<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1998
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 identification
incorporation or organization) 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.
<TABLE>
<CAPTION>
<S> <C>
Class Outstanding at August 31, 1998
- -------------------------------------- --------------------------------------
Common Stock, $.01- 2/3 par value 95,129,383 shares
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<C> <S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at July 31, 1998
(Unaudited) and January 31, 1998......................... 3-4
Condensed Consolidated Statements of Income (Unaudited) for
the Three and Six Months Ended July 31, 1998 and 1997.... 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended July 31, 1998 and 1997.......... 6
Notes to Condensed Consolidated Financial Statements
(Unaudited).............................................. 7-14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................ 15-21
Item 3. Quantitative and Qualitative Disclosures About Market
Risks.................................................... 21
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........ 22
Item 5. Other Information.......................................... 22
Item 6. Exhibits and Reports on Form 8-K........................... 22
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1998 1998
---------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................ $ 78,977 $ 58,631
Receivables.......................................... 20,918 33,640
Inventories.......................................... 25,668 22,440
Prepaid expenses and other........................... 30,110 28,152
---------- -----------
Total current assets............................... 155,673 142,863
PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS,
at cost, less accumulated depreciation
and amortization of $673,457 and $624,205,
respectively......................................... 2,748,809 2,466,848
EXCESS OF PURCHASE PRICE OVER FAIR MARKET
value of net assets acquired, net.................... 370,270 375,375
INVESTMENTS IN UNCONSOLIDATED AFFILIATES............... 263,765 255,392
OTHER ASSETS........................................... 29,157 23,070
---------- -----------
Total Assets....................................... $3,567,674 $ 3,263,548
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1998 1998
---------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt..................... $ 3,469 $ 3,071
Accounts payable--trade............................... 27,294 22,103
Accounts payable--construction........................ 36,924 40,670
Accrued liabilities................................... 114,512 101,114
---------- -----------
Total current liabilities........................... 182,199 166,958
LONG-TERM DEBT.......................................... 2,029,311 1,788,818
DEFERRED INCOME TAX..................................... 178,463 175,934
OTHER LONG-TERM LIABILITIES............................. 6,841 8,089
---------- -----------
Total liabilities................................... 2,396,814 2,139,799
---------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 2/3 par value
Authorized--450,000,000 shares
Issued--113,622,508 and 113,609,008 shares.......... 1,894 1,893
Preferred stock, $.01 par value
Authorized--75,000,000 shares....................... -- --
Additional paid-in capital............................ 558,839 558,658
Retained earnings..................................... 1,121,164 1,074,271
Treasury stock (18,493,125 and 18,496,125 shares),
at cost............................................. (511,037) (511,073)
---------- -----------
Total stockholders' equity.......................... 1,170,860 1,123,749
---------- -----------
Total Liabilities and
Stockholders' Equity.............................. $3,567,674 $ 3,263,548
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JULY 31, ENDED JULY 31,
------------------------ ------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Casino........................................................ $ 181,101 $ 158,642 $ 349,518 $ 319,237
Rooms......................................................... 88,830 79,608 176,629 165,931
Food and beverage............................................. 64,473 54,889 124,562 108,854
Other......................................................... 51,362 38,584 89,346 72,257
Earnings of unconsolidated affiliates......................... 20,186 26,618 42,237 51,874
----------- ----------- ----------- -----------
405,952 358,341 782,292 718,153
Less-complimentary allowances................................. (21,291) (15,049) (40,669) (30,763)
----------- ----------- ----------- -----------
384,661 343,292 741,623 687,390
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Casino........................................................ 92,919 75,904 176,988 148,382
Rooms......................................................... 33,043 31,358 64,465 61,511
Food and beverage............................................. 54,526 51,912 105,620 99,931
Other operating expenses...................................... 27,656 23,513 51,753 43,528
General and administrative.................................... 67,943 60,846 133,070 115,498
Depreciation and amortization................................. 34,405 28,839 68,371 57,183
----------- ----------- ----------- -----------
310,492 272,372 600,267 526,033
----------- ----------- ----------- -----------
OPERATING PROFIT BEFORE CORPORATE EXPENSE....................... 74,169 70,920 141,356 161,357
CORPORATE EXPENSE............................................... 8,064 8,173 14,192 15,972
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS.......................................... 66,105 62,747 127,164 145,385
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest, dividend and other income........................... 609 551 1,529 1,447
Interest income and guarantee fees from unconsolidated
affiliate................................................... 797 1,662 1,595 3,388
Interest expense.............................................. (24,297) (22,049) (48,120) (43,716)
Interest expense from unconsolidated affiliates............... (3,171) (4,035) (6,331) (8,261)
----------- ----------- ----------- -----------
(26,062) (23,871) (51,327) (47,142)
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAX.......................... 40,043 38,876 75,837 98,243
Provision for income tax...................................... 14,758 14,388 28,945 36,266
----------- ----------- ----------- -----------
NET INCOME...................................................... $ 25,285 $ 24,488 $ 46,892 $ 61,977
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
BASIC EARNINGS PER SHARE........................................ $ .27 $ .26 $ .49 $ .65
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
DILUTED EARNINGS PER SHARE...................................... $ .27 $ .26 $ .49 $ .65
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Avg. shares outstanding--basic.................................. 95,129,383 95,015,728 95,126,110 94,809,607
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Avg. shares outstanding--diluted................................ 95,135,119 95,322,132 95,136,667 95,288,579
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JULY 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................................. $ 46,892 $ 61,977
---------- ----------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization......................................................... 72,667 62,833
Gain on disposition of fixed assets................................................... (195) (202)
Decrease in other current assets...................................................... 7,536 5,268
Decrease in other noncurrent assets................................................... (6,150) (3,743)
Increase in interest payable.......................................................... 6,432 6,608
Increase in other current liabilities................................................. 12,157 7,402
Increase in deferred income tax....................................................... 2,529 5,181
Decrease in other noncurrent liabilities.............................................. (33) (33)
Unconsolidated affiliates' earnings in excess of distributions........................ (4,800) (18,137)
---------- ----------
Total adjustments................................................................... 90,143 65,177
---------- ----------
Net cash provided by operating activities........................................... 137,035 127,154
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................................... (349,981) (302,841)
Increase (decrease) in construction payable............................................. (3,746) 12,453
Increase in investments in unconsolidated affiliates.................................... (3,780) (2,085)
Proceeds from sale of equipment and other assets........................................ 862 328
Other................................................................................... 122 142
---------- ----------
Net cash used in investing activities............................................... (356,523) (292,003)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net effect on cash of issuances and payments of debt with original maturities of three
months or less........................................................................ 410,133 430,808
Issuances of debt with original maturities in excess of three months.................... 22,329 14,287
Principal payments of debt with original maturities in excess of three months........... (191,631) (267,476)
Exercise of stock options and warrants.................................................. 219 5,794
Purchases of treasury stock............................................................. -- (1,300)
Other................................................................................... (1,216) (10,650)
---------- ----------
Net cash provided by financing activities........................................... 239,834 171,463
---------- ----------
Net increase in cash and cash equivalents............................................... 20,346 6,614
Cash and cash equivalents at beginning of period........................................ 58,631 69,516
---------- ----------
Cash and cash equivalents at end of period.............................................. $ 78,977 $ 76,130
---------- ----------
---------- ----------
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized).................................................... $ 40,413 $ 35,733
Income tax.............................................................................. $ 16,170 $ 37,270
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 IS
UNAUDITED.)
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
Circus Circus Enterprises, Inc. (the "Company") was incorporated February
27, 1974. The Company owns and operates hotel and casino facilities in Las
Vegas, Reno, Laughlin, Jean and Henderson, Nevada and a hotel and dockside
casino in Tunica County, Mississippi. It is also an investor in several
unconsolidated affiliates, with operations that include a riverboat casino in
Elgin, Illinois, a hotel/casino in Reno, Nevada and a hotel/casino on the Las
Vegas Strip.
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 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, 1997 to conform to the financial statement
presentation for the three and six months ended July 31, 1998. 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, 1998.
(2) LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1998 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Amounts due under corporate debt program at floating
interest rates, weighted average of 5.8% and
5.8%............................................... $ 58,672 $ 981,310
Amounts due under bank credit agreement at floating
interest rates, weighted average of 6.5%........... 1,165,000 --
6.45% Senior Notes due 2006 (net of unamortized
discount of $330 and $352)......................... 199,670 199,648
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 $79 and $87)............... 149,921 149,913
7.0% Debentures due 2036 (net of unamortized discount
of $140 and $146).................................. 149,860 149,854
6.70% Debentures due 2096 (net of unamortized
discount of $255 and $279)......................... 149,745 149,721
Other notes.......................................... 9,912 11,443
------------ -----------
2,032,780 1,791,889
Less--current portion................................ (3,469) (3,071)
------------ -----------
$2,029,311 $1,788,818
------------ -----------
------------ -----------
</TABLE>
7
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 IS
UNAUDITED.)
(2) LONG-TERM DEBT (CONTINUED)
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 a long-term debt
facility (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 program, it must maintain an equivalent
amount of credit available under its bank credit facility discussed more fully
below.
In May 1997, the Company renegotiated its $1.5 billion unsecured credit
facility, dated January 29, 1996. This agreement was replaced by a new $2.0
billion unsecured credit facility which matures on July 31, 2002 (the
"Facility"). The maturity date may be extended for an unlimited number of
one-year periods with the consent of the bank group. The Facility contains
financial covenants regarding senior and total debt and new venture capital
expenditures and investments. The Facility is for general corporate purposes.
The Company incurs commitment fees (currently 17.5 basis points) on the unused
portion of the Facility. As of July 31, 1998, the Company had $1.2 billion
outstanding under the Facility. At such date, the Company also had $58.7 million
of indebtedness outstanding under the corporate debt program thus reducing, by
that amount, the credit available under the Facility for purposes other than
repayment of such indebtedness. 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.
In November 1996, the Company issued $150 million principal amount of 7.0%
Debentures due November 2036 (the "7.0% Debentures"). The 7.0% Debentures may be
redeemed at the option of the holder in November 2008. Also, in November 1996,
the Company issued $150 million principal amount of 6.70% Debentures due
November 2096 (the "6.70% Debentures"). The 6.70% Debentures may be redeemed at
the option of the holder in November 2003. Both the 7.0% Debentures, which were
discounted to $149.8 million, and the 6.70% Debentures, which were discounted to
$149.7 million, have interest payable each May and November, are not redeemable
by the Company 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 February 1996, the Company issued $200 million principal amount of 6.45%
Senior Notes due February 1, 2006 (the "6.45% Notes"), with interest payable
each February and August. The 6.45% Notes, which were discounted to $199.6
million, are not redeemable prior to maturity and are not subject to any sinking
fund requirements. The net proceeds from this offering were used primarily to
repay borrowings under the Company's corporate debt program.
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 July and January. 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.
The Company has a policy aimed at managing interest rate risk associated
with its current and anticipated future borrowings. This policy enables the
Company to use any combination of interest rate swaps, futures, options, caps
and similar instruments. To the extent the Company employs such financial
8
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 IS
UNAUDITED.)
(2) LONG-TERM DEBT (CONTINUED)
instruments pursuant to this policy, they are accounted for as hedging
instruments. In order to qualify for hedge accounting, the underlying hedged
item must expose the Company to risks associated with market fluctuations and
the financial instrument used must be designated as a hedge and must reduce the
Company's exposure to market fluctuation throughout the hedge period. If these
criteria are not met, a change in the market value of the financial instrument
is recognized as a gain or loss in the period of change. Otherwise, gains and
losses are not recognized except to the extent that the financial instrument is
disposed of prior to maturity. Net interest paid or received pursuant to the
financial instrument is included as interest expense in the period.
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 6.2%) and receives a variable
interest rate (weighted average of approximately 5.7% at July 31, 1998) on $175
million notional amount of initial swaps, and pays a variable interest rate of
approximately 5.7% at July 31, 1998, and receives a fixed interest rate of
approximately 8.2% on $30 million notional amount of a reversing swap. The net
effect of all such swaps resulted in additional interest expense, due to an
interest rate differential which, at July 31, 1998, was approximately 0.1% on
the total notional amount of the swaps. Two of the initial swaps with a combined
notional amount of $150 million provide that the swaps will terminate two
business days after any date on which three-month LIBOR is set at or above 9% on
or after October 15, 2000 for $100 million notional amount, and on or after
January 15, 2001 for $50 million notional amount. These swaps otherwise
terminate in fiscal 2008. The remaining initial swap of $25 million terminates
in fiscal 2000 while the reversing swap expires in fiscal 2002.
As of July 31, 1998, under its most restrictive loan covenants, the Company
was restricted as to the purchase of its own capital stock in excess of $491
million and was restricted from issuing additional debt in excess of
approximately $181 million.
(3) STOCK OPTIONS
The Company 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 relating to the Company's common
stock and one of the plans also permits grants of the Company's common stock as
performance share and restricted stock awards. The only awards granted pursuant
to such plans through July 31, 1998 are stock options, which are generally
exercisable in one or more installments beginning not less than six months after
the grant date.
9
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 IS
UNAUDITED.)
(3) STOCK OPTIONS (CONTINUED)
Summarized information for stock options granted pursuant to the Company's
plans is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31, 1998
-------------------------
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
------------ -----------
<S> <C> <C>
Outstanding at beginning of period................................ 5,140,255 $ 23.92
Granted........................................................... 180,000 21.53
Exercised......................................................... (16,500) 13.29
Cancelled......................................................... (19,000) 22.22
------------ -----------
Outstanding at end of period...................................... 5,284,755 $ 23.88
------------ -----------
------------ -----------
Options exercisable at end of period.............................. 3,662,454 $ 23.04
Options available for grant at end of period...................... 1,869,150
</TABLE>
(4) STOCK RELATED MATTERS
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 generally become exercisable ten
days after the earlier of an announcement that an individual or group has
acquired 15% or more of the Company's outstanding common stock or the
announcement of commencement of a tender offer for 15% 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 15% 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.
During the year ended January 31, 1998, the Company elected to settle, for
cash, outstanding put options on 2.0 million shares of its common stock and call
options on 600,000 shares of common stock. The net cost to the Company was $9.4
million. The put and call options were entered into as a complement to the
Company's overall share repurchase program.
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 such preferred stock
has yet been issued.
10
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 IS
UNAUDITED.)
(5) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128--Earnings Per Share ("SFAS 128"). SFAS
128 is effective for periods ending after December 15, 1997 and replaces
earnings per share as previously reported with "basic", or undiluted earnings
per share, and "diluted" earnings per share. Basic earnings per share is
computed by dividing net income by the weighted average number of common shares
outstanding during the period, while diluted earnings per share reflects the
additional dilution for all potentially dilutive securities, such as stock
options.
The Company has adopted the provisions of SFAS 128 and all previously
reported earnings per share amounts have been restated. The table below
reconciles weighted average shares outstanding used to calculate basic earnings
per share with the weighted shares outstanding used to calculate diluted
earnings per share. There were no reconciling items for net income.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C>
Net income........................................ $ 25,285 $ 24,488 $ 46,892 $ 61,977
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average shares outstanding used in
computation of basic earnings per share......... 95,129 95,016 95,126 94,810
Stock options..................................... 6 306 11 479
--------- --------- --------- ---------
Weighted average shares outstanding used in
computation of diluted earnings per share....... 95,135 95,322 95,137 95,289
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic earnings per share.......................... $ .27 $ .26 $ .49 $ .65
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted earnings per share........................ $ .27 $ .26 $ .49 $ .65
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(6) INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company has investments in unconsolidated affiliates that are accounted
for under the equity method. Using the equity method, original investments are
recorded at cost and adjusted by the Company's share of earnings or losses of
these entities. The investment balance also includes interest
11
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 IS
UNAUDITED.)
(6) INVESTMENTS IN UNCONSOLIDATED AFFILIATES (CONTINUED)
capitalized during construction (net of amortization). Investments in
unconsolidated affiliates consist of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1998 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Circus and Eldorado Joint
Venture (50%)
(Silver Legacy, Reno,
Nevada).................. $ 69,275 $ 64,407
Elgin Riverboat Resort
(50%)
(Grand Victoria, Elgin,
Illinois)................ 42,972 44,759
Victoria Partners (50%)
(Monte Carlo, Las Vegas,
Nevada).................. 141,470 139,958
Detroit Entertainment (45%)
(Proposed Hotel/Casino,
Detroit, Michigan)....... 10,048 6,268
----------- -----------
$263,765 $255,392
----------- -----------
----------- -----------
</TABLE>
The above unconsolidated affiliates operate with fiscal years ending on
December 31. Summarized results of operations of the unconsolidated affiliates
are as follows (unaudited, in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues.............................................................. $ 334,034 $ 329,675
Expenses.............................................................. 254,377 232,824
Operating income...................................................... 79,657 96,851
Net income............................................................ 67,433 80,220
</TABLE>
Included in the above are revenues of the Grand Victoria of $129,614 and
$125,046 for the six months ended June 30, 1998 and 1997. The property's
operating margin during those periods was 26% and 35%, respectively.
(7) COMMITMENTS AND CONTINGENT LIABILITIES
In July 1995, Silver Legacy, a 50/50 joint venture with the Eldorado
Hotel/Casino, opened in downtown Reno, Nevada. As a condition to the joint
venture's $230 million bank credit agreement, Circus is obligated under a
make-well agreement to make additional contributions to the joint venture as may
be necessary to maintain a minimum coverage ratio (as defined).
In the Spring of 1997, the Company commenced construction of Mandalay Bay, a
43-story, hotel-casino resort which will have approximately 3,700 rooms and
approximately 135,000 square feet of gaming space. The resort, which is expected
to be completed in the first quarter of 1999, will be situated on approximately
60 acres of land just south of Luxor. Mandalay Bay's attractions are planned to
include an 11-acre tropical lagoon featuring a sand-and-surf beach, a
three-quarter-mile lazy river ride, a 30,000-square-foot spa and other
entertainment attractions. Inside, Mandalay Bay will offer internationally
renowned restaurants, as well as a House of Blues nightclub and restaurant,
including its signature
12
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Foundation Room sited on Mandalay Bay's rooftop, and 100 "music-themed" hotel
rooms in Mandalay Bay's tower.
Within Mandalay Bay and as part of its 3,700 rooms, a Four Seasons Hotel
with approximately 400 rooms will provide Las Vegas visitors with a luxury
"five-star" hospitality experience. The Four Seasons Hotel, which will be owned
by the Company and managed by Four Seasons, represents the first step pursuant
to the Company's cooperative effort with Four Seasons to identify strategic
opportunities for development of hotel and casino properties worldwide. The cost
of Mandalay Bay, including the Four Seasons Hotel but excluding land and
capitalized interest, is currently estimated at approximately $850 million and
as of July 31, 1998, $516.8 million in costs had been incurred for this project.
During the course of construction, Mandalay Bay's hotel tower has
experienced settling which has exceeded the level contemplated in the building's
original design and the amount of settling has been greater in some portions of
the structure than others. The Company has retained geotechnical, structural
engineering and foundation consultants who have recommended remedial measures
which are scheduled to be completed in October. Completion of the recommended
remedial measures is not expected to delay the opening of Mandalay Bay or
materially increase the cost of the project. However, until such remedial
measures are completed and evaluated and the ongoing evaluation of the site is
concluded, there can be no assurances that further corrective measures will not
be required or, if additional measures are required, as to the cost of such
measures or their impact, if any, on the scheduled completion and opening of
Mandalay Bay.
Mandalay Bay is the latest phase of the Company's development of over 230
acres of land it owns at the south end of the Las Vegas Strip which runs from
Tropicana Avenue south approximately one mile to Russell Road ("Masterplan
Mile"). As part of its development plan for Masterplan Mile, the Company is
constructing a 125,000-square-foot convention facility and a 12,000-seat arena.
These facilities are expected to be completed and opened concurrently with
Mandalay Bay, and will represent core components of Masterplan Mile which will
be cross-marketed to guests at the Company's existing and future hotel-casinos
within Masterplan Mile. The estimated cost of the convention facility and arena,
excluding land and capitalized interest, is approximately $100 million and as of
July 31, 1998, $16.5 million in costs had been incurred for these facilities.
The Company also plans to construct a monorail system which will link the
Company's resorts on Masterplan Mile. Furthermore, the Company is planning a
"Sea of Predators" aquarium exhibit which will likewise represent a core
component of Masterplan Mile. Both the monorail and the Sea of Predators exhibit
are anticipated to be completed after the opening of Mandalay Bay. The cost of
these additional Masterplan Mile core components, excluding land and capitalized
interest, is estimated at approximately $75 million, of which $5.1 million had
been incurred as of July 31, 1998. The Company may add other core components to
its development plan for Masterplan Mile in the future.
The Company has funded Mandalay Bay and the aforementioned Masterplan Mile
core components from internal cash flows or its credit facility, and anticipates
that future funding for such projects will be from these sources or from project
specific financing.
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.
13
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative financial instruments. The provisions of SFAS
No. 133 require that a company recognize derivatives as either assets or
liabilities on its balance sheet and that the instrument be valued at its fair
value. The statement also defines the criteria and conditions which govern the
recognition of subsequent changes in the fair value of the instrument as either
balance sheet or income statement events. SFAS No. 133 is effective for fiscal
years beginning after June 15, 1999. The Company does not expect the adoption of
this pronouncement to materially impact its results of operations or financial
position.
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued Statement of Position 98-5 ("SOP 98-5")
"Reporting on the Costs of Start-up Activities." SOP 98-5 requires that the
costs of all start-up activities, as defined, be expensed as incurred. The
statement is effective for fiscal years beginning after December 15, 1998. The
Company will adopt SOP 98-5 in its fiscal year ending January 31, 2000.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED)
RESULTS OF OPERATIONS
EARNINGS PER SHARE
For the quarter ended July 31, 1998, the Company reported net income of
$25.3 million, or $.27 per share, versus $24.5 million, or $.26 per share, a
year ago. For the six months, net income was $46.9 million, or $.49 per share,
compared to $62.0 million, or $.65 per share, in the prior year.
REVENUES
Revenues for the Company increased $41.4 million, or 12%, for the three
months ended July 31, 1998 and $54.2 million, or 8%, for the six months, versus
the corresponding prior year periods. The increase in revenue for both the three
and six months was attributable primarily to two properties, though all of the
Company's wholly owned properties reported increased revenues during the second
quarter. First, the completion of an 1,100-room hotel tower at Gold
Strike-Tunica in the first quarter contributed to an increase in revenues at
that property of $18.3 million, or 184%, in the second quarter and $32.4
million, or 160%, in the six months. Second, Luxor benefitted from a new
national advertising campaign, an increase in the amount of high-budget play in
the casino and the opening of a new 1,200-seat showroom in the third quarter of
the prior year which contributed to increases in revenue at this property of
$15.0 million, or 20%, for the quarter and $27.1 million, or 19%, for the six
months ended July 31, 1998.
OPERATING INCOME
For the quarter ended July 31, 1998, income from operations rose $3.4
million, or 5%, while the six months experienced a decline in income from
operations of $18.2 million, or 13%, compared to the same periods a year ago.
The Company's composite operating margin was 17.2% and 17.1% for the three and
six months ended July 31, 1998 versus 18.3% and 21.2% for the comparable periods
in the prior year. A discussion of operating results by market follows.
LAS VEGAS
The Company's Las Vegas properties posted an overall increase in operating
income of $2.5 million, or 6%, during the second quarter, while there was an
overall decrease for the six month period of $12.3 million, or 12%. The increase
in operating income for the quarter was due primarily to improved results at
Luxor, which was up $3.1 million, or 29%, and Circus Circus-Las Vegas, which was
up $1.2 million, or 15%. These increases were partially offset by a lower
contribution from Monte Carlo (a 50%-owned joint venture) which fell $1.9
million, or 24%.
As mentioned above, Luxor benefitted from a new national advertising
campaign which began in February and an increase in the amount of high-budget
play in the casino. The increase at Circus Circus-Las Vegas was driven by
increased contributions from the hotel department (rooms were being remodeled in
the prior year) and the food and beverage department (due to selective price
increases). The decrease at Monte Carlo was due to a low hold percentage on
table games during the quarter, as well as increased promotional expenses.
For the six months ended July 31, 1998, the positive results for the second
quarter were more than offset by general softness in market conditions in Las
Vegas throughout the first three months of the year, particularly during
mid-week periods. Luxor was also negatively impacted by the additional costs of
the national advertising campaign and other casino promotional expenses. The
individual property results for the six months are as follows: Luxor down $2.5
million, or 9%, Excalibur down $5.2 million, or 14%, Circus Circus-Las Vegas
down $2.5 million, or 14%, and Monte Carlo down $2.3 million, or 13%.
15
<PAGE>
RENO
In Reno, the Company's combined operating income declined $1.0 million, or
9%, in the second quarter and $2.8 million, or 15%, in the six months versus the
same periods last year. Strong results at Circus Circus-Reno in the second
quarter (operating income up 18%) were offset by a decrease in results at Silver
Legacy (50%-owned by the Company). Circus Circus-Reno benefitted from a
comparison to the prior year in which the casino was undergoing remodeling. The
increased results at Circus Circus-Reno contributed to the decrease in results
at Silver Legacy, as guests staying at Circus spent more of their time in the
new casino rather than visiting the neighboring Silver Legacy. For the six
months, both these properties were negatively impacted by adverse weather
conditions in February, which made travel in and out of the area difficult.
LAUGHLIN
The Company's two properties in Laughlin, the Colorado Belle and the
Edgewater, posted a combined increase in operating income of $1.3 million, or
35%, in the second quarter and a combined decrease of $.3 million, or 2%, for
the six months ended July 31, 1998 versus the previous year. While the region
continues to suffer from difficult competitive challenges, foremost of which are
the unregulated Native American casinos in Laughlin's prime central Arizona and
southern California feeder markets, these two properties posted their first
quarterly increase in operating income in several years. The increases stemmed
from a combination of casino marketing efforts and cost controls.
RIVERBOAT MARKETS
In Tunica County, Mississippi, operating income at the Gold Strike rose more
than four-fold to $4.1 million in the quarter, while for the six months
operating income rose 160% to $5.5 million. The increases are the result of the
addition of a 1,100-room hotel tower that was completed during the first quarter
of this year.
Results at Grand Victoria (a 50%-owned riverboat casino in Elgin, Illinois)
reflected a $2.6 million decrease in the Company's share of operating income for
the second quarter and a $5.8 million decrease for the six months. An increase
in the maximum tax rate on casino revenues in Illinois from 20% to 35% was
responsible for the decreased contribution from Grand Victoria.
INTEREST EXPENSE
For the three and six months ended July 31, 1998, interest expense
(excluding joint venture interest expense) increased $2.2 million and $4.4
million versus the prior year. The increase was due principally to higher
average borrowings related to the construction of the new hotel tower at Gold
Strike-Tunica and the ongoing construction of Mandalay Bay. Average borrowings
were approximately $2.0 billion and $1.9 billion for the current quarter and six
months, compared against $1.5 billion and $1.4 billion for the same periods last
year. Capitalized interest was $9.9 million and $17.0 million for the quarter
and six months ended July 31, 1998 versus $4.9 million and $8.5 million in the
year-ago periods. Long-term debt at July 31, 1998 stood at $2.0 billion compared
to $1.6 billion at July 31, 1997.
The Company also recorded interest expense related to joint venture projects
of $3.2 million and $6.3 million in the quarter and six months ended July 31,
1998 compared to $4.0 million and $8.3 million in the previous year. This
reflects the Company's 50% share of the interest expense of Silver Legacy and
Monte Carlo, with the decrease in expense attributable to lower debt outstanding
at Monte Carlo.
INCOME TAX
For the three and six months ended July 31, 1998, the Company's effective
tax rate was approximately 37% and 38%, compared with 37% for both periods in
the prior year. These rates reflect the corporate
16
<PAGE>
statutory rate of 35% plus the effect of various nondeductible expenses,
including the amortization of goodwill associated with the acquisition of Gold
Strike Resorts.
FINANCIAL POSITION AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $79.0 million at July 31, 1998,
reflecting normal daily operating requirements. The Company's pretax cash flow
from operations was $102.8 million and $199.8 million for the three and six
months ended July 31, 1998 versus $94.3 million and $208.2 million for the same
periods last year. In this context, pretax cash flow from operations is defined
as the Company's income from operations plus noncash operating expenses
(primarily depreciation and amortization). The Company used its cash flow
primarily to fund the construction of Mandalay Bay, the completion of a new
hotel tower at Gold Strike-Tunica and miscellaneous other construction projects.
CAPITAL SPENDING
Capital expenditures for the quarter and six months ended July 31, 1998 were
$165.6 million and $350.0 million. Of these amounts, $133.6 million and $278.6
million related to the construction of Mandalay Bay, $13.4 million and $20.2
million related to the construction of other core components of Masterplan Mile
(primarily the convention center, arena, monorail and aquarium exhibit--see "New
Projects") and $4.6 million and $18.8 million related to the completion of
construction and remodeling at Gold Strike-Tunica.
CREDIT FACILITY
In May 1997, the Company amended its unsecured credit facility with its bank
group, increasing the size of the facility from $1.5 billion to $2.0 billion at
more favorable terms and pricing (see Note 2 of Notes to Condensed Consolidated
Financial Statements). The Company also has a $1.0 billion commercial paper
program which is backed by the credit facility. In order to provide increased
borrowing capacity during the construction of Mandalay Bay, the credit facility
was further amended in May 1998 to provide a more liberal leverage test on total
debt during such period and a new leverage test on senior debt. As of July 31,
1998, the Company had aggregate borrowings of $1.2 billion outstanding under the
credit facility and commercial paper program and under the Company's most
restrictive loan covenants, it could issue additional debt of approximately $181
million.
In August 1998, the Company filed a shelf registration statement registering
$550 million of securities that may be issued from time to time in the form of
additional debt securities of the Company and/or preferred securities of
Delaware business trusts formed for the purpose of issuing their trust
securities and investing the proceeds in debt securities of the Company.
JOINT VENTURES
In July 1995, Silver Legacy, a 50/50 joint venture with the Eldorado
Hotel/Casino, opened in downtown Reno, Nevada. As a condition of the joint
ventures's $230 million bank credit agreement, the Company is obligated under a
make-well agreement to make additional contributions to the joint venture as may
be necessary to maintain a minimum coverage ratio (as defined).
NEW PROJECTS
In the Spring of 1997, the Company commenced construction of Mandalay Bay, a
43-story, hotel-casino resort which will have approximately 3,700 rooms and
approximately 135,000 square feet of gaming space. The resort, which is expected
to be completed in the first quarter of 1999, will be situated on approximately
60 acres of land just south of Luxor. Mandalay Bay's attractions are planned to
include an 11-acre tropical lagoon featuring a sand-and-surf beach, a
three-quarter-mile lazy river ride, a 30,000-square-foot spa and other
entertainment attractions. Inside, Mandalay Bay will offer internationally
17
<PAGE>
renowned restaurants, as well as a House of Blues nightclub and restaurant,
including its signature Foundation Room sited on Mandalay Bay's rooftop, and 100
"music-themed" hotel rooms in Mandalay Bay's towers.
Within Mandalay Bay and as part of its 3,700 rooms, a Four Seasons Hotel
with approximately 400 rooms will provide Las Vegas visitors with a luxury
"five-star" hospitality experience. The Four Seasons Hotel, which will be owned
by the Company and managed by Four Seasons, represents the first step pursuant
to the Company's cooperative effort with Four Seasons to identify strategic
opportunities for development of hotel and casino properties worldwide. The cost
of Mandalay Bay, including the Four Seasons Hotel but excluding land and
capitalized interest, is currently estimated at approximately $850 million and
as of July 31, 1998, $516.8 million in costs had been incurred for this project.
During the course of construction, Mandalay Bay's hotel tower has
experienced settling which has exceeded the level contemplated in the building's
original design and the amount of settling has been greater in some portions of
the structure than others. The Company has retained geotechnical, structural
engineering and foundation consultants who have recommended remedial measures
which are scheduled to be completed in October. Completion of the recommended
remedial measures is not expected to delay the opening of Mandalay Bay or
materially increase the cost of the project. However, until such remedial
measures are completed and evaluated and the ongoing evaluation of the site is
concluded, there can be no assurances that further corrective measures will not
be required or, if additional measures are required, as to the cost of such
measures or their impact, if any, on the scheduled completion and opening of
Mandalay Bay.
Mandalay Bay is the latest phase of the Company's development of over 230
acres of land it owns at the south end of the Las Vegas Strip which runs from
Tropicana Avenue south approximately one mile to Russell Road ("Masterplan
Mile"). As part of its development plan for Masterplan Mile, the Company is
constructing a 125,000-square-foot convention facility and a 12,000-seat arena.
These facilities are expected to be completed and opened concurrently with
Mandalay Bay, and will represent core components of Masterplan Mile which will
be cross-marketed to guests at the Company's existing and future hotel-casinos
within Masterplan Mile. The estimated cost of the convention facility and arena,
excluding land and capitalized interest, is approximately $100 million and as of
July 31, 1998, $16.5 million in costs had been incurred for these facilities.
The Company also plans to construct a monorail system which will link the
Company's resorts on Masterplan Mile. Furthermore, the Company is planning a
"Sea of Predators" aquarium exhibit which will likewise represent a core
component of Masterplan Mile. Both the monorail and the Sea of Predators exhibit
are anticipated to be completed after the opening of Mandalay Bay. The cost of
these additional Masterplan Mile core components, excluding land and capitalized
interest, is estimated at approximately $75 million, of which $5.1 million had
been incurred as of July 31, 1998. The Company may add other core components to
its development plan for Masterplan Mile in the future.
The Company has formed a joint venture with the Detroit-based Atwater Casino
Group, comprised of numerous Detroit-area business, education, civic and
community leaders. The Company will own a 45% equity interest in the proposed
project and receive a management fee. On November 21, 1997, the joint venture
was selected to be one of three groups permitted to negotiate a development
agreement with the City, and its development agreement was approved by the City
Council on April 9, 1998. The joint venture's ability to proceed with the
proposed project is contingent upon the receipt of all necessary gaming
approvals and satisfaction of other conditions. The joint venture is currently
planning a $600 million project, of which the Company would be required to
contribute 20% of such amount in the form of equity, with the balance expected
to be provided through project-specific financing. If the Company proceeds with
the project, the development agreement provides that the Company will guarantee
completion of the project and will be required to give a keep-well guarantee,
pursuant to which the Company would contribute additional funds, if and as
needed, to continue operations of the project for a period of
18
<PAGE>
two years. If permitted by city and state authorities, the Company would
consider construction of a temporary facility.
The Company has announced that it plans to develop a hotel/casino resort on
the Mississippi Gulf Coast at the north end of the Bay of St. Louis, near the
DeLisle exit on Interstate 10. It is currently anticipated that the resort will
include approximately 1,500 rooms and will involve an investment of
approximately $225 million. The Company has received all necessary approvals to
commence development. However, these approvals have been challenged in state and
federal court, and the Company anticipates that the design and construction of
this project will begin only after satisfactory resolution of all legal actions.
As presently contemplated, Circus will own 90% of the resort, with a partner
contributing land (up to 500 acres) in exchange for the remaining 10% interest.
The Company has entered into an agreement with Mirage Resorts to participate
in the development of a site located in the Marina District of Atlantic City,
New Jersey. As reported by Mirage, the site consists of 181 acres, of which
about 125 acres are developable. The site is the subject of an agreement between
Mirage and Atlantic City which provides (as reported by Mirage) that the city
will convey the site to Mirage in exchange for Mirage's agreeing to develop a
hotel/casino thereon and to undertake certain other obligations.
On January 8, 1998, the City of Atlantic City transferred title to the land
to a subsidiary of Mirage. Shortly thereafter, Mirage purported to cancel its
agreement with the Company, and filed suit to have the agreement declared
invalid. The Company has filed its own suit against Mirage seeking, among other
things, to enforce the agreement. While the Company and Mirage have had
discussions regarding this dispute, there can be no assurances as to when or
whether a settlement can be reached and, in the absence of a settlement, no
assurances can be given as to the outcome of the litigation. In any event,
various governmental permits required for the development of the site have not
yet been received.
Additionally, as reported by Mirage, an existing Atlantic City hotel/casino
operator and others have filed various lawsuits which seek to prevent Mirage's
acquisition of the site and construction of road improvements to the site. These
lawsuits have the potential to delay or prevent the Company's acquisition of a
portion of the site from Mirage and development of a hotel/casino. Moreover, in
order to proceed, the Company must obtain the requisite gaming and other
approvals (including various governmental permits required for the development
of the site) and licenses in New Jersey and various other jurisdictions. While
the Company and a wholly owned subsidiary have initiated the gaming application
process in New Jersey, based upon the contingencies and impediments to this
project, there can be no assurances as to whether or when the Company will
proceed with the development of a hotel/casino on the Atlantic City site or the
magnitude of the Company's investment in any such project.
OTHER MATTERS
The Company believes that, through a combination of its credit facility,
operating cash flows and ability to raise additional funds through debt or
equity markets, it has sufficient capital resources to meet all of its existing
cash obligations and fund its commitments on the projects underway.
YEAR 2000
BACKGROUND
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, date-sensitive
computer software may recognize a date using "00" as the year 1900 rather than
the year 2000. This is generally referred to as the Year 2000 issue. If this
situation occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.
