<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999
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____
------------------------
MANDALAY RESORT GROUP
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
NEVADA 88-0121916
<S> <C>
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
</TABLE>
3950 LAS VEGAS BOULEVARD SOUTH, LAS VEGAS, NEVADA 89119
(Address of principal executive offices)
(702) 632-6700
(Registrant's telephone number, including area code)
FORMER NAME: CIRCUS CIRCUS ENTERPRISES, INC.
(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>
Class Outstanding at August 31, 1999
<S> <C>
COMMON STOCK, $.01-2/3 PAR VALUE 90,591,833 SHARES
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
-----------
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at July 31, 1999 (Unaudited) and January 31, 1999....... 3-4
Condensed Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended
July 31, 1999 and 1998.......................................................................... 5-6
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended July 31,
1999 and 1998................................................................................... 7
Notes to Condensed Consolidated Financial Statements (Unaudited).............................. 8-15
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 16-23
Item 3. Quantitative and Qualitative Disclosures About Market Risks.................................. 23
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 24
Item 6. Exhibits and Reports on Form 8-K............................................................. 25
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JANUARY 31,
1999
JULY 31, ------------
1999
------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................................................... $ 97,680 $ 81,389
Receivables......................................................................... 70,918 26,136
Inventories......................................................................... 28,299 24,270
Prepaid expenses and other.......................................................... 38,890 29,483
------------ ------------
Total current assets............................................................ 235,787 161,278
PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS,
at cost, less accumulated depreciation
and amortization of $815,662 and $733,967, respectively............................. 3,193,766 3,000,822
EXCESS OF PURCHASE PRICE OVER FAIR MARKET
value of net assets acquired, net................................................... 361,946 367,076
NOTES RECEIVABLE...................................................................... 747 10,895
INVESTMENTS IN UNCONSOLIDATED AFFILIATES.............................................. 266,871 271,707
OTHER ASSETS.......................................................................... 43,168 57,929
------------ ------------
Total Assets.................................................................... $ 4,102,285 $ 3,869,707
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JANUARY 31,
1999
JULY 31, ------------
1999
------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt................................................... $ 1,890 $ 3,481
Accounts payable--trade............................................................. 34,869 23,745
Accounts payable--construction...................................................... 44,558 75,030
Accrued liabilities................................................................. 158,854 129,317
------------ ------------
Total current liabilities......................................................... 240,171 231,573
LONG-TERM DEBT........................................................................ 2,458,838 2,259,149
DEFERRED INCOME TAX................................................................... 201,542 200,376
OTHER LONG-TERM LIABILITIES........................................................... 21,657 20,981
------------ ------------
Total liabilities................................................................. 2,922,208 2,712,079
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $.01-2/3 par value
Authorized--450,000,000 shares
Issued--113,634,013 and 113,622,508 shares........................................ 1,894 1,894
Preferred stock, $.01 par value
Authorized--75,000,000 shares..................................................... -- --
Additional paid-in capital.......................................................... 564,356 558,935
Retained earnings................................................................... 1,178,245 1,159,469
Treasury stock (22,850,725 and 22,959,425 shares), at cost.......................... (564,418) (562,670)
------------ ------------
Total stockholders' equity........................................................ 1,180,077 1,157,628
------------ ------------
Total Liabilities and Stockholders' Equity........................................ $ 4,102,285 $ 3,869,707
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH SIX MONTHS
ENDED JULY 31, ENDED JULY 31,
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
------------- ------------- ------------- -------------
REVENUES:
Casino............................................ $ 234,633 $ 181,101 $ 451,448 $ 349,518
Rooms............................................. 133,000 88,830 263,610 176,629
Food and beverage................................. 89,666 64,473 171,021 124,562
Other............................................. 66,694 51,362 117,647 89,346
Earnings of unconsolidated affiliates............. 25,151 20,186 47,145 42,237
------------- ------------- ------------- -------------
549,144 405,952 1,050,871 782,292
Less-complimentary allowances..................... (32,963) (21,291) (63,431) (40,669)
------------- ------------- ------------- -------------
516,181 384,661 987,440 741,623
------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Casino............................................ 124,996 92,919 235,515 176,988
Rooms............................................. 48,960 33,043 90,925 64,465
Food and beverage................................. 71,733 54,526 135,867 105,620
Other operating expenses.......................... 42,733 27,656 77,332 51,753
General and administrative........................ 85,929 67,943 159,237 133,070
Depreciation and amortization..................... 46,461 34,405 87,551 68,371
Operating lease rent.............................. 3,639 -- 6,054 --
Preopening expenses............................... 4,270 -- 37,880 --
------------- ------------- ------------- -------------
428,721 310,492 830,361 600,267
------------- ------------- ------------- -------------
OPERATING PROFIT BEFORE CORPORATE EXPENSE........... 87,460 74,169 157,079 141,356
CORPORATE EXPENSE................................... 8,330 8,064 15,450 14,192
------------- ------------- ------------- -------------
INCOME FROM OPERATIONS.............................. 79,130 66,105 141,629 127,164
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest, dividend and other income............... 660 609 1,182 1,529
Guarantee fees from unconsolidated affiliate...... 716 797 1,431 1,595
Interest expense.................................. (41,452) (24,297) (74,959) (48,120)
Interest expense from unconsolidated affiliates... (2,793) (3,171) (5,595) (6,331)
------------- ------------- ------------- -------------
(42,869) (26,062) (77,941) (51,327)
------------- ------------- ------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAX.............. 36,261 40,043 63,688 75,837
Provision for income tax.......................... 12,630 14,758 22,918 28,945
------------- ------------- ------------- -------------
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE.............................. 23,631 25,285 40,770 46,892
</TABLE>
5
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH SIX MONTHS
ENDED JULY 31, ENDED JULY 31,
---------------------------- ----------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cumulative effect of change in accounting
principle for preopening expenses, net of tax
benefit of $11,843.............................. -- -- (21,994) --
------------- ------------- ------------- -------------
NET INCOME.......................................... $ 23,631 $ 25,285 $ 18,776 $ 46,892
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
BASIC EARNINGS PER SHARE:
Income before cumulative effect of change in
accounting principle............................ $ .26 $ .27 $ .45 $ .49
Cumulative effect of change in accounting
principle....................................... $ -- $ -- $ (.24) $ --
------------- ------------- ------------- -------------
Net income per share.............................. $ .26 $ .27 $ .21 $ .49
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
DILUTED EARNINGS PER SHARE:
Income before cumulative effect of change in
accounting principle............................ $ .26 $ .27 $ .44 $ .49
Cumulative effect of change in accounting
principle....................................... $ -- $ -- $ (.24) $ --
------------- ------------- ------------- -------------
Net income per share.............................. $ .26 $ .27 $ .20 $ .49
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Avg.shares outstanding-basic 90,862,117 95,129,383 90,703,869 95,126,110
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Avg.shares outstanding-diluted 92,368,423 95,135,119 91,999,602 95,136,667
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JULY 31,
-----------------------
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................. $ 18,776 $ 46,892
---------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........................................................ 91,896 72,667
Gain on disposition of fixed assets.................................................. (48) (195)
(Increase) decrease in other current assets.......................................... (58,218) 7,536
(Increase) decrease in other noncurrent assets....................................... 14,821 (6,150)
Increase (decrease) in interest payable.............................................. (33) 6,432
Increase in other current liabilities................................................ 40,694 12,157
Increase in deferred income tax...................................................... 1,166 2,529
Decrease in other noncurrent liabilities............................................. (33) (33)
Unconsolidated affiliates' distributions in
excess of earnings (earnings in excess of
distributions)..................................................................... 6,133 (4,800)
---------- -----------
Total adjustments................................................................ 96,378 90,143
---------- -----------
Net cash provided by operating activities........................................ 115,154 137,035
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................................... (279,738) (349,981)
Decrease in construction payable....................................................... (30,472) (3,746)
Increase in investments in unconsolidated
affiliates........................................................................... (1,504) (3,780)
Proceeds from sale of equipment and other assets....................................... 283 862
Decrease in notes receivable........................................................... 10,148 122
---------- -----------
Net cash used in investing activities............................................ (301,283) (356,523)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net effect on cash of issuances and payments
of debt with original maturities of
three months or less................................................................. 198,404 410,133
Issuances of debt with original maturities
in excess of three months............................................................ 1,590 22,329
Principal payments of debt with original
maturities in excess of three months................................................. (1,958) (191,631)
Exercise of stock options and warrants................................................. 14,168 219
Purchases of treasury stock............................................................ (10,493) --
Other.................................................................................. 709 (1,216)
---------- -----------
Net cash provided by financing activities........................................ 202,420 239,834
---------- -----------
Net increase in cash and cash equivalents................................................ 16,291 20,346
Cash and cash equivalents at beginning of period......................................... 81,389 58,631
---------- -----------
Cash and cash equivalents at end of period............................................... $ 97,680 $ 78,977
---------- -----------
---------- -----------
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized)................................................... $ 73,185 $ 40,413
Income tax............................................................................. $ 29,215 $ 16,170
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
7
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED.)
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
Mandalay Resort Group (the "Company"), which changed its name from Circus
Circus Enterprises, Inc. effective June 18, 1999, 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, 1998 to conform to the financial statement
presentation for the three and six months ended July 31, 1999. 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, 1999.
(2) LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 1999
------------ ------------
<S> <C> <C>
(UNAUDITED)
Amounts due under bank credit agreement at floating interest rates, weighted average
of 6.0%............................................................................. $ 1,330,000 $ 1,130,000
Amounts due under corporate debt program at floating interest rates, weighted average
of 5.6% and 5.7%.................................................................... 50,000 50,000
9 1/4% Senior Subordinated Notes due 2005............................................. 275,000 275,000
6.45% Senior Notes due 2006 (net of unamortized discount of $286 and $308)............ 199,714 199,692
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 $63 and
$71)................................................................................ 149,937 149,929
7.0% Debentures due 2036 (net of unamortized discount of $126 and $133) 149,874 149,867
6.70% Debentures due 2096 (net of unamortized discount of $207 and $231) 149,793 149,769
Other notes........................................................................... 6,410 8,373
------------ ------------
2,460,728 2,262,630
Less--current portion................................................................. (1,890) (3,481)
------------ ------------
$ 2,458,838 $ 2,259,149
------------ ------------
------------ ------------
</TABLE>
8
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998 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 unsecured credit facility,
replacing it with a new $2.0 billion unsecured credit facility which matures on
July 31, 2002 (the "Facility"). The Facility was subsequently reduced to $1.8
billion, as described in Note 3. 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 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, 1999, the Company had $1.3
billion outstanding under the Facility. At such date, the Company also had $50
million issued under the corporate debt program thus reducing, by that amount,
the credit available under the Facility for purposes other than repayment of
such indebtedness.
In November 1998, the Company issued $275 million principal amount of 9 1/4%
Senior Subordinated Notes due December 2005 (the "9 1/4% Notes"), with interest
payable each June and December. The 9 1/4% Notes are redeemable at the option of
the Company, in whole, at 100% of the principal amount plus a make-whole premium
at any time prior to December 1, 2002. A portion of the 9 1/4% Notes are also
redeemable at the option of the Company prior to December 1, 2001 with the
proceeds of a public offering of equity securities. The 9 1/4% Notes are also
redeemable at the option of the Company beginning December 1, 2002 at prices
declining annually to 100% on or after December 2004. The 9 1/4% Notes are not
subject to any sinking fund requirements. The net proceeds from this offering
were used to repay borrowings under the Company's credit facility.
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.
9
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED.)
(2) LONG-TERM DEBT (CONTINUED)
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
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 5.2% at July 31, 1999)
on $175 million notional amount of "initial" swaps, and pays a variable interest
rate of approximately 5.1% at July 31,1999, 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, 1999, was approximately 0.4% 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.
10
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED.)
(2) LONG-TERM DEBT (CONTINUED)
As of July 31, 1999, under its most restrictive loan covenants, the Company
was restricted as to the purchase of its own capital stock in excess of $413
million and was restricted from issuing additional debt in excess of
approximately $186 million.
(3) LEASE FACILITY
On October 30, 1998, the Company entered into an operating lease with a
group of financial institutions (the "Lease Facility") to permit the Company to
lease up to $200 million of equipment. The lease term consists of an interim
term commencing on the delivery date and ending June 30, 1999, plus a base term
of two years. On January 28, 1999, the Company leased $100 million of equipment
at Mandalay Bay pursuant to the Lease Facility and permanently reduced the
commitment under its bank credit facility by the amount of the lease financing,
thus reducing the commitment under the credit facility to $1.9 billion. An
additional $100 million was drawn under the Lease Facility during the six months
ended July 31, 1999 and the commitment under the bank credit facility was
permanently reduced to $1.8 billion. The rent expense related to this lease
facility is reported separately on the income statement as "operating lease
rent".
(4) 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, 1999 are stock options, which are generally
exercisable in one or more installments beginning not less than six months after
the grant date.
Summarized information for stock options granted pursuant to the Company's
plans is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31, 1999
-------------------------
<S> <C> <C>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
------------ -----------
Outstanding at beginning of period................................... 3,892,674 $ 14.77
Granted.............................................................. 3,300,166 14.12
Exercised............................................................ (725,505) 19.53
Cancelled............................................................ (78,300) 13.72
------------ -----------
Outstanding at end of period......................................... 6,389,035 $ 13.91
------------ -----------
------------ -----------
Options exercisable at end of period................................. 2,253,700 $ 14.50
Options available for grant at end of period......................... 1,831,365
</TABLE>
(5) 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.
11
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED.)
(5) STOCK RELATED MATTERS (CONTINUED)
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.
For the six months ended July 31, 1999, the Company repurchased 607,300
shares of its common stock at a cost of $10.5 million.
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.
(6) 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
12
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED.)
(6) EARNINGS PER SHARE (CONTINUED)
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,
-------------------- --------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C>
Net income............................................................ $ 23,631 $ 25,285 $ 18,776 $ 46,892
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average shares outstanding used in computation of basic
earnings per share.................................................. 90,862 95,129 90,704 95,126
Stock options......................................................... 1,506 6 1,296 11
--------- --------- --------- ---------
Weighted average shares outstanding used in computation of diluted
earnings per share.................................................. 92,368 95,135 92,000 95,137
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic earnings per share.............................................. $ .26 $ .27 $ .21 $ .49
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted earnings per share............................................ $ .26 $ .27 $ .20 $ .49
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(7) 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 capitalized during
construction (net of amortization). Investments in unconsolidated affiliates
consist of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 1999
----------- -----------
<S> <C> <C>
(UNAUDITED)
Circus and Eldorado Joint Venture (50%) (Silver Legacy, Reno,
Nevada)........................................................... $ 81,441 $ 74,871
Elgin Riverboat Resort (50%) (Grand Victoria, Elgin, Illinois)...... 39,593 42,461
Victoria Partners (50%) (Monte Carlo, Las Vegas, Nevada)............ 141,471 141,658
Detroit Entertainment (45%) (Proposed Hotel/Casino, Detroit,
Michigan)......................................................... 4,366 12,717
----------- -----------
$ 266,871 $ 271,707
----------- -----------
----------- -----------
</TABLE>
13
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED.)
(7) INVESTMENTS IN UNCONSOLIDATED AFFILIATES (CONTINUED)
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,
----------------------
<S> <C> <C>
1999 1998
---------- ----------
Revenues.............................................................. $ 357,724 $ 334,034
Expenses.............................................................. 290,645 254,377
Operating income...................................................... 67,079 79,657
Net income............................................................ 56,584 67,433
</TABLE>
Included in the above are revenues of the Grand Victoria of $140,385 and
$129,614 for the six months ended June 30, 1999 and 1998. The property's
operating margin during those periods was 24% and 26%, respectively.
(8) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has formed a joint venture with the Detroit-based Atwater Casino
Group to build, own and operate a hotel/casino in Detroit, Michigan. The Company
will own a 45% equity interest in the proposed project and receive a management
fee. The joint venture is one of three groups which negotiated development
agreements with the city. These agreements were 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 planning a $600 million
project. The Company is expected to contribute 20% of this amount in the form of
equity, and will seek project-specific financing for the balance. The
development agreement provides that the Company will guarantee completion of the
project and will enter into a keep-well guarantee with the city, pursuant to
which the Company could be required to contribute additional funds, if and as
needed, to continue operation of the project for a period of two years.
The Company has issued letters of credit in an aggregate amount of $50
million for the benefit of Bank of America to back letters of credit in the same
aggregate amount issued by Bank of America to secure payments of principal and
interest on bonds issued by the Economic Development Corporation of the City of
Detroit, the proceeds of which will be used to finance costs related to the
acquisition of and other activities relating to the land on which the permanent
casinos will be built.
The Detroit joint venture has commenced construction of a temporary casino
property in downtown Detroit. The property will contain approximately 75,000
square feet of gaming space, with approximately 2,600 slot machines and 130
table games, plus 5 restaurants and a 3,000-space parking facility. Construction
is expected to be completed in September 1999. The cost of the temporary casino,
including land and capitalized interest, is approximately $150 million. The
joint venture has arranged a $150 million credit facility secured by the assets
associated with the Detroit temporary casino. The Company has guaranteed the
credit facility subject to the release of the guaranty if certain performance
measures are reached. The joint venture's ability to proceed with the temporary
casino facility is contingent upon the receipt of all necessary gaming approvals
and satisfaction of other customary conditions.
14
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED.)
(8) COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
The constitutionality of the Detroit Casino Competitive Selection Process
and the Michigan Gaming Control and Revenue Act, which govern the selection and
licensing of casino developers in the City of Detroit, has been challenged in
separate federal court proceedings initiated by the Lac Vieux Band of Lake
Superior Chippewa Indians and by Barden Detroit Casino, L.L.C. No assurance can
be given regarding the timing and outcome of either proceeding. If the federal
courts determine that either the Detroit Casino Competitive Selection Process or
the Michigan Gaming Control and Revenue Act is defective and this determination
is upheld, this may have an impact upon the validity of the Development
Agreement entered into between the joint venture and the City of Detroit which,
in turn, could have an impact on the issuance of a certificate of suitability
and a casino license to the joint venture.
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.
(9) RECENTLY ISSUED ACCOUNTING STANDARDS
Effective February 1, 1999, the Company adopted Statement of Position No.
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 Company previously capitalized preopening costs prior to the
opening of a specific project and charged them to expense at the commencement of
operations. As required by SOP 98-5, the Company wrote off $71.7 million in
preopening costs associated with Mandalay Bay and the development of its Detroit
and timeshare projects. This amount includes $37.9 million of costs incurred
during the first six months of fiscal 2000, and $33.8 million of costs incurred
in the previous fiscal year. These previously capitalized costs are reflected,
net of income tax benefit of $11.8 million, as a cumulative effect of a change
in accounting principle for preopening expenses in the condensed consolidated
statements of income.
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, 2000. The Company does not expect the adoption of
this pronouncement to materially impact its results of operations or financial
position.
15
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED)
RESULTS OF OPERATIONS
EARNINGS PER SHARE
For the quarter ended July 31, 1999, the Company reported net income of
$23.6 million, or $.26 per share, versus $25.3 million, or $.27 per share in the
prior year. For the six months, net income was $18.8 million, or $.20 per share,
compared to $46.9 million, or $.49 per share, in the prior year.
Results in the current quarter and six months include preopening expenses of
$4.3 million and $71.7 million related to Mandalay Bay, the Four Seasons at
Mandalay Bay, the Company's joint venture project in Detroit and a timeshare
project in Las Vegas. (See "New Projects" for further information regarding the
Detroit and timeshare projects.) Excluding preopening expenses, earnings per
share in the three and six months ended July 31, 1999 were $.29 and $.71
compared to $.27 and $.49 a year ago. These increases were due primarily to
Mandalay Bay, which opened March 2, 1999, as well as improved operating results
at virtually all of the Company's other properties.
The preopening expenses mentioned above were reflected in two categories.
Those costs incurred prior to January 31, 1999 were treated as a cumulative
effect of a change in accounting principle and expensed in the first quarter
this year, while those costs incurred subsequent to January 31, 1999 were
expensed as incurred. See Note 9 of Notes to Condensed Consolidated Financial
Statements for a further explanation of the accounting for preopening expenses.
REVENUES
Revenues for the Company increased $131.5 million, or 34%, for the three
months ended July 31, 1999 and $245.8 million, or 33%, for the six months,
versus the corresponding periods last year. All of the Company's wholly owned
and joint venture properties generated higher revenues for both the second
quarter and six months.
The overall increase is attributable mostly to Mandalay Bay, which opened
March 2, 1999 and produced revenues of $111.4 million in the quarter and $191.9
million in the six months.
Also contributing was Gold Strike-Tunica, whose revenues increased $4.9
million in the quarter and $14.1 million year-to-date. The addition of 1,100
hotel rooms at this property in the first quarter of the prior year has provided
a stronger base from which to market the property and spurred growth in
operating results.
The growth in revenues at the Company's other properties was driven by a
combination of increased room and occupancy rates and increases in casino
revenues. Furthermore, the Company's three joint venture properties (Grand
Victoria, Silver Legacy and Monte Carlo) each produced a strong double-digit
increase in its contribution to revenues. Recent legislation in Illinois
permitting dockside gaming was a significant factor in the increase in revenues
at Grand Victoria.
INCOME FROM OPERATIONS (EXCLUDING PREOPENING EXPENSES AND OTHER NONRECURRING
ITEMS)
For the quarter and six months ended July 31, 1999, income from operations
rose $17.3 million, or 26%, and $52.3 million, or 41%, compared to the same
periods a year ago. The Company's composite operating margin was 16.2% and 18.2%
for the three and six months ended July 31, 1998 versus 17.2% and 17.1% for the
comparable periods in the prior year. A discussion of operating results by
market follows.
16
<PAGE>
LAS VEGAS
The Company's Las Vegas properties posted an overall increase in income from
operations of $9.2 million, or 20%, during the second quarter, and $37.3
million, or 42%, for the six months. The increase in both the three and six
month periods was due to the opening of Mandalay Bay on March 2, as well as
improved results at the Company's established properties, particularly Luxor,
whose income from operations rose $4.0 million, or 30%, in the second quarter
and $11.8 million, or 46%, year-to-date. The increases at Luxor were due to a
combination of higher average room and occupancy rates and lower advertising and
marketing expenses. In the prior year Luxor had initiated a new national
advertising campaign to reintroduce the property after its substantial expansion
and remodeling. Despite strong results, both Mandalay Bay and Luxor were
negatively impacted by an unusually low hold percentage in table games in the
three and six month periods.
RENO
In Reno, the Company's properties (Circus Circus-Reno and the 50%-owned
Silver Legacy) generated combined income from operations of $3.7 million (up
35%) in the second quarter and $3.2 million (up 20%) in the six months. Circus
Circus experienced growth in revenue per available room, while Silver Legacy
experienced strong growth in casino revenues. Operating results have improved
despite the absence of a major bowling tournament this year. Reno is the host to
national bowling tournaments two out of every three years, and this year the
city is without a tournament.
Although the Company owns 50% of Silver Legacy, it currently records
approximately two-thirds of Silver Legacy's operating income as a priority
return on its investment. Based upon current projections, the Company
anticipates that this priority return will continue approximately two years
beyond fiscal 1999, but will gradually decrease from the current two-thirds
allocation to a 50% allocation.
LAUGHLIN
Income from operations at the Company's two Laughlin properties, the
Colorado Belle and the Edgewater, was virtually flat in the second quarter and
up $1.5 million, or 12%, for the six months ended July 31, 1999 versus the
previous year. Results in the second quarter were negatively impacted by
additional health insurance costs stemming from an unexpected increase in
catastrophic claims.
RIVERBOAT MARKETS
In Tunica County, Mississippi, income from operations at the Gold Strike
rose 46% in the quarter, while for the six months, income from operations was up
110% to $11.6 million. The increases are the result of the addition of a
1,100-room hotel tower and extensive remodeling of the property that was
completed during the first quarter of the prior year.
Results at Grand Victoria (a 50%-owned riverboat casino in Elgin, Illinois)
reflected a $1.9 million increase in the Company's share of income from
operations for the second quarter and a $2.4 million increase for the six
months. The advent of dockside gaming (now permitted under recent legislation in
Illinois) was a key factor in the increase in operating results at Grand
Victoria.
INTEREST EXPENSE
For the three and six months ended July 31, 1999, interest expense
(excluding joint venture interest expense and before capitalized interest)
increased $9.0 million and $19.3 million versus the prior year periods. The
increase was due principally to higher average borrowings related to the
completion of construction of Mandalay Bay and the core components of Masterplan
Mile. Average borrowings were approximately $2.5 billion for the current quarter
and six months, compared against $2.0 billion and
17
<PAGE>
$1.9 billion for the same periods last year. Capitalized interest was $1.8
million and $9.5 million for the three and six months ended July 31, 1999 versus
$9.9 million and $17.0 million a year ago. Long-term debt at July 31, 1999 stood
at $2.5 billion compared to $2.0 billion at July 31, 1998.
The Company also recorded interest expense related to joint venture projects
of $2.8 million and $5.6 million in the quarter and six months ended July 31,
1999 compared to $3.2 million and $6.3 million in the previous year. This
reflects the Company's 50% share of the interest expense of Silver Legacy and
Monte Carlo.
INCOME TAX
For the three and six months ended July 31, 1999, the Company's effective
tax rate was approximately 34.8% and 37.1%, compared with 36.9% and 38.2% for
the same periods in the prior year. These rates reflect the corporate statutory
rate of 35% plus the effect of various nondeductible expenses, including the
amortization of goodwill associated with the acquisition of Gold Strike Resorts.
The lower rate in the current year's second quarter is the result of a change in
the Company's estimated effective tax rate for the year, which is currently
expected to be in the range of 37-38%.
FINANCIAL POSITION AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $97.7 million at July 31, 1999,
reflecting normal daily operating requirements. The Company's pretax cash flow
from operations was $135.7 million and $277.4 million for the three and six
months ended July 31, 1999 versus $102.8 million and $199.8 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 completion of the construction of Mandalay Bay and the related
Masterplan Mile components.
CAPITAL SPENDING
Capital expenditures for the quarter and six months ended July 31, 1999 were
$66.2 million and $279.7 million. Of these amounts, $17.1 million and $136.3
million related to the construction of Mandalay Bay, $10.7 million and $48.9
million related to the construction of the convention center and arena at
Mandalay Bay, $7.7 million and $26.6 million related to the construction of the
monorail connecting Mandalay Bay, Luxor and Excalibur, $4.6 million and $9.5
million related to the room renovation at Excalibur, and $3.1 million and $6.9
million related to the construction of the Sea of Predators aquarium exhibit
adjacent to Mandalay Bay.
CREDIT FACILITY
In order to allow for increased borrowing capacity during the construction
of Mandalay Bay, the Company amended its unsecured credit facility with its bank
group in May 1998 to provide a more liberal test for total indebtedness during
such period and a new leverage test for senior debt. The facility, which
currently permits borrowings in an aggregate amount of $1.8 billion, was amended
in June 1999 to provide for a single leverage test for total indebtedness. The
Company also has a commercial paper program, pursuant to which it may utilize up
to $1 billion of its borrowing capacity under the credit facility to issue
commercial paper. As of July 31, 1999, the Company had utilized $1.38 billion of
its borrowing capacity under the credit facility.
18
<PAGE>
LEASE FACILITY
On October 30, 1998, the Company entered into an operating lease with a
group of financial institutions (the "Lease Facility") pursuant to which it may
lease up to $200 million of equipment. The lease term consists of an interim
term commencing on the delivery date and ending June 30, 1999, plus a base term
of two years. On January 28, 1999, the Company leased $100 million of equipment
at Mandalay Bay pursuant to the Lease Facility and permanently reduced the
commitment under its bank credit facility by the amount of the lease financing,
thus reducing the commitment under the credit facility to $1.9 billion. An
additional $100 million was drawn under the Lease Facility in the six months
ended July 31, 1999, thus further reducing the commitment under the bank credit
facility to $1.8 billion.
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
venture'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
On March 2, 1999, the Company opened Mandalay Bay, a 43-story, hotel/casino
resort in Las Vegas, Nevada. The resort includes approximately 3,700 rooms and
135,000 square feet of gaming space and is situated on approximately 60 acres of
land just south of Luxor. Mandalay Bay's attractions 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
offers internationally renowned restaurants and a House of Blues nightclub and
restaurant, including its signature Foundation Room sited on Mandalay Bay's
rooftop.
Four Seasons operates approximately 400 rooms at Mandalay Bay, providing Las
Vegas visitors with a luxury "five-star" hospitality experience. The Four
Seasons Hotel, which is owned by the Company and managed by Four Seasons,
represents the first step in the Company's cooperative effort with Four Seasons
to identify strategic opportunities for development of hotel and casino
properties worldwide. The total cost of Mandalay Bay, including the Four Seasons
Hotel and including leased equipment, but excluding land, capitalized interest
and preopening expenses, was approximately $1 billion.
During construction, Mandalay Bay's hotel tower experienced settling in
excess of the level contemplated in the building's original design. The settling
was greater in some portions of the structure than others. The Company retained
geotechnical, structural engineering and foundation consultants who evaluated
the situation and recommended remedial measures, which were completed prior to
the opening of the property. The evaluation of these remedial measures will
continue over a period of time to determine if any further measures will be
required.
The Company's development plan for Masterplan Mile includes various core
components which will be cross-marketed to guests at the Company's existing and
future hotel/casinos within Masterplan Mile. These components include a
125,000-square-foot convention facility (which opened March 12) and a
12,000-seat arena (which opened April 10). The total cost of the convention
facility and arena (excluding land, capitalized interest and preopening
expenses) was approximately $125 million. Additional core components include a
monorail system (which opened April 10) linking the Company resorts within
Masterplan Mile, as well as a Sea of Predators aquarium exhibit, which is
currently under construction and is expected to open in spring 2000. The cost of
the monorail (excluding land, capitalized interest and preopening expenses) was
approximately $40 million. The estimated cost of the aquarium (excluding land,
capitalized interest and preopening expenses) is approximately $45 million,
19
<PAGE>
of which $8.9 million had been incurred as of July 31, 1999. 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 to build, own and operate a hotel/casino in Detroit, Michigan. The Company
will own a 45% equity interest in the proposed project and receive a management
fee. The joint venture is one of three groups which negotiated development
agreements with the city. These agreements were 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 planning a $600 million
project. The Company is expected to contribute 20% of this amount in the form of
equity, and will seek project-specific financing for the balance. The
development agreement provides that the Company will guarantee completion of the
project and will enter into a keep-well guarantee with the city, pursuant to
which the Company could be required to contribute additional funds, if and as
needed, to continue operation of the project for a period of two years.
The Company has issued letters of credit in an aggregate amount of $50
million for the benefit of Bank of America to back letters of credit in the same
aggregate amount issued by Bank of America to secure payments of principal and
interest on bonds issued by the Economic Development Corporation of the City of
Detroit, the proceeds of which will be used to finance costs related to the
acquisition of and other activities relating to the land on which the permanent
casinos will be built.
The Detroit joint venture has commenced construction of a temporary casino
property in downtown Detroit. The property will contain approximately 75,000
square feet of gaming space, with approximately 2,600 slot machines and 130
table games, plus 5 restaurants and a 3,000-space parking facility. Construction
is expected to be completed in September 1999. The cost of the temporary casino,
including land and capitalized interest, is approximately $150 million. The
joint venture has arranged a $150 million credit facility secured by the assets
associated with the Detroit temporary casino. The Company has guaranteed the
credit facility subject to the release of the guaranty if certain performance
measures are reached. The joint venture's ability to proceed with the temporary
casino facility is contingent upon the receipt of all necessary gaming approvals
and satisfaction of other customary conditions.
The constitutionality of the Detroit Casino Competitive Selection Process
and the Michigan Gaming Control and Revenue Act, which govern the selection and
licensing of casino developers in the City of Detroit, has been challenged in
separate federal court proceedings initiated by the Lac Vieux Band of Lake
Superior Chippewa Indians and by Barden Detroit Casino, L.L.C. No assurance can
be given regarding the timing and outcome of either proceeding. If the federal
courts determine that either the Detroit Casino Competitive Selection Process or
the Michigan Gaming Control and Revenue Act is defective and this determination
is upheld, this may have an impact upon the validity of the Development
Agreement entered into between the joint venture and the City of Detroit which,
in turn, could have an impact on the issuance of a certificate of suitability
and a casino license to the joint venture.
As part of its Masterplan Mile development, the Company is planning a
timeshare project to be located adjacent to Mandalay Bay. Current plans call for
a three-phase, high-rise development totaling as many as 1,000 timeshare units
upon build-out. The Company anticipates breaking ground on the first phase
sometime in late 1999, with the total construction cost of the initial phase
estimated at approximately $70 million.
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 federal
court, and the Company
20
<PAGE>
anticipates that the design and construction of this project will begin only
after satisfactory resolution of all legal actions. Present plans call for the
Company to own 90% of the resort, with a partner contributing land (up to 500
acres) in exchange for the remaining 10% interest.
LIQUIDITY
The Company believes that--through the combination of its operating cash
flows, credit facility and ability to raise additional funds through capital
markets--it has sufficient capital resources to meet all of its existing cash
obligations, fund its capital commitments on the projects under way and
strategically repurchase shares of the Company's common stock. As of July 31,
1999, under its most restrictive loan covenant, the Company could issue
additional debt of approximately $186 million, and was restricted as to the
purchase of its own capital stock in excess of $413 million. The Company's Board
of Directors has authorized a share repurchase program for up to 15% of the
outstanding shares, as market conditions and other factors warrant. This
authorization replaces a former 15% authorization that was utilized over a
four-year span.
YEAR 2000 READINESS DISCLOSURE
BACKGROUND
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, information
technology ("IT"), such as date-sensitive computer software, as well as non-IT
systems (such as equipment containing microcontrollers or other embedded
technology) 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 the year is
recognized incorrectly, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.
RISK FACTORS
Date-sensitive IT and non-IT systems and equipment are utilized throughout
the Company's wholly owned properties and its joint venture properties.
Consequently, the Company is exposed to the risk that Year 2000 problems 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 of possible failure of IT and non-IT
systems external to the Company's operations ("external risk factors"). These
external risk factors arise from the fact that the Company's operations, like
those of most businesses, are dependent upon numerous other private and public
entities. While such risk factors are not the responsibility of the Company and
their remediation is beyond the Company's control, we are attempting to monitor
these risks and form contingency plans as warranted. As a result of the external
risk factors, the Company may be materially and adversely impacted even if its
own IT and non-IT systems and equipment are Year 2000-compliant. The most
significant of these factors are as follows:
- One or more of the Company's suppliers or its joint ventures' suppliers
could experience Year 2000 problems that impact their ability to provide
goods and services. The Company believes that such a disruption would have
a limited impact due to the availability of alternative suppliers.
- One or more of the Company's utility providers (of electric, natural gas,
water, sewer, garbage collection and similar services) could experience
Year 2000 problems that impact their ability to provide their services.
Furthermore, the Company could be adversely impacted if utility services
were significantly disrupted in any of its key customer markets (e.g.,
southern California), as this could alter the customary flow of visitors
from the affected market.
21
<PAGE>
- Airline service to and from the principal markets in which the Company
operates could be disrupted by Year 2000 problems, which would limit the
ability of potential customers to visit our properties.
- The possible disruption of banking services due to Year 2000 problems
could impair the Company's daily financial transactions, including the
deposit of monies and processing of checks. Furthermore, credit card
processing and customers' access to cash via automated teller machines
could also be disrupted.
The Company is developing contingency plans to address the identified risks.
