SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-7123
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Showboat, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 88-0090766
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(State or other (I.R.S. employer
jurisdiction of identification no.)
incorporation or
organization)
2800 Fremont Street, Las Vegas, Nevada 89104
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(Address of principal executive (Zip code)
offices)
Registrant's telephone number, including area code (702) 385-9141
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Securities registered pursuant to section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, $1.00 par New York Stock Exchange
value and
9 1/4% First Mortgage Bonds New York Stock Exchange
due 2008
13% Senior Subordinated Notes New York Stock Exchange
due 2009
Securities registered pursuant to section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-
affiliates of the registrant, based on the closing price of
registrant's common stock on the New York Stock Exchange on
March 18, 1998, was approximately $424,998,033.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of March 18, 1998:
16,548,765.
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable.
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PART I
ITEM 1.BUSINESS
GENERAL
Showboat, Inc., through subsidiaries (collectively, the
"Company"), is an international gaming company that (i) owns and
operates the Showboat Casino Hotel fronting the Boardwalk in
Atlantic City, New Jersey (the "Atlantic City Showboat"),
(ii) owns and operates the Showboat Hotel, Casino and Bowling
Center in Las Vegas, Nevada (the "Las Vegas Showboat"), (iii)
beneficially owns a 55% interest in, and manages, the Showboat
Mardi Gras Casino in East Chicago, Indiana (the "East Chicago
Showboat") and (iv) beneficially owns a 24.6% interest in, and
manages, the Star City casino and entertainment complex in
Sydney, New South Wales, Australia ("Star City").
The Company commenced operations in Las Vegas, Nevada in
September 1954 and was incorporated as a Nevada corporation in
1960. The Company became a publicly traded company on
December 9, 1968 and its common stock has been traded on the New
York Stock Exchange since 1984. Unless the context otherwise
requires, the "Company" or "Showboat," as applicable, refers to
Showboat, Inc. and its subsidiaries. The Company's executive
offices are located at 2800 Fremont Street, Las Vegas, Nevada
89104, and its telephone number is (702) 385-9141.
FISCAL YEAR 1997 DEVELOPMENTS
SHOWBOAT MERGER
On December 18, 1997, the Company entered a definitive
Agreement and Plan of Merger (the "Showboat Merger Agreement")
with Harrah's Entertainment, Inc., a Delaware corporation
("Harrah's"), and HEI Acquisition Corp., a Nevada corporation and
wholly-owned, indirect subsidiary of Harrah's ("Harrah's Sub"),
whereby Harrah's Sub will merge with and into the Company and the
Company consequently will become a wholly-owned, indirect
subsidiary of Harrah's (the "Showboat Merger"). The Company will
hold a special meeting of shareholders on April 23, 1998 for the
Company's shareholders to consider the Showboat Merger. If the
Showboat Merger is approved, and other conditions to the Showboat
Merger are satisfied or waived, articles of merger will be filed
with the Nevada Secretary of State and the Company's shareholders
will become entitled to receive $30.75 in cash per share of
common stock of the Company (the day on which the articles of
merger become effective is hereafter referred to as the "Closing
Date"). In the event the Company's shareholders approve the
Showboat Merger, the Company anticipates that the Closing Date
would occur during the second quarter 1998. Notwithstanding the
foregoing, no assurance can be given that the Company's
shareholders will approve the Showboat Merger.
The respective obligations of the Company and Harrah's to
effect the Showboat Merger are subject to the satisfaction (or
waiver) of the following conditions: (a) the Showboat Merger and
the Showboat Merger Agreement shall have been approved and
adopted by the shareholders of the Company; (b) no order,
executive order, stay, decree, judgment or injunction or statute,
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rule or regulation shall be in effect that makes the Showboat
Merger illegal or otherwise prohibits the consummation of the
Showboat Merger; and (c) all governmental authorizations,
consents, orders or approvals shall have been obtained (including
under all gaming laws), all statutory waiting periods in respect
thereof (including under the Hart Scott Rodino Act ("HSR Act"))
shall have expired and no such approval shall contain any
material conditions, limitations or restrictions. The applicable
waiting periods for the Company and Harrah's under the HSR Act
expired on February 11, 1998, and no request for additional
information was made. Harrah's has filed applications for
approval from, and initiated discussions with, the gaming
authorities in the four jurisdictions in which the Company
operates. These applications remain pending and are awaiting
consideration from the respective regulatory authorities.
The obligation of the Company to effect the Showboat Merger
is also subject to the satisfaction (or waiver) of the following
conditions: (a) the representations and warranties of Harrah's
and Harrah's Sub in the Showboat Merger Agreement shall be true
and correct in all material respects (except for those qualified
as to materiality or a Harrah's Material Adverse Effect (as
defined below) which shall be true and correct) as of the date of
the Showboat Merger Agreement and, except to the extent such
representations speak as of an earlier date, as of the Closing
Date as though made on and as of the Closing Date, except for
changes contemplated by the Showboat Merger Agreement; (b)
Harrah's shall have performed in all material respects all
obligations required to be performed by it under the Showboat
Merger Agreement at or prior to the Closing Date; and (c)
Harrah's shall have received all third-party consents and
approvals and approvals required to be obtained by Harrah's,
except for such third-party consents and approvals as to which
the failure to obtain, individually or in the aggregate, would
not reasonably be expected to impair or delay the consummation of
the Showboat Merger. A "Harrah's Material Adverse Effect" means
a material adverse effect on the business, properties, condition
(financial or otherwise), results of operations or prospects of
Harrah's and its subsidiaries, taken as a whole.
In addition, the obligations of Harrah's and Harrah's Sub to
effect the Showboat Merger are also subject to the satisfaction
(or waiver) of the following conditions: (a) the representations
and warranties of the Company in the Showboat Merger Agreement
shall be true and correct in all material respects (except for
those qualified as to materiality or a Showboat Material Adverse
Effect (as defined below), which shall be true and correct) as of
the date of the Showboat Merger Agreement and, except to the
extent such representations and warranties speak as of an earlier
date, as of the Closing Date as though made on and as of the
Closing Date, except for changes contemplated by the Showboat
Merger Agreement; (b) the Company shall have performed in all
material respects all obligations required to be performed by it
under the Showboat Merger Agreement at or prior to the Closing
Date; (c) between the date of the Showboat Merger Agreement and
the Effective Date, there shall have been no material adverse
change in the business, properties, assets, liabilities,
operations, condition (financial or otherwise) or prospects of
the Company and its subsidiaries, taken as a whole; (d) Harrah's
and the Company shall have received all third-party consents and
approvals required to be obtained by Harrah's or the Company,
except for such third-party consents and approvals as to which
the failure to obtain, either individually or in the aggregate,
would not reasonably be expected to result in (i) a material
adverse change in the business, properties, assets, liabilities,
operations, condition (financial or otherwise) or prospects of
the Company and its subsidiaries, taken as a whole, or (ii) a
Harrah's Material Adverse Effect, as the case may be; and
(e) no event has occurred that has or would
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result in the triggering of any right or entitlement of the
Company's shareholders under the Company's Rights Agreement dated
October 5, 1995, or will occur as a result of the consummation of
the Merger. A "Showboat Material Adverse Effect" means a
material adverse effect on the business, properties, condition
(financial or otherwise), results of operations or prospects of
the Company and its subsidiaries, taken as a whole, or any of the
three separate businesses operated as the Atlantic City Showboat,
East Chicago Showboat and Star City.
The Company has agreed that, during the period from the date
of the Showboat Merger Agreement until the earlier of the
termination of the Showboat Merger Agreement or the Effective
Time (defined in the Showboat Merger Agreement), except as
otherwise consented to in writing by Harrah's or as contemplated
by the Showboat Merger Agreement, it and each of its subsidiaries
will: (a) carry on its business in the usual, regular and
ordinary course in substantially the same manner as previously
conducted; (b) pay its debts and taxes when due subject to good
faith disputes over such debts or taxes, and pay or perform other
obligations when due; (c) use reasonable efforts consistent with
past practices and policies to preserve intact its present
business organization, keep available the services of its present
officers and key employees and preserve its relationships with
customers, suppliers, distributors and others having business
dealings with it; (d) not amend its Articles of Incorporation or
Bylaws; (e) not issue, pledge or sell, or authorize the issuance,
pledge or sale of additional shares of its capital stock (other
than upon exercise of the Options outstanding on the date of the
Showboat Merger Agreement) or securities convertible into capital
stock, or any rights, warrants or options to acquire any
convertible securities or capital stock, or any other securities
in substitution for outstanding shares of Common Stock; (f) not
amend or waive any terms of any option, warrant or stock option
plan of the Company or any of its subsidiaries; (g) not declare
or pay any dividends on or make other distributions in respect of
any of its capital stock (other than between any wholly-owned
subsidiary of the Company and the Company or any other wholly-
owned subsidiary of the Company and other than regular quarterly
dividends on shares of Common Stock not to exceed $.025 per
share); (h) not effect certain other changes in its
capitalization, and not purchase or otherwise acquire, directly
or indirectly, any shares of its capital stock; (i) not increase
the compensation or fringe benefits payable to its directors,
officers or employees or pay any benefit not required by any
existing plan or arrangement or grant any severance or
termination pay (except pursuant to existing agreements or
policies, which will be interpreted and implemented in a manner
consistent with past practice), enter into employment or
severance agreements, or establish, adopt, enter into, or amend
any plan or policy for the benefit of any directors, officers, or
current or former employees, subject to certain exceptions; (j)
not sell, pledge, lease, dispose of, grant, encumber, or
otherwise authorize the sale, pledge, disposition, grant or
encumbrance of any properties or assets of the Company or any of
its subsidiaries, except for sales of assets in the ordinary
course of business in connection with the Company's gaming
operations in an amount not to exceed $500,000 individually or
$2,000,000 in the aggregate or other sales which individually do
not exceed $100,000 and in the aggregate do not exceed $250,000;
(k) not acquire any corporation, partnership, other business
organization or any division thereof or any other assets, except
for acquisitions of assets in the ordinary course of business in
connection with the Company's gaming operations in an amount
individually not to exceed $500,000 or other acquisitions which
individually do not exceed $100,000 and in the aggregate do not
exceed $250,000; (l) not incur, assume or prepay
long-term debt or incur or assume any short-term
debt, assume, guarantee or become liable for the
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obligations of any other person, or make any loans, advances of
capital contributions to or investments in any other person, in
each case other than in the ordinary course of business
consistent with past practice; (m) not adopt or announce any
intention to adopt a plan of complete or partial liquidation or
dissolution of the Company or any of its subsidiaries; (n) not
make or rescind any material tax elections, settle any tax claims
or make any material change in its accounting methods; (o) not
pay, discharge or satisfy any material claims, liabilities or
obligations, or waive any rights of substantial value, in each
case other than in the ordinary course of business and consistent
with past practice of liabilities reflected or reserved against
in the consolidated financial statements of the Company; (p) not
fail to maintain its existing insurance coverage; (q) not enter
into any new or successor collective bargaining agreement other
than agreements covering employees at the Las Vegas Showboat on
terms consistent with those agreed to by the majority of casinos
in downtown Las Vegas; (r) not take any action inconsistent with
the ordinary course of business and past practice with respect to
accounting policies, unless required by generally accepted
accounting principles or the United States Securities and
Exchange Commission; (s) not modify, amend or terminate, or
waive, release or assign any rights with respect to, any of the
Company's material contracts except in the ordinary course of
business consistent with past practice; (t) not take any action
that would make any of its representations or warranties set
forth in the Showboat Merger Agreement inaccurate in any respect
at, or as of any time prior to, the Effective Time; (u) not
engage in any transactions with any of the Company's affiliates
other than pursuant to agreements, arrangements or understandings
existing on the date of the Showboat Merger Agreement; (v) not
close or shut down any of the casinos owned or operated by the
Company or any of its subsidiaries unless required by law or due
to acts of God or other force majeure events; or (w) not enter
into any agreement or announce any intention to take any of the
actions described in (d) through (v) above.
SYDNEY, AUSTRALIA
On November 26, 1997, the Company, through its partially
owned subsidiary, commenced operations at Star City, the
permanent casino and entertainment complex, located in Sydney,
New South Wales, Australia. Star City features 153,000 square
feet of casino space. The casino features 200 table games, 1,500
slot machines and a Totalizator Agency. The complex also
includes a 352 room hotel, 139 serviced apartments, a lyric
theatre, a cabaret theatre, restaurants and bars, a nightclub,
convention and retail facilities, 2,500 underground car spaces
and a light rail link to the city. Star City entered into an
eight-year agreement with Lord Andrew Lloyd Webber's Really
Useful Theatres Pty Ltd. for the management of the Lyric Theatre.
Upon the commencement of operations at Star City, the interim
casino ceased operations. The interim casino had commenced
operations in September 1995 and contained 500 slot machines and
150 table games. The interim casino shall hereafter be referred
to as "Sydney Harbor Casino." The total aggregate cost of the
permanent and interim casinos was approximately A$1.4 billion.
(As used in this Form 10-K amounts in Australian dollars are
denoted as "A$." As of December 31, 1997, the exchange rate was
approximately $0.6516 for each A$1.00.)
The New South Wales Casino Control Commission (the "NSWCCA")
commenced its first required three-year investigation to
determine that the casino operator is a suitable person, to
continue to give effect to the casino license and to determine
that it is in the public interest that the casino license should
continue in force. The NSWCCA commenced its investigation on
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November 8, 1996. The investigation was completed on December
14, 1997. The Minister of Racing & Gaming issued a press release
on December 18, 1997 stating that the NSWCCA had found that the
licensee was a suitable person, to continue to give effect to the
casino license and that it was in the public interest that the
casino license should continue in force.
In the fall of 1996, the Company was approached by several
parties with respect to the sale of the Company's interest in
Sydney Harbour Casino Holdings Limited ("SHCH") and the
assignment of the Company's interest in the management of Star
City. In January 1997, the Company entered into a letter of
intent with Publishing & Broadcasting Limited ("PBL") to sell 55
million ordinary shares of SHCH, or approximately 10% of the
outstanding shares, for A$1.85 per share and PBL would succeed to
the management of Star City for which PBL would pay a A$240
million fee of which the Company would be entitled to 85%. In
May 1997, the Company announced that it had been advised by PBL
that PBL would let the letter of intent lapse and PBL announced
that it was no longer interested in pursuing a purchase of the
Company's interest in SHCH or Star City.
In the months following the termination of the letter of
intent with PBL, the Company had contacts with various gaming
industry participants and others in the United States and
Australia regarding the potential sale of the Company's interests
in SHCH or Star City. The Company also had various discussions
with representatives of the board of directors of SHCH as to the
possible termination of the management contract for Star City in
consideration for cash payments. As of the date hereof, the
Company has continued its discussions with SHCH regarding a
potential transaction. However, there can be no assurance that
discussions will continue or that any agreement will be reached
and, if any agreement is reached, that it will be approved by the
NSWCCA or otherwise completed.
EAST CHICAGO, INDIANA
The Indiana Gaming Commission issued an owner's license to
Showboat Marina Casino Partnership, an Indiana general
partnership ("SMCP"), on April 15, 1997 to operate the East
Chicago Showboat subject to the completion of certain regulatory
inspections. Following successful completion of the regulatory
inspections, SMCP commenced public operations on April 18, 1997.
The East Chicago Showboat consists of a state-of-the-art cruising
gaming vessel and a land based facility that includes an
approximately 100,000 square foot pavilion, a 1,800 space parking
garage and 1,200 surface parking spaces. The East Chicago
Showboat features 53,000 square feet of gaming area, containing
approximately 82 table games (including poker tables) and
approximately 1,700 slot machines. Showboat beneficially owns,
through subsidiaries, a 55% interest in SMCP. See "Item 1.
Business - East Chicago Showboat Operations."
ATLANTIC CITY, NEW JERSEY
On January 28, 1998, a special purpose subsidiary of the
Company borrowed $100.0 million from Column Financial, Inc. to
acquire 10 1/2 leased acres of real property (the Atlantic City
Property") located at 801 Boardwalk, Atlantic City, New Jersey
and the lease pursuant to which the Atlantic City Property is
leased to Atlantic City Showboat, Inc. ("ACSI") from
Sun International, Inc. for a total purchase price of
$110.0 million. The loan will mature on February
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1, 2028. Interest accrues on the loan at an interest rate of
7.09% until February 1, 2008, at which time, unless paid off as
of such date, the loan will accrue a second tranche of interest
at a rate equal to the lesser of (i) the positive excess (if any)
of (A) the 20 Year Treasury Rate plus 2.0% per annum over (B)
7.09%, and (ii) 5.0% per annum. The loan is secured by the
Atlantic City Property.
FUTURE EXPANSION
The Company evaluates and pursues potential expansion and
acquisition opportunities in both domestic and international
markets. Such opportunities may include the ownership,
management and operation of gaming and entertainment facilities,
either alone or with joint venture partners. Currently, the
Company has announced a gaming opportunity in Rockingham Park in
Salem, New Hampshire. See "Item 1. Business - Narrative
Description of Business - Development Activities" "- Rockingham
Park, New Hampshire."
During February 1997, the Company entered into a tribal
management agreement and related documents with the Lummi Indian
Nation for the financing, development and operation of a Class
III casino to be located between Bellingham, Washington and
Vancouver, British Columbia, Canada. Prior to submitting the
agreements to the National Indian Gaming Commission for approval,
the Company withdrew from the pursuit of the tribal gaming
opportunity in June 1997 due to the announcement by the British
Columbia government that it was proposing to expand the scope of
authorized casino gaming in British Columbia. The Company
concluded, following a review of the proposed legislation, that
such legislation would have a detrimental effect on the proposed
tribal casino.
Additionally, in December 1997, the Company transferred its
wholly-owned subsidiary Showboat Lemay, Inc. to Futuresouth,
Inc., a corporation formed by a group of St. Louis investors.
Showboat Lemay, Inc. was a general partner in a limited
partnership which was developing a riverboat casino and related
amenities in Lemay, Missouri. The limited partnership had
previously filed the necessary gaming applications with the
Missouri Gaming Commission and had entered into a Lease and
Development Agreement with the St. Louis County Port Authority to
develop the project in Lemay, St. Louis County, Missouri. The
transfer of the Company's interest terminated its involvement in
the Lemay project. The Company withdrew from this opportunity,
in part, because of increased market saturation and reduced
operating performance of the existing facilities in the St. Louis
market.
Development and operation of any gaming facility is subject
to numerous contingencies, several of which are outside of the
Company's control and may include the enactment of appropriate
gaming legislation, the issuance of requisite permits, licenses
and approvals, the availability of appropriate financing and the
satisfaction of other conditions. There can be no assurance that
the Company will elect or be able to consummate any such
acquisition or expansion opportunity. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
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NARRATIVE DESCRIPTION OF BUSINESS
ATLANTIC CITY OPERATIONS
The Company's subsidiary, ACSI, owns and operates the
Atlantic City Showboat, which commenced operations in March 1987.
ACSI is a wholly-owned subsidiary of Ocean Showboat, Inc.
("OSI"), which is a wholly-owned subsidiary of the Company. The
Atlantic City Showboat is located at the eastern end of the
Boardwalk on approximately 12 acres, 10 1/2 acres of which is the
leased Atlantic City Property. On January 28, 1998, the Company
through a subsidiary, Showboat Land LLC, a Nevada limited
liability company ("Land LLC"), purchased the Atlantic City
Property and the lease of the Atlantic City Property for $110
million. As a result, Land LLC assumed the ACSI lease and became
the landlord of ACSI. ACSI will continue to make the lease
payments to Land LLC. Additionally, ACSI owns approximately nine
acres of land adjacent to the Atlantic City Showboat which are
zoned for non-casino development and which are currently used as
surface parking lots.
The Atlantic City Showboat is a New Orleans-themed casino-
hotel featuring, as of March 1, 1998, approximately 102,000
square feet of casino space. The casino, the other public areas
and administrative offices are located on the first four floors
of a 24-story hotel tower. A 16-story hotel tower, constructed
in 1994, is adjacent to the 24-story hotel tower. The Atlantic
City Showboat has been designed to promote ease of customer
access to the casino and all other public areas of the hotel-
casino. Access to the Atlantic City Showboat's casino is
provided by two main entrances, one on the Boardwalk and one on
Pacific Avenue, which runs parallel to the Boardwalk.
The Atlantic City Showboat contains two public levels. Two
pairs of large escalators, which are directly accessible from the
two ground level entrances, and elevators provide easy access to
the second public level. Public areas located on the ground
level, in addition to the casino space, include ancillary
facilities such as a show lounge, restaurants, cocktail lounge,
and retail shopping. Public areas located on the second level
include a buffet, a coffee shop, a private players club, a beauty
salon, a health spa, a video game arcade, approximately 27,000
square feet of meeting rooms, convention and exhibition space and
a 60-lane bowling center, including a snack bar and cocktail
lounge. As of March 1, 1998, the casino offered approximately
3,700 slot machines, 95 table games and a horse race simulcast
facility. The second and fourth floors of the 24-story hotel
tower are occupied by kitchens, storage for food, beverage and
other perishables, surveillance and security areas, an employee
cafeteria, computer equipment and executive and administrative
offices.
The two hotel towers feature a total of 800 hotel rooms.
Many of the hotel rooms have a view of the ocean. Included in
the number of hotel rooms are 59 suites, 40 of which have ocean-
front decks. A nine-story parking garage is located on-site at
the Pacific Avenue entrance. The facility provides self-parking
for approximately 2,000 cars and a 14-bus depot integrated with
the 24-story hotel tower. In addition, on-site underground
parking accommodates valet parking for approximately 500 cars.
This design permits Atlantic City Showboat's customers to enter
the casino hotel protected from the weather. The Atlantic City
Showboat also has surface level self-parking for approximately
950 cars adjacent to the parking garage.
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Adjacent to the Atlantic City Showboat is the Taj Mahal
Casino Hotel (the "Taj Mahal"). The Taj Mahal is connected to
both the Atlantic City Showboat and Resorts International Casino
Hotel by pedestrian passageways. These three properties form an
"uptown casino complex" in which patrons can pass from property
to property, either on the ocean-front Boardwalk or through the
pedestrian connectors. Additionally, MGM Grand, Inc. has
announced plans to construct a hotel-casino on property adjacent
to the Atlantic City Showboat.
ATLANTIC CITY EMPLOYEES AND LABOR RELATIONS
As of March 1, 1998, the Atlantic City Showboat employed
approximately 2,950 persons on a full-time basis and
approximately 270 persons on a part-time basis. Approximately
1,100 or 37% of the Atlantic City Showboat's full-time employees
are covered by collective bargaining agreements. Approximately
1,000 or 33.9% of the full-time employees are covered by a
collective bargaining agreement that expires in September 1999.
The number of employees at the Atlantic City Showboat is expected
to fluctuate, with the highest number during the summer months
and the lowest number during the winter months. All employees of
the Atlantic City Showboat whose responsibilities involve or
relate to the casino or the simulcast area must be licensed by or
registered with the applicable New Jersey regulatory authorities
before commencing work at the Atlantic City Showboat. The
Company considers its current labor relations to be satisfactory.
LAS VEGAS OPERATIONS
The Las Vegas Showboat is owned by the Company and it
commenced operations in September 1954. The Las Vegas Showboat
is managed by Showboat Operating Company ("SBOC"), a wholly-owned
subsidiary of the Company. The Las Vegas Showboat, which covers
approximately 26 acres, is located near the Boulder Highway
approximately two and one-half miles from the hotel-casinos in
downtown Las Vegas or on the Las Vegas Strip.
The Las Vegas Showboat is a New Orleans-themed hotel casino
in an 18-story hotel tower and low-rise complex. The Las Vegas
Showboat features an approximately 75,000 square foot casino, 451
hotel rooms, a 106-lane bowling center, an approximately 1,300-
seat bingo parlor garden and various ancillary facilities such as
specialty restaurants, a buffet, a coffee shop, and a lounge. In
addition, 8,300 square feet of meeting room area is available
with a seating capacity of 1,000 persons. As of March 1, 1998,
the Las Vegas Showboat's casino offered approximately 1,540 slot
machines, 25 table games, a race and sports book and a keno
facility. The Las Vegas Showboat offers a recreational vehicle
park with approximately 80 spaces on leased property contiguous
to the Las Vegas Showboat.
LAS VEGAS EMPLOYEES AND LABOR RELATIONS
As of March 1, 1998, the Las Vegas Showboat employed
approximately 1,200 persons. Approximately 750 or 62.5% of the
employees were represented by collective bargaining agreements.
One of the collective bargaining agreements covering 585 or
48.8% of the employees expired on June 1, 1997. Consistent
with prior practice, the Company and the affected
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employees are operating in accordance with the terms of the
expired collective bargaining agreement. The Company considers
its current labor relations to be satisfactory.
SYDNEY OPERATIONS
The Company's wholly-owned subsidiary, Showboat Australia
Pty Limited ("SA"), invested approximately $100.0 million for 135
million shares, or approximately 24.6% equity interest, in SHCH,
which, through wholly-owned subsidiaries, owns Star City. SA
also has an 85% interest in the management company which manages
Star City. In December 1994, the NSWCCA granted the only full-
service casino license in the State of New South Wales to Star
City Pty Ltd, formerly known as Sydney Harbour Casino Pty Limited
("SCPL"), a wholly-owned subsidiary of SHCH. Upon issuance of
the license, SCPL paid an aggregate of A$376.0 million as a one
time license fee and prepaid rent for the casino site. Star City
commenced gaming operations at the permanent casino facility on
November 26, 1997, after operating the Sydney Harbor Casino from
September 13, 1995 to November 26, 1997.
SHCH formed a wholly-owned subsidiary, Sydney Harbour Casino
Properties Pty Limited ("SHCP"), to lease the land for the Sydney
Harbour Casino from the NSWCCA and to construct Star City. Star
City is located at Pyrmont Bay adjacent to Darling Harbour,
approximately one mile from the Sydney central business district.
Star City features approximately 153,000 square feet of casino
space that includes an approximately 22,000 square foot private
area located on a separate level designated to service a premium
clientele. Star City operates 1,500 slot machines and 200 table
games. Star City also contains several themed restaurants,
cocktail lounges, a 2,000 seat lyric theatre, a 900 seat cabaret
style theatre and extensive public areas. Star City entered into
an eight-year agreement with Lord Andrew Lloyd Webber's Really
Useful Theatres Pty Ltd. for the management of the lyric theatre.
Star City complex includes a 352 room hotel tower and an adjacent
condominium tower containing 139 units with full hotel services.
(Of the 139 units, 52 units have been contracted to be sold as of
March 1, 1998.) When available, most of the 139 units will be
used by the hotel for its guests. The complex includes extensive
retail facilities, a station for Sydney's light rail system, a
bus terminal, docking facilities for commuter ferries and parking
for approximately 2,500 cars.
Pursuant to the terms of the casino license, upon opening of
the permanent casino, the interim casino ceased operations.
While in operation, the interim casino had approximately 60,000
square feet of casino space, and was located at Pyrmont Bay
adjacent to the location of the permanent casino site. An
existing building had been renovated to permit the operation of
the interim casino which contained 500 slot machines and 150
table games. Until November 26, 1997, the interim casino had
been open 24 hours per day, every day of the year. The interim
casino also featured 3 restaurants, 5 bars, a sports lounge and a
gift shop.
The opening of the Sydney Harbour Casino marked the
beginning of SHCH's 12-year monopoly as the only full-service
casino in the State of New South Wales. The 12-year monopoly
period shall expire in September 2007. This exclusive 12-year
period is included in the 99-year casino license awarded to SCPL.
The New South Wales Casino Control Act provides that every three
years, the NSWCCA will review the suitability of the casino
license holder and whether it is in the public's interest that
the casino license should continue. Such review occurred
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in 1997 and on December 18, 1997, the New South Wales Minister of
Gaming and Racing announced that the NSWCCA had formed the
opinion that Star City was a suitable person to continue to hold
the casino license and that it was in the public interest that
the casino license should continue in force.
The total aggregate project costs of Star City and the
Sydney Harbour Casino were approximately A$1.4 billion.
In addition to its 24.6% equity interest in SHCH, SA has an
option to purchase an additional 37,446,553 ordinary shares of
SHCH at an exercise price of A$1.15 per share which if exercised,
would increase the Company's ownership percentage to
approximately 29.4%. SA's option may be exercised no earlier
than July 1, 1998 and expires June 30, 2000. SA is restricted to
remain the beneficial owner of not less than 10% of the issued
capital of SHCH for a period of not less than five years after
completion of Star City and remain the beneficial owner of not
less than 5% of the issued capital of SHCH for an additional two
years thereafter. SHCH became a publicly listed company on the
Australian Stock Exchange in June 1995. As of March 18, 1998 the
price of a share of SHCH ordinary share was A$1.23.
Sydney Casino Management Pty Limited (the "Manager"), a
company which is 85% owned by SA and 15% owned by National Mutual
Trustees Limited in trust for Leighton Properties Pty Limited
("Leighton Properties"), manages Star City, and previously
managed Sydney Harbour Casino, pursuant to a 99-year management
agreement (the "Management Agreement"). The terms of the
Management Agreement required the Manager to advise SCPL or SHCP
as to the casino design and configuration and the placement of
all gaming equipment. The Manager also agreed to train all
employees of Star City and to manage a high quality international
class casino in accordance with the operating standards required
by the NSWCCA. The NSWCCA requires a service audit to be
conducted yearly by a third party so that areas of non-compliance
can be identified and remedied by the Manager. The service audit
for 1997 has not yet been completed and is anticipated to be
completed during the second quarter of 1998. The Manager will be
paid a management fee equal to the sum of (i) 1 1/2% of casino
revenue, (ii) 6% of casino gross operating profit, (iii) 3 1/2%
of total non-casino revenue, and (iv) 10% of total gross non-
casino operating profit, for each fiscal year for services
rendered by the Manager pursuant to the Management Agreement. In
conjunction with the bid for the license and the related
financing for the project, SA agreed to forego the first A$19.1
million of its 85% portion of the fees due under the Management
Agreement, which amount was satisfied during the second quarter
of 1997. Gaming revenue from Star City is taxed at a rate of (i)
22.5% of slot machine revenue and (ii) 20% of the first A$225.4
million (as adjusted) of gross table game revenue with the rate
increasing by 1.0% for each additional A$5.0 million of gross
table game revenue up to a maximum rate of 45.0% payable on gross
table game revenue in excess of A$360.7 million per annum. The
A$225.4 million of base gross table game revenue will be adjusted
annually in accordance with changes in the Consumer Price Index
(Sydney All Groups) from the first week in July each year. The
base year of the index is 1992. SCPL is also required to pay a
community benefit levy of 2.0% of gross gaming revenue.
In the fall of 1996, the Company was approached by several
parties with respect to the sale of the Company's interest in
SHCH and the assignment of the Company' s interest in the
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management of Star City. In January 1997, the Company entered
into a letter of intent with PBL to sell a portion of its
interest in SHCH and to assign its management rights to PBL. In
May 1997, the Company announced that it had been advised by PBL
that PBL would let the letter of intent lapse and PBL announced
that it was no longer interested in pursuing a purchase of the
Company's interest in SHCH or Star City. PBL had offered the
Company a per share price of A$1.85 for 55 million ordinary
shares, or an approximate 10% interest, in SHCH and offered to
purchase the right to manage Star City for A$240.0 million to
Sydney Casino Management Pty Limited, a partnership in which the
Company has an 85% partnership interest.
In the months following the termination of the letter of
intent with PBL, the Company had contacts with various gaming
industry participants and others in the United States and
Australia regarding the potential sale of the Company's interests
in SHCH and Star City. The Company also had various discussions
with representatives of the board of directors of SHCH as to the
possible termination of the management contract for Star City in
consideration for cash payments. As of the date hereof, the
Company has continued its discussions with SHCH regarding a
potential transaction. However, there can be no assurance that
discussions will continue or that any agreement will be reached
and, if any agreement is reached, that it will be approved by the
NSWCCA or otherwise completed.
The Company's participation in foreign operations in New
South Wales, Australia involves a number of risks. These risks
include, without limitation, currency and exchange control
problems, operating in highly inflationary environments,
fluctuations in monetary exchange rates, the possible inability
to execute and enforce agreements, the future regulations
governing the repatriation of funds, political, regulatory and
economic instability or changes in policies of the foreign
government, and the dependence on other future events which can
influence the success or failure of such foreign operations.
There can be no assurance that these factors will not have an
adverse impact on the Company's operating results.
SYDNEY EMPLOYEES AND LABOR RELATIONS
As of March 18, 1998, Star City employed approximately 5,100
persons, of which approximately 4,000 or 78.4% of the employees
were represented by a collective bargaining agreement which
expired February 1998. The employees covered by the expired
collective bargaining agreement have approved a new agreement,
which agreement will become effective upon certification by the
Australia Industrial Relations Commission. The new agreement
will be for a period of two years from the date of certification.
Star City considers its current labor relations to be
satisfactory.
EAST CHICAGO SHOWBOAT OPERATIONS
On April 18, 1997, the East Chicago Showboat commenced
gaming operations. Prior to April 18, 1997, SMCP activities had
been limited to applying for appropriate gaming licenses and
securing the land for, arranging for construction of, finalizing
the design of, construction and developing and obtaining
financing for the East Chicago Showboat.
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The East Chicago Showboat is located on approximately 27
acres of leased land at the Pastrick Marina, approximately 12
miles from Chicago, Illinois. The Pastrick Marina, previously
used only for private pleasure craft docking, was expanded to
serve as a marina for the East Chicago Showboat and a mooring
facility for SMCP's state-of-the-art cruising gaming vessel. The
East Chicago Showboat is located directly off Indiana State
Highway 912, a six-lane divided highway which connects 3.5 miles
south to Interstate Highway 90 and 5.5 miles south to Interstate
Highway 80/94.
The East Chicago Showboat consists of an approximately
100,000 square foot five level state-of-the-art cruising gaming
vessel, an approximately 100,000 square foot land-based pavilion
(the "Pavilion"), an approximately 1,800 space parking garage and
surface parking for an additional 1,200 automobiles. As of March
1, 1998, the casino gaming vessel included approximately 53,000
square feet of gaming space on four of its five levels, featured
approximately 1,700 slot machines and approximately 82 table
games (includes poker tables), and accommodates approximately
3,750 passengers. The casino gaming vessel resembles a modern
vacation cruise vessel, with escalators, elevators, eleven foot
to twelve and one-half foot high ceilings, and state-of-the-art
design features intended to provide customers with a smooth and
comfortable ride during cruises on Lake Michigan. The East
Chicago Showboat offers gaming 365 days per year and provides its
customers a wide variety of table games and slot machines of
varying types and denominations. SMCP operates the casino gaming
vessel approximately 20 hours each day in a series of excursions
lasting two hours each.
A festive Mardi Gras party atmosphere is replicated through
the use of murals, street performers and entertainers. Customers
can enter the casino gaming vessel through its second or third
floor via enclosed ramps from the adjacent Pavilion. Of the
casino gaming vessel's five levels, the top four levels are used
for gaming with three of the four gaming levels divided into two
distinct gaming areas separated by a lobby. The fourth gaming
level of the vessel contains a single gaming area, passenger
lounge, snack bar and cocktail lounge. The lowest level of the
casino gaming vessel is utilized for administrative support
functions.
EAST CHICAGO LABOR RELATIONS
As of March 1, 1998, the East Chicago Showboat employed
approximately 1,400 persons, of which approximately 190 or 13.5%
are represented by a collective bargaining agreement that expires
on June 30, 2001. The East Chicago Showboat considers its
current labor relations to be satisfactory. The East Chicago
Showboat's marine service provider, however, is involved in a
dispute with its maritime employees, who maintain, operate and
navigate the casino gaming vessel on its cruises. On March 18,
1997 the Marine Engineers Beneficial Association filed a petition
with the National Labor Relations Board seeking to represent
certain employees of the marine service provider. On August 21,
1997, the petition was amended to name the East Chicago Showboat
as a joint employer of the employees in the petitioned for unit.
The petition was withdrawn by the Union on November 18, 1997.
The day prior to the scheduled hearing at the Regional Office of
the Board regarding the petition has not been refiled.
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FINANCIAL INFORMATION ABOUT THE COMPANY
The primary source of revenue and income to the Company is
its casinos, although the hotels, restaurants, bars, buffets,
shops, bowling, sports and other special events and services are
important adjuncts to the casinos. At December 31, 1997, casinos
either owned or managed by the Company featured in the aggregate
approximately 8,450 slot machines and 400 table games.
Slot machines have been the principal source of casino
revenues at the Atlantic City Showboat, the Las Vegas Showboat
and the East Chicago Showboat. At the Atlantic City Showboat,
slot machines accounted for 78.7%, 76.1% and 73.9% of casino
revenues for the years ended December 31, 1997, 1996 and 1995,
respectively. At the Las Vegas Showboat, slot machines accounted
for 84.5%, 85.2% and 85.5% of casino revenues for the years ended
December 31, 1997, 1996 and 1995, respectively. At the East
Chicago Showboat, slot machines accounted for 71.2% of casino
revenues from the commencement of operations to December 31,
1997. In contrast, table games have been the principal source of
casino revenues at Star City and the Sydney Harbour Casino. For
the years ended December 31, 1997 and 1996 and for the period
from commencement of operations to December 31, 1995, table games
accounted for 76.9%, 82.2% and 86.1%, respectively, of casino
revenues at Star City and the Sydney Harbour Casino. Gaming
operations at the Atlantic City Showboat, the Las Vegas Showboat
and Star City are each conducted 24 hours a day, every day of the
year and gaming operations at the East Chicago Showboat are
conducted 20 hours a day, every day of the year.
The following table sets forth the contribution to total net
revenues on a dollar and percentage basis of the Company's major
activities at the Atlantic City Showboat and the Las Vegas
Showboat and the East Chicago Showboat for the years ended
December 31, 1997, 1996 and 1995. Net revenues for Star City,
the Sydney Harbour Casino and the Showboat Star Casino (which
ceased operations in March 1995) are not included in the table
since the Company accounts for its investment in SHCH and the
Showboat Star Partnership, the owner of the Showboat Star Casino
("SSP"), respectively, under the equity method of accounting.
For the year ended December 31, 1997, the Company's equity in the
loss of SHCH, net of intercompany elimination was $3,504,000.
The Company's equity in the income of SHCH, net of intercompany
elimination, was $4,086,000 for the year ended
December 31, 1996. For the year ended December 31, 1995,
the Company reported no earnings for SHCH due to the
write off of preopening costs. The Company's equity in
the loss of SSP, net of intercompany elimination, was
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$22,000 through March 31, 1995. For additional financial
information, see the Company's financial statements contained in
"Item 8. Financial Statements and Supplementary Data."
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
--------------------- -------------------- --------------------
(dollar amounts in thousands)
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Casino <F1> $497,124 89.3 $382,980 88.3 $379,494 88.5
Food and beverage 62,720 11.3 56,916 13.1 53,894 12.6
Rooms 25,395 4.5 26,147 6.0 25,694 6.0
Sports and special
events 3,498 0.6 3,682 0.9 3,924 1.0
Management Fees 5,671 1.0 0 0.0 190 0.0
Other 7,156 1.3 5,876 1.4 5,189 1.2
-------- ------- -------- ------- -------- ------
Total gross revenues <F2> 601,564 108.0 475,601 109.7 468,385 109.3
Less complimentaries <F1> 44,748 8.0 41,896 9.7 39,793 9.3
-------- ------- -------- ------- -------- ------
Total net revenues <F2> $556,816 100.0 $433,705 100.0 $428,592 100.0
____________________
<FN>
<F1> Casino revenues are the net difference between the sums paid
as winnings and the sums received as losses.
Complimentaries consist primarily of rooms, food and
beverages furnished gratuitously to customers. The sales
value of such services is included in the respective revenue
classifications and is then deducted as complimentaries.
Complimentary rates are periodically reviewed and adjusted
by management. See Note 1 of Notes to Consolidated
Financial Statements in Item 8. Financial Statements and
Supplementary Data.
<F2> Does not include interest income.
</FN>
</TABLE>
The Atlantic City Showboat offers complimentary meals,
drinks and room accommodations to a larger percentage of
customers than the other Showboat properties. Such promotional
allowances (complimentary services) at the Atlantic City Showboat
were 10.3%, 10.1%, and 9.7% of total net revenues for the years
ended December 31, 1997, 1996 and 1995, respectively. Such
promotional allowances (complimentary services) at the Las Vegas
Showboat were 6.1%, 7.0% and 6.8% of total net revenues for the
years ended December 31, 1997, 1996 and 1995, respectively. At
Star City and the Sydney Harbour Casino, such complimentary
services were 5.2% and 3.6% for the years ended December 31, 1997
and 1996, respectively and 2.7% of the total net revenues for the
period from commencement of operations to December 31, 1995. At
the East Chicago Showboat, complimentary services were 2.2% of
the total net revenues for the period from commencement of
operations to December 31, 1997.
GAMING CREDIT POLICY
A relatively minimal dollar amount of credit is extended to
a limited number of gaming customers at the Las Vegas Showboat
and at the East Chicago Showboat. Star City is prohibited by
regulation from extending any credit to its gaming customers.
However, Star City may bank local checks under A$5,000 the next
banking day and can hold local checks for greater than A$5,000
for up to 10 banking days. Checks from international patrons can
be held for up to 20 banking days. The Atlantic City
Showboat, however, offers substantially more credit to a
greater number of customers than the other Showboat
properties. At the Atlantic City Showboat, gaming
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receivables were $7.1 million, before deducting the allowance for
doubtful accounts of approximately $2.9 million for the year
ended December 31, 1997. The Atlantic City Showboat, gaming
receivables were approximately $6.3 million at December 31, 1996,
before deducting allowance for doubtful accounts of approximately
$2.2 million. The Atlantic City Showboat's gaming credit, as a
percentage of total gaming revenues, is at a level which is
consistent with that of the average credit levels for all other
hotel-casinos in Atlantic City. Overall, the Company's gaming
receivables were, as of the year ended December 31, 1997,
approximately $8.2 million, before deducting the allowance for
doubtful accounts of approximately $3.0 million. In comparison,
the Company's gaming receivables were approximately $7.2 million
at December 31, 1996, before deducting allowance for doubtful
accounts of approximately $2.6 million.
The non-collectibility of gaming receivables can have a
material adverse effect on results of operations, depending upon
the amount of credit extended and the size of uncollected
amounts. The Company maintains strict controls over the issuance
of credit and aggressively pursues collection of its customer
receivables. These collection efforts parallel those procedures
commonly followed by most large corporations, including the
mailing of statements and delinquency notices, personal contacts,
the use of outside collection agencies and civil litigation.
Gaming debts evidenced by credit instruments are enforceable
under the laws of New Jersey and Nevada, respectively. The
Company believes that it is reasonable to conclude that gaming
debts evidenced by credit instruments, under credit policies
approved by the Indiana Commission, should be enforceable under
the laws of Indiana. All other states are required to enforce a
judgment on a gaming debt incurred in New Jersey or Nevada
pursuant to the Full Faith and Credit Clause of the United States
Constitution. Although gaming debts are not legally enforceable
in some foreign countries, the United States assets of foreign
debtors may be reached to satisfy a judgment entered in the
United States. Annual gaming bad debt expense at the Atlantic
City Showboat was approximately 0.6% of casino revenues for the
year ended December 31, 1997, as compared to approximately 0.4%
for the years ended December 31, 1996 and 1995. Annual gaming
bad debt expense at the Las Vegas Showboat was approximately 0.2%
of casino revenues for the year ended December 31, 1997, as
compared to approximately 0.3% and 0.2% of casino revenues for
the years ended December 31, 1996 and 1995, respectively. Annual
gaming bad debt expense at the East Chicago Showboat was 0.05% of
casino revenues for the period from April 18, 1997 to December
31, 1997. At Star City and the Sydney Harbour Casino, as a
result of the permitted check holding practice, SHCH recorded bad
debt expense of 0.43% of casino revenues for the year ended
December 31, 1997, as compared to 0.32% for the year ended
December 31, 1996 and 0.52% for the period from commencement of
operations in the interim facility to December 31, 1995.
CONTROL PROCEDURES
In connection with its gaming activities, the Company
follows a policy of stringent internal controls, cross-checks and
recording of all receipts and disbursements in accordance with
industry practice. The audit and cash controls developed and
utilized by the Company include locked cash boxes, independent
counters, checkers and observers to perform the daily cash and
coin counts, floor observation of the gaming areas, closed-
circuit television observation of certain areas, daily computer
tabulation of receipts and disbursements for each slot machine,
table and other games, and the rapid identification, analysis and
resolution of discrepancies or deviations from normal
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<PAGE>
performance. Dealers and other personnel are trained by the
Company. Gaming operations are subject to risk of loss as a
result of employee or customer dishonesty due to the large amount
of cash and gaming chips handled. However, the Company has not
experienced significant losses related to employee dishonesty.
SEASONAL FACTORS
The Company does not believe that the gaming and hotel
revenues in Las Vegas, Nevada and the gaming and hotel revenues
in Sydney, Australia are significantly seasonal. In contrast,
the Company believes that gaming and hotel revenues are seasonal
in Atlantic City, New Jersey and the Company anticipates that
gaming will be seasonal in East Chicago, Indiana, due to the
harsher weather in the mid-eastern seaboard and the great lakes
area, respectively, during winter months.
COMPETITION
The gaming industry includes land-based casinos, dockside
casinos, riverboat casinos, casinos located on Native American
land, card parlors, state-sponsored lotteries, on-track and off-
track wagering and other forms of legalized gaming in the United
States and internationally. Competition is intense among
companies in the gaming industry, and the Company expects it to
remain so in the future. In recent years, many states legalized
casino gaming. Additional states may in the future consider
casino gaming.
ATLANTIC CITY, NEW JERSEY
The Atlantic City Showboat competes with 11 other hotel-
casinos in Atlantic City containing a total of approximately 1.2
million square feet of gaming space and approximately 11,150
casino hotel rooms as of December 31, 1997 (including the
Atlantic City Showboat). According to the New Jersey Convention
and Visitors Authority, eight expansions of existing hotel-
casinos have been announced and are expected to be open and could
be completed within the next four years, which will add
approximately 6,800 more hotel rooms. There are several sites on
the Boardwalk and in the Marina Area of Atlantic City on which
hotel-casino facilities could be built in the future. Several
established gaming companies, are at various stages in the
licensing process with the New Jersey Casino Control Commission
to obtain licenses and permits to develop major casino resorts in
Atlantic City. Hotel-casinos in Atlantic City generally compete
on the basis of promotional allowances, bus programs and
packages, entertainment, advertising, service provided to
patrons, caliber of personnel, attractiveness of the hotel-casino
areas and related amenities. The Atlantic City Showboat targets
slot machine customers by utilizing a variety of marketing
techniques.
The Atlantic City Showboat also competes with Foxwood's High
Stakes Bingo and Casino on the Mashantucket Pequot Indian
Reservation in Ledyard, Connecticut, the Mohegan Sun Casino near
Montville, Connecticut, Delaware's three racetracks operating
2,500 slot machines, in the aggregate, and, more recently, gaming
boats operating in international waters that dock in the New York
Metropolitan area. To a lesser extent, the Atlantic City
Showboat competes with casinos in Nevada and other states of the
United States and internationally. The Company believes that the
commencement or expansion of casino and other gaming ventures in
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<PAGE>
states close to New Jersey, particularly, Delaware, Maryland, New
York or Pennsylvania, could have an adverse effect on the
Company's Atlantic City operations.
LAS VEGAS, NEVADA
The Las Vegas Showboat competes with casinos located in the
Las Vegas area, including competitors located on the Boulder
Strip, on the Las Vegas Strip, in downtown Las Vegas and at the
Nevada-California stateline. Such competition includes a number
of hotel-casinos, as well as numerous non-hotel gaming
facilities, targeted toward slot machine players and local
residents. Several of the Company's direct competitors have
opened new hotel-casinos or have commenced or completed major
expansion projects, and other expansions are in progress or are
planned. Two new hotel-casinos targeting a similar market as the
Las Vegas Showboat opened (one in June 1997 and the other in
February 1998) in Henderson, Nevada, approximately eight miles
from the Las Vegas Showboat.
As a result of increased competition primarily for slot
machine players and Las Vegas area residents, the Las Vegas
Showboat has experienced limited growth in revenues and earnings
from operations. The Company has expanded marketing and customer
service programs in response to increased casino capacity in the
Las Vegas market. There can be no assurance that the expanded
marketing and customer service programs will attract customers to
the Las Vegas Showboat.
To a lesser extent, the Las Vegas Showboat competes with
casinos located in Mesquite, Laughlin and Reno-Lake Tahoe areas
of Nevada, casinos located on tribal lands in Arizona and
California and casinos located in New Jersey, other states of the
United States and internationally and tribal casinos located
principally in California and Arizona. The Company believes that
the commencement or expansion of casino and other gaming ventures
in states close to Nevada, particularly California, could have a
material adverse effect on the Company's Las Vegas operations.
SYDNEY, NEW SOUTH WALES
Star City competes with casinos in Australia and other
casinos located within the Pacific Rim. Currently, 15 full-
service casinos operate in Australia and New Zealand. Star City
will remain the only full-service casino in the State of New
South Wales until September 2007. While only 23.1% of casino
revenues were generated by slot machines, in excess of
approximately 76,000 slot machines were permitted in
approximately 1,820 hotels and approximately 1,450 non-profit
private clubs in New South Wales. Beginning April 1, 1997,
hotels are limited to a maximum of thirty slot machines each,
which represents an increase from the previous per hotel limit of
ten slot machines. In 1995, over 75% of the private clubs
contained 50 slot machines or less; however, the largest private
club contained in excess of 800 slot machines (the most recently
available public information). Star City competes with the local
slot clubs and with the casinos throughout Australia and the
Pacific Rim by offering excellent service and an attractive
facility containing hotel operations, bars and restaurants,
sports and recreation facilities, entertainment centers, car
parking, theaters, convention facilities and retail shopping.
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EAST CHICAGO, INDIANA
SMCP competes in the Chicago Gaming Market, an area covering
approximately 120-mile radius from the East Chicago Showboat,
with eight other operating riverboat casinos, four of which are
located in Indiana and four of which are located in Illinois.
The four riverboat casinos operating in Illinois are located
within fifty miles of the East Chicago Showboat, but these
riverboat casinos are limited to 1,200 gaming positions each by
Illinois gaming law. To a lesser extent, the East Chicago
Showboat competes with casinos located in Nevada, New Jersey,
Wisconsin, Michigan, Iowa, and other states of the United States
as well as internationally, with casinos located in Windsor,
Ontario, Canada.
SMCP competes with the riverboat casinos in the Chicago
Gaming Market based on its wide variety of table games and slot
machines of varying types and denominations, its spacious
comfortable environment, and its Mardi Gras atmosphere.
Additionally, the players slot club and special promotions are
utilized to attract customers to the East Chicago Showboat.
The legalization of additional or larger casino gaming
operations in jurisdictions in close proximity to the East
Chicago Showboat would have a material adverse effect on SMCP.
In the future, SMCP may face competition from the Pokagon Band of
Potawatomi Indians (the "Pokagon Band") of southern Michigan and
northern Indiana, a federally recognized Indian tribe. In
February 1995, the Pokagon Band voted to build at least one land-
based casino in southern Michigan and, in April 1995, voted to
accept a casino development proposal from a national casino
operator. The Governor of Michigan signed a compact with the
Pokagon Band in November 1995. As of March 1, 1998, the Governor
of Indiana has not yet begun compact negotiations with the
Pokagon Band with respect to a land-based casino in Indiana.
MARKETING
The Company's revenues and operating income depend primarily
upon the level of gaming activity at its casinos, although the
Company also seeks to maximize revenues from food and beverage,
lodging and other retail operations. Therefore, the primary goal
of the Company's marketing efforts is to attract profitable
gaming customers to its casinos. Specifically, the Company's
marketing strategy at the Atlantic City Showboat, the Las Vegas
Showboat and the East Chicago Showboat is to develop a high
volume of traffic through the casinos, emphasizing slot machine
play which accounted for 78.7%, 84.5% and 71.2% of casino
revenues of the Atlantic City Showboat, the Las Vegas Showboat
and the East Chicago Showboat, respectively, in 1997. The
Atlantic City Showboat and the East Chicago Showboat target slot
machine customers by providing competitive games and excellent
service in an attractive convenient facility and by using a
variety of marketing techniques. Customers are attracted to the
Las Vegas Showboat by competitive slot machines, bingo,
moderately priced food and accommodations, a friendly "locals"
atmosphere and a 106-lane bowling center. Star City targets
gaming patrons by positioning itself as a complete entertainment
venue with restaurants, bars, free live entertainment and gaming.
The Company advertises its hotel-casinos on television and radio,
in newspapers and magazines and on outdoor signs and billboards.
The Company markets to its slot machine customers by means of
play based rebates and promotions, including players' clubs, and
direct mailings. The Company also sponsors special events
designed to attract its target customers.
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DEVELOPMENT ACTIVITIES
In 1993, the Company created a Development and Management
Services Division to investigate and secure new properties in the
United States and the world. The Company's development strategy
is to identify new and existing gaming opportunities with strong
demographics, in attractive and accessible locations, and which
the Company believes will exceed the Company's return on
investment objectives. Such opportunities may include the
ownership, management and operation of gaming and entertainment
facilities, either alone or with joint venture partners. The
Company's Development and Management Services Division also
provides management services to support new facilities upon
opening, including human resources, marketing, design and
construction, management information systems, regulatory
compliance and operating and financial services.
The following is a listing of the Company's announced
expansion opportunities:
ROCKINGHAM PARK, NEW HAMPSHIRE
In July 1995, the Company, through its wholly-owned
subsidiary, Showboat New Hampshire, Inc. ("SNHI"), entered into
definitive agreements with Rockingham Venture, Inc. ("RVI")
regarding the proposed development and management of a non-racing
gaming project ("Showboat Rockingham Park") at Rockingham Park in
Salem, New Hampshire. RVI is the owner and operator of
Rockingham Park which is a thoroughbred racetrack. In December
1994, the Company loaned approximately $8.9 million to RVI
accruing interest at 8.3% and having an initial term of sixty
months, which loan is secured by a second mortgage on Rockingham
Park. As of the date hereof, RVI has made all payments required
to be made by the promissory note. The development of Showboat
Rockingham Park, among other things, is subject to the passage of
enabling gaming legislation by the State of New Hampshire and the
Town of Salem. SNHI owns a 50% interest in Showboat Rockingham
Company, L.L.C. ("SRC") that was formed for the purpose of
developing and owning Showboat Rockingham Park. Depending upon
the number and types of games, if any, legalized by the necessary
authorities, SNHI and RVI will make certain capital contributions
to SRC. At a minimum, the Company will contribute the promissory
note representing the loan. If enabling gaming legislation
permits more than 500 slot machines or any combination of slot
machines and table games, the Company, subject to available
financing, will contribute funds not to exceed 30% of the cash
funds required for the project. At this time, the cost of the
project has not been determined nor has the State of New
Hampshire enacted any gaming legislation.
Pursuant to the terms of a management agreement, an
administrative services agreement and a trademark license
agreement, each dated June 1995, the Company has agreed to manage
and to provide other services to the proposed operations at
Showboat Rockingham Park. The Company will receive an aggregate
fee equal to (i) 1.5% of gross gaming revenue up to a maximum fee
of $1.0 million per year, and (ii) 7% of earnings before any
interest expense, income taxes, capital lease rentals,
depreciation and amortization. The horse racing activities will
continue to be operated by RVI.
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LEMAY, MISSOURI
On May 1, 1995, Southboat Limited Partnership ("SLP") was
formed by Showboat Lemay, Inc. ("Showboat Lemay"), a corporation
wholly-owned by the Company, and Futuresouth, Inc.
("Futuresouth"), an unrelated corporation, for the purpose of
designing, developing, constructing, owning and operating a
riverboat casino and related facilities (collectively, the
"Southboat Casino Project"). In December 1997, the Company
transferred Showboat Lemay to Futuresouth, thereby terminating
its involvement in the Southboat Casino Project.
LUMMI INDIAN NATION
In February 1997, the Company entered into a tribal
management agreement and related documents with the Lummi Indian
Nation for the financing, development and operation of a Class
III casino located between Bellingham, Washington and Vancouver,
British Columbia. Prior to submitting the agreements to the
National Gaming Commission for approval, the Company withdrew
from the pursuit of the tribal gaming opportunity in June 1997
due to the announced increase in authorized casino gaming in
British Columbia.
REGULATION AND LICENSING
NEW JERSEY GAMING
Casino gaming activities in Atlantic City are subject to the
New Jersey Casino Control Act ("New Jersey Act") and the
regulations of the New Jersey Casino Control Commission (the "New
Jersey Commission"). No casino may operate unless the required
licenses and approvals are obtained from the New Jersey
Commission. The New Jersey Commission is authorized under the
New Jersey Act to adopt regulations covering a broad spectrum of
gaming, gaming-related activities and non-gaming-related
activities and to prescribe the methods and forms of applications
for licenses. The New Jersey Commission: (i) approves license
applications; (ii) regulates the design of casino facilities and
determines the allowable amount of casino space based upon the
number of hotel rooms; (iii) monitors operating methods and
financial accounting practices of licensees; and (iv) determines
and imposes sanctions for violations of the New Jersey Act and
the New Jersey Commission regulations. The New Jersey Act also
establishes a Division of Gaming Enforcement (the "Division")
which is a branch of the New Jersey Attorney General's office.
The Division investigates all applications for the granting and
renewal of licenses, enforces the provisions of the New Jersey
Act and prosecutes before the New Jersey Commission proceedings
for violations of the New Jersey Act. The Division conducts
audits and continuing reviews of all casino operations.
The New Jersey Commission has extremely broad discretion
with regard to the issuance, renewal and revocation or suspension
of licenses. A casino license is not transferable and must be
renewed by the licensee at certain intervals. The casino
licenses may be renewed for up to four years, subject to the New
Jersey Commission's authority to reconsider license eligibility
during any term. A casino license may be revoked or suspended at
any time by the New Jersey Commission upon a finding of
disqualification or noncompliance. The holder of a casino license
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must also obtain an operation certificate which may be revoked or
suspended at any time by the New Jersey Commission upon a finding
of noncompliance.
In order to obtain or renew a casino license, an applicant
must demonstrate to the New Jersey Commission: (i) its financial
stability, integrity and responsibility; (ii) its business
ability and casino experience; (iii) its good character, honesty
and integrity; and (iv) the qualification of all its financial
sources, security holders and holding and intermediate companies.
Moreover, each officer, director, principal employee, lender or
person directly or indirectly holding any beneficial interest or
ownership of the securities of the corporate licensee, and any
person deemed by the New Jersey Commission as having the ability
to control the corporate licensee or elect a majority of the
board of directors of the corporate licensee or other person
deemed appropriate by the New Jersey Commission must be found
qualified. ACSI's casino license was granted on March 27, 1987,
effective April 2, 1987. ACSI's casino license was renewed on
January 22, 1997 for the period commencing February 1, 1997 and
ending January 31, 2001. In connection therewith, the Company
and OSI were required to satisfy the licensure standards set
forth above.
The New Jersey Commission imposes certain restrictions upon
the ownership of securities issued by a corporation which holds a
casino license or is a holding company of a corporate casino
licensee. Among other restrictions, the sale, assignment,
transfer, pledge or other disposition of any security issued by a
corporation which holds a casino license is subject to approval
by the New Jersey Commission. If the New Jersey Commission finds
an individual owner or holder of any security of a corporate
casino licensee or any of its holding companies or a "financial
source," or any of its security holders to be disqualified, the
New Jersey Commission may take any necessary remedial action,
including requiring divestiture by the disqualified security
holder. If disqualified security holders of either the corporate
licensee or the holding company fail to divest themselves of such
security interests, the New Jersey Commission may revoke or
suspend ACSI's casino license. Disqualified security holders are
prohibited from: (i) receiving any dividends or interest on their
securities; (ii) exercising, directly or through any trustee or
nominee, any rights conferred by such securities; and (iii)
receiving any remuneration in any form from the corporate
licensee for services rendered or otherwise. The corporate
licensee and its non-publicly traded holding companies are
required to include in their charter or articles of incorporation
a provision establishing the right of prior approval by the New
Jersey Commission with regard to transfers of securities, shares
and other interests in the corporation. The corporate licensees'
publicly traded holding companies are required to provide in
their charter or articles of incorporation a provision that any
securities of the corporation are held subject to the condition
that if a holder thereof is disqualified, such holder shall
dispose of his interest. The Company and OSI are holding
companies of ACSI, a New Jersey casino licensee. The Company,
OSI and ACSI have charters or articles of incorporation that
comply with these regulatory requirements. In connection with
the Showboat Merger, Harrah's or its affiliate will need the
prior approval of the New Jersey Commission to effect the merger,
and an application for such approval has been filed.
The New Jersey Commission regulations include detailed
provisions concerning, among others: (i) the rules of games,
including minimum and maximum wagers, and methods of supervision
of games and of selling and redeeming gaming chips; (ii) the
granting and duration of credit, the operation of junkets, and
the extension of and accounting for complimentary
services; (iii) the manufacture, distribution and
sale of gaming equipment; (iv) the security standards,
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management control procedures, accounting and cash control
methods and the reporting of such matters to gaming authorities;
(v) casino advertising; (vi) the deposit of checks from patrons
of casinos; (vii) the reporting of currency transactions with
patrons in amounts exceeding $10,000 to the Division; and
(viii) the standards for entertainment and distribution of
alcoholic beverages in hotel-casinos.
All contracts and leases entered into by a casino licensee
are subject to the review of the New Jersey Commission and, if
reviewed and found unacceptable, may be voided. All enterprises
providing gaming-related equipment or services to a casino
licensee must be licensed or good cause must be shown for a
waiver of such licensing requirements. All other enterprises
dealing with a casino licensee must register with the New Jersey
Commission, which may require that they be licensed if they
regularly engage in business with casino licensees.
The New Jersey Commission could appoint a conservator upon
the revocation of or failure to renew a casino license. A
conservator would be vested with title to the hotel-casino of the
former or suspended licensee, subject to valid liens and
encumbrances. The conservator would act subject to the general
supervision of the New Jersey Commission and would be charged
with the duty of conserving, preserving and continuing the
operation of the hotel-casino. During the period of any such
conservatorship, the conservator may not make any distributions
of net earnings without the prior approval of the New Jersey
Commission. The New Jersey Commission may direct that all or a
portion of such net earnings be paid to the Casino Revenue Fund,
provided, however, that a suspended or former licensee is
entitled to a fair rate of return out of net earnings, if any.
Except during the pendency of a suspension or during any appeal
from any action precipitating the appointment of a conservator,
and after appropriate consultations with the former licensee, a
conservator, subject to the prior approval of the New Jersey
Commission, would be authorized to sell, assign, convey or
otherwise dispose of the hotel-casino of a former licensee
subject to all valid liens, claims and encumbrances, and to remit
the net proceeds to the former licensee.
After completion of its first full year of operation, and
continuing for 30 years thereafter, a casino licensee is subject
to a New Jersey investment obligation. ACSI will fulfill its
investment obligation in 2015. To satisfy this obligation, the
Company may either: (i) pay an investment alternative tax equal
to 2 1/2% ofits annual gross revenues from gaming operations; or
(ii) purchase bonds issued by, or invest in other development
projects approved by, the Casino Reinvestment Development
Authority, a state agency, in an amount equal to 1 1/4% of its
annual gross revenues from gaming operations net of provision for
bad debt.
All corporations doing business in New Jersey are subject to
a corporate franchise tax, based on allocated net income, at a 9%
annual rate. Interest on indebtedness is deductible under New
Jersey law. There is also an 8% tax on the gross win revenues of
New Jersey casinos, in addition to an annual $500 fee for each
slot machine.
Atlantic City imposes a real property tax and a
luxury tax applicable to certain sales, including,
but not limited to, the sale of alcoholic beverages,
tickets to entertainment events and rental of hotel rooms.
The state of New Jersey imposes a fee of $2.00 per
occupied casino hotel room per day ($1.00 for non-casino
hotel rooms). These fees are dedicated exclusively to a fund
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to market Atlantic City as a tourist destination and resort. In
addition, the state of New Jersey also imposes a $1.50 per day
fee for each patron's car that is parked at an Atlantic City
casino. Unlike a majority of other Atlantic City casinos, ACSI
has elected to absorb the parking fee as a marketing expense and
not to collect the fee from patrons.
From time to time new laws and regulations, as well as
amendments to existing laws and regulations, relating to gaming
activities in New Jersey are proposed or adopted.
In addition, the New Jersey casino regulatory authorities
from time to time may change their laws, regulations or
procedures, including their procedures for renewing licenses.
The Company cannot predict what effect, if any, new or amended
laws, regulations or procedures would have on the Company. While
in the last few years the changes to New Jersey gaming laws,
regulations or procedures have generally not been restrictive to
New Jersey licenses, changes in such laws, regulations or
procedures could have an adverse effect on the Company.
NEVADA GAMING
The ownership and operation of casino gaming facilities in
Nevada are subject to: (i) the Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively "Nevada Act");
and (ii) various local regulations. The Company's gaming
operations are subject to the licensing and regulatory control of
the Nevada Gaming Commission ("Nevada Commission"), the Nevada
State Gaming Control Board ("Nevada Board"), and the City Council
of the City of Las Vegas ("City Board"). The Nevada Commission,
the Nevada Board, and the City Board are collectively referred to
as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the
Nevada Gaming Authorities are based upon declarations of public
policy which are concerned with, among other things: (i) the
prevention of unsavory or unsuitable persons from having a direct
or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible
accounting practices and procedures; (iii) the maintenance of
effective controls over the financial practices of licensees,
including the establishment of minimum procedures for internal
fiscal affairs and the safeguarding of assets and revenues,
providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the
prevention of cheating and fraudulent practices; and (v) to
provide a source of state and local revenues through taxation and
licensing fees. Change in such laws, regulations and procedures
could have an adverse effect on the Company's gaming operations.
SBOC, which operates the Las Vegas Showboat, is required to
be licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not
transferable. The Company is registered by the Nevada Commission
as a publicly traded corporation ("Registered Corporation") and
as such, it is required periodically to submit detailed financial
and operating reports to the Nevada Commission and furnish any
other information which the Nevada Commission may require.
No person may become a shareholder of, or receive any
percentage of profits from, SBOC without first obtaining
licenses and approvals from the Nevada Gaming Authorities. The
Company and SBOC have obtained from the Nevada Gaming
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Authorities the various registrations, approvals, permits and
licenses required in order to engage in gaming activities in
Nevada.
The Nevada Gaming Authorities may investigate any individual
who has a material relationship to, or material involvement with,
the Company or SBOC in order to determine whether such individual
is suitable or should be licensed as a business associate of a
gaming licensee. Officers, directors and certain key employees
of SBOC must file applications with the Nevada Gaming Authorities
and may be required to be licensed or found suitable by the
Nevada Gaming Authorities. Officers, directors and key employees
of the Company who are actively and directly involved in gaming
activities of SBOC may be required to be licensed or found
suitable by the Nevada Gaming Authorities. The Nevada Gaming
Authorities may deny an application for licensing for any cause
which they deem reasonable. A finding of suitability is
comparable to licensing, and both require submission of detailed
personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of
suitability must pay all the costs of the investigation. Changes
in licensed positions must be reported to the Nevada Gaming
Authorities and in addition to their authority to deny an
application for a finding of suitability or licensure, the Nevada
Gaming Authorities have jurisdiction to disapprove a change in a
corporate position.
If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the Company or SBOC, the
companies involved would have to sever all relationships with
such person. In addition, the Nevada Commission may require the
Company or SBOC to terminate the employment of any person who
refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not
subject to judicial review in Nevada.
The Company and SBOC are required to submit detailed
financial and operating reports to the Nevada Commission.
Substantially all material loans, leases, sales of securities and
similar financing transactions by SBOC must be reported to, or
approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by
SBOC the gaming licenses it holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain
statutory and regulatory procedures. In addition, SBOC, the
Company, and the persons involved could be subject to substantial
fines for each separate violation of the Nevada Act at the
discretion of the Nevada Commission. Further, a supervisor could
be appointed by the Nevada Commission to operate the Company's
gaming properties and, under certain circumstances, earnings
generated during the supervisor's appointment (except for the
reasonable rental value of the Company's gaming properties) could
be forfeited to the state of Nevada. Limitation, conditioning or
suspension of any gaming license or the appointment of a
supervisor could (and revocation of any gaming license would)
materially adversely affect the Company's gaming operations.
Any beneficial holder of the Company's voting securities,
regardless of the number of shares owned, may be required to file
an application, be investigated, and have his suitability
as a beneficial holder of the Company's voting
securities determined if the Nevada Commission has
reason to believe that such ownership would
otherwise be inconsistent with the declared policies
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of the state of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.
The Nevada Act requires any person who acquires more than 5%
of the Company's voting securities to report the acquisition to
the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of the Company's voting securities apply
to the Nevada Commission for a finding of suitability within
thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain
circumstances, an "institutional investor," as defined in the
Nevada Act, which acquires more than 10%, but not more than 15%,
of the Company's voting securities may apply to the Nevada
Commission for a waiver of such finding of suitability if such
institutional investor holds the voting securities for investment
purposes only. An institutional investor shall not be deemed to
hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of
business as an institutional investor and not for the purpose of
causing, directly or indirectly, the election of a majority of
the members of the board of directors of the Company, any change
in the Company's corporate charter, bylaws, management, policies
or operations of the Company, or any of its gaming affiliates, or
any other action which the Nevada Commission finds to be
inconsistent with holding the Company's voting securities for
investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by
stockholders; (ii) making financial and other inquiries of
management of the type normally made by securities analysts for
informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other
activities as the Nevada Commission may determine to be
consistent with such investment intent. If the beneficial holder
of voting securities who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do
so by the Nevada Commission, or the Chairman of the Nevada Board,
may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the
beneficial owner. Any shareholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the
common stock of the Company beyond such period of time as may be
prescribed by the Nevada Commission may be guilty of a criminal
offense. The Company is subject to disciplinary action if, after
it receives notice that a person is unsuitable to be a
shareholder or to have any other relationship with the Company or
SBOC, the Company (i) pays that person any dividend or interest
upon voting securities of the Company, (ii) allows that person to
exercise, directly or indirectly, any voting right conferred
through securities held by that person, (iii) pays remuneration
in any form to that person for services rendered or otherwise, or
(iv) fails to pursue all lawful efforts to require such
unsuitable person to relinquish his voting securities, including,
if necessary, the immediate purchase of said voting securities
for cash at fair market value.
The Nevada Commission may, in its discretion, require the
holder of any debt security of a Registered Corporation to file
applications, be investigated and be found suitable to own
the debt security of a Registered Corporation. If
the Nevada Commission determines that a person is
unsuitable to own such security, then pursuant
to the Nevada Act, the Registered Corporation can
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be sanctioned, including the loss of its approvals, if without
the prior approval of the Nevada Commission, it: (i) pays to the
unsuitable person any dividend, interest, or any distribution
whatsoever, (ii) recognizes any voting right by such unsuitable
person in connection with such securities, (iii) pays the
unsuitable person remuneration in any form, or (iv) makes any
payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction.
The Company is required to maintain a current stock ledger
in Nevada which may be examined by the Nevada Gaming Authorities
at any time. If any securities are held in trust by an agent or
by a nominee, the record holder may be required to disclose the
identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. The Company is also
required to render maximum assistance in determining the identity
of the beneficial owner. The Nevada Commission has the power at
any time to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada
Act. However, to date, the Nevada Commission has not imposed
such a requirement on the Company.
The Company may not make a public offering of its securities
without the prior approval of the Nevada Commission if the
securities or the proceeds therefrom are intended to be used to
construct, acquire or finance gaming facilities in Nevada, or
retire or extend obligations incurred for such purposes. In
November 1997, the Nevada Commission granted the Company prior
approval to make public offerings for a period of one year,
subject to certain conditions ("Shelf Approval"). The Shelf
Approval also applies to any affiliated company wholly owned by
the Company (a "Gaming Affiliate") which is a publicly traded
corporation or would thereby become a publicly traded corporation
pursuant to a public offering. The Shelf Approval also includes
approval for the Company's licensed Nevada subsidiaries to
guaranty any security issued by, or to hypothecate their assets
to secure the payment or performance of any obligations issued by
the Company or a Gaming Affiliate in a public offering under the
Shelf Approval. However, the Shelf Approval may be rescinded for
good cause without prior notice upon the issuance of an
interlocutory stop order by the Chairman of the Nevada Board.
The Shelf Approval does not constitute a finding, recommendation
or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment
merits of the securities offered. Any representation to the
contrary is unlawful.
Changes in control of the Company through merger,
consolidation, stock or asset acquisitions, management or
consulting agreements, or any act or conduct by a person whereby
he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada
Commission in a variety of stringent standards prior to assuming
control of such Registered Corporation. The Nevada Commission
may also require controlling stockholders, officers, directors
and other persons having a material relationship or involvement
with the entity proposing to acquire control, to be investigated
and licensed as part of the approval process relating to the
transaction. The Showboat Merger requires the prior approval of
the Nevada Commission upon recommendation of the Nevada Board.
Harrah's has filed an application for approval of the Showboat
Merger.
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The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defense tactics affecting Nevada gaming
licensees, and Registered Corporations that are affiliated with
those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects
of these business practices upon Nevada's gaming industry and to
further Nevada's policy to: (i) assure the financial stability of
corporate gaming operators and their affiliates; (ii) preserve
the beneficial aspects of conducting business in the corporate
form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain
circumstances, required from the Nevada Commission before the
Company can make exceptional repurchases of voting securities
above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada
Act also requires prior approval by the Nevada Commission of a
plan of recapitalization proposed by the Company's Board of
Directors in response to a tender offer made directly to its
shareholders for the purpose of acquiring control of the Company.
The sale of alcoholic beverages by the casino is subject to
licensing, control and regulation by the City Board. All
licenses are revocable and are not transferable. The agencies
involved have full power to limit, condition, suspend or revoke
any such license, and any such disciplinary action could (and
revocation would) have a material adverse affect upon the
operations of the casino.
License fees and taxes, computed in various ways depending
on the type of gaming or activity involved, are payable to the
state of Nevada and to the counties and cities in which the
Nevada licensee's respective operations are conducted. Depending
upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received;
(ii) the number of gaming devices operated; or (iii) the number
of table games operated. A casino entertainment tax is also paid
by casino operations where entertainment is furnished in
connection with the serving or selling of food or refreshments or
the selling of any merchandise. Nevada licensees that hold a
license as an operator of a slot route, or a manufacturer's or
distributor's license, also pay certain fees and taxes to the
state of Nevada.
Any person who is licensed, required to be licensed,
registered, required to be registered, or is under common control
with such persons (collectively, "Licensees"), and who proposes
to become involved in a gaming venture outside of Nevada is
required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation of the Nevada Board of their
participation in such foreign gaming. The revolving fund is
subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with
certain reporting requirements imposed by the Nevada Act.
Licensees are also subject to disciplinary action by the Nevada
Commission if it knowingly violates any laws of the foreign
jurisdiction pertaining to the foreign gaming operation, fails to
conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming
operations, engages in activities that are harmful to the state
of Nevada or its ability to collect gaming taxes and fees, or
employs a person in the foreign operation who has been denied a
license or finding of suitability in Nevada on the ground of
personal unsuitability.
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NEW SOUTH WALES GAMING
The NSWCCA was created pursuant to the Casino Control Act
1992 (NSW) ("Casino Act") to maintain and administer systems for
licensing, supervision and control of a casino.
In considering an application for a casino license,
Section 11 of the Casino Act requires the NSWCCA to have regard
to the following matters: (i) the suitability of applicants and
close associates of applicants; (ii) the standard and nature of
the proposed casino, and the facilities to be provided in, or in
conjunction with, the proposed casino; (iii) the likely impact of
the use of the premises concerned as a casino on tourism,
employment and economic development generally in the place or
region in which the premises are located; (iv) the expertise of
the applicant, having regard to the obligations of the holder of
a casino license under the Casino Act; and (v) such other matters
as the NSWCCA considers relevant.
The NSWCCA is to determine an application by either granting
a casino license to the applicant or declining to grant a casino
license. The casino license may be granted subject to such
conditions as the NSWCCA thinks fit and is granted for the
location specified in the casino license. A casino license
confers no right of property and cannot be assigned or mortgaged,
charged or otherwise encumbered.
The conditions of a casino license may be amended by being
substituted, varied, revoked or added to by the NSWCCA subject to
the right of the licensee to make submissions to the NSWCCA in
regard to any such proposal. The NSWCCA may also cancel or
suspend, or amend the terms or conditions, of a casino license
where there are grounds for disciplinary action, including:
(i) the casino license being improperly obtained; (ii) the casino
operator, a person in charge of the casino, an agent of the
casino operator or a casino employee contravening a provision of
the Casino Act or a condition of the license; (iii) the casino
premises no longer being suitable for the conduct of the casino
operations; (iv) the licensee being considered to be no longer a
suitable person to give effect to the casino license and the
Casino Act; and (v) the public interest that the casino license
should no longer remain in force. No right of compensation
against the government arises for the cancellation, suspension or
variation of the terms and conditions of the casino license.
The NSWCCA must not grant an application for a casino
license unless it is satisfied that the applicant and each close
associate is a suitable person to be concerned in or associated
with the management and operation of a casino. In making the
determination as to the suitability of the applicant, the NSWCCA
must consider whether: (a) the applicant and each close
associate are of good repute, having regard to character, honesty
and integrity; (b) the applicant and each close associate is of
sound and stable financial background; (c) in the case of an
applicant that is not a natural person, the applicant has or has
arranged a satisfactory ownership, trust or corporate structure;
(d) the applicant has or is able to obtain financial resources
that are both suitable and adequate for insuring the financial
viability of the proposed casino; (e) the applicant has or is
able to obtain the services of persons who have sufficient
experience in the management and operation of a casino; (f) the
applicant has sufficient business ability to establish
and maintain a successful casino; (g) the applicant or
any close associate who has any business association with
any person, body or association who, in the opinion of the
NSWCCA is not of good repute, having regard to
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character, honesty and integrity or has undesirable or
unsatisfactory financial sources; and (h) each director, partner,
trustee, executive officer and secretary and any other officer or
person determined by the NSWCCA to be associated or connected
with the ownership, administration or management of the
operations or business of the applicant or a close associate of
the applicant is a suitable person to act in that capacity.
Additionally, the Showboat Merger requires the approval of the
NSWCCA and Harrah's or its affiliate will need to be found
suitable. The necessary applications for such approval and
findings of suitability have been filed by Harrah's. Following
the commencement of the Showboat Merger, the NSWCCA announced
that it will conduct an independent statutory inquiry into
Harrah's. The inquiry is part of the process of approval of the
Showboat Merger by the NSWCCA.
On receiving an application for a casino license, the NSWCCA
must carry out all such investigations and inquiries as it deems
necessary. The costs of the investigation by the NSWCCA are
payable to the NSWCCA by the applicant unless the NSWCCA
determines otherwise.
The NSWCCA may give written direction to a casino operator
as to the conduct, supervision or control of operations of the
casino. The NSWCCA may investigate a casino from time to time at
the discretion of the NSWCCA. Not later than three years after
the grant of the casino license, and thereafter in intervals not
exceeding three years, the NSWCCA must investigate and form an
opinion as to whether or not the casino operator is a suitable
person to continue to give effect to the casino license and
determine that it is in the public interest that the casino
license should continue in force. The NSWCCA commenced its
investigation on November 8, 1996. The NSWCCA announced that the
investigation would include public hearings. On February 13,
1997, the NSWCCA announced that it had received 31 submissions in
relation to its investigation and made all of the submissions
available to the public. The investigation was completed on
December 14, 1997. The Minister for Racing & Gaming issued a
press release on December 18, 1997 stating that the NSWCCA had
found that the licensee was a suitable person, to continue to
give effect to the casino license and that it was in the public
interest that the casino license should continue in force. The
NSWCCA report was made public on March 3, 1998 and contained no
material adverse recommendations.
A casino operator must not enter into a controlled contract
without first notifying the NSWCCA. A controlled contract is a
contract that relates wholly or partly to the supply of goods or
services to a casino, but does not include a contract that
relates solely to the construction of the casino or to the
alteration of premises used or to be used as a casino, or such
other contracts as may be defined by the NSWCCA.
Gaming is not to be conducted in the casino unless the
facilities provided in relation to the conduct and monitoring of
operations of the casino are in accordance with the plans,
diagrams and specifications that are approved by the NSWCCA. The
NSWCCA may approve the games to be played in the casino. A
casino operator must not conduct a game in a casino unless there
is an order in force approving the game and the game is conducted
in accordance with the rules approved by such order.
Additionally, a directive by the Minister for Racing & Gaming
limits the number of table games and slot machines which may be
placed in Star City to 200 games and 1,500 slot machines.
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The casino is to be open to the public on such days and at
such times as are directed by the NSWCCA in writing. The casino
must be closed on days and at times that are not days or times
specified by the NSWCCA.
A casino operator must not (i) accept a wager made otherwise
than by means of money or chips, (ii) lend money, chips or any
other valuable thing; provide money or chips as part of a
transaction involving a credit card or debit card, (iii) extend
any other form of credit, or (iv) wholly or partly discharge any
debt. The casino operator may issue chips in exchange for checks
if the person has established a deposit account with the casino
operator. Checks accepted by the casino operator must be
presented to the bank within one working day after the check is
accepted by the casino operator. Notwithstanding the foregoing,
the NSWCCA agreed to vary the presentment requirement so that
Star City may hold checks drawn on an Australian bank/branch in
an amount of or over A$5,000 for up to 10 banking days and may
hold checks drawn on a non-Australian bank/branch for up to 20
banking days regardless of the amount of the check prior to
presenting the checks for payment.
INDIANA GAMING
In 1993, the State of Indiana passed a Riverboat Gambling
Act which created the Indiana Commission. The Indiana Commission
is given extensive powers and duties for the purposes of
administering, regulating and enforcing the system of riverboat
gaming. It is authorized to award no more than 11 gaming licenses
(five to counties contiguous to Lake Michigan, five to counties
contiguous to the Ohio River and one to a county contiguous to
Patoka Lake).
The Indiana Commission has jurisdiction and supervision over
all riverboat gaming operations in Indiana and all persons on
riverboats where gaming operations are conducted. These powers
and duties include authority to (1) investigate all applicants
for riverboat gaming licenses, (2) select among competing
applicants those that promote the most economic development in a
home dock area and that best serve the interest of the citizens
of Indiana, (3) establish fees for licenses, and (4) prescribe
all forms used by applicants. The Indiana Commission shall adopt
rules pursuant to statute for administering the gaming statute
and the conditions under which riverboat gaming in Indiana may be
conducted. The Indiana Commission has promulgated certain final
rules and has proposed additional rules governing the application
procedure and all other aspects of riverboat gaming in Indiana.
The Indiana Commission may suspend or revoke the license of a
licensee or a certificate of suitability or impose civil
penalties, in some cases without notice or hearing for any act in
violation of the Riverboat Gambling Act or for any other
fraudulent act or if the licensee or holder of such certificate
of suitability has not begun regular riverboat excursions prior
to the end of the twelve month period following the Indiana
Commission's approval of the application for an owner's license.
In addition, the Indiana Commission may revoke an owner's license
if it is determined by the Indiana Commission that revocation is
in the best interests of the state of Indiana. The Indiana
Commission will (1) authorize the route of the riverboat and
stops that the riverboat may make, (2) establish minimum amounts
of insurance and (3) after consulting with the Corps of
Engineers, determine which waterways are navigable waterways for
purposes of the Riverboat Gambling Act and determine which
navigable waterways are suitable for the operation of riverboats.
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The Riverboat Gambling Act requires an extensive disclosure
of records and other information concerning an applicant,
including disclosure of all directors, officers and persons
holding one percent (1%) or more direct or indirect beneficial
interest.
In determining whether to grant an owner's license to an
applicant, the Indiana Commission shall consider (1) the
character, reputation, experience and financial integrity of the
applicant and any person who (a) directly or indirectly controls
the applicant, or (b) is directly or indirectly controlled by
either the applicant or a person who directly or indirectly
controls the applicant, (2) the facilities or proposed facilities
for the conduct of riverboat gaming, (3) the highest total
prospective revenue to be collected by the state from the conduct
of riverboat gaming, (4) the good faith affirmative action plan
to recruit, train and upgrade minorities in all employment
classifications, (5) the financial ability of the applicant to
purchase and maintain adequate liability and casualty insurance,
(6) whether the applicant has adequate capitalization to provide
and maintain the riverboat for the duration of the license and
(7) the extent to which the applicant meets or exceeds other
standards adopted by the Indiana Commission. The Indiana
Commission may also give favorable consideration to applicants
for economically depressed areas and applicants who provide for
significant development of a large geographic area. Each
applicant must pay an application fee of $50,000 and additional
fees may be assessed for the background investigation. If the
applicant is selected, the applicant must pay an initial license
fee of $25,000 and post a bond, and thereafter, pay an annual
license renewal fee of $5,000. The Indiana Commission has issued
eight of these eleven licenses--four in Lake County Indiana; one
in LaPorte County; one in Vanderburgh County; one in Ohio County;
and one in Dearborn County. In addition, the Indiana Commission
has issued a certificate of suitability to an applicant in
Harrison County. The Indiana Commission has decided to delay a
determination for the tenth license, which if issued, would be
located on the Ohio River. Additionally, the Indiana Commission
has not considered applicants for the eleventh license since the
Patoka Lake site has been determined by the U.S. Army Corp. of
Engineers as an unsuitable site for development of a casino
vessel project.
A person holding an owner's gaming license issued by the
Indiana Commission may not own more than a 10% interest in
another such license. An owner's license expires five years after
the effective date of the license; however, after three years the
holder of an owner's license will undergo a reinvestigation to
ensure continued suitability for licensure. Unless the license
has been terminated, expired or revoked, the gaming license may
be renewed if the Indiana Commission determines that the licensee
has satisfied all statutory and regulatory requirements. In
connection with the issuance of the license to SMCP, Showboat
Marina Partnership, an Indiana general partnership ("SMP"),
Waterfront and Showboat and its affiliates declared to the
Indiana Commission that if SMCP received a riverboat owner's
license, they shall not commence more than one other casino
gaming operation within a fifty-mile radius of East Chicago
Showboat for a period of five years beginning on the date of
issuance of an owner's license by the Indiana Commission to SMCP.
Adherence to the non-competition declaration is a condition of
the owner's license. A gaming license is a revocable privilege
and is not a property right.
Minimum and maximum wagers on games are not established by
regulation but are left to the discretion of the
licensee. Wagering may not be conducted with money or
other negotiable currency. Riverboat gaming excursions shall
be at least two hours, but not more than four hours
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in duration unless expressly approved by the Indiana Commission.
No gaming may be conducted while the boat is docked except (1)
for 30-minute time periods at the beginning and end of a cruise
while the passengers are embarking and disembarking, (2) if the
master of the riverboat reasonably determines that specific
weather or water conditions present a danger to the riverboat,
its passengers and crew, (3) if either the vessel or the docking
facility is undergoing mechanical or structural repair, (4) if
water traffic conditions present a danger to (A) the riverboat,
riverboat passengers, and crew, or (B) other vessels on the
water, or (5) if the master has been notified that a condition
exists that would cause a violation of federal law if the
riverboat were to cruise. The Indiana Commission has adopted
rules governing cruising on Lake Michigan by a riverboat casino.
The period of time during which passengers embark and disembark
constitutes a portion of the gambling excursion if gambling is
allowed. At the conclusion of the thirty-minute embarkation
period, the gangway or its equivalent must be closed. However, a
riverboat licensee must allow patrons to disembark at anytime the
riverboat remains at the dock and gambling continues. A standard
excursion schedule for a casino vessel on Lake Michigan must
include at least one full excursion (a cruise into the open water
on Lake Michigan, not more than three statute miles from the dock
site July through September and not more than one statute mile
October through June) and one intermediate excursion during which
the vessel cruises in protected navigable water on or accessible
to Lake Michigan. An intermediate excursion is to be conducted
if the statutory conditions that permit dockside gaming are not
present and if sea conditions or weather conditions, or both, do
not permit a full excursion. If a casino vessel remains dockside
because of statutory conditions, the embarkation and
disembarkation rules still apply.
An admission tax of $3.00 for each person admitted to the
gaming excursion is imposed upon the license owner. The
admissions tax is paid by the riverboat licensee for each
excursion or part of an excursion the patron remains on board.
An additional 20% tax is imposed on the adjusted gross receipts
received from gaming operations, which is defined as the total of
all cash and property (including checks received by the licensee
whether collected or not) received, less the total of all cash
paid out as winnings to patrons and uncollectible gaming
receivables (not to exceed 2%). The gaming license owner shall
remit the admission and wagering taxes before the close of
business on the day following the day on which the taxes were
incurred. Riverboats are assessed for property tax purposes as
real property and are taxed at rates to be determined by local
taxing authorities of the jurisdiction in which a riverboat
operates. SMCP is contesting the timing of the initial
assessment of property taxes by Lake County on the riverboat
vessel. The Riverboat Gambling Act requires a riverboat owner
licensee to directly reimburse the Indiana Commission for the
costs of inspectors and agents required to be present during the
conduct of gaming operations. Pursuant to agreements with the
City, and as reflected in the owner's license, SMCP has agreed to
(1) provide certain fixed incentives of approximately $16.4
million to the City of East Chicago and its agencies for
transportation, job training, home buyer assistance and discrete
economic development initiatives, (2) pay 3% of adjusted gross
receipts divided equally among the City and two not-for-profit
foundations for infrastructure improvements, education and
community development, and (3) pay 0.75% of adjusted gross
receipts for community development projects, including the
Washington High School Site town home development with a total
projected cost of $5.0 million, to East Chicago Second
Century, Inc., a for-profit corporation owned by SMP ("Second
Century"). Funding for the Washington High School Site
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project will be derived from contributions to Second Century from
SMCP as well as funds from other third-party sources.
The Indiana Commission is authorized to license suppliers
and certain occupations related to riverboat gaming. Gaming
equipment and supplies customarily used in conducting riverboat
gaming may be purchased or leased only from licensed suppliers.
The Indiana Commission has adopted a rule requiring employees
working on the riverboat to have a valid merchant marine document
issued by the United States Coast Guard.
The Indiana Riverboat Gambling Act places special emphasis
upon minority and women's business enterprise participation in
the riverboat industry. Any person issued a riverboat owner's
license must establish goals of expending at least 10% of the
total dollar value of the licensee's contracts for goods and
services with minority business enterprises and 5% of the total
dollar value of the licensee's contracts for goods and services
with women's business enterprises. The East Chicago Showboat did
not achieve these goals primarily due to the construction of the
East Chicago Showboat during the first quarter of 1997. The
Indiana Commission may suspend, limit or revoke the gaming
owner's license or impose a fine for failure to comply with
statutory requirements.
An institutional investor which acquires 5% or more of any
class of voting securities of a holding company of a licensee is
required to notify the Indiana Commission and to provide
additional information, and may be subject to a finding of
suitability. A person who acquires 5% or more of any class of
voting securities of a holding company of a licensee is required
to apply to the Indiana Commission for a finding of suitability.
Under the Showboat Merger, Harrah's filed the necessary
application for a transfer of Showboat's beneficial interest in
SMCP, including an investigatory fee of $50,000, and the Indiana
Commission will investigate the key persons and substantial
owners of Harrah's, and must thereafter find that Harrah's meets
the criteria for licensing and suitability of riverboat owner
licensees.
A riverboat owner licensee may not 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. All contracts are subject to disapproval
by the Indiana Commission.
A riverboat owner licensee or an affiliate may not enter
into a debt transaction of $1 million or more without the prior
approval of the Indiana Commission. A riverboat owner licensee
or any other person may not lease, hypothecate, borrow money
against or loan money against a riverboat owner's license.
The Indiana Commission has a rule requiring the reporting of
certain currency transactions which is similar to that required
by federal authorities. See "Item 1. Business - Other Federal,
State and Local Legislation and Regulation."
The Riverboat Gambling Act prohibits contributions to a
candidate for a state, legislative, or local office, or to a
candidate's committee or to a regular party committee by the
holder of a riverboat owner's license or a supplier's license,
by an officer of a licensee, by an officer of a
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person that holds at least a 1% interest in the licensee, or by a
person holding at least a 1% interest in the licensee. The
Indiana Commission has promulgated a rule requiring quarterly
reporting by the holder of a riverboat owner's license or a
supplier's license of officers of the licensee, officers of
persons that hold at least a 1% interest in the licensee, and of
persons who directly or indirectly own a 1% interest in the
licensee.
The Indiana Commission adopted a rule that prohibits a
distribution by a riverboat licensee to its partners,
shareholders, itself, or any affiliated entity, if the
distribution would impair the financial viability of the
riverboat gambling operation. The Indiana Commission has
proposed another rule, which would if adopted, require riverboat
licensees to maintain on a quarterly basis a cash reserve in the
amount of the actual payout for three days, and the cash reserve
would include cash in the casino cage, cash in a bank account in
Indiana, or cash equivalents not committed or obligated.
The Governor of Indiana has appointed a Gaming Impact Study
Commission chaired by the Attorney General to review the impact
of all forms of gaming in Indiana, and to issue its final report
by December 31, 1999.
A lawsuit was filed on October 25, 1996, in Harrison County
Indiana by three individuals residing in counties abutting the
Ohio River, which challenges the constitutionality of the
Riverboat Gambling Act on grounds that (i) it allegedly creates
an unequal privilege because under the Act supporters of
riverboat casino gambling, having lost a county-wide vote, are
allowed to resubmit a proposal to county voters for approval of
riverboat casino gambling while opponents of riverboat casino
gambling, having lost a county-wide vote, are not allowed to
resubmit a proposal; and (ii) it was enacted as a provision
attached to a state budget bill allegedly in violation of an
Indiana constitutional provision requiring legislative acts to be
confined to one subject and matters properly connected with the
subject. The State of Indiana filed an answer to the complaint.
The Indiana Supreme Court has previously upheld the
constitutionality of the Riverboat Gambling Act, although the
prior challenge was on different grounds than those contained in
the recently filed lawsuit. If the Riverboat Gambling Act
ultimately was held unconstitutional it would, absent timely
corrective legislation, have a material adverse effect on SMCP's
operations.
U.S. COAST GUARD
Each riverboat also is regulated by the U.S. Coast Guard,
whose regulations affect vessel design, construction, operation
(including requirements that each vessel be operated by a minimum
complement of licensed personnel) and maintenance, in addition to
restricting the number of persons who can be aboard the boat at
any one time. The East Chicago Showboat vessel must hold a
Certificate of Inspection. Loss of the Certificate of Inspection
of a vessel would preclude its use as an operating riverboat. A
vessel is subject to annual, quarterly, as well as unannounced,
inspection by the U.S. Coast Guard and must be drydocked every
five years for inspection of the hull. Such drydockings remove
the vessel from service for a period of time and can result in
required repairs. The Company believes that these regulations,
and the requirements of operating and managing cruising gaming
vessels generally, make it more expensive to conduct riverboat
gaming than to operate land-based casinos.
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All shipboard employees of the East Chicago Showboat, even
those who have nothing to do with the actual operation of the
vessel, such as dealers, cocktail hostesses and security
personnel, may be subject to the Jones Act which, among other
things, exempts those employees from state limits on workers'
compensation awards. The East Chicago Showboat has obtained such
insurance which it believes to be adequate to cover employee
claims.
SHIPPING ACT OF 1916; MERCHANT MARINE ACT OF 1936
In order for the East Chicago Showboat vessel to have United
States flag registry, the Company must maintain "United States
citizenship" as defined in the Merchant Marine Act of 1920, as
amended, and the Shipping Act of 1916. A corporation or
partnership operating any vessel in the coastwise trade is not
considered a United States citizen unless United States citizens
own 75% of the equity of the Company or the partnership and, if a
partnership, all general partners must be United States citizens.
OTHER FEDERAL, STATE AND LOCAL LEGISLATION AND REGULATIONS
The Company is subject to various other federal, state and
local laws and regulations and, on a periodic basis, has to
obtain various licenses and permits, including those required to
sell alcoholic beverages. In particular, the United States
Department of the Treasury has adopted regulations pursuant to
which a casino is required to file a report of each deposit,
withdrawal or exchange of currency or other payment or transfer
by, through or to a casino which involves a transaction in
currency of more than a predetermined amount ($10,000 for 1996)
per gaming day. Such reports are required to be made on forms
prescribed by the Secretary of the Treasury and must be filed
with the Commissioner of the Internal Revenue Service. In
addition, a casino is required to maintain detailed records
(including the names, addresses, social security numbers or other
information with respect to its customers) dealing with, among
other items, a customer's deposit and withdrawal of funds and the
maintenance of a line of credit.
Additionally, various federal, state and local legislation
and regulations relating to safety, health and environmental
matters that apply to businesses in general, such as the Clean
Air Act, the Clean Water Act, the Occupational Safety and Health
Act, the Resource Conservation Recovery Act and the Comprehensive
Environmental Response, Compensation and Liability Act, apply to
the Company as well. In addition, certain legislation and
regulations apply generally to vessels operating in United States
waters, such as the Oil Pollution Act of 1990 (which among other
things, deals with liability for oil spills and requires a
certificate of financial responsibility for vessels operating in
United States waters), or within the jurisdiction of various
states apply to SMCP. One major development in federal
legislation was the passage of the Coast Guard Authorization Act
of 1996 which amends a provision of the Johnson Gambling Devices-
Transportation Act of 1951 prohibiting gaming on federal waters,
including Lake Michigan. As a result of this amendment,
riverboat casinos, such as the casino gaming vessel operated by
SMCP, are able to conduct cruises on Lake Michigan within
boundaries of the State of Indiana and "mock cruises" will only
be permitted pursuant to the exceptions authorized by the
Riverboat Gambling Act.
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In addition, Congress enacted a bill that established a
National Gambling Impact and Policy Commission (the "Policy
Commission") to study the economic impact of gambling on the
United States, the individual States and Native American tribes.
Additional federal regulation may occur due to the initiation of
hearings by the Policy Commission. Any new federal legislation
could have a material adverse effect on the Company. Although
the Company does not anticipate making material expenditures with
respect to such laws and regulations, the applicability of such
laws and regulations may result in additional costs to the
Company.
ITEM 2. PROPERTIES.
The Company believes that its properties are generally in
good condition, are well maintained, and are generally suitable
and adequate to carry on the Company's business. In 1997, the
Company's gaming properties operated at satisfactory levels of
utilization.
ATLANTIC CITY FACILITIES
The Atlantic City Showboat is located at the eastern end of
the Boardwalk on approximately 12 acres, 10 1/2 acres of which
was leased until January 28, 1998 from Sun International, Inc.,
successor in interest to Resorts International, Inc.<F1> ("Sun
International") pursuant to a 99-year lease dated October 26,
1983 (as amended, "Lease"). On January 29, 1998, Land LLC<F2>
acquired the underlying fee interest of the Atlantic City
Property and the Lease was assigned by Sun International (the
"Land Purchase Agreement") to Land LLC. Pursuant to the Land
Purchase Agreement, Land LLC assumed Sun International's duties
under the Lease (Sun International and Land LLC shall be
respectively referred to hereafter as "Lessor"). The remaining
acreage of the Atlantic City Showboat is held in fee by ACSI. In
addition, ACSI owns approximately nine acres of land adjacent to
the Atlantic City Showboat which are zoned for non-casino
development and which are currently used as surface level parking
lots.
Under the New Jersey Act, both Lessor and ACSI, because of
their lessor-lessee relationship, are jointly and severally
liable for the acts of the other with respect to any violations
of the New Jersey Act by the other. In order to limit the
potential liability which could result from this provision, ACSI,
OSI, and Lessor have agreed to indemnify each other from all
liabilities and losses which may arise as a result of the joint
and several liability imposed by the New Jersey Act. However,
the New Jersey Commission could determine that the party seeking
indemnification is not entitled to or is barred from such
indemnification.
Pursuant to the New Jersey Act, the New Jersey Commission
approved, subject to certain changes, an Assumption Agreement
("Assumption Agreement") executed by Trump Taj Mahal
Associates Limited Partnership and Trump Taj Mahal
Realty Corp. (collectively, "Trump Taj"), ACSI and
Resorts International, Inc., in connection with Trump Taj's
acquisition of the land on which the Taj Mahal Casino Hotel is
constructed and pursuant to which Trump Taj assumed some
____________________
(1) Resorts International, Inc. and the Company had entered into
the Lease and certain other documents relating to the Atlantic
City Showboat (the "Atlantic City Showboat Agreements"). As a
result of Sun International's acquisition of Resorts
International, Inc. during 1996, Sun International succeeded to
the rights, duties and obligations of Resorts International, Inc.
under the Atlantic City Showboat Agreements.
(2) Land LLC is a special purpose bankruptcy remote subsidiary of
the Company.
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of Lessor's obligations in the Lease. The New Jersey Commission
ruled that the Assumption Agreement is a lease under the New
Jersey Act for casino regulatory purposes. As a result, for
casino regulatory purposes, a lessor-lessee relationship is
deemed to exist among ACSI, Lessor, and Trump Taj making them
jointly and severally liable for the acts of the other with
respect to any violations of the New Jersey Act by the others.
In order to limit their potential liability, ACSI, Lessor and
Trump Taj have entered into an agreement to indemnify each other
from all liabilities and losses which may arise as a result of
the joint and several liability imposed upon them by the New
Jersey Act. However, the New Jersey Commission could determine
that the party seeking indemnification is not entitled to or is
barred from such indemnification.
