SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8570
CIRCUS CIRCUS ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0121916
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2880 Las Vegas Boulevard South, Las Vegas, Nevada 89109-1120
(Address of principal executive offices)
(702) 734-0410
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 31, 1995
Common Stock, $.01-2/3 par value 102,774,854 shares
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
Form 10-Q
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
July 31, 1995 (Unaudited) and January 31,
1995........................................... 3-4
Condensed Consolidated Statements of Income
(Unaudited) for the Three and Six Months
Ended July 31, 1995 and 1994................... 5
Condensed Consolidated Statements of Cash
Flows (Unaudited) for the Six Months Ended
July 31, 1995 and 1994......................... 6-7
Notes to Condensed Consolidated Financial
Statements (Unaudited)......................... 8-17
Item 2. Management's Discussion and Analysis of Fi-
nancial Condition and Results of Operations.... 18-23
Part II. OTHER INFORMATION 24-28
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
July 31, January 31,
1995 1995
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents................ $ 62,662 $ 53,764
Receivables.............................. 10,195 8,931
Inventories.............................. 22,902 22,660
Prepaid expenses......................... 19,746 20,103
Total current assets................ 115,505 105,458
PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS,
at cost, less accumulated depreciation
and amortization of $450,245 and $412,909
respectively............................. 1,395,137 1,239,062
EXCESS OF PURCHASE PRICE OVER FAIR MARKET
value of net assets acquired, net........ 399,127 9,836
NOTES RECEIVABLE............................ 30,175 68,083
INVESTMENTS IN JOINT VENTURES............... 151,144 74,840
OTHER ASSETS................................ 12,463 9,806
Total Assets......................... $2,103,551 $1,507,085
The accompanying notes are an integral part of these
condensed consolidated financial statements.
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
July 31, January 31,
1995 1995
(Unaudited)
CURRENT LIABILITIES:
Current portion of long-term debt................ $ 965 $ 106
Accounts payable - trade ........................ 19,494 12,102
Accounts payable - construction.................. 20 1,101
Accrued liabilities ............................. 84,281 68,576
Income tax payable .............................. (16,573) 123
Total current liabilities ................ 88,187 82,008
LONG-TERM DEBT ...................................... 731,485 632,652
DEFERRED INCOME TAX ................................. 129,736 105,313
OTHER LONG-TERM LIABILITIES ......................... 928 988
Total liabilities ........................ 950,336 820,961
REDEEMABLE PREFERRED STOCK........................... 18,530 -
STOCKHOLDERS' EQUITY:
Common stock, $.01-2/3 par value
Authorized - 450,000,000 shares
Issued - 112,749,663 and 96,441,357 shares .... 1,879 1,607
Preferred stock, $.01 par value
Authorized - 75,000,000 shares ................ - -
Additional paid-in capital ...................... 519,605 124,960
Retained earnings ............................... 801,413 754,732
Treasury stock (10,017,309 and 10,589,309 shares),
at cost........................................ (188,212) (195,175)
Total stockholders' equity ............... 1,134,685 686,124
Total Liabilities and
Stockholders' Equity .................. $2,103,551 $1,507,085
The accompanying notes are an integral part of these
condensed consolidated financial statements.
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
Three Months Six Months
Ended July 31, Ended July 31,
REVENUES: 1995 1994 1995 1994
Casino ......................... $169,323 $150,458 $322,674 $301,706
Rooms .......................... 66,972 58,844 135,201 113,036
Food and beverage .............. 52,487 50,311 99,619 97,650
Other .......................... 50,130 48,738 87,350 89,115
338,912 308,351 644,844 601,507
Less-complimentary allowances .. (12,146) (8,456) (23,045) (16,711)
326,766 299,895 621,799 584,796
COSTS AND EXPENSES:
Casino ......................... 67,039 59,984 130,401 119,671
Rooms .......................... 27,815 24,349 53,480 48,072
Food and beverage .............. 51,535 47,302 91,703 92,369
Other operating expenses ....... 25,605 29,038 45,289 54,430
General and administrative ..... 55,515 45,193 103,471 88,741
Depreciation and amortization .. 23,302 20,404 45,563 40,894
Abandonment loss................ 45,148 - 45,148 -
295,959 226,270 515,055 444,177
OPERATING PROFIT BEFORE CORPORATE
EXPENSE ........................ 30,807 73,625 106,744 140,619
CORPORATE EXPENSE ................ 6,442 5,400 11,333 11,314
INCOME FROM OPERATIONS ........... 24,365 68,225 95,411 129,305
OTHER INCOME (EXPENSE):
Interest, dividend and
other income (expense)........ 2,050 (623) 4,885 (650)
Interest expense ............... (13,530) (10,067) (26,044) (20,665)
(11,480) (10,690) (21,159) (21,315)
INCOME BEFORE PROVISION FOR
INCOME TAX...................... 12,885 57,535 74,252 107,990
Provision for income tax ....... 5,604 20,987 27,571 39,151
NET INCOME ....................... $ 7,281 $ 36,548 $ 46,681 $ 68,839
EARNINGS PER SHARE................ $ .08 $ .43 $ .51 $ .80
Average shares outstanding ... 96,887,911 85,696,443 91,464,930 85,889,038
The accompanying notes are an integral part of these
condensed consolidated financial statements.
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended July 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 46,681 $ 68,839
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 46,571 41,712
Loss on disposition of fixed assets 11,584 798
(Increase) decrease in other current assets 338 (4,466)
Decrease in other non-current assets 239 4,624
Increase (decrease) in interest payable 451 (396)
Increase (decrease) in income tax payable (16,696) 1,471
Increase in other current liabilities 14,445 15,507
Increase in deferred taxes 7,080 3,711
Decrease in other non-current liabilities (33) (33)
Total adjustments 63,979 62,928
Net cash provided by operating activities 110,660 131,767
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (97,188) (85,605)
Decrease in construction payables (1,081) (6,014)
(Increase) decrease in investments in joint ventures 14,260 (48,322)
(Increase) decrease in loans to joint ventures 37,908 (2,000)
Net cash paid for acquisition of Gold Strike Resorts (3,386) -
Proceeds from sale of equipment and other assets 414 284
Net cash used in investing activities (49,073) (141,657)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net effect on cash of issuances and payments
of debt with initial maturities of
three months or less (71,160) 37,808
Issuances of debt with original maturities
in excess of three months 11,878 -
Principal payments of debt with original
maturities in excess of three months (6,133) (82)
Exercise of stock options and warrants 11,069 1,569
Purchases of treasury stock - (15,031)
Sale of stock warrants 2,000 -
Other (343) (31)
Net cash provided by (used in)
financing activities (52,689) 24,233
Net increase in cash and cash equivalents 8,898 14,343
Cash and cash equivalents at beginning of period 53,764 39,110
Cash and cash equivalents at end of period $ 62,662 $ 53,453
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
(continued)
Six Months
Ended July 31,
1995 1994
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized) $ 25,025 $ 20,538
Income tax $ 37,101 $ 34,000
Acquisition of Gold Strike Resorts:
Current assets, other than cash $ (1,487) $ -
Property and equipment (115,708) -
Other assets (484,481) -
Current liabilities 9,627 -
Long-term debt 163,978 -
Other liabilities 17,344 -
Subsidiary preferred stock 18,530 -
Stockholders' equity 388,811 -
Net cash used to acquire Gold Strike Resorts $ (3,386) $ -
The accompanying notes are an integral part of these
condensed consolidated financial statements.
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All information for the three and six months ended July 31, 1995
and 1994 is unaudited.)
(1) Principles of consolidation and basis of presentation -
Circus Circus Enterprises, Inc. (the "Company") was
incorporated February 27, 1974. The Company operates hotel and
casino facilities in Las Vegas, Reno and Laughlin, Nevada and a
riverboat casino in Tunica County, Mississippi. It is also a
member in several joint ventures, with operations that include a
casino in Windsor, Canada, a riverboat casino in Elgin, Illinois
and a hotel/casino in Reno, Nevada.
The condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries.
Material intercompany accounts and transactions have been
eliminated.
The condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of
management, all adjustments (which include normal recurring
adjustments) necessary for a fair statement of results for the
interim periods have been made. The results for the three-month
and six-month periods are not necessarily indicative of results
to be expected for the full fiscal year.
Certain reclassifications have been made to the financial
statements for the three and six months ended July 31, 1994 to
conform to the financial statement presentation for the three and
six months ended July 31, 1995. These reclassifications have no
effect on net income.
These financial statements should be read in conjunction
with the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended January
31, 1995.
(2) Acquisition of Gold Strike Resorts -
On June 1, 1995, the Company completed its acquisition of a
group of affiliated entities (collectively "Gold Strike Resorts")
in which it acquired two hotel and casino facilities in Jean,
Nevada, one in Henderson, Nevada, a 50% interest in a joint
venture which owns a riverboat casino and land-based
entertainment complex in Elgin, Illinois, and a 50% interest in a
joint venture which is developing a major destination resort on
the Las Vegas Strip. In exchange for the equity interests in
Gold Strike Resorts, the Company issued 16,291,551 shares of its
common stock and preferred stock of a subsidiary which is
convertible into an additional 793,156 shares of the Company's
common stock. In addition, the Company paid approximately $12
million in cash, while assuming approximately $165 million of
debt. The acquisition has been accounted for by the purchase
method of accounting and resulted in a total purchase price of
approximately $430 million. In determining the purchase price of
Gold Strike Resorts, the value of the Company's common stock
issued was discounted by 30% from the price quoted on the New
York Stock Exchange on May 31, 1995, based on estimates provided
by the Company's investment bankers due to restrictions on the
resale of the common stock issued. The purchase price was
allocated to assets and liabilities based on their estimated fair
values on the date of acquisition. The excess of the purchase
price over the fair market value of the net assets acquired was
approximately $390 million and is being amortized on a straight-
line basis over 40 years.
The following unaudited pro forma information combines the
consolidated results of operations of the Company and Gold Strike
Resorts for the six months ended July 31, 1995 and 1994 as if the
acquisition had occurred on February 1, 1995 and 1994,
respectively, after giving effect to amortization of goodwill and
increased corporate expense primarily due to employment contracts
entered into as a result of the merger. The pro forma informa-
tion is not necessarily indicative of the results of operations
which would have actually been obtained during such periods.
Six Months
(amounts in thousands) Ended July 31,
1995 1994
Revenue $675,583 $641,932
Net income $ 54,326 $ 71,019
Earnings per share $ .53 $ .70
(3) Long-term debt -
Long-term debt consists of the following (in thousands):
July 31, January 31,
1995 1995
(Unaudited)
Amounts due under corporate
debt program at floating
interest rates, weighted
average of 6.1% $190,638 $210,828
7-5/8% Senior Subordinated
Debentures due 2013 150,000 150,000
6-3/4% Senior Subordinated Notes
due 2003 (net of unamortized
discount of $127 and $134) 149,873 149,866
10-5/8% Senior Subordinated Notes
due 1997 (net of unamortized
discount of $33 and $42) 99,967 99,958
Amounts due under bank credit
agreements at floating interest
rates, weighted average of 6.7% 140,000 22,000
Other notes 1,972 106
732,450 632,758
Less - current portion (965) (106)
$731,485 $632,652
The Company has established a corporate debt program whereby
it can issue commercial paper or similar forms of short-term
debt. Although the debt instruments issued under this program are
short-term in tenor, they are classified as long-term debt
because (i) they are backed by long-term debt facilities (see
below) and (ii) it is management's intention to continue to
replace such borrowings on a rolling basis as various instruments
come due and to have such borrowings outstanding for longer than
one year. To the extent that the Company incurs debt under this
debt program, it must maintain an equivalent amount of credit
available under its revolving loan agreements with its bank
group.
In September 1993, the Company entered into revolving loan
agreements consisting of a $250 million unsecured 364-day
facility and a $500 million unsecured reducing revolver which
matures in September 1998 (the "Revolvers"). The $250 million
facility has provisions for annual renewal subject to the consent
of the banks and converts to a two-year term loan if not renewed.
(3) Long-term debt (continued)-
The Revolvers contain financial covenants regarding minimum
net worth, interest charge coverage, maximum leverage ratio, new
venture capital expenditures and new venture investments. The
maximum available credit under the $500 million revolver reduces
by $60 million on each of March 31, 1997, September 30, 1997 and
March 31, 1998. The Revolvers are for general corporate
purposes. The Company currently incurs commitment fees of 22.50
basis points on the unused portion of the $250 million facility
and 27.50 basis points on the unused portion of the $500 million
revolver. As of July 31, 1995, the Company had $140.0 million of
borrowings under the Revolvers. At such date, the Company also
had $190.6 million issued under the corporate debt program thus
reducing, by that amount, the credit available under the
Revolvers for purposes other than repayment of the corporate
debt. The fair value of the debt issued under the corporate debt
program approximates the carrying amount of the debt due to the
short-term maturities of the individual components of the debt.
Pursuant to the acquisition of Gold Strike Resorts, the
Company assumed a $155 million Reducing Revolving Credit
Agreement (the "Credit Facility") which matures February 1, 2001.
The maximum available credit under the Credit Facility was
reduced to $145 million on August 1, 1995 and provides for future
scheduled semi-annual reductions of such availability ranging
from $5 million to $9 million. It also includes financial
covenants identical to the Revolvers. As of July 31, 1995, there
were no amounts outstanding under the Credit Facility.
In July 1993, the Company issued $150 million principal
amount of 6-3/4% Senior Subordinated Notes (the "6-3/4% Notes")
due July 2003 and $150 million principal amount of 7-5/8% Senior
Subordinated Debentures (the "7-5/8% Debentures") due July 2013,
with interest payable each January and July. The 6-3/4% Notes,
which were discounted to $149.8 million, and the 7-5/8%
Debentures are not redeemable prior to maturity and are not
subject to any sinking fund requirements. The net proceeds from
these offerings were used primarily to repay borrowings under the
Company's corporate debt program.
In June 1990, the Company issued $100 million principal
amount of 10-5/8% Senior Subordinated Notes (the "10-5/8% Notes")
due June 1997, with interest payable each June and December. The
10-5/8% Notes, which were discounted to $99.9 million are not
redeemable prior to maturity and are not subject to any sinking
fund requirements. Holders of the 10-5/8% Notes may require the
(3) Long-term debt (continued) -
Company to repurchase all or any portion of their notes at par
upon the occurrence of both a Designated Event (as defined in the
indenture) and a Rating Decline (as defined in the indenture). As
of July 31, 1995, $9.1 million principal amount of the 10-5/8%
Notes was owned by one of the Company's outside directors.
The Company has a policy aimed at managing interest rate
risk associated with its current and future anticipated
borrowings. This policy enables the Company to use any
combination of interest rate swaps, futures, options, caps and
similar arrangements. The Company has entered into various
interest rate swaps, principally with its bank group, to manage
interest expense, which is subject to fluctuation due to the
variable rate nature of the debt under the Company's corporate
debt program. The Company has interest rate swap agreements
under which it pays a fixed interest rate (weighted average of
approximately 8.9%) and receives a variable interest rate
(weighted average of approximately 5.9% at July 31, 1995) on
"initial" swaps with a current notional amount of $151 million,
and pays a variable interest rate (weighted average of
approximately 7.6% at July 31, 1995) and receives a fixed
interest rate (weighted average of approximately 6.1%) on $95
million notional amount of "reversing" swaps. The net effect of
all such swaps resulted in additional interest expense for the
three and six months, due to an interest rate differential which,
at July 31, 1995, was approximately 1.20% on the total notional
amount of the swaps. One of the initial swaps provides for
quarterly reductions in the notional amount of up to $1 million.
This swap has a current notional amount of $31.5 million, but
declines to $22.5 million by its termination date in fiscal 1999.
Excluding this swap, the remaining initial swaps have the
following termination dates: $35 million in fiscal 1996, $30
million in fiscal 1997, $29.5 million in fiscal 1999 and $25
million in fiscal 2000. The reversing swaps expire as follows:
$35 million in fiscal 1996, $30 million in fiscal 1997 and $30
million in fiscal 2002. In addition to the aforementioned swaps,
the Company has entered into an interest rate swap with a
notional amount of $100 million in which the Company pays a
floating rate (6.2% at July 31, 1995 and capped at 6.5%) and
receives a fixed interest rate of 4.75%. This swap corresponds in
both notional amount and maturity to the Company's 10-5/8% Notes
due in 1997. The variable interest rates which the Company pays
or receives under the various swaps are based primarily upon the
London Interbank Offering Rate (LIBOR). The Company is exposed
to credit loss in the event of nonperformance by the other
(3) Long-term debt (continued) -
parties to the interest rate swap agreements. However, the
Company considers the risk of nonperformance by the counter-
parties to be minimal because the parties to the swaps and
reverse swaps are predominantly members of the Company's bank
group.
As of July 31, 1995, under the Company's most restrictive
loan covenants, the Company was restricted as to the payment of
dividends or the purchase of its own capital stock in excess of
approximately $75 million and was restricted from issuing
additional debt in excess of approximately $500 million.
