465 191,454
Interest expense ............................. 46,290 82,075
Salaries ..................................... 59,378 30,586
Legal & professional fees .................... 79,032 144,567
Other ........................................ 10,392 26,342
---------- -----------
TOTAL EXPENSES ............................... 410,557 475,024
----------- -----------
NET INCOME (LOSS) ............................ $ 130,197 $ (466,519)
========== ===========
PER SHARE INFORMATION
Weighted average number of common
shares and equivalent outstanding ........ 8,453,689 8,268,267
========== ===========
Net income (loss) per common share ........... $ .02 $ (.06)
========== ===========
The accompanying notes are an integral part of these financial statements
4
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Cumulative Amounts
September 30, During Development
--------------------------
Stage (Since
1997 1996 12/27/93)
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Royalty income ...................... $ 15,000 $ 5,000 $ 219,000
Other income ........................ 541,119 24,600 1,037,289
----------- ----------- -----------
TOTAL REVENUES ...................... 556,119 29,600 1,256,289
----------- ----------- -----------
EXPENSES
General & administrative ............ 320,877 302,900 1,450,032
Interest expense .................... 112,228 115,823 599,249
Salaries ............................ 111,219 42,901 390,204
Legal & professional fees ........... 120,110 252,124 1,388,061
Other ............................... 20,463 46,406 316,917
----------- ----------- -----------
TOTAL EXPENSES ...................... 684,896 760,154 4,144,463
----------- ----------- -----------
NET LOSS ............................ $ (128,777) $ (730,554) $(2,888,174)
=========== =========== ===========
PER SHARE INFORMATION
Weighted average number of common
shares and equivalent outstanding 8,404,638 8,264,528 6,667,146
=========== =========== ===========
Net loss per common share ........... $ (.02) $ (.09) $ (.43)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Cumulative Amounts
September 30, During Development
----------------------
Stage (Since
1997 1996 12/27/93)
--------- --------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .............................. $(128,777) $(264,035) $(2,888,174)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation ............................... 13,306 6,653 59,776
Consultant and investment banker
option expense ........................... 0 0 320,625
Changes in operating assets and liabilities:
Receivable ............................. (700) (1,814) 205,825
Accounts payable and accrued
liabilities .......................... (31,902) 153,208 1,035,138
--------- --------- -----------
NET CASH USED IN OPERATING ACTIVITIES ......... (148,073) (105,988) (1,266,810)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and assets held for development ... (45,532) (35,372) (1,318,046)
Purchase of furniture, fixtures and
equipment ................................. (6,827) 0 (35,865)
Disposition of property .................... 168,249 0 168,249
--------- --------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 115,890 (35,372) (1,185,662)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt ......................... 773,795 124,078 4,334,957
Common stock issued for cash, net of
offering costs ......................... 135,000 3,750 1,156,563
Fractional shares redeemed ................. 0 0 (36)
Payments on debt ........................... (906,326) (41,798) (3,318,268)
Salaries contributed by officers ........... 0 0 1,000
Prepaid stock subscription ................. 0 0 295,500
--------- --------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ...... 2,469 86,030 2,469,716
--------- --------- -----------
Net increase (decrease) in cash ................ (29,714) (55,330) 17,244
Beginning cash balance ......................... 78,245 76,371 6,287
--------- --------- -----------
Ending cash balance ............................ $ 48,531 $ 21,041 $ 23,531
========= ========= ===========
SUPPLEMENTAL INFORMATION:
Cash paid for interest ..................... $ 88,231 $ 6,760 $ 352,674
========= ========= ===========
Cash paid for taxes ........................ $ 0 $ 0 $ 0
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
NOTES TO INTERIM FINANCIAL STATEMENTS
ITEM 1.
GENERAL BUSINESS
Nevada Gold & Casinos, Inc.'s (the "Company") principal business
historically was mineral exploration and development of properties indirectly,
principally through investments in partnerships and joint ventures. On December
27, 1993, control of the Company changed and the Company began to explore the
real estate development and gaming businesses in Colorado. The Company is
considered to be in the development stage since December 27, 1993. In January
1994, the Company changed its name from Pacific Gold Corporation to Nevada Gold
& Casinos, Inc. While the Company is maintaining its mining business, it is
anticipated that its growth will be in the real estate and gaming businesses.
GAMING DEVELOPMENT
In June 1997, through wholly-owned subsidiaries of each company, Nevada
Gold & Casinos, Inc. and Casino America, Inc. entered into a joint venture to
develop a new Isle of Capri casino in Colorado at Black Hawk, 30 miles west of
Denver. The joint venture plans to develop, own and operate the Isle of Capri
Black Hawk as a premier casino gaming facility. The casino will be one of the
first gaming facilities encountered by customers traveling from Denver to the
Black Hawk market and, upon completion, it will be one of the largest gaming
facilities in Colorado. It will feature 90,000 square feet on one level with
1,100 slot machines, 24 blackjack and poker games, a fine dining restaurant, a
delicatessen, a Las Vegas style buffet, and an event center. The facility also
will include 1,000 on-site parking spaces. The Isle of Capri Black Hawk will be
designed and constructed pursuant to a bonded "guaranteed maximum price"
design/build agreement, which also provides for the addition of a hotel at the
option of the venture for an agreed-upon increase to the guaranteed maximum
price.
The Company holds its interest in the Isle of Capri Black Hawk through a
wholly owned subsidiary, Black Hawk Gold, Ltd., a Colorado Corporation ("Black
Hawk Gold"). The Company, through Black Hawk Gold, made a capital contribution
valued under the joint venture agreement at $7.5 million. The contribution
consisted of land valued at $7.9 million, subject to a note payable with a
balance, including principal and interest, of approximately $400,000 that was
paid by the joint venture. The property included lots 5, 6, 7 and 8 of Block 51,
and adjoining land comprised of over three acres located in Black Hawk,
Colorado. Casino America, Inc. will manage the casino under a long-term
management agreement for a fee based upon the revenues generated by the project.
The development of the project is subject to a number of conditions, including
the receipt of all required regulatory approvals, particularly approval from the
Colorado Gaming Commission.
7
<PAGE>
NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
NOTES TO INTERIM FINANCIAL STATEMENTS
In March 1996, Nevada Gold & Casinos, Inc. and Caesar's World Gaming
Corporation ("Caesar's"), a subsidiary of ITT Corporation, had announced joint
development plans for this project. Although all the necessary land was
assembled, designs were completed, and operating agreements were signed, no
further action was taken. In August 1997, Casino America purchased Caesar's
interest in this project.
Under the terms of the original agreement with Casino America, the
Company would have retained about 48% interest in the joint venture and Casino
America would have owned about 52%. In July 1997, the operating agreement with
Casino America was amended. The Company's ownership was decreased to 45% and
Casino America's ownership was increased to 55% to compensate Casino America for
providing a Completion Capital Commitment and the Managers Subordination
Agreement. Pursuant to the amended operating agreement, the Company received
from Casino America a $500,000 loan, $700,000 in cash for sale of part of its
ownership interest in the joint venture, and an additional commitment to fund up
to $800,000 toward the Company's future cash requirements. The Company's
ownership of the joint venture was reduced to approximately 41% upon receipt by
the Company of the initial $1,200,000 and its ownership will be reduced to
approximately 36% if all of the additional $800,000 commitment is used.
Substantially all of the $1,200,000 proceeds were paid directly to creditors of
the Company in full payment of the Company's outstanding obligations to such
creditors. The Company has the option to repurchase the sold portion of its
ownership interest in the project within 180 days after the date of each
funding. The loan bears interest at the higher of 14.5% or Casino America's
highest cost of funds plus two percentage points and is due on August 20, 2000.
In January 1997, the Company engaged Jefferies and Company, Inc., a
nationally known investment banking concern prominent in the gaming industry, as
its exclusive financial advisor in connection with the structuring and financing
of the casino project. In August 1997, first mortgage notes in the aggregate
amount of $75,000,000 were issued by Isle of Capri Black Hawk, L.L.C. and its
wholly owned subsidiary, Isle of Capri Black Hawk Capital Corp. (collectively
the "Issuers"). These notes mature on August 31, 2004 and bear interest at 13%
per annum. Interest on the notes is payable semi-annually on each February 28
and August 31, commencing February 28, 1998. Contingent interest is payable on
the notes, on each interest payment date, in an aggregate amount equal to 5% of
the Isle of Capri Black Hawk L.L.C.'s consolidated cash flow for the two fiscal
quarters ending during the January or July immediately preceding such interest
payment date. The notes are secured by a first lien on substantially all of the
existing and future assets of the Issuers and are without recourse to the
members of Isle of Capri Black Hawk, L.L.C. or their respective parent or
affiliate entities.
The Company conveyed property to the City of Black Hawk for the
realignment of Miners Mesa Road in exchange for a fifteen-foot strip of
adjoining gaming property which would increase the square footage available for
gaming and provide additional land to the joint venture.
8
<PAGE>
NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
NOTES TO INTERIM FINANCIAL STATEMENTS
There have been no revenues from the Company's gaming joint venture to
date since these are currently in the development stage. Revenues have not been
sufficient to cover the Company's operating expenses during the past several
years. Management does not expect significant increases in revenues from any of
its operations over the next year. In July 1997, the Company signed an amended
Operating Agreement with Casino America, Inc. concerning the development of a
casino. Pursuant to this agreement, the Company exchanged part of its ownership
interest in the casino venture for cash, a loan, and a commitment of additional
funds for future cash requirements. The long-term viability of the Company is
dependent upon the successful completion and operation of a casino.
REAL ESTATE DEVELOPMENT
On September 9, 1994, Gold Mountain Development, LLC was formed. Per
negotiated agreement with the other three members, Nevada Gold & Casino, Inc.'s
ownership was 40%. On September 26, 1995, the Company acquired the remaining 60%
interest in Gold Mountain Development, LLC, making it a wholly-owned subsidiary.
Intercompany balances have been eliminated in preparing the Company's financial
statements as of September 30, and March 31, 1997.
On July 9, 1996, President Clinton signed legislation authorizing a
public-private land exchange with Gold Mountain Development, LLC that will make
possible the creation of a major new residential and recreational development
near the Black Hawk gaming area west of Denver, while also preserving 8,700
acres of pristine wilderness area throughout Colorado. Public law 104-158
authorizes the Bureau of Land Management to swap 133 separate tracts of federal
land comprised of over 300 acres. This project is designed to provide housing,
commercial infrastructure, retail and resort facilities for the fast growing
gaming area of Black Hawk and Central City.
As of March 31, 1995, the Company entered into an agreement to purchase
100% of the outstanding common stock of Sunrise Land and Minerals, Inc.
("Sunrise"). The seller financed the entire purchase price of the acquisition
through a non-recourse note. Effective August 23, 1996, the Company retired the
short-term non-recourse note associated with the Sunrise purchase, through the
issuance of 166,667 restricted shares of the Company's common stock.
9
<PAGE>
NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
NOTES TO INTERIM FINANCIAL STATEMENTS
MINING INTERESTS
The Company had a joint venture agreement with Cameco U.S., Inc.
("Cameco") which was terminated effective March 31, 1996. Effective November 1,
1996, the Company entered into a lease with Sagebrush Exploration, Inc.,
("Sagebrush") permitting Sagebrush to explore, develop, and mine the properties
in the Goldfield Mining District located in Nye and Esmeralda Counties, Nevada.
Under the terms of this agreement, the Company was to receive advance minimum
royalty payments, production royalty and 100,000 shares of the capital stock
from Sagebrush's parent company, Coromandel Resources, Ltd., ("Coromandel").
Sagebrush agreed to incur expenditures for exploration and development of the
property and any and all taxes and maintenance fees. Sagebrush has been in
default of this lease since July 1997. Management is currently negotiating with
a potential new lessee.
REVERSE COMMON STOCK SPLIT
On August 23, 1996, the Company's Board of Directors approved and
declared a three-for-one reverse stock split of the Company's authorized, issued
and outstanding shares of common stock, par value $.04 per share. Holders of the
Common Stock were not entitled to cumulative voting. The stock split was
accompanied by an increase in the par value of the common stock from $.04 per
share to $.12 per share. All references in the consolidated financial statements
referring to shares, share prices, per share amounts and stock plans have been
adjusted retroactively for the three-for-one reverse stock split.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for fair presentation have been included. Certain prior year balances
have been reclassified to conform to current year presentation.
These financial statements are consolidated for all wholly-owned
subsidiaries. All significant intercompany transactions and balances have been
eliminated in the financial statements.
10
<PAGE>
NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1996
Revenues increased $532,249 for the three months ended September 30,
1997 compared to the same period in the prior year. The current year included a
gain of $543,418 for the sale of part of the Company's interest in the Isle of
Capri Black Hawk joint venture.
General and administrative expenses increased $24,011 for the three
months ended September 30, 1997 compared to the same period in the prior year,
including an increase of $55,700 in commission expense, partially offset by
decreases in contract labor and travel. The current quarter included fees in the
amount of $79,700 related to the casino project and the acquisition of
financing. The same period last year included $24,000 related to the acquisition
of financing.
Interest expense decreased $35,784 for the three months ended September
30, 1997 as compared to the same period last year. The prior year included
$30,000 interest on commercial paper in the amount of $2,000,000.
Salaries increased $28,792 for the three months ended September 30, 1997
as compared to the same period last year, due to the hiring of additional
personnel to handle accounting, legal and other functions previously outsourced
by the Company.
Legal and professional fees decreased $65,535 including decreases of
$45,908 in accounting expense and $21,040 in consulting fees. The prior year
included consulting fees associated with the acquisition of capital and audit
and accounting fees associated with the Company's annual audit.
Other expenses decreased $15,950, including a decrease of $12,942 in
printing expense. The prior year included expenses for SEC filings.
SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH SIX MONTHS ENDED SEPTEMBER 30,
1996
Revenues increased $526,519 for the six months ended September 30, 1997
compared to the same period in the prior year. The current year included a gain
of $543,418 for the sale of part of the Company's interest in the Isle of Capri
Black Hawk joint venture.
13
<PAGE>
NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
General and administrative expenses increased $17,977 for the six months
ended September 30, 1997 compared to the same period in the prior year,
including an increase of $55,700 in commission expense, partially offset by a
decrease of $22,765 in contract labor. The current year included fees in the
amount of $79,700 related to the casino project and the acquisition of
financing. The same period last year included $24,000 related to the acquisition
of financing.
Interest expense decreased $3,595 for the six months ended September 30,
1997 as compared to the same period last year. The current year reflected an
increase in interest expense for short-term notes payable. The prior year
included $30,000 interest on commercial paper in the amount of $2,000,000.
Salaries increased $68,317 for the six months ended September 30, 1997
as compared to the same period last year, due to the hiring of additional
personnel to handle accounting, legal, and other functions previously outsourced
by the Company.
Legal and professional fees decreased $132,014, including decreases of
$51,444 in accounting expense, $47,432 in consulting fees and $33,324 for legal
and professional fees. The prior year included consulting and legal fees
associated with the acquisition of capital and audit and accounting fees
associated with the Company's annual audit.
Other expenses decreased $25,943, including a decrease of $17,370 in
printing expense. The prior year included expenses for SEC filings.
LIQUIDITY AND CAPITAL RESOURCES
Revenues from the Company have not been sufficient to cover the
Company's operating expenses during the past two years. In addition, there have
been no revenues from the Company's gaming joint venture to date since these are
currently in the development stage. Management does not expect significant
increases in revenues from any of its operations over the next year.
During the six months ended September 30, 1997, the Company received
proceeds from short-term debt of $773,795 to cover its operating deficit and for
scheduled payments on its long-term debt. Additional funds were obtained through
private sales of restricted Company Stock to "accredited" investors, as such
term is defined under Securities and Exchange Commission Regulation D.
12
<PAGE>
NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
Pursuant to an amended operating agreement with Casino America, the
Company received from Casino America a $500,000 loan, $700,000 in cash for sale
of part of its ownership interest in the joint venture, and an additional
commitment to fund up to $800,000 toward the Company's future cash requirements.
The Company's ownership of the joint venture was reduced to approximately 41%
upon receipt by the Company of the initial $1,200,000 and its ownership will be
reduced to approximately 36% if all of the additional $800,000 commitment is
used. Substantially all of the $1,200,000 proceeds were paid directly to
creditors of the Company in full payment of the Company's outstanding
obligations to such creditors. The Company has the option to repurchase the sold
portion of its ownership interest in the project within 180 days after the date
of each funding. The loan bears interest at the higher of 14.5% or Casino
America's highest cost of funds plus two percentage points and is due on August
20, 2000.
During the year ended March 31, 1996, the Company offered $8,500,000 in
Convertible Secured Notes. As of August 23, 1996, the company withdrew this debt
offering. Funds in escrow were returned in compliance with the terms of the
offering.
On July 5, 1996, the Company issued $2,030,000 in discounted commercial
paper with a 31-day term for which it received proceeds of $2,000,000. The
commercial paper was paid in full at maturity.
In January 1997, the Company engaged Jefferies and Company, Inc., a
nationally known investment banking concern prominent in the gaming industry, as
its exclusive financial advisor in connection with the structuring and financing
of the casino project. In August 1997, first mortgage notes in the aggregate
amount of $75,000,000 were issued by the Isle of Capri Black Hawk, L.L.C. and
its wholly-owned subsidiary, Isle of Capri Black Hawk Capital Corp.
(collectively the "Issuers"). These notes mature on August 31, 2004 and bear
interest at 13% per annum. Interest on the notes is payable semi-annually on
each February 28 and August 31, commencing February 28, 1998. Contingent
interest is payable on the notes, on each interest payment date, in an aggregate
amount equal to 5% of the Isle of Capri Black Hawk, L.L.C.'s consolidated cash
flow for the two fiscal quarters ending during the January or July immediately
preceding such interest payment date. The notes are secured by a first lien on
substantially all of the existing and future assets of the Issuers and are
without recourse to the members of the Isle of Capri Black Hawk, L.L.C. or their
respective parent or affiliate entities.
Effective December 31, 1996, the Board of Directors and the holders of
the Company's common stock having at least a majority of the voting power of the
shares, approved and authorized the issuance of 500,000 shares of Preferred
Stock, $10 par value per share. The Company issued 141,290 shares of 12%
cumulative preferred stock, $10 par value, which are callable by the Company.
These shares were issued in exchange for short-term notes payable to Clay County
Holdings, Inc., an affiliate of the Secretary of the Company, and accrued
management fees due to Aaminex Capital Corp.("Aaminex"), an affiliate of the
President of the Company.
ITEM 3
Not applicable
13
<PAGE>
NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1997, the Company became aware of a lawsuit filed in August
1997 under Case Number H-97-2955 in the United District Court for the
Southern District of Texas, Houston, Texas by James R. Cleveland,
Plaintiff, against the Company and twenty-three (23) other Defendants,
including all of the Directors and two Officers of the Company. Mr.
Cleveland, an inmate in a Texas county jail, proceeding under a
pauper's affidavit, alleges that the Defendants conspired to defraud
and deceive him for the purpose of securing an investment of funds in
the Company. Mr. Cleveland has requested actual damages of $5 million
and punitive damages of $15 million. Management believes there is no
factual basis for Mr. Cleveland's allegations and the Company and
counsel are of the opinion that all Defendants will ultimately prevail
in the lawsuit.
ITEM 2. CHANGES IN SECURITIES.
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
By unanimous consent dated August 14, 1997, the Board of Directors of
the Company and the Company as the sole stockholder of Blackhawk Gold,
approved and authorized the conveyance of the Blackhawk Gold Parcel to
the Isle of Capri Black Hawk, L.L.C. The Board of Directors determined
that stockholder approval and/or ratification of this transaction was
not required under the applicable provisions of the Nevada Revised
Statutes. At the request of Jefferies and Company, Inc., the
underwriters for the Isle of Capri Black Hawk, L.L.C.'s note offering,
Winstock Mining Corporation, Clay County Holdings, Aaminex Capital
Corporation, Paul J. Burkett, William J. Jayroe and Hubert T. Wen,
holders of a majority of the outstanding common shares of the Company
(collectively the "Majority Stockholders"), entered into a written
agreement to approve and ratify, and did approve and ratify, the
conveyance of the Blackhawk Gold Parcel to the Isle of Capri Black
Hawk L.L.C. The Majority Shareholders legally and beneficially owned
an aggregate of 5,142,415 shares of the common stock of the Company,
representing a majority of the outstanding shares of the Company
authorized to vote.
ITEM 5. OTHER INFORMATION.
Not applicable
14
<PAGE>
NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) INDEX TO EXHIBITS
*3.1 - Articles of Incorporation
*3.2 - Amendment to Articles of Incorporation
*3.3 - By-laws
*4.1 - Deed of Trust
*4.2 - Master Secured Note
*4.3 - Note Participation Agreement
*10.1 - Operating Agreement Caesars Black Hawk, LLC.
*10.2 - Operating Agreement of ICB L.L.C.
10.3 - Amended and Restated Operating Agreement of Isle of Capri
Black Hawk L.L.C.
10.4 - Members Agreement
10.5 - License Agreement
27 - Financial Data Schedule
*Exhibits were previously filed and are incorporated by reference.
(B) Reports on Form 8-K
8K filed 6/30/97
Item 4 Changes in Registrant's Certifying Accountant
Item 5 Other Events
8K/A filed 7/22/97
Item 4 Changes in Registrant's Certifying Accountant
Item 5 Other Events
15
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NEVADA GOLD & CASINOS, INC.
SEPTEMBER 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has fully caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEVADA GOLD & CASINOS, INC.
(Registrant)
By:/S/ ELIZABETH A. WOODS
Elizabeth A. Woods
Treasurer and Chief
Financial Officer
DATE: November 14, 1997
16
EXHIBIT 10.3
AMENDED AND RESTATED OPERATING AGREEMENT
OF
ISLE OF CAPRI BLACK HAWK L.L.C.
This AMENDED AND RESTATED OPERATING AGREEMENT is made as of this ___ day
of July, 1997 by Casino America of Colorado, Inc. ("Casino America of Colorado")
and Blackhawk Gold, Ltd. ("Blackhawk Gold") and those other persons, if any, who
from time to time become parties to or are otherwise bound by this Agreement as
provided herein.
The parties hereto are parties to and Operating Agreement dated April 25,
1997. The parties wish to amend and restate the Operating Agreement, pursuant to
this Amended and Restated Operating Agreement, which supersedes and replaces the
Operating Agreement, effective as of the Closing Date. The parties therefore
agree as follows:
ARTICLE 1: ORGANIZATION AND DEFINITIONS
1.1 COMPANY NAME. The business of the Company will be conducted under the name
"Isle of Capri Blackhawk L.L.C." or any other name determined by the Company in
accordance with governing law.
1.2 INITIAL OWNERSHIP. Upon execution of this Amended and Restated Operating
Agreement, the Ownership Interest of the Company is as set forth below:
MEMBER OWNERSHIP INTEREST INITIAL CONTRIBUTION
-------- -------------------- ----------------------
Blackhawk Gold, Ltd. 45% $7,500,000
Casino America of Colorado,
Inc. 55% $9,200,000
The Ownership Interest shall be adjusted from time to time in accordance
with the provisions of this Agreement. The Ownership Interests of the Members
shall at all times be maintained on Appendix I hereto, which shall be amended
chronologically from time to time as necessary. Effective as of the Closing,
Blackhawk Gold has sold to Casino America of Colorado a portion of it's
Ownership Interest representing 4.2% of the total Ownership Interests in the
Company so that, as of the Closing Date, the respective percentage Ownership
Interests are as follows: Blackhawk Gold - 40.8% and Casino America of Colorado
- - 59.2%.
1.3 COLORADO OFFICE AND AGENT. The initial registered office of the Company in
Colorado is located at 1675 Broadway, Suite 1200, Denver, Colorado 80202, and
its initial registered agent at such address is CT Corporation. The Company may
subsequently change its registered office or registered agent in Colorado in
accordance with the Act. The Company's principal place of business is 711
Washington Loop, Biloxi, Mississippi 39530.
<PAGE>
1.4 TERM. The Company began on the date its Articles of Organization were filed
with the Colorado Secretary of State and continues until December 31, 2096, or
such earlier date as a Dissolution may occur.
1.5 FOREIGN QUALIFICATION. After formation of the Company under the Act, the
Company will apply for any required certificate of authority to do business in
any other state or jurisdiction where it conducts business, as appropriate.
1.6 DEFINITIONS. Terms used with initial capital letters will have the meanings
specified in Exhibit "A", applicable to both singular and plural forms, for all
purposes of this Agreement.
ARTICLE 2: PURPOSES AND POWERS
2.1 PRINCIPAL PURPOSE. The business and principal purpose of the Company is to
investigate, seek, acquire and engage in casino gaming in the Black Hawk/Central
City, Colorado area, and to engage in all activities related thereto, including,
without limitation, the operation of restaurants, gift shops and/or a hotel.
2.2 POWERS. The Company has all of the powers granted to a limited liability
company under the Act, as well as all powers necessary or convenient to achieve
its purposes and to further its business.
ARTICLE 3: CAPITAL CONTRIBUTIONS
3.1 INITIAL CAPITAL OF THE COMPANY. The Members have made an initial Capital
Contribution to the Company and have received the Initial Ownership Interests
set forth in Section 1.2 above.