The Lease and all amendments thereto are subject to review
and approval by the New Jersey Commission, and Lessor and ACSI
have agreed that they will accept any reasonable modification to
the Lease that may be required by the New Jersey Commission. If
either party determines that the requested Lease modifications
are unduly burdensome, the Lease may be terminated, subject to
arbitration in the case of disagreement. The Lease, as amended
to date, has been approved by the New Jersey Commission. In
addition, Lessor pursuant to a ruling by the New Jersey
Commission, in its capacity as lessor of the site of the Atlantic
City Showboat, must obtain a casino service industry license. On
January 28, 1998, Land LLC obtained a casino service industry
license, which is coextensive with ACSI's license which is up for
renewal 2001.
The 9 1/4% First Mortgage Bonds due 2008 (the "9 1/4%
Bonds") and the Company's $35.0 million revolving loan ("$35.0
Million Revolving Loan") from Fleet Bank, N.A. are each secured
by leasehold mortgages on (i) ACSI's interest in the Lease, (ii)
the Atlantic City Showboat (including the 24-story hotel tower as
well as certain personal property therein) and future
improvements on the leased real property, (iii) the 16-story
hotel tower as well as certain personal property therein and the
underlying real property held in fee, and (iv) the two surface
parking lots held in fee. Such mortgages are subject and
subordinate to Lessor's rights under the Lease and its fee
interest in the Atlantic City Property. Subject to certain
limited exceptions, the Lease may not be amended without the
consent of the trustee under the Indenture governing the 9 1/4%
Bonds unless certain opinions are delivered to the effect that
the amendment does not materially impair the security of the
mortgage. An event of default under the Lease constitutes an
event of default under the respective mortgage and Indenture.
In addition to its rental payment obligations under the
Lease, ACSI is obligated to contribute up to one-third of the
costs of certain infrastructure improvements to be constructed on
a 56-acre tract ("Urban Renewal Tract"). ACSI is obligated to
contribute only toward improvements of which it is the
beneficiary or which are expected to benefit ACSI and all future
occupants of the Urban Renewal Tract. ACSI has contributed to
infrastructure improvements involving the construction of certain
sewer and water lines and the realigning of a portion of Delaware
Avenue to permit direct ingress and egress from the Delaware
Avenue to the Atlantic City Showboat, which improvements have
been completed.
ACSI leases a 63,200 square-foot warehouse and office in Egg
Harbor Township, New Jersey, approximately 15 miles from the
Atlantic City Showboat. The lease term is through July 31, 2001.
ACSI holds an option to purchase the warehouse for $1.9 million.
This option may be exercised by ACSI on or after January 1, 1996,
and shall remain in effect until March 31, 2001.
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ACSI leases a parking area for its employees for
approximately 300 parking spaces. The lease term may be
terminated upon 90 days written notice by ACSI. Only in the
event that the property is condemned may the lease be terminated
by either party before September 15, 1998. ACSI provides,
through an independent contractor, a shuttle service for its
employees between the employee parking area and the Atlantic City
Showboat.
LAS VEGAS FACILITIES
The Las Vegas Showboat is located at the northern end of the
Boulder Strip and approximately 2 1/2 miles from the downtown -
Fremont Street - corridor. The Company holds fee title to
approximately 26 acres which comprises the Las Vegas Showboat.
Of the 26 acres, 19.25 acres are used for buildings and
improvements at the Las Vegas Showboat, which secures the
Company's 9 1/4% Bonds and the $35.0 Million Revolving Loan. The
Company leases such property, buildings and improvements to SBOC.
The facilities at the Las Vegas Showboat are constantly monitored
to make sure that the needs of the Company's business and
customers are met. The Las Vegas Showboat developed a
recreational vehicle park with approximately 80 spaces on leased
property contiguous to the Las Vegas Showboat. The recreational
vehicle park became operational in March 1997.
SYDNEY FACILITIES
SHCP entered into a lease with the NSWCCA for the Star City
site, which site is located on 8.4 acres on Pyrmont Bay adjacent
to Darling Harbour. Star City is approximately one mile from
Sydney's central business district and within walking distance of
a monorail station. Star City has a light rail station and has
access to a ferry wharf. Star City is also close to four major
parking garages in Darling Harbour and has good access to
arterial road routes. The lease for the Star City site has a
term of 99 years commencing on December 14, 1994. SHCP prepaid
the net rent to the NSWCCA for the first 12 years under the lease
with a payment of A$120.0 million. For the remaining term, the
net annual rent is A$250,000. Upon termination of the lease,
title to the improvements reverts to the NSWCCA without payment
or compensation. Alternatively, SHCP could be directed by the
NSWCCA to demolish any and all improvements erected on the land,
leaving it in a safe condition.
EAST CHICAGO FACILITIES
The East Chicago Showboat is located on Lake Michigan
approximately 12 miles from downtown Chicago, Illinois. On
October 19, 1995, SMP entered into a Redevelopment Project Lease
(the "Redevelopment Lease") with the City of East Chicago,
Department of Redevelopment, pursuant to which the City of East
Chicago granted SMP a leasehold interest for approximately 27
acres in East Chicago, Indiana on which to construct and operate
the East Chicago Showboat for a period of thirty (30) years from
the date SMP received the certificate of suitability from the
Indiana Commission (the "Commencement Date"). SMP transferred
all of its assets to SMCP, including the Redevelopment Lease on
March 28, 1996. SMCP may elect to renew the term for two
additional thirty year terms. The Redevelopment Lease obligates
SMCP to pay the City of East Chicago $400,000 in annual rent with
an adjustment every three years by the same percentage as the
percentage increase in the Consumer Price Index over the previous
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<PAGE>
three years not to exceed 105% of the previous annual rental.
The interests of SMCP in the Redevelopment Lease are subject to a
leasehold mortgage executed by it in conjunction with the
issuance by it and Showboat Marina Finance Corporation ("SMFC")
of the 13 1/2% First Mortgage Notes due 2003 (the "East Chicago
Notes").
In addition to these leasehold interests, SMCP owns the
casino gaming vessel. SMCP's interests in the casino gaming
vessel is also subject to a first preferred ship mortgage
executed in conjunction with the East Chicago Notes.
All of the assets of SMCP, other than certain equipment
which is pledged as security in two equipment financings, secures
the East Chicago Notes.
ITEM 3.LEGAL PROCEEDINGS.
WILLIAM H. AHERN V. CAESARS WORLD, INC., ET AL., Case No.
94-532-Civ-Orl-22, instituted on May 10, 1994 in the United
States District Court for the Middle District of Florida,
transferred to the United States District Court for the District
of Nevada, Southern Division (the "United States District Court
of Nevada"); WILLIAM POULOS V. CAESARS WORLD, INC., ET AL., Case
No. 94-0478-Civ. Orl-22, instituted on April 26, 1994 in the
United States District Court for the Middle District of Florida,
transferred to the United States District Court of Nevada; LARRY
SCHREIER V. CAESARS WORLD, INC., ET AL., Case No. 95-923-LDG
(RJJ), instituted on September 26, 1995, in the United States
District Court of Nevada. Plaintiffs in these actions, each
purportedly representing a class, filed complaints (the
"Complaints") against manufacturers, distributors and casino
operators of video poker and electronic slot machines, including
the Company, alleging that the defendants have engaged in a
course of conduct intended to induce persons to play such games
based on a false belief concerning how the gaming machines
operate, as well as the extent to which there is an opportunity
to win on a given play. The Complaints charge defendants with
violations of the Racketeer Influenced and Corrupt Organizations
Act, as well as claims of common law fraud, unjust enrichment and
negligent misrepresentation, and seek damages in excess of $1
billion without any substantiation of that amount. The United
States District Court of Nevada dismissed the Complaints
following consideration of defendants' motions to dismiss,
granting leave to Plaintiffs to re-file. The Plaintiffs filed an
amended complaint on or about May 31, 1996. Subsequently, the
United States District Court of Nevada consolidated the actions
(and one other action styled WILLIAM POULOS V. AMERICAN FAMILY
CRUISE LINE, N.V. ET AL., Case No. CV -S-95-936-LDG (RLH), in
which the Company is not a named defendant), ordered Plaintiffs
to file a consolidated amended complaint on or before February
14, 1997, and ordered all defense motions, including those of the
Company, withdrawn without prejudice. The parties have
established a steering committee to address motion practice,
scheduling and discovery matters. Plaintiffs filed their
consolidated amended complaint on February 14, 1997. The Company
renewed its motions to dismiss and joined in motions to dismiss
filed by other defendants. In late December 1997, the Court
granted in part and denied in part Defendants' Motions to Dismiss
for Failure to Plead Fraud with Particularity and for Failure to
State a Claim; granted in part and denied in part Defendants'
Motion to Strike Changes Made in Plaintiffs' Consolidated Amended
Complaint; denied Cruise Ship Defendant's Motion to Dismiss for
Lack of Subject Matter Jurisdiction; denied Defendant
Princess Hotel's Motion to Dismiss Under the Act of
State Doctrine; and denied Defendants' Motion for a Stay on
Primary Jurisdiction and Abstention Grounds. In
addition, the United States District Court of Nevada requested
additional briefing from the parties with respect to
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<PAGE>
Defendants' Motion to Dismiss for Lack of Personal Jurisdiction.
Plaintiffs filed their Second Consolidated Amended Complaint on
or about January 8, 1998. The Answer to the Second Consolidated
Amended Complaint was filed on February 11, 1998. Management
believes that the substantive allegations in the Complaints are
without merit and intends vigorously to defend the allegations.
GLOBAL GAMING TECHNOLOGY, INC. V. TRUMP PLAZA FUNDING, INC.,
ET AL., Case No. 94-2021 (JHR), instituted on May 5, 1994, in the
United States District Court for the District of New Jersey. The
plaintiff, Global Gaming Technology, Inc., filed a complaint
against eight casino operators in Atlantic City, New Jersey. The
complaint alleges a patent infringement with respect to certain
of the electronic slot machines used by the defendants, including
the Atlantic City Showboat. The plaintiff seeks to recover
damages for copyright infringement in excess of $500 million.
The manufacturers of the slot machines in question have assumed
the defense and have indemnified the Atlantic City Showboat and
other casinos in this matter. The manufacturers filed a
complaint against the plaintiff in the United States District
Court for the District of Nevada, Southern District. The United
States District Court for the District of New Jersey stayed the
New Jersey action pending resolution of the issues in the pending
Nevada action. Several of the manufacturers have reached a
settlement with the plaintiff for the release of all claims. The
United States District Court for the District of Nevada issued
its decision in February 1997 which found that although the
manufacturers infringed on Global Gaming Technology's patent, no
liability occurred since the manufacturers sold the slot machines
more than one year before Global Gaming Technology, Inc. filed
its patent application. Global Gaming Technology has filed a
motion for reconsideration of the Court's February 1997 decision.
PROGRESSIVE GAMES, INC. V. ARIZONA CHARLIE'S ET AL., Case
No. CV-S-96-00489-PMP (RJJ), instituted on June 5, 1996 in the
United States District Court for the District of Nevada. The
plaintiff filed a Complaint against 62 casinos located in Nevada,
including the Las Vegas Showboat. The complaint alleges a patent
infringement in connection with a live casino game including an
electronic jackpot feature known as "Let It Ride the Tournament"
used by the defendants. The plaintiff seeks to recover damages
for patent infringement, including punitive damages. The
licensor of the casino game has assumed the defense and has
agreed to indemnify the Las Vegas Showboat and other casinos in
this matter. On July 28, 1996, the licensor filed a motion to
dismiss the action against the casino defendants until such time
as certain issues in the pending action between plaintiff and
licensor have been resolved. The licensor's motion to dismiss
was denied on March 25, 1997.
DOUG GRANT, INC. ET AL. V. GREAT BAY CASINO CORPORATION ET
AL., instituted on July 28, 1997, in the Superior Court of New
Jersey, Middlesex County, Law Division. The Company was served
with the Complaint on July 31, 1997. The casino operators in
Atlantic City, including the Company, and others were named
defendants in the action, which alleges that the casino operators
treated plaintiffs differently due to the fact they were known or
suspected "card counters" and that the operators shared
information on such individuals. The action is ostensibly based
on purported violations of state and federal RICO and antitrust
laws and various common law causes of action and state consumer
protections law. This matter was transferred to the United
States District Court, District of New Jersey, Camden, New
Jersey, and assigned Docket Number 97CV 4291(JEI). Pursuant to
the order of the United States Magistrate managing the
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<PAGE>
case, the defendants filed a motion to dismiss the complaint on
February 20, 1998. No date for the Court's consideration of the
Motion has been as yet set; however, the Court has indicated that
it expects to consider the application in mid-April 1998. Until
a resolution of the motion to dismiss, no answer is due and
discovery is stayed. The Company is currently reviewing the
complaint and intends to vigorously defend the action.
The Company (including its subsidiaries) is also a defendant
in various other lawsuits, most of which relate to routine
matters incidental to its business. Management does not believe
that the outcome of such pending litigation, in the aggregate,
will have a material adverse effect on the Company.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders
during the fourth quarter of 1997.
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<PAGE>
PART II
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is listed on the New York Stock
Exchange ("NYSE") under the symbol SBO. The range of high and
low sales prices for the Company's common stock for each quarter
in the last two years is as follows:
<TABLE>
<CAPTION>
Dividends
High Low Declared
-------- -------- -----------
<S> <C> <C> <C>
First quarter (through March 17, 1998) 29 13/16 29 1/8 .025
1997
First quarter 23 3/4 17 1/4 .025
Second quarter 20 7/8 17 5/16 .025
Third quarter 20 3/4 15 5/8 .025
Fourth quarter 29 3/4 17 7/8 .025
1996
First quarter 28 1/2 21 .025
Second quarter 35 1/2 24 1/2 .025
Third quarter 30 5/8 18 3/4 .025
Fourth quarter 22 5/8 17 .025
</TABLE>
On December 18, 1997, the last trading day before public
announcement of the execution of the Showboat Merger Agreement,
the closing price of the Common Stock as reported on the NYSE was
$21 1/8 with a high sales price of $21 1/2 and a low sales price
of $20. On March 17, 1998, the closing price of the Company's
common stock on the New York Stock Exchange was $29 1/2.
The Company has paid quarterly dividends since 1970. The
declaration and payment of dividends is at the discretion of the
Board of Directors. The Board of Directors considers, among
other factors, the Company's earnings, financial condition and
capital spending requirements in determining an appropriate
dividend. Pursuant to the Showboat Merger Agreement and until
such time as the earlier of the termination of the Showboat
Merger Agreement or the Effective Time, the Company has agreed
not to declare or pay any dividends on or make other
distributions in respect of its Capital Stock, other than the
regular quarterly dividend of $0.25 per share and distributions
between wholly owned subsidiaries of the Company and the Company.
-44-
<PAGE>
Additionally, the Company is restricted in the payment of
dividends, loans or other similar transactions by the terms of
the Indentures executed by it in connection with the issuance of
9 1/4% Bonds and the 13% Senior Subordinated Notes due 2009 (the
"13% Notes"), respectively. Under both of the Indentures, the
declaration and making of a dividend is a Restricted Payment.
The Company may declare and make a dividend as long as (a) no
default or event of default exists under the Indentures and
(b) the sum of all Restricted Payments, including dividends,
since May 18, 1993 (the "Issue Date") is less than (x) 50% of the
Consolidated Net Income (defined in the Indentures) from April 1,
1993 to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available,
plus (y) 100% of the aggregate net cash proceeds from the sale of
equity interests (other than Disqualified Stock), plus (z) Excess
Non-Recourse Subsidiary Proceeds (defined in the Indentures)
after the Issue Date. See Note 6 to the Consolidated Financial
Statements for additional discussion of the restrictions
contained in the Indentures and see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
Under the Indenture executed in connection with the East
Chicago Notes (the "East Chicago Indenture"), SMCP cannot make a
Restricted Payment, including distributions to the holders of its
partnership interests, unless, among other things, SMCP has a
Fixed Charge Coverage Ratio of 2.0 to 1.0 for the most recently
ended four full fiscal quarters, after giving effect to such
Restricted Payment. Notwithstanding the foregoing, the East
Chicago Indenture permits SMCP to distribute good faith estimates
of maximum payments for state and federal income tax liabilities
of the Company and Waterfront. See also "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations." In addition, distributions by SMCP are subject to
rules of the Indiana Commission. See "Item 1. Business -
Regulation and Licensing - Indiana Gaming."
The approximate number of shareholders of record of the
common stock as of March 17, 1998 was 1,283.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
STATEMENT OF (In thousands, except per share data)
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net revenues $556,816 $433,705 $428,592 $401,333 $375,727
Income from operations 26,101 42,121 46,674 51,828 45,419
Income (loss) before (18,453) 6,003 13,175 15,699 13,464
extraordinary items and
cumulative effect of change
in method of accounting for
income taxes (a)(b)(c)(e)
Net income (loss) (18,453) 6,003 13,175 15,699 7,341
Income (loss) before (1.14) 0.37 0.85 1.03 0.90
extraordinary items and
cumulative effect of change
in method of accounting for
income taxes per share-
basic (a)(b)(c)(d)(e)
Net income (loss) per share- (1.14) 0.37 0.85 1.03 0.49
basic
Income (loss) before (1.14) 0.37 0.84 1.02 0.89
extraordinary items and
cumulative effect of change
in method of accounting for
income taxes per share-
diluted (a)(b)(c)(d)(e)
Net income (loss) per share- (1.14) 0.37 0.84 1.02 0.49
diluted
Cash dividends declared per 0.10 0.10 0.10 0.10 0.10
common share
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA: (In thousands)
<S> <C> <C> <C> <C> <C>
Total assets (d) $800,547 $814,669 $649,395 $623,691 $470,700
Long-term recourse debt
(including current
maturities) (d) 393,094 392,744 392,391 392,035 280,617
Long-term nonrecourse debt
(including current
maturities (f) 157,522 140,000 -- -- --
Shareholders' equity (d) 162,943 192,145 173,941 157,461 135,158
Shares outstanding at year-
end (d) 16,351 16,181 15,720 15,369 14,980
</TABLE>
(a) The Company adopted FAS 109 in 1993 and reported the
cumulative effect of $.6 million from the change in method
of accounting for income taxes as of January 1, 1993 in the
1993 Consolidated Statement of Income.
(b) In the year ended December 31, 1993, the Company
recognized an extraordinary loss of $6.7 million, net of
tax, as a result of the redemption of all of its
outstanding Mortgage-Backed Bonds.
(c) In 1993, the Company acquired a 30% equity interest in
SSP which was engaged in the development of a riverboat
casino on Lake Pontchartrain in New Orleans, Louisiana.
Operation of the riverboat casino commenced on November
8, 1993. The Company's share of the partnership's
loss from the commencement of operations through
December 31, 1993, is included in income from operations
for the year ended December 31, 1993, including the
write-off of preopening costs, of $1.3 million. In March
1994, the Company increased its equity interest in SSP to
50%. The Company's share of the net income of the
partnership was $12.8 million and is included in income
from operations for the year ended December 31, 1994.
In March 1995, the Company acquired the remaining 50% of
the equity of SSP. In March 1995, SSP sold certain of its
assets, and the Company sold all of its equity in SSP,
resulting in a pretax gain of $2.6 million to the
Company which is included in the 1995 Consolidated
Statement of Income as gain on sale of affiliate.
(d) In the year ended December 31, 1992, the Company sold
3.45 million shares of its common stock in a public
offering. Net proceeds of the offering were $50.4 million.
Proceeds of the offering were used in January 1993 to
redeem all of the Company's Debentures and to prepay the
outstanding balance of its construction and term loan.
(e) See Item 7. Management Discussion and Analysis of
Financial Conditions and Results of Operations for a
discussion of factors affecting income.
(f) In March 1996, SMCP and SMFC issued $140.0 million East
Chicago Notes for the development of the East Chicago
Showboat.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
GENERAL
Showboat, Inc. and its subsidiaries (collectively, the
"Company" or "SBO"), is an international gaming company that owns
and operates the Atlantic City Showboat Casino Hotel in Atlantic
City, New Jersey (the "Atlantic City Showboat"), the Las Vegas
Showboat Casino, Hotel and Bowling Center in Las Vegas, Nevada
(the "Las Vegas Showboat"), beneficially owns 24.6% of, and
manages, Star City, a casino and entertainment complex located
in Sydney, New South Wales, Australia, ("Star City" or "Sydney
Harbour Casino") and owns a 55% interest in, and manages, the
Showboat Mardi Gras Casino located in East Chicago, Indiana (the
"East Chicago Showboat").
The consolidated financial statements include all domestic
and foreign subsidiaries which are more than 50% owned and
controlled by the Company. Investments in unconsolidated
affiliates which are at least 20% owned by the Company are
carried at cost plus equity in
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<PAGE>
undistributed earnings or loss since acquisition. All material
intercompany balances have been eliminated in consolidation.
As used in this management's discussion and analysis of
financial condition and results of operations, amounts in
Australian dollars are denoted as "A$". The exchange rate was
approximately $0.6516 and $0.7940 for each A$1.00 as of December
31, 1997 and 1996, respectively.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 (1997)
COMPARED TO YEAR ENDED DECEMBER 31, 1996 (1996)
Financial Highlights - Comparison of Operating Results
<TABLE>
<CAPTION>
Year Ended December 31,
(Unaudited)
(Dollars in thousands)
-------------------------------------------------------------
1997 1996 Variance Percent
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross revenues
Atlantic City $ 410,577 $ 408,010 $ 2,567 0.6%
Las Vegas 67,278 67,591 (313) (0.5%)
Showboat Australia Mgt. Fees 5,671 - 5,671 N/A
East Chicago Showboat 118,038 - 118,038 N/A
------------- --------------- -------------- -------------
$ 601,564 $ 475,601 $ 125,963 26.5%
Net revenues ------------- --------------- -------------- -------------
Atlantic City $ 372,175 $ 370,537 $ 1,638 0.4%
Las Vegas 63,420 63,168 252 0.4%
Showboat Australia Mgt. Fees 5,671 - 5,671 N/A
East Chicago Showboat 115,550 - 115,550 N/A
------------- --------------- -------------- -------------
$ 556,816 433,705 $ 123,111 28.4%
Income from operations ------------- --------------- -------------- -------------
Atlantic City $ 60,155 $ 63,687 $ (3,532) (5.5%)
Las Vegas (5,657) (10,064) 4,407 43.8%
Corporate and Development (24,470) (15,420) (9,050) (58.7%)
Showboat Australia - Mgt. Fee <F1> 5,189 (168) 5,357 3188.7%
Sydney Harbour Casino <F1> 3,656 4,501 (845) (18.8%)
Sydney Harbour Casino - preopening (7,160) (415) (6,745) (1625.3%)
East Chicago Showboat 3,965 - 3,965 N/A
East Chicago Showboat - preopening (9,577) - (9,577) N/A
------------- --------------- -------------- -------------
Consolidated $ 26,101 $ 42,121 $ (16,020) (38.0%)
------------- --------------- -------------- -------------
</TABLE>
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<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Year Ended December 31,
(Unaudited)
(Dollars in thousands)
------------------------------------------------------------
1997 1996 Variance Percent
------------------------------------------------------------
<S> <C> <C> <C> <C>
EBITDA*
Atlantic City $ 86,182 $ 90,184 $ (4,002) (4.4%)
Las Vegas 811 (4,118) 4,929 119.7%
Corporate and Development (24,047) (15,045) (9,002) (59.8%)
Showboat Australia - Mgt. Fee <F1> 5,189 (168) 5,357 3188.7%
Sydney Harbour Casino <F1> 3,656 4,501 (845) (18.8%)
Sydney Harbour Casino - preopening (7,160) (415) (6,745) (1625.3%)
East Chicago Showboat 12,768 - 12,768 N/A
East Chicago Showboat - preopening (9,577) - (9,577) N/A
------------- --------------- -------------- ------------
Consolidated $ 67,822 $ 74,939 $ (7,117) (9.5%)
------------- --------------- -------------- ------------
<FN>
<F1> Net of operating expenses and amortization of equity and
debt costs at Showboat, Inc.
</FN>
</TABLE>
*EBITDA is defined as income from operations before depreciation
and amortization. EBITDA should not be construed as a substitute
for income from operations, net earnings (loss) and cash flows
from operating activities determined in accordance with Generally
Accepted Accounting Principles ("GAAP"). The Company has
included EBITDA because it believes it is commonly used by
certain investors and analysts to analyze and compare gaming
companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt.
REVENUES
The Company's gross revenues for the year ended December 31,
1997, increased $126.0 million or 26.5% compared to 1996. This
increase is primarily attributable to the $118.0 million of gross
revenues from the East Chicago Showboat which commenced
operations in April 1997. For the first time, the Company
recorded a management fee of $5.7 million from Sydney Harbour
Casino. Due to an agreement with the Sydney Harbour Casino, the
first A$19.1 million of management fees were forgone, which
amount was satisfied during the second quarter of 1997 following
approximately 20 months of operations by Sydney Harbour Casino
in its interim facility. Star City, the permanent casino and
entertainment complex, commenced its operations on November 26,
1997. Complimentaries rose $2.9 million in 1997, primarily due
to the operations of the East Chicago Showboat, slightly
offsetting the increase in gross revenues, resulting in a $123.1
million or 28.4% increase in net revenues.
The Atlantic City Showboat's gross revenues increased $2.6
million or 0.6% during 1997 compared to 1996. This increase is
principally attributed to a $4.3 million or 1.3% increase in
casino revenues tied to the $12.1 million or 4.7% growth in slot
revenue, at the Atlantic City casino which compared favorably to
a 3.6% growth in the Atlantic City market. Table games revenue
declined $7.3 million or 9.4% in 1997 compared to 1996 due
primarily to a decline in table games hold percent to 14.3% in
1997 compared to 15.8% in 1996. Other gaming revenues
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<PAGE>
also declined $.5 million or 15.8% due principally to a decline
in poker revenue. Poker was discontinued at the Atlantic City
Showboat in November, 1997. The increase in gross revenues was
partially offset by the $.9 million or 2.5% increase in
complimentaries, resulting in a $1.6 million or 0.4% increase in
net revenues.
The Company recognized consolidated net revenues of $115.6
million from the East Chicago Showboat which were derived
principally from the casino operation that produced $77.6 million
of slot revenue, $28.2 million of table game revenue and $3.2
million of poker revenue. Revenues at the Las Vegas Showboat were
relatively unchanged during the comparative year end periods.
INCOME FROM OPERATIONS
The Company's income from operations for the year ended
December 31, 1997, decreased $16.0 million or 38.0% compared to
1996. The decrease is primarily attributable to the following
unusual items: (i) $9.6 million of expenses related to the
opening of the East Chicago Showboat; (ii) $12.0 million of
expenses related to the opening of Showboat's 24.6% owned
subsidiary in Sydney, Australia (Star City); (iii) $4.9 million
of charges associated with the proposed merger with Harrah's
Entertainment, Inc. and evaluating the potential sale of the
management contract for Star City and a portion of the Company's
equity in SHCH; and (iv) $1.1 million for the write-off of the
investment made to develop a riverboat casino project on the
Mississippi River near Lemay, Missouri ("Lemay Riverboat"). In
comparison, the 1996 corporate and development results reflected
a loss of $3.8 million for the write-down of the Company's
investment in a riverboat casino operation in Randolph, Missouri.
The unusual costs recorded in 1997 were partially offset by the
net management fee contribution of $5.2 million from Star City
and the recognition of $4.0 million of income from operations
(before preopening write-off) from the East Chicago Showboat.
The Atlantic City Showboat's income from operations
decreased $3.5 million or 5.5% during 1997 compared to 1996. The
decrease is primarily attributable to the decline in table games
revenue and a $5.1 million or 1.7% increase in operating costs.
The increase in operating expenses is primarily attributed to
increased marketing and advertising costs for slot patrons and
increased casino operating expenses. These increases were
partially offset by a decline in payroll and related costs.
The Las Vegas Showboat's loss from operations decreased $4.4
million or 43.8% for the year ended December 31, 1997 compared to
the same period in 1996. This was realized principally through
cost control programs implemented at the property and more
targeted marketing programs.
The equity contribution by Star City (before preopening
write-off) decreased $.8 million or 18.8% in 1997 compared to
1996. This decline is primarily attributable to payment of
management fees to the Company, a decline in table games hold
percent to 16.3% in 1997 compared to 17.4% in 1996 and the
decline in the average exchange rate from $0.7874 in 1996 to
$0.7546 in 1997.
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<PAGE>
NET INCOME
The Company recorded a net loss of $18.5 million or $1.14
per share for the year ended December 31, 1997. Net income in
1997 was negatively impacted due to the recognition of several
unusual items totaling $35.8 million (before tax) and an
increased effective tax rate attributable to these unusual items.
The unusual items recorded in 1997 were for: (i) $17.8
million of expenses related to the opening of the East Chicago
Showboat and the minority partner's share of losses; (ii) $12.0
million of expenses related to the opening of Star City; (iii)
$4.9 million of charges associated with the proposed merger with
Harrah's Entertainment, Inc. and evaluating the potential sale of
the management contract for Star City and a portion of the
Company's equity in SHCH; and (iv) $1.1 million for the write-off
of the investment for the Lemay Riverboat. Regarding the East
Chicago Showboat, generally accepted accounting principles
require the Company to recognize the minority partner's losses as
a result of the deficit in the minority partner's capital
account. However, the Company will recognize in future periods
more than its 55% ownership interest of East Chicago Showboat's
net income, until the Company has recovered the minority
partner's share of losses absorbed by the Company. The effective
tax rate for 1997 was approximately 11.4%. The lower than
expected tax benefit is attributable to the losses incurred that
did not generate a tax benefit for state income taxes and the
preopening losses associated with the opening of the permanent
Star City which do not generate a state or federal tax benefit.
The Company's 1997 annual tax rate excluding unusual items
is approximately 38.9%. Exclusive of the above listed unusual
items, the Company would have reported net income of $9.1 million
or $.57 per share for the year ended December 31, 1997.
In 1996, the Company realized net income of $6.0 million or
$.37 per share. The 1996 results included unusual items totaling
$5.6 million (before tax). These items included: (i) $3.8 million
for the write-down of the Company's investment in a riverboat
development project in Randolph, Missouri; (ii) $2.4 million
related to the opening of the East Chicago Showboat; and (iii)
$.4 million related to the opening of the interim Sydney Harbour
Casino. The unusual charges were partially offset by a $.8
million CRDA credit recognized at the Atlantic City Showboat. As
a result, net income, excluding unusual items was $9.7 million or
$.60 per share.
YEAR ENDED DECEMBER 31, 1996 (1996)
COMPARED TO YEAR ENDED DECEMBER 31, 1995 (1995)
REVENUES
Net revenues for the Company increased to $433.7 million in
1996 from $428.6 million in 1995, an increase of $5.1 million or
1.2%. Casino revenues increased $3.5 million or 0.9% to $383.0
million in 1996 from $379.5 million in 1995. Nongaming revenues,
which consist principally of room, food, beverage, management fee
and bowling revenues, were $92.6 million in 1996 compared to
$88.7 million in 1995, an increase of $3.9 million or 4.4%. The
Company received no management fees in 1996 due to the Company's
agreement to forgive the first A$19.1
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<PAGE>
million of management fees due it from Sydney Harbour Casino. As
of December 31, 1996, approximately A$4.6 million of management
fees remain to be forgiven. The $.2 million management fee
received in 1995 was attributable to the Company's investment in
the SSP which was sold in March of 1995.
Revenues
<TABLE>
<CAPTION>
Year Ended December 31,
(Unaudited)
(Dollars in thousands)
----------------------------------------------------------------
1996 1995 Variance Percent
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated:
Casino revenues $ 382,980 $ 379,494 $ 3,486 0.9%
Non casino revenues 92,621 88,701 3,920 4.4%
Management fees 190 (190) (100.0%)
Less complimentaries (41,896) (39,793) (2,103) 5.3%
------------- --------------- --------------- --------------
Net revenues Consolidated $ 433,705 $ 428,592 $ 5,113 1.2%
------------- --------------- --------------- --------------
Atlantic City:
Table game revenues $ 77,822 $ 82,887 $ (5,065) (6.1%)
Slot revenues 258,892 249,161 9,731 3.9%
Other gaming revenues 3,312 5,104 (1,792) (35.1%)
------------- --------------- --------------- --------------
Total casino 340,026 337,152 2,874 0.9%
------------- --------------- --------------- --------------
Non casino revenues 67,984 67,449 535 0.8%
Less complimentaries (37,473) (35,731) (1,742) 4.9%
------------- --------------- --------------- --------------
Net revenues Atlantic City $ 370,537 $ 368,870 $ 1,667 .4%
------------- --------------- --------------- --------------
Las Vegas:
Table game revenues $ 5,310 $ 4,532 $ 778 17.2%
Slot revenues 36,521 36,195 326 0.9%
Other gaming revenues 1,123 1,614 (491) (30.4%)
------------- --------------- --------------- --------------
Total casino 42,954 42,341 613 1.4%
------------- --------------- --------------- --------------
Non casino revenues 24,637 21,252 3,385 15.9%
Less complimentaries (4,423) (4,062) (361) 8.9%
------------- --------------- --------------- --------------
Net revenues Las Vegas $ 63,168 $ 59,531 $ 3,637 6.1%
------------- --------------- --------------- --------------
</TABLE>
The Atlantic City Showboat generated $370.5 million of net
revenues in the year ended December 31, 1996 compared to $368.9
million for the same period in the prior year, an increase of
$1.7 million or 0.5%. Casino revenues were $340.0 million for
the year ended December 31, 1996 compared to $337.2 million for
the same period in the prior year, an increase of $2.9 million or
0.9%. The increase in casino revenues was due primarily to an
increase in slot revenues of $9.7 million or 3.9% which was
attributable to an 11.6% increase in average slot units at the
-52-
<PAGE>
Atlantic City Showboat. The increase in slot revenues at the
Atlantic City Showboat compares to a 2.1% growth in slot revenues
in the Atlantic City market for the year ended December 31, 1996
and a 10.5% increase in average slot units in the Atlantic City
market. The increase in slot revenues at the Atlantic City
Showboat was partially offset by a table game revenue decrease of
$5.1 million or 6.1% to $77.8 million for the year ended December
31, 1996 compared to $82.9 million for the same period in the
prior year. This decline in table game revenues is attributable
to a reduction in table games marketing. The Company's table game
revenue decline compares to a 1.4% growth in table game revenues
in the Atlantic City market for the year ended December 31, 1996.
The Las Vegas Showboat achieved net revenues of $63.2
million for the year ended December 31, 1996, compared to $59.5
million in the same period in 1995, an increase of $3.6 million
or 6.1%. Casino revenues increased $0.6 million or 1.4% in 1996
to $42.9 million compared to $42.3 million in 1995. The 1995
revenues reflect a reduced casino capacity due to the property's
renovation project in the last six months of 1995. During 1996
the Las Vegas Showboat increased marketing to attempt to
recapture its market share of slot machine players and local area
residents lost to competitors during the 1995 renovation. The
Company expects that the recapture, if it occurs at all, will
occur over a period of years. Non-casino revenues increased to
$24.6 million for the year ended December 31, 1996 from $21.3
million in the same period in 1995, an increase of $3.4 million
or 15.9%. The increases in revenues were attributable to
increased food and beverage capacity in 1996 as compared to the
same period in the prior year. The coffee shop was closed during
a portion of the renovation of the Las Vegas Showboat during
1995.
INCOME FROM OPERATIONS
The Company's income from operations declined $4.6 million
or 9.8% to $42.1 million in 1996 from $46.7 million in 1995. The
decrease is attributable to the decline in income from operations
at both the Atlantic City Showboat and the Las Vegas Showboat.
These declines were partially offset by the $3.9 million
contribution from Sydney Harbour Casino and the $6.5 million or
29.5% decrease in operating expenses for the Company's corporate
and development functions.
<TABLE>
<CAPTION>
Year Ended December 31,
(Unaudited)
(Dollars in thousands)
-------------------------------------------------------------
1996 1995 Variance Percent
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Income from operations
Atlantic City $ 63,687 $ 72,450 $ (8,763) (12.1%)
Las Vegas (10,065) (3,749) (6,316) (168.5%)
Australia <F1> 3,918 (150) 4,068 2712.0%
Corporate and development (15,419) (21,877) 6,458 29.5%
------------- ------------- -------------- ---------------
Consolidated $ 42,121 $ 46,674 $ (4,553) (9.8%)
------------- ------------- -------------- ---------------
</TABLE>
-53-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
(Unaudited)
(Dollars in thousands)
-------------------------------------------------------------
1996 1995 Variance Percent
-------------------------------------------------------------
<S> <C> <C> <C> <C>
EBITDA:*
Atlantic City $ 90,184 $ 99,747 $ (9,563) (9.6%)
Las Vegas (4,119) 229 (4,348) (1898.7%)
Australia <F1> 3,918 (150) 4,068 2712.0%
Corporate and development (15,044) (21,619) 6,575 30.4%
------------- ------------- -------------- ---------------
Consolidated $ 74,939 $ 78,207 $ (3,268) (4.2%)
------------- ------------- -------------- ---------------
<FN>
<F1> Net of operating expenses and amortization of equity and
debt costs at Showboat, Inc.
</FN>
</TABLE>
*EBITDA is defined as income from operations before depreciation
and amortization. EBITDA should not be construed as a substitute
for income from operations, net earnings (loss) and cash flows
from operating activities determined in accordance with Generally
Accepted Accounting Principles ("GAAP"). The Company has
included EBITDA because it believes it is commonly used by
certain investors and analysts to analyze and compare gaming
companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt.
Atlantic City Showboat's income from operations, before
management fees, decreased to $63.7 million in the year ended
December 31, 1996 compared to $72.4 million from the same period
in 1995, a decrease of $8.7 million or 12.1%. This decrease is
attributable to an increase in operating expenses at the Atlantic
City Showboat of $10.4 million or 3.5% to $306.9 million. The
increase in operating expenses is primarily attributable to
increased marketing expenses, which consisted mostly of an $8.6
million increase in slot coin expense in response to aggressive
competition for slot patrons in the Atlantic City market during
1996. The Atlantic City Showboat's operating margin, before
management fees, decreased to 17.2 % in 1996 compared to 19.6%
in 1995. The negative variance caused by the increase in
operating expenses in 1996 was partially offset by the $1.6
million increase in net revenues for 1996 as compared to 1995.
For the year ended December 31, 1996, the Las Vegas Showboat
had a loss from operations, before management fees and
intercompany rent, of $10.1 million compared to a loss of $3.7
million in the same period in 1995. This decline is due
principally to an increase in operating expenses, partially
offset by an increase in net revenues. Operating expenses
increased $9.6 million to $73.2 in 1996 compared to $63.6 million
for the same period in 1995, an increase of 15.1%. The increase
in operating expense is due primarily to the property operating
at full capacity for the entire year in 1996 and increased
marketing costs to offset the intensified competition for slot
players in the local market. During the last six months of 1995,
the casino was operating at approximately 60% of capacity due to
the property's renovation project.
Income from operations in 1996 included, for the first time,
a contribution from Sydney Harbour Casino of $3.9 million. This
compared to a $0.2 million loss in 1995 due to the write-off of
preopening costs, and administrative costs incurred.
-54-
<PAGE>
Corporate and development expenses totaled $15.4 million for
the year ended December 31, 1996 compared to $21.9 million for
the year ended December 31, 1995. This $6.5 million decrease is
attributable to a reduction in the scope of development
activities and general and administrative expenses in 1996 as
compared to 1995.
OTHER (INCOME) EXPENSE
In 1996, other (income) expense consisted of $57.6 million
of gross interest expense, $17.1 million of capitalized interest
and $9.6 million of interest income. Interest expense increased
due to the East Chicago Showboat's interest expense of $14.3
million, capitalized interest of $5.0 million and interest
income of $4.9 million. The East Chicago Showboat's net interest
expense was offset by the $2.0 million minority interest share of
loss. The write-down of the investment in Showboat Mardi Gras,
L.L.C. (the "Randolph Project") was $3.8 million in 1996. In
1995, other (income) expense consisted of $42.8 million of gross
interest expense, $13.1 million of capitalized interest and $6.2
million of interest income. During 1995, the Company realized a
net gain on the sale and write-down of affiliates totaling $1.1
million. In connection with the Company's investment in Sydney
Harbour Casino, the Company capitalized interest of $12.1 million
in 1996 compared to $12.6 million in 1995.
INCOME TAXES
In 1996, the Company incurred income taxes of $3.5 million,
or an effective tax rate of 36.7% compared to $11.4 million or an
effective tax rate of 46.5% in 1995. Differences between the
Company's effective tax rate and the statutory federal tax rates
are due to permanent differences between financial and tax
reporting, state income taxes and the impact of foreign earnings
which were not subjected to U.S. taxes.
NET INCOME
In 1996, the Company realized net income of $6.0 million or
$.37 per share compared to net income of $13.2 million or $.84
per share in 1995. The 1996 results reflect an after tax loss of
$2.4 million or $.15 per share for the write down of the
Company's investment in a riverboat casino operation in Randolph,
Missouri and the after tax increase in interest expense, net of
interest income, capitalized interest and minority interest,
totaling $1.5 million or $.09 per share caused by the East
Chicago Showboat project financing.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997 the Company held cash and cash
equivalents of $67.1 million and short term investments of $21.8
compared to cash and cash equivalents of $60.3 million and short
term investments of $28.8 million at December 31, 1996. The cash
balances include the funds of the East Chicago Showboat ($7.2
million) that are not available for use other than to support the
East Chicago Showboat. In addition, the Company's cash balances
include $3.0 million of restricted cash that has been pledged as
collateral for the East Chicago Showboat, line of credit with
Fleet Bank. As of December 31, 1997 no funds were drawn against
the facility,
-55-
<PAGE>
however, in March 1998 all available funds were drawn by the East
Chicago Showboat on this line of credit.
The Company's cash flow from operations was $36.4 million in
1997 compared to $50.9 million in 1996. The decrease in cash
flow from operations is primarily due to the operations of the
East Chicago Showboat, including the write-off of preopening
costs, and the charges associated with the proposed merger with
Harrah's Entertainment, Inc. and evaluating the potential sale of
the management contract for Star City and a portion of the
Company's equity in SHCH. Cash used in investing activities was
$34.5 million in 1997 compared to $235.2 million in 1996. The
decrease in investing activities is due primarily to the
utilization of funds in the construction of the East Chicago
Showboat during 1996 and the decrease in short term investments.
Cash provided from financing activities was $5.0 million in 1997
compared to $137.7 million in 1996. In 1997, the East Chicago
Showboat obtained $11.0 million of lease financing and a $9.6
million equipment loan, whereas in 1996 the increase in financing
activities was primarily due to the March 1996 issuance by the
East Chicago Showboat of the $140.0 million, 13 1/2% First
Mortgage Notes due 2003 (the "East Chicago Notes").
In 1997, the Company expended approximately $35.4 million on
capital improvements at the Atlantic City Showboat and the Las
Vegas Showboat which were funded by operations. In addition, the
Company expended approximately $55.9 million on construction
costs at the East Chicago Showboat which were principally funded
from the proceeds of the East Chicago Notes in March of 1996.
Management has developed a capital budget for the Atlantic City
Showboat and the Las Vegas Showboat for 1998 totaling
approximately $26.0 million and $2.9 million, respectively.
The Company is eligible to receive approximately $5.9
million in funding credits reserved by the New Jersey Casino
Reinvestment Development Authority ("CRDA"), as a result of the
completion of the hotel expansion program at the Atlantic City
Showboat in 1994. As of December 31, 1997, approximately $4.9
million in funding credits is available for distribution to the
Company. The remaining $1.0 million of reserved funding credits
will be distributed in the future.
The Company renewed and increased it's two year secured line
of credit for general working capital purposes to $35.0 million
with Fleet Bank N.A. effective as of July 1997. At the end of
the two year term, any outstanding funds may convert to a three
year term loan. The bank received security pari passu with the
holders of the Company's $275.0 million 9 1/4% First Mortgage
Bonds due 2008. As of December 31, 1997, all of the funds under
this line of credit were available for use by the Company.
On May 18, 1993, the Company issued $275.0 million of 9 1/4%
First Mortgage Bonds due 2008 (the "9 1/4% Bonds"). Interest on
the Bonds is payable semi-annually on May 1 and November 1 of
each year. The 9 1/4% Bonds are not redeemable prior to May 1,
2000. The 9 1/4% Bond Indenture was amended in July, 1994 and
permitted the Company to issue up to $150.0 million of debt. On
August 10, 1994, the Company issued $120.0 million of 13% Senior
Subordinated Notes due 2009 (the "13% Notes"). Interest on the
13% Notes is payable semi-annually on February 1 and August 1 of
each year commencing on February 1, 1995. The 13%
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<PAGE>
Notes are not redeemable prior to August 1, 2001. The 13% Note
Indenture permits the issuance of an additional $30.0 million of
Notes at the discretion of the Company. As of December 31, 1997
the Company had not issued the additional $30.0 million of Notes.
The 9 1/4% Bond Indenture and the 13% Note Indenture contain
customary financial and other covenants which, among other
things, govern the Company's ability to incur indebtedness.
Included in the covenants to the 9 1/4% Bond Indenture and the
13% Note Indenture is a covenant requiring the Company to offer
to the holders of the 9 1/4% Bonds and the 13% Notes to purchase
such bonds and notes at a purchase price equal to 101% of
the principal amount plus accrued interest at a date which is
no later than 30 days after such change in control. The
announced merger between Harrah's and Showboat will result in a
change in control. No assurance can be given that the Company
will have sufficient funds available to purchase the bonds
and notes tendered by holders in the event such holders desire
to accept the change in control offer.
On March 28, 1996, the Company's 55% owned subsidiaries,
Showboat Marina Casino Partnership ("SMCP") and Showboat Marina
Finance Corporation ("SMFC"), sold the East Chicago Notes to
support the development of the East Chicago Showboat.
Additionally, the Company contributed $40.7 million to SMCP
through intermediary partnerships. The Company will receive a 12%
preferred return on its $40.0 million investment. In addition to
its $40.0 million investment, subject to certain qualifications
and exceptions, the Company entered into a standby equity
commitment which requires that if, during any of the first three
Operating Years (as defined), SMCP's Combined Cash Flow (as
defined) is less than $35.0 million, the Company will be required
to make additional capital contributions to SMCP in the lesser of
(a) $15.0 million, or (b) the difference between the $35.0
million and the Operating Year's Combined Cash Flow. The
Company's aggregate potential obligation under the standby equity
commitment is $30.0 million. SMCP anticipates that the Combined
Cash Flow of SMCP for the first full four quarters of operation
will not achieve $35.0 million threshold and Showboat will be
required to contribute approximately $15.0 million under the
standby equity commitment. As of March 15, 1998, the Company has
contributed $1.0 million to SMCP as part of this standby equity
commitment. There can be no assurance that the Combined Cash
Flow for any future Operating Year will exceed $35.0 million and
that the Company will not be required to make additional capital
contributions to SMCP in accordance with the standby equity
commitment. The Standby Equity Commitment is subject to certain
limitations, qualifications, and exceptions.
Waterfront Entertainment and Development, Inc.
("Waterfront"), the Company's 45% partner, in the East Chicago
Showboat agreed to compensate the Company $5.2 million for the
standby equity commitment. The $5.2 million due the Company shall
accrue interest at 12% per annum until paid from Waterfront's
share of distributable cash from SMCP. The East Chicago Note
Indenture contains restrictions on payments to affiliates,
including the Company, by SMCP. As a result of these
restrictions, the distributable cash flow from SMCP is limited to
good faith estimates of maximum payments for state and federal
income tax liabilities of the Company and Waterfront, until
certain financial ratios are met by SMCP. There can be no
assurance that SMCP will meet their required financial ratios in
order to distribute cash flow to the Company in excess of the
federal and state tax liabilities.
On January 28, 1998, a special purpose subsidiary of the
Company borrowed $100.0 million from Column Financial, Inc. to
acquire 10 1/2 leased acres of real property (the "Atlantic
-57-
<PAGE>
City Property") located at 801 Boardwalk, Atlantic City, New
Jersey and the lease pursuant to which the Atlantic City Property
is leased to Atlantic City Showboat, Inc. from Sun International,
Inc. for a total purchase price of $110.0 million. The loan will
mature on February 1, 2028. Interest accrues on the loan at an
interest rate of 7.09% until February 1, 2008, at which time,
unless paid off as of such date, the loan will accrue a second
tranche of interest at a rate equal to the lesser of (i) the
positive excess (if any) of (A) the 20 Year Treasury Rate plus
2.0% over (B) 7.09%, and (ii) 5.0%. The loan is secured by the
Atlantic City Property.
The Company and Rockingham Venture, Inc. ("RVI"), which owns
the Rockingham Park, a thoroughbred racetrack in New Hampshire,
entered into agreements to develop and manage any additional
gaming that may be authorized at Rockingham Park. In December
1994, the Company loaned RVI approximately $8.9 million, which
loan is secured by a second mortgage on Rockingham Park (as of
December 31, 1997 the loan balance was approximately $7.8
million). At this time, casino gaming is not permitted in the
State of New Hampshire. If casino gaming is legalized, the
Company will, at a minimum, contribute the promissory note as a
capital contribution. Should enabling legislation permit more
than 500 slot machines or any combination of slot machines and
table games, then the Company, subject to available financing,
will contribute funds not to exceed 30% of cash funds required
for the project. At this time, the cost of the project has not
been determined.
During 1997, the Company evaluated its various systems to
determine whether or not those systems were year 2000 compliant.
Based upon this review, the Company has identified those systems
which are not compliant and has implemented a plan to update
those systems. The Company expects the cost to update the
affected systems will not exceed $7 million. The Company is
currently evaluating the effect a failure to bring its systems
into compliance will have on the Company.
The Company believes that it has sufficient capital
resources, including its existing cash balances, cash provided by
operations and existing borrowing capacity, to cover the cash
requirements of its existing operations. The ability of the
Company to satisfy its cash requirements, however, will be
dependent upon the future performance of its casino hotels which
will continue to be influenced by prevailing economic conditions
and financial, business and other factors, certain of which are
beyond the control of the Company. As the Company realizes
expansion opportunities, the Company will need to make
significant capital investments in such opportunities and
additional financing will be required. The Company anticipates
that additional funds will be obtained through loans or public
offerings of equity or debt securities, although no assurance can
be made that such funds will be available or at interest rates
acceptable to the Company.
All statements contained herein that are not historical
facts, including but not limited to, statements regarding the
Company's current business strategy, the Company's prospective
joint ventures, expansions of existing projects, and the
Company's plans for future development and operations, are based
upon current expectations. These statements are forward-looking
in nature and involve a number of risks and uncertainties.
Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the
following: the availability of sufficient capital to finance the
Company's business plan on terms satisfactory to the Company;
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<PAGE>
competitive factors, such as legalization of gaming in
jurisdictions from which the Company draws significant numbers of
patrons and an increase in the number of casinos serving the
markets in which the Company's casinos are located; changes in
labor, equipment and capital costs; the ability of the Company to
consummate its contemplated joint ventures on terms satisfactory
to the Company and to obtain necessary regulatory approvals
therefore; changes in regulations affecting the gaming industry;
the ability of the Company to comply with its Indentures for its
9 1/4% Bonds and 13% Notes; future acquisitions or strategic
partnerships; general business and economic conditions; and other
factors described from time to time in the Company's reports
filed with the Securities and Exchange Commission. The Company
wishes to caution the readers not to place undue reliance on any
such forward-looking statements, which statements are made
pursuant to the Private Litigation Reform Act of 1995 and, as
such, speak only as of the date made.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Not applicable as of the date of this filing.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Independent Auditors' Report;
Consolidated Balance Sheets as of December 31, 1997 and
1996;
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996
and 1995;
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995;
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995; and
Notes to Consolidated Financial Statements
-59-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Showboat, Inc.
We have audited the accompanying consolidated balance sheets
of Showboat, Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Showboat, Inc. and subsidiaries as of
December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Las Vegas, Nevada KPMG PEAT MARWICK LLP
March 13, 1998
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<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996
- ---------------------------------------------- --------------- ---------------
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 67,145 $ 60,287
Short term investments 21,755 28,848
Receivables, net 15,748 12,402
Income tax receivable 2,361 2,396
Inventories 3,328 2,785
Prepaid expenses 6,027 4,470
Current deferred income taxes 6,603 7,802
--------------- ---------------
Total current assets 122,967 118,990
--------------- ---------------
Property and equipment:
Land 12,005 11,545
Land improvements 14,505 14,461
Buildings 392,451 332,265
Vessel 82,528 -
Furniture and equipment 234,762 191,872
Construction in progress 8,139 101,343
--------------- ---------------
744,390 651,486
Less accumulated depreciation and amortization 243,414 211,298
--------------- ---------------
500,976 440,188
--------------- ---------------
Other assets:
Restricted cash and investments 3,000 69,601
Investment in unconsolidated affiliate 125,148 138,964
Deposits and other assets 33,906 30,963
Debt issuance costs, net of
accumulated amortization of $4,193,000
and $2,942,000 at December 31, 1997 and
December 31, 1996, respectively 14,550 15,963
--------------- ---------------
176,604 255,491
--------------- ---------------
$ 800,547 $ 814,669
=============== ===============
(continued)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(continued)
LIABILITIES AND SHAREHOLDERS'
EQUITY 1997 1996
- ---------------------------------------------------------- --------------- ---------------
(In thousands)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt - with recourse $ 28 $ 25
Current maturities of long-term debt - without recourse 5,554 -
Accounts payable 16,756 17,688
Dividends payable 402 405
Accrued liabilities 51,905 41,933
--------------- ---------------
Total current liabilities 74,645 60,051
--------------- ---------------
Long-term debt, excluding current maturities
Debt with recourse 393,066 392,719
Debt without recourse 151,968 140,000
--------------- ---------------
545,034 532,719
--------------- ---------------
Other liabilities 6,184 4,753
--------------- ---------------
Deferred income taxes 11,741 24,888
--------------- ---------------
Minority interest - 113
--------------- ---------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1 par value; 1,000,000
shares authorized; none issued
Common stock, $1 par value; 50,000,000
shares authorized; issued 16,350,849
and 16,181,199 shares at December 31,1997
and 1996, respectively 16,351 16,181
Additional paid-in capital 91,145 87,698
Retained earnings 64,761 84,828
--------------- ---------------
172,257 188,707
Cumulative foreign currency
translation adjustment (8,437) 4,773
Unearned compensation for restricted stock (877) (1,335)
--------------- ---------------
Total shareholders' equity 162,943 192,145
--------------- ---------------
800,547 $ 814,669
=============== ===============
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands except per share data)
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Casino $ 497,124 $ 382,980 $ 379,494
Food and beverage 62,720 56,916 53,894
Rooms 25,395 26,147 25,694
Sports and special events 3,498 3,682 3,924
Management fees 5,671 - 190
Other 7,156 5,876 5,189
------------ ------------ ------------
601,564 475,601 468,385
Less complimentaries 44,748 41,896 39,793
------------ ------------ ------------
Net revenues 556,816 433,705 428,592
------------ ------------ ------------
Operating costs and expenses:
Casino 252,827 193,537 177,644
Food and beverage 37,410 32,287 32,150
Rooms 6,585 7,261 8,339
Sports and special events 2,925 2,774 3,206
General and administrative 149,838 117,355 119,568
Selling, advertising and 26,328 9,638 9,456
promotion
Depreciation and amortization 41,721 32,818 31,533
Preopening costs 9,577 - -
------------ ------------ ------------
527,211 395,670 381,896
------------ ------------ ------------
Income from operations from 29,605 38,035 46,696
consolidated subsidiaries
Equity in income (loss) of (3,504) 4,086 (22)
unconsolidated affiliates
------------ ------------ ------------
Income from operations $ 26,101 $ 42,121 $ 46,674
------------ ------------ ------------
(continued)
</TABLE>
-63-
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS EXCEPT PER SHARE DATA)
(CONTINUED)
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Income from operations $ 26,101 $ 42,121 $ 46,674
Other (income) expense:
Interest income (5,427) (9,572) (6,225)
Gain on sale of affiliate - - (2,558)
Write-down of investment in - 3,789 1,426
affiliate
Foreign currency transaction 353 (100) (271)
(gain) loss
Interest expense, net of amounts 49,362 40,510 29,692
capitalized -------------- -------------- --------------
44,288 34,627 22,064
-------------- -------------- --------------
Income (loss) before income tax
expense (benefit) and minority
interest (18,187) 7,494 24,610
Minority interest (2,636) 1,987 -
-------------- -------------- --------------
Income (loss) before income tax (20,823) 9,481 24,610
expense (benefit)
Income tax expense (benefit) (2,370) 3,478 11,435
-------------- -------------- --------------
Net income (loss) $ (18,453) $ 6,003 $ 13,175
============== ============== ==============
Basic earnings (loss) per share $ (1.14) $ 0.37 $ 0.85
============== ============== ==============
Diluted earnings (loss) per share $ (1.14) $ 0.37 $ 0.84
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
-64-
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
Cumulative
foreign
Additional currency Unearned
Common paid - in Retained translation Treasury compen-
Stock capital earnings adjustment stock sation Total
--------- ------------ ---------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994 $ 15,795 $ 76,845 $68,809 $ 3,490 $ (3,364) $ (4,114) $ 157,461
Net income - - 13,175 - - - 13,175
Cash dividends ($.10
per share) - - (1,550) - - - (1,550)
Share transactions
under stock plans - 3,233 - - 2,777 (116) 5,894
Amortization of unearned
compensation - - - - - 2,166 2,166
Foreign currency trans-
lation adjustment, net
of tax - - - (3,205) - - (3,205)
--------- ------------ ---------- ------------- ---------- ---------- -----------
Balance, December 31,
1995 15,795 80,078 80,434 285 (587) (2,064) 173,941
Net income - - 6,003 - - - 6,003
Cash dividends ($.10
per share) - - (1,609) - - - (1,609)
Share transactions
under stock plans 386 7,620 - - 587 (912) 7,681
Amortization of unearned
compensation - - - - - 1,641 1,641
Foreign currency trans-
lation adjustment, net
of tax - - - 4,488 - - 4,488
--------- ------------ ---------- ------------- ---------- ---------- -----------
Balance, December 31,
1996 16,181 87,698 84,828 4,773 - (1,335) 192,145
Net loss - - (18,453) - - - (18,453)
Cash dividends ($.10
per share) - - (1,614) - - - (1,614)
Purchase of 152,100
shares of treasury stock - - - - (3,043) - (3,043)
Share transactions
under stock plans 170 3,447 - - 3,043 (713) 5,947
Amortization of unearned
compensation - - - - - 1,171 1,171
Foreign currency trans-
lation adjustment, net
of tax - - - (13,210) - - (13,210)
--------- ------------ ---------- ------------- ---------- ---------- -----------
Balance, December 31,
1997 $ 16,351 $ 91,145 $ 64,761 $ (8,437) $ - $ (877) $ 162,943
========= ============ ========== ============= ========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-65-
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (18,453) $ 6,003 $ 13,175
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for doubtful accounts 2,447 1,557 1,605
Depreciation and amortization 41,721 32,818 31,533
Amortization of original issue discount and debt
issuance costs 2,167 1,458 1,281
Provision for deferred income taxes (4,840) 2,094 2,069
Amortization of unearned compensation 1,171 1,641 2,166
Provision for loss on Casino Reinvestment
Development Authority obligation 865 497 1,414
(Earnings) loss of unconsolidated affiliate, net of
distributions 3,504 (4,086) 2,768
(Gain) loss on sale and write-down of affiliates - 3,789 (1,132)
(Gain) loss on disposition of property and equipment 466 147 (36)
Increase in receivables, net (3,312) (2,695) (2,492)
Decrease (increase) in inventories and prepaid expenses (2,100) 281 (209)
Decrease (increase) in deposits and other assets 857 (202) (656)
Pension costs, net of payments 1,519 1,954 882
Increase (decrease) in accounts payable (957) 2,096 4,566
Increase (decrease) in income taxes (payable)/receivable 1,456 1,849 (5,168)
Increase in accrued liabilities 9,974 3,644 1,384
Minority interest share of loss (113) (1,987) -
------------- ----------- -----------
Net cash provided by operating activities $ 36,372 $ 50,858 $ 53,150
------------- ----------- -----------
(continued)
</TABLE>
-66-
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(CONTINUED)
(IN THOUSANDS)
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from investing activities:
Acquisition of property and equipment $ (91,418) ($115,038) ($ 49,573)
Proceeds from sale of property and equipment 513 477 1,065
Proceeds from sale of affiliate - - 51,366
Investments in unconsolidated affiliates (10,514) (11,647) (36,551)
(Advances to) repayments from unconsolidated affiliates (188) 390 1,210
(Increase) decrease in restricted cash 66,601 (69,601) -
Increase in deposits and other assets (2,237) (6,762) (4,639)
Deposit for Casino Reinvestment Development Authority
obligation, net of refunds (4,366) (4,140) (4,052)
Purchase of short-term investments (67,758) (70,677) -
Sales of short-term investments 74,851 41,829 -
------------ ------------ ------------
Net cash used in investing activities (34,516) (235,169) (41,174)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments of long-term debt (3,123) (22) (20)
Proceeds from issuance of long-term debt 9,636 140,000 -
Proceeds from employee stock option exercises 3,528 5,510 -
Debt issuance costs (379) (6,297) (542)
Payment of dividends (1,617) (1,597) (1,543)
Issuance of common stock - - 4,604
Purchases of treasury stock (3,043) - -
Minority interest contributions - 77 2,023
------------ ------------ ------------
Net cash provided by financing activities 5,002 137,671 4,522
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 6,858 (46,640) 16,498
Cash and cash equivalents at beginning of year 60,287 106,927 90,429
------------ ------------ ------------
Cash and cash equivalents at end of year $ 67,145 $ 60,287 $ 106,927
============ ============ ============
(continued)
</TABLE>
-67-
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(CONTINUED)
(IN THOUSANDS)
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow
information and non-cash investing and
financing activities:
Cash paid (refunded) during the year for:
Interest, net of amount capitalized $ 46,448 $ 33,306 $ 28,021
Income taxes 1,010 (465) 14,533
Foreign currency translation adjustment (13,210) 4,488 (3,205)
Equipment acquired under capital lease 10,984 - -
</TABLE>
See accompanying notes to consolidated financial statements.
-68-
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION
Showboat, Inc. and Subsidiaries (collectively, the "Company"
or "SBO"), is an international gaming company that owns and
operates the Atlantic City Showboat Casino Hotel in Atlantic
City, New Jersey (the "Atlantic City Showboat"), the Las Vegas
Showboat Casino, Hotel and Bowling Center in Las Vegas, Nevada
(the "Las Vegas Showboat"), owns a 24.6% equity interest in, and
manages through subsidiaries, the Star City Casino located in
Sydney, New South Wales, Australia, ("Star City" or "Sydney
Harbour Casino") and owns through subsidiaries a 55% interest in,
and manages, the Showboat Mardi Gras Casino located in East
Chicago, Indiana (the "East Chicago Showboat"). Until March 31,
1995, the Company owned an equity interest in and managed a
riverboat casino on Lake Pontchartrain in New Orleans, Louisiana
(Star Casino).
The consolidated financial statements include all domestic
and foreign subsidiaries which are more than 50% owned and
controlled by Showboat, Inc. Investments in unconsolidated
affiliates which are at least 20% owned by Showboat, Inc. are
carried at cost plus equity in undistributed earnings or loss
since acquisition. All material intercompany balances have been
eliminated in consolidation.
CASINO REVENUE AND COMPLIMENTARIES
Casino revenues represent the net win from gaming wins and
losses. Revenues include the retail value of room, food,
beverage, and other goods and services provided to customers
without charge. Such amounts are then deducted as promotional
allowances. The estimated cost of providing these promotional
allowances was charged to the casino department in the following
amounts:
Year Ending December 31,
------------------------------------------
1997 1996 1995
------------ --------------- -----------
(In thousands)
Food and beverage $29,566 $28,421 $27,119
Room 8,484 8,559 7,197
Other 1,331 1,249 1,346
------------ --------------- -----------
Total $39,381 $38,229 $35,662
============ =============== ===========
CASH EQUIVALENTS AND RESTRICTED CASH
The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be
cash equivalents. As of December 31, 1997, restricted cash
consists of short-term investments pledged to secure a line of
credit for the East Chicago Showboat. As of December 31, 1996,
restricted cash consisted of cash and short-term investments held
by the East Chicago Showboat for construction and development.
-69-
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SHORT-TERM INVESTMENTS
Short-term investments as of December 31, 1997 and 1996
consist of U.S. Treasury bills, mortgage-backed corporate debt
securities and certificates of deposit with financial
institutions which have an average maturity date of approximately
seven months. The Company classifies these securities as
available-for-sale as they will be liquidated as needed to fund
cash requirements of the Company. These securities are recorded
at fair value as of December 31, 1997 and 1996. SFAS 115 requires
unrealized holding gains and losses, net of the related tax
effect, on available-for-sale securities to be excluded from
earnings and to be reported as a separate component of
shareholders' equity until realized. Unrealized gains (losses)
of approximately $(64,000) and $6,000 as of December 31, 1997
and 1996 were not material and were therefore included in
interest income. Realized gains and losses from the sale of
available-for-sale securities are determined on a specific
identification basis.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out method.
FAIR VALUE OF CERTAIN FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, receivables and all
current liabilities approximates fair value because of the short
term maturity of these instruments. The fair value of a
financial instrument is the amount at which the instrument could
be exchanged in a current transaction between willing parties.
See Notes 5 and 6 for additional fair value disclosures.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation,
including amortization of capitalized leases, is computed using
the straight-line method. The cost of maintenance and repairs is
charged to expense as incurred; significant renewals and
betterments are capitalized.
Estimated useful lives for property and equipment are 5 to
15 years for land improvements, 10 to 40 years for buildings and
vessel, and 2 to 10 years for furniture and equipment.
INTEREST COSTS
Interest is capitalized in connection with the construction
of major facilities. Further, interest is capitalized on
investments in unconsolidated companies accounted for by the
equity method of accounting during the period the investee
company is undergoing activities necessary to start its planned
principal operations. The capitalized interest is recorded as
part of the asset to which it relates and is amortized over the
asset's estimated useful life. For the years ended December 31,
1997, 1996, and 1995, $14,932,000, $17,081,000, and $13,148,000,
respectively, of interest cost was capitalized.
-70-
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PREOPENING AND DEVELOPMENT COSTS
Costs incurred during the preopening phase are capitalized.
Types of costs capitalized include salaries and wages, temporary
office expenses, marketing expenses, professional fees, training
costs and related travel costs. The 1997 expense of $9,577,000
consists largely of $6,000,000 of salaries and wages. Effective
January 1, 1997, the Company changed its method of accounting for
preopening costs. Preopening costs are now immediately expensed
when a new facility opens for business rather than amortized over
a period not to exceed one year as was previously done.
Expensing these costs at the date of opening is a general
industry practice and will provide a better comparison of the
Company's operations to other gaming companies. There is no
cumulative effect as of January 1, 1997 for this accounting
change.
If the new method of accounting for preopening costs had
been applied as of January 1, 1995, the equity in income of
unconsolidated affiliate would have resulted in the following
consolidated net income for the Company:
1996 1995
-------- --------
(In thousands except per share amounts)
Net Income $6,418 $12,760
Earnings per share-Basic 0.40 0.83
Earnings per share Diluted 0.39 0.81
INCOME TAXES
Under the asset and liability method of accounting for
income taxes, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to carryforward
items and differences between the financial statement carrying
amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under FAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
the period that includes the enactment date.
The Company and its domestic subsidiaries file a
consolidated federal income tax return. The Company filed for
and received a change in tax year-end with the Internal Revenue
Service. The Company's tax year-end has been changed from June
30 to December 31 effective December 31, 1996.
AMORTIZATION OF ORIGINAL ISSUE DISCOUNT AND DEBT ISSUANCE COSTS
Original issue discount is amortized over the life of the
related indebtedness using the effective interest method.
-71-
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Costs associated with the issuance of debt have been
deferred and are being amortized over the life of the related
indebtedness using the straight line method which approximates
the effective interest method.
INCOME PER BASIC AND DILUTED SHARE
In February, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," (Statement 128) which establishes standards
for computing and presenting earnings per share (EPS). It
replaces the presentation of primary and fully diluted EPS with a
presentation of basic and diluted EPS. Statement 128 is
effective for financial statements for both interim and annual
periods ending after December 15, 1997. All prior periods have
been restated to apply the provisions of Statement 128.
Income per basic and diluted share is based on the weighted
average number of shares outstanding. Basic shares outstanding
were 16,127,135, 16,042,518 and 15,453,798 for the years ended
December 31, 1997, 1996, and 1995, respectively.
Diluted shares outstanding were 16,127,135, 16,347,058, and
15,730,478 for the years ended December 31, 1997, 1996, and 1995,
respectively. Diluted shares include stock options and warrants
when dilutive.
STOCK BASED COMPENSATION
Prior to January 1, 1996, the Company accounted for its
stock option plans in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, Accounting
for Stock-Issued to Employees, and related interpretations. As
such, compensation expense would be recorded on the date of grant
only if the current market price of the underlying stock exceeded
the exercise price. On January 1, 1996, the Company adopted SFAS
No. 123, Accounting for Stock-Based Compensation, which permits
entities to recognize as expense over the vesting period the fair
value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide proforma
net income and proforma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if
the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
FOREIGN CURRENCY TRANSLATION
The financial statements of foreign subsidiaries are
adjusted to U.S. generally accepted accounting principles.
Balance sheet accounts are then translated into U.S. dollars at
current exchange rates in effect at the balance sheet date.
Items of revenue and expense are translated at average exchange
rates during the reporting period.
-72-
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Gains and losses resulting from translation of financial
statements are excluded from the Consolidated Statements of
Operations and are credited or charged directly to a separate
component of Shareholders' Equity, net of taxes. Gains and losses
resulting from foreign currency transactions are included in
income currently.
LONG-LIVED ASSETS
In March 1995, the FASB issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be Disposed of,"
which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are
present and the undiscounted cash flow estimated to be generated
by those assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Company adopted
Statement 121 in the first quarter of 1996 and there are no
write-down of assets for the years ended December 31, 1997 and
1996.
USE OF ESTIMATES
Management of the Company has made estimates and assumptions
relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period to prepare these financial
statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to
conform to the current year's presentation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board
issued SFAS No. 130, "Reporting Comprehensive Income" (SFAS No.
130). SFAS No. 130 requires companies to classify items of other
comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital
in the equity section of a statement of financial position, and
is effective for financial statements issued for fiscal years
beginning after December 15, 1997. The Company is currently
assessing the impact of this pronouncement on the Company's
financial statements and notes that foreign currency translation
adjustments and unearned compensation will be shown under
comprehensive income.
-73-
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, "Disclosure About Segments of an Enterprise
and Related Information" (SFAS No. 131). SFAS No. 131
establishes additional standards for segment reporting in the
financial statements and is effective for fiscal years beginning
after December 15, 1997. The Company believes there is no impact
of this pronouncement on the Company's financial statements.
2. RECEIVABLES, NET
Receivables, net consist of the following:
Year Ending December 31,
----------------------------
1997 1996
------------- -------------
(In thousands)
Casino $ 8,157 $ 6,524
Hotel 520 760
Other 10,154 7,535
------------- -------------
18,831 14,819
Less allowance for doubtful accounts 3,083 2,417
------------- -------------
Receivables, net $ 15,748 $ 12,402
============= =============
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
Year Ending December 31,
----------------------------
1997 1996
------------- -------------
(In thousands)
Interest $ 16,252 $ 16,296
Salaries and wages 15,644 11,985
Taxes, other than taxes on income 6,398 2,346
Medical and liability claims 3,584 4,572
Advertising and promotion 3,231 2,326
Outstanding chips and tokens 1,609 1,692
Other 5,187 2,716
------------- -------------
Total accrued liabilities $ 51,905 $ 41,933
============= =============
4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company's wholly-owned subsidiary, Showboat Australia
Pty. Ltd., (SA), invested approximately $100.0 million for
135,000,000 shares (approximately 24.6% interest) in Sydney
Harbour Casino Holdings Limited, (SHCH), which through its wholly
owned subsidiaries, owns the Sydney Harbour Casino and holds the
casino license required to operate the Sydney Harbour
-74-
<PAGE>
4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES (CONTINUED)
Casino. SA also owns 85% of the company engaged to manage the
Star City casino and entertainment complex for a management fee.
On November 26, 1997, the Sydney Harbour Casino commenced gaming
operations in its permanent casino facility after operating out
of an interim facility since September 13, 1995. For the years
ended December 31, 1997 and 1996, $(3,504,000) and $4,086,000 of
net income (loss) from the casino is included in equity in income
(loss) of unconsolidated affiliates in the Consolidated Statement
of Income. The loss from the casino in 1997 is due to the write-
off of approximately $7,160,000 (net of Australian tax) of pre-
opening costs upon the opening of the permanent casino in
November of 1997.
In 1997, for the first time, the Company recorded a
management fee of $5,671,000 from Sydney Harbour Casino. Due to
an agreement with the Sydney Harbour Casino the first A$19.1
million of management fees were forgiven, which amount was
satisfied during the second quarter of 1997 following
approximately 20 months of operations by the Sydney Harbour
Casino in its interim facility.
In addition to its 24.6% equity interest in SHCH, SA has an
option to purchase an additional 37,446,553 ordinary shares of
the fully diluted equity of SHCH at an exercise price of A$1.15
per share. SA's option may be exercised no earlier than July 1,
1998 and expires June 30, 2000.
In March 1995, the Company, with an unrelated corporation,
formed Showboat Mardi Gras, L.L.C. (SMG) to own and operate,
subject to licensing, a riverboat casino near Kansas City,
Missouri. The Company invested approximately $5.2 million in a
combination of both equity and advances to SMG. SMG was not
selected by the Missouri Gaming Commission for investigation for
a gaming license. Due to a decline in the market value of the
assets of SMG, principally a riverboat, the Company recorded a
pre-tax write-down of $3,789,000 and $1,426,000 in the years
ended December 31, 1996 and 1995, respectively, which is included
in the Consolidated Statements of Income as write-down of
investment in affiliate. The 1996 write-down includes the
Company's remaining investment in SMG, and the Company has no
further obligations to SMG.
-75-
<PAGE>
4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES (CONTINUED)
Summarized condensed financial information of SHCH as of and
for the years ending December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
(In thousands)
<S> <C> <C>
Sydney Harbour Casino Holdings Ltd.
(Unaudited)
Income statement data<F1>
Net revenues $ 249,900 $ 295,600
Net income (loss) (12,800) 17,700
Company's share of net income (loss) $ (3,504) $ 4,086
Balance sheet data:
Assets:
Property and equipment, net $ 613,400 $ 460,300
Other assets 279,200 349,400
--------------- --------------
Total assets $ 892,600 $ 809,700
=============== ==============
Liabilities and shareholders' equity:
Liabilities $ 523,100 $ 342,400
Shareholders' equity:
Company's 90,800 115,000
Other shareholders' 278,700 352,300
--------------- --------------
Total liabilities and shareholders' equity $ 892,600 $ 809,700
=============== ==============
<FN>
<F1> Amounts calculated using average exchange rate for the years ending December 31, 1997 and 1996.
</FN>
</TABLE>
The difference between the Company's equity in SHCH shown
above and the amounts reported as investment in unconsolidated
affiliate in the Company's Consolidated Balance Sheets is
primarily due to capitalized interest of approximately
$34,300,000 and $24,200,000 in 1997 and 1996, respectively.
5. NEW JERSEY INVESTMENT OBLIGATION
The New Jersey Casino Control Act (Act) provides, among
other things, for an assessment on a gaming licensee based upon 1
1/4% of its gross casino revenues. This assessment is satisfied
by investing in qualified direct investments or purchasing bonds
issued by the Casino Reinvestment Development Authority (CRDA).
In order for direct investments to be eligible, they must be
approved by the CRDA.
-76-
<PAGE>
5. NEW JERSEY INVESTMENT OBLIGATION (CONTINUED)
Deposits with the CRDA bear interest at two-thirds of market
rates resulting in a current value lower than cost. At December
31, 1997 and 1996, deposits and other assets include $9,146,000
and $7,009,000, respectively, representing the Company's bond
purchases and deposits with the CRDA of $13,616,000 as of
December 31, 1997 and $10,616,000 as of December 31, 1996, net of
a valuation allowance of $4,471,000 and $3,607,000, respectively.
The carrying value of these deposits, net of the valuation
allowance, approximates fair value.
The Company is eligible to receive approximately $8,800,000
in funding credits reserved by the Casino Reinvestment
Development Authority (CRDA), as a result of the completion of
the hotel expansion program at the Atlantic City Showboat,
completed in 1994. To date, the Company has received
approximately $2,900,000. As of December 31, 1997, approximately
$4,900,000 in funding credits is available for distribution to
the company. The remaining $1,000,000 of reserved funding
credits is expected to be distributed in the future.
6. LONG-TERM DEBT
The Company's debt is categorized separately as debt
guaranteed by the Company (generally known as recourse debt) and
debt not guaranteed by the Company (generally known as non-
recourse debt).
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1997 1996
-------------- --------------
(In thousands)
<S> <C> <C>
Recourse Debt:
9 1/4% First Mortgage Bonds (Bonds) due
2008 net of unamortized discount of
$3,881,000 and $4,257,000 at December 31,
1997 and 1996, respectively $ 271,119 $ 270,743
13% Senior Subordinated Notes(Notes) due
2009 120,000 120,000
Capital lease obligations 1,974 2,001
Non-recourse Debt:
13 1/2% First Mortgage Notes(East Chicago
Notes) due 2003 140,000 140,000
Equipment loan 8,244 -
Capital lease obligations 9,279 -
-------------- --------------
550,616 532,744
Less current maturities 5,582 25
-------------- --------------
$ 545,034 $ 532,719
============== ==============
</TABLE>
-77-
<PAGE>
6. LONG-TERM DEBT (CONTINUED)
The Bonds are secured by substantially all of the Company's
assets and are unconditionally guaranteed by Ocean Showboat, Inc.
(OSI), Atlantic City Showboat, Inc. (ACSI) and Showboat
Operating Company (SOC), subsidiaries effectively owned 100% by
the Company. Interest on the Bonds is payable semi-annually on
May 1 and November 1 of each year. The Bonds are not redeemable
prior to May 1, 2000. Thereafter, the Bonds will be redeemable,
in whole or in part, at redemption prices specified in the Bond
Indenture. The Bonds are senior secured obligations of the
Company and rank senior in right of payment to all existing and
future subordinated indebtedness of the Company and pari passu
with the Company's senior indebtedness. The Bonds are
collateralized by substantially all the assets of the Company.
The Bond Indenture, as amended, places significant
restrictions on the incurrence of additional indebtedness by SBO
and its subsidiaries, the creation of additional liens on the
collateral securing the Bonds, transactions with affiliates and
payment of certain restricted payments (as defined), including
certain investments made by SBO and its subsidiaries. The
Company was in compliance with the Bond Indenture Covenants as of
December 31, 1997.
The Notes are unsecured and unconditionally guaranteed by
OSI, ACSI and SOC. Interest on the Notes is payable semi-
annually on February 1 and August 1 of each year. The Notes will
be redeemable, in whole or in part, at the option of the company
at any time on or after August 1, 2001 at redemption prices
specified in the Indenture for the Notes (Note Indenture). The
Notes are general obligations of the Company, subordinated in
right of payment to all Senior Debt (as defined in the Note
Indenture) of the Company. The Note Indenture permits the
issuance of an additional $30,000,000 of Notes at the discretion
of the Company.
The Note Indenture places significant restrictions on the
Company, many of which are substantially similar to the
restrictions placed on the Company by the Bond Indenture, as
amended. The Company was in compliance with all the Note
Indenture Covenants as of December 31, 1997.
Included in the covenants to the Bond Indenture and the
Note Indenture is a covenant requiring the Company to offer to
the holders of the Bonds and the Notes to purchase such bonds and
notes at a purchase price equal to 101% of the principal amount
plus accrued interest at a date which is no later than 30 days
after such change in control. The announced merger between
Harrah's and Showboat will result in a change in control. No
assurance can be given that the Company will have sufficient
funds available to purchase the bonds and notes tendered by
holders in the event such holders desire to accept the change in
control offer.
On March 28, 1996 the Company's 55% owned subsidiaries,
Showboat Marina Casino Partnership (SMCP) and Showboat Marina
Finance Corporation (SMFC), sold its $140.0 million 13 1/2% East
Chicago Notes. The net proceeds from the sale were $133,700,000
net of financing costs. The funds were raised to support the
development of the East Chicago Showboat.
-78-
<PAGE>
6. LONG-TERM DEBT (CONTINUED)
The East Chicago Notes are senior secured obligations of
SMCP and rank senior in right of payment to all existing and
future subordinated indebtedness of SMCP and pari passu with
SMCP's senior indebtedness. Interest is payable semi-annually on
March 15, and September 15, of each year. The East Chicago Notes
will be redeemable at the option of SMCP, in whole or in part, on
or after March 15, 2000, at the redemption prices set forth in
the Indenture. The East Chicago Notes are without recourse to the
Company.
In June 1997, SMCP obtained a loan of approximately
$9,636,000 from FINOVA Capital Corporation secured by certain
equipment. The loan is for a term of 36 months with a fixed rate
of 11.1%.
The Company renewed and increased its two year secured line
of credit for general working capital purposes to $35.0 million
with Fleet Bank N.A. effective as of July 1997. At the end of
the two year term, any outstanding funds may convert to a three
year term loan. The bank received security pari passu with the
holders of the Company's $275.0 million 9 1/4% First Mortgage
Bonds due 2008. As of December 31, 1997, all of the funds under
this line of credit were available for use by the Company.
In October 1997, SMCP entered into a line of credit with
Fleet Bank in the amount of $3.0 million. The line of credit is
secured by the Company with funds on deposit with Fleet Bank.
The term of the line is for a period of one year, renewable
annually at an interest rate of LIBOR plus 75 basis points. As
of December 31, 1997, all of the funds under this line of credit
were available for use by SMCP. On March 13, 1998, SMCP borrowed
the entire $3.0 million for the payment of the interest on the
East Chicago Notes due March 15, 1998.
Maturities of the Company's long-term debt exclusive of
unamortized discount are as follows:
Year Ending December 31,
(in thousands)
1998 $ 5,582
1999 6,205
2000 4,951
2001 2,759
2002 -
Thereafter 535,000
---------
$ 554,497
=========
The fair value of the Company's Bonds, Notes and East
Chicago Notes were $294,250,000, $144,300,000 and $166,600,000
respectively, at December 31, 1997 based on the quoted market
prices. The carrying amount of capital leases and the equipment
loan approximates fair value at December 31, 1997.
-79-
<PAGE>
7. LEASES
The Company leases certain furniture and equipment and a
warehouse under long-term capital lease agreements. The leases
covering furniture and equipment expire in 1999 and 2001 and the
warehouse lease expires in 2001. The Company has an option to
purchase the warehouse from January 1, 1996 through March 31,
2001 at an option price of approximately $1,928,000.
Property leased under capital leases by major classes are as
follows:
December 31,
1997 1996
------------ ------------
(In thousands)
Building - warehouse $ 2,050 $2,050
Furniture and equipment 11,136 152
------------ ------------
13,186 2,202
Less accumulated amortization 2,918 1,520
------------ ------------
$ 10,268 $ 682
============ ============
ACSI is leasing 10 1/2 acres of Boardwalk property in
Atlantic City, New Jersey for a term of 99 years which commenced
October 1983. Annual rent payments, which are payable monthly,
commenced upon opening of the Atlantic City Showboat. The rent
is adjusted annually based upon changes in the Consumer Price
Index. In April 1997, the annual rent increased $242,000 to
$9,047,000. ACSI is responsible for taxes, assessments,
insurance and utilities. On January 28, 1998, a special purpose
subsidiary of the Company acquired the 10 1/2 acres of Boardwalk
property and the lease.
SMCP is obligated to pay East Chicago $400,000 annual rent
with such rentals being adjusted every 3 years based upon changes
in the Consumer Price Index subject to a maximum of 5% increase
for each adjustment.
SMCP also holds a leasehold interest in certain property in
East Chicago, Indiana for land used for offsite employee parking.
The lease is for a term of three years and may be renewed at the
option of SMCP for two additional five year terms. Payments of
$5,000 are due monthly with an adjustment on the first of May of
each year of the lease term to reflect changes in real estate
taxes.
-80-
<PAGE>
7. LEASES (CONTINUED)
The following is a schedule of future minimum lease payments
for capital leases and operating leases (with initial or
remaining terms in excess of one year) as of December 31, 1997:
<TABLE>
<CAPTION>
Capital Operating
Year ending December 31, Leases Leases
---------------- ----------------
(In thousands)
<S> <C> <C>
1998 $ 3,668 $ 11,571
1999 3,654 10,170
2000 3,634 9,807
2001 2,773 9,447
2002 - 9,447
Thereafter - 732,930
---------------- ----------------
Total minimum lease payments 13,729 $ 783,372
Less amount representing interest (10.4% to 12.9%) 2,476 ================
----------------
Present value of net minimum capital lease payments $ 11,253
Less current installments of obligations under capital
leases 2,556
----------------
Obligations under capital leases excluding current
portion $ 8,697
================
</TABLE>
Rent expense for all operating leases was $11,751,000,
$11,356,000 and $11,241,000 for the years ended December 31,
1997, 1996 and 1995, respectively.
8. INCOME TAXES
Total income tax expense (benefit) was allocated as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Continuing operations ($ 2,370) $ 3,478 $ 11,435
Shareholders' equity, related to
cumulative foreign currency translation
adjustment (7,113) 2,417 (1,726)
Shareholders' equity, primarily due to the tax
benefit related to the exercise of stock options (1,421) (2,170) (1,471)
---------- ---------- ----------
($ 10,904) $ 3,725 $ 8,238
========== ========== ==========
</TABLE>
-81-
<PAGE>
8. INCOME TAXES (CONTINUED)
Income tax expense (benefit) attributable to income from
continuing operations consists of:
<TABLE>
<CAPTION>
Year Ending December 31,
---------------------------------------------
1997 1996 1995
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
U.S. federal
Current ($ 419) ($ 587) $ 5,489
Deferred (4,581) 1,786 2,477
------------ ------------ ------------
(5,000) 1,199 7,966
------------ ------------ ------------
State and foreign
Current 2,889 1,971 3,877
Deferred (259) 308 (408)
------------ ------------ ------------
2,630 2,279 3,469
------------ ------------ ------------
Total
Current 2,470 1,384 9,366
Deferred (4,840) 2,094 2,069
------------ ------------ ------------
($ 2,370) $ 3,478 $ 11,435
============ ============ ============
</TABLE>
Income tax expense (benefit) attributable to income from
continuing operations differed from the amounts computed by
applying the U.S. federal income tax rate of 35% for the years
ended December 31, 1997, 1996 and 1995 to pretax income from
continuing operations as a result of the following:
<TABLE>
<CAPTION>
Year Ending December 31,
----------------------------------------
1997 1996 1995
------------ ------------ -----------
(In thousands)
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) ($ 7,288) $ 3,318 $ 8,614
Increase (reduction) in income tax from:
Equity in income (loss) from foreign
unconsolidated affiliate not subject
to US tax 1,111 (1,413) -
State and foreign income taxes,
net of federal tax benefit 1,821 1,523 2,174
Permanent difference for employee
cafeteria costs 1,102 - -
Other, net 884 50 647
------------ ------------ -----------
Income tax expense (benefit) ($ 2,370) $ 3,478 $ 11,435
============ ============ ============
</TABLE>
-82-
<PAGE>
8. INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit carryforwards $ 8,092 $ 5,496
Partnership loss attributable to minority partners 4,080 -
Accrued vacations 1,945 1,992
Executive deferred compensation 1,912 1,370
General business credit carryforwards 1,868 113
Interest income from partnership 1,653 702
Casino Reinvestment Development Authority obligation 1,334 1,085
Allowance for doubtful accounts 1,235 984
Bonus accrual 936 382
Long-term incentive plan 908 1,064
Accrued liability claims 690 697
Accrued medical claims 597 1,022
Cumulative foreign currency translation adjustment 4,543 -
Other 2,718 3,232
------------ ------------
Total gross deferred tax assets 32,511 18,139
------------ ------------
Deferred tax liabilities:
Depreciation and amortization 22,215 20,639
Capitalized interest 14,396 11,056
Cumulative foreign currency translation adjustment - 2,570
Other 1,038 960
------------ ------------
Total gross deferred tax liabilities 37,649 35,225
------------ ------------
Net deferred tax liabilities $ 5,138 $ 17,086
============ ============
</TABLE>
At December 31, 1997, the Company had available $8,092,000
of alternative minimum tax credit carryforwards which are
available to reduce future federal regular income taxes, if any,
over an indefinite period.
-83-
<PAGE>
9. EMPLOYEE BENEFIT PLANS
The Company maintains a retirement and savings plan for
eligible employees who are not covered by a collective bargaining
agreement or by another plan to which the Company contributes.
Under the terms of the plan, eligible employees may defer up to
3% of their compensation, as defined, of which 100% of the
deferral is matched by the Company. Eligible employees may
contribute an additional 12% of their compensation which will not
be matched by the Company. Contributions by the Company vest
over a five-year period. The Company contributed an aggregate of
$2,384,000, $1,947,000 and $1,932,000 to this plan for the years
ended December 31, 1997, 1996 and 1995, respectively.
The Company's union employees are covered by union-
sponsored, collectively-bargained, multi-employer pension plans.
The Company contributed and charged to expense $1,339,000,
$1,315,000 and $1,326,000 during the years ended December 31,
1997, 1996 and 1995, respectively. These contributions are
determined in accordance with the provisions of negotiated labor
contracts and generally are based on the number of hours worked.
In August 1994, the Company implemented a Supplemental
Executive Retirement Plan (SERP) for a select group of management
personnel to ensure that the Company's overall executive
compensation program will attract, retain and motivate qualified
senior management personnel. The participants receive benefits
based on years of service and final compensation. This defined
benefit plan is noncontributory and unfunded. The pension costs
are determined actuarially and are based on the assumption that
all eligible personnel will participate in the SERP.
The net pension cost for the years ended December 31, 1997,
1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996 1995
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Service costs of benefits earned $ 346 $ 391 $ 368
Interest cost on projected benefit obligation 428 422 387
Amortization of unrecognized prior service costs 284 284 284
------------ ------------ ------------
$1,058 $1,097 $1,039
============ ============ ============
</TABLE>
-84-
<PAGE>
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
The status of the defined benefit plan at December 31, 1997
and 1996 is as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
------------ ------------
(In thousands)
<S> <C> <C>
Fair value of plan assets $ - $ -
------------ ------------
Actuarial present value of benefit obligation:
Vested benefit obligation 2,871 2,489
Non-vested benefit obligation 1,566 1,210
------------ ------------
Accumulated benefit obligation 4,437 3,699
Effect of projected future salary increases 1,199 1,955
------------ ------------
Projected benefit obligation 5,636 5,654
------------ ------------
Plan assets less than projected benefit obligation (5,636) (5,654)
Unrecognized prior service costs 3,124 3,408
Unrecognized gain (1,092) (531)
Adjustment to recognize minimum liability (833) (922)
------------ ------------
Accrued pension cost included in other liabilities ($ 4,437) ($ 3,699)
------------ ------------
</TABLE>
Prior service costs to be recognized in income in future
years of $833,000 and $922,000 at December 31, 1997 and 1996,
respectively, are included in deposits and other assets in the
Consolidated Balance Sheets.
The assumptions used in computing the information above were
as follows:
1997 1996
------ ------
Discount rate 7.00% 7.25%
Future compensation growth rate 4.50% 4.50%
-85-
<PAGE>
10. STOCK PLANS
The Company has various incentive plans under which stock
options or restricted shares may be granted to key employees,
members of the Board of Directors and all other full and part-
time employees. A total of 3,720,000 shares have been reserved
for issuance as stock options or restricted shares under these
plans. Restricted shares and options granted to key employees
vest over a five-year period. All other options vest over a one-
year period. The options are exercisable, subject to vesting,
over ten years at option prices not less than 100% of the fair
market value of the Company's common stock determined on the date
of grant of the options. In addition, all unvested shares and
options will vest upon a change in control of the Company. The
Showboat Merger discussed at Note 16 would be considered a change
in control of the Company.
Unearned compensation in connection with restricted stock
issued for future services is recorded on the date of grant at
the fair market value of SBO's common stock and is being
amortized ratably from the date of grant over the five-year
vesting period as it is earned. Compensation expense of
$1,066,000, $1,641,000, and $2,166,000 was recognized for the
years ended December 31, 1997, 1996, and 1995, respectively.
Unearned compensation has been shown as a reduction of
shareholders' equity in the accompanying Consolidated Balance
Sheets.
The Company has four fixed option plans. Under the 1989
Long Term Incentive Plan, the Company may grant options and
restricted shares to its employees for up to 600,000 shares of
stock. Under the Directors Plan, the Company may grant options
to the directors for up to 120,000 shares of stock. Under the
1994 Long Term Incentive Plan, the Company may grant options and
restricted shares to its employees for up to 2,000,000 shares of
stock. Under the 1992 Employee Plan, The Company may grant
options and restricted shares to its employees for up to
1,000,000 shares of stock.
As required by SFAS 123, the fair value of each option grant
is estimated on the date of grant using the Black-Scholes option-
pricing model with the following weighted average assumptions:
dividend yield of .34%, expected volatility of 45%, risk free
interest rate of 5.60%, and expected life of 5 years for the
options.
-86-
<PAGE>
10. STOCK PLANS (CONTINUED)
A summary of the status of the Company's fixed stock option
plans as of December 31, 1997, 1996 and 1995, and changes during
the years then ended is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
Shares Shares Shares
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Outstanding at beginning of year 1,444 1,646 1,916
Granted 342 306 240
Exercised (290) (355) (345)
Forfeited (217) (153) (165)
-------- -------- --------
Outstanding at end of year 1,279 1,444 1,646
=================================
Options exercisable at year-end 627 630 670
Weighted average fair value of options
granted during the year $9.47 $11.49 $6.71
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
Weighted Weighted Weighted
Avg. Avg. Avg.
exercise exercise exercise
price price price
-------- -------- --------
<S> <C> <C> <C>
Outstanding at beginning of year $19 $17 $17
Granted 20 25 15
Exercised 16 16 13
Forfeited 21 20 19
Outstanding at end of year $20 $19 $17
</TABLE>
-87-
<PAGE>
10. STOCK PLANS (CONTINUED)
The following table summarizes information about fixed stock
options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------- ------------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at Contractual Exercise at Exercise
Price 12/31/97 Life Price 12/31/97 Price
- ------------ ----------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$ 7 to 8 47,000 2.2 years $8 47,000 $8
$15 to 19 228,000 6.9 15 181,000 15
$20 to 29 1,004,000 8.3 21 399,000 21
----------- -----------
$7 to 29 1,279,000 7.8 $20 627,000 $19
=========== ===========
</TABLE>
The Company applies APB Opinion No. 25 and related
Interpretations in accounting for its fixed stock option plans.
Accordingly, no compensation cost has been recognized for its
fixed stock options plans. Had compensation cost for the
Company's stock-based compensation plans been determined
consistent with FASB Statements No. 123, the Company's net income
(loss) and earnings (loss) per share would have been reduced to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
(Thousands except for per share data)
<S> <C> <C> <C>
Net income as reported $(18,453) $6,003 $13,175
Pro forma $(19,281) $5,468 $12,988
Basic earnings per share:
As reported $(1.14) $0.37 $0.85
Pro forma $(1.20) $0.34 $0.84
Diluted earnings per share:
As reported $(1.14) $0.37 $0.84
Pro forma $(1.20) $0.33 $0.83
</TABLE>
Pro forma net income reflects only options granted in 1997,
1996 and 1995. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 is not
reflected in the pro forma net income amounts presented above
because compensation cost is reflected over the options' vesting
period of five years and compensation cost for options granted
prior to January 1, 1995 is not considered. Also, the impact
discussed above may not be indicative of the impact of future
years.
-88-
<PAGE>
10. STOCK PLANS (CONTINUED)
In 1996, the Company adopted a Stock Appreciation Rights
Plan (the "Rights Plan"). The Rights Plan provides for the
granting of stock appreciation rights ("Rights") to certain key
employees of the Company. Holders of Rights will be entitled to
receive from the Company cash in the amount equal to the excess,
if any, of the market price of the common stock on the date of
change in control of the Company (as defined in the Rights Plan)
over the exercise price of the Rights. The Showboat Merger
described at Note 16 would be considered a change in control of
the Company. As of December 31, 1997, the Company had granted
640,000 stock appreciation rights to certain executive officers
of the company at an exercise price of $24.58.
11. SHAREHOLDERS' EQUITY
On October 5, 1995, the Board of Directors of the Company
declared a dividend distribution of one Preferred Stock Purchase
Right ("Right") for each outstanding share of common stock of the
Company. The distribution was payable as of October 16, 1995 to
stockholders of record on that date. Each Right entitles the
registered holder to purchase from the Company one one-hundredth
(1/100th) of a share of preferred stock of the Company,
designated as a Series A Junior Preferred Stock at a price of
$120.00 per one one-hundredth (1/100th) of a share. The Rights
expire on October 5, 2005, unless earlier redeemed. The Company
may redeem the rights in whole, but not in part, at a price of
$.01 per Right. The Rights, unless earlier redeemed by the
Company, will become exercisable following a public announcement
that a person or group has acquired 15% or more of the common
stock or has commenced (or announced an intention to make) a
tender or exchange offer for 30% or more of the common stock.
200,000 shares of preferred stock have been reserved for issuance
upon exercise of the Rights. The Company did not believe the
Rights had a material value upon declaration of the dividend.
Each share of Preferred Stock will be entitled to receive
when, as and if declared, a quarterly dividend in an amount equal
to the greater of $120.00 per share or 100 times the cash
dividends declared on the Company's common stock. In the event
of liquidation, the holders of Preferred Stock will be entitled
to receive for each share of Series A Preferred Stock, a
liquidation payment in an amount equal to the greater of
$12,000.00 or 100 times the payment made per share of common
stock. Each share of Preferred Stock will have 100 votes, voting
together with the common stock. In the event of any merger,
consolidation or other transaction in which common stock is
exchanged, each share of Preferred Stock will be entitled to
receive 100 times the amount received per share of common stock.
The rights of Preferred Stock as to dividends, liquidation and
voting are protected by anti-dilution provisions.
-89-
<PAGE>
12. SELECTED QUARTERLY DATA (UNAUDITED)
Summarized unaudited financial data for interim periods for
the years ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Quarter Ended Year Ended
--------------------------------------------- ----------------
3/31/97 6/30/97 9/30/97 12/31/97 12/31/97
----------- --------- ---------- ------------ ----------------
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
Net revenues $104,033 $149,305 $162,399 $141,079 $556,816
Income (loss)from
operations 8,371 7,121 20,389 (9,780) 26,101
Net income (loss) 879 (1,999) 3,512 (20,845) (18,453)
Net income (loss)
per share - Basic .05 (0.12) 0.22 (1.30) (1.14)
Net income (loss)
per share - Diluted $.05 $(0.12) $0.22 $(1.30) $(1.14)
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended Year Ended
--------------------------------------------- ----------------
3/31/96 6/30/96 9/30/96 12/31/96 12/31/96
----------- --------- ---------- ------------ ----------------
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
Net revenues $102,590 $109,225 $122,242 $99,648 $433,705
Income from
operations 8,439 10,082 16,593 7,007 42,121
Net income (loss) (801) 1,136 4,901 767 6,003
Net income (loss)
per share - Basic (0.05) 0.07 0.30 0.05 0.37
Net income (loss)
per share - Diluted $(0.05) $0.07 $0.30 $0.05 $0.37
</TABLE>
All per share amounts have been recalculated in accordance with Statement 128.
13. SUPPLEMENTAL FINANCIAL INFORMATION
A summary of additions and deductions to the allowance for
doubtful accounts receivable for the years ended December 31,
1997, 1996, and 1995 follows:
<TABLE>
<CAPTION>
Year Ended Balance at Balance at
beginning end of
of year Additions Deductions Year
- ------------------------- ------------------ ----------- -------------- -----------
(In thousands)
<S> <C> <C> <C> <C>
December 31, 1997 $2,417 $2,447 $1,781 $3,083
December 31, 1996 $2,681 $1,557 $1,821 $2,417
December 31, 1995 $2,400 $1,605 $1,324 $2,681
</TABLE>
-90-
<PAGE>
14. COMMITMENTS AND CONTINGENCIES
On March 28, 1996, the Company's 55% owned subsidiaries,
Showboat Marina Casino Partnership ("SMCP") and Showboat Marina
Finance Corporation ("SMFC"), sold the East Chicago Notes to
support the development of the East Chicago Showboat.
Additionally, the Company contributed $40.7 million to SMCP
through Intermediary Partnerships. The Company is eligible to
receive a 12% preferred return on its $40.7 million investment,
however, the payment of this return is subject to restrictions
under the East Chicago Note Indenture. In addition to its $40.7
million investment, subject to certain qualifications and
exceptions, the Company entered into a standby equity commitment
with SMCP, pursuant to which it will cause to be made up to an
aggregate of $30.0 million in additional capital contributions to
SMCP if, during the first three full four fiscal quarters
following the commencement of operations at the East Chicago
Showboat, the project's combined cash flow (as defined) is less
than $35.0 million for any one such full four quarter period.