19
<PAGE>
RISK FACTORS
The Company utilizes computer systems in virtually all aspects of its
business. In particular, Year 2000 problems in the hotel or casino systems at
the Company's wholly owned properties or at any of its joint venture properties
could disrupt operations at the affected properties and have a material adverse
impact upon the Company's operating results. The Company is also exposed to the
risk that one or more of its suppliers or its joint ventures' suppliers could
experience Year 2000 problems that impact the ability of such suppliers to
provide goods and services. Though this is not considered as significant a risk
with respect to the suppliers of goods, due to the availability of alternative
suppliers, the disruption of certain services, such as utilities, could,
depending upon the extent of the disruption, have a material adverse impact on
the Company's operations.
APPROACH
The Company has established a task force to coordinate the Company's
response to the Year 2000. This task force, which reports to the Audit Committee
of the Board of Directors, includes the Company's Chief Accounting Officer, the
Chief Internal Auditor, the Director of Information Services, as well as support
staff. The Company also engaged an outside consultant which assisted it in
establishing an approach to dealing with the Year 2000 issue, and the Company is
in the process of implementing a Year 2000 compliance program at the Company's
wholly owned properties and at its joint venture properties. The program
consists of the following phases:
PHASE 1 Compilation of an inventory of information technology (IT) and
non-IT systems that may be sensitive to the Year 2000 problem.
PHASE 2 Identification and prioritization of the CRITICAL systems from
the systems inventory compiled in Phase 1 and inquiries of third
parties with whom the Company does significant business (i.e.,
vendors and suppliers) as to the state of their Year 2000
readiness.
PHASE 3 Analysis of critical systems to determine which systems are not
Year 2000 compliant and evaluation of the costs to repair or
replace those systems.
PHASE 4 Repair or replace noncompliant systems and testing of those
systems for which representation as to Year 2000 compliance has
not been received or for which representation was received but
has not been confirmed.
STATUS
Phases 1 and 2 are substantially complete but for the process of making
inquiries of significant third parties as to their Year 2000 readiness, which is
currently ongoing. Phases 3 and 4 are ongoing and will continue through the
first half of calendar 1999. It is the Company's goal to have this project
completed by mid-1999. Based upon the analysis conducted to date, the Company
believes all of the major critical systems at the Company's wholly owned
properties and at its joint venture properties are currently compliant or will
be compliant by mid-1999. The only significant aspect of Year 2000 compliance of
the Company and its joint ventures which has been identified to date is the need
to replace older personal computers whose systems are not Year 2000 compatible.
COSTS
The total cost to the Company of making its systems and those of its joint
venture properties Year 2000 compliant is currently estimated to be in the range
of $5 to $10 million. The majority of this cost relates to the acquisition of
new computer hardware to replace the personal computers noted above and the
purchase of new software to replace noncompliant software. These costs will be
capitalized and depreciated over their expected useful life. To the extent
existing hardware or software is replaced, the
20
<PAGE>
Company will recognize a loss currently for the undepreciated balance. This loss
is included in the above cost estimate. Furthermore, all costs related to
software modification, as well as all costs associated with the Company's
administration of its Year 2000 project, are being expensed as incurred and are
likewise included in the cost estimate above.
FORWARD-LOOKING STATEMENTS
Certain information included in this report and other materials filed or to
be filed by the Company with the Securities and Exchange Commission (as well as
information included in oral statements or written statements made or to be made
by the Company) contains statements that are forward-looking within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include information
relating to current expansion projects, plans for future expansion projects and
other business development activities as well as other capital spending,
financing sources, Year 2000 compliance and the effects of regulation (including
gaming and tax regulation) and competition. Such forward-looking information
involves important risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results may differ from
those expressed in any forward-looking statements made by or on behalf of the
Company. These risks and uncertainties include, but are not limited to, those
relating to development and construction activities, dependence on existing
management, leverage and debt service (including sensitivity to fluctuations in
interest rates), domestic or global economic conditions, changes in federal or
state tax laws or the administration of such laws, changes in gaming laws or
regulations (including the legalization of gaming in certain jurisdictions) and
applications for licenses and approvals under applicable laws and regulations
(including gaming laws and regulations).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As of July 31, 1998 there were no material changes to the information
incorporated by reference in Item 7A of the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1998.
21
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1998 Annual Meeting of the Company's stockholders was held on June 18,
1998. At the meeting, management's nominees, William E. Bannen, M.D. and Arthur
H. Bilger, were elected to fill the two available positions as Class I
directors. Voting (expressed in number of shares) was as follows: Mr.
Bannen--83,761,726 for, 1,890,361 against or withheld and no abstentions or
broker non-votes; and Mr. Bilger--83,763,365 for, 1,888,722 against or withheld
and no 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, 1999, by vote of 84,838,224
shares for, 534,922 shares against or withheld and 278,941 abstentions or broker
non-votes.
At the meeting, a stockholder proposal to sell the Company to the highest
bidder was defeated. The vote on the proposal was as follows: 4,924,456 shares
for, 63,653,526 shares against or withheld and 17,074,105 abstentions or broker
non-votes.
ITEM 5. OTHER INFORMATION.
On May 21, 1998, the Securities and Exchange Commission adopted an amendment
to Rule 14a-4 under the Securities Exchange Act of 1934, as amended (the
"Amended Rule"), which governs a company's right to exercise discretionary proxy
voting authority with respect to certain stockholder proposals presented at a
stockholders' meeting. The Amended Rule provides that a company may exercise
such authority if it has not received notice of the proposal by an advance
notice date (the "Advance Notice Date") which is generally (1) the date that is
45 days before the month and day corresponding to the date on which the company
first mailed its proxy materials for the prior year's annual meeting of
stockholders or (ii) such date as may be established pursuant to an overriding
advance notice provision, if any, in the company's bylaws or charter. In the
case of the Company's 1999 Annual Meeting of Stockholders, the Advance Notice
Date is March 22, 1999. If certain other requirements of the Amended Rule are
satisfied, the Company may exercise discretionary voting authority with respect
a proposal notwithstanding its receipt of notice of such proposal prior to the
applicable Advance Notice Date.
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 filed one report on Form 8-K dated August 3, 1998. This Form 8-K
reported information under Item 5.
22
<PAGE>
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 11, 1998 By: /s/ GLENN SCHAEFFER
-----------------------------------------
Glenn Schaeffer
PRESIDENT, CHIEF FINANCIAL OFFICER AND
TREASURER
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
4(a). Instrument of Joinder, dated May 31, 1998, by Mandalay Corp., pursuant to the Subsidiary
Guaranty dated as of May 23, 1997, with respect to the Amended and Restated $2.0 Billion Loan
Agreement, in favor of Bank of America National Trust and Savings Association, as
administrative agent for the Banks.
10(a). Amended and Restated Development Agreement, dated as of April 9, 1998, by and among Detroit
Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the
City of Detroit for the City of Detroit Casino Development Project.
10(b). First Amendment to the Amended and Restated Development Agreement, dated as of April 9, 1998, by
and among Detroit Entertainments, L.L.C., the City of Detroit and the Economic Development
Corporation of the City of Detroit for the City of Detroit Casino Development Project.
27. Financial Data Schedule for the six months ended July 31, 1998 as required under EDGAR.
</TABLE>
<PAGE>
EXHIBIT 4(a)
INSTRUMENT OF JOINDER
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of May 23,
1998, by Mandalay Corp., a Nevada Corporation ("Joining Party"), and
delivered to Bank of America National Trust and Savings Association, as
Administrative Agent, pursuant to the Subsidiary Guaranty dated as of May 23,
1997 made by Circus Circus Casinos, Inc., Slots-A-Fun, Inc., Edgewater Hotel
Corporation, Colorado Belle Corp., New Castle Corp., Ramparts, Inc., Circus
Circus Mississippi, Inc., Pinkless, Inc., New Way, Inc., Circus Circus
Development Corp., Galleon, Inc., M.S.E. Investments, Incorporated, Last
Chance Investments, Incorporated, Goldstrike Investments, Incorporated,
Diamond Gold, Inc., Oasis Development Company, Inc., Goldstrike Finance
Company, Inc., Railroad Pass Investment Group, Jean Development Company, Jean
Development West, Nevada Landing Partnership, Gold Strike L.V., Jean
Development North, Lakeview Gaming Partnerships Joint Venture, (each a
"Guarantor" collectively "Guarantors") in favor of the Administrative Agent
and the Banks (the "Guaranty"). Terms used but not defined in this Joinder
shall have the meanings defined for those terms in the Guaranty.
RECITALS
(a) The Guaranty was made by the Guarantors in favor of the
Administrative Agent for the benefit of the Banks that are parties to that
certain Amended and Restated Loan Agreement dated as of May 23, 1997, by and
among Circus Circus Enterprises, Inc., a Nevada corporation, ("Borrower"),
the Banks, Managing Agents and Co-Agents referred to therein, and Bank of
America National Trust and Savings Association, as the Administrative Agent
for the Banks.
(b) Joining Party has become a Significant Subsidiary of
Borrower, and as such is required pursuant to Section 5.10 of the Loan
Agreement to become a Guarantor.
(c) Joining Party expects to realize direct and indirect benefits
as a result of the availability to Borrower of the credit facilities under
the Loan Agreement.
1
<PAGE>
NOW THEREFORE, Joining Party agrees as follows:
AGREEMENT
(1) By this Joinder, Joining Party becomes a "Guarantor" under
and pursuant to Section 18 of the Guaranty. Joining Party agrees that, upon
its execution hereof, it will become a Guarantor under the Guaranty with
respect to all Guaranteed Obligations of Borrower as defined in the Guaranty
heretofore and hereafter incurred under the Loan Documents, and will be bound
by all terms, conditions, and duties applicable to a Guarantor under the
Guaranty.
(2) The effective date of this Joinder is May 31, 1998.
"Joining Party"
MANDALAY CORP., a Nevada corporation
By: Glenn Schaeffer
-------------------------------
Title: President
-------------------------------
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By: Janice Hammond
------------------------
Title: Vice President
------------------------
2
<PAGE>
Exhibit 10(a)
AMENDED AND RESTATED
DEVELOPMENT AGREEMENT
AMONG
CITY OF DETROIT
AND
THE ECONOMIC DEVELOPMENT CORPORATION OF THE CITY OF DETROIT
AND
DETROIT ENTERTAINMENT, L.L.C.
FOR THE CITY OF DETROIT CASINO DEVELOPMENT PROJECT
As of April 9, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation.. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.3 Michigan Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE II
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2 Findings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.3 Intent.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.4 Commencement of Rights and Obligations.. . . . . . . . . . . . . . . 23
2.5 Conveyance of Project Premises to Developer. . . . . . . . . . . . . 25
2.6 Compliance with Other Commitments. . . . . . . . . . . . . . . . . . 25
2.7 Obtaining Certificate of Suitability and Casino License. . . . . . . 29
2.8 Payment of Development Process Costs . . . . . . . . . . . . . . . . 29
2.9 Payment of Feehold Compensation. . . . . . . . . . . . . . . . . . . 30
2.10 Initial Financing. . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.11 Failure to Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.12 Condition of Project Premises. . . . . . . . . . . . . . . . . . . . 30
2.13 Developer's Development Obligations. . . . . . . . . . . . . . . . . 30
2.14 Other Commitments of Developer . . . . . . . . . . . . . . . . . . . 31
2.15 Other Commitments of City and EDC. . . . . . . . . . . . . . . . . . 31
2.16 Approval by City, EDC and PM . . . . . . . . . . . . . . . . . . . . 31
2.17 Prompt Responses.. . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.18 Funding of Excess Costs. . . . . . . . . . . . . . . . . . . . . . 31
2.19 Administration of this Agreement . . . . . . . . . . . . . . . . . . 32
ARTICLE III
FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.1 Initial Financing. . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.2 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 35
3.3 Subsequent Financings. . . . . . . . . . . . . . . . . . . . . . . . 35
3.4 Transfer by Mortgagee. . . . . . . . . . . . . . . . . . . . . . . . 35
3.5 Sinking Fund Provision . . . . . . . . . . . . . . . . . . . . . . . 35
3.6 Financing Representations; Restrictions. . . . . . . . . . . . . . . 36
3.7 Guarantee of Developer's Obligations . . . . . . . . . . . . . . . . 36
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV
DESIGN; PROJECT SCHEDULING; INFRASTRUCTURE; QUALITY . . . . . . . . . . . . . . . 37
4.1 Schematic, Design and Construction Documents.. . . . . . . . . . . . 37
4.2 Architect(s) and Consultants.. . . . . . . . . . . . . . . . . . . . 38
4.3 City or EDC Not Responsible for Design Documents.. . . . . . . . . . 38
4.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.5 Non-Material Deviations. . . . . . . . . . . . . . . . . . . . . . . 39
4.6 Material Deviations. . . . . . . . . . . . . . . . . . . . . . . . . 39
4.7 Presentation Illustrations; Virtual Reality. . . . . . . . . . . . . 39
4.8 Integrated Complex.. . . . . . . . . . . . . . . . . . . . . . . . . 39
4.9 Developer's Representative and Program Manager.. . . . . . . . . . . 39
4.10 Utility Relocation.. . . . . . . . . . . . . . . . . . . . . . . . . 40
4.11 Infrastructure Improvements. . . . . . . . . . . . . . . . . . . . . 40
4.12 Quality of Work and Materials. . . . . . . . . . . . . . . . . . . . 41
ARTICLE V
SITE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.1 Developer's Right of Entry Prior to Conveyance . . . . . . . . . . . 41
ARTICLE VI
CONSTRUCTION PHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2 Performance of the Work. . . . . . . . . . . . . . . . . . . . . . . 42
6.3 Commencement and Completion of the Work. . . . . . . . . . . . . . . 43
6.4 Contractor; Subcontractors . . . . . . . . . . . . . . . . . . . . . 43
6.5 Claims and Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.6 Construction Matters . . . . . . . . . . . . . . . . . . . . . . . . 44
6.7 Failure to Complete by Agreed Upon Opening Date. . . . . . . . . . . 44
ARTICLE VII
OTHER COVENANTS OF DEVELOPER. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.1 Casino Complex Operation . . . . . . . . . . . . . . . . . . . . . . 45
7.2 Hours of Operation . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.3 Radius Restriction . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.4 Casino Component Management Agreements . . . . . . . . . . . . . . . 47
7.5 Inaugural Ceremonies . . . . . . . . . . . . . . . . . . . . . . . . 48
7.6 Marketing Cooperation and Coordination . . . . . . . . . . . . . . . 48
7.7 Capital Maintenance Fund . . . . . . . . . . . . . . . . . . . . . . 48
7.8 Maintenance and Repairs. . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
7.9 Memorandum of Agreement; Covenants to Run with the Land. . . . . . . 50
7.10 Financial Statements; Annual Business Plan.. . . . . . . . . . . . . 50
7.11 Alterations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.12 Space Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.13 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.14 Notification of Certain Events . . . . . . . . . . . . . . . . . . . 52
7.15 Veracity of Statements . . . . . . . . . . . . . . . . . . . . . . . 52
7.16 Certification of Performance Threshold; Financial Covenants. . . . . 53
7.17 Use of Project Premises. . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF DEVELOPER . . . . . . . . . . . . . . . . . . . 53
8.1 Representations and Warranties of Developer. . . . . . . . . . . . . 53
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CITY AND EDC . . . . . . . . . . . . 59
9.1 Representations and Warranties of City . . . . . . . . . . . . . . . 59
9.2 Representations and Warranties of EDC. . . . . . . . . . . . . . . . 59
9.3 Final Site Selection . . . . . . . . . . . . . . . . . . . . . . . . 60
9.4 Delivery of Other Development Agreements . . . . . . . . . . . . . . 60
ARTICLE X
EVENTS OF DEFAULT, REMEDIES AND TERMINATION . . . . . . . . . . . . . . . . . . . 60
10.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.2 Remedies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.3 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.4 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.5 Limitation on Remedies . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XI
CITY'S RIGHT TO PERFORM DEVELOPER'S COVENANTS . . . . . . . . . . . . . . . . . . 67
ARTICLE XII
FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.1 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.2 Extension of Time; Excuse of Performance . . . . . . . . . . . . . . 68
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
ARTICLE XIII
INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.1 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.2 Form of Insurance and Insurers . . . . . . . . . . . . . . . . . . . 69
13.3 Other Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.4 Insurance Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.5 Keep in Good Standing. . . . . . . . . . . . . . . . . . . . . . . . 69
13.6 Blanket Policies . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE XIV
TRANSFER AND ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
14.1 Transfer of Ownership. . . . . . . . . . . . . . . . . . . . . . . . 70
14.2 Transfer of Agreement; Development.. . . . . . . . . . . . . . . . . 71
ARTICLE XV
ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
15.1 Environmental Covenants. . . . . . . . . . . . . . . . . . . . . . . 72
15.2 Environmental Response . . . . . . . . . . . . . . . . . . . . . . . 72
15.3 Environmental Indemnity. . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE XVI
DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS; CONDEMNATION. . . . . . . . . . . . . . 73
16.1 Damage or Destruction. . . . . . . . . . . . . . . . . . . . . . . . 73
16.2 Use of Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . 73
16.3 No Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
16.4 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE XVII
FINANCIAL AND ACCOUNTING RECORDS; AUDIT RIGHTS. . . . . . . . . . . . . . . . . . 77
17.1 Financial and Accounting Records . . . . . . . . . . . . . . . . . . 77
17.2 Review and Audit . . . . . . . . . . . . . . . . . . . . . . . . . . 77
17.3 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE XVIII
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
18.1 Indemnification by Developer . . . . . . . . . . . . . . . . . . . . 78
ARTICLE XIX
ENTRY UPON PREMISES; INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . 79
19.1 Access and Inspection. . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE XX
TEMPORARY CASINO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
20.1 Developer's Temporary Casino Obligations . . . . . . . . . . . . . . 80
20.2 Temporary Casino Site. . . . . . . . . . . . . . . . . . . . . . . . 80
20.3 Temporary Casino Financing . . . . . . . . . . . . . . . . . . . . . 81
20.4 Temporary Casino Design Documents. . . . . . . . . . . . . . . . . . 81
20.5 Approval Procedures. . . . . . . . . . . . . . . . . . . . . . . . . 81
20.6 Construction of Temporary Casino . . . . . . . . . . . . . . . . . . 82
20.7 Temporary Casino Operations. . . . . . . . . . . . . . . . . . . . . 83
20.8 Restriction on Payments. . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE XXI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
21.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
21.2 Non-Action or Failure to Observe Provisions of this Agreement. . . . 85
21.3 Applicable Law and Construction. . . . . . . . . . . . . . . . . . . 85
21.4 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . 85
21.5 Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 86
21.6 Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
21.7 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
21.8 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
21.9 No Joint Venture.. . . . . . . . . . . . . . . . . . . . . . . . . . 86
21.10 Governmental Authorities . . . . . . . . . . . . . . . . . . . . . . 86
21.11 Technical Amendments . . . . . . . . . . . . . . . . . . . . . . . . 86
21.12 Unlawful Provisions Deemed Stricken. . . . . . . . . . . . . . . . . 87
21.13 No Liability for Approvals and Inspections . . . . . . . . . . . . . 87
21.14 Time of the Essence. . . . . . . . . . . . . . . . . . . . . . . . . 87
21.15 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
21.16 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
21.17 Sunset Provision.. . . . . . . . . . . . . . . . . . . . . . . . . . 90
21.18 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
21.19 Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . 91
21.20 Number and Gender. . . . . . . . . . . . . . . . . . . . . . . . . . 91
21.21 Third Party Beneficiary. . . . . . . . . . . . . . . . . . . . . . . 91
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
21.22 Cost of Investigation. . . . . . . . . . . . . . . . . . . . . . . . 91
21.23 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 91
21.24 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 91
21.26 Most Favored Nations Provision.. . . . . . . . . . . . . . . . . . . 91
21.27 Developer's Right to Terminate. . . . . . . . . . . . . . . . . . . 92
21.28 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
</TABLE>
vi
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
1.1(a)(19) Description of Casino Area and Public Land
1.1(a)(30) Form of Closing Certificates
1.1(a)(42) Form of Conveyance Agreement
1.1(a)(83) Form of Guaranty and Keep Well Agreement
1.1(a)(113) Form of Performance Guaranty
7.7(a) Description of Funding of Capital Maintenance Fund
8.1(c) Description of Developer's organizational structure, etc.
8.1(d) Description of Developer's capabilities, etc.
8.1(e) Cost Budgets for Casino Complex
8.1(f) Financial Projections for Casino Complex
8.1(g) Description of Developer's financing, etc.
8.1(h) Financial Statements for Developer's existing gaming operations
8.1(i) Description of Casino Complex, etc.
8.1(j) Developer's community contributions, etc. in the area of Development
8.1(k) Developer's plan for assisting businesses that may experience employee
shortages due to the Development
8.1(l) Description of the manner in which Development will enhance City as a
desirable destination for tourists
8.1(m) Developer's community contributions, etc. outside the area of the Development
8.1(n) Developer's marketing plan, etc.
8.1(o) Description of staff positions, etc.
8.1(p) Developer's training programs
8.1(q) Developer's Equal Opportunity Employment Plan
8.1(r) Compliance with prevailing wage determinations
8.1(s) Commitment re: Detroit resident apprentices and journeymen
8.1(t) Commitment re: Executive Order 22
8.1(u) Commitment re: local purchasing
8.1(v) Description of Developer's traffic and transportation plan
8.1(w) Description of Developer's plan for transportation management
8.1(x) Description of Developer's plan re: regional water facilities
8.1(y) Description of Developer's plan re: regional sewer facilities
8.1(z) Developer's commitment re: PLD
8.1(aa) Description of Developer's plan to improve fire protection services
8.1(bb) Description of Developer's plan to improve police protection services
8.1(cc) Description of Developer's plan re: child care services
8.1(dd) Description of Developer's plan re: compulsive behavior disorder treatment services
8.1(ee) Description of Developer's plan re: underage gambling
13.1 Insurance Schedule
21.25 Form of estoppel certificate
</TABLE>
vii
<PAGE>
CROSS REFERENCE TABLE FOR
ARTICLE VIII EXHIBITS
For informational purposes only, the covenants corresponding to the
Exhibits referred to in ARTICLE VIII of the Agreement may be found in the
following Sections. The inclusion of this cross reference table in no way
expands, limits, alters or amends any right, obligation or remedy of the
parties hereto.
<TABLE>
<CAPTION>
SECTION IN WHICH CORRESPONDING
EXHIBIT REFERENCE COVENANT MAY BE FOUND
<S> <C>
8.1(c) 7.13(a) and 7.13(b)
8.1(d) Not Applicable
8.1(e) 2.6(a)
8.1(f) Not Applicable
8.1(g) 2.10 and 2.6(b)
8.1(h) Not Applicable
8.1(i) 4.1(a)
8.1(j) 2.6(c)
8.1(k) 2.6(c)
8.1(l) 2.6(c)
8.1(m) 2.6(c)
8.1(n) 2.6(c) and 7.6
8.1(o) 2.6(d)
8.1(p) 2.6(c)
8.1(q) 2.6(c), 2.6(e), 2.6(f), 2.6(g), 2.6(h) and 2.6(i)
8.1(r) 2.6(c)
8.1(s) 2.6(c)
8.1(t) 2.6(i)
8.1(u) 2.6(c) and 2.6(u)
8.1(v) 2.6(c)
8.1(w) 2.6(c)
8.1(x) 2.6(c) and 4.11
8.1(y) 2.6(c) and 4.11
8.1(z) 2.6(c)
8.1(aa) Not Applicable
8.1(bb) Not Applicable
8.1(cc) 2.6(c)
8.1(dd) 2.6(c)
8.1(ee) 2.6(c)
</TABLE>
viii
<PAGE>
AMENDED AND RESTATED
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT ("Agreement") as originally executed as of
the 12th day of March, 1998 (the "Original Agreement"), is amended and
restated as of the 9th day of April, 1998, by and among the City of Detroit,
a municipal corporation ("City"), The Economic Development Corporation of the
City of Detroit, a Michigan public body corporate ("EDC"), having its
principal place of business at 211 West Fort, Suite 900, Detroit, Michigan
48226 and Detroit Entertainment, L.L.C., a Michigan limited liability company
("Developer") having its principal place of business at 2211 Woodward Avenue,
Fox Center Building, 10th Floor, Detroit, Michigan 48201.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereby amend and restate the Original Agreement
and agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS.
(a) The terms defined in ARTICLE I shall have the following
meanings for purposes of this Agreement when initially capitalized herein:
(1) "Acceptable Guarantor" shall mean either (i) Parent
Company or such other Person provided that on the Closing Date in the case
of the Parent Company and on the date of delivery of the Performance
Guaranty in the case of any other Person, either (x) has a shareholders'
equity, determined in accordance with GAAP, of at least Seven Hundred Fifty
Million Dollars ($750,000,000) or (y)(A) has uncommitted credit available
for immediate draw under its primary credit facility plus (B) unrestricted
cash, which aggregates not less than Two Hundred Seventy-Five Million
Dollars ($275,000,000); and (C) has a primary credit facility which
contains a net worth or similar covenant of which it is not in violation or
(ii) such other Person or Persons as are reasonably acceptable to City;
(2) "Act" means the Michigan Gaming Control and Revenue
Act, being Sections 432.101 ET. SEQ. of the Michigan Compiled Laws, as
amended from time to time, together with all rules and regulations issued
in connection therewith or promulgated thereunder.
(3) "Addenda" means changes to the Design Documents made
prior to the execution of a Contractor Agreement.
<PAGE>
(4) "Adjusted Equity" means an amount equal to the sum of
(i) the Net Worth of Developer as reflected on the most recent audited
financial statements of Developer, provided that prior to Completion, all
assets shall be valued at cost, without allowance for depreciation or
amortization, all development and construction costs and expenses
(including construction loan interest) shall be capitalized, and the value
of goodwill shall be treated as zero, plus (ii) the "Valuation Adjustment"
as hereinafter determined. The Valuation Adjustment shall be determined as
follows:
(A) Until the first redetermination of the Valuation
Adjustment, the Valuation Adjustment shall equal the sum of (i) the
excess, if any, of the fair market value of Developer's tangible
and intangible assets as determined in the manner provided below,
over the value of such assets as determined in calculating Net
Worth as of the date of the Valuation Adjustment, in each case
valuing goodwill at zero, plus (ii) the excess, if any, of the
"going concern value" of Developer as determined in the manner
provided below, over the value of any goodwill as determined in
calculating Net Worth as of the date of the Valuation Adjustment.
(B) The going concern value shall be an amount equal to
four and one-half (4.5) times the Developer's trailing twelve (12)
month's EBITDA (provided that prior to the first anniversary of
Completion, for purposes of the foregoing computation, EBITDA shall
be determined from Completion and annualized).
(C) At any time, Developer may redetermine its Valuation
Adjustment. Once redetermined, the Valuation Adjustment shall
remain in effect until the next redetermination.
(D) In making a determination or redetermination of the
Valuation Adjustment, the fair market value of Developer's tangible
and intangible assets shall be determined by appraisal, and the
value of Developer's value as a going concern shall be determined
by an opinion of valuation. A real estate appraisal shall be
performed by an M.A.I. appraiser. An appraisal of other tangible
property shall be performed by a recognized appraiser of such types
of property. An appraisal of intangible assets shall be performed
by a recognized expert in valuing such property. The opinion of
going concern value shall be rendered by one or more recognized
valuation expert(s) with experience in valuing businesses similar
to Developer's business. All such appraisers and other experts
shall be reasonably acceptable to City and Developer.
(5) "Affiliate" means a Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by, or is
under common Control with, another Person. For purposes of clarification
Affiliates of Developer include, without limitation, Parent Company, Circus
Circus Michigan, Inc., a Michigan corporation, Atwater Casino
2
<PAGE>
Group, L.L.C., a Michigan limited liability company, Atwater Entertainment
Associates, L.L.C., a Michigan limited liability company, and ZRX, L.L.C.,
a Michigan limited liability company.
(6) "Agreed Upon Opening Date" means the last day of the
36th full calendar month following the issuance of the Building Permit,
provided however, the Agreed Upon Opening Date shall be extended by that
period of time by which the Submission Date is earlier than the Outside
Submission Date.
(7) "Allocable Share" means a fraction, the numerator of
which is one and the denominator of which is equal to the number of Land-
Based Casino Developments not yet open to the public for business,
provided that if City is notified in a writing signed by the Developer and
the Other Land-Based Casino Developers that the Allocable Share of
Developer is a specified percentage, then the Allocable Share of Developer
shall equal such specified percentage so long as the sum of the specified
percentages of Developer and the Other Land-Based Casino Developers equals
one hundred percent (100%).
(8) "Alteration" means any demolition, alteration,
reconstruction, addition, modification, renovation or improvement in or to
the Development but shall not include any refurbishment, remodeling or
rehabilitation.
(9) "Annual Business Plan" means collectively (i) a report
for the forthcoming Fiscal Year to be prepared by Developer and/or Casino
Component Manager/Operators consisting of an estimate of revenues, expenses
and payments into the Capital Maintenance Fund and (ii) a general summary
containing nonconfidential information about how the Casino Complex is
anticipated to be marketed and promoted, including the total amounts
budgeted and spent for the marketing program each year.
(10) "Annualized Cash Flow" means, as of the last day of any
fiscal quarter of Developer, EBITDA for the most recent four fiscal
quarters of Developer ended on that date, less (i) capital expenditures
(not otherwise deducted in determining EBITDA) in excess of long term debt
incurred to fund such capital expenditures and (ii) distributions made to
Developer's members in an amount estimated to be sufficient to pay federal,
state, and local income tax payments of such members (or their respective
members) to the extent required or permitted under Developer's operating
agreement.
(11) "Architect" means an architectural firm retained by
Developer to prepare Design Documents and perform other Design Services.
(12) "Architect Agreement" means an agreement between
Developer and an Architect for the performance of Design Services.
3
<PAGE>
(13) "Board" shall mean the Michigan Gaming Control Board,
or its successors.
(14) "Books and Records" means all revenue records and any
other accounting or financial documents or records, general ledgers,
accounts receivable records, accounts payable records, invoices, payroll
records, expense records, or income records, relating to or concerning the
business operations of the Developer and the Development. Books and
Records shall not include any (i) information Developer or Casino Component
Manager/Operator is required by law not to disclose; (ii) customer specific
information; or (iii) any information subject to written confidentiality
undertakings with third parties which: (x) were agreed to by Developer
and/or any Casino Component Manager/Operator in good faith and not for the
purpose of avoiding disclosure under this Agreement and (y) the exclusion
of which information from Books and Records would not cause the available
Books and Records to fail to fairly present the operations or financial
results of the Developer or the Development, taken as a whole.
(15) "Building Permit" means that document issued by the
City Department of Building and Safety Engineering authorizing commencement
of construction of the Casino Complex pursuant to Section 12-11-17.0 of
Ordinance 290-H, Chapter 12, Article 11, Administration and Enforcement
Provisions of the Official Building Code of the City.
(16) "Building Permit Submission" shall have the same meaning
ascribed to it in Section 4.4(b).
(17) "Business Days" or "Work Days" means all weekdays
except Saturday and Sunday and those that are official legal holidays of
the City, the State or the United States government. Unless specifically
stated as "Business Days" or "Work Days," a reference to "days" means
calendar days.
(18) "Casino" means any premises wherein gaming is conducted
and includes all buildings, improvements, equipment and facilities used or
maintained in connection with such gaming.
(19) "Casino Area" means the real estate described on
Exhibit 1.1(a)(19), together with all rights, covenants, rights of way and
appurtenances belonging or in anywise appertaining thereto.
(20) "Casino Complex" means the Casino and all buildings,
hotel structures, recreational or entertainment facilities, meeting rooms
and conference centers, restaurants or other dining facilities, bars and
lounges, retail stores, parking, private bus, limousine and taxi parking
and staging areas, and other amenities that are connected with,
4
<PAGE>
or operated in such an integral manner as to form a part of the same
operation, whether on the same tract of land or otherwise.
(21) "Casino Component Management Agreement" means any
management agreement between Developer and a Casino Component
Manager/Operator pertaining to the management and/or operation of one or
more Covered Components.
(22) "Casino Component Manager/Operator" means the Person(s)
engaged, hired and/or retained by Developer to manage and/or operate one or
more Covered Components under a Casino Component Management Agreement. For
purposes of clarification, Circus Circus Michigan, Inc., by virtue of its
acting as a member of Developer, shall not be deemed a Casino Component
Manager/Operator for the purposes of this Agreement.
(23) "Casino Gaming Operations" means any gaming operations
permitted under the Act and offered or conducted at or on the Development.
(24) "Casino License" means the license issued by the Board
to operate the Casino and engage in Casino Gaming Operations.
(25) "Casino Manager" means the Person engaged, hired or
retained by Developer to manage and/or operate the Casino and the Casino
Gaming Operations. For purposes of clarification, Circus Circus Michigan,
Inc., by virtue of its acting as a member of Developer, shall not be deemed
a Casino Manager for the purposes of this Agreement.
(26) "Certificate of Suitability" means the certificate issued
by the Board.
(27) "City" means the City of Detroit, a Michigan municipal
corporation.
(28) "City Contribution" means an amount equal to the sum of
(i) the cost of acquiring the Public Land not owned by the City prior to
the Execution Date and any improvements thereon at the fair market value
determined by appraisal, subject to SECTION 2.9 plus (ii) the relocation
payments pertaining to the Public Land, up to but not to exceed Fifty
Million Dollars ($50,000,000), payable at the election of the City in
either cash or land in the Casino Area valued in accordance with the
definition of Feehold Compensation.
(29) "City Council" means the Detroit City Council.
(30) "Closing Certificates" means the certificates to be
delivered by Developer in the form as attached hereto as EXHIBIT
1.1(a)(30).
(31) "Closing Date" means the date on which all of the
conditions set forth in SECTION 2.4(a)(1) THROUGH 2.4(a)(14) are satisfied
and/or waived.
5
<PAGE>
(32) "Commencement Date" means the date of commencement of
the Work.
(33) "Completion," "Completed" or "Substantial Completion"
means for the Casino Complex, the completion of the Work, as evidenced by
the issuance of a temporary certificate of occupancy by the appropriate
Governmental Authority for all Components to which a certificate of
occupancy would apply, and that the parking structure and not less than
ninety percent (90%) of the gaming area, ninety percent (90%) of the hotel
rooms, and fifty percent (50%) of the retail floor space and fifty percent
(50%) of the restaurant floor space are open to the public for their
intended use (and/or in the case of the retail and restaurant floor spaces,
are completed as shells and available for leasing).
(34) "Completion Date" means the date on which Completion
occurs.
(35) "Component" means, with respect to the Casino Complex,
any of the following: the hotel; Casino; restaurants; meeting and assembly
space; retail space; entertainment and recreational facilities; parking;
private bus, limousine and taxi parking and staging areas; the other
facilities described on EXHIBIT 8.1(i); and such other facilities that may
be added as Components by amendment to this Agreement.
(36) "Condemnation" means a taking of all or any part of the
Project Premises by eminent domain, condemnation, compulsory acquisition or
similar proceeding by a competent authority for a public or quasi-public
use or purpose, other than in connection with the Resolution of Necessity.
(37) "Construction Documents" means the drawings and
specifications, including Addenda and change orders, to be prepared by the
Architect(s) for the construction of the Casino Complex or the Temporary
Casino, as the context requires, which shall be in sufficient detail for
review by the appropriate Governmental Authority as necessary for the
issuance of a building permit and for review by the EDC as required in this
Agreement.
(38) "Consultants" means the Architect, engineers, planners
and other consultants retained by Developer to perform the Design Services,
but excluding any Contractor or subcontractor.
(39) "Contractor" means one or more firms licensed as a
contractor in the State, City or County as required by applicable law,
bonded to the extent required by applicable law and hired by Developer
pursuant to a Contractor Agreement or by a Contractor pursuant to a
subcontract, to construct all or part of the Development.
6
<PAGE>
(40) "Contractor Agreement" means an agreement between
Developer and a Contractor or an agreement between a Contractor and a
subcontractor for construction of all or part of the Development.
(41) "Control(s)" or "Controlled" means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise, as such terms are used by and
interpreted under federal securities laws, rules and regulations.
(42) "Conveyance Agreement" means the agreement to be
entered into by Developer, City and EDC for the purchase of the Project
Premises by the Developer, in substantially the same form as attached
hereto as EXHIBIT 1.1(a)(42); provided, however, that the parties
acknowledge certain practical issues with SECTION 3.03 thereof and shall
negotiate such changes as may be appropriate for the parties to realize the
benefits thereof.
(43) "County" means Wayne County, Michigan.
(44) "Covered Components" means the Casino, hotel and
parking Components.
(45) "Debt Service" means, as of the last day of any fiscal
quarter of Developer, required payments of all principal and interest on
all Indebtedness for the most recent four fiscal quarters of Developer
ended on that date.
(46) "Debt Service Coverage Ratio" means, as of the last day
of each fiscal quarter of Developer, the ratio of (i) Annualized Cash Flow
as of that date to (ii) Debt Service as of that date.
(47) "Default Rate" means a rate of interest at all times
equal to the greater of (i) the rate of interest announced from time to
time by Comerica Bank, or its successors ("Comerica"), at its City office,
as its prime, reference or corporate base rate of interest, or if Comerica
is no longer in business in the City or no longer publishes a prime,
reference or corporate base rate of interest, then the prime, reference or
corporate base rate of interest announced from time to time by such local
bank having from time to time the largest capital surplus, plus four
percent (4%) per annum or (ii) twelve percent (12%) per annum, provided,
however, the Default Rate shall not exceed the maximum rate allowed by
applicable law.
