<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 1-12168
BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0242733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2950 SOUTH INDUSTRIAL ROAD
LAS VEGAS, NEVADA
89109
(Address of principal executive offices)
(Zip Code)
(702) 792-7200
(Registrant's telephone number, including area code)
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 filing requirements
for the past 90 days.
Yes X No
------- --------
Shares outstanding of each of the Registrant's classes of common stock as of
July 31, 1998:
Class Outstanding
----- -----------
Common stock, $.01 par value 61,825,666
<PAGE> 2
BOYD GAMING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1998
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Operations for the
three and six month periods ended June 30, 1998 and 1997 4
Condensed Consolidated Statement of Changes in
Stockholders' Equity for the six month period ended
June 30, 1998 5
Condensed Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signature Page 24
</TABLE>
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) JUNE 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 76,657 $ 78,277
Accounts receivable, net 17,858 19,372
Inventories 9,724 9,906
Prepaid expenses 16,050 14,357
Income taxes receivable 1,119 2,787
---------- ----------
Total current assets 121,408 124,699
Property and equipment, net 757,806 771,235
Other assets and deferred charges 43,666 41,912
Deferred income taxes 2,761 6,558
Goodwill and other intangible assets, net 205,309 208,011
---------- ----------
Total assets $1,130,950 $1,152,415
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,532 $ 1,828
Accounts payable 33,013 28,535
Accrued liabilities
Payroll and related 28,415 26,100
Interest and other 57,860 55,879
---------- ----------
Total current liabilities 120,820 112,342
Long-term debt, net of current maturities 796,234 842,932
Other liabilities 2,500 --
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares authorized -- --
Common stock, $.01 par value; 200,000,000 shares authorized;
61,825,666 and 61,669,628 shares outstanding 618 617
Additional paid-in capital 139,950 139,054
Retained earnings 70,828 57,470
---------- ----------
Total stockholders' equity 211,396 197,141
---------- ----------
Total liabilities and stockholders' equity $1,130,950 $1,152,415
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-3-
<PAGE> 4
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
(UNAUDITED) JUNE 30, JUNE 30,
----------------------- -------------------------
(IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Casino $181,673 $151,609 $367,537 $ 305,574
Food and beverage 40,246 37,882 82,508 77,874
Room 18,364 19,400 36,878 38,760
Other 17,474 16,371 35,741 31,428
Management fees and joint venture 9,563 11,088 20,359 22,341
-------- -------- -------- ---------
Gross revenues 267,320 236,350 543,023 475,977
Less promotional allowances 21,835 20,403 47,496 40,876
-------- -------- -------- ---------
Net revenues 245,485 215,947 495,527 435,101
-------- -------- -------- ---------
Costs and expenses
Casino 91,567 74,088 186,975 152,153
Food and beverage 27,272 27,928 53,409 55,844
Room 6,708 6,693 12,482 13,166
Other 16,377 14,787 32,276 29,121
Selling, general and administrative 37,212 28,342 75,795 61,678
Maintenance and utilities 10,618 8,560 20,113 17,710
Depreciation and amortization 18,387 18,488 36,998 36,408
Corporate expense 5,686 8,587 10,586 13,589
Impairment and restructuring charges 5,925 5,641 5,925 131,339
-------- -------- -------- ---------
Total 219,752 193,114 434,559 511,008
-------- -------- -------- ---------
Operating income (loss) 25,733 22,833 60,968 (75,907)
-------- -------- -------- ---------
Other income (expense)
Interest income 93 157 206 308
Interest expense, net of
amounts capitalized (18,747) (17,251) (38,019) (34,603)
-------- -------- -------- ---------
Total (18,654) (17,094) (37,813) (34,295)
-------- -------- -------- ---------
Income (loss) before provision (benefit)
for income taxes 7,079 5,739 23,155 (110,202)
Provision (benefit) for income taxes 3,045 2,302 9,797 (35,927)
-------- -------- -------- ---------
Net income (loss) $ 4,034 $ 3,437 $ 13,358 $ (74,275)
======== ======== ======== =========
BASIC AND DILUTED NET INCOME (LOSS)
PER COMMON SHARE $ 0.07 $ 0.06 $ 0.22 $ (1.21)
======== ======== ======== =========
Average basic shares outstanding 61,671 61,365 61,670 61,364
Average diluted shares outstanding 61,817 61,369 61,870 61,364
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-4-
<PAGE> 5
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL TOTAL
------------ PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1998 61,669,628 $617 $139,054 $57,470 $197,141
Net income -- -- -- 13,358 13,358
Stock issued in connection with
employee stock purchase plan 156,038 1 896 -- 897
---------- ---- -------- ------- --------
Balances, June 30, 1998 61,825,666 $618 $139,950 $70,828 $211,396
========== ==== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-5-
<PAGE> 6
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) JUNE 30,
-------------------------
(IN THOUSANDS) 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 13,358 $(74,275)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 36,998 36,408
Deferred income taxes 3,797 (42,250)
Impairment and restructuring charges 5,925 131,339
Changes in assets and liabilities:
Accounts receivable, net 1,514 8,930
Inventories 182 349
Prepaid expenses (1,693) 4,247
Income taxes receivable 1,668 7,144
Other assets (2,231) (1,005)
Other current liabilities 7,534 (32,396)
Income taxes payable -- 1,103
-------- --------
Net cash provided by operating activities 67,052 39,594
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES-
Acquisition of property, equipment and other assets (22,440) (19,747)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 762 669
Net borrowings under bank credit facility (45,000) (34,850)
Payments on long-term debt (1,994) (872)
-------- --------
Net cash used in financing activities (46,232) (35,053)
-------- --------
Net decrease in cash and cash equivalents (1,620) (15,206)
Cash and cash equivalents, beginning of period 78,277 70,426
-------- --------
Cash and cash equivalents, end of period $ 76,657 $ 55,220
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized $ 37,235 $ 28,606
======== ========
Cash paid for income taxes $ 4,946 $ 3,066
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-6-
<PAGE> 7
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of Boyd Gaming Corporation and its wholly-owned subsidiaries,
collectively referred to herein as the "Company". At June 30, 1998, the Company
owned and operated eleven casino entertainment facilities located in Las Vegas,
Nevada, Tunica, Mississippi, Kansas City, Missouri, East Peoria, Illinois, and
Kenner, Louisiana as well as a travel agency located in Honolulu, Hawaii. In
addition, the Company manages a casino entertainment facility in Philadelphia,
Mississippi, for which it has a seven year management contract that expires in
2001. All material intercompany accounts and transactions have been eliminated.
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the results of its operations
and cash flows for the three and six month periods ended June 30, 1998 and 1997.
It is suggested that this report be read in conjunction with the Company's
audited consolidated financial statements included in the Annual Report on Form
10-K for the transition period ended December 31, 1997. The operating results
for the three and six month periods ended June 30, 1998 and 1997 and cash flows
for the six month periods ended June 30, 1998 and 1997 are not necessarily
indicative of the results that will be achieved for the full year or for future
periods.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Significant estimates used by the Company include the
estimated useful lives for depreciable and amortizable assets, the estimated
allowance for doubtful accounts receivable, the estimated valuation allowance
for deferred tax assets, and estimated cash flows used in assessing the
recoverability of long-lived assets. Actual results could differ from those
estimates.
Reclassifications
Certain amounts in the 1997 condensed consolidated financial statements have
been reclassified to conform to the 1998 presentation. These reclassifications
had no net effect on the Company's net income.
-7-
<PAGE> 8
NOTE 2. - IMPAIRMENT AND RESTRUCTURING CHARGES
During the quarter ended March 31, 1997, the Company wrote-down the carrying
value of its fixed and intangible assets in the Missouri gaming market to fair
value, which resulted in a $126 million impairment loss. The impairment loss was
recorded due to a significant change in the competitive environment with the
January 1997 addition of a significantly larger competitor in the Kansas City
gaming market and a history of operating losses at the Company's Sam's Town
Kansas City gaming establishment. The fair value of the impaired assets was
primarily determined through a discounted cash flow analysis of the operations
of Sam's Town Kansas City.
On June 30, 1998, the Company recorded a $5.9 million restructuring charge in
connection with its announcement to cease operations at Sam's Town Kansas City.
Termination benefits of $2.6 million for substantially all of the Company's 646
employees are included as part of the restructuring charge. Other costs to exit
the Kansas City gaming market of $3.3 million are included in the restructuring
charge and principally represent the recognition of liabilities for various
long-term commitments which the Company intends to honor. The $3.4 million
current portion and the $2.5 million non-current portion of the restructuring
charge liabilities are included in "Interest and other" and "Other liabilities",
respectively, on the accompanying condensed consolidated balance sheet at June
30, 1998. During July 1998, the Company closed Sam's Town Kansas City and sold
substantially all of its tangible assets for $12.5 million, which approximated
net book value.
The Company also recorded a $5.3 million impairment loss related to its 17.4%
ownership interest in the Fremont Street Experience, Limited Liability Company
("FSE") during the quarter ended June 30, 1997. This impairment loss is
principally due to the significant levels of operating loss and operating cash
deficiency reported in May 1997 by FSE relating to its first full year of
operation. Management expects this trend to continue and, therefore, does not
expect to recover its investment in this entity.
NOTE 3. - ACQUISITION
On October 27, 1997, the Company acquired the remaining 85% equity interest in
Treasure Chest Casino, L.L.C. ("Treasure Chest") that was not owned by the
Company for approximately $103 million, plus the assumption of debt. Intangible
license rights, representing the excess of the purchase price over the fair
value of the net assets acquired, amounted to approximately $85 million.
Treasure Chest owns the Treasure Chest Casino, a riverboat casino operation on
Lake Pontchartrain in Kenner, Louisiana. The Company has managed the Treasure
Chest since its opening in September 1994. The Company funded the acquisition
and the repayment of Treasure Chest's debt with borrowings under its bank credit
facility. The Company's pro forma condensed consolidated results of operations,
as if the acquisition had occurred on January 1, 1997, are as follows:
-8-
<PAGE> 9
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997
----------------
<S> <C>
Pro forma (in thousands, except per share data):
Net revenues $ 489,313
Net loss (71,829)
=========
Basic and diluted net loss per common share:
Net loss $ (1.17)
=========
</TABLE>
NOTE 4. - NET INCOME (LOSS) PER COMMON SHARE
During the quarter ended December 31, 1997, the Company adopted SFAS No. 128,
"Earnings per Share". SFAS No. 128 requires the presentation of basic and
diluted net income (loss) per share. Basic per share amounts are computed by
dividing net income (loss) by the average shares outstanding during the period.
Diluted per share amounts are computed by dividing net income (loss) by average
shares outstanding plus the dilutive effect of common share equivalents. Since
the Company incurred a net loss during the six month period ended June 30, 1997,
both basic and diluted per share calculations are based upon average shares
outstanding of 61,364,000 during the period. The effect of options outstanding
to purchase 2,751,867 shares was not included in the diluted calculation during
the period. Diluted net income per share during the three and six month periods
ended June 30, 1998 and during the three month period ended June 30, 1997 is
determined considering the dilutive effect of outstanding stock options. The
effect of stock options outstanding to purchase 2,691,679 and 2,681,179,
respectively was not included in the diluted calculation during the three and
six month periods ended June 30, 1998 and 2,751,867 was not included in the
diluted calculation during the three month period ended June 30, 1997 since the
exercise price of such options was greater than the average price of the
Company's common shares.
NOTE 5. - GUARANTOR INFORMATION
The Company's $200 million of 9.25% Senior Notes (the "9.25% Notes") are
guaranteed by a majority of the Company's wholly-owned existing significant
subsidiaries. These guaranties are full, unconditional, and joint and several.
In connection with the October 1997 acquisition of Treasure Chest discussed in
Note 3, the Company created significant subsidiaries that do not guarantee the
9.25% Notes. Prior to October 1997, the assets, equity, income and cash flows of
the non-guarantor subsidiaries represented less than 3% of the respective
consolidated amounts and were inconsequential, individually and in the
aggregate, to the Company. As such, the following consolidating schedules
present separate condensed financial statement information on a combined basis
for the parent only, as well as the Company's guarantor subsidiaries and
non-guarantor subsidiaries, as of June 30, 1998 and for the three and six month
periods then ended. Comparative financial information is not presented since
management believes such information is not material to investors.
-9-
<PAGE> 10
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Combined
Combined Non- Elimination
(In Thousands) Parent Guarantors Guarantors Entries Consolidated
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Property and equipment, net $ 9,579 $ 89,410 $ 26,004 $ (3,585){1} $ 121,408
Other assets and deferred charges 28,014 688,181 41,611 757,806
Goodwill and other intangible assets, net 945,827 (506,682) 142,517 (535,235){1}{2} 46,427
Total assets -- 120,994 84,315 -- 205,309
-------- --------- -------- --------- ----------
$983,420 $ 391,903 $294,447 $(538,820) $1,130,950
======== ========= ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 33,183 $ 73,800 $ 18,129 $ (4,292){1} $ 120,820
Long-term debt and other, net of
current maturities 735,148 63,519 67 -- 798,734
Stockholders' equity 215,089 254,584 276,251 (534,528){2} 211,396
-------- --------- -------- --------- ----------
Total liabilities and stockholders'
equity $983,420 $ 391,903 $294,447 $(538,820) $1,130,950
======== ========= ======== ========= ==========
</TABLE>
Elimination Entries
- -------------------
{1} - To eliminate intercompany payables and receivables.
{2} - To eliminate investment in subsidiaries and subsidiaries' equity.
-10-
<PAGE> 11
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION FOR THE THREE MONTH
PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Combined
Combined Non- Elimination
(In thousands) Parent Guarantors Guarantors Entries Consolidated
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Casino $ -- $151,410 $30,263 $ -- $181,673
Food and beverage -- 37,790 2,456 -- 40,246
Room -- 18,364 -- -- 18,364
Other -- 9,425 8,333 (284){1} 17,474
Management fees and joint venture 29,203 11,381 5,279 (36,300){1} 9,563
-------- -------- ------- -------- --------
Gross revenues 29,203 228,370 46,331 (36,584) 267,320
Less promotional allowances -- 20,067 1,768 -- 21,835
-------- -------- ------- -------- --------
Net revenues 29,203 208,303 44,563 (36,584) 245,485
-------- -------- ------- -------- --------
Costs and expenses
Casino -- 80,340 11,227 -- 91,567
Food and beverage -- 24,739 2,533 -- 27,272
Room -- 6,708 -- -- 6,708
Other -- 18,396 10,272 (12,291){1} 16,377
Selling, general and administrative -- 31,366 5,846 -- 37,212
Maintenance and utilities -- 9,684 934 -- 10,618
Depreciation and amortization 119 16,004 2,264 -- 18,387
Corporate expense 5,503 -- 183 -- 5,686
Restructuring charge -- 5,925 -- -- 5,925
-------- -------- ------- -------- --------
Total 5,622 193,162 33,259 (12,291) 219,752
-------- -------- ------- -------- --------
Operating income 23,581 15,141 11,304 (24,293) 25,733
Other income (expense), net (17,431) (1,572) 349 -- (18,654)
-------- -------- ------- -------- --------
Income before provision (benefit) for
income taxes 6,150 13,569 11,653 (24,293) 7,079
Provision (benefit) for income taxes (453) 3,498 -- -- 3,045
-------- -------- ------- -------- --------
Net income $ 6,603 $ 10,071 $11,653 $(24,293) $ 4,034
======== ======== ======= ======== ========
</TABLE>
Elimination Entries
- -------------------
{1} - To eliminate intercompany revenue and expense.
-11-
<PAGE> 12
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION FOR THE SIX MONTH
PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Combined
Combined Non- Elimination
(In thousands) Parent Guarantors Guarantors Entries Consolidated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Casino $ -- $306,512 $61,025 $ -- $367,537
Food and beverage -- 77,726 4,782 -- 82,508
Room -- 36,878 -- -- 36,878
Other -- 19,670 16,850 (779){1} 35,741
Management fees and joint venture 58,872 24,090 10,656 (73,259){1} 20,359
-------- -------- ------- -------- --------
Gross revenues 58,872 464,876 93,313 (74,038) 543,023
Less promotional allowances -- 44,083 3,413 -- 47,496
-------- -------- ------- -------- --------
Net revenues 58,872 420,793 89,900 (74,038) 495,527
-------- -------- ------- -------- --------
Costs and expenses
Casino -- 164,480 22,495 -- 186,975
Food and beverage -- 48,387 5,022 -- 53,409
Room -- 12,482 -- -- 12,482
Other -- 38,659 19,732 (26,115){1} 32,276
Selling, general and administrative -- 63,537 12,258 -- 75,795
Maintenance and utilities -- 17,818 2,295 -- 20,113
Depreciation and amortization 197 32,329 4,472 -- 36,998
Corporate expense 9,519 373 694 -- 10,586
Restructuring charge -- 5,925 -- -- 5,925
-------- -------- ------- -------- --------
Total 9,716 383,990 66,968 (26,115) 434,559
-------- -------- ------- -------- --------
Operating income 49,156 36,803 22,932 (47,923) 60,968
Other income (expense), net (34,937) (3,225) 349 -- (37,813)
-------- -------- ------- -------- --------
Income before provision for
income taxes 14,219 33,578 23,281 (47,923) 23,155
Provision for income taxes 560 9,237 -- -- 9,797
-------- -------- ------- -------- --------
Net income $ 13,659 $ 24,341 $23,281 $(47,923) $ 13,358
======== ======== ======= ======== ========
</TABLE>
Elimination Entries
- -------------------
{1} - To eliminate intercompany revenue and expense.
-12-
<PAGE> 13
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION FOR THE SIX MONTH
PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Combined
Combined Non-
(In thousands) Parent Guarantors Guarantors Consolidated
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities $ 37,128 $ 324 $ 29,600 $ 67,052
-------- -------- -------- --------
Cash flows from investing activities (1,384) (19,896) (1,160) (22,440)
-------- -------- -------- --------
Cash flows from financing activities
Net borrowings under bank credit facility (45,000) -- -- (45,000)
Receipt (payment) of dividends 11,437 9,850 (21,287) --
Other (741) (396) (95) (1,232)
-------- -------- -------- --------
Net cash provided by (used in) in financing activities (34,304) 9,454 (21,382) (46,232)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,440 (10,118) 7,058 (1,620)
Cash and cash equivalents, beginning of period 2,832 58,317 17,128 78,277
-------- -------- -------- --------
Cash and cash equivalents, end of period $ 4,272 $ 48,199 $ 24,186 $ 76,657
======== ======== ======== ========
</TABLE>
-13-
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
data for the Company's properties. As used herein, "Boulder Strip Properties"
consist of Sam's Town Las Vegas, the Eldorado and Jokers Wild; "Downtown
Properties" consist of the California, the Fremont, Main Street Station and
Vacations Hawaii, the Company's wholly-owned travel agency which operates for
the benefit of the Downtown casino properties; and "Central Region Properties"
consist of Sam's Town Tunica, Sam's Town Kansas City, Par-A-Dice, management fee
income from Silver Star Resort and Casino, and management fee and joint venture
income from Treasure Chest Casino through October 27, 1997, at which time the
Company acquired the remaining 85% equity interest in Treasure Chest that it did
not already own to make it a wholly-owned subsidiary. Net revenues displayed in
this table and discussed in this section are net of promotional allowances; as
such, references to room revenue and food and beverage revenue do not agree to
the amounts on the Condensed Consolidated Statements of Operations. Operating
income from properties for the purposes of this table exclude corporate expense,
including related depreciation and amortization, and impairment and
restructuring charges.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1998 1997 1998 1997
-------- -------- -------- --------
(IN THOUSANDS)
- --------------
<S> <C> <C> <C> <C>
Net revenues
Stardust $ 41,102 $ 43,138 $ 82,435 $ 89,097
Boulder Strip Properties 46,247 47,355 94,304 96,247
Downtown Properties (a) 52,691 46,680 103,520 90,651
Central Region 105,445 78,774 215,268 159,106
-------- -------- -------- --------
Total properties $245,485 $215,947 $495,527 $435,101
======== ======== ======== ========
Operating income
Stardust $ 4,175 $ 5,249 $ 7,426 $ 10,744
Boulder Strip Properties 6,200 7,222 13,307 15,348
Downtown Properties 3,429 3,255 5,501 3,141
Central Region 23,886(b) 22,020 51,973(b) 41,153(b)
-------- -------- -------- --------
Total properties $ 37,690 $ 37,746 $ 78,207 $ 70,386
======== ======== ======== ========
</TABLE>
- ------------------
(a) Includes revenues related to Vacations Hawaii, a Honolulu travel agency,
of $7,787 and $6,119, respectively, for the quarters ended June 30, 1998
and 1997, and revenues of $15,544 and $10,820, respectively, for the six
month period ended June 30, 1998 and 1997.
(b) Before impairment and restructuring charges.
-14-
<PAGE> 15
REVENUES
- --------
Consolidated net revenues increased 13.7% during the quarter ended June 30, 1998
compared to the quarter ended June 30, 1997. Company-wide casino revenue
increased 19.8%, food and beverage revenue increased 5.2% and room revenue
decreased 8.0%. Net revenues from the Stardust, Boulder Strip Properties and
Downtown Properties (the "Nevada Region") increased 2.1% during the quarter
ended June 30, 1998 compared to the quarter ended June 30, 1997 primarily as a
result of increased operating volume at each of the three Downtown casino
properties, as well as enhanced utilization of the Company's wholly-owned travel
agency, Vacations Hawaii. These increases were partially offset by declines in
net revenues experienced at the Stardust (4.7%) and Boulder Strip Properties
(2.3%) due to the competitive environment of those two markets. Net revenues in
the Central Region increased 34% during the quarter ended June 30, 1998 compared
to the quarter ended June 30, 1997 primarily as a result of the acquisition of
Treasure Chest in October 1997, as well as a 7.4% increase in net revenues from
Par-A-Dice. These increases were partially offset by declines in net revenues
experienced principally at Sam's Town Kansas City (21%) and Sam's Town Tunica
(8.0%) due to the competitive environment in each of these gaming markets. On
July 15, 1998, the Company ceased operations at Sam's Town Kansas City. See
further discussion under Impairment and Restructuring Charges later in this
section.
Consolidated net revenues increased 13.9% during the six month period ended June
30, 1998 compared to the same period in the prior year. Company-wide casino
revenue increased 20%, food and beverage revenue declined slightly (0.6%) and
room revenue declined 10.1%. Net revenues from the Nevada Region increased 1.5%
during the six month period ended June 30, 1998 compared to the six month period
ended June 30, 1997 due to a 14.2% increase in revenues from the Downtown
Properties, partially offset by declines of 7.5% and 2.0%, respectively, at the
Stardust and Boulder Strip Properties. These declines are attributable to the
competitive environment on the Las Vegas Strip, as well as increased competition
along the Boulder Strip. Net revenues in the Central Region increased 35% during
the six month period ended June 30, 1998 compared to the same period in the
prior year. This increase in net revenues is primarily attributable to the
acquisition of Treasure Chest in October 1997. This increase was partially
offset by an 18.0% decline in net revenues at Sam's Town Kansas City due to the
competitive environment in that gaming market. On July 15, 1998, the Company
ceased operations at Sam's Town Kansas City. See further discussion under
Impairment and Restructuring Charges later in this section.
OPERATING INCOME (LOSS)
- -----------------------
Consolidated operating income before impairment and restructuring charges
increased by 11.2% to $31.7 million during the quarter ended June 30, 1998 from
$28.5 million during the quarter ended June 30, 1997. Operating income in the
Nevada Region declined 12.2% due to declines experienced at the Stardust and
Boulder Strip Properties, partially offset by a slight gain experienced at the
Downtown Properties. In the Central Region, operating income increased 8.5% due
primarily to the acquisition of Treasure Chest in October 1997, partially offset
by declines experienced principally at Sam's Town Tunica and Sam's Town Kansas
City.
For the six month period ended June 30, 1998, consolidated operating income
before impairment and restructuring charges increased by 21% to $66.9 million
compared to $55.4 million in the same period from the prior year. Operating
income in the Nevada Region declined 10.3% as the competitive Las Vegas
environment caused reductions in operating income at the Stardust and Boulder
Strip Properties, which was partially offset by gains experienced at the
Downtown Properties. In the Central Region, operating income increased 26% due
-15-
<PAGE> 16
primarily to the October 1997 acquisition of Treasure Chest, partially offset by
the decline experienced at Sam's Town Tunica.
STARDUST
- --------
Net revenues at the Stardust declined by 4.7% during the quarter ended June 30,
1998 compared to the quarter ended June 30, 1997. The majority of the decline is
attributable to a 12.8% reduction in non-gaming revenues due to a corresponding
decline in the number of occupied rooms. The decline in the number of occupied
rooms is primarily attributable to a $9 million suite remodel project which
reduced the number of available rooms by 8.0% during the quarter. The project
began toward the end of the first quarter and is expected to be substantially
complete by the end of the third quarter. Casino revenue remained relatively
unchanged as a 6.1% decline in wagering volume was offset by an increase in both
slot and table game win percentages. Operating income declined by 21% or $1.1
million during the quarter ended June 30, 1998 compared to the quarter ended
June 30, 1997, and operating income margin declined to 10.2% during the quarter
ended June 30, 1998 from 12.2% during the quarter ended June 30, 1997. These
declines in operating income and operating income margin are primarily the
result of the reduction in net revenues coupled with an increase in marketing
expenses due to the competitive environment on the Las Vegas Strip.
