<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ARGOSY GAMING COMPANY
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 37-1304247
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or
organization)
AND ITS GUARANTOR SUBSIDIARIES
ILLINOIS ALTON GAMING COMPANY 37-1261292
LOUISIANA ARGOSY OF LOUISIANA, INC. 72-1265121
LOUISIANA CATFISH QUEEN PARTNERSHIP IN COMMENDAM 72-1274791
INDIANA THE INDIANA GAMING COMPANY 37-1314871
IOWA IOWA GAMING COMPANY 37-1329487
LOUISIANA JAZZ ENTERPRISES, INC. 72-1214771
MISSOURI THE MISSOURI GAMING COMPANY 37-1311505
MISSOURI THE ST. LOUIS GAMING COMPANY 37-1314873
(State of other jurisdiction (Exact name of Registrant as specified in its charter) (I.R.S. Employer
of Identification Number)
incorporation or
organization)
</TABLE>
------------------------------
7999
(Primary Standard Industrial Classification Code Number)
------------------------------
219 PIASA STREET
ALTON, ILLINOIS 62002
(618) 474-7500
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
J. THOMAS LONG
CHIEF EXECUTIVE OFFICER
ARGOSY GAMING COMPANY
219 PIASA STREET
ALTON, ILLINOIS 62002
(618) 474-7500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPY TO:
R. Cabell Morris, Jr.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
(312) 558-5600
------------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
First Mortgage Notes due 2004..................... $235,000,000 100% $235,000,000 $81,034
Guarantees of each of the Guarantor
Subsidiaries..................................... (2) (3) (3) None (3)
</TABLE>
(1) In accordance with Rule 457(f)(2), the registration fee is calculated based
on the book value, which has been computed as of July 1, 1996, of the
outstanding 13 1/4% First Mortgage Notes due 2004 of Argosy Gaming Company
to be cancelled in the exchange transaction hereunder.
(2) The 13 1/4% First Mortgage Notes due 2004 of Argosy Gaming Company being
registered will be guaranteed by each of Alton Gaming Company, Argosy of
Louisiana, Inc., Catfish Queen Partnership in Commendam, Indiana Gaming
Company, Iowa Gaming Company, Jazz Enterprises, Inc., The Missouri Gaming
Company and The St. Louis Gaming Company.
(3) No additional consideration will be paid by the recipients of the 13 1/4%
First Mortgage Notes due 2004 for the Guarantees. Pursuant to Rule 437(n)
under the Securities Act of 1933, no separate fee is payable for the
Guarantees.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED JULY 1, 1996
[LOGO]
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS 13 1/4% FIRST MORTGAGE NOTES
DUE 2004
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000
IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 13 1/4% FIRST MORTGAGE NOTES DUE 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996 UNLESS EXTENDED.
------------------------
Argosy Gaming Company, a Delaware Corporation (the "Company"), hereby offers
to exchange (the "Exchange Offer") up to $235,000,000 in aggregate principal
amount of its new 13 1/4% First Mortgage Notes due 2004 (the "Exchange Notes")
for up to $235,000,000 in aggregate principal amount of its outstanding 13 1/4%
First Mortgage Notes due 2004 (the "Old Notes" and, together with the Exchange
Notes, the "Notes") that were issued and sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act").
The terms of the Exchange Notes are substantially identical (including
principal amount, interest rate, maturity, security and ranking) to the terms of
the Old Notes for which they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Notes (i) are freely transferable by holders thereof
(except as provided below) and (ii) are not entitled to certain registration
rights and certain liquidated damages provisions which are applicable to the Old
Notes under the Registration Rights Agreement (as defined herein). The Exchange
Notes will be issued under the indenture governing the Old Notes. The Exchange
Notes will be, and the Old Notes are, unconditionally guaranteed on a senior
basis by Alton Gaming Company, The Missouri Gaming Company, The St. Louis Gaming
Company, Iowa Gaming Company, Jazz Enterprises, Inc., Argosy of Louisiana, Inc.,
Catfish Queen Partnership in Commendam and The Indiana Gaming Company (the
"Guarantors"). There will be no cash proceeds to the Company from the Exchange
Offer.
The Exchange Notes will bear interest from June 5, 1996. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from June 5, 1996 to the date of the issuance of the Exchange Notes. The
Exchange Notes will bear interest at the rate of 13 1/4% per annum, payable
semi-annually on June 1 and December 1 of each year, commencing December 1,
1996. The Company will not be required to make any mandatory redemption or
sinking fund payments with respect to the Exchange Notes prior to maturity. The
Exchange Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after June 1, 2000 at the redemption prices set forth herein,
plus accrued and unpaid interest, if any, and Liquidated Damages (as defined
herein), if any, thereon to the date of redemption. Upon a Change of Control (as
defined herein), holders of the Exchange Notes will have the right to require
the Company to purchase all or any of their Exchange Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase. In addition, under certain circumstances, the Company will be
required to offer to purchase Exchange Notes in various amounts at either 100%
or 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of purchase in the event of certain asset sales, loss of
certain licenses and certain events with respect to the Lawrenceburg Casino (as
defined herein) and from certain distributions from the Lawrenceburg Casino.
The Exchange Notes will, and the Old Notes do, rank senior in right of
payment to all future and existing subordinated Indebtedness (as defined herein)
of the Company and PARI PASSU with other senior Indebtedness of the Company. The
Exchange Notes and the related guarantees will be, and the Old Notes and related
guarantees are, secured, subject to certain prior liens and certain exceptions,
by a first lien on substantially all the present assets of the Company and the
current Guarantors, including (i) substantially all the assets used in the
Company's Alton, Riverside, Baton Rouge and Sioux City properties, (ii) a pledge
of all the capital stock of, and partnership interests in, the Company's
Subsidiaries (as defined herein) owned by the Company and the Guarantors
(excluding the Company's partnership interest in its Sioux City property), (iii)
a pledge of intercompany notes, if any, payable to the Company and the
Guarantors from their Subsidiaries, and (iv) an assignment of the proceeds of
the management agreement relating to the Lawrenceburg Casino project. The
collateral for the Exchange Notes will not, and for the Old Notes does not,
include assets of the Company's Lawrenceburg Casino project. The indenture
pursuant to which the Exchange Notes will be, and the Old Notes were, issued
limits the ability of the Company and its Subsidiaries to incur additional
Indebtedness. Under certain circumstances, the collateral securing the Notes may
be subject to other liens securing Indebtedness, which liens will be PARI PASSU
to the lien of the Exchange Notes.
(CONTINUED ON NEXT PAGE)
--------------------------
HOLDERS OF OLD NOTES SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH IN
"RISK FACTORS" COMMENCING ON PAGE 16 OF THIS PROSPECTUS PRIOR TO MAKING A
DECISION WITH RESPECT TO THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NEITHER THE ILLINOIS GAMING BOARD, THE MISSOURI GAMING COMMISSION, THE IOWA
RACING AND GAMING COMMISSION, THE LOUISIANA GAMING CONTROL BOARD OR THE INDIANA
GAMING COMMISSION NOR ANY OTHER STATE REGULATORY BODY HAS PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS OFFERING MEMORANDUM OR THE INVESTMENT
MERITS OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
(COVER PAGE CONTINUED)
The Old Notes were originally issued and sold on June 5, 1996 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A
promulgated under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. Based upon its
view of interpretations provided to third parties by the Staff (the "Staff") of
the Securities and Exchange Commission (the "Commission"), the Company believes
that the Exchange Notes issued pursuant to the Exchange Offer in exchange for
the Old Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any holder which is (i) an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act (an
"Affiliate"), (ii) a broker-dealer who acquired Old Notes directly from the
Company or (iii) a broker-dealer who acquired Old Notes as a result of market
making or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such Exchange
Notes are acquired in the ordinary course of such holders' business and such
holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal that is filed as an exhibit to the Registration Statement of which
this Prospectus is a part (the "Letter of Transmittal") states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Broker-dealers who acquired Old Notes as a result of market making or other
trading activities may use this Prospectus, as supplemented or amended, in
connection with resales of the Exchange Notes. The Company has agreed that, for
a period of 180 days after this Registration Statement is declared effective by
the Commission, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
and any other holder that cannot rely upon such interpretations must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
Old Notes initially purchased by qualified institutional buyers were
initially represented by two global Notes in registered form, registered in the
name of a nominee of The Depository Trust Company ("DTC"), as depository. The
Exchange Notes exchanged for Old Notes represented by the global Notes will be
represented by one or more global Exchange Notes in registered form, registered
in the name of the nominee of DTC. See "Description of Exchange Notes -- Book
Entry, Delivery and Form." Exchange Notes issued to non-qualified institutional
buyers in exchange for Old Notes held by such investors will be issued only in
certificated, fully registered, definitive form. Except as described herein,
Exchange Notes in definitive certificated form will not be issued in exchange
for the global Exchange Note(s) or interests therein.
The Old Notes and the Exchange Notes constitute new issues of securities
with no established public trading market. Any Old Notes not tendered and
accepted in the Exchange Offer will remain outstanding. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered, and tendered but unaccepted, Old Notes could be adversely
affected. Following consummation of the Exchange Offer, the holders of any
remaining Old Notes will continue to be subject to the existing restrictions on
transfer thereof and the Company will have no further obligation to such holders
to provide for the registration under the Securities Act of the Old Notes except
under certain limited circumstances. See "Old Notes Registration Rights;
Liquidated Damages." No assurance can be given as to the liquidity of the
trading market for either the Old Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered or accepted for exchange. The Exchange Offer
will expire at 5:00 p.m., New York City time, on , 1996, unless
extended (the "Expiration Date"). The date of acceptance for exchange of the Old
Notes (the "Exchange Date") will be the first business day following the
Expiration Date, upon surrender of the Old Notes. Old Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date;
otherwise such tenders are irrevocable.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities of the Commission at its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional
offices at 500 W. Madison Street, 14th Floor, Chicago, Illinois 60606, and at
Seven World Trade Center, 13th Floor, New York, New York 10048. Any interested
party may obtain copies of such material at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, Quarterly Report on Form 10-Q for the three months ended March 31, 1996,
and Current Reports on Form 8-K dated February 26, 1996, March 15, 1996, March
19, 1996, and June 5, 1996 are hereby incorporated by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made hereby shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated herein by reference shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained in any subsequently filed document which is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Propsectus.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits thereto). Written or telephone requests for such copies should be
directed to the Company's principal office: Argosy Gaming Company, 219 Piasa
Street, Alton, Illinois 62002, Attention: Director of Investor Relations
(telephone: (618) 474-7500).
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS
PROSPECTUS IS PRESENTED AFTER GIVING EFFECT TO ALL TRANSACTIONS THAT ARE
DESCRIBED IN THIS PROSPECTUS AS OCCURRING PRIOR TO OR SIMULTANEOUSLY WITH THE
CLOSING OF THE EXCHANGE OFFER. UNLESS THE CONTEXT OTHERWISE REQUIRES, "COMPANY"
AND "ARGOSY" WHEN USED IN THIS PROSPECTUS SHALL MEAN ARGOSY GAMING COMPANY AND
ITS SUBSIDIARIES AND PREDECESSOR ENTITIES.
THE COMPANY
Argosy Gaming Company ("Argosy" or the "Company") is a leading
multi-jurisdictional developer, owner and operator of riverboat and dockside
casinos and related entertainment facilities in the midwestern and southern
United States. The Company, through its subsidiaries, owns and operates the
Alton Belle Casino in Alton, Illinois, serving the St. Louis metropolitan
market; the Argosy Casino in Riverside, Missouri, serving the Kansas City
metropolitan market; the Belle of Baton Rouge in Baton Rouge, Louisiana; and the
Belle of Sioux City in Sioux City, Iowa. In a highly competitive application
process, Indiana Gaming Company, L.P. ("Indiana Gaming L.P."), a limited
partnership in which the Company is the general partner and holds a 57.5%
partnership interest, received a certificate of suitability from the Indiana
Gaming Commission to develop and operate a riverboat casino and related
entertainment and support facilities in Lawrenceburg, Indiana (the "Lawrenceburg
Casino"), which is located approximately 15 miles west of Cincinnati, Ohio. The
Company is building what is anticipated to be one of the largest riverboat
casinos in the United States and estimates that the total cost of developing the
Lawrenceburg Casino project will be $210 million. The Lawrenceburg Casino is
expected to draw from a population of approximately 1.6 million residents in the
Cincinnati metropolitan area and approximately an additional 5.4 million people
who reside within 100 miles of Lawrenceburg.
The Company's business strategy emphasizes the phased development of
attractive gaming and related entertainment facilities in gaming jurisdictions
that the Company believes possess favorable long-term demographic and
competitive characteristics. As part of this strategy, the Company endeavors to
be an early entrant in emerging gaming markets, to establish a customer base and
to develop its gaming properties in stages. The Company's casinos were the first
gaming facilities to open in each of the St. Louis, Kansas City and Baton Rouge
markets. By employing a phased development strategy, the Company believes it can
reduce its initial capital investment and adapt the nature and scope of
subsequent developments based on a continuing assessment of the size and
competitive outlook of each of the Company's gaming markets. The Company intends
to utilize management's proven ability to successfully open riverboat casino
properties in new markets by continuing to pursue opportunities to develop or
acquire (either independently or through joint ventures) riverboat, dockside
and/or land-based gaming operations.
The Company's operating strategy is to develop a loyal customer base by
offering a variety of gaming and non-gaming entertainment amenities at
attractive facilities that emphasize high standards of service and customer
satisfaction. In each of its gaming markets, the Company establishes marketing
programs that identify, target and attract local patrons typically residing
within a 100-mile radius of its gaming facilities. The Company's marketing
programs are designed to increase customer awareness, patronage and loyalty, as
well as to encourage repeat business. The Company focuses and evaluates its
marketing efforts through player tracking systems, slot clubs and preferred
player clubs and utilizes mass advertising, direct mail and special promotions
to attract customers within each of its gaming markets.
CURRENT OPERATIONS
ALTON BELLE CASINO, ALTON, ILLINOIS
The Company commenced operations in Alton, Illinois in September 1991 as the
first gaming facility to open in the St. Louis market and in the State of
Illinois. The Alton Belle Casino is a three-deck contemporary style cruise liner
featuring 21,000 square feet of gaming space with approximately 650 slot
machines and 41 table games. The Alton Belle Casino also currently includes a
37,000-square foot, three-level floating
4
<PAGE>
entertainment pavilion that features a sports and entertainment lounge, a
120-seat buffet, a 90-seat fine dining restaurant, conference facilities and a
food court. Additionally, the Company is the only gaming operator in the St.
Louis market that offers its customers off-track betting facilities.
The Alton Belle Casino is located approximately 20 miles northeast of
downtown St. Louis and generally draws from a population of approximately 2.5
million within the St. Louis metropolitan area and an additional 1.2 million
within a 100-mile radius of the City of St. Louis. In particular, the primary
target market of the Alton Belle Casino is the northern and eastern regions of
the greater St. Louis metropolitan area, including certain regions of Illinois.
The Company's management believes that its early entry into the St. Louis market
has resulted in the development of a core base of customers, which, together
with its data base of over 300,000 active customers, has enabled the Alton Belle
Casino to remain competitive in the St. Louis market despite the significant
increase in the number of gaming operations. The Company's Alton operations
generated net revenues and earnings before interest, taxes, depreciation and
amortization ("EBITDA") of $86.0 million and $26.7 million, respectively, for
the year ended December 31, 1995 and $19.7 million and $5.0 million,
respectively, for the three months ended March 31, 1996.
ARGOSY CASINO, RIVERSIDE, MISSOURI
The Argosy Casino began operations in Riverside, Missouri on June 22, 1994
as the first gaming facility to open in the Kansas City market. The Argosy
Casino's riverboat is styled as a turn-of-the-century paddle wheel steamboat and
features 32,900 square feet of gaming space with approximately 950 slot machines
and 57 table games. The riverboat casino is complemented by an 85,000-square
foot, land-based entertainment pavilion that opened on January 15, 1996. The new
pavilion features a Mediterranean theme and includes over 14,000 square feet of
banquet and conference facilities, a 78-seat specialty restaurant, a sports and
entertainment lounge and a 350-seat buffet restaurant. A 624-space parking
garage and a 1,262-space surface parking area are located adjacent to the
pavilion. In August 1995, the Company began offering dockside gaming at the
Argosy Casino and is considering adding a second dockside gaming facility in
Riverside in order to increase the number of gaming positions and to offer its
patrons staggered boarding times, thereby maximizing customer convenience. The
Company has also recently entered into a letter of intent with a hotel
developer/manager to develop, through a joint venture, a 200-room hotel at its
Riverside facility. Pursuant to the letter of intent, which is subject to
numerous conditions, the Company would contribute certain of its Riverside
property to the joint venture and the developer/manager would contribute equity
capital and make loans to the joint venture in an amount sufficient to construct
the hotel.
The Argosy Casino draws from a population of approximately 1.6 million in
the greater Kansas City metropolitan area and an additional 900,000 within a
100-mile radius of Kansas City. The Argosy Casino is situated on a 55-acre site
that is located approximately five miles from downtown Kansas City and offers
convenient access from two major highways. Once competing gaming facilities that
are currently under construction are completed, the Company believes that the
Argosy Casino, which currently is the only existing or planned casino in the
western Kansas City metropolitan area, will primarily attract customers who
reside in the northwestern, western and southwestern regions of the Kansas City
metropolitan area. The Company's Riverside operations generated net revenues and
EBITDA of $94.1 million and $29.5 million, respectively, for the year ended
December 31, 1995 and $23.9 million and $5.0 million, respectively, for the
three months ended March 31, 1996.
BELLE OF BATON ROUGE, BATON ROUGE, LOUISIANA
The Belle of Baton Rouge began operations in Baton Rouge, Louisiana in
September 1994 as the first riverboat gaming facility in the Baton Rouge market.
The Belle of Baton Rouge is a three-level, ante-bellum themed riverboat casino
that contains 28,900 square feet of gaming space with approximately 775 slot
machines and 46 table games. The riverboat casino is complemented by the
Company's adjacent, land-based entertainment development known as Catfish Town.
The first phase of Catfish Town opened during 1995 and features a 250-seat
entertainment lounge and sports bar, a 50-seat premium steakhouse, a 250-seat
buffet/ coffee shop and conference facilities. The second phase of Catfish Town,
an approximately 50,000-square foot entertainment facility, opened in April 1996
and features a climate-controlled, five-story glass atrium that will host a
variety of entertainment functions, including banquets, parties, festivals,
concerts and live
5
<PAGE>
entertainment events. The third phase of the Catfish Town project will feature
the build-out of approximately 150,000 square feet of leaseable retail space
within the atrium complex that is expected to feature a variety of
entertainment-related tenants, including specialty restaurants and specialty
retail stores, entertainment venues, nightclubs and a microbrewery. The Company
has improved customer accessability to the Belle of Baton Rouge by completing
construction in October 1995 of a 733-space parking garage and by leasing in
December 1995 a 271-space surface parking lot adjacent to Catfish Town. The
Company is also pursuing opportunities to develop, through a joint venture, a
300-room hotel on the Company's property in Catfish Town. See "Risk Factors --
Louisiana Local Option Referendum to Restrict Gaming."
The Belle of Baton Rouge draws from a population of approximately 540,000 in
the Baton Rouge metropolitan area. The Company believes that the Belle of Baton
Rouge will benefit from the entertainment, retail and hotel amenities expected
to be offered at the Catfish Town development, from the facility's proximity to
the Baton Rouge convention center and from its convenient access from Baton
Rouge's two major interstate highways. The Belle of Baton Rouge casino generated
net revenues and EBITDA of $50.3 million and $7.6 million, respectively, for the
year ended December 31, 1995 and $13.8 million and $3.3 million, respectively,
for the three months ended March 31, 1996.
BELLE OF SIOUX CITY, SIOUX CITY, IOWA
The Company became the manager of the Belle of Sioux City on October 4, 1994
and on December 1, 1994 became the 70% general partner of the Belle of Sioux
City, L.P. The Company is the manager of the casino and receives a percentage
management fee based upon the facility's adjusted gross gaming revenues (as
defined in the management agreement). This fee was 4.5% through 1995 and
increased to 6.5% in January 1996. The Belle of Sioux City is a three-level
historic themed riverboat featuring approximately 11,800 square feet of gaming
space with approximately 470 slot machines and 27 table games. The casino
facility is complemented by an adjacent barge facility, which features buffet
dining, a bar and a gift shop, and 274 surface parking spaces.
The Belle of Sioux City draws from a population of approximately 80,000 in
Sioux City and an additional 900,000 residents within a 100-mile radius of Sioux
City. The Company's Sioux City operations generated net revenues and EBITDA
(before the Company's management fee) of $22.0 million and $3.6 million,
respectively, for the year ended December 31, 1995 and $5.1 million and $.6
million, respectively, for the three months ended March 31, 1996.
OPERATIONS UNDER DEVELOPMENT
LAWRENCEBURG CASINO, LAWRENCEBURG, INDIANA
On June 30, 1995, Indiana Gaming L.P. received a certificate of suitability
from the Indiana Gaming Commission to develop and operate a riverboat casino and
entertainment complex in Lawrenceburg, Indiana, which is located approximately
15 miles west of Cincinnati, Ohio. The Company is the sole general partner of,
and holds a 57.5% general partnership interest in, Indiana Gaming L.P. Conseco
Entertainment, L.L.C. ("Conseco"), an indirect subsidiary of Conseco, Inc.,
holds a 29% limited partnership interest and certain other investors, including
H. Steven Norton, Chief Operating Officer of the Company, who brought the
opportunity to the Company concurrent with his initial employment, hold the
remaining 13.5% limited partnership interest in Indiana Gaming L.P.
The Lawrenceburg Casino is expected to draw from a population of
approximately 1.6 million residents in the Cincinnati metropolitan area and an
additional 5.4 million people who reside within 100 miles of Lawrenceburg,
including the major metropolitan markets of Dayton and Columbus, Ohio;
Indianapolis, Indiana; and, to a lesser extent, Lexington, Kentucky. The City of
Lawrenceburg has major interstate highway access from each of these metropolitan
areas. Indiana gaming law currently limits the number of gaming licenses to be
issued in the state to a total of 11, including a maximum of 5 licenses along
the Ohio River and a limit of one license per county. In addition, casino gaming
is not currently permitted under the laws of either Ohio or Kentucky. As a
result, the Company expects to face limited direct competition for gaming
revenues upon the opening of the Lawrenceburg Casino. The next closest Indiana
gaming facility to the Cincinnati market will be located approximately 15 miles
south of Lawrenceburg and the principal traffic
6
<PAGE>
route between the greater Cincinnati metropolitan area and the other facility
passes Lawrenceburg. In addition, Indiana gaming law does not restrict the size
of a licensee's gaming facility or place limits on customer losses or betting
levels.
The Company plans to open a temporary gaming facility in Lawrenceburg in the
fourth quarter of 1996 and anticipates opening the permanent gaming facility not
later than twelve months thereafter. The temporary facility will feature a
leased 1,200-passenger gaming vessel with approximately 870 slot machines and 52
table games and an entertainment barge featuring ticketing, restaurant and bar
facilities. For the permanent facility, Indiana Gaming L.P. is building what it
believes to be one of the largest riverboat casinos in the United States,
featuring approximately 90,000 square feet of gaming space on three levels. The
permanent riverboat casino is expected to initially have approximately 2,600
gaming positions and accommodate approximately 4,400 passengers and crew
members. It is anticipated that the permanent facility also will include a
300-room hotel, a 1,750-space parking garage, 2,000 additional surface parking
spaces and a 120,000-square foot land-based entertainment pavilion and support
facility featuring specialty restaurants, meeting and banquet rooms and a sports
bar and entertainment lounge. The Company will manage the development,
construction and operation of the Lawrenceburg Casino and will receive a
management fee equal to 7.5% of the facility's EBITDA. Conseco will receive a
financial advisory fee equal to 5% of the facility's EBITDA. The Company
estimates that the total cost to open the temporary gaming facility and to
construct the proposed permanent riverboat casino, land-based facilities and
300-room hotel will be approximately $210 million, which costs are being funded
57.5% by the Company and 42.5% by Conseco. Pursuant to the Lawrenceburg Casino
partnership agreement, the Company and Conseco will fund on a pro rata basis any
project costs between $210 million and $225 million and the Company is obligated
to fund any project costs over $225 million. The Company's inability to satisfy
its funding obligations for the Lawrenceburg Casino could result in a
significant dilution of its interest in Indiana Gaming L.P. and its possible
removal as the general partner. See "Lawrenceburg Casino Partnership Agreement"
and "Risk Factors."
As of June 30, 1996, approximately $ million of construction costs have
been expended by Indiana Gaming L.P. for the Lawrenceburg Casino project,
principally on progress payments on the construction of the riverboat casino,
purchases of land and licensing costs. Construction projects, such as the
Company's, entail significant risks, including shortages of materials or skilled
labor, unforeseen engineering, environmental or geological problems,
difficulties arising from statutes, regulations or actions of governmental
bodies having jurisdiction or authority with regard to certain aspects of the
project, work stoppages, weather interferences, floods, unanticipated cost
increases and other problems. In addition, the number and scope of the licenses
and approvals required to complete the construction of any project, particularly
those pertaining to riverboat and dockside casino, hotel and other destination
resort facilities, are extensive. The opening of the Lawrenceburg Casino is
subject to the issuance of a gaming license in Indiana and while Indiana Gaming
L.P. has been awarded a certificate of suitability, no assurance can be given
that Indiana Gaming L.P. will have its certificate of suitability extended or be
awarded its final gaming license or the other approvals necessary to open the
Lawrenceburg Casino. See "Risk Factors."
------------------------
The Company was incorporated in Delaware in 1992. The Company's principal
executive offices are located at 219 Piasa Street, Alton, Illinois 62002, and
its telephone number is (618) 474-7500.
7
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........... The Company is offering to exchange (the "Exchange Offer")
up to $235,000,000 aggregate principal amount of its new
13 1/4% First Mortgage Notes due 2004 (the "Exchange
Notes") for up to $235,000,000 aggregate principal amount
of its outstanding 13 1/4% First Mortgage Notes due 2004
that were issued and sold in a transaction exempt from
registration under the Securities Act (the "Old Notes").
The Old Notes were initially offered and sold by Bear,
Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, BA Securities, Inc. and Deutsche
Morgan Grenfell/ C.J. Lawrence Inc., as the initial
purchasers of the Old Notes (the "Initial Purchasers"), to
certain institutional and accredited investors at a price
of 100% of the principal amount thereof. The form and
terms of the Exchange Notes are substantially identical
(including principal amount, interest rate, maturity,
security and ranking) to the form and terms of the Old
Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes are freely
transferable by holders thereof except as provided herein
(see "The Exchange Offer -- Terms of the Exchange" and
"Terms and Conditions of the Letter of Transmittal") and
are not entitled to certain registration rights and
certain liquidation damages provisions that are applicable
to the Old Notes under a registration rights agreement
dated as of June 5, 1996 (the "Registration Rights
Agreement") between the Company, the Guarantors and the
Initial Purchasers.
Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other
than any holder which is (i) an Affiliate of the Company,
(ii) a broker-dealer who acquired Old Notes directly from
the Company or (iii) a broker-dealer who acquired Old
Notes as a result of market-making or other trading
activities), without compliance with the registration and
prospectus delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders
are not engaged in, and do not intend to engage in, and
have no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes.
Minimum Condition............ The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered or
accepted for exchange.
Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1996 unless extended (the
"Expiration Date").
Exchange Date................ The first date of acceptance for exchange for the Old
Notes will be the first business day following the
Expiration Date.
Conditions to the Exchange
Offer....................... The obligation of the Company to consummate the Exchange
Offer is subject to certain conditions. See "The Exchange
Offer -- Conditions to the Exchange Offer." The Company
reserves the right to terminate or amend the Exchange
Offer at any time prior to the Expiration Date upon the
occurrence of any such condition.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Withdrawal Rights............ Tenders of Old Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. Any
Old Notes not accepted for any reason will be returned
without expense to the tendering holders thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer.
Procedures for Tendering Old
Notes....................... See "The Exchange Offer -- How to Tender."
Federal Income Tax
Consequences................ The exchange of Old Notes for Exchange Notes by tendering
holders will not be a taxable exchange for federal income
tax purposes, and such holders should not recognize any
taxable gain or loss or any interest income as a result of
such exchange.
Use of Proceeds.............. There will be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Effect on Holders of Old As a result of the making of this Exchange Offer, and upon
Notes....................... acceptance for exchange of all validly tendered Old Notes
pursuant to the terms of this Exchange Offer, the Company
will have fulfilled a covenant contained in the terms of
the Old Notes and the Registration Rights Agreement, and,
accordingly, the holders of the Old Notes will have no
further registration or other rights under the
Registration Rights Agreement, except under certain
limited circumstances. See "Old Notes Registration Rights;
Liquidated Damages." Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will continue
to hold such Old Notes and will be entitled to all the
rights and limitations applicable thereto under the
Indenture. All untendered, and tendered but unaccepted,
Old Notes will continue to be subject to the restrictions
on transfer provided for in the Old Notes and the
Indenture. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market, if
any, for the Old Notes not so tendered could be adversely
affected. See "Risk Factors -- Consequences of Failure to
Exchange Old Notes."
</TABLE>
TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $235,000,000 aggregate principal amount of Old
Notes. The form and terms of the Exchange Notes are substantially identical to
the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same debt
as the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
<TABLE>
<S> <C>
Securities Offered........... $235,000,000 principal amount of 13 1/4% First Mortgage
Notes due 2004.
Maturity Date................ June 1, 2004.
Interest Payment Dates....... June 1 and December 1 of each year, commencing December 1,
1996.
Ranking and Security......... The Exchange Notes will be secured obligations of the
Company and will rank senior in right of payment to all
subordinated Indebtedness (as defined herein) of the
Company and PARI PASSU in right of payment to all future
and existing senior Indebtedness of the Company. The
Exchange Notes and the related guarantees will be secured,
subject to prior liens and certain exceptions, by
substantially all the present assets of the Company and
the current
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Guarantors, including (i) substantially all the assets
used in the Company's Alton, Riverside, Baton Rouge and
Sioux City properties, (ii) a pledge of all the capital
stock of, and partnership interests in, the Company's
Subsidiaries owned by the Company and the Guarantors
(excluding the Company's partnership interest in its Sioux
City property), (iii) a pledge of intercompany notes, if
any, payable to the Company and the Guarantors from their
Subsidiaries, and (iv) an assignment of the proceeds of
the management agreement with Indiana Gaming L.P. relating
to the Lawrenceburg Casino. The collateral for the
Exchange Notes will not include assets of the Lawrenceburg
Casino; however, the collateral for the Exchange Notes
will include a pledge of the Company's equity interest in,
and notes evidencing capital loans advanced to, the
Lawrenceburg Casino, as well as a pledge of the proceeds
of the management fee payable to the Company. The
collateral for the Exchange Notes will not include assets
owned by the Sioux City partnership; however collateral
for the Exchange Notes will include the riverboat owned by
the Company and leased to such partnership. The indenture
pursuant to which the Exchange Notes will be, and the Old
Notes were, issued (the "Indenture") limits the ability of
the Company and its Subsidiaries to incur additional
Indebtedness. Under certain circumstances, the collateral
securing the Exchange Notes may be subject to other liens
securing other Indebtedness, which liens will be PARI
PASSU to the lien of the Exchange Notes. The collateral
for the Notes will not include assets of future
Subsidiaries of the Company unless acquired with the
proceeds of the sale of collateral or certain
distributions from the Lawrenceburg Casino. See
"Description of Exchange Notes -- Security for the
Exchange Notes" and "-- Certain Covenants -- Limitation on
Incurrence of Additional Indebtedness and Disqualified
Capital Stock."
Guarantees................... The Exchange Notes will be unconditionally guaranteed on a
senior basis by each Guarantor. See "Description of
Exchange Notes -- Guarantees."
Mandatory Redemption......... The Company is not required to make mandatory redemption
or sinking fund payments prior to the maturity of the
Exchange Notes.
Optional Redemption.......... The Exchange Notes will be redeemable at the option of the
Company in whole or in part at any time on or after June
1, 2000 at the redemption prices set forth herein plus
accrued and unpaid interest, if any, and Liquidated
Damages, if any, thereon to the date of redemption. The
Company will also have the option to redeem the Exchange
Notes at any time if a holder is not found suitable by a
gaming authority. See "Description of Exchange Notes --
Optional Redemption."
Change of Control............ Upon a Change of Control (as defined herein), holders of
the Exchange Notes will have the right to require the
Company to purchase any or all of the Exchange Notes at a
purchase price equal to 101% of the aggregate principal
amount of the Exchange Notes plus accrued and unpaid
interest thereon to the date of purchase. See "Description
of Exchange Notes -- Certain Covenants -- Repurchase of
Notes at the Option of the Holder upon a Change of
Control."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Certain Covenants; Repurchase
Obligation.................. The Indenture contains covenants restricting or limiting
the ability of the Company and its Subsidiaries (which
term, as defined in the Indenture, does not include any
Unrestricted Subsidiaries) to, among other things, (i) pay
dividends or make other restricted payments, (ii) incur
additional indebtedness or issue certain preferred stock,
(iii) create liens, (iv) create dividend or other payment
restrictions affecting Subsidiaries, (v) enter into
mergers or consolidations or make sales of all or
substantially all assets of the Company, and (vi) enter
into transactions with affiliates. In addition, under
certain circumstances, the Company will be required to
offer to purchase Exchange Notes in various amounts at
either 100% or 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, and Liquidated
Damages, to the date of purchase, in the event of certain
asset sales, loss of certain licenses and certain events
with respect to the Lawrenceburg Casino and from certain
distributions from the Lawrenceburg Casino. See
"Description of Exchange Notes."
Special Status of
Lawrenceburg Casino
Project..................... Indiana Gaming L.P., formed for the sole purpose of
developing the Lawrenceburg Casino project, is an
Unrestricted Subsidiary of the Company. None of the assets
of Indiana Gaming L.P. will be pledged as collateral;
however, the Company's 57.5% partnership interest in,
notes evidencing capital loans advanced to and the
proceeds to be received as a management fee from Indiana
Gaming L.P. will be pledged as collateral for the Exchange
Notes. A portion of the proceeds of the offering of the
Old Notes in the amount of $94.3 million was placed in a
disbursement account under the control of a disbursement
agent solely to fund the Company's share of the remaining
capital obligations necessary to construct, open and
complete the Lawrenceburg Casino project. Pursuant to the
terms of the disbursement agreement governing the
disbursement account, there are certain conditions and
limitations affecting the ability of the Company to draw
upon such funds. See "Description of Exchange Notes --
Cash Collateral and Disbursement Agreement." Approximately
$91.3 million of these capital obligations will be
invested in Indiana Gaming L.P. in the form of capital
loans and $3 million will be invested as preferred equity.
Investments by the Company in Indiana Gaming L.P., in the
form of capital loans and common and preferred equity,
will be pledged as collateral for the Exchange Notes. Any
funds remaining in the disbursement account will be
released to the Company upon final completion of the
Lawrenceburg Casino project. A portion of the funds may
also be released from the disbursement account to the
extent the project can obtain and fund third-party
financing for the hotel development. See "Lawrenceburg
Casino Partnership Agreement."
The Company's conduct with respect to Indiana Gaming L.P.
will be subject to certain restrictive covenants. The
Indenture requires the Company to make annual offers to
purchase Exchange Notes in a principal amount equal to 50%
of the distributions from Indiana Gaming L.P. (excluding
management fees, interest income, preferred dividends and
provisions for taxes, up to the amount of the
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
investment therein), and to make an offer to repurchase
Exchange Notes with the proceeds of a sale of the assets
of, or its partnership interest in, Indiana Gaming L.P. In
addition, the Indenture provides that, as long as the
Company is the general partner of Indiana Gaming L.P., the
Company will prohibit Indiana Gaming L.P. from incurring
any indebtedness that is recourse to the Company or that
restricts the payment of dividends or other distributions
from Indiana Gaming L.P. to the Company or a Guarantor.
Furthermore, as long as the Company is general partner of
Indiana Gaming L.P., the Indenture restricts the ability
of the Company to amend the terms of the partnership
agreement dealing with distributions or partnership
purpose, which is limited to the operation of the
Lawrenceburg Casino. Under certain circumstances, the
Company may be removed as general partner of Indiana
Gaming L.P., including upon a foreclosure by the Trustee
under the Notes on the Company's equity interest in
Indiana Gaming L.P.
Cash Collateral and
Disbursement Agreement...... Pursuant to the terms of the Indenture, the Company, the
Trustee and LaSalle National Trust, N.A., as disbursement
agent, entered into a Cash Collateral and Disbursement
Agreement pursuant to which $94.3 million of the proceeds
of the Offering were deposited into a disbursement account
subject to the control of the disbursement agent. Funds in
the disbursement account will be available to fund the
Company's pro rata share of Lawrenceburg Casino project
disbursements. Funds may be released from the disbursement
account upon certification by the Company to the
disbursement agent (i) as to the proposed use of the
project disbursement in the Lawrenceburg Casino project in
conformity with the construction budget, (ii) that the
amounts held in the disbursement account plus amounts
contractually obligated to be contributed by Conseco and
third party equipment financing are sufficient to complete
the Lawrenceburg Casino project, (iii) that Conseco is no
more than 90 days past due on any prior capital call,
PROVIDED, HOWEVER, that any amounts not funded by Conseco
that have been funded by the Company (other than through
the disbursement account) in an aggregate amount not to
exceed $10 million at any one time will not be considered
past due and (iv) as to the satisfaction of certain other
conditions. A portion of the funds may also be released to
the Company from the disbursement account upon completion
of the Lawrenceburg Casino project and upon funding of
hotel construction by third party lenders. The total
amount of disbursements made by the disbursement agent
shall not exceed $35 million prior to the next time the
certificate of suitability granted by the Indiana Gaming
Commission to Indiana Gaming L.P. is formally renewed or
extended by the Indiana Gaming Commission for at least 120
days or, if earlier, the date gaming operations are
commenced at the temporary gaming facility in
Lawrenceburg. No disbursements may be made at any time if
(i) Indiana Gaming L.P.'s certificate of suitability has
been revoked or canceled or has expired or been suspended
and has not been renewed by the Indiana Gaming Commission
prior to issuance of a riverboat owner's license, (ii)
Indiana Gaming L.P.'s application for
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
a permanent riverboat owner's license is denied by the
Indiana Gaming Commission, (iii) Indiana Gaming L.P. is
found unsuitable by the Indiana Gaming Commission, (iv)
Indiana Gaming L.P. has its riverboat owner's license
revoked or suspended by the Indiana Gaming Commission, (v)
the Company or any of its subsidiaries is found unsuitable
by the Indiana Gaming Commission, or (vi) the Company, any
of its subsidiaries or Indiana Gaming L.P. shall have
received notice from the Indiana Gaming Commission of the
commencement of proceedings by the Indiana Gaming
Commission, the stated purpose of which is to formally
consider taking any of the foregoing actions. The
agreement grants the Trustee a first priority security
interest in the disbursement account, and permits the
Trustee the right to access the disbursement account for
certain payments of principal and interest, including the
offer to purchase described under "Certain Covenants
Relating to the Lawrenceburg Casino -- Repurchase of
Exchange Notes on Certain Project Delays."
</TABLE>
RISK FACTORS
Holders of the Old Notes should carefully consider the matters set forth
under the caption "Risk Factors" prior to making a decision with respect to the
Exchange Offer.
13
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data has been derived from the
consolidated financial statements of the Company and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
and Notes thereto, included elsewhere in this Prospectus.
The Company believes that the results of operations for each of the three
years in the period ended December 31, 1995 are not readily comparable to each
other because (i) the Alton Belle Casino commenced operations in September 1991,
was substantially expanded in May 1993, was affected by severe flooding
experienced in the St. Louis area in the summer of 1993 and was the only casino
that operated in the St. Louis market until June 1993, (ii) the Argosy Casino in
Riverside commenced operations on June 22, 1994 on a riverboat that offered only
the limited forms of casino gaming then permitted under Missouri law, and on
December 9, 1994 expanded its operations to offer additional casino gaming,
including slot machines, (iii) the Belle of Baton Rouge commenced operations on
September 30, 1994 through a 90% interest in a joint venture, which became a
100% subsidiary of the Company on June 6, 1995 (effective May 30, 1995), and
(iv) the Company became the manager of the Belle of Sioux City on October 4,
1994 and on December 1, 1994 became the 70% general partner of Belle of Sioux
City, L.P.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Casino revenues............................................. $ 60,182 $ 138,425 $ 237,613 $ 56,593 $ 58,791
Net revenues................................................ 67,525 153,045 252,691 60,374 62,689
Income from operations...................................... 14,327 22,994 27,662 6,221 1,912
Interest expense............................................ 800 8,182 14,708 3,942 4,211
Net income (loss) (a)....................................... 10,825 9,635 6,953 1,468 (1,047)
Net income (loss) per share................................. -- .40 .29 .06 (.04)
Shares outstanding.......................................... -- 24,333 24,333 24,333 24,333
Pro forma net income (loss) per share (a)................... $ .38 -- $ .23 $ .05 --
Pro forma shares outstanding (a)............................ 23,764 -- 24,333 24,333 --
OTHER DATA:
Riverboat casinos in operation (b).......................... 1 4 4 4 4
Casino square footage (b)................................... 20,982 94,546 94,546 94,546 94,546
Gaming positions (b)........................................ 967 4,025 4,127 4,127 4,127
Capital expenditures........................................ $ 36,027 $ 112,013 $ 71,854 $ 12,559 $ 29,283
Depreciation and amortization............................... 3,333 9,846 20,450 4,579 5,889
Development and preopening costs............................ 4,609 9,761 6,888 466 1,855
EBITDA (c).................................................. 17,660 32,840 48,112 10,800 7,801
Adjusted EBITDA(d).......................................... 19,137 37,940 54,078 11,359 10,540
Cash provided by (used in)
Operating activities...................................... 15,419 24,783 49,932 14,474 5,756
Investing activities...................................... (65,434) (118,714) (86,644) (14,873) (29,415)
Financing activities...................................... 54,670 104,818 34,580 (3,672) 35,629
Ratio of earnings to fixed charges (e)...................... 16.0x 2.3x 1.5x 1.5x --(e)
Pro forma ratio of earnings to fixed charges (e)............ -- -- 1.3x -- --(e)
Ratio of EBITDA to interest expense......................... 22.1x 4.0x 3.3x 2.7x 1.9x
Ratio of Adjusted EBITDA to pro forma interest expense
(f)........................................................ -- -- 1.2x -- 1.0x
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED (G)
--------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 28,129 $ 163,741
Total assets......................................................................... 344,925 483,285
Existing Bank Credit Facility........................................................ 71,000 --
Other Long-term debt, including current maturities................................... 124,202 359,202
Total stockholders' equity........................................................... 96,493 95,508
</TABLE>
- ---------------
(a) From their inception until a reorganization that was effected on February
25, 1993, certain predecessor entities of the Company elected to be treated
as S Corporations under the Internal Revenue Code and were not generally
subject to corporate income taxes. The pro forma net income amount for the
year ended December 31, 1993 has been determined assuming the reorganization
had occurred on January 1, 1993, resulting in the Company being treated as a
C Corporation for tax purposes as of that date and to reflect the use of a
portion of the net proceeds of the Company's initial public offering to
retire debt. The pro forma tax provision for 1993 has been computed using an
effective tax rate of 39%. See Notes 1 and 8 of the Notes to the
Consolidated Financial Statements. In addition, pro forma net income per
share for the three months ended March 31, 1995 and for the year ended
December 31, 1995 reflects the Company's June 7, 1995 acquisition of Jazz
Enterprises, Inc. (the "Jazz Acquisition") as if the Jazz Acquisition had
occurred on January 1, 1995. The Company's pro forma net revenue, income
from operations, interest expense and net income giving such effect to the
Jazz Acquisition for the year ended December 31, 1995 is $252.7 million,
$26.8 million, $15.5 million and $5.7 million, respectively. The Company's
pro forma net revenue, income from operations, interest expense and net
income giving such effect to the Jazz Acquisition for the three months ended
March 31, 1995 is $60.4 million, $5.7 million, $4.4 million and $1.3 million
respectively. See Note 7 of the Notes to Consolidated Financial Statements.
(b) Data is as of end of period.
(c) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA should not be construed as an alternative to operating
income or net income (as determined in accordance with generally accepted
accounting principles) as an indicator of the Company's operating
performance, or as an alternative to cash flows generated by operating,
investing and financing activities (as determined in accordance with
generally accepted accounting principles) as an indicator of cash flow or a
measure of liquidity. EBITDA is presented solely as supplemental disclosure
because management believes that it is a widely used measure of operating
performance in the gaming industry and for companies with a significant
amount of depreciation and amortization. The Company has other significant
uses of cash flows, including capital expenditures, which are not reflected
in EBITDA.
(d) Adjusted EBITDA is EBITDA adjusted to add back $1.4 million of flood costs
in 1993, $5.1 million of pre-opening costs in 1994, a $3.5 million non-cash
write off of notes receivable related to a discontinued St. Louis
development, a $.3 million accrual related to a fine in Louisiana and $2.1
million in pre-opening costs in 1995. For the three months ended March 31,
1995, adjusted EBITDA is EBITDA adjusted to add back a $.3 million accrual
related to a fine in Louisiana and $.2 million of pre-opening costs, and for
the three months ended March 31, 1996, adjusted EBITDA is EBITDA adjusted to
add back $1.5 million in professional and other fees related to its response
to a Marion County, Indiana grand jury document subpoena and the related
termination of a private placement of first mortgage notes and $1.6 million
in pre-opening expenses and further adjusted to subtract a $.3 million
reversal of an accrual related to a fine in Louisiana.
(e) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (income before income taxes plus fixed
charges less capitalized interest) by fixed charges (interest expense plus
capitalized interest and one third of rental expense (the portion deemed
representative of the interest factor)). The Company's earnings were
inadequate to cover fixed charges for the three months ended March 31, 1996
by approximately $3.6 million. The pro forma ratio of earning to fixed
charges reflects the net increase in interest expense related to the
issuance of that portion of the Old Notes necessary to retire amounts
outstanding under the Company's former bank credit facility (the "Former
Bank Credit Facility") as of December 31, 1995 and March 31, 1996. The
Former Bank Credit Facility was repaid in full and terminated with a portion
of the net proceeds received by the Company in connection with the Offering
of the Old Notes. The Company's earnings were inadequate to cover pro forma
fixed charges for the three months ended March 31, 1996 by approximately
$4.2 million.
(f) Adjusted to give effect to the issuance and sale by the Company of the Old
Notes and the application of that portion of the net proceeds therefrom used
to retire the Former Bank Credit Facility as if such transactions had
occurred on January 1, 1995. See "Use of Proceeds."
(g) Adjusted to give effect to the issuance and sale by the Company of the Old
Notes and the application of that portion of the estimated net proceeds
therefrom used to retire the Former Bank Credit Facility as set forth under
"Use of Proceeds," including an approximately $1.0 million after-tax
extraordinary charge arising from the accelerated writeoff of deferred
finance costs related to the early extinguishment of the Former Bank Credit
Facility. See "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview." As adjusted cash
and cash equivalents includes the $94.3 million of cash that was deposited
into the cash collateral and disbursement account under the control of a
disbursement agent solely for use in connection with developing the
Lawrenceburg Casino project. See "Description of Exchange Notes -- Cash
Collateral and Disbursement Agreement."
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RISK FACTORS
IN ADDITION TO OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS, BEFORE TENDERING THEIR OLD NOTES FOR THE EXCHANGE NOTES OFFERED
HEREBY, HOLDERS OF OLD NOTES SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS,
WHICH MAY BE GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS TO THE EXCHANGE
NOTES:
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth in the legend thereon, as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws, or pursuant to an exemption therefrom. Except under certain
limited circumstances, the Company does not intend to register the Old Notes
under the Securities Act. In addition, any holder of Old Notes who tenders in
the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may be deemed to have received restricted securities and, if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. To
the extent Old Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for the Old Notes not so tendered could be adversely
affected. See "The Exchange Offer" and "Old Notes Registration Rights;
Liquidated Damages."
SUBSTANTIAL INDEBTEDNESS
At March 31, 1996, as adjusted to give effect to the offering of the Old
Notes and the use of the estimated net proceeds therefrom, the Company's total
indebtedness would have been approximately $359.2 million, its total
stockholders' equity would have been approximately $95.5 million and its total
capitalization would have been approximately $454.7 million. See
"Capitalization." After giving effect to the offering of the Old Notes, the pro
forma ratio of earnings to fixed charges for the fiscal year ended December 31,
1995 was 1.3x and earnings were inadequate to cover pro forma fixed charges for
the three months ended March 31, 1996 by approximately $4.2 million. The
substantial leverage and capital commitments of the Company have important
consequences for holders of the Old Notes and Exchange Notes (the
"Noteholders"), including the risk that the Company may not generate sufficient
cash flow from its subsidiaries operations to pay principal of, and interest on,
indebtedness and to meet its capital expenditure requirements. The Company's
indebtedness includes $115 million principal amount of 12% Convertible
Subordinated Notes that have a final maturity of June 1, 2001. In addition, the
operating and financial restrictions contained in the Indenture and future
indebtedness could affect the Company, including without limitation,
restrictions relating to the incurrence of additional indebtedness for working
capital, capital expenditures, acquisitions or general corporate purposes, the
distribution of cash to stockholders, the making of certain investments and
restricted payments, mergers and sales of assets and the creation of liens. Such
restrictions could have the following effects: (i) the Company's ability to
obtain additional financing may be significantly impaired; (ii) the Company's
ability to respond quickly to increased competition and other market forces may
be limited; (iii) the Company's ability to pursue additional gaming
opportunities will be limited; and (iv) the Company's vulnerability to weak
general economic conditions may be greater than it would otherwise be absent
such restrictions.
The ability of the Company to meet its debt service requirements and to
engage in various significant corporate transactions that may be important to
its business will be dependent upon future operating performance and the opening
of the Lawrenceburg Casino project, each of which is subject to financial,
economic, competitive, regulatory and other factors affecting the Company, many
of which are beyond the Company's control. These inherent uncertainties are
compounded as a result of the limited history of the riverboat gaming industry.
Since a substantial portion of its cash flow from operations must be dedicated
to the payment of interest on outstanding debt, there can be no assurance that
the Company's cash flow from operations will be sufficient to meet its debt
service requirements and other obligations or to repay its indebtedness at
maturity. If the Company is unable to generate sufficient cash flow, it could be
required to adopt one or more alternatives, such as reducing or delaying planned
capital expenditures, selling assets,
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restructuring debt or obtaining additional capital. However, the Company's
ability to raise funds by selling assets is greatly restricted by the Indenture
and its ability to effect equity offerings is dependent on the Company's results
of operations and market conditions. There can be no assurance that any of such
alternatives will be feasible on satisfactory terms, and resorting to
alternative sources of funds could impair the Company's competitive position and
reduce its future cash flow. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
FORECLOSURE RESTRICTIONS
In the event of an "Event of Default" by the Company under the Indenture,
before the Trustee or the Noteholders can foreclose or take possession of the
pledged stock of or partnership interest in any of the Company's subsidiaries or
certain of the Company's or its subsidiaries' assets, the Trustee or such
Noteholders may have to file applications with the gaming commissions of
Illinois, Missouri, Louisiana, Indiana and Iowa and other jurisdictions in which
the Company's gaming assets are located, be investigated and be licensed by such
jurisdiction's gaming commissions. This process can take several months and,
accordingly, the ability of the Trustee or any Noteholder to foreclose could be
substantially delayed or impaired. Moreover, no assurance can be given that
either the Trustee or any Noteholder will be found suitable by such gaming
commissions. Additionally, the Trustee and the Noteholders may be prohibited
from taking possession of that portion of the collateral that constitutes gaming
equipment and machinery by applicable state and federal law. In an Event of
Default by the Company, before the Trustee or Noteholders can take possession of
or sell any collateral constituting security for the Notes, the Trustee or such
Noteholders, in addition to complying with applicable state gaming laws, will
have to comply with all applicable federal and state judicial or non-judicial
foreclosure and sale laws. Such laws may include cure provisions, mandatory sale
notice provisions, manner of sale provisions and redemption period provisions.
Such provisions may significantly increase the time associated with taking
possession or the sale of any collateral. Failure to comply with any applicable
provision could void the foreclosure on or sale of such collateral. In addition,
licensing requirements may limit the number of potential bidders in a
foreclosure sale, may delay the sale and may adversely affect the sale price of
the Company's assets. See "Regulatory Matters."
CERTAIN BANKRUPTCY CONSIDERATIONS
The right of the Trustee to repossess and dispose of the collateral for the
Notes upon the occurrence of an Event of Default on the Notes is likely to be
significantly impaired by applicable bankruptcy law if a bankruptcy proceeding
were to be commenced by or against the Company, whether by a Noteholder or
another creditor (including a junior creditor), prior to such repossession and
disposition. Under applicable bankruptcy law, secured creditors such as the
Noteholders are prohibited from repossessing their security from a debtor in a
bankruptcy case, or from disposing of security repossessed from such debtor,
without bankruptcy court approval. Moreover, applicable bankruptcy law permits
the debtor to continue to retain and to use the collateral even though the
debtor is in default under the applicable debt instruments, provided that the
secured creditor is given "adequate protection." The meaning of the term
"adequate protection" may vary according to circumstances, but it is intended in
general to protect the value of the secured creditor's interest in the
collateral and may include cash payments or the granting of additional security,
at such time and in such amount as the court in its discretion may determine,
for any diminution in the value of the collateral as a result of the stay of
repossession or disposition or any use of the collateral by the debtor during
the pendency of the bankruptcy case. In view of the lack of a precise definition
of the term "adequate protection" and the broad discretionary powers of a
bankruptcy court, it is impossible to predict how long payments under the Notes
could be delayed following commencement of a bankruptcy case, whether or when
the Trustee could repossess or dispose of the collateral for the Notes or
whether or to what extent the Noteholders would be compensated for any delay in
payment or loss of value of the collateral for the Notes through the requirement
of "adequate protection."
FRAUDULENT TRANSFER CONSIDERATIONS
The obligation of each of the Guarantors of the Notes and the grant by each
such Guarantor of a security interest in its assets may be subject to review
under state or federal fraudulent transfer laws. Under such laws, if a court, in
a lawsuit by an unpaid creditor or representative of creditors of a Guarantor,
such as a trustee in bankruptcy or such Guarantor as debtor-in possession, were
to find that at the time such obligation
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was incurred or the security interest granted, such Guarantor, among other
things, (a) did not receive fair consideration or reasonably equivalent value
therefore and (b) either (i) was insolvent, (ii) was rendered insolvent, (iii)
was engaged in a business or transaction for which its remaining unencumbered
assets constituted unreasonably small capital, or (iv) intended to incur or
believed that it would incur debts beyond its ability to pay as such debts
matured, such court could avoid such Guarantor's obligation under its guarantee
and the grant of the security interest, and direct the return of any payments
made under the guarantee to such Guarantor or to a fund for the benefit of its
creditors. Moreover, regardless of the factors identified in the foregoing
clauses (i) through (iv), such court could avoid such obligation and such
security interest, and direct such repayment, if it found that the obligation
was incurred or the security interest granted with intent to hinder, delay, or
defraud such Guarantor's creditors. In that event, the Noteholders would have to
rely solely on the Company's pledge of such Guarantor's capital stock,
partnership interests and intercompany notes owed to the Company, if any, and
would have to look for repayment to other Guarantors whose guarantee obligations
had not been avoided.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts is greater than all of its
property at a fair valuation or if the present fair salable value of its assets
is less than the amount that will be required to pay its probable liability on
its existing debts as they become absolute and matured.
COMPETITION
The casino gaming industry is characterized by intense competition from a
large number of participants, including riverboat casinos, dockside casinos,
land-based casinos, video lottery and poker machines in locations other than
casinos, Native American gaming and other forms of gaming in the United States.
Gaming industry competition is particularly intense in each of the markets where
the Company operates and is likely to increase as other operators open new or
expanded facilities in the future. Historically, the Company has been an early
entrant in each of its markets; however, as its competitors have opened
properties in these markets, the Company's operating results in these markets
have been negatively affected. The Company expects that many of its competitors
will have more gaming industry experience, will be larger and will have
significantly greater financial and other resources than the Company. In
addition, certain of its direct competitors may have superior facilities and or
operating conditions in terms of (i) dockside versus cruising riverboat gaming,
(ii) the amenities offered by the competing casino and its related support and
entertainment facilities, (iii) convenient parking facilities, (iv) ease of
accessibility to the casino site, and (v) favorable tax or regulatory factors.
Given these factors, substantial increased competition could have a material
adverse affect on the Company's existing and proposed operations.
The Company expects increasing competition at its existing gaming
operations, particularly in the St. Louis and Kansas City markets. As a result,
the Company expects the results of operations at its Alton and Riverside casinos
will be negatively affected as new competitors open or existing competitors
expand their facilities. Moreover, increased competition could limit new
opportunities for the Company or result in the saturation of certain gaming
markets. The Company also has competed with, and assumes it will continue to
compete with, a number of bidders for a limited number of licenses and permits
to conduct gaming. In any jurisdiction where the Company may commence
operations, it also will face competition for desirable sites and qualified
personnel. A summary of the current competitive environment in each of the
markets in which the Company has casino operations follows:
ALTON, ILLINOIS FACILITY. The Company's Alton riverboat casino faces
competition from three other riverboat casinos currently operating in the St.
Louis area and expects increasing levels of competition in the future. Two
casino facilities are located in the downtown St. Louis area, one providing
dockside gaming on the Mississippi riverfront in the Gateway Arch area of
downtown St. Louis and the other providing gaming on a cruising riverboat from
East St. Louis, Illinois. Another casino is located in the northwest St. Louis
suburb of St. Charles, Missouri and offers dockside gaming on two vessels with
staggered entry times. A fourth casino complex in the St. Louis market is under
construction in the northwest suburb of Maryland Heights, Missouri, which will
include two independently owned facilities, each of which are expected to
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operate two dockside vessels. This casino complex is expected to open in the
first quarter of 1997. The operating results of the Company's Alton casino have
in the past been negatively impacted by additional competitors in the St. Louis
market and will in the future be further negatively impacted by the additional
competition expected in St. Louis. Because Missouri gaming law does not limit
the number of licenses that may be granted, there could be substantial increases
in the number of gaming operations in the St. Louis area. Specifically, the
Company is aware of several casino operators that are exploring gaming
opportunities in the St. Louis area.
RIVERSIDE, MISSOURI FACILITY. The Argosy Casino in Riverside faces
competition from two other casinos currently operating in the Kansas City area
that offer dockside gaming. Two additional casino operators have commenced
construction of gaming facilities in Kansas City, both of which are expected to
open in the second half of 1996. In addition, one existing Kansas City
competitor has commenced construction of expanded facilities, including a second
gaming vessel that recently opened. The Company anticipates that its results of
operations in Riverside will be negatively impacted by the increased competition
expected in the Kansas City market. Because Missouri gaming law does not limit
the number of licenses that may be granted, there could be substantial increases
in the number of gaming operations in the Kansas City area. To a lesser extent,
the Argosy Casino also competes with a riverboat casino in St. Joseph, Missouri
and may also compete with potential casinos in other areas of Missouri where
local voters have or may approve gaming. In addition, the legalization of casino
gaming in Kansas would have a material adverse effect on the Company's Riverside
casino.
BATON ROUGE, LOUISIANA FACILITY. The Company's Baton Rouge riverboat casino
faces competition from one riverboat casino located in downtown Baton Rouge, a
land-based Native American casino located approximately 70 miles away and
multiple casinos throughout Louisiana. In Louisiana, licenses for 15 riverboat
gaming casinos and one New Orleans land-based casino have been granted, which is
the maximum number of licenses currently authorized in the state, and 12 vessels
are currently operating. Numerous Native American casinos are also operating
throughout Louisiana, as well as more than 15,000 video poker machines that are
located in bars, restaurants and truck stops. In addition to Baton Rouge,
riverboat casinos are currently operating in New Orleans, Shreveport/Bossier
City and Lake Charles, Louisiana. The land-based casino in New Orleans has filed
for bankruptcy, has closed its temporary gaming facility and has halted
construction on its permanent facility located adjacent to the French Quarter.
See "Risk Factors -- Louisiana Local Option Referendum to Restrict Gaming."
SIOUX CITY, IOWA FACILITY. The Company's Sioux City riverboat casino faces
competition from two nearby land-based Native American casinos, slot machines at
a pari-mutuel race track in Council Bluffs, Iowa, and from two riverboat casinos
in the Council Bluffs, Iowa/Omaha, Nebraska market, which opened in January
1996.
PROPOSED LAWRENCEBURG, INDIANA PROJECT. The Company expects to face limited
direct competition for gaming revenues in the Lawrenceburg, Indiana market upon
the opening of the Company's Lawrenceburg riverboat casino at a temporary
facility, which is anticipated in the fourth quarter of 1996, and at a permanent
facility, which is anticipated to open not later than twelve months thereafter.
Indiana gaming law currently limits the number of licenses to operate riverboat
casinos on the Ohio River to five in total and a maximum of one per county. In
addition, casino gaming is not currently permitted under the laws of neighboring
Ohio and Kentucky. Along the Ohio River, a certificate of suitability has been
granted to a gaming operator in Rising Sun, Indiana, which is located in Ohio
County approximately 15 miles south of Lawrenceburg. The competing Rising Sun
casino is currently under development and may open during the same time period
as or prior to the Company's Lawrenceburg Casino. In addition a riverboat
owner's license was issued on December 4, 1995 to an operator in Evansville,
Indiana, which is located in Vanderburgh County, Indiana, approximately 200
miles southwest of Lawrenceburg. Of the remaining two licenses designated for
Ohio River counties, a certificate of suitability was recently awarded to an
operator in Harrison County, which is west of Louisville, Kentucky,
approximately 100 miles from Lawrenceburg. The final Ohio River license is being
pursued by several operators of proposed gaming projects in (i) Switzerland
County, which is approximately 40 miles south of Lawrenceburg, (ii) other
Indiana counties located west of Louisville, Kentucky in which local referenda
to authorize gaming have passed, and (iii) the two Indiana
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counties adjacent to Louisville, Kentucky; however, local referenda seeking to
authorize gaming in these two
counties have failed. The legalization of casino gaming in the States of Ohio or
Kentucky or the expansion of the number of gaming licenses in Indiana could
significantly increase competition and have a material adverse effect upon the
Company's proposed Lawrenceburg Casino.
MARION COUNTY, INDIANA GRAND JURY DOCUMENT SUBPOENA
On or after March 15, 1996, the Company, its partners in the Lawrenceburg
Casino project and certain other individuals and entities were served with
document request subpoenas issued by the Office of the Prosecuting Attorney of
Marion County, Indiana in connection with a grand jury investigation entitled:
STATE OF INDIANA V. ORIGINAL INVESTIGATION-OFFICIAL MISCONDUCT. Indiana law
requires that at the time a target of an investigation is determined, that
entity or person must be so advised by the Office of the Prosecuting Attorney.
On March 23, 1996 the Company was advised by the Marion County prosecutor that
no target subpoenas had been issued by the grand jury in its investigation as of
that date. However, there can be no assurance that targets will not be
identified as further information and documents are obtained and considered by
the grand jury. Due to the confidential nature of grand jury proceedings, the
Company is not aware of the specific subject matter or matters of the
investigation. The Company believes it has fully complied with its subpoena, and
has been informed by its partners that they will do the same.
The subpoenas request information regarding the current or prior ownership
interest in the Company and the partners of Indiana Gaming L.P. by the
individuals or entities described below. The subpoenas also request that the
Company and its partners produce a broad category of documents including
documents regarding employment and other agreements, gifts, payments and
correspondence between the Company and any of its partners on the one hand and
several business entities and individuals, including an Indiana state
legislator, certain Indiana lobbyists, and certain Lawrenceburg, Indiana city
officials and businessmen, on the other hand. The Company has learned that this
legislator has served as an employee of a subsidiary of Conseco, Inc., the
parent company of the 29% limited partner in Indiana Gaming L.P., since
September 1995. Additionally, the Company has learned that such state legislator
has served since September 1993 as a consultant to a major Indiana engineering
firm that is engaged in many state and local government funded construction
projects. That engineering firm also serves as lead engineer for the
Lawrenceburg Casino project. On May 24, 1996, the Indiana House Legislative
Ethics Committee voted to reprimand, but take no further action against, this
legislator for failing to properly report the foregoing employment and
consulting arrangements on his 1993, 1994 and 1995 statements of economic
interests.
The Company believes that neither it nor any entity controlled by or person
employed by the Company has engaged, and has been informed by representatives of
its partners that they have not engaged, in any unlawful conduct in the pursuit
by or granting to Indiana Gaming L.P. of the Lawrenceburg gaming license.
Because the grand jury proceedings are unlikely to be concluded quickly, on
March 25, 1996, a former U.S. Attorney and his law firm were retained to
conduct, as special independent counsel (the "special independent counsel"), an
internal investigation into the activities and actions of the Company and the
entities controlled by and persons employed by the Company with respect to (i)
the hiring by Conseco, Inc. and the Indiana engineering firm of the state
legislator, (ii) the endorsement of Indiana Gaming L.P. by the City of
Lawrenceburg and the financial affairs of certain Lawrenceburg officials with
respect to such endorsement and the awarding of the certificate of suitability
by the Indiana Gaming Commission, and (iii) their lobbying efforts in
furtherance of the Indiana legislature's enactment of legislation authorizing
gaming and limiting gaming licenses to one per county. A special committee of
independent directors of the Company has been appointed to supervise and
coordinate the special independent counsel's investigation. The special
independent counsel has not investigated Conseco, Inc. or the other limited
partners of Indiana Gaming L.P. The Company has been advised that Conseco, Inc.,
with the assistance of outside counsel, has conducted its own internal
investigation of matters that may be the subject of the grand jury proceedings
and such investigation found no wrongdoing by Conseco, Inc. or any person or
entity it controls, or is controlled by, and that Conseco, Inc. intends to
review with the Company's special independent counsel the findings of its
investigation.
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From March 25 to April 15, 1996, the special independent counsel conducted
its investigation and issued an interim report in which it concluded that it
found no evidence that the Company or any entity controlled by or person
employed by the Company had any involvement in, or knowledge of, the
relationship between the state legislator and Conseco, Inc. or the Indiana
engineering firm, or attempted to improperly influence any City of Lawrenceburg
official, state legislator or Indiana Gaming Commission member or staff member
in connection with the endorsement of the partnership by the City of
Lawrenceburg and the awarding of the certificate of suitability to Indiana
Gaming L.P. With regard to lobbying, including the lobbying with respect to one
gaming license per county legislation, the special independent counsel found no
evidence that either the Company or any entity controlled by or person employed
by the Company attempted to unduly influence any legislator in any way. However,
no investigation was made of any lobbyist's records, activities or expenditures,
nor were any outside lobbyists interviewed. The special independent counsel also
audited the Company's compliance with the lobbying disclosure statute in Indiana
and found only technical errors in the Company's lobbying disclosure statements.
No evidence was found that these technical errors were intentional or designed
to hide any lobbying activity. In conducting its investigation, the special
independent counsel, among other things, reviewed numerous boxes of documents
produced by the executive and Lawrenceburg offices of the Company and
extensively interviewed the nine Company officers and employees most closely
related to the Lawrenceburg Casino project, as well as the principal of R.J.
Investments, Inc., a 4% limited partner of Indiana Gaming L.P.
No assurance can be given, however, that the nature and scope of the
investigation conducted by the special independent counsel, which among other
things was conducted under severe time pressure and was limited to the Company
and the entities controlled by and persons employed by the Company, was
sufficient to uncover conduct that might be considered unlawful. In the event
that the Company, any entity controlled by the Company, any person employed by
the Company, Indiana Gaming L.P. or any of its partners is found by the Marion
County prosecutor to have engaged in unlawful conduct, there is no assurance
what effect such action would have on Indiana Gaming L.P.'s certificate of
suitability or, after issuance, the Indiana gaming license. In the event Conseco
or one of the Company's other partners in the Lawrenceburg Casino project is
determined by the Indiana Gaming Commission to be unsuitable for the ownership
of a gaming license or to have engaged in unlawful conduct, the terms of Indiana
Gaming L.P.'s partnership agreement provide that Indiana Gaming L.P. shall
redeem 100% of such unsuitable partner's interest in the partnership for an
amount equal to such partner's capital account. In the event that a partner is
determined by the Indiana Gaming Commission to be unsuitable for ownership after
the issuance of the gaming license, the terms of Indiana Gaming L.P.'s
partnership agreement provide that Indiana Gaming L.P. shall redeem 100% of such
unsuitable partner's interest for an amount equal to 90% of the "appraised
value" of that partner's interest, determined in accordance with the terms of
the partnership agreement. The purchase price is payable in five annual
installments, only from available cash flow or sale or financing proceeds of the
partnership, and bears interest at "prime." If such event were to occur with
respect to Conseco prior to the completion of the Lawrenceburg Casino project,
the Company would have to fund any remaining construction costs of the
Lawrenceburg Casino project which were to have been funded by Conseco. No
assurance can be given that the Company would be able to obtain funds sufficient
for this purpose. Also, there can be no assurance that the Indiana Gaming
Commission will not take other actions such as suspending, revoking or failing
to renew Indiana Gaming L.P.'s certificate of suitability, delaying the issuance
of or failing to issue Indiana Gaming L.P. a gaming license or, after issuance,
revoking or suspending such gaming license. Therefore, there can be no assurance
that the grand jury investigation will not lead to events having a material
adverse effect on the Company.
PROJECT DEVELOPMENT RISKS
As part of its growth strategy, the Company is undertaking significant
development projects at its Baton Rouge and Lawrenceburg properties.
Construction projects, such as the Company's, entail significant risks,
including shortages of materials or skilled labor, unforeseen engineering,
environmental or geological problems, difficulties arising from statutes,
regulations or actions of governmental bodies having jurisdiction or authority
with regard to certain aspects of the project, work stoppages, weather
interferences, floods, unanticipated cost increases and other problems. In
addition, the number and scope of the licenses and
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approvals required to complete the construction of any project, particularly
those pertaining to riverboat and dockside casino, hotel and other destination
resort facilities, are extensive. The anticipated completion and opening dates
of these projects are based on budgets, conceptual design documents and schedule
estimates prepared by the Company and its consultants that are subject to
change, which could result in significant variances to the currently anticipated
scope and costs of the development projects and the anticipated completion
dates. Unexpected concessions required by local, state, or federal regulatory
authorities could involve significant additional costs and delay scheduled
openings of facilities, including either the temporary or permanent facilities
in Lawrenceburg. Moreover, the estimated total costs of the Lawrenceburg Casino
project of $210 million, which is significantly larger in size and scope than
any of the Company's previous development projects, are based upon initial
budgets that are more susceptible to change. While the Company has selected an
architect and general contractor for the Lawrenceburg Casino project and has
entered into a maximum price contract for, and begun construction of, a
riverboat casino, it has not yet entered into a guaranteed maximum price
contract for the remaining development. In addition, site development activities
have not commenced at either the temporary or permanent facilities and cannot
commence until Indiana Gaming L.P. receives a variety of permits. Therefore, the
planned opening of the Lawrenceburg Casino at the temporary facility in the
fourth quarter of 1996, as well as the opening of the permanent facility 12
months thereafter, require the timely receipt of permits and prompt commencement
of construction of the land based, berthing, and support facility improvements
upon receipt of required permits and no substantial delays in the construction
schedule. Significant cost overruns or delays in the scheduled openings of the
Company's current projects, or the inability of the Lawrenceburg gaming market
to meet the Company's operating expectations, would have a material adverse
effect on the Company. Pursuant to the Lawrenceburg partnership agreement, the
Company is obligated to fund 57.5% of any project costs between the budgeted
$210 million total project cost and $225 million. The Company is obligated to
fund the entire amount of any project costs over $225 million. The Company's
inability to satisfy its funding obligations for the Lawrenceburg Casino project
could result in a significant dilution of its interest in Indiana Gaming L.P.
and its possible removal as the general partner. See "Risk Factors -- Certain
Risks Under the Lawrenceburg Casino Partnership Agreement" and "Lawrenceburg
Casino Partnership Agreement."
Development of the Lawrenceburg Casino project will require the Company to
(i) acquire rights to traverse, use and/or improve certain parcels of property
owned by third parties, including the abandonment of a portion of an existing
rail line, in order to gain direct, construction and emergency access to the
property, (ii) acquire access to water, sewer, gas, electric and other necessary
utility services which presently do not provide services to the site and which
may require extension of existing utility service facilities across existing
rights of way and other property owned by third parties, and (iii) acquire
permits from the U.S. Army Corps of Engineers (the "Corps") and the Indiana
Department of Natural Resources ("IDNR") to modify the existing riverfront to
accommodate large scale riverboat gaming activities. In particular, prior to
securing the Corps permit for the permanent site, Indiana Gaming L.P., as a part
of the process, has prepared and submitted significant archaeological studies
that have revealed that cultural remains may be located on the site, and
simulation studies regarding the effect of the Lawrenceburg Casino on the
historic district of the City of Lawrenceburg. Any delays in review of the
studies by the Corps or in implementation of corrective measures to address
conditions revealed by such studies could delay the issuance of the permit from
the Corps. Further, the ultimate permit received from the Corps could include
conditions that could have a material adverse effect on the costs of or result
in a material delay in the commencement and/or completion of the construction of
the temporary or permanent facilities. The Company has been informed that the
permit for the temporary site will include a condition that riverboat gambling
may not commence at the temporary site until the permit for the permanent site
has been issued. Timely completion of the temporary casino is also contingent
upon receipt of a waiver of certain prohibitions on dredging during fish
spawning season (generally April through June) from the IDNR. The Company
anticipates that construction of the temporary facilities will take at least 100
days after the receipt of the temporary site permit from the Corps and the
waiver from the IDNR. In addition, the Company must obtain Corps approval prior
to commencing construction of off-site parking lots for the temporary facility.
Further, in order for the Company to complete the permanent facility within 12
months after opening the temporary facility, as required by Indiana law, the
Company will be required to commence construction of certain portions of the
permanent facility prior to
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issuance of the final permit for the permanent site from the Corps. Although any
such preliminary construction would be within the parameters preliminarily set
forth by the Corps, there can be no assurance that the final permit would not
require modification to all or any portion of such preliminary construction, or
that a final permit from the Corps will be issued. The docking site for the
temporary casino is controlled by the City of Lawrenceburg. The City of
Lawrenceburg and Indiana Gaming L.P. have entered into a Development Agreement
which, among other things, provides for the City to lease the docking site for
the temporary casino to Indiana Gaming L.P. pursuant to certain statutorily
prescribed procedures. The City of Lawrenceburg has commenced the statutory
procedures for the lease of the docking site for the temporary facility;
however, the City of Lawrenceburg has not yet entered into a lease with Indiana
Gaming L.P. The City of Lawrenceburg has also assumed principal responsibility
for obtaining the necessary permits from the Corps and IDNR for the temporary
site. The City of Lawrenceburg obtained the IDNR permit on March 29, 1996;
however, an adjacent landowner has filed an appeal to the issuance of the permit
with the IDNR alleging that he has an interest in the City of Lawrenceburg
property that is the subject of the permit. The Company believes that the
challenge is without merit as the disputed property lies within a public street
right of way that dates back to the time of the original city plat. Any delay in
the entry into a lease between the City of Lawrenceburg and Indiana Gaming L.P.
of the docking site for the temporary casino, or stay or revocation of the IDNR
permit, could delay commencement of construction of the temporary facility and
such delay could increase the costs of, or result in a delay in, the
commencement of gaming operations at the temporary facility. In addition, the
Lawrenceburg site is potentially located in protected wetlands areas. Indiana
Gaming L.P. has agreed to an extensive wetlands mitigation plan in Lawrenceburg
and is taking appropriate steps to further investigate the Lawrenceburg Casino
site. Although the Company does not believe that the existence of wetlands or
other protected areas will prohibit or have a significant adverse impact on the
Company's ability to develop its temporary and permanent sites, there can be no
assurance that further investigation will not reveal adverse conditions or that
claims relating to such matters may not arise in the future, which could have a
material adverse effect on the costs of, or result in a material delay in
opening either temporary or permanent gaming facilities at such site. Indiana
Gaming L.P. is a defendant, along with the City of Lawrenceburg, in a lawsuit
seeking to invalidate a street vacation proceeding for a portion of the
permanent casino site. The plaintiffs in the lawsuit have requested alternate
relief which would require Indiana Gaming L.P. to provide direct access across
the permanent casino site to certain adjacent land owners. The Company does not
believe that the impact to the project or the costs of providing such
alternative relief are significant. However, invalidation of the street vacation
and corresponding denial of access to certain portions of the permanent casino
site could increase the costs of, or result in a delay in, the commencement of
gaming operations at the permanent facility. In addition, the opening of the
Lawrenceburg Casino is subject to the issuance of a gaming license in Indiana
and while Indiana Gaming L.P. has been awarded a certificate of suitability, the
certificate of suitability must be extended by the Indiana Gaming Commission
until the issuance of a gaming license, and no assurance can be given that the
certificate of suitability will be extended or that Indiana Gaming L.P. will be
awarded its final gaming licence or the other approvals necessary to open the
Lawrenceburg Casino. See "Risk Factors -- Gaming Regulation -- Licensing and
Regulation by Gaming and Local Authorities."
There can be no assurance that the Company will obtain the rights, utility
services, licenses, permits and approvals necessary to undertake or complete any
of its development plans, or that such rights, utility services, licenses,
permits and approvals will be obtained within the anticipated time frame or will
be sufficient to conduct its business as currently anticipated.
An example of a project development risk of a nature described above
occurred on April 12, 1996, when the Company received a letter from the Corps
notifying the Company that the Corps had suspended the processing of Indiana
Gaming L.P.'s permit application for the permanent site for the Lawrenceburg
Casino project pending the conclusion of the Corps investigation of whether the
placement of job trailers on the project site without prior Corps authorization
adversely impacted subsurface archeology. The Company was able to timely respond
to the Corps request because all pertinent work had previously been completed by
the Company's archeological and engineering consultants and professionals and on
May 16, 1996, the Corps lifted the suspension and resumed processing of Indiana
Gaming L.P.'s permit application. The Company believes that the five week
suspension of its permanent site Corps permit application has not affected the
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timing of the opening of the Company's temporary and permanent gaming facilities
in Lawrenceburg. No assurance can be given, however, that other events will not
arise that could result in significant delays or increased costs in the opening
of its temporary or permanent Lawrenceburg Casino.
The building trades organization in the Lawrenceburg area, the umbrella
labor group representing the various construction labor unions, has requested
that Indiana Gaming L.P. enter into a project agreement which would require that
construction work at the Lawrenceburg site be performed by union contractors.
The Company has indicated a willingness to enter into an agreement providing
that some portion of the construction work at the Lawrenceburg site would be
performed by union contractors. However, the building trades organization has
insisted upon 100% utilization of union contractors. To date, Indiana Gaming
L.P. has not retained any non-union contractors, but anticipates that non-union
contractors will be engaged to perform certain work at the Lawrenceburg site.
The Company cannot predict the effect of undertaking construction at the
Lawrenceburg site without a project agreement or the impact of hiring non-union
contractors to perform any portion of that work. Any labor action by the
building trades organization or any individual labor union or other group,
including strikes, work stoppages, pickets, or other campaigns, could delay
construction and the opening of the temporary and permanent gaming facilities in
Lawrenceburg.
CERTAIN RISKS UNDER THE LAWRENCEBURG CASINO PARTNERSHIP AGREEMENT
The Lawrenceburg Casino partnership agreement provides that the Company's
wholly-owned subsidiary, The Indiana Gaming Company, can be removed as general
partner of the partnership by the limited partners under certain limited
circumstances, including: (i) a material breach (after notice and expiration of
applicable cure periods) of certain material provisions of the partnership
agreement dealing with such things as distributions to partners or the failure
to obtain the required consent of the limited partners for certain major
decisions; (ii) conviction of embezzlement or fraud; (iii) certain bankruptcy
events; (iv) if The Indiana Gaming Company's partnership interest is less than
40% due to sales or dilution for failure to pay required capital; (v) a final
unappealable judgment against The Indiana Gaming Company in excess of $25
million which is uninsured and remains unsatisfied, unreleased or unstayed for
180 days; (vi) certain acts constituting "gross mismanagement;" (vii) if The
Indiana Gaming Company fails to fund project costs in excess of $215 million
(after expiration of applicable notice and cure periods); and (viii) if the
Trustee under the Notes were to foreclose on the Company's pledge of its
partnership interest in the partnership. Upon removal as general partner, the
general partnership interest of The Indiana Gaming Company becomes a "special
limited partner" interest with rights to partner distributions but only limited
voting rights on partnership matters. Also, if the reason for the removal is an
event described in clause (i), (ii), (iii), (v), (vi) or (viii) above, the
limited partners may acquire all, but not less than all, of The Indiana Gaming
Company's interest for the fair market value thereof determined by an appraisal
process.
The Lawrenceburg partnership agreement provides that: (i) after the third
anniversary date of commencement of operations at the Lawrenceburg Casino, each
limited partner has the right to sell its interest to the other partners (pro
rata in accordance with their respective percentage interests) or (ii) at any
time after a deadlock by the parties with respect to significant items in any
annual operating budget of the partnership for budget year 1999 and thereafter,
any partner has a right to sell its interest to the other partners (the limited
partner pursuant to clause (i) and the partner desiring to sell pursuant to
clause (ii) are hereinafter referred to as a "Selling Partner" and the
non-selling partners are hereinafter referred to as the "Non-Selling Partners").
The partnership agreement provides that after the Selling Partner gives notice
of its intent to sell, the Selling Partner and Non-Selling Partners shall have
60 days to attempt in good faith to agree to a purchase price. If within such
period of time no such agreement is reached, then the Selling Partner's interest
shall be appraised pursuant to an appraisal process to determine the fair market
value thereof. After the fair market value of the Selling Partner's interest is
determined by the appraisal process, the Non-Selling Partners have 60 days to
reject such sale at that price, and if the Non-Selling Partners decline to
purchase the interest of the Selling Partner at the appraisal price, then the
general partner is to solicit bids and sell all of the assets of the Partnership
within twelve months to the highest bidder and Indiana Gaming L.P. will be
dissolved. No assurances can be given that The Indiana Gaming Company, if it is
a Non-Selling Partner, will have or will be able to obtain sufficient funds to
acquire any Selling Partner's interests in
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the circumstances provided for above or that The Indiana Gaming Company will
choose to make such purchase and therefore the assets of the partnership would
have to be sold to the highest bidder as provided above. In addition, the
partnership agreement provides all partners with a right of first refusal on
transfers of partnership interest. A foreclosure by the Trustee on the Company's
pledge of its partnership interest shall be deemed a transfer giving rise to a
right of first refusal. See "Lawrenceburg Casino Partnership Agreement."
GAMING REGULATION
LICENSING AND REGULATION BY GAMING AND LOCAL AUTHORITIES. The ownership and
operation of casino gaming facilities are subject to extensive state and local
regulation. The states of Illinois, Missouri, Louisiana, Iowa and Indiana and
the applicable local authorities require various licenses, findings of
suitability, registrations, permits and approvals to be held by the Company and
its subsidiaries as well as the officers and directors of the Company and its
subsidiaries. The Illinois Gaming Board, the Missouri Gaming Commission, the
Louisiana Gaming Control Board, the Iowa Racing and Gaming Commission and the
Indiana Gaming Commission (herein collectively referred to as "Applicable Gaming
Commissions") may, among other things, limit, condition, suspend, fail to renew
or revoke a license or approval to own an equity interest in the Company or any
of its subsidiaries, for any cause deemed reasonable by such licensing
authority. The suspension, failure to renew or revocation of any of the
Company's licenses or the levy on the Company of substantial fines or forfeiture
of assets would have a material adverse effect on the business of the Company.
In certain circumstances, the Applicable Gaming Commissions have the authority
to approve certain distributions from the Subsidiaries to the Company.
To date, the Company has obtained all governmental licenses, registrations,
permits and approvals necessary for the operation of its current gaming
activities. However, gaming licenses and related approvals are deemed to be
privileges under Illinois, Missouri, Louisiana, Iowa and Indiana law, and no
assurances can be given that any new licenses, permits and approvals that may be
required in the future will be given or that existing ones will not be revoked
or fail to be renewed. In addition, the loss of a license in one jurisdiction
could trigger the loss of a license or effect the Company's eligibility for a
license in another jurisdiction.
On June 30, 1995, Indiana Gaming L.P. received a certificate of suitability
from the Indiana Gaming Commission to develop and operate the Lawrenceburg
Casino. The certificate of suitability was initially extended by the Indiana
Gaming Commission until June 28, 1996 and has been further temporarily extended
until such time in the third quarter of 1996 as the Indiana Gaming Commission
can conduct a formal extension hearing. A riverboat casino license will be
issued only upon satisfaction of the conditions of the certificate of
suitability and the requirements of the Indiana Gaming Commission and other
applicable law, which include, among other things, completion of the vessel,
acquisition of necessary permits or approvals from federal, state and local
authorities and readiness to commence operations. The certificate of suitability
issued to Indiana Gaming L.P. must be extended by the Indiana Gaming Commission
in order to accommodate the expected opening of the temporary facility in the
fourth quarter of 1996. Further, Indiana law permits the Indiana Gaming
Commission to permit a riverboat to dock at a temporary site for a period not
exceeding one year after award of the license at which point the permanent
facility must be opened. The certificate of suitability requires expenditures of
at least $200 million and further requires Indiana Gaming L.P. to make
additional payments to the City of Lawrenceburg equal to a percentage of annual
gross gaming receipts ranging in amount from five percent (for up to $150
million in adjusted gross receipts) to 14 percent (for adjusted gross receipts
over $300 million). Failure to comply with the foregoing conditions and/or
failure to commence riverboat excursions (at either the temporary or permanent
facilities) at such time as required by the Indiana Gaming Commission could
result in the revocation of the certificate of suitability or the license.
Further, the Indiana Gaming Commission may place restrictions, conditions, or
requirements on the permanent riverboat owner's license. There can be no
assurance that Indiana Gaming L.P. will be able to comply with the terms of the
certificate of suitability, that it will be extended until such time as a gaming
license is issued, that the permanent and temporary facilities will open in a
timely fashion or that a riverboat casino license for Lawrenceburg, Indiana will
ultimately be granted to Indiana Gaming L.P. Before the
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Lawrenceburg Casino becomes operational, additional definitive agreements must
be negotiated and executed, gaming facilities must be constructed, and a number
of further conditions must be satisfied (including the licensing of Indiana
Gaming L.P. and their respective employees and the receipt of all requisite
permits). There can be no assurance that the Lawrenceburg Casino will become
operational.
The approval of the Applicable Gaming Commissions is required for any
material debt or equity financing. No assurance can be given that the Company
will obtain the required approvals for future financings.
RISK OF ADVERSE CHANGES IN LAWS AND REGULATIONS. As described below, in
1996, legislation was adopted in Louisiana requiring local electoral
confirmations of gaming activities. No assurance can be given that the voters of
East Baton Rouge Parish will not vote to prohibit riverboat gaming or that
another jurisdiction where the Company conducts gaming operations will not
introduce similar or otherwise restrictive legislation. In addition, regulations
with respect to the conduct of gaming activities and the obligations of gaming
companies in any jurisdiction in which the Company has gaming operations are
subject to change and could impose additional operating, financial or other
burdens on the conduct of the Company's business. Moreover, legislation to
prohibit or limit gaming may be introduced in the future in states where gaming
has been legalized. The enactment of any such legislation or regulatory changes
in jurisdictions where the Company operates gaming facilities could have a
material adverse effect on the Company.
RISK OF LEGALIZATION OF GAMING IN JURISDICTIONS ADJACENT TO THE COMPANY'S
OPERATIONS. Casino gaming is currently prohibited in several jurisdictions
adjacent to Missouri and Indiana. As a result, residents of these jurisdictions,
principally Kansas, Ohio and Kentucky, comprise or are expected to comprise a
significant portion of the patrons of the Company's casino in Riverside,
Missouri and proposed Lawrenceburg Casino. The legalization of casino gaming in
Kansas would have a material adverse effect on the Company because the Company's
Riverside casino is currently the only casino located in the western portion of
the Kansas City market and therefore, residents of Kansas comprise a significant
target market. The legalization of casino gaming in Ohio or Kentucky would have
a material adverse effect on the Company's proposed Lawrenceburg Casino because
a substantial portion of the Lawrenceburg Casino's customers are anticipated to
be residents of Ohio and Kentucky. See "Regulatory Matters -- Legislative and
Regulatory Considerations in Certain Adjacent Jurisdictions."
LOUISIANA LOCAL OPTION REFERENDUM TO RESTRICT GAMING
On April 19, 1996, the Louisiana legislature approved legislation mandating
local option elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit three individual types of gaming in Louisiana.
The referendum will be brought before the Louisiana voters at the time of the
1996 presidential election and will determine whether each of the following
types of gaming will be prohibited or permitted in the following described
Louisiana parishes: (i) the operation of video draw poker devices in each
parish; (ii) the conduct of riverboat gaming in each parish that is contiguous
to a statutorily designated river or waterway or (iii) the conduct of land-based
casino gaming operations in Orleans Parish. If a majority of the voters in a
parish elect to prohibit one or more of the above-described gaming activities in
such parish, then no license or permit shall be issued to conduct such
prohibited gaming activity in such parish and no such gaming activity may be
permitted in that parish. If, however, riverboat gaming was previously permitted
in such parish, the legislation permits the current gaming operator to continue
riverboat gaming in that parish until the expiration of its gaming license.
Further, in parishes where riverboat gaming is currently authorized and
voters elect to prohibit riverboat gaming, the legislation provides that the
gaming license shall not be reissued or transferred to any parish other than a
parish in which a riverboat upon which gaming is conducted is berthed. In
addition, the Louisiana legislature approved a joint resolution to submit to
Louisiana voters at the time of the 1996 presidential election for their
approval a proposed constitutional amendment that, among other things, would
require the voters in a parish where riverboat gaming exists to approve
additional riverboat gaming in that parish. If approved, this constitutional
amendment would represent a further impediment to the Company's ability to move
the Belle of Baton Rouge to another Louisiana parish in the event that the
voters of East Baton Rouge Parish vote to prohibit riverboat gaming.
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There can be no assurance that the voters of the Belle of Baton Rouge's
parish, East Baton Rouge Parish, will not vote to prohibit riverboat gaming at
the time of the 1996 presidential election. If a vote to prohibit riverboat
gaming occurred, the Company would be required to discontinue gaming activity
upon expiration of its current gaming license in September 1999. The
discontinuance of gaming operations in East Baton Rouge Parish would have a
material adverse effect on the Company, both in terms of the loss of revenues
and cash flow generated by the Belle of Baton Rouge and the impairment of the
significant capital investment that the Company has in its riverboat casino and
related facilities, including the Catfish Town development. In addition, if the
Company were unable to move its riverboat casino to another Louisiana parish and
therefore lost its Louisiana gaming license, under the terms of the Indenture,
the Company would be required to repurchase a principal amount of Notes equal to
four times the contribution of the Belle of Baton Rouge to the consolidated
EBITDA of the Company during the four full fiscal quarters preceding the loss of
the Louisiana gaming license. See "Description of Exchange Notes -- Certain
Covenants -- Repurchase on Loss of Material Casino."
Further, the current legislation does not provide for any moratorium that
must expire before future local elections on gaming could be mandated or
allowed. Even if the voters of East Baton Rouge Parish elected to continue to
permit riverboat gaming at the time of the 1996 presidential election, there can
be no assurance that future local elections on gaming activities will not occur,
that East Baton Rouge Parish voters will not subsequently vote to discontinue
riverboat gaming in that parish or that Louisiana will not mandate other
electoral confirmations or otherwise limit, restrict or prohibit gaming in
Louisiana.
The uncertainty resulting from the upcoming local option election on the
continuance of riverboat gaming in East Baton Rouge Parish will also have a
negative impact on the ability of the Company to lease the retail space in
Catfish Town and to obtain financing for its planned hotel development in
Catfish Town.
LOSS OF A RIVERBOAT OR DOCKSIDE FACILITY FROM SERVICE; FLOODING
The Company's revenues to date have been generated primarily by its gaming
operations conducted on riverboat casinos, which are supplemented by dockside
entertainment and support facilities. A riverboat or dockside facility could be
lost from service for a variety of reasons, including casualty, forces of
nature, mechanical failure or extended or extraordinary maintenance or
inspection. In addition, U.S. Coast Guard regulations require a hull inspection
for all riverboats at five-year intervals. To comply with this inspection
requirement, which could take a substantial amount of time, the riverboats must
be taken to a U.S. Coast Guard approved dry docking facility. The Belle of Sioux
City riverboat was removed from service on April 13, 1996 for such a hull
inspection. The riverboat arrived at an approved dry docking facility on April
16, 1996, passed its inspection and returned to service on May 9, 1996. No
interruption in gaming operations occurred in Sioux City as a result of the hull
inspection process, as the Company temporarily transferred gaming operations to
the original Alton Belle prior to removing the Belle of Sioux City from service.
The current Alton Belle riverboat is due for this inspection in mid-1998 and
both the Belle of Baton Rouge and Argosy Casino in Riverside riverboats in
mid-1999.
The severe flooding which occurred along the Mississippi River in
metropolitan St. Louis during the summer of 1993 caused the Company to
experience decreased attendance and increased operating expenses. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company again experienced flooding in May 1995 at both the
Alton, Illinois and Riverside, Missouri sites; however, the flooding did not
result in any significant decrease in attendance or increase in expenses at
either site. All of the Company's riverboat casino sites are vulnerable to the
risk of future flooding. Any flood or other severe weather condition that might
occur in the future could adversely affect attendance and increase expenses, and
could lead to the loss of use of a riverboat or dockside facility for an
extended period. The loss of any riverboat from service, the inability to use a
dockside facility or the loss of parking or land-based facilities could have a
material adverse effect on the Company's financial results.
POTENTIAL INCOME TAX LIABILITY
As a result of a certain shareholder loan transaction, a predecessor entity
to the Company (the "Predecessor") could be subject to federal and certain state
income taxes (plus interest and penalties, if any) because it may have failed to
satisfy all of the requirements of the S Corporation provisions of the Internal
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Revenue Code (the "Code") relating to the prohibition concerning a second class
of stock. An audit is currently being conducted by the Internal Revenue Service
(the "IRS") of the Company's federal income tax returns for the 1992 and 1993
tax years and the IRS has asserted the S Corporation status of the Predecessor
as an issue. Although the IRS has yet to make a formal claim of deficiency, if
the IRS successfully challenges the Predecessor's S Corporation status, the
Company would be required to pay federal and certain state income tax taxes on
the Predecessor's taxable income from the commencement of its operations until
February 25, 1993 (plus interest and penalties, if any, thereon until the date
of payment). The Company estimates that this potential tax liability could be up
to approximately $11.6 million, including interest through March 31, 1996, but
excluding penalties, if any, none of which has been reserved on the books of the
Company. While the Company believes the Predecessor has legal authority for its
position that it is not subject to federal and certain state income taxes
because it met the S Corporation requirements, no assurances can be given that
the Predecessor's position will be upheld. This contingent tax liability could
have a material adverse effect on the Company's results of operations, financial
position and cash flows. No provision has been made for this contingency in the
Company's consolidated financial statements appearing elsewhere in this Offering
Memorandum.
HOTEL AND RETAIL REAL ESTATE DEVELOPMENT BUSINESS RISKS
As part of its current expansion program, the Company is pursuing the
development of hotels in Baton Rouge, Riverside and Lawrenceburg. In addition,
the Company is also currently developing a retail real estate project as part of
its Catfish Town development in Baton Rouge. The Company has no experience in
hotel or retail real estate development or management and each of these projects
will be subject to all of the risks inherent in the establishment of a new
enterprise. In addition, numerous permits and approvals are required for the
development of hotel and retail real estate projects, and no assurance can be
given that such permits and approvals can or will be obtained. Although the
Company may enter into management and/or development contracts with experienced
hotel management companies with respect to certain or all of its proposed
hotels, there can be no assurance that such contracts will be entered into or
entered into on terms favorable to the Company. In addition, the uncertainty
resulting from the upcoming local option election on the continuance of
riverboat gaming in East Baton Rouge Parish will have a negative impact on the
ability of the Company to lease the retail space in Catfish Town and to obtain
financing for its planned hotel development in Catfish Town.
JOINT VENTURE RISKS
The Company is pursuing its Lawrenceburg Casino project and, as part of its
growth strategy, is likely to pursue additional expansion opportunities by
entering into joint ventures. The development and opening of the Lawrenceburg
Casino project is dependent upon the ability of the Company's joint venture
partner to contribute or loan to the joint venture its share of the necessary
funds. In addition, any management dispute between the Company and a joint
venture partner or the failure of any such partner to become licensed or to meet
its obligations, with respect to the development of the Lawrenceburg or any
other potential joint venture project, may have a material adverse effect on the
Company's business.
GAMING TAXATION AND FEES
The Company believes that the prospect of significant additional tax revenue
is one of the primary reasons why new jurisdictions have legalized gaming. As a
result, gaming operators are typically subject to significant taxes and fees in
addition to normal federal and state corporate income taxes. Such taxes and fees
are subject to increase at any time. For example, a number of bills have been
recently introduced in the Illinois legislature proposing a graduated gaming tax
that would impose a maximum tax on Illinois casinos far in excess of the current
20% wagering tax on adjusted gaming receipts. The Governor of Illinois has
publicly supported such a graduated gaming tax and has proposed a state budget
which is in part predicated on additional revenues being generated from an
increase in the gaming taxes. The proposed bills are still pending and no
assurance can be given that one or a combination of these bills will not become
law or that similar legislation will not be introduced, in Illinois or in other
jurisdictions, in the future.
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The Company pays substantial taxes and fees with respect to its operations
and will likely incur similar burdens in any other jurisdiction in which it
conducts gaming operations in the future. Any material increase, or the adoption
of additional taxes or fees, could have a material adverse effect on the
Company's future financial results.
POTENTIAL CHALLENGE TO CERTIFICATE OF SUITABILITY FOR LAWRENCEBURG CASINO BY
UNSUCCESSFUL APPLICANT
On March 6, 1996 Indiana Gaming Company received a letter from counsel to
Schilling Casino Corporation, d/b/a Empire Casino & Resort ("Empire") advising
the Company that Empire intends to take legal action to seek a revocation or
cancellation of the certificate of suitability issued by the Indiana Gaming
Commission to Indiana Gaming L.P. on June 30, 1995 to develop and operate the
Lawrenceburg Casino. Empire was one of the 10 unsuccessful applicants competing
for the Lawrenceburg gaming license. Empire has advised Indiana Gaming L.P. that
it intends to file an application with the Indiana Gaming Commission seeking
revocation of the certificate of suitability and that if such application is
unsuccessful, Empire has stated that it intends to file a civil action
challenging the Indiana Gaming Commission's authority to issue the certificate
of suitability and finally, if any such civil action is unsuccessful, to file an
appeal from the denial of Empire's application, which denial Empire deems to
occur upon the issuance of the gaming license to Indiana Gaming L.P. Among the
grounds stated by Empire for its actions are: (i) the application process
followed by the Indiana Gaming Commission did not afford Empire due process;
(ii) Indiana Gaming L.P. will not be able to commence gaming operations prior to
June 28, 1996 due to the failure to obtain the necessary permits and an
inability to obtain the necessary financing for the project; (iii) Indiana
Gaming L.P. made misrepresentations to the Indiana Gaming Commission during the
licensing hearings; and (iv) the endorsement of Indiana Gaming L.P. by the City
of Lawrenceburg was without legal authority.
There can be no assurance that any actions of Empire will not result in a
delay in the opening of the temporary gaming facility in Lawrenceburg presently
scheduled for the fourth quarter of 1996 or the opening of the permanent gaming
facility scheduled twelve months later. Additionally, the Company cannot predict
the response of the Indiana Gaming Commission or City of Lawrenceburg to any
such actions of Empire.
CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company presently own or control
in the aggregate approximately 40% of the outstanding shares of Common Stock.
Accordingly, the directors and executive officers will effectively be able to
control the outcome of all matters requiring stockholder approval, including the
election of the Company's directors, thereby controlling the management,
policies and business operations of the Company. Such control could have the
effect of entrenching current management and delaying or discouraging a takeover
of the Company.
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USE OF PROCEEDS
There will be no cash proceeds to the Company resulting from the Exchange
Offer. The Company used the net proceeds received from the offering of the Old
Notes (approximately $225.6 million, after deducting the estimated expenses of
the offering of the Old Notes) (i) to fund the Company's share of the estimated
remaining construction costs of the Lawrenceburg Casino project, including the
development and opening of a temporary gaming facility ($94.3 million), (ii) to
repay all indebtedness outstanding under the Former Bank Credit Facility ($91.4
million), which facility was terminated upon such repayment and (iii) for
general corporate purposes ($39.9 million). Borrowings under the Former Credit
Facility were incurred to fund (a) a portion of the costs incurred in connection
with the Company's acquisition of Jazz Enterprises, Inc., (b) a portion of the
construction costs of the recent expansion projects at the Company's Riverside
and Baton Rouge casinos, and (c) the Company's share of the initial costs of
developing the Lawrenceburg Casino project. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." For a more complete discussion of the Company's expansion
and development projects, see "Business."
The portion of the proceeds used for funding the construction costs of the
Lawrenceburg Casino project are being held in a disbursement account. Pursuant
to the terms of the disbursement agreement governing the disbursement account,
there are certain conditions and limitations affecting the ability of the
Company to draw upon such funds. See "Description of Exchange Notes -- Cash
Collateral and Disbursement Agreement."
Until required for the foregoing purposes, the net proceeds of the offering
of the Old Notes are being invested in short-term, investment grade, interest
bearing securities.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company and the Guarantors with respect to the registration of the Old Notes.
The Old Notes were originally issued and sold on June 5, 1996 (the "Issue
Date"). Such sales were not registered under the Securities Act in reliance upon
the exemption provided by Section 4(2) of the Securities Act and Rule 144A
promulgated under the Securities Act. In connection with the sale of the Old
Notes, the Company, the Guarantors and the Initial Purchasers entered into a
registration rights agreement dated June 5, 1996 (the "Registration Rights
Agreement") pursuant to which the Company and the Guarantors agreed, for the
benefit of the holders of Old Notes, that they will, at their cost, (i) within
30 days after the date of original issue of the Old Notes use their respective
reasonable best efforts to file a registration statement in accordance with the
Securities Act (an "Exchange Offer Registration Statement") with the Commission
with respect to a registered offer to exchange the Old Notes for the Exchange
Notes, which will have terms substantially identical in all material respects to
the Old Notes and (ii) use their reasonable best efforts to cause such Exchange
Offer Registration Statement to be declared effective under the Securities Act
within 120 days after such issue date. Upon such Exchange Offer Registration
Statement being declared effective, the Company agreed to offer to holders of
Old Notes who are able to make certain representations an opportunity to
exchange properly tendered Old Notes for Exchange Notes. The Company has agreed
to keep the Exchange Offer open for not less than 30 days (or longer if required
by applicable law) after the date notice of such Exchange Offer is mailed to the
holders of Old Notes.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 165 days of the date of
original issue of the Old Notes, the Company and the Guarantors will, at their
own expense, use their reasonable best efforts to (a) as promptly as
practicable, file a shelf registration statement covering resales of the Old
Notes (a "Shelf Registration Statement"), (b) cause such Shelf Registration
Statement to be declared effective under the Securities Act and (c) keep
effective such Shelf Registration Statement until the earlier of 36 months
following the date of original issue of the Old Notes and such time
30
<PAGE>
as all of the Old Notes have been sold thereunder or otherwise cease to be a
Transfer Restricted Security (as defined in the Registration Rights Agreement).
The Company and the Guarantors will, in the event a Shelf Registration Statement
is required to be filed by them, provide to each holder of Old Notes copies of
the prospectus which is a part of such Shelf Registration Statement, notify each
such holder of Old Notes when such Shelf Registration Statement for the Old
Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Old Notes. A holder of Old Notes who sells
such Old Notes pursuant to the Shelf Registration Statement generally would be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which is
applicable to such a holder (including certain indemnification and contribution
rights and obligations).
If (a) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement is declared effective by the Commission on or prior to
the 120th day after the date of original issuance of the Notes (the
"Effectiveness Target Date"), (b) an Exchange Offer Registration Statement
becomes effective and the Company and the Guarantors fail to consummate the
Exchange Offer within 45 days of the earlier of the effectiveness of such
registration statement or the Effectiveness Target Date, or (c) the Shelf
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Old Notes during the period
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (c) above a "Registration Default"), then the Company and
the Guarantors will be required to pay Liquidated Damages to each Noteholder.
See "Old Notes Registration Rights; Liquidated Damages."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and the Letter of Transmittal accompanying the
Registration Statement of which this Prospectus is a part (the "Letter of
Transmittal"), $1,000 in principal amount of Exchange Notes for each $1,000 in
principal amount of Old Notes. The Terms of the Exchange Notes are substantially
identical to the terms of the Old Notes for which they may be exchanged pursuant
to this Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof, and the holders of the Exchange Notes (as well
as remaining holders of any Old Notes) are not entitled to certain registration
rights and certain liquidated damages provisions which are applicable to the Old
Notes under the Registration Rights Agreement. The Exchange Notes will evidence
the same debt as the Old Notes and will be entitled to the benefits of the
Indenture. See "Description of Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered or accepted for exchange.
Based on its view of interpretations set forth in no-action letters issued
by the Staff to third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for the Old Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
holder which is (i) an Affiliate of the Company, (ii) a broker-dealer who
acquired Old Notes directly from the Company or (iii) a broker-dealer who
acquired Old Notes as a result of market making or other trading activities)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such Exchange Notes are acquired in the
ordinary course of such holders' business, and such holders are not engaged in,
and do not intend to engage in, and have no arrangement or understanding with
any person to participate in, a distribution of such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging, and by delivering a prospectus, a
31
<PAGE>
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Broker-dealers who acquired Old Notes as a result
of market making or other trading activities may use this Prospectus, as
supplemented or amended, in connection with resales of Exchange Notes. The
Company has agreed that, for a period of 180 days after the Registration
Statement is declared effective, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. Any holder who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes or any other holder that cannot rely upon such interpretations
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
Tendering holders of Old Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from June 5, 1996. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from June 5, 1996 to the date of the issuance of the Exchange Notes. The
Exchange Notes will bear interest at a rate of 13 1/4% per annum, payable
semi-annually on June 1 and December 1 of each year, commencing December 1,
1996.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1996 unless the
Company in its sole discretion extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Company, expires.
The Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to First
National Bank of Commerce (the "Exchange Agent") and by timely public
announcement communicated by no later than 5:00 p.m. on the next business day
following the Expiration Date, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Old Notes previously tendered pursuant to
the Exchange Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Old Notes for any reason,
including if any of the events set forth below under "Conditions to the Exchange
Offer" shall have occurred and shall not have been waived by the Company and
(ii) amend the terms of the Exchange Offer in any manner, whether before or
after any tender of the Old Notes. If any such termination or amendment occurs,
the Company will notify the Exchange Agent in writing and will either issue a
press release or give written notice to the holders of the Old Notes as promptly
as practicable. Unless the Company terminates the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date, the Company will exchange the
Exchange Notes for Old Notes on the Exchange Date.
If the Company waives any material condition to the Exchange Offer, or
amends the Exchange Offer in any other material respect, and if at the time that
notice of such waiver or amendment is first published, sent to given to holders
of Old Notes in the manner specified above, the Exchange Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the fifth
business day from, and including, the date that such notice is first so
published, sent or given, then the Exchange Offer will be extended until the
expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Old Notes and will
be furnished to brokers, banks and similar persons whose names, or the names of
whose nominees, appear on the lists of holders for subsequent transmittal to
beneficial owners of Old Notes.
32
<PAGE>
HOW TO TENDER
The tender to the Company of Old Notes by a holder thereof pursuant to one
of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
GENERAL PROCEDURES
A holder of an Old Note may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
(or a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation")
pursuant to the procedure described below), to the Exchange Agent at its address
set forth on the back cover of this Prospectus on or prior to the Expiration
Date or (ii) complying with the guaranteed delivery procedures described below.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder, the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an address
other than that of a registered holder appearing on the note register for the
Old Notes, the signature on the Letter of Transmittal must be guaranteed by an
Eligible Institution.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
Old Notes should contact such holder promptly and instruct such holder to tender
Old Notes on such beneficial owner's behalf. If such beneficial owner wishes to
tender such Old Notes himself, such beneficial owner must, prior to completing
and executing the Letter of Transmittal and delivering such Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or follow the procedures described in the immediately
preceding paragraph. The transfer of record ownership may take considerable
time.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Exchange Offer within two business days after
receipt of this Prospectus, and any financial institution that is a participant
in the Book-Entry Transfer Facility's systems may make book-entry delivery of
Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Old Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal, with
any required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address
specified on the back cover of this Prospectus on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide
33
<PAGE>
his taxpayer identification number (social security number or employer
identification number, as applicable) and certify that such number is correct.
Each tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exemption exists and is proved in a manner satisfactory to
the Company and the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the Letter of Transmittal on or prior to the Expiration
Date a letter, telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering holder, the principal amount
of the Old Notes being tendered, the names in which the Old Notes are registered
and, if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission by the Eligible Institution, the Old Notes,
in proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Old Notes being tendered by the
above-described method (or a timely Book-Entry Confirmation) are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceeded by a properly completed Letter of Transmittal and any other required
documents), the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Old Notes (or a timely Book-Entry
Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. Neither the Company, the
Exchange Agent nor any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Old Notes, and that, when the same
are accepted for exchange, the Company will acquire good and unencumbered title
to the tendered Old Notes, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim. The Transferor also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
exchange, assignment and
34
<PAGE>
transfer of tendered Old Notes. The Transferor further agrees that acceptance of
any tendered Old Notes by the Company and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of its
obligations under the Registration Rights Agreement and that the Company shall
have no further obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the death
or incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
By tendering Old Notes and executing the Letter of Transmittal, the
Transferor certifies that (i) any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement with
any person to participate in the distribution of the Exchange Notes and (iii) it
is not an "affiliate," as defined in Rule 405 of the Securities Act, of the
Company, or if it is an affiliate of the Company, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable. In addition, if the Transferor is not a broker-dealer, it
will be required to represent that it is not engaged in, and does not intend to
engage in, the distribution of the Exchange Notes. If the holder is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Old Notes that were acquired as a result of market making activities or
other trading activities, it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
WITHDRAWAL RIGHTS
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of this Prospectus prior to the Expiration Date. Any
such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Old Notes to be withdrawn, the certificate
numbers of Old Notes to be withdrawn, the principal amount of Old Notes to be
withdrawn, a statement that such holder is withdrawing his election to have such
Old Notes exchanged, and the name of the registered holder of such Old Notes,
and must be signed by the holder in the same manner as the original signature on
the Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of the Old Notes being
withdrawn. The Exchange Agent will return the properly withdrawn Old Notes
promptly following receipt of notice of withdrawal. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and the
issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted for
exchange validly tendered Old Notes when, as and if the Company has given
written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Old Notes
for the purposes of receiving Exchange Notes from the Company and causing the
Old Notes to be assigned, transferred and exchanged. Upon the terms and subject
to conditions of the Exchange Offer, delivery of Exchange Notes to be issued in
exchange for accepted Old Notes will be made by the Exchange Agent promptly
after acceptance of the tendered Old Notes. Old Notes not accepted for exchange
by the Company will be returned without expense to the tendering holders (or in
the case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the procedures described
above, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) promptly following the Expiration Date
or, if the Company terminates the Exchange Offer prior to the Expiration Date,
promptly after the Exchange Offer is so terminated.
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<PAGE>
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Old Notes not previously accepted and may
terminate the Exchange Offer (by oral or written notice to the Exchange Agent
and by timely public announcement communicated by no later than 5:00 p.m. on the
next business day following the Expiration Date, unless otherwise required by
applicable law or regulation, by making a release to the Dow Jones News Service)
or, at its option, modify or otherwise amend the Exchange Offer, if (a) there
shall be threatened, instituted or pending any action or proceeding before, or
any injunction, order or decree shall have been issued by, any court or
governmental agency or other governmental regulatory or administrative agency or
commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
(ii) assessing or seeking any damages as a result thereof or (iii) resulting in
a material delay in the ability of the Company to accept for exchange or
exchange some or all of the Old Notes pursuant to the Exchange Offer; (b) any
statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer or
any of the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the reasonable judgment of the Company
might directly or indirectly result in any of the consequences referred to in
clauses (a)(i) or (ii) above or, in the reasonable judgment of the Company,
might result in the holders of Exchange Notes having obligations with respect to
resales and transfers of Exchange Notes which are greater than those described
in the interpretations of the Staff referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the Exchange
Offer; or (c) a material adverse change shall have occurred in the business,
condition (financial or otherwise), operations, or prospects of the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in whole
or in part at any time or from time to time in its sole discretion. The failure
by the Company at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right, and each right will be deemed an ongoing
right which may be asserted at any time or from time to time. In addition, the
Company has reserved the right, notwithstanding the satisfaction of each of the
foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or
nonfulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes tendered
and no Exchange Notes will be issued in exchange for any such Old Notes, if at
such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
EXCHANGE AGENT
First National Bank of Commerce has been appointed as the Exchange Agent for
the Exchange Offer. Letters of Transmittal must be addressed to the Exchange
Agent at:
<TABLE>
<S> <C>
BY MAIL: BY HAND DELIVERY/OVERNIGHT DELIVERY:
Trust Security Services Trust Security Services
First National Bank of Commerce First National Bank of Commerce
P.O. Box 60279 210 Baronne Street
New Orleans, Louisiana 70160-0279 Basement Level
Attention: Rebecca Norton New Orleans, Louisiana 70112
Attention: Rebecca Norton
</TABLE>
Telephone: (504) 623-7581
Facsimile: (504) 623-1095
36
<PAGE>
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting, legal fees and miscellaneous
expenses will be paid by the Company and are estimated to be approximately
$150,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction. In any jurisdiction the securities laws or blue sky laws
of which require the Exchange Offer to be made by a licensed broker or dealer,
the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Old Notes for Exchange Notes by tendering holders will not
be a taxable exchange for federal income tax purposes, and such holders should
not recognize any taxable gain or loss or any interest income as a result of
such exchange.
OTHER
Participation in the Exchange Offer is voluntary and holders of Old Notes
should carefully consider whether to accept the terms and conditions thereof.
Holders of the Old Notes are urged to consult their financial and tax advisors
in making their own decisions on what action to take with respect to the
Exchange Offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of this Exchange Offer, the
Company will have fulfilled a covenant contained in the terms of the Old Notes
and the Registration Rights Agreement. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights, and limitations applicable
thereto, under the Indenture, except for any such rights under the Registration
Rights Agreement which by their terms terminate or cease to have further effect
as a result of the making of this Exchange Offer. See "Description of Exchange
Notes." All untendered Old Notes will continue to be subject to the restriction
on transfer set forth in the Indenture. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for any
remaining Old Notes could be adversely affected. See "Risk Factors --
Consequences of Failure to Exchange Old Notes."
The Company may in the future seek to acquire untendered Old Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plan to acquire any Old Notes that are
not tendered in the Exchange Offer.
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<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents, short-term
indebtedness and total capitalization of the Company as of March 31, 1996 on an
actual basis and as adjusted to reflect the issuance and sale of the Old Notes
and the application of the net proceeds therefrom.
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................... $ 28,129 $ 163,741(a)
---------- --------------
---------- --------------
Total debt (b):
Existing Bank Credit Facility............................................. $ 71,000 $ --
Notes offered hereby...................................................... 235,000
Note payable.............................................................. 9,202 9,202
Convertible Subordinated Notes............................................ 115,000 115,000
---------- --------------
Total debt.............................................................. 195,202 359,202
Stockholders' equity:
Preferred stock; $.01 par value per share; 10,000,000 shares authorized;
none outstanding......................................................... -- --
Redeemable common stock; $.01 par value per share; 85 shares authorized;
none outstanding......................................................... -- --
Common stock; $.01 par value per share; 60,000,000 shares authorized;
24,333,333 shares outstanding (c)........................................ 243 243
Capital in excess of par value............................................ 71,865 71,865
Retained earnings......................................................... 24,385 23,400(d)
---------- --------------
Total stockholders' equity.............................................. 96,493 95,508
---------- --------------
Total capitalization........................................................ $ 291,695 $ 454,710
---------- --------------
---------- --------------
</TABLE>
- ---------------
(a) Such amount includes restricted cash in the amount of $94.3 million that
upon consummation of the offering of the Old Notes was deposited in a
disbursement account under the control of a disbursement agent solely for
use in connection with developing the Lawrenceburg Casino project. Pursuant
to the terms of the disbursement agreement governing the disbursement
account, there are certain conditions and limitations affecting the ability
of the Company to draw upon such funds. See "Description of Exchange Notes
-- Cash Collateral and Disbursement Agreement" and "-- Certain Covenants --
Limitation on Use of Proceeds."
(b) For a further description of the Company's debt, see "Description of
Certain Indebtedness" and Note 3 of Notes to Consolidated Financial
Statements. In March 1995, the Company entered into the Former Bank Credit
Facility pursuant to which the Company could borrow up to $20 million under
a revolving line of credit and up to an additional $80 million which would
be available under an expansion line for the Company's expansion projects.
The total indebtedness outstanding under the Former Bank Credit Facility
was $91.4 million on the closing date of the offering of the Old Notes. In
connection with the offering of the Old Notes, all amounts outstanding
under the Former Bank Credit Facility were repaid in full and the Company
terminated the facility.
(c) Does not include 2,500,000 shares of common stock available under the
Company's 1993 Employee Stock Option Plan (of which options covering
2,445,253 shares are outstanding, options covering 569,705 shares of which
are exercisable as of the date of this Offering Memorandum) and 50,000
shares of common stock available under the Company's 1993 Directors Option
Plan (of which options covering 21,000 shares are outstanding, options
covering 17,000 shares of which are exercisable as of the date of this
Offering Memorandum).
(d) Reflects an approximately $1.6 million pre-tax non-cash extraordinary
charge ($1.0 million net of tax) arising from the accelerated writeoff of
deferred finance costs related to the early extinguishment of the Existing
Bank Credit Facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview."
38
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the Company presented below
under the captions "Income Statement Data" and "Balance Sheet Data" for and as
of the end of each of the five years ended December 31, 1995 are derived from
the Consolidated Financial Statements of the Company which have been audited by
Ernst & Young LLP, independent auditors. The selected income statement data for
the three months ended March 31, 1995 and 1996 and the selected balance sheet
data at March 31, 1995 and 1996 have been derived from the unaudited condensed
consolidated financial statements which are also included in this Prospectus and
include all adjustments, consisting of normal recurring accruals, that the
Company considers necessary for a fair presentation of its consolidated
financial position and results of operations for such periods. The following
information should be read in conjunction with the consolidated financial
statements and notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
The Company believes that the results of operations for each of the five
years in the period ended December 31, 1995, are not readily comparable to each
other because (i) the Alton Belle Casino commenced operations in September 1991,
was substantially expanded in May 1993, was affected by severe flooding
experienced in the St. Louis area in the summer of 1993 and was the only casino
that operated until June 1993, (ii) the Argosy Casino in Riverside commenced
operations on June 22, 1994 on a riverboat that offered only the limited forms
of casino gaming then permitted under Missouri law and on December 9, 1994
expanded its operations to offer additional casino gaming, including slot
machines, (iii) the Belle of Baton Rouge commenced operations on September 30,
1994 through a 90% interest in a joint venture, which became a 100% subsidiary
of the Company on June 6, 1995 (effective May 30, 1995), and (iv) the Company
became the manager of the Belle of Sioux City on October 4, 1994 and on December
1, 1994 became the 70% general partner of the Belle of Sioux City, L.P.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ --------------------
1991(A) 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Casino.............................. $ 10,703 $ 49,742 $ 60,182 $ 138,425 $ 237,613 $ 56,593 $ 58,791
Admissions.......................... 2,975 5,990 6,440 12,177 15,300 4,168 1,995
Food, beverage and other............ 1,267 3,544 4,381 12,036 18,537 3,703 6,055
Less: promotional allowances........ (826) (1,257) (3,478) (9,593) (18,759) (4,090) (4,152)
--------- --------- --------- --------- ---------- --------- ---------
Net revenues.................... 14,119 58,019 67,525 153,045 252,691 60,374 62,689
Costs and expenses:
Casino.............................. 5,478 19,521 25,308 64,997 117,725 28,987 29,071
Food, beverage and other............ 1,009 2,827 4,490 11,876 17,242 4,160 5,276
Other operating expenses............ 1,203 3,346 5,078 9,897 16,910 3,384 4,368
Selling, general and
administrative..................... 1,634 5,207 8,903 23,674 45,814 12,577 14,318
Depreciation and amortization....... 656 2,089 3,333 9,846 20,450 4,579 5,889
Development and preopening.......... 1,569 -- 4,609 9,761 3,411 466 1,855
Flood costs (b)..................... -- -- 1,477 -- -- -- --
Retirement benefit (c).............. -- 1,595 -- -- -- -- --
Notes receivable writeoff........... -- -- -- -- 3,477 -- --
--------- --------- --------- --------- ---------- --------- ---------
11,549 34,585 53,198 130,051 225,029 54,153 60,777
--------- --------- --------- --------- ---------- --------- ---------
Income from operations.......... 2,570 23,434 14,327 22,994 27,662 6,221 1,912
Other income (expense):
Interest income..................... -- -- 1,254 1,081 436 98 90
Interest expense:
Amortization of accommodation
fee............................ (1,549) (6,951) -- -- -- -- --
Other........................... (328) (931) (800) (8,182) (14,708) (3,942) (4,211)
--------- --------- --------- --------- ---------- --------- ---------
Income before income taxes and
minority interest.................... 693 15,552 14,781 15,893 13,390 2,377 (2,209)
Income tax benefit (expense).......... (34) (338) (3,956) (6,453) (6,621) (934) 867
Minority interest..................... -- -- -- 195 184 25 295
--------- --------- --------- --------- ---------- --------- ---------
Net income (loss)............... $ 659 $ 15,214 $ 10,825 $ 9,635 $ 6,953 $ 1,468 $ (1,047)
--------- --------- --------- --------- ---------- --------- ---------
--------- --------- --------- --------- ---------- --------- ---------
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ --------------------
1991(A) 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) per share........... -- -- -- $ 0.40 $ 0.29 $ 0.06 $ (0.04)
Shares outstanding.................... -- -- -- 24,333 24,333 24,333 24,333
Ratio of earnings to fixed charges
(d).................................. 1.2x 3.0x 16.0x 2.3x 1.5x 1.5x --(d)
Pro forma ratio of earnings to fixed
charges (d).......................... -- -- -- -- 1.3x --(d)
Pro forma net income per share (e).... $ .36 $ .38 $ -- $ .23
Pro forma shares outstanding (e)...... 20,552 23,764 -- 24,333 24,333
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............. $ 2,088 $ 2,749 $ 7,404 $ 18,291 $ 16,159 $ 14,220 $ 28,129
Total assets.......................... 23,596 21,022 94,635 232,831 309,882 242,270 344,925
Long-term debt including current
maturities........................... 10,452 4,693 4,332 115,431 169,702 119,118 195,202
Total stockholders' equity............ 547 2,812 80,952 90,587 97,540 92,055 96,493
</TABLE>
- ---------------
(a) The income statement data for the year ended December 31, 1991 includes
preopening expenses associated with the developmental stage of the Company
through September 10, 1991, the date the Company was granted a gaming
license by the Illinois Gaming Board. The Company received no operating
revenues prior to September 10, 1991.
(b) During the early summer and early fall of 1993, the St. Louis metropolitan
area experienced severe flooding along the Mississippi river front. While
the Company remained operational during the flooding, it experienced an
increase in expenses to remain operational and its attendance during the
period declined. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(c) Represents a fully vested retirement benefit that is payable to an officer
of the Company and was expensed in its entirety during 1992.
(d) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (income before income taxes plus fixed
charges less capitalized interest) by fixed charges (interest expense plus
capitalized interest and one third of rental expense (the portion deemed
representative of the interest factor)). The Company's earnings were
inadequate to cover fixed charges for the three months ended March 31, 1996
by approximately $3.6 million. The pro forma ratio of earning to fixed
charges reflects the net increase in interest expense related to the
issuance of that portion of the Old Notes necessary to retire amounts
outstanding under the Former Bank Credit Facility as of December 31, 1995
and March 31, 1996. The Company's earnings were inadequate to cover pro
forma fixed charges for the three months ended March 31, 1996 by
approximately $4.2 million.
(e) From their inception until a reorganization that was effected on February
25, 1993, certain predecessor entities of the Company elected to be treated
as S Corporations under the Internal Revenue Code and were not generally
subject to corporate income taxes. The pro forma net income amount for the
years ended December 31, 1992 and 1993 have been determined assuming the
reorganization had occurred on January 1, 1992 resulting in the Company
being treated as a C Corporation for tax purposes as of that date and to
reflect the use of a portion of the net proceeds of the Company's initial
public offering to retire debt. The pro forma tax provision for 1993 has
been computed using an effective tax rate of 39%. The pro forma tax
provision for 1992 has been computed using an effective tax rate of 51%,
which differs from the statutory rate principally due to an an assumed
difference between book and tax treatment of amortization of the $8.5
million accomodation fee paid to a stockholder of a predecessor entity of
the Company. See Notes 1, 4, 8 and 11 of the Notes to the Consolidated
Financial Statements. In addition, pro forma net income per share for the
year ended December 31, 1995 reflects the Jazz Acquisition as if it had
occurred on January 1, 1995. The Company's pro forma net revenue, income
from operations, interest expense and net income giving such effect to the
Jazz Acquisition for the year ended December 31, 1995 is $252.7 million,
$26.8 million, $15.5 million and $5.7 million, respectively. The Company's
pro forma net revenue, income from operations, interest expense and net
income giving such effect to the Jazz Acquisition for the three months ended
March 31, 1995 is $60.4 million, $5.7 million, $4.4 million and $1.3
million, respectively. See Note 7 of the Notes to Consolidated Financial
Statements.
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY, THE CONSOLIDATED FINANCIAL STATEMENTS AND THE
NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company opened its first riverboat casino, the Alton Belle Casino, in
Alton, Illinois in September 1991. Subsequently, the Company opened the Argosy
Casino in Riverside, Missouri in June 1994; the Belle of Baton Rouge in Baton
Rouge, Louisiana in September 1994; and through a management agreement, the
Belle of Sioux City in Sioux City, Iowa in October 1994. The Company, through a
70% general partnership interest, began consolidating the results of the Belle
of Sioux City on January 1, 1995. In addition, the Company, through its 57.5%
equity interest in Indiana Gaming L.P., is developing the Lawrenceburg Casino
project, which the Company anticipates opening with a temporary gaming facility
in the fourth quarter of 1996 and with a permanent gaming facility, not later
than 12 months thereafter. The Company's results of operations for the year
ended December 31, 1993 reflect only the operations of the Alton Belle Casino.
The results of operations for the year ended December 31, 1994 reflect a full
year of operations of the Alton Belle Casino, and reflect operations from the
Argosy Casino in Riverside, Belle of Baton Rouge and Belle of Sioux City from
their respective opening dates. The results of operations for the year ended
December 31, 1995 reflect a full year of operations for each of the Company's
four existing gaming properties.
The Company believes that the results of operations for the years ended
December 31, 1993, 1994 and 1995, are not readily comparable to each other, and
may not be indicative of results of operations for future periods, due to the
operational impact at the Alton Belle Casino of the severe flooding in the St.
Louis area in 1993, the timing of the opening of the Company's properties,
certain changes in Missouri gaming regulations, and substantial present and
expected future increases in gaming competition in all of the Company's gaming
markets. The Company will face increased competition in the St. Louis and Kansas
City areas as new riverboat casinos are expected to open in these markets.
Accordingly, the Company belives that it may be more difficult in the future to
sustain historical levels of operating revenues and profitability at certain of
its properties.
During the fourth quarter of 1995 and for the first two months of 1996, the
Company experienced severe weather conditions at its two primary revenue
generating gaming facilities, the Alton Belle Casino and the Argosy Casino in
Riverside, and accordingly, both revenue and EBITDA were below management's
expectations. The Company also experienced increased levels of competition at
these two gaming facilities during the first quarter of 1996, as compared to the
first quarter of 1995, which has negatively impacted profitability at these two
facilities. The Company expects competition to further increase during the
remaining three quarters of 1996 and into 1997 and accordingly, expects
profitability at these two facilities to be below levels generated in the
comparable prior year periods. To respond to competitive pressures in the Kansas
City market, the Company opened in mid-January 1996 a new $45 million
entertainment pavilion at the Argosy Casino in Riverside featuring nightclub,
restaurant and conference facilities. The initial response to the new Riverside
facility, in terms of increased customer patronage, has been strong. Management
believes that the newly expanded Riverside facility has been, and will continue
for the foreseeable future, favorably received by the Kansas City gaming market
as a high quality, competitive gaming property. Further, for both competitive
and capacity reasons, the Company is considering opening a second vessel for the
Argosy Casino in Riverside.
In addition, in connection with the offering of the Old Notes all amounts
outstanding under the Former Bank Credit Facility were repaid in full and the
Company terminated the credit facility. As a result, the Company incurred an
approximately $1.6 million pre-tax non-cash extraordinary charge ($1.0 million
net of tax or $0.04 per share) in the second quarter of 1996 to reflect the
accelerated writeoff of deferred finance costs related to the early
extinguishment of the Former Bank Credit Facility. The factors described in this
and the preceding paragraph, together with the increased interest expense
associated with increased borrowings under the Former Bank Credit Facility and
the offering of the Old Notes and increased depreciation and
41
<PAGE>
preopening expenses associated with the Company's recently opened land-based
entertainment pavilion in Riverside, the Baton Rouge Catfish Town development
and Lawrenceburg project and professional fees incurred in connection with the
Indiana grand jury document subpeona and special independent counsel report, are
likely to result in the Company's revenues, EBITDA and net income for the first
half of 1996 being significantly less than reported in the comparable 1995
period.
The following table highlights the results of operations for the Company's
operating subsidiaries (amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------- --------------------
1993 1994 (1) 1995 1995 1996
--------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
GROSS REVENUES
Alton Belle Casino.......................... $ 71,003 $ 104,038 $ 89,262 $ 20,840 $ 20,290
Argosy Casino Riverside..................... 37,224 106,946 26,305 26,614
Belle of Baton Rouge/Catfish Town........... 20,976 52,729 11,920 14,470
Belle of Sioux City......................... 22,500 5,399 5,217
--------- ---------- ---------- --------- ---------
Total Properties.......................... $ 71,003 $ 162,238 $ 271,437 $ 64,464 $ 66,591
--------- ---------- ---------- --------- ---------
--------- ---------- ---------- --------- ---------
NET REVENUES
Alton Belle Casino.......................... $ 67,525 $ 96,983 $ 85,992 $ 20,140 $ 19,663
Argosy Casino Riverside..................... 35,351 94,058 23,353 23,904
Belle of Baton Rouge/Catfish Town........... 20,319 50,639 11,574 13,795
Belle of Sioux City......................... 21,994 5,311 5,084
--------- ---------- ---------- --------- ---------
Total Properties.......................... $ 67,525 $ 152,653 $ 252,683 $ 60,378 $ 62,446
--------- ---------- ---------- --------- ---------
--------- ---------- ---------- --------- ---------
INCOME FROM OPERATIONS
Alton Belle Casino (2)...................... $ 19,909 $ 28,817 $ 22,446 $ 5,319 $ 3,919
Argosy Casino Riverside (3)................. 2,472 22,057 6,111 2,488
Belle of Baton Rouge/Catfish Town (4)(5).... 2,843 1,222 (1,396) 1,774
Belle of Sioux City (2)..................... 3,137 993 414
--------- ---------- ---------- --------- ---------
Total Properties.......................... $ 19,909 $ 34,132 $ 48,862 $ 11,027 $ 8,595
--------- ---------- ---------- --------- ---------
--------- ---------- ---------- --------- ---------
EBITDA (6)
Alton Belle Casino (2)...................... $ 23,225 $ 32,728 $ 26,734 $ 6,348 $ 4,951
Argosy Casino Riverside (3)................. 6,450 29,452 7,672 4,986
Belle of Baton Rouge/Catfish Town (4)(5).... 3,995 7,056 (94) 3,306
Belle of Sioux City (2)..................... 3,610 1,027 599
--------- ---------- ---------- --------- ---------
Total Properties.......................... $ 23,225 $ 43,173 $ 66,852 $ 14,953 $ 13,842
--------- ---------- ---------- --------- ---------
--------- ---------- ---------- --------- ---------
</TABLE>
- ------------
(1) The operations of the Belle of Sioux City have not been included as they
are not material.
(2) Income from operations is presented before consideration of management fees
or intercompany charges paid to the Company and, in the case of the Belle
of Sioux City, before the 30% minority interest.
(3) Income from operations and EBITDA for the Argosy Casino in Riverside for
the year ended December 31, 1994 and the three months ended March 31, 1996
reflect the incurrence of $2.5 million and $.3 million, respectively, of
preopening expenses. The Argosy Casino in Riverside opened on June 22,
1994. The land-based entertainment pavilion at the Riverside casino opened
on January 15, 1996.
(4) Income from operations and EBITDA for the Belle of Baton Rouge for the year
ended December 31, 1994 reflect the incurrence of $2.6 million of
preopening expenses. The Belle of Baton Rouge opened September 30, 1994.
(5) Includes operating loss of approximately $1.2 million for the year ended
December 31, 1995, and $.5 million for the three months ended March 31,
1996, primarily depreciation and amortization related to the Catfish Town
land based development in Baton Rouge.
(6) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and is presented before any management fees or intercompany
charges paid to the Company. EBITDA should not be construed as an
alterative to operating income, or net
42
<PAGE>
income (as determined in accordance with generally accepted accounting
principles) as an indicator of the Company's operating performance, or as
an alternative to cash flows generated by operating, investing and
financing activities (as determined in accordance with generally accepted
accounting principles) as an indicator of cash flow or a measure of
liquidity. EBITDA is presented solely as a supplemental disclosure because
management believes that it is a widely used measure of operating
performance in the gaming industry and for companies with a significant
amount of depreciation and amortization. The Company has other significant
uses of cash flows, including capital expenditures, which are not reflected
in EBITDA.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
CASINO -- Casino revenues for the three months ended March 31, 1996
increased to $58.8 million from $56.6 million for the three months ended March
31, 1995. Alton casino revenues decreased from $19.2 million to $18.5 million
due to severe weather conditions in January and February 1996. Riverside casino
revenues increased from $21.0 million to $22.2 million due to the opening of the
Company's permanent land based entertainment pavilion on January 15, 1996,
offset by the severe weather conditions experienced in January and February
1996. Baton Rouge casino revenues increased $1.9 million from $11.4 million to
$13.3 million. Sioux City casino revenues decreased $.2 million to $4.9 million
due to severe weather conditions in January and February 1996.
Casino expenses remained constant at approximately $29 million for the three
months ended March 31, 1996 as compared to the three months ended March 31,
1995. Gaming taxes and admission taxes increased to $11.4 million and $4.6
million, respectively, for the three month period ended March 31, 1996 from
$11.0 million and $4.3 million respectively in 1995 which is proportionate with
the increases in casino revenues and customer boardings. Other casino operating
expenses remained approximately the same in 1996 as in 1995.
FOOD, BEVERAGE AND OTHER -- Food, beverage and other revenues increased $2.4
million to $6.1 million for the three month period ended March 31, 1996
primarily due to increased food, beverage and other sales at the expanded
Riverside and Baton Rouge facilities. Riverside revenues increased from $1.1
million to $2.5 million while Baton Rouge revenues increased from $.6 million to
$1.1 million. Alton and Sioux City food, beverage and other revenues remained
stable compared to the three month period ended March 31, 1995. Food beverage
and other net profit improved $1.3 million to $.8 million for the three months
ended March 31, 1996 due primarily to improved operating efficiencies in the
Company's food and beverage operations.
OTHER OPERATING EXPENSES -- Other operating expenses increased $1.0 million
to $4.4 million for the three months ended March 31, 1996. This increase is
primarily due to the opening of the permanent land-based entertainment pavilion
at Riverside, the addition of the restaurant barge in Sioux City and the
additional services needed for the severe weather conditions in January and
February 1996 experienced at the Alton, Riverside and Sioux City casinos.
SELLING, GENERAL AND ADMINISTRATIVE -- Selling, general and administrative
expenses increased $1.7 million to $14.3 million for the three months ended
March 31, 1996. Increases of $.4 million and $.2 million, respectively, in Alton
and Riverside relate primarily to increases in advertising expenses due to
increased competition and the opening of the Riverside permanent facility.
Additionally, the Company recorded a charge of approximately $1.5 million in
professional and other fees related to its response to a Marion County, Indiana
grand jury document subpoena and the related termination of a private placement
of first mortgage notes.
DEPRECIATION AND AMORTIZATION -- Depreciation and amortization increased
$1.3 million from $4.6 million for the three months ended March 31, 1995 to $5.9
million for the three months ended March 31, 1996. This increase is primarily
due to increased depreciation in Riverside in connection with the Company's land
based entertainment pavilion which opened on January 15, 1996 at an approximate
cost of $45 million.
DEVELOPMENT AND PREOPENING COSTS -- Development and preopening costs
increased from $.5 million for the three month period ending March 31, 1995 to
$1.9 million for the three month period ending March 31, 1996. The primary
increase is due to expenses related to developing the casino in Lawrenceburg,
Indiana, which has an anticipated opening date for the temporary facility of the
fourth quarter of 1996.
43
<PAGE>
INTEREST EXPENSE -- Net interest expense increased $.3 million to $4.1
million for the three months ended March 31, 1996. The increase is attributable
to interest expense on a higher level of borrowings on the $100 million
revolving secured line of credit.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Consolidated net revenues rose to $252.7 million for the year ended December
31, 1995 from $153.0 million for the year ended December 31, 1994. Net revenues
in Alton decreased to $86.0 million from $97.0 million due primarily to the full
year effect of increased competition in the St. Louis market beginning in May
1994 and by the addition of slot machines in Missouri casinos in December 1994.
Additionally, due to competitive circumstances the Company ceased charging
admissions in Alton in November 1994. Admission revenue in Alton was $7.1
million during the year ended December 31, 1994. Net revenues in Riverside
increased $58.7 million to $94.1 million as the casino was open for a full year
with full scale gaming compared with offering games of skill in 1994. Net
revenues contributed in Baton Rouge were $50.3 million, for the year ended
December 31, 1995 versus $20.3 million in 1994.
CASINO -- Casino revenues for the year ended December 31, 1995 increased to
$237.6 million from $138.4 million for the year ended December 31, 1994.
Riverside, Baton Rouge and Sioux City contributed casino revenues of $86.4
million, $48.9 million and $20.9 million, respectively, for the year ended
December 31, 1995 verses a combined $49.6 million in 1994. Alton casino revenues
decreased from $88.9 million to $81.4 million due to increased competition in
the St. Louis area.
Casino and other operating expenses increased approximately $59.7 million
over 1994 due to the operating expenses of the Riverside, Baton Rouge and Sioux
City casinos. Of this increase, gaming taxes and admissions taxes increased
$18.9 million and $8.8 million, respectively, which is proportionate with the
increases in casino revenues and customer boardings. The remaining casino and
other operating expenses were $17.5 million and $7.6 million in Baton Rouge and
Sioux City, respectively for the year ended December 31, 1995. The remaining
casino and other operating expenses at Riverside increased $12.1 million to
$23.1 million as a result of the casino being open for a full year in 1995
compared with six months in 1994.
FOOD, BEVERAGE AND OTHER -- Food, beverage and other revenues increased $6.5
million over the prior year to $18.5 million. Alton's food, beverage and other
revenues decreased slightly to $7.8 million as compared to $8.1 million for the
year ended December 31, 1994. Riverside, Baton Rouge and Sioux City contributed
$5.2 million, $3.5 million and $1.6 million, respectively, for the year ended
December 31, 1995 versus a combined $3.5 million in 1994. Food, beverage and
other net profit margin improved from $.2 million for the year ended December
31, 1994 to $1.3 million for the year ended December 31, 1995.
SELLING, GENERAL AND ADMINISTRATIVE -- Selling, general and administrative
expenses increased $22.1 million to $45.8 million for the year ended December
31, 1995. Alton's selling, general and administrative expenses decreased $1.2
million to $9.6 million for the year ended December 31, 1995 due to a
concentrated effort to refocus marketing strategies. The additional increase is
due to the Company operating three additional casinos for a full year in 1995
and other costs associated with the Company's substantial growth during this
period.
DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense
increased from $9.8 million to $20.4 million primarily as a result of opening
three new casinos in 1994.
DEVELOPMENT AND PREOPENING COSTS -- Development and preopening costs
decreased from $9.8 million to $6.9 million for the year ended December 31,
1995, due primarily to costs related to the opening of the three new casinos in
1994. During the year ended December 31, 1995 the Company recorded a $3.5
million charge primarily related to loans made pursuant to a lease option
related to the development of a downtown St. Louis casino. Preopening costs for
the year ended December 31, 1994 for Riverside and Baton Rouge were $2.5 million
and $2.6 million, respectively.
INTEREST EXPENSE -- Net interest expense increased to $14.3 million for the
year ended December 31, 1995, compared to $7.1 million for the year ended
December 31, 1994. The primary reason for the increase
44
<PAGE>
was the full year effect of the 12% Convertible Subordinated Notes which were
issued in June 1994 and increased borrowings on the line of credit in the year
ended December 31, 1995. The increased borrowings were used by the Company to
fund its expansion projects in Baton Rouge, Riverside and Lawrenceburg.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993.
Consolidated net revenues rose from $67.5 million for the year ended
December 31, 1993 to $153.0 million for the year ended December 31, 1994. Net
revenues in Alton increased from $67.5 million to $97.0 million due to operating
the larger Alton Belle II for a full year in 1994. In addition, the Riverside
and Baton Rouge casinos, generated net revenues of $35.4 million and $20.3
million, respectively.
CASINO -- Casino revenues for the year ended December 31, 1994 increased to
$138.4 million from $60.2 million in 1993. Riverside and Baton Rouge contributed
$29.6 million and $20.0 million, respectively for the year ended December 31,
1994. Casino revenues in Alton increased to $88.9 million from $60.2 million
mainly due to the full year of operations of the larger Alton Belle II which
opened in May 1993.
