SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
____________________
COLORADO GAMING & ENTERTAINMENT CO. 84-1242693
(formerly Hemmeter Enterprises, Inc.)
BWBH, INC. 84-1242691
BWCC, INC. 84-1243506
MILLSITE 27, INC. 84-1242692
SILVER HAWK CASINO, INC. 84-1339843
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 Lincoln Avenue, 49th Floor 80203
Denver, Colorado (Zip Code)
(Address of principal executive offices of each Registrant)
Registrant's telephone number, including area code: (303) 863-2400
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
12% Senior Secured Pay-In-Kind Notes due 2003 of Hemmeter Enterprises, Inc.
Common Stock, par value $.01 per share of Hemmeter Enterprises, Inc.
Guarantee of 12% Senior Secured Pay In-Kind Notes due 2003
of Hemmeter Enterprises, Inc. by BWBH, Inc., BWCC, Inc., Millstone 27,
Inc. and Silver Hawk Casino, Inc.
(Title of Class)
TABLE OF CONTENTS
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . 1
Background of Bankruptcy; Plan of Reorganization . . . . 1
The Bullwhackers Casinos . . . . . . . . . . . . . . . . 3
Expansion Plans . . . . . . . . . . . . . . . . . . . . 4
Market for the Colorado Casinos . . . . . . . . . . . . 5
Employees . . . . . . . . . . . . . . . . . . . . . . . 8
Colorado Gaming Regulations . . . . . . . . . . . . . . 9
Non-Gaming Regulation . . . . . . . . . . . . . . . . . 11
ITEM 2. FINANCIAL INFORMATION . . . . . . . . . . . . . . . 12
Selected Financial Information . . . . . . . . . . . . . 12
Pro Forma Adjustments . . . . . . . . . . . . . . . . . 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 21
Overview. . . . . . . . . . . . . . . . . . . . . . . . 21
Impact of the Plan of Reorganization on Results of
Operations. . . . . . . . . . . . . . . . . . . . . 22
Results of Operations. . . . . . . . . . . . . . . . . . 22
Liquidity and Capital Resources of the Company
Prior to the Effective Date . . . . . . . . . . . . 26
Liquidity and Capital Resources of the Reorganized
Company . . . . . . . . . . . . . . . . . . . . . . 27
ITEM 3. PROPERTIES . . . . . . . . . . . . . . . . . . . . . 28
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 28
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . 30
ITEM 6. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . 33
Summary Compensation Table . . . . . . . . . . . . . . . 33
Compensation of Directors . . . . . . . . . . . . . . . 34
Employment and Consulting Agreements . . . . . . . . . . 34
Management Incentive and Non-Employee Director Stock
Plan . . . . . . . . . . . . . . . . . . . . . . . 35
Management Cash Bonus Plan . . . . . . . . . . . . . . . 35
Other Plans . . . . . . . . . . . . . . . . . . . . . . 35
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . 35
ITEM 8. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . 37
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. . . . . . 39
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES . . . . . . 39
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED . . . . . . . . . . . . . . . . . . . . . . . 40
Common Stock . . . . . . . . . . . . . . . . . . . . . . 40
Colorado Gaming Regulations . . . . . . . . . . . . . . 40
Certain Charter and Bylaw Provisions . . . . . . . . . . 40
12% Senior Secured Pay-In-Kind Notes Due 2003 . . . . . 41
General . . . . . . . . . . . . . . . . . . . . . . 41
Terms . . . . . . . . . . . . . . . . . . . . . . . 41
Redemption . . . . . . . . . . . . . . . . . . . . 42
Mandatory Offers to Purchase . . . . . . . . . . . 43
Guarantee of New Notes . . . . . . . . . . . . . . 43
Security . . . . . . . . . . . . . . . . . . . . . 43
Certain Covenants . . . . . . . . . . . . . . . . . 44
Events of Default and Remedies . . . . . . . . . . 48
Defeasance . . . . . . . . . . . . . . . . . . . . 50
Satisfaction and Discharge . . . . . . . . . . . . 50
Amendments and Waivers . . . . . . . . . . . . . . 51
Regarding the Trustee . . . . . . . . . . . . . . . 51
Guarantees of 12% Senior Secured Pay-In-Kind Notes due
2003 . . . . . . . . . . . . . . . . . . . . . . . 51
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . 52
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . 53
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . 99
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS . . . . . . . . . 100
ITEM 1. BUSINESS
General
Colorado Gaming & Entertainment Co., formerly Hemmeter
Enterprises, Inc. (the "Company") develops, owns and operates
gaming and related entertainment facilities. As of the
effective date of its Plan of Reorganization (see "- Background
of Bankruptcy; Plan of Reorganization"), the Company owns,
through subsidiaries, two of the largest casinos in terms of
number of slot machines in the historic mining towns of Black
Hawk and Central City, Colorado, which it operates under the name
of "Bullwhackers" (individually, "Bullwhackers Black Hawk" and
"Bullwhackers Central City," and collectively, the "Bullwhackers
Casinos") and has acquired through a new subsidiary Silver Hawk
Casino, Inc., a third facility located in Black Hawk, Colorado,
which it expects to open as a casino in July 1996 (the "Silver
Hawk," together with the Bullwhackers Casinos, the "Colorado
Casinos"). The Company has started construction of the first
phase of an approximately 500-space covered parking garage on
approximately 3.25 acres of land it currently operates as a 260-
space surface parking lot (the "Surface Parking Lot") located
directly between Bullwhackers Black Hawk and the Silver Hawk.
See "- Expansion Plans - The Parking Garage."
Background of Bankruptcy; Plan of Reorganization
The Company was incorporated in August 1993 for the purpose
of conducting the operations of HP Casino Management, L.P., BH
Management Company, LLC, Central City Management Company, LLC, HP
Black Hawk, LLC and HP Central City, LLC, which, along with
certain predecessor entities, constructed and were operating the
Bullwhackers Casinos.
In June 1994, through its wholly owned subsidiary, Grand
Palais Riverboat, Inc. ("GPRI"), the Company entered into a joint
venture with an unrelated entity to construct and operate a
riverboat gaming facility and related shore facilities in New
Orleans, Louisiana (the "Riverboat Project"). The Company's
share of development costs of the Riverboat Project was financed
in part through the private placement by the Company of
$140,000,000 of 11 1/2% Senior Secured Pay-In-Kind Notes due 2000
(the "Old Notes"). On June 15 and December 15, 1994, and June
15, 1995, the Company issued additional Old Notes in the
respective principal amounts of $8,117,000, $8,884,000 and
$9,420,000 in payment of the interest then due and payable on the
outstanding Old Notes.
The Riverboat Project incurred construction cost overruns
and had substantial operating losses as a result of the failure
of the New Orleans gaming market to develop as anticipated and
the resulting failure of the Riverboat Project to achieve
projected revenues. In June 1995, GPRI discontinued operation of
the Riverboat Project because it was unable to generate
sufficient revenues to cover operating expenses.
On July 26, 1995, an involuntary bankruptcy proceeding was
commenced against GPRI in the United States Bankruptcy Court for
the Eastern District of Louisiana. The involuntary bankruptcy
proceeding was converted into a voluntary Chapter 11 case on July
27, 1995 (the "GPRI Bankruptcy Case").
As a result of the financial difficulties of GPRI, the Old
Notes were declared to be in default in June 1995. During the
summer and early fall of 1995, the Company and investment
advisors to certain of the holders of the Old Notes negotiated a
debt restructuring which contemplated the commencement of Chapter
11 bankruptcy proceedings for the Company and three of its
subsidiaries, BWBH, Inc., BWCC, Inc. and Millsite 27, Inc. (the
"Colorado Subsidiaries") which were not then in bankruptcy. On
November 7, 1995, the Company and the Colorado Subsidiaries
commenced voluntary Chapter 11 cases in the United States
Bankruptcy Court for the District of Delaware (the "Hemmeter
Bankruptcy Cases"). On December 27, 1995, the venue of the
Hemmeter Bankruptcy Cases was transferred to the United States
Bankruptcy Court for the Eastern District of Louisiana.
The Company and the Colorado Subsidiaries continued
their business operations as debtors-in-possession under the
supervision of the Bankruptcy Court following commencement of the
Hemmeter Bankruptcy Cases. The Company received approval from
the Bankruptcy Court to pay or otherwise honor certain of its
pre-petition obligations related to the Bullwhackers Casinos,
including employee wages and benefits, utilities, and claims
of certain trade vendors and such payments have been made. In
addition, the Bankruptcy Court approved a $7.9 million debtor-in-
possession financing facility for the Company and its Colorado
Subsidiaries (the "DIP Facility").
On March 29, 1996, a plan of reorganization (the "GPRI
Plan") was confirmed in the GPRI Bankruptcy Case. The GPRI Plan
was consummated on May 3, 1996. The GPRI Plan provided that all
outstanding shares of capital stock of GPRI (which were owned by
the Company) were cancelled and new stock issued to Casino
America, Inc., an unrelated party, or its assigns, which provided
consideration to GPRI's creditors valued at approximately
$55,000,000. Under the GPRI Plan, the Company received GPRI's
causes of action, if any, against GPRI's joint venture partner in
the Riverboat Project and received no other distribution in
respect of its stock ownership in GPRI or any claim that it may
have in the GPRI Bankruptcy Case.
On April 8, 1996, the First Amended Joint Plan of
Reorganization of the Company and its Colorado Subsidiaries (the
"Plan of Reorganization") was confirmed by order of the United
States Bankruptcy Court for the Eastern District of Louisiana.
The Plan of Reorganization was consummated on June 7, 1996
(the "Effective Date"). The following events occurred at the
Effective Date pursuant to the Plan of Reorganization:
1. The Company and its Colorado Subsidiaries were discharged
from any liability to GPRI or its creditors. The Company
no longer has any interest in GPRI or the Riverboat Project
and its principal assets consist of the stock of its
subsidiaries which own the Colorado Casinos and the Surface
Parking Lot.
2. The claims of entities which provided goods and services
to the Bullwhackers Casinos were paid in full or were
otherwise treated in such a manner so that they were not
impaired and all other unsecured creditors of the
Bullwhackers Casinos received notes in a principal amount
equal to the allowed amount of their claims which provide
for a single payment of principal and accrued interest on
the tenth anniversary of the issuance thereof. All other
unsecured creditors of the Company did not receive any
distribution in respect of their claims against the Company.
3. The holders of the Old Notes<F1> and Resort Income
Investors, Inc., which held a secured claim in the Hemmeter
Bankruptcy Case (the "RII Claim"; Resort Income Investors,
Inc. is sometimes referred to as "RII") received $50,000,000
in principal amount of 12% Senior Secured Pay-In-Kind Notes
of the Company, due 2003 (the "New Notes"), and one hundred
percent (100%) of the issued and outstanding capital stock
of the reorganized Company, subject to being diluted to 90%
by certain stock grants to be provided to senior management
employees and non-employee directors. See "Item 6, Executive
Compensation." As a result, the holders of the Old Notes
and RII are the principal creditors and stockholders of the
Company. The portion of the New Notes paid to RII are less
than $1 million and a similar portion of common stock was
issued to RII.
____________________
<F1> Because the Old Notes were primarily held in the names of
nominees, the Company is unable to determine the identity of
the Old Note holders directly. The individual holders of
approximately $152,775,000 of the outstanding principal
balance of the Old Notes filed proofs of claim in the
Chapter 11 bankruptcy proceedings of the Company described
below. The holders of five percent or more of the Old Notes
at the time of filing of those proofs of claim are described
below in Item 4, Security Ownership and Certain Beneficial
Owners and Management.
4. Pursuant to the settlement of certain lawsuits against
the Company and certain of its executive officers, the
Company issued two promissory notes to Capital Associates
International, Inc. ("CAI"), an equipment lessor which had
leased equipment to the Company and GPRI, in the respective
principal amounts of $1,621,329.35 and $3,000,000 (the "CAI
Notes"). The Company's obligation in respect of the CAI
Notes will be reduced dollar for dollar by any amounts
received by CAI in respect of its claims filed in the
GPRI Bankruptcy Case. See "Item 8, Legal Proceedings."
5. Certain claims of the Company and the Colorado
Subsidiaries against third parties, including derivative
claims against the pre-Effective Date directors, officers,
and employees of the Company and its Colorado Subsidiaries,
were transferred to a litigation trust (the "Litigation
Trust"). The trustees of the Litigation Trust are the
post-Effective Date directors of the Company and will
determine whether or not to pursue any such claims. Any
amounts received in respect of any such claims will inure to
the benefit of the holders of the Old Notes and RII. See
"Item 8, Legal Proceedings."
6. The amounts outstanding under the DIP Facility were
paid in full and the DIP Facility will be terminated. The
Company replaced the DIP Facility with a new $12.5 million
credit facility on the Effective Date. See "Item 2,
Financial Information - Management's Discussion and
Analysis of Financial Condition and Results of Operation."
7. The Company changed its name to Colorado Gaming &
Entertainment Co.
The foregoing is only a summary of some of the principal
terms of the Plan of Reorganization, and is qualified in its
entirety by reference to the complete copy of the Plan of
Reorganization that has been filed as an Exhibit to this
Registration Statement.
The Bullwhackers Casinos
Colorado law currently permits limited stakes gaming (with a
maximum single bet of $5.00) in three historic mining towns:
Black Hawk and Central City, adjacent towns located approximately
35 miles from Denver, and Cripple Creek, located approximately 40
miles from Colorado Springs and 90 miles from Denver. The
Bullwhackers Casinos are located in Black Hawk and Central City.
Colorado law only permits casinos to offer slot machines and the
table games of blackjack and poker.
The following is a description of the Bullwhackers Casinos
and related facilities:
Bullwhackers Black Hawk. Bullwhackers Black Hawk opened on
July 17, 1992 and is currently one of the largest gaming
facilities, in terms of number of slot machines, in Black Hawk.
It is located on a prime site at the town's main intersection of
Colorado State Highway 119 (the primary access road to Interstate
70, which leads to Denver) and Gregory Street (which connects
Black Hawk to Central City). Bullwhackers Black Hawk is housed
in a 36,000 square foot facility which contains approximately
12,000 square feet of gaming space on four levels with the main
entry on the second level. The casino currently has 606 slot
machines, 8 black jack tables and 7 poker tables. The facility
has one bar on each level, a 176-seat full service restaurant and
office space. Bullwhackers Black Hawk utilizes a Victorian theme
in its interior design, featuring a winding grand staircase and a
glass-enclosed elevator connecting the various levels of the
facility.
The Company leases the land underlying Bullwhackers Black
Hawk pursuant to a 23-year ground lease expiring in 2014. The
terms of the ground lease require base minimum payments for the
calendar year 1996 of $150,000 per quarter. The base minimum
quarterly payments increase thereafter for each five-year period
for the balance of the lease term, up to a maximum of $195,000
per quarter. Additional rent in the amount of 1.9% of
Bullwhackers Black Hawk's adjusted gross revenue is payable
monthly in arrears throughout the term of the lease. The lease
contains a buy-out provision which allows the Company to buy the
land subject to the lease on or after November 1, 2001 at a price
equal to nine times the annual base minimum rent payments in
effect when the buy-out is exercised.
Surface Parking Lot. The Company believes that proximity
to parking is extremely important in Black Hawk. Onsite parking
is currently inadequate for most Black Hawk casinos. Although
the town has developed an approximately 3,000-space public
parking facility which serves all of the Black Hawk casinos by
shuttle service, the location of, and access to, the municipal
parking facility are generally considered to be inadequate by
most casino patrons. The Company believes that the few gaming
facilities that offer substantial parking at or close to
the facility generate higher revenues per gaming device than gaming
facilities that do not offer adequate parking. To improve
parking for patrons of Bullwhackers Black Hawk, the Company
completed development of the Surface Parking Lot in 1994 as a
paved and lighted facility staffed for valet service, with a
capacity of approximately 260 cars. Under a current city
ordinance which imposes a fee on parking facilities which are not
"on-site" to a casino, the Company is required to pay the City of
Black Hawk $4 per day per space for each space in the Surface
Parking Lot, or approximately $380,000 per year.
Bullwhackers Central City. Bullwhackers Central City opened
on June 15, 1992 and is currently one of the largest gaming
facilities, in terms of number of slot machines, in Central City.
It is located on a prime site at one of the town's two main
intersections, and is adjacent to a public parking facility and
two of Central City's other large casinos. This 31,000 square
foot facility contains approximately 8,750 square feet of gaming
space on three levels with the main entry to the facility on the
second level. Bullwhackers Central City currently contains
approximately 400 slot machines and 4 black jack tables. The
facility has one bar on each level, a 126-seat full service
restaurant, a retail shop and office space. Bullwhackers Central
City also utilizes a Victorian theme in its interior design.
The Company believes that proximity to parking is also
extremely important to Central City casinos. However, except for
the largest casino in Central City, none of the casinos currently
operating in Central City offer onsite parking for more than 50
cars immediately adjacent to their facilities. There are several
public parking lots in Central City offering parking for a total
of approximately 550 cars, including a 200-space public lot
adjacent to Bullwhackers Central City. To alleviate the
difficulties associated with a lack of adequate parking, the
Company has recently implemented several busing programs in
conjunction with other Central City casino operators, which offer
cash giveaways and other incentives designed to enhance
incremental patron play, particularly during off-peak periods.
Expansion Plans
The Silver Hawk Casino. The Company purchased the Silver
Hawk casino facility on April 12, 1996. The purchase price for
the Silver Hawk land and building was $2.7 million, of which
$900,000 was paid in cash with the balance being financed by the
seller and payable pursuant to a promissory note secured by a
first deed of trust on the facility. The promissory note
provides for monthly payments based on a twenty-year amortization
with a balloon payment after seven years. The cash portion of
the purchase price was financed through borrowings under the DIP
Facility. The Silver Hawk is an approximately 12,000 square foot
four-story building constructed in 1993, and was operated as a
casino by an unaffiliated third party for less than 90 days
before it was closed. The Company intends to do minor interior
remodeling, install approximately 220 slot machines and 4 table
games and, upon obtaining a gaming and liquor license, open the
Silver Hawk as a casino. The Silver Hawk may not be operated
under the Bullwhackers name. The Company anticipates opening the
Silver Hawk concurrently with the opening of the first phase of
the Parking Garage (described below) in July 1996. There can be
no assurance, however, that the Company will be able to obtain
the licenses necessary to open Silver Hawk as a casino nor can
there be any assurances that the Company will be able to operate
and manage Silver Hawk on a profitable basis.
The Parking Garage. The Surface Parking Lot is located
directly between Bullwhackers Black Hawk and the Silver Hawk.
The Company intends to expand the parking available to
Bullwhackers Black Hawk and the Silver Hawk by constructing a
parking garage (the "Parking Garage") on the Surface Parking Lot
which, in addition to providing more parking spaces, will improve
traffic flow and customer access to Bullwhackers Black Hawk and
the Silver Hawk. The Parking Garage will be constructed in two
phases to minimize business disruption during the months when
revenues at Bullwhackers Black Hawk and the Silver Hawk are
highest. Phase I will consist of the construction of a 300-space
garage on approximately one-half of the Surface Parking Lot,
leaving between 150 and 200 surface parking spaces available for
use. It is anticipated that the construction of Phase I of the
Parking Garage will cost approximately $6 million and will be
completed in the second quarter of 1997. Following completion of
Phase I, the Company will re-evaluate the need for Phase II of
the Parking Garage, and if it proceeds with the construction of
Phase II, will expand the Parking Garage to cover the other half
of the Surface Parking Lot, resulting in a 500-space Parking
Garage. The estimated cost of environmental remediation which
the Company will be obligated to complete as part of the construction
of the Parking Garage is included in the estimated costs of
constructing the Parking Garage. See "- Market for
Colorado Casinos, Environmental Issues." The Company has
obtained approval of its planned unit development for the Parking
Garage and has substantially completed the environmental
remediation and excavation work for the Parking Garage. The
Company anticipates delaying commencement of construction of the
Parking Garage until after the busy summer season. There can be
no assurance that either phase of the Parking Garage construction
project will be completed or, if completed, will be completed in
the anticipated time frame or within the expected budget.
Construction of the Parking Garage is also subject to the risks
inherent in any construction project, including shortages of
material and labor, unforeseen engineering problems, weather
interferences, work stoppages and unanticipated cost increases.
Upon completion, the Parking Garage will provide convenient
access to both Bullwhackers Black Hawk and the Silver Hawk. The
Company expects that the Parking Garage will be the largest
onsite parking facility in the town of Black Hawk.
Because the Parking Garage will be "onsite" to the Silver
Hawk, the Company will no longer have to pay the $4 per day per
parking space charge for the Parking Garage spaces that is
currently levied with respect to the Surface Parking Lot, thereby
saving the Company approximately $380,000 per year.
Slot Machine Enhancement. As discussed in more detail under
"- Market for the Colorado Casinos," the Company intends to
undertake a capital program to have substantially all of its slot
machines in the Bullwhackers Casinos equipped with bill
validators. This program is expected to cost $1 to $2 million
and is expected to be completed within two years.
Other. Although the Company intends to focus on its
existing operations, it will continue to evaluate new
opportunities to apply existing management expertise to
additional gaming operations, particularly in the Black Hawk
market. The Company's ability to acquire additional gaming
facilities in the State of Colorado without disposing of existing
facilities may be limited by the fact that no entity may hold
more than three Colorado gaming licenses. See "- Colorado
Gaming Regulations."
Market for the Colorado Casinos
General. Black Hawk and Central City are historic mining
towns made famous during the gold rush of 1869. Prior to the
advent of casino gaming in October 1991, Black Hawk, and to a
greater extent, Central City, were popular tourist towns,
especially in the summer months. The two towns offered mine
tours, antique and rock shops and live performances of opera in
the Central City Opera House. Casino gaming is currently the
main draw to the towns and gaming establishments have displaced
many of the former tourist-related businesses.
Customers for casinos in Black Hawk and Central City are
primarily "day trippers" from within a 100-mile radius of Black
Hawk and Central City, which includes the Denver metropolitan
area. Approximately 1.6 million people live in the Denver
metropolitan area, and approximately two million people live
within a 50 mile radius, and approximately 2.8 million people
live within a 100-mile radius, of Black Hawk and Central City.
Black Hawk and Central City are located approximately 35 miles
west of Denver and approximately ten miles from Interstate 70,
the main east-west artery connecting Denver with many of
Colorado's premier ski resorts.
Marketing Strategy. The Company seeks to attract customers
to the Bullwhackers Casinos by: (i) offering first class
facilities with comfortable and efficient layouts and the
availability of parking which is more convenient than that
provided by many of its competitors; (ii) promoting customer
awareness through marketing of the Bullwhackers name and theme;
(iii) providing excellent customer service with a motivated
staff; (iv) utilizing strategic busing programs; (v) using direct
mail; (vi) offering customer promotions; (vii) providing
desirable food products and refreshments, and (viii) providing
incentives to higher value repeat customers through membership in
the "Bullwhackers Slot Club."
The Company has used extensive marketing programs to build
customer awareness, including television, radio, print and direct
mail. The Company believes that Bullwhackers enjoys the highest
name recognition among all casinos located in Colorado, a fact
which the Company attributes in part to the success of its marketing
campaigns. The Company has also developed promotional
offerings centered around the Bullwhackers theme of offering a
fun, exciting gaming atmosphere, including providing gift items
and a cash-back reward system based upon level of play. The
Company also has instituted a popular busing program known as the
"Bullride." The Bullride operates at least four times per day
from Golden, a western Denver suburb, to and from Black Hawk and
Central City, and between the two towns, and carries an average
of 2,500 patrons per week.
The Company intends to upgrade substantially all of its slot
machines at its Bullwhackers Casinos by equipping its slot
machines with bill validators, either by retrofitting existing
slot machines or purchasing new slot machines with bill
validators, at an estimated cost of $1 to 2 million (depending
upon whether the existing slot machines are retrofitted or new
slot machines are acquired) over the next two years. The Company
also intends to equip the Silver Hawk with slot machines with
bill validators. Bill validators allow patrons to use paper
currency rather than tokens or coins in slot machines. This
capital expenditure program is expected to increase the
competitiveness of the Colorado Casinos within their markets.
Competition. Bullwhackers Central City is located
approximately one and one-half miles from Bullwhackers Black Hawk
and, when opened, the Silver Hawk will be located adjacent to
Bullwhackers Black Hawk. Due to their proximity, the Colorado
Casinos compete for the same target market. However, the Company
believes that its primary competition for the Colorado Casinos
are other casinos operating in Black Hawk and Central City and,
secondarily, casinos operating in Cripple Creek. Colorado does
not limit the total number of gaming licenses available for
issuance in Colorado and there are no minimum facility size
requirements. As a result, there are few barriers to entry and
competition is intense.
According to the Colorado Division of Gaming, there were 56
gaming facilities operating in Colorado in December 1995, with a
total of 12,414 slot machines and 256 table games. Of these, 19
facilities, 4,877 slot machines and 113 table games were located
in Black Hawk; 13 facilities, 3,670 slot machines and 72 table
games were located in Central City, and 24 facilities, 3,867 slot
machines and 71 table games were located in Cripple Creek. In
December 1995, the average daily adjusted gross proceeds
(determined by deducting the amount paid out to patrons from
gross proceeds, and sometimes referred to as the casino's "win")
per slot machine was $102.60 in Black Hawk, $51.98 in Central
City and $85.40 in Cripple Creek. The cumulative win for slot
machines in Black Hawk as a market was $180 million in 1995,
compared with the cumulative win for slot machines in Central
City as a market of $86 million in 1995.
The Company believes that since October 1991, 12 casinos in
Black Hawk and 20 casinos in Central City have ceased operations.
In addition, several operators, including the Company, have
reduced staffing and others have closed temporarily or reduced
operations. The Company believes that the casinos that failed
did so for a variety of reasons, including inferior design, less
convenient parking, inadequate size, inexperienced management and
undercapitalization. Several facilities have also changed
ownership and more experienced, nationally recognized operators
from other areas of the country have entered the Colorado gaming
market, including Harrah's, Harvey's and Fitzgerald's. Plans
have been announced by several companies for the development and
operation of gaming facilities in Black Hawk and, to a lesser
extent, in Central City, which may be larger than those operated
by the Company. The announced Black Hawk prospects include a
proposed casino project by a joint venture between Caesars World,
Inc, a unit of ITT Corp., and Nevada Gold Casinos, a hotel/casino
project by a joint venture between Black Hawk Gaming and Jacobs
Entertainment and a major expansion by Colorado Central Station
across the street from their existing facility that would include
a hotel, parking garage, expanded gaming capacity and other
amenities. In Central City, Harvey's Wagon Wheel, currently the
largest casino in Central City, has announced plans to build a
new parking garage. In addition, certain of the Company's
competitors and potential competitors in Colorado have more
gaming industry experience and significantly greater financial
and other resources than the Company. If any of the gaming
projects in Black Hawk which have been announced are completed,
these projects could have a material adverse effect on the
Company's present and proposed operations in Colorado and the
Company's consolidated results of operations and financial
position.
While the Black Hawk market continues to grow and absorb new
capacity, growth in the Central City market has slowed recently.
Any future growth in Central City remains uncertain, due in large
part to the market's relative lack of convenient parking compared
to Black Hawk and the fact that the main thoroughfare to Central City
passes directly through Black Hawk. As the gaming industry
in Black Hawk continues to expand, Central City will face
increased competitive pressure, potentially resulting in reduced
patronage, revenues and operating margins. The Company will from
time to time re-evaluate its position in Central City based on
current market conditions.
Several lobbying groups were able to place initiatives for
additional Colorado limited stakes gaming venues, including
Denver, on the November 1992 statewide ballot. Although each of
these initiatives was defeated by a wide margin, it is possible
that future initiatives could be introduced. No assurances can
be given that any such initiatives will be introduced or enacted,
or if enacted, what effect any such initiatives would have on the
Company's consolidated results of operations or financial
position.
In addition to the Colorado competitors described above, the
Company competes for both customers and potential future gaming
sites with gaming facilities nationwide, including casinos in
Nevada and Atlantic City. The Company also competes with other
forms of gaming on both a local and national level, including
state-sponsored lotteries, charitable gaming and pari-mutuel
wagering, among others, and competes for entertainment dollars
generally with other forms of entertainment. The recent and
continuing expansion of legalized casino gaming to new
jurisdictions throughout the United States may also affect
competitive conditions. Although the focus of the Company is the
Colorado gaming market, it will consider gaming ventures in other
locations if its resources allow it to do so.
Due to the rapid growth of the Colorado gaming market,
changes in the number of facilities operating and their
individual layouts, the seasonality of the business and the local
attributes of each Colorado gaming market, revenue results have
varied significantly between the various Colorado gaming markets
and between properties within those markets.
Reliance on Denver Market. The Company's gaming revenues
currently depend primarily upon visitor traffic at the
Bullwhackers Casinos from Denver metropolitan area residents. A
decline in the Denver economy or a decline in the Colorado gaming
market, including increased competition from other gaming
jurisdictions both inside and outside Colorado, could have a
material adverse effect on the Company's consolidated results of
operations and financial position.
Weather Related Risks. Because the Colorado Casinos are
located in the Rocky Mountains, they are subject to sudden and
severe winter storms. Access to Central City and Black Hawk,
which are both located ten miles from Interstate 70, is made via
a two-lane secondary road. In bad weather, and in the winter
months generally, this access road is difficult to traverse,
which reduces the number of patrons traveling to Black Hawk and
Central City, and negatively affects the Company's operating
results during these periods. In addition, bad weather can
result in a loss of services to the Colorado Casinos which also
negatively affects the Company's operating results. As a result,
the Colorado Casinos' business tends to be seasonal, with the
highest level of activity occurring during the summer months.
The site of Bullwhackers Black Hawk is located in a 100-year
flood plain. To date, the Company has not experienced any
flooding resulting in damage to the casino. The Company carries
$5 million in flood insurance on Bullwhackers Black Hawk, which
management currently believes is adequate. There can be no
assurance that Bullwhackers Black Hawk will not suffer flood
damage in the future or that any damage will be adequately
covered by insurance.
Environmental Issues. The Black Hawk and Central City
gaming districts, including the Colorado Casino sites, are
located generally within the Central City/Clear Creek Superfund
site (the "Site") as designated by the Environmental Protection
Agency (the "EPA"), pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"). The Site includes numerous specifically identified
areas of mine tailings and other waste piles from former gold
mine operations that are the subject of ongoing investigation and
clean-up by the EPA and the Colorado Department of Public Health
and Environment (the "CDPHE"). CERCLA requires remediation of
sites from which there has been a release or threatened release
of hazardous substances and authorizes the EPA to take any
necessary response actions at Superfund sites, including
authorizing potentially responsible parties ("PRPs") to clean up
or contribute to the clean-up of a Superfund site.
PRPs are broadly defined under CERCLA, and include past and present
owners and operators of a site. CERCLA imposes strict liability on
PRPs, and courts have commonly held PRPs to be jointly and
severally liable for all response costs.
Although the Colorado Casinos are not within any of the
specific areas of the Site currently identified by the EPA for
investigation or remediation, the site on which the Surface
Parking Lot was constructed was identified as requiring
remediation in connection with the construction of the Surface
Parking Lot. That remediation was completed in June 1994.
Additional remediation will be required if the Company proceeds
with the construction of the Parking Garage on that site. The
Company has received the approval of the EPA and the CDPHE
concerning the scope of the additional remediation work and has
committed to complete such work as part of the construction of
the Parking Garage. The cost of the additional remediation has
been included in the estimated cost of construction of the
Parking Garage. See "- Expansion Plans; The Parking Garage."
The Company, through independent environmental consultants,
conducted both Phase I and Phase II environmental examinations of
the real property underlying the Bullwhackers Casinos and
obtained subsequent follow-up reports. Based on this
investigation, the Company is not aware of any environmental
problems affecting the Bullwhackers Casinos which are likely to
result in material costs to the Company. Although the Company
has not conducted environmental evaluations of the real property
underlying the Silver Hawk facility, it does not believe that
there are any environmental problems affecting the Silver Hawk
site which are likely to result in material costs to the Company.
No assurance can be given, however, that the Company will not
subsequently discover significant environmental problems at any
of its Colorado properties. Furthermore, the EPA or other
governmental authorities could broaden their investigations and
identify additional areas within the Site, including the Colorado
Casino sites, for remediation. If any of the Colorado Casinos
were included in additional areas of concern within the Site, the
Company could be identified as a PRP and any liability related
thereto could have a material adverse effect on the Company.
Furthermore, environmental conditions at any of the Company's
Colorado properties could have, or could in the future have, a
detrimental impact on adjacent or nearby properties or persons.
No assurance can be given that no such impact on a third party
will arise in the future, nor that such an impact, if it arises,
will not have a material adverse impact on the Company.
Limited Gaming Experience. The success of the Company will
depend, in large part, upon its success in hiring and retaining
qualified professionals or obtaining the services of third
parties in connection with the development, operation and
management of the Colorado Casinos. Certain of the Company's
current officers and directors, some of whom have been engaged by
the Company only recently, have limited experience in the
development or operation of casinos.
Availability and Retention of Key Management. The Company's
operations and development are dependent upon the services of its
executive officers. Although Stephen J. Szapor, Jr., President
and Chief Executive Officer of the Company ("Szapor"), Alan L.
Mayer, Senior Vice President, Chief Legal Officer and Secretary
of the Company ("Mayer") and Richard Rabin, Senior Vice President
of Operations of the Company ("Rabin"), will enter into
employment agreements with the Company on the Effective Date, the
loss of the services of these individuals could adversely affect
the Company. The Company's operations and development also are
dependent in part on its ability to attract and retain qualified
management personnel. Competition for qualified personnel in
Colorado is intense and there can be no assurance that in the
future the Company will be able to attract and retain the
personnel it needs for successful operations. See "Item 5,
Directors and Executive Officers."
Other Activities. In 1994, the Company entered into a
letter of intent to purchase a 25% interest in Promociones e
Inversiones de Guerrero S.A. de C.V. ("PRIGSA"), a Mexico City
based development and gaming company, which developed a jai alai
fronton and a race and sports betting operation in Acapulco,
Mexico. Pursuant to the letter of intent, the Company invested
approximately $6 million in PRIGSA with the right to acquire a
25% equity ownership following the receipt of certain
governmental approvals. To date, those approvals have not been
received nor do they appear likely to be received in the future.
The Company does not believe that the PRIGSA project is viable in
its current form and, accordingly, has recorded a 100% reserve
against its investment.
Employees
The Company employs approximately 500 persons, including
cashiers, dealers, food and beverage service personnel, and
facilities maintenance, accounting, marketing and human resources
personnel. Several of the Company's employees hold key licenses
in Colorado. See "- Colorado Gaming Regulations." No labor
unions currently represent any employees of the Company. A
standard package of employee benefits is provided to full-time
employees. The Company believes that its employee relations are
satisfactory.
Colorado Gaming Regulations
The State of Colorado created the Colorado Division of
Gaming within the Department of Revenue to license, implement,
regulate and supervise the conduct of limited stakes gaming. The
Director of the Division, under the supervision of the five-
member Colorado Limited Gaming Control Commission (the
"Commission"), has been granted broad power to ensure compliance
with Colorado law and regulations adopted thereunder
(collectively, the "Colorado Regulations"). The Director of the
Division may inspect, without notice, premises where gaming is
being conducted; may seize, impound or remove any gaming device;
may examine and copy all of a licensee's records; may investigate
the background and conduct of licensees and their employees, and
may bring disciplinary actions against licensees and their
employees. He may also conduct detailed background checks of
persons who loan money to or invest money in a licensee.
It is illegal to operate a gaming facility without a license
issued by the Commission. The Commission closely regulates the
suitability of persons owning or seeking to renew an interest in
a gaming license or permit, and the suitability of a licensee or
permittee can be adversely affected by persons associated with
the licensee or permittee. Additionally, any person or entity
having any direct interest in the Company or any casino directly
or indirectly owned by the Company may be subject to
administrative action, including personal history and background
investigations. The actions of persons associated with the
Company and its management employees, over whom the Company may
have no control, could jeopardize any licenses held by the
Company in Colorado.
Bullwhackers Black Hawk and Bullwhackers Central City were
granted retailer/operator licenses concurrently with their
respective openings. These licenses are subject to continued
satisfaction of suitability requirements and must be renewed
periodically. The current licenses expire on June 2, 1996.
There can be no assurance that the Company will successfully
renew its licenses in a timely manner. Prior to opening the
Silver Hawk, the Company will be required to obtain a
retailer/operator license for that facility. There can be no
assurance that the Company will be able to obtain such a license
for the Silver Hawk.
Under the Colorado Regulations, no person can have an
ownership interest in more than three retailer/operator licenses.
The Company anticipates having three licenses, one each for
Bullwhackers Black Hawk, Bullwhackers Central City and the Silver
Hawk. Accordingly, any expansion opportunities that the Company
may have in Colorado may be limited absent the disposition of one
of the Colorado Casinos.
In addition, this limitation may affect the ability of
certain entities to own the Company's stock. Under the Colorado
Regulations, the definition of an "interest" in a licensee
excludes ownership of less than 5% of a publicly traded company.
Any owner of any interest in a Colorado licensee that is not
publicly traded or a 5% or more interest in a publicly traded
licensee may be precluded from owning more than 5% of the
Company's stock.
All persons employed by the Company who are involved,
directly or indirectly, in gaming operations in Colorado also are
required to obtain a license. Key licenses are issued to "key
employees", which include any executive, employee or agent of a
licensee having the power to exercise a significant influence
over decisions concerning any part of the operations of a
licensee. At least one key license holder must be on the
premises of each Colorado Casino at all times. Messrs. Szapor,
Mayer and Rabin, among others, hold key licenses for the Company.
All of the new directors of the Company who will be elected on
the Effective Date will be required to obtain key licenses.
There is no assurance that all of the new directors will meet
applicable licensing criteria or that the key licenses for the
new directors, other than Mr. Szapor, will be issued by the
Effective Date. Accordingly, it is possible that the Company
will operate with an interim board of directors consisting of
Messrs. Szapor, Mayer and Rabin until such time as the new
directors are able to obtain their key licenses. See "Item 5,
Directors and Executive Officers."
Under the Colorado Regulations, any person or entity having
any direct or indirect interest in a gaming licensee or an
applicant for a gaming license, including but not limited to the
Company and stockholders of the Company, may be required to
supply the Commission with substantial information, including but
not limited to, personal background and financial information,
source of funding information, a sworn statement that such person
or entity is not holding his interest for any other party, and
fingerprints. Such information, investigation and licensing as
an "associated person" is automatically required of all persons
who directly or indirectly own 5% or more of a direct or indirect
legal, beneficial or voting interest in a privately owned gaming
licensee or 10% or more in a publicly traded licensee. Persons
directly or indirectly having an interest of between 5% and 9.99%
in a publicly held licensee must report their interest to the
Commission within ten days after acquiring their interest and may
be required to provide additional information and may be required
to be found suitable by the Commission. Persons directly or
indirectly having an interest in a publicly held licensee of 10%
or more must apply to the Commission for a finding of suitability
within 45 days after acquiring such interest. If certain kinds
of institutional investors provide specified information to the
Commission, such investors, at the Commission's discretion, may
be permitted to own up to 14.99% of a publicly traded licensee
before a finding of suitability will be required. The Commission
also has the right to request information from any person,
directly or indirectly interested in or employed by a licensee.
An application for licensure or a finding of suitability may be
denied for any reason deemed reasonable by the Commission or the
Director of the Division.
Pursuant to the Colorado Regulations, a licensee that elects
to register its common stock under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
is considered to be publicly traded. The Company has elected to
so register its common stock effective on the Effective Date and,
accordingly, expects to be treated as a publicly traded company
within the meaning of the Colorado Regulations. By registering
its common stock, the Company will become subject to the
reporting requirements imposed by the Exchange Act.
If the Commission determines that a person or entity is not
suitable to own a direct or indirect voting interest in the
Company, the Company may be sanctioned unless the person or
entity disposes of its voting interest. Sanctions may include
the loss by any of the Colorado Casinos of their licenses. In
addition, the Colorado Regulations prohibit a licensee or any
affiliate of a licensee from paying dividends, interest or other
remuneration to any person found to be unsuitable, or recognizing
the exercise of any voting rights by any person found to be
unsuitable. The Colorado Regulations require an operating casino
licensee to include in its corporate charter which permit the
repurchase of the voting interests of any person found to be
unsuitable. The Company's Amended and Restated Certificate of
Incorporation includes the required provisions. See Item 11,
"Description of Registrant's Securities to be Registered - Common
Stock."
The Commission has the power to require the Company to
suspend or dismiss officers, directors and other key employees or
sever relationships with other persons who refuse to file
appropriate applications or who are found to be unsuitable to act
in such capacities, and may have such power with respect to any
entity which is required to be found suitable.
A person or entity may not sell, lease, purchase, convey,
acquire or pledge an interest in a licensee without the prior
approval of the Commission, except for a less than 5% interest in
a publicly traded corporation licensed to conduct limited stakes
gaming in Colorado.
The Colorado Casinos may operate only between 8:00 a.m. and
2:00 a.m., and may permit only individuals 21 years or older to
gamble in the casino. Slot machines, black jack and poker are
the only permitted games, with a maximum single bet of $5.00.
The Colorado Casinos may not provide credit to gaming patrons.
The Colorado Regulations restrict the percentage of space a
casino may use for gaming to 50% of any floor and 35% of the
overall square footage of the building in which the casino is
located. Effective October 1 of each year, Colorado establishes
the gross gaming revenue tax rate for the ensuing twelve months.
Under the Colorado Constitution, the rate can be increased to as
much as 40%. Colorado has both raised and lowered gaming tax
rates since they were initially set in 1991. Currently, the maximum
gaming tax rate is 18%. These regulations and taxes adversely affect
the Colorado Casinos' ability to generate revenues and operating
profits. See "- Non-Gaming Regulation - Taxation."
The Company believes that it is presently in material
compliance with all applicable gaming rules and regulations.
The approval by the Commission of the changes in the stock
ownership of the Company pursuant to the Plan of Reorganization
is a condition precedent to the effectiveness of the Plan of
Reorganization.
Non-Gaming Regulation
Liquor Regulation. The sale of alcoholic beverages is
subject to licensing, control and regulation by certain Colorado
state and local agencies (the "Liquor Agencies"). Subject to
certain exceptions under applicable regulations, or the
application thereof, all persons who directly or indirectly own
5% or more of the Company must file applications with and are
subject to investigation by the Liquor Agencies. The Liquor
Agencies also may investigate persons who, directly or
indirectly, loan money to liquor licensees. All liquor licenses
are revocable and are not transferable. The Liquor Agencies have
broad powers to limit, condition, suspend or revoke any liquor
license and any such disciplinary action could (and revocation
would) have a material adverse effect upon the operations of the
Company and its Colorado Subsidiaries.
Under Colorado law, it is a criminal violation for any
person or entity to own a direct or indirect interest in more
than one type of alcoholic beverage license or more than three
gaming tavern liquor licenses. As a result, no stockholder of
the Company can legally own any direct or indirect legal,
equitable or voting interest in any other Colorado alcoholic
beverage licensee if such ownership will cause such stockholder
to own an interest in more than one type of alcoholic beverage
license or more than three gaming tavern liquor licenses.
Each Bullwhackers Casino has a gaming tavern liquor license
and it is expected that Silver Hawk will also obtain a gaming
tavern liquor license prior to its opening as a casino.
Consequently, no person with an interest in the Company can have
an interest in another liquor licensee which holds a liquor
license in Colorado other than a gaming tavern liquor license,
and, as a result, cannot have an interest in an entity which
holds a Colorado hotel and restaurant liquor license.
Additionally, to the extent that the Company holds three gaming
tavern liquor licenses in Colorado as expected, no person with an
interest in the Company can have an interest in another entity
with a Colorado gaming tavern liquor license. This limitation
may affect the ability of certain entities to own the Company's
stock.
The approval by the Liquor Agencies with jurisdiction over
the Colorado Casinos of the changes in the stock ownership of the
Company pursuant to the Plan of Reorganization is a condition
precedent to the effectiveness of the Plan of Reorganization.
Taxation. Gaming operators in Colorado are subject to state
and local taxes and fees in addition to ordinary federal and
state income taxes. Black Hawk and Central City have imposed
annual license fees currently totaling $750 and $1,265,
respectively, for each gaming device installed in a casino. The
State of Colorado has promulgated an annual gross gaming revenue
tax (gross gaming revenue being generally defined as the total
amount wagered less the total amount paid out in prizes) of 2% of
the gross gaming revenue up to and including $2 million, 8% of
the gross gaming revenue above $2 million up to and including $4
million, 15% of gross gaming revenue above $4 million up to and
including $5 million and 18% of gross gaming revenue in excess of
$5 million. Effective October 1 of each year, the Commission
establishes the gross gaming revenue tax rate for the ensuing 12
months. Under the Colorado Constitution, the Commission could
increase this rate to as much as 40%. Pursuant to a more recent
tax limitation amendment to the Colorado Constitution, however,
neither the state nor any local government may increase a tax
rate without an affirmative vote of the people; therefore, there
is some question as to whether the Commission could
constitutionally increase the state tax levied on gross gaming
revenues without such a vote. In addition, the State of Colorado
currently levies an annual $75 per device fee for each gaming
device installed in a casino. Any material increases in the
taxes or fees paid by the Company could have a material adverse
effect on the Company's consolidated results of operations and
financial position.
ITEM 2. FINANCIAL INFORMATION
Selected Financial Information
The selected consolidated financial information presented
below for each of the years in the four-year period ended
December 31, 1995 and each of the three-month periods ended March
31, 1995 and March 31, 1996 is derived from the Company's
Consolidated Financial Statements and Notes thereto which include
BWBH, Inc., BWCC, Inc., Millsite 27, Inc. and Silver Hawk Casino,
Inc. Separate audited Financial Statements for BWBH, Inc., BWCC,
Inc., Millsite 27, Inc. and Silver Hawk Casino, Inc., as the
guarantors of the New Notes (the "Guarantors"), are not included
herein because the Guarantors are each jointly and severally
liable with respect to the full amount of New Notes and the
aggregate total assets, net earnings and net equity of the
Guarantors are substantially equivalent to the total assets, net
earnings and net equity of the Company and its subsidiaries on a
consolidated basis. This data should be read in conjunction with
the Consolidated Financial Statements of the Company and the
Combined Financial Statements of the predecessors of the Company
and the Notes thereto provided as Item 13 of this Registration
Statement and the Management's Discussion and Analysis of
Financial Condition and Results of Operations provided below.
The pro forma condensed consolidated statement of operations
data has been prepared assuming that the Effective Date occurred
on January 1, 1995 and January 1, 1996, respectively and the pro
forma condensed consolidated balance sheet data has been prepared
assuming that the Effective Date occurred on December 31, 1995,
and March 31, 1996, respectively and both are provided for
comparison purposes. For a more complete discussion of the pro
forma data, see "Hemmeter Enterprises, Inc. Unaudited Pro Forma
Condensed Consolidated Financial Information."
Years Ended December 31,
_______________________________________________________
1995
(Pro
1992(a) 1993 1994(c) 1995(c) Forma)(d)
________ ________ ________ _________ _________
Statement of
Operations Data:
Net revenues . . . . $ 17,045 $ 38,468 $ 45,474 $ 47,428 $ 47,428
Operating Expenses:
Impairment of
assets and
predevelopment
expense . . . . . . . - - 10,804 11,347 11,347
Reorganization
items . . . . . . . . - - - 17,910 -
Other operating
expenses . . . . . . 25,349 35,310 47,631 44,807 46,120
Income (loss) from
operations . . . . . (8,304) 3,158 (12,961) (26,636) (10,039)
Interest expense . . 3,000 6,987 18,822 18,664 6,731
Equity in
unconsolidated
subsidiary (GPRI) - - 2,323 70,277 -
Net loss . . . . . . $(11,241) $ (3,829) $(32,131) $(115,216) $(16,720)
________ _______ _______ _________ ________
Net loss per common
share . . . . . . . . $ (1.09) $ (0.37) $ (3.22) $ (9.78) $ (3.25)
______ ______ ______ ______ ______
Weighted average
common shares (b) . 10,269,641 10,269,641 9,969,142 11,786,235 5,138,888
Three Months Ended March 31,
________________________________
1996
1995 1996 (Pro Forma)
____ ____ _________
Statement of
Operations Data:
Net revenues . . . . $ 11,817 $ 11,023 $ 11,023
Operating Expenses:
Impairment of
assets and
predevelopment
expense . . . . 1,465 - -
Reorganization
items . . . . . - 1,068 -
Other operating
expenses . . . . 12,129 9,648 9,958
Income (loss) from
operations . . . . (1,777) 424 1,065
Interest expense . . 4,459 120 1,632
Equity in
unconsolidated
subsidiary (GPRI) . 4,377 - -
Net loss . . . . . . $(10,400) $ 328 $ (543)
________ ___ ____
Net income (loss) per
common share . . . . $ (.88) $ .03 $ (.11)
_____ ___ _____
Weighted average
common shares (b) . 11,786,235 11,786,235 5,138,888
Years Ended December 31,
_______________________________________________________
1995
(Pro
1992(a) 1993 1994(c) 1995(c) Forma)(d)
________ ________ ________ _________ _________
Balance Sheet Data:
Cash and cash
equivalents . . . . . $ 1,676 $ 12,944 $ 7,977 $ 3,623 $ 3,623
Total assets . . . . . 35,181 143,622 141,093 37,680 64,000
Long-term debt
(excluding current
portion) . . . . . . 35,064 139,595 155,675 - 54,348
Liabilities subject
to compromise . . . . - - - 186,460 -
Total stockholders'
equity (deficit) . . (10,002) (4,693) (36,824) (153,137) 4,343
As of March 31,
_________________________
1996
1996 (Pro Forma)
________ ___________
Balance Sheet Data:
Cash and cash
equivalents . . . . . $ 6,091 $ 6,091
Total assets . . . . 39,247 64,000
Long-term debt
(excluding current
portion) . . . . . . - 54,168
Liabilities subject
to compromise . . . . 186,460 -
Total stockholders'
equity (deficit) . . (152,809) 3,361
____________________
(a) Reflects operating results for the period from June 15, 1992
to December 31, 1992 for Bullwhackers Central City and the
period from July 17, 1992 to December 31, 1992 for
Bullwhackers Black Hawk.
(b) Warrants totaling 7,552,213 shares of common stock and
179,000 common stock, warrants and options issued under the
Company's pre-bankruptcy Restricted Share Plan and Non-
Employee Director Plan were not included in the calculation
of weighted average shares outstanding as their effect would
have been anti-dilutive.
(c) GPRI was consolidated with the Company and its other wholly
owned subsidiaries for the Company's fiscal year ended
December 31, 1994, but was not consolidated with the Company
and its other wholly owned subsidiaries for the Company's
fiscal year ended December 31, 1995 because the Company no
longer controlled GPRI following the commencement of the
GPRI Bankruptcy Case. See "Item 13, Financial Statements
and Supplementary Data."
(d) For information on specific pro forma adjustments resulting
from the reorganization, see "Unaudited Pro Forma Condensed
Consolidated Financial Information."
Hemmeter Enterprises, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma condensed consolidated
balance sheets for December 31, 1995 and March 31, 1996 and
statement of operations for the year ended December 31, 1995 and
the three months ended March 31, 1996 of the Company is based on
the consolidated financial statements of the Company included
elsewhere in this Registration Statement. The unaudited pro
forma condensed consolidated balance sheets of the Company has
been prepared assuming that the Effective Date of the Plan of
Reorganization had occurred on December 31, 1995 and March 31,
1995, respectively. The unaudited pro forma condensed
consolidated statements of operations of the Company has been
prepared assuming that the Effective Date of the Plan of
Reorganization had occurred on January 1, 1995 and January 1,
1996, respectively. Neither the unaudited pro forma condensed
consolidated balance sheets nor the unaudited pro forma condensed
consolidated statements of operations of the Company reflect the
acquisition of the Silver Hawk facility or the commencement of
construction of Phase I of the Parking Garage.
The unaudited pro forma condensed consolidated balance sheet
and statement of operations of the Company and accompanying notes
should be read in conjunction with the Company's consolidated
financial statements and notes thereto provided as Item 13 of
this Registration Statement. The unaudited pro forma condensed
consolidated financial information is being presented for
information purposes only and does not purport to represent what
the Company's consolidated financial position or results of
operations would actually have been if the Effective Date of the
Plan of Reorganization had occurred on December 31, 1995, March
31, 1996, January 1, 1995 or 1996, or to project the Company's
financial position or results of operations at any future date.
Hemmeter Enterprises, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet Data
December 31, 1995
(In thousands)
December 31, Reorgan- December
1995 ization Fresh Start 31, 1995
(Historical) Adjustments Adjustmemts (Pro forma)
CURRENT ASSETS:
Cash and cash
equivalents . . . . . $ 3,623 $ 3,623
Accounts receivable . 226 226
Inventories . . . . . 85 85
Prepaid expenses . . 638 638
________ ________
Total current
assets . . . . . . . 4,572 4,572
PROPERTY, EQUIPMENT
AND LEASEHOLD
IMPROVEMENTS . . . . 32,127 32,127
INVESTMENT IN
UNCONSOLIDATED
SUBSIDIARIES . . . . -- --
EXCESS REORGANIZATION
VALUE . . . . . . . . -- 26,320 (4) 26,320
OTHER ASSETS . . . . 981 981
_________ _________
Total Assets . . . $ 37,680 $ 64,000
_________ _________
CURRENT LIABILITIES:
Accounts payable . .
$ 404 $ 404
Accrued expenses . . 3,953 3,953
Current portion of
credit facility. . -- 952 (1) 952
_________ _________
Total current
liabilities . . 4,357 5,309
_________ _________
NOTES PAYABLE:
Senior secured notes -- 50,000 (1) 50,000
Credit Facility . . -- 2,248 (1) 2,248
Other Notes . . . . -- 2,100 (1) 2,100
___________ ________
Total notes payable -- 54,348
___________ ________
LIABILITIES SUBJECT TO
COMPROMISE . . . . 186,460 (186,460) --
___________ _______
Total liabilities 190,817 59,657
___________ ________
STOCKHOLDERS EQUITY:
Common stock . . . . 118 (67) (2)(3) 51
Warrants . . . . . . 7,000 (7,000) (2) --
Additional paid-in
capital . . . . . . . 2,162 2,130 (5) 4,292
Retained earnings . (162,417) 138,227 24,190 (5) --
_________ _________
Total stockholders
equity . . . . . (153,137) 4,343
_________ _________
Total liabilities and
stockholders equity . $ 37,680 $ 64,000
_________ _________
Hemmeter Enterprises, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1995
(In thousands)
Year Year
Ended ended
December 31, Reorgan- December
1995 ization Fresh Start 31, 1995
(Historical) Adjustments Adjustmemts (Pro forma)
Revenues, net . . . . $ 47,428 $ 47,428
_________ ________
Operating Expenses:
Casino . . . . . . . 13,087 13,087
Gaming taxes . . . . 8,277 8,277
Food and beverage . 3,173 3,173
Casino general &
administrative . . 3,223 3,223
Corporate general &
administrative . . 6,470 6,470
Marketing. . . . . . 5,806 5,806
Depreciation and
amortization . . . . 4,771 1,313 (10) 6,084
Impairment assets and
predevelopment 11,347 11,347
expense . . . . . .
Reorganization items 17,910 (17,910) (6) --
_________ ________
Total operating
expenses . . . . 74,064 57,467
_________ ________
Operating loss . . . (26,636) (10,039)
Interest expense . . (18,664) 11,933) (7) (6,731)
Interest income . . . 361 (311) (8) 50
Equity in loss -
unconsolidated
subsidiary (GPRI). . (70,277) 70,277) (9) --
Loss before income
taxes . . . . . . . . (115,216) (16,720)
Provision for income
taxes . . . . . . . . -- --
_________ ________
Net loss . . . . . . $ (115,216) $ (16,720)
_________ ________
Hemmeter Enterprises, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet Data
March 31, 1996
(In thousands)
March 31, Reorgan- March 31,
1996 ization Fresh Start 1996
(Historical) Adjustments Adjustmemts (Pro forma)
CURRENT ASSETS:
Cash and cash
equivalents . . . . . $ 6,091 $ 6,091
Accounts receivable . 237 237
Inventories . . . . . 73 73
Prepaid expenses . . 772 772
________ _________
Total current
assets . . . . . . 7,173 7,173
PROPERTY, EQUIPMENT
AND LEASEHOLD
IMPROVEMENTS . . . . 31,034 31,034
INVESTMENT IN
UNCONSOLIDATED
SUBSIDIARIES . . . . -- --
EXCESS REORGANIZATION
VALUE . . . . . . . . -- 24,754 (4) 24,754
OTHER ASSETS . . . .
1,040 1,040
________ _________
Total Assets . . . $ 39,247 $ 64,000
________ _________
CURRENT LIABILITIES:
Accounts payable . . $ 387 $ 387
Accrued expenses . . 5,209 5,209
Current portion of
credit facility . . . -- 875 (1) 875
________ _________
Total current
liabilities . . . . . 5,596 6,471
________ _________
NOTES PAYABLE:
Senior secured notes -- 50,000 (1) 50,000
Credit Facility . . -- 2,068 (1) 2,068
Other Notes . . . . -- 2,100 (1) 2,100
________ _________
Total notes
payable -- 54,168
________ _________
LIABILITIES SUBJECT TO
COMPROMISE . . . . . 186,460 (186,460) --
________ ________
Total liabilities 192,056 60,639
________ _________
STOCKHOLDERS EQUITY:
Common stock . . . . 118 (67) (2)(3) 51
Warrants . . . . . . 7,000 (7,000) (2) --
Additional paid-in
capital . . . . . . 2,162 1,148 (5) 3,310
Retained earnings . (162,089) 162,089 (5) --
________ _________
Total stockholders
equity . . . . . . (152,809) 3,361
________ _________
Total liabilities and
stockholders equity $ 39,247 $ 64,000
________ _________
Hemmeter Enterprises, Inc.
Unaudited Pro Forma Condensed Consolidated
Statement of Operations
Three Months Ended March 31, 1996
(In thousands)
Three Months Three Months
Ended Ended
March 31, Reorgan- March 31,
1996 ization Fresh Start 1996
(Historical) Adjustments Adjustmemts (Pro forma)
Revenues, net . . . . $ 11,023 $ 11,023
_________ ________
Operating Expenses:
Casino . . . . . . . 3,168 3,168
Gaming taxes . . . . 2,002 2,002
Food and beverage . 735 735
Casino general &
administrative. . . 726 726
Corporate general &
administrative. . . 645 645
Marketing . . . . . 1,159 1,159
Depreciation and
amortization. . . . 1,095 309 (10) 1,404
Reorganization items 1,068 (1,068) (6) --
_________ ________
Total operating
expenses . . . . 10,598 9,839
_________ ________
Operating income . . 424 1,184
Interest expense . . (120) (1,512) (7) (1,632)
Interest income . . . 24 24
Income before taxes . 328 (543)
Provision for income
taxes . . . . . . . -- --
_________ ________
Net income (loss) . . $ 328 $ (543)
_________ ________
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements
The following notes set forth the explanations and
assumptions used and adjustments made in preparing the unaudited
pro forma condensed consolidated balance sheet as of December 31,
1995 and March 31, 1996, and the unaudited pro forma condensed
consolidated statements of operations for the year ended December
31, 1995 and three months ended March 31, 1996.
The unaudited pro forma condensed consolidated financial
statements reflect the adjustments described under "- Pro Forma
Adjustments" below, which are based on the assumptions and
preliminary estimates described therein, which are subject to
change. These statements do not purport to be indicative of the
financial position and results of operations of the Company as of
such dates or for such periods, nor are they indicative of future
results. Furthermore, these unaudited pro forma condensed
consolidated financial statements do not reflect anticipated
changes which may occur as the result of activities before and
after the Effective Date of the Plan of Reorganization and other
matters.
The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the financial
statements and the notes thereto provided as Item 13 of this
Registration Statement.
Pro Forma Adjustments
The unaudited pro forma condensed consolidated balance sheet
and unaudited pro forma condensed consolidated statements of
operations reflect the following pro forma adjustments based on
the assumptions described below:
The pro forma balance sheet adjustments:
1. Establishment of new secured and unsecured debt in accordance
with the Plan of Reorganization and classification between
current and long term as appropriate. This adjustment represents
the cancellation of existing Old Notes and certain other
indebtedness and the issuance of $50 million in New Notes, $3.6
million in equipment financing and $2.1 million in CAI Notes, out
of which $1 million of the $3.6 million equipment financing will
be paid within the first twelve months following the Effective
Date.
2. Elimination of preferred stock, common stock, and warrants
and the realization of debt forgiveness income as a credit to the
accumulated deficit.
3. Recording of new common stock at par (5,138,888 shares at
$.01=$51,389).
Fresh start adjustments (balance sheet)
4. Recording excess reorganization value to reflect the total
assets at estimated fair value based on appraisal data in
accordance with AICPA Statement of Position 90-7 ("SOP 90-7").
5. Recording retained earnings at zero and crediting the
difference between the reorganized assets and liabilities as a
credit to paid in capital in accordance with SOP 90-7.
The pro forma statement of operation adjustments:
6. Elimination of one time non-recurring reorganization items.
7. Adjustment to interest expense to reflect the reorganized
debt structure of the Company.
8. This adjustment reflects the reduction of interest income
recorded on affiliate loans in the 1995 period.
9. Elimination of any charges from the disposed subsidiary
(GPRI).
Fresh Start Adjustments (statement of operations):
10. Recording of additional amortization charges on excess
reorganization value, based on a 20 year amortization period.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Prior to the Effective Date, the Company, through its
Colorado Subsidiaries, owned and operated the Bullwhackers
Casinos and the Surface Parking Lot in Colorado, and, through
GPRI, operated a riverboat gaming facility on the Mississippi
River adjacent to downtown New Orleans and owned a 50% interest
in River City Joint Venture ("RCJV") which owned and leased
certain shore facilities in New Orleans, including approximately
53 acres of land. Additionally, RCJV provided administrative
services on behalf of its joint venture partners to support their
riverboat gaming operations. Both the Company's and its joint
venture partner's riverboat gaming facilities were operated under
the name `River City'. The Company's riverboat gaming facility
commenced operations on March 29, 1995, and due to substantial
operating losses, stopped operations on June 6, 1995. The
Company's joint venture partner stopped riverboat gaming
operations on June 9, 1995.
Prior to the closure of its riverboat gaming operations,
GPRI had incurred substantial obligations, including construction
costs, equipment purchases, and trade payables, for which it had
no funds available or financial ability to pay. On July 26,
1995, three creditors of GPRI filed a Chapter 7 involuntary
bankruptcy petition against GPRI in the United States Bankruptcy
Court for the Eastern District of Louisiana. On July 27, 1995,
GPRI's involuntary bankruptcy case was converted into the GPRI
Bankruptcy Case. The GPRI Plan was confirmed on March 29 1996.
The GPRI Plan provides that the Company will receive any causes
of action that GPRI may have against its joint venture partner in
the River City Project, but will not otherwise receive any
distribution from GPRI in respect of its stock ownership of GPRI
or any claim that it may have in the GPRI Bankruptcy Case. Any
payments received by CAI in respect of its claims in the GPRI
Bankruptcy Case will, however, reduce the Company's obligations
on the CAI Notes.
As a result of GPRI's financial difficulties and subsequent
bankruptcy filing, the Old Notes were declared in default in June
1995. After reaching agreement on a debt restructuring with the
holders of the Old Notes, the Company and its Colorado
Subsidiaries filed the Hemmeter Bankruptcy Cases in the United
States Bankruptcy Court for the District of Delaware on November
6, 1995. The venue of the Hemmeter Bankruptcy Cases was changed
to the United States Bankruptcy Court for the Eastern District of
Louisiana on December 27, 1995. The Plan of Reorganization of
the Company and its Colorado Subsidiaries was confirmed on April
8, 1996 and became effective on June 7, 1996. The Company and
the Colorado Subsidiaries have continued their business operations
as debtors-in-possession under the supervision of the Bankruptcy
Court from the date their bankruptcy petitions were filed.
On the Effective Date of its Plan of Reorganization, the
Company adopted fresh start reporting in accordance with SOP
90-7, resulting in adjustment of the Company's common
stockholders' equity and the carrying values of assets and
liabilities. Accordingly, the Company's post-reorganization
consolidated balance sheet and statement of operations will not
be prepared on a consistent basis of accounting with its pre-
reorganization balance sheets and statements of operations. In
connection with its reorganization, a substantial amount of pre-
bankruptcy liabilities of the Company will be converted to equity
or otherwise discharged and significant adjustments will be made
to reflect the resolution of, or provision for, certain
contingent liabilities.
Because of the Hemmeter Bankruptcy Cases and the elimination
of GPRI's operations, no measure of comparability can be drawn
from past results in order to measure those that may occur in the
future. Among the uncertainties which have effected the
Company's operations in the past and might adversely impact the
Company's future operations are (i) general economic conditions,
especially in the Denver, Colorado, metropolitan area, (ii) the
intensely competitive nature of the Colorado gaming industry,
(iii) the entry into the Black Hawk and Central City gaming
markets of licensees with substantially greater economic
resources and gaming experience than the Company, (iv)
changes in the laws governing gaming operations, and (v)
the possibility of increased taxes and other regulatory
burdens on the Company's operations.
Impact of the Plan of Reorganization on Results of Operations
Upon the Company's emergence from bankruptcy on the
Effective Date, the Company's aggregate outstanding debt balance
was reduced from $185.2 million to approximately $55.7 million.
The reduction in debt is expected to result in a reduction in
annual interest expense of approximately $12 million based on the
Company's weighted average interest rate on outstanding debt in
1995. The Company obtained a credit facility with an unaffiliated
lender to provide working capital financing and financing for
its expansion plans. See "- Liquidity and Capital Resources."
Interest on this facility, the amount of which will depend on
the amount borrowed by the Company, will increase the Company's
post-Effective Date interest expense. The Company also incurred
reorganization charges totaling $17.9 million in 1995 which are
non-recurring in nature. The Company's corporate general and
administrative expense in 1995 was $6.5 million. In early 1995,
the Company employed 27 corporate management employees who
provided operations, finance, design, development, legal and
aviation services to the Company. As part of the downsizing
of the Company, the Company will only employ five corporate
management employees on the Effective Date. The Company has
also terminated its arrangement with an affiliate for use of a
corporate aircraft and has renegotiated its office lease to
provide for more favorable terms. The reductions resulting from
these measures is expected to allow the Company to reduce its
corporate general and administrative expense by approximately
$3.7 million per year. Because of the divestiture of GPRI
through the GPRI Bankruptcy Case, the Company's operations will
no longer be burdened with the loss on GPRI's New Orleans
operations, which totaled $71.7 million in 1995.
The adoption of fresh start accounting will result in
increased amortization charges of approximately $1.3 million
annually as a result of recording $26.3 million of excess
reorganization value.
Since its inception, the Company has generated significant
net operating loss carryforwards for tax purposes, which, in the
absence of the Company's bankruptcy, would have been available to
offset any taxable income earned in the future. As a result of
the consummation of the Plan of Reorganization, the Company may
undergo a substantial change in ownership and incur significant
forgiveness of indebtedness income. For tax purposes, the
forgiveness of indebtedness income and the ownership change will
significantly limit or eliminate the Company's net operating loss
carryforwards and other tax benefits. Additionally, while fresh
start accounting requires the Company to significantly increase
the book basis of its assets, the tax bases of those assets
generally remain at their historical bases. Therefore, given the
potential limitation or elimination of the Company's net
operating loss carryforwards and the increased book depreciation
and amortization charges, the Company may have taxable income in
the future, and, therefore, may be required to pay income taxes,
even though it may record a loss for financial reporting
purposes.
Results of Operations
For the Year Three Months Ended March 31, 1996 as Compared
to the Three Months Ended March 31, 1995.
The Company's net revenue decreased to $11.0 million for the
first quarter of 1996, as compared to $11.8 million for the first
quarter of 1995, representing a 7% decrease in net revenues. The
decrease is primarily attributable to a $1.0 million, or 27%,
decrease in Bullwhackers Central City's net revenue due to
increased competition and slower growth in the Central City
market in general. The results in the first quarter at both
Bullwhackers Black Hawk and Bullwhackers Central City were also
significantly affected by abnormally severe winter weather in the
central mountains of Colorado.
Expenses directly related to casino operations, including casino
expense, gaming taxes, and food and beverage expense decreased 6%
to $5.9 million for the first quarter of 1996 as compared to $6.3
million for the first quarter of 1995 due to a decline in revenue
and implementation of certain cost efficiencies. Casino expense
was 53% of net revenue for the first quarter of 1996, as compared
to 56% of net revenue for the first quarter of 1995.
General and administrative expense decreased to $1.4 million
for the first quarter of 1996, as compared to $3.4 million for
the first quarter of 1995. The decrease is primarily due to
expense reductions made at the corporate level. During the
second quarter of 1995, the Company began to implement
significant cost reductions at the corporate level as part of the
Company's restructuring. Most corporate positions were
eliminated, administrative offices were combined with the
Colorado Casinos, and the use and subsidy of a corporate airplane
was terminated.
Marketing expense decreased to $1.2 million for the first
quarter of 1996 as compared to $1.3 million for the first quarter
of 1995. The decrease is attributable the Company implementing
more cost effective marketing programs.
Depreciation expense remained constant at $1.1 million for
the first quarter of 1996 and 1995.
There was no predevelopment expense for the first quarter of
1996 and compared to $305,000 for the first quarter of 1995.
Predevelopment expense consists of costs incurred during the
investigation of potential new gaming venues throughout North
America, including legal, consulting and design costs, political
contributions and travel expenses. The Company substantially
reduced its predevelopment activity in early 1995 due to the
Company's lack of financial resources. The Company is not
currently engaged in any predevelopment activities and has
focused its expansion efforts on the Black Hawk market in the
immediate future.
There were no impairment of assets charges in the first
quarter of 1996 as compared to $1.2 million for the first quarter
of 1995. The impairment charges in 1995 primarily relate to $1
million reserve recorded for affiliate company receivables
determined not to be collectable.
Reorganization expense totaled $1.1 million for the first
quarter of 1996 as compared to none in the first quarter of 1995.
Reorganization costs are costs directly related to the Company's
Chapter 11 reorganization and primarily consists of legal fees.
Operating Income. Income from operations increase to
$424,000 for the first quarter of 1996 as compared to a loss from
operations totaling $1.7 million for the first quarter of 1995.
The primary reason for the increase in operating income is the
reduction in corporate general and administrative expense
discussed above. The Colorado Casinos' operating income, absent
corporate overhead and restructuring charges, decreased to $2.2
million for the first quarter of 1996 as compared to $2.4 million
for the first quarter of 1995, attributable to the decline in the
Central City market and the severe weather in January.
Interest expense total $120,000 for the first quarter of
1996 as compared to $4.5 million for the first quarter of 1995.
The Company is not recording any interest on its debt obligations
in the 1996 period because all such debt obligations are
undersecured and accordingly will not be entitled to interest
pursuant to the Plan of reorganization. In the 1995 period, $4.3
million of interest was expensed related to the Company's $157
million of senior secured pay in kind notes outstanding.
For the Year Ended December 31, 1995 as Compared to the Year
Ended December 31, 1994.
Although GPRI's results of operations were consolidated with
the results of operations of the Company and its other wholly
owned subsidiaries for the Company's fiscal year ended December
31, 1994 and were not consolidated for the Company's fiscal year
ended December 31, 1995, GPRI's only operating item in 1994 was
the preopening expense of $2.6 million discussed below.
Therefore, with the exception of this item, the Company's 1995
results of operations which do not include GPRI are comparable to
the Company's 1994 results of operations which do include GPRI.
The Company's net revenue increased to $47.4 million in 1995
as compared with $45.5 million in 1994, representing a 4%
increase in net revenues. The growth is primarily attributable
to increased revenues at Bullwhackers Black Hawk resulting from
the fact that Bullwhackers Black Hawk had the benefit of the
Surface Parking Lot, which opened in April 1994, for all of 1995,
as opposed to eight months during 1994, and the fact of the
overall market growth in Black Hawk of 14% in 1995. The revenue
growth at Bullwhackers Black Hawk was offset by a slight decrease
in Bullwhackers Central City gross revenues.
Expenses directly related to the casinos, including casino
expense, gaming taxes and food and beverage expense decreased by
3% to an aggregate of $24.5 million for 1995 as compared to an
aggregate $25.3 million for 1994. Casino expense was 52% of net
revenue at the Bullwhackers Casinos for 1995 as compared 56% of
net revenue at the Bullwhackers Casinos for 1994. Casino expense
consists of all direct costs of casino operations, and includes
salaries, wages and benefits expense.
General and administrative expense decreased to $9.7 million
for 1995 as compared to $11.4 million for 1994, representing a
15% decrease. The decrease is due to the Company's reduced
corporate group during the second half of 1995. During the
second quarter of 1995, the Company began to implement
significant cost reductions at the corporate level as part of the
Company's reorganization. Most corporate positions were
eliminated, administrative offices were combined with the
Colorado Casinos, and the use and subsidy of a corporate airplane
was terminated. As a result of these and other reorganization
efforts, general and administrative expense should be
substantially lower in 1996.
Marketing expense increased to $5.8 million for 1995 as
compared to $3.8 million for 1994. The increase primarily
relates to the increased promotional costs due to increased
business volume and the competitive nature of the market.
Depreciation and amortization expense increased to $4.7
million for 1995 as compared to $4.3 million for 1994,
representing a 9% increase. The increase primarily reflects a
full year of depreciation on the improvements at the Surface
Parking Lot in 1995.
There were no pre-opening costs for 1995 as compared to $2.6
million in pre-opening costs for 1994. Pre-opening costs in 1994
consisted of expenditures incurred to prepare the New Orleans
riverboat gaming facility for opening.
Predevelopment expense decreased to $402,000 in 1995, as
compared to $3.9 million in 1994. Predevelopment expense
consists of costs incurred during the investigation of potential
new gaming venues throughout North America, including legal
($127,000 in 1995 and $641,000 in 1994), consulting and design
costs ($109,000 in 1995 and $2.4 million in 1994), political
contributions ($52,000 in 1995 and $206,000 in 1994) and travel
expenses ($115,000 in 1995 and $682,000 in 1994). The Company
substantially reduced its predevelopment activity in early 1995
due to the Company's lack of financial resources. The Company is
not currently engaged in any predevelopment activities and has
focused its expansion efforts on the Black Hawk market in the
immediate future.
Impairment of asset charges were $10.9 million for 1995 as
compared to $6.9 million for 1994. In 1995, the impairment
charges resulted primarily from approximately $6.4 million of
affiliate company receivables determined to be uncollectible,
$2.7 million of capitalized interest related to construction of
the Riverboat Project and $1.5 million of capitalized offering
costs which were written-off once certain initial public offering
and debt registration efforts were abandoned.
Reorganization expense in 1995 totaled approximately $17.9
million as compared to none in 1994. Reorganization expenses are
costs directly related to the Company's Chapter 11 reorganization
and consist primarily of professional fees and the write-off of
unamortized debt placement costs and debt discount.
Operating Income. The loss from operations increased to
$26.6 million for 1995 as compared to $13.0 million for 1994.
The New Orleans operations accounted for none and $2.6 million
of this loss in 1995 and 1994, respectively. In 1995,
reorganization, impairment and other necessary charges
totaled approximately $29.3 million. The Bullwhackers
Casinos had operating income of $9.7 million for 1995 as
compared to $8.3 million for 1994. This increase primarily
reflects the growth in the Colorado market and the
impact of the Surface Parking Lot on the Bullwhackers Black
Hawk operations.
Interest expense totaled $18.7 million for 1995 as compared
to $18.8 million for 1994. The Company ceased accruing interest
on the Old Notes and on certain of its Bullwhackers Casino
equipment financings as of November 7, 1995 because of the
Company's bankruptcy filing. As a result of the decrease in the
Company's debt following the Effective Date, the Company
anticipates that its interest expense will be substantially
reduced in the future.
The Company has made no provision for income taxes in 1995
or since its inception because the Company never generated
taxable income. The Company has reserved the full amount of its
net deferred tax asset (primarily net operating loss carry
forwards) because future taxable income, if any, is uncertain.
The reorganization of the Company on the Effective Date may have
substantial tax consequences to the Company. See "- The Impact
of the Reorganization on Results of Operations."
For the Year Ended December 31, 1994 as Compared to the Year
Ended December 31, 1993.
Net revenues for 1994 were $45.5 million, an increase of 18%
over the $38.5 million of net revenues for 1993. The increase in
revenue is due primarily to the completion of the Surface Parking
Lot in the spring of 1994 and an expanded gaming market in Black
Hawk.
Expenses directly related to the casinos, including casino
expense, gaming taxes and food and beverage expense increased to
an aggregate of $25.3 million for 1994 as compared to $19.7
million for 1993. The increase in casino expenses is due
primarily to increased staffing as a result of greater activity
at Bullwhackers Black Hawk.
General and administrative expense increased to $11.4
million for 1994 as compared to $7.7 million for 1993. These
expenses include the cost of support services such as finance,
marketing, and administrative staff. The increased expense for
1994 is due to costs totaling $8.1 million incurred in 1994
associated with the creation of a corporate group and related
staff, which were added beginning in January 1994. The corporate
group was involved with strategic planning and administration,
the development of the Company's Louisiana operations and the
pursuit and development of gaming in other venues. The corporate
group put in place in 1994 was designed to manage several
operating companies in addition to the Colorado Subsidiaries and
to pursue and develop opportunities in new venues.
Marketing expense decreased to $3.8 million for 1994 as
compared to $4.0 million for 1993.
Depreciation and amortization increased to $4.3 million for
1994 as compared to $3.9 million for 1993. The increase is
related to depreciation of the improvements at the Surface
Parking Lot which was completed in April 1994.
Pre-opening expense totaled $2.6 million for 1994 as
compared to none in 1993. Pre-opening costs consist of
expenditures incurred to prepare for the opening of the casinos
and include labor costs, certain consulting, marketing and other
direct costs. The pre-opening expense incurred in 1994 relates
to costs associated with the Company's New Orleans riverboat
gaming facility.
In 1994, the Company recorded predevelopment expense of $3.9
million as compared to none in 1993. This amount related to
costs incurred during investigation of potential new gaming
venues which was initially capitalized as investment in
development projects. These costs are expensed when a project is
no longer deemed viable. As a result of various gaming
initiatives which were not adopted by voters in potential new
gaming venues, unsuccessful gaming legislation proposed in
potential new venues and municipalities which selected gaming
operators other than the Company, all such costs were expensed in
1994. Beginning in 1995, costs related to the investigation
of new venue development projects were expensed as incurred.
Once management has determined a new venue project has a high
probability of success, commercial development costs incurred
will be capitalized.
In September 1994, the Company entered into an agreement to
acquire a 25% equity interest in PRIGSA. The Company contributed
$5.9 million to PRIGSA during 1994. The contributions were made
in the form of loans and, upon approval by the Mexican
government, were convertible into common stock. The results of
PRIGSA's operations upon opening in the fall of 1994 were
substantially below expectations, and, as a result, PRIGSA
suffered significant operating losses and has significant
liabilities which are senior to the Company's loans to PRIGSA.
As of December 31, 1994, the Company wrote-off its investment in
PRIGSA for a total charge to earnings of $5.9 million.
In 1994, the Company established a reserve of $1 million for
certain affiliate receivables that management believed might not
be collectable. The loss is included in impairment of
investments as of December 31, 1994 in the accompanying
consolidated financial statements of the Company for 1994
(provided as Item 13 to this Registration Statement). See Note
11 to the Company's 1994 Consolidated Financial Statements.
Interest expense increased to $18.8 million, net of $2.1
million of interest costs capitalized for construction projects,
in 1994 as compared to $7.0 million for 1993. The increase in
interest costs relates to the interest on the Old Notes which
were issued during December 1993. Interest expense of $4.8
million in 1993 related to certain loans provided by RII which
were repaid out of the proceeds of the Old Notes.
The Company had a net loss of $32.1 million for 1994 and
accordingly recorded no provision for income taxes. The loss for
tax reporting purposes was different than the net loss for
financial reporting purposes due to differences between the book
and tax basis of the Company's assets. In 1994, the Company
booked a valuation allowance to offset the net deferred tax asset
of approximately $16.0 million arising from differences between
the book and tax basis of the Company's assets, liabilities and
net operating loss carryforwards, because future taxable income
was uncertain.
Liquidity and Capital Resources of the Company Prior to the
Effective Date
Prior to the Effective Date of the Plan of Reorganization,
the Company owned and operated the Bullwhackers Casinos and the
Surface Parking Lot in Colorado and developed and, for a short
period of time operated, the Riverboat Project. The liquidity
and need for capital resources of the Company were materially and
adversely affected by the drain on the Company's resources caused
by the construction of the Riverboat Project and the subsequent
failure of the Riverboat Project to achieve its projected
revenues.
In December 1993, the Company sold $140 million of Old Notes
to various institutional investors in a private placement. The
net proceeds of the sale of the Old Notes were approximately $131
million, of which $42.5 million was used to retire the
construction financing for the Bullwhackers Casinos, $65 million
was used to pay part of the Company's share of the costs of
construction of the Riverboat Project, $10.5 million was used for
predevelopment activities in connection with potential new gaming
ventures and $11.5 million was used for working capital.
Since late 1993, the Bullwhackers Casinos have generated
positive cash flow from operations. This operating cash flow was
used by the Company to provide capital for the Company's efforts
to expand into other jurisdictions, to pay corporate overhead at
the Company and to provide the Company with funds to invest in
GPRI for the Riverboat Project. However, as a result of the
magnitude of the Riverboat Project cost overruns and the failure
of the Riverboat Project to meet its revenue projections because
of the failure of its anticipated market to develop, the
Riverboat Project's losses exceeded the funds available to the
Company. In June 1995, the Company determined that any further
investment in GPRI could jeopardize the ability of the
Bullwhackers Casinos to meet their operating cash and debt
service requirements and would jeopardize the successful
operations of the Bullwhackers Casinos and, as a result, stopped
all Riverboat Project operations.
The Company had anticipated that cash flow from the
Riverboat Project and the Bullwhackers Casinos would provide
sufficient cash flow to pay debt service on the Old Notes.
However, instead of generating positive cash flow, the Riverboat
Project accumulated approximately $50-$60 million of unpaid
obligations, leaving the Company with no ability to meet its debt
service obligations on the Old Notes. Because of the failure of
the Riverboat Project, the Hemmeter Bankruptcy Cases were filed
on November 7, 1995, and the Company and the Colorado
Subsidiaries have continued their business operations as debtors-
in-possession under supervision of the Bankruptcy Court since
that date.
Since the closure of the Riverboat Project, the Bullwhackers
Casinos have generated sufficient cash flow to meet all of the
Company's operating and debt service requirements other than debt
service on the Old Notes. To provide for liquidity if the
current cash flow of the Bullwhackers Casinos were insufficient
for these purposes during the Hemmeter Bankruptcy Cases, and to
finance the down payment on the Silver Hawk facility, the Company
obtained the $7.9 million DIP Facility in November 1995. The
borrowings under the DIP Facility accrue interest at the prime
rate plus 2.75% and are secured by substantially all of the
assets of the Company and its subsidiaries and have
administrative expense priority in the Hemmeter Bankruptcy Cases
which is senior to all other administrative expenses other than
certain professional fees. On April 12, 1996, the Company
borrowed $900,000 under the DIP Facility to finance the $900,000
down payment for the acquisition of the Silver Hawk facility.
Liquidity and Capital Resources of the Reorganized Company
On the Effective Date, the Old Notes were cancelled and the
Company issued New Notes in the aggregate principal amount of
$50 million. The New Notes bear interest at the rate of 12% per
annum, payable semi-annually, will mature in 2003, are secured
by a lien on substantially all of the assets of the Company and
its Colorado Subsidiaries, and are guaranteed by the Colorado
Subsidiaries. During the first twelve months that the New Notes
are outstanding, interest on the New Notes may be paid, at the
option of the Company, by issuing additional New Notes in the
amount of the interest payment which would otherwise be due. As
a result, the Company will have the option of deferring $6
million of interest payments which would otherwise be due in
respect of the New Notes during the first year following the
Effective Date.
The Company has entered into a credit facility with
Foothill Capital Corporation, an unaffiliated lender (the
"Post-Effective Date Credit Facility"), on the Effective Date
which replaced the DIP Facility. The Post-Effective Date Credit
Facility provides for total loans of up to $12.5 million, of
which $3.5 million is available for general working capital
purposes, with the balance being available to finance or
refinance equipment, the construction of the Parking Garage
and construction of a day care facility for patrons of the
Colorado Casinos. Borrowings under the Post-Effective Date
Credit Facility bear interest at the prime rate of interest
plus 2.375% and will be repayable over 3 to 5 years, depending
on the purpose of the loans. The Post-Effective Date Credit
Facility is secured by first liens on substantially all of the
assets of the Company and its subsidiaries which will be senior
to the liens securing the New Notes. On or soon after the
Effective Date, the Company expects to use approximately
$4 million of loans under the Post-Effective Date Credit
Facility to payoff the DIP Facility and approximately
$3.2 million of loans under the Post-Effective Date Credit
Facility to retire at a discount approximately, $4.1 million of
outstanding debt and capital lease obligations incurred by the
Company to finance equipment.
In April 1996, the Company purchased the Silver Hawk casino
for $2.7 million, of which $900,000 was paid in cash with the
balance being financed by the seller. The majority of the down
payment was borrowed under the DIP Facility and was refinanced
on the Effective Date with loans under the Post-Effective Date
Credit Facility. The note payable to the seller of the Silver
Hawk facility bears interest at a rate of 9.5% per annum,
provides for monthly principal and interest payments based
on a 20-year amortization with a balloon payment after seven
years and is secured by a first lien on the Silver Hawk facility.
The Company anticipates opening the Silver Hawk casino for
gaming business in July 1996. Prior to opening the Silver
Hawk, the Company anticipates acquiring approximately 200 slot
machines and complete minor interior remodeling. The total cost
of opening the Silver Hawk casino, exclusive of the acquisition
cost of the facility, is estimated to be approximately $2 million.
The majority of the opening costs will be financed through
loans under the Post-Effective Date Credit Facility with
the remainder being paid from cash flow from the operations of
the Bullwhackers Casinos.
The construction of Phase I of the Parking Garage is
expected to cost approximately $6 million and will be
financed by loans under the Post-Effective Date Credit Facility.
If the Company undertakes construction of Phase II of the
Parking Garage, the construction costs will be financed by
cash flow from operations or loans under the Post-Effective Date
Credit Facility. The Post-Effective Date Credit Facility
requires monthly principal repayments of $100,000 on the portion
of the facility used to construct the Parking Garage upon
completion of Phase I.
The Company expects to finance the approximately $1 to 2
million cost of installing bill validators on slot machines at
the Bullwhackers Casinos or purchasing new slot machines with
bill validators through cash flow from operations or loans under
the Post-Effective Date Credit Facility. The Company also
estimates that the ongoing capital expenditures necessary to keep
its casinos competitive are approximately $2 to $2.5 million per
year. The Company anticipates paying these capital expenditures,
as well as debt service on the CAI Notes, from cash flow from
operations.
The Company believes that the Post-Effective Date Credit
Facility and its operating cash flows will provide sufficient
liquidity and capital resources for its operations. However,
there is no assurance that the Company's estimate of its need for
liquidity and capital resources is accurate or that new business
developments or other unforeseen events will not occur which will
increase those needs. There is also no assurance that the
Company will achieve its estimated cash flow from operations.
Although no additional financing is contemplated at this time,
the Company may seek additional debt or equity financing if
necessary. There can be no assurance that additional financing
will be available to the Company or, if available, will be
available on terms favorable to the Company. Additional debt
financing may require the consent of the holders of the New
Notes. There is no assurance that the Company will be able to
obtain the consent of the holders of the New Notes, if such
consent is necessary.