(48) "Design Development Documents" means the intermediate
level plans, drawings and specifications for the Casino Complex to be
prepared by the Architect(s) and other Consultants that set forth the
requirements for the construction of the Casino Complex in sufficient
detail to establish the size and character of the Casino Complex, including
architectural, structural, mechanical and electrical systems, materials and
other elements.
7
<PAGE>
(49) "Design Documents" means, collectively, as applicable,
the Schematic Design Documents, the Design Development Documents, the
Construction Documents and Temporary Casino Design Documents.
(50) "Design Services" means those services to be provided
by the Architects and other Consultants in connection with the design of
the Casino Complex and the Temporary Casino and the periodic inspections,
reviews, approvals, disapprovals of the Work and any other services
customarily performed by an architect or design consultants.
(51) "Detroit-Based Business" means that term as defined in
Chapter 18 of the 1984 Detroit City Code.
(52) "Detroit Resident Business" means any business which
employs at least fifty-one (51%) percent Detroit residents. An individual
employee will be considered a Detroit resident once the business has
presented proof of such individual's payment of the City of Detroit
Resident Income Tax in the previous taxable year, or proof that the
individual is now subject to payment of Detroit Resident Income Tax.
Additionally, to qualify as a Detroit Resident Business, the firm or
company must have at least four (4) employees.
(53) "Developer" means Detroit Entertainment, L.L.C., a
Michigan limited liability company, having its principal place of business
in the State, and its successors and assigns as may be permitted hereunder.
(54) "Developer's Representative" means the Person employed
or retained by Developer to be its duly designated, official and authorized
representative and to represent Developer in all matters pertaining to this
Agreement.
(55) "Development" means the Project Premises and the
Improvements, and/or, as applicable, the Temporary Casino Site.
(56) "Development Agreement" or "Agreement" means this
Development Agreement including all exhibits hereto, as the same may be
amended, modified, restated or supplemented from time to time.
(57) "Development Process Costs" means, to the extent not
otherwise payable by Developer hereunder, the aggregate amount of any and
all costs and expenses in good faith paid, or incurred by, City and/or EDC
to third parties (which aggregate amount is reduced by the Two Million
Three Hundred Thousand Dollars ($2,300,000) already received by the City in
connection with the RFP/Q process), in connection with the Land-Based
Casino Developments, beginning with the planning and preparation of the
RFP/Q including, without limitation, (i) as and to the extent set forth in
SECTION 6.2(a), the services of the PM, the PM's staff and the cost of a
field office; outside counsel; consulting engineers; relocation
consultants; urban planners; financial advisors; and accountants; and (ii)
any and
8
<PAGE>
all title charges, survey and appraisal costs. Development Process
Costs do not include (x) Infrastructure Improvement costs; (y) Feehold
Compensation; (z) salaries, overhead and other costs related to municipal
or EDC employees performing their normal functions, except as and to the
extent set forth in SECTION 6.2(a)(1).
(58) "Deviation" means any deviation prior to Completion
from the Schematic Design Documents.
(59) "EBITDA" means Developer's (i) earnings before (ii)
pre-opening expenses, interest, taxes, depreciation and amortization each
of which elements shall be determined in accordance with GAAP, consistently
applied.
(60) "EDC" means The Economic Development Corporation of the
City of Detroit, a Michigan public body corporate.
(61) "EDC Plan" means a plan setting forth the information
required by Section 8 of the Economic Development Corporation Act, MCL
125.1601, ET SEQ. including but not limited to information regarding the
location and extent of existing streets, the location, extent, character
and estimated cost of improvements for the project area, an estimate of the
number of persons that will be displaced, a statement of the proposed
method of financing the project, and a description of the portions of the
project area which will be sold, donated or exchanged to or from the City.
(62) "Effective Date" means the date on which all of the
following have been accomplished: the Agreement has been executed by all
parties hereto and the City Council has duly approved and certified the
last of the following: (i) this Agreement; and (ii) the development
agreements of each of the Other Land-Based Casino Developers.
(63) "Environmental Claim" means any demand, cause of
action, administrative, civil or criminal proceeding arising under
Environmental Law and the results thereof for (i) damages (actual or
punitive), losses, injuries to person or property, damages to natural
resources, fines, penalties, expenses, liabilities, interest, contribution
or settlement (including, without limitation, attorneys' fees, court costs
and disbursements), (ii) the costs of site investigations, feasibility
studies, information requests, health or risk assessments, medical
monitoring or Response actions, and (iii) enforcing insurance,
contribution, or indemnification agreements.
(64) "Environmental Law" means all federal, state and local
statutes, ordinances, regulations and rules relating to environmental
quality, health, safety, contamination and clean-up, including, without
limitation, the Clean Air Act, 42 U.S.C. Section 7401 ET SEQ.; the Clean
Water Act, 33 U.S.C. Section 1251 ET SEQ., and the Water Quality Act of
1987; the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7
U.S.C. Section 136 ET SEQ.; the Marine Protection, Research, and
Sanctuaries Act, 33 U.S.C.
9
<PAGE>
Section 1401 ET SEQ.; the National Environmental Policy Act, 42 U.S.C.
Section 4321 ET SEQ.; the Occupational Safety and Health Act, 29 U.S.C.
Section 651 ET SEQ.; the Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. Section 6901 ET SEQ., as amended by the Hazardous and Solid Waste
Amendments of 1984; the Safe Drinking Water Act, 42 U.S.C. Section 300f
ET SEQ.; the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 ET SEQ., as amended by
the Superfund Amendments and Reauthorization Act, the Emergency Planning
and Community Right-to-Know Act, and Radon Gas and Indoor Air Quality
Research Act; the Toxic Substances Control Act ("TSCA"), 15 U.S.C.
Section 2601 ET SEQ.; the Federal Hazardous Materials Transportation Act,
49 U.S.C. Section 1801 ET SEQ.; the Atomic Energy Act, 42 U.S.C. Section
2011 ET SEQ.; the Nuclear Waste Policy Act of 1982, 42 U.S.C. Section 10101
ET SEQ.; and the Michigan Natural Resources and Environmental Protection
Act ("NREPA"), MCL 324.3101-.21551, with implementing regulations and to
the extent legally enforceable, guidelines. Environmental Laws shall also
include all state, regional, county, municipal and other local laws,
regulations, rules and ordinances insofar as they purport to regulate human
health, the environment or Hazardous Materials.
(65) "Equal Opportunity Employment Plan" means a voluntary
plan for the employment of women and Minorities in the Casino Complex and
in the construction of the Casino Complex.
(66) "Event of Default" shall have the meaning ascribed to
it in SECTION 10.1.
(67) "Execution Date" means March 12, 1998.
(68) "Exhibits" means those agreements, diagrams, drawings,
specifications, instruments, forms of instruments, and other documents
attached hereto on the date hereof or added to this Agreement and
designated as exhibits to, and incorporated in and made a part of, this
Agreement.
(69) "Feehold Compensation" means the (i) aggregate amount
of any and all costs, expenses and relocation payments in good faith paid,
or incurred by, City and/or EDC, excluding the cost of any land and any
improvements thereon, to third parties (i.e., "soft costs") in connection
with the acquisition, purchase, ownership, financing and disposition of all
or any part of the Casino Area and the Public Land; and (ii) cost of
acquiring the Casino Area, Public Land and any improvements thereon at
their fair market value determined by appraisal, subject to SECTION 2.9.
Feehold Compensation does not include (x) Development Process Costs, (y)
the cost of any land within the Public Land area owned by the City prior to
the Execution Date, including without limitation Chene Park and St. Aubin
marina; or (z) the cost of any Response with respect to the Public Land.
Vacated streets and sidewalks shall be deemed to be included in the parcels
to which they are appurtenant and no Feehold Compensation shall be payable
with respect thereto.
10
<PAGE>
(70) "Finance Affiliate" means any Affiliate created to
effectuate all or any portion of the Initial Financing.
(71) "Financial Statements" means a balance sheet and
related statements of income and cash flows of Developer.
(72) "Financing" means the act, process or an instance of
obtaining funds for the Development, whether secured or unsecured,
including but not limited to (i) issuing securities; (ii) drawing upon any
existing or new credit facility; or (iii) contributions to capital by any
Person.
(73) "Finish Work" refers to the finishes which create the
internal and external appearance of the Casino Complex and/or the Temporary
Casino, as the case may be.
(74) "First Class Casino Complex Standards" means the
standards of quality established and maintained on the Effective Date at
Monte Carlo Resort and Casino, Las Vegas, Nevada, taken as a whole;
provided however, for the Temporary Casino due allowances shall be made to
take into account the temporary nature of the facility and the fact the
facility was not originally designed to be a casino.
(75) "First Mortgage" means the first priority Mortgage.
(76) "First Mortgagee" means the holder of the First
Mortgage.
(77) "Fiscal Year" means the fiscal year that ends on the
last day of the fiscal year of the Developer. The first Fiscal Year shall
be the period commencing on the Effective Date and ending on the last day
of the fiscal year of the Developer in which the Effective Date occurs.
The term "Full Fiscal Year" means any Fiscal Year containing not fewer than
three hundred sixty-five (365) days. The partial Fiscal Year commencing
after the end of the last Full Fiscal Year and ending with the termination
of this Agreement shall constitute a separate Fiscal Year.
(78) "Force Majeure" means those events described in SECTION
12.1.
(79) "GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board
or in such other statements by such other entity as may be approved by a
significant segment of the accounting profession for use in the United
States, which are applicable to the circumstances as of the date of
determination.
11
<PAGE>
(80) "Gaming Authorities" means all agencies, authorities
and instrumentalities of the City, the State or the United States of
America, or any subdivision thereof, having jurisdiction over the gaming or
related activities at the Casino, including but not limited to the Board,
or their respective successors.
(81) "Governmental Authority" or "Governmental Authorities"
means any federal, state, county or municipal governmental authority,
including all executive, legislative, judicial and administrative
departments and bodies thereof (including, without limitation, any Gaming
Authority) having jurisdiction over the Developer and/or the Development.
(82) "Governmental Requirements" means all laws, ordinances,
statutes, executive orders, rules, zoning requirements and agreements of
any Governmental Authority that are applicable to the acquisition,
remediation, renovation, demolition, development, construction and
operation of the Development including, without limitation, all required
permits, approvals and any rules, guidelines or restrictions enacted or
imposed by Governmental Authorities, but only to the extent that such laws,
ordinances, statutes, executive orders, zoning requirements, agreements,
permits, approvals, rules, guidelines and restrictions are valid and
binding on Developer and Developer would be required to comply with the
same without regard to this Agreement.
(83) "Guaranty and Keep Well Agreement" means that certain
agreement substantially in the same form as attached hereto as EXHIBIT
1.1(a)(83).
(84) "Hazardous Materials" means the following, including
mixtures thereof: any hazardous substance, pollutant, contaminant, waste,
by-product, or constituent regulated under CERCLA; the Michigan Natural
Resources and Environmental Protection Act, MCL 324.101-.21551; oil and
petroleum products, natural gas liquids, liquefied natural gas and
synthetic gas usable for fuel; pesticides regulated under the FIFRA;
asbestos and asbestos-containing materials, polychlorinated biphenyls and
other substances regulated under the TSCA; source material, special nuclear
material, by-product material and any other radioactive materials or
radioactive wastes, however produced, regulated under the Atomic Energy Act
or the Nuclear Waste Policy Act; chemicals subject to the OSHA Hazard
Communication Standard, 29 C.F.R. Section 1910.1200 et seq.; solid wastes
whether or not hazardous within the meaning of RCRA; and any other
hazardous substance, pollutant or contaminant regulated under any other
Environmental Law.
(85) "Improvements" means all buildings, building additions,
structures, roads, roadways, mechanical devices, infrastructure
improvements (including without limitation, all water and sewer mains,
electrical transmission conduits and equipment and other utility facilities
not owned by public utilities or that are the obligation or responsibility
of a quasi-public or private utility), landscaping, facilities and
appurtenances constructed and
12
<PAGE>
situated now or at anytime hereafter upon the Project Premises and the
Temporary Casino Site.
(86) "Indebtedness" means, without duplication (i) all
obligations, debts, or liabilities of Developer for borrowed money which
in accordance with GAAP would be shown on a balance sheet of Developer as a
liability; (ii) all obligations, debts or liabilities for the deferred
purchase price of property or services secured by any lien on any property
owned by Developer whether or not such obligation has been assumed; and
(iii) all rental obligations under leases required to be capitalized under
GAAP.
(87) "Infrastructure Improvements" means those matters set
forth on Schedule B, to be provided by City pursuant to SECTION 2.18,
comprising streets, roads, roadways and other transportation and roadway
improvements, including, without limitation, traffic signalization and
intersection improvements; sidewalks and curbs; water mains or lines; storm
and sanitary sewers and drainage improvements; electrical transmission
conduits and equipment and other utility facilities; the foregoing of which
are located off-site (i.e., outside of, and leading to, the Development)
and which in the City's good faith judgment are necessary to operate the
Development or to mitigate or reduce the impact of the Development on
existing infrastructure improvements. In determining whether the City is
exercising good faith judgment, the City shall consider, among other
relevant matters: (x) the City's overall policies and practices concerning
infrastructure (y) available cost effective alternatives and (z) the best
interests of the City. For the avoidance of doubt: (i) an off-site
improvement shall be considered an Infrastructure Improvement if but for
construction of the Casino Complex such off-site improvement would not have
been required by City as of the Effective Date; (ii) Infrastructure
Improvements do not include maintenance or repair of existing facilities;
and (iii) subject to SECTION 2.18, under no circumstances shall City and/or
EDC be responsible to pay for any Infrastructure Improvements.
(88) "Initial Financing" has the meaning set forth in
SECTION 3.1.
(89) "Interior Leasable Space" means the floor area located
in the Casino Complex available for lease to third parties for retail or
service use.
(90) "Land-Based Casino Developments" means the Development
and the other casino projects being developed in the City by the Other
Land-Based Casino Developers.
(91) "Leverage Ratio" means Indebtedness divided by Adjusted
Equity.
(92) "Loan Default" means an event of default or default or
event or condition which, with respect to Developer or its Finance
Affiliate without further notice or passage of time, would entitle a
mortgagee to exercise the right to foreclose upon, acquire,
13
<PAGE>
possess or obtain the appointment of a receiver or other similar
trustee or officer over all or a part of Developer's interest in the
Development.
(93) "Local Partner(s)" means any Person who directly or
indirectly through an entity or series of entities owns an interest in
Atwater Casino Group, L.L.C.
(94) "Major Condemnation" means a Condemnation either (i)
of the entire Development, or (ii) of a portion of the Development if, as a
result of the Condemnation, it would be imprudent or unreasonable to
continue to operate the Casino Complex even after making all reasonable
repairs and restorations.
(95) "Manage" means to generate, manufacture, process,
treat, store, use, re-use, refine, recycle, reclaim, blend or burn for
energy recovery, incinerate, accumulate speculatively, transport, transfer,
dispose of or abandon Hazardous Materials.
(96) "Mandatory Sale" shall have the meaning ascribed to it
in SECTION 10.2(e).
(97) "Material Alteration" means any Alteration or related
series of Alterations that: (i) materially changes the nature of the use of
the Covered Components and the retail Component, taken as a whole (provided
that in making such determination, up to ten percent (10%) of the retail
Component floor space shall be excluded); (ii) materially diminishes the
exterior quality of the Development taken as a whole, or materially affects
the exterior appearance or materially affects the exterior signage of the
Casino Complex; or (iii) subject to SECTION 7.11, increases or decreases
the gaming floor area of the Casino.
(98) "Material Deviation" is a Deviation that: (i) delays
the Agreed Upon Opening Date in excess of thirty (30) Business Days; (ii)
materially changes the nature of the use of any Component; (iii) materially
diminishes the overall quality or size of a Component (measured, in the
case of size, by a reduction of more than ten percent (10%) in the number
of rooms, number of parking spaces, aggregate square footage (other than
gaming floor area), or other appropriate measure); (iv) reduces the budget
(as then approved) for the Casino Complex by more than five percent (5%) of
Total Cost; or (v) subject to SECTION 4.6, increases or decreases the
gaming floor area of the Casino.
(99) "Mayor" means the duly elected Mayor of the City.
(100) "Memorandum of Agreement" shall mean a memorandum of
this Agreement in recordable form and otherwise satisfactory in form and
substance to City, EDC and Developer in the exercise of reasonable
judgment.
(101) "Minor Condemnation" means a Condemnation that is not
a Major Condemnation.
14
<PAGE>
(102) "Minority" means that term as defined in Section
18-5-31 of Chapter 18 of the 1984 Detroit City Code.
(103) "Mortgage" means a mortgage on all or any part of
Developer's interest in the Development.
(104) "Mortgagee" means the holder from time to time of a
mortgage on all or any part of Developer's interest in the Development.
(105) "Municipal Services Fee" shall have the same meaning as
ascribed to it in the Act.
(106) "Net Worth" means the members' equity as reflected on
Developer's balance sheet, determined in accordance with GAAP.
(107) "Non-Material Alteration" means any Alteration which is
not a Material Alteration.
(108) "Non-Material Deviation" means any Deviation which is
not a Material Deviation.
(109) "Ordinance" means ordinance number 17-97, Chapter 18
of the 1984 Detroit City Code, as amended from time to time, together with
all rules and regulations issued in connection therewith or promulgated
thereunder.
(110) "Other Land-Based Casino Developers" means Greektown
Casino, L.L.C., a Michigan limited liability company and MGM Grand Detroit,
L.L.C., a Delaware limited liability company.
(111) "Outside Submission Date" means the first anniversary
of the Closing Date.
(112) "Parent Company" means Circus Circus Enterprises, Inc.,
and its successors and assigns.
(113) "Performance Guaranty" means a guarantee of performance
of Developer's obligations under this Agreement in substantially the same
form as attached hereto as EXHIBIT 1.1(a)(113).
(114) "Performance Threshold" means EBITDA, as reduced by
interest expense and scheduled principal payments (other than balloon
payments on maturity to the extent refinanced), of at least Twenty-Two
Million Five Hundred Thousand Dollars
15
<PAGE>
($22,500,000) for the most recent trailing twelve (12) month period,
provided that the first trailing twelve (12) month period shall commence
with the thirteenth (13th) month after the Completion Date and shall end
with the twenty-fourth (24th) month after the Completion Date. For the
avoidance of doubt, Developer is deemed to be in compliance with the
Performance Threshold during the period commencing with the Effective Date
through and including the first full twenty-four (24) months following
Completion Date.
(115) "Permits" means all licenses, permits, approvals,
consents and authorizations that Developer is required to obtain from any
Governmental Authority to perform and carry out its obligations under this
Agreement including but not limited to permits and licenses necessary to
demolish, build, open, operate and occupy the Development.
(116) "Permitted Affiliate Payments" means (i) payments which
represent compensation for goods and services purchased or acquired from an
Affiliate in the ordinary course of business; (ii) distributions required
under Developer's operating agreement to satisfy tax payments; (iii)
payments of interest or principal to any Affiliate of Developer, with
respect to money borrowed from such Affiliate provided no acceleration of
such payments shall be a Permitted Affiliate Payment unless as and to the
extent loans to such Affiliate from third parties have been accelerated;
(iv) payments to any Casino Manager which are used by such Casino Manager
to pay compensation and benefits to its employees; (v) (1) at such times as
Developer meets or exceeds the Performance Threshold, or (2) so long as a
Performance Guaranty from an Acceptable Guarantor remains in full force and
effect, payments for services purchased or acquired from an Affiliate in
the ordinary course of business, including without limitation management
fees, guaranty fees, and compensation for the use of intellectual property;
and (vi) distributions to Developer's members in an amount equal to, and to
be used solely for the purpose of paying, principal and interest on money
borrowed to make capital contributions to Developer.
(117) "Person" means any individual, partnership,
corporation, limited liability company, association, unincorporated
organization, trust or other entity, including but not limited to, any
government or agency or subdivision thereof, and the heirs, executors,
administrators, legal representatives, successor and assigns of such Person
where the context so permits.
(118) "Pro Rata Share" means one-third, provided that if City
and EDC are notified in a writing signed by the Developer and the Other
Land-Based Casino Developers that the Pro Rata Share of Developer is a
specified percentage, then the Pro Rata Share of Developer shall equal such
specified percentage so long as the sum of the specified percentages of
Developer and the Other Land-Based Casino Developers equals one hundred
percent (100%).
16
<PAGE>
(119) "Program Manager" or "PM" means the Person or Persons
designated by and retained by the EDC to be its authorized representative,
to represent EDC in all construction matters pertaining to this Agreement
and to facilitate the construction process of the Development.
(120) "Project Site" means the Project Premises, the staging
areas, and temporary construction easements (if any), provided for
construction of the Development.
(121) "Project Premises" means the parcel or parcels of real
estate to be conveyed to Developer pursuant to the Conveyance Agreement,
together with all rights, covenants, rights of way and appurtenances
belonging or in anywise appertaining thereto.
(122) "Proceeds" means the compensation paid by the
condemning authority to the City and/or Developer in connection with a
Condemnation, whether recovered through litigation or otherwise, but
excluding any compensation paid in connection with a temporary taking.
(123) "Public Land" means the real estate described on
Exhibit 1.1(a)(19) attached hereto, together with all rights, covenants,
rights of way and appurtenances belonging or in anywise appertaining
thereto.
(124) "Publicly Traded Corporation" shall have the same
meaning as defined in the Act.
(125) "Radius" means the geographic area encompassed by a
circle having a radius of one hundred fifty (150) miles and the
intersection of Woodward and State Fair as its center.
(126) "Release or Released" means actual or threatened
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, presence, dumping, migration from adjacent
property or disposing of Hazardous Materials into the environment, as
"environment" is defined by the Environmental Laws or the abandonment or
discarding of barrels, containers or other closed receptacles containing a
Hazardous Material.
(127) "Resolution of Necessity" means a resolution of City
Council authorizing land acquisition in the project area as set forth in
the EDC Plan by or for the benefit of the public, the City and its
residents for the purposes set forth in PA 338 of 1974.
(128) "Response or Respond" means action taken in compliance
with Environmental Laws to correct, remove, remediate, clean up, prevent,
mitigate, monitor, evaluate, investigate, halt, assess or abate a Release
and includes, but is not limited to evaluation, interim response activity,
remedial action, demolition or the taking of other
17
<PAGE>
actions necessary to protect the public health, safety, welfare or the
environment or any natural resources.
(129) "Restricted Party" has the meaning set forth in SECTION
7.3.
(130) "RFP/Q" means the Phase I and Phase II Request for
Proposals and Qualifications issued by the City in connection with the
land-based casino development project for the City.
(131) "Schematic Design Documents" means a site plan; a
schematic design establishing the general scope, conceptual design, and
scale and relationships among the Components; preliminary specifications,
specifically including quality of materials to be utilized in construction
of the exterior of the Casino Complex; and elevations prepared by the
Architect(s).
(132) "Secured Debt" means a debt of Developer secured by a
Mortgage.
(133) "Site Preparation Work" means the following actions
with respect to the Project Premises or the Temporary Casino Site, as the
case may be: (a) demolition and removal of structures; (b) demolition and
removal of surface paving and sidewalks; (c) removal of underground and
overhead utility facilities, and capping of any remaining lines as
appropriate (including without limitation the removal or capping of all
sanitary sewer, storm and drainage facilities); (d) removal of non-soil
material, rubble and debris resulting from the foregoing demolition
activities and legal disposal at landfills authorized by the State to
accept such materials; (e) removal and abatement, to the extent required by
controlling applicable law, of all toxic or hazardous substances, materials
or wastes, including contaminated soil, if any disclosed by any
environmental assessment; and (f) grading of the Project Premises to be
level with the adjacent property line grades and proper compaction of all
soils, including backfill.
(134) "Small Business Concern" means that term as defined in
Section 18-5-1 of the 1984 Detroit City Code.
(135) "Space Lease" means any sublease, franchise, license or
other agreement that would permit or allow a Person to use and/or maintain
space as a tenant in or on the Development.
(136) "Space Tenant" means a tenant under a Space Lease.
(137) "State" means the State of Michigan.
(138) "Submission Date" means the date on which the Building
Permit Submission is made.
18
<PAGE>
(139) "Suitable Lender" means:
(A) any insurance company as defined in Section 2(13) of
the Securities Act of 1933;
(B) any investment company registered under the Investment
Company Act of 1940;
(C) any business development company as defined in Section
2(a)(48) of the Investment Company Act of 1940;
(D) any small business investment company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958;
(E) any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees;
(F) any employee benefit plan within the meaning of Title I
of the Employee Retirement Income Security Act of 1974;
(G) any trust fund whose trustee is a bank or trust company
and whose participants are exclusively plans of the types
identified in paragraph (E) or (F) of this section;
(H) any business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(I) any investment adviser registered under the Investment
Advisers Act of 1940;
(J) any dealer registered pursuant to Section 15 of the
Securities and Exchange Act of 1934 or its Affiliate;
(K) any entity, all of the equity owners of which are, or
all debt securities of which are owned by, (i) "qualified
institutional buyers" as defined in Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act") acting for their own
account or the accounts of other qualified institutional buyers,
and/or (ii) parties who have acquired such equity interests or debt
securities pursuant to Regulation S of the Securities Act or
pursuant to a public offering registered pursuant to the Securities
Act;
19
<PAGE>
(L) any bank as defined in Section 3(a)(2) of the
Securities Act of 1933, any savings and loan association or other
institution as referenced in Section 3(a)(5)(A) of the Securities
Act of 1933, or any foreign bank or savings and loan association or
equivalent institution;
(M) any investor or group of investors purchasing debt
securities of Developer who are (i) purchasing such debt securities
of Developer in any public offering registered pursuant to the
Securities Act; (ii) "qualified institutional buyers" (as defined
in Rule 144A under the Securities Act); and/or (iii) purchasing
such debt securities of Developer pursuant to Regulation S of the
Securities Act;
(N) Parent Company or any Affiliate of Parent Company;
(O) any Publicly Traded Corporation whose securities are
traded on a national exchange or are included for quotation on the
NASDAQ Stock Market; and
(P) any other lender approved by City in the exercise of
its reasonable judgment.
(140) "Temporary Casino" shall mean that facility in which
Casino Gaming Operations shall be conducted by Developer until the
Completion Date in accordance with the provisions of ARTICLE XX.
(141) "Termination Date" means the date that this Agreement
is terminated pursuant to SECTION 10.3.
(142) "Total Cost" means all hard and soft costs and expenses
of Developer incurred through Completion for acquiring and developing the
Development (other than for the Temporary Casino), including without
limitation Developer's Allocable Share of Development Process Costs; Pro
Rata Share of Feehold Compensation, Infrastructure Improvements and Site
Preparation Work; and for designing and constructing the Improvements,
including but not limited to, land acquisition costs for the Development
(other than for the Temporary Casino), payments under the Contractor
Agreement(s), payments under the Agreement, fees and expenses of the
Architect(s) and other Consultants, overhead, and costs of bonds, taxes,
insurance, permits, licenses and inspections, interest and other financing
costs, legal fees and expenses and pre-opening and related marketing or
advertising expenses.
(143) "Transfer" means (i) any sale (including agreements to
sell on an installment basis), assignment, transfer, pledge, alienation,
hypothecation, merger, consolidation, reorganization, liquidation, or any
other disposition by operation of law or
20
<PAGE>
otherwise, and (ii) the creation or issuance of new or additional
interests in the ownership of any entity.
(144) "Wagering Tax" shall have the same meaning as ascribed
to it in the Act.
(145) "Work" means Site Preparation Work and/or construction
of the Improvements in accordance with the Construction Documents and
includes labor, materials and equipment to be furnished by a Contractor or
subcontractor pursuant to a Contractor Agreement.
(146) "Working Development Schedule" means the schedule to be
prepared by Developer outlining the events and estimated time periods
necessary for the completion of the Site Preparation Work and the
significant milestones for design, permitting, construction and Completion
of the Casino Complex, as modified from time to time.
(b) Any other initially capitalized terms defined within the text
of this Agreement shall have the meaning set forth therein for purposes of this
Agreement.
1.2 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on any schedules and exhibits are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or such schedules or exhibits. Words of the masculine gender shall be
deemed and construed to include correlative words of the feminine and neuter
genders. "Herein," "hereby," "hereunder," "hereof," "hereinbefore,"
"hereinafter" and other equivalent words refer to this Agreement and not solely
to the particular portion thereof in which any such word is used. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation".
1.3 MICHIGAN STATUTES. All references herein to Michigan statutes are
to the Michigan Compiled Laws, as amended.
ARTICLE II
GENERAL PROVISIONS
2.1 PURPOSE. The purpose of this Agreement is:
(a) To set forth the relationship among Developer, City and EDC the
respective duties, responsibilities and obligations of each and the procedures
to be followed relating to the design, construction and operation of the
Development; and
21
<PAGE>
(b) To provide a means by which the Development can be designed,
constructed and completed by Developer, with the cooperation of City and EDC,
and for the coordination of efforts on the part of each to ensure the timely and
expedited construction and Completion of the Development.
2.2 FINDINGS. City and EDC do hereby ascertain, determine, declare and
find that:
(a) The Development will provide or preserve gainful employment
for citizens of City, make a significant contribution to the economic growth
of City and serve a public purpose by, among other things, advancing economic
prosperity, helping to alleviate conditions of unemployment and
underemployment in the City and attracting new and improved commercial and
industrial enterprises to the City.
(b) The Development is in the best interests of the City and
accomplishes the purposes of Act 338, Michigan Public Acts of 1974, as amended
("Act 338").
(c) The EDC is empowered under Act 338, to construct, acquire by
gift or purchase, reconstruct, improve, maintain or repair projects and
acquire necessary lands for the site of a project, and to sell and to convey
a project or any part thereof for a price and at a time which EDC determines,
and to lend, grant, transfer, or convey funds, all such powers being declared
by Act 338 to constitute the performance of essential public purposes and
functions for the State and its municipalities.
(d) The execution of this Agreement and the construction
implementation of the Development will enhance the public benefit and welfare
and therefore constitute public purposes in that they prevent and combat
community deterioration in the City; increase employment opportunities in the
City; help to alleviate conditions of unemployment and/or underemployment in
the City; promote the location, relocation, expansion and retention of
commercial and industrial enterprises in the City; increase and promote
tourism and enhance tourist amenities in the City; and preserve and improve
the aesthetic quality inuring to the economic health of the City. The
above-cited items constitute important public benefits to City and EDC.
Further, additional public benefits of this Agreement and the construction of
the Development consist of increased taxes and other revenues from the
operation of the Development. Further, City hereby declares and acknowledges
that the entering into of this Agreement was done on a competitive basis with
a systematic evaluation of factors relating to the public benefit and
welfare, and the public purposes, hereinabove described, all in accordance
with the Ordinance.
2.3 INTENT. It is the intent of the parties to this Agreement that:
(a) The Development is to be accomplished by Developer as provided
herein.
22
<PAGE>
(b) This Agreement sets forth the duties, obligations, rights and
responsibilities of City, EDC and Developer with respect to the development,
design and construction of the Development and operation of the Casino
Complex and the Temporary Casino.
2.4 COMMENCEMENT OF RIGHTS AND OBLIGATIONS.
(a) This Agreement shall confer no rights and impose no
obligations until the Effective Date. Notwithstanding the execution hereof
and the occurrence of the Effective Date, except as and to the extent set
forth in (i) ARTICLE I, (ii) SECTION 2.4, (iii) SECTION 2.5, (iv) SECTION
2.7, (v) SECTION 2.8, (vi) SECTION 2.10, (vii) SECTION 2.11, (viii) SECTION
2.17, (ix) ARTICLE VIII, (x) ARTICLE IX, (xi) ARTICLE X, (xii) ARTICLE XIV,
(xiii) ARTICLE XVIII, (xiv) ARTICLE XX and (xv) ARTICLE XXI, each to the
extent applicable, no right shall be conferred or obligation imposed, by or
under this Agreement unless and until each of the following conditions has
been fully met:
(1) The Board has issued its Certificate of Suitability
pursuant to the Act, granting to Developer the right to receive a Casino
License upon the conditions set forth in the Act and such Certificate of
Suitability contains only such other conditions as may be acceptable to
Developer in the exercise of its reasonable judgment.
(2) The Developer has paid its Pro Rata Share of the
Feehold Compensation, less its Pro Rata Share of the City Contribution.
(3) The Developer has furnished such documentation as City
reasonably requires to verify that the Initial Financing has been obtained
and is available for immediate disbursement or use.
(4) The Developer, City and EDC have duly executed and
delivered the Conveyance Agreement; the Conveyance Agreement has been
approved by City Council; and the Developer, City and EDC have duly
executed, delivered and recorded the Memorandum of Agreement and Developer
has acquired title to the Project Premises subject to such Memorandum of
Agreement.
(5) The Developer has delivered, and has caused Parent
Company to deliver, to the City and EDC an opinion of counsel in a form
reasonably satisfactory to City and EDC.
(6) The City and EDC each have delivered to Developer an
opinion of counsel in a form reasonably satisfactory to Developer.
(7) The Developer has paid to the City its Allocable Share
of the Development Process Costs then due.
23
<PAGE>
(8) The City Council has (x) vacated all streets, sidewalks
and other land, the use of which is dedicated to the public as set forth in
the EDC Plan; (y) approved all zoning changes necessary to allow Developer
to operate the Casino Complex; and (z) enacted an ordinance authorizing
casino gaming in the City.
(9) There shall be no temporary restraining order,
preliminary injunction or permanent injunction enjoining the Developer from
proceeding to develop the Development.
(10) The Developer has delivered to City and EDC the
Guaranty and Keep Well Agreement executed by an Acceptable Guarantor.
(11) The Developer has delivered to City and EDC Closing
Certificates executed by Developer and an Acceptable Guarantor.
(12) The Developer has delivered to City the executed
agreement of Parent Company, any Casino Manager and each Restricted Party
required under SECTION 2.14.
(13) The Developer has delivered to City certificates
showing that Developer, any Acceptable Guarantor and any Casino Manager are
in good standing and qualified to do business in the State, if required
under the law of the State, dated no earlier than five (5) days prior to
the Closing Date.
(14) The Developer has delivered to City copies of the
organizational documents of Developer, any Acceptable Guarantor and each
member of Developer, certified by an authorized officer of each such
respective entity as true and accurate as of the Closing Date.
(b) The definition of Effective Date as provided for herein and in
the development agreements entered in by the Other Land-Based Casino Developers
may not be modified except in an instrument executed by the City, EDC, Developer
and the Other Land-Based Casino Developers. The Other Land-Based Casino
Developers are intended third party beneficiaries of this SECTION 2.4(B) and are
entitled to enforce it as a direct party hereto.
(c) Developer may waive, in whole or in part, any or all of those
conditions set forth in SECTIONS 2.4(a)(6), (a)(8), or (a)(9) prior to the
satisfaction of such condition. City may waive, in whole or in part, in writing
any of those conditions set forth in SECTIONS 2.4 (a)(2), (a)(5), (a)(11),
(a)(l2), (a)(13) or (a)(14) prior to the satisfaction of such condition.
Developer and City may mutually waive, in whole or in part, the conditions set
forth in SECTIONS 2.4(a)(3) and (a)(4) prior to the satisfaction of such
condition. No waiver of any condition shall be effective: (x) unless such
waiver shall be in writing or (y) if the failure to satisfy such condition would
make performance of this Agreement illegal.
24
<PAGE>
(d) Notwithstanding anything to the contrary contained in this
Agreement, this Agreement shall automatically terminate if all of the conditions
set forth in SECTIONS 2.4(a)(1) THROUGH 2.4(a)(14) above are not satisfied or
waived on or before December 31, 1999.
2.5 CONVEYANCE OF PROJECT PREMISES TO DEVELOPER.
(a) Provided that City is acquiring the Casino Area and Public
Land pursuant to financing from such sources and on terms and conditions
(other than amount) reasonably satisfactory to Developer and the Other
Land-Based Casino Developers and further provided that Developer's right to
approve such sources and such terms and conditions shall expire if Developer
shall fail to respond within fifteen (15) Business Days of its receipt in
writing of such sources and such terms and conditions, City and EDC shall
notify Developer of their desire to enter into the Conveyance Agreement.
Upon receipt of such notice, and provided that the proviso in the first
sentence of SECTION 4.11 has been satisfied, City, EDC and Developer shall
promptly execute and deliver to each other the Conveyance Agreement and
submit the Conveyance Agreement to City Council for approval.
(b) Within five (5) Business Days following the approval of City
Council referred to in SECTION 2.5(a), Developer shall furnish EDC with a
letter of credit in an amount equal to its Pro Rata Share of Feehold
Compensation and in such form and upon such terms and conditions as are
reasonably necessary to allow City to acquire the Casino Area and the Public
Land.
(c) If Developer breaches its obligations to acquire the Project
Premises pursuant to the Conveyance Agreement, City and EDC shall have the right
to terminate this Agreement.
2.6 COMPLIANCE WITH OTHER COMMITMENTS.
(a) Developer agrees that the Total Cost, exclusive of the Feehold
Compensation, shall not be less than Four Hundred Eighty Million Dollars
($480,000,000).
(b) As set forth on EXHIBIT 8.1(g), Developer agrees to use
commercially reasonable efforts to acquire all or some of its financing from
a Detroit-Based Business, a Detroit Resident Business and/or a Small Business
Concern and/or to utilize Detroit-based and/or Minority-owned financial
institutions in serving Developer's financial needs.