Casino and other operating expenses increased approximately $44.5 million
due to the opening of the Riverside and Baton Rouge casinos in 1994. Of this
increase, gaming taxes and admission taxes increased $15.4 and $6.5 million,
respectively, which is proportionate with the increases in casino revenues and
customer boardings. The remaining casino and other operating expenses were $11.0
million and $5.6 million in Riverside and Baton Rouge, respectively for the year
ended December 31, 1994. The remaining Alton casino and other operating expenses
increased to $21.7 million for the year ended December 31, 1994 from $15.8
million in 1993 due to the full year of operations of the Alton Belle II in
1994.
FOOD, BEVERAGE AND OTHER -- Food, beverage and other revenue increased $7.7
million over the prior year to $12.0 million. Alton's food, beverage and other
revenue increased from $4.4 in 1993 to $8.1 million in 1994 due to the expanded
food and beverage facilities at the Alton Belle II being open for an entire year
and severe flooding during 1993. Riverside and Baton Rouge contributed $2.5
million and $1.0 million, respectively for the year ended December 31, 1994.
Food, beverage and other net profit margin improved from ($.1) million for the
year ended December 31, 1993 to $.2 million for the year ended December 31,
1994.
SELLING, GENERAL AND ADMINISTRATIVE -- Selling, general and administrative
expenses increased $14.8 million to $23.7 million for the year ended December
31, 1994. This increase is due primarily to the Company opening two new casinos
in Riverside and Baton Rouge, expanded advertising, promotional and bus programs
as a result of increased competition from three casino in the St. Louis area,
and increased corporate personnel, legal and professional, insurance and other
costs associated with the Company's growth efforts.
DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense
increased $6.5 million in 1994 to $9.8 million primarily as a result of opening
the Riverside and Baton Rouge casinos and the purchase of a gaming vessel which
was in use in Sioux City, Iowa.
DEVELOPMENT, PREOPENING AND RELATED COSTS -- Development and preopening
costs increased $5.2 million to $9.8 million for the year ended December 31,
1994 due to approximately $2.6 and $2.5 million of preopening expenses
associated with the Company's Baton Rouge and Riverside casinos, respectively as
well as costs associated with unsuccessful gaming opportunities and related
referenda costs.
INTEREST EXPENSE -- Net interest expense increased to $7.1 million for the
year ended December 31, 1994 compared to net interest income of $0.5 million in
1993. The primary reason for the increase is the issuance of the 12% Convertible
Subordinated Notes in June 1994 and the interest incurred on a revolving line of
credit, which was outstanding from January 29, 1994 through June 6, 1994.
LIQUIDITY AND CAPITAL RESOURCES
In the three months ended March 31, 1996 the Company generated cash flows
from operating activities of $5.8 million compared to $14.5 million for the same
period in 1995. The decrease in cash flow is primarily attributed to decreased
operating margins and increased preopening and development expenses in 1996
compared to 1995 and, additionally, to the timing of expenditures related to
operating accounts payable.
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In the three months ended March 31, 1996, the Company used cash flows for
investing activities of $29.4 million versus $14.9 million for the three months
ended March 31, 1995. The primary use of funds was the investment of $29.3
million in property, plant and equipment. Riverside, Lawrenceburg and the
Catfish Town facility at Baton Rouge had capital expenditures of $10.6 million,
$9.6 million and $7.5 million, respectively, for the three-month period ended
March 31, 1996. The primary uses of funds for the three-month period ending
March 31, 1995 were increases in notes receivable of $2.3 million and capital
expenditures of $12.6 million.
During the three months ended March 31, 1996, the Company generated $35.6
million in cash flows from financing activities compared to using $3.7 million
of cash flows from financing activities for the same period in 1995. The primary
sources of cash flows in 1996 were $25.5 million of proceeds from the bank line
of credit and $10.4 million in capital contributions from the Company's partner
in Lawrenceburg.
In the year ended December 31, 1995, the Company generated cash flows from
operating activities of $49.9 million compared to $24.8 million for 1994 due
primarily to the full year effect of the opening of the Argosy Casino in
Riverside on June 22, 1994, the opening of the Belle of Baton Rouge on September
30, 1994 and the opening of the Belle of Sioux City on October 4, 1994.
In the year ended December 31, 1995, the Company used cash flows for
investing activities of $86.6 million, compared to $118.7 million in 1994. The
primary uses for the year ended December 31, 1995 were the investment of
approximately $23.4 million for the construction of the Company's project in
Baton Rouge, approximately $36.0 million in connection with the Company's
permanent facility in Riverside, Missouri and $9.4 million relating to the
acquisition of Jazz Enterprises, Inc. on June 6, 1995. The primary uses in 1994
were capital expenditures of $112.0 million, and advances of $9.6 million in
notes receivable to certain of its investment partners offset by sales of $4.3
million of marketable securities.
During the year ended December 31, 1995, the Company generated $34.6 million
of cash flows from financing activities compared to $104.8 million for 1994. In
1995 the primary sources of funds were borrowings under the Company's line of
credit of $45.5 million offset by $6.5 million in payments of debt and
installment contracts and $2.4 million of deferred finance costs. The primary
source of these funds in 1994 was $115 million in proceeds from the sale of its
12% Convertible Subordinated Notes in June 1994 offset by $7.0 million in
payments on long-term debt and installment contracts and a $4.8 million increase
in other assets.
As of March 31, 1996, the Company had approximately $28.1 million of cash
and cash equivalents and $1.9 million of marketable securities.
On March 8, 1995, the Company entered into its $100 million Former Bank
Credit Facility. The Company repaid all borrowings outstanding under and
terminated the Former Bank Credit Facility with a portion of the net proceeds
from the offering of the Old Notes.
The Company has made a significant investment in property and equipment and
plans to make significant additional investments at its existing properties and
into additional jurisdictions, particularly Lawrenceburg, Indiana. As a result
of its June 1995 acquisition of Jazz, the Company is now the developer of the
Catfish Town real estate project in Baton Rouge, Louisiana. The Company
estimates that the completion of the Catfish Town project will cost an
additional approximately $ million as of June 30, 1996. Further, if the
Predecessor's status as an S Corporation, which has been asserted as an issue by
the IRS during an ongoing audit, is successfully challenged, the Company
currently estimates that it would require up to approximately $11.6 million
(excluding penalties) to fund the potential income tax liability. See "Risk
Factors -- Potential Income Tax Liability."
The Company estimates that the total costs of opening a temporary gaming
facility and completing the permanent Lawrenceburg Casino and entertainment
project is approximately $210 million. As of June 30, 1996, approximately $
million had been expended on the project. Of the remaining $ million in
Lawrenceburg construction costs, approximately $25 million is anticipated to be
funded through equipment financing from third party lenders and approximately
$ million will be funded by the Company and Conseco, 57.5% of which will be
funded by the Company and 42.5% of which will be funded by Conseco. In
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the event project costs exceed the budgeted $210 million total project cost the
Company and Conseco will fund such costs on the same percentages up to a total
project cost of $225 million. Any project costs in excess of $225 million must
be funded solely by the Company. The Company will use $94.3 million of the net
proceeds of the offering of the Old Notes to finance its share of remaining
Lawrenceburg construction costs including the development and opening of both
the temporary and permanent gaming facilities up to a total project cost of $225
million.
DESCRIPTION OF CERTAIN INDEBTEDNESS
FORMER BANK CREDIT FACILITY
The Company's Former Bank Credit Facility was a $100 million senior secured
line of credit consisting of a $20 million revolving line of credit and an $80
million expansion line of credit. The total indebtedness outstanding under the
Former Bank Credit Facility was $91.4 million on the closing date of the
offering of the Old Notes. In connection with the offering of the Old Notes, all
amounts outstanding under the Former Bank Credit Facility were paid in full and
the Company terminated the facility.
CONVERTIBLE SUBORDINATED NOTES
The Company's $115 million of aggregate outstanding 12% Convertible
Subordinated Notes due 2001 (the "Convertible Notes") bear interest, payable
semi-annually, at an annual rate of 12% per year. The Convertible Notes are
convertible into shares of Common Stock at any time at or prior to maturity at a
conversion price of $17.70 per share, subject to adjustment under certain
circumstances as described in the indenture governing the Convertible Notes.
Accordingly, each $1,000 principal amount of Convertible Notes is convertible
into 56.50 shares of Common Stock, subject to adjustment, for an aggregate of
6,497,500 shares. The Convertible Notes are redeemable, in whole or in part, at
the option of the Company at any time on or after June 1, 1997 at the redemption
price of 106% of the principal amount, declining ratably to par on June 1, 2000,
plus accrued and unpaid interest to the date of redemption. In addition, upon
the occurrence of a Change of Control (as defined in the indenture governing the
Convertible Notes), or if the Common Stock is not listed as required, each
holder of Convertible Notes will have the right to require the Company to
purchase all or any part of such holder's Convertible Notes, at 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of
purchase. The Convertible Notes are subordinated in right of payment to all
existing and future senior indebtedness of the Company (including the Notes) and
will be structurally subordinated to all liabilities (including trade payables)
of the Company's subsidiaries. The indenture governing the Convertible Notes
does not include any covenants limiting or restricting the Company's or its
subsidiaries' ability to incur any additional indebtedness. The indenture
governing the Convertible Notes contains covenants which limit certain
transactions with affiliates of the Company and mergers, sales of all or
substantially all of the assets of the Company and consolidations.
NOTES PAYABLE --- JAZZ ACQUISITION
As of March 31, 1996, the Company had notes payable of $9.2 million to Jazz
Enterprises, Inc. ("Jazz"), which represents the present value of deferred
payments due to the shareholders of Jazz incurred in connection with the
Company's June 7, 1995 acquisition of 100% of the common stock of Jazz. Jazz was
the 10% limited partner in the Belle of Baton Rouge. The Company made initial
payments to the Jazz shareholders totaling $8.5 million, and is obligated to pay
the former Jazz shareholders $1.35 million annually for ten years and $500,000
for an additional ten years thereafter. As a result of such transaction, the
Company acquired Jazz's 10% minority limited partnership interest in the Belle
of Baton Rouge casino and all of Jazz's interest in the Catfish Town retail real
estate development. The Company's acquisition of Jazz enabled the Company to
cancel the prior lease agreement between Jazz and the partnership pursuant to
which the partnership was obligated to pay a lease fee which ranged from 6% to
10% of adjusted gross receipts. See Note 7 of Notes to Consolidated Financial
Statements. See "Business -- Legal Proceedings."
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BUSINESS
GENERAL
The Company, is a leading multi-jurisdictional developer, owner and operator
of riverboat and dockside casinos and related entertainment facilities in the
midwestern and southern United States. The Company, through its subsidiaries,
owns and operates riverboat casinos in Alton, Illinois, Riverside, Missouri,
Baton Rouge, Louisiana and Sioux City, Iowa. In June 1995, Indiana Gaming
Company, L.P., a limited partnership ("Indiana Gaming L.P.") in which the
Company is the general partner and has a 57.5% partnership interest, received a
certificate of suitability from the Indiana Gaming Commission to develop and
operate a riverboat casino and related entertainment and support facilities in
Lawrenceburg, Indiana, which is located approximately 15 miles west of
Cincinnati, Ohio.
The Company's business strategy emphasizes the phased development of
attractive gaming and related entertainment facilities in gaming jurisdictions
that the Company believes possess favorable long-term demographic and
competitive characteristics. As part of this strategy, the Company endeavors to
be an early entrant in emerging gaming markets, to establish a customer base and
to develop its gaming properties in stages. The Company's casinos were the first
gaming facilities to open in each of the St. Louis, Kansas City and Baton Rouge
markets. By employing a phased development strategy, the Company believes it can
reduce its initial capital investment and adapt the nature and scope of
subsequent developments based on a continuing assessment of the size and
competitive outlook of each of the Company's gaming markets. The Company intends
to utilize management's proven ability to successfully open riverboat casino
properties in new markets by continuing to pursue opportunities to develop or
acquire (either independently or through joint ventures) riverboat, dockside
and/or land-based gaming operations.
The Company's operating strategy is to develop a loyal customer base by
offering a variety of gaming and non-gaming entertainment amenities at
attractive facilities that emphasize high standards of service and customer
satisfaction. In each of its gaming markets, the Company establishes marketing
programs that identify, target and attract local patrons typically residing
within a 100-mile radius of its gaming facilities. The Company's marketing
programs are designed to increase customer awareness, patronage and loyalty, as
well as to encourage repeat business. The Company focuses and evaluates its
marketing efforts through player tracking systems, slot clubs and preferred
player clubs and utilizes mass advertising, direct mail and special promotions
to attract customers within each of its gaming markets.
CURRENT OPERATIONS
ALTON BELLE CASINO, ALTON, ILLINOIS
The Company commenced operations in Alton, Illinois in September 1991 as the
first gaming facility to open in the St. Louis market and in the State of
Illinois. Following the success of the Company's original riverboat casino, the
Alton Belle, the Company built and opened a larger three-deck contemporary style
cruise liner that provides casino style gaming on the Mississippi River at
Alton, Illinois, approximately 20 miles northeast of downtown St. Louis.
The Alton Belle Casino features 21,000 square feet of gaming space with
approximately 650 slot machines and 41 table games for a total of approximately
950 gaming positions. The Alton Belle Casino can board up to approximately 1,500
passengers including a typical crew and casino staff of 180 employees. The Alton
Belle Casino also currently includes a 37,000-square foot, three-level floating
entertainment pavilion that features a sports and entertainment lounge, a
120-seat buffet, a 90-seat fine dining restaurant, conference facilities and a
food court. Additionally, the Company is the only gaming operator in the St.
Louis market that offers its customers off-track betting facilities. Parking is
available at an adjacent city-owned surface parking facility and at two sites in
the city of Alton, to and from which the Company provides valet parking as well
as free shuttle service. The Alton Belle Casino typically conducts ten two-hour
Mississippi River cruises seven days of the week. Since November 1994, the Alton
Belle Casino has not charged an admission fee. Illinois gaming law permits
dockside gaming only when inclement weather or mechanical failure prevents a
riverboat from cruising. At such times, the Alton Belle Casino remains dockside
and operates on its normal schedule.
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The Alton Belle Casino generally draws from a population of approximately
2.5 million within the St. Louis metropolitan area and an additional 1.2 million
within a 100-mile radius of the City of St. Louis. In particular, the primary
target market of the Alton Belle Casino is the northern and eastern regions of
the greater St. Louis metropolitan area, including certain regions of Illinois.
The Company's management believes that its early entry into the St. Louis market
has resulted in the development of a core base of customers, which, together
with its data base of over 300,000 active customers, has enabled the Alton Belle
Casino to remain competitive in the St. Louis market despite the significant
increase in the number of gaming operations.
During May 1995 the Alton, Illinois area experienced flooding; however the
flood waters did not reach the flood levels of 1993 and the operations of the
Alton Belle Casino were not negatively impacted. During the Great Flood of 1993
the Company developed an emergency flood plan that was implemented in response
to the May 1995 flooding.
ARGOSY CASINO, RIVERSIDE, MISSOURI
The Argosy Casino began operations in Riverside, Missouri on June 22, 1994
as the first gaming facility to open in the Kansas City market. The Argosy
Casino's riverboat is styled as a turn-of-the-century paddle wheel steamboat and
features 32,900 square feet of gaming space with approximately 950 slot machines
and 57 tables games for a total of approximately 1,375 gaming positions.
The Company has constructed a new land-based landing and entertainment
pavilion, which opened on January 15, 1996 at a cost of approximately $45
million. The 85,000-square foot, land-based entertainment pavilion features a
Mediterranean theme and includes over 14,000 square feet of banquet and
conference facilities, a 78-seat specialty restaurant, a sports and
entertainment lounge and a 350-seat buffet restaurant. A 624-space parking
garage and a 1,262-space surface parking area are located adjacent to the new
pavilion. The Company has also recently entered into a letter of intent with a
hotel developer/manager to develop, through a joint venture, a 200-room hotel at
its Riverside facility. Pursuant to the letter of intent, which is subject to
numerous conditions, the Company would contribute certain of its Riverside
property to the joint venture and the developer/manager would contribute equity
capital and make loans to the joint venture in an amount sufficient to contruct
the hotel.
In August 1995, the Company began offering dockside gaming at the Argosy
Casino and is considering adding a second dockside gaming facility in Riverside
in order to increase the number of gaming positions and to offer its patrons
staggered boarding times, thereby maximizing customer convenience.
The Argosy Casino typically conducts 9 two-hour Missouri River "cruises"
seven days a week, with an additional "cruise" on Friday and Saturday evenings.
The Argosy Casino operates throughout the entire year. The Company is currently
operating dockside pursuant to the temporary order of the Missouri Gaming
Commission. Ordinarily, Missouri gaming law permits dockside gaming when
inclement weather or mechanical failure prevents a riverboat from cruising. At
such times, the Argosy Casino operates on its normal schedule.
When Argosy first opened its Riverside casino, Missouri law only permitted
games of skill, specifically poker, craps and "twenty-one" (blackjack).
Subsequently, on December 9, 1994, the Argosy Casino began offering full-scale
casino gaming, including roulette, big six and slot machines, after approval by
Missouri voters in November 1994 of a proposition authorizing games of chance.
The Argosy Casino draws from a population of approximately 1.6 million in
the greater Kansas City metropolitan area and an additional 900,000 within a
100-mile radius of Kansas City. The Argosy Casino is situated on a 55-acre site
that is located approximately five miles from downtown Kansas City and offers
convenient access from two major highways. Once competing gaming facilities that
are currently under construction are completed, the Company believes that the
Argosy Casino, which currently is the only existing or planned casino in the
western Kansas City metropolitan area, will primarily attract customers who
reside in the northwestern, western and southwestern regions of the Kansas City
metropolitan area.
The Company leases a portion of its site from the City of Riverside,
Missouri, pursuant to a five-year land lease agreement with a minimum aggregate
rent of $5 million for the entire five-year lease period, payable in advance. In
addition to minimum rent, during the initial five-year lease term, percentage
rent will
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be payable in an amount equal to 2% of adjusted gross receipts over $100 million
annually. The Company will have the option to extend the lease agreement for
three successive five-year terms. In all extension periods, there will be no
minimum rent, and percentage rent will be payable as follow: (i) 2% on the first
$50 million of adjusted gross receipts; (ii) 3% on adjusted gross receipts
between $50 million and $100 million; and (iii) 4% on adjusted gross receipts in
excess of $100 million. If at any time during the initial lease term or any
extension thereof, the Company is permitted to operate a permanent dockside
gaming facility, the percentage rent will increase by one percentage point in
each of the above listed categories.
In May 1995, the Riverside site experienced flooding from the rising waters
of the Missouri River. The Company implemented its emergency flood plan which
included moving the temporary landing facilities to higher ground. The business
at the Riverside Casino remained at near normal levels during this period.
BELLE OF BATON ROUGE, BATON ROUGE, LOUISIANA
The Belle of Baton Rouge began operations in Baton Rouge, Louisiana in
September 1994 as the first riverboat gaming facility in the Baton Rouge market.
The Belle of Baton Rouge is a three-level, ante-bellum themed riverboat casino
that contains 28,900 square feet of gaming space with approximately 775 slot
machines and 46 table games, for a total of 1,125 gaming positions. The
riverboat casino is complemented by the Company's adjacent, land-based
entertainment development known as Catfish Town. The first phase of Catfish Town
opened during 1995 and features a 250-seat entertainment lounge and sports bar,
a 50-seat premium steakhouse, a 250-seat buffet/coffee shop and conference
facilities. The second phase of Catfish Town, an approximately 50,000-square
foot entertainment facility, opened in April 1996 and features a
climate-controlled, five-story glass atrium that will host a variety of
entertainment functions, including banquets, parties, festivals, concerts and
live entertainment events. The third phase of the Catfish Town project will
feature the build-out of approximately 150,000 square feet of leasable retail
space within the atrium complex which is expected to feature a variety of
entertainment-related tenants, including specialty restaurants and specialty
retail stores, entertainment venues, nightclubs and a microbrewery. The Company
has improved customer accessability to the Belle of Baton Rouge by completing
construction in October 1995 of a 733-space parking garage and by leasing in
December 1995 a 271-space surface parking lot adjacent to Catfish Town. The
Company has approximately $38.8 million invested in the construction of the
Catfish Town project (excluding the riverboat casino and related landing
facilities) through May 15, 1996 and estimates that approximately $45 million
will be required (excluding the construction of a hotel) to complete all three
phases of the Catfish Town project.
On April 19, 1996, the Louisiana legislature approved legislation mandating
local option elections to determine whether to prohibit or continue to permit
specified individual types of gaming, including riverboat gaming, in Louisiana
on a parish-by-parish basis. The referendum will be brought before the Louisiana
voters at the time of the 1996 presidential election. There can be no assurance
that the voters of the Belle of Baton Rouge's parish, East Baton Rouge Parish,
will not vote to prohibit riverboat gaming at the time of the 1996 presidential
election. If such a vote to prohibit riverboat gaming occurred, the Company
would be required to discontinue gaming activity in East Baton Rouge Parish upon
the expiration of its current gaming license in September 1999. The
discontinuance of gaming operations in East Baton Rouge Parish would have a
material adverse effect on the Company, both in terms of the loss of revenues
and cash flow generated by the Belle of Baton Rouge and the impairment of the
significant capital investment that the Company has in its riverboat casino and
related facilities, including the Catfish Town development. In addition, the
uncertainty resulting from the upcoming local option election on the continuance
of riverboat gaming in East Baton Rouge Parish will have a negative impact on
the ability of the Company to lease the retail space in Catfish Town. See "Risk
Factors -- Louisiana Local Option Referendum to Restrict Gaming."
On September 21, 1995, the Company entered into a letter of intent with
DePalma Hotel Corporation and Southern Hospitality Corporation ("SHC") for the
ownership, construction and operation of a 300-room convention hotel at Catfish
Town. The agreement is subject to numerous conditions precedent including, but
not limited to, SHC obtaining separate non-recourse project financing. In the
event the Company does not commence construction of a 300-room hotel at Catfish
Town prior to September 30, 1996, pursuant to the Company's agreement with the
City of Baton Rouge, the Company's admission tax will
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increase by $1.25 per passenger on that date. Due to the uncertainty created by
the upcoming local option elections in Louisiana, the Company believes that it
is unlikely that construction of the hotel will be commenced prior to September
30, 1996. See "Risk Factors -- Louisiana Local Option Referendum to Restrict
Gaming."
The Belle of Baton Rouge typically conducts eight 3-hour Mississippi River
cruises seven days of the week. The Belle of Baton Rouge operates throughout the
entire year. Louisiana gaming law provides that a gaming vessel need not cruise
if there is inclement weather or if the river conditions endanger the passengers
or crew. The local Baton Rouge States Attorney has been diligent in monitoring
the cruising schedule of the Belle of Baton Rouge and the competing riverboat
casino in the Baton Rouge market. During such times that the Belle of Baton
Rouge is prevented from cruising it operates on an unlimited ingress and egress
schedule.
Catfish Town is located adjacent to Baton Rouge's convention complex, the
Centroplex, which has a 12,000-seat arena and a 30,000-square foot exhibition
hall. The Belle of Baton Rouge draws from a population of approximately 540,000
in the Baton Rouge metropolitan area. The Company believes that the Belle of
Baton Rouge will benefit from the entertainment, retail and hotel amenities
expected to be offered at the Catfish Town development, from the facility's
proximity to the Baton Rouge convention center and from its convenient access
from Baton Rouges' two major interstate highways.
BELLE OF SIOUX CITY, SIOUX CITY, IOWA
The Company became the manager of the Belle of Sioux City on October 4, 1994
and on December 1, 1994 began operating the Belle of Sioux City through a
partnership in which the Company is a 70% general partner and Sioux City
Riverboat Corp., Inc. is a 30% limited partner. The Company is the manager of
the casino and receives a percentage management fee based upon the facility's
adjusted gross gaming revenues (as defined in the management agreement). This
fee was 4.5% through 1995 and increased to 6.5% in January 1996.
The Company has leased to the partnership a 27,900-square foot, three-level
historic themed riverboat casino with room for 1,400 passengers and crew. The
Belle of Sioux City features approximately 11,800 square feet of gaming space
with approximately 470 slot machines and 27 table games, for a total of
approximately 670 gaming positions. The casino facility is complemented by an
adjacent barge facility, which features buffet dining, a bar and a gift shop,
and 274 surface parking spaces.
On April 13, 1996 the Belle of Sioux City was removed from service for its
requisite five-year hull inspection. The riverboat arrived at a U.S. Coast Guard
approved dry docking facility on April 16, 1996, passed its inspection and
returned to service on May 9, 1996. No interruption in gaming operations
occurred in Sioux City as a result of the hull inspection process since, prior
to removing the Belle of Sioux City from service, the Company moved the original
Alton Belle to Sioux City and temporarily transferred gaming operations to it.
The original Alton Belle boards approximately 490 passengers and has
approximately 450 gaming positions.
The Belle of Sioux City typically conducts one two-hour Missouri River
cruise each day for 100 days per year. At other times the Belle of Sioux City
remains dockside. At such time, the Belle of Sioux City operates on an unlimited
ingress and egress schedule.
The Belle of Sioux City draws from a population of approximately 80,000 in
Sioux City and an additional 900,000 residents within a 100-mile radius of Sioux
City.
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OPERATIONS UNDER DEVELOPMENT
LAWRENCEBURG CASINO, LAWRENCEBURG, INDIANA
On June 30, 1995, Indiana Gaming L.P., received a certificate of suitability
from the Indiana Gaming Commission to develop and operate a riverboat casino and
entertainment complex in Lawrenceburg, Indiana, which is located approximately
15 miles west of Cincinnati, Ohio. The Company is the sole general partner of,
and holds a 57.5% general partnership interest in, Indiana Gaming L.P. Conseco
Entertainment L.L.C. ("Conseco"), an indirect subsidiary of Conseco, Inc., holds
a 29% limited partnership interest and certain other investors, including H.
Steven Norton, Chief Operating Officer of the Company, who brought the
opportunity to the Company concurrent with his initial employment, hold the
remaining 13.5% limited partnership interest in Indiana Gaming L.P.
Indiana Gaming L.P. operates pursuant to a partnership agreement entered
into among the partners as of April 11, 1994, as amended and restated as of
February 21, 1996. Under the provisions of this agreement, the Company will
manage the development, construction and operation of the Lawrenceburg Casino
project and will receive a management fee of 7.5% of EBITDA (as defined in the
partnership agreement) and Conseco will receive a financial advisory fee of 5%
of EBITDA. For a more complete description of the partnership agreement see
"Lawrenceburg Casino Partnership Agreement."
The Company expects to face limited direct competition for gaming revenues
in the Lawrenceburg, Indiana market upon the opening of the Company's
Lawrenceburg Casino. Indiana gaming law currently limits the number of gaming
licenses to be issued in the state to a total of 11, including a maximum of 5
licenses along the Ohio River and a limit of one license per county. In
addition, casino gaming is not currently permitted under the laws of either Ohio
or Kentucky. The next closest Indiana gaming facility to the Cincinnati market
will be located approximately 15 miles south of Lawrenceburg and the principal
traffic route between the greater Cincinnati metropolitan area and the other
facility passes Lawrenceburg prior to reaching the other facility. In addition,
Indiana gaming law does not restrict the size of a licensee's gaming facility or
place limits on customer losses or betting levels.
Indiana Gaming L.P. is building what it believes to be one of the largest
riverboat casinos in the United States, featuring approximately 90,000 square
feet of gaming space on three levels. The permanent riverboat casino is expected
to initially have approximately 2,600 gaming positions and accommodate
approximately 4,400 passengers and crew members. In addition to the new
riverboat casino, it is anticipated that the permanent facility will include a
300-room hotel, a 1,750-space parking garage, 2,000 additional surface parking
spaces and a 120,000-square foot land-based entertainment pavilion and support
facility featuring specialty restaurants, meeting and banquet rooms and a sports
bar and entertainment lounge. The Company estimates that the total cost to open
a temporary facility and to construct the proposed permanent riverboat casino,
land-based facilities and 300-room hotel will be approximately $210 million. As
of June 30, 1996, approximately $ million had been expended on the project.
Of the remaining $ million in Lawrenceburg construction costs, approximately
$25 million is anticipated to be funded through equipment financing from third
party lenders and approximately $ million will be funded by the Company and
Conseco, 57.5% of which will be funded by the Company and 42.5% of which will be
funded by Conseco. In the event project costs exceed the budgeted $210 million
total project cost, the Company and Conseco will fund such costs on the same
percentages up to a total project cost of $225 million. Any project costs in
excess of $225 million must be funded solely by the Company. The Company will
use $94.3 million of the net proceeds of the offering of the Old Notes to
finance its share of remaining Lawrenceburg construction costs including the
development and opening of both the temporary and permanent gaming facilities up
to a total project cost of $225 million. See "Lawrenceburg Casino Partnership
Agreement."
The Company plans to open a temporary gaming facility in Lawrenceburg in the
fourth quarter of 1996 and anticipates opening the permanent gaming facility not
later than twelve months thereafter. The certificate of suitability issued to
Indiana Gaming L.P. must be extended by the Indiana Gaming Commission in order
to accommodate the expected opening of the temporary facility in the fourth
quarter of 1996. Further, Indiana law permits the Indiana Gaming Commission to
permit a riverboat to dock at a temporary site for a period not exceeding one
year after award of the license at which point the permanent facility must be
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opened. The certificate of suitability requires expenditures of at least $200
million and further requires Indiana Gaming L.P. to make additional payments to
the City of Lawrenceburg as a percentage of annual gross gaming receipts ranging
in amount from five percent (for up to $150 million in adjusted gross receipts)
to 14 percent (for adjusted gross receipts over $300 million). Failure to comply
with the foregoing conditions and/or failure to commence riverboat excursions
(at either the temporary or permanent facilities) at such time as required by
the Indiana Gaming Commission could result in the revocation of the certificate
of suitability or the license. Further, the Indiana Gaming Commission may place
restrictions, conditions, or requirements on the permanent riverboat owner's
license. The temporary facility will feature a leased 1,200-passenger gaming
vessel with approximately 870 slot machines and 52 table games and an
entertainment barge featuring ticketing, restaurant and bar facilities. The
temporary facility will not include on-site parking, but will include off-site
parking, with shuttle bus service that will transport customers between the
parking areas and the temporary facility. Before the Lawrenceburg Casino becomes
operational additional definitive agreements must be negotiated and executed,
gaming facilities must be constructed, and a number of further conditions must
be satisfied (including the licensing of Indiana Gaming L.P. and their
respective employees and the receipt of all requisite permits). There can be no
assurance that the Lawrenceburg Casino will become operational. See "Risk
Factors -- Project Development Risks."
The Lawrenceburg Casino is expected to draw from a population of
approximately 1.6 million residents in the Cincinnati metropolitan area and an
additional 5.4 million people who reside within 100 miles of Lawrenceburg,
including the major metropolitan markets of Dayton and Columbus, Ohio;
Indianapolis, Indiana; and, to a lesser extent, Lexington, Kentucky. The City of
Lawrenceburg has major interstate highway access from each of these metropolitan
areas.
MARKETING
The Company's management has developed a corporate marketing plan initially
based on the experience gained in developing, marketing and operating the
Company's Alton facility and further refined since opening three additional
casinos in 1994. The plan is designed to identify, target and attract initial
and return visits from the following segments of the gaming market: (i) diverse
local patrons (typically customers from within a 100-mile radius of the casino);
(ii) premium wagerers (bettors who typically wager $25 or more per bet) within
the local patrons market; and (iii) local groups and bus tours. To aggressively
pursue its customer base, the Company has upgraded and expanded both its
marketing department and sales force. In order to address each market segment,
the Company has developed and implemented a balanced marketing strategy that
emphasizes advertising, casino marketing, promotions and direct sales. The
Company utilizes television, radio, print and billboard advertising, database
marketing, players clubs and direct sales programs to market its operations to
each segment. All programs are designed to effectively tailor each specific
promotion to meet the Company's goals of increased awareness and repeat
patronage.
DIVERSE LOCAL PATRONS. The diverse local patrons market segment is
comprised of middle market recreational gaming customers from within a 100-mile
radius of its casinos in Alton, Illinois, Riverside, Missouri, Baton Rouge,
Louisiana and Sioux City, Iowa. The Company believes that its casinos have high
recognition level among patrons in the local market, in part due to each being
the first riverboat casino to open in its market. The Company has developed a
multi-level marketing approach and advertising program comprised of radio and
television commercials, billboards, newspaper insertions and public relations
efforts. In order to maintain its high level of customer awareness and fill its
off-peak capacity, the Company has begun a promotional campaign which includes
merchandising giveaways, double jackpot cruises, discount tickets and meal, trip
and car prizes. Within the broader advertising campaign, management has designed
a more focused radio promotion strategy. Specifically, the Company conducts
promotions with certain radio stations in the local market, in which a disc
jockey generally broadcasts live on-board. The Company believes that this
promotion has enabled the Company to better target specific types of customers.
The Company's state-of-the-art reservation system allows it to accommodate
increased demand and in turn to handle calls promptly, professionally and
proactively, treating each potential customer with courtesy while
enthusiastically describing the Company's product and converting calls into
confirmed advance bookings. To assist in its marketing efforts, the Company
continues to develop a database of names and addresses
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of customers based upon the Company's computerized player tracking system that
is equipped on all of the Company's slot machines. In addition, database
information is collected from telephone reservations, credit card sales and
manual player tracking. The Company recently began to use this information to
identify and direct-market to its customers through mailings (including two to
three direct mailings per month) and on other promotions. The Company uses
information obtained with this technology to refine its database and develop
gaming profiles of its slot customers. The Company plans to continue to run
special promotions rewarding its slot customers for using slot cards and has
established a VIP Slot Club as a means of enhancing this effort.
PREMIUM WAGERERS. The Company's casino marketing efforts are also focused
on identifying and developing strong relationships with its premium wagerers to
build customer loyalty. Relationships with these wagerers are initially
established by the floor managers and pit bosses. These relationships are then
extended to include the upper levels of the Company's management team. The
Company has implemented a host system to cater to and better recognize premium
wagerers, thereby providing them with more personalized service. In order to
identify and develop special marketing programs for premium slot players, the
Company utilizes a computerized player tracking system on its slot machines. The
Company has also established several clubs for its most valued premium wagerers,
which entitle the premium wagerer to participate in special promotions. Because
many premium wagerers tend not to make advance reservations, a certain number of
complimentary tickets are typically set aside for these customers up to 10
minutes before a cruise embarks. The Company has also established Platinum and
Gold Clubs to recognize, reward and differentiate among its premium wagerers.
The Gold and Platinum Clubs reward premium wagerers with complimentary gifts and
special services. The Company believes these special programs stimulate greater
customer loyalty and generate repeat business.
LOCAL GROUP AND BUS TOURS. The Company's sales force markets to groups of
patrons from the local market and bus tours which come from outside this area.
The Company's marketing efforts to these groups is focused on attracting such
groups to cruises during off-peak hours. The Company's marketing plan includes
providing discount packages, banquet facilities and other services to attract
local civic, corporate and social groups as well as bus tours. The Company's
sales force markets to the local group and bus tour segments through its direct
relationships with local and out-of-town tour operators, businesses,
organizations and other groups.
COMPETITION
The casino gaming industry is characterized by intense competition from a
large number of participants, including riverboat casinos, dockside casinos,
land-based casinos, video lottery and poker machines in locations other than
casinos, Native American gaming and other forms of legalized gaming in the
United States. Gaming industry competition is particularly intense in each of
the markets where the Company operates and is likely to increase as other
operators open new or expanded facilities in the future. Historically, the
Company has been an early entrant in each of its markets; however, as its
competitors have opened properties in these markets, the Company's operating
results in these markets have been negatively affected. The Company expects that
many of its competitors will have more gaming industry experience, will be
larger and will have significantly greater financial and other resources than
the Company. In addition, certain of its direct competitors may have superior
facilities and/or operating conditions in terms of (i) dockside versus cruising
riverboat gaming, (ii) the amenities offered by the competing casino and its
related support and entertainment facilities, (iii) convenient parking
facilities, and (iv) ease of accessibility to the casino site. Given these
factors, substantial increased competition could have a material adverse affect
on the Company's existing and proposed operations.
The Company's Alton riverboat casino currently faces competition from three
other riverboat casinos currently operating in the St. Louis area and a fourth
casino complex is under construction in the northwest suburb of Maryland
Heights, Missouri, which will include two independently owned facilities, each
of which are expected to operate two dockside vessels. Further, because Missouri
gaming law does not limit the number of licenses that may be granted, there
could be substantial increases in the number of gaming operations in the St.
Louis area. The Company's Riverside riverboat casino currently faces competition
from
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two other casinos in the Kansas City area that offer dockside gaming and two
additional casino operators have commenced construction of gaming facilities in
Kansas City, both of which are expected to open in the second half of 1996, and
the Missouri Gaming Commission is conducting reviews of their license
applications. In addition, one existing Kansas City competitor has commenced
construction of expanded facilities, including a second gaming vessel that
recently opened. The Company's Baton Rouge riverboat casino currently faces
competition from one riverboat casino in downtown Baton Rouge, a land-based
Native American casino located approximately 70 miles away and multiple casinos
throughout Louisiana. The Company's Sioux City riverboat casino currently faces
competition from two nearby land-based Native American casinos and slot machines
at nearby pari-mutuel race tracks and from two riverboat casinos in the Council
Bluffs, Iowa/Omaha, Nebraska market, which opened in January 1996. See "Risk
Factors -- Competition."
EMPLOYEES
As of December 31, 1995, the Company had approximately 2,822 full-time
employees. Approximately 1,186 employees are represented by the Seafarers
International Union of North America. The collective bargaining agreement with
that union expires in June, 2001. Eleven employees are represented by the
International Brotherhood of Electrical Workers. The Company has not experienced
any work stoppages and believes its relations with its employees are generally
satisfactory.
LEGAL PROCEEDINGS
The Company is from time to time a party to legal proceedings arising in the
ordinary course of business. The Company does not believe that the results of
such ordinary course of business legal proceedings, even if the outcome were
unfavorable to the Company, would have a material adverse impact on either its
financial condition or results of operations. Certain other legal proceedings
are described below.
MARION COUNTY, INDIANA GRAND JURY DOCUMENT SUBPOENA
On or after March 15, 1996, the Company, its partners in the Lawrenceburg
Casino project and certain other individuals and entities were served with
document request subpoenas issued by the Office of the Prosecuting Attorney of
Marion County, Indiana in connection with a grand jury investigation entitled:
STATE OF INDIANA V. ORIGINAL INVESTIGATION-OFFICIAL MISCONDUCT. Indiana law
requires that at the time a target of an investigation is determined, that
entity or person must be so advised by the Office of the Prosecuting Attorney.
On March 23, 1996 the Company was advised by the Marion County prosecutor that
no target subpoenas had been issued by the grand jury in its investigation as of
that date. However, there can be no assurance that targets will not be
identified as further information and documents are obtained and considered by
the grand jury. Due to the confidential nature of grand jury proceedings, the
Company is not aware of the specific subject matter or matters of the
investigation. The Company believes it has fully complied with its subpoena, and
has been informed by its partners that they will do the same.
The subpoenas request information regarding the current or prior ownership
interest in the Company and the partners of Indiana Gaming L.P. by the
individuals or entities described below. The subpoenas also request that the
Company and its partners produce a broad category of documents including
documents regarding employment and other agreements, gifts, payments and
correspondence between the Company and any of its partners on the one hand and
several business entities and individuals, including an Indiana state
legislator, certain Indiana lobbyists, and certain Lawrenceburg, Indiana city
officials and businessmen on the other hand. The Company has learned that this
legislator has served as an employee of a subsidiary of Conseco, Inc., the
parent company of the 29% limited partner in Indiana Gaming L.P., since
September 1995. Additionally, the Company has learned that such state legislator
has served since September 1993 as a consultant to a major Indiana engineering
firm that is engaged in many state and local government funded construction
projects. That engineering firm also serves as lead engineer for the
Lawrenceburg Casino project. On May 24, 1996, the Indiana House Legislative
Ethics Committee voted to reprimand, but take no further action against, this
legislator for failing to properly report the foregoing employment and
consulting arrangements on his 1993, 1994 and 1995 statements of economic
interests.
The Company believes that neither it nor any entity controlled by or person
employed by the Company has engaged, and has been informed by representatives of
its partners that they have not engaged, in any
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unlawful conduct in the pursuit by or granting to Indiana Gaming L.P. of the
Lawrenceburg gaming license. Because the grand jury proceedings are unlikely to
be concluded quickly, on March 25, 1996, a former U.S. Attorney and his law firm
were retained to conduct, as special independent counsel (the "special
independent counsel"), an internal investigation into the activities and actions
of the Company and the entities controlled by and persons employed by the
Company with respect to (i) the hiring by Conseco, Inc. and the Indiana
engineering firm of the state legislator, (ii) the endorsement of Indiana Gaming
L.P. by the City of Lawrenceburg and the financial affairs of certain
Lawrenceburg officials with respect to such endorsement and the awarding of the
certificate of suitability by the Indiana Gaming Commission, and (iii) their
lobbying efforts in furtherance of the Indiana legislature's enactment of
legislation authorizing gaming and limiting gaming licenses to one per county. A
special committee of independent directors of the Company has been appointed to
supervise and coordinate the special independent counsel's investigation. The
special independent counsel has not investigated Conseco, Inc. or the other
limited partners of Indiana Gaming L.P. The Company has been advised that
Conseco, Inc., with the assistance of outside counsel, has conducted its own
internal investigation of matters that may be the subject of the grand jury
proceedings and such investigation found no wrongdoing by Conseco, Inc. or any
person or entity it controls, or is controlled by, and that Conseco, Inc.
intends to review with the Company's special independent counsel the findings of
its investigation.
From March 25 to April 15, 1996, the special independent counsel conducted
its investigation and issued an interim report in which it concluded that it
found no evidence that the Company or any entity controlled by or person
employed by the Company had any involvement in, or knowledge of, the
relationship between the state legislator and Conseco, Inc. or the Indiana
engineering firm, or attempted to improperly influence any City of Lawrenceburg
official, state legislator or Indiana Gaming Commission member or staff member
in connection with the endorsement of the partnership by the City of
Lawrenceburg and the awarding of the certificate of suitability to Indiana
Gaming L.P. With regard to lobbying, including the lobbying with respect to one
gaming license per county legislation, the special independent counsel found no
evidence that the Company or any entity controlled by or person employed by the
Company attempted to unduly influence any legislator in any way. However, no
investigation was made of any lobbyist's records, activities or expenditures,
nor were any outside lobbyists interviewed. The special independent counsel also
audited the Company's compliance with the lobbying disclosure statute in Indiana
and found only technical errors in the Company's lobbying disclosure statements.
No evidence was found that these technical errors were intentional or designed
to hide any lobbying activity. In conducting its investigation, the special
independent counsel, among other things, reviewed numerous boxes of documents
produced by the executive and Lawrenceburg offices of the Company and
extensively interviewed the nine Company officers and employees most closely
related to the Lawrenceburg Casino project, as well as the principal of R.J.
Investments, Inc., a 4% limited partner of Indiana Gaming L.P.
No assurance can be given, however, that the nature and scope of the
investigation conducted by the special independent counsel, which among other
things was conducted under severe time pressure and was limited to the Company
and the entities controlled by and persons employed by the Company, was
sufficient to uncover conduct that might be considered unlawful. In the event
that the Company, any entity controlled by the Company, any person employed by
the Company, Indiana Gaming L.P. or any of its partners is found by the Marion
County prosecutor to have engaged in unlawful conduct, there is no assurance
what effect such action would have on Indiana Gaming L.P.'s certificate of
suitability or, after issuance, the Indiana gaming license. In the event Conseco
or one of the Company's other partners in the Lawrenceburg Casino project is
determined by the Indiana Gaming Commission to be unsuitable for the ownership
of a gaming license or to have engaged in unlawful conduct, the terms of Indiana
Gaming L.P.'s partnership agreement provide that Indiana Gaming L.P. shall
redeem 100% of such unsuitable partner's interest in the partnership for an
amount equal to such partner's capital account. In the event that a partner is
determined by the Indiana Gaming Commission to be unsuitable for ownership after
the issuance of the gaming license, the terms of Indiana Gaming L.P.'s
partnership agreement provide that Indiana Gaming L.P. shall redeem 100% of such
unsuitable partner's interest for an amount equal to 90% of the "appraised
value" of that partner's interest, determined in accordance with the terms of
the partnership agreement. The purchase price is payable in five annual
installments, only from available cash flow or sale or financing proceeds of the
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partnership, and bears interest at "prime." If such event were to occur with
respect to Conseco prior to the completion of the Lawrenceburg Casino project,
the Company would have to fund any remaining construction costs of the
Lawrenceburg Casino project which were to have been funded by Conseco. No
assurance can be given that the Company would be able to obtain funds sufficient
for this purpose. Also, there can be no assurance that the Indiana Gaming
Commission will not take other actions such as suspending, revoking or failing
to renew Indiana Gaming L.P.'s certificate of suitability, delaying the issuance
of or failing to issue Indiana Gaming L.P. a gaming license or, after issuance,
revoking or suspending such gaming license. Therefore, there can be no assurance
that the grand jury investigation will not lead to events having a material
adverse effect on the Company.
H. STEVEN NORTON V. JOHN T. CONNORS, ET AL.
In September, 1993, H. Steven Norton, who was then and is now the President
of the Company, filed a cause of action against John T. Connors, a significant
shareholder of the Company and a former officer, director and shareholder of J.
Connors Group Inc., a predecessor entity of the Company ("JCG"), seeking $50
million in damages. Mr. Norton alleged that Mr. Connors failed to fulfill his
promise made in the summer of 1991 to establish a partnership with Mr. Norton in
which each would have an equal 50% interest in JCG, which had a 25% partnership
interest in the Company's predecessor entity that owned the Alton Belle Casino.
As a result of the reorganization effected immediately prior to its initial
public offering, the Company succeeded to all the rights, properties and assets,
and assumed all the liabilities, of all of its predecessor entities, including
JCG. Subsequent to the filing of the lawsuit, Mr. Connors advised the Company
that his dealings with Mr. Norton, which are the subject of the litigation, were
in his capacity as an officer of JCG, and that the Company should assume the
defense and reimburse Mr. Connors for the approximately $130,000 spent to date
on legal fees, and that any liability resulting from the litigation was assumed
by the Company as a result of Company's reorganization. The Company responded to
Mr. Connors that it believed that his actions and dealings with Mr. Norton were
solely in his individual capacity as a shareholder of JCG, and the Company
declined to assume the defense or reimburse him for previously incurred legal
fees, and the Company denied that it has any liability with respect to such
matter. If, however, JCG were to have been found liable to Mr. Norton as a
result of the actions of Mr. Connors, then the Company could under certain
circumstances be liable to Mr. Norton for any damages awarded against JCG.
In April 1995, Mssrs. Norton and Connors agreed to voluntarily dismiss the
lawsuit without prejudice. However, on May 22, 1996, Mr. Norton refiled the suit
against Mr. Connors and is again seeking $50 million in damages. The Company
believes that Mr. Connors will again seek to cause the Company to indemnify and
reimburse him from liability thereunder. Therefore, there can be no assurance
that the lawsuit will not lead to events having a material adverse effect on the
Company.
GAMING INDUSTRY CLASS ACTIONS
The Company has been named, along with two gaming equipment suppliers, 41 of
the country's largest gaming operators and four gaming distributors (the "Gaming
Industry Defendants") in three class action lawsuits pending in Las Vegas,
Nevada. The suits allege that the Gaming Industry Defendants violated the
Racketeer Influenced and Corrupt Organizations Act ("RICO") by engaging in a
course of fraudulent and misleading conduct intended to induce people to play
their gaming machines based upon a false belief concerning how those gaming
machines actually operate, as well as the extent to which there is actually an
opportunity to win on any given play. The suit sought unspecified compensatory
and punitive damages. On April 17, 1996 the court granted the defendants motion
to dismiss one of the complaints; however, the court has allowed the plaintiffs
until May 31, 1996 to amend their complaint to cure certain pleading defects in
the prior complaint. Failure to so amend will result in the dismissal of the
complaint.
On August 23, 1995, a class action suit was filed in the United States
District Court for the District of New Jersey against the Company and
approximately 80 other major casinos located throughout the United States. The
suit alleges that the defendants violated federal antitrust and consumer credit
reporting laws by engaging in a conspiracy to refuse to deal to skilled
blackjack players who are capable of winning money at
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the casinos' blackjack tables. The suit seeks unspecified compensatory and
punitive damages. The Company is unable at this time to determine what effect,
if any, the suit would have on its business or results of operations.
CAPITAL HOUSE PRESERVATION COMPANY, L.L.C. V. JAZZ ENTERPRISES, INC., ET AL.
In July 1995, Capital House Preservation Company, L.L.C. ("Capital House")
filed a cause of action in the U.S. District Court of the Middle District of
Louisiana against Jazz, the former shareholders of Jazz ("Former Jazz
Shareholders"), Catfish Queen Partnership (the "Partnership"), Argosy of
Louisiana, Inc. ("Argosy Louisiana") and the Company alleging that Jazz and
Argosy obtained the gaming license for Baton Rouge based upon false and
fraudulent pretenses and declarations and financial misrepresentations. The
complaint alleges tortious conduct as well as violations of RICO and seeks
damages of $130,900,000 plus court costs and attorneys' fees. The plaintiff was
an applicant for a gaming license in Baton Rouge whose application was denied by
the Louisiana Enforcement Division. The Company believes the allegations of the
plaintiff are without merit and intends to vigorously defend such cause of
action.
On June 7, 1995, the Company consummated its purchase of all of the
outstanding capital stock of Jazz from the Former Jazz Shareholders. The Company
intends to seek indemnification from the Former Jazz Shareholders for any
liability the Company, Argosy Louisiana or Jazz suffers as a result of such
cause of action. As part of the consideration payable by the Company to the
Former Jazz Shareholders for the acquisition of Jazz, the Company agreed at the
time of such acquisition to annual deferred purchase price payments of
$1,350,000 for each of the first ten years after closing and $500,000 for each
of the next ten years. Payments are to be made quarterly by the Company. The
definitive acquisition documents provide the Company with off-set rights against
such deferred purchase price payments for indemnification claims of the Company
against the Former Jazz Shareholders and for liabilities that the Former Jazz
Shareholders contractually agreed to retain. There can be no assurance that the
Former Jazz Shareholders will have assets sufficient to satisfy any claim in
excess of the Company's off-set rights.
DISPUTE WITH FORMER SHAREHOLDERS OF JAZZ ENTERPRISES, INC.
On March 15, 1996, a judgment for approximately $2.2 million plus continuing
interest, attorney's fees and court costs was rendered against Jazz in the cause
of action entitled MARTHA MYATT BOWLUS ET. AL. V. JAZZ ENTERPRISES, INC. filed
in the Ninteenth Judicial District Court, Parish of East Baton Rouge, State of
Louisiana ("Bowlus Lawsuit"). The plaintiffs sued Jazz to recover amounts due
under a promissory note issued by Jazz and secured by a mortgage on certain
property owned by Jazz located several miles south of Catfish Town. The delay
for filing for a new trial in the Bowlus Lawsuit has elapsed and under Louisiana
law a suspensive appeal from a judgment must be filed within 30 days thereafter
and any such appeal requires the posting of an appeal bond in an amount at least
equal to the amount of the judgment. The judgment rendered in the Bowlus Lawsuit
has been recorded in the mortgage records of East Baton Rouge Parish, and
therefore the judgment now constitutes a judicial mortgage on Jazz's Catfish
Town property.
Pursuant to the definitive acquisition documents any and all amounts due by
Jazz under the Bowlus Lawsuit are the obligations of the Former Jazz
Shareholders. Prior to March 31, 1996, the Company requested, in writing, that
the Former Jazz Shareholders satisfy the obligations and satisfy the judgment.
Thereafter, Jazz was advised that the Former Jazz Shareholders hoped to settle
the Bowlus Lawsuit prior to the expiration of the suspensive appeal delay and if
not so settled, they intended to suspensively appeal the judgment. As a result
of the Former Jazz Shareholders' obligations, one of the Former Jazz
Shareholders, Mr. Steve Urie, has posted an unsecured personal appeal bond in
the amount of $2,246,187.31, and a suspensive appeal has been filed. Under
Louisiana law, if it is determined that the suspensive appeal is proper and that
the suspensive appeal bond is valid, sufficient and proper, then after a
contradictory hearing the court may order the judgement cancelled from the
mortgage records during the pendency of the suspensive appeal. The Bowlus
plaintiffs have filed pleadings to contest the validity, sufficiency, and
propriety of the suspensive appeal bond, and Jazz is not able to predict what
ruling the court may make on that issue. Accordingly, since the Former Jazz
Shareholders have allowed the judgment to be entered against Jazz, and have
allowed said judgment to remain in the mortgage records, such that the judgment
creates a judicial mortgage on Jazz's immovable property, the Company withheld a
scheduled payment of $337,500 to
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the Former Jazz Shareholders representing the March 31, 1996 quarterly
installment of the deferred purchase price. The Company believes that
withholding such payment, as well as withholding future payments, until the
Former Jazz Shareholders satisfy the Bowlus Lawsuit is within the Company's
rights as provided for in the definitive acquisition documents.
In response to the Company's withholding the March 31, 1996 payment, Mr.
Steve Urie has filed an action in the District Court of East Baton Rouge seeking
payment of the withheld amount and has also threatened, among other things, to
file a class action on behalf of the shareholders of the Company against the
Company and its directors and officers for mismanagement. The Company believes
such threatened claims are without merit and would vigorously pursue the defense
of any lawsuit filed by the Former Jazz Shareholders.
POTENTIAL CHALLENGE TO CERTIFICATE OF SUITIBILITY FOR LAWRENCEBURG CASINO BY
UNSUCCESSFUL APPLICANT
On March 6, 1996 Indiana Gaming Company received a letter from counsel to
Schilling Casino Corporation, d/b/a Empire Casino & Resort ("Empire") advising
the Company that Empire intends to take legal action to seek a revocation or
cancellation of the certificate of suitability issued by the Indiana Gaming
Commission to Indiana Gaming L.P. on June 30, 1995 to develop and operate the
Lawrenceburg Casino. Empire was one of the 10 unsuccessful applicants competing
for the Lawrenceburg gaming license. Empire has advised Indiana Gaming L.P. that
it intends to file an application with the Indiana Gaming Commission seeking
revocation of the certificate of suitability and that if such application is
unsuccessful, Empire has stated that it intends to file a civil action
challenging the Indiana Gaming Commission's authority to issue the certificate
of suitability and finally, if any such civil action is unsuccessful, to file an
appeal from the denial of Empire's application, which denial Empire deems to
occur upon the issuance of the gaming license to Indiana Gaming L.P. Among the
grounds stated by Empire for its actions are: (i) the application process
followed by the Indiana Gaming Commission did not afford Empire due process;
(ii) Indiana Gaming L.P. will not be able to commence gaming operations prior to
June 28, 1996 due to the failure to obtain the necessary permits and an
inability to obtain the necessary financing for the project; (iii) Indiana
Gaming L.P. made misrepresentations to the Indiana Gaming Commission during the
licensing hearings; and (iv) the endorsement of Indiana Gaming L.P. by the City
of Lawrenceburg was without legal authority.
The Company believes that the grounds alleged by Empire are without merit
and intends with Indiana Gaming L.P. to vigorously challenge any of the
aforementioned actions taken by Empire. Additionally, the Company and Indiana
Gaming L.P. intend to pursue their respective legal remedies against Empire and
its representatives for any damages either may suffer as a result of any
wrongful action of Empire. There can be no assurances, however, that any actions
of Empire will not result in a delay in the opening of the temporary gaming
facility in Lawrenceburg presently scheduled for the fourth quarter of 1996 or
the opening of the permanent gaming facility scheduled twelve months later. Any
such delay could have a material adverse effect on the Company. Additionally,
the Company cannot predict the response of the Indiana Gaming Commission or City
of Lawrenceburg to any such actions of Empire.
LOUISIANA GAMING MATTERS
In April 1995, the Company received a notice of violation from the Louisiana
Enforcement Division alleging certain violations of the Louisiana gaming law
principally related to compliance with reporting and internal control procedures
and initially assessing fines and penalties of approximately $440,000. In April
1996, this amount was reduced to $88,400. The Company has taken the necessary
actions to correct the matters alleged in the notice of violation.
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LAWRENCEBURG CASINO PARTNERSHIP AGREEMENT
GENERAL
On June 30, 1995, Indiana Gaming L.P., received a certificate of suitability
from the Indiana Gaming Commission to develop and operate the Lawrenceburg
Casino project. The Company is the sole general partner of, and holds a 57.5%
general partnership interest in, Indiana Gaming L.P. Conseco holds a 29% limited
partnership interest and certain other investors, including H. Steven Norton,
Chief Operating Officer of the Company, who brought the opportunity to the
Company concurrent with his initial employment, hold the remaining 13.5% limited
partnership interests in Indiana Gaming L.P.
Indiana Gaming L.P. operates pursuant to a partnership agreement entered
into among the partners as of April 11, 1994, as amended and restated as of
February 21, 1996. The Indiana Gaming Company manages the partnership pursuant
to a management agreement and as general partner, subject only to certain
actions or major decisions requiring the consent of a majority in interest of
the limited partners. Under the provisions of the partnership agreement and the
management agreement, the Company will manage the development, construction and
operation of the Lawrenceburg Casino project and will receive a management fee
of 7.5% of EBITDA (as defined in the partnership agreement) and Conseco will
receive a financial advisory fee of 5% of EBITDA. The Company estimates the
total cost to open the temporary gaming facility and to construct the proposed
permanent riverboat casino, land-based facilities and 300-room hotel will be
approximately $210 million.
PROJECT FUNDING
It is currently anticipated that the budgeted $210 million total project
cost will be funded as follows: $52.5 million by capital contributions by the
partners of which $16.75 million will constitute common equity and $35.75
million will constitute preferred equity. The Company has contributed 57.5% of
the common equity, in the amount of approximately $9.6 million, and has
contributed or will contribute 57.5% of the preferred equity, in the amount of
approximately $20.6 million. The remainder of the common equity has been and the
remainder of the preferred equity will be contributed by Conseco. The remainder
of the cost of the Lawrenceburg Casino is expected to be funded by third party
financing and capital loans from the Company and Conseco. Any capital loans are
to be funded 57.5% by the Company and 42.5% by Conseco, pursuant to agreements
under which Conseco will fund both its and such other limited partners' share of
such capital loans. Conseco is obligated to fund 42.5% of any capital loans
until project costs exceed the budgeted $210 million total project cost.
If project costs exceed $210 million, the Company and Conseco will make
capital loans up to $15 million in the aggregate, 57.5% of which will be funded
by the Company and 42.5% by of which will be funded Conseco; provided that
Conseco will receive an interest rate 700 basis points higher than the Company
on the last $10 million contributed. Any project costs over $225 million will be
funded solely by the Company without a return or compensation.
PARTNER DISTRIBUTIONS
The Lawrenceburg Casino partnership agreement sets forth the manner in which
cash flow of Indiana Gaming L.P. will be distributed. Pursuant to the agreement,
capital loans will be repaid on an eight-year amortizing schedule and cash flow
(after repayment of principal of, and interest on, capital loans) will be
distributed by the general partner not less frequently than quarterly: (i)
first, to the partners pro rata for tax payments in an amount equal to the
product of an assumed tax rate times their estimated taxable income for such
period; (ii) second, to the partners as a prepayment of principal on capital
loans to be applied in the inverse order of maturity, up to 75% of the remaining
cash flow; (iii) third, in payment of a preferred return of 14% on any preferred
equity contributed by the partners; (iv) fourth, as a return of the preferred
equity contributed by the partners; (v) fifth, as a return of common equity
contributed by the partners; and (vi) sixth, to the partners in accordance with
their respective percentage interests. The partnership agreement provides that
the net cash proceeds from a sale or refinancing are distributed by the general
partner in the same order as cash flow except that the proceeds will be used to
repay 100% of outstanding capital loans by the partners.
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GENERAL PARTNER REMOVAL
The Lawrenceburg Casino partnership agreement provides that the Company's
wholly-owned subsidiary, The Indiana Gaming Company, can be removed as general
partner of the partnership by the limited partners under certain limited
circumstances, including: (i) a material breach (after notice and expiration of
applicable cure periods) of certain material provisions of the partnership
agreement dealing with such things as distributions to partners or the failure
to obtain the required consent of the limited partners for certain major
decisions; (ii) conviction of embezzlement or fraud; (iii) certain bankruptcy
events; (iv) if The Indiana Gaming Company's partnership interest is less than
40% due to sales or dilution for failure to pay required capital; (v) a final
unappealable judgment against The Indiana Gaming Company in excess of $25
million which is uninsured and remains unsatisfied, unreleased or unstayed for
180 days; (vi) certain acts constituting "gross mismanagement"; (vii) if The
Indiana Gaming Company fails to fund project costs in excess of $215 million
(after expiration of applicable notice and cure periods); and (viii) if the
Trustee under the Notes forecloses on The Indiana Gaming Company's pledge of its
partnership interest in Indiana Gaming L.P. Upon removal as general partner, the
general partnership interest of The Indiana Gaming Company becomes a "special
limited partner" interest with rights to partner distributions but only limited
voting rights on partnership matters. Also, if the reason for the removal is an
event described in clause (i), (ii), (iii), (v), (vi) or (viii) above the
limited partners may acquire all, but not less than all, of The Indiana Gaming
Company's interest for the fair market value thereof determined by an appraisal
process.
LIMITED PARTNERS' SALE RIGHTS
The Lawrenceburg Casino partnership agreement provides that: (i) after the
third anniversary date of commencement of operations at the Lawrenceburg Casino,
each limited partner has the right to sell its interest to the other partners
(pro rata in accordance with their respective percentage interests) or (ii)
after a deadlock by the parties with respect to significant items in any annual
operating budget of the partnership for budget year 1999 and thereafter, any
partner has a right to sell its interest to the other partners (the limited
partner pursuant to clause (i) and the partner desiring to sell pursuant to
clause (ii) is hereinafter referred to as a "Selling Partner" and the
non-selling partners are hereinafter referred to as the "Non-Selling Partners").
The partnership agreement provides that after the Selling Partner gives notice
of its intent to sell the Selling Partner and Non-Selling Partners shall have 60
days to attempt in good faith to agree to a purchase price. If within such
period of time no such agreement is reached, then the Selling Partner's interest
shall be appraised pursuant to an appraisal process to determine the fair market
value thereof. After the fair market value of the Selling Partner's interest is
determined by the appraisal process, the Non-Selling Partners have 60 days to
reject such sale at that price, and if the Non-Selling Partners decline to
purchase the interest of the Selling Partner at the appraisal price then the
general partner is to solicit bids and sell all of the assets of the partnership
within twelve months to the highest bidder and the partnership will be dissolved
within a 12-month period. No assurances can be given that The Indiana Gaming
Company, if it is a Non-Selling Partner, will have or will be able to obtain
sufficient funds to acquire any Selling Partner's interest in the circumstances
provided for above and therefore the assets of the partnership would have to be
sold to the highest bidder as provided above. In addition, the partnership
agreement provides all partners with a right of first refusal on transfers of
partnership interests. A foreclosure by the Trustee on the Company's pledge of
its partnership interest shall be deemed a transfer giving rise to the right of
first refusal.
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REGULATORY MATTERS
GAMING REGULATORY SUMMARY
The following table presents a comparative summary of certain key regulatory
issues as in effect as of the date of this Offering Memorandum in the
jurisdictions where the Company operates or proposes to operate casinos:
<TABLE>
<CAPTION>
ILLINOIS IOWA MISSOURI LOUISIANA INDIANA
--------------- ------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
MANDATORY CRUISING Yes Limited (1) Yes (2) Yes Yes
CRUISE LENGTH (ACTUAL OR SIMULATED) Eight 2 hour 2 hours (1) Ten 2 hour Eight 3 hour Twelve 2 hour
cruises (30 cruises (45 cruises (45 cruises
min. board time min. board time min. board time anticipated (30
before and before and before and min. board time
after cruise) after cruise) after cruise) before and
after cruise)
MAXIMUM NUMBER OF GAMING POSITIONS 1,200 Unlimited Unlimited Unlimited Unlimited
MAXIMUM NUMBER OF LICENSES 10 Unlimited Unlimited 15 11
LICENSES OR CERTIFICATES OF 10 12 (3) 7 14 9
SUITABILITY ISSUED
STATE LICENSED CASINOS IN OPERATION 10 12 (3) 7 12 4
STATE GAMING TAX AS A PERCENTAGE OF 20% Graduated to 20% 18.5% 20%
GAMING REVENUES 20%
STATE ADMISSION TAX PER PASSENGER $2.00 (4) $2.00 $2.50 $3.00
LOSS LIMIT PER CRUISE None None $500 None None
</TABLE>
- ---------------
(1) Iowa law requires one cruise per day for 100 days per year. While an Iowa
riverboat is not cruising, customers are permitted unlimited ingress and
egress to the casino.
(2) The Missouri Gaming Commission is empowered to determine on a site by site
basis whether dockside gaming is in the best interest of Missouri and the
safety of the public and shall be permitted.
(3) Nine of the state-licensed casinos are riverboat casino operations. The
remaining three state-licensed casinos are land-based operations that are
only permitted to offer gaming in the form of slot machines.
(4) Admission fees are set annually on a per boat basis.
ILLINOIS
In February 1990, the State of Illinois pursuant to the Riverboat Gambling
Act (the "Riverboat Act") legalized riverboat gaming. The Riverboat Act
authorizes riverboat gaming upon any navigable stream within or forming a
boundary of the State of Illinois other than Lake Michigan. The Riverboat Act
does not, however, authorize riverboat gaming or the docking of a riverboat
conducting gaming within a county having a population in excess of 3,000,000.
The Riverboat Act grants the Illinois Gaming Board specific powers and duties,
and all other powers which are necessary and proper to effectuate the Riverboat
Act. The Illinois Gaming Board's jurisdiction extends to every person,
association, corporation, partnership and trust involved in riverboat gaming
operations in the State of Illinois.
The Riverboat Act authorized a five member Illinois Gaming Board to issue up
to ten owner's licenses statewide. Each owner's license permits the operation of
up to two boats as a part of a single riverboat gaming operation with a combined
maximum of 1,200 gaming positions (as defined by the Illinois Gaming Board). No
person, firm or corporation may be licensed as the owner of more than one
riverboat gaming operation in Illinois, although a licensed owner may hold up to
10% of a second riverboat gaming operation in Illinois. In addition to the ten
owner's licenses which may be authorized under the Riverboat Act, the Illinois
Gaming Board may issue special event licenses allowing persons who are not
otherwise licensed to conduct riverboat gaming and to conduct such gaming on a
specified date or series of dates. Riverboat gaming under such a license may
take place on a riverboat not normally used for riverboat gaming.
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An owner's license is issued for an initial period of three years (with a
fee of $25,000 for the first year and $5,000 for each of the following two
years) and must be renewed annually thereafter (with a fee of $5,000 for each
year). The Company's Illinois gaming license is subject to renewal on October
24, 1996. An owner's license is eligible for renewal upon payment of the
applicable fee and a determination by the Illinois Gaming Board that the
licensee continues to meet all of the requirements of the Riverboat Act. The
Illinois Gaming Board also requires that officers, directors and employees of a
gaming operation be licensed. Licenses issued by the Illinois Gaming Board may
not be transferred to another person or entity. All licensees must maintain
their suitability for licensure and have a continuing duty to disclose any
material changes in information provided to the Illinois Gaming Board.
Pursuant to its rulemaking authority under the Illinois Riverboat Act, the
Illinois Gaming Board has adopted certain regulations that provide that any
beneficial owner of the legal or beneficial interests of a gaming company may be
required, and in the case of a beneficial owner of 5% or more of the legal or
beneficial interests (a "5% Holder") is required, to furnish a detailed personal
disclosure form to the Illinois Gaming Board. The Illinois Gaming Board uses the
personal disclosure form as the basis for its investigation to determine such
holder's suitability as a stockholder of the company. In the case of a 5%
Holder, the Illinois Gaming Board conducts such an investigation. The Illinois
Gaming Board's decisions as to suitability are based on the same criteria used
for a finding of preliminary suitability for licensure including character,
reputation, experience and financial integrity of such holder. If the Illinois
Gaming Board determines that a holder is not suitable, the holder is entitled to
request a hearing; however, if no hearing is requested after such determination
or such finding is upheld after a hearing, the holder is required to divest his
shares of common stock of the company. After a holder is required to divest and
until divestiture, the licensee is unable to distribute profits to such
stockholder. The Illinois Gaming Board has adopted a regulation that provides
that a licensee can only make distributions to shareholders to the extent such
distributions would not impair the financial viability of the licensee. Factors
which would be considered by the Illinois Gaming Board include working capital
requirements, debt service requirements, requirements for repairs and
maintenance and capital expenditure requirements. Illinois Gaming Board approval
is required for certain changes, including, among other things, to the type of
entity, debt and equity offerings by a company, issuances of debt, riverboat
capacity or significant design changes, changes in the number of gaming
positions and pro forma budgets and financial statements.
Minimum and maximum wagers on games are set by the licensee. Wagering may
not be conducted with money or negotiable currency. No person under the age of
21 is permitted to wager in Illinois, and wagers may only be taken from a person
present on a licensed riverboat. With respect to electronic gaming devices, the
payout percentage may not be less than 80% nor more than 100%.
Under the Riverboat Act, vessels must have the capacity to hold a minimum of
500 persons if operating on the Mississippi River or the Illinois River south of
Marshall County, and a minimum of 400 persons on any other waterway. In
addition, all riverboats must be accessible to disabled persons, must be either
a replica of a 19th century Illinois riverboat or be a casino cruise ship design
and must comply with applicable federal and state laws, including but not
limited to U.S. Coast Guard regulations.
Gaming may only be conducted on a gaming excursion, which is limited to a
maximum period of four hours. A gaming excursion is deemed to have started upon
the commencement of gaming. For the purpose of orderly ingress of passengers to
a riverboat, gaming is deemed to commence when the first passenger boards a
riverboat for an excursion and may continue while other passengers are boarding
for a period not to exceed thirty minutes, at which time the gangplank or its
equivalent must be pulled up and further boarding is not permitted. For the
purpose of orderly egress of passengers from a riverboat at the end of an
excursion, gaming may continue for a period not to exceed thirty minutes after
the gangplank or its equivalent is lowered. During this thirty minute period of
egress, new passengers may not board a riverboat. These periods of time do not
extend the four-hour maximum. Special event extended cruises may be authorized
by the Illinois Gaming Board.
Although the Riverboat Act provides that no gambling may be conducted while
a riverboat is docked, an Illinois Gaming Board rule currently permits dockside
gaming during the 30-minute time periods prior to
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and following a cruise. Furthermore, if the captain of the riverboat reasonably
determines that for reasons of safety, although seaworthy, the riverboat should
not leave the dock or should return immediately thereto due to inclement
weather, mechanical or structural problems, or river icing, then a gaming
excursion may commence or continue while the gang plank or its equipment is
raised and remains raised, and ingress is prohibited until completion of the
excursion, in which case the riverboat is not considered docked. If such a
situation occurs, the holder of the owner's license must promptly file a report
with the administrator of the Illinois Gaming Board detailing the basis for its
decision not to cruise. Recent pronouncements by the Illinois Gaming Board
indicate that the explanations for failure to cruise pursuant to the rule will
be scrutinized and that any abuse of the rule will result in disciplinary
actions, which may include, among other things, any of the following:
cancellation of future cruises, penalties, fines, suspension and/or revocation
of a license.
The Riverboat Act imposes a 20% wagering tax on adjusted gross receipts from
gambling games. The tax imposed is to be paid by the licensed owner to the
Illinois Gaming Board on the day after the day when the wagers were made. A
number of bills have been recently introduced in the Illinois legislature
proposing a graduated gaming tax that would impose a maximum tax on Illinois
casinos far in excess of the current 20% wagering tax on adjusted gaming
receipts. The Governor of Illinois has publicly supported such a graduated
gaming tax and has proposed a state budget which is in part predicated on
additional revenues being generated from an increase in gaming taxes. The
proposed bills are still pending and no assurance can be given that one or a
combination of these bills will not become law or that similar legislation will
not be introduced in the future. The Riverboat Act also requires that licensees
pay a $2.00 admission tax for each person admitted to a gaming cruise. In
addition, all use, occupancy and excise taxes that apply to food and beverages
and all taxes imposed on the sale or use of tangible property apply to sales
aboard riverboats. The Company also pays $.20 admission tax to the City of Alton
for each person admitted to the Alton Belle Casino.
The Illinois Gaming Board is authorized to conduct investigations into the
conduct of gaming as it may deem necessary and proper and into alleged
violations of the Riverboat Act. Employees and agents of the Illinois Gaming
Board have access to and may inspect any facilities relating to riverboat gaming
operations at all times.
A holder of any license is subject to the imposition of fines, suspension or
revocation of such license, or other action for any act or failure to act by
himself or his agents or employees, that is injurious to the public health,
safety, morals, good order and general welfare of the people of the State of
Illinois, or that would discredit or tend to discredit the Illinois gaming
industry or the State of Illinois. Any riverboat operation not conducted in
compliance with the Riverboat Act may constitute an illegal gaming place and
consequently may be subject to criminal penalties, which penalties include
possible seizure, confiscation and destruction of illegal gaming devices and
seizure and sale of riverboats and dock facilities to pay any unsatisfied
judgment that may be recovered and any unsatisfied fine that may be levied. The
Illinois Gaming Board may revoke or suspend licenses, as the Board may see fit
and in compliance with applicable laws of Illinois regarding administrative
procedures and may suspend an owner's license, without notice or hearing, upon a
determination that the safety or health of patrons or employees is jeopardized
by continuing a riverboat's operation. The suspension may remain in effect until
the Illinois Gaming Board determines that the cause for suspension has been
abated and it may revoke the owner's license upon a determination that the owner
has not made satisfactory progress toward abating the hazard.
The Illinois Gaming Board may waive any licensing requirement or procedure
provided by rule if it determines that such waiver is in the best interests of
the public and the gaming industry.
INDIANA
In June 1993, the Indiana legislature adopted legislation permitting
riverboat gambling in counties contiguous to Lake Michigan, the Ohio River and
Patoka Lake. The legislation granted authority to supervise gaming activities to
the seven-member Indiana Gaming Commission (the "Indiana Gaming Commission").
The Indiana Gaming Commission is empowered to administer, regulate and enforce
the system of riverboat gaming established under Indiana's Riverboat Gambling
Act (the "Riverboat Gambling
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Act") and has jurisdiction and supervision over all riverboat gaming operations
in Indiana, as well as all persons on riverboats where gaming operations are
conducted. The Indiana Gaming Commission has broad powers to regulate riverboat
gaming operations and to approve the form of ownership and financial structure
of not only riverboat owner licensees, but also their entity qualifiers, and
intermediary and holding companies. Indiana is a new gaming jurisdiction and the
emerging regulatory framework is not yet complete. The Indiana Gaming Commission
has adopted certain final rules and has published others in proposed or draft
form which are proceeding through the review and final adoption process. The
Indiana Gaming Commission also has indicated its intent to publish additional
proposed rules in the future. The Indiana Gaming Commission has broad rulemaking
power and it is impossible to predict what effect, if any, the rules might have
on the operations of the Lawrenceburg Casino. The following description reflects
both adopted and proposed rules. Further, the Indiana General Assembly has the
power to promulgate new laws and implement amendments to the Riverboat Gambling
Act, which can materially affect the operation or economic viability of the
gaming industry in Indiana.
No one may operate a riverboat gaming operation in Indiana without holding a
riverboat owner's license. The Indiana Gaming Commission has implemented strict
regulations with respect to the suitability of riverboat license owners, their
key personnel, and employees. The Indiana Gaming Commission utilizes a "class
based" licensing structure that subjects all individuals associated with a
riverboat licensee or a riverboat license applicant to varying degrees of
background investigations.
Under current Indiana law a maximum of 11 owner's licenses may be in effect
at any time with an aggregate of five licenses to be issued to owners whose home
port is a county which is contiguous to Lake Michigan, an aggregate of five
licenses to be issued to owners whose home port is a county which is contiguous
to the Ohio River and one license to be issued to an owner whose home port is a
county contiguous to Lake Patoka. For counties contiguous to the Ohio River, the
Indiana Gaming Commission may not issue a license unless an ordinance has been
passed permitting the docking of a riverboat by the specified local entity and
the voters of the county have approved riverboat gambling in the county.
A license holder is required to pay an initial license fee of $25,000, a
renewal of $5,000 per year thereafter and post a bond to guaranty performance of
the licensee's obligations under the legislation. Gaming will be permitted only
on riverboats which (i) have a valid certificate of inspection from the U.S.
Coast Guard for the carrying of at least 500 passengers, (ii) are at least 150
feet in length, and (iii) for riverboats operating on the Ohio River, replicate
historic Indiana steamboat passenger vessels of the 19th century. No person or
entity may simultaneously own an interest in more than two riverboat owner's
licenses. A person or entity may simultaneously own up to 100% in one riverboat
owner's license and no more than 10% in a second riverboat owner's license. A
riverboat owner's licensee must possess a level of skill, experience, or
knowledge necessary to conduct a riverboat gaming operation that will have a
positive economic impact on the host site, as well as the entire State of
Indiana. Additional representative, but not exclusive, qualification criteria
with respect to the holder of a riverboat owner's license include character,
reputation, financial integrity, the facilities or proposed facilities for the
conduct of riverboat gaming including related non-gaming projects such as hotel
development, and the good faith affirmative action plan to recruit, train and
upgrade minorities and women in all employment classifications. The Indiana
Gaming Commission shall require persons holding owner's licenses to adopt
policies concerning the preferential hiring of residents of the city in which
the riverboat docks for riverboat jobs. The Indiana Gaming Commission has broad
discretion in regard to the issuance, renewal, revocation and suspension of
licenses and approvals, and the Indiana Gaming Commission is empowered to
regulate a wide variety of gaming and non-gaming related activities, including
the licensing of suppliers to, and employees at, riverboat gaming operations,
and effectively to approve the form of ownership and financial structure of not
only riverboat owner and supplier licensees, but also their subsidiaries and
affiliates. A riverboat owner's licensee or any other person may not lease,
hypothecate, borrow money against or loan money against a riverboat owner's
license. An ownership interest in a riverboat owner's license may only be
transferred in accordance with the regulations promulgated under the Riverboat
Gambling Act. An applicant for the approval of the transfer of a riverboat
owner's license must comply with application procedures prescribed by the
Indiana Gaming Commission and present evidence that it meets or possesses the
standards, qualifications, and other criteria
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under Indiana gaming laws, and pay an investigative fee in the amount of $50,000
with the application. If the Indiana Gaming Commission denies the application to
transfer an ownership interest, it shall issue notice of denial to the
applicant. Unless specifically stated to the contrary, a notice of denial of an
application for transfer shall not constitute a finding that the applicant is
not suitable for licensure. A person who is served with notice of denial under
this rule may request an administrative hearing.
"Certificates of Suitability" are issued following selection by the Indiana
Gaming Commission. The "Certificate of Suitability" is valid for 180 days unless
extended by the Indiana Gaming Commission. During this period the prospective
riverboat licensee must among other things: obtain a permit to develop the
riverboat gaming operation from the United States Army Corps of Engineers;
obtain a valid certificate of inspection from the United States Coast Guard for
the vessel on which the riverboat gaming operation will be conducted; apply for
and receive the appropriate permits or certificates from the Indiana Alcoholic
Beverage Commission, fire marshall, and other appropriate local, state and
federal agencies which issue permits including, but not limited to, health
permits, building permits and zoning permits; closing the financing necessary to
complete the development of the gaming operation; post a bond in compliance with
the applicable law; obtain the insurance deemed necessary by the Indiana Gaming
Commission; receive licensure for electronic gaming devices and other gaming
equipment under applicable law; submit an emergency response plan in compliance
with applicable laws; and take any other action that the Indiana Gaming
Commission deems necessary for compliance under Indiana gaming laws. Further,
the Indiana Gaming Commission may place restrictions, conditions or requirements
on the permanent riverboat owner's license. An owner's initial license expires
five years after the effective date of the license, and unless the owner's
license is terminated, expires or is revoked, the owner's license may be renewed
annually by the Indiana Gaming Commission upon satisfaction of certain
conditions contained in the Riverboat Gambling Act.
Pursuant to rules promulgated by the Indiana Gaming Commission, any person
(other than an institutional investor) who individually, or in association with
others, acquires directly or indirectly the beneficial ownership of 5% or more
of any class of voting securities of a publicly-traded corporation that is a
riverboat licensee or 5% or more of the beneficial interest in a riverboat
licensee, directly or indirectly, through any class of the voting securities of
any holding or intermediary company of a riverboat licensee shall apply to the
Indiana Gaming Commission for finding of suitability within 45 days after
acquiring the securities. Each institutional investor who, individually or in
association with others, acquires, directly or indirectly, beneficial ownership
of 5% or more of any class of voting securities of a publicly-traded corporation
that is a riverboat licensee or 5% or more of the beneficial interest in a
riverboat licensee through any class of the voting securities of any holding or
intermediary company of a riverboat licensee shall notify the Indiana Gaming
Commission within 10 days after the institutional investor acquires the
securities and shall provide additional information and may be subject to a
finding of suitability as required by the Indiana Gaming Commission.
An institutional investor who would otherwise be subject to a suitability
finding shall, within 45 days, after acquiring the interests submit information
to the Indiana Gaming Commission including the following: a description of the
institutional investor's business and a statement as to why the institutional
investor satisfies the definitional requirements of an institutional investor
under Indiana gaming rule requirements; a certification made under oath that the
voting securities were acquired and are held for investment purposes only and
were acquired and are held in the ordinary course of business as an
institutional investor; the name, address, telephone number, social security
number or federal tax identification number of each person who has the power to
direct or control the institutional investor's exercise of its voting rights as
a holder of voting securities of the riverboat licensee; the name of each person
who beneficially owns 5% or more of the institutional investor's voting
securities or equivalent; a list of the institutional investor's affiliates; a
list of all securities of the riverboat licensee that are or were beneficially
owned by the institutional investor or its affiliates within the preceding one
year; a disclosure of all criminal and regulatory sanctions imposed during the
preceding ten years; a copy of any filing made under 16 U.S.C. 18(a); and any
other additional information the Indiana Gaming Commission may request to insure
compliance with Indiana gaming laws.
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Each institutional investor who, individually or in association with others,
acquires, directly or indirectly, the beneficial ownership of 15% or more of any
class of voting securities of a publicly-traded corporation that owns a
riverboat owner's license or 15% or more of the beneficial interest in a
riverboat licensee directly or indirectly through any class of voting securities
of any holding company or intermediary company of a riverboat licensee shall
apply to the Indiana Gaming Commission for a finding of suitability within 45
days after acquiring the securities.
An institutional investor means any of the following: a retirement fund
administered by a public agency for the exclusive benefit of federal, state or
local public employees; an investment company registered under the Investment
Company Act of 1940; a collective investment trust organized by banks under Part
9 of the Rules of the Comptroller of the Currency; a closed end investment
trust; a chartered or licensed life insurance company or property and casualty
insurance company; a banking, chartered or licensed lending institution; an
investment adviser registered under the Investment Advisers Act of 1940; and any
other entity the Indiana Gaming Commission determines constitutes an
institutional investor. The Indiana Gaming Commission may in the future
promulgate regulations with respect to the qualification of other financial
backers, mortgagees, bond holders, holders of indentures or other financial
contributors.
The Riverboat Gambling Act imposes a tax on admissions to gaming excursions
at a rate of $3.00 for each person admitted to the gaming excursion. This
admission tax is imposed upon the license owner conducting the gaming excursion
on a per-person basis without regard to the actual fee paid by the person using
the ticket, with the exception that no tax shall be paid by admittees who are
actual and necessary officials, employees of the licensee or other persons
actually working on the riverboat. A tax is imposed on the adjusted gross
receipts received from gaming games under the Riverboat Gambling Act at a rate
of twenty percent (20%) of the amount of the adjusted gross receipts. Adjusted
gross receipts is defined as the total of all cash and property (including
checks received by a licensee), whether collected or not, received by a licensee
from gaming operations less the total of all cash paid out as winnings to
patrons including a provision for uncollectible gaming receivables as is further
set forth in the Riverboat Gambling Act. The Indiana Gaming Commission may, from
time to time, impose other fees and assessments on riverboat owner licensees. In
addition, all use, excise and retail taxes apply to sales aboard riverboats.
In general, riverboat excursions are limited to a duration of four hours,
and no gaming may be conducted while the riverboat is docked, with the exception
of (i) the 30 minutes during passenger embarkation and disembarkation and (ii)
when weather, water or traffic prevent the riverboat from cruising. Minimum and
maximum wagers on games are set by the licensee, and wagering may not be
conducted with money or other negotiable currency. No person under the age of 21
is permitted to wager, and wagers may only be taken from a person present on a
licensed riverboat.
No riverboat licensee or riverboat license applicant may enter into or
perform any contract or transaction in which it transfers or receives
consideration which is not commercially reasonable or which does not reflect the
fair market value of the goods or services rendered or received as determined at
the time the contract is executed. Any contract entered into by a riverboat
licensee or riverboat license applicant that exceeds the total dollar amount of
$50,000 shall be a written contract. A riverboat license applicant means an
applicant for a riverboat owner's license that has been issued a certificate of
suitability.
Pursuant to proposed Indiana Gaming Commission rules, riverboat licensees
and riverboat license applicants must submit an internal control procedure
regarding purchasing transactions which must contain provisions regarding
ethical standards, compliance with state and federal laws, and prohibitions on
the acceptance of gifts and gratuities by purchasing and contracting personnel
from suppliers of goods or services. The proposed rules also require any
riverboat licensee or applicant to submit any contract, transaction or series of
transactions greater than $500,000 in any 12-month period to the Indiana Gaming
Commission within 10 days of execution, and to submit a summary of all contracts
or transactions greater than $50,000 in any 12-month period on a quarterly
basis. The proposed rules provide that contracts submitted to the Indiana Gaming
Commission are not submitted for approval, but grant the Indiana Gaming
Commission authority to cancel or terminate any contract not in compliance with
Indiana law and Indiana Gaming Commission rules.
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Indiana gaming laws provide that the opportunity for full minority and
women's business enterprise participation in the riverboat industry in Indiana
is essential to social and economic parity for minority and women business
persons. The Indiana Gaming Commission has the power to review compliance with
the goals of participation by minority and women business persons and impose
appropriate conditions on licensees to insure that goals for such business
enterprises are met.
Under proposed Indiana Gaming Commission rules, a riverboat licensee or a
riverboat license applicant shall designate certain minimum percentages of the
value of its contracts for goods and services to be expended with minority
business enterprises and womens' business enterprises such that 10% of the
dollar value of the riverboat licensee's or the riverboat license applicant's
contracts be expended with minority enterprises and 5% of the dollar value of
the riverboat licensee's or the riverboat license applicant's contracts be
expended with women's business enterprises. Expenditures with minority and women
business enterprises are not mutually exclusive.
All licensees subject to the jurisdiction of the Indiana Gaming Commission
have a continuing duty to maintain suitability for licensure. The Indiana Gaming
Commission may initiate an investigation or disciplinary action or both against
a licensee about whom the commission has reason to believe is not maintaining
suitability for licensure, is not complying with licensure conditions, and/or is
not complying with Indiana gaming laws or regulations. The Indiana Gaming
Commission may suspend, revoke, restrict or place conditions on the license of a
licensee; require the removal of a licensee or an employee of a licensee; impose
a civil penalty or take any other action deemed necessary by the Indiana Gaming
Commission to insure compliance with Indiana gaming laws.
IOWA
In 1989, the State of Iowa legalized riverboat gaming on the Mississippi and
Missouri Rivers and certain other waterways located in Iowa. The Excursion
Gambling Act grants the Iowa Racing and Gaming Commission (the "Iowa
Commission") jurisdiction over all gambling operations.
The legislation authorized the granting of licenses to conduct riverboat
gaming to not-for-profit corporations which, in turn, are permitted to enter
into operating agreements with persons who are licensed by the Iowa Commission
to operate riverboat casinos. The number of licenses which may be granted is not
limited by statute or regulation.
Gaming is permitted only on riverboats which recreate, as nearly as
practicable, Iowa's riverboat history and have a capacity for at least 250
persons with tickets. In addition the licensee must utilize Iowa resources,
goods and services in the operation of the riverboat. An excursion gambling boat
must operate at least one excursion each day for 100 days during the excursion
season which will be from April 1 through October 31. Excursions consist of a
minimum two hours. While an excursion gambling boat is docked, passengers may
embark or disembark at any time during its business hours. If during the
excursion season it is determined that it would be unsafe to complete any
portion of an excursion, or if mechanical problems prevent the completion of any
portion of an excursion, the boat may be allowed to remain dockside.
A gaming license will be issued for not more than three years and is subject
to annual renewals thereafter. The Iowa Commission has broad discretion with
regard to such renewals. The annual license fee to operate an excursion gambling
boat shall be based on the passenger carrying capacity, including crew, for
which the excursion gambling boat is registered. The annual fee shall be five
dollars per person capacity. Licenses issued by the Iowa Commission may not be
transferred to another person or entity. The Company must submit detailed
financial and operating reports to the Iowa Commission.
Minimum and maximum wagers on games are set by the licensee. Wagering may
only be conducted with chips, wagering debit cards or coins. Wagers may only be
made by persons 21 years of age and older. A licensee shall not accept a credit
card to purchase coins, tokens or other forms of credit to be wagered on
gambling games.
The legislation imposes a graduated tax based on adjusted gross receipts at
a rate of 5% on the first $1 million, 10% on the next $2 million and 20% on any
amount over $3 million. The tax is to be paid by the
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licensee within 10 days after the close of business of the day when the wagers
were made. The legislation also permits the Iowa Commission to impose an
admission fee for each person embarking on an excursion vessel, and the city or
county in which gaming is conducted is permitted to impose an admission fee of
not greater than 50 CENTS.
Pursuant to its rulemaking authority, the Iowa Commission requires officers,
directors and certain key employees of the Company to be licensed by the Iowa
Commission. In addition, anyone having a material relationship or involvement
with the Company may be required to be found suitable or to be licensed, in
which case those persons would be required to pay the costs and fees of the Iowa
Commission. The Iowa Commission has jurisdiction to disapprove a change in
position by such officers or key employees and the power to require the Company
to suspend or dismiss officers, directors or other key employees or sever
relationships with other persons who refuse to file appropriate applications or
whom the Iowa Commission finds suitable to act in such capacities. Any contract
in excess of $50,000 must be submitted to and approved by the Iowa Commission.
The Iowa Commission may also require any individual who has a material
relationship with the Company to be investigated and licensed or found suitable.
Any person who acquires 5% or more of the Company's equity securities must be
approved by the Iowa Commission prior to such acquisition. The applicant
stockholder is required to pay all costs of such investigation.
LOUISIANA
In July 1991, the Louisiana legislature adopted legislation permitting
certain types of gaming activity on certain rivers and waterways in Louisiana.
The legislation granted authority to supervise riverboat gaming activities to
the Louisiana Riverboat Gaming Commission and the Riverboat Gaming Enforcement
Division of the Louisiana State Police (the "Louisiana Enforcement Division").
The Louisiana Riverboat Gaming Commission was authorized to hear and determine
all appeals relative to the granting, suspension, revocation, condition or
renewal of all licenses, permits and applications. In addition, the Louisiana
Riverboat Gaming Commission was to establish rules providing for and
determining, among other things, authorized routes, duration of excursions and
the stops a riverboat may make, minimum levels of insurance, construction of
riverboats, periodic inspections and procedures for negotiable instrument
transactions involving patrons. The Louisiana Enforcement Division was
authorized, among other things, to investigate applicants and issue licenses,
investigate violations of the statute, conduct continuing reviews of gaming
activities and exercise other broad oversight powers.
In an April 1996 special session of the Louisiana legislature, Louisiana
lawmakers passed a measure which established the Louisiana Gaming Control Board
and provides that such board shall be the successor to all prior authorities,
and the sole and exclusive authority, with regard to the regulation and
supervision of gaming operations and activities in Louisiana except for the
regulation of horse racing and offtrack betting and the conducting of charitable
gaming operations. Effective May 1, 1996, the powers, duties, functions, and
responsibilities of the Louisiana Riverboat Gaming Commission and the Louisiana
Enforcement Division, including those with respect to riverboat gaming, are
transferred to the Louisiana Gaming Control Board.
The statute authorized issuance of up to 15 licenses to conduct gaming
activities on a riverboat of new construction in accordance with applicable law.
However, no more than six licenses may be granted to riverboats operating from
any one parish. An initial license to conduct riverboat gaming operations is
valid for a term of five years. The Louisiana gaming law provides that a renewal
application for the period succeeding the initial five year term of the
operator's license must be made to the Louisiana Gaming Control Board. The
application for renewal shall be accompanied with payment of a fee and shall
include a statement under oath of any and all changes in information, including
financial information, provided in the previous application.
The Louisiana gaming law specifies certain restrictions relating to the
operation of riverboat gaming, including the following: (i) gaming is not
permitted while a riverboat is docked, other than the forty-five minutes between
excursions, and during times when dangerous weather or water conditions exist;
(ii) each
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round-trip riverboat cruise may not be less than three nor more than eight hours
in duration, subject to specific exceptions; (iii) agents of the Louisiana
Gaming Control Board are permitted on board at any time during gaming
operations; (iv) gaming devices, equipment and supplies may only be purchased or
leased from permitted suppliers; (v) gaming may only take place in the
designated gaming area while the riverboat is conducting an authorized excursion
upon a designated river or waterway; (vi) gaming equipment may not be possessed,
maintained or exhibited by any person on a riverboat except in the specifically
designated gaming area, or a secure area used for inspection, repair or storage
of such equipment; (vii) wagers may be received only from a person present on a
licensed riverboat; (viii) persons under 21 are not permitted in designated
gaming areas; (ix) except for slot machine play, wagers may be made only with
tokens, chips or electronic cards purchased from the licensee; (x) the riverboat
may only board and discharge passengers at the riverboat's licensed berth; (xi)
licensees must have adequate protection and indemnity insurance; (xii) licensees
must have all necessary Federal and state licenses, certificates and other
regulatory approvals prior to operating a riverboat; and (xiii) gaming may only
be conducted in accordance with the terms of the license and the rules and
regulations adopted by the Louisiana Gaming Control Board.
Certain persons affiliated with a riverboat gaming licensee, including
directors and officers of the licensee, directors and officers of any holding
company of the licensee involved in gaming operations, persons holding five
percent or greater interests in the licensee, and persons exercising influence
over a licensee ("Affiliated Gaming Persons"), are subject to the application
and suitability requirements of the Louisiana gaming law.
The transfer of a license or permit or an interest in a license or permit is
prohibited. The sale, purchase, assignment, transfer, pledge or other
hypothecation, lease, disposition or acquisition (a "Transfer") by any person of
securities which represents 5% or more of the total outstanding shares issued by
a corporation that holds a license is subject to Louisiana Gaming Control Board
disapproval. A security issued by a corporation that holds a license must
disclose these restrictions. Prior Louisiana Gaming Control Board approval is
required for the Transfer of any ownership interest of 5% or more in any
licensee or for the Transfer of any "economic interest" of 5% or more in any
licensee or Affiliated Gaming Person. No such prior approval is required for the
transfer of any ownership interest of 5% or more in any corporate licensee. An
"economic interest" is defined for purposes of a Transfer as any interest
whereby a person receives or is entitled to receive, by agreement or otherwise,
a profit, gain, thing of value, loss, credit, security interest, ownership
interest or other benefit.
A licensee must notify the Louisiana Gaming Control Board in writing within
five (5) days of the completion of the following transactions:
1. Withdrawal of capital in excess of five percent (5%) of the licensee's
net gaming proceeds for the preceding twelve month period;
2. The granting of a loan or any other extension of credit in excess of five
percent (5%) of the licensee's net gaming proceeds for the preceding
twelve month period;
3. Any advance or other distribtuion of any type of asset in excess of five
percent (5%) of the licensee's net gaming proceeds for the preceding
twelve month period;
No prior approval of any such withdrawal, loan, advance or distribution is
required, but such transaction is ineffective if subsequently disapproved by the
Louisiana Gaming Control Board. In addition, the Louisiana Gaming Control Board
may issue an emergency order for not more than 10 days prohibiting payment of
profits, income or accruals by, or investments in, a licensee.
Riverboat gaming licensees and their Affiliated Gaming Persons are required
to notify the Louisiana Gaming Control Board within 30 days after any such
person applies for, receives or accepts a loan, or makes use of any cash,
property, credit, loan or line of credit, or guarantees, or grants other form of
security for a loan (a "Loan") unless such transaction involves publicly
registered debt and securities (in which event such person shall file the
registration statement and other materials with the Louisiana Gaming Control
Board), unless more stringent conditions are imposed by the Louisiana Gaming
Control Board, or the amount of the Loan is below certain specified thresholds.
The Louisiana Gaming Control Board is required to investigate
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the reported Loan, and to either approve or disapprove the transaction. If
disapproved, the Loan must be rescinded by the Licensee or Affiliated Gaming
Person. The Company has obtained the approval of the Louisiana Enforcement
Division in connection with the Offering. The Louisiana Enforcement Division,
however, has reserved the right to review all Louisiana security documents.
Fees for conducting gaming activities on a riverboat include (i) $50,000 per
riverboat for the first year of operation and $100,000 per year per riverboat
thereafter; (ii) a state franchise fee of 15% of net gaming proceeds; (iii) a
state license fee of 3.5% of net gaming proceeds; and (iv) a local fee of up to
$2.50 per passenger.
On April 19, 1996, the Louisiana legislature approved legislation mandating
local option elections to determine whether to prohibit or continue to permit
three individual types of gaming in Louisiana on a parish-by-parish basis. The
referendum will be brought before the Louisiana voters at the time of the 1996
presidential election and will determine whether each of the following types of
gaming will be prohibited or permitted in the following described Louisiana
parishes: (i) the operation of video draw poker devices in each parish; (ii) the
conduct of riverboat gaming in each parish that is contiguous to a statutorily
designated river or waterway or (iii) the conduct of land-based casino gaming
operations in Orleans Parish. If a majority of the voters in a parish elect to
prohibit one or more of the above-described gaming activities in such parish,
then no license or permit shall be issued to conduct such prohibited gaming
activity in such parish and no such gaming activity may be permitted in that
parish. If, however, riverboat gaming was previously permitted in such parish,
the legislation permits the current gaming operator to continue riverboat gaming
in that parish until the expiration of its gaming license. However, the current
legislation does not provide for any moratorium that must expire before future
local elections on gaming could be mandated or allowed.
Further, in parishes where riverboat gaming is currently authorized and
voters elect to prohibit riverboat gaming, the legislation provides that the
gaming license shall not be reissued or transferred to any parish other than a
parish in which a riverboat upon which gaming is conducted is berthed. In
addition, the Louisiana legislature approved a joint resolution to submit to
Louisiana voters at the time of the 1996 presidential election for their
approval a proposed constitutional amendment which, among other things, would
require the voters in a parish where riverboat gaming exists to approve
additional riverboat gaming in that parish.
MISSOURI
Gaming was originally authorized in the State of Missouri on November 3,
1992, although no governmental action was taken to enforce or implement the
original law. On April 29, 1993, Missouri enacted the Missouri Gaming Law which
replaced the original law and established the Missouri Gaming Commission, which
is responsible for the licensing and regulation of riverboat gaming in Missouri.
The number of licenses which may be granted is not limited by statute or
regulation. The Missouri Gaming Law grants specific powers and duties to the
Missouri Gaming Commission to supervise riverboat gaming and implement the
Missouri Gaming Law and take any other action as may be reasonable or
appropriate to enforce the Missouri Gaming Law. The Missouri Gaming Commission
has discretion to approve permanently moored ("dockside") riverboat casinos if
it finds that the best interest of Missouri and the safety of the public
indicate the need for continuous docking of an excursion gambling boat.
Under the Missouri Gaming Law, the ownership and operation of riverboat
gaming facilities in Missouri are subject to extensive state and local
regulation. If a company is granted a gaming license in Missouri, such company,
any subsidiaries it may form and its officers, directors, significant
shareholders and employees will be subject to regulations. The initial license
and first subsequent license renewal of an excursion gambling boat operator
shall be for a period of one year. Thereafter, license renewal periods shall be
two years. However, the Missouri Gaming Commission may reopen license hearings
at any time. In addition to the owners license and operators license for the
riverboat, every individual participating in gaming operations in any capacity
is required to have an occupational license from the Missouri Gaming Commission.
Applicants and licensees are responsible to keep the application and any
requested materials current at all times, and this responsibility shall continue
throughout any period of licensure granted by the Missouri Gaming Commission. In
addition, Missouri has extensive licensing disclosure requirements.
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The Missouri Gaming Commission may revoke or suspend gaming licenses and
impose other penalties for violation of the Missouri Gaming Law and the rules
and regulations which may be promulgated thereunder. Penalties include, but are
not limited to, forfeiture of all gaming equipment used in the conduct of
unauthorized gambling games and fines of up to three times a licensee's highest
daily gross receipts derived from wagering on the gambling games, whether
authorized or unauthorized, conducted during the preceding twelve months. In
addition, the Missouri Gaming Commission requires 60 days notice of, and may
disapprove or require delay pending further investigation of, transactions in
excess of the greater of $500,000 or 30% of licensee's net worth, up to
$1,000,000, which transactions involve or relate to the gaming licensee.
The Missouri Gaming Law imposes operational requirements on riverboat
operators, including a charge of two dollars per gaming customer per excursion
that licensees must pay to the Missouri Gaming Commission, a minimum payout
requirement of 80% for slot machines, a 20% tax on adjusted gross receipts,
prohibitions against providing credit to gaming customers (except for the use of
credit cards and cashing checks) and a requirement that each licensee reimburse
the Missouri Gaming Commission for all costs of any Missouri Gaming Commission
staff necessary to protect the public on the licensee's riverboat. Licensees
must also submit to the Commission on a quarterly basis an audit of compliance
and of the financial transactions and condition of the licensee's total
operations for the calendar quarter and pay the associated auditing fees. The
Missouri Gaming Law provides for a loss limit of $500 per person per excursion.
Although the Missouri Gaming Law provides no limit on the amount of riverboat
space that may be used for gaming, the Missouri Gaming Commission is empowered
to impose such space limitations through the adoption of rules and regulations.
Additionally, United States Coast Guard safety regulations could affect the
amount of riverboat space that may be devoted to gaming. The Missouri Gaming Law
also includes requirements as to the form of riverboats, which must resemble
Missouri's riverboat history to the extent practicable and include certain
non-gaming amenities.
The licensee may receive wagers only from a person present on a licensed
excursion gambling boat. Wagering shall not be conducted with money or other
negotiable currency. A person under 21 years of age shall not make a wager on an
excursion gambling boat and shall not be allowed in the area of the excursion
boat where gambling is being conducted.
With respect to the availability of dockside gaming, which may be more
profitable than cruise gaming, the Missouri Gaming Commission is empowered to
determine on a site by site basis where such gaming is in the best interest of
Missouri and the safety of the public and shall be permitted.
Pursuant to its rulemaking authority, the Missouri Gaming Commission has
adopted certain regulations which provide, among other things, that: (i)
riverboat excursions are limited to a duration of four hours, and gaming may be
conducted at any time during the excursion; (ii) no gaming licensee or
occupational licensee may pledge, hypothecate or transfer in any way any
license, or any interest in a license, issued by the Missouri Gaming Commission;
(iii) without first notifying the Missouri Gaming Commission at least 60 days
prior to such consummation of any of the following transactions (and during such
period the Missouri Gaming Commission may disapprove the transaction or require
the transaction to be delayed pending further investigation) (a) a gaming
licensee or a holding company affiliated with a gaming licensee may not make a
public issuance of debt, (b) a publicly held gaming licensee or a publicly held
holding company may not make any issuance of an ownership interest equaling 5%
or greater of the gaming licensee or holding company or (c) a person or entity
may not pledge or hypothecate an ownership interest in a gaming licensee that is
not a publicly held company or a holding company that is not a publicly held
company provided that no such ownership interest may be transferred voluntarily
or involuntarily pursuant to any pledge without separate notice to the Missouri
Gaming Commission as required by the regulations; (iv) not later than 7 days
after the consummation of any transfer of ownership interest in a publicly held
gaming licensee, if such transfer would result in an entity or group of entities
acting in concert owning, directly or indirectly, a total amount of ownership
interest equaling 5% or greater of the ownership interest in the gaming
licensee, the transferee must report such consummation to the Missouri Gaming
Commission; (v) no withdrawals of capital, loans, advances or distribution of
any type of assets in excess of 5% of accumulated earnings of a licensee to
anyone
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with an ownership interest in the licensee may occur without prior Missouri
Gaming Commission approval; and (vi) the Missouri Gaming Commission may take
action against a licensee or other person who has been disciplined in another
jurisdiction for gaming related activity.
The Missouri Gaming Commission is authorized to enter the premises of
excursion gambling boats, facilities, or other places of business of a licensee
in Missouri to determine compliance with the Missouri Gaming Law and to
investigate alleged violations of the Missouri Gaming Law or Missouri Gaming
Commission rules, orders or final decisions. A holder of any license shall be
subject to imposition of penalties, suspension or revocation of such license, or
other action for any act or failure to act by himself or his agents or employees
that is injurious to the public health, safety, morals, good order and general
welfare of the people of the state of Missouri, or that would discredit the
Missouri gaming industry or the state of Missouri. The Missouri Gaming
Commission may waive any licensing requirement or procedure for any type of
license if it determines that the waiver is in the best interests of the public.
In addition, a supplier's license is required of persons who sell or lease
gambling equipment, gambling supplies or both to any licensee. A licensee
licensed to conduct gambling games shall acquire all gambling games or
implements of gambling from a licensed supplier.
LEGISLATIVE AND REGULATORY CONSIDERATIONS IN CERTAIN ADJACENT JURISDICTIONS
KANSAS. Casino gaming is currently illegal in Kansas as a constitutionally
prohibited form of lottery. In order to amend the Kansas constitution,
two-thirds of the members of each house of the Kansas legislature and a majority
of Kansas voters would have to approve a proposed amendment. Resolutions seeking
to amend the Kansas constitution to authorize limited forms of gaming have been
proposed. Kansas Governor Graves has stated that he is in favor of the
legalization of slot machines at racing locations. He has expressed his desire
to put a proposed amendment before the voters by November 1996. The Kansas
senate recently voted to allow specified racetracks, including the Woodlands
Racetrack in Kansas City, to install instant bingo dispensers that resemble slot
machines. The legislation must still be approved by the Kansas house of
representatives and signed by the governor.
The State of Kansas has approved Class III Indian compacts with four
separate tribes authorizing the tribes to conduct table and keno games, but not
slot machines, on their respective reservation lands. The reservations on which
these tribes propose to offer gaming in Kansas are located from approximately
120 to 150 miles from downtown Kansas City.
KENTUCKY. Casino gaming is illegal in Kentucky as a constitutionally
prohibited form of lottery. In order to amend the Kentucky constitution,
three-fifths of the members of each house of the Kentucky legislature and a
majority of Kentucky voters would have to approve a proposed amendment. Several
Kentucky racetracks have publicly lobbied for the right to conduct casino games.
OHIO. Casino gaming is illegal in Ohio as a constitutionally prohibited
form of lottery. In order to amend the Ohio constitution, three-fifths of the
members of each house of the Ohio legislature and a majority of Ohio voters
would have to approve the proposed amendment. There have been efforts to amend
the Ohio constitution to allow for casino gaming, but these efforts have been
rejected. As recently as 1994, a proposed amendment was introduced to amend the
constitution to allow as many as four casino vessels but it remained in
committee until the end of the legislative session. In 1990, Ohio voters
defeated a proposed constitutional amendment to allow a pilot casino gaming
project.
The Ohio legislature operates on two-year sessions. The current legislative
session runs through December 1996. Because the Ohio legislature is currently in
session, a proposed amendment could be introduced and put before the voters.
There have been reports of voter petition drives to place a casino gaming
referendum on the November 1996 ballot. Ohio Governor Voinovich has publicly
opposed the legalization of casino gaming in Ohio.
FEDERAL AND NON-GAMING REGULATIONS
The Company and its subsidiaries are subject to certain federal, state and
local safety and health laws, regulations and ordinances that apply to
businesses generally, such as the Clean Air Act, Clean Water Act,
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Occupational Safety and Health Act, Resource Conservation Recovery Act and
Comprehensive Environmental Response, Compensation and Liability Act. The
Company has not made, and does not anticipate making, material expenditures with
respect to such environmental laws and regulations. However, the coverage and
attendant compliance costs associated with such laws, regulations and ordinances
may result in additional costs to the Company. For example, in 1990 the U.S.
Congress enacted the Oil Pollution Act to consolidate and reconcile mechanisms
under various oil spill response laws. The Department of Transportation has
proposed regulations requiring owners and operators of certain vessels to
establish through the U.S. Coast Guard evidence of financial responsibility in
the amount of $5.5 million for clean-up of oil pollution. This requirement would
be satisfied by either proof of adequate insurance (including self-insurance) or
the posting of a surety bond or guaranty.
All vessels operated by the Company must comply with U.S. Coast Guard
requirements as to safety and must hold a Certificate of Seaworthiness. These
requirements set limits on the operation of the vessels and require individual
licensing of all personnel involved with the operation of the vessel. Loss of
the Certificate of Seaworthiness of a vessel would preclude its use as a
riverboat. Every five years, vessels must be drydocked for an inspection of the
outside of the hull resulting in a loss of service for a period of time. The
Belle of Sioux City riverboat was removed from service on April 13, 1996 for
such a hull inspection. The riverboat arrived at an approved dry docking
facility on April 16, 1996, passed its inspection and returned to service on May
9, 1996. No interruption in gaming operations occurred in Sioux City as a result
of the hull inspection process, as the Company temporarily transferred gaming
operations to the original Alton Belle prior to removing the Belle of Sioux City
from service.
All shipboard employees of the Company employed on U.S. Coast Guard
regulated vessels, including those who have nothing to do with the actual
operation of the vessel, such as dealers, waiters and security personnel, may be
subject to the Jones Act which, among other things, exempts these employees from
state limits on workers' compensation awards.
The Company is subject to the provisions of the Americans With Disabilities
Act but does not anticipate incurring significant expenses to bring its
facilities or procedures into compliance with such Act.
The Bank Secrecy Act (the "BSA"), enacted by Congress in 1985, requires
banks, other financial institutions and casinos to monitor receipts and
disbursements of currency in excess of $10,000 and report them to the United
States Department of the Treasury (the "Treasury"). In management's opinion, the
BSA may have resulted in a reduction in the volume of play by high level
wagerers. The Treasury has proposed tentative amendments to the BSA which would
apply solely to casinos and their reporting of currency transactions. The most
significant proposed change in the BSA is a reduction in the threshold at which
customer identification data must be obtained and documented by the casino, from
$10,000 to $3,000 (which may include the aggregation of smaller denomination
transactions). Additionally, the amendments would substantially increase the
record-keeping requirements imposed upon casinos relating to customer data,
currency and non-currency transactions. Management believes the proposed
amendments, if enacted in their current form, could result in a further
reduction in the volume of play by upper- and middle-level wagerers while adding
operating costs associated with the more extensive record-keeping requirements.
However, the effect of the Company's operations is not expected to be material.
The proposed riverboat casino sites in Lawrenceburg, Indiana and Riverside,
Missouri are located in potential wetlands or other protected areas. Although
the Company does not believe that the existence of wetlands or other protected
areas will prohibit or have a significant adverse impact on the Company's
ability to develop any of its current sites, there can be no assurance that such
a claim or other claims relating to such matters may not arise in the future,
which may have a material adverse effect on the costs of opening a casino at
such sites or result in a material delay in opening a gaming facility at such
sites.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the Company's directors
and executive officers and the positions they hold with the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- ---------------------------------------------------------
<S> <C> <C>
J. Thomas Long (a) 45 Chief Executive Officer, General Counsel and Vice
Chairman of the Board of Directors
H. Steven Norton 62 President and Chief Operating Officer
Joseph G. Uram 38 Executive Vice President, Treasurer and Chief Financial
Officer
William F. Cellini (a) 61 Chairman of the Board of Directors
George L. Bristol (c) 55 Director
Jimmy F. Gallagher (c) 67 Director
William McEnery (a) 53 Director
F. Lance Callis (b) 60 Director
John B. Pratt, Sr. (b) 73 Director
Edward F. Brennan (b) 55 Director
Walter I. Rogers 63 Vice President -- Casino Development
Patsy S. Hubbard 51 Secretary
</TABLE>
- ------------
(a) Messrs. Long, Cellini and McEnery comprise a class of directors whose term
expires in 1999.
(b) Messrs. Callis, Pratt and Brennan comprise a class of directors whose term
expires in 1998.
(c) Messrs. Bristol and Gallagher comprise a class of directors whose term
expires in 1997.
J. THOMAS LONG has been employed by the Company since March 1991 and is
currently Chief Executive Officer, General Counsel and Vice Chairman of the
Board of Directors of the Company. Prior to the hiring of Mr. Uram in January
1993, Mr. Long also served as Chief Financial Officer of the Company. Mr. Long
was an active partner in the law firm of Farrell & Long, P.C., Godfrey, Illinois
from 1985 to 1991. Mr. Long remains of counsel to The Farrell Law Firm, the
successor firm of Farrell & Long. From 1980 to 1984, Mr. Long served as
Assistant States Attorney in Madison County, Illinois.
H. STEVEN NORTON has been President and Chief Operating Officer of the
Company since January 1993. From April 1991 to December 1992, Mr. Norton was
President and Chief Executive Officer of Gold River Gambling Hall and Resort in
Laughlin, Nevada. From August 1990 to April 1991, Mr. Norton was President and
Chief Operating Officer of the Sands Hotel and Casino, Las Vegas, Nevada and
from August 1967 to August 1990, Mr. Norton was employed by Resorts
International, Inc., a hotel and casino concern based in Atlantic City, New
Jersey in numerous positions including Executive Vice President.
JOSEPH G. URAM has been Executive Vice President, Treasurer and Chief
Financial Officer of the Company since January 1993. From September 1989 to
January 1993, Mr. Uram was Vice President and Chief Financial Officer of
Creative Data Services, Inc., a national manufacturing concern headquartered in
St. Louis, Missouri. Mr. Uram is a certified public accountant and, from 1979 to
August 1989, he was employed by Arthur Andersen & Co. in St. Louis where he
served as an audit manager.
GEORGE L. BRISTOL has been President of GLB, Inc., a consulting firm, since
1977. He has been a member of the Board of Directors of the Company since
January 1995 and is a member of its Audit Committee.
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WILLIAM F. CELLINI has been Chairman of the Company's Board of Directors
since February 1993. Mr. Cellini has served as Chief Executive Officer of New
Frontier Group, a real estate development, management and construction concern
with offices in Chicago and Springfield, Illinois, since 1977. Mr. Cellini is a
member of the Nominating Committee of the Board of Directors.
JIMMY F. GALLAGHER has been a director of the Company since February 1993
and is currently a member of its Compensation Committee and Audit Committee. Mr.
Gallagher retired from the gaming industry in March 1991. From March 1990 to
March 1991, he was Supervisor of Casino Games for the Park Hotel and Casino in
Las Vegas, Nevada.
WILLIAM MCENERY has served as the president of Gas City, Ltd., an operator
of gasoline stations and convenience stores in Illinois and Florida
headquartered in Frankfort, Illinois, since 1965. Since 1982, Mr. McEnery has
served as the president of A.D. Connor, Inc., a petroleum products hauling
concern located in Frankfort, Illinois. Since 1975, Mr. McEnery has served as
president of Bell Valley Farms, Inc., an owner and operator of harness racing
training facilities located in Lockport, Illinois. Since 1992, Mr. McEnery has
been a Director and investor in the Empress Riverboat Casino Corporation, the
owner and operator of riverboat casino operations in Joliet, Illinois and the
holder of a certificate of suitability for a riverboat casino operation in
Hammond, Indiana. Mr. McEnery has been a member of the Company's Board of
Directors since February 1993 and is a member of its Audit Committee and
Nominating Committee.
F. LANCE CALLIS has been a partner with the law firm of Callis, Papa, Hale,
Jensen, Jackstadt, Bailey & Halloran P.C. (formerly Pratt & Callis, P.C.), with
offices in St Louis, Missouri and Granite City, Illinois, since 1986. Mr. Callis
has been a member of the Board of Directors of the Company since February 1993
and is a member of its Compensation and Nominating Committees.
JOHN B. PRATT, SR. has practiced law in White Hall, Illinois as a sole
practitioner since 1986. He has been a member of the Board of Directors of the
Company since February 1993 and is a member of its Compensation and Audit
Committees.
EDWARD F. BRENNAN has been a principal in the law firm of Brennan, Cates &
Constance in Belleville, Illinois since 1987. He has been a member of the Board
of Directors of the Company since January 1995.
WALTER I. ROGERS has been Vice President of Casino Development for the
Company since March 1993. From 1973 to 1977, Mr. Rogers was Vice President of
Casino Operations of Resorts International for its facilities in the Bahamas.
From 1977 to 1988, Mr. Rogers served as Resorts International's Corporate Vice
President of Casino Operations and Development and later represented Resorts
International in Europe, North and Central Africa, and Central and South
America. Mr. Rogers was retired between 1988 and 1993.
PATSY S. HUBBARD has been employed by the Company since September 1991 and
currently serves as Secretary of the Company. From 1978 through 1991, Ms.
Hubbard was an Enrolled Agent/Paralegal at the law firm of Farrell & Long, P.C.,
Godfrey, Illinois. Prior to the initial public offering, Ms. Hubbard also served
as Assistant Corporate Secretary to one of the corporate partners of the
predecessor entity of the Company.
Each director of the Company is currently required to be licensed to serve
as a director of the Company by the applicable gaming regulatory authorities in
Illinois, Missouri, Louisiana, Iowa and Indiana and may be subject to similar
requirements in other jurisdictions in which the Company may conduct business.
The nominees have met these requirements in the required jurisdictions. However,
should any director be found no longer suitable by any regulatory authority
having jurisdiction over the Company, that individual shall become ineligible to
serve on the Board of Directors and a majority of the remaining directors may
appoint a qualified replacement to serve as director for the remaining term of
the disqualified director.
William McEnery, a director and shareholder of the Company, owns Gas City,
Ltd. which since June 1, 1995 has been the exclusive operator of the service
stations on the Indiana East-West Toll Road. Since December 1995, Gas City, Ltd.
has responded to certain document subpoenas for, and produced certain employees
to testify before, a grand jury convened in the United States District Court,
Northern District of
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Indiana. The document subpoenas have related to Gas City, Ltd.'s relationship
with the Indiana Toll Road Authority. None of Gas City, Ltd., Mr. McEnery or any
employees of Gas City, Ltd. have been advised that they are targets of the grand
jury investigation. The Company believes that the grand jury investigation is
unrelated to the gaming industry and is focused on actions by, and dealings
with, the Indiana Toll Road Authority. The Company has been advised by Gas City,
Ltd. that it understands that other suppliers to the Indiana East-West Toll Road
have also received document subpoenas.
The Company has been advised that on May 14, 1996, a document subpoena was
issued by the Assistant U.S. Attorney for the United States District Court,
Northern District of Indiana to the Company in connection with the
abovementioned grand jury. The document subpoena issued to the Company seeks
certain documents relating to (i) contributions, gifts or donations to political
persons or entities, (ii) requests to the Company for contributions, gifts or
donations by political persons or entities and (iii) communications with
employees of the Indiana Toll Road Authority. Mr. McEnery and other companies in
which Mr. McEnery has investments also received similar document subpoenas. The
Company has never made any contribution, gift or donation to any political
person or entity on behalf of Mr. McEnery, Gas City, Ltd. or any entity
controlled by him, nor has the Company had any dealings or communications with
any employees of the Indiana Toll Road Authority.
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DESCRIPTION OF EXCHANGE NOTES
Set forth below is a summary of certain provisions of the Exchange Notes and
the Old Notes (collectively referred to as, the "Notes"). The Exchange Notes
will be, and the Old Notes were, issued pursuant to an indenture (the
"Indenture") dated as of June 5, 1996, by and among Argosy Gaming Company (the
"Company"), Alton Gaming Company, The Missouri Gaming Company, The St. Louis
Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., Argosy of
Louisiana, Inc., Catfish Queen Partnership in Commendam and The Indiana Gaming
Company (the "Guarantors") and First National Bank of Commerce, as trustee (the
"Trustee"). The following summary does not purport to be complete and is subject
to, and is qualified in its entirety by, reference to all of the provisions of
the Notes, the Indenture and the Collateral Documents (as defined below). The
terms of the Exchange Notes are the same in all respects (including principal
amount, interest rate, maturity, security and ranking) as the terms of the Old
Notes for which they may be exchanged pursuant to the Exchange Offer, except
that the Exchange Notes (i) are freely transferable by holders thereof (except
as provided below) and (ii) are not entitled to certain registration rights and
certain liquidated damages which are applicable to the Old Notes under the
Registration Rights Agreement. The Exchange Notes will be issued under the
Indenture governing the Old Notes.
The terms of the Indenture are also governed by certain provisions contained
in the Trust Indenture Act of 1939, as amended. Capitalized terms used herein
and not otherwise defined shall have the meanings assigned to them in the
Indenture. Wherever particular provisions of the Indenture are referred to in
this summary, such provisions are incorporated by reference as a part of the
statements made and such statements are qualified in their entirety by such
reference.
GENERAL
The Notes are senior secured obligations of the Company, limited in
aggregate principal amount to $235 million. The Notes rank pari passu in right
of payment with all present and future Indebtedness of the Company and senior to
all future subordinated indebtedness of the Company and the existing Convertible
Notes. The Notes are secured by certain property and assets as described below
(sometimes referred to herein as the "Collateral"). References herein to the
"Collateral Documents" include all documents to be entered into to create or
perfect the security interests in the Collateral. The Exchange Notes will be
issued only in fully registered form, without coupons, in denominations of
$1,000 and integral multiples thereof.
The Exchange Notes will mature on June 1, 2004. The Exchange Notes will bear
interest from June 5, 1996. Holders of Old Notes whose Old Notes are accepted
for exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Old Notes accrued from June 5, 1996 to the date of
the issuance of the Exchange Notes. The Exchange Notes will bear interest at the
rate of 13 1/4% per annum, payable semi-annually on June 1 and December 1 of
each year, commencing December 1, 1996, to the persons in whose names such
Exchange Notes are registered at the close of business on the May 15 or November
15 immediately preceding such Interest Payment Date. Interest will be calculated
on the basis of a 360-day year consisting of twelve 30-day months.
Principal of, premium, if any, and interest on the Exchange Notes will be
payable, and the Exchange Notes may be presented for registration of transfer or
exchange, at the office or agency of the Company maintained for such purpose,
which office or agency shall be maintained in the Borough of Manhattan, The City
of New York. At the option of the Company, payment of interest may be made by
check mailed to the Noteholders at the addresses set forth upon the registry
books of the Company; PROVIDED, that all payments with respect to Global Notes,
and Certificated Securities the holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof. No
service charge will be made for any registration of transfer or exchange of the
Exchange Notes, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. Until
otherwise designated by the Company, the Company's office or agency will be the
correspondent office of the Trustee presently located at Chemical Banking Corp.,
4 New York Plaza, New York, New York.
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SECURITY FOR THE NOTES
Except as provided below under the caption "Limitation on Liens Securing
Indebtedness" and to the extent permitted by applicable law, the Notes are
secured by a Lien, evidenced by pledge agreements, real estate mortgages, ship
mortgages and security agreements executed by the Company and each of the
Guarantors, as applicable, in favor of the Trustee for the benefit of the
Noteholders creating, subject to certain prior liens and other limitations and
exceptions, a first priority security interest in substantially all of the
present assets of the Company and each of the current Guarantors (collectively,
the "Collateral"). The Collateral includes (i) substantially all the assets
owned by the Company and the Guarantors and used in the Company's Alton,
Riverside, Baton Rouge and Sioux City properties, excluding their gaming
licenses, (ii) a pledge of all the capital stock of and partnership interests in
the Company's operating subsidiaries (including Indiana Gaming L.P.) owned by
the Company and the Guarantors, except for the Company's partnership interest in
the Belle of Sioux City, L.P., which operates the Sioux City property, (iii) a
pledge of intercompany notes, if any, payable to the Company or the Guarantors
from their subsidiaries, and (iv) an assignment of the proceeds payable pursuant
to the management agreement between The Indiana Gaming Company and Indiana
Gaming L.P. with respect to the Lawrenceburg Casino. The Collateral does not
include assets of the Lawrenceburg Casino and assets owned by the Belle of Sioux
City, L.P; however, the Collateral includes the riverboat owned by the Company
and leased to Belle of Sioux City, L.P. The Collateral does not include the
assets of any future projects of the Company and any Subsidiaries formed or
acquired after the date hereof and their related assets, unless acquired with
the proceeds of the sale of Collateral or out of any distributions made by
Indiana Gaming L.P. to the Company or any of its Subsidiaries (excluding
managements fees, interest income and preferred dividends) up to the amount of
the Lawrenceburg Investment to the extent not used to purchase Notes pursuant to
the covenant "Repurchase of Notes in Connection With Sale of Lawrenceburg
Interest or Repayment of Indebtedness." The Collateral does not include two
parcels of property at the Riverside and Baton Rouge properties, which will be
released from the Collateral and contributed to Unrestricted Subsidiaries of the
Company subsequent to the execution of the Indenture. Such parcels may only be
used to construct hotels, parking garages, restaurants or other businesses
directly related to the hotel business at such properties. The Company and the
Guarantors will be required to deliver to the Trustee, at their expense, one or
more insurance policies from insurance companies of favorable national
reputation having capital and surplus greater than $100,000,000, providing for
title insurance for certain fee or leasehold interests naming the Trustee as
insured on behalf of the Noteholders.
No assurance can be provided by the Company or the Guarantors as to the
priority of any security interest created by the Collateral Documents, and there
may exist significant limitations on the ability of the Noteholders to exercise
certain remedies with respect to certain of the Collateral, including the right
to foreclose on, or take possession of, certain Collateral. See "Risk Factors --
Foreclosure Restrictions" and "-- Certain Bankruptcy Considerations."
RELEASE OF COLLATERAL
Collateral may be released in certain circumstances, including: (a) in the
event the Company or a Guarantor incurs FF&E Indebtedness or working capital
Indebtedness with respect to any Material Casino in accordance with the
provisions of clauses (v) or (vi), respectively, of the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock," then such
fixtures and equipment, or accounts receivable and inventory, respectively,
securing such Indebtedness no longer need constitute Collateral, (b) in
accordance with release and substitution provisions set forth in the Indenture
and the release of obsolete property, in accordance with the terms of the
Indenture, (c) in connection with the sale of assets and subsidiary stock in
accordance with the provisions of the covenant "Limitation on Sale of Assets and
Subsidiary Stock," provided the proceeds thereof are used to purchase Notes in
accordance with an Asset Sale Offer or to purchase substitute Collateral in
accordance with such covenant, and (d) in connection with the contribution of
the Specified Parcels to joint ventures formed to develop and operate hotels at
the Company's Riverside and Baton Rouge properties.
As described below in "Limitations on Liens Securing Indebtedness," the
Company and its Subsidiaries may have or permit Liens ranking junior to or pari
passu with the Liens created by the Collateral Documents, provided that the
Indebtedness secured is Indebtedness permitted by clause (ii) of the covenant
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described below under "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock." The Company and its Subsidiaries may have or permit
Liens on property that is not Collateral, provided that the Indebtedness secured
is permitted by clause (iii) of such covenant.
GUARANTEES
The Notes are guaranteed irrevocably and unconditionally as to principal,
premium, if any, and interest jointly and severally by the Guarantors and any
future Subsidiaries of the Company. The term "Subsidiaries" is defined to
exclude Unrestricted Subsidiaries. Accordingly, Indiana Gaming L.P., the
subsidiary of the Company that will operate the Lawrenceburg Casino, will not be
a Guarantor of the Notes.
The Indenture contains provisions the intent of which is to provide that the
obligations of each Guarantor will be limited to the maximum amount that will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from, rights to receive
contribution from, or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, result in the
obligations of such Guarantor under its Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under any applicable federal, state or foreign
law. Each Guarantor that makes a payment or distribution under a Guarantee shall
be entitled to contribution from each other Guarantor so long as the exercise of
such right does not impair the rights of the Noteholders under the Guarantees or
any of the Collateral Documents. See "Risk Factors -- Fraudulent Transfer
Considerations."
The Indenture provides that in the event of (i) a sale or other disposition
of all or substantially all of the assets of any Guarantor or the sale of a
Guarantor, by way of merger, consolidation or otherwise, (ii) a Subsidiary
becoming an Unrestricted Subsidiary pursuant to terms of the Indenture or (iii)
or a sale or other disposition of all of the Capital Stock of any Guarantor,
then such Guarantor or the corporation acquiring the property, as applicable,
shall be released and relieved of any obligations under its guarantee, provided
that the Company complies with the provisions of the covenant "Limitation on
Sales of Assets and Subsidiary Stock."
The Indenture provides that the Company shall cause each Subsidiary
hereafter formed or acquired or any Unrestricted Subsidiary designated a
Subsidiary to (i) execute and deliver to the Trustee a supplemental indenture in
form reasonably satisfactory to the Trustee pursuant to which such Subsidiary
shall unconditionally guarantee all of the Company's obligations under the Notes
on the terms set forth in the Indenture and (ii) deliver to the Trustee an
opinion of counsel that, subject to customary assumptions and exclusions, such
supplemental indenture and Collateral Documents, if any, have been duly executed
and delivered by such Subsidiary.
OPTIONAL REDEMPTION
Except as set forth below, the Company does not have the right to redeem any
Notes prior to June 1, 2000. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after June 1, 2000, upon not
less than 30 days nor more than 60 days notice to each Noteholder, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the 12-month period commencing June 1 of the years indicated
below, in each case (subject to the right of Noteholders of record on a Record
Date to receive interest due on an Interest Payment Date that is on or prior to
such Redemption Date) together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------- -----------
<S> <C>
2000......................................................... 106.625%
2001......................................................... 104.417%
2002......................................................... 102.208%
2003 and thereafter.......................................... 100.000%
</TABLE>
If a Noteholder or a beneficial owner of a Note is required by any
regulatory body responsible for a gaming license (a "Gaming Authority") to be
found suitable, the Noteholder shall apply for a finding of suitability within
30 days after a Gaming Authority request or sooner if so required by such Gaming
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Authority. The applicant for a finding of suitability must pay all costs of the
investigation for such finding of suitability. If a Noteholder or beneficial
owner is required to be found suitable and is not found suitable by a Gaming
Authority, the Noteholder shall, to the extent required by applicable law,
dispose of his Notes within 30 days or within that time prescribed by a Gaming
Authority, whichever is earlier. If the Noteholder fails to dispose of its Notes
within such time period, the Company may, at its option, redeem the Noteholder's
Notes at, depending on applicable law, (i) the principal amount thereof,
together with accrued and unpaid interest [and Liquidated Damages, if any,] to
the date of the finding of unsuitability by a Gaming Authority, (ii) the amount
that such Noteholder paid for the Notes, (iii) the fair market value of the
Notes, (iv) the lowest of clauses (i), (ii) and (iii), or (v) such other amount
as may be determined by the appropriate Gaming Authority.
The Notes will not have the benefit of any sinking fund.
Except as required by a Gaming Authority with respect to a redemption
described in the second preceding paragraph, notice of any redemption will be
sent, by first class mail, at least 30 days and not more than 60 days prior to
the date fixed for redemption to each Noteholder to be redeemed to such
Noteholder's last address as then shown upon the registry books of the
Registrar. Any notice which relates to a Note to be redeemed in part only must
state the portion of the principal amount equal to the unredeemed portion
thereof and must state that on and after the date of redemption, upon surrender
of such Note, a new Note or Notes in a principal amount equal to the unredeemed
portion thereof will be issued. On and after the date of redemption, interest
and Liquidated Damages, if any, will cease to accrue on the Notes or portions
thereof called for redemption.
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a PRO RATA basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
CERTAIN COVENANTS RELATING TO THE LAWRENCEBURG CASINO
LIMITATION ON ACTIVITIES OF THE INDIANA GAMING COMPANY
The Indenture prohibits The Indiana Gaming Company from conducting any
business whatsoever other than (i) investing in and serving as general partner
of Indiana Gaming L.P., including executing agreements on behalf of Indiana
Gaming L.P., (ii) if removed as general partner of Indiana Gaming L.P. pursuant
to the terms of such partnership's partnership agreement, serving as a limited
partner thereof and (iii) complying with its obligations under the Indenture and
the Notes and acting as a Guarantor of the Notes. The Indenture also prohibits
the transfer of any of The Indiana Gaming Company's interest in Indiana Gaming
L.P. to the Company or any of its Subsidiaries, unless such Subsidiary is a
direct wholly owned Subsidiary of the Company and is bound by this provision and
all other provisions of the Indenture and the Notes specifically relating to The
Indiana Gaming Company.
LIMITATION ON CERTAIN ACTIVITIES OF INDIANA GAMING L.P.
The Indenture provides that as long as The Indiana Gaming Company is the
general partner of Indiana Gaming L.P., the Company will not permit Indiana
Gaming L.P. to incur any Indebtedness other than Indebtedness under the terms of
which (a) no recourse shall be had against any other person (other than The
Indiana Gaming Company solely in its capacity as general partner of Indiana
Gaming L.P.) for the payment of the principal of or interest or premium on such
Indebtedness or for any claim based on such Indebtedness, and (b) no
restrictions of the type prohibited by "Limitation on Dividends and Other
Payment Restrictions Affecting Subsidiaries" shall be permitted. The Indenture
provides that as long as The Indiana Gaming Company is the general partner of
Indiana Gaming L.P., the Company will not permit Indiana Gaming L.P. to amend
the provision of its partnership agreement dealing with distributions in a
manner which is adverse to the Noteholders or the provision with respect to
partnership purpose, which is limited to the operation of the Lawrenceburg
Casino.
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REPURCHASE OF NOTES ON CERTAIN PROJECT DELAYS
The Indenture provides that in the event of a Project Delay each Noteholder
will have the right, at such Noteholder's option, pursuant to an irrevocable and
unconditional offer by the Company (the "Project Delay Offer"), to require the
Company to repurchase all or any part of such Noteholder's Notes (PROVIDED, that
the principal amount of such Notes must be $1,000 or an integral multiple
thereof) on a date (the "Project Delay Purchase Date") that is no later than 40
Business Days after the date on which a Project Delay occurs, at a cash price
equal to 101% of the principal amount thereof, together with accrued interest
and Liquidated Damages, if any, to the Project Delay Purchase Date, PROVIDED,
HOWEVER, that in no event shall the Company be required to purchase more than an
aggregate principal amount of Notes equal to the amount remaining in the
disbursement account on the date of the Project Delay (the "Project Delay Offer
Amount") in connection with such Project Delay Offer. The Project Delay Offer
shall remain open for at least 20 Business Days following its commencement (the
"Project Delay Offer Period"). Upon expiration of the Project Delay Offer
Period, the Company shall purchase all Notes properly tendered in response to
the Project Delay Offer (on a PRO RATA basis if the Project Delay Offer Amount
is insufficient to purchase all Notes so tendered). In no event shall the
Company be required to make more than one offer to purchase pursuant to this
provision, assuming all Notes tendered into such offer are purchased by the
Company in accordance with the terms thereof.
To the extent applicable and if required by law, the Company will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and any
other tender offer rules under the Exchange Act and any other securities laws,
rules and regulations which may then be applicable to any offer by the Company
to purchase the Notes at the option of the Noteholders upon such failure to
open.
REPURCHASE OF NOTES IN CONNECTION WITH SALE OF LAWRENCEBURG INTEREST OR
REPAYMENT OF LAWRENCEBURG INVESTMENT
The Indenture provides that the Company and its Subsidiaries will not, and
will not permit any of their Subsidiaries to, in one or a series of related
transactions, sell or otherwise transfer any of the Company's interest in
Indiana Gaming L.P., whether directly by a sale of such interest or indirectly
by the sale, issuance or transfer of Capital Stock of any Subsidiary of the
Company directly or indirectly owning such interest (a "Lawrenceburg Sale"),
unless (1) within 40 Business Days of the date of such Lawrenceburg Sale, the
Net Cash Proceeds therefrom, less the pro rata portion of such amount
distributed to any lender holding Indebtedness secured by the Collateral on a
PARI PASSU basis, are applied to the repurchase of the Notes pursuant to an
irrevocable, unconditional cash offer to repurchase Notes at a purchase price of
101% of the principal amount, plus accrued interest and Liquidated Damages, if
any, to the date of payment, made within 15 Business Days following any such
Lawrenceburg Sale, (2) at least 85% of the consideration received for such
Lawrenceburg Sale or series of related Lawrenceburg Sales consists of cash, (3)
no Default or Event of Default shall have occurred and be continuing at the time
of, or would occur after giving effect on a PRO FORMA basis to, such
Lawrenceburg Sale, (4) the Board of Directors of the Company determines in good
faith that the Company or such Subsidiary receives fair market value for such
Lawrenceburg Sale and (5) the Board of Directors of the Company receives a
favorable written opinion as to the fairness of the transaction to the Company
from a financial point of view issued by an investment banking firm of
nationally recognized standing. The Indenture provides that the offer remain
open for at least 20 Business Days after its commencement. Upon expiration of
the offer, the Company shall apply the Net Cash Proceeds plus an amount equal to
accrued interest and Liquidated Damages, if any, to the purchase of all Notes
properly tendered (on a PRO RATA basis if the Net Cash Proceeds are insufficient
to purchase all the Notes so tendered). Pending application of Net Cash
Proceeds, such proceeds shall be maintained by the Trustee in the collateral
account in Permitted Investments. After the purchase of all Notes properly
tendered, all remaining Net Cash Proceeds shall be available for general
corporate purposes, provided, that as reinvested, the assets acquired shall
become Collateral.
The Company shall cause distributions from Indiana Gaming L.P. to The
Indiana Gaming Company to be promptly distributed to the Company. At least once
in every twelve-month period commencing on the anniversary of the date of
original issuance of the Notes (and not later than 40 Business Days after any
Property Sale, as described below), the Company shall apply 50% of any
distributions from Indiana Gaming
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L.P. (excluding management fees, interest income, preferred dividends or
provision for taxes) up to the total amount of the Lawrenceburg Investment, less
the pro rata portion of such amount distributed to any lender holding
Indebtedness secured by the Collateral on a PARI PASSU basis, to the optional
redemption of Notes in accordance with the terms of the Indenture or to the
repurchase of the Notes pursuant to an irrevocable, unconditional cash offer to
purchase Notes at a purchase price of 101% of the principal amount, plus accrued
interest and Liquidated Damages, if any, to the date of payment. In no event
shall the Company be required to make offers in an aggregate amount in excess of
the Lawrenceburg Investment. In the event of a Property Sale, as defined below,
100% of the Company's pro rata share of the Net Cash Proceeds shall be applied
in the next such offer. The Indenture provides that, except in the case of a
Property Sale, such offer may be deferred until a following twelve month period
in which such accumulated distributions exceed $10 million and that each offer
shall remain open for at least 20 Business Days following its commencement. Upon
expiration of the offer, the Company shall apply such distributions to the
purchase of all Notes properly tendered (on a PRO RATA basis if the
distributions are insufficient to purchase all the Notes so tendered). After the
purchase of all Notes properly tendered, all remaining amounts of such
distributions shall be available for general corporate purposes, provided, that
as reinvested, the assets acquired shall become Collateral.
As long as The Indiana Gaming Company serves as general partner of Indiana
Gaming L.P., Indiana Gaming L.P. will not engage in a sale of all or
substantially all its assets, by way of merger, consolidation or otherwise (a
"Property Sale") unless (i) at least 85% of the consideration received consists
of cash, (ii) the Board of Directors of the Company determines in good faith
that Indiana Gaming L.P. receives fair market value therefor, (iii) the Board of
Directors of the Company receives a favorable written opinion as to the fairness
of the transaction to Indiana Gaming L.P. from a financial point of view issued
by an investment bank of nationally recognized standing, and (iv) the Company's
pro rata share of the Net Cash Proceeds, less the pro rata portion of such
amount distributed to any lender holding Indebtedness secured by Collateral on a
PARI PASSU basis, are distributed to the Company and held by the Trustee in the
collateral account in Permitted Investments pending application in accordance
with the preceding paragraph.
To the extent applicable and if required by law, the Company will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and any
other tender offer rules under the Exchange Act and any other securities laws,
rules and regulations which may then be applicable to any offer to purchase
Notes at the option of the Noteholders.
CERTAIN COVENANTS
REPURCHASE OF NOTES AT THE OPTION OF THE NOTEHOLDER UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control has
occurred, each Noteholder will have the right, at such Noteholder's option,
pursuant to an irrevocable and unconditional offer by the Company (the "Change
of Control Offer"), to require the Company to repurchase all or any part of such
Noteholder's Notes (PROVIDED, that the principal amount of such Notes must be
$1,000 or an integral multiple thereof) on a date (the "Change of Control
Purchase Date") that is no later than 45 Business Days after the occurrence of
such Change of Control, at a cash price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof, together with accrued interest
and Liquidated Damages, if any, to the Change of Control Purchase Date. The
Change of Control Offer shall be made within 20 Business Days following a Change
of Control and shall remain open for at least 20 Business Days following its
commencement (the "Change of Control Offer Period"). Upon expiration of the
Change of Control Offer Period, the Company shall purchase all Notes properly
tendered in response to the Change of Control Offer.
As used herein, a "Change of Control" means (i) any merger or consolidation
of the Company with or into any person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
assets of the Company, on a consolidated basis, in one transaction or a series
of related transactions, if, immediately after giving effect to such
transaction, any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other
than Excluded Persons, is or becomes the "beneficial owner," directly or
indirectly, of more than 50% of the total voting power in the aggregate normally
entitled to vote in the election of directors, managers, or trustees, as
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applicable, of the transferee or surviving entity, (ii) any "person" or "group"
(as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act, whether or not applicable), other than Excluded Persons, is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the total voting
power in the aggregate of all classes of Capital Stock of the Company then
outstanding normally entitled to vote in elections of directors, or (iii) during
any period of 12 consecutive months after the Issue Date, individuals who at the
beginning of any such 12-month period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest and Liquidated Damages, if any) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted together with an Officers' Certificate
listing the Notes or portions thereof being purchased by the Company. The Paying
Agent will promptly mail to the Noteholders so accepted payment in an amount
equal to the Change of Control Purchase Price (together with accrued and unpaid
interest and Liquidated Damages, if any), and the Trustee will promptly
authenticate and mail or deliver to such Noteholders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered. Any Notes
not so accepted will be promptly mailed or delivered by the Company to the
Noteholder thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Purchase Date.