However, given the nature of many of the external risk factors, the Company does
not believe viable alternatives are available. For example, the Company cannot
develop a meaningful contingency plan to address a disruption in airline
service. Consequently, the occurrence of any of the aforementioned disruptions
could, depending upon their severity and duration, have a material adverse
impact on operating results.
APPROACH
The Company has established a task force to coordinate its 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.
Previously, the Company engaged an outside consultant who helped establish a
program for dealing with the Year 2000 issue. The Company is now implementing
this program at its wholly owned properties and at its joint venture properties.
The program consists of the following phases:
Phase 1--Compile an inventory of IT and non-IT systems that may be sensitive
to the Year 2000 problem.
Phase 2--Identify which of these systems are critical, and prioritize them;
identify third parties with whom the Company does significant business (e.g.,
vendors) and inquire as to the state of their Year 2000 readiness.
Phase 3--Analyze critical systems to determine which ones are not Year
2000-compliant, and evaluate the costs to repair or replace them.
Phase 4--Repair or replace noncompliant critical systems; test those systems
for which information about Year 2000 compliance has not been received or for
which information has been received but not confirmed.
STATUS
Phases 1 and 2 are substantially complete, though the Company has not
received all responses from significant third parties about their Year 2000
readiness. Phases 3 and 4 are ongoing and will continue into the third fiscal
quarter. It is the Company's goal to have this project substantially completed
by the end of that quarter. Based upon the analysis conducted to date, the
Company believes that all of the critical systems at its wholly owned and joint
venture properties are currently compliant or will be compliant by the end of
the third fiscal quarter. To date, the most significant Year 2000 requirement
that has been identified is the need to replace older personal computers whose
systems are not Year 2000 compatible.
COSTS
The Company currently estimates that the total cost to the Company of making
its systems and those of its joint venture properties Year 2000 compliant will
be in the range of $5 to $10 million, of which approximately $5.1 million had
been incurred as of July 31, 1999. Most of this cost relates to the acquisition
of new computer hardware to replace noncompliant personal computers and the
purchase
22
<PAGE>
of new software to replace noncompliant software. These costs are being
capitalized and the equipment and software depreciated over their expected
useful lives. To the extent existing hardware or software is replaced, the
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As of July 31, 1999 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, 1999.
23
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1999 Annual Meeting of the Company's stockholders was held on June 17,
1999. At the meeting, management's nominees, William A. Richardson and Donna B.
More, were elected to fill the two available positions as Class II directors.
Voting (expressed in number of shares) was as follows: Mr. Richardson 70,809,117
for, 2,660,370 against or withheld and no abstentions or broker non-votes; and
Ms. More 70,663,417 for, 2,806,070 against or withheld and no abstentions or
broker non-votes.
At the meeting, stockholders approved a proposal to amend the Company's
Restated Articles of Incorporation to change the name of the Company to Mandalay
Resort Group, by a vote of 72,808,469 shares for, 545,178 shares against or
withheld and 115,840 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, 2000, by vote of 73,023,859
shares for, 321,375 shares against or withheld and 124,253 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: 2,050,913 shares
for, 54,765,240 shares against or withheld and 16,653,334 abstentions or broker
non-votes.
At the meeting, a stockholder proposal to reconfigure the Company's Board of
Directors was defeated. The vote on the proposal was as follows: 14,980,947
shares for, 41,825,338 shares against or withheld and 16,663,202 abstentions or
broker non-votes.
At the meeting, a stockholder proposal to eliminate the Company's Classified
Board of Directors was defeated. The vote on the proposal was as follows:
18,975,647 shares for, 29,252,267 shares against or withheld and 25,241,573
abstentions or broker non-votes.
24
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed as part of this report:
<TABLE>
<S> <C>
4(a). Amendment No. 3, dated as of June 22, 1999, to the Amended and Restated Loan
Agreement dated as of May 23, 1997, by and among the Company, the Banks
named therein and Bank of America National Trust and Savings Association, as
administrative agent for the Banks.
10(a). Loan Agreement, dated as of June 30, 1999 among Detroit Entertainment,
L.L.C., the Banks named therein and Bank of America National Trust and
Savings Association, as administrative agent for the Banks.
27. Financial Data Schedule for the six months ended July 31, 1999 as required
under EDGAR.
</TABLE>
(b) Reports on Form 8-K. During the period covered by this report, the
Company filed one report on Form 8-K dated June 19, 1999. This form 8-K reported
information under Item 5.
25
<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.
<TABLE>
<C> <S> <C>
MANDALAY RESORT GROUP
---------------------------------------------
(REGISTRANT)
Date: September 13, 1999 By: GLENN SCHAEFFER
-----------------------------------------
Glenn Schaeffer
PRESIDENT, CHIEF FINANCIAL
OFFICER AND TREASURER
</TABLE>
26
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
4(a). Amendment No. 3, dated as of June 22, 1999, to the Amended and Restated Loan Agreement dated as of May
23, 1997, by and among the Company, the Banks named therein and Bank of America National Trust and
Savings Association, as administrative agent for the Banks.
10(a). Loan Agreement, dated as of June 30, 1999 among Detroit Entertainment, L.L.C., the Banks named therein
and Bank of America National Trust and Savings Association, as administrative agent for the Banks.
27. Financial Data Schedule for the six months ended July 31, 1999 as required under EDGAR.
</TABLE>
- ------------------------
<PAGE>
EXHIBIT 4(a)
AMENDMENT NO. 3
This Amendment No. 3 to Loan Agreement dated as of June 22, 1999 is
executed with reference to the Amended and Restated Loan Agreement dated as
of May 23, 1997, among Circus Circus Enterprises, Inc., a Nevada corporation
now known as Mandalay Resort Group, the Banks, Managing Agents, as Co-Agents,
and Lead Managers named therein, and Bank of America National Trust and
Savings Association, as Issuing Bank and Administrative Agent. The
aforementioned Loan Agreement has previously been amended by an Amendment No.
1 thereto dated as of October 3, 1997, and by an Amendment No. 2 thereto
dated as of May 15, 1998 (as so amended, the "Loan Agreement"). Terms
defined in the Loan Agreement are used herein with the same meanings.
The parties hereto agree to amend the Loan Agreement as follows:
1. REVISED DEFINITION OF "CONTINGENT GUARANTY". Section 1.1 of the
Loan Agreement is amended so that the final sentence of the definition of
"Contingent Guaranty" reads in full as follows [with added text in bold]:
"The amount of any Contingent Guaranty shall be deemed to be an
amount equal to the stated or determinable amount of the related
primary obligation (unless the Contingent Guaranty is limited by its
terms to a lesser amount, in which case to the extent of such amount)
or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by Borrower in good faith,
PROVIDED that (y) the amount of any Contingent Guaranty consisting of
a Completion Guaranty OR ANY GUARANTEE OR SIMILAR SURETYSHIP
ARRANGEMENT WITH RESPECT TO INDEBTEDNESS shall be deemed to be zero
unless and until Borrower's independent auditors have quantified the
amount of the exposure thereunder (and thereafter shall be deemed to
be the amount so quantified from time to time), and (z) the amount of
any Contingent Guaranty consisting of a "keep-well", "make well" or
other similar arrangement shall be deemed to be zero unless and until
Borrower or its Restricted Subsidiaries are required to make payment
with respect thereto (and shall thereafter be deemed to be the amount
required to be paid, but only during the period in which such payment
is required to be made)."
2. REVISED DEFINITION OF "TOTAL DEBT". Section 1.1 of the Loan
Agreement is amended so that clause (c) of the definition of "Total Debt"
reads in full as follows [with added text in bold]:
-1-
<PAGE>
"(c) obligations in respect of letters of credit or other similar
instruments for which Borrower or any of its Restricted Subsidiaries
are account parties or are otherwise obligated (other than trade
letters of credit and letters of credit in support of gaming tax and
other similar regulatory obligations), and in any event including any
such Letters of Credit or instruments which support Indebtedness of
the type described in clause (a) or Capital Lease Obligations, to the
extent of the amount drawable under such letters of credit or similar
instruments, PROVIDED THAT LETTERS OF CREDIT AND OTHER SIMILAR
INSTRUMENTS IN AN AGGREGATE AMOUNT NOT TO EXCEED $200,000,000 MAY BE
EXCLUDED FROM TOTAL DEBT FOR SO LONG AS THE SAME HAVE NOT BEEN DRAWN
UPON,"
3. DELETION OF SENIOR DEBT RATIO AND AVERAGE DAILY SENIOR DEBT
DEFINITIONS. The definitions of "Senior Debt Ratio" and "Average Daily Senior
Debt" (added by Amendment No. 2 to the Loan Agreement) are hereby deleted from
Section 1.1 of the Loan Agreement.
4. REVISED DEFINITION OF ELIGIBLE ASSIGNEE. The definition of
"Eligible Assignee" set forth in Section 1.1 of the Loan Agreement is hereby
amended to read in full as follows:
"ELIGIBLE ASSIGNEE" means (a) another Bank, (b) with respect to
any Bank, any Affiliate of that Bank, (c) any commercial bank having a
combined capital and surplus of $100,000,000 or more which is (i)
organized under the laws of the United States or any state thereof, or
(ii) the domestic branch or agency of any such commercial bank
organized under the laws of a country which is a member of the
Organization for Economic Cooperation and Development, (d) any (i)
savings bank, savings and loan association or similar financial
institution or (ii) insurance company engaged in the business of
writing insurance which, in either case (A) has a net worth of
$200,000,000 or more, (B) is engaged in the business of lending money
and extending credit under credit facilities substantially similar to
those extended under this Agreement and (C) is operationally and
procedurally able to meet the obligations of a Bank hereunder to the
same degree as a commercial bank and (e) any other financial
institution (INCLUDING a mutual fund or other fund) having total
assets of $250,000,000 or more which meets the requirements set forth
in subclauses (B) and (C) of clause (d) above; PROVIDED that each
Eligible Assignee must either (a) be organized under the Laws of the
United States of America, any State thereof or the District of
Columbia or (b) be organized under the Laws of the Cayman Islands or
any country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of such a
country, and (i) act hereunder through a branch, agency or funding
office located in the United States of America and (ii) otherwise be
exempt from withholding of tax on interest and delivers Form 1001 or
Form 4224 pursuant to Section 11.21 at the time of any assignment
pursuant to Section 11.8."
-2-
<PAGE>
5. DELETION OF MATERIAL ADVERSE EFFECT REPRESENTATION. Section 4.6
of the Loan Agreement is hereby amended to read in full as follows:
"4.6 NO OTHER LIABILITIES; NO MATERIAL ADVERSE EFFECT. As of
the Closing Date, Borrower and its Subsidiaries do not have any
material liability or material contingent liability not reflected or
disclosed in the financial statements described in Section 4.5 or on
Schedule 4.10, other than liabilities and contingent liabilities
arising in the ordinary course of business since the date of such
financial statements. As of the Closing Date, no circumstance or
event has occurred that constitutes a Material Adverse Effect since
January 31, 1997."
6. INTRACOMPANY LIENS. Section 6.8 of the Loan Agreement is hereby
amended to add a new clause (m) thereto, to read in full as follows:
"(m) Liens on real property securing Indebtedness owed by any
Restricted Subsidiary to any other Restricted Subsidiary which is a
party to the Subsidiary Guaranty, PROVIDED that (i) such Indebtedness
is evidenced by promissory notes which bear a conspicuous legend
stating that such promissory notes may not be sold, transferred,
pledged, hypothecated or otherwise disposed of without the prior
written consent of all of the Lenders (and that any purported sale,
transfer, pledge, hypothecation or other disposition is VOID AB
INITIO, and (ii) the deeds of trust, mortgages and other security
documents creating such Liens are not recorded or otherwise perfected,
and (iii) that the originals of such notes, mortgages and other
security documents are deposited with the Administrative Agent's
counsel."
7. TOTAL DEBT RATIO. Section 6.11 of the Loan Agreement is hereby
amended to read in full as follows (to both modify the required Total Debt
Ratio and to eliminate the Senior Debt Ratio):
"6.11 TOTAL DEBT RATIO. Permit the Total Debt Ratio to exceed
5.00 to 1.00 as of the last day of each Fiscal Quarter ending prior to
April 30, 2002, with a step-down to 4.75 to 1.00 for the Fiscal
Quarter ending April 30, 2002, and each subsequent Fiscal Quarter."
8. CONSENT TO SHOPPING CENTER AND TIME SHARE TRANSACTIONS.
(a) The Banks hereby consent to Borrower's and its Subsidiaries'
lease of approximately 15 acres of land adjacent to the Luxor Hotel
and Casino and the Mandalay Bay Resort Hotel and Casino, together with
related easements, to a joint venture to be formed to construct and
operate a retail mall on such Property. In connection therewith,
Borrower and its Subsidiaries may subordinate their interest in
-3-
<PAGE>
the underlying fee to the Lien of any lender to such joint venture and
may grant a pledge of their interest in such joint venture to any
lender to that joint venture.
(b) The Banks further consent to (i) the sale, transfer or other
disposition by Borrower and its Subsidiaries of any interests (whether
consisting of estates for terms of years, condominium interests, joint
tenancies, tenancies in common, leases, licenses or other interests in
real property) in approximately 5 acres of currently undeveloped land
adjacent to the Mandalay Bay Resort Hotel & Casino, either to an
entity to be formed to construct a time share development on such real
property or directly to the purchasers of such time share interests,
and to (ii) subordination of Borrower's and its Subsidiaries' interest
in such real property to the Lien of any lender to such entity or
individual purchasers.
(c) None of the transactions contemplated by this Section shall
be deemed to constitute "Dispositions" within the meaning of the Loan
Agreement or to utilize any portion of the amount of the Dispositions
permitted by Section 6.2(b) of the Loan Agreement.
(d) Each of the Persons to be formed under Sections 8(a) and
8(b) of this Amendment shall be deemed to be "New Ventures."
9. CONDITIONS PRECEDENT. As conditions precedent to the effectiveness
of this Amendment, the Administrative Agent shall have received executed
counterparts of this Amendment from Borrower, consented to be each Subsidiary
Guarantor, and consents hereto from Banks comprising at least the Requisite
Banks.
10. COUNTERPARTS. This Amendment may be executed in counterparts in
accordance with Section 11.7 of the Loan Agreement.
-4-
<PAGE>
11. CONFIRMATION. In all other respects, the Loan Agreement is
confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above by their duly authorized representatives.
MANDALAY RESORT GROUP
By: GLENN SCHAEFFER
---------------------------------
Title: PRESIDENT
------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By: JANICE HAMMOND
---------------------------------
Title: Vice President
------------------------------
The undersigned Subsidiaries of Borrower hereby consent to the execution,
delivery and performance of the foregoing amendment, and reaffirm the
Subsidiary Guaranty.
CIRCUS CIRCUS CASINOS, INC., a Nevada corporation
CIRCUS CIRCUS MISSISSIPPI, INC., a Mississippi corporation
COLORADO BELLE CORP., a Nevada corporation
EDGEWATER HOTEL CORPORATION, a Nevada corporation
GALLEON, INC., a Nevada corporation
NEW CASTLE CORP., a Nevada corporation
RAMPARTS, INC., a Nevada corporation
SLOTS-A-FUN, INC., a Nevada corporation
By: GLENN SCHAEFFER
-------------------------------------------
Glenn Schaeffer, as President of the foregoing
MANDALAY DEVELOPMENT CORP., a Nevada corporation
(formerly known as Circus Circus Development Corp.)
LAST CHANCE INVESTMENTS, INCORPORATED, a Nevada corporation
By: WILLIAM A. RICHARDSON
-------------------------------------------
-5-
<PAGE>
William A. Richardson, as President of the foregoing
DIAMOND GOLD, INC., a Nevada corporation
OASIS DEVELOPMENT COMPANY, INC., a Nevada corporation
By: PETER A. SIMON
-------------------------------------------
Peter A. Simon, as President of the foregoing
GOLD STRIKE INVESTMENTS, INCORPORATED, a Nevada corporation
By: DAVID R. BELDING
-------------------------------------------
David R. Belding, as President
M.S.E. INVESTMENTS, INCORPORATED, a Nevada corporation
By: MICHAEL S. ENSIGN
-------------------------------------------
Michael S. Ensign, as President
PINKLESS, INC., a Nevada corporation
By: YVETTE E. LANDAU
-------------------------------------------
Yvette E. Landau, as Secretary
RAILROAD PASS INVESTMENT GROUP, a Nevada partnership
JEAN DEVELOPMENT COMPANY, a Nevada partnership
JEAN DEVELOPMENT WEST, a Nevada partnership
NEVADA LANDING PARTNERSHIP, an Illinois partnership
GOLD STRIKE L.V., a Nevada partnership
JEAN DEVELOPMENT NORTH, a Nevada partnership
LAKEVIEW GAMING PARTNERSHIPS JOINT VENTURE, a Nevada partnership
By: Railroad Pass Investment Group general partner of each of the
foregoing
By: M.S.E. Investments, Incorporated
Its: general partner
By: MICHAEL S. ENSIGN
---------------------------------
Michael S. Ensign, President
CIRCUS CIRCUS MICHIGAN, INC., a Michigan corporation
By: GLENN SCHAEFFER
-------------------------------------------
Title: President
----------------------------------------
-6-
<PAGE>
CONSENT OF BANK
This Consent of Bank is delivered with reference to the Amended and
Restated Loan Agreement dated as of May 23, 1997 among Circus Circus
Enterprises, Inc., a Nevada corporation now known as Mandalay Resort Group,
the Banks, Co-Agents, Managing Agents and Lead Managers referred to therein,
and Bank of America National Trust and Savings Association, as Issuing Bank
and Administrative Agent (as amended, the "Loan Agreement"). Capitalized
terms used but not defined herein are used with the meanings set forth for
those terms in the Loan Agreement.
The undersigned Bank hereby consents to the execution, delivery and
performance of the proposed Amendment No. 3 to Loan Agreement by the
Administrative Agent on behalf of the Banks, substantially in the form
presented to the undersigned as a draft.
--------------------------------------
[Typed/Printed Name of Bank]
By: JON VARNELL
-----------------------------------
Managing Director
--------------------------------------
[Typed/Printed Name and Title]
Dated: June 21, 1999
-7-
<PAGE>
EXHIBIT 10(a)
EXECUTION
- -------------------------------------------------------------------------------
LOAN AGREEMENT
Dated as of June 30, 1999
among
DETROIT ENTERTAINMENT, L.L.C.
The Lenders, Documentation Agent, Senior Managing Agent and Co-Agent Herein
Named
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
BANC OF AMERICA SECURITIES, L.L.C.,
Lead Arranger and Sole Book Manager
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
Article 1
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 29
1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . 29
1.4 Rounding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
1.5 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . 30
1.6 References to "Borrower and its Subsidiaries" . . . . . . . . . . 30
1.7 Miscellaneous Terms . . . . . . . . . . . . . . . . . . . . . . . 30
Article 2
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.1 Loans-General . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.2 Base Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . .. 32
2.3 Eurodollar Rate Loans . . . . . . . . . . . . . . . . . . . . . .. 32
2.4 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . .. 33
2.5 Voluntary Reduction of Commitment . . . . . . . . . . . . . . . .. 36
2.6 Scheduled Reductions of Commitment. . . . . . . . . . . . . . . .. 36
2.7 Optional Termination of Commitment. . . . . . . . . . . . . . . .. 37
2.8 Mandatory Termination of Commitment . . . . . . . . . . . . . . .. 37
2.9 Administrative Agent's Right to Assume Funds Available for
Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Article 3
PAYMENTS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.1 Principal and Interest. . . . . . . . . . . . . . . . . . . . . . 38
3.2 Arrangement Fee . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.3 Upfront Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .. 39
3.4 Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . .. 39
3.5 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . .. 39
3.6 Agency Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .. 40
3.7 Increased Commitment Costs. . . . . . . . . . . . . . . . . . . .. 40
3.8 Eurodollar Costs and Related Matters. . . . . . . . . . . . . . .. 40
3.9 Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . .. 44
3.10 Computation of Interest and Fees . . . . . . . . . . . . . . . .. 44
3.11 Non-Business Days. . . . . . . . . . . . . . . . . . . . . . . .. 44
3.12 Manner and Treatment of Payments . . . . . . . . . . . . . . . .. 44
3.13 Funding Sources. . . . . . . . . . . . . . . . . . . . . . . . .. 45
3.14 Failure to Charge Not Subsequent Waiver. . . . . . . . . . . . .. 45
3.15 Administrative Agent's Right to Assume Payments Will be Made by
Borrower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.16 Fee Determination Detail . . . . . . . . . . . . . . . . . . . .. 46
3.17 Survivability. . . . . . . . . . . . . . . . . . . . . . . . . . 46
Article 4
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . ..47
4.1 Existence and Qualification; Power; Compliance With Laws. . . . . 47
-i-
<PAGE>
4.2 Authority; Compliance With Other Agreements and Instruments and
Government Regulations. . . . . . . . . . . . . . . . . . . . . . 47
4.3 No Governmental Approvals Required. . . . . . . . . . . . . . . . 48
4.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.5 Company Financials; Borrower's Financial Status . . . . . . . . . 48
4.6 No Other Liabilities. . . . . . . . . . . . . . . . . . . . . . . 48
4.7 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . 48
4.8 Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . 48
4.9 Public Utility Holding Company Act. . . . . . . . . . . . . . . . 49
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.11 Binding Obligations. . . . . . . . . . . . . . . . . . . . . . . 49
4.12 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49
4.14 Regulations T, U and X; Investment Company Act . . . . . . . . .. 50
4.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . .. 50
4.16 Tax Liability. . . . . . . . . . . . . . . . . . . . . . . . . .. 50
4.17 Projections. . . . . . . . . . . . . . . . . . . . . . . . . . .. 50
4.18 Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . .. 51
4.19 Gaming Laws. . . . . . . . . . . . . . . . . . . . . . . . . . .. 51
4.20 Excluded Property. . . . . . . . . . . . . . . . . . . . . . . .. 51
Article 5
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS) . . . . . . . . . . . . . . . . . . . . . . . . 52
5.1 Payment of Taxes and Other Potential Liens. . . . . . . . . . . . .52
5.2 Preservation of Existence . . . . . . . . . . . . . . . . . . . .. 52
5.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . .. 52
5.4 Maintenance of Insurance. . . . . . . . . . . . . . . . . . . . .. 52
5.5 Compliance With Laws. . . . . . . . . . . . . . . . . . . . . . .. 53
5.6 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . .. 53
5.7 Keeping of Records and Books of Account . . . . . . . . . . . . .. 53
5.8 Compliance With Agreements. . . . . . . . . . . . . . . . . . . .. 53
5.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . .. 53
5.10 Hazardous Materials Laws . . . . . . . . . . . . . . . . . . . .. 53
5.12 Additional Collateral; the Temporary Project . . . . . . . . . .. 54
5.13 Completion Certificates. . . . . . . . . . . . . . . . . . . . .. 55
5.14 Year 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.15 Title Insurance Documents. . . . . . . . . . . . . . . . . . . . 56
Article 6
NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.1 Payment of Subordinated Debt. . . . . . . . . . . . . . . . . .. . 57
6.2 Disposition of Property . . . . . . . . . . . . . . . . . . . .. . 57
6.3 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 57
6.4 Hostile Tender Offers . . . . . . . . . . . . . . . . . . . . .. . 58
6.5 Distributions . . . . . . . . . . . . . . . . . . . . . . . . .. . 58
6.6 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 59
6.7 Change in Nature of Business. . . . . . . . . . . . . . . . . .. . 59
6.8 Liens, Negative Pledges, Sale Leasebacks and Rights of Others .. . 59
6.9 Indebtedness and Contingent Guaranties. . . . . . . . . . . . .. . 60
-ii-
<PAGE>
6.10 Capital Expenditures . . . . . . . . . . . . . . . . . . . . .. . 60
6.11 Acquisitions and Investments . . . . . . . . . . . . . . . . .. . 61
6.12 Maximum Total Debt Ratio . . . . . . . . . . . . . . . . . . .. . 61
6.13 Minimum Fixed Charge Coverage Ratio. . . . . . . . . . . . . .. . 62
6.14 Transactions with Affiliates . . . . . . . . . . . . . . . . .. . 62
6.15 Amendments to Material Documents; Plans and Budget . . . . . . . 62
Article 7
INFORMATION AND REPORTING REQUIREMENTS. . . . . . . . . . . . . . . ... 63
7.1 Financial and Business Information. . . . . . . . . . . . . . . .. 63
7.2 Compliance Certificates . . . . . . . . . . . . . . . . . . . . .. 66
Article 8
CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.1 Initial Advances, Etc.. . . . . . . . . . . . . . . . . . . . . .. 67
8.2 Any Increasing Advance, Etc.. . . . . . . . . . . . . . . . . . .. 69
8.3 Any Advance . . . . . . . . . . . . . . . . . . . . . . . . . . .. 70
Article 9
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT. . . . . . . . . . 71
9.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . .. 71
9.2 Remedies Upon Event of Default. . . . . . . . . . . . . . . . . .. 74
Article 10
THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . .. 77
10.1 Appointment and Authorization. . . . . . . . . . . . . . . . . .. 77
10.2 Administrative Agent and Affiliates. . . . . . . . . . . . . . .. 77
10.3 Proportionate Interest in any Collateral . . . . . . . . . . . .. 77
10.4 Lenders' Credit Decisions. . . . . . . . . . . . . . . . . . . .. 77
10.5 Action by Administrative Agent . . . . . . . . . . . . . . . . .. 78
10.6 Liability of Administrative Agent. . . . . . . . . . . . . . . .. 79
10.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .. 80
10.8 Successor Administrative Agent . . . . . . . . . . . . . . . . .. 80
10.9 No Obligations of Borrower . . . . . . . . . . . . . . . . . . .. 81
Article 11
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 82
11.1 Cumulative Remedies; No Waiver . . . . . . . . . . . . . . . . .. 82
11.2 Amendments; Consents . . . . . . . . . . . . . . . . . . . . . .. 82
11.3 Costs, Expenses and Taxes. . . . . . . . . . . . . . . . . . . .. 83
11.4 Nature of Lenders' Obligations . . . . . . . . . . . . . . . . .. 84
11.5 Survival of Representations and Warranties . . . . . . . . . . .. 84
11.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 84
11.7 Execution of Loan Documents. . . . . . . . . . . . . . . . . . .. 85
11.8 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . .. 85
11.9 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . .. 88
11.10 Sharing of Setoffs. . . . . . . . . . . . . . . . . . . . . . .. 88
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<PAGE>
11.11 Indemnity by Borrower . . . . . . . . . . . . . . . . . . . . .. 89
11.12 Nonliability of the Lenders . . . . . . . . . . . . . . . . . .. 90
11.13 No Third Parties Benefitted . . . . . . . . . . . . . . . . . .. 91
11.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . .. 91
11.15 Removal of a Lender . . . . . . . . . . . . . . . . . . . . . .. 92
11.16 Further Assurances. . . . . . . . . . . . . . . . . . . . . . .. 92
11.17 Integration . . . . . . . . . . . . . . . . . . . . . . . . . .. 92
11.18 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .. 93
11.19 Severability of Provisions. . . . . . . . . . . . . . . . . . .. 93
11.20 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .. 93
11.21 Time of the Essence . . . . . . . . . . . . . . . . . . . . . .. 93
11.22 Foreign Lenders and Participants. . . . . . . . . . . . . . . . 93
11.23 Hazardous Material Indemnity. . . . . . . . . . . . . . . . . . 94
11.24 Gaming Boards . . . . . . . . . . . . . . . . . . . . . . . . .. 94
11.25 Release and Reinstatement of the Company Guaranty . . . . . . .. 94
11.26 Waiver of Right to Trial by Jury. . . . . . . . . . . . . . . .. 96
11.27 Purported Oral Amendments . . . . . . . . . . . . . . . . . . .. 96
EXHIBITS
A - Assignment Agreement
B - Compliance Certificate
C - Lease Indemnity
D - Form of Mortgage
E - Mortgagee Waiver
F - Note
G - Request for Letter of Credit
H - Request for Loan
I - Subordination Agreement
SCHEDULES
1.1 Pro Rata Shares
4.3 Governmental Approvals
4.10 Litigation
<PAGE>
LOAN AGREEMENT
Dated as of June 30, 1999
This LOAN AGREEMENT ("Agreement") is entered into among Detroit
Entertainment L.L.C., a Michigan limited liability company ("Borrower"), Bank
of America National Trust and Savings Association and each lender whose name
is set forth on the signature pages of this Agreement and each other lender
which may hereafter become a party to this Agreement pursuant to Section 11.8
(collectively, the "Lenders" and individually, a "Lender"), Comerica Bank, as
Documentation Agent, Societe Generale, as Senior Managing Agent, The First
National Bank of Chicago as Co-Agent, and Bank of America National Trust and
Savings Association, as Issuing Lender and Administrative Agent.
In consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:
Article 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the meanings set forth below:
"ACQUISITION" means any transaction, or any series of related
transactions, by which Borrower or its Restricted Subsidiaries directly or
indirectly (i) acquire any going business or all or substantially all of
the assets of any Person, or any division thereof, whether through purchase
of assets, merger or otherwise, or (ii) acquire (in one transaction or as
the most recent transaction in a series of transactions) control of at
least a majority in ordinary voting power of the securities of a
corporation which have ordinary voting power for the election of directors,
or (iii) acquire control of a 50% or more ownership interest in any
partnership, joint venture, limited liability company or any other Person.
"ADMINISTRATIVE AGENT" means Bank of America, when acting in its
capacity as the Administrative Agent under any of the Loan Documents, or
any successor Administrative Agent.
"ADMINISTRATIVE AGENT'S OFFICE" means the Administrative Agent's
address as set forth on the signature pages of this Agreement, or such
other address
-1-
<PAGE>
as the Administrative Agent hereafter may designate by written notice to
Borrower and the Lenders.
"ADVANCE" means any advance made or to be made by any Lender to
Borrower in accordance with its Pro Rata Share as provided in Article 2,
and INCLUDES each Base Rate Advance and each Eurodollar Rate Advance.
"AFFILIATE" means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled
by, such Person. As used in this definition, "control" (and the
correlative terms, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise); PROVIDED that, in any event, any Person that owns, directly
or indirectly, 10% or more of the securities having ordinary voting power
for the election of directors or other governing body of a corporation that
has more than 100 record holders of such securities, or 10% or more of the
partnership or other ownership interests of any other Person that has more
than 100 record holders of such interests, will be deemed to control such
corporation or other Person.
"AGGREGATE EFFECTIVE AMOUNT" means, as of any date of determination
and with respect to all Letters of Credit then outstanding, the SUM of (a)
the aggregate undrawn face amounts of all such Letters of Credit, PLUS (b)
the aggregate amounts paid by the Issuing Lender under any Letters of
Credit for which the Issuing Lender has not been reimbursed and which are
not the subject of Advances made pursuant to Section 2.4(e).
"AGREEMENT" means this Loan Agreement, either as originally executed
or as it may from time to time be supplemented, modified, amended, restated
or extended.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement substantially in
the form of Exhibit A.
"AVERAGE TOTAL DEBT" means, as of the last day of each Fiscal Quarter,
the average principal amount of the Total Debt outstanding on the last day
of the three constituent calendar months during such Fiscal Quarter.
"BANK OF AMERICA" means Bank of America National Trust and Savings
Association, its successors and assigns.
-2-
<PAGE>
"BUSINESS DAY" means any Monday, Tuesday, Wednesday, Thursday or
Friday, OTHER THAN a day on which banks are authorized or required to be
closed in Michigan, California or New York.
"BASE RATE" means, as of any date of determination, the rate per annum
(rounded upwards, if necessary, to the next 1/100 of 1%) equal to the
HIGHER OF (a) the Reference Rate in effect on such date (calculated on the
basis of a year of 365 or 366 days and the actual number of days elapsed)
and (b) the Federal Funds Rate in effect on such date (calculated on the
basis of a year of 360 days and the actual number of days elapsed) PLUS 1/2
of 1% (50 basis points).
"BASE RATE ADVANCE" and "BASE RATE LOAN" mean, respectively, an
Advance or a Loan made hereunder and specified to be a Base Rate Advance or
Loan in accordance with Article 2.
"BASE RATE MARGIN" means, (a) as of each date of determination when
the Company Guaranty is in effect (including during any period of
reinstatement), the interest rate margin set forth below (expressed in
basis points) opposite the Company Rating Level then in effect:
<TABLE>
<CAPTION>
COMPANY RATING LEVEL BASE RATE MARGIN
-------------------- ----------------
<S> <C>
I, II or III 0.00
IV 12.50
V 62.50;
</TABLE>
and (b) as of each date of determination when the Company Guaranty is not
in effect, 0%.
"BORROWER" means Detroit Entertainment L.L.C., a Michigan limited
liability company, and its permitted successors and assigns.
"CAPITAL EXPENDITURE" means any expenditure that is considered a
capital expenditure under Generally Accepted Accounting Principles,
INCLUDING any amount which is required to be treated as an asset subject
to a Capital Lease Obligation.
"CAPITAL LEASE OBLIGATIONS" means all monetary obligations of a Person
under any leasing or similar arrangement which, in accordance with
Generally Accepted Accounting Principles, is classified as a capital lease.
-3-
<PAGE>
"CASH" means, when used in connection with any Person, all monetary
and non-monetary items owned by that Person that are treated as cash in
accordance with Generally Accepted Accounting Principles, consistently
applied.
"CASH EQUIVALENTS" means, when used in connection with any Person,
that Person's Investments in:
(a) Government Securities due within one year after the date
of the making of the Investment;
(b) readily marketable direct obligations of any State of the
United States of America given on the date of such Investment a
credit rating of at least Aa by Moody's Investors Service, Inc. or
AA by S&P, in each case due within one year from the making of the
Investment;
(c) certificates of deposit issued by, bank deposits in,
Eurodollar deposits through, bankers' acceptances of, and
repurchase agreements covering Government Securities executed by,
any bank incorporated under the Laws of the United States of
America or any State thereof and having on the date of such
Investment combined capital, surplus and undivided profits of at
least $250,000,000, or total assets of at least $5,000,000,000, in
each case due within one year after the date of the making of the
Investment;
(d) certificates of deposit issued by, bank deposits in,
Eurodollar deposits through, bankers' acceptances of, and
repurchase agreements covering Government Securities executed by,
any branch or office located in the United States of America of a
bank incorporated under the Laws of any jurisdiction outside the
United States of America having on the date of such Investment
combined capital, surplus and undivided profits of at least
$500,000,000, or total assets of at least $15,000,000,000 in each
case due within one year after the date of the making of the
Investment;
(e) repurchase agreements covering Government Securities
executed by a broker or dealer registered under Section 15(b) of
the Securities Exchange Act of 1934 having on the date of the
Investment capital of at least $100,000,000, due within 30 days
after the date of the making of the Investment; PROVIDED that the
maker of the Investment receives written confirmation of the
transfer to it of record ownership of
-4-
<PAGE>
the Government Securities on the books of a "primary dealer" in such
Government Securities on the books of such registered broker or
dealer, as soon as practicable after the making of the Investment;
(f) readily marketable commercial paper of corporations doing
business in and incorporated under the Laws of the United States of
America or any State thereof or of any corporation that is the
holding company for a bank described in clauses (c) or (d) above
given on the date of such Investment a credit rating of at least
P-1 by Moody's or A-1 by S&P, in each case due within 90 days after
the date of the making of the Investment;
(g) "money market preferred stock" issued by a corporation
incorporated under the Laws of the United States of America or any
State thereof given on the date of such Investment a credit rating
of at least Aa by Moody's and AA by S&P, in each case having an
investment period not exceeding 50 days; PROVIDED that (i) the
amount of all such Investments issued by the same issuer does not
exceed $5,000,000 and (ii) the aggregate amount of all such
Investments does not exceed $15,000,000; and
(h) a readily redeemable "money market mutual fund" sponsored
by a bank described in clauses (c) or (d) hereof, or a registered
broker or dealer described in clause (e) hereof, that has and
maintains an investment policy limiting its investments primarily
to instruments of the types described in clauses (a) through (g)
hereof and having on the date of such Investment total assets of at
least $1,000,000,000.