(c) Developer agrees, to the extent permitted by applicable law,
to:
(1) perform and comply in all material respects with the
commitments, promises and/or undertakings set forth on EXHIBITS 8.1(j),
(m), (r) and (s);
(2) use good faith efforts to perform and comply in all
material respects with the commitments, promises and/or undertakings set
forth on EXHIBITS 8.1(k), (l), (v), (x), (y), (z), (cc) and (dd);
25
<PAGE>
(3) use reasonable best efforts to perform and comply in
all material respects with the commitments, promises and/or undertakings
set forth on EXHIBITS 8.1(p), (q), (u) AND (ee), provided that Developer's
obligations with respect to its commitments, promises and undertakings set
forth on EXHIBIT 8.1(q) are also subject to the Developer's obligations set
forth in SECTIONS 2.6(e), (h) AND (i); and
(4) use commercially reasonable efforts to perform and
comply in all material respects with the commitments, promises and
undertakings set forth on EXHIBITS 8.1(n) AND (w).
(d) Developer agrees that no fewer than three thousand seven
hundred forty-three (3,743) full-time equivalent employees will be employed at
the Casino Complex immediately following Completion, exclusive of construction
workers, and thereafter, subject to SECTION 7.17, will employ such number of
employees as may be appropriate in the exercise of Developer's reasonable
judgment to operate the Casino Complex in a manner consistent with First Class
Casino Complex Standards and in compliance with this Agreement.
(e) Developer agrees to use reasonable best efforts to attain the
goals of employment of Detroit residents set forth in EXHIBIT 8.1(q). Whenever
in this Agreement or the Exhibits, reference is made to "Detroit residents," the
first determination of whether an individual is a Detroit resident shall be made
on the Completion Date based on an individual's residence on his or her date of
hire. Subsequent to the Completion Date, the determination of whether Developer
has achieved its hiring goals with respect to Detroit residents shall be made on
each anniversary of the Completion Date (each, a "Determination Date"). Such
goal shall be deemed met if on each Determination Date Developer either (i) met
its hiring goals for Detroit residents since the last Determination Date, based
on an individual's residence on his or her date of hire or (ii) Developer then
employs no fewer than the number of Detroit residents established by its hiring
goal, based on each individual's most current address on file with Developer.
(f) Developer agrees to comply with all federal, state and local
laws governing equal employment opportunity.
(g) The Developer agrees that it shall notify its Contractors and
Consultants of their obligations relative to non-discrimination under this
Agreement when soliciting same, shall include the provisions of SECTION 2.6(f)
in each contract with its Contractors and Consultants and require that its
Contractors and Consultants include such provision in any subcontract as well as
provide the City and/or EDC a copy of any such subcontract upon request.
Developer shall have no obligation to enforce such provision if City is given
the direct right to enforce such provision in any contract or subcontract.
26
<PAGE>
(h) As set forth in EXHIBIT 8.1(q), Developer agrees to be
committed to affirmative action programs to increase the numbers of minority and
women employees in the workforce of the Developer, including professional and
management positions.
(i) As set forth in EXHIBIT 8.1(q), Developer voluntarily commits
to hire contractors who agree to implement an Equal Opportunity Employment Plan
conforming to all applicable laws and consistent with Executive Order No. 22,
dated August 29, 1983. Developer shall notify its Contractors of their
obligations relative to implementing such an Equal Opportunity Employment Plan
and shall include such a provision in each contract with its Contractors and
require that its Contractors include such provision in any subcontract.
Developer will not, however, be in default under this Agreement if any
contractor fails to comply with its agreement to implement its Equal Opportunity
Employment Plan provided, however, the City is given the direct right to enforce
such provision in any contract or subcontract.
(j) Developer shall use reasonable best efforts to ensure
that at least thirty percent (30%) of aggregate amounts expended by
Developer under contracts entered into by Developer for the construction
of, or any material additions, improvements or modification to the Casino
Complex shall be paid to Detroit-Based Businesses, Detroit Resident
Businesses, Small Business Concerns, minority business concerns or
women-owned businesses. As set forth in EXHIBIT 8.1(u), Developer agrees
to use reasonable best efforts to purchase during each Fiscal Year at
least thirty percent (30%) of the total dollar value of all purchases
of goods and services from Detroit-Based Businesses, Detroit Resident
Businesses, Small Business Concerns, minority business concerns or
women-owned businesses.
(1) "Reasonable Best Efforts" to achieve the goals set
forth in this SECTION 2.6(j) may include, but are not to be limited to, the
use of Joint Venture arrangements; Mentor Ventures; outreach to Detroit,
minority and women business, trade and professional associations or
organizations; outreach to community organizations; and advertising through
media publications or other vehicles reasonably calculated to reach
Detroit, minority and women-owned businesses, including, but not limited
to, community newsletters.
(2) "Joint Venture" as used in this SECTION 2.6(j) means a
combination of separate business persons or entities, one of which is a
Detroit-Based Business, Detroit Resident Business, Small Business Concern,
minority business concern or women-owned business, which has been created
to perform a specific contract, and in which one or more of the latter
business entities (a) shares in profits and losses, (b) is substantially
involved in all phases of the contract, including, but not limited to,
bidding and staffing; (c) provides a substantial portion of the total
performance, responsibility and project management of a specific job; and
(d) receives a substantial portion of the total remuneration from a
specific job.
27
<PAGE>
(3) "Mentor Venture" as used in this SECTION 2.6(j) refers
to a combination of a business entity with a Detroit-Based Business,
Detroit Resident Business, Small Business Concern, minority business
concern or women-owned business for the purpose of providing the latter
business entity with training, expertise, skill, experience, market access
or other attributes in a business, trade or profession designed to enhance
its ability to compete in the marketplace.
(k) Developer agrees to comply in all material respects with all
Governmental Requirements.
(l) In the event Developer elects to construct a Temporary Casino
subject to and in accordance with the provisions of ARTICLE XX:
(1) Developer shall submit to the Mayor as exhibits to its
Temporary Casino Proposal (as that term is defined in SECTION 20.5(b)), the
information required by the following Sections, modified to address the
Temporary Casino as applicable: 8.1(d), (e), (g), (i), (j), (k), (l), (m),
(n), (o), (p), (q), (r), (s), (t), (u), (v), (w), (x), (y), (z), (aa),
(bb), (cc), (dd) and (ee); and
(2) Developer agrees that its obligations set forth in the
following Sections apply to the Temporary Casino as well as to the Casino
Complex: 2.6(b), (c), (e) (SUBSTITUTING "COMPLETION OF THE TEMPORARY
CASINO" FOR "COMPLETION DATE" AND "ANNIVERSARY OF THE COMPLETION OF THE
TEMPORARY CASINO" FOR "DETERMINATION DATE"), (f), (g), (h), (i), (j) AND
(k), and substituting all references to the exhibits therein to the
exhibits furnished as part of the Temporary Casino Proposal.
(m) Except as the Agreement or the context may otherwise require,
each of the Developer's obligations set forth in SECTIONS 2.6(b)-(l), inclusive,
are ongoing and shall commence as of the Closing Date and performance thereof
shall be determined annually.
(n) Joint Employment and Procurement Advisory Board
(1) The Joint Employment and Procurement Advisory Board
(the "JEPAB") will be a private entity acting in an advisory capacity to
Developer and the Other Land-Based Casino Developers. Developer shall
cooperate with the Other Land-Based Casino Developers to establish the
JEPAB within thirty (30) days after the Closing Date. Developer and each
of the Other Land-Based Casino Developers will appoint two (2) members to
the JEPAB, and the Mayor and the City Council will each be invited to
appoint two (2) members from the community at large. The public appointees
will be non-salaried, but will be entitled to expense reimbursement paid by
the JEPAB.
(2) The purpose of the JEPAB will be to work closely with
the Developer and the Other Land-Based Casino Developers to evaluate the
effectiveness of, and
28
<PAGE>
recommend improvements to, Developer's and each of the Other Land-Based
Casino Developers' respective programs to achieve their goals of not less
than fifty-one percent (51%) Detroit resident employment and not less
than thirty percent (30%) procurement of goods and services from
Detroit-Based Businesses, Detroit Resident Businesses, minority business
concerns, women-owned businesses and/or Small Business Concerns. The JEPAB
will review Developer's and each of the Other Land-Based Casino Developers'
practices and programs aimed at achieving such goals, review the success of
such efforts, recommend improvements and refinements to such practices and
programs, and assist the Developer and each of the Other Land-Based Casino
Developers in involving local community organizations and businesses in
support of such efforts. Additionally, the JEPAB may recommend to
Developer and each of the Other Land-Based Casino Developers the engagement
of outside consultants to provide expert, independent guidance as to how to
make Developer's and each of the Other Land-Based Casino Developers'
programs more effective.
(3) Developer commits One Million Dollars ($1,000,000) to fund
the activities of the JEPAB. Such amount will be derived from funds
dedicated under SECTION 8.1(j) to promote development, economic growth and
jobs in the City. Developer shall fund the JEPAB according to the
following schedule: Two Hundred Thousand Dollars ($200,000) on the
formation of the JEPAB; Four Hundred Thousand Dollars ($400,000) on the six
(6) month anniversary of the Closing Date; and Four Hundred Thousand
Dollars ($400,000) on the twelve (12) month anniversary of the Closing
Date.
2.7 OBTAINING CERTIFICATE OF SUITABILITY AND CASINO LICENSE. Promptly
following the Effective Date, Developer agrees to submit to the Board a
completed application to obtain a Certificate of Suitability in the manner and
form prescribed by such Gaming Authorities and thereafter fully cooperate with,
and cause its members and their respective owners and investors to cooperate
with, the background investigation conducted by the Board. Based solely on the
information furnished by Developer to City in the RFP/Q, but without review of
such application, City agrees to support such application before the Board.
Developer shall diligently pursue the issuance of such Certificate of
Suitability on terms and conditions satisfactory to Developer. Upon obtaining
the Certificate of Suitability, Developer shall thereafter diligently pursue the
satisfaction of all conditions to obtaining a Casino License.
2.8 PAYMENT OF DEVELOPMENT PROCESS COSTS. Upon the Effective Date,
Developer shall pay to City the sum of One Million Dollars ($1,000,000) toward
its Allocable Share of the Development Process Costs. Thereafter, City and/or
EDC shall invoice Developer from time to time but no more frequently than
monthly for (i) its Allocable Share of Development Process Costs and (ii) to the
extent City and/or EDC in their respective reasonable discretion determines that
any Development Process Cost is directly attributable to a particular Land-Based
Casino Development, the entire amount of such Development Process Cost, in each
case incurred prior to the Completion Date. Subsequent to the Completion Date
but in no event later than six (6) months following completion of the Land-Based
Casino Developments, City and/or EDC shall invoice Developer only
29
<PAGE>
for such Development Costs as City and/or EDC reasonably determine were
incurred in connection with the Development. Developer shall pay such
invoiced Development Process Costs within fifteen (15) Business Days from the
date of the invoice. City and EDC, respectively, shall submit to the
Developer a summary of the charges set forth in such invoice containing such
detail as City and EDC, respectively, reasonably believes is necessary to
inform Developer of the nature of the costs and expenses and the basis for
the allocation amongst the Developer and the Other Land-Based Casino
Developers. At Developer's request, City and EDC shall consult with
Developer on the necessity for and allocation of such charges during the five
(5) Business Days period immediately subsequent to Developer's receipt of
such summary. In addition, prior to the Closing Date, City shall require
each Other Land-Based Casino Developer to enter into an agreement with
Developer providing for arbitration of any dispute concerning the allocation
of any Development Process Costs amongst Developer and each Other Land-Based
Casino Developer.
2.9 PAYMENT OF FEEHOLD COMPENSATION. Provided that the proviso in
the first sentence of SECTION 4.11 has been satisfied, Developer agrees to
pay, without duplication, its Pro Rata Share of Feehold Compensation, less
its Pro Rata Share of the City Contribution, as and to the extent set forth
in the Conveyance Agreement. Developer hereby acknowledges that, upon
approval by City Council, portions of the Casino Area and Public Land have
been or will be acquired by City through one or more acquisition activities
including exercise of the power of eminent domain, and that in some
instances, a final cost of acquisition particularly with respect to eminent
domain actions ("Final Purchase Price") may not be known for some period of
time after the Effective Date. City shall estimate the amount of
compensation necessary to pay the Final Purchase Price in accordance with law
(the "Estimated Compensation"). In the event the Final Purchase Price
exceeds the Estimated Compensation, Developer shall pay to EDC in immediately
available funds within five (5) Business Days following written notice
thereof from the EDC, its Pro Rata Share of the difference between the
Estimated Compensation and the Final Purchase Price. If the Final Purchase
Price shall be less than the Estimated Compensation, the difference shall be
refunded by the City within ten (10) Business Days after the Final Purchase
Price has been determined.
2.10 INITIAL FINANCING. Upon the Effective Date, Developer shall have
either obtained the Initial Financing or shall at all times thereafter
diligently pursue obtaining the Initial Financing.
2.11 FAILURE TO PAY. All amounts, including, without limitation,
Development Process Costs and Feehold Compensation, owed by Developer to
City and/or EDC pursuant to any provision of this Agreement shall bear
interest at the Default Rate from the due date (but if no due date is
specified, then fifteen (15) Business Days from demand for payment) until
paid.
2.12 CONDITION OF PROJECT PREMISES. Matters involving the condition
of the Project Premises are set forth in the Conveyance Agreement.
2.13 DEVELOPER'S DEVELOPMENT OBLIGATIONS. The Developer agrees to
undertake and complete the Development by the Agreed Upon Opening Date
subject to and in accordance with the terms of this Agreement. Except as
otherwise provided herein, Developer agrees, for itself and its
30
<PAGE>
successors and assigns, that, from and after the Closing Date, it shall
promptly begin, and thereafter shall diligently prosecute or cause to be
prosecuted to Completion, the Design Services and the Work subject to and in
accordance with the terms of this Agreement.
2.14 OTHER COMMITMENTS OF DEVELOPER. By the Closing Date, Developer
shall deliver to City and EDC the following:
(a) The Guaranty and Keep Well Agreement, executed by an Acceptable
Guarantor.
(b) The opinions of counsel referred to in SECTION 2.4(a)(5).
(c) The Memorandum of Agreement.
(d) The Closing Certificates.
(e) The executed agreement of Parent Company, any Casino Manager
and each Restricted Party requested by City, to abide by the Radius Restriction.
2.15 OTHER COMMITMENTS OF CITY AND EDC. By the Closing Date, City and
EDC shall deliver to Developer the opinions of counsel referred to in SECTION
2.4(A)(6).
2.16 APPROVAL BY CITY, EDC AND PM. Wherever an approval is required
of City, EDC, or PM pursuant to the terms of this Agreement, the approval or
disapproval shall be given in writing, which in the case of disapproval,
shall set forth the reasons of disapproval. Whenever in this Agreement any
consent or approval of the City is required, such approval or consent shall
be given or withheld by the Mayor, any City official designated by the Mayor
or appropriate City department unless otherwise indicated. Prior to the
Closing Date and from time to time thereafter, City and EDC shall designate
in writing to Developer those individuals who have authority to grant any
approvals or consents hereunder on behalf of City and EDC. Developer shall
be entitled to rely on any writing signed by such designees.
2.17 PROMPT RESPONSES. The parties agree that the time limits and
time periods provided herein are of the essence in this Agreement. The
parties mutually agree to exercise their mutual and separate best efforts to
consider and respond promptly and as expeditiously as reasonably possible
notwithstanding any time period provided in this Agreement.
2.18 FUNDING OF EXCESS COSTS.
(a) As promptly as practicable, but in any event not later than one
hundred eighty (180) days following the Effective Date, the City shall submit to
Mayor and City Council: (1) Schedule A, specifying (i) the City's best estimate
of the aggregate of the Feehold Compensation including the City Contribution;
(ii) the cost of all Infrastructure Improvements; and (iii) the costs
31
<PAGE>
of all of the above and below ground environmental Response activity
necessary in order to obtain a covenant not to sue in favor of the City, EDC,
Developer and the Other Land-Based Casino Developers issued by the Michigan
Department of Environmental Quality("MDEQ") with respect to the Casino Area
and the Public Land; and (2) Schedule B, identifying all of the
Infrastructure Improvements for which the Developer and the Other Land-Based
Casino Developers will be responsible. Developer shall cooperate with the
City and EDC in the preparation of such Schedules reflecting the nature and
cost of the Infrastructure Improvements and estimates of the cost of Response
activity.
(b) If Schedule A reflects an estimate in excess of Two Hundred
Fifty Million Dollars ($250,000,000), the City, through the Mayor, may, subject
to approval of the City Council, within ten (10) Business Days thereafter,
determine whether the project described in the EDC Plan is suitable for public
purposes. In the event the City, determines that such project is still suitable
for public purposes, the City shall proceed with the project described in the
EDC Plan. If the City determines otherwise, the City and the EDC shall use
their commercially reasonable efforts to locate a suitable alternate site for
Developer to develop, construct and operate the Casino Complex.
2.19 ADMINISTRATION OF THIS AGREEMENT.
(a) The Mayor shall designate the City departments, agencies and/or
personnel who shall be responsible for the administration of this Agreement;
monitoring of the performance by the Developer of its duties and obligations
under this Agreement; and making recommendations to the Mayor concerning its
enforcement.
(b) Except to the extent set forth in any other certificate or
report delivered to the City that contains substantially the same information,
not later than ninety (90) days after the end of each Fiscal Year commencing
with the Fiscal Year in which the Closing Date occurs, Developer shall deliver
to City a report setting forth the following:
(1) a description of Developer's efforts to comply with the
requirements of SECTION 2.6(b) during such Fiscal Year, as they apply to
the Temporary Casino, if any, and the Casino Complex;
(2) a statement as to the number of employees (including
the total number of full-time, part-time and full-time equivalent) employed
by the Developer as of the completion of the Temporary Casino, if any, each
anniversary thereof, and on the Completion Date and each Determination Date
(as the term is defined in SECTION 2.6(e));
(3) a description of any administrative determination,
binding arbitration decision, or judgment rendered by a court of competent
jurisdiction finding a violation of any federal, state or local laws
governing equal employment opportunity during such Fiscal Year;
32
<PAGE>
(4) a description of Developer's efforts to comply with the
requirements of SECTIONS 2.6(g), (h), (i) AND (j) during such Fiscal Year,
as they apply to the Temporary Casino, if any, and to the Casino Complex;
(5) a statement setting forth material information adequate
to enable the City to determine compliance with SECTION 7.2;
(6) whether Developer is aware of any non-compliance with
the Radius Restriction, as that term is defined in SECTION 7.3(a), and a
description thereof if any has occurred, during such Fiscal Year;
(7) a statement as to whether any agreement for the
management and/or operation of any Component has been entered into, amended
in any material respect, or assigned during such Fiscal Year, together with
a copy of any such agreement, amendment or assignment;
(8) a description of Developer's efforts to comply with the
requirements of SECTION 7.6 during such Fiscal Year;
(9) a description of any Material Alteration commenced
during such Fiscal Year;
(10) a description of Developer's efforts to comply with the
requirements of SECTION 7.13(a) during such Fiscal Year;
(11) whether Developer is aware of any non-compliance with
the requirements of SECTION 7.13(c) during such Fiscal Year;
(12) a description of Developer's efforts to comply with the
requirements of SECTION 7.17 during such Fiscal Year;
(13) to the extent not otherwise covered in response to
subparts (b)(1)-(12) above, a description of any change during such Fiscal
Year in Developer's efforts to comply with the plans, measures,
commitments, undertakings and covenants set forth on the following
Exhibits: 8.1(c) (LIMITED TO THE OFFICERS OR MANAGERS OF DEVELOPER AND ANY
CASINO MANAGER), (g), (j), (k), (l), (m), (n), (p), (q), (r), (s), (u),
(v), (w), (x), (y), (z), (cc), (dd) AND (ee); and
(14) whether Developer is aware of any Transfer occurring
during such Fiscal Year.
No information need be included in such report as to any obligation of
Developer which has lapsed or which otherwise does not apply during such Fiscal
Year.
33
<PAGE>
ARTICLE III
FINANCING
3.1 INITIAL FINANCING.
(a) Developer agrees to obtain Initial Financing from a Suitable
Lender on such terms and conditions as are acceptable to City and necessary and
sufficient in the reasonable opinion of City to:
(1) Fully perform its development obligations set forth in
SECTION 2.13.
(2) Pay City and/or EDC for Developer's Pro Rata Share of
the Feehold Compensation.
(3) Fund the cost of Developer's portion of all
Infrastructure Improvements to be completed by City.
(4) Reimburse City and/or EDC, as applicable, for the
Development Process Costs.
(5) Provide adequate funds for all preopening activities
and initial working capital of the Casino Complex.
(6) Provide adequate funds and/or other financial
guarantees or assurances to enable the Casino Complex to continue operating
in the event that actual operations do not meet operating projections
during the first twenty-four (24) months subsequent to the Completion Date.
(7) Fully perform all of Developer's other commitments set
forth in SECTION 2.6, except for such commitments as are to be funded out
of operating cash flow of the Casino Complex.
(b) No portion of the Initial Financing may be derived from or be
dependent on the success of the Temporary Casino.
(c) Subject to SECTION 7.13(d), Developer may mortgage, pledge or
otherwise encumber all or part of Developer's interest in the Development in
connection with the Initial Financing.
34
<PAGE>
(d) The terms and conditions of the Initial Financing as and to
the extent set forth on EXHIBIT 8.1(g) are acceptable to City, subject to
review by the City of the final documents incorporating such terms and
conditions.
3.2 FINANCIAL COVENANTS. Subject to SECTION 3.7, Developer shall
maintain (i) at all times on and after the Completion Date a Leverage Ratio
of not greater than 4 to 1 or Net Worth of no less than $120 million; (ii)
commencing with the end of the fourth full fiscal quarter subsequent to
Completion, a Debt Service Coverage Ratio of at least 1.0 to 1; and (iii)
commencing with the end of the eighth full fiscal quarter subsequent to
Completion, a Debt Service Coverage Ratio of at least 1.2 to 1. The
obligations of Developer under this SECTION 3.2 shall lapse and be of no
further force or effect seven (7) years after the Execution Date.
3.3 SUBSEQUENT FINANCINGS. Subject to SECTION 3.7, after the
Completion Date, Developer may mortgage, pledge or otherwise encumber
Developer's interest in the Development from time to time only after first
obtaining City's prior written consent which consent shall not be
unreasonably withheld, provided that City's consent shall not be required in
connection with a Financing, or the Mortgage or other security agreements as
security therefor, in which each lender is a Suitable Lender, so long as the
principal amount of Secured Debt incurred in the Financing does not (i)
have a maturity date earlier than seven (7) years subsequent to the Closing
Date; and (ii) cause a violation of the Leverage Ratio or Debt Service
Coverage Ratio covenants set forth in SECTION 3.2. The obligations of
Developer under this SECTION 3.3 shall lapse and be of no further force or
effect seven (7) years after the Execution Date.
3.4 TRANSFER BY MORTGAGEE. Developer agrees that it shall not enter
into any Mortgage unless such Mortgage shall provide that (i) the Mortgagee
shall not transfer or assign its interest in any Mortgage without City's
prior written consent, except to a Suitable Lender; and (ii) if, as the
result of a Loan Default, the Mortgagee forecloses upon or otherwise acquires
all or part of Developer's interest in the Development, the Mortgagee (or the
Nominee of the Mortgagee) shall expressly accept and agree to assume all of
the terms, covenants and provisions of this Agreement contained to be kept,
observed and performed by the Developer and become bound to comply therewith.
As used in this Agreement, the word "Nominee" shall mean a Person who is
designated by Mortgagee to act in place of the Mortgagee solely for the
purpose of holding title to the Development and performing the obligations of
Developer hereunder.
3.5 SINKING FUND PROVISION. Subject to SECTION 3.7, during the
thirty-six (36) month period ending on the final maturity date of any Secured
Debt outstanding at any time, Developer shall make Sinking Fund Payments
equaling, in the aggregate, thirty-three percent (33%) of the original
principal amount of the Secured Debt less all Voluntary Sinking Fund Payments
(as hereinafter defined) made prior to or during such thirty-six (36) month
period with respect to any and all Financings. The Sinking Fund Payments, if
any, required hereby shall be made in semi-annual installments such that the
total sum of Sinking Fund Payments and Voluntary Sinking Fund Payments made
(a) as of the date twenty-four (24) months prior to such final maturity debt
equals eleven percent (11%) of the original principal amount of the Secured
Debt, (b) as of the date twelve
35
<PAGE>
(12) months prior to such final maturity debt equals twenty-two percent (22%)
of the original principal amount of the Secured Debt, and (c) as of the final
maturity debt equals thirty-three percent (33%) of the original principal
amount of the Secured Debt. The obligations of Developer under this SECTION
3.5 shall lapse and be of no further force or effect seven (7) years after
the Execution Date.
"Sinking Fund Provisions" shall be defined as (i) the retirement of debt
under such Financing or Financings, or (ii) placement of funds in a segregated
Sinking Fund account. Funds in the Sinking Fund account shall, except for funds
overfunded which may be withdrawn by Developer, be applied to reduce or satisfy
Secured Debt outstanding under such Financing or Financings.
"Voluntary Sinking Fund Provisions" means (i) all voluntary, scheduled or
other principal repayments actually paid with respect to any Secured Debt
outstanding under such Financing or Financings; (ii) deposited in a Sinking Fund
Account established by any Mortgagee; or (iii) voluntary prepayment of unsecured
Financings during any period when they are callable and in fact called.
3.6 FINANCING REPRESENTATIONS; RESTRICTIONS. In no event may Developer
or any Finance Affiliate represent that City and/or EDC are or in any way may be
liable for the obligations of Developer or any Finance Affiliate in connection
with (i) any financing agreement or (ii) any public or private offering of
securities. If Developer or any Finance Affiliate shall at any time sell or
offer to sell any securities issued by Developer or any Finance Affiliate
through the medium of any prospectus or otherwise that relates to the Casino
Complex or its operation, Developer shall (i) first submit such offering
materials to City for review with respect to Developer's compliance with this
SECTION 3.6 and (ii) do so only in compliance with all applicable federal and
state securities laws, and shall clearly disclose to all purchasers and offerees
that (y) the City and/or the EDC shall not in any way be deemed to be an issuer
or underwriter of such securities, and (z) the City and/or the EDC and its
officers, directors, agents, and employees have not assumed and shall not have
any liability arising out of or related to the sale or offer of such securities,
including without limitation, any liability or responsibility for any financial
statements, projections or other information contained in any prospectus or
similar written or oral communication. Developer agrees to indemnify, defend or
hold the City and the EDC and their respective officers, directors, agents and
employees free and harmless from, any and all liabilities, costs, damages,
claims or expenses arising out of or related to the breach of its obligations
under this paragraph.
3.7 GUARANTEE OF DEVELOPER'S OBLIGATIONS. So long as a Performance
Guaranty from an Acceptable Guarantor remains in full force and effect, (i)
Developer's failure to comply with the financial covenants set forth in
SECTION 3.2 shall be excused and shall not be an Event of Default; (ii)
Developer's failure to meet or exceed the Performance Threshold shall (x) not
give rise to any obligation of Developer to deliver an Annual Business Plan
under SECTION 7.10(b); (y) not give rise to any obligation of Developer to
notify City under SECTION 7.12; and (z) not give rise to any obligation of
Developer to make its Books and Records available to City under SECTION 17.1;
(iii) Developer shall have no obligation under SECTION 3.3 to obtain City's
consent to a Financing; (iv) Developer shall have no obligation under SECTION
3.5 to make Sinking Fund Provisions; (v)
36
<PAGE>
Developer shall have no obligation under SECTION 7.4 to seek the approval of
City to enter into an agreement or contract to operate or manage the hotel
Component or the parking Component, provided that at such time as the
Performance Guaranty is of no force or effect either (1) such agreement or
contract terminates and the operation or management of such Component reverts
to Developer or the Parent Company or (2) Developer seeks and receives City's
approval of the Casino Component Manager/Operator of such Component; (vi)
Developer shall have no obligation under SECTION 7.7 to establish or continue
to fund a Capital Maintenance Fund; (vii) Developer shall have no obligation
under SECTION 7.16 to deliver the certificate required thereunder; (viii)
Developer shall have no obligation under SECTION 16.2 to deposit insurance
proceeds into a trust account; and (ix) Developer shall have no obligation
under SECTION 16.4 to deposit any Proceeds into an escrow account.
ARTICLE IV
DESIGN; PROJECT SCHEDULING; INFRASTRUCTURE; QUALITY
4.1 SCHEMATIC, DESIGN AND CONSTRUCTION DOCUMENTS.
(a) On or before one hundred twenty (120) days after the Closing
Date, Developer shall prepare and submit the Schematic Design Documents to PM
for review and approval as provided in SECTION 4.2, together with such other
drawings, traffic plans, documents and other supporting information as may be
reasonably necessary to enable the PM to evaluate the Schematic Design
Documents, and as soon as practicable following its completion, a Working
Development Schedule. Developer covenants and agrees that the Schematic
Design Documents will substantially conform to representations and warranties
set forth in SECTION 8.1(i) except as and to the extent otherwise approved by
the City.
(b) Upon receipt by PM of the Schematic Design Documents, PM
shall promptly and diligently review such items and submit them to the EDC.
The EDC shall either approve them as submitted or notify Developer in writing
of its disapproval and any proposed changes (including the reasons therefor)
within twenty-one (21) days after receipt thereof by the PM. Similarly,
Developer shall submit to PM any request for a Material Deviation, together
with such supporting information as reasonably required by PM. Upon receipt
of such request and information, PM shall promptly and diligently review such
items and submit them to the EDC. The EDC shall either approve the request
as submitted or notify Developer in writing of its disapproval and any
proposed changes (including the reasons therefor), within twenty-one (21)
days after receipt thereof by the PM.
(c) As soon as practicable, Developer shall prepare and submit
the Design Development Documents to PM for review for compliance with the
Schematic Design Documents.
37
<PAGE>
(d) As soon as practicable, Developer shall prepare and submit
the Construction Documents to PM for review for compliance with the Schematic
Design Documents. Developer may prepare and submit the Construction
Documents in parts in lieu of submitting all of such documents at one time.
The Contractor Agreement(s) should describe the methods of construction that
are designed to facilitate compliance with applicable Governmental
Requirements relevant to the reduction of the negative impact of construction
on adjacent properties and on businesses in the vicinity of the construction.
These shall include policies regarding scheduling of certain activities
(E.G., delivery of materials and equipment) that disrupt vehicular and
pedestrian traffic, such activities being limited to off-peak hours to the
extent possible and consistent with the Working Construction Schedule;
policies concerning the placement of temporary structures (E.G., field
offices, scaffolding, hoists); temporary utility connections (E.G., light,
heat, power) that may adversely affect surrounding businesses; and efforts to
be undertaken to schedule public paving, sidewalks, sewers, curbs and utility
hookups.
(e) As soon as practicable, Developer shall submit any material
changes in the Design Documents or Working Development Schedule to PM.
(f) EDC acknowledges that Developer may phase its submission of
Design Documents and may "fast track" certain elements. EDC agrees that
Developer may do so as long as the Completion is not delayed beyond the
Agreed Upon Opening Date.
4.2 ARCHITECT(S) AND CONSULTANTS.
(a) Neither the Architect(s) nor any other Consultants are
agents, either expressed or implied, of City or EDC.
(b) Upon their engagement, the resumes of the principals of the
Architect(s) and other Consultants working on the Development shall be
promptly provided in writing to PM. In the event that any of the principals
of the Architect(s) and other Consultants working on the Development are
changed, Developer shall notify PM as promptly as practicable upon learning
of such change.
4.3 CITY OR EDC NOT RESPONSIBLE FOR DESIGN DOCUMENTS. Neither City
nor the EDC shall be responsible for any error or omission in the Design
Documents, or for failure of the Design Documents, or a part thereof, to
comply with Governmental Requirements, or for Design Documents that result in
or cause a defective design or construction.
4.4 PERMITS.
(a) Developer shall diligently prepare and file all applications
for, and pursue and use diligent efforts to obtain, the Permits. PM shall
(x) cooperate with and assist Developer in securing the Permits and (y) use
commercially reasonable efforts to expedite the issuance of the Permits;
provided, however, that nothing in this Agreement shall adversely affect,
limit, restrict or
38
<PAGE>
reduce the right of the City or the County, as Governmental Authorities, to
exercise their respective governmental powers and authority and to act in
regulatory matters in accordance with applicable Governmental Requirements.
(b) Developer shall, not later than the Outside Submission Date,
submit to the City Department of Buildings and Safety Engineering all
documentation reasonably necessary for such Department to review and upon
completion of such review, (subject to such comments and changes requested by
such Department), issue the Building Permit.
4.5 NON-MATERIAL DEVIATIONS. Developer shall have the right to make
Non-Material Deviations, including the right to issue Supplemental
Instructions ordering changes in the Work to accommodate Non-Material
Deviations.
4.6 MATERIAL DEVIATIONS. Developer shall make no Material Deviations
without the prior written approval of the City and the EDC. Notwithstanding
the foregoing, due to the imprecise ability to measure "gaming floor area,"
City and EDC agree that if in good faith the Developer measures its gaming
floor area in a manner that differs from City's measurement of gaming floor
area by ten percent (10%) or less, such variance shall not be considered a
Material Deviation.
4.7 PRESENTATION ILLUSTRATIONS; VIRTUAL REALITY.
(a) The Developer shall deliver to the EDC and City as soon as
practicable following the Closing Date presentation-quality illustrations of
the Casino Complex, including interiors.
(b) The Developer, in coordination with the Other Land-Based
Casino Developers, shall deliver to EDC as soon as practicable a "virtual
reality illustration" of the Casino Complex showing first, vehicular traffic,
next, the massing of the facilities in the Casino Area and lastly, renderings
of the exteriors, which EDC shall make available to City. In no event shall
such illustration include the interiors of the Casino Complex.
4.8 INTEGRATED COMPLEX. Developer agrees that it shall design the
Casino Complex as an integrated complex. The goal of the Development is that
the buildings, landscaping and other pertinent improvements will blend
together and join pleasantly with adjacent properties to create an elegant
environment, compatible with City's urban context.
4.9 DEVELOPER'S REPRESENTATIVE AND PROGRAM MANAGER.
(a) Unless provided otherwise, whenever approval or action by
Developer is required by this Agreement with respect to construction matters,
such action or approval shall be taken or given by the Developer's
Representative. Written notice of the designation of Developer's
Representative (and any subsequent change in the Developer's Representative)
shall be given by the Developer to the other parties in the manner provided
in SECTION 21.1. Nothing herein is intended
39
<PAGE>
to impose personal liability on Developer's Representative except as may
exist by law or contract between a party and its agent or authorized
representative.
(b) As to construction related matters and approvals: (i) EDC
agrees that PM shall communicate with the Developer and any of its agents only
through Developer's Representative; and (ii) Developer's Representative agrees
to communicate with EDC through the PM. Any variation of this procedure must be
authorized in writing.
(c) Commencing on the Closing Date, the Developer's
Representative and the PM shall meet as necessary (no less often than
monthly) to discuss and coordinate all aspects of the Work ("Work Meetings").
The Work Meetings are, among other things, intended to constitute the
principal forum in which matters addressed in this ARTICLE IV and all other
EDC approvals (outside of the normal approval, permitting and inspection
process associated with building projects generally in the City) are to be
discussed and resolved and in which the PM shall propose methods to expedite
the resolution of outstanding issues and the obtaining of necessary Permits
and inspections by the City and its subdivisions and instrumentalities. With
respect to any matter raised with the PM which under this Agreement requires
the approval of the EDC, unless otherwise provided in this Agreement, the PM
shall respond as promptly as practicable within fifteen (15) days of such
request. If the EDC refuses to approve such matter, the Developer's
Representative and the PM shall continue their discussions in good faith to
arrive at a resolution of the outstanding matter acceptable to Developer and
EDC in the exercise of their reasonable judgment.
(d) EDC agrees to use reasonable efforts to (i) retain a PM prior
to the Closing Date; (ii) advise PM of his or her obligation to maintain the
confidentiality of confidential information provided to him or her by
Developer; and (iii) obtain a post-employment restriction agreement
restricting the PM from becoming employed by the Developer or the Other
Land-Based Casino Developers or their respective Affiliates for a period of
two (2) years after the Completion Date.
4.10 UTILITY RELOCATION. Developer shall, at Developer's sole cost
and expense, be responsible for the location and identification of all active
utilities within the Development, including but not limited to electrical,
gas, water, steam, sewerage, telephone and cable. The cost of relocating any
utilities owned or operated by a private or quasi-public entity shall be the
responsibility of the private or quasi-public utility.
4.11 INFRASTRUCTURE IMPROVEMENTS. Provided Schedule A reflects an
aggregate estimate of not more than Two Hundred Fifty Million Dollars
($250,000,000) or such higher number as shall have been approved in writing
by Developer, Developer shall pay City for Developer's Pro Rata Share of all
reasonable and documented hard and soft costs for Infrastructure Improvements
prior to the time that City pays any costs related thereto according to a
draw procedure having adequate safeguards to assure timely payments to the
City to be established by Developer, City and the Other Land-Based Casino
Developers. Upon receipt of such funds, City agrees to use such funds to
construct the Infrastructure Improvements. The Developer shall have no
responsibility to maintain
40
<PAGE>
or pay for the maintenance of any Infrastructure Improvements not owned by
Developer. Neither the City nor the EDC shall be responsible to pay for or
otherwise fund the construction of any Infrastructure Improvements, such
costs and expenses being the sole responsibility of the utility in the case
of any private or quasi-public utilities or the responsibility of Developer
in all other circumstances. City will advise and consult with Developer of
its overall plans for Infrastructure Improvements to or affecting the Casino
Area.