The phrase "all or substantially all of the assets" of the Company will
likely be interpreted under applicable state law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of the Company has occurred. In addition, no assurances can
be given that the Company will be able to acquire Notes tendered upon the
occurrence of a Change of Control.
For purposes of this definition, (i) the terms "person" and "group" shall
have the meaning used for purposes of Rules 13d-3 and 13d-5 of the Exchange Act
as in effect on the Issue Date, whether or not applicable; and (ii) the term
"beneficial owner" shall have the meaning used in Rules 13d-3 and 13d-5 under
the Exchange Act as in effect on the Issue Date, whether or not applicable,
except that a "person" shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time or upon the occurrence
of certain events.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management.
To the extent applicable and if required by law, the Company will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and any
other tender offer rules under the Exchange Act and any other securities laws,
rules and regulations which may then be applicable to any offer by the Company
to purchase the Notes at the option of the Noteholders upon a Change of Control.
LIMITATION ON USE OF PROCEEDS
The proceeds (net of the Initial Purchasers' discounts and commissions and
other transaction expenses) received by the Company from the sale of the Old
Notes were used as follows: (i) $91.4 million to pay in full all outstanding
indebtedness under the Former Bank Credit Facility, (ii) $94.3 million to make
capital contributions and capital loans to Indiana Gaming L.P. for the
development of the Lawrenceburg Casino and (iii) all remaining amounts for
general corporate purposes. The portion of the proceeds to be used for funding
the construction costs of the Lawrenceburg Casino project are being held in a
disbursement account. Pursuant to the terms of the disbursement agreement
governing the disbursement account, there are certain
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conditions and limitations affecting the ability of the Company to draw upon
such funds. See "Description of Exchange Notes -- Cash Collateral and
Disbursement Agreement." Any funds remaining in the disbursement account will be
released to the Company upon final completion of the Lawrenceburg Casino project
for general corporate purposes, PROVIDED that, as reinvested, the assets
acquired shall become Collateral. A portion of the funds may also be released
from the disbursement account if third-party financing for the hotel development
is obtained and funded, PROVIDED that, as reinvested, the assets acquired with
such released funds become Collateral.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL
STOCK
The Indenture provides that, except as set forth below in this covenant, the
Company and its Subsidiaries will not, and will not permit any of their
Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become
directly or indirectly liable with respect to (including as a result of an
Acquisition), or otherwise become responsible for, contingently or otherwise
(individually and collectively, to "incur" or, as appropriate, an "incurrence"),
any Indebtedness or any Disqualified Capital Stock (including Acquired
Indebtedness). Notwithstanding the foregoing:
(i)
if (a) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a PRO
FORMA basis to, such incurrence of Indebtedness or Disqualified Capital
Stock and (b) on the date of such incurrence (the "Incurrence Date"), the
Consolidated Coverage Ratio of the Company for the Reference Period
immediately preceding the Incurrence Date, after giving effect on a PRO
FORMA basis to such incurrence of such Indebtedness or Disqualified
Capital Stock and, to the extent set forth in the definition of
Consolidated Coverage Ratio, the use of proceeds thereof, would be at
least 2.0 to 1.0, then the Company or any Guarantor may incur unsecured
Subordinated Indebtedness;
(ii)
if (a) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro
forma basis to, such incurrence of Indebtedness and (b) on the Incurrence
Date, the Consolidated Coverage Ratio of the Company for the Reference
Period immediately preceding the Incurrence Date, after giving effect on
a pro forma basis to such incurrence of such Indebtedness and, to the
extent set forth in the definition of Consolidated Coverage Ratio, the
use of proceeds thereof, would be at least 2.5 to 1.0 (or, in the event
the sole use of proceeds of such Indebtedness is to purchase any or all
of the partnership interests in Indiana Gaming L.P. not owned by the
Company and its Subsidiaries, 2.25 to 1.0), then the Company or any
Guarantor may incur Indebtedness secured by the Collateral, PROVIDED that
such Indebtedness (x) is PARI PASSU in right of payment with the Notes or
the guarantee of the Notes, as applicable, (y) has an Average Life to
Stated Maturity greater than or equal to the Average Life to Stated
Maturity of the Notes and (z) has a final scheduled maturity later than
or equal to the Stated Maturity, and provided further that (t) such
Indebtedness is incurred to develop or acquire a Material Casino or make
a Casino Improvement, (u) not more than 80% of the cost of such
acquisition, development or improvement is funded by such Indebtedness,
(v) such Material Casino or Casino Improvements and all its assets become
Collateral for the Notes, and (w) such Indebtedness is subject to an
intercreditor agreement with the Trustee in the form attached to the
Indenture;
(iii)
if (a) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro
forma basis to, such incurrence of Indebtedness and (b) on the Incurrence
Date, the Consolidated Coverage Ratio of the Company for the Reference
Period immediately preceding the Incurrence Date, after giving effect on
a pro forma basis to such incurrence of such Indebtedness and, to the
extent set forth in the definition of Consolidated Coverage Ratio, the
use of proceeds thereof, would be at least 2.5 to 1.0, then the Company
or any Guarantor may incur Indebtedness secured by property that is not
Collateral, PROVIDED that such Indebtedness (y) has an Average Life to
Stated Maturity greater than the Average Life to Stated Maturity of the
Notes and (z) has a final scheduled maturity later than the Stated
Maturity;
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(iv)
the Company may incur Indebtedness evidenced by the Notes and represented
by the Indenture up to the amounts specified therein as of the date
thereof;
(v)
the Company and the Guarantors may incur FF&E Indebtedness, PROVIDED that
the amount of such Indebtedness in the aggregate outstanding at any time
pursuant to this paragraph (v) (including any Indebtedness, whether or
not Refinancing Indebtedness, issued to refinance, replace or refund such
Indebtedness) shall not exceed $5 million multiplied by the number of
Material Casinos then operated by the Company or Guarantors;
(vi)
the Company and the Guarantors may incur Indebtedness for working capital
purposes, PROVIDED that the amount of such Indebtedness in the aggregate
outstanding at any time pursuant to this paragraph (vi) (including any
Indebtedness, whether or not Refinancing Indebtedness, issued to
refinance, replace or refund such Indebtedness) may not exceed $4 million
multiplied by the number of Material Casinos then operated by the Company
or Guarantors;
(vii)
the Company and the Guarantors, as applicable, may incur Refinancing
Indebtedness with respect to any Indebtedness or Disqualified Capital
Stock, as applicable, described in clauses (i), (ii), (iii), (v) and (vi)
of this covenant or Indebtedness which is outstanding on the Issue Date
so long as, in the case of secured Indebtedness used to refinance,
refund, or replace secured Indebtedness, such Refinancing Indebtedness is
secured only by the assets that secured the Indebtedness so refinanced;
and
(viii)
the Company and the Guarantors may incur Permitted Indebtedness.
LIMITATION ON RESTRICTED PAYMENTS
The Indenture provides that the Company and the Subsidiaries will not, and
will not permit any of their Subsidiaries to, directly or indirectly, make any
Restricted Payment if, after giving effect to such Restricted Payment on a PRO
FORMA basis, (l) a Default or an Event of Default shall have occurred and be
continuing, (2) the Company is not permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Indebtedness incurrence ratio in
paragraph (i) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," or (3) the aggregate amount of all
Restricted Payments made by the Company and its Subsidiaries, including after
giving effect to such proposed Restricted Payment, from and after the Issue
Date, would exceed the sum, without duplication, of (a) 50% of the aggregate
Consolidated Net Income of the Company and its Consolidated Subsidiaries for the
period (taken as one accounting period), commencing on the first day of the
first full fiscal quarter commencing after the Issue Date, to and including the
last day of the fiscal quarter ended immediately prior to the date of each such
calculation (or, in the event Consolidated Net Income for such period is a
deficit, then minus 100% of such deficit), plus (b) 50% of all cash
distributions (excluding management fees, interest income, preferred dividends
or provision for taxes received from Indiana Gaming L.P.) made by The Indiana
Gaming Company to the Company or another Guarantor after the Lawrenceburg
Investment Return and after opening of the permanent Lawrenceburg Casino, plus
(c) the aggregate Net Cash Proceeds received by the Company from the sale of its
Qualified Capital Stock (other than (i) to a Subsidiary of the Company and (ii)
to the extent applied in connection with a Qualified Exchange) after the Issue
Date.
The immediately preceding paragraph, however, will not prohibit (s)
Investments not to exceed $10 million in the aggregate made on or after the
Issue Date, (t) Investments in Qualified Gaming Ventures, PROVIDED that, after
giving PRO FORMA effect to such Investment, the aggregate amount of all such
Investments made on or after the Issue Date (after giving effect to 50% of any
cash, including management fees, returned without restriction from such
Investments to the Company or the wholly owned Subsidiary that made such prior
Investment on or prior to the date of any such calculation) at any time does not
exceed $15 million, (u) Investments in Indiana Gaming L.P. to fund construction
and preopening costs until the permanent Lawrenceburg Casino is completed,
PROVIDED that, after giving PRO FORMA effect to such Investment, the aggregate
amount of all such Investments made on or after the Issue Date does not exceed
$135 million, (v) a Qualified Exchange, (w) Investments received by the Company
or its Subsidiaries as consideration for Asset Sales to the extent not otherwise
prohibited by the Indenture, (x) Investments by the Company or any of its
Subsidiaries in Interest Swap and Hedging Obligations provided that such
Interest Swap and Hedging
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Obligations are related to payment obligations on Indebtedness otherwise
permitted under the Indenture, (y) the contribution of a Specified Parcel to an
Unrestricted Subsidiary or any other person for the development and operation of
a hotel on such Specified Parcel, or (z) the payment of any dividend on
Qualified Capital Stock within 60 days after the date of its declaration if such
dividend could have been made on the date of such declaration in compliance with
the foregoing provisions. The full amount of any Restricted Payments made
pursuant to the foregoing clause (z) of the immediately preceding sentence,
however, will be deducted in the calculation of the aggregate amount of
Restricted Payments available to be made referred to in clause (3) of the
immediately preceding paragraph.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES
The Indenture provides that the Company and the Subsidiaries will not, and
will not permit any of their Subsidiaries or Indiana Gaming L.P. or its
subsidiaries (as long as The Indiana Gaming Company is the general partner of
Indiana Gaming L.P.) to, directly or indirectly, create, assume or suffer to
exist any consensual restriction on the ability of any Subsidiary of the Company
to pay dividends or make other distributions to or on behalf of, or to pay any
obligation to or on behalf of, or otherwise to transfer assets or property to or
on behalf of, or make or pay loans or advances to or on behalf of, the Company
or any Subsidiary of the Company, except (a) restrictions imposed by the Notes
or the Indenture, (b) restrictions imposed by applicable law, (c) existing
restrictions under specified Indebtedness outstanding on the Issue Date, (d)
restrictions under any Acquired Indebtedness not incurred in violation of the
Indenture or any agreement relating to any property, asset, or business acquired
by the Company or any of its Subsidiaries, which restrictions in each case
existed at the time of acquisition, were not put in place in connection with or
in anticipation of such acquisition and are not applicable to any person, other
than the person acquired, or to any property, asset or business, other than the
property, assets and business so acquired and such acquisition was not made, in
whole or in part, with any Collateral or from the proceeds of the sale of any
Collateral or out of distributions made by Indiana Gaming L.P. not in the nature
of management fees, interest income or preferred dividends up to the amount of
the Lawrenceburg Investment, (e) restrictions with respect solely to a
Subsidiary of the Company imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary, provided such restrictions apply
solely to the Capital Stock or assets of such Subsidiary which are being sold,
(f) restrictions on transfer contained in FF&E Indebtedness incurred pursuant to
paragraph (v) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," provided such restrictions relate
only to the transfer of the property acquired with the proceeds of such FF&E
Indebtedness, and (g) in connection with and pursuant to any Permitted
Refinancing, replacements of restrictions imposed pursuant to clauses (c) and
(d) of this paragraph that are not more restrictive than those being replaced
and do not apply to any other person or assets than those that would have been
covered by the restrictions in the Indebtedness so refinanced. Notwithstanding
the foregoing, neither (a) customary provisions restricting subletting or
assignment of any lease entered into in the ordinary course of business,
consistent with industry practice, (b) Liens permitted under the terms of the
Indenture on assets securing FF&E Indebtedness incurred in accordance with the
covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock," nor (c) provisions ordering distributions of cash flow from
Indiana Gaming L.P. shall in and of themselves be considered a restriction on
the ability of the applicable Subsidiary to transfer such agreement or assets,
as the case may be.
LIMITATION ON LIENS SECURING INDEBTEDNESS
The Company and its Subsidiaries will not, and will not permit any of their
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind
upon any of their respective assets now owned or acquired on or after the date
of the Indenture or upon any income or profits therefrom other than (a)
Permitted Liens; (b) Liens incurred under the Indenture to secure the Notes; (c)
Liens incurred in support of any FF&E Indebtedness permitted by clause (v) of
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock," which Liens may be exclusive; (d) Liens incurred in
connection with Indebtedness for working capital purposes permitted by clause
(vi) of the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock" on accounts receivable and inventory of the property
to which such Indebtedness relates, which Liens may be exclusive; (e) Liens
incurred in
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connection with Indebtedness permitted by clause (ii) of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock," which Liens may be junior or PARI PASSU to the Lien securing the Notes;
and (f) Liens incurred in connection with Indebtedness permitted by clause (iii)
of the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock," which Liens may be exclusive.
LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
The Indenture provides that the Company and the Subsidiaries will not, and
will not permit any of their Subsidiaries to, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of its property, business or assets, including by merger or
consolidation (in the case of a Subsidiary of the Company), and including any
sale or other transfer or issuance of any Capital Stock of any Subsidiary of the
Company (except any Subsidiary directly or indirectly owning an interest in
Indiana Gaming L.P., which transaction is governed by the covenant "Repurchase
of Notes in Connection with Sale of Lawrenceburg Interest or Repayment of
Lawrenceburg Investment") whether by the Company or a Subsidiary or through the
issuance, sale or transfer of Capital Stock by a Subsidiary of the Company (an
"Asset Sale"), unless (l)(a) within 210 days after the date of such Asset Sale,
the Net Cash Proceeds therefrom, less the pro rata portion of such amount
distributed to any lender holding indebtedness secured by the Collateral on a
PARI PASSU basis (the "Asset Sale Offer Amount") are applied to the repurchase
of the Notes pursuant to an irrevocable, unconditional cash offer (the "Asset
Sale Offer") to repurchase Notes at a purchase price (the "Asset Sale Offer
Price") of 100% of principal amount, plus accrued interest and Liquidated
Damages, if any, to the date of payment, made within 180 days of such Asset Sale
or (b) within 180 days following such Asset Sale, the Asset Sale Offer Amount is
invested in assets and property (other than notes, bonds, obligation and
securities, except with respect to an Acquisition of an entity whose business
consists solely of Related Businesses) which in the good faith reasonable
judgment of the Board will immediately constitute or be a part of a Related
Business of the Company or such Subsidiary immediately following such
transaction and which shall become Collateral if acquired with Collateral or the
proceeds of Collateral, (2) at least 85% of the consideration received (as
defined below) for such Asset Sale or series of related Asset Sales consists of
cash or cash equivalents, PROVIDED that (x) the amount of any liabilities (as
shown on the Company's or such Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Subsidiary (other than liabilities that are
by their terms subordinated to the Notes or any Guarantee thereof) that are
assumed by the transferee of any such assets and (y) the amount of any notes or
other obligations received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary into
cash or as to which the Company or such Subsidiary has received at or prior to
the consummation of the Asset Sale a commitment from a nationally recognized
investment, merchant or commercial bank to convert into cash within 90 days of
the consummation of such Asset Sale unless not actually converted into cash
within such 90-day period (to the extent of the cash received or receivable
pursuant to any such commitment) will be deemed cash or cash equivalents for
purposes of this provision, (3) no Default or Event of Default shall have
occurred and be continuing at the time of, or would occur after giving effect on
a PRO FORMA basis to, such Asset Sale, and (4) the Board of Directors of the
Company determines in good faith that the Company or such Subsidiary, as
applicable, receives fair market value for such Asset Sale. Pending the
application of Net Cash Proceeds resulting from an Asset Sale, such proceeds
shall be maintained by the Trustee in a collateral account and invested in
Permitted Investments. The Indenture provides that an Asset Sale Offer may be
deferred until the accumulated Net Cash Proceeds from Asset Sales not applied to
the uses set forth in (l)(b) above exceeds $5 million and that each Asset Sale
Offer shall remain open for at least 20 Business Days following its
commencement. Upon expiration of the offer, the Company shall apply the Asset
Sale Offer Amount plus an amount equal to accrued interest and Liquidated
Damages, if any, to the purchase of all Notes properly tendered (on a PRO RATA
basis if the Asset Sale Offer Amount is less than the principal amount of all
Notes so tendered) at the Asset Sale Offer Price (together with accrued interest
and Liquidated Damages, if any). After the purchase of all Notes properly
tendered, any remaining Net Cash Proceeds shall be available for general
corporate purposes, PROVIDED that, as reinvested, the assets acquired with
Collateral or the proceeds of Collateral shall become Collateral.
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Notwithstanding the foregoing provisions of the prior paragraph:
(i)
the Company and its Subsidiaries may, in the ordinary course of
business, convey, sell, transfer, assign or otherwise dispose of
inventory acquired and held for resale in the ordinary course of business;
(ii)
the Company and its Subsidiaries may convey, sell, transfer, assign
or otherwise dispose of assets pursuant to and in accordance with the
limitation on mergers, sales or consolidations provisions in the Indenture;
(iii)
the Company and its Subsidiaries may sell or dispose of damaged, worn
out or other obsolete property in the ordinary course of business so
long as such property is no longer necessary for the proper conduct of the
business of the Company or such Subsidiary, as applicable;
(iv)
the Company and its Subsidiaries may convey, sell, transfer, assign
or otherwise dispose of assets to the Company or any of its wholly
owned Subsidiaries;
(v)
the Company and its Subsidiaries may convey, sell, transfer, assign
or otherwise dispose of assets with an aggregate fair market value of
$5 million in any fiscal year; and
(vi)
the Company may make a like kind exchange for the Company's Alton
barge, provided that the Board of Directors of the Company determines
in good faith that the Company receives fair market value for such exchange
and the Company receives an appraisal valuing the property received as
having a value at least as great as the value of the Alton barge.
To the extent applicable and if required by law, the Company will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and any
other tender offer rules under the Exchange Act and any other securities laws,
rules and regulations which may then be applicable to any offer by the Company
to purchase the Notes at the option of the Noteholders upon an Asset Sale Offer.
All Net Cash Proceeds from an Event of Loss shall be invested or used to
repurchase Notes, all within the period and as otherwise provided above in
clause (1) of the first paragraph of this covenant.
Notwithstanding the foregoing, the Company will not, and will not permit any
Subsidiary to, directly or indirectly make any Asset Sale of any of the Capital
Stock of a Subsidiary except (i) pursuant to an Asset Sale of all the Capital
Stock of such Subsidiary or (ii) pursuant to an Asset Sale of shares of common
stock with no preferences or special rights or privileges and with no redemption
or prepayment provisions, provided that after such sale the Company or its
Subsidiaries own at least 50.1% of the voting and economic interests of the
Capital Stock of such Subsidiary.
The Indenture provides that promptly on the sale of any real or personal
property owned by Iowa Development Corp., the net proceeds will be promptly
distributed to the Company and, as reinvested, the assets acquired shall become
Collateral. Iowa Development Corp. shall not conduct any business other than the
sale of its assets.
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REPURCHASE ON LOSS OF MATERIAL CASINO
The Indenture provides that, in the event of the loss of the legal right to
operate a Material Casino, which Material Casino represented more than 10% of
the Consolidated EBITDA of the Company for and as of the end of the Reference
Period immediately preceding such loss, and such loss continues for more than 90
days (a "License Loss"), the Company shall, within 40 Business Days of such
ninetieth day, apply an amount equal to four times the contribution of such
Material Casino to such Consolidated EBITDA during the Reference Period to the
repurchase of a like principal amount of the Notes in accordance with an
irrevocable, unconditional cash offer to purchase Notes at a purchase price of
101% of the principal amount, plus accrued interest and Liquidated Damages, if
any, to the date of payment. The Indenture provides that each offer shall remain
open for at least 20 Business Days following its commencement. The Company need
not make such offer if, giving effect to the License Loss on a PRO FORMA basis,
the Company's Consolidated Coverage Ratio would be at least 2.25 to 1. Upon
expiration of the offer, the Company shall apply such amount to the purchase of
all Notes properly tendered (on a PRO RATA basis if the amount is less than the
principal amount the Notes so tendered).
To the extent applicable and if required by law, the Company will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and any
other tender offer rules under the Exchange Act and any other securities laws,
rules and regulations which may then be applicable to any offer to purchase
Notes at the option of the Noteholders.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company and its Subsidiaries will not, and
will not permit any of their Subsidiaries to, enter into any contract,
agreement, arrangement, understanding or transaction with an Affiliate (an
"Affiliate Transaction"), or series of related Affiliate Transactions, involving
consideration to either party in excess of $1 million, except for transactions
approved by a majority of the disinterested (as to such transaction) directors
of the Company and evidenced by an Officers' Certificate addressed and delivered
to the Trustee stating that such Affiliate Transaction has been so approved and
is made in good faith and that the terms of such Affiliate Transaction are no
less favorable than could have been obtained in an arm's length transaction with
a non-Affiliate and are otherwise fair and reasonable to the Company; PROVIDED
that with respect to any Affiliate Transaction (including any series of related
transactions) involving consideration to either party in excess of $10 million
(except as otherwise permitted by "Limitation on Restricted Payments") the
Company also must, prior to the consummation thereof, obtain a written favorable
opinion as to the fairness of such transaction to the Company from a financial
point of view from an independent investment banking firm of national
reputation. Transactions solely between or amongst the Company and any wholly
owned Subsidiary of the Company and Belle of Sioux City L.P. or between or
amongst wholly owned Subsidiaries of the Company and Belle of Sioux City L.P.
shall not be deemed to be Affiliate Transactions.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that neither the Company nor any Guarantor (to the
extent not permitted by the sale provisions under the heading "Guarantees"
above) will directly or indirectly consolidate with or merge with or into
another person or sell, lease, convey or transfer all or substantially all of
its assets (computed on a consolidated basis), whether in a single transaction
or a series of related transactions, to another Person or group of affiliated
Persons, unless (i) either (a) in the case of a merger or consolidation, the
Company or such Guarantor, as the case may be, is the continuing entity or (b)
the resulting, surviving or transferee entity is a corporation organized under
the laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the
Company or such Guarantor, as applicable, in connection with the Notes and the
Indenture; (ii) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a PRO FORMA basis to such transaction; (iii)
immediately after giving effect to such transaction on a PRO FORMA basis, the
Consolidated Net Worth of the consolidated surviving or transferee entity is at
least equal to the Consolidated Net Worth of the Company or such Guarantor, as
applicable, immediately prior to such transaction; (iv) other than in the case
of a transaction solely between the Company and a wholly owned Guarantor or
solely between wholly owned Guarantors, immediately after giving effect to such
transaction on a PRO FORMA basis, the consolidated
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resulting, surviving or transferee entity would immediately thereafter be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
ratio set forth in paragraph (i) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock;" and (v) such
transaction will not result in the loss of a material gaming license.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company or a Guarantor in accordance with the foregoing,
the successor corporation formed by such consolidation or into which the Company
or such Guarantor, as the case may be, is merged or to which such transfer is
made, shall succeed to, and be substituted for, and may exercise every right and
power of, the Company or such Guarantor, as the case may be, under the Indenture
with the same effect as if such successor corporation had been named therein as
the Company or such Guarantor, as the case may be, and, except in the case of a
lease, the Company or such Guarantor, as the case may be, shall be released from
the obligations under the Notes and the Indenture except with respect to any
obligations that arise from, or are related to, such transaction.
LIMITATION ON LINES OF BUSINESS
The Indenture provides that neither the Company nor any of its Subsidiaries
or Unrestricted Subsidiaries shall directly or indirectly engage to any
substantial extent in any line or lines of business activity other than that
which, in the reasonable good faith judgment of the Board of Directors of the
Company, is a Related Business, including, in the case of an Acquisition,
immediately upon such Acquisition.
LIMITATION ON STATUS AS INVESTMENT COMPANY
The Indenture prohibits the Company and its Subsidiaries from being required
to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended) or from otherwise becoming subject
to regulation under the Investment Company Act.
REPORTS
The Indenture provides that whether or not the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall deliver to the Trustee and, to each Noteholder within 15 days after it is
or would have been required to file such with the Commission, annual and
quarterly financial statements substantially equivalent to financial statements
that would have been included in reports filed with the Commission, if the
Company were subject to the requirements of Section 13 or 15(d) of the Exchange
Act, including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the Commission, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required. The Company shall simultaneously with such delivery
deliver to the Trustee annual and quarterly condensed financial statements for
Indiana Gaming L.P.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest or Liquidated Damages on the Notes as and
when the same becomes due and payable and the continuance of any such failure
for 30 days, (ii) the failure by the Company to pay all or any part of the
principal, or premium, if any, on the Notes when and as the same becomes due and
payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, redemptions or purchase offers in connection with a Property
Sale, Asset Sale, Change of Control, Lawrenceburg Sale, License Loss, failure to
open the Lawrenceburg Casino or Annual Obligation or otherwise, (iii) the
failure by the Company or any Subsidiary to observe or perform any other
covenant or agreement contained in the Notes or the Indenture and, subject to
certain exceptions, the continuance of such failure for a period of 30 days
after written notice is given to the Company by the Trustee or to the Company
and the Trustee by the holders of at least 25% in aggregate principal amount of
the Notes outstanding, (iv) certain events of bankruptcy, insolvency or
reorganization in respect of the Company or any of its Significant Subsidiaries,
(v) a default in the payment of principal, premium or interest when due which
extends beyond any stated period of grace applicable thereto or any acceleration
for any other reason of the maturity of any Indebtedness of the Company or any
of its Subsidiaries with an aggregate principal amount in excess of $5 million,
(vi) final unsatisfied judgments
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not covered by insurance aggregating in excess of $5 million, at any one time
rendered against the Company or any of its Subsidiaries and not stayed, bonded
or discharged within 45 days, (vii) an event of default specified in any of the
Collateral Documents not cured within the applicable grace period or (viii) a
default in the payment of principal, premium or interest on the Convertible
Notes at the final maturity on June 1, 2001, regardless of any consent or waiver
to such nonpayment given by any holder thereof. The Indenture provides that if a
Default occurs and is continuing, the Trustee must, within 90 days after the
occurrence of such default, give to the Noteholders notice of such default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv), above, relating to the Company or any
Subsidiary,) then in every such case, unless the principal of all of the Notes
shall have already become due and payable, either the Trustee or the holders of
25% in aggregate principal amount of the Notes then outstanding, by notice in
writing to the Company (and to the Trustee if given by Noteholders) (an
"Acceleration Notice"), may declare all principal, determined as set forth
below, and accrued interest thereon to be due and payable immediately. If an
Event of Default specified in clause (iv) above relating to the Company or any
Subsidiary occurs, all principal and accrued interest thereon will be
immediately due and payable on all outstanding Notes without any declaration or
other act on the part of Trustee or the Noteholders. The holders of a majority
in aggregate principal amount of Notes generally are authorized to rescind such
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on the Notes which have become
due solely by such acceleration, have been cured or waived, except a default
with respect to any provision requiring a supermajority to amend, which default
may only be waived by such supermajority.
Prior to the declaration of acceleration of the maturity of the Notes, the
holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Noteholders any default, except a
default in the payment of principal of or interest on any Note not yet cured or
a default with respect to any covenant or provision which cannot be modified or
amended without the consent of the each Noteholder affected, and except a
default with respect to any provision requiring a supermajority to amend, which
default may only be waived by such supermajority. Subject to the provisions of
the Indenture relating to the duties of the Trustee, the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Noteholders, unless such Noteholders
have offered to the Trustee reasonable security or indemnity. Subject to all
provisions of the Indenture and applicable law, the holders of a majority in
aggregate principal amount of the Notes at the time outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may, at its option and at any time,
elect to have its obligations discharged with respect to the outstanding Notes
("Legal Defeasance"). Such Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented, and the
Indenture shall cease to be of further effect as to all outstanding Notes and
guarantees, except as to (i) rights of Noteholders to receive payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due from the trust funds; (ii) the Company's obligations with
respect to such Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or
agency for payment and money for security payments held in trust; (iii) the
rights, powers, trust, duties, and immunities of the Trustee, and the Company's
obligations in connection therewith; and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have its obligations released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Noteholders, U.S. legal tender, non-callable government securities or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on such Notes on the stated date for
payment thereof or on the redemption date of such principal or installment of
principal of, premium, if any, or interest on such Notes, and the Noteholders
must have a valid, perfected, exclusive security interest in such trust; (ii) in
the case of the Legal Defeasance, the Company shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
Trustee confirming that (A) the Company has received from, or there has been
published by the Internal Revenue Service, a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Noteholders will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to such Trustee confirming that the Noteholders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit or insofar as
Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under the Indenture or any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit was not made by the Company with the intent of preferring the
Noteholders over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the Company
or others; and (vii) the Company shall have delivered to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that the
conditions precedent provided for in, in the case of the officers' certificate,
(i) through (vi) and, in the case of the opinion of counsel, clauses (i), (with
respect to the validity and perfection of the security interest) (ii), (iii) and
(v) of this paragraph have been complied with. Upon the occurrence of legal or
covenant defeasance, the Lien of the Collateral Documents will be released only
if the Company delivers to the Trustee an opinion of counsel as to certain
matters, including the legal status of the trust. In addition, the Lien of the
Collateral Documents will remain in place for 91 days, unless the Company
delivers to the Trustee an appraisal of the Collateral and an opinion of counsel
as to certain bankruptcy matters both as further described in the Indenture.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Noteholders. With the consent of the holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding, the
Company and the Trustee are permitted to amend or supplement the Indenture or
any supplemental indenture or modify the rights of the Noteholders; provided,
that no such modification may, without the consent of at least 66 2/3% of the
aggregate principal amount of Notes outstanding, alter the provisions of the
covenants "Repurchase of Notes of the Option of the Holder upon a Change of
Control," "Repurchase of Notes in Connection with Sale of Lawrenceburg Interest
or Repayment of Lawrenceburg Investment," "Repurchase on Loss of Material
Casino," "Limitation on Sale of Assets and Subsidiary Stock," "Use of Proceeds"
or "Repurchase of Notes on Certain Project Delays" in a manner adverse to the
Noteholders or modify the Guarantees; and that no such modification may, without
the consent of the Holders of at least 85% of the aggregate principal amount of
outstanding Securities, release or grant additional liens on the Collateral,
except as otherwise specifically provided in the Indenture; and that no such
modification may without the consent of each Noteholder affected thereby: (i)
change the Stated Maturity on any Note, or reduce the principal amount thereof
or the rate (or extend the time for payment) of interest thereon or any
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premium payable upon the redemption thereof, or change the place of payment
where, or the coin or currency in which, any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or reduce the price paid in any
purchase offer or alter the redemption provisions in a manner adverse to the
Noteholders, or (ii) reduce the percentage in principal amount of the
outstanding Notes, the consent of whose Noteholders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture, or
(iii) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the Noteholder of each outstanding
Note affected thereby, or (iv) cause the Notes or any guarantee to rank junior
in right of payment to any other Indebtedness of the Company or any guarantee,
as applicable.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of the Company or any
successor entity shall have any personal liability in respect of the obligations
of the Company under the Indenture or the Notes by reason of his or its status
as such stockholder, employee, officer or director.
CERTAIN DEFINITIONS
"ACQUIRED INDEBTEDNESS" means, with respect to any person, (i) Indebtedness
or Disqualified Capital Stock of any person existing at the time such person
becomes a Subsidiary of the Company or is merged or consolidated into or with
the Company or one of its Subsidiaries or (ii) Indebtedness encumbering any
asset acquired by such person. Acquired Indebtedness shall be deemed to have
been incurred at the time such person becomes a Subsidiary of the Company
(including upon the designation of a subsidiary or any other person as a
Subsidiary) or is merged or consolidated into or with the Company or one of its
Subsidiaries or the time of the Acquisition of such assets.
"ACQUISITION" means the purchase or other acquisition of any person or
substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"AFFILIATE" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, (ii)
any spouse, immediate family member or other relative who has the same principal
residence of any person described in clause (i) above, and (iii) any trust in
which any person described in clause (i) or (ii) above has a beneficial
interest. For purposes of this definition, the term "control" means (a) the
power to direct the management and policies of a person, directly or through one
or more intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, or (b) the beneficial ownership of 10% or more of the
voting power of a person (on a fully diluted basis) or of warrants or other
rights to acquire shares of such class of Capital Stock (whether or not
presently exercisable).
"AVERAGE LIFE TO STATED MATURITY" means, as of the date of determination,
with respect to any indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"CAPITAL STOCK" means, with respect to any person, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock or equity issued by that person.
"CASINO IMPROVEMENTS" means the acquisition of, or development and
construction of, any addition to or expansion of the Company's Riverside, Alton,
Sioux City or Baton Rouge properties in connection with
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any expansion of casino floor space, and any addition to or expansion of any
gaming, hotel, parking, dining, entertainment, retail, promotional, storage,
patron services, transportation or similar facilities related thereto, in each
case, after the date of the Indenture.
"CONSOLIDATED COVERAGE RATIO" of any person on any date of determination
(the "Transaction Date") means the ratio, on a PRO FORMA basis, of (a) the
aggregate amount of Consolidated EBITDA of such person attributable to
continuing operations and businesses exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of during the
Reference Period, to (b) the aggregate Consolidated Fixed Charges of such person
(exclusive of amounts attributable to operations and businesses permanently
discontinued or disposed of, but only to the extent that the obligations giving
rise to such Consolidated Fixed Charges would no longer be obligations
contributing to such person's Consolidated Fixed Charges subsequent to the
Transaction Date) during the Reference Period; PROVIDED,that for purposes of
such calculation, (i) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period, (ii)
transactions giving rise to the need to calculate the Consolidated Coverage
Ratio shall be assumed to have occurred on the first day of the Reference
Period, (iii) the incurrence of any Indebtedness or issuance of any Disqualified
Capital Stock during the Reference Period or subsequent to the Reference Period
and on or prior to the Transaction Date (and the application of the proceeds
therefrom to the extent used to refinance or retire other Indebtedness) shall be
assumed to have occurred on the first day of such Reference Period, and (iv) the
Consolidated Fixed Charges of such person attributable to interest on any
Indebtedness or dividends on any Disqualified Capital Stock bearing a floating
interest (or dividend) rate shall be computed on a PRO FORMA basis as if the
average rate in effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire period, unless such
Person or any of its Subsidiaries is a party to an Interest Swap or Hedging
Obligation (which shall remain in effect for the 12-month period immediately
following the Transaction Date) that has the effect of fixing the interest rate
on the date of computation, in which case such rate (whether higher or lower)
shall be used.
"CONSOLIDATED EBITDA" means, with respect to any person, for any period, the
Consolidated Net Income of such person for such period adjusted to add thereto
(to the extent deducted from net revenues in determining Consolidated Net
Income), without duplication, the sum of (i) consolidated income tax expense,
(ii) consolidated depreciation and amortization expense, provided that
consolidated depreciation and amortization of a Subsidiary that is a less than
wholly owned Subsidiary shall only be added to the extent of the equity interest
of the Company in such Subsidiary, (iii) Consolidated Fixed Charges, and (iv)
with respect to the Company, all cash distributions made by The Indiana Gaming
Company to the Company or another Guarantor, except for payments in the nature
of management fees, interest income or preferred dividends from Indiana Gaming
L.P.
"CONSOLIDATED FIXED CHARGES" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such person and its
Consolidated Subsidiaries during such period, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period, and
(b) the amount of dividends accrued or payable by such person or any of its
Consolidated Subsidiaries in respect of Preferred Stock (other than by
Subsidiaries of such person to such person or such person's wholly owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such person or a
Subsidiary of such person of an obligation of another person shall be deemed to
be the interest expense attributable to the Indebtedness guaranteed.
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"CONSOLIDATED NET INCOME" means, with respect to any person for any period,
the net income (or loss) of such person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication): (a) all gains (but not losses) which are
either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including any gain from the sale or other disposition
of assets outside the ordinary course of business or from the issuance or sale
of any capital stock), (b) any gains (but not losses) from currency exchange
transactions, (c) the net income, if positive, of any person, other than a
wholly owned Consolidated Subsidiary, in which such person or any of its
Consolidated Subsidiaries has an interest, except to the extent of the amount of
any dividends or distributions actually paid in cash to such person or a wholly
owned Consolidated Subsidiary of such person during such period, but in any case
not in excess of such person's PRO RATA share of such person's net income for
such period, (d) the net income or loss of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition, (e)
cash distributions from Indiana Gaming L.P. and the net income of The Indiana
Gaming Company, except for net income in the nature of management fees, interest
income or preferred dividends actually paid to the Company or a Guarantor other
than The Indiana Gaming Company, so long as Indiana Gaming L.P. is an
Unrestricted Subsidiary, (f) the net income, if positive, of any of such
person's Consolidated Subsidiaries to the extent that the declaration or payment
of dividends or similar distributions is not at the time permitted by operation
of the terms of its charter or bylaws or any other agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such Consolidated Subsidiary PROVIDED, HOWEVER, that statutory or regulatory
requirements of gaming authority approval prior to distribution shall not be
considered such a limitation and (g) any noncash extraordinary charge relating
to the repayment of the Existing Bank Credit Facility in connection with this
Offering.
"CONSOLIDATED NET WORTH" of any person at any date means the aggregate
consolidated stockholders' equity of such person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in calculating such
equity), (a) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock or treasury stock of such person and its Consolidated
Subsidiaries, (b) all upward revaluations and other write-ups in the book value
of any asset of such person or a Consolidated Subsidiary of such person
subsequent to the Issue Date, and (c) all investments in Subsidiaries that are
not Consolidated Subsidiaries and in persons that are not Subsidiaries.
"CONSOLIDATED SUBSIDIARY" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such person in accordance with GAAP. So long as
Indiana Gaming L.P. is an Unrestricted Subsidiary, the results of operation of
Indiana Gaming L.P. shall not be included in the calculation of Consolidated Net
Income of the Company, other than management fees, interest income and preferred
dividends paid to the Company or a Guarantor other than The Indiana Gaming
Company.
"DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in (b), with
respect to any person, Capital Stock of such person that, by its terms or by the
terms of any security into which it is convertible, exercisable or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased (including at the option of the holder thereof) by
such person or any of its Subsidiaries, in whole or in part, on or prior to the
Stated Maturity of the Notes and (b) with respect to any Subsidiary of such
person (including with respect to any Subsidiary of the Company), any Capital
Stock other than any common stock with no preference, privileges, or redemption
or repayment provisions.
"EVENT OF LOSS" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"EXCHANGE NOTES" means first mortgage notes offered for exchange hereby and
issued pursuant to the Registration Rights Agreement and the Indenture.
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"EXCLUDED PERSONS" means J. Thomas Long and William F. Cellini, each of such
person's immediate family or a trust or similar entity existing solely for the
benefit of such person or such person's immediate family.
"FF&E INDEBTEDNESS" means any Indebtedness of the Company and its
Subsidiaries and Indiana Gaming L.P. to any seller or other person incurred to
finance any gaming or gaming related fixtures, furniture or equipment which, in
the reasonable good faith judgment of the Board of Directors of the Company or
the general partner of Indiana Gaming L.P., is incurred for a Material Casino,
is directly related to a Related Business and is secured only by the assets so
financed.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession as in effect on the Issue Date.
"GUARANTOR" means the Guarantors named as such on the cover of this Offering
Memorandum, and any future newly created, acquired or designated Subsidiary of
the Company.
"INDEBTEDNESS" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of such person, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereof), (ii) evidenced by bonds,
notes, debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services, except
such as would constitute accrued expenses or trade payables to trade creditors
in the ordinary course of business that are not more than ninety (90) days past
their original due date unless being contested in good faith, (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v) for
the payment of money relating to a capitalized lease obligation, or (vi)
evidenced by a letter of credit or a reimbursement obligation of such person
with respect to any letter of credit; (b) all net obligations of such person
under Interest Swap and Hedging Obligations; (c) all liabilities and obligations
of others of the kind described in the preceding clause (a) or (b) that such
person has guaranteed or that is otherwise its legal liability and all
obligations to purchase, redeem or acquire any Capital Stock; and (d) any and
all deferrals, renewals, extensions, refinancing and refundings (whether direct
or indirect) of, or amendments, modifications or supplements to, any liability
of the kind described in any of the preceding clauses (a), (b) or (c), or this
clause (d), whether or not between or among the same parties, PROVIDED that, in
calculating Indebtedness of the Company and its Consolidated Subsidiaries,
Indebtedness of Indiana Gaming L.P. attributable to The Indiana Gaming Company
solely because of its legal status as general partner of Indiana Gaming L.P.
shall not be deemed such Indebtedness.
"INDIANA GAMING L.P." means the Indiana Gaming Company, L.P. or any
successor acquired to develop the proposed casino in Lawrenceburg, Indiana.
"INTEREST SWAP AND HEDGING OBLIGATION" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"INVESTMENT" by any person in any other person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such person (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such other
person or any agreement to make any such acquisition; (b) the making by such
person of any deposit with, or advance, loan or other extension of credit to,
such other person (including the purchase of property from another person
subject to
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an understanding or agreement, contingent or otherwise, to resell such property
to such other person) or any commitment to make any such advance, loan or
extension (but excluding (a) accounts receivable or deposits arising in the
ordinary course of business and (b) advances, loans or other extensions of
credit by the Company or any of its Subsidiaries to the Company or any
Subsidiary of the Company); (c) other than guarantees of Indebtedness of the
Company to the extent permitted by the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," the entering into by
such person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of such other
person; (d) the making of any capital contribution by such person to such other
person, other than to the Company or a wholly owned Subsidiary of the Company;
and (e) the designation by the Board of Directors of the Company of any person
to be an Unrestricted Subsidiary. The Company shall be deemed to make an
Investment in an amount equal to the fair market value of the net assets of any
subsidiary (or, if neither the Company nor any of its Subsidiaries has
theretofore made an Investment in such subsidiary, in an amount equal to the
Investments being made), at the time that such subsidiary is designated an
Unrestricted Subsidiary, and any property transferred to an Unrestricted
Subsidiary from the Company or a Subsidiary shall be deemed an Investment valued
at its fair market value at the time of such transfer.
"ISSUE DATE" means the date of first issuance of the Notes under the
Indenture.
"JUNIOR INDEBTEDNESS" means Indebtedness of the Company or a Guarantor, as
applicable, that is subordinated in right of payment to the Notes or such
Guarantor's guarantee of the Notes, as applicable, or has a scheduled
installment of principal due, by maturity, redemption, sinking fund payment or
otherwise after the Stated Maturity of the Notes, except that the amount payable
to the former Jazz shareholders shall not be deemed Junior Indebtedness if
repaid in full at a discount for an amount not to exceed $3 million.
"LAWRENCEBURG INVESTMENT" means the total aggregate Investment by the
Company and the Guarantors in Indiana Gaming L.P.
"LAWRENCEBURG INVESTMENT RETURN" means the complete repayment to the Company
and the Guarantors (other than The Indiana Gaming Company) of the Lawrenceburg
Investment, without credit for management fees, interest income, preferred
dividends or provision for taxes.
"MATERIAL CASINO" means any gaming establishment possessing at least 400
slot machines and at least 20 table games.
"NET CASH PROCEEDS" means the aggregate amount of cash received by the
Company in the case of a sale of Qualified Capital Stock, by the Company and its
Subsidiaries in respect of an Asset Sale or an Event of Loss, by the Company and
its Subsidiaries in respect of a Lawrenceburg Sale and by Indiana Gaming L.P. in
respect of a Property Sale plus, in the case of an issuance of Qualified Capital
Stock upon any exercise, exchange or conversion of securities (including
options, warrants, rights and convertible or exchangeable debt) of the Company
that were issued for cash on or after the Issue Date, the amount of cash
originally received by the Company upon the issuance of such securities
(including options, warrants, rights and convertible or exchangeable debt) less,
in each case, the sum of all payments, fees, commissions and reasonable and
customary expenses (including, without limitation, the fees and expenses of
legal counsel and investment banking fees and expenses) incurred in connection
with such Asset Sale, an Event of Loss, Lawrenceburg Sale, Property Sale or sale
of Qualified Capital Stock, and, in the case of an Asset Sale, Lawrenceburg
Sale, Property Sale or an Event of Loss only, less the amount (estimated
reasonably and in good faith by the Company) of income, franchise, sales and
other applicable taxes required to be paid by the Company or any of its
respective Subsidiaries in connection with such Asset Sale, Lawrenceburg Sale,
Property Sale or Event of Loss and, in the case of an Asset Sale, Property Sale
or Event of Loss only, less the amounts required to be applied to the repayment
of Indebtedness secured by a Lien otherwise permitted herein on the asset or
assets that were the subject of such event and which Indebtedness is required by
its terms to be repaid upon such event, and in the case of any Asset Sale,
Property Sale or Lawrenceburg Sale only, less any reserve established by the
Company or any of its Subsidiaries in accordance with GAAP against any
liabilities associated with such sale and retained by the Company or any of its
Subsidiaries, as the case may be, after such sale.
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"PERMITTED INDEBTEDNESS" means any of the following:
(a) The Company and the Guarantors may incur Indebtedness solely in
respect of bankers acceptances and performance, appeal or bid bonds
(to the extent that such incurrence does not result in the incurrence of any
obligation to repay any obligation relating to borrowed money of others) in
a principal amount not to exceed $10 million, all in the ordinary course of
business in accordance with customary industry practices, in amounts and for
the purposes customary in the Company's industry;
(b) The Company may incur Indebtedness to any Guarantor, and any
Guarantor may incur Indebtedness to any other Guarantor or to the
Company; PROVIDED that, in the case of Indebtedness of the Company, such
obligations shall be unsecured and subordinated in all respects to the
Company's obligations pursuant to the Notes and any event that causes such
Guarantor to no longer be a Subsidiary shall be an incurrence of
Indebtedness; and
(c) The Company may incur Indebtedness in the form of a guarantee of
hotel construction in Baton Rouge in an amount not to exceed $5
million and otherwise permitted under clause (s) under "Limitation on
Restricted Payments."
"PERMITTED INVESTMENT" means (i) certificates of deposit and bank accounts
with final maturities of one year or less issued by United States commercial
banks having capital and surplus in excess of $100,000,000; (ii) commercial
paper with a grade of no less than A1 or P1; (iii) direct obligations of the
United States Government or a United States agency with a maturity of one year
or less; and (iv) shares of money market mutual or similar funds having assets
in excess of $500,000,000.
"PERMITTED LIENS" means (i) Liens existing on the date of the Indenture as
specifically identified in the Offering Memorandum or securing Indebtedness not
to exceed $1 million incurred to purchase gaming and/ or office equipment; (ii)
Liens for taxes, assessments, governmental charges or claims which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor; (iii)
statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen, or other like Liens arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings, and if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (iv) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (v) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, government contracts, performance and return-of-money bonds and
other obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (vi) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with the
business of the Company or any of its Subsidiaries incurred in the ordinary
course of business; (vii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (viii) judgment and attachment Liens not giving
rise to an Event of Default; (ix) leases or subleases granted to others not
interfering in any material respect with the business of the Company or any of
its Subsidiaries; (x) any interest or title of a lessor in the property subject
to any capital lease obligation or operating lease; (xi) Liens arising from
filing Uniform Commercial Code financing statements regarding leases; (xii)
Liens securing any Indebtedness which became Indebtedness of the Company
pursuant to a transaction subject to the provisions of the Indenture described
above under "Limitation on Merger, Sale or Consolidation" or which constitutes
Acquired Indebtedness and which Liens were in existence at the time of such
transaction (unless such Indebtedness was incurred or such Lien created in
connection with, or in contemplation of, such transaction), so long as such
Liens do not extend to or cover any property or assets of the Company or any
Subsidiary of the Company other than property or assets acquired in such
transaction; (xiii) Liens securing any assumption, guarantee or other liability
which constitutes Acquired Indebtedness and which Liens were in existence at the
time of such transaction (unless such assumption, guarantee or other liability
was incurred or such Lien created in connection with, or in contemplation of,
such person
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becoming a Subsidiary of the Company), so long as such Liens do not extend to or
cover any property or assets of the Company or any Subsidiary of the Company
other than the assets of such person; and (xiv) any renewal of or substitution
for any Lien permitted by any of the preceding clauses, PROVIDED, HOWEVER, that
the Indebtedness secured is not increased nor the Lien extended to any
additional property. Liens described under clauses (xii) and (xiii) above shall
not be Permitted Liens in connection with an Acquisition which is funded in
whole or part with Collateral or the proceeds of the sale of Collateral or out
of distributions made by Indiana Gaming L.P. up to the amount of the
Lawrenceburg Investment.
"PROJECT DELAY" means (i) the failure of the Lawrenceburg Casino to commence
operations on or prior to June 30, 1997 at either the temporary or the permanent
location (for purposes of the preceding, commencement of gaming operations shall
be deemed to occur at such time as the Lawrenceburg Casino is open to the public
for gaming and is operating at least 950 gaming positions), (ii) the expiration
or suspension of Indiana Gaming L.P.'s certificate of suitability and the
failure of the Indiana Gaming Commission to renew such certificate prior to the
issuance of a riverboat owner's license, which failure continues for a period of
30 days from the date of such expiration or suspension, (iii) the revocation or
cancellation of Indiana Gaming L.P.'s certificate of suitability by the Indiana
Gaming Commission, (iv) the denial of Indiana Gaming L.P.'s application for a
permanent riverboat owner's license by the Indiana Gaming Commission, (v) a
finding of unsuitability of Indiana Gaming L.P. by the Indiana Gaming
Commission, (vi) the revocation or suspension of Indiana Gaming L.P.'s riverboat
owner's license by the Indiana Gaming Commission which results in the loss of
the legal right to operate the Lawrenceburg Casino, which loss continues for a
period of 90 days or (vii) a finding of unsuitability of the Company or any of
its subsidiaries by the Indiana Gaming Commission.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of the Company that is not
Disqualified Capital Stock.
"QUALIFIED EXCHANGE" means (i) any legal defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or Indebtedness of the Company
issued on or after the Issue Date with the Net Cash Proceeds received by the
Company from the substantially concurrent sale of Qualified Capital Stock, (ii)
any exchange of Qualified Capital Stock for any Capital Stock or Indebtedness
issued on or after the Issue Date or (iii) any exchange of Qualified Capital
Stock for, or purchase with the net proceeds of a concurrent sale of Qualified
Capital Stock of, any equity interest in Indiana Gaming L.P. not owned by a
Subsidiary of the Company or an Unrestricted Subsidiary.
"QUALIFIED GAMING VENTURE" means any person (other than Indiana Gaming L.P.
and The Indiana Gaming Company) in which the Company owns an equity interest (a)
which operates a Material Casino and any Related Business (b) which pursuant to
contract or otherwise gives the right to direct or manage the day-to-day
operation of such Material Casino to the Company or a Subsidiary of the Company,
and (c) which either (i) does not have any consensual restriction on its ability
to pay dividends or make other distributions to or on behalf of, or to pay any
obligations to or on behalf of, or otherwise to transfer assets or property to
or on behalf of, or make or pay any loans or advance to or on behalf of the
Company or any Subsidiary, except for such exceptions generally contained in
"Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries"
or (ii) is operated pursuant to a management contract with the Company or one of
its Subsidiaries at a management fee of no less than 2% of net win.
"REFERENCE PERIOD" with regard to any person means the four full fiscal
quarters (or such lesser period during which such person has been in existence)
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the Notes or the Indenture.
"REFINANCING INDEBTEDNESS" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed (i) the
principal amount or, in the case of Disqualified Capital Stock, liquidation
preference, of the Indebtedness or Disqualified Capital Stock so
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Refinanced plus the amount of any premium paid in connection with such
refinancing in accordance with the terms of documents governing the Indebtedness
being refinanced and reasonable and customary fees and expenses incurred in
connection with the Refinancing or (ii) if such Indebtedness being Refinanced
was issued with an original issue discount, the accreted value thereof (as
determined in accordance with GAAP) at the time of such Refinancing plus the
amount of any premium paid in connection with such refinancing in accordance
with the terms of documents governing the Indebtedness being refinanced and
reasonable and customary fees and expenses incurred in connection with the
Refinancing; PROVIDED that (A) any Refinancing Indebtedness incurred by any
Subsidiary of the Company shall only be used to refinance outstanding
Indebtedness or Disqualified Capital Stock of such Subsidiary, (B) Refinancing
Indebtedness shall (x) not have an Average Life shorter than the Indebtedness or
Disqualified Capital Stock to be so refinanced at the time of such Refinancing
(or, if such Refinancing Indebtedness relates to the Convertible Notes, shorter
than the Notes) and (y) in all respects, be no less subordinated or junior, if
applicable, to the rights of the Noteholders than was the Indebtedness or
Disqualified Capital Stock to be refinanced and (C) such Refinancing
Indebtedness shall have a final stated maturity no earlier than the final stated
maturity of the Indebtedness or Disqualified Capital Stock to be so refinanced
which was scheduled to come due prior to the Stated Maturity (or, if such
Refinancing Indebtedness relates to the Convertible Notes, no earlier than the
Stated Maturity).
"RELATED BUSINESS" means the gaming business and other businesses necessary
for, incident to, connected with, arising out of, or developed or operated to
permit or facilitate the conduct or pursuit of the gaming business (including
developing or operating lodging facilities, sports or entertainment facilities,
retail facilities, restaurants, night clubs, transportation and communications
services or other related activities or enterprises and any additions or
improvements thereto) and potential opportunities in the gaming business.
"RESTRICTED PAYMENT" means, with respect to any person, (a) the declaration
or payment of any dividend or other distribution in respect of Capital Stock of
such person or any parent or Subsidiary of such person, (b) any payment on
account of the purchase, redemption or other acquisition or retirement for value
of Capital Stock of such person or any Subsidiary or parent of such person, (c)
other than with the proceeds from the substantially concurrent sale of, or in
exchange for, Refinancing Indebtedness any purchase, redemption, or other
acquisition or retirement for value of, any payment in respect of any amendment
of the terms of or any defeasance of, any Junior Indebtedness, directly or
indirectly, by such person or a parent or Subsidiary of such person prior to the
scheduled maturity, any scheduled repayment of principal, or scheduled sinking
fund payment, as the case may be, of such Indebtedness and (d) any Investment by
such person, other than a Permitted Investment; PROVIDED, HOWEVER, that the term
"Restricted Payment" does not include (i) any dividend, distribution or other
payment on or with respect to Capital Stock of an issuer to the extent payable
solely in shares of Qualified Capital Stock of such issuer; or (ii) any
dividend, distribution or other payment to the Company, or to any of its wholly
owned Subsidiaries, by any of its Subsidiaries.
"SIGNIFICANT SUBSIDIARY" means, at the time of determination, any Subsidiary
of the Company that (a) accounted for more than 10% of the consolidated net
income of the Company for the most recently completed fiscal year of the Company
or (b) was the owner of more than 10% of the consolidated assets of the Company
as of the end of such fiscal year, all as shown on the consolidated financial
statements of the Company for such fiscal year.
"SPECIFIED PARCELS" means either of the two defined parcels of real estate
at the Riverside or Baton Rouge properties set aside for hotel development.
"STATED MATURITY," when used with respect to any Note, means June 1, 2004.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a
Guarantor, as applicable, that is subordinated in right of payment to the Notes
or such Guarantor's guarantee of the Notes, as applicable, in all respects and
has no scheduled installment of principal due, by maturity, redemption, sinking
fund payment or otherwise, on or prior to the Stated Maturity of the Notes.
"SUBSIDIARY," with respect to any person, means (i) a corporation a majority
of whose Capital Stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by
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such person, by such person and one or more Subsidiaries of such person or by
one or more Subsidiaries of such person, (ii) any other person (other than a
corporation) in which such person, one or more Subsidiaries of such person, or
such person and one or more Subsidiaries of such person, directly or indirectly,
at the date of determination thereof has at least majority ownership interest,
or (iii) a partnership in which such person or a Subsidiary of such person is,
at the time, a general partner. Notwithstanding the foregoing, no Unrestricted
Subsidiary, including Indiana Gaming L.P., shall be considered a Subsidiary of
the Company or of any Subsidiary of the Company.
"UNRESTRICTED SUBSIDIARY" means any direct or indirect subsidiary of the
Company that does not own any Capital Stock of, or own or hold any Lien on any
property of, the Company or any other Subsidiary of the Company and that shall
be designated an Unrestricted Subsidiary by the Board of Directors of the
Company; PROVIDED that (i) such subsidiary shall not engage, to any substantial
extent, in any line or lines of business activity other than a Related Business
and (ii) neither immediately prior thereto nor after giving pro forma effect to
such designation would there exist a Default or Event of Default. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Subsidiary, PROVIDED that (i) no Default or Event of Default is existing or will
occur as a consequence thereof and (ii) immediately after giving effect to such
designation, on a PRO FORMA basis, the Company could incur at least $1.00 of
Indebtedness pursuant to the Indebtedness Incurrence Ratio in paragraph (a) of
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock." Each such designation shall be evidenced by filing
with the Trustee a certified copy of the resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions. Indiana Gaming L.P. and Iowa Development
Corp. shall initially be designated Unrestricted Subsidiaries. Notwithstanding
anything herein to the contrary, no subsidiary of the Company with an interest
in Indiana Gaming L.P. may become an Unrestricted Subsidiary.
CASH COLLATERAL AND DISBURSEMENT AGREEMENT
Pursuant to the terms of the Indenture, the Company, the Trustee and LaSalle
National Trust, N.A., as disbursement agent, entered into a Cash Collateral and
Disbursement Agreement pursuant to which $94.3 million of the proceeds of the
offering of the Old Notes was deposited into a disbursement account subject to
the control of the disbursement agent. Funds in the disbursement account are
available to fund the Company's pro rata share of Lawrenceburg Casino project
disbursements. Funds may be released from the disbursement account upon
certification by the Company to the disbursement agent (i) as to the proposed
use of the project disbursement in the Lawrenceburg Casino project in conformity
with the construction budget, (ii) that the amounts held in the disbursement
account plus amounts contractually obligated to be contributed by Conseco and
third party equipment financing are sufficient to complete the Lawrenceburg
Casino project, (iii) that Conseco is no more than 90 days past due on any prior
capital call, PROVIDED, HOWEVER, that any amounts not funded by Conseco that
have been funded by the Company (other than through the disbursement account) in
an aggregate amount not to exceed $10 million at any one time will not be
considered past due and (iv) as to the satisfaction of certain other conditions.
A portion of the funds may also be released to the Company from the disbursement
account upon completion of the Lawrenceburg Casino project and upon funding of
hotel construction by third party lenders. The total amount of disbursements
made by the disbursement agent shall not exceed $35 million prior to the next
time the certificate of suitability granted by the Indiana Gaming Commission to
Indiana Gaming L.P. is formally renewed or extended by the Indiana Gaming
Commission for at least 120 days or, if earlier, the date gaming operations are
commenced with at least 950 gaming positions at the temporary gaming facility in
Lawrenceburg. No disbursements may be made at any time if (i) Indiana Gaming
L.P.'s certificate of suitability has been revoked or canceled or has expired or
been suspended and has not been renewed by the Indiana Gaming Commission prior
to issuance of a riverboat owner's license, (ii) Indiana Gaming L.P.'s
application for a permanent riverboat owner's license is denied by the Indiana
Gaming Commission, (iii) Indiana Gaming L.P. is found unsuitable by the Indiana
Gaming Commission, (iv) Indiana Gaming L.P. has its riverboat owner's license
revoked or suspended by the Indiana Gaming Commission, (v) the Company or any of
its subsidiaries is found unsuitable by the Indiana Gaming Commission, or (vi)
the Company, its subsidiaries or Indiana Gaming L.P. shall have received notice
from the Indiana Gaming Commission of the commencement of proceedings by the
Indiana Gaming Commission, the stated purpose of which is to formally consider
taking any of the foregoing actions. The agreement grants the Trustee a first
priority security interest in the
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disbursement account, and permits the Trustee the right to access the
disbursement account for certain payments of principal and interest, including
the offer to purchase described under "Certain Covenants Relating to the
Lawrenceburg Casino -- Repurchase of Notes on Certain Project Delays."
BOOK ENTRY, DELIVERY AND FORM
Except as set forth below, the Exchange Notes will initially be issued in
the form of one or more registered Notes in global form (the "Global Notes").
Each Global Note will be deposited on the date of the acceptance for exchange of
the Old Notes and the issuance of the Exchange Notes (the "Closing Date") with,
or on behalf of, The Depository Trust Company (the "Depository") and registered
in the name of Cede & Co., as nominee of the Depository.
The Depository has advised the Company that it is a limited-purpose trust
company that was created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depository's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depository's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly.
The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Notes, the Depository will credit the
accounts of Participants designated by the Initial Purchasers with an interest
in the Global Notes and (ii) ownership of the Exchange Notes will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by the Depository (with respect to the interests of Participants),
the Participants and the Indirect Participants. The laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Exchange Notes or to pledge the Exchange
Notes as collateral will be limited to such extent.
So long as the Depository or its nominee is the registered owner of a Global
Note, the Depository or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have Exchange Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of Certificated Securities, and will
not be considered the owners or holders thereof under the Indenture for any
purpose, including with respect to the giving of any directions, instructions or
approvals to the Trustee thereunder. As a result, the ability of a person having
a beneficial interest in Exchange Notes represented by a Global Note to pledge
such interest to persons or entities that do not participate in the Depository's
system, or to otherwise take actions with respect to such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Accordingly, persons owning a beneficial interest in a Global Note must rely
on the procedures of the Depository and, if such person is not a Participant or
an Indirect Participant, on the procedures of the Participant through which such
person owns its interest to exercise any rights of a holder under the Indenture
or such Global Note. The Company understands that under existing industry
practice, in the event the Company requests any action of Noteholders or a
person that is an owner of a beneficial interest in a Global Note desires to
take any action that the Depository, as the holder of such Global Note, is
entitled to take, the Depository would authorize the Participants to take such
action and the Participants would authorize persons owning through such
Participants to take such action or would otherwise act upon the instructions of
such persons. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of Exchange Notes by the Depository, or for maintaining, supervising or
reviewing any records of the Depository relating to such Exchange Notes.
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Payments with respect to the principal of, premium, if any, and interest of
any Exchange Notes represented by a Global Note registered in the name of the
Depository or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depository or its nominee in its capacity
as the registered Holder of the Global Note representing such Exchange Notes
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee may treat the persons in whose names the Exchange Notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Company nor the Trustee has or will have any responsibility or
liability for the payment of such amounts to beneficial owners of Exchange Notes
(including principal, premium, if any, and interest), or to immediately credit
the accounts of the relevant Participants with such payment, in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in the Global Note as shown on the records of the Depository. Payments
by the Participants and the Indirect Participants to the beneficial owners of
Exchange Notes will be governed by standing instructions and customary practice
and will be the responsibility of the Participants or the Indirect Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depository is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Exchange
Notes in definitive form under the Indenture, then, upon surrender by the
Depository of its Global Note, Certificated Securities will be issued to each
person that the Depository identifies as the beneficial owner of the Exchange
Notes represented by the Global Note. In addition, subject to certain
conditions, any person having a beneficial interest in a Global Note may, upon
request to the Trustee, exchange such beneficial interest for Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of such person or persons (or the nominee of
any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depository or any Participant or Indirect Participant in identifying the
beneficial owners of the related Exchange Notes and each such person may
conclusively rely on, and shall be protected in relying on, instructions from
the Depository for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the Exchange Notes to be
issued).
The information in this section concerning the Depository and the
Depository's book-entry system has been obtained from sources that the Company
believes to be reliable. The Company will have no responsibility for the
performance by the Depository or its Participants of their respective
obligations as described hereunder or under the rules and procedures governing
their respective operations.
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Notes (including principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Global Note holder. With
respect to Certificated Securities, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the holders
thereof or, if no such account is specified, by mailing a check to each such
holder's registered address. Secondary trading in long-term notes and debentures
of corporate issuers is generally settled in clearing-house or next-day funds.
In contrast, the Exchange Notes represented by the Global Notes are expected to
trade in the Depositary's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Exchange Notes will, therefore, be
required by the Depositary to be settled in immediately available funds. The
Company expects that secondary trading in the Certificated Securities will also
be settled in immediately available funds.
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OLD NOTES REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the sale of the Old Notes, the Company, the Guarantors
and the Initial Purchasers entered into a registration rights agreement dated
June 5, 1996 (the "Registration Rights Agreement") pursuant to which the Company
and the Guarantors agreed, for the benefit of the holders of Old Notes, that
they will, at their cost, (i) within 30 days after the date of original issue of
the Old Notes use their respective reasonable best efforts to file a
registration statement in accordance with the Securities Act (a "Exchange Offer
Registration Statement") with the Commission with respect to a registered offer
to exchange the Old Notes for the Exchange Notes, which will have terms
substantially identical in all material respects to the Old Notes and (ii) use
their reasonable best efforts to cause such Exchange Offer Registration
Statement to be declared effective under the Securities Act within 120 days
after such issue date. Upon the Registration Statement being declared effective,
the Company will offer to holders of Old Notes who are able to make certain
representations an opportunity to exchange properly tendered Old Notes for
Exchange Notes. The Company has agreed to keep the Exchange Offer open for not
less than 30 days (or longer if required by applicable law) after the date
notice of such Exchange Offer is mailed to the holders of Old Notes. For each
Old Note surrendered to the Company, pursuant to such Exchange Offer, the holder
of such Old Notes will receive Exchange Notes having a principal amount at
maturity equal to that of the surrendered Old Note.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 165 days of the date of
original issue of the Old Notes, the Company and the Guarantors will, at their
own expense, use their reasonable best efforts to (a) as promptly as
practicable, file a shelf registration statement covering resales of the Old
Notes (a "Shelf Registration Statement"), (b) cause such Shelf Registration
Statement to be declared effective under the Securities Act and (c) keep
effective such Shelf Registration Statement until the earlier of 36 months
following the date of original issue and such time as all of the Old Notes have
been sold thereunder or otherwise cease to be a Transfer Restricted Security (as
defined in the Registration Rights Agreement). The Company and the Guarantors
will, in the event a Shelf Registration Statement is required to be filed by
them, provide to each holder of the Old Notes copies of the prospectus which is
a part of such Shelf Registration Statement, notify each such holder of the Old
Notes when such Shelf Registration Statement for the Old Notes has become
effective and take certain other actions as are required to permit unrestricted
resales of the Old Notes. A holder of the Old Notes who sells such Old Notes
pursuant to the Shelf Registration Statement generally would be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which is applicable
to such a holder (including certain indemnification and contribution rights and
obligations).
If (a) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement is declared effective by the Commission on or prior to
the 120th day after the date of original issuance of the Old Notes (the
"Effectiveness Target Date"), (b) the Exchange Offer Registration Statement
becomes effective and the Company and the Guarantors fail to consummate the
Exchange Offer within 45 days of the earlier of the effectiveness of such
registration statement or the Effectiveness Target Date, or (c) the Shelf
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Old Notes during the period
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (c) above a "Registration Default"), then the Company and
the Guarantors will pay Liquidated Damages to each Noteholder, with respect to
the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Notes held by such holder. Upon a Registration Default, Liquidated
Damages will accrue at the rate specified above until such Registration Default
is cured and the amount of the Liquidated Damages will increase by an additional
$.05 per week per $1,000 principal amount of Notes with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages of $.25 per week per $1,000 principal
amount of Notes (regardless of whether one or more than
105
<PAGE>
one Registration Default is outstanding). All accrued Liquidated Damages will be
paid by the Company and the Guarantors on each Interest Payment Date to the
Noteholders by wire transfer of immediately available funds or by mailing checks
to their registered addresses if no such accounts have been specified.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF EXCHANGE NOTES
The following summary of federal income tax consequences has been prepared
by Winston & Strawn. The summary is based on current law and certain proposed
regulations and is for general information only. Forthcoming legislative,
regulatory, judicial or administrative changes or interpretations could affect
the federal income tax consequences to holders of Exchange Notes. The tax
treatment of a holder may vary depending upon whether the holder is a
cash-method or accrual-method taxpayer and upon the holder's particular status.
For example, certain holders, including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers and foreign persons may be
subject to special rules not discussed below.
EXCHANGE OFFER
The exchange of Exchange Notes for Old Notes pursuant to the Exchange Offer
will not be treated as an "exchange" for federal income tax purposes because the
Exchange Notes will not be considered to differ materially in kind or extent
from the Old Notes. Rather, the Exchange Notes received by a holder will be
treated as a continuation of the Old Notes in the hands of such holder. As a
result, there will be no federal income tax consequences to holders exchanging
the Old Notes for the Exchange Notes pursuant to the Exchange Offer. The holder
must continue to include stated interest in income as if the exchange (and
waiver of accrued interest on the Old Notes from June 5, 1996 to the date of
issuance of the Exchange Notes) had not occurred. If, however, the exchange of
the Old Notes for the Exchange Notes were treated as an "exchange" for federal
income tax purposes, such exchange would constitute a recapitalization for
federal income tax purposes. Holders exchanging the Old Notes pursuant to such
recapitalization would not recognize any gain or loss upon the exchange.
SALE OR OTHER DISPOSITION OF EXCHANGE NOTES
A holder of an Exchange Note will have a tax basis in the Exchange Note
equal to the holder's purchase price for the Old Note, increased by the amount
of interest (and market discount) that is included in the holder's gross income
and decreased by payments of cash interest received by the holder.
A holder of an Exchange Note will generally recognize gain or loss on the
sale, exchange, redemption or retirement of the Exchange Note equal to the
difference (if any) between the amount realized from such sale, exchange,
redemption or retirement and the holder's basis in the Exchange Note. Such gain
or loss will generally be long-term capital gain (except to the extent
attributable to market discount) or loss if the Exchange Note has been held more
than one year (including the period that such holder held the Old Note prior to
exchange).
BACKUP WITHHOLDING
A noncorporate holder of Exchange Notes that either (a) is (i) a citizen or
resident of the United States, (ii) a partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source or (b) is not
described in the preceding clause (a), but whose income from interest with
respect to the Exchange Notes or proceeds from the disposition of the Exchange
Notes is effectively connected with such holder's conduct of a United States
trade or business, and that receives interest with respect to the Exchange Notes
or proceeds form the disposition of the Exchange Notes will generally not be
subject to backup withholding on such payments or distributions if it certifies,
under penalty of perjury, that it has furnished a correct Taxpayer
Identification Number ("TIN") and it is not subject to
106
<PAGE>
backup withholding either because it has not been notified by the Internal
Revenue Service that is subject to backup withholding or because the Internal
Revenue Service has notified it that it is no longer subject to backup
withholding. Such certification may be made on an Internal Revenue Service Form
W-9 or substantially similar form. However, backup withholding will apply to
such a holder if the holder (i) fails to furnish its TIN, (ii) furnishes an
incorrect TIN, (iii) is notified by the Internal Revenue Service that it has
failed to properly report payments of interest or dividends or (iv) under
certain circumstances, fails to make such certification.
The Company will withhold (at a rate of 31%) all amounts required by law to
be withheld from reportable payments made and with respect to the Exchange
Notes. Any amounts withheld from a payment to a holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
Holders of the Exchange Notes should consult their tax advisors regarding
the application of backup withholding in their particular situations, the
availability of an exemption therefrom, and the procedure for obtaining such an
exemption, if available.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF
EXCHANGE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX
CONSEQUENCES OF HOLDING, EXCHANGING OR SELLING THE EXCHANGE NOTES INCLUDING THE
APPLICATION AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS, AND OF
ANY CHANGES IN APPLICABLE TAX LAWS.
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an affiliate of the Company, (ii) a broker-dealer who acquired Old Notes
directly from the Company or (iii) a broker-dealer who acquired Old Notes as a
result of market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes; provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resales of
such Exchange Notes. To date, the Staff has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to transactions involving an exchange of securities such as the
exchange pursuant to the Exchange Offer (other than a resale of an unsold
allotment from the sale of the Old Notes to the Initial Purchasers) with the
prospectus contained in the registration statement. Pursuant to the Registration
Rights Agreement, the Company has agreed to permit Participating Broker-Dealers
and other persons, if any, subject to similar prospectus delivery requirements
to use this Prospectus in connection with the resale of such Exchange Notes. The
Company has agreed that, for a period of 180 days after the Exchange Date, it
will make this Prospectus, and any amendment or supplement to this Prospectus,
available to any broker-dealer that requests such documents in the Letter of
Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer -- Terms and
Conditions of the Letter of Transmittal." In addition, each holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Old Notes that were acquired by it as a result of market-making activities
or other trading activities, will be required to acknowledge that it will
deliver a prospectus in connection with any resale by it of such Exchange Notes.
107
<PAGE>
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealers and/ or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concession of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
LEGAL MATTERS
The validity of the Exchange Notes offered will be passed on for the Company
by Winston & Strawn, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company at December 31, 1995
and 1994, and for each of the three years in the period ended December 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing. The
consolidated financial statements of Jazz Enterprises, Inc. as of February 28,
1995 and 1994, and for the related statements of operations, stockholders'
equity (deficit), and cash flows for the years ended February 28, 1995 and 1994
and for the period from June 10, 1992 (date of inception) through February 28,
1993, included in this Prospectus have been audited by Grant Thornton LLP,
independent auditors, as stated in their report appearing herein.
108
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF ARGOSY GAMING COMPANY
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets at December 31, 1995 and 1994.................................................. F-3
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993..................... F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993................. F-5
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993....... F-6
Notes to Consolidated Financial Statements................................................................. F-7
Condensed Consolidated Balance Sheet at March 31, 1996 (unaudited)......................................... F-15
Condensed Consolidated Statements of Operations for the three months ended March 31, 1996
and 1995 (unaudited)...................................................................................... F-16
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1996
and 1995 (unaudited)...................................................................................... F-17
Notes to Condensed Consolidated Financial Statements (unaudited)........................................... F-18
FINANCIAL STATEMENTS OF JAZZ ENTERPRISES, INC.
Report of Independent Certified Public Accountants......................................................... F-21
Balance Sheets............................................................................................. F-22
Statements of Operations................................................................................... F-23
Statements of Stockholders Equity (Deficit)................................................................ F-24
Statements of Cash Flows................................................................................... F-25
Notes to Financial Statements.............................................................................. F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Argosy Gaming Company
We have audited the accompanying consolidated balance sheets of Argosy
Gaming Company as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Argosy Gaming
Company at December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
January 26, 1996
except for Note 13, as to
which the date is
July 1, 1996
F-2
<PAGE>
ARGOSY GAMING COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 16,159 $ 18,291
Marketable securities................................................................ 1,952 2,500
Accounts receivable.................................................................. 3,197 2,908
Income taxes receivable.............................................................. 2,197 1,374
Deferred income taxes................................................................ 1,372 1,469
Other current assets................................................................. 3,615 2,792
---------- ----------
Total current assets............................................................... 28,492 29,334
---------- ----------
Net property and equipment............................................................. 239,480 167,548
---------- ----------
Other assets:
Notes receivable..................................................................... 1,893 22,956
Deposits............................................................................. 2,051 2,640
Prepaid rent......................................................................... 2,917 4,000
Deferred finance costs, net of accumulated amortization of $1,813 in 1995 and $382 in
1994................................................................................ 5,404 4,393
Goodwill, net of accumulated amortization of $349.................................... 23,519
Other................................................................................ 6,126 1,960
---------- ----------
Total other assets................................................................. 41,910 35,949
---------- ----------
Total assets........................................................................... $ 309,882 $ 232,831
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................................... $ 16,921 $ 4,863
Accrued payroll and related expenses................................................. 6,842 4,022
Other accrued liabilities............................................................ 7,364 4,348
Installment contracts payable........................................................ 1,147 7,415
Progressive jackpot liabilities...................................................... 2,656 1,427
Current maturities of long-term debt................................................. 399 431
---------- ----------
Total current liabilities.......................................................... 35,329 22,506
---------- ----------
Long-term debt......................................................................... 169,303 115,000
Deferred income taxes.................................................................. 5,167 1,750
Minority interests..................................................................... 2,543 2,988
Commitments and contingent liabilities (Note 11)
Stockholders' equity:
Common stock, $.01 par; 60,000,000 shares authorized; 24,333,333 shares issued and
outstanding in 1995 and 1994........................................................ 243 243
Capital in excess of par............................................................. 71,865 71,865
Retained earnings.................................................................... 25,432 18,479
---------- ----------
Total stockholders' equity......................................................... 97,540 90,587
---------- ----------
Total liabilities and stockholders' equity............................................. $ 309,882 $ 232,831
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ARGOSY GAMING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Casino....................................................................... $ 237,613 $ 138,425 $ 60,182
Admissions................................................................... 15,300 12,177 6,440
Food, beverage and other..................................................... 18,537 12,036 4,381
---------- ---------- ---------
271,450 162,638 71,003
Less promotional allowances.................................................. (18,759) (9,593) (3,478)
---------- ---------- ---------
Net revenues................................................................... 252,691 153,045 67,525
---------- ---------- ---------
COSTS AND EXPENSES:
Casino....................................................................... 117,725 64,997 25,308
Food, beverage and other..................................................... 17,242 11,876 4,490
Other operating expenses..................................................... 16,910 9,897 5,078
Selling, general and administrative.......................................... 45,814 23,674 8,903
Depreciation and amortization................................................ 20,450 9,846 3,333
Development and preopening costs............................................. 3,411 9,761 4,609
Notes receivable writeoff.................................................... 3,477
Flood costs.................................................................. 1,477
---------- ---------- ---------
225,029 130,051 53,198
---------- ---------- ---------
Income from operations......................................................... 27,662 22,994 14,327
---------- ---------- ---------
OTHER INCOME (EXPENSE):
Interest income.............................................................. 436 1,081 1,254
Interest expense............................................................. (14,708) (8,182) (800)
---------- ---------- ---------
(14,272) (7,101) 454
---------- ---------- ---------
Income before income taxes and minority interest............................... 13,390 15,893 14,781
Income tax expense............................................................. (6,621) (6,453) (3,956)
Minority interest.............................................................. 184 195
---------- ---------- ---------
Net income..................................................................... $ 6,953 $ 9,635 $ 10,825
---------- ---------- ---------
---------- ---------- ---------
Net income per share........................................................... $ .29 $ .40
---------- ----------
---------- ----------
Pro forma net income per share (Note 8)........................................ $ .38
---------
---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ARGOSY GAMING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................. $ 6,953 $ 9,635 $ 10,825
Adjustments to reconcile net income to net cash provided from operating
activities:................................................................
Depreciation and amortization............................................. 21,880 10,452 3,486
Deferred income taxes..................................................... 4,381 830 (699)
Notes receivable writeoff................................................. 3,477
Minority interests........................................................ 184
Changes in operating assets and liabilities net of the effects of the
purchase of Jazz Enterprises, Inc.:
Accounts receivable..................................................... (289) (2,387) (422)
Other current assets.................................................... (699) (1,198) (345)
Accounts payable........................................................ 12,058 1,761 2,698
Accrued liabilities..................................................... 2,810 5,405 1,535
Income taxes receivable................................................. (823) 285 (1,659)
---------- ----------- -----------
Net cash provided from operating activities............................. 49,932 24,783 15,419
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of marketable securities............................................ 548 4,250 122,975
Purchases of marketable securities........................................ (129,725)
Increase in notes receivable.............................................. (5,178) (9,606) (13,350)
Purchases of property and equipment....................................... (71,854) (112,013) (36,027)
Acquisition of business................................................... (9,388)
Deposits.................................................................. (772) (1,345) (9,307)
---------- ----------- -----------
Net cash used in investing activities................................... (86,644) (118,714) (65,434)
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit.............................................. 49,500 44,400
Repayment of line of credit............................................... (4,000) (44,400)
Payments on installment contracts......................................... (6,268) (3,124) (3,009)
Proceeds from issuance of long-term debt.................................. 115,000
Payments on long-term debt................................................ (186) (3,901) (17,093)
Increase in deferred finance costs........................................ (2,441) (4,775)
Proceeds from public offering, net of expenses of $7,657.................. 74,676
Capital contribution from partner......................................... 1,718
Other..................................................................... (3,743) 1,618 96
---------- ----------- -----------
Net cash provided from financing activities............................. 34,580 104,818 54,670
---------- ----------- -----------
Net (decrease) increase in cash and cash equivalents........................ (2,132) 10,887 4,655
Cash and cash equivalents, beginning of year................................ 18,291 7,404 2,749
---------- ----------- -----------
Cash and cash equivalents, end of year...................................... $ 16,159 $ 18,291 $ 7,404
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ARGOSY GAMING COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CAPITAL IN TOTAL
COMMON EXCESS OF RETAINED STOCKHOLDERS'
SHARES STOCK PAR EARNINGS EQUITY
------------ ----------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992....................... 20,000,000 $ 200 $ 13 $ 2,599 $ 2,812
Sale of common stock........................... 4,333,333 43 74,633 74,676
Distributions to stockholders.................. (7,361) (7,361)
Termination of S-Corporation election.......... (2,781) 2,781
Net income..................................... 10,825 10,825
------------ ----- ------------ --------- ------------
Balance, December 31, 1993....................... 24,333,333 243 71,865 8,844 80,952
Net income..................................... 9,635 9,635
------------ ----- ------------ --------- ------------
Balance, December 31, 1994....................... 24,333,333 243 71,865 18,479 90,587
Net income..................................... 6,953 6,953
------------ ----- ------------ --------- ------------
Balance, December 31, 1995....................... 24,333,333 $ 243 $ 71,865 $ 25,432 $ 97,540
------------ ----- ------------ --------- ------------
------------ ----- ------------ --------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Argosy Gaming Company (collectively with its subsidiaries, "Argosy" or
"Company") is engaged in the business of providing casino style gaming and
related entertainment to the public and, through its subsidiaries, operates
riverboat casinos in Alton, Illinois; Riverside, Missouri; Baton Rouge,
Louisiana; and Sioux City, Iowa. Indiana Gaming Company, L.P., a limited
partnership in which the Company is general partner and holds a 57.5%
partnership interest, holds a preliminary certificate of suitability from the
Indiana Gaming Commission and is developing a riverboat casino and related
entertainment and support facilities in Lawrenceburg, Indiana ("Lawrenceburg
Project").
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. The
consolidated financial statements include the accounts of Argosy and its
controlled subsidiaries and partnerships. All significant intercompany
transactions have been eliminated. Under certain conditions subsidiaries are
required to obtain approval of state gaming authorities before making
distributions to Argosy.
CASH AND CASH EQUIVALENTS -- The Company considers cash and all highly
liquid investments with an original maturity of three months or less to be cash
equivalents.
MARKETABLE SECURITIES -- Marketable securities, classified as available for
sale, are recorded at fair market value which approximates cost.
PROPERTY AND EQUIPMENT -- Property and equipment is recorded at cost.
Depreciation and amortization is computed on the straight-line method over the
following estimated useful lives:
Leasehold improvements: 5 to 31 years
Riverboats, docks and improvements: 5 to 20 years
Furniture, fixtures and equipment: 5 to 10 years
DEFERRED FINANCE COSTS -- Deferred finance costs are amortized over the life
of the respective loans using the effective interest method.
GOODWILL -- Goodwill represents the cost in excess of fair value of net
assets acquired and is being amortized over 40 years.
CASINO REVENUES AND PROMOTIONAL ALLOWANCES -- The Company recognizes as
casino revenues the net win from gaming activities, which is the difference
between gaming wins and losses. The retail value of admissions and food and
beverage, which were provided to customers without charge, has been included in
revenues, and a corresponding amount has been deducted as promotional
allowances. The estimated cost of providing promotional allowances has been
included in costs and expenses as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Admissions....................................................... $ 4,601 $ 3,399 $ 1,015
Food, beverage and other......................................... 2,989 2,775 213
</TABLE>
ADMISSIONS REVENUE -- Admissions revenue is recognized at the time the
related service is performed.
ADVERTISING COSTS -- The Company expenses advertising costs as incurred.
Advertising expense was $7,908, $4,448 and $2,149 in 1995, 1994, and 1993
respectively.
DEVELOPMENT AND PREOPENING COSTS -- Development costs incurred in an effort
to identify and develop new gaming locations are expensed as incurred, as there
can be no assurance that such costs, if capitalized, would be realizable.
Preopening costs are expensed as incurred.
F-7
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
INCOME TAXES -- Prior to a reorganization that occurred on February 25, 1993
(in connection with the Company's initial public offering), the Company's
predecessor entities elected to be taxed as S-Corporations. Therefore, all
federal and certain state taxes were obligations of the individual stockholders
of the predecessor companies. The predecessor entities were, however, subject to
Illinois Replacement Tax, which is an S-Corporation level tax based on income.
The replacement tax rate was 1.5 percent for the period prior to the
reorganization.
Effective with the reorganization, the Company became subject to applicable
federal and state income taxes and, as a result, adopted the liability method in
accounting for income taxes. The effect of this change in tax status was to
increase net income for the year ended December 31, 1993, by $632.
RECLASSIFICATIONS -- Certain amounts in prior years' financial statements
have been reclassified to conform to the 1995 presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Land...................................................................................... $ 18,828 $ 6,555
Leasehold and shore improvements.......................................................... 14,449 14,561
Riverboats, docks and improvements........................................................ 113,707 109,957
Furniture, fixtures and equipment......................................................... 48,936 40,249
Construction in progress.................................................................. 77,188 11,892
---------- ----------
273,108 183,214
Less accumulated depreciation and amortization............................................ (33,628) (15,666)
---------- ----------
Net property and equipment.............................................................. $ 239,480 $ 167,548
---------- ----------
---------- ----------
</TABLE>
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Senior secured line of credit............................................................. $ 45,500 $
Convertible subordinated notes due June 1, 2001, convertible into common stock at $17.70
per share, interest payable semi-annually at 12%......................................... 115,000 115,000
Notes payable, principal and interest payments due quarterly through September 2015,
discounted at 10.5%...................................................................... 9,202
Other..................................................................................... 431
---------- ----------
169,702 115,431
Less: Current maturities.................................................................. 399 431
---------- ----------
Long-term debt, less current maturities................................................... $ 169,303 $ 115,000
---------- ----------
---------- ----------
</TABLE>
On March 8, 1995, the Company entered into a $100 million bank revolving
senior secured line of credit ("Credit Facility"). The Credit Facility accrues
interest, at the Company's option, at prime plus 1 1/4% or the London Eurodollar
lending rate plus 2.5% and expires on December 31, 1997. The weighted average
interest rate at December 31, 1995 was 8.5%. The Company also pays a commitment
equal to the sum of 50 basis points per annum on the unused portions of the
Credit Facility. The Credit Facility is secured by substantially all of the
assets of the Company. The Credit Facility is senior to the Company's other
long-term debt.
F-8
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. LONG-TERM DEBT (CONTINUED)
Terms of the Credit Facility allow for a $20 million revolving line of
credit, to be used for working capital and general corporate purposes and an $80
million expansion line of credit to be used for expansion projects. Availability
under the $80 million expansion line decreases quarterly beginning January 1,
1997. At December 31, 1995 outstanding borrowings under the $20 million
revolving line of credit were $12 million and borrowings under the $80 million
expansion line were $33.5 million. The outstanding principal balance under the
Credit Facility of $45,500 at December 31, 1995 approximates fair value.
The Credit Facility contains restrictions on the payment of dividends on the
Company's common stock and a requirement that any future joint ventures shall be
deemed subsidiaries of the Company and, will therefore, be required to be
additional secured guarantors under the Credit Facility, as well as other
covenants customary in a senior secured financing. The Company anticipates that
as of March 31, 1996 it will be unable to comply with certain financial
covenants contained in the credit agreement governing the Credit Facility. The
Company plans, however, to repay all borrowings outstanding and terminate the
Credit Facility with a portion of the net proceeds from a financing which is
underway. In the event the financing is not consummated prior to the anticipated
covenant violation, the Company believes that the requisite number of banks
participating in the Credit Facility will agree to waive the Company's
non-compliance with these financial covenants.
The convertible subordinated notes ("Notes") are convertible into common
stock at anytime and may be redeemed by the Company on or after June 1, 1997, in
whole or in part at specified percentages of principal plus accrued and unpaid
interest to the date of redemption. The Notes are subordinated to prior payment
in full of all senior indebtedness as defined, including such indebtedness
incurred in the future. The aggregate fair value of the notes based on the
closing NASDAQ Smallcap Market price was approximately $104,075 at December 31,
1995.
Interest expense for the years ended December 31, 1995, 1994, and 1993 was
$14,708 (net of $3,203 capitalized) $8,182 (net of $1,665 capitalized), and
$800, respectively.
Maturies of long-term debt at December 31, 1995 for each of the next five
fiscal years are as follows:
<TABLE>
<S> <C>
1996............................................... $ 399
1997............................................... 45,943
1998............................................... 491
1999............................................... 545
2000............................................... 604
</TABLE>
F-9
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. INCOME TAXES
Income tax expense for the years ended December 31, 1995, 1994 and 1993
consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal.................................................................. $ 1,522 $ 4,316 $ 3,918
State.................................................................... 760 1,307 587
--------- --------- ---------
2,282 5,623 4,505
--------- --------- ---------
Deferred:
Federal.................................................................. 3,704 815 (483)
State.................................................................... 635 15 (66)
--------- --------- ---------
4,339 830 (549)
--------- --------- ---------
Income tax expense......................................................... $ 6,621 $ 6,453 $ 3,956
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes for the years ended December 31, 1995, 1994
and 1993, differs from that computed at the federal statutory corporate tax rate
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Federal statutory rate...................................................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit.................................. 6.8 5.0 4.8
Prior year taxes............................................................ 4.4
Goodwill amortization....................................................... 0.9
Federal and state benefit of S-Corporation status through February 24,
1993....................................................................... (5.0)
Impact of change in tax status on net temporary differences................. (4.3)
Tax-exempt interest income.................................................. (0.7) (5.9)
Other, net.................................................................. 2.3 1.3 2.2
--- --- ---
49.4% 40.6% 26.8%
--- --- ---
--- --- ---
</TABLE>
The tax effects of significant temporary differences representing deferred
tax assets and liabilities at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Depreciation....................................................................... $ (8,684) $ (5,364)
Preopening......................................................................... 4,609 3,877
Other, net......................................................................... 876 1,206
--------- ---------
(3,199) (281)
Valuation allowance................................................................ (595)
--------- ---------
Net deferred tax liability......................................................... $ (3,794) $ (281)
--------- ---------
--------- ---------
</TABLE>
5. SUPPLEMENTAL CASH FLOW INFORMATION
The Company acquired equipment in the amounts of $1,681, $9,564 and $4,025
in 1995, 1994 and 1993 respectively which was financed through installment
contracts. In 1993 the Company issued $7,361 in unsecured notes payable to
stockholders relating to their fourth quarter 1992 and first quarter 1993
S-Corporation earnings.
F-10
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED)
The Company paid $16,052, $8,220 and $695 for interest, and $3,105, $5,325
and $5,968 for income taxes in 1995, 1994, and 1993 respectively.
6. LEASES
Future minimum lease payments for operating leases with initial terms in
excess of one year as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- ------------------------------------------------------------
<S> <C>
1996........................................................ $ 2,673
1997........................................................ 1,142
1998........................................................ 584
1999........................................................ 429
2000........................................................ 394
Thereafter.................................................. 15,352
</TABLE>
Rent expense for the years ended December 31, 1995, 1994, and 1993 was
$4,947, $2,221, and $555, respectively.
7. PURCHASE OF JAZZ ENTERPRISES, INC.
Effective May 30, 1995 the Company acquired 100% of the stock of Jazz
Enterprises, Inc. ("Jazz"), formerly a 10% partner in the Company's Baton Rouge,
Louisiana riverboat casino. The acquisition was accounted for as a purchase.
Terms of the transaction allowed the Company to acquire Jazz's 10% limited
partnership interest in the Company's Baton Rouge casino and all of Jazz's
interest in the Catfish Town real estate development.
Under terms of the purchase agreement, the Company made initial cash
payments to Jazz totalling $8,500 and is required to make additional payments of
$1,350 annually for ten years, and payments of $500 annually for the following
ten years. The net present value of these additional payments was approximately
$9,400 assuming a discount rate of 10.5%, and is included in long-term debt in
the December 31, 1995 balance sheet. In addition, the Company forgave loans to
Jazz and its principals of approximately $20,700, assumed certain construction
obligations, ordinary course accounts payable and other liabilities totalling
approximately $7,300 and paid expenses of approximately $900. Under terms of the
Purchase Agreement substantially all other obligations of Jazz existing at the
time of the purchase remain the responsibility of the former owners of Jazz.
The table below sets forth the pro forma historical operating results of the
Company for the years ended December 31, 1995 and 1994 giving effect to the
acquisition as if the acquisition occurred on January 1, 1994. The Company's
fiscal year end is December 31 and Jazz's year end is February 28. The pro forma
operating results of the years ended December 31, 1995 and 1994 were prepared
using the Company's operating results for the year ended December 31, 1995 and
1994 and Jazz's operating results for period January 1, 1995
F-11
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. PURCHASE OF JAZZ ENTERPRISES, INC. (CONTINUED)
through May 30, 1995 (the effective date which Jazz became a wholly owned
subsidiary of the Company) and the year ended February 28, 1995. Jazz's revenues
and net loss for the months of January and February 1995 are immaterial.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1995 1994
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net Revenues.................................................................... $ 252,719 $ 153,862
---------- ----------
---------- ----------
Income from operations.......................................................... 26,762 18,746
---------- ----------
---------- ----------
Interest expense................................................................ 15,480 10,156
---------- ----------
---------- ----------
Net income...................................................................... 5,712 5,393
---------- ----------
---------- ----------
Net income per share............................................................ .23 .22
---------- ----------
---------- ----------
</TABLE>
The pro forma condensed statements of operations are not necessarily
indicative of either future results of operations or results that might have
been achieved if the foregoing transactions had been consummated as of the
indicated dates.
8. PRO FORMA NET INCOME PER SHARE
Pro forma data presented below for 1993 assumes that the Company's
reorganization would have occurred on January 1, 1993 and that the Company would
have issued 551,798 additional shares of common stock to retire related party
debt of approximately $13,000 on January 1, 1993, and would have incurred
federal and state income taxes as a C-Corporation since that date.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
-------------
<S> <C>
Income before income taxes............................................................... $ 14,781
Reduction in interest charges............................................................ 145
Pro forma income tax expense............................................................. (5,821)
-------------
Pro forma net income..................................................................... $ 9,105
-------------
-------------
Pro forma common shares outstanding...................................................... 23,763,513
-------------
-------------
</TABLE>
Pro forma income tax expense has been computed under SFAS 109 using an
effective tax rate of 39% based on taxable income of approximately $14,926 in
1993.
9. STOCK OPTION PLANS
The Company adopted the Argosy Gaming Company Stock Option Plan, as amended,
("Stock Option Plan"), which provides for the grant of non-qualified stock
options for up to 2,500,000 shares of common stock to key employees of the
Company. As of December 31, 1995, options representing 2,445,253 shares of
common stock were outstanding at exercise prices ranging between $16.75 and
$19.38 per share. These options expire in December 2003 through August 2005.
The Company also has adopted the Argosy Gaming Company 1993 Directors Stock
Option Plan ("Directors Option Plan"), which provides for a total of 50,000
shares of common stock to be authorized and
F-12
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. STOCK OPTION PLANS (CONTINUED)
reserved for issuance. The Directors Option Plan provides for the grant of
non-qualified stock options at fair market value to non-employee directors of
the Company as of the date such individuals become directors of the Company.
Under the Directors Option Plan options for 21,000 shares of common stock
are outstanding at December 31, 1995 at prices ranging from $11.50 to $19.00.
The directors options expire between 1998 and 2000.
Options outstanding under these plans at December 31, 1995, are exercisable
as follows:
<TABLE>
<CAPTION>
STOCK
OPTION DIRECTORS
PLAN OPTION PLAN
--------- -----------
<S> <C> <C>
Currently exercisable............................................................. 569,705 17,000
1996.............................................................................. 465,548 2,000
1997.............................................................................. 460,000 2,000
1998.............................................................................. 460,000
1999.............................................................................. 460,000
2000.............................................................................. 30,000
</TABLE>
The Company follows Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25) and related interpretations in accounting
for its employee stock options. Under APB 25, when the exercise price of
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
10. EMPLOYEES BENEFIT PLAN
In 1994, the Company established a 401(k) defined-contribution plan which
covers substantially all of its full-time employees. Participants can contribute
a maximum of 10% of their eligible salaries (as defined) subject to maximum
limits, as determined by provisions of the Internal Revenue Code, and the
Company will match 100% of participants' contributions up to 5% of their
eligible salaries. Expense recognized under the Plan was approximately $1,708
and $587 in 1995 and 1994, respectively.
11. COMMITMENTS AND CONTINGENT LIABILITIES
DEVELOPMENT OPPORTUNITIES
LAWRENCEBURG, INDIANA -- On June 30, 1995 Indiana Gaming Company L.P. (the
"Indiana Partnership") was awarded a preliminary suitability certificate from
the Indiana Gaming Commission to develop a riverboat casino project on the Ohio
River in Lawrenceburg, Indiana. The Company is a 57.5% general partner in the
Indiana Partnership.
Capital contributions to the Indiana Partnership will be made on the same
basis as the partners' equity ownership. Funding for the Indiana Partnership is
expected to be provided by capital contributions and capital loans by the
partners. The partnership's current estimate for the development and
construction costs for the Lawrenceburg casino and entertainment project is $210
million.
Additionally, under the Lawrenceburg partnership agreement, after the third
anniversary date of commencement of operations at the Lawrenceburg Casino, each
limited partner has the right to sell its interest to the other partners (pro
rata in accordance with their respective percentage interests).
F-13
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
This proposed gaming project is subject to the satisfaction of numerous
conditions. Before gaming can commence, the Company must obtain numerous permits
and licenses, including licensing for its employees as well as final licensing
from the gaming commission of the State. In addition, the Company must construct
gaming facilities. There can be no assurance that this proposed gaming project
will become operational.
OTHER -- A predecessor entity to the Company ("Predecessor"), as a result of
a certain shareholder loan transaction, could be subject to federal and certain
state income taxes (plus interest and penalties, if any) if it is determined
that it failed to satisfy all of the requirements of the S-Corporation
provisions of the Internal Revenue Code ("Code") relating to the prohibition
concerning a second class of stock.
An audit is currently being conducted by the Internal Revenue Service
("IRS") of the Company's federal income tax returns for the 1992 and 1993 tax
years and the IRS has asserted the S-Corporation status as one of the issues
although the IRS has yet to make a formal claim of deficiency. If the IRS
successfully challenges the Predecessor's S-corporation status, the Company
would be required to pay federal and certain state income taxes on the
Predecessor's taxable income from the commencement of its operations until
February 25, 1993 (plus interest and penalties, if any, thereon until the date
of payment). If the Predecessor was required to pay federal and state income
taxes on its taxable earnings through February 25, 1993, such payments could
amount to approximately $11,400, including interest through December 31, 1995,
but excluding penalties, if any. While the Company believes the Predecessor has
legal authority for its position that it is not subject to federal and certain
state income taxes because it met the S-Corporation requirements, no assurances
can be given that the Predecessor's position will be upheld. This contingent
liability could have a material adverse effect on the Company's results of
operations, financial condition and cash flows. No provision has been made for
this contingency in the accompanying consolidated financial statements.
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1995:
Net revenues.......................................................... $ 60,374 $ 65,162 $ 66,637 $ 60,518
Income from operations................................................ 6,221 10,028 6,585 4,828
Other expense, net.................................................... 3,844 3,859 3,879 2,690
Net income............................................................ 1,468 3,312 1,654 519
Net income per share.................................................. .06 .14 .07 .02
1994:
Net revenues.......................................................... $ 22,906 $ 26,269 $ 44,323 $ 59,547
Income from operations................................................ 2,333 3,481 5,433 11,747
Other expense, net.................................................... 138 948 2,371 3,644
Net income............................................................ 1,341 1,491 1,837 4,966
Net income per share.................................................. .06 .06 .08 .20
</TABLE>
- ------------
(a) Income from operations for the third quarter of 1995 includes a charge of
$3,477 related to the writeoff of a note receivable.
F-14
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
13. SUBSEQUENT EVENT
On May 31, 1996, the Company issued $235,000,000 of 13 1/4% First Mortgage
Notes due 2004 (the "Notes") in a private placement transaction. On July 1,
1996, the Company filed a Registration Statement on Form S-4 to effect an
exchange of the privately placed Notes with identical Notes registered with the
Securities and Exchange Commission. The Notes rank senior in right of payment to
all existing and future indebtedness of the Company.
The Notes are secured, subject to certain prior liens, by a first lien on
(i) substantially all of the assets of the Company including the assets used in
the Company's Alton, Riverside, Baton Rouge, and Sioux City operations, (ii) a
pledge of all the capital stock of, and partnership interests in, the Company's
subsidiaries, excluding the Company's partnership interest in its Sioux City
property, (iii) a pledge of the intercompany notes payable to the Company from
its subsidiaries and (iv) an assignment of the proceeds of the management
agreement relating to the proposed Lawrenceburg Casino project. The collateral
for the notes does not include assets of the Company's Lawrenceburg Casino
project.
The following tables present summarized balance sheet and operating
statement information of the Company as of December 31, 1995 and 1994 and for
each of the years in the three year period ended December 31, 1995. The column
labeled "Parent Company" represents the holding company for each of the
Company's direct subsidiaries, the column labeled "Guarantors" represents each
of the Company's direct subsidiaries, all of which are wholly-owned by the
parent company, and the column labeled "Non-Guarantors" represents the
partnerships which operate the Company's casino in Sioux City and its proposed
casino in Lawrenceburg, Indiana.
Summarized balance sheet information as of December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------------------------
PARENT NON-
COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
Current assets............................... $ 5,998 $ 25,562 $ 2,904 $ (5,972) $ 28,492
Non-current assets........................... 259,670 259,418 21,140 (258,838) 281,390
---------- ----------- ----------- ------------ ------------
$ 265,668 $ 284,980 $ 24,044 $ (264,810) $ 309,882
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
Liabilities and Equity:
Current liabilities.......................... $ 6,648 $ 27,316 $ 3,861 $ (2,496) $ 35,329
Noncurrent liabilities....................... 161,480 15,533 3,401 (3,401) 177,013
Shareholder's equity......................... 97,540 242,131 16,782 (258,913) 97,540
---------- ----------- ----------- ------------ ------------
$ 265,668 $ 284,980 $ 24,044 $ (264,810) $ 309,882
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
<CAPTION>
DECEMBER 31, 1994
----------------------------------------------------------------
PARENT NON-
COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
Current assets............................... $ 8,432 $ 20,665 $ 237 $ -- $ 29,334
Non-current assets........................... 199,759 191,637 4,575 (192,474) 203,497
---------- ----------- ----------- ------------ ------------
$ 208,191 $ 212,302 $ 4,812 $ (192,474) $ 232,831
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
Liabilities and Equity:
Current liabilities.......................... $ 2,148 $ 20,358 $ -- $ -- $ 22,506
Noncurrent liabilities....................... 115,456 4,282 -- -- 119,738
Shareholder's equity......................... 90,587 187,662 4,812 (192,474) 90,587
---------- ----------- ----------- ------------ ------------
$ 208,191 $ 212,302 $ 4,812 $ (192,474) $ 232,831
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-15
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
13. SUBSEQUENT EVENT (CONTINUED)
Summarized operating statement information for the years ended December 31,
1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------------------
PARENT NON-
COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues..................................... $ 4,071 $ 233,205 $ 21,994 $ (6,579) $ 252,691
Costs and expenses............................... 14,161 195,517 21,930 (6,579) 225,029
Net interest income (expense).................... (8,964) (5,185) (123) -- (14,272)
Net income (loss)................................ 6,953 18,101 (59) (18,042) 6,953
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------------------------
PARENT NON-
COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues..................................... $ 4,844 $ 152,654 -- $ (4,453) $ 153,045
Costs and expenses............................... 9,521 124,144 839 (4,453) 130,051
Net interest income (expense).................... (6,620) (481) -- -- (7,101)
Net income (loss)................................ (9,635) 17,252 (839) (16,413) 9,635
<CAPTION>
DECEMBER 31, 1993
-----------------------------------------------------------------
PARENT NON-
COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues..................................... $ 0 $ 67,525 -- -- $ 67,525
Costs and expenses............................... 3,301 49,362 535 -- 53,198
Net interest income (expense).................... 1,226 (772) -- -- 454
Net income (loss)................................ 10,825 11,035 (535) (10,500) 10,825
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-16
<PAGE>
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................................................... $ 28,129
Other current assets............................................................................... 12,390
-----------
Total current assets............................................................................. 40,519
-----------
NET PROPERTY AND EQUIPMENT........................................................................... 263,076
OTHER ASSETS:
Goodwill........................................................................................... 23,371
Other, net......................................................................................... 17,959
-----------
TOTAL OTHER ASSETS................................................................................. 41,330
-----------
TOTAL ASSETS......................................................................................... $ 344,925
-----------
-----------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities........................................................... $ 28,656
Other current liabilities.......................................................................... 7,170
-----------
Total current liabilities........................................................................ 35,826
-----------
LONG-TERM DEBT....................................................................................... 194,803
OTHER LONG-TERM OBLIGATIONS.......................................................................... 17,803
STOCKHOLDERS' EQUITY:
Common stock, $.01 par; 60,000,000 shares authorized; 24,333,333 shares issued and outstanding in
1995 and 1994..................................................................................... 243
Capital in excess of par........................................................................... 71,865
Retained earnings.................................................................................. 24,385
-----------
Total stockholders' equity....................................................................... 96,493
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................................... $ 344,925
-----------
-----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-17
<PAGE>
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Casino................................................................................ $ 58,791 $ 56,593
Admissions............................................................................ 1,995 4,168
Food, beverage and other.............................................................. 6,055 3,703
----------- -----------
66,841 64,464
Less: promotional allowances.......................................................... (4,152) (4,090)
----------- -----------
Net revenues............................................................................ 62,689 60,374
COSTS AND EXPENSES:
Casino................................................................................ 29,071 28,987
Food, beverage and other.............................................................. 5,276 4,160
Other operating expenses.............................................................. 4,368 3,384
Selling, general and administrative................................................... 14,318 12,577
Depreciation and amortization......................................................... 5,889 4,579
Development and preopening costs...................................................... 1,855 466
----------- -----------
60,777 54,153
----------- -----------
Income from operations.................................................................. 1,912 6,221
----------- -----------
OTHER INCOME (EXPENSE):
Interest income....................................................................... 90 98
Interest expense...................................................................... (4,211) (3,942)
----------- -----------
(4,121) (3,844)
----------- -----------
(Loss) Income before income taxes and minority interests................................ (2,209) 2,377
Income tax benefit (expense)............................................................ 867 (934)
Minority interests...................................................................... 295 25
----------- -----------
Net (loss) income....................................................................... $ (1,047) $ 1,468
----------- -----------
----------- -----------
NET (LOSS) INCOME PER SHARE............................................................. $ (.04) $ .06
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-18
<PAGE>
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income.................................................................. $ (1,047) $ 1,468
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization...................................................... 6,314 5,026
Minority interests................................................................. (295) (25)
Changes in operating assets and liabilities:
Other current assets............................................................. (57) (1,746)
Accounts payable and accrued liabilities......................................... 841 9,751
----------- -----------
Net cash provided by operating activities...................................... 5,756 14,474
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits........................................................................... (132) (19)
Increase in notes receivable....................................................... (2,295)
Purchases of property and equipment................................................ (29,283) (12,559)
----------- -----------
Net cash used in investing activities.......................................... (29,415) (14,873)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit....................................................... 25,500 2,000
Repayments on line of credit....................................................... (2,000)
Payments on long-term debt and installment contracts............................... (345) (1,861)
Capital contributions from partner................................................. 10,389
Increase in other assets........................................................... 85 (1,811)
----------- -----------
Net cash provided by (used in) financing activities.............................. 35,629 (3,672)
----------- -----------
Net increase (decrease) in cash and cash equivalents................................. 11,970 (4,071)
Cash and cash equivalents, beginning of period....................................... 16,159 18,291
----------- -----------
Cash and cash equivalents, end of period............................................. $ 28,129 $ 14,220
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-19
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION
Argosy Gaming Company (collectively with its subsidiaries, "Argosy" or
"Company") is engaged in the business of providing casino style gaming and
related entertainment to the public and, through its subsidiaries, operates
riverboat casinos in Alton, Illinois; Riverside, Missouri; Baton Rouge,
Louisiana; and Sioux City, Iowa. Also, Indiana Gaming Company, L.P., a limited
partnership in which the Company is general partner and holds a 57.5%
partnership interest, holds a preliminary certificate of suitability from the
Indiana Gaming Commission and is developing a riverboat casino and related
entertainment and support facilities in Lawrenceburg, Indiana ("Lawrenceburg
Project").
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Interim results may not necessarily be indicative of
results which may be expected for any other interim period or for the year as a
whole. For further information, refer to the financial statements and footnotes
included elsewhere in this Offering Memorandum. The accompanying unaudited
condensed consolidated financial statements contain all adjustments which are,
in the opinion of management, necessary to present fairly the financial position
and the results of operations for the periods indicated. Such adjustments
include only normal recurring accruals. Certain 1995 amounts have been
reclassified to conform to the 1996 financial statement presentation.
2. SENIOR SECURED LINE OF CREDIT
On March 8, 1995, the Company entered into a $100 million revolving secured
line of credit, with a group of banks (the "Credit Facility"). The Credit
Facility accrues interest, at the Company's option, at prime + 1 1/4% or the
London Eurodollar lending rate plus 250 basis points and expires on December 31,
1997. The Credit Facility is secured by substantially all of the assets of the
Company. The Credit Facility is senior to the Company's 12% Convertible
Subordinated Notes due 2001.
Terms of the Credit Facility allow for a $20 million revolving line of
credit, to be used for working capital and general corporate purposes and an $80
million expansion line of credit to be used for expansion projects. Availability
under the $80 million expansion line decreases beginning January 1, 1997.
The Credit Facility contains restrictions on the payment of dividends on the
Company's common stock and a requirement that any future joint ventures shall be
deemed subsidiaries of the Company and, will therefore, be required to be
additional secured guarantors under the credit agreement, as well as other
covenants customary in a senior secured financing.
On May 15, 1996, the Company obtained a waiver from compliance with certain
financial covenants from the banks participating in the Credit Facility. This
waiver is valid until June 28, 1996. The Company plans to consummate a proposed
$235 million offering of first mortgage notes prior to June 28, 1996 and to
repay all borrowings outstanding under and terminate the Credit Facility with a
portion of the net proceeds from the proposed financing.
3. ACQUISITION OF JAZZ ENTERPRISES, INC.
Effective May 30, 1995 the Company acquired 100% of the stock of Jazz
Enterprises, Inc. ("Jazz"), formerly a 10% partner in the Company's Baton Rouge,
Louisiana riverboat casino. The acquisition was accounted for as a purchase.
Terms of the transaction allowed the Company to acquire Jazz's 10% limited
partnership interest in the Company's Baton Rouge Casino, all of Jazz's interest
in the Catfish Town real estate development and allowed the Company to
extinguish the external lease fee between the Baton Rouge Casino and Jazz.
F-20
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. ACQUISITION OF JAZZ ENTERPRISES, INC. (CONTINUED)
Under terms of the purchase agreement the Company made initial payments to
Jazz totalling $8,500 and is required to make additional payments of $1,350
annually for ten years, and payments of $500 annually for the following ten
years. The net present value of these additional payments was approximately
$9,400, at the date of acquisition, assuming a discount rate of 10.5%. In
addition, the Company forgave loans to Jazz and its principals of approximately
$20,700 and assumed certain construction obligations, ordinary course accounts
payable and other liabilities totalling approximately $7,300 and paid expenses
of approximately $900. Under terms of the Purchase Agreement, substantially all
other obligations of Jazz existing at the time of the purchase remain the
responsibility of the former owners of Jazz.
The table below sets forth the pro forma historical operating results of the
Company for the three months ended March 31, 1996 and 1995 giving effect to the
acquisition as if the acquisition occurred on January 1, 1995. The Company's
fiscal year end is December 31 and Jazz's year end is February 28. The pro forma
operating results for the three months ended March 31, 1996 and 1995 were
prepared using the Company's and Jazz's historical operating results for the
three months ended March 31, 1996 and 1995 respectively.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
<S> <C> <C>
Net Revenues........................................................ $ 62,689 $ 60,402
------- -------
------- -------
Net Income.......................................................... (1,047) 1,256
------- -------
------- -------
Earnings per share.................................................. (.04) .05
------- -------
------- -------
</TABLE>
The unaudited pro forma condensed statements of operations are not
necessarily indicative of either future results of operations or results that
might have been achieved if the foregoing transactions had been consummated as
of the indicated dates.
4. COMMITMENTS AND CONTINGENT LIABILITIES
LAWRENCEBURG, INDIANA DEVELOPMENT -- On June 30, 1995 Indiana Gaming Company
L.P. (the "Indiana Partnership") was awarded a preliminary suitability
certificate from the Indiana Gaming Commission to develop a riverboat casino
project on the Ohio River in Lawrenceburg, Indiana. The Company is a 57.5%
general partner in the Indiana Partnership.
Capital contributions to the Indiana Partnership, up to a total project cost
of $225 million, will be made on the same basis as the partners' equity
ownership with any excess project cost being the responsibility of the Company.
Funding for the Indiana Partnership is expected to be provided by capital
contributions and capital loans by the partners. The partnership's current
estimate for the development and construction costs for the Lawrenceburg Project
is $210 million.
Additionally, under the Lawrenceburg partnership agreement, after the third
anniversary date of commencement of operations at the Lawrenceburg Casino, each
limited partner has the right to sell its interest to the other partners (pro
rata in accordance with their respective percentage interests).
This proposed gaming project is subject to the satisfaction of numerous
conditions. Before gaming can commence, the Company must obtain numerous permits
and licenses, including licensing for its employees as well as final licensing
from the gaming commission of the State. In addition, the Company must construct
gaming facilities. There can be no assurance that this proposed gaming project
will become operational.
F-21
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
OTHER -- A predecessor entity to the Company ("Predecessor"), as a result of
a certain shareholder loan transaction, could be subject to federal and certain
state income taxes (plus interest and penalties, if any) if it is determined
that it failed to satisfy all of the requirements of the S-Corporation
provisions of the Internal Revenue Code ("Code") relating to the prohibition
concerning a second class of stock.
An audit is currently being conducted by the Internal Revenue Service
("IRS") of the Company's federal income tax returns for the 1992 and 1993 tax
years and the IRS has asserted the S-Corporation status as one of the issues
although the IRS has yet to make a formal claim of deficiency. If the IRS
successfully challenges the Predecessor's S-Corporation status, the Company
would be required to pay federal and certain state income taxes on the
Predecessor's taxable income from the commencement of its operations until
February 25, 1993 (plus interest and penalties, if any, thereon until the date
of payment). If the Predecessor was required to pay federal and state income
taxes on its taxable earnings through February 25, 1993, such payments could
amount to approximately $11,600, including interest through March 31, 1996, but
excluding penalties, if any. While the Company believes the Predecessor has
legal authority for its position that it is not subject to federal and certain
state income taxes because it met the S-Corporation requirements, no assurances
can be given that the Predecessor's position will be upheld. This contingent
liability could have a material adverse effect on the Company's results of
operations, financial condition and cash flows. No provision has been made for
this contingency in the accompanying condensed consolidated financial
statements.
The Company is subject, from time to time, to various legal and regulatory
proceedings, in the ordinary course of business. The Company believes that these
proceedings will not have a material effect on the financial condition of the
Company.
F-22
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Jazz Enterprises, Inc.
We have audited the accompanying balance sheets of Jazz Enterprises, Inc. as
of February 28, 1995 and 1994, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years ended February 28,
1995 and 1994 and for the period from June 10, 1992 (date of inception) through
February 28, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jazz Enterprises, Inc. as of
February 28, 1995 and 1994, and the results of its operations and its cash flows
for each of the two years in the period ended February 28, 1995 and for the
period June 10, 1992 (date of inception) through February 28, 1993 in conformity
with generally accepted accounting principles.
Grant Thornton LLP
Reno, Nevada
July 10, 1995
F-23
<PAGE>
JAZZ ENTERPRISES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
FEBRUARY 28,
----------------------------
1995 1994
MAY 30, ------------- -------------
1995
-------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents......................................... $ 5,572 $ 1,508 $ 140,122
Receivables....................................................... 47,516 47,516 36,394
Due from affiliate................................................ -- -- 175,000
Prepaid expenses.................................................. 161,563 170,794 77,760
------------- ------------- -------------
Total current assets............................................ 214,651 219,818 429,276
PROPERTY AND EQUIPMENT.............................................. 21,477,253 21,427,872 13,273,609
NOTES RECEIVABLE -- RELATED PARTY................................... 1,892,966 1,861,523 807,203
OTHER ASSETS
Escrow deposits................................................... -- -- 255,000
Investment in partnership......................................... 1,550,458 1,550,458 350,232
Deposits.......................................................... 198,247 198,714 231,868
Other assets...................................................... 3,359 3,647 4,791
------------- ------------- -------------
$ 25,336,934 $ 25,262,032 $ 15,351,979
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank overdraft.................................................... $ -- $ 234,059 $ --
Short-term borrowings............................................. 1,810,680 1,810,680 --
Short-term borrowings -- related party............................ 7,879,087 7,879,087 --
Notes payable..................................................... 3,352,469 3,352,469 --
Accounts payable.................................................. 490,324 434,651 135,399
Accounts payable -- affiliate..................................... 362,983 182,638 --
Accrued liabilities............................................... 949,936 815,872 54,119
State income taxes payable........................................ 130,000 65,000 37,722
------------- ------------- -------------
Total current liabilities....................................... 14,975,479 14,774,456 227,240
------------- ------------- -------------
NOTES PAYABLE....................................................... 15,000,000 15,000,000 17,081,376
------------- ------------- -------------
COMMITMENTS AND CONTINGENCIES....................................... -- -- --
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value, 100,000 shares authorized, 200 shares
issued........................................................... 1 1 1
Additional paid-in capital........................................ 3,194,278 2,547,891 100,000
Accumulated deficit............................................... (7,832,824) (7,060,316) (2,056,638)
------------- ------------- -------------
(4,638,545) (4,512,424) (1,956,637)
------------- ------------- -------------
$ 25,336,934 $ 25,262,032 $ 15,351,979
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE>
JAZZ ENTERPRISES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 10, 1992
THREE MONTHS ENDED (DATE OF
------------------------ YEAR ENDED FEBRUARY 28, INCEPTION)
MAY 30, MAY 31, ---------------------------- THROUGH
1995 1994 1995 1994 FEBRUARY 28, 1993
----------- ----------- ------------- ------------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Rental revenue -- buildings....... $ -- $ 245,882 $ 817,346 $ 918,222 $ --
Lease revenue..................... -- -- 812,793 -- --
----------- ----------- ------------- ------------- -----------------
-- 245,882 1,630,139 918,222 --
----------- ----------- ------------- ------------- -----------------
COSTS AND EXPENSES
Rental expenses................... 47,579 180,299 788,221 497,540 --
Pre-opening expenses
Rent expense.................... 6,205 73,196 288,512 159,684 --
Salaries and employee
benefits....................... 136,674 227,335 1,361,953 434,672 22,466
Advertising and business
promotion...................... 27,200 26,381 66,030 93,492 --
Consulting fees................. 4,668 21,866 30,971 203,413 --
Professional fees............... 120,595 22,595 1,051,244 40,347 1,029
Management fees................. 180,000 180,000 720,000 720,000 120,000
Travel.......................... 9,826 66,869 218,145 291,733 5,930
Other general and administrative
costs.......................... 87,631 127,165 457,548 328,960 18,216
Depreciation and amortization... 25,078 14,633 62,118 11,598 172
Write down associated with real
estate owned................... -- -- 1,385,680 -- --
----------- ----------- ------------- ------------- -----------------
645,456 940,339 6,430,422 2,781,439 167,813
----------- ----------- ------------- ------------- -----------------
OTHER INCOME (EXPENSE)
Interest income................... 31,459 9,213 82,682 12,114 --
Gain on sale of assets............ -- -- 59,757 -- --
Interest expense.................. (93,511) (22,253) (282,259) -- --
----------- ----------- ------------- ------------- -----------------
(62,052) (13,040) (139,820) 12,114 --
----------- ----------- ------------- ------------- -----------------
Loss before income tax
provision...................... (707,508) (707,497) (4,940,103) (1,851,103) (167,813)
INCOME TAX PROVISION................ 65,000 59,990 63,575 37,722 --
----------- ----------- ------------- ------------- -----------------
NET LOSS........................ $ (772,508) $ (767,487) $ (5,003,678) $ (1,888,825) $ (167,813)
----------- ----------- ------------- ------------- -----------------
----------- ----------- ------------- ------------- -----------------
NET LOSS PER SHARE.............. $ (3,862.54) $ (3,837.44) $ (25,018.39) $ (9,444.13) $ (839.07)
----------- ----------- ------------- ------------- -----------------
----------- ----------- ------------- ------------- -----------------
SHARES USED IN CALCULATION...... 200 200 200 200 200
----------- ----------- ------------- ------------- -----------------
----------- ----------- ------------- ------------- -----------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE>
JAZZ ENTERPRISES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT FEBRUARY 28, 1993....................... 200 $ 1 $ 100,000 $ (167,813) $ (67,812)
Net loss........................................... -- -- -- (1,888,825) (1,888,825)
--- --- ------------ ------------- -------------
BALANCE AT FEBRUARY 28, 1994....................... 200 1 100,000 (2,056,638) (1,956,637)
Capital contributions.............................. -- -- 2,447,891 -- 2,447,891
Net loss........................................... -- -- -- (5,003,678) (5,003,678)
--- --- ------------ ------------- -------------
BALANCE AT FEBRUARY 28, 1995....................... 200 1 2,547,891 (7,060,316) (4,512,424)
Capital contributions (unaudited).................. -- -- 646,387 -- 646,387
Net loss (unaudited)............................... -- -- -- (772,508) (772,508)
--- --- ------------ ------------- -------------
BALANCE AT MAY 30, 1995 (UNAUDITED)................ 200 $ 1 $ 3,194,278 $ (7,832,824) $ (4,638,545)
--- --- ------------ ------------- -------------
--- --- ------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE>
JAZZ ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 10, 1992
THREE MONTHS ENDED (DATE OF
--------------------- YEAR ENDED FEBRUARY 28, INCEPTION)
MAY 30, MAY 31, ----------------------- THROUGH
1995 1994 1995 1994 FEBRUARY 28, 1993
--------- ---------- ---------- ----------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................. $(772,508) $ (767,487) $(5,003,678) $(1,888,825) $(167,813)
--------- ---------- ---------- ----------- -----------------
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization........... 35,643 25,198 104,377 36,249 172
Write down associated with real estate
owned.................................. -- -- 1,385,680 -- --
Gain on sale of assets.................. -- -- (59,757) -- --
Investment in partnership............... -- (107,522) (700,172) (315,177) (35,055)
(Increase) decrease in receivables...... -- 29,144 (11,122) (36,394) --
(Increase) decrease in prepaid
expenses............................... 9,231 32,647 (93,034) (77,760) --
(Increase) decrease in other assets..... 467 3,616 35,154 (235,089) (2,499)
Increase in accounts payable and accrued
liabilities............................ 189,737 1,743,205 1,370,860 181,573 450
Increase in state income taxes
payable................................ 65,000 60,000 27,278 37,722 --
--------- ---------- ---------- ----------- -----------------
Total adjustments..................... 300,078 1,786,288 2,057,264 (408,876) (36,932)
--------- ---------- ---------- ----------- -----------------
Net cash provided by (used in)
operating activities................. (472,430) 1,018,801 (2,946,414) (2,297,701) (204,745)
--------- ---------- ---------- ----------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase (decrease) in bank overdraft..... (234,059) -- 234,059 -- --
Proceeds from sale of assets.............. -- -- 100,529 -- --
(Increase) decrease in escrow deposit..... -- (50,303) 255,000 (255,000) --
Capital expenditures...................... (84,736) (1,671,536) (5,330,708) (13,143,010) (158,595)
Loans and advances to related parties..... (31,443) 71,752 (1,054,320) (807,203) --
--------- ---------- ---------- ----------- -----------------
Net cash used in investing
activities........................... (350,238) (1,650,087) (5,795,440) (14,205,213) (158,595)
--------- ---------- ---------- ----------- -----------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-27
<PAGE>
JAZZ ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS -- CONTINUED
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 10, 1992
THREE MONTHS ENDED (DATE OF
--------------------- YEAR ENDED FEBRUARY 28, INCEPTION)
MAY 30, MAY 31, ----------------------- THROUGH
1995 1994 1995 1994 FEBRUARY 28, 1993
--------- ---------- ---------- ----------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings --
related party............................ $ -- $2,500,000 $7,879,087 $ -- $ --
Proceeds from issuance of long-term
debt..................................... -- 51,611 51,611 15,348,389 --
Principal payments on long-term debt...... -- -- -- (400,000) --
Advances to and from affiliate............ 180,345 (75,206) 761,002 1,339,702 --
Payments to and from affiliate............ -- 175,000 175,000 (1,778,242) 263,540
Contributed capital....................... 646,387 -- 1,869,527 -- 100,000
Increase (decrease) in construction
related payable.......................... -- (2,132,987) (2,132,987) 2,132,987 --
--------- ---------- ---------- ----------- -----------------
Net cash provided by financing
activities............................. 826,732 518,418 8,603,240 16,642,836 363,540
--------- ---------- ---------- ----------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 4,064 (112,868) (138,614) 139,922 200
CASH AT BEGINNING OF PERIOD................. 1,508 140,122 140,122 200 --
--------- ---------- ---------- ----------- -----------------
CASH AT END OF PERIOD....................... $ 5,572 $ 27,254 $ 1,508 $ 140,122 $ 200
--------- ---------- ---------- ----------- -----------------
--------- ---------- ---------- ----------- -----------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest.................... $ 104 $ 422 $ 5,692 $ -- $ --
Cash paid for state income taxes.......... -- -- 37,722 -- --
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment acquisitions financed by
vendor................................... $ -- $ 18,663 $ 18,663 $ 7,495 $ --
Due to affiliate paid by stockholders..... -- -- 578,364 -- --
Construction costs and other payables paid
on behalf of the Company by Argosy Gaming
Company.................................. -- -- 3,352,469 -- --
Land acquired in exchange for notes
payable.................................. -- -- 425,000 -- --
</TABLE>
The accompanying notes are an integral part of these statements.
F-28
<PAGE>
JAZZ ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1995, 1994 AND 1993
AND MAY 30, 1995 AND MAY 31, 1994
(DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Jazz Enterprises, Inc., a Louisiana corporation, was incorporated on June
10, 1992 for the purpose of developing a riverboat gaming operation and an
entertainment complex, known as "Catfish Town" in Baton Rouge, Louisiana. Since
March 1993, when the Company obtained preliminary regulatory approval to develop
and construct a riverboat casino facility, the Company's activities have
consisted of applying for the license for the riverboat casino operation, land
acquisitions, design, construction, and renovations at Catfish Town and
negotiating contracts. In connection with the construction of the riverboat
casino, the Company entered into certain transactions in order to provide
financing for the projects (see notes F and M). The riverboat casino commenced
operations on September 30, 1994.
During the year ended February 28, 1995, the Company began operations and is
no longer considered a development stage enterprise.
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
1. INTERIM FINANCIAL STATEMENTS
The financial statements for the three months ended May 30, 1995 and May 31,
1994 are unaudited; however, in the opinion of management, all adjustments,
consisting of normal recurring adjustments necessary for a fair presentation of
the Company's financial position and results of operations for such periods have
been included. The results for the three months ended May 30, 1995 are not
necessarily indicative of the results to be expected for the year ending
February 28, 1996.
2. DEFERRED PRE-OPENING COSTS
Costs incurred which directly relate to obtaining the preliminary regulatory
approval for the gaming license for the Baton Rouge riverboat casino, have been
capitalized in the expectation that they will benefit future periods. Such costs
incurred to date consist primarily of gaming application fees and legal fees
incurred in connection with obtaining regulatory approval for a gaming license
to operate a riverboat casino in Baton Rouge, Louisiana. The Company recorded
these assets as Investment in Partnership on September 30, 1994 (see notes A6
and K). Regulatory approval for the gaming license was received on September 30,
1994 in conjunction with the opening of the riverboat casino operation. Costs
incurred to date which are primarily related to obtaining financing, negotiating
contracts, and other costs which are not expected to benefit future periods have
been expensed as nonrecoverable pre-opening expenses in the Statements of
Operations.
3. DEPRECIATION AND AMORTIZATION
Depreciation and amortization is provided for in amounts sufficient to
relate the cost of the assets to operations over their estimated service lives
principally on a straight-line basis based upon the following estimated useful
lives:
<TABLE>
<S> <C>
Buildings and improvements..................................... 39 years
5 to 7
Equipment, furniture and fixtures.............................. years
</TABLE>
4. INCOME TAXES
Income taxes are recorded in accordance with the liability method specified
by Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under the asset and liability approach for financial accounting
and reporting for income taxes, the following basic principles are applied in
accounting for income taxes at the date of the financial statements: (a) a
current liability or asset is recognized for the estimated taxes payable or
refundable on taxes for the current year, (b) a deferred tax
F-29
<PAGE>
JAZZ ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1995, 1994 AND 1993
AND MAY 30, 1995 AND MAY 31, 1994
(DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4. INCOME TAXES (CONTINUED)
liability or asset is recognized for the estimated future tax effects
attributable to temporary differences and carryforwards; (c) the measurement of
current and deferred tax liabilities and assets is based on the provisions of
the enacted tax law; the effects of future changes in tax laws or rates are not
anticipated; and (d) the measurement of deferred taxes is reduced, if necessary,
by the amount of any tax benefits that, based upon available evidence, are not
expected to be realized.
Certain events and application of the tax laws create temporary differences
between the tax basis of an asset and a liability and its reported amount in the
financial statements. The Company's principal type of differences between asset
and liabilities for financial statement and tax return purposes are reporting on
the accrual basis method for financial statement purposes and the cash basis
method for tax purposes, and pre-opening expenses expensed for financial
statement purposes and deferred for tax purposes.
5. CASH EQUIVALENTS
For the purposes of cash flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
6. INVESTMENT IN PARTNERSHIP
The Company's 10% interest in Catfish Queen Partnership, in which the
Company is a limited partner, is accounted for on the cost basis since, as a
limited partner, the Company cannot participate in the management of the limited
partnership.
7. CAPITALIZATION OF INTEREST
The Company capitalizes, as a part of the internal cost of constructing
major assets for its own use, a portion of the interest cost incurred during the
construction period. Of the total interest of $478,222 incurred for the year
ended February 28, 1995, $195,963 was capitalized. Of the total interest of
$178,247 incurred for the three months ended May 30, 1995, $84,736 was
capitalized.
8. RECLASSIFICATIONS
THE 1994 AND 1993 FINANCIAL STATEMENTS REFLECT CERTAIN RECLASSIFICATIONS, WHICH
HAVE NO EFFECT ON NET LOSS, TO CONFORM TO CLASSIFICATIONS IN THE CURRENT YEAR.
NOTE B -- NOTE RECEIVABLE -- RELATED PARTY
Note receivable from related party consisted of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
------------------------
MAY 30, 1995 1995 1994
------------ ------------ ----------
<S> <C> <C> <C>
Note receivable from the Company's Chairman of the
Board and majority stockholder, dated December 1,
1992. The note is an unsecured variable rate note
with interest payable at the short-term applicable
Federal rate......................................... $ 1,892,966 $ 1,861,523 $ 807,203
------------ ------------ ----------
------------ ------------ ----------
</TABLE>
F-30
<PAGE>
JAZZ ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1995, 1994 AND 1993
AND MAY 30, 1995 AND MAY 31, 1994
(DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED)
NOTE C -- FIXED ASSETS
Fixed assets, at cost, consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
----------------------------
MAY 30, 1995 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Buildings and improvements...................... $ 4,289,861 $ 4,289,861 $ 3,932,947
Equipment, furniture and fixtures............... 580,638 580,638 213,949
------------- ------------- -------------
4,870,499 4,870,499 4,146,896
Accumulated depreciation and amortization....... (174,080) (138,725) (35,492)
------------- ------------- -------------
4,696,419 4,731,774 4,111,404
Construction in progress........................ 11,694,791 11,610,054 5,136,405
Land............................................ 5,086,043 5,086,044 4,025,800
------------- ------------- -------------
$ 21,477,253 $ 21,427,872 $ 13,273,609
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
On June 21, 1994, the Company purchased property in exchange for promissory
notes in the amount of $1,810,680 due October 30, 1994, which is thirty days
after the Company received their gaming license from the State of Louisiana. The
Company failed to make payment on the notes and is being sued for non-payment.
The Company has also filed a countersuit against the broker regarding the value
of the property, which was subsequently discovered to be worth approximately
$425,000. The notes have been recorded on the Company's books as of February 28,
1995 and the property written down to estimated net realizable value with a
corresponding charge to expense of $1,385,680.
NOTE D -- SHORT-TERM BORROWINGS
Notes payable in the amount of $1,810,680, including interest at 8% are due
October 30, 1994 (see note C).
NOTE E -- SHORT-TERM BORROWINGS -- RELATED PARTY
Short-term borrowings from a related party consisted of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
--------------------------
MAY 30, 1995 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Notes payable to the Company's Chairman of the Board
and majority stockholder, including interest at
8.5%, unsecured.................................... $ 4,889,087 $ 4,889,087 $ --
Note payable to the Company's Chairman of the Board
and majority stockholder. The note is an unsecured
variable rate note including interest at the bank's
prime rate plus 1%................................. 2,990,000 2,990,000 --
------------ ------------ ------------
$ 7,879,087 $ 7,879,087 $ -0-
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
NOTE F -- NOTES PAYABLE
As of February 28, 1995, Argosy Gaming Company loaned the Company $15
million, of which $12.5 million was primarily used by the Company for land-based
development. The loan would be repaid as an offset against any lease payments in
excess of $3 million annually with the remaining balance due on September 30,
F-31
<PAGE>
JAZZ ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1995, 1994 AND 1993
AND MAY 30, 1995 AND MAY 31, 1994
(DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED)
NOTE F -- NOTES PAYABLE (CONTINUED)
2004 (note M). As a result of the sale of 100% of the common stock of the
Company to Argosy Gaming, the lease fees were suspended, and no loan payments
have been made. The loan is collateralized by a first mortgage on certain real
estate and all outstanding shares of common stock of the Company and is
personally guaranteed by the Company's Chairman of the Board and majority
stockholder. In anticipation of the sale of 100% of the common stock of the
Company to Argosy Gaming, Argosy paid $3,352,469 in construction costs and other
payables which are considered loans to the Company as of February 28, 1995. Had
the transaction not been completed, these loans would have become due and
payable upon 90 days notice of termination.
NOTE G -- ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
MAY 30, ---------------------
1995 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Accrued salaries, wages and other employee benefits........ $ 1,633 $ 45,850 $ 32,719
Accrued interest payable................................... 650,673 472,530 --
Accrued settlement agreement............................... 275,000 275,000 --
Other...................................................... 22,630 22,492 21,400
---------- ---------- ---------
$ 949,936 $ 815,872 $ 54,119
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
NOTE H -- LEASES
The Company owns certain buildings at Catfish Town which are leased under
non-cancelable operating leases. The Company is responsible for payment of
taxes, insurance and maintenance costs related to the properties. Certain leases
contain provisions for one and two renewal options for five years. The leases
expire on various dates through March 1998. The cost of the leased buildings is
$1,656,956, and the related accumulated depreciation was $77,475, $66,910 and
$24,651 at May 30, 1995 and February 28, 1995 and 1994, respectively.
Future minimum lease payments due to the Company under these noncancellable
lease agreements are as follows:
<TABLE>
<S> <C>
Years ending February 28,
1996........................... $ 468,223
1997........................... 340,723
1998........................... 28,394
--------
$ 837,340
--------
--------
</TABLE>
The Company also leases certain land under non-cancelable operating leases,
which expire at various dates through August 2000. The leases contain renewal
provisions and are subject to annual rent adjustments in May 1998 and January
1999, respectively, and every fifth year thereafter for increases in the
Consumer Price Index. The Company is required to pay insurance, taxes and
operating expenses.
F-32
<PAGE>
JAZZ ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1995, 1994 AND 1993
AND MAY 30, 1995 AND MAY 31, 1994
(DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED)
NOTE H -- LEASES (CONTINUED)
The minimum rental commitment under these operating leases are as follows:
<TABLE>
<S> <C>
Years ending February 28,
1996........................... $ 237,975
1997........................... 237,975
1998........................... 237,975
1999........................... 237,975
2000........................... 180,677
Thereafter..................... 63,020
-----------
$ 1,195,597
-----------
-----------
</TABLE>
Total rent expense under the above leases for the years ended February 28,
1995 and 1994 was $241,262 and $159,684, respectively.
NOTE I -- RELATED PARTY TRANSACTIONS
The Company entered into a management contract with Lodging and Gaming
Systems, Inc., a corporation owned 60% by the Company's Chairman of the Board
and majority stockholder, to receive administrative, accounting and supervisory
services to be renegotiated on an annual basis. Management fees paid during the
years ended February 28, 1995 and 1994 and from the period June 10, 1992 (date
of inception) to February 28, 1993 were $720,000, $720,000 and $120,000,
respectively. In conjunction with the sale of the Company's stock to Argosy
Gaming Company (note M), the Company terminated the shared services agreement
with Lodging and Gaming Systems, Inc. In addition, the Company reimbursed
Lodging and Gaming Systems, Inc. for certain payroll, travel, and other expenses
advanced on behalf of or supplied to the Company during the years ended February
28, 1995 and 1994 and from the period June 10, 1992 (date of inception) to
February 28, 1993 of approximately $-0-, $1,778,000 and $-0-, respectively.
Accounts payable to Lodging Systems, Inc. amounted to $362,983, $182,638 and
$-0- at May 30, 1995 and February 28, 1995 and 1994, respectively. Accounts
receivable from Lodging Systems, Inc. amounted to $-0-, $-0- and $175,000 at May
30, 1995 and February 28, 1995 and 1994, respectively.
NOTE J -- INCOME TAXES
The provision for income taxes in the accompanying statements of operations
consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
MAY 30, MAY 31, -------------------------------
1995 1994 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CURRENT:
State.......................................... $ 65,000 $ 59,990 $ 63,575 $ 37,722 $ --
DEFERRED:
Federal........................................ -- -- -- -- --
--------- --------- --------- --------- ---------
$ 65,000 $ 59,990 $ 63,575 $ 37,722 $ -0-
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
At February 28, 1995, the Company had federal net operating loss
carryforwards of $249,350, which expire through 2011.
F-33
<PAGE>
JAZZ ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1995, 1994 AND 1993
AND MAY 30, 1995 AND MAY 31, 1994
(DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED)
NOTE J -- INCOME TAXES (CONTINUED)
The components of net deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
FEBRUARY 28,
--------------------------
MAY 30, 1995 1995 1994
------------- ------------- -----------
<S> <C> <C> <C>
DEFERRED TAX ASSETS:
Write down associated with real estate owned..... $ 471,132 $ 471,132 $ --
Accounts payable and accruals.................... 553,616 419,761 23,647
Federal operating loss carryforwards............. 97,465 84,779 11,778
Preopening expenses.............................. 1,688,151 1,564,435 639,620
------------- ------------- -----------
2,810,364 2,540,107 675,045
------------- ------------- -----------
DEFERRED TAX LIABILITIES:
Accounts receivable and prepaid expenses......... 42,408 45,706 23,415
Fixed assets and other assets.................... 151,968 150,521 1,369
------------- ------------- -----------
194,376 196,227 24,784
------------- ------------- -----------
Valuation allowance.............................. (2,615,988) (2,343,880) (650,261)
------------- ------------- -----------
Net deferred taxes............................. $ -0- $ -0- $ -0-
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
NOTE K -- INVESTMENT IN PARTNERSHIP
The Company has entered into a Partnership with Argosy Gaming Company
(Argosy), in which the Company owns 10% and Argosy owns 90% to operate a
riverboat casino in Baton Rouge, Louisiana, which opened September 30, 1994. The
Company contributed its State of Louisiana riverboat gaming license and certain
leases to the partnership. The partnership leases, for a minimum of five years,
a docking site and office and warehouse space from the Company. Rent under terms
of the lease are 6% of adjusted gross receipts up to $50 million, 9% of adjusted
gross receipts between $50 million and $75 million and 10% of adjusted gross
receipts over $75 million. Lease revenues in the amount of $413,138 were
received for the period September 30, 1994 through October 31, 1994. Lease
revenues for the month of November 1994 in the amount of $399,655 have not been
paid to the Company and have been reflected as an additional contribution to the
Partnership. As a result of the sale of 100% of the common stock of the Company
to Argosy Gaming, the lease fees were suspended (note M).
NOTE L -- LEGAL SETTLEMENTS
In April 1993, the Company signed a mutual release and settlement agreement
with a corporation in which it had executed a term sheet for formation of a
limited partnership to construct and operate a riverboat casino. Under the terms
of the agreement, the Company paid $250,000 on November 10, 1994 after receiving
final licensing approval.
In April 1993, the Company signed a general release and settlement agreement
with a corporation in which it has executed a letter of intent as to the
formation of a partnership and the gaming application process. Under the terms
of the agreement, the Company paid $50,000 in April 1993 and is required to pay
$350,000 upon the September 30, 1994 licensing approval as follows: $25,000
within 30 days of license approval, $25,000 within 60 days of license approval,
and $25,000 every 90 days thereafter. At February 28, 1995, $275,000 is
outstanding.