ITEM 3. PROPERTIES
As of the Effective Date of the Plan of Reorganization,
the Company owned, through its wholly owned subsidiaries, the
Colorado Casinos and the Surface Parking Lot. For further
information, see "Item 1, Business - Colorado Casinos."
In January 1996, the Company entered into an amended
sublease for approximately 19,500 square feet of office space
located in Denver, Colorado which the Company occupies as its
corporate offices. The lease expires in October 1997 and
provides for rent of approximately $7,500 per month.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Pursuant to the Plan of Reorganization, all shares of common
stock of the Company outstanding immediately prior to the
Effective Date was cancelled and 5 million shares of newly
issued common stock of the Company were issued pro rata to the
holders of the Old Notes and to RII and 138,888 shares of newly
issued common stock will be issued to Mr. Szapor. Because the
Old Notes are primarily held in the names of nominees, the
Company is unable to determine the identity of the Old Note
holders directly. The only source of information available to
the Company concerning the identity of the Old Note holders are
the proofs of claim filed in the Hemmeter Bankruptcy Case. Set
forth below is certain information regarding each person who,
based on those proofs of claim, became the beneficial owner of
more than 5% of the Company's common stock on the Effective Date,
determined after giving effect to the cancellation of existing
shares and the issuance of new shares of common stock of the
Company on the Effective Date:
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
___________________ ____________________ __________
Keystone High Income Bond Fund (B-4) 477,916 8.5%
Keystone Strategic Income Fund 195,874 3.5
Keystone Small Company Growth Fund (S-4) 494,094 8.9
Equifax Inc. U.S. Retirement Income Plan
Trust 26,489 *
Ampex Retirement Master Trust 11,782 *
Buffalo Color Master Trust 1,435 *
200 Berkeley Street
Boston, MA 02116
Restart Partners 226,877 4.0
Restart Partners II LP 324,599 8.8
Restart Partners III LP 224,680 4.0
Restart Partners IV LP 143,275 2.6
Restart Partners V LP 57,387 1.0
Morgens Waterfall Income Partners 36,902 *
MW Employee Retirement Trust 6,769 *
The Common Fund 71,516 1.3
10 E. 50th Street, Suite 2600
New York, NY 10022 --- ---
PaineWebber Strategic Income Trust 13,911 *
Managed High Yield Fund, Inc. 83,394 1.5
PaineWebber High Income Trust 768,694 13.8
All-American Term Trust Inc. 73,300 1.3
PaineWebber Offshore Funds, plc -
The High Income Fund 50,025 *
1285 Avenue of the Americas, 15th floor
New York, NY 10010
SC Fundamental Value Fund LP 416,311 7.5
SC Fundamental Value Fund BVI, Limited 185,076 3.3
712 Fifth Avenue
New York, NY 10019
__________________
* Less than 1%.
Set forth below is certain information regarding the
beneficial ownership of each person who is nominated to be a
director of the Company on the Effective Date,<F1> each
executive officer of the Company named in the Summary
Compensation Table set out in "Item 6, Executive Compensation,"
who will be such on the Effective Date and all of the directors
and executive officers of the Company who are either nominated to
be or are such on the Effective Date as a group (7 persons):
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
___________________ ____________________ __________
Stephen J. Szapor, Jr. 138,888 2.5%
Alan L. Mayer -0- -0-
Richard Rabin -0- -0-
Robert J. Stephens -0- -0-
Franklin S. Wimer -0- -0-
Steve Leonard -0- -0-
Mark Van Hartesvelt -0- -0-
All directors and officers 138,888 2.5%
as a group (7 persons)
____________________
<F1> Because of the necessity that directors of the Company each
obtain a Colorado key gaming license, the Company may
operate with an interim board of directors until such time
as all of the individuals designated as directors obtain
their requisite licenses. The above table does not include
any of the proposed directors who will only serve as such on
an interim basis, none of whom will be shareholders of the
Company.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information with respect to each
of the individuals nominated to be a director of the Company as
of the Effective Date<F2> and each individual who will be an
executive officer of the Company and each person who will have
entered into a consulting agreement with the Company on the
Effective Date:
Position Held Director
Continuously Continuously
Name Age Position(s) Since Since
Stephen J. Szapor, Jr. 36 Chief Executive Officer, August 10, 1995 Effective
President and Director Date
Alan L. Mayer 34 Senior Vice President, September 15, 1992 -----
Chief Legal Officer
and Secretary
Richard J. Rabin 49 Senior Vice President August 1, 1995 -----
of Operations
Robert Stephens 28 Chief Accounting Officer October 5, 1995 -----
and Treasurer
Franklin S. Wimer 59 Director Effective
Date
Steve Leonard 42 Director Effective
Date
Mark Van Hartesvelt 45 Director Effective
Date
Christopher B.
Hemmeter 56 Consultant
Mark B. Hemmeter 33 Consultant
____________________
<F2> If necessary because of delays in obtaining key licenses for
individuals nominated to serve as directors as of the
Effective Date, Messrs. Mayer and Rabin have agreed to serve
as, and may be elected to serve as, interim directors.
Stephen J. Szapor, Jr. has served as President, Chief
Executive Officer of Hemmeter Enterprises, Inc. since August 1995
and Executive Vice President and Chief Financial Officer since
April 1995. From July 1994 until joining the Company, he served
as the Chief Operating Officer and a member of the board of
directors of Sahara Gaming Corporation, and from June 1993 until
July 1994, he was the Executive Vice President/Chief Financial
Officer of Sahara Gaming Corporation. From October 1986 until
June 1993, Mr. Szapor held several executive positions with
Hollywood Casino Corporation including Assistant to the President
and Vice President Strategic Planning. Mr. Szapor has also held
financial and accounting positions with Merrill Lynch & Co. and
Arthur Andersen LLP. He holds a key license from the Commission
and is a Certified Public Accountant.
Alan L. Mayer has served as Senior Vice President, Secretary
and Chief Legal Officer of the Company and its predecessors since
September 1992. From 1987 to 1992, Mr. Mayer was associated with
Isaacson, Rosenbaum, Woods & Levy in Denver, where he specialized
in real estate, land use planning, finance, corporate and gaming
law. Mr. Mayer is a member of the American Bar Association, the
Colorado Bar Association, the California Bar Association and the
International Association of Gaming Attorneys. He is licensed to
practice law in California and Colorado. He holds a key license
from the Commission and is a member of the Board of Directors of
the Casino Owners Association of Colorado.
Richard Rabin has served as Senior Vice-President of
Operations of the Company since March 1996 and Vice-President,
Finance & Administration of the Company since August 1995. From
1994 until joining the Company, he served as Chief Financial
Officer of a riverboat gaming facility operated by Sahara Gaming
Corporation in Missouri and then as General Manager of a gaming
facility operated by Sahara Gaming Corporation in Nevada. From
1991 to 1994, Mr. Rabin was Chief Financial Officer and Vice
President and, beginning in 1993, also General Manager of the
Glory Hole Saloon and Gambling Hall in Central City, Colorado.
From 1985 until 1991, Mr. Rabin served in various positions in
the gaming industry in Reno, Nevada. Mr. Rabin holds a key
license from the Commission and is a Certified Public Accountant.
Robert J. Stephens has served as Controller, Chief
Accounting Officer and Treasurer since August 1995. Previously,
Mr. Stephens served in various finance and accounting positions
since joining the Company in May 1994. From 1990 to 1994 Mr.
Stephens was associated with Arthur Andersen LLP specializing in
start up and emerging biotechnology companies and the oil and gas
industry. Mr. Stephens is a Certified Public Accountant.
Franklin S. Wimer will become a director of the Company on
the Effective Date upon approval of Colorado Gaming Commission.
Mr. Wimer has been the President of UniRock Management
Corporation, a Denver, Colorado investment banking firm since
January 1988. Prior to forming UniRock Management Corporation,
Mr. Wimer held executive positions with a number of financial
institutions.
Steve Leonard will become a director of the Company on the
Effective Date upon approval of Colorado Gaming Commission. Mr.
Leonard has been President of Pacifica Holding Company, a Denver
based commercial real estate firm since 1990. Prior to
establishing Pacifica Holding Company in 1990, Mr. Leonard held
various executive positions in the real estate and real estate
development industry.
Mark Van Hartesvelt will become a director of the Company on
the Effective Date upon approval of Colorado Gaming Commission.
Mr. Van Hartesvelt has been President of the Village at
Breckenridge Resort, a Breckenridge, Colorado resort since
1994. From 1989 to 1994 he was Senior Vice President Sales
and Marketing of Doubletree Hotels Corporation. Prior to 1989,
Mr. Van Hartesvelt served in a number of senior executive
positions in the gaming industry.
Christopher B. Hemmeter will enter into a consulting
agreement with the Company which will have become effective as of
the Effective Date. See "Item 6, Executive Compensation
Employment and Consulting Agreements". Mr. Hemmeter will have
served as Chairman of the Board of the Company from December 1993
until the Effective Date, Chief Executive Officer of the Company
from December 1993 until August 1995 and Vice President of the
Company from August 1995 until the Effective Date. From May 1992
to the present, Mr. Hemmeter has served as Chairman of the Board
of Grand Palais Enterprises, Inc., a constituent partner in
Harrah's Jazz Company. Mr. Hemmeter has been a member of the
Executive Committee of Harrah's Jazz Company from December 1993
until the present; Chairman of the Board of RII from June 1990
until August 1995 and is one of three limited partners in
Hemmeter Partners, a real estate and investment company formed in
1990. Mr. Hemmeter is a member of the Board of Directors of
Morrison Knedsen Corporation and the Advisory Board of the Carter
Center at Emory University, the Board of Trustees of the National
Symphony Orchestra and the Board of Overseers of the Music Center
of Los Angeles. Mr. Hemmeter is the father of Mark M. Hemmeter,
also a consultant to the Company. In November 1995, Harrah's
Jazz Company filed a voluntary Chapter 11 Bankruptcy case.
Mark M. Hemmeter will enter into a consulting agreement with
the Company which will have become effective on the Effective
Date. See "Item 6, Executive Compensation Employment and
Consulting Agreements." Mr. Hemmeter will have served as a
Director of the Company from December 1993 until the Effective
Date, President of the Company from December 1993 until March
1995, Executive Vice President of the Company from March 1995
until August 1995 and Vice President of the Company from August
1995 until the Effective Date. From June 1990 until August 1995,
Mr. Hemmeter served on the Board of Directors and as Executive
Vice-President, Secretary and Treasurer of RII. Mr. Hemmeter has
been engaged in real estate investment and development with
Hemmeter Partners and its predecessors since 1985. Mr. Hemmeter
is the son of Christopher B. Hemmeter, also a consultant to the
Company.
ITEM 6. EXECUTIVE COMPENSATION
Summary Compensation Table.
The following table provides information concerning
compensation paid to each of the five most highly compensated
executive officers serving as such at year end 1995, and two
executive officers who would have been among the most highly
compensated had they been employed at year end, for services
rendered by such persons in all positions with the Company.
Long-Term
Compensation
Annual Compensation Awards Payouts
Other Shares
Annual Underlying
Name and Principal Compen- Options/ LTIP
Position Year Salary Bonus sation SARs Payouts
______________________ ____ ________ ________ ______ __________ ________
Stephen J. Szapor, Jr. 1995 $211,728 $ 5,000 $ 0 $ 0 $ 0
President and Chief 1994 0 0 0 0 0
Executive Officer 1993 0 0 0 0 0
since August 10, 1995,
Chief Financial Officer
March, 1995 to
August 10, 1995
Christopher B. Hemmeter 1995 351,182 100,000 0 0 0
Chief Executive Officer 1994 336,709 100,000 0 0 0
December 15, 1993 1993 0 0 0 0 0
to August 10, 1995,
Vice President since
August 10, 1995
Mark M. Hemmeter 1995 194,223
President December 15, 1994 126,977 37,500 0 0 0
1993 to March 27, 1995, 1993 0 0 0 0 0
Executive Vice President
March 27, 1995 to
August 1, 1995, Vice
President since August 1,
1995
Kevin G. DeSanctis 1995 522,688 0 0 0 0
Executive Vice 1994 572,110 0 0 120,000 60,000
President, Chief 1993 0 0 0 0 0
Operating Officer
April 8, 1994 to
March 27, 1995
President and Chief
Operating Officer from
March 27, 1995 to
August 10, 1995
Thomas Robinson 1995 172,706 0 2,415 0 0
Executive Vice 1994 240,569 100,000 0 144,000 0
President, Development 1993 0 0 0 0 0
Inception to July 1995
Alan L. Mayer 1995 111,926 15,000 2,798 0 0
Chief Legal Officer 1994 106,384 30,000 2,144 40,000 0
and Secretary 1993 0 0 0 0 0
Robert J. Stephens 1995 56,745 0 1,410 0 0
Chief Accounting Officer 1994 30,552 3,500 222 0 0
and Treasurer 1993 0 0 0 0
Compensation of Directors
Directors who are officers or employees of the Company will
receive no compensation for service as members of the Board.
Prior to the Effective Date, the Company compensated directors
who were not officers or employees of the Company for their
services by paying such directors annual retainers of $20,000,
paid quarterly and by allowing non-employee directors to
participate in the Company's non-employee director stock plan.
It is anticipated that following the Effective Date, the non-
employee directors of the Company will receive substantially
similar compensation.
Employment and Consulting Agreements
Prior to the Effective Date, the Company had entered into
employment contracts with Christopher B. Hemmeter, Mark M.
Hemmeter, Stephen J. Szapor, Alan L. Mayer and Richard Rabin.
All such contracts terminated on the Effective Date. On the
Effective Date, the Company entered into the following
employment and consulting agreements:
Christopher B. Hemmeter. Pursuant to the Plan of
Reorganization, the Company entered into a consulting agreement
with Christopher B. Hemmeter pursuant to which the Company will
pay Mr. Hemmeter $29,166.67 per month from the Effective Date
of the Plan of Reorganization through August 1996 in return for
services to be rendered thereunder. The consulting services
to be provided to the Company by Mr. Christopher B. Hemmeter
include advice and services related to gaming regulatory issues
and help in identifying potential new business opportunities.
Mark M. Hemmeter. Pursuant to the Plan of Reorganization,
the Company entered into a consulting agreement with Mark M.
Hemmeter pursuant to which the Company will pay Mr. Hemmeter
$10,416.67 per month from the Effective Date of the Plan of
Reorganization through November 1996 in return for services to be
rendered thereunder. The consulting services to be provided to
the company by Mr. Mark M. Hemmeter include advice and services
related to gaming regulatory issues, assistance in helping the
Company recover its investment in PRIGSA and help in identifying
potential new business opportunities. The Mark M. Hemmeter
Consulting Agreement will expire on November 30, 1996.
Stephen J. Szapor, Jr. The Company entered into a new
employment agreement with Stephen J. Szapor, Jr. pursuant to
which Mr. Szapor will serve as president, chief executive officer
and as a director of the Company. Pursuant to this agreement,
Mr. Szapor will earn an initial annual salary of $300,000,
subject to increases based on cost-of-living adjustments and
other mutually agreed factors. As additional compensation, Mr.
Szapor will receive a bonus of $100,000, payable on the Effective
Date, stock grants representing 2.5% of the capital stock of the
Company (determined on a fully diluted basis) on the Effective
Date and will be entitled to participate in the Management
Incentive and Non-Employee Directors Stock Plan and the
Management Cash Bonus Plan. The employment agreement with Mr.
Szapor provides for payments to Mr. Szapor equal to the greater
of $500,000 or his base salary for the remaining period of
his employment agreement in the event of the termination of
Mr. Szapor's employment by the Company without cause or by Mr.
Szapor for good reason as defined in the employment agreement.
If Mr. Szapor's employment is terminated shortly after the
Effective Date of the Plan of Reorganization, the termination
payments Mr. Szapor receives could be as much as $900,000.
Other Employment Agreements. The Company entered into
new employment agreements with Alan L. Mayer, the Company's
Senior Vice President, Chief Legal Officer and Secretary, and
Richard Rabin, the Company's Senior Vice President of Operations.
Mr. Mayer and Mr. Rabin will each earn annual salaries of
$130,000, subject to increases based on cost-of-living
adjustments and other mutually agreed factors. Mr. Mayer and Mr.
Rabin will also be entitled to participate in the Company's
Management Incentive Non-Employee Directors Stock Plan and
Management Cash Bonus Plan.
Management Incentive and Non-Employee Director Stock Plan
The Company has established a Management Incentive and Non-
Employee Director Stock Plan effective on the Effective Date
pursuant to which the senior management of the Company will be
eligible to earn stock grants of up to 7.0% of the capital stock
of the Company (determined on a fully diluted basis) if certain
performance benchmarks as determined by the board of directors of
the Company are achieved and non-employee directors will be
awarded 0.50% of the capital stock of the Company (also
determined on a fully diluted basis). The plan shall provide
for the following participation levels:
Stephen J. Szapor 2.50%
Alan L. Mayer 1.25%
Richard Rabin 1.25%
Robert J. Stephens 0.50%
Other Employees 1.50%
Non-employee Directors 0.50%
_____
7.50%
Management Cash Bonus Plan
The Company has established a cash incentive plan effective
on the Effective Date for senior management employees in which
the participants will split a bonus pool equal to 15% of the
increase in earnings before interest, taxes, depreciation and
amortization for each plan period commencing with the period
beginning on the Effective Date of the Plan of Reorganization and
ending on December 31, 1996 and each six months thereafter over
the same period in the immediately preceding calendar year
determined, in the case of the periods in 1995 and 1996, without
regard to the effect of the Company's Riverboat Project or the
Company's extraordinary expenses resulting from the Hemmeter or
GPRI Bankruptcy Cases. The Plan provides that Mr. Szapor will
receive 30% of the bonus pool and remaining plan members will
split the remaining 70% of the bonus pool.
Other Plans
The Company has established a qualified retirement plan,
which permits eligible employees to defer a portion of their
compensation in accordance with the provisions of Section 401(k)
of the Internal Revenue Code. Employee contributions may be
matched by the Company at levels and at times determined by the
Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RII made an acquisition, development and construction loan
to the predecessor of the Company in the principal amount of $12
million (later increased to $12.3 million). At that time, Mr.
Christopher B. Hemmeter was the president and chairman of the
board of RII and the beneficial owner of approximately 2.2% of
RII's outstanding equity securities and Mark M. Hemmeter was
executive vice president, secretary and treasurer and a director
of RII and the beneficial owner of less than 1% of RII's
outstanding equity securities. The loan was secured by a third
mortgage on the real property and improvements comprising
Bullwhackers Central City as well as liens on all personal
property contained therein and $6,551,200 of the principal
thereof was personally guaranteed by Christopher B. Hemmeter. In
1992, RII also made an acquisition, development and construction
loan in the principal amount of $12 million to a predecessor of
the Company secured by a senior leasehold mortgage on
Bullwhackers Black Hawk. The terms and provisions of this loan
were substantially the same as the loan secured by Bullwhackers
Central City except that the loan was not personally guaranteed
by Christopher B. Hemmeter. Both loans obligated the Company to
pay, under certain circumstances, contingent interest equal to a
portion of any increase in the value of the collateral securing
the loans. The $24.3 million of principal, $790,000 of accrued
interest and $700,000 of bonus interest on both of these loans
were repaid in 1993 with $25.8 million of the $131.5 million of
net proceeds to the Company from the offering of the Old Notes.
Upon repayment of the loans, Christopher B. Hemmeter was released
from his guaranty.
On April 21, 1995, the Company borrowed $1 million from RII.
On May 15, 1995, the Company borrowed $2 million from RII on a
secured basis and used $1 million of this loan to repay the April
21, 1995 loan from RII. At that time, Christopher B. Hemmeter
beneficially owned approximately 1.7% of RII outstanding equity
securities and Mark M. Hemmeter beneficially owned less than 1%
of RII's outstanding equity securities. This loan forms the
basis for the RII Claim and will be satisfied pursuant to the
Plan of Reorganization. Currently, both Christopher B. Hemmeter
and Mark M. Hemmeter each own less than 1% of the outstanding
equity securities of RII.
The general contractor for the Bullwhackers Casinos held a
construction note (the "Construction Note") which was secured by
a second mortgage on the land and improvements comprising
Bullwhackers Central City. Mr. Christopher B. Hemmeter
personally guaranteed the Construction Note. The Construction
Note was repaid with a portion of the proceeds of the offering of
the Old Notes and Mr. Hemmeter was released from his guarantee.
In 1994, the Company and certain affiliates entered into an
amended consulting agreement with Mr. Daniel P. Robinowitz, a
pre-Effective Date stockholder of the Company of approximately
9.1% on a fully diluted basis, pursuant to which Mr. Robinowitz
was entitled to receive an ownership interest in the Company and
a $3 million fee in exchange for his assistance in obtaining
necessary licensing and other regulatory approvals with respect
to the Company's Louisiana operations. Pursuant to this
agreement, Mr. Robinowitz's right to receive an ownership
interest in the Company was converted in January 1995 into
1,605,739 shares of common stock of the Company. The $3 million
fee was paid to Mr. Robinowitz in March 1994. In addition, Mr.
Robinowitz was paid an initial consulting fee of $2,790,000 for
his services with respect to certain Louisiana projects, of which
$279,000 was allocated to the Company.
In December 1993, the Company reimbursed Christopher B.
Hemmeter in the amount of $225,000 for advances made by him in
1993 to Michigan City Casino & Lodge, Inc., a wholly owned
subsidiary of the Company.
The Company has outstanding advances to the following
affiliates:
December 31
___________________
(in
thousands)
1994 1995
____ ____
Canadian Pavilion Limited Partnership $ 1,323 $ 1,573
Outlaws Casino, Ltd. 876 1,072
RCJV 763 43
RCH Investments, NV 250 259
Hemmeter Partners 344 335
Grand Palais Casino, Inc. 557 587
Officers 585 867
Other 62 35
_______ _______
$ 4,760 $ 4,771
Canadian Pavilion Limited Partnership ("CPLP"), Outlaws Casino,
Ltd. ("Outlaws"), RCH Investments, NV ("RCH") and Hemmeter
Partners are majority owned by Christopher B. Hemmeter, an
officer and controlling shareholder of the Company, and Mark M.
Hemmeter, an officer of the Company. The advances to CPLP,
Outlaws, RCH, and Hemmeter Partners accrue interest at 14% with
interest payable quarterly, and are due on demand. Grand Palais
Casino, Inc. ("GPCI") is a wholly owned subsidiary of Grand
Palais Enterprises, Inc. ("GPEI"), of which certain stockholders
are also majority stockholders of the Company. This advance
accrues interest at 14% and is due on demand. The Company has
fully reserved the amounts of these advances because of
uncertainty as to their collectibility. In July 1994, Kevin G.
DeSanctis, then Executive Vice President and Chief Operating
Officer of the Company, received a $225,000 advance in accordance
with the terms of his employment agreement of which none has been
repaid. In September 1994, Christopher B. Hemmeter, President
and Chief Executive Officer of the Company, was advanced funds
totalling $275,000, accruing interest at prime plus 2%, and due
on demand. In January 1995, an additional $373,000 was advanced
to Mr. Hemmeter on an interest free basis, of which $110,000 has
been repaid. As of December 31, 1995, the amount of Mr.
Hemmeter's advances that remained unpaid totalled $641,900.
In 1994, the Company established a reserve of $1 million for
the portion of the affiliate advances described above that the
Company believed may not be collectible. This reserve was not
allocated to any particular affiliate advances. In 1995, due to
the deteriorating financial condition of Christopher B. Hemmeter,
Kevin G. DeSanctis and the affiliate companies listed in the
above table who received those advances and possible defenses
that they could raise, the Company provided a reserve for the
remainder of the amounts owed the Company by these individuals
and affiliates. Although the affiliate advances are fully
reserved, they have not been forgiven as part of the Plan of
Reorganization. The Company is assessing its strategy in
terms of pursuing collection of these advances. The Company
has agreed not to exercise any rights of set-off that the
Company may have in respect of the payments which the
Company will make to Christopher B. Hemmeter under his
consulting agreement with the Company, and the Company, as a
result of the Plan of Reorganization, does not have any obligations
to the other obligors which would give it set-off rights.
Hemmeter Partners, an affiliate of Christopher B. Hemmeter,
leased an aircraft that Mr. Hemmeter used for business and
personal purposes. In exchange for Mr. Hemmeter making the
aircraft available to the Company for business purposes, the
Company agreed to pay Mr. Hemmeter's affiliate approximately
$100,000 per month and to pay the salary and benefits of the
aircraft pilot and co-pilot, which totaled approximately $125,000
per year. Direct payments to Hemmeter Partners totalled $1.5
million and $420,000 for 1994 and 1995, respectively. Payments
made by the Company with respect to the aircraft represent the
Company's pro rata share of the costs and expenses associated
with the aircraft and are adjusted based on actual use of the
aircraft. The Company ceased using the aircraft and terminated
this arrangement as of May 1995.
In 1992 and 1993, GPCI undertook a private offering of
senior secured exchangeable notes. Certain of the Company's
majority stockholders and warrantholders, including Christopher
B. Hemmeter and Daniel P. Robinowitz, are also stockholders of
GPCI's parent company, GPEI. In September 1993, $7.5 million of
the net proceeds of GPCI's private offering were loaned to GPRI.
The loan was evidenced by a demand note payable to GPCI which
accrued interest at the rate of 12% per annum. The loan was
repaid with proceeds from the sale of the Old Notes. As
additional consideration, the GPCI noteholders were issued
warrants to purchase 2,980,986 shares of common stock of the
Company. All warrants will be extinguished pursuant to the Plan
of Reorganization.
GPCI also made additional advances to GPRI on an as needed
basis. In 1993, the advances totaled $2.2 million, accrued
interest at 12% and were unsecured. Proceeds from the Old Notes
were used to repay $1.70 million of the advances. The remaining
$490,000 was repaid in the first quarter of 1994. Through
December 31, 1993, GPCI also paid certain overhead costs and
expenses on behalf of GPRI, which amounts were not material.
The Company paid $1. 5 million, $1.3 million and $624,000 to
the law firm of Shefsky, Froelich & Devine Ltd. for legal
services rendered to the Company in 1993, 1994 and 1995,
respectively. Cezar M. Froelich, a pre-Effective Date director
and stockholder of the Company of 1.4% on a fully diluted basis,
is a member of that firm. Shefsky, Froelich & Devine Ltd.
provided legal services to the Company until February 9, 1996.
Any further payments to Shefsky, Froelich & Devine Ltd. are
subject to Bankruptcy Court approval.
ITEM 8. LEGAL PROCEEDINGS
On July 26, 1995, an involuntary Chapter 7 bankruptcy
petition was filed against GPRI, a wholly owned subsidiary of the
Company, in the United States Bankruptcy Court for the Eastern
District of Louisiana. The involuntary Chapter 7 bankruptcy case
was converted to a voluntary Chapter 11 case on July 27, 1995.
On November 7, 1995, the Company and certain of its other
subsidiaries commenced voluntary Chapter 11 bankruptcy cases in
the United States Bankruptcy Court for the District of Delaware.
On December 27, 1995, venue of these cases was transferred to the
United States Bankruptcy Court for the Eastern District of
Louisiana. For a more complete description of these bankruptcy
cases, see "Item 1, Business - Background of Bankruptcy; Plan of
Reorganization."
In September 1995, Daniel P. Robinowitz, a pre-Effective
Date stockholder of the Company, filed a stockholders derivative
action against the directors of the Company in the United States
District Court for the Eastern District of Louisiana (the
"Robinowitz Derivative Action"). The complaint alleges in
general that the Company, through its board of directors,
mismanaged the affairs of the Company. Because the Company filed
bankruptcy prior to any responsive pleadings being filed, no
activity has occurred in this case. The Company appointed Mr.
Szapor to serve as a special litigation committee for the board
of directors of the Company and he retained independent counsel
in October 1995 to investigate the allegations raised by the
complaint.
During June 1995, CAI filed an action against the Company,
BWBH, Inc., BWCC, Inc., Christopher B. Hemmeter and Mark M.
Hemmeter in the District Court for the City and County of Denver,
Colorado, seeking to enforce guarantees allegedly provided by the
defendants of an equipment lease provided to GPRI. On
September 14, 1995, the court granted summary judgment in
favor of CAI and against the defendants in the amount of
$4,477,950.26, plus interest. The Company, its subsidiaries
and the Hemmeters, have appealed from the trial court's
judgment and that appeal is currently pending in the Colorado
Court of Appeals.
On July 7, 1995, CAI also filed an action against the
Company, Messrs. Szapor and Mayer, BWBH, Inc., BWCC, Inc. and
GPRI. in the District Court for the City and County of Denver,
Colorado alleging that, among other things, they negligently and
fraudulently induced it into entering into the equipment lease
which was the subject of its June 1 1995 lawsuit. Messrs. Szapor
and Mayer filed answers denying the allegations in the complaint
and have asserted a counterclaim against CAI for abuse of
process.
On February 6, 1996, both lawsuits filed by CAI were
settled, subject to the consummation of the Plan of
Reorganization. Under the settlement, CAI has agreed to settle
and dismiss both lawsuits as they relate to all defendants and to
release all claims asserted in those lawsuits. In consideration
of the dismissal of the lawsuits and releases, the Company has
agreed to issue the CAI Notes on the Effective Date in the
respective principal amounts of $1,621,329.35 and $3,000,000 and
Messrs. Szapor and Mayer have agreed to release their
counterclaims. See "Item 1, Business - Background of Bankruptcy;
Plan of Reorganization."
Pursuant to the Plan of Reorganization, certain claims by
the Company against third parties, including the Robinowitz
Derivative Action, are assigned to the Litigation Trust. All
legal proceedings pending against the Company or its Colorado
Subsidiaries prior to the Effective Date were settled pursuant
to the Plan of Reorganization. As a result, no litigation is
pending against the Company or its Colorado Subsidiaries as of
the Effective Date. The determination by the Litigation Trust
whether or not to pursue any causes of action assigned to it
will have no material impact on the Company or the Colorado
Subsidiaries.
The Plan of Reorganization provides that the Company's
obligation to indemnify Messrs. Szapor and Mayer against any
claims asserted against them as a result of their service as
employees of the Company, both before and after the commencement
of the Hemmeter Bankruptcy Cases, will not be affected by the
Hemmeter Bankruptcy Cases and that the Company will assume any
obligations of GPRI to indemnify Messrs. Szapor and Mayer against
claims arising as a result of their service with GPRI. The Plan
of Reorganization also provides that Messrs. Szapor and Mayer
are released from any liability in respect of causes of action
assigned to the Litigation Trust.
The Plan of Reorganization also provides that the Company's
obligations to indemnify its other officers and employees who are
employed by the Company on the date of commencement of the
Hemmeter Bankruptcy Cases, other than Christopher B. Hemmeter and
Mark M. Hemmeter (collectively, the "Hemmeters"), against claims
against them as a result of their service with the Company after
the commencement of the Hemmeter Bankruptcy Cases will not be
affected by the Hemmeter Bankruptcy Cases and that the Company
will assume any similar indemnity obligations of GPRI.
The Plan of Reorganization also requires the Company to
indemnify its pre-Effective Date directors other than the
Hemmeters (the "Independent Directors") against any claims
asserted against them as a result of their service as directors
of the Company if the final report of the Independent Litigation
Counsel indicates that there is no basis for pursuing any of the
potential claims against them reviewed by the Independent
Litigation Counsel. The Company's maximum indemnity obligation
for all of the Independent Directors is capped at $500,000 in the
aggregate. Although the Company has no direct indemnity
obligations with respect to claims against the Hemmeters, if a
claim is asserted against both the Independent Directors and the
Hemmeters, the Hemmeters will be entitled to be represented by
the counsel representing the Independent Directors at the expense
of the Company to the extent that the claims are based on the
Hemmeters' actions as directors of the Company.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established United States public trading market
for the common stock of the Company. Prior to the Effective
Date, the common stock of the Company was held by 11
stockholders. Immediately following the Effective Date, the
Company believes that its common stock will be owned by
approximately 20 to 30 stockholders.
The shares of common stock of the Company were not
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any similar state law and, prior to the
Effective Date, could be sold only pursuant to an effective
registration or an applicable exemption from registration.
Pursuant to the Plan of Reorganization, the common stock of the
Company may be sold pursuant to Section 1145 of the United States
Bankruptcy Code which generally, and subject to certain
qualifications, exempts from registration securities issued
pursuant to the terms of a plan of reorganization. Because there
has never been a public market for any of the Company's common
stock, the Company is unable to indicate the number of shares of
common stock which, if offered to the public, would have a
material effect on the market price of the Company's common
stock.
On the Effective Date, the Company will be obligated to
register its common stock and the New Notes under the Securities
Act and to use its best efforts to keep a registration statement
continuously in effect covering its common stock and the New
Notes for a period of three years following the Effective Date.
Thereafter, stockholders of the Company and holders of New Notes
holding 5% or more of the outstanding shares of common stock of
the Company or New Notes, as the case may be, will be able to
request that the Company register their stock or New Note during
the two years following the expiration of such three year period.
The Company has never paid dividends on its common stock.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On December 15, 1993, the Company sold $140,000,000 in
principal amount of its Old Notes in a private placement pursuant
to Regulation D under the Securities Act. The Company believes
that all of the purchasers of such notes were "accredited
investors" within the meaning of Regulation D and that the Notes
were not offered to prospective purchasers who were not
accredited investors. Salomon Brothers Inc served as placement
agent for the sale of the Old Notes. Each note purchaser also
received 12 warrants to purchase 1.041667 shares of common stock
of the Company (subject to certain anti-dilution provisions) for
each $1,000 of principal amount of Old Notes purchased. The
aggregate offering price of the Old Notes and the warrants was
$140,000,000, of which $4,900,000 was paid to Salomon Brothers
Inc as a placement fee.
On June 15 and December 15, 1994, and June 15, 1995, the
Company issued additional Old Notes pursuant to Section 4(2)
of the Securities Act in the respective principal amounts
of $8,117,000, $8,884,000 and $9,420,000 to the then holders
of the Old Notes in payment of the interest then due and
payable on the outstanding Old Notes.
On December 17, 1993, the Company issued 10,269,641 shares
of its common stock and 5,380,359 warrants to purchase shares of
common stock for an exercise price of $.01 per share to the
owners of certain precedessors of the Company and its Colorado
Subsidiaries in exchange for the assets of these precedessors. A
total of 1,427,927 of the warrants have been exercised since
December 17, 1993 for an aggregate consideration to the Company
of $14,279.27. These shares were issued pursuant to Section 4(2)
of the Securities Act.
Pursuant to the Company's Omnibus Stock and Incentive Plan,
the Company granted employees the right to receive 130,000 shares
of its common stock provided that the restrictions to which such
grants were subject were satisfied. A total of 33,667 of these
shares were issued to employees in 1995. Each of the five non-
employee directors of the Company were each awarded 1,000 shares
of ;common stock of the Company in December 1993. The shares
issued to employees and directors were issued pursuant to Section
4(2) of the Securities Act.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
Common Stock
Immediately prior to the Effective Date, the Company's
authorized capital consisted of (i) 50,000,000 shares of common
stock, par value $.01 per share (the "Common Stock"), of which
11,847,902 shares were issued and outstanding and (ii) 2,000,000
shares of preferred stock, par value $.01 per share, of which no
shares were issued and outstanding. Effective on the Effective
Date, the Company's charter will be amended to eliminate the
Company's preferred stock and to reduce the number of authorized
shares of Common Stock to 20,000,000. Pursuant to the Plan of
Reorganization, all shares of Common Stock outstanding
immediately prior to the Effective Date was cancelled on the
Effective Date and 5 million shares of Common Stock were issued
to the holders of the Old Notes and the RII Claim and 138,888
shares of Common Stock were issued to Mr. Szapor.
Holders of Common Stock are entitled to one vote for each
share held in the election of directors and on all other matters
submitted to a vote of stockholders, and do not have cumulative
voting rights. Because stockholders do not have cumulative
voting rights, the stockholders of a majority of the shares of
Common Stock entitled to vote in any election of directors may
elect all of the directors standing for election.
Stockholders of Common Stock will be entitled to receive
ratably such dividends, if any, as may be declared by the Board
out of funds legally available therefor. Upon the liquidation,
dissolution or winding-up of the Company, the stockholders of
Common Stock will be entitled to receive ratably the net assets
of the Company available after payment of all debts and other
liabilities. Stockholders of Common Stock have no preemptive,
subscription, redemption or conversion rights. All shares of the
Common Stock will be fully paid and non-assessable when issued
upon receipt of the purchase price therefor.
Colorado Gaming Regulations
Pursuant to Colorado Gaming Regulations, the Commission has
broad powers to require stockholders of the Company to provide it
with information and to determine the suitability of any
stockholders of the Company to hold voting interests in the
Company. If the Commission determines that a person or entity is
not suitable to own a voting interest in the Company, whether
directly or indirectly, the Company may be sanctioned (including
by loss of any gaming licenses) unless such person or entity
disposes of its voting interests. In addition, the Colorado
Regulations prohibit a licensee from paying dividends, interest
or other remuneration to any person found to be unsuitable, or
from recognizing the exercise of any voting rights by any person
found to be unsuitable. The Colorado Regulations require a
casino licensee to include in its corporate charter provisions to
permit the repurchase of the voting interests of any person who
the Commission finds unsuitable. For a more complete description
of these regulations, see "Item 1, Business - Colorado Gaming
Regulations." The Company has included the required provisions
in its Amended and Restated Certificate of Incorporation. See "-
Certain Charter and Bylaws Provisions."
A person or entity may not sell, lease, purchase, convey,
acquire or pledge any shares in a holder of a gaming license
without the prior approval of the Commission, except for sales or
other transactions involving less than a 5% interest in a
publicly traded licensee. Therefore, until the Company becomes
subject to the reporting requirements of the Exchange Act, no
stockholder of the Company may transfer any Common Stock without
the prior approval of the Commission. See "Item 1, Business-
Colorado Gaming Regulations."
Certain Charter and Bylaw Provisions
To enable the Company to secure and maintain the business
and other regulatory approvals necessary for operating a gaming-
related business, the Company's Amended and Restated Certificate
of Incorporation provides that the Company may not issue any
voting securities except in compliance with the rules of any
gaming authority. The Company's Amended and Restated Certificate
of Incorporation also provides that all transfers of voting
securities of the Company must be in compliance with applicable
gaming authority rules and if any gaming authority issues an
order disqualifying a person from owning shares of Common Stock,
the Company may redeem the stock of the disqualified holder
unless Common Stock is transferred to a person found by the
Commission to be suitable within 60 days from the finding of
unsuitability. See "- Colorado Gaming Regulations." The
redemption price will be equal to the lesser of the holders
investment in the voting securities or the current market price
as of the finding of unsuitability. No holder of voting
securities of the Company which has been found to be unsuitable
may vote any such voting securities and such voting securities
shall not be deemed outstanding for quorum or other purposes and
the disqualified holder shall not be entitled to any dividends or
other remuneration with respect to such voting securities. See
Item 1, "Colorado Gaming Regulations."
As permitted by the provisions of the Delaware General
Corporation Law (the "DGCL"), the Company's Amended and Restated
Certificate of Incorporation eliminates in certain circumstances
the liability of directors of the Company for a breach of their
fiduciary duty as directors. These provisions do not eliminate
the liability of a director for: (i) breach of the director's
duty of loyalty to the Company or its stockholders; (ii) acts
or omissions by a director not in good faith or which involve
intentional misconduct or a knowing violation of the law;
(iii) liability arising under Section 174 of the DGCL (relating
to the declaration of dividends and purchase or redemption of shares
in violation of the DGCL); or (iv) any transaction from which the
director derived an improper personal benefit. In addition,
these provisions do not eliminate the liability of a director for
violations of federal securities laws, nor do they limit the
rights of the Company or its stockholders, in appropriate
circumstances, to seek equitable remedies such as injunctive or
other forms of non-monetary relief. Such remedies may not be
effective in all cases.
The Company's Amended and Restated Certificate of
Incorporation and Bylaws provide that the Company shall indemnify
all directors and officers of the Company to the full extent
permitted by the DGCL. Under such provisions, any director of
officer, in his capacity as such, who is made or threatened to be
made a party to any suit or proceeding, may be indemnified if the
Board determines such director of officer acted in good faith and
in a manner he reasonably believed to be in or not opposed to the
best interest of the Company. The Company's Amended and Restated
Certificate of Incorporation, Amended and Restated Bylaws and the
DGCL further provide that such indemnification is not exclusive
of any other rights to which such individuals may be entitled
under the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated the Bylaws, or under any
agreement, vote of stockholders or disinterested directors or
otherwise.
The Company's Amended and Restated Certificate of
Incorporation provides initially for a five member board of
directors with each director serving a one year term. Directors
may be removed with or without cause.
12% Senior Secured Pay-In-Kind Notes Due 2003
General
The New Notes will be issued on the Effective Date to the
holders of the Old Notes and the RII Claim as fully registered
notes, without coupons, under an Indenture to be dated as of the
Effective Date (the "Indenture") between the Company, its
Colorado Subsidiaries and Fleet National Bank, as trustee
(together with any successor, the "Trustee"). This summary
of the material terms of the New Notes does not purport to be
complete and is subject to, and qualified in its entirety by,
the provisions of the Indenture. Capitalized terms used under
this heading which are not otherwise defined herein shall
have the meanings ascribed thereto in the Indenture.
Terms
The New Notes will be senior secured obligations of the
Company and will mature on June 1, 2003. The aggregate principal
amount of New Notes which may be authenticated and delivered
under the Indenture is limited to $50,000,000 (plus any Secondary
Notes, as described below) except for New Notes authenticated and
delivered upon registration of transfer of, or in exchange for,
other New Notes.
Interest on the New Notes will accrue at the rate of 12% per
annum, computed on the basis of a 360-day year comprised of
twelve 30-day months. Interest will be payable commencing
December 1, 1996 and semiannually thereafter on June 1 and
December 1 of each year, to the holders of record of New Notes
at the close of business on May 15 and November 15 immediately
preceding such interest payment date.
The Company may, at its option but only provided that an
effective registration statement under the Securities Act covers
such issuance or such issuance is exempt from registration under
the Securities Act, pay interest on the New Notes through the
issuance of additional New Notes (the "Secondary Notes") in an
aggregate principal amount equal to the interest that would be
payable if such interest were paid in cash (provided, however,
that amounts less than $1,000 shall be payable in cash). The
terms of the Secondary Notes shall be identical to the terms of
the New Notes, except that interest on the Secondary Notes is
payable only in cash. All references to "New Notes" herein
shall, unless the context otherwise requires, also refer to any
Secondary Notes.
The New Notes will be issued only in denominations of $1,000
and integral multiples of $1,000. Principal of, premium, if any,
and interest on the New Notes will be payable at the office or
agency of the Company maintained for that purpose, provided
that upon the agreement of the Company and a holder of a
New Note (a "Holder"), payments of interest and principal
of any New Note may be made directly to the Holder of such
New Note. The New Notes will be transferrable at the corporate
trust office of the Trustee located at 777 Main Street, Hartford,
Connecticut. No service charge will be made for any registration
of transfer or exchange of the New Notes, except for any tax or
other governmental charge that may be imposed in connection
therewith.
Redemption
Optional Redemption. The New Notes will be redeemable, at
the election of the Company, on or after the fourth anniversary
of the Issue Date of the New Notes, at the redemption prices
(expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest to the redemption date, if
redeemed during the 12-month period following the fourth
anniversary of the Issue Date that begins in the years indicated
below:
Year Percentage
____ __________
2000 104%
2001 103%
2002 and thereafter 102%
Mandatory Redemption. Notwithstanding any other provision
of the Indenture, if any Gaming Authority requires that a Holder
or beneficial owner of New Notes must be licensed, qualified or
found suitable under any applicable Gaming Law, such Holder or
beneficial owner must apply for a license, qualification or a
finding of suitability within the required time period after
being requested to do so by the Gaming Authority. If such Holder
or such beneficial owner is not so licensed, qualified or found
suitable within the period provided therefor by such Gaming
Authority, the Company shall have the right, at its option, (i) to
require such Holder or beneficial owner to dispose of such Holder's
or beneficial owner's New Notes within 30 days of receipt of notice
of the Company's election or such earlier date as may be ordered
by such Gaming Authority; or (ii) to call for a redemption of the
New Notes of such Holder or beneficial owner at a price equal to
the lesser of 100% of the principal amount thereof or the price
at which such Holder or beneficial owner acquired the New Notes,
plus, in either case, accrued interest to the earlier of the date
of redemption or the date of the finding of unsuitability by such
Gaming Authority (which may be less than 30 days following the
notice of redemption, if so ordered by such Gaming Authority).
The Company is not responsible for any costs or expenses that any
Holder may incur in applying for a license, qualification or
finding of suitability.
Selection and Notice. In the event that less than all of
the New Notes are to be redeemed at any time, selection of New
Notes for redemption will be made by the Trustee on a pro rata
basis, by such method as the Trustee shall deem fair and
appropriate (provided that no New Notes in a principal amount of
$1,000 or less shall be redeemed in part). Unless otherwise
specified herein, notice of redemption shall be mailed by first
class mail not less than 30 days nor more than 60 days before the
redemption date to each Holder to be redeemed at its registered
address. If any New Note is to be redeemed in part only, the
notice of redemption that relates to such New Note shall state
the portion of the principal amount thereof to be redeemed. On
and after the redemption date, interest will cease to accrue on
New Notes or portions thereof called for redemption.
No Sinking Fund
No sinking fund will be established with respect to the New
Notes.
Mandatory Offers to Purchase
Offer to Purchase Upon Change of Control. The Company is
obligated to make an offer to purchase all outstanding New Notes
at a purchase price of 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase if a
Change of Control of the Company occurs. A Change of Control
includes (i) the sale or other disposition of substantially all
of the Company's assets; (ii) the liquidation or dissolution of
the Company; (iii) the acquisition by any person or group (within
the meaning of Section 13(d) and 14(d) of the Exchange Act) of
beneficial ownership or the right to acquire, whether immediately
or only after the passage of time, of more than 50% of all
classes of capital stock of the Company then outstanding normally
entitled to vote for the election of directors; (iv) during the
twelve months following the Issue Date of the New Notes, a change
in the composition of the Board of Directors of the Company such
that a majority of the directors of the Company nominated to be
such on the Issue Date cease to be directors of the Company
(other than as may be caused by the replacement of interim
directors who are serving as directors only until the individuals
named to serve as directors on the Issue Date receive Commission
approval). If a Change of Control occurs, the Company shall,
within 15 days, notify the Trustee in writing of such occurrence,
and the Trustee shall, within 15 days following receipt of notice
to the Trustee, notify the Holders of such occurrence. Such
notice from the Company shall include an offer to purchase all
New Notes then outstanding at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if
any, to the payment date. The purchase offer by the Company must
remain open for at least 20 business days from the date of the
Trustee's notice. The obligation of the Company to purchase the
New Notes upon a Change of Control may not be amended or waived
without the concurrence of the Holders of not less than 66-2/3%
of the aggregate principal amount of the New Notes then
outstanding. See "- Amendments and Waivers," below. There can
be no assurance that the Company will have sufficient funds to
purchase the New Notes upon a Change of Control.
Other Offers to Purchase. The Company is also obligated to
make offers to purchase New Notes at a purchase price of 101% of
the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of purchase in an amount equal to the Net
Cash Proceeds of certain sales or other dispositions of assets or
certain events of loss. See "- Certain Covenants - Restricted
Asset Sales" and "- Application of Net Cash Proceeds in Event of
Loss," below.
Guarantee of New Notes
On the Issue Date of the New Notes, the New Notes and the
Company's obligations under the Indenture are irrevocably and
unconditionally guaranteed by the Guarantors. The Guarantees of
the Guarantors are in addition to (and not in substitution for)
any other security for the New Notes and may not be revoked by
the Guarantor until all guaranteed obligations have been
indefeasibly paid and performed in full.
Security
The New Notes are secured by a perfected lien on certain
Collateral of the Company and the Guarantors, including all of
the capital stock of the Guarantors owned by the Company and on
substantially all of the assets of the Company and the
Guarantors, whether owned on the Issue Date or thereafter
acquired, including the Colorado Casinos, the Surface Parking Lot
and, if and when constructed, the Parking Garage through
appropriate Security Documents in favor of the Trustee as
Collateral Agent.
The liens securing the New Notes will be subordinate only to
those liens defined in the Indenture as "Permitted Liens" which
include: (i) liens securing credit facilities providing for an
aggregate principal amount of indebtedness of up to $17,500,000
incurred pursuant to permitted credit facilities; (ii) certain
specified liens on certain assets of the Company or the
Guarantors in existence on the date of the Indenture; (iii) liens
on the Silver Hawk casino securing the deferred portion of the
purchase price thereof; (iv) liens encumbering after acquired
property of the Company or a Guarantor which were in existence
when the encumbered property was acquired and which were not
created in connection with the acquisition; (v) certain statutory
liens, such as mechanics or materialmen's liens and tax liens, to
the extent that the obligation secured is not delinquent or is
being contested in good faith; and (vi) leases, subleases,
easements, rights-of-way and other minor title irregularities
which do not materially interfere with the business of the
Company or any of its subsidiaries.
Provided that no Event of Default then exists, the Company
is entitled to obtain a release of any lien securing the New
Notes with respect to any property of the Company sold or
otherwise disposed of in the ordinary course of business
(including the sale of gaming and other equipment as part of a
program to replace or upgrade gaming or such other equipment) up
to $1,500,000 in the aggregate in any 12-month period (an
"Unrestricted Asset Sale"). The Company is also entitled to
obtain a release of any lien securing the New Notes with respect
to any property sold or otherwise transferred in any other
permitted asset sale provided that the Company complies with
certain reinvestment or Note repurchase obligations. See "-
Certain Covenants - Restricted Asset Sales.
The proceeds of any sale of the Collateral in whole pursuant
to the Indenture and the related Security Documents following an
Event of Default may not be sufficient to satisfy payments due on
the New Notes. In addition, the ability of the Holders to
realize upon the Collateral may be limited pursuant to gaming
laws as described below, in the event of a bankruptcy or pursuant
to other applicable laws, including securities laws.
Certain Gaming Law Limitations. The Trustee's ability to
foreclose upon the Collateral will be limited by relevant Gaming
Laws, which generally require that persons who own or operate a
casino or possess or sell gaming equipment hold a valid gaming
license. No person can hold a license in the State of Colorado
unless the person is found qualified or suitable by the relevant
Gaming Authorities. In order for the Trustee to be found
qualified or suitable such Gaming Authorities would have
discretionary authority to require the Trustee and any or all of
the Holders to file applications, be investigated and be found
qualified or suitable as a casino licensee or as a landlord or
landlords of a gaming establishment. The applicant for
qualification for a suitability determination or for licensing
must pay all costs of such investigation. If the Trustee is
unable or chooses not to qualify, be found suitable or be
licensed to own, operate or sell such assets, it would have to
retain an entity licensed to operate or sell such assets. In
addition, in any foreclosure sale or subsequent resale by the
Trustee, licensing requirements under the relevant Gaming Laws
may limit the number of potential bidders and may delay any sale,
which may have an adverse effect on the sale price of such
Collateral. In addition, under Colorado law, Holders may be
required to file personal history and financial background
information with the Gaming Authorities and to be found suitable
in order for the Trustee to foreclose on gaming equipment and the
Colorado Casinos. Therefore, the practical value of realizing on
the Collateral may, without the appropriate approvals, be
limited.
Certain Bankruptcy Limitations. The right of the Trustee to
repossess and dispose of the Collateral upon the occurrence of an
Event of Default is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be
commenced by or against the Company or the Company Subsidiaries
prior to the Trustee having repossessed and disposed of the
Collateral. Under the Bankruptcy Code, a secured creditor such
as the Trustee is prohibited from repossessing its security from
a debtor in a bankruptcy case, or from disposing of security
repossessed from such debtor, without bankruptcy court approval.
Moreover, the Bankruptcy Code permits the debtor to continue to
retain and to use Collateral owned as of the date of the
bankruptcy filing (and the proceeds, products, rents or profits
of such Collateral) to the extent provided by the Security
Documents and applicable nonbankruptcy law even though the debtor
is in default under the applicable debt instruments, provided
that the secured creditor is given "adequate protection." The
meaning of the term "adequate protection" may vary according to
circumstances, but it is intended in general to protect the value
of the secured creditor's interest in the Collateral and may
include, if approved by the court, cash payments or the granting
of additional security for any diminution in the value of the
Collateral as a result of the stay of repossession or disposition
or any use of Collateral by the debtor during the pendency of the
bankruptcy case. In view of the lack of a precise definition of
the term "adequate protection" and the broad discretionary power
of a bankruptcy court, it is impossible to predict how long
payments under the New Notes could be delayed following
commencement of a bankruptcy case, whether or when the Trustee
could repossess or dispose of the Collateral or whether or to
what extent Holders would be compensated for any delay in payment
or loss of value of the Collateral through the requirement of
"adequate protection."
Certain Covenants
The following are certain of the covenants with which the
Company and each Company Subsidiary must comply:
Limitation on Indebtedness. The Company shall not, and
shall not permit any Company Subsidiary to, directly or
indirectly, incur any Indebtedness other than:
(a) Indebtedness under the New Notes, the Indenture
and the Security Documents;
(b) Bank Indebtedness and any renewals, replacements
and/or refinancings thereof, so long as the
aggregate principal amount of Bank Indebtedness
at anyone time outstanding pursuant to this
paragraph (b) does not exceed the Bank Indebtedness
Amount;
(c) Any Indebtedness, if (i) no Default or Event of
Default shall have occurred and be continuing at
the time of, or would occur after giving effect to,
on a pro forma basis, such incurrence of such
Indebtedness and (ii) immediately after giving
effect to the incurrence thereof, and the receipt
and the application of the proceeds therof, the
Consolidated Coverage Ratio would be greater than
(A) 1.75 to 1, in the case of such Indebtedness
incurred or to be incurred on or prior to
December 31, 1996 and (B) 2.0 to 1, in the case of
such Indebtedness incurred or to be incurred on or
after January 1, 1997; provided that any such
Indebtedness shall mature at a date not earlier
than the Stated Maturity of the New Notes and
shall have an Average Life to Stated Maturity
equal to or greater than the remaining Average Life
to Stated Maturity of the New Notes;
(d) Any Indebtedness issued in exchange for or to repay,
prepay, repurchase, redeem, defease, retire or
refinance ("refinance") any Indebtedness permitted
by clauses (a) or (c) above; provided that (i) if
the principal amount of the Indebtedness so issued
shall exceed the principal amount of the Indebtedness
so exchanged or refinanced, then such excess shall be
permitted only to the extent that it is otherwise
permitted to be incurred hereunder and (ii) the
Indebtedness so issued (A) has a Stated Maturity
later than the Stated Maturity of the Indebtedness
so exchanged or refinanced, (B) has an Average Life
to Stated Maturity equal to or greater than the
remaining Average Life to Stated Maturity of the
Indebtedness so exchanged or refinanced, and (C) is
subordinated to the New Notes to at least the same
extent as the Indebtedness so exchanged or refinanced.
Limitation on Restricted Payments. The Company shall not,
and shall not permit any Company Subsidiary to, make, directly or
indirectly, any Restricted Payment, including (i) any declaration
or payment of any dividend or similar payments in respect of the
capital stock of the Company or a Company Subsidiary (other than
dividends payable solely in capital stock or payments of
dividends on capital stock of a Company Subsidiary payable to the
Company or to Company Subsidiary which is wholly owned by the
Company); (ii) any purchase, defeasance, redemption or other
acquisition or retirement for value of any capital stock, or any
warrants, rights or options to purchase any capital stock, of the
Company or any Company Subsidiary; (iii) any payment of principal
on any Indebtedness which is subordinated in right of payment to
the New Notes, or (iv) any loan, stock purchase or other
Investment in any Person that will not be a wholly owned Company
Subsidiary of the Company immediately after giving effect to such
loan, stock purchase or other Investment, if after giving effect
thereto, on a pro forma basis:
(a) a Default or Event of Default shall have occurred
and is continuing or would occur as a consequence thereof;
(b) immediately after giving effect to such Restricted
Payment, the Company could not incur at least $1.00 of
Indebtedness and maintain the Consolidated Coverage Ratio
required for the incurrance of additional debt; or
(c) the aggregate of all Restricted Payments declared
or made after the Issue Date exceeds the sum of: (i) 50% of
Consolidated Net Income (or in the event such Consolidated
Net Income shall be a deficit, minus 100% of such deficit)
accrued during the period (treated as one accounting period)
commencing on the first full quarter after the Issue Date,
to and including the last day of the fiscal quarter ended
immediately prior to the date of each such calculation,
minus (ii) 100% of the amount of any write downs, write-
offs, or negative extraordinary charges not otherwise
reflected in Consolidated Net Income during such period,
plus (iii) an amount equal to the aggregate Net Cash
Proceeds received by the Company from the issuance or sale
(other than to a subsidiary) of its Capital Stock (excluding
Disqualified Stock, but including capital stock issued upon
conversion of convertible Indebtedness and from the exercise
of options, warrants or rights to purchase capital stock,
other than Disqualified Stock, of the Company) after the
Issue Date;
provided, however, that the foregoing provisions will not
prevent, provided that no Default or Event of Default shall have
occurred and is continuing at the time of the restricted payment:
(i) the payment of any dividend within 60 days after the date of
its declaration if, at the date of declaration, such payment
would be permitted by the foregoing provisions; (ii) the payment
of dividends or the making of distributions solely in shares of
capital stock of the Company; and (iii) Restricted Payments not
otherwise permitted by clauses (i) through (iii) above in an
amount not exceeding $200,000 in any calendar year.
Limitation of Liens. The Company shall not, and shall not
permit any Company Subsidiary to, create, incur, assume or suffer
to exist any lien of any kind upon any of its property or assets
(including, without limitation, any income or profits) now owned
or hereafter acquired by it, other than Permitted Liens.
Limitation on Dividends and Other Payment Restrictions
Affecting Company Subsidiaries. The Company shall not, and shall
permit any Company Subsidiary to, directly or indirectly create
or otherwise cause or suffer to exist any consensual encumbrance
or restriction on the ability of any Company Subsidiary to pay
dividends, make distributions on the capital stock of such
Company Subsidiary, pay any obligation to the Company or a
Company Subsidiary, or otherwise transfer assets or make or pay
loans to the Company or any Company Subsidiary, except:
(i) restrictions imposed by the Security Documents; (ii) certain
other restrictions set forth in the Indenture; (iii) customary
non-assignment provisions restricting subletting or assignment of
any lease entered into in the ordinary course of business;
(iv) restrictions imposed by Gaming Laws or any Gaming Authority;
(v) restrictions under any agreement relating to any property, assets
or business acquired by the company or its Company Subsidiaries,
which restrictions are applicable only to the assets or business
acquired; (vi) any restrictions with respect to capital stock or
assets of a Company Subsidiary imposed pursuant to a stock or
asset sale of such Company Subsidiary, and (vii) replacements of
restrictions imposed pursuant to clauses (i) through (vi) above
that are no more restrictive than those being replaced.
Limitation on Sale-Leaseback Transactions. The Company
shall not, and shall not permit any Company Subsidiary to,
directly or indirectly enter into, guarantee or otherwise become
liable with respect to any Sale-Leaseback Transaction involving
Collateral or any other Sale-Leaseback Transaction unless: (i)
after giving effect to any such Sale-Leaseback Transaction the
Company could incur $1.00 of additional Indebtedness and its
Consolidated Coverage Ratio would be no less than the ratio
necessary to increase additional Indebtedness; (ii) such
Sale-Leaseback Transaction does not involve the creation of a
lien which is not a Permitted Lien; (iii) the consideration
received by the Company and/or any of its Company Subsidiaries
for such Sale-Leaseback Transaction is at least equal to the Fair
Market Value of such property being transferred, and (iv) the
Company shall apply the Net Cash Proceeds of the sale as if such
sale was a Restricted Asset Sale. See "- Restricted Asset
Sales".
Restricted Asset Sales. The Company shall not, and shall
not permit any Company Subsidiary to, directly or indirectly,
make any Restricted Asset Sale, including the issuance by a
Company Subsidiary of any capital stock or other equity interests
to a Person other than the Company or a wholly owned Company
Subsidiary or any asset sale or other disposition which is not an
Unrestricted Asset Sale, unless: (i) at the time of such
Restricted Asset Sale the Company or such Company Subsidiary, as
the case may be, receives consideration at least equal to the
Fair Market Value of the assets sold or otherwise disposed of;
(ii) with certain exceptions, which include the sale of
Bullwhackers Central City, at least 90% in value of the proceeds
therefrom consist of U.S. dollars; (iii) no Default or Event of
Default shall have occurred and be continuing at the time of or
after giving effect to such Restricted Asset Sale; and (iv)
unless otherwise permitted by the Indenture, the Restricted Asset
Sale does not involve any Collateral.
On or before the 180th day after the date on which the
Company or any Company Subsidiary consummates a Restricted Asset
Sale, the Company shall make an offer to purchase a principal
amount (expressed as a multiple of $1,000) of New Notes equal to
the Net Cash Proceeds received by the Company in respect of the
Restricted Asset Sale at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase; provided that the
Company will not be required to purchase New Notes with the Net
Cash Proceeds of a Restricted Asset Sale if and to the extent
that on or before the 180th day after the date on which the
Company or such Company Subsidiary consummates the Restricted
Asset Sale, the Company or such Company Subsidiary applies all or
part of the Net Cash Proceeds from the Restricted Asset Sale to
acquire other assets for use in the Company's gaming business,
and upon consummation thereof, the Trustee shall have received a
perfected security interest in the property or assets acquired by
the Company or any of its Company Subsidiaries in connection
therewith. Each offer to purchase New Notes after a Restricted
Asset Sale shall remain open for a period of at least twenty (20)
business days.
In the event any Restricted Asset Sale involves any
Collateral, the Company or such Company Subsidiary, as the case
may be, shall cause such Net Cash Proceeds to be deposited in a
Collateral Account maintained by the Trustee. Such funds may be
released from the Collateral Account only to repurchase New Notes
or to acquire assets for use in the Company's gaming business.
Application of Net Cash Proceeds in Event of Loss. In the
event that the Company or any Company Subsidiary suffers any
casualty loss or government taking to any material asset, on or
before the 360th day that the Company or such Company Subsidiary
received any Net Cash Proceeds from such Event of Loss, the
Company shall make an offer to purchase from all Holders up to a
maximum principal amount (expressed as a multiple of $1,000) of
New Notes equal to the Net Cash Proceeds at a purchase price
equal to 101% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase;
provided that the Company will not be required to purchase New
Notes with such Net Cash Proceeds if and to the extent that on or
before the 360th day after the date on which the Company or such
Company Subsidiary receives such Net Cash Proceeds, the Company
or such Company Subsidiary applies all or part of the Net Cash
Proceeds to acquire other assets for use in the Company's gaming
business and upon consummation thereof, the Trustee shall have
received a perfected security interest (subject only to Permitted
Liens) in the property or assets acquired by the Company or any
of its Company Subsidiaries in connection therewith.
In the event any casualty loss or government taking involves
any Collateral, the Company or such Company Subsidiary, as the
case may be, shall cause such Net Cash Proceeds to be deposited
in a Collateral Account maintained by the Trustee. Such funds
may be released from the Collateral Account only to repurchase
New Notes or to acquire assets for use in the Company's gaming
business.
Limitation on Company Subsidiary Preferred Stock. The
Company shall not issue or permit any Company Subsidiary to
issue, directly or indirectly, any preferred stock other than
preferred stock issued to and held by the Company or a wholly
owned Company Subsidiary of the Company.
Ownership of Stock of Company Subsidiaries. The Company
shall at all times have, or cause a wholly owned Company
Subsidiary (other than a Non-Operating Subsidiary) of the Company
to have, ownership of at least 100% of each class of Voting Stock
of, and all other equity securities in, each Company Subsidiary
other than a Company Subsidiary which becomes such as a result of
a permitted Investment.
Limitation on Transactions with Affiliates. The Company
shall not, and shall not permit any Company Subsidiary to,
conduct any business or enter into any transaction or series of
transactions with any of their respective Affiliates (defined to
include entities having 15% or more voting control), except such
transactions that are on terms that are no less favorable to the
Company or such Company Subsidiary, as the case may be, than
those that could have been obtained in a comparable transaction
on an arm's-length basis from an unaffiliated third party. All
transactions with Affiliates involving aggregate payments (i) in
excess of $500,000 shall not be permitted unless, prior to the
consummation thereof, the transaction shall be approved by the
Board of Directors of the Company, including a majority of the
independent directors, as evidenced by a Board Resolution, and
(ii) in excess of $2 million shall not be permitted unless, prior
to consummation thereof, the Company shall, in addition to board
approval, receive a favorable opinion as to the fairness of the
transaction from any national or regional investment banking firm
with recognized experience with the gaming industry.
Change in Nature of Business. The Company shall not, and
shall not permit any of its Company Subsidiaries to, own, manage
or conduct any operation other than an operation involved in the
gaming and ancillary businesses.
Maintenance of Consolidated Fixed Charge Coverage Ratio.
The Company shall, at the end of each fiscal quarter beginning
with the fiscal quarter ending March 31, 1998, maintain the ratio
of the difference between its Consolidated EBITDA and its Capital
Expenses to its Consolidated Fixed Charges for the four quarters
then ending at a ratio which is greater than or equal to 1.25 to
1.
Consolidation, Merger, Conveyance, Transfer or Lease.
Except as part of a permitted Restricted Asset Sale, the Company
shall not consolidate with, merge with or into, sell, assign,
convey, lease or transfer all or substantially all of its
properties and assets to any Person or group of affiliated
Persons unless (i) the Company shall be surviving entity or the
surviving entity shall be a corporation organized and existing
under the laws of the United States or any State thereof or the
District of Columbia; (ii) the surviving entity shall expressly
assume all of the obligations of the Company under the New Notes,
the Indenture, and the Security Documents; (iii) no Default or
Event of Default shall have occurred and be continuing; (iv) the
surviving entity shall, immediately after giving effect to such
transaction on a pro forma basis, have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the
Company immediately prior to such transaction; (v) immediately
after giving effect to such transaction on a pro forma basis, the
Company or the surviving entity could incur at least $1.00 of
additional Indebtedness and maintain a Consolidated Coverage
Ratio of no less than the ratio necessary to incur additional
Indebtedness; (vi) the surviving entity shall have delivered to
the Trustee an Officer's Certificate stating that such
consolidation, merger, conveyance, transfer or lease and
supplemental indenture if a supplemental indenture is required in
connection with such transaction or series of transactions
complies with this covenant and that all conditions precedent in
the Indenture relating to the transaction or series of
transactions have been satisfied, and (vii) such transaction will
not result in the loss of any Gaming License or Change in
Control.
Other than the provisions of the Indenture discussed above,
the Indenture may not afford Holders any further protection in
the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the
Company that may adversely affect the holders of the New Notes,
if such transaction is not a transaction defined as a Change of
Control.
Events of Default and Remedies
The following are Events of Default under the Indenture:
(a) the default in the payment of any interest on
any Note when it becomes due and payable and the
continuance of any such default for a period of ten (10)
days; or
(b) the default in the payment of the principal of or
premium, if any, on any Note when due at maturity, upon
acceleration, mandatory redemption, optional redemption,
required purchase or otherwise; or
(c) the failure by the Company to own directly or
through wholly owned Company Subsidiaries subject to
certain exceptions, 100% of the Voting Stock of all Company
Subsidiaries, the failure by the Company to maintain the
required Consolidated Fixed Charges Coverage Ratio at the
required level or if the Company or any Company Subsidiary
modifies any agreement with Christopher B. Hemmeter or
Mark M. Hemmeter existing as of the Issue Date or enters
into any additional agreement after the Issue Date with
either Person.
(d) default in the performance, or breach of any
covenant or warranty of the Company or any Company
Subsidiary in the Indenture, or by the Company or any
Guarantor under any other Noteholder Document, or by any
Guarantor under its Guarantee (other than defaults otherwise
specified in this section), and the continuance of such
default or breach for a period of thirty (30) days after
written notice to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25%
in aggregate principal amount of the outstanding New
Notes; or
(e) failure by the Company or any Company Subsidiary
to make any payment when due or within applicable grace
periods with respect to any other Indebtedness to the
extent that all such payments then due aggregate the
principal amount of $1 million or more; or
(f) a final judgment for the payment of money in
excess of $1 million shall be entered against the Company,
any Guarantor or any Company Subsidiary and remaining
undischarged for a period of thirty (30) days; or
(g) any warrant of attachment in an amount of $1
million or more shall be issued against any portion of the
property or assets of the Company, any Guarantor or any
Company Subsidiary; or
(h) certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Company
Subsidiary shall have occurred; or
(i) any Noteholder Document ceases to be in full force
and effect or any Noteholder Document ceases to create in
favor of the Trustee, with respect to any portion of the
Collateral, a valid and perfected Lien on the Collateral
(subject only to Permitted Liens) purported to be covered
thereby; or
(j) any Guarantee of a Guarantor is determined by a
court of competent jurisdiction to be null and void with
respect to such Guarantor or any Guarantor denies that it
has any further liability under its Guarantee or gives
notice to such effect; or
(k) the cessation of substantially all gaming
operations at any Gaming Facility which has commenced
operations, other than the Central City Casino, for
more than 45 days, except as a result of an Event of
Loss (or 90 days in the case of cessation as a result of
renovations to or construction at or adjacent to such Gaming
Facility); or
(l) the revocation, suspension or involuntary loss of
the legal right to operate any Gaming Facility which
continues for more than 45 days; or
(m) the Company ceases to own 100% of the Voting Stock
of BWBH, Inc., sells the Black Hawk Casino or all or a
significant portion of BWBH, Inc.'s assets or properties,
the occurrence of a Restricted Asset Sale involving assets
or property owned or leased by BWBH, Inc. or used by BWBH,
Inc. in the operation of the Black Hawk Casino, or certain
Events of Loss occur with respect to the Black Hawk Casino
or BWBH, Inc.
The Company is required to deliver to the Trustee on or
before the date which is 45 days after the end of each of the
first three fiscal quarter of the Company's fiscal year and on or
before the date which is 90 days after the end of each fiscal
year of the Company, an officer's certificate stating whether or
not any Default or Event of Default has occurred. Within 45 days
after the occurrence of any Default, unless such Default shall
have been cured or waived, the Trustee must deliver notice of such
Default known to the Trustee to all Holders. Except in the case
of a Default specified in clauses (a) or (b) above, the Trustee
may withhold such notice if and so long as it determines in good
faith that withholding such notice is in the interest of the
Holders.
If an Event of Default (other than an Event of Default
specified in clause (h) above) occurs, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes may,
by written notice, declare the principal of, premium, if any, and
accrued interest on all the New Notes to be immediately due and
payable. If an Event of Default specified in clause (h) occurs,
then the principal of and accrued interest on all the Notes shall
ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
After a declaration of acceleration, the Holders of a
majority in principal amount of Outstanding Notes may, by
notice to the Company and the Trustee, rescind such declaration
of acceleration if (a) the Company has deposited with the Trustee
a sum sufficient to pay the unpaid principal of (and premium, if
any, on) the Notes, all overdue interest on the Notes (including
interest on overdue interest), and the Trustee's reasonable
expenses, (b) all existing Events of Default have been cured or
waived, other than nonpayment of principal of and interest on the
Notes due solely by such acceleration, and (c) the rescission of
acceleration would not conflict with any judgment or decree.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Notes because of
an Event of Default specified in clause (e), such declaration of
acceleration shall be automatically annulled if (i) the
Indebtedness that is the subject of such Event of Default has
been discharged or the holders thereof have waived the default
and rescinded their declaration of acceleration in respect of
such Indebtedness, (ii) the Company shall have given notice of
such discharge to the Trustee (countersigned by the holders of
such Indebtedness) within 30 days after such declaration of
acceleration in respect of the Notes, and (iii) no other Event
of Default has occurred during such 30 day period which has not
been cured or waived.
Upon the occurrence of an Event of Default which is
continuing, the Trustee may, or at the direction of the Holders
of at least 25% in principal amount of the outstanding Notes
shall, initiate suit for collection of the amounts due under the
New Notes and the Guarantees, exercise all rights and remedies
in respect of the Collateral pursuant to the Noteholder Documents
or otherwise exercise any rights and remedies available to it
under the Indenture or otherwise.
No Holder of any of the Notes has any right to institute
any proceeding with respect to the Indenture or any remedy
thereunder, unless the Holders of at least 25% in principal
amount of the outstanding Notes have made written request,
and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee, the Trustee has failed to institute
such proceeding within 15 days after receipt of such notice and
the Trustee has not within such 15-day period received directions
inconsistent with such written request by Holders of a majority
in principal amount of the outstanding Notes. Such limitations
do not apply, however, to a suit instituted by a Holder for the
enforcement of the payment of the principal of, premium, if any,
or accrued interest on, such Note on or after the respective
due dates expressed in such Note.
During the existence of an Event of Default, the Trustee is
required to exercise such rights and powers vested in it under
the Indenture and use the same degree of care and skill in its
exercise thereof as a prudent Person would exercise under the
circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties
of the Trustee, in case an Event of Default shall occur and be
continuing, the Trustee is not under any obligation to exercise
any of its rights or powers under the Indenture at the request or
direction of any of the holders unless such holders shall have
offered to such Trustee reasonable security or indemnity.
Subject to certain provisions concerning the rights of the
Trustee, the holders of a majority in principal amount of the
outstanding New Notes have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee exercising any trust or power
conferred on the Trustee.
Defeasance
The Company may at any time terminate all of its obligations
with respect to the Notes and the Indenture ("Legal Defeasance"),
except for certain obligations, including those regarding any
trust established for a defeasance and obligations to register
the transfer or exchange of the Notes, to replace mutilated,
destroyed, lost or stolen Notes and to maintain agencies in
respect to the Notes. The Company may also at any time terminate
its obligations under certain covenants set forth in the Indenture
that constitute a Default or an Event of Default with respect to
the Notes issued under the Indenture ("Covenant Defeasance").
In order to exercise either Legal Defeasance or Covenant Defeasance,
the Company must irrevocably deposit with the Trustee in trust,
for the benefit of the Holders, money or United States Government
Obligations (or a combination thereof) in such amounts as will be
sufficient to pay the principal of, premium, if any, and interest
on the Notes to redemption or maturity, together with all other
sums payable by it under the Indenture, and comply with certain
other conditions, including the delivery of an opinion as to
certain tax matters.
Satisfaction and Discharge
Upon the request of the Company, the Indenture will cease to
be of further effect (except as to surviving rights of registration
of transfer or exchange of Notes) as to all outstanding Notes when
either: (a) all such Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such trust)
have been delivered to the Trustee for cancellation; or (b)(i)
all such Notes not theretofore delivered to the Trustee for
cancellation have become due and payable or will become due and
payable at their Stated Maturity within one year or are to be
called for redemption within one year, and the Company has
irrevocably deposited or caused to be deposited, prior to the
date of such discharge, with the Trustee funds sufficient to pay
and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for
principal, premium, if any, and accrued interest to the date of
such deposit; (ii) the Company has paid all sums payable by it
under the Indenture, and (iii) the Company has delivered to the
Trustee an Officer's Certificate and an opinion of counsel
stating that all conditions precedent to satisfaction and
discharge have been complied with.
Amendments and Waivers
The Company may, when authorized by resolutions of its Board
of Directors, and the Trustee may, without the consent of the
Holders, amend, waive or supplement the Indenture, the Security
Documents or the New Notes for certain specified purposes. The
purposes for which amendments may be made without the consent of
the holders include, among other things, curing ambiguities,
defects or inconsistencies, maintaining the qualification of the
Indenture under the Trust Indenture Act, or making any change
that does not adversely affect the rights of any Holder. Other
amendments and modifications of the Indenture, the New Notes or
the Security Documents may be made by the Company and the Trustee
with the consent of the Holders of not less than a majority of
the aggregate principal amount of the Outstanding New Notes,
provided that no such modification or amendment may, without the
consent of the Holder of each Outstanding New Note affected
thereby:
(a) Alter the maturity, principal amount, interest
rate or priority of the New Notes (or the right to institute
suit for any payment after stated maturity),
(b) Release any Guarantor from its Guarantee or amend
the provisions of the Indenture relating to the Guarantee
(other than a release resulting from a permitted sale of all
of the capital stock of a Guarantor),
(c) Except as otherwise provided in the Indenture,
release any Collateral or permit creation of any Lien senior
to or equal to the Lien of any Security Document, or
(d) Reduce the percentage in principal amount of the
Outstanding New Notes the consent of whose Holders is
required for any supplemental indenture, waiver, amendment
or consent to take any action under the Indenture.
No supplemental indenture shall, without the consent of the
Holders of 66 2/3% in principal amount of the Outstanding New
Notes, waive or amend the obligation of the Company to repurchase
the New Notes upon a Change of Control. See "- Mandatory Offers
to Purchase - Offer to Purchase Upon Change of Control".
Regarding the Trustee
Fleet National Bank will serve as Trustee under the
Indenture and will act as collateral agent and the mortgagee,
as applicable, under the Security Documents. Any replacement
trustee must be qualified to act as such under the United States
Trust Indenture Act of 1940, as amended.
Guarantees of 12% Senior Secured Pay-In-Kind Notes due 2003
BWBH, Inc., BWCC, Inc., Millsite 27, Inc. and Silver Hawk
Casino, Inc., have irrevocably and unconditionally guaranteed the
payment of the New Notes and the Company's obligations under the
Indenture. The Guarantees of the Guarantors are in addition to
(and not in substitution for) any other security for the New
Notes and may not be revoked by Guarantor until all guaranteed
obligations have been indefeasibly paid and performed in full.
The liability of each Guarantor under its Guarantee is joint
and several for the full amount of each new Note and is
independent of, and not in consideration of or contingent upon,
the liability of the Company or any other Guarantor. The
obligation of each Guarantor under its Guarantee is continuing,
absolute and unconditional without regard to (i) the legality,
validity or enforceability of the New Notes, the Indenture, any
Security Document, any Lien or Collateral or the Guarantee given
by any other Guarantor; (ii) any defense (other than payment),
set-off or counterclaim that may be available to the Company or
any other Guarantor against any Holder; or (iii) any other
circumstance whatsoever. Each Guarantor waives (i) any and all
rights of subrogation, indemnity or reimbursement (until all
guaranteed obligations have been paid in full); (ii) the right to
require the Holders to proceed against the Company, any other
Guarantor, or any Collateral for the New Notes or other
guaranteed obligations; (iii) all rights under applicable law
which reduce a guarantor's obligations; (iv) the benefit of any
statute of limitations; (v) any requirement of marshalling or any
other principle of election or remedies; (vi) any right to assert
any defense, set-off or counterclaim; (vii) notice of any kind,
except as expressly required by any Security Documents securing
any guaranteed obligations, and (viii) all defenses available to
any Guarantor by virtue of valuation, stay, moratorium or other
law.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL empowers a Delaware corporation to
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such
corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director,
officer, employee or agent of another corporation or enterprise.
A corporation may indemnify such person against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. A corporation may, in
advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay
the expenses (including attorneys' fees) incurred by any officer
or director in defending such action, provided that the director
or officer undertakes to repay such amount if it shall be
ultimately determined that he is not entitled to be indemnified
by the corporation.
A Delaware corporation may indemnify officers and directors
in an action by or in the right of the corporation to procure a
judgment in its favor under the same conditions, except that no
indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above,
the corporation must indemnify him against the expenses
(including attorneys' fees) which he actually and reasonably incurred
in connection therewith. The indemnification provided is not deemed
to be exclusive of any other rights to which an officer or
director may be entitled under any corporation's by-law,
agreement, vote or otherwise.
At the Effective Date, the following provisions relating to
indemnification of the post-Effective Date directors and officers
of the Company will be in effect: Article IX of the Company's
Amended and Restated Certificate of Incorporation provides that
the Company shall indemnify its officers, directors, agents and
other persons to the fullest extent permitted by the DGCL.
Article IX of the Company's Amended and Restated Certificate of
Incorporation provides that a director of the Company shall not
be personally liable to the Company or its stockholders for
monetary damages for breaches of fiduciary duty as a director,
except for liability (i) for any breach of the officer's or
director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) for any transaction from which
the director derived any improper personal benefit.
Pursuant to the Plan of Reorganization, Messrs. Szapor and
Mayer and certain other pre-Effective Date directors and officers
of the Company are entitled to certain additional indemnification
rights. See "Item 8, Legal Proceedings."
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Reference
CONSOLIDATED FINANCIAL STATEMENTS OF HEMMETER
ENTERPRISES, INC.:
Report of Independent Public Accountants 54
Consolidated Balance Sheets as of December 31, 1994,
1995 and March 31, 1996, including unaudited
pro forma consolidated balance sheet as of
December 31, 1995 55
Consolidated Statements of Operations for each of
the three years in the period ended December 31, 1995
and the three months ended March 31, 1995 and 1996 56
Consolidated Statements of Stockholders' Equity
(Deficit) for each of the three years in the
period ended December 31, 1995 and the three
months ended March 31, 1996 57
Consolidated Statements of Cash Flows for each
of the three years in the period ended
December 31, 1995 and the three months ended
March 31, 1995 and 1996 58
Notes to Consolidated Financial Statements 60
FINANCIAL STATEMENTS OF GRAND PALAIS RIVERBOAT, INC.:
Report of Independent Public Accountants 83
Statement of Net Assets in Liquidation as of
December 31, 1995 84
Balance Sheet as of December 31, 1994 85
Statements of Operations for the period from
inception (March 29, 1993) to December 31, 1993,
and for the years ended December 31, 1994 and 1995 86
Statements of Stockholder's Equity for the period
from inception (March 29, 1993) to December 31, 1993,
and for the years ended December 31, 1994 and 1995 87
Statements of Cash Flows for the period from inception
(March 29, 1993) to December 31, 1993, and for the
years ended December 31, 1994 and 1995 88
Notes to Financial Statements 89
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hemmeter Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of
Hemmeter Enterprises, Inc. and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Hemmeter
Enterprises, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As described more fully
in Note 1 to the consolidated financial statements, on November 7,
1995, the Company filed a voluntary petition under Chapter 11 of the
Federal Bankruptcy Code and has since operated its business as a
debtor-in-possession under the supervision the Bankruptcy Court. The
Company's proposed plan of reorganization ("Plan" -- see Note 1) was
confirmed by tof he Bankruptcy Court on March 28, 1996; however, there
are certain events that must occur for the Plan to be declared
effective by the Bankruptcy Court. Because the Company's Plan is not
yet effective, and the Company would be unable to satisfy its default
on its senior secured pay-in-kind notes if the Plan does not become
effective, substantial doubt exists regarding the Company's ability to
continue as a going concern. The accompanying financial statements do
not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
Denver, Colorado,
April 11, 1996.
<TABLE>
HEMMETER ENTERPRISES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
December 31, Pro Forma
--------------------------- March 31, December 31,
ASSETS 1994 1995 1996 1995 (1)
------ ------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,977 $ 3,623 $ 6,091 $ 3,623
Accounts receivable, net 1,109 226 237 226
Inventories 85 85 85 73
Prepaid expenses 1,581 638 772 638
Due from affiliates, net 3,625 - - -
--------- --------- --------- ---------
Total current assets 14,377 4,572 7,173 4,572
========= ========= ========= =========
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, net 69,079 32,127 31,034 32,127
EQUITY INVESTMENT IN UNCONSOLIDATED
SUBSIDIARIES 18,010 - - -
RESTRICTED FUNDS IN ESCROW 18,648 - - -
EXCESS REORGANIZATION VALUE (Note 1) - - - 26,320
OTHER ASSETS, net 20,979 981 1,040 981
--------- --------- --------- ---------
$ 141,093 $ 37,680 $ 39,247 $ 64,000
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 3,118 $ 404 $ 387 $ 404
Accrued expenses 3,727 3,953 5,209 3,953
Current portion of credit facility - - - 952
Current portion of notes payable 14,610 - - -
Current portion of obligations under
capital leases 787 - - -
--------- --------- --------- ---------
Total current liabilities 22,242 4,357 5,596 5,309
--------- --------- --------- ---------
NOTES PAYABLE, net of current portion:
Senior secured notes payable 154,213 - - 50,000
Obligations under capital leases 1,462 - - -
Credit facility - - - 2,248
Other notes - - - 2,100
--------- --------- --------- ---------
155,675 - - 4,348
--------- --------- --------- ---------
LIABILITIES SUBJECT TO COMPROMISE
(Note 1) - 186,460 186,460 -
--------- --------- --------- ---------
Total liabilities 177,917 190,817 192,056 59,657
--------- --------- --------- ---------
COMMITMENTS AND CONTINGENCIES
(See Notes)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value,
2,000,000 shares authorized,
none issued - - - -
Common stock, $.01 par value,
50,000,000 shares authorized,
9,847,787, 11,786,235, and
11,786,235 shares issued and
outstanding at December 31, 1994,
1995, and March 31, 1996
respectively 99 118 118
Warrants issued 8,266 7,000 7,000 -
Common stock, $.01 par value,
20,000,000 shares authorized,
5,138,888 shares issued and
outstanding on a pro forma
basis at December 31, 1995 - - - 51
Additional paid-in capital 2,012 2,162 2,162 4,292
Accumulated deficit (47,201) (162,417) (162,089) -
--------- --------- --------- ---------
Total stockholders' equity
(deficit) (36,824) (153,137) (152,809) 4,343
--------- --------- --------- ---------
$ 141,093 $ 37,680 $ 39,247 $ 64,000
========= ========= ========= =========
(1) Unaudited Pro Forma amounts giving effect to the Plan of Reorganization and Fresh Start
Reporting -- see Note 1 of the Notes to Consolidated Financial Statements.