4.12 QUALITY OF WORK AND MATERIALS. All Work shall be performed in a
good and workmanlike manner and in accordance with good construction
practices. All materials used in the construction of the Development shall be
of first class quality. The quality of the Finish Work shall meet or exceed
First Class Casino Complex Standards.
ARTICLE V
SITE MATTERS
5.1 DEVELOPER'S RIGHT OF ENTRY PRIOR TO CONVEYANCE. As City and/or
EDC obtains a right of entry which permits Developer onto the Project
Premises for purposes of conducting tests and inspections, the City and/or
EDC shall grant to Developer (or shall cause Developer to be granted) a right
of entry onto the Project Premises to conduct preliminary or preparatory
work, such as surveys (including environmental surveys) and tests (including
but not limited to core sampling, test pits, monitoring wells, soil
compaction and test pilings). City, EDC and/or Developer shall use
reasonable best efforts to cause any parties who prepared such surveys or
tests to issue a written statement that permits the City, EDC and Developer,
as applicable, to rely on such surveys and tests. To the extent practical,
City and/or EDC and Developer agree to share the results of such testing and
inspection activities so as to avoid a duplication of such efforts.
Developer shall not suffer or permit to be enforced against all or any part
of the Development any contractors', subcontractors' or materialmens' liens
arising from any of the aforesaid activities. Developer shall promptly pay,
bond out or cause to be paid or bonded out all of said claims, demands and
liens before any action is brought to enforce the same. Developer hereby
agrees to defend, indemnify and hold harmless City and EDC and each of their
officers, agents and employees from and against any and all liabilities,
losses, damages, costs, expenses, claims, encumbrances, obligations, charges,
penalties and causes of action (including without limitation reasonable
attorneys' fees) that City and EDC and each of their officers, agents and
employees may suffer or be required to pay which arise out of or relate in
any manner to such activities performed by or an behalf of Developer on or
with respect to the Project Premises. Developer shall cause any of
Developer's contractors that conduct such work and activities on the Project
Premises to maintain insurance with respect to liability to third parties in
amounts reasonably specified by City and/or EDC. The indemnity provisions of
this SECTION 5.1 shall survive the termination of this Agreement.
41
<PAGE>
ARTICLE VI
CONSTRUCTION PHASE
6.1 GENERAL. Developer shall cause Contractor to construct the Casino
Complex and perform the Work pursuant to the Contractor Agreements and the
Construction Documents under the supervision and control of Developer.
6.2 PERFORMANCE OF THE WORK.
(a) Developer shall cause Contractor(s) to:
(1) Provide, furnish and maintain at its expense during the
construction period of the Casino Complex an appropriate separate facility
located at the project area for use by the PM and the PM's staff as a field
office. Developer shall pay or reimburse EDC for the reasonable cost of
furnishing and equipping such facility for the PM and the PM's staff. In
addition, until six (6) months following the Completion Date, Developer
shall pay or reimburse EDC for all documented fees and reasonable expenses
of EDC for the services of the PM and the PM's staff, to the extent the PM
and PM's staff are providing services to the Development. The EDC and
Developer shall agree no later than the Closing Date on a written budget
for the PM and the PM's staff.
(2) Deliver to the PM copies of the temporary and final
certificates of occupancy for the Casino Complex.
(b) Developer shall give all notices and comply, and shall use all
reasonable efforts to cause Contractor and all Consultants to comply, with all
Governmental Requirements applicable to the Work, and shall obtain, or use all
reasonable efforts to cause Contractors and/or all Consultants, as applicable,
to obtain, all licenses or other authorizations necessary for the prosecution of
the Work.
(c) Developer shall take reasonable precautions to protect from
damage caused by the Work, property adjacent to or in close proximity to the
Development and shall be responsible for damage or injury to adjacent public
and private property resulting from its construction operations. This
applies, but is not limited, to public utilities, trees, lawn areas,
buildings, monuments, fences, pipes and underground structures and public
streets (except natural wear and tear of streets resulting from legitimate
use thereof by Developer) and, wherever such property is damaged due to the
activities of Developer, it shall be restored promptly by Developer, at its
own expense, to substantially the condition which existed immediately before
such damage. In case of failure on the part of Developer to restore or take
steps to restore and diligently prosecute such restoration, or make good such
damage or injury, EDC may, upon thirty (30) days written notice to Developer,
proceed to repair, rebuild, or otherwise restore such property as may be
necessary, and the cost thereof shall be immediately due and payable to EDC.
42
<PAGE>
(d) Developer shall confine the equipment, apparatus, materials
and supplies of Developer, the Contractor(s), the Architect(s), Consultants,
subcontractors and all employed by them to the limits of the Project Site or
as otherwise permitted by law or Permits.
(e) City acknowledges that certain temporary construction
easements or other rights may be necessary for the performance of the Work,
and City agrees to provide, if available to the City without cost, the
necessary temporary easements or other rights subject to its reasonable
approval. Any delay in providing or failure to provide such necessary
easements that are available to the City without cost shall extend the
applicable schedules to the extent the delay or failure delays the Work.
6.3 COMMENCEMENT AND COMPLETION OF THE WORK. Time being of the
essence, Developer, after receipt of all required Permits, shall, subject to
the terms and provisions of this Agreement, prosecute the Work diligently,
using such means and methods of construction and sufficient employees as
Developer reasonably believes are necessary to maintain the progress of the
Work substantially in accordance with the Working Development Schedule and to
Complete the Casino Complex in accordance with the requirements of the
Construction Documents no later than the Agreed Upon Opening Date. Subject
to SECTION 7.2, Developer agrees to use commercially reasonable efforts to
open to the public for their intended use no less than ninety percent (90%)
of the retail and ninety percent (90%) of the restaurant space within nine
(9) months following the Completion Date and the balance of the Casino
Complex within a commercially reasonable time following the Completion Date.
6.4 CONTRACTOR; SUBCONTRACTORS.
(a) No later than the submittal of the Construction Documents to
PM pursuant to ARTICLE IV, Developer shall submit to EDC the name of the
Contractor and the form of the Contractor Agreement, which agreement shall
contain a provision that, in the event of a default by Developer and upon a
request from EDC and City, the Contractor agrees to continue with the Work in
accordance with the Contractor Agreement provided that EDC pays the
Contractor for work performed pursuant to this SECTION 6.4(a). EDC shall
furnish copies of all Contractor Agreements to the City.
(b) Developer shall furnish to PM as promptly as practical after
the delivery of the Construction Documents a list of all known subcontractors
who will be performing the Work.
(c) Developer shall cause appropriate provisions to be included
in all Contractor Agreements and subcontracts pertaining to the Work to bind
the Contractor(s) and all subcontractors to the terms of this Agreement, as
applicable to the Work of the Contractor(s) or the subcontractor(s).
43
<PAGE>
(d) Subject to SECTION 6.4(a), nothing in this Agreement or in
the Construction Documents, including any Contractor Agreements, shall (i)
create any contractual relationship between City and/or EDC and the
Contractor(s) or any subcontractor or (ii) liability against City and/or EDC
for labor, services or materials of a Contractor or a subcontractor. No
Contractor or subcontractor is an agent, either expressed or implied, of City
and/or EDC.
6.5 CLAIMS AND LIENS. Developer shall notify PM as soon as
practicable after Developer has actual knowledge of any filed construction
lien arising from any of the aforesaid Work.
6.6 CONSTRUCTION MATTERS.
(a) For the purpose of verifying compliance with this Agreement,
Developer and the Contractor(s) shall keep such full and detailed accounts as
shall be sufficient to verify the costs of the Casino Complex. Subject to
ARTICLE XVII, City and/or EDC shall be afforded access to Developer's Books
and Records and Developer shall preserve all such Books and Records
pertaining to the Casino Complex for a period of six (6) years from creation
of such Books and Records, or for such longer period as may be required by
law. Developer shall cause the Contractor Agreement to contain a provision
similarly binding Contractor.
(b) Developer shall cause the Contractor Agreement to bind
Contractor(s) and subcontractors to comply with the applicable regulations of
the U. S. Department of Labor, safety and health regulations for construction
promulgated under the Occupational Safety and Health Act of 1970 (Pub.L.
91-596) and any other safety and health regulations applicable to the Work.
Nothing in these laws shall be construed to supersede or in any manner affect
any workers' compensation law or statutory rights, duties or liabilities of
employers and employees under any law with respect to injuries, diseases or
death of employees arising out of, or in the course of, employment.
(c) The Developer and the Other Land-Based Casino Developers
agree to work together with the City in good faith to assure the availability
of adequate parking without expense to the City, for persons attending events
at Chene Park, both during construction of the Casino Complex and after
Completion.
6.7 FAILURE TO COMPLETE BY AGREED UPON OPENING DATE. Time is of the
essence, and a delay in Completion will result in substantial injury and
additional costs to City and/or EDC. If Completion occurs subsequent to the
Agreed Upon Opening Date, as it may be extended in accordance with the terms
of this Agreement, Developer shall pay to City as the sole remedy of the City
and EDC and as liquidated damages (and not as a penalty), an amount per
calendar day for each calendar day after the 30th calendar day following such
Agreed Upon Opening Date during which the Casino Complex is not Completed
(the "Late Period") equal to the lesser of (i) $135,616, or (ii) (A) during
periods in which two (2) other land-based casinos are open to the public
within the City, twenty-five percent (25%) of the City's share of the
aggregate Wagering Tax and Municipal Services fee derived from both such
operations during the Late Period and (B) during periods in which one (1)
other land-based casino is open to the public within the City, forty percent
(40%) of the City's
44
<PAGE>
share of the Wagering Tax and Municipal Services fee derived from such
operation during the Late Period, divided by the number of days in the Late
Period in each case reduced by (x) one hundred twenty percent (120%) of the
City's share of the Wagering Tax and (y) one hundred percent (100%) of the
Municipal Services Fee derived from the operation of Developer's Temporary
Casino during the Late Period, provided however during periods in which no
Land-Based Casino Development is open to the public within the City, the
figure in clause (i) shall be used for purposes of the computation.
Developer shall under no circumstances have aggregate liability hereunder and
pursuant to SECTION 10.2(f) in excess of Fifty Million Dollars
($50,000,000). The foregoing limitation on City's and EDC's remedies shall
in no way limit or diminish City's or EDC's rights or remedies under the
Guaranty and Keep Well Agreement.
ARTICLE VII
OTHER COVENANTS OF DEVELOPER
7.1 CASINO COMPLEX OPERATION. Developer agrees to diligently operate
the Casino Complex and all other support facilities directly, or through
Casino Component Manager/Operators or Component manager(s), in a manner
consistent with First Class Casino Complex Standards and in compliance with
this Agreement.
7.2 HOURS OF OPERATION. Developer covenants that, from the
Completion Date and at all times thereafter, it shall operate the Casino
Complex in compliance with all Governmental Requirements concerning hours of
operation. Developer covenants that, from the Completion Date and at all
times thereafter to: (i) maintain the maximum allowable hours for Casino
Gaming Operations; (ii) continuously operate and keep open for business to
the general public twenty-four (24) hours each day, every day of the calendar
year, the hotel Component and the parking Component; and (iii) operate and
keep open for business to the general public all Components (other than hotel
Component, parking Component and Components where Casino Gaming Operations
are conducted) in accordance with commercially reasonable hours of operation.
Notwithstanding the foregoing, but subject to Developer's obligations to
obtain City's approval for Material Alterations, Developer shall have the
right from time to time in the ordinary course of business and without
advance notice to City, to close portions of any Component (x) for such
reasonable periods of time as may be required for repairs, Alterations,
maintenance, remodeling, or for any reconstruction required because of
casualty, condemnation, governmental order or Force Majeure or (y) during
non-peak hours or as a result of seasonal demands in accordance with usual
and customary casino operating practices. The obligations of Developer under
this SECTION 7.2 shall lapse and be of no further force or effect ten (10)
years after the Execution Date.
45
<PAGE>
7.3 RADIUS RESTRICTION.
(a) For purposes of this SECTION 7.3, "Restricted Party" means
any Person who directly or indirectly owns any interest in Developer or in
any Casino Manager which is an Affiliate of Parent Company other than any
Person who is a Restricted Party due solely to that Person's ownership of (x)
a direct or indirect interest in a Publicly Traded Corporation or (y) five
percent (5%) or less direct or indirect interest in Developer. Commencing on
the Execution Date and continuing for the shorter of (x) such period as
casino gaming activities are permitted in the City; or (y) two (2) years
after the Termination Date, neither Developer, Parent Company, any Casino
Manager which is an Affiliate of Parent Company, Developer or any Restricted
Party, nor any Restricted Party, shall directly or indirectly (i) manage,
operate or become financially interested in any casino within the Radius
other than the Casino Complex or the Temporary Casino, (ii) make application
for any franchise, permit or license to manage or operate any casino within
the Radius other than the Casino Complex or the Temporary Casino or (iii)
respond positively to any request for proposal to develop, manage, operate or
become financially interested in any casino within the Radius (the "Radius
Restriction") other than the Casino Complex or the Temporary Casino, provided
that with respect to any Casino Manager which is an Affiliate of Parent
Company, Developer or any Restricted Party, the period set forth in clause
(y) shall be two (2) years after the termination of its Casino Component
Management Agreement. Developer shall cause Parent Company, any Casino
Manager which is an Affiliate of Parent Company, Developer or any Restricted
Party and each Restricted Party requested by City, to execute and deliver to
City an agreement to abide by the Radius Restriction. The Radius Restriction
shall survive the termination of this Agreement.
(b) If Parent Company, Developer or any Restricted Party acquires
or is acquired by a Person such that, but for the provisions of this SECTION
7.3(b), either Parent Company, Developer or any Restricted Party or the
acquiring Person would be in violation of the Radius Restriction as of the
date of acquisition, then such party shall have five (5) years in which to
comply with the Radius Restriction. In addition, if the laws of the State
are amended to allow more than three (3) casinos within the City, then
neither Developer nor any Restricted Party shall be deemed to be in violation
of the Radius Restriction solely by reason of an ownership or other interest
in any such additional casinos.
(c) Notwithstanding anything in SECTION 7.3(a) to the contrary,
Developer shall have the right to (i) make loans to the Other Land-Based
Casino Developers provided that (x) such loans are not secured, in whole or
in part, by the Casino Complex, any Component or any direct or indirect
ownership interest in Developer (other than by a Permitted Interest, as
herein defined) and (y) the Developer, as the result of such loans, is given
no ability to control or manage the affairs of the borrower; and (ii)
purchase such ownership interest in any other Land-Based Casino Development
as and to the extent permitted under the Act (a "Permitted Interest").
(d) It is the desire of the parties that the provisions of this
Section be enforced to the fullest extent permissible under the laws and
public policies in each jurisdiction in which enforcement might be sought.
Accordingly, if any particular portion of this Section shall ever be
46
<PAGE>
adjudicated as invalid or unenforceable, or if the application thereof to any
party or circumstance shall be adjudicated to be prohibited by or invalidated
by such laws or public policies, such section or sections shall be (i) deemed
amended to delete therefrom such portions so adjudicated or (ii) modified as
determined appropriate by such a court, such deletions or modifications to
apply only with respect to the operation of such section or sections in the
particular jurisdictions so adjudicating on the parties and under the
circumstances as to which so adjudicated.
(e) The obligations of Developer under this Section 7.3 shall
lapse and be of no further force or effect ten (10) years after the Closing
Date.
7.4 CASINO COMPONENT MANAGEMENT AGREEMENTS.
(a) Developer shall not enter into any agreement or contract for
the operation and/or management of the Casino or the Casino Complex without
in each case receiving the approval of City. Notwithstanding the foregoing,
the Developer shall have the right to enter into any agreement or contract
for the operation and/or management of any Component (other than the Casino)
without the approval of the City, provided that with respect to the hotel
Component and/or parking Component, Developer either first complies with
SECTION 3.7 or the agreement or contract is entered into with an Affiliate
during such period as Developer meets or exceeds the Performance Threshold.
Once approved by City, no Casino Component Manager/Operator Agreement for a
Covered Component requiring City's approval to be entered into may be
assigned, and Developer shall not accept the assignment of, any such Casino
Component Manager/Operator Agreement without the prior written consent of
City.
(b) In the event that a Casino Component Manager/Operator shall
desire to assign or transfer a Casino Component Management Agreement and such
transfer requires City's consent, the Casino Component Manager/Operator shall
first make application to City, setting forth the name or names of the
proposed assignee and an affidavit from the proposed assignee identifying all
Persons having interests in the assignee (provided, however, that if the
assignee is a Publicly Traded Corporation only those Persons known to have an
ownership interest in assignee of five percent (5%) or more need be
identified) and their respective addresses and that the proposed assignee
meets the following minimum qualifications: (i) possesses or will possess
within the time limits established by the respective Governmental Authority,
all required permits, approvals and licenses to own and operate the
applicable Component; and (ii) possesses at least three (3) years prior
experience in operating facilities of a character comparable to the
applicable Component in each of at least two (2) other locations or otherwise
demonstrates to the reasonable satisfaction of City that it possesses
comparable experience. Evidence of licensing by the State, if applicable,
and a resume of prior operating experience shall also be provided. The
foregoing are intended to establish minimum criteria for consideration and
City shall not be required to grant approval of an assignee solely because
that assignee satisfies the above criteria if City reasonably determines that
such assignee is not qualified. At such times as Developer fails to meet or
exceed the Performance Threshold, and unless a Performance Guaranty from an
Acceptable Guarantor is in full force and effect, Developer shall not amend
or modify any agreement or contract to operate and/or manage any Covered
47
<PAGE>
Component without in each case receiving the prior written consent of City,
which consent shall not be unreasonably withheld.
(c) Any consent by City under this Subsection shall apply only to
the specific transaction thereby authorized and shall not relieve the Casino
Component Manager/Operator from the requirement of obtaining any prior
consent of City for any future assignment.
7.5 INAUGURAL CEREMONIES. Developer shall notify and consult with
the Mayor and City Council with respect to planning inaugural ceremonies for
the Casino Complex.
7.6 MARKETING COOPERATION AND COORDINATION. Developer shall use
commercially reasonable efforts to coordinate marketing efforts between City
and Developer, especially with reference to the Metropolitan Detroit
Convention and Visitors Bureau ("MDCVB") and the blocking of rooms for
convention purposes. Such marketing program may include direct sales, direct
mail and joint media advertising promotion, public relations and publicity
efforts. Developer agrees to construct, at its expense, a visitor
information center (the "Center") in the Casino Complex. The Center shall be
located in a visible location and shall consist of no less than one hundred
(100) square feet. The plan and design of the Center shall be subject to the
reasonable review and approval of the MDCVB. Developer shall maintain the
Center but shall have no obligation to staff it.
7.7 CAPITAL MAINTENANCE FUND.
(a) Subject to SECTION 3.7, Developer shall establish or cause to
be established a reserve for capital replacements and/or enhancements to be
funded in accordance with EXHIBIT 7.7(a) (the "Capital Maintenance Fund").
The Capital Maintenance Fund shall be established as a segregated account as
an assurance fund to guarantee necessary capital replacements and shall be
utilized first for any necessary capital replacements to the Development.
Any amounts remaining in the Capital Maintenance Fund at the close of each
Fiscal Year shall be carried forward and shall be retained for use in
subsequent Fiscal Years. If the amount in the Capital Maintenance Fund is
insufficient at the time the funds are planned for expenditure as otherwise
provided in subparagraph (b), Developer shall supply or cause to be supplied
such shortfall in order to complete the capital expenditure. If an amount in
excess of the Capital Maintenance Fund is expended in any Fiscal Year it
shall be credited to the Developer's obligation to fund the Capital
Maintenance Fund in future Fiscal Years or to cure a shortfall in any prior
Fiscal Year, as directed by Developer, provided that no cure shall be
permitted if, prior to such cure, City has delivered written notice of
default to Developer for failure to meet its obligations under this SECTION
7.7. The obligations of Developer under this SECTION 7.7(a) shall lapse and
be of no further force or effect seven (7) years after the Execution Date.
(b) Developer shall make all capital expenditures necessary to
maintain the Casino Complex up to First Class Casino Complex Standards
regardless of the amounts in the Capital Maintenance Fund. In the event City
determines in good faith that such standard is not being maintained, City
shall provide Developer with written notice thereof.
48
<PAGE>
7.8 MAINTENANCE AND REPAIRS.
(a) Developer shall, at its sole cost and expense, keep and
maintain the Development (other than Infrastructure Improvements not owned by
Developer) up to First Class Casino Complex Standards, ordinary wear and tear
and casualties excepted, and in conformity with all applicable Governmental
Requirements, including the following to the extent located within the
Development boundaries: the Improvements (other than Infrastructure
Improvements not owned by Developer), landscaping, parks, grassy areas,
streets, driveways, curbs, and sidewalks; and shall keep and maintain the
entire Development and all landscaping and undeveloped areas thereon, in a
clean, sanitary, orderly and attractive condition, free from weeds, rubbish
and debris. Developer shall also maintain all sidewalks that abut the
Development even if not located within the Development boundaries. Developer
shall also adopt and maintain such standards of property maintenance and
housekeeping up to First Class Casino Complex Standards.
(b) Upon acquisition of the Public Land by the City:
(1) The City shall pay and be responsible for the design
and improvement of the Public Land.
(2) The City shall consult with the Developer with respect
to such design and improvement and use reasonable efforts to coordinate its
efforts with those of Developer so as to avoid conflicts between the
scheduling of construction of the Public Land improvements and the Casino
Complex.
(3) The Developer, together with the Other Land-Based
Casino Developers, shall establish a "Maintenance Trust" or equivalent
entity (the "Trust") to which Developer will contribute funds upon
establishing the Trust and on each anniversary thereafter until termination
of the Agreement. The amount contributed shall be determined pursuant to
good faith negotiations among the parties applying the standard set forth
in SECTION 7.8(b)(4).
(4) The Trust shall be responsible for the maintenance of
the Public Land (other than Chene Park or St. Aubin marina) in a clean,
sanitary, orderly and attractive condition, free from weeds, rubbish and
debris.
(5) The Trust shall engage third parties to satisfy its
maintenance obligations.
(6) The Trust shall be managed by designees of the City and
by designees of parties contributing to the Trust.
49
<PAGE>
(7) The obligations imposed on Developer pursuant to this
SECTION 7.8(b) are Developer's sole obligations with respect to maintenance
of the Public Land.
(8) The obligations imposed on Developer pursuant to this
SECTION 7.8(b) shall not in themselves give rise to an obligation by
Developer to Respond to a Release or to indemnify or reimburse City or EDC
with respect to any cost incurred in connection with any Environmental
Claim pertaining to the Public Land.
7.9 MEMORANDUM OF AGREEMENT; COVENANTS TO RUN WITH THE LAND.
(a) The parties agree that the Memorandum of Agreement shall not
in any circumstances be deemed to modify or to change any of the provisions
of this Agreement.
(b) The restrictions imposed by and under SECTION 7.17
(collectively, the "Restrictions") will be construed and interpreted by the
parties hereto as covenants running with the land. Pursuant hereto the
Developer, by accepting the deed to the Project Premises accepts same subject
to such Restrictions and agrees for itself, its successors and assigns to be
bound by each of such Restrictions. The City shall have the right to enforce
such Restrictions against the Developer, its successors and assigns to or of
the Project Premises or any part thereof or any interest therein.
7.10 FINANCIAL STATEMENTS; ANNUAL BUSINESS PLAN.
(a) Upon the earlier of the completion of the Temporary Casino or
the Completion Date, Developer shall provide City with (i) unaudited
Financial Statements for each calendar quarter within sixty (60) days after
the end of each quarter certified as accurate in all material respects by
Developer, and (ii) audited Financial Statements prepared in accordance with
GAAP within one hundred twenty (120) days after the end of each Fiscal Year.
(b) Subject to SECTION 3.7, at such times as Developer fails to
meet or exceed the Performance Threshold, Developer shall, within thirty (30)
days thereafter, prepare and make available to City for review an Annual
Business Plan for the upcoming twelve (12) month period. The City shall be
allowed to review and make notes from the Annual Business Plan provided that
City shall use reasonable efforts to keep the information contained in the
Annual Business Plan confidential. City and other relevant representatives
and the relevant Casino Component Manager/Operators shall meet within thirty
(30) days after presentation of the Annual Business Plan to City to discuss
those aspects of the Annual Business Plan addressing marketing, revenue
payments and other relevant issues.
7.11 ALTERATIONS. After the Completion Date, Developer shall not make
or cause or permit the making of any Material Alterations in or to the
Development unless the City shall have given its prior written approval and
consent which shall not be unreasonably withheld. Notwithstanding the
foregoing, due to the imprecise ability to define "gaming floor area," City
agrees that if in good faith the Developer defines its gaming floor area in a
manner that in City's judgment varies from the
50
<PAGE>
Developer's commitment to have one hundred thousand (100,000) square feet of
gaming floor area by ten percent (10%) or less, such variance shall not be
considered a Material Alteration. In addition, if at any time City
authorizes either or both of the Other Land-Based Casino Developers to
increase the size of its respective gaming floor area (an "Authorized
Increase"), Developer shall thereupon be authorized to increase the size of
its gaming floor area by the same number of square feet as set forth in any
Authorized Increase. The obligations of Developer under this SECTION 7.11
shall lapse and be of no further force or effect ten (10) years after the
Execution Date.
7.12 SPACE LEASES. Subject to SECTION 3.7, during such periods as
Developer fails to meet or exceed the Performance Threshold, Developer shall
notify the City of any new Space Lease or any material amendment or
modification of any existing Space Lease.
7.13 NEGATIVE COVENANTS. Developer covenants that except as indicated
or as otherwise required by applicable law, at all times during the term of
this Agreement:
(a) During the five (5) year period following the Effective Date
(the "Restricted Period") Developer will not, except as required by
applicable law, make any change in its organizational structure which would
alone or in the aggregate result in either (i) the governing body of
Developer having fewer than three (3) members who are African American, two
(2) members who are women and three (3) members who are residents of the
City, provided that a member of the governing body may be counted more than
once, if applicable, to satisfy such membership requirements; or (ii) the
material diminution of the powers of such governing body.
(b) Developer will not, upon an Event of Default or during the
continuance of any event which, with the giving of notice or passage of time
or both, could become an Event of Default, declare or pay any dividends or
make any other payments or distributions to any members of Developer or their
respective Affiliates, except for Permitted Affiliate Payments.
(c) During the Restricted Period Developer (i) will prohibit a
Transfer by Atwater Casino Group, L.L.C. directly or indirectly of its
ownership interest in Developer and (ii) will cause Atwater Casino Group,
L.L.C. to prohibit a Transfer by a Local Partner of any direct or indirect
ownership interest in Atwater Casino Group, L.L.C., except for a "Permitted
Transfer." For purposes of this SECTION 7.13(c), a "Permitted Transfer" means
any Transfer by a Local Partner of a direct or indirect ownership interest in
Atwater Casino Group, L.L.C. which meets any of the following: (1) the
transferee of the interest is a resident of the State; (2) the transferee of
the interest is a Local Partner; (3) the Transfer is being made due to the
economic hardship of the Local Partner; (4) the transferee of the interest is
a spouse, child or parent ("Family Members") of a Local Partner; (5) the
transferee of the interest is an entity whose beneficial owners consist
solely of Local Partners and/or Family Members; (6) if the transferor is an
entity, the transferees of the interest are the beneficial owners of such
transferor; (7) the Transfer is by operation of law; (8) the Transfer is on
account of a pledge to (x) an institutional lender or (y) any Person who owns
a direct or indirect interest in Developer; (9) the transferee of the
interest is Developer or any of its Affiliates and the failure to purchase
the interest would result in any Person who directly or indirectly owns an
interest
51
<PAGE>
in Developer becoming ineligible to hold a Certificate of Suitability or
Casino License as defined in the Act or otherwise suffering a loss,
suspension or inability to obtain a gaming license in any jurisdiction in
which Developer, such Affiliate or Person conducts or proposes to conduct
gaming operations; or (10) the transferee is the Developer or its Affiliate
in the circumstance in which the transferor is in default under its
organizational agreements and the Transfer is made thereunder. In addition,
for purposes of this SECTION 7.13(c), a "Permitted Transfer" includes a
Transfer or series of related Transfers by Atwater Casino Group, L.L.C.
and/or Local Partners which, when aggregated, equals forty-nine percent (49%)
or less of the ownership interest of Atwater Casino Group, L.L.C. in
Developer.
(d) Developer shall not enter into any Financing unless all
parties under the Financing having a right to foreclose on all or part of the
Development execute an agreement in form and substance satisfactory to the
City in the exercise of its reasonable judgment which is consistent with
SECTION 3.4.
7.14 NOTIFICATION OF CERTAIN EVENTS. As soon as practicable after
obtaining knowledge or notice thereof, Developer shall deliver to City,
together with copies of all relevant documentation with respect thereto:
(a) Notice of any matured event of default under the Initial
Financing and any other financing related to the Development.
(b) Notice of all summons, citations, directives, complaints,
notices of violation or deficiency, and other communications from any
Governmental Authority other than City or the Board, asserting a material
violation of Governmental Requirements applicable to the Development.
(c) Notice of any litigation or proceeding in which Developer is
a party if an adverse decision therein would, in Developer's reasonable
opinion, have a material adverse effect on Developer's ability to perform its
obligations hereunder.
(d) Notices received by Developer from the Board which in
Developer's reasonable opinion assert a material violation of the Act.
7.15 VERACITY OF STATEMENTS. Except (i) as otherwise indicated
herein; and (ii) for statements of third parties (other than Affiliates)
which Developer has reasonable grounds to believe are accurate and for
projections which Developer has reasonable grounds to believe are reasonable,
no representation or warranty of Developer, or any certification or report
furnished by Developer to City and/or EDC pursuant hereto which, if not
materially accurate, would have a material adverse effect on the Development,
when read in conjunction with the other representations, warranties and
certifications, contains or will contain, any untrue statement of a material
fact, or will omit any material fact that would cause such representation,
warranty, statement or certification to be materially misleading, provided
that representations, warranties and certifications made as of a specified
date shall reflect facts and circumstances known to Developer as of such
specified date.
52
<PAGE>
7.16 CERTIFICATION OF PERFORMANCE THRESHOLD; FINANCIAL COVENANTS. By
the twentieth (20th) day of each month commencing with the twenty-fifth
(25th) full month subsequent to the Completion Date, Developer shall deliver
to the City Developer's certificate stating (i) whether the Performance
Threshold, Debt Coverage Ratio and Leverage Ratio have or have not each been
met for the previous twelve (12) month period ending on the last day of the
preceding month; and (ii) the amount of Net Worth as of the last day of the
preceding month. If Developer shall fail to deliver such certificate within
ten (10) Business Days after Developer's receipt of written notice of City's
failure to receive such certificate, Developer shall be deemed to be in
breach of SECTION 3.2 and shall be deemed to have failed to meet the
Performance Threshold. The obligations of Developer under this SECTION 7.16
shall lapse and be of no further force or effect ten (10) years after the
Execution Date.
7.17 USE OF PROJECT PREMISES. So long as casino gaming activities
would be permitted by law to operate on the Project Premises (assuming the
existence of a valid Casino License), the primary business to be operated on
the Project Premises shall include casino gaming activities. The obligations
of Developer under this SECTION 7.17 shall lapse and be of no further force
or effect thirty-five (35) years after the Execution Date.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
OF DEVELOPER
8.1 REPRESENTATIONS AND WARRANTIES OF DEVELOPER. Subject to SECTION
7.15, Developer represents and warrants to City that each of the following
statements is true and accurate as of the Execution Date, except as otherwise
indicated herein or in the Exhibits referenced herein:
(a) Developer is a limited liability company duly organized and
validly existing under the laws of Michigan, and has all requisite power and
authority to enter into and perform its obligations under this Agreement and
all other agreements and undertakings to be entered into by Developer in
connection herewith.
(b) This Agreement and, to the extent such documents presently
exist in a form accepted by City and/or EDC and Developer, each document
contemplated or required by this Agreement to which Developer is a party has
been duly authorized by all necessary action on the part of, and has been or
will be duly executed and delivered by, Developer; is binding on Developer;
and is enforceable against Developer in accordance with its terms, subject to
applicable principles of equity and insolvency laws.
(c) Attached hereto as EXHIBIT 8.1(c), is a full and complete
description of the organizational structure of Developer and its Affiliates
including the names and general
53
<PAGE>
backgrounds of all officers, directors and owners of Developer and any Person
that Controls Developer, except that if Developer or an Affiliate is a
Publicly Traded Corporation, only the names and general backgrounds of owners
beneficially owning greater than five percent (5%) of the shares of the
Publicly Traded Corporation need be identified, including:
(1) Whether and to what extent the officers, directors,
shareholders or members are a Minority, a Detroit resident, a Detroit-
Based Business, a Detroit Resident Business or a Small Business Concern.
(2) Whether Developer or an Affiliate holds a gaming
license and in which jurisdiction the license is held, and whether
Developer or an Affiliate has ever been denied a gaming license or
withdrawn an application for a gaming license.
(d) Attached hereto as EXHIBIT 8.1(d), is a full and complete
description of Developer's capabilities, experience and key personnel to the
extent presently identified who Developer anticipates will be assigned to
each Component of the Casino Complex.
(e) Attached hereto as EXHIBIT 8.1(e), is a full and complete
description of projected cost budgets for the financing, design,
construction, furnishing and equipping of each Component of the Casino
Complex, including, without limitation, all soft costs, fees, land
acquisition costs, funding of reserve requirements, costs of projected
Infrastructure Improvements and all material assumptions upon which the
foregoing are based.
(f) Attached hereto as EXHIBIT 8.1(f), is a summary of certain
projections of Developer's operations for the first five (5) years of
operations; provided, however, that specific projections of balance sheets,
income statements and cash flow statements are highly confidential and
proprietary to Developer and Parent Company and are not included in the
Exhibit.
(g) Attached hereto as EXHIBIT 8.1(g), is a full and complete
description of existing and anticipated sources of financing for the Casino
Complex, including the Initial Financing specified in SECTION 3.1 hereof,
pertinent details such as terms, rates, and security covenants, whether
Developer has or will acquire all or some of its financing from a
Detroit-Based Business, a Detroit Resident Business or a Small Business
Concern; and Developer's plan, if any, for utilization of Detroit-based
Minority-owned financial institutions in servicing Developer's financial
needs.
(h) Attached hereto as EXHIBIT 8.1(h), is a full and complete
description of current detailed financial statements for each gaming
operation currently owned or operated by Developer.
(i) Attached hereto as EXHIBIT 8.1(i), is a full and complete
description of Developer's concept for the proposed Development, including:
54
<PAGE>
(1) The proposed development site or location for each
Component of the Casino Complex, a legal description of the property
boundaries, dimensions and total acreage for each such Component of the
Casino Complex, as well as any ancillary facilities proposed.
(2) The size of each Component of the Casino Complex
detailing: the number and types of gaming facilities; the number and
types of restaurants; a description of any hotel, including the number of
rooms and whether such hotel will be available for use by non-casino
patrons; the number and types of lounges or bars; the number and types of
retail shops; the number and types of ancillary entertainment or
recreational facilities planned; a description of any convention
facilities; and a description of any other facilities proposed.
(3) Architectural matters, including drawings, the name(s)
of the architect(s); the floor plans (discussing space allocations and
major functions such as gaming floor, back-of-house, circulation,
accessibility and exiting); building elevations (showing heights, relative
scale and compatibility with adjacent Components); landscaping; and design
theme.
(4) Proposed plans for employee, patron and bus parking;
tour bus and valet drop-off facilities; service vehicle parking; satellite
parking facilities; and other infrastructure related to the Casino Complex.
(5) The proposed phasing plan, the proposed sequence of the
phases and the approximate dates of beginning and completion of development
of the entire project.
(6) Developer's commitment to adhere to applicable zoning
requirements adopted by City.
(j) Attached hereto as EXHIBIT 8.1(j), is a full and complete
description of the amount and manner of investment or other contributions
Developer will make to promote economic growth and revitalize the district in
which the Development will be located; to create new jobs and contribute to the
support of existing employment opportunities; to attract new businesses,
tourists and visitors to City or to the district in which the Development will
be located.
(k) Attached hereto as EXHIBIT 8.1(k), is a full and complete
description of Developer's plans for assisting current businesses that may
experience employee shortages due to their employees accepting employment
relating to the Development.
(l) Attached hereto as EXHIBIT 8.1(l), is a full and complete
description of the manner in which the Development will enhance City as a
desirable location for tourists, conventions, families and urban life and the
manner in which the Development will encourage pedestrian linkages with other
business, economic and entertainment activities in the area in which the
Development is to be located.
55
<PAGE>
(m) Attached hereto as EXHIBIT 8.1(m), is a full and complete
description of the amount of investment or other contributions Developer will
make to promote economic growth and contribute to the revitalization of
economically depressed areas of City, other than the area in which the
Development is to be located; to create new jobs and contribute to the support
of existing employment opportunities; and to attract new businesses, tourists
and visitors to those other areas.
(n) Attached hereto as EXHIBIT 8.1(n), is a full and complete
description of Developer's plan to market the Casino Complex and Developer's
intent to cooperate and consult with City, the Metropolitan Detroit Convention
and Visitor's Bureau or other regional tourism and marketing organizations to
implement a comprehensive and uniform system of marketing City as an
entertainment destination.