F-34
<PAGE>
JAZZ ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1995, 1994 AND 1993
AND MAY 30, 1995 AND MAY 31, 1994
(DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED)
NOTE M -- CAPITAL TRANSACTIONS
On December 5, 1994, the stockholders of the Company entered in an agreement
to sell 100% of the common stock of the Company to Argosy. Under the terms of
the agreement, Argosy was appointed as both construction manager and general
manager of the Catfish Town Project for the Company and has full and complete
control and authority to make all construction, operational and management
decisions for the Company with regard to construction and completion of the
entire project. The agreement provided for the suspension of the lease fee from
the partnership in consideration of Argosy's costs to manage and develop the
Catfish Town Project. As a result of the suspension of the lease on December 5,
1994, the financial statements do not include any lease revenue or any costs
incurred by Argosy from that date forward. Further, under the terms of the
agreement, Argosy would assume certain ordinary course accounts payable and
construction obligations as of December 1, 1994 of approximately $2,000,000. The
transaction was consummated on May 30, 1995, and as a result, the stockholders
contributed capital to the Company in the amount of $2,447,891 for the year
ended February 28, 1995 and $646,387 for the period March 1, 1995 through May
30, 1995.
During the year ended February 28, 1995, the Company's Chairman of the Board
exercised an option to purchase 75% of the outstanding shares of common stock
from the current stockholders.
NOTE N -- CREDIT RISK
The Company maintains its cash and cash equivalents in bank deposit accounts
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts. The Company believes it is not exposed
to any significant credit risk on cash and cash equivalents.
NOTE O -- CONTINGENCIES
Various lawsuits, claims and proceedings of a nature considered normal to
its businesses are pending against the Company and certain of its affiliates.
The Company believes, after reviewing such matters and consulting with the
Company's counsel, that any liability which may ultimately be incurred with
respect to these matters is not expected to have a material effect on either the
Company's financial position or results of operations.
F-35
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER MADE BY
THIS PROSPECTUS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR GUARANTORS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR
THE GUARANTORS SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.......................... 3
Incorporation of Certain Documents by
Reference..................................... 3
Prospectus Summary............................. 4
Risk Factors................................... 16
Use of Proceeds................................ 30
The Exchange Offer............................. 30
Capitalization................................. 38
Selected Consolidated Financial Data........... 39
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 41
Description of Certain Indebtedness............ 47
Business....................................... 48
Lawrenceburg Casino Partnership Agreement...... 60
Regulatory Matters............................. 62
Management..................................... 75
Description of Exchange Notes.................. 78
Old Notes Registration Rights; Liquidated
Damages....................................... 105
Certain United States Federal Income Tax
Consequences.................................. 106
Plan of Distribution........................... 107
Legal Matters.................................. 108
Experts........................................ 108
Index to Financial Statements.................. F-1
</TABLE>
[LOGO]
Offer to Exchange $1,000
principal amount of its
13 1/4% First Mortgage Notes due 2004
which have been registered
under the Securities Act
for each $1,000 principal amount
of its outstanding
13 1/4% First Mortgage Notes due 2004
-------------------------------
PROSPECTUS
-------------------------------
THE EXCHANGE AGENT
FOR THE EXCHANGE OFFER IS:
FIRST NATIONAL BANK
OF COMMERCE
BY FACSIMILE:
(504) 623-1095
CONFIRMATION BY TELEPHONE:
(504) 623-7581
BY MAIL:
Trust Security Services
First National Bank of Commerce
P.O. Box 60279
New Orleans, Louisiana 70160-0279
Attention: Rebecca Norton
BY HAND DELIVERY/OVERNIGHT DELIVERY:
Trust Security Services
First National Bank of Commerce
210 Baronne Street
Basement Level
New Orleans, Louisiana 70112
Attention: Rebecca Norton
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Delaware GCU")
empowers a corporation, subject to certain limitations, to indemnify its
directors and officers against expenses (including attorneys' fees, judgments,
fines and certain settlements) actually and reasonably incurred by them in
connection with any suit or proceeding to which they are a party so long as they
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to a criminal action
or proceeding, so long as they had no reasonable cause to believe their conduct
to have been unlawful. The Registrant's Certificate of Incorporation and By-laws
provide that the Registrant shall indemnify its directors and such of its
officers, employees and agents as the Board of Directors may determine from time
to time, to the fullest extent permitted by Section 145 of the Delaware GCL.
Section 102 of the Delaware GCL permits a Delaware corporation to include in
its certificate of incorporation a provision eliminating or limiting a
director's liability to a corporation or its stockholders for monetary damages
for breaches of fiduciary duty. The enabling statute provides, however, that
liability for breaches of the duty of loyalty, acts or omissions not in good
faith or involving intentional misconduct, or knowing violation of the law, and
the unlawful purchase or redemption of stock or payment of unlawful dividends or
the receipt of improper personal benefits cannot be eliminated or limited in
this manner. The Registrant's Certificate of Incorporation and By-Laws include a
provision which eliminates, to the fullest extent permitted, director liability
for monetary damages for breaches of fiduciary duty.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Company (previously filed with the Securities
and Exchange Commission ("SEC") as an Exhibit to the Company's Registration Statement on Form S-1 (File
No. 33-55878) and incorporated herein by reference).
3.2 Amended and Restated By-laws of the Company (previously filed with the SEC as an Exhibit to the
Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
4.1 Form of the Company's 13 1/4% First Mortgage Notes due 2004 issued on June 5, 1996 in the aggregate
principal amount of $235,000,000.
4.2 Form of Guarantee issued on June 5, 1996 by Alton Gaming Company, Argosy of Louisiana, Inc., Catfish
Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises,
Inc., The Missouri Gaming Company and The St. Louis Gaming Company.
4.3 Indenture dated as of June 5, 1996 by and among the Company, First National Bank of Commerce, as
Trustee, and the Guarantors named therein, for the Company's $235,000,000 of 13 1/4% First Mortgage
Notes due 2004.
4.4 Registration Rights Agreement dated as of June 5, 1996 by and among the Company, the Guarantors named
therein and the Initial Purchasers named therein.
4.5 Cash Collateral and Disbursement Agreement dated June 5, 1996 by and among the Company, First National
Bank of Commerce, as Trustee, and LaSalle National Trust, N.A., as disbursement agent.
4.6 Form of Security Agreement dated as of June 5, 1996 by and between First National Bank of Commerce, as
Trustee, and the Company, as Grantor.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.7 Form of Subsidiary Security Agreements dated as of June 5, 1996 by and between First National Bank of
Commerce, as Trustee, and each of Alton Gaming Company, Argosy of Louisiana, Inc., Catfish Queen
Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., The
Missouri Gaming Company and The St. Louis Gaming Company, each as a Grantor.
4.8 Form of Pledge Agreement dated as of June 5, 1996 by and between First National Bank of Commerce, as
Trustee, and the Company, as Pledgor.
4.9 Form of Subsidiary Pledge Agreements dated as of June 5, 1996 by and between First National Bank of
Commerce, as Trustee, and each of Alton Gaming Company, Argosy of Louisiana, Inc., Catfish Queen
Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., The
Missouri Gaming Company and The St. Louis Gaming Company, each as a Pledgor.
4.10 Form of First Preferred Ship Mortgages dated as of June 5, 1996 executed in favor of First National Bank
of Commerce, as Trustee, by each of Alton Gaming Company (relating to Argosy I, Alton Belle Casino II
and Alton Landing), Catfish Queen Partnership in Commendam (relating to Argosy III), The Missouri
Gaming Company (relating to Argosy IV), Iowa Gaming Company (relating to Argosy V) and the Company
(relating to Spirit of America).
4.11 Form of Deed of Trust, Assignment of Leases and Rents and Security Agreement dated as of June 5, 1996 by
and among the Company, First National Bank of Commerce, as Trustee, and Chicago Title Insurance
Company.
4.12 Form of Mortgage of Jazz Enterprises, Inc., and Catfish Queen Partnership in Commendam to Secure Present
and Future Indebtedness, Assignment of Leases and Rents and Security Agreement dated as of June 5, 1996
execute in favor of First National Bank of Commerce, as Trustee.
4.13 Specimen Common Stock Certificate (previously filed with the SEC as an Exhibit to the Company's
Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
4.14 Indenture dated as of June 6, 1994 between the Company and Bank One, Springfield, as trustee, for the
Company's $115,000,000 12% Convertible Subordinated Notes due 2001 (previously filed with the SEC as an
Exhibit to the Company's Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein
by reference).
4.15 Specimen 12% Convertible Subordinated Note due 2001 (previously filed with the SEC as an Exhibit to the
Company's Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein by reference).
4.16 Registration Rights Agreement (previously filed with the SEC as an Exhibit to the Company's Registration
Statement on Form S-3 (File No. 33-76456) and incorporated herein by reference).
5.1 Legal Opinion of Winston & Strawn regarding the validity of the issuance of the 13 1/4% First Mortgage
Notes due 2004 (to be filed by amendment).
9.1 Pratt Voting Trust Agreement dated as of May 5, 1992 by and between John Biggs Pratt, Sr. and Stephanie
Pratt (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1
(File No. 33-55878) and incorporated herein by reference).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.1 Lease dated August 1, 1992 by and between Edward McPike d/b/a Grand Properties and Alton Riverboat
Gambling Partnership (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference).
10.2 Bond and Easement Agreement dated as of April 18, 1991 by and between the Alton Riverboat Gambling
Partnership and the City of Alton, Illinois (previously filed with the SEC as an Exhibit to the
Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.3 Employment Agreement by and between the Company and J. Thomas Long (previously filed with the SEC as an
Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by
reference).
10.4 Employment Agreement by and between the Company and Patsy S. Hubbard (previously filed with the SEC as
an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by
reference).
10.5 Stock Option Plan (previously filed with the SEC as an Exhibit to the Company's Registration Statement
on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.6 Form of Indemnification Agreement (previously filed with the SEC as an Exhibit to the Company's
Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.7 Director Option Plan (previously filed with the SEC as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.8 Argosy Gaming Company Savings Plan (previously filed with the SEC as an Exhibit to the Company's Form
8-K dated March 10, 1994 and incorporated herein by reference).
10.9 Letter Agreement dated as of January 28, 1993 by and between L. Thomas Lakin and the Alton Riverboat
Gambling Partnership (previously filed with the SEC as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.10 Letter Agreement dated as of January 28, 1993 by and between the Alton Riverboat Gambling Partnership
and H. Steven Norton (previously filed with the SEC as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.11 Letter Agreement dated March 29, 1995 by and between Floyd C. Warmann and the Company (previously filed
with the SEC as an exhibit to the Company's Form 10-K for the year ended December 31, 1994 dated March
31, 1995 and incorporated herein by reference).
10.12 Agreement to Purchase Stock dated January 30, 1995 by and among the Company, Jazz Enterprises, Inc. and
the signatory shareholders of Jazz Enterprises, Inc. (previously filed with the SEC as an Exhibit to
the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
10.13 Contract dated June 7, 1993 by and among the City of Riverside, Missouri, The Missouri Gaming Company
and the Company, together with amendments thereto (previously filed with the SEC as an Exhibit to the
Company's Form 8-K dated March 10, 1994 and incorporated herein by reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.14 Second Amended and Restated Agreement of Limited Partnership dated February 21, 1996 of Indiana Gaming
Company, L.P. (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference).
10.15 Management Agreement dated April 11, 1994 by and between Indiana Gaming Company, L.P. and The Indiana
Gaming Company, as amended by Amendment No. 1 to Management Agreement dated February 21, 1996
(previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31,
1995 and incorporated herein by reference).
10.16 Affirmation of Limited Parent Guaranty of Argosy Gaming Company in favor of the partners of Indiana
Gaming Company, L.P. dated February 21, 1996 (previously filed with the SEC as an Exhibit to the
Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference).
10.17 Vessel Construction Contract by and between Service Marine Industries, Inc. and Indiana Gaming Company,
L.P. dated as of November 14, 1995 (previously filed with the SEC as an Exhibit to the Company's Form
10-K for the year ended December 31, 1995 and incorporated herein by reference).
10.18 Riverboat Gaming Development Agreement between the City of Lawrenceburg, Indiana and Indiana Gaming
Company, L.P. dated as of April 13, 1994 as amended by Amendment Number One to Riverboat Development
Agreement between the City of Lawrenceburg, Indiana and Indiana Gaming Company, L.P. dated as of
December 28, 1995 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference).
10.19 Guaranty of Development Agreement dated as of April 13, 1994 by the Company in favor of the City of
Lawrenceburg (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended
December 31, 1995 and incorporated herein by reference).
10.20 Charter Agreement dated October 27, 1994 by and between President Riverboat Casino-New York, Inc. and
The Missouri Gaming Company (previously filed with the SEC as an Exhibit to the Company's Form 10-K for
the year ended December 31, 1994 and incorporated herein by reference).
12.1 Statement re Computation of Earnings to Fixed Charges
21 List of Subsidiaries
23.1 Consent of Ernst & Young LLP
23.2 Consent of Grant Thornton LLP
24 Powers of Attorney of certain directors
25.1 Statement of Eligibility and Qualification on Form T-1 under the Trust Indenture Act of 1939 of First
National Bank of Commerce, as Trustee under the Indenture relating to the 13 1/4% First Mortgage Notes
due 2004.
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and Other Nominees
99.4 Form of Letter to Clients
99.5 Guidelines for Certification of Taxpayer Identification Number on Form W-9
</TABLE>
II-4
<PAGE>
(b)Financial Statement Schedules
None.
All schedules are omitted because the required information is not present in
amounts sufficient to require submission of the schedule or because the
information required is included in the financial statements or notes thereto.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and win be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein and this offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) For the purpose of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired therein, that was not the subject of and included in the
registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Alton, State
of Illinois on June 28, 1996.
ARGOSY GAMING COMPANY
By: /s/ J. THOMAS LONG
-----------------------------------
J. Thomas Long
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons on the dates and
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ------------------------------------------- ---------------
<C> <S> <C> <C>
/s/ J. THOMAS LONG Chief Executive Officer and Director
------------------------------------- June 28, 1996
J. Thomas Long
/s/ JOSEPH G. URAM Executive Vice President, Chief
------------------------------------- Financial Officer (Principal June 28, 1996
Joseph G. Uram Accounting Officer)
/s/ EDWARD F. BRENNAN*
------------------------------------- Director
Edward F. Brennan
/s/ GEORGE L. BRISTOL*
------------------------------------- Director
George L. Bristol
/s/ F. LANCE CALLIS*
------------------------------------- Director
F. Lance Callis
/s/ WILLIAM F. CELLINI*
*By: /s/ J. THOMAS LONG
--------------------------
------------------------------------- Director J. Thomas Long
William F. Cellini ATTORNEY-IN-FACT
/s/ JIMMY F. GALLAGHER*
------------------------------------- Director June 28, 1996
Jimmy F. Gallagher
/s/ WILLIAM McENERY*
------------------------------------- Director
William McEnery
/s/ JOHN B. PRATT, SR.*
------------------------------------- Director
John B. Pratt, Sr.
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Company (previously filed with the
Securities and Exchange Commission ("SEC") as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
3.2 Amended and Restated By-laws of the Company (previously filed with the SEC as an Exhibit to the
Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by
reference).
4.1 Form of the Company's 13 1/4% First Mortgage Notes due 2004 issued on June 5, 1996 in the
aggregate principal amount of $235,000,000.
4.2 Form of Guarantee issued on June 5, 1996 by Alton Gaming Company, Argosy of Louisiana, Inc.,
Catfish Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz
Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company.
4.3 Indenture dated as of June 5, 1996 by and among the Company, First National Bank of Commerce, as
Trustee, and the Guarantors named therein, for the Company's $235,000,000 of 13 1/4% First
Mortgage Notes due 2004.
4.4 Registration Rights Agreement dated as of June 5, 1996 by and among the Company, the Guarantors
named therein and the Initial Purchasers named therein.
4.5 Cash Collateral and Disbursement Agreement dated June 5, 1996 by and among the Company, First
National Bank of Commerce, as Trustee, and LaSalle National Trust, N.A., as disbursement agent.
4.6 Form of Security Agreement dated as of June 5, 1996 by and between First National Bank of
Commerce, as Trustee, and the Company, as Grantor.
4.7 Form of Subsidiary Security Agreements dated as of June 5, 1996 by and between First National
Bank of Commerce, as Trustee, and each of Alton Gaming Company, Argosy of Louisiana, Inc.,
Catfish Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz
Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company, each as a
Grantor.
4.8 Form of Pledge Agreement dated as of June 5, 1996 by and between First National Bank of
Commerce, as Trustee, and the Company, as Pledgor.
4.9 Form of Subsidiary Pledge Agreements dated as of June 5, 1996 by and between First National Bank
of Commerce, as Trustee, and each of Alton Gaming Company, Argosy of Louisiana, Inc., Catfish
Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz
Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company, each as a
Pledgor.
4.10 Form of First Preferred Ship Mortgages dated as of June 5, 1996 executed in favor of First
National Bank of Commerce, as Trustee, by each of Alton Gaming Company (relating to Argosy I,
Alton Belle Casino II and Alton Landing), Catfish Queen Partnership in Commendam (relating to
Argosy III), The Missouri Gaming Company (relating to Argosy IV), Iowa Gaming Company (relating
to Argosy V) and the Company (relating to Spirit of America).
4.11 Form of Deed of Trust, Assignment of Leases and Rents and Security Agreement dated as of June 5,
1996 by and among the Company, First National Bank of Commerce, as Trustee, and Chicago Title
Insurance Company.
4.12 Form of Mortgage of Jazz Enterprises, Inc., and Catfish Queen Partnership in Commendam to Secure
Present and Future Indebtedness, Assignment of Leases and Rents and Security Agreement dated as
of June 5, 1996 execute in favor of First National Bank of Commerce, as Trustee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
4.13 Specimen Common Stock Certificate (previously filed with the SEC as an Exhibit to the Company's
Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
4.14 Indenture dated as of June 6, 1994 between the Company and Bank One, Springfield, as trustee,
for the Company's $115,000,000 12% Convertible Subordinated Notes due 2001 (previously filed
with the SEC as an Exhibit to the Company's Registration Statement on Form S-3 (File No.
33-76456) and incorporated herein by reference).
4.15 Specimen 12% Convertible Subordinated Note due 2001 (previously filed with the SEC as an Exhibit
to the Company's Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein
by reference).
4.16 Registration Rights Agreement (previously filed with the SEC as an Exhibit to the Company's
Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein by reference).
5.1 Legal Opinion of Winston & Strawn regarding the validity of the issuance of the 13 1/4% First
Mortgage Notes due 2004 (to be filed by amendment).
9.1 Pratt Voting Trust Agreement dated as of May 5, 1992 by and between John Biggs Pratt, Sr. and
Stephanie Pratt (previously filed with the SEC as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.1 Lease dated August 1, 1992 by and between Edward McPike d/b/a Grand Properties and Alton
Riverboat Gambling Partnership (previously filed with the SEC as an Exhibit to the Company's
Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
10.2 Bond and Easement Agreement dated as of April 18, 1991 by and between the Alton Riverboat
Gambling Partnership and the City of Alton, Illinois (previously filed with the SEC as an
Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and
incorporated herein by reference).
10.3 Employment Agreement by and between the Company and J. Thomas Long (previously filed with the
SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.4 Employment Agreement by and between the Company and Patsy S. Hubbard (previously filed with the
SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.5 Stock Option Plan (previously filed with the SEC as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.6 Form of Indemnification Agreement (previously filed with the SEC as an Exhibit to the Company's
Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.7 Director Option Plan (previously filed with the SEC as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.8 Argosy Gaming Company Savings Plan (previously filed with the SEC as an Exhibit to the Company's
Form 8-K dated March 10, 1994 and incorporated herein by reference).
10.9 Letter Agreement dated as of January 28, 1993 by and between L. Thomas Lakin and the Alton
Riverboat Gambling Partnership (previously filed with the SEC as an Exhibit to the Company's
Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
10.10 Letter Agreement dated as of January 28, 1993 by and between the Alton Riverboat Gambling
Partnership and H. Steven Norton (previously filed with the SEC as an Exhibit to the Company's
Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
10.11 Letter Agreement dated March 29, 1995 by and between Floyd C. Warmann and the Company
(previously filed with the SEC as an exhibit to the Company's Form 10-K for the year ended
December 31, 1994 dated March 31, 1995 and incorporated herein by reference).
10.12 Agreement to Purchase Stock dated January 30, 1995 by and among the Company, Jazz Enterprises,
Inc. and the signatory shareholders of Jazz Enterprises, Inc. (previously filed with the SEC as
an Exhibit to the Company's Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference).
10.13 Contract dated June 7, 1993 by and among the City of Riverside, Missouri, The Missouri Gaming
Company and the Company, together with amendments thereto (previously filed with the SEC as an
Exhibit to the Company's Form 8-K dated March 10, 1994 and incorporated herein by reference).
10.14 Second Amended and Restated Agreement of Limited Partnership dated February 21, 1996 of Indiana
Gaming Company, L.P. (previously filed with the SEC as an Exhibit to the Company's Form 10-K
for the year ended December 31, 1995 and incorporated herein by reference).
10.15 Management Agreement dated April 11, 1994 by and between Indiana Gaming Company, L.P. and The
Indiana Gaming Company, as amended by Amendment No. 1 to Management Agreement dated February
21, 1996 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference).
10.16 Affirmation of Limited Parent Guaranty of Argosy Gaming Company in favor of the partners of
Indiana Gaming Company, L.P. dated February 21, 1996 (previously filed with the SEC as an
Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein
by reference).
10.17 Vessel Construction Contract by and between Service Marine Industries, Inc. and Indiana Gaming
Company, L.P. dated as of November 14, 1995 (previously filed with the SEC as an Exhibit to the
Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference).
10.18 Riverboat Gaming Development Agreement between the City of Lawrenceburg, Indiana and Indiana
Gaming Company, L.P. dated as of April 13, 1994 as amended by Amendment Number One to Riverboat
Development Agreement between the City of Lawrenceburg, Indiana and Indiana Gaming Company,
L.P. dated as of December 28, 1995 (previously filed with the SEC as an Exhibit to the
Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference).
10.19 Guaranty of Development Agreement dated as of April 13, 1994 by the Company in favor of the City
of Lawrenceburg (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the
year ended December 31, 1995 and incorporated herein by reference).
10.20 Charter Agreement dated October 27, 1994 by and between President Riverboat Casino-New York,
Inc. and The Missouri Gaming Company (previously filed with the SEC as an Exhibit to the
Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
12.1 Statement re Computation of Earnings to Fixed Charges
21 List of Subsidiaries
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
23.1 Consent of Ernst & Young LLP
23.2 Consent of Grant Thornton LLP
24 Powers of Attorney of certain directors
25.1 Statement of Eligibility and Qualification on Form T-1 under the Trust Indenture Act of 1939 of
First National Bank of Commerce, as Trustee under the Indenture relating to the 13 1/4% First
Mortgage Notes due 2004.
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and Other Nominees
99.4 Form of Letter to Clients
99.5 Guidelines for Certification of Taxpayer Identification Number on Form W-9
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
EXHIBIT 4.1
-----------
<PAGE>
FORM OF NOTE
ARGOSY GAMING COMPANY
13 1/4% FIRST MORTGAGE NOTES
DUE 2004
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or such other entity as is requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.(1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO
THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH
IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE
- --------------
1 This paragraph should only be added if the Security is issued in global
form.
<PAGE>
COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED
INVESTOR WITHIN THE MEANING OF RULE 501(A)(1),(2),(3) OR (7)
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF THE SECURITIES OF $100,000 FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D),(E), OR (F)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. THESE SECURITIES MAY BE TRANSFERRED ONLY
IN COMPLIANCE WITH APPLICABLE GAMING LAWS.(2)
- --------------
2 This paragraph should be included only for the Original Notes.
<PAGE>
No. $
Argosy Gaming Company, a Delaware corporation (hereinafter called the
"Company," which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to _____,
or registered assigns, the principal sum of _____ Dollars, on June 1, 2004.
Interest Payment Dates: December 1 and June 1.
Record Dates: November 15 and May 15.
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated: ___________
ARGOSY GAMING COMPANY
By:
-------------------
Attest: President
- -------------------
Secretary
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
First National Bank of Commerce
By:
Authorized Signatory
Dated:
<PAGE>
ARGOSY GAMING COMPANY
13 1/4% FIRST MORTGAGE NOTES
DUE 2004
1. INTEREST.
Argosy Gaming Company, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at a rate of
13 1/4% per annum. To the extent it is lawful, the Company promises to pay
interest on any interest payment due but unpaid on such principal amount at a
rate of 13 1/4% per annum compounded semi-annually.
The Company will pay interest semi-annually on June 1 and December 1
of each year (each, an "Interest Payment Date"), commencing December 1, 1996.
Interest on the Securities will accrue from the most recent date to which
interest has been paid on either the Series A or Series B Notes pursuant to the
Indenture or, if no interest has been paid, from June 5, 1996. Interest will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company shall pay interest (and Liquidated Damages, if any) on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. Except as provided below, the Company shall pay
principal and interest (and Liquidated Damages, if any) in such coin or currency
of the United States of America as at the time of payment shall be legal tender
for payment of public and private debts ("Cash"). The Securities will be
payable as to principal, premium and interest (and Liquidated Damages, if any)
at the office or agency of the Company maintained for such purpose within the
City and State of New York or, at the option of the Company, payment of
principal, premium and interest (and Liquidated Damages, if any) may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and PROVIDED that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest (and Liquidated
Damages, if any) and premium on all Global Securities and all other Securities
the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent.
3. PAYING AGENT AND REGISTRAR.
Initially, First National Bank of Commerce (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or Co-registrar without notice to the Holders. The Company or any of its
Subsidiaries may,
<PAGE>
subject to certain exceptions, act as Paying Agent, Registrar or Co-registrar.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated June 5,
1996 (the "Indenture"), between the Company, the Guarantors named therein and
the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act, as in effect on the date of the Indenture. The Securities
are subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are senior
secured obligations of the Company limited in aggregate principal amount to
$235,000,000.
5. REDEMPTION.
Except as provided in this Paragraph 5 or as provided in Section 3.2
of the Indenture, the Company shall not have the right to redeem any Securities.
The Securities are redeemable in whole or from time to time in part at any time
on or after June 1, 2000, at the option of the Company, at the Redemption Price
(expressed as a percentage of principal amount) set forth below, if redeemed
during the 12-month period commencing June 1 of each of the years indicated
below, in each case (subject to the right of Holders of record on the Record
Date to receive interest due on an Interest Payment Date that is on or prior to
such Redemption Date), plus any accrued but unpaid interest (and Liquidated
Damages, if any) to the Redemption Date.
YEAR REDEMPTION PRICE
---- ----------------
2000 . . . . . . . . . . . . . 106.625%
2001 . . . . . . . . . . . . . 104.417%
2002 . . . . . . . . . . . . . 102.208%
2003 and thereafter . . . . . 100.000%
Any redemption of the Notes shall comply with Article III of the
Indenture.
6. NOTICE OF REDEMPTION.
Except as required by a Gaming Authority with respect to a redemption
provided for in Section 3.2 of the Indenture, notice of redemption will be
mailed by first class mail at least 30 days but not more than 60 days before the
Redemption Date (unless a shorter notice shall be required by any Governmental
Authority) to each Holder of Securities to be redeemed at his registered
address. Securities in denominations larger than $1,000 may be redeemed in
part.
Except as set forth in the Indenture, from and after
<PAGE>
any Redemption Date, if monies for the redemption of the Securities
called for redemption shall have been deposited with the Paying Agent on
such Redemption Date, the Securities called for redemption will cease to
bear interest and the only right of the Holders of such Securities will be
to receive payment of the Redemption Price, plus any accrued but unpaid
interest (and Liquidated Damages, if any) to the Redemption Date.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Securities in accordance with, the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption.
8. PERSONS DEEMED OWNERS.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent(s) will pay the money back to
the Company at its written request. After that, all liability of the Trustee
and such Paying Agent(s) with respect to such money shall cease.
10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company at any time deposits into an irrevocable trust with the
Trustee Cash or U.S. Government Obligations sufficient to pay the principal of
and interest (and Liquidated Damages, if any) on the Securities to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Securities (including the financial covenants, but excluding its
obligation to pay the principal of and interest (and Liquidated Damages, if any)
on the Securities).
11. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the written consent of the Holders of a
majority, and in certain cases a supermajority, in aggregate principal
amount of the Securities then outstanding, and any existing Default or
Event of Default or compliance with any provision may be waived with the
consent of the Holders of a majority in aggregate principal amount of the
Securities then outstanding. Without notice to or consent of any Holder,
the
<PAGE>
parties thereto may amend or supplement the Indenture or the Securities
to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities, comply with the TIA or make any other change that
does not adversely affect the rights of any Holder of a Security.
12. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to, among other things, incur additional
Indebtedness and Disqualified Capital Stock, make payments in respect of its
Capital Stock, enter into transactions with Affiliates, incur Liens, merge or
consolidate with any other person and sell, lease, transfer or otherwise dispose
of substantially all of its properties or assets. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
13. CHANGE OF CONTROL.
In the event there shall occur any Change of Control, each Holder of
Securities shall have the right, at such Holder's option but subject to the
limitations and conditions set forth in the Indenture, to require the Company to
purchase on the Change of Control Purchase Date in the manner specified in the
Indenture, all or any part (in integral multiples of $1,000) of such Holder's
Securities at a cash price equal to 101% of the principal amount thereof,
together with accrued but unpaid interest (and Liquidated Damages, if any) to
and including the Change of Control Purchase Date.
14. SECURITY.
In order to secure the obligations under the Indenture, the Company,
the Guarantors and the Trustee have entered into certain security agreements in
order to create security interests in certain assets and properties of the
Company and the Guarantors.
15. OFFERS TO PURCHASE.
The Indenture requires the Company to make Offers to Purchase to
purchase Securities in various principal amounts at either 100% or 101% of the
principal amount thereof, together with accrued but unpaid interest (and
Liquidated Damages, if any), to the date of purchase in the event of certain
asset sales, loss of certain licenses and certain events with respect to the
Lawrenceburg Casino, and from certain distributions from the Lawrenceburg
Casino.
16. GAMING LAWS.
<PAGE>
The rights of the Holder of this Security and any owner of any
beneficial interest in this Security are subject to the Gaming Laws and the
jurisdiction and requirements of the Gaming Authorities and the further
limitations and requirements set forth in the Indenture.
17. SUCCESSORS.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
18. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the Securities then
outstanding may direct the Trustee in its exercise of any trust or power.
19. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
20. NO RECOURSE AGAINST OTHERS.
No direct or indirect stockholder, director, officer or employee, as
such, past, present or future of the Company or any successor corporation shall
have any personal liability in respect of the obligations of the Company under
the Securities or the Indenture by reason of his status as such stockholder,
director, officer or employee. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
21. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
22. ABBREVIATIONS AND DEFINED TERMS.
<PAGE>
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
23. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign this Security to
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of
assignee_________________
and irrevocably appoint ___________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Dated: __________ Signed:
(Sign exactly as your name appears on the other side of
this Security)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to any of the following provisions of the Indenture, check the
appropriate box:
/ / Section 5.14; / / Section 5.16; / / Section 5.17;
/ / Section 5.18; / / Section 5.19; / / Article XII
If you want to elect to have only part of this Security purchased by
the Company pursuant to the Indenture, state the principal amount you want to be
purchased: $________
Date: ________________ Signature:
(Sign exactly as your name appears on the other side of this Security)
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES(3)
The following exchanges of a part of this Global Security
for Definitive Securities have been made:
<TABLE>
<S> <C> <C> <C> <C>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized
Principal Amount Principal Amount Security following officer of
of this Global of this Global such decrease (or Trustee or
Date of Exchange Security Security increase) Securities Custodian
- -----------------------------------------------------------------------------------------------------
</TABLE>
- --------------
3 This schedule should only be added if the Security is issued in global
form.
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF SECURITIES(4)
Re: [ ]% FIRST MORTGAGE NOTES DUE 2004 OF ARGOSY GAMING COMPANY
This Certificate relates to $______ principal amount of Securities held
in(5) / / book-entry or / / definitive form by _______ (the "Transferor").
The Transferor(5):
/ / has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depository a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
/ / has requested the Trustee by written order to exchange or register
the transfer of a Security or Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that Transferor is
familiar with the Indenture relating to the above-captioned Securities and
as provided in Section 2.6 of such Indenture, the transfer of this
Security does not require registration under the Securities Act (as
defined below) because:5
/ / Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
/ / Such Security is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act")) in reliance on Rule 144A (in
satisfaction of Section 2.6(a)(ii)(B) or Section 2.6(d)(i)(B) of the
Indenture).
/ / Such Security is being transferred in accordance with (i) Rule 144
or Regulation S under the Securities Act, (ii) pursuant to an
effective registration statement under the Securities Act, (iii) to
- --------------
4 The following should be included only for Original Notes.
5 Check applicable box.
<PAGE>
an "institutional accredited investor" within the meaning of Rule 501(A)(1),
(2), (3) or (7) under the Securities Act that is acquiring the Security for
its own account, or for the account of such an institutional accredited
investor, in each case in a minimum principal amount of the Securities of
$100,000, not with a view to or for offer or sale in connection with
any distribution in violation of the Securities Act or (iv) in reliance
on another exemption from registration under the securities Act (in
satisfaction of Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the
Indenture). To effect such transfer, the Trustee or the Company may
require delivery of an Opinion of Counsel, certification and/or other
information satisfactory to it, and in case of a transfer pursuant to
clause (iii) above, will require a transferee letter of representation.
[INSERT NAME OF TRANSFEROR]
By:
Date:___________________
By:
Attest:
<PAGE>
EXHIBIT 4.2
-----------
<PAGE>
SCHEDULE TO EXHIBIT 4.2
-----------------------
The Guarantees executed by each of the following parties in favor
of First National Bank of Commerce, as Trustee, are substantially identical
in all material respects except as indicated below.
SCHEDULE OF GUARANTORS EXECUTING GUARANTEES
-------------------------------------------
Alton Gaming Company
Argosy of Louisiana, Inc.
Catfish Queen Partnership in Commendam
The Indiana Gaming Company
Iowa Gaming Company
Jazz Enterprises, Inc.
The Missouri Gaming Company
The St. Louis Gaming Company
Pursuant to Paragraph 2 of Item 601 of S-K, the following form is
filed in lieu of the various Guarantees. Any material details in which such
Guarantees differ from the enclosed form document are described in the
enclosed form document.
<PAGE>
FORM OF GUARANTEE
-----------------
For value received, __________________, a _______________
corporation, hereby irrevocably, unconditionally guarantees to the Holder of
the Security upon which this Guarantee is endorsed the due and punctual
payment, as set forth in the Indenture pursuant to which such Security and
this Guarantee were issued, of the principal of, premium (if any) and
interest (and Liquidated Damages, if any) on such Security when and as the
same shall become due and payable for any reason according to the terms of
such Security and Article XIII of the Indenture. The Guarantee of the
Security upon which this Guarantee is endorsed will not become effective
until the Trustee signs the certificate of authentication on such Security.
<PAGE>
EXHIBIT 4.3
-----------
<PAGE>
ARGOSY GAMING COMPANY,
Issuer,
and
THE GUARANTORS NAMED HEREIN
and
FIRST NATIONAL BANK OF COMMERCE,
Trustee
________________
INDENTURE
Dated as of June 5, 1996
________________
$235,000,000
13 1/4% First Mortgage Notes due 2004
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1) . . . . . . . . . . . . . . . . . . . . . 8.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . 8.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . 8.10
(b) . . . . . . . . . . . . . . . . . . . . . 8.8;
. . . . . . . . . . . . . . . . . . . . . 8.10;
. . . . . . . . . . . . . . . . . . . . . 14.2
(c) . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . 8.11
(b) . . . . . . . . . . . . . . . . . . . . . 8.11
(c) . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . 14.3
(c) . . . . . . . . . . . . . . . . . . . . . 14.3
313(a) . . . . . . . . . . . . . . . . . . . . . 8.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . 8.6
(c) . . . . . . . . . . . . . . . . . . . . . 8.6;
. . . . . . . . . . . . . . . . . . . . . 14.2
(d) . . . . . . . . . . . . . . . . . . . . . 8.6
314(a) . . . . . . . . . . . . . . . . . . . . . 5.8;
. . . . . . . . . . . . . . . . . . . . . 5.7
(b) . . . . . . . . . . . . . . . . . . . . . 4.2
(c)(1) . . . . . . . . . . . . . . . . . . . . . 2.2;
. . . . . . . . . . . . . . . . . . . . . 8.2;
. . . . . . . . . . . . . . . . . . . . . 14.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . 8.2;
. . . . . . . . . . . . . . . . . . . . . 14.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . 4.1
(d) . . . . . . . . . . . . . . . . . . . . . 4.1
(e) . . . . . . . . . . . . . . . . . . . . . 14.5
(f) . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . 8.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . 8.5;
. . . . . . . . . . . . . . . . . . . . . 8.6;
. . . . . . . . . . . . . . . . . . . . . 14.2
(c) . . . . . . . . . . . . . . . . . . . . . 8.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . 8.2;
. . . . . . . . . . . . . . . . . . . . . 7.11;
. . . . . . . . . . . . . . . . . . . . . 8.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . 7.14
316(a)(last sentence) . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . 7.11
(a)(1)(B) . . . . . . . . . . . . . . . . . . . 7.12
(a)(2) . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . 7.12;
i
<PAGE>
. . . . . . . . . . . . . . . . . . . . . 7.8
317(a)(1) . . . . . . . . . . . . . . . . . . . . . 7.3
(a)(2) . . . . . . . . . . . . . . . . . . . . . 7.4
(b) . . . . . . . . . . . . . . . . . . . . . 2.4
318(a) . . . . . . . . . . . . . . . . . . . . . 14.1
- --------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be
deemed to be a part of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions . . . . . . . 1
Section 1.2 Incorporation by Reference
of TIA . . . . . . . . . 25
Section 1.3 Rules of Construction . . 26
ARTICLE II
THE SECURITIES
Section 2.1 Form and Dating . . . . . 26
Section 2.2 Execution and
Authentication . . . . . 27
Section 2.3 Registrar and Paying Agent 28
Section 2.4 Paying Agent to Hold
Assets in Trust . . . . 28
Section 2.5 Securityholder Lists. . . 29
Section 2.6 Transfer and Exchange . . 29
Section 2.7 Replacement Securities. . 37
Section 2.8 Outstanding Securities. . 37
Section 2.9 Treasury Securities . . . 38
Section 2.10 Temporary Securities. . . 38
Section 2.11 Cancellation. . . . . . . 38
Section 2.12 Defaulted Interest. . . . 38
ARTICLE III
REDEMPTION
Section 3.1 Right of Redemption . . . 39
Section 3.2 Redemption Pursuant to
Gaming Laws . . . . . . 39
Section 3.3 Notices to Trustee. . . . 40
Section 3.4 Selection of Securities
to Be Redeemed . . . . . 40
Section 3.5 Notice of Redemption. . . 40
Section 3.6 Effect of Notice of
Redemption . . . . . . . 42
Section 3.7 Deposit of Redemption
Price . . . . . . . . . 42
Section 3.8 Securities Redeemed in
Part . . . . . . . . . . 43
ARTICLE IV
SECURITY
Section 4.1 Security Interest . . . . 43
Section 4.2 Recording; Opinions of
Counsel . . . . . . . . 43
Section 4.3 Disposition of Certain
Collateral . . . . . . . 44
Section 4.4 Collateral Account. . . . 46
Section 4.5 Certain Releases of
Collateral . . . . . . . 48
Section 4.6 Payment of Expenses . . . 49
Section 4.7 Suits to Protect the
Collateral . . . . . . . 49
Section 4.8 Trustee's Duties. . . . . 50
iii
<PAGE>
ARTICLE V
COVENANTS Page
Section 5.1 Payment of Securities . . 50
Section 5.2 Maintenance of Office
or Agency . . . . . . . 51
Section 5.3 Limitation on Restricted
Payments . . . . . . . . 51
Section 5.4 Corporate Existence . . . 52
Section 5.5 Payment of Taxes and
Other Claims . . . . . . 53
Section 5.6 Maintenance of Insurance. 53
Section 5.7 Compliance Certificate;
Notice of Default . . . 54
Section 5.8 Reports . . . . . . . . . 54
Section 5.9 Waiver of Stay,
Extension or Usury
Laws . . . . . . . . . . 55
Section 5.10 Limitation on Transactions
with Affiliates . . . . 55
Section 5.11 Limitation on Incurrence
of Additional
Indebtedness and
Disqualified Capital
Stock. . . . . . . . . . 56
Section 5.12 Limitation on Dividends
and Other Payment
Restrictions Affecting
Subsidiaries . . . . . . 58
Section 5.13 Limitation on Liens
Securing Indebtedness . 59
Section 5.14 Limitation on Sale of
Assets and Subsidiary
Stock . . . . . . . . . 59
Section 5.15 Limitation on Use of
Proceeds . . . . . . . . 64
Section 5.16 Repurchase of Notes on
Certain Project Delays . 65
Section 5.17 Repurchase of Notes in
Connection with Sale of
Lawrenceburg Interest. . 67
Section 5.18 Repurchase of Notes in
Connection with Repayment
of Lawrenceburg
Investment . . . . . . . 70
Section 5.19 Repurchase of Notes on
Loss of Material
Casino . . . . . . . . . 74
Section 5.20 Limitation on Activities
of The Indiana Gaming
Company and Indiana
Gaming L.P. . . . . . . 76
Section 5.21 Limitation on Lines of
Business . . . . . . . . 77
Section 5.22 Limitation on Status as
Investment Company . . . 77
Section 5.23 Future Subsidiary
Guarantors . . . . . . . 77
Section 5.24 Rule 144A Information
Requirement . . . . . . 78
ARTICLE VI
SUCCESSOR CORPORATION
Section 6.1 Limitation on Merger, Sale
or Consolidation . . . . 78
Section 6.2 Successor Corporation
Substituted . . . . . . 79
iv
<PAGE>
ARTICLE VII Page
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default . . . . 80
Section 7.2 Acceleration of Maturity
Date; Rescission and
Annulment . . . . . . . 82
Section 7.3 Collection of
Indebtedness and Suits
for Enforcement by
Trustee . . . . . . . . 83
Section 7.4 Trustee May File Proofs
of Claim . . . . . . . . 84
Section 7.5 Trustee May Enforce
Claims Without
Possession of
Securities . . . . . . . 85
Section 7.6 Priorities. . . . . . . . 85
Section 7.7 Limitation on Suits . . . 85
Section 7.8 Unconditional Right of
Holders to Receive
Principal, Premium and
Interest . . . . . . . . 86
Section 7.9 Rights and Remedies
Cumulative . . . . . . 87
Section 7.10 Delay or Omission
Not Waiver . . . . . . . 87
Section 7.11 Control by Holders. . . . 87
Section 7.12 Waiver of Past Default. . 88
Section 7.13 Undertaking for Costs . . 88
Section 7.14 Restoration of Rights
and Remedies . . . . . . 89
ARTICLE VIII
TRUSTEE
Section 8.1 Duties of Trustee . . . . 89
Section 8.2 Rights of Trustee . . . . 91
Section 8.3 Individual Rights of
Trustee . . . . . . . . 92
Section 8.4 Trustee's Disclaimer. . . 92
Section 8.5 Notice of Default . . . . 92
Section 8.6 Reports by Trustee to
Holders . . . . . . . . 93
Section 8.7 Compensation and
Indemnity . . . . . . . 93
Section 8.8 Replacement of Trustee. . 94
Section 8.9 Successor Trustee by
Merger, Etc. . . . . . . 95
Section 8.10 Eligibility;
Disqualification . . . . 95
Section 8.11 Preferential Collection
of Claims against
Company . . . . . . . . 95
ARTICLE IX
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 9.1 Option to Effect Legal
Defeasance or
Covenant Defeasance . . 96
Section 9.2 Legal Defeasance and
Discharge . . . . . . . 96
Section 9.3 Covenant Defeasance . . . 96
Section 9.4 Conditions to Legal or
Covenant Defeasance . . 97
Section 9.5 Deposited Cash and U.S.
Government Obligations
to Be Held in Trust;
Other Miscellaneous
Provisions . . . . . . . 100
v
<PAGE>
Section 9.6 Repayment to Issuers . . 101
Section 9.7 Reinstatement . . . . . . 101
Section 9.8 Termination of
Obligations upon
Cancellation of the
Securities . . . . . . . 101
ARTICLE X
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 10.1 Supplemental Indentures
Without Consent of
Holders . . . . . . . . 102
Section 10.2 Amendments, Supplemental
Indentures and Waivers
with Consent of
Holders . . . . . . . . 103
Section 10.3 Compliance with TIA . . . 105
Section 10.4 Revocation and Effect
of Consents . . . . . . 105
Section 10.5 Notation on or Exchange
of Securities . . . . . 106
Section 10.6 Trustee to Sign
Amendments, Etc. . . . . 106
ARTICLE XI
MEETINGS OF SECURITYHOLDERS
Section 11.1 Purposes for Which
Meetings May Be
Called . . . . . . . . . 107
Section 11.2 Manner of Calling
Meetings . . . . . . . . 107
Section 11.3 Call of Meetings by
Company or Holders . . . 108
Section 11.4 Who May Attend and Vote
at Meetings . . . . . . 108
Section 11.5 Regulations May Be
Made by Trustee;
Conduct of the
Meeting; Voting Rights;
Adjournment . . . . . . 108
Section 11.6 Voting at the Meeting
and Record to Be Kept. . 109
Section 11.7 Exercise of Rights of
Trustee or
Securityholders
May Not Be Hindered or
Delayed by Call
of Meeting . . . . . . . 110
ARTICLE XII
RIGHT TO REQUIRE REPURCHASE
Section 12.1 Repurchase of Securities
at Option of the Holder
upon Change of Control. . 110
ARTICLE XIII
GUARANTEE
Section 13.1 Guarantee . . . . . . . . 113
Section 13.2 Execution and Delivery
of Guarantee . . . . . . 115
Section 13.3 Certain Bankruptcy
Events . . . . . . . . . 115
Section 13.4 Release of Guarantee. . . 115
Section 13.5 Future Guarantors . . . . 116
vi
<PAGE>
ARTICLE XIV
MISCELLANEOUS
Section 14.1 TIA Controls . . . . . . 116
Section 14.2 Notices . . . . . . . . . 116
Section 14.3 Communications by Holders
with Other Holders . . . 117
Section 14.4 Certificate and Opinion
as to Conditions
Precedent . . . . . . . 118
Section 14.5 Statements Required in
Certificate or Opinion . 118
Section 14.6 Rules by Trustee, Paying
Agent, Registrar . . . . 119
Section 14.7 Legal Holidays. . . . . . 119
Section 14.8 Governing Law . . . . . . 119
Section 14.9 No Adverse Interpretation
of Other Agreements . . 119
Section 14.10 No Recourse against
Others . . . . . . . . . 120
Section 14.11 Successors. . . . . . . . 120
Section 14.12 Duplicate Originals . . . 120
Section 14.13 Severability. . . . . . . 120
Section 14.14 Table of Contents,
Headings, Etc. . . . . . 120
vii
<PAGE>
Page
----
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Guarantee
Exhibit C-1 and C-2 - Forms of Deed of Trust
Exhibit D - Form of Parent Pledge Agreement
Exhibit E - Form of Subsidiary Pledge Agreement
Exhibit F - Form of Ship Mortgage
Exhibit G - Form of Parent Security Agreement
Exhibit H - Form of Subsidiary Security Agreement
Exhibit I - Form of Intercreditor Agreement
Exhibit J - Specified Indebtedness
Exhibit K - Specified Parcels
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INDENTURE, dated as of June 5, 1996, among Argosy
Gaming Company, a Delaware corporation (the "Company"), the
Guarantors referred to below and First National Bank of Commerce,
as Trustee.
Each party hereto agrees as follows for the benefit of
each other party and for the equal and ratable benefit of the
Holders of the Company's 13 1/4% First Mortgage Notes due 2004,
whether Original Notes (as defined below) or Series B Notes (as
defined below):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1 DEFINITIONS.
"ACCELERATION NOTICE" shall have the meaning specified
in Section 7.2.
"ACCEPTANCE AMOUNT" shall have the meaning specified in
Section 5.14.
"ACCUMULATED AMOUNT" shall have the meaning specified
in Section 5.14.
"ACQUIRED INDEBTEDNESS" means, with respect to any
person, (i) Indebtedness or Disqualified Capital Stock of any
person existing at the time such person becomes a Subsidiary of
the Company or is merged or consolidated into or with the Company
or one of its Subsidiaries or (ii) Indebtedness encumbering any
asset acquired by such person. Acquired Indebtedness shall be
deemed to have been incurred at the time such person becomes a
Subsidiary of the Company (including upon the designation of a
subsidiary or any other person as a Subsidiary) or is merged or
consolidated into or with the Company or one of its Subsidiaries
or the time of the Acquisition of such assets.
"ACQUISITION" means the purchase or other acquisition
of any person or substantially all the assets of any person by
any other person, whether by purchase, merger, consolidation, or
other transfer, and whether or not for consideration.
"AFFILIATE" means (i) any person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family
member, or other relative who has the same principal residence of
any person described in clause (i) above, and (iii) any trust in
which any person described in clause (i) or (ii) above has a
beneficial interest. For purposes of this definition, the term
"control" means (a) the power to direct the management and
policies of a person, directly or through one or more intermedi-
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aries, whether through the ownership of voting securities, by
contract, or otherwise, or (b) the beneficial ownership of 10% or
more of the voting power of a person (on a fully diluted basis)
or of warrants or other rights to acquire shares of such class of
Capital Stock (whether or not presently exercisable).
"AFFILIATE TRANSACTION" shall have the meaning speci-
fied in Section 5.10.
"AGENT" means any Registrar, Paying Agent or co-Regis-
trar.
"ASSET SALE" shall have the meaning specified in
Section 5.14.
"ASSET SALE OFFER" shall have the meaning specified in
Section 5.14.
"ASSET SALE OFFER AMOUNT" shall have the meaning
specified in Section 5.14.
"ASSET SALE OFFER PRICE" shall have the meaning speci-
fied in Section 5.14.
"ASSET SALE PURCHASE DATE" shall have the meaning
specified in Section 5.14.
"AVERAGE LIFE TO STATED MATURITY" means, as of the date
of determination, with respect to any indebtedness, the quotient
obtained by dividing (i) the sum of the products of (a) the
number of years from the date of determination to the date or
dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal
payment by (ii) the sum of all such principal payments.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of debtors.
"BENEFICIAL OWNER" for purposes of the definition of
Change of Control has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act, whether or not applicable,
except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time.
"BOARD OF DIRECTORS" means, with respect to any person,
the Board of Directors of such person or any committee of the
Board of Directors of such person authorized, with respect to any
particular matter, to exercise the power of the Board of Direc-
tors of such person.
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"BOARD RESOLUTION" means, with respect to any person, a
duly adopted resolution of the Board of Directors of such person.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institu-
tions in New York, New York are authorized or obligated by law or
executive order to close.
"CAPITAL STOCK" means, with respect to any person, any
and all shares, interests, rights to purchase (other than con-
vertible or exchangeable Indebtedness), warrants, options,
participations or other equivalents of or interests (however
designated) in stock or equity issued by that person.
"CAPITALIZED LEASE OBLIGATION" means obligations under
a lease, entered into on or after the Issue Date, that are
required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented
by such obligations shall be the capitalized amount of such
obligations, as determined in accordance with GAAP.
"CASH" or "CASH" means such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public or private debts.
"CASH COLLATERAL" means Cash that is Collateral for the
Securities under the Security documents.
"CASH COLLATERAL ACCOUNT" means any of the separate
custodial account or accounts (including the Net Cash Proceeds
Account, the Construction Account and Working Capital Account)
established and maintained by the Company in the name of the
Trustee or the Disbursement Agent for the benefit of the Holders
pursuant to Section 4.4 or the terms of the Cash Collateral and
Disbursement Agreement, respectively.
"CASH COLLATERAL AND DISBURSEMENT AGREEMENT" means the
Cash Collateral and Disbursement Agreement, dated as of the Issue
Date, among the Company, the Guarantors, the Trustee, and the
Disbursement Agent, as the same may be amended from time to time
in accordance with the terms thereof.
"CASINO IMPROVEMENTS" means the acquisition of, or
development and construction of, any addition to or expansion of
the Company's Riverside, Alton, Sioux City or Baton Rouge proper-
ties in connection with any expansion of casino floor space, and
any addition to or expansion of any gaming, hotel, parking,
dining, entertainment, retail, promotional, storage, patron
services, transportation or similar facilities related thereto,
in each case, after the date of this Indenture.
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"CHANGE OF CONTROL" means (i) any merger or consolida-
tion of the Company with or into any person or any sale, transfer
or other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Company, on a consolidated
basis, in one transaction or a series of related transactions,
if, immediately after giving effect to such transaction, any
"person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable), other than Excluded Persons, is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of
the total voting power in the aggregate normally entitled to vote
in the election of directors, managers, or trustees, as applica-
ble, of the transferee or surviving entity, (ii) any "person" or
"group" (as such terms are used for purposes of Sections 13(d)
and 14(d) of the Exchange Act, whether or not applicable), other
than Excluded Persons, is or becomes the "beneficial owner,"
directly or indirectly, of more than 50% of the total voting
power in the aggregate of all classes of Capital Stock of the
Company then outstanding normally entitled to vote in elections
of directors, or (iii) during any period of 12 consecutive months
after the Issue Date, individuals who at the beginning of any
such 12-month period constituted the Board of Directors of the
Company (together with any new directors whose election by such
Board or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors
then still in office who were either directors at the beginning
of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
For purposes of this definition, (i) the terms "person" and
"group" shall have the meaning used for purposes of Rules 13d-3
and 13d-5 of the Exchange Act as in effect on the Issue Date,
whether or not applicable; and (ii) the term "beneficial owner"
shall have the meaning used in Rules 13d-3 and 13d-5 under the
Exchange Act as in effect on the Issue Date, whether or not
applicable, except that a "person" shall be deemed to have
"beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately
or only after the passage of time or upon the occurrence of
certain events.
"CHANGE OF CONTROL OFFER" shall have the meaning
specified in Section 12.1.
"CHANGE OF CONTROL PURCHASE PRICE" shall have the
meaning specified in Section 12.1.
"CHANGE OF CONTROL PURCHASE DATE" shall have the
meaning specified in Section 12.1.
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"COLLATERAL" means the Property and assets of the
Company and the Property and assets of the Guarantors which are
subject to the Liens created by the Security Documents.
"COMPANY" means the party named as such in this Inden-
ture until a successor replaces it pursuant to the Indenture and
thereafter means such successor.
"CONSOLIDATED COVERAGE RATIO" of any person on any date
of determination (the "Transaction Date") means the ratio, on a
pro forma basis, of (a) the aggregate amount of Consolidated
EBITDA of such person attributable to continuing operations and
businesses exclusive of amounts attributable to operations and
businesses permanently discontinued or disposed of during the
Reference Period, to (b) the aggregate Consolidated Fixed Charges
of such person (exclusive of amounts attributable to operations
and businesses permanently discontinued or disposed of, but only
to the extent that the obligations giving rise to such Consoli-
dated Fixed Charges would no longer be obligations contributing
to such person's Consolidated Fixed Charges subsequent to the
Transaction Date) during the Reference Period; provided, that for
purposes of such calculation, (i) Acquisitions which occurred
during the Reference Period or subsequent to the Reference Period
and on or prior to the Transaction Date shall be assumed to have
occurred on the first day of the Reference Period, (ii) transac-
tions giving rise to the need to calculate the Consolidated
Coverage Ratio shall be assumed to have occurred on the first day
of the Reference Period, (iii) the incurrence of any Indebtedness
or issuance of any Disqualified Capital Stock during the Refer-
ence Period or subsequent to the Reference Period and on or prior
to the Transaction Date (and the application of the proceeds
therefrom to the extent used to refinance or retire other Indebt-
edness) shall be assumed to have occurred on the first day of
such Reference Period, and (iv) the Consolidated Fixed Charges of
such person attributable to interest on any Indebtedness or
dividends on any Disqualified Capital Stock bearing a floating
interest (or dividend) rate shall be computed on a pro forma
basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable
rate for the entire period, unless such Person or any of its
Subsidiaries is a party to an Interest Swap and Hedging Obliga-
tion (which shall remain in effect for the 12-month period
immediately following the Transaction Date) that has the effect
of fixing the interest rate on the date of computation, in which
case such rate (whether higher or lower) shall be used.
"CONSOLIDATED EBITDA" means, with respect to any
person, for any period, the Consolidated Net Income of such
person for such period adjusted to add thereto (to the extent
deducted from net revenues in determining Consolidated Net
Income), without duplication, the sum of (i) consolidated income
tax expense, (ii) consolidated depreciation and amortization ex-
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pense, provided that consolidated depreciation and amortization
of a Subsidiary that is a less than wholly owned Subsidiary shall
only be added to the extent of the equity interest of the Company
in such Subsidiary, (iii) Consolidated Fixed Charges, and
(iv) with respect to the Company, all cash distributions made by
The Indiana Gaming Company to the Company or another Guarantor,
except for payments in the nature of management fees, interest
income or preferred dividends from Indiana Gaming L.P.
"CONSOLIDATED FIXED CHARGES" of any person means, for
any period, the aggregate amount (without duplication and deter-
mined in each case in accordance with GAAP) of (a) interest
expensed or capitalized, paid, accrued, or scheduled to be paid
or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such
person and its Consolidated Subsidiaries during such period,
including (i) original issue discount and non-cash interest pay-
ments or accruals on any Indebtedness, (ii) the interest portion
of all deferred payment obligations, and (iii) all commissions,
discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency
and Interest Swap and Hedging Obligations, in each case to the
extent attributable to such period, and (b) the amount of divi-
dends accrued or payable by such person or any of its Consoli-
dated Subsidiaries in respect of Preferred Stock (other than by
Subsidiaries of such person to such person or such person's whol-
ly owned Subsidiaries). For purposes of this definition,
(x) interest on a Capitalized Lease Obligation shall be deemed to
accrue at an interest rate reasonably determined by the Company
to be the rate of interest implicit in such Capitalized Lease
Obligation in accordance with GAAP and (y) interest expense at-
tributable to any Indebtedness represented by the guaranty by
such person or a Subsidiary of such person of an obligation of
another person shall be deemed to be the interest expense attrib-
utable to the Indebtedness guaranteed.
"CONSOLIDATED NET INCOME" means, with respect to any
person for any period, the net income (or loss) of such person
and its Consolidated Subsidiaries (determined on a consolidated
basis in accordance with GAAP) for such period, adjusted to ex-
clude (only to the extent included in computing such net income
(or loss) and without duplication): (a) all gains (but not
losses) which are either extraordinary (as determined in accor-
dance with GAAP) or are either unusual or nonrecurring (including
any gain from the sale or other disposition of assets outside the
ordinary course of business or from the issuance or sale of any
capital stock), (b) any gains (but not losses) from currency ex-
change transactions, (c) the net income, if positive, of any per-
son, other than a wholly owned Consolidated Subsidiary, in which
such person or any of its Consolidated Subsidiaries has an in-
terest, except to the extent of the amount of any dividends or
distributions actually paid in cash to such person or a wholly
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owned Consolidated Subsidiary of such person during such period,
but in any case not in excess of such person's pro rata share of
such person's net income for such period, (d) the net income or
loss of any person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition, (e) cash
distributions from Indiana Gaming L.P. and the net income of The
Indiana Gaming Company, except for net income in the nature of
management fees, interest income or preferred dividends actually
paid to the Company or a Guarantor other than The Indiana Gaming
Company, so long as Indiana Gaming L.P. is an Unrestricted
Subsidiary, (f) the net income, if positive, of any of such
person's Consolidated Subsidiaries to the extent that the decla-
ration or payment of dividends or similar distributions is not at
the time permitted by operation of the terms of its charter or
bylaws or any other agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to
such Consolidated Subsidiary, PROVIDED, HOWEVER, that statutory
or regulatory requirements of Gaming Authority approval prior to
distribution shall not be considered such a limitation and (g)
any noncash extraordinary charge relating to the repayment of the
Existing Bank Credit Facility.
"CONSOLIDATED NET WORTH" of any person at any date
means the aggregate consolidated stockholders' equity of such
person (plus amounts of equity attributable to preferred stock)
and its Consolidated Subsidiaries, as would be shown on the
consolidated balance sheet of such person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in calcu-
lating such equity) (a) the amount of any such stockholders'
equity attributable to Disqualified Capital Stock or treasury
stock of such person and its Consolidated Subsidiaries, (b) all
upward revaluations and other write-ups in the book value of any
asset of such person or a Consolidated Subsidiary of such person
subsequent to the Issue Date, and (c) all investments in Subsid-
iaries that are not Consolidated Subsidiaries and in persons that
are not Subsidiaries.
"CONSOLIDATED SUBSIDIARY" means, for any person, each
Subsidiary of such person (whether now existing or hereafter
created or acquired) the financial statements of which are
consolidated for financial statement reporting purposes with the
financial statements of such person in accordance with GAAP. So
long as Indiana Gaming L.P. is an Unrestricted Subsidiary, the
results of operation of Indiana Gaming L.P. shall not be included
in the calculation of Consolidated Net Income of the Company,
other than management fees, interest income and preferred divi-
dends paid to the Company or a Guarantor other than The Indiana
Gaming Company.
"CONVERTIBLE NOTES" means the Company's 12% Convertible
Subordinated Notes due 2001.
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"CUSTODIAN" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy
Law.
"DEEDS OF TRUST" means, collectively, (i) that certain
Deed of Trust, Assignments of Rents, Leases and Security Agree-
ments substantially in the form of Exhibit C-1 dated as of the
Issue Date, executed by each of Argosy Gaming Company, and (ii)
that certain Mortgage and Fixture Filing of Jazz Enterprises,
Inc. to secure present and future indebtedness, Assignment of
Leases and Rents and Security Agreement substantially in the form
of Exhibit C-2 dated as of the Issue Date, executed by each of
Jazz Enterprises, Inc. and Catfish Queen Partnership in Commen-
dam, each in favor of the Trustee as Trustee for the
Securityholders, as the same may be amended from time to time.
"DEFAULT" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
"DEFINITIVE SECURITIES" means Securities that are in
the form of the Note attached hereto as Exhibit A that do not
include the information called for by footnotes 1 and 3 thereof.
"DEPOSITORY" means, with respect to the Securities
issuable or issued in whole or in part in global form, the person
specified in Section 2.3 as the Depository with respect to the
Securities, until a successor shall have been appointed and
become such pursuant to the applicable provision of this Inden-
ture, and, thereafter, "Depository" shall mean or include such
successor.
"DISBURSEMENT AGENT" shall have the meaning specified
in Section 4.4.
"DISQUALIFIED CAPITAL STOCK" means (a) except as set
forth in (b), with respect to any person, Capital Stock of such
person, that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon
the happening of an event or the passage of time would be,
required to be redeemed or repurchased (including at the option
of the holder thereof) by such person or any of its Subsidiaries,
in whole or in part, on or prior to the Stated Maturity of the
Notes and (b) with respect to any Subsidiary of such person
(including with respect to any Subsidiary of the Company), any
Capital Stock other than any common stock with no preference,
privileges, or redemption or repayment provisions.
"EVENT OF DEFAULT" shall have the meaning specified in
Section 7.1.
"EVENT OF LOSS" means, with respect to any property or
asset or any (i) loss, destruction or damage of such property or
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asset or (ii) any condemnation, seizure or taking, by exercise of
the power of eminent domain or otherwise, of such property or
asset, or confiscation or requisition of the use of such property
or asset.
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated by
the SEC thereunder.
"EXCHANGE OFFER" means the offer by the Company and the
Guarantors to exchange the Series B Notes and Guarantees thereof
for the Original Notes and Guarantees thereof made pursuant to
the Registration Rights Agreement.
"EXCLUDED PERSONS" means J. Thomas Long and William F.
Cellini, each of such person's immediate family or a trust or
similar entity existing solely for the benefit of such person or
such person's immediate family.
"EXISTING BANK CREDIT AGREEMENT" means the Credit
Agreement, dated March 8, 1995, among the Company, Bank of
America Illinois, as Agent, and the other financial institutions
party thereto.
"FF&E INDEBTEDNESS" means any Indebtedness of the
Company and its Subsidiaries and Indiana Gaming L.P. to any
seller or other person incurred to finance any gaming or gaming
related fixtures, furniture or equipment which, in the reasonable
good faith judgment of the Board of Directors of the Company or
the general partner of Indiana Gaming L.P., is incurred for a
Material Casino, is directly related to a Related Business and is
secured only by the assets so financed.
"GAAP" means United States generally accepted account-
ing principles set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other state-
ments by such other entity as approved by a significant segment
of the accounting profession as in effect on the Issue Date.
"GAMING AUTHORITY" means any Governmental Authority
with the power to regulate gaming in any Gaming Jurisdiction, and
the corresponding Governmental Authorities with responsibility to
interpret and enforce the laws and regulations applicable to
gaming in any Gaming Jurisdiction.
"GAMING JURISDICTION" means any Federal, state or local
jurisdiction in which any entity in which the Company has a
direct or indirect beneficial, legal or voting interest conducts
casino gaming.
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"GAMING LAW" means any law, rule, regulation or ordi-
nance governing gaming activities, any administrative rules or
regulations promulgated thereunder, and any of the corresponding
statutes, rules and regulations in each Gaming Jurisdiction.
"GAMING LICENSES" means every license, material fran-
chise or other authorization on the date of the Indenture or
thereafter required to own, lease, operate or otherwise conduct
or manage riverboat, dockside or land-based gaming in any state
or jurisdiction in which the Company or any of the Guarantors
conduct business, and any applicable liquor licenses.
"GLOBAL SECURITY" means a Security that contains the
paragraph referred to in footnote 1 and the additional schedule
referred to in footnote 3 to the form of Security attached hereto
as Exhibit A.
"GOVERNMENTAL AUTHORITY" means any agency, authority,
board, bureau, commission, department, office or instrumentality
of any nature whatsoever of the United States or a foreign
government, any state, province or any city or other political
subdivision or otherwise and whether now or hereafter in exis-
tence, or any officer or official thereof, and any maritime
authority.
"GUARANTORS" means Alton Gaming Company, The Missouri
Gaming Company, The St. Louis Gaming Company, Iowa Gaming Compa-
ny, Jazz Enterprises, Inc., Argosy of Louisiana, Inc., Catfish
Queen Partnership in Commendam and The Indiana Gaming Company and
any future newly created, acquired or designated Subsidiary of
the Company.
"GUARANTEE" shall have the meaning provided in Section
13.1(a).
"HOLDER" or "SECURITYHOLDER" means the person in whose
name a Security is registered on the Registrar's books.
"INCUR" shall have the meaning specified in Section
5.11.
"INCURRENCE DATE" shall have the meaning specified in
Section 5.11.
"INDEBTEDNESS" of any person means, without duplica-
tion, (a) all liabilities and obligations, contingent or other-
wise, of such person, (i) in respect of borrowed money (whether
or not the recourse of the lender is to the whole of the assets
of such person or only to a portion thereof), (ii) evidenced by
bonds, notes, debentures or similar instruments, (iii) represent-
ing the balance deferred and unpaid of the purchase price of any
property or services, except such as would constitute accrued
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expenses or trade payables to trade creditors in the ordinary
course of business that are not more than ninety (90) days past
their original due date unless being contested in good faith,
(iv) evidenced by bankers' acceptances or similar instruments
issued or accepted by banks, (v) for the payment of money relat-
ing to a Capitalized Lease Obligation, or (vi) evidenced by a
letter of credit or a reimbursement obligation of such person
with respect to any letter of credit; (b) all net obligations of
such person under Interest Swap and Hedging Obligations; (c) all
liabilities and obligations of others of the kind described in
the preceding clause (a) or (b) that such person has guaranteed
or that is otherwise its legal liability and all obligations to
purchase, redeem or acquire any Capital Stock; and (d) any and
all deferrals, renewals, extensions, refinancings and refundings
(whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the
preceding clauses (a), (b) or (c) or this clause (d), whether or
not between or among the same parties, provided that, in calcu-
lating Indebtedness of the Company and its Consolidated Subsid-
iaries, Indebtedness of Indiana Gaming L.P. attributable to The
Indiana Gaming Company solely because of its legal status as
general partner of Indiana Gaming L.P. shall not be deemed such
Indebtedness.
"INDENTURE" means this Indenture, as amended or supple-
mented from time to time in accordance with the terms hereof.
"INDENTURE OBLIGATIONS" means the obligations of the
Company and the Guarantors pursuant to this Indenture and the
Securities (and any other obligor hereunder or under the Securi-
ties) now or hereafter existing, to pay principal of and premium,
if any, and interest (including Liquidated Damages, if any) on
the Securities when due and payable, whether on the Maturity Date
or an Interest Payment Date, by acceleration, call for redemp-
tion, acceptance of any Asset Sale Offer, Change of Control
Offer, License Loss Offer, Lawrenceburg Sale Offer, Project Delay
Offer, Lawrenceburg Investment Offer, or otherwise, and interest
on the overdue principal and premium, if any, of, and (to the
extent lawful) interest (and Liquidated Damages), if any, on, the
Securities and all other amounts due or to become due in connec-
tion with this Indenture, the Securities and the Security Docu-
ments, including any and all extensions, renewals or other
modifications thereof, in whole or in part, and the performance
of all other obligations of the Company (and any other obligor
hereunder or under the Securities) and the Guarantors, including
all costs and expenses incurred by the Trustee or the Holders in
the collection or enforcement of any such obligations or realiza-
tion upon the Collateral or the security of any Security Docu-
ment.
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"INDIANA GAMING L.P." means the Indiana Gaming Company,
L.P. or any successor acquired to develop the proposed casino in
Lawrenceburg, Indiana.
"INITIAL PURCHASERS" means Bear, Stearns & Co. Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, BA Securi-
ties, Inc. and Deutsche Morgan Grenfell.
"INSURANCE PROCEEDS" means the Company's and the
Guarantors' interest in and to (a) all proceeds which now or
hereafter may be paid under any insurance policies now or hereaf-
ter obtained by or on behalf of the Company and the Guarantors in
connection with the conversion of the Property subject to the
Security Documents into Cash or liquidated claims, together with
the interest payable thereon and the right to collect and receive
the same, including, but without limiting the generality of the
foregoing, proceeds of casualty insurance, title insurance,
business interruption insurance and any other insurance now or
hereafter maintained with respect to such Property, (b) proceeds
of any condemnation proceedings and (c) all amounts attributable
to Events of Loss.
"INTEREST PAYMENT DATE" means the stated due date of an
installment of interest on the Securities.
"INTEREST SWAP AND HEDGING OBLIGATION" means any
obligation of any person pursuant to any interest rate swap
agreement, interest rate cap agreement, interest rate collar
agreement, interest rate exchange agreement, currency exchange
agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency
values, including, without limitation, any arrangement whereby,
directly or indirectly, such person is entitled to receive from
time to time periodic payments calculated by applying either a
fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by
applying a fixed or floating rate of interest on the same notion-
al amount.
"INVESTMENT" by any person in any other person means
(without duplication) (a) the acquisition (whether by purchase,
merger, consolidation or otherwise) by such person (whether for
cash, property, services, securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants,
of such other person or any agreement to make any such acquisi-
tion; (b) the making by such person of any deposit with, or
advance, loan or other extension of credit to, such other person
(including the purchase of property from another person subject
to an understanding or agreement, contingent or otherwise, to
resell such property to such other person) or any commitment to
make any such advance, loan or extension (but excluding (a)
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accounts receivable or deposits arising in the ordinary course of
business and (b) advances, loans or other extensions of credit by
the Company or any of its Subsidiaries to the Company or any
Subsidiary of the Company); (c) other than guarantees of Indebt-
edness of the Company to the extent permitted by Section 5.11,
the entering into by such person of any guarantee of, or other
credit support or contingent obligation with respect to, Indebt-
edness or other liability of such other person; (d) the making of
any capital contribution by such person to such other person,
other than to the Company or a wholly owned Subsidiary of the
Company; and (e) the designation by the Board of Directors of the
Company of any person to be an Unrestricted Subsidiary. The
Company shall be deemed to make an Investment in an amount equal
to the fair market value of the net assets of any subsidiary (or,
if neither the Company nor any of its Subsidiaries has thereto-
fore made an Investment in such subsidiary, in an amount equal to
the Investments being made), at the time that such subsidiary is
designated an Unrestricted Subsidiary, and any property trans-
ferred to an Unrestricted Subsidiary from the Company or a
Subsidiary shall be deemed an Investment valued at its fair
market value at the time of such transfer.
"ISSUE DATE" means the date of first issuance of the
Notes under the Indenture.
"JUNIOR INDEBTEDNESS" means Indebtedness of the Company
or a Guarantor, as applicable, that is subordinated in right of
payment to the Notes or such Guarantor's guarantee of the Notes,
as applicable, or has a scheduled installment of principal due,
by maturity, redemption, sinking fund payment or otherwise after
the Stated Maturity of the Notes, except that the amount payable
to the former Jazz Enterprises, Inc. shareholders shall not be
deemed Junior Indebtedness if repaid in full at a discount for an
amount not to exceed $3 million.
"LAWRENCEBURG CASINO" means the Company's proposed
dockside or riverboat casino and related parking, hotel, restau-
rant, bar and other entertainment facilities in Lawrenceburg,
Dearborn County, Indiana.
"LAWRENCEBURG INVESTMENT" means the total aggregate
Investment by the Company and the Guarantors in Indiana Gaming
L.P.
"LAWRENCEBURG INVESTMENT ACCEPTANCE AMOUNT" shall have
the meaning specified in Section 5.18.
"LAWRENCEBURG INVESTMENT EVENT" shall have the meaning
specified in Section 5.18.
"LAWRENCEBURG INVESTMENT OFFER" shall have the meaning
specified in Section 5.18.
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"LAWRENCEBURG INVESTMENT OFFER AMOUNT" shall have the
meaning specified in Section 5.18.
"LAWRENCEBURG INVESTMENT OFFER PRICE" shall have the
meaning specified in Section 5.18.
"LAWRENCEBURG INVESTMENT PURCHASE DATE" shall have the
meaning specified in Section 5.18.
"LAWRENCEBURG INVESTMENT RETURN" means the complete
repayment to the Company and the Guarantors (other than The
Indiana Gaming Company) of the Lawrenceburg Investment, without
credit for management fees, interest income, preferred dividends
or provision for taxes.
"LAWRENCEBURG SALE" shall have the meaning specified in
Section 5.17.
"LAWRENCEBURG SALE ACCEPTANCE AMOUNT" shall have the
meaning specified in Section 5.17.
"LAWRENCEBURG SALE OFFER" shall have the meaning speci-
fied in Section 5.17.
"LAWRENCEBURG SALE OFFER AMOUNT" shall have the meaning
specified in Section 5.17.
"LAWRENCEBURG SALE OFFER PRICE" shall have the meaning
specified in Section 5.17.
"LAWRENCEBURG SALE PURCHASE DATE" shall have the
meaning specified in Section 5.17.
"LEGAL HOLIDAY" shall have the meaning provided in
Section 14.7.
"LICENSE LOSS" shall have the meaning specified in Sec-
tion 5.19.
"LICENSE LOSS OFFER" shall have the meaning specified
in Section 5.19.
"LICENSE LOSS OFFER AMOUNT" shall have the meaning
specified in Section 5.19.
"LICENSE LOSS OFFER PRICE" shall have the meaning
specified in Section 5.19.
"LICENSE LOSS PURCHASE DATE" shall have the meaning
specified in Section 5.19.
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"LIEN" means any mortgage, lien, pledge, charge,
security interest, or other encumbrance of any kind, whether or
not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agree-
ment and any lease deemed to constitute a security interest, and
any option or other agreement to give any security interest).
"LIQUIDATED DAMAGES" shall have the meaning specified
in the Registration Rights Agreement.
"MATERIAL CASINO" means any gaming establishment
possessing at least 400 slot machines and at least 20 table
games.
"MATURITY DATE," when used with respect to any Securi-
ty, means the date on which the principal of such Security
becomes due and payable as therein or herein provided, whether at
Stated Maturity, a Change of Control Purchase Date, an Asset Sale
Purchase Date, a License Loss Purchase Date, a Lawrenceburg Sale
Purchase Date, the Project Delay Purchase Date or the
Lawrenceburg Investment Purchase Date or by declaration of accel-
eration, call for redemption or otherwise.
"MINIMUM ACCUMULATION DATE" shall have the meaning
specified in Section 5.14.
"NET CASH PROCEEDS" means the aggregate amount of cash
received by the Company in the case of a sale of Qualified
Capital Stock, by the Company and its Subsidiaries in respect of
an Asset Sale or an Event of Loss (including all Insurance
Proceeds with respect thereto), by the Company and its Subsid-
iaries in respect of a Lawrenceburg Sale and by Indiana Gaming
L.P. in respect of a Property Sale plus, in the case of an
issuance of Qualified Capital Stock upon any exercise, exchange
or conversion of securities (including options, warrants, rights
and convertible or exchangeable debt) of the Company that were
issued for cash on or after the Issue Date, the amount of cash
originally received by the Company upon the issuance of such
securities (including options, warrants, rights and convertible
or exchangeable debt) less, in each case, the sum of all pay-
ments, fees, commissions and reasonable and customary expenses
(including, without limitation, the fees and expenses of legal
counsel and investment banking fees and expenses) incurred in
connection with such Asset Sale, an Event of Loss, Lawrenceburg
Sale, Property Sale or sale of Qualified Capital Stock, and, in
the case of an Asset Sale, Lawrenceburg Sale, Property Sale or an
Event of Loss only, less the amount (estimated reasonably and in
good faith by the Company) of income, franchise, sales and other
applicable taxes required to be paid by the Company or any of its
respective Subsidiaries in connection with such Asset Sale,
Lawrenceburg Sale, Property Sale or an Event of Loss and, in the
case of an Asset Sale, Property Sale or Event of Loss only, less
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the amounts required to be applied to the repayment of Indebted-
ness secured by a Lien otherwise permitted herein on the asset or
assets that were the subject of such event and which Indebtedness
is required by its terms to be repaid on such event, and in the
case of any Asset Sale, Property Sale or Lawrenceburg Sale only,
less any reserve established by the Company or any of its Subsid-
iaries in accordance with GAAP against any liabilities associated
with such sale and retained by the Company or any of its Subsid-
iaries, as the case may be, after such sale.
"NET CASH PROCEEDS ACCOUNT" shall have the meaning as
set forth in Section 4.4 hereof.
"NOTES" See "SECURITIES."
"OFFERING MEMORANDUM" means the Offering Memorandum of
the Company dated June 1, 1996 with respect to the Notes.
"OFFER TO PURCHASE" means any Change of Control Offer,
Asset Sale Offer, License Loss Offer, Lawrenceburg Sale Offer,
Project Delay Offer or Lawrenceburg Investment Offer.
"OFFER TO PURCHASE PRICE" means any Change of Control
Purchase Price, Asset Sale Offer Price (including in connection
with an Event of Loss), License Loss Offer Price, Lawrenceburg
Sale Offer Price, Project Delay Offer Price or Lawrenceburg
Investment Offer Price.
"OFFICER" means, with respect to the Company, the
Chairman of the Board, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller, or the
Secretary or Assistant Secretary of the Company.
"OFFICERS' CERTIFICATE" means, with respect to the
Company or any Guarantor, a certificate signed by two Officers of
the Company or such Guarantor and otherwise complying with the
requirements of Sections 14.4 and 14.5.
"OPINION OF COUNSEL" means a written opinion from legal
counsel to the Company complying with the requirements of Sec-
tions 14.4 and 14.5. Unless otherwise required by this Inden-
ture, the counsel may be in-house counsel to the Company.
"ORIGINAL NOTES" means the 13 1/4% First Mortgage Notes
due 2004, as amended and supplemented from time to time in accor-
dance with the terms hereof, that are issued pursuant to this
Indenture.
"PARENT PLEDGE AGREEMENT" means the Pledge Agreement,
dated the date hereof, from the Company, as Pledgor, to the
Trustee for the benefit of Holders, in substantially the form
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<PAGE>
included as Exhibit D hereto, as the same may be amended from
time to time in accordance with the terms thereof.
"PARENT SECURITY AGREEMENT" means the Security Agree-
ment, dated the Issue Date, substantially in the form of Exhibit
G, executed by the Company, and the Trustee for the benefit of
the Holders, as the same may be amended from time to time in
accordance with the terms thereof.
"PAYING AGENT" shall have the meaning specified in
Section 2.3.
"PERMITTED ASSET SALE" shall have the meaning specified
in Section 5.14.
"PERMITTED INDEBTEDNESS" means any of the following:
(a) The Company and the Guarantors may incur
Indebtedness solely in respect of bankers acceptances and perfor-
mance, appeal or bid bonds (to the extent that such incurrence
does not result in the incurrence of any obligation to repay any
obligation relating to borrowed money of others) in a principal
amount not to exceed $10,000,000, all in the ordinary course of
business in accordance with customary industry practices, in
amounts and for the purposes customary in the Company's industry;
(b) The Company may incur Indebtedness to any
Guarantor, and any Guarantor may incur Indebtedness to any other
Guarantor or to the Company; provided that, in the case of
Indebtedness of the Company, such obligations shall be unsecured
and subordinated in all respects to the Company's obligations
pursuant to the Notes and any event that causes such Guarantor to
no longer be a Subsidiary shall be an incurrence of Indebtedness;
and
(c) The Company may incur Indebtedness in the
form of a guarantee of hotel construction in Baton Rouge in an
amount not to exceed $5,000,000 and otherwise permitted under
clause (s) of Section 5.3 hereof.
"PERMITTED INVESTMENT" means (i) certificates of
deposit and bank accounts with final maturities of one year or
less issued by United States commercial banks having capital and
surplus in excess of $100,000,000; (ii) commercial paper with a
grade of no less than A1 or P1; (iii) direct obligations of the
United States Government or a United States agency with a matu-
rity of one year or less; and (iv) shares of money market mutual
or similar funds having assets in excess of $500,000,000.
"PERMITTED LIENS" means (i) Liens existing on the date
of the Indenture as specifically identified in the Offering
Memorandum or securing Indebtedness not to exceed $1,000,000
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incurred to purchase gaming and/or office equipment; (ii) Liens
for taxes, assessments, governmental charges or claims which are
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if a reserve or other
appropriate provision, if any, as shall be required in conformity
with GAAP shall have been made therefor; (iii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, mate-
rialmen, repairmen, or other like Liens arising in the ordinary
course of business and with respect to amounts not yet delinquent
or being contested in good faith by appropriate proceedings, and
if a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor;
(iv) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security; (v) Liens incurred
or deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety and appeal bonds, govern-
ment contracts, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed
money); (vi) easements, rights-of-way, restrictions, minor de-
fects or irregularities in title and other similar charges or en-
cumbrances not interfering in any material respect with the busi-
ness of the Company or any of its Subsidiaries incurred in the
ordinary course of business; (vii) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment
of customs duties in connection with the importation of goods;
(viii) judgment and attachment Liens not giving rise to an Event
of Default; (ix) leases or subleases granted to others not inter-
fering in any material respect with the business of the Company
or any of its Subsidiaries; (x) any interest or title of a lessor
in the property subject to any capital lease obligation or oper-
ating lease; (xi) Liens arising from filing Uniform Commercial
Code financing statements regarding leases; (xii) Liens securing
any Indebtedness which became Indebtedness of the Company pur-
suant to a transaction subject to the provisions of Section 6.1
hereof or which constitutes Acquired Indebtedness and which Liens
were in existence at the time of such transaction (unless such
Indebtedness was incurred or such Lien created in connection
with, or in contemplation of, such transaction), so long as such
Liens do not extend to or cover any property or assets of the
Company or any Subsidiary of the Company other than property or
assets acquired in such transaction; (xiii) Liens securing any
assumption, guarantee or other liability which constitutes Ac-
quired Indebtedness and which Liens were in existence at the time
of such transaction (unless such assumption, guarantee or other
liability was incurred or such Lien created in connection with,
or in contemplation of, such person becoming a Subsidiary of the
Company), so long as such Liens do not extend to or cover any
property or assets of the Company or any Subsidiary of the Com-
pany other than the assets of such person; and (xiv) any renewal
of or substitution for any Lien permitted by any of the preceding
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clauses, PROVIDED, HOWEVER, that the Indebtedness secured is not
increased nor the Lien extended to any additional property.
Liens described under clauses (xii) and (xiii) above shall not be
Permitted Liens in connection with an Acquisition which is funded
in whole or in part with Collateral or the proceeds of the sale
of Collateral or out of distributions made by Indiana Gaming L.P.
up to the amount of the Lawrenceburg Investment.
"PERSON" means any individual, limited liability compa-
ny, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"PRINCIPAL" of any Indebtedness (including the Securi-
ties) means the principal of such Indebtedness plus any applica-
ble premium, if any, on such Indebtedness.
"PROJECT DELAY" means (i) the failure of the
Lawrenceburg Casino to commence operations on or prior to June
30, 1997 at either the temporary or the permanent location,
(ii) the expiration or suspension of Indiana Gaming L.P.'s
certificate of suitability and the failure of the Indiana Gaming
Commission to renew such certificate prior to the issuance of a
riverboat owner's license, which failure continues for a period
of 30 days from the date of such expiration or suspension,
(iii) the revocation or cancellation of Indiana Gaming L.P.'s
certificate of suitability by the Indiana Gaming Commission, (iv)
the denial of Indiana Gaming L.P.'s application for a permanent
riverboat owner's license by the Indiana Gaming Commission, (v) a
finding of unsuitability of Indiana Gaming L.P. by the Indiana
Gaming Commission, (vi) the revocation or suspension of Indiana
Gaming L.P.'s riverboat owner's license by the Indiana Gaming
Commission which results in the loss of the legal right to
operate the Lawrenceburg Casino, which loss continues for a
period of 90 days or (vii) a finding of unsuitability of the
Company or any of its subsidiaries by the Indiana Gaming Commis-
sion.
"PROJECT DELAY OFFER" shall have the meaning specified
in Section 5.16.
"PROJECT DELAY OFFER AMOUNT" shall have the meaning
specified in Section 5.16.
"PROJECT DELAY OFFER PRICE" shall have the meaning
specified in Section 5.16.
"PROJECT DELAY PURCHASE DATE" shall have the meaning
specified in Section 5.16.
"PROPERTY" or "PROPERTY" means any right or interest in
or to property or assets of any kind whatsoever, whether real,
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personal or mixed and whether tangible, intangible, contingent,
indirect or direct.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of
the Company that is not Disqualified Capital Stock.
"QUALIFIED EXCHANGE" means (i) any legal defeasance,
redemption, retirement, repurchase or other acquisition of
Capital Stock or Indebtedness of the Company issued on or after
the Issue Date with the Net Cash Proceeds received by the Company
from the substantially concurrent sale of Qualified Capital
Stock, (ii) any exchange of Qualified Capital Stock for any
Capital Stock or Indebtedness issued on or after the Issue Date
or (iii) any exchange of Qualified Capital Stock for, or purchase
with the Net Cash Proceeds of a concurrent sale of Qualified
Capital Stock of, any equity interest in Indiana Gaming L.P. not
owned by a Subsidiary of the Company or an Unrestricted Subsid-
iary.
"QUALIFIED GAMING VENTURE" means any person (other than
Indiana Gaming L.P. and The Indiana Gaming Company) in which the
Company owns an equity interest (a) which operates a Material
Casino and any Related Business, (b) which pursuant to contract
or otherwise gives the right to direct or manage the day-to-day
operation of such Material Casino to the Company or a Subsidiary
of the Company, and (c) which either (i) does not have any con-
sensual restriction on its ability to pay dividends or make other
distributions to or on behalf of, or to pay any obligations to or
on behalf of, or otherwise to transfer assets or property to or
on behalf of, or make or pay any loans or advance to or on behalf
of the Company or any Subsidiary, except for such exceptions
generally contained in Section 5.12 or (ii) is operated pursuant
to a management contract with the Company or one of its Subsid-
iaries at a management fee of no less than 2% of net win.
"RECORD DATE" means a Record Date specified in the
Securities whether or not such Record Date is a Business Day.
"REDEMPTION DATE," when used with respect to any
Security to be redeemed, means the date fixed for such redemption
pursuant to Article III of this Indenture and Paragraph 5 in the
form of Security.
"REDEMPTION PRICE," when used with respect to any Secu-
rity to be redeemed, means the redemption price for such redemp-
tion set forth in Paragraph 5 in the form of Security, which
shall include in each case accrued and unpaid interest with
respect to such Security to the applicable Redemption Date.
"REFERENCE PERIOD" with regard to any person means the
four full fiscal quarters (or such lesser period during which
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such person has been in existence) ended immediately preceding
any date upon which any determination is to be made pursuant to
the terms of the Notes or the Indenture.
"REFINANCING INDEBTEDNESS" means Indebtedness or Dis-
qualified Capital Stock (a) issued in exchange for, or the
proceeds from the issuance and sale of which are used substan-
tially concurrently to repay, redeem, defease, refund, refinance,
discharge or otherwise retire for value, in whole or in part, or
(b) constituting an amendment, modification or supplement to, or
a deferral or renewal of ((a) and (b) above are, collectively, a
"REFINANCING"), any Indebtedness or Disqualified Capital Stock in
a principal amount or, in the case of Disqualified Capital Stock,
liquidation preference, not to exceed (i) the principal amount
or, in the case of Disqualified Capital Stock, liquidation
preference, of the Indebtedness or Disqualified Capital Stock so
Refinanced plus the amount of any premium paid in connection with
such refinancing in accordance with the terms of documents
governing the Indebtedness being refinanced and reasonable and
customary fees and expenses incurred in connection with the
Refinancing or (ii) if such Indebtedness being Refinanced was
issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of
such Refinancing plus the amount of any premium paid in connec-
tion with such refinancing in accordance with the terms of
documents governing the Indebtedness being refinanced and reason-
able and customary fees and expenses incurred in connection with
the Refinancing; provided that (A) any Refinancing Indebtedness
incurred by any Subsidiary of the Company shall only be used to
refinance outstanding Indebtedness or Disqualified Capital Stock
of such Subsidiary, (B) Refinancing Indebtedness shall (x) not
have an Average Life shorter than the Indebtedness or Disquali-
fied Capital Stock to be so refinanced at the time of such
Refinancing (or, if such Refinancing Indebtedness relates to the
Convertible Notes, shorter than the Notes) and (y) in all re-
spects, be no less subordinated or junior, if applicable, to the
rights of the Holders than was the Indebtedness or Disqualified
Capital Stock to be refinanced and (C) such Refinancing Indebted-
ness shall have a final stated maturity no earlier than the final
stated maturity of the Indebtedness or Disqualified Capital Stock
to be so refinanced which was scheduled to come due prior to the
Stated Maturity (or, if such Refinancing Indebtedness relates to
the Convertible Notes, no earlier than the Stated Maturity).
"REGISTRAR" shall have the meaning specified in Sec-
tion 2.3.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement by and among the Company, the Guarantors and the
Initial Purchasers, dated as of the Issue Date.
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"RELATED BUSINESS" means the gaming business and other
businesses necessary for, incident to, connected with, arising
out of, or developed or operated to permit or facilitate the
conduct or pursuit of the gaming business (including developing
or operating lodging facilities, sports or entertainment facili-
ties, retail facilities, restaurants, night clubs, transportation
and communications services or other related activities or
enterprises and any additions or improvements thereto) and
potential opportunities in the gaming business.
"RESTRICTED PAYMENT" means, with respect to any person,
(a) the declaration or payment of any dividend or other distribu-
tion in respect of Capital Stock of such person or any parent or
Subsidiary of such person, (b) any payment on account of the pur-
chase, redemption or other acquisition or retirement for value of
Capital Stock of such person or any Subsidiary or parent of such
person, (c) other than with the proceeds from the substantially
concurrent sale of, or in exchange for, Refinancing Indebtedness,
any purchase, redemption, or other acquisition or retirement for
value of, any payment in respect of any amendment of the terms of
or any defeasance of, any Junior Indebtedness, directly or indi-
rectly, by such person or a parent or Subsidiary of such person
prior to the scheduled maturity, any scheduled repayment of
principal, or scheduled sinking fund payment, as the case may be,
of such Indebtedness and (d) any Investment by such person, other
than a Permitted Investment; provided, however, that the term
"RESTRICTED PAYMENT" does not include (i) any dividend, distribu-
tion or other payment on or with respect to Capital Stock of an
issuer to the extent payable solely in shares of Qualified Capi-
tal Stock of such issuer; or (ii) any dividend, distribution or
other payment to the Company, or to any of its wholly owned Sub-
sidiaries, by any of its Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" or "NOTES" means, prior to the Exchange
Offer, the Original Notes, and after the Exchange Offer, the
Original Notes (if any) and the Series B Notes, in each case as
amended or modified from time to time in accordance with the
terms hereof, issued under this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
"SECURITIES CUSTODIAN" means the Trustee, as custodian
with respect to the Securities in global form, or any successor
entity thereto.
"SECURITY DOCUMENTS" mean the Deeds of Trust, the Cash
Collateral and Disbursement Agreement, the Ship Mortgages, the
Parent Pledge Agreement, the Subsidiary Pledge Agreements, the
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Parent Security Agreement and the Subsidiary Security Agreements
and any other agreement purporting to convey to the Trustee for
the benefit of Holders, a security interest in Property pursuant
to the requirements of this Indenture executed by the Company and
the Guarantors in favor of the Trustee for the benefit of the
Securityholders, as the same may be amended from time to time.
"SECURITY INTERESTS" means the Lien on the Collateral
created by the Security Documents in favor of the Trustee for the
benefit of the Holders.
"SECURITYHOLDER" See "HOLDER."
"SERIES B NOTES" means the Series B 13 1/4% First Mortgage
Notes due 2004, in substantially the form set forth on the Form
of Note set forth as Exhibit A hereto, to be issued pursuant to
this Indenture in connection with the offer to exchange Series B
Notes for Original Notes that may be made by the Company pursuant
to the Registration Rights Agreement.
"SHIP MORTGAGES" means the first preferred ship mort-
gages substantially in the form of EXHIBIT F, dated as of the
Issue Date, by each of Iowa Gaming Company, Alton Gaming Company,
Missouri Gaming Company and Catfish Queen Partnership in Commen-
dam, in favor of the Trustee.
"SIGNIFICANT SUBSIDIARY" means at the time of determi-
nation, any Subsidiary of the Company that (a) accounted for more
than 10% of the consolidated net income of the Company for the
most recently completed fiscal year of the Company or (b) was the
owner of more than 10% of the consolidated assets of the Company
as of the end of such fiscal year, all as shown on the consoli-
dated financial statements of the Company for such fiscal year.
"SPECIFIED PARCELS" means either of the two parcels of
real estate at the Riverside or Baton Rouge properties as de-
scribed in the legal descriptions attached hereto as EXHIBIT K.
"STATED MATURITY," when used with respect to any Note,
means June 1, 2004.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the
Company or a Guarantor, as applicable, that is subordinated in
right of payment to the Notes or such Guarantor's Guarantee, as
applicable, in all respects and has no scheduled installment of
principal due, by maturity, redemption, sinking fund payment or
otherwise, on or prior to the Stated Maturity of the Notes.
"SUBSIDIARY," with respect to any person, means (i) a
corporation a majority of whose Capital Stock with voting power,
under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such person, by such person and
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one or more Subsidiaries of such person or by one or more Subsid-
iaries of such person, (ii) any other person (other than a
corporation) in which such person, one or more Subsidiaries of
such person, or such person and one or more Subsidiaries of such
person, directly or indirectly, at the date of determination
thereof has at least majority ownership interest or (iii) a part-
nership in which such person or a Subsidiary of such person is,
at the time, a general partner. Notwithstanding the foregoing,
no Unrestricted Subsidiary shall be considered a Subsidiary of
the Company or of any Subsidiary of the Company.
"SUBSIDIARY PLEDGE AGREEMENTS" means the several Pledge
Agreements, dated the date hereof, from the Guarantors, as
Pledgors, to the Trustee for the benefit of the Holders, in
substantially the form included hereto as EXHIBIT E hereto, as
the same may be amended from time to time in accordance with the
terms hereof.
"SUBSIDIARY SECURITY AGREEMENTS" means the several
Security Agreements, dated the date hereof, executed by each of
the Guarantors and the Trustee for the benefit of the Holders, in
substantially the form included hereto as EXHIBIT H hereto, as
the same may be amended from time to time in accordance with the
terms hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.
Code -section--section- 77aaa-77bbbb) as in effect on the date of the execution
of this Indenture.
"TRANSFER RESTRICTED SECURITIES" means Securities that
bear or are required to bear the legend set forth in Section 2.6.
"TRUSTEE" means the party named as such in this Inden-
ture until a successor replaces it in accordance with the provi-
sions of this Indenture and thereafter means such successor.
"TRUST OFFICER" means any officer within the corporate
trust department (or any successor group) of the Trustee includ-
ing any vice president, assistant vice president, secretary,
assistant secretary or any other officer or assistant officer of
the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers,
and also means, with respect to a particular corporate trust
matter, any other officer of the corporate trust department (or
any successor group) of the Trustee to whom such trust matter is
referred because of his knowledge of and familiarity with the
particular subject.
"UNRESTRICTED SUBSIDIARY" means any direct or indirect
subsidiary of the Company that does not own any Capital Stock of,
or own or hold any Lien on any property of, the Company or any
other Subsidiary of the Company and that shall be designated an
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Unrestricted Subsidiary by the Board of Directors of the Company;
PROVIDED that (i) such subsidiary shall not engage, to any
substantial extent, in any line or lines of business activity
other than a Related Business and (ii) neither immediately prior
thereto nor after giving PRO FORMA effect to such designation
would there exist a Default or Event of Default. The Board of
Directors of the Company may designate any Unrestricted Subsid-
iary to be a Subsidiary, PROVIDED that (i) no Default or Event of
Default is existing or will occur as a consequence thereof and
(ii) immediately after giving effect to such designation, on a
PRO FORMA basis, the Company could incur at least $1.00 of In-
debtedness pursuant to paragraph (a) of Section 5.11. Each such
designation shall be evidenced by filing with the Trustee a cer-
tified copy of the resolution giving effect to such designation
and an Officers' Certificate certifying that such designation
complied with the foregoing conditions. Indiana Gaming L.P. and
Iowa Development Corporation shall initially be designated Unre-
stricted Subsidiaries. Notwithstanding anything herein to the
contrary, no subsidiary of the Company with an interest in Indi-
ana Gaming L.P. may become an Unrestricted Subsidiary.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable
obligations of, or noncallable obligations guaranteed by, the
United States of America for the payment of which obligation or
guarantee the full faith and credit of the United States of
America is pledged.
"WHOLLY OWNED" with respect to a Subsidiary of any
person means (i) with respect to a Subsidiary that is a partner-
ship, limited liability company or similar entity, a Subsidiary
whose capital stock or other equity interests are 99% or greater
beneficially owned by such person and (ii) with respect to a
Subsidiary that is other than a partnership, limited liability
company or similar entity, a Subsidiary whose capital stock or
other equity interests are 100% beneficially owned by such
person.
Section 2 INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the
TIA, such provision is incorporated by reference in and made a
part of this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITYHOLDER" means a Holder or a
Securityholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
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"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means
the Trustee.
"OBLIGOR" on the indenture securities means the Company
and any other obligor on the Securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by SEC rule and not otherwise defined herein have the
meanings assigned to them thereby.
Section 3 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(i) a term has the meaning assigned to
it;
(ii) an accounting term not otherwise
defined has the meaning assigned to it in accordance
with GAAP;
(iii) "OR" is not exclusive;
(iv) words in the singular include the
plural, and words in the plural include the singular;
(v) provisions apply to successive
events and transactions;
(vi) "HEREIN," "HEREOF" and other words
of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other
subdivision; and
(vii) references to Sections or Arti-
cles means reference to such Section or Article in this
Indenture, unless stated otherwise.
ARTICLE II
THE SECURITIES
Section 1 FORM AND DATING.
The Securities and the Trustee's certificate of authen-
tication, in respect thereof, shall be substantially in the form
of EXHIBIT A hereto which Exhibit is part of this Indenture. The
Securities may have notations, legends or endorsements required
by law, stock exchange rule or usage. The Company shall approve
the form of the Securities and any notation, legend or endorse-
26
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ment on them. Any such notations, legends or endorsements not
contained in the form of Security attached as EXHIBIT A hereto
shall be delivered in writing to the Trustee. Each Security
shall be dated the date of its authentication.
The terms and provisions contained in the form of
Securities shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company
and the Trustee, by their execution and delivery of this Inden-
ture, expressly agree to such terms and provisions and to be
bound thereby.
Section 2 EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and
one Officer shall attest to, the Securities for the Company by
manual or facsimile signature. The Company's seal shall be
impressed, affixed, imprinted or reproduced on the Securities and
may be in facsimile form.
If an Officer whose signature is on a Security was an
Officer at the time of such execution but no longer holds that
office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless and the Company shall
nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of
authentication on the Security, but such signature shall be
conclusive evidence that the Security has been authenticated
pursuant to the terms of this Indenture.
The Trustee shall authenticate Original Notes for
original issue in the aggregate principal amount of up to $-
235,000,000 and shall authenticate Series B Notes for original
issue in the aggregate principal amount of up to $235,000,000, in
each case upon a written order of the Company in the form of an
Officers' Certificate; PROVIDED that such Series B Notes shall be
issuable only upon the valid surrender for cancellation of
Original Notes of a like aggregate principal amount in accordance
with the Registration Rights Agreement. The Officers' Certifi-
cate shall specify the amount of Securities to be authenticated
and the date on which the Securities are to be authenticated.
The aggregate principal amount of Securities outstanding at any
time may not exceed $235,000,000, except as provided in Section
2.7. Upon the written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Securities
in substitution of Securities originally issued to reflect any
name change of the Company.
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The Trustee may appoint an authenticating agent accept-
able to the Company to authenticate Securities. Unless otherwise
provided in the appointment, an authenticating agent may authen-
ticate Securities whenever the Trustee may do so. Each reference
in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate
of the Company or any of their respective Subsidiaries.
Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral
multiple thereof.
Section 3 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the
Borough of Manhattan, The City of New York, where Securities may
be presented for registration of transfer or for exchange ("Reg-
istrar") and an office or agency in the Borough of Manhattan, The
City of New York where Securities may be presented for payment
("Paying Agent") and an office or agency where notices and
demands to or upon the Company in respect of the Securities may
be served. The Company may act as its own Registrar or Paying
Agent, except that, for the purposes of Articles III, IX, XII and
Sections 5.14, 5.16, 5.17, 5.18 and 5.19 neither the Company nor
any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may have one or more co-
Registrars and one or more additional Paying Agents. The term
"Paying Agent" includes any additional Paying Agent. The Company
hereby initially appoints the Trustee as Registrar and Paying
Agent, and the Trustee hereby initially agrees so to act.
The Company shall enter into an appropriate written
agency agreement with any Agent not a party to this Indenture,
which agreement shall implement the provisions of this Indenture
that relate to such Agent. The Company shall promptly notify the
Trustee in writing of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such.
The Company initially appoints The Depository Trust
Company ("DTC") to act as Depository with respect to the Global
Securities.
The Company initially appoints the Trustee to act as
Securities Custodian with respect to the Global Securities.
Section 4 PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than
the Trustee to agree in writing that each Paying Agent shall hold
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in trust for the benefit of Holders or the Trustee all assets
held by the Paying Agent for the payment of principal of, or
interest (and Liquidated Damages, if any) on, the Securities
(whether such assets have been distributed to it by the Company
or any other obligor on the Securities), and shall notify the
Trustee in writing of any Default by the Company (or any other
obligor on the Securities) in making any such payment. If the
Company or a Subsidiary of the Company acts as Paying Agent, it
shall segregate such assets and hold them as a separate trust
fund for the benefit of the Holders or the Trustee. The Company
at any time may require a Paying Agent to distribute all assets
held by it to the Trustee and account for any assets disbursed
and the Trustee may at any time during the continuance of any
payment Default, upon written request to a Paying Agent, require
such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distri-
bution to the Trustee of all assets that shall have been deliv-
ered by the Company to the Paying Agent, the Paying Agent (if
other than the Company) shall have no further liability for such
assets.
Section 5 SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of Holders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee on or before
the third Business Day preceding each Interest Payment Date and
at such other times as the Trustee may request in writing a list
in such form and as of such date as the Trustee reasonably may
require of the names and addresses of Holders. The Trustee, the
Registrar and the Company shall provide a current securityholder
list to any Gaming Authority upon demand.
Section 6 TRANSFER AND EXCHANGE.
(a) When Definitive Securities are presented to
the Registrar or a co-Registrar with a request
(x) to register the transfer of such Definitive
Securities or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of
other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its reasonable requirements for such
transaction are met; PROVIDED, HOWEVER, that the Definitive
Securities surrendered for transfer or exchange:
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<PAGE>
(i) shall be duly endorsed or accom-
panied by a written instrument of transfer in form
reasonably satisfactory to the Company and the Regis-
trar or co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing; and
(ii) in the case of Transfer Restricted
Securities that are Definitive Securities, shall be ac-
companied by the following additional information and
documents, as applicable:
(A) If such Transfer Re-
stricted Securities are being delivered to
the Registrar by a Holder for registration in
the name of such Holder, without transfer, a
certification from such Holder to that effect
(in substantially the form set forth on the
reverse of the Security); or
(B) if such Transfer Re-
stricted Security is being transferred to a
"qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securi-
ties Act, a certification to that effect (in
the form set forth on the reverse of the
Security); or
(C) if such Transfer
Restricted Security is being transferred (i)
pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S
under the Securities Act, (ii) pursuant to an
effective registration statement under the
Securities Act, (iii) to an "institutional
accredited investor" within the meaning of
Rule 501(A)(1), (2), (3) or (7) under the
Securities Act that is acquiring the Security
for its own account, or for the account of
such an institutional accredited investor, in
each case in a minimum principal amount of
the Securities of $100,000, not with a view
to or for offer or sale in connection with
any distribution in violation of the Securi-
ties Act or (iv) in reliance on another ex-
emption from the registration requirements of
the Securities Act, a certification to that
effect (in the form set forth on the reverse
of the Security) and in the case of (iii)
above a transferee letter of representation
in substantially the form set forth in the
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Offering Memorandum and in the case of (i),
(iii) and (iv) above, if the Company or the
Registrar so request, an Opinion of Counsel
reasonably acceptable to the Company and to
the Registrar to the effect that such trans-
fer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE
SECURITY FOR A BENEFICIAL INTEREST IN A GLOBAL SECURITY. A
Definitive Security may not be exchanged for a beneficial inter-
est in a Global Security except upon satisfaction of the require-
ments set forth below. Upon receipt by the Registrar of a
Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Registrar,
together with:
(i) if such Definitive Security is a
Transfer Restricted Security, a certification, substan-
tially in the form set forth on the reverse of the
Security, that such Definitive Security is being trans-
ferred to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive
Security is a Transfer Restricted Security, written
instructions directing the Registrar to make, or to di-
rect the Securities Custodian to make, an endorsement
on the Global Security to reflect an increase in the
aggregate principal amount of the Securities represent-
ed by the Global Security,
then the Registrar shall cancel such Definitive Security and
cause, or direct the Securities Custodian to cause, in accordance
with the standing instructions and procedures existing between
the Depository and the Securities Custodian, the aggregate
principal amount of Securities represented by the Global Security
to be increased accordingly. If no Global Securities are then
outstanding, the Company shall issue and the Trustee shall
authenticate a new Global Security in the appropriate principal
amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depository, in
accordance with this Indenture (including the restrictions on
transfer set forth herein) and the procedures of the Depository
therefor.
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(D) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL
SECURITY FOR A DEFINITIVE SECURITY.
(i) Any person having a beneficial
interest in a Global Security may upon request exchange
such beneficial interest for a Definitive Security.
Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the
Depository from the Depository or its nominee on behalf
of any Person having a beneficial interest in a Global
Security and upon receipt by the Trustee of a written
order or such other form of instructions as is custom-
ary for the Depository or the Person designated by the
Depository as having such a beneficial interest in a
Transfer Restricted Security only, the following addi-
tional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial
interest is being transferred to the Person
designated by the Depository as being the
beneficial owner, a certification from such
person to that effect (in substantially the
form set forth on the reverse of the Securi-
ty); or
(B) if such beneficial
interest is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with
Rule 144A under the Securities Act, a certif-
ication to that effect from the transferor
(in the form set forth on the reverse of the
Security); or
(C) if such beneficial
interest is being transferred (i) pursuant to
an exemption from registration in accordance
with Rule 144 or Regulation S under the Secu-
rities Act, (ii) pursuant to an effective
registration statement under the Securities
Act, (iii) to an "institutional accredited
investor" within the meaning of Rule 5-
01(A)(1), (2), (3) or (7) under the Securi-
ties Act that is acquiring the security for
its own account, or for the account of such
an institutional accredited investor, in each
case in a minimum principal amount of the
Securities of $100,000, not with a view to or
for offer or sale in connection with distri-
bution in violation of the Securities Act or
(iv) in reliance on another exemption from
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<PAGE>
the registration requirements of the Securi-
ties Act, a certification to that effect from
the transferee or transferor (in the form set
forth on the reverse of the Security) and in
the case of (iii) above a transferee letter
of representation in substantially the form
set forth in the Offering Memorandum and in
the case of (i), (iii) and (iv) above, if the
Company or the Registrar so requests, an
Opinion of Counsel reasonably acceptable to
the Company and to the Registrar to the ef-
fect that such transfer is in compliance with
the Securities Act,
then the Registrar or the Securities Custodian, at the direction
of the Trustee, will cause, in accordance with the standing
instructions and procedures existing between the Depository and
the Securities Custodian, the aggregate principal amount of the
Global Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication order
in the form of an Officers' Certificate, the Trustee will authen-
ticate and deliver to the transferee a Definitive Security in the
appropriate principal amount.
(ii) Definitive Securities issued in
exchange for a beneficial interest in a Global Security
pursuant to this Section 2.6(d) shall be registered in
such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the
Trustee. The Registrar shall deliver such Definitive
Securities to the persons in whose names such Securi-
ties are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF
GLOBAL SECURITIES. Notwithstanding any other provisions of this
Indenture (other than the provisions set forth in subsection (f)
of this Section 2.6), a Global Security may not be transferred as
a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor
Depository.
(f) AUTHENTICATION OF DEFINITIVE SECURITIES IN
ABSENCE OF DEPOSITORY. If at any time:
(i) the Depository for the Securities
notifies the Company that the Depository is unwilling
or unable to continue as Depository for the Global
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<PAGE>
Securities and a successor Depository for the Global
Securities is not appointed by the Company within 90
days after delivery of such notice; or
(ii) the Company, in its sole discre-
tion, notify the Trustee in writing that it elects to
cause the issuance of Definitive Securities under this
Indenture,
then the Company will execute, and the Trustee, upon receipt of
an Officers' Certificate requesting the authentication and
delivery of Definitive Securities, will authenticate and deliver
Definitive Securities, in an aggregate principal amount equal to
the principal amount of the Global Securities, in exchange for
such Global Securities.
(g) LEGENDS.
(i) Except as permitted by the follow-
ing paragraph (ii), each Security certificate evidenc-
ing the Global Securities and the Definitive Securities
(and all Securities issued in exchange therefor or
substitution thereof) shall bear a legend in substan-
tially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURI-
TIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANS-
FERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
SUCH SECURITY PRIOR TO THE DATE (THE "RESALE RE-
STRICTION TERMINATION DATE") WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY)
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGIS-
TRATION STATEMENT WHICH HAS BEEN DECLARED EFFEC-
TIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
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144A UNDER THE SECURITIES ACT THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEAN-
ING OF RULE 501(A)(1),(2),(3) OR (7) UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN
A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF
$100,000 FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMP-
TION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D),(E), OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTO-
RY TO EACH OF THEM, AND IN EACH OF THE FOREGOING
CASES, A CERTIFICATE OF TRANSFER IN THE FORM AP-
PEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE RE-
MOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE. THESE SECU-
RITIES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH
APPLICABLE GAMING LAWS.
(ii) Upon any sale or transfer of a
Transfer Restricted Security (including any Transfer
Restricted Security represented by a Global Security)
pursuant to Rule 144 under the Act or an effective
registration statement under the Act:
(A) in the case of any
Transfer Restricted Security that is a Defin-
itive Security, the Registrar shall permit
the Holder thereof to exchange such Transfer
Restricted Security for a Definitive Security
that does not bear the legend set forth above
and rescind any restriction on the transfer
of such Transfer Restricted Security; and
(B) any such Transfer
Restricted Security represented by a Global
Security shall not be subject to the provi-
sions set forth in (i) above (such sales or
transfers being subject only to the provi-
sions of Section 2.6(c) hereof); provided,
however, that with respect to any request for
an exchange of a Transfer Restricted Security
that is represented by a Global Security for
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<PAGE>
a Definitive Security that does not bear a
legend, which request is made in reliance
upon Rule 144, the Holder thereof shall cer-
tify in writing to the Registrar that such
request is being made pursuant to Rule 144
(such certification to be substantially in
the form set forth on the reverse of the
Security).
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL
SECURITY. At such time as all beneficial interests in a Global
Security have either been exchanged for Definitive Securities,
redeemed, repurchased or cancelled, such Global Security shall be
returned to or retained and cancelled by the Trustee. At any
time prior to such cancellation, if any beneficial interest in a
Global Security is exchanged for Definitive Securities, redeemed,
repurchased or cancelled, the principal amount of Securities
represented by such Global Security shall be reduced and an
endorsement shall be made on such Global Security, by the Trustee
or the Securities Custodian, at the direction of the Trustee, to
reflect such reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND
EXCHANGES OF DEFINITIVE SECURITIES.
(i) To permit registrations of trans-
fers and exchanges, the Company shall execute and the
Trustee shall authenticate Definitive Securities and
Global Securities at the Registrar's or co-Registrar's
request.
(ii) No service charge shall be made
for any registration of transfer or exchange, but the
Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar govern-
mental charge payable in connection therewith (other
than any such transfer taxes, assessments, or similar
governmental charge payable upon exchanges or transfers
pursuant to Section 2.2, 2.10, 3.6, 5.14, 5.16, 5.17,
5.18, 5.19, 10.5, or 12.1).
(iii) Except for a redemption of Secu-
rities pursuant to Section 3.2 or upon an order of any
Gaming Authority, the Registrar or co-Registrar shall
not be required to register the transfer of or exchange
of (a) any Definitive Security selected for redemption
in whole or in part pursuant to Article III, except the
unredeemed portion of any Definitive Security being
redeemed in part, or (b) any Security for a period
beginning 15 Business Days before the mailing of a
notice of an offer to repurchase pursuant to Article
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<PAGE>
XII or Section 5.14, 5.16, 5.17, 5.18 or 5.19 hereof or
redeem Securities pursuant to Article III hereof and
ending at the close of business on the day of such
mailing.
Section 7 REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee
or if the Holder of a Security claims and submits an affidavit or
other evidence, satisfactory to the Trustee, to the Trustee to
the effect that the Security has been lost, destroyed or wrong-
fully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements
are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other indemnity, sufficient in
the judgment of both the Company and the Trustee, to protect the
Company, the Trustee or any Agent from any loss which any of them
may suffer if a Security is replaced. The Company may charge
such Holder for its reasonable, out-of-pocket expenses in replac-
ing a Security.
Every replacement Security is an additional obligation
of the Company.
Section 8 OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securi-
ties that have been authenticated by the Trustee except those
cancelled by it, those delivered to it for cancellation, those
reductions in the interest in a Global Security effected by the
Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security,
except as provided in Section 2.9.
If a Security is replaced pursuant to Section 2.7
(other than a mutilated Security surrendered for replacement), it
ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Security is held by a bona
fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant
to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying
Agent (other than the Company or an Affiliate of the Company)
holds cash sufficient to pay all of the principal and interest
(and Liquidated Damages, if any) due on the Securities payable on
that date and payment of the Securities called for redemption is
not otherwise prohibited, then on and after that date such
Securities cease to be outstanding and interest on them ceases to
accrue.
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Section 9 TREASURY SECURITIES.
In determining whether the Holders of the required
principal amount of Securities have concurred in any direction,
amendment, supplement, waiver or consent, Securities owned by the
Company, any Guarantor and Affiliates of the Company or of any
Guarantor shall be disregarded, except that, for the purposes of
determining whether the Trustee shall be protected in relying on
any such direction, amendment, supplement, waiver or consent,
only Securities that the Trustee knows or has reason to know are
so owned shall be disregarded.
Section 10 TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the
Company may prepare, the Guarantors shall endorse and the Trustee
shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of definitive Securities but
may have variations that the Company reasonably and in good faith
considers appropriate for temporary Securities. Without unrea-
sonable delay, the Company shall prepare, the Guarantors shall
endorse and the Trustee shall authenticate definitive Securities
in exchange for temporary Securities. Until so exchanged, the
temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as permanent Securities
authenticated and delivered hereunder.
Section 11 CANCELLATION.
The Company at any time may deliver Securities to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them
for transfer, exchange or payment. The Trustee, or at the
direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or an Affiliate of the Company), and no
one else, shall cancel and, at the written direction of the
Company, shall dispose of all Securities surrendered for trans-
fer, exchange, payment or cancellation. Subject to Section 2.7,
the Company may not issue new Securities to replace Securities it
has paid or delivered to the Trustee for cancellation. No
Securities shall be authenticated in lieu of or in exchange for
any Securities cancelled as provided in this Section 2.11, except
as expressly permitted in the form of Securities and as permitted
by this Indenture.
Section 12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest (and
Liquidated Damages, if any) on the Securities, it shall pay the
defaulted interest (and Liquidated Damages, if any), plus (to the
extent lawful) interest on the defaulted interest (and Liquidated
Damages, if any), to the persons who are Holders on a Record Date
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(or at its option a subsequent special record date) which date
shall be the fifteenth day next preceding the date fixed by the
Company for the payment of defaulted interest, whether or not
such day is a Business Day, unless the Trustee fixes another
record date. At least 15 days before the subsequent special
record date, the Company shall mail to each Holder with a copy to
the Trustee a notice that states the subsequent special record
date, the payment date and the amount of defaulted interest (and
Liquidated Damages, if any), and interest payable on such de-
faulted interest (and Liquidated Damages), if any, to be paid.
ARTICLE III
REDEMPTION
Section 1 RIGHT OF REDEMPTION.
Redemption of Securities shall be made only in accor-
dance with this Article III. At its election, the Company may
redeem the Securities in whole or in part, at any time or from
time to time on or after June 1, 2000, at the Redemption Prices
specified under the caption "Redemption," in the Form of Note
attached as EXHIBIT A hereto, plus accrued but unpaid interest
(and Liquidated Damages, if any) to the Redemption Date. Except
as provided in this paragraph, Section 3.2 and paragraph 5 of the
Notes, the Notes may not otherwise be redeemed at the option of
the Company.
Section 2 REDEMPTION PURSUANT TO GAMING LAWS.
If a Holder or a beneficial owner of a Note is required
by any Gaming Authority to be found suitable, the Holder shall
apply for a finding of suitability within 30 days after a Gaming
Authority request or sooner if so required by such Gaming Author-
ity. The applicant for a finding of suitability must pay all
costs of the investigation for such finding of suitability. If a
Holder or beneficial owner is required to be found suitable and
is not found suitable by a Gaming Authority, the Holder shall, to
the extent required by applicable law, dispose of his Notes
within 30 days or within that time prescribed by a Gaming Au-
thority, whichever is earlier. If the Holder fails to dispose of
his Notes within such time period, the Company may, at its
option, redeem such Holder's Notes at, depending on applicable
law, (i) the principal amount thereof, together with accrued and
unpaid interest (and Liquidated Damages, if any) to the date of
the finding of unsuitability by a Gaming Authority, (ii) the
amount that such Holder paid for the Notes, (iii) the fair market
value of the Notes, (iv) the lowest of clauses (i), (ii) and
(iii), or (v) such other amount as may be determined by the
appropriate Gaming Authority.
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Section 3 NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to
this Article III, it shall notify the Trustee in writing of the
date on which the Notes are to be redeemed ("Redemption Date")
and the principal amount of Securities to be redeemed and whether
it wants the Trustee to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of
Securities to be redeemed pursuant to Paragraph 5 of the Securi-
ties by crediting against any such redemption Securities it has
not previously delivered to the Trustee for cancellation, it
shall so notify the Trustee of the amount of the reduction and
deliver such Securities with such notice.
The Company shall give each notice to the Trustee
provided for in this Section 3.3 at least 30 days before the
Redemption Date (unless a shorter notice shall be required by
applicable Gaming Laws or by order of any Gaming Authority).
Section 4 SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed
pursuant to Paragraph 5 thereof, the Trustee shall select from
among such Securities to be redeemed PRO RATA or by lot or by
such other method as the Trustee shall determine to be fair and
appropriate and in such manner as complies with any applicable
legal and stock exchange requirements.
The Trustee shall make the selection from the Securi-
ties outstanding and not previously called for redemption and
shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Security selected
for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed
only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the princi-
pal of Securities that have denominations larger than $1,000.
Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for
redemption.
Section 5 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail a notice of redemption by
first class mail, postage prepaid, to each Holder whose Securi-
ties are to be redeemed (unless a shorter notice shall be re-
quired by any Governmental Authority). At the Company's request,
the Trustee shall give the notice of redemption in the Company's
name and at the Company's expense. Each notice for redemption
shall identify the Securities to be redeemed and shall state:
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(1) the Redemption Date;
(2) the Redemption Price, including
the amount of accrued but unpaid interest (and Liqui-
dated Damages, if any) to be paid upon such redemption;
(3) the name, address and telephone
number of the Paying Agent;
(4) that Securities called for
redemption must be surrendered to the Paying Agent at
the address specified in such notice to collect the
Redemption Price;
(5) that, unless (a) the Company
defaults in its obligation to deposit cash with the
Paying Agent in accordance with Section 3.7 hereof,
interest on Securities called for redemption ceases to
accrue on and after the Redemption Date and the only
remaining right of the Holders of such Securities is to
receive payment of the Redemption Price, including
accrued but unpaid interest (and Liquidated Damages, if
any), upon surrender to the Paying Agent of the Secu-
rities called for redemption and to be redeemed;
(6) if any Security is being re-
deemed in part, the portion of the principal amount,
equal to $1,000 or any integral multiple thereof, of
such Security to be redeemed and that, after the Re-
demption Date, and upon surrender of such Security, a
new Security or Securities in aggregate principal
amount equal to the unredeemed portion thereof will be
issued;
(7) if less than all the Securities
are to be redeemed, the identification of the particu-
lar Securities (or portion thereof) to be redeemed, as
well as the aggregate principal amount of such Securi-
ties to be redeemed and the aggregate principal amount
of Securities to be outstanding after such partial
redemption;
(8) the CUSIP number of the Secu-
rities to be redeemed; and
(9) that the notice is being sent
pursuant to this Section 3.5 and pursuant to the op-
tional redemption provisions of Paragraph 5 of the
Securities.
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Section 6 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with
Section 3.5, Securities called for redemption become due and
payable on the Redemption Date and at the Redemption Price,
including accrued but unpaid interest (and Liquidated Damages, if
any). Upon surrender to the Trustee or Paying Agent, such
Securities called for redemption shall be paid at the Redemption
Price, including interest (and Liquidated Damages, if any), if
any, accrued to and unpaid on the Redemption Date; PROVIDED that
if the Redemption Date is after a regular Record Date and on or
prior to the Interest Payment Date, the accrued interest (and
Liquidated Damages, if any) shall be payable to the Holder of the
redeemed Securities registered on the relevant Record Date; and
PROVIDED, FURTHER, that if a Redemption Date is a Legal Holiday,
payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to
such succeeding Business Day.
Section 7 DEPOSIT OF REDEMPTION PRICE.
On or before the Redemption Date, the Company shall
deposit with the Paying Agent (other than the Company or an
Affiliate of the Company) cash sufficient to pay the Redemption
Price of, including accrued but unpaid interest on (and Liquidat-
ed Damages, if any), all Securities to be redeemed on such
Redemption Date (other than Securities or portions thereof called
for redemption on that date that have been delivered by the
Company to the Trustee for cancellation). The Paying Agent shall
promptly return to the Company any cash so deposited which is not
required for that purpose upon the written request of the Compa-
ny.
If the Company complies with the preceding paragraph
and the other provisions of this Article III and payment of the
Securities called for redemption is not otherwise prohibited,
interest on the Securities to be redeemed will cease to accrue on
the applicable Redemption Date, whether or not such Securities
are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the
manner provided in the Securities shall not be so paid upon
surrender for redemption because of the failure of the Company to
comply with the preceding paragraph and the other provisions of
this Article III, interest shall continue to accrue and be paid
from the Redemption Date until such payment is made on the unpaid
principal, and, to the extent lawful, on any interest not paid on
such unpaid principal, in each case at the rate and in the manner
provided in Section 5.1 hereof and the Securities.
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Section 8 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in
part, the Company shall execute and the Trustee shall authenti-
cate and deliver to the Holder, without service charge, a new
Security or Securities equal in principal amount to the unre-
deemed portion of the Security surrendered.
ARTICLE IV
SECURITY
Section 1 SECURITY INTEREST.
(a) In order to secure the Indenture Obligations,
the Company, the Guarantors and the Trustee have entered into the
Security Documents. Each Holder, by accepting a Security, agrees
to all of the terms and provisions of the Security Documents and
the Trustee agrees to all of the terms and provisions of the
Security Documents as the Security Documents may be amended from
time to time pursuant to the provisions thereof and hereof.
(b) The Collateral as now or hereafter constitut-
ed shall be held for the equal and ratable benefit of the Holders
without preference, priority or distinction of any thereof over
any other by reason of difference in time of issuance, sale or
otherwise, as security for the Indenture Obligations.
(c) The provisions of TIA -section- 314(d), and the
provisions of TIA -section- 314(c)(3) to the extent applicable, are
hereby incorporated by reference herein as if set forth in their
entirety and to the same extent as if the Indenture were quali-
fied under the TIA.
Section 2 RECORDING; OPINIONS OF COUNSEL.
(a) Each of the Company and the Guarantors repre-
sents that it has caused or will promptly cause to be executed
and delivered, filed and recorded and covenants that it will
promptly cause to be executed and delivered, filed and recorded,
all instruments and documents, and have done and will do or will
cause to be done all such acts and other things, at the Company's
expense, as are necessary to subject the Collateral to valid
security interests and to perfect those security interests. Each
of the Company and the Guarantors shall, as promptly as practica-
ble, cause to be executed and delivered, filed and recorded all
instruments and do all acts and other things as may be required
by law to perfect, maintain and protect the security interests
under the Security Documents and herein. Each of the Company and
the Guarantors has obtained endorsements of title insurance from
insurance companies of favorable national reputation having
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capital and surplus greater than $100,000,000, naming the Trustee
as insured for the benefit of the Holders in the aggregate amount
equal to the estimated fair market value of the Property that is
real property subject to the Security Documents, subject only to
those exceptions which are reasonably acceptable to the Trustee.
(b) The Company shall furnish to the Trustee,
promptly after the execution and delivery of this Indenture and
the Security Documents and promptly after the execution and
delivery of any amendment thereto or any other instrument of
further assurance, an Opinion(s) of Counsel stating that, in the
opinion of such counsel, subject to customary exclusions and
exceptions reasonably acceptable to the Trustee, either (i) this
Indenture, the Security Documents, any such amendment and all
other instruments of further assurance have been properly record-
ed, registered and filed and all such other action has been taken
to the extent necessary to make effective valid security inter-
ests and to perfect the security interests intended to be created
by the Indenture and the Security Documents, and reciting the
details of such action or referring to prior Opinions of Counsel
in which such details are given, or (ii) no such action is
necessary to maintain the validity and perfection of the security
interests under the Security Documents and hereunder.
(c) The Company shall furnish to the Trustee, on
or prior to June 1 of each year (commencing on June 1, 1997) an
Opinion(s) of Counsel, dated as of such date, stating that, in
the opinion of such counsel, subject to customary exclusions and
exceptions, either (A) all such action has been taken with
respect to the recording, registering, filing, rerecording and
refiling of the Indenture, all supplemental indentures, the
Security Documents, financing statements, continuation statements
and all other instruments of further assurance as is necessary to
maintain the security interests under the Security Documents and
hereunder in full force and effect and reciting the details of
such action or referring to prior Opinions of Counsel in which
such details are given, and stating that all financing statements
and continuation statements have been executed and filed and such
other actions taken that are necessary fully to preserve and
protect the rights of the Holders and the Trustee hereunder and
under the Security Documents, or (B) no such action is necessary
to maintain the security interests in full force and effect.
Section 3 DISPOSITION OF CERTAIN COLLATERAL.
(a) The Company and the Guarantors may, without
consent of the Trustee, but otherwise subject to the requirements
of this Indenture:
(i) sell, assign, transfer, license or
otherwise dispose of, free from the security interests
under the Security Documents and hereunder, any machin-
ery, equipment, or other personal Property constituting
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Collateral that has become worn out, obsolete, or
unserviceable or is being upgraded;
(ii) (A) sell, assign, transfer, li-
cense or otherwise dispose of, free from the security
interests under the Security Documents and hereunder,
inventory held for resale that is at any time part of
the Collateral in the ordinary course of the Company's
business, consistent with industry practices, (B) col-
lect, liquidate, sell, factor or otherwise dispose of,
free from the security interests, accounts receivable
or notes receivable that are part of the Collateral in
the ordinary course of the Company's business, consis-
tent with industry practices, or (C) make Cash payments
from Cash that is at any time part of the Collateral
pursuant to and in accordance with the terms hereof and
of the Cash Collateral and Disbursement Agreement;
(iii) abandon, sell, assign, transfer,
license or otherwise dispose of any personal Property
the use of which is no longer necessary or desirable in
the proper conduct of the business of the Company and
its Subsidiaries and the maintenance of their earnings
and is not material to the conduct of the business of
the Company and its Subsidiaries;
(iv) sell, assign, transfer, license or
otherwise dispose of, free from the security interests
under the Security Documents and hereunder any assets
or property in accordance with Section 5.14 PROVIDED
that the proceeds of such sale, assignment, transfer,
license or other disposition are applied in the manner
set forth in Section 5.14 and, PROVIDED, FURTHER, that
the Net Cash Proceeds from such disposition required to
be applied to an Offer to Purchase or invested in a
Related Business pursuant to Section 5.14 are held in
the Net Cash Proceeds Account, pending such application
or investment in accordance with Section 5.14 and,
PROVIDED, FURTHER, that the Trustee shall receive an
effective and perfected security interest in all net
proceeds that are not Net Cash Proceeds from such
disposition and in any assets or property acquired with
the proceeds from such disposition (other than proceeds
for which there is no provision of law, statutory or
otherwise, enabling the creation of a perfected securi-
ty interest in any such proceeds), in the same priority
as such assets or property so disposed of;
(v) sell, assign, transfer, license or
otherwise dispose of, free from the security interests
under the Security Documents and hereunder a partner-
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ship interest in Indiana Gaming L.P. in accordance with
Section 5.17 PROVIDED that the proceeds of such sale,
assignment, transfer, license or other disposition are
applied in the manner set forth in Section 5.17 and,
PROVIDED, FURTHER, that the Net Cash Proceeds from such
disposition required to be applied to an Offer to
Purchase pursuant to Section 5.17 are held in the Net
Cash Proceeds Account, pending such application in
accordance with Section 5.17 and, PROVIDED, FURTHER,
that the Trustee shall receive an effective and per-
fected security interest in all net proceeds that are
not Net Cash Proceeds from such disposition and in any
assets or property acquired with the proceeds from such
disposition (other than proceeds for which there is no
provision of law, statutory or otherwise, enabling the
creation of a perfected security interest in any such
proceeds), in the same priority as such assets or prop-
erty so disposed of, except as specifically provided in
Section 5.17; and
(vi) transfer, free from the security
interests under the Security Documents and hereunder,
the Specified Parcels in accordance with Section 5.3
hereof.
(b) In the event that the Company or any Guaran-
tor has sold, exchanged, or otherwise disposed of or proposes to
sell, exchange or otherwise dispose of any portion of the Collat-
eral which under the provisions of this Section 4.3 may be sold,
exchanged or otherwise disposed of by the Company and the Guaran-
tors without consent of the Trustee, and the Company and the
Guarantors request the Trustee to furnish a written disclaimer,
release or quitclaim of any interest in such property under the
Security Documents, the Trustee shall execute such an instrument
upon delivery to the Trustee of an Officers' Certificate by the
Company and the Guarantors reciting the sale, exchange or other
disposition made or proposed to be made and describing in reason-
able detail the property affected thereby, and stating and
demonstrating that such property is property which by the provi-
sions of this Section 4.3 may be sold, exchanged or otherwise
disposed of or dealt with by the Company and the Guarantors
without any consent of the Trustee.
(c) Any disposition of Collateral made in compli-
ance with the provisions of this Section 4.3 shall be deemed not
to impair the Security Interests in contravention of the provi-
sions of this Indenture.
Section 4 COLLATERAL ACCOUNT.
(a) The Company shall establish and maintain in
the name of the disbursement agent (the "Disbursement Agent")
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pursuant to the Cash Collateral and Disbursement Agreement the
Construction Account, which shall hold $94,300,000 of the net
proceeds of the offering of the Securities, and a Working Capital
Account, which will hold certain amounts released from the
Construction Account (in which there shall be perfected an exclu-
sive security interest in favor of the Trustee for the equal and
ratable benefit of the Holders without preference, priority, or
distinction of any thereof over any other thereof by reason of
difference in time of issuance, sale or otherwise, as security
for the Indenture Obligations). The funds from time to time on
deposit in the Construction Account may be disbursed from such
account only for the purposes and in the manner provided for in
the Cash Collateral and Disbursement Agreement.
(b) All Cash received by the Company and the
Guarantors as Net Cash Proceeds from an Asset Sale (other than a
Permitted Asset Sale), an Event of Loss, a Lawrenceburg Sale or a
Property Sale shall be deposited in the Net Cash Proceeds Account
established and maintained by the Trustee, in which account there
shall be perfected an exclusive security interest in favor of the
Trustee for the equal and ratable benefit of the Holders, without
preference, priority, or distinction of any thereof over any
other thereof by reason of difference in time of issuance, sale
or otherwise, as security for the Indenture Obligations. The
funds from time to time on deposit in the Net Cash Proceeds
Account may be disbursed from such account only for the purposes
and in the manner provided for in Sections 5.14, 5.17 and 5.18
(with respect to Net Cash Proceeds from a Property Sale) hereof;
provided that once disbursed for any purpose other than payment
on an Offer to Purchase, such amounts and any assets acquired
therewith shall become Collateral for the Notes except to the
extent the Net Cash Proceeds from a Property Sale or a L-
awrenceburg Sale, taken together with distributions from The
Indiana Gaming Company not in the nature of management fees,
interest income or preferred dividends, exceed the Lawrenceburg
Investment Return.
(c) In its discretion, the Company may request
the Trustee in writing to, and the Trustee shall, invest any Cash
Collateral in the Net Cash Proceeds Account in Permitted Invest-
ments; provided that the Company shall take all actions necessary
to grant to the Trustee an exclusive, valid and perfected securi-
ty interest in the proceeds of the funds so invested.
(d) Interest and other amounts earned on Cash
Collateral in the Net Cash Proceeds Account shall be held in the
Net Cash Proceeds Account.
(e) The Company hereby grants a security interest
to the Trustee in all of its right, title and interest in amounts
held in the Construction Account, the Working Capital Account and
the Net Cash Proceeds Account, and the Company hereby grants a
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security interest to the Trustee in all of its right, title and
interest in any other account in which the terms of this Inden-
ture require that there shall be perfected in favor of the
Trustee for the benefit of holders a security interest in all
Property and amounts, from any source whatsoever, now or hereaf-
ter transferred to or held in any such account, including,
without limitation, all proceeds derived from the sale or other
disposition of Collateral paid into or held in any such account,
and in any and all interest and dividends or other income derived
from any such Property and amounts, and all statements, certifi-
cates and instruments in or representing such Property and
amounts.
Section 5 CERTAIN RELEASES OF COLLATERAL.
Subject to applicable law, the release of any Collater-
al from the terms of the Security Documents or the release of, in
whole or in part, the Liens created by the Security Documents,
will not be deemed to impair the Security Documents in contraven-
tion of the provisions of this Indenture if and to the extent the
Collateral or Liens are released pursuant to, and in accordance
with, the terms hereof, which are (i) the release of Collateral
that is the subject of an Asset Sale, if the Net Cash Proceeds of
such Asset Sale (other than a Permitted Asset Sale) are applied
in accordance with Section 5.14 and if the Trustee has a valid
and perfected security interest in the proceeds from the disposi-
tion of such Collateral in at least the same priority as that of
the Collateral so disposed of; provided that there shall concur-
rently be created and perfected a valid, exclusive Lien in favor
of the Trustee for the benefit of the Holders in the property and
assets purchased or otherwise acquired with such funds, if any,
(ii) to consummate the purchase of Notes pursuant to and in
accordance with the terms of an Offer to Purchase, (iii) in the
event the Company or a Guarantor incurs FF&E Indebtedness with
respect to any Material Casino in accordance with the provisions
of subsection (e) of Section 5.11 then such Material Casino
property so secured thereby need no longer constitute Collateral
for the Notes, (iv) in the event the Company or a Guarantor
incurs Indebtedness for working capital with respect to any
Material Casino in accordance with the provisions of subsection
(f) of Section 5.11 then any inventory or accounts receivable
with respect to such Material Casino need no longer constitute
Collateral for the Notes or (v) the release of any cash proceeds
that can be traced to a source other than the sale of Collateral
or distributions from Indiana Gaming L.P. (excluding distri-
butions in the nature of management fees, interest income and
preferred dividends) up to the amount of the Lawrenceburg Invest-
ment to the extent such cash proceeds are used to make an invest-
ment in any Person permitted under Section 5.3 hereof, other than
a Guarantor that is, or is required to be, a party to a Subsid-
iary Security Agreement pursuant to Section 5.23 hereof. To the
extent applicable, without limitation, the Company and each
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obligor on the Securities shall cause TIA -section- 314(d) relating to
the release of property or securities from the Liens of the
Security Documents to be complied with. Any certificate or
opinion required by TIA -section- 314(d) may be made by one officer prior
to the qualification of the Indenture under the TIA and by two
officers after such qualification, except in cases which TIA -section-
314(d) requires that such certificate or opinion be made by an
independent person.
Upon written request of the Company, subject to appli-
cable law, and presentation to the Trustee of an Officers'
Certificate evidencing compliance with Section 5.14, 5.15 (sub-
ject to the last sentence thereof), 5.16, 5.17, 5.18, 5.19 or
5.23 or Article XII, as applicable, the Trustee shall release
funds (and the Trustee's Lien with respect thereto) in accordance
with the terms hereof; PROVIDED that, as a condition to such
release, the Company shall take all necessary actions so that the
Lien on the funds so released shall reattach in like manner to
the assets and property purchased or otherwise acquired by the
Company or such Guarantor with such funds (except to the extent
such funds are applied to the repayment of Securities in compli-
ance with the requirements of this Indenture and except to the
extent that such amounts constitute Net Cash Proceeds from
Property Sales or Lawrenceburg Sales which, taken with distri-
butions from The Indiana Gaming Company not in the nature of
management fees, interest or preferred dividends, exceed the
Lawrence Investment Return) to the extent required by this Inden-
ture.
Section 6 PAYMENT OF EXPENSES.
On demand of the Trustee, the Company forthwith shall
pay or satisfactorily provide for all reasonable expenditures
incurred by the Trustee under this Article IV, including the
reasonable fees and expenses of counsel and all such sums shall
be a Lien upon the Collateral and shall be secured thereby.
Section 7 SUITS TO PROTECT THE COLLATERAL.
Subject to Section 4.1 of this Indenture and to the
provisions of the Security Documents, the Trustee shall have
power to institute and to maintain such suits and proceedings as
it may deem expedient to prevent any impairment of the Collateral
by any acts which may be unlawful or in violation of the Security
Documents or this Indenture, including the power to institute and
maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment,
rule or order that may be unconstitutional or otherwise invalid
or if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interests in contraven-
tion of this Indenture or be prejudicial to the interests of the
Holders or of the Trustee. The Trustee shall give notice to the
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Company promptly following the institution of any such suit or
proceeding.
Section 8 TRUSTEE'S DUTIES.
The powers and duties conferred upon the Trustee by
this Article IV are solely to protect the Security Interests and
shall not impose any duty upon the Trustee to exercise any such
powers and duties, except as expressly provided in this Inden-
ture. The Trustee shall be under no duty to the Company or any
Guarantor whatsoever to make or give any presentment, demand for
performance, notice of nonperformance, protest, notice of pro-
test, notice of dishonor, or other notice or demand in connection
with any Collateral, or to take any steps necessary to preserve
any rights against prior parties except as expressly provided in
this Indenture. The Trustee shall not be liable to the Company
or the Guarantors for failure to collect or realize upon any or
all of the Collateral, or for any delay in so doing, nor shall
the Trustee be under any duty to the Company or the Guarantors to
take any action whatsoever with regard thereto. The Trustee
shall have no duty to the Company, the Guarantors or the S-
ecurityholders to comply with any recording, filing or other
legal requirements necessary to establish or maintain the validi-
ty, priority or enforceability of the Security Interests in, or
the Trustee's rights in or to, any of the Collateral, all of
which obligations are the sole responsibility and liability of
the Company. The Trustee shall have no duty to the Company, the
Guarantors or the Securityholders with regard to amounts, types
or deductibles of insurance to be carried by the Company or the
Guarantors, or with the selection of any insurance agent or
broker, or whether the amount and type of insurance is "custom-
ary" within a particular industry or otherwise complies with any
requirement of this Indenture, or to inspect any Collateral.
ARTICLE V
COVENANTS
Section 1 PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest
(and Liquidated Damages, if any) on the Securities on the dates
and in the manner provided in the Securities and this Indenture.
An installment of principal of or interest (and Liquidated
Damages, if any) on the Securities shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the
Company or an Affiliate of the Company) holds for the benefit of
the Holders, on or before 10:00 a.m. New York City time on that
date, cash deposited and designated for and sufficient to pay the
installment.
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The Company shall pay interest on overdue principal and on overdue
installments of interest (and Liquidated Damages, if any) at the rate
specified in the Securities compounded semi-annually, to the extent lawful.
Section 2 MAINTENANCE OF OFFICE OR AGENCY.
The Company and the Guarantors shall maintain in the
Borough of Manhattan, The City of New York, an office or agency
where Securities may be presented or surrendered for payment,
where Securities may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company
and the Guarantors in respect of the Securities and this Inden-
ture may be served. The Company and the Guarantors shall give
prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time
the Company and the Guarantors shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices
and demands may be made or served at the address of the Trustee
set forth in Section 14.2.
The Company and the Guarantors may also from time to
time designate one or more other offices or agencies where the
Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall
in any manner relieve the Company and the Guarantors of their
obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company
and the Guarantors shall give prompt written notice to the
Trustee of any such designation or rescission and of any change
in the location of any such other office or agency. The Company
and the Guarantors hereby initially designate the Chemical Bank
as such office.