However, in no event will the Company be required to cause to be
contributed to SMCP more than $15.0 million in respect of any
such full four quarter period. The Company anticipates that the
Combined Cash Flow of the East Chicago Showboat for the first
full four quarters of operation will not achieve the $35.0
million threshold and that the Company will be required to
contribute approximately $15.0 million under the standby equity
commitment. As of March 12, 1998 the Company has contributed
$1.0 million to the East Chicago Showboat as part of this standby
equity commitment. There can be no assurance that the Combined
Cash Flow for any future Operating Year will exceed $35.0 million
and that the Company will not be required to make additional
contributions to the East Chicago Showboat in accordance with the
standby equity commitment.
The Company and Rockingham Venture, Inc. ("RVI"), which owns
the Rockingham Park, a thoroughbred racetrack in New Hampshire,
entered into agreements to develop and manage any additional
gaming that may be authorized at Rockingham Park. In December
1994, the Company loaned RVI approximately $8.9 million, bearing
interest at 8.3%, which loan is secured by a second mortgage on
Rockingham Park. At this time, casino gaming is not permitted in
the State of New Hampshire. If casino gaming is legalized, the
Company will, at a minimum, contribute the promissory note as a
capital contribution to a joint venture. Should enabling
legislation permit more than 500 slot machines or any combination
of slot machines and table games, then the Company, subject to
available financing, will contribute funds not to exceed 30% of
cash funds required for the project. At this time, the cost of
the project has not been determined.
On November 3, 1997, SMCP amended its agreement with
Riverboat Services, Inc. ("RSI") whereby RSI will operate and
maintain the riverboat. RSI will be reimbursed for all expenses
and will receive a management fee of $60,000 per month. The
initial term of the agreement is five years commencing January
1997, with two renewal periods of five years each at the option
of RSI.
The Company is involved in various claims and legal actions
arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not
have a material adverse effect on the Company's financial
statements taken as a whole.
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<PAGE>
15. SUBSEQUENT EVENT
On January 28,1998, a special purpose subsidiary of the
Company borrowed $100.0 million from Column Financial, Inc. to
acquire 10 1/2 leased acres of real property ("the Atlantic City
Property") located at 801 Boardwalk, Atlantic City, New Jersey
and the lease pursuant to which the Atlantic City Property was
leased to Atlantic City Showboat, Inc.("ACSI") from Sun
International, Inc. for a total purchase price of $110.0 million.
The loan will mature on February 1, 2028. Interest accrues on
the loan at an interest rate of 7.09% until February 1, 2008, at
which time, unless paid off as of such date, the loan will accrue
a second tranche of interest at a rate equal to the lesser of (i)
the positive excess (if any) of (A) the 20 year Treasury Rate
plus 2.0% per annum over (B) 7.09%, and (ii) 5.0% per annum. The
loan is secured by the Atlantic City Property.
16. SHOWBOAT MERGER
On December 18, 1997, the Company entered an Agreement and
Plan of Merger (the "Showboat Merger Agreement") with Harrah's
Entertainment, Inc., a Delaware corporation ("Harrah's"), and HEI
Acquisition Corp., a Nevada corporation and wholly owned
subsidiary of Harrah's ("Harrah's Sub"), whereby the Company
would merge into Harrah's Sub and consequently become a wholly
owned subsidiary of Harrah's (the "Showboat Merger" ). The
Company will hold a special meeting of shareholders on April 23,
1998 for the Company's shareholders to consider the Showboat
Merger. If the Showboat Merger is approved by Showboat
Shareholders, and other conditions to the Showboat Merger are
satisfied or waived, articles of merger will be filed with the
Nevada Secretary of State and the Company's shareholders will
become entitled to receive $30.75 in cash per share of common
stock of the Company held (the day of the filing of the articles
of merger is hereafter referred to as the "Closing Date"). In
the event the Company's shareholders approve the merger, the
Company expects to complete the merger by the end of the second
quarter of 1998.
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<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information is furnished with respect to each
member of the Board of Directors, each of whom, unless otherwise
indicated, has served as a director continuously since the year
shown opposite his or her name. Similar information is presented
for the executive officers who are not directors. There are no
family relationships between or among any of the Company's
directors or executive officers, except J.K. Houssels and Jeanne
S. Stewart formerly were married and are the parents of J. Kell
Houssels, III.
IDENTIFICATION OF DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITION WITH THE COMPANY<F1> AGE SINCE BACKGROUND INFORMATION<F1>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
J.K. HOUSSELS 75 1960 Until May 1994, President and Chief
Chairman of the Board of the Executive Officer of the Company; since
Company, Showboat Operating November 1974, Vice Chairman of the
Company and Ocean Showboat, Board of Directors of Union Plaza Hotel
Inc.; Director of the Company and Casino, Inc., Las Vegas, Nevada.
and all subsidiaries.
WILLIAM C. RICHARDSON 71 1972 Independent financial consultant, Los
Director of the Company and Angeles, California; since January
Ocean Showboat, Inc. 1986, arbitrator and mediator for the
American Arbitration Association and
self regulatory organizations.
JOHN D. GAUGHAN 77 1978 Since November 1974, Chairman of the
Director of the Company and Board and President of Exber, Inc.,
all subsidiaries. doing business as the El Cortez Hotel
and the Western Hotel and Casino, Las
Vegas, Nevada; since 1986, Chairman of
the Board of Union Plaza Hotel and
Casino, Inc., Las Vegas, Nevada.<F2>
JEANNE S. STEWART 75 1979 Retired attorney, Las Vegas, Nevada.
Director of the Company and
Ocean Showboat, Inc.
FRANK A. MODICA 70 1980 Until May 1995, Chairman of the Board
Director of the Company and of Atlantic City Showboat, Inc.; until
all subsidiaries. February 1995, Executive Vice President
and Chief Operating Officer of the
Company and President and Chief
Executive Officer of Showboat Operating
Company; since January 1995 Director
Emeritus of First Security Bank, Las
Vegas, Nevada; until December 1994
Director of First Security Bank;
Director of the Professional Bowlers
Association since June 1996; and
Director Monarch Casino & Resort, Inc.
since April 1997.
H. GREGORY NASKY 55 1983 From October 1993 to February 1995,
Executive Vice President Managing Director and Chief Executive
of the Company and Showboat Officer of Showboat Australia Pty
Operating Company; Presi- Limited; from March 1994 to February
dent and Chief Executive 1995, Chief Executive Officer and
Officer of Showboat Managing Director of Sydney Harbour
Development Company; Casino; since March 1994, of counsel
Secretary and Director of to the law firm Kummer Kaempfer Bonner
the Company and all & Renshaw, Las Vegas, Nevada, outside
subsidiaries. legal counsel to the Company; until
February 1994, member of the law firm
of Vargas & Bartlett, Las Vegas and
Reno, Nevada, previous general counsel
to the Company.
J. KELL HOUSSELS, III 48 1983 From May 1993 to May 1995, President
President and Chief and Chief Executive Officer of Showboat
Executive Officer of the Development Company; from May 1993 to
Company and Ocean June 1994, President and Chief
Showboat, Inc.; Vice Executive Officer of Atlantic City
Chairman of Showboat Showboat, Inc.; from January 1990 to
Operating Company; May 1994, Vice President of the
Director of Showboat, Inc. Company; from November 1990 to May
and all subsidiaries; 1995, Executive Vice President of
Chairman of the Board of Ocean Showboat, Inc.; from January
Atlantic City Showboat, 1990 to May 1993, President and Chief
Inc., Showboat Development Operating Officer of Atlantic City
Company and Showboat Showboat, Inc.
Marina Finance
Corporation;<F3> Chairman
of the Executive Committee
of Showboat Marina
Partnership.<F3>
GEORGE A. ZETTLER 70 1986 Since February 1994, President of
Director of the Company and Zimex, Redondo Beach, California;
Ocean Showboat, Inc. until January 1994, President World
Trade Services Group, Long Beach,
California.
CAROLYN M. SPARKS 56 1991 Co-owner of International Insurance
Director of the Company Services, Las Vegas, Nevada; since
and Ocean Showboat, Inc. 1988, Director of Southwest Gas
Corporation; from 1988 to July 1996,
Director of PriMerit Bank - Federal
Savings Bank, Las Vegas, Nevada; from
1984 to December 1996, Regent,
University and Community College System
of Nevada.
<FN>
<F1>Positions held with the Company and any other business
experience since 1993 and other directorships in companies with a
class of securities registered under Section 12 of the Securities
Exchange Act of 1934, as amended ("Exchange Act") or subject to
the requirements of Section 15(d) of the Exchange Act and in
companies registered under the Investment Company Act of 1940.
<F2>Mr. Gaughan also owns the Nevada Hotel and Casino, the Gold
Spike Inn and Casino, and a controlling interest in the Las Vegas
Club Hotel & Casino, each of which is located in Las Vegas,
Nevada.
<F3>Showboat Marina Casino Partnership and Showboat Marina
Finance Corporation, each an affiliate of the Company, have a
class of securities registered under Section 12 of the Exchange
Act.
</FN>
</TABLE>
NON-DIRECTOR EXECUTIVE OFFICERS
R. Craig Bird, 51, has been the Chief Financial Officer of
the Company since January 1996; the Executive Vice President,
Strategic Financing/Investor Relations of the Company and
Showboat Operating Company since November 1997; Chief Financial
Officer of Showboat Operating Company since May 1996; Executive
Vice President-Finance and Administration and Chief Financial
Officer of Showboat Development Company since October 1993; Vice
President-Financial Administration of Ocean Showboat, Inc. since
May 1996. Mr. Bird was the Executive Vice President-Finance and
Administration of the Company from June 1994 to November 1997;
the Executive Vice President-Finance and Administration and
Treasurer of Showboat Operating Company from May 1996 until
November 1997; Vice President-Financial Administration of
Atlantic City Showboat, Inc. from March 1990 to October 1993. He
serves at the pleasure of the respective board of directors.
Mark J. Miller, 41, has been the Executive Vice President
Financial Administration of the Company and Showboat Operating
Company since November 1997; Vice President-Finance of Ocean
Showboat, Inc. since April 1988; Vice President-Finance and Chief
Financial Officer of Ocean Showboat, Inc. since April 1991. Mr.
Miller has also been a member of the Executive Committee of
Showboat Marina Casino Partnership(1) and a Director and the
Treasurer of Showboat Marina Finance Corporation(1) since March
1996. Mr. Miller previously served as the Executive Vice
President-Operations of the Company from June 1995 until November
1997 and as the Executive Vice President-Operations of Showboat
Operating Company from May 1996 to November 1997. From July 1994
to June 1995, Mr. Miller served as President and Chief Executive
Officer of Atlantic City Showboat, Inc. From October 1993 to
July 1994, Mr. Miller served as Executive Vice President and
Chief Operating Officer of Atlantic City Showboat, Inc. and he
was Vice President-Finance and Chief Financial Officer of
Atlantic City Showboat, Inc.
-95-
<PAGE>
from December 1988 to October 1993. He serves at the pleasure of
the respective boards of directors.
Paul S. Harris, 62, has been Executive Vice President-Human
Resources of the Company since May 1995 and Executive Vice
President-Human Resources of Showboat Operating Company since May
1996. Mr. Harris previously served as Senior Vice President-
Human Resources of the Company from June 1994 to May 1995 and as
Vice President-Organization and Development of Atlantic City
Showboat, Inc. from July 1988 to June 1994. He serves at the
pleasure of the respective boards of directors.
Herbert R. Wolfe, 57, has been President and Chief Executive
Officer of Atlantic City Showboat, Inc. since June 1995;
Executive Vice President and Chief Operating Officer of Atlantic
City Showboat, Inc. from July 1994 to May 1995; Senior Vice
President of Marketing of Atlantic City Showboat, Inc. from April
1991 to July 1994. He serves at the pleasure of the board of
directors of Atlantic City Showboat, Inc.
J. Keith Wallace, 56, has been President and Chief Executive
Officer of Showboat Operating Company since February 1998.
Mr. Wallace previously served as President and Chief Executive
Officer of Showboat Marina Casino Partnership(1) from March 1996
until February 1998, and Showboat Indiana, Inc. from January 1996
until February 1998. Mr. Wallace served as a Member of the
Executive Committee of Showboat Marina Casino Partnership and a
Director of Showboat Marina Finance Corporation(1)from March 1996
until February 1998. From February 1995 to January 1996,
Mr. Wallace was the President and Chief Executive Officer of
Showboat Operating Company. From May 1993 to February 1995, he
was the President and Chief Executive Officer of Lake
Pontchartrain Showboat, Inc. and Showboat Louisiana, Inc. From
June 1993 to February 1995, Mr. Wallace served as Executive Vice
President and Chief Operating Officer of Showboat Louisiana, Inc.
and Lake Pontchartrain Showboat, Inc., respectively. From August
1990 to April 1993, Mr. Wallace was the Vice President and
General Manager of Showboat Operating Company. He serves at the
pleasure of the respective boards of directors.
Carlton L. Geer, 44, has been President and Chief Executive
Officer of Showboat Marina Casino Partnership(1) and Showboat
Indiana, Inc., Member of the Executive Committee of Showboat
Marina Casino Partnership and Director of Showboat Marina Finance
Corporation(1) since February 1998. Mr. Geer previously served as
President and Chief Executive Officer of Showboat Operating
Company from August 1996 until February 1998. From December 1983
to April 1996, Mr. Geer held various positions with Peppermill
Hotel Casino, Reno, Nevada, including General Manager from June
1993 to April 1996 and Executive Vice President of Hospitality
Operations from September 1989 to June 1993. He serves at the
pleasure of the respective board of directors.
Mark A. Clayton, 32, has been Vice President and General
Counsel of the Company and Assistant Secretary of the Company and
its subsidiaries since July 1995 and the Assistant
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<PAGE>
Secretary of Showboat Marina Finance Corporation(1) since March
1996. Since June 1996, Mr. Clayton has served as a member of the
Silicon Gaming, Inc. Compliance Committee. Mr. Clayton served as
Chief of Corporate Securities Division of the Nevada State Gaming
Control Board from October 1993 to June 1995; and as Deputy Chief
from May 1993 to October 1993. From October 1990 to April 1993,
Mr. Clayton was an associate of the law firm of Vargas &
Bartlett, the previous general counsel to the Company. He serves
at the pleasure of the respective boards of directors.
M. Brad Straub, 43, has been Vice President-Finance and
Treasurer of the Company since May 1996; Treasurer of Showboat
Development Company since May 1997. Mr. Straub served as Vice
President-Finance of Showboat Development and Management Services
Division for Showboat Operating Company since November 1993.
Mr. Straub previously served as Director of Financial
Administration of the Atlantic City Showboat from April 1993 to
November 1993. From May 1989 to April 1993, Mr. Straub served as
Director of Internal Audit of the Atlantic City Showboat. He
serves at the pleasure of the respective boards of directors.
Randy L. Taylor, 35, has been Vice President-Taxation,
Assistant Treasurer and Internal Revenue Service Representative
of the Company since May 1996. Mr. Taylor served as Director of
Corporate Taxation of the Company from October 1994 to April
1996. From July 1984 to September 1994, Mr. Taylor held various
positions with KPMG Peat Marwick LLP, the Company's independent
public accountant, including Senior Tax Manager from July 1991 to
September 1994. He serves at the pleasure of the respective
boards of directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's
directors and executive officers, and persons who own more than
ten percent of the Common Stock, to file with the United States
Securities and Exchange Commission and the New York Stock
Exchange initial reports of ownership and reports of changes in
ownership of Common Stock. Directors, executive officers and
greater than ten percent shareholders are required by United
States Securities and Exchange Commission regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended December 31, 1997, all Section 16(a) filing
requirements were complied with.
ITEM 11. EXECUTIVE COMPENSATION.
The following tables set forth compensation received by
J. Kell Houssels, III, the Company's President and Chief
Executive Officer, and the four other highest paid executive
(1) Showboat Marina Casino Partnership and Showboat Marina
Finance Corporation, each an affiliate of the Company, have
a class of securities registered pursuant to Section 12 of
the Exchange Act.
-97-
<PAGE>
officers of the Company during the last fiscal year, for each
year of the three-year period ended December 31, 1997 for
services rendered in all capacities to the Company and its
subsidiaries:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------------
AWARDS PAYOUTS<F1>
---------------------------- ------------
OTHER ANNUAL RESTRICTED SECURITIES LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION STOCK UNDERLYING INCENTIVE COMPENSATION<F3>
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) ($) AWARDS($) OPTIONS/SARS<F2> PAYOUTS($) ($)
- --------------------------- ---- --------- --------- ------------ ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Kell Houssels, III 1997 397,917 209,585 0 0 0/0 39,500<F4> 951,329<F5>
President and Chief Executive 1996 350,000 160,449 0 0 0/113,446 49,000<F4> 21,160
Officer 1995 327,640 239,891 0 0 0/0 30,000<F4> 20,860
J.K. Houssels 1997 200,000 104,793 0 0 0/0 39,500<F4> 722,236<F6>
Chairman of the Board 1996 200,000 95,081 0 0 0/74,439 49,000<F4> 20,121
1995 200,000 146,940 0 0 0/0 30,000<F4> 31,112
H. Gregory Nasky 1997 349,750 94,471 0 0 0/0 29,625<F7> 704,918<F8>
Executive Vice President 1996 325,000 92,564 0 0 0/73,315 36,750<F7> 21,657
1995 325,000 174,875 0 0 0/0 22,500<F7> 24,575
Herbert R. Wolfe 1997 275,185 258,885 0 0 0/0 29,625<F7> 25,910<F9>
President and Chief Executive 1996 263,035 199,086 0 0 0/79,205 36,750<F7> 23,341
Officer of Atlantic City 1995 244,536 224,712 0 0 20,000/0 22,500<F7> 16,077
Showboat, Inc.
R. Craig Bird 1997 253,500 94,471 0 0 0/0 29,625<F7> 349,410<F10>
Executive Vice President- 1996 242,333 91,156 0 0 0/69,240 36,750<F7> 6,841
Strategic Financing/Investor 1995 229,169 178,661 0 0 0/0 22,500<F7> 11,374
Relations and Chief Financial
Officer
Mark J. Miller 1997 261,000 94,471 0 0 0/0 29,625<F7> 340,670<F11>
Executive Vice President- 1996 254,000 87,376 0 0 0/71,952 36,750<F7> 11,786
Financial Administration 1995 239,155 177,580 0 0 0/0 22,500<F7> 11,981
<FN>
<F1>Amounts represented in this column were received by the
named individuals under the Company's 1994 Executive Long
Term Incentive Plan ("1994 Plan"). The restricted shares
granted under the 1994 Plan vest over a five-year period,
with the last of the restricted shares of Common Stock
vesting in March 1999; provided, however, that vesting on
all such restricted shares will accelerate to the date of
any change in control of the Company.
<F2>Amounts represented in this column equal the number of
shares of Common Stock underlying the stock options and
stock appreciation rights granted to the named individuals
under the 1994 Plan and the Showboat, Inc. 1996 Stock
Appreciation Rights Plan, respectively.
<F3>On December 31, 1997 the Company made payment of a one-
time special bonus to certain officers and employees of the
Company who were instrumental in (a) obtaining the license
for Sydney Harbour Casino and Star City, (b) overseeing the
development and operations of Sydney Harbour Casino and
Star City, and (c) successfully opening the Sydney Harbour
Casino and Star City. Sydney Harbour Casino and Star City
were built by SHCH, of which the Company is a 24.6%
shareholder, and is managed by Subsidiaries of the Company.
The special bonus (the "Sydney Bonus") was paid in
recognition of (i) the aforementioned roles played by the
individual recipients of the Sydney Bonus and (ii) the fact
that the recipient had foregone portions of prior Bonuses
that would have otherwise been payable to them while Star
City was being constructed.
<F4>This amount represents the vesting of 2,000 shares
under the 1994 Plan in the identified year.
<F5>Of this amount, $7,448 represents excess coverage life
insurance and medical reimbursement costs; $43,640
represents the Company's contribution to Mr. Houssels,
III's 401(k) and Restoration Plan account and $900,241
represents the Sydney Bonus.
<F6>Of this amount, $30,754 represents excess coverage life
insurance and medical reimbursement costs; $4,551
represents the Company's contribution to Mr. Houssel's
401(k); and $686,931 represents the Sydney Bonus.
<F7>This amount represents the vesting of 1,500 shares
under the 1994 Plan in the identified year.
<F8>Of this amount, $11,955 represents excess coverage life
insurance and medical reimbursement costs; $33,118
represents the Company's contribution to Mr. Nasky's 401(k)
and Restoration Plan account and $659,845 represents the
Sydney Bonus.
<F9>Of this amount, $11,503 represents excess coverage life
insurance and $14,407 represents the Company's contribution
to Mr. Wolfe's 401(k) and Restoration Plan account.
<F10>Of this amount, $8,937 represents excess coverage life
insurance and medical reimbursement costs; $19,997
represents the Company's contribution to Mr. Bird's 401(k)
and Restoration Plan account; and $320,476 represents the
Sydney Bonus.
<F11>Of this amount, $7,961 represents excess coverage life
insurance and medical reimbursement costs; $19,967
represents the Company's contribution to Mr. Miller's
401(k) and Restoration Plan account; and $312,742
represents the Sydney Bonus.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS/SARS AT MONEY OPTIONS/SARS AT
DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)
---------------------------- -----------------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE<F1>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J. Kell Houssels, III 56,000 909,193 0/0 16,000/113,446 0/0 146,000/543,974
J.K. Houssels 44,000 649,437 0/0 16,000/74,439 0/0 146,000/356,935
H. Gregory Nasky 27,000 339,063 0/0 12,000/73,315 0/0 109,500/351,545
R. Craig Bird 28,000 378,931 0/0 12,000/69,240 0/0 109,500/332,006
Mark J. Miller 28,000 378,250 0/0 12,000/71,952 0/0 109,500/345,009
Herbert R. Wolfe 10,000 123,262 0/0 12,000/79,205 0/0 132,500/379,788
- ------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Based on the CLOSING BID PRICE of the Company's Common
Stock of $29 3/8 per share on December 31, 1997, the last
trading day in 1997, minus the exercise price of "in-the-
money" options and stock appreciation rights, respectively.
Based on the Showboat Merger consideration, $30.75, minus
the exercise price of the options and stock appreciation
rights, the value of unexercisable options and stock
appreciation rights for J. Kell Houssels, III, J.K.
Houssels, H. Gregory Nasky, R. Craig Bird, Mark J. Miller
and Herbert R. Wolfe would be $168,000/$699,962,
$168,000/$459,289, $126,000/$452,354, $126,000/$427,211,
$126,000/$443,944 and $149,000/$488,695, respectively.
</FN>
</TABLE>
PENSION PLAN TABLE
The Company maintains the Supplemental Executive Retirement
Plan (the "SERP"), a nonqualified plan for highly compensated
employees whose retirement benefits are restricted by limitations
of the Internal Revenue Code of 1986, as amended (the "Code")
concerning qualified plans such as the 401(k) Plan. In general,
a participant will receive a retirement benefit under the SERP
equal to a percentage of his final average pay times such
participant's years of service up to 15 years, less any benefits
payable to such participant under the federal Social Security
Act, the 401(k) Plan, or under any stock plan of the Company,
with final average compensation being the average of such
participant's annual compensation (base salary plus bonus) for
his last three consecutive years of service. A participant
becomes vested in his benefits under the SERP upon the
participant's 65th birthday or upon the participant's completion
of 10 years of service if the participant is at least 55 years of
age.
The following table shows, as of December 31, 1997, the
approximate annual retirement benefits under the SERP to eligible
employees in specified compensation and years of service
categories, assuming retirement occurs at age 65 and that
benefits are payable only during the employee's lifetime. The
estimated retirement benefits provided in the table have not been
reduced by the amount of benefits payable to an individual
participant under the federal Social Security Act, the 401(k)
Plan, or any stock plan of the Company.
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<PAGE>
<TABLE>
<CAPTION>
3-YEARS FINAL ESTIMATED ANNUAL BENEFIT ($)
AVERAGE COMPENSATION YEARS OF SERVICE AT AGE 65
__________________________ _______________________________________________________________
10 15 20 25 30 35
________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C>
125,000...................... 41,667 62,500 62,500 62,500 62,500 62,500
150,000...................... 50,000 75,000 75,000 75,000 75,000 75,000
175,000...................... 58,333 87,500 87,500 87,500 87,500 87,500
200,000...................... 66,667 100,000 100,000 100,000 100,000 100,000
225,000...................... 75,000 112,500 112,500 112,500 112,500 112,500
250,000...................... 83,333 125,000 125,000 125,000 125,000 125,000
300,000...................... 100,000 150,000 150,000 150,000 150,000 150,000
400,000...................... 133,333 200,000 200,000 200,000 200,000 200,000
450,000...................... 150,000 225,000 225,000 225,000 225,000 225,000
500,000...................... 166,667 250,000 250,000 250,000 250,000 250,000
</TABLE>
The years of service for certain employees as of
December 31, 1997, are as follows: Mr. Houssels III, 12 years;
Mr. Houssels, 45 years, Mr. Nasky, 4 years; Mr. Wolfe, 10 years,
Mr. Bird, 12 years; Mr. Miller, 12 years. No benefits have
vested under the SERP with respect to any of the five named
executive officers.
Upon the consummation of the Showboat Merger, it is
anticipated that the SERP would be terminated and only the
participants who are receiving benefits or are eligible to
receive benefits upon their retirement, will continue to be
entitled to such benefits. In addition, the Showboat Merger
Agreement requires the surviving corporation to provide
retirement benefits to one executive officer who is expected to
be eligible for retirement benefits under the SERP on or about
September 1, 1998.
SEVERANCE AGREEMENTS
The Company has severance agreements (collectively, the
"Severance Agreements") with several of its executive officers
(individually an "Employee" and collectively the "Employees").
The Severance Agreements are with, among others, J.K. Houssels,
Chairman of the Board of the Company; J. Kell Houssels, III,
President and Chief Executive Officer of the Company; H. Gregory
Nasky, Executive Vice President of the Company; R. Craig Bird,
Executive Vice President, Strategic Financing/Investor Relations
and Chief Financial Officer of the Company; Paul S. Harris,
Executive Vice President-Human Resources of the Company; Mark J.
Miller, Executive Vice President, Financial Administration of the
Company; and Herbert R. Wolfe, President and Chief Executive
Officer of Atlantic City Showboat, Inc. The Severance Agreements
are renewed, unless terminated, on an annual basis. The
Severance Agreements provide for severance benefits if the
Employee is terminated by the Company or any subsidiary of the
Company (other than for cause or by reason of the Employee's
retirement, death or disability) or by the Employee for Good
Reason (as defined in the Severance Agreements) within 24 months
after a Change in Control (as defined in the Severance
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Agreements) or by the Employee for any reason other than Good
Reason within one year after a Change in Control or, in the case
of Mr. Houssels or Mr. Houssels, III, if either of their
employments are terminated for any reason, except death, within
12 months after a Change in Control. The approval by the
Company's stockholders of the Showboat Merger would constitute a
Change of Control. Each Severance Agreement provides that, in
the event of a Potential Change in Control (as defined in the
Severance Agreements), the Employee will not voluntarily resign,
subject to certain conditions, for at least six months after the
occurrence of such Potential Change in Control (or, if earlier,
the date of the Change in Control). The signing of the Showboat
Merger Agreement constituted a Potential Change of Control.
The Severance Agreements provide for: (i) a lump-sum payment
equal to 200% of the Employee's annual salary if his employment
was terminated by the Company or any subsidiary of the Company
(other than for cause or by reason of the Employee's retirement,
death or disability) or by the Employee for Good Reason or 100%
of the Employee's annual salary if his employment was terminated
by the Employee for any reason other than Good Reason (or, in the
case of Mr. Houssels or Mr. Houssels, III, 300% of his annual
salary in the case of termination for any reason except death),
plus 200% of the average bonuses awarded to the Employee for the
three fiscal years preceding the Employee's termination if his
employment was terminated by the Company or any subsidiary of the
Company (other than for cause or by reason of the Employee's
retirement, death or disability) or by the Employee for Good
Reason or 100% of the average bonuses awarded to the Employee for
the three fiscal years preceding his termination if his
employment was terminated by the Employee for any reason other
than Good Reason (or, in the case of Mr. Houssels or Mr.
Houssels, III, 300% of his average bonus for the three fiscal
years preceding his termination in the case of termination for
any reason except death), (ii) the reimbursement of legal fees
and expenses incurred by the Employee in seeking to enforce the
Employee's rights under the Severance Agreement and (iii)
continuation of the benefit of life, disability, accident and
health insurance benefits, substantially similar to those which
the Employee is receiving immediately prior to termination, for
the duration of the Severance Period (as defined in the Severance
Agreements). In addition, in the event that payments to the
Employee pursuant to the Employee's Severance Agreement would
subject such Employee to an excise tax under the Code, the
Employee may reduce his severance benefits to an amount below the
amount which would require the Employee to pay such tax.
The Severance Agreements also provide that the Employee will
receive additional service credit of up to two years under the
SERP (as defined below) upon termination of employment following
a change in control.
Based on the compensation levels as of December 31,
1997, assuming a Change in Control of the Company
and a subsequent termination within 12 months for any
reason except death, J.K. Houssels and J. Kell Houssels,
III would be entitled to receive a maximum lump-
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sum payment of $931,542 and $1,809,852 respectively, under their
Severance Agreements.
Based on compensation levels as of December 31, 1997,
assuming a Change in Control of the Company and a subsequent
termination by the Company (other than for cause or by reason of
the Employee's retirement, death or disability) or by the
Employee for Good Reason within 24 months, the following
Employees would be entitled to receive maximum lump-sum payments,
under the Severance Agreements in the following amounts: H.
Gregory Nasky $990,146, R. Craig Bird $767,876, Mark J. Miller
$783,216 and Herbert R. Wolfe $968,184.
Based on compensation levels as of December 31, 1997,
assuming a Change in Control of the Company and a subsequent
termination by the Employee for any reason other than Good Reason
within one year, the following Employees would be entitled to
receive maximum lump-sum payments under the Severance Agreements
in the following amounts: H. Gregory Nasky $495,073, R. Craig
Bird $383,938, Mark J. Miller $391,608 and Herbert R. Wolfe
$484,092.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's executive compensation is generally determined
by the Board of Directors upon the recommendation of the
Compensation Committee. No member of the Compensation Committee
in 1997 was an officer of the Company. Throughout 1997, the
Compensation Committee consisted of Mr. Richardson and
Mr. Zettler.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
REMUNERATION OF NON-EMPLOYEE DIRECTORS
For 1997, each non-employee director received a retainer of
$4,000 per quarter plus attendance fees of $3,500 per scheduled
meeting attended and $850 for a special meeting attended. Such
fees are paid by the Company and Ocean Showboat, Inc., as
applicable. In addition, non-employee members of each committee
are paid $850 for each committee meeting attended. Only non-
employee directors receive the retainer or attendance fees.
Reasonable out-of-pocket expenses incurred in attending scheduled
meetings are reimbursed as to all directors.
The Company has agreed to continue to pay director fees to
each of its non-employee directors (at an annual rate of $50,000)
for the longer of the remainder of 1998 or six months following
the effective time of the Showboat Merger. Each of the non-
employee directors will be offered health insurance, in
substantially the form currently provided, for a period of up to
five years after the effective time of the Showboat Merger.
1989 DIRECTORS' STOCK OPTION PLAN
The Company maintains a director stock option plan entitled
the 1989 Directors' Stock Option Plan ("Option Plan"). The
Option Plan is designed to encourage non-employee directors to
take a long-term view of the affairs of the Company; to attract
and retain new superior non-employee directors; and to aid in
compensating non-employee directors for their services to the
Company. The Company's non-employee directors are William C.
Richardson, John D. Gaughan, Jeanne S. Stewart, Frank A. Modica,
George A. Zettler and Carolyn M. Sparks.
Stock options granted under the Option Plan are intended to
be designated non-qualified options or options not qualified as
incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended. Subject to adjustment by reason of
stock dividend or split or other similar capital adjustments, an
aggregate of 120,000 shares of Common Stock are reserved for
issuance under the Option Plan.
The administration of the Option Plan is carried out by a
committee ("Committee") consisting of not less than two
non-employee directors of the Company selected by and serving at
the pleasure of the Company's Board of Directors. The Committee,
unless permitted by holders of the majority of outstanding
Common Stock, shall not have any discretion to determine
or vary any matters which are fixed under the terms
of the Option Plan. Fixed matters include, but are
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not limited to, which non-employee directors shall receive
awards, the number of shares of the Common Stock subject to each
option award, the exercise price of any option, and the means of
acceptable payment for the exercise of the option. The Committee
shall have the authority to otherwise interpret the Option Plan
and make all determinations necessary or advisable for its
administration. All decisions of the Committee are subject to
approval of the Company's Board of Directors. Current members of
the Committee are Mr. Richardson and Mr. Zettler.
Under the terms of the Option Plan, each option shall be
exercisable in full one year after the date of grant. Unless
special circumstances exist, each option shall expire on the
later of the tenth anniversary of the date of its grant or two
years after the non-employee director retires. Each non-employee
director initially receives a one-time option to purchase 5,000
shares of Common Stock following his or her election to the Board
of Directors or for those employee directors who became non-
employee directors upon retirement as an employee such one-time
option will be received at the next special or annual meeting,
even if the non-employee director is not then a candidate to re-
election to the Board of Directors. Thereafter, each non-
employee director receives a grant to purchase 1,000 shares of
Common Stock each year, until the shares reserved for the Option
Plan are exhausted or until the Option Plan otherwise expires.
The option exercise price is the greater of $7 5/8 or the
fair market value, as defined under the Option Plan, of the
Common Stock on the date such options are granted. The per share
exercise price of options granted during 1997 pursuant to the
Option Plan was $20 1/2.
As of December 31, 1997, options representing 93,000 shares
of Common Stock have been granted to the current six non-employee
directors and two former non-employee directors and a director
who has since become an employee. As of December 31, 1997,
34,000 options had been exercised under the Option Plan. Of the
outstanding options remaining, options representing 53,000 shares
of Common Stock are currently exercisable. The balance may not
be exercised until May 29, 1998.
EXECUTIVE MEDICAL REIMBURSEMENT PLAN
The Company maintains a supplemental executive medical
reimbursement plan entitled the Executive Medical Reimbursement
Plan ("Reimbursement Plan"). The Reimbursement Plan provides
directors, employee and non-employee, up to $5,000 in additional
taxable health benefits for medical expenses not otherwise
covered under the Company's regular health plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the number of shares of
Common Stock of the Company and the number of shares of Common
Stock of the Company subject to options beneficially owned by the
Company's directors and those executive officers named in the
Summary Compensation Table, by all directors and executive
officers as a group, and by persons beneficially owning more than
5% of the outstanding Common Stock at the close of business on
March 17, 1998. The address for all directors and executive
officers of the Company is: Showboat, Inc., 2800 Fremont Street,
Las Vegas, Nevada 89104. Security ownership was verified with
filings with the Securities and Exchange Commission
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received by the Company, and according to individual verification
as of March 17, 1998, which the Company solicited and received
from certain beneficial owners listed in the following table:
<TABLE>
<CAPTION>
Name Amount and Nature of Beneficial Ownership
______________________________________________________________________________________________________________________________
Number of Shares
Beneficially Owned Number of Shares Total Number
Excluding Shares Subject to Options of Shares
Subject to Options<F1> Beneficially Owned<F2> Beneficially Owned Percent
_______________________________________________________________________________________
<S> <C> <C> <C> <C>
J.K. Houssels<F3, F5> 1,137,087<F4> 16,000 1,153,087 7.0
William C. Richardson 6,000 13,000 19,000 *
John D. Gaughan<F5> 174,824<F6> 13,000 187,824 1.1
Jeanne S. Stewart<F5> 376,686 13,000 389,686 2.4
Frank A. Modica 0 7,000 7,000 *
H. Gregory Nasky 15,827<F7> 12,000 27,827 *
J. Kell Houssels, III<F5> 131,717<F8> 16,000 147,717 *
George A. Zettler 3,405 7,000 10,405 *
Carolyn M. Sparks<F5> 217,206<F9> 6,000 223,206 1.4
Herbert R. Wolfe<F10> 4,550 12,000 16,550 *
R. Craig Bird<F11> 16,350 12,000 28,350
Mark J. Miller<F12> 12,700 12,000 24,700
All directors and executive
officers as a group
(19 persons) 2,142,052 289,000 2,431,052 14.5
Bankers Trust New York
Corporation 1,109,870<F13> 0 1,109,870 6.7
FMR Corp. 1,160,000<F14> 0 1,160,000 7.0
____________________
<FN>
*Beneficial ownership does not exceed 1% of the outstanding
Common Stock.
<F1>Unless otherwise specifically stated herein, each person has
sole voting power and sole investment power as to the identified
Common Stock ownership.
<F2>Shares subject to will all become exercisable under the
Showboat Merger Agreement.
<F3>Mr. Houssels may be deemed to be a control person.
Mr. Houssels is the Chairman of the Board of the Company.
<F4>Mr. Houssels' shareholdings include 11,450 shares held in his
individual retirement account and 1,119,637 shares as a trustee
of the J.K. and Nancy Houssels 1992 Trust No. 1. He disclaims
beneficial ownership of 7,000 shares owned by his wife and 35,700
shares beneficially owned by dependent children pursuant to the
J.K. Houssels, Jr. 1976 Trust Agreement and such shares are
excluded from this table.
<F5>In connection with the Showboat Merger Agreement, on December
18, 1997 certain individual stockholders of the Company executed
Stockholder Support Agreements, pursuant to which these
individuals agreed to (i) vote all of their shares in favor of
the Showboat Merger; and (ii) subject to certain limited
exceptions, refrain from directly or indirectly transferring or
disposing of any portion of their shares.
<F6>Mr. Gaughan's shareholdings include 86,000 shares held by
Exber, Inc., a Nevada corporation controlled by Mr. Gaughan.
<F7>Mr. Nasky is an Executive Vice President and Secretary of the
Company. Mr. Nasky's shareholdings include 1,302 shares owned by
Mr. Nasky's wife over which he does not have voting or investment
power.
<F8>Mr. Houssels, III is the President and Chief Executive
Officer of the Company. Mr. Houssels, III's shareholdings
include 35,700 shares beneficially owned by him as trustee of the
J.K. Houssels, Jr. 1976 Trust Agreement.
<F9>Mrs. Sparks' shareholdings include 41,635 shares beneficially
owned by her as co-trustee of the Fred L. Morledge and Malvina W.
Morledge Family Trust and 161,563 shares beneficially owned by
her as co-trustee of the Sparks Family Trust; and 7,000 shares
beneficially owned as custodian for her daughter.
<F10>Mr. Wolfe is the President and Chief Executive Officer of
Atlantic City Showboat, Inc.
<F11>Mr. Bird is the Executive Vice President Strategic
Financing/Investor Relations and Chief Financial Officer of
Showboat, Inc.
<F12>Mr. Miller is the Executive Vice President Financial
Administration of Showboat, Inc.
<F13>Bankers Trust New York Corporation ("BTNYC"), the parent
holding company of Bankers Trust Company and indirect parent
holding company of BT Australia Limited, reported on a Schedule
13G/A filed on February 17, 1998, Bankers Trust & Company and BT
Australia Limited have sole investment power with respect to
246,500 and 863,270, respectively, of such shares and sole voting
power with respect to 79,000 and 863,270, respectively, of such
shares. BTNYC'S address is 280 Park Avenue, New York, New York
10017.
<F14>FMR Corp. reported on a Schedule 13G/A filed February 11,
1998, that a wholly-owned subsidiary, Fidelity Management &
Research Company ("Fidelity"), a registered investment advisor to
various investment companies. Fidelity has sole investment power
(but does not have voting power) with respect to the shares. FMR
Corp.'s address is 82 Devonshire Street, Boston, Massachusetts
02109.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company entered into a five-year lease agreement with
Exber, Inc. commencing on February 15, 1994, for land nearby the
Las Vegas Showboat. Exber, Inc., a Nevada corporation controlled
by John D. Gaughan, a Director of the Company, has rights to the
land pursuant to a sublease agreement dated November 5, 1966.
The Company pays monthly rent of $13,096 and has an option to
purchase the land and all of Exber, Inc.'s rights thereto for the
purchase price of $1,400,000.
The Company's subsidiary, Atlantic City Showboat, Inc.,
leases space at the Atlantic City Showboat to R. Craig Bird,
Executive Vice President, Strategic Financing/Investor Relations
and Chief Financial Officer of the Company, for the operation of
a gift shop and certain vending machines. During 1997, Mr. Bird
paid rent and vending commissions to Atlantic City Showboat, Inc.
in the amount of $102,643 and $40,487, respectively.
At all times during 1997, H. Gregory Nasky was a Director
and Executive Vice President of the Company and the Secretary of
the Company and its subsidiaries. Additionally, Mr. Nasky was of
counsel to the law firm of Kummer Kaempfer Bonner & Renshaw,
outside legal counsel to the Company. At all times during 1997,
John N. Brewer, a partner of the law firm of Kummer Kaempfer
Bonner & Renshaw, was an Assistant Secretary of the Company and
its subsidiaries. During 1997, the law firm of Kummer Kaempfer
Bonner & Renshaw was paid $188,065 by the Company's Nevada gaming
subsidiary, $63,599 by the Company's New Jersey subsidiaries,
$123,781 by the Company's Indiana subsidiaries, $63,108 by the
Company's Australia subsidiary, $197,301 by the Company in
connection with its expansion opportunities and $150,705 by the
Company for other parent company matters.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a)(l) The following consolidated financial statements of the
Company and its subsidiaries have been filed as a part
of this report (See "Item 8: Financial Statements and
Supplementary Data"):
Independent Auditors' Report;
Consolidated Balance Sheets as of December 31,
1997 and 1996;
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Consolidated Statements of Operations for the
Years Ended December 31, 1997, 1996 and 1995;
Consolidated Statements of Shareholders'
Equity for the Years Ended December 31, 1997, 1996
and 1995;
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1997, 1996 and 1995; and
Notes to Consolidated Financial Statements
(a)(2) All schedules are omitted because they are not
required, inapplicable, or the information is otherwise
shown in the financial statements or notes thereto.
(a)(3) Exhibits<F3>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--- -----------
<S> <C>
2.01 Agreement and Plan of Merger, dated as of December 18,
1997, among Showboat, Inc., Harrah's Entertainment,
Inc. and HEI Acquisition Corp. is incorporated herein
by reference to Showboat, Inc.'s Form 8-K (file no. 1-
7123) dated December 24, 1997, Item 7(c), Exhibit 2.1.
3.01 Restated Articles of Incorporation of Showboat, Inc.
dated June 10, 1994, is incorporated herein by
reference to Showboat, Inc.'s Amendment No. 1 to
Registration Statement on Form S-3 (file no. 33-54325)
dated July 8, 1994, Item 16, Exhibit 4.02.
3.02 Restated Bylaws of Showboat, Inc. dated October 24,
1995, is incorporated herein by reference to Showboat,
Inc.'s Form 10-Q (file no. 1-7123) for the nine month
period ended September 30, 1995, Part II, Item 6(a),
Exhibit 3.01.
4.01 Specimen Common Stock Certificate for the Common Stock
of Showboat, Inc. is incorporated herein by reference
to Showboat, Inc.'s Amendment No. 1 to Registration
Statement on Form S-3 (file no. 33-54325) dated
July 8, 1994, Item 16, Exhibit 4.01.
4.02 Rights Agreement dated October 5, 1995, between
Showboat, Inc. and American Stock Transfer and Trust
Company; Form of Right Certificate; and Certificate of
Designation of Rights and Preferences of Series A
Junior Preferred Stock of Showboat, Inc., are
incorporated herein by reference to Showboat, Inc.'s
Form 8-K (file no. 1-7123) dated October 5, 1995, Item
7(c), Exhibit 4.01.
4.03 Indenture dated May 18, 1993, for the
9 1/4% First Mortgage Bonds due 2008 among
____________________
<F3>Copies of exhibits to this Form 10-K will be furnished to any
requesting security holder who furnishes the Company a list
identifying the exhibits to be copied by the Company at a charge
of $.25 per page.
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EXHIBIT
NO. DESCRIPTION
--- -----------
Showboat, Inc., Ocean Showboat, Inc., Atlantic City
Showboat, Inc., Showboat Operating Company, and IBJ
Schroder Bank & Trust Company; Guaranty by Ocean
Showboat, Inc., Atlantic City Showboat, Inc. and
Showboat Operating Company in favor of IBJ Schroder
Bank & Trust Company; and Form of Bond Certificate for
the 9 1/4% First Mortgage Bonds due 2008, are
incorporated herein by reference to Showboat, Inc.'s
Form 8-K (file no. 1-7123) dated May 18, 1993,
Item 7(c), Exhibit 28.01. First Supplemental
Indenture dated July 18, 1994, for the 9 1/4% First
Mortgage Bonds due 2008 among Showboat, Inc., Ocean
Showboat, Inc., Atlantic City Showboat, Inc., Showboat
Operating Company and IBJ Schroder Bank & Trust
Company is incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123) for the
year ended December 31, 1994, Part IV, Item 14(a)(3),
Exhibit 4.02.
4.04 Indenture dated August 10, 1994, for the 13% Senior
Subordinated Notes due 2009 among Showboat, Inc.,
Ocean Showboat, Inc., Atlantic City Showboat, Inc.,
Showboat Operating Company, and Marine Midland Bank;
Guaranty by Ocean Showboat, Inc., Atlantic City
Showboat, Inc. and Showboat Operating Company in favor
of Marine Midland Bank; and Form of Note Certificate
for the 13% Senior Subordinated Notes due 2009, are
incorporated herein by reference to Showboat, Inc.'s
Form 8-K (file no. 1-7123) dated August 10, 1994, Item
7(c), Exhibit 4.01.
4.05. Indenture dated as of March 28, 1996, among Showboat
Marina Casino Partnership, Showboat Marina Finance
Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Nomura Securities International, Inc.,
Bear, Stearns & Co., Inc. and American Bank National
Association, as trustee, relating to the 13 1/2 Series
A and Series B First Mortgage Notes due 2003, is
incorporated herein by reference to Showboat, Inc.'s
Form 10-Q (file no 1-7123) for the six month period
ended June 30, 1996, Part II, Item 6(a), Exhibit 4.01.
10.01 Parent Services Agreement dated November 21, 1985,
between Showboat, Inc. and Atlantic City Showboat,
Inc., is incorporated herein by reference to Showboat,
Inc.'s Form 8-K (file no. 1-7123) dated November 25,
1985, Item 7(c), Exhibit 10.01. Amendment No. 1 to
Parent Services Agreement dated February 1, 1987,
between Showboat, Inc. and Atlantic City Showboat,
Inc., is incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year ended
June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.17.
Amendment No. 2 to Parent Services Agreement dated
December 31, 1990, between Showboat, Inc. and Atlantic
City Showboat, Inc., is incorporated herein by
reference to Showboat, Inc.'s Form 8-K (file no. 1-
7123) dated December 31, 1990, Item 7(c),
Exhibit 28.01. Amendment No. 3 to Parent Services
Agreement dated May 8, 1991, between Showboat, Inc.
and Atlantic City Showboat, Inc., is incorporated
herein by reference to Showboat, Inc.'s Form 10-K
(file no. 1-7123) for the year ended December 31,
1991, Part IV, Item 14(a)(3), Exhibit 10.14.
Amendment No. 4 to Parent Services Agreement dated
August 17, 1993, between Showboat, Inc. and Atlantic
City Showboat, Inc., is incorporated herein by
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EXHIBIT
NO. DESCRIPTION
--- -----------
reference to Showboat, Inc.'s Form 10-K (file no. 1-
7123) for the year ended December 31, 1993, Part IV,
Item 14(a)(3), Exhibit 10.11.
10.02 Tax Allocation Agreement effective May 10, 1993, among
Showboat, Inc. and each of its subsidiaries, is
incorporated herein by reference to Showboat, Inc.'s
Form 10-K (file no. 1-7123) for the year ended
June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.11.
First Amendment to Tax Allocation Agreement effective
May 10, 1993, among Showboat, Inc. and each of its
subsidiaries, is incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123) for the
year ended December 31, 1993, Part IV, Item 14(a)(3),
Exhibit 10.07.
10.03 Management Services Agreement dated January 1, 1989,
between Showboat, Inc. and Showboat Operating Company,
is incorporated herein by reference to Showboat,
Inc.'s Form 8-K (file no. 1-7123) dated January 1,
1989, Item 7(c), Exhibit 28.03.
10.04 Showboat, Inc. 1989 Long Term Incentive Plan, as
amended and restated on February 25, 1993, is
incorporated herein by reference to Showboat, Inc.'s
Form 10-K (file no. 1-7123) for the year ended
December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 10.23.
10.05 Showboat, Inc. 1989 Directors' Stock Option Plan, as
amended and restated February 25, 1993, is
incorporated herein by reference to Showboat, Inc.'s
Form 10-K (file no. 1-7123) for the year ended
December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 10.27.
10.06 Showboat, Inc. 1994 Executive Long Term Incentive Plan
effective May 25, 1994, is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file no. 1-
7123) for the year ended December 31, 1994, Part IV,
Item 14(a)(3), Exhibit 10.36.
10.07 Showboat, Inc. Supplemental Executive Retirement Plan
effective April 1, 1994, is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file no. 1-
7123) for the year ended December 31, 1994, Part IV,
Item 14(a)(3), Exhibit 10.37.
10.08 Showboat, Inc. Restoration Plan effective April 1,
1994, is incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year ended
December 31, 1994, Part IV, Item 14(a)(3), Exhibit
10.38.
10.09 Statement regarding Showboat, Inc.'s Incentive Bonus
Plans, is incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123) for the
year ended December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 10.12.
10.10 Atlantic City Showboat, Inc. Executive
Medical Reimbursement Plan, effective
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<PAGE>
EXHIBIT
NO. DESCRIPTION
--- -----------
August 15, 1991, is incorporated herein by reference
to Showboat, Inc.'s Form 10-K (file no. 1-7123) for
the year ended December 31, 1991, Part IV, Item
14(a)(3), Exhibit 10.23.
10.11 Atlantic City Showboat, Inc. Executive Health
Examinations Plan effective January 1, 1989, is
incorporated herein by reference to Showboat, Inc.'s
Form 10-K (file no. 1-7123) for the year ended
December 31, 1989, Part IV, Item 14(a)(3), Exhibit
10.24.
10.12 Form of Severance Agreement between Showboat, Inc. and
certain executive officer and key employees of
Showboat, Inc. and its subsidiaries, is incorporated
herein by reference to Showboat, Inc.'s Form 10-K
(file no. 1-7123) for the year ended December 31,
1994, Part IV, Item 14(a)(3), Exhibit 10.39.
10.13 Form of Indemnification Agreement between Showboat,
Inc. and each director and officer of Showboat, Inc.,
is incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year ended
December 31, 1987, Part IV, Item 14(a)(3), Exhibit
10.13.
10.14 Lease dated January 1, 1989, between Showboat, Inc.
and Showboat Operating Company, is incorporated herein
by reference to Showboat, Inc.'s Form 8-K (file no. 1-
7123) dated January 1, 1989, Item 7(c), Exhibit 28.01.
10.15 Lease dated January 14, 1994, between Showboat, Inc.
and Exber, Inc.; and Sublease dated November 5, 1966,
between Dodd Smith and John D. Gaughan and Leslie C.
Schwartz, is incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123) for the
year ended December 31, 1993, Part IV, Item 14(a)(3),
Exhibit 10.39.
10.16 Lease of Retail Store No. 7 dated April 10, 1987,
among Atlantic City Showboat, Inc., R. Craig Bird and
Debra E. Bird; and Guaranty of Lease among Atlantic
City Showboat, Inc., R. Craig Bird and Debra E. Bird,
are incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year ended
December 31, 1988, Part IV, Item 14(a)(3), Exhibit
10.24. First Amendment to the Lease between Atlantic
City Showboat, Inc. and R. Craig Bird and Debra E.
Bird, dated July 17, 1997. Letter Agreement dated
March 25, 1997 to R. Craig Bird from Atlantic City
Showboat, Inc.
10.17 Promissory Note dated August 5, 1993, in the principal
amount of $20,400.69 among Showboat, Inc., R. Craig
Bird and Debra E. Bird, is incorporated herein by
reference to Showboat, Inc.'s Form 10-K for the year
ended December 31, 1993, Part IV, Item 14(a)(3),
Exhibit 10.15.
10.18 Ground Lease dated October 26, 1983, between
Ocean Showboat, Inc. and Resorts International,
Inc., is incorporated herein by reference
to Showboat, Inc.'s Form 8-K
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<PAGE>
EXHIBIT
NO. DESCRIPTION
--- -----------
(file no. 1-7123) as amended by a Form 8 filed with
the Securities and Exchange Commission on November 28,
1983. Assignment and Assumption of Leases dated
December 3, 1985, between Ocean Showboat, Inc. and
Atlantic City Showboat, Inc.; First Amendment to Lease
Agreement dated January 15, 1985, between Resorts
International, Inc. and Atlantic City Showboat, Inc.;
Second Amendment to Lease Agreement dated July 5,
1985, between Resorts International, Inc. and Atlantic
City Showboat, Inc., are incorporated herein by
reference to the Form 10-K (file no. 1-7123) for the
year ended June 30, 1985, Part IV, Item 14(a)(3),
Exhibit 10.02. Restated Third Amendment to Lease
Agreement dated August 28, 1986, between Resorts
International, Inc. and Atlantic City Showboat, Inc.,
is incorporated herein by reference to the Form 10-K
(file no. 1-7123) for the year ended June 30, 1986,
Part IV, Item 14(a)(3), Exhibit 10.08; Fourth
Amendment to Lease Agreement dated December 16, 1986,
between Resorts International, Inc. and Atlantic City
Showboat, Inc.; Fifth Amendment to Lease Agreement
dated March 2, 1987, between Resorts International,
Inc. and Atlantic City Showboat, Inc.; Sixth Amendment
to Lease Agreement dated March 13, 1987, between
Resorts International, Inc. and Atlantic City
Showboat, Inc.; Indemnity Agreement dated January 15,
1985, among Resorts International, Inc., Atlantic City
Showboat, Inc. and Ocean Showboat, Inc.; and Amended
Indemnity Agreement dated December 3, 1985, among
Resorts International, Inc., Atlantic City Showboat,
Inc. and Ocean Showboat, Inc., are incorporated herein
by reference to Showboat, Inc.'s Form 10-K (file no. 1-
7123) for the year ended June 30, 1987, Part IV, Item
14(a)(3), Exhibit 10.02; Seventh Amendment to Lease
Agreement dated October 18, 1988, between Resorts
International, Inc. and Atlantic City Showboat, Inc.,
is incorporated herein by reference to Showboat,
Inc.'s Form 8-K (file no. 1-7123) dated November 16,
1988, Item 7(c), Exhibit 28.01; Eighth Amendment to
Lease Agreement between Atlantic City Showboat, Inc.
and Resorts International, Inc. International, Inc.
dated May 18, 1993, is incorporated herein by
reference to Showboat, Inc.'s Form 8-K (file no. 1-
7123) dated May 18, 1993, Item 7(c), Exhibit 28.06.
10.19 Closing Escrow Agreement dated September 21, 1988,
among Housing Authority and Urban Redevelopment Agency
of the City of Atlantic City, Resorts International,
Inc., Atlantic City Showboat, Inc., Trump Taj Mahal
Associates Limited Partnership, and Clapp & Eisenberg,
P.C.; Agreement as to Assumption of Obligations with
respect to Properties dated September 21, 1988, among
Atlantic City Showboat, Inc., Trump Taj Mahal
Associates Limited Partnership and Trump Taj Mahal
Realty Corp.; First Amendment of Agreement as to
Assumption of Obligations with respect to Properties
dated September 21, 1988, among Atlantic City
Showboat, Inc., Trump Taj Mahal Associates Limited
Partnership and Trump Taj Mahal Realty Corp.;
Settlement Agreement dated October 18, 1988, among
Atlantic City Showboat, Inc., Trump Taj Mahal
Associates Limited Partnership, Trump Taj Mahal Realty
Corp., Resorts International, Inc. and the Housing
Authority and Urban Redevelopment Agency of
the City of Atlantic City; Tri-Party
Agreement dated October 18, 1988, among Resorts
-110-
<PAGE>
EXHIBIT
NO. DESCRIPTION
--- -----------
International, Inc., Atlantic City Showboat, Inc. and
Trump Taj Mahal Associates Limited Partnership, are
incorporated herein by reference to Showboat, Inc.'s
Form 8-K (file no. 1-7123) dated November 16, 1988,
Item 7(c), Exhibit 28.01. Revised Second Amendment to
Agreement as to Assumption of Obligations with respect
to Properties dated May 24, 1989, among Atlantic City
Showboat, Inc., Trump Taj Mahal Associates Limited
Partnership and Trump Taj Mahal Realty Corp., is
incorporated herein by reference to Showboat, Inc.'s
Form 10-K (file no. 1-7123) for the year ended
December 31, 1989, Part IV, Item 14(a)(3), Exhibit
10.17.
10.20 Letter agreement dated September 23, 1992, between
Trump Taj Mahal Associates and Atlantic City Showboat,
Inc.; and letter agreement dated October 26, 1992 to
Trump Taj Mahal Associates from Atlantic City
Showboat, Inc., are incorporated herein by reference
to Showboat, Inc.'s Form 10-K (file no. 1-7123) for
the year ended December 31, 1992, Part IV, Item
14(a)(3), Exhibit 10.24.
10.21 Lease dated December 22, 1994, between Housing
Authority and Urban Redevelopment Agency of the City
of Atlantic City and Atlantic City Showboat, Inc.; Tri-
Party Agreement dated May 26, 1994, among Housing
Authority and Urban Redevelopment Agency of the City
of Atlantic City, Forest City Ratner Companies and
Atlantic City Showboat, Inc.; Terms and Conditions
Part II of Contract for Sale of Land for Private
Redevelopment between Housing Authority and Urban
Redevelopment Agency of the City of Atlantic City and
Atlantic City Showboat, Inc.; and Rider to Contract
for Sale of Land for Private Redevelopment between
Housing Authority and Urban Redevelopment Agency of
the City of Atlantic City and Atlantic City Showboat,
Inc., are incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123) for the
year ended December 31, 1994, Part IV, Item 14(a)(3),
Exhibit 10.46.
10.22 Agreement Amending and Restating the Tri-Party
Agreement Dated as of May 26, 1994, among the Housing
Authority and Urban Redevelopment Agency of the City
of Atlantic City, Forest City Ratner Companies and
Atlantic City Showboat, Inc. regarding Development of
a Portion of the Uptown Urban Renewal Tract dated
December 14, 1995; Release and Subordination Agreement
dated December 14, 1995, between IBJ Schroder Bank &
Trust Company and Atlantic City Showboat, Inc.; First
Amendment to Leasehold in Pari Passu Mortgage,
Assignment of Rents and Security Agreement and
Collateral Assignment of Easement Rights-Mortgage
Spreader Agreement dated December 15, 1995, between
Atlantic City Showboat, Inc. and NatWest Bank, N.A.;
Third Amendment to Leasehold Mortgage, Assignment of
Rents and Security Agreement Dated as of May 19, 1993
- Mortgage Spreader Agreement dated December 14, 1995,
between Atlantic City Showboat, Inc. and
-111-
<PAGE>
EXHIBIT
NO. DESCRIPTION
--- -----------
IBJ Schroder Bank & Trust Company; Fourth Amendment to
Leasehold Mortgage, Assignment of Rents and Security
Agreement Dated as of May 18, 1993 - Release of Part
of Mortgaged Property and Subordination Agreement
dated December 14, 1995, between IBJ Schroder Bank &
Trust Company and Atlantic City Showboat, Inc., are
incorporated herein by reference to Showboat, Inc.'s
Form 10-K (file no. 1-7123) for the year ended
December 31, 1995, Part IV, Item 14(a)(3), Exhibit
10.24.
10.23 Securities Purchase Contract dated March 29, 1988,
between the Casino Reinvestment Development Authority
and Atlantic City Showboat, Inc., is incorporated
herein by reference to Showboat, Inc.'s Form 10-K
(file no. 1-7123) for the year ended December 31,
1988, Part IV, Item 14(a)(3), Exhibit 10.23.
10.24 Deed of Trust, Assignment of Rents, and Security
Agreement dated May 18, 1993, by Showboat, Inc. to
Nevada Title Company in favor of IBJ Schroder Bank &
Trust Company; Showboat, Inc. Security and Pledge
Agreement dated May 18, 1993, between Showboat, Inc.
and the IBJ Schroder Bank & Trust Company; Trademark
Security Agreement dated May 18, 1993, by Showboat,
Inc. in favor of IBJ Schroder Bank & Trust Company;
Unsecured Indemnity Agreement dated May 18, 1993, by
Showboat, Inc. in favor of IBJ Schroder Bank & Trust
Company; and Showboat Operating Company Security
Agreement dated May 18, 1993, between Showboat
Operating Company and IBJ Schroder Bank & Trust
Company, are incorporated by reference to Showboat,
Inc.'s Form 8-K (file no. 1-7123) dated May 18, 1993,
Item 5, Exhibit 28.02. Leasehold Mortgage, Assignment
of Rents, and Security Agreement dated May 18, 1993,
by Atlantic City Showboat, Inc. in favor of IBJ
Schroder Bank & Trust Company; Assignment of Leases
and Rents dated May 18, 1993, between Atlantic City
Showboat, Inc. and IBJ Schroder Bank & Trust Company;
and Ocean Showboat, Inc. Security and Pledge Agreement
dated May 18, 1993, between Ocean Showboat, Inc. and
IBJ Schroder Bank & Trust Company, are incorporated by
reference to Showboat, Inc.'s Form 8-K (file no. 1-
7123) dated May 18, 1993, Item 7(c), Exhibit 28.03.
Intercompany Note dated May 18, 1993, in the principal
amount of $215.0 million; Assignment of Lease and
Rents dated May 18, 1993, between Atlantic City
Showboat, Inc. and Showboat, Inc.; and Issuer
Collateral Assignment dated May 18, 1993, by Atlantic
City Showboat, Inc. in favor of IBJ Schroder Bank &
Trust Company, are incorporated by reference to
Showboat, Inc.'s Form 8-K (file no. 1-7123) dated
May 18, 1993, Item 7(c), Exhibit 28.04. Showboat
Development Company Security and Pledge Agreement
dated July 18, 1994, between Showboat Development
Company and IBJ Schroder Bank & Trust Company; and
Showboat Louisiana, Inc. Security and Pledge Agreement
dated July 18, 1994, between Showboat Louisiana, Inc.
and IBJ Schroder Bank & Trust Company, are
incorporated herein by reference to Showboat, Inc.'s
Form 10-K (file no. 1-7123) for the year ended
December 31, 1994, Part IV, Item 14(a)(3),
Exhibit 4.02.
10.25 First Amendment to the Leasehold Mortgage, Assignment
of Rents and Security Agreement dated July 9, 1993,
between Atlantic City Showboat, Inc. and
Showboat, Inc., is incorporated by reference
to Showboat, Inc.'s Form 8-K (file no. 1-7123)
dated July 7, 1993, Item 7(c), Exhibit 28.01.
First Amendment to the Leasehold Mortgage,
-112-
<PAGE>
EXHIBIT
NO. DESCRIPTION
Assignment of Rents and Security Agreement dated
July 9, 1993, between Atlantic City Showboat, Inc. and
IBJ Schroder Bank & Trust Company, is incorporated by
reference to Showboat, Inc.'s Form 8-K (file no. 1-
7123) dated July 7, 1993, Item 7(c), Exhibit 28.02.
Assignment of Rights under Agreement dated July 9,
1993, by Atlantic City Showboat, Inc. in favor of IBJ
Schroder Bank & Trust Company, is incorporated by
reference to Showboat, Inc.'s Form 8-K (file no. 1-
7123) dated July 7, 1993, Item 7(c), Exhibit 28.03.
Form of Deed for Sale of Land for Private
Redevelopment for Tract 1 and Tract 2 each dated
July 7, 1993, is incorporated by reference to
Showboat, Inc.'s Form 8-K (file no. 1-7123) dated
July 7, 1993, Item 7(c), Exhibit 28.04. Use and
Occupancy Agreement dated July 7, 1993, between
Atlantic City Housing Authority and Urban
Redevelopment Agency and Atlantic City Showboat, Inc.,
is incorporated by reference to Showboat, Inc.'s Form
8-K (file no. 1-7123) dated July 7, 1993, Item 7(c),
Exhibit 28.05.
10.26 Casino Operations Agreement (excluding exhibits) dated
April 22, 1994, among Leighton Properties Pty Limited,
New South Wales Casino Control Authority, Showboat
Australia Pty Limited, Showboat Operating Company,
Sydney Casino Management Pty Limited, Sydney Harbour
Casino Holdings Limited, Sydney Harbour Casino Pty
Limited and Sydney Harbour Casino Properties Pty
Limited; First Amending Deed dated October 6, 1994;
Second Amending Deed (undated); Third Amending Deed
dated December 13, 1994; Casino Complex Management
Agreement dated April 21, 1994, among Sydney Harbour
Casino Properties Pty Limited, Showboat Australia Pty
Limited and Sydney Casino Management Pty Limited; and
Development Agreement dated April 21, 1994, between
Leighton Properties Pty Limited and Sydney Harbour
Casino Properties Pty Limited, are incorporated herein
by reference to Showboat, Inc.'s Form 10-K (file no. 1-
7123) for the year ended December 31, 1995, Part IV,
Item 14(a)(3), Exhibit 10.32. Amending Deed to Casino
Complex Management Agreement among Showboat Australia
Pty Limited, National Mutual Trustees Limited, Sydney
Casino Management Pty Limited, Sydney Harbour Casino
Properties Pty Limited and Sydney Harbour Casino Pty
Limited - undated is incorporated herein by reference
to Showboat, Inc.'s Form 10-K (file no. 1-7123) for
the year ended December 31, 1996, Part IV, Item
14(a)(3), Exhibit 10.27.
10.27 Agreement of Partnership of Showboat Marina Investment
Partnership dated March 1, 1996, between Showboat
Indiana Investment Limited Partnership and Waterfront
Entertainment and Development, Inc.; Agreement of
Partnership of Showboat Marina Casino Partnership
dated March 1, 1996, between Showboat Marina
Partnership and Showboat Marina Investment
Partnership; Letter agreement regarding economic
development dated April 8, 1994, by Showboat Marina
Partnership in favor of the City of East Chicago;
Letter agreement regarding economic development dated
April 18, 1995, by Showboat Marina Partnership in
favor of the City of East Chicago; and Redevelopment
Project Lease dated October 19, 1995, between Showboat
Marina Partnership and the City of East Chicago,
are incorporated herein by reference to
-113-
<PAGE>
EXHIBIT
NO. DESCRIPTION
--- -----------
Showboat, Inc.'s Form 10-K (file no. 1-7123) for the
year ended December 31, 1995, Part IV, Item 14(a)(3),
Exhibit 10.33. Second Amended and Restated Showboat
Marina Partnership Agreement dated June 30, 1996,
between Waterfront Entertainment and Development, Inc.
and Showboat Indiana Investment Limited Partnership;
and Promissory Note dated January 1, 1997, in
principal amount of $41,887,158 by Showboat Indiana
Investment Limited Partnership in favor of Showboat,
Inc. are incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year ended
December 31, 1996, Part IV, Item 14(a)(3), Exhibit
10.28.
10.28 Non-Negotiable Mortgage Promissory Note dated
December 28, 1994, in the principal amount of
$8,850,000, by Rockingham Venture, Inc. in favor of
Showboat, Inc.; Mortgage and Security Agreement dated
December 28, 1994, between Rockingham Venture, Inc.
and Showboat, Inc., is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file no. 1-
7123) for the year ended December 31, 1994, Part IV,
Item 14(a)(3), Exhibit 10.42. Limited Liability
Company Agreement of Showboat Rockingham Company,
L.L.C. dated July 27, 1995, among Rockingham Venture,
Inc., Showboat New Hampshire, Inc. and Showboat
Rockingham Company, L.L.C.; Management Agreement
dated July 27, 1995, among Showboat Rockingham Company
L.L.C., Showboat Operating Company and Rockingham
Venture, Inc.; Administrative Services Agreement dated
July 27, 1995, between Showboat Operating Company and
Showboat Rockingham Company, L.L.C.; and Trademark
License Agreement dated July 27, 1995, between
Showboat, Inc. and Showboat Rockingham Company,
L.L.C., are incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123) for the
year ended December 31, 1995, Part IV, Item 14(a)(3),
Exhibit 10.35. Construction and Operation Agreement
by and between Showboat Rockingham Company LLC and
Rockingham Venture, Inc. dated as of December 20,
1997; and First Amendment to Limited Liability Company
Agreement of Showboat Rockingham Company, LLC dated as
of December 20, 1997.
10.29 Promissory Note dated March 19, 1997, in the principal
amount of $15,000,000 by Atlantic City Showboat, Inc.
in favor of Showboat, Inc.
10.30 Loan and Guaranty Agreement dated July 14, 1995, among
NatWest Bank, N.A., Showboat, Inc. and Atlantic City
Showboat, Inc., Ocean Showboat, Inc. and Showboat
Operating Company; Revolving Note dated July 14, 1995,
in the principal amount of $25.0 million by Showboat,
Inc. in favor of NatWest Bank, N.A.; Deed of Trust,
Assignment of Rents and Security Agreement dated
July 14,1995, by Showboat, Inc. in favor of Nevada
Title Company for the benefit of NatWest Bank, N.A.;
Leasehold in Pari Passu Mortgage, Assignment of Rents
and Security Agreement dated July 14, 1995, between
NatWest Bank and Atlantic City Showboat, Inc.;
Assignment of Leases and Rents dated July 14,
1995, between NatWest Bank and Atlantic City
Showboat, Inc.; Intercreditor Agreement for Pari
Passu Indebtedness Relating to Atlantic City
-114-
<PAGE>
EXHIBIT
NO. DESCRIPTION
--- -----------
Showboat dated July 14, 1995, among Showboat, Inc.,
Atlantic City Showboat, Inc., IBJ Schroder Bank &
Trust Company and NatWest Bank, N.A.; and
Intercreditor Agreement for Pari Passu Indebtedness
Relating to Las Vegas Showboat dated July 14, 1995,
among Showboat, Inc., IBJ Schroder Bank & Trust
Company and NatWest Bank, N.A., are incorporated
herein by reference to Showboat, Inc.'s Form 10-K
(file no. 1-7123) for the year ended December 31,
1995, Part IV, Item 14(a)(3), Exhibit 10.38. First
Amendment to the Pari Passu Assignment of Leases and
Rents dated July 14, 1997 between Atlantic City
Showboat, Inc. and Fleet Bank, N.A. (formerly known as
NatWest Bank, N.A.); Second Amendment to the Leasehold
in Pari Passu Mortgage, Assignment of Rents and
Security Agreement dated July 14, 1997 among Atlantic
City Showboat, Inc. and Fleet Bank, N.A. (formerly
known as NatWest Bank, N.A.); Modification to Loan and
Guaranty Agreement dated July 14, 1997 among Fleet
Bank, N.A. (formerly known as NatWest Bank, N.A.),
Showboat, Inc., Showboat Operating Company, Ocean
Showboat, Inc. and Atlantic City Showboat, Inc.;
Modification to Revolving Note dated July 14, 1997, in
principal amount of $35,000,000 by Showboat, Inc. in
favor of NatWest Bank, N.A. (now known as Fleet Bank,
N.A.); First Amendment to the Intercreditor Agreement
for Pari Passu Indebtedness Relating to Atlantic City
Showboat dated July 14, 1997 among Showboat, Inc.,
Atlantic City Showboat, Inc., IBJ Schroder Bank &
Trust Company and Fleet Bank, N.A. (formerly known as
NatWest Bank, N.A.); First Amendment to the
Intercreditor Agreement for Pari Passu Indebtedness
Relating to Las Vegas Showboat dated July 14, 1997
among IBJ Schroder Bank & Trust Company, Showboat,
Inc. and Fleet Bank, N.A. (formerly known as NatWest
Bank, N.A.); First Amendment to the Deed of Trust,
Assignment of Rents and Security Agreement dated July
14, 1997 among Showboat, Inc. and Showboat Operating
Company to Nevada Title Company for the benefit of
Fleet Bank, N.A. ( formerly known as NatWest Bank,
N.A.).
10.31 Promissory Note dated January 1, 1997, in the
principal amount of $34,011,720 by Showboat Fifteen,
Inc. in favor of Showboat, Inc. is incorporated herein
by reference to Showboat, Inc.'s Form 10-K (file no. 1-
7123) for the year ended December 31, 1996, Part IV,
Item 14(a)(3), Exhibit 10.33.
10.32 Standby Equity Commitment dated March 28, 1996, by and
among Showboat Marina Casino Partnership, Showboat
Marina Finance Corporation and Showboat, Inc., is
incorporated herein by reference to Showboat, Inc.'s
Form 10-Q (file no 1-7123) for the three month period
ended March 31, 1996, Part II, Item 6(a), Exhibit
10.02.
10.33 Showboat, Inc. 1996 Stock Appreciation Rights Plan,
effective date September 3, 1996, is incorporated
herein by reference to Showboat, Inc.'s Form 10-Q
(file no 1-7123) for the nine month period ended
September 30, 1996, Part II, Item 6(a), Exhibit 10.01.
-115-
<PAGE>
EXHIBIT
NO. DESCRIPTION
--- -----------
10.34 Promissory Note dated January 1, 1997, in the
principal amount of $8,197,293 by Showboat Operating
Company in favor of Showboat, Inc.; Promissory Note
dated January 1, 1997, in the principal amount of
$12,344,192 by Showboat Operating Company in favor of
Showboat, Inc.; and Promissory Note dated January 1,
1997, in the principal amount of $9,641,821 by
Showboat Operating Company in favor of Showboat, Inc.
are incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year ended
December 31, 1996, Part IV, Item 14(a)(3), Exhibit
10.38.
10.35 Promissory Note dated January 1, 1997, in the
principal amount of $53,109,002 by Showboat
Development Company in favor of Showboat, Inc.; and
Promissory Note dated January 1, 1997, in the
principal amount of $6,292,083 by Showboat Development
Company in favor of Showboat, Inc. are incorporated
herein by reference to Showboat, Inc.'s Form 10-K
(file no. 1-7123) for the year ended December 31,
1996, Part IV, Item 14(a)(3), Exhibit 10.39.
10.36 Agreement of Purchase and Sale by and between Sun
International and Showboat Land LLC, dated January 29,
1998; Assignment and Assumption of Lease by and
between Sun International and Showboat Land LLC, dated
January 27, 1998. Landlord Estoppel Certificate by Sun
International to Atlantic City Showboat, Inc., dated
January 27, 1998; Tenant Estoppel Certificate by
Atlantic City Showboat, Inc. to Sun International
dated January 27, 1998.
10.37 Mortgage and Security Agreement by and between Column
Financial, Inc. and Showboat Land LLC, dated January
29, 1998; Promissory Note in the principal amount of
$100,000,000, in favor of Column Financial, Inc. by
Showboat Land LLC, dated January 29, 1998; Cash
Management Agreement by and between Column Financial,
Inc. and Showboat Land LLC, dated January 28, 1998;
Guaranty of Lease by and between Showboat, Inc. and
Column Financial, Inc., dated January 29, 1998;
Environmental Indemnity Agreement by and between
Column Financial, Inc., Showboat Land LLC and Atlantic
City Showboat, Inc. dated January 29, 1998;
Assignment of Leases and Rents by and between Column
Financial, Inc. and Showboat Land LLC, dated January
29, 1998; Tenant Estoppel Certificate by Atlantic City
Showboat, Inc. to Column Financial, Inc. and Showboat
Land LLC, dated January 29, 1998; Promissory Note
Clarification Agreement dated January 29, 1998 between
Column Financial, Inc. and Showboat Land LLC; and
Lease Clarification Agreement dated February 13, 1998
among Showboat Land LLC and Atlantic City Showboat,
Inc.
10.38 Parent Services Support Agreement dated May 29, 1997
between Showboat, Inc. and Showboat Operating Company;
Management Services Support Agreement dated May 29,
1997 between Showboat, Inc. and Showboat Operating
Company.
-116-
<PAGE>
EXHIBIT
NO. DESCRIPTION
--- -----------
10.39 Stock Purchase Agreement dated as of December 11, 1997
by and between Showboat Development Company and
Futuresouth, Inc.
21.01 List of Subsidiaries.
23.01 Consent of KPMG Peat Marwick LLP.
27.01 Financial Data Schedule.
</TABLE>
(b) REPORTS ON FORM 8-K.
The Company filed a report on Form 8-K dated December
24, 1997, regarding the Showboat Merger.
-117-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by this undersigned,
thereunto duly authorized.
REGISTRANT: SHOWBOAT, INC.
By: /s/ J. K. Houssels, III
J. Kell Houssels, III,
President and Chief
Executive Officer
(principal executive
officer)
DATE: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
March 30, 1998 By: /s/ J.K. Houssels
J.K. Houssels, Chairman of
the Board
March 30, 1998 By: /s/ J. K. Houssels, III
J. Kell Houssels, III,
President, Chief Executive
Officer and Director
March 30, 1998 By: /s/ R. Craig Bird
R. Craig Bird, Executive
Vice President - Strategic
Financing/Investor
Relations and Chief
Financial Officer
(principal accounting
officer)
March 30, 1998 By: /s/ William C. Richardson
William C. Richardson,
Director
-118-
<PAGE>
March 30, 1998 By: /S/ John D. Gaughan
John D. Gaughan, Director
March 30, 1998 By: /s/ Jeanne S. Stewart
Jeanne S. Stewart,
Director
March 30, 1998 By: /s/ Frank A. Modica
Frank A. Modica, Director
March 30, 1998 By: /s/ H. Gregory Nasky
H. Gregory Nasky,
Executive Vice President,
Secretary and Director
March 30, 1998 By: /s/ George A. Zettler
George A. Zettler,
Director
March 30, 1998 By: /s/ Carolyn M. Sparks
Carolyn M. Sparks,
Director
-119-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
<S> <C> <C>
2.01 Agreement and Plan of Merger, dated as of
December 18, 1997, among Showboat, Inc.,
Harrah's Entertainment, Inc. and HEI
Acquisition Corp. is incorporated herein by
reference to Showboat, Inc.'s Form 8-K (file
no. 1-7123) dated December 24, 1997, Item 7(c),
Exhibit 2.1.
3.01 Restated Articles of Incorporation of Showboat,
Inc. dated June 10, 1994, is incorporated
herein by reference to Showboat, Inc.'s
Amendment No. 1 to Registration Statement on
Form S-3 (file no. 33-54325) dated July 8,
1994, Item 16, Exhibit 4.02.
3.02 Restated Bylaws of Showboat, Inc. dated
October 24, 1995, is incorporated herein by
reference to Showboat, Inc.'s Form 10-Q (file
no. 1-7123) for the nine month period ended
September 30, 1995, Part II, Item 6(a),
Exhibit 3.01.
4.01 Specimen Common Stock Certificate for the
Common Stock of Showboat, Inc. is incorporated
herein by reference to Showboat, Inc.'s
Amendment No. 1 to Registration Statement on
Form S-3 (file no. 33-54325) dated July 8,
1994, Item 16, Exhibit 4.01.
4.02 Rights Agreement dated October 5, 1995, between
Showboat, Inc. and American Stock Transfer and
Trust Company; Form of Right Certificate; and
Certificate of Designation of Rights and
Preferences of Series A Junior Preferred Stock
of Showboat, Inc., are incorporated herein by
reference to Showboat, Inc.'s Form 8-K (file
no. 1-7123) dated October 5, 1995, Item 7(c),
Exhibit 4.01.
4.03 Indenture dated May 18, 1993, for the 9 1/4%
First Mortgage Bonds due 2008 among Showboat,
Inc., Ocean Showboat, Inc., Atlantic City
Showboat, Inc., Showboat Operating Company,
and IBJ Schroder Bank & Trust Company;
Guaranty by Ocean Showboat, Inc., Atlantic City
Showboat, Inc. and Showboat Operating Company in
favor of IBJ Schroder Bank & Trust Company; and
Form of Bond Certificate for the 9 1/4% First
Mortgage Bonds due 2008, are incorporated herein
by reference to Showboat, Inc.'s Form 8-K (file
no. 1-7123) dated May 18, 1993, Item 7(c),
Exhibit 28.01. First Supplemental Indenture
dated July 18, 1994, for the 9 1/4% First
Mortgage Bonds due 2008 among Showboat, Inc.,
Ocean Showboat, Inc., Atlantic City Showboat,
Inc., Showboat Operating Company and IBJ
Schroder Bank & Trust Company is incorporated
herein by reference to Showboat, Inc.'s Form
10-K (file no. 1-7123) for the year ended
-120-
<PAGE>
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
December 31, 1994, Part IV, Item 14(a)(3),
Exhibit 4.02.
4.04 Indenture dated August 10, 1994, for the 13%
Senior Subordinated Notes due 2009 among
Showboat, Inc., Ocean Showboat, Inc., Atlantic
City Showboat, Inc., Showboat Operating
Company, and Marine Midland Bank; Guaranty by
Ocean Showboat, Inc., Atlantic City Showboat,
Inc. and Showboat Operating Company in favor of
Marine Midland Bank; and Form of Note
Certificate for the 13% Senior Subordinated
Notes due 2009, are incorporated herein by
reference to Showboat, Inc.'s Form 8-K (file
no. 1-7123) dated August 10, 1994, Item 7(c),
Exhibit 4.01.
4.05. Indenture dated as of March 28, 1996, among
Showboat Marina Casino Partnership, Showboat
Marina Finance Corporation, Donaldson, Lufkin &
Jenrette Securities Corporation, Nomura
Securities International, Inc., Bear, Stearns &
Co., Inc. and American Bank National
Association, as trustee, relating to the 13 1/2
Series A and Series B First Mortgage Notes due
2003, is incorporated herein by reference to
Showboat, Inc.'s Form 10-Q (file no 1-7123) for
the six month period ended June 30, 1996, Part
II, Item 6(a), Exhibit 4.01.
10.01 Parent Services Agreement dated November 21,
1985, between Showboat, Inc. and Atlantic City
Showboat, Inc., is incorporated herein by
reference to Showboat, Inc.'s Form 8-K (file
no. 1-7123) dated November 25, 1985, Item 7(c),
Exhibit 10.01. Amendment No. 1 to Parent
Services Agreement dated February 1, 1987,
between Showboat, Inc. and Atlantic City
Showboat, Inc., is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file
no. 1-7123) for the year ended June 30, 1987,
Part IV, Item 14(a)(3), Exhibit 10.17.
Amendment No. 2 to Parent Services Agreement
dated December 31, 1990, between Showboat, Inc.
and Atlantic City Showboat, Inc., is
incorporated herein by reference to Showboat,
Inc.'s Form 8-K (file no. 1-7123) dated
December 31, 1990, Item 7(c), Exhibit 28.01.
Amendment No. 3 to Parent Services Agreement
dated May 8, 1991, between Showboat, Inc. and
Atlantic City Showboat, Inc., is incorporated
herein by reference to Showboat, Inc.'s Form 10-
K (file no. 1-7123) for the year ended
December 31, 1991, Part IV, Item 14(a)(3),
Exhibit 10.14. Amendment No. 4 to Parent
Services Agreement dated August 17, 1993,
between Showboat, Inc. and Atlantic City
Showboat, Inc., is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file
no. 1-7123) for the year ended December 31,
1993, Part IV, Item 14(a)(3), Exhibit 10.11.
10.02 Tax Allocation Agreement effective May 10,
1993, among Showboat, Inc. and each
of its subsidiaries, is incorporated
herein by reference to
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NO. DESCRIPTION NO.
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Showboat, Inc.'s Form 10-K (file no. 1-7123)
for the year ended June 30, 1987, Part IV, Item
14(a)(3), Exhibit 10.11. First Amendment to
Tax Allocation Agreement effective May 10,
1993, among Showboat, Inc. and each of its
subsidiaries, is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file
no. 1-7123) for the year ended December 31,
1993, Part IV, Item 14(a)(3), Exhibit 10.07.
10.03 Management Services Agreement dated January 1,
1989, between Showboat, Inc. and Showboat
Operating Company, is incorporated herein by
reference to Showboat, Inc.'s Form 8-K (file
no. 1-7123) dated January 1, 1989, Item 7(c),
Exhibit 28.03.
10.04 Showboat, Inc. 1989 Long Term Incentive Plan,
as amended and restated on February 25, 1993,
is incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123)
for the year ended December 31, 1992, Part IV,
Item 14(a)(3), Exhibit 10.23.
10.05 Showboat, Inc. 1989 Directors' Stock Option
Plan, as amended and restated February 25,
1993, is incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123)
for the year ended December 31, 1992, Part IV,
Item 14(a)(3), Exhibit 10.27.
10.06 Showboat, Inc. 1994 Executive Long Term
Incentive Plan effective May 25, 1994, is
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1994, Part IV, Item
14(a)(3), Exhibit 10.36.
10.07 Showboat, Inc. Supplemental Executive
Retirement Plan effective April 1, 1994, is
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1994, Part IV, Item
14(a)(3), Exhibit 10.37.
10.08 Showboat, Inc. Restoration Plan effective
April 1, 1994, is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file
no. 1-7123) for the year ended December 31,
1994, Part IV, Item 14(a)(3), Exhibit 10.38.
10.09 Statement regarding Showboat, Inc.'s Incentive
Bonus Plans, is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file
no. 1-7123) for the year ended December 31,
1992, Part IV, Item 14(a)(3), Exhibit 10.12.
10.10 Atlantic City Showboat, Inc. Executive
Medical Reimbursement Plan, effective
August 15, 1991, is incorporated herein
by reference to Showboat,
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NO. DESCRIPTION NO.
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Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1991, Part IV, Item
14(a)(3), Exhibit 10.23.
10.11 Atlantic City Showboat, Inc. Executive Health
Examinations Plan effective January 1, 1989, is
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1989, Part IV, Item
14(a)(3), Exhibit 10.24.
10.12 Form of Severance Agreement between Showboat,
Inc. and certain executive officer and key
employees of Showboat, Inc. and its
subsidiaries, is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file
no. 1-7123) for the year ended December 31,
1994, Part IV, Item 14(a)(3), Exhibit 10.39.
10.13 Form of Indemnification Agreement between
Showboat, Inc. and each director and officer of
Showboat, Inc., is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file
no. 1-7123) for the year ended December 31,
1987, Part IV, Item 14(a)(3), Exhibit 10.13.
10.14 Lease dated January 1, 1989, between Showboat,
Inc. and Showboat Operating Company, is
incorporated herein by reference to Showboat,
Inc.'s Form 8-K (file no. 1-7123) dated
January 1, 1989, Item 7(c), Exhibit 28.01.
10.15 Lease dated January 14, 1994, between Showboat,
Inc. and Exber, Inc.; and Sublease dated
November 5, 1966, between Dodd Smith and John
D. Gaughan and Leslie C. Schwartz, is
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1993, Part IV, Item
14(a)(3), Exhibit 10.39.
10.16 Lease of Retail Store No. 7 dated April 10,
1987, among Atlantic City Showboat, Inc., R.
Craig Bird and Debra E. Bird; and Guaranty of
Lease among Atlantic City Showboat, Inc., R.
Craig Bird and Debra E. Bird, are incorporated
herein by reference to Showboat, Inc.'s Form 10-
K (file no. 1-7123) for the year ended
December 31, 1988, Part IV, Item 14(a)(3),
Exhibit 10.24. First Amendment to the Lease
between Atlantic City Showboat, Inc. and
R. Craig Bird and Debra E. Bird, dated July 17,
1997. Letter Agreement dated March 25, 1997 to
R. Craig Bird from Atlantic City Showboat, Inc.
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NO. DESCRIPTION NO.
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10.17 Promissory Note dated August 5, 1993, in the
principal amount of $20,400.69 among Showboat,
Inc., R. Craig Bird and Debra E. Bird, is
incorporated herein by reference to Showboat,
Inc.'s Form 10-K for the year ended
December 31, 1993, Part IV, Item 14(a)(3),
Exhibit 10.15.
10.18 Ground Lease dated October 26, 1983, between
Ocean Showboat, Inc. and Resorts International,
Inc., is incorporated herein by reference to
Showboat, Inc.'s Form 8-K (file no. 1-7123) as
amended by a Form 8 filed with the Securities
and Exchange Commission on November 28, 1983.
Assignment and Assumption of Leases dated
December 3, 1985, between Ocean Showboat, Inc.
and Atlantic City Showboat, Inc.; First
Amendment to Lease Agreement dated January 15,
1985, between Resorts International, Inc. and
Atlantic City Showboat, Inc.; Second Amendment
to Lease Agreement dated July 5, 1985, between
Resorts International, Inc. and Atlantic City
Showboat, Inc., are incorporated herein by
reference to the Form 10-K (file no. 1-7123)
for the year ended June 30, 1985, Part IV, Item
14(a)(3), Exhibit 10.02. Restated Third
Amendment to Lease Agreement dated August 28,
1986, between Resorts International, Inc. and
Atlantic City Showboat, Inc., is incorporated
herein by reference to the Form 10-K (file no.
1-7123) for the year ended June 30, 1986, Part
IV, Item 14(a)(3), Exhibit 10.08; Fourth
Amendment to Lease Agreement dated December 16,
1986, between Resorts International, Inc. and
Atlantic City Showboat, Inc.; Fifth Amendment
to Lease Agreement dated March 2, 1987, between
Resorts International, Inc. and Atlantic City
Showboat, Inc.; Sixth Amendment to Lease
Agreement dated March 13, 1987, between Resorts
International, Inc. and Atlantic City Showboat,
Inc.; Indemnity Agreement dated January 15,
1985, among Resorts International, Inc.,
Atlantic City Showboat, Inc. and Ocean
Showboat, Inc.; and Amended Indemnity Agreement
dated December 3, 1985, among Resorts
International, Inc., Atlantic City Showboat,
Inc. and Ocean Showboat, Inc., are incorporated
herein by reference to Showboat, Inc.'s Form 10-
K (file no. 1-7123) for the year ended June 30,
1987, Part IV, Item 14(a)(3), Exhibit 10.02;
Seventh Amendment to Lease Agreement dated
October 18, 1988, between Resorts
International, Inc. and Atlantic City Showboat,
Inc., is incorporated herein by reference to
Showboat, Inc.'s Form 8-K (file no. 1-7123)
dated November 16, 1988, Item 7(c), Exhibit
28.01; Eighth Amendment to Lease Agreement
between Atlantic City Showboat, Inc. and
Resorts International, Inc. International, Inc.
dated May 18, 1993, is incorporated herein by
reference to Showboat, Inc.'s Form 8-K (file
no. 1-7123) dated May 18, 1993, Item 7(c),
Exhibit 28.06.
10.19 Closing Escrow Agreement dated
September 21, 1988, among Housing
Authority and Urban Redevelopment Agency
of the City of Atlantic City,
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NO. DESCRIPTION NO.
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Resorts International, Inc., Atlantic City
Showboat, Inc., Trump Taj Mahal Associates
Limited Partnership, and Clapp & Eisenberg,
P.C.; Agreement as to Assumption of Obligations
with respect to Properties dated September 21,
1988, among Atlantic City Showboat, Inc., Trump
Taj Mahal Associates Limited Partnership and
Trump Taj Mahal Realty Corp.; First Amendment
of Agreement as to Assumption of Obligations
with respect to Properties dated September 21,
1988, among Atlantic City Showboat, Inc., Trump
Taj Mahal Associates Limited Partnership and
Trump Taj Mahal Realty Corp.; Settlement
Agreement dated October 18, 1988, among
Atlantic City Showboat, Inc., Trump Taj Mahal
Associates Limited Partnership, Trump Taj Mahal
Realty Corp., Resorts International, Inc. and
the Housing Authority and Urban Redevelopment
Agency of the City of Atlantic City; Tri-Party
Agreement dated October 18, 1988, among Resorts
International, Inc., Atlantic City Showboat,
Inc. and Trump Taj Mahal Associates Limited
Partnership; and Certificate of Trump Taj Mahal
Associates Limited Partnership and Resorts
International, Inc. dated November 16, 1988,
are incorporated herein by reference to
Showboat, Inc.'s Form 8-K (file no. 1-7123)
dated November 16, 1988, Item 7(c), Exhibit
28.01. Revised Second Amendment to Agreement as
to Assumption of Obligations with respect to
Properties dated May 24, 1989, among Atlantic
City Showboat, Inc., Trump Taj Mahal Associates
Limited Partnership and Trump Taj Mahal Realty
Corp., is incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123)
for the year ended December 31, 1989, Part IV,
Item 14(a)(3), Exhibit 10.17.
10.20 Letter agreement dated September 23, 1992,
between Trump Taj Mahal Associates and Atlantic
City Showboat, Inc.; and letter agreement dated
October 26, 1992 to Trump Taj Mahal Associates
from Atlantic City Showboat, Inc., are
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1992, Part IV, Item
14(a)(3), Exhibit 10.24.
10.21 Lease dated December 22, 1994, between Housing
Authority and Urban Redevelopment Agency of the
City of Atlantic City and Atlantic City
Showboat, Inc.; Tri-Party Agreement dated
May 26, 1994, among Housing Authority and Urban
Redevelopment Agency of the City of Atlantic
City, Forest City Ratner Companies and Atlantic
City Showboat, Inc.; Terms and Conditions Part
II of Contract for Sale of Land for Private
Redevelopment between Housing Authority and
Urban Redevelopment Agency of the City of
Atlantic City and Atlantic City Showboat, Inc.;
and Rider to Contract for Sale of Land for
Private Redevelopment between Housing Authority
and Urban Redevelopment Agency of the
City of Atlantic City and Atlantic City
Showboat, Inc., are incorporated herein
by reference to Showboat, Inc.'s
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EXHIBIT PAGE
NO. DESCRIPTION NO.
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Form 10-K (file no. 1-7123) for the year ended
December 31, 1994, Part IV, Item 14(a)(3),
Exhibit 10.46.
10.22 Agreement Amending and Restating the Tri-Party
Agreement Dated as of May 26, 1994, among the
Housing Authority and Urban Redevelopment
Agency of the City of Atlantic City, Forest
City Ratner Companies and Atlantic City
Showboat, Inc. regarding Development of a
Portion of the Uptown Urban Renewal Tract dated
December 14, 1995; Release and Subordination
Agreement dated December 14, 1995, between IBJ
Schroder Bank & Trust Company and Atlantic City
Showboat, Inc.; First Amendment to Leasehold in
Pari Passu Mortgage, Assignment of Rents and
Security Agreement and Collateral Assignment of
Easement Rights-Mortgage Spreader Agreement
dated December 15, 1995, between Atlantic City
Showboat, Inc. and NatWest Bank, N.A.; Third
Amendment to Leasehold Mortgage, Assignment of
Rents and Security Agreement Dated as of
May 19, 1993 - Mortgage Spreader Agreement
dated December 14, 1995, between Atlantic City
Showboat, Inc. and IBJ Schroder Bank & Trust
Company; Fourth Amendment to Leasehold
Mortgage, Assignment of Rents and Security
Agreement Dated as of May 18, 1993 - Release of
Part of Mortgaged Property and Subordination
Agreement dated December 14, 1995, between IBJ
Schroder Bank & Trust Company and Atlantic City
Showboat, Inc., are incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file
no. 1-7123) for the year ended December 31,
1995, Part IV, Item 14(a)(3), Exhibit 10.24.
10.23 Securities Purchase Contract dated March 29,
1988, between the Casino Reinvestment
Development Authority and Atlantic City
Showboat, Inc., is incorporated herein by
reference to Showboat, Inc.'s Form 10-K (file
no. 1-7123) for the year ended December 31,
1988, Part IV, Item 14(a)(3), Exhibit 10.23.
10.24 Deed of Trust, Assignment of Rents, and
Security Agreement dated May 18, 1993, by
Showboat, Inc. to Nevada Title Company in favor
of IBJ Schroder Bank & Trust Company; Showboat,
Inc. Security and Pledge Agreement dated
May 18, 1993, between Showboat, Inc. and the
IBJ Schroder Bank & Trust Company; Trademark
Security Agreement dated May 18, 1993, by
Showboat, Inc. in favor of IBJ Schroder Bank &
Trust Company; Unsecured Indemnity Agreement
dated May 18, 1993, by Showboat, Inc. in favor
of IBJ Schroder Bank & Trust Company; and
Showboat Operating Company Security Agreement
dated May 18, 1993, between Showboat Operating
Company and IBJ Schroder Bank & Trust Company,
are incorporated by reference to Showboat,
Inc.'s Form 8-K (file no. 1-7123) dated May 18,
1993, Item 5, Exhibit 28.02. Leasehold
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NO. DESCRIPTION NO.
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Mortgage, Assignment of Rents, and Security
Agreement dated May 18, 1993, by Atlantic City
Showboat, Inc. in favor of IBJ Schroder Bank &
Trust Company; Assignment of Leases and Rents
dated May 18, 1993, between Atlantic City
Showboat, Inc. and IBJ Schroder Bank & Trust
Company; and Ocean Showboat, Inc. Security and
Pledge Agreement dated May 18, 1993, between
Ocean Showboat, Inc. and IBJ Schroder Bank &
Trust Company, are incorporated by reference to
Showboat, Inc.'s Form 8-K (file no. 1-7123)
dated May 18, 1993, Item 7(c), Exhibit 28.03.
Intercompany Note dated May 18, 1993, in the
principal amount of $215.0 million; Assignment
of Lease and Rents dated May 18, 1993, between
Atlantic City Showboat, Inc. and Showboat,
Inc.; and Issuer Collateral Assignment dated
May 18, 1993, by Atlantic City Showboat, Inc.
in favor of IBJ Schroder Bank & Trust Company,
are incorporated by reference to Showboat,
Inc.'s Form 8-K (file no. 1-7123) dated May 18,
1993, Item 7(c), Exhibit 28.04. Showboat
Development Company Security and Pledge
Agreement dated July 18, 1994, between Showboat
Development Company and IBJ Schroder Bank &
Trust Company; and Showboat Louisiana, Inc.
Security and Pledge Agreement dated July 18,
1994, between Showboat Louisiana, Inc. and IBJ
Schroder Bank & Trust Company, are incorporated
herein by reference to Showboat, Inc.'s Form 10-
K (file no. 1-7123) for the year ended
December 31, 1994, Part IV, Item 14(a)(3),
Exhibit 4.02.
10.25 First Amendment to the Leasehold Mortgage,
Assignment of Rents and Security Agreement
dated July 9, 1993, between Atlantic City
Showboat, Inc. and Showboat, Inc., is
incorporated by reference to Showboat, Inc.'s
Form 8-K (file no. 1-7123) dated July 7, 1993,
Item 7(c), Exhibit 28.01. First Amendment to
the Leasehold Mortgage, Assignment of Rents and
Security Agreement dated July 9, 1993, between
Atlantic City Showboat, Inc. and IBJ Schroder
Bank & Trust Company, is incorporated by
reference to Showboat, Inc.'s Form 8-K (file
no. 1-7123) dated July 7, 1993, Item 7(c),
Exhibit 28.02. Assignment of Rights under
Agreement dated July 9, 1993, by Atlantic City
Showboat, Inc. in favor of IBJ Schroder Bank &
Trust Company, is incorporated by reference to
Showboat, Inc.'s Form 8-K (file no. 1-7123)
dated July 7, 1993, Item 7(c), Exhibit 28.03.
Form of Deed for Sale of Land for Private
Redevelopment for Tract 1 and Tract 2 each
dated July 7, 1993, is incorporated by
reference to Showboat, Inc.'s Form 8-K (file
no. 1-7123) dated July 7, 1993, Item 7(c),
Exhibit 28.04. Use and Occupancy Agreement
dated July 7, 1993, between Atlantic City
Housing Authority and Urban Redevelopment
Agency and Atlantic City Showboat, Inc., is
incorporated by reference to Showboat, Inc.'s
Form 8-K (file no. 1-7123) dated July 7, 1993,
Item 7(c), Exhibit 28.05.
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NO. DESCRIPTION NO.
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10.26 Casino Operations Agreement (excluding
exhibits) dated April 22, 1994, among Leighton
Properties Pty Limited, New South Wales Casino
Control Authority, Showboat Australia Pty
Limited, Showboat Operating Company, Sydney
Casino Management Pty Limited, Sydney Harbour
Casino Holdings Limited, Sydney Harbour Casino
Pty Limited and Sydney Harbour Casino
Properties Pty Limited; First Amending Deed
dated October 6, 1994; Second Amending Deed
(undated); Third Amending Deed dated
December 13, 1994; Casino Complex Management
Agreement dated April 21, 1994, among Sydney
Harbour Casino Properties Pty Limited, Showboat
Australia Pty Limited and Sydney Casino
Management Pty Limited; and Development
Agreement dated April 21, 1994, between
Leighton Properties Pty Limited and Sydney
Harbour Casino Properties Pty Limited, are
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1995, Part IV, Item
14(a)(3), Exhibit 10.32. Amending Deed to
Casino Complex Management Agreement among
Showboat Australia Pty Limited, National Mutual
Trustees Limited, Sydney Casino Management Pty
Limited, Sydney Harbour Casino Properties Pty
Limited and Sydney Harbour Casino Pty Limited -
undated is incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123)
for the year ended December 31, 1996, Part IV,
Item 14(a)(3), Exhibit 10.27.