(o) Attached hereto as EXHIBIT 8.1(o), is a summary of the
presently projected key management and other staff for each functional area
of operation broken down by the number of full-time and part-time positions,
and for each job classification, its respective total estimated salaries and
benefits.
(p) Attached hereto as EXHIBIT 8.1(p), is a full and complete
description of Developer's program for staff training and development and staff
relations.
(q) Attached hereto as EXHIBIT 8.1(q), is a full and complete
description of Developer's Equal Opportunity Employment Plan to recruit,
train and upgrade Detroit residents, Minorities and women for all employment
classifications, including but not limited to:
(1) How Developer will establish contacts in City to foster
an interest in casino careers among Detroit residents, Minorities and
women, and publicize and market the Casino Complex employment
opportunities.
(2) Any proposed systematic training program to prepare
Detroit residents, Minorities and women, among others, with the life
skills and the employment skills necessary for responsible jobs within
the Casino Complex.
(r) Attached hereto as EXHIBIT 8.1(r), is a full and complete
description of Developer's commitment to hire construction contractors who
agree to include in their construction contracts an express term that the
rates, wages and fringe benefits to be paid to each class of construction
mechanics and each of their subcontractors shall be not less than the rates,
wages and fringe benefits prevailing in City as established by the most
recent survey of the Michigan Department of Labor for prevailing wage
determination under Act 166, P.A. 1965 (Act 166, P.A. 1965), MCLA 408.551 ET.
SEQ., MSA 17.256(a), ET. SEQ.
(s) Attached hereto as EXHIBIT 8.1(s), is a full and complete
description of Developer's commitment to hire contractors who will commit to
the goal of maximizing to the greatest extent possible the number of Detroit
resident apprentices who advance to journeymen status
56
<PAGE>
by agreeing themselves, and requiring their contractors to agree to, and to
the greatest extent possible utilizing unions that do or will, operate
apprentice programs on the Development construction sites that are open to
all residents of City.
(t) Attached hereto as EXHIBIT 8.1(t), is a full and complete
description of Developer's commitment to hire contractors who agree to
implement an Equal Opportunity Employment Plan conforming to all applicable
laws and consistent with City's Executive Order 22.
(u) Attached hereto as EXHIBIT 8.1(u), is a full and complete
description of Developer's commitment to purchase goods and services from
Detroit-Based Businesses, Detroit Resident Businesses or Small Business
Concerns, which to the greatest extent possible should be not less than fifty
one percent (51%) of the total dollar value of all purchases of goods and
services.
(v) Attached hereto as EXHIBIT 8.1(v), is a full and complete
description of the proposed major transportation and circulation routes,
including:
(1) A plan for the proposed use of regional airports, and
specifically the Detroit City Airport;
(2) A plan for the proposed modifications and improvements
to the existing roads necessary to accommodate the anticipated number of
trips to and from the Casino Complex each day by employees, visitors and
buses, including the size of regional transportation facilities to be
constructed or implemented, the estimated period of construction, the
approximate cost and the proposed funding source.
(3) Developer's proposed plan for traffic control measures,
such as pedestrian-grade street crossing systems, traffic control devices,
bus and other large vehicle turnout facilities, drainage mitigation and
street lighting systems, the estimated period of construction, approximate
cost and the proposed funding source.
(w) Attached hereto as EXHIBIT 8.1(w), is a full and complete
description of Developer's proposed measures for transportation demand
management and transportation supply management, including ride-sharing, mass
transit and other transportation conservation measures, which should be based
on City's requirements and City's traffic analysis studies conducted in
conjunction with casino development within City.
(x) Attached hereto as EXHIBIT 8.1(x), is a full and complete
description of Developer's plan for any anticipated improvements to the
existing regional water facilities necessary to serve the Development, the
estimated period of construction and the approximate cost of such
construction.
(y) Attached hereto as EXHIBIT 8.1(y), is a full and complete
description of Developer's plan for any anticipated improvements to the
existing regional sewer facilities necessary
57
<PAGE>
to serve the Development, the estimated period of construction and the
approximate cost of such construction.
(z) Attached hereto as EXHIBIT 8.1(z), is a full and complete
description of whether, and to what extent, Developer is willing to consider
contracting for power service with City of Detroit Public Lighting Department
("PLD"), provided that PLD furnishes such service at rates and quality
comparable to those otherwise charged by competing electric utilities.
(aa) Attached hereto as EXHIBIT 8.1(aa), is a full and
complete description of Developer's plan for proposed improvement to City's
existing fire protection services that would serve the Development, including
the number of fire stations to be constructed or modified and their location,
the estimated period of construction and the approximate cost of such
construction.
(bb) Attached hereto as EXHIBIT 8.1(bb), is a full and
complete description of Developer's plan for proposed improvements to City's
existing police protection services that would serve the Development,
including the number of police precincts to be constructed or modified and
their location, the estimated period of construction and the approximate cost
of such construction.
(cc) Attached hereto as EXHIBIT 8.1(cc), is a full and
complete description of Developer's plan for providing for or enhancing
existing child care services to ensure that such services are reasonably
affordable and appropriate for its prospective employees, including any
estimated period of construction of such facilities, and the approximate cost
of such construction.
(dd) Attached hereto as EXHIBIT 8.1(dd), is a full and
complete description of Developer's plan for enhancing existing services for
treatment of compulsive behavior disorders to ensure that they are reasonably
affordable and appropriate for its prospective employees and their affected
families and for patrons with compulsive gaming behaviors and their affected
families. The plan should include the types of public education and problem
gambling prevention strategies and prevention and education strategies for
employees that would be implemented as part of the operation of the Casino or
Casino Complex, the estimated period of implementation of the plan and the
approximate cost of the plan.
(ee) Attached hereto as EXHIBIT 8.1(ee), is a full and
complete description of Developer's plan to ensure that people under the age
of 21 years will be identified and prohibited from gambling or loitering in
the casino.
(ff) Developer is not a party to any agreement, document or
instrument that has a material adverse effect on the ability of Developer to
carry out its obligations under this Agreement.
(gg) To the best of Developer's knowledge, it is unaware of
any condition or fact that would render Developer unsuitable to receive a
Certificate of Suitability and a Casino License.
58
<PAGE>
(hh) Neither execution of this Agreement nor discharge by the
Developer of any of its obligations hereunder shall cause Developer to be in
violation of any applicable law, or regulation, its charter or other
organizational documents or any agreement to which it is a party.
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CITY AND EDC
9.1 REPRESENTATIONS AND WARRANTIES OF CITY. City represents and
warrants to Developer that each of the following statements is true and
accurate as of the Effective Date:
(a) City is a validly existing municipal corporation and has all
requisite power and authority to enter into and perform its obligations under
this Agreement, and all other agreements and undertakings to be entered into
by City in connection herewith.
(b) This Agreement and, to the extent such documents presently
exist in a form accepted by City and Developer, each document contemplated or
required by this Agreement to which City is a party has been duly authorized
by all necessary action on the part of, has been or will be duly executed and
delivered by City; is binding on City; and is enforceable against City in
accordance with its terms, subject to applicable principles of equity and
insolvency laws.
(c) Neither execution of this Agreement nor discharge by the City
of any of its obligations hereunder shall cause City to be in violation of
any applicable law, or regulation, its charter or organizational documents or
any agreement to which it is a party.
9.2 REPRESENTATIONS AND WARRANTIES OF EDC. EDC represents and
warrants to Developer that each of the following statements is true and
accurate as of the Effective Date:
(a) EDC is a validly existing State public body corporate and has
all requisite power and authority to enter into and perform its obligations
under this Agreement, and all other agreements and undertakings to be entered
into by EDC in connection herewith.
(b) This Agreement and, to the extent such documents presently
exist in a form accepted by EDC and Developer, each document contemplated or
required by this Agreement to which EDC is a party has been duly authorized
by all necessary action on the part of, has been or will be duly executed and
delivered by EDC; is binding on EDC; and is enforceable against EDC in
accordance with its terms, subject to applicable principles of equity and
insolvency laws.
(c) Neither execution of this Agreement nor discharge by the EDC
of any of its obligations hereunder shall cause EDC to be in violation of any
applicable law, or regulation, its charter or other organizational documents
or any agreement to which it is a party.
59
<PAGE>
9.3 FINAL SITE SELECTION. In the event that by the Closing Date the
Developer and the Other Land-Based Casino Developers shall not have
designated the specific sites within the Casino Area on which the Land-Based
Casino Developments are to be located (the "Final Sites"), then Developer and
the Other Land-Based Casino Developers shall jointly submit the suggested
Final Sites to the Mayor who, through a blind drawing in the presence of the
Developer and the Other Land-Based Casino Developers, shall designate which
of the Final Sites shall be conveyed to which of the developers of the
Land-Based Casino Developments.
9.4 DELIVERY OF OTHER DEVELOPMENT AGREEMENTS. On the Execution Date,
City shall deliver to Developer a true and accurate copy of each of the
development agreements executed by the Other Land-Based Casino Developers.
ARTICLE X
EVENTS OF DEFAULT, REMEDIES AND TERMINATION
10.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(a) Subject to Force Majeure, if Developer shall fail to
substantially perform or comply with any commitment, agreement, covenant,
term or condition (other than those specifically described in any other
subparagraph of this SECTION 10.1) of this Agreement, including, but not
limited to, those certain covenants set forth in SECTION 2.6 hereof, and in
such event if Developer shall fail to remedy any such default within thirty
(30) days after Developer's receipt of written notice of default with respect
thereto from City provided, however, that if any such default is reasonably
susceptible of being cured within one hundred eighty (180) days, but cannot
with due diligence be cured by Developer within thirty (30) days, and if
Developer commences to cure the default within thirty (30) days and
diligently prosecutes the cure to completion, then Developer shall not during
such period of diligently curing be in default hereunder as long as such
default is completely cured within one hundred eighty (180) days of the first
notice of such default to Developer; provided, however, that if the cure can
be accomplished by the payment of money, the failure to pay is not a diligent
commencement of a cure;
(b) If Developer shall make a general assignment for the benefit
of creditors or shall admit in writing its inability to pay its debts as they
become due;
(c) If Developer shall file a voluntary petition under any title
of the United States Bankruptcy Code, as amended from time to time, or if
such petition is filed against Developer and an order for relief is entered,
or if Developer shall file any petition or answer seeking, consenting to or
acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or any future
federal bankruptcy code or any other present or future applicable federal,
state or other statute or law, or shall seek or consent to or
60
<PAGE>
acquiesce to or suffer the appointment of any trustee, receiver, custodian,
assignee, liquidator or similar official of Developer, or of all or any
substantial part of its properties or of the Development or any interest
therein of Developer;
(d) If within ninety (90) days after the commencement of any
proceeding against Developer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
present or any future federal bankruptcy code or any other present or future
applicable federal, state or other statute or law, such proceeding shall not
have been dismissed; or if within ninety (90) days after the appointment,
without the consent or acquiescence of Developer of any trustee, receiver,
custodian, assignee, liquidator or other similar official of Developer or of all
or any substantial part of its properties or of the Development or any interest
therein of Developer, such appointment shall have not been vacated or stayed on
appeal or otherwise, or if within ninety (90) days after the expiration of any
such stay, such appointment shall not have been vacated;
(e) If any representation or warranty made by Developer hereunder
is intentionally false or misleading in any material respect when made and such
false or misleading representation or warranty either (i) has a material adverse
effect on the Development or (ii) resulted in an unfair competitive advantage
materially benefitting Developer in the RFP/Q selection process considering
Developer's response to the RFP/Q in total;
(f) If any of the Closing Certificates or any certificate delivered
pursuant to SECTION 7.16 are intentionally false or misleading in any material
respect when made and has a material adverse effect on the Development;
(g) If a default shall occur, which has not been cured within any
applicable cure period, under, or if there is any attempted withdrawal,
disaffirmance, cancellation, repudiation, disclaimer of liability or contest of
obligations (other than a contest as to performance of such obligations) under
any agreement which guaranties the payment or performance of any of the
obligations of Developer to City and/or EDC hereunder, other than as may be
permitted in such agreement;
(h) Subject to Force Majeure, if in accordance with ARTICLE XIII,
Developer fails to maintain in full force and effect those policies of insurance
as set forth on EXHIBIT 13.1 and in such event Developer fails to remedy such
default within five (5) Business Days after Developer's receipt of written
notice of default with respect thereto from City;
(i) If the construction of the Casino Complex at any time is
discontinued or suspended for a period of forty-five (45) consecutive calendar
days, subject to Force Majeure and is not restarted prior to Developer's receipt
of written notice of default hereunder;
(j) If the Completion Date does not occur within twelve (12) months
from the Agreed Upon Completion Date;
61
<PAGE>
(k) If the Casino License, once obtained, is revoked by a final,
non-appealable order or Developer fails to renew its Casino License; or
(l) If Developer fails to comply with its obligations under SECTION
3.2 within one hundred eighty (180) days after Developer's receipt of written
notice of default hereunder.
10.2 REMEDIES.
(a) Subject to the limitations set forth in SECTION 10.5, upon an
Event of Default, City shall have the right if it so elects: (i) to any and
all remedies available at law or in equity; (ii) to terminate this Agreement;
(iii) to receive liquidated damages as and to the extent set forth in this
Agreement and (iv) to institute and prosecute proceedings to enforce in whole
or in part the specific performance of this Agreement by Developer, and/or to
enjoin or restrain the Developer from commencing or continuing said breach,
and/or to cause by injunction the Developer to correct and cure said breach
or threatened breach (a "Specific Performance Proceeding"). Except as and to
the extent set forth in SECTION 10.5, none of the remedies enumerated herein
is exclusive and nothing herein shall be construed as prohibiting City and/or
EDC from pursuing any other remedies at law, in equity or otherwise available
to it under the Agreement.
(b) Subject to the limitations set forth in SECTION 10.5, the
rights and remedies of the City and EDC, whether provided by law or by this
Agreement, shall be cumulative, and the exercise by the City and/or EDC of
any one or more of such remedies shall not preclude the exercise by it, at
the same or different times, of any other such remedies for the same default
or breach, to the extent permitted by law. No waiver made by the City and/or
EDC shall apply to obligations beyond those expressly waived in writing.
(c) If City and/or EDC fails to perform an act required under
this Agreement within the time specified in this Agreement (or if no time is
specified, within a reasonable time), Developer's sole and exclusive remedies
against City and/or EDC shall be to institute and prosecute proceedings to:
(i) enforce in whole or in part the specific performance of this Agreement by
City and/or EDC, and/or to enjoin or restrain City and/or EDC from commencing
or continuing said breach, and/or cause by injunction City and/or EDC to
correct and cure said breach or threatened breach; or (ii) reform this
Agreement in such respects as may be determined to be equitable in light of
the failure of City and/or EDC. Notwithstanding the foregoing, if City
acquires the Project Premises and/or if Developer acquires the Project
Premises pursuant to the Conveyance Agreement and this Agreement terminates
solely by reason of the failure of the condition set forth in SECTION
2.4(a)(8), (x) if Developer has not acquired the Project Premises, City shall
(A) pay Developer amounts that Developer advanced pursuant to SECTION 2.5(b),
with interest at Developer's cost of funds from the date of such advance, to
the date of repayment by the City; (B) cause Developer's letter of credit
furnished thereunder to be returned; and (C) reimburse Developer for the
costs of acquiring such letter of credit and Developer's Pro Rata Share of
Infrastructure Improvements and the costs of environmental remediation; and
(y) if the Developer has acquired the Project Premises
62
<PAGE>
pursuant to the Conveyance Agreement, the Conveyance Agreement shall be
rescinded and on such rescission, City shall (A) refund to Developer: all
payments to City thereunder and all sums advanced pursuant to SECTION 2.5(b),
each with interest at Developer's cost of funds from the date of such advance
or payment to the date of repayment by the City; (B) reimburse Developer for
the costs of any letter of credit provided pursuant to SECTION 2.5(b); and
(C) reimburse Developer for its Pro Rata Share of Infrastructure Improvements
and the costs of environmental remediation, and Developer shall deliver a
quit claim deed of the Project Premises to the City or the EDC as the City
shall direct.
(d) If Developer acquires the Project Premises or any portion
thereof (the "Acquired Property") (x) but fails to obtain its Certificate of
Suitability prior to December 31, 1999 or (y) at the election of the City,
upon the occurrence of an Event of Default enumerated in SECTION 10.5(a)
prior to commencing construction, Developer agrees, upon written notice from
the City (a "Requested Resale Notice"), to reconvey the Acquired Property to
or at the direction of the City (a "Required Resale") provided EDC rescinds
the Conveyance Agreement and pays Developer its documented costs incurred in
connection with the development of the Acquired Property (other than design,
architectural and financing costs) from and after the date of conveyance of
the Acquired Property plus Developer's Pro Rata Share of Infrastructure
Improvements and its costs of environmental remediation.
(e) If an Event of Default shall occur to which a Mandatory Sale
is a remedy available to the City (a "Significant Event of Default"), the
following procedures shall be applicable and shall constitute a Mandatory
Sale:
(i) Following the occurrence of a Significant Event of
Default which has not been cured within the time provided by this Agreement (a
"Matured Significant Event of Default"), the City may, on written notice to
Developer delivered within sixty (60) days following the Significant Event of
Default becoming a Matured Significant Event of Default (the "Mandatory Sale
Notice"), institute the procedures set forth in this SECTION 10.2(e), provided
however; (i) if the City fails to deliver such Mandatory Sale Notice to
Developer within such sixty (60) day period, the City shall be deemed to have
waived the Mandatory Sale remedy with respect to that Matured Significant Event
of Default, and (ii) notwithstanding the expiration of the applicable cure
period, if Developer shall have cured the Matured Event of Default prior to the
delivery of such Mandatory Sale Notice, the remedy of Mandatory Sale shall not
be available with respect to that Matured Significant Event of Default.
(ii) Following receipt of a timely Mandatory Sale Notice,
Developer shall commence good faith efforts to dispose of the Casino Complex in
a manner consistent with this Agreement, including satisfying all the
requirements of ARTICLE XIV. In effecting such disposition, Developer shall be
entitled to seek to maximize its own economic return, subject to consultation
with the City and taking into account the findings set forth in SECTION 2.2.
Subject to SECTION 10.2(e)(iii), during the period in which Developer is
endeavoring to effect the disposition of the Casino Complex
63
<PAGE>
in a Mandatory Sale (the "Sale Period"), it shall continue to operate the
Casino Complex pursuant to and in accordance with this Agreement.
(iii) Notwithstanding anything to the contrary provided
for in SECTION 10.2(e)(ii) above, the Casino Complex shall be operated during
the Sale Period by a conservator qualified under the Act on the occurrence
and for the duration of any of the following events: (i) Developer's Casino
License is revoked by a final, non-appealable order or Developer fails to
renew its Casino License; (ii) at the election of City upon written notice to
Developer, if the disposition of the Casino Complex has not been completed
within three (3) years following delivery of a timely Mandatory Sale Notice;
(iii) at the election of City upon written notice to Developer, upon the
occurrence of a Matured Significant Event of Default other than the one
giving rise to the Mandatory Sale Notice.
(iv) Prior to completion of the disposition of the Casino
Complex pursuant to a Mandatory Sale, Developer and City may mutually agree
to terminate the disposition process, in which event the Mandatory Sale
Notice shall be deemed to have been withdrawn and to be of no force or effect.
(v) For purposes of SECTION 10.5(b)(ii), the term "Shortfall
Amount" shall mean the amount, if any, by which the (x) City's share of the
Wagering Tax and (y) Municipal Services Fee derived from the operation of the
Casino Complex during the Sale Period is less than the lesser of (1) eighty
percent (80%) of the (x) City's share of the Wagering Tax and (y) Municipal
Services Fee derived from the operation of the Casino Complex for the full
twelve (12) calendar months immediately preceding the delivery of the
Mandatory Sale Notice (or if the Casino Complex has been open for fewer than
twelve (12) months, for that number of full calendar months that it has been
opened) divided by twelve (12) (or such fewer number of full months in which
the Casino Complex has been open) and multiplied by the number of full
calendar months of the Sale Period; or (2) eighty percent (80%) of fifty
percent (50%) of the (x) City's share of the Wagering Tax and (y) Municipal
Services Fee derived from the operation of the Other Land-Based Casino
Developments during the Sale Period; provided however, in no event shall the
Shortfall Amount exceed Fifty Million Dollars ($50,000,000). By way of
illustration, if: (i) the Sale Period is eighteen (18) months; (ii) the (x)
City's share of Wagering Tax and (y) Municipal Services Fee derived from the
Casino Complex during the twelve (12) month period preceding the Sale Period
is Twenty-Four Million Dollars ($24,000,000); (iii) the (x) City's share of
the Wagering Tax and (y) Municipal Services Fee derived from the Sale Period
is Twenty-Four Million Dollars ($24,000,000); and (iv) eighty percent (80%)
of fifty percent (50%) of the aggregate of the (x) City's share of the
Wagering Tax and (y) Municipal Services Fee derived from the Other Land-Based
Casino Developments during the Sale Period is Thirty Million Dollars
($30,000,000), then the Shortfall Amount computed under clause (1) would be
Four Million Eight Hundred Thousand Dollars ($4,800,000) ($1.6 million
multiplied by 18, i.e. $28.8 million; reduced by $24 million), and the
Shortfall Amount computed under clause (2) would be Six Million Dollars
($6,000,000) ($30 million reduced by $24 million). Since the computation
under clause (1) produces a lower number than the computation under clause
(2), the Shortfall Amount computed under clause (1) would apply.
64
<PAGE>
(f) If the City elects to receive liquidated damages upon the
occurrence of an Event of Default enumerated in SECTION 10.5(a), Developer
shall pay to City as the sole remedy of the City and EDC and as liquidated
damages (and not as a penalty), an amount per calendar day for each calendar
day during the "Damage Period," as hereinafter defined, equal to the lesser
of (i) $135,616, or (ii) (A) during periods in which two (2) other land-based
casinos are open to the public within the City, twenty-five percent (25%) of
the City's share of the aggregate Wagering Tax and Municipal Services fee
derived from both such operations during the Late Period and (B) during
periods in which one (1) other land-based casino is open to the public within
the City, forty percent (40%) of the City's share of the Wagering Tax and
Municipal Services fee derived from such operation during the Late Period,
divided by the number of days in the Damage Period. Developer shall under no
circumstances have aggregate liability hereunder and pursuant to SECTION 6.7
in excess of Fifty Million Dollars ($50,000,000). For purposes of this
SECTION 10.2(f), the Damage Period shall commence on the date forty-eight
(48) months from the date the City delivers written notice to Developer of
its election to receive liquidated damages pursuant to SECTION 10.5(a) and
shall continue until the date a casino having no less than one hundred
thousand (100,000) square feet of gaming space opens for business on the
Project Premises. The foregoing limitation on City's and EDC's remedies
shall in no way limit or diminish City's or EDC's rights or remedies under
the Guaranty and Keep Well Agreement.
(g) EDC agrees that (1) it has no right to, and shall not attempt
to elect to exercise or exercise any remedy on behalf of the City under this
Agreement, Guaranty and Keep Well Agreement and Performance Guaranty and (2)
it shall not elect to exercise or exercise any remedy under this Agreement,
Guaranty and Keep Well Agreement and Performance Guaranty without the consent
of the Mayor.
10.3 TERMINATION. Except for the provisions that by their terms
survive, this Agreement shall terminate as provided in this Agreement.
10.4 LIQUIDATED DAMAGES. City and Developer covenant and agree that
because of the difficulty and/or impossibility of determining City's damages
upon certain Events of Default and breaches of this Agreement as set forth in
SECTIONS 6.7, 10.2(e) AND 10.2(f), by way of detriment to the public benefit
and welfare of the City through lost employment opportunities, lost tourism,
degradation of the economic health of the City and loss of revenue, both
directly and indirectly, Developer shall pay to City, as liquidated damages
and not as a penalty, the sum or sums set forth in SECTIONS 6.7, 10.2(e)(v)
or 10.2(f) that pertain to the specified Event of Default.
10.5 LIMITATION ON REMEDIES. City's and EDC's remedies under SECTIONS
10.2(a) AND (b) for and only for the Events of Default enumerated below in
this SECTION 10.5, shall be limited as follows:
65
<PAGE>
(a) Upon an Event of Default arising under SECTION 10.1(a) due to
the breach by Developer of any of the following obligations specified in this
SECTION 10.5(a), City may elect either to (i) institute a Specific
Performance Proceeding; and/or (ii) (x) receive liquidated damages from
Developer calculated as set forth in SECTION 10.2(f); and/or (y) terminate
this Agreement and request a Required Resale: breach by Developer of its
obligations under SECTION 2.5 (Conveyance of Project Premises to Developer);
SECTION 2.7 (Obtaining Certificate of Suitability and Casino License);
SECTION 2.10 (Initial Financing); or SECTION 2.14 (Other Commitments of
Developer).
(b) Upon an Event of Default arising under SECTION 10.1(a) due to
a breach by Developer of any of the following obligations specified in this
SECTION 10.5(b), City may elect either to (i) institute a Specific
Performance Proceeding; and/or either (ii) require a Mandatory Sale and
receive the Shortfall Amount as liquidated damages from Developer; or (iii)
receive actual damages from Developer: SECTION 3.3 (Subsequent Financings);
SECTION 3.5 (Sinking Fund); SECTION 7.7 (Capital Maintenance Fund); SECTION
7.15 (Veracity of Statements); SECTION 7.17 (Use of Project Premises);
failure of Developer to complete the Restoration as required under ARTICLE
XVI (Damage to or Destruction of Improvements; Condemnation); or upon an
Event of Default arising under SECTIONS 10.1(b), (c), (d), (e), (f), (g),
(i), (j), (k) or (l).
(c) Upon an Event of Default arising under SECTION 7.3 (Radius
Restriction) by Developer and/or Parent Company, City may elect either to (i)
institute a Specific Performance Proceeding and/or (ii) terminate this
Agreement.
(d) Upon an Event of Default arising under SECTION 10.1(a) due to
the breach by Developer of any of its obligations under SECTION 7.1 (Casino
Complex Operations) or SECTION 7.8 (Maintenance and Repairs), City may elect
either to (i) institute a Specific Performance Proceeding and/or (ii) receive
actual damages from Developer, provided however, that if in a Specific
Performance Proceeding, the arbitrator or arbitrators determine that
Developer is not maintaining or operating the Casino Complex in a manner
consistent with First Class Casino Complex Standards, but are unable or
unwilling to fashion a specific performance remedy, in lieu thereof the
arbitrator or arbitrators may require Developer to increase its spending for
capital improvements or maintenance by Five Hundred Thousand Dollars
($500,000) over the ensuing twelve (12) month period (the "Initial Period").
If during the twelve (12) month period immediately following the Initial
Period (the "Subsequent Period"), the City, by reason of an additional Event
of Default under SECTION 10.1(a) due to a breach by Developer of any of its
obligations under SECTION 7.1 or SECTION 7.8, initiates a Specific
Performance Proceeding, and the arbitrator or arbitrators determine that
Developer is not maintaining or operating the Casino Complex in a manner
consistent with First Class Casino Complex Standards, but are unable or
unwilling to fashion a specific performance remedy, in lieu thereof the
arbitrator or arbitrators may require the Developer to increase its spending
for capital improvements or maintenance by One Million Dollars ($1,000,000)
over the ensuing twelve (12) month period.
66
<PAGE>
(e) Upon an Event of Default arising under this Agreement not
otherwise specified in this SECTION 10.5, City may elect either to (i)
institute a Specific Performance Proceeding and/or (ii) receive actual
damages from Developer.
The foregoing limitations on City's and EDC's remedies under SECTIONS
10.2(a) and (b) shall in no way limit or diminish any other right of City or
EDC under this Agreement or otherwise, including without limitation City's or
EDC's rights or remedies (x) under the Guaranty and Keep Well Agreement,
Performance Guaranty, or under any other guaranty, indemnity, instrument or
agreement or (y) under SECTIONS 2.11, 6.7, 10.2(d), (e) and (f), ARTICLE XI,
ARTICLE XV or ARTICLE XVI.
ARTICLE XI
CITY'S RIGHT TO PERFORM DEVELOPER'S COVENANTS
If Developer at any time shall fail to take out, pay any insurance
premiums for, maintain or deliver any of the insurance policies in the manner
provided for herein, or shall fail to pay any sums, costs, expenses, charges,
payments or deposits to be paid by Developer hereunder after notice and the
expiration of any applicable cure period, City, without waiving or releasing
Developer from any obligation of Developer contained in this Agreement or
waiving or releasing any rights of City hereunder, at law or in equity, may
(but shall be under no obligation to) pay any such sums, costs, expenses,
charges, payments or deposits payable by Developer hereunder. All sums paid
by City and all costs and expenses incurred by City in connection with the
performance of any such obligation, together with interest thereon at the
Default Rate from the respective dates of City's making of each such payment
or incurring of each such sum, cost, liability, expense, charge, payment or
deposit until the date of actual repayment to City, shall be paid by
Developer to City on demand. Any payment or performance by City pursuant to
the foregoing provisions of this Section shall not be nor be deemed to be a
waiver or release of breach or default of Developer with respect thereto or
of the right of City to take such other action as may be permissible
hereunder, at law or in equity if an Event of Default by Developer shall have
occurred. The City's rights under this ARTICLE XI shall survive termination
of this Agreement.
ARTICLE XII
FORCE MAJEURE
12.1 FORCE MAJEURE. An event of "Force Majeure" shall mean the
following events or circumstances, to the extent that they delay or otherwise
adversely affect the performance beyond the reasonable control of Developer,
or its agents and contractors, of their duties and obligations under this
Agreement, or the performance by City, EDC or the PM of their respective
duties and obligations under this Agreement:
67
<PAGE>
(a) Strikes, lockouts, labor disputes, inability to procure
materials, failure of utilities, labor shortages or explosions on the Project
Premises;
(b) Changes in Governmental Requirements applicable to the
construction of a Component, first effective after the submission and
approval of the Schematic Design Documents, and the orders of any
Governmental Authority having jurisdiction over a party, the Development or
the Developer (however, not including stop work orders due to a building or
other code violation);
(c) Changes in Governmental Requirements by any Governmental
Authority, first effective after the Execution Date;
(d) Acts of God, tornadoes, hurricanes, floods, sinkholes, fires
and other casualties, landslides, earthquakes, epidemics, quarantine,
pestilence, and/or abnormal inclement weather;
(e) Acts of a public enemy, acts of war, terrorism, effects of
nuclear radiation, blockades, insurrections, riots, civil disturbances, or
national or international calamities;
(f) Concealed and unknown conditions of an unusual nature that
are encountered below ground or in an existing structure;
(g) Any temporary restraining order, preliminary injunction or
permanent inunction, unless based in whole or in part on the actions or
failure to act of Developer; and
(h) Unreasonable delay by the State in licensing Persons under
the Act to the extent that any such delays are not based in whole or in part
on the actions or failure to act of such Persons.
12.2 EXTENSION OF TIME; EXCUSE OF PERFORMANCE. Developer shall be
entitled to an adjustment in the time for or excuse of the performance of
any duty or obligation of Developer under this Agreement for Force Majeure
events described in SECTION 12.1, but only for the number of days due to
and/or resulting as a consequence of such causes and only to the extent that
such occurrences actually prevent or delay the performance of such duty or
obligation or cause such performance to be commercially unreasonable.
68
<PAGE>
ARTICLE XIII
INSURANCE
13.1 INSURANCE. Developer shall maintain in full force and effect the
types and commercially reasonable amounts of insurance as set forth on
EXHIBIT 13.1 to the extent available at commercially reasonable rates. Self
insurance shall be permitted in accordance with First Class Casino Complex
Standards.
13.2 FORM OF INSURANCE AND INSURERS. Whenever, under the terms of
this Agreement, Developer is required to maintain insurance, City and EDC
shall be additional named insureds in all such insurance policies to the
extent of their insurable interest, if any. All policies of insurance
provided for in this Agreement shall be effected under valid and enforceable
policies, in commercially reasonable form issued by responsible insurers
which are authorized to transact business in the State, having a Best rating
of not less than A+ or its equivalent from another recognized rating agency.
As soon as practicable following the Closing Date, Developer shall deliver to
City and EDC a copy of each policy, together with proof reasonably
satisfactory to City and EDC that the full premiums have been paid or
provided for at least the first year of the term of such policies.
Thereafter, as promptly as practicable prior to the expiration of each such
policy, Developer shall deliver to City and EDC an Accord certificate,
together with proof reasonably satisfactory to City and EDC that the full
premiums have been paid or provided for at least the renewal term of such
policies and as promptly as practicable, a copy of each renewal policy.
13.3 OTHER POLICIES. Developer shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Agreement unless City and EDC are additional named insureds therein to
the extent of their insurable interest, if any, with loss payable as provided
in SECTION 13.2. Developer shall as promptly as practicable notify City and
EDC of the taking out of any such separate insurance and shall cause copies
of the original policies in respect thereof to be delivered as required in
SECTION 13.2.
13.4 INSURANCE NOTICE. Each such policy of insurance to be provided
hereunder shall contain, to the extent obtainable on a commercially
reasonable basis, (a) a provision that no act or omission of Developer which
would otherwise result in forfeiture or reduction of the insurance therein
provided shall affect or limit the obligation of the insurance company to pay
City or EDC the amount of any loss sustained to the extent of its insurable
interest, if any, and (b) an agreement by the insurer that such policy shall
not be canceled or modified without at least thirty (30) days prior written
notice by registered mail, return receipt requested, to City and EDC.
13.5 KEEP IN GOOD STANDING. Developer shall observe and comply with
the requirements of all policies of public liability, fire and other policies
of insurance at any time in force with respect to the Development and
Developer shall so perform and satisfy the requirements of the companies
writing such policies.
69
<PAGE>
13.6 BLANKET POLICIES. Any insurance provided for in this Article may
be provided by blanket and/or umbrella policies issued to Developer covering
the Development and other properties owned or leased by Developer; provided,
however, that the amount of the total insurance allocated to the Development
shall be such as to furnish in protection the equivalent of separate policies
in the amounts herein required without possibility of reduction or
coinsurance by reason of, or damage to, any other premises covered therein,
and provided further that in all other respects, any such policy or policies
shall comply with the other specific insurance provisions set forth herein
and Developer shall make such policy or policies or a copy thereof available
for review by City and EDC at the Development.
ARTICLE XIV
TRANSFER AND ASSIGNMENT
14.1 TRANSFER OF OWNERSHIP.
(a) For purposes of this SECTION 14.1, "Restricted Owner" means
(i) Developer and (ii) any Person who directly or indirectly owns or holds
any interest in Developer or any Casino Component Manager/Operator of a
Covered Component other than any Person who would be a Restricted Owner due
solely to that Person's ownership of (x) a direct or indirect interest in a
Publicly Traded Corporation or (y) a five percent (5%) or less direct or
indirect interest in (1) Developer unless, in the case of clause (y), upon
completion of any Transfer the transferee will in the aggregate own or hold a
five percent (5%) or more direct or indirect ownership interest in Developer,
or (2) the Casino Component Manager/Operator of a Covered Component. The
covenants that Developer is to perform under this Agreement for City's and
EDC's benefit and the services that each Casino Component Manager/Operator of
a Covered Component renders with respect to the Casino Complex are personal
in nature. City and EDC are relying upon Developer and the Casino Component
Manager/Operators in the exercise of their skill, judgment, reputation and
discretion with respect to the Casino Complex. From and after the Execution
Date, any Transfer by a Restricted Owner of (x) any direct ownership interest
in Developer or any Casino Component Manager/Operator of a Covered Component,
whether held by virtue of partnership, limited liability company, corporation
or other form of entity; or (y) any ownership interest in any Restricted
Owner, whether held by virtue of partnership, limited liability company,
corporation or through other form of entity shall require the prior written
consent of City, provided that with respect to a Transfer by any Restricted
Owner other than a Transfer by Developer, any Affiliate of Developer or any
Affiliate of any Casino Component Manager/Operator of a Covered Component,
City shall not withhold its consent to any Transfer unless the transferee (i)
is in default on any debts due City, EDC or any other entity (a "Municipal
Supported Entity") that receives or received any City funding or subsidy to
carry out its activities; (ii) has defaulted on any other material
obligations to City, EDC or any Municipal Supported Entity whether or not
such default has been cured; or (iii) has engaged in any frivolous litigation
or made any frivolous claims against City as determined by a court, or has
been
70
<PAGE>
found liable to the City for abuse of process or malicious prosecution with
respect to claims against the City.
(b) Nothing contained in this SECTION 14.1 shall prevent a Transfer
of (x) an ownership interest in a Restricted Owner by: (i) Parent Company or an
Affiliate of Parent Company to an entity which has succeeded to all or a
substantial portion of the assets of Parent Company or such Affiliate; or (ii)
any Person (1) to that Person's spouse, child or parent ("Family Members"); (2)
to an entity whose beneficial owners consist solely of such transferor and/or
the Family Members of the transferor; (3) to the beneficial owners of the
transferor if the transferor is an entity; (4) to any Person who owns any direct
or indirect interest in any Restricted Owner; (5) to any Person to whom the City
previously has consented to a Transfer; (6) by operation of law; and (7) to an
institutional lender on account of a pledge to such lender or (y) an ownership
interest in Developer or Restricted Owner or in any Affiliate of Developer or
Restricted Owner in connection with a public offering registered pursuant to the
Securities Act.
(c) All transferees shall hold their interests subject to the
restrictions of this ARTICLE XIV.