Section 3 LIMITATION ON RESTRICTED PAYMENTS.
The Company and the Guarantors shall not, and shall not
permit any of their Subsidiaries to, directly or indirectly, make
any Restricted Payment if, after giving effect to such Restricted
Payment on a pro forma basis, (1) a Default or an Event of
Default shall have occurred and be continuing, (2) the Company is
not permitted to incur at least $1.00 of additional Indebtedness
pursuant to paragraph (a) of Section 5.11 or (3) the aggregate
amount of all Restricted Payments made by the Company and its
Subsidiaries, including after giving effect to such proposed
Restricted Payment from and after the Issue Date, would exceed
the sum, without duplication, of (a) 50% of the aggregate Consol-
idated Net Income of the Company and its Consolidated Subsidiar-
ies for the period (taken as one accounting period), commencing
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on the first day of the first full fiscal quarter commencing
after the Issue Date, to and including the last day of the fiscal
quarter ended immediately prior to the date of each such calcula-
tion (or, in the event Consolidated Net Income for such period is
a deficit, then minus 100% of such deficit), plus (b) 50% of all
cash distributions (excluding management fees, interest income,
preferred dividends or provision for taxes received from Indiana
Gaming L.P.) made by The Indiana Gaming Company to the Company or
another Guarantor after the Lawrenceburg Investment Return and
after opening of the permanent Lawrenceburg Casino, plus (c) the
aggregate Net Cash Proceeds received by the Company from the sale
of its Qualified Capital Stock (other than (i) to a Subsidiary of
the Company and (ii) to the extent applied in connection with a
Qualified Exchange) after the Issue Date.
The immediately preceding paragraph, however, shall not
prohibit (s) Investments not to exceed $10,000,000 in the aggre-
gate made on or after the Issue Date, (t) Investments in Quali-
fied Gaming Ventures, PROVIDED that, after giving PRO FORMA
effect to such Investment, the aggregate amount of all such
Investments made on or after the Issue Date (after giving effect
to 50% of any cash, including management fees, returned without
restriction from such Investments to the Company or the wholly
owned Subsidiary that made such prior Investment on or prior to
the date of any such calculation) at any time does not exceed
$15,000,000, (u) Investments in Indiana Gaming L.P. to fund
construction and preopening costs until the permanent
Lawrenceburg Casino is open, PROVIDED that, after giving PRO FORMA
effect to such Investment, the aggregate amount of all such
Investments made on or after the Issue Date does not exceed
$135,000,000, (v) a Qualified Exchange, (w) Investments received
by the Company or its Subsidiaries as consideration for Asset
Sales to the extent not otherwise prohibited by the Indenture,
(x) Investments by the Company or any of its Subsidiaries in
Interest Swap and Hedging Obligations provided that such Interest
Swap and Hedging Obligations are related to payment obligations
on Indebtedness otherwise permitted under the Indenture; (y) the
contribution of a Specified Parcel to an Unrestricted Subsidiary
or any other person for the development and operation of a hotel
on such Specified Parcel, or (z) the payment of any dividend on
Qualified Capital Stock within 60 days after the date of its
declaration if such dividend could have been made on the date of
such declaration in compliance with the foregoing provisions.
The full amount of any Restricted Payments made pursuant to the
foregoing clause (z) of the immediately preceding sentence,
however, shall be deducted in the calculation of the aggregate
amount of Restricted Payments available to be made referred to in
clause (c) of the immediately preceding paragraph.
Section 4 CORPORATE EXISTENCE.
Subject to Article VI, the Company and the Guarantors
shall do or cause to be done all things necessary to preserve and
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keep in full force and effect their corporate existence and the
corporate or other existence of each of their Subsidiaries in
accordance with the respective organizational documents of each
of them and the rights (charter and statutory) and corporate
franchises of the Company and their Guarantors and each of their
Subsidiaries; PROVIDED, HOWEVER, that neither the Company nor any
of the Guarantors shall be required to preserve, with respect to
itself, any right or franchise, and with respect to any of their
Subsidiaries, any such existence, right or franchise, if (a) the
Board of Directors of the Company shall determine reasonably and
in good faith that the preservation thereof is no longer desir-
able in the conduct of the business of the Company and (b) the
loss thereof is not disadvantageous in any material respect to
the Holders.
Section 5 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company and the Guarantors shall, and shall cause
each of their Subsidiaries to, pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges (including
withholding taxes and any penalties, interest and additions to
taxes) levied or imposed upon the Company, any Guarantor or any
of their Subsidiaries or properties and assets of the Company,
any Guarantor or any of their Subsidiaries and (ii) all lawful
claims, whether for labor, materials, supplies, services or
anything else, which have become due and payable and which by law
have or may become a Lien upon the property and assets of the
Company, any Guarantor or any of their Subsidiaries; PROVIDED,
HOWEVER, that neither the Company nor any Guarantor shall be
required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim whose amount, applica-
bility or validity is being contested in good faith by appropri-
ate proceedings and for which disputed amounts adequate reserves
have been established in accordance with GAAP.
Section 6 MAINTENANCE OF INSURANCE.
From and at all times after the Issue Date, the Compa-
ny, the Guarantors and each of their respective Subsidiaries
shall have in effect customary comprehensive general liability
insurance, property insurance and (as applicable) brownwater
coverage, and shall cause their material property to maintain
builder's risk coverage insurance, in each case on terms and in
an amount reasonably sufficient (taking into account, among other
factors, the creditworthiness of the insurer) to avoid a material
adverse change in the financial condition or results of operation
of the Company and the Guarantors, taken as a whole.
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Section 7 COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee
within 120 days after the end of its fiscal year an Officers'
Certificate complying (whether or not required) with Section
314(a)(4) of the TIA and stating that a review of its activities
and the activities of its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing
such certificate, whether or not the signer knows of any failure
by the Company, any Guarantor or any Subsidiary of the Company or
any Guarantor to comply with any conditions or covenants in this
Indenture and, if such signer does know of such a failure to
comply, the certificate shall describe such failure with particu-
larity. The Officers' Certificate shall also notify the Trustee
should the relevant fiscal year end on any date other than the
current fiscal year end date.
(b) So long as not contrary to the then current
recommendation of the American Institute of Certified Public
Accountants, the Company shall deliver to the Trustee within 120
days after the end of each of its fiscal years a written report
of a firm of independent certified public accountants with an
established national reputation stating that in conducting their
audit for such fiscal year, nothing has come to their attention
that caused them to believe that the Company or any Subsidiary of
the Company was not in compliance with the provisions set forth
in Section 5.3, 5.11, 5.14, 5.16, 5.17, 5.18 or 5.19 or Article
XII of this Indenture.
(c) The Company shall, so long as any of the
Securities are outstanding, deliver to the Trustee, immediately
upon becoming aware of any Default or Event of Default under this
Indenture, an Officers' Certificate specifying such Default or
Event of Default and what action the Company is taking or propos-
es to take with respect thereto. The Trustee shall not be deemed
to have knowledge of a Default or an Event of Default unless one
of its trust officers receives notice of the Default giving rise
thereto from the Company or any of the Holders.
Section 8 REPORTS.
Whether or not the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall deliver to the Trustee and to each Holder, within
15 days after it is or would have been required to file such with
the SEC, annual and quarterly consolidated financial statements
substantially equivalent to financial statements that would have
been included in reports filed with the SEC if the Company were
subject to the requirements of Section 13 or 15(d) of the Ex-
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change Act including, with respect to annual information only, a
report thereon by the Company's certified independent public
accountants as such would be so required in such reports to the
SEC, in each case together with a management's discussion and
analysis of financial condition and results of operations which
would be so required. The Company shall simultaneously with such
delivery deliver to the Trustee annual and quarterly condensed
financial statements for Indiana Gaming L.P.
Section 9 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company and each Guarantor covenants (to the extent
that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury
law or other law wherever enacted which would prohibit or forgive
the Company or any Guarantor from paying all or any portion of
the principal of or interest (and Liquidated Damages, if any) on
the Securities as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants
or the performance of this Indenture; and (to the extent that
they may lawfully do so) the Company and each Guarantor hereby
expressly waives all benefit or advantage of any such law insofar
as such law applies to the Securities, and covenant that it shall
not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.
Section 10 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company and the Guarantors shall not, and shall not
permit any of their Subsidiaries to, enter into any contract,
agreement, arrangement, understanding or transaction with an
Affiliate (an "Affiliate Transaction"), or series of related
Affiliate Transactions, involving consideration to either party
in excess of $1,000,000, except for transactions approved by a
majority of the disinterested (as to such transaction) directors
of the Company and evidenced by an Officers' Certificate ad-
dressed and delivered to the Trustee stating that such Affiliate
Transaction has been so approved and is made in good faith and
that the terms of such Affiliate Transaction are no less favor-
able than could have been obtained in an arm's length transaction
with a non-Affiliate and are otherwise fair and reasonable to the
Company; PROVIDED that with respect to any Affiliate Transaction
(including any series of related transactions) involving consid-
eration to either party in excess of $10,000,000 (except as
otherwise permitted by Section 5.3 hereof) the Company also must,
prior to the consummation thereof, obtain a written favorable
opinion as to the fairness of such transaction to the Company
from a financial point of view from an independent investment
banking firm of national reputation. Transactions solely between
or amongst the Company and any wholly owned Subsidiary of the
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Company and Belle of Sioux City L.P. or between or amongst wholly
owned Subsidiaries of the Company and Belle of Sioux City L.P.
shall not be deemed to be Affiliate Transactions.
Section 11 LIMITATION ON INCURRENCE OF ADDITIONAL
INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK.
Except as set forth below in this covenant, the Company
and the Guarantors shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly, issue, assume, guaranty,
incur, become directly or indirectly liable with respect to
(including as a result of an Acquisition), or otherwise become
responsible for, contingently or otherwise (individually and
collectively, to "incur" or, as appropriate, an "incurrence"),
any Indebtedness or any Disqualified Capital Stock (including
Acquired Indebtedness). Notwithstanding the foregoing:
(a) if (i) no Default or Event of Default shall
have occurred and be continuing at the time of, or would occur
after giving effect on a pro forma basis to, such incurrence of
Indebtedness or Disqualified Capital Stock and (ii) on the date
of such incurrence (the "Incurrence Date"), the Consolidated
Coverage Ratio of the Company for the Reference Period imme-
diately preceding the Incurrence Date, after giving effect on a
PRO FORMA basis to such incurrence of such Indebtedness or Dis-
qualified Capital Stock and, to the extent set forth in the defi-
nition of Consolidated Coverage Ratio, the use of proceeds
thereof, would be at least 2.0 to 1.0 then the Company or any
Guarantor may incur unsecured Subordinated Indebtedness;
(b) if (i) no Default or Event of Default shall
have occurred and be continuing at the time of, or would occur
after giving effect on a PRO FORMA basis to, such incurrence of
Indebtedness and (ii) on the Incurrence Date, the Consolidated
Coverage Ratio of the Company for the Reference Period immediate-
ly preceding the Incurrence Date, after giving effect on a pro
forma basis to such incurrence of such Indebtedness and, to the
extent set forth in the definition of Consolidated Coverage
Ratio, the use of proceeds thereof, would be at least 2.5 to 1.0,
(or, in the event the sole use of proceeds of such Indebtedness
is to purchase any or all of the partnership interests in Indiana
Gaming L.P. not owned by the Company and its Subsidiaries, 2.25
to 1.0) then the Company or any Guarantor may incur Indebtedness
secured by Collateral, PROVIDED such Indebtedness (x) is PARI
PASSU in right of payment with the Notes or the Guarantee, as
applicable, (y) has an Average Life to Stated Maturity greater
than or equal to the Average Life to Stated Maturity of the Notes
and (z) has a final scheduled maturity later than or equal to the
Stated Maturity, and PROVIDED FURTHER that (t) such Indebtedness
is incurred to develop or acquire a Material Casino or make a
Casino Improvement, (u) not more than 80% of the cost of such
acquisition, development or improvement is funded by such Indebt-
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edness, (v) such Material Casino or Casino Improvements and all
its assets become Collateral for the Notes and (w) such Indebted-
ness is subject to an intercreditor agreement with the Trustee in
the form attached hereto as EXHIBIT I;
(c) if (i) no Default or Event of Default shall
have occurred and be continuing at the time of, or would occur
after giving effect on a PRO FORMA basis to, such incurrence of
Indebtedness and (ii) on the Incurrence Date, the Consolidated
Coverage Ratio of the Company for the Reference Period immediate-
ly preceding the Incurrence Date, after giving effect on a pro
FORMA basis to such incurrence of such Indebtedness and, to the
extent set forth in the definition of Consolidated Coverage
Ratio, the use of proceeds thereof, would be at least 2.5 to 1.0,
then the Company or any Guarantor may incur Indebtedness secured
by property that is not Collateral, PROVIDED that such Indebtedness
(y) has an Average Life to Stated Maturity greater than the
Average Life to Stated Maturity of the Notes and (z) has a final
scheduled maturity later than the Stated Maturity;
(d) the Company may incur Indebtedness evidenced
by the Notes and represented by the Indenture up to the amounts
specified herein as of the date hereof;
(e) the Company and the Guarantors may incur FF&E
Indebtedness, PROVIDED that the amount of such Indebtedness in
the aggregate outstanding at any time pursuant to this paragraph
(e) (including any Indebtedness, whether or not Refinancing
Indebtedness, issued to refinance, replace or refund such Indebt-
edness) shall not exceed $5,000,000 multiplied by the number of
Material Casinos then operated by the Company or the Guarantors;
(f) the Company and the Guarantors may incur
Indebtedness for working capital purposes, PROVIDED that the
amount of such Indebtedness in the aggregate outstanding at any
time pursuant to this subsection (f) (including any Indebtedness,
whether or not Refinancing Indebtedness, issued to refinance,
replace or refund such Indebtedness) may not exceed $4,000,000
multiplied by the number of Material Casinos then operated by the
Company or the Guarantors;
(g) the Company and the Guarantors, as applica-
ble, may incur Refinancing Indebtedness with respect to any In-
debtedness or Disqualified Capital Stock, as applicable, de-
scribed in clauses (a), (b), (c), (e) and (f) of this Section
5.11 or Indebtedness which is outstanding on the Issue Date so
long as, in the case of secured Indebtedness used to refinance,
refund, or replace secured Indebtedness, such Refinancing Indebt-
edness is secured only by the assets that secured the Indebted-
ness so refinanced; and
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(h) the Company and the Guarantors may incur Per-
mitted Indebtedness.
Section 12 LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company and the Guarantors shall not, and shall not
permit any of their Subsidiaries or Indiana Gaming L.P. or its
Subsidiaries (as long as The Indiana Gaming Company is the
general partner of Indiana Gaming L.P.) to, directly or indirect-
ly, create, assume or suffer to exist any consensual restriction
on the ability of any Subsidiary of the Company to pay dividends
or make other distributions to or on behalf of, or to pay any
obligation to or on behalf of, or otherwise to transfer assets or
property to or on behalf of, or make or pay loans or advances to
or on behalf of, the Company or any Subsidiary of the Company,
except (a) restrictions imposed by the Notes or this Indenture,
(b) restrictions imposed by applicable law, (c) existing restric-
tions under Indebtedness specified on EXHIBIT J hereto outstand-
ing on the Issue Date, (d) restrictions under any Acquired
Indebtedness not incurred in violation of the Indenture or any
agreement relating to any property, asset, or business acquired
by the Company or any of its Subsidiaries, which restrictions in
each case existed at the time of acquisition, were not put in
place in connection with or in anticipation of such acquisition
and are not applicable to any person, other than the person
acquired, or to any property, asset or business, other than the
property, assets and business so acquired and such acquisition
was not made, in whole or in part, with any Collateral or from
the proceeds of the sale of any Collateral or out of the distri-
butions made by Indiana Gaming L.P. not in the nature of manage-
ment fees, interest income or preferred dividends up to the
amount of the Lawrenceburg Investment, (e) restrictions with
respect solely to a Subsidiary of the Company imposed pursuant to
a binding agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary, provided such restrictions apply
solely to the Capital Stock or assets of such Subsidiary which
are being sold, (f) restrictions on transfer contained in FF&E
Indebtedness incurred pursuant to subsection (e) of Section 5.11,
provided such restrictions relate only to the transfer of the
property acquired with the proceeds of such FF&E Indebtedness,
and (g) in connection with and pursuant to any Permitted Refi-
nancing, replacements of restrictions imposed pursuant to clauses
(c) and (d) of this Section 5.12 that are not more restrictive
than those being replaced and do not apply to any other person or
assets than those that would have been covered by the restric-
tions in the Indebtedness so refinanced. Notwithstanding the
foregoing, neither (i) customary provisions restricting sublet-
ting or assignment of any lease entered into in the ordinary
course of business, consistent with industry practice, (ii) Liens
permitted under the terms of the Indenture on assets securing
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FF&E Indebtedness incurred in accordance with Section 5.11, nor
(iii) provisions ordering distributions of cash flow from Indiana
Gaming L P. shall in and of themselves be considered a restric-
tion on the ability of the applicable Subsidiary to transfer such
agreement or assets, as the case may be.
Section 13 LIMITATION ON LIENS SECURING INDEBTEDNESS.
The Company and the Guarantors shall not, and shall not
permit any of their Subsidiaries to, create, incur, assume or
suffer to exist any Lien of any kind upon any of their respective
assets now owned or acquired on or after the date of the Inden-
ture or upon any income or profits therefrom other than (a)
Permitted Liens; (b) Liens incurred hereunder to secure the
Notes; (c) Liens incurred in support of any FF&E Indebtedness
permitted by subsection (e) of Section 5.11, which Liens may be
exclusive; (d) Liens incurred in connection with Indebtedness for
working capital purposes permitted by subsection (e) of Section
5.11 on accounts receivable and inventory of the property to
which such Indebtedness relates, which Liens may be exclusive;
(e) Liens incurred in connection with Indebtedness permitted by
subsection (b) of Section 5.11, which Liens may be junior or pari
passu to the Lien securing the Notes; and (f) Liens incurred in
connection with Indebtedness permitted by subsection (c) of
Section 5.11, which Liens may be exclusive.
Section 14 LIMITATION ON SALE OF ASSETS AND SUBSIDIARY
STOCK.
(a) The Company and the Guarantors shall not, and
shall not permit any of their Subsidiaries to, in one or a series
of related transactions, convey, sell, transfer, assign or
otherwise dispose of, directly or indirectly, any of its proper-
ty, business or assets, including by merger or consolidation (in
the case of a Subsidiary of the Company), and including any sale
or other transfer or issuance of any Capital Stock of any Subsid-
iary of the Company (except any Subsidiary directly or indirectly
owning an interest in Indiana Gaming L.P., which transaction is
governed by Section 5.17) whether by the Company or a Subsidiary
or through the issuance, sale or transfer of Capital Stock by a
Subsidiary of the Company (an "Asset Sale"), unless (1)(a) within
210 days after the date of such Asset Sale, the Net Cash Proceeds
therefrom, less the pro rata portion of such amount distributed
to any lender, or trustee or agent for such lender, holding
indebtedness secured by the Collateral on a PARI PASSU basis as
permitted by subsection (b) of Section 5.11, (the "Asset Sale
Offer Amount") are applied to the repurchase of the Notes pursu-
ant to an irrevocable, unconditional cash offer (the "Asset Sale
Offer") to repurchase Notes at a purchase price (the "Asset Sale
Offer Price") of 100% of principal amount, plus accrued but
unpaid interest (and Liquidated Damages, if any) to the date of
payment (the "Asset Sale Purchase Date"), made within 180 days of
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such Asset Sale or (b) within 180 days following such Asset Sale,
the Asset Sale Offer Amount is invested in assets and property
(other than notes, bonds, obligations and securities, except with
respect to an Acquisition of an entity whose business consists
solely of Related Businesses) which in the good faith reasonable
judgment of the Board of Directors of the Company will immediate-
ly constitute or be a part of a Related Business of the Company
or such Subsidiary immediately following such transaction and
which shall become Collateral if acquired with Collateral or the
proceeds of Collateral, (2) at least 85% of the consideration re-
ceived for such Asset Sale or series of related Asset Sales
consists of cash or cash equivalents, PROVIDED that (x) the
amount of any liabilities (as shown on the Company's or such
Subsidiary's most recent balance sheet or in the notes thereto)
of the Company or any Subsidiary (other than liabilities that are
by their terms subordinated to the Notes or any Guarantee there-
of) that are assumed by the transferee of any such assets and (y)
the amount of any notes or other obligations received by the
Company or any such Subsidiary from such transferee that are
immediately converted by the Company or such Subsidiary into cash
or as to which the Company or such Subsidiary has received at or
prior to the consummation of the Asset Sale a commitment from a
nationally recognized investment, merchant or commercial bank to
convert into cash within 90 days of the consummation of such
Asset Sale unless not actually converted into cash within such
90-day period (to the extent of the cash received or receivable
pursuant to any such commitment) will be deemed cash or cash
equivalents for purposes of this provision, (3) no Default or
Event of Default shall have occurred and be continuing at the
time of, or would occur after giving effect on a PRO FORMA basis
to, such Asset Sale, and (4) the Board of Directors of the
Company determines in good faith that the Company or such Subsid-
iary, as applicable, receives fair market value for such Asset
Sale. Pending the application of Net Cash Proceeds resulting
from an Asset Sale, such proceeds shall be maintained by the
Trustee in the Net Cash Proceeds Account and invested only in
Permitted Investments.
Notwithstanding the foregoing provisions of the prior
paragraph:
(i) the Company and its Subsidiaries
may, in the ordinary course of business, convey, sell,
transfer, assign or otherwise dispose of inventory ac-
quired and held for resale in the ordinary course of
business;
(ii) the Company and its Subsidiaries
may convey, sell, transfer, assign or otherwise dispose
of assets pursuant to and in accordance with Article
VI;
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(iii) the Company and its Subsidiaries
may sell or dispose of damaged, worn out or other obso-
lete property in the ordinary course of business so
long as such property is no longer necessary for the
proper conduct of the business of the Company or such
Subsidiary, as applicable;
(iv) the Company and its Subsidiaries
may convey, sell, transfer, assign or otherwise dispose
of assets to the Company or any of its wholly owned
Subsidiaries;
(v) the Company and its Subsidiaries
may convey, sell, transfer, assign or otherwise dispose
of assets with an aggregate fair market value of $-
5,000,000 in any fiscal year; and
(vi) the Company may make a like kind
exchange for the Company's Alton barge, provided that
the Board of Directors of the Company determines in
good faith that the Company receives fair market value
for such exchange and the Company receives an appraisal
valuing the property received as having a value at
least as great as the value of the Alton barge.
Asset Sales in accordance with clauses (i) and (iii) above
shall be "Permitted Asset Sales" for purposes of Article IV
hereof.
All Net Cash Proceeds from an Event of Loss shall be
invested or used to repurchase Notes, all within the period and
as otherwise provided above in clause (1) of the first paragraph
of this Section 5.14(a). For all purposes of this Section 5.14
Net Cash Proceeds of an Event of Loss shall be treated as Net
Cash Proceeds of an Asset Sale.
Notwithstanding the foregoing, the Company will not,
and will not permit any Subsidiary to, directly or indirectly,
make any Asset Sale of any of the Capital Stock of a Subsidiary
except (i) pursuant to an Asset Sale of all the Capital Stock of
such Subsidiary or (ii) pursuant to an Asset Sale of shares of
common stock with no preferences or special rights or privileges
and with no redemption or prepayment provisions, PROVIDED that
after such sale the Company or its Subsidiaries own at least
50.1% of the voting and economic interests of the Capital Stock
of such Subsidiary.
The Company shall accumulate all Net Cash Proceeds of
Asset Sales and Events of Loss, and the aggregate amount of such
accumulated amounts and the interest and other amounts earned
thereon not used for the purposes permitted by this Section
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5.14(a) and within the time provided by this Section 5.14(a)
shall be referred to as the "Accumulated Amount."
(b) Notwithstanding the foregoing, the Company
shall not be obligated to make an Asset Sale Offer until the
Accumulated Amount exceeds $5,000,000. For the purposes of this
Section 5.14, "Minimum Accumulation Date" means each date on
which the Accumulated Amount exceeds $5,000,000. Not later than
10 Business Days after each Minimum Accumulation Date the Company
shall commence an Asset Sale Offer to the Holders to purchase, on
a pro rata basis, for cash, Securities having a principal amount
equal to the Accumulated Amount, at the Asset Sale Offer Price.
Notice of an Asset Sale Offer shall be sent, on or prior to the
commencement of the Asset Sale Offer, by first-class mail, by the
Company to each Holder at its registered address, with a copy to
the Trustee. The Asset Sale Offer shall remain open for at least
20 Business Days following its commencement. The notice to the
Holders shall contain all information, instructions and materials
required by applicable law or otherwise material to such Holders'
decision to tender Securities pursuant to the Asset Sale Offer.
The notice, which (to the extent consistent with this Indenture)
shall govern the terms of an Asset Sale Offer, shall state:
(1) that the Asset Sale Offer is
being made pursuant to such notice and this Section
5.14;
(2) the Asset Sale Offer Amount,
the Asset Sale Offer Price (including the amount of
accrued but unpaid interest (and Liquidated Damages, if
any)), and the Asset Sale Purchase Date, which Asset
Sale Purchase Date shall be on or prior to 30 Business
Days following the Minimum Accumulation Date;
(3) that any Security or portion
thereof not tendered or accepted for payment will
continue to accrue interest if interest is then accru-
ing;
(4) that, unless the Company de-
faults in depositing cash with the Paying Agent (which
may not for purposes of this Section 5.14, notwith-
standing anything in this Indenture to the contrary, be
the Company or any Affiliate of the Company) in accor-
dance with the last paragraph of this clause (b), any
Security, or portion thereof, accepted for payment
pursuant to the Asset Sale Offer shall cease to accrue
interest after the Asset Sale Purchase Date;
(5) that Holders electing to have a
Security, or portion thereof, purchased pursuant to an
Asset Sale Offer will be required to surrender their
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Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security complet-
ed, to the Paying Agent (which may not for purposes of
this Section 5.14, notwithstanding any other provision
of this Indenture, be the Company or any Affiliate of
the Company) at the address specified in the notice;
(6) that Holders will be entitled
to withdraw their elections, in whole or in part, if
the Paying Agent receives, prior to the expiration of
the Asset Sale Offer, a telegram, telex, facsimile
transmission or letter setting forth the name of the
Holder, the principal amount of the Securities the
Holder is withdrawing and a statement containing a fac-
simile signature and stating that such Holder is with-
drawing his election to have such principal amount of
Securities purchased;
(7) that if Securities in a prin-
cipal amount in excess of the principal amount of
Securities to be acquired pursuant to the Asset Sale
Offer are tendered and not withdrawn, the Company shall
purchase Securities on a PRO RATA basis (with such
adjustments as may be deemed appropriate by the Company
so that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);
(8) that Holders whose Securities
were purchased only in part will be issued new Securi-
ties equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(9) the circumstances and relevant
facts regarding such Asset Sales.
Any such Asset Sale Offer shall comply with all appli-
cable provisions of Federal and state laws, including those
regulating tender offers, if applicable, and any provisions of
this Indenture that conflict with such laws shall be deemed to be
superseded by the provisions of such laws.
On or before an Asset Sale Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof
properly tendered pursuant to the Asset Sale Offer (on a pro rata
basis if required pursuant to paragraph (7) above), (ii) deposit
with the Paying Agent cash sufficient to pay the Asset Sale Offer
Price for all Securities or portions thereof so accepted and
(iii) deliver to the Trustee Securities so accepted together with
an Officers' Certificate setting forth the Securities or portions
thereof being purchased by the Company. The Paying Agent shall
promptly mail or deliver to Holders of Securities so accepted
payment in an amount equal to the Asset Sale Offer Price for such
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Securities, and the Trustee shall promptly authenticate and mail
or deliver to such Holders a new Security equal in principal
amount to any unpurchased portion of the Security surrendered.
Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof.
(c) If the amount required to acquire all Securi-
ties tendered by Holders pursuant to an Asset Sale Offer (the
"Acceptance Amount") shall be less than the Asset Sale Offer
Amount for such Asset Sale Offer, the excess of such Asset Sale
Offer Amount over the Acceptance Amount may be used by the
Company for general corporate purposes without restriction;
PROVIDED that, as reinvested, the assets acquired with Collateral
or the proceeds of Collateral shall become Collateral. Upon
consummation of any Asset Sale Offer made in accordance with the
terms of this Section 5.14, the Accumulated Amount as of the
Minimum Accumulation Date shall be reduced to zero and accumula-
tions thereof shall be deemed to recommence from the day next
following such Minimum Accumulation Date.
(d) Promptly on the sale of any real or personal
property owned by Iowa Development Corp., the Company shall cause
the net proceeds from such sale to be promptly distributed to the
Company and, as reinvested, the assets acquired shall become
Collateral. The Company shall not permit Iowa Development Corp.
to conduct any business other than the sale of its assets.
Section 15 LIMITATION ON USE OF PROCEEDS.
The Company and the Guarantors shall use the proceeds
from the sale of the Securities (net of the Initial Purchasers'
discounts and commissions and other transaction expenses) as fol-
lows: (a) such amount as is necessary to pay in full all out-
standing indebtedness under the Existing Bank Credit Facility,
(b) at least $94,000,000 shall be used to make capital contribu-
tions and capital loans to Indiana Gaming L.P. for the develop-
ment of the Lawrenceburg Casino and (c) any remaining amounts
will be available for general corporate purposes; PROVIDED that,
as reinvested, the assets acquired shall become Collateral. On
the Issue Date, the Company will cause $94,300,000 of the net
proceeds of the offering of the Securities to be segregated and
held in the Construction Account. No other funds may be held in
the Construction Account. The Company may make payments permit-
ted under this Section 5.15 from amounts held in the Construction
Account in accordance with the terms of the Cash Collateral and
Disbursement Agreement.
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Section 16 REPURCHASE OF NOTES ON CERTAIN PROJECT
DELAYS.
(a) In the event of a Project Delay Event, each
Holder of Notes shall have the right, at such Holder's option,
pursuant to an irrevocable and unconditional cash offer by the
Company (the "Project Delay Offer"), to require the Company to
repurchase all or any part of such Holder's Notes (provided that
the principal amount of such Notes must be $1,000 or an integral
multiple thereof) on a date (the "Project Delay Purchase Date")
that is no later than 40 Business Days after the date a Project
Delay occurs, at a cash price equal to 101% of the principal
amount thereof, together with accrued interest (and Liquidated
Damages, if any) to the Project Delay Purchase Date (the "Project
Delay Offer Price") PROVIDED, HOWEVER, that in no event shall the
Company be required to purchase more than an aggregate principal
amount of Notes equal to the amount remaining in the disbursement
account on the date of the Project Delay (the "Project Delay
Offer Amount") in connection with such Project Delay Offer.
Notwithstanding the foregoing, in the event the Company has
received disbursements from the disbursement account to which it
is not entitled pursuant to the terms of the Cash Collateral and
Disbursement Agreement, the Project Delay Offer Amount shall be
increased to include such disbursements.
For purposes of the preceding paragraph, commencement
of operations shall be deemed to occur at such time as the
Lawrenceburg Casino is open to the public for gaming and is
operating at least 950 gaming positions.
(b) Not later than 15 Business Days after the
Project Delay the Company shall commence a Project Delay Offer to
the Holders to purchase, on a pro rata basis, for cash Securities
having a principal amount equal to the Project Delay Offer
Amount, at the Project Delay Offer Price. Notice of a Project
Delay Offer shall be sent on or prior to the commencement of any
Project Delay Offer, by first-class mail, by the Company to each
Holder at its registered address, with a copy to the Trustee.
The Project Delay Offer shall remain open for at least 20 Busi-
ness Days following its commencement. The notice to the Holders
shall contain all information, instructions and materials re-
quired by applicable law or otherwise material to such Holders'
decision to tender Securities pursuant to the Project Delay
Offer. The notice, which (to the extent consistent with this
Indenture) shall govern the terms of a Project Delay Offer, shall
state:
(1) that the Project Delay Offer is
being made pursuant to such notice and this Section
5.16;
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(2) the Project Delay Offer Amount,
the Project Delay Offer Price (including the amount of
accrued but unpaid interest (and Liquidated Damages, if
any)) and the Project Delay Purchase Date;
(3) that any Security or portion
thereof not tendered or accepted for payment will con-
tinue to accrue interest if interest is then accruing;
(4) that, unless the Company de-
faults in depositing cash with the Paying Agent (which
may not for purposes of this Section 5.16, notwith-
standing anything in this Indenture to the contrary, be
the Company or any Affiliate of the Company) in accor-
dance with the last paragraph of this subsection (b),
any Security, or portion thereof, accepted for payment
pursuant to the Project Delay Offer shall cease to
accrue interest after the Project Delay Purchase Date;
(5) that Holders electing to have a
Security, or portion thereof, purchased pursuant to a
Project Delay Offer will be required to surrender their
Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security complet-
ed, to the Paying Agent (which may not for purposes of
this Section 5.16, notwithstanding any other provision
of this Indenture, be the Company or any Affiliate of
the Company) at the address specified in the notice;
(6) that Holders will be entitled
to withdraw their elections, in whole or in part, if
the Paying Agent receives, prior to the expiration of
the Project Delay Offer, a telegram, telex, facsimile
transmission or letter setting forth the name of the
Holder, the principal amount of the Securities the
Holder is withdrawing and a statement containing a fac-
simile signature and stating that such Holder is with-
drawing his election to have such principal amount of
Securities purchased;
(7) that if Securities in a prin-
cipal amount in excess of the Project Delay Offer
Amount are tendered and not withdrawn, the Company
shall purchase Securities on a PRO RATA basis (with
such adjustments as may be deemed appropriate by the
Company so that only Securities in denominations of
$1,000 or integral multiples of $1,000 shall be ac-
quired);
(8) that Holders whose Securities
were purchased only in part will be issued new Securi-
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ties equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(9) the circumstances and relevant
facts regarding such Project Delay Event.
The Project Delay Offer shall comply with all appli-
cable provisions of Federal and state laws, including those
regulating tender offers, if applicable, and any provisions of
this Indenture that conflict with such laws shall be deemed to be
superseded by the provisions of such laws.
On or before a Project Delay Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof
properly tendered pursuant to the Project Delay Offer (on a pro
rata basis if required pursuant to paragraph (7) above), (ii)
deposit with the Paying Agent cash sufficient to pay the Project
Delay Offer Price for all Securities or portions thereof so
accepted and (iii) deliver to the Trustee Securities so accepted
together with an Officers' Certificate setting forth the Securi-
ties or portions thereof being purchased by the Company. The
Paying Agent shall promptly mail or deliver to Holders of Securi-
ties so accepted payment in an amount equal to the Project Delay
Offer Price for such Securities, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security
equal in principal amount to any unpurchased portion of the
Security surrendered. Any Securities not so accepted shall be
promptly mailed or delivered by the Company to the Holder there-
of. In no event shall the Company be required to make more than
one offer to purchase pursuant to this provision, assuming all
Notes tendered into such offer are purchased by the Company in
accordance with the terms thereof.
Section 17 REPURCHASE OF NOTES IN CONNECTION WITH SALE
OF LAWRENCEBURG INTEREST.
(a) The Company and its Subsidiaries shall not,
and shall not permit any of their Subsidiaries to, in one or a
series of related transactions, sell or otherwise transfer any of
the Company's interest in Indiana Gaming L.P., whether directly
by a sale of such interest or indirectly by the sale, issuance or
transfer of Capital Stock of any Subsidiary of the Company
directly or indirectly owning such interest (a "Lawrenceburg
Sale"), unless (1) on a date (the "Lawrenceburg Sale Purchase
Date") not more than 40 Business Days after the date of such
Lawrenceburg Sale, the Net Cash Proceeds therefrom, less the pro
rata portion of such amount distributed to any lender, or trustee
or agent for such lender, holding indebtedness secured by the
Collateral on a PARI PASSU basis as permitted by subsection (c)
of Section 5.11 (the "Lawrenceburg Sale Offer Amount") are
applied to the repurchase of the Notes pursuant to an irrevoca-
ble, unconditional cash offer (the "Lawrenceburg Sale Offer") to
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repurchase Notes at a purchase price of 101% of the principal
amount, plus accrued interest (and Liquidated Damages, if any) to
the Lawrenceburg Sale Purchase Date (the "Lawrenceburg Sale Offer
Price"), (2) at least 85% of the consideration received for such
Lawrenceburg Sale or series of related Lawrenceburg Sales con-
sists of cash, (3) no Default or Event of Default shall have
occurred and be continuing at the time of, or would occur after
giving effect on a PRO FORMA basis to, such Lawrenceburg Sale,
(4) the Board of Directors of the Company determines in good
faith that the Company or such Subsidiary receives fair market
value for such Lawrenceburg Sale and (5) the Board of Directors
of the Company receives a favorable written opinion as to the
fairness of the transaction to the Company from a financial point
of view issued by an investment banking firm of nationally recog-
nized standing. Pending the application of Net Cash Proceeds
resulting from a Lawrenceburg Sale, such proceeds shall be main-
tained by the Trustee in the Net Cash Proceeds Account and
invested in Permitted Investments.
(b) Not later than 15 Business Days after any
Lawrenceburg Sale the Company shall commence a Lawrenceburg Sale
Offer to the Holders to purchase, on a PRO RATA basis, for cash
Securities having a principal amount equal to the Lawrenceburg
Sale Offer Amount, at the Lawrenceburg Sale Offer Price. Notice
of a Lawrenceburg Sale Offer shall be sent on or prior to the
commencement of any Lawrenceburg Sale Offer, by first-class mail,
by the Company to each Holder at its registered address, with a
copy to the Trustee. The Lawrenceburg Sale Offer shall remain
open for at least 20 Business Days following its commencement.
The notice to the Holders shall contain all information, instruc-
tions and materials required by applicable law or otherwise
material to such Holders' decision to tender Securities pursuant
to the Lawrenceburg Sale Offer. The notice, which (to the extent
consistent with this Indenture) shall govern the terms of a
Lawrenceburg Sale Offer, shall state:
(1) that the Lawrenceburg Sale
Offer is being made pursuant to such notice and this
Section 5.17;
(2) the Lawrenceburg Sale Offer
Amount, the Lawrenceburg Sale Offer Price (including
the amount of accrued but unpaid interest (and Liqui-
dated Damages, if any)) and the Lawrenceburg Sale
Purchase Date;
(3) that any Security or portion
thereof not tendered or accepted for payment will
continue to accrue interest if interest is then accru-
ing;
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<PAGE>
(4) that, unless the Company de-
faults in depositing cash with the Paying Agent (which
may not for purposes of this Section 5.17, notwith-
standing anything in this Indenture to the contrary, be
the Company or any Affiliate of the Company) in accor-
dance with the last paragraph of this subsection (b),
any Security, or portion thereof, accepted for payment
pursuant to the Lawrenceburg Sale Offer shall cease to
accrue interest after the Lawrenceburg Sale Purchase
Date;
(5) that Holders electing to have a
Security, or portion thereof, purchased pursuant to a
Lawrenceburg Sale Offer will be required to surrender
their Security, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Securi-
ty completed, to the Paying Agent (which may not for
purposes of this Section 5.17, notwithstanding any
other provision of this Indenture, be the Company or
any Affiliate of the Company) at the address specified
in the notice;
(6) that Holders will be entitled
to withdraw their elections, in whole or in part, if
the Paying Agent receives, prior to the expiration of
the Lawrenceburg Sale Offer, a telegram, telex, facsim-
ile transmission or letter setting forth the name of
the Holder, the principal amount of the Securities the
Holder is withdrawing and a statement containing a fac-
simile signature and stating that such Holder is with-
drawing his election to have such principal amount of
Securities purchased;
(7) that if Securities in a prin-
cipal amount in excess of the principal amount of
Securities to be acquired pursuant to the Lawrenceburg
Sale Offer are tendered and not withdrawn, the Company
shall purchase Securities on a PRO RATA basis (with
such adjustments as may be deemed appropriate by the
Company so that only Securities in denominations of
$1,000 or integral multiples of $1,000 shall be ac-
quired);
(8) that Holders whose Securities
were purchased only in part will be issued new Securi-
ties equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(9) the circumstances and relevant
facts regarding such Lawrenceburg Sales.
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Any such Lawrenceburg Sale Offer shall comply with all
applicable provisions of Federal and state laws, including those
regulating tender offers, if applicable, and any provisions of
this Indenture that conflict with such laws shall be deemed to be
superseded by the provisions of such laws.
On or before a Lawrenceburg Sale Purchase Date, the Company shall
(i) accept for payment Securities or portions thereof properly tendered
pursuant to the Lawrenceburg Sale Offer (on a pro rata basis if required
pursuant to paragraph (7) above), (ii) deposit with the Paying Agent cash
sufficient to pay the Lawrenceburg Sale Offer Price for all Securities or
portions thereof so accepted and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate setting forth the Securities
or portions thereof being purchased by the Compa-ny. The Paying Agent shall
promptly mail or deliver to Holders of Securities so accepted payment in an
amount equal to the Lawrenceburg Sale Offer Price for such Securities, and
the Trustee shall promptly authenticate and mail or deliver to such Holders a
new Security equal in principal amount to any unpurchased portion of the
Security surrendered. Any Securities not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof.
(c) If the amount required to acquire all Securi-
ties tendered by Holders pursuant to a Lawrenceburg Sale Offer
(the "Lawrenceburg Sale Acceptance Amount") shall be less than
the Lawrenceburg Sale Offer Amount for such Lawrenceburg Sale
Offer, the excess of such Lawrenceburg Sale Offer Amount over the
Lawrenceburg Sale Acceptance Amount may be used by the Company
for general corporate purposes; PROVIDED that, as reinvested, the
assets acquired shall become Collateral except to the extent that
the Net Cash Proceeds from Lawrenceburg Sales or Property Sales,
taken together with distributions from The Indiana Gaming Company
not in the nature of management fees, interest income or pre-
ferred dividends, exceed the Lawrenceburg Investment Return.
Section 18 REPURCHASE OF NOTES IN CONNECTION WITH
REPAYMENT OF LAWRENCEBURG INVESTMENT.
(a) The Company shall cause distributions from
Indiana Gaming L.P. to The Indiana Gaming Company to be promptly
distributed to the Company. At least once in every twelve-month
period commencing on the first anniversary of the Issue Date
(each such anniversary date, or each Property Sale (as defined
below), the "Lawrenceburg Investment Event"), the Company shall,
on a date (the "Lawrenceburg Investment Purchase Date") that is
not later than 40 Business Days after such Lawrenceburg Invest-
ment Event, apply 50% of any distributions from Indiana Gaming
L.P. (excluding management fees, interest income, preferred
dividends or provision for taxes) up to the total amount of the
Lawrenceburg Investment, less the pro rata portion of such amount
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distributed to any lender, or trustee or agent acting for such
lender, holding indebtedness secured by Collateral on a PARI
PASSU basis as permitted by subsection (b) of Section 5.11, or
100% of the Company's PRO RATA share of the Net Cash Proceeds of
a Property Sale (the "Lawrenceburg Investment Offer Amount") to
the optional redemption of the Notes in accordance with the terms
of Article III of the Indenture or to the repurchase of the Notes
pursuant to an irrevocable, unconditional cash offer (the "-
Lawrenceburg Investment Offer") to repurchase Notes at a purchase
price of 101% of the principal amount, plus accrued interest (and
Liquidated Damages, if any) to the Lawrenceburg Investment Pur-
chase Date (the "Lawrenceburg Investment Offer Price").
Notwithstanding anything in this Section 5.18 to the
contrary, except in the case of a Property Sale, a Lawrenceburg
Investment Offer need not be made in any year in which the
Lawrenceburg Investment Offer Amount (together with any L-
awrenceburg Investment Offer Amount which was not previously
subject to a Lawrenceburg Investment Offer based on this para-
graph) is less than $10,000,000; PROVIDED that in such event,
such Lawrenceburg Investment Offer Amount shall be aggregated
with subsequent years' Lawrenceburg Investment Offer Amounts for
purposes of this Section 5.18. In no event shall the Company be
required to make Lawrenceburg Investment Offers in an aggregate
amount in excess of the Lawrenceburg Investment, except in the
case of a Property Sale.
(b) Not later than 15 Business Days after any
Lawrenceburg Investment Event the Company shall commence a Law-
renceburg Investment Offer to the Holders to purchase, on a pro
rata basis, for cash Securities having a principal amount equal
to the Lawrenceburg Investment Offer Amount, at the Lawrenceburg
Investment Offer Price. Notice of a Lawrenceburg Investment
Offer shall be sent on or prior to the commencement of any
Lawrenceburg Investment Offer, by first-class mail, by the Compa-
ny to each Holder at its registered address, with a copy to the
Trustee. The Lawrenceburg Investment Offer shall remain open for
at least 20 Business Days following its commencement. The notice
to the Holders shall contain all information, instructions and
materials required by applicable law or otherwise material to
such Holders' decision to tender Securities pursuant to the
Lawrenceburg Investment Offer. The notice, which (to the extent
consistent with this Indenture) shall govern the terms of a
Lawrenceburg Investment Offer, shall state:
(1) that the Lawrenceburg Invest-
ment Offer is being made pursuant to such notice and
this Section 5.18;
(2) the Lawrenceburg Investment
Offer Amount, the Lawrenceburg Investment Offer Price
(including the amount of accrued but unpaid interest
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<PAGE>
(and Liquidated Damages, if any)) and the Lawrenceburg
Investment Purchase Date;
(3) that any Security or portion
thereof not tendered or accepted for payment will con-
tinue to accrue interest if interest is then accruing;
(4) that, unless the Company de-
faults in depositing cash with the Paying Agent (which
may not for purposes of this Section 5.18, notwith-
standing anything in this Indenture to the contrary, be
the Company or any Affiliate of the Company) in accor-
dance with the last paragraph of this subsection (b),
any Security, or portion thereof, accepted for payment
pursuant to the Lawrenceburg Investment Offer shall
cease to accrue interest after the Lawrenceburg Invest-
ment Purchase Date;
(5) that Holders electing to have a
Security, or portion thereof, purchased pursuant to a
Lawrenceburg Investment Offer will be required to sur-
render their Security, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent (which may not
for purposes of this Section 5.18, notwithstanding any
other provision of this Indenture, be the Company or
any Affiliate of the Company) at the address specified
in the notice;
(6) that Holders will be entitled
to withdraw their elections, in whole or in part, if
the Paying Agent receives, prior to the expiration of
the Lawrenceburg Investment Offer, a telegram, telex,
facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Securities
the Holder is withdrawing and a statement containing a
facsimile signature and stating that such Holder is
withdrawing his election to have such principal amount
of Securities purchased;
(7) that if Securities in a prin-
cipal amount in excess of the principal amount of
Securities to be acquired pursuant to the Lawrenceburg
Investment Offer are tendered and not withdrawn, the
Company shall purchase Securities on a PRO RATA basis
(with such adjustments as may be deemed appropriate by
the Company so that only Securities in denominations of
$1,000 or integral multiples of $1,000 shall be ac-
quired);
(8) that Holders whose Securities
were purchased only in part will be issued new Securi-
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<PAGE>
ties equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(9) the circumstances and relevant
facts regarding such Lawrenceburg Investment Event.
Any such Lawrenceburg Investment Offer shall comply
with all applicable provisions of Federal and state laws, includ-
ing those regulating tender offers, if applicable, and any
provisions of this Indenture that conflict with such laws shall
be deemed to be superseded by the provisions of such laws.
On or before a Lawrenceburg Investment Purchase Date,
the Company shall (i) accept for payment Securities or portions
thereof properly tendered pursuant to the Lawrenceburg Investment
Offer (on a pro rata basis if required pursuant to paragraph (7)
above), (ii) deposit with the Paying Agent cash sufficient to pay
the Lawrenceburg Investment Offer Price for all Securities or
portions thereof so accepted and (iii) deliver to the Trustee
Securities so accepted together with an Officers' Certificate
setting forth the Securities or portions thereof being purchased
by the Company. The Paying Agent shall promptly mail or deliver
to Holders of Securities so accepted payment in an amount equal
to the Lawrenceburg Investment Offer Price for such Securities,
and the Trustee shall promptly authenticate and mail or deliver
to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered. Any Securities
not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof.
(c) If the amount required to acquire all Securi-
ties tendered by Holders pursuant to a Lawrenceburg Investment
Offer (the "Lawrenceburg Investment Acceptance Amount") shall be
less than the Lawrenceburg Investment Offer Amount for such
Lawrenceburg Investment Offer, the excess of such Lawrenceburg
Investment Offer Amount over the Lawrenceburg Investment Accep-
tance Amount may be used by the Company for general corporate
purposes; PROVIDED that, as reinvested, the assets acquired shall
become Collateral.
(d) As long as The Indiana Gaming Company serves
as general partner of Indiana Gaming L.P., Indiana Gaming L.P.
will not engage in a sale of all or substantially all its assets,
by way of merger, consolidation or otherwise (a "Property Sale")
unless (i) at least 85% of the consideration received consists of
cash, (ii) the Board of Directors of the Company determines in
good faith that Indiana Gaming L.P. receives fair market value
therefor, (iii) the Board of Directors of the Company receives a
favorable written opinion as to the fairness of the transaction
to Indiana Gaming L.P. from a financial point of view issued by
an investment bank of nationally recognized standing and (iv) the
Company's pro rata share of the Net Cash Proceeds, less the pro
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<PAGE>
rata portion of such amount distributed to any lender, or trustee
or agent for such lender, holding indebtedness secured by the
Collateral on a PARI PASSU basis as permitted by subsection (b)
of Section 5.11, are distributed to the Company and held by the
Trustee in the Net Cash Proceeds Account in Permitted Investments
pending application in accordance with this Section 5.18.
(e) The Company may make additional Lawrenceburg
Investment Offers within any twelve-month period that substan-
tially comply with the terms of this Section 5.18.
Section 19 REPURCHASE OF NOTES ON LOSS OF MATERIAL
CASINO.
(a) In the event of the loss of the legal right
to operate a Material Casino, which Material Casino represented
more than 10% of the Consolidated EBITDA of the Company for and
as of the end of the Reference Period immediately preceding such
loss, and such loss continues for more than 90 days (such event,
a "License Loss"), the Company shall, on a date (the "License
Loss Purchase Date") that is no later than 40 Business Days after
such ninetieth day, apply an amount (the "License Loss Offer
Amount") equal to four times the contribution of such Material
Casino to such Consolidated EBITDA during the Reference Period to
the repurchase of Notes having a principal amount equal to the
License Loss Offer Amount in accordance with an irrevocable,
unconditional cash offer (the "License Loss Offer") to purchase
Notes at a purchase price of 101% of the principal amount, plus
accrued interest (and Liquidated Damages, if any) to the License
Loss Purchase Date (the "License Loss Offer Price"). The Company
need not make a License Loss Offer if, giving effect to the
License Loss on a PRO FORMA basis, the Company's Consolidated
Coverage Ratio would be at least 2.25 to 1.
(b) Not later than 15 Business Days after any
License Loss the Company shall commence a License Loss Offer to
the Holders to purchase, on a PRO RATA basis, for cash Securities
having a principal amount equal to the License Loss Offer Amount,
at the License Loss Offer Price. Notice of a License Loss Offer
shall be sent on or prior to the commencement of any License Loss
Offer, by first-class mail, by the Company to each Holder at its
registered address, with a copy to the Trustee. The License Loss
Offer shall remain open for at least 20 Business Days following
its commencement. The notice to the Holders shall contain all
information, instructions and materials required by applicable
law or otherwise material to such Holders' decision to tender
Securities pursuant to the License Loss Offer. The notice, which
(to the extent consistent with this Indenture) shall govern the
terms of a License Loss Offer, shall state:
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<PAGE>
(1) that the License Loss Offer is
being made pursuant to such notice and this Section
5.19;
(2) the License Loss Offer Amount,
the License Loss Offer Price (including the amount of
accrued but unpaid interest (and Liquidated Damages, if
any)) and the License Loss Purchase Date;
(3) that any Security or portion
thereof not tendered or accepted for payment will con-
tinue to accrue interest if interest is then accruing;
(4) that, unless the Company de-
faults in depositing cash with the Paying Agent (which
may not for purposes of this Section 5.19, notwith-
standing anything in this Indenture to the contrary, be
the Company or any Affiliate of the Company) in accor-
dance with the last paragraph of this subsection (b),
any Security, or portion thereof, accepted for payment
pursuant to the License Loss Offer shall cease to
accrue interest after the License Loss Purchase Date;
(5) that Holders electing to have a
Security, or portion thereof, purchased pursuant to a
License Loss Offer will be required to surrender their
Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security complet-
ed, to the Paying Agent (which may not for purposes of
this Section 5.19, notwithstanding any other provision
of this Indenture, be the Company or any Affiliate of
the Company) at the address specified in the notice;
(6) that Holders will be entitled
to withdraw their elections, in whole or in part, if
the Paying Agent receives, prior to the expiration of
the License Loss Offer, a telegram, telex, facsimile
transmission or letter setting forth the name of the
Holder, the principal amount of the Securities the
Holder is withdrawing and a statement containing a fac-
simile signature and stating that such Holder is with-
drawing his election to have such principal amount of
Securities purchased;
(7) that if Securities in a prin-
cipal amount in excess of the License Loss Offer Amount
are tendered and not withdrawn, the Company shall pur-
chase Securities on a PRO RATA basis (with such adjust-
ments as may be deemed appropriate by the Company so
that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);
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(8) that Holders whose Securities
were purchased only in part will be issued new Securi-
ties equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(9) the circumstances and relevant
facts regarding such License Loss.
Any such License Loss Offer shall comply with all
applicable provisions of Federal and state laws, including those
regulating tender offers, if applicable, and any provisions of
this Indenture that conflict with such laws shall be deemed to be
superseded by the provisions of such laws.
On or before a License Loss Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof
properly tendered pursuant to the License Loss Offer (on a pro
RATA basis if required pursuant to paragraph (7) above), (ii)
deposit with the Paying Agent cash sufficient to pay the License
Loss Offer Price for all Securities or portions thereof so
accepted and (iii) deliver to the Trustee Securities so accepted
together with an Officers' Certificate setting forth the Securi-
ties or portions thereof being purchased by the Company. The
Paying Agent shall promptly mail or deliver to Holders of Securi-
ties so accepted payment in an amount equal to the License Loss
Offer Price for such Securities, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security
equal in principal amount to any unpurchased portion of the
Security surrendered. Any Securities not so accepted shall be
promptly mailed or delivered by the Company to the Holder there-
of.
Section 20 LIMITATION ON ACTIVITIES OF THE INDIANA
GAMING COMPANY AND INDIANA GAMING L.P.
(a) The Indiana Gaming Company shall not conduct
any business whatsoever other than (i) investing in and serving
as general partner of Indiana Gaming Company L.P., including
executing agreements on behalf of Indiana Gaming L.P., (ii) if
removed as general partner of Indiana Gaming L.P. pursuant to the
terms of such partnership's partnership agreement, serving as a
limited partner thereof and (iii) complying with its obligations
under this Indenture and the Notes and acting as a Guarantor of
the Notes. The Indiana Gaming Company shall not transfer any of
its interest in Indiana Gaming L.P. to the Company or any of its
Subsidiaries, unless such Subsidiary is a direct wholly owned
Subsidiary of the Company and is bound by this provision and all
other provisions of the Indenture and the Notes specifically
relating to The Indiana Gaming Company.
(b) As long as The Indiana Gaming Company is the
general partner of Indiana Gaming L.P., the Company will not
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permit Indiana Gaming L.P. to incur any Indebtedness other than
Indebtedness under the terms of which (a) no recourse shall be
had against any other person (other than The Indiana Gaming
Company solely in its capacity as general partner of Indiana
Gaming L.P.) for the payment of the principal of or interest or
premium on such Indebtedness or for any claim based on such
Indebtedness and (b) no restrictions of the type prohibited by
Section 5.12 shall be permitted. As long as the Indiana Gaming
Company is the general partner of Indiana Gaming L.P., the
Company will not permit Indiana Gaming L.P. to amend the provi-
sion of its partnership agreement dealing with distributions in a
manner which is adverse to the Holders or the provision with
respect to partnership purpose, which is limited to the operation
of the Lawrenceburg Casino.
Section 21 LIMITATION ON LINES OF BUSINESS.
Neither the Company nor any of its Subsidiaries or
Unrestricted Subsidiaries shall directly or indirectly engage to
any substantial extent in any line or lines of business activity
other than that which, in the reasonable good faith judgment of
the Board of Directors of the Company, is a Related Business,
including, in the case of an Acquisition, immediately upon such
Acquisition.
Section 22 LIMITATION ON STATUS AS INVESTMENT COMPANY.
None of the Company, any Guarantor or any of their
respective Subsidiaries shall become required to be registered as
an "investment company" (as that term is defined in the Invest-
ment Company Act of 1940, as amended), or otherwise become
subject to regulation under the Investment Company Act.
Section 23 FUTURE SUBSIDIARY GUARANTORS.
The Company and the Guarantors covenant and agree that
they shall cause each person that becomes a Subsidiary of the
Company or any Guarantor to execute a Guarantee in the form of
EXHIBIT B hereto and shall cause such Subsidiary to enter into a
supplemental indenture for the purpose of jointly and severally
guaranteeing, on a senior basis, the Company's obligations to pay
principal, premium and interest (and Liquidated Damages, if any)
on the Notes, and the capital stock of such Subsidiary owned by
the Company or any Guarantors shall be pledged, pursuant to an
agreement substantially in the form of the Parent Pledge Agree-
ment or Subsidiary Pledge Agreement attached hereto as EXHIBIT D
or EXHIBIT E, respectively, in favor of the Trustee for the
benefit of the Holders, and, if any assets of such Subsidiary are
acquired with Collateral or the proceeds of Collateral, or from
distributions from Indiana Gaming L.P. (other than in the nature
of management fees, interest or preferred dividends) up to the
amount of the Lawrenceburg Investment Return, all assets shall be
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pledged under a Deed of Trust, Subsidiary Security Agreement and
Ship Mortgage, as applicable, substantially in the forms attached
hereto as EXHIBIT C-1, EXHIBIT F and EXHIBIT H, respectively.
Section 24 RULE 144A INFORMATION REQUIREMENT.
The Company shall furnish to the Holders of the Secu-
rities and prospective purchasers of Securities designated by the
Holders of Transfer Restricted Securities, upon their request,
the information required to be delivered pursuant to Rule 1-
44A(d)(4) under the Securities Act until such time as the Company
either concludes an offer to exchange the Series B Notes for the
Original Notes or a registration statement relating to resales of
the Securities has become effective under the Securities Act.
The Company shall also furnish such information during the
pendency of any suspension of effectiveness of the resale regis-
tration statement.
ARTICLE VI
SUCCESSOR CORPORATION
Section 1 LIMITATION ON MERGER, SALE OR CONSOLIDATION.
Neither the Company nor any of the Guarantors (to the
extent not permitted by the sale provisions set forth in Article
XIII) will directly or indirectly consolidate with or merge with
or into another person or sell, lease, convey or transfer all or
substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related
transactions, to another Person or group of affiliated Persons,
unless:
(1) either (a) in the case of a
merger or consolidation, the Company or such Guarantor,
as the case may be, is the continuing entity or (b) the
resulting, surviving or transferee entity is a corpora-
tion organized under the laws of the United States, any
state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obliga-
tions of the Company or such Guarantor, as applicable,
in connection with the Notes and the Indenture;
(2) no Default or Event of Default
shall exist or shall occur immediately after giving
effect on a PRO FORMA basis to such transaction;
(3) immediately after giving effect
to such transaction, on a PRO FORMA basis, the Consoli-
dated Net Worth of the consolidated surviving or trans-
feree entity is at least equal to the Consolidated Net
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Worth of the Company or the Guarantor, as applicable,
immediately prior to such transaction;
(4) other than in the case of a
transaction solely between the Company and a wholly
owned Guarantor or solely between wholly owned Guaran-
tors, immediately after giving effect to such transac-
tion, on a PRO FORMA basis, the consolidated resulting,
surviving or transferee entity would immediately there-
after be permitted to incur at least $1.00 of addition-
al Indebtedness pursuant to subsection (a) of Section
5.11;
(5) such transaction will not
result in the loss of any material Gaming License; and
(6) the Company has delivered to
the Trustee an Officers' Certificate stating that such
consolidation, merger, assignment, or transfer and such
supplemental indenture comply with this Article VI and
that all conditions precedent herein provided relating
to such transaction have been satisfied.
For purposes of the first sentence of this Section 6.1,
the sale, lease or conveyance of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company
or a Guarantor, which properties and assets, if held by the
Company or a Guarantor instead of such Subsidiaries, would
constitute all or substantially all of the properties and assets
of the Company or such Guarantor, as the case may be, on a
consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company or
such Guarantor, as the case may be.
Section 2 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger or any transfer of all
or substantially all of the assets of the Company or a Guarantor
in accordance with Section 6.1, the successor corporation formed
by such consolidation or into which the Company or such Guaran-
tor, as the case may be, is merged or to which such transfer is
made, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor, as the
case may be, under the Indenture and the Notes with the same
effect as if such successor corporation had been named therein as
the Company or such Guarantor, as the case may be, and, except in
the case of a lease, the Company or such Guarantor, as the case
may be, will be released from the obligations under the Notes and
the Indenture except with respect to any obligations that arise
from, or are related to, such transaction.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 1 EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one
of the following events (whatever the reason for such Event of
Default and whether it shall be caused voluntarily or involun-
tarily or effected, without limitation, by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body):
(1) the failure by the Company to
pay any installment of interest (or Liquidated Damages,
if any) on the Notes as and when due and payable and
the continuance of any such failure for 30 days;
(2) the failure by the Company to
pay all or any part of the principal, or premium, if
any, on the Notes when and as the same become due and
payable at maturity, redemption, by acceleration or
otherwise, including, without limitation, failure to
make a required redemption or pay any Offer to Purchase
Price, or otherwise;
(3) except as otherwise provided
herein, the failure by the Company or any Guarantor to
observe or perform any other covenant or agreement
contained in the Notes or the Indenture and the contin-
uance of such failure for a period of 30 days after
written notice is given to the Company by the Trustee
or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amount of the Notes
outstanding;
(4) a decree, judgment, or order by
a court of competent jurisdiction shall have been
entered adjudging the Company or any of its Significant
Subsidiaries as bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization of the
Company or such Significant Subsidiary under any bank-
ruptcy or similar law, and such decree or order shall
have continued undischarged and unstayed for a period
of 60 days; or a decree or order of a court of compe-
tent jurisdiction over the appointment of a receiver,
liquidator, trustee, or assignee in bankruptcy or
insolvency of the Company or such Significant Subsid-
iary, or of the property of any such person, or for the
winding up or liquidation of the affairs of any such
person, shall have been entered, and such decree,
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judgment, or order shall have remained in force undis-
charged and unstayed for a period of 60 days;
(5) the Company or any of its
Significant Subsidiaries shall institute proceedings to
be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy proceeding against it, or
shall file a petition or answer or consent seeking
reorganization under any bankruptcy or similar law or
similar statute, or shall consent to the filing of any
such petition, or shall consent to the appointment of a
Custodian, receiver, liquidator, trustee, or assignee
in bankruptcy or insolvency of it or any of its assets
or property, or shall make a general assignment for the
benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become
due, or shall, within the meaning of any Bankruptcy
Law, become insolvent or fail generally to pay its
debts as they become due;
(6) a default in the payment of
principal, premium or interest when due which extends
beyond any stated period of grace applicable thereto or
an acceleration for any other reason of maturity of any
Indebtedness of the Company or one or more of the Guar-
antors with an aggregate principal amount in excess of
$5,000,000;
(7) final unsatisfied judgments not
covered by insurance aggregating in excess of $-
5,000,000, at any one time rendered against the Company
or one or more of its Subsidiaries and not stayed,
bonded or discharged within 45 days;
(8) an event of default specified
in the Security Documents, not cured within the appli-
cable grace period; or
(9) a default in the payment of
principal, premium or interest on the Convertible Notes
at the final maturity on June 1, 2001, regardless of
any consent or waiver to such nonpayment given by any
holder thereof.
If a Default occurs and is continuing, the Trustee
must, within 90 days after the occurrence of such default, give
to the Holders notice of such default.
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Section 2 ACCELERATION OF MATURITY DATE; RESCISSION
AND ANNULMENT.
If an Event of Default (other than an Event of Default
specified in Section 7.1(4) or (5)) occurs and is continuing,
then, and in every such case, unless the principal of all of the
Securities shall have already become due and payable, either the
Trustee or the Holders of not less then 25% in aggregate princi-
pal amount of then outstanding Securities, by a notice in writing
to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all of the principal of the
Securities (and premium, if applicable), determined as set forth
below, together with accrued interest (and Liquidated Damages, if
any) thereon, to be due and payable immediately. If an Event of
Default specified in Section 7.1(4) or (5) occurs, all principal
of, premium applicable to, and accrued interest (and Liquidated
Damages, if any) on, the Securities shall be immediately due and
payable on all outstanding Securities without any declaration or
other act on the part of the Trustee or the Holders.
At any time after such a declaration of acceleration
being made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter provid-
ed in this Article VII, the Holders of a majority in aggregate
principal amount of then outstanding Securities, by written
notice to the Company and the Trustee, may waive, on behalf of
all Holders, an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default if:
(1) the Company has paid or depos-
ited with the Trustee a sum sufficient to pay
(A) all overdue interest
(and Liquidated Damages, if any) on all Secu-
rities,
(B) the principal of
(and premium, if any, applicable to) any
Securities which would become due otherwise
than by such declaration of acceleration, and
interest thereon at the rate borne by the
Securities,
(C) to the extent that
payment of such interest is lawful, interest
upon overdue interest (and Liquidated Damag-
es, if any) at the rate borne by the Securi-
ties,
(D) all sums paid or
advanced by the Trustee hereunder and the
compensation, expenses, disbursements and
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advances of the Trustee, its agents and coun-
sel, and
(2) all Events of Default, other
than the non-payment of amounts which have become due
solely by such declaration of acceleration, have been
cured or waived as provided in Section 7.12.
Notwithstanding the previous sentence of this Section 7.2, no
waiver shall be effective for any Event of Default or event which
with notice or lapse of time or both would be an Event of Default
with respect to any covenant or provision which cannot be modi-
fied or amended (i) without the consent of the Holder of each
outstanding Security, unless all such affected Holders agree, in
writing, to waive such Event of Default or event or (ii) without
the consent of Holders of a supermajority in aggregate principal
amount of then outstanding Securities, unless such Holders agree,
in writing, to waive such Event of Default or event. No such
waiver shall cure or waive any subsequent default or impair any
right consequent thereon.
Section 3 COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.
The Company covenants that if an Event of Default in
payment of principal, premium, or interest (and Liquidated
Damages, if any) specified in Section 7.1(1) or (2) occurs and is
continuing, the Company shall, upon demand of the Trustee, pay to
it, for the benefit of the Holders of such Securities, the whole
amount then due and payable on such Securities for principal,
premium (if any) and interest (and Liquidated Damages, if any),
and, to the extent that payment of such interest shall be legally
enforceable, interest on any overdue principal (and premium, if
any) and on any overdue interest (and Liquidated Damages, if
any), at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including compensation to, and
expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an
express trust in favor of the Holders, may institute a judicial
proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon
the Securities and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of the
Company or any other obligor upon the Securities, wherever
situated.
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If an Event of Default occurs and is continuing, the
Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders by such appropriate judicial
proceedings as the Trustee shall deem most effective to protect
and enforce any such rights, whether for the specific enforcement
of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy.
Section 4 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolven-
cy, liquidation, bankruptcy, reorganization, arrangement, adjust-
ment, composition or other judicial proceeding relative to the
Company or any other obligor upon the Securities or the property
of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declara-
tion or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue
principal or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise to take any and all
actions under the TIA, including
(i) to file and prove a claim for the
whole amount of principal (and premium, if any) and
interest (and Liquidated Damages, if any) owing and
unpaid in respect of the Securities and to file such
other papers or documents as may be necessary or advis-
able in order to have the claims of the Trustee (in-
cluding any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee,
its agent and counsel) and of the Holders allowed in
such judicial proceeding, and
(ii) to collect and receive any moneys
or other property payable or deliverable on any such
claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trust-
ee, its agents and counsel, and any other amounts due the Trustee
under Section 8.7.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement,
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adjustment, or composition affecting the Securities or the rights
of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSES-
SION OF SECURITIES.
All rights of action and claims under this Indenture or
the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such proceed-
ing instituted by the Trustee shall be brought in its own name as
trustee of an express trust in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of
compensation to, and expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment
has been recovered.
Section 6 PRIORITIES.
Any money collected by the Trustee pursuant to this
Article VII shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of
such money on account of principal, premium (if any) or interest
(and Liquidated Damages, if any), upon presentation of the
Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due
pursuant to Section 8.7;
SECOND: To the Holders in payment of the amounts then
due and unpaid for principal of, premium (if any) and interest
(and Liquidated Damages, if any) on, the Securities in respect of
which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to
the amounts due and payable on such Securities for principal,
premium (if any) and interest (and Liquidated Damages, if any),
respectively; and
THIRD: To whomsoever may be lawfully entitled thereto,
the remainder, if any.
Section 7 LIMITATION ON SUITS.
No Holder of any Security shall have any right to order
or direct the Trustee to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment
of a receiver or trustee, or for any other remedy hereunder,
unless
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(A) such Holder has
previously given written notice to the Trust-
ee of a continuing Event of Default;
(B) the Holders of not
less than 25% in principal amount of then
outstanding Securities shall have made writ-
ten request to the Trustee to institute pro-
ceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(C) such Holder or Hold-
ers have offered to the Trustee reasonable
security or indemnity against the costs,
expenses and liabilities to be incurred or
reasonably probable to be incurred in compli-
ance with such request;
(D) the Trustee for 60
days after its receipt of such notice, re-
quest and offer of indemnity has failed to
institute any such proceeding; and
(E) no direction incon-
sistent with such written request has been
given to the Trustee during such 60-day peri-
od by the Holders of a majority in principal
amount of the outstanding Securities;
it being understood and intended that no one or more Holders
shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other Holders, or to obtain or to
seek to obtain priority or preference over any other Holders or
to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the
Holders.
Section 8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST.
Notwithstanding any other provision of this Indenture,
the Holder of any Security shall have the right, which is abso-
lute and unconditional, to receive payment of the principal of,
and premium (if any) and interest (and Liquidated Damages, if
any) on, such Security on the Maturity Dates or Interest Payment
Dates, as applicable, of such payments as expressed in such
Security (in the case of redemption, the Redemption Price on the
Redemption Date; in the case of a Change of Control, the Change
of Control Purchase Price, on the Change of Control Purchase
Date; in the case of an Asset Sale, the Asset Sale Offer Price on
the Asset Sale Purchase Date; in the case of a License Loss, the
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License Loss Offer Price on the License Loss Purchase Date; in
the case of a Lawrenceburg Sale, the Lawrenceburg Sale Offer
Price on the Lawrenceburg Sale Purchase Date; in the case of a
Project Delay Event, the Project Delay Offer Price on the Project
Delay Purchase Date; and in the case of a Lawrenceburg Investment
Offer, the Lawrenceburg Investment Offer Price on the L-
awrenceburg Investment Purchase Date; and to institute suit for
the enforcement of any such payment, and such rights shall not be
impaired without the consent of such Holder.
Section 9 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost or stolen
Securities in Section 2.7, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders is intended to
be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employ-
ment of any other appropriate right or remedy.
Section 10 Delay or Omission Not Waiver.
No delay or omission by the Trustee or by any Holder of
any Security to exercise any right or remedy arising upon any
Event of Default shall impair the exercise of any such right or
remedy or constitute a waiver of any such Event of Default.
Every right and remedy given by this Article VII or by law to the
Trustee or to the Holders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
Section 11 Control by Holders.
The Holder or Holders of a majority in aggregate
principal amount of then outstanding Securities shall have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising
any trust or power conferred upon the Trustee, PROVIDED, that
(1) such direction shall not be in
conflict with any rule of law or with this Indenture,
(2) the Trustee shall not determine
that the action so directed would be unjustly prejudi-
cial to the Holders not taking part in such direction,
and
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(3) the Trustee may take any other
action deemed proper by the Trustee which is not incon-
sistent with such direction.
Section 12 WAIVER OF PAST DEFAULT.
Subject to Section 7.8, the Holder or Holders of not
less than a majority in aggregate principal amount of the out-
standing Securities may, by written notice to the Trustee on
behalf of all Holders, prior to the declaration of the maturity
of the Securities, waive any past default hereunder and its
consequences, except a default
(A) in the payment of
the principal of, premium, if any, or inter-
est (and Liquidated Damages, if any) on, any
Security as specified in clauses (1) and (2)
of Section 7.1,
(B) in respect of a
covenant or provision hereof which, under
Article X, cannot be modified or amended
without the consent of the Holder of each
outstanding Security affected, or
(C) in respect of a
covenant or provision hereof which, under
Article X, cannot be modified or amended
without the consent of Holders of a s-
upermajority in aggregate principal amount of
the then outstanding Securities, in which
case such waiver shall require the consent of
such Holders.
Upon any such waiver, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed
to have been cured, for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other default or
impair the exercise of any right arising therefrom.
Section 13 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of
any Security by his acceptance thereof shall be deemed to have
agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture,
or in any suit against the Trustee for any action taken, suffered
or omitted to be taken by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable
costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good
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faith of the claims or defenses made by such party litigant; but
the provisions of this Section 7.13 shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee,
to any suit instituted by any Holder, or group of Holders,
holding in the aggregate more than 10% in aggregate principal
amount of the outstanding Securities, or to any suit instituted
by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest (and Liquidated Damages, if any) on,
any Security on or after the Maturity Date of such Security.
Section 14 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any pro-
ceeding to enforce any right or remedy under this Indenture and
such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to
such Holder, then and in every case, subject to any determination
in such proceeding, the Company, the Guarantors, the Trustee and
the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies
of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
ARTICLE VIII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by
this Indenture and covenants and agrees to perform the same, as
herein expressed.
Section 1 DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has
occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture and use the
same degree of care and skill in their exercise as a prudent
person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of a Default or
an Event of Default:
(1) The Trustee need perform only
those duties as are specifically set forth in this
Indenture and no others, and no covenants or obliga-
tions shall be implied in or read into this Indenture
which are adverse to the Trustee.
(2) In the absence of bad faith on
its part, the Trustee may conclusively rely, as to the
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truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opin-
ions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to deter-
mine whether or not they conform to the requirements of
this Indenture.
(i) The Trustee may not be relieved
from liability for its own grossly negligent ac-
tion, its own grossly negligent failure to act, or
its own willful misconduct, except that:
(ii) This paragraph does not limit
the effect of subsection (b) of this Section 8.1.
(3) The Trustee shall comply with
any order or directive of a Gaming Authority that the
Trustee submit an application for any license, finding
of suitability or other approval pursuant to any Gaming
Law and will cooperate fully and completely in any pro-
ceeding related to such application; provided, however,
that in the event the Trustee in its reasonable judg-
ment determines that complying with such order or
directive would subject it or its officers or directors
to unreasonable or onerous requirements, the Trustee
may, at its option, resign as Trustee in lieu of com-
plying with such order or directive; and provided,
further, that no resignation shall become effective
until a successor Trustee is appointed and delivers a
written acceptance in accordance with Section 8.8
hereof.
(4) The Trustee shall not be liable
for any error of judgment made in good faith by a Trust
Officer, unless it is proved that the Trustee was
grossly negligent in ascertaining the pertinent facts.
(5) The Trustee shall not be liable
with respect to any action it takes or omits to take in
good faith in accordance with a direction received by
it pursuant to Section 7.12.
(c) No provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder or to take or omit to take any action under this
Indenture or at the request, order or direction of the Holders or
in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reason-
ably assured to it.
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(d) Every provision of this Indenture that in any
way relates to the Trustee is subject to subsections (a), (b),
(c) and (d) of this Section 8.1.
(e) The Trustee shall not be liable for interest
on any assets received by it except as the Trustee may agree in
writing with the Company. Assets held in trust by the Trustee
need not be segregated from other assets except to the extent
required by law.
Section 2 RIGHTS OF TRUSTEE.
Subject to Section 8.1:
(a) The Trustee may rely on any document believed
by it to be genuine and to have been signed or presented by the
proper person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from
acting, it may consult with counsel and may require an Officers'
Certificate or an Opinion of Counsel, which shall conform to
Sections 14.4 and 14.5. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on
such certificate or opinion.
(c) The Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or negli-
gence of any agent appointed with due care.
(d) The Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes
to be authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request,
direction, consent, order, bond, debenture, or other paper or
document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit.
(f) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Inden-
ture at the request, order or direction of any of the Holders,
pursuant to the provisions of this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemni-
ty against the costs, expenses and liabilities which may be
incurred therein or thereby.
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(g) Except with respect to Section 5.1, the
Trustee shall have no duty to inquire as to the performance of
the Company's covenants in Article V hereof. In addition, the
Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring
pursuant to Sections 7.1(1), 7.1(2) and 5.1, or (ii) any Default
or Event of Default of which the Trustee shall have received
written notification or obtained actual knowledge.
Section 3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and may otherwise deal
with the Company, any Guarantor, any of their respective Subsid-
iaries, or their respective Affiliates with the same rights it
would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee must comply with Sections
8.10 and 8.11.
Section 4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity
or adequacy of this Indenture or the Securities or as to the
creation, perfection, priority or continuation of perfection of
any lien or security interest and it shall not be accountable for
the Company's use of the proceeds from the Securities following
the release of such proceeds from the Net Cash Proceeds Account
in accordance with the terms of this Indenture, and it shall not
be responsible for any statement in the Securities, other than
the Trustee's certificate of authentication, or the use or
application of any funds received by a Paying Agent other than
the Trustee.
Section 5 NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall
mail to each Securityholder notice of the uncured Default or
Event of Default within 90 days after such Default or Event of
Default occurs. Except in the case of a Default or an Event of
Default in payment of principal (or premium, if any) of, or
interest (and Liquidated Damages, if any) on, any Security (in-
cluding the payment of the Change of Control Purchase Price on
the Change of Control Purchase Date, the Redemption Price on the
Redemption Date, the Asset Sale Offer Price on the Asset Sale
Purchase Date, the License Loss Offer Price on the License Loss
Purchase Date, the Lawrenceburg Sale Offer Price on the L-
awrenceburg Sale Purchase Date, the Project Delay Offer Price on
the Project Delay Purchase Date and the Lawrenceburg Investment
Offer Price on the Lawrenceburg Investment Purchase Date), the
Trustee may withhold the notice if and so long as a Trust Officer
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in good faith determines that withholding the notice is in the
interest of the Securityholders.
Section 6 REPORTS BY TRUSTEE TO HOLDERS.
If required by law, within 60 days after each March 1
beginning with the March 1 following the date of this Indenture,
the Trustee shall mail to each Securityholder a brief report
dated as of such March 1 that complies with TIA -section- 313(a). If re-
quired by law, the Trustee also shall comply with TIA -section--section- 313(b)
and 313(c).
The Company shall promptly notify the Trustee in
writing if the Securities become listed on any stock exchange or
automatic quotation system.
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the
SEC and each stock exchange, if any, on which the Securities are
listed.
Section 7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services. The Trustee's compen-
sation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall include
the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel.
The Company shall indemnify the Trustee (in its capaci-ty as
Trustee) and each of its officers, directors, attorneys-in-fact and agents
for, and hold it harmless against, any claim, demand, expense (including but
not limited to reasonable compen-sation, disbursements and expenses of the
Trustee's agents and counsel), loss or liability incurred by them without
gross negligence or bad faith on its part, arising out of or in connec-tion
with the administration of this trust and their rights or duties hereunder
including the reasonable costs and expenses of defending themselves against
any claim or liability in connection with the exercise or performance of any
of its powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemni-ty. The Company shall defend the claim and the Trustee shall provide
reasonable cooperation at the Company's expense in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel; PROVIDED, that the Company will not be required to
pay such fees and expenses if it assumes the Trustee's defense and there is
no conflict of interest between the Company and the Trustee in
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connection with such defense. The Company need not pay for any settlement
made without its written consent. The Company need not reimburse any expense
or indemnify against any loss or liability to the extent incurred by the
Trustee through its gross negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this
Section 8.7, the Trustee shall have a lien prior to the Securi-
ties on all assets held or collected by the Trustee, in its
capacity as Trustee, except assets held in trust to pay principal
and premium, if any, of or interest (and Liquidated Damages, if
any) on particular Securities.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 7.1(4) or (5)
occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any
Bankruptcy Law.
The Company's obligations under this Section 8.7 and
any lien arising hereunder shall survive the resignation or
removal of the Trustee, the discharge of the Company's obliga-
tions pursuant to Article IX of this Indenture and any rejection
or termination of this Indenture under any Bankruptcy Law.
Section 8 REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in
writing. The Holder or Holders of a majority in principal amount
of the outstanding Securities may remove the Trustee by so
notifying the Company and the Trustee in writing and may appoint
a successor trustee with the Company's consent. The Company may
remove the Trustee if:
(1) the Trustee fails to comply
with Section 8.1(d) or 8.10;
(2) the Trustee is adjudged bank-
rupt or insolvent;
(3) a receiver, Custodian, or other
public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable
of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company shall
promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holder or Holders of a
majority in principal amount of the Securities may appoint a
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successor Trustee to replace the successor Trustee appointed by
the Company.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Immediately after that and provided that all sums owing to the
Trustee provided for in Section 8.7 have been paid, the retiring
Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 8.7,
the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. A succes-
sor Trustee shall mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holder or Holders of at
least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 8.10, any
Securityholder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding replacement of the Trustee pursuant to
this Section 8.8, the Company's obligations under Section 8.7
shall continue for the benefit of the retiring Trustee.
Section 9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate
trust business to, another corporation, the resulting, surviving
or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise
eligible hereunder, be the successor Trustee.
Section 10 ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times satisfy the requirements of TIA
- -section- 310(a)(1) and TIA -section- 310(a)(5). The Trustee shall have a
combined capital and surplus of at least $25,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with
TIA -section- 310(b).
Section 11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.
The Trustee shall comply with TIA -section- 311(a), excluding
any creditor relationship listed in TIA -section- 311(b). A Trustee who
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has resigned or been removed shall be subject to TIA -section- 311(a) to
the extent indicated.
ARTICLE IX
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVE-
NANT DEFEASANCE.
The Company may, at its option at any time, elect to
have Section 9.2 or Section 9.3 applied to all outstanding
Securities upon compliance with the conditions set forth below in
this Article IX.
Section 2 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 9.1 of the
option applicable to this Section 9.2, the Company shall be
deemed to have been discharged from its obligations with respect
to all outstanding Securities on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, such Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of Section
9.5 and the other Sections of this Indenture referred to in (a)
and (b) below, and to have satisfied all its other obligations
under such Securities and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Securities
to receive solely from the trust fund described in Section 9.4,
and as more fully set forth in such section, payments in respect
of the principal of, premium, if any, and interest (and Liquidat-
ed Damages, if any) on such Securities when such payments are
due, (b) the Company's obligations with respect to such Securi-
ties under Sections 2.4, 2.6, 2.7, 2.10 and 5.2, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder
and the Company's obligations in connection therewith and (d)
this Article IX. Subject to compliance with this Article IX, the
Company may exercise its option under this Section 9.2 notwith-
standing the prior exercise of its option under Section 9.3 with
respect to the Securities.
Section 3 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 9.1 of the
option applicable to this Section 9.3, the Company shall be re-
leased from its obligations under the covenants contained in
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Sections 5.3, 5.6, 5.7, 5.8, 5.10, 5.11, 5.12, 5.13, 5.14, 5.15,
5.16, 5.17, 5.18, 5.19, 5.20, 5.21, 5.22 5.23 and 5.24 and Arti-
cle VI with respect to the outstanding Securities on and after
the date the conditions set forth below are satisfied (hereinaf-
ter, "Covenant Defeasance"), and the Securities shall thereafter
be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the conse-
quences of any thereof) in connection with such covenants, but
shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such Covenant Defeasance means
that, with respect to the outstanding Securities, the Company
need not comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any refer-
ence in any such covenant to any other provision herein or in any
other document, but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby.
In addition, upon the Company's exercise under Section 9.1 of the
option applicable to this Section 9.3, Sections 7.1(3) through
7.1(8) shall not constitute Events of Default.
Section 4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the applica-
tion of either Section 9.2 or Section 9.3 to the outstanding
Securities:
(a) The Company shall irrevocably have deposited
or caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 8.10 who shall agree to
comply with the provisions of this Article IX applicable to it)
as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Securities, (a)
cash in an amount, or (b) U.S. Government Obligations which
through the scheduled payment of principal and interest in re-
spect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, cash in an
amount, or (c) a combination thereof, in such amounts, as in each
case will be sufficient, in the opinion of a nationally recog-
nized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay
and discharge and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge (i) the principal of,
premium, if any, and interest (and Liquidated Damages, if any) on
the outstanding Securities on the stated maturity or on the
applicable redemption date, as the case may be, of such principal
or installment of principal, premium, if any, or interest (and
Liquidated Damages, if any); PROVIDED that the Trustee shall have
been irrevocably instructed to apply such cash and the proceeds
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of such U.S. Government Obligations to said payments with respect
to the Securities.
(b) In the case of an election under Section 9.2,
the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably satisfactory to the
Trustee confirming that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in
the applicable Federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that,
the Holders of the outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a result
of such Legal Defeasance and will be subject to Federal income
tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance has not
occurred;
(c) In the case of an election under Section 9.3,
the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States to the effect that the Holders of
the outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such Covenant
Defeasance and will be subject to Federal income tax in the same
amount, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default with respect
to the Securities shall have occurred and be continuing on the
date of such deposit or, in so far as Section 7.1(4) or 7.1(5) is
concerned, at any time in the period ending on the 91st day after
the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such
period);
(e) Such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a
default under, this Indenture or any other material agreement or
instrument to which the Company, the Guarantors, or any of their
Subsidiaries is a party or by which either of the Issuers is
bound;
(f) In the case of an election under either
Section 9.2 or 9.3, the Company shall have delivered to the
Trustee an Officers' Certificate stating that the deposit made by
the Company pursuant to its election under Section 9.2 or 9.3 was
not made by the Company with the intent of preferring the Holders
over other creditors of the Company or with the intent of defeat-
ing, hindering, delaying or defrauding creditors of the Company
or others;
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(g) The Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel in the
United States, each stating that the conditions precedent provid-
ed for, in the case of the Officers' Certificate, in subsections
(a) through (d) of this Section 9.4 and, in the case of the
Opinion of Counsel, subsections (a) (with respect to the validity
and perfection of the security interest), (b), (c) and (e) of
this Section 9.4 have been complied with as contemplated by this
Section 9.4; and
(h) (i) The Security Documents shall not be dis-charged as a
result of such irrevocable deposit under Section 9.4 unless the Company shall
have delivered to the Trustee an Opinion of Counsel, subject to customary
exclusions and exceptions reasonably acceptable to the Trustee, to the effect
that (i) the Company has authorization to establish such irrevocable trust in
favor of the Trustee for the benefit of the Holders under appli-cable law and
the action in establishing the irrevocable trust has been duly and properly
authorized by the Company and such authorization has not been revoked, (ii)
to their knowledge, the Trustee is an independent trustee with respect to the
irrevocable trust, (iii) a valid trust is created at the time of such
irrevo-cable deposit and (iv) the Holders of the Securities will have the
sole beneficial ownership interest under applicable law in the money so
deposited in such trust. The Opinion of Counsel so referred to in this
paragraph may contain a qualification that in the event that a court of
competent jurisdiction were to deter-mine that the trust funds remained owned
by the Company after such deposit, the Holders of the Securities will have a
non-avoidable first-priority perfected security interest under applicable law
in the money so deposited (for the limited purpose of the Opinion of Counsel
referred to in this paragraph, such opinion may contain an assumption that
the conclusions contained in a customary solvency letter by a nationally
recognized ap-praisal firm, dated as of the date of the deposit and taking
into account such deposit, or a customary alternative certificate reasonably
acceptable to the Trustee, are accurate, provided that such solvency letter
or certificate is also addressed and deliv-ered to the Trustee).
(ii) It is the intention of the parties hereto that a
valid trust for the benefit of the Holders of the Securities be
created at the time that the Company makes the deposit pursuant
to Section 9.4. The security interest in such deposit that is
granted herein to the Trustee for the benefit of the Holders of
the Securities is intended solely as protection for the Holders
of the Securities in the event that a court of competent juris-
diction were to determine either that (i) such trust had not been
validly created or (ii) such trust is not enforceable. The
Company hereby grants to the Trustee for the benefit of the
Holders a security interest in all money, funds, investments or
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other property deposited with the Trustee pursuant to Section
1302 hereof to secure the Indenture Obligations.
(iii) The Company shall take any and all acts necessary
to create, perfect and maintain, in favor of the Holders of the
Securities, a first-priority security interest in the money and
U.S. Government obligations so deposited and shall take any other
action and execute and deliver any other documents that may be
necessary or that may reasonably be requested by the Trustee to
effectuate or evidence such security interest, and shall do all
of the above at such appropriate time so that such security
interest shall attach to the deposit at the time such deposit is
made and shall at all times be perfected.
(iv) Notwithstanding the foregoing, prior to the end of the 91-day
period following the irrevocable deposit referred to above, the Lien of the
Security Documents shall not be discharged, unless and until the Company
shall have delivered to the trustee an appraisal as of a date no more than 60
days prior to the date of such irrevocable deposit reflecting the appraised
fair market value of the Collateral in an amount not less than 120% of the
amount of such irrevocable deposit and an Opinion of Counsel, subject to
customary exclusions and exceptions, to the effect that based on such
appraisal, the irrevocable deposit will not be subject to avoidance as a
preferential transfer under 11 U.S.C. -section- 547, as it may be amended
from time to time.
Section 5 DEPOSITED CASH AND U.S. GOVERNMENT OBLIGA-
TIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 9.6, all cash and U.S. Government
Obligations (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes
of this Section 9.5, the "Trustee") pursuant to Section 9.4 in
respect of the outstanding Securities shall be held in trust and
applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or
through any Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due
thereon in respect of principal, premium, if any, and interest
(and Liquidated Damages, if any), but such money need not be
segregated from other funds except to the extent required by law.
Anything in this Article IX to the contrary notwith-
standing, the Trustee shall deliver or pay to the Company from
time to time upon the request of the Company any cash or U.S.
Government Obligations held by it as provided in Section 9.4
which, in the opinion of a nationally recognized firm of indepen-
dent public accountants expressed in a written certification
thereto delivered to the Trustee (which may be the opinion
delivered under Section 9.4(a)), are in excess of the amount
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thereof which would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
Section 6 REPAYMENT TO ISSUERS.
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of
the principal of, premium, if any, or interest (and Liquidated
Damages, if any) on any Security and remaining unclaimed for two
years after such principal, and premium, if any, or interest (and
Liquidated Damages, if any) has become due and payable shall be
paid to the Company on its request; and the Holder of such
Security shall thereafter look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent
with respect to such trust money shall thereupon cease; provided,
HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money re-
mains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remain-
ing will be repaid to the Company.
Section 7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any
cash or U.S. Government Obligations in accordance with Section
9.2 or 9.3, as the case may be, by reason of any order or judg-
ment of any court or governmental authority enjoining, restrain-
ing or otherwise prohibiting such application, then the Company's
obligations under this Indenture and the Securities shall be re-
vived and reinstated as though no deposit had occurred pursuant
to Section 9.2 or 9.3 until such time as the Trustee or Paying
Agent is permitted to apply such money in accordance with Section
9.2 and 9.3, as the case may be; PROVIDED, HOWEVER, that, if the
Company makes any payment of principal of, premium, if any, or
interest (and Liquidated Damages, if any) on any Security follow-
ing the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to
receive such payment from the Cash held by the Trustee or Paying
Agent.
Section 8 TERMINATION OF OBLIGATIONS UPON CANCELLATION
OF THE SECURITIES.
In addition to the Company's rights under Sections 9.2
and 9.3, the Company and the Guarantors may terminate all of
their obligations under this Indenture (subject to Section 9.7)
when:
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(1) all Securities theretofore
authenticated and delivered (other than Securities
which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.7)
have been delivered to the Trustee for cancellation;
(2) the Company or a Guarantor has
paid or caused to be paid all sums payable hereunder by
the Company; and
(3) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of
Counsel (not in-house counsel to the Company or any of
its Subsidiaries), each stating that all conditions
precedent specified herein relating to the satisfaction
and discharge of this Indenture have been complied with
and that such satisfaction and discharge will not
result in a breach or violation of, or constitute a
Default under, this Indenture or any other instrument
to which the Company, any Guarantor or any of their
Subsidiaries is a party or by which it or their proper-
ty is bound.
ARTICLE X
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holder, the Company or any
Guarantor, when authorized by Board Resolutions, and the Trustee,
at any time and from time to time, may enter into one or more
indentures supplemental hereto, or may amend, modify or supple-
ment the Security Documents, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to cure any ambiguity, defect,
or inconsistency, or to make any other provisions with
respect to matters or questions arising under this
Indenture which shall not be inconsistent with the
provisions of this Indenture, provided such action
pursuant to this clause (1) shall not adversely affect
the interests of any Holder in any respect;
(2) to add to the covenants of the
Company for the benefit of the Holders, or to surrender
any right or power herein conferred upon the Company or
to make any other change that does not adversely affect
the rights of any Holder; PROVIDED, that the Company
has delivered to the Trustee an Opinion of Counsel
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stating that such change does not adversely affect the
rights of any Holder;
(3) to provide for additional
collateral for or additional Guarantors of the Securi-
ties;
(4) to provide for uncertificated
Securities in addition to or in place of certificated
Securities and to provide for the issuance and authen-
tication of Series B Notes in exchange for Original
Notes in compliance with this Indenture and the Regis-
tration Rights Agreement;
(5) to evidence the succession of
another person to the Company, and the assumption by
any such successor of the obligations of the Company,
herein and in the Securities in accordance with Article
VI; or
(6) to comply with the TIA.
Section 2 AMENDMENTS, SUPPLEMENTAL INDENTURES AND
WAIVERS WITH CONSENT OF HOLDERS.
Subject to Section 7.8 and the last sentence of this
paragraph, with the consent of the Holders of a majority in
aggregate principal amount of then outstanding Securities, by
written act of said Holders delivered to the Company and the
Trustee, the Company and any Guarantor, when authorized by Board
Resolutions, and the Trustee may amend or supplement the Security
Documents, this Indenture or the Securities or enter into an
indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating
any of the provisions of the Security Documents, this Indenture
or the Securities or of modifying in any manner the rights of the
Holders under the Security Documents, this Indenture or the
Securities. Subject to Section 7.8 and the last sentence of this
paragraph, the Holder or Holders of a majority, in principal
amount of then outstanding Securities may waive compliance by the
Company or any Guarantor with any provision of the Security
Documents, this Indenture or the Securities. Notwithstanding the
foregoing provisions of this Section 10.2, without the consent of
the Holders of at least 66 2/3% of the aggregate principal amount
of outstanding Securities, no such amendment, supplemental
indenture or waiver shall change any provision of Article IV,
Article XII, Article XIII, Section 5.14, Section 5.15, Section
5.16, Section 5.17, Section 5.18, or Section 5.19, without the
consent of the Holders of at least 85% of the aggregate principal
amount of outstanding Securities, no such amendment, supplemental
indenture or waiver shall release or grant additional liens on
the Collateral, except as otherwise specifically provided herein,
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and without the consent of the Holder of each outstanding Securi-
ty affected thereby, no such amendment, supplemental indenture or
waiver shall:
(1) change the percentage of prin-
cipal amount of Securities whose Holders must consent
to an amendment, supplement or waiver of any provision
of this Indenture or the Securities;
(2) reduce the rate or extend the
time for payment of interest (and Liquidated Damages,
if any) on any Security;
(3) reduce the principal amount of
any Security, or reduce any Offer to Purchase Price;
(4) change the Stated Maturity of
any Security;
(5) alter the redemption provisions
of Article III in a manner adverse to any Holder;
(6) make any changes in the provi-
sions concerning waivers of Defaults or Events of
Default by Holders of the Securities (except to in-
crease any percentage of Securities required to consent
to a waiver or to provide that certain other provisions
of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Security
affected thereby) or the rights of Holders to recover
the principal or premium of, interest (and Liquidated
Damages, if any) on, or redemption payment with respect
to, any Security;
(7) make any changes in Section
7.4, 7.7 or this third sentence of this Section 10.2;
(8) make the principal of, or the
interest (and Liquidated Damages, if any) on, any Secu-
rity payable with anything or at anywhere other than as
provided for in this Indenture and the Securities as in
effect on the date hereof; or
(9) make the Securities or Guaran-
tees subordinated in right of payment to any extent or
under any circumstances to any other indebtedness.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be suffi-
cient if such consent approves the substance thereof.
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After an amendment, supplement or waiver under this
Section becomes effective, the Company shall mail to the Holders
affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
After an amendment, supplement or waiver under this
Section 10.2 or 10.4 becomes effective, it shall bind each
Holder.
In connection with any amendment, supplement or waiver
under this Article X, the Company may, but shall not be obligated
to, offer to any Holder who consents to such amendment, supple-
ment or waiver, or to all Holders, consideration for such H-
older's consent to such amendment, supplement or waiver.
Section 3 COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture
or the Securities shall comply with the TIA as then in effect.
Section 4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes
effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Security or portion
of a Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may
revoke the consent as to his Security or portion of his Security
by written notice to the Company or the person designated by the
Company as the person to whom consents should be sent if such
revocation is received by the Company or such person before the
date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such
consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled
to consent to any amendment, supplement or waiver, which record
date shall be the date so fixed by the Company notwithstanding
the provisions of the TIA. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding
paragraph, those persons who were Holders at such record date,
and only those persons (or their duly designated proxies), shall
be entitled to revoke any consent previously given, whether or
not such persons continue to be Holders after such record date.
No such consent shall be valid or effective for more than 90 days
after such record date.
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After an amendment, supplement or waiver becomes
effective, it shall bind every Securityholder, unless it makes a
change described in any of clauses (1) through (9) of Section
10.2, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Security;
PROVIDED, that any such waiver shall not impair or affect the
right of any Holder to receive payment of principal and premium
of and interest (and Liquidated Damages, if any) on a Security,
on or after the respective dates set for such amounts to become
due and payable expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective
dates.
Section 5 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms
of a Security, the Trustee may require the Holder of the Security
to deliver it to the Trustee or require the Holder to put an
appropriate notation on the Security. The Trustee may place an
appropriate notation on the Security about the changed terms and
return it to the Holder. Alternatively, if the Company or the
Trustee so determines, the Company in exchange for the Security
shall issue, the Guarantors shall endorse and the Trustee shall
authenticate a new Security that reflects the changed terms. Any
failure to make the appropriate notation or to issue a new
Security shall not affect the validity of such amendment, supple-
ment or waiver.
Section 6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or
waiver authorized pursuant to this Article X, PROVIDED, that the
Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own
rights, duties or immunities under this Indenture. The Trustee
shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this
Article X is authorized or permitted by this Indenture.
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ARTICLE XI
MEETINGS OF SECURITYHOLDERS
Section 1 PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Securityholders may be called at any time
and from time to time pursuant to the provisions of this Article
XI for any of the following purposes:
(a) to give any notice to the Company, any
Guarantor or to the Trustee, or to give any directions to the
Trustee, or to waive or to consent to the waiving of any Default
or Event of Default hereunder and its consequences, or to take
any other action authorized to be taken by Securityholders
pursuant to any of the provisions of Article VII;
(b) to remove the Trustee or appoint a successor
Trustee pursuant to the provisions of Article VIII;
(c) to consent to an amendment, supplement or
waiver pursuant to the provisions of Section 10.2; or
(d) to take any other action (i) authorized to be
taken by or on behalf of the Holder or Holders of any specified
aggregate principal amount of the Securities under any other
provision of this Indenture, or authorized or permitted by law or
(ii) which the Trustee deems necessary or appropriate in connec-
tion with the administration of this Indenture.
Section 2 MANNER OF CALLING MEETINGS.
The Trustee may at any time call a meeting of S-
ecurityholders to take any action specified in Section 11.1, to
be held at such time and at such place in The City of New York,
State of New York or elsewhere as the Trustee shall determine.
Notice of every meeting of Securityholders, setting forth the
time and place of such meeting and in general terms the action
proposed to be taken at such meeting, shall be mailed by the
Trustee, first-class postage prepaid, to the Company, the Guaran-
tors and to the Holders at their last addresses as they shall
appear on the registration books of the Registrar, not less than
10 nor more than 60 days prior to the date fixed for a meeting.
The Company shall pay the costs and expenses of preparing and
mailing such notice.
Any meeting of Securityholders shall be valid without
notice if the Holders of all Securities then outstanding are
present in person or by proxy, or if notice is waived before or
after the meeting by the Holders of all Securities outstanding,
and if the Company and the Trustee are either present by duly
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authorized representatives or have, before or after the meeting,
waived notice.
Section 3 CALL OF MEETINGS BY COMPANY OR HOLDERS.
In case at any time the Company, pursuant to a Board
Resolution, or the Holders of not less than 25% in aggregate
principal amount of the Securities then outstanding, shall have
requested the Trustee to call a meeting of Securityholders to
take any action specified in Section 11.1, by written request
setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the
notice of such meeting within 20 days after receipt of such
request, then the Company or the Holders of Securities in the
amount above specified may determine the time and place in The
City of New York, State of New York or elsewhere for such meeting
and may call such meeting for the purpose of taking such action,
by mailing or causing to be mailed notice thereof as provided in
Section 11.2, or by causing notice thereof to be published at
least once in each of two successive calendar weeks (on any
Business Day during such week) in a newspaper or newspapers
printed in the English language, customarily published at least
five days a week of a general circulation in The City of New
York, State of New York, the first such publication to be not
less than 10 nor more than 60 days prior to the date fixed for
the meeting.
Section 4 WHO MAY ATTEND AND VOTE AT MEETINGS.
To be entitled to vote at any meeting of S-
ecurityholders, a person shall (a) be a registered Holder of one
or more Securities, or (b) be a person appointed by an instrument
in writing as proxy for the registered Holder or Holders of
Securities. The only persons who shall be entitled to be present
or to speak at any meeting of Securityholders shall be the
persons entitled to vote at such meeting and their counsel and
any representatives of the Trustee and its counsel and any
representatives of the Company, the Guarantors and their counsel.
Section 5 REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT
OF THE MEETING; VOTING RIGHTS; ADJOURNMENT.
Notwithstanding any other provision of this Indenture,
the Trustee may make such reasonable regulations as it may deem
advisable for any action by or any meeting of Securityholders, in
regard to proof of the holding of Securities and of the appoint-
ment of proxies, and in regard to the appointment and duties of
inspectors of votes, and submission and examination of proxies,
certificates and other evidence of the right to vote, and such
other matters concerning the conduct of the meeting as it shall
think appropriate. Such regulations may fix a record date and
time for determining the Holders of record of Securities entitled
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to vote at such meeting, in which case those and only those
persons who are Holders of Securities at the record date and time
so fixed, or their proxies, shall be entitled to vote at such
meeting whether or not they shall be such Holders at the time of
the meeting.
The Trustee shall, by an instrument in writing, appoint
a temporary chairman of the meeting, unless the meeting shall
have been called by the Company or by Securityholders as provided
in Section 11.3, in which case the Company or the Securityholders
calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a perma-
nent secretary of the meeting shall be elected by vote of the
Holders of a majority in principal amount of the Securities
represented at the meeting and entitled to vote.
At any meeting each Securityholder or proxy shall be
entitled to one vote for each $1,000 principal amount of Securi-
ties held or represented by him; PROVIDED, HOWEVER, that no vote
shall be cast or counted at any meeting in respect of any Securi-
ties challenged as not outstanding and ruled by the chairman of
the meeting to be not then outstanding. The chairman of the
meeting shall have no right to vote other than by virtue of
Securities held by him or instruments in writing as aforesaid
duly designating him as the proxy to vote on behalf of other
Securityholders. Any meeting of Securityholders duly called
pursuant to the provisions of Section 11.2 or Section 11.3 may be
adjourned from time to time by vote of the Holder or Holders of a
majority in aggregate principal amount of the Securities repre-
sented at the meeting and entitled to vote, and the meeting may
be held as so adjourned without further notice.
Section 6 VOTING AT THE MEETING AND RECORD TO BE KEPT.
The vote upon any resolution submitted to any meeting
of Securityholders shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities or of
their representatives by proxy and the principal amount of the
Securities voted by the ballot. The permanent chairman of the
meeting shall appoint two inspectors of votes, who shall count
all votes cast at the meeting for or against any resolution and
who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the secretary of
the meeting and there shall be attached to such record the
original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having
knowledge of the facts, setting forth a copy of the notice of the
meeting and showing that such notice was mailed as provided in
Section 11.2 or published as provided in Section 11.3. The
record shall be signed and verified by the affidavits of the
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permanent chairman and the secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to
the Trustee to be preserved by the Trustee, the latter to have
attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
Section 7 EXERCISE OF RIGHTS OF TRUSTEE OR
SECURITYHOLDERS MAY NOT BE HINDERED OR DELAYED BY CALL OF MEETING.
Nothing contained in this Article XI shall be deemed or
construed to authorize or permit, by reason of any call of a
meeting of Securityholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in
the exercise of any right or rights conferred upon or reserved to
the Trustee or to the Securityholders under any of the provisions
of this Indenture or of the Securities.
ARTICLE XII
RIGHT TO REQUIRE REPURCHASE
Section 1 REPURCHASE OF SECURITIES AT OPTION OF THE
HOLDER UPON CHANGE OF CONTROL.
(a) In the event that a Change of Control occurs,
each Holder of Securities shall have the right, at such Holder's
option, subject to the terms and conditions of this Indenture, to
require the Company to repurchase all or any part of such H-
older's Notes (provided, that the principal amount of such Notes
at maturity must be $1,000 or an integral multiple thereof) on
the date that is no later than 45 Business Days after the occur-
rence of such Change of Control (the "Change of Control Purchase
Date"), at a cash price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof, plus accrued but
unpaid interest (and Liquidated Damages), if any, to and includ-
ing the Change of Control Purchase Date.
(b) In the event that, pursuant to this Section
12.1, the Company shall be required to commence an offer to
purchase Notes (a "Change of Control Offer"), the Company shall
follow the procedures set forth in this Section 12.1 as follows:
(1) the Change of Control Offer
shall commence within 20 Business Days following the
Change of Control;
(2) the Change of Control Offer
shall remain open for 20 Business Days, except to the
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extent that a longer period is required by applicable
law;
(3) within 5 Business Days follow-
ing the expiration of a Change of Control Offer, the
Company shall purchase all of the tendered Securities
at the Change of Control Purchase Price, plus accrued
interest (and Liquidated Damages, if any);
(4) if the Change of Control Pur-
chase Date is on or after an interest payment record
date and on or before the related interest payment
date, any accrued interest (and Liquidated Damages, if
any) will be paid to the Person in whose name a Securi-
ty is registered at the close of business on such
record date, and no additional interest will be payable
to Securityholders who tender Securities pursuant to
the Change of Control Offer;
(5) the Company shall use its best
efforts to provide the Trustee with notice of the
Change of Control Offer at least 5 Business Days before
the commencement of any Change of Control Offer; and
(6) on or before the commencement
of any Change of Control Offer, the Company or the
Trustee (upon the request and at the expense of the
Company) shall send, by first-class mail, a notice to
each of the Securityholders, which (to the extent
consistent with this Indenture) shall govern the terms
of the Change of Control Offer and shall state:
(i) that the Change of Control
Offer is being made pursuant to this Section 12.1
and that all Securities, or portions thereof,
tendered will be accepted for payment;
(ii) the Change of Control Purchase
Price (including the amount of accrued but unpaid
interest (and Liquidated Damages, if any)) and the
Change of Control Purchase Date;
(iii) that any Security, or portion
thereof, not tendered or accepted for payment will
continue to accrue interest;
(iv) that, unless the Company de-
faults in depositing cash with the Paying Agent in
accordance with the last paragraph of this subsec-
tion (b), or such payment is prevented for any
reason, any Security, or portion thereof, accepted
for payment pursuant to the Change of Control
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Offer shall cease to accrue interest after the
Change of Control Purchase Date;
(v) that Holders electing to have a
Security, or portion thereof, purchased pursuant to a
Change of Control Offer will be required to surrender
the Security, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Security
completed, to the Paying Agent (which may not for
purposes of this Section 12.1, notwithstanding anything
in this Indenture to the contrary, be the Company or
any Affiliate of the Company) at the address specified
in the notice prior to the expiration of the Change of
Control Offer;
(vi) that Holders will be entitled to
withdraw their election, in whole or in part, if the
Paying Agent receives, prior to the expiration of the
Change of Control Offer, a telegram, telex, facsimile
transmission or letter setting forth the name of the
Holder, the principal amount of the Securities the
Holder is withdrawing and a statement containing a
facsimile signature and stating that such Holder is
withdrawing his election to have such principal amount
of Securities purchased; and
(vii) a brief description of the events
resulting in such Change of Control.
Any such Change of Control Offer shall comply with all
applicable provisions of Federal and state laws, including those
regulating tender offers, if applicable, and any provisions of
this Indenture which conflict with such laws shall be deemed to
be superseded by the provisions of such laws.
On or before the Change of Control Purchase Date, the
Company shall (i) accept for payment Securities or portions
thereof properly tendered pursuant to the Change of Control Offer
prior to the expiration of the Change of Control Offer, (ii)
deposit with the Paying Agent cash sufficient to pay the Change
of Control Purchase Price (including accrued and unpaid interest
(and Liquidated Damages, if any)) of all Securities so tendered
and (iii) deliver to the Trustee Securities so accepted together
with an Officers' Certificate listing the Securities or portions
thereof being purchased by the Company. The Paying Agent shall
on the Change of Control Purchase Date mail to the Holders of
Securities so accepted payment in an amount equal to the Change
of Control Purchase Price (plus accrued and unpaid interest (and
Liquidated Damages, if any)), and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security
equal in principal amount to any unpurchased portion of the
Security surrendered. Any Securities not so accepted shall be
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promptly mailed or delivered by the Company to the Holder there-
of.
ARTICLE XIII
GUARANTEE
Section 1 GUARANTEE.
(a) In consideration of good and valuable consid-
eration, the receipt and sufficiency of which is hereby acknowl-
edged, each of the Guarantors hereby irrevocably and uncondition-
ally guarantees on a joint and several basis (the "Guarantee") to
each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Inden-
ture, the Securities or the obligations of the Company under this
Indenture or the Securities, that: (w) the principal and premium
(if any) of and interest (and Liquidated Damages, if any) on the
Securities will be paid in full when due, whether at the maturity
or interest payment date, by acceleration, call for redemption,
upon an Offer to Purchase, or otherwise; (x) all other obliga-
tions of the Company to the Holders or the Trustee under this
Indenture or the Securities will be promptly paid in full or
performed, all in accordance with the terms of this Indenture and
the Securities; and (y) in case of any extension of time of
payment or renewal of any Securities or any of such other obliga-
tions, they will be paid in full when due or performed in accor-
dance with the terms of the extension or renewal, whether at
maturity, by acceleration, call for redemption, upon an Offer to
Purchase or otherwise. Failing payment when due of any amount so
guaranteed for whatever reason, each Guarantor shall be obligated
to pay the same before failure so to pay becomes an Event of
Default.
(b) Each Guarantor hereby agrees that its obliga-
tions with regard to this Guarantee shall be unconditional,
irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to
enforce the same, any delays in obtaining or realizing upon or
failures to obtain or realize upon collateral, the recovery of
any judgment against the Company, any action to enforce the same
or any other circumstances that might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each
Guarantor hereby waives diligence, presentment, demand of pay-
ment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding
first against the Company or right to require the prior disposi-
tion of the assets of the Company to meet its obligations,
protest, notice and all demands whatsoever and covenants that
this Guarantee will not be discharged except by complete perfor-
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mance of the obligations contained in the Securities and this
Indenture.
(c) If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Guarantor, or any Custodian,
Trustee, or similar official acting in relation to either the Company or such
Guarantor, any amount paid by either the Company or such Guarantor to the
Trustee or such Holder, this Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Guarantor agrees that it
will not be entitled to any right of subrogation in relation to the Holders
in respect of any obliga-tions guaranteed hereby until payment in full of all
obligations guaranteed hereby. Each Guarantor further agrees that, as
between such Guarantor, on the one hand, and the Holders and the Trustee, on
the other hand, (i) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Section 7.2 for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration as to the Company of the obligations guaranteed hereby, and (ii)
in the event of any declaration of acceleration of those obligations as
provided in Section 7.2, those obligations (whether or not due and payable)
will forthwith become due and payable by each of the Guarantors for the
purpose of this Guarantee.
(d) Each Guarantor and by its acceptance of a
Security issued hereunder each Holder hereby confirms that it is
the intention of all such parties that the guarantee by such
Guarantor set forth in Section 13.1(a) not constitute a fraudu-
lent transfer or conveyance for purpose of any Bankruptcy Law,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar Federal or state law. To effectuate
the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under
its guarantee set forth in Section 13.1(a) shall be limited to
the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after
giving effect to any collections from or payments made by or on
behalf of any other Guarantor in respect of the obligations of
such other Guarantor under its Guarantee or pursuant to the
following paragraph of this Section 13.1(d), result in the
obligations of such Guarantor under such guarantee not constitut-
ing such a fraudulent transfer or conveyance.
Each Guarantor that makes any payment or distribution
under Section 13.1(a) shall be entitled to a contribution from
each other Guarantor equal to its Pro Rata amount of such payment
or distribution so long as the exercise of such right does not
impair the rights of the Holders under the Guarantees or the
Security Documents. For purposes of the foregoing, the "Pro Rata
amount" of any Guarantor means the percentage of the net assets
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of all Guarantors held by such Guarantor, determined in accor-
dance with GAAP.
Section 2 EXECUTION AND DELIVERY OF GUARANTEE.
To evidence its Guarantee set forth in Section 13.1,
each Guarantor agrees that a notation of such Guarantee substan-
tially in the form annexed hereto as Exhibit B shall be endorsed
on each Security authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor
by two Officers or an Officer and an Assistant Secretary by
manual or facsimile signature.
Each Guarantor agrees that its Guarantee set forth in
Section 13.1 shall remain in full force and effect and apply to
all the Securities notwithstanding any failure to endorse on each
Security a notation of such Guarantee.
If an Officer whose signature is on a Security no
longer holds that office at the time the Trustee authenticates
the Security on which a Guarantee is endorsed, the Guarantee
shall be valid nevertheless.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery
of the Guarantee set forth in this Indenture on behalf of each
Guarantor.
Section 3 CERTAIN BANKRUPTCY EVENTS.
Each Guarantor hereby covenants and agrees that in the
event of the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company, such Guarantor shall not file (or
join in any filing of), or otherwise seek to participate in the
filing of, any motion or request seeking to stay or to prohibit
(even temporarily) execution on the Guarantee and hereby waives
and agrees not to take the benefit of any such stay of execution,
whether under Section 362 or 105 of the United States Bankruptcy
Code or otherwise.
Section 4 RELEASE OF GUARANTEE.
In the event (a) of a sale or other disposition of all
or substantially all of the assets of any Guarantor or the sale
of a Guarantor, by way of a merger, consolidation or otherwise,
(b) that a Subsidiary is designated an Unrestricted Subsidiary in
accordance with Section 1.1 - "Unrestricted Subsidiary", or (c)
of a sale or other disposition of all of the Capital Stock of any
Guarantor, then such Guarantor or the corporation acquiring the
property, as applicable, shall be released and relieved of any
obligations under its Guarantee, PROVIDED that (i) immediately
after giving effect to such transaction, no Default or Event of
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Default shall have occurred and be continuing or would occur as a
consequence thereof and (ii) the Company complies with the
provisions of Section 5.14.
Section 5 FUTURE GUARANTORS.
Upon the acquisition by the Company or any Guarantor of
the Capital Stock of any person, if, as a result of such acquisi-
tion, such Person becomes a Subsidiary, such Subsidiary shall
fully and unconditionally guarantee the obligations of the
Company with respect to payment and performance of the Securities
and the other obligations of the Company under this Indenture to
the same extent that such obligations are guaranteed by the other
Guarantors pursuant to Section 13.1; and, within 60 days of the
date of such occurrence, such Subsidiary shall execute and deliv-
er to the Trustee a supplemental indenture making such Subsidiary
a party to this Indenture.
ARTICLE XIV
MISCELLANEOUS
Section 1 TIA CONTROLS.
If any provision of this Indenture limits, qualifies,
or conflicts with the duties imposed by operation of the TIA, the
imposed duties, upon qualification of this Indenture under the
TIA, shall control.
Section 2 NOTICES.
Any notices or other communications to the Company, the
Guarantors or the Trustee required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified
mail, postage prepaid, return receipt requested, addressed as
follows:
if to the Company or any Guarantor:
Argosy Gaming Company
219 Piasa Street
Alton, Illinois 62002
Attention: Chief Financial Officer
Telephone: 618-474-7805
Telecopy: 618-474-7420
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with a copy to:
Winston & Strawn
35 West Wacker
Chicago, Illinois 60601
Attention: Joseph A. Walsh, Jr.
Telephone: 312-558-5600
Telecopy: 312-558-5700
if to the Trustee:
First National Bank of Commerce
210 Baronne Street
New Orleans, Louisiana 70112
Attention: Corporate Trust Department
Telephone: 504-561-1610
Telecopy: 504-561-1432
The Company, the Guarantors or the Trustee by notice to
each other party may designate additional or different addresses
as shall be furnished in writing by such party. Any notice or
communication to the Company, the Guarantors or the Trustee shall
be deemed to have been given or made as of the date so delivered,
if personally delivered; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and 5 Business Days after
mailing if sent by registered or certified mail, postage prepaid
(except that a notice of change of address shall not be deemed to
have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder
shall be mailed to him by first class mail or other equivalent
means at his address as it appears on the registration books of
the Registrar and shall be sufficiently given to him if so mailed
within the time prescribed.
Failure to mail a notice or communication to a S-
ecurityholder or any defect in it shall not affect its suffi-
ciency with respect to other Securityholders. If a notice or
communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA -section-
312(b) with other Securityholders with respect to their rights
under this Indenture or the Securities. The Company, the Guaran-
tors, the Trustee, the Registrar and any other person shall have
the protection of TIA -section- 312(c).
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Section 4 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee:
(1) an Officers' Certificate (in
form and substance reasonably satisfactory to the
Trustee) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel (in form
and substance reasonably satisfactory to the Trustee)
stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Section 5 STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION.
Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
(1) a statement that the person
making such certificate or opinion has read such cove-
nant or condition;
(2) a brief statement as to the
nature and scope of the examination or investigation
upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opin-
ion of such person, he has made such examination or
investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or
not, in the opinion of each such person, such condition
or covenant has been complied with; PROVIDED, HOWEVER,
that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or
certificates of public officials.
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Section 6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or
at a meeting of Securityholders. The Paying Agent or Registrar
may make reasonable rules for its functions.
Section 7 LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular
place of payment is a Saturday, a Sunday or a day on which
banking institutions in New York, New York are not required to be
open. If a payment date is a Legal Holiday in New York, New
York, payment may be made at such place on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for
the intervening period.
Section 8 GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
THE COMPANY AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING
IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND EACH
GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THEY MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY
OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR
ANY SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
Section 9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of any of the Company, the
Guarantors or any of their Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Inden-
ture.
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Section 10 NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorpo-
rator, as such, of the Company or the Guarantors shall not have
any liability for any obligations of the Company or the Guaran-
tors under the Securities or this Indenture. Each Securityholder
by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the
issuance of the Securities.
Section 11 SUCCESSORS.
All agreements of the Company and the Guarantors in
this Indenture and the Securities shall bind their successors.
All agreements of the Trustee in this Indenture shall bind its
successor.
Section 12 DUPLICATE ORIGINALS.
All parties may sign any number of copies or counter-
parts of this Indenture. Each signed copy or counterpart shall
be an original, but all of them together shall represent the same
agreement.
Section 13 SEVERABILITY.
In case any one or more of the provisions in this
Indenture or in the Securities shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permit-
ted by law.
Section 14 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and
headings of the Articles and the Sections of this Indenture have
been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict
any of the terms or provisions hereof.
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SIGNATURE
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
ARGOSY GAMING COMPANY
By:
---------------------------
Name:
Title:
Attest:
---------------------------
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
By:
---------------------------
Name:
Title:
GUARANTORS:
---------------------------
ALTON GAMING COMPANY
By:
---------------------------
Name:
Title:
THE MISSOURI GAMING COMPANY
By:
---------------------------
Name:
Title:
<PAGE>
THE ST. LOUIS GAMING COMPANY
By:
---------------------------
Name:
Title:
IOWA GAMING COMPANY
By:
---------------------------
Name:
Title:
JAZZ ENTERPRISES, INC.
By:
---------------------------
Name:
Title:
ARGOSY OF LOUISIANA, INC.
By:
---------------------------
Name:
Title:
CATFISH QUEEN PARTNERSHIP
in COMMENDAM
By: Jazz Enterprises, Inc.,
its General Partner
By:
---------------------------
Name:
Title:
THE INDIANA GAMING COMPANY
By:
---------------------------
Name:
Title:
<PAGE>
- ------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of June 5, 1996
by and among
ARGOSY GAMING COMPANY,
as Issuer,
THE GUARANTORS NAMED HEREIN
and
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
BA SECURITIES, INC.,
and
DEUTSCHE MORGAN GRENFELL/C.J. LAWRENCE INC.
as Purchasers
- -------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agree-
ment") is made and entered into as of June 5, 1996, among
Argosy Gaming Company, a Delaware corporation (the "Issu-
er"), the Guarantors named herein (the "Guarantors") and
Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, BA Securities, Inc. and Deutsche
Morgan Grenfell/C.J. Lawrence Inc. (collectively, the
"Purchasers").
This Agreement is made pursuant to the Purchase
Agreement, dated June 1, 1996, among the Issuer, the
Guarantors named therein and the Purchasers (the "Pur-
chase Agreement"), which provides for the sale by the
Issuer and the Guarantors to the Purchasers of
$235,000,000 aggregate principal amount of 13 1/4% First
Mortgage Notes due 2004 (the "Securities"). In order to
induce the Purchasers to enter into the Purchase Agree-
ment, the Issuer and the Guarantors have agreed to pro-
vide to the Purchasers and their respective direct and
indirect transferees, among other things, the registra-
tion rights for the Securities set forth in this Agree-
ment. The execution of this Agreement is a condition to
the closing of the transactions contemplated by the
Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms
shall have the following meanings (and, unless otherwise
indicated, capitalized terms used herein without defini-
tion shall have the meanings ascribed to them by the
Purchase Agreement):
ADVICE: See Section 5.
APPLICABLE PERIOD: See Section 2.
CLOSING DATE: The Closing Date as defined in
the Purchase Agreement.
EFFECTIVENESS PERIOD: See Section 3.
<PAGE>
EFFECTIVENESS TARGET DATE: The 120th day fol-
lowing the Closing Date.
EVENT DATE: See Section 4.
EXCHANGE ACT: The Securities Exchange Act of
1934, as amended, and the rules and regulations of the
SEC promulgated thereunder.
EXCHANGE OFFER: See Section 2.
EXCHANGE REGISTRATION STATEMENT: See Section
2.
EXCHANGE SECURITIES: See Section 2.
FILING DATE: The 30th day after the Closing
Date.
GUARANTORS: The Guarantors (as defined in the
Indenture).
HOLDER: Any holder of Transfer Restricted
Securities.
INDENTURE: The Indenture, dated as of the date
hereof, among the Issuer, the Guarantors and First Na-
tional Bank of Commerce, as trustee, pursuant to which
the Securities are being issued, as amended or supple-
mented from time to time in accordance with the terms
thereof.
ISSUER: See the introductory paragraph of this
Agreement.
LIQUIDATED DAMAGES: See Section 4.
PARTICIPATING BROKER-DEALER: See Section 2.
PERSON: An individual, trustee, corporation,
partnership, joint stock company, trust, limited liabili-
ty company, unincorporated association, union, business
association, firm or other legal entity.
PROSPECTUS: The prospectus included in any
Registration Statement (including, without limitation,
any prospectus subject to completion and a prospectus
2
<PAGE>
that includes any information previously omitted from a
prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the
offering of any portion of the Exchange Securities and/or
the Transfer Restricted Securities (as applicable) cov-
ered by such Registration Statement, and all other amend-
ments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by
reference or deemed to be incorporated by reference in
such Prospectus.
PURCHASERS: See the introductory paragraph to
this Agreement.
REGISTRATION DEFAULT: See Section 4.
REGISTRATION STATEMENT: Any registration
statement of the Issuer and the Guarantors, including,
but not limited to, the Exchange Registration Statement,
the Shelf Registration or that otherwise covers any of
the Transfer Restricted Securities pursuant to the provi-
sions of this Agreement, including the Prospectus, amend-
ments and supplements to such registration statement,
including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
RULE 144: Rule 144 promulgated pursuant to the
Securities Act, as currently in effect, as such rule may
be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC.
RULE 144A: Rule 144A promulgated pursuant to
the Securities Act, as currently in effect, as such rule
may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated pursuant to the
Securities Act, as currently in effect, as such rule may
be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
3
<PAGE>
SECURITIES: See the introductory paragraphs to
this Agreement.
SECURITIES ACT: The Securities Act of 1933, as
amended, and the rules and regulations of the SEC promul-
gated thereunder.
SHELF NOTICE: See Section 2.
SHELF REGISTRATION: See Section 3.
TIA: The Trust Indenture Act of 1939, as
amended.
TRANSFER RESTRICTED SECURITIES: The Securities
upon original issuance thereof and at all times subse-
quent thereto, until in the case of any such Securities
(i) a Registration Statement covering such Securities has
been declared effective by the SEC and such Securities
have been disposed of in accordance with such effective
Registration Statement, (ii) such Securities are sold in
compliance with Rule 144, or (iii) such Securities cease
to be outstanding.
TRUSTEE: The trustee under the Indenture and,
if existent, the trustee under any indenture governing
the Exchange Securities.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN
OFFERING: A registration in which securities of the
Issuer are sold to an underwriter for reoffering to the
public.
2. EXCHANGE OFFER
(a) The Issuer and the Guarantors agree
to use their reasonable best efforts to file with the SEC
as soon as practicable after the Closing Date, but in no
event later than the Filing Date, an offer to exchange
(the "Exchange Offer") any and all of the Transfer Re-
stricted Securities for a like aggregate principal amount
of debt securities of the Issuer and the Guarantors which
are substantially identical to the Securities, except
that the identity of the Guarantors may be different from
the Guarantors that initially guaranteed the Securities
pursuant to the Indenture so long as the Securities are
at all times guaranteed in compliance with the Indenture
4
<PAGE>
(the "Exchange Securities") (and which are entitled to
the benefits of the Indenture or a trust indenture which
is identical to the Indenture (other than such changes to
the Indenture or any such identical trust indenture as
are necessary to comply with any requirements of the SEC
to effect or maintain the qualification thereof under the
TIA) and which, in either case, has been qualified under
the TIA), except that the Exchange Securities shall have
been registered pursuant to an effective Registration
Statement in compliance with the Securities Act. The Ex-
change Offer will be registered pursuant to the Securi-
ties Act on the appropriate form (the "Exchange Registra-
tion Statement") and will comply with all applicable
tender offer rules and regulations promulgated pursuant
to the Exchange Act and shall be duly registered or
qualified pursuant to all applicable state securities or
Blue Sky laws. The Exchange Offer shall not be subject
to any condition, other than that the Exchange Offer does
not violate any applicable law or interpretation of the
Staff of the SEC. No securities shall be included in the
Registration Statement covering the Exchange Offer other
than the Exchange Securities. The Issuer and the Guaran-
tors agree to use their reasonable best efforts to (x)
cause the Exchange Registration Statement to become
effective pursuant to the Securities Act on or before the
Effectiveness Target Date; (y) keep the Exchange Offer
open for not less than 30 days (or such longer period
required by applicable law) after the commencement of the
Exchange Offer; and (z) consummate the Exchange Offer
within 45 days after the earlier of the effectiveness
thereof or the Effectiveness Target Date. Each Holder
who participates in the Exchange Offer will be required
to represent that any Exchange Securities received by it
will be acquired in the ordinary course of its business,
that at the time of the consummation of the Exchange
Offer such Holder will have no arrangement or understand-
ing with any Person to participate in the distribution of
the Exchange Securities, and that such Holder is not an
affiliate of the Issuer within the meaning of Rule 405 of
the Securities Act (or that if it is such an affiliate,
it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent
applicable). Each Holder that is not a Participating
Broker-Dealer will be required to represent that it is
not engaged in, and does not intend to engage in, the
distribution of the Exchange Securities. Each Holder
that is a Participating Broker-Dealer will be required to
5
<PAGE>
acknowledge that it will deliver a prospectus as required
by law in connection with any resale of such Exchange
Securities. Upon consummation of the Exchange Offer in
accordance with this Agreement, the Issuer and the Guar-
antors shall have no further obligation to register
Transfer Restricted Securities pursuant to Section 2(c)
and Section 3 of this Agreement.
(b) The Issuer and the Guarantors shall
include within the Prospectus contained in the Exchange
Registration Statement a section entitled "Plan of Dis-
tribution," reasonably acceptable to the Purchasers,
which shall contain a summary statement of the positions
taken or policies made by the Staff of the SEC with
respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act) of Exchange Securities
received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"). Such "Plan of Distribu-
tion" section shall also allow the use of the Prospectus
by all Persons subject to the prospectus delivery re-
quirements of the Securities Act, including all Partici-
pating Broker-Dealers, and include a statement describing
the means by which Participating Broker-Dealers may
resell the Exchange Securities.
The Issuer and the Guarantors shall use their
reasonable best efforts to keep the Exchange Registration
Statement effective and to amend and supplement the
Prospectus contained therein, in order to permit such
Prospectus to be lawfully delivered by all persons sub-
ject to the prospectus delivery requirements of the
Securities Act, for a period of 180 days after consumma-
tion of the Exchange Offer (or such longer period if
extended pursuant to the last paragraph of Section 5)
(the "Applicable Period").
In connection with the Exchange Offer, the
Issuer shall:
(a) mail as promptly as practicable to each
Holder a copy of the prospectus forming part of the
Exchange Registration Statement, together with an
appropriate letter of transmittal and related docu-
ments;
6
<PAGE>
(b) utilize the services of a Depositary for
the Exchange Offer with an address in the Borough of
Manhattan, The City of New York; and
(c) permit Holders to withdraw tendered Secu-
rities at any time prior to the close of business,
New York time, on the last business day on which the
Exchange Offer shall remain open.
As soon as practicable after the close of the
Exchange Offer, the Issuer and the Guarantors shall:
(i) accept for exchange all Securities tendered
and not validly withdrawn pursuant to the Exchange
Offer;
(ii) deliver to the Trustee for cancellation
all Securities so accepted for exchange; and
(iii) cause the Trustee to authenticate and
deliver promptly to each Holder of Securities,
Exchange Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
(c) If (1) prior to the consummation of the
Exchange Offer, applicable interpretations of the staff
of the SEC do not permit the Issuer and the Guarantors to
effect the Exchange Offer as contemplated herein, or (2)
the Exchange Offer is not consummated within 165 days of
the Closing Date for any reason, then the Issuer shall
promptly deliver to the Holders and the Trustee written
notice thereof (the "Shelf Notice") and the Issuer and
the Guarantors shall file a Registration Statement pursu-
ant to Section 3. Following the delivery of a Shelf
Notice to the Holders of Transfer Restricted Securities,
the Issuer and the Guarantors shall not have any further
obligation to conduct the Exchange Offer pursuant to this
Section 2, provided that the Issuer and the Guarantors
shall have the right, nonetheless, to proceed to consum-
mate the Exchange Offer notwithstanding their obligations
pursuant to this Section 2(c) (and, upon such consumma-
tion, their obligation to consummate a Shelf Registration
shall terminate).
7
<PAGE>
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated
by Section 2(c), then:
(a) SHELF REGISTRATION. The Issuer and the
Guarantors shall use their reasonable best efforts to
prepare and file with the SEC, as promptly as practicable
following the delivery of the Shelf Notice, a Registra-
tion Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Transfer
Restricted Securities (the "Shelf Registration"). The
Shelf Registration shall be on Form S-3 or another appro-
priate form permitting registration of such Transfer
Restricted Securities for resale by the Holders in the
manner or manners reasonably designated by them (includ-
ing, without limitation, one or more underwritten offer-
ings). The Issuer and the Guarantors shall not permit
any securities other than the Transfer Restricted Securi-
ties to be included in the Shelf Registration. The
Issuer and the Guarantors shall use their reasonable best
efforts, as described in Section 5(b), to cause the Shelf
Registration to be declared effective pursuant to the
Securities Act as promptly as practicable following the
filing thereof and to keep the Shelf Registration contin-
uously effective under the Securities Act until the date
which is 36 months from the Closing Date (the "Effective-
ness Period"), or such shorter period ending when either
(1) all Transfer Restricted Securities covered by the
Shelf Registration have been sold in the manner set forth
and as contemplated in the Shelf Registration or (2)
there ceases to be outstanding any Transfer Restricted
Securities.
(b) SUPPLEMENTS AND AMENDMENTS. The Issuer and
the Guarantors shall use their reasonable best efforts to
keep the Shelf Registration continuously effective by
supplementing and amending the Shelf Registration if re-
quired by the rules, regulations or instructions applica-
ble to the registration form used for such Shelf Regis-
tration, if required by the Securities Act, or if reason-
ably requested by the holders of a majority in aggregate
principal amount of the Transfer Restricted Securities
covered by such Registration Statement or by any under-
writer of such Transfer Restricted Securities.
8
<PAGE>
4. LIQUIDATED DAMAGES
(a) The Issuer, the Guarantors and the Purchas-
ers agree that the Holders of Transfer Restricted Securi-
ties will suffer damages if the Issuer or any Guarantor
fails to fulfill its obligations pursuant to Section 2 or
Section 3 hereof and that it would not be possible to
ascertain the extent of such damages. Accordingly, in
the event of such failure by the Issuer or any Guarantor
to fulfill such obligations, the Issuer and the Guaran-
tors hereby agree to pay liquidated damages ("Liquidated
Damages") to each Holder of Transfer Restricted Securi-
ties under the circumstances and to the extent set forth
below:
(i) if neither the Exchange Registration
Statement nor the Shelf Registration has been filed
with the SEC on or prior to the Filing Date; or
(ii) if neither the Exchange Registration
Statement nor the Shelf Registration is declared
effective by the SEC on or prior to the Effective-
ness Target Date; or
(iii) if (A) an Exchange Registration Statement
is declared effective by the SEC, and (B) the Issuer
and the Guarantors have not exchanged Exchange Secu-
rities for all Securities validly tendered in accor-
dance with the terms of the Exchange Offer on or
prior to 45 days following the earlier of (i) the
effectiveness thereof or (ii) the Effectiveness
Target Date; or
(iv) the Shelf Registration has
been declared effective by the SEC
and such Shelf Registration ceases to
be effective or usable at any time
during the Effectiveness Period,
without being succeeded on the same
day immediately by a post-effective
amendment to such Registration Statement
that cures such failure and that
is itself immediately declared effec-
tive on the same day;
(any of the foregoing, a "Registration Default") then,
with respect to the first 90-day period following such
9
<PAGE>
Event Date (as defined below), the Issuer and the Guaran-
tors jointly and severally shall pay to each Holder of
Transfer Restricted Securities Liquidated Damages in an
amount equal to $.05 per week per $1,000 principal amount
of Transfer Restricted Securities held by such Holder for
each week that the Registration Default continues. The
amount of such Liquidated Damages will increase by an
additional $.05 per week per $1,000 principal amount of
Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults
have been cured; provided, however, that Liquidated
Damages shall not at any time exceed $.25 per week per
$1,000 principal amount of Transfer Restricted Securi-
ties. Following the cure of all Registration Defaults
relating to any Transfer Restricted Securities, the
accrual of Liquidated Damages with respect to such Trans-
fer Restricted Securities will cease. A Registration
Default under clause (i) above shall be cured on the date
that either the Exchange Registration Statement or the
Shelf Registration is filed with the SEC; a Registration
Default under clause (ii) above shall be cured on the
date that either the Exchange Registration Statement or
the Shelf Registration is declared effective by the SEC;
a Registration Default under clause (iii) above shall be
cured on the earlier of the date (A) the Exchange Offer
is consummated or (B) a Shelf Registration Statement is
declared effective; and a Registration Default under
clause (iv) above shall be cured on the earlier of (A)
the date that the post-effective amendment curing the
deficiency in the Shelf Registration is declared effec-
tive or (B) the Effectiveness Period expires.
(b) The Issuer shall notify the Trustee within
one business day after each and every date on which a
Registration Default occurs (an "Event Date"). Liquidat-
ed Damages shall be paid by the Issuer and the Guarantors
to the Holders by wire transfer of immediately available
funds to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts
have been specified on or before the semi-annual interest
payment date provided in the Indenture. Each obligation
to pay Liquidated Damages shall be deemed to commence
accruing on the applicable Event Date and to cease accru-
ing when all Registration Defaults have been cured. In
no event shall the Issuer pay Liquidated Damages in
excess of the maximum applicable weekly amount set forth
10
<PAGE>
above, regardless of whether one or multiple Registration
Defaults exist.
5. REGISTRATION PROCEDURES
In connection with the registration of any
Exchange Securities or Transfer Restricted Securities
pursuant to Sections 2 or 3 hereof, the Issuer and the
Guarantors shall effect such registration to permit the
sale of such Exchange Securities or Transfer Restricted
Securities (as applicable) in accordance with the in-
tended method or methods of disposition thereof, and
pursuant thereto the Issuer and the Guarantors shall:
(a) Prepare and file with the SEC, a Registra-
tion Statement or Registration Statements as prescribed
by Section 2 or 3, and to use their reasonable best
efforts to cause such Registration Statement(s) to become
effective and remain effective as provided herein; pro-
vided that, if (1) such filing is pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, before filing any Registra-
tion Statement or Prospectus or any amendments or supple-
ments thereto, the Issuer shall, if requested, furnish to
and afford the Holders of the Transfer Restricted Securi-
ties and each such Participating Broker-Dealer, as the
case may be, covered by such Registration Statement,
their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such
documents (including copies of any documents to be incor-
porated by reference therein and all exhibits thereto)
proposed to be filed (at least 3 business days prior to
such filing, or such later date as is reasonable under
the circumstances). The Issuer and the Guarantors shall
not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the
Holders, pursuant to this Agreement, must be afforded an
opportunity to review prior to the filing of such docu-
ment, if the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities covered by
such Registration Statement, or such Participating Bro-
ker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object.
11
<PAGE>
(b) Prepare and file with the SEC such amend-
ments and post-effective amendments to each Shelf Regis-
tration or Exchange Registration Statement, as the case
may be, as may be necessary to keep such Registration
Statement continuously effective for the periods required
by Section 2 or Section 3, as applicable; cause the
related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in
force) under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and
the rules and regulations of the SEC promulgated thereun-
der applicable to it with respect to the disposition of
all securities covered by such Registration Statement as
so amended or in such Prospectus as so supplemented and
with respect to the subsequent resale of any securities
being sold by a Participating Broker-Dealer covered by
any such Prospectus; the Issuer and the Guarantors shall
be deemed not to have used their reasonable best efforts
to keep a Registration Statement effective during the
Applicable Period if they voluntarily take any action
that would result in selling Holders of the Transfer
Restricted Securities covered thereby or Participating
Broker-Dealers seeking to sell Exchange Securities not
being able to sell such Transfer Restricted Securities or
such Exchange Securities during that period, unless (i)
such action is required by applicable law, or (ii) such
action is taken by them in good faith and for valid
business reasons (not including avoidance of their obli-
gations hereunder), including the acquisition or divesti-
ture of assets or a public offering of securities by the
Issuer.
(c) If (1) a Shelf Registration is filed pursu-
ant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section
2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Ex-
change Securities during the Applicable Period, notify
the selling Holders of Transfer Restricted Securities, or
each such Participating Broker-Dealer known to the Issu-
er, as the case may be, their counsel and the managing
underwriters, if any, promptly and confirm such notice in
writing, (i) when a Prospectus or any Prospectus supple-
ment or post-effective amendment has been filed, and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective
12
<PAGE>
(including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective
amendment including financial statements and
schedules, documents incorporated or deemed to be incor-
porated by reference and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness
of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if
at any time when a prospectus is required by the Securi-
ties Act to be delivered in connection with sales of the
Transfer Restricted Securities the representations and
warranties of the Issuer or the Guarantors contained in
any agreement (including any underwriting agreement)
contemplated by Section 5(l) below cease to be true and
correct, (iv) of the receipt by the Issuer or the Guaran-
tors of any notification with respect to the suspension
of the qualification or exemption from qualification of a
Registration Statement or any of the Transfer Restricted
Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation of any proceeding for
such purpose, (v) of the happening of any event or any
information becoming known that makes any statement made
in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or
that requires the making of any changes in such Registra-
tion Statement, Prospectus or documents so that, in the
case of the Registration Statement, it will not contain
any untrue statement of a material fact or omit to state
any material fact required to be stated therein or neces-
sary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain
any untrue statement of a material fact or omit to state
any material fact required to be stated therein or neces-
sary to make the statements therein, in light of the
circumstances under which they were made, not misleading,
and (vi) of the Issuer's and the Guarantors' reasonable
determination that a post-effective amendment to a Regis-
tration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursu-
ant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section
2 is required to be delivered under the Securities Act by
13
<PAGE>
any Participating Broker-Dealer who seeks to sell Ex-
change Securities during the Applicable Period, use its
best efforts to prevent the issuance of any order sus-
pending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of a Pro-
spectus or suspending the qualification (or exemption
from qualification) of any of the Transfer Restricted
Securities or the Exchange Securities (as applicable) to
be sold by any Participating Broker-Dealer, for sale in
any jurisdiction, and, if any such order is issued, to
use their reasonable best efforts to obtain the withdraw-
al of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant
to Section 3 and if requested by the managing underwrit-
ers, if any, or the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities
being sold in connection with an underwritten offering,
(i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing
underwriters, if any, or such Holders or counsel reason-
ably request to be included therein, (ii) make all re-
quired filings of such prospectus supplement or such
post-effective amendment as soon as practicable after the
Issuer has received notification of the matters to be
incorporated in such prospectus supplement or post-effec-
tive amendment, and (iii) supplement or make amendments
to such Registration Statement with such information as
the managing underwriter, if any, or such Holders or
counsel reasonably request to be included therein.