(4) Warrants, stock options and stock rights -
In June 1989, the stockholders approved a stock purchase
warrant plan enabling the Company to offer warrants to its
officers and other key employees to purchase up to 4.5 million
shares of the Company's common stock. In accordance with the
provisions of such plan, the 4.5 million warrants were issued in
June 1989 at a price of $.17 per warrant with an exercise price
of $14.33 ($.67 per share over the fair market value on the date
the warrants were authorized). Each warrant has a term of seven
years, with 50% of the warrants becoming exercisable two years
from the date of grant and the remaining 50% three years from the
date of grant. As of July 31, 1995, warrants representing 3.8
million shares had been exercised, including warrants
representing 312,000 shares which were exercised during the six
months ended July 31, 1995.
The Company also has various stock option plans for
executive, managerial and supervisory personnel as well as the
Company's outside directors and consultants. The plans permit
grants of options, performance shares and restricted stock
relating to the Company's common stock. During the six months
ended July 31, 1995, options for 3,330,000 shares (including
options for 2,000,000 shares for which the Company received a $2
million option purchase price) were granted at prices ranging
from $25.25 to $35.33 with a weighted average exercise price of
$28.28 per share, while options for 276,755 shares were exercised
at prices ranging from $11.75 to $26.88 with a weighted average
exercise price of $22.45 per share. As of July 31, 1995, options
for 7.3 million shares remained exercisable at prices ranging
from $8.58 to $39.34 with a weighted average exercise price of
$24.47 per share, while options covering 2.9 million shares
remained available for grant. The stock options are generally
exercisable in one or more installments beginning not less than
nine months after the grant date.
(4) Warrants, stock options and stock rights (continued) -
On July 14, 1994, the Company declared a dividend of one
Common Stock Purchase Right (the "Rights") for each share of
common stock outstanding at the close of business on August 15,
1994. Each Right entitles the holder to purchase from the
Company one share of common stock at an exercise price of $125,
subject to certain antidilution adjustments. The Rights become
exercisable ten days after the earlier of an announcement that an
individual or group has acquired 10% or more of the Company's
outstanding common stock or the announcement of commencement of a
tender offer for 10% or more of the Company's common stock.
In the event the Rights become exercisable, each Right
(except the Rights beneficially owned by the acquiring individual
or group, which become void) would entitle the holder to
purchase, for the exercise price, a number of shares of the
Company's common stock having an aggregate current market value
equal to two times the exercise price. The Rights expire August
15, 2004, and may be redeemed by the Company at a price of $.01
per Right any time prior to their expiration or the acquisition
of 10% or more of the Company's common stock. The Rights should
not interfere with any merger or other business combination
approved by the Company's Board of Directors and are intended to
cause substantial dilution to a person or group that attempts to
acquire control of the Company on terms not approved by the Board
of Directors.
(5) Redeemable Preferred Stock -
In connection with the acquisition of Gold Strike Resorts,
New Way, Inc., a wholly-owned subsidiary of the Company, issued
1,069,926 shares of $10.00 Cumulative Preferred Stock. Dividends
are payable when, as and if declared by the Board of Directors.
Each share of preferred stock is exchangeable for approximately
3.9 shares of the Company's common stock, however no dividends
are payable in the event of exchange. The preferred stock is
exchangeable by the holder thereof after two years from the date
of issuance, and by the company on the occurrence of certain
events, including a merger of New Way, Inc. into another
subsidiary of the Company. The exchange rate is subject to
adjustment in the event of certain dilutive events. The
preferred stock is subject to mandatory redemption on the
fifteenth anniversary of the date of original issuance at a price
equal to the liquidation preference ($100) plus all unpaid
dividends. Of the preferred shares issued, 866,640 were issued
to another wholly-owned subsidiary of the company.
(6) Preferred stock -
The Company is authorized to issue up to 75 million shares
of $.01 par value preferred stock in one or more series having
such respective terms, rights and preferences as are designated
by the Board of Directors. No preferred stock has yet been
issued.
(7) Earnings per share -
Earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during the
period. Outstanding stock options and warrants and exchangeable
preferred stock are not included in earnings per share
computations since their assumed exercise or conversion would not
have a material dilutive effect.
(8) Investments in joint ventures -
The Company has investments in joint ventures that are
accounted for on the equity method. Under the equity method,
original investments are recorded at cost and adjusted by the
Company's share of earnings or losses of these companies.
Investments in joint ventures consist of the following (in
thousands):
July 31, January 31,
1995 1995
(Unaudited)
Circus and Eldorado Joint Venture (50%)
(Hotel/Casino, Reno, Nevada) $ 51,467 $ 55,256
Windsor Casino Limited (33 1/3%)
(Hotel/Casino, Windsor, Canada) 8,008 5,413
American Entertainment, L.L.C. (50%)
(Riverboat Casino, Chalmette, Louisiana) - 14,171
Elgin Riverboat Resort (50%)
(Riverboat Casino, Elgin, Illinois) 55,468 -
Victoria Partners (50%)
(Hotel/Casino, Las Vegas, Nevada) 36,201 -
$151,144 $ 74,840
In June 1995, the Company purchased the remaining 50%
interest in American Entertainment, L.L.C. from the other joint
venturer and in July 1995, the Company sold the unfinished
riverboat project (see Note 9 for additional details). The
Company's 50% interests in each of Elgin Riverboat Resort and
Victoria Partners were acquired as part of the merger with Gold
Strike Resorts. For the six months ended July 31, 1995 and 1994,
the joint ventures which were in operation during such periods
contributed approximately $6.8 million and $2.0 million,
respectively, to the Company's operations (included in "Other
Revenue" on the accompanying condensed consolidated statements of
income).
(9) Abandonment Loss -
During the second quarter, the Company wrote-off $45.1
million of costs associated with various assets which were
disposed of or whose values had otherwise become impaired. The
Company sold its partially completed riverboat gaming facility in
Chalmette, Louisiana for $4 million. The Company had a net
investment (including a loan to the other joint venturer) of
$35.5 million in this project and thus recognized a loss of $31.5
million on this sale. After reevaluating the New Orleans market,
the Company determined that this project could no longer promise
a sufficiently high rate of return to meet Company objectives.
The Company wrote off $6.2 million representing the
remaining value of the parking garage and people mover at Circus
Circus-Reno which will be demolished for an expansion of that
property. The Company also wrote-off $3.7 million for the
recently dismantled monorail system between Luxor and Excalibur,
$2.1 million for an inactive gondola system at Circus Circus-Las
Vegas which will be removed in the near future, and $1.6 million
for miscellaneous other assets.
(10) Commitments and contingent liabilities -
In December 1993, Windsor Casino Limited, a corporation
owned equally by Circus Circus Enterprises, Inc., Caesars World,
Inc. and Hilton Hotels Corporation or their subsidiaries, was
selected to exclusively negotiate an agreement to design, build
and operate a casino complex in Windsor, Ontario, Canada. The
planned complex will include casino, showroom and meeting
facilities as well as a 300-room hotel, all located in Windsor's
central business district, immediately across the Detroit River
from Detroit, Michigan. An interim casino, operated by Windsor
Casino Limited, opened in May 1994. The corporation is currently
negotiating the agreement for a permanent facility, which is
expected to be completed in 1997.
On July 28, 1995, the Silver Legacy, a 50/50 joint venture
with the Eldorado Hotel/Casino (a privately held company) opened
in downtown Reno, Nevada. The Silver Legacy is themed as a turn-
of-the-century silver mining town and is located on a site
between Circus Circus-Reno and the Eldorado, connected to both
properties by enclosed skyways. The cost of the initial phase of
Silver Legacy was approximately $350 million (excluding
capitalized interest and preopening expenses), of which the
venturers contributed $103.8 million in equity. On May 31, 1995,
the joint venture completed a $230 million bank credit agreement
with its bank group. Part of the proceeds of this loan were used
to repay amounts previously lent to the joint venture by the
Company. As a condition to the credit agreement, Circus
(10) Commitments and contingent liabilities (continued) -
guaranteed completion of Silver Legacy and, in addition, entered
into a make-well agreement whereby it is obligated to make
additional contributions to the joint venture as may be necessary
to maintain a minimum coverage ratio (as defined). As of July
31, 1995, the Company had a net equity investment of
approximately $51.5 million in the project and had outstanding
loans to the joint venture in the principle amount of $30.2
million.
The Company owns a 50% interest in a joint venture with
Mirage Resorts, Incorporated which is developing Monte Carlo, a
major destination resort under construction on the Las Vegas
Strip for which the Company serves as the venture's manager.
Monte Carlo has an estimated cost of $344 million (including
land, capitalized interest and preopening expenses), and the
Company is obligated to fund any portion of such cost in excess
of certain equity contributions and the funding provided by a
$185 million construction loan. As a condition to the
construction loan, the Company has guaranteed the completion of
Monte Carlo. The Company's total equity contribution is
anticipated to be approximately $63 million, of which $35.1
million had been funded as of July 31, 1995. Monte Carlo is
scheduled to open in the summer of 1996.
On September 1, 1995, the Company completed the previously
announced acquisition of the Hacienda Hotel and Casino in Las
Vegas for approximately $80 million. The Hacienda is located on
47 acres of land adjacent to Luxor, and contains approximately
1,100 rooms and 50,000 square feet of casino space.
The Company has funded the above projects from internal cash
flows, project specific financing or its revolving lines of
credit, and anticipates that future funding for such projects
will be from these sources, including the revolving lines of
credit, currently at $895 million, of which approximately $564
million was not drawn as of July 31, 1995.
The Company is a defendant in various pending litigation. In
management's opinion, the ultimate outcome of such litigation
will not have a material effect on the results of operations or
the financial position of the Company.
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited)
RESULTS OF OPERATIONS
Earnings per Share
For the second quarter ended July 31, 1995, the Company reported
net income of $7.3 million, or $.08 per share, versus $36.5
million, or $.43 per share last year. For the six months, net
income was $46.7 million, or $.51 per share, against $68.8
million, or $.80 per share in the prior year. Results were
significantly affected by one-time asset write-offs totaling
$45.1 million, as well as the recognition of approximately $6.2
million representing the Company's 50% share of preopening
expenses related to the July 28 opening of the Silver Legacy in
Reno, Nevada. (See Financial Position and Capital Resources for
additional information regarding the Silver Legacy.)
Of the $45.1 million in asset write-offs in the second quarter,
$31.5 million related to the discontinued riverboat project in
Chalmette, Louisiana. (See Financial Position and Capital
Resources for additional details regarding this project.) In
addition to Chalmette, the Company wrote off $6.2 million
representing the remaining value of a parking garage and people
mover at Circus Circus-Reno which will be demolished for an
expansion of that property. The Company also wrote-off $3.7
million for the recently dismantled monorail between Luxor and
Excalibur, $2.1 million for an inactive gondola system at Circus
Circus-Las Vegas and $1.6 million for miscellaneous other assets.
The second quarter results reflect two months of combined
performance of Circus and Gold Strike Resorts, which the Company
acquired on June 1 in exchange for 16,291,551 shares of its
common stock and preferred stock of a subsidiary which is
convertible into an additional 793,156 shares of the Company's
common stock, plus the payment of $12 million in cash and the
assumption of approximately $165 million in debt. During the
quarter, the Company's growth in operating income (before the
write-offs) derived from strong performances at the Company's two
riverboat casinos--The Grand Victoria in Elgin, Illinois
(formerly a Gold Strike property) and Circus Circus in Tunica,
Mississippi. Neither casino was in operation in the second
quarter last year.
Revenues
Revenues for the Company increased $26.9 million, or 9%, for the
three months and $37.0 million, or 6%, for the six months,
compared to the prior year. Circus Circus-Tunica, which was not
open in the prior year, was a principal factor in this growth,
posting revenues of $15.9 million in the quarter and $32.5
million in the six month period.
<PAGE>
The acquisition of Gold Strike Resorts on June 1 also contributed
to this increase, as the hotel/casino operations in Jean and
Henderson, Nevada recorded $16.4 million in revenues for the
quarter and six months. Additionally, the Company's 50% interest
in The Grand Victoria, a joint venture riverboat casino in Elgin,
Illinois, added $8.6 million, which was reflected in other
revenues.
In Las Vegas, revenues at the Company's major properties (Circus
Circus-Las Vegas, Luxor and Excalibur) were down approximately 3%
compared with the prior year, both in the quarter and on a year-
to-date basis. While casino revenues at these properties were
down approximately 7% in the quarter and six months, this was
partially offset by higher room revenues stemming from higher
average room rates. Occupancy rates remained strong at nearly
100% for each of these properties. While the broadening appeal
of Las Vegas has contributed to increased visitor counts and
strong hotel occupancy rates, customers are spending relatively
less on gaming and more in the other areas of the mega-resorts.
On a combined basis, the Company's Laughlin properties were down
approximately 11% in revenues in the quarter and six months. In
February, a new Indian casino opened over 300 rooms and another
competitor in Laughlin opened more than 700 additional rooms.
Laughlin has also felt the effect of competition from the new
mega-resorts in Las Vegas, as well as the effect of unregulated
Indian gaming in its prime Arizona feeder markets.
Operating Income
Income from operations (excluding the write-off of assets and the
recognition of Silver Legacy preopening expenses) increased $7.5
million, or 11%, in the second quarter and $17.5 million, or 14%,
in the six months, versus the comparable periods last year. The
Company's composite operating margin (excluding the asset write-
offs and preopening expenses) was 22.7% and 23.4% for the three
and six months, versus 22.7% and 22.1% last year.
As mentioned above, The Grand Victoria riverboat (a 50/50 joint
venture with the Hyatt) was the main contributor to the increase
in operating income, producing $7.8 million in the two months it
was owned by the Company. Since it opened in October 1994, The
Grand Victoria has become one of the most successful casino
riverboats in the country. Circus Circus-Tunica was also a
significant contributor, generating $5.2 million in operating
income in the quarter and $11.3 million on a year-to-date basis,
versus the prior year when it was not yet open.
The Company's Laughlin properties reported a combined decrease of
approximately 30% in operating income in the second quarter and
26% on a year-to-date basis. Operating margins also declined.
The additional competition in Laughlin is particularly evident in
room rates, which decreased from the prior year (contrary to the
trend in the Las Vegas market), while occupancy levels also
declined. The Company's Laughlin properties produced
approximately $10 million in operating cash flow for the quarter
and nearly $23 million for the six months.
Before write-offs, operating income at the Company's Las Vegas
properties was down moderately compared with the prior year,
while Circus Circus-Reno showed a mild increase in both the three
and six months.
Interest Expense
Interest expense increased $3.5 million and $5.4 million for the
three and six months compared to the prior year. This increase
was due to higher borrowings, stemming principally from the
assumption of approximately $165 million in debt in connection
with the Gold Strike acquisition. Capitalized interest was $1.9
million and $3.3 million for the three months and six months
ended July 31, 1995, versus $1.3 million and $1.5 million a year
ago. At July 31, 1995, long-term debt stood at $731 million
compared to $605 million at July 31, 1994.
Income Tax
The Company's effective tax rate for the three and six months
ended July 31, 1995 was approximately 43% and 37%. The quarter's
unusually high tax rate reflects the corporate statutory rate of
35% plus the effect of various non-deductible expenses, primarily
goodwill amortization associated with the Gold Strike merger. The
Company expects its normalized tax rate in future quarters to be
approximately 37%. The effective tax rate for the three and six
months ended July 31, 1994 was approximately 36%.
Financial Position and Capital Resources
The Company had cash and cash equivalents of $62.7 million at
July 31, 1995. Circus' pre-tax cash flow from operations was
$99.6 million and $193.3 million for the three and six months
ended July 31, 1995 versus $89.0 million and $171.0 million in
the prior year--increases of 11.9% and 13.0%, respectively. In
this context, pre-tax cash flow from operations is defined as the
Company's income from operations before asset write-offs and
preopening expenses, plus non-cash operating expenses (primarily
depreciation and amortization).
Capital expenditures for the three and six months ended July 31,
1995 were $14.4 million and $97.2 million. For the six months,
$73.4 million related to the acquisition of 73 acres of
undeveloped land south of Luxor (see additional discussion
below).
On June 1, 1995, the Company completed the acquisition of Gold
Strike Resorts pursuant to an agreement entered into as of March
19, 1995. As a result of the acquisition, the Company now owns
and operates three gaming properties in Nevada (Gold Strike Hotel
and Gambling Hall and Nevada Landing in Jean, and Railroad Pass
in Henderson). It also holds a 50% interest in and operates The
Grand Victoria riverboat in Elgin, Illinois (which opened in
October 1994), and holds a 50% interest in a joint venture with
Mirage Resorts, Incorporated which is developing Monte Carlo, a
major destination resort under construction on the Las Vegas
Strip for which it serves as the venture's manager. In exchange
for the equity interests in these properties, the Company issued
16,291,551 shares of its common stock and preferred stock of a
subsidiary which is convertible into an additional 793,156 shares
of the Company's common stock and paid approximately $12 million
in cash, while assuming approximately $165 million in debt. The
Company does not anticipate that the transaction will have a
materially dilutive impact on earnings per share.