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
<TABLE>
HEMMETER ENTERPRISES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<CAPTION>
Three Months
Ended
Years Ended December 31, March 31
---------------------------------------- --------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Casino $ 35,982 $ 42,724 $ 44,854 $ 11,186 $ 10,549
Food and beverage 2,935 3,571 3,737 888 720
Other 259 389 286 66 19
---------- ---------- ---------- ---------- ----------
Gross revenues 39,176 46,684 48,877 12,140 11,288
Less: promotional allowances (708) (1,210) (1,449) (323) (266)
---------- ---------- ---------- ---------- ----------
Net revenues 38,468 45,474 47,428 11,817 11,022
---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Casino 12,705 14,006 13,087 3,270 3,168
Gaming taxes and device fees 7,703 8,178 8,277 222 (1) 2,002
Food and beverage 3,270 3,140 3,173 770 735
General and administrative:
Casino 4,325 4,325 3,281 3,223 812
Corporate - 8,108 6,470 2,614 645
Marketing 3,376 3,776 5,806 1,309 1,159
Depreciation and amortization 3,931 4,307 4,771 1,133 1,095
Pre-opening - - 2,594 - -
Reorganization items (Note 1) - - 17,910 - 1,068
Impairment of assets (Notes 5 and 11) - 6,875 10,945 1,160 -
Predevelopment costs - 3,929 402 305 -
Other - 241 - - -
---------- ---------- ---------- ---------- ----------
Total operating expenses 35,310 58,435 74,064 13,594 10,598
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 3,158 (12,961) (26,636) (1,777) 424
Interest expense (includes $4,755 and
$122 to affiliates in 1993 and 1995,
respectively) (contractual interest of
$3,179 and $5,391 was not recognized
for December 31, 1995 and March 31,
1996, respectively (note 7)) (6,987) (18,822) (18,664) (4,459) (120)
Interest income - - 1,976 361 213
Equity in loss of unconsolidated
subsidiaries (Notes 1 and 6) - (2,324) (70,277) (4,377) -
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (3,829) (32,131) (115,216) (10,400) 328
Provision for income taxes - - - - -
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (3,829) $ (32,131) $ (115,216) $ (10,400) $ 328
========== ========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE $ (0.37) $ (3.22) $ (9.78) $ (.88) $ .03
========== ========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 10,269,641 9,969,142 11,786,235 11,786,235 11,786,235
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<TABLE>
HEMMETER ENTERPRISES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND THE THREE MONTHS ENDED MARCH 31, 1996
(in thousands, except number of shares)
<CAPTION>
Common Stock Additional
------------------------- Warrants Paid-in Accumulated
Shares Amount Issued Capital Deficit Totals
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1992 $ - $ - $ - $ 1,239 $ (11,241) $ (10,002)
Capital contributions to predecessor companies - - - 871 - 871
Issuance of common stock pursuant to
restructuring 10,269,641 103 - (102) - 1
Issuances of warrants to purchase common stock - - 8,266 - - 8,266
Net loss - - - - (3,829) (3,829)
---------- ---------- ---------- ---------- ---------- ----------
BALANCES, December 31, 1993 10,269,641 103 8,266 2,008 (15,070) (4,693)
Conversion of common stock to warrants (421,854) (4) - 4 - -
Net loss - - - - (32,131) (32,131)
---------- ---------- ---------- ---------- ---------- ----------
BALANCES, December 31, 1994 9,847,787 99 8,266 2,012 (47,201) (36,824)
Vesting of common stock grants to officers
and directors 88,667 1 - 168 - 169
Warrants of deconsolidated subsidiary - - (1,266) - - (1,266)
Conversion of warrants to common stock 1,849,781 18 - (18) - -
Net loss - - - - (115,216) (115,216)
---------- ---------- ---------- ---------- ---------- ----------
BALANCES, December 31, 1995 11,786,235 118 7,000 2,162 (162,417) (153,137)
Net income (unaudited) - - - - 328 328
---------- ---------- ---------- ---------- ---------- ----------
BALANCES, March 31, 1996 (unaudited) 11,786,235 $ 118 $ 7,000 $ 2,162 $ (162,089) $ (152,809)
========== ========== ========== ========== ========== ----------
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<TABLE> Page 1 of 2
HEMMETER ENTERPRISES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION> Three Months
Ended
Years Ended December 31, March 31
---------------------------------------- --------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (3,829) $ (32,131) $ (115,216) $ (10,400) $ 328
---------- ---------- ---------- ---------- ----------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities-
Depreciation and amortization 3,931 4,307 4,771 1,133 1,095
Loss on retirements of property
and equipment 92 - 127 - 294
Equity in loss of unconsolidated
subsidiaries - 2,324 70,277 4,377 -
Noncash compensation - - 169 128 -
Predevelopment costs - 3,929 - - -
Impairment of assets - 6,875 11,347 1,000 -
Noncash interest expense 692 17,909 17,895 5,339 120
Noncash reorganization items - - 15,317 - 1,068
(Increase) decrease in accounts
receivable (252) (808) 883 488 (11)
(Increase) decrease in inventories 115 15 - (12) 12
Increase in prepaid expenses and
other assets (16) (1,270) (172) (210) (134)
(Decrease) increase in accounts
payable (297) 1,398 378 (224) (20)
(Decrease) increase in accrued
expenses 17 167 226 (484) 188
---------- ---------- ---------- ---------- ----------
Total adjustments 4,282 34,845 121,218 11,535 2,612
---------- ---------- ---------- ---------- ----------
Net cash provided by operating
activities 453 2,714 6,002 1,135 2,940
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, equipment
and leasehold improvements (9,812) (31,560) (1,508) (1,241) (407)
Investment in development projects (571) (3,358) - - -
Net restricted funds (placed in)
disbursed from escrow (71,200) 52,552 4,209 1,679 -
Investment in unconsolidated
subsidiaries - (20,334) (9,270) (1,416) -
Advances to PRIGSA (Note 5) - (5,875) (289) - -
(Increase) decrease in other assets (7,830) (5,174) 59 (131) 24
Advances to affiliates, net (365) (4,402) (1,257) (1,594) -
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities (89,778) (18,151) (8,056) (2,703) (383)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to affiliate 6,285 - 2,000 - -
Repayment of notes payable to affiliate (31,851) - - - -
Proceeds from notes payable and
obligations under capital leases 135,255 13,048 - - -
Payment of debt placement costs,
net of accrued liabilities (7,667) (38) (315) - (89)
Repayments of notes payable and
obligations under capital leases
(10,565) (2,540) (1,651) (749) -
Capital contributions received by
predecessor companies 871 - - - -
Issuance of warrants to purchase
common stock 8,266 - - - -
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities 100,594 10,470 34 (749) (89)
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 11,269 (4,967) (2,020) (2,317) 2,468
CASH AND CASH EQUIVALENTS, at beginning
of period (less $2,334 of cash in
subsidiary deconsolidated for the
1995 period) 1,675 12,944 5,643 5,643 3,623
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
at end of period $ 12,944 $ 7,977 $ 3,623 $ 3,326 $ 6,091
========== ========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest, net of
amounts capitalized $ 6,647 $ 965 $ 579 $ 175 $ 2
========== ========== ========== ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of notes payable and capital
lease obligations for purchases of
property and equipment $ 408 $ 726 $ 227 $ - $ -
========== ========== ========== ========== ==========
Issuance of notes payable for accrued
interest obligations $ - $ 17,001 $ 9,416 $ - $ -
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated
statements.
</TABLE>
HEMMETER ENTERPRISES, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(Information as of March 31, 1996 and for the three months ended
March 31, 1995 and 1996 is unaudited)
(1) ORGANIZATION, PLAN OF REORGANIZATION
AND GOING-CONCERN CONSIDERATIONS
Organization
Hemmeter Enterprises, Inc. ("HEI"), and its subsidiaries (the
"Company"), develop, own and operate gaming and related entertainment
facilities. HEI was incorporated in August 1993 to acquire and serve
as the parent company of certain companies now comprising HEI's wholly
owned subsidiaries pursuant to a restructuring of certain entities
under common control which was consummated on December 17, 1993. The
accompanying financial statements have been prepared to give effect to
the 1993 restructuring.
Two wholly owned subsidiaries, BWBH, Inc. and BWCC, Inc., own and
operate limited stakes gaming facilities in Colorado (collectively,
"Bullwhackers Casinos"). Millsite 27, Inc., also a wholly owned
subsidiary, owns a surface parking facility constructed in 1994 for
the benefit of BWBH, Inc.'s casino. The Bullwhackers Casinos
commenced operations in 1992. Another wholly owned subsidiary, Grand
Palais Riverboat, Inc. ("GPRI"), is a fifty percent joint venture
partner in River City Joint Venture ("RCJV") with Crescent City
Capital Development Corp. ("CCCD"), an affiliate of Capital Gaming
International, Inc., which developed and operated a riverboat gaming
project in New Orleans, Louisiana (the "Riverboat Project") (Note 6).
GPRI and CCCD each operated separate riverboat gaming operations which
commenced on March 29, 1995 and April 3, 1995, respectively. RCJV
operated an entertainment and docking facility for the two riverboats,
with parking, dining, entertainment facilities and other amenities.
GPRI Bankruptcy
The Riverboat Project incurred construction cost overruns and had
substantial operating losses as a result of the failure of the New
Orleans gaming market to develop as anticipated and the resulting
failure of the Riverboat Project to achieve projected revenues. As a
result, GPRI and CCCD terminated riverboat gaming operations on June
6, 1995 and June 9, 1995, respectively. On July 26, 1995, certain
creditors filed an involuntary petition under Chapter 11 of the
Federal Bankruptcy Code against GPRI, CCCD and RCJV. On July 27,
1995, GPRI converted its petition to a voluntary petition under
Chapter 11 of the Federal Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of Louisiana (the "Court").
Since that time, GPRI has continued to operate as a debtor-in-
possession, although the business of GPRI has not operated since June
6, 1995.
Following termination of operations, HEI management began assessing
the possibility that all or part of the Riverboat Project could be
sold to another gaming operator. After evaluation and negotiation of
potential transactions, HEI, certain creditors and GPRI entered into a
letter of intent with Casino America, Inc. ("Casino America
Agreement"). Generally, the Casino America Agreement provides for the
purchase by Casino America, Inc. of 100% of the newly issued shares of
common stock of a Reorganized GPRI in exchange for consideration from
Casino America, Inc. valued at approximately $59 million, including
cash, stock, notes and the assumption of certain GPRI liabilities. On
January 30, 1996, GPRI filed its proposed plan of reorganization
("GPRI Plan") pursuant to which it seeks to implement the terms of the
Casino America Agreement. The GPRI Plan was confirmed by the Court on
March 29, 1996. The GPRI Plan will be consummated on the date on
which the conditions to the effectiveness of the GPRI Plan have been
satisfied or waived (note 13). Under the GPRI Plan, the Company will
receive GPRI's causes of action, if any, against GPRI's joint venture
partner in the Riverboat Project and will receive no other
distribution in respect of its stock ownership in GPRI or any claim
that it may have in the GPRI bankruptcy case.
HEI Bankruptcy
In June 1995, HEI received "Notices of Default" from the trustee of
its Senior Secured Pay-In-Kind Notes (the "Old Notes") (See Note 7),
alleging that HEI was in default under various provisions of the Old
Notes Indenture. The alleged defaults included, among other matters,
violations related to the issuance of certain additional indebtedness,
the termination of riverboat gaming operations, the numerous liens
filed against the Riverboat Project and the failure to file audited
financial statements on a timely basis. HEI negotiated with a
committee comprised of certain holders of the Old Notes to restructure
the Old Notes. On November 7, 1995, HEI and three of its wholly owned
subsidiaries (BWBH, Inc. BWCC, Inc. and Millsite 27, Inc.)
(collectively, the "Debtor"), filed voluntary petitions for
reorganization under Chapter 11 of the Federal Bankruptcy Code in the
District of Delaware as contemplated by the negotiations with the
holders of the Old Notes. The Chapter 11 case subsequently was
transferred to the Court.
The Court allowed the Debtor to continue business operations as a
debtor-in-possession. The Debtor's primary operations now consist of
the Bullwhackers Casinos. The Debtor received approval from the Court
to pay or otherwise honor certain of its pre-petition obligations
related to the Bullwhackers Casinos, including employee wages and
benefits, utilities, and claims of certain trade vendors.
Accordingly, these amounts have been paid or are included in the
appropriate liability captions in the accompanying December 31, 1995
consolidated balance sheet. In addition, the Court approved the
Debtor's entering into a $7.9 million debtor-in-possession financing
facility (see Note 7).
HEI Proposed Plan of Reorganization
On February 12, 1996, the Debtor filed its Chapter 11 First Amended
Plan of Reorganization and Disclosure Statement (as amended, the
"Plan") with the Court. The Court granted motions filed by the Debtor
approving an amended Disclosure Statement describing the Plan and
establishing procedures for notification of creditors and stockholders
and for solicitation of formal acceptances of the Plan by creditors.
The Plan was confirmed by the Court on March 28, 1996.
The Plan will be consummated on the date (the "Effective Date") on
which certain conditions specified in the Plan are satisfied or
waived. The Company expects that the Effective Date will occur on or
about June 1, 1996.
The following events will occur at the Effective Date pursuant to the
Plan:
1. The Debtor will be discharged from any liability to GPRI or its
creditors. Assuming that the GPRI Plan becomes effective, the
Company will no longer have any interest in GPRI or the
Riverboat Project and its principal assets will consist of the
stock of its subsidiaries which own the Bullwhackers Casinos
and a surface parking lot. If the GPRI Plan is not effective
prior to the Effective Date, the Company will continue to own
the capital stock of GPRI until the GPRI Plan becomes
effective; however, Company management does not believe that
the GPRI stock has any value.
2. The claims of entities which provide goods and services to the
Bullwhackers Casinos will be paid in full or will otherwise be
treated in such a manner so that they are not impaired and all
other unsecured creditors of the Bullwhackers Casinos will
receive notes in a principal amount equal to the allowed amount
of their claims which provide for a single payment of principal
and accrued interest on the tenth anniversary of the issuance
thereof. All other unsecured creditors of the Company will
receive no distribution in respect of their claims against the
Company.
3. The holders of the Old Notes and the holder of the secured
claim of Resort Income Investors, Inc. (the "RII Claim"; Resort
Income Investors, Inc. is sometimes referred to as "RII") will
receive $50,000,000 in principal amount of 12% Senior Secured
Pay-In-Kind Notes of the Company, due 2003 (Note 7), and one
hundred percent (100%) of the issued and outstanding capital
stock of the "Reorganized Company," subject to being diluted to
90% by certain stock grants to be provided to senior management
employees and non-employee directors of the Reorganized Company
(Note 8). As a result, the holders of the Old Notes and the
RII Claim will be the principal creditors and stockholders of
the Company. The portion of the new Senior Secured Pay-In-Kind
Notes paid to the holder of the RII claim will be less than
$1 million and a similar portion of common stock will be issued
to the holder of the RII claim.
4. Pursuant to the settlement of certain lawsuits against the
Company and certain of its executive officers, the Company will
issue two promissory notes to Capital Associates International,
Inc. ("CAI"), an equipment lessor which had leased equipment to
the Company and GPRI, in the respective principal amounts of
$1.6 million and $3 million (the "CAI Notes"). The Company's
obligation in respect of the CAI Notes will be reduced dollar-
for-dollar by any amounts received by CAI in respect of its
claims filed in the GPRI bankruptcy case (Note 10).
5. Certain claims of the Debtor against third parties, including
derivative claims against the pre-Effective Date directors,
officers, and employees of the Debtor, will be transferred to a
litigation trust (the "Litigation Trust"). The trustees of the
Litigation Trust will be the post-Effective Date directors of
the Company and will determine whether or not to pursue any
such claims. Any amounts received in respect of any such
claims will inure to the benefit of the holders of the Old
Notes and the RII Claim (Note 12).
6. Any amounts outstanding under the DIP Facility (Note 7) will be
paid in full and the DIP Facility will be terminated. The
Company anticipates replacing the DIP Facility with a new
$12.5 million credit facility on the Effective Date.
7. The Company will change its name to Colorado Gaming &
Entertainment Co.
Liabilities Subject to Compromise
Pursuant to the Chapter 11 proceedings, certain secured and unsecured
claims against the Debtor in existence prior to the filing of the
petitions for relief under the Federal Bankruptcy Code were stayed
while the Debtor continued business operations as a debtor-in-
possession. The stayed claims which are "impaired" under the Plan are
reflected in the accompanying December 31, 1995 and March 31, 1996,
consolidated balance sheets as "liabilities subject to compromise."
As of the petition date, the Debtor also discontinued accruing
interest on its pre-petition debt obligations. Additional claims have
arisen subsequent to the petition date resulting from the rejection of
executory contracts and/or leases and from the allowance by the Court
of contingent and/or disputed claims. Creditors and other parties in
interest have filed claims with the Court which are substantially in
excess of the amounts recorded in the Debtor's records. Management
believes these differences are primarily related to errors,
duplicative claims and overstatement of claims. The exact amount of
these liabilities is subject to adjustment as disputed claim amounts
are resolved by the Court, which management believes will not have a
material adverse effect on the Company's financial position, results
of operations or cash flows.
Liabilities subject to compromise consist of the following (in
thousands):
December 31 March 31,
1995, 1996
----------- -----------
(unaudited)
Senior Secured Pay-In-Kind Notes $174,274 $174,274
Resort Income Investors 2,122 2,122
Equipment financing 4,169 4,169
HEI guarantee of subsidiary debt 4,600 4,600
HEI trade payables 1,295 1,295
-------- --------
Total $186,460 $186,460
======== ========
The accompanying consolidated financial statements have been prepared
on a going-concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities in the ordinary
course of business. However, as a result of the Chapter 11 filing and
circumstances relating to this event, including the Debtor's highly
leveraged financial structure, there is substantial doubt about the
continuity of the Company's operations and the realization of the
Company's assets and liquidation of its liabilities. While under the
protection of Chapter 11, the Debtor may, with the approval of the
Court, sell or otherwise dispose of assets and liquidate or settle
liabilities for amounts other than those reflected in the consolidated
financial statements. Further, the proposed Plan will materially
change the amounts reported in the consolidated financial statements,
which do not give effect to any adjustments to the carrying value of
the assets or amounts of liabilities that might be necessary as a
consequence of the proposed Plan. The appropriateness of using the
going-concern basis is dependent upon both the Plan and the GPRI Plan
becoming effective, generation of sufficient cash from operations and
financing sources to meet obligations and achievement of satisfactory
levels of future operating profit. The accompanying financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary if
the Company is unable to continue as a going concern.
Fresh Start Reporting
Upon confirmation of the Plan, the Company's post-petition liabilities
and allowed claims exceeded the reorganization value of the
Reorganized Company. Additionally, the Plan provides that the
existing stockholders of the Company will receive no ownership
interest in the Reorganized Company. Because these two conditions
exist, the Company is subject to and as of the effective date of the
Plan, the Reorganized Company will adopt Fresh Start Reporting in
accordance with the American Institute of Certified Public Accountants
Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code" ("SOP 90-7"). Fresh start
reporting will result in material changes to the consolidated balance
sheet, including revaluation of assets and liabilities to fair market
value and revaluation of equity based on the reorganization value of
the ongoing business.
The unaudited $64 million reorganization value was estimated based
upon a Discounted Cash Flow Analysis. Under the Discounted Cash Flow
Analysis, the value of the company was calculated utilizing five year
projected cash flows plus an estimated terminal value at the end of
year five. The terminal value was calculated at 6 times year five
cash flows. The cash flows and terminal values were then discounted
to present values by applying a discount rate of approximately 17%.
The company's cash flow forecasts reflect numerous assumptions,
including modest increases in revenues and profitability resulting
primarily from enhanced marketing efforts, selective capital
expenditures, implementation of additional cost efficiencies and
overall growth in the Black Hawk market. The increases have been
assumed to be offset somewhat by an increased level of competition in
the Black Hawk market. The forecasts do not take into account the
company's proposed expansion plans including the acquisition and
opening of the Silver Hawk Casino or the construction of the proposed
parking structure in Black Hawk. Upon adopting fresh start reporting,
the reorganization value will be allocated to the assets and
liabilities of the Reorganized Company, including subsidiaries. Any
excess of the reorganization value over the fair market value of the
net assets and liabilities will be reported as excess reorganization
value and will be amortized over a 20-year period or less.
As a result of adopting fresh start reporting, the Reorganized
Company's consolidated financial statements will not be comparable
with those prepared before the effective date, including the
historical consolidated financial statements included herein. The
unaudited pro forma consolidated balance sheet as of December 31,
1995, presented alongside the accompanying consolidated balance
sheets, has been prepared by Company management based on an assumption
that fresh start reporting was adopted as of December 31, 1995,
although appraisals necessary to allocate the reorganization value to
specific assets, including the Bullwhackers Casinos and surface
parking facility, are not yet available. Once appraisals are
obtained, management anticipates that a substantial amount of the
unaudited excess reorganization value will be allocated to property,
equipment and leasehold improvements. Final allocation of this excess
amount is subject to receipt of an independent appraisal expected to
be completed by June 1996. Management believes a significant portion
of the excess amount will be allocated to property and equipment. The
Company anticipates that it may establish a deferred tax liability if
the revalued property and equipment for financial reporting purposes
is significantly in excess of the historical tax basis. The expected
amount of property and equipment basis differences from tax basis is
not reasonably estimatable.
The following reflects the adjustments between the historical and
unaudited pro forma consolidated balance sheet of the Company at
December 31, 1995.
<TABLE>
<CAPTION>
(unaudited)
----------------------------------------------
Historical Pro Forma
December 31, Reorganization Fresh Start December 31,
1995 Adjustments Adjustments 1995
-------------- -------------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,623 $ - $ - $ 3,623
Accounts receivable, net 226 - - 226
Inventories 85 - - 85
Prepaid expenses 638 - - 638
---------- ---------- ---------- ----------
Total current assets 4,572 - - 4,572
PROPERTY, EQUIPMENT AND
LEASEHOLD IMPROVEMENTS, net 32,127 - - 32,127
EXCESS REORGANIZATION VALUE - - 26,320 26,320
OTHER ASSETS, net 981 - - 981
---------- ---------- ---------- ----------
$ 37,680 $ - $ 26,320 $ 64,000
========== ========== ========== ==========
CURRENT LIABILITIES:
Accounts payable $ 404 $ - $ - $ 404
Accrued expenses 3,953 - - 3,953
Current portion of credit facility - 952 - 952
---------- ---------- ---------- ----------
Total current liabilities 4,357 952 - 5,309
---------- ---------- ---------- ----------
NOTES PAYABLE, net of current portion:
Senior secured notes payable - 50,000 - 50,000
Credit facility - 2,248 - 2,248
Other notes - 2,100 - 2,100
---------- ---------- ---------- ----------
- 54,348 - 54,348
---------- ---------- ---------- ----------
LIABILITIES SUBJECT TO COMPROMISE $ 186,460 $ (186,460) $ - $ -
---------- ---------- ---------- ----------
Total liabilities 190,817 (131,160) - 60,057
---------- ---------- ---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 118 (67) - 51
Warrants issued 7,000 (7,000) - -
Additional paid-in capital 2,162 - 2,130 4,292
Accumulated deficit (162,417) 138,227 24,190 -
---------- ---------- ---------- ----------
Total stockholders' equity (deficit) (153,137) 131,160 26,320 4,343
---------- ---------- ---------- ----------
$ 37,680 $ - $ 26,320 $ 64,000
========== ========== ========== ==========
</TABLE>
Below is a summary of reorganization adjustments and fresh start
reporting adjustments included in the unaudited pro forma consolidated
balance sheet at December 31, 1995.
Reorganization Adjustments:
- Eliminate liabilities subject to compromise. Establish new
secured and unsecured debt and classification between
current and long-term, as appropriate. Recognize gain on
settlement of liabilities subject to compromise, represented
by credit to accumulated deficit.
- Eliminate old HEI (1) preferred stock, (2) common stock,
(3) warrants and (4) additional paid-in capital.
- Record new (1) common stock (5,138,888 shares @ $.01 =
$51,389) and (2) residual amount of additional paid-in
capital of the Reorganized Company based on its estimated
reorganization value.
Fresh Start Reporting Adjustments:
- Record reorganization value in excess of amounts allocable
to identifiable assets and liabilities.
- Record reorganization value of the assets in excess of
liabilities as additional paid-in-capital.
- Eliminate accumulated deficit balance to reflect fresh-start
accounting.
(2) SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the
accounts of HEI and its wholly owned subsidiaries. Intercompany
balances and transactions have been eliminated.
As of December 31, 1994, the accounts of GPRI are consolidated with
those of HEI and its other majority owned subsidiaries. Because of
the pending GPRI Chapter 11 bankruptcy proceedings and Casino America
Agreement, it has been determined that HEI does not "control" GPRI
and, therefore, GPRI no longer meets the consolidation criteria
pursuant to Statement of Financial Standards No. 94, "Consolidation of
All Majority-Owned Subsidiaries." Accordingly, effective January 1,
1995, HEI's investment in GPRI is being accounted for under the equity
method. Under the equity method, original investments and advances
are recorded at cost and adjusted by the Company's share of
undistributed losses of the investee.
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 and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents includes cash in banks, currency located in
the casinos' vaults, coins located in the gaming device hoppers and
other cash used in daily operations. Included in cash and cash
equivalents at December 31, 1994 and 1995, and March 31, 1996 is
restricted cash totaling $618,000, $595,000 and $595,000,
respectively, which represents the portion of cash on hand that is
required to be maintained by the Bullwhackers Casinos based on
regulations promulgated by the Colorado Limited Gaming Control
Commission (the "Colorado Gaming Commission").
The Company considers all highly-liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The
carrying amount of cash equivalents approximates fair value because of
the short-term maturity of those investments.
Inventories
Inventories consist of food and beverage, retail and casino supplies.
Inventories are stated at the lower of cost (first-in, first-out
basis) or market.
Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements are stated at cost.
Depreciation and amortization are computed using the straight-line
method over the estimated useful lives of the assets. Costs of major
improvements are capitalized; costs of normal repairs and maintenance
are charged to expense as incurred.
Other Assets
Other assets consisted of the following (in thousands):
December 31,
------------------------ March 31,
1994 1995 1996
----------- ----------- -----------
(unaudited)
Debt placement costs for
$140 million 11 1/2% Senior
Secured Pay-In-Kind Notes
(net of $1,441,000 of
accumulated amortization
in 1994) $ 7,377 $ - $ -
Dock Board deposit 7,551 - -
Licensing costs 3,271 - -
Other, net 2,780 981 1,040
------- ------- -------
$ 20,979 $ 981 $ 1,040
======= ======= =======
Debt placement costs incurred to obtain the Old Notes were being
amortized over the seven-year term of the Old Notes using the
effective interest rate method. In 1995, all unamortized debt
placement cost were charged-off as reorganization items in accordance
with the provisions of SOP 90-7. The Dock Board deposit represents a
deposit paid by GPRI to the Board of Commissioners of the Port of New
Orleans related to the Riverboat Project. Costs incurred in relation
to formation of GPRI and licensing fees for its initial gaming license
have been capitalized and were being amortized over the five-year term
of the initial Louisiana gaming license beginning in March 1995.
Effective January 1, 1995, as a result of the deconsolidation of GPRI,
the Dock Board deposit and licensing costs were included in the
separate financial statements of GPRI. Accumulated amortization of
other assets as of December 31, 1994 and 1995, and March 31, 1996,
totaled $175,200, $239,400 and $255,400, respectively.
Accrued Expenses
Accrued expenses consisted of the following (in thousands):
December 31,
------------------------ March 31,
1994 1995 1996
----------- ----------- -----------
(unaudited)
Gaming taxes payable $ 541 $ 537 $ 542
Accrued payroll
and related expenses 1,310 1,048 792
Accrued offering costs 200 - -
Accrued gaming liabilities 659 437 655
Reorganization items - 1,202 2,064
Other accruals 1,017 729 1,156
------- ------- -------
$ 3,727 $ 3,953 $ 5,209
======= ======= =======
Casino Revenues and Promotional Allowances
In accordance with industry practice, the Company recognizes as casino
revenues the net win from gaming activities, which is the difference
between gaming wins and losses. The retail value of food and beverage
furnished to customers on a complimentary basis is included in gross
revenues and then deducted as promotional allowances. The estimated
cost of providing such promotional allowances is included in casino
operating expenses in the accompanying consolidated statements of
operations and totaled approximately $251,000, $429,000 and $615,000
for the years ended December 31, 1993, 1994 and 1995, respectively,
and $323,000 and 265,000 for three months ended March 31, 1995 and
1996, respectively.
Predevelopment Expense
Historically, costs incurred during investigation of potential
development projects were capitalized and charged to expense at such
time as management concluded that a development project was no longer
viable. As of December 31, 1994 all costs related to development
projects were expensed as management had determined each of the
related projects were no longer viable development opportunities.
Beginning in 1995, costs related to investigation of new venue
development projects were expensed as incurred.
Pre-opening Expenses
The Company expenses pre-opening costs as incurred. Pre-opening costs
consist of expenditures incurred prior to the opening of the casinos
to prepare the casinos for business and include labor costs, certain
consulting, marketing and other direct costs. Because GPRI was
consolidated in 1994, pre-opening costs of $2.6 million incurred in
1994 in connection with GPRI's riverboat are reflected in the
accompanying 1994 consolidated statement of operations.
Reorganization Items
Reorganization items consist of income, expenses and other costs
directly related to the Chapter 11 reorganization of the Debtor.
Reorganization items consisted of the following (in thousands):
December 31 March 31,
1995, 1996
----------- -----------
(unaudited)
Charge-off of debt discount
and placement costs $ 10,717 $ -
Guarantee of subsidiary debt 4,600 -
Professional fees 2,593 1,068
------- ------
$ 17,910 $ 1,068
======= ======
Net Loss Per Common Share
Net loss per common share and common equivalent share are computed by
dividing net loss by the weighted average number of shares of common
stock and common stock equivalents outstanding during the year. For
all periods presented in the accompanying consolidated statements of
operations, outstanding warrants, options and restricted stock have
been excluded from the calculation of weighted average common and
common equivalent shares outstanding as their impact in net loss per
share would have been antidilutive.
New Authoritative Pronouncements
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," will be adopted by the Company in 1996. The adoption of
this Statement is not expected to have a material impact upon the
Company's results of operations or financial position.
Reclassifications
Certain prior period amounts have been reclassified to conform to the
current year presentation.
Interim Financial Statements
The financial statements as of March 31, 1996, and for the three month
periods ended March 31, 1995 and 1996, are unaudited. In management's
opinion, the unaudited financial statements as of March 31, 1996, and
for the three month periods ended March 31, 1996 and 1995, include all
adjustments necessary for a fair presentation. Such adjustments were
of a normal recurring nature.
(3) RESTRICTED FUNDS IN ESCROW
In connection with the issuance of the $140 million aggregate
principal amount of Old Notes (Note 7), the Company was required to
escrow a portion of the net proceeds to be used to fund a portion of
the Company's expected share of the total cost to develop the
Riverboat Project (Note 6). The Company also escrowed additional net
proceeds used for construction of a surface parking facility (Note
12). Transactions in the escrow account were managed by an
independent trustee and disbursement agent who administered requests
for disbursements pursuant to a Disbursement Agreement, which was a
condition to the issuance of the Old Notes. Total deposits to the
escrow account were $81.7 million in 1993 of which $10.5 million and
$64.8 million had been disbursed as of December 31, 1993 and 1994,
respectively, including $9 million used to repay loans from an
affiliate in 1993 (Note 11) and $15 million which was released to the
Company in 1994 for general working capital upon the occurrence of
certain events as allowed by the Old Notes Indenture. Approximately
$2.5 million of the funds disbursed in 1994 were used for construction
of the surface parking facility. The remaining funds were disbursed
in 1995 for development of the Riverboat Project, including funds for
construction of the riverboat, and the acquisition of property for the
entertainment and dock facility. Funds held in this account served as
collateral for the Old Notes.
(4) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
Property, equipment and leasehold improvements consisted of the
following (in thousands):
December 31,
------------------------ March 31,
1994 1995 1996
----------- ----------- -----------
(unaudited)
Land and improvements $ 14,105 $ 14,330 $ 14,116
Building and improvements 5,722 5,764 5,790
Leasehold improvements 7,699 7,626 7,611
Gaming equipment, furniture
and fixtures 18,204 18,570 17,994
Construction in-progress 33,551 - 407
-------- -------- --------
79,281 46,290 45,918
Less: accumulated
depreciation
and amortization (10,202) (14,163) (14,884)
-------- -------- --------
$ 69,079 $ 32,127 $ 31,034
======== ======== ========
For the year ended December 31, 1994, interest costs totaling $248,000
were capitalized to land and improvements during construction of the
surface parking facility. In addition, interest costs totaling
$1.3 million and $1.8 million were capitalized on construction costs
related to the riverboat in 1993 and 1994, respectively, and are
included in construction in-progress. Construction in-progress at
December 31, 1994 consisted of construction costs related to GPRI's
riverboat. Effective January 1, 1995, these costs are now reflected
in the separate financial statements of GPRI.
Depreciation and amortization are computed using the straight-line
method over the following useful lives:
Useful Lives
------------------
Land improvements 15 years
Building and improvements 5 - 31.5 years
Leasehold improvements 5 - 23 years
Gaming equipment, furniture
and fixtures 5 - 31.5 years
(5) NEW VENUE PROJECTS
For the years ended December 31, 1994 and 1995, the Company expensed
$3.9 million and $402,000, respectively, of predevelopment expenses
related to various potential development opportunities in new gaming
venues throughout North America. The costs incurred represented
design, presentation, research, consulting, regulatory and other costs
associated with pursuing development opportunities in new gaming
venues. The Company expensed these costs as management determined
that each of the potential new gaming venues were no longer viable
development projects. In early 1995, the Company ceased such
activities due to its deteriorating financial condition.
In September 1994, the Company entered into an agreement to invest
$6.2 million for a 25% interest in Promociones e Inversiones de
Guerrero S.A. de C.V. ("PRIGSA"), a Mexico based development and
gaming Company with operations in Acapulco. As of December 31, 1994,
the Company had contributed $5.8 million towards its investment. In
1995, the Company contributed its remaining commitment of
approximately $289,000. The Company had an option to convert its
contributions to shares of common stock in PRIGSA upon approval by the
Mexican government. Results of PRIGSA operations upon opening in the
fall of 1994 were substantially below expectations and, as a result,
PRIGSA suffered significant operating losses. Because the majority of
PRIGSA's other debt securities are in a senior position to PRIGSA's
obligation to the Company, the Company has determined that it is
unlikely that the Company's advances will be repaid or that the
Company will otherwise realize its investment in PRIGSA. Accordingly,
as of December 31, 1994, the Company charged-off the full value of its
investment to impairment of assets in the accompanying consolidated
statements of operations.
(6) INVESTMENT IN AND ADVANCES TO GRAND PALAIS RIVERBOAT, INC.
As discussed in Note 1, GPRI was formed in March 1993 to design,
develop, own and operate a riverboat casino in New Orleans, Louisiana.
In connection with the issuance of the Old Notes, HEI escrowed
$79.2 million of the proceeds of the Old Notes for GPRI's share of the
development costs of the proposed Riverboat Project (Note 3). In June
1994, GPRI and CCCD formed the RCJV to develop the proposed Riverboat
Project. The original budgeted cost for the Riverboat Project was
$196.3 million, exclusive of capitalized interest. Through
December 31, 1994, the Company had invested $64.2 million in GPRI
relating to the construction of the riverboat, licensing, Dock Board
costs and funds invested in RCJV for construction of the entertainment
and dock facility. In addition, in 1994 the Company recorded net
losses of $3.3 million from GPRI, related to pre-opening costs of GPRI
and RCJV, offset by interest income. Amounts relating to GPRI have
been consolidated with HEI and its other subsidiaries in the
accompanying December 31, 1994 consolidated financial statements.
In April 1995, the Riverboat Project budget was revised to
approximately $223.0 million. The increased costs primarily related
to additional construction and design fees on the RCJV entertainment
and dock facility, funds which were spent to accomplish an accelerated
opening, and increased pre-opening costs, including additional
bankroll requirements, insurance costs and outside services for
staffing and operating the riverboats. GPRI intended to fund its
share of these additional costs by deferral of payments, cash flows
from the project and additional equity contributions from HEI and from
CCCD. Upon commencement of operations, revenues derived during the
period of operations of the Riverboat Project were approximately one
third of projected revenues. Accordingly, during the period of
operations (March 29, 1995 to June 6, 1995), GPRI incurred significant
operating losses. As a result of the construction cost overruns and
the failure of the Riverboat Project to generate sufficient revenues
to cover operating costs, GPRI determined it could no longer continue
the operation of its riverboat casino.
As of December 31, 1995, HEI's investment in GPRI had increased to
$73.5 million, primarily related to additional funds contributed in
1995 to cover construction overruns and operating losses. For the
year ended December 31, 1995, GPRI reported a net loss of $71.7
million, including a $20.2 million write-down of GPRI assets to
estimated realizable value and a $44.9 million write-down of its
interest in RCJV and assumption of certain RCJV debts to be paid by
GPRI pursuant to the GPRI Plan in connection with the sale of GPRI to
Casino America, Inc. As a result of the losses of GPRI, including its
write-down of RCJV, the Company's investment in GPRI has been reduced
to zero and no losses were recorded for the three month period ended
March 31, 1996, because such investment has been reduced to zero. As
discussed in Note 1, under the GPRI Plan, HEI will receive no
distribution on account of its current stock ownership in GPRI, and
HEI has also guaranteed $4.6 million of GPRI's debt.
(7) NOTES PAYABLE
Notes payable consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, Pro Forma
--------------------------- March 31, December 31,
1994 1995(1) 1996(1) 1995 (2)
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Senior Secured Pay-In-Kind Notes
(net of unamortized discount of
$5.9 million in 1994) $ 151,982 $ 174,274 $ 174,274 $ 50,000
Credit facility with a bank 13,048 - - 3,200
Notes payable to gaming equipment
vendors 3,793 2,623 2,623 -
Notes payable to RII - 2,122 2,122 -
Other - 4,600 4,600 2,100
--------- --------- --------- ---------
168,823 183,619 183,619 55,300
Less: current portion (14,610) - - (952)
--------- --------- --------- ---------
$ 154,213 $ 183,619 $ 183,619 $ 54,348
--------- --------- --------- ---------
(1) These amounts are included in "liabilities subject to compromise" in the accompanying
December 31, 1995 and March 31, 1996 consolidated balance sheets.
(2) See Note 1 for further information.
</TABLE>
Debtor-in-Possession Financing
On December 8, 1995, the Court approved certain financing and security
agreements (the "DIP Facility") between the Debtor and an unaffiliated
lender (the "DIP Lender") designed to provide the Debtor with adequate
financing to operate its businesses during the bankruptcy period. The
aggregate DIP Facility was $7.9 million in the form of revolving
credit facilities to provide up to $2.5 million for working capital
purposes, $4.4 million for equipment refinancing and $1.0 million to
provide financing for the Debtor's possible acquisition of strategic
assets (Note 12).
Borrowings under the DIP Facility are secured by a first priority lien
and security interest in all of the Debtor's property and equipment,
except for certain "permitted liens" as defined in the DIP Facility
agreements. In addition, borrowings under the DIP Facility constitute
Allowed Superpriority Administrative Expense Claims and, therefore,
have priority over substantially all other administrative expense
claims of the bankruptcy proceedings. The DIP Facility will be repaid
with proceeds from the Exit Financing (see below).
Interest on borrowings under the DIP Facility accrue interest at prime
plus 2.75%. Loan fees and other expenses totaling $300,000 were paid
to the DIP Lender, which amounts are included in other assets in the
accompanying consolidated balance sheets and are being amortized over
the one-year term of the facility.
The term of the DIP Facility is one year subject to an accelerated
maturity on the effective date of confirmation of the proposed Plan.
The Debtor is subject to certain covenants which require, among other
things, that the Debtor maintain certain financial ratios, and that
restrict, among other things, the incurrence of additional debt, the
disposal of assets and capital expenditures. As of December 31, 1995,
and April 11, 1996, there were no outstanding borrowings under the DIP
Facility.
Exit Financing
It is a condition precedent to the effectiveness of the proposed Plan
that the Debtor will have closed on a facility from the DIP Lender to
provide up to a $12.5 million revolving credit facility to the
Reorganized Company to replace the existing DIP Facility. Borrowings
under the revolving credit facility will be used for working capital
purposes, refinancing of existing equipment secured debt and for
construction of a parking structure located near the Bullwhackers
Casino (see Note 12) and adjacent to the proposed Silver Hawk Casino
in Black Hawk, Colorado. Borrowings, including accrued interest at
prime plus 2.375%, would be payable monthly, subject to a maximum
five-year term, and would be secured by a first priority lien and
security interest in substantially all the assets of the Reorganized
Company.
Senior Secured Pay-In-Kind Notes
On December 21, 1993, the Company completed a private offering of
140,000 units consisting of $140 million aggregate principal amount of
the Old Notes with detachable warrants to acquire 1,750,000 shares, or
10%, of common stock of the Company. The warrants were valued by the
Company at $7 million, which amount was offset against the Old Notes
balance and was being amortized as interest costs over the seven-year
term of the Old Notes. The net proceeds from the offering, after
deducting the commissions and other offering expenses were
approximately $131 million. The net proceeds were used to repay
construction financing for the Bullwhackers Casinos and provide funds
for the Riverboat Project and for working capital purposes. The
offering expenses of approximately $9 million, were capitalized as
other assets, and were being amortized over the seven-year term of the
Old Notes using the effective interest rate method. As of
December 31, 1995, all remaining unamortized discount and offering
expenses related to the Old Notes were written-off as a reorganization
item in accordance with SOP 90-7.
Interest on the Old Notes accrued at 12% per annum and was payable
semiannually on June 15 and December 15, commencing June 15, 1994.
Through December 15, 1995, at the Company's option, interest on the
Old Notes was payable either in cash or through the issuance of
additional Old Notes. Thereafter, the Company was required to pay
interest on the Old Notes in cash. On June 15 and December 15, 1994,
the Company made interest payments on the Old Notes by issuing a total
of $17 million of additional Old Notes. On June 15, 1995, the Company
made interest payments on the Old Notes by issuing a total of
$9.4 million of additional Old Notes. No interest payment or issuance
of additional Old Notes was made on December 15, 1995, because of the
Debtor's bankruptcy filing.
The Old Notes were redeemable by the Company, in whole or in part, at
any time beginning December 15, 1996, at certain times and redemption
prices as specified in the Old Notes Indenture. Unless previously
reduced, the Company was required to redeem, at par plus accrued
interest, 20% of the then outstanding aggregate principal amount of
the Old Notes on each of December 15, 1998 and 1999, with the
remainder due in December 2000. To date, no Old Notes have been
redeemed.
The Old Notes were secured by substantially all the assets of the
Company, including the common stock of its subsidiaries, GPRI's joint
venture interest in the RCJV, guarantees of certain of HEI's
subsidiaries, and other personal property. The Company was also
subject to certain covenants which restricted, among other things, the
incurrence of additional debt, payment of dividends, ownership of new
subsidiaries, new business activities, proceeds from the sale of
assets and transactions with affiliates.
As discussed in Note 1, in June 1995, HEI received "Notices of
Defaults" from the trustee of the Old Notes, alleging that HEI was in
default under various provisions of the Indenture. As a result of the
defaults under the Indenture, the holders of the Old Notes are
entitled to all of the remedies contained in the Indenture, including
but not limited to acceleration of repayment of the Old Notes and
foreclosing on the security pledged by the Company to the trustee.
On November 7, 1995, the Debtor filed for Chapter 11 protection.
Accordingly, interest totaling approximately $3 million was not
accrued for the period November 7, 1995 to December 31, 1995.
Additionally, for the three months ended March 31, 1996, interest
totaling $5.2 million was not recorded due to the Chapter 11
proceedings. As of December 31, 1995, the total amount of the Old
Notes, plus accrued interest through November 7, 1995, is $174.3
million which amount is included in "liabilities subject to
compromise" in the accompanying consolidated balance sheets.
The Debtor negotiated with a committee comprised of certain of the
holders of the Old Notes to restructure the Old Notes. Pursuant to
the proposed Plan, the holders of the Old Notes, along with RII, (see
below) will receive, on a pro rata basis, New Senior Secured Notes
("New Notes") having an aggregate principal amount of $50 million and
5 million shares of common stock of the Reorganized Company (Note 8).
Interest will accrue at a rate of 12% per annum, and is payable semi-
annually. Through the first year, at the option of the Reorganized
Company, interest on the New Notes will be payable either in cash or
through the issuance of additional New Notes. Thereafter, the
Reorganized Company will be required to pay interest on the New Notes
in cash. The New Notes will be secured by substantially all the
assets of the Reorganized Company, including the common stock of the
subsidiaries. The New Notes will be redeemable after the fourth
anniversary at redemption prices to be set forth in the New Notes
Indenture subject to final maturity in 2003. In addition, the New
Notes Indenture will include certain restrictive covenants.
Other Borrowings
On May 15, 1995, HEI entered into a $4 million working capital credit
facility with RII. HEI borrowed $2 million under this facility, which
proceeds were then invested in GPRI. Borrowings accrued interest at
12% and were due on September 30, 1995. The Company granted a
security interest to RII in certain of the Company's assets including
a subordinated interest in GPRI's riverboat. HEI was unable to repay
the $2 million and thus is in default under the RII facility.
Interest totaling $35,000 was not accrued from the petition date,
November 7, 1995 to December 31, 1995. Additionally, for the three
months ended March 31, 1996, interest totaling $60,000 was not
recorded due to the Chapter 11 proceedings. The $2 million, plus
accrued and unpaid interest through November 7, 1995 totaling
$2.1 million, is included in "liabilities subject to compromise" in
the accompanying consolidated balance sheet as of December 31, 1995.
Pursuant to the proposed Plan, RII will receive New Notes and shares
of common stock of the Reorganized Company as discussed above.
In 1994, GPRI obtained a credit facility from a Bank in the amount of
$15 million to fund a portion of the riverboat casino construction.
As of December 31, 1994, GPRI had borrowed $13.0 million under this
facility. Borrowings accrued interest at prime plus 1% and matured on
April 24, 1995 and accordingly, were reflected as a current note
payable in the accompanying December 31, 1994 consolidated balance
sheet. Effective January 1, 1995, as a result of the de-consolidation
of GPRI, borrowings under this credit facility are no longer recorded
in the consolidated balance sheets and are recorded in the separate
financial statements of GPRI. BWBH, Inc. and BWCC, Inc. are
guarantors under this credit facility and, accordingly, the Bank has
filed a claim in the bankruptcy proceedings of the Debtor. However,
the Bank's claims are expected to be satisfied in accordance with the
proposed GPRI Plan (note 13).
During 1991 and 1992, RII made acquisition, development and
construction loans to the Company totaling $24.3 million ("RII Notes")
for the Bullwhackers Casinos. The original maturity date of the RII
Notes was October 31, 1996. The RII Notes were repaid with proceeds
from the Old Notes in December 1993. Prior to repayment, interest on
the RII Notes accrued at 14.5% and was payable quarterly. Upon
prepayment, RII received bonus interest totaling $700,000 in
accordance with the terms of the RII Notes. To obtain the financing,
the Company paid RII loan fees totaling $729,000. The unamortized
balance of these loan fees upon repayment, totaling $457,800, was
written off as interest expense in 1993.
In May 1992, the Company signed a note agreement with its construction
contractor for payment of outstanding construction costs related to
the Bullwhackers Casinos. The note, as modified in 1993, required
monthly interest payments at prime plus 2%, with maturity in December
1994. This note was repaid with proceeds from the Old Notes in
December 1993.
The Company financed a portion of the purchase price of the land on
which the Bullwhackers Casino in Central City, Colorado is located
with a purchase money note payable to the seller. The note required
monthly payments of principal and interest of $108,100 (at 10%)
through its October 1994 maturity date. This note was repaid with
proceeds from the Old Notes in December 1993.
The Company financed the acquisition of a portion of the Bullwhackers
Casinos' gaming equipment with notes payable to an equipment vendor
totaling $7.0 million. Such notes are secured by the gaming equipment
and the proceeds from the gaming equipment and are guaranteed by
certain of the HEI's stockholders. In April 1993, the terms of the
notes payable were modified. Beginning April 1993, the then
outstanding principal balance and accrued interest were combined and
began accruing interest at a fixed rate of 9.5%. Monthly principal
and interest payments of $151,000 were required through April 1997.
As of the petition date, November 7, 1995, the Company stopped
accruing interest, totaling $37,940, for the period from November 7,
1995 to December 31, 1995, and making any repayments on these notes.
Subsequent to yearend, the Company reached an agreement with the
lender to repay the $2.6 million outstanding balance on the notes for
approximately $2.0 million with proceeds from the DIP Facility
realizing a 20% discount for retiring the notes (note 13).
(8) CAPITAL STRUCTURE
Capital Structure After Consummation of the Proposed Plan
The proposed Plan provides for the amendment and restatement of the
Company's certificate of incorporation and bylaws. The new charter
will authorize 20 million shares of $.01 par value common stock. The
holders of the Old Notes and RII (Note 1) will receive 5 million
shares of common stock, representing 100% of the outstanding shares of
common stock subject to being diluted to 90% by certain stock grants
to be issued to senior management employees and non-employee directors
of the Reorganized Company pursuant to a proposed Management Incentive
Program and under an employment agreement with the chief executive
officer of the Reorganized Company.
Capital Structure Prior to the Consummation of the Plan
Preferred Stock
Preferred stock of the Company consists of 2 million authorized
shares, of which none has been issued.
Common Stock
Common stock of the Company consists of 50 million authorized shares.
All common stock will be canceled under the Plan (Note 1). In 1993,
10,269,641 were issued pursuant to the restructuring (Note 1). In
addition, warrants to purchase a total of 7,130,359 shares of common
stock were issued in connection with the restructuring (2,399,373
shares), the issuance of the Old Notes (1,750,000 shares) (Note 7) and
the loan from an affiliate (2,980,986 shares) (Note 11). The warrants
are immediately exercisable at a price of $.01.
The warrants to acquire 2,399,373 shares of common stock of the
Company were issued to certain individuals having ownership rights in
the predecessors to the Company. These warrants were assigned a
nominal value because these individuals acquired such rights in
connection with the formation of the predecessor companies at either
nominal or no cost. A consultant to the Company in connection with
the Company's Riverboat Project received 1,605,739 of such warrants in
exchange for his right to receive ownership in the predecessor
companies. In 1994, 421,854 shares of common stock were converted
into warrants to acquire 421,854 shares of common stock as a result of
transfers to this consultant from an existing shareholder. In 1995,
certain warrants were converted into 1,849,781 shares of common stock.
The Company adopted an "Omnibus Stock and Incentive Plan" (the "Stock
Plan") in December 1993. A maximum of 1,000,000 shares were reserved
for issuance under the Stock Plan. The Stock Plan was to terminate
five years from the date of its adoption, unless sooner terminated by
the Board of Directors. In 1993 the Company granted a total of
130,000 shares of restricted shares to officers of the Company and a
consultant. In 1994, 28,000 shares of Restricted Stock were
forfeited. In 1994 the Company granted 60,000 ISO's to a former
officer to purchase shares of common stock of the Company at an
exercise price of $4.00 per share. The options vest equally over
three years with the first vesting date on April 1, 1995. In 1995 the
Company granted 85,000 restricted shares and 85,000 options, at an
exercise price of $4.00 per share, to a current officer of the
Company. Both the options and restricted stock shares vest equally
over a three year period. All grants under the Stock Plan will be
forfeited as a result of the proposed Plan (Note 1). The Company
recognized compensation expense of $169,000 in 1995 related to the
vesting of the restricted shares. No additional compensation expense
was recognized after November 7, 1995.
Warrants Issued
Warrants issued includes $7 million of value assigned to the Old Notes
warrants (Note 7) and, in 1994, $1.3 million of value assigned to the
GPRI warrants (Note 11). The Company has warrants outstanding to
purchase 5,702,432 shares of common stock at a nominal exercise price.
Subject to obtaining any necessary gaming approvals, the warrants may
be exercisable any time after their issuance. Prior to the exercise
of the warrants, holders of warrants are not entitled to any of the
rights of a holder of the Company's common stock, including the right
to vote or to receive dividends. All warrants will be extinguished
and canceled under the proposed Plan (Note 1).
Non-Employee Director Stock Option Plan
The Company has also adopted the "Non-Employee Director Stock Option
Plan." Only non-employee directors are eligible to participate in the
Non-Employee Director Stock Option Plan. A total of 100,000 shares of
common stock are authorized and reserved for issuance under the Non-
Employee Director Stock Option Plan.
A total of 20,000 options have been granted and vested to five non-
employee directors at an exercise price of $4.00 per share. All
grants under the Non-Employee Director Stock Option Plan will be
extinguished and canceled under the Plan.
(9) INCOME TAXES
The Company has no provision for income taxes in 1994 or 1995 nor for
the three months ended March 31, 1996, due to the Company's
significant loss position. Prior to December 21, 1993 or the
formation of the Company, taxes were not provided on the predecessor
entities because all tax obligations of those entities passed through
to the owners of those entities.
The Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"), in December 1993.
SFAS 109 requires recognition of deferred tax assets and liabilities
based on enacted tax laws for any temporary differences between the
financial reporting and tax basis of assets, liabilities and
carryforwards. Deferred taxes are then reduced, if deemed necessary,
by a valuation allowance for the amount of any tax benefits which,
based on management's opinion, are not expected to be realized. The
net deferred tax asset as of December 31, 1994 and 1995 is comprised
of the following:
December 31
-----------------------
1994 1995
--------- ---------
(in thousands)
CURRENT:
Accrued vacation and
gaming liabilities $ 356 $ 184
NON-CURRENT:
Differences in asset basis 3,478 3,053
Start up costs/intangibles
capitalized for tax 1,967 -
Impairment of assets 3,164 5,832
Reorganization items - 4,287
Deferred interest for tax 404 404
Book tax difference of RCJV - 8,646
Net operating loss carryforwards 7,899 41,148
-------- --------
Net deferred tax asset 16,864 63,554
Valuation allowance (16,864) (63,554)
-------- --------
$ - $ -
======== ========
The net deferred tax asset valuation allowance is equal to the full
amount of the net deferred tax asset because the realization of such
asset is dependent upon future taxable income, which is uncertain.
The Company currently has net operating loss carryforwards totaling
approximately $103 million, which expire beginning in 2008. These net
operating loss carryforwards do not include the separate company net
operating loss generated by GPRI in 1995.
Generally, the Company anticipates that the reorganization will allow
the Company to produce income from operations and potentially taxable
income and net income for financial reporting purposes. Since its
inception, the Company has generated significant net operating loss
carryforwards for tax purposes, which, in the absence of the Company's
bankruptcy, would have been available to offset any taxable income
earned in the future. As a result of the consummation of the proposed
Plan, the Company may undergo a substantial change in ownership and
incur significant forgiveness of indebtedness income. Additionally, a
significant portion of the tax assets includes tax losses of GPRI. If
GPRI is unable to reattribute those losses to HEI, then those assets
will be transferred to Casino America in connection with the sale of
GPRI stock to Casino America. If HEI is unable to attain such assets
the debt forgiveness income and the potential ownership change may
significantly limit or eliminate the Company's net operating loss
carryforwards and other tax benefits. Fresh start accounting requires
the Company to significantly increase the book basis of its assets,
the tax basis of those assets generally remain at their historical
basis. Therefore, given the potential limitation or elimination of
the Company's net operating loss carryforwards and the increased book
depreciation and amortization charges, the Company may have taxable
income in the future, and, therefore, may be required to pay income
taxes, even though it may record a loss for financial reporting
purposes.
(10) LEASES
Capital Leases
On March 1, 1993, the Company entered into a Master Lease Agreement
with Capital Associates International, Inc. ("CAI") for lease
financing totaling $2.2 million to provide working capital. Certain
of the Company's equipment was pledged as security for the borrowings.
The Debtor, and certain of HEI's stockholders also guaranteed
repayment of the borrowings. In 1995, the Master Lease Agreement was
amended to provide $2.8 million in additional lease financing to be
used for the Riverboat Project and to be repaid by GPRI. The
financing has been treated as a capital lease in the separate
financial statements of the Company and of GPRI.
As a result of the termination of Riverboat Project operations, GPRI
was unable to make its required payments under the lease.
Accordingly, CAI initiated a lawsuit against the Company (Note 12) to
recover all amounts owing under the Master Lease, as amended ("Lawsuit
#1"). The finance company initiated a second lawsuit against the
Company and certain of its officers alleging that the finance company
was misled into entering into the amendment to the Master Lease
Agreement ("Lawsuit #2"). In September 1995, a judgment was entered
against the Company in Lawsuit #1 for $4.6 million, which judgment has
been appealed by the Company. This amount is reflected as a liability
subject to compromise in the accompanying consolidated balance sheets.
In February 1996, the parties to the two lawsuits entered into a
settlement agreement which seeks to resolve the disputes. Pursuant to
the settlement agreement, both lawsuits will be dismissed and the
Reorganized Company will issue two notes payable to CAI. The first
note will be in the amount of $1.6 million, payable in 10 quarterly
installments of principal and interest (at 9% per annum) and will be
unsecured. The second note will be in the amount of $3.0 million,
payable in 20 quarterly installments of principal and interest (at 9%
per annum) and will be unsecured. Payments on each note will begin 90
days after the effective date of confirmation of the proposed Plan.
The settlement agreement further provides that if the finance company
receives any distributions (as defined) from its claims in the GPRI
bankruptcy, or if Casino America, Inc. agrees to assume any or all of
the finance company liability, then such amounts will serve to reduce
the amounts payable under the $3.0 million note first, then the
$1.6 million note (note 13). The terms of the settlement agreement
must be approved by the Court.
The Company also has capital lease obligations related to gaming
devices and certain other equipment totaling $1.6 million. The
interest rate for the various leases range from 12% to 15%. As a
result of the bankruptcy proceedings, all capital lease obligations
have been reclassified as "liabilities subject to compromise" in the
accompanying consolidated balance sheets. Subsequent to yearend, an
agreement was reached with such lessors to retire the remaining lease
obligation for approximately $1.2 million.
Operating Leases
The Company leases real property, on which the Bullwhackers Casino in
Black Hawk, Colorado, was constructed. The lease is for a period
through 2015 and requires an annual base rent as specified below,
payable quarterly.
The land lease also requires monthly payments of additional rent equal
to 1.9% of gross revenues, as defined. Total base rent plus additional
rent pursuant to the lease agreement for the years ended December 31,
1993, 1994 and 1995 and the three months ended March 31, 1995 and 1996
was $986,000, $1.1 million, $1.1 million, $291,000 and $302,000,
respectively. In addition to the specified rental payments, the
Company is also responsible for any and all costs associated with the
leased property, including but not limited to taxes and assessments,
utilities, insurance, maintenance and repairs. The Company has an
option to purchase the leased land, beginning November 1, 2001, for an
amount equal to nine times the annual base minimum rent payment then
in effect.
Future annual base rental payments for the land lease as of December
31, 1995 are as follows:
Year ending December 31 (in thousands)--
1996 $ 600
1997 600
1998 600
1999 600
2000 600
Thereafter 10,070
-------
Total $ 13,070
=======
Beginning in September 1994, the Company entered into an approximate
seven year lease for office space. The lease agreement requires
monthly payments of approximately $23,300.
As a result of the bankruptcy proceedings, the Debtor may reject
certain leases under the provisions of the Bankruptcy Code. The
Reorganized Company anticipates ratifying the Black Hawk land lease.
However, the Debtor has renegotiated the terms of its office space.
Under the revised lease terms, which were approved by the Court, the
Reorganized Company will surrender its $200,000 security deposit to
the landlord and pay monthly rent of $7,500 through October 1997, at
which time the lease will terminate.
(11) OTHER RELATED PARTY TRANSACTIONS
Due from Affiliates
The Company has outstanding advances to the following affiliates
(in thousands):
December 31,
------------------------ March 31,
1994 1995 1996
----------- ----------- -----------
(unaudited)
Canadian Pavilion
Limited Partnership $1,323 $1,573 $1,573
Outlaws Casino, Ltd. 876 1,072 1,072
RCJV 763 43 43
RCH Investments, NV 250 259 259
Hemmeter Partners 344 335 335
Grand Palais Casino, Inc. 557 587 587
Officers 585 867 867
Other 62 35 35
----- ----- -----
$4,760 $4,771 $4,771
===== ===== =====
Canadian Pavilion Limited Partnership ("CPLP"), Outlaws Casino, Ltd.
("Outlaws"), RCH Investments, NV ("RCH") and Hemmeter Partners are
majority owned by certain of the current controlling shareholders and
officers of HEI. The advances to CPLP, Outlaws, RCH, and Hemmeter
Partners accrue interest at 14% with interest payable quarterly, and
are due on demand. Grand Palais Casino, Inc. ("GPCI") is a wholly
owned subsidiary of Grand Palais Enterprises, Inc. ("GPEI"), of which
certain stockholders are also current stockholders of HEI. This
advance accrues interest at 14% and is due on demand. In July 1994,
Kevin G. DeSanetis, then Executive Vice President and Chief Operations
Officer received a $225,000 advance in accordance with the terms of
his employment agreement of which none has been repaid. In September
1994, Christopher B. Hemmeter, the President and Chief Executive
Officer was advanced funds totaling $275,000, accruing interest at
prime plus 2%, and due on demand. In January 1995, an additional
$373,000 was advanced to Mr. Hemmeter on an interest free basis, of
which $110,000 has been repaid. As of December 31, 1995 and March 31,
1996, the outstanding advances to Mr. Hemmeter totaled $641,000. All
advances to affiliates were made on an unsecured basis.
In 1994, the Company established a reserve of $1 million for certain
affiliate receivables that management believed may not be collectible.
Because of the continued deterioration in 1995 of the financial
condition of the affiliates and certain officers to which the Company
has advanced funds, the Company has determined that it is unlikely
that it will collect any of the advances to affiliates and,
accordingly, has provided an additional reserve of $3.9 million for
the remainder of the amounts owed the Company. These amounts are
reflected as impairment of assets in the accompanying consolidated
statements of operations. The Company continues to pursue collection
of the advances to affiliates.
Consulting Agreement
GPRI was party to a consulting agreement whereby the consultant was
entitled to receive an initial consultation fee and a supplemental $3
million fee in exchange for the consultant's assistance in obtaining
necessary licensing and other regulatory approvals with respect to the
Riverboat Project. In addition, the consultant was paid an initial
consultation fee of $2.8 million for his services with respect to the
Riverboat Project and GPCI project. Of this amount, 10% or $280,000,
was allocated to the Company based on relative estimates of the
potential value of the Riverboat Project and GPCI project. This
amount is included in other assets in the accompanying consolidated
balance sheet as of December 31, 1994. As a result of the
deconsolidation of GPRI, these amounts are now reflected in the
separate financial statements of GPRI. This consultant has initiated
a lawsuit against the Company as described further in Note 12.
Transactions with GPCI
In 1992 and 1993, GPCI completed private offerings of senior secured
exchangeable notes. Certain of HEI's majority stockholders are also
stockholders and warrant holders, including Christopher B. Hemmeter
and Daniel Robinowitz of GPCI's parent company, GPEI. In September
1993, $7.5 million of the net proceeds of GPCI's private offering were
loaned to GPRI. The loan was evidenced by a demand note payable to
GPCI and accrued interest at 12%. The loan was repaid with proceeds
from the Old Notes (Note 7). As additional consideration, the GPCI
noteholders were to be issued warrants to purchase one share of GPRI's
common stock per warrant for $.01 (the "GPRI Warrants"). In
connection with the formation of the Company, the GPCI noteholders
were issued warrants to purchase 2,980,986 shares of common stock of
the Company. These warrants were valued at $1.3 million, which amount
was offset against the $7.5 million demand note and amortized as
interest costs. The $1.3 million of interest costs were then
capitalized as part of construction in-progress (Note 4) in the
accompanying consolidated balance sheet as of December 31, 1994. As a
result of deconsolidation of GPRI in 1995, these amounts are now
reflected in the separate financial statements of GPRI.
During 1993, GPCI had advanced other funds to GPRI. The advances
totaled $2.2 million, accrued interest at 12% and were unsecured.
Proceeds from the Old Notes were used to repay $1.7 million of the
advances in 1993. The remaining $490,000 was repaid in the first
quarter of 1994. The Company advanced GPCI an additional $556,500 and
$30,000 in 1994 and 1995, respectively, which is included in due to
affiliates in the accompanying consolidated balance sheets. As of
December 31, 1995, all outstanding amounts have been reserved as
uncollectable due to the bankruptcy filing of Harrah's Jazz Company,
of which GPCI is a one-third equity partner.
Other
Hemmeter Partners, an affiliate of Christopher B. Hemmeter, leased an
aircraft that Mr. Hemmeter used for business and personal purposes.
In exchange for Mr. Hemmeter making the aircraft available to the
Company for business purposes, the Company agreed to pay Mr.
Hemmeter's affiliate approximately $100,000 per month and to pay the
salary and benefits of the aircraft pilot and co-pilot, which totaled
approximately $125,000 per year. Direct payments to Hemmeter Partners
totaled $1.5 million and $420,000 for 1994 and 1995, respectively.
Payments made by the Company with respect to the aircraft represent
the Company's pro rata share of the costs and expenses associated with
the aircraft and are adjusted based on actual use of the aircraft.
The Company ceased using the aircraft and terminated this arrangement
as of May 1995.
The Company paid $1.5 million, $1.3 million and $624,000 to the law
firm of Shefsky Froelich & Devine Ltd. for legal services rendered to
the Company in 1993, 1994 and 1995, respectively. Cezar M. Froelich,
a director owns 1.4% of the Company on a fully diluted basis, is a
member of that firm. Shefsky Froelich & Devine Ltd. provided legal
services to the Company until February 9, 1996. Any further payments
to Shefsky Froelich & Devine Ltd., are subject to Bankruptcy Court
approval.
Christopher B. Hemmeter received no compensation for acting as Chief
Executive Officer in 1993. The value of these services provided by Mr.
Hemmeter was not material.
(12) COMMITMENTS AND CONTINGENCIES
Gaming Licenses
The Bullwhackers Casinos are required to comply with laws and
regulations promulgated by the Colorado Gaming Commission in order to
maintain continued operations. The Bullwhackers Casinos operate under
separate current annual gaming licenses which expire in December 1996.
Management anticipates that such gaming licenses will be renewed.
Gaming Taxes and Fees
The Bullwhackers Casinos operate as licensed gaming establishments
pursuant to the Colorado Limited Gaming Act and, accordingly, are
required to make monthly gaming tax payments to the State of Colorado
which are subject to annual revisions with a maximum rate of 40%.
Such tax is calculated as a percentage of adjusted gross proceeds
(casino net win).
Gross Proceeds Tax Rate
------------------------- ----------
First $2 million 2%
Next $2 million 8%
Next $1 million 15%
Proceeds over $5 million 18%
Additionally, the city and state levy device fees ranging from $75 to
$1,265 per annum. For the years ended December 31, 1993, 1994 and
1995 and the three months ended March 31, 1995 and 1996, the Company
recorded $7.7 million, $8.2 million and $8.3 million, and $2.2 million
and $2.0 million, respectively, in total gaming taxes and device fees.
Black Hawk Parking Facility
The Company acquired a land parcel on which it constructed a 260 stall
surface parking facility. As part of the land development, the
Company agreed to conduct environmental remediation of the land parcel
pursuant to an Administrative Order on Consent with the Environmental
Protection Agency ("EPA") and the State of Colorado Department of
Health. The Company expended approximately $1.8 million for this
remediation work in 1994. The cost of the remediation was anticipated
and provided for from the net proceeds of the Old Notes and has been
capitalized as part of the land acquisition as incurred because the
work was necessary to prepare the property for its intended use.
Possible additional remediation costs are estimated at approximately
$1 million. However, the Company believes, based on consultations
with various governmental agencies and correspondence with the EPA,
that the likelihood of the EPA or other regulatory agencies requiring
this further remediation is remote.
The City of Black Hawk assesses each casino which provides off-site
parking to its patrons, a $4 per day per stall parking fee, which is
included in casino expense. The Company anticipates that upon
commencement of operations of the proposed Silver Hawk Casino (see
below), the parking fee will terminate.
Legal Proceedings
In September 1995, Daniel P. Robinowitz, a pre-effective date
stockholder of the Company (Note 11), filed a stockholders derivative
action against the directors of the Company in the United States
District Court for the Eastern District of Louisiana (the "Robinowitz
Derivative Action"). The complaint alleges in general that the
Company, through its board of directors, mismanaged the affairs of the
Company. Because the Company filed bankruptcy prior to any responsive
pleadings being filed, no activity has occurred in this case. The
Company appointed its chief executive officer to serve as a special
litigation committee for the board of directors of the Company and he
retained independent counsel in October 1995 to investigate the
allegations raised by the complaint.
Pursuant to the proposed Plan, certain claims by the Company against
third parties, including the Robinowitz Derivative Action, are
assigned to the Litigation Trust. All legal proceedings pending
against the Company or its Colorado subsidiaries prior to the
effective date of the proposed Plan will be settled pursuant to the
proposed Plan. As a result, there will be no litigation pending
against the Reorganized Company or its Colorado subsidiaries on the
effective date of the proposed Plan. The determination by the
Litigation Trust whether or not to pursue any causes of action
assigned to it will have no material impact on the Reorganized Company
or the Colorado subsidiaries.
The proposed Plan provides that the Company's obligation to indemnify
certain of its officers against any claims asserted against them as a
result of their service as employees of the Company, both before and
after the commencement of the Debtor's bankruptcy cases, will not be
affected by the Debtor's bankruptcy cases and that the Company will
assume any obligations of GPRI to indemnify the two officers discussed
above against claims arising as a result of their service with GPRI.
The proposed Plan also provides that the officers will be released
from any liability in respect of causes of action assigned to the
Litigation Trust.
The proposed Plan also provides that the Company's obligations to
indemnify its other officers and employees, other than Christopher B.
Hemmeter and Mark M. Hemmeter (collectively, the "Hemmeters"), against
claims against them as a result of their service with the Company
after the commencement of the Debtor's bankruptcy cases will not be
affected by the Debtor's bankruptcy cases and that the Company will
assume any similar indemnity obligations of GPRI.
The proposed Plan also requires the Company to indemnify its pre-
effective date directors other than the Hemmeters (the "Independent
Directors") against any claim asserted against them as a result of
their service as directors of the Company if the final report of the
Independent Litigation Counsel indicates that there is no basis for
pursuing any of the potential claims against them reviewed by the
Independent Litigation Counsel. The Company's maximum indemnity
obligation for all of the Independent Directors is capped at $500,000
in the aggregate. Although the Company has no direct indemnity
obligations with respect to claims against the Hemmeters, if a claim
is asserted against both the Independent Directors and the Hemmeters,
the Hemmeters will be entitled to be represented by the counsel
representing the Independent Directors at the expense of the Company
to the extent that the claims are based on the Hemmeters' actions as
directors of the Company.
The Company's management believes that the ultimate resolution of all
legal proceedings will not have a material adverse impact on the
Company's financial position or results of operations.
(13) EVENTS SUBSEQUENT TO THE DATE OF
THE AUDITORS' REPORT (Unaudited)
GPRI Plan
On May 3, 1996, the Company closed on the sale of its stock ownership
in GPRI to Casino America, thus signifying the effectiveness of GPRI's
Plan. The aggregate consideration paid by Casino America totaled
approximately $59 million. All proceeds from the sale will be
distributed to the creditors of GPRI, including the holders of the
Company's Old Notes, pursuant to the GPRI Plan. Part of the
consideration given by Casino America was the assumption of $2.5
million of the CAI $3 million note. Accordingly, the Company is only
obligated for the remaining $500,000. Additionally, the effectiveness
of the GPRI Plan released the Company and all of its remaining
subsidiaries from any obligations to GPRI, RCJV, and their creditors.
Silver Hawk Acquisition
On March 27, 1996, Silver Hawk Casino, Inc. ("Silver Hawk") was
incorporated in Delaware as a wholly owned subsidiary of Hemmeter
Enterprises, Inc., for purposes of acquiring and operating a limited
stakes casino in Black Hawk, Colorado. On April 12, 1996, Silver Hawk
closed on the purchase of a non-operated casino located adjacent to
the Company's Black Hawk parking facility. The purchase price was
approximately $2.7 million, of which $900,000 was paid in cash
borrowed under the DIP Facility and the remaining $1.8 million by the
issuance of a promissory note from the seller. The promissory note
requires monthly principal and interest payments at a rate of 9.5% per
annum, based on a twenty-year amortization period, with a balloon
payment after seven years. The note is secured by a first deed of
trust on the purchased property. Additionally, the Company intends to
invest up to an estimated $2.0 million to equip and prepare the Silver
Hawk for opening. The Company expects to commence gaming operations
in July 1996.
Equipment Refinancing
On April 12, 1996, the Company refinanced equipment with an
outstanding debt balance of approximately $2.6 million for
approximately $2.0 million. The Company realized a $516,000
extraordinary gain for the early retirement of the existing debt. The
debt was refinanced with proceeds from the DIP Facility.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To
Grand Palais Riverboat, Inc.:
We have audited the accompanying statement of net assets in
liquidation of Grand Palais Riverboat, Inc. (a Louisiana corporation
and a wholly owned subsidiary of Hemmeter Enterprises, Inc.) as of
December 31, 1995. We have also audited the accompanying balance
sheet of Grand Palais Riverboat, Inc. as of December 31, 1994 and the
related statements of operations, stockholder's equity and cash flows
for each of the two years ended December 31, 1995 and 1994 and for the
period from inception (March 29, 1993) through December 31, 1993.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 1, during 1995, the Company terminated its
operations and filed a voluntary petition under Chapter 11 of the
Federal Bankruptcy Code. The Plan of reorganization, which was
approved by the U.S. Bankruptcy Court on March 29, 1996, provides for
settlement of all claims and liabilities of the Company and sale of
one hundred percent of the reorganized company to an unrelated party.
As a result, effective December 31, 1995, the Company adopted the
liquidation basis of accounting. Accordingly, the carrying values of
the remaining assets as of December 31, 1995, are presented at
estimated realizable values and all liabilities are presented at
estimated settlement amounts.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets in liquidation of
Grand Palais Riverboat, Inc. as of December 31, 1995 and the financial
position of Grand Palais Riverboat, Inc. as of December 31, 1994, and
the results of its operations and cash flows for each of the two years
ended December 31, 1995 and 1994 and for the period from March 29,
1993 (date of inception) through December 31, 1993, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana,
April 11, 1996.
GRAND PALAIS RIVERBOAT, INC.
(DEBTOR-IN-POSSESSION)
STATEMENT OF NET ASSETS IN LIQUIDATION
AS OF DECEMBER 31, 1995
(in thousands)
ASSETS
Assets held for sale $ 58,864
LIABILITIES
CURRENT LIABILITIES:
Accounts payable and accrued liabilities 1,100
Debtor-in-possession financing 1,488
-------
Total current liabilities 2,588
LIABILITIES NOT SUBJECT TO COMPROMISE 1,025
LIABILITIES SUBJECT TO COMPROMISE 55,493
-------
Total liabilities 59,106
-------
NET ASSETS $ (242)
=======
The accompanying notes are an integral part of this statement.
GRAND PALAIS RIVERBOAT, INC.
(DEBTOR-IN-POSSESSION)
BALANCE SHEET
AS OF DECEMBER 31, 1994
(in thousands, except share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,334
Due from affiliates 823
Deposits 1,012
Prepaid expenses and other 102
-------
Total current assets 4,271
PROPERTY AND EQUIPMENT, net 31,861
INVESTMENT IN RIVER CITY JOINT VENTURE 18,010
RESTRICTED FUNDS IN ESCROW 14,440
OTHER ASSETS, net 11,334
-------
$ 79,916
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Due to affiliates $ 2,683
Note payable to a bank 13,048
Accounts payable and accrued liabilities 1,953
-------
Total current liabilities 17,684
-------
COMMITMENTS AND CONTINGENCIES (see Notes)
STOCKHOLDER'S EQUITY:
Common stock, no par value, 1,000 shares
authorized, 100 shares issued and
outstanding -
Additional paid-in capital 65,466
Accumulated deficit (3,234)
-------
Total stockholder's equity 62,232
-------
$ 79,916
=======
The accompanying notes are an integral part of this balance sheet.
GRAND PALAIS RIVERBOAT, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF OPERATIONS
(in thousands)
Period from
Inception
(March 29, Years Ended
1993) to December 31,
December 31, --------------------------
1993 1994 1995
------------ ------------ ------------
REVENUES:
Casino $ - $ - $ 9,452
Food and beverage and other - - 327
-------- -------- --------
Gross revenues - - 9,779
Less: promotional allowances - - (344)
-------- -------- --------
Net revenues - - 9,435
-------- -------- --------
OPERATING EXPENSES:
Casino - - 5,918
Gaming taxes and other - - 3,090
Pre-opening - 2,594 2,479
Depreciation and amortization - - 1,699
Vessel operations and other - - 2,320
Joint venture expenses - 2,324 44,945
Reorganization items - - 20,169
-------- -------- --------
Total operating expenses - 4,918 80,620
-------- -------- --------
LOSS FROM OPERATIONS - (4,918) (71,185)
OTHER INCOME (EXPENSE):
Interest income 41 1,643 109
Interest expense - - (668)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 41 (3,275) (71,744)
Provision for income taxes - - -
-------- -------- --------
NET INCOME (LOSS) $ 41 $ (3,275) $ (71,744)
======== ======== ========
The accompanying notes are an integral part of these statements.
<TABLE>
GRAND PALAIS RIVERBOAT, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM INCEPTION (MARCH 29, 1993) TO DECEMBER 31, 1993
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(in thousands, except number of shares)
<CAPTION>
Common Stock Additional Accumulated
------------------------- Paid-in Earnings
Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCEPTION, March 29, 1993 - $ - $ - $ - $ -
Issuance of common stock 100 - - - -
Capital contributions from parent - - 79,200 - 79,200
Issuance of warrants to purchase common
stock of parent - - 1,266 - 1,266
Net income during development stage - - - 41 41
--- -------- -------- -------- --------
BALANCES, December 31, 1993 100 - 80,466 41 80,507
Distribution to parent - - (15,000) - (15,000)
Net loss during development stage - - - (3,275) (3,275)
--- -------- -------- -------- --------
BALANCES, December 31, 1994 100 - 65,466 (3,234) 62,232
Capital contributions from parent - - 9,270 - 9,270
Net loss - - - (71,744) (71,744)
--- -------- -------- -------- --------
BALANCES, December 31, 1995 (Before adoption
of liquidation basis of accounting) 100 $ - $ 74,736 $(74,978) $ (242)
=== ======== ======== -------- ========
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
GRAND PALAIS RIVERBOAT, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Period from
Inception
(March 29, Years Ended
1993) to December 31,
December 31, --------------------------
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 41 $ (3,275) $ (71,744)
--------- --------- ---------
Adjustments to reconcile net income (loss)
to net cash provided by development
stage and operating activities-
Depreciation and amortization - - 1,699
Joint venture expenses - 2,324 44,945
Reorganization items - - 20,169
Increase in prepaid expenses and other - (103) (18)
Increase in accounts payable, accrued
liabilities and liabilities subject
to compromise - 1,953 10,868
--------- --------- ---------
Total adjustments - 4,174 77,662
--------- --------- ---------
Net cash provided by development
stage and operating activities 41 899 5,918
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net restricted funds (placed in) disbursed
form escrow (68,700) 54,260 14,440
Expenditures for predevelopment costs (11,288) (3,305) -
Purchases of property and equipment - (28,466) (10,359)
Investment in joint venture - (20,215) (16,527)
(Increase) decrease in affiliate advances 751 1,109 (6,392)
--------- --------- ---------
Net cash (used in) provided by investing
activities (79,237) (3,383) (18,838)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 7,551 13,048 32
Principal payments on notes payable (7,551) - (200)
Proceeds from debtor-in-possession financing - - 1,484
Capital contributions from parent 79,200 - 9,270
Distribution to parent - (15,000) -
--------- --------- ---------
Net cash provided by (used in) financing
activities 79,200 (1,952) 10,586
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 4 2,330 (2,334)
CASH AND CASH EQUIVALENTS, at beginning
of period - 4 2,334
--------- --------- ---------
CASH AND CASH EQUIVALENTS, at end
of period $ 4 $ 2,334 $ -
========= ========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
GRAND PALAIS RIVERBOAT, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(1) ORGANIZATION, PLAN OF REORGANIZATION
AND BASIS OF PRESENTATION
Organization
The accompanying financial statements include the accounts of Grand
Palais Riverboat, Inc. (the "Company" or "GPRI"), a Louisiana
corporation incorporated in March, 1993. Pursuant to a restructuring
of certain entities under common control, on December 17, 1993, the
Company became a wholly owned subsidiary of Hemmeter Enterprises, Inc.
("HEI"), a Delaware corporation. Prior to this date the Company was a
wholly owned subsidiary of Grand Palais Enterprises, Inc. ("GPEI").
Pursuant to the restructuring, the Company's stockholders and warrant
holders received common stock and warrants to purchase shares of an
equivalent amount of common stock of HEI.
The Company was formed to design, develop, operate and own a riverboat
gaming facility on the Mississippi River in New Orleans ("Riverboat
Project"). In June 1994, the Company entered into a joint venture,
the River City Joint Venture ("RCJV"), with Crescent City Capital
Development ("CCCD"), an affiliate of Capital Gaming International,
Inc. RCJV is a Louisiana general partnership in which each partner
has a 50% interest. The Company was in the development stage as of
December 31, 1994, as its principal operations had not yet commenced.
The development stage activities through December 31, 1994 related to
negotiating various agreements to develop the joint venture,
construction of the riverboat casino, the RCJV facility and financing
activities.
The Company and CCCD each operated separate gaming riverboats which
commenced operations on March 29, 1995 and April 3, 1995,
respectively. RCJV operated an entertainment and docking facility for
the two riverboats, with parking, dining entertainment facilities and
other amenities. The operations of these two riverboats were
coordinated pursuant to an Administrative Services and Consulting
Agreement between each partner and RCJV (Note 9) in which RCJV was to
provide management, marketing, human resources, accounting and other
support activities for the benefit of both riverboats.
The Riverboat Project incurred construction cost overruns and had
substantial operating losses as a result of the failure of the New
Orleans gaming market to develop as anticipated and the resulting
failure of the Riverboat Project to achieve projected revenues. As a
result, the Company and CCCD terminated riverboat gaming operations on
June 6, 1995 and June 9, 1995, respectively. On July 26, 1995,
certain creditors filed an involuntary petition under Chapter 11 of
the Federal Bankruptcy Code against the Company, CCCD and RCJV. On
July 27, 1995, the Company converted its petition to a voluntary
petition under Chapter 11 of the Federal Bankruptcy Code in the United
States Bankruptcy Court for the Eastern District of Louisiana (the
"Court"). The Court allowed the Company to operate as a debtor-in-
possession, although the business of the Company has not operated
since June 6, 1995. The Court also approved the Company's entering
into certain debtor-in-possession financing facilities (Note 5). As
discussed further in Note 5, the financial difficulties with respect
to the Company resulted in HEI filing for Chapter 11 bankruptcy
protection in November 1995.
Following termination of operations, Company management began
assessing the possibility that all or part of the Riverboat Project
could be sold to another gaming operator. After evaluation and
negotiation of potential transactions, HEI, the Company and certain
creditors entered into a letter of intent with Casino America, Inc.
("Casino America Agreement"). Generally, the Casino America Agreement
provides for the purchase by Casino America, Inc. ("Casino America")
of 100% of the newly issued shares of common stock of a "Reorganized
GPRI". The stated closing date of the sale is April 15, 1996;
however, a thirty day extension may be granted by either party to the
sale. The terms of the sale are outlined below.
CCCD has also negotiated a sale of its riverboat and license but, as
of April 11, 1996, does not have a confirmed plan of reorganization.
There is pending litigation between CCCD and GPRI as a result of the
financial difficulties of RCJV (Note 8.)
Plan of Reorganization
On March 29, 1996, the Court confirmed the Company's Chapter 11 Plan
of Reorganization and Disclosure Statement (as amended, the "Plan").
The Plan is effective upon completion of certain required conditions,
including, among other items, regulatory approval of the transfer of
the gaming license to Casino America (see Note 8) and certain other
administrative items. If the sale contemplated by the Plan does not
close, the order confirming the Plan will be rescinded. In general
the Plan provides for resolution of all claims against the Company, as
well as resolution of certain legal disputes, and provides for
distributions to creditors of (1) cash, (2) new debt securities, (3)
shares of common stock of Casino America and (4) warrants to purchase
shares of common stock of Casino America, as follows:
Bank Debt - The Company's bank debt, which includes the Riverboat
Construction Facility (Note 5), the Company's fifty percent interest
in the RCJV bank debt and certain DIP facilities (Note 5), plus all
unpaid interest, costs and attorney's fees will be settled through
issuance of a new note by Casino America on the effective date. The
new note, for the lesser of $16,500,000 or the sum of the stated
obligations on the effective date, will bear interest at prime plus
one percent and will mature in five years.
Priority Tax Claims -Priority tax claims, in an amount not to
exceed $1,000,000, will be paid through the issuance of a note (not to
exceed $1,000,000) by Casino America, payable over six years at the
legal rate of interest.
Maritime Claims - Maritime claims (claims arising in connection with
a preferred maritime lien on the riverboat) will be settled through
payments of cash of $250,000 and a note payable from Casino America in
an amount not to exceed $750,000,
Warn Act Claims - In connection with the closing of the riverboat
operations, the Company terminated substantially all of its workforce
numbering approximately 500 employees, and RCJV terminated
substantially all of its employees. Certain of the employees filed
claims under the Federal Worker Adjustment and Refinancing
Notification Act ("WARN Act"). Warn Act claims will be settled
through cash payments of $250,000 and the issuance of a note by Casino
America in the amount of $750,000, payable over 36 months bearing
interest at 6%.
DIP financing - The Plan calls for Casino America to retire other
DIP financing (see Note 5) in an amount not to exceed $870,000 through
the payment of cash in the amount of the obligation through the
effective date. In addition, Casino America will forgive its DIP
obligations as of the effective date.
Equipment Financing - Obligations to certain equipment vendors will
be settled through the issuance of notes totaling $8,915,110 to the
respective vendors by Casino America. The notes will bear interest at
prime plus 1%, with varying maturities of 18 to 36 months.
Senior Noteholder Claims and RII Claims - As discussed in Note 5,
a significant portion of the Company's assets secured HEI's Senior
Secured Notes. In addition, the Company guaranteed certain other
obligations of HEI to Resort Income Investors ("RII"). Obligations
under these liabilities will be settled through issuance of 2,250,000
shares of Casino America common stock (value of $15,469,000 as of the
confirmation date) and warrants to purchase an additional 500,000
shares of Casino America common stock at an exercise price of $10 per
share, which exceeds the market price of the stock on the date of
confirmation. The warrants are exercisable for a five year period;
however, if during the year following the effective date gaming
legislation or regulation is passed which would prohibit cruising or
dockside gaming in Lake Charles, Louisiana, the exercise price will
increase to $18 per share on the first anniversary of the effective
date.
Dock Board Secured Escrow Claims - All secured obligations to the
Dock Board of New Orleans (Note 9) will be settled through release of
an escrow account in the amount of $2,241,000. This escrow account
has been fully reserved in the accompanying financial statements.
Amounts included in this escrow as of December 31, 1994 are included
in other assets. There are additional claims by the Dock Board which
will be settled with the general unsecured claims in a pro rata
manner.
General Unsecured Claims - The holders of trade and other
miscellaneous claims will receive cash in the amount of $2,000,000 and
a $10,000,000 note from Casino America, bearing interest at 6% and
payable over 36 months. The note requires a $1 million principal
reduction within 180 days of regulatory approval to operate the boat.
In addition, fifty percent of the remaining principal balance is
required to be repaid upon successful completion of a debt or equity
offering by Casino America. The Company's share of RCJV's unsecured
claims are included in this class.
The Plan also calls for Casino America to pay cash in the amount of
$2.2 million to the bankruptcy disbursing agent to pay administrative
fees and expenses of completing the Plan. Administrative expenses of
approximately $1.1 million have been incurred as of December 31, 1995
and are included in accounts payable and accrued liabilities in the
accompanying financial statements. The Plan provides for no
distributions to be made to HEI for its current stock ownership of the
Company.
On the effective date of the Plan, title to all property of the
Company will be transferred to a Reorganized GPRI free and clear of
all claims and interests. Also on the effective date, Casino America
will issue all of the cash and notes discussed above, and in exchange
will receive 100% of the common stock of Reorganized GPRI. All
existing equity interests in the Company will be extinguished on that
date. The value of the assets recorded in the accompanying financial
statements approximate the fair value of the assets based on the sale
price to Casino America.
Liabilities Subject to Compromise
Pursuant to the Chapter 11 proceedings, certain secured and unsecured
claims against the Company in existence prior to the filing of the
petition for relief under the Federal Bankruptcy Code were stayed
while the Company pursued consummation of the Plan. The stayed claims
which may be "impaired" under the Plan are reflected in the
accompanying December 31, 1995, statement of net assets in liquidation
as "liabilities subject to compromise." The amount recorded as
liabilities subject to compromise approximates the amounts approved by
the Court in the Plan.