(f) If (1) a Shelf Registration is filed pursu-
ant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section
2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Ex-
change Securities during the Applicable Period, furnish
to each selling Holder of Transfer Restricted Securities
and to each such Participating Broker-Dealer who so
requests, as the case may be, their counsel and each
managing underwriter, if any, without charge, one con-
formed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits.
14
<PAGE>
(g) If (1) a Shelf Registration is filed pursu-
ant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section
2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Ex-
change Securities during the Applicable Period, deliver
to each selling Holder of Transfer Restricted Securities,
or each such Participating Broker-Dealer, as the case may
be, their counsel, and the underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses
(including each form of preliminary prospectus) and each
amendment or supplement thereto and any documents incor-
porated by reference therein as such Persons may reason-
ably request; and, subject to the last paragraph of this
Section 5, the Issuer and the Guarantors hereby consent
to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of
Transfer Restricted Securities or each such Participating
Broker-Dealer, as the case may be, and the underwriters
or agents, if any, and dealers (if any), in connection
with the offering and sale of the Transfer Restricted
Securities covered by or the sale by Participating Bro-
ker-Dealers of the Exchange Securities pursuant to such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Transfer
Restricted Securities pursuant to a Shelf Registration or
any delivery of a Prospectus contained in the Exchange
Registration Statement by any Participating Broker-Dealer
who seeks to sell Exchange Securities during the Applica-
ble Period, to use its reasonable best efforts to regis-
ter or qualify, and to cooperate with the selling Holders
of Transfer Restricted Securities or each such Partici-
pating Broker-Dealer, as the case may be, the underwrit-
ers, if any, and their respective counsel in connection
with the registration or qualification (or exemption from
such registration or qualification) of such Transfer
Restricted Securities for offer and sale under the secu-
rities or Blue Sky laws of such jurisdictions as any
selling Holder, Participating Broker-Dealer, or the
managing underwriters reasonably request in writing,
PROVIDED that where Exchange Securities held by Partici-
pating Broker-Dealers or Transfer Restricted Securities
are offered other than through an underwritten offering,
the Issuer and the Guarantors agree to cause their coun-
sel to perform Blue Sky investigations and file registra-
tions and qualifications required to be filed pursuant to
15
<PAGE>
this Section 5(h); keep each such registration or quali-
fication (or exemption therefrom) effective during the
period such Registration Statement is required to be kept
effective and do any and all other acts or things reason-
ably necessary or advisable to enable the disposition in
such jurisdictions of the Exchange Securities held by
Participating Broker-Dealers or the Transfer Restricted
Securities covered by the applicable Registration State-
ment; PROVIDED that the Issuer and the Guarantors shall
not be required to (A) qualify generally to do business
in any jurisdiction where they are not then so qualified,
(B) take any action that would subject them to general
service of process in any such jurisdiction where they
are not then so subject or (C) subject themselves to
taxation in excess of a nominal dollar amount in any such
jurisdiction.
(i) If a Shelf Registration is filed pursuant
to Section 3, cooperate with the selling Holders of
Transfer Restricted Securities and the managing under-
writers, if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted
Securities to be sold, which certificates shall not bear
any restrictive legends and shall be in a form eligible
for deposit with The Depository Trust Company, and enable
such Transfer Restricted Securities to be in such denomi-
nations and registered in such names as the managing
underwriters, if any, or Holders may reasonably request.
(j) If (1) a Shelf Registration is filed pursu-
ant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section
2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Ex-
change Securities during the Applicable Period, upon the
occurrence of any event contemplated by paragraph 5(c)(v)
or 5(c)(vi) above, as promptly as practicable prepare and
(subject to Section 5(a) above) file with the SEC, at the
expense of the Issuer and the Guarantors, a supplement or
post-effective amendment to the Registration Statement or
a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by
reference, or file any other required document so that,
as thereafter delivered to the purchasers of the Transfer
Restricted Securities being sold thereunder or to the
purchasers of the Exchange Securities to whom such Pro-
spectus will be delivered by a Participating Broker-
16
<PAGE>
Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances
under which they were made, not misleading.
(k) Prior to the effective date of the first
Registration Statement relating to the Transfer Restric-
ted Securities, (i) provide the Trustee with certificates
for the Transfer Restricted Securities in a form eligible
for deposit with The Depository Trust Company and (ii)
provide a CUSIP number for the Transfer Restricted Secu-
rities.
(l) In connection with an underwritten offering
of Transfer Restricted Securities pursuant to a Shelf
Registration, enter into an underwriting agreement as is
customary in underwritten offerings and take all such
other actions as are reasonably requested by the managing
underwriters in order to expedite or facilitate the
registration or the disposition of such Transfer Restricted
Securities, and in such connection, (i) make
such representations and warranties to the underwriters,
with respect to the business of the Issuer, the Guaran-
tors and their subsidiaries and the Registration State-
ment, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters
in underwritten offerings, and confirm the same if and
when requested; (ii) obtain opinions of counsel to the
Issuer and the Guarantors and updates thereof in form and
substance reasonably satisfactory to the managing under-
writers, addressed to the underwriters covering the
matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be
reasonably requested by underwriters; (iii) obtain "cold
comfort" letters and updates thereof in form and sub-
stance reasonably satisfactory to the managing underwrit-
ers from the independent certified public accountants of
the Issuer and the Guarantors (and, if necessary, any
other independent certified public accountants of any
subsidiary of the Issuer or the Guarantors or of any
business acquired by either of them for which financial
statements and financial data are, or are required to be,
included in the Registration Statement), addressed to
each of the underwriters, such letters to be in customary
form and covering matters of the type customarily covered
17
<PAGE>
in "cold comfort" letters in connection with underwritten
offerings and such other matters as are reasonably re-
quested by underwriters as permitted by Statement on
Auditing Standards No. 72; and (iv) if an underwriting
agreement is entered into, the same shall contain indem-
nification provisions and procedures no less favorable
than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Transfer Re-
stricted Securities covered by such Registration State-
ment and the managing underwriters or agents) with re-
spect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under
such underwriting agreement, or as and to the extent
required thereunder.
(m) If (1) a Shelf Registration is filed pursu-
ant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section
2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Ex-
change Securities during the Applicable Period, make
available for inspection by any selling Holder of such
Transfer Restricted Securities being sold, or each such
Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of
Transfer Restricted Securities, if any, and any attorney,
accountant or other agent retained by any such selling
Holder or each such Participating Broker-Dealer, as the
case may be, or underwriter (collectively, the "Inspec-
tors"), at the offices where normally kept, during rea-
sonable business hours, all financial and other records,
pertinent corporate documents and properties of the
Issuer, the Guarantors and their subsidiaries (collectively,
the "Records") as shall be reasonably necessary
to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and
employees of the Issuer, the Guarantors and their subsidiaries
to supply all information in each case reasonably
requested by any such Inspector in connection with such
Registration Statement. Records which the Issuer determines,
in good faith, to be confidential and any Records
which it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors, unless (i) the disclosure
of such Records is necessary to avoid or correct
a misstatement or omission in such Registration Statement,
(ii) the release of such Records is or-
18
<PAGE>
dered pursuant to a subpoena or other order from a court
of competent jurisdiction or (iii) the information in such
Records has been made generally available to the public.
(n) Provide an indenture trustee for the Trans-
fer Restricted Securities or the Exchange Securities, as
the case may be, and cause the Indenture to be qualified
under the TIA not later than the effective date of the
Exchange Offer or the first Registration Statement relat-
ing to the Transfer Restricted Securities; and in connec-
tion therewith, cooperate with the trustee under any such
indenture and the holders of the Transfer Restricted
Securities, to effect such changes to such indenture as
may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and
use its best efforts to cause such trustee to execute,
all documents as may be required to effect such changes,
and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified
in a timely manner.
(o) Comply in all material respects with all
applicable rules and regulations of the SEC and, as soon
as reasonably practicable, make generally available to
its securityholders consolidated earnings statements of
the Issuer that satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder.
(p) If an Exchange Offer is to be consummated,
upon delivery of the Transfer Restricted Securities by
Holders to the Issuer (or to such other Person as direct-
ed by the Issuer) in exchange for the Exchange Securi-
ties, the Issuer and the Guarantors shall mark, or cause
to be marked, on such Transfer Restricted Securities that
such Transfer Restricted Securities are being cancelled
in exchange for the Exchange Securities; in no event
shall such Transfer Restricted Securities be marked as
paid or otherwise satisfied.
(q) Cooperate with each seller of Transfer
Restricted Securities covered by any Registration State-
ment and each underwriter, if any, participating in the
disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings
required to be made with the National Association of
Securities Dealers, Inc. (the "NASD").
19
<PAGE>
(r) Use their best efforts to take all other
steps necessary to effect the registration of the Trans-
fer Restricted Securities or Exchange Securities, as
applicable, covered by a Registration Statement contem-
plated hereby.
(s) Use their best efforts to cause the Trans-
fer Restricted Securities or the Exchange Securities, as
applicable, covered by an effective registration state-
ment required by Section 2 or Section 3 hereof to be
rated with the appropriate rating agencies, if so re-
quested by the Holders of a majority in aggregate princi-
pal amount of Transfer Restricted Securities relating to
such registration statement or the managing underwriters
in connection therewith, if any.
The Issuer may require each seller of Transfer
Restricted Securities or Participating Broker-Dealer as
to which any registration is being effected to furnish to
the Issuer such information regarding such seller or
Participating Broker-Dealer and the distribution of such
Transfer Restricted Securities or Exchange Securities to
be sold by such Participating Broker-Dealer, as the case
may be, as the Issuer may, from time to time, reasonably
request. The Issuer may exclude from such registration
the Transfer Restricted Securities of any seller or
Participating Broker-Dealer who fails to furnish such
information within a reasonable time after receiving such
request.
Each Holder of Transfer Restricted Securities
and each Participating Broker-Dealer agrees by acquisi-
tion of such Transfer Restricted Securities or Exchange
Securities to be sold by such Participating Broker-Deal-
er, as the case may be, that, upon receipt of any notice
from the Issuer of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or
5(c)(vi), such Holder will forthwith discontinue disposi-
tion of such Transfer Restricted Securities covered by
such Registration Statement or Prospectus or Exchange
Securities to be sold by such Participating Broker-Deal-
er, as the case may be, until such Holder's receipt of
the copies of the supplemented or amended Prospectus
contemplated by Section 5(j), or until it is advised in
writing (the "Advice") by the Issuer that the use of the
applicable Prospectus may be resumed, and has received
copies of any amendments or supplements thereto. In the
20
<PAGE>
event the Issuer gives any notice of the happening of any
event of the kind described in Section 5(c)(ii), 5-
(c)(iv), 5(c)(v) or 5(c)(vi), the time period for the
effectiveness of such Registration Statement set forth in
Section 2 or Section 3 hereof, as applicable, shall be
extended by the number of days from the date of such
notice to the date when each selling Holder covered by
such Registration Statement shall have received copies of
the supplemental or amended Prospectus contemplated by
Section 5(j) or shall have received the Advice that the
use of the applicable Prospectus may be resumed.
6. Registration Expenses
(a) All fees and expenses incident to the
performance of or compliance with this Agreement by the
Issuer or the Guarantors shall be borne by the Issuer and
the Guarantors, whether or not the Exchange Offer or a
Shelf Registration is filed or becomes effective, includ-
ing, without limitation, (i) all registration and filing
fees (including, without limitation, (A) fees with re-
spect to filings required to be made with the NASD in
connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky
laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky
qualifications of the Transfer Restricted Securities or
Exchange Securities (x) where the Holders of Transfer
Restricted Securities are located, in the case of the
Exchange Securities, or (y) as provided in Section 5(h),
in the case of Transfer Restricted Securities or Exchange
Securities to be sold by a Participating Broker-Dealer
during the Applicable Period)), (ii) printing expenses
(including, without limitation, expenses of printing
certificates for Transfer Restricted Securities or Ex-
change Securities in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if
the printing of prospectuses is requested by the managing
underwriters, if any, or, in respect of Transfer Restricted
Securities or Exchange Securities to be sold by
any Participating Broker-Dealer during the Applicable
Period, by the Holders of a majority in aggregate princi-
pal amount of the Transfer Restricted Securities included
in any Registration Statement or of such Exchange Securi-
ties, as the case may be), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel
for the Issuer and the Guarantors, (v) fees and disburse-
21
<PAGE>
ments of all independent certified public accountants
referred to in Section 5(l)(iii) (including, without
limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such perfor-
mance), (vi) rating agency fees, (vii) Securities Act
liability insurance, if the Issuer and the Guarantors
desire such insurance, (viii) fees and expenses of all
other Persons retained by the Issuer or the Guarantors,
(ix) internal expenses of the Issuer and the Guarantors
(including, without limitation, all salaries and expenses
of officers and employees of the Issuer and the Guaran-
tors performing legal or accounting duties), (x) the
expense of any annual audit, (xi) the fees and expenses
incurred in connection with the listing of the securities
to be registered on any securities exchange and (xii) the
expenses relating to printing, word processing and dis-
tributing all Registration Statements, underwriting
agreements, securities sales agreements, and indentures.
Nothing contained in this Section 6 shall create an
obligation on the part of the Issuer or any Guarantor to
pay or reimburse any Holder for any underwriting commis-
sion or discount attributable to any such Holder's Trans-
fer Restricted Securities included in an underwritten
offering pursuant to a Registration Statement filed in
accordance with the terms of this Agreement, or to guar-
antee such Holder any profit or proceeds from the sale of
such Securities.
(b) In connection with any Shelf Registration
hereunder, the Issuer and the Guarantors shall reimburse
the Holders of the Transfer Restricted Securities being
registered in such registration for the reasonable fees
and disbursements of not more than one counsel (in addi-
tion to appropriate local counsel) chosen by the Holders
of a majority in aggregate principal amount of the Trans-
fer Restricted Securities to be included in such Regis-
tration Statement and other reasonable out-of-pocket ex-
penses of the Holders of Transfer Restricted Securities
reasonably incurred in connection with the registration
of the Transfer Restricted Securities.
7. INDEMNIFICATION
The Issuer and each Guarantor agrees, jointly
and severally, to indemnify and hold harmless (i) each of
the Purchasers, each Holder of Transfer Restricted Secu-
rities, each Holder of Exchange Securities, each Partici-
22
<PAGE>
pating Broker-Dealer, (ii) each person, if any, who con-
trols (within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act) any such Person (any of
the persons referred to in this clause (ii) being herein-
after referred to as a "controlling person"), and (iii)
the respective officers, directors, partners, employees,
representatives and agents of any of such Person or any
controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "In-
demnified Person") to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities,
judgments, actions and expenses (including, without limi-
tation, and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending
any claim or action, or any investigation or proceeding
by any governmental agency or body, commenced or threat-
ened, including the reasonable fees and expenses of coun-
sel to any Indemnified Person) directly or indirectly
caused by, related to, based upon, arising out of or in
connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registra-
tion Statement or Prospectus (as amended or supplemented
if the Issuer shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or
caused by, arising out of or based upon any omission or
alleged omission to state therein a material fact re-
quired to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as
such losses, claims, damages or liabilities are caused by
(i) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in con-
formity with information relating to any Indemnified
Person furnished to the Issuer or any underwriter in
writing by such Indemnified Person expressly for use
therein, or (ii) any untrue statement contained in or
omission from a preliminary prospectus if a copy of the
Prospectus (as then amended or supplemented, if the
Issuer shall have furnished to or on behalf of the Holder
participating in the distribution relating to the rele-
vant Registration Statement any amendments or supplements
thereto) was not sent or given by or on behalf of such
Holder to the person asserting any such losses, liabili-
ties, claims, damages or expenses who purchased Securi-
ties, if such is required by law at or prior to the
written confirmation of the sale of such Securities to
such person and the untrue statement contained in or
23
<PAGE>
omission from such preliminary prospectus was corrected
in the Prospectus (or the Prospectus as amended or sup-
plemented). The Issuer and the Guarantors shall notify
the Holders promptly of the institution, threat or asser-
tion of any claim, proceeding (including any governmental
investigation) or litigation of which it or they shall
have become aware in connection with the matters addressed
by this Agreement which involves the Issuer, any
Guarantor or an Indemnified Person.
In connection with any Registration Statement
in which a Holder of Transfer Restricted Securities is
participating, such Holder of Transfer Restricted Securi-
ties agrees, severally and not jointly, to indemnify and
hold harmless the Issuer, the Guarantors and their direc-
tors and officers and each person who controls the Issuer
and the Guarantors within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the
Issuer and the Guarantors to each Indemnified Person, but
only with reference to information relating to such
Indemnified Person furnished to the Issuer in writing by
such Indemnified Person expressly for use in any Regis-
tration Statement or Prospectus, any amendment or supple-
ment thereto, or any preliminary prospectus. The liabil-
ity of any Indemnified Person pursuant to this paragraph
shall in no event exceed the net proceeds received by
such Indemnified Person from sales of Transfer Restricted
Securities giving rise to such obligations.
If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or
demand shall be brought or asserted against any person in
respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemni-
fying person") in writing, and the indemnifying person
shall have the right to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party
to represent the indemnified party and any others the
indemnifying person may reasonably designate in such
proceeding and shall pay the reasonable fees and expenses
actually incurred by such counsel related to such pro-
ceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense
24
<PAGE>
of such indemnified party, unless (i) the indemnifying
person and the indemnified party shall have mutually
agreed in writing to the contrary, (ii) the indemnifying
person failed to assume the defense within a reasonable
time after the commencement of the action and employ
counsel reasonably satisfactory to the indemnified party
or (iii) the named parties to any such action (including
any impleaded parties) include both such indemnified
party and the indemnifying person, or any affiliate of
the indemnifying person and such indemnified party shall
have been reasonably advised by counsel that either (x)
there may be one or more legal defenses available to it
which are different from or additional to those available
to the indemnifying person or such affiliate of the
indemnifying person or (y) a conflict may exist between
such indemnified party and the indemnifying person or
such affiliate of the indemnifying person (in which case
the indemnifying person shall not have the right to
assume the defense of such action on behalf of such
indemnified party, it being understood, however, that the
indemnifying person shall not, in connection with any one
such action or separate but substantially similar or
related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) for all
such indemnified parties, which firm shall be designated
in writing by indemnified parties who sold a majority in
interest of Transfer Restricted Securities sold by all
such indemnified parties and any such separate firm for
the Issuer and the Guarantors, their directors, their
officers and such control persons of the Issuer and the
Guarantors shall be designated in writing by the Issuer.
The indemnifying person shall not be liable for any
settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be
a final judgment for the plaintiff, the indemnifying
person agrees to indemnify any indemnified party from and
against any loss or liability by reason of such settle-
ment or judgment. No indemnifying person shall, without
the prior written consent of the indemnified party,
effect any settlement of any pending or threatened pro-
ceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such
25
<PAGE>
indemnified party from all liability on claims that are
the subject matter of such proceeding.
If the indemnification provided for in the
first and second paragraphs of this Section 7 is unavail-
able to an indemnified party in respect of any losses,
claims, damages, liabilities, or expenses referred to
therein (other than by reason of the exceptions provided
therein), then each indemnifying person under such para-
graphs, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or pay-
able by such indemnified party as a result of such loss-
es, claims, damages, liabilities, or expenses (i) in such
proportion as is appropriate to reflect the relative
benefits of the indemnified party on the one hand and the
indemnifying person(s) on the other in connection with
the statements or omissions that resulted in such losses,
claims, damages, liabilities, or expenses or (ii) if the
allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the
indemnifying person(s) and the indemnified party, as well
as any other relevant equitable considerations. The
relative fault of the Issuer and the Guarantors, on the
one hand, and any Indemnified Persons, on the other,
shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to
state a material fact relates to information supplied by
the Issuer or any Guarantor, on the one hand, or by such
Indemnified Persons, on the other, and the parties' rela-
tive intent, knowledge, access to information and oppor-
tunity to correct or prevent such statement or omission.
The parties agree that it would not be just and
equitable if contribution pursuant to this Section 7 were
determined by PRO RATA allocation (even if such indemni-
fied parties were treated as one entity for such purpose)
or by any other method of allocation that does not take
account of the equitable considerations referred to in
the immediately preceding paragraph. The amount paid or
payable by an indemnified party as a result of the loss-
es, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to in-
clude, subject to the limitations set forth above, any
reasonable legal or other expenses actually incurred by
26
<PAGE>
such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding
the provisions of this Section 7, in no event shall an
Indemnified Person be required to contribute any amount
in excess of the amount by which proceeds received by
such Indemnified Person from sales of Transfer Restricted
Securities exceeds the amount of any damages that such
Indemnified Person has otherwise been required to pay by
reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraud-
ulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contri-
bution from any person who was not guilty of such fraudu-
lent misrepresentation.
The indemnity and contribution agreements
contained in this Section 7 will be in addition to any
liability which the indemnifying persons may otherwise
have to the indemnified parties referred to above. The
Indemnified Persons' obligations to contribute pursuant
to Section 7 are several in proportion to the respective
principal amount of Securities sold by each of the Indem-
nified Persons hereunder and not joint.
8. RULES 144 AND 144A
The Issuer and the Guarantors covenant that
they will file the reports required to be filed by them
pursuant to the Securities Act and the Exchange Act and
the rules and regulations adopted by the SEC thereunder
in a timely manner and, if at any time the Issuer and the
Guarantors are not required to file such reports, they
will, upon the request of any Holder of Transfer Restricted
Securities, make available information required
by Rules 144 and 144A under the Securities Act in order
to permit sales pursuant to Rule 144 and Rule 144A. The
Issuer and the Guarantors further covenant that they will
take such further action as any Holder of Transfer Re-
stricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder
to sell Transfer Restricted Securities without registra-
tion under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144 and Rule 144A
under the Securities Act, as such Rules may be amended
from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC.
27
<PAGE>
9. UNDERWRITTEN REGISTRATIONS
(a) If any of the Transfer Restricted Securi-
ties covered by any Shelf Registration are to be sold in
an underwritten offering, the investment banker or in-
vestment bankers and manager or managers that will manage
the offering will be selected by the Holders of a majori-
ty in aggregate principal amount of such Transfer Re-
stricted Securities included in such offering and reason-
ably acceptable to the Issuer.
No Holder of Transfer Restricted Securities may
participate in any underwritten registration hereunder,
unless such Holder (a) agrees to sell such Holder's
Transfer Restricted Securities on the basis provided in
any customary underwriting arrangements entered into in
connection therewith and (b) completes and executes all
questionnaires, powers of attorney, indemnities, under-
writing agreements and other documents required under the
terms of such underwriting arrangements.
(b) Each Holder of Transfer Restricted Securi-
ties agrees, if requested (pursuant to a timely written
notice) by the managing underwriters in an underwritten
offering or placement agent in a private offering of the
Company's debt securities, not to effect any private sale
or distribution (including a sale pursuant to Rule 144(k)
and Rule 144A, but excluding non-public sales to any of
its affiliates, officers, directors, employees and con-
trolling persons) of any of the Securities except pursu-
ant to an Exchange Offer, during the period beginning 10
days prior to, and ending 90 days after, the closing date
of the underwritten offering.
The foregoing provisions shall not apply to any
holder of Transfer Restricted Securities if such holder
is prevented by applicable statute or regulation from
entering into any such agreement.
The Issuer and the Guarantors agree (i) without
the written consent of the managing underwriters in an
underwritten offering of Transfer Restricted Securities
covered by a Registration Statement filed pursuant to
Section 3 hereof, not to effect any public or private
sale or distribution of their respective debt securities,
including a sale pursuant to Regulation D or Rule 144A
under the Securities Act, during the period beginning
28
<PAGE>
10 days prior to, and ending 90 days after, the closing
date of each underwritten offering made pursuant to such
Registration Statement (PROVIDED, HOWEVER, that such
period shall be extended by the number of days from and
including the date of the giving of any notice pursuant
to Section 5(c)(v) or (c)(vi) hereof to and including the
date when each seller of Transfer Restricted Securities
covered by such Registration Statement shall have re-
ceived the copies of the supplemented or amended Prospec-
tus contemplated by Section 5(j) hereof).
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the
Issuer of any of its obligations under this Agreement,
each Holder of Transfer Restricted Securities, in addi-
tion to being entitled to exercise all rights provided
herein, in the Indenture or, in the case of the Purchas-
ers, in the Purchase Agreement, or granted by law, in-
cluding recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The
Issuer and the Guarantors agree that monetary damages
would not be adequate compensation for any loss incurred
by reason of a breach by them of any of the provisions of
this Agreement and hereby further agree that, in the
event of any action for specific performance in respect
of such breach, they shall waive the defense that a
remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the
Issuer nor any Guarantor has, as of the date hereof, and
none of them shall, after the date of this Agreement,
enter into any agreement with respect to any of their
respective securities that is inconsistent with the
rights granted to the Holders of Transfer Restricted
Securities in this Agreement or otherwise conflicts with
the provisions hereof. Neither the Issuer nor any Guar-
antor will enter into any agreement with respect to any
of their respective securities which will grant to any
Person piggy-back registration rights with respect to a
Registration Statement.
(c) AMENDMENTS AND WAIVERS. The provisions of
this Agreement, including the provisions of this sen-
tence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions
hereof may not be given, unless the Issuer has obtained
29
<PAGE>
the written consent of Holders of at least a majority of
the then outstanding aggregate principal amount of Trans-
fer Restricted Securities. Notwithstanding the forego-
ing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively
to the rights of Holders of Transfer Restricted Securi-
ties whose securities are being sold pursuant to a Regis-
tration Statement and that does not directly or indirect-
ly affect, impair, limit or compromise the rights of
other Holders of Transfer Restricted Securities may be
given by Holders of at least a majority in aggregate
principal amount of the Transfer Restricted Securities
being sold by such Holders pursuant to such Registration
Statement; PROVIDED that the provisions of this sentence
may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preced-
ing sentence.
(d) NOTICES. All notices and other communica-
tions (including without limitation any notices or other
communications to the Trustee) provided for or permitted
hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day air courier or
telecopier:
(i) if to a Holder of Transfer Restricted
Securities, at the most current address given by the
Trustee to the Issuer; and
(ii) if to the Issuer or the Guarantors, Argosy
Gaming Company, 219 Plasa Street, Alton, Illinois
62002, Attention: Chief Financial Officer.
All such notices and communications shall be
deemed to have been duly given: when delivered by hand,
if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; one
business day after being timely delivered to a next-day
air courier; and when receipt is acknowledged by the
addressee, if telecopied.
Copies of all such notices, demands or other
communications shall be concurrently delivered by the
Person giving the same to the Trustee under the Indenture
at the address specified in such Indenture.
30
<PAGE>
(e) SUCCESSORS AND ASSIGNS. This Agreement
shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties, including
without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted
Securities. The Issuer and the Guarantors agree that the
Holders of the Securities shall be third party beneficia-
ries to the agreements made hereunder by the Issuer and
the Guarantors and each Holder shall have the right to
enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its
rights hereunder.
(f) COUNTERPARTS. This Agreement may be exe-
cuted in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of
which taken together shall constitute one and the same
agreement.
(g) HEADINGS. The headings in this Agreement
are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) SEVERABILITY. If any term, provision,
covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provi-
sions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto
shall use their best efforts to find and employ an alter-
native means to achieve the same or substantially the
same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they
would have executed the remaining terms, provisions,
covenants and restrictions without including any of such
31
<PAGE>
that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) ENTIRE AGREEMENT. This Agreement, together
with the Purchase Agreement, is intended by the parties
as a final expression of their agreement, and is intended
to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the
subject matter contained herein and therein.
(k) SECURITIES HELD BY THE ISSUER, THE GUARAN-
TORS OR THEIR AFFILIATES. Whenever the consent or ap-
proval of Holders of a specified percentage of Transfer
Restricted Securities is required hereunder, Transfer
Restricted Securities held by the Issuer, any Guarantor
or any of their affiliates (as such term is defined in
Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given
by the Holders of such required percentage.
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed
this Registration Rights Agreement as of the date first
written above.
ARGOSY GAMING COMPANY
By:
----------------------------
Name:
Title:
GUARANTORS:
ALTON GAMING COMPANY
By:
----------------------------
Name:
Title:
THE MISSOURI GAMING COMPANY
By:
----------------------------
Name:
Title:
THE ST. LOUIS GAMING COMPANY
By:
----------------------------
Name:
Title:
<PAGE>
IOWA GAMING COMPANY
By:
----------------------------
Name:
Title:
JAZZ ENTERPRISES, INC.
By:
-----------------------------
Name:
Title:
ARGOSY OF LOUISIANA, INC.
By:
----------------------------
Name:
Title:
CATFISH QUEEN PARTNERSHIP
in COMMENDAM
By: Jazz Enterprises, its
General Partner
By:
----------------------------
Name:
Title:
THE INDIANA GAMING COMPANY
By:
----------------------------
Name:
Title:
<PAGE>
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BA SECURITIES, INC.
DEUTSCHE MORGAN GRENFELL/
C.J. LAWRENCE INC.
BY: BEAR, STEARNS & CO. INC.
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT 4.5
-----------
<PAGE>
CASH COLLATERAL AND DISBURSEMENT AGREEMENT
Dated June 5, 1996
Among
FIRST NATIONAL BANK OF COMMERCE,
as Trustee,
-----------
LASALLE NATIONAL TRUST, N.A.,
as Disbursement Agent,
----------------------
and
ARGOSY GAMING COMPANY
<PAGE>
T A B L E O F C O N T E N T S
Section Page
------- ----
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms . . . . . . 2
SECTION 1.2 Computation of Time Periods . . . 6
ARTICLE II
ESTABLISHMENT OF ACCOUNTS;
INITIAL DEPOSITS; PRIORITY RELEASES
SECTION 2.1 Establishment of Accounts . . . . 6
SECTION 2.2 Deposits to Accounts. . . . . . . 6
SECTION 2.3 Priority Releases . . . . . . . . 7
SECTION 2.4 Security Interest . . . . . . . . 7
SECTION 2.5 Appointment of Disbursement Agent 8
SECTION 2.6 Disbursement Agent is Agent of
Trustee . . . . . . . . . . . . 8
SECTION 2.7 Instructions and Entitlement
Orders of Trustee . . . . . . . 9
ARTICLE III
REQUESTING AND MAKING CASH
DISBURSEMENTS FROM THE CONSTRUCTION ACCOUNTS
SECTION 3.1 Requesting the Cash Disbursement. 9
SECTION 3.2 Certain Cash Disbursements. . . . 9
SECTION 3.3 Making the Cash Disbursement. . . 10
SECTION 3.4 Additional Cash Disbursement
Requirements . . . . . . . . . . 10
SECTION 3.5 Completion of the Project . . . . 11
ARTICLE IV
CONDITIONS OF CASH DISBURSEMENTS
FROM THE CONSTRUCTION ACCOUNT
SECTION 4.1 Conditions Precedent to Cash
Disbursements. . . . . . . . . . 12
ARTICLE V
OTHER DISBURSEMENTS
SECTION 5.1 Disbursements from the Working
Capital Account. . . . . . . . . 14
i
<PAGE>
ARTICLE VI
COVENANTS
SECTION 6.1 Covenants of the Company. . . . . 14
SECTION 6.2 Covenants of the Disbursement
Agent . . . . . . . . . . . . . 17
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES; RIGHTS UPON DEFAULT
SECTION 7.1 Event of Default. . . . . . . . . 19
SECTION 7.2 Rights and Remedies Generally . . 19
SECTION 7.3 Assembly of Collateral. . . . . . 19
SECTION 7.4 Disposition of Collateral . . . . 19
SECTION 7.5 Recourse. . . . . . . . . . . . . 20
SECTION 7.6 Expenses; Attorneys' Fees . . . . 20
SECTION 7.7 Limitation on Duties Regarding
Preservation of Cash Collateral. 20
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments, Etc.. . . . . . . . . 21
SECTION 8.2 Notices, Etc. . . . . . . . . . . 21
SECTION 8.3 No Waiver; Remedies . . . . . . . 22
SECTION 8.4 Indemnity and Expenses. . . . . . 22
SECTION 8.5 Execution in Counterparts . . . . 24
SECTION 8.6 Relationship of Trustee . . . . . 24
SECTION 8.7 Governing Law . . . . . . . . . . 24
SECTION 8.8 Gaming Laws . . . . . . . . . . . 24
SECTION 8.9 Waiver of Jury Trial. . . . . . . 24
SECTION 8.10 Termination . . . . . . . . . . . 24
ARTICLE IX
ARBITRATION
SECTION 9.1 Arbitration . . . . . . . . . . . 25
ii
<PAGE>
SCHEDULES
Schedule 1 Construction Budget. . . . . . . . S-1
Schedule 2 Supplemental Conditions Precedent. S-3
EXHIBITS
EXHIBIT A REQUEST FOR A CASH DISBURSEMENT . . . . A-1
EXHIBIT B FORM OF TRUSTEE'S CERTIFICATE . . . . . B-1
EXHIBIT C FORM OF REVIEWING AGENT'S
CERTIFICATE. . . . . . . . . . . . C-1
iii
<PAGE>
CASH COLLATERAL AND DISBURSEMENT AGREEMENT
CASH COLLATERAL AND DISBURSEMENT AGREEMENT,
dated June 5, 1996, among First National Bank of Com-
merce, as trustee for the Holders (in such capacity, to-
gether with its successor in trust, if any, appointed
pursuant to the Indenture referred to below, the "Trust-
ee"), under an Indenture dated the date hereof (such
Indenture as amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof,
the "Indenture"), Argosy Gaming Company, a Delaware
corporation (the "Company"), and LaSalle National Trust,
N.A., as Disbursement Agent for the Trustee (the "Dis-
bursement Agent").
PRELIMINARY STATEMENTS:
(1) The Company has entered into the Indenture
pursuant to which it will issue $235,000,000 of its 13 1/4%
First Mortgage Notes due 2004 (the "Notes").
(2) As security for the prompt and complete
payment and performance in full of the Indenture Obliga-
tions, the Company intends to grant to the Trustee a
security interest in, among other things, the Cash Col-
lateral.
(3) The Disbursement Agent has agreed to take
such action with respect to the Accounts as specified
herein.
(4) This Cash Collateral and Disbursement
Agreement is a condition to the issuance of the Notes
under the terms of the Purchase Agreement, dated June 1,
1996 by and among the Company, the guarantors and the
initial purchasers named therein.
NOW, THEREFORE, in consideration of the forego-
ing and of the mutual covenants hereinafter set forth,
and for other good and valuable consideration, the re-
ceipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1 CERTAIN DEFINED TERMS. Capitalized
terms used but not defined herein and in any schedules
and exhibits hereto shall have the meanings set forth in
the Indenture. In addition, the following terms shall
have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the
terms defined):
"ACCOUNTS" has the meaning specified in Section
2.1.
"BUSINESS DAY" means each Monday, Tuesday,
Wednesday, Thursday and Friday that is not a day on
which banks in Chicago are authorized or obligated
by law to close.
"CASH COLLATERAL" has the meaning specified in
Section 2.4.
"CASH DISBURSEMENT" means a disbursement to
Indiana Gaming L.P. from the Company in an amount
equal to the Project Funding Requirement times the
Company Percentage.
"CASH DISBURSEMENT DATE" has the meaning speci-
fied in Section 3.1.
"CLOSING DATE" means June 5, 1996.
"COMPANY" means Argosy Gaming Company.
"COMPANY PERCENTAGE" means 57.5%, provided that
after the Construction Budget has been increased to
an amount greater than $225,000,000 and $225,000,000
has been funded through capital calls for Project
Funding Requirements, Company Percentage shall mean
100%.
"CONSTRUCTION ACCOUNT" has the meaning set
forth in Section 2.1 hereof.
"CONSTRUCTION BUDGET" means, for each of the
Ship Project, the Land Project and the Temporary
2
<PAGE>
Project, the budget attached hereto as Schedule 1,
as amended from time to time as provided herein.
"CONSTRUCTION SCHEDULE" means for each of the
Projects the construction schedule proposed by the
Company, The Indiana Gaming Company or Indiana Gam-
ing L.P., as amended from time to time as provided
herein.
"CONSTRUCTION SUPERVISOR" means for each Pro-
ject the Person responsible for monitoring the rele-
vant Construction Budget, Plans and Specifications
and changes thereto, cost breakdowns and estimates;
the Construction Supervisor shall make periodic in-
spections of the appropriate Project, as applicable
and monitor the appropriate Project, as applicable.
The Construction Supervisor may be either the Pro-
ject Architect or an outside contractor not controlled
by the Company or any of its affiliates.
"CONTRACT" means any contract or subcontracts
for work or materials for any Project.
"COSTS" means all Hard Costs and all Soft
Costs.
"DISBURSEMENT AGENT" has the meaning specified
in the recital of parties.
"HARD COSTS" means the costs and expenses in
respect of supplying goods, materials and labor for
the construction of the Projects.
"INDENTURE" has the meaning specified in the
recital of parties.
"INDIANA" means The Indiana Gaming Company, a
wholly owned subsidiary of the Company and the gen-
eral partner of Indiana Gaming L.P.
"INDIANA GAMING L.P." means Indiana Gaming
Company, L.P., the operator of the casino at
Lawrenceburg.
"LAND CONTRACTS" means each Contract for the
Land Project.
3
<PAGE>
"LAND PROJECT" means Indiana Gaming L.P.'s
permanent facility at Lawrenceburg, Indiana,
excluding the Ship Project.
"LINE ITEM" means an item of cost set forth in
a Construction Budget for a specific Project.
"MAJOR CONTRACT" means any Contract or series
of related Contracts for substantially the same work
or materials in connection with Hard Costs or Soft
Costs for an amount equal to or in excess of $-
2,000,000.
"MAJOR CONTRACTOR" means any counterparty under
a Major Contract.
"MINOR CONTRACT" means any Contract or series
of related Contracts for substantially the same work
or materials that is not a Major Contract.
"NOTES" has the meaning specified in the Preamble
hereof.
"PERSON" means an individual, partnership,
corporation (including a business trust), joint
stock company, trust, unincorporated association,
joint venture or other entity, or a government or
any political subdivision or agency thereof.
"PLANS AND SPECIFICATIONS" means for each of
the Projects the plans and specifications developed
by or for the Company, as amended from time to time
as provided herein.
"PROJECT ARCHITECT" means, in the case of any
Project, any Person acting as an architect for any
aspect of the applicable Project selected by the
Company, The Indiana Gaming Company or Indiana Gam-
ing L.P.
"PROJECT DISBURSEMENT DELAY" means the occurrence of
any of the following events: (i) Indiana
Gaming L.P.'s certificate of suitability has been
revoked or cancelled or has expired or been suspended
and has not been renewed by the Indiana Gaming
Commission prior to the issuance of a riverboat
owner's license, (ii) Indiana Gaming L.P.'s applica-
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tion for a permanent riverboat owner's license is
denied a gaming license by the Indiana Gaming Com-
mission, (iii) Indiana Gaming L.P. is found unsuit-
able by the Indiana Gaming Commission, (iv) Indiana
Gaming L.P. has its riverboat owner's license re-
voked or suspended by the Indiana Gaming Commission,
(v) the Company or any of its subsidiaries is found
unsuitable by the Indiana Gaming Commission or (vi)
the Company, its subsidiaries or Indiana Gaming L.P.
shall have received notice from the Indiana Gaming
Commission of the commencement of proceedings by the
Indiana Gaming Commission, the stated purpose of
which is to formally consider taking any of the
foregoing actions.
"PROJECT FUNDING REQUIREMENT" means the total
funding required by Indiana Gaming L.P. from all of
its partners, as directed by the Company, to pay or
reimburse construction and other costs directly
related to the applicable Project.
"PROJECTS" means each of the Ship Project, the
Land Project and the Temporary Project.
"REQUEST FOR A CASH DISBURSEMENT" has the mean-
ing specified in Section 3.1.
"RIVERBOAT" shall mean Indiana Gaming L.P.'s
permanent riverboat gaming facility in Lawrenceburg,
Indiana.
"SHIP CONTRACT" means each Contract for the
Ship Project.
"SHIP PROJECT" means the project for the con-
struction and outfitting of the Riverboat.
"SHIPYARD" means Service Marine Industries,
Inc. or any other shipyard chosen by the Company to
construct the Riverboat.
"SOFT COSTS" means all costs of the Company
other than Hard Costs that are related to the Pro-
jects, including, without limitation, pre-opening
costs.
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"TEMPORARY PROJECT" shall mean Indiana Gaming
L.P.'s temporary riverboat casino project at Law-
renceburg, Indiana.
"TRUSTEE" shall have the meaning set forth in
the recitals hereof.
"WORKING CAPITAL ACCOUNT" has the meaning spec-
ified in Section 2.1.
SECTION 2 COMPUTATION OF TIME PERIODS. In
this Agreement, in the computation of periods of time
from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and
"until" each means "to but excluding."
ARTICLE II
ESTABLISHMENT OF ACCOUNTS;
INITIAL DEPOSITS; PRIORITY RELEASES
SECTION 1 ESTABLISHMENT OF ACCOUNTS. There
are hereby established with the Disbursement Agent the
following separate custodial accounts (collectively, the
"Accounts") under the sole dominion and control of the
Disbursement Agent: (a) an account in the name of the
Company (the "Construction Account") for the Ship Pro-
ject, the Land Project and the Temporary Project; and (b)
an account in the name of the Company for working capital
and general corporate purposes of the Company (the "Work-
ing Capital Account"). Each of the above listed Accounts
shall clearly indicate on the title thereof that it is
held "subject to the lien of First National Bank of
Commerce, as trustee for the holders of 13 1/4% First Mort-
gage Notes due 2004 of Argosy Gaming Company."
SECTION 2 DEPOSITS TO ACCOUNTS. The initial
deposits to the Accounts shall be as follows:
Construction Account $94,300,000
Working Capital Account 0.00
TOTAL DEPOSIT TO ACCOUNTS $94,300,000
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The Company at any time may make contributions to the
Construction Account consistent with the terms of the
Indenture, which amounts may be added to the Contingency
Line Item in Schedule 1.
SECTION 3 PRIORITY RELEASES. Funds in the
Construction Account and the Working Capital Account
shall be released by the Disbursement Agent to any ac-
count specified by the Trustee, upon receipt of a T-
rustee's Certificate substantially in the form of Exhibit
B hereto, certifying that such amounts will promptly be
used for the purpose of making any required payment of
principal or interest to Noteholders, including without
limitation payments to Noteholders accepting any offer to
purchase pursuant to the terms of the Indenture, but
excluding offers to purchase pursuant to Sections 5.14,
5.18 and 5.19 of the Indenture, provided that the appli-
cable notice shall have been given and the applicable
cure periods shall have expired, in each case as provided
for in the Indenture.
SECTION 4 SECURITY INTEREST. As security for
the prompt and complete payment and performance in full
of all the Indenture Obligations, the Company hereby
pledges and assigns to the Trustee for the equal and
ratable benefit of the Holders, and grants to the Trustee
for the equal and ratable benefit of the Holders an
exclusive first priority security interest in all of its
right, title and interest in the following collateral
(the "Cash Collateral"):
(a) the Accounts, all funds, investments
and securities held therein or cred-
ited thereto, whether by book-entry
or other form, and all certificates
and instruments, if any, from time to
time representing or evidencing the
Accounts;
(b) all investments from time to time
credited to any of the accounts con-
stituting the Accounts, and all cer-
tificates and instruments, if any,
held therein from time to time repre-
senting or evidencing the Permitted
Investments;
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(c) all notes, certificates of deposits,
deposit amounts, checks and other
instruments from time to time hereafter
delivered to or otherwise possessed by
the Disbursement Agent for
or on behalf of the Trustee for the
benefit of the Holders;
(d) all interest, dividends, cash and in-
struments from time to time received,
receivable or otherwise distributed
in respect of or in exchange for any
or all of the then existing Cash Col-
lateral; and
(e) all proceeds of any and all of the
foregoing.
SECTION 5 APPOINTMENT OF DISBURSEMENT AGENT.
The Trustee hereby appoints LaSalle National Trust, N.A.
to act as the Disbursement Agent in connection with this
Agreement, and to take all actions necessary or appropri-
ate on behalf of the Trustee in order to comply with the
terms of this Agreement.
SECTION 6 DISBURSEMENT AGENT IS AGENT OF
TRUSTEE. Solely for purposes of perfecting the security
interest set forth in Section 2.4 above, and subject to
the limitations as to the duties and liabilities of the
Disbursement Agent set forth below, (a) the Trustee
hereby appoints the Disbursement Agent as the Trustee's
agent and pledgee-in-possession for the Cash Collateral;
and (b) the Disbursement Agent by its execution and
delivery of this Agreement hereby accepts such appoint-
ment and agrees to be bound by the terms of this Agree-
ment. The Company hereby agrees to such appointment of
the Disbursement Agent and further agrees that the Dis-
bursement Agent, on behalf of the Trustee, shall be
entitled to act upon the instructions of the Trustee
pursuant to Section 2.7 below. The Disbursement Agent
agrees to take such action as shall from time to time be
specified in writing from the Trustee to enable the
Trustee to exercise its rights and remedies with respect
to the lien and security interest described in Section
2.4 above.
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<PAGE>
SECTION 7 INSTRUCTIONS AND ENTITLEMENT ORDERS
OF TRUSTEE. The Disbursement Agent hereby agrees, and
the Company hereby acknowledges, that the Disbursement
Agent shall comply with instructions and entitlement
orders (including without limitation, instructions as to
the investment, transfer, redemption or other disposition
of the Cash Collateral) originated by the Trustee without
further consent of the Company. This Agreement is in-
tended to establish the Trustee's control over the Cash
Collateral for purposes of the provisions of Section 8-106
of the Illinois Uniform Commercial Code. Notwith-
standing the foregoing, the Trustee agrees with the
Company that any such instruction or entitlement order
shall be consistent with any and all rights that the
Trustee may have under the Indenture and all other agree-
ments and instruments executed pursuant thereto, or under
applicable law, with respect to the Cash Collateral.
ARTICLE III
REQUESTING AND MAKING CASH
DISBURSEMENTS FROM THE CONSTRUCTION ACCOUNTS
SECTION 1 REQUESTING THE CASH DISBURSEMENT.
Subject to the provisions of Section 3.2 below, the
Company may request that a Cash Disbursement be made from
the Construction Account by delivering notice to the Dis-
bursement Agent, not later than 11:00 A.M. (New York
time) on the second Business Day prior to the date of the
proposed Cash Disbursement. Each such request shall be
substantially in the form of Exhibit A (a "Request for a
Cash Disbursement"), shall be executed by a duly autho-
rized officer of the Company and shall specify therein
(i) the requested date of such Cash Disbursement (the
"Cash Disbursement Date") and (ii) the aggregate amount
of such Project Funding Requirements.
SECTION 2 CERTAIN CASH DISBURSEMENTS. In the
event that Indiana Gaming L.P. funds required costs in
connection with the Land Project from funds available to
it from time to time from lenders for hotel construction,
then to the extent such costs are funded in compliance
with the conditions to disbursements from the Construc-
tion Account as if such conditions were applicable and
that the Company executes a Request for Cash Disbursement
substantially in the form of Exhibit A hereto, an amount
9
<PAGE>
equal to the Cash Disbursement not necessary as a result
of the third party funding will be immediately trans-
ferred from the Construction Account to the Working
Capital Account. Costs will be deemed funded if paid to
Indiana Gaming L.P. in cash or if Indiana Gaming L.P. is
made the beneficiary of an escrow agreement or standby
letter of credit, each irrevocable for the period set
aside for hotel construction in the Construction Sched-
ule, in such amount and containing as the only condition
for disbursement or draws a certification by Indiana
Gaming L.P. that the proceeds thereof are used for hotel
construction.
SECTION 3 MAKING THE CASH DISBURSEMENT. Upon
fulfillment of the terms and conditions set forth herein
including, without limitation, the applicable conditions
set forth in Article IV hereof, the Disbursement Agent
shall make payment of each Cash Disbursement, no later
than 3:00 P.M. (New York time) on each Cash Disbursement
Date, by deducting the amount of each Cash Disbursement
from the Construction Account and depositing such amount
in the Indiana Gaming L.P. account maintained with the
Disbursement Agent for such purpose or as otherwise di-
rected by the Company. At least two Business Days prior
to any Cash Disbursement Date, the Company shall instruct
the Disbursement Agent to sell such portion of the Permitted
Investments, if any, held in the Construction Ac-
count as shall be necessary to fund the requested Cash
Disbursement. The Disbursement Agent is authorized to
disburse funds via electronic funds transfer pursuant to
the following wiring instructions as may be amended by an
officer of the Company:
Bank of America
Account# 74-08099
Indiana Gaming Company L.P.
ABA# 071000039
SECTION 4 ADDITIONAL CASH DISBURSEMENT RE-
QUIREMENTS. (a) LINE ITEM REALLOCATION. Subject to the
terms of Section 3.5, in the event that (i) the work to
be performed in respect of any Line Item in a particular
Construction Budget (either for Hard Costs or Soft Costs)
shall be completed without the expenditure of all amounts
in the applicable Construction Budget allocated to such
Line Item (or the Company certifies in an Officers' Cer-
tificate (x) that at least 80% of the work to be per-
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<PAGE>
formed in respect of such Line Item has been completed
and (y) that such work is projected to be completed with-
out the expenditure of all amounts in the applicable Con-
struction Budget allocated to such Line Item) and (ii)
Indiana Gaming L.P. has paid all amounts due to contrac-
tors under contracts entered into with Indiana Gaming
L.P. or any of its subsidiaries and other persons with
whom Indiana Gaming L.P. or its subsidiaries have con-
tracted and directly entitled to payment for work com-
pleted as of the date of request for disbursement in re-
spect of such Line Item (except as may be disputed in
good faith and as to which appropriate reserves are being
maintained), the Company may, subject to the other terms
and conditions of this Agreement regarding the making of
Cash Disbursements, reallocate the undisbursed portion of
the Construction Budget allocable to such Line Item to
the general Contingency Line Item or to other uncompleted
Line Items within such Construction Budget or, if no
uncompleted Line Items remain, to the Construction Bud-
gets of one or more other Projects, as selected by the
Company.
(b) USE OF CONTINGENCY. In the event
that the cost of the work performed or projected to be
performed in respect of any Line Item shall exceed the
amount allocated to such Line Item in the Construction
Budget, the Disbursement Agent, subject to the other
terms and conditions of this Agreement regarding the
making of Cash Disbursements, shall at the request of the
Company disburse funds to pay such excess from the undis-
bursed portion of any general contingency Line Item con-
tained in such Construction Budget. All income on and
gains from Permitted Investments in the Construction
Account shall be deposited in the Construction Account,
and all income and gains on the Working Capital Account
shall be added to the Working Capital Account added to
the general contingency Line Item.
SECTION 5 COMPLETION OF THE PROJECT. Upon the
substantial completion of the Ship Project and the Land
Project, and the payment of all amounts then due (or to
become due by passage of time only) to contractors under
contracts entered into with Indiana Gaming L.P. or any of
its subsidiaries and other persons with whom Indiana
Gaming L.P. or any of its subsidiaries have contracted
and directly entitled (or to become entitled by passage
of time only) to payment for work completed (except as
11
<PAGE>
may be disputed in good faith and as to which appropriate
reserves are being maintained), and a delivery to the
Trustee and Disbursement Agent of an Officer's Certificate
to such effect, any undisbursed, unreleased funds
remaining in the Construction Account shall be trans-
ferred to the Working Capital Account.
ARTICLE IV
CONDITIONS OF CASH DISBURSEMENTS
FROM THE CONSTRUCTION ACCOUNT
SECTION 1 CONDITIONS PRECEDENT TO CASH DIS-
BURSEMENTS. The Disbursement Agent shall make Cash Dis-
bursements from the Construction Account upon satisfac-
tion in connection with each Cash Disbursement of the
conditions set forth on Schedule 2 hereto, as applicable,
and the following conditions:
(a) DOCUMENTS. The Disbursement Agent
shall have received the following, in form and substance
reasonably satisfactory to the Disbursement Agent:
(i) a Request for a Cash Dis-
bursement in substantially the form of Exhibit
A (including the representations and warranties
referred to in Section 4.1(b) herein, which
shall be true and correct in all material re-
spects);
(ii) such other instruments,
documents, opinions, and information pertaining
to the Cash Disbursement or evidencing compli-
ance by the Company with the provisions of this
Agreement and the Indenture as the Disbursement
Agent may reasonably request; and
(iii) within 45 days following
the end of each fiscal quarter of the Company
during which a Cash Disbursement was made, a
copy of a certificate from an independent pub-
lic accountant engaged by Company (a "Reviewing
Agent") in the form of Exhibit C hereto with
respect to all Cash Disbursements and related
Project Funding Requirements during such quar-
ter.
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<PAGE>
(b) REPRESENTATIONS AND WARRANTIES. The
giving of each Request for a Cash Disbursement and the
acceptance by the Company of the proceeds of such Cash
Disbursement shall constitute a representation and war-
ranty by the Company to the Disbursement Agent, the
Trustee and the Holders that:
(i) The representations and
warranties contained in Exhibit A and Schedule
2 hereto are correct, in each case on and as of
the date of such Cash Disbursement, before and
after giving effect to such Cash Disbursement
and to the application of the proceeds there-
from, as though made on and as of such date,
except to the extent that any such representa-
tion or warranty by its terms relates to a
specified prior date;
(ii) No event has occurred and
is continuing, or would result from such Cash
Disbursement or from the application of the
proceeds thereof, that constitutes an Event of
Default under the Indenture or a Project Dis-
bursement Delay or would constitute an Event of
Default but for the requirement that notice be
given or time elapse or both; and
(iii) The Company has satisfied
all of the conditions herein to the release of
such funds.
(c) NO NOTICE OF DEFAULT. The Disburse-
ment Agent shall not have received written notice from
the Trustee that an Event of Default has occurred and is
continuing under the Indenture. The Trustee agrees to
promptly notify the Disbursement Agent of an Event of
Default.
(d) LIMITATION ON DISBURSEMENTS. The
total amount of disbursements made by the Disbursement
Agent shall not exceed $30 million prior to the next time
after the date of this Agreement that the certificate of
suitability granted by the Indiana Gaming Commission to
Indiana Gaming L.P. is formally extended or renewed by
the Indiana Gaming Commission for a period of at least
120 consecutive days or, if earlier, the date gaming
13
<PAGE>
operations are commenced with at least 950 gaming posi-
tions at the Temporary Project. Such extension or renew-
al must be made by one order at one time, and two or more
orders which cumulatively extend the certificate of
suitability for 120 days or more shall not satisfy the
foregoing condition. The Company covenants to promptly
notify the Disbursement Agent of such extension or renew-
al, and the Disbursement Agent may rely on such notifica-
tion without independent verification.
(e) CESSATION OF DISBURSEMENTS. In the
event of an Event of Default or a Project Disbursement
Delay, the Disbursement Agent shall not disburse any
additional funds until such event is waived or cured.
The Company covenants to promptly notify the Disbursement
Agent of such event, and the Disbursement Agent may rely
on such notification without independent verification.
ARTICLE V
OTHER DISBURSEMENTS
SECTION 1 DISBURSEMENTS FROM THE WORKING
CAPITAL ACCOUNT. Notwithstanding Articles III and IV,
the Disbursement Agent shall release amounts on deposit
in the Working Capital Account to a bank account of the
Company or any of its Subsidiaries designated by the
Company for working capital, general corporate or other
purposes, identified in writing at least 2 Business Days
prior thereto by the Company upon receipt of an Officers'
Certificate to the effect that:
(i) such funds will not be
applied in violation of the terms of the Inden-
ture; and
(ii) no Event of Default under
the Indenture shall have occurred or be contin-
uing.
ARTICLE VI
COVENANTS
14
<PAGE>
SECTION 1 COVENANTS OF THE COMPANY. For so
long as this Agreement shall remain in effect, the Compa-
ny shall:
(a) CONSTRUCTION SUPERVISOR. Select Con-
struction Supervisors for the Ship, Land and Temporary
Projects as soon as practicable, and in any event prior
to the earlier of (i) 90 days following the Closing Date
and (ii) in the case of each of the respective Projects,
the date on which construction commences on such Ship,
Land or Temporary Project, as applicable.
(b) PLANS AND SPECIFICATIONS, ETC. As
soon as practicable, prepare (or cause to be prepared)
Plans and Specifications and a Construction Schedule for
the Ship Project, the Land Project and the Temporary Pro-
ject.
(c) COPIES OF CONTRACTS, ETC. Deliver to
the Disbursement Agent upon the request of the Disburse-
ment Agent, (i) copies of all Major and Minor Contracts,
(ii) as promptly as practicable, copies of all work per-
mits, building permits and other permits required, and
(iii) no less frequently than the first Business Day of
each month a list of all Major Contractors that have per-
formed work on or supplied materials for each of the Pro-
jects during the previous month and that are scheduled to
perform work or supply materials to one or more of the
Projects during the current month; provided that at any
time after the delivery of the initial list of such Major
Contractors, the Company may fulfill its obligations
hereunder by delivering a list of changes from the most
recent list delivered to the applicable Construction
Supervisor.
(d) CHANGES IN BUDGET AND PLANS. (i)
Cause the proceeds from the Offerings to be utilized in
accordance with Section 5.15 of the Indenture, and not
make or permit any of its Subsidiaries or Indiana Gaming
L.P. to make, any changes in such Plans and Specifica-
tions, Construction Budgets and Construction Schedules,
except such changes that (x) do not materially alter the
scope of the applicable Project, or (y) are set forth in
revised Plans and Specifications, a revised Construction
Budget or a revised Construction Schedule which are
delivered to the applicable Construction Supervisor,
consistent with a determination by the Company to the
15
<PAGE>
effect that the Company Percentage of such revised Con-
struction Budget does not exceed cash on deposit in the
Construction Account, (ii) deliver to the applicable Con-
struction Supervisor, as promptly as possible, copies of
material change orders for each Project, and (iii) keep
complete and accurate records of all changes in the ap-
plicable Plans and Specifications, Construction Budgets
and Construction Schedules.
(e) ACCESS TO INFORMATION. Permit and
cause each of its Subsidiaries and Indiana Gaming L.P. to
permit the Disbursement Agent and any of its respective
agents on reasonable notice and at such times as shall be
reasonably requested (i) to inspect each of the Plans and
Specifications and Construction Budgets, (ii) to inspect
and review (and receive copies of, if requested) (A) all
changes to the Plans and Specifications and Construction
Budgets, (B) all contracts or subcontracts relating to
the Projects and any changes thereto, (C) all books and
records of the Company and any of its Subsidiaries and
Indiana Gaming L.P. related to the Projects and (D) such
other information as the Construction Supervisor shall
reasonably request relating to the performance of the
Projects (including copies of receipts, invoices and
other supporting documentation to substantiate the costs
to be paid from the proceeds of any requested disburse-
ment hereunder), (iii) to attend any job progress meet-
ings and (iv) to discuss, in the presence of a designated
employee of the Company or Indiana Gaming L.P., the Pro-
jects and other matters related thereto with any Project
Architect, any contractor or subcontractor performing
work or supplying material for the Projects or any em-
ployee of the Company and any of its Subsidiaries and
Indiana Gaming L.P.
(f) CERTAIN RIGHTS. Not claim any rights
with respect to the Accounts except as specifically set
forth in the Indenture, herein or in accordance with
applicable law.
(g) FURTHER ASSURANCES. From time to time
at the expense of the Company, promptly execute, deliver,
file and record all further instruments, indorsement and
other documents, and take such further action as the
Trustee may deem reasonably desirable in obtaining the
full benefits of this Agreement and of the rights, reme-
16
<PAGE>
dies and powers herein granted, including, without limi-
tation, the following:
(i) the filing of any financing
statements, in form acceptable to the Trustee
under the UCC in effect in any jurisdiction
with respect to the liens and security inter-
ests granted hereby. The Company also hereby
authorizes the Trustee to file any such financ-
ing statement without the signature of the
Company to the extent permitted by applicable
law. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing
statement and may be filed in lieu of the orig-
inal to the extent permitted by applicable law.
The Company will pay or reimburse the Trustee
for all filing fees and related expenses;
(ii) furnish to the Trustee
from time to time statements and schedules
further identifying and describing the Cash
Collateral and such other reports in connection
with the Cash Collateral as the Trustee may
reasonably request, all in reasonable detail
and in form satisfactory to the Trustee.
(h) CHANGE OF NAME; IDENTITY; CORPORATE
STRUCTURE; OR CHIEF EXECUTIVE OFFICE. Not change its
name, identity, corporate structure or the location of
its chief executive office without (i) giving the Trustee
and the Disbursement Agent at least thirty (30) days'
prior written notice clearly describing such new name,
identity, corporate structure or new location and provid-
ing such other information in connection therewith as the
Trustee may reasonably request, and (ii) taking all
action satisfactory to the Trustee as the Trustee may
reasonably request to maintain the security interest of
the Trustee in the Cash Collateral intended to be granted
hereby at all times fully perfected with the same or
better priority and in full force and effect.
(i) PROMPT NOTICE. Upon discovering that
it requires funding for a Project and is unable to make
the representations and warranties contained herein in
connection with a Request for a Cash Disbursement,
promptly notify the Trustee and the Holders of such
event.
17
<PAGE>
SECTION 2 COVENANTS OF THE DISBURSEMENT AGENT.
For so long as this Agreement shall remain in effect, in
addition to its other undertakings, the Disbursement
Agent:
(a) THE ACCOUNTS. Shall maintain the
Accounts as follows:
(i) Notwithstanding anything to
the contrary in this or any other agreement
relating to the Accounts, each of the Accounts
is and will be held in trust on behalf of the
Trustee for the benefit of the Holders and not
commingled with any ordinary deposit or commer-
cial bank account, will be maintained with the
trust department of the Disbursement Agent
solely for the Trustee for the benefit of the
Holders and will be subject to the written
instructions of the Trustee.
(ii) Unless otherwise instruct-
ed in writing by the Trustee for the benefit of
the Holders, the Disbursement Agent shall in-
vest amounts on deposit in the Accounts in
Permitted Investments in accordance with the
written instructions of the Company.
(iii) All disbursements and
releases pursuant to this Agreement shall be
made by the Disbursement Agent irrespective of,
and without deduction for, any counterclaim,
defense, recoupment or set-off and shall be fi-
nal, and the Disbursement Agent will not seek
to recover from the Trustee for any reason any
such payment once made.
(iv) All service charges and
fees with respect to this Agreement or the Ac-
counts shall be paid by the Company.
(v) The Disbursement Agent
irrevocably waives and renounces any pledge,
security interest (whether consensual, statuto-
ry or otherwise) or right of offset or compen-
sation that it has or may ever have for its own
benefit with respect to the Accounts.
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<PAGE>
(b) BOOKS AND RECORDS. Shall maintain
appropriate books and records with respect to each Ac-
count in which shall be recorded all transactions related
thereto including, without limitation, all disbursements
hereunder and any Permitted Investments made by the Dis-
bursement Agent and shall permit the Trustee or any of
its agents or representatives to inspect and to make
copies of such books and records at the Company's sole
cost and expense.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES; RIGHTS UPON DEFAULT
SECTION 1 EVENT OF DEFAULT. For purposes of
this Agreement, the term "Event of Default" shall have
the meaning provided in the Indenture and shall also
include any default in the performance, or breach, of any
covenant of the Company set forth in Section 6.1 hereof
that continues for 30 days after written notice has been
given from the Trustee or from holders of at least 25% of
the aggregate principal amount of the Notes then out-
standing, specifying such default and requiring that it
be remedied.
SECTION 2 RIGHTS AND REMEDIES GENERALLY. If
an Event of Default shall occur and be continuing, then
and in every such case, the Trustee shall have all the
rights of a secured party under the UCC, shall have all
rights now or hereafter existing under all other applica-
ble laws, and, subject to any mandatory requirements of
applicable law then in effect, shall have all the rights
set forth in this Agreement and all the rights set forth
with respect to the Cash Collateral or this Agreement in
any other security agreement between the parties.
SECTION 3 ASSEMBLY OF COLLATERAL. If an Event
of Default shall occur and be continuing, upon five days
notice to the Company, the Company shall, at its own ex-
pense, assemble the Cash Collateral (or from time to time
any portion thereof) and make it available to the Trustee
at any place or places designated by the Trustee which is
reasonably convenient to both parties.
19
<PAGE>
SECTION 4 DISPOSITION OF COLLATERAL. The
Trustee will give the Company reasonable notice of the
time and place of any public sale of the Cash Collateral
or any part thereof or of the time after which any pri-
vate sale or any other intended disposition thereof is to
be made. The Company agrees that the requirements of
reasonable notice to it shall be met if such notice is
mailed, postage prepaid to its address specified in
Section 8.2 of this Agreement (or such other address that
the Company may provide to the Trustee in writing) at
least ten (10) days before the time of any public sale or
after which any private sale may be made.
SECTION 5 RECOURSE. The Company shall remain
liable for any deficiency if the proceeds of any sale or
other disposition of the Cash Collateral are insufficient
to satisfy the Indenture Obligations in accordance with
the terms of the Indenture. The Company shall also be
liable for all expenses of the Trustee incurred in con-
nection with collecting such deficiency, including,
without limitation, the fees and disbursements of any
attorneys employed by the Trustee to collect such defi-
ciency.
SECTION 6 EXPENSES; ATTORNEYS' FEES. The
Company shall reimburse the Trustee for all its expenses
in connection with the exercise of its rights hereunder,
including, without limitation, all reasonable attorneys'
fees and legal expenses incurred by the Trustee. Ex-
penses of retaking, holding, preparing for sale, selling
or the like shall include the reasonable attorneys' fees
and legal expenses of the Trustee. All such expenses
shall be secured hereby.
SECTION 7 LIMITATION ON DUTIES REGARDING
PRESERVATION OF CASH COLLATERAL. (a) The Trustee's sole
duty with respect to the custody, safekeeping and physi-
cal preservation of the Cash Collateral in its posses-
sion, under Section 9-207 of the UCC or otherwise, shall
be to deal with it in the same manner as the Trustee
deals with similar property for its own account.
(b) The Trustee shall have no obligation
to take any steps to preserve rights against prior par-
ties to any Cash Collateral.
20
<PAGE>
(c) Neither the Trustee nor any of its
directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon all or any
part of the Cash Collateral or for any delay in doing so
or shall be under any obligation to sell or otherwise
dispose of any Cash Collateral upon the request of the
Company or otherwise.
(d) Neither the Trustee nor the Disburse-
ment Agent nor any of their directors, officers, employ-
ees or agents shall be liable for disbursements made in
good faith reliance on any certificate provided to either
of them pursuant to the terms of this Agreement; PROVID-
ED, HOWEVER, that the Trustee, the Disbursement Agent and
their respective directors, officers, employees and
agents shall remain liable for damages caused by dis-
bursements made through their gross negligence, bad faith
or willful misconduct.
ARTICLE VIII
MISCELLANEOUS
SECTION 1 AMENDMENTS, ETC. No amendment,
modification or waiver of any provision of this Agreement
may be made except in accordance with Article X of the
Indenture; PROVIDED, that any such amendment, modifica-
tion or waiver which adversely affects the Disbursement
Agent shall require the prior written consent of the
Disbursement Agent.
SECTION 2 NOTICES, ETC. All notices and other
communications required or permitted hereunder shall be
in writing and shall be sufficiently given if made by
hand delivery, by telex, by facsimile or registered or
certified mail, postage prepaid, return receipt re-
quested, addressed as follows:
To Disbursement Agent:
LaSalle National Trust, N.A.
135 S. LaSalle
Chicago, Illinois 60603
Attention: Corporate Trust Administration,
Room 1825
21
<PAGE>
To Trustee:
First National Bank of Commerce
210 Baronne Street
New Orleans, Louisiana 70112
Attention: Marilyn Maloney
To the Company:
Argosy Gaming Company
219 Piasa Street
Alton, Illinois 62002-6232
Attention to each of: Chief Financial Officer
and Controller
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60605
Attention: Joseph Walsh, Esq.
Any party hereto may by notice to each other
party designate such additional or different addresses as
shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have
been given or made as of the date so delivered, if per-
sonally delivered; when answered back, if telexed; when
receipt is acknowledged, if faxed; and five calendar days
after mailing, if sent by registered or certified mail
(except that a notice of change of address shall not be
deemed to have been given until actually received by the
addressee).
SECTION 3 NO WAIVER; REMEDIES. No failure on
the part of the Disbursement Agent, the Trustee, or any
Holder to exercise, and no delay in exercising, any right
under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such
right preclude any other or further exercise thereof or
the exercise of any other right.
SECTION 4 INDEMNITY AND EXPENSES. (a) The
Company agrees to indemnify the Trustee, the Holders, the
Disbursement Agent and each Construction Supervisor (the
"Indemnified Parties") from and against any and all
claims, losses and liabilities growing out of or result-
22
<PAGE>
ing from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or
liabilities resulting from such Indemnified Party's bad
faith, gross negligence or willful misconduct as deter-
mined by a final judgment of a court of competent juris-
diction.
(b) The Company will upon demand pay to
the Disbursement Agent, the Trustee or the applicable
Construction Supervisor the amount of any and all reason-
able expenses, including the reasonable fees and expenses
of its counsel and of any experts and agents, that the
Disbursement Agent or the Trustee may incur in connection
with (i) the administration of this Agreement, (ii) the
exercise or enforcement of any of the rights of the Dis-
bursement Agent, the Trustee, or the Holders hereunder or
(iii) the failure by the Company to perform or observe
any of the provisions hereof. The Company will also pay
on demand all reasonable fees and expenses of the appli-
cable Construction Supervisor in connection with this
Agreement.
(c) Notwithstanding any other provision of
this Agreement, the fees and expenses (but not indemni-
ties) payable to any Construction Supervisor and included
in the relevant Construction Budget shall be paid from
the Construction Account upon request by the Company.
(d) The making of any Cash Disbursement or
part thereof shall not constitute an approval or accep-
tance of the work or material by the Trustee or the Dis-
bursement Agent nor shall such approval give rise to any
liability or responsibility related to:
(i) the quality of the work,
the quantity of the work, the rate or progress
in completion of the work, or the sufficiency
of materials or labor being supplied in connec-
tion therewith; and
(ii) any errors, omissions,
inconsistencies or other defects of any nature
in the Plans and Specifications and any inspec-
tion of the work that either the Trustee, the
Disbursement Agent or the Construction Supervi-
sor may choose to make, whether through any
consulting engineer, agent or employee or offi-
23
<PAGE>
cer, during the progress of the work shall be
solely for the Trustee and/or the Disbursement
Agent's information, and under no circumstances
will any such inspection be deemed to have been
made for the purpose of supervising or superin-
tending the work or for the information or pro-
tection of any right or interest of any persons
other than the Trustee, the Disbursement Agent
or the Holders.
(e) In no event shall either the Trustee
or the Disbursement Agent be liable for any Liens which
may be filed by third parties against the Projects.
SECTION 5 EXECUTION IN COUNTERPARTS. This
Agreement may be executed in any number of separate coun-
terparts and by different parties hereto in separate
counterparts, each of which, when so executed, shall be
deemed to be an original and all of which, taken togeth-
er, shall constitute one and the same agreement. Deliv-
ery of an executed counterpart of a signature page to
this Agreement by telecopier shall be effective as deliv-
ery of a manually executed counterpart of this Agreement.
SECTION 6 RELATIONSHIP OF TRUSTEE. The Trust-
ee shall not be under any responsibility in respect of
the validity or sufficiency of this Agreement or the
execution and delivery hereof or in respect of the valid-
ity or sufficiency of any document or agreement delivered
in connection herewith, including, but not limited to,
the Request for a Cash Disbursement as provided by Exhib-
it A. The Trustee shall not be accountable for the use
or application of the funds in the Accounts or for Cash
Disbursements, except as set forth herein or in the
Indenture.
SECTION 7 GOVERNING LAW. This Agreement shall
be governed by, and construed in accordance with, the
laws of the State of Illinois.
SECTION 8 GAMING LAWS. Each of the provisions
of this Agreement is subject to, and shall be enforced in
compliance with, the provisions of any applicable laws
and regulations promulgated by any Gaming Authority.
SECTION 9 WAIVER OF JURY TRIAL. Each of the
Company, the Trustee and the Disbursement Agent hereby
24
<PAGE>
irrevocably waives all right to trial by jury in any ac-
tion, proceeding or counterclaim (whether based on con-
tract, tort or otherwise) arising out of or relating to
this Agreement, or the actions of any party hereto in the
negotiation, administration, performance or enforcement
thereof.
SECTION 10 TERMINATION. The rights, duties
and obligations of each of the parties hereto as provided
for hereunder shall cease and this Agreement shall termi-
nate upon the disbursement of all funds from the Accounts
or the earlier discharge in full of all of the Indenture
Obligations.
ARTICLE IX
ARBITRATION
Section 9.1 ARBITRATION. Any disagreement
with respect to the release of funds from the Construc-
tion Account, or any related disagreement with respect to
the construction, meaning or effect of this Agreement,
arising out of this Agreement or concerning the rights or
obligations of the parties hereunder shall be submitted
to arbitration, one arbitrator to be chosen by the Compa-
ny, one by the Disbursement Agent (with the approval of
the applicable Construction Supervisor), and a third to
be chosen by the first two arbitrators before they enter
into arbitration. The arbitrators shall be impartial and
shall be active or retired persons with experience in
construction, development and/or construction lending
(and in the case of the Ship Project, maritime construc-
tion, development and/or construction lending).
In the event that either party should fail to
choose an arbitrator within 10 days following a written
request by the other party to enter into arbitration, the
requesting party may choose two arbitrators who shall, in
turn, choose the third arbitrator. If the first two
arbitrators have not chosen a third arbitrator at the end
of 10 days following the last day of the selection of the
first two arbitrators, each of the first two arbitrators
shall name three candidates, of whom the other arbitrator
shall eliminate two, and the determination of the third
arbitrator shall be made from the remaining two candi-
dates by drawing lots. Each party shall present its case
25
<PAGE>
to the arbitrators within 15 days following the date of
the appointment of the third arbitrator. The decision of
a majority of the three arbitrators shall be final and
binding upon both parties. Such decision shall be ren-
dered within 10 days of the completion of such arbitra-
tion. Judgment may be entered upon the arbitration award
in any court having jurisdiction. Each party shall bear
the expense of its own arbitrator and shall jointly and
equally bear with the other the expense of the third
arbitrator and of the arbitration. In the event that the
two arbitrators are chosen by one party, as above provid-
ed, the expense of the arbitrators and the arbitration
shall be equally divided between the two parties. Any
such arbitration shall take place in Chicago, Illinois
unless some other location is mutually agreed upon by the
parties. The arbitrators shall resolve any dispute aris-
ing hereunder in a manner consistent with the intent of
the parties as expressed in this Agreement. The arbitra-
tors shall not award any punitive, consequential or exem-
plary damages or any amount in excess of the amount to be
released from the Construction Account. All awards by
the arbitrators shall be payable solely from the amounts
on deposit in the Construction Account.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first
above written.
ARGOSY GAMING COMPANY
By:
-----------------------------
Name:
Title:
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
By:
-----------------------------
Name:
Title:
LASALLE NATIONAL TRUST, N.A.,
as Disbursement Agent
By:
-----------------------------
Name:
Title:
27
<PAGE>
EXHIBIT 4.6
<PAGE>
FORM OF
SECURITY AGREEMENT
(ARGOSY GAMING COMPANY)
THIS SECURITY AGREEMENT, dated as of June 5, 1996 (as amended,
restated, supplemented or otherwise modified from time to time, this
"Security Agreement") is by and between ARGOSY GAMING COMPANY, a Delaware
corporation (the "Grantor"), and FIRST NATIONAL BANK OF COMMERCE, as trustee
(together with its successors in such capacity, the "Trustee" or the
"Grantee") for the holders of those certain Notes (as hereinafter defined).
W I T N E S S E T H
WHEREAS, the Grantor, the Grantee and the Guarantors (as defined in
the Indenture (as hereinafter defined)) have entered into that certain
Indenture dated June 5, 1996 (as amended, restated, supplemented or otherwise
modified from time to time, the "Indenture"), pursuant to which, among other
things, the Grantor shall issue its 13 1/4% First Mortgage Notes due 2004 (the
"Original Notes"); and
WHEREAS, pursuant to a Registration Rights Agreement between the
Grantor, the Guarantors and Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, BA Securities, Inc. and Deutsche Morgan
Grenfell/C. J. Lawrence Inc. (collectively, the "Initial Purchasers"), the
Grantor and the Guarantors will file a registration statement with respect to
an offer to exchange the Original Notes for a new series of 13 1/4% First
Mortgage Notes due 2004 registered under the Securities Act of 1933, as
amended, with terms substantially identical to those of the Original Notes
(the "Series B Notes" and, together with the Original Notes, the "Notes");
WHEREAS, pursuant to the Indenture, the Grantee shall act as the
trustee for the holders of the Original Notes and the holders of the Series B
Notes (collectively, the "Noteholders");
WHEREAS, to secure the repayment of the Notes and any and all other
Secured Obligations (as defined in Section 1 hereof) of the Grantor, the
Grantor has agreed to grant to the Grantee for the ratable benefit of the
Noteholders a security interest in and to the Collateral (as defined in
Section 2 hereof) upon the terms and subject to the conditions hereinafter
set forth;
WHEREAS, Grantor and the Guarantors will derive substantial direct
and indirect benefit from the issuance of the Notes; and
WHEREAS, it is a condition precedent to the purchase of the
Original Notes by the Initial Purchasers from the Grantor that the Grantor
shall have executed and delivered this Security Agreement to the Grantee for
the ratable benefit of the Noteholders;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. Terms defined in the Indenture and not
otherwise defined herein have the respective meanings provided for in the
Indenture. Each term defined in the first paragraph and the Recitals shall
have the meaning set forth above whenever used herein, unless otherwise
expressly provided or unless the context clearly requires otherwise.
When used herein, (a) the terms ACCOUNT, CHATTEL PAPER, DEPOSIT
ACCOUNT, DOCUMENT, EQUIPMENT, FIXTURE, GENERAL INTANGIBLES, GOODS, INVENTORY,
INSTRUMENT, INVESTMENT PROPERTY and UNCERTIFICATED SECURITY shall have the
respective meanings assigned to such terms in the Uniform Commercial Code (as
defined below) and (b) the following terms shall have the following meanings:
"ACCOUNT DEBTOR" shall means the party who is obligated on or under
any Account or Contract Right of the Grantor or, if appropriate, any General
Intangible of the Grantor.
"APPLICABLE GAMING REGULATIONS" shall mean, at any particular time,
federal and state gaming and gambling statutes, laws, rules and regulations
applicable to the Grantor or its Subsidiaries (as defined in the Indenture).
"COLLATERAL" shall have the meaning assigned thereto in Section 2
hereof.
"CONTRACT RIGHTS" shall means any right of the Grantor to payment
under a contract for the sale or lease of Goods or the rendering of services,
which right at the time is not yet earned by performance.
"EVENT OF DEFAULT" means when any of the following events shall
have occurred:
(i) the occurrence of an "Event of Default" as defined in the
Indenture; or
(ii) failure in the due observance or performance by the Grantor of
any of the covenants and conditions in this Security Agreement required
to be observed and performed by Grantor and continuance of such failure
for thirty (30) days after the Grantor becomes aware or should have become
aware of such failure.
"INTELLECTUAL PROPERTY" means all of Grantor's intellectual
property, including without limitation all present and future designs,
patents, patent rights and applications therefor, trademarks, service marks,
business names, logos and registrations or applications therefor, trade
names, inventions, copyrights and all applications and registrations
therefor, software or computer programs, source codes, object codes, license
rights, trade secrets, methods, processes, knowhow, drawings, specifications,
descriptions, and all memoranda, notes and records with respect to any
-2-
<PAGE>
research and development, whether now owned or hereafter acquired by any
Grantor, all goodwill associated with any of the foregoing and proceeds of
all of the foregoing.
"NON-TANGIBLE COLLATERAL" shall mean, collectively, the Grantor's
Accounts, Contract Rights and General Intangibles.
"PERMITTED LIENS" shall have the meaning specified in the Indenture.
"PROCEEDS" means all "proceeds" (as defined in the Uniform
Commercial Code) of, and all other profits, rentals or receipts, in whatever
form, arising from the collection, sale, lease, exchange, assignment,
licensing or other disposition of, or realization upon, any Collateral.
"SECURED OBLIGATIONS" means all Secured Obligations of the Grantor
to repay the Notes and any and all other Secured Obligations of the Grantor
to the Grantee under the Indenture, this Security Agreement and the other
Security Documents (as that term is defined in the Indenture). Without
limiting the foregoing, the Secured Obligations shall include (i) the payment
of the principal of and premium and Liquidated Damages (as that term is
defined in the Indenture), if any, and interest on the Notes, (ii) the
payment of all other indebtedness of the Grantor in respect of the Notes and
the Indenture and (iii) the due performance of and compliance by the Grantor
with all the terms of and all the obligations to the Grantee under the Notes
and the Indenture.
"SECURITY INTERESTS" means the security interests granted pursuant
to Section 2, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Security Agreement.
"TERMINATION DATE" shall have the meaning assigned thereto in
Section 8.7 hereof.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as
in effect in the State of New York on the date of this Security Agreement;
provided, however, that if by reason of mandatory provisions of law, the
perfection or effect of perfection or non-perfection of the security interest
granted hereunder in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "Uniform Commercial
Code" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
SECTION 2. GRANT OF SECURITY INTERESTS
In order to secure the payment and performance of the Secured
Obligations, Grantor hereby grants to Grantee, for the ratable benefit of the
Noteholders, a continuing security interest in and to all right, title and
interest of the Grantor in the following property, whether now owned or
existing or hereafter owned, acquired, licensed, leased, consigned or arising
and regardless of where located (all being collectively referred to as, the
"COLLATERAL"):
(i) Accounts;
-3-
<PAGE>
(ii) Chattel Paper;
(iii) Deposit Accounts;
(iv) Documents or other receipts covering, evidencing or
representing goods;
(v) Equipment;
(vi) Fixtures;
(vii) General Intangibles;
(viii) Goods (including, without limitation, all its Equipment,
Fixtures and Inventory), and together will all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor;
(ix) Intellectual Property;
(x) Instruments and, to the extent not otherwise included in the
definition of Instruments, Investment Property (as defined in the Uniform
Commercial Code as in effect in the State of Illinois), including without
limitation financial assets and securities accounts;
(xi) Inventory;
(xii) money (of every jurisdiction whatsoever);
(xiii) Uncertificated Securities;
(xiv) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that
at any time evidence or contain information relating to any of the
property described above or are otherwise necessary or helpful in the
collection thereof or realization thereon;
(xv) all undocumented vessels, engines, machinery, masts, boats,
anchors, cables, chains, rigging, tackle, apparel, furniture, including
but not limited to all gaming equipment and related devises, and all other
appurtenances thereunto and appertaining or belonging, whether now or
hereafter acquired, and also any and all additions, improvements and
replacements hereafter made in or to such vessels or in or to such
equipment and appurtenances; and
(xvi) Proceeds of all or any of the property described above,
including proceeds of any insurance policies covering any of the property
described above;
-4-
<PAGE>
PROVIDED, HOWEVER, that there shall be expressly excluded from the Collateral
the Grantor's or any Subsidiary's gaming license(s) and any interest in such
gaming license(s) and Indiana Gaming Company, L.P.'s certificate of
suitability and gaming license and any interest in such certificate and
gaming license; PROVIDED, FURTHER, HOWEVER, that there shall be expressly
excluded from the Collateral (i) that certain Charter and Equipment Lease
Agreement dated as of October 30, 1995 by and between St. Charles Riverfront
Station, Inc. and the Grantor with regard to the "Casino St. Charles" and all
of the Grantor's rights thereunder and (ii) the charter and equipment
sublease agreement to be entered into by and between the Grantor and Indiana
Gaming Company, L.P. with regard to the "Casino St. Charles" and all of the
Grantor's rights thereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants that:
(i) no Uniform Commercial Code financing statement (other than
which may have been filed on behalf of the Grantee or in connection with
Permitted Liens) covering any of the Collateral is on file in any public
office;
(ii) the Grantor is (or, to the extent the Collateral is acquired
after the date hereof, will be) the lawful owner of all of the Collateral,
free of all liens and claims whatsoever, other than the security interest
hereunder and Permitted Liens, with full power and authority to execute
this Security Agreement, to perform the Grantor's Secured Obligations
hereunder and to subject the Collateral to the security interest hereunder;
(iii) the Grantor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(iv) the execution and delivery of this Security Agreement and the
performance by the Grantor of its Secured Obligations hereunder are within
the Grantor's corporate powers, have been duly authorized by all necessary
corporate action, have received all necessary governmental approval (if any
shall be required), and do not and will not contravene or conflict with any
provision of law or of the charter or by-laws of the Grantor or of any
agreement, instrument or order binding upon the Grantor;
(v) this Security Agreement is a legal, valid and binding
obligation of the Grantor, enforceable in accordance with its terms;
(vi) all information with respect to the Collateral set forth in any
schedule, certificate or other writing at any time heretofore or hereafter
furnished by the Grantor to the Grantee or any Noteholder, and all other
written information heretofore or hereafter furnished by the Grantor to the
Grantee or any Noteholder, is and will be true and correct in all material
respects as of the date furnished;
-5-
<PAGE>
(vii) the address of the location of the records of the Grantor
concerning Non-Tangible Collateral of the Grantor and the address of the
Grantor's chief executive office are as set forth on Schedule I hereto, and
the Grantor's Inventory and other Goods are located at its own premises at
the address(es) shown on such Schedule I;
(viii) the Grantor is in compliance with the requirements of all
applicable laws, rules, regulations and orders of every governmental
authority, the noncompliance with which could materially adversely affect
the business, results of operations, condition (financial or otherwise) or
business affairs of the Grantor and its Subsidiaries, taken as a whole, or
the value of the Collateral or the worth of the Collateral as collateral
security;
(ix) the Grantor is the lawful and exclusive owner or licensee of
the trademarks listed in Schedule II hereto, except those listed as being
held under a non-exclusive license, said listed trademarks include all the
United States federal registrations or applications registered in the
United States Patent and Trademark office;
(x) the Grantor is the lawful and exclusive owner or licensee of
all rights in the patents listed in Schedule III hereto and in the
copyrights listed in Schedule IV hereto, said patents include all the
United States patents and applications for United States patents that the
Grantor owns and said copyrights constitute all the United States
copyrights registered in the United States Copyright Office and
applications for United States copyrights that the Grantor now uses or
practices under;
(xi) to the knowledge of the Grantor, all of the Intellectual
Property is subsisting and none has been adjudged invalid or unenforceable,
in whole or in part;
(xii) to the best of the Grantor's knowledge, all of the Intellectual
Property is valid and enforceable and, in the case of the patents and
patent applications included in the Intellectual Property, the Grantor has
notified the Grantee in writing of all prior uses (including public uses
and sales ) of which it is aware;
(xiii) the security interests in the Collateral granted to the Grantee
hereunder constitute perfected security interests therein superior and
prior to all Liens (other than Permitted Liens); provided, however, the
Grantor makes no representations or warranties under this clause (xiii)
with regard to Deposit Accounts or money of which the Grantee has not
taken possession;
(xiv) except to the extent that the Grantee shall consent in writing
(which consent shall not be unreasonably withheld), the Grantor (either
itself or through
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<PAGE>
licensees) will, unless the Grantor shall reasonably determine that a
trademark which (or an application for which) is included as part of the
Intellectual Property (any "Trademark") is of negligible economic value to
the Grantor, (A) continue to use each Trademark on each and every trademark
class of goods applicable to its current line as reflected in its current
catalogs, brochures, advertisements and price lists in order to maintain
each Trademark in full force and effect free from any claim of abandonment
for non-use, (B) maintain as in the past the quality of products and
services offered under each Trademark, (C) employ each Trademark with the
appropriate notice of application or registration, (D) not use any
Trademark except for the uses for which registration or application for
registration of such Trademark has been made, and (E) not (and not permit
any licensee or sublicensee thereto to) abandon any Trademark or do any act
of knowingly omit to do any act whereby any Trademark may become
invalidated or abandoned; and
(xv) unless the Grantor shall reasonably determine that a patent,
patent application or Trademark is of negligible economic value to the
Grantor, the Grantor shall use its best efforts to maintain all
registrations of such Intellectual Property in full force and effect by,
without limitation, preparing and filing in a timely manner and with the
appropriate offices all necessary applications for renewal or to extend the
term thereof and all documents required to be filed therewith.
SECTION 4. COVENANTS OF GRANTOR. The Grantor covenants and agrees
that except as provided in the Indenture:
(i) Grantor will take such actions as are reasonably necessary to
keep all tangible Collateral in good repair, working order and condition,
normal depreciation excepted, and will, from time to time, replace any
worn, broken or defective parts thereof;
(ii) Grantor will keep all Collateral free and clear of all security
interests, liens and encumbrances except the creation or existence of
Permitted Liens or as otherwise permitted under the Indenture;
(iii) Grantor will, at all reasonable times, permit Grantee or its
representative to examine or inspect any Collateral, wherever located, and
to examine, inspect and copy Grantor's books and records pertaining to the
Collateral and its business and financial condition and will, upon request
of the Grantee, at any time when an Event of Default has occurred and is
continuing, deliver to the Grantee all of such records and papers which
pertain to the Collateral and the Account Debtors;
-7-
<PAGE>
(iv) Grantor will keep accurate and complete records pertaining to
the Collateral and pertaining to Grantor's business and financial condition
and will submit to Grantee such periodic reports concerning the Collateral
and Grantor's business and financial condition as Grantee may from time to
time reasonably request;
(v) Grantor will pay when due or reimburse Grantee on demand for
all expenses, including reasonable attorneys' fees and legal expenses,
incurred by the Grantee in connection with the collection of any of the
Secured Obligations and all other out-of-pocket expenses (including in each
case all reasonable attorneys' fees) incurred by Grantee in connection with
the creation, perfection, satisfaction or enforcement of the Security
Interest or the execution or creation, continuance or enforcement of this
Security Agreement or any or all of the Secured Obligations and, in the
case of an Event of Default, incurred by the Grantee in seeking to collect
any of the Secured Obligations and to enforce its rights hereunder;
(vi) Grantor will not use or keep any Collateral, or permit it to be
used or kept, for any unlawful purpose or in violation of any federal,
state or local law, statute or, ordinance;
(vii) without the prior written consent of Grantee, Grantor will not
sell, transfer, assign (by operation of law or otherwise), exchange or
otherwise dispose of all or any portion of the Collateral or any interest
therein, or release any party obligated with respect to the Collateral,
except for the sale or lease of Inventory in the ordinary course of its
business and as otherwise permitted by the Indenture and this Security
Agreement, and if the Collateral, or any part thereof or interest therein,
is sold, transferred, assigned, exchanged, or otherwise disposed of in
violation of these provisions, the security interest of Grantee shall
continue in such Collateral or part thereof notwithstanding such sale,
transfer, assignment, exchange or other disposition, and Grantor will hold
the proceeds thereof in a separate account for Grantee's benefit and
Grantor will, at Grantee's request, transfer such proceeds to Grantee in
kind; and
(viii) the Grantor will execute such Uniform Commercial Code financing
statements and other documents (including, without limitation, any
assignment of claim form under or pursuant to the federal assignment of
claims statute, 31 U.S.C. Section 3726, any successor or amended version
thereof or any regulation promulgated under or pursuant to any version
thereof), and pay the cost of filing or recording the same or this Security
Agreement in all public offices necessary or appropriate, and will do such
other acts and things as may be necessary to establish and maintain a
valid, perfected security interest in the Collateral (free of all other
liens, claims and rights of third
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<PAGE>
parties whatsoever other than Permitted Liens) to secure the performance
and payment of the Secured Obligations;
(ix) Grantor will promptly pay when due all license fees,
registration fees, taxes, assessments and other charges which may be levied
upon or assessed against the ownership, operation, possession, maintenance
or use of its Equipment and other Goods (as applicable); provided, however,
that the Grantor shall not be required to pay any such fee, tax, assessment
or other charge, the validity of which is being contested by the grantor in
good faith by appropriate proceedings, so long as forfeiture of any part of
this Equipment or other Goods will not result from the failure of the
Grantor to pay any such fee, tax, assessment or other charge, during the
period of such contest;
(x) upon the reasonable request of the Grantee, stamp on its
records concerning the Collateral (and/or enter in its computer records
concerning the Collateral) and add on all Chattel Paper constituting a
portion of the Collateral a notation, in form reasonably satisfactory to
the Grantee, of the security interest of the Grantee hereunder;
(xi) at all times keep all its Inventory and other Goods insured
under policies maintained with reputable insurance companies against loss,
damage, theft and other risks to such extent as is customarily maintained
by companies similarly situated (and, in any event, as is required by
applicable law) and such policies or certificates thereof shall, if the
Grantee so requests, be furnished to the Grantee and, whenever an Event of
Default shall be existing, the Grantee may apply any proceeds of such
insurance which may be received by it toward payment of the Notes, whether
or not due;
(xii) furnish to the Grantee, as soon as possible and in any event
within thirty (30) days prior to the occurrence from time to time of any
change in the address of the Grantor's chief executive office or in the
name of the Grantor, notice in writing of such change;
(xiii) prosecute diligently all applications now pending with respect
to Intellectual Property rights;
(xiv) protect, preserve and maintain all rights in the Collateral,
including but not limited to the duty to prosecute and/or defend against
any and all suits contesting infringement or dilution of the Intellectual
Property, any other suits containing allegations respecting the validity
of the Collateral or any thereof, and any suits claiming injury to the
goodwill associated with any of the Trademarks;
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<PAGE>
(xv) keep all its Inventory and other Goods, unless the Grantee
shall otherwise consent in writing, at its own premises at address(es)
shown on Schedule I hereto;
(xvi) keep, at its address(es) so indicated on Schedule I hereto,
its records concerning Non-Tangible Collateral, which records will be of
such character as will enable the Grantee or its designees to determine
at any time the status thereof; and
(xvii) upon request of the Grantee, cause to be noted on the
applicable certificate, in the event any of its Equipment is covered by a
certificate of title, the security interest of the Grantee in the Equipment
covered thereby.
Any expenses incurred in protecting, preserving and maintaining any
of the Collateral shall be borne by the Grantor. Whenever an Event of Default
shall be existing, the Grantee shall have the right to bring suit to enforce
any or all of the Intellectual Property or licenses thereunder, in which
event the Grantor shall at the request of the Grantee do any and all lawful
acts and execute any and all proper documents required by the Grantee in aid
of such enforcement and the Grantor shall promptly, upon demand, reimburse
and indemnify the Grantee for all costs and expenses incurred by the Grantee
in the exercise of its rights under this Section 4.
SECTION 5. PROCESSING SALE COLLECTIONS, ETC. Until such time
as an Event of Default shall have occurred and remained continuing and the
Grantee shall have notified the Grantor of the revocation of such power and
authority, the Grantor
(i) may, in the ordinary course of its business, at its own
expense, sell, lease or furnish under contracts of service any of the
Inventory normally held by the Grantor for such purpose, and use and
consume, in the ordinary course of its business, any raw materials, work
in process or materials normally held by the Grantor for such purpose;
(ii) will, at its own expense, endeavor to collect, as and when due,
all amounts due with respect to any of the Non-Tangible Collateral,
including the taking of such action with respect to such collection as the
Grantee may reasonably request or, in the absence of such request, as the
Grantor may deem advisable; and
(iii) may grant, in the ordinary course of business, to any party
obligated on any of the Non-Tangible Collateral, any rebate, refund or
allowance to which such party may be lawfully entitled, and may accept,
in connection therewith, the return of Goods, the sale or lease of which
shall have given rise to such Non-Tangible Collateral.
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<PAGE>
Upon request of the Grantee at any time an Event of Default has
occurred and is continuing, the Grantor will (except as the Grantee may
otherwise consent in writing) forthwith, upon receipt, transmit and deliver
to the Grantee, in the form received, all cash, checks, drafts, chattel paper
and other instruments or writings for the payment of money (properly endorsed,
where required, so that such items may be collected by the Grantee) which may
be received by the Grantor (except for amounts payable to regulatory authorities
as required by law) at any time in full or partial payment or otherwise as
proceeds of any of the Collateral.
The Grantee may, at the direction of the holders of at least 50% of
the aggregate principal amount of the Notes then outstanding, at any time an
Event of Default has occurred and is continuing, whether before or after any
revocation of such power and authority, notify any parties obligated on any
of the Non-Tangible Collateral to make payment to the Grantee of any, amounts
due or to become due thereunder and enforce collection of any of the
Non-Tangible Collateral by suit or otherwise and surrender, release or
exchange all or any part thereof or compromise or extend or renew of any
period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Grantee at any time a
Event of Default has occurred and is continuing, the Grantor will, at its own
expense notify any parties obligated on any of the Non-Tangible Collateral to
make payment to the Grantee of any amounts due or to become due thereunder.
SECTION 6. EVENT OF DEFAULT.
(i) Whenever an Event of Default (as that term is defined in the
Indenture) shall have occurred and remained continuing, subject to
compliance with Applicable Gaming Regulations, the Grantee may exercise
from time to time any rights and remedies available to it under applicable
law, including without limitation the rights of a secured party under the
Uniform Commercial Code.
(ii) The Grantor agrees, in case of an Event of Default,
(1) at Grantee's request, to assemble, at its expense, all its
Inventory and other Goods (other than Fixtures) at a
convenient place or places acceptable to the Grantee, and
(2) at Grantee's request, to execute all such documents and do
all such other things which may be necessary or desirable
in order to enable the Grantee or its nominee to be
registered as owner of the Intellectual Property with any
competent registration authority.
(iii) Any notification of intended disposition of any of the
Collateral required by law shall be deemed reasonably and properly given if
given at least ten (10) days before such disposition. Any proceeds of any
disposition by the Grantee of any of the Collateral shall be applied as set
forth in SECTION 7.
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<PAGE>
SECTION 7. APPLICATION OF PROCEEDS. The proceeds of a sale of
Collateral sold after the occurrence and during the continuation of an
Event of Default shall be applied by the Grantee in accordance with the
Indenture.
SECTION 8. MISCELLANEOUS PROVISIONS.
SECTION 8.1 LIMITATION ON DUTY OF GRANTEE IN RESPECT OF
COLLATERAL. The Grantee shall be deemed to have exercised reasonable care in
the custody and preservation of any of the Collateral in its possession if it
takes such action for that purpose as the Grantor requests in writing, but
failure of the Grantee to comply with any such request shall not of itself be
deemed a failure to exercise reasonable care, and no failure of the Grantee
to preserve or protect any rights with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by the Grantor, shall be deemed a failure to
exercise reasonable care in the custody or preservation of such Collateral.
SECTION 8.2 LIMITATIONS OF GAMING REGULATIONS. The Grantee
acknowledges that its rights and remedies with respect to the Collateral upon
an Event of Default are subject to the limitations and restrictions of
Applicable Gaming Regulations. Further, without limiting any of the
foregoing, the Grantee further acknowledges and agrees that, notwithstanding
any other provision of this Security Agreement to the contrary, (i) nothing
in this Security Agreement shall effect any transfer of any "ownership
interest" (within the meaning of 68 Indiana Administrative Code 5) in Indiana
Gaming Company, L.P. ("Indiana L.P.") or effect any transfer, sale, purchase,
lease or hypothecation of, or any borrowing or loaning of any money against,
the certificate of suitability of Indiana L.P., or any owner's license
subsequently issued to Indiana L.P., (ii) no person, other than the Grantor
or the other current owners of Indiana L.P., shall have any "ownership
interest" in Indiana L.P., and (iii) no person may exercise any rights or
remedies granted in this Security Agreement against Indiana L.P. unless and
until such exercise (a) is approved by the Indiana Gaming Commission and (b)
complies with all Indiana laws and regulations, including 68 Indiana
Administrative Code 5. In addition, the exercise of Grantee's rights
hereunder is expressly subject to the terms of that certain Second Amended
and Restated Agreement of Limited Partnership of Indiana Gaming Company, L.P.
dated February 21, 1996 (including without limitation Section 14.2(e)
thereof). Further, without limiting any of the foregoing, the Grantee
further acknowledges and agrees to the requirement of the Riverboat Gaming
Enforcement Division, Office of State Police, Department of Public Safety and
Corrections, State of Louisiana (the "Division") and/or its successor, that,
within five (5) days of the commencement of the exercise of any remedy(ies)
set forth in this Security Agreement in favor of the Grantee or the
Noteholders with respect to Argosy of Louisiana, Inc., Catfish Queen
Partnership in Commendam or Jazz Enterprises, Inc., the Grantee shall notify
the Division or its successor, in writing, of the date, nature and scope of
the exercise of such remedy(ies) and further acknowledges that the exercise
of such remedy(ies) and any transfer or proposed transfer of any ownership
interest or economic interest resulting therefrom or related thereto shall
require compliance with any applicable provisions of (i) Title 4, Section 528
of the Louisiana Revised Statutes and all regulations promulgated pursuant
thereto, and/or (ii) Title 27, Section 1 et seq. of the Louisiana Revised
Statutes and any regulations promulgated pursuant thereto. Further, without
limiting any of the foregoing, Grantee acknowledges that the foreclosure,
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<PAGE>
possession, sale, transfer or disposition of certain gaming equipment and
machinery is subject to compliance with Applicable Gaming Regulations which
may be proscriptive or require prior consent or approval by applicable state
gaming commissions, including the Missouri Gaming Commission, to such
foreclosure, possession, sale, transfer or disposition. Grantee hereby
further acknowledges that Missouri law does not presently permit the Grantee
to foreclose or take possession of certain gaming equipment and machinery
without the Grantee being licensed by the Missouri Gaming Commission or, in
the alternative, the creation of a different mechanism that is in compliance
with Missouri laws and is acceptable to the Missouri Gaming Commission (which
mechanism could include, subject to the Missouri Gaming Commission's
approval, the sale, transfer or disposition of such gaming equipment and
machinery in question to an entity licensed by the Missouri Gaming
Commission).
SECTION 8.3 NOTICE. All notices or other communications
required or permitted hereunder shall be in writing and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
last known address of the respective party.
SECTION 8.4 NO WAIVER; AMENDMENT. No delay on the part of the
Grantee in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by the Grantee of any right or
remedy shall preclude other or further exercise thereof or the exercise of
any other right or remedy. No amendment to, modification or waiver of, or
consent with respect to, any provision of this Security Agreement shall be
effective unless the same shall be in writing and signed and delivered by the
Grantee, and then such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
SECTION 8.5 CAPTIONS. Section captions used in this Security
Agreement are for convenience of reference only and shall not affect the
construction of this Security Agreement.
SECTION 8.6 COUNTERPARTS. This Security Agreement may be
executed in any number of counterparts and by the different parties on
separate counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Security Agreement.
SECTION 8.7 TERMINATION; RELEASE OF COLLATERAL. This Security
Agreement shall terminate with respect to all Collateral when all of the
Secured Obligations have been fully and indefeasibly paid and satisfied (the
date of such termination of all Collateral, the "Termination Date"). In
addition, the Collateral, or any portion thereof, may be released as provided
in the Indenture (including without limitation, Articles IV and IX thereof).
At the time of any such termination, the Grantee, at the request and expense
of the Grantor, will execute and deliver to the Grantor a proper instrument
or instruments acknowledging the satisfaction and termination of this
Security Agreement with respect to such Collateral, and will duly assign,
transfer and deliver to the Grantor any such Collateral as has not yet
theretofore been sold or otherwise applied or released pursuant to this
Security Agreement, together with any moneys at the time held by the Grantee
in
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<PAGE>
respect of such Collateral. Such assignment and delivery shall be without
warranty by or recourse to the Grantee, except as to the absence of any prior
assignments by the Grantee of its interest in the Collateral.
SECTION 8.8 GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 8.9 BINDING AGREEMENT; ASSIGNMENT. This Security
Agreement shall be binding upon the Grantor and the Grantee and their
respective successors and assigns, and shall inure to the benefit of the
Grantor, the Noteholders and the Grantee and their respective successors and
assigns.
SECTION 8.10 DOCUMENTS SUFFICIENT AS FINANCING STATEMENT. At the
option of the Grantee, this Security Agreement, or a carbon, photographic or
other reproduction of this Security Agreement or of any Uniform Commercial
Code financing statement covering the Collateral or any portion thereof shall
be sufficient as a Uniform Commercial Code financing statement and may be
filed as such.
SECTION 8.11 CONFLICTS WITH PLEDGE AGREEMENTS OR SHIP MORTGAGES.
To the extent that the Collateral is also subject to the Parent Pledge
Agreement (as defined in the Indenture), any Subsidiary Pledge Agreement (as
defined in the Indenture) or any Ship Mortgage (as defined in the Indenture)
and any provisions of the Parent Pledge Agreement, any such Subsidiary Pledge
Agreement or any such First Preferred Ship Mortgage conflict with the
provisions of this Security Agreement, the provisions of the Parent Pledge
Agreement, such Subsidiary Pledge Agreement or such First Preferred Ship
Mortgage, as applicable, shall control.
SECTION 8.12 JURISDICTION; SERVICE OF PROCESS; VENUE. THE
GRANTOR HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING
PERTAINING TO THIS SECURITY AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK, BOROUGH OF MANHATTAN, OR IN THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY THIS EXECUTION AND DELIVERY OF
A COUNTERPART HEREOF, THE GRANTOR IRREVOCABLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS. THE GRANTOR HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS
IN ANY SUCH ACTION OF PROCEEDING MAY BE MADE BY MAILING, BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, A COPY OF THE SUMMONS AND COMPLAINT, OR
OTHER LEGAL PROCESS IN SUCH ACTION OR PROCEEDINGS TO THE GRANTOR AT ITS
ADDRESS SHOWN ON THE SIGNATURE PAGE HEREOF (OR ANY OTHER ADDRESS OF THE
GRANTOR APPEARING ON THE RECORDS OF THE GRANTEE). SERVICE OF PROCESS IN ANY
SUCH ACTION OR PROCEEDING, EFFECTED AS AFORESAID, SHALL BE LEGAL UPON RECEIPT
BY THE GRANTOR AND SHALL BE DEEMED PERSONAL SERVICE UPON THE GRANTOR AND
SHALL BE LEGAL AND BINDING UPON THE GRANTOR FOR ALL
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<PAGE>
PURPOSES, THE GRANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT AS WELL AS ANY RIGHT IT MAY NOT OR
HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OF PROCEEDING, ONCE COMMENCED, TO
ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE.
SECTION 8.13 WAIVER OF RIGHT TO JURY TRIAL. THE GRANTOR AND THE
GRANTEE HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT OR ANY
AMENDMENT INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, this Security Agreement has been duly executed
as of the day and year first above written.
ADDRESS: ARGOSY GAMING COMPANY,
Argosy Gaming Company a Delaware corporation,
219 Piasa Street as Grantor
Alton, Illinois 62002
Attention: Joseph G. Uram
Facsimile: (618) 474-7636 By: ___________________________________
Phone No.: (618) 474-7620
Name: Joseph G. Uram
Title: Executive Vice President, Treasurer
and Chief Financial Officer
ADDRESS: FIRST NATIONAL BANK OF COMMERCE,
First National Bank of Commerce as Trustee and as Grantee
Corporate Trust Division
210 Baronne Street
New Orleans, Louisiana 70112 By: ___________________________________
Facsimile: (504) 561-1432
Phone No.: (504) 561-1640 Name: Denis L. Milliner
Title: Vice President and Trust Officer
Document Number: EX-4-6.WP
<PAGE>
EXHIBIT 4.7
<PAGE>
SCHEDULE TO EXHIBIT 4.7
-----------------------
The Subsidiary Security Agreements by and between each of the
following parties and First National Bank of Commerce, as Trustee, are
substantially identical in all material respects to the attached form
document except as indicated below.
SCHEDULE OF GUARANTORS EXECUTING SUBSIDIARY SECURITY AGREEMENTS
---------------------------------------------------------------
Alton Gaming Company
Argosy of Louisiana, Inc.
Catfish Queen Partnership in Commendam
The Indiana Gaming Company
Iowa Gaming Company
Jazz Enterprises, Inc.
The Missouri Gaming Company
The St. Louis Gaming Company
Pursuant to Paragraph 2 of Item 601 of S-K, the following form is
filed in lieu of the various Subsidiary Security Agreements. Any material
details in which such Subsidiary Security Agreements differ from the enclosed
form document are described in the enclosed form document.
<PAGE>
FORM OF
SUBSIDIARY SECURITY AGREEMENT
[(INSERT SUBSIDIARY NAME)]
THIS SECURITY AGREEMENT, dated as of June 5, 1996 (as amended,
restated, supplemented or otherwise modified from time to time, this
"security agreement") is by and between [INSERT SUBSIDIARY NAME], a _________
corporation (the "Grantor"), and FIRST NATIONAL BANK OF COMMERCE, as trustee
(together with its successors in such capacity, the "Trustee" or the
"Grantee") for the holders of those certain Notes (as hereinafter defined).
W I T N E S S E T H
WHEREAS, the Grantor, Argosy Gaming Company, a Delaware corporation
("Argosy"), the Grantee and the other Guarantors (as defined in the Indenture
(as hereinafter defined)) have entered into that certain Indenture dated June
5, 1996 (as amended, restated, supplemented or otherwise modified from time
to time, the "Indenture"), pursuant to which, among other things, Argosy
shall issue its 13 1/4% First Mortgage Notes due 2004 (the "Original Notes");
and
WHEREAS, pursuant to a Registration Rights Agreement between
Argosy, the Grantor and the other Guarantors and Bear, Stearns & Co. Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc. and
Deutsche Morgan Grenfell/C. J. Lawrence Inc. (collectively, the "Initial
Purchasers"), Argosy, the Grantor and the other Guarantors will file a
registration statement with respect to an offer to exchange the Original
Notes for a new series of 13 1/4% First Mortgage Notes due 2004 registered
under the Securities Act of 1933, as amended, with terms substantially
identical to those of the Original Notes (the "Series B Notes" and, together
with the Original Notes, the "Notes");
WHEREAS, pursuant to the Indenture, the Grantee shall act as the
trustee for the holders of the Original Notes and the holders of the Series B
Notes (collectively, the "Noteholders");
WHEREAS, to secure the repayment of the Notes and any and all other
Secured Obligations (as defined in Section 1 hereof) of the Grantor, the
Grantor has agreed to grant to the Grantee for the ratable benefit of the
Noteholders a security interest in and to the Collateral (as defined in
Section 2 hereof) upon the terms and subject to the conditions hereinafter
set forth;
WHEREAS, Grantor and the Guarantors will derive substantial direct
and indirect benefit from the issuance of the Notes; and
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<PAGE>
WHEREAS, it is a condition precedent to the purchase of the
Original Notes by the Initial Purchasers from Argosy that the Grantor shall
have executed and delivered this Security Agreement to the Grantee for the
ratable benefit of the Noteholders;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. Terms defined in the Indenture and not
otherwise defined herein have the respective meanings provided for in the
Indenture. Each term defined in the first paragraph and the Recitals shall
have the meaning set forth above whenever used herein, unless otherwise
expressly provided or unless the context clearly requires otherwise.
When used herein, (a) the terms ACCOUNT, CHATTEL PAPER, DEPOSIT
ACCOUNT, DOCUMENT, EQUIPMENT, FIXTURE, GENERAL INTANGIBLES, GOODS, INVENTORY,
INSTRUMENT, INVESTMENT PROPERTY and UNCERTIFICATED SECURITY shall have the
respective meanings assigned to such terms in the Uniform Commercial Code (as
defined below) and (b) the following terms shall have the following meanings:
"ACCOUNT DEBTOR" shall means the party who is obligated on or under
any Account or Contract Right of the Grantor or, if appropriate, any General
Intangible of the Grantor.
"APPLICABLE GAMING REGULATIONS" shall mean, at any particular time,
federal and state gaming and gambling statutes, laws, rules and regulations
applicable to Argosy or its Subsidiaries (as defined in the Indenture).
"COLLATERAL" shall have the meaning assigned thereto in Section 2
hereof.
"CONTRACT RIGHTS" shall means any right of the Grantor to payment
under a contract for the sale or lease of Goods or the rendering of services,
which right at the time is not yet earned by performance [ADD IN THE INDIANA
GAMING COMPANY ONLY - including without limitation, the Grantor's rights under
that certain Management Agreement by and between The Indiana Gaming Company
and Indiana Gaming Company, L.P. dated April 11, 1994 (as amended by that
certain Amendment No. 1 to Management Agreement dated February 21, 1996].
"EVENT OF DEFAULT" means when any of the following events shall
have occurred:
(i) the occurrence of an "Event of Default" as defined in the
Indenture; or
(ii) failure in the due observance or performance by the Grantor of
any of the covenants and conditions in this Security Agreement
required to be observed and performed by Grantor and continuance
of such failure for thirty (30) days after the Grantor becomes
aware or should have become aware of such failure.
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<PAGE>
"INTELLECTUAL PROPERTY" means all of Grantor's intellectual
property, including without limitation all present and future designs,
patents, patent rights and applications therefor, trademarks, service marks,
business names, logos and registrations or applications therefor, trade
names, inventions, copyrights and all applications and registrations
therefor, software or computer programs, source codes, object codes, license
rights, trade secrets, methods, processes, knowhow, drawings, specifications,
descriptions, and all memoranda, notes and records with respect to any
research and development, whether now owned or hereafter acquired by any
Grantor, all goodwill associated with any of the foregoing and proceeds of
all of the foregoing.
"NON-TANGIBLE COLLATERAL" shall mean, collectively, the Grantor's
Accounts, Contract Rights and General Intangibles.
"PERMITTED LIENS" shall have the meaning specified in the Indenture.
"PROCEEDS" means all "proceeds" (as defined in the Uniform
Commercial Code) of, and all other profits, rentals or receipts, in whatever
form, arising from the collection, sale, lease, exchange, assignment,
licensing or other disposition of, or realization upon, any Collateral.
"SECURED OBLIGATIONS" means all Secured Obligations of the Grantor
to repay the Notes and any and all other Secured Obligations of the Grantor
to the Grantee under the Indenture, this Security Agreement and the other
Security Documents (as that term is defined in the Indenture). Without
limiting the foregoing, the Secured Obligations shall include (i) the payment
of the principal of and premium and Liquidated Damages (as that term is
defined in the Indenture), if any, and interest on the Notes, (ii) the
payment of all other indebtedness of the Grantor in respect of the Notes and
the Indenture and (iii) the due performance of and compliance by the Grantor
with all the terms of and all the obligations to the Grantee under the Notes
and the Indenture.
"SECURITY INTERESTS" means the security interests granted pursuant
to SECTION 2, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Security Agreement.
"TERMINATION DATE" shall have the meaning assigned thereto in
SECTION 8.7 hereof.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as
in effect in the State of New York on the date of this Security Agreement;
provided, however, that if by reason of mandatory provisions of law, the
perfection or effect of perfection or non-perfection of the security interest
granted hereunder in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "Uniform Commercial
Code" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
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<PAGE>
SECTION 2. GRANT OF SECURITY INTERESTS
In order to secure the payment and performance of the Secured
Obligations, Grantor hereby grants to Grantee, for the ratable benefit of the
Noteholders, a continuing security interest in and to all right, title and
interest of the Grantor in the following property, whether now owned or
existing or hereafter owned, acquired, licensed, leased, consigned or arising
and regardless of where located (all being collectively referred to as, the
"COLLATERAL"):
(i) Accounts;
(ii) Chattel Paper;
(iii) Deposit Accounts;
(iv) Documents or other receipts covering, evidencing or
representing goods;
(v) Equipment;
(vi) Fixtures;
(vii) General Intangibles;
(viii) Goods (including, without limitation, all its Equipment,
Fixtures and Inventory), and together will all accessions,
additions, attachments, improvements, substitutions and
replacements thereto and therefor;
(ix) Intellectual Property;
(x) Instruments and, to the extent not otherwise included in the
definition of Instruments, Investment Property (as defined in
the Uniform Commercial Code as in effect in the State of
Illinois), including without limitation financial assets and
securities accounts;
(xi) Inventory;
(xii) money (of every jurisdiction whatsoever);
(xiii) Uncertificated Securities;
(xiv) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing
software that at any time evidence or contain information
relating to any of the property described above or are
otherwise necessary or helpful in the collection thereof or
realization thereon;
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<PAGE>
(xv) all undocumented vessels, engines, machinery, masts, boats,
anchors, cables, chains, rigging, tackle, apparel, furniture,
including but not limited to all gaming equipment and related
devises, and all other appurtenances thereunto and
appertaining or belonging, whether now or hereafter acquired,
and also any and all additions, improvements and replacements
hereafter made in or to such vessels or in or to such
equipment and appurtenances; and
(xvi) Proceeds of all or any of the property described above,
including proceeds of any insurance policies covering any
of the property described above;
PROVIDED, HOWEVER, that there shall be expressly excluded from the Collateral
the Grantor's or any Subsidiary's gaming license(s) and any interest in such
gaming license(s) [ADD IN THE INDIANA GAMING COMPANY ONLY - and Indiana Gaming
Company, L.P.'s certificate of suitability and gaming license and any interest
in such certificate and gaming license] [ADD IN IOWA GAMING COMPANY ONLY - and
Belle of Sioux City, L.P.'s gaming license and any interest in such gaming
license. Notwithstanding the foregoing, the Collateral shall not include
(i) the partnership interest owned by the Grantor in Belle of Sioux City, L.P.
and (ii) the Grantor's rights and interests in that certain Management and Boat
Lease Agreement dated December 1, 1994 by and between Belle of Sioux City, L.P.
and the Grantor]. [ADD IN THE MISSOURI GAMING COMPANY AND THE ST. LOUIS GAMING
COMPANY ONLY - Grantee hereby acknowledges that Missouri law does not presently
allow any pledge, hypothecation or transfers of gaming licenses (or any
interest therein) issued under the Missouri Riverboat Gambling Act or any
security interest attached to any such license.]
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants that:
(i) no Uniform Commercial Code financing statement (other than
which may have been filed on behalf of the Grantee or in
connection with Permitted Liens) covering any of the
Collateral is on file in any public office;
(ii) the Grantor is (or, to the extent the Collateral is acquired
after the date hereof, will be) the lawful owner of all of the
Collateral, free of all liens and claims whatsoever, other
than the security interest hereunder and Permitted Liens, with
full power and authority to execute this Security Agreement, to
perform the Grantor's Secured Obligations hereunder and to
subject the Collateral to the security interest hereunder;
(iii) the Grantor is a corporation duly organized, validly existing
and in good standing under the laws of the State of __________;
(iv) the execution and delivery of this Security Agreement and the
performance by the Grantor of its Secured Obligations hereunder
are within the Grantor's corporate powers, have been duly
authorized by all necessary corporate action, have received
all necessary governmental approval (if any shall be required),
and do not and will not contravene or conflict with any
provision of law or of the charter or by-laws of the Grantor or
of any agreement, instrument or order binding upon the Grantor;
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<PAGE>
(v) this Security Agreement is a legal, valid and binding
obligation of the Grantor, enforceable in accordance with
its terms;
(vi) all information with respect to the Collateral set forth in
any schedule, certificate or other writing at any time
heretofore or hereafter furnished by the Grantor to the
Grantee or any Noteholder, and all other written information
heretofore or hereafter furnished by the Grantor to the
Grantee or any Noteholder, is and will be true and correct
in all material respects as of the date furnished;
(vii) the address of the location of the records of the Grantor
concerning Non-Tangible Collateral of the Grantor and the
address of the Grantor's chief executive office are as set
forth on SCHEDULE I hereto, and the Grantor's Inventory and
other Goods are located at its own premises at the address(es)
shown on such SCHEDULE I;
(viii)the Grantor is in compliance with the requirements of all
applicable laws, rules, regulations and orders of every
governmental authority, the noncompliance with which could
materially adversely affect the business, results of
operations, condition (financial or otherwise) or business
affairs of the Grantor and its Subsidiaries, taken as a whole,
or the value of the Collateral or the worth of the Collateral
as collateral security;
(ix) the Grantor is the lawful and exclusive owner or licensee of
the trademarks listed in SCHEDULE II hereto, except those
listed as being held under a non-exclusive license, said
listed trademarks include all the United States federal
registrations or applications registered in the United States
Patent and Trademark office;
(x) the Grantor is the lawful and exclusive owner or licensee of
all rights in the patents listed in SCHEDULE III hereto and in
the copyrights listed in SCHEDULE IV hereto, said patents
include all the United States patents and applications for
United States patents that the Grantor owns and said copyrights
constitute all the United States copyrights registered in the
United States Copyright Office and applications for United
States copyrights that the Grantor now uses or practices under;
(xi) to the knowledge of the Grantor, all of the Intellectual
Property is subsisting and none has been adjudged invalid or
unenforceable, in whole or in part;
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<PAGE>
(xii) to the best of the Grantor's knowledge, all of the
Intellectual Property is valid and enforceable and, in the
case of the patents and patent applications included in the
Intellectual Property, the Grantor has notified the Grantee in
writing of all prior uses (including public uses and sales) of
which it is aware;
(xiii)the security interests in the Collateral granted to the
Grantee hereunder constitute perfected security interests
therein superior and prior to all Liens (other than Permitted
Liens); PROVIDED, HOWEVER, the Grantor makes no representations
or warranties under this clause (xiii) with regard to Deposit
Accounts or money of which the Grantee has not taken
possession;
(xiv) except to the extent that the Grantee shall consent in writing
(which consent shall not be unreasonably withheld), the
Grantor (either itself or through licensees) will, unless
the Grantor shall reasonably determine that a trademark
which (or an application for which) is included as part
of the Intellectual Property (any "Trademark") is of
negligible economic value to the Grantor, (A) continue to
use each Trademark on each and every trademark class of
goods applicable to its current line as reflected in its
current catalogs, brochures, advertisements and price
lists in order to maintain each Trademark in full force
and effect free from any claim of abandonment for
non-use, (B) maintain as in the past the quality of
products and services offered under each Trademark, (C)
employ each Trademark with the appropriate notice of
application or registration, (D) not use any Trademark
except for the uses for which registration or application
for registration of such Trademark has been made, and (E)
not (and not permit any licensee or sublicensee thereto
to) abandon any Trademark or do any act of knowingly omit
to do any act whereby any Trademark may become
invalidated or abandoned; and
(xv) unless the Grantor shall reasonably determine that a patent,
patent application or Trademark is of negligible economic
value to the Grantor, the Grantor shall use its best
efforts to maintain all registrations of such
Intellectual Property in full force and effect by,
without limitation, preparing and filing in a timely
manner and with the appropriate offices all necessary
applications for renewal or to extend the term thereof
and all documents required to be filed therewith.
SECTION 4. COVENANTS OF GRANTOR. The Grantor covenants and agrees
that except as provided in the Indenture:
(i) Grantor will take such actions as are reasonably necessary to
keep all tangible Collateral in good repair, working order and
condition, normal depreciation excepted, and will, from time
to time, replace any worn, broken or defective parts thereof;
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<PAGE>
(ii) Grantor will keep all Collateral free and clear of all
security interests, liens and encumbrances except the creation
or existence of Permitted Liens or as otherwise permitted under
the Indenture;
(iii)Grantor will, at all reasonable times, permit Grantee or its
representative to examine or inspect any Collateral, wherever
located, and to examine, inspect and copy Grantor's books and
records pertaining to the Collateral and its business and
financial condition and will, upon request of the Grantee, at
any time when an Event of Default has occurred and is
continuing, deliver to the Grantee all of such records and
papers which pertain to the Collateral and the Account Debtors;
(iv) Grantor will keep accurate and complete records pertaining to
the Collateral and pertaining to Grantor's business and
financial condition and will submit to Grantee such periodic
reports concerning the Collateral and Grantor's business and
financial condition as Grantee may from time to time
reasonably request;
(v) Grantor will pay when due or reimburse Grantee on demand for
all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the Grantee in connection with the
collection of any of the Secured Obligations and all other
out-of-pocket expenses (including in each case all reasonable
attorneys' fees) incurred by Grantee in connection with the
creation, perfection, satisfaction or enforcement of the
Security Interest or the execution or creation, continuance
or enforcement of this Security Agreement or any or all of the
Secured Obligations and, in the case of an Event of Default,
incurred by the Grantee in seeking to collect any of the
Secured Obligations and to enforce its rights hereunder;
(vi) Grantor will not use or keep any Collateral, or permit it to be
used or kept, for any unlawful purpose or in violation of any
federal, state or local law, statute or, ordinance;
(vii)without the prior written consent of Grantee, Grantor will not
sell, transfer, assign (by operation of law or otherwise),
exchange or otherwise dispose of all or any portion of the
Collateral or any interest therein, or release any party
obligated with respect to the Collateral, except for the sale
or lease of Inventory in the ordinary course of its business
and as otherwise permitted by the Indenture and this Security
Agreement, and if the Collateral, or any part thereof or
interest therein, is sold, transferred, assigned, exchanged,
or otherwise disposed of in violation of these provisions, the
security interest of Grantee shall continue in such Collateral
or part thereof notwithstanding such sale, transfer, assignment,
exchange or other disposition, and Grantor will hold the
proceeds thereof in a separate account for Grantee's benefit and
Grantor will, at Grantee's request, transfer such proceeds to
Grantee in kind; and
-8-
<PAGE>
(viii)the Grantor will execute such Uniform Commercial Code financing
statements and other documents (including, without limitation,
any assignment of claim form under or pursuant to the federal
assignment of claims statute, 31 U.S.C. Section 3726, any
successor or amended version thereof or any regulation
promulgated under or pursuant to any version thereof), and pay
the cost of filing or recording the same or this Security
Agreement in all public offices necessary or appropriate, and
will do such other acts and things as may be necessary to
establish and maintain a valid, perfected security interest
in the Collateral (free of all other liens, claims and rights
of third parties whatsoever other than Permitted Liens) to
secure the performance and payment of the Secured Obligations;
(ix) Grantor will promptly pay when due all license fees,
registration fees, taxes, assessments and other charges which
may be levied upon or assessed against the ownership, operation,
possession, maintenance or use of its Equipment and other Goods
(as applicable); provided, however, that the Grantor shall not
be required to pay any such fee, tax, assessment or other
charge, the validity of which is being contested by the grantor
in good faith by appropriate proceedings, so long as forfeiture
of any part of this Equipment or other Goods will not result
from the failure of the Grantor to pay any such fee, tax,
assessment or other charge, during the period of such contest;
(x) upon the reasonable request of the Grantee, stamp on its
records concerning the Collateral (and/or enter in its
computer records concerning the Collateral) and add on all
Chattel Paper constituting a portion of the Collateral a
notation, in form reasonably satisfactory to the Grantee, of
the security interest of the Grantee hereunder;
(xi) at all times keep all its Inventory and other Goods insured
under policies maintained with reputable insurance companies
against loss, damage, theft and other risks to such extent as
is customarily maintained by companies similarly situated (and,
in any event, as is required by applicable law) and such
policies or certificates thereof shall, if the Grantee so
requests, be furnished to the Grantee and, whenever an Event
of Default shall be existing, the Grantee may apply any
proceeds of such insurance which may be received by it toward
payment of the Notes, whether or not due;
-9-
<PAGE>
(xii)furnish to the Grantee, as soon as possible and in any event
within thirty (30) days prior to the occurrence from time to
time of any change in the address of the Grantor's chief
executive office or in the name of the Grantor, notice in
writing of such change;
(xiii)prosecute diligently all applications now pending with respect
to Intellectual Property rights;
(xiv)protect, preserve and maintain all rights in the Collateral,
including but not limited to the duty to prosecute and/or
defend against any and all suits contesting infringement
or dilution of the Intellectual Property, any other suits
containing allegations respecting the validity of the
Collateral or any thereof, and any suits claiming injury
to the goodwill associated with any of the Trademarks;
(xv) keep all its Inventory and other Goods, unless the Grantee
shall otherwise consent in writing, at its own premises at
address(es) shown on Schedule I hereto;
(xvi)keep, at its address(es) so indicated on Schedule I hereto,
its records concerning Non-Tangible Collateral, which records
will be of such character as will enable the Grantee or its
designees to determine at any time the status thereof; and
(xvii)upon request of the Grantee, cause to be noted on the
applicable certificate, in the event any of its Equipment
is covered by a certificate of title, the security interest
of the Grantee in the Equipment covered thereby.
Any expenses incurred in protecting, preserving and maintaining any
of the Collateral shall be borne by the Grantor. Whenever an Event of
Default shall be existing, the Grantee shall have the right to bring suit to
enforce any or all of the Intellectual Property or licenses thereunder, in
which event the Grantor shall at the request of the Grantee do any and all
lawful acts and execute any and all proper documents required by the Grantee
in aid of such enforcement and the Grantor shall promptly, upon demand,
reimburse and indemnify the Grantee for all costs and expenses incurred by
the Grantee in the exercise of its rights under this SECTION 4.
SECTION 5. PROCESSING SALE COLLECTIONS, ETC. Until such time
as an Event of Default shall have occurred and remained continuing and the
Grantee shall have notified the Grantor of the revocation of such power and
authority, the Grantor
(i) may, in the ordinary course of its business, at its own
expense, sell, lease or furnish under contracts of service
any of the Inventory normally held by the Grantor for such
purpose, and use and consume, in the ordinary course of its
business, any raw materials, work in process or materials
normally held by the Grantor for such purpose;
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<PAGE>
(ii) will, at its own expense, endeavor to collect, as and when
due, all amounts due with respect to any of the Non-Tangible
Collateral, including the taking of such action with respect
to such collection as the Grantee may reasonably request or,
in the absence of such request, as the Grantor may deem
advisable; and
(iii) may grant, in the ordinary course of business, to any party
obligated on any of the Non-Tangible Collateral, any rebate,
refund or allowance to which such party may be lawfully
entitled, and may accept, in connection therewith, the return
of Goods, the sale or lease of which shall have given rise to
such Non-Tangible Collateral.
Upon request of the Grantee at any time an Event of Default has
occurred and is continuing, the Grantor will (except as the Grantee may
otherwise consent in writing) forthwith, upon receipt, transmit and deliver
to the Grantee, in the form received, all cash, checks, drafts, chattel paper
and other instruments or writings for the payment of money (properly
endorsed, where required, so that such items may be collected by the Grantee)
which may be received by the Grantor (except for amounts payable to
regulatory authorities as required by law) at any time in full or partial
payment or otherwise as proceeds of any of the Collateral.
The Grantee may, at the direction of the holders of at least 50% of
the aggregate principal amount of the Notes then outstanding, at any time an
Event of Default has occurred and is continuing, whether before or after any
revocation of such power and authority, notify any parties obligated on any
of the Non-Tangible Collateral to make payment to the Grantee of any, amounts
due or to become due thereunder and enforce collection of any of the
Non-Tangible Collateral by suit or otherwise and surrender, release or
exchange all or any part thereof or compromise or extend or renew of any
period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Grantee at any time a
Event of Default has occurred and is continuing, the Grantor will, at its own
expense notify any parties obligated on any of the Non-Tangible Collateral to
make payment to the Grantee of any amounts due or to become due thereunder.
SECTION 6. EVENT OF DEFAULT.
(i) Whenever an Event of Default (as that term is defined in the
Indenture) shall have occurred and remained continuing,
subject to compliance with Applicable Gaming Regulations, the
Grantee may exercise from time to time any rights and remedies
available to it under applicable law, including without
limitation the rights of a secured party under the Uniform
Commercial Code.
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<PAGE>
(ii) The Grantor agrees, in case of an Event of Default,
(1) at Grantee's request, to assemble, at its expense, all its
Inventory and other Goods (other than Fixtures) at a
convenient place or places acceptable to the Grantee, and
(2) at Grantee's request, to execute all such documents and do
all such other things which may be necessary or desirable
in order to enable the Grantee or its nominee to be
registered as owner of the Intellectual Property with
any competent registration authority.
(iii) Any notification of intended disposition of any of the
Collateral required by law shall be deemed reasonably and
properly given if given at least ten (10) days before such
disposition. Any proceeds of any disposition by the
Grantee of any of the Collateral shall be applied as set
forth in SECTION 7.
[ADD IN ARGOSY OF LOUISIANA, INC., JAZZ ENTERPRISES, INC. AND
CATFISH QUEEN PARTNERSHIP ONLY-
(iv) For purposes of Louisiana executory process, the Grantor hereby
acknowledges the Secured Obligations, whether now existing or
to arise hereafter, and confesses judgment for the full amount
thereof if the Secured Obligations are not paid at maturity,
and does by these presents consent, agree and stipulate that
if any portion of the Secured Obligations is not promptly and
fully paid when due, or if there should occur an Event of
Default as defined above, the Secured Obligations shall, at
the option of the Grantee, become immediately due and payable
and it shall be lawful for the Grantee, without making a
demand and without notice or putting in default, the same
being hereby expressly waived, to cause all and singular
the Collateral to be seized and sold by executory
process, with or without appraisement (appraisement being
hereby expressly waived), either in its entirely or in
lots or parcels, as the Grantee may determine, to the
highest bidder for cash, or on such terms as the
plaintiff in such proceedings may direct. The Grantor
hereby expressly waives: (a) the benefit of
appraisement, as provided in Articles 2332, 2336, 2723
and 2724, Louisiana Code of Civil Procedure, and all
other laws conferring the same; (b) the demand and three
(3) days delay accorded by Articles 2639 and 2721,
Louisiana Code of Civil Procedure; (c) the notice of
seizure required by Articles 2293 and 2721, Louisiana
Code of Civil Procedure; (d) the three (3) days delay
provided by Articles 2331 and 2722, Louisiana Code of
Civil Procedure, and (e) the benefit of the other
provisions of Articles 2331, 2722 and 2723, Louisiana
Code of Civil Procedure, and the benefit of any other
Articles or laws relating to rights of appraisement,
notice, or delay not specifically mentioned above; and
the Grantor expressly agrees to the immediate seizure of
the Collateral in the event of suit hereon. The Grantee
shall have the option, at its discretion, of appointing
itself or its agent as keeper of the collateral pursuant
to the provisions of R.S. 9:5136, et seq. The keeper
appointed pursuant to these provisions shall have all the
powers, duties, and compensation provided for in R.S.
9:5138, and shall not be required to provide any bond
otherwise than as required by law in such proceedings,
pursuant to R.S. 9:5139. Such keeper shall be entitled
to reimbursement for all reasonable out of pocket
expenses and for a reasonable fee for its services.]
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SECTION 7. APPLICATION OF PROCEEDS. The proceeds of a sale of
Collateral sold after the occurrence and during the continuation of an Event
of Default shall be applied by the Grantee in accordance with the Indenture.
SECTION 8. MISCELLANEOUS PROVISIONS.
SECTION 8.1 LIMITATION ON DUTY OF GRANTEE IN RESPECT OF
COLLATERAL. The Grantee shall be deemed to have exercised reasonable care in
the custody and preservation of any of the Collateral in its possession if it
takes such action for that purpose as the Grantor requests in writing, but
failure of the Grantee to comply with any such request shall not of itself be
deemed a failure to exercise reasonable care, and no failure of the Grantee
to preserve or protect any rights with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by the Grantor, shall be deemed a failure to
exercise reasonable care in the custody or preservation of such Collateral.
SECTION 8.2 LIMITATIONS OF GAMING REGULATIONS. The Grantee
acknowledges that its rights and remedies with respect to the Collateral upon
an Event of Default are subject to the limitations and restrictions of
Applicable Gaming Regulations. [ADD IN THE INDIANA GAMING COMPANY ONLY -
Further, without limiting any of the foregoing, the Grantee further
acknowledges and agrees that, notwithstanding any other provision of this
Security Agreement to the contrary, (i) nothing in this Security Agreement
shall effect any transfer of any "ownership interest" (within the meaning of
68 Indiana Administrative Code 5) in Indiana Gaming Company, L.P. ("Indiana
L.P.") or effect any transfer, sale, purchase, lease or hypothecation of, or
any borrowing or loaning of any money against, the certificate of suitability
of Indiana L.P., or any owner's license subsequently issued to Indiana L.P.,
(ii) no person, other than the Grantor or the other current owners of Indiana
L.P., shall have any "ownership interest" in Indiana L.P., and (iii) no person
may exercise any rights or remedies granted in this Security Agreement against
Indiana L.P. unless and until such exercise (a) is approved by the Indiana
Gaming Commission and (b) complies with all Indiana laws and regulations,
including 68 Indiana Administrative Code 5. In addition, Grantee acknowledges
that any foreclosure, possession, sale, transfer or disposition of the
partnership interest held by Grantor in Indiana L.P. is subject to compliance
with Applicable Gaming Regulations which may be proscriptive or require prior
consent or approval by applicable state gaming commissions, including the
Indiana Gaming Commission, to such foreclosure, possession, sale, transfer
or disposition. Grantee hereby acknowledges that Indiana law does not
presently allow any pledge, hypothecation or transfers of gaming licenses
(or any interest therein)
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<PAGE>
issued under the Indiana Riverboat Gambling Act or any security interest
attached to any such license. In addition, the exercise of Grantee's rights
hereunder is expressly subject to the terms of that certain Second Amended
and Restated Agreement of Limited Partnership of Indiana Gaming Company, L.P.
dated February 21, 1996 (including without limitation Section 14.2(e)
thereof.)][ADD IN ARGOSY OF LOUISIANA, INC., JAZZ ENTERPRISES, INC. AND
CATFISH QUEEN PARTNERSHIP ONLY - Further, without limiting any of the
foregoing, the Grantee further acknowledges and agrees to the requirement of
the Riverboat Gaming Enforcement Division, Office of State Police, Department
of Public Safety and Corrections, State of Louisiana (the "Division") and/or
its successor, that, within five (5) days of the commencement of the exercise
of any remedy(ies) set forth in this Security Agreement in favor of the
Grantee or the Noteholders with respect to Argosy of Louisiana, Inc., Catfish
Queen Partnership in Commendam or Jazz Enterprises, Inc., the Grantee shall
notify the Division or its successor, in writing, of the date, nature and
scope of the exercise of such remedy(ies) and further acknowledges that the
exercise of such remedy(ies) and any transfer or proposed transfer of any
ownership interest or economic interest resulting therefrom or related
thereto shall require compliance with any applicable provisions of (i) Title
4, Section 528 of the Louisiana Revised Statutes and all regulations
promulgated pursuant thereto, and/or (ii) Title 27, Section 1 et seq. of the
Louisiana Revised Statutes and any regulations promulgated pursuant
thereto.][ADD IN THE MISSOURI GAMING COMPANY AND THE ST. LOUIS GAMING
COMPANY ONLY - Grantee acknowledges that the foreclosure, possession, sale,
transfer or disposition of certain gaming equipment and machinery is subject
to compliance with Applicable Gaming Regulations which may be proscriptive or
require prior consent or approval by applicable state gaming commissions,
including the Missouri Gaming Commission, to such foreclosure, possession,
sale, transfer or disposition. Grantee hereby further acknowledges that
Missouri law does not presently permit the Grantee to foreclose or take
possession of certain gaming equipment and machinery without the Grantee
being licensed by the Missouri Gaming Commission or, in the alternative, the
creation of a different mechanism that is in compliance with Missouri laws
and is acceptable to the Missouri Gaming Commission (which mechanism could
include, subject to the Missouri Gaming Commission's approval, the sale,
transfer or disposition of such gaming equipment and machinery in question to
an entity licensed by the Missouri Gaming Commission).]
SECTION 8.3 NOTICE. All notices or other communications
required or permitted hereunder shall be in writing and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
last known address of the respective party.
SECTION 8.4 NO WAIVER; AMENDMENT. No delay on the part of the
Grantee in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by the Grantee of any right or
remedy shall preclude other or further exercise thereof or the exercise of
any other right or remedy. No amendment to, modification or waiver of, or
consent with respect to, any provision of this Security Agreement shall be
effective unless the same shall be in writing and signed and delivered by the
Grantee, and then such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
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<PAGE>
SECTION 8.5 CAPTIONS. Section captions used in this Security
Agreement are for convenience of reference only and shall not affect the
construction of this Security Agreement.
SECTION 8.6 COUNTERPARTS. This Security Agreement may be
executed in any number of counterparts and by the different parties on
separate counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Security Agreement.
SECTION 8.7 TERMINATION; RELEASE OF COLLATERAL. This Security
Agreement shall terminate with respect to all Collateral when all of the
Secured Obligations have been fully and indefeasibly paid and satisfied (the
date of such termination of all Collateral, the "Termination Date"). In
addition, the Collateral, or any portion thereof, may be released as provided
in the Indenture (including without limitation, Articles IV and IX thereof).
At the time of any such termination, the Grantee, at the request and expense
of the Grantor, will execute and deliver to the Grantor a proper instrument
or instruments acknowledging the satisfaction and termination of this
Security Agreement with respect to such Collateral, and will duly assign,
transfer and deliver to the Grantor any such Collateral as has not yet
theretofore been sold or otherwise applied or released pursuant to this
Security Agreement, together with any moneys at the time held by the Grantee
in respect of such Collateral. Such assignment and delivery shall be without
warranty by or recourse to the Grantee, except as to the absence of any prior
assignments by the Grantee of its interest in the Collateral.
SECTION 8.8 GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 8.9 BINDING AGREEMENT; ASSIGNMENT. This Security
Agreement shall be binding upon the Grantor and the Grantee and their
respective successors and assigns, and shall inure to the benefit of the
Grantor, the Noteholders and the Grantee and their respective successors and
assigns.
SECTION 8.10 DOCUMENTS SUFFICIENT AS FINANCING STATEMENT. At the
option of the Grantee, this Security Agreement, or a carbon, photographic or
other reproduction of this Security Agreement or of any Uniform Commercial
Code financing statement covering the Collateral or any portion thereof shall
be sufficient as a Uniform Commercial Code financing statement and may be
filed as such.
SECTION 8.11 CONFLICTS WITH PLEDGE AGREEMENTS OR SHIP MORTGAGES.
To the extent that the Collateral is also subject to the Parent Pledge
Agreement (as defined in the Indenture), any Subsidiary Pledge Agreement (as
defined in the Indenture) or any Ship Mortgage (as defined in the Indenture)
and any provisions of the Parent Pledge Agreement, any such Subsidiary Pledge
Agreement or any such First Preferred Ship Mortgage conflict with the
provisions of this Security Agreement, the provisions of the Parent Pledge
Agreement, such Subsidiary Pledge Agreement or such First Preferred Ship
Mortgage, as applicable, shall control.