The Monte Carlo, the joint venture project with Mirage, will
feature over 3,000 rooms and a 90,000 square foot casino, with a
palatial style reminiscent of the Belle Epoque, the French
Victorian architecture of the late 19th century. This project
has an estimated cost of $344 million (including land,
capitalized interest and preopening expenses), and the Company is
obligated to fund any portion of such cost in excess of certain
equity contributions and the funding provided by a $185 million
construction loan. The Company's total equity contribution is
anticipated to be approximately $63 million, of which $35.1
million had been funded as of July 31, 1995. Monte Carlo is
scheduled to open in the summer of 1996.
During the quarter, as noted above, the Company sold its
partially completed riverboat gaming facility in Chalmette,
Louisiana for $4 million. The Company had owned a 50% interest
in the joint venture engaged in the development of this project,
which was to be located approximately 20 minutes from downtown
New Orleans. After re-evaluating the changing circumstances in
the New Orleans market, the Company determined that the project
could no longer promise a sufficiently high rate of return to
meet its objectives. The Company had a net investment in or
commitments for this project of approximately $25.5 million and a
loan to the other joint venturer of $10 million, resulting in a
net write-off of $31.5 million in connection with the
disposition.
On July 28, 1995, the Silver Legacy, a 50/50 joint venture with
the Eldorado Hotel/Casino (a privately held company) opened in
downtown Reno, Nevada. The Silver Legacy is themed as a turn-of-
the-century silver mining town and is located on a site between
Circus Circus-Reno and the Eldorado, connected to both properties
by enclosed skyways. The cost of the initial phase of Silver
Legacy was approximately $350 million (excluding capitalized
interest and preopening expenses), of which the venturers
contributed $103.8 million in equity. On May 31, 1995, the joint
venture completed a $230 million bank credit agreement with its
bank group. Part of the proceeds of this loan were used to repay
amounts previously lent to the joint venture by the Company. As
a condition to the credit agreement, Circus guaranteed completion
of Silver Legacy and, in addition, entered into a make-well
agreement whereby it is obligated to make additional
contributions to the joint venture as may be necessary to
maintain a minimum coverage ratio (as defined). As of July 31,
1995, the Company had a net equity investment of approximately
$51.5 million in the project and had outstanding loans to the
joint venture in the principle amount of $30.2 million.
On September 1, 1995, the Company completed the previously
announced acquisition of the Hacienda Hotel and Casino in Las
Vegas for approximately $80 million. The Hacienda is located on
47 acres of land adjacent to Luxor, and contains approximately
1,100 rooms and 50,000 square feet of casino space. Previously,
in March 1995, the Company purchased approximately 73 acres of
undeveloped land at the northwest corner of Russell Road and the
Las Vegas Strip, just south of the Hacienda, at a cost of
approximately $73 million. Both of these acquisitions were
financed under the Company's bank lines of credit. The Company
is developing a master plan for these sites as well as expansion
and improvements of Luxor and Excalibur.
As a first step to this master plan, the Company expects to
commence construction on a major expansion at Luxor by the end of
the current fiscal year. The expansion will involve a 1,780 room
addition, raising the total rooms at Luxor to approximately
4,300. The new rooms will be arranged in a low-rise, villa-style
configuration around the pyramid, featuring lush courtyards and
terraces. The expansion will also include additional casino
space, retail area, restaurants, and a multi-purpose showroom, as
well as a signature "dark" ride with a working title of
"Tutmania", an adventure through the fabled and enchanted tombs
of ancient Egypt. The first block of rooms should be open by
fall 1996. The estimated cost for this expansion is expected to
be between $225 and $250 million. It is the Company's belief
that the Las Vegas market can readily absorb significant new
capacity, including that contemplated in its master plan.
Furthermore, the focus in Las Vegas has shifted toward the south
end of the Las Vegas Strip, where the Company will be developing
its master plan at what is essentially the gateway to Las Vegas.
In December 1993, Windsor Casino Limited, a corporation owned
equally by Circus Circus Enterprises, Inc., Caesars World, Inc.
and Hilton Hotels Corporation or their subsidiaries, was selected
to exclusively negotiate an agreement to design, build and
operate a casino complex in Windsor, Ontario, Canada. The
planned complex will include casino, showroom and meeting
facilities as well as a 300-room hotel, all located in Windsor's
central business district, directly across the Detroit River from
Detroit, Michigan. An interim casino, operated by Windsor Casino
Limited, opened in May 1994. The corporation is currently
negotiating an agreement for a permanent facility, expected to be
completed in 1997. As of July 31, 1995, Circus had a net equity
investment of approximately $8.0 million in this project.
The Company's Board of Directors has authorized the repurchase of
up to 15% of the Company's common stock, subject to share price.
In the past, Circus has been a periodic repurchaser of its shares
at the same time that it has increased its operating capacity.
The Company believes that it has sufficient capital resources
through its existing bank arrangements and its operating cash
flows to meet all of its existing cash obligations, fund its
commitments on each of the above discussed projects and
strategically repurchase shares. The Company anticipates that
additional funds could, however, be raised through debt or equity
if necessary.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
An amended complaint in a purported class action lawsuit was
filed on August 23, 1995 in the United States District Court for
the District of New Jersey, Camden Division, against 79 named
defendants, including the Company and other casino operators, and
the Company received service of process in connection with such
suit on August 31, 1995. The complaint, filed on behalf of
Thomas Hyland and other persons similarly situated, alleges that
the defendants have engaged in a course of conduct involving
conspiracy among casinos in the United States to refuse to deal
to skilled blackjack players who are capable of winning money at
the casinos' blackjack tables in violation of various statutory
provisions including the Sherman Act, the Fair Credit Reporting
Act and various state antitrust and consumer fraud laws. The
complaint also asserts pendant causes of action under the tort
and contract laws of states where it is alleged that refusal to
deal to skilled players is illegal. The complaint seeks recovery
of any compensatory damages determined to have been sustained as
a result of the alleged violations as well as exemplary damages,
including treble damages for alleged violations of the Sherman
Act. Management believes that the claims against the Company are
wholly without merit and does not expect that the lawsuit will
have a material adverse effect on the Company's financial
position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
The 1995 Annual Meeting of the Company's stockholders was
held June 22, 1995. At the meeting, management's nominees,
William N. Pennington, Tony Coelho and Carl F. Dodge, were
elected to fill the three available positions as Class I
directors. Voting (expressed in numbers of shares) was as
follows: Mr. Pennington -- 67,828,893 for, 2,831,551 against or
withheld and no abstentions or broker non-votes; Mr. Coelho --
67,755,274 for, 2,905,170 against or withheld and no abstentions
or broker non-votes; and Mr. Dodge -- 67,817,984 for, 2,842,460
against or withheld and no abstentions or broker non-votes.
At the meeting, a 1995 Special Stock Option Plan providing
for the issuance of up to 3,300,000 shares of the Company's
Common Stock was approved by a vote of 54,276,728 shares for,
15,998,370 shares against or withheld and 385,346 abstentions or
broker non-votes.
At the meeting, an Executive Officer Bonus Plan was approved
by a vote of 66,068,821 shares for, 4,151,671 shares against or
withheld and 439,952 abstentions or broker non-votes.
At the meeting, stockholders ratified the appointment of
Arthur Andersen LLP as the Company's independent auditors to
examine and report on its financial statements for the fiscal
year ending January 31, 1996, by a vote of 70,286,834 shares for,
154,517 shares against or withheld and 219,093 abstentions or
broker non-votes.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits filed as part of this report are listed on
the Index to Exhibits accompanying this report.
(b) Reports on Form 8-K. During the period covered by this
report, the Company made a filing on Form 8-K dated June 1, 1995,
which included information in response to items 2 and 7 of Form
8-K. The financial statements required in item 7 were (in
accordance with paragraph (a)(4) of item 7) filed by an amendment
on Form 8-K/A dated August 11, 1995. Such financial statements,
which relate to the Company's acquisition described in item 2 of
such Form 8-K, consist of the following:
(1) The audited combined financial statements of Gold
Strike Resorts for the years ended December 31, 1994
and 1993.
(2) The audited financial statements of Elgin Riverboat
Resort - Riverboat Casino for the years ended December
31, 1994 and 1993.
(3) Combined pro forma balance sheets of the Company as of
April 30, 1995 and Gold Strike Resorts as of May 31,
1995.
(4) Combined pro forma income statements of the Company for
the twelve months ended January 31, 1995 and Gold
Strike Resorts for the twelve months ended December 31,
1994.
(5) Combined pro forma income statements of the Company for
the three months ended April 30, 1995 and Gold Strike
Resorts for the three months ended May 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CIRCUS CIRCUS ENTERPRISES, INC.
(Registrant)
Date: September 13, 1995 By CLYDE T. TURNER
Clyde T. Turner
Chairman of the Board and
Chief Executive Officer
Date: September 13, 1995 By GLENN W. SCHAEFFER
Glenn W. Schaeffer
President and Chief Financial
Officer
INDEX TO EXHIBITS
Exhibit
No. Description
10(a). Reducing Revolving Loan Agreement, dated as of December
21, 1994, among Victoria Partners, each bank party
thereto, The Long-Term Credit Bank of Japan, Ltd., Los
Angeles Agency, and Societe Generale, as Co-agents, and
Bank of America National Trust and Savings Association,
as Administrative Agent (without Schedules or Exhibits)
(the "Victoria Partners Loan Agreement"). Incorporated
by reference to Exhibit 99.2 to Amendment No. 1 on Form
8-K/A to the Current Report on Form 8-K dated December
9, 1994 of Mirage Resorts, Incorporated. Commission
File No. 1-6697.
10(b). Amendment No. 1 to the Victoria Partners Loan
Agreement, dated as of January 31, 1995. Incorporated
by reference to Exhibit 10(uu) to the Annual Report on
Form 10-K for the year ended December 31, 1994 of
Mirage Resorts Incorporated. Commission File No.
1-6697.
10(c). Amendment No. 2 to the Victoria Partners Loan
Agreement, dated as of June 30, 1995. Incorporated by
reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995
of Mirage Resorts, Incorporated. Commission File No.
1-6697.
10(d). Amendment No. 3 to the Victoria Partners Loan
Agreement, dated as of July 28, 1995. Incorporated by
reference to Exhibit 10.3 to the Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995
of Mirage Resorts, Incorporated. Commission File No.
1-6697.
10(e). Joint Venture Agreement, dated as of December 9, 1994,
between MRGS Corp. and Gold Strike L.V. (without
Exhibit) (the "Victoria Partners Venture Agreement").
Incorporated by reference to Exhibit 99.1 to the
Current Report on Form 8-K dated December 9, 1994 of
Mirage Resorts, Incorporated. Commission File No. 1-
6697.
10(f). Amendment No. 1 to the Victoria Partners Venture
Agreement dated as of April 17, 1995. Incorporated by
reference to Exhibit 10(c) to the Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1995
of Mirage Resorts, Incorporated. Commission File No.
1-6697.
10(g). Joint Venture Agreement, dated as of December 18, 1992,
between Nevada Landing Partnership and RBG, L.P.
10(h). Amendment dated July 15, 1993 to the Joint Venture
Agreement between Nevada Landing Partnership and RBG,
L.P.
10(i). Amendment dated October 6, 1994 to the Joint Venture
Agreement between Nevada Landing Partnership and RBG,
L.P.
10(j). Amendment dated June 1, 1995 to the Joint Venture
Agreement between Nevada Landing Partnership and RBG,
L.P.
27. Financial Data Schedule for the six months ended July
31, 1995.
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT ("Agreement") is made and entered
into as of the 18th day of December, 1992, by and among NEVADA
LANDING PARTNERSHIP, an Illinois general partnership ("Nevada
Group") and RBG, L.P., an Illinois limited partnership ("Illinois
Group").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to organize a general
partnership under the laws of the State of Illinois;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consider-
ation, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
1.1 Definitions. Except as otherwise herein expressly
provided, the following terms and phrases shall have the meanings
set forth below:
"Affiliate" shall mean, as to any Partner (or as to any other
person the affiliates of whom are relevant for purposes of any of
the provisions of this Agreement) any corporation, partnership,
joint venture, trust or individual controlled by, under common
control with, or which controls, directly or indirectly, such
Partner or other person. The term "control" for these purposes
means the ability, whether by direct or indirect ownership of
shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have
the power to remove and then select, a majority of those persons
exercising governing authority over an entity, and, in the case of
a limited partnership, shall mean the sole general partner thereof,
all of the general partners thereof to the extent each has equal
management control or authority, or the managing general partner or
managing general partners thereof, as appropriate (and in any event
shall mean the ownership and control [that is, the right to vote]
of fifty percent [50%] or more of the residual equity interests in
an entity). The term "Affiliate" shall also mean and include (i)
a trust of which the Partner, or other applicable person, or a
direct or indirect shareholder of such Partner or other person, is
a trustee, or which has as its principal income or residual
beneficiaries, such Partner or other person, or any direct or
indirect shareholder of such Partner or other person, or members of
the immediate family of such Partner, direct or indirect
shareholder or other person, and (ii) any members of such Partner's
or other person's immediate family, or a member of the immediate
family of any direct or indirect shareholder of such Partner or
other person. For purposes hereof, shares or other ownership
interests held by a trust shall be deemed to be owned pro rata by
the income and residuary beneficiaries of such trust. Further, the
members of the immediate family of any Partner or other person
shall include all collateral relatives of such Partner or other
person having a common linear ancestor with such Partner or other
person, and the spouse or any former spouse of such Partner or
other person or any of such collateral relatives.
"Bankruptcy" or "Bankrupt" as to any person (including,
without limitation, any Partner, the Joint Venture or other
relevant person, including, in the case of any Partner which is
itself a partnership, any general partner of such Partner) means
(i) any proceeding brought by or against such person under the
United States Bankruptcy Code, or any successor thereto, as
amended, or any state laws providing for the relief of debtors,
except that, in the case of an involuntary proceeding brought
against any such person, only if such proceeding shall not have
been withdrawn, stayed or discharged within sixty (60) days after
the institution thereof, unless, within such sixty (60) day period,
such person shall have consented to the institution thereof; (ii)
admission in writing of the inability of such person to pay its
debts as they come due; (iii) the making of an assignment for the
benefit of the creditors of such person; (iv) if such person shall
become insolvent (except that, for purposes hereof, no Partner
shall be deemed insolvent merely by reason of the fact that it has
a negative balance in its Capital Account or by reason of the fact
that the amount of its liabilities exceed the amount of its assets
by an amount equal to or less than the negative balance of such
Partner's Capital Account); or (v) the entry of an order, judgment
or decree against such person in an amount in excess of $100,000
which continues unpaid, unstayed or undischarged for more than
sixty (60) days after the entry thereof. A Bankruptcy of a general
partner of a Partner shall, for purposes of this Agreement, also
constitute the Bankruptcy of such Partner.
"Capital Account" shall mean, with respect to any Partner, the
separate "book" account which the Joint Venture shall establish and
maintain for such Partner in accordance with Section 704(b) of the
Code and Section 1.704-1(b)(2)(iv) of the Regulation and such other
provisions of Section 1.704-1(b) of the Regulation that must be
complied with in order for the Capital Accounts to be determined in
accordance with the provisions of the Regulation. In furtherance
of the foregoing, the Capital Accounts shall be maintained in
compliance with Section 1.704-1(b)(2)(iv) of the Regulation; and
the provisions hereof shall be interpreted and applied in a manner
consistent therewith.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Committee" shall have the meaning set forth in Section 7.1.
"Default Loan" shall have the meaning set forth in Section
4.4.
"Default Rate" shall mean five percent (5%) per annum, plus
the per annum rate of interest announced from time to time by the
First National Bank of Chicago, main branch, as its prime rate,
corporate base rate or other similar reference rate, such rate to
change concurrently with any changes in the said reference rate.
"Defaulting Partner" shall have the meaning set forth in
Section 4.3.
"Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization or other cost
recovery deduction allowable for federal income tax purposes with
respect to an asset for such year or other period in accordance
with the depreciation method elected by the Joint Venture with
respect to such asset, except that if the Gross Asset Value of an
asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction allowable for such
year or other period bears to such beginning adjusted tax basis.
"Gain" or "Loss" shall mean the gain or loss recognized by the
Joint Venture during any fiscal year on account of the sale,
exchange, condemnation or other disposition of any Joint Venture
assets, as determined in accordance with Section 1001 of the Code
(or, where applicable, Section 453 of the Code), appropriately
adjusted, however, with respect to final determination of the
foregoing for federal income tax purposes, and also adjusted as
follows:
(1) In the event the Gross Asset Value of any Joint
Venture asset is adjusted pursuant to subparagraphs (2) or (3)
of the definition of Gross Asset Value, the amount of such
adjustment shall be taken into account as though the same
constituted gain or loss from the disposition of such asset
for purposes of computing Gain or Loss under the provisions of
this Joint Venture Agreement.
(2) Gain or Loss, if any, resulting from any
disposition of Joint Venture property with respect to which
gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax
basis of such property differs from its Gross Asset Value.