10.27 Agreement of Partnership of Showboat Marina
Investment Partnership dated March 1, 1996,
between Showboat Indiana Investment Limited
Partnership and Waterfront Entertainment and
Development, Inc.; Agreement of Partnership of
Showboat Marina Casino Partnership dated March
1, 1996, between Showboat Marina Partnership
and Showboat Marina Investment Partnership;
Letter agreement regarding economic development
dated April 8, 1994, by Showboat Marina
Partnership in favor of the City of East
Chicago; Letter agreement regarding economic
development dated April 18, 1995, by Showboat
Marina Partnership in favor of the City of East
Chicago; and Redevelopment Project Lease dated
October 19, 1995, between Showboat Marina
Partnership and the City of East Chicago, are
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1995, Part IV, Item
14(a)(3), Exhibit 10.33. Second Amended and
Restated Showboat Marina Partnership Agreement
dated June 30, 1996, between Waterfront
Entertainment and Development, Inc. and
Showboat Indiana Investment Limited
Partnership; and Promissory Note dated
January 1, 1997, in principal amount of
$41,887,158 by Showboat Indiana Investment
Limited Partnership in favor of Showboat, Inc.
are incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123)
for the year ended December 31, 1996, Part IV,
Item 14(a)(3), Exhibit 10.28.
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NO. DESCRIPTION NO.
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10.28 Non-Negotiable Mortgage Promissory Note dated
December 28, 1994, in the principal amount of
$8,850,000, by Rockingham Venture, Inc. in
favor of Showboat, Inc.; Mortgage and Security
Agreement dated December 28, 1994, between
Rockingham Venture, Inc. and Showboat, Inc., is
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1994, Part IV, Item
14(a)(3), Exhibit 10.42. Limited Liability
Company Agreement of Showboat Rockingham
Company, L.L.C. dated July 27, 1995, among
Rockingham Venture, Inc., Showboat New
Hampshire, Inc. and Showboat Rockingham
Company, L.L.C.; Management Agreement dated
July 27, 1995, among Showboat Rockingham
Company L.L.C., Showboat Operating Company and
Rockingham Venture, Inc.; Administrative
Services Agreement dated July 27, 1995, between
Showboat Operating Company and Showboat
Rockingham Company, L.L.C.; and Trademark
License Agreement dated July 27, 1995, between
Showboat, Inc. and Showboat Rockingham Company,
L.L.C., are incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123)
for the year ended December 31, 1995, Part IV,
Item 14(a)(3), Exhibit 10.35. Construction and
Operation Agreement by and between Showboat
Rockingham Company LLC and Rockingham Venture,
Inc. dated as of December 20, 1997; and First
Amendment to Limited Liability Company
Agreement of Showboat Rockingham Company, LLC
dated as of December 20, 1997.
10.29 Promissory Note dated March 19, 1997, in the
principal amount of $15,000,000 by Atlantic
City Showboat, Inc. in favor of Showboat, Inc.
10.30 Loan and Guaranty Agreement dated July 14,
1995, among NatWest Bank, N.A., Showboat, Inc.
and Atlantic City Showboat, Inc., Ocean
Showboat, Inc. and Showboat Operating Company;
Revolving Note dated July 14, 1995, in the
principal amount of $25.0 million by Showboat,
Inc. in favor of NatWest Bank, N.A.; Deed of
Trust, Assignment of Rents and Security
Agreement dated July 14,1995, by Showboat, Inc.
in favor of Nevada Title Company for the
benefit of NatWest Bank, N.A.; Leasehold in
Pari Passu Mortgage, Assignment of Rents and
Security Agreement dated July 14, 1995, between
NatWest Bank and Atlantic City Showboat, Inc.;
Assignment of Leases and Rents dated July 14,
1995, between NatWest Bank and Atlantic City
Showboat, Inc.; Intercreditor Agreement for
Pari Passu Indebtedness Relating to Atlantic
City Showboat dated July 14, 1995, among
Showboat, Inc., Atlantic City Showboat, Inc.,
IBJ Schroder Bank & Trust Company and NatWest
Bank, N.A.; and Intercreditor Agreement for
Pari Passu Indebtedness Relating to Las Vegas
Showboat dated July 14, 1995, among Showboat,
Inc., IBJ Schroder Bank & Trust
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NO. DESCRIPTION NO.
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Company and NatWest Bank, N.A., are
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1995, Part IV, Item
14(a)(3), Exhibit 10.38. First Amendment to
the Pari Passu Assignment of Leases and Rents
dated July 14, 1997 between Atlantic City
Showboat, Inc. and Fleet Bank, N.A. (formerly
known as NatWest Bank, N.A.); Second Amendment
to the Leasehold in Pari Passu Mortgage,
Assignment of Rents and Security Agreement
dated July 14, 1997 among Atlantic City
Showboat, Inc. and Fleet Bank, N.A. (formerly
known as NatWest Bank, N.A.); Modification to
Loan and Guaranty Agreement dated July 14, 1997
among Fleet Bank, N.A. (formerly known as
NatWest Bank, N.A.), Showboat, Inc., Showboat
Operating Company, Ocean Showboat, Inc. and
Atlantic City Showboat, Inc.; Modification to
Revolving Note dated July 14, 1997, in
principal amount of $35,000,000 by Showboat,
Inc. in favor of NatWest Bank, N.A. (now known
as Fleet Bank, N.A.); First Amendment to the
Intercreditor Agreement for Pari Passu
Indebtedness Relating to Atlantic City Showboat
dated July 14, 1997 among Showboat, Inc.,
Atlantic City Showboat, Inc., IBJ Schroder Bank
& Trust Company and Fleet Bank, N.A. (formerly
known as NatWest Bank, N.A.); First Amendment
to the Intercreditor Agreement for Pari Passu
Indebtedness Relating to Las Vegas Showboat
dated July 14, 1997 among IBJ Schroder Bank &
Trust Company, Showboat, Inc. and Fleet Bank,
N.A. (formerly known as NatWest Bank, N.A.);
First Amendment to the Deed of Trust,
Assignment of Rents and Security Agreement
dated July 14, 1997 among Showboat, Inc. and
Showboat Operating Company to Nevada Title
Company for the benefit of Fleet Bank, N.A. (
formerly known as NatWest Bank, N.A.).
10.31 Promissory Note dated January 1, 1997, in the
principal amount of $34,011,720 by Showboat
Fifteen, Inc. in favor of Showboat, Inc. is
incorporated herein by reference to Showboat,
Inc.'s Form 10-K (file no. 1-7123) for the year
ended December 31, 1996, Part IV, Item
14(a)(3), Exhibit 10.33.
10.32 Standby Equity Commitment dated March 28, 1996,
by and among Showboat Marina Casino
Partnership, Showboat Marina Finance
Corporation and Showboat, Inc., is incorporated
herein by reference to Showboat, Inc.'s Form 10-
Q (file no 1-7123) for the three month period
ended March 31, 1996, Part II, Item 6(a),
Exhibit 10.02.
10.33 Showboat, Inc. 1996 Stock Appreciation Rights
Plan, effective date September 3, 1996, is
incorporated herein by reference to Showboat,
Inc.'s Form 10-Q (file no 1-7123) for the nine
month period ended September 30, 1996, Part II,
Item 6(a), Exhibit 10.01.
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NO. DESCRIPTION NO.
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10.34 Promissory Note dated January 1, 1997, in the
principal amount of $8,197,293 by Showboat
Operating Company in favor of Showboat, Inc.;
Promissory Note dated January 1, 1997, in the
principal amount of $12,344,192 by Showboat
Operating Company in favor of Showboat, Inc.;
and Promissory Note dated January 1, 1997, in
the principal amount of $9,641,821 by Showboat
Operating Company in favor of Showboat, Inc.
are incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123)
for the year ended December 31, 1996, Part IV,
Item 14(a)(3), Exhibit 10.38.
10.35 Promissory Note dated January 1, 1997, in the
principal amount of $53,109,002 by Showboat
Development Company in favor of Showboat, Inc.;
and Promissory Note dated January 1, 1997, in
the principal amount of $6,292,083 by Showboat
Development Company in favor of Showboat, Inc.
are incorporated herein by reference to
Showboat, Inc.'s Form 10-K (file no. 1-7123)
for the year ended December 31, 1996, Part IV,
Item 14(a)(3), Exhibit 10.39.
10.36 Agreement of Purchase and Sale by and between
Sun International and Showboat Land LLC, dated
January 29, 1998; Assignment and Assumption of
Lease by and between Sun International and
Showboat Land LLC, dated January 27, 1998;
Landlord Estoppel Certificate by Sun
International to Atlantic City Showboat, Inc.,
dated January 27, 1998; Tenant Estoppel
Certificate by Atlantic City Showboat, Inc. to
Sun International dated January 27, 1998.
10.37 Mortgage and Security Agreement by and between
Column Financial, Inc. and Showboat Land LLC,
dated January 29, 1998; Promissory Note in the
principal amount of $100,000,000, in favor of
Column Financial, Inc. by Showboat Land LLC,
dated January 29, 1998; Cash Management
Agreement by and between Column Financial, Inc.
and Showboat Land LLC, dated January 28, 1998;
Guaranty of Lease by and between Showboat, Inc.
and Column Financial, Inc., dated January 29,
1998; Environmental Indemnity Agreement by and
between Column Financial, Inc., Showboat Land
LLC and Atlantic City Showboat, Inc., dated
January 29, 1998; Assignment of Leases and
Rents by and between Column Financial, Inc. and
Showboat Land LLC, dated January 29, 1998;
Tenant Estoppel Certificate by Atlantic City
Showboat, Inc. to Column Financial, Inc. and
Showboat Land LLC dated January 29, 1998;
Promissory Note Clarification Agreement dated
January 29, 1998 between Column Financial, Inc.
and Showboat Land LLC; and Lease Clarification
Agreement dated February 13, 1998 among
Showboat Land LLC and Atlantic City
-131-
<PAGE>
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
Showboat, Inc.
10.38 Parent Services Support Agreement dated May 29,
1997 between Showboat, Inc. and Showboat
Operating Company; Management Services Support
Agreement dated May 29, 1997 between Showboat,
Inc. and Showboat Operating Company.
10.39 Stock Purchase Agreement dated as of December
11, 1997 by and between Showboat Development
Company and Futuresouth, Inc.
21.01 List of Subsidiaries.
23.01 Consent of KPMG Peat Marwick LLP.
27.01 Financial Data Schedule.
-132-
<PAGE>
</TABLE>
EXHIBIT 10.16
<PAGE>
FIRST AMENDMENT TO LEASE BETWEEN
ATLANTIC CITY SHOWBOAT, INC. AND
R. CRAIG BIRD AND DEBRA E. BIRD
DATED APRIL 10, 1987
WHEREAS, Atlantic City Showboat, Inc. ("Lessor"), and R.
Craig Bird and Debra E. Bird ("Lessee") entered into that certain
Lease dated as of April 10, 1987, by which Lessor leased to
Lessee certain real property within the Showboat Casino Hotel
building in Atlantic City for a term of years as defined said
Lease; and
WHEREAS, Lessee has continuously occupied the Premises as
defined in the Lease and operated therefrom a Gift Shop; and
WHEREAS, due to certain renovations of the Showboat Casino
Hotel building, the Lessor and Lessee desire to relocate Lessee's
gift shop operation from the Premises as defined in the Lease to
another location within the Showboat Casino Hotel building; and
WHEREAS, the parties desire to amend the Lease with respect
to the use of the premises; and
WHEREAS, Lessee desires to memorialize its exercise of its
options to extend the term of the Lease; and
WHEREAS, Lessor and Lessee, upon mutual execution of this
First Amendment, desire that all of the terms and conditions of
the Lease remain in full force and effect with the exception of
those portions of the Lease herein amended and wish to ratify and
confirm all of the terms, conditions and provisions of the Lease
so that such terms, conditions and provisions are completely
applicable to the relationship of Lessor and Lessee with respect
to the relocated gift shop.
<PAGE>
NOW, therefore, in consideration of mutual covenants, Lessor
and Lessee hereby agree to amend the Lease as follows:
1. Effective as of March 1, 1997, Lessee shall vacate,
surrender and forever relinquish any right, title or
interest to that certain real property identified in the
Lease as RS7 identified in Exhibits A and B of the Lease.
2. Effective March 1, 1997, Lessor leases to Lessee and Lessee
leases from Lessor that certain real property located within
the Showboat Casino Hotel building more particularly
depicted and described in and on Exhibits A and B attached
hereto, which Exhibits A and B are intended to replace and
supersede the corresponding Exhibits attached to the Lease.
3. Effective as of March 1, 1997, the Lease, as amended by this
first amendment, including all of its terms, conditions and
provision, shall apply to the new Gift Shop Premises to the
same extent as it applied to the Premises.
4. Effective as of March 1, 1997, the following shall be
deleted from Article 18(a)(2) of the Lease (see page 20 of
Lease):
The following words or phrases contained in
subparagraph (i): "Ron Lee clown figures
(described as 24 karat gold over a base metal
on an onyx base)";
Subparagraph (v) in its entirety;
Subparagraph (vi) in its entirety;
The following words or phases contained in
subparagraph (vii): "fresh baked cookies,"
"soft drinks," "ice cream cones or bars or
any ice cream package fountain product".
5. Lessee hereby exercises the option to renew set forth at
Article 41 of the Lease, to wit, the Term of the Lease is
extended for one (1) successive ten (10) year term following
the expiration of the Term of the Lease as set forth at page
one thereof.
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and
seals by their authorized representatives as of this 17th day of
July, 1997.
Attest: ATLANTIC CITY SHOWBOAT, INC.
/s/ Luther G. Anderson BY: /s/ Herbert R. Wolfe
Luther G. Anderson Herbert R. Wolfe
Assistant Secretary President and CEO
Witness:
/s/ Brenda S. Wallace BY: /s/ R. Craig Bird
R. Craig Bird
Witness:
/s/ Brenda S. Wallace BY: /s/ Debra E. Bird
Debra E. Bird
<PAGE>
[HARD COPY OF FIRST AMENDMENT TO LEASE CONTAINS GRAPHIC
CONSTRUCTION PLAN @ FUTURE GIFT SHOP AS EXHIBIT A]
Exhibit A
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE GENERAL
SPACE LOCATION SIZE UTILIZATION
<S> <C> <C> <C>
Gift Shop See Hillier Sheet 1,300 sq. ft. Retail sale of magazines
#A2.I newspapers, general mer-
chandise, sundries,
drugs, souvenirs and
tobacco products
</TABLE>
Exhibit B
<PAGE>
[Showboat Letterhead]
March 25, 1987
R. Craig Bird, t/a
Ocean 11 Enterprises
4 E. Timber Avenue
Marmora, NJ 08223
Re: ATLANTIC CITY SHOWBOAT, INC. -
OCEAN 11 ENTERPRISES AGREEMENT
Dear Mr. Bird:
Please have this letter confirm the terms of the arrangement
between you and Atlantic City Showboat, Inc. ("Showboat") for the
placement of cigarette and food vending machines at the Atlantic
City Showboat Hotel, Casino and Bowling Center ("Hotel"). Those
terms are as follows:
1. YOUR OBLIGATIONS. You will be obligated at your cost
to:
(a) Transport, place and install at the Hotel as
expeditiously as possible a quantity and variety of
cigarette and candy/snack vending machines
satisfactory to Showboat. Such machines will be
installed at all locations directed by Showboat in
its sole discretion;
(b) Make substitutions of machines from time to
time at the reasonable discretion of Showboat;
(c) Service, repair, stock and maintain in good
condition machines installed and respond to any
service call within 24 hours;
(d) Maintain comprehensive general liability
insurance satisfactory to Showboat and workers
compensation insurance as required by law;
(e) Adhere to Showboat's cash collection procedures
as prescribed from time to time;
(f) Bear the risk of loss of all machines;
(g) Obtain all necessary governmental licenses,
permits, registrations and approvals;
<PAGE>
Mr. R. Craig Bird
March 25, 1987
Page 2
(h) Make collections from the machines at
designated intervals as prescribed by Showboat;
(i) Make available at the following prices and pay
to Showboat commissions in accordance with the
following schedule:
MACHINE VENDING PRICE COMMISSION
Candy & Snacks .60 12%
(Public)
Cigarettes 1.85 30%
(Public)
Candy & Snacks .50 None
(Employee)
Cigarettes 1.50 12%
(Employee)
Collections will be made at designated times by you
or your representative and a representative of
Showboat and divisions of collection proceeds will
be made at the Hotel upon each collection:
(j) Allow Showboat to audit at its discretion any
records pertinent to collections:
(k) Indemnify, defend and hold Showboat and/or its
employees harmless for any claims, suits or damages
arising out of your performance or non-performance
of this Agreement, including any claim or assessment
for taxes levied in connection with or arising out
of operation of the machines.
2. OBLIGATIONS OF SHOWBOAT. Showboat will be obligated
at its cost to:
(a) Grant to you the exclusive limited license to
place cigarette and candy/snack vending machines on
the Hotel premises at locations specified by
Showboat (subject to the terms and conditions of
this Agreement) and to allow you or your employees
to come into the Hotel premises for the purpose of
servicing machines. The parties agree that this
limited license will be deemed not to be coupled
with any interest and neither this letter agreement
nor any memorandum thereof will be lodged for
recording as an interest in real property.
<PAGE>
Mr. R. Craig Bird
March 25, 1987
Page 3
3. TERMS AND TERMINATION. The term of this Agreement
("Term") shall commence on April 1, 1987, and will
continue in effect until March 31, 1992, and from
year to year thereafter unless and until terminated
by either party on sixty (60) days written notice
given prior to the fifth anniversary or subsequent
anniversaries of commencement of the Term. This
Agreement shall be terminable on ten (10) days
written notice by Showboat, however, in the event
that Showboat's casino license is revoked, in the
event that either party becomes bankrupt, insolvent
or is dissolved, any Act of God or a third party
which renders operation of the Hotel/Casino complex
impossible or the sale by Showboat of the Hotel.
Notice shall be effective if given by certified
mail, return receipt requested, to the parties at the
addresses set forth in this letter.
4. GOVERNING LAW. This Agreement will be subject to,
governed by and construed in accordance with the
laws of the State of New Jersey as may be amended
and supplemented from time to time, and any action
arising out of this agreement will be brought before
a court of competent jurisdiction in Atlantic
County, New Jersey.
5. RELATIONSHIP OF THE PARTIES. The parties
acknowledge that nothing herein is intended to
create any employment, agency, partnership, joint
venture or tenancy and that your relationship to
Showboat is strictly that of limited licensee.
6. ENTIRE AGREEMENT. This Agreement embodies the
entire Agreement between the parties and supersedes
all prior or contemporaneous agreements or
understandings with respect to the subject matter
hereof. This Agreement may be amended only in
writing signed by the party to be charged.
If the terms set forth in this letter are acceptable to you,
please so indicate by signing where indicated below and
returning this letter to Mr. Anderson of our Legal Department.
ATLANTIC CITY SHOWBOAT, INC.
/s/ Frank A. Modica Mar. 26, 1987
Frank A. Modica, President Date
AGREED TO & ACCEPTED BY
OCEAN 11 ENTERPRISES
/s/ R. Craig Bird Mar. 28, 1987
R. Craig Bird, Sole Date
Proprietor
cc: Al Hoff, Vice Pres. Sports
Robert McDonald, Vice Pres. Hotel
Robert L. Frolow, Insurance & Risk Mgr.
Luther G. Anderson, Asst. General Counsel
<PAGE>
EXHIBIT 10.28
<PAGE>
CONSTRUCTION AND OPERATION
COOPERATION AGREEMENT
This Construction and Operation Cooperation Agreement (the
"Agreement") is made by and between Showboat Rockingham Company,
L.L.C., a New Hampshire limited liability company ("SRC"), as
amended by the First Amendment to the Limited Liability Company
agreements, and Rockingham Venture, Inc., a New Hampshire
corporation ("Rockingham"), as of this 20TH day of DECEMBER,
1997.
R E C I T A L S
1. SRC contemplates that the State of New Hampshire may
enact privately owned non-racing gaming legislation and, if
authorized by such legislation and if licensed by the appropriate
licensing authorities having jurisdiction over such gaming
operations in New Hampshire, SRC may construct a non-racing
gaming facility or renovate an existing building at Rockingham
Park, Rockingham County, Salem, New Hampshire ("Rockingham Park")
for the exclusive benefit of non-racing gaming operations.
2. Rockingham is the owner of Rockingham Park and conducts
pari-mutuel horse racing operations, simulcast wagering, and
other related support activities at Rockingham Park.
3. SRC and Rockingham have discussed the impact of
construction activities and the operation of a gaming facility by
SRC on the activities conducted at Rockingham Park by Rockingham,
including, without limitation, the operation of live thoroughbred
horse racing.
4. SRC and Rockingham desire to provide mutual cooperation
to each other to facilitate the construction and operation of the
gaming facility at Rockingham Park, provided that the
construction and operation of the gaming facility by SRC shall
not in any way materially impair the horse racing operations or
other related support activities at Rockingham Park.
Now, Therefore, in consideration herein, and for other good
and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, SRC and Rockingham agree as follows:
I. PRECONSTRUCTION PLANNING
A. SCHEMATIC DIAGRAMS. Rockingham shall provide detailed
schematic diagrams of Rockingham Park to SRC showing the location
of all electrical lines, utilities lines, gas lines, sewer lines,
storm drains and other design and engineering elements of
Rockingham Park to the extent that such drawings are available.
<PAGE>
B. OTHER INFORMATION. Upon the request of SRC, Rockingham
shall provide SRC with any other information with regard to
Rockingham Park which will assist SRC in the construction of a
gaming facility at Rockingham Park.
C. PERMIT PROCESS: Rockingham agrees to assist and
cooperate with SRC to file all applications necessary to obtain
all required permits and other approvals necessary to construct
(or renovate existing buildings) and operate a non-racing gaming
facility at Rockingham Park.
D. DESIGN OF GAMING FACILITY. Prior to construction of
any gaming facility, SRC shall provide Rockingham with the final
site plan, footprints, utility plans, exterior renderings and a
proposed construction schedule of the work for the construction
of the proposed gaming facility, including, without limitation,
types of construction activities to be conducted on particular
days and hours. Without limiting the generality of the
foregoing, prior to commencement of the construction by SRC, SRC
shall submit to Rockingham for Rockingham's approval, which
approval may not be unreasonably withheld: (i) a construction
plan of the gaming facility at Rockingham Park showing
improvements to be constructed by SRC; (ii) proposed locations
for construction shacks and other temporary improvements as well
as construction workmen's parking area; and (iii) a schedule
describing approximate days and times during which construction
activities shall take place. Within ten (10) days after
submission of such plans, proposed locations and time schedule,
Rockingham shall notify SRC in writing whether the same are
approved or disapproved, specifying the reasons therefor if
disapproved, provided that a failure to give such written notice
within said ten (10) days shall constitute approval thereof. If
Rockingham shall disapprove the plans, proposed locations and
time of the construction, SRC shall be given adequate time and
opportunity to correct such matters which Rockingham has
identified for the basis of such disapproval. In the event such
revised plans, locations and schedule are disapproved by
Rockingham, and SRC concludes such disapproval was not reasonable
in light of the goals to be achieved pursuant to that certain
Limited Liability Company Agreement between Rockingham and
Showboat New Hampshire, Inc. dated as of July 27, 1995 (the
"Limited Liability Company Agreement") such dispute shall be
resolved in accordance with Article V, Arbitration.
E. CONTROL OF THE WORK: SRC shall have the sole and
exclusive right to select any architect, construction manager,
general contractor and engineer in connection with the design and
construction of the proposed gaming facility. SRC shall also
have the sole and exclusive right to select any additional
subcontractors, materialmen, suppliers or any other persons or
companies in connection with the construction of the proposed
gaming facility. Further, SRC shall have the sole and exclusive
right to manage, direct, control, coordinate and prosecute the
completion of the proposed gaming facility, and Rockingham shall
cooperate fully in such regard, but at no cost or expense to
Rockingham.
II. CONSTRUCTION REQUIREMENTS
NON-INTERFERENCE WITH HORSE RACING OPERATIONS. SRC agrees
to construct the gaming facility in such a manner as not to
materially interfere with any related horse racing activities
currently being conducted at Rockingham Park, including without
limitation, live thoroughbred horse racing and simulcast
wagering. The construction of the gaming facility shall not
materially interfere with the operation of live thoroughbred
horse racing, including training at Rockingham
2
<PAGE>
Park and access to the racetrack facility by customers, suppliers
and others. Such prohibited conduct includes, but is not limited
to, noise, bright lights, flashing lights, changes in color or
any other activities which can cause distraction of horses on the
racing facility or impair patrons of Rockingham from
participating in the activities conducted at Rockingham Park by
Rockingham. Subject to the foregoing, Rockingham agrees to
conduct its horse racing activities and other related activities
in a manner (i) so as not to cause undue increase in the cost of
construction of the gaming facility at Rockingham Park, or any
part thereof which is not reasonably necessary for the protection
of Rockingham's horse racing activities and other related support
activities, and (ii) so as not to unreasonably interfere with
SRC's timetable for construction of the gaming facility at
Rockingham Park or any part thereof.
III. COMPLIANCE WITH LAWS
SRC and Rockingham shall comply in all material respects
with all applicable laws, rules, regulations and orders of all
states, counties and municipalities in which such party conducts
business related to the construction activities for the non-
racing gaming facility at Rockingham Park including but not
limited to the rules and regulations of the New Hampshire Pari-
Mutuel Commission.
IV. INSURANCE INDEMNITY
SRC agrees to maintain adequate liability insurance
including Rockingham as an additional insured with regard to all
construction activities. SRC, for itself, its successors and
assigns, agrees to indemnify and hold Rockingham harmless from
any claim, causes of action, suits, and damages arising out of or
in any way related to the construction of the gaming facility not
otherwise caused by negligence.
V. OPERATION OF GAMING FACILITY
Subject to the provisions of the Limited Liability Company
Agreement, SRC shall operate the gaming facility in a manner
which will not materially interfere with the horse racing
operations and related support activities of Rockingham Park,
including without limitation, ensuring that all operations at the
gaming facility do not materially interfere with, distract, or
disrupt live thoroughbred horse racing or simulcast wagering at
Rockingham Park.
VI. ARBITRATION
ANY DISPUTE UNDER THIS AGREEMENT SHALL BE RESOLVED BY
ARBITRATION BY A SINGLE ARBITRATOR ACTING PURSUANT TO THE RULES
OF THE AMERICAN ARBITRATION ASSOCIATION. ANY DECISION OF SUCH
ARBITRATOR MAY BE ENFORCED IN ANY COURT OF COMPETENT
JURISDICTION. EITHER PARTY MAY SERVE UPON THE OTHER PARTY A
WRITTEN NOTICE OF THE DEMAND DISPUTE TO BE RESOLVED PURSUANT TO
THIS ARTICLE. WITHIN FIFTEEN (15) DAYS AFTER THE GIVING OF SUCH
NOTICE, AN ARBITRATOR MUST BE CHOSEN. SRC AND ROCKINGHAM
SHALL ADVANCE EQUALLY THE COST OF THE SELECTED
ARBITRATOR. SAID ARBITRATOR SHALL BE SWORN FAITHFULLY
3
<PAGE>
AND FAIRLY TO DETERMINE THE QUESTION AT ISSUE. THE ARBITRATOR
SHALL AFFORD TO SRC AND ROCKINGHAM A HEARING AND THE RIGHT TO
SUBMIT EVIDENCE, WITH THE PRIVILEGE OF CROSS-EXAMINATION, ON THE
QUESTION AT ISSUE, AND SHALL WITH ALL POSSIBLE SPEED MAKE HIS
DETERMINATION IN WRITING AND SHALL GIVE NOTICE TO THE PARTIES
HERETO OF SUCH DETERMINATION. THE DETERMINATION SHALL BE BINDING
ON THE PARTIES.
VII. MISCELLANEOUS
A. TIME OF THE ESSENCE. Time is of the essence with
respect to all time periods set forth in this Agreement.
B. HEIRS, SUCCESSORS, ASSIGNS. Except as otherwise
provided herein, each provision hereof shall extend to and shall,
as the case may require, bind and inure to the benefit of the
parties' heirs, executors, administrators, permitted successors,
permitted assigns and legal representatives.
C. CONSTRUCTION. All of the provisions of this Agreement
shall be deemed and construed to be conditions, as well as
covenants as though in words specifically expressing or importing
covenants and conditions, for use in each separate provision
hereof. The language in all parts of this Agreement shall be in
all cases construed simply according to its fair meaning, and not
strictly for or against SRC or Rockingham. This Agreement shall
be construed without regard to any presumption or other rule
requiring construction against the party causing the same to be
drafted.
D. GOVERNING LAW. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State
of New Hampshire without reference to its choice of law
provisions.
E. SEVERABILITY. Should any portion of this Agreement be
declared invalid or unenforceable, then such portion shall be
deemed to be severed from this Agreement and shall not affect the
remainder thereof.
F. RELATION OF THE PARTIES. Nothing in this Agreement
shall be construed as creating a tenancy, ownership, limited
partnership, joint venture, or any other relationship between the
parties hereto. All debts and liabilities incurred by SRC within
the scope of the authority granted and permitted hereunder in the
course of its management and operation of the gaming facility
shall be the debts and liabilities of SRC only, and Rockingham
shall not be liable for such debts and liabilities except as
specifically stated to the contrary herein.
G. ATTORNEYS' FEES. Should either party institute an
arbitration, action or proceeding to enforce any provision
hereof, or for other relief due to an alleged breach of any
provision of this Agreement, the prevailing party shall be
entitled to receive from the other party all costs of the action
or proceeding and reasonable attorneys' fees.
H. ENTIRE AGREEMENT. This Agreement covers in full each
and every agreement of any kind or nature whatsoever between the
parties hereto concerning this Agreement, and all
4
<PAGE>
preliminary negotiations and agreements, whether verbal or
written, of whatsoever kind or nature are merged herein. No oral
agreement or implied covenant shall be held to vary the
provisions hereof, any statute law or customs to the contrary
notwithstanding.
I. COUNTERPARTS. This Agreement may be executed in two or
more counterparts and shall be deemed to have become effective
when and only when all parties hereto have executed this
Agreement, although it shall not be necessary that any single
counterpart be signed by or on behalf of each of the parties
hereto, and all such counterparts shall be deemed to constitute
but one and the same instrument.
J. HEADINGS. Headings or captions have been inserted for
convenience of reference only and are not to be construed or
considered to be a part hereof and shall not in any way modify,
restrict or amend any of the terms or provisions thereof.
K. WAIVER. The waiver by one party of any default or
breach of any of the provisions, covenants or conditions hereof
on the part of the other part to be kept and performed shall not
be a waiver of any preceding or subsequent breach of any other
provisions, covenants or conditions contained herein.
Agreed And Accepted of the date first above-written.
Showboat Rockingham Company, L.L.C.,
a limited liability company, by
Showboat New Hampshire, Inc., its
Manager,
By: /s/
its duly authorized
_________________
Rockingham Venture, Inc., a New
Hampshire corporation
By: /s/
its duly authorized
_________________
5
<PAGE>
FIRST AMENDMENT
TO
LIMITED LIABILITY COMPANY AGREEMENT
OF
SHOWBOAT ROCKINGHAM COMPANY, L.L.C.,
A NEW HAMPSHIRE LIMITED LIABILITY COMPANY
THIS FIRST AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT
("First Amendment") is made and entered into as of DECEMBER 20,
1997, by and among Rockingham Venture, Inc., a New Hampshire
corporation ("Rockingham"), and Showboat New Hampshire, Inc., a
Nevada corporation ("Showboat") (Rockingham and Showboat are
hereinafter collectively referred to as the "Members" and
individually as the "Member), and Showboat Rockingham Company,
L.L.C., a New Hampshire limited liability company (the
"Company").
RECITALS
A. The Members and the Company have entered into a Limited
Liability Company Agreement ("Original Agreement") dated as of
July 27, 1995, to govern the affairs of the Company and the
conduct of its business, including, without limitation, the
rights and restrictions on the transfer of a Member's Interest in
the Company owned by the current and future Members of the
Company.
B. The Members and the Company desire to amend the
Original Agreement (i) to provide for the repayment of the
Promissory Note (defined in the Original Agreement); (ii) to
expand the ability of Rockingham to transfer its interest in the
Company in certain limited situations; and (iii) to revise the
procedure for future amendments to the Original Agreement, each
in accordance with the terms and conditions of this First
Amendment.
NOW, THEREFORE, in consideration of the mutual promises
contained in this First Amendment, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and with the intention of being bound by
this First Amendment, the Members and the Company agree as
follows:
1. RECITALS. The foregoing Recitals are true and correct.
2. DEFINITIONS. Except as otherwise defined herein, the
capitalized terms used in this First Amendment shall have the
meanings specified in the Original Agreement.
3. AMENDMENT TO SECTION 4.1(B)(I)(2) OF THE ORIGINAL
AGREEMENT. Article IV, Section 4.1(b)(i)(2) of the Original
Agreement is hereby amended and restated as follows:
Showboat shall contribute the principal
balance of the Promissory Note exclusive of any
unpaid due balances. Upon contribution of the
Promissory Note by Showboat, Rockingham's
obligations to make principal and interest
payments shall continue in accordance with Section
<PAGE>
4.1(b) (iii) below. In the event that the
Company is liquidated during Limited Gaming, all
distributions paid to Showboat pursuant to this
Agreement shall be aggregated. If the aggregated
distributions do not exceed the principal balance
of the Promissory Note as of the date of
contributing same to the Company, Rockingham shall
execute a new promissory note in the principal
amount which is equal to the difference between
the balance of the Promissory Note at the time of
contribution to the Company and the aggregate of
the distributions to Showboat. The new promissory
note shall accrue interest from the date of
liquidation of the Company at the same rate as
interest accrued under the Promissory Note and
principal and interest shall be paid in quarterly
installments of no less than $259,000 until said
promissory note is fully amortized. All monies
paid, whether by the Company or Rockingham shall
be applied first to interest then to principal.
4. AMENDMENT TO SECTION 4.1(B)(II)(2) OF THE ORIGINAL
AGREEMENT. Article IV, Section 4.1(b)(ii)(2) of the Original
Agreement is hereby amended and restated as follows:
Showboat shall contribute (i) the principal
balance of the Promissory Note (if not previously
contributed) exclusive of any unpaid due balances
and Rockingham's obligations to make principal and
interest payments shall continue in accordance
with Section 4.1(b)(iii) below and (ii) cash
sufficient to obtain the Development Financing in
an amount to fund the Project, not to exceed 30%
of cash funds required for the Project. To the
extent that Showboat's contribution exceeds 20% of
cash funds required for the Project, the excess
shall become a loan (the "Capital Loan") from
Showboat to the Company and shall be repaid to
Showboat by the Company over a four (4) year
amortization period which repayment shall commence
on the third anniversary date of commencement of
operations at the Project. Such excess shall
accrue interest at the same rate as the
Development Financing. Attached hereto as Schedule
1 is an exemplar of the calculation of funds to be
repaid to Showboat pursuant to the Capital
Loan should Showboat make cash contributions
in excess of 20% of cash funds
5. AMENDMENT TO SECTION 4.1(B)(III) OF THE ORIGINAL
AGREEMENT. Article IV, Section 4.1(b)(iii) of the Original
Agreement is hereby amended and restated as follows:
Upon contribution to the Company, the
Promissory Note shall be amended and restated so
that Rockingham shall make equal principal and
interest payments to the Company so that the
Promissory Note shall be repaid in full within six
years of the projected date of commencement of
operations of the Company.
6. AMENDMENT TO SECTION 7.3 OF THE ORIGINAL AGREEMENT.
Article VII, Section 7.3 of the Original Agreement is hereby
amended by adding the following new paragraph after the two
existing paragraphs in that section:
2
<PAGE>
The Rockingham Shareholders shall be
permitted to effect a public offering(s) of the
capital stock of Rockingham registered under the
Securities Act of 1993, provided, however, that
(i) the Rockingham Shareholders and the Permitted
Rockingham Transferees, at all times maintain
ownership of more than fifty percent (50%) of
Rockingham's issued and outstanding shares of
capital; (ii) said public offering(s) is (are) in
compliance with all applicable laws and
regulations, including, without limitation, the
receipt of any required gaming licenses or
approvals; and (iii) such public offering(s) will
not adversely effect any gaming license held by
Showboat or its Affiliates in any other
jurisdiction. Rockingham shall pay all costs of a
public offering of its capital stock and any costs
or expenses incurred by the Company, the other
Members, or Showboat and its Affiliates, related
to such public offering, including, but not
limited to regulatory, investigative and licensing
fees and expenses.
In addition, Rockingham Shareholders shall be
permitted to privately transfer interests in
Rockingham so long as (i) the Rockingham
Shareholders and Rockingham Permitted Transferees,
at all times maintain ownership of more than fifty
percent (50%) of the issued and outstanding shares
of capital stock of Rockingham; (ii) said
transfers is in compliance with all laws and
regulations, including, without limitation, the
receipt of any required gaming licenses or
approvals; and (iii) said transfers will not
adversely effect any gaming license held by
Showboat or its Affiliates in any other
jurisdiction.
Prior to the transfers of an interest in
Rockingham pursuant to this section, it is
acknowledged and agreed that to the extent that
the purchasers of any interest in Rockingham are
required to be licensed in New Hampshire or in any
other jurisdiction as a result of their ownership
in Rockingham that, notwithstanding the foregoing,
the purchasers of such interest shall be required,
at their sole expense, to obtain all approvals
necessary to effectuate such transfer and that no
transfer shall become effective until such
purchaser of such interest obtains such approvals
and/or licenses. The purchasers of such interest
shall pay all costs and expenses incurred by the
Company, the other Members, or Showboat and its
Affiliates, related to such transfer, including,
but not limited to, regulatory, investigative and
licensing fees and expenses. In addition, the
purchasers of such interest shall be required,
prior to the transfer becoming effective, to
execute and deliver to the Company a counterpart
copy of this Agreement or a written agreement in
form and substance satisfactory to Showboat, its
successors or assigns. No such transfer shall
release or discharge the transferor from any
liabilities or obligations under this Agreement
until such counterpart or other agreement becomes
effective, and, then only to the extent provided
herein.
3
<PAGE>
7. AMENDMENT TO SECTION 9.1(E) OF THE ORIGINAL AGREEMENT.
Article IX, Section 9.1(e) of the Original Agreement is hereby
amended by the addition of a replacement Section 9.1(e) to read
in its entirety as follows:
(e) If a Member, directly or
indirectly, transfers its Interest or any portion
thereof in the Company (i) to any Person other
than a Permitted Transferee or a Rockingham
Permitted Transferee, as the case may be, without
the unanimous written consent of the Members
(excluding the proposed transferee); or (ii) to
any Person except as expressly provided in Section
7.3 of this Agreement; or
8. AMENDMENT TO SECTION 19.7 OF THE ORIGINAL AGREEMENT.
Article XIX, Section 19.7 of the Original Agreement is hereby
amended by the addition of a replacement Section 19.7 to read in
its entirety as follows:
This Agreement may not be modified,
changed or amended except by an instrument in
writing, signed by all of the Members of the
Company.
9. AMENDMENT TO SECTION 23.1(F) OF THE ORIGINAL AGREEMENT.
Article XXIII, Section 23.1(f) of the Original Agreement is
hereby amended by the addition of a replacement Section 23.1(f)
to read in its entirety as follows:
(i) upon a change in the ownership of
Showboat, Inc. or its Affiliates resulting in a
change in control of Showboat, unless Rockingham
consents within thirty (30) days prior to the
change in control of Showboat, which consent shall
not be unreasonably or untimely withheld, in
writing to such change in control; or (ii) upon a
change in control of Rockingham, its successors or
assigns, unless Showboat consents within thirty
(30) days prior to the change in control of
Rockingham, which consent shall not be
unreasonably or untimely withheld, in writing to
such change in control. A change of control of
Rockingham shall not be deemed to have occurred if
shares of Rockingham are transferred to an entity
which is controlled by the Rockingham Shareholders
or transferred to a Permitted Rockingham
Transferee. For purposes of this section,
"control" means the possession, directly or
indirectly, of the power to direct or cause the
direction of the management and policies of a
person or entity, whether through the ownership of
voting securities, by contract or otherwise.
Control shall have deemed to occur where a Person
owns more than 35% of a publicly traded
corporation, or more than 50% of a non-publicly
traded corporation.
10. CONFLICT BETWEEN THIS FIRST AMENDMENT AND THE
ORIGINAL AGREEMENT. If there is a conflict between any of the
provisions of this First Amendment and any of the provisions of
the Original Agreement, the provisions of the First Amendment
shall control.
4
<PAGE>
11. NO OTHER AMENDMENTS OR CHANGES. Except as expressly
amended or modified by this First Amendment, all of the terms and
conditions of the Original Agreement shall remain unchanged and
in full force and effect.
12. COVENANT OF COMPLIANCE. In accordance with Article
XIX, Section 19.7 "Amendments" of the Original Agreement,
Rockingham, Showboat and the Company covenant and agree that: (i)
this First Amendment has been approved by a unanimous vote (and
not by written consent) of all of the Members of the Company at a
special or annual meeting of the Members; and (ii) notice of the
parties' intention to amend the original Agreement was contained
in the notice of such special or annual meeting of the Members,
or such notice of a meeting was waived by all of the Members.
IN WITNESS WHEREOF, parties hereto have executed this First
Amendment on the date first above written.
Members: Company:
ROCKINGHAM VENTURE, INC., SHOWBOAT ROCKINGHAM COMPANY,
a New Hampshire corporation L.L.C., a New Hampshire limited
liability company
By: SHOWBOAT NEW HAMPSHIRE, INC.,
its Manager
By: /s/ By: /s/
Joseph E. Carney, Jr. Its:______________________________
President
SHOWBOAT NEW HAMPSHIRE, INC.,
a Nevada corporation
By: /s/
J. Kell Houssels, III
President
5
<PAGE>
ACKNOWLEDGED AND AGREED TO:
Rockingham Shareholders:
_____________________________
_____________________________
_____________________________
_____________________________
____________________________
6
EXHIBIT 10.29
<PAGE>
$15,000,000.00 US Atlantic City, New Jersey
As of March 19, 1997
PROMISSORY NOTE
On March 18, 1998, for value received, Atlantic City
Showboat, Inc. ("ACSI") promises to pay to the order of Showboat,
Inc. ("SBO") at 2800 Fremont Street, Las Vegas, Nevada or such
other place as SBO shall designate in writing to ACSI, the sum of
Fifteen Million and no/one-hundredths Dollars ($15,000,000.00)
(or such lesser principal sum which is the aggregate unpaid
principal amount of all loans made by SBO and ACSI as indicated
on the Schedule of Advances attached as page 3 of this promissory
note). ACSI also promises to pay interest to SBO on the unpaid
principal amount outstanding from time-to-time prior to maturity
at an annual rate equal to the average prime rate for money
center banks as published on the first business day of each
calendar month in the WALL STREET JOURNAL called "daily composite
rates" ("prime rate"), plus one percent (1%) the ("Contract
Rate"). The Contract Rate shall be adjusted on the first day of
each calendar month to reflect the prime rate, but shall not be
adjusted at any other time during the calendar month. In no
event shall the interest rate be in excess of the maximum rate of
interest permitted under applicable law. Interest at the
Contract Rate or Default Rate (as hereinafter defined) shall be
paid by ACSI on the first day of each month commencing on the
first day of the month occurring after the date of said
promissory note. If any payment becomes due on any day which is
not a business day, such payment shall be made on the next
succeeding business day. The term "business day" means Monday
through Friday excepting national (federal) legal holidays.
Interest hereunder shall be calculated for the actual
number of days elapsed on the basis of a 360-day year.
All payments of principal and/or interest shall be paid
in lawful money of the United States of America.
ACSI hereby expressly authorizes SBO to record on the
schedule to this promissory note the amount and date of all/any
such loan(s) made hereunder and the date and amount of each
payment of principal thereon. All such notations shall be
presumed to be correct and the aggregate unpaid amount of all/any
loan(s) set forth on the schedule shall be presumed to be the
aggregate unpaid principal amount due under this promissory note.
Any loan may be prepared in whole or in part at any
time and from time to time without premium or penalty together
with interest accrued on the amount prepaid to the date of any
such prepayment. Upon ACSI's (i) failure to pay when due any
accrued interest or principal or (ii) failure to duly keep,
perform and observe each and every term, condition, covenant,
agreement or provision of this promissory note, or
(iii) assignment for the benefit of creditors, declaration of
bankruptcy (either voluntary or involuntary) or initiation of
proceedings in any court seeking or acquiescing to any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief with its creditors, in
any manner, in or for the payment of its debts when due under any
state or federal law including, without limitation, the seeking,
consenting to, or acquiescing to or being subject to the
appointment of any trustee, receiver, assignee, custodian, master
or liquidator of itself or any of its property or any of the
rent, revenue, issue, earnings, profits or income thereof, SBO
may, at its option, and without notice to ACSI, declare
immediately due and payable the entire unpaid aggregate balance
of principal, together with all accrued interest thereon, so that
the same shall become immediately due and payable. The foregoing
shall be events of default and any singular one
shall be a default. In the event of a default
or an event of default, interest shall accrue from
time thereof until such default or event of
<PAGE>
default is cured, at a default rate of interest ("Default Rate")
which shall be calculated as that rate of interest equal to the
prime rate plus two percent (2%) from the date of default or
event of default. Payment thereof may be enforced and recovered
in whole or in part at any time by one or more of the remedies
provided in this note or available to SBO either at law or in
equity.
Each and every right and remedy granted to SBO or
allowed to it by law shall be cumulative and not exclusive for
one or the other. No delay, failure or omission by SBO upon any
default of ACSI to exercise any right or remedy granted to it or
allowed to it by law shall constitute a waiver by SBO of the
right to exercise any such right or remedy upon such default or
upon any subsequent default.
ACSI hereby waives and releases all errors, defects and
imperfections in any proceedings instituted by SBO under the
terms of this note.
ACSI hereby waives presentment for payment, demand,
notice of demand, notice of nonpayment or dishonor, protest and
notice of protest of this promissory note, and all other notices
in connection with the delivery, acceptance, performance, default
or enforcement of this promissory note.
Any demand or notice if made or given shall be
sufficiently made upon or given to ACSI if made in writing and
mailed to ACSI by certified mail, return receipt requested, to
the last address of ACSI known to SBO.
This promissory note shall be governed by and construed
in accordance with the laws of the State of Nevada. If any
provision of this note shall be prohibited by or invalid under
such laws, such provisions shall be ineffective to the extent of
such prohibition or invalidity only, without invalidating the
remainder of such provision or the remaining provisions of this
promissory note.
IN WITNESS WHEREOF, ACSI has caused this promissory
note to be executed by its duly authorized officers and its
corporate seal affixed hereto as of the day and year written on
the first page of this note.
ATLANTIC CITY SHOWBOAT , INC.
By: /s/
Herb Wolfe
President and Chief Executive
Officer
Attest:
/s/
Luther Anderson
Assistant Secretary
2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF ADVANCES
<S> <C> <C> <C>
DATE AMOUNT OF AMOUNT OF AGGREGATE
ADVANCE PAYMENT AMOUNT DUE
3
</TABLE>
EXHIBIT 10.30
<PAGE>
FIRST AMENDMENT TO IN PARI PASSU ASSIGNMENT OF
LEASES AND RENTS
This First Amendment (the "First Amendment") to the In Pari
Passu Assignment of Leases and Rents (the "Assignment") is made
as of the 14th day of July, 1997 by and between ATLANTIC CITY
SHOWBOAT, INC., a New Jersey corporation ("Assignor"), and FLEET
BANK, N.A. (formerly known as NATWEST BANK, N.A.), a national
banking association ("Assignee"). Terms used herein not otherwise
defined herein shall have the meanings set forth in the
Assignment.
RECITALS
WHEREAS, Assignor and Assignee entered into an In Pari Passu
Assignment of Leases and Rents dated as of July 14, 1995,
recorded in the Clerk's Office of Atlantic County, New Jersey on
September 14, 1995 in Mortgage Book 5702, Page 253 (the
"Assignment");
WHEREAS, the Assignment was executed and delivered by
Assignor to Assignee to secure the payment of that certain
Revolving Note (herein the "Promissory Note"), dated July 14,
1995, executed and delivered by Showboat, Inc. to Assignee, in
the maximum aggregate amount of $25,000,000;
WHEREAS, the Assignor has requested that the Promissory Note
be amended to provide for a maximum aggregate amount of
$35,000,000; and
WHEREAS, Assignee is willing to permit such amendment of the
Promissory Note as requested by Showboat, Inc.
NOW, THEREFORE, in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. The definition of "Promissory Note" is hereby amended
to increase the principal amount thereof from $25,000,000.00 to
$35,000,000.00.
2 The definition of the "SBI Loan" is hereby amended to
increase the principal amount thereof from $25,000,000.00 to
$35,000,000.00.
3. All other terms and conditions of the Assignment are
hereby ratified and confirmed.
<PAGE>
IN WITNESS WHEREOF, the Assignor and Assignee have caused this
instrument to be duly executed as of the 14th day of July, 1997.
ATLANTIC CITY SHOWBOAT, INC.
By: /s/ Kathleen Caracciolo
Kathleen Caracciolo
Vice President - Finance, Treasurer
and Chief Financial Officer
FLEET BANK, N.A.
By: /s John T. Harrison
John T. Harrison
Vice President
<PAGE>
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
Be it remembered that on this 23rd day of October, 1997,
before me, the subscriber, in and for said county, personally
appeared Kathleen Caracciolo, Vice President - Finance,
Treasurer and Chief Financial Officer of Atlantic City
Showboat, Inc., who I am satisfied is the person who signed the
within instrument, and she acknowledged that she signed and
delivered the same as such officer aforesaid, and that the
within instrument is the voluntary act and deed of such
corporation made by virtue of a Resolution of its Board of
Directors. And said Kathleen Caracciolo did further certify and
acknowledge that she received a true, correct and complete copy
of the within instrument.
Witnesseth my hand and seal.
/s/ Barbara L. McGuire
Notary Public
My Commission Expires: 5/6/98
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
Be it remembered, that on this 27th day of October, 1997,
before me, the subscriber, a Notary Public, personally appeared
John T. Harrison, Vice President of FLEET BANK, N.A., who, I am
satisfied is the person(s) named in and who executed the within
instrument and he did acknowledge that he signed, sealed and
delivered the same as his act and deed on behalf of the Bank
and for the uses and purposes therein expressed.
Witnesseth my hand and seal.
/s/ Michelle A. Fernetti
Notary Public
My Commission Expires: 3/31/98
<PAGE>
SECOND AMENDMENT TO LEASEHOLD IN PARI PASSU MORTGAGE,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
This Second Amendment (the "Second Amendment") to the
Leasehold in Pari Passu Mortgage, Assignment of Rents and
Security Agreement (the "Mortgage") is made as of the 14th day of
July, 1997 by and between ATLANTIC CITY SHOWBOAT, INC., a New
Jersey Corporation ("Mortgagor"), whose address is 801 Boardwalk,
Atlantic City, New Jersey, 08401, and FLEET BANK, N.A. (formerly
known as NATWEST BANK, N.A.), a national banking association with
a business office at 10 Exchange Place, Jersey City, New Jersey,
07322 ("Mortgagee"). Terms used herein not otherwise defined
herein shall have the meanings set forth in the Mortgage.
RECITALS
WHEREAS, Mortgagor and Mortgagee entered into a Leasehold in
Pari Passu Mortgage, Assignment of Rents and Security Agreement
dated as of July 14, 1995, recorded in the Clerk's Office of
Atlantic County, New Jersey on September 14, 1995 in Mortgage
Book 5702, Page 152 (the "Mortgage") pursuant to which Mortgagor
granted to Mortgagee a security interest in all of the Mortgaged
Property; and
WHEREAS, the Mortgage was executed and delivered by
Mortgagor to Mortgagee to secure the payment of that certain
Revolving Note (herein the "Promissory Note"), dated July 14,
1995, executed and delivered by Showboat, Inc. to Mortgagee, in
the maximum aggregate amount of $25,000,000.00; and
WHEREAS, Mortgagor, Mortgagee and others have entered into
an Amendment to the Loan and Guaranty Agreement providing for an
increase in the amount available under the Loan Agreement from
$25,000,000 to $35,000,000 (the "Amendment"), and making other
changes in the terms of the loan; and
WHEREAS, pursuant to the Amendment, Showboat, Inc. has
executed and delivered to Mortgagee an Amendment to the
Promissory Note to be secured hereby.
NOW, THEREFORE, in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. The definition of "Promissory Note" in the Mortgage is
hereby amended to read as follows:
"Promissory Note" means that certain Revolving
Note, dated July 14, 1995, between Borrower
and Mortgagee as amended by that certain
Modification to Revolving Note, dated as of
July 14, 1997, and as may be further amended
<PAGE>
pursuant to the Loan Agreement, in the maximum
aggregate amount of $35,000,000.
2. All other terms and conditions of the Mortgage are
hereby ratified and confirmed.
IN WITNESS WHEREOF, the Mortgagor and Mortgagee have caused
this instrument to be duly executed as of the 14th day of July,
1997.
ATLANTIC CITY SHOWBOAT, INC.
By: /s/ Kathleen Caracciolo
Kathleen Caracciolo
Vice President - Finance, Treasurer
and Chief Financial Officer
FLEET BANK, N.A.
By: /s John T. Harrison
John T. Harrison
Vice President
<PAGE>
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
Be it remembered that on this 23rd day of October, 1997,
before me, the subscriber, in and for said county, personally
appeared Kathleen Caracciolo, Vice President - Finance,
Treasurer and Chief Financial Officer of Atlantic City
Showboat, Inc., who I am satisfied is the person who signed the
within instrument, and she acknowledged that she signed and
delivered the same as such officer aforesaid, and that the
within instrument is the voluntary act and deed of such
corporation made by virtue of a Resolution of its Board of
Directors. And said Kathleen Caracciolo did further certify and
acknowledge that she received a true, correct and complete copy
of the within instrument.
Witnesseth my hand and seal.
/s/ Barbara L. McGuire
Notary Public
My Commission Expires: 5/6/98
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
Be it remembered, that on this 27th day of October, 1997,
before me, the subscriber, a Notary Public, personally appeared
John T. Harrison, Vice President of FLEET BANK, N.A., who, I am
satisfied is the person(s) named in and who executed the within
instrument and he did acknowledge that he signed, sealed and
delivered the same as his act and deed on behalf of the Bank
and for the uses and purposes therein expressed.
/s/ Michelle A. Fernetti
Notary Public
My Commission Expires: 3/31/98
<PAGE>
MODIFICATION TO LOAN AND GUARANTY AGREEMENT
This Modification to Loan and Guaranty Agreement is entered
into as of the 14th day of July, 1997, between and among FLEET
BANK, N.A., formerly known as NATWEST BANK, N.A., a national
banking association (hereinafter called "Lender"), with a
business address at 10 Exchange Place, Jersey City, New Jersey
07322, and SHOWBOAT, INC., a Nevada corporation with a business
address at 2800 Fremont Street, Las Vegas, Nevada 89104
(thereinafter called "Borrower"), and SHOWBOAT OPERATING COMPANY,
a Nevada corporation, OCEAN SHOWBOAT, INC., a New Jersey
corporation, and ATLANTIC CITY SHOWBOAT, INC., a New Jersey
corporation (the "Guarantors") having the addresses set forth on
the signature pages hereof.
WITNESSETH
WHEREAS, NatWest Bank, N.A., Borrower and Guarantors entered
into that certain Loan and Guaranty Agreement dated July 14, 1995
(herein, the "Agreement"); and
WHEREAS, the parties have agreed to modify the Agreement in
order to increase the amount of the credit facility from
$25,000,000.00 to $35,000,000.00, to extend the term thereof and
to make other modifications to the terms and conditions thereof
as more fully set forth herein.
NOW THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto agree as follows:
1. DEFINITIONS.
(a) All capitalized terms not otherwise defined herein
shall have the meaning set forth in the Agreement.
(b) Effective as of July 14,1997, the following
definitions contained in Section 1 of the Agreement shall be
modified to read as set forth below:
"CAPITAL FUNDS" means the Stockholders' Equity of
the Borrower less on a consolidated basis the value on
the Borrower's books of all intangible assets other
than those related to Non-Recourse Debt plus the
Borrower's Subordinated Debt.
"CONVERSION DATE" means September 14,1999.
"LENDER" means Fleet Bank, N.A. (formerly known as
NatWest Bank, N.A.), its successors and assigns.
<PAGE>
(c) The following definition shall be added to Section
1 of the Agreement, effective July 14, 1997:
"STOCKHOLDERS' EQUITY" means as at any date of
determination Borrower's Stockholders' Equity
determined according to GAAP.
2. AMENDMENT TO REVOLVING NOTE. Upon execution of this
Agreement, the parties shall execute an amendment to the
Revolving Note to increase the face amount thereof to
$35,000,000.00 and to reflect the change in the Conversion Date
referred to in paragraph 1 above.
3. TERM NOTE. The last sentence of Section 2.04(b) of the
Agreement is hereby modified to read as follows:
The Term Note shall mature on September 14, 2002.
4. REPRESENTATIONS AND WARRANTIES. In order to induce the
Lender to enter into this Modification and to make the Loans
provided for herein, each and every of the representations and
warranties made by Lender set forth in Sections 3.01 through 3.20
of the Agreement are hereby reaffirmed by the Borrower as if made
as of the date hereof.
5. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THE
MODIFICATION. The effectiveness of this modification is subject
to the following conditions precedent:
(a) CORPORATE DOCUMENTS OF THE BORROWER. At the time
of the effective date hereof (the "Effective Date"), the
Lender shall have received:
(i) a copy of the Borrower's Certificate of
Incorporation, certified as of a recent date by the
Secretary of State of its state of incorporation;
(ii) certificates of such Secretary of State,
dated as of a recent date as to the good standing of
and payment of taxes by the Borrower which lists the
charter documents on file in the office of such
Secretary of State;
(iii) a certificate dated as of a recent date
as to the good standing of the Borrower issued by the
Secretary of State of each jurisdiction in which the
Borrower is qualified as a foreign corporation; and
2
<PAGE>
(iv) a certificate of the Secretary of the
Borrower dated the Effective Date and certifying (A)
that attached thereto is a true and complete copy of
the by-laws of the Borrower as in effect on the date of
such certification, (B) that attached thereto is a true
and complete copy of resolutions adopted by the Board
of Directors of the Borrower authorizing the execution,
delivery and performance in accordance with their
respective terms of this Agreement and any other
documents required or contemplated hereunder or
thereunder, (C) that the certificate of incorporation
of the Borrower has not been amended since the date of
the last amendment thereto indicated on the certificate
of the Secretary of State furnished pursuant to clause
(i) above and (D) as to the incumbency and specimen
signature of each officer of the Borrower executing
this Agreement or any other document delivered by it in
connection herewith or therewith (such certificate to
contain a certification by another officer of the
Borrower as to the incumbency and signature of the
officer signing the certificate referred to in this
clause (iv)).
(b) CORPORATE DOCUMENTS OF OBLIGORS (OTHER THAN THE
BORROWER). At the time of the Effective Date, the Lender
shall have received for each Obligor (other than the
Borrower):
(i) a copy of such entity's certificate of
incorporation, certified as of a recent date by the
Secretary of State of the state of incorporation;
(ii) a certificate of each such Secretary of
State, dated as of a recent date as to the good
standing of and payment of taxes by such entity which
lists the charter documents on file in the office of
such Secretary of State;
(iii) a certificate dated as of a recent date
as to the good standing of such entity issued by the
Secretary of State of each jurisdiction in which such
entity is qualified as a foreign corporation; and
(iv) a certificate of the Secretary of such entity
dated the Effective Date and certifying (A) that
attached thereto is a true and complete copy of the
by-laws of such entity as in effect on the date of such
certification, (B) that attached thereto is a true and
complete copy of resolutions adopted by the Board of
Directors of such entity authorizing the execution,
delivery and performance in accordance with their
respective terms of this Agreement, and any other
documents required or contemplated hereunder or
thereunder, (C) that the certificate of incorporation
of such entity has not been amended
3
<PAGE>
since the date of the last amendment thereto indicated
on the certificate of the Secretary of State furnished
pursuant to clause (i) above and (D) as to the
incumbency and specimen signature of each officer of
such entity executing this Agreement or any other
document delivered by it in connection herewith or
therewith (such certificate to contain a certification
by another officer of such entity as to the incumbency
and signature of the officer signing the certificate
referred to in this clause (iv)).
(c) REVOLVING NOTE. On or before the effective date
hereof, the Lender shall have received a modification to the
Revolving Note, executed on behalf of the Borrower, dated
the date thereof.
(d) OPINIONS OF COUNSEL. The Lender shall have
received the favorable written opinion, dated the Effective
Date and addressed to the Lender of (i) Kummer, Kaempfer,
Bonner & Renshaw, counsel to the Obligors, and (ii) such
local counsel as the Lender may request regarding perfection
of the security interests, validity of the mortgage
modification and other similar matters.
(e) ERISA. The Lender shall have received copies of
all Plans of the Borrower and its Subsidiaries that are in
existence on the date hereof, and confirmation satisfactory
to the Lender that (i) none of the Plans has incurred any
"accumulated funding deficiency" (as defined in Section 302
of ERISA and Section 412 of the Code), (ii) no Reportable
Event has occurred as to any Plan, and (iii) no termination
of, or withdrawal from, any of the Plans has occurred or is
contemplated that would result in any liability on the part
of the Borrower or any of its Subsidiaries, if the
occurrence of any of the foregoing events could reasonably
be expected to have a Material Adverse Effect.
(f) MORTGAGES. Appropriate modifications of the Deed
of Trust covering the Las Vegas Showboat and of the Mortgage
covering the Atlantic City Showboat shall be duly executed
and delivered to Lender.
(g) INTERCREDITOR AGREEMENT. A modification to the
Intercreditor Agreements executed in connection with closing
under the Agreement shall have been executed and delivered
by each of the Lender, Borrower and the Trustee as to the
Atlantic City Showboat and by the Trustee and the Lender as
to the Las Vegas Showboat in form acceptable to the Lender
and in accordance with the Bond Indenture.
(h) TITLE INSURANCE, ETC. The Lender shall have
received as to the Atlantic City Showboat and the Las Vegas
Showboat legal, valid and binding
4
<PAGE>
commitments from a title insurance company reasonably
acceptable to the Lender, to issue a mortgage title
insurance policy in form and substance reasonably
satisfactory to the Lender in respect of the Mortgages as
modified showing that such Mortgages are valid first liens
subject only to Permitted Liens and that such fee or
leasehold interest in real property subject to the Mortgages
is owned by the Borrower or ACSI, respectively, free of
encumbrances other than Permitted Liens.
(i) SURVEYS ETC. Lender shall have received an
updated survey (certified in form and by surveyors
reasonably acceptable to Lender) relating to the Las Vegas
Showboat and the Atlantic City Showboat prepared in
accordance with ALTA standards indicating the absence of any
encroachments or other title defects or an affidavit or
other document sufficient to induce the Borrower's title
insurance company to remove the survey exception.
(j) FEDERAL RESERVE REGULATIONS. The Lender shall be
reasonably satisfied that the provisions of Regulations G,
T, U and X of the Board of Governors of the Federal Reserve
System will not be violated by the transactions contemplated
hereby.
(k) NO MATERIAL ADVERSE CHANGE. No change shall have
occurred with respect to the Borrower or any of its
Subsidiaries since the date of the most recent audited
financial statement delivered to the Lender of each such
Person having or as could reasonably be expected to have a
Material Adverse Effect.
(l) INSURANCE. The Borrower shall have furnished the
Lender with a summary of all existing insurance coverage and
evidence reasonably acceptable to the Lender that the
insurance policies required by Section 5.03 (a) and (b) of
the Agreement have been obtained and are in full force and
effect.
(m) UCC FINANCING STATEMENTS AND UCC SEARCHES, ETC.
The Lender shall have received, if necessary, in each case
in form satisfactory to it, (i) UCC financing statements
executed on behalf of the Obligor for filing in all
jurisdictions in which it shall be necessary or desirable to
make a filing in order to provide the Lender with a
perfected security interest in the Collateral and (ii) UCC
searches satisfactory to the Lender indicating that no other
filings with regard to the Collateral are of record in any
of such jurisdictions except in connection with Permitted
Liens and existing Liens listed on Schedule 6.05.
(n) OFFICERS' CERTIFICATE. The Lender shall have
received an appropriate officers' certificate executed by
the Chief Executive Officer and
5
<PAGE>
Senior Financial Officer of the Borrower similar to that
executed at closing under the Agreement.
(o) LOAN FEE. Upon execution and delivery of this
Agreement, the Borrower shall have paid to the Lender a loan
fee of $125,000.
6. CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS ETC.
Section 6.04 of the Loan Agreement is amended to add the
following at the end thereof:
The Borrower shall be permitted to sell all of its
interest in the Las Vegas Showboat subject to the following
requirements:
(a) no Default or Event of Default shall exist or be
continuing immediately prior to and after giving effect to
such sale;
(b) after giving effect to such sale, the Borrower's
Leverage Ratio will not exceed the applicable minimum
Leverage Ratio set forth in Section 6.14; and
(c) such sale shall comply with the requirements of
Section 4.10(a) of the Bond Indenture, prior to giving
effect to any waiver or modification of the terms of such
Section 4.10(a).
7. MINIMUM CAPITAL FUNDS. Effective as of July 14, 1997,
Section 6.13 "Capital Funds" of the Agreement shall be amended to
read as follows:
(a) Permit Capital Funds at any time as of the dates
referenced below to fall below the amounts indicated below
for such date:
12/31/96 $270,000,000
12/31/97 $275,000,000
12/31/98 $280,000,000
12/31/99 $285,000,000
12/31/00 $290,000,000
12/31/01 $290,000,000
(b) Notwithstanding the foregoing, in the event of a
permitted sale of the Las Vegas Showboat which results in a
reduction in the Capital Funds of the Borrower, the required
minimum Capital Funds amounts set forth above shall each be
reduced effective as of the date of such sale and as to all
dates subsequent to the date of such sale. The amount of the
reduction in the required minimum Capital Funds amount set
forth above shall be a sum
6
<PAGE>
equal to the reduction in the Capital Funds of the Borrower
resulting from such sale, which reduction shall be net of
tax benefits arising out of losses realized upon such sale.
Any reduction in the required minimum Capital Funds amounts
set forth above shall be in addition to any reduction under
subsections 6.13(c) or (d).
(c) Notwithstanding the foregoing, in the event of a
repurchase by Borrower of any of its issued and outstanding
common stock, the required minimum Capital Funds amounts set
forth above shall each be reduced effective as of the date
of such repurchase and as to all dates subsequent to the
date of such repurchase up to an aggregate of $50,000,000 by
reason of such repurchases. The amount of the reduction in
the required minimum Capital Funds amounts set forth above
shall be equal to the reduction in the Capital Funds of the
Borrower resulting from such repurchase. Any reduction in
the required minimum Capital Funds amounts set forth above
shall be in addition to any reduction under subsections
6.13(b) or (c).
(d) Notwithstanding the foregoing, in the event of a
sale by the Borrower directly or through one of its
Subsidiaries of any of its interest in the Australian Joint
Venture and the immediate subsequent use of such funds by
the Borrower for reduction of Subordinated Debt, the
required minimum Capital Funds amounts set forth above shall
each be reduced effective as of the date of such sale and
reduction and as to all dates subsequent to the date of such
sale and reduction by a sum equal to the excess, if any, of
the said reduction in Subordinated Debt over any increase in
the Capital Funds of the Borrower resulting from such sale,
which increase shall be net of tax costs arising out of
gains realized upon such sale. Any reduction in the minimum
Capital Funds amounts set forth above shall be in addition
to any reduction under subsections 6.13(a) or (b).
8. LEVERAGE RATIO. Section 6.14 of the Agreement
("Leverage Ratio") shall be amended to read as follows:
At any time prior to the completion of both (a) a sale
of the Las Vegas Showboat and (b) a repurchase by the
Borrower of its common stock of at least $25,000,000, permit
the Leverage Ratio to exceed 1.7x, and at any time after the
completion of said sale and repurchase, permit the Leverage
Ratio to exceed 2.2x.
9. DEBT SERVICE COVERAGE RATIO. Section 6.15 of the
Agreement ("Debt Service Coverage Ratio") shall be amended to
read as follows:
Permit the Debt Service Coverage Ratio as of the last
day of any fiscal quarter of the Borrower measured as to the
period consisting of such fiscal
7
<PAGE>
quarter combined with the three previous fiscal quarters to
be less than the amount indicated below for the applicable
fiscal quarters indicated below:
4th Quarter 1994 - 3rd Quarter 1995 1.50x
4th Quarter 1995 - 3rd Quarter 1996 1.30x
4th Quarter 1996 - 3rd Quarter 1998 1.30x
4th Quarter 1998 and thereafter 1.50x
10. STOCK REPURCHASES. The Agreement is modified by adding
a new Section 6.18 as follows:
SECTION 6.18. STOCK REPURCHASES.
Repurchase any of its common stock unless at the time
of such repurchase (a) no Default or Event of Default shall
exist or be continuing immediately prior to and after giving
effect to such repurchase, (b) after giving effect to such
repurchase, the Borrower's Leverage Ratio will not exceed
the applicable minimum Leverage Ratio set forth in section
6.14 and (c) Borrower will have complied with and the
repurchase will have been permitted under Section 4.09 of
the Bond Indenture as same is presently in effect, and
without regard to any waiver or modification of the terms of
such Section 4.09.
11. MISCELLANEOUS. All expenses incurred by the Lender in
connection with the preparation, execution and delivery of this
Modification and such other documents as may be necessary to
consummate the transactions contemplated hereunder, including all
legal, filing and other fees and expenses, shall be paid by the
Borrower. The Borrower and the Guarantors hereby ratify, confirm
and approve all of the terms, conditions, and covenants of the
Loan Documents, as the same have been modified from time to time
and as modified hereby. Except as previously modified or
expressly modified hereby, the Loan Documents shall continue in
full force and effect in accordance with the provisions thereof.
The Borrower and the Guarantors further represent that there are
no, and hereby waive any and all, defenses, offsets or
counterclaims which they may have as to the Obligations. This
Agreement states the entire understanding of the parties with
reference to the subject matter hereof, and may not be modified
except in writing signed by both the Borrower and the Lender.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Modification to Loan and Guaranty Agreement as of the date and
year first above written.
LENDER:
FLEET BANK, N.A.
By: /s/ John T. Harrison
John T. Harrison
Vice President
BORROWER:
SHOWBOAT, INC.
By: /s/ R. Craig Bird
R. Craig Bird
Executive Vice President - Financial
and Administration and Chief
Financial Officer
GUARANTORS:
SHOWBOAT OPERATING COMPANY
2800 Fremont Street
Las Vegas, Nevada 89104
By: /s/ R. Craig Bird
R. Craig Bird
Executive Vice President,
Treasurer and Chief Financial
Officer
OCEAN SHOWBOAT, INC.
801 Boardwalk
Atlantic City, NJ 08401
By: /s/ R. Craig Bird
R. Craig Bird
Vice President
Financial Administration
9
<PAGE>
ATLANTIC CITY SHOWBOAT, INC.
801 Boardwalk
Atlantic City, NJ 08401
By: /s/ Kathleen Caracciolo
Kathleen Caracciolo
Vice President - Finance, Treasurer
and Chief Financial Officer
10
<PAGE>
MODIFICATION TO REVOLVING NOTE
This Modification to Revolving Note is made as of the 14th
day of July, 1997, by Showboat, Inc., ("Borrower"), a Nevada
Corporation.
WHEREAS, Borrower executed and delivered to NatWest
Bank, N.A. (now known as Fleet Bank, N.A.) ("Lender"), its
Revolving Note in the face amount of Twenty Five Million Dollars
($25,000,000.00) dated July 14, 1995 (the "Revolving Note")
pursuant to the terms of a Loan and Guaranty Agreement between
the Borrower, NatWest Bank, N.A. and the Guarantors (hereunder
the "Loan Agreement"); and
WHEREAS, the Borrower and the Lender have entered into
a Modification to Loan and Guaranty Agreement of even date
herewith providing for an increase in the amount of the Revolving
Loan Facility to the sum of $35,000,000.00 and providing for an
extension to the Conversion Date.
NOW THEREFORE, the undersigned Borrower hereby modifies the
Revolving Note as follow:
1. The face amount of the Note is changed from $25,000,000.00
to $35,000,000.00.
2. The Conversion Date referred to as July 14, 1997 in the
second paragraph of the Note is changed to September 14, 1999.
3. Capitalized terms used herein which are not otherwise
defined shall have the meaning set forth in the Revolving Note.
Except as herein modified, all of the terms and conditions of the
Revolving Note are hereby affirmed and ratified. This
modification shall be attached to and made a part of the
Revolving Note.
IN WITNESS WHEREOF, the Borrower has executed this
Modification to Revolving Note as of the date and year first
above written.
SHOWBOAT, INC.
By: /s/ R. Craig Bird
R. Craig Bird
Executive Vice President -
Financial and Administration
and Chief Financial Officer
<PAGE>
FIRST AMENDMENT TO INTERCREDITOR AGREEMENT
FOR PARI PASSU INDEBTEDNESS RELATING TO
ATLANTIC CITY SHOWBOAT
This First Amendment (the "Amendment") to the Intercreditor
Agreement for Pari Passu Indebtedness Relating to ATLANTIC CITY
SHOWBOAT (the "Intercreditor Agreement") is made as of the 14th
day of July, 1997, by and among SHOWBOAT, INC., a Nevada
corporation (the "Company"), ATLANTIC CITY SHOWBOAT, INC., a New
Jersey corporation ("ACSI"), IBJ SCHRODER BANK & TRUST COMPANY
(the "Trustee") and FLEET BANK, N.A. (formerly known as NATWEST
BANK, N.A.) (the "Lender"). Terms used herein not otherwise
defined herein shall have the meanings set forth in the
Intercreditor Agreement.
RECITALS
WHEREAS, the Trustee, the Company, ACSI and the Lender
entered into the Intercreditor Agreement with respect to the
Mortgage held by Lender securing a loan to the Company in the
maximum sum of $25,000,000; and
WHEREAS, the loan secured by the Lender's Mortgage has been
increased to the maximum principal amount of $35,000,000, and
ACSI has executed and delivered to the Lender certain
modifications to the Lender's documents, including the Lender's
Mortgage, to reflect such increase; and
WHEREAS, the parties hereto desire to amend the
Intercreditor Agreement to reflect such increase in the Company's
indebtedness to the Lender:
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. The initial paragraph of page 3 of the Intercreditor
Agreement is hereby amended to read as follows:
WHEREAS, the maximum aggregate principal amount of
Indebtedness to be provided by Lender is $35,000,000.00.
2. Paragraph 2 (a) of the Intercreditor Agreement is
hereby amended to change the reference to $25,000,000.00 to
$35,000,000.00.
3. Paragraph 2 (b) of the Intercreditor Agreement is
hereby amended to change the reference to $25,000,000.00 to
$35,000,000.00.
4. Paragraph 2 (c) of the Intercreditor Agreement is
hereby amended to change the reference to $25,000,000.00 to
$35,000,000.00.
<PAGE>
5. All other terms and conditions of the Intercreditor
Agreement are hereby ratified and confirmed.
IN W1INESS WHEREOF, the Trustee, the Company, the Lender and
ACSI have caused this instrument to be duly executed as of the
14th day of July, 1997.
SHOWBOAT, INC.
2800 Fremont Street
Las Vegas, Nevada 89104
By: /s/ R. Craig Bird
R. Craig Bird
Executive Vice President - Financial
and Administration and Chief
Financial Officer
ATLANTIC CITY SHOWBOAT, INC.
801 Boardwalk
Atlantic City, New Jersey 08401
By: /s/ Kathleen Caracciolo
Kathleen Caracciolo
Vice President - Finance, Treasurer
and Chief Financial Officer
IBJ SCHRODER BANK & TRUST CO.
One State Street
New York, New York 10004
By: /s/ Terence Rawlins
Name: Terence Rawlins
Title: Assistant Vice President
FLEET BANK, N.A
10 Exchange Place
Jersey City, NJ 07322.
By: /s/ John T. Harrison
John T. Harrison
Vice President
<PAGE>
FIRST AMENDMENT TO INTERCREDITOR AGREEMENT
FOR PARI PASSU INDEBTEDNESS RELATING TO
LAS VEGAS SHOWBOAT
The First Amendment (the "Amendment") to the Intercreditor
Agreement for Pari Passu Indebtedness Relating to LAS VEGAS
SHOWBOAT (the "Intercreditor Agreement") is made as of the 14th
day of July, 1997, by and among IBJ SCHRODER BANK & TRUST
COMPANY (the "Trustee"), SHOWBOAT, INC., a Nevada corporation
(the "Company"), and FLEET BANK, N.A. (formerly known as NATWEST
BANK, N.A.) (the "Lender"). Terms used herein not otherwise
defined herein shall have the meanings set forth in the
Intercreditor Agreement.
RECITALS
WHEREAS, the Trustee, the Company and the Lender entered
into the Intercreditor Agreement with respect to the First
Mortgage Bonds and the Deed of Trust held by Lender securing a
loan in the maximum sum of $25,000,000; and
WHEREAS, the loan secured by the Lender's Deed of Trust has
been increased to the maximum principal amount of $35,000,000,
and the Company has executed and delivered to the Lender certain
modifications to the Lender's documents, including the Lender's
Deed of Trust, to reflect such increase; and
WHEREAS, the parties hereto desire to amend the
Intercreditor Agreement to reflect such increase in the Company's
indebtedness to the Lender:
NOW, THEREFORE, in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Paragraph 2(a) of the Intercreditor Agreement is hereby
amended to change the reference to $25,000,000 to $35,000,000.
2. Paragraph 2(b) of the Intercreditor Agreement is hereby
amended to change the reference to $25,000,000 to $35,000,000.
3. All other terms and conditions of the Intercreditor
Agreement are hereby ratified and confirmed.
<PAGE>
IN WITNESS WHEREOF, the Trustee, the Company and the Lender
have caused this instrument to be duly executed as of the 14th
day of July, 1997.
IBJ SCHRODER BANK & TRUST CO.
One State Street
New York, New York 10004
By: /s/ Terence Rawlins
Name: Terence Rawlins
Title: Assistant Vice President
SHOWBOAT, INC.
2800 Fremont Street
Las Vegas, Nevada 89104
By: /s/ R. Craig Bird
R. Craig Bird
Executive Vice President-Financial
and Administration and Chief
Financial Officer
FLEET BANK, N.A.
10 Exchange Place
Jersey City, NJ 07322
By: /s/ John T. Harrison
John T. Harrison
Vice President
<PAGE>
AMENDMENT TO DEED OF TRUST, ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
This First Amendment (the "Amendment") to the Deed of
Trust, Assignment of Rents and Security Agreement (hereinafter
called the "Deed of Trust") is made as of the 14th day of July,
1997 by and among SHOWBOAT, INC. a Nevada corporation, and
SHOWBOAT OPERATING COMPANY, a Nevada corporation (collectively
as "Trustor"), whose address is 2800 Fremont Street, Las Vegas,
Nevada, 89104, to NEVADA TITLE COMPANY, a Nevada Corporation,
whose address is 3320 West Sahara, Suite 200, Las Vegas,
Nevada, 89102-60677, as Trustee ("Trustee") for the benefit for
FLEET BANK, N.A. (formerly known as NatWest Bank, N.A.), a
national banking association ("Beneficiary"), as Lender under
that certain Loan and Guaranty Agreement, dated July 14, 1995,
and as amended as of even date herewith, among Beneficiary, as
Lender, Trustor, as borrower, and OCEAN SHOWBOAT, INC., a New
Jersey corporation, ATLANTIC CITY SHOWBOAT, Inc., a New Jersey
Corporation ("ACSI"), and SHOWBOAT OPERATING COMPANY, a Nevada
corporation as Guarantors. Terms used herein not otherwise
defined herein shall have the meanings set forth in the Deed of
Trust.
RECITALS
WHEREAS, Showboat, Inc. made, executed and delivered to
Lender a Revolving Note dated July 14, 1995, in the maximum
aggregate amount of $25,000,000, evidencing the extension of
credit by Lender to Showboat, Inc. in the maximum aggregate
amount of $25,000,000;
WHEREAS, Showboat, Inc. has requested that the Lender
increase the maximum aggregate amount under the Revolving Note
to $35,000,000;
WHEREAS, Trustor and Beneficiary have entered into a
Modification to Loan and Guaranty Agreement providing for an
increase in the amount available under the Loan Agreement from
$25,000,000 to $35,000,000 (the "Amendment"), and making other
changes in the terms of the loan; and
WHEREAS, pursuant to the Amendment, Trustor has executed
and delivered to Beneficiary an Amendment to the Promissory Note
to be secured hereby.
NOW, THEREFORE, in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. The definition of "Promissory Note" in the Deed of Trust is
hereby amended to read as follows:
<PAGE>
"Promissory Note" means that certain Revolving
Note between Trustor and Beneficiary dated July
14, 1995, as amended by that certain Modification
to Revolving Note, dated as of July 14, 1997, and
as may be further amended pursuant to the Loan
Agreement, in the maximum aggregate amount of
$35,000,000.
2. The definition of "Permitted Dispositions" in the Deed
of Trust is amended to read as follows:
"Permitted Dispositions" means (a) the sale, transfer or
other disposition of Collateral not to exceed an aggregate
value of $3,000,000.00 per annum and (b) the sale of the
Las Vegas Showboat, provided all of the applicable
conditions, agreements and covenants contained in Section
6.04 of the Loan Agreement are met and complied with.
3. All other terms and conditions of the Deed of Trust are
hereby ratified and confirmed.
IN WITNESS WHEREOF, the Trustor has caused this instrument
to be duly executed as of the 14th day of July, 1997.
SHOWBOAT, INC.
By: /s/ R. Craig Bird
R. Craig Bird
Executive Vice President - Financial
and Administration and Chief
Financial Officer
SHOWBOAT OPERATING COMPANY
By: /s/ R. Craig Bird
R. Craig Bird
Executive Vice President, Treasurer
and Chief Financial Officer
<PAGE>
FLEET BANK, N.A.
By: /s/ John T. Harrison
John T. Harrison
Vice President
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
Be it remembered that on this 23rd day of October, 1997,
before me, the subscriber, in and for said county, personally
appeared R. Craig Bird, Executive Vice President - Financial
and Administration and Chief Financial Officer of Showboat,
Inc. who I am satisfied is the person who signed the within
instrument, and he acknowledged that he signed and delivered
the same as such officer aforesaid, and that the within
instrument is the voluntary act and deed of such corporation
made by virtue of a Resolution of its Board of Directors. And
said R. Craig Bird did further certify and acknowledge that he
received a true, correct and complete copy of the within
instrument.
Witnesseth my hand and seal.
/s/ Donna M. Berenette
Notary Public
My Commission Expires: 12/23/98
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
Be it remembered that on this 23rd day of October, 1997,
before me, the subscriber, in and for said county, personally
appeared R. Craig Bird, Executive Vice President, Treasurer and
Chief Financial Officer of Showboat Operating Company, who I am
satisfied is the person who signed the within instrument, and
he acknowledged that he signed and delivered the same as such
officer aforesaid, and that the within instrument is the
voluntary act and deed of such corporation made by virtue of a
Resolution of its Board of Directors. And said R. Craig Bird
did further certify and acknowledge that he received a true,
correct and complete copy of the within instrument.
Witnesseth my hand and seal.
/s/ Donna M. Berenette
Notary Public
My Commission Expires: 12/23/98
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
Be it remembered, that on this 30th day of October, 1997,
before me, the subscriber, a Notary Public, personally appeared
John T. Harrison, Vice President of FLEET BANK, N.A., who, I am
satisfied is the person(s) named in and who executed the within
instrument and he did acknowledge that he signed, sealed and
delivered the same as his act and deed on behalf of the Bank and
for the uses and purposes therein expressed.
/s/ Irene Gutierrez
Notary Public
My Commission Expires: 9/11/00
<PAGE>
EXHIBIT 10.36
<PAGE>
AGREEMENT OF PURCHASE AND SALE
SUN INTERNATIONAL NORTH AMERICA, INC., SELLER
AND
SHOWBOAT LAND LLC, BUYER
Dated: As of January 29, 1998
Lot 140, Block 13
Tax Map of City of Atlantic City
Atlantic County, New Jersey
<PAGE>
AGREEMENT OF SALE
This Agreement of Sale ("Agreement") is made and entered
into as of January 29, 1998 by and between Sun International
North America, Inc., formerly known as Resorts International,
Inc., a Delaware corporation ("Seller"), and Showboat Land LLC, a
Nevada limited liability company ("Buyer").
BACKGROUND
A. Seller owns certain real property located on the
Boardwalk in the City of Atlantic City, County of Atlantic,
currently designated as Block 13, Lot 140 on the current Atlantic
City Tax Map and more particularly described on Exhibit A
attached hereto and made a part hereof, together with the right,
title and interest of Seller, if any, in and to the streets and
in and to the land lying in the bed of any streets, roads or
avenues, open or proposed, public or private, in front of,
adjoining or abutting said real property to the center line
thereof, the air space and development rights pertaining to said
real property and the right to use such air space and development
rights, all rights of way, privileges, liberties, tenements,
hereditaments and appurtenances belonging, or in any way
appertaining thereto, all easements now or hereafter benefitting
said real property and all royalties and rights appertaining to
the use and enjoyment of said real property, including, but
without limiting the generality of the foregoing, all riparian,
alley, vault, drainage, mineral, water, oil, coal, gas and other
similar rights (all of the foregoing being hereinafter
collectively referred to as the "Property").
B. Seller currently leases the Property to Atlantic City
Showboat, Inc. ("Tenant"), a New Jersey corporation, pursuant to
that certain Lease Agreement dated October 26, 1983, by and
between Resorts, as landlord, and Tenant, as lessee. Thereafter,
the said lease was amended by the parties thereto by the First
Amendment to Lease Agreement dated January 15, 1985, the Second
Amendment to Lease Agreement dated July 5, 1985, the Third
Amendment to Lease Agreement dated October 28, 1985, the Restated
Third Amendment to Lease Agreement dated August 28, 1986, the
Fourth Amendment to Lease Agreement dated December 16,
1986, the Fifth Amendment dated March 2, 1987, the
<PAGE>
Sixth Amendment to Lease Agreement dated March 13, 1987, the
Seventh Amendment to Lease Agreement dated October 18, 1988 and
the Eighth Amendment to Lease Agreement dated May 18, 1993
(collectively, the "Lease").
C. Seller desires to sell to Buyer and Buyer desires to
purchase the Property from Seller, and Seller desires to assign
the Lease and Buyer desires to assume the Lease on the terms and
conditions set forth in this Agreement.
ARTICLE I
DEFINED TERMS
1.1 DEFINITIONS. In addition to the abbreviations and
definitions set forth above and in the preamble to this
Agreement, the following defined terms used in this Agreement
shall have the meanings specified below:
"ADDITIONAL EXCEPTIONS" is defined in SECTION 3.1 of
this Agreement.
"CLOSING" means consummation of the purchase of the
Property by Buyer from Seller in accordance with the terms and
conditions of Article II of this Agreement.
"CLOSING DATE" means the date specified in SECTION
2.3 of this Agreement on which the Closing will be held.
"ENVIRONMENTAL LAWS" means any and all federal, state
or local laws, regulations, ordinances, orders, permits and
judgments and common law, including the law of strict liability
and the law of conducting abnormally dangerous activities
relating to the protection of health and/or the environment,
including, without limitation, provisions pertaining to or
regulating air pollution, water pollution, noise control,
wetlands, water courses, natural resources, wildlife, Hazardous
Substances, or any other activities or conditions which impact or
relate to the environment or nature.
2
<PAGE>
"HAZARDOUS SUBSTANCES" shall mean any flammable
substance, explosive, radioactive material, hazardous material,
hazardous waste, toxic substance, gasoline, petroleum product,
pollutant, contaminant or any other substance which is regulated
under any Environmental Law, including, but not limited to,
asbestos, PCBs and any "hazardous substance", "hazardous
material", hazardous waste", "industrial waste" or similar term
as defined in any and all Environmental Laws such as, for
example, Section 101 (14) of the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C. Section 9601
(14) ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"); Section 307 and 311 of the
Clean Water Act, 33 U.S.C. Sections 137 and 1321; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. Sections
1801-1812; Section 1004 (5); of the Resource Conservation
Recovery Act, 42 U.S.C. Section 6903 (5); the New Jersey
Industrial Sight Recovery Act, N.J.S.A. 13:1K-6, et seq.
("ISRA"); the New Jersey Water Pollution Control Act, N.J.S.A.
58:10A-3, et seq.; the New Jersey Underground Storage of
Hazardous Substances Act, N.J.S.A. 58:10A-21, et seq.; the New
Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11,
et seq. (the "Spill Act"); and in the rules and regulations
adopted in connection with any and all of the aforementioned
Statutes and all other Environmental Laws.
"NJDEP" means New Jersey Department of Environmental
Protection.
"PERMITTED EXCEPTIONS" is defined in SECTION 3.1 of
this Agreement.
"PURCHASE PRICE" means the total consideration to be
paid by Buyer to Seller for the purchase of the Property pursuant
to SECTION 2.2 of this Agreement.
"TITLE COMPANY" means Commonwealth Land Title
Insurance Company, Lawyers Title Insurance Corporation and/ or
such other title insurance company or companies selected by Buyer
and licensed by the State of New Jersey.
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"TITLE POLICY" means the ALTA owners policy of title
insurance issued by the Title Company to Buyer which insures
title to the Property as provided in SECTION 3.1 of this
Agreement.
1.2 OTHER DEFINED TERMS. Certain other defined terms
shall have the respective meanings assigned to them elsewhere in
this Agreement.
ARTICLE II
PURCHASE AND SALE
2.1 PROPERTY. On the terms and conditions stated in this
Agreement, Seller hereby agrees to sell and convey to Buyer, and
Buyer hereby agrees to purchase and acquire from Seller, the
Property.
2.2 PURCHASE PRICE. The Purchase Price to be paid by
Buyer to Seller shall be One Hundred Ten Million
($110,000,000.00) Dollars allocated as follows:
$57,000,000.00 - land
$53,000,000.00 - excess rent attributable to leased fee
estate
The Purchase Price shall be payable to, or at the direction of
Seller through, the Title Company at the Closing by wire transfer
of immediately available funds to an account designated by
Seller.
2.3 CLOSING. The Closing of the purchase and sale of the
Property shall take place at 10:00 a.m. on January 29, 1998, at
the offices of Latham & Watkins, 885 Third Avenue, New York, New
York 10022-4802 or such other place as may be mutually agreed
upon by Buyer and Seller.
2.4 ADJUSTMENTS AT CLOSING. There shall be no adjustments
between Buyer and Seller at Closing.
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2.5 COSTS OF CLOSING. Each party is responsible for
paying the legal fees of its counsel in negotiating, preparing,
and closing the transaction contemplated by this Agreement. Buyer
shall be responsible for the cost of recording the deed, the
Title Policy (as hereinafter defined) and for all fees and
expenses of the Title Company. Buyer shall be responsible for
the payment of the realty transfer fee in connection with the
transfer of title to the Property. Each party shall be
responsible for paying any other fees, costs and expenses
identified herein as being the responsibility of such party.
Notwithstanding the foregoing, in the event a
determination is made that an additional realty transfer fee is
due in connection with the conveyance of the Property to Buyer,
each party shall be responsible for the payment of one-half of
such additional realty transfer fee and any penalties and/or
interest related thereto within ten (10) days of the date of such
determination. The parties agree to share equally any and all
costs and expenses, including legal fees with regard to any
action or proceeding commenced related to the realty transfer
fee. The provisions of this sentence shall survive Closing.
2.6 ASSIGNMENT OF LEASE AND RENTS. At closing, Seller
shall assign and set over to Buyer all of Seller's right, title
and interest in the Lease and rents thereunder, free and clear of
all liens and encumbrances, except Permitted Exceptions and
Additional Exceptions, and Buyer shall assume the Lease.
ARTICLE III
CONDITION OF TITLE
3.1 CONDITION OF TITLE. Title to the Property shall be
good and marketable and insurable at standard rates by the Title
Company, and shall be free and clear of all liens, encumbrances
and rights of others, except for (a) those matters set forth on
EXHIBIT 3.1 attached hereto and made a part hereof (the
"Permitted Exceptions''). At Closing, title to the Property
shall be conveyed to Buyer, in fee simple, by bargain and sale
deed with a covenant as to grantor's acts (the "Deed") and (b)
such other matters as the Title Company
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shall be willing, at Buyer's request, to omit as exceptions to
coverage or to except, without special premium, with insurance
against collection out of or enforcement against the Property
(the "Additional Exceptions").
ARTICLE IV
CONDITIONS PRECEDENT; DELIVERIES
4.1 CONDITIONS PRECEDENT.
A. The obligation of Buyer to complete the Closing is
subject to the fulfillment (or waiver in writing by Buyer) of
each of the following conditions at or prior to the Closing:
(a) All representations and warranties made by
Seller hereunder are true, complete and correct in all material
respects on the date hereof, and shall be true, complete and
accurate in all material respects as of the Closing Date (as if
then made).
(b) All covenants, agreements and obligations
required by the terms of this Agreement to be performed by Seller
on or before the Closing Date shall have been fully performed in
all material respects.
(c) Seller shall have furnished or caused to be
furnished to Buyer all of the items required to be furnished by
Seller under SECTION 4.2 of this Agreement.
(d) Approval of the transactions contemplated by
this Agreement by the New Jersey Casino Control Commission.
B. The obligation of Seller to complete the Closing is
subject to the fulfillment (or waiver in writing by Seller) of
each of the following conditions at or prior to Closing:
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(a) All representations and warranties made by Buyer
hereunder are true, complete and correct on the date hereof, and
shall be true, complete and correct in all material respects as
of the Closing Date (as if then made).
(b) All covenants, agreements and obligations
required by the terms of this Agreement to be performed by Buyer
on or before the Closing Date shall have been fully performed in
all material respects.
(c) Buyer shall have furnished or caused to be
furnished to Seller all of the items required to be furnished by
Buyer under SECTION 4.3 of this Agreement.
4.2 SELLER'S DELIVERIES. At the Closing, Seller shall
deliver or cause to be delivered to Buyer, the following items
duly executed, witnessed and/or attested, sealed and acknowledged
where so indicated by all necessary parties:
(a) The Deed, duly executed in recordable form by
Seller.
(b) The Assignment and Assumption of Lease in the
form attached hereto as EXHIBIT 4.2(b).
(c) Affidavit of title attached hereto as EXHIBIT
4.2(c).
(d) Resolution of the Board of Directors of Seller
authorizing the sale of the Property to Buyer in accordance with
the terms of this Agreement.
(e) Discharge of Mortgage recorded in Mortgage Book
4445, page 209 ET SEQ. and Assignment recorded in Deed Book 5136,
page 45.
(f) The Estoppel Certificate in the form attached
hereto as EXHIBIT 4.2(h).
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4.3 BUYER'S DELIVERIES. At the Closing, Buyer shall
deliver or cause to be delivered to Seller or the Title Company,
the following items:
(a) The payment required by SECTION 2.2 of this
Agreement.
(b) The Assignment and Assumption of Lease in the
form attached hereto as EXHIBIT 4.2(b)..
(c) The Estoppel Certificate of Tenant in the form
attached hereto as EXHIBIT 4.3(c).
(d) Resolution of the Buyer authorizing the purchase
of the Property in accordance with the terms of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1 REPRESENTATIONS AND WARRANTIES. The following
representations and warranties of Seller are true, complete and
correct in all material respects on the date hereof and shall be
true, complete and correct in all material respects on the
Closing Date (as if then made):
(a) Seller has the full legal right, power and
authority to enter into, execute, deliver and perform all of its
obligations under this Agreement. All requisite action necessary
to authorize Seller to enter into this Agreement and to carry out
its obligation hereunder have been, or on the Closing Date will
have been, taken. The execution and delivery of this Agreement
by Seller constitutes the valid and legally binding obligation of
Seller to perform this Agreement, enforceable against Seller in
accordance with its terms.
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(b) Seller has not received any written notice of
any pending or threatened condemnation action with respect to all
or any portion of the Property, and to the best of Seller's
knowledge, there are no existing condemnation or other legal
proceedings affecting the Property by any governmental authority
having jurisdiction over or affecting all or any part of the
Property.
(c) No permission, consent or approval by any third
party or, to the best of Seller's knowledge, any governmental
authority is required to be obtained by Seller in order for
Seller to consummate the transactions contemplated by this
Agreement.
(d) There are no actions, suits or proceedings
pending or, to the best of Seller's knowledge or the knowledge of
its affiliates, threatened affecting the Property or any portion
thereof.
(e) Seller and each of its affiliates have not
received written notice that the Property is in violation of any
Environmental Laws. Seller and each of its affiliates have no
knowledge of the release of Hazardous Substance on or from the
Property or to the Property from any adjacent property, or any
potential or known liability which has resulted in or may result
in a lien on the Property or which is or may result in a
violation of any Environmental Laws. Seller and each of its
affiliates have not received written notice of a threatened or
pending Regulatory Action (hereinafter defined) and has not
received any written notification that it is or may be
potentially responsible or liable for clean-up, testing or other
remedial activities at any site including, without limitation,
the Property. "Regulatory Action" is defined as any violation,
complaint, citation, request for information, order, directive,
compliance schedule, notice of claim, consent decree, action,
litigation or proceeding brought by or instituted by any
governmental authority under or in connection with any
Environmental Law.
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(f) To the best of Seller's knowledge and belief,
the Lease is in full force and effect and no default or event,
which with notice, the passage of time or both would constitute a
default, has occurred thereunder. Tenant under the Lease is
current in the payment of rent and all other amounts due under
the Lease.
(g) The representations and warranties of Seller
contained herein shall not survive the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
The following representations and warranties of Buyer are
true, complete and correct in all material respects on the date
hereof and shall be true, complete and correct in all material
respects on the Closing Date (as if then made):
(a) Buyer has the full legal right, power and authority
to enter into, execute, deliver and perform all of its
obligations under this Agreement. All requisite action necessary
to authorize Buyer to enter into this Agreement and to carry out
Buyer's obligations hereunder has been, or on the Closing Date
will have been, taken. The execution and delivery of this
Agreement by Buyer constitutes the valid and legally binding
obligation of Buyer to perform this Agreement, enforceable in
accordance with its terms.
(b) Buyer and each of Buyer's affiliates have not
received any written notice of any pending or threatened
condemnation action with respect to all or any portion of the
Property, and to the best of Buyer's knowledge, there are no
existing condemnation or other legal proceedings affecting the
Property by any governmental authority having jurisdiction over
or affecting all or any part of the Property.
(c) No permission, consent or approval by any third party
or, to the best of Buyer' s knowledge, any governmental
authority is required to be obtained by Buyer in
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order for Buyer to consummate the transactions contemplated by
this Agreement, except the consent or approval of the New Jersey
Casino Control Commission which may be required to be obtained by
Buyer and/or Tenant.
(d) There are no actions, suits or proceedings pending
or, to the best of Buyer's knowledge or the knowledge of its
affiliates, threatened affecting the Property or any portion
thereof.
(e) Buyer and each of its affiliates have not received
written notice that the Property is in violation of any
Environmental Laws. Buyer and each of its affiliates have no
knowledge of the release of Hazardous Substance on or from the
Property or to the Property from any adjacent property, or any
potential or known liability which has resulted in or may result
in a lien on the Property or which is or may result in a
violation of any Environmental Laws. Buyer and each of its
affiliates have not received written notice of a threatened or
pending Regulatory Action and has not received any notification
that it is or may be potentially responsible or liable for
clean-up, testing or other remedial activities at any site
including, without limitation, the Property.
(f) To the best of Tenant's knowledge and belief, the
Lease is in full force and effect and no default or event, which
with notice, the passage of time or both would constitute a
default, has occurred thereunder.
(g) The representations and warranties of Buyer contained
herein shall not survive the Closing.
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ARTICLE VII
BROKERAGE COMMISSIONS
Seller and Buyer each warrant to the other that neither has
incurred any obligation for a real estate or brokerage commission
with respect to this transaction, and each hereby agrees to
defend, indemnify, and hold harmless the other for any loss,
cost, or expense which may result from a breach of this warranty.
ARTICLE VIII
CONDEMNATION
If, prior to the Closing, there shall occur a threatened or
actual taking or condemnation of all or any substantial portion
of the Property, then, in such event, Buyer shall have the right
to terminate this Agreement by written notice delivered to Seller
within ten (10) days after Buyer has received written notice from
Seller of such an event ("Seller's Condemnation Notice"). If
Buyer elects to terminate this Agreement pursuant to the
preceding sentence, the parties shall have no further rights or
obligations under this Agreement, one to the other with respect
to the subject matter of this Agreement. If this Agreement is
not terminated by Buyer, it shall remain in full force and
effect, and Seller, upon the Closing, at Buyer's election, shall
either (i) pay to Buyer any award collected by Seller as a result
of said taking, deducting from same the reasonable expenses of
Seller, including attorneys' fees, incurred in the collection of
same, or (ii) assign, transfer and set over to Buyer all of
Seller's right, title and interest in and to any awards to be
made on account of said taking, as the case may be.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. All notices, demands, approvals,
consents, requests and other communications required
or permitted hereunder shall be in writing, and
shall be deemed to be properly delivered (i) on receipt if
delivered by hand, (ii) the next business day if
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delivered overnight delivery by a nationally recognized overnight
courier service provided it is delivered, and (iii) whether
actually received or refused three (3) days after having been
deposited in a regularly maintained receptacle for the United
States mail, registered or certified, return receipt requested,
postage prepaid, addressed as follows:
If to Seller: Sun International North America, Inc.