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<PAGE>
SECTION 8.12 JURISDICTION; SERVICE OF PROCESS; VENUE. THE
GRANTOR HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING
PERTAINING TO THIS SECURITY AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK, BOROUGH OF MANHATTAN, OR IN THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY THIS EXECUTION AND DELIVERY OF
A COUNTERPART HEREOF, THE GRANTOR IRREVOCABLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS. THE GRANTOR HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS
IN ANY SUCH ACTION OF PROCEEDING MAY BE MADE BY MAILING, BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, A COPY OF THE SUMMONS AND COMPLAINT, OR
OTHER LEGAL PROCESS IN SUCH ACTION OR PROCEEDINGS TO THE GRANTOR AT ITS
ADDRESS SHOWN ON THE SIGNATURE PAGE HEREOF (OR ANY OTHER ADDRESS OF THE
GRANTOR APPEARING ON THE RECORDS OF THE GRANTEE). SERVICE OF PROCESS IN ANY
SUCH ACTION OR PROCEEDING, EFFECTED AS AFORESAID, SHALL BE LEGAL UPON RECEIPT
BY THE GRANTOR AND SHALL BE DEEMED PERSONAL SERVICE UPON THE GRANTOR AND
SHALL BE LEGAL AND BINDING UPON THE GRANTOR FOR ALL PURPOSES, THE GRANTOR
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT AS WELL AS ANY RIGHT IT MAY NOT OR HEREAFTER HAVE TO REMOVE
ANY SUCH ACTION OF PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE
GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE.
SECTION 8.13 WAIVER OF RIGHT TO JURY TRIAL. THE GRANTOR AND THE
GRANTEE HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT OR ANY
AMENDMENT INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, this Security Agreement has been duly executed
as of the day and year first above written.
Address: [INSERT SUBSIDIARY NAME],
[INSERT SUBSIDIARY NAME] a _________ corporation,
219 Piasa Street as Grantor
Alton, Illinois 62002
Attention: Joseph G. Uram
Facsimile: (618) 474-7636 By:___________________________
Phone No.: (618) 474-7620
Name: ________________________
Title:________________________
Address: FIRST NATIONAL BANK OF COMMERCE,
First National Bank of Commerce as Trustee and as Grantee
Corporate Trust Division
210 Baronne Street
New Orleans, Louisiana 70112 By:___________________________
Facsimile: (504) 561-1432
Phone No.: (504) 561-1640 Name: ________________________
Title:________________________
<PAGE>
FORM OF
PLEDGE AGREEMENT
(ARGOSY GAMING COMPANY)
THIS PLEDGE AGREEMENT, dated as of June 5, 1996 (herein, as
amended, restated, supplemented or otherwise modified from time to time,
called this "Pledge Agreement") is by ARGOSY GAMING COMPANY, a Delaware
corporation (herein called the "Pledgor"), to and in favor of FIRST NATIONAL
BANK OF COMMERCE, as trustee (herein, together with its successors in such
capacity, called the "Trustee" or the "Pledgee") for the holders of those
certain Notes (as hereinafter defined).
W I T N E S S E T H
WHEREAS, the Pledgor, the Pledgee and the Guarantors (as defined in
the Indenture) have entered into that certain Indenture dated June 5, 1996
(herein, as amended, restated, supplemented or otherwise modified from time
to time, called the "Indenture"), pursuant to which, among other things, the
Pledgor shall issue its 13 1/4% First Mortgage Notes due 2004 (herein called
the "Original Notes");
WHEREAS, pursuant to a Registration Rights Agreement between the
Pledgor, the Guarantors and Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, BA Securities, Inc. and Deutsche Morgan
Grenfell/C. J. Lawrence Inc. (herein, collectively, called the "Initial
Purchasers"), the Pledgor and the Guarantors will file a registration
statement with respect to an offer to exchange the Original Notes for a new
series of 13 1/4% First Mortgage Notes due 2004 registered under the Securities
Act of 1933, as amended, with terms substantially identical to those of the
Original Notes (herein called the "Series B Notes" and, together with the
Original Notes, called the "Notes");
WHEREAS, the Pledgor will derive substantial direct and indirect
benefit from the issuance of the Notes;
WHEREAS, pursuant to the Indenture, the Pledgee shall act as the
trustee for the holders of the Original Notes and the holders of the Series B
Notes (herein, collectively, called the "Noteholders");
WHEREAS, Pledgor is (i) the owner of the shares of stock described
in Schedule A hereto issued by the entities listed therein (herein called the
"Pledged Stock"), (ii) the holder of those certain promissory notes described
in SCHEDULE B hereto and payable by the obligors named therein (herein called
the "Pledged Debt") and (iii) the holder of the partnership interests
described in SCHEDULE C hereto issued by the partnerships or joint venturers
named therein (herein called the "Pledged Partnership Interests");
WHEREAS, to secure the repayment of the Notes and any and all other
Secured Obligations (as defined in Section 1 hereof) of the Pledgor, the
Pledgor has agreed to grant to the
<PAGE>
Pledgee for the ratable benefit of the Noteholders a security interest in and
to the Pledged Collateral (as defined in Section 2 hereof) upon the terms and
subject to the conditions hereinafter set forth; and
WHEREAS, it is a condition precedent to the purchase of the
Original Notes by the Initial Purchasers from the Pledgor that the Pledgor
shall have executed and delivered this Pledge Agreement to the Pledgee for
the ratable benefit of the Noteholders;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
Section 1. DEFINITIONS. Terms used herein but not otherwise
defined herein shall have the meanings assigned to such terms in the
Indenture. Each term defined in the first paragraph and the Recitals shall
have the meaning set forth above whenever used herein, unless otherwise
expressly provided or unless the context clearly requires otherwise.
In addition to the terms defined in the first paragraph and the
Recitals, whenever used herein the following terms shall have the meanings
set forth below, unless otherwise expressly provided or unless the context
clearly requires otherwise:
"Applicable Gaming Regulations" shall mean, at any particular time,
federal and state gaming and gambling statutes, laws, rules and regulations
applicable to the Pledgor or its Subsidiaries (as defined in the Indenture).
"Division" shall have the meaning assigned thereto in Section 8(c)
below.
"Event of Default" shall mean when any of the following events
shall have occurred:
(i) the occurrence of an "Event of Default" as defined in the
Indenture; or
(ii) failure in the due observance or performance by the Pledgor of
any of the covenants and conditions in this Pledge Agreement required to
be observed and performed by Pledgor and continuance of such failure for
thirty (30) days after the Pledgor becomes aware or should have become
aware of such failure.
"Pledged Collateral" shall have the meaning assigned thereto in
Section 2 below.
"Secured Obligations" shall mean all obligations of the Pledgor to
repay the Notes and any and all other obligations of the Pledgor to the
Pledgee under the Indenture, this Pledge Agreement and the other Security
Documents (as that term is defined in the Indenture). Without limiting the
foregoing, the Secured Obligations shall include (i) the payment of the
principal of and premium and Liquidated Damages (as that term is defined in
the Indenture), if any, and interest on the Notes, (ii) the payment of all
other indebtedness of the Pledgor in respect of the Notes and the
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<PAGE>
Indenture and (iii) the due performance of and compliance by the Pledgor with
all the terms of and all the obligations to the Pledgee under the Notes and
the Indenture.
"Securities Act" shall have the meaning assigned thereto in Section
8(a)(3) below.
Section 2. Pledge. As security for the timely payment and
performance in full of the Secured Obligations, the Pledgor hereby
hypothecates, pledges, sets over and delivers unto the Pledgee, and grants to
the Pledgee (for the ratable benefit of the Noteholders) a security interest
in and to all of the Pledgor's right, title and interest in and to, the
following (herein, collectively, called the "Pledged Collateral"):
(i) the Pledged Stock, the Pledged Partnership Interests and the
certificates representing or evidencing all such shares and interests;
(ii) all payments of principal or interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for or upon the
conversion of the Pledged Stock or the Pledged Partnership Interests;
(iii) the Pledged Debt and other instruments evidencing the
Pledged Debt;
(iv) all payments of principal or interest, cash, instruments and
other property from time to time received, receivable and otherwise
distributed in respect of or in exchange for any and all of the Pledged
Debt;
(v) all rights and privileges and all securities entitlements of
the Pledgor with respect to the securities and other property referred
to in clauses (i), (ii), (iii) and (iv) above;
(vi) all additional shares of stock of the Guarantors from time
to time acquired by the Pledgor in any manner and the certificates
representing such additional shares and interests and all dividends,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for such
shares and interests;
(vii) all additional indebtedness from time to time owed to the
Pledgor by any obligor of the Pledged Debt and the instruments
evidencing such indebtedness and all interest, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any and all of such
indebtedness; and
(viii) all proceeds of any of the foregoing.
Section 3. SECURITY FOR SECURED OBLIGATIONS. The Pledgor grants
the aforementioned security interest in the Pledged Collateral to and in
favor of the Pledgee to secure the full and faithful payment and performance
by the Pledgor of the Secured Obligations.
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<PAGE>
Section 4. DELIVERY OF THE COLLATERAL. The Pledgor shall deliver
to the Pledgee, (A) any stock certificates, partnership certificates, notes
or other securities or instruments now or hereafter included in the Pledged
Collateral duly indorsed to the Pledgee in blank or accompanied by stock
powers duly executed in blank or other instruments of transfer satisfactory
to the Pledgee together with such other instruments and documents as the
Pledgee may reasonably request, (B) debt instruments, if any, including all
notes payable to the Pledgor from any one or all of the Guarantors, now and
hereinafter included in the Pledged Collateral duly endorsed to the Pledgee
in blank; and (C) all other property comprising part of the Pledged
Collateral accompanied by proper instruments of assignment duly executed by
the Pledgor and such other instruments or documents as may be necessary in
order to perfect and/or maintain the security interest granted hereunder in
and to the Pledged Collateral. Each delivery of such Pledged Collateral
shall be accompanied by a schedule describing the securities and/or
indebtedness theretofore and then being pledged hereunder, which schedule
shall be attached hereto and made a part hereof. Each schedule so delivered
shall supersede any prior schedules so delivered.
Section 5. REPRESENTATIONS AND WARRANTIES. As further security
for the full and faithful performance of the Secured Obligations, the Pledgor
hereby represents, warrants and covenants to the Pledgee that:
(a) the Pledged Stock includes all of the outstanding capital
stock of the Guarantors owned by the Pledgor and the Pledged Stock has
been duly authorized and validly issued and is fully paid and
nonassessable;
(b) the Pledged Partnership Interests include all of the
outstanding partnership interests in Guarantors owned by the Pledgor and
the Pledged Partnership Interests have been duly authorized and validly
issued, and all payments required to be made by any holder of such
partnership interests in respect of such interests have been made;
(c) the Pledged Debt has been duly authorized, authenticated or
issued and delivered and is the legal, valid and binding obligations of
the payors thereof;
(d) except for the security interest granted hereunder, the Pledgor
(i) is and will at all times continue to be the direct owner,
legally, beneficially and of record, of the Pledged Stock, the
Pledged Partnership Interests and the Pledged Debt;
(ii) holds the same free and clear of all liens, security
interests, options or other charges or encumbrances;
(iii) will make no assignment, pledge, hypothecation or
transfer of, or create any security interest in or otherwise
encumber, the Pledged Collateral;
(iv) will cause all securities within the Pledged Collateral
to be certificated securities; PROVIDED, HOWEVER, the Pledgee
acknowledges that the Pledged
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<PAGE>
Partnership Interests shall not be deemed securities for the
purposes of this Pledge Agreement; and
(v) will cause any and all certificates, instruments or
other documents representing or evidencing Pledged Collateral to be
forthwith deposited with the Pledgee and pledged or assigned
thereunder;
(e) by virtue of the execution and delivery by Pledgor of this
Pledge Agreement, when the Pledged Stock and the Pledged Debt are
delivered to the Pledgee in accordance with this Pledge Agreement, and
upon the filing of UCC financing statements in the appropriate filing
offices with respect to the Pledged Partnership Interests, which office is
the office of the Illinois Secretary of State, and with respect to
dividends payable in respect to the Pledged Stock, the Pledgee will
obtain a valid, legal and perfected first priority security interest in
the Pledged Collateral as security for the repayment of the Secured
Obligations free and clear of all liens (other than Permitted Liens);
(f) the Pledgor will cause the Guarantors not to issue any stock
or other equity securities unless such securities are issued in
accordance with the terms of the Indenture and the Pledgor's pro rata
share of such securities is concurrently pledged and delivered to the
Pledgee hereunder (except as otherwise not required under the Indenture);
(g) the Pledgor will at any time or times hereafter execute such
financing statements, continuation statements or other instruments of
assurance as Pledgee may reasonably request to establish, maintain
and/or perfect the Pledgee's security interest in the Pledged Collateral;
(h) this Pledge Agreement is the legal, valid and binding
commitment of the Pledgor according to its terms, except as such
enforcement may be limited by the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting the rights of creditors generally;
(i) the pledge effected hereby is effective to vest in the
Pledgee, for the benefit of the Pledgee and the Noteholders, the rights
of the Pledgee in the Pledged Collateral as set forth herein;
(j) there are no conditions precedent to the effectiveness of this
Pledge Agreement which have not been satisfied or waived;
(k) the Pledgor's chief executive office and place of business is
located at Alton, Illinois, and its records concerning the Pledged
Collateral are kept at said office;
(l) the Pledgor will furnish to the Pledgee, as soon as possible
and in any event within thirty (30) days prior to the occurrence from
time to time of any change in the address of the Pledgor's chief
executive office or in the name of the Pledgor, notice in writing of
such changes; and
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<PAGE>
(m) none of the Pledged Stock constitutes margin stock, as defined
in Regulation U of the Board of Governors of the Federal Reserve System.
The Pledgor covenants and agrees that it will defend the Pledgee's
right, title and security interest in and to the Pledged Collateral and
the proceeds thereof against the claims and demands of all persons
whomsoever, and the Pledgor covenants and agrees that it will have like
title to and right to pledge any other property at any time hereafter
pledged to the Pledgee as Pledged Collateral hereunder and will likewise
defend the Pledgee's right thereto and security interest therein.
Section 6. REGISTRATION IN NOMINEE NAME; DENOMINATIONS. Subject to
Applicable Gaming Regulations:
(a) The Pledgee, on behalf of the Noteholders, shall have the
right (in its sole and absolute discretion) to hold the Pledged Stock in
its own name, the name of its nominee or the name of the Pledgor,
endorsed or assigned in blank or in favor of the Pledgee;
(b) the Pledgor will promptly give to the Pledgee copies of any
notices or other communications received by it specifically with respect
to Pledged Stock registered in the name of the Pledgor;
(c) the Pledgee shall at all times have the right to exchange the
certificates representing Pledged Stock for certificates of smaller or
larger denominations for any purposes consistent with this Pledge
Agreement; and
(d) the Pledgee may, at the direction of the holders of at least
50% of the aggregate principal amount of the Notes then outstanding, at
any time an Event of Default has occurred and is continuing, whether
before or after any revocation of such power and authority, notify any
parties obligated on any of the Non-Tangible Collateral (as defined in
that certain Security Agreement dated as of the date hereof between the
Pledgor and the Pledgee) to make payment to the Pledgee of any, amounts
due or to become due thereunder and enforce collection of any of the
Non-Tangible Collateral by suit or otherwise and surrender, release or
exchange all or any part thereof or compromise or extend or renew for
any period (whether or not longer than the original period) any
indebtedness thereunder or evidenced thereby. Upon request of the Pledgee
at any time an Event of Default has occurred and is continuing, the Pledgor
will, at its own expense, notify any parties obligated on any of the
Non-Tangible Collateral to make payment to the Pledgee of any amounts due
or to become due thereunder.
Section 7. VOTING RIGHTS; DIVIDENDS AND INTEREST; ETC.
Notwithstanding any other provision hereof (including without limitation
subsection (v) of Section 2 hereof) and subject to compliance with
Applicable Gaming Regulations:
(a) unless and until an Event of Default shall have occurred and
be continuing:
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<PAGE>
(i) the Pledgor shall be entitled to exercise or refrain
from exercising any and all voting rights and other consensual
rights accruing to it as the owner of the Pledged Collateral or any
part thereof for any purpose consistent with the terms of this
Pledge Agreement and the Indenture; provided, however, that the exercise or
refrain from exercising of rights could not reasonably be expected,
in the best judgment of the Pledgor, to have a material adverse
effect on the value of the Pledged Collateral or to adversely
affect the rights and remedies of the Pledgee or the Noteholders
under this Pledge Agreement or the Indenture or the ability of the
Pledgee or the Noteholders to exercise the same;
(ii) the Pledgee shall execute and deliver to the Pledgor, or
cause to be executed and delivered to the Pledgor, all such
proxies, powers of attorney, and other instruments as the Pledgor
may reasonably request for the purpose of enabling the Pledgor to
exercise the voting rights which it is entitled to exercise or refrain from
exercising pursuant to subparagraph (i) above; and
(iii) the Pledgor shall be entitled to receive and retain any
and all cash principal, interest, dividends and other income
payable on or with respect to or in accordance with the Pledged
Collateral to the extent and only to the extent that such dividends
and interest payments are permitted by, and otherwise paid in accordance
with, the terms and conditions of the Indenture and applicable laws;
PROVIDED, that any and all other dividends and distributions and
interest made on or in respect of the Pledged Collateral, whether
paid or payable in cash, securities or other property and, whether
resulting from a subdivision, combination or reclassification, or received
in exchange for the Pledged Collateral or any part thereof, or as a
result of any merger, consolidation, acquisition or other exchange
of assets to which the issuer thereof may be a party or otherwise,
shall be applied by Pledgor in accordance with the terms of the
Indenture.
(b) (i) Upon the occurrence and during the continuance of an
Event of Default, or any event which, with giving of notice or
lapse of time, or both, would become an Event of Default, all
rights of the Pledgor to dividends and interest which the Pledgor
is authorized to receive pursuant to paragraph (a)(iii) of this Section 7
shall cease, and all such rights shall thereupon become vested in the
Pledgee, who shall have the sole and exclusive right and authority
to receive and retain as Pledged Collateral such dividends and
interest payments;
(ii) All dividends, distributions and interest payments which
are received by the Pledgor contrary to the provisions of this Section
7(b) shall be received in trust for the benefit of the Pledgee and the
Noteholders, shall be segregated from other property or funds of the
Pledgor and shall be immediately delivered to the Pledgee in the same form
as so received (with any necessary endorsement). Any and all money and
other property paid over to or received by the Pledgee pursuant to the
provisions of this subdivision (ii) of paragraph 7(b) shall be deposited
by the Pledgee in an account to be established by the
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<PAGE>
Pledgee for the benefit of the Pledgee and the Noteholders upon
receipt of such money or other property and shall be applied in
accordance with the provisions of Section 9 hereof.
(c) Upon the occurrence and during the continuance of an Event of
Default, or any event which, with giving of notice or lapse of time, or
both, would become an Event of Default, all rights of the Pledgor to
exercise or refrain from exercising the voting rights which it is
entitled to exercise or refrain from exercising pursuant to paragraph (a)
(i)of this Section 7 shall, upon notice to the Pledgee, cease, and all
such rights shall thereupon become vested in the Pledgee, which shall
have the sole and exclusive right (but not the obligation) and authority
to exercise such voting rights. The Pledgor shall execute and deliver to
the Pledgee all such proxies, powers of attorney, and other instruments as
the Pledgee shall request for the purpose of enabling the Pledgee to
exercise or refrain from exercising the voting rights which it is
entitled to exercise or refrain from exercising pursuant to this Section
7(c) during the continuance of such Event of Default.
Section 8. REMEDIES UPON AN EVENT OF DEFAULT. Upon the occurrence
and during the continuance of an Event of Default, whether or not all of the
Secured Obligations shall have become due and payable, subject to compliance
with Applicable Gaming Regulations:
(a) the Pledgee shall have the following remedies:
(i) subject to the notice requirements and other relevant
provisions of the Notes and the Indenture, the Pledgee may, at its
option, declare all or any part of the Secured Obligations
immediately due and payable and may exercise all of its rights and
remedies under the Indenture, the Notes and the Security Documents (as
that term is defined in the Indenture);
(ii) the Pledgee may, at its option and in the name of the
Pledgor or otherwise, collect and dispose of all or any part of the
Pledged Collateral at a public or private sale without demand of
performance, advertisement or notice (all of which are hereby
waived by Pledgor) for such prices and on such terms as the Pledgee
may reasonably determine and the Pledgee or anyone else may be the
purchaser, lessee, assignee or recipient or any or all of the Pledged
Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale) and, to the extent provided
by law, thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise) of the Pledgor, any such demand, notice
and right or equity being hereby expressly waived and released;
PROVIDED that at least 10 days' notice of the time and place of any
such sale shall be given to Pledgor, and the Pledgee is authorized
to apply all proceeds from the disposition of the Pledged Collateral
in accordance with the terms of the Indenture;
(iii) the Pledgor recognizes that by reason of certain
prohibitions contained in the Securities Act of 1933 (as amended
from time to time, the "Securities Act"), and applicable state
securities law, the Pledgee may be compelled,
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<PAGE>
with respect to any sale of all or any part of the
Pledged Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Pledged Collateral for their own
account, for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges that any such private
sales may be at prices and on terms less favorable to the Pledgee
than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that
any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Pledgee shall have no
obligation to engage in public sales and no obligation to delay the
sale of any Pledged Collateral for the period of time necessary to
permit the Guarantors to register any such Pledged Collateral for
public sale;
(iv) the Pledgee shall have the right to require all
distributions and other amounts payable with respect to the Pledged
Collateral to be applied in accordance with the terms of the
Indenture;
(v) at Pledgee's request, the Pledgor shall cooperate with
the Pledgee and do all things necessary to enable the Pledgee to
sell any and all of the Pledged Collateral, in compliance with all
applicable securities and other laws and regulations; and
(vi) the Pledgee may exercise or enforce any and all rights or
remedies available to the Pledgee by law or agreement against the
Pledgor.
(b) The Pledgor agrees that, upon the occurrence and during the
continuance of an Event of Default, if for any reason the Pledgee
desires and exercises its right to sell any of the Pledged Collateral
pursuant to this Section 8, the Pledgor shall, at any time and from time
to time, upon the written request of the Pledgee:
(i) take (or use its best efforts to cause to be taken) such
action to prepare, distribute and/or file such documents, as are
required or advisable in the opinion of counsel for the Trustee to
register the Pledged Stock under the Securities Act of 1933 (as
amended from time to time, the "Securities Act") to permit the
public sale of such Pledged Collateral, including, but not limited to,
a public offering and sale of the Pledged Stock pursuant to any
applicable federal and state securities laws and regulations, and
to cause the registration statement to remain effective for such
period as prospectuses are required by law to remain effective, or in
the alternative, to effect a sale of such Pledged Collateral in
accordance with an exemption under the Securities Act;
(ii) indemnify, defend and hold harmless the Pledgee and
any financial advisor or underwriter from and against any and all
loss, liability, expenses, costs, fees and disbursements of counsel
(including, without limitation, a reasonable estimate of the cost
of the Pledgee of legal counsel), and any and all claims (including
the costs of investigation) which they may incur insofar as such loss,
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<PAGE>
liability, expense or claim arises out of or is based upon any alleged
untrue statement of a material fact contained in any prospectus (or
any amendment or supplement thereto) or in any notification or
offering circular, or arises out of or is based upon any alleged
omission to state a material fact required to be stated therein or
necessary to make the statements in any respect thereof not
misleading, except insofar as the same may have been caused by any
untrue statement or omission based upon information furnished in
writing to the Pledgor or the issuer of such Pledged Securities by the
Pledgee or the underwriter expressly for use therein; and
(iii) the Pledgor further agrees to use its best efforts
to qualify, file or register, or cause the issuer of any Pledged
Stock to qualify, file or register, any of the Pledged Stock under
applicable state securities laws and regulations as the Pledgee may
specify and to keep effective, or cause to be kept effective, all such
qualifications, filings or registrations.
The Pledgor acknowledges that there is no adequate remedy at law for
failure by it to comply with the foregoing provisions and that such
failure would not be adequately compensable in damages, and therefore
agrees that its agreements with respect to the foregoing may be
specifically enforced.
(c) The Pledgee acknowledges that any sale, transfer or
disposition of the Pledged Collateral may be subject to compliance with
Applicable Gaming Regulations which may require prior consent or
approval by applicable state gaming commissions to such sale, transfer
or disposition. Without limiting the foregoing, the Pledgee acknowledges
that any foreclosure, possession, sale, transfer or disposition of the
Pledged Stock is subject to compliance with Applicable Gaming
Regulations which may be proscriptive or require prior consent or
approval by applicable state gaming commissions, including without
limitation the Missouri Gaming Commission, to such foreclosure, possession,
sale, transfer or disposition. The Pledgee hereby acknowledges that
Missouri law does not presently allow any pledge, hypothecation or
transfers of gaming licenses (or any interest therein) issued under the
Missouri Riverboat Gambling Act or any security interest attached to any
such license. The Pledgee hereby further acknowledges that Missouri law
does not presently permit the Pledgee to foreclose upon, possess, sell,
transfer or dispose of certain gaming equipment and machinery without
the Pledgee being licensed by the Missouri Gaming Commission or, in the
alternative, the creation of a different mechanism that is in compliance
with Missouri laws and is acceptable to the Missouri Gaming Commission
(which mechanism could include, subject to the Missouri Gaming Commission's
approval, the sale, transfer or disposition of such gaming equipment and
machinery in question to an entity licensed by the Missouri Gaming
Commission). Further, without limiting any of the foregoing, the Pledgee
further acknowledges and agrees to the requirement of the Riverboat
Gaming Enforcement Division, Office of State Police, Department of Public
Safety and Corrections, State of Louisiana (the "Division"), that,
within five (5) days of the commencement of the exercise of any
remedy(ies) set forth in this Pledge Agreement in favor of the Pledgee
or the Noteholders with respect to Argosy of Louisiana, Inc., Catfish
Queen Partnership in Commendam or Jazz Enterprises, Inc., the Pledgee shall
notify the
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<PAGE>
Division, in writing, of the date, nature and scope of the
exercise of such remedy(ies) and further acknowledges that the exercise
of such remedy(ies) and any transfer or proposed transfer of any
ownership interest or economic interest resulting therefrom or related
thereto shall require compliance with any applicable provisions of Title
4, Section 528 of the Louisiana Revised Statutes and all regulations
promulgated pursuant thereto. Further, without limiting any of the
foregoing, the Pledgee further acknowledges and agrees that,
notwithstanding any other provision of this Pledge Agreement to the
contrary, (i) nothing in this Pledge Agreement shall effect any transfer
of any "ownership interest" (within the meaning of 68 Indiana
Administrative Code 5) in Indiana Gaming Company, L.P. ("Indiana L.P.") or
effect any transfer, sale, purchase, lease or hypothecation of, or any
borrowing or loaning of any money against, the certificate of suitability
of Indiana L.P., or any owner's license subsequently issued to Indiana
L.P., (ii) no person, other than The Indiana Gaming Company or the other
current owners of Indiana L.P., shall have any "ownership interest" in
Indiana L.P., and (iii) no person may exercise any rights or remedies
granted in this Pledge Agreement against Indiana L.P., unless and until
such exercise (a) is approved by the Indiana Gaming Commission and (b)
complies with all Indiana laws and regulations, including 68 Indiana
Administrative Code 5. In addition, the exercise of Pledgee's rights
hereunder is expressly subject to the terms of that certain Second Amended
and Restated Agreement of Limited Partnership of Indiana Gaming Company,
L.P. dated February 21,1996 (including without limitation Section 14.2(e)
thereof).
Section 9. APPLICATION OF PROCEEDS OF SALE. The proceeds of any
sale of Pledged Collateral pursuant to Section 8 hereof, as well as any
Pledged Collateral consisting of cash, shall be applied by the Pledgee in the
order and to the items provided for and as set forth in the Indenture.
Section 10. REIMBURSEMENT OF PLEDGEE. The Pledgor hereby agrees
to reimburse the Pledgee and the Noteholders, on demand, for all expenses
incurred by the Pledgee in connection with the administration and enforcement
of this Pledge Agreement and agrees to indemnify the Pledgee and hold the
Pledgee and the Noteholders harmless from and against any and all liability
incurred by the Pledgee hereunder or in connection herewith, unless such
liability shall have been determined by a final, non-appealable order of a
court of competent jurisdiction to have resulted solely from willful
misconduct or gross negligence on the part of the Pledgee or the Noteholders.
Section 11. PLEDGEE APPOINTED ATTORNEY-IN-FACT. Except as
otherwise provided herein, the Pledgor hereby appoints the Pledgee the
attorney-in-fact of the Pledgor, from time to time after the occurrence and
during the continuance of an Event of Default, for the purposes of carrying
out the provisions of this Pledge Agreement or taking any action or executing
any instrument which the Pledgee may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest. Without limiting the generality of the foregoing, the
Pledgee shall have the right, upon the occurrence and during the continuance
of an Event of Default, subject to compliance with Applicable Gaming
Regulations, with full power of substitution either in the Pledgee's name or
in the name of the Pledgor, to ask for, demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due under or by
virtue of any Pledged Collateral, to endorse checks, drafts, orders and other
instruments for the payment of money payable to the Pledgor constituting
Pledged Collateral or any part thereof or on account thereof and to give
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<PAGE>
full discharge for the same, to settle, compromise, prosecute or defend any
action, claim or proceeding with respect thereto, and to sell, assign,
endorse, pledge, transfer and make any agreement respecting, or otherwise
deal with, the same; PROVIDED, HOWEVER, that nothing herein contained shall
be construed as requiring or obligating the Pledgee to make any commitment or
to make any inquiry as to the nature or sufficiency of any payment received
by the Pledgee, or to present or file any claim or notice, or to take any
action with respect to the Pledged Collateral or any part thereof or the
monies due or to become due in respect thereof or any property covered
thereby, and no action taken by the Pledgee or omitted to be taken with
respect to the Pledged Collateral or any part thereof shall give rise to any
defense, counterclaim or offset in favor of any Pledgor or to any claim or
action against the Pledgee.
Section 11.1 PLEDGEE MAY PERFORM. If the Pledgor fails to perform
any agreement contained herein, the Pledgee may itself perform, or cause
performance of, such agreement and the expenses of the Pledgee incurred in
connection therewith shall be payable by the Pledgor under Section 11.2 below.
Section 11.2 EXPENSES. The Pledgor will upon demand pay to the
Pledgee the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which the Pledgee may incur in connection with (i) the administration of this
Pledge Agreement, (ii) the custody or preservation of, or the sale of,
collection from or other realization upon, any of the Pledged Collateral,
(iii) the exercise or enforcement of any of the rights of the Pledgee or the
Noteholders hereunder or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof.
Section 12. THE PLEDGEE AS AGENT. The Pledgee will hold in
accordance with this Pledge Agreement all items of the collateral at any time
received by it under this Pledge Agreement. It is expressly understood and
agreed that the obligations of the Pledgee as holder of the Pledged
Collateral and with respect to the disposition thereof, and otherwise under
this Pledge Agreement, are only those expressly set forth in this Pledge
Agreement. The Pledgee shall act hereunder on the terms and conditions set
forth herein.
Section 13. NO WAIVER. No failure on the part of the Pledgee to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or remedy by the Pledgee preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law. The Pledgee shall not be deemed to have waived any
rights hereunder or under any other agreement or instrument unless such
waiver shall be in writing and signed by such party.
Section 14. PLEDGOR'S SECURED OBLIGATIONS ABSOLUTE, ETC.. The
obligations of the Pledgor under this Pledge Agreement shall, subject to
compliance with Applicable Gaming Regulations, be absolute and unconditional
and shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by any
circumstances or occurrence whatsoever, including, without limitation: (a)
any renewal, extension, amendment or modification of, or addition or
supplement to or deletion from any of the Indenture,
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<PAGE>
the Notes or any other instrument or agreement referred to therein, or any
assignment or transfer of any thereof; (b) any waiver, consent, extension,
indulgence or other action or inaction under or in respect of any such
instrument or agreement or this Pledge Agreement, the Indenture, or the Notes
or any exercise or non-exercise of any right, remedy, power or privilege
under or in respect of this Pledge Agreement, the Indenture or the Notes; (c)
any furnishing of any additional security to the Pledgee or any acceptance
thereof or any sale, exchange, release, surrender or realization of or upon
any security by the Pledgee; (d) any invalidity, irregularity or
unenforceability of all or part of the Secured Obligations or of any security
therefor; (e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to the
Pledgor or any subsidiary of the Pledgor, or any action taken with respect to
this Pledge Agreement by any trustee or receiver, or by any court, in any
such proceeding, whether or not the Pledgor shall have notice or knowledge of
any of the foregoing or (f) any other circumstance which might otherwise
constitute a defense available to, or discharge of, the Pledgor in respect of
the Secured Obligations or in respect of this Pledge Agreement.
Section 15. TERMINATION. This Pledge Agreement shall terminate
when all of the Secured Obligations, whether or not contingent, have been
fully and indefeasibly paid and satisfied. In addition, the Pledged
Collateral may be released as provided in the Indenture (including without
limitation Articles IV and IX thereof). Upon such termination or release,
the Pledgee shall reassign and deliver to the Pledgor, or to such person or
persons as the Pledgor shall designate, against receipt therefor, such of the
Pledged Collateral (if any) as shall not have been sold or otherwise applied
by the Pledgee pursuant to the terms hereof and shall still be held by the
Pledgee hereunder, together with appropriate instruments of reassignment and
release. Any such reassignment shall be without recourse to or warranty by
the Pledgee and at the expense of the Pledgor.
Section 16. NOTICES. All notices or other communications required
or permitted hereunder shall be in writing and shall be sufficiently given if
made by hand delivery, by telex, by telecopier or registered or certified
mail, postage prepaid, return receipt requested, addressed to the last known
address of the respective party.
Section 17. FURTHER ASSURANCES. The Pledgor agrees that at any
time from time to time, at the expense of the Pledgor, the Pledgor will do
such further acts and things, and execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Pledgee may at
any time request in connection with the administration and enforcement of
this Pledge Agreement, with respect to the Pledged Collateral or any part
thereof or in order to better assure and confirm unto the Pledgee its rights
and remedies hereunder.
Section 18. BINDING AGREEMENT; ASSIGNMENTS. The Pledge Agreement,
and the terms, covenants and conditions hereof, shall be binding upon and
inure to the benefit of the parties hereto, the Noteholders and their
respective successors and assigns, except that without the written consent of
the Pledgee the Pledgor shall not be permitted, either expressly or by
operation of law, to assign this Pledge Agreement or any interest herein or
in the Pledged Collateral or any part thereof, or, except as otherwise
permitted by the terms of this Pledge Agreement, otherwise transfer, pledge,
encumber or grant any option with respect to the Pledged Collateral or any
part thereof.
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<PAGE>
Section 19. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants
and agreements made by the Pledgor herein and in the certificates or other
instruments prepared or delivered in connection with this Pledge Agreement
shall be considered to have been relied upon by the Pledgee and the
Noteholders and shall survive the issuance by the Pledgor of the Notes and
shall continue in full force and effect as long as any of the Secured
Obligations, whether or not contingent, have not been fully and indefeasibly
paid and satisfied.
(b) In the event any one or more of the provisions contained in this
Pledge Agreement should be held invalid, illegal or unenforceable in any
respect, no party hereto shall be required to comply with such provision for
so long as such provision is held to be invalid, illegal or unenforceable,
and the validity, legality and enforceability of the remaining provisions
contained herein or therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
Section 20. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
Section 21. HEADINGS. Section headings used herein are for
convenience only, and are not to affect the construction of, or be taken into
consideration in interpreting, this Pledge Agreement.
Section 22. COUNTERPARTS. This Pledge Agreement may be executed
in any number of copies or counterparts, all of which taken together shall
constitute one agreement, and any of the parties may execute this Pledge
Agreement by signing any such copy or counterpart.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Pledge Agreement, or caused this Pledge Agreement to be duly executed, as of
the day and year first above written.
ARGOSY GAMING COMPANY,
a Delaware corporation
By:
--------------------------------
Name: Joseph G. Uram
Title: Executive Vice President, Treasurer
and Chief Financial Officer
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
By:
--------------------------------
Name: Denis L. Milliner
Title: Vice President and Trust Officer
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<PAGE>
EXHIBIT 4.9
-----------
<PAGE>
SCHEDULE TO EXHIBIT 4.9
-----------------------
The Subsidiary Pledge Agreements by and between each of the
following parties and First National Bank of Commerce, as Trustee, are
substantially identical in all material respects to the attached form
document except as indicated below.
SCHEDULE OF GUARANTORS EXECUTING GUARANTEES
-------------------------------------------
Alton Gaming Company
Argosy of Louisiana, Inc.
Catfish Queen Partnership in Commendam
The Indiana Gaming Company
Iowa Gaming Company
Jazz Enterprises, Inc.
The Missouri Gaming Company
The St. Louis Gaming Company
Pursuant to Paragraph 2 of Item 601 of S-K, the following form is
filed in lieu of the various Subsidiary Pledge Agreements. Any material
details in which such Subsidiary Pledge Agreements differ from the enclosed
form document are described in the enclosed form document.
<PAGE>
FORM OF
SUBSIDIARY PLEDGE AGREEMENT
[INSERT SUBSIDIARY NAME]
THIS PLEDGE AGREEMENT, dated as of June 5, 1996 (herein, as
amended, restated, supplemented or otherwise modified from time to time,
called this "Pledge Agreement") is by [INSERT SUBSIDIARY NAME], a
____________ corporation (herein called the "Pledgor"), to and in favor of
FIRST NATIONAL BANK OF COMMERCE, as trustee (herein, together with its
successors in such capacity, called the "Trustee" or the "Pledgee") for the
holders of those certain Notes (as hereinafter defined).
W I T N E S S E T H
WHEREAS, the Pledgor, Argosy Gaming Company, a Delaware corporation
("Argosy"), the Pledgee and the other Guarantors (as defined in the
Indenture) have entered into that certain Indenture dated June 5, 1996
(herein, as amended, restated, supplemented or otherwise modified from time
to time, called the "Indenture"), pursuant to which, among other things,
Argosy shall issue its 13 1/4% Notes due 2004 (herein called the "Original
Notes");
WHEREAS, pursuant to a Registration Rights Agreement between
Argosy, the Pledgor, the other Guarantors and Bear, Stearns & Co. Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc. and
Deutsche Morgan Grenfell/C. J. Lawrence Inc. (herein, collectively, called
the "Initial Purchasers"), Argosy, the Pledgor and the other Guarantors will
file a registration statement with respect to an offer to exchange the
Original Notes for a new series of 13 1/4% Notes due 2004 registered under the
Securities Act of 1933, as amended, with terms substantially identical to
those of the Original Notes (herein called the "Series B Notes" and, together
with the Original Notes, called the "Notes");
WHEREAS, the Pledgor will derive substantial direct and indirect
benefit from the issuance of the Notes;
WHEREAS, pursuant to the Indenture, the Pledgee shall act as the
trustee for the holders of the Original Notes and the holders of the Series B
Notes (herein, collectively, called the "Noteholders");
WHEREAS, Pledgor is (i) the owner of the shares of stock described
in SCHEDULE A hereto issued by the entities listed therein (herein called the
"Pledged Stock"), (ii) the holder of those certain promissory notes described
in SCHEDULE B hereto and payable by the obligors named therein (herein called
the "Pledged Debt") and (iii) the holder of the partnership interests
described in SCHEDULE C hereto issued by the partnerships or joint venturers
named therein (herein called the "Pledged Partnership Interests");
<PAGE>
WHEREAS, to secure the repayment of the Notes and any and all other
Secured Obligations (as defined in Section 1 hereof) of the Pledgor, the
Pledgor has agreed to grant to the Pledgee for the ratable benefit of the
Noteholders a security interest in and to the Pledged Collateral (as defined
in Section 2 hereof) upon the terms and subject to the conditions hereinafter
set forth; and
WHEREAS, it is a condition precedent to the purchase of the
Original Notes by the Initial Purchasers from Argosy that the Pledgor shall
have executed and delivered this Pledge Agreement to the Pledgee for the
ratable benefit of the Noteholders;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
Section 1. DEFINITIONS. Terms used herein but not otherwise
defined herein shall have the meanings assigned to such terms in the
Indenture. Each term defined in the first paragraph and the Recitals shall
have the meaning set forth above whenever used herein, unless otherwise
expressly provided or unless the context clearly requires otherwise.
In addition to the terms defined in the first paragraph and the
Recitals, whenever used herein the following terms shall have the meanings
set forth below, unless otherwise expressly provided or unless the context
clearly requires otherwise:
"Applicable Gaming Regulations" shall mean, at any particular time,
federal and state gaming and gambling statutes, laws, rules and regulations
applicable to Argosy or its Subsidiaries (as defined in the Indenture).
"Division" shall have the meaning assigned thereto in Section 8(c)
below.
"Event of Default" shall mean when any of the following events
shall have occurred:
(i) the occurrence of an "Event of Default" as defined
in the Indenture; or
(ii) failure in the due observance or performance by the Pledgor of
any of the covenants and conditions in this Pledge Agreement required to
be observed and performed by Pledgor and continuance of such failure for
thirty (30) days after the Pledgor becomes aware or should have become
aware of such failure.
"Pledged Collateral" shall have the meaning assigned thereto in
Section 2 below.
"Secured Obligations" shall mean all obligations of the Pledgor to
repay the Notes and any and all other obligations of the Pledgor to the
Pledgee under the Indenture, this Pledge Agreement and the other Security
Documents (as that term is defined in the Indenture). Without limiting the
foregoing, the Secured Obligations shall include (i) the payment of the
principal of and
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<PAGE>
premium and Liquidated Damages (as that term is defined in the Indenture),
if any, and interest on the Notes, (ii) the payment of all other indebtedness
of the Pledgor in respect of the Notes and the Indenture and (iii) the due
performance of and compliance by the Pledgor with all the terms of and all
the obligations to the Pledgee under the Notes and the Indenture.
"Securities Act" shall have the meaning assigned thereto in Section
8(a)(3) below.
Section 2. PLEDGE. As security for the timely payment and
performance in full of the Secured Obligations, the Pledgor hereby
hypothecates, pledges, sets over and delivers unto the Pledgee, and grants to
the Pledgee (for the ratable benefit of the Noteholders) a security interest
in and to all of the Pledgor's right, title and interest in and to, the
following (herein, collectively, called the "Pledged Collateral"):
(i) the Pledged Stock, the Pledged Partnership Interests and the
certificates representing or evidencing all such shares and interests;
(ii) all payments of principal or interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for or upon the
conversion of the Pledged Stock or the Pledged Partnership Interests;
(iii) the Pledged Debt and other instruments evidencing the Pledged
Debt;
(iv) all payments of principal or interest, cash, instruments and
other property from time to time received, receivable and otherwise
distributed in respect of or in exchange for any and all of the Pledged
Debt;
(v) all rights and privileges and all securities entitlements of
the Pledgor with respect to the securities and other property referred
to in clauses (i), (ii), (iii) and (iv) above;
(vi) all additional shares of stock of the Guarantors from time to
time acquired by the Pledgor in any manner and the certificates representing
such additional shares and interests and all dividends, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for such shares and interests;
(vii) all additional indebtedness from time to time owed to the
Pledgor by any obligor of the Pledged Debt and the instruments evidencing
such indebtedness and all interest, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any and all of such indebtedness; and
(viii) all proceeds of any of the foregoing.
[INSERT FOR IOWA GAMING COMPANY ONLY: Notwithstanding the foregoing, the
Pledged Collateral shall not include (i) the partnership interest owned by
the Pledgor in Belle of Sioux City,
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<PAGE>
L.P. and (ii) the Pledgor's rights and interests in that certain Management
and Boat Lease Agreement dated December 1, 1994 by and between Belle of
Sioux City, L.P. and the Pledgor.]
Section 3. SECURITY FOR SECURED OBLIGATIONS. The Pledgor grants
the aforementioned security interest in the Pledged Collateral to and in
favor of the Pledgee to secure the full and faithful payment and performance
by the Pledgor of the Secured Obligations.
Section 4. DELIVERY OF THE COLLATERAL. The Pledgor shall deliver
to the Pledgee, (A) any stock certificates, partnership certificates, notes
or other securities or instruments now or hereafter included in the Pledged
Collateral duly indorsed to the Pledgee in blank or accompanied by stock
powers duly executed in blank or other instruments of transfer satisfactory
to the Pledgee together with such other instruments and documents as the
Pledgee may reasonably request, (B) debt instruments, if any, including all
notes payable to the Pledgor from any one or all of the Guarantors, now and
hereinafter included in the Pledged Collateral duly endorsed to the Pledgee
in blank; and (C) all other property comprising part of the Pledged
Collateral accompanied by proper instruments of assignment duly executed by
the Pledgor and such other instruments or documents as may be necessary in
order to perfect and/or maintain the security interest granted hereunder in
and to the Pledged Collateral. Each delivery of such Pledged Collateral
shall be accompanied by a schedule describing the securities and/or
indebtedness theretofore and then being pledged hereunder, which schedule
shall be attached hereto and made a part hereof. Each schedule so delivered
shall supersede any prior schedules so delivered.
Section 5. REPRESENTATIONS AND WARRANTIES. As further security
for the full and faithful performance of the Secured Obligations, the Pledgor
hereby represents, warrants and covenants to the Pledgee that:
(a) the Pledged Stock includes all of the outstanding capital
stock of the Guarantors owned by the Pledgor and the Pledged Stock has been
duly authorized and validly issued and is fully paid and nonassessable;
(b) the Pledged Partnership Interests include all of the
outstanding partnership interests in Guarantors owned by the Pledgor and the
Pledged Partnership Interests have been duly authorized and validly issued,
and all payments required to be made by any holder of such partnership
interests in respect of such interests have been made;
(c) the Pledged Debt has been duly authorized, authenticated or
issued and delivered and is the legal, valid and binding obligations of
the payors thereof;
(d) except for the security interest granted hereunder, the Pledgor
(i) is and will at all times continue to be the direct owner,
legally, beneficially and of record, of the Pledged Stock, the
Pledged Partnership Interests and the Pledged Debt;
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<PAGE>
(ii) holds the same free and clear of all liens, security
interests, options or other charges or encumbrances;
(iii) will make no assignment, pledge, hypothecation or
transfer of, or create any security interest in or otherwise
encumber, the Pledged Collateral;
(iv) will cause all securities within the Pledged
Collateral to be certificated securities; PROVIDED, HOWEVER, the
Pledgee acknowledges that the Pledged Partnership Interests shall
not be deemed securities for the purposes of this Pledge Agreement;
and
(v) will cause any and all certificates, instruments or other
documents representing or evidencing Pledged Collateral to be
forthwith deposited with the Pledgee and pledged or assigned
thereunder;
(e) by virtue of the execution and delivery by Pledgor of this
Pledge Agreement, when the Pledged Stock and the Pledged Debt are delivered
to the Pledgee in accordance with this Pledge Agreement, and upon the filing
of UCC financing statements in the appropriate filing offices with respect to
the Pledged Partnership Interests, which office is the office of the Illinois
Secretary of State, and with respect to dividends payable in respect to the
Pledged Stock, the Pledgee will obtain a valid, legal and perfected first
priority security interest in the Pledged Collateral as security for the
repayment of the Secured Obligations free and clear of all liens (other
than Permitted Liens);
(f) the Pledgor will cause the Guarantors owned by the Pledgor not
to issue any stock or other equity securities unless such securities are
issued in accordance with the terms of the Indenture and the Pledgor's pro
rata share of such securities is concurrently pledged and delivered to the
Pledgee hereunder (except as otherwise not required under the Indenture);
(g) the Pledgor will at any time or times hereafter execute such
financing statements, continuation statements or other instruments of
assurance as Pledgee may reasonably request to establish, maintain
and/or perfect the Pledgee's security interest in the Pledged Collateral;
(h) this Pledge Agreement is the legal, valid and binding
commitment of the Pledgor according to its terms, except as such
enforcement may be limited by the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting the rights of creditors generally;
(i) the pledge effected hereby is effective to vest in the
Pledgee, for the benefit of the Pledgee and the Noteholders, the rights
of the Pledgee in the Pledged Collateral as set forth herein;
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<PAGE>
(j) there are no conditions precedent to the effectiveness of this
Pledge Agreement which have not been satisfied or waived;
(k) the Pledgor's chief executive office is located at Alton,
Illinois, and its records concerning the Pledged Collateral are kept at
said office;
(l) the Pledgor will furnish to the Pledgee, as soon as possible
and in any event within thirty (30) days prior to the occurrence from
time to time of any change in the address of the Pledgor's chief
executive office or in the name of the Pledgor, notice in writing of
such changes; and
(m) none of the Pledged Stock constitutes margin stock, as defined
in Regulation U of the Board of Governors of the Federal Reserve System.
The Pledgor covenants and agrees that it will defend the Pledgee's
right, title and security interest in and to the Pledged Collateral and
the proceeds thereof against the claims and demands of all persons
whomsoever, and the Pledgor covenants and agrees that it will have like
title to and right to pledge any other property at any time hereafter pledged
to the Pledgee as Pledged Collateral hereunder and will likewise defend
the Pledgee's right thereto and security interest therein.
Section 6. REGISTRATION IN NOMINEE NAME; DENOMINATIONS. Subject
to Applicable Gaming Regulations:
(a) The Pledgee, on behalf of the Noteholders, shall have the
right (in its sole and absolute discretion) to hold the Pledged Stock in
its own name, the name of its nominee or the name of the Pledgor,
endorsed or assigned in blank or in favor of the Pledgee;
(b) the Pledgor will promptly give to the Pledgee copies of any
notices or other communications received by it specifically with respect
to Pledged Stock registered in the name of the Pledgor;
(c) the Pledgee shall at all times have the right to exchange the
certificates representing Pledged Stock for certificates of smaller or
larger denominations for any purposes consistent with this Pledge
Agreement; and
(d) the Pledgee may, at the direction of the holders of at least
50% of the aggregate principal amount of the Notes then outstanding, at
any time an Event of Default has occurred and is continuing, whether
before or after any revocation of such power and authority, notify any
parties obligated on any of the Non-Tangible Collateral (as defined in
that certain Security Agreement dated as of the date hereof between the
Pledgor and the Pledgee) to make payment to the Pledgee of any, amounts
due or to become due thereunder and enforce collection of any of the
Non-Tangible Collateral by suit or otherwise and surrender, release or
exchange all or any part thereof or compromise or extend or renew for
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<PAGE>
any period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Pledgee at any
time an Event of Default has occurred and is continuing, the Pledgor
will, at its own expense, notify any parties obligated on any of the
Non-Tangible Collateral to make payment to the Pledgee of any amounts due
or to become due thereunder.
Section 7. VOTING RIGHTS; DIVIDENDS AND INTEREST; ETC.
Notwithstanding any other provision hereof (including without limitation
subsection (v) of Section 2 hereof) and subject to compliance with Applicable
Gaming Regulations:
(a) unless and until an Event of Default shall have occurred and
be continuing:
(i) the Pledgor shall be entitled to exercise or refrain from
exercising any and all voting rights and other consensual rights
accruing to it as the owner of the Pledged Collateral or any part
thereof for any purpose consistent with the terms of this Pledge
Agreement and the Indenture; PROVIDED, HOWEVER, that the exercise or
refrain from exercising of rights could not reasonably be expected,
in the best judgment of the Pledgor, to have a material adverse
effect on the value of the Pledged Collateral or to adversely affect
the rights and remedies of the Pledgee or the Noteholders under this
Pledge Agreement or the Indenture or the ability of the Pledgee or
the Noteholders to exercise the same;
(ii) the Pledgee shall execute and deliver to the Pledgor, or
cause to be executed and delivered to the Pledgor, all such proxies,
powers of attorney, and other instruments as the Pledgor may
reasonably request for the purpose of enabling the Pledgor to
exercise the voting rights which it is entitled to exercise or
refrain from exercising pursuant to subparagraph (i) above; and
(iii) the Pledgor shall be entitled to receive and retain any
and all cash principal, interest, dividends and other income payable
on or with respect to or in accordance with the Pledged Collateral
to the extent and only to the extent that such dividends and
interest payments are permitted by, and otherwise paid in
accordance with, the terms and conditions of the Indenture and
applicable laws; PROVIDED, that any and all other dividends and
distributions and interest made on or in respect of the Pledged
Collateral, whether paid or payable in cash, securities or other
property and, whether resulting from a subdivision, combination or
reclassification, or received in exchange for the Pledged Collateral
or any part thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which the issuer thereof
may be a party or otherwise, shall be applied by Pledgor in
accordance with the terms of the Indenture.
(b) (i) Upon the occurrence and during the continuance of an Event
of Default, or any event which, with giving of notice or lapse of
time, or both, would become an Event of Default, all rights of the
Pledgor to dividends and interest which
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the Pledgor is authorized to receive pursuant to paragraph (a)(iii)
of this Section 7 shall cease, and all such rights shall thereupon
become vested in the Pledgee, who shall have the sole and exclusive
right and authority to receive and retain as Pledged Collateral
such dividends and interest payments;
(ii) All dividends, distributions and interest payments
which are received by the Pledgor contrary to the provisions of this
Section 7(b) shall be received in trust for the benefit of the Pledgee
and the Noteholders, shall be segregated from other property or funds of
the Pledgor and shall be immediately delivered to the Pledgee in the same
form as so received (with any necessary endorsement). Any and all money
and other property paid over to or received by the Pledgee pursuant to
the provisions of this subdivision (ii) of paragraph 7(b) shall be
deposited by the Pledgee in an account to be established by the Pledgee
for the benefit of the Pledgee and the Noteholders upon receipt of such money
or other property and shall be applied in accordance with the provisions
of Section 9 hereof.
(c) Upon the occurrence and during the continuance of an Event of
Default, or any event which, with giving of notice or lapse of time, or
both, would become an Event of Default, all rights of the Pledgor to
exercise or refrain from exercising the voting rights which it is
entitled to exercise or refrain from exercising pursuant to paragraph
(a)(i) of this Section 7 shall, upon notice to the Pledgee, cease, and
all such rights shall thereupon become vested in the Pledgee, which
shall have the sole and exclusive right (but not the obligation) and
authority to exercise such voting rights. The Pledgor shall execute and
deliver to the Pledgee all such proxies, powers of attorney, and other
instruments as the Pledgee shall request for the purpose of enabling the
Pledgee to exercise or refrain from exercising the voting rights which
it is entitled to exercise or refrain from exercising pursuant to this
Section 7(c) during the continuance of such Event of Default.
Section 8. REMEDIES UPON AN EVENT OF DEFAULT. Upon the occurrence
and during the continuance of an Event of Default, whether or not all of the
Secured Obligations shall have become due and payable, subject to compliance
with Applicable Gaming Regulations:
(a) the Pledgee shall have the following remedies:
(i) subject to the notice requirements and other relevant
provisions of the Notes and the Indenture, the Pledgee may, at its
option, declare all or any part of the Secured Obligations
immediately due and payable and may exercise all of its rights and
remedies under the Indenture, the Notes and the Security Documents
(as that term is defined in the Indenture);
(ii) the Pledgee may, at its option and in the name of the
Pledgor or otherwise, collect and dispose of all or any part of the
Pledged Collateral at a public or private sale without demand of
performance, advertisement or notice (all of which are hereby waived
by Pledgor) for such prices and on such terms as the Pledgee may
reasonably determine and the Pledgee or anyone else may be the
purchaser, lessee,
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<PAGE>
assignee or recipient or any or all of the
Pledged Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and, to the extent
provided by law, thereafter hold the same absolutely, free from any
claim or right of whatsoever kind, including any right or equity of
redemption (statutory or otherwise) of the Pledgor, any such demand,
notice and right or equity being hereby expressly waived and
released; PROVIDED that at least 10 days' notice of the time and
place of any such sale shall be given to Pledgor, and the Pledgee
is authorized to apply all proceeds from the disposition of the
Pledged Collateral in accordance with the terms of the Indenture;
(iii) the Pledgor recognizes that by reason of certain
prohibitions contained in the Securities Act of 1933 (as amended
from time to time, the "Securities Act"), and applicable state
securities law, the Pledgee may be compelled, with respect to any
sale of all or any part of the Pledged Collateral, to limit
purchasers to those who will agree, among other things, to acquire
the Pledged Collateral for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor
acknowledges that any such private sales may be at prices and on
terms less favorable to the Pledgee than those obtainable through
a public sale without such restrictions, and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to
have been made in a commercially reasonable manner and that the
Pledgee shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the
period of time necessary to permit the Guarantors to register any
such Pledged Collateral for public sale;
(iv) the Pledgee shall have the right to require all
distributions and other amounts payable with respect to the Pledged
Collateral to be applied in accordance with the terms of the
Indenture;
(v) at Pledgee's request, the Pledgor shall cooperate with the
Pledgee and do all things necessary to enable the Pledgee to sell
any and all of the Pledged Collateral, in compliance with all
applicable securities and other laws and regulations; and
(vi) the Pledgee may exercise or enforce any and all rights or
remedies available to the Pledgee by law or agreement against the
Pledgor.
(b) The Pledgor agrees that, upon the occurrence and during the
continuance of an Event of Default, if for any reason the Pledgee desires
and exercises its right to sell any of the Pledged Collateral pursuant
to this Section 8, the Pledgor shall, at any time and from time to time,
upon the written request of the Pledgee:
(i) take (or use its best efforts to cause to be taken) such
action to prepare, distribute and/or file such documents, as are
required or advisable in
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<PAGE>
the opinion of counsel for the Trustee to register the Pledged Stock
under the Securities Act of 1933 (as amended from time to time, the
"Securities Act") to permit the public sale of such Pledged
Collateral, including, but not limited to, a public offering and
sale of the Pledged Stock pursuant to any applicable federal and
state securities laws and regulations, and to cause the registration
statement to remain effective for such period as prospectuses are
required by law to remain effective, or in the alternative, to
effect a sale of such Pledged Collateral in accordance with an
exemption under the Securities Act;
(ii) indemnify, defend and hold harmless the Pledgee and
any financial advisor or underwriter from and against any and all
loss, liability, expenses, costs, fees and disbursements of counsel
(including, without limitation, a reasonable estimate of the cost of
the Pledgee of legal counsel), and any and all claims (including the
costs of investigation) which they may incur insofar as such loss,
liability, expense or claim arises out of or is based upon any
alleged untrue statement of a material fact contained in any
prospectus (or any amendment or supplement thereto) or in any
notification or offering circular, or arises out of or is based upon
any alleged omission to state a material fact required to be stated
therein or necessary to make the statements in any respect thereof
not misleading, except insofar as the same may have been caused by
any untrue statement or omission based upon information furnished in
writing to the Pledgor or the issuer of such Pledged Securities by
the Pledgee or the underwriter expressly for use therein; and
(iii) the Pledgor further agrees to use its best efforts to
qualify, file or register, or cause the issuer of any Pledged Stock
to qualify, file or register, any of the Pledged Stock under
applicable state securities laws and regulations as the Pledgee may
specify and to keep effective, or cause to be kept effective, all
such qualifications, filings or registrations.
The Pledgor acknowledges that there is no adequate remedy at law for
failure by it to comply with the foregoing provisions and that such
failure would not be adequately compensable in damages, and therefore
agrees that its agreements with respect to the foregoing may be
specifically enforced.
(c) The Pledgee acknowledges that any sale, transfer or disposition
of the Pledged Collateral may be subject to compliance with Applicable
Gaming Regulations which may require prior consent or approval by
applicable state gaming commissions to such sale, transfer or disposition.
[FOR THE MISSOURI GAMING COMPANY AND THE ST. LOUIS GAMING COMPANY ONLY -
Without limiting the foregoing, the Pledgee acknowledges that any
foreclosure, possession, sale, transfer or disposition of the Pledged
Stock is subject to compliance with Applicable Gaming Regulations which
may be proscriptive or require prior consent or approval by applicable
state gaming commissions, including without limitation the Missouri
Gaming Commission, to such foreclosure, possession, sale, transfer or
disposition. The Pledgee hereby acknowledges that Missouri law
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<PAGE>
does not presently allow any pledge, hypothecation or transfers of gaming
licenses (or any interest therein) issued under the Missouri Riverboat
Gambling Act or any security interest attached to any such license. The
Pledgee hereby further acknowledges that Missouri law does not presently
permit the Pledgee to foreclose upon, possess, sell, transfer or dispose
of certain gaming equipment and machinery without the Pledgee being
licensed by the Missouri Gaming Commission or, in the alternative, the
creation of a different mechanism that is in compliance with Missouri
laws and is acceptable to the Missouri Gaming Commission (which mechanism
could include, subject to the Missouri Gaming Commission's approval, the
sale, transfer or disposition of such gaming equipment and machinery in
question to an entity licensed by the Missouri Gaming Commission).]
[FOR ARGOSY OF
LOUISIANA, INC., JAZZ ENTERPRISES, INC. AND CATFISH QUEEN PARTNERSHIP
ONLY - Further, without limiting any of the foregoing, the Pledgee further
acknowledges and agrees to the requirement of the Riverboat Gaming
Enforcement Division, Office of State Police, Department of Public Safety
and Corrections, State of Louisiana (the "Division") and/or its successor,
that, within five (5) days of the commencement of the exercise of any
remedy(ies) set forth in this Pledge Agreement in favor of the Pledgee or
the Noteholders with respect to Argosy of Louisiana, Inc., Catfish Queen
Partnership in Commendam or Jazz Enterprises, Inc., the Pledgee shall
notify the Division or its successor, in writing, of the date, nature and
scope of the exercise of such remedy(ies) and further acknowledges that
the exercise of such remedy(ies) and any transfer or proposed transfer of
any ownership interest or economic interest resulting therefrom or
related thereto shall require compliance with any applicable provisions
of (i) Title 4, Section 528 of the Louisiana Revised Statutes and all
regulations promulgated pursuant thereto, and/or (ii) Title 27, Section 1
et seq. of the Louisiana Revised Statutes and any regulations promulgated
pursuant thereto.] [FOR INDIANA GAMING COMPANY ONLY - Further, without
limiting any of the foregoing, the Pledgee further acknowledges and agrees
that, notwithstanding any other provision of this Pledge Agreement to the
contrary, (i) nothing in this Pledge Agreement shall effect any transfer
of any "ownership interest" (within the meaning of 68 Indiana
Administrative Code 5) in Indiana Gaming Company, L.P. ("Indiana L.P.")
or effect any transfer, sale, purchase, lease or hypothecation of, or any
borrowing or loaning of any money against, the certificate of suitability
of Indiana L.P., or any owner's license subsequently issued to Indiana
L.P., (ii) no person, other than the Pledgor or the other current owners
of Indiana L.P., shall have any "ownership interest" in Indiana L.P.,
and (iii) no person may exercise any rights or remedies granted in this
Pledge Agreement against Indiana L.P., unless and until such exercise (a)
is approved by the Indiana Gaming Commission and (b) complies with all
Indiana laws and regulations, including 68 Indiana Administrative Code 5.
In addition, Pledgee acknowledges that any foreclosure, possession, sale,
transfer or disposition of the partnership interest held by Pledgor in
Indiana L.P. is subject to compliance with Applicable Gaming Regulations
which may be proscriptive or require prior consent or approval by
applicable state gaming commissions, including the Indiana Gaming
Commission, to such foreclosure, possession, sale, transfer or
disposition. Pledgee hereby acknowledges that Indiana law does not
presently allow any pledge, hypothecation or transfers of gaming licenses
(or any interest therein) issued under the Indiana Riverboat Gambling Act
or any security interest attached to any such license. In addition, the
exercise of Pledgee's rights hereunder is expressly
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<PAGE>
subject to the terms of that certain Second Amended and Restated Agreement
of Limited Partnership of Indiana Gaming Company, L.P. dated February 21,
1996 (including without limitation Section 14.2(e) thereof).]
Section 9. APPLICATION OF PROCEEDS OF SALE. The proceeds of any
sale of Pledged Collateral pursuant to Section 8 hereof, as well as any
Pledged Collateral consisting of cash, shall be applied by the Pledgee in the
order and to the items provided for and as set forth in the Indenture.
Section 10. REIMBURSEMENT OF PLEDGEE. The Pledgor hereby agrees
to reimburse the Pledgee and the Noteholders, on demand, for all expenses
incurred by the Pledgee in connection with the administration and enforcement
of this Pledge Agreement and agrees to indemnify the Pledgee and hold the
Pledgee and the Noteholders harmless from and against any and all liability
incurred by the Pledgee hereunder or in connection herewith, unless such
liability shall have been determined by a final, non-appealable order of a
court of competent jurisdiction to have resulted solely from willful
misconduct or gross negligence on the part of the Pledgee or the Noteholders.
Section 11. PLEDGEE APPOINTED ATTORNEY-IN-FACT. Except as
otherwise provided herein, the Pledgor hereby appoints the Pledgee the
attorney-in-fact of the Pledgor, from time to time after the occurrence and
during the continuance of an Event of Default, for the purposes of carrying
out the provisions of this Pledge Agreement or taking any action or executing
any instrument which the Pledgee may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest. Without limiting the generality of the foregoing, the
Pledgee shall have the right, upon the occurrence and during the continuance
of an Event of Default, subject to compliance with Applicable Gaming
Regulations, with full power of substitution either in the Pledgee's name or
in the name of the Pledgor, to ask for, demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due under or by
virtue of any Pledged Collateral, to endorse checks, drafts, orders and other
instruments for the payment of money payable to the Pledgor constituting
Pledged Collateral or any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any
action, claim or proceeding with respect thereto, and to sell, assign,
endorse, pledge, transfer and make any agreement respecting, or otherwise
deal with, the same; PROVIDED, HOWEVER, that nothing herein contained shall
be construed as requiring or obligating the Pledgee to make any commitment or
to make any inquiry as to the nature or sufficiency of any payment received
by the Pledgee, or to present or file any claim or notice, or to take any
action with respect to the Pledged Collateral or any part thereof or the
monies due or to become due in respect thereof or any property covered
thereby, and no action taken by the Pledgee or omitted to be taken with
respect to the Pledged Collateral or any part thereof shall give rise to any
defense, counterclaim or offset in favor of any Pledgor or to any claim or
action against the Pledgee.
Section 11.1 PLEDGEE MAY PERFORM. If the Pledgor fails to perform
any agreement contained herein, the Pledgee may itself perform, or cause
performance of, such agreement and the expenses of the Pledgee incurred in
connection therewith shall be payable by the Pledgor under Section 11.2 below.
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<PAGE>
Section 11.2 EXPENSES. The Pledgor will upon demand pay to the
Pledgee the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which the Pledgee may incur in connection with (i) the administration of this
Pledge Agreement, (ii) the custody or preservation of, or the sale of,
collection from or other realization upon, any of the Pledged Collateral,
(iii) the exercise or enforcement of any of the rights of the Pledgee or the
Noteholders hereunder or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof.
Section 12. THE PLEDGEE AS AGENT. The Pledgee will hold in
accordance with this Pledge Agreement all items of the collateral at any time
received by it under this Pledge Agreement. It is expressly understood and
agreed that the obligations of the Pledgee as holder of the Pledged
Collateral and with respect to the disposition thereof, and otherwise under
this Pledge Agreement, are only those expressly set forth in this Pledge
Agreement. The Pledgee shall act hereunder on the terms and conditions set
forth herein.
Section 13. NO WAIVER. No failure on the part of the Pledgee to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or remedy by the Pledgee preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law. The Pledgee shall not be deemed to have waived any
rights hereunder or under any other agreement or instrument unless such
waiver shall be in writing and signed by such party.
Section 14. PLEDGOR'S SECURED OBLIGATIONS ABSOLUTE, ETC.. The
obligations of the Pledgor under this Pledge Agreement shall, subject to
compliance with Applicable Gaming Regulations, be absolute and unconditional
and shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by any
circumstances or occurrence whatsoever, including, without limitation: (a)
any renewal, extension, amendment or modification of, or addition or
supplement to or deletion from any of the Indenture, the Notes or any other
instrument or agreement referred to therein, or any assignment or transfer of
any thereof; (b) any waiver, consent, extension, indulgence or other action
or inaction under or in respect of any such instrument or agreement or this
Pledge Agreement, the Indenture, or the Notes or any exercise or non-exercise
of any right, remedy, power or privilege under or in respect of this Pledge
Agreement, the Indenture or the Notes; (c) any furnishing of any additional
security to the Pledgee or any acceptance thereof or any sale, exchange,
release, surrender or realization of or upon any security by the Pledgee; (d)
any invalidity, irregularity or unenforceability of all or part of the
Secured Obligations or of any security therefor; (e) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation
or other like proceeding relating to the Pledgor or any subsidiary of the
Pledgor, or any action taken with respect to this Pledge Agreement by any
trustee or receiver, or by any court, in any such proceeding, whether or not
the Pledgor shall have notice or knowledge of any of the foregoing or (f) any
other circumstance which might otherwise constitute a defense available to,
or discharge of, the Pledgor in respect of the Secured Obligations or in
respect of this Pledge Agreement.
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<PAGE>
Section 15. TERMINATION. This Pledge Agreement shall terminate
when all of the Secured Obligations, whether or not contingent, have been
fully and indefeasibly paid and satisfied. In addition, the Pledged
Collateral may be released as provided in the Indenture (including without
limitation Articles IV and IX thereof). Upon such termination or release,
the Pledgee shall reassign and deliver to the Pledgor, or to such person or
persons as the Pledgor shall designate, against receipt therefor, such of the
Pledged Collateral (if any) as shall not have been sold or otherwise applied
by the Pledgee pursuant to the terms hereof and shall still be held by the
Pledgee hereunder, together with appropriate instruments of reassignment and
release. Any such reassignment shall be without recourse to or warranty by
the Pledgee and at the expense of the Pledgor.
Section 16. NOTICES. All notices or other communications required
or permitted hereunder shall be in writing and shall be sufficiently given if
made by hand delivery, by telex, by telecopier or registered or certified
mail, postage prepaid, return receipt requested, addressed to the last known
address of the respective party.
Section 17. FURTHER ASSURANCES. The Pledgor agrees that at any
time from time to time, at the expense of the Pledgor, the Pledgor will do
such further acts and things, and execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Pledgee may at
any time request in connection with the administration and enforcement of
this Pledge Agreement, with respect to the Pledged Collateral or any part
thereof or in order to better assure and confirm unto the Pledgee its rights
and remedies hereunder.
Section 18. BINDING AGREEMENT; ASSIGNMENTS. The Pledge Agreement,
and the terms, covenants and conditions hereof, shall be binding upon and
inure to the benefit of the parties hereto, the Noteholders and their
respective successors and assigns, except that without the written consent of
the Pledgee the Pledgor shall not be permitted, either expressly or by
operation of law, to assign this Pledge Agreement or any interest herein or
in the Pledged Collateral or any part thereof, or, except as otherwise
permitted by the terms of this Pledge Agreement, otherwise transfer, pledge,
encumber or grant any option with respect to the Pledged Collateral or any
part thereof.
Section 19. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants
and agreements made by the Pledgor herein and in the certificates or other
instruments prepared or delivered in connection with this Pledge Agreement
shall be considered to have been relied upon by the Pledgee and the
Noteholders and shall survive the issuance by the Pledgor of the Notes and
shall continue in full force and effect as long as any of the Secured
Obligations, whether or not contingent, have not been fully and indefeasibly
paid and satisfied.
(b) In the event any one or more of the provisions contained in this
Pledge Agreement should be held invalid, illegal or unenforceable in any
respect, no party hereto shall be required to comply with such provision for
so long as such provision is held to be invalid, illegal or unenforceable,
and the validity, legality and enforceability of the remaining provisions
contained herein or therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid
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<PAGE>
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
Section 20. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 21. HEADINGS. Section headings used herein are for
convenience only, and are not to affect the construction of, or be taken into
consideration in interpreting, this Pledge Agreement.
Section 22. COUNTERPARTS. This Pledge Agreement may be executed
in any number of copies or counterparts, all of which taken together shall
constitute one agreement, and any of the parties may execute this Pledge
Agreement by signing any such copy or counterpart.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Pledge Agreement, or caused this Pledge Agreement to be duly executed, as of
the day and year first above written.
[INSERT SUBSIDIARY NAME]
a ______________ corporation
By:___________________________
Name: ________________________
Title: _______________________
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
By: ___________________________
Name: _________________________
Title: ________________________
Document Number: EX-4-9.
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EXHIBIT 4.10
Schedule to Exhibit 4.10
The First Preferred Ship Mortgage by and between each of the following
parties and First National Bank of Commerce, as Trustee, and relating to the
indicated vessel, are substantially identical in all material respects to the
attached form document except as indicated below.
Schedule of Mortagors executing
First Preferred Ship Mortgages and the vessels they relate to
-------------------------------------------------------------
Alton Gaming Company (relating to Argosy I)
Alton Gaming Company (relating to Alton Belle Casino II)
Catfish Queen Partnership in Commendam (relating to Argosy III)
The Missouri Gaming Company (relating to Argosy IV)
Iowa Gaming Company (relating to Argosy V)
Argosy Gaming Company (relating to Spirit of America)
Alton Gaming Company (relating to Alton Landing)
Pursuant to Paragraph 2 of Item 601 of S-K, the following form is filed
in lieu of the various First Preferred Ship Mortgages. Any material details
in which such First Preferred Ship Mortgages differ from the enclosed form
document are described in the enclosed form document.
<PAGE>
- ------------------------------------------------------------------------------
FORM OF
FIRST PREFERRED SHIP MORTGAGE
made by
[NAME OF MORTGAGOR]
in favor of
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
_____________________________
Dated as of June 5, 1996
_____________________________
- ------------------------------------------------------------------------------
Mortgagor: [NAME OF MORTGAGOR]
Mortgagor's Interest
in each Vessel: 100%
Mortgagee: First National Bank of Commerce, as Trustee
Mortgagee's Interest: 100%
Amount of Mortgage: $235,000,000
<PAGE>
FIRST PREFERRED SHIP MORTGAGE
THIS FIRST PREFERRED SHIP MORTGAGE, dated as of June 5, 1996 (this
"Mortgage"), is granted by [NAME OF MORTGAGOR], a ________ corporation (the
"Mortgagor"), to FIRST NATIONAL BANK OF COMMERCE, as trustee (in such
capacity, hereinafter called the "Mortgagee") under that certain Indenture
dated as of June 5, 1996 (as amended, restated, supplemented or otherwise
modified from time to time, the "Indenture") by and among Argosy Gaming
Company, a Delaware corporation (the "Borrower"), the Mortgagor and the other
Guarantors (as defined in the Indenture) and Mortgagee, as trustee for the
holders of those certain Notes (as hereinafter defined).
WHEREAS, the names and addresses of the parties to this Mortgage
are set forth in full in Section 3.2 of Article III hereto;
WHEREAS, the Mortgagor is the sole owner of the whole of the vessel
(hereinafter as more particularly identified and described, the "Vessel"),
which Vessel has been duly documented in the name of the Mortgagor under the
laws of the United States;
WHEREAS, pursuant to the Indenture, among other things, the
Borrower shall issue its 13 1/4% First Mortgage Notes due 2004 (the "Original
Notes");
WHEREAS, pursuant to a Registration Rights Agreement between the
Borrower and Bear Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, BA Securities, Inc. and Deutsche Morgan Grenfell/C.J. Lawrence
Inc. (collectively, the "Initial Purchasers"), the Borrower and the
Guarantors will file a registration statement with respect to an offer to
exchange the Initial Notes for a new series of 13 1/4% First Mortgage Notes due
2004 registered under the Securities Act of 1933, as amended, with terms
substantially identical to those of the Initial Notes (the "Series B Notes"
and, together with the Initial Notes, the "Notes");
WHEREAS, pursuant to the Indenture, the Mortgagee shall act as the
trustee for the holders of the Original Notes and the holders of the Series B
Notes (collectively, the "Noteholders");
WHEREAS, it is a condition precedent to the purchase of the Initial
Notes by the Initial Purchasers that the Mortgagor shall have executed and
delivered this Mortgage to the Mortgagee;
WHEREAS, the Mortgagor will derive substantial direct and indirect
benefit from the sale of the Notes pursuant to the Indenture in that the
Borrower and the Mortgagor are the beneficiaries of joint management and
other operational, financial and economic synergies and, pursuant to the
Indenture, the Mortgagor has guaranteed the payment and performance of all
obligations of the Borrower arising under or in respect of the Notes;
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<PAGE>
NOW THEREFORE, in consideration of the premises and of the
additional covenants herein contained and to induce the Initial Purchasers to
purchase the Original Notes and Noteholders to purchase the Notes and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Mortgagor hereby agrees with the Mortgagee as
follows:
As security for the prompt performance and payment of the Secured
Obligations (as defined in Section 3.1 below), when, if and as due, and all
other sums which may be secured by this Mortgage and to secure the due
performance and observance of all the agreements and covenants contained in
the Indenture and the Security Documents (as defined in the Indenture), THE
MORTGAGOR HAS GRANTED, CONVEYED, MORTGAGED, PLEDGED, HYPOTHECATED, CONFIRMED,
TRANSFERRED AND SET OVER, AND BY THESE PRESENTS DOES GRANT, CONVEY, MORTGAGE,
PLEDGE, HYPOTHECATE, CONFIRM, ASSIGN, TRANSFER AND SET OVER UNTO AND IN FAVOR
OF THE MORTGAGEE a first priority security interest in, and all right, title
and interest of the Mortgagor in and to the following property, now owned or
hereinafter acquired (the "Collateral"):
(i) the whole of the vessel known as the [NAME OF VESSEL], official
number ______, home port of Falling Waters, West Virginia,
together with its barge facility and all of its boilers,
engines, machinery, motors, masts, spars, boats, pumps,
anchors, cables, chains, rigging, tackle, cranes, apparel,
furniture, including, but not limited to, all gaming equipment
and related devices and operations, and all other
appurtenances thereunto appertaining or belonging, whether now
or hereafter acquired, and also any and all additions,
improvements and replacements hereafter made in or to said
vessel or in or to its equipment and appurtenances aforesaid
(the "Vessel");
(ii) any charter, lease, sublease or other transfer or disposition
of whatever kind or nature of the Vessel, together with all
renewals thereof, executed from time to time, and all payments
received thereunder and all rights to enforce payments
thereunder, including, without limitation, all payments of
rent, all insurance proceeds and all other amounts due or to
become due thereunder; and
(iii) to the extent not otherwise included, all proceeds of all or
any of the foregoing.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Mortgagor shall remain liable under any lease
and any other document or instrument expressly assumed by it thereunder all
in accordance with and pursuant to the terms and provisions thereof, and the
Mortgagee shall have no obligation or liability under any lease or any other
document or instrument included in the Collateral by reason of or arising out
of this Mortgage, nor shall the Mortgagee be required or obligated in any
manner to perform or fulfill any obligations of the Mortgagor under or
pursuant to any lease or any other document or instrument included in the
Collateral except as herein expressly provided, to make any payment, or to
make any inquiry as to
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the nature or sufficiency of any payment received by it, or present or file
any claim, or take any action to collect or enforce the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any time or times. Notwithstanding the foregoing, so long as there is no
Event of Default (as defined in Section 2.1 hereof), the Mortgagor shall be
entitled to exercise all of its rights and remedies pursuant to the terms of
any document included in the Collateral.
TO HAVE AND TO HOLD all and singular the above mortgaged and
described property unto the Mortgagee and its successors and assigns, to its
and its successors' and assigns' own use, benefit and behoof forever, upon
the terms herein set forth for the enforcement of the payment of Two Hundred
Thirty-Five Million Dollars ($235,000,000) and interest, expenses and fees in
accordance with the terms of the Indenture, the Security Documents (as
defined in the Indenture) and all other Secured Obligations and to secure the
performance and observance of, and compliance with all agreements, covenants,
terms and conditions in this Mortgage contained.
PROVIDED ONLY, and the condition of these presents is such, that if
the entire Secured Obligations shall be paid as and when the same shall
become due and payable, if the Mortgagor, its successors or assigns shall pay
or cause to be paid all other such sums as may hereafter become secured by
this Mortgage and shall perform, observe and comply with all agreements,
covenants, terms and conditions in this Mortgage, expressed or implied, to be
performed, observed or complied with by and on the part of the Mortgagor,
then these presents and the rights hereunder shall cease, determine and be
void; otherwise the same shall be and remain in full force and effect.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the property
above described is to be held subject to the further agreements and
conditions hereinafter.
ARTICLE I
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE MORTGAGOR
SECTION 1.1 PERFORMANCE OF SECURED OBLIGATIONS. The Mortgagor
hereby agrees with the Mortgagee duly and promptly to perform and to observe
the Secured Obligations.
SECTION 1.2 COMPLIANCE WITH LAWS.
(a) 46 U.S.C. Section 31321. The Mortgagor will cause this
Mortgage to be duly recorded in accordance with the provisions of Chapter 313
of Title 46, United States Code, and will otherwise cause compliance with and
satisfaction of all of the provisions of said Chapter 313, as amended
("Chapter 313") in order to establish and maintain this Mortgage as a first
preferred mortgage lien thereunder upon the Vessel and upon all renewals,
replacements and improvements made in or to the same for the amount indicated
in Article IV hereof, as the same may be amended, modified or increased from
time to time, and will do all such other acts and execute all such
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instructions, deeds, conveyances, mortgages and assurances as the Mortgagee
shall reasonably require in order to subject and maintain the Vessel to the
lien of the Mortgage.
(b) DOCUMENTATION. The Mortgagor will comply with and satisfy all
of the provisions of the laws of the United States in order that the Vessel
shall continue to be documented pursuant to the laws of the United States as
a vessel of the United States under the United States flag.
SECTION 1.3 LAWS, TREATISES AND CONVENTIONS. In the event that
this Mortgage or the Secured Obligations, or any provision hereof or thereof,
shall be deemed invalidated in whole or in part by reason of any present or
future laws, or any decision of any authoritative court, or if the documents
at any time held by the Mortgagee shall be deemed by the Mortgagee for any
reason insufficient to carry out the true intent and spirit of this Mortgage
or the Secured Obligations, then, from time to time, the Mortgagor will
execute, on its own behalf such other and further assurances and documents
as, in the reasonable opinion of the Mortgagee, may be required more
effectually to subject the Vessel to the terms and provisions of the
Mortgage, including the payment of all sums required to be paid by the
Mortgagor under the Secured Obligations hereby secured.
SECTION 1.4 NOTICE OF MORTGAGE. The Mortgagor will cause a
notice, reading as follows (or containing such additional information
relating to any permitted mortgage that is placed on the Vessel as may be
approved by the Mortgagee) printed in plain type of such size that the
paragraph of reading matter shall cover a space not less than six inches wide
by nine inches high, and framed, to be placed and kept prominently exhibited
in the chart room and in the master's cabin of the Vessel if such room and
cabin are contained in the Vessel and, if not, where such notices customarily
are kept for vessels of the type of the Vessel:
"NOTICE OF SHIP MORTGAGE
This vessel is owned by [Name of Mortgagor], a _______ corporation,
and is covered by a First Preferred Ship Mortgage in favor of First
National Bank of Commerce, as Trustee, pursuant to the provisions of 46
U.S.C. Section 31321 ET SEQ., a certified copy of which mortgage is
kept with this Vessel's papers, as amended. Under the terms of said
Mortgage, neither the owner, any charterer, the master or agent of this
vessel nor any other person has any right, power or authority to create,
incur, or permit to be placed or imposed upon this vessel any lien
whatsoever, other than liens for wages of a stevedore when employed
directly by a person listed in 46 U.S.C. Section 31341, for wages of
the crew in respect of this vessel, general average or for salvage
(including contract salvage), liens fully covered by insurance and any
deductible applicable thereto, or, to the extent they are liens
subordinate to the liens of the said Mortgage, other liens incident to
current operations or for repairs."
SECTION 1.5 CHANGE OF PORT OF DOCUMENTATION. The Mortgagor will
not transfer or change the flag or port of documentation of the Vessel
without having obtained the prior written consent of the Mortgagee, and any
such written consent to any one transfer or change of flag or port
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of documentation shall not be construed to be a waiver of this provision with
respect to any subsequent proposed transfer or change of flag or port of
documentation.
SECTION 1.6 INSURANCE.
(a) On and after the date of this Mortgage, the Mortgagor will
cause to be carried and maintained in respect of the Vessel hull and
machinery and protection and indemnity insurance in such amounts and with
such first class insurance companies, underwriters, protection and indemnity
associations or clubs, as is representative of hull and machinery and
protection and indemnity insurance customarily maintained by owners of like
vessels with respect to such vessels.
(b) In the event of any actual, constructive or compromised total
loss of the Vessel, such loss shall not be adjusted or compromised without
the prior written consent of the Mortgagee, and all insurance or other
payments for such shall be paid to the Mortgagor and applied by the Mortgagor
in accordance with the terms of the Indenture.
(c) The Mortgagor shall assign to the Mortgagee, for the benefit
of the Mortgagee and the Noteholders, all policies and contracts of such
insurance, subject to the other provisions of this Section 1.6. However,
notwithstanding such assignment:
(i) any loss under any insurance on the Vessel with
respect to protection and indemnity or collision liability
risks may be paid directly to the person to whom any liability
covered by such insurance has been incurred, or to the
Mortgagor to reimburse it for any loss, damage or expense
incurred by it and covered by such insurance; PROVIDED that in
the latter event the underwriter shall have first received
evidence that the liability insured against has been
discharged; and
(ii) in the case of any loss to the Vessel or any
other loss involving liability of the Vessel (other than a
loss covered by subparagraph (i) above in this paragraph (c)
or by paragraph (b) of this Section 1.6) under insurance with
respect to the Vessel the underwriters may pay directly for
the repair, salvage, liability or other charges involved, or,
if the Mortgagor shall have first fully repaired the damage
and paid the cost thereof or discharged the liability or paid
other charges and the underwriters shall have first received
evidence thereof, shall pay the Mortgagor as reimbursement
therefor.
(d) In the event that any claim or lien is asserted against the
Vessel for loss, damage or expense which is covered by insurance required
hereunder, and it is necessary for the Mortgagor to obtain a bond or supply
other security to prevent arrest of the Vessel or to release the Vessel from
arrest on account of such claim or lien, the Mortgagee, on request of the
Mortgagor or its agent, may, in the sole discretion of the Mortgagee, assign
to any person, firm or corporation executing a surety or guarantee bond or
other agreement to save or release the Vessel from such arrest, all right,
title and interest of the Mortgagee in and to said insurance covering said
loss,
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damage or expense, as collateral security to indemnify such person, firm or
corporation against liability under said bond or other agreement.
(e) If requested by the Mortgagee at any time and from time to
time, the Mortgagor will deliver to the Mortgagee copies of all cover notes,
binders, policies and certificates of membership in protection and indemnity
associations, and all endorsements and riders amendatory thereof, in respect
of insurance maintained in connection with the Vessel.
(f) The Mortgagor agrees that it will not do or permit or
willingly allow to be done any act by which any insurance required by the
terms of this Mortgage may be suspended, impaired or canceled, and that it
will not permit or allow the Vessel to undertake any voyage or run any risk
or transport any cargo or passengers which may not be permitted by the
policies in force, having previously insured the Vessel by additional
coverage to extend to such voyages, risks, passengers or cargoes.
SECTION 1.7 LIBEL OR ATTACHMENT. If a libel is filed upon the
Vessel or if the Vessel shall be attached, levied upon or taken into custody
by virtue of any proceeding in any court or tribunal or by any government or
other authority, the Mortgagor will promptly notify the Mortgagee thereof by
telegram or cable, confirmed by letter addressed to the Mortgagee, and within
thirty (30) days after such libel, levy, attachment or taking into custody
will cause the Vessel subject thereto to be released (unless such libel,
levy, attachment or taking into custody is being contested in good faith by
appropriate proceedings) and will promptly notify the Mortgagee of such
release in the manner aforesaid.
SECTION 1.8 INSPECTION. The Mortgagor at all reasonable times
will afford the Mortgagee or its authorized representatives full and complete
access to the Vessel for the purpose of inspecting or surveying (provided
that such surveying does not disrupt or interfere with the business conducted
on such Vessel) the same and its papers and records, and at the request of
the Mortgagee, the Mortgagor will deliver for inspection copies of any and
all contracts and documents relating to the Vessel, whether on board or not.
SECTION 1.9 SALE OR OTHER DISPOSITION OF VESSEL. Except as
permitted in the Indenture, the Mortgagor will not sell, charter, mortgage,
transfer or in any other way dispose of all or any part of the Vessel (except
(i) by way of time or voyage charter party, (ii) transfer of appurtenances to
the Vessel permitted by Section 2.11 hereof or (iii) pursuant to a charter
or lease in the ordinary course of business) without the prior written
consent of the Mortgagee. Except as otherwise provided in the preceding
sentence, any sale, mortgage or transfer of all or any part of any Vessel
shall be subject to the provisions of this Mortgage and the lien hereof.
SECTION 1.10 REQUISITION OF TITLE OR USE. In the event that the
title to or ownership of the Vessel, or the use of the Vessel, shall be
requisitioned, purchased or taken by, or the Vessel shall be seized by or
forfeited to, any government of any country or any department, agency or
representative thereof, pursuant to any present or future law, proclamation,
decree, order or otherwise or by any other person or persons, whether or not
acting under color of governmental
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authority, the compensation, purchase price, reimbursement or award for such
requisition, purchase, seizure, forfeiture or other taking of such title,
ownership or use shall forthwith be and become payable to the Mortgagor, who
shall be entitled to receive the same and shall apply it as provided in the
Indenture. The Mortgagor hereby constitutes and appoints the Mortgagee its
true and lawful attorney, for it and in its name, place and stead, from and
after an Event of Default and during the continuance thereof, to collect,
receipt for, acknowledge the payment of, sue for and execute any
documentation or writing that may be necessary or required in order to obtain
payment of said compensation, purchase price, reimbursement or award, giving
and granting to said attorney full power and authority to do and perform
every act and thing whatsoever requisite or necessary to be done in or about
the premises as fully and to all intents and purposes as it, the Mortgagor,
might or could do if personally present at the doing thereof, with full power
of substitution, hereby, ratifying and confirming all that its said attorney
or substitute shall do or cause to be done by virtue hereof, and the
Mortgagor shall promptly execute and deliver to the Mortgagee such documents
and shall promptly do and perform such acts as in the opinion of the
Mortgagee may be necessary or useful to facilitate or expedite the collection
by the Mortgagee of such compensation, purchase price, reimbursement or
award.
SECTION 1.11 OUTSTANDING LIENS. Mortgagor lawfully owns and is
lawfully possessed of the Vessel free and clear of all Liens, except
Permitted Liens under the Indenture; and Mortgagor will and does hereby
warrant and defend the title and possession thereto and to every part thereof
for the benefit of Mortgagee against the claims and demands of all persons
whomsoever subject to the Permitted Liens and other matters permitted under
the Indenture.
SECTION 1.12 OPERATION OF VESSEL. Mortgagor will not cause or
permit the Vessel to be operated in any manner contrary to law and Mortgagor
will not engage in any unlawful trade or violate any law or regulation or
expose the Vessel to penalty or forfeiture, and will not do, or suffer or
permit to be done, anything which can or may injuriously affect the
registration or flag of the Vessel under the laws and regulations of the
United States of America. Mortgagor will not operate the Vessel outside the
navigation limits of the insurance required pursuant to Section 1.6 of this
Mortgage.
SECTION 1.13 CARE OF VESSEL. On the date hereof and at all times
thereafter, the Vessel is, and shall be, tight, staunch and strong and well
and sufficiently tackled, apparelled, furnished and equipped and in all
respects seaworthy. Mortgagor shall preserve and maintain the Vessel in good
condition, repair and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in its reasonable judgement may be necessary, so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in
this Section shall prevent Mortgagor from discontinuing any operation or
maintenance of any portion of the Vessel, or disposing thereof, if such
discontinuance or disposal is desirable in the conduct of the business of the
Mortgagor.
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SECTION 1.14 PAYMENT OF TAXES. Mortgagor will pay or cause to be
paid prior to delinquency, all taxes, assessments, governmental levies, fines
and penalties lawfully imposed on Mortgagor or on the Vessel.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
SECTION 2.1 For all purposes of this Mortgage the term "Event of
Default" shall mean when any of the following events shall have occurred:
(a) The occurrence of an "Event of Default" as defined in the
Indenture.
(b) Failure in the due and punctual observance or performance by
the Mortgagor of any of the other covenants and conditions herein required to
be observed and performed and continuance of such default for thirty (30)
days after notice by Mortgagee.
SECTION 2.2 REMEDIES UPON EVENT OF DEFAULT. If any Event of
Default shall occur and be continuing uncured, then at any time thereafter
while such Event of Default shall remain uncured, the Mortgagee shall have
the right to exercise any or all of the following remedies:
(a) Exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of 46 U.S.C. Section 31321
et seq. or by any other provisions of applicable law;
(b) Bring suit at law, in equity or in admiralty, or initiate or
prosecute any other proceedings as it may consider appropriate, to recover
any and all payments due, or declared due, under the Secured Obligations and
hereunder, and collect the same out of any and all of the assets of the
Mortgagor whether covered by this Mortgage or otherwise and in connection
therewith obtain a decree ordering the sale of the Vessel in accordance with
subsection (d) of this Section 2;
(c) The Mortgagee may take and enter into possession of the
Vessel, at any time, wherever the same may be, without legal process and
without being responsible for loss or damage, and, upon demand of the
Mortgagee, the Mortgagor or other person in possession shall surrender
forthwith to the Mortgagee possession of the Vessel and, once in possession
of the Vessel, the Mortgagee may, without being responsible for loss or
damage, hold, lay up, lease, charter, operate or otherwise use the Vessel for
such time and upon such terms as it may deem to be for its best advantage,
and demand, collect and retain all hire, freights, earnings, issues,
revenues, income, profits, return premiums, salvage awards or recoveries,
recoveries in general average, and all other sums due or to become due in
respect of the Vessel or in respect of any insurance thereon from any person
whomsoever, accounting only for the net profits, if any, arising from such
use of the Vessel and charging upon all receipts from the use of the Vessel
or from the sale thereof by court proceedings or pursuant to subsection (d)
of this Section all costs, expenses, charges, damages or losses by reason of
such use; and if at any time the Mortgagee shall avail itself of the right
herein
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given to it to take the Vessel, the Mortgagee shall have the right to dock
the Vessel taken, for a reasonable time at any dock, pier or other premises
of any person in possession of the Vessel without charge, or to dock the
Vessel taken at any other place at the cost and expense of the Mortgagor; and
(d) The Mortgagee may take and enter into possession of the
Vessel, at any time, wherever the same may be, without legal process, and,
once in possession of the Vessel, if it seems desirable to the Mortgagee and
without being responsible for loss or damage, sell the Vessel, at any place
and at such time as the Mortgagee may specify and in such manner as the
Mortgagee may deem advisable, free from any claim by the Mortgagor in
admiralty, in equity, at law or by statute, after first giving notice of the
time and place of sale with a general description of the property in the
following manner:
(i) By publishing such notice for ten (10) consecutive business
days, in a daily newspaper of general circulation published in
the port of registry of the Vessel;
(ii) If the place of sale should not be the port of registry of the
Vessel, then also by publication of a similar notice for a
similar period of time in a daily newspaper, if any, published
at the place of sale; and
(iii) By mailing, by registered or certified mail, a similar notice
to the Mortgagor on the day of first publication and at least
fourteen (14) days prior to the date fixed for sale.
SECTION 2.3 FINALITY OF SALE. Any sale of the Vessel made
pursuant to this Mortgage, whether under the power of sale hereby granted or
any judicial proceedings, shall operate to divest all right, title and
interest of any nature whatsoever of the Mortgagor therein and thereto, and
shall bar the Mortgagor, its successors and assigns, and all persons claiming
by, through or under them from claiming any interest in or with respect to
the Vessel. No purchaser shall be bound to inquire whether notice has been
given, or whether any Event of Default has occurred, or as to the propriety
of the sale, or as to the application of the proceeds thereof. At any such
sale, the Mortgagee or any Noteholder may bid for and purchase such property
and upon compliance with the terms of sale may hold, retain and dispose of
such property without further accountability therefor.
SECTION 2.4 POWERS AND RIGHTS OF MORTGAGEE UPON EVENT OF
DEFAULT. The Mortgagee and its successors and assigns are hereby irrevocably
appointed attorney-in-fact of the Mortgagor upon the occurrence and
continuation of an Event of Default to execute and deliver to any purchaser
aforesaid, and is hereby vested with full power and authority to make, in the
name and in behalf of the Mortgagor, a good conveyance of the title to the
Vessel. In the event of any sale of the Vessel, under any power herein
contained, the Mortgagor will, if and when required by the Mortgagee, ratify
and confirm any sale of the Vessel by executing and delivering to the
purchaser thereof any such form of conveyance, instruments of transfer and
releases of the Vessel as the Mortgagee may direct or approve.
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SECTION 2.5 REVENUES AND PROCEEDS OF VESSEL. The Mortgagee is
hereby appointed attorney-in-fact of the Mortgagor upon the happening of any
Event of Default, in the name of the Mortgagor to demand, collect, receive,
compromise and sue for, so far as may be permitted by law, all freight, hire,
earnings, issues, revenues, income and profits of the Vessel and all amounts
due from the underwriters under any insurance thereon as payment of losses or
as return premiums or otherwise, salvage awards and recoveries, recoveries in
general average or otherwise, and all other sums due or to become due at the
time of the happening of any Event of Default or during the continuation
thereof in respect of the Vessel, or in respect of any insurance thereon,
from any person whomsoever, and to make, give and execute in the name of the
Mortgagor, acquittance, receipts, releases or other discharges for the same,
whether under seal or otherwise, and to endorse and accept in the name of the
Mortgagor all checks, notes, drafts, warrants, agreements and other
instruments in writing with respect to the foregoing.
SECTION 2.6 ADDITIONAL RIGHTS.
(a) The Mortgagor covenants and agrees that in addition to any and
all other rights, powers and remedies elsewhere in this Mortgage granted to
and conferred upon the Mortgagee, the Mortgagee in any suit to enforce any of
its rights, powers or remedies, shall be entitled as a matter of right and
not as a matter of discretion to the appointment of a receiver or receivers
of the Vessel, and any receiver or receivers so appointed shall have full
right and power to use and operate and dispose of the Vessel, and the
Mortgagee may become the purchaser at such sale and shall have the right to
credit on the purchase price any and all sums of money due on the Secured
Obligations.
(b) The Mortgagor authorizes and empowers the Mortgagee or its
appointees or any of them to appear in name of the Mortgagor, its successors
and assigns, in any court of any country or nation of the world where a suit
is pending against the Vessel because of or on account of any alleged lien
against such Vessel from which such Vessel has not been released and to take
such actions as may seem proper in the reasonable judgment of the Mortgagee
towards the defense of such suit and the purchase or discharge of such lien,
and all expenditures made or incurred by the Mortgagee, for the purpose of
such defense or purchase or discharge shall be a debt due from the Mortgagor,
its successors and assigns, to the Mortgagee, and shall be secured by the
lien of this Mortgage in like manner and extent as if the amount and
description thereof were written herein.
SECTION 2.7 REINSTATEMENT. If at any time after the occurrence
of an Event of Default and prior to the actual sale of the Vessel by the
Mortgagee or prior to commencement of any foreclosure proceedings, the
Mortgagor completely cures all Events of Default and pays all expenses and
advances of the Mortgagee consequent on such Event of Default, with interest
at the then-applicable rate, then the Mortgagee shall restore the Mortgagor
to its former position, but such action shall not affect any subsequent Event
of Default or impair any rights consequent thereon.
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SECTION 2.8 CUMULATIVE REMEDIES; NO WAIVER; GAMING LIMITATIONS.
(a) Each and every power and remedy herein given to the Mortgagee
shall be cumulative and shall be in addition to every other power and remedy
herein given or now or hereafter existing at law, in equity, in admiralty or
by statute, and each and every power and remedy whether herein given or
otherwise existing may be exercised from time to time and as often and in
such order as may be deemed expedient by the Mortgagee, and the exercise or
the beginning of the exercise of any power or remedy shall not be construed
to be a waiver of the right to exercise at the same time or thereafter any
other power or remedy. No delay or omission by the Mortgagee in the exercise
of any right or power or in the pursuance of any remedy accruing upon any
Event of Default shall impair any such right, power or remedy or be construed
to be a waiver of any such Event of Default or to be acquiescence therein;
nor shall the acceptance by the Mortgagee of any security or of any payment
of or on account of the amounts due in respect of the Secured Obligations
after any Event of Default or of any payment on account of any past Event of
Default be construed to be a waiver of any right to take advantage of any
future Event of Default or of any past Event of Default not completely cured
thereby.
(b) Mortgagee acknowledges that its rights and remedies with
respect to the Collateral upon an Event of Default are subject to the
limitations and restrictions of applicable federal and state gaming and
gambling statutes, laws, rules and regulations. [INSERT THE FOLLOWING IN
ARGOSY/LOUISIANA SHIP MORTGAGE-- Mortgagee acknowledges and agrees to the
requirement of the Riverboat Gaming Enforcement Division, Office of State
Police, Department of Public Safety and Corrections, State of Louisiana (the
"Division"), that, within five (5) days of the commencement of the exercise
of any remedy(ies) in favor of Mortgagee as set forth in this Mortgage,
Mortgagee shall notify the Division, in writing, of the date, nature and
scope of the exercise of such remedy(ies) and further acknowledges that the
exercise of such remedy(ies) and any transfer or proposed transfer of any
ownership interest or economic interest resulting therefrom or related
thereto shall require compliance with any applicable provisions of Title 4,
Section 528 of the Louisiana Revised Statutes and all regulations promulgated
pursuant thereto.] [INSERT THE FOLLOWING IN MISSOURI GAMING SHIP
MORTGAGES--Mortgagee acknowledges that the foreclosure, possession, sale,
transfer or disposition of certain gaming equipment and machinery is subject
to compliance with applicable federal and state gaming and gambling statutes,
laws, rules and regulations which may be proscriptive or require prior
consent or approval by applicable state gaming commissions, including the
Missouri Gaming Commission, to such foreclosure, possession, sale, transfer
or disposition. Mortgagee hereby further acknowledges that Missouri law does
not presently permit the Mortgagee to foreclose or take possession of certain
gaming equipment and machinery without the Mortgagee being licensed by the
Missouri Gaming Commission or, in the alternative, the creation of a
different mechanism that is in compliance with Missouri laws and is
acceptable to the Missouri Gaming Commission (which mechanism could include,
subject to the Missouri Gaming Commission's approval, the sale, transfer or
disposition of such gaming equipment and machinery in question to an entity
licensed by the Missouri Gaming Commission).]
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SECTION 2.9 RESTORATION OF POSITION. In case the Mortgagee
shall have proceeded to enforce any right, power or remedy under this
Mortgage by foreclosure, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Mortgagee, then and in every such case the Mortgagor and the
Mortgagee shall be restored to their former positions and rights hereunder
with respect to the property subject or intended to be subject to this
Mortgage, and all rights, remedies and powers of the Mortgagee shall continue
as if no such proceedings had been taken.
SECTION 2.10 APPLICATION OF PROCEEDS. The proceeds of any sale
and net earnings derived from the operation, use, charter, or any other
employment of the Vessel by the Mortgagee, as mortgage creditor, and within
any of the powers and authority above given, as well as the proceeds of any
judgment which the Mortgagee may obtain by reason of the breach or failure to
perform any of the terms of this Mortgage, as well as the proceeds of any
claim for damage received by the Mortgagee while exercising the powers and
the authorities above given, shall be applied as follows:
FIRST: Applied to the payment of all expenses and
charges, including the costs and expenses of any
sale, the expenses of any retaking, attorneys' fees,
court costs, and any other expenses or advances
made or incurred by the Mortgagee in the
protection of its rights or the pursuance of its
remedies hereunder;
SECOND: Applied to the payment of any damages or
injuries sustained by the Mortgagee occasioned by
non-compliance by the Mortgagor with the terms
and provisions of this Mortgage and to furnish
indemnity in the proper amount against any other
liens or other encumbrances which have or may
have priority over those established by this
Mortgage;
THIRD: Applied to the payment of the Secured
Obligations in such priority as among the several
obligations of the Mortgagor thereunder as the
Mortgagee may elect;
FOURTH: Applied to the payment of any other obligations
of the Mortgagor to the Mortgagee hereunder; and
FIFTH: Any surplus thereafter remaining shall be paid
promptly to the Mortgagor.
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<PAGE>
In the event the proceeds and the net earnings referred to in this
Section 2.10 should be insufficient to pay the sum total of the amounts
specified in paragraphs First through Fourth above, then the Mortgagee, as
mortgage creditor, shall have the right to collect and to receive from the
Mortgagor, or from any other person or persons who may be chargeable in
respect thereof, such amount as will fully pay any remaining deficiency with
respect to the amounts specified in paragraphs First through Fourth above.
SECTION 2.11 RIGHT OF PEACEFUL ENJOYMENT. Until one or more
Events of Default shall happen, the Mortgagor, subject to the provisions of
this Mortgage, shall be suffered and permitted to retain actual possession
and use of the Vessel and shall have the right, from time to time, in its
discretion, and without application to the Mortgagee, and without obtaining a
release thereof by the Mortgagee, to dispose of, free from the lien hereof,
any boilers, engines, machinery, masts, spars, sails, rigging, boats,
anchors, chains, tackle, apparel, furniture, fittings or equipment including
all gaming devices and equipment or any other appurtenances of the Vessel
that are no longer useful, necessary, profitable or advantageous in the
operation of the Vessel or of the business of the Vessel, provided that
Mortgagor first or simultaneously replaces the same with new boilers,
engines, machinery, masts, spars, sails, rigging, boats, anchors, chains,
tackle, apparel, furniture, fittings, equipment, or gaming devices and
equipment or other appurtenances of substantially equal value to the
Mortgagor, which shall forthwith become subject to the lien of this Mortgage
as a preferred mortgage thereon.
[INSERT THE FOLLOWING IN SPIRIT OF AMERICA SHIP MORTGAGE--
SECTION 2.12 MORTGAGEE'S CONSENT TO CHARTER AND LEASE TO INDIANA
GAMING COMPANY, L.P. Notwithstanding any other provision of this Mortgage,
Mortgagee hereby consents to the charter of the Vessel and the lease of the
related equipment (the "Equipment") by Mortgagor to Indiana Gaming Company,
L.P. ("Indiana L.P.") pursuant to the terms of a charter and equipment lease
agreement to be entered into between the Mortgagor and Indiana L.P. (together
with any amendments, restatements, extensions or other modifications thereto,
the "Charter"). Mortgagee agrees that the Charter, and the rights of Indiana
L.P. under the Charter, will remain in full force and effect and possession
of the Vessel and the Equipment under the Charter will remain undisturbed by
Mortgagee during the term of the Charter so long as Indiana L.P. satisfies
all of its obligations under the Charter.
After receipt of notice from Mortgagee of its intent to foreclose
the lien of, or otherwise enforce its rights under, the Security Documents
(as defined in the Indenture) or that Mortgagee has retaken or repossessed
the Vessel or received a conveyance of the Vessel and Equipment in lieu of
foreclosure, Indiana L.P. will be considered to have attorned to and
recognized Mortgagee, its successor and assigns, or any purchaser at the
foreclosure sale, as the substitute "Owner" under the Charter and Indiana
L.P.'s possession of the Vessel and Equipment will not be disturbed as
provided herein. This agreement will be considered self-operative, and no
separate agreements will be required to effectuate the attornment and
recognition of these rights.]
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<PAGE>
ARTICLE III
SUNDRY PROVISIONS
SECTION 3.1 CERTAIN DEFINITIONS.
(a) Terms used in this Mortgage which are not defined herein but
which are defined in the Indenture shall have the meanings herein set forth
for them in the Indenture.
(b) When used herein, the term "Secured Obligations" shall mean
all obligations of the Mortgagor to the Mortgagee which arise out of or in
connection with any Security Document (including without limitation all
obligations of the Mortgagor to Mortgagee hereunder, under any Guarantee or
under any other Security Document).
SECTION 3.2 The names and addresses of each of the parties to
this Mortgage are as follows:
(a) [NAME OF MORTGAGOR]
219 Piasa Street
Alton, Illinois 62002-6232
Attention: Joseph G. Uram
Phone: (618) 474-7620
Facsimile: (618) 474-7636
(b) First National Bank of Commerce, as Trustee
Corporate Trust Division
210 Baronne Street
New Orleans, Louisiana 70112
Attention: Denis L. Milliner
Phone: (504) 561-1640
Facsimile: (504) 561-1432
unless another address shall be furnished in writing by the party to receive
such notice to the party giving such notice, and any such notice shall be
deemed made as of the date of mailing or hand delivery.
SECTION 3.3 SURVIVAL OF AGREEMENTS. All of the covenants,
promises, stipulations and agreements of the Mortgagor in this Mortgage
contained shall bind the Mortgagor and its successors and assigns and shall
inure to the benefit of the Mortgagee and its successors and assigns. In the
event of any assignment of this Mortgage, the term "Mortgagee", as used in
this Mortgage, shall be deemed to mean any such assignee.
SECTION 3.4 ACTS BY AGENTS OF MORTGAGEE. Wherever and whenever
herein any right, power or authority is granted or given to the Mortgagee,
such right, power or authority may
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<PAGE>
be exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall
constitute the act of the Mortgagee hereunder.
SECTION 3.5 COUNTERPARTS. This Mortgage may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 3.6 NOTICE. All notices or other communications
required or permitted hereunder shall be in writing and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
last known address of the respective party.
SECTION 3.7 NO WAIVER OF PREFERRED STATUS. No provision of this
Mortgage shall be deemed to constitute a waiver by the Mortgagee of the
preferred status hereof given by 46 U.S.C. Section 31321 et seq. and any
provision of this Mortgage which would otherwise constitute such a waiver
shall to such extent be of no force or effect.
SECTION 3.8 WAIVERS; AMENDMENTS. None of the terms and
provisions of this Mortgage may be waived, altered, amended, modified or
supplemented except by an instrument in writing executed by the Mortgagor and
the Mortgagee.
SECTION 3.9 GOVERNING LAW. THIS MORTGAGE AND ALL THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEIR SUCCESSORS AND ASSIGNS SHALL
BE GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA, AND, TO THE EXTENT
APPLICABLE, THE LAWS OF THE STATE OF NEW YORK, EXCEPTING FOR THE CHOICE OF
LAW RULES OF SAID STATE AND EXCEPT TO THE EXTENT PREEMPTED BY APPLICABLE
FEDERAL AND MARITIME LAWS OF THE UNITED STATES.
SECTION 3.10 FURTHER ASSURANCES. In the event that this
Mortgage, or any provisions hereof, shall be deemed invalid in whole or in
part by reason of any present or future law or any decision of any court
having jurisdiction, or if the documents at any time held by the Mortgagee
shall be deemed by the Mortgagee for any reason insufficient to carry out the
rights and powers granted to the Mortgagee herein, then from time to time,
the Mortgagor will do, execute, acknowledge and deliver, or cause to be done,
executed, acknowledged and delivered such other and further assurances and
documents as in the opinion of the Mortgagee may reasonably be required in
order more effectively to subject the Vessel to the lien of this Mortgage or
more effectively subject the Vessel to the performance of the terms and
provisions of this Mortgage, or to enable this Mortgage to enjoy continuously
the status of a First Preferred Ship Mortgage.
SECTION 3.11 ILLEGALITY OR UNENFORCEABILITY. If this Mortgage or
any provision of this Mortgage or the application thereof to any person or
circumstances or portion of the Secured Obligations shall be invalid or
unenforceable to any extent, the remainder of this Mortgage and the
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<PAGE>
application of such provision to other persons or circumstances or portion of
the Secured Obligations shall not be affected thereby and shall be enforced
to the greatest extent permitted by law.
ARTICLE IV
RECORDING
For the purpose of recording this First Preferred Ship Mortgage as
required by 46 U.S.C. Section 31321 et seq. the maximum amount of the
Mortgage outstanding at one time, excluding interest, expenses and fees, is
$235,000,000 (the "Total Amount"). The discharge amount is the same as the
Total Amount.
ARTICLE V
DEFEASANCE; TERMINATION
If the entire amount of the Secured Obligations shall be paid and
discharged as and when the same become due and payable and if the Mortgagor
shall also pay or cause to be paid all other sums payable hereunder by the
Mortgagor, then this Mortgage and the lien, rights and interest hereby
granted shall cease, determine and become null and void. In addition, this
Mortgage may be released as provided in the Indenture (including without
limitation Articles IV and IX thereof). Upon such defeasance or release, the
Mortgagee shall, at the request and expense of the Mortgagor, execute and
deliver such instrument or instruments of satisfaction as may be necessary to
satisfy and discharge the lien hereof, and forthwith the estate, right, title
and interest of the Mortgagee in and to all property subject to this Mortgage
shall thereupon cease, determine and become null and void.
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<PAGE>
IN WITNESS WHEREOF, the Mortgagor has caused this First Preferred
Ship Mortgage to be duly executed and delivered and its corporate seal to be
hereunto affixed as of day and year first above written.
[NAME OF MORTGAGOR],
[CORPORATE SEAL] a _______ corporation
By:____________________________
Name:__________________________
Title:_________________________
Attest:
___________________________________
Secretary
ACKNOWLEDGMENT
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this ____ day of
June, 1996, by ________________________ the _______________________ of [NAME
OF MORTGAGOR], a _______ corporation, on behalf of the corporation.
Notary Public
<PAGE>
Missouri
FORM OF
DEED OF TRUST, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
Dated: June 5, 1996
Among ARGOSY GAMING COMPANY,
a Delaware corporation
CHICAGO TITLE INSURANCE COMPANY, a Missouri corporation
and
FIRST NATIONAL BANK OF COMMERCE,
a national banking association
Platte County, Missouri
Recording requested by and after recording return to:
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
Attn: David S. McCarthy, Esq.
This instrument was prepared by:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Reed W. Ramsay, Esq.
- -------------------------------------------------------------------------------
THIS DEED OF TRUST SECURES FUTURE ADVANCES
AND FUTURE OBLIGATIONS AT ANY TIME OUTSTANDING
UP TO A MAXIMUM PRINCIPAL AMOUNT OF $235,000,000,
AND BENEFICIARY SHALL RECEIVE THE BENEFITS OF
R.S. MO. - Section-443.055
<PAGE>
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS
AND SECURITY AGREEMENT
June 5, 1996
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY
AGREEMENT (this "INSTRUMENT") is entered into as of the day set forth above
by and between ARGOSY GAMING COMPANY, a Delaware corporation (referred to
herein as either "GRANTOR" or "BORROWER") whose chief executive office is
located at 219 Piasa Street, Alton, Illinois 62002-6232 and CHICAGO TITLE
INSURANCE COMPANY, a Missouri corporation ("TRUSTEE") having an office at
1100 Main Street, Suite 500, Kansas City, Missouri 64105 and FIRST NATIONAL
BANK OF COMMERCE, a national banking association, as trustee under the
Indenture (as hereinafter defined), ("BENEFICIARY"), whose address is 210
Baronne Street, New Orleans, Louisiana 70112.
WHEREAS, the Grantor, Beneficiary, and certain other parties have
entered into that certain Indenture dated as of June 5, 1996 (as amended,
restated, supplemented or otherwise modified from time to time, the
"INDENTURE"), pursuant to which, among other things, the Grantor has issued
its 13 1/4% First Mortgage Notes due 2004 (the "Original Notes"); and
WHEREAS, pursuant to a Registration Rights Agreement between the
Grantor and certain other parties, the Grantor will file a registration
statement with respect to an offer to exchange the Original Notes for a new
series of 13 1/4% First Mortgage Notes due 2004 registered under the
Securities Act of 1933, as amended, with terms substantially identical to
those of the Original Notes (the "SERIES B NOTES" and together with the
Original Notes, the "Notes"); and
WHEREAS, execution of this Instrument is a condition precedent to
the closing on the Indenture.
Capitalized terms used herein but not described herein have the
meanings ascribed such terms in the Indenture.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS that in order to
secure to Beneficiary (a) the repayment of the indebtedness evidenced by the
Notes to the Holders with interest thereon, and all other Indenture
Obligations, together with all renewals, extensions and modifications
thereof; (b) the payment of all other sums with interest thereon advanced in
accordance herewith to protect the security of this Instrument; and (c) the
performance of the covenants and agreements of Grantor herein contained and
contained in the Indenture and the Security Documents (collectively, the
"INDEBTEDNESS"), Grantor hereby irrevocably grants, bargains, sells, conveys,
confirms, assigns, transfers and sets over to the TRUSTEE IN TRUST, WITH THE
POWER OF SALE the premises described in EXHIBIT 1 attached hereto and made a
part hereof (the premises described in EXHIBIT 1 are hereinafter individually
and collectively referred to as the "PREMISES") together with:
(a) all buildings, improvements, and tenements now or hereafter
erected on the Premises, and all heretofore or hereafter vacated alleys
and streets abutting the Premises; and
<PAGE>
(b) all easements, rights of way, rights, appurtenances, rents,
issues, profits, royalties, mineral, oil and gas rights and profits,
water, water rights, and water stock appurtenant to the Premises; and
(c) all fixtures, personal property, machinery, equipment,
engines, boilers, incinerators, building materials, appliances and goods
of every nature whatsoever now or hereafter located in, or on, or used,
or intended to be used in connection with the Premises, including, but
not limited to, those for the purposes of supplying or distributing
heating, cooling, electricity, gas, water, air and light; and
(d) all elevators, and related machinery and equipment, fire
prevention and extinguishing apparatus, security and access control
apparatus, plumbing, bathtubs, water heaters, water closets, sinks,
ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers,
awnings, storm windows, storm doors, screens, blinds, shades, curtains and
curtain rods, mirrors, cabinets, paneling, rugs, attached floor
coverings, furniture, fixtures, equipment used in connection with the
Premises; and
(e) all other property now owned or hereafter acquired and used
in, on or about the Premises; and
(f) all leasehold estates, right, title and interest of Grantor in
and to all ground leases, leases, subleases covering the Premises or any
portion thereof now or hereafter existing or entered into (herein
"LEASES") and all right, title and interest of Grantor thereunder,
including without limitation all guaranties thereof, all cash, security
deposits, advance rentals, and all deposits or payments of a similar
nature; and
(g) all right, title and interest of Grantor into and under all
plans, specifications, maps, surveys, studies, reports, permits,
licenses (excluding Gaming Licenses (as defined in the Indenture) or any
other governmental approval or payment, to the extent that, under the
terms and conditions of such approval or under applicable law, such
approvals cannot be subjected to a Lien in favor of Beneficiary),
architectural, engineering and construction contracts, books, accounts,
insurance policies, title insurance policies and other documents of
whatever kind or character, relating to the use, construction, occupancy,
leasing, sale or operation of the Premises; and
(h) all fixtures and personal property described in EXHIBIT 2; and
(i) all interests, estates or other claims or demands, in law and
in equity which Grantor now has or may hereafter acquire, in the
Property (hereinafter defined) and all estate, interest, right, title,
other claim or demand, both in law and in equity including claims or
demands with respect to proceeds of insurance relating thereto, which
Grantor now has or may hereafter acquire in the Premises or any other
property, or any portion thereof or interest therein; and
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<PAGE>
(j) all awards made for the taking by eminent domain or by any
proceeding or purchase in lieu thereof of the whole or any part of the
Property, including without limitation, any award resulting from a
change of any streets (whether as to grade accession otherwise) and any
award for severance damages all of which, including all appurtenances,
replacements, betterments, renewals, substitutions and additions thereto,
shall be deemed to be and remain a part of the real property covered by
this Instrument.
All of the foregoing, together with said Premises, individually and
collectively, are herein referred to as the "Property."
Grantor covenants to Trustee and Beneficiary that Grantor is
lawfully seized of the estate hereby conveyed and has the right to grant,
bargain, sell, convey, confirm, assign, transfer and set over the Property,
that the Property is unencumbered and free of all mortgages, pledges, liens,
charges, other encumbrances, adverse claims and other defects of title
whatsoever except for easements of record that do not materially interfere
with the use of the Property for the operation of Missouri Gaming Company,
liens and other encumbrances permitted by the Indenture, and that Grantor
will forever warrant and defend the title to the Property and the validity
and priority of the lien of this Instrument to Trustee and Beneficiary and
their respective successors and assigns against all claims and demands,
whatsoever.
TO HAVE AND TO HOLD the Property unto the Trustee forever, the
Grantor hereby binds itself and Grantor, Trustee and Beneficiary covenant and
agree as follows:
1. PAYMENT OF PRINCIPAL AND INTEREST. Grantor shall pay when
due the principal of and interest on the Indebtedness evidenced by the Notes,
any prepayment and late charges provided in the Notes, and all other
Indebtedness secured by this Instrument all without relief from valuation and
appraisement laws.
2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Upon default in
payment of any of the following described items, or upon the occurrence of
any other Event of Default as defined in the Indenture, Beneficiary shall
have the right at its option, to require Grantor to pay to Beneficiary, every
month, until the Indebtedness is paid in full, a sum (herein "FUNDS") equal
to one-twelfth of (a) the yearly water and sewer rates and assessments, all
taxes, liens, impositions, public charges and all general, special ordinary
charges and assessments which may be levied on the Property; (b) the yearly
ground rents, if any; and (c) the yearly premium installments for fire and
other hazard insurance, general liability, rent loss insurance and such other
insurance covering the Property as Beneficiary may require pursuant to
Paragraph 5 hereof, all as reasonably estimated initially and from time to
time by Beneficiary on the basis of assessments and bills and reasonable
estimates thereof. Any waiver by Beneficiary of a requirement that Grantor
pay such Funds may be revoked by Beneficiary, in Beneficiary's sole
discretion, at any time upon notice in writing to Grantor. Beneficiary may
require Grantor to pay to Beneficiary, in advance, such other Funds for other
taxes, charges, premiums, assessments and impositions in connection with
Grantor or the Property which Beneficiary shall reasonably deem necessary to
protect Beneficiary's interests (herein "OTHER IMPOSITIONS"). Unless
otherwise provided by applicable law, Beneficiary, at
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<PAGE>
Beneficiary's option, may require Funds for Other Impositions to be paid by
Grantor in a lump sum or in periodic installments.
Beneficiary shall apply the Funds to pay said rates, rents, taxes,
assessments, insurance premiums and Other Impositions so long as Grantor is
not in breach of any covenant or agreement of Grantor in this Instrument or
the Indenture. Beneficiary shall make no charge for so holding and applying
the Funds, analyzing said account or for verifying and compiling said
assessments and bills, unless Beneficiary pays Grantor interest, earnings or
profits on the Funds and applicable law permits Beneficiary to make such a
charge. Unless such agreement is made or applicable law requires interest,
earnings or profits on the Funds to be paid, Beneficiary shall not be
required to pay Grantor any interest, earnings or profits on the Funds.
Beneficiary shall give to Grantor, without charge, an annual accounting of
the Funds in Beneficiary's normal format showing credits and debits to the
Funds and the purpose for which each debit to other Funds was made. The
Funds are pledged as additional security for the Indebtedness secured by this
Instrument and shall be subject to the right of set off.
If the amount of the Funds held by Beneficiary at the time of the
annual accounting thereof shall exceed the amount deemed necessary by
Beneficiary to provide for the payment of water and sewer rates, taxes,
assessments, finance premiums, rents and Other Impositions, as they fall due,
such excess may be credited to Grantor on the next monthly instrument or
installments of Funds due or may be applied to the outstanding balance of the
Indebtedness secured hereby, within the sole discretion of the Beneficiary.
If at any time the amount of the Funds held by Beneficiary shall be less than
the amount deemed necessary by Beneficiary to pay water and sewer rates,
taxes, assessments, insurance premiums, rents and Other Impositions, as they
fall due, Grantor shall pay to Beneficiary any amount necessary to make up
the deficiency immediately after notice from Beneficiary to Grantor
requesting payment thereof.
Upon Grantor's breach of any covenant or agreement of Grantor in
this Instrument or upon the occurrence of an Event of Default under the
Indenture, Beneficiary may apply, in any amount and in any order as
Beneficiary shall determine in Beneficiary's sole discretion, any Funds held
by Beneficiary at the time of application (a) to pay rates, rents, taxes,
assessments, insurance premiums and Other Impositions which are now or will
hereafter become due or (b) pay interest or principal on the Indebtedness
evidenced by the Notes or as a credit against any Indebtedness secured by
this Instrument. Upon payment in full of the Indebtedness secured by this
Instrument or release of this Instrument as provided for in the Indenture,
Beneficiary shall promptly refund to Grantor any Funds held by Beneficiary.
3. APPLICATION OF PAYMENTS. Unless applicable law provides
otherwise, and except as otherwise provided herein, all payments received by
Beneficiary from Grantor under this Instrument shall be applied by
Beneficiary in the following order of priority: (a) amounts payable to
Beneficiary by Grantor under Paragraph 2 hereof; (b) interest payable on the
Notes; (c) principal of the Notes; (d) interest payable on advances made
pursuant to Paragraph 8 hereof; (e) principal of advances made pursuant to
Paragraph 8 hereof; and (f) any other Indebtedness secured by this Instrument
in such order as Beneficiary, at Beneficiary's option, may
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<PAGE>
determine; PROVIDED, HOWEVER, that Beneficiary may, at Beneficiary's option,
apply any sums payable pursuant to Paragraph 8 hereof prior to interest on
and principal of the Notes, but such application shall not otherwise affect
the order of priority of application specified in this Paragraph 3 and that
Beneficiary, at Beneficiary's option, may apply payments received and applied
to payment of principal or interest on the Notes among the Notes in such
order as Beneficiary, in Beneficiary's sole discretion, may determine.
4. CHARGES, LIENS. Grantor shall pay all water and sewer rates,
rents, taxes (not being diligently contested in good faith by Grantor in a
timely manner), assessments, premiums, and Other Impositions attributable to
the Property. Except as otherwise permitted under the Indenture, Grantor
shall immediately discharge any Lien upon the Property, and Grantor shall pay
when due or bond-over the claims of all persons supplying labor or materials
to or in connection with the Property. Without Beneficiary's prior written
permission, Grantor shall not allow or permit or by any act or failure to
act, acquiesce or allow to be created any lien, encumbrance, or other
interest in the Property to be placed, created or perfected against the
Property.
5. INSURANCE. Grantor will insure each individual Property
against such perils and hazards, and in such amounts and with such limits, as
Beneficiary may reasonably require from time to time, and in any event, will
continuously maintain the following described policies of insurance (the
"INSURANCE POLICIES"):
(a) Casualty insurance against loss and damage by all risks of
physical loss or damage, including fire, windstorm, flood, earthquake
and other risks covered by the so-called extended coverage endorsement
or all risk insurance in amounts not less than the eighty percent (80%)
of the full insurable replacement value of all improvements, fixtures and
equipment from time to time on the Property and bearing a replacement cost
agreed amount endorsement;
(b) Comprehensive public and product liability insurance against
death, bodily injury and property damage in an amount not less than One
Million Dollars ($1,000,000.00);
(c) Rental or business interruption insurance in amounts
sufficient to pay, for a period of up to one (1) year, all amounts
required to be paid by Grantor pursuant to the Notes and this Instrument
(or as otherwise approved by Beneficiary);
(d) If the Federal Insurance Administration (FIA) has designated
the Property to be in a special flood hazard area and has designated the
community in which the Property is located eligible for sale of
subsidized insurance, first and second layer flood insurance when and as
available; and
(e) The types and amounts of coverage as are customarily
maintained by owners or operators of like properties in similar
corresponding geographic areas.
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<PAGE>
All insurance policies and renewals thereof shall be in a form
reasonably acceptable to Beneficiary and shall include a standard mortgage
clause in favor of and in form acceptable to Beneficiary. Beneficiary shall
be listed as a mortgagee, loss payee and additional insured of all such
policies as its interests may appear. Beneficiary shall have the right to
hold the policies, and Grantor shall promptly furnish to Beneficiary all
renewal notices and all receipts of paid premiums. At least thirty days
prior to the expiration date of a policy, Grantor shall deliver to
Beneficiary a renewal policy in form satisfactory to Beneficiary.
In the event of any Event of Loss with respect to the Property,
Grantor shall give immediate written notice to the insurance carrier and to
Beneficiary. Grantor hereby authorizes and empowers Beneficiary as
attorney-in-fact for Grantor to make proof of loss, to adjust and compromise
any claim under the insurance policies, to appear in and prosecute any action
arising from such insurance policies, to collect and receive insurance
proceeds, and to deduct therefrom Beneficiary's expenses actually incurred in
the collection of such proceeds; provided, however, that nothing contained in
this Paragraph 5 shall require Grantor to incur any expense or take any
action hereunder. In the event of such Event of Loss, the Net Cash Proceeds
shall be disbursed as provided in the Indenture.
If the Net Cash Proceeds are held by Beneficiary to reimburse
Grantor for the cost of restoration and repair of the Property, Grantor shall
commence and shall continue to restore and repair the Property to the
equivalent of its original condition. If the cost of such restoration shall
exceed the sum of One Million Dollars ($1,000,000) or if the restoration to
be done may materially impair the structural integrity of a material portion
of the buildings on the Premises, disbursement of said proceeds shall be
conditioned on Beneficiary's receipt of plans and specifications of an
architect, contractor's cost estimates, architect's certificates, waivers of
lien, sworn statements of mechanics and materialmen and such other evidence
of costs, percentage completion of construction, application of payments, and
satisfaction of liens and such other conditions and requirements as
Beneficiary may require. If the Net Cash Proceeds are applied to the payment
of the Indebtedness secured by this Instrument, any such application of
proceeds to principal shall not extend or postpone the due dates of the
installments payable under the Indenture or change the amounts of such
installments. Notwithstanding the foregoing, if the Property is sold
pursuant to the terms and provisions of this Instrument or if Beneficiary
acquires title to the Property, Beneficiary shall have all of the right,
title and interest of Grantor in and to any insurance policies and unearned
premiums thereon and in and to the proceeds resulting from any damage to the
Property prior to such sale or acquisition.
Wherever a provision is made in this Instrument for insurance
policies to bear mortgage clauses or other loss payable clauses or
endorsements in favor of Beneficiary, or to confer authority upon Beneficiary
to settle or participate in the settlement of losses under policies of
insurance or to hold and disburse or otherwise control use of insurance
proceeds, from and after the entry of judgment of foreclosure, all such
rights and powers of the Beneficiary shall continue in the Beneficiary as
judgment creditor or mortgagee until confirmation of sale.
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6. PRESERVATION AND MAINTENANCE OF PROPERTY. Grantor (a) shall
not commit waste or permit impairment or deterioration of the Property; (b)
shall not abandon the Property; (c) shall restore or repair promptly and in a
good and workmanlike manner all or any part of the Property to the equivalent
of its original condition, or such other condition as Beneficiary may, in its
reasonable discretion, approve in writing, in the event of any damage, injury
or loss thereto, whether or not insurance proceeds are available to cover in
whole or in part the costs of such restoration or repair unless the
improvements constituting the Property are totally destroyed, insurance has
been maintained thereon as required by this Instrument and Beneficiary
applies the proceeds of said insurance to payment of the Indebtedness secured
by this Instrument; (d) shall keep the Property, including improvements,
fixtures, equipment, machinery and appliances thereon in good repair and
shall replace fixtures, equipment, machinery and appliances on the Property
when necessary to keep such items in good repair; (e) shall comply with all
laws, ordinances, regulations, zoning ordinances and requirements of any
governmental body applicable to the Property; and (f) shall give notice in
writing to Beneficiary, appear in and defend any action or proceeding
purporting to affect the Property, the security of this Instrument or the
rights or powers of Beneficiary. Neither Grantor nor any tenant or other
person shall remove, demolish or alter any improvement now existing or
hereafter erected on the Property or any fixture (other than trade fixtures),
equipment, machinery or appliance in or on the Property except when incident
to the replacement of fixtures, equipment, machinery and appliances with
items of like kind.
7. USE OF PROPERTY. (a) Unless required by applicable law or
unless Beneficiary has otherwise agreed in writing, Grantor shall not allow
changes in the use for which all or any part of the Property was intended at
the time this Instrument was executed. Grantor shall not initiate or
acquiesce to a change in the zoning classification of the Property without
Beneficiary's prior written consent (which consent shall not be unreasonably
withheld). Grantor shall have the right to enter into easements for ingress,
egress and utilities which serve and benefit the Property, without the
consent of Beneficiary. If at any time Grantor desires that Beneficiary
release the lien of this Instrument from the parcel described in EXHIBIT 3
attached hereto (the "Specified Parcel"), which constitutes part of the
Premises owned by Grantor, Grantor shall notify Beneficiary in writing (a
"RELEASE NOTICE") not less than fifteen (15) days prior to the date of the
desired release. Grantor shall provide Beneficiary with a legal description
of the Specified Parcel and evidence of proper subdivision thereof if
required, and separate tax identification if required (or, that proper
application therefor has been made) prior to the desired release.
Beneficiary agrees to cause Trustee to execute and deliver to Grantor, within
fifteen (15) days after receipt of the Release Notice, an appropriate release
document upon payment by Grantor to Beneficiary of a release price of One
Dollar ($1.00). Notwithstanding anything to the contrary contained in the
foregoing, upon the occurrence and during the continuance of a Default, no
release of the Specified Parcel shall be permitted.
(b) Provided Grantor delivers to Beneficiary and Trustee the
certification hereinafter described, Grantor shall have the right, without
the consent of Beneficiary or Trustee, to grant, reserve, dedicate or create
easements on, over, across, through and under portions of the Property
reasonably necessary for the purposes of (i) ingress to and egress from the
Specified Parcel, (ii) utilities, including, but not limited to sewer, water,
gas, electric and telephone, and (iii) parking, in connection with the
development of the Specified Parcel, provided, however, that no such easement
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shall materially interfere with the use and operation of the Property (the
easements contained in (i), (ii) and (iii) are collectively referred to as
the "Easements"). Prior to any grant, reservation, dedication or creation of
any Easements, Grantor shall deliver to Trustee and Beneficiary a written
certification stating that: (w) the Easements will not cause the Property or
any portion thereof to fail to comply in any material respects with the terms
of this Instrument and any applicable law, ordinances or regulation; (x) all
governmental consents or approvals required in connection with the Easements
have been applied for or obtained; (y) the Easements are for the purposes
described in clauses (i) through (iii) above; and (z) the Easements will not
adversely affect the value, utility or useful life of the Property. At the
request of Grantor, Beneficiary shall cause Trustee to execute and deliver to
Grantor an agreement pursuant to which the lien of this Instrument shall be
subordinated to the Easements.
8. PROTECTION OF BENEFICIARY'S SECURITY. If Grantor fails to
perform the covenants and agreements contained in this Instrument, or if any
action or proceeding is commenced which affects the Property or title thereto
or the interest of Beneficiary therein, including, but not limited to,
eminent domain, insolvency, code enforcement, or arrangements or proceedings
involving a bankrupt or decedent, then, after the running of applicable grace
periods, if any, Beneficiary at Beneficiary's option may make such
appearances, disburse such sums and take such action as Beneficiary deems
necessary, in its sole discretion, to protect Beneficiary's interests,
including, but not limited to: (a) disbursement of reasonable attorneys'
fees; (b) entry upon the Property to make repairs; and (c) procurement of
satisfactory insurance as provided in Paragraph 5 hereof.
Any amounts disbursed by Beneficiary pursuant to this Paragraph 8,
with interest thereon, shall be added to the Indebtedness of Grantor secured
by this Instrument. Unless Grantor and Beneficiary agree to other terms of
payment, such amounts shall be immediately due and payable and shall bear
interest from the date of disbursement at the rate stated in the Notes unless
collection from Grantor of interest at such rate would be contrary to
applicable law, in which event such amounts shall bear interest at the
highest rate which may be collected from Grantor under applicable law.
Grantor hereby covenants and agrees that Beneficiary shall be subrogated to
the lien of any mortgage or other lien discharged, in whole or in part, by
the Indebtedness secured hereby. Nothing contained in this Paragraph 8 shall
require Beneficiary to incur any expense or take any action hereunder.
9. INSPECTION. Beneficiary may make or cause to be made
reasonable entries upon and inspections of the Property.
10. BOOKS AND RECORDS. Grantor shall keep and maintain at all
times complete and accurate books of account and records adequate to reflect
correctly the results of the operation of the Property and copies of all
written contracts, leases and other instruments which affect the Property.
Such books, records, contracts, leases, subleases and other instruments shall
be subject to examination and inspection at any reasonable time by
Beneficiary.
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11. CONDEMNATION AND EMINENT DOMAIN. All awards made to the
present, or any subsequent, owner of the Property, by any governmental or
other lawful authority for the taking, by condemnation or eminent domain, of
all or any part of the Property (the "AWARDS") are hereby assigned by Grantor
to Beneficiary, and shall be held and applied in accordance with the terms
and provisions of the Indenture. Grantor shall immediately notify
Beneficiary of the actual or threatened commencement of any condemnation or
eminent domain proceedings affecting any part of the Property and shall
deliver to Beneficiary copies of all papers served in connection with any
such proceedings. Grantor shall make, execute and deliver to Beneficiary, at
any time upon request, free of any encumbrance, any further assignments and
other instruments deemed necessary by Beneficiary for the purpose of
assigning the Awards to Beneficiary. After deducting from the Award for such
taking all of its expenses incurred in the collection and administration of
the Award, including attorneys' fees, unless otherwise permitted by prior
written consent of the Beneficiary, the Award shall be applied as provided in
the Indenture.
12. GRANTOR AND LIEN NOT RELEASED. From time to time, Beneficiary
may, at Beneficiary's option, subject to the terms of the Indenture, without
giving notice to or obtaining the consent of Grantor, Grantor's successors,
or assigns or of any junior lienholder or guarantors, without liability on
Beneficiary's part and notwithstanding Grantor's breach of any covenant or
agreement of Grantor in this Instrument, extend the time for payment of the
Indebtedness secured by this Instrument or any part thereof, reduce the
payments thereon, release one or more persons or entities liable on any of
said Indebtedness, accept a renewal note or notes therefor, release from the
lien of this Instrument any part of the Property, take or release other or
additional security, reconvey any part of the Property, consent to any map or
plat of the Property, consent to the granting of any easement, join in any
extension or subordination agreement, agree in writing with Grantor to modify
the rate of interest or period of amortization of the Notes or either of
them, or change the amount of the installments payable thereunder. Any
actions taken by Beneficiary pursuant to the terms of this Paragraph 12 shall
not affect the obligation of Grantor or Grantor's successors or assigns to
pay the Indebtedness secured by this Instrument and to observe the covenants
of Grantor contained herein, shall not affect the guaranty of any person,
corporation, partnership or other entity for payment of the Indebtedness
secured hereby, and shall not affect the lien or priority of lien hereof on
the Property. Grantor shall pay Beneficiary a reasonable service charge,
together with such title insurance premiums and attorneys' fees as may be
incurred at Beneficiary's option for any such action if taken at Grantor's
request.
13. FORBEARANCE BY BENEFICIARY NOT A WAIVER. Any forbearance by
Beneficiary in exercising any right to remedy hereunder, or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise
of any right or remedy. The acceptance by Beneficiary of payment of any sum
secured by this Instrument after the due date of such payment shall not be a
waiver of Beneficiary's right to either require prompt payment when due of
all other sums to secured or to declare a default for failure to make prompt
payment. The procurement of insurance or the payment of taxes or other liens
or charges by Beneficiary shall not be a waiver of Beneficiary's right to
accelerate the maturity of the Indebtedness secured by this Instrument.
Beneficiary's receipt of any Awards, proceeds or damages under Paragraphs 5
and 11
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<PAGE>
hereof shall not operate to cure or waive Grantor's default in payment of
sums secured by this Instrument.
14. ESTOPPEL CERTIFICATE. Grantor shall, within ten days of a
written request from Beneficiary, furnish Beneficiary with a written
statement, duly acknowledged, setting forth the Indebtedness secured by this
Instrument and any right of set-off, counterclaim or other defense which
Grantor is aware exists against such sums and the obligations of this
Instrument and provide such other information as Beneficiary may reasonably
request.
15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. In addition to
being a deed of trust and assignment of leases and rents, this Instrument is
intended to be a security agreement pursuant to the Uniform Commercial Code
for any of the items specified herein above as part of the Property which
under applicable law, may be subject to a security interest pursuant to the
Uniform Commercial Code, and Grantor hereby grants Beneficiary a security
interest in said items and a security interest shall hereby attach thereto
for the benefit of Beneficiary to further secure the Indebtedness. Grantor
shall file this Instrument, or a reproduction thereof, in the real estate
records or other appropriate index, as a financing statement for any of the
items specified above as part of the Property. Any reproduction of this
Instrument or of any other security agreement or financing statement shall be
sufficient as a financing statement. In addition, Grantor shall execute and
file all financing statements, extensions, renewals and amendments thereof,
and reproductions of this Instrument in such form as may be required to
perfect and continue a security interest with respect to said items. Grantor
shall pay all costs of filing such financing statements and any extensions,
renewals, amendments and releases thereof, and shall pay all reasonable costs
and expenses of any record searches for financing statements Beneficiary may
reasonably require. Without the prior written consent of Beneficiary, Grantor
shall not create or suffer to be created pursuant to the Uniform Commercial
Code any other security interest in said items, including replacements and
additions thereto. If any Default hereunder or Event of Default (as defined
in the Indenture) occurs or if Beneficiary declares the Indebtedness secured
hereby immediately due and payable in accordance with Paragraph 25 hereof or
pursuant to any other provision of this Instrument, the Indenture, or the
other Security Documents, Beneficiary shall have the remedies of a secured
party under the Uniform Commercial Code and, at Beneficiary's option, may
also invoke any remedies provided in this Instrument. In exercising any of
said remedies, Beneficiary may proceed against the items of real property and
any items of personal property specified above as part of the Property
separately or together and in any order whatsoever, without in any way
affecting the availability of Beneficiary's remedies under the Uniform
Commercial Code or of the remedies provided in Paragraph 25 hereof.
16. LEASES OF THE PROPERTY. Grantor shall comply with and observe
Grantor's obligations as landlord under the Leases. Grantor, at Beneficiary's
request, shall furnish Beneficiary with executed copies of all leases and
guaranties now existing or hereafter made of all or any part of the Property.
Grantor may, without the consent of Beneficiary, enter into, modify and/or
cancel any of the Leases in the ordinary course of business. Grantor may,
from time to time, request Trustee and Beneficiary, not individually, but
solely in its capacity as Trustee, to execute a form of subordination
agreement, substantially in the form of EXHIBIT 4 attached hereto, provided
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<PAGE>
that together with such request, Grantor shall submit a certificate of one of
its officers that the lease which is the subject of the subordination
agreement is at market rates, and contains market terms. Provided Grantor
satisfies the conditions contained in this paragraph, Trustee and
Beneficiary, not individually, but solely in its capacity as Trustee, shall
execute said subordination agreement within thirty (30) days after receipt of
such request.