"Gross Asset Value" means, with respect to any Joint Venture
Asset, the adjusted basis of such asset for federal income tax
purposes, except as follows:
(1) The Gross Asset Value of any asset contributed by
a Partner to the Joint Venture shall, as of the date of such
contribution and subject to further adjustment as herein
provided, be the gross fair market value of such asset, as
determined by the contributing Partner and the Joint Venture.
(2) The Gross Asset Values of all Joint Venture assets
(including assets contributed to the Joint Venture) shall be
adjusted to equal their respective gross fair market values,
as reasonably determined by the General Partner, as of each of
the following times: (a) the acquisition of an additional
interest in the Joint Venture by any new or existing Partner
in exchange for more than a de minimis capital contribution;
(b) the distribution by the Joint Venture to a Partner of more
than a de minimis amount of Joint Venture property in
consideration of the redemption, or partial redemption, of the
Partnership Interest in the Joint Venture of the Partner or
Partners to whom such distribution shall be made if, in
connection therewith, the General Partner reasonably
determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the
Joint Venture; and (c) the liquidation of the Joint Venture
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulation.
(3) The Gross Asset Value of any Joint Venture asset
distributed to any Partner shall be the gross fair market
value of such asset on the date of distribution.
(4) The Gross Asset Value of any Joint Venture assets
shall be increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that
such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulation; provided, however, that Gross Asset Values shall
not be adjusted to the extent the Partners determine that an
adjustment pursuant to subparagraph (2) above is necessary or
appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this
subparagraph (4).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to any of the foregoing, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Net Profits
and Net Losses.
"License" shall mean any license, permit, authorization,
consent or approval issued by any governmental agency, authority,
board, bureau, commission, department or instrumentality, and
required in order to conduct a gaming business, either alone or in
combination with any one or more other businesses, including any
such license, permit, authorization, consent or approval issued by
the State of Illinois or any local governmental authority in
connection with the operation of the business of the Joint Venture,
or by any other jurisdiction, domestic or foreign, necessary in
order to conduct the business of either Partner or any of the
Affiliates of either Partner, in any such other jurisdiction.
"Loss of License" shall have the meaning set forth in Section
8.1.
"Minimum Gain" shall mean the partnership minimum gain
determined by computing, with respect to each non-recourse
liability of the Joint Venture, the amount of gain (of whatever
character), if any, that would be realized by the Joint Venture if
it disposed of (in a taxable transaction) the Joint Venture
property subject to such liability in full satisfaction thereof
(and for no other consideration), and by then aggregating the
amounts so computed. Minimum Gain shall be computed in all
respects in conformity with the Regulation. Without limiting the
generality of the foregoing, all definitions relevant for Minimum
Gain purposes shall have the meaning ascribed thereto in, or for
purposes of, the Regulation.
"Net Cash Flow" shall mean, with respect to any fiscal period
of the Joint Venture, the excess, if any, of "Receipts" over
"Expenditures". For purposes hereof, the term "Receipts" means the
sum of all cash receipts of the Joint Venture from all sources for
such period, including capital contributions, net sale proceeds and
net financing proceeds. The term "Expenditures" means the sum of
(a) all cash expenses of the Joint Venture for such period, (b) the
amount of all payments of principal and interest on account of any
indebtedness of the Joint Venture, and (c) such reasonable cash
reserves as of the last day of such period as the Partners deem
necessary for any capital or operating expenditure permitted
hereunder.
"Net Profits" or "Net Losses" shall mean the income or loss of
the Joint Venture for federal income tax purposes determined as of
the close of the Joint Venture's fiscal year or as of such other
time as may be required by this Agreement or the Code, as well as,
where the context requires, related federal tax items such as tax
preferences and credits (but excluding any items of Gain or Loss),
appropriately adjusted with respect to final determination of any
of the foregoing for federal income tax purposes, and also adjusted
as follows:
(1) Any income of the Joint Venture that is exempt
from federal income tax and not otherwise taken into account
in computing Net Profits or Net Losses shall be added to such
taxable income or loss.
(2) Any expenditures of the Joint Venture described in
Section 705(a)(2)(B) of the Code, or treated as Section
705(a)(2)(B) expenditures pursuant to Section 1.704-
1(b)(2)(iv)(i) of the Regulation, and not otherwise taken into
account in computing Net Profits or Net Losses shall be
subtracted from such taxable income or loss.
(3) In lieu of depreciation, amortization or other
cost recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such fiscal year or other period.
(4) Notwithstanding any other provision hereof, any
items which are specially allocated under Section 4.3 shall
not be taken into account in computing Net Profits or Net
Losses.
"Partner" shall mean either the Illinois Group or the Nevada
Group without distinction between them.
"Partnership Interest" shall mean the ownership interest of a
Partner in the Joint Venture from time to time including the right
of such Partner to any and all benefits to which such Partner may
be entitled in this Agreement or under the Act, together with the
obligations of such Partner to comply with all of the terms and
provisions of this Joint Venture Agreement and of applicable law,
and shall include, without limitation, each Partner's Partnership
Percentage and Capital Account. Wherever in this Agreement
reference is made to a particular percentage of a Partner's
Partnership Interest it shall be deemed to refer to such Partner's
Partnership Percentage and shall include a proportionate amount of
such Partner's other interests in the Joint Venture. Accordingly,
a one percent (1%) Partnership Interest of a Partner having a fifty
percent (50%) Partnership Percentage shall mean 1/50th of such
Partner's Partnership Percentage, as well as 1/50th of its Capital
Account.
"Partnership Percentages" shall mean the Percentage Interests
of each of the Illinois Group and the Nevada Group pursuant to
Section 4.5, as the same may be adjusted, from time to time, in
accordance with the provisions of this Joint Venture Agreement.
"Regulation" shall mean the Treasury Regulations, as in effect
on the date hereof, adopted pursuant to Section 704(b) of the Code,
together with any revisions or amendments thereto.
"Riverboat" shall mean the riverboat to be acquired,
constructed, developed, furnished, equipped and operated by the
Joint Venture as a gaming casino.
"Sale" shall mean the sale, exchange, condemnation,
foreclosure or other disposition of all or any substantial part of
the Hotel in a non-recurring transaction outside the regular course
of business of the Joint Venture, and shall include, without
limitation, any condemnation, easement sale, casualty or other form
of disposition of property, and any other transaction (other than
a capital contribution or loan transaction) wherein the proceeds of
the Joint Venture are, under generally accepted accounting
principles, considered capital in nature. The occasional sale,
trade-in or depreciation of furniture, furnishings, fixtures and
equipment which become worn out, obsolete or surplus is, for
purposes hereof, a transaction occurring in the regular course of
business and therefore not a Sale.
1.2 References. All references in this Joint Venture
Agreement to particular sections or articles shall, unless
expressly otherwise provided or unless the context otherwise
requires, be deemed to refer to the specific sections or articles
in this Joint Venture Agreement. In addition, the words "hereof",
"herein", "hereunder", and words of similar import, refer to this
Joint Venture Agreement as a whole and not to any particular
section or article.
1.3 Gender and Number. All pronouns and variations used
herein shall, regardless of the pronouns actually used, be deemed
to refer to the masculine, feminine, neuter, singular or plural as
the identity of the person or persons may, in the context in which
such pronoun is used, require.
ARTICLE II
Organization
2.1 Formation. The parties hereto do hereby form a general
partnership pursuant to the pertinent laws of the State of Illinois
(the "Joint Venture"), for the limited purposes and upon the terms
and conditions hereinafter set forth. The Partners agree that the
rights and liabilities of the Partners shall be as provided under
the Partnership Act of the State of Illinois, as the same may be
amended from time to time, except as otherwise herein expressly
provided.
2.2 Name. The business of the Joint Venture shall be con-
ducted under the name of "ELGIN RIVERBOAT RESORT-RIVERBOAT CASINO"
or such other name as the Partners may select, and all transactions
of the Joint Venture, to the extent permitted by applicable law,
shall be carried on and completed in such name.
2.3 Character of the Business. The purpose of the Joint
Venture shall be to acquire direct or indirect interests in, hold,
develop, own, maintain and operate a Riverboat and related land
facilities on the Fox River in Elgin, Illinois, to operate the same
for casino gaming and related purposes, and to engage in such other
ancillary activities as shall be necessary or desirable, and as
shall be determined by the Committee, to effectuate the foregoing
purposes. The Joint Venture shall have all powers necessary or
desirable to accomplish the purposes enumerated.
2.4 Location of the Principal Place of Business. The
location of the principal place of business of the Joint Venture
shall be at the principal place of business of Illinois Group at
200 West Madison Street, 38th Floor, Chicago, Illinois 60606,
Attention: Richard L. Schulze.
ARTICLE III
Term
The Joint Venture shall commence as of the date hereof and
continue until dissolved upon the occurrence of the earliest of the
following events:
(a) The sale or other disposition of all or
substantially all of the assets of the Joint Venture;
(b) The purchase of all of one Partner's interests by
the other Partner;
(c) The written consent of all the Partners;
(d) Dissolution of the Joint Venture by operation of
law; or
(e) December 31, 2068.
ARTICLE IV
Contributions to Capital
4.1 Initial Capital Contributions. Each of the Partners
has funded one-half (1/2) of the total amount of expenses
heretofore incurred on behalf of the Joint Venture, the full amount
thereof, by each of the Partners, to be deemed capital
contributions to the Joint Venture and credited to the respective
Capital Accounts of the Partners. The Partners agree to cause a
full accounting to be made of all expenses heretofore incurred by
each of the Partners. If either Partner shall have paid or
incurred expenses in excess of the amounts paid or incurred by the
other Partner, the difference shall be settled in cash so that the
initial Capital Accounts of the Partners shall be equal.
4.2 Additional Capital Contributions. In the event the
Committee shall determine that additional funds are necessary in
order to finance the acquisition, development, construction or
operation of the assets and business of the Joint Venture in excess
of funds otherwise available to the Joint Venture, including funds
available from third party loans, the Committee shall so advise all
other Partners thereof in writing setting forth (i) the amount of
funds required by the Joint Venture, (ii) the date on which such
funds shall be required (the "Funding Date"), and (iii) each
Partner's share of the required amount. Each Partner shall be
obligated to advance to the Joint Venture its pro rata share of the
required additional funding equal to their respective Partnership
Percentages, the amount of which shall be due, in cash, on the
Funding Date. Any amounts funded pursuant hereto shall be credited
to the Capital Account of the contributing Partner.
Anything herein contained notwithstanding, either Partner
shall have the right to make a call for an additional capital
contribution pursuant to this Section 4.2 notwithstanding that the
Committee shall fail or refuse to do so if (i) such Partner shall
have requested the Committee to make the call for funds and the
Committee has failed to take action or has voted not to take such
action; (ii) funds are needed by the Joint Venture in order to pay
debt service or other obligations of the Joint Venture to third
parties which is either then due and owing, or which is coming due
within forty-five (45) days following the date of the call for such
funds, or any combination of the foregoing; and (iii) the amount of
the additional capital contributions being called for shall not
exceed the amount referred to in the preceding clause (ii). Any
call for funds made by an individual Partner pursuant to the
provisions of the preceding sentence shall, for all purposes
hereof, be deemed a call therefor having been made by the
Committee.
4.3 Partner Failure to Advance. In the event any Partner
shall fail to advance to the Joint Venture the full amount of the
additional capital contribution which such Partner is obligated to
advance in accordance with the provisions of Section 4.2 (such
Partner being herein referred to as a "Defaulting Partner"), then
the other Partner, provided such other Partner shall have advanced
the full amount of its capital contribution required on the Funding
Date (such other Partner being herein referred to as the
"Contributing Partner"), shall have the right (but shall not be
obligated), exercisable within thirty (30) days after the Funding
Date but only so long as the Defaulting Partner shall continue to
be a Defaulting Partner hereunder, to elect any of the following
remedies, any of which may be instituted by the Contributing
Partner for its own account, or on behalf of the Joint Venture, as
appropriate:
(a) To cause the Joint Venture to return to the
Contributing Partner the full amount of the capital
contribution previously advanced to the Joint Venture by the
Contributing Partner with respect to the relevant Funding
Date, such refund to be made immediately upon written demand
therefor from the Contributing Partner; or
(b) Whether or not the Contributing Partner has
elected to cause a refund of its capital contribution pursuant
to subsection (a) above, elect to dissolve the Joint Venture
in accordance with the provisions of Article X, which election
shall be set forth in a written notice delivered by the
Contributing Partner to the Defaulting Partner and which,
after delivery thereof, shall be irrevocable except upon
agreement, in writing, of all Partners; or
(c) In lieu of the provisions of subsection (a) and
(b) above, cause the Joint Venture to institute and prosecute
appropriate legal proceedings to compel the Defaulting Partner
to make the full capital contribution required hereunder. The
Defaulting Partner shall indemnify and hold harmless all of
the other Partners and the Joint Venture from and against any
and all costs and expenses (including legal fees and
disbursements) incurred in instituting and prosecuting any
such proceeding, and the amount thereof may be recovered by
the Joint Venture and the Contributing Partner as part of the
judgment entered in the proceedings brought to enforce the
obligation of the Defaulting Partner. The amount which may be
recovered by the Joint Venture in connection with any such
proceedings shall be the amount of the capital contribution as
to which the Defaulting Partner is in default together with
interest at the Default Rate from the due date thereof until
recovery, such interest to inure to the benefit of the
Contributing Partner as liquidated damages and not as a
penalty; or
(d) Whether or not legal proceedings are instituted
pursuant to subsection (c) above, but in lieu of the
provisions of subsections (a) and (b) above, the Contributing
Partner may (but shall not be obligated to) advance to the
Joint Venture an additional sum equal to (but not less than)
the difference between the full amount of the capital
contribution which the Defaulting Partner was required to
advance to the Joint Venture and the actual amount thereof, if
any, so advanced by the Defaulting Partner (said difference
being herein referred to as the "Unfunded Balance"). If the
Contributing Partner elects to advance an additional amount
equal to the Unfunded Balance to the Joint Venture, it shall,
concurrently therewith, elect, by notice in writing to the
Joint Venture and the Defaulting Partner, to treat the
additional advance either as a Default Loan (as described in
Section 4.4) or as an additional capital contribution to the
Joint Venture, or any combination of Default Loan and
additional capital contribution. If the Contributing Partner
elects to treat all or part of the additional advance as an
additional capital contribution to the Joint Venture, then (i)
the amount of such advance which is treated as a capital
contribution shall be credited to the Capital Account of the
Contributing Partner; and (ii) the Partnership Percentages of
the Partners shall be adjusted (provided, however, that the
adjustment shall not affect the Capital Accounts of the
Partners), effective as of the date of the additional advance
made by the Contributing Partner, as follows:
(1) The Partnership Percentage of the
Contributing Partner shall be equal to the percentage
determined by dividing the sum of all capital
contributions made by the Contributing Partner pursuant
to Sections 4.1 and 4.2 hereof plus one hundred fifty
percent (150%) of all capital contributions then and
theretofore made by the Contributing Partner pursuant
to this Section 4.3(d) (including, but not limited to,
the additional capital contribution made hereunder with
respect to the Funding Date in question) by the sum
total all capital contributions to the Joint Venture
made by all Partners pursuant to Sections 4.1 and 4.2
and pursuant to this Section 4.3(d) (for purposes of
calculating the denomination of the fraction herein
described, contributions pursuant to this Section
4.3(d) shall be added without mark up or premium);
provided, however in no event shall the Partnership
Percentage of the Contributing Partner exceed ninety-
nine percent (99%);
(2) The Partnership Percentage of the Defaulting
Partner shall be an amount equal to one hundred percent
(100%) less the Partnership Percentage of the
Contributing Partner, as adjusted pursuant to clause
(1) above.
4.4 Default Loans. If the Contributing Partner shall elect
to advance a Default Loan as contemplated by Section 4.3 (the
"Default Loans"), the amount of such advance shall be made to the
Joint Venture but shall, for all purposes, be deemed a loan made to
and on behalf of the Defaulting Partner to enable the Defaulting
Partner to make its required capital contribution. Default Loans
shall bear interest at the Default Rate, and, if not sooner paid,
the outstanding principal amount thereof, together with accrued and
unpaid interest thereon, shall be due and payable in full on the
Liquidation Date in accordance with the priorities set forth in
Article X. In order to secure the payment of the Default Loans,
and interest thereon, the Defaulting Partner shall be deemed to
have granted to the Contributing Partner a security interest in the
Partnership Interest of the Defaulting Partner and shall be deemed
to have constituted and appointed the Contributing Partner, or any
officer, agent, employee, or Affiliate of the Contributing Partner
designated by the Contributing Partner, as the true and lawful
agent and attorney-in-fact for the Defaulting Partner with full
power of substitution and with the full right, power and authority
to execute such financing statements, continuation statements and
other similar instruments and documents reasonably necessary in
order to perfect the security interest herein granted.