"CERTIFICATE OF A RESPONSIBLE OFFICIAL" means a certificate signed by
a Responsible Official of the Person providing the certificate.
"CHANGE IN CONTROL" means any transaction or series of related
transactions (a) occurring when the Company Guaranty is in effect
(including during any period of reinstatement)(i) in which any Unrelated
Person or two or more Unrelated Persons acting in concert acquire
beneficial ownership (within the meaning of Rule 13d-3(a)(1) under the
Securities Exchange Act of 1934, as amended), directly or indirectly, of
50% or more of the Common Stock, (ii) in which any such Unrelated Person or
Unrelated Persons acting in concert acquire beneficial ownership of 20% or
more of the Common Stock subsequent to the Closing Date
-5-
<PAGE>
and (A) at the first election for the board of directors of the Company
subsequent to such acquisition, individuals who prior to such election were
directors of the Company cease for any reason (OTHER THAN death, incapacity
or disqualification under any Gaming Law) to constitute 50% or more of the
board of directors of the Company or (B) if the terms of all directors of
the Company do not expire at the date of such first election, then at the
second election for the board of directors of the Company subsequent to
such acquisition, individuals who prior to such first election were
directors of the Company cease for any reason (OTHER THAN death,
incapacity or disqualification under any Gaming Law) to constitute 50%
or more of the board of directors of the Company, or (iii) constituting a
"change in control" or other similar occurrence under documentation
evidencing or governing any Indebtedness of Company of $25,000,000 or more
which results in an obligation of Company to prepay, purchase, offer to
purchase, redeem or defease such Indebtedness, or (b) occurring at any time
which result in the failure of the Company for any reason to own, directly
or indirectly, 90% of the outstanding membership interests in Borrower
owned by the Company as of the Closing Date.
"CLOSING DATE" means the time and Business Day on which the conditions
set forth in Section 8.1 are satisfied or waived. The Administrative Agent
shall notify Borrower and the Lenders of the date that is the Closing Date.
"CO-AGENT" means The First National Bank of Chicago. The capacity of
the Co-Agent is titular in nature, and the Co-Agent shall have no rights
and duties under the Loan Documents over and above those of the other
Lenders by reason of this title.
"CODE" means the Internal Revenue Code of 1986, as amended or replaced
and as in effect from time to time.
"COMMITMENT" means, subject to Sections 2.5, 2.6, 2.7 and 2.8 and
11.15, $150,000,000. As of the Closing Date, the respective Pro Rata
Shares of the Lenders with respect to the Commitment are set forth in
Schedule 1.1.
-6-
<PAGE>
"COMMITMENT FEE RATE" means (a) as of each date of determination
when the Company Guaranty is in effect (including during any period of
reinstatement), the per annum rate set forth below (expressed in basis
points) opposite the Company Rating Level then in effect:
<TABLE>
<CAPTION>
COMPANY RATING LEVEL COMMITMENT FEE RATE MARGIN
-------------------- --------------------------
<S> <C>
I 17.50
II 20.00
III 22.50
IV 25.00
V 30.00;
</TABLE>
and (b) as of each date of determination when the Company Guaranty is not
in effect, the per annum rate forth below (expressed in basis points)
opposite the Total Debt Ratio in effect as of the last day of the Fiscal
Quarter ending immediately prior to the first day of the then current
Pricing Period:
<TABLE>
<CAPTION>
Total Debt Ratio Commitment Fee Rate
---------------- -------------------
<S> <C>
Less than or equal to 1.00:1.00 22.50
Greater than 1.00:1.00 25.00
</TABLE>
"COMMON STOCK" means the common stock of the Company or its successor
by merger.
"COMPANY" means Mandalay Resort Group, a Nevada corporation formerly
known as Circus Circus Enterprises, Inc., its successors and permitted
assigns.
"COMPANY DEBT RATINGS" means, as of each date of determination, the
higher of the two credit ratings, actual or implicit, assigned to (a)
senior unsecured Indebtedness of the Company by S&P and Moody's or (b) in
the event a credit rating is issued for the Company Loan Agreement is
issued by either such rating agency service, the bank debt credit rating
assigned to the Indebtedness evidenced by the Company Loan Agreement by
such rating agency service. For the purposes of this Agreement, each
change in such a rating shall be deemed effective five Business Days
following the official announcement thereof by the relevant rating
agency service.
"COMPANY GUARANTY" means the continuing guaranty of the Obligations
to be executed and delivered by the Company on the Closing Date in favor
of the Administrative Agent, in form and substance satisfactory to the
Administrative Agent, in connection with this Agreement, either as
originally executed or as it may from time
-7-
<PAGE>
to time be supplemented, modified, amended, extended, supplanted or as
reinstated from time to time in accordance with Section 11.25(c).
"COMPANY LOAN AGREEMENT" means (a) the Amended and Restated Loan
Agreement dated as of May 23, 1997 among the Company, the Banks party
thereto, and Bank of America, as Issuing Bank and Administrative Agent,
as heretofore amended and as the same may from time to time be further
supplemented, modified, amended, renewed or extended, and (b) in the event
that the obligations under the Agreement described in clause (a) are
hereafter repaid and the lending commitments thereunder are terminated,
each other senior credit agreement entered into by the Company providing
for credit facilities in excess of $500,000,000.
"COMPANY RATING LEVEL" means, as of each date of determination, the
Company Rating Level set forth below opposite the then prevailing Company
Debt Ratings, PROVIDED that in the event that Moody's and S&P assign
Company Debt Ratings which are at different Levels, the higher of the
two ratings shall apply:
<TABLE>
<CAPTION>
Company Debt Ratings Company Rating Level
-------------------- --------------------
<S> <C>
BBB+/Baa1 or higher I
BBB/Baa2 II
BBB-/Baa3 III
BB+/Ba1 IV
Lower than BB+/Ba1 V
</TABLE>
"COMPANY SUBORDINATED DEBT" means Indebtedness of Borrower to the
Company having a final maturity which is after the Maturity Date, having
no payments due prior to that maturity date, which is subject to a
Subordination Agreement, and which has representations, warranties,
covenants and defaults which are no less favorable to the Company than
those contained herein and which are otherwise acceptable to the
Administrative Agent.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of Exhibit B, properly completed and signed on behalf of Borrower by a
Senior Officer of Borrower.
"CONFIDENTIAL OFFERING MEMORANDUM" means the Confidential Offering
Memo dated April, 1999 delivered to the Lenders in connection with this
Agreement.
-8-
<PAGE>
"CONTINGENT GUARANTY" means, as to any Person, any (a) guarantee by
that Person of Indebtedness of, or other obligation performable by, any
other Person or (b) assurance given by that Person to an obligee of any
other Person with respect to the performance of an obligation by, or the
financial condition of, such other Person, whether direct, indirect or
contingent, INCLUDING any purchase or repurchase agreement covering such
obligation or any collateral security therefor, any agreement to provide
funds (by means of loans, capital contributions or otherwise) to such
other Person, any agreement to support the solvency or level of any balance
sheet item of such other Person or any "keep-well", "make-well" or other
arrangement of whatever nature given for the purpose of assuring or holding
harmless such obligee against loss with respect to any obligation of such
other Person; PROVIDED, HOWEVER, that the term Contingent Guaranty shall
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Guaranty shall
be deemed to be an amount equal to the stated or determinable amount of
the related primary obligation (unless the Contingent Guaranty is limited
by its terms to a lesser amount, in which case to the extent of such
amount) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by Borrower in good
faith, PROVIDED that the amount of any Contingent Guaranty consisting of
a "keep-well", "make well" or other similar arrangement shall be deemed
to be zero unless and until Borrower or its Restricted Subsidiaries
are required to make payment with respect thereto (and shall thereafter be
deemed to be the amount required to be paid, but only during the period in
which such payment is required to be made).
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
outstanding security issued by that Person or of any material agreement,
instrument or undertaking to which that Person is a party or by which it or
any of its Property is bound.
"CREDITORS" means, collectively, the Administrative Agent, the Issuing
Lender, each Lender and, where the context requires, any one or more of
them.
"DEBTOR RELIEF LAWS" means the Bankruptcy Code of the United States of
America, as amended from time to time, and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief Laws
from time to time in effect affecting the rights of creditors generally.
-9-
<PAGE>
"DEFAULT" means any event that, with the giving of any applicable
notice or passage of time specified in Section 9.1, or both, would be an
Event of Default.
"DEFAULT RATE" means the interest rate prescribed in Section 3.9.
"DESIGNATED DEPOSIT ACCOUNT" means a deposit account to be maintained
by Borrower with Bank of America, as from time to time designated by
Borrower by written notification to the Administrative Agent.
"DESIGNATED EURODOLLAR MARKET" means, with respect to any Eurodollar
Rate Loan, (a) the London Eurodollar Market, or (b) if prime banks in the
London Eurodollar Market are at the relevant time not accepting deposits of
Dollars or if the Administrative Agent determines that the London
Eurodollar Market does not represent at the relevant time the effective
pricing to the Lenders for deposits of Dollars in the London Eurodollar
Market, the Cayman Islands Eurodollar Market or (c) if prime banks in the
Cayman Islands Eurodollar Market are at the relevant time not accepting
deposits of Dollars or if the Administrative Agent determines that the
Cayman Islands Eurodollar Market does not represent at the relevant time
the effective pricing to the Lenders for deposits of Dollars in the Cayman
Islands Eurodollar Market, such other Eurodollar Market as may from time to
time be selected by the Administrative Agent with the approval of Borrower
and the Requisite Lenders.
"DEVELOPMENT AGREEMENT" means the Amended and Restated Development
Agreement dated as of April 9, 1998 among Borrower, the City of Detroit and
The Economic Development Corporation of the City of Detroit, as the same
may be amended from time to time.
"DISPOSITION" means the sale, transfer or other disposition of any
asset of Borrower or any of its Restricted Subsidiaries (including the
sale, transfer or other disposition of the stock or other equity interest
of any Restricted Subsidiary of Borrower) OTHER THAN any sale, transfer or
other disposition (i) of inventory or other assets sold or otherwise
disposed of in the ordinary course of business of Borrower or any of its
Restricted Subsidiaries, (ii) of equipment or other assets sold or
otherwise disposed of where substantially similar equipment or other
similar assets in replacement thereof have theretofore been acquired, or
thereafter within 90 days is acquired, in each case by Borrower or any of
its Restricted Subsidiaries, or (iii) to Borrower or a Restricted
Subsidiary of Borrower.
-10-
<PAGE>
"DISQUALIFICATION" means, with respect to any Lender or any holder of
Subordinated Debt:
(a) the failure of that Person timely to file pursuant to
applicable Gaming Laws (i) any application or other papers
requested of that Person or required by any Gaming Board or Gaming
Laws required of that Person as a lender to Borrower or (ii) any
required application or other papers in connection with
determination of the suitability of that Person as a lender to
Borrower;
(b) the withdrawal by that Person (EXCEPT where requested or
permitted by the Gaming Board) of any such application or papers; or
(c) any determination by the Executive Director of the
Michigan Gaming Control Board or by a Gaming Board pursuant to
applicable Gaming Laws (i) that such Person is "unsuitable" as a
lender to Borrower, (ii) that such Person shall be "disqualified"
as a lender to Borrower, (iii) denying the issuance to that Person
of any license or other approval required under applicable Gaming
Laws to be held by all lenders to Borrower making the type of loans
referred to in this Agreement, or (iv) otherwise denying or
conditioning the issuance of any license required for the conduct
of gaming operations at the Temporary Project on the basis of that
such Person is a Lender.
"DISTRIBUTION" means, with respect to any shares of capital stock or
any warrant or option to purchase an equity security or other equity
security issued by a Person, (i) the retirement, redemption, purchase,
or other acquisition for Cash or for Property by such Person of any such
security, (ii) the declaration or (without duplication) payment by such
Person of any dividend in Cash or in Property on or with respect to any
such security, (iii) any Investment by such Person in the holder of 5% or
more of any such security if a purpose of such Investment is to avoid
characterization of the transaction as a Distribution and (iv) any other
payment in cash or Property by such Person constituting a distribution
under applicable Laws with respect to such security.
"DOCUMENTATION AGENT" means Comerica Bank. The capacity of the
Documentation Agent is titular in nature, and the Documentation Agent shall
have no rights and duties under the Loan Documents over and above those of
the other Lenders by reason of this title.
"DOLLARS" or "$" means United States dollars.
-11-
<PAGE>
"EBITDA" means, for any fiscal period (a) Net Income, PLUS (b) any
extraordinary loss reflected in Net Income, MINUS (c) any extraordinary
gain reflected in Net Income, PLUS (d) depreciation, amortization and
all other non-cash expenses, PLUS (e) Interest Expense, PLUS (f) the
aggregate amount of federal and state taxes on or measured by income
(whether or not payable during that period), PLUS (g) Pre-Opening Expenses,
in each case for Borrower and its Restricted Subsidiaries during that
period and as determined in accordance with Generally Accepted Accounting
Principles and only to the extent deducted in the determination of Net
Income for that period.
"ELIGIBLE ASSIGNEE" means (a) another Lender, (b) with respect to any
Lender, any Affiliate of that Lender, (c) any commercial bank having a
combined capital and surplus of $100,000,000 or more (or, in the case of
any such institution headquartered within the State of Michigan,
$25,000,000), (d) any (i) savings bank, savings and loan association or
similar financial institution or (ii) insurance company engaged in the
business of writing insurance which, in either case (A) has a net worth
of $200,000,000 or more, (B) is engaged in the business of lending money
and extending credit under credit facilities substantially similar to
those extended under this Agreement and (C) is operationally and
procedurally able to meet the obligations of a Lender hereunder to the same
degree as a commercial bank and (e) any other financial institution
(INCLUDING a mutual fund or other fund) having total assets of $250,000,000
or more which meets the requirements set forth in subclauses (B) and (C) of
clause (d) above; PROVIDED that (I) each Eligible Assignee must either (a)
be organized under the Laws of the United States of America, any State
thereof or the District of Columbia or (b) be organized under the Laws of
the Cayman Islands or any country which is a member of the Organization for
Economic Cooperation and Development, or a political subdivision of such a
country, and (i) act hereunder through a branch, agency or funding office
located in the United States of America and (ii) be exempt from withholding
of tax on interest and deliver the documents related thereto pursuant to
Section 11.22 and (II) to the extent required under applicable Gaming Laws,
each Eligible Assignee must be approved by all applicable Gaming Boards and
must not be the subject to a Disqualification as of the time of a proposed
assignment.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any regulations issued pursuant thereto, as amended or replaced and as in
effect from time to time.
"EURODOLLAR BUSINESS DAY" means any Business Day on which dealings in
Dollar deposits are conducted by and among banks in the Designated
Eurodollar Market.
"EURODOLLAR BASE RATE" means, with respect to any Eurodollar Rate
Loan, the average of the interest rates per annum (rounded upward, if
necessary, to the next 1/16
-12-
<PAGE>
of 1%) at which deposits in Dollars are offered by Bank of America to prime
banks in the Designated Eurodollar Market at or about 11:00 a.m. local time
in the Designated Eurodollar Market, two Eurodollar Business Days before
the first day of the applicable Eurodollar Period in an aggregate amount
approximately equal to the amount of the Advance made by Bank of America
with respect to such Eurodollar Rate Loan and for a period of time
comparable to the number of days in the applicable Eurodollar Period.
The determination of the Eurodollar Base Rate by the Administrative Agent
shall be conclusive in the absence of manifest error.
"EURODOLLAR LENDING OFFICE" means, as to each Lender, its office or
branch so designated by written notice to Borrower and the Administrative
Agent as its Eurodollar Lending Office. If no Eurodollar Lending Office is
designated by a Lender, its Eurodollar Lending Office shall be its office
at its address for purposes of notices hereunder.
"EURODOLLAR MARGIN" means (a) as of each date of determination when
the Company Guaranty is in effect (including during any period of
reinstatement), the interest rate margin set forth below (expressed in
basis points) opposite the Company Rating Level then in effect:
<TABLE>
<CAPTION>
COMPANY RATING LEVEL EURODOLLAR RATE MARGIN
-------------------- ----------------------
<S> <C>
I 87.50
II 100.00
III 112.50
IV 137.50
V 162.50;
</TABLE>
and (b) as of each date of determination when the Company Guaranty is not
in effect, the interest rate margin set forth below (expressed in basis
points) opposite the Total Debt Ratio in effect as of the last day of the
Fiscal Quarter ending immediately prior to the first day of the then
current Pricing Period:
<TABLE>
<CAPTION>
Total Debt Ratio Eurodollar Rate Margin
---------------- ----------------------
<S> <C>
Less than or equal to 1.00:1.00 112.50
Greater than 1.00:1.00 137.50
</TABLE>
"EURODOLLAR MARKET" means a regular established market located outside
the United States of America by and
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<PAGE>
among banks for the solicitation, offer and acceptance of Dollar deposits
in such banks.
"EURODOLLAR OBLIGATIONS" means eurocurrency liabilities, as defined in
Regulation D.
"EURODOLLAR PERIOD" means, as to each Eurodollar Rate Loan, the period
commencing on the date specified by Borrower pursuant to Section 2.1(b) and
ending 1, 2, 3 or 6 months (or, with the written consent of all of the
Lenders, any other period) thereafter, as specified by Borrower in the
applicable Request for Loan; PROVIDED that:
(a) The first day of any Eurodollar Period shall be a
Eurodollar Business Day;
(b) Any Eurodollar Period that would otherwise end on a day
that is not a Eurodollar Business Day shall be extended to the next
succeeding Eurodollar Business Day unless such Eurodollar Business
Day falls in another calendar month, in which case such Eurodollar
Period shall end on the next preceding Eurodollar Business Day; and
(c) No Eurodollar Period shall extend beyond the Maturity Date.
"EURODOLLAR RATE" means, with respect to any Eurodollar Rate Loan, an
interest rate per annum (rounded upward, if necessary, to the nearest 1/16
of one percent) determined pursuant to the following formula:
Eurodollar Eurodollar Base Rate
--------------------
Rate = 1.00 - Eurodollar Reserve
Percentage
"EURODOLLAR RATE ADVANCE" and "EURODOLLAR RATE LOAN" mean,
respectively, an Advance made hereunder and specified to be a Eurodollar
Rate Advance or Loan in accordance with Article 2.
"EURODOLLAR RESERVE PERCENTAGE" means, with respect to any Eurodollar
Rate Loan, the maximum reserve percentage (expressed as a decimal, rounded
upward to the nearest 1/100th of 1%) in effect on the date the Eurodollar
Base Rate for that Eurodollar Rate Loan is determined (whether or not
applicable to any Lender) under regulations issued from time to time by the
Federal Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve require-
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<PAGE>
ment) with respect to eurocurrency funding (currently referred to as
"eurocurrency liabilities") having a term comparable to the Eurodollar
Period for such Eurodollar Rate Loan. The determination by the
Administrative Agent of any applicable Eurodollar Reserve Percentage
shall be conclusive in the absence of manifest error.
"EVENT OF DEFAULT" shall have the meaning provided in Section 9.1.
"EXCLUDED PROPERTY" means, as of each date of determination, that
portion of the Real Property (including both fee and leasehold interests)
owned or leased by Borrower in the vicinity of the Temporary Project which
is not subject to the Mortgages or to a new mortgage delivered pursuant to
Section 5.12. The property described on Exhibit A to the Mortgages as of
the Closing Date is not Excluded Property.
"FEDERAL FUNDS RATE" means, as of any date of determination, the rate
set forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including
any such successor, "H.15(519)") for such date opposite the caption
"Federal Funds (Effective)". If for any relevant date such rate is not
yet published in H.15(519), the rate for such date will be the rate set
forth in the daily statistical release designated as the Composite 3:30
p.m. Quotations for U.S. Government Securities, or any successor
publication, published by the Federal Reserve Bank of New York (including
any such successor, the "Composite 3:30 p.m. Quotation") for such date
under the caption "Federal Funds Effective Rate". If on any relevant date
the appropriate rate for such date is not yet published in either H.15(519)
or the Composite 3:30 p.m. Quotation, the rate for such date will be the
arithmetic mean of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on that date by each
of three leading brokers of Federal funds transactions in New York City
selected by the Administrative Agent. For purposes of this Agreement, any
change in the Base Rate due to a change in the Federal Funds Rate shall be
effective as of the opening of business on the effective date of such
change.
"FISCAL QUARTER" means the fiscal quarter of Borrower consisting of a
three month fiscal period ending on each March 31, June 30, September 30
and December 31.
"FISCAL YEAR" means the fiscal year of Borrower consisting of a twelve
month fiscal period ending on each December 31.
-15-
<PAGE>
"FIXED CHARGES" means, for any period and without duplication, all of
Borrower's (a) required payments of principal with respect to Indebtedness
(including Capital Lease Obligations), (b) Interest Expenses paid or
payable in cash, (c) Distributions made pursuant to Sections 6.5(b) to
the extent paid in cash, (d) Maintenance Capital Expenditures, and (e)
Restricted Payments, in each case for that period determined in accordance
with Generally Accepted Accounting Principles, consistently applied.
"FIXED CHARGE COVERAGE RATIO" means, as of the last day of any fiscal
quarter, the ratio of EBITDA to Fixed Charges, in each case for the four
fiscal quarter period then ended, PROVIDED that as of the last day of each
of the first three full Fiscal Quarters following the Opening Date, EBITDA
and Fixed Charges shall be determined on the basis of the results of
operations of the Borrower and its Restricted Subsidiaries for the period
beginning on the Opening Date and ending on the last day of each such
Fiscal Quarter.
"GAMING BOARD" means, collectively, the Michigan Gaming Control Board
and any other Governmental Agency that holds regulatory, licensing or
permit authority over gambling, gaming or casino activities conducted by
the Company, the Borrower or any Subsidiary of the Company or Borrower
within its jurisdiction or over the Temporary Project or the Permanent
Project, or before which an application for licensing to conduct such
activities is pending.
"GAMING LAWS" means the Michigan Gaming Control and Revenue Act, the
administrative rules promulgated thereunder, and all other Laws pursuant
to which any Gaming Board possesses regulatory, licensing or permit
authority over gambling, gaming or casino activities conducted by the
Company, Borrower and any Subsidiary of the Company or Borrower within
its jurisdiction.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means, as of any date of
determination, accounting principles (a) set forth as generally accepted
in then currently effective Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants, (b) set forth as
generally accepted in then currently effective Statements of the Financial
Accounting Standards Board or (c) that are then approved by such other
entity as may be approved by a significant segment of the accounting
profession in the United States of America. The term "CONSISTENTLY
APPLIED," as used in connection therewith, means that the accounting
principles applied are consistent in all material respects to those
applied at prior dates or for prior periods.
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<PAGE>
"GOVERNMENT SECURITIES" means readily marketable (a) direct full
faith and credit obligations of the United States of America or
obligations guaranteed by the full faith and credit of the United States
of America and (b) obligations of an agency or instrumentality of, or
corporation owned, controlled or sponsored by, the United States of
America that are generally considered in the securities industry to be
implicit obligations of the United States of America.
"GOVERNMENTAL AGENCY" means (a) any international, foreign, federal,
state, county or municipal government, or political subdivision thereof,
(b) any governmental or quasi-governmental agency, authority, board,
bureau, commission, department, instrumentality or public body, or (c)
any court or administrative tribunal.
"HAZARDOUS MATERIALS" means substances defined as hazardous
substances pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq.,
or as hazardous, toxic or pollutant pursuant to the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the
Hazardous Waste Control Law, California Health & Safety Code Section
25100, et seq., or in any other applicable Hazardous Materials Law, in
each case as such Laws are amended from time to time.
"HAZARDOUS MATERIALS LAWS" means all federal, state or local laws,
ordinances, rules or regulations governing the disposal of Hazardous
Materials applicable to any of the Real Property.
"INDEBTEDNESS" means, as to any Person (without duplication), (a)
indebtedness of such Person for borrowed money or for the deferred
purchase price of Property or services (excluding trade and other
accounts payable and deferred payments under employment agreements in
the ordinary course of business in accordance with customary trade
terms), INCLUDING any Contingent Guaranty for any such indebtedness, (b)
indebtedness of such Person of the nature described in clause (a) that
is non-recourse to the credit of such Person but is secured by assets of
such Person, to the extent of the lesser of the amount of such
indebtedness or the value of such assets, (c) Capital Lease Obligations
of such Person, (d) indebtedness of such Person arising under acceptance
facilities or under facilities for the discount of accounts receivable
of such Person, (e) any direct or contingent obligations of such Person
under letters of credit issued for the account of
-17-
<PAGE>
such Person, and (f) to the extent of the net defined credit committed
with respect thereto, any obligations of such Person under a Swap
Agreement, marked to market on a quarterly basis.
"INTANGIBLE ASSETS" means assets that are considered intangible
assets under Generally Accepted Accounting Principles, INCLUDING
customer lists, goodwill, computer software, copyrights, trade names,
trademarks and patents.
"INTEREST DIFFERENTIAL" means, with respect to any prepayment of a
Eurodollar Rate Loan on a day prior to the last day of the applicable
Eurodollar Period and with respect to any failure to borrow a Eurodollar
Rate Loan on the date or in the amount specified in any Request for
Loan, (a) the per annum interest rate payable pursuant to Section 3.1(c)
with respect to the Eurodollar Rate Loan MINUS (b) the Eurodollar Rate
on, or as near as practicable to the date of the prepayment or failure
to borrow for, a Eurodollar Rate Loan commencing on such date and ending
on the last day of the Eurodollar Period of the Eurodollar Rate Loan so
prepaid or which would have been borrowed on such date.
"INTEREST EXPENSE" means, as of the last day of any fiscal period,
the SUM OF (a) all interest, fees, charges and related expenses paid or
payable (without duplication) for that fiscal period to a lender in
connection with borrowed money or the deferred purchase price of assets
that are considered "interest expense" under Generally Accepted
Accounting Principles, PLUS (b) the portion of rent paid or payable
(without duplication) for that fiscal period under Capital Lease
Obligations that should be treated as interest in accordance with
Financial Accounting Standards Board Statement No. 13.
"INVESTMENT" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means
of a loan, advance creating a debt, capital contribution, guaranty or
other debt or equity participation or interest in any other Person,
INCLUDING any partnership and joint venture interests of such Person.
The amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the value of
such Investment.
"ISSUING LENDER" means, subject to Section 10.8, Bank of America,
when acting in its capacity as Issuing Lender under any of the Loan
Documents, or any successor Issuing Lender.
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<PAGE>
"LAWS" means, collectively, all international, foreign, federal,
state and local statutes, treaties, rules, regulations, ordinances,
codes and administrative or judicial precedents.
"LANDLORD" means D.A.T.T. Incorporated, a Michigan corporation, and
its successors and assigns.
"LEAD ARRANGER" means Banc of America Securities, L.L.C. The Lead
Arranger shall have no obligations under this Agreement or the other
Loan Documents.
"LEASE" means that certain Building Lease dated July 2, 1998 between
the Landlord and Marian Ilitch, not personally but solely on behalf of
an entity to be formed, as assigned to Borrower.
"LEASE INDEMNITY" means a Lease Indemnity executed by the Company on
the Closing Date, substantially in the form of Exhibit C, either as
originally executed or as it may from time to time be supplemented,
modified, amended, restated or extended.
"LETTER OF CREDIT" means any letter of credit issued by the Issuing
Lender pursuant to Section 2.4, either as originally issued or as the
same may from time to time be supplemented, modified, amended, renewed
or extended in accordance with the terms hereof.
"LETTER OF CREDIT FEE" means (a) as of each date of determination
when the Company Guaranty is in effect (including during any period of
reinstatement), the per annum rate set forth below (expressed in basis
points) opposite the Company Rating Level then in effect:
<TABLE>
<CAPTION>
COMPANY RATING LEVEL LETTER OF CREDIT FEE RATE
<S> <C>
I 87.50
II 100.00
III 112.50
IV 137.50
V 162.50;
</TABLE>
and (b) as of each date of determination when the Company Guaranty is
not in effect, the per annum rate set forth below (expressed in basis
points) opposite the Total Debt Ratio in effect as of the last day of
the Fiscal Quarter ending immediately prior to the first day of the then
current Pricing Period:
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<PAGE>
<TABLE>
<CAPTION>
TOTAL DEBT RATIO LETTER OF CREDIT FEE RATE
<S> <C>
Less than or equal to 1.00:1.00 112.50
Greater than 1.00:1.00 137.50
</TABLE>
"LICENSE REVOCATION" means the denial, revocation, failure to renew
or suspension of, or the appointment of a receiver, supervisor or
similar official with respect to, any casino, gambling or gaming license
issued or proposed to be issued by any Gaming Board covering any casino
or gaming facility of Borrower and its Restricted Subsidiaries.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, lien or charge
of any kind, whether voluntarily incurred or arising by operation of Law
or otherwise, affecting any Property, INCLUDING any agreement to grant
any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and/or the
filing of or agreement to give any financing statement (OTHER THAN a
precautionary financing statement with respect to a lease or other
agreement that is not in the nature of a security interest) under the
Uniform Commercial Code or comparable Law of any jurisdiction with
respect to any Property.
"LOAN" means the aggregate of the Advances made at any one time by
the Lenders pursuant to Article 2.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the
Company Guaranty, the Lease Indemnity, the Mortgages (and any amendments
thereto or new mortgages delivered pursuant to Section 5.12), the
Security Agreement, any Request for Loan, any Request for Letter of
Credit, any Compliance Certificate and any other instruments, documents
or agreements of any type or nature hereafter executed and delivered by
the Company, Borrower or any of its Subsidiaries to the Administrative
Agent or any other Creditor in any way relating to or in furtherance of
this Agreement, in each case either as originally executed or as the
same may from time to time be supplemented, modified, amended, restated,
extended or supplanted.
"MAINTENANCE CAPITAL EXPENDITURE" means a Capital Expenditure made
following the Opening Date for the maintenance, repair, restoration or
refurbishment of the
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<PAGE>
Temporary Project, but EXCLUDING any Capital Expenditure which adds to
or further improves the Temporary Project.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation U.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events
which (a) has or could reasonably be expected to have any material
adverse effect whatsoever upon the validity or enforceability of any
Loan Document, (b) is or could reasonably be expected to be material and
adverse to the condition (financial or otherwise), assets or business
operations of Borrower and its Restricted Subsidiaries, taken as a
whole, or (c) materially impairs or could reasonably be expected to
materially impair the ability of Borrower and its Restricted
Subsidiaries, taken as a whole, to perform the Obligations.
"MATERIAL DOCUMENTS" means the Lease and the Borrower's Operating
Agreement, as in effect on the Closing Date.
"MATURITY DATE" means the earliest to occur of (i) October 31,
2003, (ii) the date which is forty-two months after the Opening Date,
and (iii) the date upon which the Permanent Project is first open for
gaming customers.
"MONTHLY PAYMENT DATE" means the last day of each calendar month.
"MOODY'S" means Moody's Investor Service, Inc., its successors and
assigns.
"MORTGAGE" means each of the Mortgages executed by Borrower on the
Closing Date in favor of Administrative Agent concerning the Temporary
Project, substantially in the form of Exhibit D, either as originally
executed or as it may from time to time be supplemented, modified,
amended, restated or extended.
"MORTGAGEE WAIVER" means a Mortgagee Waiver executed on or prior to
the Closing Date in favor of the Administrative Agent by each mortgagee
with respect to the fee underlying the Lease, substantially in the form
of Exhibit E, either as originally executed or as it may from time to
time be supplemented, modified, amended, restated or extended.
"MULTIEMPLOYER PLAN" means any employee benefit plan of the type
described in Section 4001(a)(3) of ERISA.
"NEGATIVE PLEDGE" means a Contractual Obligation that contains a
covenant binding on Borrower or any of its Restricted Subsidiaries that
prohibits Liens on any of its
-21-
<PAGE>
or their Property, OTHER THAN (a) any such covenant contained in a
Contractual Obligation granting a Lien permitted under Section 6.8 which
affects only the Property that is the subject of such permitted Lien and
(b) any such covenant that does not apply to Liens securing the
Obligations.
"NET INCOME" means, with respect to any fiscal period, the
consolidated net income of Borrower and its Restricted Subsidiaries for
that period, determined in accordance with Generally Accepted Accounting
Principles, consistently applied.
"NOTE" means the promissory note made by Borrower to a Lender
evidencing the Advances under that Lender's Pro Rata Share,
substantially in the form of Exhibit F, either as originally executed or
as the same may from time to time be supplemented, modified, amended,
renewed, extended or supplanted.
"OBLIGATIONS" means all present and future obligations of every kind
or nature of Borrower or any Party at any time and from time to time
owed to the Creditors or any one or more of them, under any one or more
of the Loan Documents, whether due or to become due, matured or
unmatured, liquidated or unliquidated, or contingent or noncontingent,
INCLUDING obligations of performance as well as obligations of payment,
and INCLUDING interest that accrues after the commencement of any
proceeding under any Debtor Relief Law by or against the Company,
Borrower or any Restricted Subsidiary.
"OPENING DATE" means the first date upon which the Temporary Project
is open for business to gaming patrons.
"OPINIONS OF COUNSEL" means the favorable written legal opinions of
(a) Wolf, Block, Schorr and Solis-Cohen, LLP, (b) Jones Vargas, local
Nevada counsel to Borrower and the Company, and (c) Fraser, Trebilcock,
Davis & Foster P.C., local Michigan counsel to Borrower, together with
copies of all factual certificates and legal opinions upon which such
counsel has relied.
"OUTSTANDING OBLIGATIONS" means, as of each date of determination,
and giving effect to the making of any such credit accommodations
requested on that date, the SUM of (i) the aggregate principal amount of
the outstanding Loans, PLUS (ii) the Aggregate Effective Amount of all
Letters of Credit.
"PARTY" means any Person other than Creditors which now or hereafter
is a party to any of the Loan Documents.
-22-
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereof established under ERISA.
"PENSION PLAN" means any "employee pension benefit plan" (as such
term is defined in Section 3(2) of ERISA), OTHER THAN a Multiemployer
Plan, which is subject to Title IV of ERISA and is maintained by
Borrower or any of its Subsidiaries or to which Borrower or any of its
Subsidiaries contributes or has an obligation to contribute.
"PERMANENT PROJECT" means a permanent hotel and casino project the
majority of which is owned, directly or indirectly by the Company, the
Borrower or an Unrestricted Subsidiary, and located in the Detroit,
Michigan area on a site other than the site of the Temporary Project.