Liabilities subject to compromise consist of the following:
December 31, 1995
(in thousands)
Secured note payable to a bank $13,791
Notes payable to equipment vendors 11,035
Guarantee of HEI Senior Secured Notes (Note 5) 15,469
Other claims and accrued liabilities 15,198
Total $55,493
======
Liabilities Not Subject to Compromise
Liabilities not subject to compromise consist primarily of priority
tax claims. The recorded amounts approximate the amounts approved by
the Court in the Plan.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Liquidation Basis of Accounting
As a result of the confirmed Plan discussed in Note 1, effective
December 31, 1995, the Company adopted the liquidation basis of
accounting. Accordingly, the remaining assets as of December 31, 1995
are presented at estimated realizable values, based on the sale to
Casino America (Note 1) and all liabilities have been valued in
accordance with the Plan. If the Plan is not completed as
contemplated, actual amounts may differ from these estimates (Note 8).
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 and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are highly-liquid investments with an
original maturity of less than three months and are stated at cost
which approximates market value.
Deposits
The Company had placed deposits on certain equipment and services not
received as of December 31, 1994. These amounts have been recorded as
deposits in the accompanying balance sheets and were capitalized as
property and equipment or expensed, as appropriate, in 1995 when the
related items were received.
Property and Equipment
Property and equipment are recorded at cost. At December 31, 1994,
property and equipment consisted of construction in progress with no
depreciation expense recorded. Depreciation and amortization were
computed using the straight-line method over the estimated useful
lives of the assets (15 years for the riverboat and improvements and
3-7 years for gaming equipment, furniture and fixtures) beginning in
March 1995, when the assets were placed in service. Costs of major
improvements were capitalized; costs of normal repairs and maintenance
were charged to expense as incurred. The Company discontinued
depreciating its property and equipment, effective July 1995, as a
result of the terminated riverboat operations.
The Company capitalized interest costs associated with debt incurred
in connection with construction in progress. Interest capitalized
through December 31, 1994 and 1995 was approximately $168,000 and
$321,000, respectively. In addition, the Company capitalized
financing costs in the amount of $282,000 associated with this debt.
Also included in property and equipment at December 31, 1994 is
capitalized debt discount in the amount of $1,266,000. All previously
capitalized interest, financing costs and debt discounts are included
in net assets held for sale, which has been written down to the net
realizable value. See Reorganization and Impairment of Assets Items.
Other Assets
Costs incurred in the Company's pursuit, application and awarding of
its initial gaming license, primarily consisting of consulting fees as
further discussed in Note 7 were being amortized over the five-year
term of the initial Louisiana gaming license beginning in March 1995.
The Company also capitalized a $7.6 million deposit paid to the Board
of Commissioners of the Port of New Orleans (the "Dock Board")
pursuant to the Berthing Infrastructure Reimbursement Agreement
("BIRA") between the Company and the Dock Board (Note 9). Other
assets, at December 31, 1994, also includes approximately $5.8 million
of other predevelopment costs incurred during the pursuit of the
Riverboat Project which were allocated proportionately to the fixed
asset accounts upon commencement of gaming operations in March 1995.
As of December 31, 1995, in connection with the reorganization, the
unamortized balance of gaming license fees totaling $2.8 million and
the Dock Board deposit totaling $7.1 million were expensed as
reorganization items.
Casino Revenues and Promotional Allowances
In accordance with industry practice, during the period of operation,
the Company recognized as casino revenues the net win from gaming
activities, which is the difference between gaming wins and losses.
The retail value of food and beverage furnished to customers on a
complimentary basis is included in gross revenues and then deducted as
promotional allowances.
Pre-opening Costs
The Company expensed pre-opening costs as incurred. Pre-opening costs
consisted of expenditures incurred prior to the opening of the casino
to prepare the casino for business and included labor costs, certain
consulting, marketing and other direct costs.
Reorganization and Impairment of Asset Items
Reorganization items are segregated from normal operations in the
December 31, 1995 statement of Operations and reflect the costs
incurred associated with the reorganization of the Company.
Based on management's evaluations and the terms of the confirmed Plan,
the following asset writedowns and reorganization items/reserves,
respectively, were recorded in the accompanying statement of
Operations for the year ended December 31, 1995:
Reorganization
Items/Reserves
--------------
Write-off of property and equipment $ 935
Write-off of license fee 2,785
Write-off of Dock Board deposits 7,101
Write-off of due to/from affiliates 4,532
Litigation settlements 3,084
Other reorganization Items:
Professional fees 1,110
Interest expense 622
-------
$ 20,169
=======
(3) RESTRICTED FUNDS IN ESCROW
In December 1993, HEI completed a private offering of $140 million
aggregate principal of Senior Secured Pay-In-Kind Notes (the "Notes")
(Note 5) and contributed $79.2 million of the proceeds to the Company
to be used in the development of the Riverboat Project. Of the $79.2
million contributed, $9 million was used to repay loans from GPCI
(Note 7) and the remainder was placed in an escrow account pursuant to
the terms of the Disbursement Agreement entered in connection with the
issuance of the Notes. Disbursements from the escrow account were
managed by an independent trustee and disbursement agent who
administered requests for disbursements pursuant to the Disbursement
Agreement. Although the Company did not submit all documentation as
required by the Disbursement Agreement, the Escrow Agent released all
funds to the Company. Management does not believe this to be a
material violation of the Disbursement Agreement. Total deposits to
the escrow account were $70.2 million of which $1.5 million and
$55.8 million had been disbursed as of December 31, 1993 and 1994,
respectively, including $15 million which was distributed back to HEI
in 1994 upon the occurrence of certain events allowed by the Notes
Indenture. The remaining funds were disbursed in 1995 towards
completion of the Riverboat Project. Funds held in this account
served as collateral for the Notes.
(4) INVESTMENT IN RIVER CITY JOINT VENTURE
As discussed in Note 1, the Company is a fifty percent joint venture
partner in RCJV, a general partnership formed to develop, own and
operate a common entertainment and docking facility from which the
Company's and CCCD's riverboats operated. The Company accounted for
its investment in RCJV under the equity method.
Operations of the RCJV facility were terminated in June 1995 in
connection with the termination of operations of the joint venture
partners' riverboats. In July 1995, certain creditors of the
Riverboat Project filed an involuntary petition under Chapter 11 of
the Federal Bankruptcy Code against RCJV. In March 1996, the
involuntary Chapter 11 proceeding against RCJV was dismissed. The
Company and CCCD continue to maintain the assets of RCJV until an
orderly liquidation can take place.
Joint venture expenses include the Company's share of the losses of
RCJV. These losses include significant charges recorded in 1995 to
reduce the carrying amount of the RCJV assets to their estimated net
realizable value. In determining the amount of the write-down,
management considered such factors as the poor performance of the New
Orleans gaming market as a whole, the poor marketability of the
entertainment and docking facility to other potential gaming companies
with which the Company and CCCD were negotiating, and that all or
substantially all the RCJV's assets are real property or improvements
to real property securing a $22.5 million first mortgage position from
a lender.
Pursuant to the Plan, GPRI's 50% joint venture interest will not be
included in the assets of the Reorganized GPRI. Accordingly, the
Investment in RCJV was reduced to zero through joint venture expenses
recognized in 1995. The Plan provides for the settlement of certain
RCJV obligations; all of these obligations have been recorded as joint
venture expenses in accordance with the Plan and are included in
"liabilities subject to compromise" as of December 31, 1995. Upon
execution of the Plan, the Company's interest in RCJV will be
transferred to the Litigation Trust, which will be funded out of
recoveries or excess reserves, if any. This trust will oversee RCJV's
liquidation, and the Company and HEI will have no further obligations
or ownership with respect to RCJV. Any proceeds remaining in this
trust will be distributed to the general unsecured creditors and the
senior secured noteholders, as stipulated by the Plan.
(5) NOTES PAYABLE
Debtor-in-Possession Financing
After commencement of bankruptcy proceedings, the Court approved a
series of debtor-in-possession financing agreements ("DIP Facilities")
with two unaffiliated third parties (bank and other). The DIP
Facilities were intended to provide the Company with adequate
financing for preservation of Company and RCJV assets and for allowed
administrative claims during the bankruptcy proceedings. The DIP
Facilities are secured by a security interest in the Company's assets,
including its riverboat. In addition, borrowings under the DIP
Facilities constitute Allowed Superiority Administrative Expense
Claims, and, therefore, will be repaid on a priority basis from the
consideration provided by Casino America under the Plan.
Borrowings under the bank and other DIP Facilities totaled $660,963
and $773,300, respectively, at December 31, 1995. Interest on these
borrowings, approximately $50,000 at December 31, 1995, accrues at
prime plus 1%, and LIBOR plus 3%, respectively, and is due at
maturity.
No further borrowings are being made under the first two DIP
Facilities upon the Company securing the third DIP Facility pursuant
to the Casino America Agreement in December 1995 ("Casino America DIP
Facility"). Borrowings under the Casino America DIP Facility began in
January 1996 and accrue interest at 9.25%. In connection with the
Plan becoming effective, these borrowings will be forgiven by Casino
America.
Riverboat Construction Facility
In 1994, the Company obtained a credit facility from a Bank in the
amount of $15 million to fund a portion of the construction of the
riverboat. The loan accrued interest at the Bank's prime lending rate
plus one percent and was secured by a first preferred ship mortgage on
the riverboat being constructed. In addition, certain subsidiaries of
HEI are guarantors under the credit facility. As of December 31, 1994,
$13 million was outstanding under this line of credit and is included
in current liabilities in the accompanying 1994 balance sheet. The
loan matured April 24, 1995.
In 1995, the Company anticipated repaying the credit facility with
proceeds from permanent financing to be provided by an unaffiliated
third party. However, such permanent financing could not be obtained
and the Company was unable to repay the credit facility. Accordingly,
on April 24, 1995, the Company extended this facility to July 24, 1995
with an increase in the interest rate to prime plus 3%. However, the
Company did not meet all requirements under this extension and on July
27, 1995 the credit facility began accruing interest at a default rate
of prime plus 7%. In connection with the Plan, the Bank agreed to
forego the interest based on the penalty rate, and will collect
interest based on the contractual rate of prime plus 1% through April
24, 1995, and prime plus 3% for the period from April 25, 1995 through
December 31, 1995. The principal amount of the credit facility ($12.9
million) plus accrued and unpaid interest at the contractual rate,
($910,000) total $13.8 million which is included in "liabilities
subject to compromise" in the accompanying 1995 statement of net
assets in liquidation.
Guarantee of HEI Debt
On December 21, 1993, HEI completed a private offering of the Notes,
the net proceeds of which, after deducting the commissions and other
offering expenses, were approximately $131 million. The net proceeds
were used to repay indebtedness of HEI as well as to establish escrow
funds for the purpose of constructing the Riverboat Project (Note 3).
The Notes are reflected as liabilities in the consolidated financial
statements of HEI. Substantially all of the Company's assets,
including the Company's interest in RCJV, and excluding gaming
equipment, are pledged as security for the Notes. As of December 31,
1995, the total amount outstanding under the Notes, including accrued
and unpaid interest totaled $174.3 million.
As a result of the financial difficulties of the Company and certain
other related events, HEI was declared to be in default under the
terms of the Indenture covering the Notes. HEI immediately entered
into negotiations with certain of the holders of the Notes to
restructure the Notes. On November 7, 1995, HEI and three of its
other wholly owned subsidiaries filed a voluntary Chapter 11 petition
in the United States Bankruptcy Court for the District of Delaware.
The Chapter 11 case subsequently was transferred to the Court. On
February 12, 1996, a plan of reorganization (the "HEI Plan") was filed
in the HEI bankruptcy case. The holders of the Notes have filed
claims against the Company regarding HEI's default under the Notes
Indenture. As discussed in Note 1, the Plan provides for settlement
of the guarantee through the issuance of common stock and warrants to
purchase common stock of Casino America. The Company has recorded
this liability ($15,469,000) at the value of the Casino America stock,
as of March 29, 1996, the date the Court approved the Plan. No value
was assigned to the warrants. Under the HEI Plan, the Company will
have no further obligations with respect to the Notes.
In June of 1994, RCJV made the decision to relocate the riverboat
project to a new location. HEI sought and received approval from the
holders of the Notes to relocate and in consideration for bondholder
consent, the Company paid a fee of of one percent of the principal
amount held by each consenting bondholder. These fees totaled
approximately $635,000 and were included in pre-opening expense as of
December 31, 1994.
(6) INCOME TAXES
The Company had no income tax provision in 1994 and 1995 due to the
Company's significant loss position. The Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109") in December 1993. SFAS 109 requires recognition of
deferred income tax assets and liabilities based on enacted tax laws
for any temporary differences between financial reporting and tax
basis of assets, liabilities and carryforwards. Deferred taxes are
then reduced, if deemed necessary, by a valuation allowance for the
amount of any tax benefits which, based on management's opinion, are
not expected to be realized. The net deferred tax assets and
liabilities as of December 31, 1994 and 1995 are comprised as follows:
December 31
----------------------
1994 1995
--------- ---------
Accelerrated depreciation for tax $ 929 $ 2,610
Start up costs/intangibles
capitalized for tax 1,038 -
Impairment of assets - 3,267
Net operating loss carryforwards - 3,146
------- -------
Net deferred tax asset 1,967 29,023
Valuation allowance (1,967) (29,023)
------- -------
$ - $ -
======= =======
The net deferred tax asset valuation allowance is equal to the full
amount of the deferred tax asset because the realization of such asset
is dependent upon future taxable income, which is uncertain. The
Company has net operating loss carryforwards totaling $58 million ,
which expire beginning in 2110.
The Company's Plan provides for the new common stock in a Reorganized
GPRI to be issued to Casino America, which will result in a "change of
ownership" under Section 382 of the Code. As a result, total usage of
the Company's net operating loss carryforwards will be limited. In
addition, deferred deductions indicated above that become deductible
for tax purposes during the five-year period following the effective
date of the Plan are also subject to the annual limitation. Net
operating loss carryforwards and future deductions exceeding the
annual limitations will expire unused.
(7) RELATED PARTY TRANSACTIONS
Advances to/from Affiliates
The Company has advanced and borrowed funds to and from certain
affiliates. Such funds advanced from affiliates were approximately
$751,000 and $2.7 million, respectively, at December 31, 1994 and
1995. Funds advanced to affiliates were approximately $958,000 and
$7.2 million, respectively, at December 31, 1994 and 1995. Theses
advances have no stated repayment terms and are non-interest bearing.
The amount due to affiliates in 1995 represents a payable to HEI. The
Plan does not contemplate any payment to affiliates, accordingly ,
this liability has been reduced to zero. Of the amount due from
affiliates, $5.5 million relates to RCJV and $1.7 million is due from
the Company's joint venture partner, CCCD. Because of the
deterioration of the financial condition of the affiliates to which
the Company has advanced funds, the Company has determined that it is
unlikely that it will collect any of the advances to affiliates and,
accordingly, has expensed the entire amount owed the Company. This
reserve is reflected as a reorganization cost in the accompanying
statements of operations. The Company will continue to pursue
collection of the advances to affiliates if it determines any value
will be recoverable.
Consulting Agreement
The Company was party to a consulting agreement whereby the consultant
was entitled to receive an ownership interest in the Company and a $3
million fee in exchange for the consultant's assistance in obtaining
necessary licensing and other regulatory approvals with respect to the
Riverboat Project. Pursuant to this agreement, the consultant's right
to receive an ownership interest was converted into 1,605,739 warrants
to purchase common stock of HEI in connection with the reorganization
in 1993. The $3 million fee was paid to the consultant in 1994. In
addition, the consultant was paid an initial consulting fee of $2.8
million for his services with respect to the riverboat and to an
affiliate's project, of which $280,000 was allocated to the Company.
These fees have been capitalized as licensing costs to be amortized
over the initial five-year term of the riverboat license. All
licensing costs were charged to reorganization costs in the
accompanying statement of operations in 1995.
In October, 1994, RCJV entered into a consulting agreement with a
stockholder of HEI for general business, legal and legislative
analysis services. The contract provides for annual compensation of
$500,000 plus life and health insurance benefits. The contract runs
for an indefinite period of time but may be terminated by RCJV with at
least five years notice. If terminated for any reason other than
death, without such notice, a severance benefit in the amount of
$1,250,000 would be required. This contract was rejected as part of
the bankruptcy proceedings.
Transactions with GPCI
In 1992 and 1993, Grand Palais Casino, Inc. ("GPCI") undertook a
private offering of senior secured exchangeable notes. Certain of
HEI's stockholders are also stockholders of GPCI's parent company,
GPEI. In September 1993, $7.6 million of the net proceeds of GPCI's
private offering were loaned to the Company. The loan was evidenced
by a demand note (Note 6) payable to GPCI and accrued interest at 12%.
The loan was repaid with proceeds from the HEI note offering in
December 1993. As additional consideration, the GPCI noteholders were
to be issued warrants to purchase one share of the Company's common
stock at $.01 per warrant. In connection with the December 1993
restructuring, the GPCI noteholders were issued warrants to purchase
2,980,986 shares of common stock of HEI. These warrants were valued
at $1.3 million, which amount was offset against the $7.6 million
demand note and amortized as interest costs, which were then
capitalized as property and equipment.
During 1993, GPCI advanced other funds to the Company totaling $2.2
million, which accrued interest at 12% and were unsecured. Proceeds
from the Notes were used to repay $1.7 million of the advances in
1993. The remaining $490,000 was repaid in 1994.
Transactions with Directors
The Company paid $0, $463,000 and $70,000 to the law firm of Shefsky
Froelich & Devine Ltd. for legal services rendered to the Company in
1993, 1994 and 1995, respectively. Cezar M. Froelich, a director of
the Company and director and owner of 1.4% of HEI on a fully diluted
basis, is a member of that firm. Shefsky Froelich & Devine Ltd.
provided legal services to the Company until February 9, 1996. Any
further payments to Shefsky Froelich & Devine Ltd., are subject to
Court approval.
(8) COMMITMENTS AND CONTINGENCIES
Litigation and Contingencies
As discussed in Note 1, completion of the Plan is contingent upon one
regulatory approval. The Louisiana State Police, which governs the
issuance of riverboat casino operating licenses, is currently
investigating the suitability of Casino America. This investigation
must be successfully completed prior to transfer of the license. The
value of the assets of GPRI will be significantly less than as
reflected in the accompanying financial statements, if the riverboat
casino operating license is not included as a transferable asset.
Management of the Company believes that the required approval to
transfer the license will be obtained.
As of April 11, 1996 the Louisiana State Legislature was in a special
session in which one of the significant issues being addressed was a
public referendum on allowing continued gaming operations in
Louisiana. The outcome of any legislation approved will not impact
completion of the sale to Casino America.
As of April 11, 1996, the Louisiana State Police are conducting a
casino revenue audit. No significant changes are expected as a result
of this audit.
The Company adheres to SFAS No. 5 concerning the recording of
liabilities for pending litigation. The Plan, as confirmed, settles
all liabilities for pending litigation and other contingencies.
(9) SIGNIFICANT AGREEMENTS
Administrative Services and Consulting Agreements
The Company had an Administrative Services and Consulting Agreement
with RCJV pursuant to which RCJV provided all non-gaming operational
services required to own and operate the Company's riverboat,
including, but not limited to security (but no surveillance), food and
beverage service, janitorial services, and accounting and payroll
administration. The Company reimbursed RCJV for its share of actual
costs of providing such services, inclusive of overhead and employee
salaries.
Berthing and Terminal Lease Agreements
In 1993, the Company and CCCD selected a riverboat site and entered
into negotiations with the Dock Board for a lease of that site. The
Dock Board required a $7.6 million payment from each partner, which
funds were to be used by the Dock Board to make improvements to the
riverboat dock site for the benefit of the River City Joint Venture
partners. Disbursements of these funds were to be made pursuant to
the BIRA. In June, 1994, RCJV made the decision to relocate the
Riverboat Project to a new location and negotiated new lease
agreements with the Dock Board which were executed subsequent to
December 31, 1994. Under the terms of the lease agreements, the
Company was required to maintain a security deposit with the Dock
Board in the amount of $2.5 million in the form of either cash or a
letter of credit. During the initial twenty-seven months of the
agreements, the deposit made under the BIRA was to serve as security
for both the berthing and the terminal leases. The $7.6 million was
to be refunded to the Company over the initial ten-year term of the
lease, subject to continuance of the agreement. Accordingly, this
amount was capitalized as an other asset as of December 31, 1994.
Because of the termination of riverboat operations, the refunding of
this deposit ceased. As of December 31, 1995, the Company had been
refunded $500,000 of the Dock Board payment. In 1995, the remaining
amount was written off as impairment of assets, as the Company has
determined that it is unlikely that it will receive any additional
refunds of the Dock Board payment.
The Company leased berthing space for its riverboat from the Dock
Board and was required to pay, for the first three months of each
year, the greater of (x) $2.50 per passenger, or (y) a sliding
percentage of the gross revenues from gaming operations (the
"Percentage Formula"). The payment for the remaining nine months of
each year was based upon the Percentage Formula. The Company also
guaranteed the Dock Board minimum payments of $2.5 million per year
under the Berthing Agreement. Finally, the Company was obligated to
contribute toward the cost of the Dock Board's police and fire
protection services. This charge was to be approximately $346,000 in
the first year. In addition, pursuant to a Terminal and Use
Agreement, River City Joint Venture was required to pay as rent
$400,000 per year to the Dock Board. Both the Berthing Agreement and
Terminal and Use Agreement were for an initial term of 10 years, with
renewal options which would result in a total term of 50 years. As a
result of the termination of riverboat operations, the Company and
RCJV ceased payments under the berthing and terminal leases. Total
payments by the Company were $223,000 for 1995 and are included in
gaming taxes and other in the accompanying statements of operations.
All obligations to the Dock Board are being settled through the
Company's confirmed Plan.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
An Index to Financial Statements appears at Page 53 hereof.
(b) Exhibits
Exhibit No. Description
___________ ___________
2.1 Disclosure Statement for First Amended Joint Plan
of Reorganization of Hemmeter Enterprises, BWBH,
Inc., BWCC, Inc. and Millsite 27, Inc.*
2.2 First Amended Joint Plan of Reorganization of the
Hemmeter Enterprises, Inc., BWBH, Inc., BWCC, Inc.
and Millsite 27, Inc. (included in exhibit 2.1.)*
3.1 Amended and Restated Articles of Incorporation of
Hemmeter Enterprises, Inc.
3.2 Amended and Restated By laws of Hemmeter Enterprises,
Inc.
4.1 Indenture between Hemmeter Enterprises, Inc. and
Fleet National Bank, as Trustee.
4.2 Specimen Certificate of Common Stock.*
4.3 Form of Note.*
4.4 Registration Rights Agreement.
10.1 Loan and Security Agreement, dated as of November
1, 1995 by and between BWBH, Inc., BWCC, Inc. and
Millsite 27, Inc. and Foothill Capital
Corporation.*
10.2 Amendment Number One to Loan and Security
Agreement, dated as of December 4, 1995.*
10.3 Amendment Number Two to Loan and Security
Agreement, dated as of January 24, 1996.*
10.4 Letter Agreement, dated as of December 18, 1995,
from BWBH, Inc., BWCC, Inc. and Millsite 27, Inc.
to Foothill Credit Corporation.*
10.5 Security Agreement, dated as of November 1, 1995,
between Hemmeter Enterprises, Inc., and Foothill
Credit Corporation.*
10.6 Trademark Security Agreement, dated as of November
1, 1995, between Hemmeter Enterprises, Inc. and
Foothill Credit Corporation.*
10.7 Continuing Guaranty, dated as of November 1, 1995
by Hemmeter Enterprises, Inc. and Foothill Credit
Corporation.*
10.8 Amended and Restated Loan and Security Agreement,
dated as of June 4, 1996 between Foothill Capital
Corporation, BWBH, Inc., BWCC, Inc., Millsite 27,
Inc. and Silver Hawk Casino, Inc.
10.9 Lease Agreement, dated October 25, 1991 by and
among Jerry L. Brown and Harold Gene Reagin and HP
Black Hawk, L.P.*
10.10 Option to Purchase dated October 28, 1991 by and
among Jerry L. Brown and Harold Gene Reagin and HP
Black Hawk, L.P.*
10.11 Sublease Agreement by and between Marsh &
McLennan, Incorporated and Hemmeter Enterprises,
Inc.*
10.12 Amendment to Sublease Agreement, dated as of
January 18, 1996 by and between Marsh & McLennan,
Incorporated and Hemmeter Enterprises, Inc.*
10.13 Guaranty, dated as of January 18, 1996, by BWBH,
Inc., BWCC, Inc. and Millsite 27, Inc.*
10.14 Agreement for Sale of Real Estate, dated October
20, 1995, by and between Millsite 20 Limited
Liability Company, Iron City Limited Liability
Company and Hemmeter Enterprises, Inc.*
10.15 First Amendment to Agreement for Sale of Real
Estate, dated December 21, 1995 by and between
Millsite 20 Limited Liability Company, Iron City
Limited Liability Company and Hemmeter
Enterprises, Inc.*
10.16 Letter dated February 28, 1996 from the United
States Environmental Protection Agency.*
10.17 Subdivision Agreement dated February 28, 1996 by
and among the City of Black Hawk, the Black
Hawk/Central City Sanitation District, Millsite
27, Inc. and Millsite 20 Limited Liability
Company.*
10.18 State of Colorado, Department of Revenue, Limited
Gaming License issued to Bullwhackers Black Hawk
Casino.*
10.19 State of Colorado, Department of Revenue,
Alcoholic Beverage License issued to BWBH, Inc.*
10.20 City of Black Hawk, Retail Liquor License with
Extended Hours issued to BWBH, Inc.*
10.21 State of Colorado, Department of Revenue, Limited
Gaming License issued to Bullwhackers Central City
Casino.*
10.22 State of Colorado, Department of Revenue,
Alcoholic Beverage License issued to BWCC, Inc.*
10.23 City of Central City, Retail Liquor License issued
to BWCC, Inc.*
10.24 City of Central City, Extended Hours License
issued to BWCC, Inc.*
10.25 Colorado Gaming & Entertainment Co. Management Stock
Incentive Plan.
10.26 Colorado Gaming & Entertainment Co. Cash Bonus Plan.
10.27 Form of Consulting Agreement between Hemmeter Enterprises,
Inc. and Christopher B. Hemmeter.*
10.28 Form of Consulting Agreement between Hemmeter Enterprises,
Inc. and Mark M. Hemmeter.*
10.29 Employment Agreement between Hemmeter Enterprises,
Inc. and Stephen J. Szapor, Jr.
10.30 Employment Agreement between Hemmeter Enterprises,
Inc. and Alan L. Mayer.
10.31 Employment Agreement between Hemmeter Enterprises,
Inc. and Richard Rabin.
21.1 List of Subsidiaries.*
23.1 Consent of Arthur Andersen LLP.*
99.1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended of Fleet National Bank, as
Trustee under the Indenture.*
_____________________
* Previously filed.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
HEMMETER ENTERPRISES, INC.
(Registrant)
By: /s/ Stephen J. Szapor, Jr.
Name: Stephen J. Szapor, Jr.
Title: President & Chief Executive Officer
BWBH, INC.
(Registrant)
By: /s/ Stephen J. Szapor, Jr.
Name: Stephen J. Szapor, Jr.
Title: President
BWCC, INC.
(Registrant)
By: /s/ Stephen J. Szapor, Jr.
Name: Stephen J. Szapor, Jr.
Title: President
MILLSITE 27, INC.
(Registrant)
By: /s/ Stephen J. Szapor, Jr.
Name: Stephen J. Szapor, Jr.
Title: President
SILVER HAWK CASINO, INC.
(Registrant)
By: /s/ Stephen J. Szapor, Jr.
Name: Stephen J. Szapor, Jr.
Title: President
July 2, 1996.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF HEMMETER ENTERPRISES, INC.
The undersigned, being the duly elected President and
Secretary of Hemmeter Enterprises, Inc., a Delaware corporation
(the "Corporation"), hereby certify as follows:
The original Certificate of Incorporation of the
Corporation was filed with the Office of the Secretary of State
of Delaware on August 30, 1993. The original name of the
Corporation was Bullwhackers, Inc. A First Amendment to the
Certificate of Incorporation which, among other things, changed
the name of the Corporation to Hemmeter Enterprises, Inc., was
approved by the board of directors and shareholders of the
Corporation on December 13, 1993, and was incorporated in an
Amended and Restated Certificate of Incorporation which was filed
with the Secretary of State of Delaware on December 15, 1993.
On November 7, 1995, the Corporation filed a petition
in the United States Bankruptcy Court seeking relief under
Chapter 11 of the United States Bankruptcy Code, 11 U.S.C.
section 101 et seq.
On April 8, 1996, the United States Bankruptcy Court
for the Eastern District of Louisiana confirmed a plan of
reorganization (the "Plan of Reorganization") of the Corporation
which adopted this Amended and Restated Certificate of
Incorporation pursuant to Section 303 of the General Corporation
Law of the State of Delaware (the "DGCL").
Pursuant to and in accordance with Section 103 and 303
of the DGCL, the Certificate of Incorporation of the Corporation,
as previously amended and restated, is hereby amended and
restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Colorado Gaming &
Entertainment Co.
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation
in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered
agent at such address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The Corporation is organized for the purpose of
engaging in any lawful act or activity for which corporations may
be organized under the DGCL.
ARTICLE IV
DESCRIPTION OF CAPITAL STOCK
A. Authorized Classes and Numbers of Shares. The aggregate
number of shares which the Corporation shall have authority
to issue is 20,000,000 shares of Common Stock, par value
$.01 per share (hereinafter called the "Common Stock").
B. Dividends. Such dividends (payable in cash, stock or
otherwise) as may be determined by the Board of Directors
may be declared and paid on the Common Stock from time to
time from any funds, property or shares legally available
therefor.
C. Voting Rights. Each outstanding share of Common Stock shall
be entitled to one vote on each matter submitted to a vote
of holders of Common Stock at a meeting of stockholders.
Cumulative voting for the election of directors of the
Corporation shall not be permitted.
D. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, the holders of Common Stock shall be
entitled to share ratably in the net balance of any assets
of the Corporation.
E. No Preemptive Rights. No holder of Common Stock shall be
entitled as such, as a matter of right, to subscribe for or
purchase or receive any new or additional issue of stock of
the Corporation, or securities convertible into stock of the
Corporation, whether now or hereafter authorized, or whether
issued for cash, property or services, by way of dividend,
or in exchange for the stock of another corporation.
ARTICLE V
BOARD OF DIRECTORS
A. Powers. The business and affairs of the Corporation shall
be managed by, or under the direction of, a Board of
Directors, which shall exercise all of the powers of the
Corporation except as are by law or by this Amended and
Restated Certificate of Incorporation or the Amended and
Restated Bylaws of the Corporation (the "Bylaws") conferred
upon or reserved to the stockholders of the Corporation.
B. Number, Tenure and Qualifications of Directors.
(1) Number of Directors. Subject to the right of the Board
of Directors to increase or decrease the number of
directors pursuant to this Section B(1), the Board of
Directors shall consist of five (5) directors. The
Board of Directors may increase or decrease the number
of directors by the affirmative vote of a majority of
the entire Board of Directors; provided, however, that
the Board of Directors shall at all times consist of a
maximum of seven (7) and a minimum of three (3)
directors.
(2) Terms of Directors. The Initial Directors (as defined
below) shall serve for a term expiring on the later of
the date of the first annual meeting of stockholders
following the Effective Date or the date of the
qualification of their successors pursuant to Section
B(4) of this Section V. Thereafter, directors shall
serve for one year terms expiring on the later of the
date of the first annual meeting of stockholders
following the annual meeting at which such directors
were elected or the date of the qualification of their
successors pursuant to Section B(4) of this Article V.
(3) Removal of Directors. Any director, or the entire
Board of Directors, may be removed from office with or
without cause by the affirmative vote of not less than
a majority of the votes entitled to be cast by the
holders of all the then outstanding shares of Common
Stock of the Corporation at a special meeting of the
stockholders called for such purpose.
(4) Qualification of Directors. Before any individual
elected to serve as a director of the Corporation,
including the Initial Directors, shall be eligible to
serve, such individual shall receive any necessary
approvals or licenses from any Gaming Authority (as
hereinafter defined) with jurisdiction over the
Corporation or any of its subsidiaries and shall
otherwise meet the requirements of any applicable laws,
regulations or rules governing the conduct of the
Corporation's gaming businesses.
(5) Initial Directors. Pursuant to the Plan of
Reorganization, the following individuals shall be the
initial directors of the Corporation (the "Initial
Directors") and with terms commencing on the earlier of
the Effective Date or the date such individuals (other
than Stephen J. Szapor, Jr., who is already qualified)
are qualified to serve as directors pursuant to Section
B(4) of this Article V:
Stephen J. Szapor, Jr.
Franklin S. Wimer
Steve Leonard
Mark Van Hartesvelt
Until such time as two of the Initial Directors other than
Stephen J. Szapor, Jr., are qualified to serve as directors
pursuant to Section B(4) of this Article V, Alan L. Mayer
and Richard Rabin shall serve as directors but shall be
deemed to have resigned upon the qualification of such
Initial Directors.
C. Additional Authority of Board. In furtherance and not in
limitation of the powers conferred by statute, the Board of
Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation. The holders of shares
of Common Stock shall, to the extent such power is at the
time conferred on them by applicable law, also have the
power to make, alter, amend or repeal the Bylaws of the
Corporation.
D. Nomination and Election of Directors. Nominations for the
election of directors shall be made by a majority of the
Board of Directors. In addition, any stockholder entitled
to vote in the election of directors generally may nominate
one or more persons for election as directors at an annual
meeting of stockholders, but only if written notice of such
stockholder's intent to make such nomination or nominations
has been received by the Secretary of the Corporation not
less than ten days prior to the date of such annual meeting
of stockholders. Each such notice by a stockholder shall
set forth: (a) the name and address of the stockholder who
intends to make the nomination and of the person or persons
to be nominated; (b) a representation that the stockholder
is a holder of record of Common Stock entitled to vote at
such meeting and intends to appear in person or by proxy at
a meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or
understandings between the stockholder or any affiliate of
the stockholder and each nominee and any other person or
persons (naming such person or persons) relating to the
nomination or nominations; (d) the number of shares of the
Corporation which are beneficially owned by such stockholder
and the person to be nominated as of the date of such
stockholder's notice and by any other stockholders known by
such stockholder to be supporting such nominees as of the
date of such stockholder's notice; (e) such other
information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (f) the written
consent of each nominee to serve as a director of the
Corporation if so elected. The stockholder shall also
comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations thereunder, with respect to the
matters set forth in this Article V, Section D.
In addition, in the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or
more directors, any stockholder entitled to vote in the
election of directors generally may nominate one or more
persons for election as directors at a special meeting only
if written notice of such stockholder's intent to make such
nomination or nominations, setting forth the information and
complying with the form described in the immediately
preceding paragraph, has been received by the Secretary of
the Corporation not later than the close of business on the
tenth day prior to such special meeting. The stockholder
shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Article V, Section
D.
No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the
procedures set forth in this Article V, Section D. The
presiding officer of the meeting shall, if the facts
warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures
prescribed by this Article V, Section D, and if he or she
should so determine, the defective nomination shall be
disregarded.
Elections of directors shall be by written ballot.
ARTICLE VI
STOCKHOLDERS
A. Meetings of Stockholders; Books. Meetings of the
stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. Any action required or
permitted to be taken by the stockholders of the Corporation
may be effected at a duly called annual or special meeting
of such stockholders. Special meetings of the stockholders
of the Corporation may be called only by the President of
the Corporation or by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of
Directors or by the holders of at least 25% of the votes
entitled to be cast by the then outstanding shares of Common
Stock of the Corporation at such meeting. The books of the
Corporation may be kept (subject to any provision of law)
outside the State of Delaware at such place or places as may
be designated from time to time by the Board of Directors or
in the Bylaws of the Corporation.
B. Proposals of Stockholders. At any meeting of the
stockholders, only such business shall be conducted as shall
have been properly brought before such meeting. To be
properly brought before an annual meeting of stockholders,
business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the
Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors
or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must
be received no less than ten days prior to the annual
meeting of stockholders. Each such notice shall set forth
as to each matter the stockholder proposes to bring before
the annual meeting of stockholders: (a) a brief description
of the business desired to be brought before the annual
meeting of stockholders and the reasons for conducting such
business at such meeting, (b) the name and address, as they
appear on the Corporation's books, of the stockholder
proposing such business, (c) the class, series and number of
shares of the Corporation which are beneficially owned by
the stockholder, and (d) any material interest of the
stockholder or any Affiliate of the stockholder in such
business. The stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to the matters set
forth in this Article VI, Section B. To be properly brought
before a special meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by
or at the direction of the Board of Directors or by the
stockholders calling such special meeting or (b) otherwise
properly brought before the meeting by or at the direction
of the Board of Directors.
No business shall be conducted at any meeting of the
stockholders except in accordance with the procedures set
forth in this Article VI, Section B. The presiding officer
of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly
brought before the meeting and in accordance with the
provisions of this Article VI, Section B, and if he or she
should so determine, any such business not properly brought
before the meeting shall not be transacted. Nothing herein
shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or
any successor provision.
C. Stockholder Action. Any action which may be taken by the
stockholders at any annual or special meeting of the
stockholders of the Corporation may be taken without a
meeting, without prior notice (including, without
limitation, any notice required to be given pursuant to
Section B of this Article VI if such action were taken at
any annual or special meeting of stockholders) and without a
vote of stockholders, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered
office, its principal place of business, or any officer or
agent of the Corporation having custody of the books in
which proceedings of the meetings of stockholders are
recorded.
ARTICLE VII
BUSINESS TRANSACTIONS
The Corporation hereby elects not to be governed by the
provisions of Section 203 of the DGCL (or any successor statute)
relating to business combinations with interested stockholders as
defined in such statute.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation;
provided, however, notwithstanding any other provisions of this
Amended and Restated Certificate of Incorporation or the Bylaws
of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Amended and Restated
Certificate of Incorporation or the Bylaws of the Corporation),
any lawful amendment of this Amended and Restated Certificate of
Incorporation may be made by affirmative vote by at least a
majority of the aggregate number of votes which the holders of
the then outstanding shares of Common Stock are entitled to cast
on the amendment.
ARTICLE IX
LIMITATION ON DIRECTOR LIABILITY AND
INDEMNIFICATION OF DIRECTORS AND OFFICERS
A. Limited Liability. A person who is or was a director of the
Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability
(a) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or
a knowing violation of law, (c) under Section 174 of the
DGCL, or (d) for any transaction from which the director
derived an improper personal benefit. If the DGCL is
amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the
liability of the directors of the Corporation shall be
eliminated or limited to the fullest extent permitted by the
DGCL, as so amended. The elimination and limitation of
liability provided herein shall continue after a director
has ceased to occupy such position as to acts or omissions
occurring during such director's term or terms of office,
and no amendment, repeal or modification of this Article IX
shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director
occurring prior to such amendment, repeal or modification.
B. Right to Indemnification.
(1) Each person who was or is a party or is threatened to
be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or
the person of whom he or she is the legal
representative, is or was a director or officer of the
Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent
of another corporation or of a partnership, joint
venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the
basis of such proceeding is alleged action or inaction
in an official capacity as a director, officer,
employee or agent or in any other capacity while
serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corpo-
ration to the fullest extent authorized by the DGCL, as
the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide
broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment),
against all expenses, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes
or penalties and amounts paid or to be paid in settle-
ment) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall
continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and
administrators; provided, however, that, except as
provided in this Article IX, Section B, the Corporation
shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof)
initiated by such person only as authorized in the
specific case upon a determination that indemnification
of the director, officer, employee or agent is proper
in the circumstances because he or she has met the
applicable standard set forth in the DGCL. Such a
determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or
proceeding; (b) if such a quorum is not obtainable, or,
even if obtainable and a quorum of disinterested
directors so directs, by independent legal counsel
(compensated by the Corporation) in a written opinion;
(c) by the stockholders; or (d) in any other manner
permitted by the DGCL. The right to indemnification
conferred in this Article IX, Section B, shall be a
contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposi-
tion; provided, however, that, if the DGCL requires,
the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer
of the Corporation (and not in any other capacity in
which service was or is rendered by such person while a
director or officer, including, without limitation,
service to an employee benefit plan) in advance of the
final disposition of a proceeding, shall be made only
upon delivery to the Corporation of an undertaking, by
or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be
determined that such director or officer is not
entitled to be indemnified under this Section B or
otherwise. The Corporation may, by action of its Board
of Directors, provide indemnification to employees and
agents of the Corporation with the same scope and
effect as the foregoing indemnification of directors
and officers.
(2) If a claim under paragraph (1) of this Section B is not
paid in full by the Corporation within 30 days after a
written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to
enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where
the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not
met the standard of conduct which makes it permissible
under the DGCL for the Corporation to indemnify the
claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the
commencement of such action that indemnification of the
claimant is proper in the circumstances because he or
she has met the applicable standard of conduct set
forth in the DGCL, nor an actual determination by the
Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that
the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a
presumption that the claimant has not met the
applicable standard of conduct. In any suit brought by
the claimant to enforce a right to indemnification or
to an advancement of expenses hereunder, or brought by
the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of
proving that the claimant is not entitled to be
indemnified, or to such advancement of expenses, under
this Article IX or otherwise shall be on the
Corporation.
(3) The rights to indemnification and the payment of
expenses incurred in defending a proceeding in advance
of its final disposition conferred in this Article IX,
Section B, shall not be exclusive of any other right
which any person may have or hereafter acquire under
any statute, provision of this Amended and Restated
Certificate of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
(4) The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee
or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or
not the Corporation would have the power to indemnify
such person against such expense, liability or loss
under the DGCL.
(5) The Corporation may enter into an indemnity agreement
with any director, officer, employee or agent of the
Corporation, or of another corporation, partnership,
joint venture, trust or other enterprise, upon terms
and conditions that the Board of Directors deems
appropriate, as long as the provisions of the agreement
are not impermissible under applicable law.
(6) Any amendment or repeal of this Article IX, Section B,
shall not be retroactive in effect.
(7) In case any provision in this Article IX, Section B,
shall be determined at any time to be unenforceable in
any respect, the other provisions shall not in any way
be affected or impaired thereby, and the affected
provision shall be given the fullest possible
enforcement in the circumstances, it being the
intention of the Corporation to afford indemnification
and advancement of expenses to the persons indemnified
hereby to the fullest extent permitted by law.
(8) The Corporation may, by action of the Board of
Directors, authorize one or more officers to grant
rights to indemnification and advancement of expenses
to employees or agents of the Corporation on such terms
and conditions as such officer or officers deem
appropriate under the circumstances.
ARTICLE X
REGULATORY MATTERS
In order to enable the Corporation and any subsidiary to
secure and maintain in good standing all license and other
regulatory approvals necessary for the lawful operation of gaming
and related businesses now or hereafter engaged in by the
Corporation or any subsidiary of the Corporation (the "Gaming
License") from the Gaming Authority (as defined below), and in
order to insure that the business of the Corporation and its
subsidiaries will be carried on in compliance with the laws,
rules, regulations and policies of the Gaming Authorities and in
a manner consonant with the responsibilities of the Corporation
and its subsidiaries to the public as an organization engaged in
gaming and related businesses, the following provisions are made:
A. The Corporation shall not issue any voting securities
or other voting interests except in accordance with the
provisions of the Colorado Limited Gaming Act and any
other applicable Gaming Laws and the rules and
regulations promulgated thereunder. The issuance of
any voting securities or other voting interests in
violation thereof shall be void and such voting
securities or other voting interests shall be deemed
not to be issued and outstanding until (a) the
Corporation shall cease to be subject to the
jurisdiction of the Colorado Limited Gaming Control
Commission or any other Gaming Authority authorized or
empowered to enforce any other applicable Gaming Laws,
or (b) the Colorado Limited Gaming Control Commission
or any such other Gaming Authority shall, by
affirmative action, validate said issuance or waive any
defect in issuance.
B. No voting securities or other voting interests issued
by the Corporation and no interest, claim or charge
therein or thereto shall be transferred in any manner
whatsoever except in accordance with the provisions of
the Colorado Limited Gaming Act and all other
applicable Gaming Laws and the rules and regulations
promulgated thereunder. Any transfer in violation
thereof shall be void until (a) the Corporation shall
cease to be subject to the jurisdiction of the Colorado
Limited Gaming Control Commission or any other Gaming
Authority authorized or empowered to enforce any other
applicable Gaming Laws, or (b) the Colorado Limited
Gaming Control Commission or any such other Gaming
Authority shall, by affirmative action, validate said
transfer or waive any defect in said transfer.
C. If the Colorado Limited Gaming Control Commission or
any other Gaming Authority with jurisdiction at any
time determines that a holder of voting securities or
other voting interests of the Corporation is unsuitable
to hold such securities or other voting interests, then
the Corporation may, within sixty (60) days after the
finding of unsuitability, purchase such voting
securities or other voting interests of such unsuitable
person at the lesser of (i) the cash equivalent of such
person's investment in the Corporation, or (ii) the
current market price as of the date of the finding of
unsuitability unless such voting securities or other
voting interests are transferred to a suitable person
(as determined by the Colorado Limited Gaming Control
Commission or such other Gaming Authority) within sixty
(60) days after the finding of unsuitability. Until
such voting securities or other voting interests are
owned by persons found by the Colorado Limited Gaming
Control Commission or such other Gaming Authority to be
suitable to own them, (a) the Corporation shall not be
required or permitted to pay any dividend or interest
with regard to the voting securities or other voting
interests, (b) the holder of such voting securities or
other voting interests shall not be entitled to vote on
any matter as the holder of the voting securities or
other voting interests, and such voting securities or
other voting interests shall not for any purposes be
included in the voting securities or other voting
interests of the Corporation entitled to vote, and
(c) the Corporation shall not pay any remuneration in
any form to the holder of the voting securities or
other voting interests except in exchange for such
voting securities or other voting interests as provided
in this Article X, Section (c).
D. The following definitions shall apply with respect to
this Article X:
"Gaming Authority" means any governmental agency other
than the Colorado Limited Gaming Control Commission
having the authority to issue or grant any license
necessary for the lawful operation of gaming and
related businesses of the Corporation or any subsidiary
of the Corporation.
"Gaming Law" means each gaming law of any Gaming
Authority and any rules or regulations promulgated
thereunder to the extent applicable to the Corporation
or any of its subsidiaries or shareholders.
IN WITNESS WHEREOF, the Corporation has caused this
Amended and Restated Certificate of Incorporation to be executed
in its corporate name this _____ day of __________, 1996.
HEMMETER ENTERPRISES, INC.
By:_____________________________
President
________________________________
Secretary
AMENDED AND RESTATED BYLAWS
OF
COLORADO GAMING & ENTERTAINMENT CO.
ARTICLE I
CORPORATE NAME AND OFFICES
SECTION 1. The name of the corporation is Colorado
Gaming & Entertainment Co. (the "Corporation").
SECTION 2. The Corporation shall continuously maintain
in the State of Delaware, a registered office and a registered
agent whose office is identical with such registered office and
may have other offices within or without the state. The address
of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, Wilmington,
County of New Castle, State of Delaware 19801. The name of the
Corporation's registered agent at such address is The Corporation
Trust Company. The Corporation reserves the power to change its
registered agent and registered office at any time.
ARTICLE II
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of
stockholders of the Corporation shall be held on such date, at
such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors from
time to time.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
stockholders may be called either by the President of the
Corporation, the Board of Directors (sometimes referred to as the
"Board"), pursuant to a resolution approved by the majority of
the entire Board, or by the holders of at least 25% of the votes
entitled to be cast by the then outstanding shares of common
stock of the Corporation at such meeting, for the purpose or
purposes stated in the call of the meeting.
SECTION 3. PLACE OF MEETINGS. Each meeting of the
stockholders for the election of directors shall be held at the
offices of the Corporation in Denver, Colorado, unless the Board
of Directors shall, by resolution, designate any other place of
such meeting. Meetings of stockholders for any other purpose may
be held at such place, within or without the State of Delaware,
and at such time as shall be determined pursuant to Section 2 of
this Article II, and stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
SECTION 4. NOTICE OF MEETINGS. A written notice of each
meeting of stockholders, stating the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given to each
stockholder entitled to vote at the meeting. Unless otherwise
provided by the General Corporation Law of Delaware ("DGCL"), the
notice shall be given not less than ten (10) nor more than sixty
(60) days before the date of the meeting. If the notice is
mailed, it shall be deposited in the United States mail, postage
prepaid, and shall be directed to the stockholder at his address
as it appears on the records of the Corporation. Notice shall be
deemed given on the date it has been mailed if deposited in the
United States mail, upon receipt if personally delivered, and
upon transmission if delivered by facsimile transmission to the
telephone number contained in the records of the Corporation.
For any notice delivered hereunder by facsimile transmission, the
recipient may rely upon a facsimile signature unless and until
receipt of any revocation of such facsimile signature by the
signator of the notice. No notice need be given to any person
with whom communication is unlawful, nor shall there be any duty
to apply for any permit or license to give notice to any such
person.
SECTION 5. WAIVER OF NOTICE. Anything herein to the
contrary notwithstanding, with respect to any stockholder
meeting, any stockholder who in person or by proxy shall have
waived in writing notice of the meeting, either before or after
such meeting, or who shall attend the meeting in person or by
proxy, shall be deemed to have waived notice of such meeting
unless he attends for the express purpose of objecting at the
beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 6. QUORUM; MANNER OF ACTING AND ORDER OF
BUSINESS. Subject to the provisions of these Amended and
Restated Bylaws, the Amended and Restated Certificate of
Incorporation (as further amended or restated from time to time),
and the DGCL as to the vote that is required for a specified
action, the presence in person or by proxy of the holders of a
majority of the outstanding shares of the Corporation entitled to
vote at any meeting of stockholders shall constitute a quorum for
the transaction of business. The vote of the holders of a
majority of the shares of the Corporation's stock entitled to
vote, present in person or represented by proxy, shall be binding
on all stockholders of the Corporation, unless the vote of a
greater number is required by the DGCL or the Amended and
Restated Certificate of Incorporation or these Amended and
Restated Bylaws. The stockholders present at a duly called or
held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum.
In the absence of a quorum, stockholders holding a majority
of the shares present in person or by proxy and entitled to vote,
regardless of whether or not they constitute a quorum, or if no
stockholders are present, the presiding officer may adjourn the
meeting to another time and place. Any business that might have
been transacted at the original meeting may be transacted at any
adjourned meeting at which a quorum is present. No notice of an
adjourned meeting need be given if the time and place are
announced at the meeting at which the adjournment is taken except
that, if adjournment is for more than thirty (30) days or if,
after the adjournment, a new record date is fixed for the
meeting, notice of the adjourned meeting shall be given pursuant
to Section 4 of this Article II.
Meetings of the stockholders shall be presided over by the
Chairman of the Board, or in his absence by the President of the
Corporation, or in the absence of the foregoing persons by a
presiding officer designated by the Board of Directors, or in the
absence of such designation, by a presiding officer chosen at the
meeting. The Secretary of the Corporation shall act as secretary
of the meeting, but in the absence of the Secretary, the
presiding officer may appoint any person to act as secretary of
the meeting. At any meeting of the stockholders, only such
business shall be conducted as shall have been properly brought
before such meeting, in accordance with the Amended and Restated
Certificate of Incorporation.
SECTION 7. VOTING; PROXIES. Each stockholder of record
on the record date, as determined pursuant to Section 6 of
Article VII, shall be entitled to one vote for every share
registered in his name, except as otherwise provided in the
Amended and Restated Certificate of Incorporation of the
Corporation, as amended or restated from time to time. All
elections of directors shall be by written ballot.
Each stockholder entitled to vote at any meeting of
stockholders (or to express consent to or dissent from corporate
action in writing without a meeting) may authorize another person
to act for him by proxy. No proxy shall be valid after three
years from its date of execution, unless the proxy provides for a
longer period.
Such proxy shall be in writing and shall be filed with the
Secretary of the Corporation before or at the time of the meeting
(or giving of such written consent, as the case may be).
Execution of a writing authorizing another person or persons to
act as proxy may be accomplished by the stockholder (or his or
her authorized officer, director, employee or agent) signing such
writing, or causing his signature to be affixed to such writing
by any reasonable means, including by facsimile signature.
A stockholder may authorize another person or persons to act
for him as proxy by transmitting or authorizing the transmission
of a telegram, cablegram or other means of electronic
transmission to the person who will be the holder of the proxy or
to a proxy solicitation firm, proxy support service organization
or like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission, provided that
any such telegram, cablegram or other means of electronic
transmission must either set forth or be submitted with
information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the
stockholder. A stockholder may also vote by means of a proxy
which has been executed by him or his duly authorized agent if
both sides of the proxy instrument have been telecopied to the
inspectors or, if there are not inspectors, to such other
authorized person or persons.
SECTION 8. INSPECTORS OF ELECTION.
(a) In advance of any meeting of stockholders, the Board of
Directors may appoint inspectors of election to act at each
meeting of stockholders and any adjournment thereof. If
inspectors of election are not so appointed, the presiding
officer of the meeting may, and upon the request of any
stockholder or his proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one or
three. If appointed at the meeting upon the request of one or
more stockholders or proxies, the vote of the holders of a
majority of shares present shall determine whether one or three
inspectors are appointed. In any case, if any person appointed
as an inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment made by the directors in
advance of the convening of the meeting or at the meeting by the
person acting as presiding officer.
(b) The inspectors of election shall, based upon the list
of stockholders produced at the meeting of stockholders in
accordance with Section 9 of this Article II, determine the
outstanding stock of the Corporation, the stock represented at
the meeting and the existence of a quorum, shall receive votes,
ballots, or consents, shall count and tabulate all votes and
shall determine the result; and in connection therewith, the
inspector shall determine the authority, validity and effect of
proxies, hear and determine all challenges and questions, and do
such other ministerial acts as may be proper to conduct the
election or vote with fairness to all stockholders. If there are
three inspectors of election, the decision, act or certificate of
a majority is effective in all respects as the decision, act or
certificate of all. If no inspectors of election are appointed,
the Secretary shall pass upon all questions and shall have all
other duties specified in this Section.
(c) Upon request of the chairman of the meeting or any
stockholder or his proxy, the inspector(s) of election shall make
a report in writing of any challenge or question or other matter
determined by him and shall execute a certificate of any fact
found in connection therewith. Any such report or certificate
shall be filed with the record of the meeting.
SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The
officer who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, and showing the address of each
stockholder and the number of shares registered in the name of
each stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days
prior to the meeting, at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where
the meeting is to be held. The list shall also be produced and
kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of
the stockholders, the corporate books, or to vote at any meeting
of the stockholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of
its own stock belonging to the Corporation, unless held by it in
a fiduciary capacity, shall not be voted, directly or indirectly,
at any meeting, and shall not be counted in determining the total
number of outstanding shares at any given time. Shares standing
in the name of another corporation, domestic or foreign, may be
voted by such officer, agent or proxy as the bylaws of such
corporation may prescribe or, in the absence of such provision,
as the board of directors of such corporation may determine.
Persons holding stock in a fiduciary capacity shall be entitled
to vote the shares so held. Persons whose stock is pledged shall
be entitled to vote, unless in the transfer by the pledgor on the
books of the Corporation the pledgor expressly empowered the
pledgee to vote thereon, in which case only the pledgee, or
pledgee's proxy, may represent such stock and vote thereon.
SECTION 11. VOTING BY BALLOT. Any question or election at
a meeting of the stockholders may be decided by voice vote unless
the presiding officer of the meeting shall order that the voting
be by ballot, unless otherwise provided in the Amended and
Restated Certificate of Incorporation of the Corporation, or
unless otherwise required by the DGCL.
SECTION 12. STOCKHOLDER ACTION. Any action which may be
taken by the stockholders at any annual or special meeting of the
stockholders of the Corporation may be taken without a meeting,
without prior notice (including, without limitation, any notice
required to be given pursuant to Section B of Article VI of the
Amended and Restated Certificate of Incorporation of the
Corporation if such action were taken at any annual or special
meeting of stockholders) and without a vote of stockholders, if a
consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered
office, its principal place of business, or any officer or agent
of the Corporation having custody of the books in which
proceedings of the meetings of stockholders are recorded.
ARTICLE III
DIRECTORS
SECTION 1. RESIGNATIONS. Any director may resign at any
time by giving written notice to the Board of Directors. Such
resignation shall take effect at the time specified therein; and,
unless tendered to take effect upon acceptance thereof, the
acceptance of such resignation shall not be necessary to make it
effective.
SECTION 2. REGULAR MEETINGS. A regular meeting of the
Board of Directors shall be held, without other notice than this
Section 2, immediately after and at the same place as the annual
meeting of stockholders. In the event such meeting is not held
at such time and place, the meeting may be held at such time and
place as shall be specified in a notice given as provided below
with respect to special meetings of the Board of Directors, or as
shall be specified in a written waiver signed by all of the
directors. The Board of Directors may provide, by resolution,
the time and place, either within or without the State of
Delaware, for the holding of additional regular meetings without
other notice than such resolution.
SECTION 3. SPECIAL MEETINGS. Special meetings of the
Board of Directors may be called by or at the request of the
Chairman of the Board, the President, or a majority of the
directors. The person or persons authorized to call special
meetings of the Board of Directors may, within the notice of such
meetings, designate the time and place, either within or without
the State of Delaware, as the time and place for holding any
meeting of the Board of Directors called by them. In the absence
of such a designation, the place of meeting shall be the
Corporation's principal place of business.
SECTION 4. BUSINESS OF MEETINGS. Except as otherwise
expressly provided in these Amended and Restated Bylaws, any and
all business may be transacted at any meeting of the Board of
Directors.
SECTION 5. NOTICE OF SPECIAL MEETINGS. Notice of any
meeting of the Board of Directors shall be given at least twenty-
four (24) hours previous thereto by prior written notice to each
director at his principal place of business. Notice may be
delivered or given in any manner allowed under Delaware law,
including by facsimile transmission to the facsimile number of
the director which appears in the records of the Corporation.
For purposes of the facsimile transmission, the recipient may
rely upon the facsimile signature of any proper officer who may
provide such notice, as provided by Delaware law or these Amended
and Restated Bylaws, unless and until notice is received that
such signature has been revoked.
SECTION 6. WAIVER OF NOTICE. A written waiver of
notice, signed by a director entitled to notice of a meeting of
the Board of Directors, or of a committee of such Board of which
the director is a member, whether before or after the time of the
meeting, shall be deemed equivalent to the giving of such notice
to that director. Attendance of a director at a meeting of the
Board of Directors, or of a committee of such Board of which the
director is a member, shall constitute a waiver of notice of such
meeting, except when the director attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 7. ATTENDANCE BY TELEPHONE. Directors may
participate in meetings of the Board of Directors by means of
conference telephone or similar communications equipment by means
of which all directors participating in the meeting can hear one
another, and such participation shall constitute presence in
person at the meeting.
SECTION 8. QUORUM AND MANNER OF ACTING; ADJOURNMENT. A
majority of the directors shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors
and the act of a majority of the directors present at any meeting
at which a quorum is present shall be the act of the Board.
SECTION 9. INFORMAL ACTION BY DIRECTORS. Any action which
could be taken at a meeting of the Board of Directors may be
taken without a meeting if all of the directors consent to the
action in writing and the writing or writings are filed with the
minutes of proceedings of the Board.
SECTION 10. PRESUMPTION OF ASSENT. A director of the
Corporation who is present at duly convened meeting of the Board
of Directors, or any committee of such Board, at which action on
any corporate matter is taken, shall be conclusively presumed to
have assented to the action taken unless such director's dissent
shall be entered in the Minutes of the meeting, or unless such
director shall file a written dissent to such action with the
person acting as the Secretary of the meeting before adjournment
of meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
SECTION 11. FILLING OF VACANCIES. A vacancy or vacancies
in the board of directors shall exist when any previously
authorized position of director is not then filled by a duly
elected director, whether caused by death, resignation or
removal. Vacancies shall be filled as provided in the Amended
and Restated Certificate of Incorporation of the Corporation.
SECTION 12. COMPENSATION OF DIRECTORS. The directors may
be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and at each meeting of a committee of the
Board of Directors of which they are members. The Board of
Directors, irrespective of any personal interest of any of its
members, shall have the authority to fix the compensation of
directors, unless otherwise provided in the Amended and Restated
Certificate of Incorporation of the Corporation.
SECTION 13. PRESIDING OFFICER. The presiding officer at
any meeting of the Board of Directors shall be the Chairman of
the Board, or in his absence, the President of the Corporation,
or in the absence of the foregoing persons, any other director
elected by vote of a majority of the directors present at the
meeting.
SECTION 14. INTERESTED DIRECTORS OR OFFICERS. No contract
or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other
Corporation, partnership, association or other organization in
which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer
is present at, or participates in the meeting of the Board or
committee thereof, which authorizes the contract or transaction,
or because his or their votes are counted for such purposes, if:
(a) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are
known to the Board of Directors or the committee, and the
Board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested
directors be less than a quorum; or
(b) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good
faith by vote of the stockholders; or
(c) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or
ratified by the Board of Directors, a committee thereof, or
the stockholders.
Interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors, or
of a committee which authorizes the contract or transaction.
ARTICLE IV
COMMITTEES
SECTION 1. APPOINTMENT AND POWERS. The Board of Directors
may, by resolutions passed by a majority of the whole board,
designate one or more committees, each committee to consist of
one or more of the directors of the Corporation which, to the
extent provided in said resolution or in these Amended and
Restated Bylaws, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may
require it. Not withstanding the foregoing, no committee shall
have the power or authority to:
(a) amend the Amended and Restated Certificate of
Incorporation of the Corporation, as amended or restated from
time to time, except that any such committee may, to the extent
authorized in the resolution or resolutions adopted by the Board
of Directors provide for the issuance of shares of stock by the
Corporation;
(b) adopt an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of
all, or substantially all, of the Corporation's property and
assets;
(c) recommend to the stockholders the sale, lease or
exchange of all, or substantially all, of the Corporations
property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation, or a revocation thereof;
(e) declare a dividend; or
(f) amend the Amended and Restated Bylaws.
SECTION 2. RECORD OF PROCEEDINGS. Each committee shall
keep regular minutes of its proceedings, and, when required by
the Board of Directors, shall report the same to the Board of
Directors.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation may
consist of the Chairman of the Board, the President, one or more
Vice Presidents (the number thereof to be determined by the Board
of Directors), the Secretary, the Treasurer and such Assistant
Secretaries and Assistant Treasurers, or any other officers
thereunto authorized or elected by the Board of Directors. Any
two or more offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
Corporation shall be elected by the Board of Directors at their
first meeting and thereafter at any subsequent meeting and shall
hold their offices for such term as determined by the Board of
Directors. Each officer shall hold office until his successor is
duly elected and qualified, or until his death or disability, or
until he resigns or is removed from his duties in the manner
hereinafter provided.
SECTION 3. REMOVAL AND RESIGNATION. Any officer may be
removed, either with or without cause, by a majority of the
directors then in office, at any meeting of the Board of
Directors, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Any officer
may resign at any time by giving written notice to the Board of
Directors, the President, or the Secretary. Any such resignation
shall take effect at the date of the receipt of such notice or at
any later time specified therein, and, unless tendered to take
effect upon acceptance thereof, the acceptance of such
resignation shall not be necessary to make it effective;
provided, however, that the acceptance, or deemed acceptance, of
such resignation by the Corporation shall be without prejudice to
the contract rights, if any, of the Corporation with respect to
such person so resigning.
SECTION 4. VACANCIES. A vacancy in any office because of
death, resignation or removal or any other cause may be filled
for the unexpired portion of the term by the Board of Directors.
SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board
of the Corporation shall preside at all meetings of the Board of
Directors, and at all stockholders' meetings whether annual or
special, at which he is present, and shall exercise such other
powers and perform such other duties as the Board of Directors
may from time to time assign to him or as may be prescribed by
these Amended and Restated Bylaws. Except in those instances in
which the authority to execute is expressly delegated to another
officer or agent of the Corporation, or a different mode of
execution is expressly prescribed by the Board of Directors or
these Amended and Restated Bylaws, the Chairman of the Board may
execute for and on behalf of the Corporation certificates for its
shares and any contracts, deeds, mortgages, bonds, or other
instruments which the Board of Directors has properly authorized,
and he may execute said instruments under or without the seal of
the Corporation, either individually or with the Secretary, any
Assistant Secretary, or any other officer thereunto authorized by
the Board of Directors, in accordance with the requirements of
the form of the instruments to be executed.
SECTION 6. PRESIDENT. The President shall be the Chief
Executive Officer of the Corporation. Subject to the direction
and control of the Board of Directors, the President shall be in
charge of the business of the Corporation; he shall see that the
resolutions and directions of the Board of Directors are
effectuated, except in those instances in which that
responsibility is specifically assigned to some other person by
the Board of Directors; and in general, he shall discharge all
duties incident to the office of President and such other duties
as may be prescribed by the Board of Directors from time to time.
In the event that the Chairman of the Board is absent from an
annual or special meeting of the stockholders, the president may
preside at such meeting in the place of, and instead, of the
Chairman of the Board, provided, however that the Board of
Directors must expressly approve the President's power to so act
in place of the Chairman at any stockholders' meeting in each and
every circumstance. Except in those instances in which the
authority to execute is expressly delegated to another officer or
agent of the Corporation, or a different mode of execution is
expressly prescribed by the Board of Directors or these Amended
and Restated Bylaws the President may execute for the Corporation
certificates for its shares and any contracts, deeds, mortgages,
bonds, or other instruments which the Board of Directors has
properly authorized, and he may execute said instruments under or
without the seal of the Corporation, either individually or with
the Secretary, any Assistant Secretary, or any other officer
thereunto authorized by the Board of Directors, in accordance
with the requirements of the form of the instruments to be
executed. He may vote all securities which the Corporation is
entitled to vote, except to the extent such authority shall be
vested in a different officer or agent of the Corporation by the
Board of Directors.
SECTION 7. VICE PRESIDENT. The Vice President (or in the
event there be more than one Vice President, each of the Vice
Presidents), if any, shall assist the President in the discharge
of his duties, as the President may direct, and shall perform
such other duties as from time to time may be assigned to him by
the President or by the Board of Directors. In the absence of
the President, or in the event of his inability or refusal to
act, the Vice President (or in the event there be more than one
vice President, the Vice President designated by the Board of
Directors, or by the President, if the Board of Directors has not
made such a designation, or in the absence of any designation,
then in the order of seniority of tenure as Vice President) shall
perform the duties of the President, and when so acting, shall
have the powers of, and be subject to, all the restrictions upon
the President. Except in those instances in which the authority
to execute is expressly delegated to another officer or agent of
the Corporation, or a different mode of execution is expressly
prescribed by the Board of Directors or these Amended and
Restated Bylaws, the Vice President (or each of them, if there
are more than one) may execute for the Corporation certificates
for its shares and any contracts, deeds, mortgages, bonds, or
other instruments which the Board of Directors has properly
authorized, and he may execute said instruments either under or
without the seal of the Corporation, and either individually or
with the Secretary, any Assistant Secretary, or any other officer
thereunto authorized by the Board of Directors, according to the
requirements of the form of the instruments to be executed.
SECTION 8. TREASURER. The Treasurer performs all the
duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him by the President.
Without limiting the foregoing, the Treasurer shall:
(a) have charge and custody of, and be responsible for, the
adequate maintenance of the books and records of the
Corporation;
(b) have charge and custody of all funds and securities of
the Corporation, and be responsible therefor and for the
receipt and disbursement thereof; and
(c) deposit all funds and securities of the Corporation in
such banks, trust companies and other depositories as shall
be selected in accordance with these Amended and Restated
Bylaws. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of
his duties in such sum and with such surety or sureties as
the Board of Directors may determine.
SECTION 9. SECRETARY. The Secretary shall:
(a) record the minutes of the stockholders and of the Board
of Directors meetings in one or more books provided for that
purpose;
(b) see that all notices are duly given in accordance with
the provisions of these Amended and Restated Bylaws or as
required by the DGCL;
(c) be custodian of the corporate books and records and of
the seal of the Corporation;
(d) keep a register of the post office address of each
stockholder which shall be furnished to the Secretary by
such stockholder;
(e) sign with the Chairman of the Board, or the President,
or a Vice President, or any other officer thereunto properly
authorized by the Board of Directors, certificates for the
shares of the Corporation, the issue of which shall gave
been authorized by the Board of Directors, and any
contracts, deeds, mortgages, bonds, or other instruments
which the Board of Directors has authorized to be executed
according to the requirements of the form of the instrument,
except when a different mode of execution is expressly
prescribed by the Board of Directors or these Amended and
Restated Bylaws;
(f) have general charge of the stock-transfer books of the
Corporation;
(g) perform all duties incident to the office of the
Secretary and such other duties as from time to time may be
assigned to him by the President or by the Board of
Directors.
SECTION 10. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
The Assistant Treasurers and Assistant Secretaries shall perform
such duties as shall be assigned to them by the Board of
Directors. When the Secretary is unavailable, any Assistant
Secretary may sign with the President, or a Vice President, or
any other office thereunto authorized by the Board of Directors,
any contracts deeds, mortgages, bonds, or other instruments,
according to the requirements of the form of the instrument,
except when a different mode of execution is expressly prescribed
by the Board of Directors or these Amended and Restated Bylaws.
The Assistant Treasurers shall, respectively, if required by the
Board of Directors, give for the faithful discharge of their
duties in such sums and with such surety or sureties as the Board
of Directors may determine.
SECTION 11. SALARIES. The salaries and additional
compensation, if any, of the officers shall be fixed from time to
time by the Board of Directors and no officer shall be prevented
from receiving such salary and additional compensation, if any,
by reason of the fact that he is also a director of the
Corporation.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize
any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and
on behalf of the Corporation and such authority may be general or
confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of
the Corporation and no evidences of indebtedness shall be issued
in its name, unless authorized by a resolution of the Board of
Directors. Such authority may be general or confined to specific
instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the Corporation, shall be
signed by such officer or officers, agent or agents of the
Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the
credit of the Corporation in such banks, trust companies, or
other depositories as the Board of Directors may select.
SECTION 5. STOCK IN OTHER CORPORATIONS. Shares of any other
corporation which may from time to time be held by the
Corporation may be represented and voted by the President, or by
any proxy appointed in writing by the President, or by any other
person or persons thereunto authorized by the Board of Directors,
at any meeting of the stockholders of such corporation, or by
executing written consents with respect to such shares, where
stockholder action may be taken by written consent. Shares
represented by certificates standing in the name of the
Corporation may be endorsed for sale or transfer in the name of
the Corporation by the President or by any other person or
persons thereunto authorized by the Board of Directors. Shares
belonging to the Corporation need not stand in the name of the
Corporation, but may be held for the benefit of the Corporation
in the name of any nominee designated for such purpose by the
Board of Directors.
ARTICLE VII
CERTIFICATES OF STOCK AND THEIR TRANSFER
SECTION 1. STOCK RECORD AND CERTIFICATES. Records shall be
kept by or on behalf of the Corporation which shall contain the
names and addresses of stockholders, the number of shares held by
them respectively, and the number of certificates, if any, repre-
senting the shares, and in which there shall be recorded all
transfers of shares. Every stockholder shall be entitled to a
certificate signed by the Chairman of the Board of Directors, or
the President or a Vice President, and by the Secretary or an
Assistant Secretary of the Corporation, certifying the class and
number of shares owned by him in the Corporation, provided that
any and all signatures on a certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, the certificate may be issued
by the Corporation with the same effect as if such officer,
transfer agent or registrar was acting in such capacity at the
date of issue.
SECTION 2. TRANSFER AGENTS AND REGISTRARS. The Board of
Directors may, in its discretion, appoint one or more responsible
banks, trust companies or other institutions as the Board of
Directors may deem advisable, from time to time, to act as
transfer agents and registrars of shares of the Corporation; and,
when such appointments shall have been made, no certificate for
shares of the Corporation shall be valid until countersigned by
one of such transfer agents and registered by one of such
registrars.
SECTION 3. STOCKHOLDERS' ADDRESSES. Every stockholder, or
transferee, shall furnish the Secretary, or a transfer agent,
with the address to which notice of meetings and all other
notices may be served upon or mailed to such stockholder or
transferee, and in default thereof, such stockholder or
transferee shall not be entitled to service or mailing of any
such notice.
SECTION 4. LOST CERTIFICATES. In case any certificate for
shares of the Corporation is lost, stolen or destroyed, the Board
of Directors, in its discretion, or any transfer agent duly
authorized by the Board of Directors, may authorize the issue of
a substitute certificate in place of the certificate so lost,
stolen, destroyed. The Corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction
of any such certificate, or the issuance of such new certificate
or uncertified shares.
SECTION 5. DISTRIBUTIONS TO STOCKHOLDERS. To the extent
permitted by the DGCL, and subject to any restrictions contained
in the Amended and Restated Certificate of Incorporation of the
Corporation, as amended or restated from time to time, the Board
of Directors may declare and pay dividends upon the shares of its
capital stock in the manner and upon the terms and conditions
provided by the DGCL and the Amended and Restated Certificate of
Incorporation of the Corporation, as amended or restated from
time to time. Dividends may be paid in cash, in property, or in
shares of the Corporation's capital stock.
SECTION 6. RECORD DATES. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at
any meeting of stockholders, or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion, or exchange of shares, or for
the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which record date shall, in
the case of any meeting of stockholders, be not more than 60, nor
less than ten days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the
date next preceding the day on which notice is given or, if
notice is waived, at the close of business on the date next
preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of, or to vote at, a
meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a
new record date for the adjourned meeting.
Only those who shall be stockholders of record on the record
date fixed in accordance with this Section 6 shall be entitled to
notice of, and to vote at, such meeting and any adjournment of
such meeting, or to receive payment of such dividend or other
distribution, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding the
transfer of any stock on the books of the Corporation after the
applicable record date.
SECTION 7. TRANSFERS OF SHARES. Subject to any limitations
contained in the Amended and Restated Certificate of
Incorporation of the Corporation, the shares of the Corporation
shall be transferable. The Corporation shall have a duty to
register any such transfer provided that the following is
presented to the Corporation or its transfer agents:
(a) the stock certificate endorsed by the appropriate
person or persons; and
(b) reasonable assurance that such endorsement is genuine
and effective; and, provided that (i) the Corporation has no duty
to inquire into adverse claims or has discharged any such duty;
(ii) any applicable law relating to the collection of taxes has
been complied with; and (iii) the transfer is in fact rightful or
is being made to a bona fide purchaser.
Upon registration of such transfer on the stock transfer
books of the corporation, the certificates representing the
shares transferred shall be cancelled and the new record holder,
upon request, shall be entitled to a new certificate or
certificates. The terms and conditions described in the
foregoing provisions of this Section 7 shall be construed in
accordance with the provisions of the Delaware Uniform Commercial
Code, except as otherwise provided by the DGCL. No new
certificate shall be issued until the former certificate or
certificates for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost,
destroyed, wrongfully taken or mutilated certificate, a new one
may be issued therefor upon such terms and indemnity to the
Corporation as the President or the Board of Directors may
prescribe consistent with applicable law and Section 4 of this
Article VII.
SECTION 8. REPURCHASE OF SHARES ON OPEN MARKET. The
Corporation may purchase its shares on the open market and invest
its assets in its own shares, provided that in each case the
consent of the Board of Directors shall have been obtained.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the
Board of Directors
ARTICLE IX
SEAL
The corporate seal may have inscribed thereon the name of
the Corporation and the words "Corporate Seal" and "Delaware".
The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given under the
Amended and Restated Bylaws, the Amended and Restated Certificate
of Incorporation of the Corporation, as amended or restated from
time to time, or the DGCL, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or
after the time stated therein, shall be deemed equivalent to the
giving of such notice.
ARTICLE XI
SEVERABILITY
If any provision of these Amended and Restated Bylaws, or
its application of a provision to any person or circumstances, is
held invalid, the remainder of these Amended and Restated Bylaws
and the application of such provision to other persons or
circumstances shall not be affected by such invalidity.
ARTICLE XII
AMENDMENTS
Unless otherwise provided in the Amended and Restated
Certificate of Incorporation of the Corporation, as amended or
restated from time to time, these Amended and Restated Bylaws be
altered, amended or repealed or new Bylaws may be adopted by
affirmative vote of a majority of the Board of Directors at any
regular or special meeting of the board. The stockholders
entitled to vote shall have the right to change or repeal any
bylaws adopted or by the directors at an annual meeting or any
special meeting called for that purpose or by written consent in
lieu of an annual or special meeting. The Amended and Restated
Bylaws may contain any provisions for the regulation and
management of the affairs of the Corporation not inconsistent
with the DGCL or the Amended and Restated Certificate of
Incorporation of the Corporation, as amended or restated from
time to time.
_____________________________________________________
COLORADO GAMING & ENTERTAINMENT CO.,
as Issuer,
and
BWBH, INC.,
BWCC, INC.,
MILLSITE 27, INC. and
SILVER HAWK CASINO, INC.,
as Guarantors,
and
FLEET NATIONAL BANK,
as Trustee
______________________
Indenture
Dated as of June 7, 1996
______________________
up to $56,000,000
12% Senior Secured Pay-In-Kind Notes
Due 2003
_____________________________________________________
Colorado Gaming & Entertainment Co.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of June 7, 1996
Trust Indenture Indenture
Act Section Section
310(a) (1) . . . . . . . . . . . . . 508
(a) (5) . . . . . . . . . . . . . 508
(b) . . . . . . . . . . . . . 505, 508,
509(d)
(b) (1) . . . . . . . . . . . . . 508
311 . . . . . . . . . . . . . 505
(a) . . . . . . . . . . . . . 512
312(b) . . . . . . . . . . . . . 601
313 . . . . . . . . . . . . . 101
(definition of
"Outstanding")
(a), (b) . . . . . . . . . . . . . 604
(c) . . . . . . . . . . . . . 604, 605(c)
314 . . . . . . . . . . . . . 1109(a)
(a) . . . . . . . . . . . . . 605(c), 909(a)
(a) (4) . . . . . . . . . . . . . 908(a)
(c) . . . . . . . . . . . . . 301(d)
(d) . . . . . . . . . . . . . 1105(b)
315(b) . . . . . . . . . . . . . 501
(d) . . . . . . . . . . . . . 101
(definition of
"Outstanding")
(e) . . . . . . . . . . . . . 509(d)
316(a) . . . . . . . . . . . . . 101
(definition of
"Outstanding")
__________________
Note: This reconciliation and tie shall not, for any purpose,
be deemed to be a part of the Indenture.
INDENTURE, dated as of June 7, 1996, among Colorado
Gaming & Entertainment Co., formerly known as Hemmeter
Enterprises, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the
"Company"), as Issuer, having its principal office at One Norwest
Center, 1700 Lincoln, Denver, Colorado 80203, BWBH, Inc., a
corporation duly organized and existing under the laws of the
State of Delaware, BWCC, Inc., a corporation duly organized and
existing under the laws of the State of Delaware, Millsite 27,
Inc., a corporation duly organized and existing under the laws of
the State of Delaware, and Silver Hawk Casino, Inc., a
corporation duly organized and existing under the laws of the
State of Delaware, as Guarantors (each, a "Guarantor" and
collectively, together with any additional guarantor pursuant to
Sections 806 or 1318, the "Guarantors"), and Fleet National Bank,
a national banking association, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an
issue of 12% Senior Secured Pay-In-Kind Notes Due 2003 (herein
called the "Notes"), of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
It is a condition precedent to the effectiveness of the
First Amended Joint Plan of Reorganization of Hemmeter
Enterprises, Inc., BWBH, Inc., BWCC, Inc. and Millsite 27, Inc.,
dated February 14, 1996, as the same may have been or may be
amended from time to time, in the Bankruptcy Cases that, among
other things, the Company and the Guarantors shall have executed
this Indenture, the Company shall have issued the Notes and each
of the Company and the Guarantors shall have granted and conveyed
the Noteholder Security Interest in and to the Collateral
pursuant to the Noteholder Documents.
All things necessary have been done to make the Notes,
when executed by the Company and authenticated and delivered
hereunder and duly issued by the Company, the valid obligations
of the Company and to make this Indenture a valid and binding
agreement of the Company, in accordance with their and its terms.
RECITALS OF THE GUARANTORS
Each of the Guarantors has duly authorized its
guarantee of the Notes and certain other obligations of the
Company as set forth in Article Thirteen hereof and endorsed on
the Notes (together with any amendment to the Guarantee of the
Notes to be executed by any Guarantor, the "Guarantee"), and to
provide therefor, each Guarantor has duly authorized the
execution and delivery of this Indenture.
All things necessary have been done to make the
Guarantee, when executed by the Guarantors and endorsed on the
Notes that will be authenticated and delivered hereunder and duly
issued by the Company, the valid and binding obligations of the
Guarantors and to make this Indenture a valid and binding
agreement of the Guarantors in accordance with their and its
terms.
NOW, THEREFORE, each party hereto agrees as follows for
the benefit of the other parties hereto and for the ratable
benefit of the Holders of the Notes:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 101. Definitions.
"Act", when used with respect to any Holder, has the
meaning specified in Section 105.
"Additional Deed of Trust" has the meaning specified in
Section 922.
"Affiliate" of any specified Person means any other
Person that, directly or indirectly, controls, is controlled by
or is under direct or indirect common control with, such
specified Person and with respect to any natural Person, any
other Person having a relationship by blood, marriage or
adoption, not more remote than first cousins with such natural
Person. For the purposes of this definition, "control" when used
with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock or other equity
interests, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing;
provided that, in any event, any Person that owns directly or
indirectly 15% or more of the securities having ordinary voting
power for the election of directors or other governing body of
corporation or 15% or more of the partnership or other ownership
interests of any other Person (other than as a limited partner of
such other Person) will be deemed to control such corporation,
partnership or other Person.
"Affiliate Transaction" has the meaning specified in
Section 920.
"Agent" means any Note Registrar, Paying Agent, co-note
registrar, co-paying agent or other agent appointed pursuant to
Section 902.
"Amortization Expense" means, for any period, the
amount of the amortization expense, including bond discount or
premium, that is reflected on the financial statements of the
Company and any Company Subsidiaries consolidated in such
financial statements for such period in accordance with GAAP and
which was determined in accordance with GAAP.
"Asset Acquisition" means (a) any capital contribution
(including, without limitation, transfers of cash or other
property to others or payments for property or services for the
account or use of others, or otherwise), or purchase or
acquisition of Capital Stock or other similar ownership or profit
interest, by the Company or any of the Company Subsidiaries in
any other Person, in either case, pursuant to which such other
Person shall become a Company Subsidiary or any of the Company
Subsidiaries or shall be merged with or into the Company or any
of the Company Subsidiaries or (b) any acquisition by the Company
or any of the Company Subsidiaries of the assets of any Person
which constitute substantially all of an operating unit, division
or business of such Person.
"Average Life" means, as of the date of determination,
with respect to any debt security, the quotient obtained by
dividing (i) the sum of the product of the numbers of years from
the date of determination to the dates of each successive
scheduled principal (or redemption) payment of such debt security
multiplied by the amount of such principal (or redemption)
payment by (ii) the sum of all such principal (or redemption)
payments.
"Bank Documents" means each loan agreement, note,
security agreement, guaranty, mortgage, deed of trust and each
other agreement, instrument or document relating to the Bank
Indebtedness, as amended, modified or replaced from time to time.
"Bank Facility" means any revolving credit or term loan
facility, any facility providing purchase money financing for the
acquisition of equipment and any facility providing for the
creation of Capitalized Lease Obligations entered into between
the Company and/or any Company Subsidiary and one or more
financial institutions, institutional lenders, finance companies,
equipment lessors or equipment manufacturers or vendors, that, in
each case, are not Affiliates of the Company or any Company
Subsidiary, providing financing for working capital or other
corporate purposes on a secured or unsecured basis, whether now
existing or hereafter created and whether replacing or
refinancing any Bank Facility.
"Bank Indebtedness" means, at any date, all
Indebtedness of the Company and the Company Subsidiaries under
any Bank Facility and under any guarantee of such Indebtedness
executed by the Company and/or any Company Subsidiary (including,
without limitation, all principal, premium, interest, fees,
expenses, indemnities, other amounts payable in connection with
such Indebtedness and all rights, claims, demands, action or
causes of action of any nature whatsoever that the holders of
Bank Indebtedness may now hold or hereafter may acquire against
the Company and/or any Company Subsidiary, including, without
limitation, all interest accruing after commencement of any case,
proceeding, or other action relating to the bankruptcy,
insolvency, or reorganization of the Company and/or any Company
Subsidiary).
"Bank Indebtedness Amount" means $17,500,000, less the
aggregate payments of principal made on account of, and required
pursuant to the terms of, any Bank Indebtedness by reason of any
transaction or event (other than an Unrestricted Asset Sale)
involving all or any portion of the Collateral (including,
without limitation, a Restricted Asset Sale, an Event of Loss or
another transaction or event relating to the release of all or a
portion of the Collateral); provided, however, that if the Bank
Indebtedness Amount is reduced pursuant to the foregoing sentence
and, thereafter, the Company or any Company Subsidiary (i) makes
a Permitted Related Investment, and (ii) the Trustee receives a
valid and perfected first Lien (subject to Permitted Liens) in
and upon the assets comprising such Permitted Related Investment,
the Bank Indebtedness Amount shall be increased, but not above
$17,500,000, by the lesser of (i) the Fair Market Value of the
Collateral acquired as part of such Permitted Related Investment
(as of the date such Lien is perfected) and (ii) the amount of
such Permitted Related Investment (but only to the extent that
such Permitted Related Investment was not made with funds
withdrawn for such purpose from the Collateral Account) (it being
agreed that, notwithstanding anything herein to the contrary, any
voluntary prepayment of principal made on account of any Bank
Indebtedness (including, without limitation, any voluntary
repayment of any advance under any revolving facility) or any
payment of principal made on account of Bank Indebtedness that
was payable solely by reason of the occurrence of a particular
date set forth in the applicable Bank Document (including,
without limitation, any regularly scheduled installment of
principal under any term loan) and not by reason of any event or
transaction involving all or a portion of the Collateral (such as
a sale or casualty) shall not reduce the Bank Indebtedness Amount
hereunder).
"Bank Security Interest" means any Lien on the
Collateral and other assets and property of the Company and the
Company Subsidiaries securing the Secured Bank Indebtedness.
"Bankruptcy Cases" means Bankruptcy Case Nos. 96-
10001A, 96-10018A, 96-10019A and 96-10020A pending in the United
States Bankruptcy Court for the Eastern District of Louisiana.
"Bankruptcy Law" means any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, including,
without limitation, the Federal Bankruptcy Code or any similar
federal or state law for the relief of debtors.
"Black Hawk Casino" means the casino located in Black
Hawk, Colorado owned by BWBH on the date of this Indenture.
"Black Hawk Casino Event" means (i) a sale, assignment,
lease, transfer, conveyance or other disposition, directly or
indirectly, of the Black Hawk Casino or all or a significant
portion of BWBH's assets or properties, whether in a single
transaction or a series of related transactions, to any Person,
(ii) BWBH consolidates or merges with or into or winds up into
any other Person, (iii) the failure of the Company to own,
directly or indirectly, 100% of all classes of issued and
outstanding Capital Stock of BWBH, (iv) the occurrence of a
Restricted Asset Sale involving any assets or properties owned or
leased by BWBH or used by BWBH in the operation of the Black Hawk
Casino, or (v) the occurrence of an Event of Loss with respect to
BWBH or the Black Hawk Casino ; provided, however, that, with
respect to an Event of Loss involving any property or asset that
has a Fair Market Value of less than $3 million, a Black Hawk
Casino Event shall be deemed to have occurred under clause (v)
above only if the efficient operation of BWBH and the Black Hawk
Casino has not resumed within a period of twenty (20) Business
Days after the occurrence of the loss, destruction or material
damage to the property or asset giving rise to such Event of
Loss.