1133 Boardwalk
Atlantic City, NJ 08401
Attn: Charles D. Adamo, Esq.
With a copy to: William C. Murtha, Esq.
Senior Corporate Counsel
Sun International North America,
Inc.
1133 Boardwalk
Atlantic City, NJ 08401
and to: James P. Gerkis, Esq.
Whitman, Breed, Abbott & Morgan LLP
200 Park Avenue
New York, NY 10166
If to Buyer: R. Craig Bird, Executive Vice President
Finance and Administration
Showboat Incorporated
6601 Ventnor Avenue
Ventnor, NJ 08406
With a copy to: John Brewer, Esq.
Kummer, Kaempfer, Bonner & Renshaw
Seventh Floor
3800 Howard Hughes Parkway
Las Vegas, Nevada 89109
and to: Arthur E. Sklar, Esq.
Levine, Staller, Sklar, Chan,
Brodsky & Donnelly, P.A.
3030 Atlantic Avenue
Atlantic City, NJ 08401
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Any of the addresses for notice may be changed by delivery
of written notice in connection herewith.
9.2 ENTIRE AGREEMENT AND AMENDMENTS. This Agreement
embodies the entire agreement between the parties with respect to
the Property and supersedes all prior agreements and
understandings, if any, relating to the Property, and may be
amended or supplemented only by an instrument in writing executed
by the party against whom enforcement is sought.
9.3 PARTIES BOUND. This Agreement shall be binding upon
and inure to the benefit of Seller and Buyer, and their
respective legal representatives, successors and assigns.
9.4 TIME IS OF THE ESSENCE. It is expressly agreed by
Seller and Buyer that time is of the essence with respect to this
Agreement.
9.5 ATTORNEY'S FEES. If either party hereto shall be
required to employ an attorney to enforce or defend the rights of
such party hereunder, the prevailing party will be entitled to
recover its reasonable attorneys fees, costs and disbursements.
9.6 MULTIPLE COUNTERPARTS; FACSIMILE SIGNATURES. This
Agreement may be executed and delivered in any number of
counterparts, all of which taken together shall constitute one
and the same agreement and either of the parties hereto may
execute this Agreement by signing and delivering any such
counterpart. Signatures delivered by telecopier or similar
device shall be deemed the equivalent of an original signature.
At the request of a party, the other party shall deliver to the
requesting party a signature page bearing the original signature
of such party.
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9.7 SEVERABILITY. If any provision of this Agreement
shall, for any reason, be held violative of any applicable law,
and so much of this Agreement is held to be unenforceable, then
the invalidity of such specific provision shall not be held to
invalidate any other provision of this Agreement which shall
remain in full force and effect.
9.8 ASSIGNMENT. This Agreement may not be assigned by
Buyer, in whole or in part, without the prior written consent of
Seller.
9.9 GOVERNING LAW. The terms and conditions of this
Agreement shall be governed by the internal laws of the State of
New Jersey.
9.10 COUNTERPARTS;FACSIMILE SIGNATURES. This Agreement may
be executed in counterparts and when executed by each of the
parties hereto shall constitute a binding, single agreement and
execution of this document and any Exhibits hereto by facsimile
signature shall be acceptable and deemed the same as original
signatures. The party delivering the facsimile signature shall
promptly deliver a live signature page to the other party.
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EXECUTED by Buyer this 27TH day of January, 1998
Showboat Land LLC
By: Showboat Operating Company,
a member
By: /s/ R. Craig Bird
R. Craig Bird
Executive Vice-President and
Chief Financial Officer
Acknowledged and Agreed to:
Atlantic City Showboat, Inc.
By: /s/ Herbert R. Wolfe
Herbert R. Wolfe
President
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EXECUTED by Seller this 27TH day of January, 1998
Sun International North America, Inc.
By: /s/ John Allison
John Allison
Executive Vice President-Finance &
Chief Financial Officer
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INDEX OF EXHIBITS
A. Legal Description
3.1 Permitted Exceptions
4.2(b) Assignment and Assumption of Lease
4.2(c) Affidavit of Title
4.2(h) Estoppel Certificate of Seller
4.3(c) Estoppel Certificate of Tenant
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EXHIBIT A
LEGAL DESCRIPTION
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SCHEDULE A
SITUATE in the City of Atlantic City, County of Atlantic and
State of New Jersey, bounded and described as follows:
BEGINNING at a point in the Southerly line of Pacific Avenue
(60.00 feet wide), South 62 degrees 32 minutes 00 seconds West,
266.00 feet from the Westerly line of New Jersey Avenue (50.00
feet wide), said point being in the division line between Lots
140 and 144.10 in Block 13 as shown on the current tax map for
the City of Atlantic City, and extending from said beginning
point; thence
(1) South 27 degrees 28 minutes 00 seconds East, in and along
said division line, and continuing in and along the division
line between Lots 140 and continuing in and along the division
line between Lots 140 and 144.02 and 144.01, respectively,
parallel with New Jersey Avenue 1432.20 feet to the Inland or
Interior Line of Public Park (The Boardwalk); thence
(2) Southwestwardly in and along same in the arc of a circle
curving to the right, having a radius of 1102.57 feet, the arc
length of 8.94 feet to a point of tangent; thence
(3) South 59 degrees, 24 minutes, 40 seconds West in and along
same, 308.53 feet to the Easterly line of Lot 128.03 thence
(4) North 27 degrees 28 minutes 00 seconds West in and along
same, and continuing in and along the Easterly line of Lots
128.03 and 129.06 respectively, parallel with New Jersey Avenue,
1369.53 feet to a point in the Southerly line of Lot 130; thence
(5) North 62 degrees 32 minutes 00 seconds East in and along
same, and continuing in and along the Southerly line of Lot
129.02, parallel with Pacific Avenue, 25.00 feet to a point;
thence
(6) North 27 degrees 28 minutes 00 seconds West, in and along
the Easterly line of Lot 129.02, parallel with New Jersey Avenue
80.00 feet to the Southerly line of Pacific Avenue; thence
(7) North 62 degrees 32 minutes 00 seconds East in and along
the Southerly line of Pacific Avenue, 292.00 feet to the POINT
AND PLACE OF BEGINNING.
BEING KNOWN AS Lot 140 in Block 13 as shown on the current Tax
Map for the City of Atlantic City.
TOGETHER WITH the following non-exclusive easements:
Continued on next page
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SCHEDULE A CONTINUED
1. A non-exclusive easement for the construction, repair,
maintenance and use of the Common Facilities (as such are defined
in the Ground Lease, a short form recorded in Deed Book 3878,
page 1 and the Agreement as to Assumption of Obligations with
respect to properties recorded in Deed Book 4795, page 243 and
Deed Book 4863, page 5).
2. A non-exclusive easement over, upon and across the
Pedestrian Passageway, together with the 17-Foot Egressway
(Parcel A), the Service Road (Parcel B) and the Service Road
Extension (Parcel C) (as such are defined in the Ground Lease, a
short form recorded in Deed Book 3878, page 1 and the Agreement
as to Assumption of Obligations with respect to properties
recorded in Deed Book 4795, page 243 and Deed Book 4863, page
5), as shown on a survey made by Arthur W. Ponzio Co. and
Associates, Inc., dated November 17, 1997, and being more
particularly described as Parcels A, B and C, respectively.
SUBJECT to a portion of the fifty-foot wide service easement
lying within the Showboat Leased Land and more particularly
described as Parcel D attached hereto.
PARCEL A
DESCRIPTION OF THE SEVENTEEN-FOOT WIDE EGRESSWAY AT GRADE
BETWEEN THE SERVICE ROAD AND THE BOARDWALK OVER LOTS 128.07 AND
128.08 IN BLOCK 13 ON THE OFFICIAL TAX MAP OF ATLANTIC CITY.
ALL that certain lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey, bounded and described as
follows:
BEGINNING at a point distant 535.00 feet East of the Easterly
line of Virginia Avenue (80 feet wide) and 868.00 feet South of
the Southerly line of Pacific Avenue (60 feet wide), when
measured at right angles to said avenues respectively, and
extending from said beginning point the following courses and
distances:
(1) South 27 degrees 28 minutes 00 seconds East parallel with
Virginia Avenue, a distance of 582.45 feet to the Inland or
Interior Line of Public Park; thence
(2) South 59 degrees 24 minutes 40 seconds West in and along the
Inland or Interior Line of Public Park, a distance or 17.03 feet;
thence
Continued on next page
<PAGE>
SCHEDULE A CONTINUED
(3) North 27 degrees 28 minutes 00 seconds West parallel with
Virginia Avenue, a distance of 583.38 feet; thence
(4) North 62 degrees 32 minutes 00 seconds East parallel with
Pacific Avenue, a distance of 17.00 feet to the POINT AND PLACE
OF BEGINNING.
PARCEL B
DESCRIPTION OF THE FIFTY-FOOT WIDE SERVICE ROAD OVER LOTS
129.02, 129.06 AND A PORTION OF LOTS 128.03, 130 AND 140 IN
BLOCK 13 ON THE OFFICIAL TAX MAP OF ATLANTIC CITY.
ALL that certain lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey, bounded and described as
follows:
BEGINNING at a point in the Southerly side of Pacific Avenue (60
feet wide), said point being distant 577.00 feet East of the
Easterly line of Virginia Avenue (80 feet wide) and extending
from said beginning point the following courses and distances:
(1) South 27 degrees 28 minutes 00 seconds East parallel with
Virginia Avenue, a distance of 86.00 feet; thence
(2) South 07 degrees 48 minutes 46 seconds East, a distance of
74.33 feet; thence
(3) South 27 degrees 28 minutes 00 seconds East parallel with
Virginia Avenue, a distance of 712.00 feet, to a point distant
868.00 feet South of the Southerly line of Pacific Avenue when
measured at right angles thereto; thence
(4) South 62 degrees 32 minutes 00 seconds West parallel with
Pacific Avenue, a distance of 50.00 feet; thence
(5) North 27 degrees 28 minutes 00 seconds West parallel with
Virginia Avenue, a distance of 720.66 feet; thence
(6) North 07 degrees 48 minutes 46 seconds West, a distance of
74.33 feet; thence
(7) North 27 degrees 28 minutes 00 seconds West parallel with
Virginia Avenue, a distance of 77.34 feet to the Southerly line
of Pacific Avenue; thence
Continued on next page
<PAGE>
SCHEDULE A CONTINUED
(8) North 62 degrees 32 minutes 00 seconds East in and along
the Southerly line of Pacific Avenue, a distance of 50.00 feet
to the POINT AND PLACE OF BEGINNING.
PARCEL C
DESCRIPTION OF THE SEVENTEEN-FOOT WIDE FIRE LANE BETWEEN THE
SERVICE ROAD AND THE BOARDWALK OVER A PORTION OF LOT 128.03 IN
BLOCK 13 ON THE OFFICIAL TAX MAP OF ATLANTIC CITY.
ALL that certain lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey, bounded and described as
follows:
BEGINNING at a point distant 552.00 feet East of the Easterly
line of Virginia Avenue (80 feet wide) and 868.00 feet South of
the Southerly line of Pacific Avenue (60 feet wide), when
measured at right angels to said avenues respectively, and
extending from said beginning point the following courses and
distances:
(1) South 27 degrees 28 minutes 00 seconds East parallel with
Virginia Avenue, a distance of 581.53 feet to the Inland or
Interior Line of Public Park; thence
(2) South 59 degrees 24 minutes 40 seconds West in and along
the Inland or Interior Line of Public Park, a distance of 17.03
feet; thence
(3) North 27 degrees 28 minutes 00 seconds West parallel with
Virginia Avenue, a distance of 582.45 feet; thence
(4) North 62 degrees 32 minutes 00 seconds East parallel with
Pacific Avenue, a distance of 17.00 feet to the POINT AND PLACE
OF BEGINNING.
PARCEL D
DESCRIPTION FOR THE EASEMENT FOR THAT PORTION OF THE FIFTY-FOOT
WIDE SERVICE ROAD LYING WITXIN THE SHOWBOAT LANDS OVER A PORTION
OF LOT 140, BLOCK 13 ON THE OFFICIAL TAX MAP OF ATLANTIC CITY.
ALL that certain lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey, bounded and described as
Continued next page
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SCHEDULE A CONTINUED
follows:
BEGINNING at a point distant 577.00 feet East of the Easterly
line of Virginia Avenue (80 feet wide) and 80.00 feet South of
the Southerly line of Pacific Avenue (60 feet wide), and
extending from said beginning point the following courses and
distances:
(1) South 27 degrees 28 minutes 00 seconds East parallel with
Virginia Avenue, a distance of 6.00 feet; thence
(2) South 07 degrees 48 minutes 46 seconds East, a distance of
74.33 feet; thence
(3) North 27 degrees 28 minutes 00 seconds West parallel with
Virginia Avenue, a distance of 76.00 feet; thence
(4) North 62 degrees 32 minutes 00 seconds East parallel with
Pacific Avenue, a distance of 25.00 feet to the POINT AND PLACE
OF BEGINNING.
NOTE: All references herein to Lot and Block designations are
to be used for informational purposes only and are not to be
interpreted as being part of the description.
BEING KNOWN AS Lot in Block as shownon the tax
map of the CITY of ATLANTIC CITY.
<PAGE>
EXHIBIT 3.1
PERMITTED EXCEPTIONS
1. LANDLORDS WAIVER: between Resorts International Inc. and
Maryland National Leasing Corporation dated September 18,
1986 recorded December 30, 1986 in Deed Book 4372 page 282.
2. AGREEMENT AS TO ASSUMPTION OF OBLIGATIONS WITH RESPECT TO
PROPERTIES: between Atlantic City Showboat Inc., a New
Jersey Corporation, Trump Taj Mahal Associates Limited
Partnership, a New Jersey Limited Partnership, Trump Taj
Mahal Realty Corp., a New Jersey Corporation, and Resorts
International Inc., a Delaware Corporation dated September
21, 1988 and recorded November 17, 1988 in Deed Book 4795
page 243 and as amended by First Amendment recorded in Deed
Book 4966 page 181.
3. AGREEMENT AS TO ASSUMPTION OF OBLIGATIONS WITH RESPECT TO
PROPERTIES: Between Atlantic City Showboat, Inc., a New
Jersey Corporation, Trump Taj Mahal Associates Limited
Partnership, a New Jersey Limited Partnership, Trump Taj
Mahal Realty Corp., a New Jersey Corporation, and Resorts
International Inc. a Delaware Corporation dated September
21, 1988 recorded March 14, 1989 in Deed book 4863 page 5.
4. Restrictions, covenants, agreements, and easements
contained in Deed Book 2436 page 110; Misc. Book 12 page
242; and Misc. Book 12 page 377.
5. Restrictions, covenants, agreements and easements,
contained in Deed Book 3978 page 219, Certification in Deed
Book 4524 page 192 as modified in Deed Book 4646 page 166
and in Deed Book 3846 page 199 as amended by Correction and
Confirmatory Deed in Deed Book 4636 page 218, and Deed Book
4016 page 70.
6. Rights granted to the Atlantic City Electric Company in
Deed Book 1991 page 100.
7. Rights of the Federal Government to take, without
compensation, any land now or formerly flowed by tidal
waters for the purpose of commerce and navigation and its
authority to regulate and control navigation and in that
connection to establish and change bulkhead and pierhead
lines.
8. Easement for Service Road over a portion of premises (Lot
140 Block 13) described as Parcel D on Exhibit A.
9. Estate and interest under the terms and provisions of lease
by Resorts International Inc. a Delaware Corporation to
Ocean Showboat Inc. a New Jersey Corporation Short Form
Lease dated October 26, 1983 recorded January 18, 1984 in
Deed Book 3878 page 1.
20
<PAGE>
10. Taxes, charges and assessments.
11. Liability for additional assessment for tax in connection
with new construction pursuant to N.J.S.A. 54:4-63.1 ET
SEQ.
12. Water charges, if any, affecting the premises in question.
13. Rights or claims of parties in possession not shown by the
public records, limited, however, to the Lease.
14. Encroachments, overlaps, boundary line disputes, or other
matters which would be disclosed by an accurate survey and
inspection of the Property.
15. Any liens, or right to a lien, for services, labor, or
material heretofore or hereafter furnished, imposed by law
and not shown by the public record, except such liens
attributable to Seller.
16. Terms and conditions contained in Riparian Grants from the
State of New Jersey to Benjamin Brown, recorded March 28,
1882 in Deed Book 88, page 80 and to James B. Reilly,
recorded August 11, 1899 in Deed Book 233, page 417
provided, however, the Title Company insures that the
grantees in the Riparian Grants were the upland owners at
the time said Grants were given.
DECLARATION OF COMMENCEMENT DATE OF LEASE: by Resorts
International Inc. a Delaware Corporation and Ocean Showboat
Inc. a New Jersey Corporation dated December 15, 1983 recorded
May 1, 1984 in Deed Book 3911 page 63.
ASSIGNMENT AND ASSUMPTION OF LEASE: by Ocean Showboat Inc. a
New Jersey Corporation to Atlantic City Showboat, Inc. a New
Jersey Corporation dated December 3, 1984 recorded December 24,
1984 in Deed Book 4004 page 310.
FIRST AMENDMENT TO LEASE: between Resorts International Inc. a
Delaware Corporation and Atlantic City Showboat Inc. a New
Jersey Corporation dated January 15, 1985 recorded August 16,
1985 in Deed Book 4107 page 141.
SECOND AMENDMENT TO LEASE: between Resorts International Inc. a
Delaware Corporation and Atlantic City Showboat Inc. a New
Jersey Corporation dated July 5, 1985 recorded November 25, 1985
in Deed Book 4158, page 221.
THIRD AMENDMENT TO LEASE: between Resorts International Inc. a
Delaware Corporation and Atlantic City Showboat Inc. a New
Jersey Corporation dated October 28, 1985 recorded November 25,
1985 in Deed Book 4158, page 227.
21
<PAGE>
RESTATED THIRD AMENDMENT TO LEASE: between Resorts
International Inc. a Delaware Corporation and Atlantic City
Showboat, Inc. a New Jersey Corporation dated October 28, 1985
recorded February 20, 1987 in Deed Book 4406 page 17.
FOURTH AMENDMENT TO LEASE: between Resorts International Inc. a
Delaware Corporation and Atlantic City Showboat Inc. a New
Jersey Corporation dated December 16, 1986 recorded February 20,
1987 in Deed Book 4406, page 37.
FIFTH AMENDMENT TO LEASE: between Resorts International Inc. a
Delaware Corporation and Atlantic City Showboat Inc. a New
Jersey Corporation dated March 2, 1987 recorded March 23,1987 in
Deed Book 4421 page 10.
SIXTH AMENDMENT TO LEASE: between Resorts International Inc. a
Delaware Corporation and Atlantic City Showboat, Inc. a New
Jersey Corporation dated March 13, 1987 recorded March 23, 1987
in Deed Book 4421 page 17.
SEVENTH AMENDMENT TO LEASE: between Resorts International Inc.
a Delaware Corporation and Atlantic City Showboat, Inc. a New
Jersey Corporation date October 18, 1988 recorded December 19,
1988 in Deed Book 4814 page 231.
EIGHTH AMENDMENT TO LEASE: between Resorts International Inc.,
a Delaware Corporation and Atlantic City Showboat, Inc. a New
Jersey Corporation dated May 18, 1993 recorded May 18, 1993 in
Deed Book 5500, page 284.
22
<PAGE>
EXHIBIT 4.2(B)
ASSIGNMENT AND ASSUMPTION OF LEASE
23
<PAGE>
Prepared by:
/S/ ARTHUR E. SKLAR
Arthur E. Sklar
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE ("Assignment") is made
this 27th day of January, 1998 by and between SUN INTERNATIONAL
NORTH AMERICA, INC., 1133 Boardwalk, Atlantic City, New Jersey
08401 ("Assignor"), SHOWBOAT LAND LLC, 3720 Howard Hughes
Parkway, Suite 200, Las Vegas, Nevada 89109 ("Assignee") and
ATLANTIC CITY SHOWBOAT, INC. ("Lessee").
BACKGROUND
A. Assignor conveyed to Assignee that certain real
property located on The Boardwalk in the City of Atlantic City,
being designated as Lot 140 in Block 13 on the current Atlantic
City Tax Map and more particularly described on Exhibit A
attached hereto and made a part hereof (the "Property"), subject
to that certain Lease Agreement dated October 26, 1983, by and
between Resorts International, Inc., as landlord, and Atlantic
City Showboat, Inc., as lessee. Thereafter, the said lease was
amended by the parties thereto by the First Amendment to Lease
Agreement dated January 15, 1985, the Second Amendment to Lease
Agreement dated July 5, 1985, the Third Amendment to Lease
Agreement dated October 28, 1985, the Restated Third Amendment to
Lease Agreement dated August 28, 1986, the Fourth Amendment to
Lease Agreement dated December 16, 1986, the Fifth Amendment to
Lease Agreement dated March 2, 1987, the Sixth Amendment to Lease
Agreement dated March 13, 1987, the Seventh Amendment to Lease
Agreement dated October 18, 1988 and the Eighth Amendment to
Lease Agreement dated May 18, 1993 (collectively, the "Lease").
B. In connection with said conveyance, Assignor desires to
assign to Assignee all of Assignor's right, title and interest
in, to and under the lease, and Assignee desires to assume the
obligations of Assignor thereunder.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
Assignor and Assignee hereby agree as follows:
1. ASSIGNMENT OF LEASE. Assignor hereby grants, sells,
assigns, transfers and sets over to Assignee, all of Assignor's
right, title and interest in and to the Lease.
2. ASSIGNMENT OF RENTS AND SECURITY DEPOSIT. Assignor
hereby unconditionally grants, sells, assigns, transfers and sets
over to Assignee all rents, royalties, issues, revenues, income
and profits due and payable from and after the date hereof under
the terms of the Lease. Assignee acknowledges that no security
deposit exists under the Lease and agrees that no security is
assigned hereunder.
3. ASSUMPTION OF LEASES. In consideration of the
foregoing assignments, Assignee hereby accepts said assignment
and assumes and agrees to keep and perform, any and all of
Assignor's obligations under the Lease to be performed or paid on
and after the date hereof and agrees to be bound by the terms,
covenants and conditions of the Lease. Assignee agrees to
indemnify and hold Assignor harmless from and against any loss,
damage, liability, cost and expense suffered or incurred by
Assignor, including, without limitation, reasonable attorneys'
fees and expenses, by reason of the failure of Assignee
<PAGE>
to perform, keep or pay any of its obligations under the Lease or
any claims related to the Property arising or accruing after the
date hereof.
4. ASSIGNOR'S REPRESENTATIONS. Assignor represents and
warrants to Assignee that the Lease is assigned to Assignor, free
and clear of all liens, encumbrances and rights of others. and
any rights thereunder have not been assigned by Assignor. This
Assignment is otherwise made without representation or warranty
of any kind by Assignor.
5. RELEASE.
(a) ASSIGNEE'S RELEASE. Assignee hereby releases
Assignor, its directors, officers, agents, representatives,
control persons and affiliates (including, without limitation,
Sun International Hotels Limited) and the directors, officers,
agents and representatives of such control persons and affiliates
(each, a "Released Person") from all actions, causes of action,
suits, proceedings, debts, sums of money, liens, accounts,
reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses,
damages, judgments, extents, liabilities, obligations,
executions, claims and demands whatsoever, in law, admiralty or
equity or otherwise, which against any of the Released Persons,
Assignee, its directors, officers, agents, representatives,
members, control persons and affiliates of Assignee, and the
directors, officers, agents and representatives of such members,
control persons and affiliates, ever had, now have or hereafter
can, shall or may, have for, upon, or by reason of any matter,
cause or thing whatsoever pursuant to the Lease from the
beginning of the world to the end of time.
(b) ATLANTIC CITY SHOWBOAT, INC.'S RELEASE. Atlantic
City Showboat, Inc. hereby releases Assignor, its directors,
officers, agents, representatives, control persons and affiliates
(including, without limitation, Sun International Hotels Limited)
and the directors, officers, agents and representatives of such
control persons and affiliates (each, a "Released Person") from
all actions, causes of action, suits, proceedings, debts, sums of
money, liens, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, liabilities,
obligations, executions, claims and demands whatsoever, in law,
admiralty or equity or otherwise, which against any of the
Released Persons, Atlantic City Showboat, Inc., its directors,
officers, agents, representatives, members, control persons and
affiliates of Atlantic City Showboat, Inc., and the directors,
officers, agents and representatives of such members, control
persons and affiliates, ever had, now have or hereafter can,
shall or may, have for, upon, or by reason of any matter, cause
or thing whatsoever pursuant to the Lease from the beginning of
the world to the end of time.
(c) ASSIGNOR'S RELEASE. Assignor hereby releases
Assignee and Atlantic City Showboat, Inc., its directors,
officers, agents, representatives, control persons and affiliates
(including, without limitation, Showboat, Inc. and Atlantic City
Showboat, Inc.) and the directors, officers, agents and
representatives of such control persons and affiliates (each, a
"Released Person") from all actions, causes of action, suits,
proceedings, debts, sums of money, liens, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments,
extents, liabilities, obligations, executions, claims and demands
whatsoever, in law, admiralty or equity or otherwise, which
against any of the Released Persons, Assignor, its directors,
officers, agents, representatives, members, control persons and
affiliates of Assignor, and the directors, officers, agents and
representatives of such members, control persons and affiliates,
ever had, now have or hereafter can, shall or may, have for,
upon, or by reason of any matter, cause or thing whatsoever
pursuant to the Lease
<PAGE>
from the beginning of the world to the end of time; PROVIDED,
HOWEVER, this release shall not apply to any claims or causes of
action asserted against Assignor by persons or entities
unaffiliated with Assignor arising out of the use and/or
occupancy of the Property by the Lessee under the Lease.
Nothing contained in this Paragraph 5 is intended to release
or modify the obligations of Trump Taj Mahal Realty Corp. and
Trump Taj Mahal Associates Limited Partner (together, "Trump")
under that certain agreement as to Assumption of Obligations with
Respect to Property between Atlantic City Showboat, Inc. and
Trump dated September 21, 1988, as amended.
6. MISCELLANEOUS. This Assignment shall run with the land
and be binding upon the parties hereto and each of their
respective successors and assigns. This Assignment shall be
governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first written above.
WITNESS/ATTEST: ASSIGNOR:
SUN INTERNATIONAL NORTH AMERICA, INC.
/S/ By: /s/ John Allison
John Allison, Executive Vice
President-Finance & CFO
STATE OF FLORIDA :
: ss
COUNTY OF Broward :
BE IT REMEMBERED, that on this 27th day of January, 1998,
before me, the subscriber, a Notary Public of Florida (State),
personally appeared John Allison, Executive Vice-President-Finance
& CFO of Sun International North America, Inc., who, I am satisfied,
is the person who signed, sealed and delivered the same as such
officer aforesaid, and that the within instrument is the
voluntary act and deed of such corporation.
/S/ LINDA WEISKOPF
WITNESS/ATTEST: ASSIGNEE:
SHOWBOAT LAND LLC
By: Showboat Operating Company,
a member
/s/ Catherine Hudson By: /s/ R. Craig Bird
R. Craig Bird
Executive Vice-President
Chief Financial Officer
STATE OF NEW JERSEY :
: ss
COUNTY OF ATLANTIC :
BE IT REMEMBERED, that on this 27th day of January, 1998,
before me, the subscriber, a Notary Public of New Jersey
(State), personally appeared R. Craig Bird, Executive Vice
President and Chief Financial Officer of Showboat Operating
Company, a member of Showboat Land LLC, who, I am satisfied, is
the person who signed, sealed and delivered the same as such
officer aforesaid, and that the within instrument is the
voluntary act and deed of such limited liability company.
/s/ Kimberly A. Park
KIMBERLY A. PARK
A Notary Public of New Jersey
My Commission Expires March 16, 1998
4
<PAGE>
LESSEE:
ATLANTIC CITY SHOWBOAT, INC.
By: /s/ Herbert R. Wolfe
Herbert R. Wolfe, President
and CEO
STATE OF NEW JERSEY :
: ss
COUNTY OF ATLANTIC :
BE IT REMEMBERED, that on this 27 day of January, 1998,
before me, the subscriber, a Notary Public of New Jersey
(State), personally appeared Herbert R. Wolfe, President and CEO
of Atlantic City Showboat, Inc., who, I am satisfied, is the
person who signed, sealed and delivered the same as such officer
aforesaid, and that the within instrument is the voluntary act
and deed of such limited liability company.
/s/ Denise L. Perrone
DENISE L. PERRONE
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires Sept. 19, 1999
5
<PAGE>
EXHIBIT 4 2(C)
AFFIDAVIT OF TITLE
24
<PAGE>
AFFIDAVIT OF TITLE
STATE OF FLORIDA :
: ss
COUNTY OF BROWARD :
The undersigned says under oath:
1. AUTHORIZATION. I am the Executive Vice
President-Finance & Chief Financial Officer of Sun International
North America, Inc., a corporation of the State of Delaware (the
"Corporation") and am delivering the affidavit on behalf of the
Corporation. I am fully familiar with the business of the
corporation. I am at least 18 years old.
2. REPRESENTATIONS. The statements contained in this
affidavit are true to the best of my knowledge, information and
belief.
3. CORPORATE AUTHORITY. The corporation is the only
owner of property known as Block 13, Lot 140 on the Tax map of
the City of Atlantic City, and more particularly described in
Stewart Title Guaranty Company Title Commitment No. 91118875
(the "Title Commitment"), hereinafter called "this property."
This action, and the making of this affidavit of title,
have been duly authorized by a proper resolution of the Board of
Directors of the Corporation. The Corporation is legally
authorized to transact business in New Jersey. It has paid all
state franchise taxes presently due. Its charter, franchise and
corporate powers have never been suspended or revoked. It is
not restrained from doing business nor has any legal action been
taken for that purpose.
4. APPROVAL BY SHAREHOLDERS. ( check one only)
[X] Shareholder approval is not required.
[ ] This is sale of all or substantially all of the
assets of the Corporation. The sale is not made
in the regular course of the business of the
Corporation. A copy of the authorization and
approval of the shareholders is attached.
5. OWNERSHIP AND POSSESSION. The Corporation has owned
this property since the dates recited in the Title Commitment.
Since then no one has questioned its right of ownership. The
property is in possession of Atlantic City Showboat, Inc. in
accordance with the lease agreement recited in the Title
Commitment.
<PAGE>
6. LIENS OR ENCUMBRANCES. It has not allowed any
interests (legal rights) to be created which affects its
ownership or use of this property except for those recited in
the Title Commitment. The Corporation does not have any pending
lawsuits or judgments against it or other legal obligations
which may be enforced against this property. It does not owe
any disability, unemployment, corporate franchise, social
security, municipal or alcoholic beverage tax payments. No one
has any security interest in any personal property or fixtures
on this property except those recited in the Title Commitment.
7. EXCEPTIONS AND ADDITIONS. The following is a complete
list of exceptions and additions to the above statements.
a. Matters contained in the Title Commitment.
b. Rights, restrictions, conditions, agreements and
easements that appear of record.
c. Lawsuits arising in the course of operating the
business of the Corporation.
8. RELIANCE. The Corporation makes this affidavit in
order to induce Stewart Title Guaranty Company, Commonwealth
Land Title Insurance Company and Lawyers Title Insurance
Corporation (the "Title Companies") to issue a title policy to
Buyer. The Corporation is aware that the Title Companies will
rely on the statements made in this affidavit and on its
truthfulness.
/s/ John Allison
John Allison, Executive Vice
President-Finance & Chief
Financial Officer
Signed and sworn to before
me on January 26, 1998
/s/ Linda Weiskoff LINDA WEISKOFF
Notary Public NOTARY PUBLIC-STATE OF FLORIDA
MY COMMISSION EXPIRES 6/20/98
COMMISSION NUMBER CC385040
<PAGE>
EXHIBIT 4.2(H)
ESTOPPEL CERTIFICATE OF LANDLORD (SELLER)
25
<PAGE>
EXHIBIT 4.2(H)
LANDLORD ESTOPPEL CERTIFICATE
This LANDLORD ESTOPPEL CERTIFICATE (this "Certificate") is
made as of this 27TH day of JANUARY, 1998 by SUN INTERNATIONAL
NORTH AMERICA, INC., a Delaware corporation having an address at
1133 Boardwalk, Atlantic City, New Jersey 08401 ("Landlord"), to
ATLANTIC CITY SHOWBOAT, INC., a New Jersey corporation having an
address at 801 Boardwalk, Atlantic City, New Jersey 08401
("Tenant") and SHOWBOAT LAND LLC. ("Purchaser").
W I T N E S S E T H
WHEREAS, Landlord (formerly known as Resorts International
Inc.) and Tenant entered into that certain Lease Agreement dated
October 26, 1983, as amended by the First Amendment to Lease
Agreement dated January 15, 1985, the Second Amendment to Lease
Agreement dated July 5, 1985, the Third Amendment to Lease
Agreement dated October 28, 1985, the Restated Third Amendment to
Lease Agreement dated August 28, 1986, the Fourth Amendment to
Lease Agreement dated December 16, 1986, the Fifth Amendment to
Lease Agreement dated March 2, 1987, the Sixth Amendment to Lease
Agreement dated March 13, 1987, the Seventh Amendment to Lease
Agreement dated October 18, 1988, and the Eighth Amendment to
Lease Agreement dated May 18, 1993, for real property designated
as Lot 140 in Block 13, Atlantic City, New Jersey (the
"Property"), (the Lease Agreement and all amendments thereto,
collectively, the "Lease");
WHEREAS, Landlord has offered to sell the Property to Tenant
in accordance with the Lease; and
WHEREAS, Tenant has accepted Landlord's offer; and
WHEREAS, Tenant has requested that Landlord sell the
Property to Purchaser, in lieu of selling the Property to Tenant
and, in connection therewith, that Landlord assign its rights
under the Lease to Purchaser, provided Purchaser assumes the
obligations under the Lease pursuant to the terms and conditions
of the Assignment and Assumption of Lease Agreement; and
WHEREAS, Landlord, as an accommodation to Tenant, has agreed
to sell the Property to Purchaser pursuant to the terms and
conditions of the Agreement of Purchase and Sale; and
WHEREAS, the Purchase Agreement (hereinafter defined), as a
condition of such sale, requires, among other things, this
Certificate be delivered by Landlord.
NOW, THEREFORE, in consideration of the premises, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Landlord certifies to Purchaser
and Tenant as follows:
a. The Lease is in full force and effect and has not been
modified, supplemented or amended in any way except to
the extent set forth in the first recital hereof.
<PAGE>
b. The Lease represents the only lease, agreement or
understanding between the Landlord and Tenant affecting
the Property or the use thereof, except for that
certain Agreement as to Assumption of Obligations With
Respect to Properties between Tenant and Trump Taj
Mahal Realty Corp. and Trump Taj Mahal Associates
Limited Partnership dated September 21, 1988, as
amended (the "Assumption Agreement").
c. All monetary obligations of Tenant to Landlord have
been fully satisfied. To the knowledge of the
undersigned, all other conditions under the Lease to be
performed by Tenant have been fully satisfied, and as
of the date hereof, there are no existing defenses or
offsets which Landlord has against the enforcement of
the Lease by Tenant.
d. To the knowledge of the undersigned, (i) Tenant is not
in default under the Lease, and (ii) no event has
occurred, nor does any condition exist, which with
notice or the passage of time would constitute such a
default. Landlord is not in default under the Lease
and no event has occurred which, after lapse of time
and/or notice thereof to any person, would constitute a
default thereunder.
e. Landlord has no claim, action or lien against Tenant
for any maintenance costs or payments with respect to
the Common Areas.
f. There are no allowances presently due or to become due,
from Tenant to Landlord, on account of its improvements
or otherwise.
g. No Rent (as defined in the Lease) has been prepaid by
more than 30 days beyond the date hereof with respect
to the Lease.
h. Landlord has not assigned, hypothecated or pledged its
interest in the Lease or Rent payable under the Lease,
other than the pledge thereof by Landlord to The Bank
of New York, as Trustee, which pledge will be released
concurrently with the sale of the Property.
i. Landlord has not received any written notice of any
pending or threatened condemnation action with respect
to all or any portion of the Property, and to the best
of Landlord's knowledge, there are no existing
condemnation or other legal proceedings affecting the
Property by any governmental authority having
jurisdiction over or affecting all or any part of the
Property.
j. No permission, consent or approval by any third party
or, to the best of Landlord's knowledge, any
governmental authority is required to be obtained by in
order for Seller to consummate the transactions
contemplated hereby, except the consent or approval of
the New Jersey Casino Control Commission which may be
required to be obtained by Tenant and/or Purchaser.
k. Landlord has not received written notice that the
Property is in violation of any Environmental Laws (as
defined in the Purchase Agreement). Landlord has not
received written notice of a threatened or pending
Regulatory Action (as defined in the Purchase
Agreement) and has not received any notification that
it is or may be potentially responsible or liable for
clean-up, testing or other remedial activities at any
site including, without limitation, the Property.
2
<PAGE>
l. To the best of Landlord's knowledge, there are no
actions, suits or proceedings pending or threatened
affecting the Property or any portion thereof.
m. Landlord hereby acknowledges that Tenant and Purchaser
may rely on the matters herein set forth, and
hereafter, Landlord may be estopped from denying the
veracity or accuracy of the matters herein set forth.
IN WITNESS WHEREOF, the undersigned has executed this
Agreement as of the date first set forth above.
SUN INTERNATIONAL NORTH AMERICA,
INC.
By: /S/ JOHN ALLISON
John Allison
Executive Vice-President-Finance &
Chief Financial Officer
STATE OF FLORIDA :
: SS
COUNTY OF BROWARD :
BE IT REMEMBERED, that on this 27th day of January , 1998,
before me, the subscriber, a Notary Public of Florida (State),
personally appeared John Allison, Executive Vice-President-Finance
& Chief Financial Officer of Sun International North America, Inc.,
who, I am satisfied, is the person who signed, sealed and
delivered the same as such officer aforesaid, and that the
within instrument is the voluntary act and deed of such corporation.
/S/ LINDA WEISKOPF
<PAGE>
EXHIBIT 4.3(C)
TENANT ESTOPPEL CERTIFICATE
This TENANT ESTOPPEL CERTIFICATE (this "Certificate") is
made as of this 27TH day of JANUARY , 1998 by ATLANTIC CITY
SHOWBOAT, INC., a New Jersey corporation having an address at 801
Boardwalk, Atlantic City, New Jersey 08401 ("Tenant") to SUN
INTERNATIONAL NORTH AMERICA, INC., a Delaware corporation having
an address at 1133 Boardwalk, Atlantic City, New Jersey 08401
("Landlord").
W I T N E S S E T H
WHEREAS, Landlord (formerly known as Resorts International
Inc.) and Tenant entered into that certain Lease Agreement dated
October 26, 1983, as amended by the First Amendment to Lease
Agreement dated January 15, 1985, the Second Amendment to Lease
Agreement dated July 5, 1985, the Third Amendment to Lease
Agreement dated October 28, 1985, the Restated Third Amendment to
Lease Agreement dated August 28, 1986, the Fourth Amendment to
Lease Agreement dated December 16, 1986, the Fifth Amendment to
Lease Agreement dated March 2, 1987, the Sixth Amendment to Lease
Agreement dated March 13, 1987, the Seventh Amendment to Lease
Agreement dated October 18, 1988, and the Eighth Amendment to
Lease Agreement dated May 18, 1993, for real property designated
as Lot 140 in Block 13, Atlantic City, New Jersey (the
"Property"), (the Lease Agreement and all amendments thereto,
collectively, the "Lease");
WHEREAS, Landlord has offered to sell the Property to Tenant
in accordance with the Lease; and
WHEREAS, Tenant has accepted Landlord's offer; and
WHEREAS, Tenant has requested that Landlord sell the
Property to Purchaser, in lieu of selling the Property to Tenant
and, in connection therewith, that Landlord assign its rights
under the Lease to Purchaser, provided Purchaser assumes the
obligations under the Lease pursuant to the terms and conditions
of the Assignment and Assumption of Lease Agreement; and
WHEREAS, Landlord, as an accommodation to Tenant, has agreed
to sell the Property to Purchaser pursuant to the terms and
conditions of the Agreement of Purchase and Sale; and
WHEREAS, Landlord, as a condition of such sale, requires,
among other things, this certificate be delivered by Tenant.
NOW, THEREFORE, in consideration of the premises, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Tenant certifies to Purchaser
and Landlord as follows:
<PAGE>
a. The Lease is in full force and effect and has not been
modified, supplemented or amended in any way except to
the extent set forth in the first recital hereof.
b. The Lease represents the only lease, agreement or
understanding between the Landlord and Tenant affecting
the Property or the use thereof, except for that
certain Agreement as to Assumption of Obligations With
Respect to Properties between Tenant and Trump Taj
Mahal Realty Corp. and Trump Taj Mahal Associates
Limited Partnership dated September 21, 1988, as
amended (the "Assumption Agreement").
c. All conditions under the Lease to be performed by
Landlord have been fully satisfied, and as of the date
hereof, there are no existing defenses or offsets which
Tenant has against the enforcement of the Lease by
Landlord.
d. To the knowledge of the undersigned, (i) Landlord is
not in default under the Lease, and (ii) no event has
occurred, nor does any condition exist, which with
notice or the passage of time would constitute such a
default. Tenant is not default under the Lease and no
event has occurred which, after lapse of time and/or
notice thereof to any person, would constitute a
default thereunder.
e. Landlord has paid its share of all maintenance costs
and payments to the Common Areas, as defined in the
Lease, and Tenant has no claim, action or lien against
Landlord for any such maintenance costs or payments.
f. There are no allowances presently due or to become due,
from Landlord to Tenant, on account of its improvements
or otherwise.
g. No Rent (as defined in the Lease) has been prepaid by
more than 30 days beyond the date hereof with respect
to the Lease.
h. Tenant has no knowledge of any assignment,
hypothecation or pledge of the Lease or Rent payable
under the Lease, other than the pledge thereof by
Landlord to The Bank of New York, as Trustee, which
pledge will be released concurrently with the sale of
the Property and other than the pledge thereof by
Tenant to Fleet Bank, N.A. and IBJ Schroder Bank and
Trust Company, as trustee.
i. No portion of the Property has been sublet and Tenant
is the only occupant of the Property, except retail
store subleases between Tenant and third persons.
j. Tenant has not received any written notice of any
pending or threatened condemnation action with respect
to all or any portion of the Property, and to the best
of Tenant's knowledge, there are no existing
condemnation or other legal proceedings affecting the
Property by any governmental authority having
jurisdiction over or affecting all or any part of the
Property.
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k. No permission, consent or approval by any third party
or, to the best of Tenant's knowledge, any governmental
authority is required to be obtained by Tenant in order
for Seller to consummate the transactions contemplated
hereby, except the consent or approval of the New
Jersey Casino Control Commission which may be required
to be obtained by Tenant and/or Purchaser.
l. There are no actions, suits or proceedings pending or,
to the best of Tenant's knowledge, threatened affecting
the Property or any portion thereof.
m. Tenant has not received written notice that the
Property is in violation of any Environmental Laws (as
defined in the Purchase Agreement). Tenant has no
knowledge of the release of Hazardous Substance (as
defined in the Purchase Agreement) on or from the
Property or to the Property from any adjacent property,
or any potential or known liability which has resulted
in or may result in a lien on the Property or which is
or may result in a violation of any Environmental Laws.
Tenant has not received written notice of a threatened
or pending Regulatory Action (as defined in the
Purchase Agreement) and has not received any
notification that it is or may be potentially
responsible or liable for clean-up, testing or other
remedial activities at any site including, without
limitation, the Property.
n. Tenant hereby acknowledges that Landlord and Purchaser
may rely on the matters herein set forth, and
hereafter, Tenant may be estopped from denying the
veracity or accuracy of the matters herein set forth.
IN WITNESS WHEREOF, the undersigned has executed this
Agreement as of the date first set forth above.
ATLANTIC CITY SHOWBOAT, INC.
By: /S/ HERBERT R. WOLFE
Herbert R. Wolfe
President
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STATE OF NEW JERSEY :
: SS
COUNTY OF ATLANTIC :
BE IT REMEMBERED, that on this 27TH day of January, 1998,
before me, the subscriber, a Notary Public of New Jersey (State),
personally appeared Herbert R. Wolfe, President of Atlantic City
Showboat, Inc., who, I am satisfied, is the person who signed,
sealed and delivered the same as such officer aforesaid, and that
the within instrument is the voluntary act and deed of such
corporation.
/S/ DENISE L. PERRONE
<PAGE>
EXHIBIT 10.37
<PAGE>
WHEN RECORDED, RETURN TO:
Attention: Mark M. Leskiw, L.A.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (this "Mortgage")
is made as of the 29th day of January, 1998, between SHOWBOAT
LAND, LLC, a Nevada limited liability company ("Mortgagor") whose
address is 3720 Howard Hughes Parkway, Suite 200, Las Vegas,
Nevada 89109, and COLUMN FINANCIAL, INC., a Delaware corporation
("Mortgagee"), whose address is 3414 Peachtree Road, N.E., Suite
1140, Atlanta, Georgia 30326.
W I T N E S S E T H:
THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND
NO/100 DOLLARS ($10.00), AND OTHER VALUABLE CONSIDERATION, THE
RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED,
MORTGAGOR HEREBY IRREVOCABLY MORTGAGES, GRANTS, BARGAINS, SELLS,
CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND ASSIGNS, AND GRANTS A
SECURITY INTEREST, TO MORTGAGEE, ITS SUCCESSORS AND ASSIGNS, with
power of sale, in all of Mortgagor's estate, right, title and
interest in, to and under any and all of the following described
property, whether now owned or hereafter acquired (collectively,
the "Property"):
(A) All that certain real property situated in the County
of Atlantic, State of New Jersey, more particularly described on
Exhibit A attached hereto and incorporated herein by this
reference (the "Real Estate"), together with all of the
easements, rights, privileges, franchises, tenements,
hereditaments and appurtenances now or hereafter thereunto
belonging or in any way appertaining and all of the estate,
right, title, interest, claim and demand whatsoever of Mortgagor
therein or thereto, either at law or in equity, in possession or
in expectancy, now or hereafter acquired;
(B) All structures, buildings and improvements of every
kind and description now or at any time hereafter located or
placed on the Real Estate (the "Improvements");
(C) All furniture, furnishings, fixtures, goods, equipment,
inventory or personal property owned by Mortgagor and now or
hereafter located on, attached to or used in and about thc
Improvements, including, but not limited to, all machines,
engines, boilers, dynamos, elevators, stokers, tanks, cabinets,
awnings, screens, shades, blinds, carpets, draperies, lawn
mowers, and all appliances, plumbing, heating, air conditioning,
lighting, ventilating, refrigerating, disposals and incinerating
equipment, and all fixtures and appurtenances thereto, and such
other goods and chattels and personal property owned by Mortgagor
as are now or hereafter used or furnished in operating the
Improvements, or the activities conducted therein, and all
building materials and equipment hereafter situated on or about
the Real Estate or Improvements, and all
<PAGE>
warranties and guaranties relating thereto, and all additions
thereto and substitutions and replacements therefor (exclusive of
any of the foregoing owned or leased by tenants of space in the
Improvements);
(D) All easements, rights-of-way, strips and gores of land,
vaults, streets, ways, alleys, passages, sewer rights, and other
emblements now or hereafter located on the Real Estate or under
or above the same or any part or parcel thereof, and all estates,
rights, titles, interests, tenements, hereditaments and
appurtenances, reversions and remainders whatsoever, in any way
belonging, relating or appertaining to the Property or any part
thereof, or which hereafter shall in any way belong, relate or be
appurtenant thereto, whether now owned or hereafter acquired by
Mortgagor;
(E) All water, ditches, wells, reservoirs and drains and
all water, ditch, well, reservoir and drainage rights which are
appurtenant to, located on, under or above or used in connection
with the Real Estate or the Improvements, or any part thereof,
whether now existing or hereafter created or acquired;
(F) All minerals, crops, timber, trees, shrubs, flowers and
landscaping features now or hereafter located on, under or above
the Real Estate, and all riparian, littoral, mineral, oil, and
gas rights now or hereafter acquired and relating to all or any
part of the Real Estate;
(G) All cash funds, deposit accounts and other rights and
evidence of rights to cash, now or hereafter created or held by
Mortgagee pursuant to this Mortgage or any other of the Loan
Documents (as hereinafter defined) including, without limitation,
all funds now or hereafter on deposit in the Impound Account (as
hereafter defined);
(H) All leases, licenses, concessions and occupancy
agreements of the Real Estate or the Improvements now or
hereafter entered into and all rents, royalties, issues, profits,
revenue, income and other benefits (collectively, the "Rents and
Profits") of the Real Estate or the Improvements, now or
hereafter arising from the use or enjoyment of all or any portion
thereof or from any lease, license, concession, occupancy
agreement or other agreement pertaining thereto or arising from
any of the Contracts (as hereinafter defined) or any of the
General Intangibles (as hereinafter defined) and all cash or
securities deposited to secure performance by the tenants.
lessees or licensees, as applicable, of their obligations under
any such leases, licenses, concessions or occupancy agreements,
whether said cash or securities are to be held until the
expiration of the terms of said leases, licenses, concessions or
occupancy agreements or applied to one or more of the
installments of rent coming due prior to the expiration of said
terms, subject to, however, the provisions contained in Section
1.11 hereinbelow;
(I) All contracts and agreements now or hereafter entered
into covering any part of the Real Estate or the Improvements
(collectively, the "Contracts") and all revenue, income and other
benefits thereof, including, without limitation, management
agreements, service contracts, maintenance contracts, equipment
leases, personal property, leases and any contracts or documents
relating to construction on any part of the Real Estate or the
Improvements (including plans, drawings, surveys, tests, reports,
bonds and governmental approvals) or to the management or
operation of any part of the Real Estate or the Improvements;
(J) All present and future monetary deposits given to any
public or private utility with respect to utility services
furnished to any part of the Real Estate or the Improvements;
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(K) All present and future funds, accounts, instruments,
accounts receivable, documents, causes of action, claims, general
intangibles (including without limitation, trademarks, trade
names, servicemarks and symbols now or hereafter used in
connection with any part of the Real Estate or the Improvements,
all names by which the Real Estate or the Improvements may be
operated or known, all rights to carry on business under such
names, and all rights, interest and privileges which Mortgagor
has or may have as developer or declarant under any covenants,
restrictions or declarations now or hereafter relating to the
Real Estate or the Improvements) and all notes or chattel paper
now or hereafter arising from or by virtue of any transactions
related to the Real Estate or the Improvements (collectively, the
"General Intangibles");
(L) All water taps, sewer taps, certificates of occupancy,
permits, licenses, franchises, certificates, consents, approvals
and other rights and privileges now or hereafter obtained in
connection with the Real Estate or the Improvements and all
present and future warranties and guaranties relating to the
Improvements or to any equipment, fixtures, furniture,
furnishings, personal property or components of any of the
foregoing now or hereafter located or installed on the Real
Estate or the Improvements;
(M) All building materials, supplies and equipment now or
hereafter placed on the Real Estate or in the Improvements by or
on behalf of Mortgagor and all architectural renderings, models,
drawings, plans, specifications, studies and data now or
hereafter relating to the Real Estate or the Improvements and
owned by Mortgagor;
(N) All right, title and interest of Mortgagor in any
insurance policies or binders now or hereafter relating to the
Property including any unearned premiums thereon;
(O) All proceeds, products, substitutions and accessions
(including claims and demands therefor) of the conversion,
voluntary or involuntary, of any of the foregoing into cash or
liquidated claims, including, without limitation, proceeds of
insurance and condemnation awards paid or payable to Mortgagor;
and
(P) All other or greater rights and interests of every
nature in the Real Estate or the Improvements and in the
possession or use thereof and income therefrom, whether now owned
or hereafter acquired by Mortgagor.
FOR THE PURPOSE OF SECURING:
(1) The debt evidenced by that certain Promissory Note
(such Note, together with any and all renewals, modifications,
consolidations and extensions thereof, is hereinafter referred to
as the "Note") of even date with this Mortgage, made by Mortgagor
to the order of Mortgagee in the principal face amount of ONE
HUNDRED MILLION AND NO/100 ($100,000,000.00), together with
interest as therein provided;
(2) The full and prompt payment and performance of all of
the provisions, agreements, covenants and obligations herein
contained and contained in any other agreements, documents or
instruments now or hereafter evidencing, securing or otherwise
relating to the indebtedness evidenced by the Note (the Note,
this Mortgage, and such other agreements, documents and
instruments, together with any and all renewals, amendments,
extensions and modifications thereof, are hereinafter
collectively referred to as the "Loan Documents") and the payment
of all other sums therein covenanted to be paid; and
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(3) Any and all additional advances made by Mortgagee to
protect or preserve the Property or the lien or security interest
created hereby on the Property, or for taxes, assessments or
insurance premiums as hereinafter provided or for performance of
any of Mortgagor's obligations hereunder or under the other Loan
Documents or for any other purpose provided herein or in the
other Loan Documents (whether or not the original Mortgagor
remains the owner of the Property at the time of such advances);
and
(4) Any and all other indebtedness now owing or which may
hereafter be owing by Mortgagor to Mortgagee, however and
whenever incurred or evidenced, whether express or implied,
direct or indirect, absolute or contingent, or due or to become
due, and all renewals, modifications, consolidations,
replacements and extensions thereof.
(All of the sums referred to in Paragraphs (1) through (4) above
are herein sometimes referred to as the "secured indebtedness" or
the "indebtedness secured hereby").
TO HAVE AND TO HOLD the Property unto Mortgagee, its
successors and assigns forever, for the purposes and uses herein
set forth.
PROVIDED, HOWEVER, that if the principal and interest
and all other sums due or to become due under the Note,
including, without limitation, any prepayment fees required
pursuant to the terms of the Note, shall have been paid at the
time and in the manner stipulated therein and all other sums
payable hereunder and all other indebtedness secured hereby shall
have been paid and all other covenants contained in the Loan
Documents shall have been performed, then, in such case, this
Mortgage shall be satisfied and the estate, right, title and
interest of Mortgagee in the Property shall cease, and upon
payment to Mortgagee of all costs and expenses incurred for the
preparation of the release hereinafter referenced and all
recording costs if allowed by law, Mortgagee shall release this
Mortgage and the lien hereof by proper instrument.
AND, PROVIDED, FURTHER, that this Mortgage and the
security interests created hereby shall be subject and
subordinate to the Ground Lease (as hereinafter defined) and the
rights of the ground lessee thereunder.
ARTICLE 1.
COVENANTS OF MORTGAGOR
For the purpose of further securing the indebtedness
secured hereby and for the protection of the security of this
Mortgage, for so long as the indebtedness secured hereby or any
part thereof remains unpaid, Mortgagor covenants and agrees as
follows:
1.1. Warranties of Mortgagor. Mortgagor, for itself and its
successors and assigns, does hereby represent, warrant and
covenant to and with Mortgagee, its successors and assigns, that:
(a) Mortgagor has good and marketable fee simple
title to the Property, subject only to those matters expressly
set forth on Exhibit B attached hereto and by this reference
incorporated herein (the "Permitted Exceptions"), and has full
power and lawful authority to grant, bargain, sell, convey,
assign, transfer and mortgage its interest in the Property in the
manner and form hereby done or intended.
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<PAGE>
Mortgagor will preserve its interest in and title to the Property
and will forever warrant and defend, or cause to be warranted and
defended, the same to Mortgagee against any and all claims
whatsoever and will forever warrant and defend, or cause to be
warranted and defended, the validity and priority of the lien and
security interest created herein against the claims of all
persons and parties whomsoever, subject to the Permitted
Exceptions. The foregoing warranty of title shall survive the
foreclosure of this Mortgage and shall inure to the benefit of
and be enforceable by Mortgagee in the event Mortgagee acquires
title to the Property pursuant to any foreclosure;
(b) No bankruptcy or insolvency proceedings are
pending or contemplated by Mortgagor or, to the best knowledge of
Mortgagor, against Mortgagor or by or against any direct or
indirect principal of Mortgagor or by or against any endorser,
cosigner or guarantor of the Note;
(c) All reports, certificates, affidavits, statements
and other data furnished by Mortgagor to Mortgagee in connection
with the loan evidenced by the Note are true and correct in all
material respects and do not omit to state any fact or
circumstance necessary to make the statements contained therein
not misleading;
(d) The execution, delivery and performance of this
Mortgage, the Note and all of the other Loan Documents have been
duly authorized by all necessary action to be, and are, binding
and enforceable against Mortgagor and/or Mortgagor's affiliate
that is a party thereto in accordance with the respective terms
thereof (subject, as to the enforcement of remedies, to the
effect of applicable bankruptcy, reorganization, insolvency and
similar laws and to the effect of general principles of equity)
and do not contravene, result in a breach of or constitute (upon
the giving of notice or the passage of time or both) a default
under the operating agreement, articles of incorporation or other
organizational documents of Mortgagor or such affiliate or any
contract or agreement of any nature to which Mortgagor or such
affiliate is a party or by which Mortgagor or such affiliate or
any of its respective property may be bound and do not violate or
contravene any law, order, decree, rule or regulation to which
Mortgagor or such affiliate is subject;
(e) Neither Mortgagor nor any of its affiliates is
required to obtain any consent, approval or authorization from or
to file any declaration or statement with, any Governmental
Authority or agency in connection with or as a condition to the
execution, delivery or performance of this Mortgage, the Note or
the other Loan Documents which has not been so obtained or filed;
(f) Mortgagor and its affiliates have obtained or
made all necessary (i) consents, approvals and authorizations and
registrations and filings of or with all Governmental Authorities
and (ii) consents, approvals, waivers and notifications of
partners, stockholders, creditors, lessors and other non-
governmental persons and/or entities, in each case, which are
required to be obtained or made by Mortgagor and/or such
affiliates in connection with the execution and delivery of, and
the performance by Mortgagor and such affiliates of their
respective obligations, if any, under, the Loan Documents;
(g) Mortgagor and the managing member of Mortgagor,
have filed all federal, state and local tax returns required to
be filed and has paid or made adequate provision for the payment
of all federal, state and local taxes, charges and assessments
payable by Mortgagor and its managing member.
5
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Mortgagor and its managing member believe that their respective
tax returns properly reflect the income and taxes of Mortgagor
and said managing member, if any, for the periods covered
thereby, subject only to reasonable adjustments required by the
Internal Revenue Service or other applicable tax authority upon
audit;
(h) Mortgagor is not an "employee benefit plan", as
defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), which is subject to
Title I of ERISA and the assets of Mortgagor do not constitute
"plan assets" of one or more such plans within the meaning of 29
C.F.R. Section 2510.3-101;
(i) to the best knowledge of Mortgagor, the Real
Estate and the Improvements and the intended use thereof by
Mortgagor comply with all applicable restrictive covenants,
zoning ordinances, subdivision and building codes, flood disaster
laws, applicable health and environmental laws and regulations
and all other ordinances, orders or requirements issued by any
state, federal or municipal authorities having or claiming
jurisdiction over the Property. The Real Estate and Improvements
constitute a separate tax parcel for purposes of ad valorem
taxation. The Real Estate and Improvements do not require any
rights over, or restrictions against, other property in order to
comply with any of the aforesaid governmental ordinances, orders
or requirements.
(j) to the best knowledge of Mortgagor, all utility
services necessary and sufficient for the full use, occupancy,
operation and disposition of the Real Estate and the Improvements
for their intended purposes are available to the Property,
including water, storm sewer, sanitary sewer, gas, electric,
cable and telephone facilities, through public rights-of-way or
perpetual private easements approved by Mortgagee;
(k) to the best knowledge of Mortgagor, all streets,
roads, highways, bridges and waterways necessary for access to
and full use, occupancy, operation and disposition of the Real
Estate and the Improvements have been completed, have been
dedicated to and accepted by the appropriate municipal authority
and are open and available to the Real Estate and the
Improvements without funkier condition or cost to Mortgagor;
(l) to the best knowledge of Mortgagor, all curb
cuts, driveways and traffic signals shown on the survey delivered
to Mortgagee prior to the execution and delivery of this Mortgage
are existing and have been fully approved by the appropriate
governmental authority;
(m) There are no judicial, administrative, mediation
or arbitration actions, suits or proceedings pending or
threatened against or affecting Mortgagor or any of Mortgagor's
members or affiliates or the Property which, if adversely
determined, would materially impair either the Property or
Mortgagor's or such member's or affiliate's ability to perform
the covenants or obligations required to be performed by
Mortgagor or such affiliates under the Loan Documents;
(n) to the best knowledge of Mortgagor, the Property
is free from delinquent water charges, sewer rents, taxes and
assessments;
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(o) to the best knowledge of Mortgagor, as of the
date of this Mortgage, the Property is free from unrepaired
damage caused by fire, flood, accident or other casualty;
(p) As of the date of this Mortgage, no part of the
Real Estate or the Improvements has been taken in condemnation,
eminent domain or like proceeding nor is any such proceeding
pending or to Mortgagor's knowledge and belief, threatened or
contemplated;
(q) Mortgagor possesses all franchises, patents,
copyrights, trademarks, tradenames, licenses and permits adequate
for the conduct of its business substantially as now conducted at
the Property;
(r) to the best knowledge of Mortgagor, the
Improvements are structurally sound, in good repair and free of
defects in materials and workmanship and have been constructed
and installed in substantial compliance with the plans and
specifications relating thereto. All major building systems
located within the Improvements, including without limitation the
heating and air-conditioning systems and the electrical and
plumbing systems, are in good working order and condition;
(s) Mortgagor has delivered to Mortgagee true,
correct and complete copies of all Contracts and all amendments
thereto or modifications thereof;
(t) Mortgagor and the Property are free from any past
due obligations for sales and payroll taxes;
(u) There are no security agreements or financing
statements affecting any of the Property other than (i) as
disclosed in writing by Mortgagor to Mortgagee prior to the date
hereof and (ii) the security agreements and financing statements
created in favor of Mortgagee;
(v) Mortgagor has delivered a true, correct and
complete schedule (the "Rent Roll") of all leases to which
Mortgagor is a party affecting the Property, (collectively,
"Leases") as of the date hereof, which accurately and completely
sets forth in all material respects for each such Lease, the
following: the name of the tenant, the lease expiration date,
extension and renewal provisions, the base rent payable, and the
security deposit held thereunder;
(w) No Lease or Contract or easement, right-of-way,
permit or declaration (collectively all such instruments are
referred to hereinafter as "Property Agreements") provides any
party with the right to obtain a lien or encumbrance upon the
Property superior to the lien of this Mortgage, except that the
Mortgage is subject and subordinate to the Ground Lease;
(x) Except as previously disclosed to Mortgagee in
writing, there are no brokerage fees or commissions payable by
Mortgagor with respect to the leasing of space at the Property
and there are no management fees payable by Mortgagor with
respect to the management of the Property;
(y) All Security Deposits, if any, are held in a
segregated account and Mortgagor is in compliance with all legal
requirements relating to such Security Deposits;
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(z) There are no outstanding options or rights of
first refusal to purchase all or any portion of the Property or
Mortgagor's ownership thereof except as set forth in the Ground
Lease. No condition exists whereby Mortgagor or any future owner
of the Property may be required to purchase any other parcel of
land which is subject to any Property Agreement or which gives
any person or entity a right to purchase, or right of first
refusal with respect to, the Property;
(aa) The Property is free and clear of any mechanics'
liens or liens in the nature thereof, and no rights are
outstanding that under law would give rise to any such liens, any
of which liens are or may be prior to, or equal with, the lien of
this Mortgage, except those which are insured against by the
title insurance policy insuring the lien of this Mortgagee;
(bb) To the extent required by Mortgagee, Mortgagor
has delivered to Mortgagee true, correct and complete copies of
all Property Agreements;
(cc) No default exists, or with the passing of time or
the giving of notice or both would exist, under any Property
Agreement which would, in the aggregate, have a material adverse
effect on the ability of Mortgagor to perform any obligations
under any Loan Document (collectively, a "Material Adverse
Effect");
(dd) To the best knowledge of Mortgagor, no offset or
any right of offset exists respecting continued contributions to
be made by any party to any Property Agreement except as
expressly set forth therein. Except as previously disclosed to
Mortgagee in writing, no material exclusions or restrictions on
the utilization, leasing or improvement of the Property
(including non-compete agreements) exists in any Property
Agreement;
(ee) All work, if any, to be performed by Mortgagor
under each of the Property Agreements has been substantially
performed, all contributions to be made by Mortgagor to any party
to such Property Agreement have been made, and all other
conditions to such party's obligations thereunder have been
satisfied;
(ff) The Property is taxed separately without regard
to any other real estate and constitutes a legally subdivided lot
under all applicable legal requirements (or, if not subdivided,
no subdivision or platting of the Property is required under
applicable legal requirements), and for all purposes may be
mortgaged, conveyed or otherwise dealt with as an independent
parcel; and
(gg) The representations and warranties contained in
this Mortgage and the other Loan Documents, or the review and
inquiry made on behalf of the Mortgagor therefor, have all been
made by persons having the requisite expertise and knowledge to
provide such representations and warranties. No statement or fact
made by or on behalf of Mortgagor in this Mortgage or in the
other Loan Documents, or in any certificate, document or schedule
furnished to Mortgagee pursuant hereto or thereto, contains any
untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or
therein not misleading (which may be to Mortgagor's best
knowledge where so provided herein or therein). There is no fact
presently known to Mortgagor which as not been disclosed to
Mortgagee which would have a Material Adverse Effect.
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1.2. DEFENSE OF TITLE. If, while this Mortgage is in force,
the title to the Property or the interest of Mortgagee therein
shall be the subject, directly or indirectly, of any action at
law or in equity, or be attached directly or indirectly, or
endangered, clouded or adversely affected in any manner,
Mortgagor, at Mortgagor's sole expense, shall take all necessary
and proper steps for the defense of said title or interest,
including the employment of counsel approved by Mortgagee, the
prosecution or defense of litigation, and the compromise or
discharge of claims made against said title or interest.
Notwithstanding the foregoing, in the event that Mortgagee
reasonably determines that Mortgagor is not adequately performing
its obligations under this Section and Mortgagee notifies
Mortgagor in writing of such inadequate performance and such
inadequate performance is not cured within ten (10) days of such
notice, Mortgagee may, without limiting or waiving any other
rights or remedies of Mortgagee hereunder, take such steps with
respect thereto as Mortgagee shall deem necessary or proper and
any and all costs and expenses incurred by Mortgagee in
connection therewith, together with interest thereon at the
Default Interest Rate (as defined in the Note) from the date
incurred by Mortgagee until actually paid by Mortgagor, shall be
immediately paid by Mortgagor on demand and shall be secured by
this Mortgage and by all of the other Loan Documents securing all
or any part of the indebtedness evidenced by the Note.
1.3. PERFORMANCE OF OBLIGATIONS. Mortgagor shall pay when
due the principal of and the interest on the indebtedness
evidenced by the Note. Mortgagor shall also pay all charges,
fees and other sums required to be paid by Mortgagor as provided
in the Loan Documents, and shall observe, perform and discharge
all obligations, covenants and agreements to be observed,
performed or discharged by Mortgagor set forth in the Loan
Documents in accordance with their terms. Further, Mortgagor
shall promptly and strictly perform and comply with all
covenants, conditions, obligations and prohibitions required of
Mortgagor in connection with any other document or instrument
affecting title to the Property, or any part thereof, regardless
of whether such document or instrument is superior or subordinate
to this Mortgage.
1.4. INSURANCE. Mortgagor shall, at Mortgagor's expense,
maintain or cause to be maintained, in force and effect on the
Property at all times while this Mortgage continues in effect the
following insurance:
(a) "All-risk" and "special causes" coverage
insurance against loss or damage to the Property from all-risk
perils. The amount of such insurance shall be not less than one
hundred percent (100%) of the full replacement cost of the
Improvements, furniture, furnishings, fixtures, equipment and
other items (whether personally or fixtures) included in the
Property and owned by Mortgagor from time to time, without
reduction for depreciation. The determination of the replacement
cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing such coverage. Full
replacement cost, as used herein, means, with respect to the
Improvements, the cost of replacing the Improvements without
regard to deduction for depreciation, exclusive of the cost of
excavations, foundations and footings below the lowest basement
floor, and means, with respect to such furniture, furnishings,
fixtures, equipment and other items, the cost of replacing the
same. Each policy or policies shall contain a replacement cost
endorsement and either an agreed amount endorsement (to avoid the
operation of any co-insurance provisions) or a waiver of any co-
insurance provisions, all subject to Mortgagee's approval.
(b) Broad form Comprehensive general liability
insurance for personal injury, bodily injury, death and property
damage liability in amounts not less than $l,000,000.00 per
occurrence, $10,000,000.00 aggregate (inclusive of umbrella
coverage). Mortgagee hereby retains the right to
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periodically (but not more often than once in any three- (3-)
year period) review the amount of said liability insurance being
maintained by Mortgagor and to require an increase in the amount
of said liability insurance should Mortgagee deem an increase to
be reasonably prudent under then existing circumstances.
(c) Insurance covering the major components of the
central heating, air conditioning and ventilating systems,
boilers, other pressure vessels, high pressure piping and
machinery, elevators and escalators, if any, and other similar
equipment installed in the Improvements, in an amount equal to
one hundred percent (100%) of the full replacement cost of the
Improvements which policies shall insure against physical damage
to and loss of occupancy and use of the Improvements arising out
of an accident or breakdown covered thereunder.
(d) Business interruption insurance in amounts
sufficient to compensate Mortgagor for all Rents and Profits
after a casualty during the period beginning on the date on which
the Property, or any portion thereof, is damaged or destroyed and
ending not earlier than the date that is 90 days after the date
on which a certificate of occupancy is issued for the completed
restoration work performed at the Property after such casualty,
provided that during any period in which the tenant under the
Ground Lease or the guarantor under the Guaranty of Lease, dated
as of even date herewith, made by Showboat, Inc. for the benefit
of Mortgagor, is an entity whose securities have an investment
grade rating, Mortgagor shall be required to maintain such
business interruption insurance but with coverage for a period of
not less than one year after the occurrence of a casualty
affecting the Property.
All such insurance shall (i) be with insurers
authorized to do business in the state within which the Real
Estate is located and who have and maintain a Best rating of A-
XII or better, (ii) contain the complete address of the Real
Estate (or a complete legal description), (iii) be for a term of
at least one year, and (iv) contain deductibles no greater than
$1,000,000 as to the insurance required under paragraph (a) of
this Section 1.4.
Mortgagor shall as of the date hereof deliver to
Mortgagee evidence that said insurance policies have been paid
current as of the date hereof and certified copies of such
insurance policies and original certificates of insurance signed
by an authorized agent evidencing such insurance satisfactory to
Mortgagee and all other policies of insurance maintained with
respect to the Property. Mortgagor shall renew all such insurance
and deliver to Mortgagee certificates evidencing such renewals at
least thirty (30) days before any such insurance shall expire.
Without limiting the required endorsements to insurance policies,
Mortgagor further agrees that all such policies shall provide
that proceeds thereunder, to the extent payable to Mortgagor,
shall be payable to Mortgagee, its successors and assigns,
pursuant and subject to a loss payee clause (without
contribution) of standard form attached to, or otherwise made a
part of, the applicable policy and that Mortgagee, its successors
and assigns, shall be named as an additional insured under all
liability insurance policies. Mortgagor further agrees that all
such insurance policies: (i) shall provide for at least thirty
(30) days' prior written notice to Mortgagee prior to any
cancellation or termination thereof and prior to any modification
thereof which affects the interest of Mortgagee; (ii) shall
contain an endorsement or agreement by the insurer that any loss
shall be payable to Mortgagee in accordance with the terms of
such policy notwithstanding any act or negligence of Mortgagor
which might otherwise result in forfeiture of such insurance; and
(iii) shall either name Mortgagee as an additional insured or
waive all rights of subrogation against Mortgagee. The delivery
to Mortgagee of the insurance
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policies or the certificates of insurance as provided above shall
constitute an assignment of all proceeds payable under such
insurance policies by Mortgagor to Mortgagee as further security
for the indebtedness secured hereby. In the event of foreclosure
of this Mortgage, or other transfer of title to the Property in
extinguishment in whole or in part of the secured indebtedness,
all right, title and interest of Mortgagor in and to all proceeds
payable under such policies then in force concerning the Property
shall thereupon vest in the purchaser at such foreclosure, or in
Mortgagee or other transferee in the event of such other transfer
of title. Approval of any insurance by Mortgagee shall not be a
representation of the solvency of any insurer or the sufficiency
of any amount of insurance. In the event Mortgagor fails to
provide, maintain, keep in force, or cause to be provided,
maintained and kept in force, or to deliver and furnish to
Mortgagee the policies of insurance required by this Mortgage or
evidence of their renewal as required herein, Mortgagee may, but
shall not be obligated to, procure such insurance and Mortgagor
shall pay all amounts advanced by Mortgagee, together with
interest thereon at the Default Interest Rate from and after the
date advanced by Mortgagee until actually repaid by Mortgagor,
promptly upon demand by Mortgagee. Any amounts so advanced by
Mortgagee, together with interest thereon, shall be secured by
this Mortgage and by all of the other Loan Documents securing all
or any part of the indebtedness evidenced by the Note. Mortgagee
shall not be responsible for nor incur any liability for the
insolvency of the insurer or other failure of the insurer to
perform, even though Mortgagee has caused the insurance to be
placed with the insurer after failure of Mortgagor to furnish
such insurance.
Notwithstanding anything on this Section 1.4 to the
contrary, Mortgagor shall be deemed to have performed its
obligations with respect to the insurance described in clauses
(a) through (d) above if such insurance is maintained, in full
compliance with the terms of this Mortgage, by one or more
affiliates of Mortgagor; provided that if any such insurance
shall cease to be so maintained by such affiliate(s), Mortgagor
shall immediately effect actual (as opposed to deemed)
performance of its obligation to maintain such insurance.
1.5. PAYMENT OF TAXES. Mortgagor shall pay or cause to be
paid, except to the extent provision is actually made therefor
pursuant to Section 1.6 of this Mortgage, all taxes and
assessments which are or may become a lien on the Property or
which are assessed against or imposed upon the Property.
Mortgagor shall furnish Mortgagee with receipts (or if receipts
are not immediately available, with copies of canceled checks
evidencing payment with receipts to follow promptly after they
become available) showing payment of such taxes and assessments
prior to the applicable delinquency date therefor.
Notwithstanding the foregoing, Mortgagor may in good faith, by
appropriate proceedings and upon notice to Mortgagee, contest, or
permit to be contested, the validity, applicability or amount of
any asserted tax or assessment so long as (a) such contest is
diligently pursued, (b) such contest suspends the obligation to
pay the tax and nonpayment of such tax or assessment will not
result in the sale, loss, forfeiture or diminution of the
Property or any part thereof or any interest of Mortgagee
therein, and (c) prior to the earlier of the commencement of such
contest or the delinquency date of the asserted tax or
assessment, Mortgagor deposits in the Impound Account (as
hereinafter defined) an amount determined by Mortgagee to be
adequate to cover the payment of such tax or assessment and a
reasonable additional sum to cover possible interest, costs and
penalties; PROVIDED, HOWEVER, THAT Mortgagor shall promptly cause
to be paid any amount adjudged by a court of competent
jurisdiction to be due, with all interest, costs and penalties
thereon, promptly after such judgment becomes final: and PROVIDED
FURTHER THAT in any event each such contest shall
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be concluded and the taxes, assessments, interest, costs and
penalties shall be paid prior to the date any writ or order is
issued under which the Property may be sold, lost or forfeited.
1.6. TAX AND INSURANCE IMPOUND ACCOUNT. When required by
Mortgagee pursuant to the next following sentence and subject to
the last sentence of this Section 1.6, Mortgagor shall have the
right to establish and maintain at all times while this Mortgage
continues in effect an impound account (the "Impound Account")
with Mortgagee or a financial institution designated by Mortgagee
for payment of insurance premiums and real estate taxes and
assessments on the Property and as additional security for the
indebtedness secured hereby. After the occurrence of a default
hereunder and Mortgagee's request, Mortgagor shall be obligated
to deposit in the Impound Account an amount determined by
Mortgagee to be necessary to ensure that there will be on deposit
with Mortgagee an amount which, when added to the monthly
payments subsequently required to be deposited with Mortgagee
hereunder on account of real estate taxes, assessments and
insurance premiums, will result in there being on deposit in the
Impound Account an amount sufficient to pay the next due annual
installment of insurance premiums, real estate taxes and
assessments on the Property at least one (1) month prior to the
delinquency date thereof (if paid in one installment). Commencing
on the first monthly payment date under the Note after the
occurrence of such default and Mortgagee's request for deposits
into the Impound Account and continuing thereafter on each
monthly payment date under the Note, Mortgagor shall pay to
Mortgagee, concurrently with and in addition to the monthly
payment due under the Note and until the Note and all other
indebtedness secured hereby is fully paid and performed, deposits
in an amount equal to one-twelfth (1/12) of the amount of the
annual insurance premiums, real estate taxes and assessments that
will next become due and payable on the Property as estimated and
determined by Mortgagee. So long as no default hereunder or under
the other Loan Documents has occurred and is continuing, all sums
in the Impound Account shall be held by Mortgagee in the Impound
Account to pay said insurance premiums, taxes and assessments in
one installment before the same become delinquent. Mortgagor
shall be responsible for ensuring the receipt by Mortgagee, at
least thirty (30) days prior to the respective due date for
payment thereof, of all bills, invoices and statements for all
taxes, assessments and insurance premiums to be paid from the
Impound Account, and so long as no default hereunder or under the
other Loan Documents has occurred and is continuing, Mortgagee
shall pay the governmental authority or other party entitled
thereto directly to the extent funds are available for such
purpose in the Impound Account. In making any payment from the
Impound Account, Mortgagee shall be entitled to rely on any bill,
statement or estimate procured from the appropriate public office
or insurer without any inquiry into the accuracy of such bill,
statement or estimate and without any inquiry into the accuracy,
validity, enforceability or contestability of any insurance
premium, tax, assessment, valuation, sale, forfeiture, tax lien
or title or claim thereof. The Impound Account shall not, unless
otherwise explicitly required by applicable law, be or be deemed
to be escrow or trust funds, but Mortgagee shall hold the Impound
Account in a separate account. No interest on funds contained in
the Impound Account shall be paid by Mortgagee to Mortgagor. The
Impound Account is solely for the protection of Mortgagee and
entails no responsibility on Mortgagee's part beyond the payment
of insurance premiums, taxes and assessments following receipt of
bills, invoices or statements therefor in accordance with the
terms hereof and beyond the allowing of due credit for the sums
actually received. Upon assignment of this Mortgage by Mortgagee,
any funds in the Impound Account shall be fumed over to the
assignee and any responsibility of Mortgagee, as assignor, with
respect thereto shall terminate. If the total funds in the
Impound Account shall exceed the amount of payments actually
applied by Mortgagee for the purposes of the Impound Account,
such excess shall be credited by Mortgagee on subsequent payments
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to be made hereunder. If, however, the Impound Account shall not
contain sufficient funds to pay the sums required when the same
shall become due and payable, Mortgagor shall, within ten (10)
days after receipt of written notice thereof, deposit with
Mortgagee the full amount of any such deficiency. If Mortgagor
shall fail to deposit with Mortgagee the full amount of such
deficiency as provided above, Mortgagee shall have the option,
but not the obligation, to make such deposit and all amounts so
deposited by Mortgagee, together with interest thereon at the
Default Interest Rate from the date incurred by Mortgagee until
actually paid by Mortgagor, shall be immediately paid by
Mortgagor on demand and shall be secured by this Mortgage and by
all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. If there is a default under
this Mortgage which is not cured within any applicable grace or
cure period, Mortgagee may, but shall not be obligated to, apply
at any time the balance then remaining in the Impound Account
against the indebtedness secured hereby in whatever order
Mortgagee shall subjectively determine. No such application of
the Impound Account shall be deemed to cure any default
hereunder. Upon full payment of the indebtedness secured hereby
in accordance with its terms or at such earlier time as Mortgagee
may elect, the balance of the Impound Account then in Mortgagee's
possession shall be paid over to Mortgagor and no other party
shall have any right or claim thereto. Notwithstanding anything
in this Section 1.6 to the contrary, Mortgagee shall not require
Mortgagor to establish and maintain an Impound Account during any
period when the tenant under the Ground Lease is maintaining an
impound or escrow account for the payment of real estate taxes
and insurance premiums at the request or demand, and for the
benefit, of such tenant's mortgagee(s).
1.7. Intentionally omitted.
1.8. Intentionally omitted.
1.9. CASUALTY AND CONDEMNATION. Mortgagor shall give
Mortgagee prompt written notice of the occurrence of any casualty
affecting, or the institution of any proceedings for eminent
domain or for the condemnation of, the Property or any portion
thereof. All insurance proceeds on the Property payable to
Mortgagor pursuant to the Ground Lease or otherwise, and all
causes of action, claims, compensation, awards and recoveries
pertaining to Mortgagor for any damage, condemnation or taking of
all or any part of the Property or for any damage or injury to it
for any loss or diminution in value of the Property, are hereby
assigned to and shall be paid to Mortgagee. To the extent that
Mortgagor has the right or the option to do so, Mortgagee may
participate in any suits or proceedings relating to any such
proceeds, causes of action, claims, compensation, awards or
recoveries and Mortgagee is hereby authorized, in its own name or
in Mortgagor's name, to adjust any loss covered by insurance or
any condemnation claim or cause of action, and to settle or
compromise any claim or cause of action in connection therewith,
and Mortgagor shall from time to time deliver to Mortgagee any
instruments required to permit such participation; PROVIDED,
HOWEVER, THAT Mortgagee shall not have the right to participate
in the adjustment of any loss payable to Mortgagor which is not
in excess of the lesser of (i) ten percent (10%) of the then
outstanding principal balance of the Note and (ii) $250,000.00.
Mortgagee shall apply any sums received by it under this Section
first to the payment of all of its costs and expenses (including,
but not limited to, legal fees and disbursements) incurred in
obtaining those sums, and then, as follows:
(a) In the event that less than sixty percent (60%) of the
Improvements located on the Real Estate have been taken or
destroyed, then if:
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(1) no default is then continuing hereunder or under any
of the other Loan Documents and no event has occurred which, with
the giving of notice or the passage of time or both, would
constitute a default hereunder or under any of the other Loan
Documents, and
(2) the Property can, in Mortgagee's judgment, with
diligent restoration or repair, be returned to a condition at
least equal to the condition thereof that existed prior to the
casualty or partial taking causing the loss or damage within the
earlier to occur of (i) six (6) months after the receipt of
insurance proceeds or condemnation awards by either Mortgagor or
Mortgagee, and (ii) the stated maturity date of the Note, and
(3) all necessary governmental approvals can be obtained
to allow the rebuilding and reoccupancy of the Property as
described in subsection (a)(2) above, and
(4) there are sufficient sums available (through insurance
proceeds or condemnation awards and contributions by Mortgagor,
the full amount of which shall at Mortgagee's option have been
deposited with Mortgagee) for such restoration or repair
(including, without limitation, for any costs and expenses of
Mortgagee to be incurred in administering said restoration or
repair) and for payment of principal and interest to become due
and payable under the Note during such restoration or repair, and
(5) the economic feasibility of the Improvements after
such restoration or repair will be such that income from their
operation is reasonably anticipated to be sufficient to pay
operating expenses of the Property and debt service on the
indebtedness secured hereby in full with the same coverage ratio
considered by Mortgagee in its determination to make the loan
secured hereby, and
(6) Mortgagor shall have delivered to Mortgagee, at
Mortgagor's sole cost and expense, an appraisal report in form
and substance satisfactory to Mortgagee appraising the value of
the Property as so restored or repaired to be not less than the
appraised value of the Property considered by Mortgagee in its
determination to make the loan secured hereby, and
(7) Mortgagor so elects by written notice delivered to
Mortgagee within five (5) days after settlement of the aforesaid
insurance or condemnation claim, then, Mortgagee shall, solely
for the purposes of such restoration or repair, advance so much
of the remainder of such sums as may be required for such
restoration or repair, and any funds deposited by Mortgagor
therefor, to Mortgagor in the manner and upon such terms and
conditions as would be required by a prudent interim construction
lender, including, but not limited to, the prior approval by
Mortgagee of plans and specifications, contractors and form of
construction contracts and the furnishing to Mortgagee of
permits, bonds, lien waivers, invoices, receipts and affidavits
from contractors and subcontractors in form and substance
satisfactory to Mortgagee in its discretion, with any remainder
being applied by Mortgagee for payment of the indebtedness
secured hereby in whatever order Mortgagee directs in its
absolute discretion.
(b) In all other cases, namely, in the event that sixty
percent (60%) or more of the Improvements located on the Real
Estate have been taken or destroyed or Mortgagor does not elect
to restore or repair the Property pursuant to clause (a) above,
or otherwise fails to meet the requirements of clause (a) above,
then. in any of such events Mortgagee shall elect. in Mortgagee's
absolute discretion and without regard to the adequacy of
Mortgagee's security to do either of the following: (1)
accelerate the
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maturity date of the Note and declare any and all indebtedness
secured hereby to be immediately due and payable and apply the
remainder of such sums received pursuant to this section to the
payment of the indebtedness secured hereby in whatever order
Mortgagee directs in its absolute discretion, with any remainder
being paid to Mortgagor, or (2) notwithstanding that Mortgagor
may have elected not to restore or repair the Property pursuant
to the provisions of Section 1.9(a)(7) above, require Mortgagor
to restore or repair the Property in the manner and upon such
terms and conditions as would be required by a prudent interim
construction lender, including, but not limited to, the deposit
by Mortgagor with Mortgagee, within thirty (30) days after demand
therefor, of any deficiency necessary in order to assure the
availability of sufficient funds to pay for such restoration or
repair, including Mortgagee's costs and expenses to be incurred
in connection therewith, the prior approval by Mortgagee of plans
and specifications, contractors and form of construction
contracts and the furnishing to Mortgagee of permits, bonds, lien
waivers, invoices, receipts and affidavits from contractors and
subcontractors in form and substance satisfactory to Mortgagee in
its discretion, and apply the remainder of such sums toward such
restoration and repair, with any balance thereafter remaining
being applied by Mortgagee for payment of the indebtedness
secured hereby in whatever order Mortgagee directs in its
absolute discretion.
Any reduction in the indebtedness secured hereby
resulting from Mortgagee's application of any sums received by it
hereunder shall take effect only when Mortgagee actually receives
such sums and elects to apply such sums to the indebtedness
secured hereby and, in any event, the unpaid portion of the
indebtedness secured hereby shall remain in full force and effect
and Mortgagor shall not be excused in the payment thereof.
Partial payments received by Mortgagor, as described in the
preceding sentence, shall be applied first to the final payment
due under the Note and "thereafter to installments due under the
Note in the inverse order of their due date. If Mortgagor elects
or Mortgagee directs Mortgagor to restore or repair the Property
after the occurrence of a casualty or partial taking of the
Property as provided above, Mortgagor shall promptly and
diligently, at Mortgagor's sole cost and expense and regardless
of whether the insurance proceeds or condemnation award, as
appropriate, shall be sufficient for the purpose, restore,
repair, replace and rebuild the Property as nearly as possible to
its value, condition and character immediately prior to such
casualty or partial taking in accordance with the foregoing
provisions, and Mortgagor shall pay to Mortgagee all costs and
expenses of Mortgagee incurred in administering said rebuilding,
restoration or repair, provided that Mortgagee makes such
proceeds or award available for such purpose. Mortgagor agrees
to execute and deliver from time to time such further instruments
as may be requested by Mortgagee to confirm the foregoing
assignment to Mortgagee of any award, damage, insurance proceeds,
payment or other compensation. Mortgagee is hereby irrevocably
constituted and appointed the attorney-in-fact of Mortgagor
(which power of attorney shall be irrevocable so long as any
indebtedness secured hereby is outstanding, shall be deemed
coupled with an interest, shall survive the voluntary or
involuntary dissolution of Mortgagor and shall not be affected by
any disability or incapacity suffered by Mortgagor subsequent to
the date hereof), with full power of substitution, subject to the
terms of this Section, to settle for, collect and receive any
such awards, damages, insurance proceeds, payments or other
compensation from the parties or authorities making the same, to
appear in and prosecute any proceedings therefor and to give
receipts end acquittances therefor.
1.10. MECHANICS' LIENS. Mortgagor shall pay, or cause
to be paid, when due all claims and demands of mechanics,
materialmen, laborers and others for any work performed or
materials delivered for the Real Estate or the Improvements;
PROVIDED, HOWEVER, that Mortgagor shall have the right to
contest, or
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permit to be contested, in good faith any such claim or demand,
so long as it does so diligently, by appropriate proceedings and
without prejudice to Mortgagee and provided that neither the
Property nor any interest therein would be in any danger of sale,
loss or forfeiture as a result of such proceeding or contest. In
the event Mortgagor shall contest, or permit to be contested, any
such claim or demand, Mortgagor shall promptly notify Mortgagee
of such contest and thereafter shall, upon Mortgagee's request,
promptly provide a bond, cash deposit or other security
satisfactory to Mortgagee to protect Mortgagee's interest and
security should the contest be unsuccessful. If Mortgagor shall
fail to discharge or provide security against any such claim or
demand as aforesaid within 30 days of receiving notice of the
existence of such claim or demand, with respect to discharge, or
within 10 days of Mortgagee's request, with respect to providing
security, Mortgagee may do so and any and all expenses incurred
by Mortgagee, together with interest thereon at the Default
Interest Rate from the date incurred by Mortgagee until actually
paid by Mortgagor, shall be immediately paid by Mortgagor on
demand and shall be secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the indebtedness
evidenced by the Note.
1.11. RENTS AND PROFITS. As additional and collateral
security for the payment of the indebtedness secured hereby and
cumulative of any and all rights and remedies herein provided
for, Mortgagor hereby absolutely and presently assigns to
Mortgagee all existing and future Rents and Profits which
assignment is outright, immediate, continuing and absolute.
Mortgagor hereby grants to Mortgagee the sole, exclusive and
immediate right, without taking possession of the Property, to
demand, collect (by suit or otherwise), receive and give valid
and sufficient receipts for any and all of said Rents and
Profits, for which purpose Mortgagor does hereby irrevocably
make, constitute and appoint Mortgagee its attorney-in-fact with
full power to appoint substitutes or a trustee to accomplish such
purpose (which power of attorney shall be irrevocable so long as
any indebtedness secured hereby is outstanding, shall be deemed
to be coupled with an interest, shall survive the voluntary or
involuntary dissolution of Mortgagor and shall not be affected by
any disability or incapacity suffered by Mortgagor subsequent to
the date hereof). Mortgagee shall be without liability for any
loss which may arise from a failure or inability to collect Rents
and Profits, proceeds or other payments. However, until the
occurrence of a default under this Mortgage which has not been
cured within any applicable notice and grace or cure period, and
not a limitation or as a condition hereof, but as a personal
covenant only to Mortgagor and its successors and not to any
lessees or any other person, Mortgagor shall have a revocable
license to collect and receive the Rents and Profits when due and
prepayments thereof for not more than one month prior to due date
thereof. Upon the occurrence of a default hereunder which has
not been cured within any applicable grace or cure period,
Mortgagor's license shall automatically terminate without notice
to Mortgagor and Mortgagee may thereafter, without taking
possession of the Property, collect the Rents and Profits itself
or by an agent or receiver. From and after the termination of
such license, Mortgagor shall be the agent of Mortgagee in
collection of the Rents and Profits and all of the Rents and
Profits so collected by Mortgagor shall be held in trust by
Mortgagor for the sole and exclusive benefit of Mortgagee and
Mortgagor shall, within one (1) business day after receipt of any
Rents and Profits, pay the same to Mortgagee to be applied by
Mortgagee as hereinafter set forth. Neither the demand for or
collection of Rents and Profits by Mortgagee shall constitute any
assumption by Mortgagee of any obligations under any agreement
relating thereto. Mortgagee is obligated to account only for
such Rents and Profits as are actually collected or received by
Mortgagee. Mortgagor irrevocably agrees and consents that the
respective payors of the Rents and Profits shall, upon demand and
notice from Mortgagee of a default hereunder, pay said Rents and
Profits directly to Mortgagee without liability to determine the
actual existence of any default claimed by Mortgagee. Mortgagor
hereby waives any right,
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claim or demand which Mortgagor may now or hereafter have against
any such payor by reason of such payment of Rents and Profits to
Mortgagee, and any such payment shall discharge such payor's
obligation to make such payment to Mortgagor. All Rents and
Profits collected or received by Mortgagee may be applied against
all expenses of collection, including, without limitation,
attorneys' fees, against costs of operation and management of the
Property and against the indebtedness secured hereby, in whatever
order or priority as to any of the items so mentioned as
Mortgagee directs in its sole subjective discretion and without
regard to the adequacy of its security. Neither the exercise by
Mortgagee of any rights under this Section nor the application of
any Rents and Profits to the secured indebtedness shall cure or
be deemed a waiver of any default hereunder. The assignment of
Rents and Profits hereinabove granted shall continue in full
force and effect during any period of foreclosure or redemption
with respect to the Property. Mortgagor has executed an
Assignment of Leases and Rents dated of even date herewith (the
"Assignment") in favor of Mortgagee covering all of the right,
title and interest of Mortgagor, as landlord, lessor or licensor,
in and to any leases, licenses and occupancy agreements relating
to all or portions of the Property, intending that such
instrument create an outright, immediate, continuing and absolute
assignment of the Rents and Profits. All rights and remedies
granted to Mortgagee under the Assignment shall be in addition to
and cumulative of all rights and remedies granted to Mortgagee
hereunder.
1.12. Leases and Licenses.
(a) Mortgagor shall submit to Mortgagee for Mortgagee's
approval, prior to the execution thereof, any proposed lease,
license or occupancy agreement of the Property. Except to the
extent required by the New Jersey Casino Control Commission (the
"Commission"), Mortgagor shall not execute, modify, amend,
supplement, cancel, terminate or accept the surrender of any
lease, license or occupancy agreement for all or a substantial
portion of the Property without the prior written approval of
Mortgagee, and shall at all times promptly and faithfully
perform, or cause to be performed, all of the covenants,
conditions and agreements contained in all leases, licenses and
occupancy agreements with respect to the Property, now or
hereafter existing, on the part of the landlord, lessor or
licensor thereunder to be kept and performed. If Mortgagor shall
be required or have the right to grant or withhold its consent to
any action of a tenant, licensee or occupant of the Property,
Mortgagor shall not grant or withhold such consent or approval
without the prior written approval of Mortgagee to so do.
Mortgagor shall not do or suffer to be done any act that might
result in a default by the landlord, lessor or licensor under any
such lease, license or occupancy agreement or allow the tenant,
lessee or licensee thereunder to withhold payment or rent and,
except as otherwise expressly permitted by the terms of Section
1.13 hereof, shall not assign any such lease, license or
occupancy agreement or any such rents. Mortgagor, at no cost or
expense to Mortgagee, shall enforce, short of termination, the
performance and observance of each and every material condition
and covenant of each of the parties under such leases. Mortgagor
shall not, without the prior written consent of Mortgagee, waive
or release any other party from the performance or observance of
any obligation or condition under such leases except in the
normal of course of business in a manner which is consistent with
sound and customary leasing and management practices for similar
properties in the community in which the Property is located.
Mortgagor shall not permit the prepayment of any rents under any
of the leases for more than one month prior to the due date
thereof.
(b) Each lease, license and occupancy agreement executed
after the date hereof affecting Mortgagor's interest in any of
the Real Estate or the Improvements must provide, in a manner
approved by
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Mortgagee, that the tenant, lessee or licensee, as appropriate,
will, to the extent permitted by law, recognize as its landlord,
lessor or licensor and attorn to any person succeeding to the
interest of Mortgagor upon any foreclosure of this Mortgage or
deed in lieu of foreclosure. Each such lease, license and
occupancy agreement shall also provide that, upon request of said
successor in interest, the tenant, lessee or licensee shall
execute and deliver an instrument or instruments confirming its
attornment as provided for in this Section; provided, however,
that neither Mortgagee nor any successor-in-interest shall be
bound by any payment of rental for more than one (1) month in
advance, or any amendment or modification of said lease or rental
agreement made without the express written consent of Mortgagee
or said successor-in-interest.
(c) Upon the occurrence of a default under this Mortgage
which is not cured within any applicable grace period, whether
before or after the whole principal sum secured hereby is
declared to be immediately due or whether before or after the
institution of legal proceedings to foreclose this Mortgage,
forthwith, upon demand of Mortgagee, Mortgagor shall surrender to
Mortgagee and Mortgagee shall be entitled to take actual
possession of the Property or any part thereof personally, or by
its agent or attorneys. In such event, Mortgagee shall have, and
Mortgagor hereby gives and grants to Mortgagee, the right, power
and authority to make and enter into leases, licenses and
occupancy agreements with respect to the Property or portions
thereof for such rents and for such periods of occupancy and upon
conditions and provisions as Mortgagee may deem desirable in its
sole discretion, and Mortgagor expressly acknowledges and agrees
that the term of such lease, license or occupancy agreement may
extend beyond the date of any foreclosure sale of the Property;
it being the intention of Mortgagor that in such event Mortgagee
shall be deemed to be and shall be the attorney-in-fact of
Mortgagor for the purpose of making and entering into leases,
licenses or occupancy agreements of parts or portions of the
Property for the rents and upon the terms, conditions and
provisions deemed desirable to Mortgagee in its sole discretion
and with like effect as if such leases, licenses or occupancy
agreements had been made by Mortgagor as the owner in fee simple
of the Property free and clear of any conditions or limitations
established by this Mortgage. The power and authority hereby
given and granted by Mortgagor to Mortgagee shall be deemed to be
coupled with an interest, shall not be revocable by Mortgagor so
long as any indebtedness secured hereby is outstanding, shall
survive the voluntary or involuntary dissolution of Mortgagor and
shall not be affected by any disability or incapacity suffered by
Mortgagor subsequent to the date hereof. In connection with any
action taken by Mortgagee pursuant to this Section, Mortgagee
shall not be liable for any loss sustained by Mortgagor resulting
from any failure to let the Property, or any part thereof, or
from any other act or omission of Mortgagee in managing the
Property (unless such act or omission constitutes gross
negligence on the part of Mortgagee), nor shall Mortgagee be
obligated to perform or discharge any obligation, duty or
liability under any lease, license or occupancy agreement
covering the Property or any part thereof or under or by reason
of this instrument or the exercise of rights or remedies
hereunder. Mortgagor shall, and does hereby, indemnify Mortgagee
for, and hold Mortgagee harmless from, any and all claims,
actions, demands, liabilities, loss or damage which may or might
be incurred by Mortgagee under any such lease, license or
occupancy agreement or under this Mortgage or by the exercise of
rights or remedies hereunder and from any and all claims and
demands whatsoever which may be asserted against Mortgagee by
reason of any alleged obligations or undertakings on its part to
perform or discharge any of the terms, covenants or agreements
contained in any such lease, license or occupancy agreement other
than those finally determined to have resulted solely from the
gross negligence or willful misconduct of Mortgagee. Should
Mortgagee incur any such liability, the amount thereof,
including, without limitation, costs, expenses and attorneys'
fees, together with interest thereon at the Default Interest Rate
from the date incurred by Mortgagee until actually paid by
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Mortgagor, shall be immediately due and payable to Mortgagee by
Mortgagor on demand and shall be secured hereby and by all of the
other Loan Documents securing all or any part of the indebtedness
evidenced by the Note. Nothing in this Section shall impose on
Mortgagee any duty, obligation or responsibility for the control,
care, management or repair of the Property, or for the carrying
out of any of the terms and conditions of any such lease, license
or occupancy agreement, nor shall it operate to make Mortgagee
responsible or liable for any waste committed on the Property by
the tenants or by any other parties or for any dangerous or
defective condition of the Property, or for any negligence in the
management, upkeep, repair or control of the Property. Mortgagor
hereby assents to, ratifies and confirms any and all actions of
Mortgagee with respect to the Property taken under this Section.
(d) Notwithstanding anything in this Section 1.12 to the
contrary, Mortgagor may, without obtaining the prior written
consent of Mortgagee, but with prior notice to Mortgagee, consent
to the transfer or assignment of the interest of the tenant under
the Ground Lease to an entity that is at least fifty-percent
(50%) beneficially owned, directly or indirectly, by Showboat,
Inc. or, after the contemplated acquisition of Showboat, Inc. by
Harrah's Entertainment, Inc. ("Harrah's"), by Harrah's provided
that (i) the successor tenant has a net worth at least equal to
that of the original tenant, (ii) concurrently with such transfer
or assignment, Showboat, Inc. or Harrah's, as applicable, (A)
delivers to Mortgagee a written confirmation from each of the
rating agencies rating the certificates issued under the
Securitization (as hereinafter defined) stating that such
transfer or assignment will not adversely affect or change the
then-current rating of any class of certificate issued under the
Securitization and (B) delivers to Mortgagee and to the rating
agencies one or more nonconsolidation opinions with respect to
the Mortgagor, the successor tenant and their respective direct
and indirect owners (after such transfer or assignment) that are
acceptable to the rating agencies, and (iii) the successor tenant
assumes in writing all of the obligations of the tenant under the
Ground Lease.