The making of a Default Loan by the Contributing Partner shall
not relieve the Defaulting Partner of its obligation to make the
capital contribution, or the portion thereof as to which it is in
default. The Contributing Partner shall have the right at any time
that a Default Loan is outstanding, to elect the remedies set forth
in Section 4.3(c), in which event the recovery shall first be
applied in payment of outstanding Default Loans and interest
thereon. In addition, the Contributing Partner shall have the
right, at its election and without further action of the Committee,
to contribute to the Joint Venture, at any time or from time to
time, an amount not to exceed the principal amount of the Default
Loans outstanding, together with any accrued and unpaid interest
thereon, the amount thereof to be treated as though an additional
capital contribution had been made to the Joint Venture pursuant to
Section 4.3(d) with an adjustment to the Partnership Percentages of
the Partners with respect to the amount so contributed as
contemplated by Section 4.3(d), in which event, however, the
Default Loan, and all accrued and unpaid interest thereon, shall be
deemed to have been paid in full.
4.5 Status as "Defaulting Partner". A "Defaulting Partner"
shall cease to be such on the earlier to occur of (i) payment of
the required capital contribution, and any required interest in
full prior to any funding on behalf of the Defaulting Partner by
the Contributing Partner; (ii) if a Default Loan has not been
advanced by the Contributing Partner, an election by the
Contributing Partner to treat its contribution on behalf of the
Defaulting Partner as an additional capital contribution to the
Joint Venture and to adjust the Partnership Percentages
accordingly; and (iii) if a Default Loan has been advanced by the
Contributing Partner, upon payment thereof, and interest thereon in
full, or upon deemed payment thereof by contribution of the amount
thereof to the capital of the Joint Venture by the Contributing
Partner.
4.6 Partnership Percentage. Subject to adjustment as
hereinabove provided, the initial Partnership Percentage of each of
the Partners shall be fifty percent (50%) for the Illinois Group
and fifty percent (50%) for the Nevada Group.
4.7 No Withdrawal. The Joint Venture shall not be
obligated to redeem or repurchase the Partnership Interest of any
Partner. No Partner shall be entitled to withdraw any part of its
capital contribution [except as provided in Section 4.3(a)], or to
receive any distributions from the Joint Venture except as
expressly provided herein or by law. In no event shall any Partner
have the right to redeem or receive any assets of the Joint Venture
other than cash.
4.8 Capital Accounts. An individual Capital Account shall
be maintained for each Partner.
4.9 No Third Party Beneficiaries. The right or obligation
of any Partner to make a capital contribution or a Default Loan, or
otherwise to do, perform, satisfy or discharge any liability or
obligation of any Partner hereunder, or to pursue any other right
or remedy hereunder or at law or in equity provided, shall not
confer any right or claim upon or otherwise inure to the benefit of
any creditor or other third party having dealings with the Joint
Venture, it being understood and agreed that the provisions of this
Joint Venture Agreement shall be solely for the benefit of, and may
be enforced solely by, the parties hereto and their respective
successors and assigns. The rights or obligations of the Partners
herein set forth, including, without limitation, the obligation to
make capital contributions or the right to make additional capital
contributions or Default Loans shall not be deemed an asset of the
Joint Venture, may not be sold, transferred or assigned by the
Joint Venture in connection with any sale or transfer of a
Partnership Interest made in accordance with the provisions of this
Joint Venture Agreement, and may not be pledged or encumbered to
secure any debt or other obligation of the Joint Venture or of the
Partners.
ARTICLE V
Allocations, Distributions and
Other Tax and Accounting Matters
5.1 Allocation of Net Profits. The Net Profits of the
Joint Venture for any fiscal year of the Joint Venture shall,
subject to the provisions of Section 5.5, be allocated among the
Partners as follows:
(a) In any fiscal year in which there shall be a
distribution to the Partners of Net Cash Flow (other than Net
Cash Flow resulting from a transaction giving rise to Gain or
Loss), Net Profits, up to and including (but not in excess of)
the amount of such Net Cash Flow so distributed for such
fiscal year, shall be allocated among the Partners in the same
proportion in which such Net Cash Flow has been so
distributed.
(b) In the event that, as a result of any of the
provisions of Section 5.5, Net Losses for any preceding fiscal
year shall have been allocated among the Partners other than
in accordance with the Partnership Percentages of the Partners
for the fiscal year or years in which such allocations shall
have been made, then any Net Profits remaining for the fiscal
year in question after allocation pursuant to subsection (a)
above shall be allocated to those Partners which, in preceding
fiscal years, shall have been allocated Net Losses in excess
of the amount thereof which would have been allocated to such
Partners on the basis of their Partnership Percentages then in
effect (or, for any fiscal year in which an adjustment shall
have been made in Partnership Percentages, their weighted
average Partnership Percentage for such fiscal year), until
there shall have been allocated to such Partners pursuant to
this subsection (b), pro rata in accordance with the
respective amounts of such excess Net Losses previously
allocated each such Partner, an amount of Net Profits equal to
such excess Net Losses.
(c) If in any fiscal year there shall be Net Profits
not otherwise allocated pursuant to subsections (a) or (b)
above, and if the aggregate amount of Net Profits allocated to
the Partners for all previous Joint Venture fiscal years
shall, as of the end of any fiscal year, be less than the
aggregate amount of Net Cash Flow distributed to the Partners
(other than Net Cash Flow excluded pursuant to subsection (a)
above), Net Profits for the year in question and for all
subsequent fiscal years shall be allocated to the Partners in
such amounts and in such proportions as shall result, as
nearly as possible, in the total amount of all Net Profits
allocated to the Partners on a cumulative basis during the
term of the Joint Venture being equal to the total amount of
such Net Cash Flow actually distributed to the Partners.
(d) If in any fiscal year there shall be Net Profits
not otherwise allocated pursuant to subsections (a), (b) or
(c) above, the balance shall be allocated among the Partners
in accordance with their respective Partnership Percentages as
of the end of the fiscal year in question.
5.2 Net Losses. The Net Losses of the Joint Venture for
any fiscal year of the Joint Venture shall, subject to the
provisions of Section 5.5, be allocated to the Partners in
accordance with their respective Partnership Percentages.
5.3 Gain or Loss.
(a) Timing of Allocations. All allocations of Gain or
Loss realized during any fiscal year shall be made after the
Capital Accounts of the Partners shall have been credited or
charged with all Net Profits and Net Losses of the Partnership,
after distribution of any Net Cash Flow (other than Net Cash Flow
resulting from a transaction giving rise to Gain or Loss), and
after any special allocations required by Section 5.5, in each case
for any fiscal year in which such Gain or Loss occurs, but prior to
the charge to the Capital Accounts resulting from the distribution
of Net Cash Flow resulting from the transaction giving rise to such
Gain or Loss.
(b) Allocation of Gain. After compliance with Section
5.3(a), any Gain shall be allocated among the Partners as follows
and in the following order of priority:
(i) If, at the time of allocation of such Gain,
either Partner shall have a negative balance in its Capital
Account, there shall first be allocated to the Partners having
a negative balance in their Capital Accounts, an amount of
such Gain sufficient to cause the balances in their respective
Capital Accounts to equal zero (0), such Gain to be allocated
among the Partners pro rata in accordance with their
respective negative Capital Account balances; and
(ii) Next, any remaining Gain shall be allocated
among the Partners in accordance with their then respective
Partnership Percentages.
(c) Losses. Any Losses recognized during any fiscal
year of the Joint Venture shall be allocated as follows:
(i) Losses shall first be allocated among those
Partners, if any, having positive balances in their Capital
Accounts in such manner and in such amount so as to cause
their respective positive Capital Account balances to be
proportionate with their respective Partnership Percentages;
and
(ii) Any remaining Losses shall be allocated among
the Partners in accordance with their then Partnership
Percentages.
(d) Installment Sales. In connection with any
transaction which, under the Code, the Joint Venture elects to
treat as an installment sale, Gain or Loss shall be allocated under
the above provisions of this Section as though the full amount of
the deferred obligation had been received at the time of Sale, and,
in any fiscal year in which a portion of the Gain or Loss is
required to be recognized for federal income tax purposes, the
portion to be recognized by the Joint Venture for such fiscal year
shall be allocated among the Partners, as nearly as possible, in
the proportions in which Net Cash Flow resulting from such Sale has
been distributed or is distributable to the Partners for such
fiscal year, until such time as the full amount of the Gain or Loss
required to be allocated to a Partner has been so allocated.
Anything herein to the contrary notwithstanding, the amount of
interest income included in the income of the Joint Venture for
federal income tax purposes by reason of the collection of interest
on any deferred obligation resulting from a Sale shall be specially
allocated to the Partners to whom and in such amount as such
interest is distributable pursuant to Section 6.3.
5.4 Allocations in Case of Transfer or Other Events. The
Net Profits or Net Losses allocable to a Partner whose Partnership
Interest has been transferred or otherwise adjusted, in whole or in
part, during any fiscal year, shall be allocated among the persons
who were holders of such Partnership Interest (or the portion
thereof so transferred or adjusted) during such year in proportion
to their respective holding periods, without any requirement for
the attempted separate determination of the results of Joint
Venture operations during such separate periods; provided, however,
Gains or Losses shall be allocated to those Partners who were
Partners in accordance with the provisions above set forth with
respect to allocations of Gains or Losses based upon Capital
Account balances and Partnership Percentages in effect at the time
of the occurrence of the event giving rise to such Gain or Loss.
5.5 Minimum Gain and Qualified Income Offset.
(a) Notwithstanding any other provision of this
Article V, if during any Joint Venture fiscal year the Joint
Venture either (i) has Non-Recourse Deductions (as such term is
defined in the Regulation) or (ii) makes a distribution of proceeds
of a Non-Recourse Liability (as such term is defined in the
Regulation) that are allocable to an increase in Joint Venture
Minimum Gain, then each Partner shall be specially allocated items
of Joint Venture Net Profit and Gain for such year (and, if
necessary, for subsequent years) in proportion to, and to the
extent of, an amount equal to the greater of (1) the portion of
such Partner's share of the net decrease in Joint Venture Minimum
Gain during such year that is allocable to the disposition of Joint
Venture property subject to one or more Non-Recourse Liabilities of
the Joint Venture; or (2) the deficit balance in such Partner's
Adjusted Capital Account. All allocations made pursuant to this
Section 5.5 are intended to comply with the "minimum gain
chargeback" provision of Section 1.704-1T(b)(4)(iv)(e) of the
Regulation and shall be interpreted consistently therewith.
(b) Notwithstanding any other provision of this
Agreement, if, for any fiscal year, a Partner receives any
adjustments, allocations or distributions described in subsections
(4), (5) or (6) of Section 1.704-1(b)(ii)(d) of the Regulation,
that cause or increase a deficit balance of such Partner in his
Capital Account, items of income, Net Profits and Gain shall be
specially allocated to such Partner (or Net Loss or Losses shall
not be allocated to such Partner) in an amount and manner
sufficient to eliminate such deficit balance as quickly as
possible.
(c) Except as provided in Section 5.5(a) hereof, in
the event any Partner has a deficit Capital Account at the end of
any Joint Venture fiscal year, each such Partner shall be specially
allocated items of Joint Venture income, Net Profits and Gain in
the amount of such excess as quickly as possible.
(d) Any special allocations of items of Net Profits or
Gain (or reallocation of Net Loss or Losses) pursuant to Sections
5.5(a), (b) and (c) shall be taken into account for the purpose of
equitably adjusting subsequent allocations of Net Profits and Net
Losses so that the net allocations, in the aggregate, made to each
Partner pursuant to this Article V and the Adjusted Capital Account
of each Partner shall, as quickly as possible and to the extent
possible and without violating the constraints on deficit Capital
Account balances prescribed by this Section 5.5, be the same as if
no special allocations had been made under Sections 5.5(a), (b) or
(c).
(e) This Section 5.5 is intended to comply with the
"minimum gain chargeback" and "qualified income offset" provisions
of the Regulation and shall be interpreted consistently therewith,
and shall, to the extent of any allocations required to be made
pursuant hereto, supersede and take priority over all other
allocation provisions of this Article V.
5.6 Fiscal Year. The fiscal year of the Joint Venture
shall be the calendar year.
5.7 Books and Records. The Illinois Group shall maintain
or cause to be maintained full and accurate books and records for
the Joint Venture in accordance with generally accepted accounting
principles consistently applied. The Joint Venture books and
records shall be kept at the principal office of the Joint Venture
and each Partner shall, at reasonable times, have free access
thereto for the purpose of inspecting or copying the same. The
accrual method of accounting shall be selected for all purposes of
the Joint Venture's books of account and for federal income tax
purposes unless otherwise determined by the Committee.
5.8 Tax Elections and Returns. All elections required or
permitted to be made by the Joint Venture under any applicable tax
laws shall be made by the Committee; provided, however, the Joint
Venture shall, if requested by the transferee of a Partnership
Interest, file an election on behalf of the Joint Venture pursuant
to Section 754 of the Code to adjust the basis of the Joint Venture
property in the case of a transfer of a Partnership Interest made
in accordance with the provisions of this Joint Venture Agreement.
The Illinois Group shall be responsible for preparing all federal
and state tax returns for the Joint Venture and furnishing required
schedules showing allocations of tax items to all other Partners
within the period of time prescribed by law (including any
extensions permitted by applicable law), and the Administrative
Partner shall be the tax matters partner for the Partnership.
5.9 Restoration of Deficit Capital Accounts. Anything
herein to the contrary notwithstanding, no Partner shall have any
obligation to restore the amount of any negative balance in its
Capital Account whether upon dissolution or liquidation of the
Joint Venture or otherwise. The negative balance in any Capital
Account shall in no event be deemed an asset of the Joint Venture.
5.10 Allocations Pursuant to Section 704(c). In accordance
with Section 704(c) of the Code and the Treasury Regulation
thereunder, gain, loss or deduction with respect to any property
contributed to the capital of the Joint Venture, or any property
whose Gross Asset Value has otherwise been adjusted as herein
provided, shall, solely for tax purposes, be allocated among the
Partners so as to take into account any variation between the value
of the property at the time of contribution or adjustment, and the
adjusted basis of such property to the Joint Venture for federal
income tax purposes. Allocations pursuant to this Section 5.10 are
solely for purposes of federal, state and local taxes and shall not
affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of distributions pursuant to any
provisions of this Joint Venture Agreement.
ARTICLE VI
Distributions and Reimbursements
6.1 Net Cash Flow. Subject to the provisions of Section
6.2, the Illinois Group shall cause the Joint Venture to distribute
to the Partners, so much of the Net Cash Flow of the Joint Venture
as the Committee shall authorize, all such distributions to be made
in accordance with the then Partnership Percentages of the Partners
as of the date on which the distribution was authorized by the
Committee (subject to Section 6.3), provided, however, if, as of
the date of such distribution, either or both of the Partners shall
be obligated with respect to a Default Loan, all distributions
otherwise payable to such Partner shall be paid to the Contributing
Partner which has advanced the Default Loan to be applied first to
accrued and unpaid interest and then to the principal of the
Default Loan.
6.2 Net Cash Flow Resulting From a Sale. Notwithstanding
the provisions of Section 6.1, with respect to any Net Cash Flow
resulting from a Sale distributions with respect thereto shall be
made from time to time as determined by the Committee, and when
made shall be distributed in the following amounts and the
following order of priority:
(a) First to the Partners an amount equal to the then
outstanding positive balances in their Capital Accounts, pro
rata in accordance with their then positive balances until the
positive balances in their respective Capital Accounts shall
have been reduced to zero (0); and
(b) Any remaining amounts shall be distributed to the
Partners in accordance with their respective Partnership
Percentages;
provided, however, (i) in the case of any distribution of Net Cash
Flow resulting from a Sale which results in or is made in
connection with the liquidation of the Joint Venture (as defined in
Section 1.704-1(b)(2)(ii)(g) of the Regulation) no such
distribution shall be made to any Partner except to the extent of
and in proportion to then positive balance in the Partner's Capital
Account after allocation to such Partner of any gain or loss in
accordance with the provisions of Section 5.3, and (ii) the
provisions of Section 6.1 with respect to payment of Default Loans
and interest thereon shall be equally applicable to distributions
pursuant to this Section 6.2.
6.3 Installment Sales. In connection with any Sale
transaction whereby Net Cash Flow is received in installments,
principal payments received with respect to the installment
obligation shall be allocated among the Partners in the priority
indicated in (and subject to the provisions of) Section 6.1 as of
the date of such Sale, and interest payments received by the Joint
Venture with respect to such deferred obligation shall be
distributed among the Partners in the same proportion in which each
is entitled to share in the principal portion of the deferred
obligation.