(d) Developer shall promptly notify City as promptly as practicable
upon Developer becoming aware of any Transfer.
(e) Developer agrees to (x) include in all Casino Component
Management Agreements of a Covered Component a transfer restriction provision
substantially similar to the transfer restriction set forth in this SECTION
14.1 and to cause the Casino Component Manager/Operator of a Covered
Component to acknowledge that City is a third-party beneficiary of such
provision; and (y) cause each Restricted Owner, other than a Publicly Traded
Corporation, to (1) place a legend on its ownership certificate, if any, or
include in its organizational documents, a transfer restriction provision
substantially similar to the transfer restriction set forth in this SECTION
14.1 and (2) either enforce such provision or acknowledge that City is a
third-party beneficiary of such provision.
14.2 TRANSFER OF AGREEMENT; DEVELOPMENT. Developer shall not, whether
by operation of law or otherwise, Transfer this Agreement, or, subject to
SECTION 3.3, the Development, without the prior written consent of the Mayor
and City Council; provided that the Mayor and City Council's right to consent
to the Transfer of the Development shall be of no further force or effect at
such time as the business operated on the Project Premises no longer includes
casino gaming activities.
71
<PAGE>
ARTICLE XV
ENVIRONMENTAL
15.1 ENVIRONMENTAL COVENANTS. Developer covenants that (a) Developer
shall at its own cost comply, and cause its agents, employees, contractors,
Space Tenants or any other Person under the control and direction of
Developer to comply, with all Environmental Laws with respect to the
Development; (b) Developer shall Respond to any Release occurring on, under
or adjacent to the Development to the extent required by applicable
controlling Environmental Laws; (c) Developer shall not Manage any Hazardous
Materials on the Development, nor conduct nor authorize the same, except in
compliance with all Environmental Laws; (d) Developer shall not take any
action that would subject the Development to permit requirements under RCRA
for storage, treatment or disposal of Hazardous Materials; and (e) Developer
shall obtain or cause to be obtained, at no expense to City and/or EDC, any
and all permits necessary or required under Environmental Laws in connection
with or arising out of Developer's demolition and construction of
Improvements at the Development.
15.2 ENVIRONMENTAL RESPONSE. If Developer's Management of Hazardous
Materials at the Development gives rise to liability or to an Environmental
Claim under any Environmental Law, Developer shall promptly take all
applicable action in Response to the extent required by law. City shall have
the right, but not the obligation, after providing Developer with notice and
a reasonable opportunity to cure, to enter onto the Development to perform
any and all legally required Response action(s) to cause the Development to
comply with Environmental Laws and to seek reimbursement for the cost of such
Response from Developer, together with interest at the Default Rate from the
date same was paid.
15.3 ENVIRONMENTAL INDEMNITY. Developer shall indemnify, defend and
hold harmless City and the EDC from all Environmental Claims suffered or
incurred by any of the foregoing arising from or attributable to (a) any
breach by Developer of any of its warranties, representations or covenants in
this Section; (b) noncompliance of the Development or Developer with any
Environmental Laws; (c) the condition of the Development; (d) any actual or
alleged illness, disability, injury, or death of any person in any manner
arising out of or allegedly arisen out of exposure to Hazardous Materials or
other substances or conditions present at the Development, regardless of when
any such illness, disability, injury, or death shall have occurred or been
incurred or manifested itself; and (e) Hazardous Materials Managed or
Released by Developer or otherwise located or Released upon the Development.
In the event any Environmental Claims or other assertion of liability shall
be made against City and/or EDC for which City and/or EDC is entitled to
indemnity hereunder, City and/or EDC shall notify Developer of such
Environmental Claim or assertion of liability and thereupon Developer shall,
at its sole cost and expense, assume the defense of such Environmental Claim
or assertion of liability and continue such defense at all times thereafter
until completion. Notwithstanding anything to the contrary contained in this
SECTION 15.3, Developer shall not indemnify and shall have no responsibility
to City and/or EDC for any liability with respect to any part of the Project
Premises that was owned by City and/or EDC, as applicable,
72
<PAGE>
prior to the Effective Date and which liability arose as a result of the
gross negligence or willful misconduct of City and/or EDC, as applicable,
during the period of the City's and/or EDC's ownership. Developer's
obligations hereunder shall survive the termination or expiration of this
Agreement.
ARTICLE XVI
DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS; CONDEMNATION
16.1 DAMAGE OR DESTRUCTION. In the event of damage to or destruction
of Improvements on the Project Premises or any part thereof by fire, casualty
or otherwise, Developer, at its sole expense and whether or not the insurance
proceeds, if any, shall be sufficient therefor, shall promptly repair,
restore, replace and rebuild (collectively, "Restore") the Improvements, as
nearly as possible to the same condition that existed prior to such damage or
destruction (subject to Developer's right to make Alterations in accordance
with the terms of this Agreement), using materials of an equal or superior
quality to those existing in the Improvements prior to such casualty. All
work required to be performed in connection with such restoration and repair
is hereinafter called the "Restoration." Developer shall obtain a permanent
certificate of occupancy as soon as practicable after the completion of such
Restoration. If neither Developer nor any Mortgagee shall commence the
Restoration of the Improvements or the portion thereof damaged or destroyed
promptly following such damage or destruction and adjustment of its insurance
proceeds, or, having so commenced such Restoration, shall fail to proceed to
complete the same with reasonable diligence in accordance with the terms of
this Agreement, City may, but shall have no obligation to, complete such
Restoration at Developer's expense. Upon City's election to so complete the
Restoration, Developer immediately shall permit City to utilize all insurance
proceeds which shall have been received by Developer, minus those amounts, if
any, which Developer shall have applied to the Restoration, and if such sums
are insufficient to complete the Restoration, Developer, on demand, shall pay
the deficiency to City. Each Restoration shall be done subject to the
provisions of this Agreement.
16.2 USE OF INSURANCE PROCEEDS.
(a) Subject to the conditions set forth below, all proceeds of
casualty insurance on the Improvements shall be made available to pay for the
cost of Restoration if any part of the Improvements are damaged or destroyed
in whole or in part by fire or other casualty. Subject to SECTION 3.7, all
such insurance proceeds, less the cost of collection, shall be paid into a
trust account to be created by an independent third party ("Insurance
Trustee") to be chosen by (i) the First Mortgagee if the Project Premises is
encumbered by a First Mortgage or (ii) Developer and City in the event there
is no First Mortgagee, within ten (10) days of when the proceeds are to be
made available. Nothing herein shall prohibit the First Mortgagee from acting
as the Insurance Trustee. If Developer or City for whatever reason, cannot or
will not participate in the selection of the Insurance Trustee, then the
other party shall select the Insurance Trustee. Developer shall name the
Insurance Trustee appointed pursuant to this SECTION 16.2 as the sole loss
payee on Developer's
73
<PAGE>
casualty insurance. If those parties who participate in the selection
process cannot agree on the selection of the Insurance Trustee, either City
or Developer may apply to the Circuit Court for the County for the
appointment of a local bank having a capital surplus in excess of Two Hundred
Million Dollars ($200,000,000) as the Insurance Trustee. The Insurance
Trustee shall hold the insurance proceeds in trust to be disbursed in stages
to pay for the cost of the Restoration, as hereafter provided. The Insurance
Trustee shall deposit the insurance proceeds in an interest bearing account
and any after tax interest earned thereon shall be added to the insurance
proceeds. All fees and expenses of the Insurance Trustee shall be paid by
Developer.
(b) Promptly following any damage or destruction to the
Improvements by fire, casualty or otherwise, Developer shall:
(1) give written notice of such damage or destruction to
City and each Mortgagee; and
(2) deliver an agreement by Developer to complete the
Restoration in a reasonable amount of time plus periods of time as
performance by Developer is prevented by Force Majeure events (other than
financial inability) after occurrence of the fire or casualty.
(c) After satisfaction of the conditions specified in paragraph
(b) of this Section, insurance proceeds shall be paid to Developer, or City,
as the case may be, from time to time thereafter in installments, but not
more frequently than once a month, upon application to be submitted from time
to time by Developer to Insurance Trustee showing the cost of work, labor,
services, materials, fixtures and equipment incorporated in the Restoration,
or incorporated therein since the last previous application, and paid for by
Developer or then due and owing. The amount of any installment to be paid to
Developer shall be such proportion of the total insurance proceeds as the
cost of work, labor, services, materials, fixtures and equipment theretofore
incorporated by Developer into the Restoration bears to the total estimated
cost of the Restoration by Developer, less all payments heretofore made to
Developer out of the insurance proceeds. Upon completion of and payment for
the Restoration by Developer, the balance of the insurance proceeds shall be
paid over to Developer, subject to the rights of any Mortgagee named as an
insured. If the estimated cost of any Restoration exceeds the insurance
proceeds received by Insurance Trustee, then prior to the commencement of
such Restoration or thereafter if at any time that the cost to complete the
Restoration exceeds the unapplied portion of such insurance proceeds,
Developer shall from time to time immediately deposit with Insurance Trustee
cash funds in the amount of such excess, to be held and applied by Insurance
Trustee in accordance with the provisions hereof. If City elects to make the
Restoration at Developer's expense, as provided in SECTION 16.1, then, as
provided above with respect to Developer, Insurance Trustee shall pay over
the insurance proceeds to City, from time to time, upon City's application
accompanied by a certificate containing the statements required under clauses
(i), (ii) and (iii) of SECTION 16.2(d)(1), to the extent not previously paid
to Developer pursuant to this SECTION 16.2(c), and Developer shall pay to
Insurance Trustee, on demand, any sums
74
<PAGE>
which City certifies to be an estimate of the amount necessary to complete
the Restoration, less the undisbursed insurance proceeds.
(d) The following shall be conditions precedent to each payment
made to Developer as provided in SECTION 16.2:
(1) There shall be submitted to Insurance Trustee the
certificate of the Architect stating (i) that the sum then requested to be
withdrawn either has been paid by Developer or is justly due to
contractors, subcontractors, materialmen, engineers, architects or other
Persons (whose names and addresses shall be stated) who have rendered or
furnished work, labor, services, materials, fixtures or equipment for the
work and giving a brief description of such work, labor, services,
materials, fixtures or equipment and the principal subdivisions or
categories thereof and the several amounts so paid or due to each of said
Persons in respect thereof, and stating in reasonable detail the progress
of the Restoration up to the date of said certificate; (ii) that no part of
such expenditures has been or is being made the basis, in any previous or
then pending request, for the withdrawal of insurance money or has been
made out of the proceeds of insurance received by Developer; and (iii) that
the balance of the insurance proceeds held by Insurance Trustee will be
sufficient, upon completion of the Restoration, to pay for the same in
full, and stating in reasonable detail an estimate of the cost of such
completion.
(2) There shall be furnished to Insurance Trustee
appropriate sworn statements and lien waivers (which comply with the
mechanics' lien laws of the State) from all Persons receiving payment
under such draw.
(3) There shall be furnished to Insurance Trustee a title
search, or a similar certificate of a title insurance company reasonably
satisfactory to Insurance Trustee, showing that there are no liens
affecting the Development or any part thereof in connection with work done,
authorized or incurred at or relating to the Development which had not been
discharged of record, except such as will be discharged upon payment of the
amount then requested to be withdrawn.
(e) Notwithstanding anything in this SECTION 16.2 to the
contrary, insurance proceeds for any fire or casualty of less than Forty
Million Dollars ($40,000,000) shall not be paid to the Insurance Trustee to
be disbursed as provided in SECTION 16.2, but instead such proceeds shall be
paid by the insurer directly into a segregated account established by
Developer for the purpose of funding the Restoration. This account is
established as an assurance fund to guarantee the completion of the
Restoration. Developer retains the right to withdraw funds from this account
to pay for the Restoration and to any excess funds in the account following
completion of the Restoration. Upon receipt of such proceeds in the account,
Developer shall promptly undertake and complete the Restoration in accordance
with this Article.
75
<PAGE>
16.3 NO TERMINATION. No destruction of or damage to the Improvements,
or any portion thereof or property therein by fire, flood or other casualty,
whether such damage or destruction be partial or total, shall permit
Developer to terminate this Agreement or relieve Developer from its
obligations hereunder.
16.4 CONDEMNATION. If a Major Condemnation occurs, this Agreement
shall terminate, and no party to this Agreement shall have any claims,
rights, obligations, or liabilities towards any other party arising after
termination, other than as provided for herein. If a Minor Condemnation
occurs or the use or occupancy of the Development or any part thereof is
temporarily requisitioned by a civil or military governmental authority, then
(a) this Agreement shall continue in full force and effect; (b) Developer
shall promptly perform all Restoration required in order to repair any
physical damage to the Development caused by the Condemnation, and to restore
the Development, to the extent reasonably practicable, to its condition
immediately before the Condemnation. If a Minor Condemnation occurs, subject
to SECTION 3.7, any Proceeds in excess of Forty Million Dollars ($40,000,000)
will be and are hereby, to the extent permitted by applicable law and agreed
to by the condemnor, assigned to and shall be withdrawn and paid into an
escrow account to be created by an escrow agent ("the Escrow Agent") selected
by (i) the First Mortgagee if the Development is encumbered by a First
Mortgage; or (ii) Developer and City in the event there is no First
Mortgagee, within ten (10) days of when the Proceeds are to be made
available. If Developer or City for whatever reason cannot or will not
participate in the selection of the Escrow Agent, then the other party shall
select the Escrow Agent. Nothing herein shall prohibit the First Mortgagee
from acting as the Escrow Agent. This transfer of the Proceeds, to the
extent permitted by applicable law and agreed to by the condemnor, shall be
self-operative and shall occur automatically upon the availability of the
Proceeds from the Condemnation and such Proceeds shall be payable into the
escrow account on the naming of the Escrow Agent to be applied as provided in
this SECTION 16.4. If City or Developer are unable to agree on the selection
of an Escrow Agent, either City or Developer may apply to the Circuit Court
for the County for the appointment of a local bank having a capital surplus
in excess of Two Hundred Million Dollars ($200,000,000) as the Escrow Agent.
The Escrow Agent shall deposit the Proceeds in an interest-bearing escrow
account and any after tax interest earned thereon shall be added to the
Proceeds. The Escrow Agent shall disburse funds from the Escrow Account to
pay the cost of the Restoration in accordance with the procedure described in
SECTION 16.2(b), (c) and (d). If the cost of the Restoration exceeds the
total amount of the Proceeds, Developer shall be responsible for paying the
excess cost. If the Proceeds exceed the cost of the Restoration, the Escrow
Agent shall distribute the excess Proceeds, subject to the rights of the
Mortgagees. Nothing contained in this SECTION 16.4 shall impair or abrogate
any rights of Developer against the condemning authority in connection with
any Condemnation. All fees and expenses of the Escrow Agent shall be paid by
Developer.
76
<PAGE>
ARTICLE XVII
FINANCIAL AND ACCOUNTING RECORDS; AUDIT RIGHTS
17.1 FINANCIAL AND ACCOUNTING RECORDS. Developer shall maintain and
keep, or shall cause to be maintained and kept, full and accurate Books and
Records at the Casino Complex or at such other location as shall be approved
by the Board of all business conducted or transacted in, upon or from the
Development, including but not limited to all business operations conducted
by the Casino Component Manager/Operators. Subject to SECTIONS 3.7 and 17.3,
during such periods as Developer fails to meet or exceed the Performance
Threshold, Developer shall make available and require each Casino Component
Manager/Operator to make available to City's third party consultants ("City's
Consultants") for their review, full and accurate Books and Records
reflecting the results of the Casino Complex and, if applicable, any Casino
Component Manager/Operator's operation of the applicable Component. If
Developer maintains permanent records in a computerized or microfiche
fashion, Developer shall make available to City's Consultants, upon request,
a detailed index to the microfiche or computerized record, which must be
indexed in accordance with Developer's practices. The Books and Records are
subject to the record retention and storage policies required by this
Agreement and by applicable Governmental Requirements. Developer shall
retain and maintain or cause such Books and Records to be retained and
maintained for at least six (6) years or such longer period as may be
required by law.
17.2 REVIEW AND AUDIT. Subject to SECTION 17.3, a third party auditor
designated by City ("City's Auditor") shall have the right to independently
examine, audit, inspect and transcribe the Books and Records of Developer and
the Casino Component Manager/Operators. Developer shall make or cause to be
made available Books and Records of the Casino Component Manager/Operators
for the aforesaid purpose. City agrees that any auditor that it designates
as the City Auditor shall either be knowledgeable in auditing casino
operations or shall joint venture the engagement with another auditor having
such knowledge.
17.3 PROCEDURES. Any Books and Records required to be disclosed to
City's Consultants and City's Auditor pursuant to this Agreement shall be
subject to reasonable confidentiality restrictions and shall be available for
review during normal business hours on reasonable notice at the offices of
the Developer or such Casino Component Manager/Operator, as applicable, and
may not be removed or copied without the consent of Developer or such Casino
Component Manager/Operator, as applicable, which consent shall not be
unreasonably withheld. Such review shall be conducted in such a manner as to
minimize, to the extent practicable, disruption and inconvenience to
Developer and all Casino Component Manager/Operators and their respective
staff. Internal control standards and records required thereby shall be made
available for review only to City's Auditor. The reasonable costs and
expenses of (x) City's Consultants incurred pursuant to SECTION 17.1 shall be
borne by Developer and (y) City incurred in connection with SECTION 17.2
shall be borne by City. The rights granted to City under SECTIONS 17.1 AND
17.2 shall be in addition to and not in limitation of any other inspection
and/or audit rights that City and/or EDC may have under law.
77
<PAGE>
ARTICLE XVIII
INDEMNIFICATION
18.1 INDEMNIFICATION BY DEVELOPER.
(a) On and after the Effective Date of this Agreement, Developer
shall defend, indemnify and hold harmless City, EDC and each of their
officers, agents and employees (collectively the "Indemnitees" and
individually an "Indemnitee") from and against any and all liabilities,
losses, damages, costs, expenses, claims, obligations, penalties and causes
of action (including without limitation, reasonable fees and expenses for
attorneys, paralegals, expert witnesses and other consultants at the
prevailing market rate for such services) whether based upon negligence,
strict liability, absolute liability, product liability, misrepresentation,
contract, implied or express warranty or any other principal of law, that are
imposed upon, incurred by or asserted against Indemnitees or which
Indemnitees may suffer or be required to pay and which arise out of or relate
in any manner to any of the following occurring prior to the Termination
Date: (1) the ownership, possession, use, condition or occupancy of the
Development or any part thereof or any Improvement thereon; (2) the operation
or management of the Development or any part thereof; (3) the performance of
any labor or services or the furnishing of any material for or on the
Development or any part thereof or enforcement of any liens with respect
thereto; (4) any personal injury, death or property damage suffered or
alleged to have been suffered by Developer (including Developer's employees,
agents or servants), the Casino Complex Operator/Managers (including their
employees, agents or servants) or any third person as a result of any action
or inaction of the Developer; (5) any work or things whatsoever done in, or
on the Development or any portion thereof, or off-site pursuant to the terms
of this Agreement; (6) the condition of any building, facilities or
Improvements on the Project Premises or the Temporary Casino Site or any
non-public street, curb or sidewalk on the Project Premises or the Temporary
Casino Site, or any vaults, tunnels, malls, passageways or space therein; (7)
any breach or default on the part of Developer for the payment, performance
or observance of any of its obligations under all agreements entered into by
Developer or any of its Affiliates relating to the performance of services or
supplying of materials to the Development or any part thereof; (8) any act,
omission or negligence of any Space Tenant, or any of their respective
agents, contractors, servants, employees, licensees or other tenants; and (9)
any claim by a third party relating to or arising from any failure of
Developer to comply with all Governmental Requirements. In case any action
or proceeding shall be brought against any Indemnitee based upon any claim in
respect of which Developer has agreed to indemnify any Indemnitee, Developer
will upon notice from Indemnitee defend such action or proceeding on behalf
of any Indemnitee at Developer's sole cost and expense and will keep
Indemnitee fully informed of all developments and proceedings in connection
therewith and will furnish Indemnitee with copies of all papers served or
filed therein, irrespective of by whom served or filed. Developer shall
defend such action with counsel it selects provided that such counsel is
reasonably satisfactory to Indemnitee. Such counsel shall not be deemed
reasonably satisfactory to Indemnitee if counsel has: (i) a legally
cognizable conflict of
78
<PAGE>
interest with respect to City or EDC; (ii) within the five (5) years
immediately preceding such selection performed legal work for City or EDC
which in their respective reasonable judgment was inadequate; or (iii)
frequently represented parties opposing City or EDC in prior litigation.
Each Indemnitee shall have the right, but not the obligation, at its own
cost, to be represented in any such action by counsel of its own choosing.
(b) Notwithstanding anything to the contrary contained in SECTION
18.l(a) but further subject to SECTION 18.1(c) below, Developer shall not
indemnify and shall have no responsibility to Indemnitees for: (i) any matter
involving the gross negligence or willful misconduct of any of the
Indemnitees; (ii) any matter giving rise to any liability of any of the
Indemnitees prior to the Effective Date, except for such liabilities arising
from acts or omissions undertaken by or at the request or insistence of
Developer; (iii) any liability arising with respect to portions of the
Development owned or under the control of the City, the EDC, or any
instrumentality or subdivision thereof prior to Effective Date which arises
from any acts or omissions of any Indemnitee occurring prior to the Effective
Date; (iv) any liability arising with respect to any off-site Infrastructure
Improvements owned and under the control of the City which arises from acts
or omissions of the City; (v) any failure by the City or any subdivision or
instrumentality thereof to exercise its police and similar public safety
powers with respect to the Development, but only to the extent Developer is
not required to undertake or perform such services pursuant to the terms of
this Agreement; or (vi) any breach by City or EDC of its obligations pursuant
to this Agreement.
(c) The foregoing exclusions from Developer's obligation to
indemnify Indemnitees set forth in SECTION 18.1(b) above shall in no event
apply to Developer's environmental indemnity obligations set forth in SECTION
15.3.
ARTICLE XIX
ENTRY UPON PREMISES; INSPECTION
19.1 ACCESS AND INSPECTION.
(a) City and/or its representatives shall have the right at all
reasonable times, upon reasonable notice to Developer (except in the case of
emergency, in which event no notice shall be required), to enter the
Development for the purposes of (1) inspection, (2) making of such repairs or
performing such acts that City and/or EDC shall have the right to make or
perform by the Agreement provisions, or (3) determining whether Developer is
complying with the terms and conditions of this Agreement, including but not
limited to compliance with Environmental Laws.
(b) Developer may, during such inspection, have an employee or
agent of Developer escort any person so inspecting the Development and due
precautions shall be taken with respect to special security areas in the
Development. City and/or EDC shall be allowed to take all material into and
upon the Development that may be required for the inspections or repairs
above
79
<PAGE>
mentioned as the same is required for such purpose. In performing any such
inspections or repairs, City and/or EDC agrees to use reasonable efforts to
minimize to the extent practicable any disruption of or interference with
occupancy, business or operations of Developer or any Space Tenant, provided
that nothing contained herein shall require City and/or EDC to perform such
work outside of normal business hours.
(c) Notwithstanding the foregoing, the EDC's rights to enter the
Development for the purposes set forth in SECTION 19.1(a) AND (b) shall be
limited to construction matters.
ARTICLE XX
TEMPORARY CASINO
20.1 DEVELOPER'S TEMPORARY CASINO OBLIGATIONS. Subject to Developer
acquiring or leasing a Temporary Casino Site (as herein defined), Developer may
elect to design, construct, finance and operate a Temporary Casino subject to
and in accordance with the terms of this ARTICLE XX and the other provisions of
this Agreement, as applicable. In the event Developer makes such election, the
following provisions in this ARTICLE XX shall apply.
20.2 TEMPORARY CASINO SITE.
(a) Developer shall select a land-based location for the
Temporary Casino ("Temporary Casino Site"), which Temporary Casino Site shall
be subject to the approval of the City. Developer hereby acknowledges that
Developer will acquire or lease, and develop the Temporary Casino Site at its
sole cost and expense. Neither City nor EDC shall be required to contribute
any funds or perform any obligations in connection with Developer's
acquisition or lease and development of the Temporary Casino Site.
(b) At the time Developer submits the Temporary Casino Design
Documents in accordance with SECTION 20.4, Developer shall submit plans for
the reuse of the Temporary Casino Site and the Improvements thereon
subsequent to Completion. Such plans may consist of using the Temporary
Casino Site as a training center or other purpose auxiliary to the operations
of the Casino Complex or such other use as the City may approve, which
approval shall not be unreasonably withheld. In no event shall Developer
abandon the Temporary Casino Site or allow the Improvements thereon to fall
into a state of disrepair during its ownership or lease of the Temporary
Casino Site.
(c) Developer shall pay City for all reasonable hard and soft
costs, including, without limitation, personnel and labor costs (excluding
salaries, overhead and other costs of City employees performing their normal
functions) relating to the design and construction of any Infrastructure
Improvements necessary or required for the Temporary Casino prior to the time
that City incurs any costs related thereto. The Developer shall have no
responsibility to maintain or pay
80
<PAGE>
for the maintenance of any such Infrastructure Improvements once installed.
It is the intention of the parties that neither the City nor the EDC shall be
responsible to pay for or otherwise fund the construction of any such
Infrastructure Improvements, such costs and expenses being the sole
responsibility of the utility in the case of any private or quasi-public
utilities or the responsibility of Developer in all other circumstances.
Upon receipt of such funds, City agrees to use such funds to construct such
Infrastructure Improvements.
20.3 TEMPORARY CASINO FINANCING. Developer shall submit to City its
plan for obtaining funds to finance the acquisition of the Temporary Casino
Site and the design construction and operation of the Temporary Casino. Such
funds shall be on such terms and conditions as are acceptable to City in the
exercise of its commercially reasonable judgment. Any borrowed funds shall
be from a Suitable Lender.
20.4 TEMPORARY CASINO DESIGN DOCUMENTS.
(a) Developer shall prepare and submit schematic design drawings
for the Temporary Casino in sufficient detail to establish the size and
character of the Temporary Casino (the "Temporary Casino Design Documents"),
to City for review and approval, together with such other drawings, documents
and other supporting information as reasonable required by City in connection
with City's review of the Temporary Casino Design Documents.
(b) Developer covenants and agrees to cause the Temporary Casino
to be designed as close to First Class Casino Complex Standards as the
Temporary Casino Site will permit. Developer covenants and agrees that the
Temporary Casino shall have a gaming floor area of not less than thirty-five
thousand (35,000) square feet nor more than one hundred thousand (100,000)
square feet.
(c) Neither City nor the EDC shall be responsible for any error
or omission in the Temporary Casino Design Documents, or for failure of the
Temporary Casino Design Documents, or a part thereof, to comply with
Governmental Requirements, or for Temporary Casino Design Documents that
result in or cause a defective design or construction.
20.5 APPROVAL PROCEDURES.
(a) Provided that by May 1, 1998 the Developer has identified its
Temporary Casino Site and submitted to the City the information required from
Developer under ARTICLE XX (the "Temporary Casino Information"), the Mayor,
within ten (10) Business Days of (i) being satisfied with the Temporary
Casino Information and (ii) reaching agreement with the Developer on funding
law enforcement training activities in connection with the Temporary Casino
as a partial advance against the first year's Municipal Services Fee, shall
transmit the Temporary Casino Information to the City Council for approval.
The Mayor shall act within a reasonable period of time under the
circumstances.
81
<PAGE>
(b) Provided that by May 1, 1998 the Mayor (i) receives
information from the Other Land-Based Casino Developers concerning their
temporary casinos as and to the extent required under the casino development
agreements with the City which information is satisfactory to the Mayor
(including but not limited to the information required by SECTION 2.6(L)) and
(ii) reaches agreement with the Other Land-Based Casino Developers on funding
law enforcement training activities in connection with their temporary
casinos as a partial advance against the first year's Municipal Services Fee,
the Mayor shall submit the Temporary Casino Information and the comparable
information of any of the Other Land-Based Casino Developers who satisfy
clauses (i) and (ii) (collectively, the "Temporary Casino Proposals") to the
City Council for approval in a single transmission.
(c) Provided City Council approves all but not less than all of
the Temporary Casino Proposals submitted pursuant to SECTION 20.5(b),
including all necessary zoning changes therefor, Developer shall have the
right to commence construction of its Temporary Casino, subject to applicable
provisions of this Agreement. Notwithstanding the failure of any other
Land-Based Casino Developer to have satisfied clauses (i) and (ii) of SECTION
20.5(b), the Mayor shall submit the Temporary Casino Proposals of the
Developer and any other Land-Based Casino Developer who does satisfy clauses
(i) and (ii) of SECTION 20.5(b) to the City Council for approval.
(d) Nothing shall preclude the Developer from submitting its
Temporary Casino Information to the Mayor after May 1, 1998. Provided City
Council approves any such subsequently submitted Temporary Casino Proposals
together with all necessary zoning changes therefor, Developer shall have the
right to commence construction of its Temporary Casino, subject to applicable
provisions of this Agreement.
20.6 CONSTRUCTION OF TEMPORARY CASINO.
(a) Developer shall cause Contractor to construct the Temporary
Casino and perform the Work under the supervision and control of Developer.
Developer shall cause Contractor(s) to deliver to the City copies of the
temporary and final certificates of occupancy for the Temporary Casino.
Developer shall give notices and comply, and shall use all reasonable efforts
to cause Contractor and all Consultants to comply, with all Governmental
Requirements applicable to the Work, and shall obtain all permits, licenses
or other authorizations necessary for the prosecution of the Work.
(b) All Work shall be performed in a good and workmanlike manner
and in accordance with good construction practices. All materials used in
the construction of the Temporary Casino and the quality of the interiors and
Finish Work for the Temporary Casino, shall meet or exceed First Class Casino
Complex Standards. The quality of the materials utilized in the interior and
the exterior of the Temporary Casino shall be subject to the reasonable
approval of the City.
82
<PAGE>
(c) Time being of the essence, Developer, after receipt of all
required Permits, shall, subject to the terms and provisions of this Agreement,
prosecute the Work diligently, using such means and methods of construction and
sufficient employees as Developer reasonably believes are necessary to maintain
the progress of the Work and to complete the Temporary Casino in accordance with
the requirements of the construction documents no later than the temporary
casino opening date.
20.7 TEMPORARY CASINO OPERATIONS.
(a) Developer agrees to exert all commercially reasonable efforts
to develop, operate and maintain the Temporary Casino in a manner consistent
with First Class Casino Complex Standards and all Governmental Requirements.
(b) Developer agrees to cease all Casino Gaming Operations at the
Temporary Casino on the Completion Date.
20.8 RESTRICTION ON PAYMENTS. Developer covenants and agrees that
until the Completion Date, Developer shall not declare or pay any dividends or
make any other distributions to any members of Developer or their respective
Affiliates except:
(a) for Permitted Affiliate Payments; or
(b) provided Developer is not otherwise then restricted in making
distributions under SECTION 7.13:
(1) for distributions to Atwater Casino Group, L.L.C.
according to the terms of Developer's operating agreement (without giving
effect to any amendments made to the copy of such operating agreement
submitted in connection with its RFP/Q), made subsequent to the payment by
Developer of its Pro Rata Portion of the Feehold Compensation due upon the
closing of the purchase of the Project Premises pursuant to the Conveyance
Agreement; and
(2) for distributions to Developer's members made
subsequent to the completion of the construction of the foundation for any
Covered Component.
ARTICLE XXI
MISCELLANEOUS
21.1 NOTICES. Notices shall be given as follows:
83
<PAGE>
(a) Any notice, demand or other communication which any party may
desire or may be required to give to any other party shall be in writing
delivered by (i) hand-delivery, (ii) a nationally recognized overnight courier,
(iii) telecopy, or (iv) mail (but excluding electronic mail, i.e., "e-mail")
addressed to a party at its address set forth below, or to such other address as
the party to receive such notice may have designated to all other parties by
notice in accordance herewith:
If to City: Mayor
City of Detroit
1126 City-County Building
Detroit, Michigan 48226
Telecopier No.: 313-224-4433
with copies to: Corporation Counsel
City of Detroit
First National Building
660 Woodward Avenue
Suite 1650
Detroit, Michigan 48226
Telecopier No.: 313-224-5505
If to EDC: The Economic Development Corporation
of the City of Detroit
211 West Fort Street
Suite 900
Detroit, Michigan 48226
Telecopier No.: 313-963-9786
If to Developer: Detroit Entertainment, L.L.C.
2211 Woodward Avenue
Fox Office Center, 10th Floor
Detroit, Michigan 48207
Attn: Michael Malik
Telecopier No.: 313-983-6604
with copies to: Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attn: Peter Simon and Yvette Landau
Telecopier No.: 702-794-3810
- and -
Atwater Entertainment Associates, L.L.C.
84
<PAGE>
300 River Place
Suite 6600
Detroit, Michigan 48207
Attn: Herbert J. Strather
Telecopier No.: 313-446-9905
- and -
Seyburn, Kahn, Ginn, Bess, Deitch & Serlin
2000 Town Center
Suite 1500
Southfield, Michigan 48075
Attn: Laurence B. Deitch
Telecopier No.: 248-353-2727
(b) Any such notice, demand or communication shall be deemed
delivered and effective upon the earlier to occur of actual delivery or, if
delivered by telecopier, the same day as confirmed by telecopier transmission
or the first Business Day thereafter if telecopied on a non-Business Day.
21.2 NON-ACTION OR FAILURE TO OBSERVE PROVISIONS OF THIS AGREEMENT.
The failure of City, EDC or Developer to promptly insist upon strict
performance of any term, covenant, condition or provision of this Agreement,
or any Exhibit hereto, or any other agreement contemplated hereby, shall not
be deemed a waiver of any right or remedy that City, EDC or Developer may
have, and shall not be deemed a waiver of a subsequent default or
nonperformance of such term, covenant, condition or provision.
21.3 APPLICABLE LAW AND CONSTRUCTION. The laws of the State shall
govern the validity, performance and enforcement of this Agreement. This
Agreement has been negotiated by City, EDC and Developer, and the Agreement,
including, without limitation, the Exhibits, shall not be deemed to have been
negotiated and prepared by City, EDC or Developer, but by each of them.
21.4 SUBMISSION TO JURISDICTION.
(a) Each party to this Agreement hereby submits to the
jurisdiction of the Wayne County Circuit Court, the appellate courts of the
State and to the jurisdiction of the United States District Court for the
Eastern District of the State, for the purposes of any suit, action or other
proceeding arising out of or relating to this Agreement, and hereby agrees
not to assert by way of a motion as a defense or otherwise that such action
is brought in an inconvenient forum or that the venue of such action is
improper or that the subject matter thereof may not be enforced in or by such
courts.
85
<PAGE>
(b) If at any time during the term of this Agreement, Developer
is not a resident of the State or has no officer, director, employee, or
agent thereof available for service of process as a resident of the State, or
if any permitted assignee thereof shall be a foreign corporation, partnership
or other entity or shall have no officer, director, employee, or agent
available for service of process in the State, Developer or its assignee
hereby designates the Secretary of State of the State, as its agent for the
service of process in any court action between it and City and/or EDC or
arising out of or relating to this Agreement and such service shall be made
as provided by the laws of the State for service upon a non-resident;
provided, however, that at the time of service on the Secretary of State,
copy of such service shall be delivered to Developer in the manner provided
in SECTION 21.1.
21.5 COMPLETE AGREEMENT. This Agreement, and all the documents and
agreements described or referred to herein, including without limitation the
Exhibits hereto, constitute the full and complete agreement between the
parties hereto with respect to the subject matter hereof, and supersedes and
controls in its entirety over any and all prior agreements, understandings,
representations and statements whether written or oral by each of the parties
hereto.
21.6 HOLIDAYS. It is hereby agreed and declared that whenever a
notice or performance under the terms of this Agreement is to be made or
given on a day other than a Business Day, it shall be postponed to the next
following Business Day.
21.7 EXHIBITS. Each Exhibit referred to and attached to this Agreement
is an essential part of this Agreement.
21.8 NO BROKERS. City, EDC and Developer hereby represent, agree and
acknowledge that no real estate broker or other person is entitled to claim
or to be paid a commission as a result of the execution and delivery of this
Agreement.
21.9 NO JOINT VENTURE. City and EDC on the one hand and Developer on
the other, agree that nothing contained in this Agreement or any other
documents executed in connection herewith is intended or shall be construed
to establish City and/or EDC and Developer as joint venturers or partners.
21.10 GOVERNMENTAL AUTHORITIES. Notwithstanding any other
provisions of this Agreement, any required permitting, licensing or other
regulatory approvals by any Governmental Authorities shall be subject to and
undertaken in accordance with the established procedures and requirements of
such authority, as may be applicable, with respect to similar projects and in
no event shall the Governmental Authority by virtue of any provision of this
Agreement be obligated to take any actions concerning regulatory approvals
except through its established processes.
21.11 TECHNICAL AMENDMENTS. In the event that there are minor
inaccuracies contained herein or any Exhibit attached hereto or any other
agreement contemplated hereby, or the parties agree that changes are required
due to unforeseen events or circumstances, or technical matters
86
<PAGE>
arising during the term of this Agreement, which changes do not alter the
substance of this Agreement, the respective officers of City and EDC, and the
officers of Developer, are authorized to approve such changes, and are
authorized to execute any required instruments, to make and incorporate such
amendment or change to this Agreement or any Exhibit attached hereto or any
other agreement contemplated hereby.