For the six month period ended June 30, 1998, net revenues at the Stardust
declined by 7.5% versus the comparable period in the prior year. Casino revenue
declined by 3.9% due primarily to a decline in slot and table game wagering.
Non-gaming revenues declined 13.4% due to a 9.6% decline in the number of
occupied rooms. As discussed above, a portion of the decline in the number of
occupied rooms is attributable to a $9 million suite remodel project which
reduced the number of available rooms by 4.8% during the six month period.
Operating income declined by 31% or $3.3 million during the six month period
ended June 30, 1998 compared to the same period in the prior year. Operating
income margin declined to 9.0% during the six month period ended June 30, 1998
from 12.1% during the six month period ended June 30, 1997. These declines in
operating income and operating income margin are attributable to the reduction
in net revenues, coupled with an increase in marketing expenses due to the
competitive environment on the Las Vegas Strip.
BOULDER STRIP PROPERTIES
- ------------------------
Net revenues at the Boulder Strip Properties decreased 2.3% during the quarter
ended June 30, 1998 compared to the quarter ended June 30, 1997 due to increased
competition with the recent openings of two new properties along the Boulder
Strip. Casino revenue remained flat due primarily to an increase in slot win
percentage being offset by a decline in slot wagering volume. Food and beverage
revenue and room revenue decreased 11.1% and 8.5%, respectively, from the prior
period's levels. Operating income at the Boulder Strip Properties declined by
14.2% or $1.0 million during the quarter ended June 30, 1998 compared to the
quarter ended June 30, 1997, and operating income margin declined to 13.4%
during the quarter ended June 30, 1998 from 15.3% during the quarter ended June
30, 1997. These declines are primarily attributable to the reduction in net
revenues.
Net revenues at the Boulder Strip Properties declined by 2.0% during the six
month period ended June 30, 1998 compared to the same period from the prior
year. The decline is attributable to increased competition with the recent
openings of two new properties along the Boulder Strip. Casino revenue remained
virtually unchanged due primarily to an increase in slot win percentage being
offset by a decline in wagering volume. Food and beverage revenue and room
revenue declined by 10.0% and 3.7%, respectively, from the prior period. During
the six month period ended June 30, 1998, operating income at the Boulder Strip
Properties declined 13.3% or $2.0 million versus the comparable period in 1997.
Operating income margin declined to 14.1% for the six
-16-
<PAGE> 17
month period ended June 30, 1998 compared to 15.9% for the same period in 1997.
These reductions are primarily attributable to the decline in net revenues.
DOWNTOWN PROPERTIES
- -------------------
Net revenues at the Downtown Properties increased 12.9% during the quarter ended
June 30, 1998 compared to the quarter ended June 30, 1997 due primarily to
casino revenue, which increased 11.4% as a result of increased slot wagering
volume at Main Street Station and the Fremont. Non-gaming revenues at the
Downtown Properties increased 15.3% during the quarter ended June 30, 1998
versus the comparable quarter in 1997 due to the enlargement of the Company's
Honolulu travel agency, Vacations Hawaii, as well as increases in food and
beverage revenue and room revenue. Operating income at the Downtown Properties
increased 5.3% to $3.4 million during the quarter ended June 30, 1998 compared
to the quarter ended June 30, 1997 as improvements in operating results at the
California and Vacations Hawaii were partially offset by a decline in operating
income at the Fremont and a slight increase in the operating loss at Main Street
Station. Operating income margin declined slightly to 6.5% during the quarter
ended June 30, 1998 versus 7.0% during the comparable quarter in the prior year.
The increase in net revenue and the decline in operating income margin are
primarily attributable to the implementation of various marketing programs and
related expenses.
Net revenues at the Downtown Properties increased 14.2% during the six month
period ended June 30, 1998 compared to the same period in the prior year. Casino
revenue increased 12.3% due primarily to increased slot wagering volumes at each
of the Downtown casino properties. Non-gaming revenues at the Downtown
Properties increased 17.4% during the six month period ended June 30, 1998
versus the comparable prior year period due primarily to the enlargement of the
Company's Honolulu travel agency, Vacations Hawaii, as well as increases in food
and beverage revenue and room revenue. Operating income at the Downtown
Properties increased $2.4 million or 75% during the six month period ended June
30, 1998 compared to the same period in the prior year. Operating income margin
increased to 5.3% during the six month period ended June 30, 1998 versus 3.5% in
the comparable prior year period. These increases are primarily attributable to
the implementation of various marketing programs to enhance operating volumes at
the Downtown Properties.
CENTRAL REGION
- --------------
Net revenues from the Central Region increased 34% during the quarter ended June
30, 1998 compared to the quarter ended June 30, 1997. The majority of the
increase is attributable to the acquisition of the remaining interest in
Treasure Chest on October 27, 1997, as well as a 7.4% increase in net revenues
from Par-A-Dice. Treasure Chest produced net revenues for the Company of $31.2
million during the quarter ended June 30, 1998 compared to $1.3 million during
the quarter ended June 30, 1997. Prior to the acquisition of Treasure Chest, the
Company accounted for its 15% minority interest under the equity method.
However, since the acquisition of the remaining 85% equity interest in Treasure
Chest, the revenues and expenses generated by that property are now included in
the Company's condensed consolidated statement of operations. These increases in
net revenues during the June 30, 1998 quarter were partially offset by a 21%
decline in net revenues at Sam's Town Kansas City due to a reduction in market
share caused by the competitive environment in Kansas City. Pending the
consummation of the sale of the property, management ceased operations at Sam's
Town Kansas City on July 15, 1998. See further discussion under Impairment and
Restructuring Charges later in this section. In addition, net revenues at Sam's
Town Tunica declined by 8.0% due to increased competition which came on line in
the Tunica gaming market toward the end of the quarter ended March 31, 1998.
Operating income for the Central Region increased to $23.9 million during the
quarter ended June 30, 1998 from $22.0 million during the comparable quarter in
1997
-17-
<PAGE> 18
due primarily to the acquisition of Treasure Chest, partially offset by declines
in operating results experienced primarily at Sam's Town Tunica and Sam's Town
Kansas City.
Net revenues from the Central Region increased 35% during the six month period
ended June 30, 1998 compared to the same period in the prior year. The majority
of the increase is attributable to the acquisition of the remaining interest in
Treasure Chest on October 27, 1997, as well as 5.6% increase in management fees
from Silver Star and a 2.4% increase in net revenues from Par-A-Dice. Treasure
Chest produced net revenues for the Company of $62.9 million during the six
month period ended June 30, 1998 versus $3.1 million during the comparable prior
year period. Prior to the acquisition of Treasure Chest, the Company accounted
for its 15% minority interest under the equity method. However, since the
acquisition of the remaining 85% equity interest in Treasure Chest, the revenues
and expenses generated by that property are now included in the Company's
condensed consolidated statement of operations. The increases in net revenues
were partially offset by an 18.0% decline in net revenues at Sam's Town Kansas
City due to a reduction in market share caused by the competitive environment in
Kansas City. Pending the consummation of the sale of the property, management
ceased operations at Sam's Town Kansas City on July 15, 1998. See further
discussion under Impairment and Restructuring Charges later in this section. In
addition, Sam's Town Tunica experienced a 3.0% decline in net revenues due to
increased competition which came online in the Tunica gaming market toward the
end of the quarter ended March 31, 1998. Operating income for the Central Region
increased to $52.0 million during the six month period ended June 30, 1998 from
$41.2 million during the comparable prior year period primarily to the
acquisition of Treasure Chest, partially offset by a decline in operating
results at Sam's Town Tunica.
IMPAIRMENT AND RESTRUCTURING CHARGES
- ------------------------------------
During the quarter ended March 31, 1997, the Company, in accordance with SFAS
No. 121, recorded an impairment loss of $126 million to adjust the carrying
value of its fixed and intangible assets in the Missouri gaming market to fair
value. The impairment loss was recorded due to a significant change in the
competitive environment with the January 1997 addition of a significantly larger
facility in the Kansas City gaming market and a history of operating losses at
the Company's Sam's Town Kansas City gaming establishment. On June 30, 1998, the
Company recorded a $5.9 million restructuring charge in connection with its
announcement to cease operations at Sam's Town Kansas City. During July 1998,
the Company closed Sam's Town Kansas City and sold substantially all of its
tangible assets for $12.5 million, which approximated net book value.
During the quarter ended June 30, 1997, the Company recorded a $5.3 million
impairment loss related to its 17.4% ownership interest in Fremont Street
Experience, Limited Liability Company ("FSE"), which is the entity that operates
the downtown Las Vegas tourist attraction known as the Fremont Street
Experience. This impairment loss is principally due to the significant levels of
operating loss and operating cash deficiency reported in May 1997 by FSE
relating to its first full year of operations. Management expects this trend to
continue and, therefore, does not expect to recover its investment in this
entity.
OTHER EXPENSES
- --------------
Depreciation and amortization expense declined slightly ($.1 million) during the
quarter ended June 30, 1998 versus the comparable quarter in 1997, and increased
by $.6 million during the six month period ended June 30, 1998 compared to the
corresponding 1997 period. The slight increase in depreciation and amortization
expense during the six month period ended June 30, 1998 is due to the increase
in intangible and fixed assets related to the acquisition of Treasure Chest in
October 1997, offset by the reduction in fixed and intangible assets related to
the impairment loss recorded during the quarter ended March 31, 1997.
-18-
<PAGE> 19
The marginal decline in depreciation and amortization expense during the quarter
ended June 30, 1998 is primarily attributable to an increase in fully
depreciated assets, as well as the Treasure Chest acquisition and the March 1997
impairment loss discussed above.
OTHER INCOME (EXPENSE)
- ----------------------
Other income and expense is primarily comprised of interest expense. Interest
expense increased by $1.5 million and $3.4 million, respectively, during the
quarter and six month period ended June 30, 1998 compared to the corresponding
periods in 1997. The increase is primarily attributable to higher levels of debt
outstanding due to the October 1997 acquisition of Treasure Chest, partially
offset by a decline in interest rates on certain fixed and floating rate debt.
PROVISION (BENEFIT) FOR INCOME TAXES
- ------------------------------------
The Company's effective tax rates were 43% and 40%, respectively, during the
quarters ended June 30, 1998 and 1997, and 42% and (33%), respectively, during
the six month periods ended June 30, 1998 and 1997. The fluctuation in the rates
during the comparable quarters ended June 30, 1998 and 1997 is primarily
attributable to state taxes, which have increased due to the enhanced earnings
generated from the Company's Central Region properties. The Company's Nevada
properties are not subject to state income tax. The fluctuation in the rates
during the comparable six month periods ended June 30, 1998 and 1997 is
primarily attributable to the impairment loss recorded during the quarter ended
March 31, 1997.
NET INCOME (LOSS)
- -----------------
As a result of these factors, the Company reported net income of $4.0 million
and $13.4 million, respectively, during the quarter and six month period ended
June 30, 1998 compared to net income of $3.4 million during the quarter ended
June 30, 1997 and a net loss of $74 million during the six month period ended
June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW AND WORKING CAPITAL
- -----------------------------
During the six month period ended June 30, 1998, the Company generated operating
cash flows of $67 million compared to $40 million during the comparable prior
year period. The increase in operating cash flows is primarily attributable to
the operations of Treasure Chest, which was acquired in October 1997. As of June
30, 1998 and 1997, the Company had balances of cash and cash equivalents of $77
million and $55 million, respectively, and working capital of $.6 million and a
working capital deficit of $3.5 million, respectively. The Company has
historically operated with minimal or negative levels of working capital in
order to minimize borrowings and related interest costs under its five-year,
$500 million reducing revolving credit facility (the "Bank Credit Facility").
The working capital deficits, if any, are funded through cash generated from
operations as well as borrowings under the Bank Credit Facility.
In connection with the July 1998 sale of certain tangible assets of Sam's Town
Kansas City, the Company will be able to realize the benefit of approximately
$35 million in deferred tax assets. The realization of these deferred tax assets
will benefit operating cash flows by reducing the amount of future federal
income tax payments beginning in the quarter ended September 30, 1998.
-19-
<PAGE> 20
CAPITAL EXPENDITURES
- --------------------
The Company is committed to continually maintaining and enhancing its existing
facilities, most notably by upgrading and remodeling its casinos, hotel rooms,
restaurants and other public space and by providing the latest slot machines for
its customers. The Company's capital expenditures for these purposes were
approximately $22 million and $20 million, respectively, during the six month
periods ended June 30, 1998 and 1997.
DEBT FACILITIES AND EQUITY FINANCING
- ------------------------------------
Much of the funding for the Company's renovation and expansion projects has come
from debt and equity financings, as well as cash flows from existing operations.
Cash flows used for financing activities totaled $46 million during the six
month period ended June 30, 1998, compared to $35 million during the
corresponding period in 1997, as the Company paid down outstanding debt with its
free cash flow generated from operations. At June 30, 1998, outstanding
borrowings and unused availability under the Bank Credit Facility were $345
million and $155 million, respectively. Interest on the Bank Credit Facility is
based upon the agent bank's quoted reference rate or the London Interbank
Offered Rate, at the discretion of the Company. The blended rate under the Bank
Credit Facility at June 30, 1998 was 7.9%.
The Bank Credit Facility contains certain financial and other covenants,
including, without limitation, various covenants (i) requiring the maintenance
of a minimum tangible net worth, (ii) requiring the maintenance of a minimum
fixed charge coverage ratio, (iii) establishing a maximum permitted funded debt
to EBITDA ratio, (iv) imposing limitations on the incurrence of additional
indebtedness and the creation of liens, (v) imposing limitations on the maximum
permitted expansion capital expenditures during the term of the Bank Credit
Facility, (vi) imposing limits on the maximum permitted maintenance capital
expenditures during the term of the Bank Credit Facility, and (vii) imposing
restrictions in investments, the purchase or redemption of subordinated debt
prior to its stated maturity, dividends and other distributions, and the
redemption or purchase of capital stock of the Company.
As of June 30, 1998, the Company had outstanding $200 million principal amount
of 9.25% Senior Notes (the "9.25% Notes") due October 1, 2003 and $250 million
principal amount of 9.50% Senior Subordinated Notes (the "9.50% Notes") due July
2007. The 9.25% and 9.50% Notes contain limitations on, among other things, (a)
the ability of the Company and its Restricted Subsidiaries (as defined in the
Indenture Agreements) to incur additional indebtedness, (b) the payment of
dividends and other distributions with respect to the capital stock of the
Company and its Restricted Subsidiaries and the purchase, redemption or
retirement of capital stock of the Company and its Restricted Subsidiaries, (c)
the making of certain investments, (d) asset sales, (e) the incurrence of liens,
(f) transactions with affiliates, (g) payment restrictions affecting restricted
subsidiaries and (h) certain consolidations, mergers and transfers of assets.
Management believes the Company and its subsidiaries are in compliance with all
covenants contained in its long-term debt agreements at June 30, 1998.
The Company's ability to service its debt will be dependent on its future
performance, which will be affected by, among other things, prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the Company's control.
EXPANSION PROJECTS
- ------------------
The Company, as part of its ongoing strategic planning process, is currently
establishing its priorities for the future. In Nevada, the Company continues to
examine and explore alternatives to improve
-20-
<PAGE> 21
the Stardust and its 61-acre site on the Las Vegas Strip. In addition, the
Company is exploring opportunities for both the expansion of its Sam's Town Las
Vegas property and the expansion of the Sam's Town concept to other sites in
the Las Vegas locals market.
Outside of Nevada, the Company continues to monitor acquisition opportunities in
many of the newer gaming markets as the industry continues to consolidate. In
addition, on July 14, 1998, the Company, through a wholly-owned subsidiary,
entered into an amended joint venture agreement (the "Amended Agreement") with
Mirage Resorts, Incorporated ("Mirage") to jointly develop and own a casino
hotel entertainment facility in Atlantic City, New Jersey (the "Atlantic City
Project"). Among other things, the Amended Agreement provides for the settlement
of litigation between the Company and Mirage relating to the joint venture
agreement that the Company and Mirage entered into in May 1996. The Atlantic
City Project is expected to cost $750 million and contemplates a hotel of at
least 1,200 rooms and a casino and related amenities adjacent and connected to
Mirage's planned wholly-owned resort. The Amended Agreement provides for at
least $150 million in capital contributions by the Company. Funding of the
Company's Atlantic City Project capital contributions are expected to be funded
from cash flow from operations and availability under the Company's Bank Credit
Facility.
Substantial funds would be required for the expansion projects discussed above.
There are no assurances that any of the above mentioned projects will go forward
or ultimately become operational. The source of funds required to meet the
Company's working capital needs (including maintenance capital expenditures) is
expected to be cash flow from operations and availability under the Company's
Bank Credit Facility. The source of funds for the Company's expansion projects
may come from cash flow from operations and availability under the Company's
Bank Credit Facility, additional debt or equity offerings, joint venture
partners or other sources. No assurance can be given that additional financing
will be available or that, if available, such financing will be obtainable on
terms favorable to the Company or its stockholders.
YEAR 2000 PROJECT
- -----------------
The Company is conducting a review of its computer systems to identify those
areas that could be affected by the "Year 2000" issue and is in the process of
replacing many of its existing systems to improve overall business performance
and to accommodate business for the "Year 2000". However, given the inherent
risks for a project of this magnitude and the resources required, the timing and
costs involved could differ materially from that anticipated by the Company. The
Company expects its "Year 2000" date conversion project to be completed on a
timely basis. However, there can be no assurance that the conversion project
will be completed on schedule, and that the systems of other companies on which
the Company may rely also will be timely converted or that such failure to
convert by another company would not have an adverse impact on the Company's
systems. The estimated costs directly or indirectly associated with the
conversion project is currently expected to be approximately $16 million, a
significant majority of which will be in the form of capital expenditures. At
June 30, 1998, the Company had incurred costs of $2.7 million which were
directly or indirectly related to the "Year 2000" project.
-21-
<PAGE> 22
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward looking statements. Certain information included in this Form 10-Q
and other materials filed or to be filed by the Company with the Securities and
Exchange Commission (as well as information included in oral statements or other
written statements made or to be made by the Company) contains statements that
are forward looking, such as statements relating to plans for future expansion
and other business development activities as well as other capital spending,
financing sources, and the effects of regulation (including gaming and tax
regulation) and competition. Such forward looking statements involve important
risks and uncertainties that could significantly affect anticipated results in
the future, and accordingly, actual results may differ materially from those
expressed in any forward looking statements made by or on behalf of the Company.
These risks and uncertainties include, but are not limited to, those related to
construction, expansion and development activities, economic conditions, changes
in tax laws, changes in laws or regulations affecting gaming licenses, changes
in competition, and factors affecting leverage and debt service including
sensitivity to fluctuation in interest rates, risks related to the "Year 2000"
project and other factors described from time to time in the Company's reports
filed with the Securities and Exchange Commission, including the Company's
Transition Report on Form 10-K for the transition year ended December 31, 1997.
Any forward looking statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 and, as such, speak only as of the date made.
-22-
<PAGE> 23
Part II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting was held May 21, 1998. The stockholders
re-elected Messrs. William S. Boyd, Philip J. Dion, Perry B. Whitt and
William G. Yates, Jr. to three year terms, ending on the date of the
Company's Annual Meeting in 2001. The following persons remain
directors of the Company: Messrs. William R. Boyd, Michael O. Maffie,
Warren L. Nelson, Donald D. Snyder, Robert L. Boughner and Billy G.
McCoy and Ms. Marianne Boyd Johnson. The number of shares, voting as
to the election of each nominee and the ratification of the
appointment of Deloitte & Touche LLP to serve as independent auditors
for fiscal 1998 is set forth below:
<TABLE>
<CAPTION>
Votes
---------------------------
Election of Class I Directors For Withheld
----------------------------- ----------- --------
<S> <C> <C>
William S. Boyd 52,570,088 269,783
Philip J. Dion 52,562,437 277,434
Perry B. White 52,563,320 276,551
William G. Yates, Jr. 52,571,966 267,905
</TABLE>
The stockholders ratified the selection of Deloitte & Touche LLP as
independent auditors for the Company for the year ending December 31,
1998 with voting as follows: [52,528,761] for; [281,848] against;
[29,262] non-votes.
ITEM 5. OTHER INFORMATION
(a) During July 1998, the Company ceased operations at Sam's Town
Kansas City and consummated the sale of substantially all of
its tangible assets. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Impairment
and Restructuring Charges."
(b) Any shareholder proposal submitted with respect to Boyd Gaming's
1999 Annual Meeting of Shareholders, which proposal is submitted
outside the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934, will be considered untimely for purposes of
Rule 14a-4 and 14a-5 if notice thereof is received by Boyd
Gaming after February 27, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.55 Amended and Restated Joint Venture Agreement
of Stardust A.C., dated as of July 14, 1998,
by and between MAC, CORP., a New Jersey
corporation which is a wholly-owned
subsidiary of Mirage Resorts, Incorporated,
a Nevada corporation, and Boyd Atlantic
City, Inc., a New Jersey corporation which
is a wholly-owned subsidiary of the Company.
27. Financial Data Schedule
(b) Reports on Form 8-K.
(i) The Company filed a current report on Form 8-K dated
July 14, 1998 related to the Amended and Restated
Joint Venture Agreement of Stardust A.C.
-23-
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOYD GAMING CORPORATION
(Registrant)
Date: August 13, 1998 By /s/ Ellis Landau
-------------------------------------
Ellis Landau,
Executive Vice President,
Chief Financial Officer, and
Treasurer (Principal Financial
Officer)
-24-
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
10.55 Amended and Restated Joint Venture Agreement of Stardust A.C., dated
as of July 14, 1998, by and between MAC, CORP., a New Jersey
corporation which is a wholly-owned subsidiary of Mirage Resorts,
Incorporated, a Nevada corporation, and Boyd Atlantic City, Inc., a
New Jersey corporation which is a wholly-owned subsidiary of the
Company.
27. Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.55
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF
STARDUST A.C.
Dated as of July 14, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PREAMBLE ................................................................ 1
ARTICLE 1 THE JOINT VENTURE ................................. 3
1.1 Organization ............................................. 3
1.2 Name ..................................................... 3
1.3 Place of Business ........................................ 3
1.4 Business of the Joint Venture ............................ 3
1.5 Purposes Limited ......................................... 3
1.6 No Payments of Individual Obligations .................... 3
1.7 Statutory Compliance ..................................... 3
1.8 Title to Property ........................................ 4
1.9 Duration ................................................. 4
1.10 Definitions .............................................. 4
ARTICLE 2 THE VENTURERS
2.1 Identification ........................................... 12
2.2 Services of Venturers .................................... 12
2.3 Reimbursement and Fees ................................... 12
2.4 Transactions with Affiliates ............................. 12
2.5 Liability of the Venturers; Indemnification .............. 13
ARTICLE 3 CAPITAL CONTRIBUTIONS; LOANS; CAPITAL ACCOUNTS
3.1 Initial Capital Contributions ............................ 13
3.2 Contribution of Property ................................. 13
3.3 Additional Capital Contributions ......................... 16
3.4 Acquisition and Development of Additional Property ....... 17
3.5 Failure to Make Capital Contributions .................... 18
3.6 Interests ................................................ 20
3.7 Loans by Venturers to the Joint Venture .................. 20
3.8 No Further Capital Contributions ......................... 20
3.9 Capital Accounts ......................................... 20
3.10 Return of Capital ........................................ 21
ARTICLE 4 PREOPENING ACTIVITIES
4.1 Construction Financing ................................... 21
4.2 Design. Development and Construction ..................... 22
4.3 Governmental Approvals ................................... 25
4.4 Environmental Matters .................................... 26
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ARTICLE 5 ALLOCATION OF PROFITS AND LOSSES
5.1 Profits and Losses ....................................... 27
5.2 Allocations .............................................. 28
5.3 Transfers of Joint Venture Interests ..................... 29
ARTICLE 6 NON-LIQUIDATING DISTRIBUTIONS
6.1 Distributable Cash ...................................... 30
6.2 Distribution of Distributable Cash ....................... 30
ARTICLE 7 ACCOUNTING AND RECORDS
7.1 Books and Records ........................................ 30
7.2 Tax Book Values .......................................... 31
7.3 Reports .................................................. 31
7.4 Tax Returns .............................................. 32
7.5 Tax Matters Partner ...................................... 32
7.6 Fiscal Year .............................................. 32
7.7 Bank Accounts ............................................ 32
7.8 Tax Elections ............................................ 33
7.9 Tax Withholding .......................................... 33
ARTICLE 8 CONFIDENTIALITY; INTELLECTUAL PROPERTY
8.1 Confidential Treatment of Information .................... 33
8.2 Intellectual Property .................................... 34
ARTICLE 9 MANAGEMENT
9.1 Management by Managing Venturer .......................... 35
9.2 Exclusive Powers of the Venturers ........................ 36
9.3 Replacement of Managing Venturer ......................... 38
9.4 Meetings of the Venturers: Time and Place ................ 38
9.5 Officers ................................................. 39
ARTICLE 10 REPRESENTATIONS AND WARRANTIES
10.1 MR Sub ................................................... 39
10.2 Boyd Sub ................................................. 42
10.3 Brokers .................................................. 43
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ARTICLE 11 TRANSFER OF INTERESTS
11.1 Restrictions on Transfers ................................ 43
11.2 Permitted Transfers ...................................... 43
11.3 Limitation on Ownership of Venturers; Prohibited
Transferees .............................................. 44
11.4 Right of First Refusal ................................... 45
11.5 Buy-Out on Default ....................................... 46
11.6 Transactions With Prohibited Transferees ................. 47
ARTICLE 12 EVENTS OF DEFAULT
12.1 Events of Default ........................................ 48
12.2 Remedies upon Default .................................... 50
ARTICLE 13 DISSOLUTION AND LIQUIDATION
13.1 Events of Dissolution .................................... 50
13.2 Venturers' Consent to Continue Business .................. 51
13.3 Dissolution and Liquidation .............................. 51
13.4 Notice of Dissolution .................................... 52
ARTICLE 14 MISCELLANEOUS PROVISIONS
14.1 Waiver of Partition and Covenant Not to Withdraw ......... 52
14.2 Notices .................................................. 53
14.3 Amendments ............................................... 54
14.4 Successors and Assigns ................................... 54
14.5 Time ..................................................... 54
14.6 Severability ............................................. 54
14.7 Counterparts ............................................. 54
14.8 Attorneys' Fees .......................................... 54
14.9 Entire Agreement ......................................... 55
14.10 Further Assurances ....................................... 55
14.11 Headings; Interpretation ................................. 55
14.12 Exhibits ................................................. 55
14.13 Approvals and Consents ................................... 55
14.14 Estoppels ................................................ 55
14.15 Compliance with Laws and Contractual Obligations ......... 55
14.16 Remedies Cumulative ...................................... 56
14.17 Waiver ................................................... 56
14.18 Gaming Licensing Matters ................................. 56
14.19 Liquidated Damages ....................................... 56
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14.20 Governing Law and Choice of Forum ........................ 57
14.21 Dismissal of Pending Litigation .......................... 57
14.22 Joint Access ............................................. 57
14.23 Memorandum of Agreement .................................. 57
14.24 Survival of Indemnification Obligations .................. 58
SIGNATURES .............................................................. 58 & 59
EXHIBIT A Depiction of Tracts A, B & C
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AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF
STARDUST A.C.