3.2 NO ADDITIONAL CAPITAL CONTRIBUTIONS. Except as agreed by the Members in the
Members Agreement, no Member shall be required to make an additional Capital
Contribution to the Company.
3.3 NO WITHDRAWAL. Except as specifically provided in this Agreement, no Member
will be entitled to withdraw all or any part of such Member's capital from the
Company or, when such withdrawal of capital is permitted, to demand a
distribution of property other than cash.
3.4 NO INTEREST ON CAPITAL. No Member will be entitled to receive interest on
such Member's Capital Contribution or Capital Account.
3.5 LOANS BY MEMBERS. The Company may borrow money from any Member or Affiliate
for Company purposes on such terms as the Company and such Member or Affiliate
may agree. Any such advance or loan will be treated as indebtedness of the
Company, and will not be treated as a
<PAGE>
Capital Contribution by a Member.
3.6 CAPITAL ACCOUNTS. A Capital Account will be maintained for each Member and
credited, charged and otherwise adjusted in accordance with generally accepted
accounting principles consistently applied. Each Member's Capital Account will
be:
[a] Credited with [i] the capital contributions (net of liabilities secured by
such property that the Company takes subject to or assumes), [ii] the
Member's allocable share of Profits and [iii] all other items properly
credited to the Member's Capital Account; and
[b] Charged with [i] the amount of cash distributed to the Member by the
Company, [ii] the Fair Market Value of property distributed to the Member
by the Company (net of liabilities secured by such property that the
Member takes subject to or assumes), [iii] the Member's allocable share of
Losses and [iv] all other items properly charged to the Member's Capital
Account.
Any unrealized appreciation or depreciation with respect to any asset
distributed in kind will be allocated among the Members in accordance with the
provisions of Article 5 as though such asset had been sold for its Fair Market
Value on the date of Distribution, and each Member's Capital Account will be
adjusted to reflect both the deemed realization of such appreciation or
depreciation and the Distribution of such property. In determining the Fair
Market Value of any asset of the Company for purposes of any Distribution, the
Company may obtain the written report of any one or more independent qualified
appraisers (or appraisal firms). If more than one appraisal report is obtained
by the Company, Fair Market Value will be determined as the average of such
appraised values. The Company will select each such appraiser (or appraisal
firm), and bear the cost of any such appraisal.
The Capital Account of each Member shall be determined and maintained in
accordance with generally accepted accounting principles consistently applied in
the casino industry. For income tax purposes, the Company shall make all
required elections under Section 704(b) of the Code.
3.7 TRANSFER. If all or any part of an Ownership Interest is transferred in
accordance with this Agreement, the Capital Account and Ownership Interest of
the Transferor (including a pro-rata share of Capital Contributions) that is
attributable to the transferred interest will carry over to the Transferee.
3.8 CERTIFICATES FOR UNITS REPRESENTING OWNERSHIP INTERESTS. Ownership Interests
in the Company shall be represented by Units and a Person's Ownership Interest
shall equal the number of Units owned by such Person divided by the total number
of Units issued and outstanding. The Units shall be represented by Certificates,
which shall be in such form as may be determined by the Managers. Certificates
shall be signed by a majority of the Managers. All Certificates shall be
consecutively numbered or otherwise identified. The name of the Person to whom
the Units are issued, with the number of Units and the date of issue, shall be
entered on the books of the Company. All Certificates surrendered to the Company
for transfer shall be canceled and no new Certificate shall be issued until the
former Certificate for a like number of Units shall have been surrendered and
canceled, except that in the case of a lost, destroyed or mutilated certificate
a new one may be
3
<PAGE>
issued therefor upon such terms and indemnity to the Company as
the Managers may prescribe. Transfers of Units of the Company shall be made only
on the books of the Company by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to transfer, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Company, and, on surrender for cancellation of the Certificate
for such Units. The Person in whose name a Unit or Units stands on the books of
the Company shall be deemed the owner thereof for all purposes as regards the
Company.
ARTICLE 4: MEMBERS AND MANAGERS
4.1 MANAGEMENT BY MANAGERS. Except as to matters expressly reserved to the
Members by statute or by this Operating Agreement, the business and affairs of
the Company shall be managed by the Managers set forth below, as such Managers
may be changed from time to time as set forth herein. The initial Managers of
the Company shall be John M. Gallaway, Allan B. Solomon, whose address is 711
Washington Loop, Biloxi, Mississippi, and H. Thomas Winn, whose address is 3040
Post Oak Boulevard, Suite 675, Houston, Texas. Each Member shall have the right
to elect one Manager, except that so long as Casino America of Colorado or its
Affiliates own a Majority In Interest of the Company, Casino America of Colorado
or its Affiliates shall be entitled to elect a majority of the Managers, which
initially shall be two Managers, and Blackhawk Gold shall be entitled to elect
one Manager. Each Member shall have the right to remove, replace, fill a vacancy
or designate a temporary replacement for the Manager or Managers elected by it.
Managers shall hold office for a term of one year from election, or until
the next Annual Meeting of Members. Any action provided for in this Agreement
that may be taken by the Company may, except as otherwise provided in this
Agreement, only be taken with the consent of a majority of the Managers or by
the officers of the Company to the extent a majority of the Managers have
delegated authority with respect to such actions to such officers. Except as
provided in Section 4.9 below or as to any other matter the Members agree shall
require a unanimous vote, actions of the Managers shall be by majority vote at
meetings duly called for purposes of taking action at which a quorum is present.
A quorum at any meeting of the Managers shall consist of a majority of the
Managers then appointed. The Managers may also act by unanimous written consent
in lieu of a meeting.
Meetings of the Managers shall be held no less often than quarterly (one
of which shall be the Annual Meeting of the Members) on dates established
therefor at each preceding Annual Meeting of the Managers. Special meetings of
the Managers shall be held from time to time as called by any of the Managers on
no less than five (5) days' advance notice given in writing by the Manager
calling such meeting, which notice may be given by facsimile, Federal Express or
similar courier service, certified mail or personal delivery. Notices of
meetings shall be effective when sent, if sent by facsimile, or upon receipt, if
given by certified mail, overnight courier or personal delivery, in each case at
the address of each of the Managers on the books and records of the Company. The
Managers may participate in a meeting by means of conference telephone or
similar communications equipment by which all the members participating in the
meeting can hear each other at the same time. Such participation will constitute
presence in person at the meeting and waiver of any required notice.
4
<PAGE>
4.2 MEMBER'S REPRESENTATIVE. Each Member which is not an individual will
designate one or more individuals to act as such Member's duly authorized
representative and agent for purposes of exercising such Member's vote on any
matter involving the Company requiring the approval or action of the Members.
Each Member which is not an individual may also designate one or more
individuals as an alternate in the event that the primary representative is
unavailable to act for any reason. A Member may change any such designation at
any time upon similar notice. The representatives of a Member will cast the vote
of each Member in accordance with such Member's Ownership Interest, as provided
in this Article.
4.3 MAJORITY VOTING. All decisions reserved by the Act or this Operating
Agreement to the Members will be made by the affirmative vote of Members owning
more than 50% of the Ownership Interests held by all Members, without regard to
quorum requirements, unless the unanimous vote (under Section 4.9) provisions
apply or except as to any other matter the Member agree shall require a
unanimous vote or as otherwise specifically provided in this Agreement. Any
determination to be made by the Members will be made in each Member's sole and
absolute discretion.
4.4 NO RESIGNATION OR RETIREMENT. Each Member agrees not to voluntarily resign
or retire as a Member in the Company. However, if such voluntary resignation or
retirement occurs in contravention of this Agreement, the withdrawing Member
will, without further act, become a Transferee of such Ownership Interest (with
the limited rights of a Transferee as set forth in Section 13.6). Any Member who
resigns or retires from the Company in contravention of this Agreement will be
liable to the Company and the other Members for proven monetary damages (but any
such action or proposed action to resign or retire will not be subject to any
equitable action for injunctive relief or specific performance).
4.5 POWERS. Each Manager is an agent of the Company for the purpose of
conducting its business and affairs. The act of any Manager for apparently
carrying on in the usual way of the Company's business or affairs binds the
Company unless the Manager so acting has, in fact, no authority to act for the
Company in the particular matter and the person with whom such Member is dealing
has knowledge of such lack of authority. The act of any Manager which is not
apparently for the carrying on in the usual way of the Company's business or
affairs does not bind the Company unless authorized in accordance with this
Agreement. Each Manager agrees to act on behalf of the Company only in
compliance with this Agreement, and agrees that any act in contravention of this
Agreement renders such Manager liable to the Company and other Members for
monetary damages and other relief.
4.6 SUBSTITUTE MEMBERS. A Transferee may be admitted as a substitute Member of
the Company only upon the affirmative written agreement of all of the Members
(excluding the Transferor Member), effective upon a date specified (which must
be on or after the effective date of the Transfer, as determined under Section
13.5).
4.7 ADDITIONAL MEMBERS. Subject to Section 4.9, additional Members of the
Company may be admitted incident to the contribution of money or other
property to the Company (or otherwise) only
5
<PAGE>
upon the affirmative written agreement of all Members, effective upon a date
specified by all the Members.
4.8 OFFICERS. The Company, acting through the Managers, may appoint and remove
such officers as it determines to be necessary or desirable to carry out the
day-to-day management of the Company. The Company's officers may include a
president, one or more vice presidents, a secretary and a treasurer, as well as
one or more assistant vice presidents, secretaries and treasurers. Such officers
may also include a chief executive officer, chief operating officer and chief
financial officer. Appointment as an officer or agent of the Company will not,
of itself create any contract rights. The officers of the Company, acting in
their capacity as such, will be agents acting on behalf of the Company as
principal. No officer of the Company has the continuing exclusive authority to
make independent business decisions on behalf of the Company without the
approval of the Managers as set forth in this Article.
4.9 UNANIMOUS VOTE. The following actions by the Company will require the
affirmative vote of all the Managers and the Members, without regard to quorum
requirements.
[a] The admission of an additional Member under Section 4.7;
[b] Any non pro-rata distribution, including the non pro-rata distribution of
assets in kind in Liquidation under Section 12.3;
[c] The amendment of this Agreement, except as provided in Section 14.1 of
this Agreement;
[d] The merger of the Company with any other business entity as provided by
governing law; or
[e] The sale of substantially all of the Company's assets.
ARTICLE 5: ALLOCATION OF PROFITS AND LOSSES
5.1 PROFITS AND LOSSES. For each Fiscal Year, Profits or Losses of the Company
will be an amount equal to the Company's income or loss determined under the
accrual method of accounting, in accordance with generally accepted accounting
principles consistently applied.
5.2 GENERAL ALLOCATION RULE. Except as otherwise provided in (or until changed
pursuant to) this Agreement, the Profits or Losses of the Company, including
items of income, gain, loss and deduction for each Fiscal Year, will be
allocated to the Members in proportion to their respective Ownership Interests
as defined herein. Appropriate adjustment during the Fiscal Year of any change
in this allocation will be determined in accordance with Section 706 of the Code
and the Section 706 Regulation to take into account the varying interests of the
Members in the Company during such Fiscal Year, in the manner determined by the
Company.
5.3 EXCEPTION. Notwithstanding the general rule on allocation and for
tax accounting purposes only and not for financial statement purposes or any
other provision of this Operating Agreement, no cash shall be distributed to any
Member if the effect thereof would be to create a deficit in his
6
<PAGE>
Capital Account balance or increase the deficit in his Capital Account below the
sum of [1] the amount (if any,) which he is required to contribute to the
Company and [2] said Member's share of gain which the Company would recognize
upon a sale of its property for an amount equal to the balance of the
non-recourse debt encumbering it, (the "Company's Minimum Gain") and such cash
shall be retained by the Company and shall be distributed to the Member at the
earliest time or times possible when such distributions will not cause such a
deficit or increase such a deficit in the distributee's Capital Account balance.
Notwithstanding the provisions of Section 5.2, the following allocations of net
profits and net losses and items thereof shall be made:
[a] If in any taxable year there is a net decrease in the amount of the
Company's Minimum Gain, each Member shall be allocated items of the
Company's net profits for that year (and, if necessary, subsequent
years) equal to that Member's share of the net decrease in the
Company's Minimum Gain (within the meaning of Treasury Regulation
Section 1.704-2(g)(2)). The items to be so allocated shall be
determined in accordance with Treasury Regulation Section 1.704-2(j).
This Section 5.3 is intended to comply with the Minimum Gain Chargeback
requirement in Treasury Regulation Section 1.704-2 and shall be
interpreted consistently therewith.
[b] If during any taxable year a Member unexpectedly receives any
adjustments, allocations or distributions described in Treasury
Regulation Section 1.704-l(b)(2)(ii)(d)(4), (5), or (6), then items of
net profits shall be specially allocated to each Member in an amount
and manner sufficient to eliminate, to the extent required by Treasury
Regulation Section 1.704-(1)(b)(2)(ii)(d), the deficit in the Capital
Account of such Member as quickly as possible, provided that an
allocation pursuant to this Section 5.3 [b] shall be made only if and
to the extent that such Member has an adjusted Capital Account deficit
after all other allocations provided for in this Article 5 have been
tentatively made and as if this Section 5.3[b] were not in this
Agreement. This Section 5.3[b] is intended to comply with the
Qualified Income Offset requirements in Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
It is the intent of the Members that the allocations provided for in this
Operating Agreement have "substantial economic effect," as that term is defined
in Section 704(b) of the Code. Notwithstanding anything in this Section 5.3 to
the contrary, nothing contained in this Section 5.3 shall serve to restrict any
distribution by the Company to any Member.
5.4 TAX ALLOCATIONS. Allocation of items of income, gain, loss and deduction of
the Company for federal income tax purposes for a Fiscal Year will be allocated,
as nearly as is practicable, in accordance with the manner in which such items
are reflected in the allocations of Profits and Losses among the Members for
such Fiscal Year. To the extent possible, principles identical to those that
apply to allocations for federal income tax purposes will apply for state and
local income tax purposes.
5.5 TRANSFER. Except as otherwise provided in Section 5.2, if an Ownership
Interest is transferred during any Fiscal Year (whether by Transfer or
liquidation of an Ownership Interest, or otherwise), the books of the Company
will be closed as of the effective date of Transfer. The Profits or Losses
attributed to the period from the first day of such Fiscal Year through the
effective date of Transfer will be allocated to the Transferor, and the Profits
or Losses attributed to the period commencing on the effective date
7
<PAGE>
of Transfer will be allocated to the Transferee. In lieu of an interim closing
of the books of the Company and with the agreement of the Transferor and
Transferee, the Company may agree to allocate Profits and Losses for such Fiscal
Year between the Transferor and Transferee based on a daily proration of items
for such Fiscal Year or any other reasonable method of allocation (including an
allocation of extraordinary Company items, as determined by the Company, based
on when such items are recognized for federal income tax purposes).
5.6 CONTRIBUTED PROPERTY. All items of income, gain, loss and deduction with
respect to property contributed (or deemed contributed) to the Company will,
solely for tax purposes, be allocated among the Members as required by Section
704(c) of the Code so as to take into account the variation between the tax
basis of the property and its Fair Market Value at the time of contribution. For
example, if there is built-in gain with respect to contributed property, upon
the Company's sale of that property the pre-contribution taxable gain (as
subsequently adjusted under the Section 704(c) Regulations during the period
such property was held by the Company) would be allocated to the contributing
Member (and such pre-contribution gain would not again create a Capital Account
adjustment since the property was credited to Capital Account upon contribution
at its Fair Market Value). Except as limited by the following sentence, the
allocation of tax items with respect to Section 704(c) property to Members not
contributing such property will, to the extent possible, be equal to the
allocation of the corresponding book items made to such noncontributing Members
with respect to such property. If book allocations of cost recovery deductions
(such as depreciation or amortization) exceed the tax allocations of those items
so that the ceiling rule of the Section 704(c) Regulations applies, any curative
or remedial allocations of tax items will be made as the Company may determine.
All tax allocations made under this provision will be made in accordance with
Section 704(c) of the Code and the Section 704(c) Regulations.
5.7 TAX CREDITS. Any tax credit, and any tax credit recapture, will be allocated
to the Members in the same ratio that the federal income tax basis of the asset
(to which such tax credit relates) is allocated to the Members under the Section
46 Regulations, and if no basis is allocated, in the same manner as Profits are
allocated to the Members under Section 5.2.
ARTICLE 6: DISTRIBUTIONS
6.1 PRORATA DISTRIBUTIONS. The Company will make distributions to the Members in
proportion to their Ownership Interests. Any Net Sales Cash that is realized
incident to the Dissolution and Liquidation of the Company will be distributed
as provided in Article 12, with any Net Sales Cash that is realized other than
incident to the Dissolution and Liquidation of the Company to be distributed in
accordance with this Section 6.1.
6.2 NONPRORATA DISTRIBUTIONS. Unless the Members otherwise unanimously agree,
the Members intend that all Distributions will be made to the Members in
proportion to their Ownership Interests. In the event any Distribution is not
made in proportion to their Ownership Interests without the unanimous consent of
the Members, any excess Distribution to a Member will be treated as an advance
or loan made by the Company to such Member, payable to the Company with Interest
8
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and on demand.
6.3 PAYMENT. Any Distribution will be made to a Member only if such Person owns
an Ownership Interest on the date of Distribution, as reflected on the books of
the Company.
6.4 WITHHOLDING. If required by the Code or by state or local law, the Company
will withhold any required amount from Distributions to a Member for payment to
the appropriate taxing authority. Any amount so withheld from a Member will be
treated as a Distribution by the Company to such Person. Each Member agrees to
timely file any agreement that is required by any taxing authority in order to
avoid any withholding obligation that would otherwise be imposed on the Company.
6.5 DISTRIBUTION LIMITATION. Notwithstanding any other provision of this
Agreement, the Company will not make any Distribution to the Members unless,
after the Distribution, the liabilities of the Company (other than liabilities
to Members on account of their Capital Contributions) have been paid or there
remains property of the Company sufficient to pay them.
6.6 CASH RESERVES. The Company will establish and maintain reasonable cash
reserves for [a] operating expenses (other than depreciation, amortization or
similar non-cash allowances), [b] capital improvements, [c] debt service, [d]
working capital and [e] bankroll. The amount of such reserves will be as the
Company may from time to time determine.
ARTICLE 7: MEETINGS OF MEMBERS
7.1 ANNUAL MEETING. Unless the Company determines (whether by vote or otherwise)
that an annual meeting is not necessary or desirable, the annual meeting of the
Members will be held on the second Tuesday of April in each year at 9:00 a.m.
(local time) by Notice to all other Members. The purpose of the annual meeting
is to review the Company's operations for the preceding Fiscal Year and to
transact such business as may come before the meeting. The failure to hold any
annual meeting has no adverse effect on the continuance of the Company.
7.2 SPECIAL MEETINGS. Special meetings of the Members, for any purpose or
purposes, may be called by any Member or Members owning at least ten percent
(10%) of the Ownership Interests held by all Members by notice to all other
Members.
7.3 PLACE. The Members calling the meeting may designate any place as the place
of meeting for any meeting of the Members. If no designation is made, or if a
special meeting is otherwise called, the place of meeting will be the Company's
executive offices in Colorado.
7.4 NOTICE. Notice of any annual meeting determined by resolution of the Members
or of any special meeting must be given not less than 5 days nor more than 30
days before the date of the meeting. Such notice must state the place, day, and
hour of the meeting and, in the case of a special meeting, the purpose for which
the meeting is called.
9
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7.5 WAIVER OF NOTICE. Any Member may waive, in writing, any notice is required
to be given to such Member, whether before or after the time stated in such
notice. Any Member who signs minutes of action (or written consent or agreement)
will be deemed to have waived any required notice with respect to such action.
7.6 RECORD DATE. For the purpose of determining Members entitled to notice of or
to vote at any meeting of Members, the date on which notice of the meeting is
first given will be the record date for the determination of Members. Any such
determination of Members entitled to vote at any meeting of Members will apply
to any adjournment of a meeting.
7.7 QUORUM. A quorum at any meeting of Members shall consist of Members owning
at least 50% of the Ownership Interests held by all Members. Any meeting at
which a quorum is not present may adjourn the meeting to another place, day and
hour without further notice.
7.8 MANNER OF ACTING. If a quorum is present, the affirmative vote of Members as
set forth in Article 4 will be the act of the Company.
7.9 PROXIES. At a meeting of the Members, a Member may vote in person or by
written proxy given to another Member. Such proxy must be signed by the Member
or by a duly authorized attorney-in-fact and filed with the Company before or at
the time of the meeting. No proxy will be valid after eleven months from the
date of its signing unless otherwise provided in the proxy. Attendance at the
meeting by the Member giving the proxy will revoke the proxy during the period
of attendance.
7.10 MEETINGS BY TELEPHONE. The Members may participate in a meeting by means of
conference telephone or similar communications equipment by which all Members
participating in the meeting can hear each other at the same time. Such
participation will constitute presence in person at the meeting and waiver of
any required notice.
7.11 ACTION WITHOUT A MEETING. Any action required or permitted to be taken at a
meeting of Members under this Article 7 may be taken without a meeting if the
action is evidenced by one or more written consents describing the action taken,
signed by Members owning total Ownership Interests sufficient for the particular
action as set forth in Article 4. Action so taken is effective when sufficient
Members approving the action have signed the consent, unless the consent
specifies a later effective date. Notice of the action must be provided to all
members.
ARTICLE 8: LIABILITY OF A MEMBER
8.1 LIMITED LIABILITY. Unless otherwise provided in the Act, the Articles or an
agreement signed by the Member to be subjected to any individual liability, no
Member of the Company is individually liable for the debts or liabilities of the
Company.
8.2 LIABILITY TO COMPANY. Each Member is liable to the Company for any Capital
Contribution or Distribution that has been wrongfully or erroneously returned or
paid to such Person in violation of the Act, the Articles or this Agreement.
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ARTICLE 9: INDEMNIFICATION
9.1 INDEMNIFICATION. Except with respect to any actions or omissions described
in Section 14.10 and the last sentence of Section 4.4 and 4.5, the Company will
indemnify, defend and hold harmless any Person who was or is a party (or is
threatened to be made a party) to any Proceeding by reason of the fact that such
Person was a Member, or agent or representative thereof, a Manager, employee or
agent of the Company to the fullest extent permitted by the Act. Any such
indemnification will apply to any Liability actually and reasonably incurred in
connection with the defense or settlement of the Proceeding.
9.2 EXPENSE ADVANCEMENT. With respect to the expenses actually and reasonably
incurred by a Member or Manager who is a party to a Proceeding, the Company
shall provide funds to such Person in advance of the final disposition of the
Proceeding if the Person furnishes the Company with such Person's written
affirmation of a good-faith belief that such Person has met the standard of
conduct described in the Act, and such Person agrees in writing to repay the
advance if it is subsequently determined that such Person has not met such
standard of conduct.
9.3 INSURANCE. The indemnification provisions of this Article do not limit a
Member's or Manager's right to recover under any insurance policy or other
financial arrangement by the Company (including any self-insurance, trust fund,
letter of credit, guaranty or surety). If, with respect to any Liability, any
Member or Manager receives an insurance or other indemnification payment which,
together with any indemnification payment made by the Company, exceeds the
amount of such Liability, then such Member or Manager will immediately repay
such excess to the Company.
ARTICLE 10: ACCOUNTING AND REPORTING
10.1 FISCAL YEAR. For income tax and accounting purposes, the Fiscal Year of the
Company will end on the last Sunday in April of each year (unless otherwise
required by the Code).
10.2 ACCOUNTING METHOD. For accounting purposes, the Company will use
generally accepted accounting principles.
10.3 TAX ELECTIONS. The Company will have the authority to make such tax
elections, and to revoke any such election, as the Company may from time to time
determine.
10.4 RETURNS. The Company will cause the preparation and timely filing of all
tax returns required to be filed by the Company pursuant to the Code, as well as
all other tax returns required in each jurisdiction in which the Company does
business.
10.5 REPORTS. The Company will furnish a Profit or Loss statement and a
balance sheet to each
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Member within a reasonable time after the end of each fiscal quarter. The
Company books will be closed at the end of each Fiscal Year and audited
financial statements prepared showing the financial condition of the Company and
its Profits or Losses from operations. Copies of these statements will be given
to each Member. In addition, as soon as is practicable after the close of each
Fiscal Year (and in any event within 90 days following the end of each Fiscal
Year), the Company will provide each Member with all necessary tax reporting
information.
10.6 BOOKS AND RECORDS. The records of the Company will be kept at the Company's
business office in Colorado, and will be available for inspection and copying by
any Member at such Person's expense, during ordinary business hours.
10.7 INFORMATION. Any Member has the right to inspect and copy the Company books
and records as provided in Section 10.6 and to have a formal accounting of
Company affairs whenever circumstances render it just and reasonable. In
addition, subject to reasonable standards as established by the Company from
time to time, and upon reasonable demand for any purpose reasonably related to
the Member's interest as a Member, any Member has the right to obtain from the
Company correct and complete information relating to the state of the Company's
business and its financial condition.
10.8 BANKING. The Company may establish one or more bank or financial accounts
and safe deposit boxes. The Company may authorize one or more individuals to
sign checks on and withdraw funds from such bank or financial accounts and to
have access to such safe deposit boxes, and may place such limitations and
restrictions on such authority as the Company deems advisable.