"Board of Directors" means either the board of
directors of the Company or any duly authorized committee of that
board.
"Board Resolution" means, with respect to any Person, a
duly adopted resolution of the board of directors of such Person.
"Business Day" means any day other than a Saturday, a
Sunday or any other day on which banking institutions or trust
companies in the State of New York, City of New York, or the city
in which the principal Corporate Trust Office of the Trustee is
located, are not required to be open.
"BWBH" means BWBH, Inc., a Delaware corporation.
"Capital Expenditure" means for any period, the sum of
the aggregate of all expenditures (whether paid in cash or
accrued as a liability) by the Company and the Company
Subsidiaries during that period which, in accordance with GAAP,
are or should be included in "additions to property, plant or
equipment" or similar items reflected in the consolidated
statement of cash flows of the Company. For purposes of this
definition, the purchase price of equipment which is purchased
simultaneously with the trade-in of existing equipment owned by
the Company or any Company Subsidiary or with insurance proceeds
(as permitted hereunder) shall be included in Capital
Expenditures only to the extent of the gross amount of such
purchase price less any credit granted by the seller of such
equipment for the equipment being traded in at such time or the
amount of such proceeds, as the case may be. For purposes of
determining the Consolidated Fixed Charges Coverage Ratio,
"Capital Expenditures" shall exclude all expenditures in respect
of the construction of Phase II of the 600-space parking garage
that the Company currently intends to construct adjacent to the
Black Hawk Casino and which is described in Appendix C to the
Disclosure Statement, dated February 14, 1996, for the Plan of
Reorganization.
"Capital Stock" means, with respect to any Person, any
and all shares, interests, participations, or other equivalents
or similar ownership or profit interest (however designated) of
such Person, including, without limitation, each class of common
stock and preferred stock of such Person or each class of
partnership interests of such Person.
"Capitalized Lease Obligation" means, with respect to
any Person, any obligation of a Person to pay rent or other
amounts under a lease of (or other agreement conveying the right
to use) any property (whether real, personal or mixed) that is
required to be classified and accounted for as a capital lease on
the face of a balance sheet of such Person prepared in accordance
with GAAP, and, for the purpose of this Indenture, the amount of
such obligation at any date of determination shall be the
capitalized amount thereof at such date, determined in accordance
with GAAP and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease
(or other agreement) prior to the first date upon which such
lease (or other agreement) may be terminated by the lessee
without payment of a penalty.
"Cash Equivalents" means (a) readily marketable U.S.
Government Obligations maturing one year or less from the date of
purchase, (b) commercial paper having the highest rating
obtainable from either Moody's Investor Service, Inc. or Standard
& Poor's Corporation, Inc., (c) any certificate of deposit
maturing one year or less from the date of purchase issued by,
bankers' acceptances and deposit accounts of, and time deposits
with, a commercial bank chartered in the United States of America
or Canada with capital, surplus and undivided profits aggregating
in excess of $100,000,000, (d) any demand or fully insured time
deposit used in the ordinary course of the Company's business
with a commercial bank insured by the Federal Deposit Insurance
Corporation, and (e) any share of any money market fund that
invests solely in Cash Equivalents of the kind described in
clauses (a) through (d), above.
"Central City Casino" means the casino located in
Central City, Colorado owned by BWCC, Inc. on the date of this
Indenture.
"Change of Control" has the meaning specified in
Section 1011.
"Change of Control Purchase Offer" has the meaning
specified in Section 1011.
"Change of Control Purchase Price" has the meaning
specified in Section 1011.
"Collateral" means all "Collateral" referred to in any
of the Noteholder Documents and all other property or assets (or
interests in property or assets) that become subject to a Lien in
favor of the Trustee or the Holders under any of the Noteholder
Documents or applicable law, or by any other means.
"Collateral Account" means a deposit account in the
name of the Company, but under the sole dominion and control of
the Trustee, in which the Company and the Guarantors shall
deposit or shall cause to be deposited all Collateral Proceeds on
the Business Day on which such Collateral Proceeds are received
in accordance with Section 1105(c).
"Collateral Control Period" means the longer of: (i)
the earlier of (x) the period of one hundred eighty (180) days
after a Senior Event of Default and (y) the date on which such
Senior Event of Default shall have been cured or waived or shall
cease to exist or on which the Secured Bank Indebtedness shall
have been discharged or paid in full in cash or in any other form
acceptable to the holders of Secured Bank Indebtedness, and (ii)
the period during which the holders of Secured Bank Indebtedness
are proceeding to enforce their rights and remedies with respect
to the Collateral under the Bank Documents; provided, however,
that during any 360-day period there shall be no more than one
(1) Collateral Control Period.
"Collateral Proceeds" means (a) any Net Cash Proceeds
received or receivable by the Company or any Company Subsidiary
as a result of an Event of Loss or a Restricted Asset Sale that
involves all or any portion of the Collateral and (b) all
interest or other earnings on amounts on deposit in the
Collateral Account.
"Collateral Proceeds Release Date" has the meaning
specified in Section 1105.
"Collateral Release Date" has the meaning specified in
Section 1105.
"Commission" means the Securities and Exchange
Commission, as from time to time constituted, created under the
Securities Exchange Act of 1934, or, if at any time after the
execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" means, with respect to any Person, any
and all shares, interests, participation and other equivalents
(however designated, whether voting or non-voting) of such
Person's common stock, whether now outstanding or issued after
the date of this Indenture, and includes, without limitation, all
series and classes of such common stock.
"Company" means the Person named as the "Company" in
the first paragraph of this Indenture, until a successor Person
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Company" shall mean such
successor Person.
"Company Request" or "Company Order" means a written
request or order signed in the name of the Company by its
Chairman, its President, any Vice President, its Treasurer or an
Assistant Treasurer, and delivered to the Trustee.
"Company Subsidiary" means any corporation,
partnership, limited liability company, joint venture, trust,
estate or other entity of which (or in which) 50% or more of
(a) any class of the issued and outstanding Capital Stock or
other equity or ownership interest, (b) the interest in the
capital or profits of such partnership or joint venture or (c)
the beneficial interest in such trust or estate, is at the time
directly or indirectly owned or controlled by the Company, by the
Company and one or more of the Company Subsidiaries or by one or
more of the Company Subsidiaries.
"Consolidated" refers to the consolidation of accounts
in accordance with GAAP.
"Consolidated Cash Flow" means, for any fiscal quarter
in 1995, $2,800,000, and, for any period thereafter, the sum of:
(a) the Consolidated Net Income of the Company and the
Company Subsidiaries for such period, plus;
(b) the sum of the following items (but only to the
extent deducted in determining Consolidated Net Income and
without duplication): (i) all Consolidated Fixed Charges;
(ii) all Amortization Expense; (iii) all Depreciation
Expense; (iv) all Consolidated Income Tax Expense; (v) all
professional fees and other extraordinary expenses incurred
in connection with the Bankruptcy Cases or the restructuring
contemplated by the Plan of Reorganization; (vi) all
reductions or charges to Consolidated Net Income resulting
from the consummation of the Plan of Reorganization
(including, without limitation, as a result of the use by
the Company and the Company Subsidiaries of "fresh start"
accounting); and (vii) all charges to Consolidated Net
Income resulting from the write down or the sale or other
disposition of the investment of the Company or BWCC, Inc.
in the Central City Casino.
"Consolidated Coverage Ratio" means the ratio of (a)
Consolidated Cash Flow of the Company and the Company
Subsidiaries for the four full fiscal quarters for which
financial statements are available that immediately precede the
date of the transaction or other circumstances giving rise to the
need to calculate the Consolidated Coverage Ratio (the
"Transaction Date") to (b) the Consolidated Fixed Charges for the
fiscal quarter in which the Transaction Date occurs and to be
accrued during the three fiscal quarters immediately following
such fiscal quarter (based upon the pro forma amount of
Indebtedness of the Company and the Company Subsidiaries
outstanding on the Transaction Date and after giving effect to
the transaction in question). For purposes of this definition,
Consolidated Cash Flow and the items referred to in the preceding
clause (b) shall be calculated after giving effect on a pro forma
basis for the period of such calculation to (i) the incurrence or
retirement of any Indebtedness of the Company and the Company
Subsidiaries (including the Notes) at any time during the
Reference Period but on or after the Issue Date or subsequent to
the Reference Period and on or prior to the Transaction Date,
including, without limitation, the incurrence of the Indebtedness
giving rise to the need to make such calculation, as if such
Indebtedness were incurred on the first day of the Reference
Period; provided that if the Company or any of the Company
Subsidiaries directly or indirectly guarantees Indebtedness of a
third person, the above clause shall give effect to the
incurrence of such guaranteed Indebtedness as if the Company or
such Company Subsidiary had directly incurred such guaranteed
Indebtedness and (ii) any Restricted Asset Sale, Event of Loss or
Asset Acquisition (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a
result of the Company or any of the Company Subsidiaries
(including any Person who becomes a Company Subsidiary as result
of the Asset Acquisition) incurring Acquired Indebtedness)
occurring during the Reference Period and any retirement of
Indebtedness in connection with such Asset Acquisition, as if
such Restricted Asset Sale, Event of Loss or Asset Acquisition
and/or retirement occurred on the first day of the Reference
Period. Furthermore, in calculating the denominator (but not the
numerator) of "Consolidated Coverage Ratio," interest on
Indebtedness determined on a fluctuating basis that cannot be
determined in advance shall be deemed to accrue at the rate in
effect on the Transaction Date for such entire period.
"Consolidated EBITDA" means, for any period, the sum
of:
(a) the Consolidated Net Income of the Company and the
Company Subsidiaries for such period, plus;
(b) the sum of the following items (but only to the
extent deducted in determining Consolidated Net Income and
without duplication): (i) all Consolidated Fixed Charges;
(ii) all Amortization Expense; (iii) all Depreciation
Expense; and (iv) all Consolidated Income Tax Expense.
"Consolidated Fixed Charges" means as applied for any
period (a) the sum of the following items (without duplication):
(i) the aggregate amount of interest recognized by the Company
and the Company Subsidiaries in respect of their Consolidated
Indebtedness (including, without limitation, all interest
capitalized by the Company and the Company Subsidiaries during
such period, any amortization of deferred finance cost and debt
discount or premium and all commissions, discounts and other
similar fees and charges owed by the Company or any of the
Company Subsidiaries for letters of credit and bankers'
acceptance financing and the net costs associated with interest
rate protection agreements of the Company and the Company
Subsidiaries); (ii) the aggregate amount of the interest
component of rentals in respect of Capitalized Lease Obligations
recognized by the Company and the Company Subsidiaries; (iii) to
the extent any Indebtedness of any other Person is guaranteed by
the Company or any of the Company Subsidiaries, the aggregate
amount of interest paid or accrued by such other Person during
such period attributable to any such guaranteed Indebtedness;
(iv) dividends on Preferred Stock of any Company Subsidiary that
is held by a Person other than the Company or a Company
Subsidiary; (v) the interest portion of any deferred payment
obligation; and (vi) one-third of the rental expense attributable
to operating leases; and less (b) to the extent included in
clause (a) above, Amortization Expense or write-off of deferred
financing costs of the Company and the Company Subsidiaries and
any charge related to any premium or penalty paid in connection
with redeeming or retiring any Indebtedness before its stated
maturity, with the foregoing amounts in the case of both clauses
(a) and (b) above, as determined in accordance with GAAP.
"Consolidated Fixed Charges Coverage Ratio" means, with
respect to any four fiscal quarter period, the ratio of
(a) Consolidated EBITDA for such four fiscal quarter period less
Capital Expenditures for such four fiscal quarter period to
(b) Consolidated Fixed Charges for such four fiscal quarter
period.
"Consolidated Income Tax Expense" means, for any
period, federal, state, local and foreign income taxes of the
Company and the Company Subsidiaries for such period, determined
in accordance with GAAP; provided that, for purposes hereof,
"income taxes" shall specifically exclude any taxes paid to or
imposed by a Gaming Authority or a Liquor Authority.
"Consolidated Net Income" means, for any period, the
aggregate of the consolidated Net Income (or net loss) of the
Company and the Company Subsidiaries (determined in accordance
with GAAP); adjusted to exclude (to the extent included in such
consolidated Net Income) (a) the Net Income, if positive, of any
Person, other than a Company Subsidiary or any other Person whose
financial statements are (or should have been) consolidated for
financial statement reporting purposes with the financial
statements of the Company in accordance with GAAP, in which the
Company, any Company Subsidiary or such other Person has an
interest, except to the extent the amount of cash dividends or
other cash distributions in respect of Capital Stock or other
interest owned is actually paid (out of funds legally available
therefrom) to and received by the Company, any Company Subsidiary
or such other Person, but not in excess of such Person's pro rata
share of such Person's Net Income for such period; (b) all items
classified as gains (but not losses) that are either
extraordinary (as determined in accordance with GAAP) or are
nonrecurring (only to the extent included in computing such Net
Income (or net loss) and without duplication); (c) the Net
Income, if positive, of any other Person (except to the extent
includible in clause (a) above) accrued or attributable to any
period before the date on which it becomes a Company Subsidiary
or is merged into or consolidated with the Company or any of the
Company Subsidiaries or such other Person's property or Capital
Stock (or a portion thereof) is acquired by the Company or any of
the Company Subsidiaries; and (d) the Net Income, if positive, of
any Company Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Company
Subsidiary of that income is not at the time permitted, directly
or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, law,
rule or governmental regulations applicable to that Company
Subsidiary or its stockholders (other than as a result of
restrictions on distribution permitted pursuant to Section 915).
"Consolidated Net Worth" means, of any Person at any
date of determination, the aggregate of capital, surplus and
retained earnings of such Person (plus amounts of equity
attributable to Preferred Stock) and its Subsidiaries and any
other Person ("Consolidated Subsidiary") whose financial
statements are (or should have been) consolidated for financial
statement reporting purposes, with the financial statements of
such Person in accordance with GAAP, as would be shown on the
consolidated balance sheet of such Person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in
calculating such equity), (a) the amount of capital, surplus and
accrued but unpaid dividends attributable to any Disqualified
Stock or treasury shares, (b) all upward recalculations or other
write-ups subsequent to the date of this Indenture in the book
value of any asset owned by such Person or a Consolidated
Subsidiary of such Person, (c) goodwill and other intangible
assets and (d) Investments in Persons that are not Consolidated
Subsidiaries.
"Contingent Obligation" means, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person,
whether or not contingent (a) to purchase any such primary
obligation or any property constituting direct or indirect
security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary
obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or
hold harmless the owner of any such primary obligation against
loss in respect thereof; provided, however, that the term
Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount
(based on the maximum reasonably anticipated net liability in
respect thereof as determined by the Company in good faith) of
the primary obligation or portion thereof in respect of which
such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated net liability in
respect thereof (assuming such Person is required to perform
thereunder) as determined by the Company in good faith.
"Corporate Trust Office" means the principal corporate
trust office of the Trustee, at which at any particular time its
corporate trust business shall be administered, which office at
the date of execution of this Indenture is located at 777 Main
Street, Hartford, Connecticut.
"Corporation" includes corporations, associations,
companies, limited liability companies and business trusts.
"Covenant Defeasance" has the meaning specified in
Section 1203.
"Custodian" means any receiver, trustee, assignee,
liquidator, or similar official under any Bankruptcy Law.
"Default" means any Event of Default, or an event that
would constitute an Event of Default but for the requirement that
notice be given or time elapse or both.
"Defaulted Interest" has the meaning specified in
Section 208.
"Default Premium Amount" means (i) for the period
following the Issue Date through June 1, 2001, an amount equal to
4% of the unpaid principal amount of all Outstanding Notes,
(ii) for the twelve-month period following June 1, 2001, an
amount equal to 3% of the unpaid principal amount of all
Outstanding Notes, and (iii) for the period subsequent to June 1,
2002, an amount equal to 2% of the unpaid principal amount of all
Outstanding Notes.
"Depreciation Expense" means, for any period, the
provision for depreciation that is reflected on the financial
statements of the Company and any Company Subsidiaries
consolidated in such financial statements for such period in
accordance with GAAP and which was determined in accordance with
GAAP.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or
before the Maturity Date of the Notes.
"Environmental Law" means the common law and all
federal, state, local and foreign laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated,
approved or entered thereunder, now or hereafter in effect,
relating to pollution or protection of human health or the
environment, including, without limitation, laws relating to (a)
emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or
hazardous constituents, substances or wastes, including, without
limitation, petroleum (including crude oil or any fraction
thereof) or any petroleum product or other wastes, chemicals or
substances regulated by any Environmental Law (collectively
referred to as "Hazardous Materials"), into the environment
(including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), (b) the
manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport or handling of Hazardous
Materials, and (c) underground storage tanks, and related piping,
and emissions, discharges, releases or threatened release of
Hazardous Materials therefrom.
"Event of Default" has the meaning specified in Section
401.
"Event of Loss" means, with respect to any property or
asset (tangible or intangible, real or personal) that either is
(A) material to the efficient operation of any Gaming Facility of
the Company or any Company Subsidiary or (B) has a Fair Market
Value of $3 million or more, any of the following: (i) any loss,
destruction or material damage of such property or asset; (ii)
any institution of any proceedings for the condemnation or
seizure of such property or asset or for the exercise of any
right of eminent domain or navigational servitude; or (iii) any
actual condemnation, seizure or taking, by exercise of the power
of eminent domain or otherwise, of such property or asset, or
confiscation of such property or asset or the requisition of the
use of such property or asset.
"Event of Loss Offer", "Event of Loss Offer Notice" and
"Event of Loss Purchase Price" have the meanings specified in
Section 918.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in
an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Unless
otherwise specified by the Indenture, Fair Market Value of
property having a value in excess of $500,000 shall be determined
by the Board of Directors of the Company acting in good faith and
shall be evidenced by a Board Resolution delivered to the
Trustee.
"Federal Bankruptcy Code" means Title 11 of the United
States Code, as amended from time to time.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the financial
Accounting Standards Board that are applicable as of the Issue
Date.
"Gaming Authority" means any agency, authority, board,
bureau, commission, department, office or instrumentality of any
nature whatsoever of the United States federal or foreign
government, any state, province or any city or other political
subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, with authority to
regulate any gaming operation (or proposed gaming operation)
owned, managed, or operated by the Company or any of the Company
Subsidiaries.
"Gaming Facilities" means any land-based, riverboat,
dockside or other casino gaming business of a Person or any
business that is related to, ancillary or supportive of,
connected with or arising out of the gaming business of such
Person (including, without limitation, developing and operating
lodging, dining, child care, amusement, sports or entertainment
facilities, transportation services or other related activities
or enterprises and any additions or improvements thereto).
"Gaming Laws" means each gaming law of any Gaming
Authority, including, without limitation, the State of Colorado,
and its political subdivisions, as amended from time to time, and
the regulations promulgated and rulings issued thereunder
applicable to the Company or any of the Company Subsidiaries or
shareholders.
"Governmental Authority" means any government (federal,
state or local), any governmental agency, bureau or board or any
governmental office, officer or official (including
environmental) having jurisdiction over the Company or any of the
Company Subsidiaries.
"Guarantee" has the meaning stated in the recital of
the Guarantors in this Indenture.
"guarantee" by any Person means any obligations,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Indebtedness of any other Person and, without
limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person: (i) to
purchase or pay (or advance or supply funds for the purchase of
payment of) such Indebtedness of such other Person (whether
arising by virtue of participation arrangements, by agreement to
keep well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain a financial statement conditions or
otherwise); or (ii) entered into for the purpose of assuring the
obligee of such Indebtedness in any other manner of the payment
thereof, or to protect such obligee of such Indebtedness in any
other manner of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided
that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business.
"Guarantor" and "Guarantors" means the Persons named as
Guarantors pursuant to the first paragraph of this instrument.
"Holder" means a Person in whose name a Note is
registered in the Note Register.
"Indebtedness" of any Person means (a) any liability,
contingent or otherwise, of such Person (i) for borrowed money
(whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), (ii)
evidenced by a note, bond, debenture or similar instrument,
letters of credit, acceptances or other similar facilities (other
than accounts payable to trade creditors created or assumed by
such Person in the ordinary course of business), (iii) for any
Capitalized Lease Obligation or (iv) any obligation relating to
the balance deferred and unpaid of the purchase price of property
or services, including, without limitation, a purchase money
obligation (other than accounts payable to trade creditors
created or assumed by such Person in the ordinary course of
business); (b) any reimbursement obligations relating to letters
of credit issued for the account of such Person; (c) any
obligation secured by a Lien to which the property or assets
(including, without limitation, leasehold interests and any other
tangible or intangible property rights) of such Person are
subject, whether or not the obligations secured thereby shall
have been assumed by or shall otherwise be such Person's legal
liability; (d) all obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect
of any Capital Stock of or other ownership or profit interest in
such Person or any of its Affiliates or any warrants, rights or
options to acquire such Capital Stock, valued, in the case of
Disqualified Stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid
dividends; (e) all indebtedness incurred by such Person in the
acquisition (whether by way of purchase, merger, consolidation or
otherwise) of any business, real property or other assets, except
assets, other than capital assets, acquired in the ordinary
course of the conduct of the acquiror's business ("Acquired
Indebtedness"); (f) all Interest Rate and Currency Protection
Obligations; (g) any guarantee by such Person of any
indebtedness, obligation or liability of any other Person of the
kind described in any of the preceding clauses; and (h) any and
all deferrals, renewals, extensions and refundings of, or
amendments, restructurings, modifications or supplements to, any
indebtedness, obligation, guarantee or liability of the kind
described in any of the preceding clauses.
"Indenture" means this instrument as originally
executed and as it may from time to time be supplemented or
amended in accordance with the terms hereof.
"Indenture Obligations" has the meaning specified in
Section 1301.
"Independent", when used with respect to any Person,
means such other Person who (a) is in fact independent, (b) does
not have any direct financial interest or any material indirect
financial interest in the Company or in any Affiliate of the
Company and (c) is not an officer, employee, promoter,
underwriter, trustee, partner or person performing similar
functions for the Company or a spouse, family member or other
relative of any such Person. Whenever it is provided in the
Indenture that any Independent Person's opinion or certificate
shall be furnished to the Trustee, such Person shall be appointed
by the Company and approved by the Trustee in the exercise of
reasonable care, and such opinion or certificate shall state that
the signer has read this definition and that the signer is
Independent within the meaning hereof.
"Interest and Currency Rate Protection Obligations"
means the obligations of any Person pursuant to any direct or
indirect interest rate swap, cap or collar agreement, interest
rate future or option contract, currency swap agreement, currency
future or option contract and other similar agreement or
arrangement designed to hedge against fluctuations in interest
rates or foreign exchange rates.
"Interest Payment Date" means December 1, 1996 and each
June 1 and December 1 thereafter.
"Investment", by any Person in any other Person, means
(without duplication) (i) any, direct or indirect, loan, advance,
deposit with, guarantee or other extension of credit or capital
contribution to (including, without limitation, transfers of cash
or other property to others or payments for property or services
for the account or use of others, or otherwise) by such Person to
such other Person, (ii) any purchase or acquisition (whether for
cash, property, services, securities or other property) by such
Person of Capital Stock, partnership or other ownership
interests, warrants, rights, options, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by such
other Person or Indebtedness of such other Person secured by (or
for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on any assets
or properties (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person
has not assumed or become liable for the payment of such
Indebtedness, (iii) the entering into by such Person of any
guarantee, or other Contingent Obligation, with respect to
Indebtedness or other liability of such other Person (except in
the case of the Company or a Company Subsidiary, the guarantee by
the Company of any of the obligations of any Company Subsidiary
or by any Company Subsidiary of any of the obligations of the
Company or any other Company Subsidiary) or (iv) any commitment
or agreement to do any of the foregoing. The amount of any
Investment shall be the original cost of such Investment, plus
the cost of all additions thereto, and minus the amount of any
portion of such Investment repaid to the Person making such
Investment in cash as a repayment of principal or a return of
capital, as the case may be, but without any other adjustments
for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment. In determining the
amount of any Investment involving a transfer of any property
other than cash, such property shall be valued at its fair value
at the time of such transfer, as determined in good faith by the
Board of Directors of the person making such transfer, whose
determination will be conclusive absent manifest error.
"Issue Date" means June 7, 1996.
"Legal Defeasance" has the meaning specified in Section
1202.
"Legal Requirements" means all applicable restrictive
covenants, applicable zoning and subdivision ordinances and
building codes, all applicable health and environmental
regulations, all applicable Gaming Laws, Liquor Laws and all
other applicable laws, ordinances, rules, regulations, judicial
decisions, administrative orders, and other requirements of any
Governmental Authority having jurisdiction over the Company or
any Company Subsidiary in effect either at the time of execution
of this Indenture or at any time during the term hereof.
"Lien" means any mortgage, pledge, lien (statutory or
other), encumbrance, assignment for security, deposit arrangement
or preference or other security agreement of any kind or nature
whatsoever, charge, hypothecation, interest or adverse claim
affecting title or resulting in an encumbrance upon or with
respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired, or a security
interest of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell and any
filing of or agreement to give any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any
jurisdiction, excluding operating leases).
"Liquor Authority" means any agency, authority, board,
bureau, commission, department, office or instrumentality of any
nature whatsoever of the United States federal or foreign
government, any state, province or any city or other political
subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, with authority to
regulate the service or distribution of liquor or alcoholic
beverages by the Company or any of the Company Subsidiaries.
"Liquor Laws" means each law of any Liquor Authority,
including, without limitation, the State of Colorado, and its
political subdivisions, as amended from time to time, and the
regulations promulgated and rulings issued thereunder applicable
to the sale or distribution of liquor or alcoholic beverages by
the Company or any of the Company Subsidiaries.
"Marketable Securities" means Cash Equivalents or any
fund investing exclusively in Cash Equivalents.
"Maturity", when used with respect to any Note, means
the date on which the principal of such Note or an installment of
principal becomes due and payable as therein or herein provided,
whether at the Stated Maturity or by declaration of acceleration,
notice of redemption, required purchase or otherwise.
"Maturity Date", when used with respect to any Note,
means the date specified in such Note as the fixed date on which
the principal of such Note is due and payable.
"Net Cash Proceeds" means, with respect to any
Restricted Asset Sale, Event of Loss, issuance or sale by the
Company or any Company Subsidiary of its Capital Stock or similar
equity interest or incurrence of Indebtedness, as the case may
be, the proceeds thereof in the form of cash or Cash Equivalents
received by the Company or any of the Company Subsidiaries
(whether as initial consideration, through the payment or
disposition of deferred compensation, the payment of insurance
proceeds or the release of reserves), after deducting therefrom
(without duplication): (a) reasonable and customary brokerage
commissions, underwriting fees and discounts, legal fees,
finder's fees and other similar fees and expenses incurred in
connection with such Restricted Asset Sale or Event of Loss;
(b) provisions for all taxes (other than income taxes) payable as
a result of such Restricted Asset Sale or Event of Loss; and
(c) payments made to retire Indebtedness (other than payments on
the Notes), including, but not limited to, Secured Bank
Indebtedness, secured by the assets subject to such Restricted
Asset Sale or Event of Loss to the extent required pursuant to
the terms of such Indebtedness.
"Net Income" means, with respect to any Person for any
period, the net income (or loss) of such Person determined in
accordance with GAAP.
"Non-Operating Subsidiaries" means (i) Michigan City
Casino and Lodge, Inc., an Indiana corporation; (ii) HEI-Mexico,
Inc., a Delaware corporation; and (iii) HEDC, Inc., a Delaware
corporation.
"Noteholder Documents" means this Indenture, the Notes,
the Security Agreement, the Pledge Agreement and any other pledge
agreement, mortgage, deed of trust, security agreement or similar
instrument or document securing the Noteholder Indebtedness and
each other agreement, instrument or document relating to the
Noteholder Indebtedness, each as amended, modified or replaced
from time to time.
"Noteholder Indebtedness" means, at any date, all
Indebtedness of the Company and the Company Subsidiaries under
the Indenture, the Notes, the Noteholder Documents and the
Guarantee and under any other guarantee of such Indebtedness
executed by the Company and any Company Subsidiary (including,
without limitation, all Indenture Obligations, all obligations of
the Guarantors under the Guarantee, and all principal, premium,
interest, fees, expenses, indemnities, other amounts payable in
connection with such Indebtedness and all rights, claims,
demands, action or causes of action of any nature whatsoever that
the Holders of Notes (or the Trustee on their behalf) may now
hold or hereafter may acquire against the Company and/or any
Company Subsidiary, including, without limitation, all interest
accruing after commencement of any case, proceeding, or other
action relating to the bankruptcy, insolvency, or reorganization
of the Company and/or any Company Subsidiary, and any
Indebtedness owing to the Trustee under the Noteholder
Documents).
"Noteholder Security Interest" means any Lien on such
Collateral and other assets and property of the Company and the
Company Subsidiaries securing the Noteholder Indebtedness.
"Note Register" and "Note Registrar" have the
respective meanings specified in Section 205.
"Notes" has the meaning stated in the first recital of
this Indenture and more particularly means any securities
authenticated and delivered under this Indenture.
"Notice of Offer" means a Restricted Asset Sale Offer
Notice or an Event of Loss Offer Notice, as the case may be.
"Officers' Certificate" means a certificate signed by
the Chairman, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal
counsel, who is reasonably acceptable to the Trustee, which
counsel may be an employee of, or counsel to, the Company or the
Trustee.
"Outstanding", when used with respect to Notes, means,
as of the date of determination, all Notes (including all
Secondary Notes) theretofore authenticated and delivered under
this Indenture, except:
(i) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment
or redemption money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Notes;
provided that, if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee
has been made;
(iii) Notes, except to the extent provided in
Sections 1202 and 1203, with respect to which the Company
has effected defeasance and/or covenant defeasance as
provided in Article Twelve; and
(iv) Notes which have been paid pursuant to
Section 206 or in exchange for or in lieu of which other
Notes have been authenticated and delivered pursuant to
this Indenture, other than any such Notes in respect of
which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide
purchaser in whose hands the Notes are valid obligations of
the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of Outstanding Notes have given any
request, demand, authorization, direction, consent, notice or
waiver hereunder, and for the purpose of making the calculations
required by TIA Sections 313, 315(d)(3) or 316(a), Notes owned by
the Company or any other obligor upon the Notes (including any
Guarantor) or any Affiliate of the Company or any Company
Subsidiary or such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the
Trustee shall be protected in making such calculation or in
relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes which a Responsible Officer
of the Trustee knows to be so owned shall be so disregarded.
Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the
reasonable satisfaction of the Trustee the pledgee's right so to
act with respect to such Notes and that the pledgee is not the
Company or any other obligor upon the Notes or any Affiliate of
the Company or such other obligor.
"Paying Agent" means any Person (including the Company
acting as Paying Agent) authorized by the Company to pay the
principal of (and premium, if any, on) or interest on any Notes
on behalf of the Company.
"Permitted Liens" means:
(i) Liens on property acquired by the Company or
any of the Company Subsidiaries (including an indirect
acquisition of property by way of a merger of a Person with
or into the Company or any of the Company Subsidiaries or
the acquisition of a Person), provided that such Liens were
in existence prior to the contemplation of such acquisition,
merger or consolidation, and were not created in connection
therewith or in anticipation thereof, and provided that such
Liens do not extend to any additional property or assets of
the Company or any of the Company Subsidiaries;
(ii) statutory Liens to secure the performance of
obligations, surety or appeal bonds, performance bonds or
other obligations of a like nature incurred in the ordinary
course of business (exclusive of obligations in respect of
the payment of borrowed money), or for taxes, assessments or
governmental charges or claims, provided that in each case
the obligations are not yet delinquent or are being
contested in good faith by appropriate proceedings promptly
instituted and diligently concluded and any reserve or other
adequate provision as shall be required in conformity with
GAAP shall have been made therefor;
(iii) leases or subleases granted to others not
interfering in any material respect with the business of the
Company or any of the Company Subsidiaries;
(iv) with respect to the property involved,
easements, rights-of-way, navigational servitudes,
restrictions, minor defects or irregularities in title and
other similar charges or encumbrances which do not interfere
in any material respect with the ordinary conduct of
business of the Company and the Company Subsidiaries as now
conducted or as contemplated herein;
(v) Liens in favor of the Company or any
Guarantor which are assigned to the Trustee as Collateral
for the Notes and the Guarantee, as applicable;
(vi) Liens in favor of the Trustee under the
Indenture and the other Noteholder Documents;
(vii) Liens securing any Secured Bank Indebtedness
and any replacement, extension or renewal of any Lien
securing Secured Bank Indebtedness;
(viii) The replacement, extension or renewal of any
Lien permitted by clauses (i) through (vi) upon or in the
same property theretofore subject thereto or the
replacement, extension or renewal (without increase in the
principal amount or change in any direct or contingent
obligor) of the Indebtedness secured thereby.
"Permitted Line of Business" means, with respect to any
Person, any land-based, riverboat, dockside or other casino
gaming business of such Person or any business that is related
to, ancillary or supportive of, connected with or arising out of
the gaming business of such Person (including, without
limitation, developing and operating lodging, dining, child care,
amusement, sports or entertainment facilities, service of
alcoholic beverages, transportation services or other related
activities or enterprises and any additions or improvements
thereto).
"Permitted Related Investment" means the acquisition of
property or assets by a Person to be used in connection with a
Permitted Line of Business of such Person, including, without
limitation, any physical improvements of existing property or
assets of such Person.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, limited
liability company, trust, unincorporated association, joint
venture or other entity, or a government or any political
subdivision or agency thereof.
"Plan of Reorganization" means the First Amended Joint
Plan of Reorganization of Hemmeter Enterprises, Inc., BWBH, BWCC,
Inc. and Millsite 27, Inc. which was confirmed in the Bankruptcy
Cases, as the same may have been or may be amended from time to
time.
"Pledge Agreement" means the Pledge Agreement of even
date herewith duly executed by the Company in favor of the
Trustee for its benefit and the benefit of the Holders.
"Predecessor Note" of any particular Note means every
previous Note evidencing all or a portion of the same debt as
that evidenced by such particular Note; and, for the purposes of
this definition, any Note authenticated and delivered under
Section 206 in exchange for a mutilated Note or in lieu of a
lost, destroyed or stolen Note shall be deemed to evidence the
same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock", as applied to the Capital Stock of
any Person, means Capital Stock of such Person of any class or
classes (however designated) that ranks prior, as to the payment
of dividends on or to the distribution of assets upon any
voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of
such Person.
"Process Agent" has the meaning specified in Section
1507.
"Purchase Date" has the meaning specified in Section
1012.
"Purchase Notice" has the meaning specified in Section
1012.
"Purchase Offer" means the Change of Control Purchase
Offer, the Restricted Asset Sale Offer or the Event of Loss
Offer, as applicable.
"Purchase Price" means the Change of Control Purchase
Price, Restricted Asset Sale Purchase Price or Event of Loss
Purchase Price, as applicable.
"Redemption Date", when used with respect to any Note
to be redeemed, in whole or in part, means the date fixed for
such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Note
to be redeemed, means the price at which it is to be redeemed
pursuant to this Indenture and such Notes.
"Reference Period" means, as of any date and with
regard to any person, the four full fiscal quarters ended
immediately preceding such date.
"Regular Record Date" for the interest payable on any
Interest Payment Date means the May 15 or November 15 (whether or
not a Business Day), as the case may be, next preceding such
Interest Payment Date.
"Responsible Officer", when used with respect to the
Trustee, means any officer in the Trustee's Corporate Trust
Office or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above-
designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Asset Sale" means any direct or indirect
(a) issuance by any Company Subsidiary to any Person (other than
the Company or a wholly-owned Company Subsidiary) of any Capital
Stock of any Company Subsidiary or other similar equity interest
or (b) sale, conveyance, assignment, transfer, lease or other
disposition (including, without limitation, by means of a Sale-
Leaseback Transaction) by the Company or any Company Subsidiary
to any Person (other than the Company or a wholly-owned Company
Subsidiary), in one transaction or a series of related
transactions, of any property or asset of the Company or any
Company Subsidiary, whether now owned or hereafter acquired
(excluding any Unrestricted Asset Sale).
"Restricted Asset Sale Offer", "Restricted Asset Sale
Offer Notice" and "Restricted Asset Sale Purchase Price" have the
meanings specified in Section 917.
"Restricted Payment" means any of the following: (a)
the declaration or payment of any dividend or any other
distribution (whether made in cash, property or securities) on
Capital Stock of the Company or any Company Subsidiary or any
payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any
Company Subsidiary (other than (i) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock)
otherwise permitted by the Indenture and (ii) in the case of a
Company Subsidiary, dividends or distributions payable to the
Company or to a wholly-owned Company Subsidiary), (b) the
purchase, defeasance, redemption or other acquisition or
retirement for value of any Capital Stock, or any warrants,
rights or options to purchase such Capital Stock of the Company
or any Company Subsidiary (other than Capital Stock of such
Company Subsidiary held by the Company or any of the Company
Subsidiaries), (c) the making of any principal payment on, or the
purchase, defeasance, repurchase, redemption or other acquisition
or retirement for value, before any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, of any instrument
evidencing Indebtedness which is subordinated in any manner in
right of payment to the Notes and (d) the making of any
Investment in any Person (which shall, solely for purposes of
this clause (d), exclude the payment of Capital Stock of the
Company or any other consideration to the direct holders of
Capital Stock of such Person in connection with a transaction
pursuant to which such Person shall become a wholly-owned Company
Subsidiary) or guarantee of any Investment in any Person
(including, without limitation, any Affiliate of the Company)
other than a Person that would be a wholly-owned Company
Subsidiary immediately after giving effect to such Investment;
provided, however, that any Investments made in a Company
Subsidiary which ceases to be a Company Subsidiary shall
thereafter be considered as having been Restricted Payments when
made in determining the aggregate amount of all Restricted
Payments made to a particular date.
"Sale-Leaseback Transaction" means any arrangement with
any Person providing for the leasing by the Company or any
Company Subsidiary of any real or tangible personal property,
which property has been or is to be sold or transferred by the
Company or any such Company Subsidiary to such Person in
contemplation of such leasing.
"Secondary Notes" has the meaning specified in Section
208.
"Secured Bank Indebtedness" means Bank Indebtedness
secured by all or any part of the Collateral; provided, however,
that, at any date, the aggregate principal amount of Secured Bank
Indebtedness shall not exceed the Bank Indebtedness Amount on
such date.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Agreement" means the Security Agreement of
even date herewith, duly executed by the Company and each
Guarantor and HEI-Mexico, Inc. in favor of the Trustee for its
benefit and the benefit of the Holders.
"Senior Event of Default" means the occurrence of an
event of default under any of the Bank Documents for Secured Bank
Indebtedness.
"Silver Hawk Property" means the real property located
at 100 Chase Street, Black Hawk, Colorado 80422.
"Special Record Date" has the meaning specified in
Section 208.
"Stated Maturity" means, with respect to any
Indebtedness, the date specified in such Indebtedness as the
fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable. Unless otherwise
stated, "Stated Maturity" when used with respect to any Note
refers to the Stated Maturity of the principal of (and not
interest on) the Notes.
"Subject Subsidiaries" means, collectively, the Company
Subsidiaries, other than BWBH.
"Subsidiary" means, with respect to any Person, (i) a
corporation a majority of whose Capital Stock with voting power,
under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by such Person and
one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person or (ii) any other Person (other than
a corporation) in which such Person, one or more Subsidiaries of
such Person, or such Person and one or more Subsidiaries of such
Person, directly or indirectly, at the date of determination
thereof has at least a majority ownership interest.
"Trust Indenture Act" or "TIA" means the Trust
Indenture Act of 1939, as amended.
"Trustee" means the Person named as the "Trustee" in
the first paragraph of this Indenture until a successor Trustee
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Trustee" shall mean such
successor Trustee.
"Unrestricted Asset Sale" means any sale, conveyance,
assignment, transfer, lease or other disposition by the Company
or any Company Subsidiary to any Person (other than the Company
or a Company Subsidiary) in one transaction or a series of
related transactions, of any property or asset of the Company or
the Company Subsidiaries, whether now owned or hereafter
acquired, to the extent that (a) such sale, conveyance,
assignment, transfer, lease or other disposition is in the
ordinary course of business, (b) the Company or a Company
Subsidiary, as the case may be, receives consideration at the
time of such Unrestricted Asset Sale at least equal to the Fair
Market Value (as determined in good faith by the Company taking
into account the aggregate benefits to the Company and the
Company Subsidiaries after giving effect to the proposed
Unrestricted Asset Sale) of the assets or property sold,
conveyed, assigned, transferred or otherwise disposed of and
(c) the aggregate amount of the Fair Market Value (as determined
in good faith by the Company) of the assets or property sold,
conveyed, assigned, transferred or otherwise disposed of does not
exceed $1,500,000 in any twelve-month period. For purposes of
the foregoing sentence, the sale or other disposition of any slot
machine or other equipment (i) which is obsolete or otherwise
unnecessary in the ongoing operations of the Company and the
Company Subsidiaries, or (ii) as part of a program to replace or
upgrade any part of the slot machines or other equipment of the
Company or any of the Company Subsidiaries, shall be deemed to be
a sale or other disposition in the ordinary course of business.
"U.S. Dollars" means lawful currency of the United
States.
"U.S. Government Obligations" has the meaning specified
in Section 1204.
"Vice President", when used with respect to the
Company, means any vice president, whether or not designated by a
number or a word or words added before or after the title "vice
president".
"Voting Stock" of any Person means Capital Stock of
such Person which ordinarily has voting power for the election of
directors (or persons performing similar functions) of such
Person, whether at all times or only as long as no senior class
of securities has such voting power by reason of any contingency.
Section 102. Rules of Construction.
Unless the context otherwise requires:
(1) a term defined in this Indenture has the meaning
assigned to it in the Indenture;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive and the word "including"
shall mean without limitation;
(4) words in the singular include the plural, and
words in the plural include the singular;
(5) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other
subdivision; and
(6) any gender used in this Indenture shall be deemed
to include the neuter, masculine or feminine genders.
Section 103. Compliance Certificates and Opinions.
Upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent, if any, provided for in
this Indenture (including any covenant the compliance with which
constitutes a condition precedent) relating to the proposed
action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the
case of any such application or request as to which the
furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular
application or request, no additional certificate or opinion need
be furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture
(other than pursuant to Section 908(a)) shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition
and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation
as, is necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been
complied with.
Section 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an officer of the Company
may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless
such officer knows that the certificate or opinion or
representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating
that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in
the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Indenture,
they may, but need not, be consolidated and form one instrument.
Section 105. Acts of Holders.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this
Indenture or any other Noteholder Document to be given or taken
by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders
in person or by agents duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to
the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are sometimes referred to herein
as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 502) conclusive
in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The record date for determining the Holders
entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other Act provided by this
Indenture shall be the first date on which a signed instrument or
instruments embodying or evidencing any of the foregoing is
delivered to the Trustee, and, where it is hereby expressly
required, to the Company.
Notwithstanding the foregoing, the Company may, but
shall not be obligated to, fix a record date for the purpose of
determining the Holders entitled to consent to any amendment,
supplement or waiver of any provision of this Indenture or to any
indenture supplemental hereto, provided that (i) the Company
gives at least 20 days' prior written notice of such record date
to the Trustee, the Note Registrar and the Holders and (ii) any
such Act of the Holders shall become effective within 30 days
after such record date.
(c) The fact and date of the execution by any Person
of any such instrument or writing may be established in any
reasonable manner that the Trustee deems sufficient, which shall
include, but not be limited to, notarization of such instrument.
(d) The ownership of Notes shall be proved by the Note
Register.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other Act by the Holder of any Note
shall bind every future Holder of the same Note or the Holder of
every Note issued upon the transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done,
suffered or omitted to be done by the Trustee, any Paying Agent
or the Company or any Guarantor in reliance thereon, whether or
not notation of such action is made upon such Note.
Section 106. Notices, Etc., to Trustee, the Company
and the Guarantors.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or
permitted by this Indenture or any other Noteholder Document to
be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company or any
Guarantor shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with the
Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration, or at any other address previously
furnished in writing to such Person by the Trustee; or
(b) the Company or any Guarantor by the Trustee or by
any Holder shall be sufficient for every purpose hereunder
(unless otherwise herein expressly provided) if in writing
and sent via registered or certified mail, telefax, telex or
overnight delivery service to the Company or the Guarantor,
as the case may be, addressed to it at the address set forth
on Schedule 106, or at any other address previously
furnished in writing to the Trustee by the Company or such
Guarantor.
Section 107. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event
to Holders by the Company or the Trustee, such notice shall be
sufficiently given (unless otherwise herein expressly provided)
if in writing and sent via certified mail, telefax or overnight
delivery service, to each Holder affected by such event, at its
address as it appears in the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice is so
provided to Holders, neither the failure to provide such notice,
nor any defect in any such notice, to any particular Holder shall
affect the sufficiency of such notice with respect to any other
Holders. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice
by Holders shall be filed with the Trustee, but such filing shall
not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
ARTICLE TWO
THE NOTES
Section 201. Forms Generally.
The Notes and the Trustee's certificate of
authentication and the notation with respect to the Guarantee
shall be substantially in the form of Exhibit A attached hereto,
with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture.
Exhibit A is hereby incorporated in and expressly made a part of
this Indenture. The Notes may have such letters, numbers or
other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any
securities exchange or as may consistently herewith be determined
by the officers executing such Notes, as evidenced by their
execution of the Notes. Any portion of the text of any Note or
the notation with respect to the Guarantee may be set forth on
the reverse thereof, with an appropriate reference thereto on the
face of the Note.
The definitive Notes shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any
other manner, all as determined by the officers of the Company
executing such Notes, as evidenced by their execution of such
Notes.
Section 202. Title and Terms.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to
$50,000,000 (plus Secondary Notes, as defined in Section 208),
except for Notes authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Notes
pursuant to Sections 204, 205, 206, 207, 806, 1008 and 1015.
The Notes shall be known and designated as the 12%
Senior Secured Pay-In-Kind Notes Due 2003 of the Company. Their
Stated Maturity shall be June 1, 2003, and they shall bear
interest at the rate per annum equal to 12%, accruing from the
Issue Date (or in the case of Secondary Notes issued after the
Issue Date pursuant to Section 208, the respective dates of
issuance thereof), or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, payable on
December 1, 1996 and semiannually thereafter on June 1 and
December 1 in each year and at said Stated Maturity, until the
principal thereof is paid or duly provided for; provided,
however, that if any interest is not paid when due, such overdue
interest shall bear interest, payable in arrears on each Interest
Payment Date and on demand, at a rate per annum at all times
equal to 12%.
The principal of (and premium, if any, on) and interest
on the Notes shall be payable at the office or agency of the
Company maintained for such purpose in The City of New York, or
at such other office or agency of the Company as may be
maintained for such purpose. Notwithstanding any provisions of
this Indenture to the contrary, prior to the Stated Maturity of
the Notes, if the Company and a Holder shall so agree, payments
of interest on and principal of any Note shall be made by the
Paying Agent directly to the Holder of such Note (whether by
federal funds, wire transfer or otherwise), without any
requirement of surrender of such Note. In any such case, if the
Trustee shall then act as Paying Agent, the Company shall deliver
written instructions to the Trustee at least 15 days prior to the
relevant payment date requesting that such payment will be so
made and designating the bank account to which such payment shall
be made. Unless a new instruction is delivered to the Trustee at
least 15 days prior to any subsequent payment date, the Trustee
shall make any payment due on any such subsequent payment date in
accordance with the previous instructions. The Company will
indemnify and hold harmless the Trustee from and against any
loss, liability or expense (including attorneys' fees) resulting
from any act or omission to act on the part of the Company or any
such Holder in connection with any such agreement or which the
Trustee may incur as a result of making any payment in accordance
with any such agreement.
The payment of the Notes is guaranteed pursuant to the
Guarantee in favor of the Holders.
The Notes and the Guarantee are secured by and entitled
to the benefits of the Liens in the Collateral provided by the
Noteholder Documents.
The Notes shall be repurchased by the Company, at the
option of the Holders, pursuant to Sections 917, 918 and 1011.
The Notes shall be redeemable as provided in Article
Ten.
Section 203. Denominations.
The Notes shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any
integral multiple thereof.
Section 204. Execution, Authentication, Delivery and
Dating.
The Notes shall be executed on behalf of the Company by
its Chairman, its President or a Vice President, under its
corporate seal reproduced thereon and attested by its Secretary
or an Assistant Secretary. The signature of any of these
officers on the Notes may be manual or facsimile.
The Guarantee shall be executed on behalf of each
Guarantor by an officer of the Guarantor or by an officer of the
Company authorized by power of attorney to act on behalf of such
Guarantor. Each Guarantor hereby irrevocably appoints each
officer of the Company who would be authorized to execute any of
the Notes on behalf of the Company its due and lawful attorney-
in-fact to execute the Notation of Guarantee on the face of each
Note on behalf of such Guarantor. The signature of any such
officer on the Guarantee may be manual or facsimile.
Notes and the Guarantee bearing the manual or facsimile
signatures of individuals who were at any time the proper
officers of the Company or such Guarantor shall bind the Company
and such Guarantors, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the
authentication and delivery of such Notes or Guarantee or did not
hold such offices at the date of such Notes or Guarantee.
At any time and from time to time after the execution
and delivery of this Indenture, the Company may deliver Notes
executed by the Company and the Guarantors to the Trustee for
authentication, together with a Company Order for the
authentication and delivery of such Notes, and the Trustee in
accordance with such Company Order shall authenticate and deliver
such Notes.
Each Note shall be dated the date of its
authentication.
The Company Order may also request the Trustee to
authenticate certificates representing Notes bearing any
notation, legend or endorsement permitted by Section 201 or to
remove any such notation, legend or endorsement.
The Trustee may appoint an authenticating agent to
authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, the Guarantors
or their Affiliates.
No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there
appears on such Note a certificate of authentication
substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized officer, and
such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and
delivered hereunder and is entitled to the benefits of this
Indenture.
In case the Company, pursuant to Article Seven, shall
be consolidated or merged with or into any other Person or shall
convey transfer, lease or otherwise dispose of its properties and
assets substantially as an entirety to any Person, and the
successor Person resulting from such consolidation, or surviving
such merger or into which the Company shall have been merged or
the Person which shall have received a conveyance transfer, lease
or other disposition as aforesaid shall have executed an
indenture supplemental hereto with the Trustee pursuant to
Article Seven, any of the Notes authenticated or delivered prior
to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the
successor Person, be exchanged for other Notes executed in the
name of the successor Person with such changes in phraseology and
form as may be appropriate but otherwise in substance of like
tenor as the Notes surrendered for such exchange and of like
principal amount; and the Trustee, upon Company Request of the
successor Person, shall authenticate and deliver Notes as
specified in such request for the purpose of such exchange. If
Notes shall at any time be authenticated and delivered in any new
name of a successor Person pursuant to this Section in exchange
or substitution for or upon registration of transfer of any
Notes, such successor Person, at the option of the Holders but
without expense to them, shall provide for the exchange of all
Notes at the time Outstanding for Notes authenticated and
delivered in such new name.
Section 205. Registration, Transfer and Exchange.
(a) The Company shall cause to be kept at the
Corporate Trust Office of the Trustee a register (the register
maintained in such office and in any other office or agency
designated pursuant to Section 902 being herein sometimes
referred to as the "Note Register") in which the Company shall
provide for the registration of Notes and of transfers of Notes.
The Note Register shall be in written form or any other form
capable of being converted into written form within a reasonable
time. At all reasonable times, the Note Register shall be open
to inspection by the Trustee. The Trustee is hereby initially
appointed as security registrar (the "Note Registrar") for the
purpose of registering Notes and transfers of Notes as herein
provided.
Upon surrender for registration of transfer of any Note
at the office or agency of the Company designated pursuant to
Section 902, the Company and the Guarantors shall execute, and
the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Notes of
any authorized denomination or denominations of a like aggregate
principal amount.
At the option of a Holder, Notes may be exchanged for
other Notes of any authorized denomination and of a like
aggregate principal amount upon surrender of the Notes to be
exchanged at such office or agency. Whenever any Notes are so
surrendered for exchange, the Company and the Guarantors shall
execute, and the Trustee shall authenticate and deliver, the
Notes which the Holder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Company
and the Guarantors, evidencing the same debt (including, without
limitation, the Guarantee), and entitled to the same benefits
under this Indenture, as the Notes surrendered upon such
registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or
the Note Registrar) be duly endorsed, or be accompanied by a
written instrument of transfer, in form satisfactory to the
Company and the Note Registrar duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 207, 806, 1008 and 1015.
The Company shall not be required (i) to issue,
register the transfer of or exchange any Note during a period
beginning at the opening of business 15 days before mailing of a
notice of redemption of or of an offer to repurchase the Notes
selected for redemption or repurchase and ending at the close of
business on the day of such mailing, (ii) to register the
transfer of or exchange any Note so selected for redemption in
whole or in part, except in the case of any Note to be redeemed
in part, the portion thereof not to be redeemed, or (iii) to
register the transfer of or exchange any Note in respect of which
a Purchase Notice has been given to any Paying Agent until the
earlier of (A) such time as such notice has been withdrawn in
accordance with Section 1013 or (B) the Purchase Date.
Section 206. Mutilated, Destroyed, Lost and Stolen
Notes.
If (i) any mutilated Note is surrendered to the
Trustee, or (ii) the Company and the Trustee receive evidence to
their satisfaction of the destruction, loss or theft of any Note,
and there is delivered to the Company and the Trustee such Note
or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide
purchaser, the Company and the Guarantors shall execute, and upon
Company Order, the Trustee shall authenticate and deliver, in
exchange for any such mutilated Note or in lieu of any such
destroyed, lost or stolen Note, a new Note of like tenor and
principal amount, bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen
Note has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Note, pay
such Note.
Upon the issuance of any new Note under this Section,
the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu
of any destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Company and the
Guarantors, whether or not the destroyed, lost or stolen Note
shall be at any time enforceable by anyone, and shall be entitled
to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes.
Section 207. Temporary Notes.
Pending the preparation of definitive Notes, the
Company and the Guarantors may execute, and upon Company Order,
the Trustee shall authenticate and deliver, temporary Notes which
are printed, lithographed, typewritten, mimeographed or otherwise
produced in any authorized denomination, substantially of the
tenor of the definitive Notes in lieu of which they are issued
and with such appropriate insertions, omissions, substitutions
and other variations as the officers executing such Notes may
determine as conclusively evidenced by their execution of such
Notes.
If temporary Notes are issued, the Company and the
Guarantors will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at the office or agency of
the Company designated for such purpose pursuant to Section 902,
without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Notes, the Company and the Guarantors
shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Notes of
authorized denominations. Until so exchanged, the temporary
Notes shall in all respects be entitled to the same benefits
under this Indenture as definitive Notes.
Section 208. Payment of Interest; Interest Rights
Preserved.
Interest on any Note which is payable, and is
punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name such Note (or one
or more Predecessor Notes) is registered at the close of business
on the Regular Record Date for such interest.
Through and including June 1, 1997, on each Interest
Payment Date, the Company may, at its option and in its sole
discretion, in lieu of the payment in whole or in part of
interest in cash on the Notes (other than any Notes that were
issued after the Issue Date as Secondary Notes pursuant to this
Section 208) pay interest on the Notes through the issuance of
additional Notes ("Secondary Notes") in an aggregate principal
amount equal to the amount of interest that would be payable with
respect to the Notes, if such interest were paid in cash;
provided, however, that the Company shall only be permitted to
issue Secondary Notes pursuant to this paragraph if there is, as
of the date of such issuance, an effective registration statement
under the Securities Act covering such issuance or such issuance
is exempt from registration under the Securities Act.
Thereafter, the Company shall pay interest on the Notes in cash.
The Company shall notify the Trustee in writing of such election
not less than ten nor more than 45 days prior to the Regular
Record Date for an Interest Payment Date on which Secondary Notes
will be issued. On each such Interest Payment Date, the Trustee
shall authenticate Secondary Notes for original issuance to each
Holder on the relevant Regular Record Date in the aggregate
principal amount required to pay the amount of interest on the
Notes that the Company has elected to pay through its issuance of
Secondary Notes in lieu of cash. Notwithstanding any other
provision of this paragraph to the contrary, the Company shall
pay cash in lieu of issuing Secondary Notes in any denomination
of less than $1,000 (which shall be determined with respect to
the aggregate amount of Notes held by each Holder as shown by the
records of the Trustee). Notwithstanding anything contained in
this Indenture to the contrary, interest on any Secondary Note
shall be payable only in cash.
Any interest on any Note that is payable, but is not so
paid or duly provided for, on or before any Interest Payment Date
(herein called "Defaulted Interest") shall forthwith cease to be
payable to the Holder of record on the relevant Regular Record
Date by virtue of having been such Holder; and such Defaulted
Interest shall be paid by the Company to the Persons in whose
names the Notes (or their respective Predecessor Notes) are
registered at the close of business on the day fixed by the
Company to determine which Holders shall receive the payment of
Defaulted Interest (the "Special Record Date"). The Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Note, and shall deposit with
the Trustee an amount of U.S. Dollars equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest
in immediately available funds by 10:00 a.m. (New York time) on
the Business Day immediately preceding the payment date, such
U.S. Dollars when deposited to be held in trust for the benefit
of the Persons entitled to such Defaulted Interest as in this
Section provided. In the name and at the expense of the Company,
the Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be
sent via registered or certified mail, telefax, telex or
overnight delivery service, to each Holder at its address as it
appears in the Note Register, provided that the Company shall
deliver notice to the Trustee at least 15 days' prior to the date
notice is to be given to the Holders. The Trustee shall pay such
Defaulted Interest forthwith to the Persons in whose names the
Notes (or their respective Predecessor Notes) are registered on
such Special Record Date.
Subject to the foregoing provisions of this Section,
each Note delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Note shall
carry the rights to interest accrued and unpaid, and to accrue,
which were carried by such other Note.
Section 209. Persons Deemed Owners.
Prior to and at the time of the due presentment of a
Note for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in
whose name such Note is registered as the owner of such Note for
the purpose of receiving payment of principal of (and premium, if
any, on) and (subject to Sections 205 and 208) interest on such
Note and for all other purposes whatsoever, whether or not such
Note be overdue, and neither the Company, the Trustee nor any
agent of the Company or the Trustee shall be affected by notice
to the contrary.
Section 210. Cancellation.
All Notes surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and
shall be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee
(or to any other Person for delivery to the Trustee) for
cancellation any Notes previously authenticated hereunder which
the Company has not issued and sold, and all Notes so delivered
shall be promptly canceled by the Trustee. If the Company shall
so acquire any of the Notes, however, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness
represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as
provided in this Section, except as expressly permitted by this
Indenture. All canceled Notes held by the Trustee shall be
disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the
Company, unless by Company Order, the Company shall direct that
canceled Notes be returned to it. The Company may not issue new
Notes to replace Notes that it has paid or delivered to the
Trustee for cancellation.
Section 211. Computation of Interest.
Interest on the Notes shall be computed on the basis of
a 360-day year of twelve 30-day months.
ARTICLE THREE
SATISFACTION AND DISCHARGE
Section 301. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be
of further effect (except as to surviving rights of registration
of transfer or exchange of Notes herein expressly provided for)
and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of
this Indenture when
(a) either
(i) all Notes theretofore authenticated and
delivered (other than (A) Notes which have been
destroyed, lost or stolen and which have been
replaced or paid as provided in Section 206 and
(B) Notes for whose payment U.S. Dollars have
theretofore been deposited in trust with the
Trustee or any Paying Agent or segregated and held
in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as
provided in Section 903) have been delivered to
the Trustee for cancellation; or
(ii) all such Notes not theretofore delivered to
the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their
Stated Maturity within one year, or
(C) are to be called for redemption within
one year under arrangements satisfactory to
the Trustee for the giving of notice of
redemption by the Trustee in the name, and at
the expense, of the Company,
and the Company, in the case of subclause (A), (B) or
(C) of clause (ii) above, has irrevocably deposited or
caused to be deposited with the Trustee as trust funds,
in trust for such purpose an amount in U.S. Dollars
sufficient to pay and discharge the entire indebtedness
on such Notes not theretofore delivered to the Trustee
for cancellation, as certified to the Trustee by a
nationally recognized firm of independent public
accountants, for principal (and premium, if any) and
interest to the date of such deposit (in the case of
Notes which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(b) the Company, any Guarantor or any other obligor
under the Notes has paid or caused to be paid all other
sums payable hereunder by the Company, the Guarantors
and any other obligor under the Notes, including,
without limitation, all sums due to the Trustee;
(c) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this
Indenture have been complied with; and
(d) the Company and each Guarantor has complied with
Section 314(c) of the Trust Indenture Act in connection
with such satisfaction and discharge.
Section 302. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under
Section 507 and, if U.S. Dollars shall have been deposited with
the Trustee pursuant to subclause (ii) of clause (a) of
Section 301, the obligations of the Trustee under Section 303 and
the last paragraph of Section 903 shall survive.
Section 303. Application of Trust Money.
Subject to the provisions of the last paragraph of
Section 903, all U.S. Dollars deposited with the Trustee pursuant
to Section 301 shall be held in trust and applied by it, in
accordance with the provisions of the Notes and this Indenture,
to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the
principal (and premium, if any) and interest for whose payment
such U.S. Dollars has been deposited with the Trustee.
ARTICLE FOUR
DEFAULTS AND REMEDIES
Section 401. Events of Default.
"Event of Default", wherever used herein, means any one
of the following events (whatever the reason for such Event of
Default and whether it shall be occasioned by the provisions of
Article Thirteen or be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body):
(a) default in the payment of any interest on any Note
when the same becomes due and payable, and such default
continues for a period of 10 days; or
(b) default in the payment of the principal of (or
premium, if any, on) any Note when the same becomes due and
payable at Stated Maturity, upon redemption pursuant to
Sections 1001 and 1007, upon repurchase pursuant to
Sections 917, 918, 1011 and 1012, by acceleration or
otherwise, including failure to make payment of any Purchase
Price or Redemption Price, as and when due; or
(c) default in the due observance or performance of
any covenant, condition or agreement contained in Section
919, 924 or 929; or
(d) default in the performance, or breach, of any
covenant or warranty of the Company or any Company
Subsidiary in this Indenture, or by the Company or any
Guarantor under the Security Agreement, or any other
Noteholder Document, or by any Guarantor under the Guarantee
on its part to be performed (other than a default in the
performance, or breach, of a covenant or warranty which is
specifically dealt with elsewhere in this Section), and
continuance of such default or breach for a period of 30
days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Notes a written notice specifying
such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder;
or
(e) default by the Company or any of the Company
Subsidiaries in (i) any payment of principal of or interest
on any Indebtedness (including, without limitation, any Bank
Indebtedness) or in the payment of any Contingent
Obligation, beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness or
Contingent Obligation was created; or (ii) the observance or
performance of any other agreement or condition relating to
any such Indebtedness or Contingent Obligation or contained
in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such
Contingent Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity, any
applicable grace period having expired, or such Contingent
Obligation to become payable, any applicable grace period
having expired, provided that the aggregate principal amount
of all such Indebtedness and Contingent Obligations which
would then become due or payable, together with the
principal amount of any other such Indebtedness under which
such a default then exists or with respect to which the
maturity thereof has been so accelerated or that has not
been paid at maturity, aggregates $1,000,000 or more; or
(f) any Person entitled to take the actions described
in this Section 401(f), after the occurrence of any event of
default under any agreement or instrument evidencing any
Indebtedness in excess of $1,000,000 in the aggregate of the
Company or any Company Subsidiary, shall notify the Trustee
of the intended sale or disposition of any assets of the
Company or any Company Subsidiary that have been pledged to
or for the benefit of such Person to secure such
Indebtedness or shall commence proceedings, or take any
action (including by way of set-off) to retain in
satisfaction of any Indebtedness, or to collect on, seize,
dispose of or apply, any such assets of the Company or any
Company Subsidiary (including funds on deposit or held
pursuant to lock-box and other similar arrangements),
pursuant to the terms of any agreement or instrument
evidencing, securing or relating to any such Indebtedness of
the Company or any Company Subsidiary or in accordance with
applicable law; or
(g) any warrant of attachment in an amount of
$1,000,000 or more is issued against any portion of the
property or assets of the Company or any Company Subsidiary
and is not quashed within 30 days after issuance, or final
judgments not covered by insurance for the payment of money
which in the aggregate at any one time exceeds $1,000,000
shall be rendered against the Company or any Company
Subsidiary by a court of competent jurisdiction and shall
remain undischarged for a period (during which execution
shall not be effectively stayed) of 30 days after such
judgment becomes final and nonappealable; or
(h) a court of competent jurisdiction enters a
judgment decree or order for relief under any Bankruptcy Law
which shall (i) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in
respect of the Company or any Company Subsidiary, (ii)
appoint a Custodian of the Company or any Company
Subsidiary, or for any part of their respective properties
or (iii) order the winding-up or liquidation of the
Company's or any Company Subsidiary's affairs; and such
judgment, decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or any
bankruptcy or insolvency petition or application is filed,
or any bankruptcy or insolvency proceeding is commenced,
against the Company or any Company Subsidiary and such
petition, application or proceeding is not dismissed within
60 days; or
(i) the Company or any Company Subsidiary, pursuant to
or within the meaning of any Bankruptcy Law, (i) becomes
insolvent, (ii) fails generally to pay its debts as they
become due, (iii) admits in writing its inability to pay its
debts generally as they become due, (iv) commences any case,
proceeding or other action seeking to have an order for
relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it
or its debts, (v) consents to the entry of a judgment,
decree or order for relief against it in an involuntary case
or proceeding under any Bankruptcy Law, (vi) consents to the
appointment of a Custodian of it or for any part of its
property, (vii) consents to or acquiesces in the institution
of a bankruptcy or an insolvency proceeding against it,
(viii) applies for, consents to or acquiesces in the
appointment of or taking possession by a Custodian of the
Company or any Company Subsidiary, or for any part of its
property, (ix) makes a general assignment for the benefit of
its creditors, or (x) takes any corporate action in
furtherance of any of the foregoing; or
(j) any Noteholder Document ceases to be in full force
and effect or any Noteholder Document ceases to create in
favor of the Trustee, with respect to any amount of
Collateral, a valid and perfected, senior, first priority
Lien (subject only to Permitted Liens) on the Collateral
purported to be covered thereby; or
(k) the Guarantee is determined by a court of
competent jurisdiction to be null and void with respect to
any Guarantor or any Guarantor denies that it has any
further liability under the Guarantee or gives notice to
such effect (other than by reason of: (i) the indefeasible
payment in full of all principal of, premium, if any, and
interest on the Notes; (ii) the termination of this
Indenture; or (iii) a release pursuant to the provisions
described under Section 1204 or 1314); or
(l) the cessation of substantially all gaming
operations at any Gaming Facility which has commenced
operations, other than the Central City Casino, for more
than 45 consecutive days, except as a result of an Event of
Loss; provided, however, that the cessation of substantially
all gaming operations at any Gaming Facility as a result of
renovations of or construction at or adjacent to such Gaming
Facility for 90 consecutive days or less shall not
constitute an Event of Default under this Section 401(l); or
(m) the occurrence of a Black Hawk Casino Event; or
(n) the revocation, suspension or involuntary loss of
the legal right to own or operate any Gaming Facility and
such revocation, suspension or involuntary loss shall be
continuing for more than 45 consecutive days; or
(o) the Company or any Company Subsidiary shall fail
to comply with its obligations under Article Seven hereof;
or
(p) an "event of default" under any other Noteholder
Document.
Section 402. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than an Event of Default
specified in Section 401(h) or 401(i)) occurs and is continuing,
then and in every such case the Trustee or the Holders of not
less than 25% in principal amount of the Notes Outstanding may
declare the principal amounts of all the Notes to be due and
payable immediately, together with (A) unpaid interest thereon
and (B) in the case of an Event of Default under Section 401(a),
(b), (d), (e), (j), (k), (l), (m), (n), (o) or (p), the Default
Premium Amount in effect at the time such Event of Default
occurs, by a notice in writing to the Company (and to the Trustee
if given by Holders), and upon any such declaration such amounts
shall become immediately due and payable. If an Event of Default
specified in Section 401(h) or 401 (i) occurs and is continuing,
then the principal amount of all the Notes, together with unpaid
interest thereon, shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after a declaration of acceleration has
been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount
of the Notes Outstanding, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its
consequences if
(a) the Company has paid or deposited with the Trustee
a sum sufficient to pay,
(i) all overdue interest on all Notes,
(ii) all unpaid principal of (and premium, if
any, on) any Notes which has become due otherwise than
by such declaration of acceleration, and interest
thereon as provided herein,
(iii) to the extent that payment of such
interest is lawful, interest on overdue interest at the
rate borne by the Notes, and
(iv) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents
and counsel;
(b) all Events of Default, other than the non-payment
of principal of the Notes that has become due solely by such
declaration of acceleration, have been cured or waived as
provided in Section 413; and
(c) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction.
No such rescission shall affect any subsequent default or impair
any right consequent thereon.
Notwithstanding the preceding paragraph, in the event
of a declaration of acceleration in respect of the Notes because
of an Event of Default specified in Section 401(e) shall have
occurred and be continuing, such declaration of acceleration
shall be automatically annulled if the Indebtedness that is the
subject of such Event of Default has been discharged or the
holders thereof have waived all defaults in respect of such
Indebtedness triggering such acceleration and (if applicable)
rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or waiver and
(if applicable) rescission, as the case may be, shall have been
given to the Trustee by the Company and countersigned by the
holders of such Indebtedness or a trustee, fiduciary or agent for
such holders, within 30 days after such declaration of
acceleration in respect of the Notes, and no other Event of
Default has occurred during such 30 day period which has not been
cured or waived during such period.
Notwithstanding any provision contained herein to the
contrary, the Trustee and each Holder of Notes acknowledges that
the Legal Requirements may mandate either gaming approvals,
liquor approvals, or both, before, during or after the exercise
of any right or remedy provided for herein.
Section 403. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company and each Guarantor covenant that if
(a) default is made in the payment of any installment
of interest on any Note when such interest becomes due and
payable and such default continues for a period of 10 days,
or
(b) default is made in the payment of the principal of
(or premium, if any, on) any Note at the Maturity thereof,
the Company and each Guarantor (and, in the case of each
Guarantor, subject to the provisions of Article Thirteen) will,
upon demand of the Trustee, pay to the Trustee for the benefit of
the Holders of such Notes, the whole amount then due and payable
on such Notes for principal (and premium, if any) and interest,
and interest on any overdue principal (and premium, if any) and,
to the extent that payment of such interest shall be legally
enforceable, upon any overdue installment of interest, at the
rate borne by the Notes, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel.
If the Company or any Guarantor, as the case may be,
fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may
(or, at the direction of Holders of not less than 25% of
Outstanding Notes shall) institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same
against the Company or any Guarantor or any other obligor upon
the Notes and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of the
Company or any Guarantor or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the
Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect
and enforce any such rights, including seeking recourse from any
Guarantor pursuant to the terms of the Guarantee, whether for the
specific enforcement of any covenant or agreement in this
Indenture or in the other Noteholder Documents or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy. The Trustee may, in connection with the matters
covered by the two preceding paragraphs, take such actions under
any of the Noteholder Documents as shall be required or available
thereunder or under applicable law.
Section 404. Trustee May File Proofs of Claim.
In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Notes, including any
Guarantor, or assets or the property of the Company or of such
other obligor, including any Guarantor, or their creditors, the
Trustee (irrespective of whether the principal of the Notes shall
then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made
any demand on the Company or any Guarantor for the payment of
overdue principal, premium, if any, or interest) shall be
entitled and empowered, by intervention in such proceedings or
otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and
unpaid in respect of the Notes and to file such other papers
or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or similar official in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section
507.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of
any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 405. Trustee May Enforce Claims Without
Possession of Notes.
All rights of action and claims under this Indenture,
the Guarantee or the Notes may be prosecuted and enforced by the
Trustee without the possession of any of the Notes or the
production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its
own name and as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Notes in respect of which such judgment has
been recovered.
Section 406. Application of Money Collected.
Subject to the provisions of Section 1112, any money
collected by the Trustee pursuant to the Indenture, the Notes,
the Guarantee or the Noteholder Documents shall be applied in the
following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Notes
and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 507;
SECOND: To the payment of all amounts due the Trustee
under the Noteholder Documents;
THIRD: To the payment of the amounts then due and
unpaid for principal of (and premium, if any, on) and
interest on the Notes in respect of which or for the benefit
of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts
due and payable on such Notes for principal (and premium, if
any) and interest, respectively; and
FOURTH: To the ratable payment of all other amounts
due the Holders under the Noteholder Documents; and
FIFTH: To the payment of the remainder, if any, to the
Company, its successors or assigns or to whomsoever may be
lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
Section 407. Limitation on Suits.
No Holder of any Notes shall have any right to
institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal
amount of the Outstanding Notes shall have made written
request to the Trustee to institute proceedings in respect
of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 15 days after its receipt of such
notice, request and offer of indemnity has failed to
institute any such proceedings; and
(5) no direction inconsistent with such written
request has been given to the Trustee during such 15-day
period by the Holders of a majority or more in principal
amount of the Outstanding Notes;
it being understood and intended that no one or more Holders
shall have any right in any manner whatever by virtue of, or by
availing itself of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other Holders, or to
obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit
of all the Holders.
Section 408. Unconditional Right of Holders to
Receive Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture
or any other Noteholder Document, the Holder of any Note shall
have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article
Twelve) and in such Note, of the principal of (and premium, if
any, on) and interest on such Note on the respective Stated
Maturities expressed in such Note (or, in the case of redemption,
on the Redemption Date or in the case of repurchase, on the
Purchase Date) and to institute suit for the enforcement of any
such payment, and such rights shall not be impaired without the
consent of such Holder.
Section 409. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Indenture
and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, each of the
Guarantors, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder
and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been
instituted.
Section 410. Rights and Remedies Cumulative.
Except as otherwise provided in Section 206, no right
or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 411. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of
any Note to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Indenture, the Notes, the
other Noteholder Documents, the Guarantee or by law to the
Trustee or to the Holders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
Section 412. Control by Holders.
The Holders of not less than a majority in principal
amount of the Outstanding Notes shall have the right to direct
the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee, provided that
(a) such direction shall not be in conflict with any
rule of law or with this Indenture,
(b) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction, and
(c) the Trustee need not take any action which might
involve it in personal liability or be unjustly prejudicial
to the Holders not consenting.
Section 413. Waiver of Past Defaults.
The Holders of not less than a majority in principal
amount of the Outstanding Notes may on behalf of the Holders of
all the Notes waive any past default hereunder and its
consequences, except a default
(1) in respect of the payment of the principal of (or
premium, if any, on) or interest on any Note, or
(2) in respect of a covenant or provision hereof which
under Article Eight cannot be modified or amended without
the consent of the Holder of each Outstanding Note affected.
Upon any such waiver, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed
to have been cured, for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.
Section 414. Environmental Laws and the Trustee.
Notwithstanding anything to the contrary contained in
this Indenture, or the other Noteholder Documents, in the event
the Trustee is entitled or required to commence an action to
foreclose on any Collateral or otherwise exercise its remedies to
acquire control or possession of any part of the Collateral and
solely to the extent that the Trustee shall have determined in
good faith that the indemnification provided to the Trustee under
Section 507(4) does not or will not adequately protect and
indemnify it from and against the foregoing liability, the
Trustee shall not be required to commence any such action or
exercise any such remedy with respect to such part of the
Collateral if the Trustee has determined in good faith (and upon
written advice of outside counsel) that the Trustee may incur
liability under the Environmental Laws as the result of the
presence at, or release on or from such part of the Collateral of
any Hazardous Materials unless the Trustee has received security
or indemnity, from a Holder or Holders, in an amount and in a
form all satisfactory to the Trustee, in its sole discretion,
protecting the Trustee from all such liability.
ARTICLE FIVE
THE TRUSTEE
The Trustee hereby accepts the trust imposed upon it by
this Indenture and covenants and agrees to perform the same as
herein expressed.
Section 501. Notice of Defaults.
Within 45 days after the occurrence of any Default
hereunder, unless such Default shall have been cured or waived,
the Trustee shall transmit by mail to all Holders, as their names
and addresses appear in the Note Register, notice of such Default
hereunder known to a Responsible Officer of the Trustee. Except
in the case of a Default in the payment of the principal of (or
premium, if any, on) or interest on any Note or in the payment of
any Redemption Price or Purchase Price, the Trustee may withhold
such notice if and so long as the board of directors, the
executive committee or a committee of Responsible Officers of the
Trustee in good faith determines that withholding such notice is
in the interest of the Holders. The provisions of Section 315(b)
of the Trust Indenture Act are hereby excluded from this
Indenture.
Section 502. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise its rights and powers
and use the same degree of care and skill in their exercise
as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(b) Except during the continuance of an Event of
Default known to a Responsible Officer of the Trustee:
(1) the Trustee need perform only those duties
that are specifically set forth (or incorporated by
reference) in this Indenture or the other Noteholder
Documents and no others, and no covenants or
obligations shall be implied in or read into this
Indenture or the other Noteholder Documents which are
adverse to the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture or the other Noteholder
Documents ; provided, however, that the Trustee shall
examine reports, certificates and opinions specifically
required to be furnished to the Trustee under this
Indenture to determine whether or not they conform to
the requirements of this Indenture;
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section 502;
(2) the Trustee shall not be liable for any error
of judgment made in good faith by a Trust Officer,
unless it is proved that the Trustee is negligent in
ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect
to action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 412 hereof;
(d) Every provision of this Indenture or the other
Noteholder Documents that in any way relates to the Trustee
is subject to this Section 502, including without
limitation, paragraphs (a), (b) and (c) of this Section 502;
and
(e) No provision of this Indenture or the other
Noteholder Documents shall require the Trustee to expend or
risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder
or to take or omit to take any action under this Indenture
or the other Noteholder Documents or at the request, order
or direction of the Holders or in exercise of any of its
rights or powers if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to
it.
Section 503. Certain Rights of Trustee.
Subject to the provisions of Section 502:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request
or Company Order and any resolution of the Board of
Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture
or any other Noteholder Document the Trustee shall deem it
desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it
hereunder in good faith in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders
pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney during
regular business hours and upon reasonable prior
notification;
(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder; and
(h) except with respect to Section 901 (including the
payment as and when due of any Redemption Price or Purchase
Price), the Trustee shall have no duty to inquire as to the
performance of the covenants set forth in Article Nine. In
addition, the Trustee shall not be deemed to have knowledge
of any Default or Event of Default except (i) any Event of
Default under Section 401(a) or 401(b) or (ii) any Default
or Event of Default of which (or of the facts forming the
basis of which) a Responsible Officer of the Trustee shall
have received written notification or obtained actual
knowledge.
All references in this Section 503 shall be deemed to
include the Trustee's duties under the Noteholder Documents.
Section 504. Trustee Not Responsible for Recitals or
Issuance of Notes.
The recitals contained herein and in the Notes, except
for the Trustee's certificates of authentication, shall be taken
as the statements of the Company and the Guarantors, and the
Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes, except that the
Trustee represents that it is duly authorized to execute and
deliver this Indenture, authenticate the Notes and perform its
obligations hereunder and under the other Noteholder Documents to
which it is a party and that the statements made by it in a
Statement of Eligibility and Qualification of Form T-1 supplied
to the Company are true and accurate, subject to the
qualifications set forth therein.
The Trustee makes no representations with respect to
the effectiveness or adequacy of any Noteholder Document, or the
validity, perfection or priority of Liens granted to it under
this Indenture or the Noteholder Documents. The Trustee shall
not be responsible for ascertaining or maintaining such validity,
perfection or priority and shall be fully protected in relying
upon certificates and opinions delivered to it in accordance with
the terms of this Indenture or the Noteholder Documents.
Section 505. May Hold Notes.
The Trustee, any Paying Agent, any Note Registrar or
any other agent of the Company or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee
of Notes and, subject to TIA Sections 310(b) and 311, may
otherwise deal with the Company with the same rights it would
have if it were not Trustee, Paying Agent, Note Registrar or such
other agent.
Section 506. Money Held in Trust.
Money held by the Trustee in trust hereunder need not
be segregated from other funds except to the extent required by
law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with
the Company.
Section 507. Compensation, Reimbursement and
Indemnity.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder
(which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express
trust);
(2) to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it
harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending
itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties
hereunder (the Trustee shall notify the Company promptly of
any claim for which it may seek indemnity); and
(4) without in any way limiting the foregoing
subsection (3), to indemnify the Trustee for, and hold it
harmless against, any loss or liability incurred by the
Trustee (including reasonable attorneys' and consultants'
fees and court costs) arising from or relating to any
Environmental Laws or Hazardous Materials concerning the
Collateral or any breach or alleged breach by the Company of
any representations, warranty or covenant in the Noteholder
Documents, provided such is not due to the Trustee's willful
violation of any Environmental Laws.
The obligations of the Company under this Section 507
to compensate the Trustee, to pay or reimburse the Trustee for
expenses, disbursements and advances and to indemnify and hold
harmless the Trustee shall constitute additional indebtedness
hereunder. To secure the Company's payment obligations in this
Section 507, the Trustee shall have a Lien (subject to Permitted
Liens) prior to that of the Holders upon all property and funds
held or collected by the Trustee as such, except funds held in
trust for the payment of principal of (and premium, if any, on)
or interest on particular Notes. When the Trustee incurs
expenses or renders services after an Event of Default specified
in Sections 401(h) or (i) occurs, the expenses and the
compensation for the services are intended to constitute expenses
of administration under any Bankruptcy Law.
The Company's obligations under this Section 507 and
any Lien arising hereunder shall survive the resignation or
removal of the Trustee, the discharge of the Company's
obligations pursuant to Article Three of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy
Law.
The rights and protections set forth in Sections 503
and 507 afforded the Trustee pursuant to this Article Five shall
also be afforded the Note Registrar, the Paying Agent and the
Trustee in its capacity as collateral agent under the Noteholder
Documents.
Section 508. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which
shall be eligible to act as Trustee under TIA Sections 310(a)(1)
and 310(a)(5) and shall have a combined capital and surplus of at
least $100 million. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of
Columbia supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. The Trustee shall comply with TIA Section 310(b);
provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or
participation in other securities, of the Company are
outstanding, if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met. If at any time the Trustee shall
cease to be eligible in accordance with the provisions of this
Section, it shall resign in the manner and with the effect
hereinafter specified in this Article.
Section 509. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee in accordance with the applicable requirements
of Section 510.
(b) The Trustee may resign at any time by giving
written notice thereof to the Company. If the instrument of
acceptance by a successor Trustee required by Section 510 shall
not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(c) The Trustee may be removed at any time by Act of
the Holders of not less than a majority in principal amount of
the Outstanding Notes, delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the
provisions of TIA Section 310(b) after written request
therefor by the Company or by any Holder who has been a bona
fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under
Section 508 and shall fail to resign after written request
therefor by the Company or by any Holder who has been a bona
fide Holder of a Note for at least six months, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed by any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution,
may remove the Trustee, or (ii) subject to TIA Section 315(e),
any Holder who has been a bona fide Holder of a Note for at least
six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee. Within one year after such
resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee may be appointed by Act of the
Holders of a majority in principal amount of the Outstanding
Notes by delivery of written notice thereof to the Company and
the retiring Trustee. If a successor Trustee is so appointed by
the Holders, such successor Trustee shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no
successor Trustee shall have been so appointed by the Company or
the Holders and accepted appointment in the manner provided in
Section 510, any Holder who has been a bona fide Holder of a Note
for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation
and each removal of the Trustee and each appointment of a
successor Trustee to the Holders of Notes in the manner provided
for in Section 107. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
Section 510. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall
execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and
thereupon, the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but,
on request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its expenses, execute and deliver
an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Company shall execute
any and all instruments to more fully and certainly vest in and
confirm to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment
unless, at the time of such acceptance, such successor Trustee
shall be qualified and eligible under this Article. Both the
retiring Trustee and the successor Trustee shall be entitled to
receive an Opinion of Counsel stating that all conditions
precedent have been complied with and that the appointment of
such successor Trustee is enforceable against the Company,
subject to bankruptcy, insolvency, reorganization, moratorium,
arrangement or other similar laws relating to creditors' rights
generally, and general principles of equity (regardless whether
considered in a proceeding at law or in equity), including
concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance
or other equitable relief.
Section 511. Merger, Conversion, Consolidation or
Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part
of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver
the Notes so authenticated with the same effect as if such
successor Trustee had itself authenticated such Notes.
Section 512. Preferential Collection of Claims
Against Company.
The Trustee shall comply with TIA Section 311(a). A
Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated therein.
Section 513. Paying Agent; Note Registrar.
(a) Each Paying Agent or Note Registrar (other than
the Company) shall be a corporation organized and doing business
under the laws of the United States of America or of any State
and having a combined capital and surplus of at least
$500,000,000.
(b) Each Agent may resign at any time by giving
written notice thereof to the Company. The Company, by a Board
Resolution and upon giving written notice thereof to the Agent,
may remove each Agent at any time.
(c) If any Agent shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
any Agent for any cause, the Company, by a Board Resolution,
shall promptly appoint a successor Agent.
(d) The Company shall give notice of each resignation
and each removal of any Agent and each appointment of a successor
Agent by mailing written notice of such event by first-class
mail, postage prepaid, to the Trustee. Each Notice shall include
the name and address of the successor Agent.
(e) The Trustee is hereby initially appointed Paying
Agent and Note Registrar.
(f) The Company shall enter into an appropriate
written agency agreement with any Agent not a party to this
Indenture, which agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify
the Trustee in writing of the name and address of any such Agent.
ARTICLE SIX
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 601. Disclosure of Names and Addresses of
Holders.
Every Holder of Notes, by receiving and holding the
same, agrees with the Company and the Trustee that neither the
Company, the Guarantors nor the Trustee shall be held accountable
by reason of the disclosure of any such information as to the
names and addresses of the Holders, regardless of the source from
which such information was derived, and that the Trustee shall
not be held accountable by reason of mailing any material
pursuant to a request made under TIA Section 312(b).
Section 602. Company to Furnish Trustee Names and
Addresses of Holders.
(a) The Company will furnish or cause to be furnished
to the Trustee
(i) semiannually, not more than five Business
Days after each Regular Record Date pertaining to the Notes,
a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders as of such Regular
Record Date; and
(ii) at such other times as the Trustee may
request in writing, within 30 days after receipt by the
Company of any such request, a list of similar form and
content as of a date not more than 15 days prior to the time
such list is furnished; provided, however, that if and so
long as the Trustee shall be the Note Registrar, no such
list need be furnished.
(b) If and whenever the Company, any Company
Subsidiary or any Affiliate of the Company or any Company
Subsidiary acquires any Notes, the Company shall within 10
Business Days after such acquisition by the Company or any
Company Subsidiary and within 10 Business Days after the
date on which it obtains knowledge of any such acquisition
by any Affiliate of the Company or any Company Subsidiary,
provide the Trustee with written notice of such acquisition,
the aggregate principal amount so acquired (to the extent
known by the Company), the Holder from whom such Notes were
acquired and the date of such acquisition.
Section 603. Preservation of Information;
Communications to Holders.
(a) The Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as
provided in Section 602 and the names and addresses of Holders
received by the Trustee in its capacity as Note Registrar. The
Trustee may destroy any list furnished to it as provided in
Section 602 upon receipt of a new list so furnished.