This Amended and Restated Joint Venture Agreement (the "Agreement") is
made as of July 14, 1998, by and between MAC, CORP. ("MR Sub"), a New Jersey
corporation which is a wholly owned subsidiary of Mirage Resorts, Incorporated,
a Nevada corporation ("MRI"), and Boyd Atlantic City, Inc. ("Boyd Sub"), a New
Jersey corporation which is a wholly owned subsidiary of Boyd Gaming
Corporation, a Nevada corporation ("Boyd") (MR Sub and Boyd Sub are hereinafter
referred to individually as a "Venturer" and collectively as the "Venturers").
MRI, Atlandia Design and Furnishings, Inc., a New Jersey corporation
("Atlandia") and Boyd are also parties to this Agreement solely for the specific
purposes enumerated herein.
PREAMBLE
WHEREAS, the Venturers desire to amend and restate that certain Joint
Venture Agreement between the Venturers, dated as of May 29, 1996 (the "Original
Agreement"), relating to a joint venture formed for the purpose of designing,
developing, constructing, owning and operating a hotel-casino and related
facilities on property located in the "Huron North Redevelopment Area" in the
Marina area of Atlantic City, New Jersey, which property was conveyed to MR Sub
by deed, dated January 8, 1998, recorded in the office of the County Clerk of
the County on January 9, 1998, pursuant to a resolution of the City Council of
the City of Atlantic City, New Jersey (the "City"), duly adopted at a meeting of
the City Council on December 17, 1997, and signed by the Mayor of the City on
December 18, 1997, and which property is designated as the "H-Tract" on Exhibit
A attached hereto (the "Parcel").
WHEREAS, MRI has proposed to subdivide the Parcel into three (3)
sub-tracts, the first of which is comprised of approximately 25 gross acres of
real property and depicted as Tract A on Exhibit A attached hereto ("Tract A");
the second of which is comprised of approximately 50 gross acres of real
property and depicted as Tract B on Exhibit A attached hereto ("Tract B"); and
the third of which is comprised of approximately 25 gross acres of real property
and depicted as Tract C on Exhibit A attached hereto ("Tract C").
WHEREAS, MRI previously entered into an agreement, dated May 30, 1996
(the "Circus Agreement"), with Circus Circus Enterprises, Inc. ("Circus")
relating to the proposed sale by MRI or its Affiliate to Circus of an
undesignated portion of the Parcel, to be comprised of no less than thirty acres
and no greater than forty-eight acres at such location as to be designated by
MRI, but MRI has declared that the Circus Agreement has terminated according to
its terms and that all provisions of the Circus Agreement are of no further
force and effect.
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WHEREAS, MRI, MR Sub and Circus and an Affiliate of Circus are involved
in litigation in both Nevada and New Jersey (collectively, the "Circus
Litigation") relating to the Parcel, and the Parcel is, as of the date of this
Agreement, subject to a notice of lis pendens recorded by Circus on or about
February 13, 1998, in the records of the County (the "Lis Pendens").
WHEREAS, MR Sub has offered and agreed to use all commercially
reasonable efforts to contribute Tract A to the Joint Venture in accordance with
the terms and conditions set forth in this Agreement.
WHEREAS, Boyd Sub is willing to accept Tract A upon the express terms
and conditions set forth herein.
WHEREAS, for a period of one year following the date of this Agreement,
MRI and MR Sub have agreed to use all commercially reasonable efforts to obtain
(and if obtained, to cause to be recorded in the official records of the County)
a final, non-appealable order or orders, in recordable form, from any and all
courts having jurisdiction with regard to the Circus Litigation, releasing the
Lis Pendens as it relates to Tract A and releasing any and all claims relating
to the right of Circus to acquire title to Tract A (collectively, a "Lis Pendens
Release") and to use all commercially reasonable efforts to satisfy any and all
commercially reasonable requirements of any provider of an owner's or lender's
policy of title insurance together with any and all commercially reasonable
requirements of any provider or providers of the Construction Financing relating
to the effects of the Lis Pendens or the Circus Litigation upon the status of
title to Tract A (collectively, the "Lis Pendens Requirements").
WHEREAS, if, upon the terms and conditions set forth herein, Boyd Sub
elects to substitute Tract C for Tract A, then MR Sub has agreed to use all
commercially reasonable efforts to contribute Tract C rather than Tract A to the
Joint Venture in accordance with the terms and conditions set forth in this
Agreement.
WHEREAS, as of the date of the execution of this Agreement, a portion of
Tract C is owned by Harrah's Entertainment, Inc., a Delaware corporation, or an
Affiliate thereof (collectively, "Harrah's").
WHEREAS, MR Sub and Harrah's have entered into that certain Exchange &
Development Agreement, dated as of July 13, 1998 (the "Harrah's Land Exchange
Agreement"), in order to enable MR Sub to deliver marketable title to Tract C,
in its entirety, as depicted on Exhibit A attached hereto, and in the event
Tract C is to be substituted for Tract A as provided herein, MRI and MR Sub have
agreed to use all commercially reasonable efforts to complete the closing of the
transactions contemplated by the Harrah's Land Exchange Agreement (as the same
may be amended or supplemented from time to time hereafter upon the terms and
conditions permitted hereby).
WHEREAS, if Boyd Sub elects to substitute Tract C for Tract A, then MR
Sub and Boyd Sub have agreed to use all commercially reasonable efforts to
obtain and record a Lis Pendens
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Release and to satisfy any and all Lis Pendens Requirements in order for MR Sub
to contribute Tract C to the Joint Venture in accordance with the terms and
conditions set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
promises set forth, the parties agree as follows:
ARTICLE 1
THE JOINT VENTURE
Section 1.1 Organization. The Venturers hereby form and establish a
joint venture in the form of a general partnership (the "Joint Venture") under
and pursuant to, and which shall continue to constitute a joint venture for
purposes of, the provisions of this Agreement and the New Jersey Uniform
Partnership Act (the "Act") as of the date first above written, upon the terms
and conditions set forth in this Agreement.
Section 1.2 Name. The name of the Joint Venture shall be Stardust A. C.
and all business of the Joint Venture shall be conducted solely in such name or
in such other name or names as the Venturers may mutually determine.
Section 1.3 Place of Business. The principal office of the Joint Venture
shall be located at such place within the County as may be approved by the
Venturers.
Section 1.4 Business of the Joint Venture. The business of the Joint
Venture is to acquire and own the Property and to design, develop, construct,
finance, own and operate the Facility on the Property. In furtherance of its
business, the Joint Venture shall have and may exercise all the powers now or
hereafter conferred by the laws of the State of New Jersey on partnerships
formed under the laws of that State, and may do any and all things related or
incidental to its business as fully as natural persons might or could do under
the laws of that State.
Section 1.5 Purposes Limited. The Joint Venture shall be a joint venture
only for the purposes specified in Section 1.4. Except as otherwise provided in
this Agreement, the Joint Venture shall not engage in any other activity or
business and neither Venturer shall have any authority to hold itself out as an
agent of the other Venturer in any other business or activity.
Section 1.6 No Payments of Individual Obligations. The Venturers shall
use the Joint Venture's credit and assets solely for the benefit of the Joint
Venture. No asset of the Joint Venture shall be transferred or encumbered for or
in payment of any individual obligation of a Venturer.
Section 1.7 Statutory Compliance. The Joint Venture shall exist under
and be governed by, and this Agreement shall be construed and enforced in
accordance with, the laws of the State of
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New Jersey, excluding its conflict of law principles. The Venturers shall make
all filings and disclosures required by, and shall otherwise comply with, all
such laws. The Venturers shall execute, file and record in the appropriate
records any assumed or fictitious name certificate required by law to be filed
or recorded in connection with the formation of the Joint Venture and shall
execute, file and record such other documents and instruments as may be
necessary or appropriate with respect to the formation of, and conduct of
business by, the Joint Venture.
Section 1.8 Title to Property. All property, whether real or personal,
tangible or intangible, owned by the Joint Venture shall be owned in the name of
the Joint Venture and no Venturer shall have any ownership interest in such
property in its individual name or right and each Venturer's interest in the
Joint Venture shall be personal property for all purposes.
Section 1.9 Duration. The Joint Venture commenced as of May 29, 1996 and
shall continue until dissolved and liquidated pursuant to law or any provision
of this Agreement.
Section 1.10 Definitions. As used in this Agreement:
(a) "Acceptance Notice" has the meaning set forth in Section 11.4
hereof.
(b) "Accountants" has the meaning set forth in Section 7.3 hereof.
(c) "Act" has the meaning set forth in Section 1.1 hereof.
(d) "Affiliate" means a person which directly, or indirectly through one
or more intermediaries, controls, is controlled by or is under common control
with the person specified; provided, however, that a Venturer, as such, shall
not be deemed to be an Affiliate of the other Venturer.
(e) "Allocable Share" means the Joint Venture's equitable share of any
Government Improvement Costs and Master Plan Improvement Costs for which the
Joint Venture is responsible in accordance with the terms and provisions hereof
relating to the components of the Government Improvements and Master Plan
Improvements that are not for the sole use or benefit of any of Tract A, Tract B
or Tract C. The Venturers agree that to the extent that a Government Improvement
or Master Plan Improvement for which the Joint Venture is responsible in
accordance with the terms and provisions hereof is for the use or benefit of the
entire Parcel, the Joint Venture's Allocable Share of the Government Improvement
Costs and/or Master Plan Improvement Costs relating thereto shall be 25%.
(f) "Applicable Ratio" has the meaning set forth in Section 3.5 hereof.
(g) "Appraisal Notice" has the meaning set forth in Section 11.5 hereof.
(h) "Appraised Value" has the meaning set forth in Section 11.5 hereof.
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(i) "Atlandia" has the meaning set forth in the first paragraph of this
Agreement.
(j) "Boyd" has the meaning set forth in the first paragraph of this
Agreement.
(k) "Boyd License Agreement" has the meaning set forth in Section 8.2 of
this Agreement.
(l) "Boyd Sub" has the meaning set forth in the first paragraph of this
Agreement.
(m) "CAFRA" means the New Jersey Coastal Area Facilities Review Act and
the rules, regulations and policies promulgated thereunder, as each may be
amended from time to time.
(n) "Capital Account" has the meaning set forth in Section 3.10 hereof.
(o) "Circus" has the meaning set forth in the Preamble to this
Agreement.
(p) "Circus Agreement" has the meaning set forth in the Preamble to this
Agreement.
(q) "Circus Litigation" has the meaning set forth in the Preamble to
this Agreement.
(r) "City" has the meaning set forth in the Preamble to this Agreement.
(s) "Closure Reports" has the meaning set forth in Section 4.4(b)
hereof.
(t) "Code" has the meaning set forth in Section 5.1 hereof.
(u) "Commencement of Construction" means (i) with respect to
construction of the Facility, the date that a notice to proceed is issued by the
Managing Venturer or any of its Affiliates to the contractor(s) for the
Facility, which date shall, in any event, occur only after receipt by the
responsible Venturer or by MRI, as appropriate, of all permits, authorizations
and approvals necessary to construct the Facility, including without limitation,
all Master Plan Approvals, and (ii) with respect to construction of the MRI
Casino Project, the date that a notice to proceed is issued by MRI or its
Affiliates to the contractor(s) for the MRI Casino Project, which date shall, in
any event, occur only after receipt by Atlandia, MRI or MR Sub, as appropriate,
of all permits, authorizations and approvals necessary to construct the MRI
Casino Project, including without limitation, all Master Plan Approvals.
(v) "Connector" means the Atlantic City-Brigantine Connector road
improvement project currently under development in the City, as the same may be
modified from time to time hereafter.
(w) "Construction Financing" means debt financing, which may be
unsecured or collateralized by one or more liens on the Property and the
Facility or any portion thereof (including purchase money financing
collateralized by furniture, furnishings, fixtures, machinery or
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equipment), to be obtained by the Joint Venture from one or more commercial
banks or other lenders (including vendors or the Venturers) for the purpose of
funding Project Costs and which, except as otherwise provided in Section 4.1
hereof, is nonrecourse to the stockholders and other Affiliates of each Venturer
and does not require the stockholders or other Affiliates of either Venturer to
provide a personal guaranty.
(x) "Construction Period" has the meaning set forth in Section 4.1
hereof
(y) "County" means Atlantic County, New Jersey.
(z) "CRDA" means the New Jersey Casino Reinvestment Development
Authority.
(aa) "Cumulative Excess Contributions" has the meaning set forth in
Section 3.5 hereof.
(bb) "Defaulting Venturer" has the meaning set forth in Section 12.1
hereof
(cc)"Development Agreement" means that certain agreement entitled "An
Agreement between the City of Atlantic City and MRI for the Development of the
Huron North Redevelopment Area," dated May 3, 1996, as the same was amended by
an Amendment thereto dated January 8, 1998 and as the same may be amended or
supplemented from time to time hereafter upon the terms and conditions permitted
hereby.
(dd) "Disapproval Notice" has the meaning set forth in Section 1 1.4
hereof.
(ee) "Distributable Cash" has the meaning set forth in Section 6.1
hereof.
(ff) "Environmental Assessment Reports" shall mean all environmental
assessment reports and data relating to the Property and the Parcel, including
without limitation, all Phase I, II and III environmental assessments, Closure
Reports, and any and all documentation, correspondence, reports or data relating
to any investigation, analyses, cleanup, detoxification, testing, monitoring or
remediation of the Property and the Parcel or otherwise relating to the
preparation and implementation of any closure, remediation or other required
plans, together with evidence of all federal, state and local governmental
consents and approvals relating thereto.
(gg) "Event of Bankruptcy" has the meaning set forth in Section 12.1
hereof.
(hh) "Event of Default" has the meaning set forth in Section 12.1
hereof.
(ii) "Excess Government Improvement Costs" means the amount, if any, of
the Joint Venture's share of Government Improvement Costs that exceeds, in the
aggregate, the sum of $7,500,000.
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(jj) "Excess Master Plan Improvement Costs" means the amount, if any, of
the Joint Venture's share of Master Plan Improvement Costs relating to the
Initial Master Plan Improvements that exceeds, in the aggregate, the sum of
$27,500,000.
(kk) "Facility" means a new hotel-casino and related restaurant,
entertainment, retail and other facilities and amenities, containing not less
than 1,200 guestrooms, to be designed, developed and constructed by the Joint
Venture on the Property, including all furniture, furnishings, machinery,
equipment and other tangible personal property located therein and used in
connection therewith.
(ll) "Government Improvements" means all off-site and on-site
improvements (other than the Initial Master Plan Improvements and any other
Master Plan Improvements to be constructed upon the Parcel) required by any
federal, state, county, municipal or other governmental or quasi-governmental
agency or by any utility provider, in order both to subdivide the Parcel into
three (3) separate and distinct lots inclusive of the Tracts A, B and C and to
enable the construction of each of the MRI Casino Project, the Facility and, if
applicable, the Third Casino on the Parcel, including without limitation, the
construction or relocation of any required common air and water quality
infrastructure, wetlands remediation, solid waste, ground water and storm water
runoff facilities and other similar improvements or projects, and the
construction of all improvements required to bring all necessary utilities to
the Parcel and to the Property (including without limitation, water, gas,
electricity, sewer and telephone), and the relocation of any existing utility
service or installation located upon the Parcel that would obstruct the intended
development thereof.
(mm) "Government Improvement Costs" means all costs and expenses of
designing, engineering, developing and constructing the Government Improvements,
including without limitation, all direct and indirect costs related thereto,
such as labor, materials, supplies, machinery, equipment, construction
management, legal, architectural, engineering and design fees, site work,
utility installation and hookup charges, construction permits, certificates,
bonds, and other deposits, but excluding any and all costs associated with
conveying the Property to the Joint Venture which are the sole responsibility of
MRI, MR Sub and/or Atlandia, or their Affiliates, as more particularly provided
in Section 3.2 hereof, and excluding any other costs or expenses which are the
sole obligation of any of the Parties pursuant to the terms hereof.
(nn) "Harrah's" has the meaning set forth in the Preamble to this
Agreement.
(oo) "Harrah's Land Exchange Agreement" has the meaning set forth in the
Preamble to this Agreement.
(pp) "Initial Master Plan Improvements" means those Master Plan
Improvements that are currently anticipated to be constructed upon the Parcel as
more particularly described in the Mirage Roadway System Order of Magnitude
Estimate, dated as of May 18, 1998, prepared by Tishman Construction Corporation
of New Jersey, which is incorporated herein in its entirety by this reference
thereto.
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(qq) "Initiating Venturer" has the meaning set forth in Section 11.4
hereof
(rr) "Interest" has the meaning set forth in Section 3.6 hereof.
(ss) "Lis Pendens" has the meaning set forth in the Preamble to this
Agreement.
(tt) "Lis Pendens Release" has the meaning set forth in the Preamble to
this Agreement.
(uu) "Lis Pendens Requirements" has the meaning set forth in the
Preamble to this Agreement.
(vv) "Losses" has the meaning set forth in Section 5.1 hereof.
(ww) "Managing Venturer" means Boyd Sub until such time, if any, as MR
Sub becomes the Managing Venturer pursuant to Section 9.3 hereof, and thereafter
means MR Sub.
(xx) "Master Plan" means the engineering, design and specifications for
(i) the entirety of the infrastructure and other improvements that will jointly
benefit or be used in common by the MRI Casino Project, the Facility, and if
applicable, the Third Casino, including without limitation, all common
landscaping, signage, lighting and fencing, the specific points at which the
Connector will connect to the Parcel, the location, size and specifications of
all proposed porte-cocheres, all utility substations, traffic, parking, and
circulation improvements (including, without limitation, roads, bridges,
tunnels, walkways, monorail systems and other means of transportation within,
adjoining or servicing the Parcel and the Property and all landscaping, lighting
and fencing related thereto); and (ii) all Government Improvements; excluding
only the engineering and design of those improvements that specifically, solely,
and individually comprise, respectively, the Facility, the MRI Casino Project,
and if applicable, the Third Casino.
(yy) "Master Plan Approvals" means all those permits, licenses, and
approvals, issued in final, unappealable, and unconditional form, that are
required under all applicable federal, state, county and municipal laws,
regulations or governmental or quasi-governmental requirements pertaining to or
necessary for the formal adoption and approval of the Master Plan and the
construction of the Government Improvements, including without limitation,
Federal Aviation Administration approvals, and excluding only those permits,
licenses, and approvals that pertain solely to the improvements that
specifically, solely, and individually comprise, respectively, the Facility, the
MRI Casino Project, and if applicable, the Third Casino.
(zz) "Master Plan Improvements" means any and all improvements included
in or built or to be built pursuant to the Master Plan other than any specific
improvements included in the Master Plan which constitute Government
Improvements.
(aaa) "Master Plan Improvement Costs" means all costs and expenses of
designing, engineering, developing, constructing, equipping and opening any
Master Plan Improvements,
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including without limitation, all direct and indirect costs related thereto,
such as labor, materials, supplies, furniture, furnishings, fixtures, machinery,
equipment, construction management, legal architectural, engineering and design
fees, site work, construction permits, certificates, bonds, and other deposits,
but excluding any and all costs associated with conveying the Property to the
Joint Venture, which are the sole responsibility of MRI, MR Sub and/or Atlandia,
or their Affiliates, as more particularly provided in Section 3.2 hereof, and
excluding any other costs or expenses which are the sole obligation of any of
the Parties pursuant to the terms hereof.
(bbb) "MRI" has the meaning set forth in the first paragraph of this
Agreement.
(ccc) "MRI Casino Project" means a hotel-casino project proposed to be
constructed by MRI or its Affiliate on Tract B depicted on Exhibit A attached
hereto.
(ddd) "MR Sub" has the meaning set forth in the first paragraph of this
Agreement.
(eee) "New Jersey Gaming Authorities" means, collectively, the New
Jersey Casino Control Commission and the New Jersey Division of Gaming
Enforcement, or any governmental agency of the State of New Jersey or its
political subdivisions which succeeds to the functions of such agencies.
(fff) "NJDEP" means the New Jersey Department of Environmental
Protection.
(ggg) "Non-Managing Venturer" means MR Sub until such time, if any, as
MR Sub becomes the Managing Venturer pursuant to Section 9.3 hereof, and
thereafter means Boyd Sub.
(hhh) "Offering Notice" has the meaning set forth in Section 11.4
hereof.
(iii) "Original Agreement" has the meaning set forth in the Preamble to
this Agreement.
(jjj) "Parcel" has the meaning set forth in the Preamble to this
Agreement.
(kkk) "Parcel Map" means a plat or map duly approved by all governmental
and quasi-governmental agencies with jurisdiction thereover, in recordable form,
showing Tracts A, B and C materially in all respects as depicted on Exhibit A
attached hereto as separate, perfected subdivided tax lots, with separate legal
descriptions and real property tax parcel numbers for each of Tracts A, B and C.
(lll) "Party" or "Parties" means MR Sub, MRI, Atlandia, Boyd Sub and
Boyd, individually or collectively, as appropriate.
(mmm) "Profits" has the meaning set forth in Section 5.1 hereof.
(nnn) "Prohibited Transaction" has the meaning set forth in Section
11.3(c) hereof.
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(ooo) "Prohibited Transferees" has the meaning set forth in Section
11.3(c) hereof.
(ppp) "Prohibited Transfer Notice" has the meaning set forth in Section
11.3(c) hereof.
(qqq) "Project Costs" means all hard and soft costs and expenses of
designing, engineering, developing, constructing, equipping and opening the
Facility paid or accrued prior to the end of the Construction Period, including
without limitation (i) all direct and indirect costs related thereto, such as
labor, materials, site work, supplies, furniture, furnishings, fixtures,
machinery, equipment, construction management, architectural, engineering and
design fees paid to non-Affiliates of Boyd Sub, (ii) all out-of-pocket fees and
expenses for which Boyd Sub shall be entitled to reimbursement or compensation
pursuant to either Section 2.3 or Section 2.4 hereof, and all salaries paid to
employees of Boyd Sub or its Affiliates who devote substantially full time to
the Joint Venture's designing, engineering, developing, constructing, equipping
and opening the Facility, (iii) all Master Plan Improvement Costs and Government
Improvement Costs, to the extent payable by the Joint Venture pursuant to the
terms of Section 4.2. hereof, (iv) the cost of installing utility service from
the Property boundary, (v) the cost of design and construction approvals,
permits, certificates, bonds and other non-refundable deposits, (vi) preopening
expenses, (vii) costs and expenses of preparing, filing and processing
applications to obtain licenses and approvals from the New Jersey Gaming
Authorities to the extent payable by the Joint Venture pursuant to Section
4.3(d) hereof, (viii) initial gaming and non-gaming bankroll, (ix) interest and
fees on the Construction Financing, and (x) the value of the Property as
specified in Section 3.2(f) hereof; but excluding (A) costs and expenses of
acquiring any additional property pursuant to Section 3.4 hereof; (B) all Road
Development Costs associated with the Connector; (C) all costs and expenses
associated with the evaluation and remediation of environmental contamination of
the Property; (D) the amount of Excess Master Plan Improvement Costs, if any,
which shall be the sole obligation of MR Sub, as provided in Section 4.2(c)
hereof; and (E) any other costs or expenses which are the sole obligation of any
of MRI, MR Sub or Atlandia, respectively, as provided herein.