"PERMITTED ENCUMBRANCES" means:
(a) Inchoate Liens incident to construction or maintenance of
Real Property; or Liens incident to construction or maintenance of
Real Property now or hereafter filed of record for which adequate
reserves have been set aside (or deposits made pursuant to
applicable Law) and which are being contested in good faith by
appropriate proceedings and have not proceeded to judgment or which
are bonded over, PROVIDED that, by reason of nonpayment of the
obligations secured by such Liens, no such Real Property is subject
to a material risk of loss or forfeiture;
(b) Liens for taxes and assessments on and similar charges
with respect to Real Property which are not yet delinquent such
that interest or penalties have begun to accrue or any enforcement
action has been commenced with respect thereto; or Liens for taxes
and assessments on Real Property for which adequate reserves have
been set aside and are being contested in good faith by appropriate
proceedings and have not proceeded to judgment, PROVIDED that, by
reason of nonpayment of the obligations secured by such Liens, no
material Real Property is subject to a material risk of loss or
forfeiture;
(c) defects and irregularities in title to any Real Property
which in the aggregate do not materially impair the fair market
value or use of the Real Property for the purposes for which it is
or may reasonably be expected to be held;
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<PAGE>
(d) easements, exceptions, dedications, reservations, or other
agreements for the purpose of pipelines, conduits, cables, wire
communication lines, power lines and substations, streets, trails,
walkways, driveways, drainage, irrigation, water, and sewerage
purposes, dikes, canals, ditches, the removal of oil, gas, coal, or
other minerals, and other like purposes affecting Real Property,
facilities, or equipment which in the aggregate do not materially
burden or impair the fair market value or use of such Real Property
for the purposes for which it is or may reasonably be expected to
be held;
(e) easements, exceptions, reservations, or other agreements
for the purpose of facilitating the joint or common use of property
which in the aggregate do not materially burden or impair the fair
market value or use of such property for the purposes for which it
is or may reasonably be expected to be held;
(f) rights granted, reserved to or vested in any Governmental
Agency to control or regulate, or obligations or duties to any
Governmental Agency with respect to, the use of any Real Property;
(g) rights granted, reserved to or vested in any Governmental
Agency to control or regulate, or obligations or duties to any
Governmental Agency with respect to, any right, power, franchise,
grant, license, or permit;
(h) present or future zoning laws, building codes and
ordinances, zoning restrictions, or other laws and ordinances
restricting the occupancy, use, or enjoyment of Real Property;
(i) statutory Liens, other than those described in clauses (a)
or (b) above, arising in the ordinary course of business with
respect to obligations which are not delinquent or are being
contested in good faith, PROVIDED that, if delinquent, adequate
reserves have been set aside with respect thereto and, by reason of
nonpayment, no property is subject to a material risk of loss or
forfeiture;
(j) covenants, conditions, and restrictions affecting the use
of Real Property which in the aggregate do not materially impair
the fair market value or use of the Real Property for the purposes
for which it is or may reasonably be expected to be held;
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(k) rights of tenants under leases and rental agreements
covering Real Property entered into in the ordinary course of
business of the Person owning such Real Property;
(l) Liens consisting of pledges or deposits to secure
obligations under workers' compensation laws or similar
legislation, including Liens of judgments thereunder which are not
currently dischargeable;
(m) Liens consisting of pledges or deposits of property to
secure performance in connection with operating leases made in the
ordinary course of business to which Borrower or a Subsidiary of
Borrower is a party as lessee, PROVIDED the aggregate value of all
such pledges and deposits in connection with any such lease does
not at any time exceed 20% of the annual fixed rentals payable
under such lease;
(n) Liens consisting of deposits of property to secure bids
made with respect to, or performance of, contracts (OTHER THAN
contracts creating or evidencing an extension of credit to the
depositor) in the ordinary course of business;
(o) Liens consisting of any right of offset, or statutory
bankers' lien, on bank deposit accounts maintained in the ordinary
course of business so long as such bank deposit accounts are not
established or maintained for the purpose of providing such right
of offset or bankers' lien;
(p) Liens consisting of deposits of property to secure
statutory obligations of Borrower or a Subsidiary of Borrower in
the ordinary course of its business;
(q) Liens consisting of deposits of property to secure (or in
lieu of) surety, appeal or customs bonds in proceedings to which
Borrower or a Subsidiary of Borrower is a party in the ordinary
course of its business;
(r) Liens created by or resulting from any litigation or legal
proceeding involving Borrower or a Subsidiary of Borrower in the
ordinary course of its business which is currently being contested
in good faith by appropriate proceedings, PROVIDED that adequate
reserves have been set aside and no material property is subject to
a material risk of loss or forfeiture;
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(s) other non-consensual Liens incurred in the ordinary course
of business but not in connection with an extension of credit,
which do not in the aggregate, when taken together with all other
Liens, materially impair the value or use of the Property of
Borrower and its Subsidiaries, taken as a whole; and
(t) any matters disclosed on Schedule B to the policies of
title insurance delivered to the Administrative Agent pursuant to
Section 8.1 and matters disclosed to the Administrative Agent on
the preliminary title reports issued with respect to such policies
but not shown on such policies, including without limitation the
possible rights of certain heirs of deceased persons who were the
owners of portions of the real property underlying the proposed
parking garage for the temporary casino.
"PERMITTED RIGHT OF OTHERS" means a Right of Others consisting of
(i) an interest (other than a legal or equitable co-ownership interest,
an option or right to acquire a legal or equitable co-ownership interest
and any interest of a ground lessor under a ground lease), that does not
materially impair the value or use of Property for the purposes for
which it is or may reasonably be expected to be held, (ii) an option or
right to acquire a Lien that would be a Permitted Encumbrance, (iii) the
subordination of a lease or sublease in favor of a financing entity and
(iv) a license, or similar right, of or to Intangible Assets granted in
the ordinary course of business.
"PERSON" means any entity, whether an individual, trustee,
corporation, general partnership, limited partnership, joint stock
company, trust, estate, unincorporated organization, business
association, firm, joint venture, Governmental Agency, or otherwise.
"PLANS AND BUDGET" means the plans, specifications, construction
budget, construction plan and timetable prepared by or for Borrower, as
the same may be amended or supplemented from time to time, all of which
plans and specifications describe the construction of the Temporary
Project.
"PRE-OPENING EXPENSES" means, with respect to any fiscal period, the
amount of expenses (OTHER THAN Interest Expenses) classified as
"pre-opening expenses" on the applicable financial statements of
Borrower and its Restricted Subsidiaries for such period, prepared in
accordance with Generally Accepted Accounting Principles consistently
applied.
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"PRICING PERIOD" means the period beginning on the Closing Date and
ending on August 31, 1999, and each subsequent period of three calendar
months ending on the last day of each February, May, August and November.
"PROJECTIONS" means the financial projections contained in the
Confidential Offering Memorandum.
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"PRO RATA SHARE" means, with respect to each Lender, the percentage
of the Commitment held by that Lender. The Pro Rata Share of each
Lender as of the Closing Date is set forth opposite the name of that
Lender on Schedule 1.1.
"QUARTERLY PAYMENT DATE" means each March 31, June 30, September 30,
and December 31.
"QUALIFIED SWAP AGREEMENTS" means, as of each date of determination,
those Swap Agreements to which Borrower and its Restricted Subsidiaries
are party which have a term which is not greater than the related
Indebtedness of Borrower or such Subsidiary and as to which Borrower's
independent auditors have accorded hedge accounting treatment in
accordance with Generally Accepted Accounting Principles.
"REAL PROPERTY" means, as of any date of determination, all real
property then or theretofore owned, leased or occupied by Borrower or
any of its Restricted Subsidiaries.
"REDUCTION AMOUNT" means, subject to Section 2.5(b), (i) for the
first four Reduction Dates, an amount equal to $12,500,000, (ii) for the
fifth through and including the tenth Reduction Dates, an amount equal
to $15,000,000, and (iii) for the eleventh Reduction Date, an amount
equal to $10,000,000.
"REDUCTION DATE" means (a) the earlier of (i) June 30, 2001, and
(ii) the last day of the first Fiscal Quarter which ends one year or
more after the Opening Date, and (b) each Quarterly Payment Date
thereafter.
"REFERENCE RATE" means the rate of interest publicly announced from
time to time by Bank of America in San Francisco, California, as its
"reference rate" or the similar prime rate or reference rate announced
by any successor Administrative Agent. Bank of America's reference rate
is a rate set by Bank of America based upon
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various factors including Bank of America's costs and desired return,
general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above,
or below such announced rate. Any change in the Reference Rate
announced by Bank of America or any successor Administrative Agent shall
take effect at the opening of business on the day specified in the
public announcement of such change.
"REGULATION D" means Regulation D, as at any time amended, of the
Board of Governors of the Federal Reserve System, or any other
regulation in substance substituted therefor.
"REGULATIONS T, U AND X" means Regulations T, U and X, as at any
time amended, of the Board of Governors of the Federal Reserve System,
or any other regulations in substance substituted therefor.
"REQUEST FOR LETTER OF CREDIT" means a written request for a Letter
of Credit substantially in the form of Exhibit G, together with any
forms of application for letter of credit required by the Issuing
Lender, in each case signed by a Responsible Official of Borrower on
behalf of Borrower and properly completed to provide all information
required to be included therein.
"REQUEST FOR LOAN" means a written request for a Loan substantially
in the form of Exhibit H, signed by a Responsible Official of Borrower,
on behalf of Borrower, and properly completed to provide all information
required to be included therein.
"REQUIREMENT OF LAW" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any Law, or judgment, award,
decree, writ or determination of a Governmental Agency, in each case
applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"REQUISITE LENDERS" means (a) as of any date of determination if the
Commitment is then in effect, Lenders having in the aggregate 51% or
more of the Commitment then in effect and (b) as of any date of
determination if the Commitment has then been terminated, Lenders
holding 51% of the Outstanding Obligations.
"RESPONSIBLE OFFICIAL" means (a) when used with reference to a
Person other than an individual, any cor-
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porate officer of such Person, general partner of such Person, corporate
officer of a corporate general partner of such Person, or corporate
officer of a corporate general partner of a partnership that is a
general partner of such Person, or any other responsible official
thereof duly acting on behalf thereof, and (b) when used with reference
to a Person who is an individual, such Person. Any document or
certificate hereunder that is signed or executed by a Responsible
Official of another Person shall be conclusively presumed to have been
authorized by all necessary corporate, partnership and/or other action
on the part of such other Person.
"RESTRICTED PAYMENTS" means, for any Fiscal Quarter and without
duplication, the sum of all (a) Capital Expenditures made by Borrower
and its Restricted Subsidiaries with respect to the Permanent Project,
(b) Distributions made by Borrower and its Restricted Subsidiaries
(other than Distributions by Restricted Subsidiaries made to Borrower),
and (c) Investments made in any Unrestricted Subsidiaries, in each case
during that Fiscal Quarter and net of the amount of (i) any Investments
made in Borrower by its members in cash during that Fiscal Quarter,
whether in the form of any equity Investment or Company Subordinated
Debt, and (ii) any Indebtedness incurred by Borrower and its
Subsidiaries to finance construction of the Permanent Project which is
then permitted by Section 6.9.
"RESTRICTED SUBSIDIARY" means each Subsidiary of Borrower not
properly designated as an Unrestricted Subsidiary promptly upon its
acquisition or formation by Borrower.
"RIGHT OF OTHERS" means, as to any Property in which a Person has an
interest, any legal or equitable ownership right, title or other
interest (other than a Lien) held by any other Person in that Property,
and any option or right held by any other Person to acquire any such
right, title or other interest in that Property, INCLUDING any option or
right to acquire a Lien; PROVIDED, however, that (a) any covenant
restricting the use or disposition of Property of such Person contained
in any Contractual Obligation of such Person, (b) any provision
contained in a contract creating a right of payment or performance in
favor of a Person that conditions, limits, restricts, diminishes,
transfers or terminates such right, and (c) any residual rights held by
a lessor or vendor of Property, shall not be deemed to constitute a
Right of Others.
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"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., its successors and assigns.
"SALE AND LEASEBACK" means, with respect to any Person, the sale of
Property owned by that Person (the "Seller") to another Person (the
"Buyer"), together with the substantially concurrent leasing of such
Property by the Buyer to the Seller.
"SALE AND LEASEBACK OBLIGATION" means, with respect to any Sale and
Leaseback and as of any date of determination, the present value of the
aggregate monetary obligations of the lessee under the lease of the
Property which is the subject of such Sale and Leaseback (discounted at
the interest rate implicit in such lease, compounded semiannually) for
the then remaining term of such lease (treating all extension options
exercisable by the lessor as having been exercised, but deeming the
lease terminated as of the earliest date upon which the lessee has the
option to do so); PROVIDED that such monetary obligations shall exclude
amounts payable in respect of maintenance, repairs, insurance, taxes,
assessments, utilities and similar charges.
"SECURITY AGREEMENT" means the Security Agreement executed by
Borrower as of the Closing Date, as the same may from time to time be
supplemented, modified, amended, renewed, extended, supplanted or
replaced.
"SENIOR MANAGING AGENT" means Societe Generale. The capacity of the
Senior Managing Agent is titular in nature, and the Senior Managing
Agent shall have no rights and duties under the Loan Documents over and
above those of the other Lenders by reason of this title.
"SENIOR OFFICER" means Borrower's or the Company's, as applicable,
(a) chief executive officer, (b) president, (c) chief financial officer,
(d) treasurer, (e) general manager, and (f) controller.
"SPECIAL EURODOLLAR CIRCUMSTANCE" means the application or adoption
after the date hereof of any Law or interpretation, or any change
therein or thereof, or any change in the interpretation or
administration thereof by any Governmental Agency, central bank or
comparable authority charged with the interpretation or administration
thereof, or compliance by any Lender or its Eurodollar Lending Office
with any request or directive (whether or not having the force of Law)
of any such Governmental Agency, central bank or comparable authority,
or the existence or occurrence of circumstances affecting
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the Designated Eurodollar Market generally that are beyond the
reasonable control of the Lenders.
"STANDBY LETTER OF CREDIT" means each Letter of Credit OTHER THAN
any Letter of Credit which is a commercial Letter of Credit. The
determination by the Issuing Lender of which Letters of Credit are
Standby Letters of Credit shall be conclusive in the absence of manifest
error.
"SUBORDINATED DEBT" means any Indebtedness of Borrower which is
subordinated in right of payment to the Obligations pursuant to
subordination provisions which are acceptable to the Requisite Lenders
in the exercise of their sole discretion, and includes any Company
Subordinated Debt.
"SUBORDINATION AGREEMENT" means a Subordination Agreement hereafter
executed by the Company with respect to Company Subordinated Debt,
substantially in the form of Exhibit I, and in any event in a form which
is acceptable to the Administrative Agent, either as originally executed
or as it may from time to time be supplemented, modified, amended,
restated or extended.
"SUBSIDIARY" means, as of any date of determination and with respect
to any Person, any corporation, partnership or limited liability company
(whether or not, in the case of any of the foregoing, characterized as
such or as a "joint venture"), whether now existing or hereafter
organized or acquired: (a) in the case of a corporation, of which a
majority of the securities having ordinary voting power for the election
of directors or other governing body (other than securities having such
power only by reason of the happening of a contingency) are at the time
beneficially owned by such Person and/or one or more Subsidiaries of
such Person, or (b) in the case of a partnership or a limited liability
company, of which a majority of the partnership or other ownership
interests are at the time beneficially owned by such Person and/or one
or more of its Subsidiaries.
"SWAP AGREEMENT" means a written agreement between Borrower and one
or more financial institutions providing for the "swap" of interest rate
payment obligations with respect to any Indebtedness.
"TEMPORARY PROJECT" means the proposed design, development,
construction and operation by Borrower and its Restricted Subsidiaries
of a temporary casino on the property described in the Mortgages,
together with all facilities incidental thereto.
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"TOTAL DEBT" means, as of any date of determination, the SUM
(without duplication) of (a) the outstanding principal Indebtedness of
Borrower and its Restricted Subsidiaries for borrowed money (INCLUDING
debt securities issued by Borrower or any of its Restricted
Subsidiaries) on that date, other than any Qualified Swap Agreements,
PLUS (b) the aggregate amount of all Capital Lease Obligations of
Borrower and its Restricted Subsidiaries on that date, PLUS (c) all
obligations in respect of letters of credit or other similar instruments
for which Borrower or any of its Restricted Subsidiaries are account
parties or are otherwise obligated, (other than trade letters of credit
and letters of credit in support of gaming tax and other regulatory
obligations), PLUS (d) the aggregate amount of all Contingent Guarantees
and other similar contingent obligations of Borrower and its Restricted
Subsidiaries with respect to any of the foregoing to the extent
classified as a liability on their respective balance sheets under
Generally Accepted Accounting Principles, and PLUS (e) any obligations
of Borrower or any of its Restricted Subsidiaries to the extent that the
same are secured by a Lien on any of the assets of Borrower or its
Restricted Subsidiaries.
"TOTAL DEBT RATIO" means, as of the last day of each Fiscal Quarter,
the RATIO OF (a) Average Total Debt on that date, to (b) EBITDA for the
four Fiscal Quarter period ending on that date.
"TO THE BEST KNOWLEDGE OF" means, when modifying a representation,
warranty or other statement of any Person, that the fact or situation
described therein is known by the Person (or, in the case of a Person
other than a natural Person, known by a Responsible Official of that
Person) making the representation, warranty or other statement, or with
the exercise of reasonable due diligence under the circumstances (in
accordance with the standard of what a reasonable Person in similar
circumstances would have done) should have been known by the Person (or,
in the case of a Person other than a natural Person, should have been
known by a Responsible Official of that Person).
"TYPE", when used with respect to any Loan or Advance, means the
designation of whether such Loan or Advance is a Base Rate Loan or
Advance, or a Eurodollar Rate Loan or Advance.
"UNRELATED PERSON" means any Person OTHER THAN (a) a Subsidiary of
Borrower or (b) an employee stock ownership plan or other employee
benefit plan covering the employees of Borrower and its Subsidiaries.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of Borrower engaged
primarily in the business of the design,
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ownership, construction, and operation of the Permanent Project and not
engaged in such businesses with respect to the Temporary Project,
PROVIDED that each Unrestricted Subsidiary shall be designated as such
by Borrower in a writing delivered to the Administrative Agent prior to
its initial capitalization.
"YEAR 2000 ISSUE" means failure of computer software, hardware and
firmware systems, and equipment containing embedded computer chips, to
properly receive, transmit, process, manipulate, store, retrieve,
re-transmit or in any other way utilize data and information due to the
occurrence of the year 2000 or the inclusion of dates on or after
January 1, 2000.
1.2 USE OF DEFINED TERMS. Any defined term used in the plural
shall refer to all members of the relevant class, and any defined term used
in the singular shall refer to any one or more of the members of the relevant
class.
1.3 ACCOUNTING TERMS. All accounting terms not specifically
defined in this Agreement shall be construed in conformity with, and all
financial data required to be submitted by this Agreement shall be prepared
in conformity with, Generally Accepted Accounting Principles applied on a
consistent basis, EXCEPT as otherwise specifically prescribed herein. In the
event that Generally Accepted Accounting Principles change during the term of
this Agreement such that the covenants contained in Sections 6.12 and 6.13
would then be calculated in a different manner or with different components,
(a) Borrower and the Lenders agree to amend this Agreement in such respects
as are necessary to conform those covenants as criteria for evaluating
Borrower's financial condition to substantially the same criteria as were
effective prior to such change in Generally Accepted Accounting Principles
and (b) Borrower shall be deemed to be in compliance with the covenants
contained in the aforesaid Sections during the 90 day period following any
such change in Generally Accepted Accounting Principles if and to the extent
that Borrower would have been in compliance therewith under Generally
Accepted Accounting Principles as in effect immediately prior to such change.
1.4 ROUNDING. Any financial ratios required to be maintained by
Borrower pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one
place more than the number of places by which such ratio is expressed in this
Agreement and rounding the result up or down to the nearest number (with a
round-up if there is no nearest number) to the number of places by which such
ratio is expressed in this Agreement.
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1.5 EXHIBITS AND SCHEDULES. All Exhibits and Schedules to this
Agreement, either as originally existing or as the same may from time to time
be supplemented, modified or amended, are incorporated herein by this
reference. A matter disclosed on any Schedule shall be deemed disclosed on
all Schedules.
1.6 REFERENCES TO "BORROWER AND ITS SUBSIDIARIES". Any reference
herein to "Borrower and its Subsidiaries" or the like shall refer solely to
Borrower during such times, if any, as Borrower shall have no Subsidiaries.
1.7 MISCELLANEOUS TERMS. The term "or" is disjunctive; the term
"and" is conjunctive. The term "shall" is mandatory; the term "may" is
permissive. Masculine terms also apply to females; feminine terms also apply
to males. The term "including" is by way of example and not limitation.
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Article 2
LOANS
2.1 LOANS-GENERAL.
(a) Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time from the Closing Date through
and including the Maturity Date, each Lender shall, pro rata according to
that Lender's Pro Rata Share of the then applicable Commitment, make Advances
in Dollars to Borrower in such amounts as Borrower may request PROVIDED that,
giving effect to such Advances, the Outstanding Obligations shall not exceed
the Commitment. Subject to the limitations set forth herein, Borrower may
borrow, repay and reborrow under the Commitment without premium or penalty.
(b) Subject to the next sentence, each Loan shall be made pursuant
to a Request for Loan which shall specify the requested (i) date of such
Loan, (ii) type of Loan, (iii) amount of such Loan, and (iv) in the case of a
Eurodollar Rate Loan, the Eurodollar Period for such Loan. Unless the
Administrative Agent has notified, in its sole and absolute discretion,
Borrower to the contrary, a Loan may be requested by telephone by a
Responsible Official of Borrower, in which case Borrower shall confirm such
request by promptly delivering a Request for Loan in person or by telecopier
conforming to the preceding sentence to the Administrative Agent. The
Administrative Agent shall incur no liability whatsoever hereunder in acting
upon any telephonic request for loan purportedly made by a Responsible
Official of Borrower, which hereby agrees to indemnify the Administrative
Agent from any loss, cost, expense or liability as a result of so acting.
(c) Promptly following receipt of a Request for Loan, the
Administrative Agent shall notify each Lender by telephone or telecopier (and
if by telephone, promptly confirmed by telecopier) of the date and type of
the Loan, the applicable Eurodollar Period, and that Lender's Pro Rata Share
of the Loan. Not later than 11:00 a.m., California local time, on the date
specified for any Loan (which must be a Business Day), each Lender shall make
its Pro Rata Share of the Loan in immediately available funds available to
the Administrative Agent at the Administrative Agent's Office. Upon
satisfaction or waiver of the applicable conditions set forth in Article 8,
all Advances shall be credited on that date in immediately available funds to
the Designated Deposit Account.
(d) Unless the Requisite Lenders otherwise consent, each Loan
shall be an integral multiple of $500,000 and shall be not less than
$1,000,000.
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(e) The Advances made by each Lender shall be evidenced by that
Lender's Note.
(f) A Request for Loan shall be irrevocable upon the
Administrative Agent's first notification thereof.
(g) If no Request for Loan (or telephonic request for loan
referred to in the second sentence of Section 2.1(b), if applicable) has been
made within the requisite notice periods set forth in Sections 2.2 or 2.3 in
connection with a Loan which, if made and giving effect to the application of
the proceeds thereof, would not increase the outstanding principal
Indebtedness evidenced by the Notes, then Borrower shall be deemed to have
requested, as of the date upon which the related then outstanding Loan is due
pursuant to Section 3.1(e)(i), a Base Rate Loan in an amount equal to the
amount necessary to cause the outstanding principal Indebtedness evidenced by
the Notes, to remain the same and, subject to Section 8.3, the Lenders shall
make the Advances necessary to make such Loan notwithstanding Sections
2.1(b), 2.2 and 2.3.
(h) If a Loan is to be made on the same date that another Loan is
due and payable, Borrower or the Lenders, as the case may be, shall make
available to the Administrative Agent the net amount of funds giving effect
to both such Loans and the effect for purposes of this Agreement shall be the
same as if separate transfers of funds had been made with respect to each
such Loan.
2.2 BASE RATE LOANS. Each request by Borrower for a Base Rate
Loan shall be made pursuant to a Request for Loan (or telephonic or other
request for loan referred to in the second sentence of Section 2.1(b), if
applicable) received by the Administrative Agent, at the Administrative
Agent's Office, not later than 9:00 a.m. California local time, on the date
which is one Business Day prior to the date (which must be a Business Day) of
the requested Base Rate Loan. All Loans shall constitute Base Rate Loans
unless properly designated as a Eurodollar Rate Loan pursuant to Section 2.3.
2.3 EURODOLLAR RATE LOANS.
(a) Each request by Borrower for a Eurodollar Rate Loan shall be
made pursuant to a Request for Loan (or telephonic or other request for loan
referred to in the second sentence of Section 2.1(b), if applicable) received
by the Administrative Agent, at the Administrative Agent's Office, not later
than 9:00 a.m., California local time, at least three Eurodollar Business
Days before the first day of the applicable Eurodollar Period.
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(b) On the date which is two Eurodollar Business Days before the
first day of the applicable Eurodollar Period, the Administrative Agent shall
confirm its determination of the applicable Eurodollar Rate (which
determination shall be conclusive in the absence of manifest error) and
promptly shall give notice of the same to Borrower and the Lenders by
telephone or telecopier (and if by telephone, promptly confirmed by
telecopier).
(c) Unless the Administrative Agent and the Requisite Lenders
otherwise consent, no more than ten Eurodollar Rate Loans shall be
outstanding at any one time.
(d) No Eurodollar Rate Loan may be requested during the existence
of a Default or Event of Default.
(e) Nothing contained herein shall require any Lender to fund any
Eurodollar Rate Advance in the Designated Eurodollar Market.
2.4 LETTERS OF CREDIT.
(a) Subject to the terms and conditions hereof, at any time and
from time to time from the Closing Date through the day prior to the Maturity
Date, the Issuing Lender shall issue such Letters of Credit under the
Commitment as Borrower may request by a Request for Letter of Credit;
PROVIDED that giving effect to all such Letters of Credit, (i) the
Outstanding Obligations shall not exceed the Commitment, and (ii) the
Aggregate Effective Amount under all outstanding Letters of Credit shall not
exceed $10,000,000. Each Letter of Credit shall be in a form acceptable to
the Issuing Lender. Unless all the Lenders otherwise consent in a writing
delivered to the Administrative Agent, no Letter of Credit shall have a term
which exceeds one year or which extends beyond the Maturity Date.
(b) Each Request for Letter of Credit shall be submitted to the
Issuing Lender, with a copy to the Administrative Agent, at least five
Business Days prior to the date upon which the related Letter of Credit is
proposed to be issued. The Administrative Agent shall promptly notify the
Issuing Lender whether such Request for Letter of Credit, and the issuance of
a Letter of Credit pursuant thereto, conforms to the requirements of this
Agreement. Upon issuance of a Letter of Credit, the Issuing Lender shall
promptly notify the Administrative Agent, and the Administrative Agent shall
promptly notify the Lenders, of the amount and terms thereof.
(c) Upon the issuance of a Letter of Credit, each Lender shall be
deemed to have purchased a pro rata participation in such Letter of Credit
from the Issuing Lender in
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an amount equal to that Lender's Pro Rata Share. Without limiting the scope
and nature of each Lender's participation in any Letter of Credit, to the
extent that the Issuing Lender has not been reimbursed by Borrower for any
payment required to be made by the Issuing Lender under any Letter of Credit,
each Lender shall, pro rata according to its Pro Rata Share, reimburse the
Issuing Lender promptly upon demand for the amount of such payment. The
obligation of each Lender to so reimburse the Issuing Lender shall be
absolute and unconditional and shall not be affected by the occurrence of
an Event of Default or any other occurrence or event. Any such reimbursement
shall not relieve or otherwise impair the obligation of Borrower to reimburse
the Issuing Lender for the amount of any payment made by the Issuing Lender
under any Letter of Credit together with interest as hereinafter provided.
(d) Borrower agrees to pay to the Issuing Lender an amount equal
to any payment made by the Issuing Lender with respect to each Letter of
Credit within one (1) Business Day after demand made by the Issuing Lender
therefor (which demand the Issuing Lender shall make promptly and in any
event shall make upon the request of the Requisite Lenders), together with
interest on such amount from the date of any payment made by the Issuing
Lender at the rate applicable to Base Rate Loans for three Business Days and
thereafter at the Default Rate. The principal amount of any such payment
shall be used to reimburse the Issuing Lender for the payment made by it
under the Letter of Credit and, to the extent that the Lenders have not
reimbursed the Issuing Lender pursuant to Section 2.4(c), the interest amount
of any such payment shall be for the account of the Issuing Lender. Each
Lender that has reimbursed the Issuing Lender pursuant to Section 2.4(c) for
its Pro Rata Share of any payment made by the Issuing Lender under a Letter
of Credit shall thereupon acquire a pro rata participation, to the extent of
such reimbursement, in the claim of the Issuing Lender against Borrower for
reimbursement of principal and interest under this Section 2.4(d) and shall
share, in accordance with that pro rata participation, in any principal
payment made by Borrower with respect to such claim and in any interest
payment made by Borrower (but only with respect to periods subsequent to the
date such Lender reimbursed the Issuing Lender) with respect to such claim.
The Issuing Lender shall promptly make available to the Administrative Agent,
which will thereupon remit to the appropriate Lenders, in immediately
available funds, any amounts due to the Lenders under this Section.
(e) Borrower may, pursuant to a Request for Loan, request that
Advances be made pursuant to Section 2.1(a) to provide funds for the payment
required by Section 2.4(d) and, for this purpose, the conditions precedent
set forth in
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Article 8 shall not apply. The proceeds of such Advances shall be paid
directly to the Issuing Lender to reimburse it for the payment made by it
under the Letter of Credit.
(f) If Borrower fails to make the payment required by Section
2.4(d) within the time period therein set forth, in lieu of the reimbursement
to the Issuing Lender under Section 2.4(c) the Issuing Lender may (but is not
required to), without notice to or the consent of Borrower, cause Advances to
be made by the Lenders under the Commitment in an aggregate amount equal to
the amount paid by the Issuing Lender with respect to that Letter of Credit
and, for this purpose, the conditions precedent set forth in Article 8 shall
not apply. The proceeds of such Advances shall be paid directly to the
Issuing Lender to reimburse it for the payment made by it under the Letter of
Credit.
(g) The issuance of any supplement, modification, amendment,
renewal, or extension to or of any Letter of Credit shall be treated in all
respects the same as the issuance of a new Letter of Credit.
(h) The obligation of Borrower to pay to the Issuing Lender the
amount of any payment made by the Issuing Lender under any Letter of Credit
shall be absolute, unconditional, and irrevocable. Without limiting the
foregoing, Borrower's obligations shall not be affected by any of the
following circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, this Agreement, or any other agreement or instrument relating
thereto;
(ii) any amendment or waiver of or any consent to departure
from the Letter of Credit, this Agreement, or any other agreement or
instrument relating thereto;
(iii) the existence of any claim, setoff, defense, or other
rights which Borrower may have at any time against the Issuing Lender or
any other Creditor, any beneficiary of the Letter of Credit (or any
persons or entities for whom any such beneficiary may be acting) or any
other Person, whether in connection with the Letter of Credit, this
Agreement, or any other agreement or instrument relating thereto, or any
unrelated transactions;
(iv) any demand, statement, or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid, or
insufficient in any
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respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
(v) payment by the Issuing Lender under the Letter of
Credit against presentation of a draft or any accompanying document
which does not strictly comply with the terms of the Letter of Credit;
(vi) the existence, character, quality, quantity, condition,
packing, value or delivery of any Property purported to be represented
by documents presented in connection with any Letter of Credit or any
difference between any such Property and the character, quality,
quantity, condition, or value of such Property as described in such
documents;
(vii) the time, place, manner, order or contents of shipments
or deliveries of Property as described in documents presented in
connection with any Letter of Credit or the existence, nature and extent
of any insurance relative thereto;
(viii) the solvency or financial responsibility of any party
issuing any documents in connection with a Letter of Credit;
(ix) any failure or delay in notice of shipments or arrival
of any Property;
(x) any error in the transmission of any message relating
to a Letter of Credit not caused by the Issuing Lender, or any
delay or interruption in any such message;
(xi) any error, neglect or default of any correspondent of
the Issuing Lender in connection with a Letter of Credit;
(xii) any consequence arising from acts of God, war,
insurrection, civil unrest, disturbances, labor disputes, emergency
conditions or other causes beyond the control of the Issuing Lender;
(xiii) so long as the Issuing Lender in good faith determines
that the document appears to comply with the terms of the Letter of
Credit (and no payment is made by the Issuing Lender with respect to
presentations made after the expiration date of the Letter of Credit or
in amounts greater than the amount thereof), the form, accuracy,
genuineness or legal effect of any contract or document referred to in
any document submitted to the Issuing Lender in connection with a Letter
of Credit;
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(xiv) so long as the Issuing Lender in good faith determines
that the document appears to comply with the terms of the Letter of
Credit, the form, accuracy, genuineness or legal effect of any contract
or document referred to in any document submitted to the Issuing Lender
in connection with a Letter of Credit; and
(xv) where the Issuing Lender has acted in good faith and
observed general banking usage, any other circumstances whatsoever.
(i) The Issuing Lender shall be entitled to the protection accorded
to the Administrative Agent pursuant to Section 10.6, MUTATIS MUTANDIS.
2.5 VOLUNTARY REDUCTION OF COMMITMENT.
(a) Borrower shall have the right, at any time and from time to
time, without penalty or charge, upon at least five Business Days prior
written notice to the Administrative Agent, voluntarily to reduce or to
terminate, permanently and irrevocably, in aggregate principal amounts in an
integral multiple of $500,000 but not less than $1,000,000, all or a portion
of the then undisbursed portion of the Commitment, PROVIDED that any such
reduction or termination shall be accompanied by (i) payment of all accrued
and unpaid commitment fees with respect to the portion of the Commitment
being reduced or terminated, and (ii) in the event that a prepayment results
from any such reduction or termination, any amounts payable pursuant to
Section 3.1(f)(iv) as a result of such prepayment. The Administrative Agent
shall promptly notify the Lenders of any reduction of the Commitment under
this Section.
(b) Any voluntary reduction of the Commitment under this Section
shall be applied to reduce the Reduction Amount on such Reduction Dates as
may be specified by Borrower or, if no such specification is made at the time
of such voluntary reduction, to reduce the Reduction Amount for the most
remote Reduction Date (to the extent of such reduction) and thereafter to
earlier Reduction Dates (to the extent not previously applied) in the inverse
order of their occurrence.
2.6 SCHEDULED REDUCTIONS OF COMMITMENT. Subject to Section 2.5,
on each Reduction Date, the Commitment shall automatically be permanently
reduced by the then applicable Reduction Amount.
2.7 OPTIONAL TERMINATION OF COMMITMENT. Following the occurrence
of a Change in Control during any period in
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which the Company Guaranty is in effect (including during any period of
reinstatement), the Requisite Lenders may in their sole and absolute
discretion elect, during the sixty day period immediately subsequent to the
LATER OF (a) such occurrence and (b) the EARLIER of (i) receipt of Borrower's
written notice to the Administrative Agent of such occurrence and (ii) if no
such notice has been received by the Administrative Agent, the date upon
which the Administrative Agent and the Lenders have actual knowledge thereof,
to terminate the Commitment. In any such case the Commitment shall be
terminated effective on the date which is sixty days subsequent to the date
of written notice from the Administrative Agent to Borrower thereof, and (i)
to the extent that there is then any Indebtedness evidenced by the Notes, the
same and all other amounts payable under the Loan Documents shall be
immediately due and payable, and (ii) to the extent that any Letters of
Credit are then outstanding, Borrower shall provide cash collateral for the
same.
2.8 MANDATORY TERMINATION OF COMMITMENT. The Commitment shall
automatically terminate upon the occurrence of a Disposition consisting of
all or substantially all of the assets of Borrower, and (i) to the extent
that there is then any Indebtedness evidenced by the Notes, the same and all
other amounts payable under the Loan Documents shall be immediately due and
payable, and (ii) to the extent that any Letters of Credit are then
outstanding, Borrower shall provide cash collateral for the same.