10.9 TAX MATTERS PARTNER. Until further action by the Company, Casino America of
Colorado is designated as the tax matters partner under Section 623l (a)(7) of
the Code. The tax matters partner will be responsible for notifying all Members
of ongoing proceedings, both administrative and judicial, and will represent the
Company throughout any such proceeding. The Members will furnish the tax matters
partner with such information as it may reasonably request to provide the
Internal Revenue Service with sufficient information to allow proper notice to
the Members. If an administrative proceeding with respect to a partnership item
under the Code has begun, and the tax matters partner so requests, each Member
will notify the tax matters partner of its treatment of any partnership item on
its federal income tax return, if any, which is inconsistent with the treatment
of that item on the partnership return for the Company. Any settlement agreement
with the Internal Revenue Service will be binding upon the Members only as
provided in the Code. The tax matters partner will not bind any other Member to
any extension of the statute of limitations or to a settlement agreement without
such Member's written consent. Any Member who enters into a settlement agreement
with respect to any partnership item will notify the other Members of such
settlement agreement and its terms within 30 days from the date of settlement.
If the tax matters partner does not file a petition for readjustment of the
partnership items in the Tax Court, Federal District Court or Claims Court
within the 90 day period following a notice of a final partnership
administrative adjustment, any notice partner or 5-percent group (as such terms
are defined in the Code) may institute such action within the following 60 days.
The tax matters partner will timely notify the other Members in writing of its
decision. Any notice partner or 5 percent group will notify any other Member of
its filing of any petition for readjustment.
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10.10 NO PARTNERSHIP. The classification of the Company as a partnership will
apply only for federal (and, as appropriate, state and local) income tax
purposes. This characterization, solely, for tax purposes, does not create or
imply a general partnership between the Members for state law or any other
purpose. Instead, the Members acknowledge the status of the Company as a limited
liability company formed under the Act.
ARTICLE 11: DISSOLUTION OF THE COMPANY
11.1 DISSOLUTION. Dissolution of the Company will occur only upon the happening
of any of the following events:
[a] An event of Withdrawal (as defined in Section 11.2) of a Member, unless
there is at least one remaining Member (including any Transferee admitted
as a substitute Member);
[b] By unanimous agreement of the Members; or
[c] December 31, 2096.
11.2 EVENTS OF WITHDRAWAL. An event of Withdrawal of a Member occurs when any of
the following occurs:
[a] With respect to any Member, upon the Transfer of all of such Member's
Ownership Interest not approved by a majority of the Members (which
Transfer is treated as a resignation);
[b] With respect to any Member, upon the voluntary withdrawal (including any
resignation or retirement in contravention of Section 4.4) of the Member
by notice to all other Members;
[c] With respect to any Member that is a corporation, upon filing of articles
of dissolution of the corporation;
[d] With respect to any Member that is a partnership or a limited liability
company, upon dissolution of such entity;
[e] With respect to any Member who is an individual, upon either the death or
retirement of the individual, or upon such Person's insanity or the entry
by a court of competent jurisdiction of an order adjudicating the
individual to be incompetent to manage such individual's person or estate;
[f] With respect to any Member that is a trust, upon termination of the trust;
[g] With respect to any Member that is an estate, upon final distribution of
the estate's Ownership Interest;
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[h] Any other event which terminates the continued membership of a Member in
the Company;
[i] With respect to any Member, the bankruptcy of the Member, so long as there
is one or more remaining Members.
Within 30 days following the happening of any event of Withdrawal with
respect to a Member, such Member must give notice of the date and the nature of
such event to the Company. Any Member failing to give such notice will be liable
in damages for the consequences of such failure as otherwise provided in this
Agreement. Upon the occurrence of an event of Withdrawal with respect to a
Member, such Member will cease to have voting rights under Article 4, and such
Member's Ownership Interest will be deemed transferred to such Member's
Transferee or other successor in interest (which Person, unless already a Member
in such capacity, will have only the limited rights of a Transferee as set forth
in Section 13.6, unless and until admitted as a substitute Member).
11.3 BANKRUPTCY. Notwithstanding anything else to the contrary contained herein
or in Section 7-80-801(1)(c) of the Act, the bankruptcy of a Member will not
dissolve the Company. The bankruptcy of a Member will be deemed to occur when
such Person: [a] files a voluntary petition in bankruptcy, [b] is adjudged a
bankrupt or insolvent, or has entered against such Person an order for relief in
any bankruptcy or insolvency proceeding, [c] files a petition or answer seeking
for such Person any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or regulation,
[d] files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against such Person in any proceeding
of this nature, or [e] seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of all or any substantial part of such Person's
properties. In addition, the bankruptcy of a Member will be deemed to occur if
any proceeding filed against a Member seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation is not dismissed within 120 days or if the
appointment without the Member's consent (or acquiescence of a trustee, receiver
or liquidator of the Member or of all or any substantial part of such Person's
properties) is not vacated or stayed within 90 days (or if after the expiration
of any stay, if the appointment is not vacated within 90 days).
ARTICLE 12: LIQUIDATION
12.1 LIQUIDATION. Upon Dissolution of the Company, the Company will immediately
proceed to wind up its affairs and liquidate. The Managers will appoint a
liquidating trustee. The winding up and Liquidation of the Company will be
accomplished in a businesslike manner as determined by the liquidating trustee
and this Article 12. A reasonable time will be allowed for the orderly
Liquidation of the Company and the discharge of liabilities to creditors so as
to enable the Company to provide for any losses attendant upon Liquidation. Any
gain or loss on disposition of any Company assets in Liquidation will be
allocated to Members and credited or charged to Capital Accounts in accordance
with the provisions of Articles 3 and 5. Any liquidating trustee is entitled to
reasonable compensation for services actually performed, and may contract for
such assistance
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in the liquidation process as such Person deems necessary. Until
the filing of articles of dissolution as provided in Section 12.6, the
liquidating trustee may settle and close the Company's business, prosecute and
defend suits, dispose of its property, discharge or make provision for its
liabilities, and make distributions in accordance with the priorities set forth
in Section 12.2.
12.2 PRIORITY OF PAYMENT. The assets of the Company will be distributed in
Liquidation of the Company in the following order:
[a] First, to non-Member creditors of the Company in order of priority as
provided by law in payment of unpaid liabilities of the Company to the
extent required by law or under agreements with such creditors;
[b] Second, to the setting of any reserves which the Members reasonably deem
necessary for any anticipated, contingent or unforeseen liabilities or
obligations of the Company arising out of or in connection with the
conduct of the Company's business. At the expiration of such period as the
Members reasonably deem advisable, the balance thereof shall be
distributed in accordance with this Section 12.2;
[c] Third, to any Member for any other loans or debts owing to such Member by
the Company;
[d] Fourth, to all Members in proportion to their Capital Account balances to
the extent allowable under Section 5.3 until their Capital Account
balances are reduced to zero; and,
[e] Fifth, the balance, if any, to all Members in proportion to their
Ownership Interests percentages under Section 5.2.
12.3 DISTRIBUTION TO MEMBERS. Distributions in Liquidation due to the Members
may be made by either or a combination of the following methods: selling the
Company assets and distributing the net proceeds, or by distributing the Company
assets to the Members at their net Fair Market Value in kind. Any liquidating
Distribution in kind to the Members may be made either by a pro-rata
Distribution of undivided interests or, upon the affirmative Vote of all
Members, by non pro-rata Distribution of specific assets at Fair Market Value on
the effective date of Distribution. Any Distribution in kind may be made subject
to, or require assumption of, liabilities to which such property may be subject,
but in the case of any non pro-rata Distribution only upon the express written
agreement of the Member receiving the Distribution. Each Member hereby agrees to
save and hold harmless the other Members from such Member's share of any and all
such liabilities which are taken subject to or assumed. Appropriate and
customary prorations and adjustments shall be made incident to any Distribution
in kind. The Members will look solely to the assets of the Company for the
return of their Capital Contributions, and if the assets of the Company
remaining after the payment or discharge of the debts and liabilities of the
Company are insufficient to return such contributions, they will have no
recourse against any other Member.
12.4 NO RESTORATION OBLIGATION. Except as otherwise specifically provided in
Article 8, nothing contained in this Agreement imposes on any Member an
obligation to make a Capital Contribution in order to restore a deficit Capital
Account upon Liquidation of the Company. Furthermore, each Member will look
solely to the assets of the Company for the return of such Member's Capital
Contribution and Capital Account.
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12.5 LIQUIDATING REPORTS. A report will be submitted with each liquidating
distribution to Members, showing the collections, disbursements and
distributions during the period which is subsequent to any previous report. A
final report, showing cumulative collections, disbursements and distributions,
will be submitted upon completion of the liquidation process.
12.6 ARTICLES OF DISSOLUTION. Upon Dissolution of the Company and the completion
of the winding up of its business, the Company will file articles of dissolution
(to cancel its Articles of Organization) with the Colorado Secretary of State
pursuant to the Act. At such time, the Company will also file an application for
withdrawal of its certificate of authority in any jurisdiction where it is then
qualified to do business.
ARTICLE 13: TRANSFER RESTRICTIONS
13.1 GENERAL RESTRICTION. No Member may Transfer all or any part of its
Ownership Interest in any manner whatsoever except: [a] to a Permitted
Transferee as set forth in Section 13.3 or [b] after full compliance with the
right of first refusal set forth in Section 13.4, and in either case only if the
requirements of Section 13.5 have also been satisfied. Any other Transfer of all
or any part of an Ownership Interest is null and void, and of no effect. Any
Member who makes a Transfer of all of such Member's Ownership Interest will be
treated as resigning from the Company on the effective date of such Transfer.
Any Member who makes a Transfer of part (but not all) of such Member's Ownership
Interest will continue as a Member (with respect to the interest retained), and
such partial Transfer will not constitute an event of Withdrawal of such Member.
The rights and obligations of any resigning Member or of any Transferee of an
Ownership Interest will be governed by the other provisions of this Agreement.
13.2 NO MEMBER RIGHTS. No Member has the right or power to confer upon any
Transferee the attributes of a Member in the Company. The Transferee of all or
any part of an Ownership Interest by operation of law does not, by virtue of
such Transfer, succeed to any rights as a Member in the Company.
13.3 PERMITTED TRANSFEREE. Subject to the requirements set forth in Section
13.5, a Person may Transfer all or any part of such Person's Ownership Interest:
[a] To an Affiliate of such Person,
[b] To another Member,
[c] To the Company,
[d] To a Person approved by all the Members;
[e] To another Person as part of a merger, reorganization, consolidation or
sale of all or substantially all of the assets of a Person that controls
any Member; or
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[f] In the form of a pledge or the granting of a security interest to another
Person or a foreclosure or sale in lieu of foreclosure in connection with
the granting of any such pledge or security interest as described in
Section 13.7.
13.4 RIGHT OF FIRST REFUSAL. Prior to any proposed Transfer of all or any part
of an Ownership Interest, other than to a Permitted Transferee pursuant to
Section 13.3, the Transferor must obtain a Third Party Offer. For purposes of
this Section 13.4, a Transfer of an Ownership Interest of a Member shall be
deemed to occur upon any change in control of such Member other than to a
Permitted Transferee pursuant to Section 13.3. The Third Party Offer must not be
subject to unstated conditions or contingencies or be part of a larger
transaction such that the price for the Ownership Interest stated in such Third
Party Offer does not accurately reflect the Fair Market Value (reduced by the
amount of associated liabilities) of such Ownership Interest. The Third Party
Offer must contain a description of all of the consideration, material terms and
conditions of the proposed Transfer. The Transferor will give notice of the
Third Party Offer to the Company and all the Members exclusive of Transferees
who have not been admitted as substitute Members pursuant to Section 4.6 (the
"Other Members") other than the Transferor, together with a written offer to
sell the Ownership Interest (which is the subject of the Third Party Offer) to
the Company and the other Members on the same price and terms as the Third Party
Offer as provided herein. The Company may accept such offer by the Transferor,
in whole but not in part, by giving notice to the Transferor within 30 days
after notice of such offer. Unless otherwise agreed, the closing of such sale
will be held at the Company's registered office in Colorado on a date to be
specified by the Company which is not later than 60 days after the date of the
Company's notice of acceptance. At the closing, the Company will deliver the
consideration in accordance with the terms of the Third Party Offer, and the
Transferor will by appropriate documents assign to the Company the Ownership
Interest to be sold, free and clear of all liens, claims and encumbrances.
Subject to Section 13.5, if the Company has not accepted the Third Party Offer
and closed the purchase in accordance with this Section 13.4, the Other Members
shall have the right, on a pro rata basis in accordance with the ratio of their
Percentage Ownership Interests, to purchase, in whole but not in part, the
Ownership Interest of the Transferor in accordance with the terms of the Third
Party Offer by written notice to the Transferor within 30 days after the
expiration of the thirty-day period for the Company's acceptance. If all of the
other Members reject the offer or if the offer is not closed in accordance with
this Section 13.4, the Transferor will be free for a period of 60 days after the
last day for such acceptance to sell all, but not less than all, of such
Ownership Interest so offered, but only to the Third Party for a price and on
terms no more favorable to the Third Party than the Third Party Offer. If such
Ownership Interest is not so sold within such 60-day period (or within any
extensions of such period agreed to in writing by the Company), all rights to
sell such Ownership Interest pursuant to such Third Party Offer (without making
another offer to the Company pursuant to this Section 13.4) will terminate and
the provisions of this Article will continue to apply to any proposed future
Transfer.
13.5 GENERAL CONDITIONS ON TRANSFERS. No Transfer of an Ownership Interest after
the date of this Agreement will be effective unless all of the conditions set
forth below are satisfied:
[a] Unless waived by the Company, the Transferor signs and delivers to the
Company an undertaking in form and substance satisfactory to the
Company to pay all reasonable expenses incurred by the Company in
connection with the Transfer (including, but not
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limited to, reasonable fees of counsel and accountants and the costs to be
incurred with any additional accounting required in connection with the
Transfer, and the cost and fees attributable to preparing, filing and
recording such amendments to the organizational documents or filings as
may be required by law);
[b] Such transfer does not require the registration of such transferred
interest pursuant to any applicable federal or state securities laws,
and the Transferor delivers to the Company an opinion of counsel for
the Transferor satisfactory in form and substance to the Company to the
effect that the Transfer of the Ownership Interest is in compliance
with the applicable federal and state securities laws, and a statement
of the Transferee in form and substance satisfactory to the Company
making appropriate representations and warranties in respect to
compliance with the applicable federal and state securities laws and as
to any other matter reasonably required by the Company;
[c] The Company receives an opinion from its counsel that [i] the Transfer
does not cause the Company to lose its classification as a partnership for
federal or state income tax purposes, and [ii] the Transfer, together with
all other Transfers within the preceding twelve months, does not cause a
termination of the Company for federal or state income tax purposes;
[d] The Transferor signs and delivers to the Company a copy of the assignment
of the Ownership Interest to the Transferee, together with the
Certificates for Units representing such Ownership Interest, duly executed
for assignment;
[e] The Transferee signs and delivers to the Company its agreement to be bound
by this Agreement;
[f] Such Transfer does not cause the Company to become a "Publicly Traded
Partnership," as such term is defined in Sections 469(k)(2) or 7704(b) of
the Code;
[g] Such Transfer does not subject the Company to regulation under the
Investment Company Act of 1940, the Investment Advisers Act of 1940 or the
Employee Retirement Income Security Act of 1974, each as amended;
[h] Such Transfer is in compliance with the Colorado Limited Gaming Act;
[i] Such Transfer is not made to any Person who lacks the legal right, power
or capacity to own such Interest; and
[j] The Transfer is in compliance with the other provisions of this Article.
Except as the Company and the Transferee may otherwise agree, the Transfer
of an Ownership Interest will be effective as of 12:01 a.m. (Mountain Time) on
the first day of the month following the month in which all of the above
conditions have been satisfied. Upon the effective date, Appendix I will be
deemed amended to reflect the new Ownership Interests.
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Notwithstanding anything to the contrary expressed or implied in this
Agreement, the sale, assignment, transfer, pledge or other disposition of any
direct or indirect interest in the Company is subject to the laws of the state
of Colorado and the requirements, limitations and decisions of the Colorado
Division of Gaming and the Colorado Limited Gaming Control Commission..
13.6 RIGHTS OF TRANSFEREES. Any Transferee of an Ownership Interest will, on the
effective date of the Transfer, have only those rights of an assignee as
specified in the Act and this Agreement unless and until such Transferee is
admitted as a substitute Member. This provision limiting the rights of a
Transferee will not apply if such Transferee is already a Member; provided that,
any Member who resigns or retires from the Company in contravention of Section
4.4 will have only the rights of an assignee as specified in the Act and this
Agreement. Any Transferee of all or any part of an Ownership Interest who is not
admitted as a substitute Member in accordance with this Agreement has no right
[a] to participate or interfere in the management or administration of the
Company's business or affairs, [b] to vote or agree on any matter affecting the
Company or any Member, [c] to require any information on account of Company
transactions, or [d] to inspect the Company's books and records. The only right
of a Transferee of all or any part of an Ownership Interest who is not admitted
as a substitute Member in accordance with this Agreement is to receive the
allocations and Distributions to which the Transferor was entitled (to the
extent of the Ownership Interest transferred) and to receive required tax
reporting information. However, each Transferee of all or any part of an
Ownership Interest (including both immediate and remote Transferees) will be
subject to all of the obligations, restrictions and other terms contained in the
Agreement as if such Transferee were a Member. To the extent of any Ownership
Interest transferred, the Transferor Member does not possess any right or power
as a Member and may not exercise any such right or power directly or indirectly
on behalf of the Transferee. The Members acknowledge that these provisions may
differ from the rights of an assignee as set forth in the Act, and the Members
agree that they intend, to that extent, to vary those provisions by this
Agreement.
13.7 SECURITY INTEREST. The pledge or granting of a security interest, lien or
other encumbrance in or against all or any part of a Member's Ownership Interest
does not cause the Member to cease to be a Member or constitute an event of
Withdrawal. Upon foreclosure or sale in lieu of foreclosure of any such secured
interest, the secured party will be entitled to receive the allocations and
Distributions as to which a security interest has been granted by such Member.
In no event will any secured party be entitled to exercise any rights under this
Agreement, and such secured party may look only to such Member for the
enforcement of any of its rights as a creditor. In no event will the Company
have any liability or obligation to any Person by reason of the Company's
payment of a Distribution to any secured party as long as the Company makes such
payment in reliance upon written instructions from the Member to whom such
Distributions would be payable. Any secured party will be entitled, with respect
to the security interest granted, only to the Distributions to which the
assigning Member would be entitled under this Agreement, and only if, as and
when such Distribution is made by the Company. Neither the Company nor any
Member will owe any fiduciary duty of any nature to a secured party. Reference
to any secured party includes any assignee or successor-in-interest of such
Person.
13.8 REGULATORY COMPLIANCE RESTRICTIONS. Notwithstanding anything to the
contrary in this Agreement or elsewhere, the following provisions shall apply.
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The Company shall not issue any voting securities or other voting
interests, except in accordance with the provisions of the Colorado Limited
Gaming Act and the regulations promulgated thereunder. The issuance of any
voting securities or other voting interests shall be deemed not to be issued and
outstanding until (a) the Company shall cease to be subject to the jurisdiction
of the Colorado Limited Gaming Control Commission, or (b) the Colorado Limited
Gaming Control Commission shall, by affirmative action, validate said issuance
or waive any defect in issuance.
No voting securities or other voting interests issued by the Company and
no interests, claim or charge therein or thereto shall be transferred in any
manner whatsoever except in accordance with the provisions of the Colorado
Limited Gaming Act and the regulations promulgated thereunder. Any transfer in
violation thereof shall be void until (a) the Company shall cease to be subject
to the jurisdiction of the Colorado Limited Gaming Control Commission, or (b)
the Colorado Limited Gaming Control Commission shall, by affirmative action,
validate said transfer or waive any defect in said transfer.
If the Colorado Limited Gaming Control Commission at any time determines
that a holder of voting securities or other voting interests of this Company is
unsuitable to hold such securities or other voting interests, then the Company
may, within sixty (60) days after the findings of unsuitability, purchase such
voting securities or other voting interests of such unsuitable Person at the
lesser of (i) the cash equivalent of such Person's investment in the Company, or
(ii) the current market price as of the date of the finding of unsuitability
unless such voting securities or other voting interests are transferred to a
suitable person (as determined by the Commission) within sixty (60) days after
the finding of unsuitability. Until such voting securities or other voting
interests are owned by Persons found by the Commission to be suitable to own
them, (a) the Company shall not be required or permitted to pay any dividend or
interest with regard to the voting securities or other voting interests, (b) the
holder of such voting securities or other voting interests shall not be entitled
to vote on any matter as the holder of the voting securities shall not for any
purposes be included in the voting securities or other voting interests of the
Company entitled to vote, and (c) the Company shall not pay any remuneration in
any form to the holder of the voting securities or other voting interests except
in exchange for such voting securities or other voting interests as provided in
this paragraph.
ARTICLE 14: GENERAL PROVISIONS
14.1 AMENDMENT. This Agreement may be amended by the unanimous written agreement
of the Members. Any amendment will become effective upon such approval, unless
otherwise provided. Notice of any proposed amendment must be given at least 5
days in advance of the meeting at which the amendment will be considered (unless
the approval is evidenced by duly signed minutes of action). Any duly adopted
amendment to this Agreement is binding upon, and inures to the benefit of, each
Person who holds an Ownership Interest at the time of such amendment.
Notwithstanding any other provision of this Agreement, with respect to any
Transferee not admitted as a substitute Member, no amendment to Section 5.2
(relating to the general allocation rule for allocation of Profits or Losses),
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Section 6.1 (relating to pro-rata Distributions), Section 12.2 (relating to
Distributions in Liquidation) and Section 14.1 (relating to amendment of this
Agreement) will be effective, nor will such Person be required to make any
Capital Contribution, without such Person's written consent. Non-Material
amendments relating to this Agreement or that are necessary for compliance with
applicable law may be made by the Managers.
14.2 UNREGISTERED INTERESTS. Each Member [a] acknowledges that the Ownership
Interests are being offered and sold without registration under The Securities
Act of 1933, as amended, or under similar provisions of state law, [b]
represents and warrants that such Person is an accredited investor as defined
for federal securities laws purposes, [c] represents and warrants that it is
acquiring an Ownership Interest for such Person's own account, for investment,
and with no view to the distribution of the Ownership Interest, and [d] agrees
not to Transfer, or to attempt to Transfer, all or any part of its Ownership
Interest without registration under the Securities Act of 1933, as amended, and
any applicable state securities laws, unless the Transfer is exempt from such
registration requirements.
14.3 WAIVER OF PARTITION RIGHT. Each Member waives and renounces any right that
such Person may have prior to Dissolution and Liquidation to institute or
maintain any action for partition with respect to any real property owned by the
Company.
14.4 WAIVERS GENERALLY. No course of dealing will be deemed to amend or
discharge any provision of this Agreement. No delay in the exercise of any right
will operate as a waiver of such right. No single or partial exercise of any
right will preclude its further exercise. a waiver of any right on any one
occasion will not be construed as a bar to, or waiver of, any such right on any
other occasion.
14.5 EQUITABLE RELIEF. If any Person proposes to Transfer all or any part of
such Person's Ownership Interest in violation of the terms of this Agreement,
the Company or any Member may apply to any court of competent jurisdiction for
an injunctive order prohibiting such proposed Transfer except upon compliance
with the terms of this Agreement, and the Company or any Member may institute
and maintain any action or proceeding against the Person proposing to make such
Transfer to compel the specific performance of this Agreement. Any attempted
Transfer in violation of this Agreement is null and void, and of no force and
effect. The Person against whom such action or proceeding is brought waives the
claim or defense that an adequate remedy at law exists, and such Person will not
urge in any such action or proceeding the claim or defense that such remedy at
law exists.
14.6 REMEDIES FOR BREACH. The rights and remedies of the Members set forth in
this Agreement are neither mutually exclusive nor exclusive of any right or
remedy provided by law, in equity or otherwise. The Members agree that all legal
remedies (such as monetary damages) as well as all equitable remedies (such as
specific performance) will be available for any breach or threatened breach of
any provision of this Agreement.
14.7 ORIGINAL. This Agreement is signed in two original documents that are to be
delivered to each initial Member. A photocopy of this Agreement, as signed, will
be delivered to each substitute
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or additional Member, and each such photocopy will be deemed to be an original
document.
14.8 NOTICES. Any notices (including any communication or delivery) required or
permitted under this agreement will be in writing and will be addressed to the
Members at their respective addresses, as set forth on the Register of Members
maintained by the Company. All notices may be made by mail, personal delivery,
courier service or facsimile machine, and will be effective upon delivery. Any
Member may change such Person's address by notice to the Company and each other
Member.
14.9 COSTS. If the Company or any Member retains counsel for the purpose of
enforcing or preventing the breach or any threatened breach of any provision of
this Agreement or for any other remedy relating to it, then the prevailing party
will be entitled to be reimbursed by the non-prevailing party for all costs and
expenses so incurred (including reasonable attorneys' fees, costs of bonds, and
fees and expenses for expert witnesses) unless the arbitrator or other trier of
fact determined otherwise in the interest of fairness.