Grantor does hereby assign to Beneficiary all Leases and all
security deposits made by tenants in connection with such leases of the
Property. All security deposits shall be held in a separate account if
required by law. Grantor does hereby assign to Beneficiary Grantor's
interests in all leases of equipment related to the Property. Beneficiary
shall have all of the rights and powers possessed by Grantor prior to such
assignment.
17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument
is distinct and cumulative to all other rights or remedies under this
Instrument or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever. No delay or omission
of the Beneficiary or Trustee in exercising any right or power arising upon
any Default shall impair any such right, power, or remedy of Beneficiary or
Trustee, or shall be construed to be a waiver of any Default, or acquiescence
therein.
18. NOTICE. Except for any notice required under applicable law
to be given in another manner, all notices provided for in this Instrument
shall be given and shall be deemed to be given as set forth in the Indenture.
19. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY;
AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind,
and the rights hereunder shall inure to, the respective successors and
assigns of Beneficiary and Grantor, subject to the provisions of the
Indenture. All covenants and agreements of Grantor are subject to the
provisions of the Indenture. All covenants and agreements of Grantor shall
be joint and several. In exercising any rights hereunder or taking any
actions provided for herein, Beneficiary may act through its employees,
agents or independent contractors as authorized by Beneficiary. The captions
and headings of the Paragraphs of this Instrument are for convenience only
and are not to be used to interpret or define the provisions hereof.
20. GOVERNING LAW; SEVERABILITY. This Instrument shall be
governed by the law of the jurisdiction in which the Property is located. In
the event that any provision of this Instrument conflicts with applicable
law, such conflict shall not affect other provisions of this Instrument which
can be given effect without the conflicting provisions, and to this end the
provisions of this Instrument are declared to be severable.
21. WAIVER OF STATUTE OF LIMITATIONS RIGHT OF REDEMPTION AND OTHER
RIGHTS. To the full extent permitted by law, Grantor hereby waives the right
to assert any statute of limitations as a bar to the enforcement of the lien
of this Instrument or to any action brought to enforce the Notes or any other
obligation secured by this Instrument. To the full extent permitted by law,
Grantor agrees that it will not at any time or in any
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manner whatsoever take any advantage of any stay, exemption or extension law
or any so-called "Moratorium Law" now or at any time hereafter in force, nor
take any advantage of any law now or hereafter in force providing for the
valuation or appraisement of the Property, or any part thereof, prior to any
sale thereof to be made pursuant to any provisions herein contained, or to
any decree, judgment or order of any court of competent jurisdiction; or
claim or exercise any rights under any statute now or hereafter in force to
redeem the Property or any part thereof, or relating to the marshalling
thereof, on foreclosure sale or other enforcement hereof. To the full extent
permitted by law, Grantor hereby expressly waives any and all rights it may
have to require that the Property be sold as separate tracts or units in the
event of foreclosure. To the full extent permitted by law, Grantor hereby
expressly waives any and all rights to redemption and reinstatement under
applicable law, on its own behalf, on behalf of all persons claiming or
having an interest (direct or indirect) by, through or under Grantor and on
behalf of each and every person acquiring any interest in or title to the
Property subsequent to the date hereof, it being the intent hereof that any
and all such rights of redemption of Grantor and such other persons are and
shall be deemed to be hereby waived to the full extent permitted by
applicable law. To the full extent permitted by law, Grantor agrees that, by
invoking or utilizing any applicable law or laws or otherwise, it will not
hinder, delay or impede the exercise of any right, power or remedy herein or
otherwise granted or delegated to Beneficiary, but will permit the exercise
of every such right, power and remedy as though no such law or laws have been
or will have been made or enacted. To the full extent permitted by law,
Grantor hereby agrees that no action for the enforcement of the lien or any
provision hereof shall be subject to any defense which would not be good and
valid in any action at law upon the Notes.
22. WAIVER OF MARSHALLING. Notwithstanding the existence of any
other security interests in the Property held by Beneficiary or by any other
party, Beneficiary shall have the right to determine the order in which any
or all of the Property shall be subjected to the remedies provided herein.
Beneficiary shall have the right to determine the order in which any or all
portions of the Indebtedness secured hereby are satisfied from the proceeds
realized upon the exercise of the remedies provided herein. Grantor, any
party who consents to this Instrument, and any party who now or hereafter
acquires a security interest in the Property and who has actual or
constructive notice hereof, hereby waives any and all right to require the
marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein.
23. INDENTURE PROVISIONS. Grantor agrees to comply with the
covenants and conditions of the Indenture which are hereby incorporated by
reference in and made a part of this Instrument. Initial capitalized terms
used herein not otherwise defined shall have the meaning ascribed to them in
the Indenture. To the extent any provision of this Instrument conflicts or
is inconsistent with the provisions of the Indenture, the provisions of the
Indenture shall control.
24. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; BENEFICIARY IN
POSSESSION. As part of the consideration for the Indebtedness served by this
Instrument, Grantor hereby absolutely and unconditionally assigns and
transfers to Beneficiary all the rents, income, profits and revenues of the
Property, including those now due, past due, or to become due by virtue of
any lease or other agreement for the occupancy or use of all or any part of
the Property and including without limitation any room rents, concession fees
and other amounts
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paid for use of all or any part of the Property, regardless of to whom the
rents and revenues of the Property are payable. Grantor hereby authorizes
Beneficiary or Beneficiary's agents to collect the aforesaid rents and
revenues and hereby directs each tenant of the Property to pay such rents to
Beneficiary or Beneficiary's agents; provided, however, that prior to written
notice given by Beneficiary to Grantor of the breach by Grantor of any
covenant or agreement of Grantor, in this Instrument, Grantor may receive all
rents, income, profits and revenues of the Property as trustee for the
benefit of Beneficiary and Grantor; it being intended by Grantor and
Beneficiary that this assignment be additional security for the performance
of its obligations under this Instrument. Upon delivery of written notice by
Beneficiary to Grantor of a breach by Grantor of any covenant or agreement of
Grantor in this Instrument or upon a Default or Event of Default, and without
the necessity of Beneficiary entering upon and taking and maintaining full
control of the Property in person, by agent or by a court-appointed receiver,
Beneficiary shall immediately be entitled to possession of all rents, income,
profits and revenues of the Property as specified in this Paragraph 24 as the
same become due and payable, including but not limited to rents then due and
unpaid, and all such rents shall immediately upon delivery of such notice be
held by Grantor as trustee for the benefit of Beneficiary only. Grantor
agrees that commencing upon delivery of such written notice of Grantor's
breach by Beneficiary to Grantor each tenant of the Property shall make such
rents payable to and pay such rents to Beneficiary or Beneficiary's agents on
Beneficiary's written demand to each tenant therefor, delivered to each
tenant personally, by mail or delivering such demand to each rental unit,
without any liability on the part of such tenant to inquire further as to the
existence of a default by Grantor.
Grantor hereby covenants that Grantor has not executed any prior
assignment of said rents, that Grantor has not performed, and will not
perform, any acts or has not executed, and will not execute, any instrument
which would prevent Beneficiary from exercising its rights under this
Paragraph 24, and that at the time of execution of this Instrument there has
been no anticipation or prepayment to Grantor of any of the rent of the
Property for more than one month prior to the due date of such rent. Grantor
covenants that Grantor will not hereafter collect or accept payment of any
rents of the Property more than one month prior to the due dates of such
rents. Grantor further covenants that Grantor will execute and deliver to
Beneficiary such further assignments of rents, income, profits and revenues
of the Property as Beneficiary may from time to time request.
Upon Grantor's breach of any covenant or agreement of Grantor in
this Instrument or upon a Default or Event of Default, Beneficiary may in
person, by agent, or by a court-appointed receiver, regardless of the
adequacy of Beneficiary's security, enter upon and take and maintain full
control of the Property in order to perform all acts necessary and
appropriate for the operation and maintenance thereof including, but not
limited to, the execution, cancellation or modification of leases, the
collection of all rents and revenues of the Property, the making of repairs
to the Property and the execution or termination of contracts providing for
the management or maintenance of the Property, all of such terms as are
deemed best to protect the security of this Instrument. In the event
Beneficiary elects to seek the appointment of a receiver for the Property
upon Grantor's breach of any covenant or agreement of Grantor in this
Instrument, Grantor hereby expressly consents to the appointment of such
receiver. Beneficiary or the receiver shall be entitled to receive a
reasonable fee for so managing the Property.
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All rents and revenues collected subsequent to delivery of written notice by
Beneficiary to Grantor of a breach by Grantor of any covenant or agreement of
Grantor in this Instrument shall be applied first to the costs, if any, of
taking control of and managing the Property and collecting the premiums on
receiver's bonds, costs of repairs to the Property, premiums on insurance
policies, taxes, assessments and other charges on the Property, and the costs
of discharging any obligation or liability of Grantor as lessor or landlord
of the Property and then to Indebtedness secured by this Instrument.
Beneficiary or the receiver shall have access to the books and records used
in the operation and maintenance of the Property and shall be liable to
account only for those rents actually received. Beneficiary shall not be
liable to Grantor, anyone claiming under or through Grantor or anyone having
an interest in the Property by reason of anything done or left undone by
Beneficiary under this Paragraph 24.
If the rents of the Property are not sufficient to meet the costs,
if any, of taking control and managing the Property and collecting the rents,
any funds expended by Beneficiary for such purposes shall become Indebtedness
of Grantor to Beneficiary secured by this Instrument pursuant to Paragraph 8
hereof. Unless Beneficiary and Grantor agree in writing to other terms of
payment, such amounts shall be payable upon notice from Beneficiary to
Grantor requesting payment thereof and shall bear interest from the date of
disbursement at the rate stated in the Notes.
Any entering upon and taking and maintaining of control of the
Property by Beneficiary or the receiver and any application of rents as
provided herein shall not cure or waive any default hereunder or invalidate
any other right or remedy of Beneficiary under applicable law or as provided
herein. This assignment of rents shall terminate at such time as this
Instrument ceases to secure Indebtedness held by Beneficiary.
25. DEFAULTS. The occurrence of one or more of the following
events shall constitute a default ("DEFAULT") under this Instrument:
(a) Grantor fails to pay any amount payable pursuant to this
Instrument when due and payable in accordance with the
provisions hereof, and such failure continues for thirty (30)
days.
(b) A breach by Grantor of any of the obligations, provisions, or
covenants of the Indebtedness or this Instrument.
(c) A default in or breach of any obligations, provision, or
covenant of the Indebtedness secured by this Instrument.
(d) If Grantor should become insolvent or apply to a bankruptcy
court to be adjudicated a voluntary bankrupt, or should
proceedings be taken against Grantor looking to the
appointment of a receiver or placing Grantor in involuntary
bankruptcy, or should any applications for a reorganization be
made.
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<PAGE>
(e) If all or any part of the Property is seized under any work or
process of court.
(f) Except as provided herein, or in the Indenture, if all or any
part of the Property is sold, transferred, mortgaged or
otherwise encumbered without the prior, written consent of
Beneficiary.
(g) Upon destruction or substantial damage to the Improvements on
the Property by the fault of Grantor.
(h) An Event of Default as defined in the Indenture.
Upon a Default, Beneficiary, at its option and without affecting
the lien hereby created or the priority of said lien or any other right of
Beneficiary hereunder, may declare, without further notice, all Indebtedness
immediately due whether or not such Default is thereafter remedied by
Grantor, and Beneficiary may immediately proceed to foreclose this Instrument
and to exercise any right provided by this Instrument, the Indenture, the
Notes, the other Security Documents or otherwise.
26. FORECLOSURE.
(a) Upon the occurrence of one or more Defaults or after the
occurrence of one or more Defaults, Beneficiary and/or Trustee may
institute an action of mortgage foreclosure, or take such other action
as the law may allow, at law or in equity, for the enforcement hereof
and realization on the Property or any other security which is herein or
elsewhere provided for, and proceed thereon to final judgment and execution
thereon for the entire principal then outstanding under the Notes at the
rate stipulated in the applicable Notes to the date of default and
thereafter at the rate stipulated in the event of a default thereunder
(the "DEFAULT RATE") together with all other Indebtedness secured by this
Instrument, including all sums which may have been advanced by Beneficiary
to Grantor after the date of this Instrument, and all sums which may
have been advanced by Beneficiary for taxes, water or sewer rents,
charges or claims, payment of prior liens, insurance or repairs to the
Property, all costs of suit, including, without limitation, the expenses
which are described in Paragraph 46 hereof, and interest at the Default
Rate on any judgment obtained by Beneficiary from and after the date of
any sale of the Property until actual payment of the full amount due
Beneficiary and Beneficiary and/or Trustee may sell for cash or upon
credit the Property or any part thereof and all estate, claim, demand,
right, title and interest of the Grantor therein and rights of redemption
thereof, pursuant to power of sale or otherwise, and any and every part
thereof, en masse or in parcels, at public venue to the highest bidder
for cash in hand at the door or on the steps of the courthouse or court
building customarily used for such purposes in the county where the
Premises are located, first giving notice of the time and place of sale
and description of the property to be sold by advertisement published as
is provided by the laws of the State of Missouri then in effect, and
upon such sale shall execute and deliver a deed of conveyance of the
property sold to the purchaser or purchasers thereof, and in the event of a
sale, by foreclosure or otherwise, of less than all of the
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Property, this Instrument shall continue as a lien on the remaining portion
of the Property. At any sale of the Property (by power of sale or
otherwise) Beneficiary may bid for and acquire the Property or any part
thereof and in lieu of paying cash therefor may make settlement for the
purchase price by crediting upon the principal then outstanding under the
Notes with interest thereon and other obligations of Grantor secured by
this Instrument the net sales price after deducting therefrom the expenses
of the sale and the costs of the action and any other sums which
beneficiary is authorized to deduct under this Instrument. Upon the
request of Beneficiary and to the extent not prohibited by applicable law,
Grantor shall execute and file with the clerk of the court a legally
sufficient waiver of any statutory waiting period with respect to the
execution of a judgment obtained by Beneficiary in connection with any
foreclosure proceedings. The obligation of Grantor to so execute and file
such waiver shall survive the termination of this Instrument.
(b) Upon the occurrence of a Default and the election of the
Beneficiary to effect a trustee's sale of the Property in lieu of
judicial foreclosure, then the Beneficiary may instruct the Trustee to
commence such sale and consummate such sale in the following manner:
The Trustee shall deliver to the purchaser at any such trustee's sale
its deed, without warranty, which shall convey to the purchaser the
interest in the Property which the Grantor has or has the power to
convey at the time of the execution of this Instrument, and such as it
may have acquired hereafter. The Trustee's deed shall recite the facts
showing that the sale was conducted in compliance with all the
requirements of law and of this Instrument, which recital shall be
prima facie evidence of such compliance and conclusive evidence
thereof in favor of bona fide purchasers and encumbrances for value.
(c) Beneficiary may at any time or from time to time sell or
dispose of any part of the Property constituting personalty at public or
private sale at Grantor's or Beneficiary's place of business or
otherwise in such order as Beneficiary may elect. If any notice of
intended sale or disposition of any of such personal property is required
by law, such notice shall be deemed reasonable and proper if mailed at
least ten (10) days before such sale or disposition, postage prepaid, by
certified mail, return receipt requested, addressed to Grantor at
Grantor's most recent address as shown in Beneficiary's records, whether or
not actually received by Grantor.
(d) Upon the completion of any sale or sales made by the Trustee
under or by virtue of this Instrument, the Trustee, or an officer of any
court empowered to do so, shall execute and deliver to the accepted
purchaser or purchasers a good and sufficient instrument, or good and
sufficient instruments, conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold.
The Trustee is hereby irrevocably appointed the true and lawful attorney
of the Grantor, in its name and stead, to make all necessary
conveyances, assignments, transfers and deliveries of the Property and
rights so
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sold and for that purpose the Trustee may execute all necessary
instruments of conveyance, assignment and transfer, and may substitute
one or more persons with like power, the Grantor hereby ratifying and
confirming all that said attorney or such substitute or substitutes
shall lawfully do by virtue hereof. The foregoing appointment is coupled
with an interest and may not be revoked as long as the Indebtedness or
any portion thereof remains unpaid. Beneficiary shall not exercise its
rights under this Paragraph until a Default has occurred. Any such sale
or sales made under or by virtue of this Instrument, whether made under
the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, shall
operate to divest all the estate, right, title, interest, claim and
demand whatsoever, whether at law or in equity, of the Grantor in and to
the properties and rights so sold, and shall be a perpetual bar both at
law and in equity against the Grantor and against any and all persons
claiming or who may claim the same, or any part thereof from, through or
under the Grantor.
(e) In case of a sale under this Instrument, the said Property, real,
personal and mixed may be sold in one part as an entirety or in separate
parts and in such order as may be determined by the Beneficiary in its
discretion, and the Grantor hereby waives and releases any right to have
the Property or any part thereof marshalled upon foreclosure sale or
otherwise.
(f) In the event that the Grantor has an equity of redemption and
the Property is sold pursuant to the power of sale or otherwise under or
by virtue of this Instrument, the purchaser may during any redemption
period allowed, make such repairs or alterations on said property as may
be reasonably necessary for the proper operation, care, preservation,
protection and insuring thereof. Any sums so paid together with interest
thereon from the time of such expenditure at the Default Rate (if not
prohibited by law, otherwise at the highest lawful contract rate) shall
be added to and become a part of the amount required to be paid for
redemption from such sale.
(g) The Trustee may adjourn from time to time any sale by it to be
made under or by virtue of this Instrument by announcement at the time
and place appointed for such sale or for such adjourned sale or sales;
and, except as otherwise provided by any applicable provision of law,
the Beneficiary, without further notice or publication, may make such sale
at the time and place to which the same shall be so adjourned.
27. SALE IN PARCELS. In the event of a foreclosure of this
Instrument or upon any sale under this Instrument pursuant to judicial
proceedings or otherwise, the Property may be sold in one parcel and as an
entirety or in such parcels, manner or order as permitted by law.
28. RIGHT OF POSSESSION. Upon the occurrence of one or more
Default or when the Indebtedness shall become due, whether by acceleration or
otherwise, or if Beneficiary has a right to institute foreclosure
proceedings, Grantor shall surrender to Beneficiary, forthwith upon demand of
Beneficiary, and Beneficiary shall be entitled to be placed in possession of
the Property as provided, and Beneficiary, in its discretion and pursuant to
court order, may enter upon
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and take and maintain possession of all or any part of the Property, together
with all documents, books, records, papers and accounts of Grantor or the
then owner of the Property relating thereto, and may exclude Grantor, such
owner, and any agents and servants thereof wholly therefrom and, on behalf of
Grantor or such owner, or in its own name as Beneficiary and under the powers
herein granted may:
(a) hold, operate, manage and control all or any part of the
Property and conduct the business, if any, thereof, either personally or
by its agents, with full power to use such measures, legal or equitable,
as Beneficiary may deem necessary to enforce the payment or security of
the rents, issues, deposits, profits and avails of the Property, including,
without limitation, actions for recovery of rent, actions in forcible
detainer, and actions in distress for rent, all without notice to
Grantor;
(b) cancel or terminate the Leases for any cause or on any ground
that would entitle Grantor to cancel the same;
(c) elect to disaffirm the Leases made subsequent to this
Instrument without Beneficiary's prior written consent;
(d) extend or modify the Leases and make new leases of all or any
part of the Property, which extensions, modifications, and new leases
may provide for terms to expire, or for options to lessees to extend or
review terms to expire, beyond the maturity date of the loan evidenced
by the Notes and the issuance of a deed to a purchaser at a foreclosure
sale, it being understood and agreed that any such leases, and the options
or other such provisions to be contained therein, shall be binding upon
Grantor, all persons whose interests in the Property are subject to the
lien hereof, and the purchaser at any foreclosure sale, notwithstanding
any redemption from sale, reinstatement, discharge of the Indebtedness,
satisfaction of any foreclosure decree, or issuance of any certificate of
sale or deed to any such purchaser;
(e) make all necessary or proper repairs, decoration renewals,
replacements, alterations, additions, betterments and improvements in
connection with the Property as may seem judicious to Beneficiary, to
insure and reinsure the Property and all risks incidental to
Beneficiary's possession, operation, and management thereof, and to
receive all rents, issues, deposits, profits and avails therefrom; and
(f) apply the net income, after allowing a reasonable fee for the
collection thereof and for the management of the Property, to the
payment of taxes, premiums and other charges applicable to the Property,
or in reduction of the Indebtedness in such order and manner as
Beneficiary shall select.
Without limiting the generality of the foregoing, Beneficiary shall have all
power, authority and duties as provided under applicable law. Nothing herein
contained shall be construed as constituting
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Beneficiary a mortgagee in possession in the absence of the actual taking of
possession of the Property.
29. RECEIVER. Upon the occurrence of one or more Defaults,
Beneficiary may apply for the appointment of a receiver of the rents, issues,
and profits of all or any part of the Property, without notice to or demand
upon Grantor or any person claiming through or under Grantor, and Beneficiary
shall be entitled to the appointment of such receiver as a matter of right,
to the extent not prohibited by applicable law, without notice to or demand
upon Grantor or any person claiming through or under Grantor and without
consideration of the value of the Property as security for the amounts due to
Beneficiary or the solvency of any person liable for the payment of such
amounts. Grantor specifically waives the right to object to the appointment
of a receiver as aforesaid and hereby expressly agrees that such appointment
may be made ex parte and without notice to Grantor and as a matter of
absolute right to Beneficiary. In order to maintain and preserve the
Property and to prevent waste or impairment of its security, Beneficiary may,
at its option, advance monies to the receiver and all such sums advanced
shall become secured obligations and shall bear interest at the Default Rate.
30. FORECLOSURE SALE. Except to the extent otherwise required by
applicable law, the proceeds of any foreclosure sale of the Property shall be
distributed and applied in the following order of priority: first, all items
which under the terms hereof constitute Indebtedness additional to the
principal and interest evidenced by the Notes in such order as Beneficiary
shall elect with interest thereon as herein provided including, without
limitation, all costs and expenses of such sale, including compensation to
Beneficiary, its agents and counsel, and any judicial proceeding wherein the
same may be made and all expenses, costs, liabilities and advances made or
incurred by Beneficiary (including attorneys' fees and expenses) and to the
payment of reasonable charges of the Trustee, an amount as may be agreed upon
between the Beneficiary and the Trustee; and second, all principal and
interest remaining unpaid on the Notes in such order as Beneficiary shall
elect; and lastly, any surplus to Grantor and its successors and assigns, as
their rights may appear.
31. POWER OF SALE. Trustee is hereby granted a power of sale and
may sell the Property or such part or parts thereof or interest therein as
Beneficiary may select pursuant to the applicable provisions of the laws of
the state in which the Premises is located, and upon such sale and compliance
with the law relating thereto, to convey title to the purchaser. The
proceeds of such sale shall be applied in the same manner as proceeds are
applied pursuant to Paragraph 3 to the extent permitted by applicable law.
32. INSURANCE DURING FORECLOSURE. All rights and powers of
Beneficiary under Paragraphs 2 and 5 hereof, from and after the entry of
judgment of foreclosure, shall continue in the Beneficiary as decree creditor
until confirmation of sale. In case of an insured loss after foreclosure
proceedings have be instituted, the proceeds of any Insurance Policy, if not
applied in rebuilding or restoring the Property, as aforesaid, shall be used
to pay the amount due in accordance with any decree of foreclosure that may
be entered in any such proceeding, and the balance, if any, shall be paid as
the court may direct. The foreclosure decree may provide that the
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mortgagee's clause attached to each of the casualty Insurance Policies may be
cancelled and that the decree creditor may cause a new loss clause to be
attached to each of said casualty Insurance Policies making the loss
thereunder payable to said decree creditors. In the event of foreclosure
sale, Beneficiary, without the consent of Grantor, may assign any Insurance
Policies to the purchaser at the sale, or take such other steps as
Beneficiary may deem advisable to protect the interest of such purchaser.
33. RELEASE. Upon payment of all sums secured by this Instrument
or as otherwise provided in the Indenture, Beneficiary shall cancel this
Instrument. Grantor shall pay Beneficiary's reasonable costs incurred in
discharging this Instrument.
34. SUCCESSORS AND ASSIGNS.
(a) Holders of the Notes. This Instrument and each provision
hereof shall be binding upon Grantor and its successors and assigns
(including, without limitation, each and every record owner from time to
time of the Premises or any other person having an interest therein),
and shall inure to the benefit of Beneficiary and its successors and
assigns. Wherever herein Beneficiary is referred to, such reference shall
be deemed to include the Holders from time to time of the Notes; and each
such Holder of the Notes shall have all of the rights afforded hereby,
and may enforce the provisions hereof, as fully as if Beneficiary had
designated such Holder of the Notes herein by name.
(b) Covenants Run With Land; Successor Owners. All of the
covenants of this Instrument shall run with the Land and be binding on
any successor owners of the Land. If the ownership of the Premises or
any portion thereof becomes vested in a person other than Grantor,
Beneficiary, without notice to Grantor, may deal with such person with
reference to this Instrument and the Indebtedness in the same manner as
with Grantor without in any way releasing Grantor from its obligations
hereunder. Grantor will give immediate written notice to Beneficiary of
any conveyance, transfer or change of ownership of the Premises, but
nothing in this Paragraph shall vary the effectiveness of the provisions
of Paragraphs 16, 19 and 25 hereof or any provision of the Indenture.
35. LIMITATIONS OF GAMING REGULATIONS. The rights and remedies of
Beneficiary and Trustee with respect to the Property upon Default are subject
to the limitations and restrictions of applicable gaming statutes, rules and
regulations.
36. EFFECT OF EXTENSIONS AND AMENDMENTS. If the payment of the
Indebtedness, or any part thereof, is extended or varied, or if any part of
the security or guarantees therefor are released, all persons now or at any
time hereafter liable therefor, or interested in the Property, shall be held
to assent to such extension, variation or release, and their liability, and
the lien, and all provisions hereof, shall continue in full force and effect;
the right of recourse against all such persons being expressly reserved by
Beneficiary, notwithstanding any such extension, variation or release. Any
person, firm or corporation taking a junior mortgage, or other lien upon the
Property or any part thereof or any interest therein, shall take said lien
subject to the rights of
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Beneficiary to amend, modify, extend or release the Indenture, the Notes,
this Instrument or any other Security Document, in each case without
obtaining the consent of the holder of such junior lien and without the lien
of this Instrument losing its priority over the rights of any such junior
lien.
37. ENVIRONMENTAL MATTERS.
(a) Grantor represents and warrants that it conducts in the
ordinary course of business a review of the effect of existing
Environmental Laws and existing Environmental Claims on the Premises and
as a result thereof Grantor has reasonably concluded that, except as
specifically disclosed in that certain Phase One Environmental
Assessment dated March 2, 1994, prepared by McKinney Associates and D.G.
Purdy & Associates, Inc. (the "Environmental Report"), such
Environmental Laws and Environmental Claims could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(b) Except as disclosed in the Environmental Report, (i) neither
Grantor nor, to the best of Grantor's knowledge, any other Person has
ever caused or permitted any Hazardous Material to be released, or
disposed of on, under or at the Premises, in any amount or manner which
would require remedial action under Environmental Laws, (ii) the
Premises has never been used by Grantor, or to the best of Grantor's
knowledge, by any other Person as a dump site for any Hazardous Material
or a permanent storage site for any Hazardous Material, and (iii)
neither Grantor nor any of its predecessors has received written notice
from any Governmental Authority or any third party that it may be
responsible for the release of any Hazardous Material at any location.
(c) Except in compliance with Environmental Laws, and except as
disclosed in the Environmental Report, neither the Grantor nor, to the
best of Grantor's knowledge, any other Person has ever caused or
permitted any Hazardous Material to be treated or stored on, under or at
the Premises.
(d) Grantor shall conduct its operations and keep and maintain its
property in compliance with all Environmental Laws and obtain and comply
with and maintain any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws,
except such non-compliance as could not result in liability to Grantor
(individually or together with the Borrower or any Subsidiary) in excess
of $100,000 or otherwise have a Material Adverse Effect. Without
limiting the foregoing, (i) Grantor shall comply in a reasonable and
cost-effective manner with any valid Federal or state judicial or
administrative order requiring the performance at the Premises of
activities in response to the release or threatened release of a
Hazardous Material except for the period of time that Grantor is
diligently in good faith contesting such order; (ii) notify the
Beneficiary within five days of the Grantor's receipt for any written
claim, demand, proceeding, action, or notice of liability by any Person
arising out of or relating to the release or threatened release of a
Hazardous Material; and (iii) notify the Beneficiary within five days of
any release or threat of release of Hazardous Material reported to any
Governmental Authority occurring at the Premises. Furthermore, Grantor
shall not commence disposal of any Hazardous Material
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into or onto the Premises except in compliance with Environmental Laws on
or allow any Lien imposed pursuant to any Environmental Law relating to
Hazardous Material or the disposal thereof to remain on such real property.
For purposes of this Instrument, "disposal" means the intentional placement
of Hazardous Materials with no intention of retrieval.
(e) Grantor shall protect, indemnify, save, defend, and hold
harmless Beneficiary, its officers, directors, stockholders, partners,
employees, successors and assigns (collectively, the "INDEMNIFIED
ENVIRONMENTAL PARTIES") from and against any and all liability, loss,
damage, actions, causes of action, costs or expenses whatsoever
(including, without limitation, reasonable attorneys' fees and expenses)
and any and all claims, suits and judgments which any Indemnified
Environmental Party may suffer, as a result of or with respect to: (i)
any Environmental Claim relating to or arising from the Property; (ii)
violation of any Environmental Law in connection with the Property;
(iii) any release, spill, or the presence of any Hazardous Materials
affecting the Property; and (iv) the presence at, in, on or under, or
the release, escape, seepage, leakage, discharge or migration at or
from, the Property of any Hazardous Materials, whether or not such
condition was known or unknown to Grantor provided that in each case,
Grantor may be relieved of its obligation under this subsection if it
demonstrates, by a preponderance of the evidence, that any of the
matters referred to in clauses (i) through (iv) above did not occur (but
need not have been discovered) prior to (x) the foreclosure of this
Instrument with respect to the Property, (y) the delivery by Grantor to
Beneficiary of a deed-in-lieu of foreclosure with respect to such
property or (z) Beneficiary's taking possession and control of the
Property after the occurrence and during the continuance of a Default
hereunder or an Event of Default under the Indenture. Promptly after
Beneficiary receives notice of the commencement of any Environmental
Claim in respect of which indemnification is sought hereunder,
Beneficiary shall notify Grantor in writing thereof; but the omission so
to notify Grantor shall not relieve Grantor from any obligation
hereunder provided that Grantor has not been materially prejudiced by
such failure by Beneficiary to notify Grantor. If any such action or
other proceeding shall be brought against Beneficiary, upon written
notice (given reasonably promptly following Beneficiary's notice to
Grantor of such action or proceeding), Grantor shall be entitled to
assume the defense thereof, at Grantor's expense, with counsel
reasonably acceptable to Beneficiary; provided, however, Beneficiary
may, at its own expense, retain separate counsel to participate in such
defense, but such participation shall not be deemed to give Beneficiary
a right to control such defense, which right Grantor expressly retains.
Notwithstanding the foregoing, Beneficiary shall have the right to
employ separate counsel at Grantor's expense if, in the reasonable
opinion of legal counsel, conflict or potential conflict exists between
Beneficiary and Grantor that would make such separate representation
advisable; provided, however, in no event shall Grantor be required to
pay reasonable fees and expenses actually incurred under this indemnity
for more than one separate firm of attorneys for Beneficiary in any one
legal action.
For the purposes of this Instrument the following terms shall have
the meanings asset forth herein:
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"ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment;
"ENVIRONMENTAL LAWS" shall mean all federal, state or local laws,
statutes, rules, regulations, ordinances and codes, together with all
administrative orders, licenses, authorizations and permits of, and
agreements with, any Governmental Authorities, in each case relating to
environmental, health and safety matters;
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by
any of the foregoing;
"HAZARDOUS MATERIAL" shall mean (a) any "hazardous substance" as now
defined pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sec. 9601(14) as amended by
the Superfund Amendments and Reauthorization Act, and including the
judicial interpretation thereof; (b) any "pollutant or contaminant" as
defined in 42 U.S.C. Sec. 9601(33); (c) any material now defined as
"hazardous waste" pursuant to 40 C.F.R. part 261; (d) any petroleum,
including crude oil and any fraction thereof; (e) natural gas, natural
gas liquids, liquefied natural gas, or synthetic gas useable for fuel;
(f) any "hazardous chemicals" as defined pursuant to 29 C.F.R. Part
1910; (g) any asbestos, polychlorinated biphenyl (PCB), or isomer or
dioxin; and (h) any other substance, regardless of physical form, that
is regulated under any Environmental Law;
"MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse change in,
or a material adverse effect upon, the business, assets, operations,
properties or condition (financial or otherwise) of Grantor or Grantor
and any Affiliate, taken as a whole or any material adverse change in,
or material adverse effect upon, the obligations under the Indenture,
this Mortgage or the Security Documents of any such Person or Persons
which could reasonably be expected to result in any of the foregoing;
(b) a material impairment of the ability of Grantor or any Affiliate to
perform under any provision of the Indenture or any Security Document;
or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against Grantor or an Affiliate of the
Indenture or any Security Document; and,
"PERSON" shall mean any individual, limited liability company,
corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated organization or government or other
agency or political subdivision thereof.
38. FUTURE ADVANCES. At all times, regardless of whether any loan
proceeds have been disbursed, this Instrument secures as part of the
Indebtedness the payment of all loan commissions, service charges, liquidated
damages, attorneys' fees, expenses and advances
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due to or incurred by Beneficiary in connection with the Indebtedness, all in
accordance with the Indenture, the Notes, this Instrument, and the other
Security Documents.
39. OPTION TO SUBORDINATE. At the option of Beneficiary, this
Instrument shall become subject and subordinate, in whole or in part (but not
with respect to priority of entitlement to insurance proceeds or any award in
condemnation) to any and all leases of all or any part of the Premises upon
the execution by Beneficiary and recording thereof, at any time hereafter, in
the Office of the Recorder of Deeds for the county wherein the Premises are
situated or other appropriate location, of a unilateral declaration to that
effect.
40. SEPARABILITY. If all or any portion of any provision of this
Instrument, the Indenture, the Notes or the Security Documents shall be held
to be invalid, illegal or unenforceable in any respect, then such invalidity,
illegality or unenforceability shall not affect any other provision hereof or
thereof, and such provision shall be limited and construed in such
jurisdiction as if such invalid, illegal or unenforceable provision or
portion thereof were not contained herein or therein.
41. ANTI-FORFEITURE. Grantor hereby expressly represents and
warrants to Beneficiary that there has not been committed by Grantor or, to
the best of Grantor's knowledge, any other Person involved with the Property
any act or omission affording the federal government or any state or local
government the right of forfeiture as against the Property or any part
thereof or any monies paid in performance of its obligations under the
Indenture, the Notes, this Instrument or under any of the other Security
Documents, and Grantor hereby covenants and agrees not to commit, permit or
suffer to exist any act or omission affording such right of forfeiture. In
furtherance thereof, Grantor agrees to indemnify, defend with counsel
reasonably acceptable to Beneficiary (at Grantor's sole cost) and hold
Beneficiary harmless from and against any claim or other cost (including,
without limitation, reasonable attorneys' fees and costs incurred by
Beneficiary), damage, liability or injury by reason of the breach of the
covenants and agreements or the warranties and representations set forth in
the preceding sentence. Without limiting the generality of the foregoing,
the filing of formal charges or the commencement of proceedings against
Grantor, the Beneficiary or all or any part of the Property under any federal
or state law in which forfeiture of the Premises or any part thereof or of
any monies paid in performance of Grantor's obligations under the Indenture,
the Notes, or the Security Documents is a potential result, at the election
of Beneficiary, shall constitute a Default hereunder.
42. JURY TRIAL WAIVER. Grantor waives, to the extent permitted by
law, trial by jury in any actions brought by either Grantor or Beneficiary in
connection with the Indebtedness.
43. NO MERGER. It is the desire and intention of the parties
hereto that this Instrument and the lien hereof shall not merge in fee simple
title to the Premises, unless a contrary intent is ever manifested by
Beneficiary as evidenced by an express statement to that effect in an
appropriate document duly recorded. Therefore, it is hereby understood and
agreed that should Beneficiary acquire any additional or other interests in
or to the Premises or the ownership thereof,
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then this Instrument and the lien hereof shall not merge in the fee simple
title, toward the end that this Instrument may be foreclosed as if owned by a
stranger to the fee simple title.
44. INDEMNITY. Grantor agrees to indemnify and hold harmless
Beneficiary from and against any and all losses, liabilities, suits,
obligations, fines, damages, judgments, penalties, claims, charges, costs and
expenses (including attorneys' fees and disbursements) which may be imposed
on, incurred or paid by or assessed against Beneficiary by reason or on
account of, or in connection with, (i) any Default or Event of Default by
Grantor hereunder or under the Indenture or the other Security Documents,
(ii) Beneficiary's exercise of any of its rights and remedies, or the
performance of any of its duties, hereunder or under the Indenture or the
other Security Documents to which Grantor is a party, (iii) the construction,
reconstruction or alteration of the Property or any part thereof, (iv) any
negligence or willful misconduct of Grantor, any lessee of the Property, or
any of their respective agents, contractors, subcontractors, servants,
employees, licensees, guests or invitees, (v) any accident, injury, death or
damage to any Person or property occurring in, on or about the Property or
any street, drive, sidewalk, curb or passageway adjacent thereto, or (vi) any
other transaction arising out of or in any way connected with the Property
(or any part thereof) or the Indenture or any of the Security Documents,
except for the willful misconduct or gross negligence of the indemnified
Person. The above indemnity shall not apply to liabilities incurred by
Beneficiary as a result of Beneficiary's acts or omissions in connection with
the Property (or parts thereof) within the possession and control of
Beneficiary arising during such period of time as such Property is actually
within the possession and control of Beneficiary, except those liabilities
arising either directly or indirectly as a result of any Default or Event of
Default by Grantor under this Instrument or the Indenture or any act or
omission of Grantor, any lessees or sublessees of the Property or any of
their respective agents, contractors, subcontractors, servants, employees,
licensees, guests or invitees. Any amount payable to Beneficiary under this
Paragraph shall be deemed a demand obligation, shall be part of the
Indebtedness, shall bear interest at the Default Rate and shall be secured by
this Instrument. Grantor's obligations under this Paragraph shall not be
affected by the absence or unavailability of insurance covering the same or
by the failure or refusal by any insurance carrier to perform any obligation
on its part under any such policy of covering insurance and shall survive the
repayment or cancellation of the Indebtedness and the release, discharge,
satisfaction or cancellation of this Instrument. If any claim, action or
proceeding is made or brought against Beneficiary which is subject to the
indemnity set forth in this Paragraph, Grantor shall resist or defend against
the same, if necessary in the name of Beneficiary by attorneys for Grantor's
insurance carrier (if the same is covered by insurance) or otherwise by
attorneys approved by Beneficiary. Notwithstanding the foregoing,
Beneficiary, in its reasonable discretion, may engage its own attorneys to
resist or defend, or assist therein, and Grantor shall pay, or, on demand,
shall reimburse Beneficiary for the payment of, the reasonable fees and
disbursements of said attorneys.
45. CONTEMPORANEOUS MORTGAGES. THIS INSTRUMENT IS MADE
CONTEMPORANEOUSLY WITH ANOTHER MORTGAGE OF EVEN DATE HEREWITH GIVEN BY
GRANTOR'S AFFILIATE TO OR FOR THE BENEFIT OF BENEFICIARY COVERING PROPERTY
LOCATED IN THE STATE OF LOUISIANA (the "CONTEMPORANEOUS MORTGAGE"). The
Contemporaneous Mortgage secures the Indebtedness and the
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performance of the other covenants and agreements of Grantor set forth in the
Indenture and the Security Documents. Upon the occurrence of a Default
herein, or upon the occurrence of an Event of Default as defined in the
Indenture, Trustee and/or Beneficiary may proceed under this Instrument
and/or the Contemporaneous Mortgage against any of such property and/or the
Property in one or more parcels and in such manner and order as Trustee
and/or Beneficiary shall elect. Grantor hereby irrevocably waives and
releases, to the extent permitted by law, and whether now or hereafter in
force, any right to have the Property and/or the property covered by the
Contemporaneous Mortgage marshalled upon any foreclosure of this Instrument
or the Contemporaneous Mortgage.
46. EXPENSES OF BENEFICIARY. All sums (including reasonable
attorneys' fees, costs, expenses and disbursements, to the extent permitted
by law) paid by Beneficiary or Trustee in connection with any litigation to
prosecute or defend the rights and obligations created by this Instrument,
with interest thereon from the time, shall, on demand, be immediately due
from Grantor to Beneficiary or Trustee, as the case may be, and shall be
added to and included in the Indebtedness and shall be secured by this
Instrument.
47. PARTIAL FORECLOSURE. Beneficiary may from time to time, if
permitted by law, take action to recover any sums, whether interest,
principal or any other sums, required to be paid under this Instrument or the
Notes, the Indenture or any other Security Documents as the same become due,
without prejudice to the right of the Beneficiary thereafter to bring an
action of foreclosure, or any other action, for a default or defaults by
Grantor existing when such earlier action was commenced. Beneficiary may
also foreclose this Instrument for any sums due under this Instrument or the
Notes, the Indenture or any other Security Documents and the lien of this
Instrument shall continue to secure the balance of the Indebtedness.
48. LEASE OF PREMISES TO GRANTOR. The Trustee hereby lets the
Premises to Grantor until a Default or a release of this Instrument upon the
following terms and conditions, to-wit: Grantor and each and every Person
claiming or possessing the Premises, or any part thereof, by, through or
under them shall pay rent therefor during such term at the rate of one cent
(1 cent) per month, payable monthly upon demand, and shall surrender immediate
peaceable possession of the Premises, and any and every part thereof, sold
pursuant to Paragraphs 26, 27, 28, 29, 30, 31 or 46, to the purchaser
thereof, under such sale, without notice or demand therefor.
49. TITLE ACTS BY TRUSTEE. At any time upon written request of
the Beneficiary, payment of its fees and presentation of this Instrument and
said Note for endorsement (in case of full reconveyance, for cancellation and
retention), without affecting the liability of any Person for the payment of
the Indebtedness, the Trustee may (a) consent to the making of any map or
plat of the Premises, (b) join in granting any easement or creating any
restriction thereon, (c) join in any subordination or other agreement
affecting this Instrument or the lien or charge thereof, (d) reconvey,
without warranty, all or any part of the Premises. The grantee in any
reconveyance may be described as the "person or persons legally entitled
thereto," and the recitals therein of any matters or facts shall be
conclusive proof of the truthfulness thereof. The Grantor agrees to pay a
reasonable Trustee's fee for full or partial reconveyance, together with a
recording fee if the Trustee, at its option, elects to record said
reconveyance.
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50. SUCCESSOR TRUSTEE. At the option of the Beneficiary, with or
without any reason, a successor or substitute trustee may be appointed by the
Beneficiary without any formality other than a designation in writing of a
successor or substitute trustee, who shall thereupon become vested with and
succeed to all the powers and duties given to the Trustee herein named, the
same as if the successor or substitute trustee had been named the original
trustee herein; and such right to appoint a successor or substitute trustee
shall exist as often and whenever the Beneficiary desires.
THIS MISSOURI DEED OF TRUST SECURES ADVANCES AND FUTURE
OBLIGATIONS AT ANY TIME OUTSTANDING AND SHALL BE GOVERNED BY SECTION
443.055 R-S. MO. AS AMENDED. THE TOTAL PRINCIPAL AMOUNT OF THE PRESENT
AND FUTURE ADVANCES AND OBLIGATIONS AT ANY TIME OUTSTANDING WHICH
MAY BE SECURED HEREBY IS $235,000,00.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, Grantor has executed this Instrument as of the day
and year first set forth above.
ARGOSY GAMING COMPANY
a Delaware corporation
By:___________________________
Name:__________________________
Title:__________________________
STATE OF ILLINOIS )
) ss:
COUNTY OF COOK )
On this ___ day of___________, 1996, before me, the undersigned, a
Notary Public in and for the State of Illinois, personally appeared
_____________________ to me personally known, who being by me duly sworn, did
say that he is ___________________ of said corporation executing the within
and foregoing instrument; that no seal has been procured by the said
corporation that said instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors; and that the said
_____________________ acknowledged the execution of said instrument to be the
voluntary act and deed of said corporation, by it and by them voluntarily
executed.
_______________________________
Notary Public
This Instrument was prepared by:
Reed W. Ramsay
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
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<PAGE>
EXHIBIT 1
LEGAL DESCRIPTION
[See attached]
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<PAGE>
EXHIBIT 2
DESCRIPTION OF COLLATERAL
All of the following property now or at any time hereafter owned by
Grantor or in which the Grantor may now or at any time hereafter have any
interest or rights, together with all of Grantor's right, title and interest
therein:
A. All fixtures and personal property now or hereafter owned by, Grantor
and attached to or contained in or used or useful in connection with the
Premises or any of the improvements now or hereafter located thereon,
including without limitation any and all air conditioners, antennae,
appliances, apparatus, awnings, basins, bathtubs, bidets, boilers, bookcases,
cabinets, carpets, coolers, curtains, dehumidifiers, disposals, doors,
drapes, dryers, ducts, dynamos, elevators, engines, equipment, escalators,
fans, fittings, floor coverings, furnaces, furnishings, furniture, hardware,
heaters, humidifiers, incinerators, kitchen equipment and utensils, lighting,
machinery, motors, ovens, pipes, plumbing, pumps, radiators, ranges,
recreational facilities, refrigerators, screens, security systems, shades,
shelving, sinks, sprinklers, stokers, stoves, toilets, ventilators, wall
coverings, washers, windows, window coverings, wiring, all renewals or
replacements thereof or articles in substitution therefor, and all property
owned by Grantor and now or hereafter used for similar purposes on the
Premises;
B. Articles or parts now or hereafter affixed to the property described in
Paragraph A of this Exhibit or used in connection with such property, any and
all replacements for such property, and all other property of a similar type
or used for such purposes now or hereafter in or on the Premises or any of
the improvements now or hereafter located thereon;
C. Grantor's right, title and interest in all personal property used or to
be used in connection with the operation of the Premises or the conduct of
business thereon, including without limitation business equipment and
inventories located on the Premises or elsewhere, together with files, books
of account, and other records, wherever located;
D. Grantor's right, title, and interest in and to any and all contracts now
or hereafter relating to the Premises executed by any architects, engineers,
or contractors, including all amendments, supplements, and revisions thereof,
together with all Grantor's rights and remedies thereunder and the benefit of
all covenants and warranties thereon and also together with all drawings,
designs, estimates, layouts, surveys, plats, plans, specifications and test
results prepared by any architect, engineer, or contractor, including any
amendments, supplements, and revisions thereof and the right to use and enjoy
the same, as well as all building permits, environmental permits, approvals
and licenses, other governmental or administrative permits, licenses,
agreements and rights relating to construction on the Premises;
E. Grantor's right, title and interest in and to any and all contracts now
or hereafter relating to the operation of the Premises or the conduct of
business thereon, including without limitation all
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<PAGE>
management and other service contracts, the books and records, and the right
to appropriate and use any and all trade names used or to be used in
connection with such business;
F. Grantor's right, title and interest in the rents, issues, deposits
(including security deposits and utility deposits), and profits in connection
with all leases, contracts, and other agreements made or agreed to by any
Person or entity (including without limitation Grantor and Beneficiary under
the powers granted by the Deed of Trust, Assignment of Leases and Rents and
Security Agreement and the Security Documents made between Grantor and
Beneficiary and the other loan documents) with any Person or entity
pertaining to all or any part of the Premises, whether such agreements have
been heretofore or are hereafter made;
G. Grantor's right, title and interest in all sale contracts, earnest money
deposits, proceeds of sale contracts, accounts receivable, and general
intangibles relating to the Premises (but not including the Grantor's gaming
license to the extent Missouri law (as of the date hereof) prohibits the
Debtor from granting a lien thereon (the Beneficiary hereby acknowledges that
Missouri law does not presently allow any transfers of gaming licenses issued
under the Missouri Riverboat Gambling Act or any security interest to attach
to such license; however, in the event that Missouri law should ever be
amended to allow transfers of gaming licenses issued under the Missouri
Riverboat Gambling Act, any proceeds a transfer of such license shall be
included));
H. All rights in and proceeds from all fire and hazard, loss-of-income, and
other non-liability insurance policies now or hereafter covering improvements
now or hereafter located on the Premises or described in the Deed of Trust,
Assignment of Leases and Rents and Security Agreement, the use or occupancy
thereof, or the business conducted thereon;
I. All Grantor's rights in and to awards or payments, including interest
thereon, that may be made with respect to the Premises, whether from the
right of the exercise of eminent domain (including any transfer made in lieu
of the exercise of said right) or for any other injury to or decreased in
volume of the Premises; and
J. All Grantor's rights in and to proceeds from the sale, transfer, or
pledge of any or all of the foregoing property.
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<PAGE>
EXHIBIT 3
SPECIFIED PARCEL
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<PAGE>
EXHIBIT 4
FORM OF NONDISTURBANCE AGREEMENT
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<PAGE>
EXHIBIT 4.12
<PAGE>
LOUISIANA
Recording Requested by, and
after recording return to:
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
Attn: David S. McCarthy, Esq.
Prepared by:
Reed W. Ramsay, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
FORM OF
MORTGAGE OF JAZZ ENTERPRISES, INC. AND
CATFISH QUEEN PARTNERSHIP IN COMMENDAM TO SECURE
PRESENT AND FUTURE INDEBTEDNESS,
ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT
("MORTGAGE")
STATE OF ILLINOIS
COUNTY OF COOK
On this 5th day of June, 1996, before the undersigned Notary Public, and
in the presence of the respective undersigned competent witnesses, personally
came and appeared collectively as MORTGAGOR:
Jazz Enterprises, Inc., a Louisiana corporation, and Catfish Queen
Partnership in Commendam, a Louisiana partnership (collectively,
"MORTGAGOR"), each owned either directly or indirectly by Argosy Gaming
Company, whose Tax Identification Numbers the MORTGAGOR declared to be
72-1214771 and 72-1274791, respectively.
MORTGAGOR further declared that:
(A) ARGOSY GAMING COMPANY, a Delaware corporation ("BORROWER"), whose
chief executive office is located at 219 Piasa Street,
Alton, Illinois 62002-6232, has entered into that certain
Indenture dated as of June 5, 1996 (as said Indenture may
be amended, restated, supplemented or otherwise modified
from time to time, the "Indenture") by and among:
BORROWER, certain other parties named therein, and FIRST
NATIONAL BANK OF COMMERCE, a national banking
association, as trustee under the Indenture, whose chief
executive office is located at 210 Baronne Street, New
Orleans, Louisiana 70112, and whose tax identification
number is 72-0269760.
<PAGE>
(B) Pursuant to the Indenture, among other things, BORROWER has issued
its 13 1/4% First Mortgage Notes due 2004 (the "ORIGINAL NOTES").
(C) Pursuant to a Registration Rights Agreement between BORROWER and
certain other parties, BORROWER will file a registration
statement with respect to an offer to exchange the Original Notes
for a new series of 13 1/4% First Mortgage Notes due 2004
registered under the Securities Act of 1933, as amended, with terms
substantially identical to those of the Original Notes (the "SERIES
B Notes" and together with the Original Notes, the "NOTES").
(D) MORTGAGOR, being wholly owned by BORROWER, shall benefit from the
issuance of the Notes.
(E) Execution of this Mortgage by MORTGAGOR is a condition precedent to
the closing on the Indenture.
(F) The term MORTGAGEE as used in this Mortgage shall mean and include
FIRST NATIONAL BANK OF COMMERCE, as trustee under the Indenture, and
its successors and assigns, as said Indenture may be modified and/or
amended.
(G) Capitalized terms used herein which are not defined herein, but
which are defined in the Indenture, shall have the meanings as
defined in the Indenture.
MORTGAGOR further declared that:
1. MORTGAGOR desires, pursuant to Article 3298 of the Louisiana Civil
Code and also pursuant to other provisions of law, to secure all Indebtedness
(as hereinafter defined) MORTGAGOR and/or BORROWER currently have or may
incur in the future to MORTGAGEE. This Mortgage secures future advances and
future obligations incurred under the Indenture. The maximum principal
amount of indebtedness at any time outstanding secured by this Mortgage is
limited to $235,000,000, and notwithstanding any contrary provisions, if any,
the maximum total indebtedness (including principal, interest, costs, fees
and damages) secured by this Mortgage is limited to $235,000,000.
2. The term "Indebtedness," as used in this Mortgage, shall include,
but not be limited to, any and all indebtedness and/or obligations of
MORTGAGOR and/or of BORROWER to MORTGAGEE, whether such indebtedness and/or
obligations arose in the past, exits presently, or may occur at any time in
the future, whether direct or contingent, primary or secondary, whether
represented by notes, drafts, bills, letters of credit, overdrafts, invoices,
guarantees, suretyship agreements, pledges, security agreements, assignments,
endorsements, financing statements, agreements, documents, instruments or
otherwise; and whether incurred for advances made for the purposes of
constructing erecting, repairing, improving, altering works or property in
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<PAGE>
connection with the Louisiana Private Works Act, R.S. 9:4801, et seq., or
otherwise, and in particular the term "Indebtedness" includes all Notes (as
defined in the Indenture) with interest thereon and all other indebtedness
and/or obligations due and/or to be due hereunder and under the Indenture.
The term "Indebtedness" also includes any and all Indebtedness and/or
obligations arising by renewals, modifications, amendments or extensions of
any indebtedness, together with all interest, costs of collection, and
attorneys' fees.
3. This Mortgage is granted for the purpose of being used as security
by MORTGAGOR for any Indebtedness due MORTGAGEE. This Mortgage will remain
in effect until canceled under a written mortgage cancellation instrument
signed by MORTGAGEE, or its successors or assigns. MORTGAGOR may request such
a written mortgage cancellation instrument from MORTGAGEE only after all of
the Indebtedness and obligations have been fully paid and satisfied and there
is no obligation or commitment on MORTGAGEE's part to fund or permit any
additional Indebtedness to be incurred or to exist. MORTGAGOR may request
such a mortgage cancellation instrument by writing to MORTGAGEE at its
address set forth hereinabove, or at such other address as MORTGAGEE may
furnish to MORTGAGOR in the future. MORTGAGEE may delay providing such a
mortgage cancellation instrument for up to sixty (60) days following its
receipt of such written notice of request.
4. This Mortgage need not, but may, be signed by MORTGAGEE whose
consent and acceptance is hereby acknowledged by MORTGAGOR.
5. In order to secure the full and final payment of the Indebtedness,
including principal, interest, costs, and attorneys' fees, up to the maximum
amount set forth in Paragraph 1 above, MORTGAGOR now specially mortgages to
MORTGAGEE, and grants to MORTGAGEE a security interest in, the following
property, together with all buildings, improvements, appurtenances,
servitudes, rights of way, privileges, prescriptions and advantages (all
collectively referred to as the "Property"), located in the State of
Louisiana, to wit:
I All of that immovable property described on Exhibit 1 attached
hereto and made a part hereof.
II All improvements, structures, buildings, fixtures, additions,
enlargements, extensions, modifications or repairs now or hereafter
located on or in the said immovable property described on Exhibit 1
referred to hereinabove or thereunto belonging or appertaining,
which may from time to time be owned by MORTGAGOR, or which may be
used or usable in connection with any present or future use or
operations of said MORTGAGOR and the Property's business, or any
part thereof, whether now owned or hereafter acquired by MORTGAGOR
or others, and together with all replacements thereof,
substitutions therefor and additions thereto, and with respect to
all of the foregoing and hereinafter described property, this
Mortgage shall also constitute a security agreement under Chapter 9
of Title 10 of the Louisiana Revised Statutes of 1950, as amended
(hereinafter sometimes called the "Commercial Laws - Secured
Transactions"), and pursuant thereto a security
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<PAGE>
interest is granted in said property. In order to secure the
repayment of any and all Indebtedness and the performance of any
and all obligations described or otherwise undertaken herein and
under the Indenture and the other Security Documents, all of which
are intended to be secured under this Mortgage and under the
security interests herein granted under the said Commercial Laws -
Secured Transactions, the said security interests shall apply to
all of the proceeds (cash and non-cash) thereof, including the
proceeds of any and all insurance policies in connection therewith,
MORTGAGEE to have all of the rights and remedies of a secured party
under the said Commercial Laws - Secured Transactions. Said
security interests shall also apply to, and there is hereby granted
a security interest in, any and all judgments, awards of damages
(including but not limited to severance and consequential damages),
payments, proceeds, settlements or other compensation heretofore or
hereafter made including interest thereon, and the right to receive
the same as a result of, in connection with, or in lieu of (a) any
taking of the said property or any part thereof under power of
expropriation or eminent domain, either temporarily or permanently;
(b) any change or alteration of the grade of any street; and (c)
any other injury or damage to, or decrease in value of, the said
property or any part thereof. The security interest granted herein
also covers all stored or extracted oil, gas and other minerals of
every kind and character, and/or products of oil, gas and other
minerals, wherever located, stored or maintained, and also covers
all of the proceeds (cash and noncash) and accessions of the
property described in this paragraph and in the above and also the
following paragraphs of this Mortgage.
Provided, however, the Property shall not include Gaming Licenses (as
defined in the Indenture) or any other governmental approval or payment, to
the extent that under the terms and conditions of such approval or under
applicable law, the same cannot be subjected to a Lien in favor of MORTGAGEE.
The maximum principal amount of Indebtedness at any time outstanding
secured by this Mortgage is limited to $235,000,000, and notwithstanding any
contrary provisions, if any, the maximum total indebtedness (including
principal, interest, costs, fees and damages) secured by this Mortgage is
limited to $235,000,000.
6. As further security for the full and final payment of the
Indebtedness up to the maximum amount set forth above, including principal,
interest, costs and attorneys' fees, MORTGAGOR now grants a security interest
in and collaterally transfers, pledges and assigns to MORTGAGEE:
(A) All current and future rents, profits, revenues, royalties, bonuses,
rights and benefits under any and all oil, gas, geothermal or
mineral leases concerning the above described immovable property or
any part of it, with the right to receive and receipt for these
items and to apply those items to the Indebtedness secured by this
Mortgage. MORTGAGEE may demand, sue for and recover any such
payments but shall not be required to do so.
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<PAGE>
(B) All other current and future rents, issues and profit of the
above-described immovable property or any part of it whether under
leases or tenancies now existing or created in the future. At its
option, upon default of any Indebtedness secured by this Mortgage,
MORTGAGEE is authorized to collect rentals and apply them to
MORTGAGOR'S Indebtedness after deduction of collection charges, and
any lessee or future lessee is directed to pay to MORTGAGEE, upon
demand by MORTGAGEE, all rentals become due under any lease or
rental contract on all or any portion of the said immovable
property. By accepting this transfer, assignment, and pledge,
however, MORTGAGEE does not assume any obligations of MORTGAGOR
under any such lease or rental contract.
(C) All leasehold estates, right, title and interest of MORTGAGOR in and
to all ground leases, leases, subleases covering the Property or
any portion thereof now or hereafter existing or entered into
(herein "Leases") and all right, title and interest of MORTGAGOR
thereunder, including without limitation all guaranties thereof,
all cash, or security deposits, advance rentals, and all deposits
or payments of a similar nature. MORTGAGOR shall comply with and
observe MORTGAGOR'S obligations as landlord or tenant, as
applicable, under the Leases. MORTGAGOR, at MORTGAGEE's request,
shall furnish MORTGAGEE with executed copies of all Leases and
guaranties now existing or hereafter made of all or any part of the
Property. MORTGAGOR may, without the consent of MORTGAGEE, enter
into, modify and/or cancel any of the Leases in the ordinary course
of business. MORTGAGOR may, from time to time, request MORTGAGEE,
not individually, but solely in its capacity as Trustee, to execute
a form of subordination agreement, substantially in the form of
Exhibit 4 attached hereto, provided that together with such
request, MORTGAGOR shall submit a certificate of one of its
officers that the lease which is the subject of the subordination
agreement is at market rates, and contains market terms. Provided
MORTGAGOR satisfies the conditions contained in this paragraph,
MORTGAGEE, not individually, but solely in its capacity as Trustee,
shall execute said subordination agreement within thirty (30) days
after receipt of such request.
(D) MORTGAGOR does hereby collaterally assign to MORTGAGEE all Leases
and all security deposits made by tenants in connection with such
Leases of the Property. All security deposits shall be held in a
separate account if required by law. MORTGAGOR does hereby
collaterally assign to MORTGAGEE MORTGAGOR'S interests in all
leases of equipment related to the Property. MORTGAGEE shall have
all of the rights and powers possessed by MORTGAGOR prior to such
assignment.
(E) All of the property described on Exhibit 2 hereto.
All of the property in paragraphs 5 and 6 shall hereinafter be referred
to as the "Property".
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<PAGE>
7. If any Indebtedness secured by this Mortgage is not paid punctually
at its maturity and according to its tenor, then at the option of MORTGAGEE
the Property or any portion(s) thereof may be seized and sold under executory
and/or any other process issued by any court of competent jurisdiction, with
or without appraisement, to the highest bidder, for cash.
8. MORTGAGOR expressly confesses judgment for purposes of executory
process in favor of MORTGAGEE for the full amount of the Indebtedness secured
hereby, all in conformity with R.S. 9:3590. Time being of the essence,
MORTGAGOR further expressly waives demand, putting in default, citation and
all notices and delays, including the three-day notice provided by Article
2639 of the Louisiana Code of Civil Procedure. MORTGAGOR further expressly
consents to the use of executory process to enforce this Mortgage, and
consents to the immediate seizure and sale of the Property with or without
appraisal.
9. (a) The Property shall remain mortgaged and subject to the
security interests granted hereinabove until the cancellation of this
Mortgage by written instrument. Except as otherwise provided in the
Indenture, the Property shall not be sold, alienated, or encumbered to the
prejudice of MORTGAGEE without MORTGAGEE'S prior written consent. MORTGAGOR
agrees that, unless there has been prior written approval obtained from
MORTGAGEE, should any of the Property be encumbered, mortgaged, sold or
transferred, either with or without the assumption of the Indebtedness and
this Mortgage, such sale, transfer, encumbrance, or mortgage shall constitute
a breach of this Mortgage. Such an event, at the option of MORTGAGEE, shall
constitute a default in and at MORTGAGEE'S option shall automatically make
payable the Indebtedness secured by this Mortgage, without any demand or
putting in default. In such an event it shall be lawful for MORTGAGEE to
proceed with enforcement of this Mortgage by executory process, ordinary
process, or otherwise. Notwithstanding the foregoing, MORTGAGOR shall have
the right, without the consent of MORTGAGEE, to enter into easements or
servitudes for ingress, egress, utilities and the like which benefit the
Property. If at any time MORTGAGOR desires that MORTGAGEE release the lien
of this Mortgage from the parcel described in Exhibit 3 attached hereto (the
"Specified Parcel"), which constitutes part of the Property owned by
MORTGAGOR, MORTGAGOR shall notify MORTGAGEE in writing (a "RELEASE NOTICE")
not less than fifteen (15) days prior to the date of the desired release.
MORTGAGOR shall provide MORTGAGEE with a legal description of the Specified
Parcel and evidence of proper subdivision thereof if required by governmental
authority, separate tax identification if required by governmental authority,
(or, that proper application therefore has been made) prior to the desired
release. MORTGAGEE agrees to execute and deliver to Mortgagor, within
fifteen (15) days after receipt of the Release Notice, an appropriate release
document upon payment by MORTGAGOR to MORTGAGEE of a release price of One
Dollar ($1.00). Notwithstanding anything to the contrary contained in the
foregoing, upon the occurrence and during the continuance of a Default, no
release of the Specified Parcel shall be permitted.
(b) Provided MORTGAGOR delivers to MORTGAGEE the certification
hereinafter described, MORTGAGOR shall have the right, without the consent of
MORTGAGEE, to grant, reserve or create easements or servitudes on, over,
across, through and under portions of the Property reasonably necessary for
the purposes of (i) ingress to and egress from the Specified Parcel,
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(ii) utilities, including, but not limited to sewer, water, gas, electric and
telephone, and (iii) parking, in connection with the development of the
Specified Parcel (the easements contained in (i), (ii) and (iii) are
collectively referred to as the "Easements"). Prior to any grant,
reservation, dedication or creation of any Easements, MORTGAGOR shall deliver
to MORTGAGEE a written certification stating that: (w) the Easements will not
cause the Property or any portion thereof to fail to comply in any material
respect with the terms of this Instrument and any applicable law, ordinance
or regulation; (x) all governmental consents or approvals required in
connection with the Easements have been applied for or obtained; (y) the
Easements are for the purposes described in clauses (i) through (iii) above;
and (z) the Easements will not adversely affect the value, utility or useful
life of the Property. At the request of MORTGAGOR, MORTGAGEE shall execute
and deliver to MORTGAGOR an agreement pursuant to which the lien of this
Mortgage shall be subordinated to the Easements.
10. MORTGAGOR shall not abandon the Property.
11. At all reasonable times MORTGAGEE shall have access to and the
right to inspect the Property.
12. MORTGAGOR shall observe and comply with all lawful rules and
regulations of legally constituted authorities relating to the Property.
13. MORTGAGOR will insure the Property against such perils and hazards,
and in such amounts and with such limits, as MORTGAGEE may require from time
to time, and in any event, will continuously maintain the following described
policies of insurance (the "INSURANCE POLICIES"):
(A) Casualty insurance against loss and damage by all risks of
physical loss or damage, including fire, windstorm, flood,
earthquake and other risks covered by the so-called extended
coverage endorsement or all risk insurance in amounts not less than
the eighty percent (80%) of the full insurable replacement value of
all improvements, fixtures and equipment from time to time on the
Property and bearing a replacement cost agreed amount endorsement;
(B) Comprehensive public and product liability insurance against
death, bodily injury and property damage in an amount not less than
One Million Dollars ($1,000,000.00);
(C) Rental or business interruption insurance in amounts sufficient
to pay, for a period of up to one (1) year, all amounts required to
be paid by MORTGAGOR pursuant to the Notes and this Mortgage (or as
otherwise approved by MORTGAGEE);
(D) If the Federal Insurance Administration (FIA) has designated
the Property to be in a special flood hazard area and has
designated the community in which the Property are located eligible
for sale of subsidized insurance, first and second layer flood
insurance when and as available; and
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<PAGE>
(E) The types and amounts of coverage as are customarily maintained
by owners or operators of like properties in similar corresponding
geographic areas.
All insurance policies and renewals thereof shall be in a form
acceptable to MORTGAGEE and shall include a standard mortgage clause in favor
of and in form acceptable to MORTGAGEE. MORTGAGEE shall be listed as a
mortgagee, loss payee and additional insured of all such policies as its
interests may appear. MORTGAGEE shall have the right to hold the policies,
and MORTGAGOR shall promptly furnish to MORTGAGEE all renewal notices and all
receipts of paid premiums. At least thirty days prior to the expiration date
of a policy, MORTGAGOR shall deliver to MORTGAGEE a renewal policy in form
satisfactory to MORTGAGEE.
In the event of any Event of Loss with respect to the Property,
MORTGAGOR shall give immediate written notice to the insurance carrier and to
MORTGAGEE. MORTGAGOR hereby authorizes and empowers MORTGAGEE as
attorney-in-fact for MORTGAGOR to make proof of loss, to adjust and
compromise any claim under the insurance policies, to appear in and prosecute
any action arising from such insurance policies, to collect and receive
insurance proceeds, and to deduct therefrom MORTGAGEE's expenses actually
incurred in the collection of such proceeds; PROVIDED, HOWEVER, nothing
contained in this Paragraph 13 shall require MORTGAGEE to incur any expense
or take any action hereunder. In the event of such Event of Loss, the Net
Cash Proceeds shall be disbursed as provided in the Indenture.
If the Net Cash Proceeds are held by MORTGAGEE to reimburse
MORTGAGOR for the cost of restoration and repair of the Property, MORTGAGOR
shall commence and shall continue to restore and repair the Property to the
equivalent of its original condition. If the cost of such restoration shall
exceed the sum of One Million Dollars ($1,000,000) or if the restoration to
be done may materially impair the structural integrity of a material portion
of the buildings on the Property, disbursement of said proceeds shall be
conditioned on MORTGAGEE's receipt of plans and specifications of an
architect, contractor's cost estimates, architect's certificates, waivers of
lien, sworn statements of mechanics and materialmen and such other evidence
of costs, percentage completion of construction, application of payments, and
satisfaction of liens and such other conditions and requirements as MORTGAGOR
may require. If the Net Cash Proceeds are applied to the payment of the
Indebtedness secured by this Mortgage, any such application of proceeds to
principal shall not extend or postpone the due dates of the installments
payable under the Indenture or change the amounts of such installments.
Notwithstanding the foregoing, if the Property is sold pursuant to the terms
and provisions of this Mortgage or if MORTGAGEE acquires title to the
Property, MORTGAGEE shall have all of the right, title and interest of
MORTGAGOR in and to any insurance policies and unearned premiums thereon and
in and to the proceeds resulting from any damage to the Property prior to
such sale or acquisition.
Wherever a provision is made in this Mortgage for insurance
policies to bear mortgage clauses or other loss payable clauses or
endorsements in favor of MORTGAGEE, or to confer authority upon MORTGAGEE to
settle or participate in the settlement of losses under policies of insurance
or to hold and disburse or otherwise control use of insurance proceeds, from
and after the seizure of the Property and/or the entry of judgement of
foreclosure, all such rights and powers of MORTGAGEE shall continue in
MORTGAGEE as judgment creditor or MORTGAGEE until confirmation of sale.
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<PAGE>
14. MORTGAGOR shall pay all water and sewer rates, rents, taxes (not
being diligently contested by MORTGAGOR in a timely manner), assessments,
premiums, and Other Impositions (as defined in Paragraph 15 hereof)
attributable to the Property. Except as otherwise permitted under the
Indenture, MORTGAGOR shall immediately discharge any lien upon the Property,
and MORTGAGOR shall pay when due or bond-over the claims of all persons
supplying labor or materials to or in connection with the Property. Without
MORTGAGEE'S prior written permission, MORTGAGOR shall not allow or permit or
by any act or failure to act, acquiesce or allow to be created any lien,
encumbrance, or other interest in the Property to be placed, created or
perfected against the Property, except for the "Permitted Liens" as defined
in the Indenture, and any other Liens permitted thereunder.
15. Upon default in payment of any of the following described items, or
upon the occurrence of any other Event of Default as defined in the
Indenture, MORTGAGEE shall have the right, at its option, to require
MORTGAGOR to pay to MORTGAGEE, every month, until the Indebtedness is paid in
full, a sum (herein "FUNDS") equal to one-twelfth of (a) the yearly water and
sewer rates and assessments, all taxes, liens, impositions, public charges
and all general, special ordinary charges and assessments which may be levied
on the Property; (b) the yearly ground rents, if any; and (c) the yearly
premium installments for fire and other hazard insurance, general liability,
rent loss insurance and such other insurance covering the Property as
MORTGAGEE may require pursuant to Paragraph 13 hereof, all as reasonably
estimated initially and from time to time by MORTGAGEE on the basis of
assessments and bills and reasonable estimates thereof. Any waiver by
MORTGAGEE of a requirement that MORTGAGOR pay such Funds may be revoked by
MORTGAGEE, in MORTGAGEE's sole discretion, at any time upon notice in writing
to MORTGAGOR. MORTGAGEE may require MORTGAGOR to pay to MORTGAGEE, in
advance, such other Funds for other taxes, charges, premiums, assessments and
impositions in connection with MORTGAGOR or the Property with MORTGAGEE shall
reasonably deem necessary to protect MORTGAGEE's interests (herein "OTHER
IMPOSITIONS"). Unless otherwise provided by applicable law, MORTGAGEE, at
MORTGAGEE's option, may require Funds for Other Impositions to be paid by
MORTGAGOR in a lump sum or in periodic installments.
MORTGAGEE shall apply the Funds to pay said rates, rents, taxes,
assessments, insurance premiums and Other Impositions so long as MORTGAGOR is
not in breach of any covenant or agreement of MORTGAGOR in this Mortgage or
the Indenture. MORTGAGEE shall make no charge for so holding and applying
the Funds, analyzing said account or for verifying and compiling said
assessments and bills, unless MORTGAGEE pays MORTGAGOR interest, earnings or
profits on the Funds and applicable law permits MORTGAGEE to make such a
charge. Unless such agreement is made or applicable law requires interest,
earnings or profits on the Funds to be paid, MORTGAGEE shall not be required
to pay MORTGAGOR any interest, earnings or profits on the Funds. MORTGAGEE
shall give to MORTGAGOR, without charge, an annual accounting of the Funds in
MORTGAGEE'S normal format showing credits and debits to the Funds and the
purpose for which each debit to other Funds was made. The Funds are pledged
and a security interest granted therein to MORTGAGEE as additional security
for the indebtedness secured by this Mortgage and shall be subject to the
right of set off.
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If the amount of the Funds held by MORTGAGEE at the time of the
annual accounting thereof shall exceed the amount deemed necessary by
MORTGAGEE to provide for the payment of water and sewer rates, taxes,
assessments, insurance premiums, rents and Other Impositions, as they fall
due, such excess may be credited to MORTGAGOR on the next monthly installment
or installments of Funds due or may be applied to the outstanding balance of
the Indebtedness secured hereby, within the sole discretion of MORTGAGEE. If
at any time the amount of the Funds held by MORTGAGEE shall be less than the
amount deemed necessary by MORTGAGEE to pay water and sewer rates, taxes,
assessments, insurance premiums, rents and Other Impositions, as they fall
due, MORTGAGOR shall pay to MORTGAGEE any amount necessary to make up the
deficiency immediately after notice from MORTGAGEE to MORTGAGOR requesting
payment thereof.
Upon MORTGAGOR'S breach of any covenant or agreement of MORTGAGOR
in this Mortgage or upon the occurrence of a Default or an Event of Default
under the Indenture, MORTGAGEE may apply, in any amount and in any order as
MORTGAGEE shall determine in MORTGAGEE'S sole discretion, any Funds held by
MORTGAGEE at the time of application (a) to pay rates, rents, taxes,
assessments, insurance premiums and Other Impositions which are now or will
hereafter become due or (b) pay interest or principal on the Indebtedness
evidenced by the Notes or as a credit against any Indebtedness secured by
this Mortgage. Upon payment in full of the Indebtedness secured by this
Mortgage or release of this Mortgage as provided for in the Indenture,
MORTGAGEE shall promptly refund to MORTGAGOR any Funds held by MORTGAGEE.
16. MORTGAGOR (a) shall not commit waste or permit impairment or
deterioration of the Property; (b) shall not abandon the Property; (c) shall
restore or repair promptly and in a good and workmanlike manner all or any
part of the Property to the equivalent of its original condition, or such
other conditions as MORTGAGEE may approve in writing, in the event of any
damage, injury or loss thereto, whether or not insurance proceeds are
available to cover in whole or in part the cost of such restoration or repair
unless the improvements constituting the Property are totally destroyed,
insurance has been maintained thereon as required by this Mortgage and
MORTGAGEE applies the proceeds of said insurance to payment of the
Indebtedness secured by this Mortgage; (d) shall keep the Property, including
Improvements, fixtures, equipment, machinery and appliances thereon in good
repair and shall replace fixtures, equipment, machinery and appliances on the
Property when necessary to keep such items in good repair; (e) shall comply
with all law, ordinances, regulations, zoning ordinances and requirements of
any governmental body applicable to the Property; and (f) shall give notice
in writing to MORTGAGEE, appear in and defend any action or proceeding
purporting to affect the Property, the security of this Mortgage or the
rights or powers of MORTGAGEE. Neither MORTGAGOR nor any tenant or other
person shall remove, demolish or alter any improvement now existing or
hereafter erected on the Property or any fixture (other than trade fixtures),
equipment, machinery or appliance in or on the Property except when incident
to the replacement of fixtures, equipment, machinery and appliances with
items of like kind.
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<PAGE>
17. Unless required by applicable law or unless MORTGAGEE has otherwise
agreed in writing, MORTGAGOR shall not allow changes in the use for which all
or any part of the Property was intended at the time this Mortgage was
executed. MORTGAGOR shall not initiate or acquiesce to a change in the
zoning classification of the Property without MORTGAGEE'S prior written
consent
18. MORTGAGEE may make or cause to be made reasonable entries upon and
inspections of the Property.
19. MORTGAGOR shall keep and maintain at all times complete and
accurate books of account and records adequate to reflect correctly the
results of the operations of the Property and copies of all written
contracts, leases and other instruments which affect the Property. Such
books, records, contracts, leases, subleases and other instruments shall be
subject to examination and inspection at any reasonable time by MORTGAGEE.
20. If MORTGAGOR fails to perform the covenants and agreements
contained in this Mortgage, or if any action or proceeding is commenced which
affects the Property or title thereto or the interest of MORTGAGEE therein,
including, but not limited to, eminent domain, insolvency, code enforcement,
or arrangements or proceedings involving a bankrupt or decedent, then, after
the running of applicable grace periods, if any, MORTGAGEE at MORTGAGEE's
option may make such appearances, disburse such sums and take such action as
MORTGAGEE deems necessary, in its sole discretion, to protect MORTGAGEE's
interests, including, but not limited to: (a) disbursement of reasonable
attorneys' fees; (b) entry upon the Property to make repairs; and (c)
procurement of satisfactory insurance as provided in Paragraph 13 hereof.
Any amounts disbursed by MORTGAGEE pursuant to this Paragraph 20,
with interest thereon, shall be added to the Indebtedness of MORTGAGOR
secured by this Mortgage. Unless MORTGAGOR and MORTGAGEE agree to other terms
of payment, such amounts shall be immediately due and payable and shall bear
interest from the date of disbursement at the rate stated in the Notes unless
collection from MORTGAGOR of interest at such rate would be contrary to
applicable law, in which event such amounts shall bear interest at the
highest rate which may be collected from MORTGAGOR under applicable law.
MORTGAGOR hereby covenants and agrees that MORTGAGEE shall be subrogated to
the lien of any mortgage or other lien discharged, in whole or in part, by
the Indebtedness secured hereby. Nothing contained in this Paragraph 20
shall require MORTGAGEE to incur any expense or take any action hereunder.
21. Any one of the following shall constitute a default in the
Indebtedness secured by this Mortgage and a default under this Mortgage, and
shall, at MORTGAGEE's option, automatically accelerate all such Indebtedness
and make it payable immediately without any demand or putting in default:
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<PAGE>
(A) MORTGAGOR fails to pay any amount payable pursuant to this Mortgage
when due and payable in accordance with the provisions hereof, and
such failure continues for thirty (30) days.
(B) A breach by MORTGAGOR of any of the obligations, provisions, or
covenants of the Indebtedness or this Mortgage.
(C) A default in or breach of any obligations, provision, or covenant of
the Indebtedness secured by this Mortgage.
(D) If MORTGAGOR should become insolvent or apply to a bankruptcy court
to be adjudicated a voluntary bankrupt, or should proceedings be
taken against MORTGAGOR looking to the appointment of a receiver or
placing MORTGAGOR in involuntary bankruptcy, or should any
applications for a reorganization be made.
(E) If all or any part of the Property is seized under any work or
process of court.
(F) Except as provided herein, or in the Indenture, if all or any part
of the Property is sold, transferred, mortgaged or otherwise
encumbered without the prior, written consent of MORTGAGEE.
(G) Upon destruction or substantial damage to the Improvements on the
Property by the fault of MORTGAGOR.
(H) An Event of Default as defined in the Indenture.
22. Upon any default whether MORTGAGEE accelerates the maturity of the
Indebtedness secured by this Mortgage, or whether MORTGAGEE institutes
foreclosure proceedings, MORTGAGEE at its option may have a receiver
appointed by the court to take possession of the Property to manage or
operate it and conserve the value thereof, and to collect its rents, issues
and profits. The receiver may also take possession of and for these purposes
use any and all personal property contained on the Property and used by
MORTGAGOR in the occupancy, use, rental or leasing of all or any part of the
Property. The right to enter and take possession of the Property and use
personal property, to manage, operate and preserve the Property, and to
collect the rents, issues, and profits, shall be in addition to all other
rights or remedies of MORTGAGEE. After paying costs of collection and any
other expenses incurred, the proceeds shall be applied to the payment of the
Indebtedness secured by this Mortgage in any order that MORTGAGEE shall
elect. MORTGAGEE shall not be liable to account to MORTGAGOR for any of these
actions other than to account for any rents or other revenues from the
operation of the Property actually received by MORTGAGEE. MORTGAGEE shall
have the option, at its discretion, of appointing itself or its agent as
keeper of the Property pursuant to the provisions of R.S. 9:5136, et seq.
The keeper appointed pursuant to these provisions shall have all the powers,
duties, and compensation provided for in R.S. 9:5138, and shall not be
required to provide any bond otherwise than as required by law in such
proceedings, pursuant to R.S. 9:5139. Such keeper shall be entitled to
reimbursement for all reasonable out of pocket expenses and for a reasonable
fee for its services.
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23. (a) MORTGAGOR warrants that it will sign and record all necessary
documents or instruments and take all necessary actions to interrupt
prescription on the Indebtedness and to reinscribe this Mortgage. Failure of
MORTGAGOR to do so shall constitute a default under the Indebtedness and this
Mortgage. Nothing shall require MORTGAGEE to reinscribe this Mortgage, and
the failure of MORTGAGEE to reinscribe it shall not be grounds for any cause
of action, either by MORTGAGOR or by any assignee (including future holders
of any Indebtedness) of MORTGAGEE.
(b) Without limiting any of the provisions of this Mortgage,
MORTGAGOR expressly grants unto MORTGAGEE, as a Secured Party, a security
interest in all of the Property described in this Mortgage (including both
that now existing and that hereafter arising) to the full extent that the
said Property may be subject to the said Commercial Laws - Secured
Transactions. MORTGAGOR warrants that it shall execute and file with the
offices of the Secretary of State of the State of Louisiana, and/or any
appropriate filing office in any other jurisdiction, federal or state, all
financing statements or other statements or instruments as required in order
to perfect the security interests granted hereby or to continue the
effectiveness of the same.
24. From time to time, MORTGAGEE may, at MORTGAGEE's option, without
giving notice to or obtaining the consent of MORTGAGOR, MORTGAGOR'S
successors, or assigns or of any junior lienholder or guarantors, without
liability on MORTGAGEE's part and notwithstanding MORTGAGOR'S breach of any
covenant or agreement of MORTGAGOR in this Mortgage, extend the time for
payment of the Indebtedness secured by this Mortgage or any part thereof,
reduce the payments thereon, release one or more persons or entities liable
on any of said Indebtedness, accept a renewal note or notes therefor, release
from the lien of this Mortgage any part of the Property, take or release
other or additional security, reconvey any part of the Property, consent to
any map or plat of the Property, consent to the granting of any easement,
join in any extension or subordination agreement, agree in writing with
MORTGAGOR to modify the rate of interest or period of amortization of the
Notes or either of them, or change the amount of the installments payable
thereunder. Any actions taken by MORTGAGEE pursuant to the terms of this
Paragraph 24 shall not affect the obligation of MORTGAGOR or MORTGAGOR'S
successors or assigns to pay the Indebtedness secured by this Mortgage and to
observe the covenants of MORTGAGOR contained herein, shall not affect the
guaranty of any person, corporation, partnership or other entity for payment
of the Indebtedness secured hereby, and shall not affect the lien or priority
of lien hereof on the Property. MORTGAGOR shall pay MORTGAGEE a reasonable
service charge, together with such title insurance premiums and attorneys'
fees as may be incurred at MORTGAGEE's option for any such action if taken at
MORTGAGOR'S request.
25. No delay by MORTGAGEE in enforcing any rights or remedies, whether
provided or created under the Indebtedness, this Mortgage, or by law, shall
be a waiver of that right or remedy or preclude MORTGAGEE from exercising the
right or remedy at any time, during the continuance of MORTGAGOR'S default or
otherwise.
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<PAGE>
26. MORTGAGEE acknowledges and agrees to the requirement of the
Riverboat Gaming Enforcement Division, Office of State Police, Department of
Public Safety and Corrections, State of Louisiana (the "Division") and/or its
successor, that, within five (5) days of the commencement of the exercise of
any remedy(ies) in favor of MORTGAGEE pursuant hereto, MORTGAGEE shall notify
the Division or its successor, in writing, of the date, nature and scope of
the exercise of such remedy(ies) and further acknowledges that the exercise
of such remedy(ies) and any transfer or proposed transfer of any ownership
interest or economic interest resulting therefrom or related thereto shall
require compliance with any applicable provisions of Title 4, Section 528 of
the Louisiana Revised Statutes and all regulations promulgated pursuant
thereto, and/or Title 27, Section 1 ET. SEQ. of the Louisiana Revised
Statutes and any regulations promulgated pursuant thereto.
27. All awards made to the present, or any subsequent, owner of the
Property, by any governmental or other lawful authority for the taking, by
condemnation or eminent domain, of all or any part of the Property (the
"Awards") are hereby assigned by, and a security interest therein granted by,
MORTGAGOR to MORTGAGEE, and shall be held and applied in accordance with the
terms and provisions of the Indenture. MORTGAGOR shall immediately notify
MORTGAGEE of the actual or threatened commencement of any condemnation or
eminent domain proceedings affecting any part of the Property and shall
deliver to MORTGAGEE copies of all papers served in connection with any such
proceedings. MORTGAGOR shall make, execute and deliver to MORTGAGEE at any
time upon request, free of any encumbrance, any further assignments and other
instruments deemed necessary by MORTGAGEE for the purpose of assigning the
Awards to MORTGAGEE. After deducting from the Award all of its expenses
incurred in the collection and administration of the Award, including
attorneys' fees, unless otherwise permitted by prior written consent of
MORTGAGEE, the Award shall be applied as a mandatory prepayment against the
Indebtedness as provided in the Indenture.
28. THIS MORTGAGE IS MADE CONTEMPORANEOUSLY WITH A DEED OF TRUST OF
EVEN DATE HEREWITH GIVEN BY BORROWER TO OR FOR THE BENEFIT OF MORTGAGEE
COVERING PROPERTY LOCATED IN THE STATE OF MISSOURI (the "Contemporaneous
Mortgage"). The Contemporaneous Mortgage secures the Indebtedness and the
performance of the other covenants and agreements of Borrower set forth in
the Indenture and the Security Documents. Upon the occurrence of a default
herein, or upon the occurrence of an Event of Default as defined in the
Indenture, MORTGAGEE may proceed under this Mortgage and/or the
Contemporaneous Mortgage against any of such property and/or the Property in
one or more parcels and in such manner and order as MORTGAGEE shall elect.
MORTGAGOR hereby irrevocably waives and releases, to the extent permitted by
law, and whether now or hereafter in force, any right to have the Property
and/or the property covered by the Contemporaneous Mortgage marshalled upon
any foreclosure of this Mortgage or the Contemporaneous Mortgage.
29. All the agreements and stipulations herein contained and all the
obligations assumed in this Mortgage shall inure to the benefit of and be
binding upon the heirs, successors and assigns (including future holder of
any Indebtedness secured under this Mortgage) of the respective parties. All
rights granted in this Mortgage to MORTGAGEE shall inure to the benefit of,
and may be enforced and executed by, all future holders of any Indebtedness
secured by this Mortgage. All future holders of any Indebtedness acquired
under this Mortgage shall be entitled to all of the rights and benefits
granted to MORTGAGEE in this Mortgage with respect to any such Indebtedness
acquired by such future holder and any subsequently arising Indebtedness of
MORTGAGOR and/or Borrower to such future holder. All parties signing this
Mortgage have declared themselves to be of full legal capacity.
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<PAGE>
30. At any time, without notice to or consent by that MORTGAGOR, and
without either affecting the liability of any other person, partnership,
corporation or entity not expressly released in writing or affecting the
rights of MORTGAGEE to any security not expressly released in writing,
MORTGAGEE may:
(A) Release any person, corporation, or entity for all or any part of
any Indebtedness secured by this Mortgage.
(B) Extend, modify or alter the time or terms of payment of all or any
part of any Indebtedness secured by this Mortgage.
(C) Accept additional security.
(D) Release, subordinate, or modify any consensual or nonconsensual
security device (including, but not limited to, any form of
mortgage, future advance mortgage, mortgage to secure present and
future Indebtedness, construction mortgage, collateral mortgage,
chattel mortgage, collateral chattel mortgage, lien, privileges
pledge, security agreement or assignment) on any property,
immovable or movable, corporeal or incorporeal (including, but not
limited to, the Property that is described in this Mortgage).
31. As used in this Mortgage, the term "shall" is mandatory, not
discretionary, the term "may" is discretionary, not mandatory.
32. The parties to this Mortgage dispense with any certificate of
mortgage and agree to hold me, Notary, harmless for the nonproduction thereof.
33. MORTGAGOR declared that with respect to the Property hereby
mortgaged, it does expressly waive and renounce in favor of MORTGAGEE any and
all homestead exemptions and other exemptions from seizure and/or sale or
claims thereto, whether existing or arising under or by virtue of the
Constitution and laws of the State of Louisiana or otherwise.
34. MORTGAGOR waives, to the extent permitted by law, trial by jury in
any actions brought by either MORTGAGOR or MORTGAGEE in connection with the
Indebtedness.
35. All sums (including reasonable attorneys' fees, costs, expenses and
disbursements, to the extent permitted by law) paid by MORTGAGEE in
connection with any litigation to prosecute or defend the rights and
obligations created by this Mortgage, with interest thereon from the time,
shall, on demand, be immediately due from MORTGAGOR to MORTGAGEE, and shall
be added to and included in the Indebtedness and shall be secured by this
Mortgage.
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<PAGE>
36. Wherever the word "MORTGAGEE" or the word "holder" occurs in this
Mortgage, it shall be construed as singular or plural, as the case may be and
shall mean and include MORTGAGEE individually and/or, as applicable, as
trustee for each of the Holders under the Indenture.
37. (A) MORTGAGOR represents and warrants that it conducts in the
ordinary course of business a review of the effect of existing Environmental
Laws and existing Environmental Claims on the Property and as a result
thereof MORTGAGOR has reasonably concluded that, except as specifically
disclosed in that certain Environmental Report dated June of 1993 prepared by
Walk, Haydel & Associates, Inc. (the "Environmental Report"), such
Environmental Laws and Environmental Claims could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(B) Except as disclosed in the Environmental Report, (i) neither
MORTGAGOR nor, to the best of MORTGAGOR'S knowledge, any other Person has
ever caused or permitted any Hazardous Material to be released, or disposed
of on, under or at the Property, in any amount or manner which would require
remedial action under Environmental Laws, (ii) the Property has never been
used by MORTGAGOR, or to the best of MORTGAGOR'S knowledge, by any other
Person as a dump site for any Hazardous Material or a permanent storage site
for any Hazardous Material, and (iii) neither MORTGAGOR nor any of its
predecessors has received written notice from any Governmental Authority or
any third party that it may be responsible for the release of any Hazardous
Material at any location.
(C) Except in compliance with Environmental Laws, and except as
disclosed in the Environmental Report, neither MORTGAGOR nor, to the best of
MORTGAGOR'S knowledge, any other Person has ever caused or permitted any
Hazardous Material to be treated or stored on, under or at the Property.
(D) MORTGAGOR shall conduct its operations and keep and maintain
its property in compliance with all Environmental Laws and obtain and comply
with and maintain any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws, except
such non-compliance as could not result in liability to MORTGAGOR
(individually or together with the Borrower or any Subsidiary) in excess of
$100,000 or otherwise have a Material Adverse Effect. Without limiting the
foregoing, (i) MORTGAGOR shall comply in a reasonable and cost-effective
manner with any valid Federal or state judicial or administrative order
requiring the performance at the Property of activities in response to the
release or threatened release of a Hazardous Material except for the period
of time that MORTGAGOR is diligently in good faith contesting such order;
(ii) notify MORTGAGEE within five days of MORTGAGOR'S receipt for any written
claim, demand, proceeding, action, or notice of liability by any Person
arising out of or relating to the release or threatened release of a
Hazardous Material; and (iii) notify MORTGAGEE within five days of any
release or threat of release of Hazardous Material reported to any
Governmental Authority occurring at the Property. Furthermore, MORTGAGOR
shall not commence disposal of any Hazardous Material into or onto the
Property except in compliance with Environmental Laws on or allow any Lien
imposed pursuant to any Environmental Law relating to Hazardous Material or
the disposal thereof to remain on such real property. For purposes of this
Mortgage, "disposal" means the intentional placement of Hazardous Materials
with no intention of retrieval.
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(E) MORTGAGOR shall protect, indemnify, save, defend, and hold
harmless MORTGAGEE, its officers, directors, stockholders, partners,
employees, successors and assigns (collectively, the "INDEMNIFIED
ENVIRONMENTAL PARTIES") from and against any and all liability, loss, damage,
actions, causes of action, costs or expenses whatsoever (including, without
limitation, reasonable attorneys' fees and expenses) and any and all claims,
suits and judgments which any Indemnified Environmental Party may suffer, as
a result of or with respect to: (i) any Environmental Claim relating to or
arising from the Property; (ii) violation of any Environmental Law in
connection with the Property; (iii) any release, spill, or the presence of
any Hazardous Materials affecting the Property; and (iv) the presence at, in,
on or under, or the release, escape, seepage, leakage, discharge or migration
at or from, the Property of any Hazardous Materials, whether or not such
condition was known or unknown to MORTGAGOR provided that in each case,
MORTGAGOR may be relieved of its obligation under this subsection if it
demonstrates, by a preponderance of the evidence, that any of the matters
referred to in clauses (i) through (iv) above did not occur (but need not
have been discovered) prior to (x) the foreclosure of this Mortgage with
respect to the Property, (y) the delivery by MORTGAGOR to MORTGAGEE of a
deed-in-lieu of foreclosure with respect to such property or (z) MORTGAGEE's
taking possession and control of the Property after the occurrence and during
the continuance of a Default hereunder or an Event of Default under the
Indenture. Promptly after MORTGAGEE receives notice of the commencement of
any Environmental Claim in respect of which indemnification is sought
hereunder, MORTGAGEE shall notify MORTGAGOR in writing thereof; but the
omission so to notify MORTGAGOR shall not relieve MORTGAGOR from any
obligation hereunder provided that MORTGAGOR has not been materially
prejudiced by such failure by MORTGAGEE to notify MORTGAGOR. If any such
action or other proceeding shall be brought against MORTGAGEE, upon written
notice (given reasonably promptly following MORTGAGEE's notice to MORTGAGOR
of such action or proceeding), MORTGAGOR shall be entitled to assume the
defense thereof, at MORTGAGOR'S expense, with counsel reasonably acceptable
to MORTGAGEE; provided, however, MORTGAGEE may, at its own expense, retain
separate counsel to participate in such defense, but such participation shall
not be deemed to give MORTGAGEE a right to control such defense, which right
MORTGAGOR expressly retains. Notwithstanding the foregoing, MORTGAGEE shall
have the right to employ separate counsel at MORTGAGOR'S expense if, in the
reasonable opinion of legal counsel, conflict or potential conflict exists
between MORTGAGEE and MORTGAGOR that would make such separate representation
advisable; provided, however, in no event shall MORTGAGOR be required to pay
reasonable fees and expenses actually incurred under this indemnity for more
than one separate firm of attorneys for MORTGAGEE in any one legal action.
For the purposes of this Mortgage the following terms shall have
the meanings as set forth herein:
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"ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by
any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental Law,
or for release or injury to the environment;
"ENVIRONMENTAL LAWS" shall mean all federal, state or local laws,
statutes, rules, regulations, ordinances and codes, together with
all administrative orders, licenses, authorizations and permits of,
and agreements with, any Governmental Authorities, in each case
relating to environmental, health and safety matters;
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing;
"HAZARDOUS MATERIAL" shall mean (a) any "hazardous substance" as
now defined pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sec. 9601(14) as amended
by the Superfund Amendments and Reauthorization Act, and including
the judicial interpretation thereof; (b) any "pollutant or
contaminant" as defined in 42 U.S.C. Sec. 9601(33); (c) any
material now defined as "hazardous waste" pursuant to 40 C.F.R.
part 261; (d) any petroleum, including crude oil and any fraction
thereof; (e) natural gas, natural gas liquids, liquefied natural
gas, or synthetic gas useable for fuel; (f) any "hazardous
chemicals" as defined pursuant to 29 C.F.R. Part 1910; (g) any
asbestos, polychlorinated biphenyl (PCB), or isomer or dioxin; and
(h) any other substance, regardless of physical form, that is
regulated under any Environmental Law;
"MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse change
in, or a material adverse effect upon, the business, assets,
operations, properties or condition (financial or otherwise) of
MORTGAGOR or MORTGAGOR and any Affiliate, taken as a whole or any
material adverse change in, or material adverse effect upon, the
obligations under the Indenture, this Mortgage or the Security
Documents of any such Person or Persons which could reasonably be
expected to result in any of the foregoing; (b) a material
impairment of the ability of MORTGAGOR or any Affiliate to perform
under any provision of the Indenture or any Security Document; or
(c) a material adverse effect upon the legality, validity, binding
effect or enforceability against MORTGAGOR or an Affiliate of the
Indenture or any Security Document; and,
"PERSON" shall mean any individual, limited liability company,
corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated organization or government or other
agency or political subdivision thereof.
38. MORTGAGOR agrees to indemnify and hold harmless MORTGAGEE from and
against any and all losses, liabilities, suits, obligations, fines, damages,
judgments, penalties, claims, charges, costs and expenses (including
attorneys' fees and disbursements) which may be imposed
-18-
<PAGE>
on, incurred or paid by or assessed against MORTGAGEE by reason or on account
of, or in connection with, (i) any Default or Event of Default by MORTGAGOR
hereunder or under the Indenture or the other Security Documents, (ii)
MORTGAGEE's exercise of any of its rights and remedies, or the performance of
any of its duties, hereunder or under the Indenture or the other Security
Documents to which MORTGAGOR is a party, (iii) the construction,
reconstruction or alteration of the Property or any part thereof, (iv) any
negligence or willful misconduct of MORTGAGOR, any lessee of the Property, or
any of their respective agents, contractors, subcontractors, servants,
employees, licensees, guests or invitees, (v) any accident, injury, death or
damage to any Person or property occurring in, on or about the Property or
any street, drive, sidewalk, curb or passageway adjacent thereto, or (vi) any
other transaction arising out of or in any way connected with the Property
(or any part thereof) or the Indenture or any of the Security Documents,
except for the willful misconduct or gross negligence of the indemnified
Person. The above indemnity shall not apply to liabilities incurred by
MORTGAGEE as a result of MORTGAGEE's acts or omissions in connection with the
Property (or parts thereof) within the possession and control of MORTGAGEE
arising during such period of time as such Property is actually within the
possession and control of MORTGAGEE, except those liabilities arising either
directly or indirectly as a result of any Default or Event of Default by
MORTGAGOR under this Mortgage or the Indenture or any act or omission of
MORTGAGOR, any lessees or sublessees of the Property or any of their
respective agents, contractors, subcontractors, servants, employees,
licensees, guests or invitees. Any amount payable to MORTGAGEE under this
Paragraph shall be deemed a demand obligation, shall be part of the
Indebtedness, shall bear interest at the rate stated in the Notes unless
collection from MORTGAGOR of interest at such rate would be contrary to
applicable law, in which event such amounts shall bear interest at the
highest rate which may be collected from MORTGAGOR under applicable law (the
"Default Rate") ( and shall be secured by this Mortgage. MORTGAGOR'S
obligations under this Paragraph shall not be affected by the absence or
unavailability of insurance covering the same or by the failure or refusal by
any insurance carrier to perform any obligation on its part under any such
policy of covering insurance and shall survive the repayment or cancellation
of the Indebtedness and the release, discharge, satisfaction or cancellation
of this Mortgage. If any claim, action or proceeding is made or brought
against MORTGAGEE which is subject to the indemnity set forth in this
Paragraph, MORTGAGOR shall resist or defend against the same, if necessary in
the name of MORTGAGEE by attorneys for MORTGAGOR'S insurance carrier (if the
same is covered by insurance) or otherwise by attorneys approved by
MORTGAGEE. Notwithstanding the foregoing, MORTGAGEE, in its reasonable
discretion, may engage its own attorneys to resist or defend, or assist
therein, and MORTGAGOR shall pay, or, on demand, shall reimburse MORTGAGEE
for the payment of, the reasonable fees and disbursements of said attorneys.
39. Attached hereto are certified resolutions of the Board of Directors
of Jazz Enterprises, Inc. and of Argosy of Louisiana, Inc., a Louisiana
corporation, General Partner of Catfish Queen Partnership in Commendam, a
Louisiana partnership, authorizing the execution of this Mortgage for the
purposes of Louisiana executory process.
[Signature Page Follows]
-19-
<PAGE>
THUS DONE, READ AND SIGNED by MORTGAGOR in Cook County, Illinois on the
date set forth above, in the presence of me, Notary, and the undersigned
competent witnesses, after a due reading of the whole.
WITNESSES: MORTGAGOR
_______________________________ Jazz Enterprises, Inc.
_______________________________ By:____________________
Duly Authorized
Catfish Queen Partnership in Commendam
By: Argosy of Louisiana, Inc.
A Louisiana partnership,
_______________________________ General Partner
_______________________________ By:_________________________________
Duly Authorized
___________________
NOTARY PUBLIC
THUS DONE, READ AND SIGNED by MORTGAGEE in ____________ County, Illinois
on the date set forth above, in the presence of me, Notary, and the
undersigned competent witnesses, after a due reading of the whole.
WITNESSES: MORTGAGEE
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
_______________________________
_______________________________ By: ____________________________
___________________
NOTARY PUBLIC
-20-
<PAGE>
EXHIBIT 1
[See attached]
-21-
<PAGE>
EXHIBIT 2
DESCRIPTION OF COLLATERAL
All of the following property now or at any time hereafter owned by
MORTGAGOR or in which MORTGAGOR may now or at any time hereafter have any
interest or rights, together with all of MORTGAGOR'S right, title and
interest therein:
i. All fixtures and personal property now or hereafter owned
by MORTGAGOR and attached to or contained in or used or
useful in connection with the Property or any of the
improvements now or hereafter located thereon, including
without limitation any and all air conditioners, antennae,
appliances, apparatus, awnings, basins, bathtubs, bidets,
boilers, bookcases, cabinets, carpets, coolers, curtains,
dehumidifiers, disposals, doors, drapes, dryers, ducts,
dynamos, elevators, engines, equipment, escalators, fans,
fittings, floor coverings, furnaces, furnishings, furniture,
hardware, heaters, humidifiers, incinerators, kitchen
equipment and utensils, lighting, machinery, motors, ovens,
pipes, plumbing, pumps, radiators, ranges, recreational
facilities, refrigerators, screens, security systems, shades,
shelving. sinks, sprinklers, stokers, stoves, toilets,
ventilators, wall coverings, washers, windows, window
coverings, wiring, all renewals or replacements thereof or
articles in substitution therefor, and all property owned by
MORTGAGOR and now or hereafter used for similar purposes in
or on the Property;
ii. Articles or parts now or hereafter affixed to the property
described in Paragraph A of this Exhibit or used in
connection with such property, any and all replacements for
such property, and all other property of a similar type or
used for similar purposes now or hereafter in or on the
Property or any of the improvements now or hereafter located
thereon;
iii. MORTGAGOR'S right, title and interest in all personal
property used or to be used in connection with the operation
of the Property or the conduct of business thereon, including
without limitation business equipment and inventories located
on the Property or elsewhere, together with files, books of
account, and other records, wherever located;
iv. MORTGAGOR'S right, title and interest in and to any and
all contracts now or hereafter relating to the Property
executed by any architects, engineers, or contractors,
including all amendments, supplements, and revisions thereof,
together with all MORTGAGOR'S rights and remedies thereunder
and the benefit of all covenants and warranties thereon and
also together with all drawings, designs, estimates, layouts,
surveys, plats, plans, specifications and test results
prepared by any architect, engineer, or contractor, including
any amendments, supplements, and revisions thereof and the
<PAGE>
right to use and enjoy the same, as well as all building
permits, environmental permits, approvals and licenses
(excluding Gaming Licenses (as defined in the Indenture) or
any other governmental approval or payment, to the extent
that, under the terms and conditions of such approval or
under applicable law, cannot be subjected to a Lien in favor
of MORTGAGEE), other governmental or administrative permits,
licenses, agreements and rights relating to construction on
the Property;
v. MORTGAGOR'S right, title and interest in and to any and all
contracts now or hereafter relating to the operation of the
Property or the conduct of business thereon, including
without limitation all management and other service
contracts, the books and records, and the right to
appropriate and use any and all trade names used or to be
used in connection with such business;
vi. MORTGAGOR'S right, title and interest in the rents, issues,
proceeds, deposits (including security deposits and utility
deposits), and profits in connection with all leases,
contracts, and other agreements made or agreed to by any
person or entity (including without limitation MORTGAGOR and
MORTGAGEE under the powers granted by the Mortgage made
between MORTGAGOR and MORTGAGEE and the other Security
Documents) with any person or entity pertaining to all or any
part of the Property, whether such agreements have been
heretofore or are hereafter made;
vii. MORTGAGOR'S right, title and interest in all sale
contracts, earnest money deposits, proceeds of sale
contracts, accounts receivable, and general intangibles
relating to the Property;
viii. All rights in and proceeds from all fire and hazard,
loss-of-income, and other non-liability insurance policies
now or hereafter covering improvements now or hereafter
located on the Property or described in the Mortgage,
Assignment of Leases and Rents and Security Agreement, the
use or occupancy thereof, or the business conducted thereon;
ix. All MORTGAGOR'S rights in and to awards or payments,
including interest thereon, that may be made with respect to
the Property, whether from the right of the exercise of
eminent domain (including any transfer made in lieu of the
exercise of said right) or for any other injury to or decreed
in volume of the Property; and
x. All MORTGAGOR'S rights in and to proceeds from the sale,
transfer, or pledge of any or all of the foregoing property.
-2-
<PAGE>
EXHIBIT 3
SPECIFIED PARCEL
-3-
<PAGE>
EXHIBIT 4
FORM OF NONDISTURBANCE AGREEMENT
-4-
<PAGE>
Document Number: EX-4-12.WP
6-27-96/:44a
-5-
<PAGE>
EXHIBIT 12.1
<PAGE>
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES COMPUTATION
ARGOSY GAMING COMPANY
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA THREE MONTHS ENDED THREE MONTHS
YEARS ENDED DECEMBER 31, YEAR ENDED ----------------------- ENDED
----------------------------------------------------------- DECEMBER 31, MARCH 31, MARCH 31, MARCH 31,
1991 1992 1993 1994 1995 1995 1995 1996 1996
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Actual . . . . . . $ 693,000 $15,552,000 $14,781,000 $15,893,000 $13,390,000 $11,831,000 $ 2,377,000 $(2,209,000) $(2,209,000)
Proforma interest
expense. . . -- -- -- -- -- 1,099,000 -- -- (560,000)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income from
operations . . . . 693,000 15,552,000 14,781,000 15,893,000 13,390,000 10,732,000 2,377,000 (2,209,000) (2,769,000)
Fixed charges
(see below). . . 2,202,000 7,913,000 985,000 10,587,000 19,560,000 21,431,000 4,484,000 6,022,000 6,582,000
Interest
capitalized . . (325,000) -- -- (1,665,000) (3,203,000) (3,203,000) (130,000) (1,358,000) (1,358,000)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Adjusted earnings. . $ 2,570,000 $23,465,000 $15,766,000 $24,815,000 $29,747,000 $28,960,000 $ 6,731,000 $ 2,455,000 $ 2,455,000
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
FIXED CHARGES:
Interest expense . $ 1,877,000 $ 7,882,000 $ 800,000 $ 8,182,000 $14,708,000 $16,579,000 $ 3,942,000 $ 4,211,000 $ 4,771,000
1/3 Rental expense 31,000 185,000 1,665,000 3,203,000 1,649,000 412,000 453,000 1,358,000
Interest
capitaliz ed . . 325,000 -- -- 740,000 1,649,000 3,203,000 130,000 1,358,000 453,000
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Fixed charges. . . . $ 2,202,000 $ 7,913,000 $ 985,000 $10,587,000 $19,560,000 $21,431,000 $ 4,484,000 $ 6,022,000 $ 6,582,000
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------ -----------
Ratio of earnings
to fixed charges. . 1.2 3.0 16.0 2.3 1.5 1.4 1.5 -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
EXHIBIT 21
<PAGE>
EXHIBIT 21
LIST OF SIGNIFICANT SUBSIDIARIES
The following is a list of the significant subsidiaries of the Registrant:
STATE OF PERCENTAGE
INCORPORATION OWNERSHIP
NAME OF SIGNIFICANT SUBSIDIARY OR ORGANIZATION OF ENTITY
- ------------------------------ --------------- ---------
Alton Gaming Company Illinois corporation 100%
The Missouri Gaming Company Missouri corporation 100%
The St. Louis Gaming Company Missouri corporation 100%
The Indiana Gaming Company Indiana corporation 100%
Iowa Gaming Company Iowa corporation 100%
Iowa Development Corp. Iowa corporation 100%
Argosy of Louisiana, Inc. Louisiana corporation 100%
Jazz Enterprises, Inc. Louisiana corporation 100%
Catfish Queen Partnership
in Commendam Louisiana partnership 100%
Indiana Gaming Company, L.P. Indiana limited partnership 57.5%
Belle of Sioux City, L.P. Iowa limited partnership 70%
<PAGE>
EXHIBIT 23.1
<PAGE>
EXHIBIT 23.1
[Letterhead of Ernst & Young LLP]
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
January 26, 1996 (except Note 13 as to which the date is July 1, 1996) in the
Registration Statement (Form S-4) and the related Prospectus of Argosy Gaming
Company for the registration of $235,000,000 of 13-1/4% First Mortgage Notes
due 2004.
/s/ Ernst & Young LLP
Chicago, Illinois
July 1, 1996
<PAGE>
EXHIBIT 23.2
<PAGE>
EXHIBIT 23.2
[Letterhead of Grant Thornton LLP]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated July 10, 1995, accompanying the
financial statements of Jazz Enterprises, Inc. contained in the Registration
Statement. We consent to the use of the aforementioned report in the
Registration Statement, and to the use of our name as it appears under the
caption "Experts".
/s/ Grant Thornton LLP
Reno, Nevada
June 28, 1996
<PAGE>
EXHIBIT 24
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
Argosy Gaming Company, a Delaware corporation, in connection with its exchange
offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the
Securities and Exchange Commission under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-4, hereby constitutes and
appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and
lawful attorneys-in-fact and agents, with full power to act without the other,
to sign such Registration Statement and to file such Registration Statement and
the exhibits thereto and sign and file any and all amendments thereto and other
documents in connection therewith with the Securities and Exchange Commission,
and to do and perform any and all acts and things requisite and necessary to be
done in connection with the foregoing as fully as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: June 28, 1996 /s/F. LANCE CALLIS
---------------- ------------------------------
(Signature)
F. LANCE CALLIS
------------------------------
(Print Name)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
Argosy Gaming Company, a Delaware corporation, in connection with its exchange
offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the
Securities and Exchange Commission under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-4, hereby constitutes and
appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and
lawful attorneys-in-fact and agents, with full power to act without the other,
to sign such Registration Statement and to file such Registration Statement and
the exhibits thereto and sign and file any and all amendments thereto and other
documents in connection therewith with the Securities and Exchange Commission,
and to do and perform any and all acts and things requisite and necessary to be
done in connection with the foregoing as fully as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: June 28, 1996 /s/WILLIAM F. CELLINI
---------------- ------------------------------
(Signature)
WILLIAM F. CELLINI
------------------------------
(Print Name)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
Argosy Gaming Company, a Delaware corporation, in connection with its exchange
offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the
Securities and Exchange Commission under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-4, hereby constitutes and
appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and
lawful attorneys-in-fact and agents, with full power to act without the other,
to sign such Registration Statement and to file such Registration Statement and
the exhibits thereto and sign and file any and all amendments thereto and other
documents in connection therewith with the Securities and Exchange Commission,
and to do and perform any and all acts and things requisite and necessary to be
done in connection with the foregoing as fully as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: June 28, 1996 /s/GEORGE L. BRISTOL
---------------- ------------------------------
(Signature)
GEORGE L. BRISTOL
-------------------------------
(Print Name)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
Argosy Gaming Company, a Delaware corporation, in connection with its exchange
offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the
Securities and Exchange Commission under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-4, hereby constitutes and
appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and
lawful attorneys-in-fact and agents, with full power to act without the other,
to sign such Registration Statement and to file such Registration Statement and
the exhibits thereto and sign and file any and all amendments thereto and other
documents in connection therewith with the Securities and Exchange Commission,
and to do and perform any and all acts and things requisite and necessary to be
done in connection with the foregoing as fully as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: June 28, 1996 /s/JIMMY F. GALLAGHER
---------------- ------------------------------
(Signature)
JIMMY F. GALLAGHER
------------------------------
(Print Name)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
Argosy Gaming Company, a Delaware corporation, in connection with its exchange
offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the
Securities and Exchange Commission under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-4, hereby constitutes and
appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and
lawful attorneys-in-fact and agents, with full power to act without the other,
to sign such Registration Statement and to file such Registration Statement and
the exhibits thereto and sign and file any and all amendments thereto and other
documents in connection therewith with the Securities and Exchange Commission,
and to do and perform any and all acts and things requisite and necessary to be
done in connection with the foregoing as fully as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: June 28, 1996 /s/JOHN B. PRATT, SR.
---------------- ------------------------------
(Signature)
JOHN B. PRATT, SR.
------------------------------
(Print Name)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
Argosy Gaming Company, a Delaware corporation, in connection with its exchange
offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the
Securities and Exchange Commission under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-4, hereby constitutes and
appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and
lawful attorneys-in-fact and agents, with full power to act without the other,
to sign such Registration Statement and to file such Registration Statement and
the exhibits thereto and sign and file any and all amendments thereto and other
documents in connection therewith with the Securities and Exchange Commission,
and to do and perform any and all acts and things requisite and necessary to be
done in connection with the foregoing as fully as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: June 28, 1996 /s/WILLIAM McENERY
---------------- ------------------------------
(Signature)
WILLIAM McENERY
------------------------------
(Print Name)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
Argosy Gaming Company, a Delaware corporation, in connection with its exchange
offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the
Securities and Exchange Commission under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-4, hereby constitutes and
appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and
lawful attorneys-in-fact and agents, with full power to act without the other,
to sign such Registration Statement and to file such Registration Statement and
the exhibits thereto and sign and file any and all amendments thereto and other
documents in connection therewith with the Securities and Exchange Commission,
and to do and perform any and all acts and things requisite and necessary to be
done in connection with the foregoing as fully as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: June 28, 1996 /s/EDWARD F. BRENNAN
---------------- ------------------------------
(Signature)
EDWARD F. BRENNAN
------------------------------
(Print Name)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Filed by Registration No.
Form T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(B)(2)________
FIRST NATIONAL BANK OF COMMERCE
(Exact name of Trustee as specified in its charter)
N/A 210 Baronne Street 72-0269760
(Jurisdiction of incorporation New Orleans, Louisiana 70112 (I.R.S. Employer
or organization if not a U.S. (Address, including zip code Identification
National Bank) of principal executive Number)
offices)
FIRST NATIONAL BANK OF COMMERCE
210 Baronne Street
New Orleans, Louisiana 70112
Telephone: 504-623-1610
(Name, address and telephone number of agent for service)
ARGOSY GAMING COMPANY
(Exact name of Obligor as specified in its charter)
DELAWARE 219 Piasa Street 37-1304247
(State of other jurisdiction of Alton, Illinois 62002-6232 (I.R.S. Employer
incorporation or organization) (Address of principal Identification
executive offices) Number)
FIRST MORTGAGE NOTES DUE 2004
(Title of Indenture Securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Comptroller of the Currency, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe such
affiliation.
No such affiliation exists.
12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
The Obligor is not currently indebted to the Trustee. A credit
facility with the Obligor was paid in full on June 5, 1996.
16. LIST OF EXHIBITS. List below all exhibits filed as part of this statement
of eligibility and qualification.
* 1. A copy of the articles of incorporation of the Trustee as now
in effect.
** 2. A copy of the certificate of authority of the Trustee to commence
business.
** 3. A copy of the certificate of authorization of the Trustee to
exercise corporate trust powers issued by the Board of Governors
of the Federal Reserve System under date of May 20, 1933.
* 4. A copy of the existing bylaws of the Trustee.
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to requirements of its supervising or examining
authority.
_______________
* Incorporated by reference to Exhibit bearing the same Exhibit number
submitted with the Trustee's Form T-1 (File No. 22-20536).
** Incorporated by reference to Exhibit bearing the same Exhibit number
submitted with the Trustee's Form T-1 (File No. 2-32069).
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 as
amended to November 15, 1990, the Trustee, First National Bank of Commerce, a
national banking association organized and existing under the laws of the
United States of America, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New Orleans, and State of Louisiana on the
18th day of June, 1996.
FIRST NATIONAL BANK OF COMMERCE
By: Denis L. Milliner
--------------------------------
Name: Denis L. Milliner
Title: Vice President and Trust Officer
<PAGE>
Exhibit 6
Consent of Trustee Required by Section 321(b)
of the Trust Indenture Act of 1939
In connection with the Indenture referred to in the Form T-1 of even date
herewith between Argosy Gaming Company and First National Bank of Commerce in
New Orleans, as Trustee pursuant to Section 321(b) of the Trust Indenture Act
of 1939 as amended to November 15, 1990, hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request thereof.
Dated as of June 18, 1996
FIRST NATIONAL BANK OF COMMERCE
By: Denis L. Milliner
--------------------------------
Name: Denis L. Milliner
Title: Vice President and Trust Officer
<PAGE>
Exhibit 7
<PAGE>
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
ARGOSY GAMING COMPANY
219 Piasa Street
Alton, Illinois 62002
LETTER OF TRANSMITTAL
TO EXCHANGE 13 1/4% FIRST MORTGAGE NOTES DUE 2004
Exchange Agent:
FIRST NATIONAL BANK OF COMMERCE
To: First National Bank of Commerce
FACSIMILE TRANSMISSION:
(504) 623-1095
CONFIRM BY TELEPHONE TO:
(504) 623-7581
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BY MAIL: BY HAND DELIVERY/OVERNIGHT
DELIVERY:
Trust Security Services Trust Security Services
First National Bank of Commerce 210 Baronne Street
P.O. Box 60279 Basement Level
New Orleans, Louisiana 70160-0279 New Orleans, Louisiana 70112
Attention: Rebecca Norton Attention: Rebecca Norton
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated ,
1996, (as the same may be amended or supplemented from time to time, the
"Prospectus") of Argosy Gaming Company, a Delaware corporation (the "Issuer"),
and this Letter of Transmittal for 13 1/4% First Mortgage Notes 2004 which may
be amended from time to time (this "Letter"), which together constitute the
Issuer's offer (the "Exchange Offer") to exchange $1,000 principal amount of its
13 1/4% First Mortgage Notes due 2004 which have been registered under the
Securities Act of 1933, as amended (the "Exchange Notes"), for each $1,000 in
principal amount of its outstanding 13 1/4% First Mortgage Notes due 2004 (the
"Old Notes") that were issued and sold in a transaction (the "Initial Offering")
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Old Notes who wish to tender their Old Notes must, prior to
the Expiration Date: (1) complete, sign, date and deliver this Letter, or a
facsimile thereof, to the Exchange Agent, in person or to the address set forth
above; and (2) tender his or her Old Notes or, if a tender of Old Notes is to be
made by book-entry transfer to the account maintained by the Exchange Agent at
The Depository Trust Company (the "Book-Entry Transfer Facility"), confirm such
book-entry transfer (a "Book-Entry Confirmation"), in each case in accordance
with the procedures for tendering described in the Instructions to this Letter.
Holders of Old Notes whose certificates are not immediately available, or who
are unable to deliver their certificates or Book-Entry Confirmation and all
other documents required by this Letter to be delivered to the Exchange Agent on
or prior to the Expiration Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth under the caption "The Exchange Offer
- -- How to Tender" in the Prospectus. (See Instruction 1).
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and the
issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Issuer shall be deemed to have accepted for
exchange validly tendered Old Notes when, as and if the Issuer has given written
notice thereof to the Exchange Agent.
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above, or G. Dan Marshall, Director of Investor Relations of the Issuer,
at (618) 474-7666, 219 Piasa Street, Alton, Illinois 62002.
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Old Notes of which you are the holder. If the space
provided in Box 1 is inadequate, list the certificate numbers and principal
amount of Old Notes on a separate signed schedule and affix that schedule to
this Letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
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PRINCIPAL
PRINCIPAL AMOUNT OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF OLD OLD NOTES
(PLEASE FILL IN IF BLANK) NUMBER(S) (1) NOTES TENDERED (2)
Totals:
</TABLE>
(1) Need not be completed if Old Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Old Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Old Notes indicated
above. Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered with this Letter, the undersigned exchanges, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest in
and to the Old Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Old Notes, with
full power of substitution, to: (a) deliver certificates for such Old Notes; (b)
deliver Old Notes and all accompanying evidence of transfer and authenticity to
or upon the order of the Issuer upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Notes to which the undersigned is entitled
upon the acceptance by the Issuer of the Old Notes tendered under the Exchange
Offer; (c) presentation of Old Notes for transfer on the register for such Old
Notes; and (d) receive all benefits and otherwise exercise all rights of
beneficial ownership of the Old Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be deemed
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Old Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuer to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered.
By tendering Old Notes, the undersigned certifies (a) that it is not an
affiliate (as defined in Rule 501 of the Securities Act, an "Affiliate") of the
Issuer, that it is not a broker-dealer that owns Old Notes acquired directly
from the Issuer or an Affiliate of the Issuer, that it is acquiring the Exchange
Notes offered hereby in the ordinary course of the undersigned's business and
that the undersigned has no arrangement with any person to participate in the
distribution of such Exchange Notes; (b) that it is an Affiliate of the Issuer
or of the Initial Purchasers (as defined in the Prospectus) of the Old Notes in
the Initial Offering and that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable
to it; or (c) that it is a Participating Broker-Dealer (as defined in the
Prospectus) and that it will deliver a prospectus in connection with any resale
of the Exchange Notes.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuer may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns. Tenders may be withdrawn only
in accordance with the procedures set forth in the Instructions contained in
this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Old Notes not tendered but represented by a certificate also
encompassing Old Notes which are tendered) to the undersigned at the address set
forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict between
the terms of the terms of the Prospectus and this Letter, the Prospectus shall
prevail.
<PAGE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: __________________________________________
Account Number: _________________________________________________________
Transaction Code Number: ________________________________________________
- --------------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s): _________________________________________
Date of Execution of Notice of Guaranteed Delivery: _____________________
Window Ticket Number (if available): ____________________________________
Name of Institution which Guaranteed Delivery: __________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by registered holder(s) of Old Notes as
their name(s) appear(s) on certificate(s) for Old Notes, or by
person(s) authorized to become registered holder(s) by endorsement
and documents transmitted with this Letter. If signature is by a
trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, such
person must set forth his or her full title below. (See
Instruction 3)
X ______________________________________________________________________________
X ______________________________________________________________________________
Signature(s) of Owner(s) or Authorized Signatory
Date: ____________, 1996
Name(s): _______________________________________________________________________
(Please Print)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: ___________________________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTIONS 4 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
________________________________________________________________________________
(Address (including zip code) and Telephone Number (including area code) of
Firm)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Printed Name)
Date: ____________, 1996
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME: FIRST NATIONAL BANK OF COMMERCE
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Part 1 Social Security Number or
PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT Employer Identification
AND CERTIFY BY SIGNING AND DATING BELOW. Number
SUBSTITUTE Part 2 / /
Form W-9 Department Check the box if you are NOT subject to back-up withholding under the
of the Treasury, provisions of Section 2406(a)(1)(C) of the Internal Revenue Code
Internal Revenue because (1) you have not been notified that you are subject to back-up
Service withholding as a result of failure to report all interest or dividends
or (2) the Internal Revenue Service has notified you that you are no
longer subject to back-up withholding.
Payor's Request for Part 3 / /
Taxpayer Check if
Identification Awaiting TIN
Number (TIN)
CERTIFICATION UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
Signature Date , 1996
Name: (Please Print)
</TABLE>
<PAGE>
<TABLE>
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BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if certificates for Old To be completed ONLY if certificates for Old
Notes in a principal amount not exchanged, or Notes in a principal amount not exchanged, or
Exchange Notes, are to be issued in the name Exchange Notes, are to be sent to someone
of someone other than the person whose other than the person whose signature appears
signature appears in Box 2, or if Old Notes in Box 2 or to an address other than that
delivered by book-entry transfer which are shown in Box 1.
not accepted for exchange are to be returned Deliver:
by credit to an account maintained at the (check appropriate boxes)
Book-Entry Transfer Facility other than the / / Old Notes not tendered
account indicated above. / / Exchange Notes, to:
Issue and deliver: (Please Print)
(check appropriate boxes) Name:
/ / Old Notes not tendered Address:
/ / Exchange Notes, to:
(Please Print)
Name:
Address: Please complete the Substitute Form W-9 at
Box 3
Tax I.D. or Social Security Number:
Please complete the Substitute Form W-9 at
Box 3
Tax I.D. or Social Security Number:
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Old Notes or
a Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed copy of this Letter and any other documents required by this
Letter, must be received by the Exchange Agent at one of its addresses set forth
herein on or before the Expiration Date. The method of delivery of this Letter,
certificates for Old Notes or a Book-Entry Confirmation, as the case may be, and
any other required documents is at the election and risk of the tendering
holder, but except as otherwise provided below, the delivery will be deemed made
when actually received by the Exchange Agent. If delivery is by mail, the use of
registered mail with return receipt requested, properly insured, is suggested.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder, the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Issuer and duly executed by
the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act of 1934, as
amended. If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Old Notes, the signature on the Letter of Transmittal
must be guaranteed by an Eligible Institution.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
Old Notes should contact such holder promptly and instruct such holder to tender
Old Notes on such beneficial owner's behalf. If such beneficial owner wishes to
tender such Old Notes himself, such beneficial owner must, prior to completing
and executing the Letter of Transmittal and delivering such Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or follow the procedures described in the immediately
preceding paragraph. The transfer of record ownership may take considerable
time.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes or a Book-Entry Confirmation, as the case may be, and all other
required documents to the Exchange Agent on or before the Expiration Date may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in the Prospectus. Pursuant to such procedure: (i) tender must be made by or
through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange
Agent must have received from the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by telegram, telex, facsimile
transmission, mail or hand delivery) (x) setting forth the name and address of
the holder, the description of the Old Notes and the principal amount of Old
Notes tendered, (y) stating that the tender is being made thereby and (z)
guaranteeing that, within five New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery, this Letter together
with the certificates representing the Old Notes or a Book-Entry Confirmation,
as the case may be, and any other documents required by this Letter will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) the
certificates for all tendered Old Notes or a Book-Entry Confirmation, as the
case may be, as well as all other documents required by this Letter, must be
received by the Exchange Agent within five New York Stock Exchange trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in the Prospectus under the caption "The Exchange Offer -- How to
Tender."
The method of delivery of Old Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration Date
to permit delivery to the Exchange Agent on or before the Expiration Date.
<PAGE>
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide his or her taxpayer identification number (social security number or
employer identification number) and certify that such number is correct. Each
tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exemption exists and is proved in a manner satisfactory to
the Issuer and the Exchange Agent.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the back cover hereof on or prior to the Expiration Date a
letter, telegram or facsimile transmission from an Eligible Institution setting
forth the name and address of the tendering holder, the principal amount of the
Old Notes being tendered, the names in which the Old Notes are registered and,
if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission by the Eligible Institution, the Old Notes,
in proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Old Notes being tendered by the
above-described method (or a timely Book-Entry Confirmation) are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Issuer may, at its option, reject the tender. Copies of a Notice
of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Old Notes (or a timely Book-Entry
Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Issuer, whose determination will be final and binding. The Issuer reserves
the absolute right to reject any or all tenders that are not in proper form or
the acceptance of which, in the opinion of the Issuer's counsel, would be
unlawful. The Issuer also reserves the right to waive any irregularities or
conditions of tender as to particular Old Notes. All tendering holders, by
execution of this Letter, waive any right to receive notice of acceptance of
their Old Notes. The Issuer's interpretation of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding.
Neither the Issuer, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount
of any Old Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal amount
tendered in the fourth column of Box 1 above. All of the Old Notes represented
by a certificate or by a Book-Entry Confirmation delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. A certificate
for Old Notes not tendered will be sent to the holder, unless otherwise provided
in Box 5, as soon as practicable after the Expiration Date, in the event that
less than the entire principal amount of Old Notes represented by a submitted
certificate is tendered (or, in the case of Old Notes tendered by book-entry
transfer, such non-exchanged Old Notes will be credited to an account maintained
by the holder with the Book-Entry Transfer Facility).
<PAGE>
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. For a withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be timely received
by the Exchange Agent at its address set forth on the back cover of the
Prospectus prior to the Expiration Date. Any such notice of withdrawal must
specify the person named in the Letter of Transmittal as having tendered Old
Notes to be withdrawn, the certificate numbers of Old Notes to be withdrawn, the
principal amount of Old Notes to be withdrawn, a statement that such holder is
withdrawing his election to have such Old Notes exchanged, and the name of the
registered holder of such Old Notes, and must be signed by the holder in the
same manner as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence satisfactory to
the Issuer that the person withdrawing the tender has succeeded to the
beneficial ownership of the Old Notes being withdrawn. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Issuer, and such
determination will be final and binding on all parties.
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS: GUARANTEE OF SIGNATURES. If
this Letter is signed by the holder(s) of Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Old Notes, without alteration, enlargement or any change
whatsoever.
If any of the Old Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Old Notes are held in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate copies of this Letter as there are names in which
certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Old Notes are tendered; and/or (ii) untendered
Old Notes, if any, are to be issued to the holder of record, then the holder of
record need not endorse any certificates for tendered Old Notes, nor provide a
separate bond power. In any other case, the holder of record must transmit a
separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Issuer of their authority to so act must be submitted, unless waived by the
Issuer.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Old Notes are tendered: (i) by a holder who has not completed the Box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
this Letter; or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of The Securities Transfer Agents
Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature
Program (MSP) or The Stock Exchanges Medallion Program (SEMP). If Old Notes are
registered in the name of a person other than the signer of this Letter, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Issuer, in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Old Notes not exchanged are to be issued or
sent, if different from the name and address of the person signing this Letter.
In the case of issuance in a different name, the tax identification number of
the person named must also be indicated. Holders tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such holder may
designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered Old Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or
<PAGE>
her social security number. If the Exchange Agent is not provided with the
correct TIN, the holder may be subject to a $50 penalty imposed by the Internal
Revenue Service. In addition, delivery to the holder of the Exchange Notes
pursuant to the Exchange Offer may be subject to back-up withholding. (If
withholding results in overpayment of taxes, a refund may be obtained.) Exempt
holders (including, among others, all corporations and certain foreign
individuals) are not subject to these back-up withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest or
dividends; (ii) the Internal Revenue Service has notified the holder that he or
she is no longer subject to back-up withholding; or (iii) in accordance with the
Guidelines, such holder is exempt from back-up withholding. If the Old Notes are
in more than one name or are not in the name of the actual owner, consult the
enclosed Guidelines for information on which TIN to report.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Old Notes
not exchanged are to be delivered to, or are to be issued in the name of, any
person other than the record holder, or if tendered certificates are recorded in
the name of any person other than the person signing this Letter, or if a
transfer tax is imposed by any reason other than the transfer of Old Notes to
the Issuer or its order pursuant to the Exchange Offer, then the amount of such
transfer taxes (whether imposed on the record holder or any other person) will
be payable by the tendering holder. If satisfactory evidence of payment of taxes
or exemption from taxes is not submitted with this Letter, the amount of
transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend
or waive any of the specified conditions in the Exchange Offer in the case of
any Old Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED OLD
NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
<PAGE>
ARGOSY GAMING COMPANY
NOTICE OF GUARANTEED DELIVERY
OF 13 1/4% FIRST MORTGAGE NOTES DUE 2004
As set forth in the Prospectus dated , 1996 (as the same may be
amended or supplemented from time to time, the "Prospectus") of Argosy Gaming
Company (the "Issuer") under "The Exchange Offer -- How to Tender" and in the
Letter of Transmittal for 13 1/4% First Mortgage Notes due 2004 (the "Letter of
Transmittal"), this form or one substantially equivalent hereto must be used to
accept the Exchange Offer (as defined below) of the Issuer if: (i) certificates
for the above-referenced Notes (the "Old Notes") are not immediately available,
(ii) time will not permit all required documents to reach the Exchange Agent (as
defined below) on or prior to the Expiration Date (as defined in the Prospectus)
or (iii) the procedures for book-entry transfer cannot be completed on or prior
to the Expiration Date. Such form may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or letter to the Exchange Agent.
TO: FIRST NATIONAL BANK OF COMMERCE
(the "Exchange Agent")
BY FACSIMILE:
(504) 623-1095
CONFIRM BY TELEPHONE TO:
(504) 623-7581
<TABLE>
<S> <C>
BY MAIL: BY HAND DELIVERY/OVERNIGHT
DELIVERY:
Trust Security Services Trust Security Services
First National Bank of Commerce 210 Baronne Street
P.O. Box 60279 Basement Level
New Orleans, Louisiana 70160-0279 New Orleans, Louisiana 70112
Attention: Rebecca Norton Attention: Rebecca Norton
</TABLE>
Delivery of this instrument to an address other than
as set forth above or transmittal of this instrument to
a facsimile or telex number other then as set forth
above does not constitute a valid delivery.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures described in the Prospectus and the Letter of Transmittal.
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1996, unless extended by
the Issuer. With respect to the Exchange Offer, "Expiration Date" means such
time and date, or if the Exchange Offer is extended, the latest time and date to
which the Exchange Offer is so extended by the Issuer.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<TABLE>
<C> <S>
SIGNATURES Principal amount of Old Notes
Exchanged: $
Signature of Owner Certificate Nos. of Old Notes (if available)
Signature of Owner (if more than one)
Dated: , 1996 Total $
Name(s): IF OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY
TRANSFER, PROVIDE THE DEPOSITORY TRUST COMPANY
(Please Print) ("DTC") ACCOUNT NO.:
Address: Account No.
(Include Zip Code)
Area Code and
Telephone No.:
Capacity (full title), if signing in a
representative
capacity:
Taxpayer Identification or Social Security No.:
</TABLE>
<PAGE>
<TABLE>
<S> <C>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion program within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), hereby guarantees (a) that the above-named person(s) own(s) the
above-described securities tendered hereby within the meaning of Rule 10b-4 under the
Exchange Act, (b) that such tender of the above-described securities complies with Rule
10b-4 under the Exchange Act, and (c) that delivery to the Exchange Agent of
certificates tendered hereby, in proper form for transfer, or delivery of such
certificates pursuant to the procedure for book-entry transfer, in either case with
delivery of a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other required documents, is being made within three New York Stock
Exchange trading days after the date of execution of a Notice of Guaranteed Delivery of
the above-named person.
Name of Firm:
(Authorized Signature)
Title:
Number and Street or P.O. Box
Date:
City State Zip Code
Tel. No.
Fax No.:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD NOTES WITH THIS NOTICE. OLD
NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
ARGOSY GAMING COMPANY
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF
13 1/4% FIRST MORTGAGE NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 13 1/4% FIRST MORTGAGE NOTES DUE 2004
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated , 1996 (as
the same may be amended or supplemented from time to time, the "Prospectus") and
a form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Argosy Gaming Company (the "Issuer") to exchange
up to $235,000,000 in aggregate principal amount of its 13 1/4% First Mortgage
Notes due 2004 (the "Exchange Notes") for up to $235,000,000 in aggregate
principal amount of its outstanding 13 1/4% First Mortgage Notes due 2004 that
were issued and sold in a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Old Notes").
We are asking you to contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee, in addition, we ask you
to contact your clients who, to your knowledge, hold Old Notes registered in
their own name. The Issuer will not pay any fees or commissions to any broker,
dealer or other person in connection with the solicitation of tenders pursuant
to the Exchange Offer. You will, however, be reimbursed by the Issuer for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Issuer will pay all transfer taxes, if
any, applicable to the tender of Old Notes to it or its order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the exchange
of Old Notes and for the information of your clients (facsimile copies of
the Letter of Transmittal may be used to exchange Old Notes);
3. A form of letter that may be sent to your clients for whose accounts
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining the clients' instructions with regard to the
Exchange Offer;
4. A Notice of Guaranteed Delivery;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. A return envelope addressed to First National Bank of Commerce, the
Exchange Agent.
Your prompt action is requested. The Exchange offer will expire at 5:00
p.m., New York City time, on , , 1996, unless extended (the
"Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
To tender Old Notes, certificates for Old Notes or a Book-Entry Confirmation
(as defined in the Prospectus), a duly executed and properly completed Letter of
Transmittal or a facsimile thereof, and any other required documents, must be
received by the Exchange Agent as provided in the Prospectus and the Letter of
Transmittal.
<PAGE>
Questions and requests for assistance with respect to the Exchange Offer or
for additional copies of the enclosed material may be directed to the Exchange
Agent at its address set forth in the Prospectus or at (504) 623-1640.
Very truly yours,
ARGOSY GAMING COMPANY
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR ANY AFFILIATE
THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR
THE ENCLOSED DOCUMENTS AND THE STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
2
<PAGE>
ARGOSY GAMING COMPANY
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF
13 1/4% FIRST MORTGAGE NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 13 1/4% FIRST MORTGAGE NOTES DUE 2004
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
To Our Clients:
Enclosed for your consideration is a Prospectus dated , 1996 (as
the same may be amended or supplemented from time to time, the "Prospectus") and
a form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Argosy Gaming Company (the "Issuer") to exchange
up to $235,000,000 in aggregate principal amount of its 13 1/4% First Mortgage
Notes due 2004 (the "Exchange Notes") for up to $235,000,000 in aggregate
principal amount of its outstanding 13 1/4% First Mortgage Notes due 2004 that
were issued and sold in a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Old Notes").
The material is being forwarded to you as the beneficial owner of Old Notes
carried by us for your account or benefit but not registered in your name. A
tender of any Old Notes may be made only by us as the registered holder and
pursuant to your instructions. Therefore, the Issuer urges beneficial owners of
Old Notes registered in the name of a broker, dealer, commercial bank, trust
company or other nominee to contact such registered holder promptly if they wish
to tender Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all of the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the Prospectus and Letter of Transmittal. We urge you to
read carefully the Prospectus and Letter of Transmittal before instructing us to
tender your Old Notes.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to tender Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , , 1996, unless extended (the "Expiration
Date"). Old Notes tendered pursuant to the Exchange Offer may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to the
Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount at
maturity of the Exchange Notes for each $1,000 principal amount at maturity
of the Old Notes, of which $235,000,000 aggregate principal amount of the
Old Notes was outstanding as of , 1996. The terms of the Exchange
Notes are substantially identical (including principal amount, interest
rate, maturity, security and ranking) to the terms of the Old Notes, except
that the Exchange Notes (i) are freely transferable by holders thereof
(except as provided in the Prospectus) and (ii) are not entitled to certain
registration rights and certain additional interest provisions which are
applicable to the Old Notes under a registration rights agreement dated as
of June 5, 1996 (the "Registration Rights Agreement") among the Company, the
Guarantors and Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, BA Securities, Inc., and Deutsche Morgan
Grenfell/C.J. Lawrence Inc. as initial purchasers.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS, SEE "THE
EXCHANGE OFFER -- CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on , 1996, unless extended.
<PAGE>
4. The Issuer has agreed to pay the expenses of the Exchange Offer
except as provided in the Prospectus and the Letter of Transmittal.
5. Any transfer taxes incident to the transfer of Old Notes from the
tendering Holder to the Issuer will be paid by the Issuer, except as
provided in the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to nor will exchange be accepted from
or on behalf of holders of Old Notes in any jurisdiction in which the making of
the Exchange Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction.
If you wish to have us tender any or all of your Old Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying Letter
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender Old Notes held by us and registered in our name for
your account or benefit.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Argosy Gaming
Company, including the Prospectus and the Letter of Transmittal.
This form will instruct you to exchange the aggregate principal amount of
Old Notes indicated below (or, if no aggregate principal amount is indicated
below, all Old Notes) held by you for the account or benefit of the undersigned,
pursuant to the terms and conditions set forth in the Prospectus and Letter of
Transmittal.
<TABLE>
<S> <C>
Aggregate Principal Amount of Old Notes to be exchanged
$ *
* I (we) understand that if I (we) sign
these instruction forms without indicating
an aggregate principal amount of Old Notes Signature(s)
in the space above, all Old Notes held by
you for my (our) account will be exchanged.
(Please print name(s) and address above)
Dated: , 1996
(Area Code & Telephone Number)
(Taxpayer Identification or
Social Security Number)
</TABLE>
2
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employee identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals (1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person
(1)
4. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor
(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person (3)
for a designated ward,
minor, or incompetent
person
7. a. The usual revocable The grantor- trustee
savings trust account (1)
(grantor is also
trustee)
b. So-called trust The actual owner (1)
account that is not a
legal or valid trust
under State law
8. Sole proprietorship The owner (4)
account
<CAPTION>
------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION NUMBER
FOR THIS TYPE OF ACCOUNT: OF--
------------------------------------------------------
<S> <C> <C>
9. A valid trust, estate, The legal entity (Do
or pension trust not furnish the
identifying number of
the person
representative or
trustee unless the
legal entity itself is
not designated in the
account title) (5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation
- A financial institution
- An organization exempt from tax under
section 501(a). or an individual retirement plan.
- The United States or any agency or instrumentality
thereof.
- A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a
foreign government, or any agency or instrumentality thereof.
- An international organization or any agency, or
instrumentality thereof.
- A registered dealer in securities or commodities
registered in the U.S. or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under
section 584(a).
- An exempt charitable remainder trust, or a
nonexempt trust describe in section 4947(a)(1).
- An entity registered at all times under the
Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to
withholding under section 1441.
- Payments to partnerships not engaged in a trade or
business in the U.S. and which have at least one nonresident partner.
- Payments of patronage dividends where the amount
received is not paid in money.
- Payments made a by a certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of Interest on obligations issued by
individuals. Note: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the payer's trade or
business and you have not provided your correct taxpayer identification
number to the payer.
- Payments of tax-exempt interest (including exempt-
interest dividends under section 852). Payments described in section
6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under
section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt Payees described above should file form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to IRS. IRS uses the numbers for identification purposes.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Beginning January 1, 1993, payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may also
apply.
PENALTIES
(1) PENALTIES FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to a
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. --Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