2.9 ADMINISTRATIVE AGENT'S RIGHT TO ASSUME FUNDS AVAILABLE FOR
ADVANCES. Unless the Administrative Agent shall have been notified by any
Lender no later than the Business Day prior to the funding by the
Administrative Agent of any Loan that such Lender does not intend to make
available to the Administrative Agent such Lender's portion of the total
amount of such Loan, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on the date of the
Loan and the Administrative Agent may, in reliance upon such assumption, make
available to Borrower a corresponding amount. If the Administrative Agent
has made funds available to Borrower based on such assumption and such
corresponding amount is not in fact made available to the Administrative
Agent by such Lender, the Administrative Agent shall be entitled to recover
such corresponding amount on demand from such Lender. If such Lender does
not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent promptly shall notify Borrower and
Borrower shall pay such corresponding amount to the Administrative Agent.
The Administrative Agent also shall be entitled to recover from such Lender
interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Administrative
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Agent to Borrower to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to the daily Federal Funds
Rate. Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its share of the Commitment or to prejudice any rights
which the Administrative Agent or Borrower may have against any Lender as a
result of any default by such Lender hereunder.
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Article 3
PAYMENTS AND FEES
3.1 PRINCIPAL AND INTEREST.
(a) Interest shall be payable on the outstanding daily unpaid
principal amount of each Advance from the date thereof until payment in full
is made and shall accrue and be payable at the rates set forth or provided
for herein before and after default, before and after maturity, before and
after judgment, and before and after the commencement of any proceeding under
any Debtor Relief Law, with interest on overdue interest to bear interest at
the Default Rate to the fullest extent permitted by applicable Laws.
(b) Interest accrued on each Base Rate Loan on the last Business
Day of each calendar month, and interest accrued as of the date of any
termination of the Commitments, shall be due and payable on that day. EXCEPT as
otherwise provided in Section 3.9, the unpaid principal amount of any Base Rate
Loan shall bear interest at a fluctuating rate per annum equal to the Base Rate
PLUS the Base Rate Margin. Each change in the interest rate under this
Section 3.1(b) due to a change in the Base Rate shall take effect simultaneously
with the corresponding change in the Base Rate.
(c) Interest accrued on each Eurodollar Rate Loan on the last
Business Day of each calendar month, and on the date of any prepayment thereof
pursuant to Section 3.1(f), shall be due and payable on that day. EXCEPT as
otherwise provided in Sections 3.1(d) and 3.9, the unpaid principal amount of
any Eurodollar Rate Loan shall bear interest at a rate per annum equal to the
Eurodollar Rate for that Eurodollar Rate Loan PLUS the Eurodollar Margin.
(d) During the existence of a Default or Event of Default, the
Requisite Lenders may determine that any or all then outstanding Eurodollar Rate
Loans shall be converted to Base Rate Loans. Such conversion shall be effective
upon notice to Borrower from the Requisite Lenders (or from the Administrative
Agent on behalf of the Requisite Lenders) and shall continue so long as such
Default or Event of Default continues to exist.
(e) If not sooner paid, the principal Indebtedness evidenced by the
Notes shall be payable as follows:
(i) the principal amount of each Eurodollar Rate Loan shall be
payable on the last day of the Eurodollar Period for such Loan;
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(ii) the amount, if any, by which the Outstanding Obligations
at any time exceed the Commitment shall be payable immediately, and shall
be applied to the Notes; and
(iii) the principal Indebtedness evidenced by the Notes shall
in any event be payable on the Maturity Date.
(f) The Notes may, at any time and from time to time, voluntarily
be paid or prepaid in whole or in part without premium or penalty, EXCEPT that
with respect to any voluntary prepayment under this Section 3.1(f), (i) any
partial prepayment shall be in an integral multiple of $500,000 but not less
than $1,000,000, (ii) the Administrative Agent shall have received written
notice of any prepayment by 9:00 a.m., California local time one Business Day
before the date of prepayment in the case of a Base Rate Loan, and three
Business Days, in the case of a Eurodollar Rate Loan, before the date of
prepayment, which notice shall identify the date and amount of the prepayment
and the Loan(s) being prepaid, (iii) each prepayment of principal shall be
accompanied by payment of interest accrued to the date of payment on the amount
of principal paid and (iv) any payment or prepayment of all or any part of any
Eurodollar Rate Loan on a day other than the last day of the applicable
Eurodollar Period shall be subject to Section 3.8(d).
3.2 ARRANGEMENT FEE. On the Closing Date, Borrower shall pay to the
Administrative Agent, for the sole account of the Lead Arranger, an arrangement
fee in the amount heretofore agreed upon by letter agreement between Borrower
and the Lead Arranger. Such arrangement fee is for the services of the Lead
Arranger in arranging the credit facilities under this Agreement and is fully
earned when paid. The arrangement fee is earned as of the date hereof and is
nonrefundable.
3.3 UPFRONT FEES. On the Closing Date, Borrower shall pay to the
Administrative Agent, for the respective accounts of the Lenders, upfront fees
in the respective amounts set forth in the Confidential Offering Memorandum.
Such participation/extension fees are for the credit facility committed by each
Lender under this Agreement and are fully earned when paid. The
participation/extension fees paid to each Lender are solely for its own account
and are nonrefundable.
3.4 COMMITMENT FEES. From the Closing Date, Borrower shall pay to the
Administrative Agent, for the respective accounts of the Lenders, pro rata
according to their Pro Rata Share, a commitment fee equal to (a) the Commitment
Fee Rate per annum TIMES (b) the amount by which the Commitment exceeds the SUM
of the average daily outstanding principal Indebtedness
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evidenced by the Notes PLUS the average daily Aggregate Effective Amount of
all Standby Letters of Credit, in each case for the period from the Closing
Date or the most recent Quarterly Payment Date. Commitment fees shall be
payable quarterly in arrears on each Quarterly Payment Date, on the date upon
which all or any portion of the Commitment is terminated pursuant to Sections
2.7 or 2.8 (with respect to the amount so terminated) and on the Maturity
Date.
3.5 LETTER OF CREDIT FEES. Concurrently with the issuance of each Letter
of Credit, Borrower shall pay a letter of credit issuance fee to the Issuing
Lender, for the sole account of the Issuing Lender, in an amount set forth in a
letter agreement between Borrower and the Issuing Lender. Each letter of credit
issuance fee is nonrefundable. On each Quarterly Payment Date and on the
Maturity Date, Borrower shall also pay to the Administrative Agent in arrears,
for the ratable account of the Lenders in accordance with their Pro Rata Share,
standby letter of credit fees in an amount equal to the Letter of Credit Fee per
annum TIMES the average daily Aggregate Effective Amount of all Standby Letters
of Credit for the period from the Closing Date or the most recent Quarterly
Payment Date. All standby letter of credit fees shall also be non-refundable.
3.6 AGENCY FEES. Borrower shall pay to the Administrative Agent an
agency fee in such amounts and at such times as heretofore agreed upon by letter
agreement between Borrower and the Administrative Agent. The agency fee is for
the services to be performed by the Administrative Agent in acting as
Administrative Agent and is fully earned on the date paid. The agency fee paid
to the Administrative Agent is solely for its own account and is nonrefundable.
3.7 INCREASED COMMITMENT COSTS. If any Lender shall determine that the
introduction after the Closing Date of any applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein or any change in the
interpretation or administration thereof by any central bank or other
Governmental Agency charged with the interpretation or administration thereof,
or compliance by such Lender (or its Eurodollar Lending Office) or any
corporation controlling the Lender, with any request, guidelines or directive
regarding capital adequacy (whether or not having the force of law) of any such
central bank or other authority, affects or would affect the amount of capital
required or expected to be maintained by such Lender or any corporation
controlling such Lender and (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and such Lender's
desired return on capital) determines that the amount of such capital is
increased, or the rate of return on capital is reduced, as a consequence of its
obligations under
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this Agreement, then, within five Business Days after demand
of such Lender, Borrower shall pay to such Lender, from time to time as
specified by such Lender, additional amounts sufficient to compensate such
Lender in light of such circumstances, to the extent reasonably allocable to
such obligations under this Agreement. Each Lender shall endeavor to assure
that each demand made of Borrower under this Section affords treatment to
Borrower which is substantially similar to that which such Lender affords to its
other similarly situated customers.
3.8 EURODOLLAR COSTS AND RELATED MATTERS.
(a) If, after the date hereof, the existence or occurrence of any
Special Eurodollar Circumstance shall:
(1) subject any Lender or its Eurodollar Lending Office to any
tax, duty or other charge or cost with respect to any Eurodollar
Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or
its obligation to make Eurodollar Rate Advances, or shall change the
basis of taxation of payments to any Lender of the principal of or
interest on any Eurodollar Rate Advance or any other amounts due
under this Agreement in respect of any Eurodollar Rate Advance, any
of its Notes evidencing Eurodollar Rate Loans or its obligation to
make Eurodollar Rate Advances, EXCLUDING, with respect to each
Creditor, and any Affiliate or Eurodollar Lending Office thereof,
(i) taxes imposed on or measured in whole or in part by its net
income, gross income or gross receipts or capital and franchise
taxes imposed on it, (ii) any withholding taxes or other taxes based
on gross income (other than withholding taxes and taxes based on
gross income resulting from or attributable to any change in any
law, rule or regulation or any change in the interpretation or
administration of any law, rule or regulation by any Governmental
Agency) or (iii) any withholding taxes or other taxes based on gross
income for any period with respect to which it has failed to provide
Borrower with the appropriate form or forms required by
Section 11.22, to the extent such forms are then required by
applicable Laws;
(2) impose, modify or deem applicable any reserve not
applicable or deemed applicable on the date hereof (INCLUDING,
without limitation, any reserve imposed by the Board of Governors of
the Federal Reserve System, BUT EXCLUDING the Eurodollar Reserve
Percentage taken into account in calculating the Eurodollar Rate),
special deposit, capital or similar requirements against assets of,
deposits with
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or for the account of, or credit extended by, any
Lender or its Eurodollar Lending Office; or
(3) impose on any Lender or its Eurodollar Lending Office or
the Designated Eurodollar Market any other condition materially
affecting any Eurodollar Rate Advance, any of its Notes evidencing
Eurodollar Rate Loans, its obligation to make Eurodollar Rate
Advances or this Agreement, or shall otherwise materially affect any
of the same;
and the result of any of the foregoing, as determined by such Lender, increases
the cost to such Lender or its Eurodollar Lending Office of making or
maintaining any Eurodollar Rate Advance or in respect of any Eurodollar Rate
Advance, any of its Notes evidencing Eurodollar Rate Loans or its obligation to
make Eurodollar Rate Advances or reduces the amount of any sum received or
receivable by such Lender or its Eurodollar Lending Office with respect to any
Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or
its obligation to make Eurodollar Rate Advances (assuming such Lender's
Eurodollar Lending Office had funded 100% of its Eurodollar Rate Advance in the
Designated Eurodollar Market), then, PROVIDED THAT such Lender makes demand upon
Borrower (with a copy to the Administrative Agent) within 90 days following the
date upon which it becomes aware of any such event or circumstance, Borrower
shall within five Business Days pay to such Lender such additional amount or
amounts as will compensate such Lender for such increased cost or reduction
(determined as though such Lender's Eurodollar Lending Office had funded 100% of
its Eurodollar Rate Advance in the Designated Eurodollar Market). Borrower
hereby indemnifies each Lender against, and agrees to hold each Lender harmless
from and reimburse such Lender within five Business Days after demand for
(without duplication) all costs, expenses, claims, penalties, liabilities,
losses, legal fees and damages incurred or sustained by each Lender in
connection with this Agreement, or any of the rights, obligations or
transactions provided for or contemplated herein, as a result of the existence
or occurrence of any Special Eurodollar Circumstance. A statement of any Lender
claiming compensation under this subsection and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error. Each Lender agrees to endeavor promptly to notify Borrower
of any event of which it has actual knowledge, occurring after the Closing Date,
which will entitle such Lender to compensation pursuant to this Section and
agrees to designate a different Eurodollar Lending Office if such designation
will avoid the need for or reduce the amount of such compensation and will not,
in the judgment of such Lender, otherwise be materially disadvantageous to such
Lender. If any Lender claims compensation under this Section, Borrower may at
any time, upon
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at least four Eurodollar Business Days' prior notice to the
Administrative Agent and such Lender and upon payment in full of the amounts
provided for in this Section through the date of such payment PLUS any
prepayment fee required by Section 3.8(d), pay in full the affected Eurodollar
Rate Advances of such Lender or request that such Eurodollar Rate Advances be
converted to Base Rate Advances. To the extent that any Lender which receives
any payment from Borrower under this Section later receives any funds which are
identifiable as a reimbursement or rebate of such amount from any other Person,
such Lender shall promptly refund such amount to Borrower.
(b) If the existence or occurrence of any Special Eurodollar
Circumstance shall, in the opinion of any Lender, make it unlawful, impossible
or impracticable for such Lender or its Eurodollar Lending Office to make,
maintain or fund its portion of any Eurodollar Rate Loan, or materially restrict
the authority of such Lender to purchase or sell, or to take deposits of,
Dollars in the Designated Eurodollar Market, or to determine or charge interest
rates based upon the Eurodollar Rate, and such Lender shall so notify the
Administrative Agent, then such Lender's obligation to make Eurodollar Rate
Advances shall be suspended for the duration of such illegality, impossibility
or impracticability and the Administrative Agent forthwith shall give notice
thereof to the other Lenders and Borrower. Upon receipt of such notice, the
outstanding principal amount of such Lender's Eurodollar Rate Advances, together
with accrued interest thereon, automatically shall be converted to Base Rate
Advances with Eurodollar Periods corresponding to the Eurodollar Loans of which
such Eurodollar Rate Advances were a part on either (1) the last day of the
Eurodollar Period(s) applicable to such Eurodollar Rate Advances if such Lender
may lawfully continue to maintain and fund such Eurodollar Rate Advances to such
day(s) or (2) immediately if such Lender may not lawfully continue to fund and
maintain such Eurodollar Rate Advances to such day(s), PROVIDED that in such
event the conversion shall not be subject to payment of a prepayment fee under
Section 3.8(d). Each Lender agrees to endeavor promptly to notify Borrower of
any event of which it has actual knowledge, occurring after the Closing Date,
which will cause that Lender to notify the Administrative Agent under this
Section 3.8(b), and agrees to designate a different Eurodollar Lending Office if
such designation will avoid the need for such notice and will not, in the
judgment of such Lender, otherwise be disadvantageous to such Lender. In the
event that any Lender is unable, for the reasons set forth above, to make,
maintain or fund its portion of any Eurodollar Rate Loan, such Lender shall fund
such amount as a Base Rate Advance for the same period of time, and such amount
shall be treated in all respects as a Base Rate Advance. Any Lender whose
obligation to make Eurodollar Rate Advances has been suspended under this
Section 3.8(b) shall promptly
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notify the Administrative Agent and Borrower of
the cessation of the Special Eurodollar Circumstance which gave rise to such
suspension.
(c) If, with respect to any proposed Eurodollar Rate Loan:
(1) the Administrative Agent reasonably determines that, by
reason of circumstances affecting the Designated Eurodollar Market generally
that are beyond the reasonable control of the Lenders, deposits in Dollars
(in the applicable amounts) are not being offered to any Lender in the
Designated Eurodollar Market for the applicable Eurodollar Period; or
(2) the Requisite Lenders advise the Administrative Agent that
the Eurodollar Rate as determined by the Administrative Agent (i) does not
represent the effective pricing to such Lenders for deposits in Dollars in
the Designated Eurodollar Market in the relevant amount for the applicable
Eurodollar Period, or (ii) will not adequately and fairly reflect the cost
to such Lenders of making the applicable Eurodollar Rate Advances;
then the Administrative Agent forthwith shall give notice thereof to Borrower
and the Lenders, whereupon until the Administrative Agent notifies Borrower that
the circumstances giving rise to such suspension no longer exist, the obligation
of the Lenders to make any future Eurodollar Rate Advances shall be suspended.
If at the time of such notice there is then pending a Request for Loan that
specifies a Eurodollar Rate Loan, such Request for Loan shall be deemed to
specify a Base Rate Loan.
(d) Upon payment or prepayment of any Eurodollar Rate Advance,
(OTHER THAN as the result of a conversion required under Section 3.1(d) or
3.8(b)), on a day other than the last day in the applicable Eurodollar Period
(whether voluntarily, involuntarily, by reason of acceleration, or
otherwise), or upon the failure of Borrower (for a reason other than the
failure of a Lender to make an Advance) to borrow on the date or in the
amount specified for a Eurodollar Rate Loan in any Request for Loan, Borrower
shall pay to the appropriate Lender within five Business Days after demand a
prepayment fee or failure to borrow fee, as the case may be, (determined as
though 100% of the Eurodollar Rate Advance had been funded in the Designated
Eurodollar Market) equal to the SUM of:
(1) principal amount of the Eurodollar Rate Advance prepaid or
not borrowed, as the case may be, TIMES the quotient of (A) the number of
days between the date of
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prepayment or failure to borrow, as applicable,
and the last day in the applicable Eurodollar Period, DIVIDED BY (B) 360,
TIMES the applicable Interest Differential (PROVIDED that the product of
the foregoing formula must be a positive number); PLUS
(2) all out-of-pocket expenses incurred by the Lender
reasonably attributable to such payment, prepayment or failure to borrow.
Each Lender's determination of the amount of any prepayment fee payable under
this Section 3.8(d) shall be conclusive in the absence of manifest error.
3.9 LATE PAYMENTS. If any installment of principal or interest or any
fee or cost or other amount payable under any Loan Document to any Creditor is
not paid when due or, at the option of the Requisite Lenders, when any Event of
Default has occurred and remain continuing, the Obligations shall thereafter
bear interest at a fluctuating interest rate per annum at all times equal to the
sum of the Base Rate PLUS the Base Rate Margin PLUS 2%, to the fullest extent
permitted by applicable Laws. Accrued and unpaid interest on past due amounts
(INCLUDING, without limitation, interest on past due interest) shall be
compounded monthly, on the last day of each calendar month, to the fullest
extent permitted by applicable Laws.
3.10 COMPUTATION OF INTEREST AND FEES. Computation of interest on Base
Rate Loans calculated with reference to the Reference Rate shall be calculated
on the basis of a year of 365 or 366 days, as the case may be, and the actual
number of days elapsed; computation of interest on Base Rate Loans calculated by
reference to the Federal Funds Rate, and on Eurodollar Rate Loans and all fees
under this Agreement shall be calculated on the basis of a year of 360 days and
the actual number of days elapsed. Borrower acknowledges that such latter
calculation method will result in a higher yield to the Lenders than a method
based on a year of 365 or 366 days. Interest shall accrue on each Loan for the
day on which the Loan is made; interest shall not accrue on a Loan, or any
portion thereof, for the day on which the Loan or such portion is paid. Any
Loan that is repaid on the same day on which it is made shall bear interest for
one day.
3.11 NON-BUSINESS DAYS. If any payment to be made by Borrower or any
other Party under any Loan Document shall come due on a day other than a
Business Day, payment shall instead be considered due on the next succeeding
Business Day and the extension of time shall be reflected in computing interest
and fees.
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3.12 MANNER AND TREATMENT OF PAYMENTS.
(a) Each payment hereunder (EXCEPT payments pursuant to
Sections 3.7, 3.8, 11.3, 11.11 and 11.23) or on the Notes or under any other
Loan Document shall be made without setoff, counterclaim, recoupment or other
deduction to the Administrative Agent, at the Administrative Agent's Office, for
the account of each of the Lenders or the Administrative Agent, as the case may
be, in immediately available funds not later than 11:00 a.m., California local
time, on the day of payment (which must be a Business Day). All payments
received after this deadline shall be deemed received on the next succeeding
Business Day. The amount of all payments received by the Administrative Agent
for the account of each Lender shall be immediately paid by the Administrative
Agent to the applicable Lender in immediately available funds and, if such
payment was received by the Administrative Agent by 11:00 a.m., California local
time, on a Business Day and not so made available to the account of a Lender on
that Business Day, the Administrative Agent shall reimburse that Lender for the
cost to such Lender of funding the amount of such payment at the Federal Funds
Rate. All payments shall be made in lawful money of the United States of
America.
(b) Each payment or prepayment on account of any Loan shall be
applied pro rata according to the outstanding Advances made by each Lender
comprising such Loan.
(c) Each Lender shall use its best efforts to keep a record of
Advances made by it and payments received by it with respect to each of its
Notes and, subject to Section 10.6(g), such record shall, as against Borrower,
be presumptive evidence of the amounts owing. Notwithstanding the foregoing
sentence, no Lender shall be liable to any Party for any failure to keep such a
record.
(d) Each payment of any amount payable by Borrower or any other
Party under this Agreement or any other Loan Document shall be made free and
clear of, and without reduction by reason of, any taxes, assessments or other
charges imposed by any Governmental Agency, central bank or comparable
authority, EXCLUDING, in the case of each Creditor, and any Affiliate or
Eurodollar Lending Office thereof, (i) taxes imposed on or measured in whole or
in part by its net income, gross income or gross receipts or capital and
franchise taxes imposed on it, (ii) any withholding taxes or other taxes based
on gross income (other than withholding taxes and taxes based on gross income
resulting from or attributable to any change in any law, rule or regulation or
any change in the interpretation or administration of any law, rule or
regulation by any Governmental Agency) or (iii) any withholding taxes or other
taxes based on gross income for any period with respect to
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which it has failed to provide Borrower with the appropriate form or forms
required by Section 11.22, to the extent such forms are then required by
applicable Laws (all such non-excluded taxes, assessments or other charges
being hereinafter referred to as "Taxes"). To the extent that Borrower is
obligated by applicable Laws to make any deduction or withholding on account
of Taxes from any amount payable to any Lender under this Agreement, Borrower
shall (i) make such deduction or withholding and pay the same to the relevant
Governmental Agency and (ii) pay such additional amount to that Lender as is
necessary to result in that Lender's receiving a net after-Tax amount equal
to the amount to which that Lender would have been entitled under this
Agreement absent such deduction or withholding. If and when receipt of such
payment results in an excess payment or credit to that Lender on account of
such Taxes, that Lender shall promptly refund such excess to Borrower.
3.13 FUNDING SOURCES. Nothing in this Agreement shall be deemed to
obligate any Lender to obtain the funds for any Loan or Advance in any
particular place or manner or to constitute a representation by any Lender that
it has obtained or will obtain the funds for any Loan or Advance in any
particular place or manner.
3.14 FAILURE TO CHARGE NOT SUBSEQUENT WAIVER. Any decision by the
Creditors not to require payment of any interest (INCLUDING interest arising
under Section 3.9), fee, cost or other amount payable under any Loan Document,
or to calculate any amount payable by a particular method, on any occasion shall
in no way limit or be deemed a waiver of the Creditor's right to require full
payment of any interest (INCLUDING interest arising under Section 3.9), fee,
cost or other amount payable under any Loan Document, or to calculate an amount
payable by another method that is not inconsistent with this Agreement, on any
other or subsequent occasion.
3.15 ADMINISTRATIVE AGENT'S RIGHT TO ASSUME PAYMENTS WILL BE MADE BY
BORROWER. Unless the Administrative Agent shall have been notified by Borrower
prior to the date on which any payment to be made by Borrower hereunder is due
that Borrower does not intend to remit such payment, the Administrative Agent
may, in its discretion, assume that Borrower has remitted such payment when so
due and the Administrative Agent may, in its discretion and in reliance upon
such assumption, make available to each Lender on such payment date an amount
equal to such Lender's share of such assumed payment. If Borrower has not in
fact remitted such payment to the Administrative Agent, each Lender shall
forthwith on demand repay to the Administrative Agent the amount of such assumed
payment made available to such Lender, together with interest thereon in respect
of each day from and including the date such amount was made available by
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the Administrative Agent to such Lender to the date such amount is repaid to
the Administrative Agent at the Federal Funds Rate.
3.16 FEE DETERMINATION DETAIL. Each Creditor shall provide reasonable
detail to Borrower regarding the manner in which the amount of any payment to
that Creditor under Article 3 has been determined, concurrently with demand for
such payment.
3.17 SURVIVABILITY. All of Borrower's obligations under Sections 3.7
and 3.8 shall survive for ninety days following the date on which the Commitment
is terminated and all Loans hereunder are fully paid.
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Article 4
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to the Creditors, as of the date
hereof, as of the Closing Date, and to the extent set forth in Sections 8.2 and
8.3, as of the date of the making of each Advance and the issuance of each
Letter of Credit that:
4.1 EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS. Borrower
is a limited liability company duly formed, validly existing and in good
standing under the Laws of Michigan. The Company is a corporation duly formed,
validly existing and in good standing under the Laws of Nevada. Borrower and
the Company are duly qualified or registered to transact business and are in
good standing in each other jurisdiction in which the conduct of their business
or the ownership or leasing of their Properties makes such qualification or
registration necessary, EXCEPT where the failure so to qualify or register and
to be in good standing would not constitute a Material Adverse Effect. Borrower
and the Company have all requisite limited liability company and corporate power
and authority, respectively, to conduct their business, to own and lease their
Properties and to execute and deliver each Loan Document to which each is a
Party and to perform the Obligations. All outstanding membership interests of
Borrower are duly authorized, validly issued, fully paid, non-assessable and no
holder thereof has any enforceable right of rescission under any applicable
state or federal securities Laws. Borrower is in compliance with all Laws and
other legal requirements applicable to its business, has obtained all
authorizations, consents, approvals, orders, licenses and permits from, and has
accomplished all filings, registrations and qualifications with, or obtained
exemptions from any of the foregoing from, any Governmental Agency that are
necessary for the transaction of its business (it being understood that as of
the Closing Date Borrower has not yet obtained a gaming license from the
Michigan Gaming Control Board), EXCEPT where the failure so to comply, file,
register, qualify or obtain exemptions does not constitute a Material Adverse
Effect.
4.2 AUTHORITY; COMPLIANCE WITH OTHER AGREEMENTS AND INSTRUMENTS AND
GOVERNMENT REGULATIONS. The execution, delivery and performance by Borrower and
the Company of the Loan Documents to which it is a Party have been duly
authorized by all necessary corporate or other organizational action, and do not
and will not:
(a) Require any consent or approval not heretofore obtained of
any member, partner, director, stockholder, security holder or creditor
of such Party;
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(b) Violate or conflict with any provision of such Party's
operating agreement, charter, articles of incorporation or bylaws, as
applicable;
(c) Result in or require the creation or imposition of any
Lien or Right of Others upon or with respect to any Property now owned or
leased or hereafter acquired by such Party;
(d) Violate any Requirement of Law applicable to such Party;
(e) Result in a breach by such Party of or constitute a
default by such Party under, or cause or permit the acceleration of any
obligation owed under, any indenture or loan or credit agreement or any
other Contractual Obligation to which such Party is a party or by which
such Party or any of its Property is bound or affected;
and neither of Borrower or the Company is in violation of, or default under, any
Requirement of Law or Contractual Obligation, or any indenture, loan or credit
agreement described in Section 4.2(e), in any respect that constitutes a
Material Adverse Effect.
4.3 NO GOVERNMENTAL APPROVALS REQUIRED. EXCEPT as set forth in Schedule
4.3 or previously obtained or made, no authorization, consent, approval, order,
license or permit from, or filing, registration or qualification with, any
Governmental Agency is or will be required to authorize or permit under
applicable Laws the execution, delivery and performance by Borrower and its
Subsidiaries of the Loan Documents to which any of them is a Party. All
authorizations from, or filings with, any Governmental Agency described in
Schedule 4.3 will be accomplished as of the Closing Date or such other date as
is specified in Schedule 4.3.
4.4 SUBSIDIARIES. Borrower does not own any capital stock, equity
interest or debt security which is convertible, or exchangeable, for capital
stock or equity interests in any Person.
4.5 COMPANY FINANCIALS; BORROWER'S FINANCIAL STATUS. As of the Closing
Date, no Material Adverse Effect has occurred with respect to the Company since
January 31, 1999. The Borrower does not have any material liabilities not
reflected on the balance sheet contained in the Confidential Offering
Memorandum.
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4.6 NO OTHER LIABILITIES. Borrower does not have any material liability
or material contingent liability required under Generally Accepted Accounting
Principles to be reflected or disclosed and not reflected or disclosed in the
pro forma opening balance sheet described in Section 4.5 as of the date thereof.
4.7 TITLE TO PROPERTY. Borrower and its Restricted Subsidiaries have
valid title to the Property reflected in the financial statements described in
Section 4.5, other than immaterial items of Property and Property subsequently
sold or disposed of in the ordinary course of business, free and clear of all
Liens and Rights of Others, OTHER THAN Permitted Encumbrances or Permitted
Rights of Others, or as permitted by Section 6.8.
4.8 INTANGIBLE ASSETS. Borrower and its Restricted Subsidiaries own, or
possess the right to use to the extent necessary in their respective businesses,
all material trademarks, trade names, copyrights, patents, patent rights,
computer software, licenses and other Intangible Assets that are used in the
conduct of their businesses as now operated, and no such Intangible Asset, to
the best knowledge of Borrower, conflicts with the valid trademark, trade name,
copyright, patent, patent right or Intangible Asset of any other Person to the
extent that such conflict constitutes a Material Adverse Effect. Without
limitation on the foregoing, Borrower is not legally prohibited from using the
name "Motor City Casino" with respect to the Temporary Project. As of the
Closing Date, Borrower and its Subsidiaries do not own or possess the right to
use any registered trademarks, trade names, copyrights, patents or patent
rights.
4.9 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Borrower nor any
Restricted Subsidiary is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.10 LITIGATION. EXCEPT for (a) any matter fully covered as to
subject matter and amount (subject to applicable deductibles and retentions)
by insurance for which the insurance carrier has not asserted lack of subject
matter coverage or reserved its right to do so, (b) any matter, or series of
related matters, involving a claim against Borrower or any of its Restricted
Subsidiaries of less than $1,000,000, (c) matters of an administrative nature
not involving a claim or charge against Borrower or any of its Restricted
Subsidiaries and (d) matters set forth in Schedule 4.10, there are no
actions, suits, proceedings or investigations pending as to which Borrower or
any of its Restricted Subsidiaries have
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been served or have received notice or, to the best knowledge of Borrower,
threatened against or affecting Borrower or any of its Restricted
Subsidiaries or any Property of any of them before any Governmental Agency.
4.11 BINDING OBLIGATIONS. The Lease constitutes the legal, valid and
binding obligation of each party thereto, enforceable against such party in
accordance with its terms, EXCEPT as enforcement may be limited by Debtor Relief
Laws, Gaming Laws or equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial discretion.
Each of the Loan Documents to which Borrower or any of its Subsidiaries is a
Party will, when executed and delivered by such Party, constitute the legal,
valid and binding obligation of such Party, enforceable against such Party in
accordance with its terms, EXCEPT as enforcement may be limited by Debtor Relief
Laws or Gaming Laws or equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial discretion.
4.12 NO DEFAULT. No event has occurred and is continuing that is a
Default or Event of Default.
4.13 ERISA.
(a) With respect to each Pension Plan:
(i) such Pension Plan complies in all material respects with
ERISA and any other applicable Laws to the extent that noncompliance could
reasonably be expected to have a Material Adverse Effect;
(ii) such Pension Plan has not incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA) that could
reasonably be expected to have a Material Adverse Effect;
(iii) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred that could reasonably be expected to have a Material
Adverse Effect; and
(iv) neither Borrower nor any of its Subsidiaries has
engaged in any non-exempt "prohibited transaction" (as defined in Section
4975 of the Code) that could reasonably be expected to have a Material
Adverse Effect.
(b) Neither Borrower nor any of its Subsidiaries has incurred or
expects to incur any withdrawal liability to any Multiemployer Plan that
could reasonably be expected to have a Material Adverse Effect.
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4.14 REGULATIONS T, U AND X; INVESTMENT COMPANY ACT. No part of the
proceeds of any Loan hereunder will be used to purchase or carry, or to
extend credit to others for the purpose of purchasing or carrying, any Margin
Stock in violation of Regulations T, U or X. Neither Borrower nor any of its
Restricted Subsidiaries is or is required to be registered as an "investment
company" under the Investment Company Act of 1940.
4.15 DISCLOSURE. No written statement made by a Senior Officer of
Borrower to any Creditor in connection with this Agreement, or in connection
with any Loan, Advance or Letter of Credit as of the date thereof contained
any untrue statement of a material fact or omitted a material fact necessary
to make the statement made not misleading in light of all the circumstances
existing at the date the statement was made.
4.16 TAX LIABILITY. Borrower and its Restricted Subsidiaries have
filed all tax returns which are required to be filed, and have paid, or made
provision for the payment of, all taxes with respect to the periods, Property
or transactions covered by said returns, or pursuant to any assessment
received by Borrower or any of its Restricted Subsidiaries, EXCEPT (a) such
taxes, if any, as are being contested in good faith by appropriate
proceedings and as to which adequate reserves have been established and
maintained and (b) immaterial taxes and tax returns so long as no material
item or portion of Property of Borrower or any of its Restricted Subsidiaries
is in jeopardy of being seized, levied upon or forfeited.
4.17 PROJECTIONS. As of the Closing Date, to the best knowledge of
Borrower, the assumptions set forth in the Projections are reasonable and
consistent with each other and with all facts known to Borrower, and the
Projections are reasonably based on such assumptions. Nothing in this
Section 4.17 shall be construed as a representation or covenant that the
Projections in fact will be achieved.
4.18 HAZARDOUS MATERIALS. Neither Borrower nor any of its Restricted
Subsidiaries at any time has disposed of, discharged, released or threatened
the release of any material amount of Hazardous Materials on, from or under
the Real Property in any manner that violates any Hazardous Materials Law in
any manner which would result in a Material Adverse Effect. No condition
exists that violates any Hazardous Material Law affecting any Real Property
except for such violations that would not individually or in the aggregate
have a Material Adverse Effect. No Real Property or any portion thereof is
or has been utilized by Borrower or any of its Restricted Subsidiaries as a
site for the manufacture of any Hazardous Materials. To the extent that any
Hazardous Materials are used, generated or stored by Borrower or any of
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its Restricted Subsidiaries on any Real Property, or transported to or from such
Real Property by Borrower or any of its Restricted Subsidiaries, such use,
generation, storage and transportation are in compliance in all material
respects with all Hazardous Materials Laws.
4.19 GAMING LAWS. Borrower and each of its Subsidiaries are in
compliance in all material respects with all Gaming Laws that are applicable
to them and their businesses.
4.20 EXCLUDED PROPERTY. As of each date of determination, (a) all
Real Property which is Excluded Property is held by the Borrower or its
Restricted Subsidiaries for possible future development and is not essential
to or an operationally integral part of the casino operations associated with
the Temporary Project, including all material gaming, entertainment,
restaurant, parking and other support functions operated by Borrower and its
Restricted Subsidiaries with respect to the Temporary Project, and (b)
Borrower and its Restricted Subsidiaries have not constructed any material
facilities or works of improvement on the Excluded Property.
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Article 5
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS)
So long as any Advance remains unpaid, or any other Obligation
remains unpaid or unperformed, or any portion of the Commitment remains in
force, Borrower shall, and shall cause each of its Restricted Subsidiaries to,
unless the Administrative Agent (with the written approval of the Requisite
Lenders) otherwise consents:
5.1 PAYMENT OF TAXES AND OTHER POTENTIAL LIENS. Pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed upon
any of them, upon their respective Property or any part thereof and upon their
respective income or profits or any part thereof, EXCEPT that Borrower and its
Restricted Subsidiaries shall not be required to pay or cause to be paid (a) any
tax, assessment, charge or levy that is not yet past due in such a manner that
interest or penalties have begun to accrue or any enforcement action has been
commenced with respect thereto, or is being contested in good faith by
appropriate proceedings so long as the relevant entity has established and
maintains adequate reserves for the payment of the same or (b) any immaterial
tax so long as no material item or portion of Property of Borrower or any of its
Restricted Subsidiaries is in jeopardy of being seized, levied upon or
forfeited.