14.10 INDEMNIFICATION. Each Member hereby indemnifies and agrees to hold
harmless the Company and each other Member from any liability, cost or expense
arising from or related to any act or failure to act of such Member which is in
violation of this Agreement.
14.11 PARTIAL INVALIDITY. Wherever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. However, if for any reason any one or more of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect, such
action will not affect any other provision of this Agreement. In such event,
this Agreement will be construed as if such invalid, illegal or unenforceable
provision had never been contained in it.
14.12 ENTIRE AGREEMENT. This Agreement, together with the Members Agreement,
contains the entire agreement and understanding of the Members with respect to
its subject matter, and it supersedes all prior written and oral agreements. No
amendment of this Agreement will be effective for any purpose unless it is made
in accordance with Section 14.1.
14.13 BENEFIT. The contribution obligations of each Member will inure solely to
the benefit of the other Members and the Company, without conferring on any
other Person any rights of enforcement or other rights.
14.14 BINDING EFFECT. This Agreement is binding upon, and inures to the benefit
of, the Members and their permitted successors and assigns; provided that, any
Transferee will have only the rights specified in Section 13.6 unless admitted
as a substitute Member in accordance with this Agreement.
14.15 FURTHER ASSURANCES. Each Member agrees, without further consideration, to
sign and deliver such other documents of further assurance as may reasonably be
necessary to effectuate the provisions of this Agreement.
14.16 HEADINGS. Article and section titles have been inserted for convenience of
reference only. They are not intended to affect the meaning or interpretation of
this Agreement.
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14.17 TERMS. Terms used with initial capital letters will have the meanings
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural include the other, as the context requires or permits. The
word include (and any variation) is used in an illustrative sense rather than a
limiting sense.
14.18 GOVERNING LAW; CONFLICTS. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Colorado (except to the
extent preempted by any federal law or the gaming laws of any state or
governmental agency having jurisdiction over the affairs of any Member). Any
conflict or apparent conflict between this Agreement and the Act will be
resolved in favor of this Agreement except as otherwise required by the Act. The
Members have entered into a Members Agreement, dated as of the date of this
Agreement, which Members Agreement contains certain provisions as to the affairs
of the Company and the conduct of its business and which, for purposes of the
Act, shall be considered, together with this Agreement, as an "operating
agreement" of the Company.
14.19. EFFECTIVENESS. The effectiveness and enforceability of this Agreement are
subject to the occurrence of the Closing. This Agreement shall automatically,
without further action by any of the parties, become effective and enforceable
according to its terms, and shall supersede and replace the Operating Agreement,
as of the Closing Date. In the event the Closing shall not have occurred by
September 3, 1997, this Agreement shall be null and void AB INITIO and none of
the parties shall have any rights or obligations of any kind under or pursuant
to this Agreement. The Operating Agreement shall remain effective, and its terms
shall apply, until the Closing.
IN WITNESS WHEREOF, the initial Members have signed this Amended and Restated
Operating Agreement of Isle of Capri Black Hawk, L.L.C. as of the date first set
forth above.
CASINO AMERICA OF COLORADO, INC.,
a Colorado corporation
By: ____________________________
BLACKHAWK GOLD, LTD.,
a Nevada corporation
By: H. THOMAS WINN
H. Thomas Winn, President
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APPENDIX I
OWNERSHIP INTERESTS
DATE OWNERSHIP INTERESTS
------ -------------------
1. April 25, 1997 Casino America of Colorado, Inc. 51.6%
Blackhawk Gold, Ltd. 48.4%
2. July__, 1997 Casino America of Colorado, Inc. 55%
Blackhawk Gold, Ltd. 45%
3.* August ___, 1997 Casino America of Colorado, Inc. 59.20%
Blackhawk Gold, Ltd. 40.80%
4.
5.
6.
7.
8.
9.
10.
* Effective at the Closing Date.
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EXHIBIT "A"
DEFINITIONS
ACT: The Colorado Limited Liability Company Act, as
amended from time to time.
AFFILIATE: An "Affiliate" of a Person means a Person directly or
indirectly controlling, controlled by or under common
control with such Person. For this purpose and for
purposes of the use of the term "control" in this
Agreement, control means the possession, direct or
indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether
through the ownership of voting securities, by contract
or otherwise.
AGREEMENT: This Amended and Restated Operating Agreement, as
amended from time to time.
ARTICLES: The Articles of Organization of the Company as filed
under the Act, as amended from time to time.
BLACKHAWK GOLD: Blackhawk Gold, Ltd., a Nevada corporation, and its
Permitted Transferees (provided that any Transferee
will become a substitute Member only in accordance
with the Agreement).
CAPITAL ACCOUNT: The book value capital account maintained under
Section 3.6.
CAPITAL CONTRIBUTION: Any contribution by a Member to the Company.
CAPITAL TRANSACTION: Any sale, exchange, condemnation (including any eminent
domain or similar transaction), casualty, financing,
refinancing or other disposition with respect to any
real or personal property owned by the Company which is
not in the ordinary course of
business.
CASINO AMERICA OF Casino America of Colorado, Inc., a Colorado
COLORADO: corporation, and its Permitted Transferees (provided
that any Transferee will become a substitute Member
only in accordance with the Agreement).
CLOSING: The consummation of the sale of $75 million first
mortgage notes due 2004 issued by the Company and Isle
of Capri Black Hawk Capital Corp. to finance the
development, construction, equipping and operation of
the casino gaming project and related
facilities in Black Hawk, Colorado.
CLOSING DATE: The date and time at which the Closing occurs.
CODE: The Internal Revenue Code of 1986, as amended from time
to time (including corresponding provisions of
subsequent revenue laws).
COMPANY: Isle of Capri Blackhawk, L.L.C., as formed under the
Articles and as operating under this Agreement.
<PAGE>
DISSOLUTION: The dissolution of the Company as provided in
Section 11.1.
DISTRIBUTION: A distribution of money or other property made by
the Company with respect to an Ownership Interest.
FAIR MARKET VALUE: As to any property, the price at which a willing seller
would sell and a willing buyer would buy such property
having full knowledge of the relevant facts, in an
arm's- length transaction without time constraints, and
without being under any compulsion to buy or sell, or
the value otherwise agreed by the
Members to be the Fair Market Value.
FISCAL YEAR: The fiscal and taxable year of the Company as
determined under this Agreement, including both
12-month and short taxable years.
INITIAL OWNERSHIP: The relative Ownership Interest of the Members existing
upon the execution of this Agreement entitling the
holders thereof to all the benefits of ownership in the
Company, but which Ownership Interests may be changed
from time to time as set
forth in this Agreement.
LIABILITY: The obligation to pay any judgment, settlement,
penalty, fine or reasonable expense (including
attorneys' fees) incurred with respect to any
Proceeding.
LIQUIDATION: The process of terminating the Company and winding
up its business under Article 12 after its
Dissolution.
LOSSES: The Company's net loss (including deductions) for
any Fiscal Year, determined under Section 5.1.
MAJORITY IN INTEREST: More than 50% of the Ownership Interests.
MEMBER: A person who is an initial Member of the Company, or
who is subsequently admitted as a substitute or an
additional Member as provided in this Agreement.
MEMBERS AGREEMENT: The agreement, of even date with this Agreement,
between the Company, Blackhawk Gold, Casino America
of Colorado, Casino America, Inc., and Nevada Gold &
Casinos, Inc.
NET SALES CASH: Cash receipts of the Company from a Capital
Transaction, less payment of fees or expenses
related to the Capital Transaction.
NOTICE: Written notice (including any communication or
delivery), actually given pursuant to Section 14.8.
OWNERSHIP INTEREST: With respect to each Person owning an interest in the
Company, all of the interests of such Person in the
Company (including, without limitation, an interest in
Profits and Losses of the Company, a Capital Account
interest, and all other rights and obligations of such
Person under this Agreement), expressed as a percentage
(carried to the nearest one-thousandth of a percent, if
other than an even percentage), as initially set forth
in Section 1.2 and as subsequently changed in
accordance with this
Agreement.
<PAGE>
PERMITTED TRANSFEREE: A person described in Section 13.3 to whom an Ownership
Interest may be transferred without
compliance with a right of first refusal.
PERSON: An individual, corporation, trust, partnership, limited
liability company, limited liability association,
unincorporated organization,
association or other entity.
PROCEEDING: Any threatened, pending or completed claim, action,
suit or proceeding, whether formal or informal, and
whether civil, administrative, investigative or
criminal.
PROFITS: The Company's net profit (including income and
gains) for any Fiscal Year, determined under Section
5.1.
PROFITS INTEREST: Each Member's (or Transferee's) percentage interest
(carried to the nearest one-thousandth of a percent, if
other than an even percentage), in the Profits of
the Company, determined under Section 5.2.
REGULATIONS: The Treasury Regulations (including temporary
regulations) promulgated under the Code, as amended
from time to time (including corresponding
provisions of succeeding regulations).
THIRD PARTY: With respect to any Member, a Person other than an
Affiliate.
THIRD PARTY OFFER: A BONA FIDE, non-collusive, binding, arm's-length
written offer from a Third Party stated in terms of
U.S. dollars.
TRANSFER: A sale, exchange, assignment or other disposition of
Ownership Interest, whether voluntary or by
operation of law.
TRANSFEREE: A person to whom an Ownership Interest is
transferred in compliance with this Agreement.
TRANSFEROR: A person who transfers an Ownership Interest in
compliance with this Agreement.
WITHDRAWAL: The occurrence of an event with respect to a Member
which terminates membership in the Company, as
provided in Section 11.2.
<PAGE>
By: ___________________________ By: Casino America of Colorado, Inc.,
Its: ___________________________ Member
By: _________________________
Title: _________________________
Blackhawk Gold, Ltd., Member
By: H. THOMAS WINN
Title: President
EXHIBIT 10.4
MEMBERS AGREEMENT
This Agreement is made as of this 29th day of July, 1997 among Casino
America of Colorado, Inc., a Colorado corporation ("CAC"), Casino America, Inc.,
a Delaware corporation ("CA"), Blackhawk Gold, Ltd., a Colorado corporation
("BG") and Nevada Gold & Casinos, Inc., a Nevada corporation ("NG"). CAC and BG
are sometimes herein referred to as the "Members" or individually as a "Member".
WHEREAS, CAC and BG are the initial members of Isle of Capri Black Hawk
L.L.C., a Colorado limited liability company (the "Company") and are parties to
an Amended and Restated Operating Agreement of the Company dated as of the date
of this Agreement;
WHEREAS, CAC is a wholly-owned subsidiary of CA and BG is a
wholly-owned subsidiary of NG;
WHEREAS, the Company was formed for the purpose of developing,
constructing and operating a casino and related facilities in Black Hawk,
Colorado;
WHEREAS, the Company has entered into a Management Agreement, dated April
25, 1997, as amended effective as of the date hereof, with CA for CA to manage
the foregoing project;
WHEREAS, the parties wish to set forth certain agreements with respect to
the foregoing project and their respective rights and obligations;
THEREFORE, the parties agree as follows:
ARTICLE I: INITIAL OWNERSHIP INTEREST AND DEFINITIONS
1.1 INITIAL OWNERSHIP. The parties agree that, after giving effect to the
sale of Ownership Interests pursuant to Section 3.2 [a] below, the respective
percentage Ownership Interests are as follows: BG- 40.80% and CAC- 59.20%, and
that Appendix I to the Operating Agreement will be amended accordingly.
1.2 DEFINITIONS. Capitalized terms not otherwise defined in Exhibit A hereto
shall have the respective meanings ascribed for those terms in the Operating
Agreement, applicable to both singular and plural forms, for all purposes of
this Agreement.
ARTICLE 2: PROJECT DEVELOPMENT
GENERAL INTENT. The Members anticipate that certain expenditures will be made in
the development of the Project pursuant to the Development Plan (including
feasibility studies, development planning, regulatory approvals and the
obtaining of financing). The Members anticipate that these costs will be funded
by CAC pursuant and subject to the terms of Sections 3.1 and 3.3 hereof and
subject to the other terms and conditions of this Agreement.
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2.2 EMPLOYEE COSTS. Except as otherwise expressly provided in this Agreement or
in the Management Agreement, each Member will be separately responsible for its
own payroll and benefit expense of its employees and independent contractors
with respect to the Project or Company business.
2.3 DEBT FINANCING. Except for the Initial Contributions by the Members and any
contributions under the CA Completion Capital Commitment, the Members
acknowledge and agree that, to the extent commercially reasonable, the Project
will be funded through debt financing. The Company shall incur no debt or
liability for which the Members or their respective Affiliates would be
obligated in any way. Without limiting the foregoing, no Member or Affiliate
will be required to guarantee or co-sign any loan made to the Company or any
other obligation of the Company.
2.4 DEVELOPMENT PLAN. CAC will use its reasonable commercial efforts to attempt
to develop the Project on behalf of the Company. A description of the
Development Plan is contained in the Offering Circular, and such plan is hereby
approved by the Members. In consideration for contributing the Development Plan
for the Project to the Company, CAC has, effective as of the date of this
Agreement, received a credit to its capital account in the Company.
Neither CAC nor any Affiliate shall be liable to the Company or BG or its
Affiliates for any losses, damages, liabilities or expenses resulting or arising
from the Development Plan, other than as a direct and proximate result of the
gross negligence or willful misconduct of CAC; and neither CAC nor its
Affiliates makes any representations or warranties as to the Development Plan or
the successful completion of the Project.
BG and its Affiliates will cooperate with CAC in connection with the
development of the Project in all reasonable respects, including without
limitation, providing pertinent information, documents or records or making
appearances before regulatory authorities whose approvals are required for the
Project. Additionally, NG hereby agrees to allow the Company to dispose of
excavated rock or soil on property in Gilpin County owned by NG, subject to a
commercially reasonable fee, or to locate for the Company a reasonably
acceptable alternative site to dispose of such materials.
Notwithstanding anything to the contrary in this Agreement or elsewhere,
all costs, expenses, liabilities or obligations (the "Development and
Pre-Opening Costs") incurred by CAC or any Affiliate in connection with the
Development Plan or in connection with any other matter of any kind or nature
prior to the opening for public business of the Casino Facility (other than
costs of services provided by the regular employees of CA at no additional cost
to it), (i) shall not exceed the sum of one million dollars ($1,000,000) without
the consent of CAC and (ii) shall be deemed, as and when incurred or paid by CAC
or its Affiliates, to be a contribution to the capital of the Company pursuant
to Section 3.1(b)(i) below.
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ARTICLE 3: CAPITAL CONTRIBUTIONS
3.1 INITIAL CONTRIBUTIONS.
[a] BY BG: Upon the Closing, BG will have made an Initial Contribution of the
property described in the attached Exhibit "C" (the "BG Land"). The
Members agree that the Fair Market Value of the BG Land is $7.5 million.
[b] BY CAC: Upon the Closing, CAC will have made an Initial Contribution
aggregating $9.2 million, consisting of the following: (i) the sum of
$1 million, less the aggregate amount of the Development and
Pre-Opening Costs paid or incurred by CAC or its Affiliates through the
Closing Date, (ii) the Development Plan, which effective as of the
Closing Date, shall be deemed to have been contributed by CAC to the
Company, (iii) an assignment of the right to acquire the Caesars Land,
together with the amount of $6.4 million, representing the balance of
the total purchase price of $6.5 million for the Caesars Land and (iv)
the benefits to the Company resulting from the CA Completion Capital
Commitment and the Fee Subordination Agreement.
3.2 CERTAIN TRANSACTIONS BETWEEN CAC AND BG AT THE CLOSING. Effective as of the
Closing, the following will have occurred:
[a] BG will have sold to CAC and CAC will have purchased from BG, a portion
of BG's Ownership Interest representing 4.20% of the total Ownership
Interests in the Company, for the sum of $700,000, which the parties
acknowledge will have been paid in full as of the Closing Date. BG
represents and warrants to CAC that, as of the Closing Date, it will
have transferred, conveyed and assigned to CAC the foregoing Ownership
Interest, free and clear of all liens, restrictions, rights or
encumbrances of any kind whatsoever.
[b] CAC will have granted BG a non-assignable, non-transferrable right (the
"Put") to require CAC to purchase from BG an additional 4.80% of the
total Ownership Interest of the Company for a price of $800,000 (or
such lesser portion thereof for a prorata portion of such price). BG
must exercise the Put, if at all, by written notice to CAC pursuant to
Section 8.9 hereof by no later than the 5:00 P.M. Mountain time on the
first business day following the first anniversary of the Closing Date.
The closing of the purchase and sale pursuant to any exercise of the
Put, including the payment of the purchase price and the delivery of
the Certificates for the Ownership Interest being purchased, shall
occur no later than 10 days following the effective date of the
notice. Any Ownership Interest purchased pursuant to the exercise of
the Put shall be free and clear of all liens, encumbrances, rights or
restrictions of any kind whatsoever, and BG shall provide such
representations and warranties regarding title to the Ownership
Interests being conveyed as CAC may request. The Put shall
automatically expire in the event BG shall cease to be a Member of the
Company at any time or is subject to a bankruptcy as defined in Section
11.3 of the Operating Agreement.
[c] CAC will have loaned BG and NG the sum of $500,000, for which they shall
be jointly and severally liable, for a term expiring on the third
anniversary of the Closing Date, bearing interest at the Interest rate,
and secured by a pledge of all of BG's Ownership Interest in the
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Company, pursuant and subject to the terms of a Promissory Note and Pledge
Agreement in the form attached hereto as Exhibit B, which BG and NG will
have executed and delivered as of the Closing.
3.3 ADDITIONAL CONTRIBUTIONS. Except upon the agreement of all Members and upon
such terms and conditions as they may agree in writing, no Additional
Contributions will be required or permitted from the members of the Company,
except for any amounts contributed to the Company pursuant to the terms of the
CA Completion Capital Commitment and except that the Company may, by vote of the
Majority In Interest, require Additional Contributions from Members (i) if
required by governing law, (ii) as reasonably required in connection with the
development and construction of a hotel on the Project, but only to the extent
that the total funds available to complete the hotel from the unused portion of
the CA Completion Capital Commitment and from the proceeds of the $75 million of
Project financing are insufficient to permit the completion of the hotel, (iii)
for replacement of fixtures, furnishings or equipment of the Project and (iv)
not to exceed a total cumulative additional sum of $4 million, as reasonably
required for implementation of the Development Plan or other reasonably required
capital expenditures of the Company. The Member that provides any Additional
Contribution shall receive a corresponding credit to its capital account and its
Ownership Interest shall be increased proportionately with the increase in its
capital account.
3.4 DEFAULT. If a Member fails to make a required Capital Contribution timely
when due, each other Member which is not in default will have the option to:
[a] Make all or part of such Capital Contribution on its own behalf and
increase its Ownership Interest accordingly; or
[b] Loan all or part of such Capital Contribution amount to the Company, with
such loan payable on demand and with Interest (and such amount will be
treated as a loan rather than as a Capital Contribution).
If there is more than one Member which is not in default in its required
Capital Contributions, the non-defaulting Members will agree among themselves as
to the allocation of any required Capital Contribution that is either
contributed or loaned, and if they do not agree, each such Member will be
entitled to contribute and to loan an amount equal to its proportionate share
(based on the ratio of their Capital Contributions previously made).
3.5 LOANS BY MEMBERS. Subject to term of the Indenture, the Members or their
Affiliates may loan money to the Company for Company purposes as provided in the
Operating Agreement, at the Interest rate.
3.6 DISTRIBUTIONS. The parties agree to cause the Managers appointed by them to
cause the Company, at least quarterly, to distribute to Members from Available
Company Cash the maximum amount that may be distributed with respect to the
Ownership Interests subject to the terms of the Indenture. "Available Company
Cash" means cash in excess of the cash reserves provided for in Section 6.6 of
the Operating Agreement. In the event CA (or CAC) is required to make any
payment pursuant to the CA Completion Capital Commitment, at CAC's election upon
notice to BG, the
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parties agree and consent, pursuant to Section 6.2 of the Operating Agreement,
to the distribution to CAC of the entire amount of any and all distributions by
the Company with respect to the Ownership Interests of all the Members, up to
the aggregate amount of the payments made under the CA Completion Capital
Commitment less any amount paid by BG to CAC for any part of the Increased
Ownership Interest that CAC acquired as a result of such payments under the CA
Completion Capital Commitment, before any distributions are made to any other
Member. The capital account and Ownership Interest of CAC shall be appropriately
adjusted to reflect any such priority distribution to CAC.
3.7 OPTIONAL PURCHASE OF OWNERSHIP INTEREST FROM CAC. BG shall have the option
to purchase for cash (unless otherwise agreed) from CAC portions of its
Increased Ownership Interest sufficient to permit BG to hold up to forty-five
percent (45.0%) of the Ownership Interest of the Company under the following
terms and conditions:
[a] BG must provide CAC not less than fourteen (14) days prior written notice
of BG's intention to exercise such option;
[b] The price for such Increased Ownership Interest will be the price paid by
CAC for such Increased Ownership Interest plus Interest from the date the
Increased Ownership Interest was paid for by CAC through the date of
payment by BG; and
[c] Any option to be exercised by BG under this Section 3.7 must be exercised
within 180 days from the date that CAC acquired such portion of its
Increased Ownership Interest in excess of 55.0%.
Upon the completion of such purchase or purchases, Appendix I to the
Operating Agreement shall be automatically adjusted proportionately to reflect
such purchase(s).
Notwithstanding anything to the contrary herein, BG may not exercise an
option to purchase an Increased Ownership Interest from CAC if, after giving
effect to the exercise, CAC's Ownership Interest would be less than 55.0%.
ARTICLE 4: MANAGEMENT
4.1 UNANIMOUS VOTE. The parties agree to cause the Managers appointed by them
not to cause the Company to effect any of the following matters without (i) the
unanimous consent of each of the other Managers and (ii) the unanimous consent
of the Members:
[a] The making of material changes to the Development Plan described in the
Offering Circular;
[b] The adoption of any Annual Budget for any year following the opening of
the Project for public business calling for capital expenditures for such
budgeted year of greater than $4,000,000;
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[c] A call for Additional Contributions by the Members other than as provided
for under Section 3.3; and,
[d] The approval of the principal terms of any refinancing of the Project
financing described in Section 8.21(i) or the incurrence of indebtedness
outside of the normal operating requirements of the Project in an
outstanding amount which at any time exceeds $1 million, except for
indebtedness incurred for replacement of furnishings, fixtures or
equipment or as may be otherwise specifically authorized by this
Agreement.
4.2 ANNUAL BUDGETS. CAC will prepare an Annual Budget within a reasonable time
before the beginning of each Fiscal Year, including the budget submitted under
the Management Agreement (Exhibit "D"). An Annual Budget will include the amount
of any Additional Contribution that is determined to be necessary or desirable
(to be made in the proportion of the Capital Contributions previously made), and
the date or dates on which such contribution to capital will be due.
ARTICLE 5: SALE OF PROPERTY ON DISSOLUTION
5.1 SALE OF REAL PROPERTY ON DISSOLUTION. In connection with any liquidation of
the real property described in Section 3.1, together with any improvements
thereon (the "Property"), the Members agree to vote and to cause the Managers
appointed by them to vote to apply the following procedures in connection with
such liquidation:
[a] The Company will seek to sell the Property, by listing it with a reputable
broker or through such other means as it may deem appropriate to maximize
the proceeds from the sale. The initial price at which the Property is
offered for sale shall be the book value of the Property as reflected on
the Company's books and records, unless otherwise agreed by all the
Members.
[b] If any bona fide offer (the "Offer") is made for the Property, and all
the Members deem the Offer acceptable, the Company shall sell the
Property pursuant to the Offer. If one Member deems the Offer
acceptable (the "Selling Member") and another deems it unacceptable
(the "Non-Selling Member"), the following procedure shall apply: the
Non-Selling Member shall have thirty (30) days from the date it
receives written notice of the Offer to exercise a right of first
refusal to purchase the Property on the same terms and conditions as
contained in the Offer. The Non-Selling Member shall exercise such
right of first refusal by written notice to the Selling Member within
such thirty (30) day period, which notice shall be accompanied by
evidence, reasonably satisfactory to the Selling Member, that the
Non-Selling Member has a commitment to finance the purchase of the
Property. The purchase of the Property pursuant to the exercise of the
right of first refusal shall occur within sixty (60) days after
exercise of this right of first refusal. If the Non-Selling Member
does not exercise its right of first refusal, or if it is unable to
adequately demonstrate the availability of financing for the purchase,
or if it does not close the purchase within such sixty (60) day period,
the Company
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shall sell the Property pursuant to the Offer, or pursuant to any other
Offer it may receive, the terms of which are at least as favorable as
those contained in the Offer.
ARTICLE 6: DISPUTE RESOLUTION
6.1 DISPUTES. Except as to any disputes for which injunctive relief may be
available, in the event a dispute of any kind arises in connection with this
Agreement (including any dispute concerning its construction, performance or
breach), the parties to the dispute (who may be any combination of the Company
and any one or more of the Members) will attempt to resolve the dispute as set
forth in Section 6.2 before proceeding to arbitration as provided in Section
6.3. All documents, discovery and other information related to any such dispute,
and the attempts to resolve or arbitrate such dispute, will be kept confidential
to the fullest extent possible. This Article 6 shall not apply to disputes
arising under the Management Agreement.