(rrr) "Property" shall mean Tract A or Tract C, whichever is contributed
by MR Sub to the Joint Venture, for all purposes set forth herein.
(sss) "Redevelopment Plan" means that certain Redevelopment Plan For the
Huron North Redevelopment Area, adopted by the City of Atlantic City, New
Jersey, dated as of March 15, 1995.
(ttt) "Resort Zone Designation" means the land zoning classification of
the City which authorizes and which is recognized by the New Jersey Gaming
Authorities as acceptable for the construction of a casino facility with all
forms of legalized gaming permitted pursuant to the laws of the State of New
Jersey.
(uuu) "Responding Venturer" has the meaning set forth in Section 11.4
hereof.
(vvv) "Road Development Agreement" means that certain Road Development
Agreement, dated as of January 10, 1997, by and among the State of New Jersey,
SJTA and MRI, which Road
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Development Agreement was subsequently assigned by MRI to Atlandia, pursuant to
an Assignment and Assumption Agreement, dated as of January 10, 1997, and which
Road Development Agreement has been amended pursuant to that certain First
Amendment to Road Development Agreement, dated as of July 31, 1997, and pursuant
to that certain Second Amendment to Road Development Agreement, dated as of
October 10, 1997, and as the same may be amended or supplemented from time to
time upon the terms and conditions permitted hereby.
(www) "Road Development Costs" means all costs and expenses of
designing, developing, constructing, equipping and opening the Connector,
including without limitation, any and all direct and indirect costs related
thereto, such as labor, materials, supplies, fixtures, machinery, equipment,
landscaping, construction management, legal, architectural, engineering and
design fees, site work, utility installation and hook up fees, construction
permits, certificates, bonds, and deposits, and any other costs payable by MRI
or its Affiliates pursuant to the terms of the Road Development Agreement.
(xxx) "Survey" shall mean an ALTA survey of the Property prepared by a
licensed surveyor or civil engineering firm, which shall be certified to the
Joint Venture, each of the Parties, and the Joint Venture's title insurer, and
which shall include, without limitation, the legal description and gross acreage
of the Property, and the locations of any existing improvements, easements and
servitudes existing upon or encumbering the Property.
(yyy) "SJTA" means the South Jersey Transportation Authority.
(zzz) "Special Revenue Bonds" means the Special Revenue Bonds (Atlantic
City/Brigantine Connector Project - CRDA H-Tract Revenue Pledge Agreement) to be
issued by SJTA to MRI or an Affiliate of MRI pursuant to SJTA's Resolution
adopted on October 8, 1997 and the Bond Purchase Agreement dated as of October
10, 1997 between SJTA and MRI, as the same may be amended from time to time
hereafter.
(aaaa) "Third Casino" shall mean a multistory, high-rise casino hotel
project that, in addition to the Facility and the MRI Casino Project, may be
constructed upon the Parcel.
(bbbb) "Third Party" has the meaning set forth in Section 11.4(a) of
this Agreement.
(cccc) "Tract A" has the meaning set forth in the Preamble to this
Agreement.
(dddd) "Tract B" has the meaning set forth in the Preamble to this
Agreement.
(eeee) "Tract C" has the meaning set forth in the Preamble to this
Agreement.
(ffff) "Transfer" has the meaning set forth in Section 11.1 hereof.
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(gggg) "Venturer" and "Venturers" means, individually or collectively,
as applicable, the parties named as such in the first paragraph of this
Agreement or any successor to either party by Transfer expressly permitted by
this Agreement.
ARTICLE 2
THE VENTURERS
Section 2.1 Identification. MR Sub and Boyd Sub shall be the Venturers
of the Joint Venture. No other person may become a Venturer except pursuant to a
Transfer specifically permitted under and effected in compliance with this
Agreement.
Section 2.2 Services of Venturers. During the existence of the Joint
Venture, the Venturers shall be required to devote only such time and effort to
Joint Venture business as may be necessary to promote adequately the interests
of the Joint Venture and the mutual interests of the Venturers, it being
specifically understood and agreed that the Venturers shall not be required to
devote full time to Joint Venture business and, except as provided in Section
3.4 hereof, each Venturer and its Affiliates may at any time and from time to
time engage in and possess interests in other business ventures of every type
and description, independently or with others, whether or not such ventures
relate to or compete with the Facility; and neither the Joint Venture nor the
other Venturer shall by virtue of this Agreement have any right, title or
interest in or to such independent ventures or to the income or profits derived
therefrom. The Venturers may, but shall not be required to, organize a
management company under the laws of Nevada to manage the affairs of the Joint
Venture in a manner consistent with the provisions of this Agreement.
Section 2.3 Reimbursement and Fees. Unless expressly provided for in
this Agreement or approved by each of the Venturers, neither of the Venturers
nor any Affiliate thereof shall be paid any compensation for its management
services to the Joint Venture provided pursuant to the terms hereof or be
reimbursed for out-of-pocket, overhead or general administrative expenses.
Notwithstanding the foregoing, the Managing Venturer and its Affiliates shall be
entitled to reimbursement by the Joint Venture for reasonable out-of-pocket
costs and expenses incurred for travel to and from the Facility in connection
with the performance of any services required or contemplated by this Agreement,
including without limitation, travel in connection with designing, developing,
constructing, and operating the Facility. In addition, in the event the Managing
Venturer requests employees of MR Sub or its Affiliates to travel to the
Facility for purposes of the Joint Venture's business, or employees of MR Sub or
its Affiliates to travel to Las Vegas, Nevada for purposes of the Joint
Venture's business, then MR Sub or its Affiliates shall be entitled to
reimbursement by the Joint Venture for reasonable out-of-pocket costs and
expenses incurred for such travel.
Section 2.4 Transactions with Affiliates. The Managing Venturer shall be
entitled to employ or retain, or enter into any transaction or contract with,
any Venturer or any officer,
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employee or Affiliate of any Venturer, provided that the compensation and other
terms and conditions of any such arrangement are no less favorable to the Joint
Venture than those that could reasonably be obtained at the time from an
unrelated party providing comparable goods or services.
Section 2.5 Liability of the Venturers; Indemnification. Neither
Venturer shall be liable for damages or otherwise to the Joint Venture or the
other Venturer for any act or omission performed or omitted by it in good faith
on behalf of the Joint Venture and in a manner reasonably believed by it to be
within the scope of the authority granted to it by this Agreement and in the
best interests of the Joint Venture if it shall not have been guilty of gross
negligence, bad faith or willful misconduct with respect to such acts or
omissions. Each Venturer shall be indemnified by the Joint Venture for, from and
against any and all claims, losses, damages and liabilities, including
reasonable attorneys' fees which shall be reimbursed as incurred, arising out of
or relating to any act or failure to act performed or omitted by it within the
scope of the authority conferred upon it by this Agreement; provided, however,
that such indemnity shall be payable only if such Venturer acted in good faith
and in a manner it reasonably believed to be in, or not opposed to, the best
interests of the Joint Venture. Any indemnity under this Section 2.5 shall be
paid from, and shall be limited to the extent of, Joint Venture assets, and no
Venturer shall have any personal liability on account thereof.
ARTICLE 3
CAPITAL CONTRIBUTIONS; LOANS; CAPITAL ACCOUNTS
Section 3.1 Initial Capital Contributions. Within ten (10) days
following the date of execution of this Agreement by all Parties, each Venturer
shall contribute or cause to be contributed to the Joint Venture, as its initial
capital contribution, cash in the amount of $1,000.
Section 3.2 Contribution of Property.
(a) Following the latest of such time as: (i) the City approves the
transfer of the Property to the Joint Venture pursuant to the Development
Agreement; (ii) the City and the County approve the recordation of the Parcel
Map; (iii) MR Sub or its Affiliates shall have obtained all other governmental
or quasi-governmental approvals necessary to permit the transfer of title to the
Property to the Joint Venture; (iv) the City has vacated the existing public
works facilities located on the Property, and MRI, MR Sub or the City, as
appropriate, has caused all such facilities to be completely removed from the
Property; (v) MRI and MR Sub have obtained all Master Plan Approvals; and (vi)
MRI and/or MR Sub shall have obtained and recorded a Lis Pendens Release as it
affects the status of title to Tract A or Tract C, as applicable, and otherwise
satisfied any and all Lis Pendens Requirements, but not sooner than the latest
date practicable prior to having met all conditions to allow the first draw
under the Construction Financing (except for any conditions relating to the
conveyance of the Property or to capital contributions which are to be made
concurrently with the contribution of the Property to the Joint Venture), MR Sub
shall, as an additional capital contribution, convey, or cause to be conveyed,
to the Joint Venture fee title to
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<PAGE> 19
either Tract A or Tract C, as applicable, by bargain and sale deed, with
covenants against the grantor's acts, and with covenants that the Property shall
be free and clear of all monetary liens and encumbrances and all other liens,
encumbrances, rights and restrictions which would materially adversely affect
the Joint Venture's contemplated use of the Property, other than those liens,
encumbrances, rights and restrictions contained or referred to in the deed to
the Parcel from the City to MR Sub, in the Development Agreement, in the Stewart
Title Guaranty Company ALTA Owners Policy of Title Insurance, dated as of
January 9, 1997 [sic], Policy No. 0-9993-523635, or in the Commonwealth Land
Title Insurance Company of New Jersey ALTA Owners Policy of Title Insurance,
dated as of January 8, 1998, Policy No. L950400. The Parties agree to amend this
Agreement to insert an additional Exhibit to this Agreement containing the legal
descriptions of Tracts A, B and C, respectively, at the time of recordation of
the Parcel Map.
(b) Tract A consists of approximately 25 gross acres, portions of which
are to be used for the ingress, egress and service roads depicted on Exhibit A
attached hereto. Boyd Sub acknowledges that a portion of Tract A is not
currently within the Resort Zone Designation, and such portion is not zoned for
the construction of the casino component of the proposed Facility. MRI and MR
Sub hereby represent and warrant, however, that the zoning for the portion of
Tract A that is not within the Resort Zone Designation will allow for the
construction of restaurants, hotel towers, retail, parking garages, showrooms,
administrative office space and any and all other non-casino space to be
developed in connection with the Facility. To the extent that the City or the
New Jersey Gaming Authorities shall require a rezoning of all or any portion of
Tract A to the Resort Zone Designation, or to the extent that Boyd Sub deems it
reasonably necessary to have all or any portion of Tract A rezoned to the Resort
Zone Designation in order to best utilize Tract A to construct the Facility,
then the Venturers shall cooperate with each other to use all commercially
reasonable efforts to attempt to obtain such rezoning of Tract A, with the cost
thereof to be a Project Cost to be paid by the Joint Venture. Without limiting
the foregoing, immediately upon execution of this Agreement, MR Sub and MRI
shall request an amendment to the Redevelopment Plan to revise the height
restrictions related to Parcel B (as such term is defined in the Redevelopment
Plan) from a maximum of 160 feet to a maximum of 386 feet and shall use all
commercially reasonable efforts to obtain such amendment and such other
amendments as may be agreed to by the Venturers. If Tract A is contributed to
the Joint Venture, all costs associated with such amendment shall be deemed to
be Project Costs to be paid by the Joint Venture. If Tract C is substituted for
Tract A as the Property, all costs associated with such amendment shall be borne
solely by MRI and MR Sub and shall not be costs or expenses of the Joint
Venture. If MRI and MR Sub shall be unable to obtain such amendment on or before
the date six (6) months after the date of this Agreement, then Boyd Sub shall
have the right to have MR Sub substitute Tract C for Tract A as the Property by
irrevocable written notice from Boyd Sub to MR Sub.
(c) For a period of one year following the date of this Agreement, MRI
and MR Sub shall be jointly responsible, at their sole cost and expense and not
as an expense of the Joint Venture, (i) to use all commercially reasonable
efforts to obtain a Lis Pendens Release as expeditiously as possible as it
affects the status of title to Tract A and, if obtained, to cause evidence
thereof to be recorded in the records of the County and (ii) to use all
commercially reasonable efforts to satisfy any Lis
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<PAGE> 20
Pendens Requirements relating to the status of title to Tract A. If, during such
one-year period, MRI and/or MR Sub obtains and records a Lis Pendens Release and
otherwise satisfies all Lis Pendens Requirements as the same affect the status
of title to Tract A upon the terms and conditions set forth herein, then the
Joint Venture shall accept Tract A as the Property. Upon contribution by MR Sub
of Tract A to the Joint Venture in accordance with the terms hereof, all
covenants, restrictions and obligations relating to Tract C shall thereupon
cease and be of no further force and effect. At the expiration of such one-year
period, in the event MRI and MR Sub shall be unable, despite using all
commercially reasonable efforts, to obtain either the Lis Pendens Release or to
satisfy any one or more of the Lis Pendens Requirements, then Boyd Sub may
elect, in its sole and absolute discretion, by irrevocable written notice
delivered to MR Sub within thirty (30) days following the expiration of such
one-year period, either to terminate this Agreement or to join MRI and MR Sub in
using all commercially reasonable efforts to obtain the Lis Pendens Release and
to satisfy the Lis Pendens Requirements as the same affect the status of title
to Tract A, with all legal fees and other expenses relating to such efforts
(exclusive of any costs paid in judgment or settlement) following such one-year
period being deemed to be Project Costs to be paid by the Joint Venture.
(d) At any time following the end of such one-year period, unless Boyd
Sub has exercised its option to terminate this Agreement pursuant to the terms
of Section 3.2(c) hereof, Boyd Sub shall have the right to require MR Sub to
substitute Tract C for Tract A as the Property. In the event Boyd Sub so elects
by irrevocable written notice to MR Sub to substitute Tract C for Tract A as the
Property, MR Sub shall use all commercially reasonable efforts to contribute
Tract C to the Joint Venture pursuant to the terms and conditions of this
Agreement, and for all purposes of this Agreement and all covenants and
obligations set forth herein, Tract C shall thereupon be deemed to be the
Property. If Tract C is to be substituted for Tract A as the Property following
the end of such one-year period, then Boyd Sub shall join MRI and MR Sub in
using all commercially reasonable efforts to obtain and cause to be recorded the
Lis Pendens Release and to satisfy the Lis Pendens Requirements as the same
affect the status of title to Tract C, with all legal fees and other expenses
relating to such efforts (exclusive of any costs paid in judgment or settlement)
that are incurred following the end of such one-year period being deemed to be
Project Costs to be paid by the Joint Venture. Upon contribution by MR Sub of
Tract C to the Joint Venture in accordance with the terms hereof, all covenants,
restrictions and obligations relating to Tract A shall thereupon cease and be of
no further force and effect.
(e) Tract C consists of approximately 25 gross acres, portions of which
are to be used for the ingress, egress and service roads depicted on Exhibit A
attached hereto. MRI and MR Sub hereby represent and warrant that Tract C, in
its entirety, has the Resort Zone Designation. MRI, MR Sub and their Affiliates
shall not enter into any amendment to the Harrah's Land Exchange Agreement that
would materially adversely affect the development of the Property by the Joint
Venture without obtaining the prior written consent of Boyd Sub thereto, which
consent shall not unreasonably be withheld or delayed by Boyd Sub. Without
limiting the foregoing, MRI, MR Sub and their Affiliates shall not enter into
any amendment to the Harrah's Land Exchange Agreement that would result in the
imposition of any private development restrictions or the requirement to obtain
any approvals from Harrah's or its Affiliates relating to the design or use of
Tract C, including
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without limitation, any restrictions or requirements for approvals relating to
building elevation or height or setback requirements. In the event Tract C is to
be substituted for Tract A as the Property as provided herein, then MRI and MR
Sub shall be jointly responsible, at their sole cost and expense and not as an
expense of the Joint Venture, to use all commercially reasonable efforts to
cause the closing of all transactions contemplated by the Harrah's Land Exchange
Agreement in order to enable MR Sub to deliver marketable title to Tract C, in
its entirety, as depicted on Exhibit A attached hereto, in accordance with all
of the terms and provisions of this Agreement.
(f) The Venturers agree, solely for purposes of this Agreement, that the
fair market value of the Property (whether the Property shall be comprised of
Tract A or Tract C) shall be $90,000,000 as of the date the Property is
contributed to the Joint Venture.
(g) All costs and expenses associated with the Environmental Assessment
Reports and remediation of the Property, all Road Development Costs, all real
property transfer taxes, all costs and expenses relating to obtaining and
recording the Lis Pendens Release and to satisfying the Lis Pendens Requirements
(except those which are to be borne by the Joint Venture as expressly provided
herein) and any other costs and expenses of conveying the Property to the Joint
Venture, including the cost of obtaining the Survey and the cost of an ALTA
owner's policy of title insurance, shall be borne solely by MRI, MR Sub or
Atlandia, as appropriate, and shall not be costs or expenses of the Joint
Venture. Real property taxes and assessments relating to the Property shall be
prorated as of the date of contribution of the Property to the Joint Venture. MR
Sub shall not be entitled to any increase in its capital account or in its
Interest in the Joint Venture by virtue of the expenditure of any sums relating
to the matters set forth in this Section 3.2(g).
Section 3.3 Additional Capital Contributions.
(a) Not later than the time of conveyance of the Property to the Joint
Venture by MR Sub pursuant to Section 3.2, Boyd Sub shall make one or more
additional capital contributions of cash aggregating $90,000,000 to the Joint
Venture. A portion of such additional capital contributions may consist of
out-of-pocket fees and expenses paid by Boyd Sub to non-Affiliates of Boyd Sub
on behalf of the Joint Venture in connection with the Joint Venture's design,
permitting and other pre-construction activities and salaries paid to employees
of Boyd Sub or its Affiliates who devote substantially full time to the Joint
Venture. From time to time thereafter, each of the Venturers shall concurrently
make equal additional capital contributions of cash aggregating $60,000,000 each
to the Joint Venture at such time or times as required by the provider of the
Construction Financing or at the time or times as the Managing Venturer
reasonably determines necessary to coincide with the funding of Project Costs;
provided, however, that if acceptable to the provider of the Construction
Financing, each of the Venturers may provide all or part of such $60,000,000 as
subordinated loans, on such terms as the Venturers may mutually determine,
rather than as capital contributions.
(b) The Parties acknowledge that as of the date of this Agreement, the
anticipated total Project Costs (including a contingency to be established by
Boyd Sub) are $750,000,000. Boyd Sub shall make additional capital contributions
of cash to the Joint Venture equal to the amount of
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<PAGE> 22
Project Costs that exceed, in the aggregate, the sum of $750,000,000, except to
the extent such Project Costs are the sole obligation of any of MRI, MR Sub or
Atlandia, or their respective Affiliates, pursuant to the terms hereof and
except to the extent the Venturers mutually agree in writing to increase the
size or scope of the Facility and to share in any increase in the Project Cost
relating to such change in size or scope. The additional capital contributions
referred to in the immediately preceding sentence shall be made by Boyd Sub at
such time or times as required by the provider of the Construction Financing or
at the time or times as the Managing Venturer reasonably determines necessary to
coincide with the funding of Project Costs, but in no event prior to the
contribution of the Property to the Joint Venture by MR Sub.
(c) MR Sub shall make additional capital contributions of cash to the
Joint Venture equal to the amount of any Excess Master Plan Improvement Costs.
The additional capital contributions referred to in the immediately preceding
sentence shall be made by MR Sub at such time or times as required by the
provider of the Construction Financing or at the time or times as the Venturers
reasonably determine to be necessary to coincide with the funding of the Master
Plan Improvements.
(d) If required to fund Project Costs incurred or to be incurred prior
to conveyance of the Property to the Joint Venture, each Venturer shall,
promptly following the request of the Managing Venturer, make one or more
additional equal capital contributions of cash to the Joint Venture in amounts
sufficient to fund outstanding or anticipated Project Costs, as reasonably
determined by Managing Venturer, which contributions shall be credited against
each Venturer's capital contribution obligations due under the third sentence of
Section 3.3(a) hereof.
(e) MR Sub shall contribute to the Joint Venture 25% of the aggregate
principal amount (not exceeding $13,750,000) of Special Revenue Bonds as and
when such Special Revenue Bonds are issued by SJTA to MRI or an Affiliate of
MRI, but in no event prior to the contribution of the Property to the Joint
Venture. All payments of principal and interest in respect of the Special
Revenue Bonds owned by the Joint Venture shall accrue to and be the property of
the Joint Venture. At the time of the initial contribution of Special Revenue
Bonds to the Joint Venture, and as a condition thereto, the Joint Venture shall
execute and deliver, and agree to perform its obligations under, all agreements
and instruments, including without limitation a Donation Agreement with CRDA in
substantially the form of the Donation Agreement dated October 10, 1997 between
CRDA and MR Sub, necessary to permit the Joint Venture to obtain a credit
against its future CRDA alternative investment tax obligations to the maximum
extent permitted by law. The contribution of the Special Revenue Bonds by MR Sub
to the Joint Venture shall not increase the capital account or Interest of MR
Sub in the Joint Venture.
Section 3.4 Acquisition and Development of Additional Property.
(a) Subject to the terms and conditions of this Agreement, MR Sub or its
Affiliates may, alone or as a partner, joint venturer, stockholder or associate
of or with one or more other persons or entities, (i) develop and operate the
MRI Casino Project on such terms and conditions as it may determine, and (ii)
acquire, develop and operate additional property adjacent to the Property or the
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Parcel on such terms and conditions as it may determine it its sole discretion,
and neither the Joint Venture nor Boyd Sub shall have any rights with respect
thereto except such as may be agreed to by each of the Venturers.
(b) Without the consent of MR Sub, which it may withhold or condition in
its sole discretion, neither Boyd Sub nor its Affiliates, alone or as a partner,
joint venturer, stockholder (except for ownership of up to 5% of the stock of
any publicly traded company) or associate of or with other persons or entities,
may acquire or possess an interest in any other gaming property, gaming
development project or gaming business located: (i) within the Marina area of
the City at any time during the term of this Agreement or within three years
following the termination of this Agreement as a result of the occurrence of an
Event of Default by Boyd Sub or (ii) within the entire City during the
three-year period commencing on the date of this Agreement; provided, however,
that the foregoing restrictions shall cease and be of no further force and
effect in the event that (A) MRI, MR Sub or Atlandia shall default under any
material obligation under this Agreement, or (B) this Agreement shall terminate
or be terminated without any uncured Event of Default on the part of Boyd Sub.
(c) With the consent of each Venturer, the Joint Venture may acquire
additional property beneficial to the Joint Venture in the vicinity of the
Property. The purchase price and other terms of any such acquisition shall be
subject to the approval of each Venturer. Unless the Venturers agree otherwise,
the acquisition cost of any such additional property shall be funded by equal
additional capital contributions by each of the Venturers on or prior to the
acquisition date, which shall not affect the respective obligations of the
Venturers to make additional capital contributions to the Joint Venture pursuant
to Section 3.3. If any such additional property is acquired by the Joint Venture
and the Joint Venture is thereafter dissolved and liquidated, MR Sub shall have
the option, exercisable for a period of 90 days following liquidation of the
Joint Venture, to purchase any or all of such additional property for cash at a
purchase price equal to the Joint Venture's acquisition cost of such additional
property, plus all other capitalized costs and expenses incurred by the Joint
Venture in connection with such additional property.
Section 3.5 Failure to Make Capital Contributions.
(a) If a Venturer defaults in its obligation to make capital
contributions required by this Article 3, the other Venturer shall have and may
exercise all remedies available pursuant to this Agreement, at law or in equity.
In addition, if a Venturer defaults in its obligation to make capital
contributions in cash required by this Article 3, the other Venturer may, but
shall not be required to, contribute to the Joint Venture all or a portion of
such amount. If such other Venturer contributes any amount to the Joint Venture
pursuant to this Section 3.5, immediately following such contribution the
Interest of the contributing Venturer in the Joint Venture shall be increased
and the Interest of the Defaulting Venturer in the Joint Venture shall be
decreased. The resulting Interest of the contributing Venturer shall be the
number of percentage points (rounded to the nearest one-hundredth of a
percentage point) determined in accordance with the following formula: (i)
determine the percentage equivalent of a fraction, the numerator of which shall
be the aggregate
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<PAGE> 24
capital contributions made to the Joint Venture by the contributing Venturer
pursuant to this Agreement, and the denominator of which shall be the aggregate
capital contributions made to the Joint Venture by all Venturers pursuant to
this Agreement, (ii) subtract 50 percentage points, (iii) multiply the result of
(i) and (ii) by the Applicable Ratio (rounded to the nearest one-hundredth of a
percentage point) and (iv) add 50 percentage points to the result of (i), (ii)
and (iii). For purposes of the immediately preceding sentence, the value of the
Property contributed by MR Sub pursuant to Section 3.2 hereof shall at all times
be deemed to be equal to $90,000,000. The resulting Interest of the Defaulting
Venturer shall be the number of percentage points equal to 100 minus the
resulting Interest of the contributing Venturer as determined above.
(b) As used in this Section 3.5: (i) to the extent that the cash
contributed by the contributing Venturer pursuant to this Section 3.5 in
response to such default, together with all cash previously contributed by the
contributing Venturer pursuant to this Section 3.5 in response to prior defaults
(collectively, the "Cumulative Excess Contributions"), is less than $30,000,000,
the Applicable Ratio shall be 1.20; (ii) with respect to that portion of the
Cumulative Excess Contributions that is between $30,000,000 and $39,999,999, the
Applicable Ratio shall be 1.30; (iii) with respect to that portion of the
Cumulative Excess Contributions that is between $40,000,000 and $49,999,999, the
Applicable Ratio shall be 1.40; and (iv) with respect to that portion of the
Cumulative Excess Contributions that is $50,000,000 or more, the Applicable
Ratio shall be 1.50.