5.2 PRESERVATION OF EXISTENCE. Preserve and maintain their respective
existences in the jurisdiction of their formation and all material
authorizations, rights, franchises, privileges, consents, approvals, orders,
licenses, permits, or registrations from any Governmental Agency that are
necessary for the transaction of their respective business, EXCEPT where the
failure to so preserve and maintain the existence of any Restricted Subsidiary
and such authorizations would not constitute a Material Adverse Effect AND
EXCEPT that a merger permitted by Section 6.3 shall not constitute a violation
of this covenant; and qualify and remain qualified to transact business in each
jurisdiction in which such qualification is necessary in view of their
respective business or the ownership or leasing of their respective Properties
EXCEPT where the failure to so qualify or remain qualified would not constitute
a Material Adverse Effect.
5.3 MAINTENANCE OF PROPERTIES. Maintain, preserve and protect all of
their respective depreciable Properties in good order and condition, subject to
wear and tear in the ordinary course of business, and not permit any waste of
their respective Properties, EXCEPT that the failure to maintain, preserve
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and protect a particular item of depreciable Property that is not of significant
value, either intrinsically or to the operations of Borrower and its Restricted
Subsidiaries, taken as a whole, shall not constitute a violation of this
covenant.
5.4 MAINTENANCE OF INSURANCE. Maintain liability, casualty and other
insurance (subject to customary deductibles and retentions) with responsible
insurance companies in such amounts and against such risks as is carried by
responsible companies engaged in similar businesses and owning similar assets in
the general areas in which Borrower and its Restricted Subsidiaries operate.
5.5 COMPLIANCE WITH LAWS. Comply, within the time period, if any,
given for such compliance by the relevant Governmental Agency or Agencies
with enforcement authority, with all Requirements of Law noncompliance with
which constitutes a Material Adverse Effect, EXCEPT that Borrower and its
Restricted Subsidiaries need not comply with a Requirement of Law then being
contested by any of them in good faith by appropriate proceedings.
5.6 INSPECTION RIGHTS. Upon reasonable notice and to the extent
permitted by applicable Laws, at any time during regular business hours and as
often as requested (but not so as to materially interfere with the business of
Borrower or any of its Restricted Subsidiaries), permit the Administrative Agent
or any Lender, or any authorized employee, agent or representative thereof, to
examine, audit and make copies and abstracts from the records and books of
account of, and to visit and inspect the Properties of, Borrower and its
Restricted Subsidiaries and to discuss the affairs, finances and accounts of
Borrower and its Restricted Subsidiaries with any of their officers, key
employees or accountants and, upon request, furnish promptly to the
Administrative Agent or any Lender true copies of all financial information made
available to the board of directors or audit committee of the board of directors
of Borrower.
5.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep adequate records
and books of account reflecting all financial transactions in conformity with
Generally Accepted Accounting Principles, consistently applied, and in
material conformity with all applicable requirements of any Governmental
Agency having regulatory jurisdiction over Borrower or any of its Restricted
Subsidiaries.
5.8 COMPLIANCE WITH AGREEMENTS. Promptly and fully comply with all
Contractual Obligations under all material agreements, indentures, leases and/or
instruments to which any one or more of them is a party, whether such material
agreements, indentures, leases or instruments are with a Lender
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or another Person, EXCEPT for any such Contractual Obligations (a) the
performance of which would cause a Default or (b) then being contested by any
of them in good faith by appropriate proceedings, or if the failure to comply
with such agreements, indentures, leases or instruments does not constitute a
Material Adverse Effect.
5.9 USE OF PROCEEDS. Use the proceeds of Loans (a) on the Closing
Date, to refinance funds invested prior to the Closing Date by the Company in
the Temporary Project, (b) to finance expenses associated with the
transactions contemplated herein, (c) to finance design, development and
construction expenses associated with the Temporary Project, (d) for working
capital and general corporate purposes of Borrower and its Restricted
Subsidiaries associated with the Temporary Project.
5.10 HAZARDOUS MATERIALS LAWS. Keep and maintain all Real Property
then owned or leased by Borrower or its Restricted Subsidiaries and each
portion thereof (or cause such Real Property to be kept and maintained) in
compliance in all material respects with all applicable Hazardous Materials
Laws and promptly notify the Administrative Agent in writing of (a) any and
all material enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened in writing by a
Governmental Agency pursuant to any applicable Hazardous Materials Laws, (b)
any and all material claims made or threatened in writing by any Person
against Borrower relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials and (c)
discovery by any Senior Officer of Borrower of any material occurrence or
condition on any real property adjoining or in the vicinity of such Real
Property that could reasonably be expected to cause such Real Property or any
part thereof to be subject to any material restrictions on the ownership,
occupancy, transferability or use of such Real Property under any applicable
Hazardous Materials Laws.
5.11 NEW RESTRICTED SUBSIDIARIES. Concurrently with the formation or
acquisition of any Restricted Subsidiary, cause such Restricted Subsidiary to
execute and deliver to the Administrative Agent a guarantee of the Obligations
and Collateral Documents granting perfected Lien in the Property of such
Restricted Subsidiary (and, in the case of any property owned thereby which is
associated with the Temporary Project, subject only to Permitted Encumbrances
and Liens, Negative Pledges and Rights of Others permitted by Section 6.8), in
each case which are in form and substance reasonably acceptable to the
Administrative Agent.
5.12 ADDITIONAL COLLATERAL; THE TEMPORARY PROJECT.
(a) If Borrower or any Restricted Subsidiary of Borrower
acquires any fee or leasehold interest in Real Property (other than the
property underlying the
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Permanent Project), or hereafter materially improves the Excluded Property or
commences operations or opens any material facilities or improvements located
on the Excluded Property, Borrower or the relevant Restricted Subsidiary
shall execute and deliver to the Administrative Agent, an amendment to the
appropriate Mortgage (or, if the Administrative Agent requests, a separate
first mortgage with respect thereto in a form reasonably acceptable to the
Administrative Agent and in any event providing substantive remedies no less
favorable to the Creditors than the Mortgages) prior to the first to occur of
the following events:
(i) the commencement of construction of any such material
improvements to any such Property or the commencement of operations
or opening of any material facilities or improvements located on
such Property which are used in conjunction with the Temporary
Project;
(ii) the submission of any request for release of the
Company Guaranty;
(b) each amendment to the Mortgages (or new mortgage)
delivered to the Administrative Agent pursuant to clause (a) of this
Section shall be accompanied by the following, in each case at Borrower's
sole expense:
(i) prior to any release of the Company Guaranty, at
Borrower's option, either (A) any endorsements to the ALTA policy of
lenders title insurance referred to in Section 8.1 as may be
reasonably requested by the Administrative Agent, or (B) a new ALTA
policy of lenders title insurance concerning such interest in Real
Property;
(ii) concurrently with the delivery of each such amendment
to the Mortgages or new mortgage, a "Phase I" environmental report
with respect to the underlying Real Property prepared by a qualified
independent environmental expert acceptable to the Administrative
Agent and having results reasonably satisfactory to the
Administrative Agent and the Requisite Lenders; and
(iii) at any time, such other assurances, insurance
certificates, opinions and the like as the Administrative Agent may
reasonably request;
(c) Until the Opening Date:
(i) Borrower and its Restricted Subsidiaries shall comply
in all material respects with all existing Laws and requirements of
all Governmental Agencies having jurisdiction over the Company,
Borrower, its Restricted
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Subsidiaries and the Temporary Project, and with all future Laws and
requirements that become applicable to the Temporary Project;
(ii) Subject to applicable Gaming Laws, permit the
Administrative Agent, or any Lender, at any reasonable time to enter
and visit the Temporary Project for the purposes of performing an
appraisal, observing the work of construction and examining all
materials, plans, specifications, working drawings and other matters
relating to the construction and\or redevelopment thereof; and
(iii) Promptly pay when due (subject to applicable
retentions) or otherwise discharge all claims and Liens for labor
done and materials and services furnished in connection with the
Temporary Project's construction or redevelopment, EXCEPT for claims
contested in good faith by appropriate proceedings, PROVIDED that
any such claims are covered by such payment bonds or title insurance
policy endorsements as may reasonably be requested by the
Administrative Agent.
5.13 COMPLETION CERTIFICATES. As promptly as practicable following
the Opening Date for the Temporary Project, promptly provide the Administrative
Agent with:
(a) a written certificate executed by the primary architect,
engineer and contractor and reasonably acceptable to the Administrative
Agent certifying that the Temporary Project has been completed in all
material respects in accordance with the plans therefor and is ready to
be opened for business; and
(b) Any endorsements to the title insurance policy referred to in
Section 8.1(a) as are reasonably requested by the Administrative Agent,
at the sole expense of Borrower.
5.14 YEAR 2000. Borrower shall promptly make, and shall cause each
of its Restricted Subsidiaries to promptly make, all required systems changes in
computer software, hardware and firmware systems and equipment containing
embedded microchips owned or operated by or for Borrower and its Restricted
Subsidiaries required as a result of the Year 2000 Issue to permit the proper
functioning of such computer systems and other equipment, except to the extent
that the failure to take any such action could not reasonably be expected to
result in a Default or to have a material adverse effect on the business,
financial position, results of operations or prospects of Borrower and its
Restricted Subsidiaries, considered as a whole. At the request of any Lender,
Borrower shall provide, and shall cause each of its Restricted Subsidiaries to
provide, to such Lender reasonable assurance of its compliance with the
preceding sentence.
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5.15 TITLE INSURANCE DOCUMENTS. Borrower shall, on the Closing
Date and monthly thereafter, deliver to First Title Corporation sworn statements
and lien waivers and such other documentation as may reasonably be required by
First Title Corporation to endorse the policy of title insurance referred to in
Section 8.1(a) to the amounts then expended by Borrower with respect to the
Temporary Project.
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Article 6
NEGATIVE COVENANTS
So long as any Advance remains unpaid, or any other Obligation
remains unpaid or unperformed, or any portion of the Commitment remains in
force, Borrower shall not, and shall not permit any of its Restricted
Subsidiaries to, unless the Administrative Agent (with the written approval
of the Requisite Lenders or, if required by Section 11.2, of all of the
Lenders) otherwise consents:
6.1 PAYMENT OF SUBORDINATED DEBT. (a) Pay any principal (INCLUDING
sinking fund payments) or any other amount (OTHER THAN scheduled interest
payments) with respect to any Subordinated Debt, or purchase or redeem any
Subordinated Debt, or (b) pay any scheduled interest on any Subordinated
Debt, IF an Event of Default then exists or would result therefrom.
PROVIDED, HOWEVER, that this Section shall not apply to prohibit a Disposition
to the extent necessary to prevent a License Revocation if (i) no Default or
Event of Default then exists which is not curable by such Disposition, and
(ii) Borrower has notified the Administrative Agent in writing of the necessity
to invoke this proviso at least ten Business Days (or such shorter period as may
be necessary in order to comply with a regulation or order of the relevant
Gaming Board) in advance, and PROVIDED FURTHER that nothing in this Section
shall apply to restrict the Disposition of any of the equity securities of any
Person that holds, directly or indirectly through a holding company or
otherwise, an interest in a license issued or proposed to be issued under any
Gaming Law to the extent such restriction is unlawful under that Gaming Law.
6.2 DISPOSITION OF PROPERTY. Make any Disposition of its Property,
whether now owned or hereafter acquired, EXCEPT (a) the grant or creation of
any Permitted Encumbrance (to the extent that the same constitutes a
Disposition) and (b) other Dispositions made during the term of this
Agreement in an aggregate amount not in excess of $5,000,000, in each case
made when no Event of Default then exists or would result therefrom;
PROVIDED, HOWEVER, that this Section shall not apply to prohibit a
Disposition to the extent necessary to prevent a License Revocation if (i) no
Default or Event of Default then exists which is not curable by such
Disposition, and (ii) Borrower has notified the Administrative Agent in
writing of the necessity to invoke this proviso at least ten Business Days
(or such shorter period as may be necessary in order to comply with a
regulation or order of the relevant Gaming Board) in advance, and PROVIDED
FURTHER that nothing in this Section shall apply to restrict the Disposition
of any of the equity securities of any Person that holds, directly or
indirectly through a holding company or otherwise, an interest in a license
issued or proposed to be issued under any Gaming Law to the extent such
restriction is unlawful under that Gaming Law.
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6.3 MERGERS. Merge or consolidate with or into any Person, EXCEPT:
(a) mergers and consolidations of a Restricted Subsidiary of
Borrower into Borrower (with Borrower as the surviving entity) or of
Restricted Subsidiaries of Borrower with each other, PROVIDED that Borrower
and each of its Restricted Subsidiaries has executed such amendments to the
Loan Documents as the Administrative Agent may reasonably determine are
appropriate as a result of such merger; and
(b) a merger or consolidation of Borrower or any Restricted
Subsidiary of Borrower with any other Person, PROVIDED that (i) either (A)
Borrower or the Restricted Subsidiary of Borrower is the surviving entity, or
(B) the surviving entity is a corporation organized under the Laws of a State
of the United States of America and, as of the date of such merger or
consolidation, expressly assumes, by an instrument satisfactory in form and
substance to the Requisite Lenders, the Obligations of Borrower or the
Restricted Subsidiary of Borrower, as the case may be, and (ii) giving effect
thereto on a pro-forma basis, no Default or Event of Default exists or would
result therefrom.
6.4 HOSTILE TENDER OFFERS. Make any offer to purchase or acquire, or
consummate a purchase or acquisition of, 5% or more of the capital stock of
any corporation or other business entity if the board of directors or
management of such corporation or business entity has notified Borrower that
it opposes such offer or purchase and such notice has not been withdrawn or
superseded.
6.5 DISTRIBUTIONS. Make any Distribution, whether from capital, income
or otherwise, and whether in Cash or other Property, IF an Event of Default
then exists or would result therefrom EXCEPT:
(a) Distributions by any Restricted Subsidiary of Borrower to
Borrower; and
(b) other Distributions made following the Opening Date and
when no Default or Event of Default exists or would result therefrom PROVIDED
THAT giving PRO FORMA effect to the making of such Distributions (and all
other Restricted Payments theretofore made during the then current Fiscal
Quarter) as of the last day of the immediately proceeding Fiscal Quarter, the
Fixed Charge Coverage Ratio is not less than 1.10:1.00;
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PROVIDED, however, that this Section shall not apply to prohibit a Distribution
to the extent necessary to prevent a License Revocation if (i) no Default or
Event of Default then exists which is not curable by such Distribution and
(ii) Borrower has notified the Administrative Agent in writing of the necessity
to invoke this proviso at least ten Business Days (or such shorter period as may
be necessary in order to comply with a regulation or order of the relevant
Gaming Board) in advance.
6.6 ERISA.
(a) At any time, permit any Pension Plan to:
(i) engage in any non-exempt "prohibited transaction" (as
defined in Section 4975 of the Code);
(ii) fail to comply with ERISA or any other applicable Laws;
(iii) incur any material "accumulated funding deficiency" (as
defined in Section 302 of ERISA); or
(iv) terminate in any manner, which, with respect to each
event listed above, could reasonably be expected to result in a Material
Adverse Effect.
(b) Withdraw, completely or partially, from any Multiemployer Plan
if to do so could reasonably be expected to result in a Material Adverse
Effect.
6.7 CHANGE IN NATURE OF BUSINESS. Make any material change in the
nature of the business of Borrower and its Restricted Subsidiaries, taken as
a whole.
6.8 LIENS, NEGATIVE PLEDGES, SALE LEASEBACKS AND RIGHTS OF OTHERS.
Create, incur, assume or suffer to exist any Lien, Negative Pledge or Right
of Others of any nature upon or with respect to any of their respective
Properties, whether now owned or hereafter acquired, or enter into any Sale
and Leaseback with respect to any such Properties EXCEPT:
(a) Permitted Encumbrances and Permitted Rights of Others;
(b) Liens and Negative Pledges under the Loan Documents;
(c) Liens on Property having an aggregate value not in excess
of $20,000,000 securing Indebtedness (INCLUDING Capital Lease
Obligations) in an aggregate
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principal amount which is not in excess of $15,000,000 at any time, and
Negative Pledges relating to such Property for the benefit of the holders of
such Indebtedness PROVIDED that (i) no real property shall be subject to any
such Lien or Negative Pledge, and (ii) the monetary limitations set forth in
this clause (c) shall be reduced by the amount of Sale Leaseback Obligations
under, and the value of the Property subject to, any Sales and Leasebacks
entered into pursuant to clause (d), below;
(d) Sales and Leasebacks of Property having an aggregate
value, and with Sale and Leaseback Obligations which are in an amount,
which would be permitted under clause (c) above if the same were to be
construed as financing transactions;
(e) Liens, Negative Pledges and Rights of Others in favor of
counterparties to agreements, and assignees thereof, entered into by
Borrower and its Restricted Subsidiaries in the ordinary course of
business on the interests of Borrower and its Restricted Subsidiaries
under such agreements and the proceeds thereof, PROVIDED that such Liens,
Negative Pledges and Rights of Others shall secure and relate only to
restrictions on transfer of the rights of Borrower and its Restricted
Subsidiaries to the holders thereof under the relevant agreement; and
(f) Liens, Negative Pledges and Rights of Others on assets
primarily associated with the Permanent Project and not used in
connection with the Temporary Project.
PROVIDED, that this Section shall not apply to prohibit the creation of a Lien,
Negative Pledge or Right of Others to the extent necessary to prevent a License
Revocation if (i) no Default or Event of Default then exists which is not
curable by creation of the Lien, Negative Pledge or Right of Others and
(ii) Borrower has notified the Administrative Agent in writing of the necessity
to invoke this proviso at least ten Business Days (or such shorter period as may
be necessary in order to comply with a regulation or order of the relevant
Gaming Board) in advance.
6.9 INDEBTEDNESS AND CONTINGENT GUARANTIES. Create, incur, assume or
suffer to exist any Indebtedness or Contingent Guaranty (other than Indebtedness
of Restricted Subsidiaries of Borrower to Borrower or another Restricted
Subsidiary of Borrower) OTHER THAN:
(a) the Obligations;
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(b) purchase money Indebtedness, Capital Lease Obligations and
sale leaseback transactions permitted under Sections 6.8(c) and 6.8(d)
incurred solely to finance the acquisition of equipment and fixtures and in
an aggregate amount not to exceed $15,000,000 at any time; and
(c) Company Subordinated Debt.
6.10 CAPITAL EXPENDITURES. Make, or become legally obligated to make,
any Capital Expenditure (including Maintenance Capital Expenditures) except:
(a) Capital Expenditures for the development and construction
of the Temporary Project in a manner which is consistent with the Plans and
Budget in an amount which is not greater than $155,000,000;
(b) Maintenance Capital Expenditures in an annual amount which
in an annual amount which does not exceed $10,000,000 (plus any amounts
permitted under this clause but not expended in the immediately preceding
Fiscal Year);
(c) Capital Expenditures made with respect to the Permanent
Project which are required by the Development Agreement or any requirement of
any Gaming Board to be made, PROVIDED that prior to the making of any Capital
Expenditure under this clause (c), Borrower shall have received, not more
than 90 days prior to the making of such Capital Expenditure, the proceeds of
new permanent equity contributions or Subordinated Debt in an amount which is
equal to the amount of such Capital Expenditure; and
(d) other Capital Expenditures made following the Opening Date
in connection with the development or construction of the Permanent Project
and made when no Default or Event of Default exists or would result therefrom
PROVIDED THAT giving PRO FORMA effect to the making of such Capital
Expenditures (and all other Restricted Expenditures theretofore made during
the then current Fiscal Quarter) as of the last day of the immediately
proceeding Fiscal Quarter, the Fixed Charge Coverage Ratio is not less than
1.10:1.00.
6.11 ACQUISITIONS AND INVESTMENTS. Make any Acquisition or enter into
any agreement to make any Acquisition, or suffer to exist any Investment,
OTHER THAN:
(a) Investments in Restricted Subsidiaries engaged in the
operation, design, development or construction of the Temporary Project and
reasonably related businesses;
(b) Investments consisting of Cash Equivalents;
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(c) Investments consisting of advances to members and their
respective officers, managers, directors, and employees of Borrower and the
Restricted Subsidiaries for travel, entertainment, relocation and analogous
ordinary business purposes;
(d) other Investments in Unrestricted Subsidiaries made
following the Opening Date and when no Default or Event of Default exists or
would result therefrom PROVIDED THAT giving PRO FORMA effect to the making of
such Capital Expenditures (and all other Restricted Expenditures theretofore
made during the then current Fiscal Quarter) as of the last day of the
immediately proceeding Fiscal Quarter, the Fixed Charge Coverage Ratio is not
less than 1.10:1.00;
6.12 MAXIMUM TOTAL DEBT RATIO. Permit the Total Debt Ratio as of the
last day of any Fiscal Quarter ending one year or more following the Opening
Date, to exceed the ratio set forth opposite that Fiscal Quarter in the
matrix below:
<TABLE>
<CAPTION>
FISCAL QUARTER AFTER OPENING DATE MAXIMUM RATIO
<S> <C>
Fourth Fiscal Quarter and 1.45:1.00
Fifth Fiscal Quarter
Sixth Fiscal Quarter and
Seventh Fiscal Quarter 1.20:1.00
Eighth Fiscal Quarter and
Ninth Fiscal Quarter 0.90:1.00
Tenth Fiscal Quarter and
Eleventh Fiscal Quarter 0.60:1.00
Twelfth Fiscal Quarter and
Thereafter 0.30:1.00.
</TABLE>
6.13 MINIMUM FIXED CHARGE COVERAGE RATIO. Permit the Fixed Charge
Coverage Ratio as of the last day of any Fiscal Quarter ending one year or
more following the Opening Date and when the Company Guaranty is not in
effect to be less than 1.10:1.00 (it being understood that Borrower shall
report the Fixed Charge Coverage Ratio in its Compliance Certificate for all
other Fiscal Quarters for informational purposes).
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6.14 TRANSACTIONS WITH AFFILIATES. Enter into any material transaction
of any kind with any Affiliate of Borrower OTHER THAN (a) salary, bonus,
employee stock option and other compensation arrangements with directors or
officers in the ordinary course of business, (b) transactions that are fully
disclosed to the board of directors of Borrower and expressly authorized by a
resolution of the board of directors of Borrower which is approved by a
majority of the directors not having an interest in the transaction, (c)
transactions between or among Borrower and its Restricted Subsidiaries and
(d) transactions on overall terms, giving effect to all other business
arrangements of Borrower and its Restricted Subsidiaries with that Affiliate,
at least as favorable to Borrower or its Restricted Subsidiaries as would be
the case in an arm's-length transaction between unrelated parties of equal
bargaining power.
6.15 AMENDMENTS TO MATERIAL DOCUMENTS; PLANS AND BUDGET. Amend any
Material Document in any respect which increases the rate of payments by
Borrower and its Restricted Subsidiaries thereunder or is otherwise
materially adverse to the interests of the Creditors, or amend or modify the
Plans and Budget in any material respect.
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Article 7
INFORMATION AND REPORTING REQUIREMENTS
7.1 FINANCIAL AND BUSINESS INFORMATION. So long as any Advance remains
unpaid, or any other Obligation remains unpaid or unperformed, or any portion of
the Commitment remains in force, Borrower shall, unless the Administrative Agent
(with the written approval of the Requisite Lenders) otherwise consents, deliver
to the Administrative Agent and the Lenders, at Borrower's sole expense:
(a) As soon as practicable, and in any event within 45 days
after the end of each Fiscal Quarter, (i) the consolidated balance sheet
of Borrower and its Restricted Subsidiaries as at the end of such Fiscal
Quarter and the consolidated statement of operations for each Fiscal
Quarter, a schedule detailing Capital Expenditures and Distributions made
during that Fiscal Quarter and the portion of the Fiscal Year ended with
such Fiscal Quarter and (ii) the consolidating balance sheets and
statements of operations as at and for the portion of the Fiscal Year
ended with such Fiscal Quarter, all in reasonable detail. Such financial
statements shall be certified by a Senior Officer of Borrower as fairly
presenting the financial condition, results of operations and cash flows
of Borrower and its Restricted Subsidiaries in accordance with Generally
Accepted Accounting Principles (other than footnote disclosures),
consistently applied, as at such date and for such periods, subject only
to normal year-end accruals and audit adjustments;
(b) As soon as practicable, and in any event within 90 days
after the end of each Fiscal Year, (i) the consolidated balance sheet of
Borrower and its Restricted Subsidiaries as at the end of such Fiscal
Year and the consolidated statements of operations, shareholders' equity
and cash flows, in each case of Borrower and its Restricted Subsidiaries
for such Fiscal Year and (ii) consolidating balance sheets and statements
of operations, in each case as at and for the Fiscal Year, all in
reasonable detail. Such financial statements shall be prepared in
accordance with Generally Accepted Accounting Principles, consistently
applied, and such consolidated balance sheet and consolidated statements
shall be accompanied by a report and opinion of KPMG Peat Marwick or
other independent public accountants of recognized standing selected by
Borrower and reasonably satisfactory to the Requisite Lenders, which
report and opinion shall be prepared in accordance with generally
accepted auditing standards as at such date, and shall not be subject to
any qualifications or exceptions as to the
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scope of the audit nor to any other qualification or exception
determined by the Requisite Lenders in their good faith business judgment
to be adverse to the interests of the Lenders. Such accountants' report
and opinion shall be accompanied by a certificate stating that, in making
the examination pursuant to generally accepted auditing standards necessary
for the certification of such financial statements and such report, such
accountants have obtained no knowledge of any Default or, if, in the
opinion of such accountants, any such Default shall exist, stating the
nature and status of such Default, and stating that such accountants have
reviewed Borrower's financial calculations as at the end of such Fiscal
Year (which shall accompany such certificate) under Section 6.12 and 6.13,
have read such Sections (including the definitions of all defined terms
used therein) and that nothing has come to the attention of such
accountants in the course of such examination that would cause them to
believe that the same were not calculated by Borrower in the manner
prescribed by this Agreement;
(c) As soon as practicable, and in any event within 90 days
after the commencement of each Fiscal Year, a budget and projection by
Fiscal Quarter for that Fiscal Year and by Fiscal Year for the next three
succeeding Fiscal Years (but not past the Maturity Date), INCLUDING for
the first such Fiscal Year, projected quarterly consolidated balance
sheets, statement of operations and statements of cash flow and, for the
remaining three Fiscal Years, projected annual consolidated condensed
balance sheets and statements of operations and cash flow, of Borrower
and its Restricted Subsidiaries, all in reasonable detail;
(d) Promptly after request by any Creditor, copies of any
detailed audit reports, management letters or recommendations submitted
to the board of directors (or the audit committee of the board of
directors) of Borrower by independent accountants in connection with the
accounts or books of Borrower or any of its Restricted Subsidiaries, or
any audit of any of them;
(e) As soon as practicable, and in any event within 30 days
after the end of each Fiscal Quarters in each Fiscal Year, a written
report, in form and detail mutually acceptable to Borrower and the
Administrative Agent, with a narrative report describing the results of
operations of Borrower and its Restricted Subsidiaries during such Fiscal
Quarter;
(f) Promptly after the same are available, copies of each
annual report, proxy or financial statement
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or other report or communication sent to the shareholders of Borrower, and
copies of all annual, regular, periodic and special reports and
registration statements which Borrower may file or be required to file with
the Securities and Exchange Commission under Sections 13 or 15(d) of the
Securities Exchange Act of 1934 and not otherwise required to be delivered
to the Lenders pursuant to other provisions of this Section;
(g) Promptly after the same are available, copies of
Borrower's certifications to the Michigan Gaming Control Board of its
compliance with minimum internal controls and other requirements of the
Michigan Gaming Control Board by or on account of Borrower and any
communications to Borrower or any of its Restricted Subsidiaries from any
Gaming Board advising it of a material violation of or material
non-compliance with, any Gaming Law by Borrower or any of its Restricted
Subsidiaries;
(h) Promptly after request by any Creditor, copies of any
other material report or other material document that was filed by
Borrower or any of its Restricted Subsidiaries with any Governmental
Agency;
(i) Promptly upon a Senior Officer of Borrower becoming aware,
and in any event within five Business Days after becoming aware, of the
occurrence of any (i) "reportable event" (as such term is defined in
Section 4043 of ERISA) or (ii) "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code) in
connection with any Pension Plan or any trust created thereunder,
telephonic notice specifying the nature thereof, and, no more than five
Business Days after such telephonic notice, written notice again
specifying the nature thereof and specifying what action Borrower or any
of its Restricted Subsidiaries is taking or proposes to take with respect
thereto, and, when known, any action taken by the Internal Revenue
Service with respect thereto;
(j) As soon as practicable, and in any event within
two Business Days after a Senior Officer of Borrower becomes aware of the
existence of any condition or event which constitutes a Default,
telephonic notice specifying the nature and period of existence thereof,
and, no more than two Business Days after such telephonic notice, written
notice again specifying the nature and period of existence thereof and
specifying what action Borrower or any of its Restricted Subsidiaries are
taking or propose to take with respect thereto;
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(k) Promptly upon a Senior Officer of Borrower becoming aware
that (i) any Person commenced a legal proceeding with respect to a claim
against Borrower or any of its Restricted Subsidiaries that is $5,000,000
or more in excess of the amount thereof that is fully covered by
insurance, (ii) any creditor or lessor under a written credit agreement
or material lease has asserted a default thereunder on the part of
Borrower or any of its Restricted Subsidiaries, (iii) any Person
commenced a legal proceeding with respect to a claim against Borrower or
any of its Restricted Subsidiaries under a contract that is not a credit
agreement or material lease, which claim is in excess of $5,000,000 or
which otherwise may reasonably be expected to result in a Material
Adverse Effect, (iv) any labor union has notified Borrower of its intent
to strike Borrower or any of its Restricted Subsidiaries on a date
certain and has taken any affirmative action in furtherance thereof, or
(v) any Gaming Board has indicated its intent to consider or act upon a
License Revocation or a fine or penalty of $500,000 or more with respect
to Borrower or any of its Restricted Subsidiaries, a written notice
describing the pertinent facts relating thereto and what action Borrower
or its Restricted Subsidiaries are taking or propose to take with respect
thereto;
(l) At such times as the Company Guaranty is in effect
(including during any period of reinstatement), as soon as practicable,
and in any event within two Business Days after a Senior Officer of
Borrower becomes aware thereof, notice of any change in the Company Debt
Ratings from either Moody's or S&P which results in a change in the
Company Rating Level;
(m) At such times as the Company Guaranty is in effect
(including during any period of reinstatement), the Company shall deliver
to the Lenders all annual and quarterly financial statements of the
Company required to be delivered to pursuant to the Company Loan
Agreement, concurrently with their delivery to the lenders under the
Company Loan Agreement;
(n) As soon as practicable, and in any event not less than 10
days (or, if acceptable to the Administrative Agent, a shorter period)
prior to the proposed effective date thereof, written notice of any
proposed material amendment, material modification or material waiver of
the material terms and provisions of any of the Material Documents or the
Plans and Budget;
(o) Promptly and in any event within two Business Days following
the receipt of Borrower any notices under the Lease stating that it is or
may be in
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default thereunder or otherwise demanding compliance with any terms of the
Lease, and concurrently with the delivery by Borrower of any notices to the
Landlord under the Lease, copies of such notices; and
(p) Such other data and information as from time to time may
be reasonably requested by any Creditor through the Administrative Agent.
7.2 COMPLIANCE CERTIFICATES. So long as any Advance remains unpaid, or
any other Obligation remains unpaid or unperformed, or any portion of the
Commitment remains outstanding, Borrower shall deliver to the Administrative
Agent and the Lenders, at Borrower's sole expense, concurrently with the
financial statements required pursuant to Sections 7.1(a) and 7.1(b), a
Compliance Certificate signed on Borrower's behalf by a Senior Officer of
Borrower.
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Article 8
CONDITIONS
8.1 INITIAL ADVANCES, ETC.. The obligation of each Lender to make the
initial Advance to be made by it and the obligation of the Issuing Lender to
issue the initial Letters of Credit, are each subject to the following
conditions precedent, each of which shall be satisfied prior to the making of
the initial Advances (unless all of the Lenders, in their sole and absolute
discretion, shall agree otherwise):
(a) The Administrative Agent shall have received all of the
following, each of which shall be originals unless otherwise specified,
each properly executed by a Responsible Official of each party thereto,
each dated as of the Closing Date and each in form and substance
satisfactory to the Administrative Agent and its legal counsel (unless
otherwise specified or, in the case of the date of any of the following,
unless the Administrative Agent otherwise agrees or directs):
(1) at least one executed counterpart of this Agreement,
together with arrangements satisfactory to the Administrative Agent
for additional executed counterparts, sufficient in number for
distribution to the Lenders and Borrower;
(2) Notes executed by Borrower in favor of each Lender, each
in a principal amount equal to that Lender's Pro Rata Share;
(3) the Company Guaranty executed by the Company;
(4) with respect to Borrower and the Company, such
documentation as the Administrative Agent may require to establish
the due organization, valid existence and good standing of Borrower
and the Company, its qualification to engage in business in each
material jurisdiction in which it is engaged in business or required
to be so qualified, its authority to execute, deliver and perform
any Loan Documents to which it is a Party, the identity, authority
and capacity of each Responsible Official thereof authorized to act
on its behalf, INCLUDING certified copies of articles of
organization and amendments thereto, operating agreements and
amendments thereto, articles of incorporation and amendments
thereto, bylaws and amendments thereto, as applicable, certificates
of good standing and/or qualification to engage in business, tax
clearance
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certificates, certificates of corporate resolutions, incumbency
certificates, Certificates of Responsible Officials, and the like;
(5) the Opinions of Counsel;
(6) the Mortgages executed by Borrower and a related fixture
filing in a form suitable for recordation in the real property
records of Wayne County, Michigan;
(7) the Lease Indemnity executed by the Company with respect
to the Lease;
(8) the Security Agreement executed by Borrower;
(9) such financing statements on Form UCC-1 and Form UCC1-A
executed by Borrower with respect to the Security Agreement as the
Administrative Agent may request;
(10) a certificate of insurance issued by Borrower's insurance
carrier or agent with respect to the insurance required to be
maintained pursuant to the Mortgages, together with lenders' loss
payable endorsements thereof on Form 438BFU or other form acceptable
to the Administrative Agent;
(11) a Certificate of a Senior Officer of Borrower attaching
true, correct and complete copies of each of the Material Documents.
(12) a Request for Loan in compliance with Article 2;
(13) the fee letter described in Sections 3.2, 3.3 and 3.6;
(14) such assurances as the Administrative Agent deems
appropriate that the relevant Gaming Boards have approved the
transactions contemplated by the Loan Documents to the extent that
such approval is required by applicable Gaming Laws;
(15) such assurances as the Administrative Agent deems
appropriate that Borrower has obtained, or will in due course
obtain, all licenses, permits, and necessary approvals of all
relevant Gaming Boards and Governmental Agencies in order to permit
the design, development and construction of the Temporary Project in
accordance with the Development Agreement (it being understood that
no gaming licenses shall be issued by the Michigan Gaming Control
Board with respect to the Temporary Project prior to its substantial
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completion), and that all of such licenses, permits and other
approvals are, or shall when necessary be, in full force and effect;
(16) a Certificate signed by a Senior Officer of Borrower
attaching the Plans and Budget; and
(17) a Certificate of a Responsible Official signed on
Borrower's behalf by a Senior Officer of Borrower certifying that
the conditions specified in Sections 8.1(d) and 8.1(e) have been
satisfied; and
(18) such other assurances, certificates, documents, consents
or opinions as the Administrative Agent reasonably may require,
including without limitation all environmental site assessments as
the Administrative Agent may reasonably require and evidence that
the Temporary Casino is not located in a special flood hazards zone.