6.2 NEGOTIATION. If a dispute arises, any party to the dispute will give notice
to each other party. If the Company is not a party to the dispute, notice will
be given to the Company. After notice has been given, the parties in good faith
will attempt to negotiate a resolution of the dispute.
6.3 ARBITRATION. If, within 30 days after the notice provided in Section 6.2, a
dispute is not resolved through negotiation or mediation, the dispute will be
arbitrated. The parties to the dispute agree to be bound by the selection of an
arbitrator, and to settle the dispute exclusively by binding arbitration in
accordance with the following provisions:
[a] All parties to the dispute will collectively select one arbitrator. If
they fail to do so within 45 days after the notice provided in Section
6.2, one or more parties will request the American Arbitration
Association to submit a panel of five arbitrators who are qualified to
resolve the matters in dispute from which the choice will be made. The
party requesting the arbitration will strike first, followed by
alternative striking until one name remains. A similar procedure will
be followed if there are more than two parties. The parties may by
agreement reject one entire list, and request a second list. If
selection by the above method is not completed within 90 days after the
notice provided in Section 6.2, or if there are more than four parties,
then an arbitrator will be selected by the American Arbitration
Association. The arbitrator so selected will then arbitrate the
dispute in Denver, Colorado, and issue an award.
[b] To the extent consistent with the provisions of this Article, the
arbitration will be conducted under the Commercial Arbitration Rules of
the American Arbitration Association and in accordance with Colorado law.
The arbitrators decision will be made pursuant to the relevant substantive
law of the State of Colorado. The award of the arbitrator will be final,
binding and non-appealable. Judgment on the award may be entered in any
court, state or federal court having jurisdiction.
[c] The fees and expenses of the arbitrator, and the other direct costs of the
arbitration, will be shared by the parties to the dispute in equal
proportions. Each party to the dispute will bear all other costs and
expenses as provided in Section 8.10. If one or more Members are
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included in the arbitration because of their membership or former
membership in the Company, such group will collectively be treated as one
party to the dispute (through the Company as a party).
ARTICLE 7: PRIVILEGED LICENSE PROTECTION
7.1 REGULATORY COMPLIANCE. BG acknowledges that as a result of the transactions
contemplated by this Agreement, BG and its agents and Affiliates may be subject
to licensing and other regulatory review and approval procedures ("Regulatory
Review"), by any governmental or quasi-governmental agency which is authorized
or empowered to regulate the gaming operations of CA and its Affiliates
("Regulatory Authority") in the jurisdictions in which CA and its Affiliates
conduct or propose to conduct gaming activities including, without limitation,
Colorado, Mississippi, Louisiana and Florida. BG agrees to cooperate fully and
to cause its Affiliates to cooperate fully with the representatives of all such
Regulatory Authorities in making applications, supplying information, providing
reports, attending licensing and other hearings, and otherwise cooperating with
and complying with the requirements of all such Regulatory Authorities so as not
to interfere with CA or its Affiliates ability to develop new business or to
continue to conduct its existing business. BG agrees that in the event the Board
of Directors of CA reasonably determines based upon communications with a
Regulatory Authority that BG or any of its Affiliates is likely to be determined
unsuitable by such Regulatory Authority and as a result CAC or its Affiliates
may not be permitted to engage or to continue to engage in a gaming activity
(collectively a "Licensing Problem"), then, within the lesser of 150 days of
notice of such event from CAC to BG or the applicable period prescribed by the
appropriate Regulatory Authority (provided CAC timely notifies BG of such a
determination) BG shall eliminate the Licensing Problem to the reasonable
satisfaction of CA's Board or transfer its rights and obligations hereunder and
its Ownership Interest to a Person reasonably acceptable to CA, who does not
have a Licensing Problem, and such Person shall be accepted as a Member of the
Company for all purposes. Any such transfer shall be subject to the terms and
conditions contained in Article 13 of the Operating Agreement. In the event such
transfer does not occur (or is not subject to a binding contract for a bona fide
sale to a Third Party to close within thirty (30) days of the expiration of the
one hundred fifty (150) day period described above), or the Licensing Problem is
not eliminated within the prescribed one hundred fifty (150) day period, BG
shall immediately convey its Ownership Interest under the agreement to CAC or an
Affiliate designated by CAC for the sum equal to its Capital Account balance
determined as of the end of the most recent month preceding the date of transfer
with such amount payable over a five (5) year period with interest at the Prime
Rate and without penalty for early payment thereof. All qualification and other
expenses relating to the foregoing applications shall be borne by the respective
parties submitting the applications; provided that the parties will be
reimbursed by the Company for such expenses from the debt financing for the
Project to the extent provided in the Offering Circular not inconsistent with
the Indenture.
Notwithstanding the foregoing, in the event that the Board of Directors of
CA reasonably determines, based upon communications with a Regulatory Authority,
that the opening of the Project might be delayed because (i) the licensing
and/or background investigations of BG or any of its Affiliates, agents or
related Persons are incomplete or (ii) any of such Persons are likely to be
found unsuitable, then BG agrees to take whatever action the Regulatory
Authority deems acceptable to
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avoid a delay in opening the Project, which actions may include, without
limitation, placing BG's Ownership Interest in escrow, transferring its
Ownership Interest to a Person, reasonably acceptable to CA, who is licensed by
the applicable regulatory authority or conveying its Ownership Interest to the
Company or to CAC or an Affiliate designated by CAC for such consideration as
the Regulatory Authority may prescribe.
7.2 NO UNSUITABILITY KNOWLEDGE. Neither BG nor CAC is aware of any facts or
circumstances which would make any Member or the officers, directors, managers,
or owners (directly or indirectly) of such Member, a Person or entity unsuitable
for licensing under applicable Colorado gaming laws, rules and regulations.
7.3 ADDITIONAL REGULATORY COMPLIANCE MATTERS. The following restrictions shall
be in addition to, and shall govern in the event of a conflict with, the
provisions of Section 7.1 above.
The parties agree to cause the Company not to issue any voting securities
or other voting interests, except in accordance with the provisions of the
Colorado Limited Gaming Act and the regulations promulgated thereunder. The
issuance of any voting securities or other voting interests in noncompliance
with the preceding sentence shall be deemed not to be issued and outstanding
until (a) the Company shall cease to be subject to the jurisdiction of the
Colorado Limited Gaming Control Commission, or (b) the Colorado Limited Gaming
Control Commission shall, by affirmative action, validate said issuance or waive
any defect in issuance.
No voting securities or other voting interests issued by the Company and
no interests, claim or charge therein or thereto shall be transferred in any
manner whatsoever except in accordance with the provisions of the Colorado
Limited Gaming Act and the regulations promulgated thereunder. Any transfer in
violation thereof shall be void until (a) the Company shall cease to be subject
to the jurisdiction of the Colorado Limited Gaming Control Commission, or (b)
the Colorado Limited Gaming Control Commission shall, by affirmative action,
validate said transfer or waive any defect in said transfer.
If the Colorado Limited Gaming Control Commission at any time determines
that a holder of voting securities or other voting interests of this Company is
unsuitable to hold such securities or other voting interests, then the Company
may, within sixty (60) days after the findings of unsuitability, purchase such
voting securities or other voting interests of such unsuitable Person at the
lesser of (i) the cash equivalent of such Person's investment in the Company, or
(ii) the current market price as of the date of the finding of unsuitability
unless such voting securities or other voting interests are transferred to a
suitable Person (as determined by the Commission) within sixty (60) days after
the finding of unsuitability. Until such voting securities or other voting
interests are owned by Persons found by the Commission to be suitable to own
them, (a) the Company shall not be required or permitted to pay any dividend or
interest with regard to the voting securities or other voting interests, (b) the
holder of such voting securities or other voting interests shall not be entitled
to vote on any matter as the holder of the voting securities shall not for any
purposes be included in the voting securities or other voting interests of the
Company entitled to vote, and (c) the Company shall not pay any remuneration in
any form to the holder of the voting securities or other voting interests except
in exchange for such voting securities or other voting interests as provided in
this paragraph.
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ARTICLE 8: GENERAL PROVISIONS
8.1 AMENDMENT; EFFECTIVE DATE. This Agreement may be amended by the unanimous
written agreement of the parties. Any amendment will become effective upon such
approval, unless otherwise provided. The effectiveness and enforceability of
this Agreement are subject to the occurrence of the Closing. This Agreement
shall automatically, without further action by any of the parties, become
effective and enforceable according to its terms as of the Closing Date. In the
event the Closing shall not have occurred by September 3, 1997, this Agreement
shall be null and void AB INITIO and none of the parties shall have any rights
or obligations of any kind under or pursuant to this Agreement.
8.2 REPRESENTATIONS. Each of the parties represents and warrants (which
representations and warranties shall survive the Closing) to each of the other
parties that, as of the signing of this Agreement and as of the Closing:
[a] Such party is duly organized, validly existing and in good standing under
the laws of the jurisdiction where it purports to be organized, and is a
United States Person;
[b] Such party has full power and authority to enter into and perform this
Agreement and, in the case of BG and CAC, the Operating Agreement;
[c] All actions necessary to authorize the signing and delivery of this
Agreement and the Operating Agreement, and the performance of the
respective obligations of the parties to each of such agreements, have
been duly taken;
[d] This Agreement and the Operating Agreement have each been duly signed
and delivered by a duly authorized officer or other representative of
each of the parties that are signatories thereto, and each such
agreement constitutes the legal, valid and binding obligation of each
such party enforceable in accordance with its respective terms (except
as such enforceability may be affected by applicable bankruptcy,
insolvency or other similar laws effecting creditors' rights generally,
and except that the availability of equitable remedies is subject to
judicial discretion);
[e] No consent or approval of any other Person is required in connection with
the signing, delivery and performance of this Agreement by the parties or
the Operating Agreement by BG and CAC; and
[f] The signing, delivery and performance of this Agreement or the Operating
Agreement do not violate the organizational documents of such party, or
any material agreement to which such party is a party or by which such
party is bound.
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8.3 UNREGISTERED INTERESTS. Each Member [a] acknowledges that the Ownership
Interests are being offered and sold without registration under the Securities
Act of 1933, as amended, or under similar provisions of state law, [b]
represents and warrants that such Person is an accredited investor as defined
for federal securities laws purposes, [c] represents and warrants that it is
acquiring an Ownership Interest for such Person's own account, for investment,
and with no view to the distribution of the Ownership Interest, and [d] agrees
not to Transfer, or to attempt to Transfer, all or any part of its Ownership
Interest without registration under The Securities Act of 1933, as amended, and
any applicable state securities laws, unless the Transfer is exempt from such
registration requirements.
8.4 CONFIDENTIALITY. A Member may make such announcements, file such documents
(including this Agreement) with the Securities and Exchange Commission, and
other regulatory authorities, and otherwise take such actions to comply with the
requirements of federal and state securities laws as it deems appropriate. To
the extent reasonably practicable, each Member will provide the other with the
portion of any such announcement or filing that refers to this Agreement and the
transactions contemplated by it no later than concurrently with releasing or
filing the same.
8.5 EXCLUSIVITY. During the term of this Agreement, no Member nor any of its
Affiliates will seek to manage, develop or engage in a casino gaming operation
in Gilpin County, Colorado except through this Agreement and the Operating
Agreement. Notwithstanding any other provision of this Agreement, the Members
acknowledge and agree that NG's interest in Gold Mountain Development shall not
be a violation of this exclusivity restriction, provided such interest does not
expand beyond the scope set forth on the attached Exhibit "E". CAC may, however,
participate as an equal joint venture partner with BG or its Affiliates in any
hotel project proposed for the property described in Exhibit E provided (i) CAC
is willing to make a contribution to such venture equal in value to the
contribution to be made by BG or its Affiliates and (ii) CAC shall have thirty
(30) days from its receipt in writing of notice of the proposed venture
(together with a reasonably detailed description of the project and the proposed
terms of the venture) to accept or reject the opportunity. The Members agree
that any such hotel or related project will have a permanent license to connect
to and access the Project in a manner reasonably agreeable to the Company and
not disruptive to the operation of the Project.
8.6 CONFLICTS. In the course of operating gaming at the Project, it is expected
that information will be shared between the Project and other operations carried
on by Affiliates of CAC and BG. Also, Affiliates of CAC and BG will be entitled
to carry on existing gaming and hotel businesses, and to manage or develop any
new gaming or hotel business anywhere in the world, subject to Section 8.5. In
the course of operating any such gaming and hotel businesses, CAC and BG and
their respective Affiliates will be entitled to solicit customers in competition
with the Project anywhere in the world including Gilpin County and any such
activities shall not be deemed to be a conflict of interest or breach of any
fiduciary obligation on the part of CAC or BG.
8.7 WAIVERS GENERALLY. No course of dealing will be deemed to amend or discharge
any provision of this Agreement. No delay in the exercise of any right will
operate as a waiver of such right. No single or partial exercise of any right
will preclude its further exercise. a waiver of any right on any one occasion
will not be construed as a bar to, or waiver of, any such right on any other
occasion.
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8.8 REMEDIES FOR BREACH. The rights and remedies of the parties set forth in
this Agreement are neither mutually exclusive nor exclusive of any right or
remedy provided by law, in equity or otherwise. The parties agree that all legal
remedies (such as monetary damages), subject to the dispute resolution
provisions of Article 6, as well as all equitable remedies (such as specific
performance), will be available for any breach or threatened breach of any
provision of this Agreement; provided, however, that no breach or threatened
breach of this Agreement shall serve as the basis for or entitle any party to
assert any claim against the Company for damages or for any injunctive or
equitable remedy against the Company.
8.9 NOTICES. Any notices (including any communication or delivery) required or
permitted under this Agreement will be in writing and will be addressed as
follows:
If to CAC:
Casino America of Colorado, Inc.
Attention: John Gallaway
711 Washington Loop
Biloxi, MS 39530
With a copy to: Allan B. Solomon
2200 Corporate Blvd., NW, Suite 310
Boca Raton, FL 33431
If to BG:
Blackhawk Gold, Ltd.
3040 Post Oak Boulevard, Suite 675
Houston, Texas 77056
Telephone: (713) 621-2245
Telecopier: (713) 621-6919
Attention: H. Thomas Winn
With a copy to: Adams & Reese, L.L.P.
1221 McKinney, Suite 4400
Houston, Texas 77010
Telephone: (713) 652-5151
Telecopier: (713) 652-5152
Attention: Mark W. Coffin
All notices may be made by mail, personal delivery, courier service or facsimile
machine, and will be effective upon delivery. Any Member may change such
Person's address by notice to each other Member.
8.10 COSTS. If the Company or any Member retains counsel for the purpose of
enforcing or preventing the breach or any threatened breach of any provision of
this Agreement or the Operating Agreement or for any other remedy relating to
it, then the prevailing party will be entitled to be reimbursed by the
nonprevailing party for all costs and expenses so incurred (including reasonable
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attorneys' fees, costs of bonds, and fees and expenses for expert witnesses)
unless the arbitrator or other trier of fact determined otherwise in the
interest of fairness.
8.11 INDEMNIFICATION. Subject to Section 2.4 above, each Member hereby
indemnifies and agrees to hold harmless the Company and each other Member from
any liability, cost or expense arising from or related to any act or failure to
act of such Member which is in violation of this Agreement or the Operating
Agreement.
8.12 PARTIAL INVALIDITY. Wherever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. However, if for any reason any one or more of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect, such
action will not affect any other provision of this Agreement. In such event,
this Agreement will be construed as if such invalid, illegal or unenforceable
provision had never been contained in it.
8.13 ENTIRE AGREEMENT. This Agreement, together with the Operating Agreement,
which is incorporated by reference herein, contains the entire agreement and
understanding of the Members with respect to its subject matter, and it
supersedes all prior written and oral agreements. No amendment of this Agreement
will be effective for any purpose unless it is made in accordance with Section
8.1.
8.14 BENEFIT. The contribution obligations of each Member will inure solely to
the benefit of the other Members and the Company, without conferring on any
other Person any rights of enforcement or other rights.
8.15 BINDING EFFECT. This Agreement is binding upon, and inures to the benefit
of, the Members and their permitted successors and assigns; provided that, the
parties acknowledge that any Transferee will have only the rights specified in
Section 13.6 of the Operating Agreement (and no rights under this Agreement)
unless admitted as a substitute Member in accordance with the Operating
Agreement.
8.16 FURTHER ASSURANCES. Each Member agrees, without further consideration, to
sign and deliver such other documents of further assurance as may reasonably be
necessary to effectuate the provisions of this Agreement.
8.17 HEADINGS. Article and section titles have been inserted for convenience of
reference only. They are not intended to affect the meaning or interpretation of
this Agreement.
8.18 TERMS. Terms used with initial capital letters will have the meanings
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural include the other, as the context requires or permits. The
word include (and any variation) is used in an illustrative sense rather than a
limiting sense.
8.19 GOVERNING LAW; CONFLICTS WITH OPERATING AGREEMENT. This Agreement will be
governed by, and construed in accordance with, the laws of the State of Colorado
(except to the extent
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preempted by any federal law or the gaming laws of any
state or governmental agency having jurisdiction over the affairs of any
Member). For purposes of the Act, this Agreement shall be deemed, together with
the Operating Agreement, as the operating agreement of the Company. Any conflict
or apparent conflict between the provisions of Article 4 of this Agreement and
the Operating Agreement or the Act will be resolved in favor of the Operating
Agreement except as otherwise required by the Act.
8.20 BROKERS FEES. The parties represent and warrant to one another that no
brokers fees will be due and owing by the Company to any party in connection
with the Project. Without limitation of the foregoing, NG and BG, jointly and
severally, hereby agree to indemnify the Company, CAC and CA and their
respective officers, directors and members and hold them harmless from all
suits, actions, injuries, damages, liabilities, and expenses of any kind,
including reasonable attorneys' fees and court costs, incurred in connection
with any claims brought by, or on behalf of Praven Banker. The parties
acknowledge the investment banking fees that may be owed to Jefferies & Company,
Inc. ("Jefferies") pursuant to that certain Engagement Agreement between NG and
Jefferies dated January 10, 1997, as amended, and the parties will cause the
Company to expressly and fully assume such agreement. However, the parties
acknowledge and agree that neither the Company, CA nor CAC will be liable for
any introduction fee in connection with the Project or for any fee to D.E. Frey
& Co.
8.21 APPROVALS. The Members hereby approve the Offering Circular and the
transactions and matters described therein, including, without limitation, (i)
the terms of the issuance by the Company of approximately $75 million in first
mortgage notes, underwritten by Jefferies & Company, to be secured by
substantially all of the assets of the Company, (ii) the other financings
described in or contemplated by the Offering Circular and (iii) the Management
Agreement.
8.22 GUARANTEES. In addition to the respective obligations of CA and NG under
this Agreement, CA agrees to guarantee the obligations of CAC under this
Agreement and NG agrees to guarantee the obligations of BG under this Agreement.
8.23 NO JOINT VENTURE. This Agreement shall not be deemed or construed to
create an agency relationship or joint venture among the parties hereto.
[THIS SPACE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
CASINO AMERICA OF COLORADO, INC.
a Colorado corporation
By: ALAN B. SOLOMON
BLACKHAWK GOLD, LTD.,
a Nevada corporation
By: H. THOMAS WINN
H. Thomas Winn, President
CASINO AMERICA, INC.,
a Delaware corporation
By: ALAN B. SOLOMON
NEVADA GOLD & CASINOS, INC.,
a Nevada corporation,
By: H. THOMAS WINN
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EXHIBIT "A"
DEFINITIONS
ADDITIONAL CONTRIBUTION: A capital contribution (other than the Initial
Contribution) that a Member makes to the Company, as
described in Section 3.3.
AGREEMENT: This Agreement, as amended from time to time.
ANNUAL BUDGET: The Annual Budget for the Project.
AVAILABLE COMPANY CASH: Cash available for distribution as provided in
Section 3.6 of the Agreement.
BG: Blackhawk Gold, Ltd., a Nevada corporation, and its
Permitted Transferees (provided that any Transferee
will become a substitute Member only in accordance
with the Operating Agreement).
CA COMPLETION CAPITAL The Completion Capital Commitment of CA, as defined
COMMITMENT: in the Offering Circular.
CAC: Casino America Corporation of Colorado, Inc., a
Colorado corporation, and its Permitted Transferees
under the terms of this Agreement (provided that any
Transferee will become a substitute Member only in
accordance with the Operating Agreement).
CASINO FACILITY: The casino to be developed as part of the Project.
CLOSING: The consummation of the sale of $75 million first
mortgage notes due 2004 issued by the Company and Isle
of Capri Black Hawk Capital Corp. pursuant to
the Offering Circular.
CLOSING DATE: The date and time at which the Closing occurs.
DEVELOPMENT PLAN: The description of the development of the Project,
as contained in the Offering Circular.
FEE SUBORDINATION The agreement of CA, contained in the Indenture, that
AGREEMENT: the right of CA to receive payment of fees under the
Management Agreement shall be subordinate
in right of payment to the right of the holders of
such notes to receive payment pursuant to the notes.
INDENTURE: The Indenture for the First Mortgage Notes due 2004
to be issued pursuant to the Offering Circular.
INCREASED OWNERSHIP That portion of the Ownership Interest of CAC which is
INTEREST: in excess of 55% and which it acquired as a result of
(i) making an Additional Contribution, (ii) the
purchase of a portion of BG's Ownership
Interest pursuant to Section 3.2(a) of the Agreement
or (iii) the exercise of the Put by BG.
<PAGE>
INITIAL CONTRIBUTION: The initial capital contribution that a Member makes
to the Company, as described in Section 3.1.
INTEREST: The higher of (i) 14.50%, or (ii) the base rate of the
highest effective yield to maturity currently being
paid by CA, Inc. to any third party lender, plus two
percentage points; provided that, the interest rate may
not exceed the highest rate
allowed by governing law.
MANAGEMENT AGREEMENT: That certain Management Agreement between the Company
and CAC, Inc. dated as of April 25, 1997, as amended as
of the date of the Agreement, concerning the management
of the Project, which is attached as
Exhibit C.
NOTICE: Written notice (including any communication or
delivery), actually given pursuant to Section 8.9.
OFFERING CIRCULAR: The Offering Circular for the offering by the
Company of $75 million of ___% First Mortgage Notes
due 2004.
OPERATING AGREEMENT: The Amended and Restated Operating Agreement of the
Company dated as of the date of the Agreement.
PROJECT: The development and operation of a casino gaming
facility and related facilities in Black Hawk,
Colorado, as contemplated by this Agreement.
PUT: The right of BG to cause CAC to purchase a certain
portion of its Ownership Interest as provided in
Section 3.2(b) of the Agreement.
<PAGE>
EXHIBIT B PROMISSORY NOTE
PROMISSORY NOTE AND PLEDGE AGREEMENT
<PAGE>
$500,000.00 DENVER, COLORADO
, 1997
FOR VALUE RECEIVED, BLACKHAWK GOLD, LTD., A COLORADO CORPORATION
("BLACKHAWK") AND NEVADA GOLD & CASINOS, INC., A NEVADA CORPORATION ("NEVADA
GOLD"), (Blackhawk Gold and Nevada Gold being collectively called "MAKER"),
promise to pay to the order of CASINO AMERICA OF COLORADO, INC., A COLORADO
CORPORATION ("LENDER"), in lawful money of the United States of America, in
immediately available funds, at such place as the holder hereof may from time to
time designate, or in the absence of such designation, at the office of the
Lender, 711 Washington Loop, Biloxi, Mississippi 39530, the principal sum of
FIVE -HUNDRED THOUSAND DOLLARS ($500,000.00), or so much thereof as shall be
outstanding from time to time (the "LOAN"), in accordance with the following
terms and provisions: Except as otherwise defined in this Note, terms used with
initial capital letters will have the meanings ascribed to them in the
Members Agreement of event date among Maker, Lender, and Casino America, Inc.
1. The principal amount of the Loan plus all accrued interest shall be due
and payable on ________, 2000. The Loan may not be prepaid without the express
written consent of the Lender, which may be granted or withheld in holder's sole
and absolute discretion.
2. The unpaid principal amount of the Loan shall bear interest from the
date hereof at the following rates per annum: (A) prior to maturity, at the
higher of (i) 14.50% or (ii) the base rate of the highest effective yield to
maturity currently being paid by Casino America, Inc. to any third party lender,
plus two percentage points, and (B) after maturity, whether by acceleration or
otherwise, at ____%. Interest at the foregoing rate shall accrue and be
compounded semi-annually and shall be payable on the due date of the Loan.
Interest shall be computed for the actual number of days elapsed on the basis of
a year consisting of 360 days.
3. This Note is secured by a Pledge Agreement of even date herewith (the
"PLEDGE") given by Blackhawk Gold for the benefit of the holder hereof
encumbering all of Blackhawk Gold's interest in Isle of Capri Black Hawk, LLC, a
Colorado limited liability company. This Note and the Pledge and any other
documents or instruments evidencing or securing the Loan are collectively
referred to herein as the "LOAN DOCUMENTS".