(c) By way of illustration, assume that (i) MR Sub and Boyd Sub each has
a 50% Interest, (ii) MR Sub has previously contributed the Property pursuant to
Section 3.2 and $60,000,000 pursuant to the third sentence of Section 3.3(a),
and Boyd Sub has previously contributed a total of $150,000,000 pursuant to the
first and third sentences of Section 3.3(a) and (iii) Boyd Sub is required to
contribute an additional $35,000,000 pursuant to Section 3.3(b). If Boyd Sub
fails to contribute such amount, and MR Sub elects to contribute such
$35,000,000 pursuant to this Section 3.5, the resulting Interest of MR Sub
following such contribution would be 56.32%, determined as follows:
$90,000,000 plus $60,000,000 plus $35,000,000
[MR Sub cash and Property contributions]
---------------------------------------------------------------------
$245,000,000 plus $90,000,000 [total cash and Property contributions]
equals 55.22%, minus 50% equals 5.22%, multiplied by 1.21 [the blended
Applicable Ratio applicable to $35,000,000] equals 6.32%, plus 50% equals
56.32%.
Accordingly, the resulting Interest of Boyd Sub would be 43.68% .
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<PAGE> 25
Section 3.6 Interests. The respective percentage interest (the
"Interest") of the Venturers in the Joint Venture shall initially be as follows:
MR Sub - 50%
Boyd Sub - 50%
Any additional capital contributions made by Boyd Sub pursuant to Section 3.3(b)
hereof shall not increase the Interest of Boyd Sub. Any additional capital
contributions made by MR Sub pursuant to Section 3.3(c) hereof shall not
increase the Interest of MR Sub.
Section 3.7 Loans by Venturers to the Joint Venture. If the Managing
Venturer reasonably determines that the Joint Venture's existing funds (giving
effect to funds available pursuant to existing third-party financing and amounts
required to be contributed to the Joint Venture by the Venturers pursuant to
Section 3.3) are insufficient to meet the Joint Venture's costs, expenses,
obligations and liabilities, the Managing Venturer may offer to each Venturer
the opportunity to advance funds to the Joint Venture in proportion to its
respective Interest. No Venturer shall be required to advance funds to the Joint
Venture, and neither Venturer shall be permitted to advance funds to the Joint
Venture without the approval of each Venturer. All amounts so advanced shall
take the form of an unsecured loan and shall bear interest at a floating rate
equal to the Joint Venture's weighted average cost of borrowed funds (or, if the
Joint Venture then has no borrowed funds, the published prime rate charged from
time to time by Bank of America NT & SA). Such loans shall be repayable on
demand but solely out of assets of the Joint Venture, in accordance with the
provisions of Section 6.2(a) and Article 13 hereof, and no Venturer shall have
any personal liability on account thereof, nor shall there be any recourse to
such Venturer's assets. To the extent required by the terms of the Construction
Financing or such other third-party financing obtained by the Joint Venture,
repayment of such loans shall be subordinated to the prior repayment of the
Construction Financing or other third-party financing. The provisions of this
Section 3.7 are solely and exclusively for the benefit of the Venturers, may
only be enforced by the Venturers and shall not inure to the benefit of, or be
enforceable by, any third party, including without limitation any creditor of
the Joint Venture.
Section 3.8 No Further Capital Contributions. The Venturers shall not
be required to contribute additional capital or lend any funds to the Joint
Venture, except as expressly provided in this Article 3.
Section 3.9 Capital Accounts. Each Venturer shall have a single capital
account (the "Capital Account") that shall be (i) increased by (a) the sum of
the cash and the fair market value at the time of contribution of any property
contributed by such Venturer, (b) such Venturer's distributive share of Joint
Venture Profits and (c) the amount of any Joint Venture liabilities assumed by
such Venturer or secured by any Joint Venture property distributed to such
Venturer and (ii) decreased by (a) the sum of the cash and the fair market value
of property distributed to such Venturer, (b) such Venturer's distributive share
of Joint Venture Losses and (c) the amount of liabilities of such Venturer
assumed by the Joint Venture or that are secured by property contributed
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by such Venturer to the Joint Venture. No Venturer shall be entitled to receive
or shall be paid interest on its contributions to the capital of the Joint
Venture or on its Capital Account balance. This Section 3.9 is intended to
comply with the requirements of Treasury Regulation ss. 1.704-1(b) regarding the
maintenance of capital accounts and shall be interpreted and applied in a manner
consistent with that provision.
Section 3.10 Return of Capital. Except as specifically provided herein,
no Venturer may withdraw capital from the Joint Venture. To the extent any cash
which any Venturer is entitled to receive pursuant to any provision of this
Agreement would constitute a return of capital, each of the Venturers consents
to the withdrawal of such capital. If any capital is, or is to be, returned to a
Venturer, the Venturer shall not have the right to receive property other than
cash, except as otherwise expressly provided in this Agreement.
ARTICLE 4
PREOPENING ACTIVITIES
Section 4.1 Construction Financing. The Managing Venturer, in
consultation and cooperation with the Non-Managing Venturer, shall use all
commercially reasonable efforts to obtain as promptly as practicable committed
Construction Financing in an amount up to $450,000,000 plus the amount of
additional indebtedness, if any, allowed pursuant to the third sentence of this
Section 4.1 on the most favorable terms available to the Joint Venture. The
Managing Venturer shall have the responsibility and authority for the
negotiation, structuring and documentation of the Construction Financing.
Without the approval of each Venturer, the outstanding principal amount of the
Construction Financing shall not exceed 60% of the total Project Costs;
provided, however, that (i) if the weighted average interest rate accrued on
such indebtedness during the period beginning on the day on which the first draw
on such indebtedness is made and ending on the day before the day on which the
Facility opens to the general public (the "Construction Period") exceeds 8.5%
per annum, the outstanding principal amount of Construction Financing may exceed
60% of the total Project Costs by an amount equal to 100% of the difference
between (A) the interest accrued on such indebtedness during the Construction
Period and (B) the interest which would have accrued on such indebtedness during
the Construction Period if such weighted average interest rate had been 8.5% per
annum, and (ii) without double counting, the outstanding principal amount of
Construction Financing may be increased by the amount of Excess Government
Improvement Costs, if any. In any event, without the approval of each Venturer,
the aggregate principal amount of Construction Financing and all other Joint
Venture indebtedness outstanding at any time (other than Venturer subordinated
loans permitted by Section 3.3(a) hereof) shall not exceed the sum of
$450,000,000 plus the amount of additional indebtedness, if any, permitted by
the immediately preceding sentence. The interest rate and other terms of the
Construction Financing and any other Joint Venture indebtedness shall be subject
to the approval of each Venturer, such approval not to be unreasonably withheld
or delayed. If nonrecourse debt financing is not available to the Joint Venture
on terms reasonably acceptable to the Venturers, the Venturers will cooperate in
good faith
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to agree on alternative construction financing and to seek such alternative
construction financing (and in such event such alternative construction
financing shall constitute "Construction Financing" as such term is used in this
Agreement). In no event shall the stockholder or other Affiliates of MR Sub or
Boyd Sub be required to guarantee or otherwise assume liability for Construction
Financing.
Section 4.2 Design. Development and Construction.
(a) MRI or its Affiliates shall have sole responsibility and authority
with respect to the Master Plan, and MRI agrees to use all commercially
reasonable efforts to attempt (or to cause its Affiliates to attempt) to obtain,
as expeditiously as possible, all required Master Plan Approvals for the Parcel
and the Property. MRI or its Affiliates, in consultation with Boyd Sub, shall
prepare and submit all applications for all necessary Master Plan Approvals and
shall thereafter prosecute such applications diligently to completion. MRI shall
keep Boyd Sub fully advised on a regular basis with respect to all aspects of
the Master Plan Approvals. Any material changes to the engineering, design
and/or composition of the Initial Master Plan Improvements shall be subject to
the reasonable approval of Boyd Sub. MRI and its Affiliates shall have
responsibility for and shall diligently complete or cause to be completed the
construction of all Master Plan Improvements and Government Improvements in such
a manner as to minimize any inconvenience in or disruption to the construction
or operation of the Facility upon the Property. Notwithstanding the foregoing,
MRI and its Affiliates shall use all commercially reasonable efforts to cause
all Government Improvements and the Initial Master Plan Improvements to be
completed on or before the opening of the Facility.
(b) Upon conveyance of the Property to the Joint Venture, the Joint
Venture shall become obligated to pay or reimburse MRI or its Affiliates for (i)
all Government Improvement Costs and all Master Plan Improvement Costs relating
to the Initial Master Plan Improvements (except to the extent of any Excess
Master Plan Improvement Costs, which shall be the sole obligation of MR Sub as
more particularly provided herein), which are for the sole use or benefit of the
Property; and (ii) its Allocable Share of all Government Improvement Costs, and
of all Master Plan Improvement Costs relating to the Initial Master Plan
Improvements (except to the extent of any Excess Master Plan Improvement Costs,
which shall be the sole obligation of MR Sub as more particularly provided
herein), which are partially for the use of or partially benefit the Property,
whether such costs are incurred prior to or following conveyance of the Property
to the Joint Venture. Following conveyance of the Property to the Joint Venture,
the Joint Venture shall also become obligated to pay or reimburse MRI or its
Affiliates for the Allocable Share of all reasonable costs and expenses relating
to the operation, maintenance, repair and necessary replacements of all
Government Improvements, and of the Initial Master Plan Improvements, except to
the extent of any costs of operation, maintenance, repair or replacement that
are required due to the negligence or willful misconduct of MRI or its
Affiliates or their respective employees, agents or contractors, or to the
extent the cost of such operation, maintenance, repair or replacement is paid by
any third party, including without limitation, any insurance or bonding company
or any other person or business entity. Notwithstanding the foregoing, the Joint
Venture shall not have any responsibility for any Master Plan Improvement Costs
or for any costs or expenses relating to the operation or maintenance
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of any Master Plan Improvements other than those relating to the Initial Master
Plan Improvements unless Boyd Sub agrees in writing to share in any such costs
or expenses.
(c) MR Sub shall be responsible, at its sole cost and expense and not as
an expense of the Joint Venture, for any Excess Master Plan Improvement Costs.
MR Sub shall pay such amount as an additional capital contribution to the Joint
Venture, as more particularly provided in Section 3.3(c) hereof.
(d) Except as provided in Section 4.2(a) hereof and in Sections 4.4 and
9.2 hereof, the Managing Venturer shall have the responsibility and authority
for supervising the design, development and construction of the Facility.
Commencing upon the date that is six (6) months following the date of this
Agreement, the Managing Venturer shall (i) prepare or cause to be prepared all
necessary preliminary plans and architectural, engineering, design and
construction drawings and other construction documents for the Facility, (ii)
arrange for the Joint Venture to obtain a construction contract from a reputable
and qualified general contractor or a construction management agreement from a
reputable and qualified construction management firm, (iii) engage on behalf of
the Joint Venture other reputable and qualified contractors or subcontractors,
architects, engineers, designers and other professionals for the design,
development and construction of the Facility, and (iv) in consultation with MR
Sub, prepare, submit and prosecute diligently to completion, applications for
all necessary pre-construction permits and approvals for the Facility, including
without limitation a CAFRA permit. Prior to conveyance of the Property to the
Joint Venture, MR Sub agrees to execute any and all documents, instruments or
consents necessary to enable the Managing Venturer to apply for and obtain any
such permits and approvals for the Facility. The Managing Venturer shall keep
the other Venturer fully advised on a regular basis with respect to all aspects
of the design, permitting, development and construction of the Facility. In the
event Tract C is to be substituted for Tract A as permitted by Section 3.2
hereof, MRI and MR Sub shall be responsible, at their sole cost and expense and
not as an expense of the Joint Venture, and shall reimburse the Joint Venture,
Boyd and Boyd Sub (including their respective directors, officers, employees,
Affiliates, successors and assigns) for any and all Project Costs that are
associated solely with Tract A that are incurred commencing upon the date that
is six (6) months following the date of this Agreement through the date that is
one year following the date of this Agreement up to but not exceeding, in the
aggregate, the sum of $10,000,000. Notwithstanding the foregoing, Boyd Sub shall
be entitled to commence any or all of the activities specified in (i) through
(iv) above prior to the date that is six (6) months following the date of this
Agreement upon the condition that (A) if this Agreement is terminated at the
election of Boyd Sub pursuant to the provisions of Section 3.2(c) hereof, then
Boyd Sub shall be responsible, at its sole cost and expense, and not as an
expense of the Joint Venture, for any and all costs and expenses relating to the
foregoing matters undertaken by Boyd Sub prior to the end of such six (6)-month
period; (B) if this Agreement is not terminated by Boyd Sub pursuant to the
provisions of Section 3.2(c) hereof, and Tract A is contributed by MR Sub to the
Joint Venture, then all such costs and expenses incurred prior to the expiration
of such six (6)-month period shall be deemed to be Project Costs for which Boyd
Sub shall be entitled to a capital contribution credit pursuant to the terms of
Section 3.3(a) hereof; and (C) if this Agreement is not terminated by Boyd Sub
pursuant to the provisions of Section 3.2(c) hereof and Boyd Sub
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elects to substitute Tract C for Tract A pursuant to the provisions of Section
3.2(d) hereof, then Boyd Sub shall be responsible for any and all such costs and
expenses incurred prior to the expiration of such six (6)-month period that are
solely associated with Tract A, and the portion of such costs and expenses that
are not solely associated with Tract A which are incurred prior to the
expiration of such six-(6) month period shall be deemed to be Project Costs for
which Boyd Sub shall be entitled to a capital contribution credit pursuant to
the terms of Section 3.3(a) hereof.
(e) Without the consent of each Venturer, which consent shall not
unreasonably be withheld, Commencement of Construction of the Facility shall not
occur until the closing of the Construction Financing, but shall occur as
promptly as practicable thereafter. If Commencement of Construction of the
Facility has not occurred by the first anniversary of the later to occur of (i)
the date of the Commencement of Construction of the MRI Casino Project by MRI or
its Affiliate, provided that such construction shall at all times thereafter
proceed with diligence and in a timely manner, or (ii) the date the Property is
contributed to the Joint Venture in accordance with and satisfaction of all of
the terms and conditions of this Agreement; subject to any delays in the
Commencement of Construction of the Facility attributable to factors beyond Boyd
Sub's reasonable control, including, without limitation, any delays by MRI or MR
Sub in obtaining the Master Plan Approvals, any delays relating to the Circus
Litigation, any delays by the City in vacating the City facilities upon the
Parcel, any delays in the Joint Venture's obtaining any and all required
consents, permits, licenses and approvals necessary to construct the Facility
(which delays are not caused by any fault on the part of Boyd Sub), or the
inability of the Joint Venture to obtain Construction Financing upon the terms
and conditions provided in Section 4.1 hereof (but which factors shall not
include any lack of financial resources that prevents Boyd Sub from contributing
any amount required by Section 3.3 hereof), for all of which delays the
foregoing time period shall be automatically extended for a period of time equal
to the corresponding delay, either Venturer may, by written notice to the other
Venturer delivered within 60 days after such date, elect to dissolve the Joint
Venture as provided in Article 13 hereof. In the event of a dissolution of the
Joint Venture pursuant to the terms and conditions of this Section 4.2(e), which
dissolution is not subject to any dispute between the Venturers (or which
dissolution, in the event of such dispute, is finally determined by a judicial
tribunal to have been authorized pursuant to the express terms and conditions of
this Section 4.2(e)), Boyd shall pay MR Sub, from Boyd's funds and not from the
assets of the Joint Venture, a termination fee of $2,000,000.
(f) Boyd Sub shall diligently cause to be completed the construction of
the Facility and shall cause the Facility to open to the public as expeditiously
as possible.
(g) MRI shall have the responsibility and authority to negotiate a
project agreement with the Atlantic City Building Trades Council on behalf of
all developers within the Parcel. Such negotiation shall be conducted by a
committee chaired by a representative of Atlandia, and on which Boyd Sub shall
be represented by its most senior in-house construction official.
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Section 4.3 Governmental Approvals.
(a) In addition to using all commercially reasonable efforts in order to
obtain all Master Plan Approvals, as more particularly provided in Section
4.2(a) hereof, MR Sub shall have the responsibility and authority, at its sole
cost and expense and not as an expense of the Joint Venture, for preparing and
filing all documents, instruments and applications necessary to obtain all
permits or approvals of all governmental and quasi-governmental agencies
required in order to subdivide the Parcel, record the Parcel Map therefor and to
contribute the Property to the Joint Venture. The subdivision of the Parcel
shall be consistent with the Master Plan, and the subdivision of Tracts A and C
shall conform, in all material respects, to the size, location and configuration
of Tracts A and C, respectively, as depicted on Exhibit A attached hereto.
Tracts A and C shall consist of separate legal parcels, and upon approval and
recordation of the final Parcel Map, MR Sub shall deliver to Boyd Sub an "as
recorded" copy thereof and an updated ALTA Survey of each of Tracts A and C.
(b) MRI, MR Sub and Atlandia, in consultation with Boyd Sub, shall
prepare and submit all applications for the permits and approvals required
pursuant to Section 4.3(a) hereof and shall thereafter prosecute such
applications diligently to completion. With regard to all Master Plan Approvals
or other governmental permits and approvals required to be obtained pursuant to
Section 4.3(a) hereof, MRI, MR Sub and Atlandia agree that they will, and will
cause their respective consultants and contractors, to (i) keep Boyd Sub
informed on a regular and timely basis as to the status of any and all such
approvals and permits which have not been received prior to the date hereof or
which may require modification or amendment, as permitted hereby, (ii) cooperate
with Boyd Sub and give due consideration to any recommendations and/or proposals
made by Boyd Sub with regard thereto, and (iii) otherwise not take or permit to
be taken any actions which might materially adversely affect the use and
development of the Property and the Facility.
(c) The Managing Venturer shall have the responsibility and authority
for preparing, filing and processing all applications to obtain all governmental
licenses, approvals, permits and entitlements on behalf of the Joint Venture
necessary or appropriate for the design, development, construction, ownership
and operation of the Facility, including without limitation a CAFRA permit,
building permits and licenses and approvals issued by the New Jersey Gaming
Authorities, but excluding all Master Plan Approvals or other governmental
approvals that are expressly set forth herein as the obligation of MRI, MR Sub
or Atlandia.
(d) The costs of preparing, filing and processing applications to obtain
licenses and approvals from the New Jersey Gaming Authorities, including without
limitation, investigation costs, shall be borne by the Venturer who (or whose
Affiliates) requires such licenses and approvals and shall not be an expense of
the Joint Venture. The Venturers shall at all times cooperate with each other
and furnish all documents and other information necessary in order to obtain
such licenses, approvals, permits and entitlements. Notwithstanding the
foregoing, the costs of obtaining and maintaining a finding of suitability of
the Facility as an approved hotel and of obtaining and maintaining a valid
operation certificate for the Facility from the New Jersey Gaming Authorities
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pursuant to Sections 83, 84e and 96, respectively, of the New Jersey Casino
Control Act (N.J.S.A. 5:12-1 et. seq.), shall be an obligation of the Joint
Venture.
(e) MRI, MR Sub, Atlandia, and their respective Affiliates shall not
enter into any amendments to the Development Agreement, the Road Development
Agreement or any other agreement with any third party or governmental entity
that would materially adversely affect the development of the Property by the
Joint Venture without obtaining the prior written consent of Boyd Sub thereto,
which consent shall not unreasonably be withheld or delayed by Boyd Sub. If the
Managing Venturer determines that any amendments or modifications to the
Development Agreement or Road Development Agreement are reasonably necessary or
advisable to accommodate the development of the Facility, MRI, MR Sub and/or
Atlandia, respectively, agrees that it will take such steps as are reasonably
necessary or advisable to attempt to obtain such amendments or modifications.
Section 4.4 Environmental Matters.
(a) MRI shall have sole responsibility and authority with respect to and
shall, at its sole cost and expense and not as an expense of the Joint Venture,
use all commercially reasonable efforts to cause to be diligently completed, the
environmental assessment and remediation of the Parcel (including the Property,
to the extent that such assessment and remediation relates to the Facility as it
exists at the time of initial public opening and not to any future expansions
thereof or additions thereto). The environmental assessment and remediation of
the Parcel and the Property shall be conducted in accordance with a remediation
plan approved by all applicable federal, state and local agencies. MRI shall
also be responsible, at its sole cost and expense and not as an expense of the
Joint Venture, for satisfying all commercially reasonable requirements of any
provider or providers of the Construction Financing and of any title insurance
company that provides either an ALTA Owner's Policy or a Lender's Policy of
Title Insurance, relating to the environmental assessment or remediation of the
Parcel. Except for the foregoing costs and expenses, MRI have no further
liability to the Joint Venture or any Venturer with respect to or in any way
arising out of the environmental remediation of the Parcel and the Property, and
the Parties hereby release MRI and its Affiliates from and waive any such
liability, damages, costs and expenses.
(b) MRI shall be entitled to receive and retain any credits or other
financial assistance which may be made available by the State of New Jersey or
any other governmental entity as a result of expenditures for environmental
assessment and remediation of the Parcel. To the extent that, pursuant to any
applicable law or regulation, any such credits or other financial assistance
become payable to the Joint Venture, the Joint Venture shall promptly remit the
full amount thereof to MRI. The environmental assessment and remediation of the
Parcel shall be conducted by one or more licensed professional firms selected by
MRI, and MRI will assign to the Joint Venture any and all assignable rights
(including rights to indemnification) which MRI has under its contract or
contracts with such firms. Promptly upon completion of such remediation (other
than ongoing methane venting and other ongoing monitoring or remediation
systems), MRI shall use all commercially reasonable efforts to have delivered to
the Joint Venture (i) all Environmental Assessment Reports,
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including without limitation, all closure reports issued by all applicable
governmental or quasi-governmental agencies and authorities, confirming their
final approval of completion of such remediation work (other than any such
ongoing ventilation and monitoring requirements) (the "Closure Reports"), (ii) a
"no further action" letter issued by the NJDEP, and (iii) a covenant not to sue
issued by the NJDEP, pursuant to which the NJDEP shall agree to waive its rights
to institute any and all civil suits and claims against the Venturers or the
Joint Venture pursuant to any applicable environmental laws or regulations for
cleanup and removal costs or natural resource damages concerning contamination
discharge at the Property prior to date that MR Sub conveys title to the
Property to the Joint Venture.
(c) If requested by MRI, Boyd Sub shall furnish MRI as promptly as
practicable with information concerning the proposed Facility, including without
limitation the footprint, storm drainage system, slab elevations at the bottom
floor relative to existing grade, utility lines, hard scape areas and site
grading, necessary for MRI's consultants to prepare all permit applications and
construction documents that may be required to secure approval for MRI's
contractor(s) to remediate the Property. Boyd Sub will fully cooperate with
MRI's consultants and contractors(s) to ensure that the remediation of the
Property can be accomplished in the most efficient and cost-effective manner
possible. If MRI determines that all or a portion of the remediation associated
with the Facility (for example, the installation of methane venting systems) can
be more efficiently accomplished by the Joint Venture's contractors as part of
the construction of the Facility, the Joint Venture shall directly engage such
contractors as MRI shall direct for such purpose, and MRI shall reimburse the
Joint Venture for the costs and expenses of such contractors. All plans relating
to the Facility shall be consistent with the landfill closure and remediation
plan approved by the State of New Jersey.
(d) The Joint Venture will maintain the methane venting and other
environmental remediation systems associated with the Facility in accordance
with all approved Closure Reports and all applicable laws, regulations and
procedures (and acknowledges that the Property will be subject to recorded deed
restrictions imposed by the NJDEP intended to ensure compliance with such
procedures) and will indemnify and hold harmless MRI and its Affiliates from and
against any and all damages, claims, liabilities and expenses resulting from the
Joint Venture's failure to do so.
ARTICLE 5
ALLOCATION OF PROFITS AND LOSSES
Section 5.1 Profits and Losses. The terms "Profits" and "Losses" shall
mean, for each fiscal year, an amount equal to the Joint Venture's federal
taxable income or loss for such period determined in accordance with Section
703(a) of the Internal Revenue Code of 1986, as amended (the "Code"), but
disregarding Section 703(a)(1) of the Code, and with the following adjustments:
(a) income exempt from federal income tax shall be added to such taxable
income or loss;
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(b) expenditures not deductible in computing the Joint Venture's taxable
income and that are not properly chargeable as capital expenditures shall be
subtracted from such taxable income or loss;
(c) in the event that the tax book value of any Joint Venture asset is
adjusted pursuant to Section 7.2(a) or (b) hereof, the amount of such adjustment
shall be taken into account as gain or loss from the disposition of such asset
in computing Profits and Losses;
(d) gain or loss from any disposition of a Joint Venture asset with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the tax book value and not the adjusted
federal income tax basis of the asset disposed of; and
(e) if the tax book value of a Joint Venture asset has been adjusted
pursuant to Section 7.2 hereof, in lieu of federal income tax depreciation, tax
book depreciation (which shall be in the same ratio to tax book value at the
beginning of the taxable period as federal income tax depreciation is to
adjusted federal income tax basis at the beginning of such period) shall be
taken into account in computing Profits and Losses.