(b) The arrangement fee, upfront fees and agency fees payable
pursuant to Sections 3.2, 3.3 and 3.6 shall have been paid.
(c) The reasonable costs and expenses of the Administrative
Agent in connection with the preparation of the Loan Documents payable
pursuant to Section 11.3, and invoiced to Borrower prior to the Closing
Date, shall have been paid.
(d) The representations and warranties of Borrower contained
in Article 4 shall be true and correct.
(e) Borrower and any other Parties shall be in compliance with
all the terms and provisions of the Loan Documents, and after giving
effect to the initial Advance no Default or Event of Default shall have
occurred and be continuing.
(f) The Administrative Agent shall have received the written
assurance of First American Title Insurance Company (acting through First
Title Corporation) that it is prepared to issue its ALTA title policies
of lenders title insurance, insuring the Mortgages as first priority
mortgages with respect to the Temporary Project in the amount of
$75,000,000 (subject to tie-in endorsements as to each such policy),
subject to the Lease and those exceptions to title shown on Schedule B
thereto and with endorsements to title and such reinsurance commitments
as are reasonably acceptable to the Administrative Agent.
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(g) Bank One, Michigan (formerly, NBD Bank) shall have
executed and delivered a Mortgagee Waiver with respect to the Temporary
Casino project site.
8.2 ANY INCREASING ADVANCE, ETC. The obligation of each Lender to make
any Advance which would increase the aggregate principal amount of the
outstanding Advances and the obligation of the Issuing Lender to issue each
Letter of Credit, is subject to the following conditions precedent:
(a) giving effect to the requested Loan or Letter of Credit,
EXCEPT (i) for representations and warranties which expressly speak as of
a particular date or are no longer true and correct as a result of a
change which is not a violation of the Loan Documents and (ii) as
disclosed by Borrower and approved in writing by the Requisite Lenders,
the representations and warranties contained in Article 4 (OTHER THAN
Sections 4.4, 4.6, 4.10, 4.17, and, when the Company Guaranty is not in
effect, the representations set forth in Section 4.1 as to the Company)
shall be true and correct on and as of the date of the Advance as though
made on that date;
(b) there shall not be then pending or threatened any action,
suit, proceeding or investigation against or affecting Borrower or any of
its Restricted Subsidiaries or any Property of any of them before any
Governmental Agency that constitutes a Material Adverse Effect;
(c) the Administrative Agent shall have timely received a
Request for Loan (or telephonic or other request for loan referred to in
the second sentence of Section 2.1(b), if applicable) in compliance with
Article 2 (or, in the proper case, a Request for Letter of Credit); and
(d) the Administrative Agent shall have received, in form and
substance satisfactory to the Administrative Agent, such other
assurances, certificates, documents or consents related to the foregoing
as the Administrative Agent or Requisite Lenders reasonably may require.
8.3 ANY ADVANCE. The obligation of each Lender to make any Advance
(OTHER THAN a Base Rate Advance with respect to a Base Rate Loan which, if made,
would not increase the outstanding principal Indebtedness evidenced by the
Notes), is subject to the conditions precedent that (a) the representations and
warranties contained in Sections 4.1, 4.2,
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4.3, 4.11, 4.12 (but only with respect to Events of Default) and 4.14 shall be
true and correct in all material respects on the date of such Advance as though
made on that date except as disclosed by Borrower and approved in writing by the
Requisite Lenders, and (b) EXCEPT as provided for in Section 2.1(g), the
Administrative Agent shall have timely received a Request for Loan in compliance
with Article 2 (or telephonic or other request for loan referred to in the
second sentence of Section 2.1(b), if applicable).
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Article 9
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
9.1 EVENTS OF DEFAULT. The existence or occurrence of any one or more
of the following events, whatever the reason therefor and under any
circumstances whatsoever, shall constitute an Event of Default:
(a) Borrower (i) fails to pay any principal on any Note, or
any portion thereof, on the date when due, (ii) fails to make any payment
with respect to any Letter of Credit when required by Section 2.4(d),
(A) if an Event of Default otherwise then exists, on the date when due or
(B) if an Event of Default otherwise does not then exist, within
one Business Day after the date when due; or
(b) Borrower fails to pay any interest on any of the Notes, or
any fees under Sections 3.4, 3.5 or 3.6, or any portion thereof, within
five Business Days after the date when due; or fails to pay any other fee
or amount payable to the Lenders under any Loan Document, or any portion
thereof, within five Business Days after demand therefor; or
(c) Borrower fails, immediately upon notice from the
Administrative Agent, to comply with any of the covenants contained in
Article 6 (OTHER THAN the covenants contained in Sections 6.6, 6.7, 6.14
and 6.15);
(d) Borrower fails to comply with Section 7.1(j) in any
respect that is materially adverse to the interests of the Lenders; or
(e) Borrower, any of its Restricted Subsidiaries or any other
Party fails to perform or observe any other covenant or agreement (not
specified in clauses (a), (b), (c) or (d) above) contained in any Loan
Document on its part to be performed or observed within ten Business Days
after the giving of notice by the Administrative Agent on behalf of the
Requisite Lenders of such Default; or
(f) Any representation or warranty of Borrower or any of its
Restricted Subsidiaries or any other Party made in any Loan Document, or
in any certificate or other writing delivered by Borrower, its Restricted
Subsidiaries or any other Party pursuant to any Loan Document, proves to
have been incorrect when made or reaffirmed in any respect that is
materially adverse to the interests of the Lenders; or
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(g) Borrower or any of its Restricted Subsidiaries (i) fails
to pay the principal, or any principal installment, of any present or
future indebtedness for borrowed money of $5,000,000 or more, or any
guaranty of present or future indebtedness for borrowed money of
$5,000,000 or more, on its part to be paid, when due (or within any
stated grace period), whether at the stated maturity, upon acceleration,
by reason of required prepayment or otherwise or (ii) fails to perform or
observe any other term, covenant or agreement on its part to be performed
or observed, or suffers any event to occur, in connection with any
present or future indebtedness for borrowed money of $5,000,000 or more,
or of any guaranty of present or future indebtedness for borrowed money
of $5,000,000 or more, if as a result of such failure or sufferance any
holder or holders thereof (or an agent or trustee on its or their behalf)
has the right to declare such indebtedness due before the date on which
it otherwise would become due; or
(h) (i) Borrower fails to pay any present or future
installment of rent under the Lease when due (or within any stated grace
period), or (ii) Borrower is informed by the Landlord that it has failed
to perform or observe any other term, covenant or agreement on its part
to be performed or observed under the Lease, or that any event of default
has occurred under the Lease, and that as a result of such failure or
sufferance the Landlord has the right to terminate the Lease before its
scheduled termination (or with the giving of any further notice or the
passage of time will have the right to so terminate the Lease unless a
cure is timely affected), or (iii) the Lease is otherwise terminated
prior to the repayment of the Obligations and the termination of the
Commitment (unless Borrower shall have concurrently purchased the fee
interest underlying the Lease from the Landlord); or
(i) At such times as the Company Guaranty is in effect
(including during any period of reinstatement), the Company (i) fails to
pay the principal, or any principal installment, under the Company Loan
Agreement or any other present or future indebtedness for borrowed money
of $100,000,000 or more, or any guaranty of present or future
indebtedness for borrowed money of $100,000,000 or more, on its part to
be paid, when due (or within any stated grace period), whether at the
stated maturity, upon acceleration, by reason of required prepayment or
otherwise or (ii) fails to perform or observe any other term, covenant or
agreement on its part to be performed or observed, or suffers any event
to occur, in connection with any present or future indebtedness for
borrowed money of $100,000,000 or more, or of any guaranty of present or
future indebtedness for borrowed money of $100,000,000 or more, if as a
result of such failure or sufferance any holder or holders thereof (or an
agent or trustee on its or their behalf) has the right to declare such
indebtedness due before the date on which it otherwise would become due;
or
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(j) Any event occurs which gives the holder or holders of any
Subordinated Debt (or an agent or trustee on its or their behalf) the
right to declare such indebtedness due before the date on which it
otherwise would become due, or the right to require the issuer thereof to
redeem or purchase, or offer to redeem or purchase, all or any portion of
any Subordinated Debt; or
(k) Any Loan Document, at any time after its execution and
delivery and for any reason other than the agreement of the Lenders or
satisfaction in full of all the Obligations ceases to be in full force
and effect or is declared by a court of competent jurisdiction to be null
and void, invalid or unenforceable in any respect which, in any such
event in the reasonable opinion of the Requisite Lenders, is materially
adverse to the interests of the Lenders; or any Party thereto denies in
writing that it has any or further liability or obligation under any Loan
Document, or purports in writing to revoke, terminate or rescind same; or
(l) A final judgment against Borrower or any of its Restricted
Subsidiaries is entered for the payment of money in excess of $5,000,000
(or, at such times as the Company Guaranty is in effect (including during
any period of reinstatement), a final judgment against the Company or any
of its Significant Restricted Subsidiaries (as defined in the Company
Loan Agreement as in effect on the date hereof) is entered for the
payment of money in excess of $25,000,000) and, absent procurement of a
stay of execution, such judgment remains unsatisfied for thirty calendar
days after the date of entry of judgment, or in any event later than five
days prior to the date of any proposed sale thereunder; or any writ or
warrant of attachment or execution or similar process is issued or levied
against all or any material part of the Property of any such Person and
is not released, vacated or fully bonded within thirty calendar days
after its issue or levy; or
(m) Borrower or any of its Restricted Subsidiaries (or, at
such time as the Company Guaranty is in effect (including during any
period of reinstatement), the Company or any of its Significant
Restricted Subsidiaries (as defined in the Company Loan Agreement as in
effect on the date hereof)) institutes or consents to the institution of
any proceeding under a Debtor Relief Law relating to it or to all or any
part of its Property, or is unable or admits in writing its inability to
pay its debts as they mature, or makes an assignment for the benefit of
creditors; or applies for or consents to the appointment of any receiver,
trustee, custodian, conser-
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vator, liquidator, rehabilitator or similar officer for it or for all or
any part of its Property; or any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed without the
application or consent of that Person and the appointment continues
undischarged or unstayed for 60 calendar days; or any proceeding under a
Debtor Relief Law relating to any such Person or to all or any part of its
Property is instituted without the consent of that Person and continues
undismissed or unstayed for 60 calendar days; or
(n) The occurrence of an Event of Default (as such term is or
may hereafter be specifically defined in any other Loan Document) under
any other Loan Document; or
(o) Any determination is made by a court of competent
jurisdiction that any Subordinated Debt is not subordinated in accordance
with its terms to the Obligations, PROVIDED THAT for so long as such
determination is effectively stayed during any pending appeal the same
shall not constitute an Event of Default; or
(p) Any Pension Plan maintained by Borrower or any of its
Restricted Subsidiaries is determined to have a material "accumulated
funding deficiency" as that term is defined in Section 302 of ERISA and
the result is a Material Adverse Effect; or
(q) Following the issuance thereof, the occurrence of a
License Revocation with respect to a license issued by any Governmental
Agency of the State of Michigan that continues for five calendar days.
9.2 REMEDIES UPON EVENT OF DEFAULT. Without limiting any other rights
or remedies of the Creditors provided for elsewhere in this Agreement, or the
Loan Documents, or by applicable Law, or in equity, or otherwise:
(a) Upon the occurrence, and during the continuance, of any
Event of Default OTHER THAN an Event of Default described in
Section 9.1(m):
(1) the commitment to make Advances and all other obligations
of the Creditors and all rights of Borrower and any other Parties
under the Loan Documents shall be suspended without notice to or
demand upon Borrower, which are expressly waived by Borrower, EXCEPT
that all of the Lenders or the Requisite Lenders (as the case may
be, in accordance with Section 11.2) may waive an Event of Default
or, without waiving, determine, upon terms and conditions
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satisfactory to the Lenders or Requisite Lenders, as the case may
be, to reinstate the Commitment and make further Advances, which
waiver or determination shall apply equally to, and shall be binding
upon, all the Lenders; and
(2) the Requisite Lenders may request the Administrative Agent
to, and the Administrative Agent thereupon shall, terminate the
Commitment, demand that Borrower deposit cash collateral for all
Letters of Credit in the amount thereof with the Issuing Lender
and/or declare all or any part of the unpaid principal of all Notes,
all interest accrued and unpaid thereon and all other amounts
payable under the Loan Documents to be forthwith due and payable,
whereupon the same shall become and be forthwith due and payable,
without protest, presentment, notice of dishonor, demand or further
notice of any kind, all of which are expressly waived by Borrower.
(b) Upon the occurrence of any Event of Default described in
Section 9.1(m):
(1) the commitment to make Advances and all other obligations
of the Creditors and all rights of Borrower and any other Parties
under the Loan Documents shall terminate without notice to or demand
upon Borrower, which are expressly waived by Borrower, EXCEPT that
all the Lenders may waive the Event of Default or, without waiving,
determine, upon terms and conditions satisfactory to all the
Lenders, to reinstate the Commitment and make further Advances,
which determination shall apply equally to, and shall be binding
upon, all the Lenders; and
(2) the unpaid principal of all Notes, all interest accrued
and unpaid thereon and all other amounts payable under the Loan
Documents shall be forthwith due and payable, without protest,
presentment, notice of dishonor, demand or further notice of any
kind, all of which are expressly waived by Borrower, and Borrower
shall be obligated to immediately deposit cash collateral for all
Letters of Credit with the Issuing Lender in the amount thereof.
(c) Upon the occurrence of any Event of Default, the
Creditors, or any of them, without notice to (EXCEPT as expressly
provided for in any Loan Document) or demand upon Borrower, which are
expressly waived by Borrower (EXCEPT as to notices expressly provided for
in any Loan Document), may proceed (but only with the consent
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of the Requisite Lenders) to protect, exercise and enforce their rights
and remedies under the Loan Documents against Borrower and any other Party
and such other rights and remedies as are provided by Law or equity.
(d) In addition to any other rights and remedies, if an Event
of Default occurs prior to the Opening Date for the Temporary Project,
the Creditors shall have the right, subject to applicable Laws, to take
possession of the Temporary Project, whether in person or through a
designee or receiver, and take such steps as the Creditors reasonably
deem necessary or appropriate to complete construction of the Temporary
Project, INCLUDING making any changes to the construction plans, budget
or timetable and/or terminating or amending any of the architects
contracts, engineering contracts, construction contracts or any other
contract or arrangement related to the Temporary Project; PROVIDED,
however, that the Administrative Agent shall be responsible for any
breach of contract resulting from any such change, termination or
amendment. Any such action shall not be construed as an assumption of
responsibility by the Creditors to complete the Temporary Project, and
such steps may be discontinued at any time. Any such action shall not be
construed to make any of the Creditors a partner or joint venturer with
Borrower or any of Borrower's Affiliates. All amounts expended by the
Creditors for the completion of the Temporary Project shall be deemed
additional Advances and shall be secured by the Collateral Documents.
(e) The order and manner in which the Lenders' rights and
remedies are to be exercised shall be determined by the Requisite Lenders
in their sole discretion, and all payments received by the Creditors,
shall be applied first to the costs and expenses (including attorneys'
fees and disbursements and the allocated costs of attorneys employed by
the Administrative Agent) of the Creditors, and thereafter paid pro rata
to the Lenders in the same proportions that the aggregate Obligations
owed to each Lender under the Loan Documents bear to the aggregate
Obligations owed under the Loan Documents to all the Lenders, without
priority or preference among the Lenders. Regardless of how each Lender
may treat payments for the purpose of its own accounting, for the purpose
of computing Borrower's Obligations hereunder and under the Notes,
payments shall be applied FIRST, to the costs and expenses of the
Creditors, as set forth above, SECOND, to the payment of accrued and
unpaid interest due under any Loan Documents to and including the date of
such application (ratably, and without duplication, according to the
accrued and unpaid interest due under each of the Loan Documents), and
THIRD, to the payment of all other amounts (including principal and fees)
then owing to the Creditors under the Loan Documents. No application of
payments will cure any Event of Default, or prevent acceleration, or
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continued acceleration, of amounts payable under the Loan Documents, or
prevent the exercise, or continued exercise, of rights or remedies of the
Lenders hereunder or thereunder or at Law or in equity.
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Article 10
THE ADMINISTRATIVE AGENT
10.1 APPOINTMENT AND AUTHORIZATION. Each Creditor hereby irrevocably
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to the Administrative Agent by the terms thereof or are reasonably incidental,
as determined by the Administrative Agent, thereto. This appointment and
authorization is intended solely for the purpose of facilitating the servicing
of the Loans and does not constitute appointment of the Administrative Agent as
trustee for any Lender or as representative of any Lender for any other purpose
and, EXCEPT as specifically set forth in the Loan Documents to the contrary, the
Administrative Agent shall take such action and exercise such powers only in an
administrative and ministerial capacity.
10.2 ADMINISTRATIVE AGENT AND AFFILIATES. Bank of America (and each
successor Administrative Agent) has the same rights and powers under the Loan
Documents as any other Lender and may exercise the same as though it was not the
Administrative Agent, and the term "Lender" or "Lenders" includes Bank of
America in its individual capacity. Bank of America (and each successor
Administrative Agent) and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of banking, trust or other business with
Borrower, any Restricted Subsidiary thereof, or any Affiliate of Borrower or any
Restricted Subsidiary thereof, as if it was not the Administrative Agent and
without any duty to account therefor to the Lenders. Bank of America (and each
successor Administrative Agent) need not account to any other Lender for any
monies received by it for reimbursement of its costs and expenses as
Administrative Agent hereunder, or for any monies received by it in its capacity
as a Lender hereunder. The Administrative Agent shall not be deemed to hold a
fiduciary relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Administrative Agent.
10.3 PROPORTIONATE INTEREST IN ANY COLLATERAL. The Administrative
Agent, on behalf of all the Lenders, shall hold in accordance with the Loan
Documents all items of any collateral or interests therein received or held by
the Administrative Agent. Subject to the Administrative Agent's and the
Lenders' rights to reimbursement for their costs and expenses hereunder
(INCLUDING attorneys' fees and disbursements and other professional services and
the allocated costs of attorneys employed by the Administrative Agent or a
Lender) and subject to the application of payments in accordance with
Sec-
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tion 9.2(d), each Lender shall have an interest in the Lenders' interest in
any collateral or interests therein in the same proportions that the aggregate
Obligations owed such Lender under the Loan Documents bear to the aggregate
Obligations owed under the Loan Documents to all the Lenders, without priority
or preference among the Lenders.
10.4 LENDERS' CREDIT DECISIONS. Each Creditor agrees that it has,
independently and without reliance upon the Administrative Agent, any other
Creditor or the directors, officers, agents, employees or attorneys of any other
Creditor, and instead in reliance upon information supplied to it by or on
behalf of Borrower and upon such other information as it has deemed appropriate,
made its own independent credit analysis and decision to enter into this
Agreement. Each Creditor also agrees that it shall, independently and without
reliance upon any other Creditor or the directors, officers, agents, employees
or attorneys of any other Creditor, continue to make its own independent credit
analyses and decisions in acting or not acting under the Loan Documents.
10.5 ACTION BY ADMINISTRATIVE AGENT.
(a) The Administrative Agent and the Issuing Lender may assume that
no Default or Event of Default has occurred and is continuing, unless they have
received notice from Borrower stating the nature of the Default or Event of
Default or have received notice from a Lender stating the nature of the Default
or Event of Default and that such Lender considers the Default or Event of
Default to have occurred and to be continuing.
(b) The Administrative Agent has only those obligations under the
Loan Documents as are expressly set forth therein.
(c) EXCEPT for any obligation expressly set forth in the Loan
Documents and as long as the Administrative Agent may assume that no Event of
Default has occurred and is continuing, the Administrative Agent may, but shall
not be required to, exercise its discretion to act or not act, EXCEPT that the
Administrative Agent shall be required to act or not act upon the instructions
of the Requisite Lenders (or of all the Lenders, to the extent required by
Section 11.2) and those instructions shall be binding upon the Administrative
Agent and all the Lenders, PROVIDED that the Administrative Agent shall not be
required to act or not act if to do so would be contrary to any Loan Document or
to applicable Law or would result, in the reasonable judgment of the
Administrative Agent, in substantial risk of liability to the Administrative
Agent.
(d) If the Administrative Agent has received a notice specified in
clause (a), the Administrative Agent shall
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immediately give notice thereof to the Lenders and shall act or not act upon the
instructions of the Requisite Lenders (or of all the Lenders, to the extent
required by Section 11.2), PROVIDED that the Administrative Agent shall not be
required to act or not act if to do so would be contrary to any Loan Document or
to applicable Law or would result, in the reasonable judgment of the
Administrative Agent, in substantial risk of liability to the Administrative
Agent, and EXCEPT that if the Requisite Lenders (or all the Lenders, if required
under Section 11.2) fail, for five Business Days after the receipt of notice
from the Administrative Agent, to instruct the Administrative Agent, then the
Administrative Agent, in its sole discretion, may act or not act as it deems
advisable for the protection of the interests of the Creditors.
(e) The Administrative Agent shall have no liability to any
Creditor for acting, or not acting, as instructed by the Requisite Lenders (or
all the Lenders, if required under Section 11.2), notwithstanding any other
provision hereof.
10.6 LIABILITY OF ADMINISTRATIVE AGENT. Neither the Administrative
Agent nor any of its directors, officers, agents, employees or attorneys shall
be liable for any action taken or not taken by them under or in connection with
the Loan Documents, EXCEPT for their own gross negligence or willful misconduct.
Without limitation on the foregoing, the Administrative Agent and its directors,
officers, agents, employees and attorneys:
(a) May treat the payee of any Note as the holder thereof
until the Administrative Agent receives notice of the assignment or
transfer thereof, in form satisfactory to the Administrative Agent, signed
by the payee, and may treat each Lender as the owner of that Lender's
interest in the Obligations for all purposes of this Agreement until the
Administrative Agent receives notice of the assignment or transfer thereof,
in form satisfactory to the Administrative Agent, signed by that Lender.
(b) May consult with legal counsel (INCLUDING in-house legal
counsel), accountants (INCLUDING in-house accountants) and other
professionals or experts selected by it, or with legal counsel, accountants
or other professionals or experts for Borrower and/or its Restricted
Subsidiaries or the Lenders, and shall not be liable for any action taken
or not taken by it in good faith in accordance with any advice of such
legal counsel, accountants or other professionals or experts.
(c) Shall not be responsible to any Lender for any statement,
warranty or representation made in any of
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the Loan Documents or in any notice, certificate, report, request or other
statement (written or oral) given or made in connection with any of the
Loan Documents.
(d) EXCEPT to the extent expressly set forth in the Loan
Documents, shall have no duty to ask or inquire as to the performance or
observance by Borrower or its Restricted Subsidiaries of any of the terms,
conditions or covenants of any of the Loan Documents or to inspect any
collateral or the Property, books or records of Borrower or its Restricted
Subsidiaries.
(e) Will not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, effectiveness,
sufficiency or value of any Loan Document, any other instrument or writing
furnished pursuant thereto or in connection therewith, or any collateral.
(f) Will not incur any liability by acting or not acting in
reliance upon any Loan Document, notice, consent, certificate, statement,
request or other instrument or writing believed by it to be genuine and
signed or sent by the proper party or parties.
(g) Will not incur any liability for any arithmetical error in
computing any amount paid or payable by Borrower or any Restricted
Subsidiary or Affiliate thereof or paid or payable to or received or
receivable from any Lender under any Loan Document, INCLUDING, without
limitation, principal, interest, commitment fees, Advances and other
amounts; PROVIDED that, promptly upon discovery of such an error in
computation, the Creditors (and, to the extent applicable Borrower and/or
its Restricted Subsidiaries or Affiliates) shall make such adjustments as
are necessary to correct such error and to restore the parties to the
position that they would have occupied had the error not occurred.
10.7 INDEMNIFICATION. Each Lender shall, ratably in accordance with its
Pro Rata Share, indemnify and hold the Administrative Agent, the Lead Arranger
and their respective directors, officers, agents, employees and attorneys
harmless against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (INCLUDING, without limitation, attorneys' fees and
disbursements and allocated costs of attorneys employed by the Administrative
Agent or the Lead Arranger) that may be imposed on, incurred by or asserted
against it or them in any way relating to or arising out of the Loan Documents
(other than losses incurred by reason of the failure of Borrower to pay the
indebtedness
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represented by the Notes) or any action taken or not taken by it as
Administrative Agent and the Lead Arranger thereunder, EXCEPT such as result
from their own gross negligence or willful misconduct. Without limitation on
the foregoing, each Lender shall reimburse the Administrative Agent and the Lead
Arranger upon demand for that Lender's Pro Rata Share of any out-of-pocket cost
or expense incurred by the Administrative Agent or the Lead Arranger in
connection with the negotiation, preparation, execution, delivery, amendment,
waiver, restructuring, reorganization (INCLUDING a bankruptcy reorganization),
enforcement or attempted enforcement of the Loan Documents, to the extent that
Borrower or any other Party is required by Section 11.3 to pay that cost or
expense but fails to do so upon demand. Nothing in this Section 10.7 shall
entitle the Administrative Agent or the Lead Arranger to recover any amount from
the Lenders if and to the extent that such amount has theretofore been recovered
from Borrower or any of its Restricted Subsidiaries, and the Administrative
Agent shall promptly refund to the Lenders any amount for which it is
indemnified for which it later receives duplicative reimbursement.
10.8 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may, and
at the request of the Requisite Lenders shall, resign as Administrative Agent
upon thirty days notice to the Lenders and Borrower. If the Administrative
Agent shall resign as Administrative Agent under this Agreement, the Requisite
Lenders shall appoint from among the Lenders a successor administrative agent
for the Lenders, which successor administrative agent shall be approved by
Borrower (and such approval shall not be unreasonably withheld). If no
successor administrative agent is appointed prior to the effective date of the
resignation of the Administrative Agent, the Administrative Agent may appoint,
after consulting with the Lenders and Borrower, a successor administrative agent
from among the Lenders. Upon the acceptance of its appointment as successor
administrative agent hereunder, such successor administrative agent shall
succeed to all the rights, powers and duties of the retiring Administrative
Agent and the term "Administrative Agent" shall mean such successor
administrative agent and the retiring Administrative Agent's appointment, powers
and duties as Administrative Agent shall be terminated (except for any
liabilities incurred prior to such termination). After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article 10, and Sections 11.3, 11.11 and 11.23, shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If (a) the Administrative Agent has
not been paid its agency fees under Section 3.6 or has not been reimbursed for
any expense reimbursable to it under Section 11.3, in either case for a period
of at least one (1) year and (b) no
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successor administrative agent has accepted appointment as Administrative Agent
by the date which is thirty days following a retiring Administrative Agent's
notice of resignation, the retiring Administrative Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Requisite Lenders appoint a successor administrative agent as provided for
above.
10.9 NO OBLIGATIONS OF BORROWER. Nothing contained in this Article 10
shall be deemed to impose upon Borrower any obligation in respect of the due and
punctual performance by the Administrative Agent of its obligations to the
Lenders under any provision of this Agreement, and Borrower shall have no
liability to any Creditor in respect of any failure by any Creditor to perform
any of its obligations to any other Creditor under this Agreement. Without
limiting the generality of the foregoing, where any provision of this Agreement
relating to the payment of any amounts due and owing under the Loan Documents
provides that such payments shall be made by Borrower to the Administrative
Agent for the account of any Creditor, Borrower's obligations to the Lenders in
respect of such payments shall be deemed to be satisfied upon the making of such
payments to the Administrative Agent in the manner provided by this Agreement.
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Article 11
MISCELLANEOUS
11.1 CUMULATIVE REMEDIES; NO WAIVER. The rights, powers,
privileges and remedies of the Creditors provided herein or in any Note or
other Loan Document are cumulative and not exclusive of any right, power,
privilege or remedy provided by Law or equity. No failure or delay on the
part of any Creditor in exercising any right, power, privilege or remedy may
be, or may be deemed to be, a waiver thereof; nor may any single or partial
exercise of any right, power, privilege or remedy preclude any other or
further exercise of the same or any other right, power, privilege or remedy.
The terms and conditions of Article 8 hereof are inserted for the sole
benefit of the Creditors; the same may be waived in whole or in part, with or
without terms or conditions, in respect of any Loan or Letter of Credit
without prejudicing the Creditors rights to assert them in whole or in part
in respect of any other Loan or Letter of Credit.
11.2 AMENDMENTS; CONSENTS. No amendment, modification, supplement,
extension, termination or waiver of any provision of this Agreement or any
other Loan Document, no approval or consent thereunder, and no consent to any
departure by Borrower or any other Party therefrom, may in any event be
effective unless in writing signed by the Requisite Lenders (and, in the case
of any amendment, modification or supplement of or to any Loan Document to
which Borrower is a party, signed by Borrower and, in the case of any
amendment, modification or supplement to Article 10, signed by the
Administrative Agent), and then only in the specific instance and for the
specific purpose given; and, without the approval in writing of all the
Lenders, no amendment, modification, supplement, termination, waiver or
consent may be effective:
(a) To amend or modify the principal of, or the amount of
principal, principal prepayments or the rate of interest payable on,
any Note, or the amount of the Commitment or the Pro Rata Share of any
Lender or the amount of any Letter of Credit Fee or commitment fee
payable to any Lender, or any other fee or amount payable to the
Creditors under the Loan Documents or to waive an Event of Default
consisting of the failure of Borrower to pay when due principal,
interest or any commitment fee or letter of credit fee;
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(b) To postpone any date fixed for any payment of principal
of, prepayment of principal of or any installment of interest on, any
Note or any installment of any commitment fee or letter of credit fee,
or to extend the term of the Commitment;
(c) When any Default or Event of Default exists, to release
any Restricted Subsidiary from its obligations under any guarantee
entered into by such Restricted Subsidiary pursuant to Section 5.10;
(d) To amend the provisions of the definition of "REQUISITE
LENDERS", Articles 8 or 9 or this Section 11.2 or to amend or waive
Section 6.4;
(e) To release either of the Mortgages or any material portion
of the Collateral from the Lien of the Loan Documents except for any
releases which are expressly provided for in the Loan Documents,
provided that when no Default or Event of Default exists, the
Administrative Agent may release its Lien upon any Collateral which is
sold, transferred or otherwise disposed of by Borrower and its
Restricted Subsidiaries in any transaction which is not prohibited by
the Loan Documents;
(f) To release the Company Guaranty or the Lease Indemnity,
except in the manner contemplated by Section 11.25; or
(g) To amend any provision of this Agreement that expressly
requires the consent or approval of all the Lenders.
Any amendment, modification, supplement, termination, waiver or consent pursuant
to this Section 11.2 shall apply equally to, and shall be binding upon, all of
the Creditors.
11.3 COSTS, EXPENSES AND TAXES. Borrower shall pay upon demand,
accompanied by an invoice therefor, the reasonable costs and expenses of the
Administrative Agent and the Lead Arranger in connection with the negotiation,
preparation, syndication, execution and delivery of the Loan Documents and any
amendment thereto or waiver thereof. Borrower shall also pay on demand,
accompanied by an invoice therefor, the reasonable costs and expenses of the
Creditors in connection with the refinancing, restructuring, reorganization
(INCLUDING a bankruptcy reorganization) and enforcement or attempted enforcement
of the Loan Documents, and any matter related thereto. The foregoing costs and
expenses shall include filing fees, recording fees, title insurance fees,
appraisal fees, search fees, and other out-of-pocket expenses and the reasonable
fees and out-of-pocket expenses of any legal counsel
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(INCLUDING allocated costs of legal counsel employed by any Creditor),
independent public accountants and other outside experts retained by any of
the Creditors, whether or not such costs and expenses are incurred or
suffered by the Creditors in connection with or during the course of any
bankruptcy or insolvency proceedings of Borrower or any Restricted Subsidiary
thereof. Such costs and expenses shall also include, in the case of any
amendment or waiver of any Loan Document requested by Borrower, the
administrative costs of the Administrative Agent and the Issuing Lender
reasonably attributable thereto. Borrower shall pay any and all documentary
and other taxes, EXCLUDING, in the case of each Creditor and any Affiliate or
Eurodollar Lending Office thereof, (i) taxes imposed on or measured in whole
or in part by its net income, gross income or gross receipts or capital and
franchise taxes imposed on it, (ii) any withholding taxes or other taxes
based on gross income (other than withholding taxes and taxes based on gross
income resulting from or attributable to any change in any law, rule or
regulation or any change in the interpretation or administration of any law,
rule or regulation by any governmental authority) or (iii) any withholding
taxes or other taxes based on gross income for any period with respect to
which it has failed to provide Borrower with the appropriate form or forms
required by Section 11.22, to the extent such forms are then required by
applicable Laws, and all costs, expenses, fees and charges payable or
determined to be payable in connection with the filing or recording of this
Agreement, any other Loan Document or any other instrument or writing to be
delivered hereunder or thereunder, or in connection with any transaction
pursuant hereto or thereto, and shall reimburse, hold harmless and indemnify
the Creditors from and against any and all loss, liability or legal or other
expense with respect to or resulting from any delay in paying or failure to
pay any such tax, cost, expense, fee or charge or that any of them may suffer
or incur by reason of the failure of any Party to perform any of its
Obligations. Any amount payable to the Creditors under this Section 11.3
shall bear interest from the second Business Day following the date of demand
for payment at the Default Rate.
11.4 NATURE OF LENDERS' OBLIGATIONS. The obligations of the Lenders
hereunder are several and not joint or joint and several. Nothing contained in
this Agreement or any other Loan Document and no action taken by the Creditors
or any of them pursuant hereto or thereto may, or may be deemed to, make the
Creditors a partnership, an association, a joint venture or other entity, either
among themselves or with Borrower or any Affiliate of Borrower. Each Lender's
obligation to make any Advance pursuant hereto is several and not joint or joint
and several, and in the case of the initial Advance only is conditioned upon the
performance by all other Lenders of their obligations to make initial Advances.
A default by any Lender
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will not increase the Pro Rata Share attributable to any other Lender. Any
Lender not in default may, if it desires, assume in such proportion as a
majority in interest of the nondefaulting Lenders agree the obligations of
any Lender in default, but is not obligated to do so. The Administrative
Agent agrees that it will use its best efforts either to induce the other
Lenders to assume the obligations of a Lender in default or to obtain another
Lender, reasonably satisfactory to Borrower, to replace such a Lender in
default.
11.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained herein or in any other Loan Document, or in any
certificate or other writing delivered by or on behalf of any one or more of the
Parties to any Loan Document, will survive the making of the Loans hereunder and
the execution and delivery of the Notes, and have been or will be relied upon by
the Creditors, notwithstanding any investigation made by the Creditors or on
their behalf.
11.6 NOTICES. EXCEPT as otherwise expressly provided in the Loan
Documents, all notices, requests, demands, directions and other communications
provided for hereunder or under any other Loan Document must be in writing and
must be mailed, telegraphed, telecopied or delivered to the appropriate party at
the address set forth on the signature pages of this Agreement or other
applicable Loan Document or, as to any party to any Loan Document, at any other
address as may be designated by it in a written notice sent to all other parties
to such Loan Document in accordance with this Section. EXCEPT as otherwise
expressly provided in any Loan Document, if any notice, request, demand,
direction or other communication required or permitted by any Loan Document is
given by mail it will be effective on the earlier of receipt or the third
calendar day after deposit in the United States mail with first class or airmail
postage prepaid; if given by telegraph or cable, when delivered to the telegraph
company with charges prepaid; if given by telecopier, when sent; or if given by
personal delivery, when delivered.