ARTICLE VII
Management of the Joint Venture
7.1 Executive Committee. The management and control of the
Joint Venture shall be vested in an Executive Committee (the
"Committee"), which shall be responsible for the establishment of
policy and operating procedures respecting the business affairs of
the Joint Venture. The Committee shall at all times consist of
four (4) members of whom two (2) shall be appointed by Illinois
Group and two (2) by Nevada Group; provided, however, no Partner
having a Partnership Percentage of twenty-five percent (25%) or
less shall be entitled to appoint members to the Committee and the
size of the Committee shall be permanently reduced by the number of
members which such Partner would otherwise have been entitled to
appoint. Each Partner may appoint an alternate for each member
appointed by it to the Committee, who shall have all the powers of
the Committee member in his absence or inability to serve. Each
member of the Committee may vote by delivering his proxy to another
member of the Committee or any other person. Each Partner shall
have the power to remove any member or alternative member of the
Committee appointed by it by delivering written notice of such
removal to the Joint Venture and to the other Partner. Vacancies
on the Committee shall be filled by the Partner which appointed the
Committee member previously holding the position which is then
vacant.
The Committee shall meet at least once each quarter at the
offices of the Joint Venture or such other times or places as the
Committee shall determine (unless such meeting shall be waived by
all members thereof) or on the call of any two members upon two
days' notice to all members by telephone or telegraph. An agenda
for each meeting shall be prepared in advance by the Partners in
consultation with each of the other. Three (3) members of the
Committee shall constitute a quorum (unless the Committee shall
then consist of less than three (3) members in which event all
members shall be required for a quorum). A concurring vote of at
least three (3) members of the Committee shall govern all its
actions (unless the Committee shall then consist of less than three
(3) members in which event unanimous action is required). The
Committee may act without a meeting if the action taken is approved
in advance by three (3) members (unless the Committee shall then
consist of less than three (3) members in which event unanimous
action is required). The Committee shall cause written minutes to
be prepared of all action taken by the Committee and shall deliver
a copy thereof to each member of the Committee within thirty (30)
days thereafter.
The Committee may by resolution delegate its powers, but not
its responsibilities, to employees of either Partner or of both
Partners or to any other person or persons.
Anything in this Joint Venture Agreement to the contrary
notwithstanding, the members of the Committee appointed by any
Partner who is a Defaulting Partner shall not be entitled to
attend, participate in meetings of, or vote on any matters coming
before the Committee for so long as such Partner shall be and
remain a Defaulting Partner, and, for such period of time, the
Committee shall be deemed to have been reduced in size for all
purposes (including, without limitation, determination of quorum
and required votes to act) by the number of members which the
Defaulting Partner would otherwise be entitled to appoint to the
Committee. For so long as any Partner shall be a Defaulting
Partner, any action taken by the remaining members of the Committee
shall be fully binding on all Partners (including, without
limitation, the Defaulting Partner).
7.2 Bank Accounts. The Joint Venture shall maintain bank
accounts in such banks as the Committee may designate exclusively
for the deposit and disbursement of all funds of the Joint Venture.
All funds of the Joint Venture shall be promptly deposited in such
accounts. The Committee from time to time shall authorize
signatories for such accounts.
7.3 Reimbursements for Costs and Expenses. The Committee
shall fix the amounts, if any, by which the Joint Venture will
reimburse each Partner for all costs and expenses incurred by such
Partner on behalf and for the benefit of the Joint Venture;
provided, however, that no overhead or general administrative
expenses of either Partner or its Affiliates shall be allocated to
the operation of the Joint Venture, and no salaries, fees,
commissions or other compensation shall be paid by the Joint
Venture to any Affiliate of any Partner or to any officer or
employee of either Partner or its Affiliates for any services
rendered to the Joint Venture except as may be provided by the
Committee.
7.4 No Authority of Individual Partner. Neither the
Illinois Group nor the Nevada Group, acting individually, nor any
of their respective Affiliates, has the power or authority to bind
the Joint Venture or any Partner or to authorize any action to be
taken by the Joint Venture, or to act as agent for the Joint
Venture or any other Partner, unless that power or authority has
been specifically delegated by action of the Committee.
7.5 Other Businesses. Each party recognizes that the
Partners, and their Affiliates, have or may have other business
interests, activities and investments, some of which may now or
hereafter be in conflict or competition with the business of the
Joint Venture, and that each Partner and their respective
Affiliates are entitled to carry on such other business activities,
interests and investments without any accountability therefor to
the Joint Venture or any other Partner. No Partner, and no
Affiliate of any Partner, shall be obligated to devote all or any
particular part of its time and effort to the Joint Venture or its
business affairs except such reasonable amount of time as may be
necessary in order to fulfill their respective duties and
obligations hereunder. Each Partner, and each Affiliate of each
Partner, may engage in or possess an interest in any other business
or venture of any kind, independently or with others, including,
without being limited to, owning, financing, acquiring, leasing,
promoting, developing, improving, constructing, operating or
managing other real or personal properties (including real and
personal properties devoted, in whole or in part, to the business
of gaming or which are activities in support of gaming operations)
on its own behalf or on behalf of other entities with which it is
affiliated or associated, and any Partner and each Affiliate of any
Partner may engage in any activities, whether or not competitive to
the Joint Venture, without any obligation to offer any interest in
such activities to the Joint Venture or to any Partner or to any
Affiliate of any Partner. Neither the Joint Venture nor any
Partner nor any Affiliate of any Partner shall have any right by
virtue of this Joint Venture Agreement or by virtue of the
relationship between the Partners as partners, in or to such other
activities, or to the income or profits derived therefrom, and the
pursuit of such activities, even if competitive with the business
of the Joint Venture, shall not be deemed wrongful or improper or
a breach of any joint venture or fiduciary duties owed by one party
to the other, or entitle either party to any interest in or sharing
in the profits or losses from any such other activities.
7.6 Liability of the Partners. So long as each Partner
acts in good faith with respect to the conduct of the business and
affairs of the Joint Venture, and in the manner in which it
reasonably believes to be in the best interests of the Joint
Venture or otherwise in accordance with the provisions of this
Joint Venture Agreement, neither Partner shall be liable or
accountable to the Joint Venture or to any of the Partners in
damages or otherwise for any error of judgment, for any mistake of
fact or of law, or for any other act or thing which it may do or
refrain from doing or suffer to be done in connection with the
business and affairs of the Joint Venture, except in the case of
its willful misconduct or gross negligence.
7.7 Indemnity. The Joint Venture shall indemnify, defend
and hold each Partner, and each officer, director, stockholder,
partner, employee, agent, affiliate, subsidiary or assign of each
Partner (the "Indemnitees") free and harmless of, from and against
any expenses, losses, claims, costs, damages and liabilities,
including without limitation, judgments, fines, amounts paid in
settlement and expenses (including without limitation, attorneys'
fees and expenses, court costs, investigation costs and litigation
costs) incurred by any Indemnitee in any civil, criminal or
investigative proceeding in which it is involved or threatened to
be involved by reason of the Partner's being a partner in the Joint
Venture provided that the Partner acted in good faith, within what
it reasonably believed to be the scope of its authority and for a
purpose which it reasonably believed to be in the best interests of
the Joint Venture and/or the Partners or otherwise in compliance
with the provisions of this Joint Venture Agreement; provided,
however (i) that the Joint Venture shall not be required to
indemnify any Indemnitee for any loss, expense or damage which it
may suffer as a result of its willful misconduct, gross negligence
or bad faith in failing to perform its duties hereunder; (ii) the
Joint Venture shall not be required to indemnify any Indemnitee for
any breach of the provisions of this Joint Venture Agreement, or
for any loss, expense or damage which it may suffer as a result of
the breach of this Joint Venture Agreement by the Partner to which
the Indemnitee is related; and (iii) any liability hereunder shall
be limited solely to the assets and properties of the Joint
Venture, and no Partner (or any Affiliate of any Partner) shall
have any liability or obligation hereunder.
ARTICLE VIII
Loss of License
8.1 Loss of License. A "Loss of License" shall mean any
denial, revocation, suspension (for a period in excess of three (3)
days) or non-renewal of any License, whether resulting from any
judicial or administrative proceeding, or otherwise, and which
results, directly or indirectly, from any act or omission of any
Partner, or any Affiliate of a Partner (including, for this
purpose, the partners, shareholders, employees, agents, officers or
directors of any of the Partners, or their respective partners or
equity participants or any person or entity with whom such party
has had business or other dealings), including, without limitation,
the commission of any crime or other act deemed inconsistent with
the holding of a License, or the association or affiliation with
unsuitable persons or entities, whether or not the allegations with
respect thereto are true in fact. No Loss of License shall be
deemed to have occurred so long as proceedings with respect thereto
are being contested with due diligence and in good faith by the
Joint Venture, or the person or entity affected thereby, provided
that, during the pendency of such proceedings, the Joint Venture is
able to continue gaming operations on an uninterrupted basis and
without additional restrictions with respect thereto. A Loss of
License, however, shall be deemed to have occurred notwithstanding
that additional rights of appeal or contest may be available if, as
a result of any such action, gaming operations by the Joint Venture
are prohibited or materially restrained, limited or restricted.
For purposes of the below provisions of this Article VIII, the
"Responsible Partner" shall mean the Partner (either the Illinois
Group or the Nevada Group, as applicable) which is, or whose
Affiliate is, responsible for the Loss of License and the Non-
Responsible Partner shall mean the other Partner. If the Loss of
License results from the acts or omissions of one or more
Affiliates of both Partners, then each Partner shall be a
Responsible Partner with respect to the Affiliate whose acts or
omissions were responsible for the Loss of License, and each
Partner shall also be deemed a Non-Responsible Partner with respect
to the same act or omission, and each shall separately have the
right to invoke the provisions hereinafter set forth.
8.2 Provisions Relating to Loss of License. If a Loss of
License shall occur, then the following provisions shall apply:
(a) The Non-Responsible Partner shall have the right,
at any time and for so long as the Loss of License condition
shall continue, to elect the "Buy-Out Right" set forth in
Section 8.3 below, such election to be contained in a written
notice (the "Buy-Out Notice") from the Non-Responsible Partner
to the Responsible Partner.
(b) Promptly upon delivery of the Buy-Out Notice, and
in no event later than three (3) days thereafter, the
Responsible Partner shall have the right, exercisable by
written notice to the Non-Responsible Partner (the "Response
Notice") that the Responsible Partner has elected to, and has,
caused the withdrawal of the Affiliate of the Responsible
Partner responsible for the Loss of License. Upon the
delivery of the Response Notice, the Partners shall advise the
appropriate licensing authorities that the Affiliate
responsible for the Loss of License has withdrawn from its
interest in the Joint Venture and shall request reinstatement
of the License. If, after such request, the License is
reinstated, then, with respect to the event or circumstance
giving rise to the Loss of License, the Buy-Out Notice shall
be deemed to have been terminated and will be of no further
force or effect. If, however, the licensing authorities fail
or refuse to reinstate the License within five (5) days after
request therefor as hereinabove provided, then the Buy-Out
Notice shall remain in effect and the provisions of Section
8.3 shall be applicable.
8.3 Buy-Out Provisions. Whenever a Buy-Out Notice shall be
delivered in accordance with the provisions of Section 8.2, the
same shall constitute an agreement on the part of the Non-
Responsible Partner to buy, and the Responsible Partner to sell,
the entire Partnership Interest of the Responsible Partner in the
Joint Venture for a price, payable in cash at the closing, equal to
(i) the total amount of all capital contributions made to the Joint
Venture by the Responsible Partner pursuant to Article IV; plus
(ii) the then balance of any outstanding Default Loans, together
with unpaid interest thereon, made by the Responsible Partner to
the Joint Venture on behalf of other Partners; and less (iii) a sum
equal to all Net Cash Flow theretofore distributed by the Joint
Venture to the Responsible Partner (less any Net Cash Flow
theretofore distributed in respect of principal or interest on
Default Loans). The closing shall take place not later than five
(5) days after the delivery of the Buy-Out Notice at the offices of
the Joint Venture. At the closing, the Responsible Partner shall
execute and deliver such instruments, documents and certificates as
the Non-Responsible Partner shall reasonably request in order to
transfer and assign to the Responsible Partner (or to any other
party designated by the Non-Responsible Partner to the Responsible
Partner in writing at or prior to the closing) the entire
Partnership Interest of the Responsible Partner in the Joint
Venture, including, without limitation, the entire interest of the
Responsible Partner in all Default Loans, and all interest accrued
and unpaid thereon, and the Non-Responsible Partner shall deliver
the purchase price in cash (or by certified or cashier's check made
payable to the order of the Responsible Partner). In the event of
any dispute between the Responsible Partner and the Non-Responsible
Partner regarding the amount of the purchase price, there shall be
paid to the Responsible Partner the amount not in dispute, and the
remainder shall be paid promptly upon the determination thereof by
the parties, or, in the event they shall fail to agree on the
amount, by arbitration conducted in Chicago, Illinois in accordance
with the rules and regulations of the American Arbitration
Association. In order to further secure the performance of the
obligations of the parties hereto, each Partner (if it shall be a
Responsible Partner at any time hereafter) hereby appoints the Non-
Responsible Partner, and each of its Affiliates, and the officers,
directors, shareholders, employees and agents of the Responsible
Partner and its Affiliates, as the agent and attorney-in-fact for
and on behalf of the Non-Responsible Partner to execute,
acknowledge and deliver such instruments, documents or certificates
as are herein contemplated in connection with any buy-out.
ARTICLE IX
Transfer of Partnership Interests
9.1 Right to Transfer. Except as otherwise herein in this
Article IX provided, there shall be no restriction on the right,
power or authority of any Partner to sell, transfer or encumber its
Partnership Interest. To the extent, however, the following
provisions of this Article IX set forth any such restrictions, it
is the intention of the Partners that there shall be no indirect
transfer of the beneficial interest of a Partner in this Joint
Venture or any part thereof as a result of a transfer of control of
any Partner under any circumstances in which a direct transfer of
a Partnership Interest is prohibited or restricted. Accordingly,
except as otherwise specifically provided herein, the provisions of
this Article IX applicable to any transfer of a Partnership
Interest shall be equally applicable to the sale, assignment,
transfer, conveyance, encumbrance, exchange or other disposition,
directly or indirectly, of a controlling interest in a Partner,
including without limitation, any partnership or other equity
interest of a Partner which is a partnership or other form of
business organization, and all references in this Article IX to
transfers of a Partnership Interest shall apply equally to the
transfer of controlling shares of the capital stock of, or other
ownership interests in, such partners. For purposes hereof, a
controlling interest in a partnership or corporation shall mean a
partnership interest or corporate shares representing fifty percent
(50%) or more of the residual interests in such partnership or
fifty percent (50%) of the voting shares of such corporation. Each
Partner agrees that its respective partnership agreements,
corporate charter, by-laws and shareholder agreements comply with
the restrictions set forth herein and each Partner shall be deemed
a third party beneficiary with respect to such restrictions
contained in each Partner's partnership and shareholder constituent
documents. Any partnership interest validly transferred in
accordance with the provisions of this Article IX shall remain
subject to all limitations and restrictions contained in this
Agreement.
Notwithstanding the foregoing, and except as provided in
Section 9.4, this Article IX shall not be deemed to limit or
restrict the right of any corporation which is a partner of any
Partner [or the direct or indirect parent corporation or ultimate
ownership entity (such as a partnership or trust) of any such
partner], to sell, transfer, convey, exchange or otherwise dispose
of all or any part of its assets, or to sell, transfer, convey,
exchange or otherwise dispose of any interest in said corporation
(whether or not a controlling interest) as part of a transaction
involving either the transfer of control of such parent corporation
or other entity or the sale of substantial assets in addition to
the interests of said corporation (direct or indirect) in the Joint
Venture, or the transfer of control of such parent corporation or
ultimate ownership entity. For purposes of the preceding sentence,
a transaction involving the sale of assets having a book value
(that is, the value at which such assets are shown on the books of
the selling entity without deduction for indebtedness or
accumulated depreciation) as of the end of its immediately
preceding fiscal year at least ten times the book value of the
seller's interest in the Joint Venture, or the sale of ownership
interests in a parent corporation or other entity whose balance
sheet as of the end of its immediately preceding fiscal year showed
total assets (without deduction for accumulated depreciation or
associated debt) at least ten times the book value of its interest
in the Joint Venture, shall be deemed a sale of substantial assets
or the transfer of a controlling interest in a parent or other
ultimate ownership entity for purposes of the preceding sentence,
and, therefore, exempt from the restrictions on transfer (other
than the provisions of Section 9.4) contained in this Article IX.