(b) If three or more Holders (referred to as
"applicants" in this Section 603(b)) apply in writing to the
Trustee and furnish to the Trustee reasonable proof that each
such applicant has owned a Note for a period of at least six
months preceding the date of such application, and such
application states that the applicants desire to communicate with
other Holders with respect to their rights under the Noteholder
Documents and is accompanied by a copy of the form of proxy or
other communication which such applicants propose to transmit,
then the Trustee shall, within five Business Days after the
receipt of such application, at its election, either:
(i) afford to such applicants access to the
information preserved at the time by the Trustee in
accordance with the provisions of Section 603(a); or
(ii) inform such applicants as to the approximate
number of Holders whose names and addresses appear in
the information preserved at the time by the Trustee in
accordance with the provisions of Section 603(a), and
as to the approximate cost of mailing to such Holders
the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford to such
applicants access to such information, the Trustee shall, upon
the written request of such applicants, mail to each Holder whose
name and address appears in the information preserved at the time
by the Trustee in accordance with the provisions of Section
603(a), a copy of the form of proxy or other communication which
is specified in such request, with reasonable promptness after a
tender, to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five Business Days after such tender
the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of
the Holders of Notes or would be in violation of applicable law.
Such written statement shall specify the basis of such opinion.
If the Commission, after opportunity for a hearing upon the
objection specified in the written statement so filed, shall
enter an order refusing to sustain any of such objections or if,
after the entry of any order sustaining one or more of such
objections, the Commission shall find, after notice and
opportunity for hearing, that all the objections so sustained
have been met, and shall enter an order so declaring, the Trustee
shall mail copies of such material to all such Holders with
reasonable promptness after the entry of such order and the
renewal of such tender; otherwise, the Trustee shall be relieved
of any obligation or duty to such applicants respecting their
application.
Section 604. Reports by Trustee.
To the extent required by the Trust Indenture Act, on
or before 60 days after May 15 of each year commencing with the
first May 15 after the date of this Indenture, the Trustee shall
transmit by mail to the Company and to all Holders, if required,
as provided in Section 313(c) of the Trust Indenture Act, a brief
report dated as of such May 15 that complies with Section 313(a)
of the Trust Indenture Act. The Trustee also shall comply with
Section 313(b) of the Trust Indenture Act.
If and so long as this Indenture is qualified under the
Trust Indenture Act, a copy of each such report shall, at the
time of such transmission to Holders, be filed by the Trustee
with each stock exchange upon which the Notes are listed (if
any), with the Commission and with the Company. The Company will
notify the Trustee if and when the Notes are listed on any stock
exchange.
Section 605. Reports by Company.
If and so long as this Indenture is qualified under the
Trust Indenture Act, the Company shall:
(a) file with the Trustee, within 15 days after the
Company or any Guarantor is required to file the same with the
Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules
and regulations prescribe) that the Company or any Guarantor may
be required to file with the Commission pursuant to Section 13,
14 or Section 15(d) of the Exchange Act; or, if the Company is
not required to file information, documents or reports pursuant
to any of such Sections, then it shall file with the Trustee and
the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports
that may be required pursuant to Section 13 of the Exchange Act
in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in
such rules and regulations;
(b) file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to
time by the Commission, such additional information, documents
and reports with respect to compliance by the Company and the
Guarantors with the conditions and covenants of this Indenture as
may be required from time to time by such rules and regulations;
and
(c) transmit by mail to all Holders, as provided in
Section 313(c) of the Trust Indenture Act, within five days after
the filing thereof with the Trustee, summaries of any
information, documents and reports required to be filed by the
Company or any Guarantor pursuant to subsections (a) and (b) of
this Section 605 as may be required by rules and regulations
prescribed from time to time by the Commission.
The Company shall also comply with the other
provisions of Section 314(a) of the Trust Indenture Act to the
extent such provisions are applicable.
ARTICLE SEVEN
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 701. Company May Consolidate, Etc., Only on
Certain Terms.
Except as part of a Restricted Asset Sale involving a
Subject Subsidiary that is permitted pursuant to Section 917,
neither the Company nor any Company Subsidiary shall consolidate
with or merge with or into or wind up into another Person or,
directly or indirectly, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties
or assets, whether in a single transaction or a series of related
transactions, to another Person or group of affiliated Persons,
except that the Company may consolidate with or merge with or
into or sell, assign, convey, lease or transfer all or
substantially all of its properties and assets to any Person or
group of affiliated Persons in a single transaction or through a
series of transactions:
(a) if (i) the Company shall be the continuing Person
or the resulting, surviving or transferee Person (the "surviving
entity") shall be a corporation organized under the laws of the
United States, any state thereof or the District of Columbia,
(ii) the surviving entity expressly assumes by supplemental
indenture or other appropriate document all of the obligations of
the Company in connection with the Noteholder Documents, the
Notes and the Indenture (including any Liens thereunder) and the
Company shall have taken all steps necessary or desirable to
perfect and protect the Noteholder Security Interest granted or
purported to be granted by the Noteholder Documents and
(iii) each Guarantor shall have entered into amendments to the
Guarantee to reflect the guarantee of the obligations of the
surviving entity and the Company has delivered to the Trustee an
Opinion of Counsel that all such steps have been taken;
(b) immediately before and immediately after giving
effect to such transaction, or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to
be incurred in connection with or in respect of such transaction
or series of transactions), no Default or Event of Default shall
have occurred and be continuing;
(c) the Company or the surviving entity (if the
transaction or series of transactions involves the Company) shall
immediately before and after giving effect to such transaction or
series of transactions (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection
with or in respect of the transaction or series of transactions)
have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction or series of transactions;
(d) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the
Company or the surviving entity could incur at least $1.00 of
additional Indebtedness pursuant to clause (c) of Section 911;
(e) the Company or the surviving entity shall have
delivered to the Trustee an Officer's Certificate and an Opinion
of Counsel stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in
connection with such transaction or series of transactions, such
supplemental indenture, complies with this covenant and that all
conditions precedent in the Indenture and the Noteholder
Documents relating to the transaction or series of transactions
have been satisfied;
(f) such transaction will not result in the loss of
any Gaming License or other license necessary for the continued
operations of the Company or any Company Subsidiary as conducted
immediately prior to such consolidation, merger, conveyance,
transfer or lease;
(g) neither the Company nor any Company Subsidiary
would thereupon become obligated with respect to any
Indebtedness, nor any of its property subject to any Lien, unless
the Company or such Company Subsidiary could incur such
Indebtedness or create such Lien under each of the Noteholder
Documents; and
(h) each Guarantor shall have by supplemental
indenture confirmed that its Guarantee shall apply to the
Company's or the surviving entity's obligations under this
Indenture and the Notes and the other Noteholder Documents.
Section 702. Successor Substituted.
Upon any consolidation, merger or disposal of all or
substantially all of the assets of the Company in accordance with
Section 701, the successor Person formed by such consolidation or
into which the Company is merged or the successor Person to which
such disposition is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under
this Indenture, the Notes and the other Noteholder Documents,
with the same effect as if such successor had been named as the
Company herein or therein. Any such Person will be required to
ensure, by executing and delivering appropriate instruments and
opinions of counsel, that the Trustee continues to hold the
Noteholder Security Interest with the required priority on all
Collateral for the benefit of the Holders of the Notes.
Section 703. Redemption.
The provisions of this Article Seven shall not impair
the Holders' right of repurchase following a Change of Control as
provided in Section 1011 herein.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES,
AMENDMENTS AND WAIVERS
Section 801. Supplemental Indentures and Amendments
Without Consent of Holders.
Without the consent of any Holders, the Company and any
Company Subsidiary, when authorized by a Board Resolution, and
the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto or amendments to the
Indenture (including any amendment to the Guarantee), the Notes
or the Noteholder Documents, in form satisfactory to the Trustee,
for any of the following purposes:
(a) to evidence the succession of another Person to
the Company, in accordance with Article Seven, or a Subject
Subsidiary, in accordance with a Restricted Asset Sale
permitted pursuant to Section 917, and the assumption by any
such successor of the covenants of the Company, in
accordance with Article Seven, or such Subject Subsidiary,
in accordance with a Restricted Asset Sale permitted
pursuant to Section 917, contained herein, in the Notes, in
the Noteholder Documents or in the Guarantee; or
(b) to add to the covenants of the Company or any
Company Subsidiary or Guarantor for the benefit of the
Holders or to surrender any right or power herein conferred
upon the Company or any Company Subsidiary or Guarantor; or
(c) to add any additional Events of Default; or
(d) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee pursuant to the
requirements of Section 510 hereof; or
(e) to cure any ambiguity, to correct or supplement
any provision herein, in the Noteholder Documents, in the
Notes or in the Guarantee which may be inconsistent with any
other provision herein or therein, or to make any other
provisions with respect to matters or questions arising
under this Indenture, under the Noteholder Documents or
under the Guarantee that shall not be inconsistent with the
provisions herein or therein; provided that, in each case,
any such provisions shall not adversely affect the interests
of the Holders; or
(f) to comply with Sections 1314 and 1318 hereof; or
(g) to effectuate any release of Collateral expressly
permitted by Section 1105; or
(h) to establish or maintain the Noteholder Security
Interest as a senior, first priority Lien (subject only to
Permitted Liens) and prior to all other Liens (other than
Permitted Liens) or to correct or amplify the description of
any Collateral subject to the Noteholder Security Interest,
or to subject additional property to the Lien of this
Indenture or other Noteholder Documents; or
(i) to comply with any requirement of the Commission
or state securities regulators in connection with the
qualification of the Indenture under the TIA or any
registration or qualification of the Notes under the
Securities Act or state securities laws.
Section 802. Supplemental Indentures and Amendments
with Consent of Holders.
(a) Subject to Section 408, with the written consent
of the Holders of a majority in principal amount of the
Outstanding Notes, by Act of such Holders delivered to the
Company and the Trustee, the Company and the Guarantors,
when authorized by a Board Resolution, and the Trustee may
amend or supplement the Indenture, the Noteholder Documents
or the Notes for the purpose of adding any provisions to or
changing in any manner or eliminating or waiving any of the
provisions of this Indenture, the Noteholder Documents or
the Notes or of modifying in any manner the rights of the
Holders under this Indenture, the Noteholder Documents or
the Notes; provided, however, that
(i) no such amendment, supplement or waiver
shall, without the consent of the Holder of each
Outstanding Note affected thereby,
(A) extend the Stated Maturity of the principal
of, or any installment of interest on, any Note, or
reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the
redemption or repurchase thereof or the Default Premium
Amount payable pursuant to Section 402, or change the
coin or currency in which the principal of any Note or
any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement
of any such payment after the Stated Maturity thereof
(or, in the case of redemption, after the Redemption
Date or, in the case of repurchase, after the Purchase
Date), or affect the ranking (in terms of right or time
of payment) of the Notes or the Guarantee,
(B) release any Guarantor from the Guarantee or
amend Article Thirteen, except as contemplated by
Section 801(a),
(C) except as expressly provided in Section
801(a), 914 or 1105 or the Noteholder Documents,
release any Collateral, permit the creation of any Lien
senior to or ranking equally with the Noteholder
Security Interest, deprive the Holders of the security
of the Collateral, or amend Section 914, 917, 922, or
923, or Article Eleven,
(D) reduce the percentage in principal amount of
the Outstanding Notes the consent of whose Holders is
required for any such supplemental indenture, or the
consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences)
provided for in this Indenture,
(E) modify any provision of Article Ten or the
definitions used therein if the effect of such
modification or waiver is to decrease the amount of any
payment required to be made by the Company thereunder
or extend the Maturity Date of such payment,
(F) modify in any respect Section 408, or
(G) modify any of the provisions of this Section
802 or Section 413, except to increase any such
percentage or to provide that certain other provisions
of this Indenture cannot be modified or waived without
the consent of the Holder of each Note affected
thereby; and
(ii) no such supplemental indenture shall,
without the consent of the Holders of 66-2/3% in
principal amount of the Outstanding Notes, modify
Section 1011 in any respect or modify in any respect,
or waive a Default or Event of Default under,
Section 401(m).
(b) It shall not be necessary for any Act of Holders
under this Section 802 to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if
such Act and such notice shall approve the substance thereof.
Section 803. Execution or Acceptance of Supplemental
Indentures, Amendments and Waivers.
In executing, or accepting the additional trusts
created by, any supplement, amendment or waiver permitted by this
Article Eight or the modifications thereby of the trusts created
by this Indenture, the Trustee shall receive, and (subject to
Section 502) shall be fully protected in relying upon, an Opinion
of Counsel stating that this Indenture, the Guarantee, the Notes
and the Noteholder Documents, as amended by such supplement,
amendment or waiver, constitute the legal, valid and binding
obligations of the Company and the Guarantors, enforceable
against each of them in accordance with its terms.
No waiver of any term, provision or condition contained
in the Notes, the Indenture, or the Noteholder Documents shall
extend to or affect such term, provision or condition except to
the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the
Guarantors and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and
effect.
Section 804. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture or
amendment under this Article, this Indenture, the Notes, or the
Noteholder Documents, as the case may be, shall be modified in
accordance therewith, and such supplemental indenture or
amendment shall form a part of this Indenture, the Notes, or the
Noteholder Documents, as the case may be, for all purposes, and
every Holder of Notes theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby and entitled to the
benefits thereof (including the benefits of any amendment to the
Guarantee).
Section 805. Conformity with Trust Indenture Act.
Every supplemental indenture or amendment made pursuant
to this Article shall conform to the requirements of the TIA as
then in effect.
Section 806. Reference in Notes to Supplemental
Indentures, Amendments or Waivers.
Notes authenticated and delivered after any supplement,
amendment or waiver has been made pursuant to this Article Eight
may, and shall if required by the Trustee, bear a notation in
form acceptable to the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplement,
amendment or waiver may be prepared and executed by the Company
and the Guarantors and authenticated and delivered by the Trustee
in exchange for Outstanding Notes. Without limiting Section 804,
in the case of any amendment to the Guarantee to add a Guarantor
to the Guarantee, whether or not any or all new Notes are so
executed, authenticated and exchanged for previously Outstanding
Notes, the Guarantor added to the Guarantee by such amendment
shall be obligated with respect to the Guarantee as if all
Outstanding Notes had been exchanged for Notes executed by the
Company and all Guarantors, including such added Guarantor.
ARTICLE NINE
COVENANTS
Section 901. Payment of Principal, Premium, If Any,
and Interest.
The Company will duly and punctually pay the principal
of (and premium, if any, on) and interest on the Notes in
accordance with the Notes and this Indenture.
Section 902. Maintenance of Note Register, Note
Registrar and Paying Agent.
The Company shall maintain or cause to be maintained in
the State of New York and the City of New York, (i) an office or
agency where Notes may be presented for registration of transfer
or exchange and at which the Notes registrar will be maintained;
and (ii) an office or agency where Notes may be presented for
payment by the Paying Agent. The Note Registrar shall maintain
the Note Register. The Company may appoint the Paying Agent, the
Note Registrar, one or more co-note registrars, and one or more
additional paying agents. The terms "Paying Agent" and "Note
Registrar" include any additional paying agent or co-
note registrar. The Trustee hereby designates the office of
Shawmut Trust Company, 14 Wall Street, 8th Floor, New York, New
York 10005, as the office of the Trustee at which Notes may be
presented for payment or presented for registration of transfer
or exchange in accordance with the terms of this Indenture as
long as the Trustee acts as Note Registrar or Paying Agent.
Section 903. Money for Note Payments to Be Held in
Trust.
If the Company shall at any time act as its own Paying
Agent, it will, on or before each due date of the principal of
(and premium, if any, on) or interest on any of the Notes,
segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying
Agents for the Notes, it will, on or before each due date of the
principal of (and premium, if any, on), or interest on, any
Notes, timely deposit with a Paying Agent in immediately
available funds a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of such
action or any failure so to act.
The Company will cause each Paying Agent (other than
the Trustee) to execute and deliver to the Trustee an instrument
in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the
principal of (and premium, if any, on) or interest on Notes
in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise
disposed of as herein provided;
(2) give the Trustee notice of any default by the
Company (or any other obligor upon the Notes) in the making
of any payment of principal (and premium, if any) or
interest; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such Paying
Agent.
The Company may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture or for
any other purpose, pay, or by Company Order direct any Paying
Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent, and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such sums.
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of
the principal of (and premium, if any, on) or interest on any
Note and remaining unclaimed for two years after such principal
(and premium, if any) or interest has become due and payable
shall, subject to applicable escheat laws, be paid to the Company
on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent,
subject to applicable escheat laws, before being required to make
any such repayment, may at the expense (and upon written request)
of the Company cause to be published once, in The New York Times
and The Wall Street Journal (national edition), and mail to each
such Holder, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30
days from the date of such publication, any unclaimed balance of
such money then remaining will, subject to applicable escheat
laws, promptly be repaid to the Company.
Section 904. Corporate Existence and Keeping of
Books.
Subject to Article Seven and Section 917, the Company
will do or cause to be done all things necessary to preserve and
keep in full force and effect the corporate, partnership or other
existence, rights (charter and statutory) and franchises of the
Company and each of the Company Subsidiaries. The Company will
keep, and cause each of the Company Subsidiaries to keep, proper
records and books of account, in which full and correct entries
shall be made of all financial transactions and the assets and
business of the Company and each such Company Subsidiary in
accordance with GAAP in all material respects.
Section 905. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid
or discharged, before the same shall become delinquent, (a) all
taxes, assessments and governmental charges levied or imposed
upon the Company or any Company Subsidiary or any of their
respective properties and (b) all lawful claims for labor,
materials and supplies, which, if unpaid, might by law become a
Lien upon the property of the Company or any Company Subsidiary;
provided, however, that except as otherwise provided in the
Noteholder Documents, the Company and any such Company Subsidiary
shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim (i) that is
being contested in good faith by appropriate proceedings and for
which adequate reserves have been established as required by GAAP
or (ii) if the failure to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim would not
have a material adverse effect on the financial condition,
results of operations, business or properties of the Company and
the Company Subsidiaries taken as a whole.
Section 906. Maintenance of Properties.
With respect to all properties owned by the Company or
any Company Subsidiary or used or held for use in the conduct of
its business or the business of any Company Subsidiary, the
Company will, and will cause the Company Subsidiaries to,
maintain and keep such property in good condition, repair and
working order and supplied with all necessary equipment and will
cause all necessary repairs, renewals, replacements, betterments
and improvements thereof to be made, all as required by the
Noteholder Documents and as otherwise may be necessary so that
the business carried on in connection therewith may be properly
and advantageously conducted at all times; provided, however,
that nothing in this Section shall prevent the Company and the
Company Subsidiaries from discontinuing the maintenance of any of
such properties if such discontinuance is (i) in the judgment of
the Company or such Company Subsidiary (which shall, in the case
of properties having an aggregate value of $500,000 or more, be
evidenced by a Board Resolution of the Board of Directors),
desirable in the conduct of the business of the Company or any
Company Subsidiary and (ii) not disadvantageous in any material
respect to the Holders.
Section 907. Insurance.
(a) The Company shall, and shall cause the Company
Subsidiaries to, have in effect customary insurance against such
risks, on terms, with deductibles and in amounts as are
customarily carried by similar businesses conducting gaming in
the jurisdictions of the gaming operations of the Company and the
Company Subsidiaries and reasonably sufficient to avoid a
material adverse change in the financial condition, results of
operation, business or properties of the Company and the Company
Subsidiaries taken as a whole. All such insurance shall be
issued by carriers having an A.M. Best & Company, Inc. rating of A-
or higher, or if such carrier is not rated by A.M. Best &
Company, Inc., having the financial stability and size deemed
appropriate by a reputable insurance broker.
(b) Without limitation of subsection (a) of this
Section 907, customary insurance coverage for the purposes of
this Section 907 shall include, where appropriate, the following:
(i) workers' compensation insurance in full compliance with all
applicable state and federal laws and regulations, (ii) property
insurance protecting property against loss or damage by fire,
lightning, windstorm, tornado, water damage, vandalism, riot,
civil commotion, malicious mischief, hurricane, and such other
risks and hazards as are from time to time covered by an "all-
risk" policy or a property policy covering "special" causes of
loss, (iii) business interruption insurance and (iv) such other
insurance as is in effect on the date hereof, in the case of each
of (i), (ii), (iii) and (iv) in amounts and with deductibles and
other significant terms at least as favorable as those in effect
on the date hereof (which are described on Schedule 907).
(c) All insurance shall name the Trustee as an
additional insured (in the case of liability insurance) or loss
payee (in the case of casualty insurance with respect to
Collateral), as applicable. To the extent obtainable on
commercially reasonable terms, all required insurance shall
contain an endorsement or agreement by the insurer (i) that any
loss shall be payable in accordance with the terms of such policy
notwithstanding any act or negligence of the Company and the
Company Subsidiaries that might otherwise result in forfeiture of
such insurance, (ii) that such policies will not be canceled or
materially amended, which term shall include any reduction in the
scope or limits of coverage, without at least 20 days prior
written notice to the Trustee, (iii) providing for no recourse to
the Holders for the payment of premiums and waiving all rights of
set off, counterclaim or deductions against the Trustee and
(iv) that its liability to the Trustee will not be affected by
acts outside of the Trustee's control. All policies of required
casualty insurance shall have attached thereto a lender's loss
payable endorsement for the benefit of the Holders.
Section 908. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, on or
before a date not more than 45 days after the end of the first,
second and third fiscal quarters of each fiscal year of the
Company and not more than 90 days after the end of each fiscal
year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not, after a review under each
signer's supervision of the activities of the Company and the
Company Subsidiaries during such fiscal quarter or fiscal year,
as the case may be, and of the performance of the Company and
each Company Subsidiary under this Indenture and the other
Noteholder Documents, to the best knowledge, based on such
review, of the signers thereof, a Default or Event of Default has
occurred during such fiscal quarter or fiscal year, as the case
may be, and, if there has been a Default or Event of Default that
is continuing, specifying each Default or Event of Default and
the nature and status thereof. Each such statement shall comply
with Section 314(a)(4) of the Trust Indenture Act and shall,
commencing with the fiscal quarter ending March 31, 1998, set
forth all computations, in reasonable detail satisfactory to the
Trustee, demonstrating compliance with the provisions of
Section 924.
(b) When the Company is aware that any Default, or
Event of Default or if any holder or the trustee for the holder
of any other evidence of Indebtedness of the Company or any
Company Subsidiary gives any notice to the Company or takes any
other action of which the Company is aware with respect to a
claimed default, the Company shall deliver to the Trustee by
registered or certified mail or by telegram, telex or facsimile
transmission an Officers' Certificate specifying such event,
notice or other action within three Business Days after the
Company becomes aware of its occurrence.
Section 909. Provision of Financial Statements.
(a) The Company shall file with the Trustee, within 15
days after it files them with the Commission, copies of the
annual, quarterly and periodic reports, and of the information,
documents and other reports, which the Company is required to
file with the Commission pursuant to Section 13, 14 or 15(d) of
the Exchange Act. If the Company is not subject to the
requirements of Section 13, 14 or 15(d) of the Exchange Act, the
Company shall file with the Trustee, within 15 days after it
would have been required to file such information with the
Commission were it subject to Section 13, 14 or 15(d) of the
Exchange Act, financial statements, including any notes thereto
(and with respect to annual reports, an auditors' report by a
firm of established national reputation), and a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," both comparable to that which the Company would have
been required to include in the annual and quarterly reports the
Company would have been required to file if the Company were
subject to the requirements of Section 13, 14 or 15(d) of the
Exchange Act. The Company also shall comply with the provisions
of TIA Section 314(a).
(b) If the Company is required to furnish annual or
quarterly reports to its stockholders pursuant to the Exchange
Act, so long as any Notes remain outstanding, the Company shall
cause any annual report to stockholders and any quarterly or
other financial reports furnished by it to stockholders to be
filed with the Trustee at the time of such mailing or furnishing
to stockholders. If the Company is not required to furnish
annual or quarterly reports to its stockholders pursuant to the
Exchange Act, the Company shall cause its financial statements
referred to in Section 909(a) above, including any notes thereto
(and with respect to annual reports, an auditors' report by a
firm of established national reputation), and a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," comparable to that which would have been required to
appear in annual or quarterly reports filed under Section 13 or
15(d) of the Exchange Act to be filed with the Trustee within 105
days after the end of each of the Company's fiscal years and
within 60 days after the end of each of the Company's first three
fiscal quarters of such fiscal year. The Company shall file with
the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants of
this Indenture as may be required from time to time by such rules
and regulations. The Trustee will make such reports available
for inspection and copying by, and will provide copies to, each
Holder requesting the reports described in this Section 909(b).
(c) The Company shall provide the Trustee with a
sufficient number of copies of all reports and other documents
and information that the Trustee may be required to provide to
the Holders upon request under Section 909(b) to permit the
Trustee to satisfy that requirement.
(d) If any Company Subsidiary is required to file
reports or other information with the Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act separately from the
Company, the Company shall file or cause to be filed with the
Trustee, and supply or cause to be supplied to each Holder of
Notes, without cost to such Holder, copies of such reports or
other information, within fifteen days after the same shall be
filed with the Commission.
Section 910. Compliance with Laws, Etc.
The Company will comply, and cause each of the Company
Subsidiaries to comply, with all applicable laws, unless the
failure to so comply would not have a material adverse effect on
the financial condition, results of operations, business or
properties of the Company and the Company Subsidiaries taken as a
whole.
Section 911. Limitation on Company Indebtedness.
The Company shall not, and shall not permit any of the
Company Subsidiaries to, directly or indirectly, create, incur,
assume, suffer to exist, guarantee or in any manner become
directly or indirectly liable for the payment of ("incur"), any
Indebtedness other than:
(a) Indebtedness under the Notes, the Indenture and
the other Noteholder Documents;
(b) Bank Indebtedness and any renewals, replacements
and/or refinancings thereof, so long as the aggregate
principal amount of Bank Indebtedness at any one time
outstanding pursuant to this paragraph (b) does not exceed
the Bank Indebtedness Amount;
(c) Any Indebtedness, if (i) no Default or Event of
Default shall have occurred and be continuing at the time
of, or would occur after giving effect to, on a pro forma
basis, such incurrence of such Indebtedness and
(ii) immediately after giving effect to the incurrence
thereof, and the receipt and the application of the proceeds
thereof, the Consolidated Coverage Ratio would be greater
than (A) 1.75 to 1, in the case of such Indebtedness
incurred or to be incurred on or prior to December 31, 1996
and (B) 2.0 to 1, in the case of such Indebtedness incurred
or to be incurred on or after January 1, 1997; provided that
any such Indebtedness shall mature at a date not earlier
than the Stated Maturity of the Notes and shall have an
Average Life to Stated Maturity equal to or greater than the
remaining Average Life to Stated Maturity of the Notes;
(d) Any Indebtedness issued in exchange for or to
repay, prepay, repurchase, redeem, defease, retire or
refinance ("refinance") any Indebtedness permitted by
clauses (a) or (c) above; provided that (i) if the principal
amount of the Indebtedness so issued shall exceed the
principal amount of the Indebtedness so exchanged or
refinanced, then such excess shall be permitted only to the
extent that it is otherwise permitted to be incurred under
this Section 911 and (ii) the Indebtedness so issued (A) has
a Stated Maturity later than the Stated Maturity of the
Indebtedness so exchanged or refinanced, (B) has an Average
Life to Stated Maturity equal to or greater than the
remaining Average Life to Stated Maturity of the
Indebtedness so exchanged or refinanced, and (C) is
subordinated to the Notes to at least the same extent as the
Indebtedness so exchanged or refinanced.
Section 912. Limitation on Company Subsidiary Stock.
The Company shall not sell, and shall not cause or
permit any Company Subsidiary to issue or sell directly or
indirectly, any of the Capital Stock of such Company Subsidiary
(including, without limitation, any of its Common Stock,
Preferred Stock or Disqualified Stock) to any Person other than
the Company or a wholly-owned Company Subsidiary.
Section 913. Limitation on Restricted Payments.
The Company shall not, and shall not permit any of the
Company Subsidiaries to, make, directly or indirectly, any
Restricted Payment if, after giving effect thereto, on a pro
forma basis:
(a) a Default or Event of Default shall have occurred
and is continuing or would occur as a consequence thereof;
(b) the Company would not have been permitted, at the
time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made
at the beginning of the applicable Reference Period, to
incur at least $1.00 of additional Indebtedness pursuant to
Section 911(c); or
(c) the aggregate amount of all Restricted Payments
declared or made after the Issue Date would exceed the sum
of a (i) 50% of the aggregate Consolidated Net Income (or in
the event such Consolidated Net Income shall be a deficit,
minus 100% of such deficit) accrued during the period
(treated as one accounting period) commencing on the first
full fiscal quarter commencing after the Issue Date, to and
including the last day of the fiscal quarter ended
immediately prior to the date of each such calculation,
minus (ii) 100% of the amount of any write downs, write-
offs, or negative extraordinary charges not otherwise
reflected in Consolidated Net Income during such period,
plus (iii) an amount equal to the aggregate Net Cash
Proceeds received by the Company from the issuance or sale
(other than to a Company Subsidiary) of its Capital Stock
(excluding Disqualified Stock, but including Capital Stock
issued upon conversion of convertible Indebtedness and from
the exercise of options, warrants or rights to purchase
Capital Stock (other than Disqualified Stock) of the
Company) after the Issue Date;
provided, however, that the foregoing provisions will not
prevent, provided that no Default or Event of Default shall have
occurred and be continuing at the time of and after giving effect
to such Restricted Payment: (i) the payment of any dividend
within 60 days after the date of its declaration if, at the date
of declaration, such payment would be permitted by such
provisions; (ii) the payment of dividends or the making of
distributions on shares of Capital Stock of the Company solely in
shares of Capital Stock of the Company; and (iii) Restricted
Payments not otherwise permitted by this Section 913 which do not
exceed $200,000 in any fiscal year.
Section 914. Limitation of Liens.
The Company shall not, and shall not permit any of the
Company Subsidiaries to, create, incur, assume or suffer to exist
any Lien in or on any right, title or interest to any of their
properties or assets (including, without limitation, any income
or profits) now owned or hereafter acquired by it, other than
Permitted Liens.
Section 915. Limitation on Dividends and Other
Payment Restrictions Affecting Company Subsidiaries.
The Company shall not, and shall not permit any of the
Company Subsidiaries to, directly or indirectly, create, assume
or suffer to exist any consensual encumbrance or restriction on
the ability of such Company Subsidiary to pay dividends, or make
any other distributions on the Capital Stock of such Company
Subsidiary or pay any obligation to the Company or the Company
Subsidiaries, or otherwise transfer assets or make or pay loans
or advances to the Company or any Company Subsidiary, except
(a) restrictions imposed by the Noteholder Documents;
(b) restrictions set forth on Schedule 915;
(c) customary non-assignment provisions restricting
subletting or assignment of any lease entered into in the
ordinary course of business, consistent with industry
practices,
(d) restrictions imposed by applicable Gaming Laws or
Liquor Laws or any applicable Gaming Authority or Liquor
Authority,
(e) restrictions under any agreement relating to any
property, assets or business acquired by the Company or the
Company Subsidiaries, which restrictions existed at the time
of acquisition, were not put in place in anticipation of
such acquisition and are not applicable to any Person, other
than the Person acquired or to any property, assets or
business other than the property, assets and business of the
Person so acquired,
(f) any restrictions (continuing for a period of not
more than 90 consecutive days) with respect to Capital Stock
or assets, as the case may be, of a Subject Subsidiary
imposed pursuant to an agreement that has been entered into
for the sale or disposition, constituting a Restricted Asset
Sale permitted under Section 917, of all or substantially
all of the Capital Stock or assets of such Subject
Subsidiary, and
(g) replacements of restrictions imposed pursuant to
clauses (a) through (e) that are no more restrictive than
those being replaced.
Section 916. Limitation on Sale-Leaseback
Transactions.
The Company shall not, directly or indirectly, and
shall not permit any of the Company Subsidiaries to, directly or
indirectly, enter into, guarantee or otherwise become liable with
respect to any Sale-Leaseback Transaction unless (a) after giving
effect to any such Sale-Leaseback Transaction the Company could
incur $1.00 of additional Indebtedness pursuant to Section
911(c), (b) such Sale-Leaseback Transaction is otherwise
permitted under Section 914, (c) the consideration received by
the Company and/or any of the Company Subsidiaries for such Sale-
Leaseback Transaction are at least equal to the Fair Market Value
of such property being transferred, and (d) the Company shall
apply the Net Cash Proceeds of the sale as provided under Section
917. Notwithstanding anything contained in this covenant, the
Company shall not, and shall not permit any of the Company
Subsidiaries to, directly or indirectly, enter into, guarantee or
otherwise become liable with respect to any Sale-Leaseback
Transaction with respect to any Collateral.
Section 917. Limitation on Restricted Asset Sales.
(a) The Company shall not, and shall not permit any
Subject Subsidiary to, directly or indirectly, make any
Restricted Asset Sale unless (i) at the time of such Restricted
Asset Sale, the Company or such Subject Subsidiary, as the case
may be, receives consideration at least equal to the Fair Market
Value of the assets sold or otherwise disposed of; (ii) at least
90% in value of the form of the consideration therefore received
by the Company or such Subject Subsidiary is in U.S. Dollars;
provided, however, that the amount of (A) any liabilities (as
shown on the Company's or the Subject Subsidiary's most recent
balance sheet or in the notes thereto) of the Company or any
Subject Subsidiary that are assumed by the transferee in any such
transaction, and (B) any notes, obligations or other marketable
securities received by the Company or any Subject Subsidiary from
such transferee that are immediately converted by the Company or
such Subject Subsidiary into the form of consideration
constituting U.S. Dollars, shall both be deemed to be U.S.
Dollars for purposes of this provision; provided, further,
however, that the 90% limitation referred to above shall not
apply to (I) the sale by the Company of all of the Capital Stock
of BWCC, Inc. or the sale by BWCC, Inc. of substantially all of
the assets of the Central City Casino, or (II) any Restricted
Asset Sale in which the portion of the consideration received in
U.S. Dollars is equal to or greater than what the net after-tax
proceeds would have been had such Restricted Asset Sale complied
with the aforementioned 90% limitation; (iii) no Default or Event
of Default shall have occurred and be continuing at the time of
or after giving effect to such Restricted Asset Sale; and
(iv) unless otherwise expressly provided in the Indenture, the
Company shall apply the Net Cash Proceeds of such Restricted
Asset Sale in connection with the offer to purchase the Notes
described below; provided, however, that notwithstanding anything
contained herein to the contrary, other than as expressly
permitted by Section 1105, in no event shall the Company or any
Subject Subsidiary be permitted to, directly or indirectly,
engage in any Restricted Asset Sale involving any Collateral.
(b) On or before the 180th day after the date on which
the Company or any Subject Subsidiary consummates the relevant
Restricted Asset Sale, the Company shall make an offer to
purchase (the "Restricted Asset Sale Offer") from all holders of
Notes up to a maximum principal amount (expressed as a multiple
of $1,000) of Notes equal to the Net Cash Proceeds from such
Restricted Asset Sale at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase (the "Restricted Asset
Sale Purchase Price"); provided that the Company will not be
required to make a Restricted Asset Sale Offer if, and only to
the extent that, on or before the 165th day after the date on
which the Company or such Subject Subsidiary consummates the
relevant Restricted Asset Sale, the Company or any Subject
Subsidiary applies all of such portion thereof that is not
applied in connection with an Restricted Asset Sale Offer to make
a Permitted Related Investment and upon consummation thereof the
Trustee shall have or shall have received a senior, first
priority fully perfected Lien (subject only to the Permitted
Liens) in and upon the property or assets acquired by the Company
or any of its Subject Subsidiaries in connection therewith, and
the Company has delivered to the Trustee an Opinion of Counsel
with respect to the validity and perfection of such Lien. If the
Company is required to make a Restricted Asset Sale Offer
pursuant to this Section 917, on or prior to the 165th day
following the date on which the Company or any Company Subsidiary
consummates the relevant Restricted Asset Sale, the Company shall
deliver a written notice (a "Restricted Asset Sale Offer Notice")
via telefax or overnight delivery to the Trustee that the Company
is required to make a Restricted Asset Sale Offer that specifies
the Restricted Asset Sale Purchase Price that will be paid by the
Company in connection therewith. Each Restricted Asset Sale
Offer shall remain open for a period of at least 20 Business
Days. To the extent the Restricted Asset Sale Offer is not fully
subscribed to by the Holders of the Notes, the Company may retain
such unutilized portion of the Net Cash Proceeds. Holders whose
Notes are purchased only in part will be issued new Notes equal
in part in principal amount to the unpurchased portion of the
Notes surrendered.
The Company shall comply with applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, in connection
with an Restricted Asset Sale Offer.
Section 918. Application of Net Cash Proceeds in
Event of Loss.
In the event that the Company or any Subject Subsidiary
suffers any Event of Loss that does not otherwise constitute a
Default or an Event of Default, on or before the 360th day after
the Company or such Subject Subsidiary receives any Net Cash
Proceeds from such Event of Loss, the Company shall make an offer
to purchase (the "Event of Loss Offer") from all holders of Notes
up to a maximum principal amount (expressed as a multiple of
$1,000) of Notes equal to the Net Cash Proceeds at a purchase
price equal to 101% of the principal amount thereof plus accrued
and unpaid interest thereon, if any, to the date of purchase (the
"Event of Loss Purchase Price"); provided that the Company will
not be required to make an Event of Loss Offer if, and only to
the extent that, on or before the 345th day after the date on
which the Company or such Subject Subsidiary receives any Net
Cash Proceeds from the relevant Event of Loss, the Company or any
Subject Subsidiary applies all or such portion thereof that is
not applied in connection with an Event of Loss Offer to make a
Permitted Related Investment and, upon consummation thereof, the
Trustee shall have or shall have received a senior, first
priority fully perfected Lien (subject only to Permitted Liens)
in and upon the property or assets acquired by the Company or any
of its Subject Subsidiaries in connection therewith, and the
Company has delivered to the Trustee an Opinion of Counsel as to
the validity and perfection of such Lien. If the Company is
required to make an Event of Loss Offer pursuant to this Section
918, on or prior to the 345th day following the date on which the
Company or any Company Subsidiary suffers the relevant Event of
Loss, the Company shall deliver a written notice (an "Event of
Loss Offer Notice") via telefax or overnight delivery to the
Trustee that the Company is required to make an Event of Loss
Offer that specifies the Event of Loss Purchase Price that will
be paid by the Company in connection therewith. Each Event of
Loss Offer shall remain open for a period of at least 20 Business
Days. To the extent the Event of Loss Offer is not fully
subscribed to by the holders of the Notes, the Company may retain
such unutilized portion of the Net Cash Proceeds. Holders whose
Notes are purchased only in part will be issued new Notes equal
in principal amount to the unpurchased portion of the Notes
surrendered. The Company shall comply with applicable tender
offer rules, including Rule 14e-1 under the Exchange act, in
connection with an Event of Loss Offer.
In the event any Event of Loss involves any Collateral,
the Company or the Company Subsidiary, as the case may be, shall
cause such Net Cash Proceeds to be deposited in the Collateral
Account on the Business Day on which such Net Cash Proceeds are
received by the Company or such Company Subsidiary. Collateral
Proceeds (including any earnings thereon) may be released from
the Collateral Account only in accordance with Section 1105.
Section 919. Ownership of Stock of Company
Subsidiaries.
(a) The Company shall at all times have, or cause a
wholly-owned Company Subsidiary (other than a Non-Operating
Subsidiary) to have, ownership of 100% of each class of Voting
Stock of, and all other equity securities in, each Company
Subsidiary (other than a Non-Operating Subsidiary), except
(i) any Subject Subsidiary that shall be disposed of in its
entirety in accordance with Section 917, and (ii) any Company
Subsidiary which becomes a Company Subsidiary by means of an
Investment by the Company or any Company Subsidiary expressly
permitted pursuant to Section 913.
Section 920. Limitation on Transactions with
Affiliates.
(a) Subject to subsection (b) below, the Company shall
not, and shall not permit any Company Subsidiary to, enter into,
renew or extend any transaction or series of related transactions
with any of their respective Affiliates (each an "Affiliate
Transaction"), unless (i) the Affiliate Transaction is on terms
at least as favorable to the Company or such Company Subsidiary,
as the case may be, as those that could have been obtained in a
comparable transaction on an arm's-length basis with an
unaffiliated third party; (ii) in the case of an Affiliate
Transaction (including any series of related transactions) with a
value to either party in excess of $500,000, a majority of the
Independent directors of the Board of Directors has determined in
good faith that such Affiliate Transaction complies with clause
(i), as evidenced by a Board Resolution; and (iii) in the case of
any Affiliate Transactions (including any series of related
transactions) with an aggregate value (to either party) in excess
of $1,000,000, the Company or such Company Subsidiary obtains a
written favorable opinion as to the fairness of such transaction
to the Company or such Company Subsidiary from a financial point
of view from any national or regional independent investment
banking firm with recognized experience in the gaming industry.
The Company, and any Company Subsidiary that is a Guarantor, may
only sell, transfer, convey, lease or assign any Collateral to
the Company or a Company Subsidiary if the Trustee has or
receives a senior, first priority fully perfected Lien (subject
only to the Permitted Liens) in and upon such Collateral upon
such sale, transfer, conveyance, lease or assignment and the
Company has delivered to the Trustee an Opinion of Counsel with
respect to the validity and perfection of such Lien.
(b) Subsection (a) shall not apply to any of the
following: (i) transactions between one or more Guarantors that
are wholly-owned Company Subsidiaries or between the Company and
one or more Guarantors that are wholly-owned Company
Subsidiaries, (ii) Restricted Payments permitted to be made under
Section 913 or (iii) customary directors' fees and indemnities.
Section 921. Change in Nature of Business.
The Company shall not, and shall not permit any of the
Company Subsidiaries to, directly or indirectly, own, acquire,
manage or conduct any operation, line of business or business or
other enterprise, other than a Permitted Line of Business.
Section 922. Additional Collateral.
The Company will, and will cause each of the Company
Subsidiaries that now owns or hereafter owns any assets or
property to, grant to the Trustee a valid and perfected senior,
first priority Lien (subject only to the Permitted Liens) in and
upon such assets or property enforceable against all third
parties and to execute and deliver all documents and to take all
action necessary or desirable to perfect and protect the
Noteholder Security Interest in favor of the Trustee, including,
without limitation, the following:
(i) executing and delivering to the Trustee (A) a
first priority mortgage and/or a deed of trust (subject only
to the Permitted Liens) which is (a) in the case of any
Colorado real property interests, in substantially the form
of the deeds of trust filed in respect of the fee or
leasehold interests in real property securing the Notes as
of the date of this Indenture, and (b) in the case of real
property interests in any other jurisdiction, in
substantially the form of the deed of trust referred to in
clause (a), appropriately modified to reflect the local law
of the jurisdiction in which such real property interest is
located, in any event with such modifications as are
acceptable to the Trustee and covering each real property
interest that is or becomes part of such assets (an
"Additional Deed of Trust"), together with (1) evidence that
counterparts of such Additional Deed of Trust have been duly
filed or recorded in all filing or recording offices
necessary or desirable in order to create a valid and
enforceable senior, first priority Lien (subject only to the
Permitted Liens) on such real property interest in favor of
the Trustee for its benefit and the benefit of the Holders,
and that all filing and recording taxes and fees have been
paid; (2) a fully paid American Land Title Association
Lender's Extended Coverage title insurance policy (or
written commitment to issue such policy) in an amount not
less than the fair market value, reasonably determined by
the Company, of such real property interest, insuring the
Additional Deed of Trust to be a valid and enforceable first
priority Lien (subject only to the Permitted Liens) on such
real property interest, free and clear of all defects and
encumbrances; (3) if necessary, copies of all
authorizations, consents and approvals of, evidence of other
actions by, and notices to and filings with, all
governmental authorities and regulatory bodies required for
the due execution, delivery or performance by the Company or
such Company Subsidiary of the Additional Deed of Trust
certified as to accuracy and completeness by a duly
authorized officer of the Company or such Company
Subsidiary; and (4) all necessary documentation or consents
required to perfect and maintain the validity, effectiveness
and enforceability of the Additional Deed of Trust,
including, without limitation, with respect to leasehold
interests acquired by the Company or such Company
Subsidiary, fully executed memoranda of lease, in recordable
form, and consents to assignment of the lease, provided that
where any such documentation or consents are required from a
third party, the Company or such Company Subsidiary will use
all reasonable efforts to obtain such documentation or
consent;
(ii) executing and delivering additional security
agreements or supplements to the Security Agreement (and the
schedules thereto) so as to create a senior, first priority
Lien (subject only to the Permitted Liens) on all personal
property that is or becomes part of such assets or property
(including the filing of Uniform Commercial Code financing
statements, endorsement and physical delivery, if
applicable, and the giving of notices and obtaining
appropriate consents), and otherwise complying with all of
the terms and conditions of the Security Agreement;
(iii) executing and delivering additional pledge
agreements or supplements to the Pledge Agreement (and the
schedules thereto) so as to create a senior, first priority
Lien (subject only to Permitted Liens) on all Capital Stock
that is or becomes part of such assets or property
(including the filing of Uniform Commercial Code financing
statements, endorsement and physical delivery thereof, if
applicable, and the giving of notice and obtaining
appropriate consents) and otherwise complying with all of
the terms and conditions of the Pledge Agreement; and
(iv) delivering to the Trustee within 30 days
after taking any of the foregoing actions a favorable
Opinion of Counsel as to the matters described in clause
(i), (ii) or (iii) being legal, valid and binding
obligations of the Person delivering the same and the
Company has delivered to the Trustee an Opinion of Counsel
with respect to the validity and perfection of the
Noteholder Security Interest.
Section 923. Non-Operating Subsidiaries.
The Company shall not permit any of its Non-Operating
Subsidiaries to engage in, or conduct, any business whatsoever or
hold for use or own any assets or property (including, without
limitation, any equity securities), except for the assets or
property listed on Schedule 923. Without limiting the generality
of the foregoing, the Company shall not permit any Non-Operating
Subsidiary to (i) incur any Indebtedness or (ii) issue or sell
any Capital Stock, including, without limitation, any Common
Stock, Preferred Stock or Disqualified Stock of such Non-
Operating Subsidiary to any Person.
Section 924. Maintenance of Fixed Charge Coverage.
As of the end of each fiscal quarter commencing with
the fiscal quarter ending March 31, 1998, the Company shall not
permit the Consolidated Fixed Charges Coverage Ratio for the four
fiscal quarters ended as of such fiscal quarter to be less than
1.25 to 1.
Section 925. Noteholder Documents.
Simultaneously herewith, the Company shall execute, or
cause the Company Subsidiaries and Guarantors to execute, the
respective Noteholder Documents, as appropriate, securing the
Company's and the Guarantor's obligations under this Indenture
(including the Guarantee), the Noteholder Documents and the
Notes. Each Holder, by accepting a Note, agrees to all terms and
provisions of the Noteholder Documents as the same may be amended
or supplemented from time to time pursuant to the provisions
hereof and thereof. The terms of the release of the Collateral
and the rights of the Holders with respect thereto shall be
governed by the Noteholder Documents and this Indenture;
provided, however, that in the event of a conflict between the
terms of the Indenture and the terms of any other Noteholder
Documents, the terms of this Indenture shall govern.
Section 926. Validity of Noteholder Security
Interest.
The Company represents and warrants that it has, and
covenants that it shall continue to have, full power and lawful
authority to grant, release, convey, assign, transfer, mortgage,
pledge, hypothecate and otherwise create the Noteholder Security
Interest referred to in Article Eleven, and the Company shall
warrant, preserve and defend the Noteholder Security Interest of
the Trustee in and to the Collateral or any asset or property
that should constitute Collateral but for the fact that the
Company and/or the Company Subsidiaries failed to comply with the
provisions of the Indenture or the Noteholder Documents against
the claims of all persons, and will maintain and preserve the
Noteholder Security Interest contemplated by Article Eleven. No
assets or property may be used at or in connection with a Gaming
Facility or any other property of the Company and/or the Company
Subsidiaries unless the Company and/or the Company Subsidiaries
have done all things necessary or desirable to create and perfect
a senior, first priority Lien (subject only to the Permitted
Liens) in such assets or property, and the Company has delivered
to the Trustee an Opinion of Counsel with respect to the validity
and perfection of such Lien.
Section 927. Investment Company Act.
Neither the Company nor any of the Company Subsidiaries
shall become an investment company subject to registration under
the Investment Company Act of 1940, as amended.
Section 928. Payment for Consent.
The Company shall not, and shall cause the Company
Subsidiaries not to, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Notes for or as an inducement to
any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the other Noteholder Documents
unless such consideration is offered to be paid or agreed to be
paid to all Holders that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
Section 929. Hemmeter Consulting Agreements.
The Company shall not, and shall not permit any Company
Subsidiary to, amend, modify or extend the term of any consulting
agreement entered into between the Company or any Company
Subsidiary and Christopher B. Hemmeter and the Company or any
Company Subsidiary and Mark M. Hemmeter as of the Issue Date, nor
thereafter enter into any additional agreements or arrangements
with either Christopher B. Hemmeter or Mark M. Hemmeter or any
Affiliate of either of them.
Section 930. Stay, Extension and Usury Laws.
Each of the Company, the Guarantors and the Company
Subsidiaries covenants (to the extent permissible under
applicable law) that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law or any usury law or other
law, wherever enacted, now or at any time hereafter in force,
that would prohibit or forgive the Company or the Guarantors from
paying all or any portion of the principal of, premium, if any,
or interest on the Notes and amounts from time to time payable
under the Guarantees, in each case as contemplated herein, or
that may materially affect the covenants or the performance of
this Indenture or the other Noteholder Documents in a manner
inconsistent with the provisions of this Indenture or such
Noteholder Documents and (to the extent that it may lawfully do
so) each of the Company and the Guarantors hereby expressly
waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been
enacted.
ARTICLE TEN
REDEMPTIONS AND REPURCHASES OF NOTES
Section 1001. Right of Redemption.
(a) The Notes may be redeemed, at the election of the
Company, as a whole or from time to time in part, by payment
thereof in accordance with Paragraph 5 of the Notes.
(b) All references in Article Ten to "Holder" shall
include any beneficial owner of Notes
Section 1002. Applicability of Article.
Redemption of Notes at the election of the Company or
otherwise, as permitted or required by any provision of this
Indenture, shall be made in accordance with such provision and
this Article.
Section 1003. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes
pursuant to Section 1001 shall be evidenced by a Board
Resolution. The Company shall, at least 45 and no more than 60
days prior to the Redemption Date fixed by the Company
(a) deliver an Officers' Certificate to the Trustee notifying the
Trustee of such Redemption Date and of the principal amount of
Notes to be redeemed and (b) provide the Trustee with an Opinion
of Counsel stating that such redemption is authorized or
permitted by this Indenture.
Section 1004. Selection by Trustee of Notes to Be
Redeemed or Repurchased.
Except as contemplated by Section 1009, if less than
all the Outstanding Notes are to be redeemed or repurchased, the
particular Notes or portions thereof to be redeemed or
repurchased shall be determined on a pro rata basis, by lot or by
such other method determined by the Trustee to be fair and
appropriate (subject to the requirements of any securities
exchange or trading system on which the Notes are then listed or
approved for trading) in principal amounts of $1,000 or integral
multiples thereof from the Outstanding Notes not previously
called for redemption or repurchase.
The Trustee shall promptly notify the Company and each
Note Registrar in writing of the Notes to be redeemed or
repurchased and, in the case of any Notes which will be redeemed
or repurchased in part, the principal amount thereof to be
redeemed or repurchased.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption or
repurchase of Notes shall relate, in the case of any Note
redeemed or repurchased, or to be redeemed or repurchased only in
part, to the portion of the principal amount of such Note which
has been or is to be redeemed or repurchased.
Section 1005. Notice of Redemption.
Notice of redemption shall be given in the manner
provided for in Section 107 not less than 30 nor more than 60
days prior to the Redemption Date, to each Holder of Notes to be
redeemed at the address appearing in the Note Register. All
notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of
accrued and unpaid interest to the Redemption Date;
(3) if less than all Outstanding Notes are to be
redeemed, the identification (and in the case of a partial
redemption, the principal amounts) of the particular Notes
to be redeemed;
(4) that on the Redemption Date, the Redemption Price
(together with accrued interest, if any, to the Redemption
Date payable as provided in Section 1007) will become due
and payable upon each such Note, or the portion thereof, to
be redeemed, and that interest thereon will cease to accrue
on and after said date; and
(5) the place or places where such Notes are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Notes to be redeemed at the
election of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense
of the Company, provided that the text of any such notice shall
be determined by the Company.
Section 1006. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as
provided in Section 903) an amount of money in same day funds by
10:00 a.m. New York time on the Business Day immediately
preceding the Redemption Date sufficient to pay the Redemption
Price of, and (if the Redemption Date shall not be an Interest
Payment Date, but subject to 1009) accrued and unpaid interest
on, all the Notes or portions thereof which are to be redeemed on
the Redemption Date.
Section 1007. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid,
the Notes so to be redeemed shall, on the Redemption Date, become
due and payable at the Redemption Price for such Notes and from
and after such date (unless the Company shall default in the
payment of the Redemption Price and, subject to Section 1009,
accrued interest to the Redemption Date) such Notes shall cease
to bear interest. Upon the later of the Redemption Date or
surrender of any such Note for redemption in accordance with said
notice, such Note shall be paid by the Company at the Redemption
Price, together with, subject to Section 1009, accrued and unpaid
interest to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to
the Redemption Date shall be payable to the Holders of such Notes
or one or more Predecessor Notes, registered as such on the
relevant Record Dates according to their terms and the provisions
of Section 208.
If any Note called for redemption shall not be so paid
or duly provided for upon the later of the Redemption Date or
surrender thereof for redemption, the principal (and premium, if
any) shall, until paid, bear interest from the Redemption Date as
provided herein.
Section 1008. Notes Redeemed in Part.
Any Note which is to be redeemed only in part shall be
surrendered to the Paying Agent or Note Registrar (with, if the
Company, the Paying Agent, the Registrar or the Trustee so
requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company, the Paying Agent, the
Registrar or the Trustee duly executed by, the Holder thereof or
such Holder's attorney duly authorized in writing), and the
Company and the Guarantors shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Note without
service charge, a new Note or Notes, of any authorized
denomination as requested by such Holder, in an aggregate
principal amount equal to, and in exchange for, the unredeemed
portion of the principal of the Note so surrendered.
Section 1009. Redemption Pursuant to Gaming Laws.
Each Holder, by accepting the Notes, shall be deemed to
have agreed (to the extent permitted by applicable law) that if
the Gaming Authority of any jurisdictions in which the Company or
any of the Company Subsidiaries conducts or proposes to conduct
gaming requires that a Person who is a Holder must be licensed or
found suitable under Gaming Laws, such Holder shall apply for a
license or a finding of suitability within the required time
period. If such Person fails to apply or become licensed or is
found unsuitable, the Company shall have the right, at its
option, (i) to require such Person to dispose of its Notes or
beneficial interest therein within 30 days of receipt of notice
of the Company's election or such earlier date as may be ordered
by such Gaming Authority or (ii) to redeem such Notes at a
Redemption Price equal to the lesser of (A) such Person's cost
and (B) 100% of the principal amount thereof, plus accrued and
unpaid interest to the earlier of the Redemption Date and the
date of the finding of unsuitability, which may be less than 30
days following the notice of redemption if so ordered by the
Gaming Authority. The Company shall notify the Trustee in
writing of any such redemption as soon as practicable. The
Company shall not be responsible for any costs or expenses any
such Holder may incur in connection with its application for a
license, qualification or a finding of suitability.
Section 1010. Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for
redemption shall become due and payable on the Redemption Date at
the Redemption Price, together with, subject to Section 1009,
accrued and unpaid interest on such Notes through the Redemption
Date. Upon surrender to the Paying Agent, such Notes shall be
paid on the Redemption Date at the Redemption Price, together
with, subject to Section 1009, accrued and unpaid interest on
such Notes through the Redemption Date. If a Redemption Date is
a date other than a Business Day, payment shall be made on the
next succeeding Business Day and no interest shall accrue for the
period from such Redemption Date to such succeeding Business Day.
Section 1011. Offer to Purchase Notes upon Change of
Control.
(a) If a Change of Control (as defined below) shall
occur, subject to Section 1112 (including, without limitation the
rights of the holders of Secured Bank Indebtedness under Section
1112), the Company shall offer (a "Change of Control Purchase
Offer") to purchase from Holders of the Notes, and shall purchase
from Holders accepting such offer, Notes, at a purchase price
equal to 101% of the aggregate principal amount of the Notes,
plus accrued and unpaid interest to the Purchase Date (the
"Change of Control Purchase Price"), subject to satisfaction by
or on behalf of the Holder of the requirements set forth in
Section 1012(c). "Change of Control" means (i) a sale,
assignment, lease, transfer, conveyance or other disposition,
directly or indirectly, of all or substantially all of the
Company's assets or properties, whether in a single transaction
or a series of related transactions (other than by way of merger
or consolidation), to any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange
Act), (ii) the liquidation or dissolution of the Company,
(iii) the time that the Company first determines or reasonably
should have known that any "person" or "group" (as such terms are
used for purposes of Section 13(d) and 14(d) of the Exchange Act,
whether or not applicable) is or becomes the "beneficial owner"
(as such terms is used in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a "person"
shall be deemed to have "beneficial ownership" of all shares that
any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly (including as a result of a merger or
consolidation), of more than 50% of the total voting power in the
aggregate of all classes of Capital Stock then outstanding of the
Company normally entitled to vote in elections of directors, or
(iv) during any period of 12 consecutive months after the Issue
Date, individuals who at the beginning of such period constituted
the Board of Directors of the Company (determined after the
resignation of interim directors who are serving as directors
only until all of the individuals who are proposed by the Plan of
Reorganization as the initial directors (other than Thomas
Thorsen) (the "Initial Directors") of the Company are approved by
the applicable Gaming Authorities) together with any new
directors whose election by such board or whose nomination for
election by the shareholders of the Company was approved by a
vote of a majority of the directors then still in office who were
directors at the beginning of such period, cease for any reason
to constitute a majority of the Board of Directors of the Company
then in office. Notwithstanding anything contained herein to the
contrary, (A) any interim director of the Company who is still
serving as a director of the Company six months after the Issue
Date shall be deemed to be an Initial Director as of the Issue
Date for purposes of clause (iv) hereof and (B) the occurrence of
a Black Hawk Casino Event shall not give rise to a Change of
Control.
(b) Within 15 Business Days after the occurrence of a
Change of Control, the Company shall given written notice of
Change of Control to the Trustee. Within 15 Business Days after
the Trustee receives such notice, the Trustee shall send, via
registered or certified mail, telefax, telex or overnight
delivery, a copy of such written notice to each Holder (and to
beneficial owners if required by applicable law as certified to
the Trustee in an Opinion of Counsel). The Trustee shall be
under no obligation to ascertain the occurrence of a Change of
Control or to give notice with respect thereto other than as
provided above upon receipt of the written notice of Change of
Control from the Company. The Trustee may conclusively assume,
in the absence of written notice to the contrary from the
Company, that no Change of Control has occurred.
Section 1012. Procedure for Offers to Purchase Notes.
(a) Within 5 days after delivery by the Company to the
Trustee of any Notice of Offer pursuant to Section 917 or 918,
the Trustee shall select, in the manner specified in
Section 1004, the Notes or portions thereof as to which the
Company will make the Restricted Asset Sale Offer or the Event of
Loss Offer, as applicable, relating to such Notice of Offer,
unless the Restricted Asset Sale Offer or the Event of Loss
Offer, as applicable, will be made as to all Outstanding Notes.
Within 15 days after delivery to the Trustee of such Notice of
Offer (or, if applicable, following such selection by the
Trustee, pursuant to the immediately preceding sentence, of the
Notes to be so purchased by the Company), the Company will, or
will cause the Trustee to, send to each Holder of Notes whose
Notes have been selected to be offered to be repurchased by the
Company, at its address appearing in the Note Register, by
registered or certified mail, telegraph, telefax, telex, cable or
overnight delivery, an offer to repurchase such Notes or a
portion thereof determined in accordance with Section 1004.
(b) Any notice to a Holder given pursuant to
Section 1012(a) or 1011(b) shall include a form of Purchase
Notice (as defined in subsection (c) below) and shall state:
(i) that the Company thereby offers to
repurchase at the applicable Purchase Price those Notes
of such Holder as shall be specified therein (or, in
the case of a Change of Control Purchase Price, all
Notes of such Holder);
(ii) in the case of a Change of Control
Purchase Offer, the events causing the Change of
Control and the date on which such Change of Control is
deemed to have occurred for purposes of this
Section 1012;
(iii) the date by which the Purchase Notice
must be delivered to the Paying Agent;
(iv) the date as of which Notes will be
purchased pursuant to the Purchase Offer (the "Purchase
Date"), which shall be the date 20 Business Days
(unless a longer period is required by applicable law)
after the date on which the notice pursuant to
Section 1011(b) or Section 1012(a), as applicable, is
given to the Holders of the Notes;
(v) the name and address of the Paying
Agent;
(vi) that Notes must be surrendered to the
Paying Agent at the office of the Paying Agent to
collect payment;
(vii) that the Purchase Price for any Notes as
to which a Purchase Notice has been duly given and not
withdrawn will be paid on the later of (A) the Purchase
Date and (B) the first Business Day following the date
of surrender of such Notes as described in clause (vi);
(viii) the procedures the Holder must follow to
exercise rights under Section 917, 918 or 1011, as
applicable, and this Section 1012 and a brief
description of those rights; and
(ix) the procedures for withdrawing a
Purchase Notice.
If any such notice is given by the Trustee at the
Company's request, the text of such notice shall be determined by
the Company.
(c) A Holder may exercise its rights under
Section 917, 918 or 1011, as applicable, and this Section 1012 by
delivering to the Paying Agent at the office of the Paying Agent
a written notice of purchase (a "Purchase Notice") at any time
prior to midnight on the Purchase Date, stating:
(i) the certificate numbers of the Notes that the
Holder will deliver to be purchased; and
(ii) the portion of the principal amount of the
Notes that the Holder will deliver to be purchased,
which portion must be $1,000 or an integral multiple
thereof.
The delivery of such Notes (together with all necessary
endorsements) to the Paying Agent at the office of the Paying
Agent prior to, on or after the Purchase Date shall be a
condition to the receipt by the Holder of the Purchase Price
therefor; provided that such Purchase Price shall be so paid
pursuant to this Section 1012 only if the Notes so delivered
shall conform in all respects to the description thereof set
forth in the related Purchase Notice.
Notwithstanding anything herein to the contrary, any
Holder delivering to the Paying Agent at the office of the Paying
Agent the Purchase Notice contemplated by this Section 1012(c)
shall have the right to withdraw such Purchase Notice in
accordance with Section 1013.
The Paying Agent shall promptly notify the Company by
telecopier of the receipt by the former of any Purchase Notice or
written notice of withdrawal thereof.
Section 1013. Effect of Purchase Notice.
Upon receipt by the Company or the Paying Agent of any
Purchase Notice, the Holder of the Note in respect of which such
Purchase Notice was given shall (unless such Purchase Notice is
withdrawn as specified in the following two paragraphs of this
Section 1013) thereafter be entitled to receive solely the
applicable Purchase Price with respect to such Note. Such
Purchase Price shall be paid to such Holder on the later of
(a) the applicable Purchase Date with respect to such Note
(provided the conditions in Section 1012(c) have been satisfied)
and (b) the first Business Day following the date of delivery of
such Note to the Paying Agent at the office of the Paying Agent
by the Holder thereof in the manner required by Section 1013.
A Purchase Notice may be withdrawn before or after
delivery by the Holder to the Paying Agent at the office of the
Paying Agent of the Note to which such Purchase Notice relates,
by means of a written notice of withdrawal delivered by the
Holder to the Paying Agent at the office of the Paying Agent at
any time prior to midnight on the Purchase Date, specifying, as
applicable:
(a) the certificate number and series of the Note in
respect of which such notice of withdrawal is being submitted,
(b) the principal amount of the Note with respect to
which such notice of withdrawal is being submitted, and
(c) the principal amount, if any, of such Note that
remains subject to the original Purchase Notice, and that has
been or will be delivered for purchase by the Company.
The Paying Agent will promptly return to the respective
Holders thereof any Notes with respect to which a Purchase Notice
has been withdrawn in compliance with this Indenture.
Section 1014. Deposit of Purchase Price.
No later than 10:00 a.m. (local time at the office of
the Paying Agent) on the Business Day immediately succeeding the
Purchase Date, the Company shall deposit with the Trustee or with
the Paying Agent (or, if the Company or a Company Subsidiary or
an Affiliate of either of them is acting as the Paying Agent,
shall segregate and hold in trust, or cause to be segregated and
held in trust, as provided in Section 903) an amount of cash
sufficient to pay the aggregate Purchase Price of all the Notes
or portions thereof that are to be purchased as of the Purchase
Date. Upon such deposit or segregation, all Notes or portions
thereof that are to be purchased shall cease to bear interest
after the Purchase Date.
Section 1015. Notes Purchased in Part.
Any Note that is to be purchased only in part shall be
surrendered to the Paying Agent at the office of the Paying Agent
or Note Registrar (with, if the Company, the Paying Agent, the
Note Registrar or the Trustee so requires, due endorsement by, or
a written instrument of transfer in form satisfactory to the
Company, the Paying Agent, the Note Registrar and the Trustee
duly executed by, the Holder thereof or such Holder's attorney
duly authorized in writing) and the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such
Note, without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder in an
aggregate principal amount equal to, and in exchange for, the
portion of the principal amount of the Note so surrendered that
is not purchased.
Section 1016. Covenant to Comply With Securities Laws
Upon Purchase of Notes.
In connection with any offer to purchase or purchase of
Notes under Section 917, 918, 1011 or 1012, notwithstanding
anything herein to the contrary, the Company shall comply with
all applicable federal and state securities laws so as to permit
the rights and obligations under Section 917, 918, 1011 or 1012
to be exercised to the greatest extent practicable in the time
and in the manner specified in such Sections.
Section 1017. Repayment to the Company.
The Trustee and the Paying Agent shall return to the
Company upon written order any cash that remains unclaimed,
together with interest, if any, accrued thereon, held by them for
the payment of the Purchase Price two years after the related
Purchase Date.
ARTICLE ELEVEN
NOTEHOLDER SECURITY INTEREST
Section 1101. Noteholder Security Interest Generally.
(a) In order to secure the performance of the
Company's obligation to pay the principal amount of, premium, if
any, and interest on the Notes when and as the same shall be due
and payable, whether at maturity or on an Interest Payment Date,
by acceleration, call for redemption or otherwise, and interest
on the overdue principal of and interest on, if any, the Notes
and performance of all other obligations of the Company to the
Holders and the Trustee under this Indenture and the Notes,
according to the terms hereunder or thereunder, and to secure the
obligations of the Guarantors under the Guarantee, the Company
and the Guarantors pursuant to the Noteholder Documents have
unconditionally and absolutely granted and conveyed to the
Trustee for the benefit of itself and all Holders the Noteholder
Security Interest which shall constitute a senior, first priority
Lien in and upon the Collateral and all other assets and property
of the Company and the Company Subsidiaries securing the
Noteholder Indebtedness, subject only to the Permitted Liens.
(b) The Noteholder Security Interest as now or
hereafter in effect shall be held for the Trustee and for the
equal and ratable benefit and security of the Notes without
preference, priority or distinction of any thereof over any other
by reason, or difference in time, of issuance, sale or otherwise,
and, without limiting the generality of subsection (a) of this
Section 1101, for the enforcement of the payment of principal of,
premium, if any, and interest on the Notes in accordance with
their terms.
(c) The Company and the Guarantors have executed and
delivered, filed and recorded and/or will execute and deliver,
file and record, all instruments and documents, and have done or
will do or cause to be done all such acts and other things as are
necessary to subject the Collateral to the Lien of the Noteholder
Documents. The Company and the Guarantors will execute and
deliver, file and record all instruments and do all acts and
other things as may be reasonably necessary or advisable to
perfect, maintain and protect the Noteholder Security Interest
and shall pay all filing, recording, mortgage or other taxes or
fees incidental thereto.
(d) The Company shall establish the Collateral Account
with the Trustee on or prior to the Issue Date.
Section 1102. Evidence of Perfection of Liens.
The Company and the Guarantors shall furnish to the
Trustee:
(a) On the Issue Date, an Opinion of Counsel stating
that, in the opinion of such counsel, all recordings, filings and
other actions contemplated by such Noteholder Documents necessary
to make effective or perfect the Noteholder Security Interest
have been taken, reciting such actions;
(b) On or prior to each anniversary of the date
hereof, an Opinion of Counsel, dated as of such date, either (i)
stating that, in the opinion of such counsel, such action has
been taken with respect to the recording, registering, filing,
re-recording, re-registering and re-filing of the Noteholder
Documents, or financing statements, continuation statements or
other instruments of further assurance, as is necessary to
maintain the Liens of the Noteholder Documents to the extent
required hereby, until the next such anniversary, and reciting
the details of such action, or (ii) stating that, in the opinion
of such counsel no such action is necessary to maintain such
Liens.
Section 1103. Suits to Protect the Collateral.
To the extent permitted under the Noteholder Documents
and this Indenture, the Trustee shall have power to institute and
maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Collateral by any acts which may be
unlawful or in violation of this Indenture or the Noteholder
Documents and such suits and proceedings as the Trustee may deem
expedient to preserve or protect its interests and the interest
of the Holders in the Collateral and in the profits, rents,
revenues and other income arising therefrom (including power to
institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the
Noteholder Security Interest thereunder or be prejudicial to the
interest of the Holders or of the Trustee).
Section 1104. Further Assurances and Security.
The Company and the Guarantors represent and warrant
that at the time the Noteholder Documents and this Indenture are
executed, the Company and/or the Guarantors (i) will have full
right, power and lawful authority to grant, bargain, sell,
release, convey, hypothecate, assign, mortgage, pledge, transfer
and confirm, absolutely, the Collateral, in the manner and form
done, or intended to be done, in the Noteholder Documents, free
and clear of all Liens, except for the Permitted Liens,and will
forever warrant and defend the title to the same against the
claims of all Persons whatsoever; (ii) will execute, acknowledge
and deliver to the Trustee, at the Company's and the Guarantor's
expense, at any time and from time to time such further
assignments, transfer, assurances or other instruments as may be
required to effectuate the terms of this Indenture or the
Noteholder Documents; and (iii) will at any time and from time to
time do or cause to be done all such acts and things as may be
necessary or proper, or as may be required by the Trustee (which
shall have no duty to so require), to assure and confirm to the
Trustee the Noteholder Security Interest contemplated hereby and
by the Noteholder Documents.
Section 1105. Release of Collateral.
(a) The Company or any Company Subsidiary (including
any Guarantor) shall have the right, in connection with any
Unrestricted Asset Sale involving Collateral, to release from the
Noteholder Security Interest any Collateral sold, conveyed,
assigned, transferred, leased or otherwise disposed of as part of
such Unrestricted Asset Sale, provided that immediately before
and after giving effect to such release and proposed Unrestricted
Asset Sale, no Default or Event of Default has occurred and is
continuing and upon compliance by the Company of each of the
following:
(1) Receipt by the Trustee of a Company Request
at least ten (10) Business Days in advance of the
requested date for the delivery of the release
instruments, requesting that the Trustee execute one or
more specifically described release instruments; and
(2) Receipt by the Trustee on or before the date
scheduled for such release of an Officer's Certificate
certifying that the conditions of this Section 1105(a)
with respect to such release have been fulfilled and
setting forth a description of each item of Collateral
to be released, the Fair Market Value of any such item
of Collateral, the total consideration, if any, that
the Company, any Company Subsidiary, or any Guarantor
will receive in connection with the Unrestricted Asset
Sale and, that in the opinion of the signors, the
security interest in favor of the Trustee in the
remaining Collateral would not be impaired by such
release.
(b) The Company or any Company Subsidiary or any
Guarantor shall have the right, in connection with any Restricted
Asset Sale involving Collateral that is otherwise expressly
permitted in accordance with the terms and conditions set forth
in Section 917, to release from the Noteholder Security Interest
any Collateral, provided that immediately before and after giving
effect to such release and the proposed Restricted Asset Sale:
(x) the Consolidated Coverage Ratio immediately after giving
effect to such release (assuming that the Net Cash Proceeds to be
received are applied immediately after the Restricted Asset Sale
first, to reduce the principal amount of any outstanding Secured
Bank Indebtedness to the extent required by the terms thereof,
and thereafter to the extent of any remaining Net Cash Proceeds,
to reduce the principal amount of Notes Outstanding) would be no
less than the Consolidated Coverage Ratio immediately prior to
such release, (y) no Default or Event of Default has occurred and
is continuing, and (z) upon compliance by the Company with each
of the following:
(1) Receipt by the Trustee of a Company Request
at least ten (10) Business Days in advance of the
requested date for the delivery of the release
instruments, requesting the Trustee to execute one or
more specifically described release instruments;
(2) Receipt by the Trustee on or before the date
scheduled for such release (the "Collateral Release
Date") of an Officers' Certificate certifying that the
conditions of this Section 1105 set forth below have
been fulfilled. Such Officers' Certificate shall also
set forth:
(A) a description of each item of Collateral
to be released, the Fair Market Value of each such
item of Collateral, the total consideration that
the Company, any Company Subsidiary or any
Guarantor will receive in connection with the
Restricted Asset Sale and the amount of cash
and/or Cash Equivalents that the Company, any
Company Subsidiary or any Guarantor shall receive
in connection with such Restricted Asset Sale;
(B) that, in the opinion of the signers, (x)
the Noteholder Security Interest in the remaining
Collateral will not be impaired by such release,
and (y) the Collateral to be released is not
necessary for the efficient operation of the Black
Hawk Casino or for the conduct of the business of
the Company and the Company Subsidiaries (taken as
a whole) as conducted immediately prior thereto;
and
(C) that (x) the Consolidated Coverage Ratio
immediately after giving effect to such release
(assuming that the Net Cash Proceeds to be
received are applied immediately after the
Restricted Asset Sale first, to reduce the
principal amount of any outstanding Secured Bank
Indebtedness to the extent required by the terms
thereof, and thereafter to the extent of any
remaining Net Cash Proceeds, to reduce the
principal amount of Notes Outstanding) would be no
less than the Consolidated Coverage Ratio
immediately prior to such release; (y) no Default
or Event of Default has occurred and is
continuing; and (z) all conditions precedent in
the Indenture and the Noteholder Documents
relating to the release of such Collateral have
been complied with; and
(D) (i) whether the aggregate amount of the
fair value of the property to be released at the
date of the Company Request and the fair value of
all securities or other property released since
the commencement of the then current calendar year
(as previously certified to the Trustee in
connection with releases) is 5% or more of the
aggregate principal amount of the Notes at the
time Outstanding and (ii) whether said fair value
of the property to be released is at least $25,000
and at least 1% of the aggregate principal amount
of the Notes at the time Outstanding; and
(E) if the criteria in (D) are met, that a
certificate or opinion of an Independent Person
selected and approved as required by TIA
Section 314(d) is being furnished pursuant to
paragraph (3) of this Section 1105; and
(F) the Bank Indebtedness Amount immediately
after giving effect to the Restricted Asset Sale.
(3) The Company shall deliver to the Trustee any
certificate or opinion of an engineer, appraiser or
other expert required by TIA Section 314(d) as to the
Fair Market Value of the Collateral to be released,
dated or updated as of the date not more than 90 days
prior to the date of release; such certificate or
opinion shall state that the proposed release of
Collateral will not impair the Noteholder Security
Interest in contravention of the terms hereof. Any
certificate or opinion required by TIA Section 314(d)
may be made by an officer of the Company, except in
cases as to which TIA Section 314(d) required that such
certificate or opinion be made by an Independent
Person, in which case, such certificate or opinion
shall be made by an Independent Person selected and
approved as required by TIA Section 314(d).
(4) The Company shall deliver to the Trustee an
Opinion of Counsel stating that the certificate,
opinions, other instruments or cash which have been or
are therewith delivered to and deposited with the
Trustee conform to the requirements of this Indenture
and the other Noteholder Documents, that the property
to be released pursuant to a Company Request may be
lawfully released from the Noteholder Security Interest
and that all conditions precedent in this Indenture and
the Noteholder Documents relating to such release have
been complied with.
(c) The Company shall deposit, and shall cause each
Company Subsidiary to deposit, all Net Cash Proceeds of any
Restricted Asset Sale pursuant to Section 917 that involves
Collateral or any Event of Loss that involves Collateral in the
Collateral Account on the Business Day on which such Net Cash
Proceeds are received by the Company or such Company Subsidiary.
Upon receipt by the Trustee of a Company Request, Collateral
Proceeds (including any earnings thereon) may be released from
the Collateral Account in order to, and in only such amount as is
required to, (i) pay the principal amount of Notes tendered
pursuant to a Restricted Asset Sale Offer or Event of Loss Offer
or (ii) make a Permitted Related Investment; provided that upon
consummation of such Permitted Related Investment, the Trustee
shall have received a senior, first priority Lien (subject only
to the Permitted Liens) in the property or assets acquired by the
Company or any Company Subsidiary in connection therewith,
provided that prior to such release of Collateral Proceeds from
the Collateral Account the Company delivers to the Trustee each
of the following:
(1) an Officer's Certificate, dated the date on which
Collateral Proceeds shall be released from the Collateral
Account (the "Collateral Proceeds Release Date"), stating
in substance as to certain matters (which statements shall,
on the Collateral Proceeds Release Date, be true and
correct), including the following:
(A) the reason that the Company is requesting a
release of the Collateral Proceeds and a description of
the use to be made of the Collateral Proceeds to be
released;
(B) in the case of clause (i) above, the
aggregate principal amount of Notes purchased on the
Collateral Proceeds Release Date and, in the case of
clause (ii) above, a description of the property or
assets being acquired and the Fair Market Value and the
purchase price of each such property or asset to be
acquired by the Company and/or the Company Subsidiaries
(if more than one);
(C) that the amount to be released from the
Collateral Account does not exceed the aggregate
principal amount of Notes to be purchased on the
Collateral Proceeds Release Date or the purchase price
of the property or assets to acquired by the Company or
any of the Company Subsidiaries, as the case may be;
(D) that, in the case of clause (ii) above, the
Company and/or the Company Subsidiaries, as the case
may be, have taken all steps necessary or desirable so
that upon consummation of such Permitted Related
Investment, the Trustee shall receive a senior, first
priority Lien in and upon such property or assets
(subject only to Permitted Liens);
(E) that no Default or Event of Default has
occurred and is continuing at the time of, or after
giving effect to, such release of Collateral Proceeds;
and
(F) that all conditions precedent in the
Indenture and the Noteholder Documents relating to the
release of the Collateral Proceeds have been complied
with; and
(2) an Opinion of Counsel stating that the
certificate, opinions, other instruments or cash which have
been or are therewith delivered to and deposited with the
Trustee conform to the requirements of this Indenture and
the other Noteholder Documents, that the Collateral Proceeds
to be released pursuant to such Company Request referred to
above may be lawfully released from the Noteholder Security
Interest and that all conditions precedent in this Indenture
and the other Noteholder Documents relating to such release
(including, without limitation, the requirement that in the
case of clause (ii) above the Trustee receive a senior,
first priority Lien in and upon the property or assets
acquired, subject only to Permitted Liens), have been
complied with.
Section 1106. Reliance on Opinion of Counsel.
The Trustee shall, before taking any action under this
Article Eleven, be entitled to receive an Opinion of Counsel,
stating the legal effect of such action, the steps necessary to
consummate the same and to perfect the Trustee's priority with
respect to any Lien in connection therewith and that such action
will not be in contravention of the provisions of this Indenture
or the other Noteholder Documents and such opinion shall be full
protection to the Trustee for any action taken or omitted to be
taken in reliance thereon.
Section 1107. Purchaser May Rely.
A purchaser in good faith of the Collateral or any part
thereof or interest therein which is purported to be transferred,
granted or released by the Trustee as provided in this Article
Eleven shall not be bound to ascertain, and may rely on the
authority of the Trustee to execute, transfer, grant or release,
or to inquire as to the satisfaction of any conditions precedent
to the exercise of such authority, or to see to the application
of the purchase price therefor.
Section 1108. Payment of Expenses.
On demand of the Trustee, the Company forthwith shall
pay or satisfactorily provide for the payment of all reasonable
expenditures incurred by the Trustee under this Article Eleven,
including, without limitation, the costs of title insurance,
surveys, attorneys' fees and expenses, recording fees and taxes,
transfer taxes, taxes on indebtedness and other expenses
incidental thereto and all such sums shall be a Lien (subject to
Permitted Liens) upon the Collateral prior to the Notes and shall
be secured thereby.
Section 1109. Release and Substitution of Collateral-
Trust Indenture Act Compliance.
At all times after qualification of this Indenture
under the Trust Indenture Act:
(a) To the extent applicable, the Company and each
Guarantor shall comply with Section 314 of the Trust Indenture
Act relating to the release of property or securities from the
Noteholder Security Interest.
(b) The release of any Collateral from the Noteholder
Security Interest or the subordination of the Noteholder Security
Interest shall not be deemed to impair the Noteholder Security
Interest or the Collateral under the Noteholder Documents in
contravention of the provisions of this Indenture or such
Noteholder Document if and to the extent the Collateral or the
Noteholder Security Interest is released or subordinated pursuant
to, and in accordance with, this Indenture and such Noteholder
Documents.
Section 1110. Release Upon Termination of the
Company's Obligations.
(a) If (i) the Company delivers an Officers'
Certificate certifying that all of its obligations under this
Indenture have been indefeasibly satisfied and discharged by
complying with the provisions of Article Three or Twelve hereof
or (ii) all Outstanding Notes issued under this Indenture shall
have been surrendered to the Trustee for cancellation, the
Trustee, subject to compliance by the Company with Section 1109,
shall deliver to the Company and the Guarantors a certificate
stating that the Trustee, on behalf of the Holders, disclaim and
have given up any and all rights they have in or to the
Collateral, and any rights they have under the Noteholder
Documents, and, upon and after the receipt by the Company and the
Guarantors of such certificate, the Trustee shall no longer be
deemed to hold the Noteholder Security Interest for the benefit
of the Holders.
(b) Any release of Collateral made in compliance with
this Section 1110 shall not be deemed to impair the Noteholder
Security Interest or the Collateral under the Noteholder
Documents in contravention of the provisions of this Indenture or
the Noteholder Documents.
(c) Nothing in this Section 1110 shall impair the
first priority Lien and trust created pursuant to Article Three
or Twelve in any funds or securities deposited with the Trustee
pursuant to such Articles.
Section 1111. Trustee Duties with Respect to
Collateral.
(a) The Trustee shall:
(i) to the extent contemplated by the relevant
Noteholder Documents and this Indenture, execute and deliver all
Noteholder Documents required to be executed by the Trustee and
hold in its possession all Collateral Proceeds from time to time
delivered to it; and
(ii) take all steps the Trustee is entitled to
take under the relevant Noteholder Documents for the protection
of the Collateral or the Liens of the Holders therein or its
priority (including by discharging or paying Liens and claims the
Trustee is entitled to discharge or pay), provided the Trustee
has received notice of facts indicating that such steps are
required for the protection of the Collateral or such Lien or its
priority, whether in the Opinion of Counsel required by Section
1102, pursuant to any requirement of the Noteholder Documents to
give such notice, or otherwise.
(b) The Trustee shall have only such duties with
respect to the Collateral as are set forth in this Indenture and
the Noteholder Documents.
(c) In the performance of its duties hereunder and the
Noteholder Documents, the Trustee shall be fully protected and
indemnified to the full extent of the indemnity provided in
Section 503 and Section 507.
Section 1112. Priority of Liens.
Notwithstanding anything to the contrary contained in
Noteholder Documents, the Company, each Company Subsidiary and
the Trustee agree, and each Holder by accepting a Note agrees,
that:
(a) Relative Lien Priorities. As between the holders
of Secured Bank Indebtedness, on the one hand, and the Trustee
and the Holders of the Notes, on the other hand, and
notwithstanding the terms (including the description of the
Collateral), time, order or method of granting or perfection of
any security interest or Lien, the time or order of filing or
recording of any financing statements, assignments, deeds of
trust, mortgages, or any other documents, instruments, or
agreements under the Uniform Commercial Code or any other
applicable law: the Bank Security Interest is and shall be a
senior, first priority Lien in and upon the Collateral and any
and all other assets and property of the Company and the Company
Subsidiaries as may now or hereafter constitute Collateral, and
the Noteholder Security Interest is and shall be a junior, second
priority Lien in and upon the Collateral and any and all assets
or property of the Company and the Company Subsidiaries as may
now or hereafter constitute Collateral, except that so long as
Millsite 20 Limited Liability Company LLC, a Colorado limited
liability company (or its permitted assignee), holds a first deed
of trust on the Silver Hawk Property, the Bank Security Interest
is and shall be a second priority Lien in and upon the Silver
Hawk Property, and the Noteholder Security Interest is and shall
be a third priority Lien in and upon the Silver Hawk Property.
The Lien priorities provided herein shall not be altered or
otherwise affected by any amendment, modification, supplement,
extension, renewal, restatement, replacement or refinancing of
any Secured Bank Indebtedness or any Noteholder Indebtedness, nor
by any action or inaction which the holders of Secured Bank
Indebtedness, the Trustee or the Holders of the Notes may take or
fail to take in respect of any of the Collateral. The Trustee
and the Holders of the Notes hereby acknowledge that this Section
1112 shall constitute notice of the interests in the Collateral
of the holders of Secured Bank Indebtedness as provided by
Section 9-504 of the Uniform Commercial Code. The Trustee and
the Holders of the Notes waive any right to compel the holders of
Secured Bank Indebtedness to marshal any assets or property of
the Company or the Company Subsidiaries or to seek payment from
any particular assets of the Company or the Company Subsidiaries
or from any other Person. The Company and the Guarantors hereby
agree that no action taken by any holder of Secured Bank
Indebtedness shall impair, preclude or restrict in any way (and
the Company and each Guarantor hereby waives any right to assert
that any such action impairs, precludes or restricts in any way)
the right of any Holder of the Notes or the Trustee under the
Noteholder Documents, including the right to exercise any remedy
under any Noteholder Document or to seek, or assert a right to,
payment of the Noteholder Indebtedness or any portion thereof.
Without limiting the generality of the foregoing, the provisions
of this Section 1112 are and are intended solely for the purpose
of defining the relative lien priorities of the Bank Security
Interest and the Noteholder Security Interest. Nothing contained
in this Section 1112 or elsewhere in this Indenture or any other
Noteholder Documents or in the Notes is intended to or shall (a)
impair, as among the Company and/or the Company Subsidiaries,
their respective secured creditors and other creditors, and the
Holders of the Notes, the obligation of the Company and the
Guarantors, which is absolute and unconditional (and which is
intended to rank equally with all other Indebtedness of the
Company and the Guarantors (including, without limitation,
Secured Bank Indebtedness and any other Bank Indebtedness)) to
pay to the Holders of the Notes the principal of (and premium, if
any) and interest on the Notes as and when the same shall become
due and payable in accordance with their terms (including,
without limitation, demanding payment on the Notes or the
Guarantee and taking any action to accelerate the maturity of the
Notes in accordance with the terms of this Indenture); or (b)
affect the relative rights as among the Company and/or the
Company Subsidiaries, their respective secured creditors and
other creditors (other than the holders of Secured Bank
Indebtedness) and the Holder of the Notes, regarding the relative
priority of the Noteholder Security Interest as a senior Lien in
and upon the Collateral to all other Liens in and upon the
Collateral such that, except for the Bank Security Interest and
other Permitted Liens, the Noteholder Security Interest shall be
a senior, first priority Lien in and upon the Collateral and any
and all other assets and property of the Company and the Company
Subsidiaries as may now or hereafter constitute Collateral; or
(c) subject to the rights of the holders of Secured Bank
Indebtedness under this Section 1112, prevent the Trustee or any
Holder of Notes from exercising any remedy with respect to, or
asserting any right against, the Collateral, the Company or any
Guarantor permitted under the Noteholder Documents or under
applicable law upon a Default or Event of Default or from
receiving cash, property or securities otherwise payable or
deliverable to the Trustee or the Holders of the Notes.