11.7 EXECUTION OF LOAN DOCUMENTS. Unless the Administrative Agent
otherwise specifies with respect to any Loan Document, (a) this Agreement and
any other Loan Document may be executed in any number of counterparts and any
party hereto or thereto may execute any counterpart, each of which when executed
and delivered will be deemed to be an original and all of which counterparts of
this Agreement or any other Loan Document, as the case may be, when taken
together will be deemed to be but one and the same instrument and (b) execution
of any such counterpart may be evidenced by a telecopier transmission of the
signature of such party. The execution of this Agreement or any other Loan
Document by any party hereto or thereto will not become effective until
counterparts hereof
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or thereof, as the case may be, have been executed by all the parties hereto
or thereto.
11.8 BINDING EFFECT; ASSIGNMENT.
(a) This Agreement and the other Loan Documents to which Borrower
is a Party will be binding upon and inure to the benefit of Borrower, the
Creditors, and their respective successors and assigns, EXCEPT that except as
permitted in Section 6.3, Borrower may not assign its rights hereunder or
thereunder or any interest herein or therein without the prior written consent
of all the Lenders. Each Lender represents that it is not acquiring its Note
with a view to the distribution thereof within the meaning of the Securities Act
of 1933, as amended (subject to any requirement that disposition of such Note
must be within the control of such Lender). Any Lender may at any time pledge
its Note or any other instrument evidencing its rights as a Lender under this
Agreement to a Federal Reserve Bank, but no such pledge shall release that
Lender from its obligations hereunder or grant to such Federal Reserve Bank the
rights of a Lender hereunder absent foreclosure of such pledge.
(b) From time to time following the Closing Date, each Lender may
assign to one or more Eligible Assignees all or any portion of its Pro Rata
Share and its Notes; PROVIDED that (i) such Eligible Assignee, if not then a
Lender or an Affiliate of the assigning Lender having a combined capital and
surplus in excess of $100,000,000, shall be approved by each of the
Administrative Agent (which approval shall not be unreasonably withheld) and
Borrower (which approval shall not be unreasonably withheld and will not be
required if an Event of Default has occurred and remains continuing), (ii) such
assignment shall be evidenced by an Assignment Agreement, a copy of which shall
be furnished to the Administrative Agent, (iii) EXCEPT in the case of an
assignment to an Affiliate of the assigning Lender, to another Lender or of the
entire remaining Commitment of the assigning Lender, the assignment shall not
assign a Pro Rata Share which is less than $3,000,000, (iv) the effective date
of any such assignment shall be as specified in the Assignment Agreement, but
not earlier than the date which is five Business Days after the date the
Administrative Agent has received the Assignment Agreement, and (v) any
necessary approvals of Michigan Gaming Boards shall have been obtained. Upon
the effective date of such Assignment Agreement, the Eligible Assignee named
therein shall be a Lender for all purposes of this Agreement, with the Pro Rata
Share therein set forth and, to the extent of such Pro Rata Share, the assigning
Lender shall be released from its further obligations under this Agreement and
the other Loan Documents. Borrower agrees that it shall execute and deliver
(against delivery by the assigning Lender to Borrower of its
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Notes) to such assignee Lender, Notes evidencing that assignee Lender's Pro
Rata Share, and to the assigning Lender, Notes evidencing the remaining
balance Pro Rata Share retained by the assigning Lender.
(c) By executing and delivering an Assignment Agreement, the
Eligible Assignee thereunder acknowledges and agrees that: (i) other than the
representation and warranty that it is the legal and beneficial owner of the Pro
Rata Share being assigned thereby free and clear of any adverse claim, the
assigning Lender has made no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness or sufficiency of this Agreement or any
other Loan Document; (ii) the assigning Lender has made no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrower or its Restricted Subsidiaries or the performance by Borrower or its
Restricted Subsidiaries of the Obligations; (iii) it has received a copy of this
Agreement and the other Loan Documents, together with copies of the most recent
financial statements delivered pursuant to Section 7.1 and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment Agreement; (iv) it will, independently
and without reliance upon any other Creditor and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) it
appoints and authorizes the Administrative Agent to take such action and to
exercise such powers under this Agreement and the Loan Documents as are
delegated to the Administrative Agent by this Agreement; and (vi) it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain a copy of each
Assignment Agreement delivered to it. After receipt of a completed Assignment
Agreement executed by any Lender and an Eligible Assignee, and receipt of an
assignment fee of $2,500 from such Eligible Assignee, the Administrative Agent
shall, promptly following the effective date thereof, provide to Borrower and
the Lenders a revised Schedule 1.1 giving effect thereto.
(e) Each Lender may from time to time grant participations in a
portion of its Pro Rata Share to one or more banks or other financial
institutions or trusts (INCLUDING another Lender); PROVIDED, HOWEVER, that
(i) such Lender's obligations under the Loan Documents shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other
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parties hereto for the performance of such obligations, (iii) the
participating banks or other financial institutions shall not be a Lender
hereunder for any purpose EXCEPT, if the participation agreement so provides,
for the purposes of Sections 3.7, 3.8, 11.11 and 11.25 but only to the extent
that the cost of such benefits to Borrower does not exceed the cost which
Borrower would have incurred in respect of such Lender absent the
participation, (iv) Borrower and the other Creditors shall continue to deal
solely and directly with such Lender in connection with such Lender's rights
and obligations under this Agreement, (v) the participation interest shall
not restrict an increase in the Commitment, or in the granting Lender's Pro
Rata Share, so long as the amount of the participation interest is not
affected thereby, and (vi) the consent of the holder of such participation
interest shall not be required for amendments or waivers of provisions of the
Loan Documents OTHER THAN those which (A) extend the Maturity Date or any
other date upon which any payment of money is due to the Lenders, (B) reduce
the rate of interest on the Notes, any fee or any other monetary amount
payable to the Lenders, (C) reduce the amount of any installment of principal
due under the Notes, (D) change the definition of "Requisite Lenders", or (E)
increase the Commitment, or the granting Lender's Pro Rata Share, if the
amount of the participation interest is affected thereby.
(f) Notwithstanding anything in this Section to the contrary, the
rights of the Lenders to make assignment of, and grant participations in, their
Pro Rata Share of the Commitment shall be subject to the approval of any Gaming
Board, to the extent required by applicable Gaming Laws.
(g) Notwithstanding anything to the contrary contained herein but
subject to the provisions of applicable Gaming Laws, any Lender (a "Granting
Lender") may grant to a special purpose funding vehicle (an "SPC") of such
Granting Lender, identified as such in writing from time to time by the Granting
Lender to the Administrative Agent and the Borrower, the option to provide to
the Borrower all or any part of any Loan that such Granting Lender would
otherwise be obligated to make to the Borrower pursuant to Sections 2.1, 2.2,
2.3 or 2.5, provided that (i) nothing herein shall constitute a commitment to
make any Loan by any SPC and (ii) if an SPC elects not to exercise such option
or otherwise fails to provide all or any part of such Loan, the Granting Lender
shall be obligated to make such Loan pursuant to the terms hereof. The making
of a Loan by an SPC hereunder shall utilize the Commitment of the Granting
Lender to the same extent, and as if, such Loan were made by the Granting
Lender. Each party hereto hereby agrees that no SPC shall be liable for any
indemnity or similar payment obligation under this Agreement (all liability for
which shall remain with the related Granting Lender). In
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furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to
the date that is one year and one day after the payment in full of all
outstanding senior indebtedness of any SPC, it will not institute against,
or join any other person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or similar
proceedings under the laws of the United States or any State thereof,
PROVIDED THAT the Granting Lender for each SPC hereby agrees to indemnify,
save, and hold harmless each other party hereto for any loss, cost, damage
and expense arising out of their inability to institute any such proceeding
against its SPC. In addition, notwithstanding anything to the contrary
contained in this Section 11.8, any SPC may (i) with notice to, but without
the prior written consent of, the Borrower or the Administrative Agent and
without paying any processing fee therefor, assign all or a portion of its
interests in any Loans to its Granting Lender or to any financial
institutions providing liquidity and/or credit facilities to or for the
account of such SPC to fund the Loans made by such SPC or to support the
securities (if any) issued by such SPC to fund such Loans (but nothing
contained herein shall be construed in derogation of the obligation of the
Granting Lender to make Loans hereunder), PROVIDED THAT neither the consent
of the SPC or of any such assignee shall be required for amendments or
waivers of provisions of the Loan Documents except for those amendments or
waivers for which the consent of participants is required under Section
11.8(e)(vi), and (ii) disclose on a confidential basis (in the same manner
described in Section 11.14) any non-public information relating to its Loans
to any rating agency, commercial paper dealer or provider of a surety,
guarantee or credit or liquidity enhancement to such SPC.
11.9 RIGHT OF SETOFF. If an Event of Default has occurred and is
continuing, each of the Creditors (but only with the consent of the Requisite
Lenders) may exercise its rights under Article 9 of the Uniform Commercial Code
and other applicable Laws and, to the extent permitted by applicable Laws, apply
any funds in any deposit account maintained with it by Borrower and any Property
of Borrower in its possession against the Obligations.
11.10 SHARING OF SETOFFS. Each Lender severally agrees that if it,
through the exercise of any right of setoff, banker's lien or counterclaim
against Borrower, or otherwise, receives payment of the Obligations held by it
that is ratably more than any other Lender, through any means, receives in
payment of the Obligations held by that Lender, then, subject to applicable
Laws: (a) The Lender exercising the right of setoff, banker's lien or
counterclaim or otherwise receiving such payment shall purchase, and shall be
deemed to have
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simultaneously purchased, from the other Lenders a participation in the
Obligations held by the other Lenders and shall pay to the other Lenders a
purchase price in an amount so that the share of the Obligations held by each
Lender after the exercise of the right of setoff, banker's lien or
counterclaim or receipt of payment shall be in the same proportion that
existed prior to the exercise of the right of setoff, banker's lien or
counterclaim or receipt of payment; and (b) Such other adjustments and
purchases of participations shall be made from time to time as shall be
equitable to ensure that all of the Lenders share any payment obtained in
respect of the Obligations ratably in accordance with each Lender's share of
the Obligations immediately prior to, and without taking into account, the
payment; PROVIDED that, if all or any portion of a disproportionate payment
obtained as a result of the exercise of the right of setoff, banker's lien,
counterclaim or otherwise is thereafter recovered from the purchasing Lender
by Borrower or any Person claiming through or succeeding to the rights of
Borrower, the purchase of a participation shall be rescinded and the purchase
price thereof shall be restored to the extent of the recovery, but without
interest. Each Lender that purchases a participation in the Obligations
pursuant to this Section shall from and after the purchase have the right to
give all notices, requests, demands, directions and other communications
under this Agreement with respect to the portion of the Obligations purchased
to the same extent as though the purchasing Lender were the original owner of
the Obligations purchased. Borrower expressly consents to the foregoing
arrangements and agrees that any Lender holding a participation in an
Obligation so purchased may exercise any and all rights of setoff, banker's
lien or counterclaim with respect to the participation as fully as if the
Lender were the original owner of the Obligation purchased.
11.11 INDEMNITY BY BORROWER. Borrower agrees to indemnify, save and
hold harmless each of the Creditors and the Lead Arranger and their Affiliates,
directors, officers, agents, attorneys and employees (collectively the
"INDEMNITEES") from and against: (a) Any and all claims, demands, actions or
causes of action (EXCEPT a claim, demand, action, or cause of action for any
amount excluded from the definition of "Taxes" in Section 3.12(d)) if the claim,
demand, action or cause of action arises out of or relates to any act or
omission (or alleged act or omission) of Borrower, its Affiliates or any of its
officers, directors or shareholders relating to the Commitment, the use or
contemplated use of proceeds of any Loan or Letter of Credit, or the
relationship of Borrower and the Creditors under this Agreement; (b) Any
administrative or investigative proceeding by any Governmental Agency arising
out of or related to a claim, demand, action or cause of action described in
clause (a) above; and (c) Any and all liabilities, losses, costs or expenses
(INCLUDING attorneys' fees and the
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allocated costs of attorneys employed by any Indemnitee and disbursements of
such attorneys and other professional services) that any Indemnitee suffers
or incurs as a result of the assertion of any foregoing claim, demand, action
or cause of action; PROVIDED that no Indemnitee shall be entitled to
indemnification for any loss caused by its own gross negligence or willful
misconduct or for any loss asserted against it by another Indemnitee. If any
claim, demand, action or cause of action is asserted against any Indemnitee,
such Indemnitee shall promptly notify Borrower, but the failure to so
promptly notify Borrower shall not affect Borrower's obligations under this
Section unless such failure materially prejudices Borrower's right to
participate in the contest of such claim, demand, action or cause of action,
as hereinafter provided. Such Indemnitee may (and shall, if requested by
Borrower in writing) contest the validity, applicability and amount of such
claim, demand, action or cause of action and shall permit Borrower to
participate in such contest, PROVIDED that unless the Indemnitee reasonably
determines that allowing Borrower to control the defense thereof would
unreasonably expose such Indemnitee to a liability which Borrower is not
capable of repaying, Borrower shall have the right to control the defense
thereof using counsel for Borrower reasonably acceptable to the Indemnitee,
PROVIDED that Borrower shall promptly provide copies of all pleadings to the
Indemnitees and shall diligently prosecute the defense of all indemnified
claims in good faith. Any Indemnitee that proposes to settle or compromise
any claim or proceeding for which Borrower may be liable for payment of
indemnity hereunder shall give Borrower written notice of the terms of such
proposed settlement or compromise reasonably in advance of settling or
compromising such claim or proceeding and shall obtain Borrower's prior
consent (which shall not be unreasonably withheld). In connection with any
claim, demand, action or cause of action covered by this Section against more
than one Indemnitee, all such Indemnitees shall be represented by the same
legal counsel (which may be a law firm engaged by the Indemnitees or
attorneys employed by an Indemnitee or a combination of the foregoing)
selected by the Indemnitees and reasonably acceptable to Borrower; PROVIDED,
that if such legal counsel determines in good faith that representing all
such Indemnitees would or could result in a conflict of interest under Laws
or ethical principles applicable to such legal counsel or that a defense or
counterclaim is available to an Indemnitee that is not available to all such
Indemnitees, then to the extent reasonably necessary to avoid such a conflict
of interest or to permit unqualified assertion of such a defense or
counterclaim, each Indemnitee shall be entitled to separate representation by
legal counsel selected by that Indemnitee and reasonably acceptable to
Borrower, with all such legal counsel using reasonable efforts to avoid
unnecessary duplication of effort by counsel for all Indemnitees; and FURTHER
PROVIDED that the Administrative Agent (as an Indemnitee) shall at all
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times be entitled to representation by separate legal counsel (which may be a
law firm or attorneys employed by the Administrative Agent or a combination
of the foregoing). Any obligation or liability of Borrower to any Indemnitee
under this Section shall survive the expiration or termination of this
Agreement and the repayment of all Loans and the payment and performance of
all other Obligations owed to the Lenders.
11.12 NONLIABILITY OF THE LENDERS. Borrower acknowledges and agrees
that:
(a) Any inspections of any Property of Borrower made by or
through the Creditors are solely for purposes of administration of this
Agreement and Borrower is not entitled to rely upon the same (whether
or not such inspections are at the expense of Borrower);
(b) By accepting, furnishing or approving anything required to
be observed, performed, fulfilled or given to the Creditors pursuant to
the Loan Documents, none of the Creditors shall be deemed to have
warranted or represented the sufficiency, legality, effectiveness or
legal effect of the same, or of any term, provision or condition
thereof, and such acceptance, furnishing or approval thereof shall
not constitute a warranty or representation to anyone with respect
thereto by the Creditors;
(c) The relationship between Borrower and the Creditors is,
and shall at all times remain, solely that of a borrower and lenders;
none of the Creditors shall under any circumstance be construed to be
partners or joint venturers of Borrower or its Affiliates; none of the
Creditors shall under any circumstance be deemed to be in a
relationship of confidence or trust or a fiduciary relationship with
Borrower or its Affiliates, or to owe any fiduciary duty to Borrower or
its Affiliates; none of the Creditors undertakes or assumes any
responsibility or duty to Borrower or its Affiliates to select, review,
inspect, supervise, pass judgment upon or inform Borrower or its
Affiliates of any matter in connection with their Property or the
operations of Borrower or its Affiliates; Borrower and its Affiliates
shall rely entirely upon their own judgment with respect to such
matters; and any review, inspection, supervision, exercise of judgment
or supply of information undertaken or assumed by the Creditors in
connection with such matters is solely for the protection of the
Creditors and neither Borrower nor any other Person is entitled to rely
thereon; and
(d) The Creditors shall not be responsible or liable to any
Person for any loss, damage, liability or
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claim of any kind relating to injury or death to Persons or damage to
Property caused by the actions, inaction or negligence of Borrower
and/or its Affiliates and Borrower hereby indemnifies and holds the
Creditors harmless from any such loss, damage, liability or claim.
11.13 NO THIRD PARTIES BENEFITTED. This Agreement is made for the
purpose of defining and setting forth certain obligations, rights and duties of
Borrower and the Creditors in connection with the Loans and Letters of Credit,
and is made for the sole benefit of Borrower, the Creditors, and the Creditors'
successors and assigns, and, subject to Section 6.3 successors to Borrower by
permitted merger. EXCEPT as provided in Sections 11.8 and 11.11, no other
Person shall have any rights of any nature hereunder or by reason hereof.
11.14 CONFIDENTIALITY. Each Creditor agrees to hold any confidential
information that it may receive from Borrower pursuant to this Agreement in
confidence, EXCEPT for disclosure: (a) To Affiliates of that Creditor and to
other Creditors; (b) To legal counsel and accountants for Borrower or any
Creditor; (c) To other professional advisors to Borrower or any Creditor,
provided that the recipient has accepted such information subject to a
confidentiality agreement substantially similar to this Section 11.14 or has
notified such professional advisors of the confidentiality of such information;
(d) To regulatory officials having jurisdiction over that Creditor; (e) To any
Gaming Board having regulatory jurisdiction over Borrower or its Restricted
Subsidiaries, provided that each Lender agrees to use its best efforts to notify
Borrower of any such disclosure unless prohibited by applicable Laws; (f) As
required by Law or legal process (PROVIDED THAT the relevant Creditor shall
endeavor, to the extent it may do so under applicable Law, to give Borrower
reasonable prior notice thereof to allow Borrower to seek a protective order) or
in connection with any legal proceeding to which that Creditor and Borrower are
adverse parties; and (g) To another financial institution in connection with a
disposition or proposed disposition to that financial institution of all or part
of that Creditor's interests hereunder or a participation interest in its Notes,
provided that the recipient has accepted such information subject to a
confidentiality agreement substantially similar to this Section. For purposes
of the foregoing, "confidential information" shall mean any information
respecting Borrower or its Restricted Subsidiaries reasonably considered by
Borrower to be confidential, OTHER THAN (i) information previously filed with
any Governmental Agency and available to the public, (ii) information previously
published in any public medium from a source other than, directly or indirectly,
that Lender, and (iii) information previously disclosed by Borrower to any
Person not associated with Borrower without a confidentiality
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agreement substantially similar to this Section. Nothing in this Section
shall be construed to create or give rise to any fiduciary duty on the part
of any Creditor to Borrower.
11.15 REMOVAL OF A LENDER. Borrower shall have the right to remove a
Lender as a party to this Agreement pursuant to this Section in the event that
such Lender requests compensation under Section 3.7 or Section 3.8 which has not
been requested by all other Lenders, by written notice to the Administrative
Agent and such Lender within 60 days following any such refusal or request,
PROVIDED that no Default or Event of Default then exists. If Borrower is
entitled to remove a Lender pursuant to this Section EITHER:
(a) The Lender being removed shall within five Business Days
after such notice execute and deliver an Assignment Agreement covering
that Lender's Pro Rata Share in favor of one or more Eligible Assignees
designated by Borrower and reasonably acceptable to the Administrative
Agent, subject to payment of a purchase price by such Eligible Assignee
equal to all principal and accrued interest, fees and other amounts
payable to such Lender under this Agreement through the date of the
Assignment Agreement; or
(b) Borrower may reduce the Commitment pursuant to Section 2.5
(and, for this purpose, the numerical requirements of such Section
shall not apply) by an amount equal to that Lender's Pro Rata Share,
pay and provide to such Lender the amount required by clause (a) above
and release such Lender from its Pro Rata Share (subject, however, to
the requirement that all conditions set forth in Section 8.2 are met as
of the date of such reduction and the payment to the other Lenders of
appropriate fees for the assumption of that Lender's participation in
all Letters of Credit then outstanding), in which case the percentage
Pro Rata Shares of the remaining Lenders shall be ratably increased
(but without any increase in the Dollar amount of the Pro Rata Shares
of such Lenders).
11.16 FURTHER ASSURANCES. Borrower and its Restricted Subsidiaries
shall, at their expense and without expense to the Creditors, do, execute and
deliver such further acts and documents as any Creditor from time to time
reasonably requires for the assuring and confirming unto the Creditors of the
rights hereby created or intended now or hereafter so to be, or for carrying out
the intention or facilitating the performance of the terms of any Loan Document.
11.17 INTEGRATION. This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and
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<PAGE>
supersedes all prior agreements, written or oral, on the subject matter
hereof. In the event of any conflict between the provisions of this
Agreement and those of any other Loan Document, the provisions of this
Agreement shall control and govern; PROVIDED that the inclusion of
supplemental rights or remedies in favor of the Creditors in any other Loan
Document shall not be deemed a conflict with this Agreement. Each Loan
Document was drafted with the joint participation of the respective parties
thereto and shall be construed neither against nor in favor of any party, but
rather in accordance with the fair meaning thereof.
11.18 GOVERNING LAW. EXCEPT to the extent otherwise provided therein,
each Loan Document shall be governed by, and construed and enforced in
accordance with, the local Laws of Nevada.
11.19 SEVERABILITY OF PROVISIONS. Any provision in any Loan
Document that is held to be inoperative, unenforceable or invalid as to any
party or in any jurisdiction shall, as to that party or jurisdiction, be
inoperative, unenforceable or invalid without affecting the remaining
provisions or the operation, enforceability or validity of that provision as
to any other party or in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.
11.20 HEADINGS. Article and Section headings in this Agreement and
the other Loan Documents are included for convenience of reference only and
are not part of this Agreement or the other Loan Documents for any other
purpose.
11.21 TIME OF THE ESSENCE. Time is of the essence of the Loan
Documents.
11.22 FOREIGN LENDERS AND PARTICIPANTS. Each Lender, and each
holder of a participation interest herein, that is incorporated under the
Laws of a jurisdiction other than the United States of America or any state
thereof shall deliver to Borrower (with a copy to the Administrative Agent),
within twenty days after the Closing Date (or after accepting an Assignment
Agreement or receiving a participation interest herein pursuant to Section
11.8, if applicable) two duly completed copies, signed by a Responsible
Official, of either
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<PAGE>
Form 1001 (relating to such Person and entitling it to a complete exemption
from withholding on all payments to be made to such Person by Borrower
pursuant to this Agreement) or Form 4224 (relating to all payments to be made
to such Person by Borrower pursuant to this Agreement) of the United States
Internal Revenue Service or such other evidence (INCLUDING, if reasonably
necessary, Form W-9) satisfactory to Borrower and the Administrative Agent
that no withholding under the federal income tax laws is required with
respect to such Person. Thereafter and from time to time, each such Person
shall (a) promptly submit to Borrower (with a copy to the Administrative
Agent), such additional duly completed and signed copies of one of such forms
(or such successor forms as shall be adopted from time to time by the
relevant United States taxing authorities) as may then be available under
then current United States laws and regulations to avoid, or such evidence as
is satisfactory to Borrower and the Administrative Agent of any available
exemption from, United States withholding taxes in respect of all payments to
be made to such Person by Borrower pursuant to this Agreement and (b) take
such steps as shall not be materially disadvantageous to it, in the
reasonable judgment of such Lender, and as may be reasonably necessary
(including the re-designation of its Eurodollar Lending Office, if any) to
avoid any requirement of applicable laws that Borrower make any deduction or
withholding for taxes from amounts payable to such Person.
11.23 HAZARDOUS MATERIAL INDEMNITY. Borrower hereby agrees to
indemnify, hold harmless and defend (by counsel reasonably satisfactory to
the Administrative Agent) each of the Creditors and their respective
directors, officers, employees, agents, successors and assigns from and
against any and all claims, losses, damages, liabilities, fines, penalties,
charges, administrative and judicial proceedings and orders, judgments,
remedial action requirements, enforcement actions of any kind, and all costs
and expenses incurred in connection therewith (including but not limited to
reasonable attorneys' fees and the allocated costs of attorneys employed by
any of the Creditors, and expenses to the extent that the defense of any such
action has not been assumed by Borrower), arising directly or indirectly, in
whole or in part, out of (i) the presence on or under any Real Property of
any Hazardous Materials, or any releases or discharges of any Hazardous
Materials on, under or from any Real Property and (ii) any activity carried
on or undertaken on or off any Real Property by Borrower or any of its
predecessors in title, whether prior
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<PAGE>
to or during the term of this Agreement, and whether by Borrower or any
predecessor in title or any employees, agents, contractors or subcontractors
of Borrower or any predecessor in title, or any third persons at any time
occupying or present on any Real Property, in connection with the handling,
treatment, removal, storage, decontamination, clean-up, transport or disposal
of any Hazardous Materials at any time located or present on or under any
Real Property. The foregoing indemnity shall further apply to any residual
contamination on or under any Real Property, or affecting any natural
resources, and to any contamination of any property or natural resources
arising in connection with the generation, use, handling, storage, transport
or disposal of any such Hazardous Materials, and irrespective of whether any
of such activities were or will be undertaken in accordance with applicable
Laws, but the foregoing indemnity shall not apply to Hazardous Materials on
any Real Property, the presence of which is caused by the Creditors.
Borrower hereby acknowledges and agrees that, notwithstanding any other
provision of this Agreement or any of the other Loan Documents to the
contrary, the obligations of Borrower under this Section shall be unlimited
corporate obligations of Borrower and shall NOT be secured by any deed of
trust on any Real Property. No claim giving rise for indemnification under
this Section shall be settled without Borrower's prior written consent, which
consent shall not be unreasonably withheld or delayed.
11.24 GAMING BOARDS. The Creditors agree to comply with all
applicable provisions of the Michigan Gaming Control and Revenue Act as
amended (including all regulations promulgated thereunder) and otherwise
cooperate with all Gaming Boards in connection with the administration of
their regulatory jurisdiction over Borrower and its Restricted Subsidiaries,
INCLUDING the provision of such documents or other information as may be
requested by any such Gaming Board relating to Borrower or any of its
Restricted Subsidiaries or to the Loan Documents.
11.25 RELEASE AND REINSTATEMENT OF THE COMPANY GUARANTY.
(a) Each of the Lenders hereby agrees that the Company Guaranty
may be released (or following any such release, reinstated) upon the
written request of the Company submitted to the Administrative Agent in
accordance with the procedures set forth in this Section. No release
of the Company Guaranty shall imply a release of the Lease Indemnity.
(b) The Company may request that the Administrative Agent release
the Company Guaranty (or, one year after any reinstatement of the
Company Guaranty in accordance
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<PAGE>
with clause (c) of this Section, to re-release the Company Guaranty)
if, as of the last day of the then most recent Fiscal Quarter for which
a Compliance Certificate has been delivered in accordance with
Section 7.2, all of the following conditions are satisfied:
(i) as of the last day of such Fiscal Quarter, the Temporary
Project has been open for not less than four full Fiscal
Quarters;
(ii) as of the last day of such Fiscal Quarter, EBITDA was in
excess of $95,000,000 for the four Fiscal Quarters then
ended;
(iii) as of such date and as of the immediately preceding fiscal
quarter, the Fixed Charge Coverage Ratio was in excess of
1.10:1.00;
(iv) if the Company Guaranty has previously been released and
thereafter reinstated in accordance with clause (c) of
this Section, not less than one year has passed since such
reinstatement;
(v) Borrower shall have delivered a Certificate to the
Administrative Agent, signed by a Senior Officer of
Borrower, certifying as to the foregoing and stating that
no Default or Event of Default exists as of the date of
the issuance of Certificate; and
(vi) Borrower shall be in compliance with the provisions of
Section 5.12 and shall have caused the issuance of such
endorsements to the policy of title insurance delivered to
the Administrative Agent pursuant to Section 8.1 as may
reasonably requested by the Administrative Agent,
including without limitation any modification to Mortgage
endorsements as may be required to demonstrate the
continued perfection and priority of the Mortgages with
respect to the Temporary Project (including any parcels
added to the Lien of the Mortgages by amendment thereto).
Promptly following its receipt thereof, and of any endorsements of the
type referred to in clause (vi) above, the Administrative Agent shall
deliver the Certificate referred to in clause (iv) above to each of the
Lenders and, unless any Lender notifies the Administrative Agent in
writing that it disputes the accuracy of such Certificate within the
ten Business Day period following
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<PAGE>
its delivery to each of the Lenders, the Administrative Agent shall
deliver a written release of the Company Guaranty to the Company (with
a copy to the Borrower), whereupon the Company Guaranty shall be deemed
released.
(c) Following the release of the Company Guaranty, at the option
of the Company, the Company Guaranty may be reinstated by means of the
re-execution of the Company Guaranty, substantially in the form
delivered on the Closing Date and in any event in a form acceptable to
the Administrative Agent, and the delivery of the same to the
Administrative Agent together with any opinions of counsel as the
Administrative Agent may reasonably request to confirm the due
execution, delivery and valid and binding nature thereof (and pricing
shall thereafter be determined on the basis of the Company Debt Rating
while the reinstated Company Guaranty remains in effect). While the
Company Guaranty may subsequently be re-released in accordance with the
procedures set forth in clause (a) of this Section, in no event shall
any reinstatement of the Company Guaranty be for a period which is less
than one full year (or, if shorter, the period ending on the Maturity
Date).
11.26 WAIVER OF RIGHT TO TRIAL BY JURY. EACH SIGNATORY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE SIGNATORIES
HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS
RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH SIGNATORY HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY SIGNATORY TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
11.27 PURPORTED ORAL AMENDMENTS. BORROWER EXPRESSLY ACKNOWLEDGES THAT
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR
THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN
WRITING THAT COMPLIES WITH SECTION 11.2. BORROWER AGREES THAT IT WILL NOT RELY
ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS
BY ANY REPRESENTATIVE OF ANY OF THE CREDITORS THAT DOES NOT COMPLY WITH
SECTION 11.2 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first above
written.
DETROIT ENTERTAINMENT, L.L.C.
By: Circus Circus Michigan, Inc., authorized member
By: CHERYL SCOTT DUBE
----------------------------------------
Cheryl Scott Dube, Esquire
----------------------------------------
[Printed name and title]
Address:
1922 Cass Avenue
Detroit, Michigan 48226
Attn: Cheryl Scott Dube, Esquire
Telecopier: (313) 237-7721
Telephone: (313) 237-5295
S-1
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By: JANICE HAMMOND
----------------------------------------
Janice Hammond, Vice President
Address:
Bank of America National Trust and
Savings Association
555 South Flower Street
11th Floor
Los Angeles, California 90071
Attn: Janice Hammond
Telecopier: (213) 228-2299
Telephone: (213) 228-9861
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Lender
By: JON VARNELL
----------------------------------------
Jon Varnell, Managing Director
Address:
Bank of America National Trust and
Savings Association
555 South Flower Street, #3283
Los Angeles, California 90071
Attn: Jon Varnell, Managing Director
Telecopier: (213) 228-2641
Telephone: (213) 228-6181
With a copy to:
Bank of America National Trust and
Savings Association
555 South Flower Street (LA-5777)
Los Angeles, California 90071
Attn: William Newby, Managing Director
Telecopier: (213) 228-3145
Telephone: (213) 228-2438
S-2
<PAGE>
COMERICA BANK
By: Eoin P. COLLINS
----------------------------------------
Eoin P. Collins, Account Officer
Address for notices:
Comerica Bank
500 Woodward Avenue
Detroit, Michigan 48226
Attn.: Marinda D. Little, Legal
Officer
Corporate Legal - 3391
Facsimile: (313) 222-3977
Telephone: (313) 222-3843
S-3
<PAGE>
SOCIETE GENERALE
By: DONALD SCHUBERT
-------------------------------------------
Title: Managing Director
----------------------------------------
Address for notices:
Societe Generale
2029 Century Park East, Suite 2900
Los Angeles, California 90067
Attn.: Donald Schubert, Managing Director
Facsimile: (310) 551-1537
Telephone: (310) 788-7104
S-4
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: ROBERT SIMON
-------------------------------------------
Title:
----------------------------------------
Address for notices:
The First National Bank of Chicago
One First National Plaza, 11th Floor
Chicago, Illinois 60670
Attn.: Robert Simon
Facsimile: (312) 732-4840
Telephone: (312) 732-8543
S-5
<PAGE>
NATIONAL CITY BANK
By: KENNETH R. EHRHARDT
-------------------------------------------
Title: Vice President
----------------------------------------
Address for notices:
National City Bank
1900 East Ninth Street, LC 01-2077
Cleveland, Ohio 44114
Attn.: Kenneth R. Ehrhardt
Facsimile: (248) 901-2033
Telephone: (248) 901-1402
S-6
<PAGE>
MICHIGAN NATIONAL BANK
By: JOHN BEBB
-------------------------------------------
Title:
----------------------------------------
Address for notices:
Michigan National Bank
27777 Inkster Road, 10-36
Farmington Hills, Michigan 48334
Attn.: John Bebb
Facsimile: (248) 473-4345
Telephone: (248) 473-4372
S-7
<PAGE>
FIRST INDEPENDENCE NATIONAL BANK OF
DETROIT
By: BARBARA W. WORDEN
-------------------------------------------
Title: Senior Vice President
------------------------------------------
Address for notices:
First Independence National Bank of Detroit
44 Michigan Avenue
Detroit, Michigan 48226
Attn.: Barbara W. Worden, Senior Vice President
Facsimile: (313) 256-8444
Telephone: (313) 256-8420
S-8
<PAGE>
Schedule 1.1 - Bank Pro Rata Shares
<TABLE>
<CAPTION>
Lender Amount Pro Rata Share*
<S> <C> <C>
Bank of America National Trust
and Savings Association $44,000,000 29.33%
Comerica Bank $30,000,000 20.00%
Societe Generale $25,000,000 16.66%
The First National Bank of Chicago $20,000,000 13.33%
National City Bank $15,000,000 10.00%
Michigan National Bank $15,000,000 10.00%
First Independence National Bank
of Detroit $ 1,000,000 0.66%
-----------------------------------------------------------------------
Total $150,000,000 100.00%
</TABLE>
* repeating decimal
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 97,680
<SECURITIES> 0
<RECEIVABLES> 70,918
<ALLOWANCES> 0
<INVENTORY> 28,299
<CURRENT-ASSETS> 235,787
<PP&E> 4,009,428
<DEPRECIATION> 815,662
<TOTAL-ASSETS> 4,102,285
<CURRENT-LIABILITIES> 240,171
<BONDS> 2,458,838
0
0
<COMMON> 1,894
<OTHER-SE> 1,178,183
<TOTAL-LIABILITY-AND-EQUITY> 4,102,285
<SALES> 987,440
<TOTAL-REVENUES> 987,440
<CGS> 0
<TOTAL-COSTS> 830,361
<OTHER-EXPENSES> 15,450
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77,941
<INCOME-PRETAX> 63,688
<INCOME-TAX> 22,918
<INCOME-CONTINUING> 40,770
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (21,994)
<NET-INCOME> 18,776
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.20
</TABLE>