9.2 Transfer of Partnership Interests - Right of First
Refusal. If any Partner (whichever thereof being referred to in
this Section 9.2 as the "Selling Partner") shall at any time desire
to sell all or any part of its Partnership Interest other than to
an "Exempt Purchaser" (as hereinafter defined) in a transaction
other than a transaction exempted from the provisions of Article IX
pursuant to Section 9.1, and shall have received a bona fide
written offer for the purchase thereof, the Selling Partner shall,
within five (5) days thereafter, transmit a copy thereof to the
other Partners (such other Partners being referred to in this
Section 9.2 as the "Electing Partners"). The Partnership Interest
(or so much thereof as the Selling Partner proposes to sell) shall
thereupon be subject to the option on the part of the Electing
Partners to purchase said Partnership Interest on the same terms as
contained in the offer, and, if more than one of the Electing
Partners shall elect to purchase the Partnership Interest which the
Selling Partner proposes to sell, the Electing Partners shall
purchase said Partnership Interest pro rata in accordance with
their respective Partnership Percentages. The Electing Partners
must exercise their option hereunder, if at all, by giving notice
of exercise to the Selling Partner within thirty (30) days of the
transmittal of a copy of the offer by the Selling Partner, and such
sale shall be consummated on the date on which the sale would
otherwise have been consummated pursuant to the offer but in no
event sooner than ninety (90) days after the date on which notice
of the offer is delivered by the Selling Partner. In the event all
Electing Partners fail to elect to purchase the Partnership
Interest of the Selling Partner as hereinabove provided within the
aforesaid period of thirty (30) days, said right shall terminate
and be of no further force or effect with respect to the
transaction described in the offer. If any offer is for less than
all of the Selling Partner's Partnership Interest, the remaining
Partnership Interest of the Selling Partner shall continue to be
subject to the provisions of this Section 9.2 in the event of any
future transaction relating to the remaining Partnership Interest
to which this Section 9.2 would otherwise be applicable. If the
Electing Partners fail to exercise their option hereunder in
accordance with the above provisions and within the aforesaid
period of thirty (30) days, then the Selling Partner may sell its
Partnership Interest (or so much thereof as it proposed to sell
pursuant to the offer) on the terms specified in the offer,
provided such sale is consummated no later than the later to occur
of (i) the date set forth for closing in the offer; or (ii) one
hundred twenty (120) days after the expiration of the aforesaid
thirty (30) day option period. If the sale is not consummated
within the period of time specified in the preceding sentence, then
no sale may be consummated with respect to any portion of the
Partnership Interest of the Selling Partner except upon compliance
again with the provisions of this Section 9.2 to the extent this
Section 9.2 would otherwise be applicable. In the event any offer
shall contemplate the payment of any consideration in exchange for
the purchase of the Partnership Interest to the Selling Partner
other than cash then: (i) if such other consideration shall be a
note, contract obligation or other form of deferred payment, the
Selling Partner shall accept the note or other obligation of the
Electing Partners in satisfaction of said obligation (the
respective obligations of the Electing Partners to be several and
not joint or joint and several and shall be pro rata in accordance
with the portion of the Selling Partner's Partnership Interest
which each Electing Partner elects to purchase); and (ii) with
respect to any other form of consideration, the Electing Partners
may either, at their election (each such Electing Partner having
separate rights of election), deliver the non-cash consideration
called for by the offer, or cash in lieu thereof equal to the fair
market value of such non-cash consideration as of the date of
closing. If the fair market value of the non-cash consideration
cannot be agreed upon by the Selling Partner and the Electing
Partners, the closing shall take place by delivery to the Selling
Partner of cash in the amount of the fair market value as proposed
by the Electing Partners, and the remaining amount in dispute shall
be resolved by arbitration conducted in Chicago, Illinois in
accordance with the rules and regulations of the American
Arbitration Association.
For purposes hereof, the term "Exempt Purchaser" shall mean
(x) any person, firm, corporation or other entity which is then a
Partner in the Partnership, or any Affiliate of any Partner
(including, without limitation, any Affiliate of the Selling
Partner); and (y) with respect to a sale or transfer of an interest
in any entity which is a Partner, or with respect to a sale or
transfer of any ownership interest in any partner of a Partner, any
other partner of such Partner or any Affiliate of such other
partner.
9.3 Securities Laws. In connection with any sale or other
transfer of a Partnership Interest, the selling or transferring
Partner shall effect such transfer only in compliance with all
applicable federal and state securities laws (to the extent said
laws may be applicable to such transaction), and the transferring
Partner shall indemnify, protect and defend the Joint Venture, and
each of the other Partners, from any liabilities, obligations,
costs or expenses to which the Joint Venture or any Partner may
become liable by reason of the application of any such securities
laws in connection with such transfer.
9.4 Further Restrictions on Transfer. In addition to any
other restrictions on transfer herein contained, in no event may
any transfer or assignment be made (i) to any "tax exempt entity"
as such term is defined in Section 168(j) of the Code; (ii) to any
person or entity who lacks the legal right, power or capacity to
own a Partnership Interest; (iii) in violation of any provision of
any of the loan documents, or any similar documents relating to any
financing obtained by the Joint Venture, or in violation of any
other instrument, document or agreement to which the Joint Venture
is, at the time of the proposed transfer, a party or is otherwise
bound; (iv) if the effect of any such transfer is to cause a
termination of the Joint Venture for federal income tax purposes
pursuant to Section 708 of the Code; (v) in violation of Illinois
law; (vi) of any component portion of a Partnership Interest such
as any rights with respect to Net Cash Flow or Default Loans
separate and apart from all other components of a Partnership
Interest; (vii) except to a person or entity who shall have been
approved, for licensing by the Illinois Gaming Commission, or any
other state or local authority in the State of Illinois whose
approval shall be required; or (viii) to any person or entity whose
interest in the Joint Venture might reasonably be expected to
result in a Loss of License in any jurisdiction other than
Illinois.
9.5 New Partners. Any person or entity not then a partner
to which a Partnership Interest shall be transferred in accordance
with the above provisions shall not become a Partner hereunder
unless, among other things, such person or entity shall, in
writing, expressly assume and agree to be bound by all of the terms
and conditions of this Joint Venture Agreement. Each such person
or entity shall also cause to be delivered to the Joint Venture, at
its sole cost and expense, a favorable written opinion of legal
counsel reasonably acceptable to the General Partner to the effect
that (i) the transfer of a Partnership Interest to such person or
entity does not violate any applicable federal or state securities
law and (ii) such person or entity has the legal right, power and
capacity to own the Partnership Interest being transferred to it.
All reasonable costs and expenses incurred by the Joint Venture in
connection with any transfer, and, if applicable, the admission of
any person or entity as a partner hereunder, shall be paid by the
transferror. In addition, no transferee of a Partner's Partnership
Interest shall have the right to become a substitute limited
partner of the Joint Venture except upon the express written
consent and approval of the Committee.
If a Partnership Interest is transferred in accordance with
the provisions of this Article, and the transferee refuses to
execute an agreement to be bound by all of the terms and conditions
of this Agreement, or if other conditions to the admission of such
person or entity as a partner herein shall not have been satisfied,
such transferee shall be deemed a mere assignee of profits only
without any right, power or authority of a partner hereunder, and
such transferee shall be entitled to a share of the profits but
shall have no right to participate in the affairs of the Joint
Venture and shall bear its share of losses in the same manner as
its predecessor in interest.
Upon compliance with the provisions of this Section, and upon
admission of the transferee as a new partner, the transferror
shall, to the extent of the portion of its Partnership Interest so
transferred, be deemed to have withdrawn from the Partnership.
Anything herein contained to the contrary notwithstanding, no
person, including, without limitation, a substitute Partner in the
Joint Venture admitted in connection with the transfer of any
Partnership Interest, shall have the right to designate or elect
any member of the Committee unless such person or entity shall own
more than a twenty-five percent (25%) Partnership Percentage, and
each Partner owning more than a twenty-five percent (25%)
Partnership Percentage shall be entitled to elect two (2) members
of the Committee.
9.6 Bankrupt Partner.
(a) If any Partner, or a general partner of any
Partner, at any time shall become Bankrupt (such Partner being
herein referred to as the "Bankrupt Partner") the remaining
Partners shall have the right and option, exercisable by written
notice (the "Purchase Notice") delivered to the Bankrupt Partner
and all other Partners at any time during the continuance of the
Bankruptcy proceedings, or so long as the Bankruptcy event shall be
continuing, or by notice to the successors or legal representatives
of the Bankrupt Partner, to purchase all, but not less than all, of
the Partnership Interest of the Bankrupt Partner at a price equal
to the amount which the Bankrupt Partner would have been entitled
to receive if the Joint Venture had sold substantially all of its
assets for their fair market value, subject to existing liens and
encumbrances, as of the date of delivery of the aforesaid notice,
such fair market value to be determined in accordance with the
provisions of this Section 9.5. The amount which the Bankrupt
Partner would have been entitled to receive upon such Sale shall be
the amount of Net Cash Flow which would have been distributed to
the Bankrupt Partner from the Joint Venture following a Sale and
after payment of all liabilities and obligations of the Joint
Venture.
Upon delivery of the Purchase Notice, the same shall
constitute an irrevocable and unconditional contract of purchase
and sale between the Partner delivering such notice and the
Bankrupt Partner. The closing of the purchase and sale of the
Partnership Interest of the Bankrupt Partner shall take place on
the closing date specified in the Purchase Notice, which date shall
not be more than ninety (90) days, nor less than thirty (30) days,
after the delivery of the Purchase Notice. If more than one
Partner shall deliver a Purchase Notice (or, if any Partner shall
deliver a Purchase Notice within ten (10) days after receipt of a
Purchase Notice from another Partner) then each such electing
Partner shall be entitled to purchase a pro rata portion of the
Bankrupt Partner's Partnership Interest.
(b) At the election of any Partner electing to
purchase the Partnership Interest of the Bankrupt Partner, the
purchase price may be paid either all in cash at the closing or
such lesser amount of cash (but in no event less than twenty
percent (20%) in cash) on the closing date with the balance to be
represented by a promissory note executed by the purchasing Partner
in favor of the Bankrupt Partner, bearing interest at a rate equal
to the greater of (i) eight percent (8%) per annum, or (ii) the
applicable Applicable Federal Rate as set forth in Section 1274 of
the Code, and providing for payment in equal monthly installments
of principal and interest in such amount as will fully amortize the
principal amount of such note over a period of five (5) years.
(c) The fair market value of the assets of the Joint
Venture, subject to liens and encumbrances, if not otherwise agreed
upon by the Partners, shall be determined, using the income
approach, by three (3) independent appraisers, all of whom shall be
members of the American Institute of Real Estate Appraisers with
experience in appraisal of hotel properties, one appointed by each
Partner, and a third appointed by the two appraisers appointed by
each such Partner. The appraisers to be appointed by each Partner
shall be appointed not later than fifteen (15) days following
delivery of the Purchase Notice to the Bankrupt Partner, and, if
either Partner shall fail to appoint its appraiser within the
aforesaid period of fifteen (15) days the fair market value shall
be determined solely by the appraiser selected by the Partner who
has selected its appraiser within the required fifteen (15) day
period. If the two appraisers so appointed shall be unable to
agree on the selection of the third appraiser, then either
appraiser, on behalf of both, may request such appointment by the
Chief Judge of the United States District Court for the Northern
District of Illinois. The fair market value of the assets of the
Joint Venture, subject to liens and encumbrances, shall be the
average of the valuations of such property as determined by each
such appraiser; provided, however, if such average deviates more
than seven percent (7%) from the median of such valuations, the
fair market value shall be the average of the two closest
valuations. Any such appraisal shall be at the sole expense of the
Joint Venture and shall be submitted to the Partners within thirty
(30) days after the panel of the three appraisers is constituted.
ARTICLE X
Dissolution and Liquidation
In all cases of dissolution of the Joint Venture, the business
of the Joint Venture shall be wound up by the Committee and the
Joint Venture terminated as promptly as practicable thereafter and
each of the following shall be accomplished:
(a) The Partners shall cause to be prepared a
statement setting forth the assets and liabilities of the
Joint Venture as of the date of dissolution, a copy of which
statement shall be furnished to all Partners.
(b) The property and assets of the Joint Venture shall
be liquidated by the Committee as promptly as possible, but in
an orderly and businesslike and commercially reasonable manner
so as not to cause undue financial sacrifice. The Committee
may, in the exercise of its business judgment, determine not
to sell all or any portion of the property and assets of the
Joint Venture, in which such event such property and assets
shall be distributed in kind. In connection with any such
liquidation of the assets of the Joint Venture, the Committee,
in the exercise of its discretion, may sell for cash or on
credit or in exchange for other property as determined by the
Committee, at public, private or negotiated sale or sales, and
if upon credit, taking such collateral security, if any, as
the Committee deems appropriate.
(c) Following sale or liquidation of the property of
the Joint Venture, the proceeds of such sale shall, after
payment of all costs and expenses of dissolution and winding
up of the Joint Venture, and after payment or adequate
provision for payment of all debts and liabilities of the
Joint Venture, be distributed to the Partners in proportion to
their Capital Accounts after giving effect to the allocations
set forth in Article IV no later than the end of the fiscal
year in which the Joint Venture ceases to be a going concern,
the Joint Venture terminates pursuant to Section 708(b)(1)(A)
of the Code, or, if later, ninety (90) days after such
termination or cessation (subject, however, to the provisions
set forth above with respect to payment of Default Loans and
interest thereon). If deemed prudent and advisable by the
Committee, the Committee may establish such reasonable
reserves for contingent or unforeseen liabilities as they deem
appropriate, in such form and for such period of time as may
be reasonably necessary, and the Partners shall then, when all
contingent or unforeseen liabilities have been paid or
otherwise satisfied, distribute any balance of such reserves
to the Partners as herein provided.
ARTICLE XI
Miscellaneous
11.1 Further Assurances. Each Partner agrees to execute,
acknowledge, deliver, file, record and publish such further
certificates, amendments to certificates, instruments and
documents, and do such other acts and things as may be required by
law, or as may be required to carry out the intent and purposes of
this Joint Venture Agreement.
11.2 Notices. All notices, demands, consents, approvals,
requests or other communications which any of the parties to this
Agreement may desire or shall be required to be given hereunder
shall be in writing and shall be given by registered or certified
mail, return receipt requested, or by personal delivery, or
delivery by a private air freight service, the cost and expense of
such delivery to be borne by the sending party. All notices shall
be addressed to the parties at their respective addresses as set
forth on the signature page hereof. Any Partner may designate
another address (or change its address) for notices hereunder by
delivery of a written notice to all other Partners in accordance
with the provisions of this Section. Any notice sent in compliance
with the above provisions shall be deemed delivered on the fifth
business day next succeeding the day on which it was sent, or, if
sooner, on the actual date of receipt by the other party.
11.3 Governing Law. This Agreement is made pursuant to and
shall be governed by and construed in accordance with the laws of
the State of Illinois.
11.4 Absence of Usury. The Partners intend that the
obligations of the Joint Venture with respect to Default Loans, or
interest thereon, shall be in strict compliance with all applicable
state or federal usury laws. None of the terms and provisions
contained in this Joint Venture Agreement shall ever be construed
to create a contract to pay for the use, forbearance or detention
of money, or interest at a rate in excess of the "Maximum Legal
Rate." If it is ever determined by the parties or held that the
obligations of the Joint Venture or any Partner hereunder with
respect to Default Loans are not in strict compliance with
applicable usury laws: (a) neither the Joint Venture nor any other
parties now or hereafter becoming liable for the payment of Default
Loans, or interest thereon, shall ever be required to pay interest
which would be in excess of the Maximum Legal Rate, and the
provisions of this Section 11.4 shall control over all other
provisions of this Joint Venture Agreement; and (b) in the event
any Partner shall have collected monies with respect to Default
Loans which are determined or held to constitute interest at a rate
in excess of the Maximum Legal Rate, all such sums which are deemed
to constitute interest in excess of the Maximum Legal Rate shall,
upon such determination, at the option of the recipient Partner
either be immediately returned to the Joint Venture, or credited
against the principal balance of Default Loan then outstanding,
such credit to be deemed to have been made effective as of the date
of receipt of such excess interest sums. For purposes hereof, the
term "Maximum Legal Rate" shall mean the maximum lawful interest
rate which may be contracted for, charged, taken, received or
reserved with respect to any Default Loan in accordance with
applicable state or federal law taking into account all items
contracted for, charged or received in connection with such
indebtedness which are treated as interest under applicable state
or federal law, and having due regard for the nature and character
of the parties who are the borrower and lender thereunder, as such
rate may change from time to time. If applicable state or federal
law provides that the amount of interest which may lawfully be
contracted for, charged or received on Default Loans under the
circumstances in which the same are charged or received under the
provisions of this Joint Venture Agreement is unlimited or imposes
no limit, then the Maximum Legal Rate shall be considered infinite
and greater than any other rate of interest referred to herein.
11.5 Captions. All article and section headings or captions
contained in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit, extend
or describe the scope of this Joint Venture Agreement or the intent
of any provision hereof.
11.6 Successors and Assigns. Subject to the provisions of
Article IX, this Joint Venture Agreement shall be binding upon the
parties hereto and their respective executors, administrators,
legal representatives, heirs, successors and assigns, and shall
inure to the benefit of the parties hereto, and, except as
otherwise herein expressly provided, their respective executors,
administrators, legal representatives, successors and assigns.
11.7 Extension Not a Waiver. No delay or omission in the
exercise of any power, remedy or right herein provided or otherwise
available to a party or to the Joint Venture shall impair or affect
the right of such Partner or the Joint Venture thereafter to
exercise the same. Any extension of time or other indulgences
granted to a Partner hereunder shall not otherwise alter or affect
any power, remedy or right of any other Partner or of the Joint
Venture, or of the obligations of the Partner to whom such
extension or indulgence is granted.