21.12 UNLAWFUL PROVISIONS DEEMED STRICKEN. If this Agreement
contains any unlawful provisions not an essential part of this Agreement and
which shall not appear to have a controlling or material inducement to the
making thereof, such provisions shall be deemed of no effect and shall be
deemed stricken from this Agreement without affecting the binding force of
the remainder. In the event any provision of this Agreement is capable of
more than one interpretation, one which would render the provision invalid
and one which would render the provision valid, the provision shall be
interpreted so as to render it valid.
21.13 NO LIABILITY FOR APPROVALS AND INSPECTIONS. Except as may be
otherwise expressly provided herein, no approval to be made by City, EDC or
the PM under this Agreement or any inspection of the Work by City, EDC or the
PM under this Agreement, shall render City and/or EDC liable for failure to
discover any defects or non-conformance with this Agreement, or a violation
of or noncompliance with any federal, state or local statute, regulation,
ordinance or code.
21.14 TIME OF THE ESSENCE. All times, wherever specified herein for
the performance by Developer of its obligations hereunder, are of the essence
of this Agreement.
21.15 CAPTIONS. The captions of this Agreement are for convenience
of reference only and in no way define, limit or describe the scope or intent
of this Agreement or in any way affect this Agreement.
21.16 ARBITRATION.
(a) MATTERS SUBJECT TO ARBITRATION. In case of a dispute between
Developer, on the one hand, and either City and/or EDC on the other, with
respect to any disagreement under this Agreement other than a disagreement
with respect to any of the following items, the parties shall in good faith
attempt to resolve such dispute through informal negotiations
("Negotiations"). In the event the parties reach a resolution during
Negotiations such resolution shall be set forth in a writing signed by all
parties and may be enforced in any court of competent jurisdiction as if it
were an arbitration award, pursuant to SECTION 21.16(j). In the event either
party determines in its sole discretion that a resolution cannot be reached
during the Negotiations, such party may deliver to the other party written
notice to terminate the Negotiations and to refer the disagreement to binding
arbitration consistent with the procedures set forth below. The decision of
the arbitrator or arbitrators shall be final and binding upon the parties,
and a judgment may be rendered thereon in any court of competent
jurisdiction. The matters not subject to arbitration hereunder are as
follows:
(1) Any dispute arising under SECTION 2.6.
87
<PAGE>
(2) Any dispute asserted by City and/or EDC which could give
rise to an Event of Default to which a Mandatory Sale is a remedy available
to City.
(b) COMMENCEMENt. The Negotiations shall be initiated by the
claiming party serving written notice upon the other party requesting
commencement of informal negotiations. If either party determines that
Negotiations should be terminated and arbitration shall be commenced, said
party shall initiate arbitration proceedings by serving written notice upon
the other party requesting that the dispute be resolved by arbitration. All
notices sent pursuant to this Section 21.16, shall set forth a statement of
claim from the claiming party indicating with specificity the nature and
extent of the matter in dispute, together with the relief requested.
(c) SITUS OF HEARING. Any Negotiations and/or hearings held
pursuant to this SECTION 21.16 shall be conducted in Detroit, Michigan, or at
such other place as may be selected by mutual written agreement of the
parties.
(d) SELECTION OF ARBITRATOR.
(1) Within fifteen (15) days of being served with the statement
of claim the parties to the arbitration shall appear by counsel and meet to
attempt to agree on a single arbitrator to decide the subject claim. If
the parties to the arbitration cannot agree on a single arbitrator within
fifteen (15) days after the appearance of counsel, then each party shall
select an arbitrator, and the two (2) arbitrators so selected shall
together select a third (3rd) arbitrator within fifteen (15) days. The
three (3) arbitrators so selected shall thereafter decide the matter in
dispute. In the event both the City and EDC are parties to the
arbitration, then the City and EDC, collectively, shall select one
arbitrator and Developer shall select the second arbitrator.
(2) In order to expedite any arbitration regarding construction
matters, the parties shall, within ninety (90) days of the Closing Date,
select an arbitrator or if the parties cannot agree on a single arbitrator
within such ninety (90) days, then each party shall select an arbitrator,
and the two (2) arbitrators so selected shall select a third (3rd)
arbitrator within thirty (30) days, which arbitrator or panel shall be
available to hear any dispute concerning construction matters arising under
this Agreement during the period of construction of the Casino Complex. In
the event both the City and EDC are parties to the arbitration, then the
City and EDC shall collectively, select one arbitrator and Developer shall
select the second arbitrator. With respect to any dispute concerning
construction matters, the arbitrator or arbitrators selected shall be
knowledgeable in construction disputes involving major projects.
(3) With respect to any dispute concerning gaming matters, the
arbitrator or arbitrators selected shall be knowledgeable in casino gaming
matters and selected in the same manner as set forth in SECTION
21.16(d)(1).
88
<PAGE>
(4) If the parties are unable to agree on a single arbitrator,
and thereafter if either party fails to select an arbitrator within fifteen
(15) days, then the arbitrator or arbitrators shall be chosen, on the
application of any party, by any court of competent jurisdiction.
(e) RULES AND PROCEDURES. The statement of claim and all
subsequent proceedings in the arbitration shall be governed by the Commercial
Arbitration Rules of the American Arbitration Association, as amended from
time to time, but the arbitration itself shall not be administered by or
proceed before the American Arbitration Association. Any subject claim that
a party has breached this Agreement by failing to pay any money when due and
payable or has failed to perform a duty or obligation hereunder, which is
presented in accordance herewith, shall proceed expeditiously and, to the
extent applicable, the Commercial Arbitration Rule's Expedited Procedures
(other than as to appointment of the arbitrator) shall apply.
(f) MODIFICATION OF RULES AND PROCEDURES. The parties to any
arbitration subject to this Agreement may on an ad hoc basis stipulate in
writing to modify the rules and procedures set forth herein that will govern
the particular arbitration to which they are the parties; provided, however,
that no such stipulation and modification shall govern, or have any
precedential value whatsoever for, any other or subsequent arbitration or
shall affect in any way the construction or interpretation of this Agreement.
(g) SCOPE OF AUTHORITY. Except as otherwise provided in this
Agreement, including but not limited to the provisions set forth in ARTICLE X
and SECTION 6.7, the Arbitrator or Arbitrators shall have the authority to
award any and all legal and equitable remedies that a court of this state
could order or grant, including, without limitation, specific performance of
any obligation created under the Agreement, the issuance of an injunction or
the imposition of sanctions for abuse or frustration of the arbitration
process.
(h) INTERIM RELIEF. Either party may, without inconsistency with
this Agreement, seek from a court of competent jurisdiction any interim or
provisional relief that may be necessary to protect the rights or property of
that party and to preserve the status quo, pending the establishment of the
arbitral tribunal. If a party is successful in achieving such interim or
provisional relief, the arbitral tribunal, once established, is authorized
to: (x) continue such relief pending the arbitral tribunal's determination of
the merits of the controversy; (y) modify such relief as deemed equitable by
the Arbitrator(s) pending the arbitral tribunal's determination of the merits
of the controversy; or (z) immediately terminate such relief and proceed with
a resolution of merits of the controversy.
(i) COSTS OF ARBITRATION. The costs of the arbitrator shall be
split equally by the parties to an arbitration, but the arbitrator shall
provide in the award that if City and/or EDC is the prevailing party, such
party shall recover its share of such costs as well as its reasonable
attorneys' fees and other costs from Developer. If the Developer is the
prevailing party, the Developer shall
89
<PAGE>
have no obligation to pay the attorney's fees and costs of City and/or EDC
and the Developer shall recover its share of costs and reasonable attorney's
fees if and only if the arbitrator finds that the claims of the City and/or
EDC are frivolous and that City and/or EDC are subject to sanctions therefor.
(j) ENFORCEMENT. If either party refuses to participate in
arbitration of any dispute subject to arbitration under the terms of this
Agreement, a party may seek to compel arbitration in accordance herewith in
any court of competent jurisdiction. If any party fails to comply with a
final award or order of arbitration, a party may seek an order from any court
of competent jurisdiction confirming, vacating or modifying any such final
arbitration award or order obtained in accordance with this Agreement and
enforcing any judgment upon such confirmed or modified award.
(k) PARTIES SUBJECT TO ARBITRATION. This SECTION 21.16 is
applicable to disputes arising between the Developer, on one hand, and either
the City and/or EDC on the other, regarding disputes, claims, questions, or
disagreements arising out of or relating to each parties' rights, duties
and/or obligations established pursuant to this Agreement. SECTION 21.16
shall in no way limit the right of the City or its agencies, authorities
and/or instrumentalities or Developer to institute proceedings in any court
of competent jurisdiction from disputes, claims, questions, or disagreements
arising between Developer and the City or its agencies, authorities and/or
instrumentalities while the City or its agencies, authorities and/or
instrumentalities are acting pursuant to their normal City functions such as,
without limitation, disputes arising from the permitting and/or inspection
processes.
(l) CONFIDENTIALITY. Subject to applicable law, the parties and
the arbitrator(s) agree to maintain the substance of any proceedings
hereunder in confidence.
21.17 SUNSET PROVISION.
(a) The obligations imposed on Developer by and under the
following provisions of this Agreement shall lapse and be of no further force
or effect seven (7) years after the Execution Date: SECTIONS 3.2, 3.3, 3.5
AND 7.7.
(b) The obligations imposed on Developer by and under the
following provisions of this Agreement shall lapse and be of no further force
or effect ten (10) years after the Execution Date: SECTIONS 7.2, 7.11 AND
7.16.
(c) The obligations imposed on Developer by and under SECTION 7.17
shall lapse and be of no further force or effect thirty-five (35) years after
the Execution Date.
(d) The obligations imposed on Developer by and under SECTION 7.3
shall lapse and be of no further force or effect ten (10) years after the
Closing Date.
90
<PAGE>
21.18 COMPLIANCE. Any provision that permits or requires a party to
take action shall be deemed to permit or require, as the case may be, the
party to cause the action to be taken.
21.19 TABLE OF CONTENTS. The table of contents is for the purpose
of convenience only and is not to be deemed or construed in any way as part
of this Agreement or as supplemental thereto or amendatory thereof.
21.20 NUMBER AND GENDER. All terms used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any gender as the context may require.
21.21 THIRD PARTY BENEFICIARY. Except as set forth in SECTION
2.4(b), there shall be no third party beneficiaries with respect to this
Agreement.
21.22 COST OF INVESTIGATION. If as a result of the Agreement, City
or any of their directors or officers, the Mayor, or any City Council
members, or any employee, agent, or representative of City is required to be
licensed, or approved by the Board, one-third (1/3) of all reasonable costs
of such licensing, approval or investigation shall be paid by Developer
within five (5) Business Days following receipt of a written request from
City.
21.23 ATTORNEYS' FEES. Developer shall pay all of City's and EDC's
costs, charges and expenses, including court costs and attorneys' fees,
incurred in enforcing Developer's obligations under this Agreement or
incurred by City or EDC in any action brought by Developer in which City or
EDC is the prevailing party. If the Developer is the prevailing party, the
Developer shall have no obligation to pay the attorneys' fees and costs of
City and/or EDC and the Developer shall recover its share of costs and
reasonable attorneys' fees if and only if the court finds that the claims of
the City and/or EDC are frivolous and that City and/or EDC are subject to
sanctions.
21.24 FURTHER ASSURANCES. City, EDC and Developer will cooperate
and work together in good faith to the extent reasonably necessary and
commercially reasonable to accomplish the mutual intent of the parties that
the Development be successfully completed as expeditiously as is reasonably
possible.
21.25 ESTOPPEL CERTIFICATES. City and EDC shall, at any time and
from time to time, upon not less than fifteen (15) Business Days prior
written notice from any lender of Developer, execute and deliver to any
lender of Developer an estoppel certificate in the form attached hereto as
Exhibit 21.25.
21.26 MOST FAVORED NATIONS PROVISION. City and EDC agree that in
the event: (i) either of the development agreements of either Other
Land-Based Casino Developer are amended in any material respect, City and EDC
shall offer to Developer the same amendment to this Agreement with such
conforming changes as may be reasonably required, provided, however, that
City's and EDC's obligation under this SECTION 21.26 shall end thirty-five
(35) years subsequent to the Closing Date
91
<PAGE>
with respect to any amendment to SECTION 7.17 and ten (10) years subsequent
to the Closing Date with respect to all other amendments to this Agreement;
and (ii) they waive any of the conditions imposed by SECTIONS 2.4(a)(1), (2),
(4) OR (7) under either of the development agreements of either Other
Land-Based Casino Developer, they shall offer to waive such condition for
Developer.
21.27 DEVELOPER'S RIGHT TO TERMINATE. Upon written notice delivered
by Developer to City and EDC within ten (10) Business Days from the Execution
Date, Developer may terminate this Agreement if Developer's Board of
Directors fails to approve this Agreement.
21.28 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original document and together shall
constitute one instrument.
[Signatures on next page]
92
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and had their
seals affixed on the dates set forth after their respective signatures.
CITY OF DETROIT, a municipal
corporation
By: Dennis Archer
------------------------------
Its: Mayor
------------------------------
THE ECONOMIC DEVELOPMENT
CORPORATION OF THE CITY OF
DETROIT, a Michigan public body
corporate
By: C. Beth Dun Combe
------------------------------
Its: Authorized Agent
By: George E. Bushnell, Jr.
------------------------------
Its: Treasurer
DEVELOPER:
DETROIT ENTERTAINMENT, L.L.C.
a Michigan limited liability company
By: Circus Circus Michigan, Inc., a Michigan
corporation, one of its members
By: Glenn Schaeffer
------------------------------
Its: President
By: Atwater Casino Group, LLC, a Michigan
limited liability company, one of its
members
By: Atwater Management Corporation, a
Delaware corporation, its manager
By: Herbert J. Strather
------------------------------
Its: Chairman of the Board
By: Thomas Celani
------------------------------
Its: President
93
<PAGE>
EXHIBIT 10(b)
FIRST AMENDMENT TO THE
AMENDED AND RESTATED DEVELOPMENT AGREEMENT
BY AND AMONG
THE CITY OF DETROIT, THE ECONOMIC DEVELOPMENT CORPORATION OF THE
CITY OF DETROIT AND [DEVELOPER]
THIS FIRST AMENDMENT (the "First Amendment") to that certain Amended and
Restated Development Agreement, dated as of April 9, 1998, by and among the
City of Detroit, the Economic Development Corporation of the City of Detroit
and [Developer] for the City of Detroit Casino Development Project (the
"Development Agreement") is made on this 24th day of June, 1998 by and among
the City of Detroit, the Economic Development Corporation of the City of
Detroit and [Developer].
WHEREAS, the City, EDC and Developer have previously entered into
the Development Agreement; and
WHEREAS, it is the desire of the parties to enter into this First
Amendment to amend certain provisions of the Development Agreement and to
provide for an advance of certain fees.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants herein contained, the parties agree as follows:
1. All capitalized terms not otherwise defined herein shall have the same
meaning as set forth in the Development Agreement.
2. SECTION 2.4(a) of the Development Agreement is hereby amended by deleting
the existing language of such section and substituting the following in its
place:
(a) This Agreement shall confer no rights and impose no obligations until
the Effective Date. Notwithstanding the execution hereof and the
occurrence of the Effective Date, except as and to the extent set
forth in (i) ARTICLE I, (ii) SECTION 2.4, (iii) SECTION 2.5, (iv)
SECTION 2.7, (v) SECTION 2.8, (vi) SECTION 2.10, (vii) SECTION 2.11,
(viii) SECTION 2.17, (ix) ARTICLE VIII, (x) ARTICLE IX, (xi) ARTICLE
X, (xii) ARTICLE XIV, (xiii) ARTICLE XVIII, (xiv) ARTICLE XX and
(xv) ARTICLE XXI, each to the extent applicable, no right shall be
conferred or obligation imposed, by or under this Agreement until the
first to occur of: (x) the Temporary Casino Opening Date, as that term
is defined in SECTION 20.6, or (y) the Closing Date. Notwithstanding
the foregoing, Developer shall have no right to commence construction
of the Casino Complex (other than Site Preparation Work on those
parcels within the Project Premises to which Developer has acquired
title) until the Closing Date, unless such condition is
1
<PAGE>
otherwise waived, in writing, by the City. The Closing Date for the
Casino Complex shall occur when each of the following conditions has
been fully satisfied:
[Remainder of SECTION 2.4(a)(1)-(a)(14) remains unchanged.]
3. SECTION 2.5(b) of the Development Agreement is hereby amended by deleting
the existing language of such section and substituting the following in its
place:
(b) Within five (5) Business Days following the date the last of the
following occurs: (i) City Council approves the Conveyance Agreement;
and (ii) the Due Diligence Period, as defined in the Conveyance
Agreement has expired, Developer shall furnish the EDC with a letter
of credit in an amount equal to the Letter of Credit Amount (as
hereinafter defined) and in such form and upon such terms and
conditions as are reasonably necessary to allow City to acquire the
Casino Area and the Public Land. For purposes hereof, the "Letter of
Credit Amount" shall be equal to Developer's Pro Rata Share times an
amount equal to (A) the sum of (x) Feehold Compensation plus (y) a
reasonable reserve as agreed to by Developer, the City, the EDC and
the Other Land-Based Casino Developers, less (B) the appraised value
of any land owned by the City in the Casino Area determined in
accordance with the definition of Feehold Compensation.
4. SECTION 5.1 of the Development Agreement is hereby amended by deleting the
first sentence of the existing language of such section and substituting
the following in its place:
As City and/or EDC obtains a right of possession to the Project Premises
which permits Developer onto the Project Premises for purposes of
conducting tests and inspections, the City and/or EDC shall grant to
Developer (or shall cause Developer to be granted) a right of entry onto
the Project Premises to conduct preliminary or preparatory work, such as
surveys (including environmental surveys) and tests (including but not
limited to core sampling, test pits, monitoring wells, soil compaction and
test pilings).
[Remainder of SECTION 5.1 remains unchanged.]
5. EXHIBIT 1.1(a)(42) (Conveyance Agreement), Paragraph 3.03 is hereby amended
by deleting the existing language in such paragraph and substituting the
following in its place:
3.03 SURVEYING AND TESTING. EDC shall permit Developer and its Associates
to enter the Property for purposes of site investigation and testing,
in the manner and subject to the limitations set forth in SECTION 5.1
of the Development Agreement. Developer shall have sixty (60) days
(the "Due Diligence Period") commencing on the date the last of the
following occurs: (i) the City and EDC deliver the cost estimates set
forth on Schedule A, as referred to in SECTION 2.18 of the Development
Agreement ("Schedule A"), together with all reports, analyses, and
other material relied upon by City and EDC in developing Schedule A
(the "Supporting Material"), including, without limitation,
appraisals, estimates of relocation payments and other costs included
in Feehold Compensation (other than information which the City is
2
<PAGE>
restricted from disclosing pursuant to Section 5(2) of the Uniform
Condemnation Procedures Act, MCL 213.55(2)), Phase I and Phase II
environmental site assessments, laboratory analysis, reports,
estimates of the cost of environmental Response activity and
underlying assumptions and calculations, geotechnical reports,
estimates of the cost of Infrastructure Improvements and underlying
assumptions and calculations, and (ii) the City and EDC deliver the
Commitment and the Survey in order to: (x) satisfy itself as to the
physical condition of the Property and title thereto, or (y) determine
the feasibility of the issuance of an Administrative Order By Consent
And Covenant Not To Sue in favor of the City, EDC, Developer and the
Other Land-Based Casino Developers, or (z) determine the feasibility
of Developer and the Other Land-Based Casino Developers preparing an
acceptable baseline environmental assessment; provided, in any event,
the City shall not be obligated to acquire any portion of the Property
until the Due Diligence Period has expired.
6. EXHIBIT 1.1(a)(42) (Conveyance Agreement), Paragraph 3.04 is hereby amended
by deleting the existing language in such paragraph and substituting the
following in its place:
3.04 DEVELOPER'S RIGHT TO TERMINATE. If Developer's review of the
Commitment, Schedule A, and/or the Supporting Material during the Due
Diligence Period reveals a defect in title or a physical or
geotechnical condition which renders it commercially impracticable for
Developer to construct and operate the Casino Complex in accordance
with the Development Agreement, then Developer may, at its option,
upon giving EDC written notice thereof, together with an opinion of
counsel describing such defect in title or copies of the reports,
analyses and other material pertaining to such condition, as the case
may be, at any time on or before the expiration of the Due Diligence
Period, elect to terminate this Agreement. If Developer should
terminate this Agreement for any reason, Developer shall immediately
surrender and furnish to City and EDC copies of any and all surveys,
reports and studies which have been prepared by Developer or any of
its consultants with respect to the Property. Subject to the
foregoing right of termination and to SECTION 18.1(b) of the
Development Agreement, Developer agrees to accept the Property in an
"as is", "where is" condition and Developer waives any and all rights
and remedies it might have against City and EDC as a result of the
condition thereof.
7. EXHIBIT 1.1(a)(83) (Guaranty and Keep Well Agreement), Paragraph 1 is
hereby amended by deleting the existing language in such paragraph and
substituting the following in its place:
1. Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to EDC the following (collectively, the "Obligations"): (i)
the full and faithful performance of each and every one of the
covenants and obligations in the Conveyance Agreement on Developer's
part to be kept and performed in accordance with the terms, covenants
and conditions of the Conveyance Agreement; (ii) the full and faithful
performance of each and every one of the covenants and obligations in
the Development Agreement on Developer's part to be kept and performed
with respect
3
<PAGE>
to the construction, equipping and completion of the Casino Complex
on or before the Agreed Upon Opening Date in accordance with the
terms, covenants and conditions of the Development Agreement
(including, without limitation, the payment of so-called "hard costs"
of construction and so-called "soft costs" of construction such as
fees and charges of architects, engineers, consultants, surveyors,
attorneys and others and the costs of all Permits, licenses and other
matters); (iii) Developer's prompt payment as and when due of all
amounts of every kind or nature whatsoever, including without
limitation, the Advance (if applicable), Feehold Compensation (net of
the City Contribution), Developer's Allocable Share of Development
Process Costs, Developer's portion of all Infrastructure Improvements
to be paid by Developer to EDC and/or City under the Development
Agreement; and (iv) with respect to any mechanic's or materialman's
lien filed against or attaching to all or any part of the Project
Premises as a result of the Work, the removal or release of such lien,
provided that nothing herein shall preclude Developer or Guarantor
from contesting in good faith any such lien by appropriate
proceedings. Notwithstanding the foregoing, Guarantor shall have no
obligation to obtain the Certificate of Suitability and/or Casino
License for or on behalf of Developer.
8. SECTION 20.1 of the Development Agreement is hereby amended by deleting the
existing language of such section and substituting the following in its
place:
20.1 DEVELOPER'S TEMPORARY CASINO OBLIGATIONS.
(a) Subject to Developer acquiring or leasing a Temporary Casino Site (as
herein defined), Developer may elect to design, construct, finance
and operate a Temporary Casino subject to and in accordance with the
terms of this ARTICLE XX and the other provisions of this Agreement,
as applicable. In the event Developer makes such election, the
following provisions in this ARTICLE XX shall apply.
(b) Nothing in this ARTICLE XX shall in any way affect, limit, or modify
Developer's obligations contained in any other provision of this
Agreement.
9. SECTION 20.3 of the Development Agreement is hereby amended by deleting the
existing language of such section and substituting the following in its
place:
20.3 TEMPORARY CASINO FINANCING.
(a) Developer shall submit to City its plan for obtaining funds to finance
the acquisition or leasing of the Temporary Casino Site and the
design, construction and operation of the Temporary Casino. Such
funds shall be on such terms and conditions as are acceptable to City
in the exercise of its commercially reasonable judgment. Any borrowed
funds shall be from a Suitable Lender.
(b) Developer represents and warrants that the funding described under its
plan submitted to the City pursuant to SECTION 20.3(a) will be
available to Developer and
4
<PAGE>
is sufficient to acquire or lease the Temporary Casino Site and to
construct, develop, equip and operate the Temporary Casino in
accordance with the terms of this Agreement.
10. SECTION 20.4(b) of the Development Agreement is hereby amended by deleting
"one hundred thousand (100,000) square feet" in the last sentence and
substituting in its place "seventy-five thousand (75,000) square feet."
11. SECTION 20.5(a) of the Development Agreement is hereby amended by deleting
the existing language of such section and substituting the following in its
place:
(a) Provided that by May 1, 1998 the Developer has identified its
Temporary Casino Site and submitted to the City the information
required from Developer under ARTICLE XX (the "Temporary Casino
Information"), the Mayor, within ten (10) Business Days of being
satisfied with the Temporary Casino Information, shall transmit the
Temporary Casino Information to the City Council. The Mayor shall act
within a reasonable period of time under the circumstances.
12. SECTION 20.5(b) of the Development Agreement is hereby amended by deleting
the existing language of such section and substituting the following in its
place:
(b) Provided that by May 1, 1998 the Mayor receives information from the
Other Land-Based Casino Developers concerning their temporary casinos
as and to the extent required under the casino development agreements
with the City which information is satisfactory to the Mayor
(including but not limited to the information required by SECTION
2.6(l)), the Mayor shall submit the Temporary Casino Information and
the comparable information of any of the Other Land-Based Casino
Developers who satisfy this SECTION 20.5(b) (collectively, the
"Temporary Casino Proposals") to the City Council in a single
transmission.
13. SECTION 20.5(c) of the Development Agreement is hereby amended by deleting
the existing language of such section and substituting the following in its
place:
(c) Provided City Council approves all zoning changes necessary to
accommodate all of the Temporary Casino Proposals submitted pursuant
to SECTION 20.5(b), Developer shall have the right to commence
construction of its Temporary Casino, subject to SECTION 20.5(f) and
all other applicable provisions of this Agreement. Notwithstanding
the failure of any Other Land-Based Casino Developer to have satisfied
SECTION 20.5(b), the Mayor shall submit the Temporary Casino Proposals
of the Developer and any Other Land-Based Casino Developer who does
satisfy SECTION 20.5(b) to the City Council in a single transmission.
14. Section 20.5 of the Development Agreement is hereby amended by inserting as
Section 20.5(e) the following:
5
<PAGE>
(e) Unless the Board shall have indicated in writing its intention not to
approve Temporary Casinos, within seven (7) Business Days following
the date the last of the following occurs: (i) the First Amendment is
effective (as set forth in paragraph 26 of this First Amendment); and
(ii) City Council has approved all zoning changes necessary to permit
casino gaming operations to be conducted at, and Developer's
development and site plan for, the Temporary Casino, Developer shall
pay to the City a non-refundable sum of Three Hundred Thirty Three
Thousand Three Hundred Thirty-Three and 34/100 Dollars ($333,333.34)
(the "Early Advance"). The Early Advance shall be credited against
Developer's first year's Municipal Services Fee obligation and will be
used to assist the City in defraying the cost of hosting casinos.
Except as set forth in SECTION 20.5(f), the City shall have no
obligation to Developer to pay interest on the Early Advance or to
reimburse Developer for the Early Advance in the event the Municipal
Services Fee obligation never becomes payable. Developer's failure
to pay the Early Advance in accordance with the above terms shall be
deemed an Event of Default as set forth in SECTION 10.1(a) of the
Development Agreement and shall be subject to the Default Rate as set
forth in Section 2.11 of the Development Agreement.
15. SECTION 20.5 of the Development Agreement is hereby amended by inserting as
SECTION 20.5(f) the following:
(f) No later than seven (7) months prior to the Temporary Casino Opening
Date, (as defined in SECTION 20.6(d)), Developer shall pay to the City
a non-refundable sum of Three Million Six Hundred Sixty Six Thousand
Six Hundred Sixty-Six and 66/100 Dollars ($3,666,666.66) (the
"Advance"). The Advance shall be credited against Developer's first
year's Municipal Services Fee obligation and will be used to assist
the City in defraying the cost of hosting casinos. Except and to the
extent set forth in the next succeeding sentence, the City shall have
no obligation to Developer to pay interest on the Advance or to
reimburse Developer for the Advance in the event the Municipal
Services Fee obligation never becomes payable. In the event the
Temporary Casino Opening Date does not occur because the Board does
not issue a Casino License for the Temporary Casino Site, the Early
Advance and the Advance shall bear interest at a per annum rate equal
to the rate paid from time to time by the Governmental Cash Investment
Fund (Comerica Investment Fund J) or if such fund no longer exists at
the time such interest is calculated, at the rate paid from time to
time by such other governmental investment fund in which the City
maintains short term investments, which amount shall be credited
against Developer's first and subsequent years' Municipal Services Fee
obligation until fully applied.
16. SECTION 20.6(c) of the Development Agreement is hereby amended by
capitalizing the reference to "temporary casino opening date."
17. SECTION 20.6 of the Development Agreement is hereby amended by inserting as
SECTION 20.6(d) the following:
6
<PAGE>
(d) For purposes of ARTICLE XX, "Temporary Casino Opening Date" shall mean
the first day the Temporary Casino is open to the public for its
intended use. The Temporary Casino Opening Date shall not occur
until and unless all of the following conditions have been fully
satisfied or have been waived in accordance with SECTION 20.6(e):
(1) The Board has issued its Certificate of Suitability pursuant to
the Act, granting to Developer the right to receive a Casino
License upon the conditions set forth in the Act and such
Certificate of Suitability contains only such other conditions as
may be acceptable to Developer in the exercise of its reasonable
judgment.
(2) The Developer, City and EDC have duly executed and delivered the
Conveyance Agreement and the Conveyance Agreement has been
approved by City Council.
(3) The Developer has delivered to the EDC a letter of credit in the
Letter of Credit Amount and in such form and upon such terms and
conditions as are reasonably necessary to allow City to acquire
the Casino Area and the Public Land.
(4) The Developer has delivered, and has caused Parent Company to
deliver, to the City and EDC an opinion of counsel in a form
reasonably satisfactory to City and EDC.
(5) The City and EDC each have delivered to Developer an opinion of
counsel in a form reasonably satisfactory to Developer.
(6) The Developer has paid to the City its Allocable Share of the
Development Process Costs then due.
(7) The Developer has paid to the City the Advance, in accordance
with SECTION 20.5(f).
(8) The City Council has approved all zoning changes necessary to
allow Developer to operate the Temporary Casino and enacted an
ordinance authorizing casino gaming in the City.
(9) There shall be no temporary restraining order, preliminary
injunction or permanent injunction to enjoin the Developer from
proceeding to develop the Temporary Casino.
(10) The Developer has delivered to City and EDC the Guaranty and Keep
Well Agreement executed by an Acceptable Guarantor. [Not
applicable to Greektown].
7
<PAGE>
(11) The Developer has delivered to City and EDC Closing Certificates
executed by Developer and an Acceptable Guarantor.
(12) The Developer has delivered to City the executed agreement of
Parent Company, any Casino Manager and each Restricted Party
required under SECTION 2.14(e).
(13) The Developer has delivered to City certificates showing that
Developer, any Acceptable Guarantor and any Casino Manager are in
good standing and qualified to do business in the State, if
required under the law of the State, dated no earlier than five
(5) days prior to the Temporary Casino Opening Date.
(14) The Developer has approved, in writing, Schedule A as referred to
in SECTION 4.11.
(15) The Developer has furnished such documentation as City reasonably
required to verify that the Initial Financing to be obtained by
Developer is in substantially the same form as set forth in
EXHIBIT 8.11(e) or is otherwise satisfactory to the City, and is
still in effect.
Notwithstanding satisfaction of the foregoing conditions, in no event shall
the Temporary Casino Opening Date occur prior to seven (7) months following
Developer's payment of the Advance.
18. SECTION 20.6 of the Development Agreement is hereby amended by inserting as
SECTION 20.6(e) the following:
(e) Developer may waive, in whole or in part, any or all of those
conditions set forth in SECTION 20.6(d)(5) prior to the satisfaction
of such condition. City may waive, in whole or in part, any of those
conditions set forth in SECTIONS 20.6(d)(2), (d)(3), (d)(4), (d)(6),
(d)(7), (d)(10), (d)(11), (d)(12), (d)(13) AND (d)(14) prior to the
satisfaction of such condition. No waiver of any condition shall be
effective: (x) unless such waiver shall be in writing or (y) if the
failure to satisfy such condition would make performance of this
Agreement illegal.
19. SECTION 20.7(b) of the Development Agreement is hereby amended by deleting
the existing language in such section and substituting the following in its
place:
(b) Developer agrees to cease all Casino Gaming Operations at the
Temporary Casino on the Completion Date but in no event later than
forty-eight (48) months from the Temporary Casino Opening Date.
Developer's obligation to cease Casino Gaming Operations at the
Temporary Casino Site under this SECTION 20.7(b) is not subject to
Force Majeure.
8
<PAGE>
20. SECTION 20.8 of the Development Agreement is hereby amended by inserting as
SECTION 20.8(c) the following:
(c) Notwithstanding and in addition to the limitations imposed by SECTION
20.8(b), distributions to Developer's members (other than those
permitted by SECTION 20.8(a)) shall be suspended during any period in
which either of the following conditions exists: (i) Developer's
Schematic Design Documents have not been submitted to the PM for
review or approval, provided that such distributions shall not be
suspended under this SECTION 20.8(c)(i) during the one hundred twenty
(120) day period after the Closing Date; or (ii) construction of the
Casino Complex is not at least fifty percent (50%) completed, as
certified by Developer's architect, provided that such distributions
shall not be suspended under this SECTION 20.8(c)(ii) during the
twenty-four (24) month period after issuance of the Building Permit.
21. SECTION 20.8 of the Development Agreement is hereby amended by inserting as
SECTION 20.8(d) the following:
(d) For purposes of SECTION 20.8(b) and (c), "distributions" shall include
any loans or advances made to Developer's members.
22. ARTICLE XX of the Development Agreement is hereby amended by inserting as
SECTION 20.9 the following:
20.9 CERTAIN LIMITATIONS ON REMEDIES. Notwithstanding any other provision
in this Agreement to the contrary, upon an Event of Default arising under
SECTION 10.1(a) due to the breach by Developer of any of Developer's
obligations specified in ARTICLE XX, it being understood that ARTICLE XX
does not obligate Developer to develop or operate a Temporary Casino, City
and EDC's remedies under SECTIONS 10.2(a) AND (b) shall be limited to the
City electing to (i) institute a Specific Performance Proceeding and/or
(ii) receive actual damages from Developer. The foregoing limitation on
City's and EDC's remedies under Sections 10.2(a) and (b) shall in no way
limit or diminish any other right of City under this Agreement or
otherwise, including without limitation, City's or EDC's rights or remedies
under the Guaranty and Keep Well Agreement, under any other guaranty,
indemnity or agreement or under SECTION 2.11 or ARTICLE XI.
23. SECTION 1.1(a)(4)(B) of the Development Agreement is hereby amended by
inserting at the beginning of that section the following: "Until the first
redetermination of the Valuation Adjustment,".
24. By execution of this First Amendment, the Mayor hereby approves Developer's
Temporary Casino Proposal, subject to: (i) all necessary approvals by City
Council; and (ii) all approval, permitting, and inspection processes
associated with building projects generally in the City and within the
zoning classification pertaining to the Temporary Casino.
9
<PAGE>
25. Except as amended by this First Amendment, the Development Agreement is
reaffirmed in all respects, and shall remain in full force and effect.
26. This First Amendment shall become effective on the date on which all of the
following have been accomplished: the First Amendment has been executed by
all parties hereto and the City Council has duly approved the last of the
following: (i) this First Amendment; and (ii) the first amendment to the
amended and restated development agreements of each of the Other Land-Based
Casino Developers.
27. This First Amendment may be executed in counterparts, each of which shall
be deemed to be an original document and together shall constitute one
instrument.
[SIGNATURES ON NEXT PAGE]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and had their
seals affixed on the dates set forth after their respective signatures.
CITY OF DETROIT, a municipal
corporation
By: Dennis Archer
---------------------------
Its: Mayor
---------------------------
THE ECONOMIC DEVELOPMENT
CORPORATION OF THE CITY OF
DETROIT, a Michigan public body
corporate
By: C. Beth Dun Combe
---------------------------
Its: Authorized Agent
---------------------------
By: Karen O'Donoghue
---------------------------
Its: Authorized Agent
DEVELOPER:
DETROIT ENTERTAINMENT, L.L.C.
a Michigan limited liability company
By: Circus Circus Michigan, Inc., a Michigan
corporation, one of its members
By: Glenn Schaeffer
---------------------------
Its: President
---------------------------
By: Atwater Casino Group, LLC, a Michigan
limited liability company, one of its
members
By: Atwater Management Corporation, a
Delaware corporation, its manager
By: Herbert J. Strather
---------------------------
Its: Chairman of the Board
---------------------------
By: Thomas Celani
---------------------------
Its: President
---------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 78,977
<SECURITIES> 0
<RECEIVABLES> 20,918
<ALLOWANCES> 0
<INVENTORY> 25,668
<CURRENT-ASSETS> 155,673
<PP&E> 3,422,266
<DEPRECIATION> 673,457
<TOTAL-ASSETS> 3,567,674
<CURRENT-LIABILITIES> 182,199
<BONDS> 2,029,311
0
0
<COMMON> 1,894
<OTHER-SE> 1,168,966
<TOTAL-LIABILITY-AND-EQUITY> 3,567,674
<SALES> 741,623
<TOTAL-REVENUES> 741,623
<CGS> 0
<TOTAL-COSTS> 600,267
<OTHER-EXPENSES> 14,192
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,327
<INCOME-PRETAX> 75,837
<INCOME-TAX> 28,945
<INCOME-CONTINUING> 46,892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,892
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