Section 5.2 Allocations. Profits or Losses, including without limitation
all items of income, gain, profit, loss, cost, expense, deduction or credit
earned or incurred by the Joint Venture, shall be allocated and credited to the
Venturers, and reflected in the Capital Accounts of the Venturers, in accordance
with each Venturer's Interest. Notwithstanding the foregoing, the following
items shall be specially allocated in the following manner:
(a) Solely for the purpose of federal, state and local income taxes, and
without affecting or in any way being taken into account in computing a
Venturer's Capital Account or share of Profits, Losses or other items or
distributions pursuant to any provision of this Agreement:
(i) items of income, gain, loss and deduction with respect to any
property contributed to the Joint Venture by any Venturer shall be allocated
among the Venturers in accordance with Section 704(c) of the Code so as to take
account of any variation between the adjusted basis of the property to the Joint
Venture and the fair market value of the property (as determined by the
Venturers) at the time of the contribution; and
(ii) in the event that the tax book value of a Joint Venture
asset is adjusted pursuant to Section 7.2(a) hereof, subsequent allocations of
income, gain, loss and deduction with respect to such asset shall take account
of any difference between the adjusted basis of such asset for federal income
tax purposes and its book value in the same manner as under Section 704(c) of
the Code.
(b) To the extent the adjusted federal income tax basis of a Joint
Venture asset is adjusted pursuant to Section 734(b) or 743(b) of the Code, and
such adjustment is required by Treasury Regulation ss. 1.704-1 (b)(2)(iv)(m) to
be taken into account in determining Capital Accounts, the
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amount of such adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such gain or loss shall be allocated to
the Venturers in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Treasury Regulation.
(c) Except as provided in Treasury Regulation ss. 1.704-2(f)(2), (3) and
(4) (pertaining to conversion or repayment of nonrecourse liabilities), in the
event there is a net decrease in partnership minimum gain (within the meaning of
Treasury Regulation ss. 1 .704-2(d)) for a taxable year of the Joint Venture,
each Venturer must be allocated items of partnership income and gain for that
year equal to that Venturer's share of the net decrease in partnership minimum
gain (within the meaning of Treasury Regulation ss. 1.704-2(g)(2)). Allocations
made pursuant to this Section 5.2(c) shall consist of gains recognized from the
disposition of Joint Venture property subject to one or more nonrecourse
liabilities of the Joint Venture and then, if necessary, shall consist of a pro
rata portion of the Joint Venture's other items of income and gain for that
taxable year.
(d) Items of loss or deductions attributable to a nonrecourse liability
to a Venturer incurred pursuant to Section 3.7 hereof or to a nonrecourse
liability with respect to which a Venturer bears the economic risk of loss
(within the meaning of Treasury Regulation ss. 1.752-2) shall be allocated to
such Venturer.
(e) If the additional capital contributions of Boyd Sub pursuant to the
first sentence of Section 3.3(a) hereof and pursuant to Section 3.3(b) hereof
exceed the fair market value of the Property at the time of the conveyance of
the Property to the Joint Venture as specified in Section 3.2(f) hereof, upon
liquidation of the Joint Venture in accordance with Article 13 hereof MR Sub
shall be allocated items of income and gain, including gross income if
necessary, equal to the excess of such additional capital contributions over
such fair market value.
(f) If MR Sub makes additional capital contributions pursuant to Section
3.3(c) hereof, upon liquidation of the Joint Venture in accordance with Article
13 hereof Boyd Sub shall be allocated items of income and gain, including gross
income if necessary, equal to the amount of such additional capital
contributions.
Section 5.3 Transfers of Joint Venture Interests. If any Interest in the
Joint Venture is Transferred in accordance with Section 11.2(a) hereof, all
items of Profits or Losses, including without limitation all items of income,
gain, profit, loss, deduction, cost, expense or credit and all other items of
the Joint Venture with respect to the Interest so Transferred, shall be
allocated between the transferor and the transferee in accordance with Section
706 of the Code using such conventions as may be selected by the Venturers.
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ARTICLE 6
NON-LIQUIDATING DISTRIBUTIONS
Section 6.1 Distributable Cash. The term "Distributable Cash" with
respect to any period shall mean an amount equal to the total cash revenues and
receipts of the Joint Venture from any source (including capital contributions,
loans and refinances) for such period, less the sum of (i) all operating
expenses paid or incurred by the Joint Venture, including current principal and
interest payments on the Construction Financing and other Joint Venture
indebtedness, but excluding any distributions pursuant to Section 6.2, (ii) all
capital expenditures made by the Joint Venture and (iii) the amount of any
increase during such period in, or amounts established during such period for,
reasonable reserves for anticipated costs, expenses, liabilities and obligations
of the Joint Venture, working capital needs of the Joint Venture or other
appropriate Joint Venture purposes, as reasonably determined by the Managing
Venturer in consultation with the other Venturer.
Section 6.2 Distribution of Distributable Cash. Subject to any covenants
contained in the documentation governing the Construction Financing or any other
agreements to which the Joint Venture is a party, commencing with the first full
fiscal quarter following the fiscal quarter during which the Facility opens to
the public, Distributable Cash for each fiscal quarter shall be distributed
within 45 days after the end of such quarter in the following order of priority:
(a) first, to the Venturers to repay amounts, if any, lent by them to
the Joint Venture pursuant to Section 3.7 hereof, any such payments to be made
on a pro rata basis according to the then outstanding balances of such loans,
with such payments applied first against accrued interest; and
(b) the balance, if any, to the Venturers, pro rata in accordance with
their respective Interests.
ARTICLE 7
ACCOUNTING AND RECORDS
Section 7.1 Books and Records. The Joint Venture shall keep at its
principal office separate books of account for the Joint Venture which shall
show a true and accurate record of all costs and expenses incurred, all charges
made, all credits made and received and all income derived in connection with
the operation of the Joint Venture business in accordance with generally
accepted accounting principles consistently applied.
Each Venturer shall, at its sole expense, have the right, at any time
without notice to the other, to examine, copy and audit the Joint Venture's
books and records during normal business hours.
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Section 7.2 Tax Book Values. The tax book value of any Joint Venture
asset shall be such asset's adjusted basis for federal income tax purposes,
except as follows:
(a) The tax book value of Joint Venture assets shall be adjusted to
equal their respective gross fair market values, as determined by the Venturers,
as of the following times:
(i) upon the acquisition of an additional Interest in the Joint
Venture by any new or existing Venturer in exchange for more than a de minimis
capital contribution; and
(ii) upon the liquidation of the Joint Venture within the meaning
of Treasury Regulation ss. 1.704-1 (b)(2)(ii)(g).
(b) The tax book value of a Joint Venture asset that is distributed to
any Venturer shall be the fair market value of such asset at the time of
distribution, as determined by the Venturers.
(c) The tax book value of Joint Venture assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Section 734(b) or 743(b) of the Code, but only to the extent such
adjustments are taken into account in determining Capital Accounts pursuant to
Treasury Regulation ss. 1.704-l (b)(2)(iv)(m).
(d) If the tax book value of a Joint Venture asset has been adjusted
pursuant to this Section 7.2, such tax book value shall thereafter be adjusted
by the amount of tax book depreciation taken into account with respect to such
asset for the purpose of determining Profits and Losses.
Section 7.3 Reports.
(a) The Managing Venturer shall cause to be prepared and distributed to
each Venturer the following reports as promptly as practicable, but in any event
within 75 days after the end of each fiscal year of the Joint Venture:
(i) a balance sheet as of the end of the fiscal year and
statements of income, Venturers' equity and cash flows for the year then ended,
each of which shall be audited by a Firm of independent certified public
accountants (the "Accountants") selected by the Venturers in accordance with
Section 9.2(1) hereof;
(ii) a general description of the activities of the Joint Venture
during the period covered by the report; and
(iii) a report of any material contracts or transactions between
the Joint Venture and the Venturers or any of their Affiliates, including fees
or compensation paid by the Joint Venture and the products supplied and services
performed by the Venturers or any such Affiliate for such fees or compensation.
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(b) As promptly as practicable, but in any event within 30 days after
the end of each of the first three quarters of each fiscal year, the Managing
Venturer shall cause to be prepared and distributed to each Venturer a quarterly
report containing a balance sheet and statement of income for the period covered
by the report, each of which may be unaudited but which shall be certified by
the chief financial officer of the Joint Venture as fairly presenting the
financial position and results of operations of the Joint Venture during the
period covered by the report and as having been prepared in accordance with
generally accepted accounting principles applied on a basis substantially
consistent with that of the Joint Venture's audited financial statements. The
report shall also contain a description of any material event regarding the
business of the Joint Venture during the period covered by the report.
(c) As promptly as practicable, but in any event within 90 days after
the end of each fiscal year, the Managing Venturer shall cause to be prepared
and distributed to each Venturer all information necessary for the preparation
of such Venturer's federal and state income tax returns, including a statement
showing such Venturer's share of income, gains, losses, deductions and credits
for such year for federal and state income tax purposes and the amount of any
distributions made to or for the account of such Venturer pursuant to this
Agreement.
Section 7.4 Tax Returns. The Managing Venturer, at the expense of the
Joint Venture, shall prepare or cause the Accountants to prepare all income and
other tax returns, on an accrual basis, of the Joint Venture and cause the same
to be filed in a timely manner. The Managing Venturer shall furnish to each
Venturer a copy of each such return as soon as it has been filed, together with
any schedules or other information which each Venturer may require in connection
with such Venturer's own tax affairs. Each of the Venturers shall, in its
respective income tax return and other statements filed with the Internal
Revenue Service or other taxing authority, report taxable income in accordance
with the provisions of this Agreement.
Section 7.5 Tax Matters Partner. The Managing Venturer is hereby
designated as the "tax matters partner" of the Joint Venture as defined in
Section 6231 of the Code and, to the extent authorized or permitted under
applicable law, the Managing Venturer shall represent the Joint Venture in
connection with all examinations of Joint Venture affairs by taxing authorities,
including, without limitation, resulting administrative and judicial
proceedings.
Section 7.6 Fiscal Year. The fiscal year of the Joint Venture shall be
the calendar year. As used in this Agreement, a fiscal year shall include any
partial fiscal year at the beginning or end of the term of the Joint Venture.
Section 7.7 Bank Accounts. The Managing Venturer shall be responsible
for causing one or more accounts to be maintained in one or more banks, which
accounts shall be used for the payment of expenses incurred in connection with
the business of the Joint Venture, and in which shall be deposited any and all
cash receipts. All such amounts shall be and remain the property of the Joint
Venture and shall be received, held and disbursed by the Joint Venture for the
purposes
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specified in this Agreement. There shall not be deposited in any of such
accounts any funds other than funds belonging to the Joint Venture, and no other
funds shall be commingled with such funds.
Section 7.8 Tax Elections.
(a) At the request of any Venturer, the Managing Venturer, on behalf of
the Joint Venture, shall elect to adjust the basis of the assets of the Joint
Venture for federal income tax purposes in accordance with Section 754 of the
Code in the event of a distribution of Joint Venture property as described in
Section 734 of the Code or a transfer by any Venturer of its Interest in the
Joint Venture as described in Section 743 of the Code.
(b) The Managing Venturer, on behalf of the Joint Venture, shall from
time to time make such other tax elections as it deems necessary or desirable to
carry out the business of the Joint Venture or the purposes of this Agreement.
Section 7.9 Tax Withholding. Except as otherwise provided in this
Section 7.9, if the Joint Venture incurs an obligation to withhold taxes with
respect to any Venturer, any amount withheld or paid as withholding taxes by the
Joint Venture with respect to such Venturer shall be treated for all purposes of
this Agreement as if it had been distributed to such Venturer. The Venturers may
make such elections with respect to such withholding obligations, including
without limitation an election pursuant to Section 1446 of the Code, as they
reasonably determine. If the withholding obligation exceeds the amount that
would have been distributed to such Venturer determined without regard to the
provisions of this Section 7.9, such excess amount shall be treated for all
purposes of this Agreement as if it had been transferred to such Venturer by the
Joint Venture as an interest-free loan. If the Joint Venture incurs any
liability as a result of a failure to withhold with respect to any Venturer,
such liability will be borne by such Venturer and charged to such Venturer's
Capital Account. Amounts treated as loaned to any Venturer pursuant to this
Section 7.9 shall be repaid by such Venturer to the Joint Venture as promptly as
practicable. The Joint Venture shall offset such amounts against any amounts
that would otherwise be distributed to such Venturer.
ARTICLE 8
CONFIDENTIALITY; INTELLECTUAL PROPERTY
Section 8.1 Confidential Treatment of Information. Each of the Venturers
agrees, and shall cause each of its Affiliates (i) not to disclose any material
information concerning the Joint Venture or its business to the press or the
general public without the approval of the other Venturer, such approval not to
be unreasonably withheld or delayed and (ii) to retain in strict confidence any
proprietary confidential information and trade secrets of the other Venturer,
whether disclosed prior to or after the date hereof, and not to use or disclose
to persons other than the Venturer or its Affiliates ("third parties"), and to
use its best efforts to cause its employees, agents and consultants not to use
or disclose to third parties, such proprietary confidential information or trade
secrets
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without the approval of the other Venturer, unless in either case it can be
established by the disclosing party that such information:
(a) at the time of disclosure is part of the public domain and readily
accessible to the public or such third party;
(b) at the time of disclosure is already known by the receiving party
otherwise than pursuant to a breach of an obligation of confidentiality;
(c) is required by applicable law, regulation or court order to be
disclosed; or
(d) is required by any vendor, supplier or consultant in order to carry
out the business of the Joint Venture, provided that the disclosing Venturer
shall obtain the written agreement and obligation of such third party, in a form
reasonably satisfactory to the other Venturer, prior to disclosing such
information, that all of the provisions of this Article 8 shall apply with equal
effect to such third party. The Joint Venture shall be a third-party beneficiary
of any such written agreement.
Section 8.2 Intellectual Property. The Joint Venture, Boyd and Boyd Sub,
and their respective Affiliates, shall not have any right to use any trademark,
service mark, trade name, logo, copyright or other intellectual property owned
by MRI or MR Sub, or any of their respective Affiliates, in connection with the
Facility or the business of the Joint Venture. Except as expressly provided
herein, the Joint Venture, MRI and MR Sub, and their respective Affiliates,
shall not have the right to use any trademark, service mark, trade name, logo,
copyright or other intellectual property owned by Boyd or Boyd Sub, or any of
their respective Affiliates, in connection with the Facility or the business of
the Joint Venture. Notwithstanding the foregoing, Boyd will enter into a license
agreement (in form and substance reasonably satisfactory to Boyd) with the Joint
Venture providing for the use of the name "Stardust" (subject to legal
availability thereof) and other intellectual property owned by Boyd and to be
used in connection with the management or operation of the Facility (the "Boyd
License Agreement"), without compensation to Boyd, as long as Boyd Sub or
another Affiliate of Boyd shall be a Venturer. In the event that Boyd Sub or
another Affiliate of Boyd shall cease for any reason to be a Venturer, the Boyd
License Agreement shall provide for a reasonable transition period to enable the
Joint Venture to replace Boyd's intellectual property being used by the Joint
Venture, including without limitation, the Stardust name, without causing any
disruption in the operations of the Facility. Notwithstanding the above, in the
event that Boyd Sub or another Affiliate of Boyd shall become the Non-Managing
Venturer, the Boyd License Agreement shall provide that the Joint Venture may
continue to use the "Stardust" name and shall provide for a reasonable
transition period to enable the Joint Venture to replace Boyd's other
intellectual property being used by the Joint Venture, without causing any
disruption in the operations of the Facility. The Managing Venturer, on behalf
and at the expense of the Joint Venture, shall prepare, file and prosecute all
applications which it reasonably deems necessary or appropriate to protect and
preserve any intellectual property rights acquired or developed by the Joint
Venture. Upon any liquidation of the Joint Venture, the Boyd License Agreement
shall terminate
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(if not previously terminated pursuant to the terms thereof), and each Venturer
shall be entitled to the full and complete right to use any and all intellectual
property owned or developed by the Joint Venture (other than any intellectual
property covered by the Boyd License Agreement, including without limitation,
any alterations or modifications of the intellectual property covered thereby
which may have been developed by the Joint Venture, which items shall be the
exclusive property of Boyd Sub or its Affiliates) during the term hereof,
including without limitation, any customer or marketing databases developed by
the Joint Venture.
ARTICLE 9
MANAGEMENT
Section 9.1 Management by Managing Venturer. Subject to Section 9.3
hereof, Boyd Sub shall be and hereby is appointed the Managing Venturer of the
Joint Venture and shall serve in such capacity without fee or other
compensation.
Except as otherwise provided in this Agreement, the Managing Venturer
shall have, and hereby assumes, sole responsibility and authority for the
prudent day-to-day management and operation of the Joint Venture and the
Facility, and in furtherance thereof may exercise the following specific rights
and powers without approval of the other Venturer:
(a) oversee and manage the day-to-day operations of the Facility, the
Joint Venture business and such other activities as are customary in connection
with such operations;
(b) except as otherwise provided in Sections 4.2, 4.4 and 9.2 hereof,
direct and oversee the architectural, engineering, design, construction,
administrative, legal and other work necessary for the design, development,
construction, completion, financing, opening, operation and improvement of the
Facility and other Joint Venture business;
(c) prepare appropriate budgets and construction schedules for the
development, construction, opening, repair, improvement and operation of the
Facility and other Joint Venture property;
(d) except as otherwise provided in Sections 4.2, 4.4 and 9.2 hereof,
negotiate with and enter into contracts for the design, development,
construction, completion, opening, operation and improvement of the Facility,
and supervise all such work;
(e) implement decisions made by the Venturers;
(f) use its best efforts to operate, on behalf of and for the sole
benefit of the Joint Venture, the Facility and such other business and
activities as are customary in connection with such operation;
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(g) preserve, maintain and distribute Joint Venture funds in accordance
with the provisions of this Agreement;
(h) contract on behalf of the Joint Venture for the services of
independent contractors, including attorneys, accountants and financial
advisers;
(i) establish, maintain and supervise the deposit of funds and
securities of the Joint Venture with federally insured banking institutions, and
the Managing Venturer is authorized to sign on behalf of the Joint Venture on
all accounts with such banking institutions;
(j) acquire by purchase, lease or otherwise such personal property as
may be necessary, convenient or incidental to the accomplishment of the purposes
of the Joint Venture;
(k) procure on behalf of the Joint Venture such general liability,
casualty, comprehensive, workers' compensation, fidelity, errors and omissions,
business interruption and other insurance as is adequate to protect the Joint
Venture;
(l) execute on behalf of the Joint Venture any and all agreements,
documents, certificates and instruments necessary or convenient in connection
with the management and operation of the Facility or in connection with managing
the affairs of the Joint Venture; and
(m) employ or retain, or enter into any transaction or contract with,
any Venturer or any officer, employee or Affiliate of any Venturer, upon the
terms and conditions provided in Section 2.4 hereof.
Section 9.2 Exclusive Powers of the Venturers. In addition to those
matters which, pursuant to other provisions of this Agreement, require approval
of each Venturer, the following matters shall require the approval of each
Venturer:
(a) except as otherwise provided in this Agreement, the admission of an
additional Venturer;
(b) except as otherwise provided in Section 4.2 hereof, the design of
the exterior of the Facility, including landscaping, lighting and signage;
(c) the acquisition of any real property in addition to the Property;
(d) any transaction which is unrelated to the purposes of the Joint
Venture or makes it unlawful or impossible to carry out the purposes of the
Joint Venture;
(e) except with respect to the Construction Financing or as otherwise
provided in this Agreement, the incurrence of any indebtedness;
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(f) the refinancing or early retirement of any Joint Venture
indebtedness;
(g) except in connection with the Construction Financing, the sale or
hypothecation of all or any significant part of the property or assets of the
Joint Venture, other than in the ordinary course of business;
(h) capital expenditures which are not included in the original
construction budget or in a budget prepared by the Managing Venturer and
approved by the Non-Managing Venturer on an annual basis, except for capital
expenditures not exceeding $50,000 per expenditure and $250,000 in the aggregate
in any fiscal year of the Joint Venture.
(i) except as otherwise provided in Article 11 hereof, the Transfer of
all or any portion of a Venturer's Interest in the Joint Venture;
(j) the compromise of any claim owned by the Joint Venture in excess of
$500,000 or submission to arbitration of any dispute or controversy involving
the Joint Venture, other than in the ordinary course of business;
(k) the cancellation or lapse of any material insurance policy, which
approval shall not be unreasonably withheld or delayed;
(l) the selection and retention of independent certified public
accountants to audit the Joint Venture's financial statements and prepare its
tax returns;
(m) the establishment of hotel room rate structures for the Facility;
provided, however, that the Managing Venturer may change hotel room rates
without the approval of the Non-Managing Venturer until such time as the
Non-Managing Venturer shall have notified the Managing Venturer in writing that
the Non-Managing Venturer's approval shall thereafter be required;
(n) any expenditure by the Joint Venture in excess of $50,000 other than
expenditures authorized pursuant to Sections 9.2(a)-(m) hereof or expenditures
in the ordinary course of business;
(o) except as otherwise provided in this Agreement, the dissolution or
liquidation of the Joint Venture, or a merger, consolidation or recapitalization
involving the Joint Venture; and
(p) the sale or other disposition of any Special Revenue Bonds owned by
the Joint Venture.
Any matter which requires the approval of each Venturer may be approved
by an instrument signed by an authorized representative of each Venturer. The
initial authorized representatives of Boyd Sub shall be William S. Boyd, Donald
D. Snyder, Robert L. Boughner and Ellis Landau, and the initial authorized
representatives of MR Sub shall be Stephen A. Wynn, Daniel R. Lee, Bruce A.
Levin and Kenneth R. Wynn. Either Venturer may designate different or additional
authorized
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representatives by written notice to the other. Notwithstanding anything
contained in this Section 9.2 or in any other provision of this Agreement, if MR
Sub shall become the Managing Venturer pursuant to Section 9.3 hereof due to a
Prohibited Transaction, the Non-Managing Venturer shall cease to have any
approval or consent rights whatsoever under this Agreement.
Section 9.3 Replacement of Managing Venturer.
(a) Except as otherwise provided in this Agreement, the Managing
Venturer may only be changed with the approval of each Venturer. In the event
that (i) the Joint Venture is in material default with respect to any of its
debt obligations, whether or not any period to cure such default has expired,
(ii) an Event of Default on the part of Boyd Sub has occurred and is continuing
under this Agreement, (iii) Boyd Sub or another direct or indirect wholly owned
subsidiary of Boyd ceases for any reason (including a Permitted Transfer) to own
at least a 50% Interest in the Joint Venture or Boyd Sub consummates a
Prohibited Transaction as provided in Section 11.6 hereof, (iv) prior to the end
of the three-year period commencing upon the public opening of the Facility,
William S. Boyd ceases to serve as Chairman of the Board of Boyd other than by
reason of his death or incapacity or, in the event of the death or incapacity of
William S. Boyd, none of Donald D. Snyder, Robert L. Boughner or Ellis Landau is
serving as Chief Operating Officer or a more senior executive officer of Boyd
for any reason, or (v) prior to the end of the three-year period commencing upon
the public opening of the Facility, William S. Boyd, or his heirs or legatees
collectively, cease to own beneficially at least 15% of the outstanding common
stock or to be the largest beneficial stockholder of Boyd, MR Sub may, at any
time during the continuation of any event specified in (i) through (v) above,
elect by written notice delivered to Boyd Sub to become the Managing Venturer,
and MR Sub shall thereupon become the Managing Venturer and Boyd Sub shall
become the Non-Managing Venturer. In the event of such election by MR Sub as a
result of an event specified in clause (i), (ii) or (iii) of this Section
9.3(a), the Joint Venture shall pay MR Sub, on a quarterly basis, a management
fee equal to 3.5% of gross revenues (before deduction of promotional allowances)
of the Joint Venture. Upon the occurrence of any of the events specified in
Section 13 .1(h) hereof with respect to the Managing Venturer, if the business
of the Joint Venture is continued, the remaining Venturer shall become the
Managing Venturer.
(b) The Managing Venturer shall not have the right to resign as Managing
Venturer, and any such purported resignation shall constitute an Event of
Default under this Agreement which shall entitle the other Venturer to exercise
all rights and remedies available under this Agreement, at law or m equity.
Section 9.4 Meetings of the Venturers: Time and Place. The Venturers
shall meet with each other on a periodic basis, at least quarterly. At such
meetings, the Managing Venturer's representatives shall report on the
performance and condition of the Joint Venture, give progress reports on
negotiation of the Construction Financing, the status of governmental permits
and approvals for the Facility, capital projects including construction of the
Facility, material contracts entered into, material litigation and other matters
material to the operation of the Joint Venture. Meetings shall be held at such
time and place within the County as the Managing Venturer shall
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determine or by telephone, provided that each Venturer's representatives may
simultaneously participate and hear each other Venturer's representatives. The
Venturers may take action without a meeting if the action taken is reduced to
writing (either prior to or thereafter) and signed on behalf of each Venturer.