1.13. Alienation and Further Encumbrances.
(a) Mortgagor acknowledges that Mortgagee has relied upon
the principals of Mortgagor and the ownership and organizational
structure of the Mortgagor in connection with the closing of the
loan evidenced by the Note. Accordingly, except as specifically
allowed hereinbelow in this Section and notwithstanding anything
to the contrary contained in Section 4.6 hereof, in the event
that the Property or any part thereof or interest therein shall
be sold, conveyed, disposed of, alienated, hypothecated, leased
(except in accordance with the provisions of Section 1.12
hereof), assigned, pledged, mortgaged, further encumbered or
otherwise transferred or Mortgagor shall be divested of its title
to the Property or any interest therein, in any manner or way,
whether voluntarily or involuntarily, without the prior written
consent of Mortgagee being first obtained, which consent may be
withheld in Mortgagee's sole discretion, then the same shall
constitute a default hereunder and Mortgagee shall have the
right, at its option, to declare any or all of the indebtedness
secured hereby, irrespective of the maturity date specified in
the Note, immediately due and payable and to otherwise exercise
any of its other rights and remedies contained in Article III
hereof. If such acceleration is during any period when a
prepayment fee is payable pursuant to the provisions set forth in
the Note, then, in addition to all of the foregoing, such
prepayment fee shall also then be immediately due and payable to
the same end as though Mortgagor were prepaying the entire
indebtedness secured hereby on the date of such acceleration.
For the purposes of this Section: (i) in the event either
Mortgagor or any of its members is a corporation or trust, the
sale, conveyance, transfer or
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disposition of any of the issued and outstanding capital stock of
Mortgagor or any of its members or of the beneficial interest of
such trust (or the issuance of new shares of capital stock in
Mortgagor or any of its members) shall be deemed to be a transfer
of an interest in the Property; and (ii) in the event Mortgagor
or any members of Mortgagor is a limited or general partnership,
a joint venture or a limited liability company, a change in the
ownership interests in any general partner, any joint venturer or
any member, either voluntarily, involuntarily or otherwise, or
the sale, conveyance, transfer, disposition, alienation,
hypothecation or encumbering of all or any portion of the
interest of any such general partner, joint venturer or member in
Mortgagor or such member (whether in the form of a beneficial or
membership interest or in the form of a power of direction,
control or management, or otherwise), shall be deemed to be a
transfer of an interest in the Property.
(b) In the event that Mortgagee shall consent, without in
any way implying any obligation on the part of Mortgagee to so
consent, to a further encumbrance of the Property, the documents
evidencing or creating such encumbrance shall be subject to the
prior written approval of Mortgagee and shall expressly provide,
in addition to any other items required by Mortgagee, that: (i)
they are subordinate, secondary, junior and inferior in all
respects to the lien of this Mortgage, to the security provided
by the other Loan Documents and to any and all rights of
Mortgagee set forth therein, including, without limitation,
Mortgagee's right to payment under the Note and the rights of
Mortgagee set forth herein with respect to any insurance proceeds
and condemnation awards which are a part of the Property; and
(ii) they shall remain subordinate, secondary, junior and
inferior in all respects to any amendments, modifications,
extensions or changes in this Mortgage and the other Loan
Documents thereafter entered into by Mortgagee and Mortgagor or
any indemnitor or guarantor under any indemnity or guaranty
executed in connection with the loan secured hereby; and (iii)
they are subordinate, secondary, junior and inferior in all
respects to all existing and future leases of the Property or any
portion thereof and the holder thereof shall, upon request of
Mortgagee, specifically subordinate the lien of such encumbrance
to all leases of the Property or any portion thereof executed
after the date of such encumbrance; and (iv) the holder of such
subordinate mortgage acknowledges and agrees that a conveyance of
all or any portion of the Property to such holder by foreclosure,
deed in lieu of foreclosure or otherwise shall constitute a
default under this Mortgage.
(c) Notwithstanding anything in this Section 1.13 to the
contrary, Mortgagor may, without obtaining the prior written
consent of Mortgagee, but with prior written notice to Mortgagee,
transfer all of its right, title and interest in and to the
Property, subject to this Mortgage, to another single-purpose,
bankruptcy-remote entity that is at least fifty percent (50%)
beneficially owned, directly or indirectly, by Showboat, Inc. or,
after the consummation of the contemplated acquisition of
Showboat, Inc. by Harrah's, by Harrah's, and a change in the
ownership of Mortgagor may be effected without obtaining the
prior written consent of Mortgagee (but with prior written notice
to Mortgagee) so long as Showboat, Inc. or Harrah's, as
applicable, shall beneficially own, directly or indirectly, at
least fifty percent (50%) of the interests in Mortgagor, provided
that concurrently with such transfer, (i) Showboat, Inc. or
Harrah's, as applicable, delivers to Mortgagee a written
confirmation from each of the rating agencies rating the
certificates issued under the Securitization (as hereinafter
defined) stating that such transfer will not adversely affect or
change the then-current rating of any class of certificate issued
under the Securitization, (ii) Showboat, Inc. or Harrah's, as
applicable, delivers to Mortgagee and to the rating agencies one
or more nonconsolidation opinions with respect to the Mortgagor
and its direct and indirect owners (after such transfer) that are
acceptable to the rating agencies, and (iii) with respect to a
transfer of the Property, the
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transferee agrees in writing to assume and perform all of
Mortgagor's obligations hereunder and under the other Loan
Documents and to be bound by all of the terms, covenants and
conditions of the Loan Documents pertaining to Mortgagor.
1.14. PAYMENT OF UTILITIES, ASSESSMENTS, CHARGES, ETC.
Mortgagor shall pay, or cause to be paid, when due all utility
charges which are incurred by Mortgagor or which may become a
charge or lien against any portion of the Property for gas,
electricity, water and sewer services furnished to the Real
Estate and/or the Improvements and all other assessments or
charges of a similar nature, or assessments payable pursuant to
any restrictive covenants, whether public or private, affecting
the Real Estate and/or the Improvements or any portion thereof,
whether or not such assessments or charges are or may become
liens thereon.
1.15. ACCESS PRIVILEGES AND INSPECTIONS. Mortgagee and
the agents, representatives and employees of Mortgagee shall,
subject to the rights of tenants, have full and free access to
the Real Estate and the Improvements and any other location where
books and records concerning the Property are kept at all
reasonable times for the purposes of inspecting the Property and
of examining, copying and making extracts from the books and
records of Mortgagor relating to the Property, the cost of which,
except after the occurrence and during the continuance of a
default, shall be paid by Mortgagee. Mortgagor shall lend
assistance to all such agents, representatives and employees of
Mortgagee. Mortgagee shall reasonably endeavor not to
unreasonably interfere with the conduct of business at the
Property in exercising its rights under this Section 1.15.
1.16. WASTE; MAINTENANCE. Mortgagor shall not commit,
suffer or permit any waste on the Property nor take any actions
that might invalidate any insurance carried on the Property.
Mortgagor shall maintain or cause to be maintained the Property
in good condition and repair.
1.17. ZONING. Without the prior written consent of
Mortgagee, which consent shall not be unreasonably withheld,
Mortgagor shall not seek, make, suffer, consent to or acquiesce
in any change in the zoning or conditions of use of the Real
Estate or the Improvements. Mortgagor shall comply with and
make, or cause to be complied with and made, all payments
required under the provisions of any covenants, conditions or
restrictions affecting the Real Estate or the Improvements.
Mortgagor shall comply with, or cause to be complied with, all
existing and future requirements of all governmental authorities
having jurisdiction over the Property. Mortgagor shall keep, or
cause to be kept, all licenses, permits, franchises and other
approvals necessary for the operation of the Property in full
force and effect. Mortgagor shall operate, or cause to be
operated, the Property as a casino and hotel for so long as the
indebtedness secured hereby is outstanding unless such operation
is prohibited by law. If, under applicable zoning provisions,
the use of all or any part of the Real Estate or the Improvements
is or becomes a nonconforming use, Mortgagor shall not cause or
permit such use to be discontinued or abandoned without the prior
written consent of Mortgagee. Further, without Mortgagee's prior
written consent, Mortgagor shall not file or subject any part of
the Real Estate or the Improvements to any declaration of
condominium or cooperative or convert any part of the Real Estate
or the Improvements to a condominium, co-operative or other form
of multiple ownership and governance.
1.18. FINANCIAL STATEMENTS AND BOOKS AND RECORDS. Mortgagor
shall keep accurate books and records of account of the Property
and its own financial affairs sufficient to permit the
preparation of
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financial statements therefrom in accordance with generally
accepted accounting principles. Mortgagee and its duly
authorized representatives shall have the right to examine, copy
and audit Mortgagor's records and books of account at all
reasonable times. So long as this Mortgage continues in effect,
Mortgagor shall provide to Mortgagee, in addition to any other
financial statements required hereunder or under any of the other
Loan Documents, the following financial statements and
information, all of which must be certified to Mortgagee as being
true and correct by Mortgagor or the entity to which they
pertain, as applicable, be prepared in accordance with generally
accepted accounting principles consistently applied and be in
form and substance acceptable to Mortgagee:
(a) copies of all tax returns filed by Mortgagor, within
thirty (30) days after the date of filing;
(b) annual balance sheets for the Property and annual
financial statements for Mortgagor, each principal or member in
Mortgagor, and each indemnitor and guarantor under any indemnity
or guaranty executed in connection with the loan secured hereby
within one hundred twenty (120) days after the end of each
calendar year audited by an independent certified public
accountant; and
(c) such other information with respect to the Property,
Mortgagor, the principals or members in Mortgagor, and each
indemnitor and guarantor under any indemnity or guaranty executed
in connection with the loan secured hereby, which may be
requested from time to time by Mortgagee, within a reasonable
time after the applicable request.
Mortgagor agrees that any and all materials furnished
hereunder are the property of Mortgagee (and Mortgagee's
servicer) and may be released to such parties as Mortgagee or its
servicer deems appropriate, including FNMA, FHLMC, Donaldson,
Lufkin & Jenrette Securities Corporation and any affiliates, any
issuer, underwriter, certificateholder or trustee with respect to
securities issued in connection with the sale of this Mortgage,
or any rating agency responsible for rating such securities from
time to time.
1.19. FURTHER DOCUMENTATION. Mortgagor shall, on the
request of Mortgagee and at the expense of Mortgagor: (a)
promptly correct any defect, error or omission which may be
discovered in the contents of this Mortgage or in the contents of
any of the other Loan Documents; (b) promptly execute,
acknowledge, deliver and record or file such further instruments
(including, without limitation, further mortgages, deeds of
trust, security deeds, security agreements, financing statements,
continuation statements and assignments of rents or leases) and
promptly do such further acts as may be necessary, desirable or
proper to carry out more effectively the purposes of this
Mortgage and the other Loan Documents and to subject to the liens
and security interests hereof and thereof any property intended
by the terms hereof and thereof to be covered hereby and thereby,
including specifically, but without limitation, any renewals,
additions, substitutions, replacements or appurtenances to the
Property; (c) promptly execute, acknowledge, deliver, procure and
record or file any document or instrument (including specifically
any financing statement) deemed advisable by Mortgagee to
protect, continue or perfect the liens or the security interests
hereunder against the rights or interests of third persons; and
(d) promptly furnish to Mortgagee, upon Mortgagee's request, a
duly acknowledged written statement and estoppel certificate
addressed to such party or parties as directed by Mortgagee and
in form and substance supplied by Mortgagee, setting forth all
amounts due under the Note, stating whether any event has
occurred which, with the passage of time or the
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giving of notice or both, would constitute an event of default
hereunder, stating whether any offsets or defenses exist against
the indebtedness secured hereby and containing such other matters
as Mortgagee may reasonably require.
1.20. PAYMENT OF COSTS; REIMBURSEMENT TO MORTGAGEE.
Mortgagor shall pay all costs and expenses of every character
incurred in connection with the closing of the loan evidenced by
the Note and secured hereby or otherwise attributable or
chargeable to Mortgagor as the owner of the Property, including,
without limitation, appraisal fees, recording fees, documentary,
stamp, mortgage or intangible taxes, brokerage fees and
commissions, title policy premiums and title search fees, uniform
commercial code/tax lien/litigation search fees, escrow fees and
attorneys' fees. If Mortgagor defaults in any such payment,
which default is not cured within any applicable grace or cure
period, Mortgagee may pay the same and Mortgagor shall reimburse
Mortgagee on demand for all such costs and expenses incurred or
paid by Mortgagee, together with such interest thereon at the
Default Interest Rate from and after the date of Mortgagee's
making such payment until reimbursement thereof by Mortgagor.
Any such sums disbursed by Mortgagee, together with such interest
thereon, shall be additional indebtedness of Mortgagor secured by
this Mortgage and by all of the other Loan Documents securing all
or any part of the indebtedness evidenced by the Note. Further,
Mortgagor shall promptly notify Mortgagee in writing of any
litigation or threatened litigation affecting the Property, or
any other demand or claim which, if enforced, could impair or
threaten to impair Mortgagee's security hereunder Without
limiting or waiving any other rights and remedies of Mortgagee
hereunder, if Mortgagor fails to perform any of its covenants or
agreements contained in this Mortgage or in any of the other Loan
Documents and such failure is not cured within any applicable
grace or cure period, or if any action or proceeding of any kind
(including, but not limited to, any bankruptcy, insolvency,
arrangement, reorganization or other debtor relief proceeding) is
commenced which might affect Mortgagee's interest in the Property
or Mortgagee's right to enforce its security, then Mortgagee may,
at it option, with or without notice to Mortgagor, make any
appearances, disburse any sums and take any actions as may be
necessary or desirable to protect or enforce the security of this
Mortgage or to remedy the failure of Mortgagor to perform its
covenants and agreements (without, however, waiving any default
of Mortgagor). Mortgagor agrees to pay on demand all expenses of
Mortgagee incurred with respect to the foregoing (including, but
not limited to, fees and disbursements of counsel), together with
interest thereon at the Default Interest Rate from and after the
date on which Mortgagee incurs such expenses until reimbursement
thereof by Mortgagor. Any such expenses so incurred by
Mortgagee, together with interest thereon as provided above,
shall be additional indebtedness of Mortgagor secured by this
Mortgage and by all of the other Loan Documents securing all or
any part of the indebtedness evidenced by the Note. The
necessity for any such actions and of the amounts to be paid
shall be determined by Mortgagee in its discretion. Subject to
the Ground Lease, Mortgagee is hereby empowered to enter and to
authorize others to enter upon the Property or any part thereof
for the purpose of performing or observing any such defaulted
term, covenant or condition without thereby becoming liable to
Mortgagor or any person in possession holding under Mortgagor.
Mortgagor hereby acknowledges and agrees that the remedies set
forth in this Section 1.20 shall be exercisable by Mortgagee, and
any and all payments made or costs or expenses incurred by
Mortgagee in connection therewith shall be secured hereby and
shall be, without demand, immediately repaid by Mortgagor with
interest thereon at the Default Interest Rate, notwithstanding
the fact that such remedies were exercised and such payments made
and costs incurred by Mortgagee after the filing by Mortgagor of
a voluntary case or the filing against Mortgagor of an
involuntary case pursuant to or within the meaning of the
Bankruptcy Reform Act of 1978, as amended,
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Title 11 U.S.C., or after any similar action pursuant to any
other debtor relief law (whether statutory, common law, case law
or otherwise) of any jurisdiction whatsoever, now or hereafter in
effect, which may be or become applicable to Mortgagor,
Mortgagee, any guarantor or indemnitor, the secured indebtedness
or any of the Loan Documents. Mortgagor hereby indemnifies and
holds Mortgagee harmless from and against all loss, cost and
expenses with respect to any default hereof, any liens (i.e.,
judgments, mechanics' and materialmen's liens, or otherwise),
charges and encumbrances filed against the Property, and from any
claims and demands for damages or injury, including claims for
property damage, personal injury or wrongful death, arising out
of or in connection with any accident or fire or other casualty
on the Real Estate or the Improvements or any nuisance made or
suffered thereon, including, in any case, attorneys' fees, costs
and expenses as aforesaid, whether at pretrial, trial or
appellate level, and such indemnity shall survive payment in full
of the indebtedness secured hereby. This Section shall not be
construed to require Mortgagee to incur any expenses, make any
appearances or take any actions.
1.21. SECURITY INTEREST. This Mortgage is also intended
to encumber and create a security interest in, and Mortgagor
hereby grants to Mortgagee a security interest in all sums on
deposit with Mortgagee pursuant to the provisions of Section 1.6
hereof or any other Section hereof and Mortgagor's interest in
all fixtures, chattels, accounts, equipment, inventory, contract
rights, general intangibles and other personal property included
within the Property, all renewals, replacements of any of the
aforementioned items, or articles in substitution therefor or in
addition thereto or the proceeds thereof (said property is
hereinafter referred to collectively as the "Collateral"),
whether or not the same shall be attached to the Real Estate or
the Improvements in any manner. It is hereby agreed that to the
extent permitted by law, all of the foregoing property is to be
deemed and held to be a part of and affixed to the Real Estate
and the Improvements. The foregoing security interest shall also
cover Mortgagor's leasehold interest in any of the foregoing
property which is leased by Mortgagor. Notwithstanding the
foregoing, all of the foregoing property shall be owned by
Mortgagor and no leasing or installment sales or other financing
or title retention agreement in connection therewith shall be
permitted without the prior written approval of Mortgagee.
Mortgagor shall, from time to time upon the request of Mortgagee,
supply Mortgagee with a current inventory of all of the property
in which Mortgagee is granted a security interest hereunder, in
such detail as Mortgagee may require. Mortgagor shall promptly
replace all of the Collateral subject to the lien or security
interest of this Mortgage when worn or obsolete with Collateral
comparable to the worn out or obsolete Collateral when new and
will not, without the prior written consent of Mortgagee, remove
from the Real Estate or the Improvements any of the Collateral
subject to the lien or security interest of this Mortgage except
such as is replaced by an article of equal suitability and value
as above provided, owned by Mortgagor free and clear of any lien
or security interest except that created by this Mortgage and the
other Loan Documents and except as otherwise expressly permitted
by the terms of Section 1.13 of this Mortgage. All of the
Collateral shall be kept at the location of the Real Estate
except as otherwise required by the terms of the Loan Documents.
Mortgagor shall not use any of the Collateral in violation of any
applicable statute, ordinance or insurance policy.
1.22. SECURITY AGREEMENT. This Mortgage constitutes a
security agreement between Mortgagor and Mortgagee with respect
to the Collateral in which Mortgagee is granted a security
interest hereunder, and, cumulative of all other rights and
remedies of Mortgagee hereunder, Mortgagee shall have all of the
rights and remedies of a secured party under any applicable
Uniform Commercial Code. Mortgagor hereby agrees to execute and
deliver on demand and hereby irrevocably constitutes and appoints
Mortgagee the
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attorney-in-fact of Mortgagor to execute and deliver and, if
appropriate, to file with the appropriate filing officer or
office such security agreements, financing statements,
continuation statements or other instruments as Mortgagee may
request or require in order to impose, perfect or continue the
perfection of the lien or security interest created hereby.
Except with respect to Rents and Profits to the extent
specifically provided herein to the contrary, Mortgagee shall
have the right of possession of all cash, securities,
instruments, negotiable instruments, documents, certificates and
any other evidences of cash or other property or evidences of
rights to cash rather than property, which are now or hereafter a
part of the Property and Mortgagor shall promptly deliver the
same to Mortgagee, endorsed to Mortgagee, without further notice
from Mortgagee. Mortgagor agrees to furnish Mortgagee with
notice of any change in the name, identity, corporate structure,
residence, or principal place of business or mailing address of
Mortgagor within ten (10) days of the effective date of any such
change. Upon the occurrence of any default hereunder not cured
within any applicable grace or cure period, Mortgagee shall have
the rights and remedies as prescribed in the Mortgage, or as
prescribed by general law, or as prescribed by any applicable
Uniform Commercial Code, all at Mortgagee's election. Any
disposition of the Collateral may be conducted by an employee or
agent of Mortgagee. Any person, including both Mortgagor and
Mortgagee, shall be eligible to purchase any part or all of the
Collateral at any such disposition. Expenses of retaking,
holding, preparing for sale, selling or the like (including,
without limitation, Mortgagee's attorneys' fees and legal
expenses), together with interest thereon at the Default Interest
Rate from the date incurred by Mortgagee until actually paid by
Mortgagor, shall be paid by Mortgagor on demand and shall be
secured by this Mortgage and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the
Note. Subject to the Ground Lease, Mortgagee shall have the
right to enter upon the Real Estate and the Improvements or any
real property where any of the property which is the subject of
the security interest granted herein is located to take
possession of, assemble and collect the same or to render it
unusable, or Mortgagor, upon demand of Mortgagee, shall assemble
such property and make it available to Mortgagee at the Real
Estate, a place which is hereby deemed to be reasonably
convenient to Mortgagee and Mortgagor. If notice is required by
law, Mortgagee shall give Mortgagor at least ten (10) days prior
written notice of the time and place of any public sale of such
property or of the time of or after which any private sale or any
other intended disposition thereof is to be made, and if such
notice is sent to Mortgagor, as the same is provided for the
mailing of notices herein, it is hereby deemed that such notice
shall be and is reasonable notice to Mortgagor. No such notice
is necessary for any such property which is perishable, threatens
to decline speedily in value or is of a type customarily sold on
a recognized market. Any sale made pursuant to the provisions of
this Section shall be deemed to have been a public sale conducted
in a commercially reasonable manner if held contemporaneously
with the foreclosure sale as provided in Section 3.1(e) hereof
upon giving the same notice with respect to the sale of the
Property hereunder as is required under said Section 3.1(e).
Furthermore, to the extent permitted by law, in conjunction with,
in addition to or in substitution for the rights and remedies
available to Mortgagee pursuant to any applicable Uniform
Commercial Code:
(a) In the event of a foreclosure sale, the Property may,
at the option of Mortgagee, be sold as a whole; and
(b) It shall not be necessary that Mortgagee take
possession of the aforementioned Collateral, or any part thereof,
prior to the time that any sale pursuant to the provisions of
this Section is conducted and it shall not be necessary that said
Collateral, or any part thereof, be present at the location of
such sale; and
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(c) Mortgagee may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident
to any sale held by Mortgagee, including the sending of notices
and the conduct of the sale, but in the name and on behalf of
Mortgagee.
The name and address of Mortgagor (as Debtor under any applicable
Uniform Commercial Code) are:
Showboat Land LLC
3720 Howard Hughes Parkway
Suite 200
Las Vegas, Nevada 89109
The name and address of Mortgagee (as Secured Party under any
applicable Uniform Commercial Code) are:
Column Financial, Inc.
3414 Peachtree Road, N.E
Suite 1140
Atlanta, Georgia 30326
1.23. EASEMENTS AND RIGHTS-OF-WAY. Mortgagor shall not
grant any easement or right-of-way with respect to all or any
portion of the Real Estate or the Improvements without the prior
written consent of Mortgagee unless such grant is required
pursuant to the terms of the Ground Lease. The purchaser at any
foreclosure sale hereunder may, at its discretion, disaffirm any
easement or right-of-way granted in violation of any of the
provisions of this Mortgage and may take immediate possession of
the Property free from, and despite the terms of, such grant of
easement or right-of-way. If Mortgagee consents to the grant of
an easement or right-of-way, Mortgagee agrees to grant such
consent without charge to Mortgagor other than expenses.
Including, without limitation, attorneys' fees, incurred by
Mortgagee in the review of Mortgagor's request and in the
preparation of documents effecting the subordination.
1.24. COMPLIANCE WITH LAWS. Mortgagor shall at all
times comply, or cause to be complied, with all statutes,
ordinances, regulations and other governmental or quasi-
governmental requirements and private covenants now or hereafter
relating to the ownership, construction, use or operation of the
Property, including, but not limited to, those concerning
employment and compensation of persons engaged in operation and
maintenance of the Property and any environmental or ecological
requirements, even if such compliance shall require structural
changes to the Property; PROVIDED, HOWEVER, that, Mortgagor may,
upon providing Mortgagee with security satisfactory to Mortgagee,
proceed diligently and in good faith to contest, or permit to be
contested, the validity or applicability of any such statute,
ordinance, regulation or requirement so long as during such
contest the Property shall not be subject to any lien, charge,
fine or other liability and shall not be in danger of being
forfeited, lost or closed. Mortgagor shall not use or occupy, or
allow the use or occupancy of, the Property in any manner which
violates any lease of or any other agreement applicable to the
Property or any applicable law, rule, regulation or order or
which constitutes a public or private nuisance or which makes
void, voidable or cancelable, or increases the premium of, any
insurance then in force with respect thereto.
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1.25. ADDITIONAL TAXES. In the event of the enactment
after this date of any law of the state where the Property is
located or of any other governmental entity deducting from the
value of the Property for the purpose of taxation any lien or
security interest thereon, or imposing upon Mortgagee the payment
of the whole or any part of the taxes or assessments or charges
or liens herein required to be paid by Mortgagor, or changing in
any way the laws relating to the taxation of mortgages or
security agreements or debts secured by mortgages or security
agreements or the interest of the mortgagee or secured party in
the property covered thereby, or the manner of collection of such
taxes, so as to adversely affect this Mortgage or the
indebtedness secured hereby or Mortgagee, then, and in any such
event, Mortgagor, upon demand by Mortgagee, shall pay such taxes,
assessments, charges or liens, or reimburse Mortgagee therefor;
PROVIDED, HOWEVER, that if in the opinion of counsel for
Mortgagee (a) it might be unlawful to require Mortgagor to make
such payment, or (b) the making of such payment might result in
the imposition of interest beyond the maximum amount permitted by
law, then and in either such event, Mortgagee may elect, by
notice in writing given to Mortgagor, to declare all of the
indebtedness secured hereby to be and become due and payable in
full sixty (60) days from the giving of such notice.
1.26. SECURED INDEBTEDNESS. It is understood and agreed
that this Mortgage shall secure payment of not only the
indebtedness evidenced by the Note but also any and all
substitutions, replacements, renewals and extensions of the Note,
any and all indebtedness and obligations arising pursuant to the
terms hereof and any and all indebtedness and obligations arising
pursuant to the terms of any of the other Loan Documents, all of
which indebtedness is equally secured with and has the same
priority as any amounts advanced as of the date hereof. It is
agreed that any future advances made by Mortgagee to or for the
benefit of Mortgagor from time to time under this Mortgage or the
other Loan Documents and whether or not such advances are
obligatory or are made at the option of Mortgagee, or otherwise,
made for any purpose, and all interest accruing thereon, shall be
equally secured by this Mortgage and shall have the same priority
as all amounts, if any, advanced as of the date hereof and shall
be subject to all of the terms and provisions of this Mortgage.
1.27. MORTGAGOR'S WAIVERS. To the full extent permitted
by law, Mortgagor agrees that Mortgagor shall not at any time
insist upon, plead, claim or take the benefit or advantage of any
law now or hereafter in force providing for any appraisement,
valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the
indebtedness secured hereby prior to any sale of the Property to
be made pursuant to any provisions contained herein or prior to
the entering of any decree, judgment or order of any court of
competent jurisdiction, or any right under any statute to redeem
all or any part of the Property so sold. Mortgagor, for
Mortgagor and Mortgagor's successors and assigns, and for any and
all persons ever claiming any interest in the Property, to the
full extent permitted by law, hereby knowingly, intentionally and
voluntarily with and upon the advice of competent counsel:
(a) waives, releases, relinquishes and forever forgoes all rights
of valuation, appraisement, stay of execution, reinstatement and
notice of election or intention to mature or declare due the
secured indebtedness (except such notices as are specifically
provided for herein); (b) waives, releases, relinquishes and
forever forgoes all right to a marshalling of the assets of
Mortgagor, including the Property, to a sale in the inverse order
of alienation, or to direct the order in which any of the
Property, shall be sold in the event of foreclosure of the liens
and security interests hereby created and agrees that any court
having jurisdiction to foreclose such liens and security
interests may order the Property sold as an entirety; and (c)
waives, releases, relinquishes and forever forgoes all rights and
periods of redemption provided under applicable law. To the full
extent
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permitted by law, Mortgagor shall not have or assert any right
under any statute or rule of law pertaining to the exemption of
homestead or other exemption under any federal, state or local
law now or hereafter in effect, the administration of estates of
decedents or other matters whatever to defeat, reduce or affect
the right of Mortgagee under the terms of this Mortgage to a sale
of the Property, for the collection of the secured indebtedness
without any prior or different resort for collection, or the
right of Mortgagee under the terms of this Mortgage to the
payment of the indebtedness secured hereby out of the proceeds of
sale of the Property in preference to every other claimant
whatever. Further, Mortgagor hereby knowingly, intentionally and
voluntarily, with and upon the advice of competent counsel,
waives, releases, relinquishes and forever forgoes all present
and future statutes of limitations as a defense to any action to
enforce the provisions of this Mortgage or to collect any of the
indebtedness secured hereby the fullest extent permitted by law.
Mortgagor covenants and agrees that upon the commencement of a
voluntary or involuntary bankruptcy proceeding by or against
Mortgagor, Mortgagor shall not seek a supplemental stay or
otherwise pursuant to 11 U.S.C. Section 105 or any other
provision of the Bankruptcy Reform Act of 1978, as amended, or
any other debtor relief law (whether statutory, common law, case
law, or otherwise) of any jurisdiction whatsoever, now or
hereafter in effect, which may be or become applicable, to stay,
interdict, condition, reduce or inhibit the ability of Mortgagee
to enforce any rights of Mortgagee against any guarantor or
indemnitor of the secured obligations or any other party liable
with respect thereto by virtue of any indemnity, guaranty or
otherwise.
1.28. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(A) MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE
ADVICE OF COMPETENT COUNSEL, (I) SUBMITS TO PERSONAL JURISDICTION
IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING BY
ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS MORTGAGE OR
ANY OTHER OF THE LOAN DOCUMENTS, (II) AGREES THAT ANY SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION SITTING IN NEW YORK COUNTY, NEW
YORK, (III) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND, (IV)
TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT
BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT
NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO BRING ANY
ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM). MORTGAGOR FURTHER
CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE
MORTGAGOR AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 4.5
HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT
NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTLVENESS OF
PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
(B) MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE
ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER
FORGOES THE RIGHT
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TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO THE INDEBTEDNESS
SECURED HEREBY OR ANY CONDUCT, ACT OR OMISSION OF MORTGAGEE OR
MORTGAGOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS,
MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH MORTGAGEE OR MORTGAGOR, IN EACH OR THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
1.29. CONTRACTUAL STATUTE OF LIMITATIONS. Mortgagor
hereby agrees that any claim or cause of action by Mortgagor
against Mortgagee, or any of Mortgagee's directors, officers,
employees, agents, accountants or attorneys, based upon, arising
from or relating to the indebtedness secured hereby, or any other
matter, cause or thing whatsoever, whether or not relating
thereto, occurred, done, omitted or suffered to be done by
Mortgagee or by Mortgagee's directors, officers, employees,
agents, accountants or attorneys, whether sounding in contract or
in tort or otherwise, shall be barred unless asserted by
Mortgagor by the commencement of an action or proceeding in a
court of competent jurisdiction by the filing of a complaint
within one (1) year after Mortgagor first acquires or reasonably
should have acquired knowledge of the first act, occurrence or
omission upon which such claim or cause of action, or any part
thereof, is based and service of a summons and complaint on an
officer of Mortgagee or any other person authorized to accept
service of process on behalf of Mortgagee, within thirty (30)
days thereafter. Mortgagor agrees that such one (1) year period
of time is reasonable and sufficient time for a borrower to
investigate and act upon any such claim or cause of action. The
one (1) year period provided herein shall not be waived, tolled
or extended except by the specific written agreement of
Mortgagee. This provision shall survive any termination of this
Mortgage or any of the other Loan Documents.
1.30. Intentionally Omitted.
1.31. Hazardous Waste and Other Substances.
(a) Mortgagor hereby represents and warrants to Mortgagee
that, as of the date hereof: (i) to the best of Mortgagor's
knowledge, information and belief, the Property is not in direct
or indirect violation of any local, state or federal law, rule or
regulation applicable to the Property pertaining to environmental
regulation, contamination or clean-up (collectively,
"Environmental Laws"), including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. Section 9601 ET SEQ. and 40 CFR Section
302.1 ET SEQ.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C.Section 6901 ET SEQ.), The Federal Water Pollution
Control Act (33 U.S.C. Section 1251 ET SEQ. and 40 CFR Section
116.1 ET SEQ.), and the Hazardous Materials Transportation Act
(49 U.S.C. Section 1801 ET SEQ.), the Industrial Site Recovery
Act, N.J.S.A. 13:1K-6 ET SEQ., the Leaking Underground Storage
Tank Act, N.J.S.A. 58:10A-21 ET SEQ., the Spill Compensation and
Control Act, N.J.S.A. 58:10-23.11 ET SEQ., and the regulations
promulgated pursuant to said laws, all as amended; (ii) to the
best knowledge of Mortgagor, no hazardous, toxic or harmful
substances, wastes, materials, pollutants or contaminants
(including, without limitation, asbestos, polychlorinated
biphenyls, petroleum products, flammable explosives, radioactive
materials, infectious substances or raw materials which include
hazardous constituents) or any other substances or materials
which are included under or regulated by Environmental Laws
(collectively, "Hazardous Substances") are located on or have
been handled, generated, stored, processed or disposed of on or
transported, released or
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discharged from the Property (including underground
contamination) except in the ordinary course of Mortgagor's
business and in compliance with all Environmental Laws; (iii) the
Property is not subject to any private or governmental lien or
judicial or administrative notice or action relating to Hazardous
Substances; (iv) there are no existing or closed underground
storage tanks or other underground storage receptacles for
Hazardous Substances on the Property; (v) Mortgagor has received
no notice of, and to the best of Mortgagor's knowledge and
belief, there exists no investigation, action, proceeding or
claim by any agency, authority or unit of government or by any
third party which could result in any liability, penalty,
sanction or judgment under any Environmental Laws with respect to
any condition, use or operation of the Property nor does
Mortgagor know of any basis for such a claim; and (vi) Mortgagor
has received no notice of and, to the best of Mortgagor's
knowledge and belief, there has been no claim by any party that
any use, operation or condition of the Property has caused any
nuisance or any other liability or adverse condition on any other
property nor does Mortgagor know of any basis for such a claim.
(b) Mortgagor shall keep or cause the Property to be kept
free from Hazardous Substances (except those substances used in
the ordinary course of business at the Property and in compliance
with all Environmental Laws) and in compliance with all
Environmental Laws, shall not install or use, or permit to be
installed or used, any underground storage tanks, shall expressly
prohibit the use, generation, handling, storage, production,
processing and disposal of Hazardous Substances by all tenants of
the Property, and, without limiting the generality of the
foregoing, during the term of this Mortgage, shall not install in
the Improvements or permit to be installed in the Improvements
asbestos or any substance containing asbestos.
(c) Mortgagor shall promptly notify Mortgagee if Mortgagor
shall become aware of the possible existence of any Hazardous
Substances on the Property or if Mortgagor shall become aware
that the Property is or may be in direct or indirect violation of
any Environmental Laws. Further, immediately upon receipt of the
same, Mortgagor shall deliver to Mortgagee copies of any and all
orders, notices, permits, applications, reports, and other
communications, documents and instruments pertaining to the
actual, alleged or potential presence or existence of any
Hazardous Substances at, on, about, under, within, near or in
connection with the Property. Mortgagor shall, promptly and when
and as required, at Mortgagor's sole cost and expense, take, or
cause to be taken, all actions as shall be necessary or advisable
for the clean-up of any and all portions of the Property or other
affected property, including, without limitation, all
investigative, monitoring, removal, containment and remedial
actions in accordance with all applicable Environmental Laws (and
in all events in a manner satisfactory to Mortgagee), and shall
further pay or cause to be paid, at no expense to Mortgagee, all
clean-up, administrative and enforcement costs of applicable
governmental agencies which may be asserted against the Property.
In the event Mortgagor fails to do so after notice from Mortgagee
and a reasonable time to perform, subject to the Ground Lease,
Mortgagee may, but shall not be obligated to, cause the Property
or other affected property to be freed from any Hazardous
Substances or otherwise brought into conformance with
Environmental Laws and any and all costs and expenses incurred by
Mortgagee in connection therewith, together with interest thereon
at the Default Interest Rate from the date incurred by Mortgagee
until actually paid by Mortgagor, shall be immediately paid by
Mortgagor on demand and shall be secured by this Mortgage and by
all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. Mortgagor hereby grants to
Mortgagee and its agents and employees access to the Property
and, subject to the ground lease of the Real Estate (as
heretofore amended, the "Ground Lease"), dated October 26, 1983,
between Resorts International, Inc. and Ocean Showboat, Inc. a
license to remove any items constituting Hazardous
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Substances and to do all things necessary to bring the Property
in conformance with Environmental Laws. Mortgagor covenants and
agrees, at Mortgagor's sole cost and expense, to indemnify,
defend (at trial and appellate levels, and with attorneys,
consultants and experts acceptable to Mortgagee), and hold
Mortgagee harmless from and against any and all liens, damages,
losses, liabilities, obligations, settlement payments, penalties,
assessments, citations, directives, claims, litigation, demands,
defenses, judgments, suits, proceedings, costs, disbursements or
expenses of any kind or of any nature whatsoever (including,
without limitation, reasonable attorneys', consultants' and
experts' fees and disbursements actually incurred in
investigating, defending, settling or prosecuting any claim,
litigation or proceeding) which may at any time be imposed upon,
incurred by or asserted or awarded against Mortgagee or the
Property, and arising directly or indirectly from or out of: (i)
the presence, release or threat of release of any Hazardous
Substances on, in, under or affecting all or any portion of the
Property or any surrounding areas, regardless of whether or not
caused by or within the control of Mortgagor; (ii) the violation
of any Environmental Laws relating to or affecting the Property,
whether or not caused by or within the control of Mortgagor;
(iii) the failure by Mortgagor to comply fully with the terms and
conditions of this Section 1.31; (iv) the breach of any
representation or warranty contained in this Section 1.31; or (v)
the enforcement of this Section 1.31, including, without
limitation, the cost of assessment, containment and/or removal of
any and all Hazardous Substances from all or any portion of the
Property or any surrounding areas, the cost of any actions taken
in response to the presence, release or threat of release of any
Hazardous Substances on, in, under or affecting any portion of
the Property or any surrounding areas to prevent or minimize such
release or threat of release so that it does not migrate or
otherwise cause or threaten danger to present or future public
health, safety, welfare or the environment, and costs incurred to
comply with the Environmental Laws in connection with all or any
portion of the Property or any surrounding areas. The indemnity
set forth in this Section 1.31(c) shall also include any
diminution in the value of the security afforded by the Property
or any future reduction in the sales price of the Property by
reason of any matter set forth in this Section 1.31(c).
Mortgagee's rights under this Section shall survive payment in
full of the indebtedness secured hereby and shall be in addition
to all other rights of Mortgagee under this Mortgage, the Note
and the other Loan Documents.
(d) Upon Mortgagee's request, at any time after the
occurrence of a default hereunder or at such other time, but not
more than once in any twelve (12) month period, as Mortgagee has
reasonable grounds to believe that Hazardous Substances are or
have been released, stored or disposed of on or around the
Property or that the Property may be in violation of the
Environmental Laws, Mortgagor shall provide, at Mortgagor's sole
cost and expense, an inspection or audit of the Property prepared
by a hydrogeologist or environmental engineer or other
appropriate consultant approved by Mortgagee indicating the
presence or absence of Hazardous Substances on the Property or an
inspection or audit of the Improvements prepared by an
engineering or consulting firm approved by Mortgagee indicating
the presence or absence of friable asbestos or substances
containing asbestos on the Property. If Mortgagor fails to
provide such inspection or audit within thirty (30) days after
such request, Mortgagee may order the same, and Mortgagor hereby
grants to Mortgagee and its employees and agents access to the
Property, subject to the Ground Lease, and a license to undertake
such inspection or audit. The cost of such inspection or audit,
together with interest thereon at the Default Interest Rate from
the date incurred by Mortgagee until actually paid by Mortgagor,
shall be immediately paid by Mortgagor on demand and shall be
secured by this Mortgage and by all of thc other Loan Documents
securing all or any part of the indebtedness evidenced by the
Note.
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(e) Without limiting the foregoing, where recommenced by a
"Phase I" or "Phase II" assessment or otherwise required by
Mortgagee, Mortgagor shall establish and comply with an
operations and maintenance program relative to the Property, in
form and substance acceptable to Mortgagee, prepared by an
environmental consultant acceptable to Mortgagee, which program
shall address any Hazardous Substances (including asbestos
containing material or lead based paint) that may now or in the
future be detected on the Property. Without limiting the
generality of the preceding sentence, Mortgagee may require (i)
periodic notices or reports to Mortgagee in form, substance and
at such intervals as Mortgagee may specify, (ii) an amendment to
such operations and maintenance program to address changing
circumstances, laws or other matters, (iii) at Mortgagor's sole
expense, supplemental examination of the Property by consultants
specified by Mortgagee, (iv) subject to the Ground Lease, access
to the Property, by Mortgagee, its agents or servicer, to review
and assess the environmental condition of the Property and
Mortgagor's compliance with any operations and maintenance
program, and (v) variation of the operations and maintenance
program in response to the reports provided by any such
consultants.
1.32. Indemnification; Subrogation.
(a) Mortgagor shall indemnify, defend and hold Mortgagee
harmless against: (i) any and all claims for brokerage, leasing,
finders or similar fees which may be made relating to the
Property or the secured indebtedness, and (ii) any and all
liability, obligations, losses, damages, penalties, claims,
actions, suits, costs and expenses (including Mortgagee's
reasonable attorneys' fees, together with reasonable appellate
counsel fees, if any) of whatever kind or nature which may be
asserted against, imposed on or incurred by Mortgagee in
connection with the secured indebtedness, this Mortgage, the
Property, or any part thereof, or the exercise by Mortgagee of
any rights or remedies granted to it under this Mortgage;
provided, however, that nothing herein shall be construed to
obligate Mortgagor to indemnify, defend and hold harmless
Mortgagee from and against any and all liabilities, obligations,
losses, damages, penalties, claims, actions, suits, costs and
expenses enacted against, imposed on or incurred by Mortgagee
solely by reason of Mortgagee's willful misconduct or gross
negligence.
(b) If Mortgagee is made a party defendant to any
litigation or any claim is threatened or brought against
Mortgagee concerning the secured indebtedness, this Mortgage, the
Property, or any part thereof, or any interest therein, or the
construction, maintenance, operation or occupancy or use thereof,
then Mortgagor shall indemnify, defend and hold Mortgagee
harmless from and against all liability by reason of said
litigation or claims, including reasonable attorneys' fees
(together with reasonable appellate counsel fees, if any) and
expenses incurred by Mortgagee in any such litigation or claim,
whether or not any such litigation or claim is prosecuted to
judgment. If Mortgagee commences an action against Mortgagor to
enforce any of the terms hereof or to prosecute any breach by
Mortgagor of any of the terms hereof or to recover any sum
secured hereby, Mortgagor shall pay to Mortgagee its reasonable
attorneys' fees (together with reasonable appellate counsel,
fees, if any) and expenses. The right to such attorneys' fees
(together with reasonable appellate counsel fees, if any) and
expenses shall be deemed to have accrued on the commencement of
such action, and shall be enforceable whether or not such action
is prosecuted to judgment. If Mortgagor breaches any term of this
Mortgage, Mortgagee may engage the services of an attorney or
attorneys to protect its rights hereunder, and in the event of
such engagement following any breach by Mortgagor, Mortgagor
shall pay Mortgagee reasonable attorneys' fees (together with
reasonable appellate counsel fees, if any) and expenses incurred
by Mortgagee, whether or not an action is actually
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commenced against Mortgagor by reason of such breach. All
references to "attorneys" in this Subsection and elsewhere in
this Mortgage shall include without limitation any attorney or
law firm engaged by Mortgagee and Mortgagee's in-house counsel,
and all references to "fees and expenses" in this Subsection and
elsewhere in this Mortgage shall include without limitation any
fees of such attorney or law firm and any allocation charges and
allocation costs of Mortgagee's in-house counsel.
(c) A waiver of subrogation shall be obtained by Mortgagor
from its insurance carrier and, consequently, Mortgagor waives
any and all right to claim or recover against Mortgagee, its
officers, employees, agents and representatives, for loss of or
damage to Mortgagor, the Property, Mortgagor's property or the
property of others under Mortgagor's control from any cause
insured against or required to be insured against by the
provisions of this Mortgage.
1.33. COVENANTS WITH RESPECT TO INDEBTEDNESS, OPERATIONS,
FUNDAMENTAL CHANGES OF MORTGAGOR. Mortgagor represents, warrants
and covenants as of the date of hereof and until such time as the
secured indebtedness is paid in full, that Mortgagor:
(a) does not own and will not own any encumbered asset
other than (i) the Property, and (ii) incidental personal
property necessary for the operation of the Property;
(b) is not engaged and will not engage in any business
other than the ownership and leasing of the Property;
(c) will not enter into any contract or agreement with any
member, principal or affiliate of the Mortgagor or any affiliate
of the members of the Mortgagor except upon terms and conditions
that are intrinsically fair and substantially similar to those
that would be available on an arms-length basis with third
parties other than an affiliate, and has not made and will not
make any loans or advances to any third part, (including any
affiliate);
(d) has not incurred and will not incur any debt secured
or unsecured, direct or contingent (including guaranteeing any
obligation), other than the secured indebtedness;
(e) [RESERVED]
(f) is and will be solvent and pay its debts from its
assets as the same shall become due;
(g) has done or caused to be done and will do all things
necessary to preserve its existence, and will not, nor will any
member or shareholders thereof, amend, modify or otherwise change
its organizational documents in a manner which adversely affects
the Mortgagor's existence as a single purpose, bankruptcy remote
entity;
(h) will conduct and operate its business as presently
conducted and operated;
(i) will maintain books and records and bank accounts
separate from those of its affiliates, including its members;
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(j) will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other
entity (including any affiliate thereof, including any member or
any affiliate of the general partner of the Mortgagor);
(k) will file its own tax returns;
(l) will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations;
(m) will not seek the dissolution or winding up, in whole
or in part, of the Mortgagor;
(n) will not enter into any transaction of merger or
consolidation, or acquire by purchase or otherwise all or
substantially all of the business or assets of, or any stock or
beneficial ownership of, any entity;
(o) will not commingle the funds and other assets of the
Mortgagor with those of any member, any affiliate or any other
person;
(p) has and will maintain its assets in such a manner that
it is not costly or difficult to segregate, ascertain or identify
its individual assets from those of any affiliate or any other
person; and
(q) does not and will not hold itself out to be
responsible for the debts or obligations of any other person.
1.34. HANDICAPPED ACCESS. (a) Mortgagor agrees that the
Property shall at all times comply to the extent applicable with
the requirements of the Americans with Disabilities Act of 1990,
the Fair Housing Amendments Act of 1988, all state and local laws
and ordinances related to handicapped access and all rules,
regulations, and orders issued pursuant thereto including,
without limitation, the American with Disabilities Act
Accessibility Guidelines for Buildings and Facilities
(collectively, "Access Laws").
(b) Mortgagor agrees to give prompt notice to Mortgagee of
the receipt by Mortgagor of any complaints related to violations
of any Access Laws and of the commencement of any proceedings or
investigation which relate to compliance with applicable Access
Laws.
ARTICLE 2.
EVENTS OF DEFAULT
2.1. EVENTS OF DEFAULT. The occurrence of any of the
following events shall be a default hereunder:
(a) Mortgagor fails to timely perform any covenant,
agreement, obligation, term or condition hereof or of any other
Loan Document, including the Note, which requires payment of any
money to Mortgagee.
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(b) Mortgagor fails to provide, or to cause the provision
of, insurance as required by Section 1.4 hereof or fails to
perform any covenant, agreement, obligation, term or condition
set forth in Section 1.16 or 1.31 hereof.
(c) Mortgagor fails to perform any other covenant,
agreement, obligation, term or condition set forth herein other
than those otherwise described in this Section 2.1 and, to the
extent such failure or default is susceptible of being cured, the
continuance of such failure or default for thirty (30) days after
written notice thereof from Mortgagee to Mortgagor; PROVIDED,
HOWEVER, that if such default is susceptible of cure but such
cure cannot be accomplished with reasonable diligence within said
period of time, and if Mortgagor commences to cure such default
promptly after receipt of notice thereof from Mortgagee, and
thereafter prosecutes the curing of such default with reasonable
diligence, such period of time shall be extended for such period
of time as may be necessary to cure such default with reasonable
diligence, but not to exceed an additional sixty (60) days.
(d) Any representation or warranty made herein, in or in
connection with any application or commitment relating to the
loan evidenced by the Note, or in any of the other Loan Documents
to Mortgagee by Mortgagor, by any principal, member or general
partner in Mortgagor or by any indemnitor or guarantor under any
indemnity or guaranty executed in connection with the loan
secured hereby is determined by Mortgagee to have been false or
misleading in any material respect at the time made.
(e) There shall be a sale, conveyance, disposition,
alienation, hypothecation, leasing, assignment, pledge, mortgage,
granting of a security interest in or other transfer or further
encumbrancing of the Property, Mortgagor or its members, or any
portion thereof or any interest therein, in violation of Section
1.13 hereof.
(f) A default occurs under any of the other Loan Documents
which has not been cured within any applicable grace or cure
period therein provided.
(g) Mortgagor, any principal or member of Mortgagor
owning, directly or indirectly, twenty-five percent (25%) or more
of the interests in Mortgagor, or any indemnitor or guarantor
under any indemnity or guaranty executed in connection with the
loan secured hereby becomes insolvent, or shall make a transfer
in fraud of creditors, or shall make an assignment for the
benefit of creditors, shall file a petition in bankruptcy, shall
voluntarily be adjudicated insolvent or bankrupt or shall admit
in writing the inability to pay debts as they mature, shall
petition or apply to any tribunal for or shall consent to or
shall not contest the appointment of a receiver, trustee,
custodian or similar officer for Mortgagor, for any such
principal or member of Mortgagor or for any such indemnitor or
guarantor or for a substantial part of the assets of Mortgagor,
of any such principal or member of Mortgagor or of any such
indemnitor or guarantor, or shall commence any case, proceeding
or other action under any bankruptcy, reorganization,
arrangement, readjustment or debt, dissolution or liquidation law
or statute of any jurisdiction, whether now or hereafter in
effect.
(h) A petition is filed or any case, proceeding or other
action is commenced against Mortgagor, against any principal or
member of Mortgagor owning, directly or indirectly, twenty-five
percent (25%) or more of the interests in Mortgagor, or against
any indemnitor or guarantor under any indemnity, or guaranty
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executed in connection with the loan secured hereby seeking to
have an order for relief entered against it as debtor or seeking
reorganization, arrangement, adjustment, liquidation, dissolution
or composition of it or its debts or other relief under any law
relating to bankruptcy, insolvency, arrangement, reorganization,
receivership or other debtor relief under any law or statute of
any jurisdiction, whether now or hereafter in effect, or a court
of competent jurisdiction enters an order for relief against
Mortgagor, against any principal or member of Mortgagor or
against any indemnitor or guarantor under any indemnity or
guaranty executed in connection with the loan secured hereby, as
debtor, or an order, judgment or decree is entered appointing,
with or without the consent of Mortgagor, of any such principal
or member of Mortgagor or of any such indemnitor or guarantor, a
receiver, trustee, custodian or similar officer for Mortgagor,
for any such principal or member of Mortgagor or for any such
indemnitor or guarantor, or for any substantial part of any of
the properties of Mortgagor, of any such principal or member of
Mortgagor or of any such indemnitor or guarantor, and if any such
event shall occur, such petition, case, proceeding, action,
order, judgment or decree shall not be dismissed within sixty
(60) days after being commenced.
(i) The Property or any part thereof shall be taken on
execution or other process of law in any action against
Mortgagor.
(j) Mortgagor abandons all or a portion of the Property.
(k) The holder of any lien or security interest on the
Property (without implying the consent of Mortgagee to the
existence or creation of any such lien or security interest),
whether superior or subordinate to this Mortgage or any of the
other Loan Documents, declares a default and such default is not
cured within any applicable grace or cure period set forth in the
applicable document or such holder institutes foreclosure or
other proceedings for the enforcement of its remedies thereunder.
(l) The Property, or any part thereof, is subjected to
actual or threatened waste or to removal, demolition or material
alteration so that the value of the Property is materially
diminished thereby and Mortgagee determines (in its subjective
determination) that it is not adequately protected from any loss,
damage or risk associated therewith.
(m) Any dissolution, termination, partial or complete
liquidation, merger or consolidation of Mortgagor or any of its
principals or members owning, directly or indirectly, twenty-five
percent (25%) or more of the interests in Mortgagor.
(n) [RESERVED]
(o) A default by Mortgagor occurs under the Ground Lease
which default has not been cured within any applicable grace or
cure period, if any, provided therein.
ARTICLE 3.
REMEDIES
3.l. REMEDIES AVAILABLE. If there shall occur a default
under this Mortgage, and such default has not been cured within
any applicable grace or cure period, then this Mortgage is
subject to foreclosure as provided by law and Mortgagee may, at
its option and by or through a trustee, nominee, assignee or
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otherwise, to the fullest extent permitted by law, exercise any
or all of the following rights, remedies and recourses, either
successively or concurrently:
(a) ACCELERATION. Accelerate the maturity date of the Note
and declare any or all of the indebtedness secured hereby to be
immediately due and payable without any presentment, demand,
protest, notice or action of any kind whatever (each of which is
hereby expressly waived by Mortgagor), whereupon the same shall
become immediately due and payable. Upon any such acceleration,
payment of such accelerated amount shall constitute a prepayment
of the principal balance of the Note and any applicable
prepayment fee provided for in the Note shall then be immediately
due and payable.
(b) ENTRY ON THE PROPERTY. Either in person or by agent,
with or without bringing any action or proceeding, or by a
receiver appointed by a court and without regard to the adequacy
of its security, enter upon and take possession of the Property,
or any part thereof, without force or with such force as is
permitted by law and without notice or process or with such
notice or process as is required by law unless such notice and
process is waivable, in which case Mortgagor hereby waives such
notice and process, and do any and all acts and perform any and
all work which may be desirable or necessary in Mortgagee's
judgment to preserve the value, marketability or rentability of
the Property, to increase the income therefrom, to manage and
operate the Property or to protect the security hereof and all
sums expended by Mortgagee therefor, together with interest
thereon at the Default Interest Rate, shall be immediately due
and payable to Mortgagee by Mortgagor on demand and shall be
secured hereby and by all of the other Loan Documents securing
all or any part of the indebtedness evidenced by the Note.
(c) COLLECT RENTS AND PROFITS. With or without taking
possession of the Property, sue or otherwise collect the Rents
and Profits, including those past due and unpaid.
(d) APPOINTMENT OF RECEIVER. Upon, or at any time prior or
after, initiating the exercise of any power of sale, instituting
any judicial foreclosure or instituting any other foreclosure of
the liens and security interests provided for herein or any other
legal proceedings hereunder, make application to a court of
competent jurisdiction for appointment of a receiver for all or
any part of the Property, as a matter of strict right and without
notice to Mortgagor and without regard to the adequacy of the
Property for the repayment of the indebtedness secured hereby or
the solvency of Mortgagor or any person or persons liable for the
payment of the indebtedness secured hereby, and Mortgagor does
hereby irrevocably consent to such appointment, waives any and
all notices of and defenses to such appointment and agrees not to
oppose any application therefor by Mortgagee, but nothing herein
is to be construed to deprive Mortgagee of any other right,
remedy or privilege Mortgagee may now have under the law to have
a receiver appointed, PROVIDED, HOWEVER, that, the appointment of
such receiver, trustee or other appointee by virtue of any court
order, statute or regulation shall not impair or in any manner
prejudice the rights of Mortgagee to receive payment of the Rents
and Profits pursuant to other terms and provisions hereof. Any
such receiver shall have all of the usual powers and duties of
receivers in similar cases, including, without limitation, the
full power to hold, develop, rent, lease, manage, maintain,
operate and otherwise use or permit the use of the Property upon
such terms and conditions as said receiver may deem to be prudent
and reasonable under the circumstances as more fully set forth in
Section 3.3 below. Such receivership shall, at the option of
Mortgagee, continue until full payment of all of the indebtedness
secured hereby or until title to the Property shall have passed
by foreclosure sale under this Mortgage or deed in lieu of
foreclosure.
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(e) FORECLOSURE. Immediately commence an action to
foreclose this Mortgage or to specifically enforce its provisions
or any of the indebtedness secured hereby pursuant to the
statutes in such case made and provided and sell the Property or
cause the Property to be sold in accordance with the requirements
and procedures provided by said statutes in a single parcel or in
several parcels at the option of Mortgagee.
(1) In the event foreclosure proceedings are filed by
Mortgagee, all expenses incident to such proceeding, including,
but not limited to, attorneys' fees and costs, shall be paid by
Mortgagor and secured by this Mortgage and by all of the other
Loan Documents securing all or any part of the indebtedness
evidenced by the Note. The secured indebtedness and all other
obligations secured by this Mortgage, including, without
limitation, interest at the Default Interest Rate (as defined in
the Note), any prepayment charge, fee or premium required to be
paid under the Note in order to prepay principal (to the extent
permitted by applicable law), attorneys' fees and any other
amounts due and unpaid to Mortgagee under the Loan Documents, may
be bid by Mortgagee in the event of a foreclosure sale hereunder.
In the event of a judicial sale pursuant to a foreclosure decree,
it is understood and agreed that Mortgagee or its assigns may
become the purchaser of the Property or any part thereof.
(2) Mortgagee may, by following the procedures and
satisfying the requirements prescribed by applicable law,
foreclose on only a portion of the Property and, in such event,
said foreclosure shall not affect the lien of this Mortgage on
the remaining portion of the Property foreclosed.
(f) OTHER. Exercise any other right or remedy available
hereunder, under any of the other Loan Documents or at law or in
equity.
3.2. APPLICATION OF PROCEEDS. To the fullest extent
permitted by law, the proceeds of any sale under this Mortgage
shall be applied to the extent funds are so available to the
following items in such order as Mortgagee in its discretion may
determine:
(a) To payment of the costs, expenses and fees of taking
possession of the Property, and of holding, operating,
maintaining, using, leasing, repairing, improving, marketing and
selling the same and of otherwise enforcing Mortgagee's right and
remedies hereunder and under the other Loan Documents, including,
but not limited to, receivers' fees, court costs, attorneys',
accountants', appraisers', managers' and other professional fees,
title charges and transfer taxes or fees.
(b) To payment of all sums expended by Mortgagee under the
terms of any of the Loan Documents and not yet repaid, together
with interest on such sums at the Default Interest Rate.
(c) To payment of the secured indebtedness and all other
obligations secured by this Mortgage, including, without
limitation, interest at the Default Interest Rate and, to the
extent permitted by applicable law, any prepayment fee, charge or
premium required to be paid under the Note in order to prepay
principal, in any order that Mortgagee chooses in its sole
discretion.
The remainder, if any, of such funds shall be
disbursed to Mortgagor or to the person or persons legally
entitled thereto.
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3.3. RIGHT AND AUTHORITY OF RECEIVER OR MORTGAGEE IN THE
EVENT OF DEFAULT; POWER OF ATTORNEY. Upon the occurrence of a
default hereunder, which default is not cured within any
applicable grace or cure period, and entry upon the Property
pursuant to Section 3.1(b) hereof or appointment of a receiver
pursuant to Section 3.1(d) hereof, and under such terms and
conditions as may be prudent and reasonable under the
circumstances in Mortgagee's or the receiver's sole discretion,
all at Mortgagor's expense, Mortgagee or said receiver, or such
other persons or entities as they shall hire, direct or engage,
as the case may be, may do or permit one or more of the
following, successively or concurrently, subject to the Ground
Lease: (a) enter upon and take possession and control of any and
all of the Property; (b) take and maintain possession of all
documents, books, records, papers and accounts relating to the
Property; (c) exclude Mortgagor and its agents, servants and
employees wholly from the Property; (d) manage and operate the
Property; (e) preserve and maintain the Property; (f) make
repairs and alterations to the Property; (g) complete any
construction or repair of the Improvements, with such changes,
additions or modifications of the plans and specifications or
intended disposition and use of the Improvements as Mortgagee may
in its sole discretion deem appropriate or desirable to place the
Property in such condition as will, in Mortgagee's sole
discretion, make it or any part thereof readily marketable or
rentable; (h) conduct a marketing or leasing program with respect
to the Property, or employ a marketing or leasing agent or agents
to do so, directed to the leasing or sale of the Property under
such terms and conditions as Mortgagee may in its sole discretion
deem appropriate or desirable; (i) employ such contractors,
subcontractors, materialmen, architects, engineers, consultants,
managers, brokers, marketing agents, or other employees, agents,
independent contractors or professionals, as Mortgagee may in its
sole discretion deem appropriate or desirable to implement and
effectuate the rights and powers herein granted; (j) execute and
deliver, in the name of Mortgagor as attorney-in-fact and agent
of Mortgagor or in its own name as Mortgagee, such documents and
instruments as are necessary or appropriate to consummate
authorized transactions; (k) enter such leases, whether of real
or personal property, or tenancy agreements, under such terms and
conditions as Mortgagee may in its sole discretion deem
appropriate or desirable; (1) collect and receive the Rents and
Profits from the Property; (m) eject tenants or repossess
personal property, as provided by law, for breaches of the
conditions of their leases or other agreements; (n) sue for
unpaid Rents and Profits, payments, income or proceeds in the
name of Mortgagor or Mortgagee; (o) maintain actions in forcible
entry and detainer, ejectment for possession and actions in
distress for rent; (p) compromise or give acquittance for Rents
and Profits, payments, income or proceeds that may become due;
(q) delegate or assign any and all rights and powers given to
Mortgagee by this Mortgage; and (r) do any acts which Mortgagee
in its sole discretion deems appropriate or desirable to protect
the security hereof and use such measures, legal or equitable, as
Mortgagee may in its sole discretion deem appropriate or
desirable to implement and effectuate the provisions of this
Mortgage. This Mortgage shall constitute a direction to and full
authority to any lessee, or other third party who has heretofore
dealt or contracted or may hereafter deal or contract with
Mortgagor or Mortgagee, at the request of Mortgagee, to pay all
amounts owing under any lease, contract, concession, license or
other agreement to Mortgagee without proof of the default relied
upon. Any such lessee or third party is hereby irrevocably
authorized to rely upon and comply with (and shall be fully
protected by Mortgagor in so doing) any request, notice or demand
by Mortgagee for the payment to Mortgagee of any Rents and
Profits or other sums which may be or thereafter become due under
its lease, contract, concession, license or other agreement, or
for the performance of any undertakings under any such lease,
contract, concession, license or other agreement, and shall have
no right or duty to inquire whether any default under this
Mortgage or under any of the other Loan Documents has actually
occurred or is then existing. Mortgagor hereby constitutes and
appoints Mortgagee, its assignees, successors, transferees and
nominees, as Mortgagor's true
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and lawful attorney-in-fact and agent, with full power of
substitution in the Property, in Mortgagor's name, place and
stead, to do or permit any one or more of the foregoing described
rights, remedies, powers and authorities, successively or
concurrently, and said power of attorney shall be deemed a power
coupled with an interest and irrevocable so long as any
indebtedness secured hereby is outstanding. Any money advanced
by Mortgagee in connection with any action taken under this
Section 3.3, together with interest thereon at the Default
Interest Rate from the date of making such advancement by
Mortgagee until actually paid by Mortgagor, shall be a demand
obligation owing by Mortgagor to Mortgagee and shall be secured
by this Mortgage and by every other instrument securing the
secured indebtedness.
3.4. OCCUPANCY AFTER FORECLOSURE. In the event there is a
foreclosure sale hereunder and at the time of such sale,
Mortgagor or Mortgagor's representatives, successors or assigns,
or any other persons claiming any interest in the Property by,
through or under Mortgagor (except tenants of space in the
Improvements subject to leases entered into prior to the date
hereof), are occupying or using the Property, or any part
thereof, then, to the extent not prohibited by applicable law,
each and all shall, at the option of Mortgagee or the purchaser
at such sale, as the case may be, immediately become the tenant
of the purchaser at such sale, which tenancy shall be a tenancy
from day-to-day, terminable at the will of either landlord or
tenant, at a reasonable rental per day based upon the value of
the Property occupied or used, such rental to be due daily to the
purchaser. Further, to the extent permitted by applicable law,
in the event the tenant fails to surrender possession of the
Property upon the termination of such tenancy, the purchaser
shall be entitled to institute and maintain an action for
unlawful detainer of the Property in the appropriate court of the
county in which the Real Estate is located.
3.5. NOTICE TO ACCOUNT DEBTORS. Mortgagee may, at any time
after a default hereunder, which default is not cured within any
applicable grace or cure period, notify the account debtors and
obligors of any accounts, chattel paper, negotiable instruments
or other evidences of indebtedness to Mortgagor included in the
Property to pay Mortgagee directly. Mortgagor shall at any time
or from time to time upon the request of Mortgagee provide to
Mortgagee a current list of all such account debtors and obligors
and their addresses.
3.6. CUMULATIVE REMEDIES. All remedies contained in this
Mortgage are cumulative and Mortgagee shall also have all other
remedies provided at law and in equity or in any other Loan
Documents. Such remedies may be pursued separately, successively
or concurrently at the sole subjective direction of Mortgagee and
may be exercised in any order and as often as occasion therefor
shall arise. No act of Mortgagee shall be construed as an
election to proceed under any particular provisions of this
Mortgage to the exclusion of any other provision of this Mortgage
or as an election of remedies to the exclusion of any other
remedy which may then or thereafter be available to Mortgagee.
No delay or failure by Mortgagee to exercise any right or remedy
under this Mortgage shall be construed to be a waiver of that
right or remedy or of any default hereunder. Mortgagee may
exercise any one or more of its rights and remedies at its option
without regard to the adequacy of its security.
3.7. PAYMENT OF EXPENSES. Mortgagor shall pay on demand all
of Mortgagee's expenses incurred in any efforts to enforce any
terms of this Mortgage, whether or not any lawsuit is filed and
whether or not foreclosure is commenced but not completed,
including, but not limited to, legal fees and disbursements,
foreclosure costs and title charges, together with interest
thereon from and after the date
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incurred by Mortgagee until actually paid by Mortgagor at the
Default Interest Rate, and the same shall be secured by this
Mortgage and by all of the other Loan Documents securing all or
any part of the indebtedness evidenced by the Note.
ARTICLE 4.
MISCELLANEOUS TERMS AND CONDITIONS
4.1. TIME OF ESSENCE. Time is of the essence with respect
to all provisions of this Mortgage.
4.2. RELEASE OF MORTGAGE. If all of the secured
indebtedness be paid, then and in that event only, all rights
under this Mortgage shall terminate except for those provisions
hereof which by their terms survive, and the Property shall
become wholly clear of the liens, security interests,
conveyances and assignments evidenced hereby, which shall be
released by Mortgagee in due form upon Mortgagor's request and
at Mortgagor's cost. No release of this Mortgage or the lien
hereof shall be valid unless executed by Mortgagee.
4.3. CERTAIN RIGHTS OF MORTGAGEE. Without affecting
Mortgagor's liability for the payment of any of the
indebtedness secured hereby, Mortgagee may from time to time
and without notice to Mortgagor: (a) release any person liable
for the payment of the indebtedness secured hereby; (b) extend
or modify the terms of payment of the indebtedness secured
hereby; (c) accept additional real or personal property of any
kind as security or alter, substitute or release any property
securing the indebtedness secured hereby; (d) recover any part
of the Property; (e) consent in writing to the making of any
subdivision map or plat thereof; (f) join in granting any
easement therein; or (g) join in any extension agreement of
this Mortgage or any agreement subordinating the lien hereof.
4.4. WAIVER OF CERTAIN DEFENSES. No action for the
enforcement of the lien hereof or of any provision hereof shall
be subject to any defense which would not be good and available
to the party interposing the same in an action at law upon the
Note or any of the other Loan Documents.
4.5. NOTICES. All notices, demands, requests or other
communications to be sent by one party to the other hereunder
or required by law shall be in writing and shall be deemed to
have been validly given or served by delivery of the same in
person to the intended addressee, or by depositing the same
with Federal Express or another reputable private courier
service for next business day delivery, or by depositing the
same in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, in any event
addressed to the intended addressee at its address set forth on
the first page of this Mortgage or at such other address as may
be designated by such party as herein provided. All notices,
demands and requests shall be effective upon such personal
delivery, or one (1) business day after being deposited with
the private courier service, or two (2) business days after
being deposited in the United States mail as required above.
Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice,
demand or request sent. By giving to the other party hereto at
least fifteen (15) days' prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall
have the right from time to time to change their respective
addresses and each shall have the right to specify as its
address any other address within the United States of America.
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4.6. SUCCESSORS AND ASSIGNS. The terms, provisions,
indemnities, covenants and conditions hereof shall be binding
upon Mortgagor and the successors and assigns of Mortgagor,
including all successors in interest of Mortgagor in and to all
or any part of the Property, and shall inure to the benefit of
Mortgagee, its directors, officers, shareholders, employees and
agents and their respective successors and assigns and shall
constitute covenants running with the land. All references in
this Mortgage to Mortgagor or Mortgagee shall be deemed to
include all such parties' successors and assigns, and the term
"Mortgagee" as used herein shall also mean and refer to any
lawful holder or owner, including pledgees and participants, of
any of the indebtedness secured hereby. If Mortgagor consists of
more than one person or entity, each will be jointly and
severally liable to perform the obligations of Mortgagor.
4.7. SEVERABILITY. A determination that any provision of
this Mortgage is unenforceable or invalid shall not affect the
enforceability or validity of any other provision, and any
determination that the application of any provision of this
Mortgage to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of
such provision as it may apply to any other persons or
circumstances.
4.8. GENDER. Within this Mortgage, words of any gender
shall be held and construed to include any other gender, and
words in the singular shall be held and construed to include the
plural, and vice versa, unless the context otherwise requires.
4.9. WAIVER; DISCONTINUANCE OF PROCEEDINGS. Mortgagee may
waive any single default by Mortgagor hereunder without waiving
any other prior or subsequent default. Mortgagee may remedy any
default by Mortgagor hereunder without waiving the default
remedied. Neither the failure by Mortgagee to exercise, nor the
delay by Mortgagee in exercising, any right, power or remedy upon
any default by Mortgagor hereunder shall be construed as a waiver
of such default or as a waiver of the right to exercise any such
right, power or remedy at a later date. No single or partial
exercise by Mortgagee of any right, power or remedy hereunder
shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy hereunder
may be exercised at any time and from time to time. No
modification or waiver of any provision hereof nor consent to any
departure by Mortgagor therefrom shall in any event be effective
unless the same shall be in writing and signed by Mortgagee, and
then such waiver or consent shall be effective only in the
specific instance and for the specific purpose given. No notice
to nor demand on Mortgagor in any case shall of itself entitle
Mortgagor to any other or further notice or demand in similar or
other circumstances. Acceptance by Mortgagee of any payment in
an amount less than the amount then due on any of the secured
indebtedness shall be deemed an acceptance on account only and
shall not in any way affect the existence of a default hereunder.
In case Mortgagee shall have proceeded to involve any right,
remedy or recourse permitted hereunder or under the other Loan
Documents and shall thereafter elect to discontinue or abandon
the same for any reason, Mortgagee shall have the unqualified
right to do so and, in such an event, Mortgagor and Mortgagee
shall be restored to their former positions with respect to the
indebtedness secured hereby, the Loan Documents, the Property and
otherwise, and the rights, remedies, recourses and powers of
Mortgagee shall continue as if the same had never been involved.
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4.10. SECTION HEADINGS. The headings of the sections and
paragraphs of this Mortgage are for convenience of reference
only, are not to be considered a part hereof and shall not limit
or otherwise affect any of the terms hereof.
4.11. GOVERNING LAW. This Mortgage will be governed by and
construed in accordance with the laws of the State of New York,
provided that to the extent that any of such laws may now or
hereafter be preempted by Federal law, in which case such
Federal law shall so govern and be controlling; and provided
further that the laws of the state in which the Real Estate is
located shall govern as to the creation, priority and enforcement
of liens and security interests in property located in such
state.
4.12. COUNTING OF DAYS. The term "days" when used herein
shall mean calendar days. If any time period ends on a Saturday,
Sunday or holiday officially recognized by the state within
which the Real Estate is located, the period shall be deemed
to end on the next succeeding business day. The term "business
day" when used herein shall mean a weekday, Monday through
Friday, except a legal holiday or a day on which banking
institutions in New York, New York are authorized by law to be
closed.
4.13. RELATIONSHIP OF THE PARTIES. The relationship
between Mortgagor and Mortgagee is that of a borrower and a
lender only and neither of those parties is, nor shall it hold
itself out to be, the agent, employee, joint venturer or partner
of the other party.
4.14. APPLICATION OF THE PROCEEDS OF THE NOTE. To the
extent that proceeds of the Note are used to pay indebtedness
secured by any outstanding lien, security interest, charge or
prior encumbrance against the Property, such proceeds have been
advanced by Mortgagee at Mortgagor's request and Mortgagee shall
be subrogated to any and all rights, security interests and liens
owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said
liens, security interests, charges or encumbrances are released.
4.15. UNSECURED PORTION OF INDEBTEDNESS. If any part of
the secured indebtedness cannot be lawfully secured by this
Mortgage or if any part of the Property cannot be lawfully
subject to the lien and security interest hereof to the full
extent of such indebtedness, then all payments made shall be
applied on said indebtedness first in discharge of that portion
there of which is unsecured by this Mortgage.
4.16. CROSS DEFAULT. A default hereunder which has not
been cured within any applicable grace or cure period shall be a
default under each of the other Loan Documents.
4.17. INTEREST AFTER SALE. In the event the Property or
any part thereof shall be sold upon foreclosure as provided
hereunder, to the extent permitted by law, the sum for which the
same shall have been sold shall, for purposes of redemption
(pursuant to the laws of the state in which the Property is
located), bear interest at the Default Interest Rate.
4.18. INCONSISTENCY WITH OTHER LOAN DOCUMENTS. In the
event of any inconsistency between the provisions hereof and the
provisions in any of the other Loan Documents, it is intended
that the provisions selected by Mortgagee in its sole subjective
discretion shall be controlling.
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4.19. CONSTRUCTION OF THIS DOCUMENT. This document may
be construed as a mortgage, security deed, deed of trust, chattel
mortgage, conveyance, assignment, security agreement, pledge,
financing statement, hypothecation or contract, or any one or
more of the foregoing, in order to fully effectuate the liens and
security interests created hereby and the purposes and agreements
herein set forth.
4.20. NO MERGER. It is the desire and intention of the
parties hereto that this Mortgage and the lien hereof do not
merge in fee simple title to the Property. It is hereby
understood and agreed that should Mortgagee acquire any
additional or other interests in or to the Property or the
ownership thereof, then, unless a contrary intent is manifested
by Mortgagee as evidenced by an appropriate document duly
recorded, this Mortgage and the lien hereof shall not merge in
such other or additional interests in or to the Property, toward
the end that this Mortgage may be foreclosed as if owned by a
stranger to said other or additional interests.
4.21. RIGHTS WITH RESPECT TO JUNIOR ENCUMBRANCES. Any
person or entity purporting to have or to take a junior mortgage
or other lien upon the Property or any interest therein shall be
subject to the rights of Mortgagee to amend, modify, increase,
vary, alter or supplement this Mortgage, the Note or any of the
other Loan Documents and to extend the maturity date of the
indebtedness secured hereby and to increase the amount of the
indebtedness secured hereby and to waive or forebear the exercise
of any of its rights and remedies hereunder or under any of the
other Loan Documents and to release any collateral or security
for the indebtedness secured hereby in each and every case
without obtaining the consent of the holder of such junior lien
and without the lien or security interest of this Mortgage losing
its priority over the rights of any such junior lien.
4.22. MORTGAGEE MAY FILE PROOFS OF CLAIM. In the case
of any receivership, insolvency, bankruptcy, reorganization,
arrangement, adjustment, composition or other proceedings
affecting Mortgagor or the principals or general partners in
Mortgagor, or their respective creditors or property, Mortgagee,
to the extent permitted by law, shall be entitled to file such
proofs of claim and other documents as may be necessary or
advisable in order to have the claims of Mortgagee allowed in
such proceedings for the entire secured indebtedness at the date
of the institution of such proceedings and for any additional
amount which may become due and payable by Mortgagor hereunder
after such date.
4.23. FIXTURE FILING. This Mortgage shall be effective
from the date of its recording as a financing statement filed as
a fixture filing with respect to Mortgagor's interest in all
goods constituting part of the Property which are or are to
become fixtures.
4.24. AFTER-ACQUIRED PROPERTY. All property acquired by
Mortgagor after the date of this Mortgage which by the terms of
this Mortgage shall be subject to the lien and the security
interest created hereby, shall immediately upon the acquisition
thereof by Mortgagor and without further mortgage, conveyance or
assignment become subject to the lien and security interest
created by this Mortgage. Nevertheless, Mortgagor shall execute,
acknowledge, deliver and record or file, as appropriate, all and
every such further mortgages, security agreements, financing
statements, assignments and assurances as Mortgagee shall require
for accomplishing the purposes of this Mortgage.
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4.25. NO REPRESENTATION. By accepting delivery of any
item required to be observed, performed or fulfilled or to be
given to Mortgagee pursuant to the Loan Documents, including, but
not limited to, any officer's certificate, balance sheet,
statement of profit and loss or other financial statement,
survey, appraisal or insurance policy, Mortgagee shall not be
deemed to have warranted, consented to, or affirmed the
sufficiency, legality, effectiveness or legal effect of the same,
or of any term, provision or condition thereof, and such
acceptance of delivery thereof shall not be or constitute any
warranty, consent or affirmation with respect thereto by
Mortgagee.
4.26. COUNTERPARTS. This Mortgage may be executed in
any number of counterparts, each of which shall be effective only
upon delivery and thereafter shall be deemed an original, and all
of which shall be taken to be one and the same instrument, for
the same effect as if all parties hereto had signed the same
signature page. Any signature page of this Mortgage may be
detached from any counterpart of this Mortgage without impairing
the legal effect of any signatures thereon and may be attached to
another counterpart of this Mortgage identical in form hereto but
having attached to it one or more additional signature pages.
4.27. PERSONAL LIABILITY. Notwithstanding anything to
the contrary contained in this Mortgage, the liability of
Mortgagor for the indebtedness secured hereby and for the
performance of the other agreements, covenants and obligations
contained herein and in the Loan Documents shall be limited as
set forth in Section 1.05 of the Note; provided however that
nothing herein shall be deemed to be a waiver of any right which
Mortgagee may have under Sections 506(a), 506(b), 1111(b) or any
other provisions of the U.S. Bankruptcy Code to file a claim for
the full amount of the indebtedness secured hereby or to require
that all collateral shall continue to secure all indebtedness
owing to Mortgagee in accordance with the Note, this Mortgage and
the other Loan Documents.
4.28. RECORDING AND FILING. Mortgagor will cause the
Loan Documents and all amendments and supplements thereto and
substitutions therefor to be recorded, filed, re-recorded and re-
filed in such manner and in such places as Mortgagee shall
reasonably request, and will pay on demand all such recording,
filing, re-recording and re-filing taxes, fees and other charges.
Mortgagor shall reimburse Mortgagee, or its servicing agent, for
the costs incurred in obtaining a tax service company to verify
the status of payment of taxes and assessments on the Property.
4.29. ENTIRE AGREEMENT AND MODIFICATIONS. This Mortgage
and the other Loan Documents contain the entire agreements
between the parties relating to the subject matter hereof and
thereof and all prior agreements relative hereto and thereto
which are not contained herein or therein are terminated. This
Mortgage and the other Loan Documents may not be amended,
revised, waived, discharged, released or terminated orally but
only by a written instrument or instruments executed by the party
against which enforcement of the amendment, revision, waiver,
discharge, release or termination is asserted. Any alleged
amendment, revision, waiver, discharge, release or termination
which is not so documented shall not be effective as to any
party.
4.30. MAXIMUM INTEREST. The provisions of this Mortgage
and of all agreements between Mortgagor and Mortgagee, whether
now existing or hereafter arising and whether written or oral,
are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of demand or
45
<PAGE>
acceleration of the maturity of the Note or otherwise, shall the
amount paid, or agreed to be paid ("Interest"), to Mortgagee for
the use, forbearance or retention of the money loaned under the
Note exceed the maximum amount permissible under applicable law.
If, from any circumstance whatsoever, performance or fulfillment
of any provision hereof or of any agreement between Mortgagor and
Mortgagee shall, at the time performance or fulfillment of such
provision shall be due, exceed the limit for Interest prescribed
by law or otherwise transcend the limit of validity prescribed by
applicable law, then IPSO FACTO the obligation to be performed or
fulfilled shall be reduced to such limit and if, from any
circumstance whatsoever, Mortgagee shall ever receive anything of
value deemed Interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive Interest shall be
applied to the reduction of the principal balance owing under the
Note in the inverse order of its maturity (whether or not then
due) or at the option of Mortgagee be paid over to Mortgagor, and
not to the payment of Interest. All Interest (including any
amounts or payments deemed to be Interest) paid or agreed to be
paid to Mortgagee shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the
full period until payment in full of the principal balance of the
Note so that the Interest thereon for such full period will not
exceed the maximum amount permitted by applicable law. This
paragraph will control all agreements between Mortgagor and
Mortgagee.
4.31. Intentionally Omitted.
4.32. Intentionally Omitted.
4.33. COOPERATION.
(a) Mortgagor covenants and agrees that in the event
Mortgagee decides to include the Loan as an asset of a secondary
market transaction (a "Securitization"), Mortgagor shall, at
Mortgagee's request, (a) meet with representatives of rating
agencies to discuss the business and operations of the Property,
and (b) cooperate, and cause its affiliates to cooperate, with
the reasonable requests of rating agencies in connection with all
of the foregoing, including, without limitation, delivering
financial statements for Mortgagor and or its affiliates and such
other information as may be requested by such rating agencies.
Without limiting the foregoing, Mortgagor agrees that it will,
and will cause its members and principals to, reasonably
cooperate with Mortgagee in the Securitization, including,
without limitation:
(i) subject to obtaining any approval required to
be obtained from the Commission, amending this Mortgage and
the other Loan Documents, and executing such additional
documents, as may be required by the rating agencies;
(ii) modifying the Note to create multiple pari
passu notes, PROVIDED that the longest final maturity of any
such note shall not exceed ten (10) years, the weighted
average amortization of the principal amount of the pari
passu notes is not less than 30 years, and the weighted
average coupon for the life of the pari passu notes is no
higher than the Note Rate (as defined in the Note);
(iii) providing such information as may be
reasonably requested in connection with the preparation of a
private placement memorandum or registration statement
required to privately place or publicly distribute the
securities under the Securitization in a manner which does
not conflict with federal or state securities laws;
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<PAGE>
(iv) causing to be rendered such customary opinion
letters as may be requested by the rating agencies
(including, but not limited to, a substantive
non-consolidation opinion, an opinion letter from local real
estate counsel to Mortgagor stating that the assignment of
the Loan and the Loan Documents to the trustee under the
Securitization is enforceable, and opinions with respect to
the Property, Mortgagor and its affiliates);
(v) making such customary representations and
warranties with respect to Mortgagor and the Property as may
be requested by the rating agencies, consistent with the
facts covered by such representations and warranties as they
exist on the date thereof (including, but not limited to,
the representations and warranties made herein) which
representations and warranties shall survive the closing of
the Securitization;
(vi) providing such updated third party reports and
financial information regarding the Property and Mortgagor
and its affiliates and expanded ongoing administration and
reporting by the trust under the Securitization as may be
requested by the rating agencies or potential investors in
the securities or otherwise required in connection with the
election by the trust of REMIC status;
(vii) obtaining the insurance policies required
herein or otherwise required by the rating agencies in
connection with the Securitization;
(viii) amending Mortgagor's organizational documents
and/or making such other changes to Mortgagor's structure as
required by the rating agencies to the extent necessary to
conform to customary requirements for single purpose
bankruptcy remote entities in similar transactions;
(ix) obtaining comfort letter (in customary form and
containing customary exceptions) from a nationally
recognized accounting firm in connection with financial
information relating to Mortgagor and/or the Property and
which, in connection with the Securitization, shall be
represented in the private placement memorandum or
prospectus; and
(x) providing any indemnity required in connection
with the Securitization.
Mortgagee shall reimburse Mortgagor for the actual, out-of-
pocket, third-party costs and expenses incurred by Mortgagee in
order to comply with this Section 4.33.
(b) In addition, Mortgagee may elect to sell one or more
participation interests (each, a "Participation") in the Note.
In the event that Mortgagee notifies Mortgagor that the sale of
a participation to another party is a desirable course of action,
then Mortgagor shall cooperate with the Mortgagee in the
preparation of any information reasonably necessary or incidental
to such Participation with respect to the Property which is
reasonably within the possession or control of Mortgagor or is
obtainable by Mortgagor and shall in good faith enter into any
amendments to the Note and/or the Loan Documents necessary to
accomplish the Participation.
4.34. CASINO CONTROL COMMISSION.
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Mortgagee shall not take any action under this
Mortgage requiring under the New Jersey Casino Control Act (as
from time to time amended) or any successor provision of law, and
the regulations promulgated thereunder, would require the
approval of the Commission, without soliciting the prior approval
of the Commission; provided that if the Commission shall withhold
or deny its approval, Mortgagee shall have the right to contest
the Commission's decision.
4.35. FURTHER STIPULATIONS. The additional covenants,
agreements and provisions set forth in EXHIBIT C attached hereto,
if any, shall be a part of this Mortgage and shall, in the event
of any conflict between such further stipulations and any of the
other provisions of this Mortgage, be deemed to control.
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<PAGE>
IN WITNESS WHEREOF, Mortgagor has executed this
Mortgage as of the day and year first above written.
MORTGAGOR:
SHOWBOAT LAND, LLC
a Nevada limited liability company
By: Showboat Operating Company,
a Nevada corporation, a member
By: /s/ R. Craig Bird
R. Craig Bird, Executive Vice-
President
and Chief Financial Officer
By: Showboat Land Holding Limited
Partnership,
a Nevada limited partnership, a
member
By: Showboat Land Company, a Nevada
corporation,
its general partner
By: /s/ R. Craig Bird
R. Craig Bird, Vice-
President/Finance
<PAGE>
Acknowledgments
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK)
I certify that on January 23, 1998, R. Craig Bird personally
came before me and this person acknowledged under oath, to my
satisfaction, that:
(a) this person, signed, sealed and delivered the attached
document as Vice President/Finance of Showboat Land Company, a
Nevada corporation, which is the general partner of Showboat Land
Holding Limited Partnership, which is the member of Showboat
Land, LLC, the Nevada limited liability company named in this
document; and
(b) this document was signed and delivered by Showboat Land
Company, on behalf of Showboat Land, LLC, as its voluntary act
and deed by virtue of authority from its Board of Directors.
/s/ Maria A. Vargas
Notary Public
MARIA A. VARGAS
Notary Public, State of New York
No. 01VA5072319
Qualified in Kings County
Commission Expires January 27, 1999
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK)
I certify that on January 23, 1998, R. Craig Bird personally
came before me and this person acknowledged under oath, to my
satisfaction, that:
(a) this person, signed, sealed and delivered the attached
document as Executive Vice President and Chief Financial Officer
of Showboat Operating Company, which is the member of Showboat
Land, LLC, the Nevada limited liability company named in this
document; and
(b) this document was signed and delivered by Showboat
Operating Company, on behalf of Showboat Land, LLC, as its
voluntary act and deed by virtue of authority from its Board of
Directors.
/s/ Maria A. Vargas
Notary Public
MARIA A. VARGAS
Notary Public, State of New York
No. 01VA5072319
Qualified in Kings County
Commission Expires January 27, 1999
<PAGE>
PROMISSORY NOTE
$100,000,000 Loan No. WLD540070
January 29, 1998
New York, New York
FOR VALUE RECEIVED, the undersigned, SHOWBOAT LAND, LLC, a
Nevada limited liability company ("Borrower"), promises to pay to
the order of COLUMN FINANCIAL, INC., a Delaware corporation
("Lender"), at the office of Lender at 3414 Peachtree Road, N.E.,
Suite 1140, Atlanta, Georgia 30326 or at such other place as
Lender may designate to Borrower in writing from time to time,
the principal sum of ONE HUNDRED MILLION and NO/100 DOLLARS
($100,000,000.00), together with interest on so much thereof as
is from time to time outstanding and unpaid, from the date of the
advance of the principal evidenced hereby, at the rate of seven
and 9/100ths percent (7.09%) per annum (the "Note Rate"), in
lawful money of the United States of America, which shall at the
time of payment be legal tender in payment of all debts and dues,
public and private.
ARTICLE I - TERMS AND CONDITIONS
1.01 PAYMENT OF PRINCIPAL AND INTEREST.
(a) Said interest shall be computed hereunder based on a
365- or 366-day (as applicable) year and based on twelve (12) 30-
day months for each full calendar month end on the actual number
of days elapsed for any whole or partial month in which interest
is being calculated. In computing the number of days during
which interest accrues, the day on which funds are initially
advanced shall be included regardless of the time of day such
advance is made, and the day on which funds are repaid shall be
included unless repayment is credited prior to close of business.
Payments in federal funds immediately available in the place
designated for payment received by Lender prior to 3:00 p.m.
local time on a day on which Lender is open for business at said
place of payment shall be credited prior to close of business,
while other payments received by Lender, so long as such are
immediately available to Lender in federal funds in the place
designated for payment, shall be credited on the first (1st) day
thereafter on which Lender is open for business. Such principal
and interest shall be payable in equal consecutive monthly
installments of $671,357.80 each, beginning on (x) the first day
of the second full calendar month following the date of this Note
or (y) the first day of the first full calendar month following
the date hereof in the event the advance of the principal amount
evidenced by this Note is made on the first day of a calendar
month, and continuing on the first day of each and every month
thereafter through and including February 1, 2028 (the "Maturity
Date"), at which time the entire outstanding principal balance
hereof, together with all accrued but unpaid interest thereon,
shall be due and payable in full. Each such monthly installment
shall be applied first to the payment of accrued interest and
then to reduction of principal. If the funding of the principal
amount evidenced by this Note is made on a date other than the
first day of a calendar month, then Borrower shall pay to Lender
contemporaneously with the execution hereof interest at the
foregoing interest rate for a period from the date hereof through
and including the last day of the calendar month in which such
funding occurs.
(b) From and after the first day of February,
2008 (the "Preferred Prepayment Date"), Borrower shall
pay to Lender on the first day of each
calendar month, in addition to all amounts payable under
<PAGE>
subsection (a) above, all funds on deposit in the Curtailment
Reserve Sub-Account (as such term is defined in that certain Cash
Management Agreement dated as of the date hereof between Borrower
and Lender), to be applied in reduction of the outstanding
principal balance of this Note.
(c) From and after the Preferred Prepayment Date, the
outstanding principal balance of this Note shall, in addition to
interest at the Note Rate, accrue a second tranche of interest
(the "Additional Interest") at a rate equal to the lesser of
(i) the positive excess (if any) of (A) the 20-Year Treasury Rate
plus two percent (2.0%) per annum over (B) the Note Rate, and
(ii) five percent (5.0%) per annum. The term "20-Year Treasury
Rate" shall mean the linearly interpolated implied yield for a
U.S. Treasury obligation having a maturity corresponding to the
Maturity Date using the yields for the most closely corresponding
U.S. Treasury obligations with maturities longer and shorter than
the Maturity Date; provided that if any U.S. Treasury obligation
has a maturity that exactly corresponds to the Maturity Date,
then the yield for that U.S. Treasury obligation shall be the 20-
Year Treasury Rate. The yields used to calculate the 20-Year
Treasury Rate shall be the yields on page C13 of the Government
Section of Bloomberg News Service, or its successor, as of the
Business Day immediately prior to the Preferred Prepayment Date.
If no such rate or such statistical release is published, Lender
shall select a comparable interest rate index which is readily
available and verifiable to Borrower but is beyond Lender's
control. The Additional Interest shall accrue on the outstanding
principal balance of this Note from and after the Preferred
Prepayment Date and shall be payable only after the outstanding
principal balance of this Note shall have been paid in full.
1.02 PREPAYMENT.
(a) This Note may be prepaid in whole but not in part
(except as otherwise specifically provided herein) at any time
after the earlier of (1) the date of thirty-sixth (36th) monthly
installment of principal and interest due hereunder and (2) if
this Note and the Security Instrument become the subject of a
securitization, the date that is the second anniversary of the
closing of the securitization (in either ease, such date, the
"Lock Out Expiration Date") provided (i) written notice of such
prepayment is received by Lender not more than sixty (60) days
and not less than thirty (30) days prior to the date of such
prepayment, (ii) such prepayment is received on the first day of
a calendar month (or, if such prepayment is not received on the
first day of a calendar month, interest is paid through the last
day of such calendar month) and is accompanied by all interest
accrued hereunder and all other sums due hereunder or under the
other Loan Documents, and (iii) if this Note is being prepaid
prior to the Preferred Prepayment Date, Borrower shall have
delivered to Lender cash, treasury notes or other substitute
collateral acceptable to Lender sufficient, together with the
prepayment, to pay all scheduled payments of principal and
interest from and after the date of prepayment as and when due
hereunder, including, without limitation, the outstanding
principal balance hereof on the Preferred Prepayment Date (the
"Defeasance Payment"). No Defeasance Payment or other prepayment
fee or premium shall be due or payable in connection with any
prepayment of the indebtedness evidenced by the Note resulting
from application of insurance or condemnation proceeds as
provided in the Security Instrument at any time during the loan
term. With regard to any prepayment made hereunder, if the prior
written notice required in (i) above has not been received by
Lender, the prepayment shall be increased by an amount equal to
the lesser of (i) thirty (30) days' unearned interest computed on
the outstanding principal balance of this Note so prepaid and
(ii) unearned interest computed on the outstanding principal
balance of this Note so prepaid for the period from, and
including, the date of prepayment through the Preferred
Prepayment Date.
(b) Partial prepayments of this Note shall not be
permitted, except partial prepayments resulting from Lender
applying insurance or condemnation proceeds to reduce the
outstanding principal balance of this Note as provided in the
Security Instrument, in which event no Defeasance Payment or
other prepayment fee or premium shall be due. No
notice of prepayment shall be required under the
circumstance specified in the preceding sentence. No principal
amount repaid may be reborrowed. Partial payments of
<PAGE>
principal shall be applied to the unpaid principal balance
evidenced hereby but such application shall not reduce the amount
of the fixed monthly installments required to be paid pursuant to
Section 1.01 above.
(c) Except as otherwise expressly provided in Section
1.02(b) above, the Defeasance Payment provided above shall be
due, to the extent permitted by applicable law, under any and all
circumstances where all or any portion of this Note is paid prior
to the Maturity Date, whether such prepayment is voluntary or
involuntary, even if such prepayment results from Lender's
exercise of its rights upon Borrower's default and acceleration
of the maturity date of this Note (irrespective of whether
foreclosure proceedings have been commenced), and shall be in
addition to any other sums due hereunder or under any of the
other Loan Documents. No tender of a prepayment of this Note
with respect to which the Defeasance Payment is due shall be
effective unless such prepayment is accompanied by the Defeasance
Payment. If the indebtedness of this Note shall have been
declared due and payable by Lender pursuant to Section 1.04
hereof due to a default by Borrower, then any tender of payment
of such indebtedness made prior to the Lock Out Expiration Date
must include a Defeasance Payment computed as provided in Section
1.02(a) above plus an additional prepayment fee of one percent
(1%) of the principal balance of this Note.
1.03 SECURITY. The indebtedness evidenced by this Note and
the obligations created hereby are secured by that certain
Mortgage and Security Agreement (the "Security Instrument") from
Borrower to Lender, dated as of even date herewith concerning
property located in Atlantic County, New Jersey (the "Property").
The Security Instrument together with this Note and all other
documents to or of which Lender is a party or beneficiary now or
hereafter evidencing, securing, guarantying, modifying or
otherwise relating to the indebtedness evidenced hereby, are
herein referred to collectively as the "Loan Documents." All of
the terms and provisions of the Loan Documents are incorporated
herein by reference. Some of the Loan Documents are to be filed
for record on or about the date hereof in the appropriate public
records.
1.04 DEFAULT. It is hereby expressly agreed that should any
default occur in the payment of principal or interest as
stipulated above and such payment is not made within five (5)
days of the date such payment is due (provided that no grace
period is provided for the payment of principal and interest due
on the Maturity Date), or should any other default occur under
any of the Loan Documents which is not cured within any
applicable grace or cure period, then a default shall exist
hereunder, and in such event the indebtedness evidenced hereby,
including all sums advanced or accrued hereunder or under any
other Loan Document, and all unpaid interest accrued thereon,
shall, at the option of Lender and without notice to Borrower, at
once become due and payable and may be collected forthwith,
whether or not there has been a prior demand for payment and
regardless of the stipulated date of maturity. In the event that
any payment is not received by Lender on the date when due
(subject to the applicable grace period), then in addition to any
default interest payments due hereunder, Borrower shall also pay
to Lender a late charge in an amount equal to five percent (5.0%)
of the amount of such overdue payment. So long as any default
exists hereunder, regardless of whether or not there has been an
acceleration of the indebtedness evidenced hereby, and at all
times after maturity of the indebtedness evidenced hereby
(whether by acceleration or otherwise), interest shall accrue on
the outstanding principal balance of this Note at a rate per
annum equal to four percent (4.0%) plus the interest rate which
would be in effect hereunder absent such default or maturity, or
if such increased rate of interest may not be collected under
applicable law, then at the maximum rate of interest, if any,
which may be collected from Borrower under applicable law (the
"Default Interest Rate"), and such default interest shall be
immediately due and payable. Borrower acknowledges that it would
bc extremely difficult or impracticable to determine Lender's
actual damages resulting from any late payment or default, and
such late charges and default interest are reasonable estimates
of those damages and do not constitute a penalty. The remedies
of Lender in this Note or in the Loan Documents, or at law or in
equity, shall be cumulative and concurrent, and may be
pursued singly, successively or together in Lender's
discretion. Time is of the essence of this Note. In the event
this Note, or any part hereof, is collected by or through an
<PAGE>
attorney-at-law, Borrower agrees to pay all costs of collection
including, but not limited to, reasonable attorney's fees.
1.05 EXCULPATION. Notwithstanding anything in the Loan
Documents to the contrary, but subject to the qualifications
hereinbelow set forth, Lender agrees that (i) Borrower shall be
liable upon the indebtedness evidenced hereby and for the other
obligations arising under the Loan Documents to the full extent
(but only to the extent) of the security therefor, the same being
all properties (whether real or personal), rights, estates and
interests now or at any time hereafter securing the payment of
this Note and/or the other obligations of Borrower under the Loan
Documents (collectively, the "Security Property"), (ii) if a
default occurs in the timely and proper payment of all or any
part of such indebtedness evidenced hereby or in the timely and
proper performance of the other obligations of Borrower under the
Loan Documents, any judicial proceedings brought by Lender
against Borrower shall be limited to the preservation,
enforcement and foreclosure, or any thereof, of the liens,
security titles, estates, assignments, rights and security
interests now or at any time hereafter securing the payment of
this Note and/or the other obligations of Borrower under the Loan
Documents, and confirmation of any sale under power of sale, and
no attachment, execution or other writ of process shall be
sought, issued or levied upon any assets, properties or funds of
Borrower other than the Security Property except with respect to
the liability described below in this section, and (iii) in the
event of a foreclosure of such liens, security titles, estates,
assignments, rights or security interests securing the payment of
this Note and/or the other obligations of Borrower under the Loan
Documents, whether by judicial proceedings or exercise of power
of sale, no judgment for any deficiency upon the indebtedness
evidenced hereby shall be sought or obtained by Lender against
Borrower, except with respect to the liability described below in
this section; provided, however, that, notwithstanding the
foregoing provisions of this section, Borrower shall be fully and
personally liable and subject to legal action (a) for proceeds
paid under any insurance policies (or paid as a result of any
other claim or cause of action against any person or entity) by
reason of damage, loss or destruction to all or any portion of
the Security Property, to the full extent of such proceeds not
previously delivered to Lender, but which, under the terms of the
Loan Documents, should have been delivered to Lender, (b) for
proceeds or awards resulting from the condemnation or other
taking in lieu of condemnation of all or any portion of the
Security Property, or any of them, to the full extent of such
proceeds or awards not previously delivered to Lender, but which,
under the terms of the Loan Documents, should have been delivered
to Lender, (c) for all tenant security deposits or other
refundable deposits paid to or held by Borrower or any other
person or entity in connection with leases of all or any portion
of the Security Property which are not applied in accordance with
the terms of the applicable lease or other agreement, (d) for
rent and other payments received from tenants under leases of all
or any portion of the Security Property paid more than one month
in advance, (e) for rents, issues, profits and revenues of all or
any portion of the Security Property which are not paid or
remitted to the Central Account in accordance with the Cash
Management Agreement being executed concurrently herewith between
Lender and Borrower, (f) for damage to the Security Property as a
result of the misconduct or negligence of Borrower or any of its
principals, officers, members or affiliates, or any agent or
employee of any such persons, or any removal of the Security
Property in violation of the terms of thc Loan Documents, to the
full extent of the losses or damages incurred by Lender on
account of such damage or removal, (g) for failure to pay any
valid taxes, assessments, mechanic's liens, materialmen's liens
or other liens which could create liens on any portion of the
Security Property which would be superior to the lien or security
title of the Security Instrument or the other Loan Documents, to
the full extent of the amount claimed by any such lien claimant,
(h) for all obligations and indemnities of Borrower under the
Loan Documents relating to hazardous or toxic substances or
compliance with environmental laws and regulations to thc full
extent of any losses or damages (including those resulting from
diminution in value of any Security Property) incurred by Lender
as a result of the existence of such hazardous or toxic
substances or failure to comply with environmental laws or
regulations, and (i) for fraud or material misrepresentation
by Borrower or any of its principals, officers,
members or affiliates, any guarantor, any indemnitor or
any agent, employee or other person authorized or
apparently authorized to make statements or representations
<PAGE>
on behalf of Borrower, any principal, officer, member or
affiliate of Borrower, any guarantor or any indemnitor, to the
full extent of any losses, damages and expenses of Lender on
account thereof. References herein to particular sections of the
Loan Documents shall be deemed references to such sections as
affected by other provisions of the Loan Documents relating
thereto. Nothing contained in this section shall (i) be deemed
to be a release or impairment of the indebtedness evidenced by
this Note or the other obligations of Borrower under the Loan
Documents or the lien of the Loan Documents upon the Security
Property, or (ii) preclude Lender from foreclosing the Loan
Documents in case of any default or from enforcing any of the
other rights of Lender except as stated in this section, or
(iii) limit or impair in any way whatsoever the Environmental
Indemnity Agreement or the Guaranty of Lease, both of even date,
executed and delivered in connection with the indebtedness
evidenced by this Note or release, relieve, reduce, waive or
impair in any way whatsoever, any obligation of any party to such
Environmental Indemnity Agreement or Guaranty of Lease.