4. Until the Loan and any other amounts due under the Loan Documents are
paid in full, Maker covenants that neither Blackhawk Gold nor Nevada Gold shall
incur or permit to exist any indebtedness or liability on account of advances or
for borrowed money or for the deferred purchase price of any property or
services, except (i) the Loan and (ii) current accounts payable of Blackhawk
Gold or Nevada Gold arising in the ordinary course of business and payable
within 30 days in an aggregate amount (including the accounts payable of both
Blackhawk Gold and Nevada Gold) that does not at any time exceed $50,000.
<PAGE>
5. Each Maker hereby covenants and agrees that (I) the schedule attached
hereto contains, as of the date of this Note, all the liabilities (the "Maker
Liabilities") of any kind, whether fixed or contingent, of Blackhawk Gold and
Nevada Gold and (ii) the proceeds of the Loan, together with the $700,000 paid
by Lender to Blackhawk Gold pursuant to Section 3.2 [a] of the Agreement and any
an all amounts paid by Lender to Blackhawk Gold as a result of the exercise of
the Put under Section 3.2 [b] of the Agreement will be promptly applied by Maker
solely to pay the Maker Liabilities, excluding any liabilities to any Affiliate
of either Maker.
6. If (a) any default occurs in the payment of any principal, interest or
any other sums when due hereunder, or in the performance of any covenant or
agreement hereunder or in any of the other Loan Documents, and such default
continues for a period of five (5) Business Days after written notice thereof to
Maker, then the outstanding principal amount of the Loan, any interest accrued
thereon from time to time, and any other sums then remaining unpaid hereunder,
at the option of the holder hereof and without notice, shall become immediately
due and payable. Failure to exercise any such option shall not constitute a
waiver of the right to exercise the same at a later time or in the event of any
subsequent default.
7. Blackhawk Gold and Nevada Gold shall be jointly and severally liable
for Maker's obligations under this Note, including the payment of all amounts
due hereunder.
8. Maker and all endorsers, guarantors and all persons liable or to become
liable under this Note hereby waive to the fullest extent permitted by law
presentment, demand, protest, notice of protest, notice of dishonor and notice
of any other kind (except as specifically required herein or in the other Loan
Documents) in connection with this Note.
9. Maker agrees to pay all costs and out-of-pocket expenses (including, but
not limited to, attorneys' fees and expenses) incurred by holder in connection
with the collection or enforcement of this Note, the Pledge or any other Loan
Documents.
10. This Note shall be construed in accordance with and governed by the
internal laws and decisions of Colorado, without giving effect to Colorado
choice of law principles.
11. The parties hereto intend and believe that each provision of this Note
comports with all applicable local, state and federal laws and judicial
decisions. However, if any provision or provisions, or if any portion of any
provision or provisions of this Note or the other Loan Documents is found by a
court of law to be in violation of any applicable local, state or federal
ordinance, statute law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note or other Loan Documents to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent of all parties hereto that such
portion, provision or provisions shall be given force to the fullest possible
extent that it or they are legal, valid and enforceable, that the remainder of
this Note and other Loan Documents shall be construed as if such illegal,
invalid, unlawful, void or unenforceable portion, provision or provisions were
not contained herein, and that the rights, obligations and interest of Maker and
holder hereof under the
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remainder of this Note shall continue in full force and
effect. All agreements herein are expressly limited so that in no contingency or
event whatever, whether by reason of advancement of the proceeds hereof,
acceleration of maturity of the unpaid principal balance hereof or otherwise,
shall the amount paid or agreed to be paid to the holder hereof for the use,
forbearance or detention of the money to be advanced hereunder exceed the
highest lawful rate permissible under applicable usury laws. If, from any
circumstances whatever, the fulfillment of any provision hereof or of the other
Loan Documents, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law which a court of
competent jurisdiction may deem applicable hereto, then IPSO FACTO, the
obligation to be fulfilled shall be reduced to the limit of such validity; and
if, from any circumstance the holder hereof shall ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excess interest shall be applied to the reduction of the unpaid principal
balance due hereunder and not the payment of the interest and any excess after
application to the unpaid principal balance shall be paid to Maker.
12. No modification, waiver, amendment, discharge or change of this Note
shall be valid unless the same is in writing and signed by the party against
which the enforcement of such modification, waiver, amendment, discharge or
change is sought.
13. Time is hereby declared to be of the essence of this Note and of every
part hereof.
14. This Note shall inure to the benefit of and shall be binding on the
parties hereto and their respective successors and assigns.
15. Any notice, demand, request or other communication which any party
hereto may be required or may desire to give hereunder shall be given in
accordance with SECTION 21 of the Pledge, except that notice to Nevada Gold may
be provided to it at the same address and in the same manner as specified for
Blackhawk Gold.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered as of the date first above written.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
MAKER:
BLACKHAWK GOLD, LTD.
By: /s/ H. THOMAS WINN
Name: H. THOMAS WINN
Title: PRESIDENT
NEVADA GOLD & CASINOS, INC.
By: /s/ H. THOMAS WINN
Name: H. Thomas Winn
Title: PRESIDENT
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PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement") entered into this ___ day of
__________, 1997, by and between Blackhawk Gold, Ltd., a Colorado corporation
("Pledgor"), in favor of Casino America of Colorado, Inc., a Colorado
corporation ("Pledgee").
WITNESSETH:
WHEREAS, Pledgor, together with Nevada Gold & Casinos, Inc. (together
the "Maker"), has executed a promissory note in the original principal amount
of $500,000.00 (the "Note") in favor of Pledgee;
WHEREAS, each of Maker is a party to a Members Agreement among each
Maker, Casino America, Inc. and Nevada Gold & Casinos, Inc. (the "Agreement")
relating to Isle of Capri Black Hawk, L.L.C., a Colorado limited liability
company (the "Company");
WHEREAS, Pledgor has agreed to secure the Note and its obligations under
the Agreement by pledging and granting a security interest in the Pledgor's
Ownership Interest in the Company.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Pledgee agree as follows: All capitalized terms not
otherwise defined herein shall have the respective meanings ascribed to them in
Agreement. The reference to "Maker" hereunder shall mean Pledgor and Nevada Gold
& Casinos, Ltd.
1. PLEDGE.
1.1 As security for the prompt and complete payment and performance of the
obligations of the Maker under the Note and the Agreement (including without
limitation the representations of Maker in the Agreement) and the obligations of
Pledgor under this PledgeAgreement (the "Liabilities"), Pledgor hereby delivers,
pledges and grants a security interest to Pledgee in the following:
(a) All Ownership Interests (or Units representing Ownership
Interests) in the Company now or hereafter acquired by
Pledgor, and all certificates or other indicia of ownership
representing such Ownership Interests (or Units), referred to
together with all rights to the proceeds thereof as the
"Units";
(b) All dividends and other distributions received by Pledgor in
accordance with Section 6 hereof; and
(c) All "Proceeds", as such term is defined in the Uniform
Commercial Code as the same may from time-to-time be effect in
the State of Colorado (the "Code").
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The Units are hereby delivered to Pledgee accompanied by stock powers
("Powers") duly executed in blank. The Units, Powers and Proceeds thereof,
together with the Property and interests in Property described in Section 6
below, are hereinafter collectively referred to as the "Collateral". Pledgor
hereby appoints Pledgee its attorney-in-fact to arrange at Pledgee's option for
the transfer upon or at any time after the existence or occurrence of an "Event
of Default" of the Collateral on the books of the Company to the name of Pledgee
or to the name of Pledgee's nominee. For purposes of this Agreement, an "Event
of Default" shall mean any failure of either Maker to perform, comply with or
observe any obligation, covenant representation or agreement under the Note or
the Agreement or of Pledgor to perform, comply with or observe any obligation,
covenant or agreement under this Agreement.
2. VOTING RIGHTS.
2.1 During the term of this Pledge Agreement, and so long as there shall
not occur or exist an Event of Default, Pledgor shall have the right to vote the
Units on all Company questions; provided, however, that no action shall be taken
that would impair the value of the Collateral or be inconsistent with or violate
any provision of this Pledge Agreement or the Note. Upon the existence or
occurrence of an Event of Default, Pledgee shall thereafter be entitled to
exercise all voting powers pertaining to the Collateral.
3. REPRESENTATIONS.
3.1 Pledgor represents, warrants and agrees as follows:
(a) Pledgor holds Ownership Interests in the Company, representing
40.8% of all the outstanding Ownership Interests in the
Company;
(b) Pledgor has full power and authority to enter into this Pledge
Agreement;
(c) Pledgor has the right to vote, pledge and grant a security
interest in or otherwise transfer such Collateral free of any
liens, claims and encumbrances; and
(d) The Powers are duly executed and give the legal holder thereof
the authority they purport to confer.
4. LIMITATION ON LIENS AND DISPOSITIONS.
4.1 Pledgor agrees that it will not create, permit or suffer to exist, and
will defend the Collateral against and take such other action as is necessary to
remove, any lien, encumbrance, charge or right (a "Lien") on or against the
Collateral and will defend the right, title and interest of Pledgee in and to
any of Pledgor's right, title and interest in and to the Collateral against the
claims and demands of all other Persons. Pledgor will not sell, assign,
exchange, grant a security interest in, transfer, encumber, or otherwise dispose
of, any of the Collateral, or attempt or contract to do so.
5. SUBSEQUENT CHANGES AFFECTING COLLATERAL.
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5.1 Pledgor represents to Pledgee that Pledgor has made its own
arrangements for keeping informed of changes or potential changes affecting the
Collateral, and Pledgor agrees that Pledgee shall not have any responsibility or
liability for informing Pledgor of any such changes or potential changes or for
taking any action or omitting to take any action with respect thereto. Pledgee
may, upon or at any time after the occurrence of an Event of Default, without
notice and at its option, transfer or register the Collateral or any part
thereof into its or its nominee's name with or without any indication that such
Collateral is subject to the security interest hereunder.
6. DISTRIBUTIONS.
6.1 If at any time this Pledge Agreement is effective, Pledgor, by reason
of its ownership of the Units, shall become entitled to receive, or shall
receive, any Ownership Interest (including, without limitation, any Ownership
Interest representing a dividend or a distribution in connection with any
reclassification, increase or reduction of capital, or reorganization), option,
warrant, or other rights, whether as an addition to, in substitution of, or in
exchange for any Units, whether by declared dividend, stock split, or other
method, Pledgor agrees it shall accept the same as Pledgee's agent and hold the
same in trust for Pledgee and deliver the same forthwith to Pledgee in the exact
form received, with the endorsement of Pledgor when requested by Pledgee and/or
appropriate undated stock powers duly executed in blank, to be held by Pledgee
as additional collateral security for the Liabilities.
Any sums or property paid upon or in respect of the Units or any other
securities received under this section upon the reorganization, liquidation
(whether complete or partial), or dissolution of the issuer of any of the Units
or any such other securities shall immediately be paid over to Pledgee to be
held by Pledgee as additional collateral security for the Liabilities. All sums
of money and property so paid or distributed in respect of the Units that are
received by Pledgor shall, until paid or delivered to Pledgee, be segregated
from the other property of funds of Pledgor and held by Pledgor in trust as
additional collateral security of the Liabilities. Pledgor agrees to give
Pledgee 30 days prior notice of any such distribution.
6.2 Pledgor shall be entitled to receive all cash dividends or
distributions declared and paid with respect to any Units, free of any security
interest in favor of Pledgee hereunder provided, that no Event of Default exists
at the time of such dividend or distribution or will exist as a result of such
dividend or distribution. Upon the occurrence and continuance of any Event of
Default, Pledgee shall be entitled to receive any and all such cash dividends or
distributions, and Pledgor shall immediately deliver to Pledgee any such cash
dividends or distributions which it receives. Pledgee shall hold any such cash
dividends or distributions as Collateral pursuant to this Pledge Agreement, or,
at Pledgee's election, may apply any such cash dividends or distributions to the
reduction of any Liabilities.
7. POWER OF ATTORNEY.
7.1 Pledgor does hereby irrevocably constitute and appoint Pledgee its
true and lawful attorney, with full power of substitution, for them and in their
name, place and stead, to ask, demand, collect, receive, receipt for, sue for,
compound and give acquittance for any and all sums or properties
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which may be or become due, payable or distributable on or in respect of the
Collateral or which constitute a part thereof, with full power to settle, adjust
or compromise any claim thereunder or therefor as fully as Pledgor could
themselves do, and to endorse or sign the names of Pledgor on all commercial
paper given in payment or in part payment thereof and on all documents of
satisfaction, discharge or receipt required or requested in connection
therewith, and in its discretion, to file any claim or take any other action or
proceeding, either in its own name or in the names of Pledgor, or otherwise,
which Pledgee may deem necessary or appropriate to collect or otherwise realize
upon any and all of the Collateral, or effect a transfer thereof, or which may
be necessary or appropriate to protect and preserve the right, title and
interest of Pledgee in and to such Collateral and the security intended to be
afforded hereby. Pledgee shall not exercise its rights under this Section 7
unless and until there exists an Event of Default.
8. CONSENT.
8.1 Pledgor hereby consents that, from time-to-time, before or after the
occurrence or existence of an Event of Default, with or without notice to or
assent from Pledgor, any other security at any time held by or available to
Pledgee for any of the Liabilities or any security at any time held by or
available to Pledgee for any obligation of any other person, firm or corporation
secondarily or otherwise liable for any of the Liabilities, may be changed,
altered, renewed, extended, continued, surrendered, compromised, waived or
released, in whole or in part, as Pledgee may see fit, and Pledgor shall remain
bound under this Pledge Agreement notwithstanding any such exchange, surrender,
release, alteration, renewal, extension, continuance, compromise, waiver or
inaction, extension of further credit or other dealing.
9. REMEDIES.
9.1 Upon the occurrence or existence of an Event of Default, Pledgee shall
have, in addition to any other rights given by law or hereunder, all of the
rights and remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code in effect in the State of Colorado. In addition, with
respect to the Collateral, or any part thereof, which shall then be or shall
thereafter come into the possession or custody of Pledgee, Pledgee may in its
sole discretion, without notice except as specified below, sell or cause the
same to be sold at any exchange, broker's board or at public or private sale, in
one or more sales or lots, at such price as Pledgee may deem best, and for cash
or on credit or for future delivery, without assumption of any credit risk, and
the purchaser of any or all of the Collateral so sold shall thereafter hold the
same, absolutely free from any claim, encumbrance or right of any kind
whatsoever. Pledgee may, in its own name, or in the name of a designee or
nominee, buy the Collateral at any public sale, and if permitted by applicable
law, buy the Collateral at any private sale. Pledgor hereby waives all of its
rights or redemption from any sale or other disposition of the Collateral.
Pledgor will pay to Pledgee all expenses (including, without limitation, court
costs and reasonable attorneys' and paralegals' fees and expanses) of, or
incident to, the enforcement of any provisions hereof. Neither Pledgee nor any
party acting as its attorney, shall be liable for any acts or omissions or for
any error of judgment or mistake of fact or law other than their gross
negligence or willful misconduct. Pledgee agrees to return to Pledgor any
proceeds of the sale of the Collateral that exceed the then outstanding balance
of the Liabilities and the expenses described above. Pledgor shall be liable for
any deficiency following the sale of the Collateral.
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<PAGE>
9.2 Unless any of the Collateral threatens to decline speedily in value or
is or becomes of a type sold on a recognized market, Pledgee will give Pledgor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable commercial
practices of banks, commercial finance companies, insurance companies or other
financial institution disposing of property similar to the Collateral shall be
deemed to be commercially reasonable. Notwithstanding any provisions to be
contrary contained herein any requirements of reasonable notice shall be met if
such notice is received by Pledgor as provided in Section 21 below, at least
five (5) days before the time of the sale or disposition. Any other requirement
of notice, demand or advertisement for sale is, to the extent permitted by law,
waived.
9.3 In view of the fact that federal and state security laws may impose
certain restrictions on the method by which a sale of the Collateral may be
effected after an Event of Default, Pledgor agrees that, upon the occurrence or
existence of an Event of Default, Pledgee may, from time-to-time, attempt to
sell all or any part of the Collateral by means of a private placement
restricting the bidder and prospective purchasers to those who will represent
and agree that they are purchasing for investment only and not for distribution.
In so doing, Pledgee may solicit offers to buy the Collateral, or any part of
it, for cash, from a limited number of investors deemed by Pledgee, in its
reasonable judgment, to be respectable parties who might be interested in
purchasing the Collateral, and if Pledgee solicits such offers from not less
than two (2) such investors, then the acceptance by Pledgee of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method of
disposition of such Collateral.
9.4 Nothwithstanding anything to the contrary in this Pledge Agreement,
any transfer of the Units will be subject to licensing and other regulatory
review and approval requirements and procedures of any Regulatory Authority (as
defined in Section 7.1 of the Agreement).
10. SECURITY INTEREST, ETC.
10.1 The Pledge and security interests herein created and provided for
stand as direct and primary security for all of the Liabilities. No application
of any sums received by Pledgee in respect of the Collateral or any disposition
thereof to the reduction of the Liabilities or any part thereof shall in any
manner entitle Pledgor to any right, title or interest in or to the Liabilities
of any Collateral security therefor unless and until all Liabilities have been
fully paid and satisfied. Pledgor acknowledges and agrees that the pledge and
security interest hereby created are absolute and unconditional and shall not in
any manner be effected or impaired by any acts or omissions whatsoever of
Pledgee or any other holder of any of the Liabilities, and without limiting the
generality of the foregoing, the pledge and security hereof shall not be
impaired by acceptance by Pledgee or any other holder of any of the Liabilities
of any other security for or guarantors upon any of the Liabilities or by any
failure, neglect or omission on the part of Pledgee or any other holder of any
of the Liabilities to realize upon or protect any of the Liabilities, or of any
Collateral security therefor. The Pledge and security hereof shall not in any
manner be impaired or affected by (and, Pledgee, without notice to any one is
hereby authorized to make from time-to-time) any sale, pledge, surrender,
compromise, settlement, release, renewal, extension, indulgence, alteration,
substitution, exchange, change in, modification or disposition of any of the
Liabilities, or of any collateral security
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therefor, or of any guaranty thereof, or of any loan agreement executed in
connection herewith.
11. WAIVERS AND CONSENTS.
11.1 Upon the occurrence or existence of an Event of Default, Pledgee may
enforce this Pledge Agreement independently or any other remedy or security
Pledgee at any time may have or hold in connection with the Liabilities, and it
shall not be necessary for Pledgee to marshal assets in favor of Pledgor or any
other person or entity or to proceed upon or against and/or exhaust any other
security or remedy before proceeding to enforce this Pledge Agreement. Pledgor
expressly waives any right to require Pledgee to marshal assets in favor of
Pledgor or any other person or entity or to proceed against any other person or
entity or any Collateral provided by any other person or entity, and agrees that
Pledgee may proceed against Pledgor and/or any other person or entity and/or the
Collateral in such order as it shall determine in its sole and absolute
discretion. Pledgee may file a separate action or separate actions against
Pledgor, whether brought or prosecuted with respect to any other security or
against any other person or entity, or whether any other person or entity is
joined in any such action or actions. Pledgor agrees that Pledgee, and any
Affiliate of Pledgee, and Pledgor, and any Affiliate of Pledgor, may deal with
each other in connection with the Liabilities, or otherwise, or alter any
contracts or Agreements now or hereafter existing between any of them, in any
manner whatsoever, all without in any way altering or affecting the Liens
created or granted herein. Pledgee's rights hereunder shall be reinstated and
revived, and the enforceability under this Pledge Agreement. Pledgor expressly
waives the benefit of an statute(s) of limitations affecting its liability
hereunder or the enforcement of the Liabilities, or any Liens created or granted
herein. Pledgee's rights hereunder shall be required to be restored or returned
by Pledgee (whether as a "voidable preference", "fraudulent conveyance" or
otherwise) upon the bankruptcy, insolvency or reorganization of Pledgor, or
otherwise, all as though such amount had not been paid. The Liens created or
granted herein and the enforceability of this Pledge Agreement at all times
shall remain effective to secure the full amount of all the Liabilities even
though the Liabilities INCLUDING any part thereof or any other security or
guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against Pledgor and whether or not Pledgor shall have any
personal liability with respect thereto. Pledgor expressly waives any and all of
the following defenses now or hereafter arising or asserted by reason of (a) any
disability or other defense of Pledgor with respect to the Liabilities, (b) the
unenforceability or invalidity of any security or guaranty for the Liabilities
or the lack of perfection or continuing perfection or failure of priority of any
security for the Liabilities, (c) any failure of Pledgee to marshal assets in
favor of Pledgor or any other person or entity (except Pledgor) in connection
with any sale or disposition of Collateral, (d) any failure of Pledgee to give
notice of sale or other disposition of Collateral to any person or entity
(except Pledgor) or any defect in any notice that may be given to any person or
entity (except Pledgor) in connection with any sale or disposition of
Collateral, (e) any failure of Pledgee to comply with applicable laws in
connection with the sale or other disposition of any Collateral or other
security for any Liabilities, INCLUDING without limitation, any failure of
Pledgee to conduct a commercially reasonable sale of other disposition of any
Collateral or other security for any Liability, (f) any act or omission of
Pledgee or others that directly or indirectly results in or aids the discharge
or release of any portion of the Liabilities or any other security or guaranty
therefor by operation of law or otherwise, except any act of gross negligence
which Pledgee is determined by the judgment of a court of competent jurisdiction
(sustained on appeal, if any) to have committed, (g) any failure of Pledgee to
file or enforce a claim in any bankruptcy or other proceeding with respect to
any person or entity,
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(h) the election by Pledgee, in any bankruptcy proceeding of any person or
entity of the application or non-application of Section 1111(b) (2) of the
United States Bankruptcy Code, (i) any extension of credit or the grant of any
Lien under Section 364 of the United States Bankruptcy Code, (j) any use of cash
Collateral under Section 363 of the United States Bankruptcy Code, (k) any
agreement or stipulation with respect to the provision of adequate protection in
any bankruptcy proceeding of any person or entity, (1) the avoidance of any Lien
in favor of Pledgee for any reason, (m) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, liquidation or dissolution
proceeding commenced by or against any person or entirety, INCLUDING any
discharge of, or bar or stay against collecting, all or any of the Liabilities
(or any interest thereon) in or as a result of any such proceeding, or (n) any
action taken by Pledgee that is authorized by this Section 11 or any other
provision of this Pledge Agreement or the Note. Pledgor expressly waives all
presentments, demands for payment or performance, notices of nonpayment or
nonperformance, protests, notices of protest, notices of dishonor and all other
notices or demands of any kind or nature whatsoever with respect to the
Liabilities, and all notices of acceptance of this Pledge Agreement or of the
existence, creation or incurring of new or additional Liabilities.
12. WAIVER OF RIGHTS OF SUBROGATION.
12.1 Notwithstanding anything to the contrary elsewhere contained herein,
the Agreement, the Note or in any other Collateral Document to which Pledgor is
a party, Pledgor hereby expressly waives with respect to Pledgor and its
successors and assigns (INCLUDING any surety) and any other person or entity,
any and all rights at law or in equity to subrogation, to reimbursement, to
exoneration, to contribution, to set off or to any other rights that could
accrue to a surety against a principal, to a guarantor against a marker or
obligor, to an accommodation party against the party accommodated, or to a
holder or transferee against a maker, and which Pledgor may have or hereafter
acquire against any person or entity in connection with or as a result of
Pledgor's execution, delivery and/or performance of this Pledge Agreement, or
any other documents to which Pledgor is a party. Pledgor expressly waives any
"claim" (as such term is defined in the United States Bankruptcy Code) of any
kind against Pledgee. Pledgor agrees that they shall not have or assert any such
rights against any person or entity (including any surety), either directly or
as an attempted setoff to any action commenced against Pledgor by Pledgee or any
other person or entity. Pledgor hereby acknowledges and agrees that this waiver
is intended to benefit Pledgee and shall not limit or otherwise affect Pledgor's
liability hereunder or the enforceability hereof.
13. UNDERSTANDING WITH RESPECT TO WAIVERS AND CONSENTS.
13.1 Pledgor warrants and agrees that each of the waivers and consents set
forth herein are made after consultation with legal counsel and with full
knowledge of their significance and consequences, with the understanding that
events giving rise to any defense or right waived may diminish, destroy or
otherwise adversely affect rights which Pledgor otherwise may have against
Pledgee or others or against the Collateral, and that, under the circumstances,
the waivers and consents herein given are reasonable and not contrary to public
policy or law. Such waivers and consents shall be effective to the maximum
extent permitted by law.
14. TERM.
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14.1 This Pledge Agreement shall remain in full force and effect until all
the Liabilities have been fully paid and satisfied. This Pledge Agreement shall
remain in full force and effect and continue to be effective should any petition
be filed by or against Pledgor for liquidation or reorganization, should Pledgor
become insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Pledgor's
assets, and shall continue to be effective or be reinstated, as the case may be,
if any time payment and performance of the Liabilities, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount or must otherwise be
restored or returned by any obligee of the Liabilities, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Liabilities shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned. Upon the termination of the Pledge Agreement as
provided above (other than as a result of the sale of the Collateral), Pledgee
will release the security interest and Lien created hereunder and will deliver
the Collateral to Pledgor.
15. COVENANTS.
15.1 Pledgor shall comply with all of its covenants in the Agreement,
which covenants are hereby incorporated herein by reference.
16. TERMS.
16.1 The singular shall include plural and vice versa and any gender shall
include any other gender as the text shall indicate.