11.8 Severability. If any provision of this Joint Venture
Agreement or application to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Joint Venture
Agreement or the application of such provision to such person or
circumstances, other than as to which it is so determined invalid
or unenforceable shall not be affected thereby, and each provision
shall be valid and shall be enforced to the fullest extent
permitted by law.
11.9 Consent. Any consent or approval to any act or matter
required under this Agreement must be in writing and shall apply
only with respect to the particular act or matter to which such
consent or approval is given, and shall not relieve any Partner
from the obligation to obtain consent or approval, as applicable,
whenever required under this Joint Venture Agreement or any other
act or matter.
11.10 Entire Agreement and Amendments. This Joint Venture
Agreement contains the entire understanding and agreement of the
parties hereto relating to the subject matter hereof and all prior
agreements relative hereto which are not contained herein are
terminated. Amendments, variations, modifications or changes
herein may be made effective and binding upon the Partners by, and
only by, setting forth the same in a document duly executed by each
Partner, and any alleged amendment, variation, modification or
change herein which is not so documented shall not be effective as
to any Partner.
11.11 Counterparts. This Joint Venture Agreement may be
executed in one or more counterparts, each of which shall be deemed
an original, and all of which, when taken together, shall be deemed
one Agreement, but no counterpart shall be binding unless an
identical counterpart shall have been executed and delivered by
each of the other parties hereto.
11.12 Waiver of Right of Partition. Each of the Partners
does hereby agree to and does hereby waive any right it may have to
cause any property or assets of the Joint Venture, or any part
thereof or interest therein, to be partitioned or to file a
complaint or to institute any proceeding at law or in equity
seeking to have any such property or asset partitioned.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Joint
Venture Agreement to be duly executed as of the day and year first
above written.
Address:
ILLINOIS GROUP 200 West Madison Street
Suite 3800
RBG, L.P., an Illinois limited Chicago, Illinois 60606
partnership, by its general partner
Attention: Richard L. Schulze
HCCA CORPORATION, a Delaware
corporation
By:RICHARD L. SCHULZE
Richard L. Schulze,
Vice President
NEVADA GROUP U.S. 93
Boulder City, Nevada 89005
NEVADA LANDING PARTNERSHIP, an
Illinois general partnership, Attention: David R. Belding
by a general partner thereof
GOLDSTRIKE INVESTMENTS, INC.,
a Nevada corporation
By:DAVID R. BELDING
David R. Belding,
President
TABLE OF CONTENTS
Page
ARTICLE I Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 References. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.3 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II Organization . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Character of the Business . . . . . . . . . . . . . . . . . . . 8
2.4 Location of the Principal Place of Business . . . . . . . . . . 8
ARTICLE III Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV Contributions to Capital . . . . . . . . . . . . . . . . . . 9
4.1 Initial Capital Contributions.. . . . . . . . . . . . . . . . . 9
4.2 Additional Capital Contributions. . . . . . . . . . . . . . . . 9
4.3 Partner Failure to Advance. . . . . . . . . . . . . . . . . . . 10
4.4 Default Loans . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5 Status as "Defaulting Partner". . . . . . . . . . . . . . . . . 13
4.6 Partnership Percentage. . . . . . . . . . . . . . . . . . . . . 13
4.7 No Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8 Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . 13
ARTICLE V Allocations, Distributions and
Other Tax and Accounting Matters. . . . . . . . . . . . . . . . 14
5.1 Allocation of Net Profits . . . . . . . . . . . . 14
5.2 Net Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Gain or Loss. . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Allocations in Case of Transfer or Other
Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Minimum Gain and Qualified Income Offset. . . . . . . . . . . . 17
5.6 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 Books and Records . . . . . . . . . . . . . . . . . . . . . . . 18
5.8 Tax Elections and Returns . . . . . . . . . . . . . . . . . . . 18
5.9 Restoration of Deficit Capital Accounts . . . . . . . . . . . . 18
5.10 Allocations Pursuant to Section 704(c). . . . . . . . . . . . . 18
ARTICLE VI Distributions and Reimbursements . . . . . . . . . . . . . . 19
6.1 Net Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Net Cash Flow Resulting From a Sale . . . . . . . . . . . . . . 19
6.3 Installment Sales . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII Management of the Joint Venture. . . . . . . . . . . . . . . 20
7.1 Executive Committee . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Bank Accounts . . . . . . . . . . . . . . . . . . 21
7.3 Reimbursements for Costs and Expenses . . . . . . . . . . . . . 21
7.4 No Authority of Individual Partner. . . . . . . . . . . . . . . 22
7.5 Other Businesses. . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 Liability of the Partners . . . . . . . . . . . . . . . . . . . 22
7.7 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII Loss of License. . . . . . . . . . . . . . . . . . . . . . 23
8.1 Loss of License . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Provisions Relating to Loss of License. . . . . . . . . . . . . 24
8.3 Buy-Out Provisions. . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IX Transfer of Partnership Interests. . . . . . . . . . . . . . 26
9.1 Right to Transfer . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Transfer of Partnership Interests - Right of
First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Further Restrictions on Transfer. . . . . . . . . . . . . . . . 29
9.5 New Partners. . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.6 Bankrupt Partner. . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE X Dissolution and Liquidation. . . . . . . . . . . . . . . . . 32
ARTICLE XI Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 33
11.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 33
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.4 Absence of Usury. . . . . . . . . . . . . . . . . . . . . . . . 33
11.5 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.6 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 34
11.7 Extension Not a Waiver. . . . . . . . . . . . . . . . . . . . . 34
11.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.9 Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.10 Entire Agreement and Amendments. . . . . . . . . . . . . . . 35
11.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 35
11.12 Waiver of Right of Partition . . . . . . . . . . . . . . . . 35
JOINT VENTURE AGREEMENT
BY AND AMONG
NEVADA LANDING PARTNERSHIP,
an Illinois general partnership
AND
RBG, L.P.,
an Illinois limited partnership
Dated as of: December 18, 1992
Exhibit 10(h)
FIRST AMENDMENT
TO
JOINT VENTURE AGREEMENT
OF
ELGIN RIVERBOAT RESORT
THIS FIRST AMENDMENT TO JOINT VENTURE AGREEMENT is made and
entered into as of the 15th day of July 1993 by and among NEVADA
LANDING PARTNERSHIP, an Illinois general partnership, and RGB,
L.P., an Illinois limited partnership.
W I T N E S S E T H:
WHEREAS, the parties have heretofore entered into that
certain Joint Venture Agreement by and among Nevada Landing
Partnership and RGB, L.P., dated as of December 18, 1992 (the
"Joint Venture Agreement");
WHEREAS, the parties desire to amend the Joint Venture
Agreement to confirm that all provisions of the Joint Venture
Agreement are subject to the Illinois Riverboat Gambling Act and
the rules and regulations of the Illinois Gaming Board;
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, the parties hereby agree as follow:
1. The Joint Venture Agreement is hereby amended (to be
effective as of December 18, 1992) by adding the following new
section 11.13:
"11.13 Illinois Gaming Laws. All of the provisions of this
Agreement are subject to the Illinois Riverboat Gambling Act and
the rules and regulations of the Illinois Gaming Board."
2. Except as provided herein, the Joint Venture Agreement
is hereby confirmed and the terms and provisions thereof, as
modified herein, shall remain in full force and affect.
3. This amendment may be executed in counterparts, each of
which shall be an original, but all of which shall constitute one
and the same document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
RGB, L.P., an Illinois limited
partnership, by its general partner
HCCA Corporation, a Delaware
corporation
By: RICHARD L. SCHULZE
Richard L. Schulze
Vice President
Nevada Landing Partnership, an
Illinois general partnership, by
a general partner thereof
Diamond Gold, Inc.
a Nevada corporation
By: PETER A. SIMON, II
Peter A. Simon, II
President
Exhibit 10(i)
SECOND AMENDMENT
TO
JOINT VENTURE AGREEMENT
OF
ELGIN RIVERBOAT RESORT - RIVERBOAT CASINO
THIS SECOND AMENDMENT TO JOINT VENTURE AGREEMENT is made and
entered into as of the 6th day of October, 1994 by and among
NEVADA LANDING PARTNERSHIP, an Illinois general partnership, and
RBG, L.P., an Illinois limited partnership.
W I T N E S S E T H:
WHEREAS, the parties have heretofore entered into that
certain Joint Venture Agreement by and among Nevada Landing
Partnership and RBG, L.P., dated as of December 18, 1992, as
amended by agreement dated as of July 15, 1993 (the "Joint
Venture Agreement"); and
WHEREAS, the parties desire to amend the Joint Venture
Agreement to change the Joint Venture's principal place of
business and to amend the notice provisions.
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, the parties hereby agree as follows:
1. Section 2.4 of the Joint Venture Agreement is hereby
amended in its entirety as follows:
"2.4 Location of the Principal Place of Business. The
location of the principal place of business of the Joint
Venture shall be at 250 South Grove, Elgin, Illinois 60120."
2. The Joint Venture Agreement is hereby further amended by
amending the second sentence of Section 11.2 as follows:
"All such notices or other communications shall be addressed
to the parties at their respective addresses as set forth on
the signature page hereof with a copy to Neal Gerber &
Eisenberg, Two North LaSalle Street, Chicago,Illinois 60606,
Attention: Mindy C. Sircus.
3. Except as provided herein, the Joint Venture Agreement
is hereby confirmed and the terms and provisions thereof, as
modified hereby, shall remain in full force and effect.
4. This Amendment may be executed in counterparts, each of
which shall be an original, and all of which when taken together
shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date and year first written above.
RBG, L.P. an Illinois limited
partnership
By: HCCA CORPORATION, its general
partner
By: RICHARD L. SCHULZE
Richard L. Schulze,
Vice President
NEVADA LANDING PARTNERSHIP, an
Illinois general partnership
By: GOLDSTRIKE INVESTMENTS, INC.,
one of its general partners
By: DAVID R. BELDING
David R. Belding, President
Exhibit 10(j)
SECOND AMENDMENT
TO
JOINT VENTURE AGREEMENT
OF
ELGIN RIVERBOAT RESORT
THIS SECOND AMENDMENT ("Amendment") TO JOINT VENTURE AGREEMENT is
made and entered into as of the 1st day of June, 1995 by and among
NEVADA LANDING PARTNERSHIP, an Illinois general partnership ("Nevada
Group"), and RBG, L.P., an Illinois limited partnership ("Illinois
Group").
W I T N E S S E T H:
WHEREAS, the Nevada Group and the Illinois Group (hereinafter
each sometimes referred to as a "Partner" and collectively as the
"Partners") have heretofore entered into that certain Joint Venture
Agreement dated as of December 18, 1992, as amended by that certain
First Amendment to Joint Venture Agreement dated July 15, 1993
(hereinafter said Joint Venture Agreement as amended, the "Original
Agreement");
WHEREAS, the individual shareholders of the corporate partners of
the Nevada Group have agreed to merge with Circus Circus Enterprises,
Inc. ("Circus Circus"), a publicly traded Nevada corporation,
pursuant to a transaction (the "Merger") whereby the individual
shareholders of the corporate partners of the Nevada Group shall
become shareholders of Circus Circus and the corporate partners of the
Nevada Group will become wholly owned subsidiaries of Circus Circus;
WHEREAS, the Partners desire to amend the Original Agreement as
hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, the parties hereby agree as follows:
Section 1. Definitions.
1.1 Joint Venture Agreement. Wherever there is a reference to
the "Joint Venture Agreement" or the "Agreement", unless the context
shall otherwise require, the same shall mean the Original Agreement as
hereby amended.
1.2 Other Defined Terms. Wherever in this Amendment terms are
used which are defined in the Original Agreement, all such terms
shall, unless otherwise herein expressly provided, or unless the
context shall otherwise require, have the same meaning as set forth in
the Original Agreement.
Section 2. Cash Flow Provisions.
2.1 The definition of "Net Cash Flow" set forth in Section 1.1
of the Original Agreement is hereby deleted in its entirety and the
following definition is substituted therefor:
"Net Cash Flow" shall mean, with respect to any fiscal
period of the Joint Venture, the excess, if any, of
"Receipts" over "Expenditures". For purpose hereof, the
term "Receipts" means the sum of all cash receipts of the
Joint Venture from all sources for such period, including
capital contributions, net sales proceeds and net financing
proceeds. The term "Expenditures" means the sum of (a) all
cash expenses of the Joint Venture for such period, (b) the
amount of all payments of principal and interest on account
of any indebtedness of the Joint Venture, and (c)
such reasonable cash reserves as of the last day of such
period as the Partners deem necessary for any operating
expenditure (such operating expenditure cash reserves
shall not exceed Three Million Dollars ($3,000,000.00)
and/or for any capital expenditure (such capital
expenditure cash reserves to be in such amounts as
established by the Committee from time to time), in each
case as otherwise permitted hereunder."
2.2 Section 6.1 of the Original Agreement is hereby deleted in
its entirety and the following new Section 6.1 is substituted
therefor:
"Section 6.1 Net Cash Flow. Subject to the provisions
of Section 6.2, the Joint Venture shall distribute to
the Partners all of the Net Cash Flow on Thursday of
each week, all such distributions to be made in accord-
ace with the then Partnership Percentages of the
Partners, provided, however, if, as of the date of such
distribution, either or both of the Partners shall be
obligated with respect to a Default Loan, all distributions
otherwise payable to such Partner shall be paid to the
Contributing Partner which has advanced the Default Loan
to be applied first to accrued and unpaid interest and then
to the principal of the Default Loan."
Section 3. Transfer Provisions.
3.1 Section 9.1 of the Original Agreement is hereby deleted in
its entirety and the following new Section 9.1 is substituted
therefor:
"9.1 Right to Transfer/Exceptions.
Except as otherwise herein in this Article IX
provided, there shall be no restriction on the
right, power of authority of any Partner to sell,
transfer, convey or assign its Partnership Interest.
Notwithstanding the foregoing, a Partner may not pledge,
collaterally assign or otherwise encumber in any way all or
any part of its Partnership Interest in the Partnership
without the prior written consent of the other Partner
(which consent may be given or withheld by such other
Partner in its sole and absolute discretion)."
3.2 Section 9.2 of the Original Agreement is hereby deleted in
its entirety and the following new Section 9.2 is substituted
therefor:
"9.2 Permitted Pledge of Proceeds.
Except as otherwise provided in Sections 9.3 and /or
9.4 hereof, a Partner shall be permitted to pledge,
encumber or collaterally assign its right to receive
proceeds or distributions from the Joint Venture (a
"Collateral Assignment") in connection with a credit
facility or other financial arrangement provided such
Partner and its assignee each notifies the other Partner in
writing of such Collateral Assignment concurrently with or
prior to such Collateral Assignment. If a Partner enters
into a Collateral Assignment with respect to a financing
or other transaction and thereafter a default or event of
default occurs with respect to such Partner (the "Default
Partner") in such transaction, (a) such Default Partner
and its assignee shall each immediately notify the other
Partner of the occurrence of such default or event of
default and (b) during the pendency of such default or
event of default neither the Default Partner nor its
assignee shall have the right to designate or elect any
member of the Committee, with the size of the Committee
being reduced during the pendency of such default by the
number of members which the Default Partner would otherwise
have been entitled to appoint."
3.3 Section 9.4 of the Original Agreement shall be amended by
adding the words "without the prior written consent of the Committee"
after "(i)", "(iv)", and "(vi)".
Section 4. Acknowledgement. The Illinois Group hereby
acknowledges and consents to the Merger transaction and the resulting
change in ownership of the Nevada Group.
Section 5. No other Changes. Except as otherwise
expressly provided, all of the terms and provisions of the Original
Agreement shall continue in full force and effect. In the event any
of the provisions of this Agreement shall be inconsistent, or be in
conflict, with any of the provisions of the Original Agreement, the
Provisions of this Amendment shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first written above.
PARTNERS:
RBG, L.P., an Illinois limited NEVADA LANDING PARTNERSHIP
partnership, by its general an Illinois general partnership
partner by a general partner thereof
HCCA CORPORATION, a GOLDSTRIKE INVESTMENTS, INC.,
Delaware corporation a Nevada corporation
By:RICHARD L. SCHULZE By:DAVID R. BELDING
Richard L. Schulze David R. Belding
Vice President President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JUL-31-1995
<CASH> 62,662
<SECURITIES> 0
<RECEIVABLES> 10,195
<ALLOWANCES> 0
<INVENTORY> 22,902
<CURRENT-ASSETS> 115,505
<PP&E> 1,845,382
<DEPRECIATION> 450,245
<TOTAL-ASSETS> 2,103,551
<CURRENT-LIABILITIES> 88,187
<BONDS> 731,485
<COMMON> 1,879
18,530
0
<OTHER-SE> 1,132,806
<TOTAL-LIABILITY-AND-EQUITY> 2,103,551
<SALES> 621,799
<TOTAL-REVENUES> 621,799
<CGS> 0
<TOTAL-COSTS> 515,055
<OTHER-EXPENSES> 11,333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,159
<INCOME-PRETAX> 74,252
<INCOME-TAX> 27,571
<INCOME-CONTINUING> 46,681
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,681
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