ARTICLE II - GENERAL CONDITIONS
2.01 NO WAIVER; AMENDMENT. No failure to accelerate the
debt evidenced hereby by reason of default hereunder, acceptance
of a partial or past due payment, or indulgences granted from
time to time shall be construed (i) as a novation of this Note or
as a reinstatement of the indebtedness evidenced hereby or as a
waiver of such right of acceleration or of the right of Lender
thereafter to insist upon strict compliance with the terms of
this Note, or (ii) to prevent the exercise of such right of
acceleration or any other right granted hereunder or by any
applicable laws; and Borrower hereby expressly waives the benefit
of any statute or rule of law or equity now provided, or which
may hereafter be provided, which would produce a result contrary
to or in conflict with the foregoing. No extension of the time
for the payment of this Note or any installment due hereunder,
made by agreement with any person now or hereafter liable for the
payment of this Note shall operate to release, discharge, modify,
change or affect the original liability of Borrower under this
Note, either in whole or in part unless Lender agrees otherwise
in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought.
2.02 WAIVERS. Presentment for payment, demand, protest and
notice of demand, protest and nonpayment and all other notices
are hereby waived by Borrower. Borrower hereby further waives
and renounces, to the fullest extent permitted by law, all rights
to the benefits of any statute of limitations and any moratorium,
reinstatement, marshalling, forbearance, valuation, stay,
extension, redemption, appraisement, exemption and homestead now
or hereafter provided by the Constitution and laws of the United
States of America and of each state thereof, both as to itself
and in and to all of its property, real and personal, against the
enforcement and collection of the obligations evidenced by this
Note or the other Loan Documents.
2.03 LIMIT OF VALIDITY. The provisions of this Note and of
all agreements between Borrower and Lender, whether now existing
or hereafter arising and whether written or oral, are hereby
expressly limited so that in no contingency or event whatsoever,
whether by reason of demand or acceleration of the maturity of
this Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest"), to Lender for the use, forbearance or
retention of thc money loaned under this Note exceed the maximum
amount permissible under applicable law. If, from any
circumstance whatsoever, performance or fulfillment of any
provision hereof or of any agreement between Borrower and Lender
shall, at thc time performance or fulfillment of such provision
shall be due, exceed thc limit for interest prescribed by law or
otherwise transcend the limit of validity prescribed by
applicable law, then IPSO FACTO the obligation to be performed or
fulfilled shall be reduced to such limit and if,
from any circumstance whatsoever, Lender shall ever receive
anything of value deemed Interest by applicable law in
excess of the maximum lawful amount, an amount equal to any
<PAGE>
excessive Interest shall be applied to the reduction of the
principal balance owing under this Note in the inverse order of
its maturity (whether or not then due) or at the option of Lender
be paid over to Borrower, and not to the payment of Interest.
All Interest (including any amounts or payments deemed to be
Interest) paid or agreed to be paid to Lender shall, to the
extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full period until payment in
full of the principal balance of this Note so that the Interest
thereof for such full period will not exceed the maximum amount
permitted by applicable law. This Section 2.03 will control all
agreements between Borrower and Lender.
2.04 USE OF FUNDS. Borrower hereby warrants, represents and
covenants that no funds disbursed hereunder shall be used for
personal, family or household purposes.
2.05 UNCONDITIONAL PAYMENT. Borrower is and shall be
obligated to pay principal, interest and any and all other
amounts which become payable hereunder or under the other Loan
Documents absolutely and unconditionally and without any
abatement, postponement, diminution or deduction and without any
reduction for counterclaim or setoff. In the event that at any
time any payment received by Lender hereunder shall be deemed by
a court of competent jurisdiction to have been a voidable
preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to
make such payment shall survive any cancellation or satisfaction
of this Note or return thereof to Borrower and shall not be
discharged or satisfied with any prior payment thereof or
cancellation of this Note, but shall remain a valid and binding
obligation enforceable in accordance with the terms and
provisions hereof (subject to the effects of general principles
of equity), and such payment shall be immediately due and payable
upon demand.
2.06 MISCELLANEOUS. This Note shall be interpreted,
construed and enforced according to the laws of the State of New
York. The terms and provisions hereof shall be binding upon and
inure to the benefit of Borrower and Lender and their respective
heirs, executors, legal representatives, successors, successors-
in-title and assigns, whether by voluntary action of the parties
or by operation of law. As used herein, the terms "Borrower" and
"Lender" shall be deemed to include their respective heirs,
executors, legal representatives, successors, successors-in-title
and assigns, whether by voluntary action of the parties or by
operation of law. If Borrower consists of more than one person
or entity, each shall be jointly and severally liable to perform
the obligations of Borrower under this Note. All personal
pronouns used herein, whether used in the masculine, feminine or
neuter gender, shall include all other genders; the singular
shall include the plural and vice versa. Titles of articles and
sections are for convenience only and in no way define, limit,
amplify or describe the scope or intent of any provisions hereof.
Time is of the essence with respect to all provisions of this
Note. This Note and the other Loan Documents contain the entire
agreements between the parties hereto relating to the subject
matter hereof and thereof and all prior agreements relative
hereto and thereto which are not contained herein or therein are
terminated.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of
the day and year first above written.
SHOWBOAT LAND, LLC,
a Nevada limited liability company
By: Showboat Operating Company,
a Nevada corporation, a member
By: /s/ R. Craig Bird
R. Craig Bird, Executive Vice-
President and Chief Financial
Officer
By: Showboat Land Holding Limited
Partnership, a Nevada limited
partnership, a member
By: Showboat Land Company, a Nevada
corporation, its general partner
By: /s/ R. Craig Bird
R. Craig Bird, Vice-President/
Finance
<PAGE>
CASH MANAGEMENT AGREEMENT
THIS CASH MANAGEMENT AGREEMENT (this "AGREEMENT") is made as
of the 29th day of January, 1998, by SHOWBOAT LAND, LLC
("MORTGAGOR"), whose address is 3720 Howard Hughes Parkway, Suite
200, Las Vegas, Nevada 89109 to COLUMN FINANCIAL, INC.
("MORTGAGEE"), whose address is 3414 Peachtree Road, N.E., Suite
1140, Atlanta, Georgia 30326.
RECITALS:
WHEREAS, Mortgagee has authorized a loan (hereinafter
referred to as the "LOAN") to Mortgagor in the original principal
amount of $100,000,000 (hereinafter referred to as the "LOAN
AMOUNT"), which Loan is evidenced by that certain promissory
note, dated the date hereof (hereinafter referred to as the
"NOTE"), given by Mortgagor and secured by, among other things,
that certain mortgage and security agreement dated the date
hereof (hereinafter referred to as the "MORTGAGE"), encumbering
certain real property described on EXHIBIT A attached hereto and
made a part hereof;
WHEREAS, in consideration of the Loan, Mortgagor has agreed
to make payments in amounts sufficient to pay and redeem, and
provide for the payment and redemption of the principal of,
premium (if any) and interest on the Note when due;
WHEREAS, Mortgagor agrees and acknowledges that this
Agreement is a material inducement to Mortgagee's making the Loan
to Mortgagor;
WHEREAS, Mortgagor and Mortgagee intend these recitals to be
a material part of, and are hereby incorporated into, this
Agreement; and
WHEREAS, all things necessary to make this Agreement the
valid and legally binding obligation of Mortgagor in accordance
with its terms, for the uses and purposes herein set forth, have
been done and performed.
NOW THEREFORE, in consideration of Ten Dollars ($10.00), the
foregoing premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Mortgagor covenants and agrees with and warrants to Mortgagee
that the Recitals are true and correct and are incorporated
herein by this reference and the parties further covenant and
agree with and warrant as follows:
SECTION 1: DEFINITIONS
For all purposes of this Agreement, except as otherwise
expressly provided or unless the context clearly indicates a
contrary intent:
(1) the capitalized terms defined in this Section have the
meanings assigned to them in this Section, and include the plural
as well as the singular;
(2) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP;
(3) capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings ascribed to them
in the Mortgage; and
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<PAGE>
(4) the words "herein", "hereof", and "hereunder" and
other words of similar import refer to this Agreement as a whole
and not to any particular Section or other subdivision.
"AFFILIATE" of any specified Person shall mean any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
Person. For purposes of this definition, "control" when used
with respect to any specified Person, means the power to direct
the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and
"controlled" have the meanings correlative to the foregoing.
"BANK" shall mean Banc One, or any successor bank hereafter
selected by Mortgagee.
"BUSINESS DAY" shall mean any day other than (a) a Saturday
or Sunday, or (b) a day on which banking and savings and loan
institutions in the State of New York are authorized or obligated
by law or executive order to be closed, or, at any time during
which the Loan is an asset of a securitization, a day on which
banking and savings and loan institutions in the cities, states
and/or commonwealths in which the trustee and the servicer(s)
under the securitization are located are authorized or obligated
to be closed.
"CENTRAL ACCOUNT" shall mean an Eligible Account, maintained
at the Bank, in the name of Mortgagee or its successors or
assigns (as secured party), as may be designated by Mortgagee,
and established for the benefit of Mortgagee and Mortgagor.
"CLOSING DATE" shall mean the date of the Note.
"COLLECTION ACCOUNT" shall mean an account designated by
Mortgagee, which shall be an Eligible Account, to which payments
of secured indebtedness are transferred.
"COMMITMENT" shall mean a written commitment for the
refinancing of the Loan from an Institutional Mortgagee.
"CONDEMNATION PROCEEDS" shall have the meaning set forth in
SECTION 2.13(B) hereof.
"CURRENT MONTH" shall have the meaning set forth in SECTION
2.05 hereof.
"CURTAILMENT PERIOD" shall mean (i) if Mortgagor fails to
provide Mortgagee with a Commitment on or prior to the Refinance
Notification Date, the period commencing on the Refinance
Notification Date and ending on the date the secured indebtedness
has been paid in full and (ii) if Mortgagor provides Mortgagee
with a Commitment on or prior to the Refinance Notification Date
and the Void Commitment Date occurs, the period commencing on the
Void Commitment Date and ending on the date the secured
indebtedness has been paid in full; provided, however, that if
Mortgagor provides Mortgagee with a Commitment on or before the
Refinance Notification Date and the Void Commitment Date does not
occur, there shall be no Curtailment Period hereunder.
"CURTAILMENT RESERVE SUB-ACCOUNT" shall mean the Sub-Account
of the Central Account established pursuant to SECTION 2.02
hereof and maintained pursuant to SECTION 2.11 hereof for the
purpose of holding certain Excess Property Income.
"DEBT SERVICE" shall mean the amount of interest and
principal payments due and payable in accordance with the Note
during an applicable period.
2
<PAGE>
"DEBT SERVICE PAYMENT SUB-ACCOUNT" shall mean the Sub-
Account of the Central Account established pursuant to SECTION
2.02 hereof and maintained pursuant to SECTION 2.07 hereof for
the purposes of making Debt Service payments.
"DEFAULT" shall mean any event that, with notice and/or the
passage of time, would become a default under Section 2.1 of the
Mortgage.
"DEVELOPMENT LAWS" shall mean all applicable subdivision,
zoning, environmental protection, wetlands protection, or land
use laws or ordinances, and any and all applicable rules and
regulations of any federal, state or local governmental authority
or agency promulgated thereunder of related thereto.
"ELIGIBLE ACCOUNT" shall mean a segregated account held by
and at the Bank or an account that is either: (a) maintained with
a depository institution or trust company the long-term unsecured
debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of
a holding company, the long-term unsecured debt obligations of
such holding company) have been rated by the Rating Agencies in
one of their two highest rating categories or the short-term
commercial paper of which is rated by the Rating Agencies in
their highest rating category at the time of any deposit therein;
(b) an account or accounts maintained with a federal or state
chartered depository institution or trust company with trust
powers acting in its fiduciary capacity provided that any such
state chartered institution or trust company shall be subject to
regulations regarding fiduciary funds on deposit substantially
similar to federal regulation 12 CFR Section 910(b); or (c) such
other account maintained at a bank; or institution having
aggregate deposits in an amount not less than $100,000,000 and
otherwise acceptable to Mortgagee. The title of each Eligible
Account shall indicate that funds held therein are held in trust
for the uses and purposes set forth herein.
"ENGINEER" shall mean any independent engineer or
engineering firm reasonably approved by Mortgagee.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in the
Mortgage.
"EVENT OF DEFAULT" shall mean (a) any default under Section
2.1 of the Mortgage, (b) any, failure of Mortgagor to cause
sufficient funds to be deposited in the Central Account on any
Payment Date to fund all of the Sub-Accounts pursuant to SECTION
2.05, which failure shall continue for five (5) days after such
Payment Date and (c) any event specified as an "Event of Default"
hereunder.
"EXCESS PROPERTY INCOME" shall have the meaning set forth in
SECTION 2.05(C) hereof.
"FISCAL YEAR" shall mean the twelve month period commencing
on January 1 and ending on December 31 during each year of the
term of this Agreement and the Mortgage, or such other fiscal
year of Mortgagor as Mortgagor may select from time to time with
the prior written consent of Mortgagee.
"IMPROVEMENTS" shall have the meaning set forth in the
granting clauses of the Mortgage.
"INSTITUTIONAL MORTGAGEE" shall mean any of the following
Persons: (a) any bank, savings and loan association, savings
institution, trust company or national banking association,
acting for its own account or in a fiduciary capacity, (b) any
charitable foundation, (c) any insurance company or pension
and/or annuity company, (d) any fraternal benefit society, (e)
any pension. retirement or profit sharing trust or fund within
the meaning of Title I of ERISA or for which any bank, trust
company, national banking association or investment adviser
registered under the Investment Advisers Act of 1940, as amended,
is acting as trustee or agent, (f) any investment company or
business development company, as defined in the Investment
3
<PAGE>
Company Act of 1940, as amended, (g) any small business
investment company licensed under the Small Business Investment
Act of 1958, as amended, (h) any broker or dealer registered
under the Securities and Exchange Act of 1934, or any investment
adviser registered under the Investment Adviser Act of 1940, as
amended, (i) any government, any public employees' pension or
retirement system, or any other government agency supervising the
investment of public funds, (j) any mortgage conduit which is in
the business of originating loans for securitization in the
capital markets, or (k) any other entity all of the equity owners
of which are Institutional Mortgagees; provided that each of said
Persons shall have net assets equal to or greater than
$500,000,000, be in the business of making commercial mortgage
loans, secured by properties of like type, size and value as the
Property and have a long term credit rating which is not less
than investment grade.
"INSURANCE PROCEEDS" shall have the meaning set forth in
SECTION 2.13(A) hereof.
"LEASE" shall mean the ground lease of the Property, dated
October 26, 1983, between Resorts International, Inc. and
Atlantic City Showboat, Inc. (as successor by assignment to Ocean
Showboat, Inc.), as heretofore or hereafter amended.
"LEGAL REQUIREMENT" shall mean, as to any Person, the
certificate of incorporation and by-laws or other organization or
governing documents of such Person, and any law, treaty, rule or
regulation (including, without limitation, Environmental Laws,
Development Laws, and Use Requirements) or determination of an
arbitrator or a court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is
subject.
"LOAN" shall have the meaning set forth in the Recitals
hereto.
"LOAN AMOUNT" shall have the meaning set forth in the
Recitals hereto.
"LOAN DOCUMENTS" shall mean this Agreement, the Mortgage,
the Note, the Assignment of Leases and Rents, and any and all
other agreements, instruments, certificates or documents executed
and delivered by Mortgagor or any Affiliate of Mortgagor in
connection with the Loan.
"LOSS PROCEEDS" shall have the meaning set forth in SECTION
2.13(C) hereof.
"MATURITY DATE" shall have the meaning set forth in the
Note.
"MORTGAGE" shall mean the Mortgage as originally executed or
as it may hereafter from time to time be supplemented, amended,
modified or extended by one or more indentures supplemental
thereto.
"MORTGAGEE" shall mean the Mortgagee named herein and its
successors or assigns.
"MORTGAGOR" shall mean Mortgagor named herein and any
successor to the obligations of Mortgagor.
"NOTE" shall have the meaning set forth in the recitals
hereof.
"PAYMENT DATE" shall mean, with respect to each month, the
first (1st) calendar day in such month, or if such day is not a
Business Day, the next following Business Day.
4
<PAGE>
"PERMITTED INVESTMENTS" shall mean any one or more of the
following obligations or securities acquired at a purchase-price
of not greater than par, including those issued by Mortgagee, its
successors or assigns, or any of their respective Affiliates:
(i) direct obligations of, or obligations fully
guaranteed as to payment of principal and
interest by, (a) the United States or any agency
or instrumentality thereof provided such
obligations are backed by the full faith and
credit of the United States of America, or (b)
FHLMC, FNMA, the Federal Farm Credit System or
the Federal Home Loan Banks provided such
obligations at the time of purchase or
contractual commitment for purchase are
qualified by the Rating Agencies as a Permitted
Investment hereunder as evidenced in writing;
(ii) fully FDIC-insured demand and time deposits in
or certificates of deposit of, or bankers'
acceptances issued by, any bank or trust
company, savings and loan association or savings
bank, provided that the commercial paper and
long-term unsecured debt obligations of such
depository institution o trust company have the
highest rating available for such securities by
the Rating Agencies, or such lower rating as is
consented to in writing by Mortgagee;
(iii) repurchase obligations with respect to any
security described in clause (i) above entered
into with a depository institution or trust
company (acting as principal) described in
clause (ii) above;
(iv) general obligations of or obligations guaranteed
by any State of the United States or the
District of Columbia receiving the highest long-
term unsecured debt rating available for such
securities by the Rating Agencies, or such lower
rating as is consented to in writing by
Mortgagee;
(v) securities bearing interest or sold at a
discount that are issued by any corporation
incorporated under the laws of the United States
of America or any State thereof or the District
of Columbia and is rated by the Rating Agencies
in their highest long-term unsecured rating
categories at the time of such investment or
contractual commitment providing for such
investment; PROVIDED, HOWEVER, that securities
issued by any such corporation will not be
Permitted Investments to the extent that
investment therein will cause the then
outstanding principal amount of securities
issued by such corporation and held as part of
the Central Account to exceed 20% of the
aggregate principal amount of all Permitted
Investments held in the Central Account;
(vi) commercial or finance company paper (including
both non-interest-bearing discount obligations
and interest g obligations payable on demand or
on a specified date not more than one year after
the date of issuance thereof) that is rated by
the Rating Agencies in their highest short-term
unsecured debt rating available at the time of
such investment or contractual commitment
providing for such investment, and is issued by
a corporation the outstanding senior long-term
debt obligations of which are then rated by the
Rating Agencies in their highest short-term and
long-term unsecured debt ratings, or such lower
rating as is consented to in writing by
Mortgagee;
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<PAGE>
(vii) guaranteed reinvestment agreements acceptable
to the Rating Agencies issued by any bank,
insurance company or other corporation rated in
the highest long-term unsecured rating levels
available to such issuers by the Rating Agencies
throughout the duration of such agreements, or
such lower rating as is consented to in writing
by Mortgagee;
(viii) units of taxable money market funds, which
funds are regulated investment companies, seek
to maintain a constant net asset value per share
and invest solely in obligations backed by the
full faith and credit of the United States,
which funds have been designated in writing by
the Rating Agencies as Permitted Investments
with respect to this definition; and
(ix) any other demand, money market or time deposit,
or any other obligation, security or investment,
that may be consented to in writing by
Mortgagee;
PROVIDED, HOWEVER, that no instrument or security shall be a
Permitted Investment if (y) such instrument or security evidences
a right to receive only interest payments or (z) the right to
receive principal and interest payments derived from the
underlying investment provides a yield to maturity in excess of
120% of the yield to maturity at par of such underlying
investment.
"PERSON" shall mean any individual, corporation,
partnership, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government
or any bureau, department or agency thereof and any fiduciary
acting in such capacity on behalf of any of the foregoing.
"PREFERRED PREPAYMENT DATE" shall have the meaning set forth
in the Note.
"PRINCIPAL AMOUNT" shall mean the Loan Amount as such
principal amount may be reduced from time to time pursuant to the
terms of the Mortgage, the Note or the other Loan Documents.
"PROPERTY" shall have the meaning set forth in the granting
clauses of the Mortgage.
"PROPERTY INCOME" shall mean, in each Fiscal Year or portion
thereof during the term hereof, all revenue derived by Mortgagor
arising from the Property including, without limitation, Rents
and Profits (whether denominated as basic rent, additional rent,
percentage rent, escalation payments, electrical payments or
otherwise) and other fees and charges payable pursuant to the
Lease or otherwise in connection with the Property, and rent
insurance proceeds.
"RATING AGENCY" shall mean any nationally recognized
statistical agency selected by Mortgagee including, without
limitation, Duff & Phelps Rating Co., Fitch Investors Service,
Inc., Moody's Corporation, and/or Standard and Poor's Ratings
Group, Inc., collectively, and any successor to any of them;
provided, however, that at any time during which the Loan is an
asset of a securitization or is otherwise an asset of any rated
transaction, "Rating Agency" shall mean the rating agency or
rating agencies that from time to time rate the securities,
certificates or other instruments issued in connection with such
securitization or other transaction.
"REFINANCE NOTIFICATION DATE" shall mean the date that is
six (6) months prior to the Preferred Prepayment Date.
"RENTS AND PROFITS" shall have the meaning set forth in the
granting clauses of the Mortgage.
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"REQUIRED DEBT SERVICE PAYMENT" shall mean, as of any
Payment Date, the amount of interest and principal then due and
payable pursuant to the Note, together with any other sums due
thereunder, including, without limitation, any prepayments
required to be made or for which notice has been given under this
Mortgage, Default Rate Interest and premium, if any, made in
accordance therewith.
"SUB-ACCOUNTS" shall have the meaning set forth in SECTION
2.02 hereof.
"TAKING" shall mean any condemnation or taking pursuant to
the exercise of the power of eminent domain and any deed
delivered in lieu thereof.
"USE REQUIREMENTS" shall mean any all building codes,
permits, certificates of occupancy or compliance, laws,
regulations, or ordinances (including, without limitation,
health, pollution, fire protection, medical and day-care
facilities, waste product and sewage disposal regulations),
declarations or other agreements affecting the use of the
Property or any part thereof.
"VOID COMMITMENT DATE" shall mean the date, if any, upon
which the Commitment lapses, terminates or is otherwise
withdrawn.
SECTION II: CENTRAL CASH MANAGEMENT
Section 2.01. CASH FLOW. (a) Mortgagor hereby acknowledges
and agrees that the Rents and Profits (which for the purposes of
this SECTION 2.01 shall not include security deposits from the
tenant under the Lease unless duly applied towards rental
payments under the Lease) derived from the Property and all Loss
Proceeds shall be allocated to the Sub-Accounts in the manner and
priority set forth in SECTION 2.05 hereof. Mortgagor shall
direct the tenant under the Lease to make all rental payments
under the Lease directly to Mortgagee by wire transfer, cashier's
check or money order made payable to Mortgagee or its successors
and assigns and cause same to be deposited directly into the
Central Account. Any Rents and Profits received by Mortgagor
shall be deposited immediately in the Central Account.
(b) Mortgagee may elect to change the financial institution
in which the Central Account shall be maintained; PROVIDED,
HOWEVER, Mortgagee shall give Mortgagor not fewer than ten (10)
Business Days' prior notice of such change. All fees and charges
of the bank in which the Central Account is located shall be paid
by Mortgagor.
Section 2.02. ESTABLISHMENT OF SUB-ACCOUNTS. Mortgagee has
established, or caused to be established, the Central Account in
the name of Mortgagee. The Central Account shall be under the
sole dominion and control of Mortgagee. Mortgagor hereby
irrevocably directs and authorizes Mortgagee to deposit into and
withdraw funds from the Central Account, all in accordance with
the terms and conditions of this Agreement. Mortgagor shall have
no right of withdrawal from the Central Account. Each transfer
of funds to be made hereunder shall be made only to the extent
that funds are on deposit in the Central Account or the affected
Sub-Account, and Mortgagee shall have no responsibility to make
additional funds available in the event that funds on deposit are
insufficient. The Central Account shall contain the Debt Service
Payment Sub-Account and the Curtailment Reserve Sub-Account (to
the extent applicable) (each a "SUB-ACCOUNT" and collectively,
the "SUB-ACCOUNTS") to which certain funds shall be allocated and
from which disbursements shall be made pursuant to the terms of
this Agreement. Each Sub-Account shall be an Eligible Account.
Section 2.03. PERMITTED INVESTMENTS. Upon the written
request of Mortgagor, Mortgagee shall direct the Bank to invest
and reinvest any balance in the Central Account from time to time
in Permitted
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Investments as instructed by Mortgagor (which instruction may be
made no more than one time per month), PROVIDED THAT (a) if
Mortgagor fails to so instruct Mortgagee, or upon the occurrence
of a Default or Event of Default, Mortgagee may direct the Bank
to invest and reinvest such balance in Permitted Investments as
Mortgagee shall determine in its sole discretion (and Mortgagee
shall provide written notice to Mortgagor of Mortgagee's
directions regarding Permitted Investments), (b) the maturities
of the Permitted Investments on deposit in the Central Account
shall, to the extent such dates are ascertainable, be selected
and coordinated to become due not later than the day before any
disbursements from the applicable Sub-Accounts must be made, (c)
all such Permitted Investments shall be held in the name and be
under the sole dominion and control of Mortgagee, and (d) no
Permitted Investment shall be made unless Mortgagee shall retain
a perfected first priority lien in such Permitted Investment
securing the secured indebtedness and all filings and other
actions necessary to ensure the validity, perfection, and
priority of such lien have been taken. It is the intention of
the parties hereto that the entire amounts deposited in the
Central Account (or as much thereof as Mortgagee may reasonably
arrange to invest) shall at all times be invested in Permitted
Investments, and that the Central Account shall be a so-called
"zero balance" account. All funds in the Central Account that
are invested in a Permitted Investment are deemed to be held in
the Central Account for all purposes of this Mortgage and the
other Loan Documents. Mortgagee shall not have any liability for
any loss in investments of funds in the Central Account that are
invested in Permitted Investments whether Mortgagor or Mortgagee
selected such Permitted Investment in accordance herewith and no
such loss shall affect Mortgagor's obligation to fund, or
liability for funding, the Central Account and each Sub-Account,
as the case may be. Mortgagor agrees that Mortgagor shall include
all such earnings on the Central Account as income of Mortgagor
(and, if Mortgagor is a partnership or other pass-through entity,
the partners, members or beneficiaries of Mortgagor, as the case
may be) for federal and applicable state and local tax purposes.
Mortgagor shall have no right whatsoever to direct the investment
of the proceeds in the Collection Account.
Section 2.04. INTEREST ON ACCOUNTS. All interest paid or
other earnings on the Permitted Investments of funds deposited
into the Central Account made hereunder shall be deposited into
the Central Account.
Section 2.05. MONTHLY FUNDING OF SUB-ACCOUNTS. (a) On the
Payment Date of each month during the term of the Loan (each, a
"Current Month"), commencing on the Payment Date of the second
month after the month in which the Loan is initially funded, and
Mortgagee shall allocate all funds transferred or deposited into
the Central Account among the Sub-Accounts as follows and in the
following priority:
(i) first, to the Debt Service Payment Sub-Account,
until an amount equal to the Required Debt Service
Payment for the Payment Date occurring in such
Current Month has been allocated to the Debt
Service Payment Sub-Account; and
(ii) second, with respect to any Current Month for
which funds are to be allocated to the Curtailment
Reserve Sub-Account pursuant to SECTION 2.11
hereof, all Excess Property Income shall be
allocated to the Curtailment Reserve Sub-Account.
(b) Provided that (i) no Event of Default has occurred and
is continuing, and (ii) no Curtailment Period is in effect,
Mortgagee agrees that in each Current Month any amounts deposited
into or remaining in the Central Account after sufficient funds
have been transferred to the Sub-Accounts in accordance with, and
such funds have been allocated in the amounts set forth in,
clauses (i) and (ii) above with respect to the Current Month and
any periods prior thereto shall be disbursed by Mortgagee
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to Mortgagor on the Payment Date in such Current Month pursuant
to the instructions set forth on SCHEDULE 1 attached hereto or
any subsequent written instructions delivered to Mortgagee by
Mortgagor.
(c) As used herein, "EXCESS PROPERTY INCOME" means the
amounts available in the Central Account in any Current Month
after the allocation under clause (i) of subsection (a) above has
been made.
(d) After the occurrence and during the continuance of an
Event of Default hereunder or under any other Loan Document, no
funds held in the Central Account shall be distributed to
Mortgagor, and Mortgagee shall have the right (without limitation
to any other right or remedy of Mortgagee) to apply all or any
portion of the funds held in such account to the secured
indebtedness in Mortgagee's sole discretion.
Section 2.06. [Reserved]
Section 2.07. DEBT SERVICE PAYMENT SUB-ACCOUNT. On each
Payment Date during the term of the Loan, Mortgagee shall
transfer to the Collection Account, from the Debt Service Payment
Sub-Account, an amount equal to the sum of (a) the Required Debt
Service Payment for such Payment Date and (b) any amounts
deposited into the Central Account that are either (i) Loss
Proceeds that Mortgagee has elected to apply to reduce the
secured indebtedness in accordance with the terms of SECTION 2.13
hereof or (ii) excess Loss Proceeds remaining after the
completion of any restoration required hereunder.
Section 2.08. [Reserved]
Section 2.09 [Reserved]
Section 2.10. [Reserved]
Section 2.11. CURTAILMENT RESERVE SUB-ACCOUNT. During any
Curtailment Period, on each and every Payment Date until the date
on which all secured indebtedness has been paid in full,
Mortgagee shall allocate all Excess Property Income to the
Curtailment Reserve Sub-Account in accordance with SECTION
2.05(A)(II). On each Payment Date during any Curtailment Period,
Mortgagee shall transfer to the Collection Account an amount
equal to the lesser of (a) the amount available in the
Curtailment Reserve Sub-Account, and (b) the total secured
indebtedness then outstanding under the Note and the other Loan
Documents. At the end of any Curtailment Period, the balance in
the Curtailment Reserve Sub-Account shall be promptly disbursed
to Mortgagor.
Section 2.12. [Reserved]
Section 2.13. LOSS PROCEEDS. (a) In the event of a
casualty to the Property, unless Mortgagee elects, or is required
pursuant to SECTION 1.9 of the Mortgage, to make all of the
proceeds received by or on behalf of Mortgagor under the
insurance policy required to be maintained by Mortgagor
("INSURANCE PROCEEDS") available to Mortgagor for restoration of
the Property, Mortgagee and Mortgagor shall cause all such
Insurance Proceeds to be paid by the insurer directly to the
Central Account, whereupon Mortgagee shall, after deducting
Mortgagee's costs of recovering and paying out such Insurance
Proceeds, including without limitation, reasonable attorneys'
fees, apply such Insurance Proceeds to reduce the secured
indebtedness in accordance with the terms of the Note; PROVIDED,
HOWEVER, that if Mortgagee elects, or is deemed to have elected,
to make the Insurance Proceeds available for restoration of the
Property, all Insurance Proceeds in respect of business
interruption coverage shall be maintained in the Central Account,
to be applied by Mortgagee in the same manner as Rents and
Profits received from Mortgagor with respect to the operation of
the Property; PROVIDED FURTHER, HOWEVER, that in the event that
the Insurance Proceeds of such business interruption insurance
policy are paid in a lump sum in advance, Mortgagee shall (i)
hold
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such Insurance Proceeds in a segregated interest-bearing escrow
account, which shall be an Eligible Account, (ii) estimate, in
Mortgagee's reasonable discretion based upon a certification of
an Engineer or independent, licensed architect, the number of
months required for Mortgagor to restore the damage caused by the
casualty, (iii) divide the aggregate business interruption
Insurance Proceeds by such number of months, and (iv) disburse
from such escrow account into the Central Account each month
during the performance of such restoration such monthly
installment of said Insurance Proceeds. In the event that
Insurance Proceeds are to be applied toward restoration,
Mortgagee shall hold such funds in a segregated bank account at
the Bank, which shall be an Eligible Account, and shall disburse
same in accordance with the provisions of SECTION 1.9 of the
Mortgage.
(b) In the event of a Taking of all or any portion of the
Property, unless Mortgagee elects, or is required pursuant to
SECTION 1.9 of the Mortgage, to make all of the proceeds payable
to Mortgagor in respect of such Taking (any such proceeds,
"CONDEMNATION PROCEEDS") available to Mortgagor for restoration
of the Property, Mortgagee and Mortgagor shall cause all such
Condemnation Proceeds to be paid to the Central Account,
whereupon Mortgagee shall, after deducting Mortgagee's costs of
recovering and paying out such Condemnation Proceeds, including
without limitation, reasonable attorneys' fees, apply same, by
transferring such amounts to the Collection Account, to reduce
the secured indebtedness in accordance with the terms of the
Note; PROVIDED, HOWEVER, that any Condemnation Proceeds received
by or on behalf of Mortgagor in connection with a temporary
Taking shall be maintained in the Central Account, to be applied
by Mortgagee in the same manner as Rents and Profits received
from Manager with respect to the operation of the Property;
PROVIDED FURTHER, HOWEVER, that in the event that the
Condemnation Proceeds of any such temporary Taking are paid in a
lump sum in advance, Mortgagee shall (i) hold such Condemnation
Proceeds in a segregated interest-bearing escrow account, which
shall be an Eligible Account, (ii) estimate, in Mortgagee's
reasonable discretion, the number of months that the Property
shall be affected by such temporary Taking, (iii) divide the
aggregate Condemnation Proceeds in connection with such temporary
Taking by such number of months, and (iv) disburse from such
escrow account into the Central Account each month during the
pendency of such temporary Taking such monthly installment of
said Condemnation Proceeds. In the event that Condemnation
Proceeds are to be applied toward restoration, Mortgagee shall
hold such funds in a segregated bank account at the Bank, which
shall be an Eligible Account, and shall disburse same in
accordance with the provisions of SECTION 1.9 of the Mortgage.
(c) If any Insurance Proceeds or Condemnation Proceeds
(collectively, "LOSS PROCEEDS") are received by Mortgagor, such
Loss Proceeds shall be received in trust for Mortgagee, shall be
segregated from other funds of Mortgagor, and shall be forthwith
paid into the Central Account, or paid to Mortgagee to hold in a
segregated account, in each case to be applied or disbursed in
accordance with the foregoing. Any Loss Proceeds made available
to Mortgagor for restoration in accordance herewith, to the
extent not used by Mortgagor in connection with, or to the extent
they exceed the cost of, such restoration, shall be deposited
into the Central Account, whereupon Mortgagee shall apply the
same to reduce the secured indebtedness in accordance with the
terms of the Note.
SECTION 3: MISCELLANEOUS
Section 3.1. CUMULATIVE RIGHTS. The rights of Mortgagee
under this Agreement shall be separate, distinct and cumulative
and none shall be given effect to the exclusion of the others
hereunder or under any other Loan Document. No act of Mortgagee
shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision.
Mortgagee shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled, subject to the
terms of this
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Agreement and the other Loan Documents, to every right and remedy
now or hereafter afforded by law or in equity.
Section 3.2. EXHIBITS INCORPORATED. The information set
forth in the Exhibits annexed hereto is hereby incorporated
herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
Section 3.3. SEVERABLE PROVISIONS. If any term, covenant
or condition of the Loan Documents including, without limitation,
the Note, the Mortgage or this Agreement, is held to be invalid,
illegal or unenforceable in any respect, such Loan Document shall
be construed without such provision.
Section 3.4. DUPLICATE ORIGINALS. The Agreement may be
executed in any number of duplicate originals and each such
duplicate original shall be deemed to constitute but one and the
same instrument.
Section 3.5. NO ORAL CHANGE. This Agreement, and any
provisions hereof, may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act
on the part of Mortgagor or Mortgagee, but only by an agreement
in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or
termination is sought.
Section 3.6. WAIVER OF COUNTERCLAIM. Mortgagor hereby
waives the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought
against it by Mortgagee or its agents, and waives trial by jury
in any action or proceeding brought by either party hereto
against the other or in any counterclaim Mortgagor may be
permitted to assert hereunder or which may be asserted by
Mortgagee or its agents, against Mortgagor, or in any matters
whatsoever arising out of or in any way connected with this
Agreement or the secured indebtedness.
Section 3.7. HEADINGS, ETC. The table of contents,
headings and captions of various paragraphs of this Agreement are
for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the
provisions hereof.
Section 3.8. SOLE DISCRETION OF MORTGAGEE. Whenever
Mortgagee exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to
Mortgagee, the decision of Mortgagee to approve or disapprove or
to decide that arrangements or terms are satisfactory or not
satisfactory shall be in the sole discretion of Mortgagee and
shall be final and conclusive, except as may be otherwise
specifically provided herein.
Section 3.9. WAIVER OF NOTICE. Mortgagor shall not be
entitled to any notices of any nature whatsoever from Mortgagee
except with respect to matters for which the Mortgage
specifically and expressly provides for the giving of notice by
Mortgagee to Mortgagor and except with respect to matters for
which Mortgagor is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice.
Section 3.10. COVENANTS RUN WITH THE LAND. All of the
grants, covenants, terms, provisions and conditions herein shall
run with the Premises, shall be binding upon Mortgagor and shall
inure to the benefit of Mortgagee, subsequent holders of this
Mortgage and their successors and assigns. Without limitation to
any provision hereof, the term "Mortgagor" shall include and
refer to the Mortgagor named herein, any subsequent owner of the
Property, and its respective heirs, executors, legal
representatives, successors and assigns.
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Section 3.11 APPLICABLE LAW. This Agreement will be
governed by and construed in accordance with the laws for the
State of New York, provided that to the extent that any of such
laws may now or hereafter be preempted by Federal law, such
Federal law shall so govern and be controlling; and provided
further that the laws of the state in which the Property is
located shall govern as to the creation, priority and enforcement
of liens and security interest in property located in such state.
Section 3.12. REMEDIES OF MORTGAGOR. In the event that a
claim or adjudication is made that Mortgagee has acted
unreasonably or unreasonably delayed acting in any case where by
law or under this Agreement, the Note, the Mortgage or the other
Loan Documents, it has an obligation to act reasonably or
promptly, Mortgagee shall not be liable for any monetary damages,
and Mortgagor's remedies shall be limited to injunctive relief or
declaratory judgment.
Section 3.13. Offsets, Counterclaims and Defenses. Any
assignee of the Mortgage, this Agreement, the Note or any other
Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to this Agreement,
the Note, the Mortgage and such other Loan Documents which
Mortgagor may otherwise have against any assignor of the
Mortgage, this Agreement, the Note and such other Loan Documents
and no such unrelated counterclaim or defense shall be interposed
or asserted by Mortgagor in any action or proceeding brought by
any such assignee upon the Mortgage, this Agreement, the Note or
any other Loan Documents and any such right to interpose or
assert any such unrelated offset, counterclaim or defense in any
such action or proceeding is hereby expressly waived by
Mortgagor.
Section 3.14. WAIVER OF STATUTE OF LIMITATIONS. The
pleadings of any statute of limitations as a defense to any and
all obligations secured by this Agreement are hereby waived to
the full extent permitted by law.
Section 3.15. NO JOINT VENTURE OR PARTNERSHIP. Mortgagor
and Mortgagee intend that the relationship created hereunder be
solely that of mortgagor and mortgagee or borrower and lender, as
the case may be. Nothing herein is intended to create a joint
venture, partnership, tenancy-in-common, or joint tenancy
relationship between Mortgagor and Mortgagee nor to grant
Mortgagee any interest in the Property other than that of
mortgagee or lender.
Section 3.16. TIME OF THE ESSENCE. Time shall be of the
essence in the performance of all obligations of Mortgagor
hereunder.
Section 3.17. NO RELEASE. No recovery of any judgment by
Mortgagee and no levy of an execution under any judgment upon the
Property or any part thereof or upon any other property of
Mortgagor shall release any liens, rights, powers or remedies of
Mortgagee hereunder, but such liens, rights, powers and remedies
of Mortgagee shall continue unimpaired until all amounts due
under the Note, the Mortgage and the other Loan Documents are
paid in full.
Section 3.18. MORTGAGOR'S OBLIGATIONS ABSOLUTE. Except as
expressly set forth to the contrary in the Loan Documents, all
sums payable by Mortgagor hereunder shall be paid without notice
or demand, counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and
the obligations and liabilities of Mortgagor hereunder shall in
no way be released, discharged, or otherwise affected (except as
expressly provided herein) by reason of: (a) any damage to or
destruction of or any taking of the Property or any portion
thereof; (b) any restriction or prevention of or interference
with any use of the Property or any portion thereof; (c) any
title defect or encumbrance or any eviction from the Property or
any portion thereof by title paramount or otherwise; (d) any
bankruptcy
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proceeding relating to Mortgagor, any general partner, member, or
shareholder, or any guarantor or indemnitor, or any action taken
with respect to this Mortgage or any other Loan Document by any
trustee or receiver of Mortgagor or any such general partner,
member, shareholder, guarantor or indemnitor, or by any court, in
any such proceeding; (e) any claim which Mortgagor has or might
have against Mortgagee; (f) any default or failure on the part of
Mortgagee to perform or comply with any of the terms hereof or of
any other agreement with Mortgagor; or (g) any other occurrence
whatsoever, whether similar or dissimilar to the foregoing,
whether or not Mortgagor shall have notice or knowledge of any of
the foregoing.
Section 3.19 SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE
ADVISE OF COMPETENT COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION
IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING BY
ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT, THE NOTE,
THE MORTGAGE OR ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREES THAT
ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN NEW YORK
COUNTY, NEW YORK, (iii) SUBMITS TO THE JURISDICTION OF SUCH
COURT, AND, (iv) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES
THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY
OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF
MORTGAGEE TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER
FORUM). MORTGAGOR FURTHER CONSENTS AND AGREES TO SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT,
ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL,
POSTAGE PREPAID, TO THE MORTGAGOR AT THE ADDRESS FOR NOTICE SET
FORTH IN THE MORTGAGE, AND CONSENTS AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE
(BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF
PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
(b) MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE
ADVISE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER
FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE
INDEBTEDNESS SECURED HEREBY OR ANY CONDUCT, ACT OR OMISSION OF
MORTGAGEE OR MORTGAGOR OR ANY OF THEIR DIRECTORS, OFFICERS,
PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER
PERSONS AFFILIATED WITH MORTGAGEE OR MORTGAGOR, IN EACH OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
Section 3.20 EXCULPATION. Notwithstanding anything to the
contrary contained herein, Mortgagor's liability hereunder shall
be limited as set forth in Paragraph 13 of the Note.
Section 3.21 AMENDMENT. This Agreement may not be
modified, amended, supplemented, replaced or terminated except by
a written agreement signed by Mortgagee and Mortgagor.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, Mortgagor and Mortgagee have duly
executed this Agreement the day and year first above written.
SHOWBOAT LAND, LLC,
a Nevada limited liability company
By: Showboat Operating Company,
a Nevada corporation, a member
By: /s/ R. Craig Bird
R. Craig Bird, Executive Vice-
President
and Chief Financial Officer
By: Showboat Land Holding Limited
Partnership,
a Nevada limited partnership, a
member
By: Showboat Land Company, a Nevada
corporation,
its general partner
By: /s/ R. Craig Bird
R. Craig Bird, Vice-
President/Finance
COLUMN FINANCIAL, INC.
By: /s/ Linda L. Keller
Name: Linda L. Keller
Title: Assistant Vice President
<PAGE>
GUARANTY OF LEASE
This GUARANTY OF LEASE (the "Guaranty") is made and entered
into by SHOWBOAT, INC., a Nevada corporation, having an office at
2800 Fremont Street, Las Vegas, Nevada 89104 ("Guarantor"), for
the benefit of COLUMN FINANCIAL, INC., a Delaware corporation
having an office at 3414 Peachtree Road, N.E., Suite 1140,
Atlanta, Georgia 30326 ("Lender"). This Guaranty is made with
reference to the following facts:
A. Sun International, as successor-in-interest to Resorts
International, Inc. ("Original Landlord"), and Atlantic City
Showboat, Inc. ("TENANT") are parties to the Lease (as
hereinafter defined).
B. Showboat Land LLC ("Landlord") is simultaneously
herewith acquiring the fee interest in the real property that is
the subject of the Lease (the "Premises") and acquiring the
Original Landlord's interest under the Lease.
C. Guarantor owns or controls both Landlord and Tenant.
D. Lender is simultaneously herewith making a loan in the
original principal amount of $100 million to Landlord (the
"Loan") to fund a portion of the purchase price of the Premises,
which Loan will be secured by a mortgage on the Premises and an
assignment of the Lease and the rents thereunder.
E. Guarantor acknowledges that the Loan will benefit
Guarantor as the beneficial owner of all of the outstanding
interests of Landlord.
F. Lender would not make the Loan to Landlord unless
Guarantor executed this Guaranty. This Guaranty is therefore
being delivered to Lender to induce Lender to make the Loan to
Landlord.
NOW, THEREFORE, in exchange for Ten Dollars ($10.00) and
other good, adequate and valuable consideration, the receipt and
sufficiency of which Guarantor acknowledges, and to induce Lender
to make the Loan to Landlord, Guarantor agrees as follows:
1. DEFINITIONS. For purposes of this Guaranty, the
following terms shall be defined as follows. In addition, any
terms defined in the Lease shall have the same meanings in this
Guaranty, except to the extent that this Guaranty provides some
other meaning(s) for such terms.
1.1 "LEASE." The "Lease" means the Lease, dated on or about
October 26, 1983, between Landlord's and Tenant's respective
predecessor-in-interest, as it heretofore has been and hereafter
may be amended from time to time. The term "Lease" shall also
refer to: (a) any renewal, modification, option, extension or
assignment of the Lease; and (b) Tenant's obligations relating to
the Premises during any period when Tenant is occupying the
Premises or any portion thereof either (i) as a "holdover tenant"
or (ii) as a "statutory tenant" or under any other rent
regulation, rent control, rent stabilization, mandatory
arbitration or other statutory scheme regulating the landlord-
tenant relationship (the parties recognizing, however, that none
of the schemes referred to in this clause "ii" would presently
apply to the Lease). If the Lease is terminated, then at
Lender's option, notwithstanding such termination (and in the
event of any subsequent reinstatement of the Lease), all
Obligations under this
<PAGE>
Guaranty shall be calculated and determined as if the Lease were
still in effect. Any request by Landlord that Tenant vacate the
Premises and surrender the Lease shall not affect the definition
of "Lease" for all purposes of this Guaranty.
1.2 "LEGAL COSTS." Lender's "Legal Costs" means
Lender's actual reasonable attorneys' fees and expenses and costs
incurred by Lender in any Proceeding with Guarantor or with
Tenant on account of Tenant's breach of the Lease or Guarantor's
breach of this Guaranty, provided that Lender prevails.
1.3 "OBLIGATIONS." The "Obligations" shall mean all
obligations of Tenant under the Lease to pay money, including
without limitation: (a) the obligation to pay fixed rent; and (b)
the obligation to make all payments required under the Lease on
account of taxes and all other matters, and to make all payments
required under the Environmental Indemnity Agreement, dated as of
even date hereof, from Tenant and Landlord for the benefit of
Lender.
1.4 "PROCEEDING." The term "Proceeding" means any
legal action, suit, arbitration hearing or proceeding arising out
of, or relating to the interpretation or enforcement of, this
Guaranty or the Lease, including a bankruptcy or similar
proceeding affecting Tenant or Guarantor.
1.5 "TENANT." The term "Tenant" means: (a) Tenant as
defined above, acting on its own behalf, and its successors and
assigns as tenant under the Lease, by sale, assignment or
otherwise; (b) any estate created by the commencement of a
bankruptcy or similar proceeding affecting Tenant; (c) any
trustee, liquidator, sequestrator or receiver of Tenant or
Tenant's property; and (d) any similar person or officer,
appointed pursuant to any law governing any bankruptcy or
insolvency proceeding or otherwise.
1.6 "Landlord." The term "Landlord" means the
Landlord named herein and its successors and assigns as landlord
under the Lease, by sale, assignment, foreclosure or otherwise.
2. GUARANTY OF OBLIGATIONS. Guarantor unconditionally and
irrevocably guarantees Tenant's payment and performance of the
Obligations when due, strictly in compliance with the Lease. If
Tenant does not pay or perform any of the Obligation(s) when due,
strictly in compliance with the Lease, then Guarantor shall pay
or perform such Obligation(s). At Lender's option (whether or
not Landlord has previously requested payment or performance of
the Obligation(s) from Tenant) Lender may demand that Guarantor
pay or perform any Obligation(s) without demanding that Tenant
pay or perform same. Guarantor's liability under this Guaranty
shall be primary and not secondary. Guarantor's liability under
this Guaranty shall be in the full amount owed by Tenant on
account of the Obligations, including any interest, default
interest, costs and fees (including, without limitation, Legal
Costs) with respect to the Obligations, including any of the
foregoing that would have accrued but for the commencement of a
bankruptcy, insolvency or similar proceeding affecting Tenant.
3. NO OFFSET. Except to the extent, if any, that Lender
agrees otherwise in writing, Guarantor's obligations under this
Guaranty shall not be subject to offset, deduction, reduction,
counterclaim, or defense of any kind, including without
limitation on account of any offset, deduction, reduction,
counterclaim, or defense arising or purportedly arising under the
Lease or from the landlord-tenant relationship thereunder.
4. CHANGES IN LEASE. Without notice to, or consent by,
Guarantor, and in Landlord's sole and absolute discretion and
without prejudice to Lender or in any way limiting or reducing
Guarantor's
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liability under this Guaranty, Landlord may: (a) grant extensions
of time, renewals or other indulgences or modifications to
Tenant; (b) change, amend or modify the Lease; and (c) accept or
make compositions or other arrangements or file or refrain from
filing a claim in any bankruptcy or similar proceeding, and
otherwise deal with Tenant and any other party related to the
Lease as Landlord may determine in its sole and absolute
discretion. Without limiting the generality of the foregoing,
Guarantor's liability under this Guaranty shall continue even if
Landlord alters any obligations under the Lease in any respect or
if Landlord's remedies or rights against Tenant are in any way
impaired or suspended with or without Guarantor's consent. If
Landlord performs any of the actions described in this paragraph,
then Guarantor's liability shall continue in full force and
effect. Guarantor acknowledges that Guarantor is and will be in
a position to know about and control any of the actions described
in this paragraph.
5. NATURE OF GUARANTY. Guarantor's liability under this
Guaranty is a guaranty of payment of money only. This Guaranty
is a guaranty of payment, not of collection. Guarantor's
liability under this Guaranty is not conditioned or contingent
upon the genuineness, validity, regularity or enforceability of
the Lease. Guarantor acknowledges that Guarantor is fully
obligated under this Guaranty (with respect to the Obligations
only) even if Tenant had no liability at the time of execution of
the Lease or later ceases to be liable under the Lease, whether
pursuant to bankruptcy or otherwise. Guarantor waives any right
to compel Landlord to proceed first against Tenant or under the
Lease, before proceeding against Guarantor. Guarantor agrees
that if any of the Obligations are or become void or
unenforceable, then Guarantor's liability under this Guaranty
shall continue in full force with respect to all Obligations as
if they were and continued to be legally enforceable.
Guarantor's liability under this Guaranty shall continue until
the Loan has been satisfied in full.
6. EXTENSION, RENEWAL, ETC. OF LEASE. This Guaranty
shall remain and continue in full force and effect
notwithstanding any renewal, modification, option, extension or
assignment of the Lease, whether or not separately consented to,
acknowledged or confirmed by Guarantor. The definition of "Lease"
shall include any such renewal, modification, option, extension
or assignment of the Lease.
7. WAIVERS OF RIGHTS AND DEFENSES. Guarantor waives any
right to require Landlord to proceed against Tenant or pursue any
other right or remedy for Guarantor's benefit. Guarantor agrees
that Lender may proceed against Guarantor with respect to the
Obligations without taking any action against Tenant. Guarantor
agrees that Landlord may unqualifiedly exercise in its sole
discretion any or all rights and remedies available to it against
Tenant without impairing Lender's rights and remedies in
enforcing this Guaranty, under which Guarantor's liabilities
shall remain independent and unconditional.
8. ADDITIONAL WAIVERS. Guarantor waives diligence and all
demands, protests, presentments and notices of every kind or
nature, including notices of protest, dishonor, nonpayment,
acceptance of this Guaranty and the creation, renewal, extension,
modification or accrual of any of the Obligations. Guarantor
further waives any right to plead any and all statutes of
limitations as a defense to Guarantor's liability under this
Guaranty or the enforcement of this Guaranty. No failure or
delay on Lender's pan in exercising any power, right or privilege
under this Guaranty shall impair or waive any such power, right
or privilege. Guarantor irrevocably waives any right to trial by
jury in any action, proceeding, counterclaim or other litigation
arising out of or relating to this Guaranty, the enforcement of
this Guaranty, or any actions of Lender in connection with or
relating to the enforcement of this Guaranty.
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9. LANDLORD'S EXERCISE OF LEASE REMEDIES. The validity
of this Guaranty and the obligations of Guarantor shall in no way
be terminated, limited, affected or impaired by reason of
Landlord's assertion against Tenant of any rights or remedies
reserved to Landlord under the Lease or available with respect to
the Lease under applicable law. Lender may enforce this Guaranty
against Guarantor either before, after, in conjunction with, or
independently of Landlord's assertion against Tenant of any
remedies available under the Lease or with respect to the Lease
under applicable law. Guarantor's primary personal liability for
the Obligations shall not be limited, restricted, diminished, or
reduced in any manner by the occurrence of any of the following:
(a) Tenant's departure from the Premises after such Obligations
accrued; (b) Landlord's obtaining a judgment against Tenant for
rent or use and occupancy payments, except to the extent that
such judgment has actually been paid and such payment(s) are
credited against the Obligations pursuant to this Guaranty; (c)
any actions or inactions by Landlord in any Proceeding affecting
Tenant or the Lease; or (d) Landlord's termination of the Lease
or exercise of any other remedies under the Lease.
10. TENANT'S FINANCIAL CONDITION. Guarantor represents
that Guarantor is fully aware of the financial condition of
Tenant. Guarantor delivers this Guaranty based solely upon
Guarantor's own independent investigation and based in no part
upon any representation or statement by Lender. Guarantor is not
relying upon, nor expecting, Lender to furnish Guarantor with any
information concerning the financial condition of Tenant.
11. MERGER; NO CONDITIONS; AMENDMENTS. This Guaranty
contains the entire agreement among the parties with respect to
the matters set forth in this Guaranty. This Guaranty supersedes
all prior agreements among the parties with respect to the
matters set forth in this Guaranty. No course of prior dealings
among the parties, no usage of trade, and no parole or extrinsic
evidence of any nature shall be used to supplement, modify or
vary any terms of this Guaranty. This Guaranty is unconditional.
There are no unsatisfied conditions to the full effectiveness of
this Guaranty. No terms or provisions of this Guaranty may be
changed, waived, revoked or amended without Lender's prior
written consent. If any court of competent jurisdiction
determines that any provision of this Guaranty is unenforceable,
then all other provisions of this Guaranty shall remain fully
effective.
12. INTERPRETATION. This Guaranty shall be governed under
the law of the State of New York. The words "include" or
"including" are intended to be interpreted as if followed in each
case by the words "without limitation."
13. LEGAL COSTS. In the event of any Proceeding between
Guarantor and Lender including any Proceeding in which Lender
enforces or attempts to enforce this Guaranty, Guarantor shall
reimburse Lender for all Legal Costs of such Proceeding.
14. COMMERCIAL TRANSACTION. Guarantor acknowledges that
the Lease and this Guaranty are a commercial transaction, and
that neither this Guaranty nor the Lease is entered into for
personal, family, household or agricultural purposes.
15. NO THIRD-PARTY BENEFICIARIES. This Guaranty is
executed and delivered for the benefit of Lender and its heirs,
successors and assigns, and is not intended to benefit any third
party.
16. NOTICES. All notices, requests and demands to be made under
this Guaranty shall be given in writing to a party at its address
set forth in the preamble and shall be delivered by hand against
a signed receipt, by nationally recognized overnight courier or
by certified or registered mail, postage prepaid, return receipt
requested, and shall be deemed given on the date received or on
the date that
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<PAGE>
receipt is refused. Either party may change its address for
notice by a notice given in accordance herewith.
17. ACQUISITION. Guarantor is in the process of being
acquired by Harrah's Entertainment, Inc. ("Harrah's"). In the
event that the acquisition of Guarantor by Harrah's is
consummated, at any time thereafter Guarantor may assign this
Guaranty to Harrah's or any entity that is at least fifty percent
(50%) beneficially owned by Harrah's having a net worth equal to
or greater than Guarantor's net worth at such time and owning,
directly or indirectly, at least fifty percent (50%) of the
outstanding interests of Tenant (such entity, the "Successor
Guarantor") provided that the Successor Guarantor agrees in
writing to assume all of the Guarantor's obligations hereunder
and to be bound by all of the terms, conditions and covenants
contained in this Guaranty pertaining to the Guarantor.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Guarantor has duly executed this
Guaranty as of the date indicated below.
GUARANTOR
SHOWBOAT, INC.
By: /s/ R. Craig Bird
Its: Executive Vice President
and Chief Financial
Officer
Date: January 29, 1998
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<PAGE>
ENVIRONMENTAL INDEMNITY AGREEMENT
ENVIRONMENTAL INDEMNITY AGREEMENT (the "Agreement")
made as of the 29th day of January, 1998 by SHOWBOAT LAND, LLC, a
Nevada limited liability company, having an office at 3720 Howard
Hughes Parkway, Suite 200, Las Vegas, Nevada 89109 ("Owner-
Indemnitor"), and ATLANTIC CITY SHOWBOAT, INC., a New Jersey
corporation, having an office at 801 Boardwalk, Atlantic City,
New Jersey 08401 ("Tenant-Indemnitor"), in favor of COLUMN
FINANCIAL, INC., a Delaware corporation, having an office at 3414
Peachtree Road, N.E., Suite 1140, Atlanta, Georgia 30326
("Indemnitee") and other Indemnified Parties (as hereinafter
defined).
RECITALS
A. Owner-Indemnitor and Tenant-Indemnitor (together,
"Indemnitors"), are, or will be, respectively, the fee owner of
and the ground tenant (pursuant to that certain Lease Agreement,
dated October 26, 1983, originally entered into between Resorts
International, Inc. and Ocean Showboat, Inc., as amended) with
respect to that certain real property located in the City of
Atlantic City, County of Atlantic, and State of New Jersey, known
as Atlantic City Showboat Hotel and Casino and more particularly
described in Exhibit A attached hereto (said real property,
together with any real property hereafter encumbered by the lien
of the Security Instrument (defined below), being herein
collectively referred to as the "Land"; the Land, together with
Owner-Indemnitor's, title and interest in and to all structures,
buildings and improvements now or hereafter located on the Land,
being collectively referred to as the "Property").
B. Indemnitee is prepared to make a loan (the "Loan")
to Owner-Indemnitor in the principal amount of $100,000,000.00,
to be evidenced by a certain promissory note of even date
herewith in the principal amount of $100,000,000.00 made by Owner-
Indemnitor to Indemnitee (the "Note") and secured by, among other
things, a certain mortgage and security agreement given by Owner-
Indemnitor to Indemnitee (the "Security Instrument") which will
encumber the Property.
C. Indemnitee is unwilling to make the Loan unless
Owner-Indemnitor and Tenant-Indemnitor, jointly and severally,
agree to provide the indemnification, representations,
warranties, and covenants and other matters described in this
Agreement for the benefit of Indemnified Parties.
AGREEMENT
NOW THEREFORE, in consideration of the loan and the
right to use the premises and Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Owner-Indemnitor and Tenant-Indemnitor
hereby represent, warrant, covenant and agree for the benefit of
Indemnified Parties as follows:
1. ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES. The
Indemnitors represent and warrant that, to the best knowledge of
Indemnitors: (a) there are no Hazardous Substances (defined
below) or underground storage tanks in, on, above, or under the
Property, except those that are both (i) in compliance with all
Environmental Laws (defined below) and with permits issued
pursuant thereto, if applicable, and (ii) fully disclosed to
Indemnitee in writing pursuant to the written report(s) resulting
from the environmental assessment(s) of the Property delivered to
Indemnitee (such report(s) are
<PAGE>
identified in Exhibit B attached hereto and are hereinafter
referred to collectively as the "Environmental Report"); (b)
there are no past, present or threatened Releases (defined below)
of Hazardous Substances in, on, above, under or from the Property
except as described in the Environmental Report; (c) there is no
threat of any Release of Hazardous Substances migrating to the
Property except as described in the Environmental Report; (d)
there is no past or present non-compliance with Environmental
Laws, or with permits issued pursuant thereto, in connection with
the Property, except as described in the Environmental Report;
(e) Indemnitors do not know of, and neither of the Indemnitors
has received, nor has knowledge of the receipt by any prior
tenant of, any written or oral notice or other communication from
any person or entity (including but not limited to a governmental
entity) relating to Hazardous Substances or Remediation (defined
below) thereof, of possible liability of any person or entity
pursuant to any Environmental Law, other environmental conditions
in connection with the Property, or any actual or potential
administrative or judicial proceedings in connection with any of
the foregoing; and (f) Indemnitors have truthfully and fully
provided to Indemnitee, in writing, any and all information
relating to conditions in, on, above, under or from the Property
that is known to Indemnitors or that is contained in files and
records of the Indemnitors, including but not limited to any
reports relating to Hazardous Substances in, on, above, under or
from the Property and/or to the environmental condition of the
Property.
2. ENVIRONMENTAL COVENANTS. Indemnitors covenant and
agree that: (a) all uses and operations on or of the Property,
whether by Indemnitors or by any other person or entity, shall be
in compliance with all Environmental Laws and permits issued
pursuant thereto; (b) there shall be no Releases of Hazardous
Substances in, on, above, under or from the Property other than
in compliance with all Environmental Laws; (c) there shall be no
Hazardous Substances in, on, above or under the Property, except
those that are in compliance with all Environmental Laws and with
permits issued pursuant thereto; (d) Indemnitors shall keep the
Property free and clear of all liens and other encumbrances
imposed pursuant to any Environmental Law, whether due to any act
or omission of Indemnitors or any other person or entity (the
"Environmental Liens"); (e) Indemnitors shall, at their sole cost
and expense, fully and expeditiously cooperate in all activities
of Indemnified Parties pursuant to Section 3 hereof, including
but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Indemnitors
shall, at their sole cost and expense, perform any environmental
site assessment or other investigation of environmental
conditions in connection with the Property, pursuant to any
reasonable written requests of Indemnitee (including but not
limited to sampling, testing and analysis of soil, water, air,
building materials, and other materials and substances whether
solid, liquid or gas), and share with Indemnitee the reports and
other results thereof, and Indemnitee and other Indemnified
Parties shall be entitled to rely on such reports and other
results thereof, provided that, so long as no Event of Default
has occurred and is continuing, such requests by Indemnitee shall
not be made more than once in any twelve (12) month period; (g)
Indemnitors shall, at their sole cost and expense, comply with
all reasonable written requests of Indemnitee to (i) reasonably
effectuate Remediation of any condition (including but not
limited to a Release of a Hazardous Substance) in, on, above,
under or from the Property; (ii) comply with any Environmental
Law; (iii) comply with any directive from any governmental
authority; and (iv) take any other reasonable action necessary or
appropriate for protection of human health or the environment;
(h) Indemnitors shall not do or allow any tenant or other user of
the Property to do any act or thing that materially increases the
dangers to human health or the environment, poses an unreasonable
risk of harm to any person or entity (whether on or off the
Property), or constitutes a public or private nuisance; and (i)
Indemnitors shall immediately notify Indemnitee in writing of (A)
any presence or Releases or threatened Releases of Hazardous
Substances in, on, above, under, from or migrating towards the
Property, (B) any non-compliance with any
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Environmental Laws related in any way to the Property, (C) any
actual or potential Environmental Lien, (D) any required or
proposed Remediation of environmental conditions relating to the
Property, and (E) any written or oral notice or other
communication of which Indemnitors become aware from any source
whatsoever (including but not limited to a governmental entity)
relating in any way to Hazardous Substances or Remediation
thereof, possible liability of any person or entity pursuant to
any Environmental Law, other environmental conditions in
connection with the Property, or any actual or potential
administrative or judicial proceedings in connection with
anything referred to in this Agreement, in each case of which
either Indemnitor has knowledge or notice. Any failure of
Indemnitors to perform their obligations pursuant to this
Agreement shall constitute bad faith waste with respect to the
Property.
3. INDEMNIFIED PARTIES' RIGHTS/COOPERATION AND
ACCESS. Indemnified Parties and any other person or entity
designated by Indemnified Parties (including but not limited to
any receiver, any representative of a governmental entity, and
any environmental consultant) shall have the right but not the
obligation, to enter upon the Property at all reasonable times to
assess any and all aspects of the environmental condition of the
Property and its use, including but not limited to conducting any
environmental assessment or audit (the scope of which shall be
determined in Indemnified Parties' sole and absolute discretion)
and taking samples of soil, groundwater or other water, air, or
building materials, and conducting other invasive testing.
Indemnitors shall cooperate with and provide access to
Indemnified Parties and any such person or entity designated by
Indemnified Parties. Indemnified Parties shall reasonably
endeavor to minimize any interference to Indemnitors caused by
Indemnified Parties' exercise of their rights under this Section
3.
4. INDEMNIFICATION. Indemnitors covenant and agree,
jointly and severally, at their sole cost and expense, to
protect, defend, indemnify, release and hold harmless Indemnified
Parties from and against any and all Losses (defined below)
imposed upon or incurred by or asserted against any Indemnified
Parties (other than those Losses arising solely (i) from a state
of facts that first came into existence after Indemnitee acquired
title to the Property through foreclosure or a deed in lieu
thereof or (ii) from the gross negligence of any Indemnified
Parties) and directly or indirectly arising out of or in any way
relating to any one or more of the following: (a) any presence of
any Hazardous Substances in, on, above, or under the Property;
(b) any past, present or threatened Release of Hazardous
Substances in, on, above, under or from the Property; (c) any
activity by one or both of the Indemnitors, any person or entity
affiliated with one or both Indemnitors, and any other user of
the Property in connection with any actual, proposed or
threatened use, treatment, storage, holding, existence,
disposition or other Release, generation, production,
manufacturing, processing, refining, control, management,
abatement, removal, handling, transfer or transportation to or
from the Property of any Hazardous Substances at any time located
in, under, on or above the Property; (d) any activity by one or
both of the Indemnitors, any person or entity affiliated with one
or both of the Indemnitors, and any other user of the Property in
connection with any actual or proposed Remediation of any
Hazardous Substances at any time located in, under, on or above
the Property, whether or not such Remediation is voluntary or
pursuant to court or administrative order, including but not
limited to any removal, remedial or corrective action; (e) any
past, present or threatened non-compliance or violations of any
Environmental Laws (or permits issued pursuant to any
Environmental Law) in connection with the Property or operations
thereon, including but not limited to any failure by one or both
of the Indemnitors, any person or entity affiliated with one or
both of the Indemnitors, and any other user of the Property to
comply with any order of any governmental authority in connection
with any Environmental Laws; (f) the imposition, recording or
filing or the threatened imposition, recording or filing of any
Environmental Lien encumbering the Property; (g) any
administrative processes or proceedings or judicial proceedings
in any way connected with any matter
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<PAGE>
addressed in this Agreement; (h) any past, present or threatened
injury to, destruction of or loss of natural resources in any way
connected with the Property, including but not limited to costs
to investigate and assess such injury, destruction or loss; (i)
any acts of one or both of the Indemnitors, any person or entity
affiliated with one or both of the Indemnitors, and any other
user of the Property in arranging for disposal or treatment, or
arranging with a transporter for transport for disposal or
treatment, of Hazardous Substances at any facility or
incineration vessel containing such or similar Hazardous
Substances; (j) any acts of one or both of the Indemnitors, any
person or entity affiliated with one or both of the Indemnitors,
and any other user of the Property in accepting any Hazardous
Substances for transport to disposal or treatment facilities,
incineration vessels or sites from which there is a Release, or a
threatened Release of any Hazardous Substance which causes the
incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property or other damage arising under any
statutory or common law or tort law theory, including but not
limited to damages assessed for private or public nuisance or for
the conducting of an abnormally dangerous activity on or near the
Property; (1) any misrepresentation or inaccuracy in any
representation or warranty or material breach or failure to
perform any covenants or other obligations pursuant to this
Agreement or Section 1.31 of the Security Instrument; and (m) any
diminution in value of the Property in any way connected with any
occurrence or other matter referred to in this Agreement.
5. DUTY TO DEFEND AND ATTORNEYS' AND OTHER FEES AND
EXPENSES. Upon written request by any Indemnified Party,
Indemnitors shall defend same (if requested by any Indemnified
Party, in the name of the Indemnified Party) by attorneys and
other professionals approved by the Indemnified Parties.
Notwithstanding the foregoing, any Indemnified Parties may, in
their sole and absolute discretion, engage their own attorneys
and other professionals to defend or assist them, and, at the
option of Indemnified Parties, their attorneys shall control the
resolution of claim or proceeding; provided, however, that,
unless any conflict of interest shall arise among the Indemnified
Parties, the Indemnified Parties shall have the right to retain
no more than one firm of attorneys to defend or assist them.
Upon demand, Indemnitors shall pay or, in the sole and absolute
discretion of the Indemnified Parties, reimburse, the Indemnified
Parties for the payment of reasonable fees and disbursements of
attorneys, engineers, environmental consultants, laboratories and
other professionals in connection therewith.
6. DEFINITIONS. Capitalized terms used herein and
not specifically defined herein shall have the respective
meanings ascribed to such terms in the Security Instrument. As
used in this Agreement, the following terms shall have the
following meanings:
The term "Hazardous Substances" includes but is not
limited to any and all substances (whether solid, liquid or gas)
defined, listed, or otherwise classified as pollutants, hazardous
wastes, hazardous substances, hazardous materials, extremely
hazardous wastes, or words of similar meaning or regulatory
effect under any present or future Environmental Laws or that may
have a negative impact on human health or the environment,
including but not limited to petroleum and petroleum products,
asbestos and asbestos-containing materials ("ACM"),
polychlorinated biphenyls ("PCBs"), lead, radon, radioactive
materials, flammables and explosives.
The term "Environmental Law" means any present and
future federal, state and local laws, statutes, ordinances,
rules, regulations and the like, as well as common law,
applicable to the Property and relating to protection of human
health or the environment, relating to Hazardous Substances,
relating to liability for or costs of Remediation or prevention
of Releases of Hazardous Substances or relating to liability for
or costs of other actual or threatened danger to human health or
the environment.
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<PAGE>
The term "Environmental Law" includes, but is not limited to, the
following statutes, as amended, any successor thereto, and any
regulations promulgated pursuant thereto, and any state or local
statutes, ordinances, rules, regulations and the like applicable
to the Property and addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the
Emergency Planning and Community Right-to-Know Act; the Hazardous
Substances Transportation Act; the Resource Conservation and
Recovery Act (including but not limited to Subtitle I relating to
underground storage tanks); the Solid Waste Disposal Act; the
Clean Air Act; the Toxic Substances Control Act; the Safe
Drinking Water Act; the Occupational Safety and Health Act; the
Federal Water Pollution Control Act (the "Clean Water Act"); the
Federal Insecticide, Fungicide and Rodenticide Act; the
Endangered Species Act; the National Environmental Policy Act;
the Spill Compensation and Control Act; the Industrial Site
Recovery Act; the Leaking Underground Storage Tank Act; and the
River and Harbors Appropriation Act. The term "Environmental
Law" also includes, but is not limited to, any present and future
federal, state and local laws, statutes, ordinances, rules,
regulations and the like, as well as common law, conditioning
transfer of property upon a negative declaration or other
approval of a governmental authority of the environmental
condition of the Property; requiring notification or disclosure
of Releases of Hazardous Substances or other environmental
condition of the Property to any governmental authority or other
person or entity, whether or not in connection with transfer of
title to or interest in the Property; imposing conditions or
requirements in connection with permits or other authorization
for lawful activity at or with respect to the Property; relating
to nuisance, trespass or other causes of action related to the
Property; and relating to wrongful death, personal injury, or
property or other damage in connection with any physical
condition or use of the Property.
The term "Release" with respect to any Hazardous
Substance includes but is not limited to any release, deposit,
discharge, emission, leaking, leaching, spilling, seeping,
migrating, injecting, pumping, pouring, emptying, escaping,
dumping, disposing or other movement of Hazardous Substances.
The term "Remediation" includes but is not limited to
any response, remedial, removal, or corrective action; any
activity to clean up, detoxify, decontaminate, contain or
otherwise remediate any Hazardous Substance; any actions to
prevent, cure or mitigate any Release of any Hazardous Substance;
any action to comply with any Environmental Laws or with any
permits issued pursuant thereto; any inspection, investigation,
study, monitoring, assessment, audit, sampling and testing,
laboratory or other analysis, or evaluation relating to any
Hazardous Substances or to anything referred to herein and in
Section 1.31 of the Security Instrument.
The term "Legal Action" means any claim, suit or
proceeding, whether administrative or judicial in nature.
The term "Indemnified Parties" includes Indemnitee, any
person or entity who is or will have been involved in originating
the Loan, any person or entity who is or will have been involved
in servicing the Loan, any person or entity in whose name the
encumbrance created by the Security Instrument is or will have
been recorded, persons and entities who may hold or acquire or
will have held a full or partial interest in the Loan (including
but not limited to those who may acquire any interest in mortgage
pass-through certificates or other securities evidencing a
beneficial interest in the Loan offered in a rated or unrated
public offering or private investment ("Securities"), as well as
custodians, trustees and other fiduciaries who hold or have held
a full or partial interest in the Loan for the benefit of third
parties), as well as the respective directors, officers,
shareholders, partners, employees, agents, servants,
representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, successors and assigns of
-5-
<PAGE>
any and all of the foregoing (including but not limited to any
other person or entity who holds or acquires or will have held a
participation or other full or partial interest in the Loan or
the Property, whether during the term of the Loan or as part of
or following foreclosure pursuant to the Loan) and including but
not limited to any successors by merger, consolidation or
acquisition of all or a substantial part of Indemnitee's assets
and business.
The term "Losses" includes any and all claims, suits,
liabilities (including but not limited to strict liabilities),
administrative or judicial actions or proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value,
fines, penalties, charges, fees, expenses, costs of Remediation
(whether or not performed voluntarily), judgments, awards,
amounts paid in settlement, foreseeable and unforeseeable
consequential damages, litigation costs, attorneys' fees and
costs of diligence, engineers' fees, environmental consultants'
fees, and investigation costs (including but not limited to costs
for sampling, testing and analysis of soil, water, air, building
materials, and other materials and substances whether solid,
liquid or gas), of whatever kind or nature, and whether or not
incurred in connection with any judicial or administrative
proceedings.
7. UNIMPAIRED LIABILITY. The liability of
Indemnitors under this Agreement shall in no way be limited or
impaired by, and Indemnitors hereby consent to and agree to be
bound by, any amendment or modification of the provisions of the
Note, the Security Instrument or any other document which
evidences, secures or guarantees all or any portion of the Loan
or executed and delivered in connection with the Loan (the "Other
Security Documents") to or with Indemnitee by Indemnitor or any
person who succeeds Indemnitor under any of such documents or as
owner of the Property. In addition, the liability of Indemnitors
under this Agreement shall in no way be limited or impaired by
(i) any extensions of time for performance required by the Note,
the Security Instrument or any of the Other Security Documents,
(ii) any sale or transfer of all or part of the Property, (iii)
except as provided herein, any exculpatory provision in the Note,
the Security Instrument, or any of the Other Security Documents
limiting Indemnitee's recourse to the Property or to any other
security for the Note, or limiting Indemnitee's rights to a
deficiency judgment against any Indemnitor, (iv) the accuracy or
inaccuracy of the representations and warranties made by any
Indemnitor under the Note, the Security Instrument or any of the
Other Security Documents or herein, (v) the release of one or
both Indemnitors or any other person from performance or
observance of any of the agreements, covenants, terms or
conditions contained in any of the Other Security Documents by
operation of law, Indemnitee's voluntary act, or otherwise, (vi)
the release or substitution in whole or in part of any security
for the Note, or (vii) Indemnitee's failure to record the
Security Instrument or file any UCC financing statements (or
Indemnitee's improper recording or filing of any thereof) or to
otherwise perfect, protect, secure or insure any security
interest or lien given as security for the Note; and, in any such
case, whether with or without notice to Indemnitor and with or
without consideration.
8. ENFORCEMENT. (a) Indemnified Parties may enforce
the obligations of the Indemnitors without first resorting to or
exhausting any security or collateral or without first having
recourse to the Note, the Security Instrument, or any Other
Security Documents or any of the Property, through foreclosure
proceedings or otherwise, provided, however, that nothing herein
shall inhibit or prevent Indemnitee from suing on the Note,
foreclosing, or exercising any power of sale under, the Security
Instrument, or exercising any other rights and remedies
thereunder. This Agreement is not collateral or security for the
debt of Owner-Indemnitor pursuant to the Loan, unless Indemnitee
expressly elects in writing to make this Agreement additional
collateral or security for the debt of Owner-Indemnitor pursuant
to the Loan, which Indemnitee is entitled to do in its sole and
absolute discretion. It is not
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<PAGE>
necessary for an event of default to have occurred pursuant to
the Security Instrument for Indemnified Parties to exercise their
rights pursuant to this Agreement. Notwithstanding any provision
of the Security Instrument, the obligations pursuant to this
Agreement are exceptions to any non-recourse or exculpation
provision of the Security Instrument; Indemnitors are fully and
personally, jointly and severally, liable for such obligations,
and their liability is not limited to the original or amortized
principal balance of the Loan or the value of the Property.
(b) Notwithstanding anything to the contrary in this
Agreement, it shall not be a default hereunder if an Indemnitor
shall breach any of its covenants, or fail to perform its
obligations, set forth in Section 2 hereof unless and until (i)
an Indemnified Party shall have notified the Indemnitors that
such breach or failure has occurred, and (ii) such breach or
failure is not cured within thirty (30) days after the effective
date of such notice, or, if such breach or default is not
reasonably capable of being cured within such thirty (30) day
period, Indemnitors do not commence to cure within such thirty
(30) day period and thereafter diligently pursue such cure to
completion.
9. SURVIVAL. The obligations and liabilities of
Indemnitors under this Agreement shall fully survive indefinitely
notwithstanding any termination, satisfaction, assignment, entry
of a judgment of foreclosure, exercise of any power of sale, or
delivery of a deed in lieu of foreclosure of the Security
Instrument.
10. INTEREST. Any amounts payable to Indemnified
Parties under this Agreement shall become immediately due and
payable and, if not paid within thirty (30) days of written
demand therefor, shall bear interest at a per annum rate equal to
the lesser of (a) eleven and 9/100ths percent (11.09%) per annum
or (b) the maximum interest rate which Indemnitors may by law pay
or Indemnified Parties may charge and collect, from the date
payment was due.
11. WAIVERS. (a) Indemnitors hereby waive and
relinquish (i) any right or claim of right to cause a marshalling
of Indemnitors' assets or to cause Indemnitee or other
Indemnified Parties to proceed against any of the security for
the Loan before proceeding under this Agreement against
Indemnitors; (ii) all rights and remedies accorded by applicable
law to indemnitors or guarantors, except any rights of
subrogation which Indemnitors may have, provided that the
indemnity provided for hereunder shall neither be contingent upon
the existence of any such rights of subrogation nor subject to
any claims or defenses whatsoever which may be asserted in
connection with the enforcement or attempted enforcement of such
subrogation rights including, without limitation, any claim that
such subrogation rights were abrogated by any acts of Indemnitee
or other Indemnified Parties; (iii) the right to assert a
counterclaim, other than a mandatory or compulsory counterclaim,
in any action or proceeding brought against or by Indemnitee or
other Indemnified Parties; (iv) notice of acceptance hereof and
of any action taken or omitted in reliance hereon; (v)
presentment for payment, demand of payment, protest or notice of
nonpayment or failure to perform or observe, or other proof, or
notice or demand; and (vi) all homestead exemption rights against
the obligations hereunder and the benefits of any statutes of
limitations or repose. Notwithstanding anything to the contrary
contained herein, Indemnitors hereby agree to postpone the
exercise of any rights of subrogation with respect to any
collateral securing the Loan until the Loan shall have been paid
in full.
(b) INDEMNITORS HEREBY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING
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<PAGE>
OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE
SECURITY INSTRUMENT, THIS AGREEMENT OR THE OTHER SECURITY
DOCUMENTS OR ANY ACTS OR OMISSIONS OF ANY INDEMNIFIED PARTIES BY
CONNECTION THEREWITH.
12. SUBROGATION. Indemnitors shall take any and all
reasonable actions, including institution of legal action against
third-parties, necessary or appropriate to obtain reimbursement,
payment or compensation from such persons responsible for the
presence of any Hazardous Substances at, in, on, under or near
the Property or otherwise obligated by law to bear the cost
Indemnified Parties shall be and hereby are subrogated to all of
Indemnitors' rights now or hereafter in such claims.
13. INDEMNITOR'S REPRESENTATIONS AND WARRANTIES.
Indemnitors represent and warrant that:
(a) each has the full corporate power and
authority to execute and deliver this Agreement and to
perform its obligations hereunder; the execution, delivery
and performance of this Agreement by each Indemnitor has
been duly and validly authorized; and all requisite
corporate action has been taken by each Indemnitor to make
this Agreement valid and binding upon such Indemnitor,
enforceable in accordance with its terms;
(b) each Indemnitor's execution of, and
compliance with, this Agreement will not result in the
breach of any term or provision of the charter or by-laws
of that Indemnitor or result in the breach of any term or
provision of, or conflict with or constitute a default
under or result in the acceleration of any obligation
under, any agreement, indenture or loan or credit
agreement or other instrument to which the Indemnitor or
the Property is subject, or result in the violation of any
law, rule, regulation, order, judgment or decree to which
the Indemnitor or the Property is subject;
(c) there is no action, suit, proceeding or
investigation pending or threatened against either
Indemnitor which, either in any one instance or in the
aggregate, that may result in any material adverse change
in the business, operations, financial condition,
properties or assets of either Indemnitor, or in any
material impairment of the right or ability of either
Indemnitor to carry on its business substantially as now
conducted, or in any material liability on the part of
either Indemnitor, or which would draw into question the
validity of this Agreement or of any action taken or to be
taken in connection with the obligations of each
Indemnitor contemplated herein, or which would be likely
to impair materially the ability of either Indemnitor to
perform under the terms of this Agreement;
(d) Indemnitors do not believe, nor does either
Indemnitor have any reason or cause to believe, that it
cannot perform each and every covenant contained in this
Agreement;
(e) no approval, authorization, order, license
or consent of, or registration or filing with, any
governmental authority or other person, and no approval,
authorization or consent of any other party is required in
connection with this Agreement; and
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<PAGE>
(f) this Agreement constitutes a valid, legal
and binding obligation of each Indemnitor, enforceable
against it in accordance with the terms hereof, subject to
general principles of equity and laws affecting the rights
and remedies of debtors and creditors generally.
14. NO WAIVER. No delay on any Indemnified Party's
part in exercising any right, power or privilege under this
Agreement shall operate as a waiver of any such privilege, power
or right.
15. NOTICE OF LEGAL ACTIONS. Each party hereto shall,
within five (5) business days of receipt thereof, give written
notice to the other party hereto of (i) any notice, advice or
other communication from any governmental entity or any source
whatsoever with respect to Hazardous Substances on, from or
affecting the Property, and (ii) any Legal Action brought against
such party or related to the Property, with respect to which
Indemnitor may have liability under this Agreement. Such notice
shall comply with the provisions of Section 19 hereof.
16. BOOKS AND RECORDS. (a) Each Indemnitor shall
keep adequate books and records of account in accordance with
generally accepted accounting principles ("GAAP"), or in
accordance with other methods acceptable to Indemnitee in its
sole discretion, consistently applied, and each Indemnitor shall
furnish to Indemnitee:
(i) an annual balance sheet and profit and loss
statement of such Indemnitor in the form required by
Indemnitee, prepared and certified by such Indemnitor,
or if required by Indemnitee, audited financial
statements prepared by an independent certified public
accountant acceptable to Indemnitee, within ninety (90)
days after the close of each fiscal year of Indemnitor;
and
(ii) such other financial statements as may,
from time to time, be required by Indemnitee.
(b) Indemnitors shall furnish to Indemnitee and its
agents convenient facilities for the examination and audit of any
such books and records. Within a reasonable time after request
by Indemnitee, each Indemnitor shall provide any other
information with respect to the Property and the financial
condition of such Indemnitor as Indemnitee may from time to time
request.
(c) To the extent that any of the above financial
statements and/or records are prepared for an Indemnitor by an
independent certified public accountant, such Indemnitor shall
deliver copies of such certified financial statements and/or
records to Indemnitee.
17. EXAMINATION OF BOOKS AND RECORDS. Indemnitee and
its accountants shall have the right to examine the records,
books, management and other papers of each Indemnitor which
reflect upon such Indemnitor's financial condition, at the
Property or at any office regularly maintained by such Indemnitor
where the books and records are located. Indemnified Parties and
their accountants shall have the right to make copies and
extracts from the foregoing records and other papers. In
addition, Indemnified Parties and their accountants shall have
the right to examine and audit the books and records of each
Indemnitor pertaining to the income, expenses and operation of
the Property during reasonable business hours at any office of
such Indemnitor where the books and records are located.
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<PAGE>
18. TRANSFER OF LOAN. (a) Indemnitee may, at any time,
sell, transfer or assign the Note, the Security Instrument, this
Agreement and the Other Security Documents, any or all servicing
rights with respect thereto, or grant participations therein or
issue mortgage pass-through certificates or other securities
evidencing a beneficial interest in a rated or unrated public
offering or private placement. Indemnitee may forward to each
purchaser, transferee, assignee, servicer, participant, investor
in such securities or any credit rating agency rating such
securities (collectively, the "Investor") and each prospective
Investor, all documents and information which Indemnitee now has
or may hereafter acquire relating to Indemnitors and the
Property, as Indemnitee determines necessary or desirable.
Indemnitors shall furnish, and Indemnitors consent to Indemnitee
furnishing, to such Investors or such prospective Investors any
and all information concerning the financial condition of the
Indemnitors and of the Property as may be requested by
Indemnitee, any Investor or any prospective Investor in
connection with any sale, transfer or participation interest.
(b) Upon any transfer or proposed transfer
contemplated above and by Section 4.33 of the Security
Instrument, at Indemnitee's request, each or both Indemnitors
shall provide an estoppel certificate to the Investor or any
prospective Investor in such form, substance and detail as
Indemnitee, such Investor or prospective Investor reasonably may
require.
19. NOTICES. (a) Any notice or communication in
respect thereof will be sufficiently given to a party if in
writing and delivered in person, sent by certified or registered
mail (airmail if overseas) or the equivalent (with return receipt
requested) or by overnight courier or given by facsimile
transmission addressed to the party at its address or facsimile
number provided for that purpose.
(b) A notice or communication will be effective, if
delivered by hand, sent by overnight courier or by facsimile
transmission, on the day it is delivered (or if that day is not a
day on which commercial banks are open for business in the city
specified in the address for notice provided by the recipient (a
"Local Banking Day"). or if delivered after 5:00 p.m.
(recipient's local time) on a Local Banking Day, on the first
following day that is a Local Banking Day), or, if sent by
certified or registered mail (airmail if overseas) or the
equivalent (return receipt requested), three Local Banking Days
after dispatch if the recipient's address for notice is in the
same country as the place of dispatch and otherwise seven Local
Banking Days after dispatch (or, in either case, if delivered
after 5:00 p.m. (recipient's local time) on a Local Banking Day,
on the first following day that is a Local Banking Day).
(c) Either party by notice to the other may designate
additional or different addresses for subsequent notices or
communications.
20. JURISDICTION. Indemnitors covenant and agree (i)
that in any action or proceeding brought by any Indemnified Party
against an Indemnitor under this Agreement, the Supreme Court of
the State of New York for the County of New York, or, in a case
involving diversity of citizenship, the United States District
Court for the Southern District of New York, shall have non
exclusive jurisdiction over any such action or proceeding; (ii)
that service of any summons and complaint or other process in any
such action or proceeding may be made by registered or certified
mail directed to Indemnitor to its address set forth on the first
page of this Agreement; Indemnitors hereby waive personal service
thereof; and (iii) that within thirty days after such mailing
Indemnitor so served shall appear or answer to any summons and
complaint or other process, and should Indemnitor so served fail
to appear or answer within said thirty-day period, Indemnitor
shall be deemed in default and judgment may be entered
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<PAGE>
against the Indemnitor for the amount as demanded in any summons
and complaint or other process so served.
21. NO THIRD-PARTY BENEFICIARY. The terms of this
Agreement are for the sole and exclusive protection and use of
Indemnified Parties. No party shall be a third-party beneficiary
hereunder, and no provision hereof shall operate or inure to the
use and benefit of any such third party. It is agreed that those
persons and entities included in the definition of Indemnified
Parties are not such excluded third party beneficiaries.
22. DUPLICATE ORIGINALS; COUNTERPARTS. This Agreement
may be executed in any number of duplicate originals and each
duplicate original shall be deemed to be an original. This
Agreement may be executed in several counterparts, each of which
counterparts shall be deemed an original instrument and all of
which together shall constitute a single Agreement. The failure
of any party hereto to execute this Agreement, or any counterpart
hereof, shall not relieve the other signatories from their
obligations hereunder.
23. NO ORAL CHANGE. This Agreement, and any
provisions hereof, may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act
or failure to act on the part of any Indemnitor or any
Indemnified Party, but only by an agreement in writing signed by
the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is
sought.
24. HEADINGS, ETC. The headings and captions of
various paragraphs of this Agreement are for convenience of
reference only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions
hereof.
25. NUMBER AND GENDER/SUCCESSORS AND ASSIGNS. All
pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.
Without limiting the effect of specific references in any
provision of this Agreement, the term "Indemnitor" shall be
deemed to refer to each and every person or entity comprising an
Indemnitor from time to time, as the sense of a particular
provision may require, and to include the heirs, executors,
administrators, legal representatives, successors and assigns of
an Indemnitor, all of whom shall be bound by the provisions of
this Agreement, provided that no obligation of an Indemnitor may
be assigned except with the written consent of Indemnitee, but
provided further that if the interest of the Owner-Indemnitor or
the Tenant-Indemnitor in the Property shall be transferred to
another entity in accordance with the provisions of Section
1.13(c) or Section 1.12(d), respectively, of the Security
Instrument, then the transferee of such interest shall be deemed
and be an assign of the transferor and an Indemnitor hereunder
and shall be bound by the provisions of this Agreement without
obtaining the written consent of the Indemnitee. Each reference
herein to Indemnitee shall be deemed to include its successors
and assigns. This Agreement shall inure to the benefit of
Indemnified Parties and their respective successors and assigns
forever.
26. JOINT AND SEVERAL LIABILITY. If any Indemnitor
consists of more than one person or entity, the obligations and
liabilities of each such person hereunder are joint and several.
The obligations and liabilities of this Agreement are joint and
several to Owner-Indemnitor and Tenant-Indemnitor.
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<PAGE>
27. RELEASE OF LIABILITY. Any one or more parties
liable upon or in respect of this Agreement may be released, or
partially released, without affecting the liability of any party
not so released.
28. RIGHTS CUMULATIVE. The rights and remedies herein
provided are cumulative and not exclusive of any rights or
remedies which Indemnitee has under the Note, the Security
Instrument, or the Other Security Documents or would otherwise
have at law or in equity.
29. INAPPLICABLE PROVISIONS. If any term, condition
or covenant of this Agreement shall be held to be invalid,
illegal or unenforceable in any respect, this Agreement shall be
construed without such provision.
30. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the law of the State of New
York, without reference or giving effect to any choice of law
doctrine, provided that to the extent that any of such laws may
now or hereafter be preempted by Federal law, such Federal law
shall so govern and be controlling.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by
Owner-Indemnitor and Tenant-Indemnitor and is effective as of the
day and year first above written.
SHOWBOAT LAND, LLC,
a Nevada limited liability company
By: Showboat Operating Company,
a Nevada corporation, a member
By: /s/ R. Craig Bird
R. Craig Bird, Executive Vice-
President
and Chief Financial Officer
By: Showboat Land Holding Limited
Partnership,
a Nevada limited partnership, a
member
By: Showboat Land Company, a Nevada
corporation,
its general partner
By: /s/ R. Craig Bird
R. Craig Bird, Vice-
President/Finance
ATLANTIC CITY SHOWBOAT, INC.,
a Nevada corporation
By: /s/ John N. Brewer
Name: John N. Brewer
Title: Assistant Secretary
<PAGE>
RECORD AND RETURN TO:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
Attention: Mark M. Leskiw, L.A.
ASSIGNMENT OF LEASES AND RENTS
THIS ASSIGNMENT OF LEASES AND RENTS (this
"Assignment"), made as of the 29th day of January, 1998, is by
SHOWBOAT LAND, LLC, a Nevada limited liability company
("Assignor"), whose address is 3270 Howard Hughes Parkway, Suite
200, Las Vegas, Nevada 89109, in favor of Column Financial, Inc.,
a Delaware corporation ("Assignee"), whose address is 3414
Peachtree Road, N.E., Suite 1140, Atlanta, Georgia 30326.
W I T N E S S E T H :
THAT, WHEREAS, Assignor has executed a certain note
dated of even date herewith (the "Note"), payable to the order of
Assignee in the stated principal amount of One Hundred Million
and 00/100 Dollars ($100,000,000.00); and
WHEREAS, the Note is secured by that certain Mortgage
and Security Agreement dated of even date herewith (the
"Mortgage"), between Assignor, as mortgagor, and Assignee, as
mortgagee, encumbering that certain real property, situated at
801 Boardwalk, Atlantic City, County of Atlantic, State of New
Jersey, as more particularly described on EXHIBIT A attached
hereto and incorporated herein by this reference, and all of
Assignor's right, title and interest in and to all buildings and
other improvements now or hereafter located thereon
(collectively, the "Improvements") (said real property and the
Improvements are hereinafter sometimes collectively referred to
as the "Property"); and
WHEREAS, Assignor is desirous of further securing to
Assignee the performance of the terms, covenants and agreements
hereof and of the Note, the Mortgage and each other document
evidencing, securing, guaranteeing or otherwise relating to the
indebtedness evidenced by the Note (the Note, the Mortgage and
such other documents, as each of the foregoing may from time to
time be amended, consolidated, renewed or replaced, being
collectively referred to herein as the "Loan Documents").
NOW, THEREFORE, in consideration of the mailing of the
loan evidenced by the Note be Assignee to Assignor and for other
good and valuable consideration, the receipt and
<PAGE>
sufficiency of which are hereby acknowledged, Assignor does
hereby irrevocably, absolutely and unconditionally transfer,
sell, assign, pledge, deliver and convey to Assignee, its
successors and assigns, all of the right, title and interest of
Assignor in and to:
(a) any and all leases, licenses, rental agreements
and occupancy agreements of whatever form now or hereafter
affecting all or any part of the Property, including, without
limitation, the Ground Lease (as hereinafter defined), and any
and all guarantees, extensions, renewals, replacements and
modifications thereof (collectively, the "Leases"); and
(b) all deposits (whether for security or otherwise),
rents, issues, profits, revenues, royalties, accounts, rights,
benefits and income of every nature of and from the Property,
including, without limitation, minimum rents, additional rents,
termination payments, forfeited security deposits, liquidated
damages following default and all proceeds payable to Assignor
(pursuant to the Ground Lease (as hereinafter defined) or
otherwise) under any policy of insurance covering loss of rents
resulting from untenantability due to destruction or damage to
the Property, and all proceeds of and awards in condemnation
payable to Assignor arising from the Property, together with the
immediate and continuing right to collect and receive the same,
whether now due or hereafter becoming due, and together with all
rights and claims of any kind that Assignor may have against any
tenant, lessee or licensee under the Leases or under law or
equity as a result of their relationship as landlord and tenant,
or against any other occupant of the Property (collectively, the
"Rents").
TO HAVE AND TO HOLD the same unto Assignee, its
successors and assigns.
This Assignment is an absolute assignment to Assignee,
and not an assignment as security for the performance of the
obligations under the Loan Documents or any other indebtedness.
This is an outright, immediate, continuing, and absolute
assignment, and not a pledge or the passing of a security
interest. Notwithstanding the foregoing, upon termination of
this Assignment in accordance with Section 16 hereof, this
Assignment shall become and be void and of no effect; but the
affidavit of any officer of Assignee stating that any portion of
the amount due under the Note or any other Loan Document is
unpaid or any term of any of the Loan Documents is unperformed
shall be and constitute PRIMA FACIE evidence of the validity,
effectiveness and continuing force of this Assignment and any
party may and is hereby authorized to rely thereon.
IT IS AGREED that, notwithstanding that this instrument
is a present, outright, immediate, continuing, absolute and
executed assignment of the Rents and of the Leases and a present,
outright, immediate, continuing, absolute and executed grant of
the powers herein granted to Assignee, and not merely the
collateral assignment of, or a grant of a lien or security,
interest in, the Rents and Leases, Assignor is hereby permitted,
at the sufferance of Assignee and at its discretion, and is
hereby granted (not as a limitation or condition hereof, but as a
personal covenant only to Assignor and its successors and not to
any lessee or any other person) a revocable license by Assignee,
to retain possession of the Leases and to collect and retain the
Rents unless and until there shall be a default
under the terms of any of the Loan Documents,
2
<PAGE>
which default has not been cured within any applicable grace or
cure period (including any applicable notice). In the event of
such uncured default (any such uncured default, an "Event of
Default"), the aforementioned license granted to Assignor shall
automatically terminate without notice to Assignor, and Assignee
may thereafter, without taking possession of the Property, take
possession of the Leases and collect the Rents. Further, from
and after such termination, Assignor shall be the agent of
Assignee in collection of the Rents, and any Rents so collected
by Assignor shall be held in trust by Assignor for the sole and
exclusive benefit of Assignee and Assignor shall, within one (1)
business day after receipt of any Rents, pay the same to Assignee
to be applied by Assignee as hereinafter set forth. Furthermore,
from and after such uncured default and termination of the
aforementioned license, Assignee shall have the immediate and
continuing power, right and authority, without any notice
whatsoever to Assignor and without regard to the adequacy of the
security therefor (but subject to (i) the terms and conditions of
that certain Lease Agreement, dated October 26, 1983, between
Resorts International, Inc. and Ocean Showboat, Inc., as such
lease agreement has been amended to date (as so amended, the
"Ground Lease") and (ii) the requirements of the New Jersey
Casino Control Commission (the "Commission")), to: (a) enter
upon, take possession of, and manage and operate the Property,
with full power to employ agents to manage the same, whether
foreclosure of the Mortgage has been instituted or not and
without applying for a receiver; (b) demand, collect, receive and
sue for the Rents, including those past due and unpaid; and (c)
do all acts relating to such management of the Property,
including, but not limited to, negotiation of new Leases, making
adjustments of existing Leases, contracting and paying for
repairs and replacements to the Improvements and to the fixtures,
equipment and personal property located in the Improvements or
used in any way in the operation, use and occupancy of the
Property as in the sole subjective judgment and discretion of
Assignee may be necessary to maintain the same in a tenantable
condition, purchasing and paying for such additional furniture
and equipment as in the sole subjective judgment of Assignee may
be necessary to maintain a proper rental income from the
Property, employing necessary managers and other employees,
purchasing fuel, providing utilities and paying for all other
expenses incurred in the operation of the Property, maintaining
adequate insurance coverage over hazards customarily insured
against and paying the premiums therefor. Assignee may apply the
Rents received by Assignee from the Property, after deducting the
costs of collection thereof, including, without limitation,
attorneys' fees and a management fee for any management agent so
employed, against amounts expended for repairs, upkeep,
maintenance, service, fuel, utilities, taxes, assessments,
insurance premiums and such other expenses as Assignee incurs in
connection with the operation of the Property and against
interest, principal, required escrow deposits and other sums
which have or which may become due, from time to time, under the
terms of the Loan Documents, in such order or priority as to any
of the items so mentioned as Assignee, in its sole subjective
discretion, may determine. The exercise by Assignee of the
rights granted Assignee in this paragraph, and the collection of
the Rents and the application thereof as herein provided, shall
not be considered a waiver by Assignee of any default under the
Loan Documents or prevent foreclosure of any liens on the
Property nor shall such exercise make Assignee liable under any
of the Leases, Assignee hereby expressly reserving
3
<PAGE>
all of its rights and privileges under the Mortgage and the other
Loan Documents as fully as though this Assignment had not been
entered into.