(b) Management and Sale of Collateral. From and after
a Senior Event of Default and through the end of any Collateral
Control Period:
(i) The holders of Secured Bank Indebtedness
shall have the sole and exclusive right to manage, perform and
enforce all rights and remedies with respect to the Collateral
and to exercise and enforce all privileges and rights under the
Bank Documents according to their discretion and the exercise of
their business judgment, including, without limitation, the
exclusive right to approve the enforcement or settlement of any
insurance claims, take or retake control or possession of any of
the Collateral, notify account debtors, collect accounts
receivable, and hold, prepare for sale, process, sell, lease,
dispose of, or liquidate any of the Collateral. Until all
obligations with respect to the Secured Bank Indebtedness have
been discharged in full, any and all proceeds of the Collateral
which shall come into the possession, control, or custody of the
Trustee or the Holders of Notes shall be held in trust by the
Trustee and the Holders of the Notes and immediately paid over to
the holders of Secured Bank Indebtedness. Nothing contained
herein or in any Noteholder Document or any Bank Document shall
be deemed to in any way impair, restrict or otherwise adversely
affect the right of the Trustee or the Holders of Notes to bring,
or join with any creditor in bringing, any proceeding against the
Company or any Company Subsidiary under any bankruptcy,
reorganization, readjustment or arrangement of debt, suspension
of payments, receivership, liquidation or insolvency or similar
law or statute now or hereafter in effect ("Insolvency
Proceeding"), to vote on any plan of reorganization, arrangement,
adjustment or composition involving any obligor of the Notes or
to file proofs of claim as secured creditors in respect of the
Noteholder Security Interest or the Noteholder Indebtedness or
assert any right to adequate protection in any Insolvency
Proceeding involving the Company or the Company Subsidiaries.
(ii) The Trustee and the Holders of the Notes
shall not enforce or attempt to enforce any rights or remedies
with respect to the Collateral or exercise or enforce any
privileges or rights under the Noteholder Documents with respect
to the Collateral including, without limitation, enforcing or
settling insurance claims, taking or retaking control or
possession of any of the Collateral, notifying account debtors,
or collecting accounts receivable or selling, leasing, disposing
of, or liquidating any of the Collateral.
(iii) The Trustee and the Holders of the Notes
will, immediately upon the request of the holders of a majority
of the outstanding Secured Bank Indebtedness, release or
otherwise terminate their Noteholder Security Interest in any
portion of the Collateral but only to the extent such portion of
the Collateral is sold, or otherwise disposed of by the Company
or any Company Subsidiary with the consent of the holders of
Secured Bank Indebtedness to any Person that is not a holder of
Secured Bank Indebtedness or an Affiliate of any holder of
Secured Bank Indebtedness, and the Trustee and the Holders of the
Notes will immediately deliver such release documents as the
holders of Secured Bank Indebtedness may require in connection
therewith; provided, however, that notwithstanding anything
contained herein or in any other Noteholder Document to the
contrary, neither the Trustee nor any Holder of Notes shall have
any obligation to release or otherwise terminate the Noteholder
Security Interest in any portion of the Collateral unless
simultaneously therewith, the holders of the Secured Bank
Indebtedness shall have released or otherwise terminated the Bank
Security Interest in such portion of the Collateral. The holders
of Secured Bank Indebtedness are hereby granted an irrevocable
power of attorney, coupled with an interest, exercisable in the
event the Trustee or the Holders of the Notes fail to comply with
the foregoing covenant, to execute in the name of the Trustee and
the Holders of the Notes any such release documents.
(c) Modification of Documents. The holders of Secured
Bank Indebtedness may grant extensions of the time of payment or
performance for Secured Bank Indebtedness and make compromises
and settlements with the Company and/or the Company Subsidiaries
and all other persons with respect to Secured Bank Indebtedness,
release all or any portion of the Collateral from the Bank
Security Interest, or otherwise amend any of the Bank Documents
or waive any of the provisions thereof, all without the consent
of the Trustee or the Holders of the Notes and without affecting
the agreements of the Trustee and the Holders of the Notes or the
Company and the Company Subsidiaries set forth in this Section
1112. If the holders of Secured Bank Indebtedness shall, for any
reason, determine to discontinue the extension of credit to the
Company and/or the Company Subsidiaries, the holders of Secured
Bank Indebtedness may do so. The Company, the Company
Subsidiaries, the Trustee and the Holders of the Notes shall not
amend or modify the Noteholder Documents in any respect which
would adversely affect the rights of the holders of Secured Bank
Indebtedness under this Section 1112.
(d) No Impairment. No right of any holder of Secured
Bank Indebtedness to enforce the subordination of the Noteholder
Security Interest shall be impaired by any act or failure to act
by the Company, any Company Subsidiary, the Trustee or any Holder
of Notes or by failure of the Company, any Company Subsidiary,
the Trustee or any Holder of Notes to comply with this Indenture
or the Noteholder Documents.
(e) Notice of Event of Default Under Indenture. The
Company shall promptly notify the holders of Secured Bank
Indebtedness of the occurrence of any Event of Default.
(f) Cure of Event of Default. The holders of Secured
Bank Indebtedness shall have the option exercisable in their sole
discretion to cure any Event of Default on behalf of Company and
the Company Subsidiaries.
(g) Injunctive Relief. If the Trustee or any Holders
of the Notes shall take or attempt to take any action in
violation of this Section 1112: (i) the Company and the Company
Subsidiaries may interpose as a defense or dilatory plea the
making of this Section 1112 and the holders of Secured Bank
Indebtedness may intervene and interpose such defense or plea in
the name of the holders of Secured Bank Indebtedness or in the
name of the Company and the Company Subsidiaries, and (ii) the
holders of Secured Bank Indebtedness, the Company or the Company
Subsidiaries may restrain the enforcement thereof in the name of
holders of Secured Bank Indebtedness or in the name of the
Company and the Company Subsidiaries.
(h) Continuing Offer. The provisions of this Section
1112 shall constitute a continuing offer to all Persons who, in
reliance upon such provisions, become holders of, or continue to
hold, Secured Bank Indebtedness, and such provisions are made for
the benefit of the holders of Secured Bank Indebtedness, and such
holders are made obligees hereunder and they or each of them may
enforce such provisions.
(i) Ability to Retire Secured Bank Indebtedness. The
Holders of Notes shall have the option exercisable in their sole
discretion, at any time following a Senior Event of Default, to
advance any and all amounts to the Company to satisfy the then
outstanding Secured Bank Indebtedness in full. All sums so
advanced and all expenses incurred by the holders of the Notes in
connection with such advances or actions shall be deemed to be
additional Noteholder Indebtedness and shall bear interest from
the date any sums are advanced or expenses are incurred by the
Holders of Notes at a rate equal 12% per annum.
ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 1201. Option to Effect Legal Defeasance or
Covenant Defeasance.
The Company may, at its option by Board Resolution, at
any time, with respect to the Notes, elect to have the provisions
set forth in either Section 1202 or Section 1203 applied to all
Outstanding Notes upon compliance with the conditions set forth
below in this Article Twelve.
Section 1202. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the
option applicable to this Section 1202, the Company and the
Guarantors shall be deemed to have been discharged from their
obligations with respect to all Outstanding Notes on the date the
conditions set forth in Section 1204 are satisfied (hereinafter,
"Legal Defeasance"). For these purposes, such Legal Defeasance
means that the Company and each Guarantor shall be deemed to have
paid and discharged the entire Indebtedness represented by the
Outstanding Notes and this Indenture shall cease to be of further
effect as to all Outstanding Notes (except as to the rights of
Holders to receive payment which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 1205 and the other
Sections of this Indenture referred to in (a) and (b) below), and
to have satisfied all its other obligations under such Notes,
this Indenture and the Guarantee insofar as such Notes are
concerned (and the Trustee, on demand of and at the expense of
the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of
Holders of Outstanding Notes to receive, solely from the trust
fund described in Section 1204 and as more fully set forth in
such Section, payments in respect of the principal of (and
premium, if any, on) and interest on such Notes when such
payments are due, (b) the Company's and the Guarantor's
obligations with respect to such Notes under Sections 205, 206,
702 and 903 and Article Thirteen, (c) the rights, powers, trusts,
duties, indemnities and immunities of the Trustee hereunder and
the Company's and the Guarantors' obligations in connection
therewith and (d) this Article Twelve. Subject to compliance
with this Article Twelve, the Company may exercise its option
under this Section 1202 notwithstanding the prior exercise of its
option under Section 1203 with respect to the Notes.
Section 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the
option applicable to this Section 1203, the Company and the
Guarantors shall be released from their obligations under any
covenant contained in Article Seven and Sections 904, 906, 907
and 911 through 929 with respect to the Outstanding Notes on and
after the date the conditions set forth in Section 1204 are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes
shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act
of Holders (and the consequences of any thereof) in connection
with such covenants, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the
Outstanding Notes, the Company and the Guarantors need not comply
with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any
such covenant to any other provision herein or in any other
document, but, except as specified above, the remainder of this
Indenture (including the Guarantee) and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise
under Section 1201 of the option applicable to this Section 1203,
the events specified in clauses (c) and (d) (to the extent they
relate to any of the covenants from which the Company and the
Guarantors are being released pursuant to this Section 1203) and
clauses (e) through (o) of Section 401 shall not constitute
Events of Default.
Section 1204. Conditions to Legal Defeasance or
Covenant Defeasance.
The following shall be the conditions to application of
either Section 1202 or Section 1203 to the Outstanding Notes:
(1) The Company shall irrevocably deposit or cause to
be deposited with the Trustee (or another trustee satisfying
the requirements of Section 508 who shall agree to comply
with the provisions of this Article Twelve applicable to it)
as trust funds, in trust for the purpose of making the
following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of such
Notes, (A) U.S. Dollars in an amount, or (B) U.S. Government
Obligations that through the scheduled payment of principal
and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due
date of any payment, U.S. Dollars in an amount, or (C) a
combination thereof, as in each case will be sufficient, in
the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and
which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge the principal of (and premium,
if any, on) and interest on the Outstanding Notes on the
stated date for payment thereof (or on the Redemption Date,
as the case may be, of such principal (and premium, if any)
or installment of principal, premium, if any or interest on
such Notes, and the Trustee on behalf of the Holders must
have a valid, perfected and exclusive security interest in
such trust; provided that the Trustee shall have been
irrevocably instructed to apply such U.S. Dollars or the
proceeds of such U.S. Government Obligations to such
payments with respect to the Notes. Before such a deposit,
the Company may give to the Trustee, in accordance with
Section 1003 hereof, a notice of its election to redeem all
of the Outstanding Notes at a future date in accordance with
Article Ten hereof, which notice shall be irrevocable. Such
irrevocable redemption notice, if given, shall be given
effect in applying the foregoing. For purposes of this
Article Twelve, "U.S. Government Obligations" means direct
non-callable obligations of, or non-callable obligations
guaranteed by, the United States of America for the payment
of which obligation or guarantee the full faith and credit
of the United States is pledged.
(2) No Default or Event of Default with respect to the
Notes shall have occurred and be continuing on the date of
such deposit or, insofar as paragraphs (h) and (i) of
Section 401 hereof are concerned, at any time during the
period ending on the ninety-first day after the date of such
deposit (it being understood that this condition shall not
be deemed satisfied until the expiration of such period).
(3) Such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a
default under, this Indenture or any other material
agreement or instrument to which the Company or any of the
Company Subsidiaries is a party or by which the Company or
any of the Company Subsidiaries is bound.
(4) In the case of an election under Section 1202, the
Company shall have delivered to the Trustee an Opinion of
Counsel, reasonably satisfactory in form and substance to
the Trustee, stating that (x) the Company has received from,
or there has been published by, the Internal Revenue Service
a ruling, or (y) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such
opinion shall confirm that, the Holders of the Outstanding
Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred.
(5) In the case of an election under Section 1203, the
Company shall have delivered to the Trustee an Opinion of
Counsel, reasonably satisfactory in form and substance to
the Trustee, to the effect that the Holders of the
Outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not
occurred.
(6) The Company and Guarantors shall have delivered to
the Trustee Officers' Certificates stating that the deposit
made by the Company pursuant to its election under
Section 1202 or 1203 was not made with the intent of
preferring the Holders of such Notes over any other
creditors of the Company or such Guarantors or with the
intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or such Guarantors or others.
(7) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for relating
to either the Legal Defeasance under Section 1202 or the
Covenant Defeasance under Section 1203 (as the case may be)
have been complied with.
Section 1205. Deposited U.S. Dollars and U.S.
Government Obligations to Be Held in Trust; Other Miscellaneous
Provisions.
Subject to the provisions of the last paragraph of
Section 903 and Section 1206, all U.S. Dollars and U.S.
Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1205, the "Trustee") pursuant to Section
1204 in respect of the Outstanding Notes shall be held in trust
(and subject to a first priority Lien in favor of the Trustee for
the benefit of the Holders) and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture,
to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums
due and to become due thereon in respect of principal (and
premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on, or assessed against, the
U.S. Government Obligations deposited pursuant to Section 1204 or
the principal and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account
of the Holders of the Outstanding Notes.
Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company
from time to time upon Company Request any U.S. Dollars or U.S.
Government Obligations held by it as provided in Section 1204
which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of
the amount thereof which would then be required to be deposited
to effect an equivalent Legal Defeasance or Covenant Defeasance,
as applicable, in accordance with this Article.
Section 1206. Repayment to the Company.
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of
the principal of, premium, if any, or interest on any Note and
remaining unclaimed for two years after such principal, and
premium, if any, or interest has become due and payable, shall be
paid to the Company on its request, and the Holder of such Note
shall thereafter look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the
Company cause to be published once, in The New York Times and The
Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then
remaining will be repaid to the issuers.
Section 1207. Reinstatement.
If the Trustee or any Paying Agent is unable to apply
any U.S. Dollars or the proceeds of any U.S. Government
Obligations in accordance with Section 1205 by reason of any
order or judgment of any court or Governmental Authority
enjoining, restraining or otherwise prohibiting such application,
then the Company's and the Guarantor's obligations under this
Indenture (including the Guarantee) and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant
to Section 1202 or 1203, as the case may be, until such time as
the Trustee or Paying Agent is permitted to apply all such U.S.
Dollars or the proceeds of any U.S. Government Obligations in
accordance with Section 1205; provided, however, that if the
Company makes any payment of principal of (or premium, if any,
on) or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the
Holders of such Notes to receive such payment from the money held
by the Trustee or Paying Agent.
ARTICLE THIRTEEN
GUARANTEE OF NOTES
Section 1301. Guarantee.
Each of the Guarantors, for consideration received,
jointly and severally unconditionally and irrevocably guarantees
to each Holder of a Note and to the Trustee, the due and punctual
payment of the Indenture Obligations. The term "Indenture
Obligations" means any and all present and future obligations and
liabilities of the Company of every type and description to the
Holders under the Indenture, the Notes and any other Noteholder
Document, whether for principal, premium (if any), interest,
expenses, indemnities or other amounts, in each case whether due
or not due, absolute or contingent, voluntary or involuntary,
liquidated or unliquidated, determined or undetermined, now or
hereafter existing, renewed or restructured, whether or not from
time to time decreased or extinguished and later increased,
created or incurred, whether or not arising after the
commencement of a proceeding under any Bankruptcy Law (including
post-petition interest) and whether or not allowed or allowable
as a claim in any such proceeding, and whether or not recovery of
any such obligation or liability may be barred by a statute of
limitations or such obligation or liability may otherwise be
unenforceable. All Indenture Obligations shall be conclusively
presumed to have been created in reliance on the Guarantee. The
Guarantee is a continuing guaranty of the Indenture Obligations
and may not be revoked and shall not otherwise terminate unless
and until any and all Indenture Obligations have been
indefeasibly paid and performed in full, except as otherwise
provided in Section 1314.
Section 1302. Nature of Guarantee.
The liability of each Guarantor under the Guarantee is
independent of and not in consideration of or contingent upon the
liability of the Company or any other Guarantor and a separate
action or actions may be brought and prosecuted against any
Guarantor, whether or not any action is brought or prosecuted
against the Company or any other Guarantor or whether the Company
or any other Guarantor is joined in any such action or actions.
The Guarantee given by each Guarantor shall be construed as a
continuing, absolute and unconditional guaranty of payment (and
not merely of collection) without regard to:
(a) the legality, validity or enforceability of the
Notes, this Indenture or any other Noteholder Document, any of
the Indenture Obligations, any Lien on Collateral, the
Noteholder Security Interest or the Guarantee given by any other
Guarantor;
(b) any defense (other than payment), set-off or
counterclaim that may at any time be available to the Company or
any other Guarantor against, and any right of setoff at any time
held by, any Holder; or
(c) any other circumstance whatsoever (with or without
notice to or knowledge of any Guarantor or the Company), whether
or not similar to any of the foregoing, that constitutes, or
might be construed to constitute, an equitable or legal discharge
of the Company or any other Guarantor, in bankruptcy or in any
other instance.
Any payment by the Company or any Guarantor or other
circumstance that operates to toll any statute of limitations
applicable to such Persons shall also operate to toll the statute
of limitations applicable to each Guarantor.
Section 1303. Authorization.
Each Guarantor authorizes each Holder and the Trustee,
without notice to or further assent by such Guarantor, and
without affecting any Guarantor's liability hereunder (regardless
of whether any subrogation or similar right that such Guarantor
may have or any other right or remedy of such Guarantor is
extinguished or impaired), from time to time to do any or all of
the following:
(a) permit the Company to increase or create Indenture
Obligations, or terminate, release, compromise, subordinate,
extend, accelerate or otherwise change the amount or time, manner
or place of payment of, or rescind any demand for payment or
acceleration of, the Indenture Obligations or any part thereof,
consent or enter into supplemental indentures or otherwise amend
the terms and conditions of the Noteholder Documents or any
provision thereof;
(b) take and hold Collateral from the Company or any
other Person, perfect or refrain from perfecting a Lien on such
Collateral, and exchange, enforce, subordinate, release (whether
intentionally or unintentionally), or take or fail to take any
other action in respect of, any such Collateral or Lien or any
part thereof;
(c) exercise in such manner and order as it elects in
its sole discretion, fail to exercise, waive, suspend, terminate
or suffer expiration of, any of the remedies or rights of such
Holder against the Company or any Guarantor in respect of any
Indenture Obligation or any Collateral;
(d) release, add or settle with any Guarantor or the
Company in respect of the Guarantee or the Indenture Obligations;
(e) accept partial payments on the Indenture
Obligations and apply any and all payments or recoveries from any
Guarantor or the Company or Collateral to such of the Indenture
Obligations as any Holder may elect in its sole discretion,
whether or not such Indenture Obligations are secured or
guaranteed;
(f) refund at any time, at such Holder's sole
discretion, any payments or recoveries received by such Holder in
respect of any Indenture Obligations or Collateral; and
(g) otherwise deal with the Company, any Guarantor and
any Collateral as such Holder may elect in its sole discretion.
Section 1304. Right to Demand Full Performance.
In the event of any demand for payment or performance
by the Trustee from any Guarantor hereunder, the Trustee or the
Holders shall have the right to demand its full claim and to
receive all dividends or other payments in respect thereof until
the Indenture Obligations have been paid in full, and the
Guarantors shall continue to be jointly and severally liable
hereunder for any balance which may be owing to the Trustee or
the Holders by the Company under this Indenture and the Notes.
The retention by the Trustee or the Holders of any security,
prior to the realization by the Trustee or the Holders of its
rights to such security upon foreclosure thereon, shall not, as
between the Trustee and any Guarantor, be considered as a
purchase of such security, or as payment, satisfaction or
reduction of the Indenture Obligations due to the Trustee or the
Holders by the Company or any part thereof. Each Guarantor,
promptly after demand, will reimburse the Trustee and the Holders
for all costs and expenses of collecting such amount under, or
enforcing this Guarantee, including, without limitation, the
reasonable fees and expenses of counsel.
Section 1305. Certain Waivers.
Each Guarantor waives:
(a) the right to require the Holders to proceed
against the Company or any other Guarantor, to proceed against or
exhaust any Collateral or to pursue any other remedy in any
Holder's power whatsoever and the right to have the property of
the Company or any other Guarantor first applied to the discharge
of the Indenture Obligations;
(b) all rights and benefits under applicable law
purporting to reduce a guarantor's obligations in proportion to
the obligation of the principal or providing that the obligation
of a surety or guarantor must neither be larger nor in other
respects more burdensome than that of the principal;
(c) the benefit of any statute of limitations
affecting the Indenture Obligations or any Guarantor's liability
hereunder;
(d) any requirement of marshaling or any other
principle of election of remedies;
(e) any right to assert against any Holder any defense
(legal or equitable), set-off, counterclaim and other right that
any Guarantor may now or any time hereafter have against the
Company or any other Guarantor;
(f) presentment, demand for payment or performance
(including diligence in making demands hereunder), notice of
dishonor or nonperformance, protest, acceptance and notice of
acceptance of this Guarantee, and, except to the extent expressly
required by the Noteholder Documents, all other notices of any
kind, including (i) notice of any action taken or omitted by the
Holders in reliance hereon, (ii) notice of any default by the
Company or any other Guarantor, (iii) notice that any portion of
the Indenture Obligations is due, (iv) notice of any action
against the Company or any other Guarantor, or any enforcement of
other action with respect to any Collateral, or the assertion of
any right of any Holder hereunder; and
(g) all defenses that at any time may be available to
any Guarantor by virtue of any valuation, stay, moratorium or
other law now or hereafter in effect.
Section 1306. The Guarantors Remain Obligated in Event
the Company Is No Longer Obligated to Discharge Indenture
Obligations.
It is the express intention of the Trustee and the
Guarantors that if for any reason the Company has no legal
existence, is or becomes under no legal obligation to discharge
the Indenture Obligations owing to the Trustee or the Holders by
the Company or if any of the Indenture Obligations owing by the
Company to the Trustee or the Holders becomes irrecoverable from
the Company by operation of law or for any reason whatsoever,
this Guarantee and the covenants, agreements and obligations of
the Guarantors contained in this Article Thirteen shall
nevertheless be binding upon the Guarantors, as principal debtor,
until such time as all such Indenture Obligations have been paid
in full to the Trustee and all Indenture Obligations owing to the
Trustee or the Holders by the Company have been discharged, or
such earlier time as Section 1202 shall apply to the Notes, and
the Guarantors shall be responsible for the payment thereof to
the Trustee or the Holders upon demand.
Section 1307. Severability of Void Obligations under
Company Subsidiary Guarantee.
The obligations of any Guarantor hereunder shall be
limited to the maximum amount that would not render its
obligations hereunder subject to avoidance under Section 548 of
the Federal Bankruptcy Code or any applicable provisions of
comparable state law.
Section 1308. Guarantee Is in Addition to Other
Security.
This Guarantee shall be in addition to and not in
substitution for any other guarantees or other security which the
Trustee may now or hereafter hold in respect of the Indenture
Obligations owing to the Trustee or the Holders by the Company
and (except as may be required by law) the Trustee shall be under
no obligation to marshal in favor of each of the Guarantors any
other guarantees or other security or any moneys or other assets
which the Trustee may be entitled to receive or upon which the
Trustee or the Holders may have a claim.
Section 1309. Release of Noteholder Security Interest.
Without limiting the generality of the foregoing and
except as otherwise provided in this Indenture, each Guarantor
hereby consents and agrees, to the fullest extent permitted by
applicable law, that the rights of the Trustee hereunder, and the
liability of the Guarantors hereunder, shall not be affected by
any and all releases for any purpose of any Collateral, if any,
from the Noteholder Security Interest created by any Noteholder
Documents and that this Guarantee shall continue to be effective
or be reinstated, as the case may be, if at any time any payment
of any of the Indenture Obligations is rescinded or must
otherwise be returned by the Trustee upon the insolvency,
bankruptcy or reorganization of the Company or otherwise, all as
though such payment had not been made.
Section 1310. No Bar to Further Actions.
Except as provided by law, no action or proceeding
brought or instituted under Article Thirteen and the Guarantee
and no recovery or judgment in pursuance thereof shall be a bar
or defense to any further action or proceeding which may be
brought under Article Thirteen and the Guarantee by reason of any
further default or defaults under Article Thirteen and the
Guarantee or in the payment of any of the Indenture Obligations
owing by the Company.
Section 1311. Failure to Exercise Rights Shall Not
Operate as a Waiver; No Suspension of Remedies.
(a) No failure to exercise and no delay in exercising,
on the part of the Trustee or the Holders, any right, power,
privilege or remedy under this Article Thirteen and the Guarantee
shall operate as a waiver thereof, nor shall any single or
partial exercise of any rights, power, privilege or remedy
preclude any other or further exercise thereof, or the exercise
of any other rights, powers, privileges or remedies. The rights
and remedies herein provided for are cumulative and not exclusive
of any rights or remedies provided in law or equity.
(b) Nothing contained in this Article Thirteen shall
limit the right of the Trustee or the Holders to take any action
to accelerate the maturity of the Notes pursuant to Article Four
and as set forth in the Indenture or to pursue any rights or
remedies hereunder or under applicable law.
Section 1312. Trustee's Duties; Notice to Trustee.
(a) Any provision in this Article Thirteen or
elsewhere in this Indenture allowing the Trustee to request any
information or to take any action authorized by, or on behalf of
any Guarantor, shall be permissive and shall not be obligatory on
the Trustee except as the Holders may direct in accordance with
the provisions of this Indenture or where the failure of the
Trustee to request any such information or to take any such
action arises from the Trustee's negligence, bad faith or willful
misconduct.
(b) The Trustee shall not be required to inquire into
the existence, powers or capacities of the Company, any Guarantor
or the officers, directors or agents acting or purporting to act
on their respective behalf.
Section 1313. Successors and Assigns.
All terms, agreements and conditions of this Article
Thirteen shall extend to and be binding upon each Guarantor and
its successors and permitted assigns and shall inure to the
benefit of and may be enforced by the Trustee and its successors
and assigns.
Section 1314. Release of Guarantee.
(a) In the event of a Restricted Asset Sale permitted
under Section 917 involving the sale by the Company of all of the
Capital Stock of any Company Subsidiary (other than BWBH or a
Non-Operating Subsidiary) or the sale by any Company Subsidiary
(other than BWBH or a Non-Operating Subsidiary) of all or
substantially all of the assets of such Company Subsidiary, other
than to another Company Subsidiary ("Subject Restricted Asset
Sale"), and subject to compliance with the provisions of Section
1105 (including the delivery of all required Officer's
Certificates) and to the requirements of subsection (b) of this
Section 1314, the Company Subsidiary whose Capital Stock or
assets are so sold shall be released from and relieved of its
obligations under this Article Thirteen.
(b) The Company shall deliver to the Trustee an
Officers' Certificate and an Opinion of Counsel to the effect
that the Subject Restricted Asset Sale giving rise to the release
of this Guarantee was consummated in accordance with the
provisions of this Indenture, the Notes and the other Noteholder
Documents, and upon receipt thereof by the Trustee, the Trustee
shall execute any documents reasonably required in order to
evidence the release of the Company Subsidiary relating to such
Subject Restricted Asset Sale from its obligations under this
Guarantee.
(c) Concurrently with the payment in full of all of
the Indenture Obligations, the Guarantors shall be released from
and relieved of their obligations under this Article Thirteen.
If any of the Indenture Obligations are revived and reinstated
after the termination of this Guarantee, then all of the
obligations of the Guarantors (other than any Company Subsidiary
that is otherwise released from the Guarantee pursuant to
subsection (a) of this Section 1314) under this Guarantee shall
be revived and reinstated as if this Guarantee had not been
terminated until such time as the Indenture Obligations are paid
in full, and each Guarantor shall enter into an amendment to this
Guarantee, reasonably satisfactory to the Trustee, evidencing
such revival and reinstatement.
Section 1315. Execution of Guarantee.
To evidence the Guarantee, each Guarantor hereby agrees
to execute a notation relating to the Guarantee to be endorsed on
each Note authenticated and delivered by the Trustee. Each
Guarantor agrees that this Indenture shall be executed on behalf
of each Guarantor by its Chairman of the Board, its President,
its Chief Executive Officer, Chief Operating Officer or one of
its Vice Presidents, under its corporate seal reproduced thereon
attested by its Secretary or one of its Assistant Secretaries.
The signature of any of these officers on the Notes may be manual
or facsimile.
If an officer whose signature is on this Indenture no
longer holds that office at the time the Trustee authenticates a
Note on which this Guarantee is endorsed, such Guarantee shall be
valid nevertheless.
Section 1316. No Subrogation; Certain Agreements.
(a) EACH GUARANTOR WAIVES ANY AND ALL RIGHTS OF
SUBROGATION, INDEMNITY OR REIMBURSEMENT, AND ANY AND ALL BENEFITS
OF AND RIGHTS TO ENFORCE ANY POWER, RIGHT OR REMEDY THAT ANY
HOLDER OR THE TRUSTEE MAY NOW OR HEREAFTER HAVE IN RESPECT OF THE
INDENTURE OBLIGATIONS AGAINST THE COMPANY OR ANY OTHER OBLIGOR
(OTHER THAN RIGHTS OF CONTRIBUTION FROM OTHER GUARANTORS), ANY
AND ALL BENEFITS OF AND RIGHTS TO PARTICIPATE IN ANY COLLATERAL,
WHETHER REAL OR PERSONAL PROPERTY, NOW OR HEREAFTER HELD BY ANY
HOLDER OR THE TRUSTEE, AND ANY AND ALL OTHER RIGHTS AND CLAIMS
(AS DEFINED IN THE FEDERAL BANKRUPTCY CODE) ANY GUARANTOR MAY
HAVE AGAINST THE COMPANY, UNDER APPLICABLE LAW OR OTHERWISE, AT
LAW OR IN EQUITY, BY REASON OF ANY PAYMENT UNDER THE GUARANTEE,
UNLESS AND UNTIL THE INDENTURE OBLIGATIONS SHALL HAVE BEEN PAID
IN FULL.
(b) Each Guarantor assumes the responsibility for
being and keeping itself informed of the financial condition of
each other Guarantor and of all other circumstances bearing upon
the risk of nonpayment of the Indenture Obligations or the
Guarantee of any other Guarantor that diligent inquiry would
reveal, and agrees that neither the Holders nor the Trustee shall
have any duty to advise any Guarantor of information regarding
such condition or any such circumstances.
Section 1317. Bankruptcy; No Discharge.
(a) Without limiting Section 1302 or any other
provision of this Article Thirteen, the Guarantee shall not be
discharged or otherwise affected by any bankruptcy,
reorganization or similar proceeding commenced by or against the
Company or any other Guarantor, including (i) any discharge of,
or bar or stay against collecting, all or any part of the
Indenture Obligations in or as a result of any such proceeding,
whether or not assented to by any Holder, (ii) any disallowance
of all or any portion of any Holder's claim for repayment of the
Indenture Obligations, (iii) any use of cash or other collateral
in any such proceeding, (iv) any agreement or stipulation as to
adequate protection in any such proceeding, (v) any failure by
any Holder to file or enforce a claim against the Company or any
other Guarantor or its estate in any bankruptcy or reorganization
case, (vi) any amendment, modification, stay or cure of any
Holder's rights that may occur in any such proceeding, (vii) any
election by any Holder under Section 1112(b)(2) of the Federal
Bankruptcy Code, or (viii) any borrowing or grant of a Lien under
Section 364 of the Federal Bankruptcy Code. Each Guarantor
understands and acknowledges that by virtue of this Guarantee, it
has specifically assumed any and all risks of any such proceeding
with respect to the Company and each other Guarantor.
(b) Notwithstanding anything in this Article Thirteen
to the contrary, any Event of Default under Section 401(h) or (i)
of this Indenture shall render all Indenture Obligations
automatically due and payable for purposes of the Guarantee,
without demand on the part of the Trustee or any Holder.
(c) Notwithstanding anything to the contrary herein
contained, the Guarantee (and any Lien on the Collateral securing
the Guarantee or the Indenture Obligations) shall continue to be
effective or be reinstated, as the case may be, if at any time
any payment, or any part thereof, of any or all of the Indenture
Obligations is rescinded, invalidated, declared to be fraudulent
or preferential or otherwise required to be restored or returned
by any Holder or the Trustee in connection with any bankruptcy,
reorganization or similar proceeding involving the Company, any
other Guarantor or otherwise, if the proceeds of any Collateral
are required to be returned by such Holder or the Trustee under
any such circumstances, or if any Holder or the Trustee elects to
return any such payment or proceeds or any part thereof in its
sole discretion, all as though such payment had not been made or
such proceeds not been received.
Section 1318. Additional Guarantors.
Each Company Subsidiary that executes and delivers to
the Trustee from time to time an amendment to the Guarantee after
the Issue Date shall be a Guarantor as if such Company Subsidiary
had been a signatory to this Indenture, and no such amendment to
the Guarantee must be executed and delivered by any other
Guarantor. Each Guarantor hereby consents to any such amendment,
whether or not it receives notice thereof.
ARTICLE FOURTEEN
MEETING OF NOTE HOLDERS
Section 1401. Purpose for Which Meeting May Be Called.
A meeting of Holders may be called at any time and from
time to time pursuant to the provisions of this Article Fourteen
for any of the following purposes:
(a) to give any notice to the Company or to the
Trustee, or to give any directions to the Trustee, or to
waive or consent to the waiver of any Default or Event of
Default hereunder and its consequences, or to take any other
action authorized to be taken by Holders pursuant to any of
the provisions of Article Four;
(b) to remove the Trustee or appoint a successor
Trustee pursuant to the provisions of Article Five;
(c) to consent to an amendment, supplement or
waiver pursuant to the provisions of Section 802; or
(d) to take any other action (i) authorized to be
taken by or on behalf of the Holder or Holders of any
specified aggregate principal amount of the Notes under any
other provision of this Indenture or the other Noteholder
Documents, or authorized or permitted by law or (ii) which
the Trustee deems necessary or appropriate in connection
with the administration of this Indenture or the other
Noteholder Documents.
Section 1402. Manner of Calling Meeting.
The Trustee may at any time call a meeting of the
Holders to take any action specified in Section 1401 to be held
at such time and at such place in the City of New York, State of
New York or elsewhere as the Trustee shall determine. Notice of
every meeting of Holders, setting forth the time and place of
such meeting and in general terms the action proposed to be taken
at such meeting, shall be mailed by the Trustee, first-class
postage prepaid, to the Company and to the Holders at their last
addresses as they shall appear on the registration books of the
Note Registrar, not less than 10 nor more than 60 days prior to
the date fixed for a meeting.
Any meeting of Holders shall be valid without notice if
the Holders of all Notes then outstanding are present in person
or by proxy, or if notice is waived before or after the meeting
by the Holders of all Notes outstanding, and if the Company and
the Trustee are either present by duly authorized representatives
or have received notice of the meeting or, before or after the
meeting, waived notice.
Section 1403. Call of Meeting by Company or Holders.
In case at any time the Company, pursuant to a Board
Resolution, or the Holders of not less than 10% in aggregate
principal amount of the Notes then outstanding shall have
requested the Trustee to call a meeting of Holders to take any
action specified in Section 1401, by written request setting
forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have mailed the notice of such
meeting within 20 days after receipt of such request, then the
Company or such Holders of Notes may determine the time and place
in the City of New York, State of New York or elsewhere for such
meeting and may call such meeting for the purpose of taking such
action, by mailing or causing to be mailed notice thereof as
provided in Section 1402, or by causing notice thereof to be
published at least once in each of two successive calendar weeks
(on any Business Day during such week) in a newspaper or
newspapers of general circulation in the City of New York, State
of New York printed in the English language and customarily
published at least five days a week, the first such publication
to be not less than 10 nor more than 60 days prior to the date
fixed for the meeting.
Section 1404. Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Holders, a
Person must be (a) a registered Holder of one or more Notes, or
(b) a Person appointed by an instrument in writing as proxy for
the registered Holder or Holders of Notes. The only persons who
shall be entitled to be present or to speak at any meeting of
Holders shall be the Persons entitled to vote at such meeting and
their counsel, representatives of the Trustee and its counsel and
representatives of the Company, any of the Guarantors and their
counsel.
Section 1405. Regulations May Be Made by Trustee;
Conduct of the Meeting; Voting Rights; Adjournment.
Notwithstanding any other provision of this Indenture,
the Trustee may make such reasonable regulations as it may deem
advisable for any action by or any meeting of Holders regarding
proof of the holding of Notes and of the appointment of proxies,
and regarding the appointment and duties of inspectors of votes,
and submission and examination of proxies, certificates and other
evidence of the right to vote, and such other matters concerning
the conduct of the meeting as it shall deem appropriate. Such
regulations may fix a record date and time for determining the
Holders of record of Notes entitled to vote at such meeting, in
which case those and only those Persons who are Holders of Notes
at the record date and time so fixed, or their proxies, shall be
entitled to vote at such meeting whether or not they shall be
such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint
a temporary chairman of the meeting, unless the meeting shall
have been called by the Company or by Holders as provided in
Section 1403, in which case, the Company or Holders calling the
meeting, as the case may be, shall in like manner appoint a
temporary chairman. A permanent chairman and permanent secretary
of the meeting shall be elected by vote of the Holders of a
majority in principal amount of the Outstanding Notes represented
at the meeting and entitled to vote.
At any meeting each Holder or proxy shall be entitled
to one vote for each $100 principal amount of Notes held or
represented by such Holder; provided, however, that no vote shall
be cast or counted at any meeting in respect of any Notes
challenged as not Outstanding and ruled by the chairman of the
meeting to be not Outstanding. The chairman of the meeting shall
have no right to vote other than by virtue of the Notes held by
him or instruments in writing as aforesaid duly designating him
as the proxy to vote on behalf of other Holders. Any meeting of
Holders duly called pursuant to the provisions of Section 1402 or
Section 1403 may be adjourned from time to time by vote of the
Holder or Holders of a majority in aggregate principal amount of
the Notes represented at the meeting and entitled to vote, and
the meeting may be held as so adjourned without further notice.
Section 1406. Voting at the Meeting and Record to Be
Kept.
The vote upon any resolution submitted to any meeting
of Holders shall be by written ballots on which shall be
subscribed the signatures of the Holders of Notes or of their
representatives by proxy and the principal amount of the Notes
voted by the ballot. The permanent chairman of the meeting shall
appoint two inspectors of votes, who shall count all votes cast
at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record
in duplicate of the proceedings of each meeting of Holders shall
be prepared by the secretary of the meeting and there shall be
attached to such record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one
or more Persons having knowledge of the facts, setting forth a
copy of the notice of the meeting and showing that such notice
was mailed as provided in Section 1402 or published as provided
in Section 1403. The record shall be signed and verified by the
affidavits of the permanent chairman and the secretary of the
meeting and one of the duplicates shall be delivered to the
Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at
the meeting.
Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
Section 1407. Exercise of Rights of Trustee or
Noteholders May Not Be Hindered or Delayed by Call of Meeting.
Nothing contained in this Article Fourteen shall be
deemed or construed to authorize or permit, by reason of any call
of a meeting of Holders or any rights conferred hereunder,
expressed or implied, to make such call, any hindrance or delay
in the exercise of any right or rights conferred upon or reserved
to the Trustee or to the Holders under any of the provisions of
the Indenture (including with respect to the Guarantee), the
Notes or the other Noteholder Documents.
ARTICLE FIFTEEN
MISCELLANEOUS
Section 1501. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with any other provision hereof that is then required
to be included in this Indenture by any of the provisions of the
Trust Indenture Act, such required provision shall control.
Section 1502. Notices.
Any notice or communication shall be sufficiently given
if in writing and delivered in person or mailed by certified or
registered mail (return receipt requested) or sent by facsimile
transmission addressed as follows:
If to the Company:
Colorado Gaming & Entertainment Co.
One Norwest Center
1700 Lincoln
Denver, Colorado 80203
Attn.: Alan Mayer, Esq.
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
633 Seventeenth Street - Suite 2800
Denver, Colorado 80202
Attn.: Thomas J. Moore, Esq.
If to the Trustee:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attn.: Corporate Trust Department
with a copy to:
Shipman & Goodwin
One American Row
Hartford, Connecticut 06103-2819
Attn.: Thomas F. Tresselt, Esq.
The Company or the Trustee by notice to the other may
designate an additional or different address for subsequent
notices or communications.
Any notice or communication mailed to a Holder shall be
mailed to him by first-class mail at his address as it appears on
the registration books of the Note Registrar and shall be
sufficiently given to him if so mailed within the time prescribed
herein.
Failure to mail, or any defect in, a notice or
communication to a Holder shall not affect the sufficiency
thereof with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 1503. Successors and Assigns.
All covenants and agreements in this Indenture and in
the other Noteholder Documents by the Company and each Guarantor
shall bind their respective successors and permitted assigns,
whether so expressed or not.
Section 1504. Benefits of Noteholder Documents.
Nothing in this Indenture, the Notes or the other
Noteholder Documents, express or implied, shall give to any
Person, other than the parties hereto, any Paying Agent, any Note
Registrar and their successors hereunder, and the Holders, any
benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 1505. Legal Holidays.
In any case where any Interest Payment Date, Redemption
Date, Purchase Date or Stated Maturity or Maturity of any Note
shall not be a Business Day, then (notwithstanding any other
provision of this Indenture or of the Notes) payment of interest
or principal (and premium, if any) need not be made on such date,
but may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date,
Redemption Date, Purchase Date or at the Stated Maturity or
Maturity of such Note without additional interest.
Section 1506. Exhibits and Schedules.
All of the Exhibits and Schedules attached to this
Indenture shall be deemed incorporated herein by reference and
made a part of this Indenture.
Section 1507. Governing Law.
(a) THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. EACH
OF THE COMPANY, THE GUARANTORS, THE TRUSTEE AND THE HOLDERS
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK
STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE
NOTES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. EACH OF THE COMPANY, THE GUARANTORS, THE
TRUSTEE AND THE HOLDERS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE COMPANY, THE GUARANTORS, THE TRUSTEE AND THE
HOLDERS IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS SAID
ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR
ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY OR ANY GUARANTOR IN ANY OTHER JURISDICTION.
(b) The Company and each Guarantor hereby irrevocably
appoints CT Corporation System (the "Process Agent," which has
consented thereto) with offices on the date hereof at 1633
Broadway, New York, New York 10019, as Process Agent to receive
for and on behalf of the Company or such Guarantor, as the case
may be, service of process in the County of New York relating to
this Indenture and the Notes. SERVICE OF PROCESS IN ANY SUIT,
ACTION OR PROCEEDING AGAINST THE COMPANY OR ANY GUARANTOR MAY BE
MADE ON THE PROCESS AGENT BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR
UNDER APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK, AND THE
PROCESS AGENT IS HEREBY AUTHORIZED AND DIRECTED TO ACCEPT SUCH
SERVICE FOR AND ON BEHALF OF THE COMPANY OR SUCH GUARANTOR, AS
THE CASE MAY BE, AND TO ADMIT SERVICE WITH RESPECT THERETO. SUCH
SERVICE UPON THE PROCESS AGENT SHALL BE DEEMED EFFECTIVE PERSONAL
SERVICE ON THE COMPANY OR SUCH GUARANTOR, AS THE CASE MAY BE,
SUFFICIENT FOR PERSONAL JURISDICTION, 10 DAYS AFTER MAILING, AND
SHALL BE LEGAL AND BINDING UPON THE COMPANY OR SUCH GUARANTOR, AS
THE CASE MAY BE, FOR ALL PURPOSES, NOTWITHSTANDING ANY FAILURE OF
THE PROCESS AGENT TO MAIL COPIES OF SUCH LEGAL PROCESS TO THE
COMPANY OR SUCH GUARANTOR, AS THE CASE MAY BE, OR ANY FAILURE ON
THE PART OF THE COMPANY OR SUCH GUARANTOR, AS THE CASE MAY BE, TO
RECEIVE THE SAME. The Company and each Guarantor confirms that
it has instructed the Process Agent to mail to such Person, upon
service of process being made on the Process Agent pursuant to
this Section, a copy of the summons and complaint or other legal
process served upon it, by registered mail, return receipt
requested, at such Person's address set forth in Schedule 106, or
to such other address as such Person may notify the Process Agent
in writing. The Company and each Guarantor agrees that it will
at all times maintain a process agent to receive service of
process in the County of New York on its behalf with respect to
this Indenture and the Notes. If for any reason the Process
Agent or any successor thereto shall no longer serve as such
process agent or shall have changed its address without
notification thereof to the Trustee, the Company or such
Guarantor, as the case may be, immediately after gaining
knowledge thereof, irrevocably shall appoint a substitute process
agent acceptable to the Trustee in the County of New York and
advise the Trustee thereof.
Section 1508. No Adverse Interpretation of Other
Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or a Company
Subsidiary. Any such indenture, loan or debt agreement may not
be used to interpret this Indenture.
Section 1509. No Recourse Against Others.
A director, officer, employee, stockholder or
incorporator, as such, of the Company, any Guarantor or any
Company Subsidiary shall not have any liability for any
obligations of the Company, any Guarantor or any Company
Subsidiary under the Notes, this Indenture, the other Noteholder
Documents or the Guarantee or for any claim based on, in respect
of or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such
liability.
Section 1510. Severability Clause.
In case any provision in this Indenture or in the Notes
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 1511. Duplicate Originals.
The parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of
them together shall represent the same instrument.
Section 1512. Table of Contents, Headings, Etc.
The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year first above written.
COLORADO GAMING & ENTERTAINMENT CO.
By: . . . . . . . . . . . . . . . .
Name: . . . . . . . . . . . . . . .
Title: . . . . . . . . . . . . . .
BWBH, INC.
By: . . . . . . . . . . . . . . . .
Name: . . . . . . . . . . . . . . .
Title: . . . . . . . . . . . . . .
BWCC, INC.
By: . . . . . . . . . . . . . . . .
Name: . . . . . . . . . . . . . . .
Title: . . . . . . . . . . . . . .
MILLSITE 27, INC.
By: . . . . . . . . . . . . . . . .
Name: . . . . . . . . . . . . . . .
Title: . . . . . . . . . . . . . .
SILVER HAWK CASINO, INC.
By: . . . . . . . . . . . . . . . .
Name: . . . . . . . . . . . . . . .
Title: . . . . . . . . . . . . . .
FLEET NATIONAL BANK, as Trustee
By: . . . . . . . . . . . . . . . .
Name: . . . . . . . . . . . . . . .
Title: . . . . . . . . . . . . . .
REGISTRATION RIGHTS AGREEMENT, dated as of June 7,
1996, by and among COLORADO GAMING & ENTERTAINMENT Co., formerly
known as HEMMETER ENTERPRISES, INC., a Delaware corporation (the
"Company"), and the parties listed on Annex A hereto (the
"Initial Holders").
This Agreement is being entered into pursuant to
Section 5.10 of the First Amended Joint Plan of Reorganization,
dated as of February 14, 1996, as amended, of the Company, BWBH,
Inc. ("BWBH"), BWCC, Inc. ("BWCC") and Millsite 27, Inc.
("Millsite 27") (the "Plan of Reorganization"). The Plan of
Reorganization provides for the issuance of (i) 12% Senior
Secured Pay in Kind Notes (the "Notes") due 2003 by the Company
that are guaranteed by BWBH, BWCC, Millsite, and Silver Hawk
Casino, Inc. (collectively, the "Guarantors") and (ii) Common
Stock (as hereinafter defined).
The parties hereto desire to provide certain
registration rights to the Initial Holders with respect to the
Notes and the shares of Common Stock.
Accordingly, the parties hereto agree as follows:
1. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following
respective meanings:
"Commission" means the Securities and Exchange
Commission or any other Federal agency at the time administering
the Securities Act.
"Common Stock" means any shares of Common Stock, par
value $.01 per share, of the Company now or hereafter authorized
to be issued, and any and all securities of any kind whatsoever
of the Company which may be issued on or after the date hereof in
respect of, or in exchange for, shares of Common Stock pursuant
to a merger, consolidation, stock split, stock dividend,
recapitalization of the Company or otherwise.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the rules
and regulations of the Commission thereunder, all as the same
shall be in effect at the time. Reference to a particular
section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
"Holder" means a registered holder of Registrable
Common Stock or Registrable Notes.
"Indenture" means the Indenture among the Company, the
Guarantors and Fleet National Bank, as trustee, dated as of the
date hereof, as the same may be amended and supplemented from
time to time in accordance with the terms thereof.
"Initial Holders" has the meaning assigned to it in the
preamble hereof.
"Notes" has the meaning assigned to it in the preamble
hereof.
"Person" means a corporation, an association, a
partnership, an organization, a business, a trust, an individual,
or any other entity or organization, including a government or
political subdivision or an instrumentality or agency thereof.
"Registrable Common Stock" means (i) the shares of
Common Stock issued to an Initial Holder pursuant to the Plan of
Reorganization or (ii) any Common Stock issued with respect to
the Common Stock referred to in clause (i) hereof by way of a
stock dividend, stock split or reverse stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or otherwise. As to any particular
Registrable Common Stock, such securities shall cease to be
Registrable Common Stock when (i) a registration statement with
respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement,
(ii) they shall have been distributed to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act,
(iii) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent
disposition of them shall not require the registration under the
Securities Act, or (iv) they shall have ceased to be outstanding.
"Registrable Notes" means the Notes issued to any
Initial Holder pursuant to the Plan of Reorganization, any
replacement or successor notes issued in respect thereof or any
notes or other securities exchanged therefor. As to any
particular Registrable Notes, such securities shall cease to be
Registrable Notes when (i) a registration statement with respect
to the sale of such securities shall have become effective under
the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) they
shall have been distributed to the public pursuant to Rule 144
(or any successor provision) under the Securities Act, (iii) they
shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of them shall
not require the registration under the Securities Act, or (iv)
they shall have ceased to be outstanding.
"Registrable Securities" means the Registrable Common
Stock and the Registrable Notes.
"Registration Expenses" means all expenses incident to
the registration and disposition of the Registrable Securities
pursuant to Section 2 hereof, including, without limitation, all
registration, filing and applicable national securities exchange
fees; all fees and expenses of complying with state securities or
blue sky laws (including fees and disbursements of counsel to the
underwriters or the Holders in connection with "blue sky"
qualification of the Registrable Securities and determination of
their eligibility for investment under the laws of the various
jurisdictions); all duplicating and printing expenses; all
messenger and delivery expenses; the fees and disbursements of
counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters or,
in connection with a registration pursuant to Section 2.3 only,
any special audits required by, or incident to, such
registration; all fees and disbursements of underwriters (other
than underwriting discounts and commissions); all transfer taxes;
and the reasonable fees and expenses of one counsel to the
Holders; provided, however, that Registration Expenses shall
exclude and the Holders shall pay underwriting discounts and
commissions in respect of the Registrable Securities being
registered.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect at the time. References to a particular section of
the Securities Act shall include a reference to the comparable
section, if any, of any such similar Federal statute.
2. Shelf Registration; Registration Under Securities
Act, etc.
2.1 Shelf Registration. Within 75 days following the
date hereof, the Company shall file with the Commission, at the
Company's expense, a "shelf" registration statement on any
appropriate form pursuant to Rule 415 under the Act covering all
Registrable Securities (the "Shelf Registration"). The Company
shall use its best efforts to have the Shelf Registration
declared effective as promptly as practicable after such filing
(but not later than 150 days after the date hereof) and to keep
the Shelf Registration continuously effective three years
following the date on which the Shelf Registration is declared
effective (the "Shelf Registration Period"). The Company shall,
to the extent necessary, supplement or amend the Shelf
Registration (in each case, at the Company's expense) to keep the
Shelf Registration effective during the Shelf Registration
Period. The Company further agrees to supplement or amend any
Shelf Registration, as required by the registration form utilized
by the Company, by the instructions applicable to such
registration form or by the Securities Act or the rules and
regulations thereunder or as reasonably requested by any Holder.
The Company shall furnish to the Holders copies, in substantially
the form proposed to be used and/or filed, of any such supplement
or amendment at least 30 days prior to its being used and/or
filed with the Commission. The Company hereby consents to the
use (in compliance with applicable law) of the prospectus or any
amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale
of the Registrable Securities covered by the prospectus or any
amendment or supplement thereto. The Company shall pay all
Registration Expenses incurred in connection with the Shelf
Registration, whether or not it becomes effective. In no event
shall the Shelf Registration include securities other than
Registrable Securities, unless the Holders of all Registrable
Securities consent to such inclusion. Nothing herein shall
obligate the Company to incur or pay for fees and disbursements
of underwriters in connection with a distribution under the Shelf
Registration.
2.2 Registration on Request.
(a) Request. Subject to the provisions of
Section 2.2(h) below, (i) if the Shelf Registration remains
continuously effective during the Shelf Registration Period in
accordance with the terms hereof, at any time or from time to
time after the expiration of the Shelf Registration Period and
until the fifth anniversary hereof, or (ii) if for any reason the
Shelf Registration does not become effective within 150 days
after the date hereof or ceases to be effective at any time prior
to the expiration of the Shelf Registration Period, at any time
or from time to time after the date which is 150 days from the
date hereof (if the Shelf Registration fails to become effective)
or the date on which the Shelf Registration ceases to be
effective, as the case may be, and until the fifth anniversary
hereof, the Holders, individually and jointly, of not less than
(i) 5% of issued and outstanding shares of Common Stock or
(ii) 5% of the aggregate principal amount of outstanding Notes,
(the "Initiating Holders") shall have the right to require the
Company to effect the registration under the Securities Act of
all or part of the Registrable Common Stock or Registrable Notes,
as the case may be, held by such Initiating Holders, by
delivering a written request therefor to the Company specifying
the number of shares of Registrable Common Stock or aggregate
principal amount of Registrable Notes, as the case may be, and
the intended method of distribution. The Company shall promptly
give written notice of such requested registration to all other
Holders, and thereupon the Company shall, as expeditiously as
possible, use its best efforts to (A) effect the registration
under the Securities Act (including by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so
requested in such request and if the Company is then eligible to
use such a registration) of the Registrable Securities which the
Company has been so requested to register by the Initiating
Holders, and all other Registrable Securities which the Company
has been requested to register by any other Holder (together with
the Initiating Holders, the "Selling Holders") by written request
given to the Company within 10 days after the giving of written
notice by the Company, all to the extent necessary to permit
distribution in accordance with the intended method of
distribution set forth in the written request or requests
delivered by the Selling Holders, and (B) if requested by the
Selling Holders, obtain acceleration of the effective date of the
registration statement relating to such registration.
(b) Registration of Other Securities. Whenever
the Company shall effect a registration pursuant to this Section
2.2, no securities (other than Registrable Securities) shall be
included among the securities covered by such registration (i)
if, in connection with an underwritten offering by any Selling
Holders of Registrable Securities, the managing underwriter of
such offering shall have advised the Company and the Selling
Holders in writing that the inclusion of such other securities
would adversely affect such offering or (ii), if such offering is
not an underwritten offering, unless the Selling Holders of not
less than (A) 50% of the Registrable Common Stock and (B) 50% of
the aggregate principal amount of the Registrable Notes, to be
covered by such registration shall have consented in writing to
the inclusion of such other securities.
(c) Registration Statement Form. Registrations
under this Section 2.2 shall be on such appropriate registration
form of the Commission as shall be selected by the Company and as
shall be reasonably acceptable to the Selling Holders. The
Company agrees to include in any such registration statement all
information which, in the opinion of counsel to the Selling
Holders and counsel to the Company, is required to be included.
(d) Expenses. The Company shall pay all
Registration Expenses in connection with any registration
requested pursuant to this Section 2.2.
(e) Effective Registration Statement. A
registration requested pursuant to this Section 2.2 shall not be
deemed to have been effected (including for purposes of paragraph
(h) of this Section 2.2) (i) unless a registration statement with
respect thereto has become effective and has been kept
continuously effective for a period of at least 120 days (or such
shorter period which shall terminate when all the Registrable
Securities covered by such registration statement have been sold
pursuant thereto), (ii) if after it has become effective, such
registration is interfered with by any stop order, injunction or
other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to
the Selling Holders and has not thereafter become effective, or
(iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such
registration are not satisfied for any reason not attributable to
the Selling Holders or waived.
(f) Selection of Underwriters. The underwriters
of each underwritten offering of the Registrable Securities to be
registered shall be selected by the Selling Holders and shall be
reasonably satisfactory to the Company.
(g) Priority in Requested Registration. If the
managing underwriter of any underwritten offering shall advise
the Company in writing (with a copy to each Selling Holder) that,
in its opinion, the (i) number of shares of Registrable Common
Stock requested to be included in such registration exceeds the
number of shares which can be sold in such offering within a
price range acceptable to the Selling Holders of Registrable
Common Stock, or (ii) the aggregate principal amount of
Registrable Notes exceeds the amount which can be sold in such an
offering within a price range acceptable to the Selling Holders
of Registrable Notes, the Company will include in such
registration that number of shares of Registrable Common Stock or
the aggregate principal amount of Registrable Notes, as
applicable, which the Company is so advised can be sold in such
offering. The Registrable Securities requested to be included in
such registration shall be reduced (A) pro rata among the Selling
Holders requesting such registration of Registrable Common Stock
on the basis of the percentage of Registrable Common Stock of
such Selling Holders requesting such registration and (B) pro
rata among the Selling Holders requesting such registration of
Registrable Notes on the basis of the principal amount of the
Registrable Notes of such Selling Holders requesting such
registration. In connection with any such registration to which
this Section 2.2(g) is applicable, no securities other than
Registrable Securities shall be covered by such registration.
(h) Limitations on Registration on Request.
Notwithstanding anything to the contrary contained herein, the
registration rights granted to the Holders in Section 2.2(a) are
subject to the following limitations: (i) the Holders shall be
entitled to require the Company to, and the Company shall be
required to, effect no more than three registrations pursuant to
Section 2.2(a)(i) hereof (at least one of which relates to
Registrable Notes and at least two of which relate to Registrable
Common Stock) and no more than four registrations pursuant to
Section 2.2(a)(ii) hereof (at least one of which relates to
Registrable Notes and at least two of which relate to Registrable
Common Stock); (ii) the Company shall not be required to effect a
registration pursuant to Section 2.2(a) if, with respect thereto,
the managing underwriter, the Commission, the Securities Act or
the rules and regulations thereunder, or the form on which the
registration statement is to be filed, would require the conduct
of an audit other than the regular audit conducted by the Company
at the end of its fiscal year, but rather the filing may be
delayed until the completion of such regular audit (unless the
Holders agree to pay the expenses of the Company in connection
with such an audit other than the regular audit) and (iii) the
Holders shall not be entitled to require the Company to, and the
Company shall not be required to, effect a registration pursuant
to Section 2.2(a) within six (6) months following the effective
date of another registration pursuant to Section 2.2(a).
(i) Postponement. The Company shall be entitled
once in any six-month period to postpone for a reasonable period
of time (but not exceeding 90 days) (the "Postponement Period")
the filing of any registration statement required to be prepared
and filed by it pursuant to this Section 2.2 if the Company
determines, in its reasonable judgment, that such registration
and offering would materially interfere with any material
financing, corporate reorganization or other material transaction
involving the Company or any subsidiary, or would require
premature disclosure thereof, and promptly gives the Selling
Holders written notice of such determination, containing a
general statement of the reasons for such postponement and an
approximation of the anticipated delay. If the Company shall so
postpone the filing of a registration statement, (i) the Selling
Holders of not less than 50% of the shares of Registrable Common
Stock to be registered shall have the right to withdraw the
request for registration in respect of the Registrable Common
Stock or (ii) the Selling Holders of not less than 50% of the
aggregate principal amount of the Registrable Notes to be
registered shall have the right to withdraw the request for
registration in respect of the Registrable Notes, by giving
written notice to the Company at any time and, in the event of
any such withdrawal, such request shall not be counted for
purposes of the requests for registration to which the Holders
are entitled pursuant to this Section 2.2.
2.3 Incidental Registration.
(a) Right to Include Registrable Securities. If
the Company at any time prior to the expiration of the Holders'
right to request the registration of Registrable Securities
pursuant to Section 2.2(a) hereof proposes to register any of its
securities under the Securities Act by registration on Form S-1,
S-2 or S-3 or any successor or similar form(s) (except
registrations on such Form or similar form(s) solely for
registration of securities in connection with an employee stock
option, stock purchase, stock bonus or similar plan, pursuant to
a dividend reinvestment plan, pursuant to a merger, exchange,
offer or transaction of the type specified in Rule 145(a) under
the Securities Act or pursuant to a "shelf" registration),
whether or not for sale for its own account, it will each such
time give prompt written notice to the Holders of its intention
to do so and of the Holders' rights under this Section 2.3 and
the Holders shall be entitled to include, subject to the
provisions of this Agreement, Registrable Securities on the same
terms and conditions (if any) as apply to other comparable
securities of the Company sold in connection with such
registration. Upon the written request of any Holder (a
"Requesting Holder"), specifying the maximum number of shares of
Registrable Common Stock or principal amount of Registrable
Notes, as applicable, intended to be disposed of by such
Requesting Holder, made as promptly as practicable and in any
event within 15 days after the receipt of any such notice, the
Company shall use its best efforts to effect the registration
under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Requesting
Holders; provided, however, that if, at any time after giving
written notice of its intention to register any securities and
prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine
for any reason not to register or to delay registration of such
securities, the Company shall give written notice of such
determination and its reasons therefor to the Holders and (i) in
the case of a determination not to register, shall be relieved of
its obligation under this Section 2.3 to register any Registrable
Securities in connection with such registration (but not from any
obligation of the Company to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights
of the Holders to request that such registration be effected as a
registration under Section 2.2, and (ii) in the case of a
determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as
the delay in registering such other securities. No registration
effected under this Section 2.3 shall relieve the Company of its
obligation to effect any registration upon request under Section
2.2. The Company will pay all Registration Expenses in
connection with any registration of Registrable Securities
requested pursuant to this Section 2.3.
(b) Right to Withdraw. Any Requesting Holder
shall have the right to withdraw its request for inclusion of
Registrable Securities in any registration statement pursuant to
this Section 2.3 at any time by giving written notice to the
Company of its request to withdraw.
(c) Priority in Incidental Registrations. If the
managing underwriter of any underwritten offering shall inform
the Company by letter of its opinion that the number of shares of
Registrable Common Stock, when added to the number of other
securities to be offered in such registration, would materially
adversely affect such offering, then the Company shall include in
such registration that number of shares of Registrable Common
Stock which the Company is so advised by the managing underwriter
can be sold in (or during the time of) such offering without
materially adversely affecting such offering (in the case of
Registrable Common Stock, the "Section 2.3 Common Stock Sale
Amount") in the following order of priority: (i) all of the
securities proposed by the Company to be sold for its own account
(if any); (ii) thereafter, (x) to the extent the Section 2.3
Common Stock Sale Amount is not exceeded in clause (i), the
Registrable Common Stock requested by the Requesting Holders to
be included in such registration pursuant to Section 2.3(a) pro
rata among the Requesting Holders on the basis of the percentage
of Registrable Common Stock of such Requesting Holders requested
to be included in such registration and (y) the Registrable
Notes requested by the Requesting Holders to be included in such
registration pursuant to Section 2.3(a) pro rata among the
Requesting Holders on the basis of the percentage of the
principal amount of Registrable Notes of such Requesting Holders
requested to be included in such registration; and
(iii) thereafter, to the extent the Section 2.3 Common Stock Sale
Amount is not exceeded, any other securities of the Company
requested to be included in such registration.
(d) Plan of Distribution. Any participation by
the Holders in a registration by the Company shall be in
accordance with the Company's plan of distribution.
2.4 Registration Procedures. If and whenever the
Company is required to use its best efforts to effect the
registration of any Registrable Securities under the Securities
Act as provided in Sections 2.1, 2.2 and 2.3 hereof, the Company
shall as expeditiously as possible:
(a) prepare and file with the Commission as
soon as practicable the requisite registration
statement to effect such registration (and shall
include all financial statements required by the
Commission to be filed therewith) and thereafter
use its best efforts to cause such registration
statement to become effective; provided, however,
that before filing such registration statement
(including all exhibits) or any amendment or
supplement thereto or comparable statements under
securities or blue sky laws of any jurisdiction,
the Company shall furnish such documents to each
Holder selling Registrable Securities covered by
such registration statement and each underwriter,
if any, participating in the offering of the
Registrable Securities and their respective
counsel, which documents will be subject to the
review and comments of each such Holder, each
underwriter and their respective counsel; and
provided further, that (i) as to registration
pursuant to Section 2.1 or 2.2 hereof, the Company
may discontinue any registration of its securities
which are not Registrable Securities and, (ii) as
to registration pursuant to Section 2.3 hereof,
the Company may discontinue any registration of
its securities, in each case, at any time prior to
the effective date of the registration statement
relating thereto;
(b) notify each Holder selling Registrable
Securities covered by such registration statement
of the Commission's requests for amending or
supplementing the registration statement and the
prospectus, and prepare and file with the
Commission such amendments and supplements to such
registration statement and the prospectus used in
connection therewith as may be necessary to keep
such registration statement effective and to
comply with the provisions of the Securities Act
with respect to the disposition of all Registrable
Securities covered by such registration statement
for such period as shall be required for the
disposition of all of such Registrable Securities
in accordance with the intended method of
distribution thereof; provided that, except with
respect to the Shelf Registration and any other
such registration statement filed pursuant to
Rule 415 under the Securities Act, such period
need not exceed 120 days;
(c) furnish, without charge, to each Holder
selling Registrable Securities covered by such
registration statement and each underwriter such
number of conformed copies of such registration
statement and of each such amendment and
supplement thereto (in each case including all
exhibits), such number of copies of the prospectus
contained in such registration statement
(including each preliminary prospectus and any
summary prospectus) and any other prospectus filed
under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities
Act, and such other documents, as such Holders and
such underwriters may reasonably request;
(d) use its best efforts (i) to register or
qualify all Registrable Securities and other
securities covered by such registration statement
under such securities or blue sky laws of such
States of the United States of America where an
exemption is not available and as any Holder or
Holders selling Registrable Securities covered by
such registration statement or any managing
underwriter shall reasonably request, (ii) to keep
such registration or qualification in effect for
so long as such registration statement remains in
effect, and (iii) to take any other action which
may be reasonably necessary or advisable to enable
the Holders to consummate the disposition in such
jurisdictions of the securities to be sold by such
Holder or Holders; provided, however, that the
Company shall not for any purpose be required to
execute a general consent to service of process or
to qualify to do business as a foreign corporation
in any jurisdiction where it is not so qualified;
(e) use its best efforts to cause all
Registrable Securities covered by such
registration statement to be registered with or
approved by such other Federal or state
governmental agencies or authorities as may be
necessary in the opinion of counsel to the Company
and counsel to any Holder or Holders selling
Registrable Securities covered by such
registration statement to consummate the
disposition of such Registrable Securities;
(f) furnish to each Holder selling
Registrable Securities covered by such
registration statement and each underwriter, if
any, participating in the offering of the
securities covered by such registration statement,
a signed counterpart of
(i) an opinion of counsel for the
Company, and
(ii) a "comfort" letter signed by the
independent public accountants who have
certified the Company's financial statements
included or incorporated by reference in such
registration statement,
covering substantially the same matters with
respect to such registration statement (and the
prospectus included therein) and, in the case of
the accountants' comfort letter, with respect to
events subsequent to the date of such financial
statements, as are customarily covered in opinions
of issuer's counsel and in accountants' comfort
letters delivered to the underwriters in
underwritten public offerings of securities (and
dated the dates such opinions and comfort letters
are customarily dated) and, in the case of the
legal opinion, such other legal matters, and, in
the case of the accountants' comfort letter, such
other financial matters, as such Holder or
Holders, or the underwriters, may reasonably
request;
(g) promptly notify the Holders selling
Registrable Securities covered by such
registration statement and each managing
underwriter, if any, participating in the offering
of the securities covered by such registration
statement (i) when such registration statement,
any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-
effective amendment to such registration statement
has been filed, and, with respect to such
registration statement or any post-effective
amendment, when the same has become effective;
(ii) of any request by the Commission for
amendments or supplements to such registration
statement or the prospectus related thereto or for
additional information; (iii) of the issuance by
the Commission of any stop order suspending the
effectiveness of such registration statement or
the initiation of any proceedings for that
purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of any of the Registrable Securities
for sale under the securities or blue sky laws of
any jurisdiction or the initiation of any
proceeding for such purpose; and (v) at any time
when a prospectus relating thereto is required to
be delivered under the Securities Act or, in the
case of the Shelf Registration, at any time during
the Shelf Registration Period, upon discovery
that, or upon the happening of any event as a
result of which, the prospectus included in such
registration statement, as then in effect,
includes an untrue statement of a material fact or
omits to state any material fact required to be
stated therein or necessary to make the statements
therein not misleading, in the light of the
circumstances under which they were made, and in
the case of this clause (v), at the request of any
Holder or Holders selling Registrable Securities
covered by such registration statement promptly
prepare and furnish to such Holder or Holders and
each managing underwriter, if any, participating
in the offering of the Registrable Securities, a
reasonable number of copies of a supplement to or
an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus
shall not include an untrue statement of a
material fact or omit to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading in the light
of the circumstances under which they were made.
(h) otherwise comply with all applicable
rules and regulations of the Commission, and make
available to its security holders, as soon as
reasonably practicable, an earnings statement
covering the period of at least twelve months
beginning with the first full calendar month after
the effective date of such registration statement,
which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act
and Rule 158 promulgated thereunder, and promptly
furnish to the Holders a copy of any amendment or
supplement to such registration statement or
prospectus;
(i) cause to be maintained a transfer agent
and registrar (which, in each case, may be the
Company) for the Common Stock and the Notes from
and after the date of such registration;
(j) (i) use its best efforts to cause all
Registrable Common Stock covered by such
registration statement to be quoted on the
National Market System ("National Market System")
of the National Association of Securities Dealers,
Inc. Automated Quotation System ("NASDAQ") within
the meaning of Rule 11Aa2-1 of the Commission if
the quoting of such Registrable Securities is then
permitted under NASDAQ rules; or (ii) if no
similar securities of the Company are then so
quoted, use its bests efforts to (x) secure
designation of all such Registrable Securities as
a NASDAQ National Market System security or
(y) failing that, cause all such Registrable
Securities to be listed on a national securities
exchange or (z) failing that, to secure NASDAQ
authorization for such shares and, without
limiting the generality of the foregoing, to
arrange for at least two market makers to register
as such with respect to such shares with the
National Association of Securities Dealers, Inc.;
(k) deliver promptly to counsel to the
Holders selling Registrable Securities covered by
such registration statement and each underwriter,
if any, participating in the offering of the
Registrable Securities, copies of all
correspondence between the Commission and the
Company, its counsel or auditors and all memoranda
relating to discussions with the Commission or its
staff with respect to such registration statement;
(l) use its best efforts to obtain the
withdrawal of any order suspending the
effectiveness of the registration statement;
(m) provide a CUSIP number for all
Registrable Securities, no later than the
effective date of the registration statement;
(n) make available its employees and
personnel and otherwise provide reasonable
assistance to the underwriters (taking into
account the needs of the Company's businesses) in
their marketing of Registrable Securities; and
(o) in the case of a Shelf Registration,
upon the occurrence of any event or the discovery
of any facts, each as contemplated by Section
2.4(g)(v) hereof, use its best efforts to prepare
a supplement or post-effective amendment to the
registration statement or the related prospectus
or any document incorporated therein by reference
or file any other required documents so that,
thereafter, such prospectus will not contain at
the time of such delivery any untrue statement of
a material fact or omit to state a material fact
necessary to make the statements therein, in light
of the circumstances under which they were made,
not misleading.
The Company may require the Holders selling Registrable
Securities covered by such registration statement to furnish the
Company such information regarding the Holders and the
distribution of the Registrable Securities as the Company may
from time to time reasonably request in writing. In the event of
a registration effected pursuant to Section 2.1, 2.2(a) or 2.3(a)
hereof, if a Holder fails to provide such information and the
failure by such Holder to furnish such information would prevent
or unreasonably delay the registration statement relating to such
registration from being declared effective by the Commission, the
Company may exclude such Holder's Registrable Common Stock and/or
Registrable Notes from such registration, which right of the
Company shall, in the case of a registration effected pursuant to
Section 2.1 or 2.2(a) hereof, be subject to the consent of the
Holders of not less than 50% of the shares of Registrable Common
Stock to be included in such registration in the case of
Registrable Common Stock (other than such Holder's Registrable
Common Stock) and not less than 50% of the aggregate principal
amount of the Registrable Notes to be included in such
registration (other than such Holder's Registrable Notes).
The Holders agree that upon receipt of any notice from
the Company of the happening of any event of the kind described
in paragraph (g)(iii) or (v) of this Section 2.4, each of the
Holders will discontinue its disposition of Registrable
Securities pursuant to the registration statement relating to
such Registrable Securities until, in the case of
paragraph (g)(v) of this Section 2.4, its receipt of the copies
of the supplemented or amended prospectus contemplated by
paragraph (g)(v) of this Section 2.4 and, if so directed by the
Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in its
possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. If the
disposition by the Holders of their securities is discontinued
pursuant to the foregoing sentence, the Company shall extend the
period of effectiveness of the registration statement by the
number of days during the period from and including the date of
the giving of notice to and including the date when the Holders
shall have received copies of the supplemented or amended
prospectus contemplated by paragraph (g)(v) of this Section 2.4;
and, if the Company shall not so extend such period, the Holders'
request pursuant to which such registration statement was filed
shall not be counted for purposes of the requests for
registration to which the Holders are entitled pursuant to
Section 2.2 hereof.
2.5 Underwritten Offerings.
(a) Requested Underwritten Offerings. If
requested by the underwriters for any underwritten offering by
the Selling Holders pursuant to a registration requested under
Section 2.1 or 2.2, the Company shall enter into a customary
underwriting agreement with such underwriter or underwriters.
Such underwriting agreement shall be reasonably satisfactory in
form and substance to the Selling Holders and shall contain such
representations and warranties by, and such other agreements on
the part of, the Company and such other terms as are generally
prevailing in agreements of that type, including, without
limitation, such customary provisions relating to indemnification
and contribution by the Company. The Selling Holders shall be
parties to such underwriting agreement and may, at their option,
require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for
the benefit of the Selling Holders and that any or all of the
conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the
obligations of the Selling Holders. No Selling Holder shall be
required to make any representations or warranties to or
agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Selling
Holder, its ownership of and title to the Registrable Securities,
and its intended method of distribution; and any liability of any
Selling Holder to any underwriter or other Person under such
underwriting agreement shall be limited to liability arising from
misstatements in or omissions from its representations and
warranties and shall be limited to an amount equal to the net
proceeds that it derives from such registration.
(b) Incidental Underwritten Offerings. In the
case of a registration pursuant to Section 2.3 hereof, if the
Company shall have determined to enter into any underwriting
agreements in connection therewith, all of the Requesting
Holders' Registrable Securities to be included in such
registration shall be subject to such underwriting agreements.
The Requesting Holders may, at their option, require that any or
all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of
the Requesting Holders and that any or all of the conditions
precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations
of the Requesting Holders. No Requesting Holder shall be
required to make any representations or warranties to or
agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such
Requesting Holder, its ownership of and title to the Registrable
Securities, and its intended method of distribution; and any
liability of any Requesting Holder to any underwriter or other
Person under such underwriting agreement shall be limited to
liability arising from misstatements in or omissions from its
representations and warranties and shall be limited to an amount
equal to the net proceeds that it derives from such registration.
2.6 Preparation; Reasonable Investigation. In
connection with the preparation and filing of each registration
statement under the Securities Act pursuant to this Agreement,
the Company will give the participating Holders, their
underwriters, if any, and their respective counsel, accountants
and other representatives and agents the opportunity to
participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission,
and, to the extent practicable, each amendment thereof or
supplement thereto, and give each of them such access to its
books and records and such opportunities to discuss the business
of the Company with its officers and employees and the
independent public accountants who have certified its financial
statements, and supply all other information reasonably requested
by each of them, as shall be necessary or appropriate, in the
opinion of the participating Holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
2.7 Indemnification.
(a) Indemnification by the Company. The Company
agrees that in the event of any registration of any securities of
the Company under the Securities Act, the Company shall, and
hereby does, indemnify and hold harmless each Holder, its
respective directors, officers, partners, agents and affiliates
and each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if
any, who controls such Holder or any such underwriter within the
meaning of the Securities Act, against any losses, claims,
damages, or liabilities, joint or several, to which such Holder
or any such director, officer, partner, agent or affiliate or
underwriter or controlling Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities, joint or several (or actions or
proceedings, whether commenced or threatened, in respect
thereof), arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in any
registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, (ii) any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein in light of
the circumstances in which they were made not misleading, or
(iii) any violation by the Company of any Federal, state or
common law rule or regulation applicable to the Company and
relating to action required of or inaction by the Company in
connection with any such registration, and the Company shall
reimburse such Holder and each such director, officer, partner,
agent or affiliate, underwriter and controlling Person for any
legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall
not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company through an
instrument duly executed by or on behalf of the Holders or
underwriter, as the case may be, specifically stating that it is
for use in the preparation thereof; and provided, further, that
the Company shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus,
as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person
if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force regardless
of any investigation made by or on behalf of either Holder or any
such director, officer, partner, agent or affiliate or
controlling Person and shall survive the transfer of such
securities by such Holder.
(b) Indemnification by the Holders. As a
condition to including any Registrable Securities in any
registration statement, the Company shall have received an
undertaking reasonably satisfactory to it from each Holder so
including any Registrable Securities to indemnify and hold
harmless (in the same manner and to the same extent as set forth
in paragraph (a) of this Section 2.7) the Company, and each
director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning
of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, but only to the extent such
statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly
executed by such Holder specifically stating that it is for use
in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the liability of such
indemnifying party under this Section 2.7(b) shall be limited to
the amount of net proceeds received by such indemnifying party in
the offering giving rise to such liability. Such indemnity shall
remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer
or controlling Person and shall survive the transfer of such
securities by such Holder.
(c) Notices of Claims, etc. Promptly after
receipt by an indemnified party of notice of the commencement of
any action or proceeding involving a claim referred to in the
preceding subsections of this Section 2.7, such indemnified party
shall, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the
commencement of such action or proceeding; provided, however,
that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under the preceding subsections of this Section 2.7,
except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve
the indemnifying party from any liability which it may have to
the indemnified party otherwise than under this Section 2.7. In
case any such action or proceeding is brought against an
indemnified party, the indemnifying party shall be entitled to
participate therein and, unless in the opinion of outside counsel
to the indemnified party a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any such
action or proceeding include both the indemnified party and the
indemnifying party and if in the opinion of outside counsel to
the indemnified party there may be legal defenses available to
such indemnified party and/or other indemnified parties which are
different from or in addition to those available to the
indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to defend such action or
proceeding on behalf of such indemnified party or parties and the
indemnifying party shall be obligated to pay the fees and
expenses of such separate counsel or counsels. After notice from
the indemnifying party to such indemnified party of its election
so to assume the defense thereof and approval by the indemnified
party of such counsel, the indemnifying party shall not be liable
to such indemnified party for any legal expenses subsequently
incurred by the latter in connection with the defense thereof
other than reasonable costs of investigation (unless the proviso
in the preceding sentence shall be applicable). No indemnifying
party shall be liable for any settlement of any action or
proceeding effected without its written consent which shall not
be unreasonably withheld. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) Contribution. If the indemnification
provided for in this Section 2.7 shall for any reason be held by
a court to be unavailable to an indemnified party under
subsection (a) or (b) hereof in respect of any loss, claim,
damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under subsection (a) or (b)
hereof, the indemnified party and the indemnifying party under
subsection (a) or (b) hereof shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand, and the
indemnified party on the other, which resulted in such loss,
claim, damage or liability, or action in respect thereof, with
respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations, or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law or if the allocation provided in this
clause (ii) provides a greater amount to the indemnified party
than clause (i) above, in such proportion as shall be appropriate
to reflect not only the relative fault but also the relative
benefits received by the indemnifying party and the indemnified
party from the offering of the securities covered by such
registration statement as well as any other relevant equitable
considerations. The parties hereto agree that it would not be
just and equitable if contributions pursuant to this
Section 2.7(d) were to be determined by pro rata allocation or by
any other method of allocation which does not take into account
the equitable considerations referred to in the preceding
sentence of this Section 2.7(d). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The
Holders' obligations to contribute as provided in this subsection
(d) are several and not joint and shall be in proportion to the
relative value of their respective Registrable Securities covered
by such registration statement. In addition, no Person shall be
obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's
consent, which consent shall not be unreasonably withheld.
Notwithstanding anything in this subsection (d) to the contrary,
no indemnifying party (other than the Company) shall be required
to contribute any amount in excess of the net proceeds received
by such party from the sale of the Registrable Securities in the
offering to which the losses, claims, damages or liabilities of
the indemnified parties relate.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding
subsections of this Section 2.7 (with appropriate modifications)
shall be given by the Company and the Holders with respect to any
required registration or other qualification of securities under
any Federal, state or blue sky law or regulation of any
governmental authority other than the Securities Act. The
indemnification agreements contained in this Section 2.7 shall be
in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law
or contract and shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the transfer of any of
the Registrable Securities by any of the Holders.
(f) Indemnification Payments. The
indemnification and contribution required by this Section 2.7
shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred;
provided, however, that such periodic payments shall only be made
upon delivery to the indemnifying party of an agreement by the
indemnified party to repay the amounts advanced to the extent it
is ultimately determined that the indemnified party is not
entitled to indemnification pursuant to this Section 2.7 or
otherwise. The parties hereto agree that for each of them such
agreement shall be deemed to be contained herein.
2.8 Unlegended Certificates. In connection with the
offering of any Registrable Securities registered pursuant to
this Section 2, the Company shall facilitate the timely
preparation and delivery to the Holders and the underwriters, if
any, participating in such offering, of unlegended certificates
representing ownership of such Registrable Securities being sold
in such denominations and registered in such names as requested
by the Holders or such underwriters.
2.9 Limitation on Sale of Securities. If any
registration of Registrable Securities shall be in connection
with an underwritten public offering, the Company agrees (x) not
to effect any public sale or distribution of any issue of the
same class or series as the Registrable Securities being
registered in an underwritten public offering (other than
pursuant to an employee stock option, stock purchase or similar
plan, pursuant to a dividend reinvestment plan, pursuant to a
merger, exchange offer or a transaction of the type specified in
Rule 145(a) under the Securities Act), any securities of the
Company similar to any such issue or any securities of the
Company or of any security convertible into or exchangeable or
exercisable for any such issue of the Company during the 15 days
prior to, and during the 90-day period (or such longer period,
not in excess of 180 days, as may be reasonably requested by the
underwriter of such offering) beginning on, the effective date of
such registration statement (except as part of such registration)
and (y) that any agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue
any privately placed securities shall contain a provision under
which holders of such securities agree not to effect any public
sale or distribution of any such securities during the period
referred to in the foregoing clause (x), including any sale
pursuant to Rule 144 under the Securities Act (except as part of
such registration, if permitted).
2.10 No Required Sale. Nothing in this Agreement shall
be deemed to create an independent obligation on the part of any
of the Holders to sell any Registrable Securities pursuant to any
effective registration statement.
3. Rule 144. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities
to sell such securities without registration under the Securities
Act within the limitation of the exemptions provided by
(a) Rule 144, or (b) any similar rule or regulation hereafter
adopted by the Commission including, without limiting the
generality of the foregoing, filing on a timely basis all reports
required to be filed by the Exchange Act. Upon the request of
any Holder, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
4. Amendments and Waivers. This Agreement may not be
modified or amended, or any of the provisions hereof waived,
temporarily or permanently, except pursuant to the written
consent of (i) the Holders of not less than 50% of the shares of
Registrable Common Stock, (ii) the Holders of not less than 50%
of the aggregate principal amount of Registrable Notes and
(iii) the Company.
5. Adjustments. In the event of any change in the
capitalization of the Company as a result of any stock split,
stock dividend, reverse split, combination, recapitalization,
merger, consolidation, or otherwise, the provisions of this
Agreement shall be appropriately adjusted.
6. Notice. All notices and other communications
hereunder shall be in writing and, unless otherwise provided
herein, shall be deemed to have been given when received by the
party to whom such notice is to be given at its address set forth
below, or such other address for the party as shall be specified
by notice given pursuant hereto:
(a) If to any Holder, the address of such Holder set
forth on Annex A attached hereto;
(b) If to the Company, to it at:
Colorado Gaming & Entertainment Co.
1700 Lincoln, 49th Floor
Denver, CO 80203
Attention: Stephen J. Szapor, Jr.
With a copy to:
Le Boeuf, Lamb, Greene & MacRae
633 Seventeenth Street
Suite 2800
Denver, CO 80202
Attention: Thomas J. Moore
7. Assignment. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns.
This Agreement may not be assigned by the Company. Any Holder
may, at its election, at any time or from time to time, assign
its rights under this Agreement, in whole or in part, to any
transferee of Registrable Securities.
8. Remedies. The parties hereto agree that money
damages or other remedy at law would not be sufficient or
adequate remedy for any breach or violation of, or a default
under, this Agreement by them and that, in addition to all other
remedies available to them, each of them shall be entitled to an
injunction restraining such breach, violation or default or
threatened breach, violation or default and to any other
equitable relief, including without limitation specific
performance, without bond or other security being required. In
any action or proceeding brought to enforce any provision of this
Agreement (including the indemnification provisions thereof), the
successful party shall be entitled to recover reasonable
attorneys' fees in addition to its costs and expenses and any
other available remedy.
9. No Inconsistent Agreements. The Company will not,
on or after the date of this Agreement, enter into any agreement
with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof, other than any customary
lock-up agreement with the underwriters in connection with any
registration and offering by the Company of its securities to the
public (an "Offering") effected hereunder, pursuant to which the
Company shall agree not to register for sale, and the Company
shall agree not to sell or otherwise dispose of, Notes, and/or
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, as applicable, for a specified
period following such Offering. The Company hereby represents
and warrants that the rights granted to the Holders hereunder do
not in any way conflict with and are not inconsistent with any
other agreements to which the Company is a party or by which it
is bound. The Company further agrees that if any other
registration rights agreement entered into after the date of this
Agreement with respect to any of its securities contains terms
which are more favorable to, or less restrictive on, the other
party thereto than the terms and conditions contained in this
Agreement are (insofar as they are applicable) to the Holders,
then the terms and conditions of this Agreement shall immediately
be deemed to have been amended without further action by the
Company or the Holders so that the Holders shall be entitled to
the benefit of any such more favorable or less restrictive terms
or conditions.
10. Headings. Headings of the sections and paragraphs
of this Agreement are for convenience only and shall be given no
substantive or interpretive effect whatsoever.
11. Governing Law; Jurisdiction. (a) This Agreement
shall be construed and enforced in accordance with and governed
by the laws of the State of New York, without giving effect to
the conflicts of law principles thereof.
(b) Each of the parties hereto irrevocably and
unconditionally consents to the jurisdiction of the federal
courts and courts of the state of New York situated in New York
County, New York in respect of the interpretation and enforcement
of the provisions of this Agreement, and hereby agrees that
service of process in any such action, suit or proceeding against
the other party with respect to this Agreement may be made upon
it in any manner permitted by the laws of New York or the federal
laws of the United States.
12. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one
and the same instrument.
13. Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any
jurisdiction shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any restriction or
provision of this Agreement is held unreasonable, unlawful or
unenforceable in any respect, such restriction or provision shall
be interpreted, revised or applied in a manner that renders it
lawful and enforceable to the fullest extent possible under law.