17. SUCCESSOR AND ASSIGNS.
17.1 This Pledge Agreement shall be binding upon and inure to the benefit
of Pledgor, Pledgee and their respective successor and assigns. Pledgor's
successors and assigns shall include, without limitation, a receiver, trustee to
debtor in possession of or for the Pledgor. Without limiting the generality of
the foregoing, Pledgee may assign or otherwise transfer its rights to receive
payment or performance of the Liabilities (or any part thereof) to any other
person or entity, and such other person or entity shall thereupon become vested
with all of the rights in respect thereof granted to Pledgee herein or
otherwise. Pledgor hereby releases Pledgee and its agents from any liability for
any act or omission relating to the Collateral or this Pledge Agreement except
the gross negligence or willful misconduct of Pledgee.
18. APPLICABLE LAW.
18.1 This Pledge Agreement shall be governed by and construed under the
internal laws (as opposed to conflict of laws provisions) of the State of
Colorado. Whenever possible, each provision of this Pledge Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but, if any provision of this Pledge Agreement shall be held to be prohibited by
or invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Pledge Agreement.
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19. FURTHER ASSURANCES.
19.1 Pledgor agrees that it will cooperate with Pledgee and will execute
and deliver, or cause to be executed and delivered, all such other stock powers,
proxies, instruments and documents, and will take all such other action,
including, without limitation, the filling of financing statements, as Pledgee
may reasonable request from time-to-time in order to carry out the provisions
and purposes hereof.
20. OBLIGATION.
20.1 Pledgee shall be under no obligation to take any steps necessary to
preserve rights in the Collateral against any other parties but may do so at its
option, and all expenses incurred in connection therewith shall be for the sole
account of Pledgor.
21. NOTICES.
21.1 All notices and other communications provided for hereunder shall be
in writing (including telegraphic communication) and mailed or telegraphed,
telecopied or delivered,
if to Pledgor, at:
Blackhawk Gold, Ltd.
c/o H. Thomas Winn
3040 Post Oak Boulevard
Suite 675
Houston, TX 77056
if to Pledgee, at:
Casino America of Colorado, Inc.
711 Washington Loop
Biloxi, MS 39530
with a copy to:
Allan B. Solomon, Esq.
2200 Corporate Boulevard, N.W.
Suite 310
Boca Raton, FL 33431
or as to each party, at such other address as designated by such party in a
written notice to the other party. All such notices and communications shall be
deemed to be validly served, given or delivered (i) three (3) days following
deposit in the United States mail, with proper postage prepaid; (ii) upon
delivery thereof if delivered by hand to the party to be notified as set forth
above; or (iii) upon acknowledgment of receipt thereof if transmitted to a valid
telecopier number for the party to be
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notified as set forth above.
22. SECTION HEADINGS.
22.1 The section headings herein are for convenience of reference only,
and shall not affect in any way the interpretation of any of the provisions
hereof.
23. MISCELLANEOUS.
23.1 No failure or delay on the part of Pledgee in the exercise of any
power or right, and no course of dealing between Pledgor and Pledgee shall
operate as a waiver of such power or right, nor shall any single or partial
exercise of any power or right preclude any further to other exercise thereof of
the exercise of any other power or right. The remedies provided for herein are
cumulative and not exclusive of any remedies which may be available to Pledgee
at law or in equity. Any waiver of any provision of this Pledge Agreement, and
any consent to any departure by provision of this Pledge Agreement, and any
consent to any departure by the Pledgor from the terms of any provision of this
Pledge Agreement, shall be effective only in the specific instance and for the
specific purpose for which given.
IN WITNESS WHEREOF, Pledgor has executed and delivered this Pledge
Agreement as of the date first written above.
PLEDGOR:
Blackhawk Gold, Ltd.
By: /s/ H. THOMAS WINN
H. Thomas Winn
AGREED TO AND ACCEPTED BY:
Casino America of Colorado, Inc.
By: ALLAN B. SOLOMON
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EXHIBIT "C"
INITIAL CAPITAL CONTRIBUTION OF BG
1. Those portions of the properties which are set forth in blue on the
boundary survey of Clear Mountain Surveying, Inc., dated August 26, 1996,
under Job No. E209600, a true and correct copy of which is attached hereto
and made a part hereof by reference, excluding the land commonly referred
to as "Parcel C"; and,
2. That portion of the properties which is set forth in brown on the attached
survey and which is commonly known as "Parcel D", which the parties
acknowledge will be exchanged on or prior to the Transfer Date for that
portion of the properties on the attached survey which is set forth in
blue and white stripes and which is commonly known as "Parcel E2".
Subject to the following encumbrances:
A. A $350,000.00 lien created by that certain Deed of Trust dated May 11,
1995 in favor of River Oaks Trust Company on behalf of certain note
holders; and,
B. The requirements of the United States Environmental Protection Agency as
set forth in that certain Administrative Order on Consent dated June 6,
1995,
which encumbrances are subject to the provisions of Section 4.1[a] of the
Operating Agreement.
The parties may substitute the attached survey with a more current survey
setting forth metes and bounds.
<PAGE>
EXHIBIT D
MANAGEMENT AGREEMENT
AMENDED AND RESTATED MANAGEMENT AGREEMENT
This AMENDED AND RESTATED MANAGEMENT AGREEMENT (the "Management
Agreement"), dated as of this 29th day of July, 1997, is by and between CASINO
AMERICA, INC., a Delaware corporation ("Manager"), and ISLE OF CAPRI BLACK HAWK,
LLC, a Colorado limited liability company ("Owner") and is effective as of the
Closing Date, as defined in the Amended and Restated Operating Agreement of the
Owner of even date.
RECITALS:
A. Owner proposes to acquire, construct, develop and equip a Casino
Facility including a casino, restaurant and a hotel in Black Hawk, Colorado.
B. Owner desires to have Manager manage the business operations of its
Casino Facility and Manager desires to manage Owner's Casino Facility, all upon
the terms and conditions of this Agreement.
C. Owner and Manager executed a Management Agreement, dated as of April
25, 1997, and wish by this Agreement to amend and restate the Management
Agreement dated as of April 25, 1997.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, Owner and Manager agree as follows:
1. DEFINITIONS AND REFERENCES.
1.1 DEFINITIONS. As used herein, the following terms shall have the
respective meanings indicated below:
(a) Annual Plan - The Annual Plan to be prepared by Manager and approved
by Owner in accordance with the provisions of Section 6.2 hereof.
(b) Casino Facility - The Casino Facility to be owned by Owner and
operated in Black Hawk, Colorado by Manager. The Casino Facility may have
gaming, hotel rooms, parking, food and beverage, gift shop and entertainment
together with other related activities.
(c) Commencement Date - The date upon which Owner first opens the Casino
Facility to the public for business, which date shall be confirmed in writing by
Owner and Manager.
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(d) Compensation - The direct salaries and wages paid to, or accrued for
the benefit of, any executive or other employee, including, without limitation,
employer's contributions under F.I.C.A., unemployment compensation or other
employment taxes, pension fund contributions, Worker's Compensation, group life,
accident, health and other insurance premiums, profit sharing, and retirement
plans, disability and other similar benefits.
(e) Operating Agreement - That certain Amended and Restated Operating
Agreement of Owner dated as of even date herewith by and between Casino America
of Colorado, Inc. and Blackhawk Gold, Ltd.
2. SCOPE OF AGREEMENT, RESPONSIBILITIES.
2.1 AUTHORITY OF OWNER. Owner shall determine the general policy with
respect to the management of its Casino Facility and shall have all other
decision making powers customarily afforded to an owner of a casino/hotel
facility, as well as any additional powers reserved to Owner hereunder.
2.2 AUTHORITY OF MANAGER. Subject to the foregoing general authority of
Owner, and subject to the terms of this Management Agreement, Manager shall have
the authority to exclusively supervise and direct the management and operation
of the day-to-day activities of the Casino Facility for the account of Owner.
Manager shall have the authority and responsibility (i) to determine operating
policy, standards of operation, quality of service, the maintenance and physical
appearance of the Casino Facility and any other matters affecting operations and
maintenance; (ii) to supervise and direct all phases of advertising, sales and
business promotion for the Casino Facility; and (iii) to carry out all programs
contemplated by the Annual Plan. Owner agrees that it will cooperate with
Manager in every reasonable and proper way to permit and assist Manager to carry
out its duties hereunder and comply with any conditions or restrictions, if any,
placed upon Manager by any gaming authority.
2.3 DUTIES AND OBLIGATIONS OF MANAGER. Manager shall take all actions
which may, in its sole discretion, be reasonably necessary or appropriate in
connection with the authority granted to it in accordance with the provisions of
this Management Agreement. Manager shall devote to its responsibilities such
time as may be reasonably necessary for the proper performance of all duties
hereunder. The standard of performance by Manager in managing the Casino
Facility shall be measured by commercial standards of reasonableness in the
industry consistent with good business practices and policies. An organizational
chart detailing the supervisory and management positions and all other employees
of the Manager will be provided by Manager to Owner.
2.4 CONSULTATION WITH OWNER. Notwithstanding the foregoing, Manager shall
at all times keep Owner reasonably apprised and aware of all operating policies.
Manager agrees to
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consult with Owner as frequently as Owner shall reasonably request to review
operating policies and other matters referred to herein. Owner shall, at all
times, have the right to enter the Casino Facility for the purpose of inspecting
same and reviewing the operations. Owner agrees that it and its representatives
will, at no time, act in a manner which is inconsistent with the authority
granted to Manager.
3. LICENSING. Other than as set forth in the Operating Agreement, Owner and
Manager shall apply for and maintain at Owner's expense any and all licenses and
approvals required in order to implement the provisions of this Management
Agreement. The performance of any services pursuant to this Management Agreement
that require any such licenses and approvals is contingent upon the receipt of
all such licenses and approvals.
4. TERM. The term of this Management Agreement shall continue until December 31,
2096, unless sooner terminated as hereinafter set forth.
5. PRE-COMMENCEMENT DATE RESPONSIBILITIES.
5.1 OWNER'S RESPONSIBILITIES. Owner, without cost or expense to Manager,
shall design, acquire, construct and equip the Casino Facility. All expenses and
fees incident thereto shall be paid by Owner.
5.2 MANAGER'S RESPONSIBILITIES. From the date of this Management Agreement
to the Commencement Date, Manager shall be available to consult with Owner in
designing, acquiring, constructing and equipping all assets to be used by Owner
in the operation of the Casino Facility. Manager shall, at Owner's expense and
with Owner's approval, also be responsible for the development and
implementation of all pre-opening activities.
6. OPERATION OF THE BUSINESS.
6.1 PERMITS. Manager and Owner shall timely apply for, obtain and maintain
all licenses and permits required to operate the business (other then gaming
authority permits, licenses and approvals required to be obtained by parties
other than owner or Manager), at Owner's expense.
6.2 ANNUAL PLAN.
6.2.1 PREPARATION. With such cooperation and assistance of Owner as
Manager may request, Manager shall prepare for Owner's review and approval not
less than thirty (30) days in advance of each fiscal year, an Annual Plan for
approval by Owner, which shall include:
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(a) a forecast comprised of estimated income and expenses by
month for the coming fiscal year;
(b) an estimated cash flow projection by month, and an estimate as
to the amount of funds needed for working capital
requirements;
(c) a budget covering estimated expenditures for capital
improvements;
(d) an annual marketing plan; and
(e) an organizational chart of Owner, as of the date of the Annual
Plan, listing all employees' names, positions and compensation
(including key employees whether employees of Owner or charged
to Owner).
Manager shall not be deemed to have made any guarantee or warranty in connection
with the results of operations or performance set forth in the Annual Plan since
the parties acknowledge that the Annual Plan is intended to set forth objectives
and goals based upon Manager's best judgment of the facts and circumstances
known by Manager at the time of preparation.
6.2.2 OWNER'S REVIEW AND APPROVAL. The Annual Plan will be subject
to the approval of Owner, which approval will not be unreasonably withheld or
delayed. Owner shall approve or disapprove the Annual Plan within twenty (20)
days after submission to Owner. If Owner fails to provide written notice to
Manager of any specific objections to a proposed Annual Plan within such twenty
(20)-day period, such Annual Plan shall be deemed to have been approved by Owner
as submitted. In the event Owner disapproves or raises any objections to the
proposed Annual Plan or any revisions thereto, Owner and Manager agree to
cooperate with each other in good faith to resolve the dispute. Owner agrees,
consistent with the Annual Plan, to provide the funds necessary to operate the
Casino Facility.
6.2.3 COMPLIANCE. Manager shall use all reasonable efforts to comply
with the Annual Plan and shall not deviate in any substantial respect therefrom.
In the event Manager encounters circumstances which require unexpected
expenditures not foreseen at the time of preparation of the Annual Plan and
which Manager deems reasonably necessary, Manager may without Owner's approval,
make or cause to be made on account of Owner, any expenditures, provided,
however, that no such expenditures shall be made in violation of the applicable
provisions of the Operating Agreement. Manager, without Owner's approval, on a
monthly basis with full reporting to Owner, shall be entitled to increase the
total expenses budgeted within the Annual Plan by a percentage approved by Owner
to cover any expenditures that were underestimated at the time the Annual Plan
was prepared and that are reasonably necessary in Manager's sole discretion, to
carry out the provisions of this Agreement. Owner and Manager agree to cooperate
with each other in good faith in resolving disputes. Policy changes not
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anticipated in the Annual Plan shall be submitted to Owner for approval, which
approval shall not be unreasonably delayed or withheld.
6.2.4 SPECIFIC MATTERS. The description of specific matters
hereinafter stated are in every respect subject to the prior approval of Owner
as part of its approval of the Annual Plan.
6.3 PERSONNEL.
6.3.1 GENERAL. Manager, for the account of Owner, shall hire,
supervise, direct, discharge and determine terms of employment of all personnel
working for the Casino Facility. An organizational chart detailing the specific
type of personnel and functions shall be provided to Owner by Manager. The
determination of Compensation for all employees shall be part of the Annual Plan
approved by Owner.
6.3.2 KEY EMPLOYEES. The key employees may include, but are not
limited to, the general manager, director of gaming, director of food, beverage
and entertainment, director of marketing and director of finance and may, at the
option of Manager and with prior approval of Owner, be employees of Manager.
Owner shall reimburse Manager for the Compensation of such employees working for
the Casino Facility or primarily on behalf of Owner in connection with the
Casino Facility.
6.3.3 PERSONNEL EXPENSES AND COMPENSATION. Subject to the above, it
is expressly understood and agreed that all other personnel of Owner are in the
sole employ of Owner.
6.3.4 PROFESSIONAL AND OTHER SPECIALISTS. Manager shall have the
right to retain legal counsel and such other professionals, consultants and
specialists as Manager deems necessary or appropriate in connection with the
operation of the Casino Facility. The selection of all professional firms shall
be subject to Owner's prior approval.
6.4 SALES, MARKETING AND ADVERTISING. Manager shall advertise and promote
the Casino Facility for Owner's account and shall institute and supervise a
sales and marketing program. Manager, in its sole discretion, may cause
participation in sales and promotional campaigns and activities involving
complimentary passage, food and beverages to travel agents, tourist officials
and airline representatives.
6.5 OTHER SERVICES PROVIDED BY MANAGER. Other services, such as data
processing, reservation system, internal audit, etc. may be provided by Manager
to Owner at an additional cost on a commercially reasonable basis, or may be
contracted for separately.
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6.6 MAINTENANCE AND REPAIR. Owner shall be responsible for maintaining the
property utilized in the business in good repair and condition. To implement
Owner's responsibility, Manager shall, on behalf of Owner, and at Owner's
expense, make or cause to be made, all repairs, replacements, corrections and
maintenance items as shall be required in the normal and ordinary course of
operation of the business.
6.7 CAPITAL EXPENDITURES. Owner recognizes the necessity of capital
improvements and shall expend such amount for capital improvements as shall be
required in the normal and ordinary course of operation of the business in
conformity with the amounts approved as part of the Annual Plan.
6.8 REIMBURSEMENT. In addition to the Compensation provided for in Section
9 of this Management Agreement, Manager shall be entitled to be reimbursed for
the actual reasonable travel and entertainment expenses of all officers and
employees of Manager incurred in performing its duties hereunder in connection
with any phase of the operation of the Casino Facility. In addition, if
employees of Manager on a specific assignment for the benefit of the Casino
Facility are in a position that would otherwise be filled by an employee of
Owner, then Manager shall be entitled to be reimbursed by Owner for the
Compensation payable to such employees while working for the Casino Facility.
However, Manager shall not be entitled to reimbursement for (i) any cost,
expense, liability or obligation deemed a contribution to the capital of Owner
under Section 3.1[b] of the Members Agreement of even date among Manager, Nevada
Gold & Casinos, Inc., Casino America of Colorado, Inc. and Blackhawk Gold,
Ltd.or (ii) the compensation of any other employee unless otherwise provided in
this Management Agreement. Manager shall be entitled to all reimbursements
authorized under this Section 6.8, or under any other provision of this
Agreement, provided that (i) no such reimbursement shall exceed the actual costs
incurred by Manager or, if such costs are not determinable, the fair market
value of items for which reimbursement is sought and (ii) all such
reimbursements shall be made in a manner which is consistent with the provision
of the Annual Plan or as otherwise agreed with Owner.
7. FISCAL MATTERS.
7.1 ACCOUNTING MATTERS AND FISCAL PERIODS.
7.1.1 BOOKS AND RECORDS. Manager shall maintain, or cause to be
maintained, at Owner's expense, full and complete books of account and such
other records as are necessary to reflect the operating results of the Casino
Facility. Manager shall also prepare and file for Owner, at Owner's expense, all
informational and/or tax returns which may be required by any governmental
authority.
7.1.2 REPORTS TO OWNER. Manager, at Owner's expense, shall deliver
or cause to be delivered to Owner, monthly financial statements, which shall
include a statement of cash
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flows, and monthly comparison of operational income and expenses versus the
Annual Plan.
7.1.3 OWNER'S RIGHT TO AUDIT. Owner and the individual members of
the limited liability company reserve the right upon reasonable prior notice, to
perform any and all additional audit procedures relating to the business where
accounting books and records are kept.
7.2 BANK ACCOUNT. All bank accounts for the Casino Facility shall be in
the name of Manager, as agent for Owner. Owner and Manager shall agree on the
procedures for withdrawals and deposits of funds. Manager shall have the right
to designate individuals to disburse funds from the business bank accounts to
pay all costs and expenses of managing, operating and maintaining the business
and its properties, including authorized capital expenditures and management
fees due to Manager. Owner agrees that at all times during the term of this
Management Agreement, a bank balance as approved in the Annual Plan shall be
maintained in an amount necessary to provide sufficient working capital to
assure the uninterrupted and efficient operation of the business. Excess funds
shall be disbursed to Owner.
8. TITLE, OTHER MATTERS.
8.1 COVENANT OF TITLE. Owner shall enable Manager to peaceably and quietly
operate the business in accordance with the terms of this Management Agreement.
8.2 PROPRIETARY INFORMATION. All specifically identifiable information
developed by Manager for Owner shall be the property of both Manager and Owner.
All existing information of Manager previously developed by Manager at Manager's
expense, including, without limitation, all customer lists, gaming and marketing
strategies and other similar information, shall be the property of Manager and
not Owner and neither Owner nor any of its affiliates or successors may use such
proprietary information without the consent of Manager, which consent shall not
be unreasonably withheld. The parties agree that Proprietary Information does
not include information which is clearly available in the public domain.
8.3 OUTSIDE ACTIVITIES OF PARTIES. This Management Agreement shall be
limited to the purposes set forth herein and nothing in this Management
Agreement, whether by implication or otherwise, shall be construed to extend the
relationship of the parties beyond such purposes. Each party acknowledges that
the other party and their respective affiliates are or may hereafter become
interested, directly or indirectly, by ownership, contract, agency or otherwise,
in business opportunities which are not within the purpose of this Management
Agreement and which may compete with or otherwise affect all or some aspects of
the Casino Facility. However, both
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parties agree that they will not compete in any gaming activities in Gilpin
County, Colorado during the Term except as permitted under the Operating
Agreement.
9. COMPENSATION OF MANAGER.
9.1 In consideration for the services to be performed by Manager after the
Commencement Date, Manager shall be entitled to an annual management fee equal
to two percent (2%) of Revenues (as defined below), plus ten percent (10%) of
Operating Income (as defined below), but such fee shall not, in the aggregate,
exceed four percent (4%) of Revenues.
(a) Revenues means all revenues, less sales tax on such revenues,
determined on an annual basis received from the following sources: (i) gross
gaming receipts from the Casino Facility, less 50% of applicable gaming and
admission taxes from the operation of gaming in the Casino Facility; (ii) hotel
operations; (iii) food and beverage operations; (iv) all parking fees; (v) all
revenues generated from gift shops and arcades; (vi) other revenues, fees and
income, which are attributable to the operation of the Casino Facility. Revenues
derived from non-operating activities, such as the sale of capital assets are
excluded from the definition of Revenues.
(b) Operating Income means the income of the Casino Facility before
any management fee paid to Manager, distributions to Members of Owner, interest,
depreciation, amortization and write-off or start-up and pre-opening type
expenses and income taxes.
(c) The fee shall become due and payable ten (10) days after the end
of each month based upon the Revenues and Operating Income for the previous
month. Payment of such compensation may be paid to Manager by withholding
Revenues it has received for Owner's account; provided, however, that the fee
shall be accrued as a liability and not paid to the extent that Owner has not
generated sufficient cash flow to pay such fee. For these purposes, cash flow
shall be determined before capital expenditures and distributions to Members of
Owner.
10. INSURANCE.
10.1 COVERAGE. Owner, for the benefit of both Owner and Manager, shall
maintain adequate insurance during the term of this Agreement. The type and
amount of coverage shall be approved by Owner.
10.2 POLICIES AND ENDORSEMENTS.
10.2.1 POLICIES. All insurance coverage provided for hereunder shall
be effected by policies issued by insurance companies with sound and adequate
financial responsibility, or by
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self-insurance programs of either Manager or Owner. Either party shall be
entitled to object to an insurance company. Owner shall deliver to the Manager
duplicate copies of the insurance policies or certificates of insurance with
respect to all of the policies of insurance so procured, including existing,
additional and renewal policies, and in the case of insurance about to expire,
shall deliver duplicate copies of the insurance policies or insurance
certificates with respect to the renewal policies to the other party not less
than thirty (30) days prior to the respective dates of expiration.
10.2.2 ENDORSEMENT. All insurance shall, to the extent obtainable,
have attached thereto:
(a) an endorsement that such policy shall not be canceled or
materially changed without at least thirty (30) days' prior written notice to
Owner and Manager; and
(b) an endorsement to the effect that no act or omission of Owner or
Manager shall affect the obligation of the insurer to pay the full amount of any
loss sustained.
(c) Owner and its members shall be named as additional insureds on
all policies.
10.2.3 NAMED INSUREDS. All policies of insurance shall be carried in
the name of Owner and Manager. All liability policies shall name Owner and
Manager, and their respective members, managers, directors, officers, agents and
employees, as additional insureds.
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11. INDEMNIFICATION.
11.1 INDEMNIFICATION. Manager agrees to indemnify and hold Owner free and
harmless from any loss, liability, claim, demand, legal proceeding or cost
(including attorneys' fees, costs, expenses and other charges) which is not
covered by insurance proceeds and which Owner may sustain, incur or assume as a
result of any allegation, claim, civil or criminal action, proceeding, charge or
prosecution (collectively "Claims") which may be alleged, made, instituted or
maintained against Manager or Owner, jointly or severally, to the extent arising
out of or based upon (a) Claims by the employees of the Manager (including
without limitation injury or compensation Claims); (b) the performance or
non-performance of the Management Agreement by Manager, its agents or employees;
or (c) the acts or failure to act of Manager, its employees or agents in a
manner consistent with the standards set forth in Section 2.3 above.
Notwithstanding the foregoing, Manager shall not be liable to indemnify and hold
Owner harmless to the extent of any such loss, liability or cost which (i)
results from the negligence of Owner, its agents (other than Manager) or
employees or (ii) consists of consequential or punitive damages (including any
such damages asserted by a third party). Nothing contained in this Section 11 or
this Agreement shall constitute a guaranty or commitment by the Manager of the
operating results or business prospects of the Casino Facility.
11.2 RELATED MATTERS.
11.2.1 LEGAL FEES, ETC., PROCEDURES. Manager shall reimburse Owner
for any legal fees and costs, including attorney's fees and other litigation
expenses, incurred by Owner in respect to which indemnity is granted hereunder.
If Claims are asserted or threatened, or if any action or suit is commenced or
threatened with respect thereto, for which indemnity may be sought against
Manager hereunder, Owner shall notify Manager in writing within thirty (30) days
after Owner shall have had actual knowledge of the threat, assertion or
commencement of the Claims, which notice shall specify in reasonable detail the
matter for which indemnity may be sought. Manager shall have the right, upon
notice to Owner given within thirty (30) days of its receipt of Owner's notice,
to take primary responsibility for the prosecution, defense or settlement of
such matter and payment of expenses in connection therewith. Owner shall
provide, without cost to Manager, all relevant records and information
reasonably required by Manager for such prosecution, defense or settlement and
shall cooperate with Manager to the fullest extent possible. Owner, at Owner's
sole cost and expense, shall have the right to employ its own counsel in any
such matter with respect to which Manager has elected to take primary
responsibility for prosecution, defense or settlement.