Without limiting the rights granted hereinabove, in the
event Assignor shall fail to make any payment or to perform any
act required under the terms hereof and such failure shall not be
cured within any applicable grace or cure period (including any
applicable notice), then Assignee may, but shall not be obligated
to, without prior notice to or demand on Assignor, and without
releasing Assignor from any obligation hereof, make or perform
the same in such manner and to such extent as Assignee reasonably
may deem necessary to protect the security hereof, including
specifically, without limitation, appearing in and defending any
action or proceeding purporting to affect the security hereof or
the rights or powers of Assignee, performing or discharging any
obligation, covenant or agreement of Assignor under any of the
Leases, and, in exercising any of such powers, paying all
necessary costs and expenses, employing counsel and incurring and
paying attorneys' fees. Any sum advanced or paid by Assignee for
any such purpose, including, without limitation, reasonable
attorneys' fees, together with interest thereon at the Default
Interest Rate (as defined in the Note) from the date paid or
advanced by Assignee until repaid by Assignor, shall immediately
be due and payable to Assignee by Assignor on demand and shall be
secured by the Mortgage and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the
Note.
IT IS FURTHER AGREED that this Assignment is made upon
the following terms, covenants and conditions:
1. This Assignment shall not operate to place responsibility
for the control, care, management or repair of the Property upon
Assignee, nor for the performance of any of the terms and
conditions of any of the Leases, nor shall it operate to make
Assignee responsible or liable for any waste committed on the
Property by the tenants or any other party or for any dangerous
or defective condition of the Property or for any negligence in
the management, upkeep, repair or control of the Property.
Assignee shall not be liable for any loss sustained by Assignor
resulting from Assignee's failure to let the Property or from any
other act or omission of Assignee in managing the Property except
for such acts or omissions constituting gross negligence on the
part of Assignee. Assignor shall and does hereby indemnify and
hold Assignee harmless from and against any and all liability,
loss, claim, demand or damage which may or might be incurred by
reason of this Assignment, including, without limitation, claims
or demands for security deposits from tenants of space in the
Improvements deposited with Assignor, and from and against any
and all claims and demands whatsoever which may be asserted
against Assignee by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in any of the Leases.
Should Assignee incur any liability by reason of this Assignment
or in defense of any claim or demand for loss or damage as
provided above, the amount thereof, including, without
limitation, costs, expenses and attorneys' fees, together with
interest thereof at the Default Interest Rate from the date paid
or incurred by Assignee until repaid by Assignor, shall be
immediately due and payable to Assignee by Assignor upon demand
and
4
<PAGE>
shall be secured by the Mortgage and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced
by the Note.
2. This Assignment shall not be construed as making
Assignee a mortgagee in possession.
3. Assignee is obligated to account to Assignor only for
such Rents as are actually collected or received by Assignee.
4. Assignor hereby further presently and absolutely
assigns to Assignee subject to the terms and provisions of this
Assignment: (a) any award or other payment which Assignor may
hereafter become entitled to receive with respect to any of the
Leases as a result of or pursuant to any bankruptcy, insolvency
or reorganization or similar proceedings involving the tenants
under such Leases; and (b) any and all payments made by or on
behalf of any tenant of any part of the Property in lieu of Rent.
Assignor hereby irrevocably appoints Assignee as its attorney-in-
fact to, from and after the occurrence of a default by Assignor
hereunder or under any of the other Loan Documents which has not
been cured within any applicable grace or cure period, appear in
any such proceeding and to collect any such award or payment,
which power of attorney is coupled with an interest by virtue of
this Assignment and is irrevocable so long as any sums are
outstanding under the loan evidenced by the Note.
5. Assignor represents, warrants and covenants to and for
the benefit of Assignee: (a) that Assignor now is (or with
respect to any Leases not yet in existence, will be immediately
upon the execution thereof) the absolute owner of the landlord's
interest in the Leases, with full right and title to assign the
same and the Rents due or to become due thereunder; (b) that,
other than this Assignment and those assignments, if any,
specifically permitted in the Mortgage, there are no outstanding
assignments of the Leases or Rents; (c) that no Rents have been
anticipated, discounted, released, waived, compromised or
otherwise discharged except for prepayment of rent of not more
than one (1) month prior to the accrual thereof; (d) that there
are no material defaults now existing under any of the Leases by
the landlord or tenant, and there exists no state of facts which,
with the giving of notice or lapse of time or both, would
constitute a default under any of the Leases by the landlord or
tenant, except as disclosed in writing to Assignee; (e) that
Assignor has and shall duly and punctually observe and perform
all covenants, conditions and agreements in the Leases on the
part of the landlord to be observed and performed thereunder and
(f) the Leases are in full force and effect and are the valid and
binding obligations of Assignor, and, to the knowledge of
Assignor, are the valid and binding obligations of the tenants
thereto.
6. Assignor covenants and agrees that Assignor shall not,
without the prior written consent of Assignee, except as
expressly required by the Commission: (a) exclusive of security
deposits, accept any payment of Rent or installments of Rent for
more than one month in advance; (b) enter into any Lease having a
term of less than six (6) months or in excess of two (2) years;
(c) cancel or terminate any Lease (other than for non-payment of
Rent or any other material default thereunder) or amend or modify
any Lease; (d) take or omit to take any action or exercise any
right or option which would permit the tenant under any Lease to
cancel or terminate said Lease; (e)
5
<PAGE>
anticipate, discount, release, waive, compromise or otherwise
discharge any Rents payable or other obligations under the
Leases; (f) further pledge, transfer, mortgage or otherwise
encumber or assign the Leases or future payments of Rents except
as otherwise expressly permitted by the terms of the Mortgage or
incur any material indebtedness, liability or other obligation to
any tenant, lessee or licensee under the Leases; or (g) permit
any Lease to become subordinate to any lien, except to the extent
that such may occur without Assignor's consent under the terms of
such Lease; provided, however, that Assignor may take any of the
actions described in subsection (c) or (e) above so long as such
actions are taken by Assignor in the ordinary course of business
and are consistent with sound customary leasing and management
practices for similar properties.
7. Assignor covenants and agrees that Assignor shall, at
its sole cost and expense, appear in and defend any action or
proceeding arising under, growing out of, or in any manner
connected with the Leases or the obligations, duties or
liabilities of the landlord or tenant thereunder, and shall pay
on demand all costs and expenses, including, without limitation,
attorneys' fees, which Assignee may incur in connection with
Assignee's appearance, voluntary or otherwise, in any such action
or proceeding, together with interest thereon at the Default
Interest Rate from the date incurred by Assignee until repaid by
Assignor.
8. At any time after the occurrence of an Event of
Default, Assignee may, at its option, notify any tenants or other
parties of the existence of this Assignment, Assignor does hereby
specifically authorize, instruct and direct each and every
present and future tenant, lessee and licensee of the whole or
any part of the Property to pay all unpaid and future Rents to
Assignee upon receipt of demand from Assignee to so pay the same
and Assignor hereby agrees that each such present and future
tenant, lessee and licensee may rely upon such written demand
from Assignee to so pay said Rents without any inquiry into
whether there exists a default hereunder or under the other Loan
Documents or whether Assignee is otherwise entitled to said
Rents. Assignor hereby waives any right, claim or demand which
Assignor may now or hereafter have against any present or future
tenant, lessee or licensee by reason of such payment of Rents to
Assignee, and any such payment shall discharge such tenant's,
lessee's or licensee's obligation to make such payment to
Assignor.
9. Assignee may take or release any security for the
indebtedness evidenced by the Note, may release any party
primarily or secondarily liable for the indebtedness evidenced by
the Note, may grant extensions, renewals or indulgences with
respect to the indebtedness evidenced by the Note and may apply
any other security therefor held by it to the satisfaction of any
indebtedness evidenced by the Note without prejudice to any of
its rights hereunder.
10. The acceptance of this Assignment and the collection of the
Rents in the event Assignor's license terminates, as referred to
above, shall be without prejudice to Assignee. The rights of
Assignee hereunder are cumulative and concurrent, may be pursued
separately, successively or together and may be exercised as
often as occasion therefor shall arise, it being agreed by
Assignor that the exercise of any one or more of the rights
provided for herein shall not
6
<PAGE>
be construed as a waiver of any of the other rights or remedies
of Assignee, at law or in equity or otherwise, so long as any
obligation under the Loan Documents remains unsatisfied.
11. All rights of Assignee hereunder shall inure to the
benefit of its successors and assigns; and all obligations of
Assignor shall bind its successors and assigns and any subsequent
owner of the Property. All rights of Assignee in, to and under
this Assignment shall pass to and may be exercised by any
assignee of such rights of Assignee. Assignor hereby agrees that
if Assignee gives notice to Assignor of an assignment of said
rights, upon such notice the liability of Assignor to the
assignee of the Assignee shall be immediate and absolute.
Assignor will not set up any claim against Assignee or any
intervening assignee as a defense, counterclaim or set-off to any
action brought by Assignee or any intervening assignee for any
amounts due hereunder or for possession of or the exercise of
rights with respect to the Leases or the Rents.
12. It shall be a default hereunder (a) if any
representation or warranty made herein by Assignor is determined
by Assignee to have been false or misleading in any material
respect at the time made; or (b) upon any failure by Assignor to
comply with the provisions of Paragraph 6 above; or (c) upon any
failure by Assignor in the performance or observance of any other
covenant or condition hereof and, to the extent such failure
described in this subsection (c) is susceptible of being cured,
the continuance of such failure for thirty (30) days after
written notice thereof from Assignee to Assignor, PROVIDED,
HOWEVER, that if such default is susceptible of cure but such
cure cannot be accomplished with reasonable diligence within said
period of time, and if Assignor commences to cure such default
promptly after receipt of notice thereof from Assignee, and
thereafter prosecutes the curing of such default with reasonable
diligence, such period of time shall be extended for such period
of time as may be necessary to cure such default with reasonable
diligence, but not to exceed an additional sixty (60) days. Any
such default not so cured shall be a default under each of the
other Loan Documents, entitling Assignee to exercise any or all
rights and remedies available to Assignee under the terms hereof
or of any or all of the other Loan Documents, and any default
under any other Loan Document which is not cured within any
applicable grace or cure period shall be deemed a default
hereunder subject to no grace or cure period, entitling Assignee
to exercise any or all rights provided for herein.
13. Failure by Assignee to exercise any right which it may
have hereunder shall not be deemed a waiver thereof unless so
agreed in writing by Assignee, and the waiver by Assignee of any
default hereunder shall not constitute a continuing waiver or a
waiver of any other default or of the same default on any future
occasion. No collection by Assignee of any Rents pursuant to
this Assignment shall constitute or result in a waiver of any
default then existing hereunder or under any of the other Loan
Documents.
14. If any provision under this Assignment or the application
thereof to any entity, person or circumstance shall be invalid,
illegal or unenforceable to any extent, the remainder of this
Assignment and the application of the provisions hereof to other
entities, persons or circumstances shall not be affected thereby
and shall be enforced to the fullest extent permitted by law.
7
<PAGE>
15. This Assignment may not be amended, modified or
otherwise changed except by a written instrument duly executed by
Assignor and Assignee.
16. This Assignment shall be in full force and effect
continuously from the date hereof to and until the Mortgage shall
be released of record, and the release of the Mortgage shall, for
all purposes, automatically terminate this Assignment and render
this Assignment null and void and of no effect whatsoever.
17. In case of a conflict between any provision of this
Assignment and any provision of the other Loan Documents, the
provision selected by Assignee in its sole subjective discretion
shall prevail and be controlling.
18. All notices, demands, requests or other communications
to be sent by one party to the other hereunder or required by law
shall be given and become effective as provided in the Mortgage.
19. This Assignment shall be governed by and construed in
accordance with the laws of the State of New York, except to the
extent that any of such laws may now or hereafter be preempted by
Federal law, in which case such Federal law shall so govern and
be controlling; and provided further that the laws of the state
in which the real property on EXHIBIT "A" attached hereto is
located shall govern as to the creation, priority and enforcement
of liens and security interests on and in property located in
such state.
20. This Assignment may be executed in any number of
counterparts, each of which shall be effective only upon delivery
and thereafter shall be deemed an original, and all of which
shall be taken to be one and the same instrument, for the same
effect as if all parties hereto had signed the same signature
page. Any signature page of this Assignment may be detached from
any counterpart of this Assignment without impairing the legal
effect of any signatures thereon and may be attached to another
counterpart of this Assignment identical in form hereto but
having attached to it one or more additional signature pages.
21. In addition to, but not in lieu of, any other rights
hereunder, Assignee shall have the right to institute suit and
obtain a protective or mandatory injunction against Assignor to
prevent a breach or default, or to enforce the observance, of the
agreements, covenants, terms and conditions contained herein, as
well as the right to damages occasioned by any breach or default
by Assignor.
22. This Assignment shall continue and remain in full force
and effect during any period of foreclosure with respect to the
Property.
23. Assignor hereby covenants and agrees that Assignee shall be
entitled to all of the rights, remedies and benefits available by
statute, at law, in equity or as a matter of practice for the
enforcement and perfection of the intents and purposes hereof.
Assignee shall, as a matter of absolute right, be entitled, upon
application to a court of applicable jurisdiction, to the
appointment
8
<PAGE>
of a receiver to obtain and secure the rights of Assignee
hereunder and the benefits intended to be provided to Assignee
hereunder.
24. Notwithstanding anything to the contrary contained in
this Assignment, the liability of Assignor and its members for
the indebtedness secured hereby and for the performance of the
other agreements, covenants and obligations contained herein and
in the Loan Documents shall be limited as set forth in Section
1.05 of the Note.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
IN WITNESS WHEREOF, Assignor has executed this
Assignment as of the day and year first above written.
SHOWBOAT LAND, LLC
a Nevada limited liability company
By: Showboat Operating Company,
a Nevada corporation, a member
By: /s/ R. Craig Bird
R. Craig Bird, Executive Vice-
President and Chief
Financial Officer
By: Showboat Land Holding Limited
Partnership,
a Nevada limited partnership,
a member
By: Showboat Land Company, a
Nevada corporation, its
general partner
By: /s/ R. Craig Bird
R. Craig Bird, Vice-
President/Finance
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
I certify that on January 23, 1998, R. Craig Bird personally
came before me and this person acknowledged under oath, to my
satisfaction, that:
(a) this person signed, sealed and delivered the attached
document as Executive Vice President and Chief Financial Officer
of Showboat Operating Company, which is the member of Showboat
Land, LLC, the Nevada limited liability company named in this
document; and
(b) this document was signed and delivered by Showboat
Operating Company, on behalf of Showboat Land, LLC, as its
voluntary act and deed by virtue of authority from its Board of
Directors.
/s/ Maria A. Vargas
Notary Public
Maria A. Vargas
Notary Public, State of New York
No. 01VA5072319
Qualified in Kings County
Commission Expires January 27, 1999
<PAGE>
Acknowledgments
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
I certify that on January 23, 1998, R. Craig Bird personally
came before me and this person acknowledged under oath, to my
satisfaction, that:
(a) this person signed, sealed and delivered the attached
document as Vice President/Finance of Showboat Land Company, a
Nevada corporation, which is the general partner of Showboat Land
Holding Limited Partnership, which is the member of Showboat
Land, LLC, the Nevada limited liability company named in this
document; and
(b) this document was signed and delivered by Showboat Land
Company, on behalf of Showboat Land, LLC, as its voluntary act
and deed by virtue of authority from its Board of Directors.
/s/ Maria A. Vargas
Notary Public
Maria A. Vargas
Notary Public, State of New York
No. 01VA5072319
Qualified in Kings County
Commission Expires January 27, 1999
<PAGE>
TENANT ESTOPPEL CERTIFICATE
January 29, 1998
Column Financial, Inc.
3414 Peachtree Road, N.E.
Atlanta, Georgia 30326
Re: 801 BOARDWALK. ATLANTIC CITY, NEW JERSEV (THE
"PROPERTY")
Gentlemen:
It is our understanding that Column Financial, Inc.
("Lender") is about to make a loan to Showboat Land, LLC
("Landlord"), the landlord, or successor-in-interest to the
landlord under our lease, secured by a mortgage on the Property
(the "Loan"), and, as a condition precedent thereof, you have
required this certification by the undersigned.
The undersigned, as successor by assignment to Ocean
Showboat, Inc., the named tenant under that certain lease made
with Resorts International, Inc., as landlord, dated October 26,
1983, which lease has been modified or amended by amendments
dated January 15, 1985, July 5, 1985, October 28, 1985, August
28, 1986 (restating amendment of October 28, 1985), December 6,
1987, March 2, 1987, March 13, 1987, October 18, 1988, and May
18, 1993 (as so amended and modified, the "LEASE", a true and
complete copy of which, including all such amendments and
modifications, is attached hereto), hereby ratifies the Lease and
certifies and agrees that:
(a) the undersigned entered into possession of the
premises described in the Lease (the "DEMISED PREMISES") on
December 15, 1983 (the commencement date of the term of the
Lease). The Demised Premises consist of the entirety of the
Property;
(b) the fixed rental in the annual amount of
$6,340,000 (payable in equal monthly installments) was payable
beginning on April 1, 1987;
(c) the current annual fixed rental under the Lease is
$9,046,626.97;
(d) the Lease is in full force and effect in
accordance with its terms and, except as indicated above, has not
been assigned, modified, supplemented or amended in any way and
the undersigned has no notice of any assignment, pledge or
hypothecation by the Landlord of the Lease or of the rentals
thereunder;
(e) the Lease represents the entire agreement between
the parties with respect
<PAGE>
to the Demised Premises and the Property, and the undersigned has
no options, rights of first refusal or other rights with respect
to the Property and the Demised Premises except as set forth
therein;
(f) other than leasehold mortgages currently
encumbering the Property, the Lease has not been assigned or
pledged. No portion of the Demised Premises has been sublet,
except as listed on Exhibit A to this Certificate;
(g) the term of the Lease commenced on December 15,
1983 and, unless otherwise terminated or extended in accordance
with the terms of the Lease, will expire on December 14, 2082.
There are no options to renew, extend or cancel the Lease except
to the extent contained in the Lease;
(h) all construction and other obligations of a
material nature required to be performed by the landlord under
the Lease (including, without limitation, the landlord covenants
in Articles 9, 10, 11 and 15 of the Lease) have been fully
satisfied or are inapplicable to Landlord, and there are no
existing obligations on the part of Landlord under the Lease;
(i) any required payments, if any, by the landlord to
the undersigned for tenant improvements have been made;
(j) on this date there are no existing defenses,
offsets or counterclaims which the undersigned has against the
enforcement of the Lease by the Landlord and the undersigned has
no knowledge of any existing default under the Lease or any event
which, with the giving of notice, the passage of time or both,
would constitute a default under said Lease;
(k) the undersigned is not entitled to any free rent
periods, offsets, concessions, abatements, deductions or
otherwise against the rent payable under the Lease from and after
the date hereof, except as follows: none (list all offsets,
abatements and deductions to the rent or, if none, so indicate);
(1) no rental, other than for the current month, has
been paid in advance;
(m) there is no security deposit held by the Landlord;
(n) the rentals under the Lease have been paid through
the month of January 1998;
(o) there are no actions, whether voluntary or
involuntary, pending against the undersigned under the bankruptcy
or insolvency laws of the United States or any state or territory
of the United States;
(p) to the best of the undersigned's knowledge, no
hazardous wastes or hazardous substances have been treated,
stored, placed, used or disposed of in, on, at, above or under
the Demised Premises except such cleaning or other fluids used in
the ordinary course of
2
<PAGE>
business;
(q) the undersigned currently has no right to
terminate the Lease pursuant to Section 29.1 thereof (granting
the unilateral right to terminate the Lease upon a determination
that modifications or additions required by The New Jersey Casino
Control Commission are unreasonably burdensome);
(r) the undersigned will maintain, throughout the 10-
year term of the Loan, the casualty and liability insurance that
the undersigned is required to maintain under the terms of the
leasehold mortgages currently encumbering the Demised Premises;
(s) in the event that all or substantially or
effectively all of the Property is taken by condemnation, the
undersigned will not contest or submit to arbitration any
valuation of Landlord's fee estate at an amount equal to the
amount then outstanding under the Loan;
(t) in the event that a default on the part of
Landlord occurs under the Lease, the undersigned will give
written notice to Lender of said default, including sufficient
detail to enable Lender, to cure said default, and the
undersigned will forbear from exercising any and all rights and
remedies exercisable under the Lease as a result of such default
to afford Lender a reasonable period of time (but in no event
less the thirty (30) days after the expiration of the applicable
cure period with respect to Landlord) to cure such default,
including, as necessary, sufficient time for Lender to obtain
possession of the Property through foreclosure or otherwise;
The undersigned understands and acknowledges that (i)
this certificate shall be binding upon the undersigned and its
successors and assigns, (ii) Lender is relying on this
certificate in extending financial accommodations to Landlord,
(iii) Lender will be secured by, among other things, a mortgage
on the Property and a collateral assignment of Landlord's
interest in the Lease, (iv) certain modifications of the Lease
and other actions relating to the Lease may require your prior
written consent, and (v) this certificate also may be relied upon
by Lender's successors and assigns and, if the Loan becomes the
subject of a securitization, may also be relied upon by the
credit rating agency, if any, rating the securities
collateralized by the Loan as well as by any issuer of such
securities and any servicer and/or trustee acting in respect of
such securitization.
Very truly yours,
ATLANTIC CITY SHOWBOAT, INC.
By: /s/ John N. Brewer
Name: John N. Brewer
Title: Assistant Secretary
3
<PAGE>
EXHIBIT A
SUBLEASES
4
<PAGE>
RETAIL LEASES AND LIMITED LICENSE AGREEMENT
APPENDIX ITEM
A Somerset Ice Company, Inc. lease (Jewelry
Shop)
B Ocean 11 Enterprises lease (Gift Shop)
C Mr. Larry's Hair Salon Lease
D L.A.Y. Enterprises, Inc. lease (Peanut Shop)
E Megabucks Host Casino Limited License and
Personnel Agreement
<PAGE>
PROMISSORY NOTE CLARIFICATION AGREEMENT
Dated as of January 29, 1998
between
COLUMN FINANCIAL, INC.,
a Delaware corporation having an office at
3414 Peachtree Road, N.E., Suite 1140,
Atlanta, Georgia 30326
and
SHOWBOAT LAND, LLC,
A Nevada limited liability company having an office at
3720 Howard Hughes Parkway, Suite 200
Las Vegas, Nevada 89109
<PAGE>
PROMISSORY NOTE CLARIFICATION AGREEMENT
THIS PROMISSORY NOTE CLARIFICATION AGREEMENT (this
"AGREEMENT"), made as of the 29th day of January, 1998, between
SHOWBOAT LAND, LLC, a Nevada limited liability company having an
office at 3720 Howard Hughes Parkway, Suite 200, Las Vegas,
Nevada 89109 ("BORROWER"), and COLUMN FINANCIAL, INC., a Delaware
corporation having an office at 3414 Peachtree Road, N.E., Suite
1140, Atlanta, Georgia 30326 ("LENDER").
W I T N E S S E T H :
WHEREAS, Borrower is the owner of certain real property
situated at 801 Boardwalk, Atlantic City, County of Atlantic,
State of New Jersey (the "PROPERTY"); and
WHEREAS, in connection with a certain mortgage loan
made with regard to the Property by Lender to Borrower, in the
original principal amount of One Hundred Million and 00/100
Dollars ($100,000,000.00) (the "Loan"), Borrower executed and
delivered to Lender a Promissory Note, dated January 29, 1998, in
the maximum principal amount of One Hundred Million and 00/100
Dollars ($100,000,000.00) (the "NOTE") to evidence the Loan; and
WHEREAS, Borrower and Lender have agreed to clarify
their understanding with respect to Section 1.01 (a) of the Note.
NOW, THEREFORE, in consideration of the sum of Ten
Dollars ($10.00), and
for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, and the mutual
covenants contained herein, the parties hereto do hereby agree as
follows:
1. CLARIFICATION OF THE NOTE.
If there is any confusion or question about the meaning
of the first sentence of Section 1.01 (a) of the Note, then said
sentence shall be interpreted as if written as follows:
"Said interest shall be computed hereunder based on a
360-day year, but paid based upon the actual number of days in
each calendar month."
2. MISCELLANEOUS.
This Agreement shall be interpreted, construed and
enforced according to the laws of the State of New York. The
terms and provisions hereof shall be binding upon and inure to
the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors-in-title
and assigns, whether by voluntary action of the parties or by
<PAGE>
operation of law. As used herein, the terms "Borrower" and
"Lender" shall be deemed to include their respective heirs,
executors, legal representatives, successors, successors-in-title
and assigns, whether by voluntary action of the parties or by
operation of law. If Borrower consists of more than one person
or entity, each shall be jointly and severally liable to perform
the obligations of Borrower under the Note and under this
Agreement.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of
the day and year first above written.
Attest: (Seal) SHOWBOAT LAND, LLC
a Nevada limited liability company
By: Showboat Operating Company,
a Nevada corporation, a member
By: /s/ R. Craig Bird
R. Craig Bird, Executive Vice-
President and Chief Financial Officer
By: Showboat Land Holding Limited Partnership,
a Nevada limited partnership, a member
By: Showboat Land Company,
a Nevada corporation, its general partner
By: /s/ R. Craig Bird
R. Craig Bird, Vice-President/Finance
COLUMN FINANCIAL, INC.,
a Delaware corporation
By: /s/ D. S. Foster
David S. Foster, Senior Vice President
<PAGE>
LEASE CLARIFICATION AGREEMENT
THIS LEASE CLARIFICATION AGREEMENT (this "AGREEMENT")
is made and entered into as of the 13th day of February, 1998, by
and between SHOWBOAT LAND, LLC, a Nevada limited liability
company, as lessor ("LESSOR"), and ATLANTIC CITY SHOWBOAT, INC.,
a New Jersey corporation, as lessee ("LESSEE").
W I T N E S S E T H:
A. Resorts International, Inc. ("RESORTS") together
with Resorts' subsidiary, Resorts International, Inc. of New
Jersey ("RESORTS NEW JERSEY"), to the extent of its interest, and
Lessee's parent corporation, Ocean Showboat, Inc., a New Jersey
corporation ("OSI") entered into a lease agreement dated October
26, 1983 (which lease agreement, as amended, is hereinafter
called the "LEASE") for certain property located in the City of
Atlantic City (the "DEMISED PREMISES"), as such property and such
Lease are more particularly described on EXHIBIT A and EXHIBIT B,
respectively, annexed hereto and made a part hereof.
B. On December 3, 1984, OSI assigned to Lessee the
lessee's interest under the Lease pursuant to the provisions of
Paragraph 13.1 of the Lease.
C. On January 15, 1985, Resorts and Lessee executed a
First Amendment to Lease Agreement.
D. On July 5, 1985, Resorts and Lessee executed a
Second Amendment to Lease Agreement.
E. On October 28, 1985, Resorts and Lessee executed a
Third Amendment to Lease Agreement.
F. On August 28, 1986, Resorts and Lessee executed a
Restated Third Amendment to Lease Agreement.
G. On December 16, 1986, Resorts and Lessee executed
a Fourth Amendment to Lease Agreement.
H. Resorts acquired from Resorts New Jersey the fee
simple interest in the Demised Premises by deed dated December
23, 1986 and recorded in the Clerk's Office on December 24, 1986
in Deed Book 4366, page 214.
I. On March 2, 1987, Resorts and Lessee executed a
Fifth Amendment to Lease Agreement.
<PAGE>
J. On March 13, 1987, Resorts and Lessee executed a
Sixth Amendment to Lease Agreement.
K. On October 18, 1988, Resorts and Lessee executed a
Seventh Amendment to Lease Agreement.
L. On May 18, 1983, Resorts and Lessee executed an
Eighth Amendment to Lease Agreement.
M. By Deed dated January 26, 1998, Sun International
North America, Inc. ("SUN"), Resorts' successor in interest with
respect to the Demised Premises, conveyed to Lessor the fee
simple interest in the Demised Premises, and Lessor succeeded to
Sun's interest as lessor under the Ground Lease.
N. Lessee, as the current lessee under the Lease, the
lessee thereunder which has executed all amendments thereto to
date, and an affiliate of the original lessee under the Lease,
and Lessor, as the current lessor under the Lease, desire to
clarify the meaning of Section 24.4 of the Lease.
NOW, THEREFORE, in consideration of the mutual
covenants and conditions contained herein.
1. DEFINITIONS. All words and terms used herein
shall have the same meanings as those set forth in the Lease,
unless otherwise provided herein.
2. CLARIFICATION OF SECTION 24.4 OF THE LEASE.
Lessee acknowledges and agrees, and Lessor confirms that it was
Lessor's understanding when it acquired fee title to the Demised
Premises, that it was the intent of the parties to the Lease
that, and Lessor and Lessee agree that, Section 24.4 provide
that:
(a) if the purchase price to be paid by Lessee is
less than the amount (collectively, the "Fee Mortgage
Release Amount") that Lessor would be obligated to pay
to the holder of the fee mortgage to obtain a release
and satisfaction (or, if applicable, to effect a
defeasance) thereof in accordance with the related loan
documents, including, without limitation, any
prepayment premiums, late charges, or any other amounts
that may be due and payable under such fee mortgage in
connection therewith then, Lessee shall not be entitled
to acquire fee title to the Demised Premises free of
the lien of such fee mortgage unless Lessor or, at its
election, Lessee, pays to the holder of the fee
mortgage an amount equal to the difference between the
Fee Mortgage Release Amount and such purchase price;
and
2
<PAGE>
(b) no closing of such transfer of fee title to
the Demised Premises shall occur until the lien of such
fee mortgage has been cleared.
3. INCONSISTENCY BETWEEN THIS AGREEMENT AND THE
LEASE. If there shall be an inconsistency between the terms and
provisions of this Agreement and those of the Lease, then the
terms and provisions of this Agreement shall control.
4. CHOICE OF LAW. This Agreement shall be deemed to
be a contract entered into pursuant to the laws of the State of
New Jersey and shall in all respects be governed, construed,
applied and enforced in accordance with the laws of the State of
New Jersey.
5. ENTIRE AGREEMENT. This writing constitutes the
entire agreement of the parties relative to the subject matter
hereof. Any modification or amendment hereto shall be
ineffective unless in writing and signed by the parties hereto.
6. NO WAIVER. Nothing in this Agreement is intended
to waive or release any rights of Lessor to any payments to which
Lessor is or may be entitled under the Lease.
7. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns.
8. RATIFICATION OF THE LEASE. The provisions of the
Lease as clarified hereby are ratified and affirmed by Lessor and
Lessee and shall remain in full force and effect according to
their terms.
9. COUNTERPARTS. This Agreement may be executed in
one or more counterparts which, when taken together, shall
constitute one and the same Agreement, with the same effect as if
all parties hereto signed the same Agreement.
[NO FURTHER TEXT ON THIS PAGE]
3
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed
this instrument as of the day and year first written.
LESSOR:
SHOWBOAT LAND, LLC, A Delaware
limited liability company
ATTEST: By: SHOWBOAT OPERATING COMPANY,
a Nevada corporation, a member
____________________________
Name:
Title: (Assistant) Secretary By: /s/ R. Craig Bird
R. Craig Bird, Executive
Vice President and Chief
Financial Officer
By: SHOWBOAT LAND HOLDING
LIMITED PARTNERSHIP,
a Nevada limited partnership,
a member
ATTEST: By: SHOWBOAT LAND COMPANY,
a Nevada corporation,
its general partner
____________________________
Name:
Title: (Assistant) Secretary By: /s/ R. Craig Bird
R. Craig Bird,
Vice President/Finance
LESSEE:
ATTEST: ATLANTIC CITY SHOWBOAT, INC., a New
Jersey corporation
____________________________ By: /s/
Name: Name:
Title: (Assistant) Secretary Title:
<PAGE>
STATE OF NEW JERSEY )
) ss.:
COUNTY OF ATLANTIC )
BE IT REMEMBERED, that on this 13th day of
February, 1998, before me, this subscriber, an _________________
of New Jersey, personally appeared R. Craig Bird, who, I am
satisfied is the person who signed the within instrument as
Executive Vice President of Showboat Operating Company, a Nevada
corporation, a member of SHOWBOAT LAND, LLC, a Nevada limited
liability company, the entity named therein, and he acknowledged
that he signed and delivered the same as such officer aforesaid,
and that the within instrument is the voluntary act and deed of
such entity, in its capacity as a member of SHOWBOAT LAND, LLC,
made by virtue of the authority of its Board of Directors.
/s/ Brenda Sue Wallace
NOTARY PUBLIC
[Seal]
STATE OF NEW JERSEY )
) ss.:
COUNTY OF ATLANTIC )
BE IT REMEMBERED, that on this 13th day of
February, 1998, before me, this subscriber, an
_______________________ of New Jersey, personally appeared R.
Craig Bird, who, I am satisfied is the person who signed the
within instrument as Vice President/Finance of Showboat Land
Company, a Nevada corporation, a general partner of Showboat Land
Holding Limited Partnership, a Nevada limited partnership, a
member of SHOWBOAT LAND, LLC, a Nevada limited liability company,
the entity named therein, and he acknowledged that he signed and
delivered the same as such officer aforesaid, and that the within
instrument is the voluntary act and deed of such entity, in its
capacity as a general partner of Showboat Land Holding Limited
Partnership, a member of SHOWBOAT LAND, LLC, made by virtue of
the authority of its Board of Directors.
/s/ Brenda Sue Wallace
NOTARY PUBLIC
[Seal]
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed
this instrument as of the day and year first written.
LESSOR:
SHOWBOAT LAND, LLC, A Delaware
limited liability company
ATTEST: By: SHOWBOAT OPERATING COMPANY,
a Nevada corporation, a member
____________________________
Name: By: /s/
Title: (Assistant) Secretary R. Craig Bird, Executive
Vice President and Chief
Financial Officer
By: SHOWBOAT LAND HOLDING
LIMITED PARTNERSHIP,
a Nevada limited partnership,
a member
ATTEST: By: SHOWBOAT LAND COMPANY,
a Nevada corporation,
its general partner
____________________________
Name:
Title: (Assistant) Secretary By: /s/
R. Craig Bird,
Vice President/Finance
LESSEE:
ATTEST: ATLANTIC CITY SHOWBOAT, INC., a New
Jersey corpoation
/s/ M. Clayton By: /s/ John N. Brewer
Name: Name:
Title: (Assistant) Title:
Secretary
<PAGE>
STATE OF NEVADA )
) ss
COUNTY OF CLARK )
BE IT REMEMBERED, that on this 13th day of February,
1998, before me, this subscriber, a Notary Public of Nevada,
personally appeared John N. Brewer, who, I am satisfied is the
person who signed the within instrument as Assistant Secretary of
ATLANTIC CITY SHOWBOAT, INC., a New Jersey corporation, the
entity named therein, and he acknowledged that he signed and
delivered the same as such officer aforesaid, and that the within
instrument is the voluntary act and deed of such entity, made by
virtue of the authority of its Board of Directors.
/s/ Pier Washington
OFFICIAL SEAL
PIER WASHINGTON
Notary Public - State of Nevada
My Comm. Expires Nov. 20, 1999
No. 96-0550-1
<PAGE>
EXHIBIT "A"
DESCRIPTION OF THE LAND
ALL THAT CERTAIN lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey, bounded and described as
follows:
BEGINNING at a point in the southerly line of Pacific Avenue (60
feet wide), distant 577.00 feet eastwardly from the easterly line
of Virginia Avenue (80 feet wide), said point also being located
62.00 feet eastwardly from the westerly line of the former States
Avenue (90 feet wide) (now vacated), and extending thence
1. North 62 degrees 32 minutes 00 seconds East, in and along
the southerly line of Pacific Avenue, 292.00 feet; thence
2. South 27 degrees 28 minutes 00 seconds East; parallel with
Virginia Avenue, 1432.20 feet to the Interior or Inland Line
of Public Park; thence
3. South, curving to the right in the arc of a circle, having a
radius of 1102.57 feet, the arc distance of 8.94 feet to a
point of tangent; thence
4. South 59 degrees 24 minutes 40 seconds West, in and along
the Interior or INLAND LINE of Public Park, 308.53 feet to a
point distant 552.00 feet east of the easterly line of
Virginia Avenue, when measured at right angles thereto;
thence
5. North 27 degrees 28 minutes 00 seconds West, parallel with
Virginia Avenue, 1369.53 feet; thence
6. North 62 degrees 32 minutes 00 seconds East, parallel with
Pacific Avenue, 25.00 feet; thence
7. North 27 degrees 28 minutes 00 seconds West, parallel with
Virginia Avenue, 80.00 feet to the point and place of
BEGINNING.
TOGETHER WITH the following non-exclusive easements:
1. A non-exclusive easement for the construction, repair,
maintenance and use of the Common Facilities (as defined in
the Ground Lease).
2. A non-exclusive easement over, upon and across the
Pedestrian Passageway (as defined in the Ground Lease),
together with the 17-Foot Egressway, the Service Road and
the Service Road Extension (as such terms are defined in the
Ground Lease), as shown on a survey made by Arthur W. Ponzio
Co. and Associates, Inc. dated December 30, 1986 and being
more particularly described as Parcels A, B and C,
respectively, attached hereto.
SUBJECT to a portion of the fifty-foot wide service easement
lying within the Land and more particularly described as Parcel D
attached hereto.
BEING Block 13, Lot 1401, Tax Map o the City of Atlantic City,
New Jersey.
PARCEL A
DESCRIPTION OF THE SEVENTEEN-FOOT WIDE EGRESSWAY AT GRADE BETWEEN
THE SERVICE ROAD AND THE BOARDWALK.
ALL that certain lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey, bounded and described as
follows:
BEGINNING at a point distant 535.00 feet east of the easterly
line of Virginia Avenue (80 feet wide) and 868.00 feet south of
the southerly line of Pacific Avenue (60 feet wide), when
measured at right angles to said avenues respectively, and
extending from said beginning point the following courses and
distances:
1. South 27 degrees 28 minutes 00 seconds East, parallel with
Virginia Avenue, a distance of 582.45 feet to the Inland or
Interior Line of Public Park; thence
<PAGE>
2. South 59 degree 24 minutes 40 seconds West, in and along the
Inland or Interior Line of Public Park, a distance of 17.03
feet; thence
3. North 27 degrees 28 minutes 00 seconds West, parallel with
Virginia Avenue, a distance of 583.38 feet: thence
4. North 62 degrees 32 minutes 00 seconds East, parallel with
Pacific Avenue, a distance of 17.00 feet to the point and
place of BEGINNING.
PARCEL B
DESCRIPTION OF THE FIFTY-FOOT WIDE SERVICE ROAD
All that certain lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey, bounded and described as
follows:
BEGINNING at a point in the southerly side of Pacific Avenue (60
feet wide), said point being distant 577.00 feet east of the
easterly line of Virginia Avenue (80 feet wide) and extending
from said beginning point the following courses and distances:
1. South 27 degrees 28 minutes 00 seconds East, parallel with
Virginia Avenue, a distance of 86.00 feet; thence
2. South 07 degrees 48 minutes 46 seconds East, a distance of
74.33 feet; thence
3. South 27 degrees 28 minutes 00 seconds East, parallel with
Virginia Avenue, a distance of 712.00 feet, to a point
distant 868.00 feet south of the southerly line of Pacific
Avenue when measured at right angles thereto; thence
4. South 62 degrees 32 minutes 00 seconds West, parallel with
Pacific Avenue, a distance of 50.00 feet; thence
5. North 27 degrees 28 minutes 00 seconds West, parallel with
Virginia Avenue, a distance of 720.66 feet; thence
6. North 07 degrees 48 minutes 46 seconds West, a distance of
74.33 feet; thence
7. North 27 degrees 28 minutes 00 seconds West, parallel with
Virginia Avenue, a distance of 77.34 feet to the southerly
line of Pacific Avenue; thence
8. North 62 degrees 32 minutes 00 seconds East, in and along
the southerly line of Pacific Avenue, a distance of 50.00
feet to the point and place of BEGINNING.
PARCEL C
DESCRIPTION OF THE SEVENTEEN-FOOT WIDE FIRE LANE BETWEEN THE
SERVICE ROAD AND THE BOARDWALK.
All that certain lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey, bounded and described as
follows:
BEGINNING at a point distant 552.00 feet east of the easterly
line of Virginia Avenue (80 feet wide) and 868.00 feet south of
the southerly line of Pacific Avenue (60 feet wide), when
measured at right angles to said avenues respectively, and
extending from said beginning point the following courses and
distances:
1. South 27 degrees 28 minutes 00 seconds East, parallel with
Virginia Avenue, a distance of 581.53 feet to the Inland or
Interior Line of Public Park; thence
2. South 59 degrees 24 minutes 40 seconds West, in and along
the Inland or Interior Line of Public Park, a distance of
17.03 feet; thence
3. North 27 degrees 28 minutes 00 seconds West, parallel with
Virginia Avenue, a distance of 582.45 feet; thence
4. North 62 degrees 32 minutes 00 seconds East, parallel with
Pacific Avenue, a distance of 17.00 feet to the point and
<PAGE>
place of BEGINNING.
PARCEL D
DESCRIPTION FOR THE EASEMENT FOR THAT PORTION OF THE FIFTY-FOOT
WIDE SERVICE ROAD LYING WITHIN THE SHOWBOAT LANDS.
ALL that certain lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey, bounded and described as
follows:
BEGINNING at a point distant 577.00 feet east of the easterly
line of Virginia Avenue (80 feet wide) and 80.00 feet south of
the southerly line of Pacific Avenue (60 feet wide), and
extending from said beginning point the following courses and
distances:
1. South 27 degrees 28 minutes 00 seconds East, parallel with
Virginia Avenue, a distance of 6.00 feet; thence
2. South 07 degrees 48 minutes 46 seconds East, a distance of
74.23 feet; thence
3. North 27 degrees 28 minutes 00 seconds West, parallel with
Virginia Avenue, a distance of 76.00 feet; thence
4. North 62 degrees 32 minutes 00 seconds East, parallel with
Pacific Avenue, a distance of 25.00 feet to the point and
place of BEGINNING.
<PAGE>
RECITAL:
BEING the same premises that were leased by Resorts International
Inc., a Delaware Corporation to Ocean Showboat Inc., a New Jersey
Corporation dated October 26, 1983 recorded January 18, 1984 in
Deed Book 3878 page 1.
ASSIGMENT AND ASSUMPTION OF LEASE: by Ocean Showboat Inc., a New
Jersey Corporation to Atlantic City Showboat Inc., a New Jersey
Corporation to Atlantic City Showboat Inc., a New Jersey
Corporation dated December 3, 1984 recorded December 24, 1984 in
Deed Book 4004 page 310.
FIRST AMENDMENT TO LEASE: dated January 15, 1985 recorded August
16, 1985 in Deed Book 4107 page 141.
SECOND AMENDMENT TO LEASE: dated July 5, 1985 recorded November
25, 1985 in Deed Book 4158 page 221.
THIRD AMENDMENT TO LEASE: dated October 28, 1985 recorded
November 25, 1985 in Deed Book 4158 page 227.
RESTATED THIRD AMENDMENT TO LEASE: dated October 28, 1985
recorded February 20, 1987 in Deed Book 4406 page 17.
FOURTH AMENDMENT TO LEASE: dated December 16, 1986 recorded
February 20, 1987 in Deed Book 4406 page 37.
FIFTH AMENDMENT TO LEASE: dated March 2, 1987 recorded March 23,
1987 in Deed Book 4421 page 10.
SIXTH AMENDMENT TO LEASE: dated March 13, 1987 recorded March
23, 1987 in Deed Book 4421 page 17.
SEVENTH AMENDMENT TO LEASE: dated October 18, 1988 recorded
December 19, 1988 in Deed Book 4814 page 231.
<PAGE>
EXHIBIT "B"
"RESORTS LEASE" means that certain Lease Agreement
dated as of October 26, 1983 between Resorts and OSI, recorded
May 1, 1984 in Deed Book 3878, page 1, as assigned to Mortgagor
pursuant to that certain Assignment and Assumption of Lease made
December 3, 1984 between OSI and Mortgagor recorded, December 24,
1984 in Deed Book 4004, page 310, as amended by (i) that certain
First Amendment to Lease Agreement dated as of January 15, 1985
between Resorts and Mortgagor recorded, August 16, 1985 in Deed
Book 4107, page 141; (ii) that certain Second Amendment to Lease
Agreement dated as of July 5, 1985 between Resorts and Mortgagor
recorded, November 25, 1985 in Deed Book 4158, page 221; (iii)
that certain Third Amendment to Lease Agreement dated as of
October 28, 1985 between Resorts and Mortgagor, recorded November
25, 1985 in Deed Book 4158, page 227; (iv) that certain Restated
Third Amendment to Lease Agreement dated as of August 28, 1986
between Resorts and Mortgagor, recorded February 20, 1987 in Deed
Book 4406 page 17; (v) the certain Fourth Amendment to Lease
Agreement dated as of December 16, 1986 between Resorts and
Mortgagor, recorded February 20, 1987 in Deed Book 4406, page 37;
(vi) that certain Fifth Amendment to Lease Agreement dated as of
March 2, 1987 between Resorts and Mortgagor, recorded March 23,
1987 in Deed Book 4421, page 10; (vii) that certain Sixth
Amendment to Lease Agreement dated as of March 13, 1987 between
Resorts and Mortgagor, recorded March 23, 1987 in Deed Book 4421,
page 17; (viii) that certain Seventh Amendment to Lease Agreement
dated as of October 18, 1988 between Resorts and Mortgagor,
recorded December 19, 1988 in Deed Book 4814, page 231; and (ix)
that certain Eighth Amendment to Lease Agreement dated as of May
18, 1993 between Resorts and Mortgagor, recorded May ____, 1993
in Deed Book ____, page _____.
EXHIBIT 10.38
<PAGE>
PARENT SERVICES SUPPORT AGREEMENT
This Parent Services Support Agreement (this
"Agreement") is made as of the ____ day of May 1997, by and
between Showboat, Inc., a Nevada corporation ("SI") and Showboat
Operating Company, a Nevada corporation ("SOC").
R E C I T A L S
A. SI, provides certain administrative services to
Atlantic City Showboat, Inc. ("ACSI") in connection with its
gaming operations at the Showboat Casino Hotel in Atlantic City,
New Jersey, pursuant to the terms of that certain Parent Services
Agreement dated November 21, 1985, and as amended on February 1,
1987, December 31, 1990, May 8, 1991 and August 17, 1993
(collectively, the "Parent Services Agreement").
B. SOC, a wholly-owned subsidiary of SI, owns and
operates the Showboat Hotel, Casino and Bowling Center in Las
Vegas, Nevada, and has extensive experience in the gaming
industry.
C. Certain employees of SOC have previously assisted
SI in fulfilling its obligations to ACSI under the Parent
Services Agreement, and SI desires to continue to use the
services of such SOC employees in connection with the Parent
Services Agreement.
D. SI and SOC desire to set forth the terms of
compensation for the services previously rendered, and to be
rendered by, SOC pursuant to the term of this Agreement.
OPERATIVE PROVISIONS
In consideration of the recitals, covenants and
conditions contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, SI and SOC agree as follows:
1. SERVICES
Upon the terms and conditions described herein, SOC shall
provide to SI the services (collectively, the "Services")
required for SI to fulfill its obligations to ACSI under the
Parent Services Agreement, including, without limitation, (i)
executive services, (ii) financial services, (iii) data
processing services, (iv) legal services, (v) marketing services,
(vi) tax planning and compliance services, (vii) site selection
services, and (viii) administrative services.
2. SOC PERSONNEL
All SOC personnel engaged to render the Services shall
remain the employees of SOC, and SOC shall be responsible for
their compensation and for withholding federal or state income
taxes. The costs and expenses incurred by SOC for consultants,
agents and independent contractors selected and
<PAGE>
engaged to perform the Services for SI shall be engaged and paid
directly by SI or reimbursed to SOC upon demand. Any such
consultants, agents and independent subcontractors shall
separately invoice and account for their Services provided to SI.
3. STANDARD OF PERFORMANCE
SOC undertakes to provide the Services hereunder with the
same degree of care and diligence it uses in providing similar
services for its own operations. In providing the Services
hereunder, SOC shall not be liable to SI for errors or omissions
hereunder except to the extent that such errors and omissions
constitute gross negligence or willful misconduct.
4. FEES
SI shall pay to SOC fees for the Services previously
rendered, and to be rendered hereunder, equal to one-half of the
fees received by SI from ACSI under the Parent Services
Agreement.
5. EXPENSE REIMBURSEMENT
SI shall be solely responsible for the payment of all direct
and indirect costs and expenses incurred by SOC in connection
with the performance of the Services. SI shall pay directly or
reimburse SOC for all costs and expenses incurred by SOC for the
benefit of SI, including, without limitation, all supplies,
materials, communications, facsimile, courier services, postage
and handling charges, travel, meals, accommodations and
entertainment. SOC shall provide SI with sufficient detailed
invoices of such expenses in accordance with the then applicable
guidelines of the Internal Revenue Service so as to entitle SI to
a deduction for such expenses.
6. TERM
The term of this Agreement shall be effective retroactively
as of January 1, 1997, and shall continue until the earlier to
occur of the expiration or termination of the Parent Services
Agreement.
7. REMEDIES
In the event that either party commits a material default of
its obligations hereunder, the nondefaulting party may notify the
defaulting party of such default. In the event that such default
is not cured within five (5) days thereafter, the nondefaulting
party shall be entitled to pursue any remedies available to it,
including but not limited to, the termination of this Agreement
upon notice to the defaulting party.
8. GENERAL PROVISIONS
(a) RECITALS. The recitals set forth above are true and
correct and are incorporated herein.
(b) OTHER SERVICES. Nothing in this Agreement shall be
construed to prohibit SOC from undertaking to provide additional
services to SI not described in this Agreement on terms and
conditions (including the fees therefore) satisfactory to each of
SI and SOC.
2
<PAGE>
(c) EFFECT OF WAIVER. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
(d) ATTORNEY'S FEES. SI and SOC agree that in the event of
a dispute, arbitration or litigation concerning this Agreement,
the losing party shall pay the prevailing party's reasonable
attorneys' fees in that dispute, arbitration or litigation.
(e) NOTICE. Any and all notices required under this
Agreement shall be in writing and shall be either (i)
hand-delivered; (ii) mailed, postage prepaid, certified mail,
return receipt requested; or (iii) delivered via a nationally
recognized overnight courier service, addressed to:
SI: Showboat, Inc.
2800 Fremont Street
P.O. Box 43117
Las Vegas, Nevada 89116-0117
Attention: Chief Financial Officer
SOC: Showboat Operating Company
2800 Fremont Street
P.O. Box 43117
Las Vegas, Nevada 89116-0117
Attention: Chief Financial Officer
All notices hand-delivered shall be deemed delivered as of
the date actually delivered. All notices mailed or delivered via
overnight courier shall be deemed delivered as of three business
days after the date postmarked. Any changes in any of the
addresses listed herein shall be made by notice as provided in
this Section 8(e).
(f) AMENDMENT. No amendment or modification of this
Agreement shall be deemed effective unless and until it is
executed in writing by both SI and SOC.
(g) SEVERABILITY. It is mutually agreed that all of the
terms, covenants, provisions and agreements contained herein
are severable and that, in the event any of them shall be held to
be invalid by any competent court, this Agreement shall be
interpreted as if such invalid term, covenant, provision or
agreement were not contained herein.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada in
effect on the date of this Agreement without resort to any
conflict of laws principles, and the courts of the State of
Nevada shall have sole and exclusive jurisdiction over any matter
brought under, or by reason of, this Agreement.
(i) ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties regarding SI's engagement of SOC,
and the parties hereby agree that no other oral representations
or agreements have been entered into in connection with this
transaction.
3
<PAGE>
(j) ACKNOWLEDGMENT. SI and SOC agree to cooperate fully
with each other in order to achieve the purposes of this
Agreement and to take all actions and execute and deliver all
documents that may be required to carry out the purposes and
intent of this Agreement.
(k) COUNTERPARTS. This Agreement may be executed at
different times and in multiple counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
(l) NEUTRAL INTERPRETATION. The provisions contained
herein shall not be construed in favor of or against any party
because that party or its counsel drafted this Agreement, but
shall be construed as if all parties prepared this Agreement,
and any rules of construction to the contrary are hereby
specifically waived. The terms of this Agreement were negotiated
at arm's length by the parties hereto.
(m) NO THIRD PARTY BENEFICIARIES. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to
confer upon or give any person or entity, other than the parties
hereto, any rights or remedies under or by the reason of the
Agreement.
In witness whereof, the parties hereto have caused this
Agreement to be executed by their representatives thereunto duly
authorized.
SHOWBOAT, INC.,
a Nevada corporation
By: /s/
J. KELL HOUSSELS, III, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
SHOWBOAT OPERATING COMPANY,
a Nevada corporation
By: /s/
J. KELL HOUSSELS, III, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
4
<PAGE>
MANAGEMENT SERVICES SUPPORT AGREEMENT
This Management Services Support Agreement (this
"Agreement") is made as of the ____ day of May 1997, by and
between Showboat, Inc., a Nevada corporation ("SI") and Showboat
Operating Company, a Nevada corporation ("SOC").
R E C I T A L S
A. SI, provides certain administrative services to
SOC in connection with its gaming operations at the Showboat
Hotel, Casino and Bowling Center in Las Vegas, Nevada, pursuant
to the terms of that certain Management Services Agreement dated
January 1, 1989.
B. SOC, a wholly-owned subsidiary of SI, owns and
operates the Showboat Hotel, Casino and Bowling Center in Las
Vegas, Nevada, and has extensive experience in the gaming
industry.
C. Certain employees of SOC have previously assisted
SI in fulfilling its obligations to SOC under the Management
Services Agreement, and SI desires to continue to use the
services of such SOC employees in connection with the
Management Services Agreement.
D. SI and SOC desire to set forth the terms of
compensation for the services previously rendered, and to be
rendered by, SOC pursuant to the term of this Agreement.
OPERATIVE PROVISIONS
In consideration of the recitals, covenants and
conditions contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, SI and SOC agree as follows:
1. SERVICES
Upon the terms and conditions described herein, SOC shall
provide to SI the services (collectively, the "Services")
required for SI to fulfill its obligations to SOC under the
Management Services Agreement, including, without limitation, (i)
executive services, (ii) financial services, (iii) data
processing services, (iv) legal services, (v) marketing services,
(vi) tax planning and compliance services, (vii) site selection
services, and (viii) administrative services.
2. SOC PERSONNEL
All SOC personnel engaged to render the Services shall
remain the employees of SOC, and SOC shall be responsible for
their compensation and for withholding federal or state income
taxes. The costs and expenses incurred by SOC for consultants,
agents and independent contractors selected and engaged to
perform the Services for SI shall be engaged and paid directly by
SI or reimbursed to SOC
<PAGE>
upon demand. Any such consultants, agents and independent
subcontractors shall separately invoice and account for their
Services provided to SI.
3. STANDARD OF PERFORMANCE
SOC undertakes to provide the Services hereunder with the
same degree of care and diligence it uses in providing similar
services for its own operations. In providing the Services
hereunder, SOC shall not be liable to SI for errors or omissions
hereunder except to the extent that such errors and omissions
constitute gross negligence or willful misconduct.
4. FEES
SI shall pay to SOC fees for the Services previously
rendered, and to be rendered hereunder, equal to one-half of the
fees received by SI from SOC under the Management Services
Agreement.
5. EXPENSE REIMBURSEMENT
SI shall be solely responsible for the payment of all direct
and indirect costs and expenses incurred by SOC in connection
with the performance of the Services. SI shall pay directly or
reimburse SOC for all costs and expenses incurred by SOC for the
benefit of SI, including, without limitation, all supplies,
materials, communications, facsimile, courier services, postage
and handling charges, travel, meals, accommodations and
entertainment. SOC shall provide SI with sufficient detailed
invoices of such expenses in accordance with the then applicable
guidelines of the Internal Revenue Service so as to entitle SI to
a deduction for such expenses.
6. TERM
The term of this Agreement shall be effective retroactively
as of January 1, 1997, and shall continue until the earlier to
occur of the expiration or termination of the Management Services
Agreement.
7. REMEDIES
In the event that either party commits a material default of
its obligations hereunder, the nondefaulting party may notify the
defaulting party of such default. In the event that such default
is not cured within five (5) days thereafter, the nondefaulting
party shall be entitled to pursue any remedies available to it,
including but not limited to, the termination of this Agreement
upon notice to the defaulting party.
8. GENERAL PROVISIONS
(a) RECITALS. The recitals set forth above are true and
correct and are incorporated herein.
(b) OTHER SERVICES. Nothing in this Agreement shall be
construed to prohibit SOC from undertaking to provide additional
services to SI not described in this Agreement on terms and
conditions (including the fees therefore) satisfactory to each of
SI and SOC.
2
<PAGE>
(c) EFFECT OF WAIVER. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
(d) ATTORNEY'S FEES. SI and SOC agree that in the event of
a dispute, arbitration or litigation concerning this Agreement,
the losing party shall pay the prevailing party's reasonable
attorneys' fees in that dispute, arbitration or litigation.
(e) NOTICE. Any and all notices required under this
Agreement shall be in writing and shall be either (i)
hand-delivered; (ii) mailed, postage prepaid, certified mail,
return receipt requested; or (iii) delivered via a nationally
recognized overnight courier service, addressed to:
SI: Showboat, Inc.
2800 Fremont Street
P.O. Box 43117
Las Vegas, Nevada 89116-0117
Attention: Chief Financial Officer
SOC: Showboat Operating Company
2800 Fremont Street
P.O. Box 43117
Las Vegas, Nevada 89116-0117
Attention: Chief Financial Officer
All notices hand-delivered shall be deemed delivered as of
the date actually delivered. All notices mailed or delivered via
overnight courier shall be deemed delivered as of three business
days after the date postmarked. Any changes in any of the
addresses listed herein shall be made by notice as provided in
this Section 8(e).
(f) AMENDMENT. No amendment or modification of this
Agreement shall be deemed effective unless and until it is
executed in writing by both SI and SOC.
(g) SEVERABILITY. It is mutually agreed that all of the
terms, covenants, provisions and agreements contained herein
are severable and that, in the event any of them shall be held to
be invalid by any competent court, this Agreement shall be
interpreted as if such invalid term, covenant, provision or
agreement were not contained herein.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada in
effect on the date of this Agreement without resort to any
conflict of laws principles, and the courts of the State of
Nevada shall have sole and exclusive jurisdiction over any matter
brought under, or by reason of, this Agreement.
(i) ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties regarding SI's engagement of SOC,
and the parties hereby agree that no other oral representations
or agreements have been entered into in connection with this
transaction.
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<PAGE>
(j) ACKNOWLEDGMENT. SI and SOC agree to cooperate fully
with each other in order to achieve the purposes of this
Agreement and to take all actions and execute and deliver all
documents that may be required to carry out the purposes and
intent of this Agreement.
(k) COUNTERPARTS. This Agreement may be executed at
different times and in multiple counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
(l) NEUTRAL INTERPRETATION. The provisions contained herein
shall not be construed in favor of or against any party because
that party or its counsel drafted this Agreement, but shall be
construed as if all parties prepared this Agreement, and any
rules of construction to the contrary are hereby specifically
waived. The terms of this Agreement were negotiated at arm's
length by the parties hereto.
(m) NO THIRD PARTY BENEFICIARIES. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to
confer upon or give any person or entity, other than the parties
hereto, any rights or remedies under or by the reason of the
Agreement.
In witness whereof, the parties hereto have caused this
Agreement to be executed by their representatives thereunto duly
authorized.
Showboat, Inc.,
a Nevada corporation
By: /s/
J. KELL HOUSSELS, III, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Showboat Operating Company,
a Nevada corporation
By: /s/
J. KELL HOUSSELS, III, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
4
EXHIBIT 10.39
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and
entered into as of the 11th day of December, 1997, by and between
Showboat Development Company, a Nevada corporation (the
"Seller"), and Futuresouth, Inc., a Missouri corporation (the
"Buyer").
RECITALS
A. Seller is the owner of 100 shares of common stock (the
"Shares"), $1.00 par value (the "Common Stock"), of Showboat
Lemay, Inc., a Nevada corporation (the "Company"). The Shares
represent one hundred percent (100%) of the total outstanding
Common Stock, equity and ownership of the Company.
B. Company is the general partner of Southboat Limited
Partnership (the "Partnership").
C. Buyer desires to acquire the Shares from Seller upon
the terms and conditions hereinafter set forth.
D. Seller desires to sell the Shares upon the terms and
conditions hereinafter set forth.
Now, Therefore, for and in consideration of the premise
and mutual covenants, agreements, understandings, undertakings,
representations, warranties and promises, and subject to the
conditions hereinafter set forth, and intending to be legally
bound thereby, the parties do hereby covenant and agree that the
Recitals set forth above are true and accurate, and further
covenant and agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE
Subject to the provisions hereof, on the Closing Date (as
hereinafter defined), Seller shall sell, transfer, assign and
deliver the Shares to Buyer, and Buyer shall buy the Shares from
Seller.
1.2 CONSIDERATION
In consideration of the sale of the Shares to Buyer, Buyer
shall pay the sum of One Hundred Ten Dollars and 00/100th Dollars
($110.00) and other consideration provided herein.
<PAGE>
1.3 REIMBURSEMENT OF EXPENSES
a. Seller represents and warrants that Seller has
incurred approximately $4.8 million in direct out-of-
pocket expenses in connection with development of the
Project, which expenses are described on SCHEDULE 1.3
attached hereto (the "Seller Development Costs").
SCHEDULE 1.3 is a complete listing of the Seller
Development Costs. Seller represents the Seller
Development Costs were incurred in (i) developing the
plans for the proposed riverboat casino complex, (ii)
obtaining financing commitments for the riverboat
casino complex, (iii) coordinating interactions with
and making applications and presentations to the
Missouri Gaming Commission for a gaming license, and
(iv) coordinating interactions with and making
applications and presentations to St. Louis County, for
selection and negotiation of a lease for riverboat
casino site. The Seller Development Costs do not
include Seller's soft costs for which no reimbursement
is contemplated. Seller agrees upon the request of the
Partnership to provide the Partnership with such
documentation of the Seller Development Costs as may be
requested.
b. Buyer has advised Seller that Buyer intends to
transfer the general partner interest held by the
Company in the Partnership to another gaming operator
(the "New Gaming Operator"). Buyer recognizes that the
work previously done on the Project and the Project
Documents by Seller and the incurrence of the Seller
Development costs in performing such work will have
considerable value to the Partnership and may save the
Partnership money in connection with completing the
Project. Within 60 days after Buyer brings a New
Gaming Operator into the Partnership, Buyer, Seller and
the New Gaming Operator shall meet and attempt to reach
agreement in good faith on the dollar amount of the
Seller Development Costs to be reimbursed to Seller in
light of Seller's efforts, time and energies in
securing, negotiating, developing and maintaining the
Project and the Project Documents, and that amount
(which may not exceed the Seller Development Costs)
shall be the amount to be reimbursed to Seller (this
amount is referred to as the "Adjusted Reimbursement
Costs").
c. In the event that the Seller and the Partnership can
not agree on the amount of the Adjusted Reimbursement
Costs, either the Seller or the Partnership may request
that the issue be submitted to binding arbitration, and
be referred to a panel of three neutral arbitrators for
final determination pursuant to the Commercial Rules of
the American Arbitration Association (the "AAA"). Such
arbitration will be administered by the AAA and held in
St. Louis, Missouri. Any such arbitration will be
initiated by a written request for arbitration
delivered by one party to the other and to the AAA.
The arbitrators will be attorneys with gaming
experience selected in accordance with the rules of the
AAA. The hearing will begin sixty (60) days after the
arbitrators are selected, and a final decision or award
will be made within thirty (30) days of the closing of
the hearing. The decision or award and the basis
therefor will be in writing and delivered to the
parties. The final decision will be binding on Seller
and the Partnership and enforceable in any court
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<PAGE>
of law having jurisdiction. Each party shall bear
its own costs incurred in connection with the
arbitration.
d. If the riverboat casino project (the "Project")
(the term Project as used in this Agreement includes
all aspects of the riverboat gaming project including
but not limited to the Lease of the site with the St.
Louis County Port Authority) contemplated by the
Southboat Limited Partnership Agreement is completed
and opens for gaming business, the Partnership shall,
if permitted by law and by the and the rules and
regulations of the Missouri Gaming Commission, pay to
Seller an amount equal to the Adjusted Reimbursement
Cost (without interest) payable only in the manner set
forth in this paragraph. The Partnership shall pay
five percent (5%) of its net earnings as computed in
accordance with generally accepted accounting
principles before taking into account depreciation and
amortization (on intangible assets). Moreover, Buyer
shall have been fully reimbursed for the $500,000 in
development costs that Buyer has invested in the
Project before any Adjusted Reimbursement Costs are
paid to Seller. Partnership payments pursuant to this
paragraph shall be made annually within 120 days after
the close of its fiscal year.
e. The Adjusted Reimbursement Costs are payable only
to the extent that all terms and conditions in this
Section 1.3 are satisfied, otherwise the Seller is
irrevocably waiving any right to recover the Seller
Development Costs and the Adjusted Reimbursement Costs.
For example, without limiting the preceding sentence,
Seller forfeits all right to recover the Seller
Development Costs and the Adjusted Reimbursement Costs
if the Project does not open for business, or if the
Partnership is not legally permitted to make said
payments. Seller also acknowledges that it is
irrevocably waiving any right to recover that amount by
which the Seller Development Costs exceed the Adjusted
Reimbursement Costs.
f. Seller represents and warrants that it is the sole
owner of the Seller Development Costs and that no other
person has any rights to recover the Seller Development
Costs from Buyer or the Partnership. Seller agrees to
indemnify and hold Buyer and the Partnership harmless
with respect to any claims made against them for
recovery of any of the Seller Development Costs,
excluding the Partnership's obligations to Seller under
this Section 1.3.
ARTICLE II
CLOSING
2.1 CLOSING DATE
The closing (the "Closing") under this Agreement
for the purchase and sale of the Shares shall be
at the offices of the Company, unless otherwise
agreed to in writing by each of the parties
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<PAGE>
hereto, on December 12, 1997 (the "Closing Date"). The Closing
shall take place at 10:00 a.m. Pacific Standard Time on the
Closing Date.
2.2 SELLER'S CLOSING DOCUMENTS
At the Closing, Seller shall deliver to Buyer the following
documents:
a. the certificate representing all of the Shares duly
endorsed in blank;
b. a certified resolution of the Company removing all
officers and directors appointed by the Company and
replacing said officers and directors with officers and
directors identified by Buyer as of the Closing; and
c. an executed amendment to the articles of
incorporation of the Company changing the name of the
Company to Southboat Lemay, Inc.; and
d. the Project Documents (as defined in section 7.1).
2.3 PURCHASER'S CLOSING DOCUMENTS
a. At the Closing, Buyer shall deliver to Seller the
amount of One Hundred Ten Dollars and 00/100th Dollars
($110.00).
b. At the Closing, Buyer shall cause to be delivered
to Seller a faxed copy of a letter signed by the St.
Louis County Port Authority addressed to the Bank of
New York in the form attached hereto directing the
release from escrow of Seller's Security Deposit and
Guarantees (with original to be delivered by overnight
delivery to Seller's counsel).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and
warranties to Buyer, and Seller warrants that the following are
true and accurate on the date hereof and will be true and
accurate at all times thereafter through the Closing Date.
3.1 TITLE TO SHARES
Seller is the record and beneficial owner of the Shares,
free and clear of all liens, encumbrances, security agreements,
options, charges, restrictions or any other claims of any type,
kind or nature whatsoever. The Shares are fully paid and
nonassessable and have been duly and validly issued by Company,
and were not issued in violation of any preemptive rights.
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<PAGE>
3.2 AUTHORITY
Seller has the full right, power, legal capacity and
authority to enter into, and perform its obligations under this
Agreement, including the sale and delivery of the Shares to
Buyer.
3.3 BINDING NATURE OF AGREEMENT
This Agreement constitutes the valid and binding obligation
of Seller, enforceable against Seller in accordance with its
terms.
3.4 NO VIOLATION
Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the
fulfillment of the terms hereof by Seller will conflict with, or
result in a breach of or default under, any of the terms or
provisions of (i) any agreement, note, indenture, mortgage, deed
of trust, instrument lease or franchise to which Seller is a
party or by which it or any of its assets or properties are
bound; or (ii) any law, judgment, order, arbitration award, rule,
regulation, ordinance, writ, injunction or decree of any
governmental agency or instrumentality or court applicable to or
having jurisdiction over Seller or any of its assets or
properties.
3.5 NO COMPANY LIABILITIES
The Company has no liabilities as of the date hereof other
than the Box Suite Lease and Ticket Option Agreement between the
Rams Football Company, Inc. and the Company, and Seller
represents that all amounts then due under said agreements
through the Closing Date have been paid. For purposes of this
Agreement the term "liabilities" shall include without limitation
any direct or indirect liability or obligation, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute,
contingent, mature, not mature or otherwise.
3.6 NO COMMISSION OR FINDER'S FEE
Seller has not dealt with any broker or finder in
connection with the Project (which term includes the Lease) or
any of the transactions contemplated by this Agreement other
than a consulting agreement with Jeffrey A. Boughrum (a copy of
which was provided to Buyer on December 8, 1997), and no broker
or other person is entitled to any commission or finder's fee in
connection with such transactions or the Project. Seller is
solely responsible for paying all amounts owed to Jeffrey A.
Boughrum pursuant to his Consulting Agreement with Seller dated
August 15, 1997, or otherwise, and Seller agrees to indemnify and
hold Buyer and the Partnership harmless with respect to all
amounts owed to Jeffrey A. Boughrum.
3.7 NO REPRESENTATIONS UNTRUE
No representation made by Seller in this Agreement contain
or will contain any untrue statement of material fact or omit to
state any material fact known to Seller necessary to make any
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<PAGE>
statement, warranty or representations not misleading to Buyer.
Seller knows of no material facts or conditions adversely
affecting the value of the Shares, which have not been disclosed
to Buyer. Except as set forth in this Agreement, Seller does not
make any representations or warranties to Buyer.
3.8 NO FUTURE INTERESTS
Seller hereby represents and warrants that it has conducted
all necessary due diligence with respect to the subject matter of
this Agreement, including its own investigation of the future
prospects of the Project and hereby represents and warrants that
it is freely and voluntarily entering into the transactions
described in this Agreement based solely on its own due
diligence. Seller acknowledges that it is not relying on any
representations by Buyer in entering into this transaction, and
that it has no basis to rescind this transaction or seek other
relief against the Buyer or the Partnership in the event that the
Partnership is able to obtain a gaming license (except for any
payments made pursuant to Section 1.3. Seller represents and
warrants that it fully understands that it is permanently
terminating all interest it has in the Project, the Project
Documents and the Partnership and that it will have no interest
of any kind in the Project, the Project Documents or the
Partnership and no right to payments of any kind (except for any
payments made pursuant to Section 1.3) in the event that the
Partnership is able to obtain a gaming license and open the
Project for a gaming business. Without limiting the foregoing,
Seller acknowledges that it has no rights in the gaming
application fee paid to the Missouri Gaming Commission and that
all rights in said fees now belong to the Partnership.
3.9 ALL COMPANY AND PARTNERSHIP AGREEMENTS DISCLOSED
Attached hereto as SCHEDULE 3.9 is a list of all agreements
under which either the Company or the Partnership has any future
obligations. A copy of all agreements listed on SCHEDULE 3.9 is
attached to said Schedule. Seller represents that the agreements
listed on SCHEDULE 3.9 and attached hereto are true and complete
copies of the agreements that are binding on Company and/or the
Partnership, and that there are no amendments, side agreements or
other undisclosed agreements that would change the terms of any
of the attached agreements, and that there are no defaults under
said agreements. Seller further warrants that Company and the
Partnership have paid all amounts due under the agreements listed
on SCHEDULE 3.9 through the Closing Date.
3.10 ALL LIABILITIES DISCLOSED
The Partnership has no liabilities (as defined in section
3.5), except for those disclosed on SCHEDULE 3.10 attached
hereto. Without limiting the foregoing, the Seller represents
that neither the Partnership, nor the Company has any obligation
to make any payments, grant any equity interests in the Project
or pay any other consideration to any person in the event that
the Partnership is able to open a gaming business.
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<PAGE>
3.11 PROPERTY
Attached hereto as SCHEDULE 3.11 is a list of all property
owned or leased by the Company or by the Partnership (the
"Property"). Seller warrants that the Company or the Partnership
holds good title to all of the Property free and clear of all
liens, claims and encumbrances. Seller shall cooperate in taking
any actions necessary to vest title and control of the Property
in Buyer, such as changing signature cards on bank accounts.
3.12 TAX RETURNS
The Company and the Partnership have filed all tax returns
that were due prior to the Closing Date and have paid all taxes
that are owed by the Company or the Partnership for all periods
prior to the Closing Date. There is no pending audit concerning
any Company or Partnership tax returns. The representations in
this section apply to all taxes applicable to the Company and the
Partnership, including without limitation all federal, state
(Nevada and Missouri) and local income, franchise, property and
gaming taxes.
3.13 OWNERSHIP OF COMPANY
The 100 Shares being transferred to Buyer constitute all
outstanding stock that has been issued by Company. Company has
no other outstanding stock and has no obligation, contingent or
otherwise, to issue any stock to any person. Without limiting
the foregoing, Company warrants that it has not issued any
warrants or stock options.
3.14 OWNERSHIP OF PARTNERSHIP
Company owns an 80% interest in the Partnership ("Company's
80% Partnership Interest"), and Buyer by acquiring ownership of
Company will be acquiring ownership of 100% of the Partnership.
Company's 80% Partnership Interest is free and clear of all
liens, encumbrances, security agreements, options, charges,
restrictions or any other claims of any type, kind or nature
whatsoever. Company's 80% Partnership Interest and Buyer's 20%
interest in the Partnership constitute the entire equity interest
in the Partnership, and the Partnership has no obligation,
contingent or otherwise, to issue any equity interest to any
person.
3.15 COMPANY
Company is duly organized under the laws of the State of
Nevada, is qualified to do business in the State of Missouri, and
is in good standing in the States of Nevada and Missouri.
3.16 COMPLIANCE WITH LAW
Seller represents and warrants that Seller, Company and the
Partnership have not violated any laws or governmental
regulations in connection with their activities to establish a
gaming business in Missouri.
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<PAGE>
3.17 DISCLOSURE UNDER PARTNERSHIP AGREEMENT
Except as disclosed on Schedule 3.17 Seller has no
involvement in any gaming projects in the State of Missouri or in
East St. Louis, Illinois other than the Project.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to
Seller, and Buyer hereby warrants that the following are true and
accurate on the date hereof and will be true and accurate at all
times thereafter through the Closing Date.
4.1 AUTHORITY
Buyer has the full right, power, legal capacity and
authority to enter into, and perform its obligations under this
Agreement.
4.2 BINDING NATURE OF AGREEMENT
This Agreement constitutes the valid and binding obligations
of Buyer, enforceable against Buyer in accordance with its terms.
4.3 DIFFERENCE IN FACTS
Buyer hereby represents and warrants that it has conducted
all necessary due diligence with respect to the subject matter of
this Agreement and hereby represents and warrants that it accepts
the Company "as is" and accepts that any and all liabilities
and/or obligations of the Company for any and all acts committed
prior to the purchase of the Shares contemplated by this
Agreement, except that nothing herein shall be deemed to release
Seller from any liability that it has for its obligations,
representations and warranties in this Agreement.
4.4 NO VIOLATION
Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the
fulfillment of the terms hereof by Buyer will conflict with, or
result in a breach of or default under, any of the terms or
provisions of: (i) any agreement, note, indenture, mortgage,
deed of trust, instrument, lease or franchise to which Buyer is a
party or by which it or any of its assets or properties are
bound; or (ii) any law, judgment, order, arbitration award, rule,
regulation, ordinance, writ, injunction or decree of any
governmental agency or instrumentality or court applicable to or
having jurisdiction over Buyer or any of its assets or
properties.
4.5 NO RELIANCE
Buyer acknowledges that Seller has not made and does not
make any representations or warranties concerning the past or
future performance of the Company, except for any
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<PAGE>
representations set forth in this Agreement. In making its
investment decision, Buyer has relied upon its own examination of
the Company, including the merits and risks involved. Buyer has
consulted its own attorney, business advisor or tax advisor as to
legal, business or tax advice. Buyer possesses sufficient
business probity and sophistication to assess the risks of
purchasing the Shares or has consulted with persons of its own
choosing who possess such probity and sophistication to advise
Buyer of the risks attendant to the investment called for under
this Agreement.
4.6 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account, for
investment and not with a view to the resale or distribution
thereof, and Buyer understands the nature and effect of this
representation.
4.7 NO COMMISSION OR FINDER'S FEE
Buyer has not dealt with any broker or finder in connection
with any of the transactions contemplated by this Agreement, and
to the best of its knowledge, no broker or other person is
entitled to any commission or finder's fee in connection with
such transactions.
4.8 NO REPRESENTATIONS UNTRUE
No representation made by Buyer in this Agreement contains
or will contain any untrue statement of material fact or omit to
state any material fact known to Buyer necessary to make any
statement, warranty or representation not misleading to Seller.
Except as set forth in this Agreement, Buyer does not make any
representations or warranties to Seller.
ARTICLE V
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
5.1 SATISFACTION OF CONDITIONS PRECEDENT
The obligation of Seller to sell and transfer the Shares
under this Agreement is subject to the satisfaction, on or before
the Closing Date, of all the conditions set forth in this Article
V. Seller may waive any or all of these conditions in whole or
in part without prior notice; provided, however, that no such
waiver of a condition shall constitute a waiver by Seller of any
of its other rights or remedies, at law or in equity, if Buyer
should be in default of any of its representations, warranties,
or covenants under this Agreement.
5.2 RETURN OF SECURITY DEPOSIT
Seller shall have received a faxed copy of a letter in the
form attached to this Agreement signed by the St. Louis County
Port Authority irrevocably instructing the Bank of New York to
deliver the $750,000 security deposit plus interest earned
thereon deposited in the St. Louis County Port
Authority/Southboat Limited Partnership escrow account at the
Bank of New York, Account Number 484299 thereon to
Seller. Buyer, the Company and the Partnership hereby
-9-
<PAGE>
waive any and all claims they may have to share in said security
deposit and interest earned thereon. Seller represents and
warrants to Buyer, the Partnership and the St. Louis County Port
Authority that all sums owing to the Bank of New York and to any
predecessor escrow agent under the Escrow Agreement dated October
13, 1995 by and between the St. Louis County Port Authority, the
Partnership and Boatmen's Trust Company at any time through
termination of the Escrow Agreement have been paid in full, and
Seller agrees it is solely responsible for paying all amounts, if
any, still owing to the Escrow Agent under said Escrow Agreement.
5.3 RELEASE OF GUARANTEES
Seller shall have received a faxed copy of a letter in the
form attached to this Agreement signed by the St. Louis County
Port Authority irrevocably instructing the Bank of New York to
deliver to Seller the Guarantee of Minimum Rent and the
Completion Guarantee, each dated as of October 13, 1995.
ARTICLE VI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
6.1 SATISFACTION OF CONDITIONS PRECEDENT
The obligation of Buyer to purchase the Shares under this
Agreement is subject to the satisfaction, on or before the
Closing Date, of all the conditions set forth in this Article VI.
Buyer may waive any or all of these conditions in whole or in
part without prior notice; provided, however, that no such waiver
of a condition shall constitute a waiver by Buyer of any of its
other rights or remedies, at law or in equity, if Seller should
be in default of any of its representations, warranties, or
covenants under this Agreement.
6.2 REPRESENTATIONS AND WARRANTIES
All representations and warranties by Seller in this
Agreement shall be true and correct as of the Closing Date and
Seller shall have performed all of its obligations under this
Agreement which are to be performed on or before Closing.
6.3 ACCEPTANCE OF FUTURESOUTH
The St. Louis County Port Authority shall have provided
Seller with its written consent and acceptance of Buyer as the
controlling shareholder of Company, subject to such terms and
conditions as are acceptable to Buyer.
-10-
<PAGE>
ARTICLE VII
ADDITIONAL COVENANTS BY SELLER
7.1 DELIVERY OF PROJECT DOCUMENTS
(a) Seller shall deliver to Buyer at or prior to Closing
all books, records and other documents in the possession of or
under the control of Seller, the Company, the Partnership, or any
of their affiliates, that relate to the Project or the business
of the Company or the Partnership, including, but not limited to,
all engineering studies, architectural and engineering drawings
and plans, elevations, site studies, Coast Guard permit
applications, if any, the Partnership's Missouri Gaming
Commission application, title insurance commitments, surveys,
environmental reports, market studies, information, presentations
and other material used for any attempts to sell the Project or
any part thereof, agreements, the Company's corporate minute
books, the Company's and the Partnership's tax returns and all
correspondence (collectively, the "Project Documents"). To the
extent not delivered at Closing, Seller has a continuing
obligation after Closing to supply such Project Documents to
Buyer. Seller forfeits its right to receive the Adjusted
Reimbursement Costs if Buyer has not received substantially all
of the Project Documents within 30 days after the Closing Date.
Seller is assigning all of its right, title and interest in the
Project Documents to Buyer. Seller does not represent or warrant
the completeness, accuracy of the contents or usefulness of any
of the Project Documents. Buyer either possesses sufficient
business probity and sophistication to assess the risks of
relying on the Project Documents or has consulted with persons of
its own choosing who possess such probity and sophistication to
advise Buyer of the risks attendant to the reliance on the
Project Documents. Seller agrees to make available at Buyer's
expense employees of Seller who have knowledge of the Project
Documents upon the written request of Buyer and upon the mutual
agreement of Seller and Buyer.
(b) Seller further represents that Buyer has not pledged,
mortgaged, hypothecated or transferred the Project Documents and
there are no payments due to anyone if the Project Documents are
used by Buyer. Seller hereby irrevocably consents to Buyer
having access to and use of all Project Documents, and Seller
shall if requested by Buyer, at Buyer's expense, provide any
consents that may be reasonable required by third parties in
order for Buyer to use and have access to the Project Documents.
Without limiting the preceding sentence, Seller hereby authorizes
the Missouri Gaming Commission to disclose the Partnership's
gaming application and all materials related thereto (other than
the personal disclosure gaming applications filed by officers,
directors and key employees of Showboat, Inc. and any of its
subsidiaries.
7.2 COOPERATION
Seller agrees to cooperate with Buyer after Closing in
providing, at Buyer's expense such documents as may be reasonably
required to effectuate the transactions described in this
Agreement, including but not limited to providing any additional
consents, amendments to the gaming applications, assignments or
other documents as may be required by any third party, including
but not limited to any documents required by the Missouri Gaming
Commission, St. Louis County or the Coast Guard.
-11-
<PAGE>
7.3 NO EMPLOYEES
Seller warrants that the Company and the Partnership do not
have and have not had any employees at any time prior to the
Closing Date, and as of closing all of Seller's directors and
officers shall have resigned their offices with the Company and
the Partnership.
7.4 CONFIDENTIALITY
(a) Seller and Buyer agree to keep the terms of this
Agreement confidential following the Closing, provided that
nothing herein shall prevent Seller or Buyer from making such
disclosures as are required by government agencies or by court
order, and Buyer may disclose this Agreement to third parties
that are involved in the Project to the extent Buyer determines
such disclosure is appropriate. In the event that either Seller
or Buyer reasonably believes that public disclosure of this
Agreement is appropriate Seller and Buyer shall prepare a
mutually agreeable press releases.
(b) Seller agrees to keep the Project Documents
confidential following the Closing, provided that nothing herein
shall prevent Seller from making such disclosures as are required
by government agencies or by court order.
(c) Buyer agrees to keep the Partnership's gaming
application confidential to the extent that the application
contains personal information regarding officers and directors of
Showboat, Inc. and any of its subsidiaries, provided that nothing
herein shall prevent Buyer from making such disclosures as are
required by government agencies or by court order.
7.5 PRESERVATION OF LEASE AND GAMING APPLICATION
Seller agrees to not do anything that would cause a
termination of the Lease and Development Agreement between
Partnership and the St. Louis County Port Authority (the "Lease")
prior to Closing, and agrees to execute at Closing any documents
required to retract the termination notice it had given with
respect to the Lease. Seller also agrees not to withdraw the
Partnership's application to the Missouri Gaming Commission for a
class A owner's and class B operator's license or do anything
else that would adversely affect that license application, except
that Seller may notify the Missouri Gaming Commission of its
withdrawal from the Project and may withdraw its application for
an operator's license. In accordance with Missouri gaming rules
and regulations, Buyer shall cause the Partnership to amend said
application with the Missouri Gaming Commission to reflect the
change in ownership contemplated under this Agreement. Seller
shall coordinate any notifications it makes to the Missouri
Gaming Commission, St. Louis County and the Coast Guard with
Buyer. Following Closing Seller agrees not to do anything that
adversely affects the Partnership's gaming application, except
that it is recognized that Seller is permitted to withdraw from
the Project and that Seller may respond to questions by any
gaming authority regulating its or any of its affiliates
regarding the Project and Seller's sale of the Shares to Buyer.
-12-
<PAGE>
ARTICLE VIII
COSTS
Buyer and Seller shall each bear their own costs and
expenses incurred or to be incurred in negotiating and preparing
this Agreement and in taking whatever actions that may be
necessary or appropriate to consummate the transactions
contemplated by this Agreement, including the costs of obtaining
any consents or approvals.
ARTICLE IX
RELEASE AND INDEMNITY BY BUYER
9.1 RELEASE BY BUYER
Buyer, for itself and its successors and assigns, releases
and forever discharges Seller, including the officers, directors,
employees and agents of the Seller, or any affiliated companies
of the Seller, of and from any and all manner of action and
causes of action, suits, debts, dues, accounts, contracts,
agreements, judgments, claims and demands whatsoever, whether in
law or in equity, whether known or unknown, anticipated or
unanticipated, disclosed or undisclosed, which now exist or may
hereafter arise from any matter, fact, circumstance, happening,
or thing whatsoever occurring or failing to occur from the
beginning of the world to the date of this Agreement. Buyer does
not release any claims that may arise under this Agreement.
9.2 INDEMNIFICATION BY BUYER
Buyer shall defend, indemnify, and hold completely free and
harmless the Seller, including the officers, directors, employees
and agents of the Seller, or any affiliated companies of the
Seller, from any and all actions and causes of action, suits,
debts, dues, accounts, contracts, agreements, judgments, claims,
and demands (including attorneys' fees and costs) related to the
Company, Southboat Limited Partnership Agreement or the Lease,
except that Buyer is not obligated to indemnify Seller for any
matters that were not disclosed to Buyer or for any matters that
violate Seller's representations, warranties and covenants under
this Agreement.
ARTICLE X
RELEASE AND INDEMNITY BY SELLER
10.1 RELEASE BY SELLER OF BUYER
Seller, for itself and its successors and assigns, releases
and forever discharges Buyer, Company, the Partnership, including
the affiliates, officers, directors, employees and agents of the
foregoing (collectively referred to as the "Buyer Released
Parties"), of and from any and all manner of action and causes of
action, suits, debts, dues, accounts, contracts, agreements,
judgments, claims and demands whatsoever, whether in law or in
equity, whether known or unknown, anticipated or unanticipated,
disclosed or undisclosed, which now exist or may
-13-
<PAGE>
hereafter arise from any matter, fact, circumstance, happening,
or thing whatsoever occurring or failing to occur from the
beginning of the world to the date of this Agreement. Seller
does not release any claims that may arise under this Agreement.
10.2 INDEMNIFICATION BY SELLER
Seller shall defend, indemnify, and hold completely free
and harmless the Buyer, including the officers, directors,
employees and agents of the Buyer, or any affiliated companies
of the Buyer, from any and all loss, liability and expense
(including attorneys' fees and costs) related to any default by
Seller in its obligations under this Agreement, including any
loss, liability and expense incurred by Buyer as a result of
any of Seller's representations and warranties in this
Agreement not being correct.
ARTICLE XI
GENERAL PROVISIONS
11.1 CAPTIONS
The subject headings or captions of the selections and
subsection of this Agreement are included only for the purposes
of the convenience and shall not affect the construction or
interpretation of any provisions contained herein.
11.2 ENTIRE AGREEMENT
This Agreement (together with all exhibits, documents,
agreements and instruments executed or furnished in connection
herewith) constitutes the entire agreement between the parties
pertaining to the subject matter hereof, and supersedes any and
all prior or contemporaneous written or oral negotiations,
agreements, representations, and understandings of the parties
with respect to such subject matter.
11.3 EXPENSES
If any legal action or any arbitration or other proceeding
is brought is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default, or
misrepresentations in connection with any the provisions of this
Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other
relief to which it may be entitled.
11.4 NOTICE
Any and all notices required under this Agreement shall be
in writing and shall be either: (i) hand-delivered; (ii) mailed,
first-class postage prepaid, certified mail, return receipt
requested; or (iii) delivered via a nationally recognized
overnight courier service, addressed to:
-14-
<PAGE>
Seller: Showboat Development Company
2800 Fremont Street
Las Vegas, Nevada 89104
H. Gregory Nasky, President and Chief
Executive Officer
Copy to: John N. Brewer
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Parkway, Seventh Floor
Las Vegas, Nevada 89109
Buyer: Futuresouth, Inc.
10205 Gravois Road
St. Louis, Missouri 63123
Dennis Long, President and Chief
Executive Officer
Copy to: Frederick J. Berger
Riezman & Blitz, P.C.
7700 Bonhomme, 7th Floor
St. Louis, Missouri 63105
All notices hand-delivered or delivered via overnight
courier shall be deemed delivered as of the date actually
delivered. All notices mailed shall be deemed delivered as of
three (3) business days after the date postmarked. Any changes
in any of the addresses listed herein shall be made by notice as
provided in this Section 11.4.
11.5 MODIFICATION, AMENDMENT OR WAIVER
This Agreement may not be amended, supplemented or
otherwise modified, and none of its terms may be waived,
unless such amendment, supplement, modification or waiver is in
an express writing and executed by the party or parties to be
bound thereby. The failure of any party at any time or
times to require performance of any provision hereof shall not
affect the right of such party at a later time to enforce the
same, and no waiver of any term or provision hereof on any one
occasion shall be deemed to be a waiver of the same or any other
provision hereof at any subsequent time or times.
11.6 BINDING EFFECT; ASSIGNMENT
This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors,
predecessors, parents, affiliates, subsidiaries, divisions,
officers, directors, shareholders, employees, advisors,
consultants, insurers, attorneys, heirs, executors,
administrators and any persons claiming rights by, through or
under them; provided, however, that no assignment of any rights
or delegation of any obligations provided for herein may be made
by either party to this Agreement without the prior written
consent of the other party.
-15-
<PAGE>
11.7 CONSTRUCTION
This Agreement shall be construed in accordance with its
intent and without regard to any presumption or any other rule
requiring construction against the party causing the same to be
drafted.
11.8 GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada in effect on the
date of this Agreement without resort to any conflict of laws
principles.
11.9 COUNTERPARTS
This Agreement may be executed at different times and in
multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
11.10 NO THIRD PARTIES BENEFITTED
This Agreement is made and entered into for the sole
protection and benefit of Buyer and Seller, their successors and
assigns, and no other person or persons shall have any right of
action hereon.
11.11 SEVERABILITY
If any provision of this Agreement, or any portion of any
provision, shall be deemed invalid or unenforceable for any
reason whatsoever, such invalidity or unenforceability shall not
affect the enforceability and validity of the remaining
provisions hereof.
11.12 TIME OF THE ESSENCE
At all times stated herein, time shall be of the essence.
11.13 GENDER
Each party to this Agreement agrees that masculine or
feminine pronouns shall be substituted for the neuter form and
vice versa and the plural shall be substituted for the singular
form and vice versa in any place or places herein which the
context requires such substitution or substitutions.
11.14 NEUTRAL INTERPRETATION
The provisions contained herein shall not be construed in
favor of or against any party because that party or its counsel
drafted this Agreement, but shall be construed as if all parties
prepared this Agreement, and any rules of construction to the
contrary are hereby specifically waived. The terms of this
Agreement were negotiated at arm's length by the parties hereto.
-16-
<PAGE>
11.15 SURVIVAL
All representations, warranties and covenants in this
Agreement shall survive closing.
11.16 COUNTERPARTS
This Agreement may be executed in counterparts. The
parties may sign this Agreement and fax a signed copy to the
other party. Any party receiving a copy bearing a facsimile
signature may rely on such facsimile signature and the facsimile
copy is binding on the party that signed it.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION
WHICH MAY BE ENFORCED BY THE PARTIES.
In Witness Whereof, the parties hereto have duly executed
this Agreement on the date first set forth above.
SELLER BUYER
SHOWBOAT DEVELOPMENT COMPANY, FUTURESOUTH, INC., a Missouri
a Nevada corporation corporation
By: /s/ By: /s/
H. Gregory Nasky Dennis Long
President and Chief President and Chief
Executive Officer Executive Officer
-17-
<PAGE>
EXHIBIT 1.3
SCHEDULE OF SELLER'S REIMBURSEMENT COSTS
-18-
<PAGE>
SCHEDULE 3.9
SCHEDULE OF AND COPIES OF ALL AGREEMENTS UNDER WHICH
PARTNERSHIP OR COMPANY HAS OBLIGATIONS
1. Release of All Claims and Indemnification Agreement among
Showboat Lemay, Inc., Showboat, Inc., Showboat Development
company and Futuresouth, Inc. dated May 1, 1995.
2. Release of all Claims and Indemnification Agreement among
Futuresouth, Inc., Showboat Lemay, Inc., Showboat, Inc. and
Showboat Development Company dated May 2, 1995.
3. Management Agreement by and between Southboat Partnership and
Showboat Operating Company dated as of May 2, 1995.*
4. Administrative Services Agreement by and between Showboat
Operating Company and Southboat Partnership dated as of May 2,
1995.*
5. Trademark License Agreement by and between Showboat, Inc. and
Southboat Partnership dated as of May 2, 1995.*
6. Agreement of Limited Partnership of Southboat Limited
Partnership dated May 1, 1995
7. Letter Agreement between Showboat Lemay, Inc., Futuresouth,
Inc. and Southboat Limited Partnership dated as of September
20, 1995.
8. Lease and Development Agreement dated as of October 13, 1995,
First Amendment to Lease and Development Agreement dated as of
May 1996, and Second Amendment to Lease and Development
Agreement dated as of December 12, 1996.
9. Box Suite Lease and Ticket Option Agreement between the Rams
Football Company, Inc. and Showboat Lemay, Inc.
*Agreements by their terms terminate once Showboat no longer
maintains an equity interest in the Southboat Limited
Partnership.
-19-
<PAGE>
SCHEDULE 3.10
SCHEDULE OF ALL PARTNERSHIP LIABILITIES
All liabilites due and owing as of the Closing Date have
been paid.
-20-
<PAGE>
SCHEDULE 3.11
SCHEDULE OF ALL PARTNERSHIP AND COMPANY PROPERTY
Showboat Lemay, Inc. has no property other than $100 in a
bank account.
Southboat Limited Partnership has no property other than
the property leased pursuant to the Lease and Development
Agreement dated October, 13, 1995.
-21-
<PAGE>
SCHEDULE 3.17
DISCLOSURE OF ALL OTHER GAMING PROJECTS SELLER IS INVOLVED IN
LOCATED IN MISSOURI OR EAST ST. LOUIS, ILLINOIS
None.
-22-
EXHIBIT 21.01
<PAGE>
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
State of
Incorporation/
NAME ORGANIZATION NAMES USED IN DOING BUSINESS
---- ------------ ----------------------------
<S> <C> <C>
Atlantic City Showboat, Inc. New Jersey Showboat; Showboat Hotel and Casino;
Atlantic City Showboat
Ocean Showboat, Inc. New Jersey Ocean Showboat
Ocean Showboat Finance Corporation New Jersey Ocean Showboat Finance Corporation
Showboat Operating Company Nevada Showboat; Showboat Hotel, Casino &
Bowling Center; Las Vegas Showboat
Showboat Development Company Nevada Showboat Development Company
Showboat Australia Pty Limited Australia Not applicable
Sydney Harbour Casino Holdings Australia Not applicable
Limited
Sydney Casino Management Pty Australia Not applicable
Limited
Star City Casino Pty Limited Australia Not applicable
Sydney Harbour Casino Properties Australia Sydney Harbour Casino
Pty Limited
Showboat Indiana, Inc. Nevada Not applicable
Showboat Indiana Investment, Nevada Not applicable
Limited Partnership
Showboat Marina Partnership Indiana Showboat Marina; East Chicago
Showboat
Showboat Marina Casino Partnership Indiana Showboat Marina; East Chicago
Showboat
Showboat Marina Finance Corporation Indiana Not applicable
Showboat Marina Investment Indiana Not applicable
Partnership
Showboat New Hampshire, Inc. Nevada Not applicable
Showboat Rockingham Company, L.L.C. New Hampshire Not applicable
Showboat Land Company Nevada Not applicable
Showboat Land Holding Limited Nevada Not applicable
Partnership
Showboat Land LLC Nevada Not applicable
</TABLE>
EXHIBIT 23.01
<PAGE>
CONSENT OF INDEPENDENT AUDITORS'
The Board of Directors
Showboat, Inc.:
We consent to incorporation by reference in the registration
statements (Nos. 33-36048, 33-56044, 33-47945 and 33-58315) on
Form S-8 of Showboat, Inc. of our report dated March 13, 1998,
relating to the consolidated balance sheets of Showboat, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders'
equity, and cash flows for each of the years in the three-year
period ended December 31, 1997, which report appears in the
December 31, 1997 annual report on Form 10-K of Showboat, Inc.
KPMG PEAT MARWICK
Las Vegas, Nevada
March 27, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 67,145
<SECURITIES> 21,755
<RECEIVABLES> 18,831
<ALLOWANCES> 3,083
<INVENTORY> 3,328
<CURRENT-ASSETS> 122,967
<PP&E> 744,390
<DEPRECIATION> 243,414
<TOTAL-ASSETS> 800,547
<CURRENT-LIABILITIES> 74,645
<BONDS> 531,119
0
0
<COMMON> 16,351
<OTHER-SE> 155,029
<TOTAL-LIABILITY-AND-EQUITY> 800,547
<SALES> 543,989
<TOTAL-REVENUES> 556,816
<CGS> 0
<TOTAL-COSTS> 299,747
<OTHER-EXPENSES> 227,464
<LOSS-PROVISION> 2,447
<INTEREST-EXPENSE> 43,935
<INCOME-PRETAX> 20,823
<INCOME-TAX> 2,370
<INCOME-CONTINUING> 18,453
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,453
<EPS-PRIMARY> 0
<EPS-DILUTED> 1.14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following is a Restated Financial Data Schedule for Showboat, Inc. for the
year ended December 31, 1996 in connection with the accounting principle change
regarding the calculation of earnings per share.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 26,748
<SECURITIES> 62,387
<RECEIVABLES> 14,819
<ALLOWANCES> 2,417
<INVENTORY> 2,785
<CURRENT-ASSETS> 118,990
<PP&E> 651,486
<DEPRECIATION> 211,298
<TOTAL-ASSETS> 814,669
<CURRENT-LIABILITIES> 60,051
<BONDS> 530,743
0
0
<COMMON> 16,181
<OTHER-SE> 171,191
<TOTAL-LIABILITY-AND-EQUITY> 814,669
<SALES> 427,829
<TOTAL-REVENUES> 433,705
<CGS> 0
<TOTAL-COSTS> 235,859
<OTHER-EXPENSES> 159,811
<LOSS-PROVISION> 2,417
<INTEREST-EXPENSE> 30,938
<INCOME-PRETAX> 9,481
<INCOME-TAX> 3,478
<INCOME-CONTINUING> 6,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,003
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following is a Restated Financial Data Schedule for Showboat, Inc. for the
year ended December 31, 1995 in connection with the accounting principle change
regarding the calculation of earnings per share.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 29,605
<SECURITIES> 77,322
<RECEIVABLES> 11,129
<ALLOWANCES> 2,681
<INVENTORY> 2,808
<CURRENT-ASSETS> 134,731
<PP&E> 541,786
<DEPRECIATION> 186,872
<TOTAL-ASSETS> 649,395
<CURRENT-LIABILITIES> 53,716
<BONDS> 392,369
0
0
<COMMON> 15,795
<OTHER-SE> 158,145
<TOTAL-LIABILITY-AND-EQUITY> 649,395
<SALES> 423,213
<TOTAL-REVENUES> 428,592
<CGS> 0
<TOTAL-COSTS> 210,339
<OTHER-EXPENSES> 171,556
<LOSS-PROVISION> 1,605
<INTEREST-EXPENSE> 29,692
<INCOME-PRETAX> 24,610
<INCOME-TAX> 11,435
<INCOME-CONTINUING> 13,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,175
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.84
</TABLE>