Any Venturer may call for a meeting of the Venturers at any time by giving at
least 48 hours' prior written notice to the other Venturer.
Section 9.5 Officers. The Managing Venturer shall appoint the chief
executive officer, chief financial officer and other officers of the Joint
Venture, who shall serve at the direction and pleasure of the Managing Venturer.
Appointment and replacement of the chief executive officer (or equivalent
officer) of the Joint Venture shall require the approval of the Non-Managing
Venturer, which approval shall not be unreasonably withheld or delayed. The
officers shall perform those functions of the Managing Venturer and such other
duties and responsibilities as the Managing Venturer may assign to them. No
officer or employee of either Venturer or its Affiliates who does not devote
substantially full time to the Joint Venture shall receive any salary or other
compensation from the Joint Venture. The Managing Venturer may from time to time
appoint employees of the Managing Venturer or its Affiliates to devote
substantially full time to the Joint Venture and retain such employees on its
payroll. In such event, the Joint Venture shall reimburse the Managing Venturer
or its Affiliate for the out-of-pocket compensation (including salary, bonus and
the direct cost of health and retirement benefit plans) paid to such employee
for performing services to the Joint Venture on a full-time basis. The terms of
any benefits offered to such an employee shall be within the discretion of the
Managing Venturer or its Affiliate. Each officer of the Joint Venture shall be
indemnified by the Joint Venture from and against any and all claims, losses,
damages and liabilities, including reasonable attorneys' fees which shall be
reimbursed as incurred, arising out of or relating to any act or failure to act
performed or omitted by him; provided, however, that such indemnity shall be
payable only if such officer acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Joint Venture.
Any indemnity under this Section 9.5 shall be paid from, and shall be limited to
the extent of, Joint Venture assets, and no Venturer shall have any personal
liability on account thereof. Each officer of the Joint Venture shall be fully
protected with respect to any action or omission taken or omitted by him in good
faith if such action or omission is taken or omitted in reliance upon and in
accordance with the opinion or advice of competent legal counsel, accountants,
financial advisers or other professionals as to matters within their
professional competence.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
Section 10.1 MR Sub. MRI, MR Sub and Atlandia, as applicable, hereby
represent and warrant, which representations and warranties shall survive the
execution of this Agreement (and which representations and warranties shall be
true and accurate in all material respects at the time that MR Sub conveys the
Property to the Joint Venture pursuant to the terms hereof), that:
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(a) MR Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey and has the requisite
corporate power and authority to enter into and carry out the terms of this
Agreement;
(b) all of the outstanding capital stock of MR Sub is owned directly or
indirectly by MRI;
(c) all corporate action required to be taken by MR Sub to enter into
and carry out the terms of this Agreement has been taken and, except as
otherwise provided or contemplated in this Agreement, no further approval of any
governmental agency, court or other body is necessary in order to permit MR Sub
to enter into and carry out the terms of this Agreement;
(d) this Agreement has been duly executed and delivered by MR Sub and
constitutes the legal, valid and binding obligation of MR Sub, enforceable in
accordance with its terms (subject to applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally, equitable
principles and judicial discretion);
(e) to the best of its knowledge, neither the execution and delivery of
this Agreement, nor the performance of its obligations hereunder, has resulted
or will result in any violation of, or default under, the charter or bylaws of
MR Sub or any indenture, trust agreement, mortgage or other agreement or any
permit, judgment, decree or order to which MR Sub is a party or by which it is
bound (including without limitation, the Circus Agreement, which MRI and MR Sub
believe, in good faith, has terminated in accordance with its own terms), and
there is no default and no event or omission has occurred which, with the
passage of time or the giving of notice or both, would constitute a default on
the part of MR Sub under this Agreement;
(f) to the best of its knowledge, there is no action, proceeding or
investigation, pending or threatened, which questions the validity or
enforceability of this Agreement as to MR Sub;
(g) no representation, warranty or covenant of MR Sub in this Agreement,
or in any document or certificate furnished or to be furnished to Boyd Sub
pursuant hereto, contains or will contain any untrue statement of material fact
or omits or will omit to state a material fact necessary to make the statements
or facts contained therein not misleading; all such representations, warranties
or statements of MR Sub are based, to the best of MR Sub's knowledge, upon
accurate and complete information as of the time of their making, and there have
been, to the best of MR Sub's knowledge, no material changes in such information
subsequent thereto;
(h) MR Sub has no reason to believe that it or its Affiliates will not
receive any gaming license, approval or permit necessary for the consummation of
the transactions contemplated by this Agreement;
(i) MR Sub has provided Boyd Sub with complete and accurate copies of
the Development Agreement, the Road Development Agreement and the Harrah's Land
Exchange Agreement, including any amendments thereto. Other than as set forth in
or referred to in the
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Development Agreement, the Road Development Agreement, the Harrah's Land
Exchange Agreement and the Circus Agreement (which MRI and MR Sub believe, in
good faith, has terminated), to the best of MR Sub's and MRI's knowledge, there
are no unrecorded leases, arrangements, agreements, understandings, options,
contracts, or rights of first refusal affecting or relating in any material way
to the use and development of the Facility and/or the Property. No default or
breach (nor event which, with the giving of notice or the passage of time, or
both, would constitute a default or breach) exists under the Development
Agreement or the Road Development Agreement on the part of MRI, MR Sub, Atlandia
or to the best of the knowledge of MRI, MR Sub or Atlandia, any other party to
such agreements. There is no information or document not disclosed or provided
by MRI, MR Sub or Atlandia to Boyd Sub, which to the best of the actual
knowledge of MRI, MR Sub or Atlandia, could reasonably be expected to materially
adversely affect the use and development of the Facility and/or the Property.
(j) MRI, MR Sub and Atlandia have complied, in all material respects,
with all laws, ordinances, rules, regulations, requirements and orders of
federal, state, or local governments and/or their agencies with respect to the
Property of which they have actual knowledge.
(k) To the best of the knowledge of MRI, MR Sub and Atlandia, there are
no historical or archeological materials or artifacts of any kind or any Indian
ruins of any kind located on the Property;
(l) To the best of the knowledge of MRI, MR Sub and Atlandia, the
Property is not located within any water conservation, irrigation, weed or
insect abatement, or other similar district, or any special improvement
district. The Property is located within a soil conservation district and a
flood hazard area;
(m) MRI, MR Sub and Atlandia do not have any liability for any taxes, or
any interest or penalty in respect thereof, of any nature that may be assessed
against the Joint Venture or that are or may become a lien against the Property;
(n) Except as set forth in the deed to the Parcel from the City to MR
Sub or in the Development Agreement, there are no conditions imposed by any
governmental or quasi-governmental agency or instrumentality, which, if not
satisfied, waived or otherwise eliminated, could result in a reversion or other
defeasance of title to the Property or the Parcel;
(o) MRI, MR Sub and Atlandia have provided Boyd Sub with copies of any
and all reports, studies, investigations and other similar information obtained
by MRI, MR Sub and/or Atlandia which could reasonably be expected to materially
adversely affect the use and development of the Property; and
(p) The information furnished by MRI, MR Sub and Atlandia to Boyd Sub or
Boyd in accordance with the provisions of this Agreement is true and accurate in
all material respects, and
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if, at any time hereafter, there is any material change in any of such
information, MRI , MR Sub and/or Atlandia, respectively, shall promptly notify
Boyd Sub of such material change.
Section 10.2 Boyd Sub. Boyd Sub hereby represents and warrants, which
representations and warranties shall survive the execution of this Agreement
(and which representations and warranties shall be true and accurate in all
material respects at the time that MR Sub conveys the Property to the Joint
Venture pursuant to the terms hereof), that:
(a) Boyd Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey and has the requisite
corporate power and authority to enter into and carry out the terms of this
Agreement;
(b) all of the outstanding capital stock of Boyd Sub is owned directly
or indirectly by Boyd;
(c) all corporate action required to be taken by Boyd Sub to enter into
and carry out the terms of this Agreement has been taken and, except as
otherwise provided or contemplated in this Agreement, no further approval of any
governmental agency, court or other body is necessary in order to permit Boyd
Sub to enter into and carry out the terms of this Agreement;
(d) this Agreement has been duly executed and delivered by Boyd Sub and
constitutes the legal, valid and binding obligation of Boyd Sub, enforceable in
accordance with its terms (subject to applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally, equitable
principles and judicial discretion);
(e) to the best of its knowledge, neither the execution and delivery of
this Agreement, nor the performance of its obligations hereunder, has resulted
or will result in any violation of, or default under, the charter or bylaws of
Boyd Sub or any indenture, trust agreement, mortgage or other agreement or any
permit, judgment, decree or order to which Boyd Sub is a party or by which it is
bound, and there is no default and no event or omission has occurred which, with
the passage of time or the giving of notice or both, would constitute a default
on the part of Boyd Sub under this Agreement;
(f) to the best of its knowledge, there is no action, proceeding or
investigation, pending or threatened, which questions the validity or
enforceability of this Agreement as to Boyd Sub;
(g) No representation, warranty or covenant of Boyd Sub in this
Agreement, or in any document or certificate furnished or to be furnished to MR
Sub pursuant hereto, contains or will contain any untrue statement of material
fact or omits or will omit to state a material fact necessary to make the
statements or facts contained therein not misleading; all such representations,
warranties or statements of Boyd Sub are based, to the best of Boyd Sub's
knowledge, upon accurate and complete information as of the time of their
making, and there have been, to the best of Boyd Sub's knowledge, no material
changes in such information subsequent thereto; and
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(h) Boyd Sub has no reason to believe that it or its Affiliates will not
receive any gaming license, approval or permit necessary for the consummation of
the transactions contemplated by this Agreement.
Section 10.3 Brokers. The parties each represent to the other that they
have not retained any broker, finder or agent in connection with the
transactions contemplated hereby or the negotiation thereof. Each party shall
indemnify and hold the other party harmless from and against all losses, claims,
damages and liabilities, including reasonable attorneys' fees, arising out of or
relating to any claim of brokerage or other commissions relative to this
Agreement or the transactions contemplated hereby insofar as any such claim
arises by reason of services alleged to have been rendered to or at the request
of the indemnifying party.
ARTICLE 11
TRANSFER OF INTERESTS
Section 11.1 Restrictions on Transfers. Except as otherwise expressly
provided in this Agreement, no Venturer shall, without the approval of each of
the Venturers, sell, transfer, assign, pledge, encumber or otherwise dispose of
(each a "Transfer") all or any portion of its Interest in the Joint Venture or
any rights therein. Any purported Transfer in violation of the preceding
sentence shall be null and void and of no force or effect. Each Venturer
acknowledges the reasonableness of the restrictions on Transfers imposed by this
Agreement in view of the Joint Venture purposes and the relationship of the
Venturers. The Venturers acknowledge and agree that they are relying on the
experience, reputation and financial condition of each other in entering into
this Agreement, that the nature of the relationship between the Venturers is
personal and that the amount of damages that would be sustained by the Venturers
in the event of a breach of the restrictions on Transfers imposed by this
Agreement would not be readily ascertainable. Accordingly, upon any breach of
this Article 11 by any Venturer, the other Venturer (in addition to all rights
and remedies it may have under this Agreement, at law or in equity) shall be
entitled to a decree or order from a court of competent jurisdiction
specifically enforcing the restrictions on Transfers contained herein. Each
Venturer further agrees to hold the Joint Venture and the other Venturer
(including their respective directors, officers, employees, Affiliates,
successors and assigns) harmless for, from and against any and all claims,
losses, damages, liabilities and costs, including without limitation, reasonable
attorneys' fees (which shall be reimbursed as incurred), and liabilities for
income taxes and costs of enforcing this indemnity, incurred by any of such
indemnified parties as a result of a Transfer or purported Transfer in violation
of this Agreement.
Section 11.2 Permitted Transfers.
(a) A Venturer shall be entitled to make the following Transfers of its
Interest (each a "Permitted Transfer") without the approval of the other
Venturer: (i) a pledge or encumbrance of its Interest in favor of one or more
commercial banks or other institutional lenders to secure a loan
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provided by such lender(s) to such Venturer or its Affiliates, provided that a
foreclosure upon such pledge or encumbrance shall not be a Permitted Transfer;
(ii) a Transfer of its Interest to an Affiliate of such Venturer, subject to the
provisions of Section 11.3; (iii) a Transfer of its Interest to MR Sub or Boyd
Sub; or (iv) a Transfer of its Interest pursuant to the right of first refusal
provisions of Section 11.4.
(b) Except with respect to Permitted Transfers described in clause (ii),
(iii) or (iv) of Section 11.2(a), a transferee of an Interest in the Joint
Venture shall be admitted as a Venturer only upon the agreement of each
Venturer. The rights of a transferee who is not admitted as a Venturer shall be
limited to the right to receive allocations and distributions from the Joint
Venture with respect to the Interest transferred, as provided in this Agreement.
A transferee that is not admitted as a Venturer shall not be a Venturer with
respect to such Interest, and without limiting the foregoing, shall not have the
right to inspect the Joint Venture's books or assets, grant or withhold
approvals, act for or bind the Joint Venture or otherwise participate in its
operations.
(c) The Venturers intend that a Permitted Transfer shall not cause the
dissolution of the Joint Venture under the Act. However, if a court of competent
jurisdiction determines that a dissolution has occurred, the Venturers shall
continue to hold the Joint Venture's assets and operate its business in joint
venture form pursuant to this Agreement as if no such dissolution had occurred.
(d) In the event of a Permitted Transfer, the Venturer making the
Transfer shall notify the other Venturer of the Transfer and shall furnish the
Joint Venture with the transferee's taxpayer identification number and
sufficient information to determine the transferee's Interest and tax basis in
the Joint Venture and any other information reasonably necessary to permit the
Joint Venture to file all required tax returns. All Transfers shall be by
instrument in form and substance reasonably satisfactory to counsel for the
Joint Venture and shall contain an agreement of the transferee to accept the
Transfer and to accept and adopt all of the applicable provisions of this
Agreement. The Venturer making a Permitted Transfer shall execute, acknowledge
and deliver all such documents and instruments, in form and substance reasonably
satisfactory to counsel for the Joint Venture, as may be necessary or desirable
to effectuate such Transfer, and shall pay all costs and expenses incurred by
the Joint Venture in connection with such Transfer.
(e) Notwithstanding anything to the contrary in this Agreement, no
Venturer shall be permitted to Transfer its Interest or any portion thereof to
the extent such Transfer would be in violation of applicable law (including
without limitation securities and gaming laws and regulations) or would cause a
default under any agreement or instrument to which the Joint Venture is a party
or by which it is bound.
Section 11.3 Limitation on Ownership of Venturers; Prohibited
Transferees.
(a) Unless otherwise agreed by Boyd Sub, all of the outstanding capital
stock of MR Sub (or any Affiliate of MR Sub to whom MR Sub Transfers its
Interest pursuant to the terms of Section 11.2(a)(ii) hereof) shall continue to
be owned directly or indirectly by MRI.
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(b) Unless otherwise agreed by MR Sub, all of the outstanding capital
stock of Boyd Sub (or any Affiliate of Boyd Sub to whom Boyd Sub Transfers its
Interest pursuant to the terms of Section 11.2(a)(ii) hereof) shall continue to
be owned directly or indirectly by Boyd.
(c) In the event Boyd shall enter into any agreement relating to any
merger, consolidation, sale of all or substantially all of its capital stock or
assets or other extraordinary corporate transaction as a result of which
management of Boyd is or will be controlled directly or indirectly by, or the
Chairman of the Board, Chief Executive Officer or equivalent officer of Boyd or
the entity ultimately controlling Boyd is or will be, either Donald J. Trump or
Arthur M. Goldberg (collectively, the "Prohibited Transferees"), then Boyd Sub
shall deliver written notice of such proposed transaction (a "Prohibited
Transaction"), including the name of the Prohibited Transferee involved in and
the general nature of the proposed transaction (the "Prohibited Transfer
Notice"), to MR Sub, and MR Sub shall have the option either to terminate this
Agreement and the Joint Venture (if such Prohibited Transfer Notice is delivered
prior to the date that MR Sub contributes the Property to the Joint Venture) or
to purchase Boyd Sub's entire Interest in the Joint Venture (if such Prohibited
Transfer Notice is delivered on or after the date that MR Sub contributes the
Property to the Joint Venture) upon the terms and conditions set forth in
Section 11.6 hereof. Notwithstanding the foregoing, other than the specific
rights set forth in Section 11.6 hereof, MRI and MR Sub shall have no right to
restrict or otherwise prohibit Boyd from consummating any Prohibited
Transaction.
(d) Notwithstanding anything contained herein to the contrary, all of
the terms and provisions of this Article 11 relating to a Prohibited Transaction
or otherwise relating in any way to the Prohibited Transferees shall
automatically cease and be of no further force and effect whatsoever commencing
upon the date that Stephen A. Wynn is neither the Chairman of the Board (other
than as Chairman Emeritus or other similar inactive designation) nor the Chief
Executive Officer or equivalent officer of MRI.
Section 11.4 Right of First Refusal.
(a) Commencing on the first anniversary of the opening of the Facility
to the public, either Venturer shall have the right to Transfer all or any part
of its Interest in the Joint Venture to a person who is not an Affiliate of any
Venturer (the "Third Party"), in consideration for cash and/or a promissory
note, provided that (i) the Venturer wishing to Transfer its Interest (the
"Initiating Venturer") has not caused the Joint Venture to be in default under
the terms of the Construction Financing, (ii) the Initiating Venturer is not in
default under any of the provisions of this Agreement, and (iii) the Initiating
Venturer first offers the Interest (or portion thereof) to the other Venturer as
provided in this Section 11.4.
(b) Prior to becoming legally obligated to Transfer its Interest or any
portion thereof (the "Relevant Interest") to a Third Party pursuant to the terms
of this Section 11.4, the Initiating Venturer shall deliver written notice (the
"Offering Notice") to the other Venturer (the "Responding Venturer") offering to
Transfer the Relevant Interest to the Responding Venturer on the same terms
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and for the same price as the Initiating Venturer proposes to Transfer to the
Third Party. The Offering Notice shall specify the name of the Third Party, the
Relevant Interest proposed to be Transferred and the material terms on which the
Transfer is to be consummated, including without limitation, the Transfer price,
terms of payment and the time and place of the closing. The Responding Venturer
shall thereupon have the right and option to purchase from the Initiating
Venturer all ( but not less than all) of the Relevant Interest at the purchase
price set forth in the Offering Notice by delivering written notice (an
"Acceptance Notice") to the Initiating Venturer within 30 days after delivery of
the Offering Notice. If the Responding Venturer delivers an Acceptance Notice,
it shall be legally obligated to purchase the Relevant Interest on the same
terms as specified in the Offering Notice at a closing to be held as specified
in the Offering Notice (but in no event earlier than 60 days after delivery of
the Offering Notice) or such other time as may be directed by the New Jersey
Gaming Authorities. At the closing, the Initiating Venturer shall deliver to the
Responding Venturer good title to the Relevant Interest, free and clear of any
liens, claims or other encumbrances.
(c) If the Responding Venturer does not elect to purchase the Relevant
Interest, it may, within the 30-day period referred to above, deliver to the
Initiating Venturer written notice (the "Disapproval Notice") stating that it
does not elect to purchase the Relevant Interest and that it disapproves of the
proposed Transfer to the Third Party. In the event that the Responding Venturer
delivers the Disapproval Notice within such 30-day period, and the Disapproval
Notice sets forth the existence of specific facts which reasonably demonstrate
that the Third Party would not be suitable as a Venturer due to its background,
reputation or lack of financial capability, the Initiating Venturer may not
consummate the proposed Transfer. If the Responding Venturer does not deliver
the Acceptance Notice or the Disapproval Notice within the 30-day period
referred to above, or if the Disapproval Notice does not satisfy the foregoing
requirements, the Initiating Venturer may, within 90 days after the expiration
of such 30-day period, consummate the proposed Transfer to the Third Party on
the terms set forth in the Offering Notice or on substantially similar terms. If
the Initiating Venturer does not consummate the proposed Transfer within such
90-day period, the proposed Transfer may not be effected unless the Initiating
Venturer again complies with the provisions of this Section 11.4.
(d) Notwithstanding anything contained herein, no Venturer may Transfer
its Interest to a Prohibited Transferee for as long as the restrictions relating
to Prohibited Transactions remain in effect as set forth in Section 11.3(d)
hereof.
Section 11.5 Buy-Out on Default. At any time during the continuance of
an Event of Default under this Agreement, the non-defaulting Venturer, without
limiting any other rights or remedies it may have under this Agreement, at law
or in equity, may, upon written notice (the "Appraisal Notice") delivered to the
Defaulting Venturer, elect to purchase all (but not less than all) of the
Interest of the Defaulting Venturer for cash in an amount equal to 80% of the
Appraised Value of the Defaulting Venturer's Interest. The "Appraised Value"
shall be an amount equal to the Defaulting Venturer's Interest multiplied by the
fair market value of the Joint Venture, which shall represent the amount that a
single purchaser unrelated to any Venturer would reasonably be expected
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to pay for the Joint Venture business and assets as a going concern, subject to
all existing indebtedness, liens and encumbrances, in a single cash purchase,
taking into account the current condition, use and net income of the Facility.
If the Venturers are unable to mutually agree upon the Appraised Value within 30
days after delivery of the Appraisal Notice, each Venturer shall select a
reputable MAI appraiser to determine the Appraised Value. The two appraisers
shall furnish the Venturers with their written appraisals within 45 days of
their selection, setting forth their determinations of the Appraised Value as of
the date of the Appraisal Notice. If the higher of such appraisals does not
exceed the lower of such appraisals by more than 10%, the Appraised Value shall
be the average of the two appraisals. If the higher of such appraisals exceeds
the lower of such appraisals by more than 10%, the two appraisers shall, within
20 days, mutually select a third reputable MAI appraiser. The third appraiser
shall furnish the Venturers with its written appraisal within 45 days of its
selection, and the Appraised Value shall be the average of the three appraisals.
The cost of the appraisals shall be borne equally by the Defaulting Venturer and
the non-defaulting Venturer. The determination of the Appraised Value in
accordance with this Section 11.5 shall constitute a final and non-appealable
arbitration. The closing of the purchase and sale of the Interest of the
Defaulting Venturer pursuant to this Section 11.5 shall occur not later than 90
days after determination of the Appraised Value, or such other time as may be
directed by the New Jersey Gaming Authorities. At the closing, the Defaulting
Venturer shall deliver to the non-defaulting Venturer good title to its
Interest, free and clear of any liens, claims or other encumbrances.
Section 11.6 Transactions With Prohibited Transferees.
(a) In the event Boyd Sub shall deliver a Prohibited Transfer Notice to
MR Sub prior to the date of the contribution of the Property by MR Sub to the
Joint Venture in accordance with the terms hereof, then MR Sub shall have the
option to terminate this Agreement and the Joint Venture by irrevocable written
notice delivered by MR Sub to Boyd Sub within thirty (30) days following the
receipt by MR Sub of the Prohibited Transfer Notice. In the event MR Sub so
elects to terminate the Joint Venture pursuant to this Section 11.6, then MRI
and MR Sub shall be jointly obligated to reimburse Boyd and Boyd Sub for any and
all Project Costs and for any other costs and expenses for which Boyd and/or
Boyd Sub would otherwise be entitled to reimbursement pursuant to the terms
hereof that are incurred by Boyd and/or Boyd Sub prior to the receipt of such
notice of termination.
(b) In the event Boyd Sub shall deliver a Prohibited Transfer Notice to
MR Sub on or after the date of the contribution of the Property by MR Sub to the
Joint Venture in accordance with the terms hereof, then MR Sub shall have the
option to purchase all (but not less than all) of Boyd Sub's Interest in the
Joint Venture for cash in an amount equal to 100% of the Appraised Value of Boyd
Sub's Interest, upon the terms and conditions set forth in this Section 11.6.
The Appraised Value of Boyd Sub's Interest in the Joint Venture shall be
determined in the manner provided in Section 11.5 hereof. MR Sub shall have 30
days following the final determination of the Appraised Value of Boyd Sub's
Interest in which to deliver to Boyd Sub an Acceptance Notice, pursuant to which
MR Sub agrees to purchase the entire Interest of Boyd Sub upon the terms and
conditions set forth in this Section 11.6. In the event MR Sub delivers an
Acceptance Notice pursuant to this
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Section 11.6, then MR Sub shall be legally obligated to purchase the Interest of
Boyd Sub in the Joint Venture at 100% of the Appraised Value thereof, in cash,
with the closing to occur within 90 days after delivery of the Acceptance Notice
(or such other time as may be directed by the New Jersey Gaming Authorities). At
the closing, Boyd Sub shall deliver to MR Sub good title to its Interest, free
and clear of any liens, claims or other encumbrances. If MR Sub does not
consummate the proposed Transfer within such 90-day period, then MR Sub shall be
deemed to be in material default hereunder. In the event MR Sub fails to deliver
an Acceptance Notice within such 30-day period, then MR Sub shall be deemed to
have elected not to exercise its option to purchase the Interest of Boyd Sub
pursuant to this Section 11.6, and Boyd Sub shall have an option to purchase the
Interest of MR Sub as hereinafter set forth.