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11.2.2 INDEMNIFIED PARTIES. The indemnities contained in this
Section 11 shall run to the benefit of both Owner and its affiliates, and its
directors, officers, shareholders and employees.
11.2.3 SURVIVAL. The provisions of this Section 11 shall survive any
cancellation, termination or expiration of this Management Agreement and shall
remain in full force and effect until such time as the applicable statute of
limitation shall cut off all claims which are subject to the provisions of this
Section 11.
12. DAMAGE TO AND DESTRUCTION OF THE BUSINESS.
12.1 RESTORATION. Provided that there are sufficient insurance proceeds,
in the event fire or other casualty shall damage or destroy the property used in
the Casino Facility, Owner shall be required to repair, restore or replace the
same to the extent as may be limited by insurance proceeds. If there are not
sufficient insurance proceeds and Owner no longer desires to operate the Casino
Facility, Manager shall have the option, exercisable within ninety (90) days of
such casualty, to obtain the license to operate the Casino Facility subject to
appropriate regulatory approval. Owner shall use its best efforts to assist
Manager in obtaining the license. In the event fire or other casualty shall
damage or destroy the Casino Facility, Owner shall have the choice of repairing,
restoring or replacing the same to the extent as may be limited by insurance
proceeds. If Owner determines that it is not in its best interest to restore the
Casino Facility, the Management Agreement will terminate.
13. DEFAULT AND TERMINATION.
13.1 EVENTS OF DEFAULT. It shall be an event of default hereunder (an
"Event of Default") if Manager or Owner (the "Defaulting Party") as hereinafter
defined fails to keep, perform or observe any material covenant, obligation or
agreement required to be kept, performed or observed by such party under the
terms of this Management Agreement, followed by written notice of such breach,
default or non-compliance from the other party (the "Non-Defaulting Party" as
hereinafter defined) to the Defaulting Party and the Defaulting Party fails to
remedy or correct such breach, default or non-compliance within thirty (30) days
after receipt of such notice. If the breach, default or non-compliance is other
than payment of money and is of a nature such that it cannot reasonably be cured
within such thirty (30) day period, the period for curing the default shall be
extended so long as the Defaulting Party commences immediately and expediently
as possible to cure the breach, default or non-compliance within such thirty
(30) day period.
13.2 TERMINATION.
13.2.1 GENERAL. If an Event of Default occurs and has not been
cured, this Management Agreement shall terminate at the election of the
Non-Defaulting Party. Notice of
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termination pursuant to this Section 13 may be given by the Non-Defaulting Party
to the Defaulting Party at any time prior to the curing of such Event of
Default, and such termination shall be effective as of the date specified in
such notice of termination, which date shall be not less than sixty (60) nor
more than one hundred twenty (120) days after the date of such notice.
Notwithstanding the foregoing, if the Event of Default pertains to the payments
of money, Manager may cease the discharge of its responsibilities hereunder
effective upon the expiration of the thirty (30)-day notice referenced in
Section 13.1 hereof. Manager shall receive all funds due to it at the time of
Termination.
13.2.2 TERMINATION. In addition to the foregoing, this Management
Agreement shall terminate upon any of the following events:
(a) The mutual agreement of the parties; or
(b) The inability of either party to receive or maintain the
licenses to perform their obligations hereunder; or
(c) Manager shall
(i) apply for or consent to the appointment of, or
taking possession by, a receiver, custodian,
trustee, liquidator or other similar official of
all of its assets;
(ii) make a general assignment for the benefit of
creditors;
(iii) be adjudicated as bankrupt or insolvent or have
an order for relief entered with respect thereto;
or
(iv) file a voluntary petition, commence a voluntary
case under the federal bankruptcy laws as now
or hereafter constituted or file a petition or
an answer seeking reorganization or any
arrangement with creditors or take advantage of
any bankruptcy, reorganization, insolvency,
readjustment of debts, dissolution or
liquidation law or statute.
13.2.3 WAIVER. The waiver of any one Event of Default shall not be
construed as the waiver of any other Event of Default.
13.3 REMEDIES CUMULATIVE. Except as herein provided to the contrary, the
termination of this Management Agreement by the Non-Defaulting Party upon an
Event of Default shall be without damages, injunctions, specific performance or
other legal or equitable remedies by reason
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of any breach, default or non-compliance by the Defaulting Party with such
Defaulting Party's covenants, obligations and agreements hereunder. Except as to
any disputes for which injunctive relief would be an appropriate remedy, in the
event a dispute of any kind arises in connection with this Agreement (including
any dispute concerning its construction, performance or breach), the parties to
the dispute will attempt to resolve the dispute as set forth in Section 13.4
before proceeding to arbitration as provided in Section 13.5. All documents,
discovery and other information related to any such dispute, and the attempts to
resolve or arbitrate such dispute, will be kept confidential to the fullest
extent possible.
13.4 NEGOTIATION. If a dispute arises, any party to the dispute will give
notice to each other party. If Owner is not a party to the dispute, notice will
be given to Owner. After notice has been given, the parties in good faith will
attempt to negotiate a resolution of the dispute.
13.5 ARBITRATION. If, within 30 days after the notice provided in Section
13.4, a dispute is not resolved through negotiation or mediation, the dispute
will be arbitrated. The parties to the dispute agree to be bound by the
selection of an arbitrator, and to settle the dispute exclusively by binding
arbitration in accordance with the following provisions:
(a) All parties to the dispute will collectively select one
arbitrator. If they fail to do so within 45 days after the notice provided in
Section 13.4, one or more parties will request the American Arbitration
Association to submit a panel of five arbitrators who are qualified to resolve
the matters in dispute from which the choice will be made. The party requesting
the arbitration will strike first, followed by alternative striking until one
name remains. A similar procedure will be followed if there are more than two
parties. The parties may by agreement reject one entire list, and request a
second list. If selection by the above method is not completed within 90 days
after the notice provided in Section 13.4, or if there are more than four
parties, then an arbitrator will be selected by the American Arbitration
Association. The arbitrator so selected will then arbitrate the dispute in
Denver, Colorado, and issue an award.
(b) To the extent consistent with the provisions of this Article,
the arbitration will be conducted under the Commercial Arbitration Rules of the
American Arbitration Association and in accordance with Colorado law. The
arbitrator's decision will be made pursuant to the relevant substantive law of
the State of Colorado. The award of the arbitrator will be final, binding and
non-appealable. Judgment on the award may be entered in any court, state or
federal, having jurisdiction.
(c) The fees and expenses of the arbitrator, and the other direct
costs of the arbitration, will be shared by the parties to the dispute in equal
proportions. Each party to the dispute will bear its other respective costs and
expenses. If one or more Members are included in
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the arbitration because of their membership or former membership in Owner, such
group will collectively be treated as one party to the dispute (through Owner as
a party).
140 NOTICES.
14.1 NOTICES. Every notice, demand, consent, approval or other document or
instrument required or permitted to be served upon any of the parties hereto
shall be in writing and shall be deemed to have been duly served on the day of
mailing, and shall be sent by registered or certified United States Mail,
postage prepaid, return receipt requested, addressed to the respective parties
at the addresses stated below:
If to Manager: John M. Gallaway, President
or his designee Manager
711 Washington Loop
Biloxi, MS 39530
With copies thereof to the following:
Allan B. Solomon, Esq.
2200 Corporate Blvd. NW
Suite 310
Boca Raton, FL 33434
If to Owner: Isle of Capri Black Hawk L.L.C.
711 Washington Loop
Biloxi, MS 39530
Attention: John M. Gallaway
With copies thereof to the following:
H. Thomas Winn, President, or his designee,
Nevada Gold and Casinos, Inc.
3040 Post Oak Boulevard, Suite 675
Houston, TX 77056
or to such other address as either Manager or Owner may have specified in a
notice duly given as required herein to the other.
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150 RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS.
15.1 RELATIONSHIP. Manager and Owner shall not be construed as joint
venturers or partners of each other by reason of this Management Agreement and
neither shall have the power to bind or obligate the other except as
specifically authorized and set forth in this Management Agreement.
Nevertheless, Manager is granted such authority and powers as may be reasonably
necessary for it to carry out the provisions of this Management Agreement. This
Management Agreement, either alone or in conjunction with any other documents,
shall not be deemed to constitute or create a lease of all or any portion of the
Casino Facility.
15.2 CONTRACTUAL AUTHORITY. Subject to the limitations thereon set forth
in this Management Agreement, and in conformity with the Annual Plan, Manager is
authorized to make, enter into and perform in the name of, for the account of,
on behalf of and at the expense of Owner any contracts and agreements
(including, but not limited to bank accounts) which are reasonably necessary and
appropriate to carry out and place in effect the terms and conditions of this
Management Agreement. Copies of all executed contracts shall be immediately
conformed and furnished to Owner.
15.3 FURTHER ACTIONS. Owner and Manager agree to execute all contracts,
agreements and documents and to take all actions necessary to comply with the
provisions of this Management Agreement and the intent hereof.
160 APPLICABLE LAW. This Management Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado. If any of the terms and
provisions hereof shall be held invalid or unenforceable for any reason, such
validity or unenforceability shall in no event affect any of the other terms or
provisions hereof, all such other terms and provisions to be held valid and
enforceable to the fullest extent permitted by law; provided, however, that in
the event any material part of Owner's obligations under this Management
Agreement shall be declared invalid or unenforceable, Manager shall have the
option to terminate this Management Agreement.
170 MISCELLANEOUS.
17.1 SUCCESSORS AND ASSIGNS. Manager shall not assign the whole or any
portion of this Management Agreement or any payments due Manager hereunder,
without the unanimous consent of the Members of Owner, which consent will not be
unreasonably withheld, except that Manager may make such an assignment, without
Owner's or the Members' consent, to a Permitted Transferee as defined in the
Operating Agreement Owner shall not assign the whole or any portion of this
Agreement, except to an affiliate of Owner, without Manager's consent, except as
collateral for any financing obtained in connection with the development and/or
operation of the Casino Facility. If the Agreement is assigned to an affiliate
of Owner, Manager shall continue to be responsible under this agreement.
15
<PAGE>
17.2 FORCE MAJEURE. If at any time it becomes necessary in Manager's or
Owner's reasonable opinion to cease operation of all or part of the Casino
Facility to protect the Casino Facility or the health, safety or welfare of
guests or employees of the Casino Facility for reasons of force majeure, such
as, but not limited to, weather, acts of war, insurrection, civil strife and
commotion, labor unrest, contagious illness, catastrophic events, or acts of
God, then in such event Manager or Owner may close and cease operations of all
or part of the Casino Facility, reopening and commencing operation when Manager
and Owner determine in good faith that such may be done without jeopardy to the
Casino Facility, its guests and employees. Neither party shall be liable for
failure to perform any obligation hereunder (other than to pay money) when
prevented by any force majeure cause not reasonably within the control of such
party, such as strike, lockout, breakdown, accident, order or regulation of or
by any governmental authority, failure of supply or inability, by the exercise
of reasonable diligence, to obtain supplies, parts or employees necessary to
perform such obligation to which such force majeure applies shall be extended
for a period of time equivalent to the delay from such cause.
17.3 AUTHORIZATION. Owner and Manager represent to the other that it has
full power and authority to execute this Management Agreement and to be bound by
and perform the terms hereof. On request, each party shall furnish the other
evidence of such authority.
17.4 INTEREST. Any amount payable to a party hereunder which shall not be
paid when due, shall accrue interest at the prime rate as published from time to
time in the Wall Street Journal.
17.5 ENTIRE AGREEMENT: AMENDMENTS. This Management Agreement sets forth
the entire and only agreement or understanding between Owner and Manager
relating to the subject matter hereof and supersedes and cancels all previous
agreements, negotiations, commitments and representations in respect hereof
among them. Owner has not relied on any projection of earnings or statements as
to the possibility of future success or other similar matters which may have
been prepared by Manager or Owner, or any of their respective affiliates, and
understands that no guaranty is made or implied by Manager or its affiliates as
to the cost or the future financial success of the operations being managed
hereunder. This Management Agreement may not be amended in any respect except by
an instrument in writing signed by Owner and Manager.
17.6 SURVIVAL OF COVENANTS. Any covenant, term or provision of this
Management Agreement which, in order to be effective, must survive the
termination of this Management Agreement, shall survive any such termination.
17.7 NO WAIVER. No waiver by either party of a breach by the other
party of any of the terms, covenants or conditions of this Management
Agreement, shall be construed or held to be a
16
<PAGE>
waiver of any succeeding or preceding breach of the same or any other term,
covenant or condition herein contained. No waiver of any default of either party
hereunder shall be implied from any omission by the other party to take any
action on account of such default if such default persists or is repeated, and
no express waiver shall affect default other than as specified in said waiver.
17.8 COMPLIANCE. In performing its obligations under this Management
Agreement, Manager shall comply with all present and future laws, ordinances and
all rules and regulations, requirements and orders of all governmental
authorities and shall obtain all licenses and permits required to perform such
obligations and shall file all returns and reports lawfully required of Manager
in connection with its duties hereunder, including, but not limited to, income
tax withholding returns, Federal Insurance Contributions Act returns and
reports, Federal Unemployment Tax Act and worker's compensation returns and
reports, sales and use tax returns (and shall timely pay all contributions,
taxes, costs and other amounts due thereunder). All of the foregoing returns and
reports shall be maintained as a part of the books and records of Manager.
17.9 HEADINGS. The headings hereunder are used for convenience only and
shall not affect the construction or interpretation of any provision hereof.
17.10 COUNTERPARTS. For the convenience of the parties hereto, this
Management Agreement may be executed in several original counterparts, each of
which shall be deemed an original for all purposes and all such counterparts
shall constitute but one and the same agreement.
17.11 COMMERCIAL REASONABLENESS. Anything contained in this Management
Agreement to the contrary notwithstanding, all contracts and agreements entered
into by Manager hereunder, including any contracts on account of Owner, shall be
commercially reasonable.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Management Agreement as of the date and year first above written.
CASINO AMERICA, INC., ISLE OF CAPRI BLACK HAWK, L.L.C.,
a Delaware corporation a colorado limited liability company
By: ALAN B. SOLOMON By: Casino America of Colorado, Inc.
Its: Executive Vice President Member
By: /s/ ALLAN B. SOLOMON
Title: Executive Vice President
Blackhawk Gold, Ltd., Member
By: /s/ H. THOMAS WINN
Title: PRESIDENT
18
<PAGE>
EXHIBIT E
SCOPE OF GOLD MOUNTAIN DEVELOPMENT
Commercial and residential real estate activity of any kind, including the
operation of developed commercial and residential projects, by NG & Casinos,
Inc., BG, Ltd., or any of their affiliates, including Gold Mountain L.L.C., on
lands primarily located to or in the vicinity of the Gaming District of Black
Hawk, Colorado, and lands located in sections 7, 17 and 18 of Gilpin County,
Colorado, but not limited to those specific areas, provided, however, that such
activity shall not include any state regulated gaming activities.
EXHIBIT 10.5
LICENSE AGREEMENT
This LICENSE AGREEMENT (the "Agreement"), dated as of this _29th_ day of July,
1997, is by and between CASINO AMERICA, INC., a Delaware corporation
("Licensor"), and ISLE OF CAPRI BLACK HAWK L.L.C., a Colorado limited liability
company ("Licensee") and is effective as of the Closing Date, as defined in the
Amended and Restated Operating Agreement of the Licensee of even date.
Whereas, Licensor and Licensee are parties to an Amended and Restated
Management Agreement of even date (the "Management Agreement"), pursuant to
which Licensor will manage the business operations of the Casino Facility;
Whereas, Licensee desires to use the name "Isle of Capri" as part of its
company name and to use such name and the other trade or service marks set forth
on Exhibit A hereto or such other names or trade or service marks used in
connection with other Isle of Capri casinos or hotels facilities (each, a
"Mark," collectively, the "Marks") in connection with the operation of the
Casino Facility;
Whereas, Licensor is willing to license the use of the Marks, subject to
the terms and limitations contained herein.
NOW, THEREFORE, in consideration of the payment of $2.00 to Licensor by
Licensee, the receipt and sufficiency of which are hereby acknowledged, and in
consideration of the mutual promises and covenants herein contained, Licensor
and Licensee agree as follows:
1. Except as otherwise provided herein, all capitalized terms shall have
the respective meanings ascribed to them in the Management Agreement.
2. Licensee hereby acknowledges that Licensor is the sole owner of all
right, title and interest in and to the Marks as used in connection with the
operation of the Casino Facility, and that Licensee's rights to use the Marks
derive solely from and are limited to this Agreement.
3. Licensor hereby grants to Licensee the non-exclusive license to use the
Marks solely in connection with the operation of the Casino Facility. Licensee
agrees not to use the Marks in any other business. Licensee's rights hereunder
shall extend only to operations in the city of Blackhawk, Colorado and to the
promotion and marketing of Licensee's gaming activities in a manner generally
consistent with the marketing and promotional activities of Licensor and its
Affiliates. All use of the Marks shall inure to the benefit of Licensor.
Licensor agrees that during the term of this Agreement, it shall, upon request
of Licensee, promptly license to Licensee any of its service marks or trade
names, whether existing as of the date of this Agreement or acquired
subsequently, which are, or become, used in connection with any gaming facility
operating under
1
<PAGE>
the Marks, on the terms and conditions set forth herein, and, upon request of
Licensee, shall amend Exhibit A accordingly.
4. Licensor or its authorized representatives shall have the right to
inspect the services provided by Licensee in connection with the Marks, at any
reasonable time with prior notice to Licensee. If Licensor reasonably determines
that Licensee has directly caused any aspect of such services, or Licensee's use
of the Marks, in connection with the promotion, marketing or provision of the
services, to not be used reasonably consistently with Licensors use thereof, in
all material respects, so as to cause it to not materially comply with
Licensor's quality standards or Licensor's requirements regarding the appearance
of the Marks, and such non-compliance was not the result of Licensor, then
Licensor shall notify Licensee in writing specifying such deficiencies. If
Licensee fails to correct all such deficiencies to Licensor's reasonable
satisfaction within a reasonable time, but not more than 60 days from receipt of
notice of such deficiency, then Licensor may provide Licensee notice for breach
or nonperformance as provided in paragraph 8.
5. Licensee agrees to display and use the Marks only in a manner (I)
reasonably consistent with the use of the Marks by Licensor or other licensees
of Licensor, and (II) which does not unreasonably diminish the value of the
Marks. If Licensee desires to use the Marks in a manner not reasonably
consistent with the use by Licensor or other licensees of Licensor, Licensee
shall first submit such change to Licensor for its approval.
6. Licensee will not register or attempt to register any of the Marks as
any part of its own name or marks, and will cooperate as reasonably requested by
Licensor in connection with any registration by Licensor of any of the Marks.
Licensee will promptly inform Licensor of any infringement of any of the Marks
or of any protest by others to Licensee concerning its use of any Mark, in each
case, to the best of its knowledge, and will cooperate with Licensor in all
reasonable respects in connection with any litigation, administrative
proceedings or protests which Licensor deems reasonably desirable in connection
with the protection of or maintenance of rights to make decisions concerning the
initiation, defense, compromise or settlement of any action involving any Mark;
provided, however, that Licensee will be fully indemnified and held harmless for
complying with this sentence.
7. Licensor represents and warrants that it has all right, title and
interest in and to the Marks and the right to license the Marks, to enter into
this Agreement, and to agree to the terms and conditions of this Agreement.
Licensor shall not assign or transfer any of its right, title or interest in any
of the marks to any party, unless such assignment or transfer is subject to the
terms hereof or such party enters into an agreement to license such Mark or
Marks to Licensee on terms and conditions identical to those provided herein.
8. If Licensor should determine that Licensee has caused a material breach
of this Agreement, then Licensor shall so inform Licensee in writing, whereupon
Licensee shall have
2
<PAGE>
thirty (30) days within which to cure said breach and deficiency. If Licensee
does not cure said breach and deficiency within that time to the satisfaction of
Licensor, its right to use the Marks shall forthwith terminate notwithstanding
the term of this license.
9. If Licensee files a petition in bankruptcy or is adjudicated a
bankrupt, if a petition in bankruptcy is filed against Licensee and such
petition is not stayed within sixty (60) days of filing, if it becomes insolvent
or makes an assignment for the benefit of creditors or any arrangements pursuant
to any bankruptcy law, if Licensee discontinues its business or a receiver is
appointed for it or its business, the license granted hereunder shall terminate,
and all use of the Marks shall cease.
10. Unless earlier terminated pursuant to the preceding two sections,
Licensee's license to use the Marks hereunder shall automatically terminate upon
termination of the Management Agreement for any reason; provided, however, that
in the event there is an Event of Default (as defined in the Indenture) and the
Trustee for the Indenture initiates a foreclosure action against the Note
Collateral (as defined in the Indenture), Licensee may continue to use the
Marks, subject to the terms of this License, for a period of six months
following any termination of the Management Agreement.
11. Upon termination of Licensee's rights to use the Marks for any reason
hereunder, Licensee shall immediately take reasonable steps to effect a change
of its trade marks, service marks, trade names, company name and assumed names
so as to remove any of the Marks or any confusingly similar mark or terms.
12. Licensee may not assign, sublicense or otherwise transfer any of its
rights under this Agreement to any third party without the prior written consent
of Licensor, which consent may not be unreasonably withheld. Subject to the
other terms herein, this Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns.
Notwithstanding the foregoing, (i) Licensee may assign its interest herein to
the Trustee, and (ii) any successor or assign of Licensor shall enter into a
Consent to Assignment of License, substantially in the form of that Consent to
Assignment of License entered into by Licensor for the benefit of Trustee.
13. Every notice, demand, consent, approval or other document or
instrument required or permitted to be served upon any of the parties hereto
shall be in writing and shall be deemed to have been duly served on the day of
mailing, and shall be sent by registered or certified United States Mail,
postage prepaid, return receipt requested, addressed to the respective parties
at the addresses stated below:
If to Licensor: John M. Gallaway, President
or his designee
711 Washington Loop
Biloxi, MS 39530
3
<PAGE>
With copies thereof to the following:
Allan B. Solomon, Esq.
2200 Corporate Blvd. NW
Suite 310
Boca Raton, FL 33434
If to Licensee: Isle of Capri Black Hawk L.L.C.
711 Washington Loop
Biloxi, MS 39530
Attention: John M. Gallaway
With copies thereof to the following:
H. Thomas Winn, President, or his designee,
Nevada Gold and Casinos, Inc.
3040 Post Oak Boulevard, Suite 675
Houston, TX 77056
or to such other address as either Licensor or Licensee may have specified in a
notice duly given as required herein to the other.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado. If any of the terms and provisions hereof
shall be held invalid or unenforceable for any reason, such validity or
unenforceability shall in no event affect any of the other terms or provisions
hereof, all such other terms and provisions to be held valid and enforceable to
the fullest extent permitted by law.
15. This Agreement sets forth the entire and only agreement or
understanding between Licensee and Licensor relating to the subject matter
hereof and supersedes and cancels all previous agreements, negotiations,
commitments and representations in respect hereof among them. This Agreement may
not be amended in any respect except by an instrument in writing signed by
Licensee and Licensor.
16. For the convenience of the parties hereto, this Agreement may be
executed in several original counterparts, each of which shall be deemed an
original for all purposes and all such counterparts shall constitute but one and
the same agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the date and year first above written.
4
<PAGE>
CASINO AMERICA, INC., ISLE OF CAPRI BLACK HAWK L.L.C., a
A DELAWARE CORPORATION COLORADO LIMITED LIABILITY COMPANY
By: ALLAN B. SOLOMON By: Casino America of Colorado, Inc.,
Its: Executive Vice President Member
By: ALLAN B. SOLOMON
Title: EXECUTIVE VICE PRESIDENT
Blackhawk Gold, Ltd., Member
By: H. THOMAS WINN
Title: PRESIDENT
5
<PAGE>
CASINO AMERICA, INC.
TRADEMARKS
MARK REGISTRATION NUMBER
- ------ -------------------
ISLE OF CAPRI 1,789,909
ISLE OF CAPRI 1,789,917
ISLE OF CAPRI 1,921,161
WAVES OF FORTUNE 1,985,794
ISLAND GOLD 1,925,975
CALYPSO'S 2,022,801
ISLE OF CAPRI (PARROT LOGO) 2,039,052
ISLE STYLE APPLICATION FOR TRADEMARK
REGISTRATION PENDING
FARRADDAY'S APPLICATION FOR TRADEMARK
REGISTRATION PENDING
EXHIBIT A
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 48,531
<SECURITIES> 0
<RECEIVABLES> 83,108
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 131,639
<PP&E> 4,260,638
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,392,277
<CURRENT-LIABILITIES> 292,548
<BONDS> 674,670
0
1,412,900
<COMMON> 1,019,908
<OTHER-SE> 992,251
<TOTAL-LIABILITY-AND-EQUITY> 4,392,277
<SALES> 0
<TOTAL-REVENUES> 556,119
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 572,668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112,228
<INCOME-PRETAX> (128,777)
<INCOME-TAX> 0
<INCOME-CONTINUING> (128,777)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,777)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