(c) In the event MR Sub shall elect not to exercise its option to
purchase the Interest of Boyd Sub pursuant to Section 11.6(b) hereof, then Boyd
Sub shall have the option to purchase all (but not less than all) of MR Sub's
Interest in the Joint Venture for cash in an amount equal to 100% of the
Appraised Value of MR Sub's Interest, upon the terms and conditions set forth in
this Section 11.6. The Appraised Value of MR Sub's Interest in the Joint Venture
shall be determined in the manner provided in Section 11.5 hereof. Boyd Sub
shall have 30 days following the final determination of the Appraised Value of
MR Sub's Interest in which to deliver to MR Sub an Acceptance Notice, pursuant
to which Boyd Sub agrees to purchase the entire Interest of MR Sub upon the
terms and conditions set forth in this Section 11.6. In the event Boyd Sub
delivers an Acceptance Notice pursuant to this Section 11.6, then Boyd Sub shall
be legally obligated to purchase the Interest of MR Sub in the Joint Venture at
100% of the Appraised Value thereof, in cash, with the closing to occur within
90 days after delivery of the Acceptance Notice (or such other time as may be
directed by the New Jersey Gaming Authorities). At the closing, MR Sub shall
deliver to Boyd Sub good title to its Interest, free and clear of any liens,
claims or other encumbrances. If Boyd Sub does not consummate the proposed
Transfer within such 90-day period, then Boyd Sub shall be deemed to be in
material default hereunder. In the event Boyd Sub fails to deliver an Acceptance
Notice within such 30-day period, then Boyd Sub shall be deemed to have elected
not to exercise its option to purchase the Interest of MR Sub pursuant to this
Section 11.6, and Boyd shall be entitled to consummate such Prohibited
Transaction with such Prohibited Transferee, upon whatever terms and conditions
are acceptable to Boyd, in its sole and absolute discretion.
ARTICLE 12
EVENTS OF DEFAULT
Section 12.1 Events of Default. The occurrence of any of the following
events shall constitute an "Event of Default" hereunder on the part of the
Venturer to which such event relates (the "Defaulting Venturer") if within 30
days following delivery to the Defaulting Venturer of written notice of such
default by the other Venturer, or within 10 days if the default is due solely to
the non-payment of monies, the Defaulting Venturer fails to pay such monies, or
in the case of
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non-monetary defaults, fails to commence substantial efforts to cure such
default or thereafter fails within a reasonable time to prosecute to completion
with diligence the curing of such default; provided, however, that the
occurrence of any of the events described in Section 12.1 (a) or (b) shall
constitute an Event of Default immediately upon such occurrence without any
requirement of notice or the passage of time except as specifically set forth
therein:
(a) the violation by a Venturer of any of the restrictions set forth in
Article 11 of this Agreement upon the right of such Venturer to Transfer its
Interest;
(b) (i) the institution by a Venturer of proceedings under any federal
or state law for the relief of debtors wherein such Venturer is seeking relief
as debtor, (ii) a general assignment by a Venturer for the benefit of creditors,
(iii) the institution by a Venturer of a proceeding for relief under the Federal
Bankruptcy Code, (iv) the institution against a Venturer of a proceeding under
the Federal Bankruptcy Code, which proceeding is not dismissed, stayed or
discharged within 60 days after the filing thereof or, if stayed, which stay is
thereafter lifted without a contemporaneous discharge or dismissal of such
proceeding, (v) the admission by a Venturer in writing of its inability to pay
its debts as they mature or (vi) the attachment, execution or other judicial
seizure of all or any substantial part of a Venturer's Interest which remains
undismissed or undischarged for a period of 15 days after the levy thereof, if
such attachment, execution or other judicial seizure would reasonably be
expected to have a material adverse effect upon the performance by such Venturer
of its obligations under this Agreement; provided, however, that any such
attachment, execution or seizure shall not constitute an Event of Default if
such Venturer posts a bond sufficient to fully satisfy the amount of such claim
or judgment within 15 days after the levy thereof and the Venturer's Interest is
thereby released from the lien of such attachment (each an "Event of
Bankruptcy");
(c) any material breach by a Venturer of its representations and
warranties pursuant to Article 10 hereof or any material default in performance
of, or failure to comply with, any other agreement, obligation or undertaking of
a Venturer contained in this Agreement;
(d) the Managing Venturer causing or permitting a material event of
default under the Construction Financing or any other third-party indebtedness
incurred by the Joint Venture, irrespective of any cure period;
(e) the issuance of a final and non-appealable order or directive of a
governmental agency of any jurisdiction, including the New Jersey Gaming
Authorities, disqualifying a Venturer from holding any license, approval or
permit required for the business of the Joint Venture, or directing that the
other Venturer or any of its Affiliates terminate its relationship with such
Venturer:;
(f) the failure or inability of a Venturer, its officers, directors, key
employees or direct or indirect owners or the officers, directors or key
employees of its direct or indirect owners to obtain any license, approval or
permit required for the business of the Joint Venture or any other event
involving a Venturer which results in the Joint Venture or such Venturer
becoming unable to conduct a gaming business; and
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(g) the failure of MRI or its Affiliates to use all commercially
reasonable efforts to obtain any Master Plan Approvals or to cause to be
completed the Government Improvements and/or the Master Plan Improvements upon
the terms and conditions set forth herein.
Section 12.2 Remedies upon Default. Upon the occurrence of any Event of
Default, the non-defaulting Venturer shall have the right, without limitation,
to exercise any and all rights and remedies set forth in this Agreement or as
may be available at law or in equity against the Defaulting Venturer.
ARTICLE 13
DISSOLUTION AND LIQUIDATION
Section 13.1 Events of Dissolution. The Joint Venture shall dissolve
upon the occurrence of any of the following events:
(a) the sale or other disposition (including, without limitation, taking
by eminent domain) of all or substantially all of the assets of the Joint
Venture and the collection of the proceeds thereof;
(b) the approval of each of the Venturers;
(c) at the election of the non-defaulting Venturer, the occurrence of an
Event of Default by a Defaulting Venturer;
(d) December 31, 2068;
(e) at the election of Boyd Sub or MR Sub, as the case may be, pursuant
to Section 4.2 hereof;
(f) at the election of either Venturer in the event of a final
determination, judicial or otherwise, resulting in the permanent termination of
construction of the Connector prior to the substantial completion thereof;
(g) the final and non-appealable denial of the Joint Venture's
application for a casino license for the Facility or, after issuance, the final
and non-appealable revocation of such license;
(h) the death, withdrawal, bankruptcy or dissolution of a Venturer, or
the occurrence of any event that terminates a Venturer's continued interest in
the Joint Venture or causes a Transfer of such interest by operation of law,
unless within 90 days after such event one or more new Venturers is admitted
pursuant to Section 11.2 or 13.2 hereof;
(i) at the election of Boyd Sub, pursuant to the terms of Section 3.2(c)
hereof;
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(j) at the election of MR Sub, pursuant to the terms of Section 11.6
hereof; or
(k) the occurrence or failure to occur of any other event, as a result
of which it is or becomes unlawful or impossible to carry on the business of the
Joint Venture.
Section 13.2 Venturers' Consent to Continue Business. Upon the
occurrence of an event described in Section 13.1 which may cause the dissolution
of the Joint Venture, or subsequent discovery of the occurrence of such an
event, the Managing Venturer shall immediately notify each of the remaining
Venturers of the occurrence of the event, and each of the remaining Venturers
shall notify the Managing Venturer whether or not it consents to continue the
business of the Joint Venture. If all of the remaining Venturers consent to
continue the Joint Venture's business, and there are at least two remaining
Venturers, the Joint Venture shall not be dissolved and the remaining Venturers
shall continue the Joint Venture's business. If there is only one remaining
Venturer and it consents to continue the Joint Venture's business, such Venturer
shall have the absolute right, notwithstanding any contrary provision of this
Agreement, to Transfer a portion of its Interest to a transferee (who may be an
Affiliate of such Venturer) and to unilaterally admit such transferee as a new
Venturer in the Joint Venture, so that such two Venturers may continue the Joint
Venture's business.
Section 13.3 Dissolution and Liquidation. Upon the occurrence of an
event of dissolution described in Section 13.1, if the business of the Joint
Venture is not continued by the remaining Venturers pursuant to Section 13.2,
the Joint Venture shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets and satisfying the claims
of its creditors and Venturers and no Venturer shall take any action that is
inconsistent with, or not necessary to or appropriate for, winding up the Joint
Venture's business and affairs. To the extent not inconsistent with the
foregoing, all covenants and obligations set forth in this Agreement shall
continue in effect until such time as the Joint Venture's assets have been
distributed pursuant to this Section 13.3 and the Joint Venture has been
liquidated. The Managing Venturer shall be responsible for overseeing the
winding up and liquidation of the Joint Venture, shall take full account of the
Joint Venture's liabilities and assets, shall cause the assets to be liquidated
as promptly as is consistent with obtaining the fair market value thereof and
shall cause the proceeds therefrom, to the extent sufficient therefor, to be
applied and distributed in the following order:
(a) first, to the payment and discharge of all of the Joint Venture's
debts and liabilities to creditors other than Venturers, in the order of
priority provided by law;
(b) second, to the payment and discharge of all of the Joint Venture's
debts and liabilities to Venturers, other than liabilities for distributions to
which Venturers are entitled in their capacities as Venturers pursuant to
Article 6 hereof;
(c) third, to the establishment of any reserves that may reasonably be
deemed necessary by the Managing Venturer to meet any contingent or unforeseen
liabilities or obligations of the Joint Venture not covered by insurance. Any
such reserve shall be deposited in a bank or other financial
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institution. All or any portion of such reserve no longer needed for the purpose
for which it was established shall be distributed as promptly as practicable in
accordance with Section 13.3(d) or 13.3(e), as appropriate;
(d) fourth, to the Venturers in accordance with the positive balances in
their respective Capital Accounts; and
(e) fifth, to the Venturers in accordance with their respective
Interests.
The Managing Venturer shall not receive any compensation for any
services performed pursuant to this Section 13.3 but shall be entitled to
reimbursement for all out-of-pocket costs and expenses reasonably incurred in
connection therewith
Any gains or losses on the disposition of assets of the Joint Venture in
the process of liquidation shall be credited or charged to the Venturers in
accordance with Article 5 hereof. Any property distributed in kind in the
liquidation shall be valued by agreement of the Venturers and the Capital
Accounts of the Venturers shall be adjusted to reflect the amount of Profits or
Losses that would have been recognized by the Joint Venture had such property
been sold for such value immediately before such distribution.
In the event that any Venturer has a negative balance in its Capital
Account after the liquidation of all of the Joint Venture's assets, such
Venturer shall contribute to the Joint Venture cash in an amount sufficient to
eliminate such negative balance.
Section 13.4 Notice of Dissolution. Upon the occurrence of an event of
dissolution described in Section 13.1, if the business of the Joint Venture is
not continued by the remaining Venturers pursuant to Section 13.2, the Managing
Venturer shall, within 30 days thereafter (i) provide written notice thereof to
each of the Venturers and to all other persons with whom the Joint Venture
regularly conducts business (as determined in the discretion of the Managing
Venturer) and (ii) publish notice of such dissolution in a newspaper of general
circulation in each place in which the Joint Venture conducts business.
ARTICLE 14
MISCELLANEOUS PROVISIONS
Section 14.1 Waiver of Partition and Covenant Not to Withdraw. Each
Venturer covenants and agrees that the Venturers have entered into this
Agreement based on the mutual expectation that both Venturers will continue as
Venturers and carry out the duties and obligations undertaken by them hereunder
and, except as otherwise expressly required or permitted by this Agreement or
approved by each of the Venturers, each Venturer covenants and agrees not to (i)
take any action to require partition or to compel any sale with respect to its
Interest, (ii) take any action to file a
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certificate of dissolution or its equivalent with respect to itself, (iii) take
any action that would cause an Event of Bankruptcy of such Venturer, (iv)
withdraw or resign, or attempt to do so, from the Joint Venture, (v) exercise
any power under the Act to dissolve the Joint Venture, (vi) except as permitted
herein, transfer all or any portion of its Interest, (vii) petition for judicial
dissolution of the Joint Venture or (viii) demand a return of its capital
contributions. Upon any breach of this Section 14.1 by any Venturer, the other
Venturer (in addition to all rights and remedies it may have under this
Agreement, at law or in equity) shall be entitled to a decree or order from a
court of competent jurisdiction restraining and enjoining such application,
action or proceeding.
Section 14.2 Notices. Unless otherwise provided herein, all notices or
other communications required or permitted by this Agreement shall be in writing
and shall be deemed to have been duly given on the date of delivery if delivered
personally to the Party to whom notice is given, on the next business day if
sent by confirmed facsimile transmission or on the date of actual delivery if
sent by overnight commercial courier or by first-class mail, registered or
certified, with postage prepaid and properly addressed to the party at its
address set forth below, or at any other address that any party may from time to
time designate by written notice to the others:
If to MR Sub:
MAC, CORP.
c/o Mirage Resorts, Incorporated
3400 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
Facsimile: (702) 791-5787
If to MRI:
MIRAGE RESORTS, INCORPORATED
3400 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
Facsimile: (702) 791-5787
If to Atlandia:
ATLANDIA DESIGN AND FURNISHINGS, INC.
3260 South Industrial Road
Las Vegas, Nevada 89109
Attention: President
Facsimile: (702) 792-4790
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<PAGE> 59
If to Boyd Sub:
BOYD ATLANTIC CITY, INC.
c/o Boyd Gaming Corporation
2950 South Industrial Road
Las Vegas, Nevada 89109-1100
Attention: General Counsel
Facsimile: (702) 792-7335
If to Boyd:
BOYD GAMING CORPORATION
2950 South Industrial Road
Las Vegas, Nevada 89109-1100
Attention: General Counsel
Facsimile: (702) 792-7335
Section 14.3 Amendments. The provisions of this Agreement may not be
waived, amended or repealed, in whole or in part, by any of the Parties hereto,
except with the written consent of each of the Parties hereto.
Section 14.4 Successors and Assigns. This Agreement shall be binding on,
and inure to the benefit of, the Parties hereto and their respective heirs,
legal representatives, successors and permitted transferees and assigns.
Section 14.5 Time. Time is of the essence with respect to this Agreement
and each and every provision hereof.
Section 14.6 Severability. Each provision of this Agreement is intended
to be severable. If any term or provision hereof is held to be illegal or
invalid for any reason, such illegality or invalidity shall not affect the
legality or validity of the remainder of this Agreement.
Section 14.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 14.8 Attorneys' Fees. Except as otherwise provided in this
Agreement, each of the Parties shall bear its own legal fees and expenses in
connection with the negotiation, execution and performance of this Agreement.
Boyd and Boyd Sub acknowledge that various lawsuits are pending in federal and
state courts in New Jersey challenging the validity of the Development Agreement
and the construction of the Connector and agree that if they are named as
parties in any such lawsuit or in any future lawsuit, they shall bear their own
legal fees and expenses in connection therewith. The Joint Venture shall bear
all legal fees and expenses in connection with any lawsuit in which the Joint
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<PAGE> 60
Venture is named as a party. Should any action or proceeding be commenced
(including without limitation any proceeding in bankruptcy) by any of the
Parties to enforce any of the terms of this Agreement or that in any other way
pertains to Joint Venture affairs or this Agreement, the prevailing Party or
Parties in such action or proceeding (as determined by the presiding
official(s)) shall be entitled to receive from the opposing Party or Parties the
prevailing Party's reasonable costs and attorneys' fees incurred in
investigating, prosecuting, defending or appearing in any such action or
proceeding.
Section 14.9 Entire Agreement. This Agreement constitutes the complete
and exclusive statement of the agreement among the Parties. This Agreement
supersedes all prior negotiations, understandings and agreements of the parties,
written or oral, with respect to the subject matter hereof, including without
limitation the Original Agreement.
Section 14.10 Further Assurances. Each of the Parties agrees to perform
any further acts and execute, acknowledge and deliver any documents or
instruments which may be reasonably necessary or appropriate to carry out the
provisions of this Agreement and to satisfy the conditions to the obligations of
the Parties hereunder.
Section 14.11 Headings; Interpretation. Article and section headings
contained in this Agreement are for convenience of reference only and shall not
be deemed a part of this Agreement or have any legal effect. All provisions of
this Agreement shall be construed to further the interests and business of the
Joint Venture. The Parties agree to cooperate with one another in all respects
in order to effect the purposes of and carry out the business activities of the
Joint Venture, as more particularly set forth herein.
Section 14.12 Exhibits. Each of the Exhibits referred to herein and
attached hereto is hereby incorporated by reference and made a part hereof for
all purposes. Unless the context otherwise expressly requires, any reference to
"this Agreement" shall mean and include all such Exhibits.
Section 14.13 Approvals and Consents. Whenever the approval or consent
of a Venturer or any of the Parties is required by this Agreement, such Venturer
or Party shall have the right to give or withhold such approval or consent in
its sole and unfettered discretion, unless otherwise expressly provided herein.
Section 14.14 Estoppels. Each of the Parties shall, upon the written
request of any other Party, promptly execute and deliver to the other Parties a
statement certifying that this Agreement is unmodified and in full force and
effect (or, if modified, the nature of the modification) and whether or not
there are, to such Party's knowledge, any uncured defaults on the part of the
other Party or Parties, specifying such defaults if any exist.
Any such statement may be relied upon by third parties.
Section 14.15 Compliance with Laws and Contractual Obligations. Each of
the Parties shall at all times act in accordance with all applicable laws and
regulations and shall indemnify and hold
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<PAGE> 61
the other Parties (including their respective directors, officers, employees,
Affiliates, successors and assigns) harmless for, from and against any and all
claims, losses, damages, liabilities and costs, including without limitation,
reasonable attorneys' fees (which shall be reimbursed as incurred), arising out
of or relating to any breach of such laws or regulations. The Joint Venture will
at all times comply with all legal and contractual obligations and requirements
applicable to the acquisition or development of the Property and the operation
of the Facility, including without limitation those relating to the employment
of economically disadvantaged persons and City residents, contained in the
Development Agreement, and with all applicable federal, state and local
statutes, ordinances and regulations.
Section 14.16 Remedies Cumulative. Each right, power and remedy provided
for in this Agreement or now or hereafter existing at law, in equity, by statute
or otherwise shall be cumulative and concurrent and shall be in addition to
every other right, power or remedy provided for in this Agreement or now or
hereafter existing at law, in equity, by statute or otherwise, and the exercise
by any Party of any one or more of such rights, powers or remedies shall not
preclude the simultaneous or later exercise by such Party of any or all of such
other rights, powers or remedies.
Section 14.17 Waiver. No consent or waiver, express or implied, by any
Party to or of any breach or default by any other Party in the performance of
obligations under this Agreement shall be deemed or construed to be a consent or
waiver to or of any other breach or default in the performance by such Party.
Failure on the part of any Party to complain of any act or failure to act by any
other party or to declare any other party in default, irrespective of how long
such failure continues, shall not constitute a waiver by any Party of its rights
under this Agreement.
Section 14.18 Gaming Licensing Matters. The Parties shall provide all
reasonable cooperation with any investigation by any gaming authority having
jurisdiction over any Party or any Affiliate of any Party. Each Venturer shall
cause any transferee of any portion of its Interest likewise to so cooperate.
Each Party agrees that it shall not take any action or omit to take any action
that would have the effect of adversely affecting any gaming license, approval
or permit held by any Venturer. MR Sub and its Affiliates shall cooperate with
Boyd and its Affiliates, to the extent reasonably necessary, in connection with
any review of this Agreement by the New Jersey Gaming Authorities, and the
Parties shall execute and deliver any further documents or instruments,
including amendments to this Agreement, as the New Jersey Gaming Authorities may
reasonably require and which do not alter the terms of this Agreement in a
manner unfavorable to any of the Parties in their sole discretion. Each Party
acknowledges that monetary damages alone would not be adequate compensation for
a breach of this Section 14.18 and the Parties agree that a non-breaching Party
shall be entitled to seek a decree or order from a court of competent
jurisdiction for specific performance to restrain a breach or threatened breach
of this Section 14.18 or to require compliance by a Party with this Section
14.18.
Section 14.19 Liquidated Damages. The provisions of Section 3.5 hereof,
which in certain circumstances could result in the reduction of a Venturer's
Interest, constitute an agreement by the Parties upon a liquidated amount as to
the damages sustained by the other Parties upon the failure
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<PAGE> 62
of a Venturer to contribute to the capital of the Joint Venture. Each Venturer
acknowledges that the amount of damages sustained by the Venturers in the event
of such a failure is not readily ascertainable and that the provisions of
Section 3.5 hereof establishing such liquidated amount are reasonable under the
circumstances existing at the time of the execution of this Agreement and, to
the extent permitted by law, each Venturer waives any and all rights of any
nature whatsoever to challenge the reasonableness of such provisions as of the
date of this Agreement. In the event that the non-defaulting Venturer
contributes the full amount of capital that the Defaulting Venturer shall have
failed to contribute, the reduction in the Defaulting Venturer's Interest shall
be the sole measure of damages resulting from the occurrence of such a failure.
If the non-defaulting Venturer does not contribute the full amount of the
deficit, the Joint Venture and the non-defaulting Venturer shall have all other
rights and remedies that may be available under this Agreement, at law or in
equity against the Defaulting Venturer with respect to the portion of the
deficit not contributed by the non-defaulting Venturer.
Section 14.20 Governing Law and Choice of Forum. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
Jersey, excluding its conflict of law principles. In the event of any litigation
between the Parties concerning or arising out of this Agreement, the Parties
hereby consent to the exclusive jurisdiction of the federal and state courts in
New Jersey.
Section 14.21 Dismissal of Pending Litigation. Immediately following the
execution of this Agreement, each Party shall take all actions necessary or
appropriate to dismiss with prejudice the litigation pending between the parties
in Superior Court for Atlantic County, New Jersey relating to the Original
Agreement, including the execution and delivery of a mutual release of all
claims.
Section 14.22 Joint Access. MRI agrees that there shall be a physical
public connection or transportation link between the Facility and the MRI Casino
Project, which connection or link shall be subject to the reasonable approval of
Boyd Sub. The Joint Venture shall pay its equitable share of all costs and
expenses relating to the design, engineering, construction, operation,
maintenance and repair of such physical public connection or transportation
link, including the Joint Venture's equitable share of a People Mover System (as
defined in the Harrah's Land Exchange Agreement), but only if such People Mover
System includes a station or stop constructed upon the Property and such station
or stop is approved by Boyd Sub.
Section 14.23 Memorandum of Agreement. The Parties hereby consent to the
recordation of a memorandum of agreement promptly following the recordation of
the Parcel Map, which memorandum of agreement shall be in a form reasonably
acceptable to the Parties, but which shall specify, at a minimum, that the Joint
Venture has certain real property rights and interests in Tract A and in Tract C
and which shall contain a legal description of Tracts A and C. Upon the earlier
of conveyance of either Tract A or Tract C to the Joint Venture or the
dissolution of the Joint Venture in accordance with the terms hereof, the
Managing Venturer shall execute a release of the memorandum of agreement in
recordable form and shall cause such release to be recorded in the official
records of the County.
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<PAGE> 63
Section 14.24 Survival of Indemnification Obligations. Each and every
indemnification obligation of any one or more of the Parties hereto shall
expressly survive the termination of this Agreement and the dissolution of the
Joint Venture.
IN WITNESS WHEREOF, the parties have executed this Joint Venture
Agreement as of the date first above written.
MAC, CORP., a New Jersey
corporation
By:
--------------------------
Its:
-------------------------
Boyd Atlantic City, Inc., a
New Jersey corporation
By:
--------------------------
Its:
-------------------------
Mirage Resorts, Incorporated
hereby agrees to all of its
obligations specified in the
foregoing Agreement.
Mirage Resorts, Incorporated,
a Nevada corporation
By:
--------------------------
Its:
-------------------------
Atlandia Design and
Furnishings, Inc. hereby
agrees to all of its
obligations specified in the
foregoing Agreement
Atlandia Design and
Furnishings, Inc., a New
Jersey corporation
By:
--------------------------
Its:
-------------------------
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<PAGE> 64
Boyd Gaming Corporation
hereby agrees to all of its
obligations specified in the
foregoing Agreement.
Boyd Gaming Corporation, a
Nevada corporation
By:
--------------------------
Its:
-------------------------
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<PAGE> 65
Exhibit A
Designation of Entire H-Tract
With Separate Designations of Tracts A, B and C
With Resort Zone Designation Clearly Depicted Thereon
With Harrah's Land Swap Acreage Depicted Thereon
With All Ingress, Egress and Service Roads Depicted Thereon
With Location of all Proposed Porte-Cocheres Designated Thereon
-60-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 76,657
<SECURITIES> 0
<RECEIVABLES> 21,851
<ALLOWANCES> 3,993
<INVENTORY> 9,724
<CURRENT-ASSETS> 121,408
<PP&E> 1,185,784
<DEPRECIATION> 427,978
<TOTAL-ASSETS> 1,130,950
<CURRENT-LIABILITIES> 120,820
<BONDS> 796,234
0
0
<COMMON> 618
<OTHER-SE> 210,778
<TOTAL-LIABILITY-AND-EQUITY> 1,130,950
<SALES> 0
<TOTAL-REVENUES> 245,485
<CGS> 0
<TOTAL-COSTS> 219,752
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,747
<INCOME-PRETAX> 7,079
<INCOME-TAX> 3,045
<INCOME-CONTINUING> 4,034
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,034
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