14. Further Assurances. Each party hereto shall do
and perform or cause to be done and performed all further acts
and things and shall execute and deliver all other agreements,
certificates, instruments, and documents as any other party
hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
15. Entire Agreement; Effectiveness. This Agreement
and the other writings referred to herein or delivered in
connection herewith contain the entire agreement among the
parties with respect to the subject matter hereof and supersede
all prior and contemporaneous arrangements or understandings with
respect thereto.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
COLORADO GAMING & ENTERTAINMENT CO.
By:____________________________
Name:
Title:
KEYSTONE HIGH INCOME BOND FUND (B-4)
By:____________________________
Name:
Title:
KEYSTONE STRATEGIC INCOME FUND
By:____________________________
Name:
Title:
KEYSTONE SMALL COMPANY GROWTH FUND (S-4)
By:____________________________
Name:
Title:
EQUIFAX INC. U.S. RETIREMENT INCOME PLAN
TRUST, AMPEX RETIREMENT MASTER TRUST AND
BUFFALO COLOR MASTER TRUST
By: KEYSTONE FIXED INCOME ADVISERS,
INC., as investment manager
By:____________________________
Name:
Title:
PAINEWEBBER STRATEGIC INCOME FUND, a
Series of PaineWebber Securities Trust
By:____________________________
Name:
Title:
MANAGED HIGH YIELD FUND INC.
By:____________________________
Name:
Title:
PAINEWEBBER HIGH INCOME FUND, a Series
of PaineWebber Managed Investments Trust
By:____________________________
Name:
Title:
ALL-AMERICAN TERM TRUST INC.
By:____________________________
Name:
Title:
PAINEWEBBER OFFSHORE FUNDS, PLC - THE
HIGH INCOME FUND
By: MITCHELL HUTCHINS ASSET MANAGEMENT
INC., the discretionary investment
advisor
By:____________________________
Thomas J. Libassi
Senior Vice President
THE MAINSTAY FUNDS, on behalf of its
HIGH YIELD CORPORATE BOND FUND series
By: MACKAY-SHIELDS FINANCIAL
CORPORATION, its Investment Advisor
By:____________________________
Name: Jeffrey B. Platt
Title: Director
BROWN & WILLIAMSON HIGH YIELD ACCOUNT
By: MACKAY-SHIELDS FINANCIAL
CORPORATION, its Investment Advisor
By:____________________________
Name: Jeffrey B. Platt
Title: Director
NEW YORK LIFE MFA SERIES FUND, INC.,
on behalf of its HIGH YIELD CORPORATE
BOND FUND PORTFOLIO
By: MACKAY-SHIELDS FINANCIAL
CORPORATION, its Investment Advisor
By:____________________________
Name: Jeffrey B. Platt
Title: Director
SC FUNDAMENTAL VALUE FUND LP
By:____________________________
Name:
Title:
SC FUNDAMENTAL VALUE FUND BVI, LIMITED
By:____________________________
Name:
Title:
ANNEX A
1. Keystone High Income Bond Fund (B-4)
2. Keystone Strategic Income Fund
3. Keystone Small Company Growth Fund (S-4)
4. Equifax Inc. U.S. Retirement Income Plan Trust
5. Ampex Retirement Master Trust
6. Buffalo Color Master Trust
7. PaineWebber Strategic Income Fund, a series of PaineWebber
Securities Trust
8. Managed High Yield Fund Inc.
9. PaineWebber High Income Fund, a series of PaineWebber
Managed Investments Trust
10. All-American Term Trust Inc.
11. PaineWebber Offshore Funds, Plc - The High Income Fund
12. The Mainstay Funds, on behalf of its High Yield Corporate
Bond Fund Series
13. Brown & Williamson High Yield Account
14. New York Life Mfa Series Fund, Inc., on behalf of its High
Yield Corporate Bond Fund Portfolio
15. SC Fundamental Value Fund LP
16. SC Fundamental Value Fund BVI, Limited
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
by and among
BWBH, INC.,
BWCC, INC.,
MILLSITE 27, INC.,
SILVER HAWK CASINO, INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of June 5, 1996
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . 14
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . 14
1.4 Construction . . . . . . . . . . . . . . . . . . . 14
1.5 Schedules and Exhibits. . . . . . . . . . . . . . . 14
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . 14
2.1 Advances. . . . . . . . . . . . . . . . . . . . . . 14
2.2 Overadvances . . . . . . . . . . . . . . . . . . . 15
2.3 Amortization of Equipment Refinance/Finance
Facility, Millsite Parking Lot Construction Facility
and Silver Hawk Facility . . . . . . . . . . . . . 16
2.4 Interest: Rates, Payments, and Calculations . . . 16
2.5 Crediting Payments; Application of Collections . . 17
2.6 Statements of Obligations . . . . . . . . . . . . . 17
2.7 Fees . . . . . . . . . . . . . . . . . . . . . . . 18
2.8 Costs and Expenses . . . . . . . . . . . . . . . . 19
2.9 Joint Borrower Provisions . . . . . . . . . . . . . 19
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . 20
3.1 Conditions Precedent to Initial Advance . . . . . . 20
3.2 Conditions Precedent to Any Advance under the
Equipment Refinance/Finance Facility. . . . . . . . 24
3.3 Conditions Precedent to the Advance under the
Millsite Parking Lot Construction Facility . . . . 24
3.4 Conditions Precedent to the Advance under the
Silver Hawk Facility . . . . . . . . . . . . . . . 26
3.5 Conditions Precedent to All Advances. . . . . . . . 27
3.6 Term; Automatic Renewal . . . . . . . . . . . . . . 27
3.7 Effect of Termination . . . . . . . . . . . . . . . 27
3.8 Early Termination by Borrower . . . . . . . . . . . 28
3.9 Termination Upon Event of Default . . . . . . . . . 28
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . 28
4.1 Grant of Security Interest . . . . . . . . . . . . 28
4.2 Negotiable Collateral . . . . . . . . . . . . . . . 28
4.3 Collection of Accounts, General Intangibles,
Negotiable Collateral . . . . . . . . . . . . . . . 28
4.4 Delivery of Additional Documentation Required . . . 29
4.5 Power of Attorney . . . . . . . . . . . . . . . . . 29
4.6 Right to Inspect . . . . . . . . . . . . . . . . . 30
4.7 Completion of the Work . . . . . . . . . . . . . . 30
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . 31
5.1 No Prior Encumbrances . . . . . . . . . . . . . . . 31
5.2 Location of Inventory and Equipment . . . . . . . . 31
5.3 Inventory and Equipment Records . . . . . . . . . . 31
5.4 Location of Chief Executive Office; FEIN . . . . . 31
5.5 Due Organization, Qualification . . . . . . . . . . 31
5.6 Due Authorization; No Conflict . . . . . . . . . . 32
5.7 Litigation . . . . . . . . . . . . . . . . . . . . 32
5.8 No Material Adverse Change in Financial Condition . 32
5.9 Employee Benefits . . . . . . . . . . . . . . . . . 32
5.10 Environmental Condition . . . . . . . . . . . . . . 33
5.11 Equipment Financing Contracts . . . . . . . . . . . 33
5.12 Solvency . . . . . . . . . . . . . . . . . . . . . 33
5.13 Reliance by Foothill; Cumulative . . . . . . . . . 33
5.14 Governmental Compliance . . . . . . . . . . . . . . 34
5.15 Plan Changes . . . . . . . . . . . . . . . . . . . 34
6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . 34
6.1 Accounting System . . . . . . . . . . . . . . . . . 34
6.2 Collateral and Other Reports . . . . . . . . . . . 34
6.3 Financial Statements, Certificates . . . . . . . . 35
6.4 Tax Returns . . . . . . . . . . . . . . . . . . . . 36
6.5 Guarantor Reports . . . . . . . . . . . . . . . . . 36
6.6 Title to Equipment . . . . . . . . . . . . . . . . 36
6.7 Maintenance of Equipment . . . . . . . . . . . . . 36
6.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . 37
6.9 Insurance . . . . . . . . . . . . . . . . . . . . . 37
6.10 Financial Covenant . . . . . . . . . . . . . . . . 38
6.11 No Setoffs or Counterclaims . . . . . . . . . . . . 38
6.12 Location of Inventory and Equipment . . . . . . . . 38
6.13 Compliance with Laws . . . . . . . . . . . . . . . 38
6.14 Employee Benefits . . . . . . . . . . . . . . . . . 39
6.15 Gaming Tax Escrow Accounts . . . . . . . . . . . . 39
6.16 Construction of Improvements . . . . . . . . . . . 39
6.17 Mechanic's Liens and Contest Thereof . . . . . . . 40
6.18 Personal Property . . . . . . . . . . . . . . . . . 40
6.19 Silver Hawk Property Appraisal. . . . . . . . . . . 40
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 40
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . 40
7.2 Restrictions on Equipment Financing . . . . . . . . 41
7.3 Liens . . . . . . . . . . . . . . . . . . . . . . . 41
7.4 Restrictions on Fundamental Changes . . . . . . . . 41
7.5 Extraordinary Transactions and Disposal of Assets . 41
7.6 Change Name . . . . . . . . . . . . . . . . . . . . 41
7.7 Guarantee . . . . . . . . . . . . . . . . . . . . . 41
7.8 Restructure . . . . . . . . . . . . . . . . . . . . 41
7.9 Purchase of CAI Notes or PIK Notes; Prepayments . . 42
7.10 Change of Control . . . . . . . . . . . . . . . . . 42
7.11 Capital Expenditures . . . . . . . . . . . . . . . 42
7.12 Distributions . . . . . . . . . . . . . . . . . . . 42
7.13 Amendments to Debt Instruments . . . . . . . . . . 43
7.14 Accounting Methods . . . . . . . . . . . . . . . . 43
7.15 Investments . . . . . . . . . . . . . . . . . . . . 43
7.16 Transactions with Affiliates . . . . . . . . . . . 44
7.17 Suspension . . . . . . . . . . . . . . . . . . . . 44
7.18 Compensation . . . . . . . . . . . . . . . . . . . 44
7.19 Use of Proceeds. . . . . . . . . . . . . . . . . . 44
7.20 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees. . . . . . . . 45
7.21 Limitation On Accounts . . . . . . . . . . . . . . 45
8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . 45
9. FOOTHILL'S RIGHTS AND REMEDIES. . . . . . . . . . . . . 48
9.1 Rights and Remedies . . . . . . . . . . . . . . . . 48
9.2 Remedies Cumulative . . . . . . . . . . . . . . . . 50
9.3 Gaming Regulations . . . . . . . . . . . . . . . . 50
10. TAXES AND EXPENSES REGARDING THE COLLATERAL . . . . . . 50
11. WAIVERS; INDEMNIFICATION . . . . . . . . . . . . . . . . 51
11.1 Demand; Protest; etc. . . . . . . . . . . . . . . . 51
11.2 Foothill's Liability for Collateral . . . . . . . . 51
11.3 Indemnification . . . . . . . . . . . . . . . . . . 51
11.4 Suretyship Waivers and Consents . . . . . . . . . . 51
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . 56
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . 56
14. DESTRUCTION OF BORROWER'S DOCUMENTS . . . . . . . . . . 57
15. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 57
15.1 Effectiveness . . . . . . . . . . . . . . . . . . . 57
15.2 Successors and Assigns . . . . . . . . . . . . . . 57
15.3 Section Headings . . . . . . . . . . . . . . . . . 58
15.4 Interpretation . . . . . . . . . . . . . . . . . . 58
15.5 Severability of Provisions . . . . . . . . . . . . 58
15.6 Amendments in Writing . . . . . . . . . . . . . . . 58
15.7 Counterparts; Telefacsimile Execution . . . . . . . 58
15.8 Revival and Reinstatement of Obligations . . . . . 58
15.9 Integration . . . . . . . . . . . . . . . . . . . . 59
SCHEDULES
Schedule E-1 Equipment Financing Contracts
Schedule P-1 Permitted Liens
Schedule R-1 Real Property
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.19 Executive Compensation
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated
as of June 5, 1996, is entered into between FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place
of business located at 11111 Santa Monica Boulevard, Suite 1500,
Los Angeles, California 90025-3333, on the one hand, and BWBH,
INC., a Delaware corporation ("BWBH"), BWCC, INC., a Delaware
corporation ("BWCC"), MILLSITE 27, INC., a Delaware corporation
("Millsite"), and SILVER HAWK CASINO, INC., a Delaware
corporation ("Silver Hawk") (sometimes individually referred to
herein as a "Borrower," and collectively as the "Borrowers"),
each of the foregoing with its chief executive office located at
One Norwest Center, 1700 Lincoln Street, 49th Floor, Denver,
Colorado 80203, on the other hand, with reference to the
following facts:
A. Foothill and the Borrowers are parties to that certain
Loan and Security Agreement dated as of November 1, 1995, as
amended pursuant to Amendment Number One dated December 4, 1995,
as amended pursuant to Amendment Number Two dated January 24,
1996, and as amended pursuant to Amendment Number Three dated
April 11, 1996 (the "DIP Loan and Security Agreement").
B. Pursuant to the DIP Loan and Security Agreement,
Foothill has made secured loans to Silver Hawk and to BWBH, BWCC
and Millsite while they have been operating as debtors-in-
possession in the Bankruptcy Cases. The obligations of Borrowers
under the DIP Loan and Security Agreement are guaranteed by CG&E
which also has been operating as a debtor-in-possession in one of
the Bankruptcy Cases.
C. The Bankruptcy Court has confirmed the Plan of
Reorganization of CG&E, BWBH, BWCC and Millsite.
D. Borrowers, CG&E and Foothill mutually desire that
effective as of the Closing Date: (i) the DIP Loan and Security
Agreement be amended and restated in its entirety as set forth in
this Agreement, and (ii) Foothill continue to make secured loans
to Borrowers on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the
following terms shall have the following definitions:
"Account Debtor" means any Person who is or who may
become obligated under, with respect to, or on account of an
Account.
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of
obligations owing to each of the Borrowers arising out of the
sale or lease of goods or the rendition of services by a
Borrower, irrespective of whether earned by performance, and any
and all credit insurance, guaranties, or security therefor.
"Affiliate" means, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or
under common control with, that Person. For purposes of this
definition, "control" as applied to any Person means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" means this Amended and Restated Loan and
Security Agreement and any extensions, riders, supplements,
notes, amendments, or modifications to or in connection with this
Amended and Restated Loan and Security Agreement.
"Approved Project Budget" means a budget for the
Project submitted by Borrowers to Foothill and approved by
Foothill in its sole discretion, as the same may be amended from
time to time with the prior written consent of Foothill.
"Authorized Officer" means any officer of any of the
Borrowers.
"Average Unused Portion of Maximum Amount" means (a)
the Maximum Amount, less (b) the average Daily Balance of
advances made by Foothill under Section 2.1 that were outstanding
during the immediately preceding month.
"Bankruptcy Cases" means the chapter 11 cases of CG&E
(No. 96-10001 A), BWBH (No. Case No. 96-10018 A), BWCC
(No. 96-10019 A) and Millsite (No. 96-10020 A) in the Bankruptcy
Court.
"Bankruptcy Code" means the United States Bankruptcy
Code (11 U.S.C. section 101 et seq.), as amended, and any
successor statute.
"Bankruptcy Court" means the United States Bankruptcy
Court for the Eastern District of Louisiana in which the
Bankruptcy Cases are pending.
"Black Hawk Lease" means that certain Lease Agreement,
dated as of October 25, 1991 by and among Jerry L. Brown and
Harold Gene Reagin, as Landlord, and HP BLACK HAWK, L.P., a
California limited partnership, as Tenant, (of which a Short Form
of Lease Agreement was recorded as Reception No. 72164 in Book
517 at Page 397 of the real estate records for Gilpin County,
Colorado, on November 1, 1991) as amended by an Assignment and
Assumption of Ground Lease between HP Black Hawk, L.P. and HP
Black Hawk, L.L.C., a Delaware limited liability company, dated
September 22, 1993 and recorded as Reception No. 79057 in Book
550 at Page 460 of the real estate records for Gilpin County,
Colorado, on September 22, 1993 and further amended by a
Memorandum of Merger between HP Black Hawk, L.L.C. and Black Hawk
Management Company, L.L.C., a Delaware limited liability company,
dated as of November 17, 1993 and recorded in Book 554 at Page
201 of the real estate records for Gilpin County, Colorado, on
December 1, 1993 and further amended by a Memorandum of Merger
between Black Hawk Management Company, L.L.C. and BWBH dated
December 20 1993.
"Borrower" and "Borrowers" have the meaning set forth
in the preamble to this Agreement.
"Borrowers' Architect" means Borrowers' architect or
engineer as approved by Foothill.
"Borrower's Books" means all of each Borrower's books
and records including: ledgers; records indicating, summarizing,
or evidencing a Borrower's properties or assets (including the
Collateral) or liabilities; all information relating to a
Borrower's business operations or financial condition; and all
computer programs, disc or tape files, printouts, runs, or other
computer prepared information, and the equipment containing such
information.
"Business Day" means any day which is not a Saturday,
Sunday, or other day on which national banks are authorized or
required to close.
"CAI" means Capital Associates International, Inc., a
Colorado corporation.
"CAI Notes" means the two unsecured promissory notes in
the original principal amounts of $1,621,329.23 and $3,000,000,
respectively, issued to CAI by CG&E on or about the Closing Date
in accordance with the Plan of Reorganization.
"Casinos" means BWBH's casino located in Black Hawk,
Colorado, BWCC's casino located in Central City, Colorado and
Silver Hawk's casino located in Black Hawk, Colorado, together
with any future casino hereafter acquired or established by any
Borrower.
"CG&E" means Hemmeter Enterprises, Inc., a Delaware
corporation, to be known as Colorado Gaming & Entertainment Co.
after the Closing Date.
"CG&E Security Agreement" means a Security Agreement in
form and substance satisfactory to Foothill pursuant to which
CG&E grants to Foothill a first priority security interest in all
of its assets.
"CG&E Continuing Guaranty" means a Continuing Guaranty
in form and substance satisfactory to Foothill pursuant to which
CG&E unconditionally guarantees payment and performance of the
Obligations.
"Change of Control" means (i) if CG&E ceases to own one
hundred percent (100%) of all classes of stock then outstanding
of the Borrowers normally entitled to vote in the election of
directors, (ii) a sale, assignment, lease, transfer, conveyance
or other disposition, directly or indirectly, of all or
substantially all of the assets or properties of CG&E or any of
the Borrowers, whether in a single transaction or a series of
related transactions, to any "person" or "group" (as such terms
are used for purposes of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, whether or not applicable),
(iii) the liquidation or dissolution of CG&E or any of the
Borrowers, (iv) the time that CG&E first determines or reasonably
should have known that any "person" or "group" (as such terms are
used for purposes of Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, whether or not applicable) is or becomes
the "beneficial owner" (as such term is used in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, whether or not
applicable, except that a "person" shall be deemed to have
"beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly
(including as a result of a merger or consolidation), of more
than 50% of the total voting power in the aggregate of all
classes of stock then outstanding of CG&E normally entitled to
vote in the election of directors, or (v) during any period of 12
twelve consecutive months after the Closing Date, individuals who
at the beginning of such period constituted the Board of
Directors of CG&E (determined after the resignation of interim
directors who are serving as directors only until all of the
individuals who are proposed by the Plan of Reorganization as the
initial directors (other than Thomas Thorsen) (the "Initial
Directors") of CG&E are approved by the Gaming Authorities)
together with any new directors whose election by such board or
whose nomination for election by the shareholders of CG&E was
approved by a vote of a majority of the directors then still in
office who were directors at the beginning of such period, cease
for any reason to constitute a majority of the Board of Directors
of CG&E then in office. Notwithstanding anything contained
herein to the contrary, (A) any interim director of CG&E who is
still serving as a director of CG&E six (6) months after the
Closing Date shall be deemed to be an Initial Director as of the
Closing Date for purposes of clause (v) hereof, and (B) a
Permitted Sale of Bullwhackers Central City shall not in and of
itself give rise to a Change in Control.
"Closing Date" means the date of the initial advance
under this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts;
Borrower's Books; the Equipment; the General Intangibles; the
Inventory; the Negotiable Collateral; the Real Property; the
Option Agreement; any money, or other assets of a Borrower which
now or hereafter come into the possession, custody, or control of
Foothill; and the proceeds and products, whether tangible or
intangible, of any of the foregoing including proceeds of
insurance covering any or all of the Collateral, and any and all
Accounts, Borrower's Books, Equipment, General Intangibles,
Inventory, Negotiable Collateral, money, deposit accounts, or
other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the
foregoing, or any portion thereof or interest therein, and the
proceeds thereof. Notwithstanding the foregoing, the Collateral
shall not include any gaming licenses or any liquor licenses of
any of the Borrowers to the extent that the grant of a security
interest therein is prohibited or restricted by applicable law;
provided, however, that the Collateral shall include the proceeds
from the sale or disposition of such licenses.
"Completion Date" means two hundred seventy (270) days
after the date of the advance under the Millsite Parking Lot
Construction Facility subject to being extended by up to an
additional ninety (90) days as a result of Force Majeure.
"Consent to Hypothecation" means a Consent to
Hypothecation of Lease and Landlord's Waiver executed by the
landlords on the Black Hawk Lease and by any other party which
has an interest in the Black Hawk Lease, in form and substance
satisfactory to Foothill.
"Construction Escrow Account" means an escrow account
established on terms and conditions acceptable to Foothill in its
sole discretion into which the advance under the Millsite Parking
Lot Construction Facility is to be deposited and from which
disbursements shall be made periodically upon completion of
stages of construction as verified pursuant to procedures and by
a Person acceptable to Foothill in its sole discretion. The
Construction Escrow Account shall be controlled by Foothill and
disbursements therefrom may only be authorized by Foothill.
"Daily Balance" means the amount of an Obligation owed
at the end of a given day.
"Deposit Account Agreements" means those certain Tri-
Party Deposit Agreements, in form and substance satisfactory to
Foothill, among each of the Borrowers, CG&E and the Deposit
Account Bank.
"Deposit Account Bank" means First Interstate Bank of
Denver, N.A. (also to be known as Wells Fargo Bank).
"Early Termination Premium" has the meaning set forth
in Section 3.7.
"EBITDA" means the earnings before interest, taxes,
depreciation and amortization of Borrowers and CG&E. For
purposes of calculating EBITDA, the corporate selling, general
and administrative expenses of Borrowers and CG&E shall exclude
Reorganization Expenses.
"Equipment" means all of each Borrower's present and
hereafter acquired machinery, machine tools, motors, equipment,
furniture, furnishings, fixtures, slot machines, gaming
equipment, vehicles (including motor vehicles and trailers),
tools, parts, dies, jigs, goods (other than consumer goods, farm
products, or Inventory), wherever located, and any interest of a
Borrower in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
"Equipment Refinance/Finance Facility" has the meaning
set forth in Section 2.1(b).
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, or any predecessor,
successor, or superseding laws of the United States of America,
together with all regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether
or not incorporated) which, within the meaning of Section 414 of
the IRC, is: (i) under common control with a Borrower;
(ii) treated, together with a Borrower, as a single employer;
(iii) treated as a member of an affiliated service group of which
a Borrower is also treated as a member; or (iv) is otherwise
aggregated with a Borrower for purposes of the employee benefits
requirements listed in IRC Section 414(m)(4).
"ERISA Event" means any one or more of the following:
(i) a Reportable Event with respect to a Qualified Plan or a
Multiemployer Plan; (ii) a Prohibited Transaction with respect to
any Plan; (iii) a complete or partial withdrawal by a Borrower or
any ERISA Affiliate from a Multiemployer Plan; (iv) the complete
or partial withdrawal of a Borrower or an ERISA Affiliate from a
Qualified Plan during a plan year in which it was, or was treated
as, a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (v) a failure to make full payment when due of all amounts
which, under the provisions of any Plan or applicable law, a
Borrower or any ERISA Affiliate is required to make; (vi) the
filing of a notice of intent to terminate, or the treatment of a
plan amendment as a termination, under Sections 4041 or 4041A of
ERISA; (vii) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to
administer, any Qualified Plan or Multiemployer Plan; (viii) the
imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon a Borrower or any ERISA Affiliate; and (ix) a violation of
the applicable requirements of Sections 404 or 405 of ERISA, or
the exclusive benefit rule under Section 403(c) of ERISA, by any
fiduciary or disqualified person with respect to any Plan for
which a Borrower or any ERISA Affiliate may be directly or
indirectly liable.
"Event of Default" has the meaning set forth in Section
8.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to
this Agreement.
"Foothill Expenses" means all: costs or expenses
(including taxes, photocopying, notarization, telecommunication
and insurance premiums) required to be paid by any Borrower under
any of the Loan Documents that are paid or advanced by Foothill;
documentation, filing, recording, publication, appraisal
(including periodic Collateral appraisals), real estate survey,
environmental audit, and search fees assessed, paid, or incurred
by Foothill in connection with Foothill's transactions with
Borrowers; costs and expenses incurred by Foothill in the
disbursement of funds to Borrowers (by wire transfer or
otherwise); charges paid or incurred by Foothill resulting from
the dishonor of checks; costs and expenses paid or incurred by
Foothill to correct any default or enforce any provision of the
Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion
thereof, irrespective of whether a sale is consummated; costs and
expenses paid or incurred by Foothill in examining Borrower's
Books; costs and expenses of third party claims or any other suit
paid or incurred by Foothill in enforcing or defending the Loan
Documents; and Foothill's reasonable attorneys fees and expenses
incurred in advising, structuring, drafting, reviewing,
administering, amending, terminating, enforcing, defending, or
concerning the Loan Documents, irrespective of whether suit is
brought.
"Foothill's Operating Account" means Foothill's
operating account as follows (or any other Foothill account as
Foothill may designate in writing from time to time):
Chemical Bank
ABA# 021000128
Credit: Foothill Capital Corp.
Account No.: 323-266193
Re: Hemmeter
"Force Majeure" means only those work stoppages which
occur by reason of governmental order, decree, regulation,
shortage of materials, acts of God, strikes, or other causes
beyond the ability of Borrowers to control.
"GAAP" means generally accepted accounting principles
as in effect from time to time in the United States, consistently
applied.
"Gaming Authorities" means the Colorado Division of
Gaming, the Colorado Limited Gaming Control Commission and any
other applicable governmental or administrative state or local
agency involved in the regulation of gaming and gaming activities
in the State of Colorado.
"Gaming Regulations" means the laws and regulations of
the State of Colorado relating to gaming and the rules and
regulations of the Gaming Authorities.
"Gaming Taxes" means all taxes, interest, penalties,
fees (including license fees) and other amounts payable by
Borrowers under Gaming Regulations including, without limitation,
the amount of tax Borrowers are required to pay on their adjusted
gross proceeds pursuant to Part 6 of the Limited Gaming Act of
1991, C.R.S. 12-47-101, et seq. and the rules promulgated
thereunder.
"Gaming Tax Escrow Accounts" has the meaning set forth
in Section 6.15.
"Gaming Tax Reserve" means, as of the date of any
determination, an amount equal to the difference between the
amount of Gaming Taxes owed by the Borrowers and the amount on
deposit in the Gaming Tax Escrow Accounts.
"General Intangibles" means all of each Borrower's
present and future general intangibles and other personal
property (including contract rights, rights arising under common
law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, service marks,
copyrights, blueprints, drawings, purchase orders, customer
lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing
agreements, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, deposit
accounts, insurance premium rebates, tax refunds, and tax refund
claims), other than goods and Accounts.
"Hazardous Materials" means all or any of the
following: (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials,"
"hazardous wastes," "toxic substances," or any other formulation
intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity,
reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity"; (b) oil, petroleum, or petroleum derived substances,
natural gas, natural gas liquids, synthetic gas, drilling fluids,
produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural
gas, or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any
form or electrical equipment which contains any oil or dielectric
fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million.
"Improvements" means the construction of Phase 1 of a
parking structure on the Millsite Property and such other items
as are set forth in the Approved Project Budget.
"Indebtedness" means: (a) all obligations of each of
the Borrowers for borrowed money; (b) all obligations of each of
the Borrowers evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations of
such Borrower in respect of letters of credit, letter of credit
guaranties, bankers acceptances, interest rate swaps, controlled
disbursement accounts, or other financial products; (c) all
obligations under capitalized leases; (d) all obligations or
liabilities of others secured by a lien or security interest on
any property or asset of a Borrower, irrespective of whether such
obligation or liability is assumed; and (e) any obligation of a
Borrower guaranteeing or intended to guarantee (whether
guaranteed, endorsed, co-made, discounted, or sold with recourse
to a Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Indenture" means that certain Indenture, dated on or
about the Closing Date, by and among CG&E, Borrowers and Fleet
National Bank relating to PIK Notes issued by CG&E.
"Insolvency Proceeding" means any proceeding commenced
by or against any Person under any provision of the Bankruptcy
Code or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with its creditors,
or proceedings seeking reorganization, arrangement, or other
similar relief.
"Interest Expense" means for any period the total
interest expense during such period of Borrowers (i) in respect
of obligations owed to Foothill, and (ii) in connection with the
note secured by the first deed of trust on the Silver Hawk
Property. For purposes of calculating Borrowers' Interest
Expense during the first twelve (12) calendar months after the
Closing Date, Borrowers' actual Interest Expense for such
calendar months shall be annualized and shall be deemed to be
Borrowers' Interest Expense for the previous twelve calendar
months. For example, assuming the Closing Date occurs on June
30, 1996, for purposes of calculating Borrowers' interest expense
for the twelve months preceding October 1996, Borrowers' actual
Interest Expense for the months of July, August and September
1996 shall be multiplied by four and the product thereof shall be
deemed to be Borrowers' Interest Expense for the twelve months
preceding October 1996.
"Inventory" means all present and future inventory in
which any Borrower has any interest, including goods held for
sale or lease or to be furnished under a contract of service and
all of each Borrower's present and future raw materials, work in
process, finished goods, and packing and shipping materials,
wherever located, and any documents of title representing any of
the above.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Loan Documents" means this Agreement, the Deposit
Account Agreements, the CG&E Continuing Guaranty, the CG&E
Security Agreement, the Trademark Security Agreements, the
Mortgages, the Option Agreement Assignment, the Consent to
Hypothecation, any note or notes executed by a Borrower and
payable to Foothill, and any other agreement entered into in
connection with this Agreement.
"Maximum Amount" has the meaning set forth in Section
2.1.
"Millsite Parking Lot Construction Facility" has the
meaning set forth in Section 2.1(c).
"Millsite Property" means the Real Property located at
Millsite 27 in Black Hawk, Colorado 80422.
"Minimum EBITDA" means the EBITDA of Borrowers and CG&E
on a consolidated basis for the previous twelve (12) calendar
months calculated as of the end of each calendar month. For
purposes of calculating Minimum EBITDA, the aggregate corporate
selling, general and administrative expenses of Borrowers and
CG&E for each calendar month ending prior to January 1996 shall
be deemed to be the lesser of the following amount for each such
month: (i) the actual amount of such expenses for the month, or
(ii) Two Hundred Ten Thousand Dollars ($210,000) for the month.
"Mortgages" means one or more mortgages, deeds of
trust, or deeds to secure debt, executed by a Borrower in favor
of Foothill, the form and substance of which shall be
satisfactory to Foothill, that encumber the Real Property
(including, without limitation, Borrowers' leasehold interests)
and the related improvements thereto.
"Multiemployer Plan" means a multiemployer plan as
defined in Sections 3(37) or 4001(a)(3) of ERISA or Section 414
of the IRC in which employees of a Borrower or an ERISA Affiliate
participate or to which a Borrower or any ERISA Affiliate
contribute or are required to contribute.
"Negotiable Collateral" means all of each Borrower's
present and future letters of credit, notes, drafts, instruments,
certificated and uncertificated securities (including the shares
of stock of subsidiaries of each Borrower), documents, personal
property leases (wherein a Borrower is the lessor), chattel
paper, and Borrower's Books relating to any of the foregoing.
"Noteholder Documents" means the Indenture, the PIK
Notes, the Security Documents (as defined in the Indenture), the
Guarantee (as defined in the Indenture) and all related
agreements and instruments.
"Obligations" means all loans, advances, debts,
principal, interest, premiums, liabilities (including all amounts
charged to any Borrower's loan account pursuant to any agreement
authorizing Foothill to charge a Borrower's loan account),
obligations, fees, lease payments, guaranties, covenants, and
duties owing by each Borrower to Foothill of any kind and
description (whether pursuant to or evidenced by the Loan
Documents, by any note or other instrument, or pursuant to any
other agreement between Foothill and a Borrower, and irrespective
of whether for the payment of money), whether direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or
obligation owing from any Borrower to others that Foothill may
have obtained by assignment or otherwise, and further including
all interest not paid when due and all Foothill Expenses that
Borrowers are required to pay or reimburse by the Loan Documents,
by law, or otherwise.
"Option Agreement" means that certain Option to
Purchase relating to the Black Hawk Lease between Harold Gene
Reagin and Jerry L. Brown, as optionors, and HP Black Hawk, L.P.,
a California limited partnership, as optionee, dated October 25,
1991 (of which a Memorandum of Right to Purchase was recorded as
Reception No. 72165 in Book 517 at Page 401 of the real estate
records for Gilpin County, Colorado, on November 1, 1991) as
amended by an Assignment of Option to Purchase between HP Black
Hawk, L.P. and HP Black Hawk, L.L.C. a Delaware limited liability
company, dated September 22, 1993 and recorded as Reception No.
79058 in Book 500 at Page 463 of the real estate records for
Gilpin County, Colorado, on September 22, 1993 and further
amended by a Memorandum of Merger between HP Black Hawk, L.L.C.
and Black Hawk Management Company, L.L.C., a Delaware limited
liability company, dated as of November 17, 1993 and recorded in
Book 554 at Page 198 of the real estate records for Gilpin
County, Colorado, on December 1, 1993 and further amended by a
Memorandum of Merger between Black Hawk Management Company,
L.L.C. and BWBH dated December 20, 1993.
"Option Agreement Assignment" means an assignment of
the Option Agreement, in form and substance acceptable to
Foothill.
"Overadvance" has the meaning set forth in Section 2.2.
"Paine Webber" means Paine Webber Preferred Yield Fund,
L.P., Capital Preferred Yield Fund, L.P. and Capital Preferred
Yield Fund II, L.P. as successors in interest to CAI.
"Pay-Off Letters" means letters, agreements and/or
other documentation, in form and substance satisfactory to
Foothill, from Persons leasing/financing Equipment respecting the
dollar amount necessary to obtain a termination of all of the
security interests, liens and other interests of such Persons in
and to the Equipment and other property and assets of Borrowers
and CG&E.
"PBGC" means the Pension Benefit Guaranty Corporation
as defined in Title IV of ERISA, or any successor thereto.
"Permitted Casino Shut Down" means the closure of
Silver Hawk's Casino located in Black Hawk, Colorado during the
construction of the Improvements or the closure of BWCC's Casino
located in Central City, Colorado for up to seventy five (75)
days during the months of January, February and/or March, subject
to the condition that Borrowers' shall give Foothill not less
than fifteen (15) days prior written notice of a proposed
Permitted Casino Shut Down detailing the reasons and the period
of time for the proposed Permitted Casino Shut Down.
"Permitted Equipment Sales" means sales by BWBH, BWCC
or Silver Hawk in the ordinary course of business of slot
machines having a book value of not greater than Fifty Thousand
Dollars ($50,000) in the aggregate and the proceeds thereof are
paid to Foothill and applied against the Obligations as
determined by Foothill, unless: (i) the slot machines are
replaced with slot machines of equal or greater value as
determined by Foothill and Foothill obtains a first priority
perfected security interest in such slot machines, or (ii) the
sale is approved by Foothill and the proceeds thereof are paid to
Foothill and applied against the Obligations as determined by
Foothill.
"Permitted Liens" means: (a) liens and security
interests held by Foothill; (b) liens for unpaid taxes that are
not yet due and payable or which are junior and subordinate to
those of Foothill and which are being contested in good faith by
appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of Borrowers in
conformity with GAAP; and (c) liens and security interests set
forth on Schedule P-1 attached hereto subject to any conditions
stated therein.
"Permitted Sale of Bullwhackers Central City" means a
sale by BWCC of its Casino located in Central City, Colorado
which meets all of the following conditions: (a) the sale is for
cash only, (b) the net sales price is not less than Five Million
Dollars ($5,000,000), and (c) all of the sale proceeds are paid
to Foothill and shall be applied first against the outstanding
balance of the Millsite Parking Lot Construction Facility, second
against the outstanding balance of the Equipment
Refinance/Finance Facility and third against the remaining
Obligations as determined by Foothill. Borrowers' borrowing
availability under the Equipment Refinance/Finance Facility shall
be permanently reduced by the amount of any sale proceeds applied
against the outstanding balance of the Equipment
Refinance/Finance Facility.
"Person" means and includes natural persons,
corporations, limited partnerships, general partnerships, joint
ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities,
and governments and agencies and political subdivisions thereof.
"PIK Notes" means the 12% Senior Pay-In-Kind Notes Due
2003 issued in accordance with the Indenture.
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which a Borrower or any ERISA Affiliate
sponsors or maintains or to which a Borrower or any ERISA
Affiliate makes, is making, or is obligated to make
contributions, including any Multiemployer Plan or Qualified
Plan.
"Plan of Reorganization" means the First Amended Joint
Plan of Reorganization of CG&E, BWBH, BWCC and Millsite as
confirmed by the Bankruptcy Court effective as of April 8, 1996.
"Plans and Specifications" means the final plans and
specifications for the Project prepared by Borrowers' Architect
as approved by Foothill in its discretion.
"Pledged Account" and "Pledged Accounts" mean the
"Deposit Account(s)," "Master Account(s)," and "Subsidiary
Accounts" as defined in the respective Deposit Account
Agreements.
"Prohibited Transaction" means any transaction
described in Section 406 of ERISA which is not exempt by reason
of Section 408 of ERISA, and any transaction described in Section
4975(c) of the IRC which is not exempt by reason of Section
4975(c) of the IRC.
"Project" means the construction of the Improvements on
the Millsite Property.
"Qualified Plan" means a pension plan (as defined in
Section 3(2) of ERISA) intended to be tax-qualified under Section
401(a) of the IRC which a Borrower or any ERISA Affiliate
sponsors, maintains, or to which any such person makes, is
making, or is obligated to make, contributions, or, in the case
of a multiple-employer plan (as described in Section 4064(a) of
ERISA), has made contributions at any time during the immediately
preceding period covering at least five (5) plan years, but
excluding any Multiemployer Plan.
"Real Property" means the parcels of real property
(including the Millsite Property) and the related improvements
thereto (including the Improvements) identified on Schedule R-1,
and any parcels of real property hereafter acquired or leased by
any Borrower.
"Reference Rate" means the variable rate of interest,
per annum, most recently announced by Norwest Bank Minnesota,
N.A., or any successor to the foregoing institution, as its "base
rate", "prime rate" or "reference rate," as the case may be,
irrespective of whether such announced rate is the best rate
available from such financial institution.
"Reorganization Expenses" means legal, accounting and
other professional fees and other costs and expenses incurred by
Borrowers and CG&E in the Bankruptcy Cases including, without
limitation, any amounts that may be payable in respect of
restructuring the "PIK Notes" (as defined in the Plan of
Reorganization) and classified as reorganization expenses on the
balance sheets of Borrowers and CG&E.
"Reportable Event" means any event described in Section
4043 (other than Subsections (b)(7) and (b)(9)) of ERISA.
"Revolving Advance Facility" has the meaning set forth
in Section 2.1(a).
"RW Leasing" means RW Leasing Company.
"Silver Hawk Property" means the Real Property located
at 100 Chase Street, Black Hawk, Colorado 80422.
"Solvent" means, with respect to any Person on a
particular date, that on such date (a) at fair valuations, all of
the properties and assets of such Person are greater than the sum
of the debts, including contingent liabilities, of such Person,
(b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required
to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize
upon its properties and assets and pay its debts and other
liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (d) such Person does not
intend to, and does not believe that it will, incur debts beyond
such Person's ability to pay as such debts mature, and (e) such
Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such
Person's properties and assets would constitute unreasonably
small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In
computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount
that, in light of all the facts and circumstances existing at
such time, represents the amount that reasonably can be expected
to become an actual or matured liability.
"Trademark Security Agreements" means Trademark
Security Agreements in form and substance satisfactory to
Foothill pursuant to which each of the Borrowers and CG&E grants
to Foothill a first priority security interest in all names,
logos, service mark and trademark rights of each of the Borrowers
and CG&E including, without limitation, with respect to the names
and marks "Bullwhackers" and "Silver Hawk."
"Title Company" and "Title Policy" have the meanings
set forth in Section 3.1(n).
"Unfunded Benefit Liability" means the excess of a
Plan's benefit liabilities (as defined in Section 4001(a)(16) of
ERISA) over the current value of such Plan's assets, determined
in accordance with the assumptions used by the Plan's actuaries
for funding the Plan pursuant to Section 412 of the IRC for the
applicable plan year.
"Voidable Transfer" has the meaning set forth in
Section 15.8.
1.2 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP. When used herein, the term "financial statements" shall
include the notes and schedules thereto. Whenever the term
"Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrowers on a
consolidated basis unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement which are
defined in the Code shall be construed and defined as set forth
in the Code unless otherwise defined herein.
1.4 Construction. Unless the context of this
Agreement clearly requires otherwise, references to the plural
include the singular, references to the singular include the
plural, the term "including" is not limiting, and the term "or"
has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this
Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. Section, subsection,
clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or
in the Loan Documents to this Agreement or any of the Loan
Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions,
and supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated
herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Advances. Subject to the terms and conditions of
this Agreement, Foothill agrees to make advances to Borrowers not
exceeding Twelve Million Five Hundred Thousand Dollars
($12,500,000) in the original aggregate principal amount (the
"Maximum Amount") as follows:
(a) Revolving Advances. Revolving advances to
Borrowers not to exceed Three Million Five Hundred Dollars
($3,500,000) minus the Gaming Tax Reserve.
(b) Equipment Refinance/Finance Facility.
Revolving advances to Borrowers (the "Equipment Refinance/Finance
Facility") not to exceed Five Million Dollars ($5,000,000); the
amount of such borrowing availability being subject to permanent
reduction as provided in the definition of a "Permitted Sale of
Bullwhackers Central City."
(c) Millsite Parking Lot Construction Facility.
An advance to Borrowers (the "Millsite Parking Lot Construction
Facility") in an original aggregate principal amount not to
exceed Five Million Dollars ($5,000,000) which shall be deposited
by Foothill into the Construction Escrow Account; the amount of
such borrowing availability being subject to permanent reduction
as provided in the definition of a "Permitted Sale of
Bullwhackers Central City."
(d) Silver Hawk Facility. An advance to
Borrowers (the "Silver Hawk Facility") in an original aggregate
principal amount not to exceed One Million Dollars ($1,000,000)
to be used, together with other funds available to the Borrowers,
to prepay in full the remaining outstanding balance of the
existing note and deed of trust on the Silver Hawk Property in
favor of Millsite 20 Limited Liability Company LLC.
(e) The Borrowers acknowledge that even though
the amounts set forth in Sections 2.1(a), (b), (c) and (d) add up
to more than Twelve Million Five Hundred Thousand Dollars
($12,500,000), Foothill will not make advances to Borrowers which
result in more than Twelve Million Five Hundred Thousand Dollars
($12,500,000) in aggregate principal amount outstanding at any
time.
(f) Foothill is authorized to make advances under
this Agreement based upon telephonic or other instructions
received from anyone purporting to be an Authorized Officer of
Borrower, or without instructions if pursuant to Section 2.4(d).
Borrowers agree to establish and maintain a single designated
deposit account for the purpose of receiving the proceeds of the
advances requested by any Borrower and made by Foothill
hereunder. Unless otherwise agreed by Foothill and Borrowers,
any advance requested by a Borrower and made by Foothill
hereunder shall be made to such designated deposit account.
Amounts borrowed pursuant to Section 2.1(a) and Section 2.1(b)
may be repaid and, subject to the terms and conditions of this
Agreement (including, without limitation, permanent reduction of
borrowing availability under the Equipment Refinance/Finance
Facility as a result of a Permitted Sale of Bullwhackers Central
City), reborrowed at any time during the term of this Agreement.
Any amounts borrowed pursuant to Section 2.1(c) or Section 2.1(d)
and repaid may not be reborrowed. All amounts of principal
prepaid under the Equipment Refinance/Finance Facility and/or the
Millsite Parking Lot Construction Facility and/or the Silver Hawk
Facility shall be applied against installments of principal due
thereunder in the inverse order of maturity.
2.2 Overadvances. If, at any time or for any reason,
the amount of Obligations owed by Borrowers to Foothill pursuant
to Section 2.1 is greater than the dollar limitations set forth
in Section 2.1 (an "Overadvance"), Borrowers immediately shall
pay to Foothill, in cash, the amount of such excess to be used by
Foothill to repay the Obligations.
2.3 Amortization of Equipment Refinance/Finance
Facility, Millsite Parking Lot Construction Facility and Silver
Hawk Facility. Subject to becoming due and payable earlier upon
the occurrence of an Event of Default or upon termination of the
term of this Agreement, the principal balance of amounts advanced
under the Equipment Refinance/Finance Facility and the Millsite
Parking Lot Construction Facility shall be repaid by Borrowers as
follows:
(a) Equipment Refinancing. The principal balance
of the amounts which are to be advanced on the Closing Date under
the Equipment Refinance/Finance Facility pursuant to Section
7.20(b)(i) to repay in full the outstanding balance of the
"Equipment Refinance Facility" (as defined in the DIP Loan and
Security Agreement) and to refinance Borrowers' Equipment that is
currently leased/financed by Paine Webber and RW Leasing shall be
repaid by Borrowers in thirty six (36) equal monthly installments
commencing on the first day of the month after the advance is
made and continuing on the first day of each month thereafter.
(b) Equipment Purchase. The principal balance of
amounts advanced under the Equipment Refinance/Finance Facility
to purchase new Equipment pursuant to Section 7.20(b)(ii) shall
be repaid by Borrowers in forty two (42) equal monthly
installments commencing on the first day of the month after the
advance is made and continuing on the first day of each month
thereafter.
(c) Millsite Parking Lot Construction Facility.
The principal balance of the amount advanced under the Millsite
Parking Lot Construction Facility shall be repaid by Borrowers in
equal monthly installments over the remaining initial term of
this Agreement commencing on the first day of the month after the
advance is made and continuing on the first day of each month
thereafter.
(d) Silver Hawk Facility. The principal balance
of the amount advanced under the Silver Hawk Facility shall be
repaid by Borrowers in thirty six (36) equal monthly installments
commencing on the first day of the month after the advance is
made and continuing on the first day of each month thereafter.
2.4 Interest: Rates, Payments, and Calculations.
(a) Interest Rate. All Obligations shall bear
interest, on the actual Daily Balance, at a per annum rate of two
and three eighths (2.375) percentage points above the Reference
Rate.
(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence and during the
continuance of an Event of Default, at a per annum rate equal to
five and three eighths (5.375) percentage points above the
Reference Rate.
(c) Minimum Interest. In no event shall the rate
of interest chargeable hereunder be less than nine percent (9%)
per annum.
(d) Payments. Interest hereunder shall be due
and payable in arrears on the first day of each month during the
term hereof. Borrowers hereby authorize Foothill, at its option,
without prior notice to Borrowers, to charge such interest, all
Foothill Expenses (as and when incurred), and all installments or
other payments due hereunder and under any note or other Loan
Document to Borrowers' loan account, which amounts shall
thereafter accrue interest at the rate then applicable hereunder.
Any interest not paid when due shall be compounded by becoming a
part of the Obligations, and such interest shall thereafter
accrue interest at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of this
date is eight and one quarter percent (8.25%) per annum. In the
event the Reference Rate is changed from time to time hereafter,
the applicable rate of interest hereunder automatically and
immediately shall be increased or decreased by an amount equal to
such change in the Reference Rate. The rates of interest charged
hereunder shall be based upon the actual Reference Rate in effect
during the month. All interest and fees chargeable under the
Loan Documents shall be computed on the basis of a three hundred
sixty (360) day year for the actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful
Rate. In no event shall the interest rate or rates payable under
this Agreement, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law that
a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrowers and Foothill, in
executing this Agreement, intend to legally agree upon the rate
or rates of interest and manner of payment stated within it;
provided, however, that, anything contained herein to the
contrary notwithstanding, if said rate or rates of interest or
manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrowers
are and shall be liable only for the payment of such maximum as
allowed by law, and payment received from Borrowers in excess of
such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such
excess.
2.5 Crediting Payments; Application of Collections.
The receipt of any wire transfer of funds, check, or other item
of payment by Foothill immediately shall be applied to
provisionally reduce the Obligations as determined by Foothill.
Notwithstanding the foregoing, the receipt of any wire transfer
of funds, check, or other item of payment by Foothill shall not
be considered a payment on account unless such wire transfer is
of immediately available federal funds and is made to Foothill's
Operating Account or unless and until such check or other item of
payment is honored when presented for payment. Anything to the
contrary contained herein notwithstanding, any wire transfer,
check, or other item of payment shall be deemed received by
Foothill only if it is received into Foothill's Operating Account
at or before 11:00 a.m. Los Angeles time. If any wire transfer,
check, or other item of payment is received into Foothill's
Operating Account after 11:00 a.m. Los Angeles time it shall be
deemed to have been received by Foothill as of the opening of
business on the immediately following Business Day.
2.6 Statements of Obligations. Foothill shall render
statements to Borrowers of the Obligations, including principal,
interest, fees, and including an itemization of all charges and
expenses constituting Foothill Expenses owing. Within thirty
(30) days after receipt of any such statement, Borrowers may
request in writing that Foothill provide Borrowers with
supporting information relating to such statement. Such
statements and supporting information shall be conclusively
presumed to be correct and accurate and constitute an account
stated between Borrowers and Foothill unless, within thirty (30)
days after receipt thereof by Borrowers, Borrowers shall deliver
to Foothill by registered or certified mail at its address
specified in Section 12, written objection thereto describing the
error or errors contained in any such statements and supporting
information.
2.7 Fees. Borrowers shall pay to Foothill the
following fees:
(a) Closing Fee. A one time closing fee of One
Hundred Sixty Thousand Dollars ($160,000) which is earned, in
full, on the Closing Date and is due and payable by Borrowers to
Foothill in connection with this Agreement on the Closing Date.
(b) Unused Line Fee. On the first day of each
month after the Closing Date, a fee in an amount equal to one
half percent (0.50%) per annum times the Average Unused Portion
of the Maximum Amount.
(c) Equipment Refinance/Finance Facility Funding
Fee. Concurrently with each advance under the Equipment
Refinance/Finance Facility, a fee in an amount equal to one
percent (1%) of such advance.
(d) Millsite Parking Lot Construction Facility
Funding Fee. A fee in an amount equal to Fifty Thousand Dollars
($50,000) which is earned, in full, on the Closing Date and is
due and payable by Borrowers to Foothill upon the earlier of: (i)
September 30, 1996, or (ii) concurrently with the advance under
the Millsite Parking Lot Construction Facility.
(e) Silver Hawk Facility Fee. Concurrently with
the advance under the Silver Hawk Facility, a fee in an amount
equal to one percent (1%) of such advance.
(f) Financial Examination, Documentation, and
Appraisal Fees. Foothill's customary fee of Six Hundred Fifty
Dollars ($650) per day per examiner, plus out-of-pocket expenses
for each financial analysis and examination of Borrowers
performed by Foothill or its agents; Foothill's customary
appraisal fee of One Thousand Five Hundred Dollars ($1,500) per
day per appraiser, plus out-of-pocket expenses for each appraisal
of the Collateral performed by Foothill or its agents; and
Foothill's annual loan documentation review fee of Five Thousand
Dollars ($5,000). So long as no Event of Default has occurred,
Foothill will not conduct a financial analysis and examination
more frequently than quarterly or an appraisal more frequently
than annually.
(g) Servicing Fee. On the first day of each
month during the term of this Agreement, and thereafter so long
as any Obligations are outstanding, a servicing fee in an amount
equal to Six Thousand Five Hundred Dollars ($6,500) per month.
2.8 Costs and Expenses. Borrowers agree to pay up to
Seventy Five Thousand Dollars ($75,000) of Foothill's costs and
expenses incurred prior to the date hereof in connection with the
initial closing of the financing transaction governed by this
Agreement, including costs and expenses incurred by auditors and
appraisers in verifying Borrowers' records, Foothill's legal
expenses for advice in preparing Loan Documents and any filing
and search fees. Nothing contained in this Section 2.8 shall be
construed as limiting Borrowers' obligations to pay Foothill
Expenses in connection with any matters relating to the DIP Loan
and Security Agreement or as otherwise provided in this Agreement
with respect to matters other than Foothill's costs and expenses
incurred prior to the date hereof in connection with the initial
closing of the financing transaction governed by this Agreement.
2.9 Joint Borrower Provisions.
(a) Any advances made by Foothill hereunder shall
be deemed to be made jointly to Borrowers and shall be charged to
each Borrower jointly and severally and each Borrower shall be
jointly and severally liable for all advances. Any payments
received by Foothill hereunder likewise shall be credited to each
Borrower.
(b) Foothill will credit the amount of advances
made to Borrowers under Section 2.1 to Borrowers' designated
deposit account. It is expressly agreed and understood by each
Borrower that Foothill shall have no responsibility to inquire
into the apportionment, allocation, or disposition of any
advances made to Borrowers. All advances are to be made for the
collective account of Borrowers.
(c) For the purpose of implementing the joint
borrower provisions of the Loan Documents, each Borrower hereby
irrevocably appoints each other Borrower as its agent and
attorney-in-fact for all purposes of the Loan Documents,
including the making of requests for advances, the execution and
delivery of certificates, and the receiving and allocating of
disbursements from Foothill.
(d) It is understood and agreed that the handling
of the revolving credit facility on a joint borrowing basis as
set forth in this Agreement is solely as an accommodation to
Borrowers and at their request, and that Foothill shall not incur
any liability to Borrowers as a result thereof. To induce
Foothill to do so, and in consideration thereof, each Borrower
hereby agrees to indemnify Foothill and hold Foothill harmless
from and against any and all liabilities, expenses, losses,
damages, or claims of damage or injury asserted against Foothill
by Borrowers or by any other Person arising from or incurred by
reason of Foothill's handling of the financing arrangement of
Borrowers, as herein provided, reliance by Foothill on any
requests or instructions from any Borrower, or any other action
taken by Foothill hereunder.
(e) Each Borrower represents and warrants to
Foothill that the request for joint handling of the advances and
other financial accommodations to be made by Foothill hereunder
was made because Borrowers are engaged in an integrated operation
that requires financing on a basis permitting the availability of
credit from time to time to each Borrower. Each Borrower expects
to derive benefit, directly or indirectly, from such availability
because the successful operation of Borrowers is dependent on the
continued successful performance of the functions of the
integrated group.
(f) Each Borrower represents and warrants to
Foothill that (i) such Borrower has established adequate means of
obtaining from each other Borrower, on a continuing basis,
financial and other information pertaining to the business,
operations, and condition (financial and otherwise) of each other
Borrower, and its property, and (ii) such Borrower now is and
hereafter will be completely familiar with the business,
operations, and condition (financial and otherwise) of each other
Borrower and its property. Each Borrower hereby waives and
relinquishes any duty on the part of Foothill to disclose to such
Borrower any matter, fact or thing relating to the business
operations, or condition (financial or otherwise) of each other
Borrower, or the property of each other Borrower, whether now or
hereafter known by Foothill during the term of this Agreement.
(g) Each Borrower has determined that it has and,
after giving effect to the transactions contemplated by this
Agreement, will have, access to adequate capital for the conduct
of its business and the ability to pay its debts from time to
time incurred in connection therewith as such debts mature.
Accordingly, the Borrowers are and will be jointly and severally
liable for each and every representation, covenant and obligation
to be performed by the Borrowers under this Agreement and the
Loan Documents, and the invalidity, unenforceability or
illegality of this Agreement or any Loan Document as to one of
the Borrowers, or the release by Foothill of a Borrower hereunder
or thereunder, will not affect the Obligations of the other
Borrowers under this Agreement or the Loan Documents, all of
which will otherwise remain valid and legally binding obligations
of such other Borrowers. Each of the Borrowers agrees, on behalf
of itself, that it will not seek to exercise any rights of
contribution or exoneration from payment which it may have as a
matter of law or otherwise as against the other Borrowers
hereunder so long as any of the Obligations are outstanding, and
if by law any right of contribution or exoneration from payment
may not be postponed, then such right shall be subordinate to the
rights of Foothill against the Borrowers under this Agreement and
the Loan Documents. None of the Borrowers shall be subrogated in
whole or in part to the rights of Foothill, and if by law one is
so subrogated, such rights shall be subordinate and junior to the
rights of Foothill under this Agreement, the Loan Documents or
any other agreement or document referred to herein or therein,
until payment and discharge in full of all Obligations.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to Initial Advance. The
obligation of Foothill to make the initial advance is subject to
the fulfillment, to the satisfaction of Foothill and its counsel,
of each of the following conditions on or before the Closing
Date:
(a) the Bankruptcy Court order confirming the
Plan of Reorganization shall not have been appealed or subject to
reconsideration and shall remain in full force and effect;
(b) the "Effective Date" of the Plan of
Reorganization (as defined in the Plan of Reorganization) and all
conditions to the effectiveness of the Plan of Reorganization
shall have occurred and Foothill shall have received evidence of
the same in form and substance satisfactory to Foothill;
(c) the Closing Date shall occur on or before
June 7, 1996;
(d) Foothill shall have received searches
reflecting the filing of its financing statements and fixture
filings;
(e) Foothill shall have received each of the
following documents (or, where deemed applicable by Foothill,
amendments to such documents) in form and substance satisfactory
to Foothill, duly executed, and each such document (as amended)
shall be in full force and effect:
(i) this Agreement;
(ii) the Deposit Account Agreements;
(iii) the CG&E Continuing Guaranty;
(iv) the CG&E Security Agreement;
(v) the Trademark Security Agreements;
(vi) UCC-1 Financing Statements from
each of the Borrowers and CG&E;
(vii) Fixture filings from each of the
Borrowers;
(viii) the Mortgages;
(ix) the Option Agreement Assignment;
and
(x) the Consent to Hypothecation.
(f) Foothill shall have received a certificate
from the Secretary of each Borrower attesting to the resolutions
of such Borrower's Board of Directors authorizing its execution
and delivery of this Agreement and the other Loan Documents to
which such Borrower is a party and authorizing specific officers
of such Borrower to execute same;
(g) Foothill shall have received a certificate
from the Secretary of CG&E attesting to the resolutions of CG&E's
Board of Directors authorizing its execution and delivery of the
Loan Documents to which CG&E is a party and authorizing specific
officers of CG&E to execute same;
(h) Foothill shall have received copies of each
of the Borrower's and CG&E's By-laws and Certificate of
Incorporation, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Borrower and
CG&E;
(i) Foothill shall have received a certificate of
corporate status with respect to each Borrower and CG&E, dated
within ten (10) days prior the Closing Date, by the Secretary of
State of Delaware, which certificate shall indicate that each
such Borrower and CG&E is in good standing in such state;
(j) Foothill shall have received certificates of
corporate status with respect to each Borrower and CG&E, each
dated within fifteen (15) days prior to the Closing Date, such
certificates to be issued by the Secretary of State of the states
in which such Borrower's or CG&E's failure to be duly qualified
or licensed would have a material adverse effect on the financial
condition or properties and assets of such Borrower or CG&E,
which certificates shall indicate that such Borrower and CG&E is
in good standing;
(k) Foothill shall have received certificates of
insurance evidencing the issuance of the policies of insurance,
together with the endorsements thereto, as are required by
Section 6.9 hereof and in the Mortgages, the form and substance
of which shall be satisfactory to Foothill and its counsel;
(l) Foothill shall have received duly executed
certificates of title with respect to that portion of the
Collateral that is subject to certificates of title, if any;
(m) Foothill shall have received a landlord
waiver from the lessor of Borrowers' warehouse facility located
at 15880 West 6th Avenue, Golden, Colorado 80401;
(n) Foothill shall have received ALTA Lender's
Policies of Title Insurance (the "Title Policy") from Lawyers
Title Insurance Company (the "Title Company"), in an amount
satisfactory to Foothill, insuring: (i) its first priority lien
upon each parcel of Real Property (including the Real Property
which is the subject of the Black Hawk Lease but excluding the
Silver Hawk Property), and (ii) its second priority lien upon the
Silver Hawk Property;
(o) an environmental report and real estate
survey shall have been completed on each parcel of Real Property
(including the Real Property which is the subject of the Black
Hawk Lease). The environmental consultants retained for the
environmental report, the scope of the report, and the results of
the report shall be acceptable to Foothill and its counsel, in
their sole discretion;
(p) Foothill shall have been satisfied with the
effect of the Gaming Regulations and the policies of the Gaming
Authorities as they relate to each of the Borrowers entering into
this Agreement and to the transactions governed by the Loan
Documents including, without limitation, the rights and remedies
of Foothill under the Loan Documents;
(q) Foothill shall have received evidence
satisfactory to Foothill of the establishment of the Gaming Tax
Escrow Accounts;
(r) Foothill shall have received copies of all
licenses issued to each of BWBH, BWCC and Silver Hawk (if
licensed on the Closing Date) by the Gaming Authorities as in
effect after May 20, 1996;
(s) Foothill shall have received a letter from
the Gaming Authorities with respect to each of BWBH, BWCC and
Silver Hawk (if licensed on the Closing Date), dated after May
20, 1996 and within ten (10) days prior to the Closing Date,
which letter shall indicate that each of BWBH, BWCC and Silver
Hawk (if licensed on the Closing Date) is duly licensed under the
Gaming Regulations and that each of their respective licenses
have been renewed through at least December 1, 1996;
(t) Foothill shall have received from Borrowers
and CG&E updated proforma financial statements of CG&E and the
Borrowers as of the Closing Date reflecting the effectiveness of
the Plan of Reorganization;
(u) Foothill shall have received from Borrowers a
copy of the final form of the Indenture, the Noteholder Documents
and CAI Notes and the Indenture, the Noteholders Documents and
the CAI Notes shall be in form and substance satisfactory to
Foothill in its sole discretion (including, without limitation,
all provisions in the Indenture and the Noteholder Documents
relating to the subordination of the security interests in the
Collateral granted to the holders of the PIK Notes);
(v) Foothill shall received executed UCC
termination statements, reconveyances of deeds of trust and other
documentation evidencing the termination of all security
interests, liens and other interests in and to the properties and
assets of each of the Borrowers and CG&E (except with respect to
those in favor of Foothill and Permitted Liens) including,
without limitation, executed UCC termination statements from IGT -
Colorado Corporation, International Game Technology and executed
Pay-Off Letters and UCC termination statements from Paine Webber
and RW Leasing;
(w) Foothill shall have received an opinion of
Borrowers' counsel with expertise in the Gaming Regulations in
form and substance satisfactory to Foothill in its sole
discretion;
(x) Foothill shall have received an opinion of
counsel to Borrowers and CG&E in form and substance satisfactory
to Foothill in its sole discretion; and
(y) all other documents and legal matters in
connection with the transactions contemplated by this Agreement
shall have been delivered or executed or recorded and shall be in
form and substance reasonably satisfactory to Foothill and its
counsel.
3.2 Conditions Precedent to Any Advance under the
Equipment Refinance/Finance Facility. The obligation of Foothill
to make any advance under the Equipment Refinance/Finance
Facility is subject to the fulfillment, to the satisfaction of
Foothill and its counsel, of each of the following conditions:
(a) in connection with the refinance on the
Closing Date of Equipment leased/financed by Paine Webber and RW
Leasing as provided in Section 7.20(b)(i), Foothill shall have
received executed Pay-Off Letters from Paine Webber and RW
Leasing together with UCC termination statements and other
documentation evidencing the termination of such Persons'
security interests, liens and other interests in and to the
properties and assets of each of the Borrowers and CG&E;
(b) in connection with the purchase of any new
Equipment:
(i) each advance shall be advanced
directly to the applicable vendor that is selling the
Equipment to Borrowers;
(ii) each advance shall be in a
principal amount of not less than (x) Two Hundred Fifty
Thousand Dollars ($250,000), or (y) such lesser amount as is
the then unfunded balance of the Equipment Refinance/Finance
Facility;
(iii) each advance shall be in an amount,
as determined by Foothill, not to exceed one hundred percent
(100%) of Borrowers' invoice cost (net of shipping, freight,
installation, sales tax and other so-called soft costs) of
the new Equipment that is to be purchased by Borrower with
the proceeds of such advance;
(iv) the new Equipment that is to be
purchased by Borrower must be acceptable to Foothill in all
respects, not be a fixture, and not be intended to be
affixed to real property or to become installed in or
affixed to other goods (except for other goods owned by
Borrowers and included in the Collateral); and
(v) the aggregate amount outstanding at
any time under the Equipment Refinance/Finance Facility
(including giving effect to any requested advance) shall not
exceed the lesser of cost or fair market value of all of the
Equipment acquired or financed with the proceeds of the
Equipment Refinance/Finance Facility.
3.3 Conditions Precedent to the Advance under the
Millsite Parking Lot Construction Facility. The obligation of
Foothill to make the advance under the Millsite Parking Lot
Construction Facility (and any disbursement from the Construction
Escrow Account described below) is subject to the fulfillment, to
the satisfaction of Foothill and its counsel, of each of the
following conditions:
(a) The Construction Escrow Account shall be
established on terms and conditions acceptable to Foothill in its
sole discretion into which the advance under the Millsite Parking
Lot Construction Facility is to be deposited. The Construction
Escrow Account shall be controlled by Foothill and disbursements
therefrom may only be authorized by Foothill;
(b) The advance under the Millsite Parking Lot
Construction Facility and the deposit thereof into the
Construction Escrow Account must be made by no later than
September 30, 1997;
(c) disbursements from the Construction Escrow
Account shall be made periodically upon completion of stages of
construction as verified pursuant to procedures and by a Person
acceptable to Foothill in its sole discretion;
(d) If requested by Foothill, prior to each
disbursement from the Construction Escrow Account, Foothill shall
have received an endorsement to the Title Policy reflecting the
date and the amount of the intended disbursement, or satisfactory
confirmation from the Title Company that it is in a position to
issue such an endorsement. If any intervening mechanics' liens
or other liens or bonded stop notices are filed against the
Project or served on Foothill at any time, Borrowers shall cause
the Title Company to provide affirmative coverage over such
liens, or Borrowers shall cause such liens or bonded stop notices
to be released, as Foothill may require;
(e) Prior to each disbursement for a construction
item, Borrowers' Architect must have certified that the portion
of the work for which a disbursement is requested has been
completed in accordance with the Plans and Specifications and in
a good and workmanlike manner. If Foothill determines that any
work or materials are not in conformity with the Plans and
Specifications approved by Foothill, or are not in conformity
with sound building practice, or otherwise depart from any of the
requirements of this Agreement, Foothill shall have the right to
stop the work and order disbursements withheld hereunder and to
order the replacement or correction of any such work or materials
regardless of whether or not such work or materials have been
incorporated in the Project;
(f) Foothill shall have received and approved a
construction schedule for the construction of the Improvements,
which schedule shall provide for completion of the Improvements
and all on and off site work by the Completion Date. Such
schedule shall show a trade-by-trade breakdown of the estimated
periods of commencement and completion of such work;
(g) Foothill shall have received and approved
assignments of all contracts, permits, licenses and approvals,
and the Borrowers' Architect Certificate;
(h) Foothill shall have received and approved
final Plans and Specifications, together with certificates, in
such detail as required by Foothill, from the architect(s) and
engineer(s) preparing or contributing to the Plans and
Specifications and such evidence of approval by all governmental
agencies as is required to complete and construct the Project in
Foothill's judgment;
(i) Foothill shall have received and approved a
certificate executed in duplicate by Borrowers' Architect,
containing (i) a detailed listing of the Plans and
Specifications, (ii) a statement that the Plans and
Specifications comply with all applicable laws and ordinances,
(iii) a statement that the Plans and Specifications are complete
in all respects and contain all detail requisite to construct the
Improvements which, when built in accordance therewith, shall be
in accordance with all applicable zoning and building ordinances
or regulations and with all other requirements of all
governmental instrumentalities in which the Millsite Property is
located and of any governmental body or agency having
jurisdiction thereof, and (iv) a statement that all permits
required to construct and complete construction of the Project in
compliance with all applicable laws and governmental regulations
have, as and when, and to the extent required, been duly and
validly issued;
(j) Foothill shall have received and approved
evidence which, in Foothill's sole judgment, confirms that the
Project conforms and will conform to all applicable building,
zoning, use and environmental laws and ordinances. Such evidence
shall include, but not be limited to, certified copies of all
building permits and all approvals, consents and permits of all
governmental authorities under all environmental protection, land
use and development laws, ordinances and regulations;
(k) Foothill shall have received evidence
satisfactory to it that all necessary utilities (including
without limitation such utilities as are necessary to secure a
certificate of occupancy or its equivalent) will be supplied to
the Project in a timely manner;
(l) Foothill shall have received and approved a
detailed budget specifying all costs of constructing and
completing the Project accompanied by such back-up data as
Foothill may require to assure itself of the accuracy thereof and
the sources of all funds to pay such costs; and
(m) No event or circumstance shall exist, in the
reasonable judgment of Foothill, which would preclude completion
of the Improvements by the Completion Date.
3.4 Conditions Precedent to the Advance under the
Silver Hawk Facility. The obligation of Foothill to make the
advance under the Silver Hawk Facility is subject to the
fulfillment, to the satisfaction of Foothill and its counsel, of
each of the following conditions:
(a) The advance under the Silver Hawk Facility
must be made within ninety (90) days after the Closing Date;
(b) Foothill shall have received executed UCC
termination statements, reconveyances of deeds of trust and other
documentation evidencing the termination of all security
interests, liens and other interests in and to the Silver Hawk
Property and the other properties and assets of each of the
Borrowers and CG&E from any Persons holding the note and first
deed of trust on the Silver Hawk Property; and
(c) Foothill shall have received any endorsements
to the Title Policy that Foothill may require.
3.5 Conditions Precedent to All Advances. The
following shall be conditions precedent to all advances
hereunder:
(a) the representations and warranties contained
in this Agreement and the other Loan Documents shall be true and
correct in all respects on and as of the date of such advance as
though made on and as of such date (except to the extent that
such representations and warranties relate solely to an earlier
date);
(b) no Event of Default or event which with the
giving of notice or passage of time would constitute an Event of
Default shall have occurred and be continuing on the date of such
advance nor shall either result from the making of the advance;
(c) no injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly,
the making of such advance shall have been issued and remain in
force by any governmental authority against any Borrower,
Foothill, or any of their Affiliates; and
(d) nothing shall have occurred which could
adversely affect Foothill having a first priority security
interest in all of the Collateral (other than the Silver Hawk
Property with respect to which Foothill shall have a second
priority security interest so long as Millsite 20 Limited
Liability Company, LLC (or its permitted assignee) holds a note
and first deed of trust on the Silver Hawk Property), which such
security interests shall secure all present and future
Obligations.
3.6 Term; Automatic Renewal. This Agreement shall
become effective on the Closing Date and shall continue in full
force and effect for a term ending on the date (the "Renewal
Date") that is five (5) years from the Closing Date and
automatically shall be renewed for successive one (1) year
periods thereafter, unless sooner terminated pursuant to the
terms hereof. Borrowers or Foothill may terminate this Agreement
effective on the Renewal Date or on any one (1) year anniversary
of the Renewal Date by giving the other party at least ninety
(90) days prior written notice by registered or certified mail,
return receipt requested. The foregoing notwithstanding,
Foothill shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence
and during the continuation of an Event of Default.
3.7 Effect of Termination. On the date of
termination, all Obligations immediately shall become due and
payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrowers of
Borrowers' duties, Obligations, or covenants hereunder, and
Foothill's continuing security interests in the Collateral shall
remain in effect until all Obligations have been fully and
finally discharged and Foothill's obligation to provide advances
hereunder is terminated. If Borrowers have sent a notice of
termination pursuant to the provisions of Section 3.6, but fail
to pay all Obligations on the date set forth in said notice, then
Foothill may, but shall not be required to, renew this Agreement
for an additional term of one (1) year.
3.8 Early Termination by Borrower. The provisions of
Section 3.6 that allow termination of this Agreement by Borrowers
only on the Renewal Date and certain anniversaries thereof
notwithstanding, Borrowers have the option, at any time upon
ninety (90) days prior written notice to Foothill, to terminate
this Agreement by paying to Foothill, in cash, the Obligations
together with a premium (the "Early Termination Premium") equal
to the greater of: (a) the total interest for the immediately
preceding six (6) months; and (b) Seven Thousand Dollars ($7,000)
multiplied by the number of months remaining in the term of this
Agreement.
3.9 Termination Upon Event of Default. If Foothill
terminates this Agreement upon the occurrence of an Event of
Default, in view of the impracticability and extreme difficulty
of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Foothill's lost profits
as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal
to the Early Termination Premium. The Early Termination Premium
shall be presumed to be the amount of damages sustained by
Foothill as the result of the early termination and Borrower
agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this
Section 3.9 shall be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each of the Borrowers
hereby grants to Foothill a continuing security interest in all
currently existing and hereafter acquired or arising Collateral
in order to secure prompt repayment of any and all Obligations
and in order to secure prompt performance by the Borrowers of
each of their covenants and duties under the Loan Documents.
Foothill's security interests in the Collateral shall attach to
all Collateral without further act on the part of Foothill or any
of the Borrowers. Anything contained in this Agreement or any
other Loan Document to the contrary notwithstanding, and other
than Permitted Equipment Sales and a Permitted Sale of
Bullwhackers Central City, Borrowers have no authority, express
or implied, to dispose of any item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any
Collateral, including proceeds, is evidenced by or consists of
Negotiable Collateral, Borrowers shall, immediately upon the
request of Foothill, endorse and assign such Negotiable
Collateral to Foothill and deliver physical possession of such
Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles,
Negotiable Collateral. At any time that an Event of Default has
occurred, subject to applicable Gaming Regulations, Foothill or
Foothill's designee may: (a) notify customers or Account Debtors
of any Borrower that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Foothill or that
Foothill has a security interest therein; and (b) collect the
Accounts, General Intangibles, and Negotiable Collateral directly
and charge the collection costs and expenses to Borrowers' loan
account. At any time that an Event of Default has occurred, each
of the Borrowers agrees, subject to applicable Gaming
Regulations, that it will hold in trust for Foothill, as
Foothill's trustee, any cash receipts, checks, and other items of
payment (including, proceeds of cash sales, rental proceeds, and
tax refunds) that it receives and, upon request by Foothill,
immediately will deliver said cash receipts, checks, and other
items of payment to Foothill in their original form as received
by each such Borrower.
4.4 Delivery of Additional Documentation Required. At
any time upon the request of Foothill, each of the Borrowers
shall execute and deliver to Foothill all financing statements,
continuation financing statements, fixture filings, security
agreements, chattel mortgages, pledges, assignments, endorsements
of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority,
and all other documents that Foothill may reasonably request, in
form satisfactory to Foothill, to perfect and continue perfected
Foothill's security interests in the Collateral and in order to
fully consummate all of the transactions contemplated hereby and
under the other the Loan Documents.
4.5 Power of Attorney.
(a) At any time that an Event of Default has
occurred and is continuing, each of the Borrowers hereby
irrevocably makes, constitutes, and appoints Foothill (and any of
Foothill's officers, employees, or agents designated by Foothill)
as such Borrower's true and lawful attorney, with power, subject
to applicable Gaming Regulations, to: (a) if such Borrower
refuses to, or fails timely to execute and deliver any of the
documents described in Section 4.4, sign the name of Borrower on
any of the documents described in Section 4.4; (b) sign
Borrower's name on any drafts against Account Debtors, schedules
and assignments of Accounts, verifications of Accounts, and
notices to Account Debtors; (c) send requests for verification of
Accounts; (d) endorse Borrower's name on any checks, notices,
acceptances, money orders, drafts, or other item of payment or
security that may come into Foothill's possession; and (e) settle
and adjust disputes and claims respecting the Accounts directly
with Account Debtors, for amounts and upon terms which Foothill
determines to be reasonable, and Foothill may cause to be
executed and delivered any documents and releases which Foothill
determines to be necessary. The appointment of Foothill as each
Borrower's attorney, and each and every one of Foothill's rights
and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully and finally repaid and
performed and Foothill's obligation to extend credit hereunder is
terminated.
(b) With respect to the power of attorney granted
by BWBH, BWCC and Silver Hawk in this Section 4.5 and each and
every other power of attorney granted by BWBH, BWCC and Silver
Hawk elsewhere herein or in the other Loan Documents, Foothill
acknowledges that the Gaming Authorities may require that
Foothill or any other person granted a right to act for or on
behalf of BWBH, BWCC and Silver Hawk obtain approval of the
relevant Gaming Authorities before, during or after the exercise
thereof.
(c) Foothill acknowledges that if a power of
attorney is exercised by Foothill, the management and operations
of the Casinos only may be undertaken by a Person licensed under
applicable Gaming Regulations.
4.6 Right to Inspect.
(a) Subject to applicable Gaming Regulations,
Foothill (through any of its officers, employees, or agents)
shall have the right from time to time hereafter during normal
business hours to inspect each Borrower's Books and to check,
test, and appraise the Collateral in order to verify each
Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
(b) Foothill or any governmental agency, shall
have the right to enter onto and inspect the Project at any time
and from time to time and, if in Foothill's opinion, the
construction is not in conformance with the Plans and
Specifications, or is otherwise not satisfactory to Foothill,
Foothill has the right to stop construction progress, and to
require Borrowers or any of their agents, to promptly remedy such
unsatisfactory construction, whether or not unsatisfactory work
has already been incorporated into the Improvements, and Foothill
further reserves the right to withhold all further advances and
disbursements until such time as Foothill, in its sole and
absolute discretion, is satisfied with the remedies which
Borrowers have taken to correct such unsatisfactory construction
conditions. Borrowers further authorize Foothill, and all
government agencies to consult with any architect, engineer,
contractor, subcontractor or supplier performing services or
furnishing materials in connection with the Project. Foothill's
rights under this Section are for the sole purpose of protecting
its collateral interest in the Project.
(c) Foothill shall have no liability or
obligation whatsoever in connection with the Improvements or the
construction or completion thereof or work performed thereon and
shall not be liable for the performance or default of any
contractor or subcontractor, or for any failure to construct,
complete, protect or insure the Improvements or for the payment
of any costs or expenses incurred in connection therewith, or for
the performance or nonperformance of any obligation of Borrowers
to Foothill and nothing, including without limitation, any
disbursement hereunder or the deposit or acceptance of any
document or instrument, shall be construed as a representation or
warranty, express or implied, on behalf of Foothill.
4.7 Completion of the Work.
(a) Completion. Construction of the Improvements
on the Millsite Property must be completed on or before the
Completion Date, with the progress of construction being pursued
diligently until completion.
(b) Sufficiency of Millsite Parking Lot
Construction Facility. Anything contained in this Agreement to
the contrary notwithstanding, it is expressly understood and
agreed that the Millsite Parking Lot Construction Facility
provided for herein shall at all times be in balance. The
Millsite Parking Lot Construction Facility shall be deemed to be
"in balance" prior to the advance, and from time to time
thereafter, only if there are funds available under the Millsite
Parking Lot Construction Facility (and after the advance, in the
Construction Escrow Account) to assure Foothill, in its sole
judgment, that the undisbursed portion of such funds are
sufficient to pay on an item by item basis everything set forth
in the Approved Project Budget. Within five (5) days after
Foothill notifies Borrowers that it considers the Millsite
Parking Lot Construction Facility not in balance Borrowers shall
deposit the deficiency into the Construction Escrow Account,
which deposit shall first be disbursed pursuant to the provisions
set forth in this Agreement before any further disbursement shall
be made. The failure to make a decision to require an additional
deposit by Borrowers at one point shall not limit Foothill's
right to make such a decision at a later time. All such funds
are hereby assigned to Foothill as additional security for the
indebtedness of Borrowers arising hereunder and Foothill is
hereby granted a security interest therein.
5. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers, jointly and severally,
represents and warrants to Foothill as follows:
5.1 No Prior Encumbrances. Each of the Borrowers has
good and indefeasible title to its Collateral, free and clear of
liens, claims, security interests, or encumbrances, except for
Permitted Liens.
5.2 Location of Inventory and Equipment. The
Inventory and Equipment are not stored with a bailee,
warehouseman, or similar party (without Foothill's prior written
consent) and are located only at the locations identified on
Schedule 6.12.
5.3 Inventory and Equipment Records. Each of the
Borrowers now keeps, and hereafter at all times shall keep,
correct and accurate records itemizing and describing the kind,
type, quality, and quantity of the Inventory and Equipment, and
such Borrower's cost therefor.
5.4 Location of Chief Executive Office; FEIN. The
chief executive office of each Borrower is located at the address
indicated in the preamble to this Agreement. Each of the
Borrower's FEIN is as follows:
Borrower FEIN
BWBH 84-1242691
BWCC 84-1243506
Millsite 84-1242692
Silver Hawk 84-1339843
5.5 Due Organization, Qualification and Compliance
with Law. Each of the Borrowers is duly organized and existing
and in good standing under the laws of the State of Delaware.
Each of the Borrowers is qualified and licensed to do business
in, and in good standing in, any other state where the failure to
be so licensed or qualified could reasonably be expected to have
a material adverse effect on the business, operations, condition
(financial or otherwise), finances, or prospects of such Borrower
or on the value of the Collateral to Foothill. Each of the
Borrowers is in compliance, in all material respects, with the
requirements of all applicable laws, rules, regulations, and
orders of governmental authority, including the Fair Labor
Standards Act and the Americans With Disabilities Act. Each of
the Borrowers is in compliance with the requirements of all
applicable Gaming Regulations. Each of the Borrowers has been
duly and validly issued all licenses from the Gaming Authorities
that are necessary for the conduct of its business and all such
licenses are in full force and effect.
5.6 Due Authorization; No Conflict. The execution,
delivery, and performance of the Loan Documents are within each
Borrower's corporate powers, have been duly authorized, and are
not in conflict with nor constitute a breach of any provision
contained in such Borrower's Certificate of Incorporation, or By-
laws, nor will they constitute an event of default under any
material agreement to which such Borrower is a party or by which
its properties or assets may be bound.
5.7 Litigation. There are no actions or proceedings
pending by or against any Borrower before any court or
administrative agency and Borrowers do not have knowledge or
belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or
prosecutions involving any Borrower or any guarantor of the
Obligations, except for: (a) ongoing collection matters in which
a Borrower is the plaintiff; (b) proceedings in the Bankruptcy
Court; and (c) matters arising after the date hereof that, if
decided adversely to a Borrower, would not materially impair the
prospect of repayment of the Obligations or materially impair the
value or priority of Foothill's security interests in the
Collateral.
5.8 No Material Adverse Change in Financial Condition.
All financial statements relating to any Borrower or any
guarantor of the Obligations that have been delivered by a
Borrower to Foothill have been prepared in accordance with GAAP
and fairly present such Borrower's (or such guarantor's, as
applicable) financial condition as of the date thereof and such
Borrower's results of operations for the period then ended.
There has not been a material adverse change in the financial
condition of any Borrower since the date of the latest financial
statements submitted to Foothill on or before the Closing Date.
5.9 Employee Benefits. Each Plan is in compliance in
all material respects with the applicable provisions of ERISA and
the IRC. Each Qualified Plan and Multiemployer Plan has been
determined by the Internal Revenue Service to qualify under
Section 401 of the IRC, and the trusts created thereunder have
been determined to be exempt from tax under Section 501 of the
IRC, and, to the best knowledge of Borrowers, nothing has
occurred that would cause the loss of such qualification or tax-
exempt status. There are no outstanding liabilities under Title
IV of ERISA with respect to any Plan maintained or sponsored by a
Borrower or any ERISA Affiliate, nor with respect to any Plan to
which a Borrower or any ERISA Affiliate contributes or is
obligated to contribute which could reasonably be expected to
have a material adverse effect on the financial condition of any
Borrower. No Plan subject to Title IV of ERISA has any Unfunded
Benefit Liability which could reasonably be expected to have a
material adverse effect on the financial condition of any
Borrower. None of the Borrowers nor any ERISA Affiliate has
transferred any Unfunded Benefit Liability to a person other than
a Borrower or an ERISA Affiliate or has otherwise engaged in a
transaction that could be subject to Sections 4069 or 4212(c) of
ERISA which could reasonably be expected to have a material
adverse effect on the financial condition of any Borrower. None
of the Borrowers nor any ERISA Affiliate has incurred nor
reasonably expects to incur (x) any liability (and no event has
occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Sections 4201 or
4243 of ERISA with respect to a Multiemployer Plan, or (y) any
liability under Title IV of ERISA (other than premiums due but
not delinquent under Section 4007 of ERISA) with respect to a
Plan, which could, in either event, reasonably be expected to
have a material adverse effect on the financial condition of any
Borrower. No application for a funding waiver or an extension of
any amortization period pursuant to Section 412 of the IRC has
been made with respect to any Plan. No ERISA Event has occurred
or is reasonably expected to occur with respect to any Plan which
could reasonably be expected to have a material adverse effect on
the financial condition of any Borrower. Each of the Borrowers
and each ERISA Affiliate have complied in all material respects
with the notice and continuation coverage requirements of Section
4980B of the IRC.
5.10 Environmental Condition. None of any Borrower's
properties or assets has ever been used by a Borrower or, to the
best of Borrowers' knowledge except as previously disclosed in
writing to Foothill by Borrowers, by previous owners or operators
in the disposal of, or to produce, store, handle, treat, release,
or transport, any Hazardous Materials unless stored in accordance
with the requirements of applicable law. Except as previously
disclosed in writing to Foothill by Borrowers, none of any
Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, or a candidate
for closure pursuant to any environmental protection statute. No
lien arising under any environmental protection statute has
attached to any revenues or to any real or personal property
owned or operated by any Borrower. None of the Borrowers have
received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state
governmental agency concerning any action or omission by a
Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
5.11 Equipment Financing Contracts. Schedule E-1
contains a true and accurate description of all equipment leases
and/or equipment financing contracts that relate to any Equipment
and other property used by any of the Borrowers and the
outstanding balance of the obligations owed by each Borrower
thereunder.
5.12 Solvency. The Borrowers taken together on a
consolidated basis are Solvent. No transfer of property is being
made by any Borrower and no obligation is being incurred by any
Borrower in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder,
delay, or defraud either present or future creditors of any
Borrower.
5.13 Reliance by Foothill; Cumulative. Each warranty
and representation contained in this Agreement automatically
shall be deemed repeated with each advance and shall be
conclusively presumed to have been relied on by Foothill
regardless of any investigation made or information possessed by
Foothill. The warranties and representations set forth herein
shall be cumulative and in addition to any and all other
warranties and representations that any of the Borrowers now or
hereafter shall give, or cause to be given, to Foothill.
5.14 Governmental Compliance. The Project and the use
thereof are in compliance with all applicable zoning and all
other laws, ordinances, rules, and regulations and Borrowers have
obtained and will obtain all required permits, authorizations and
approvals from appropriate governmental boards or agencies
(federal, state, regional, county and local), to enable them to
construct, own, operate and maintain the Project.
5.15 Plan Changes. The Project concept will not be
changed without the prior written consent of Foothill.
6. AFFIRMATIVE COVENANTS.
Each of the Borrowers, jointly and severally, covenants
and agrees that, so long as any credit hereunder shall be
available and until full and final payment of the Obligations,
and unless Foothill shall otherwise consent in writing, each of
the Borrowers shall do all of the following:
6.1 Accounting System. Each of the Borrowers shall
maintain a standard and modern system of accounting in accordance
with GAAP with ledger and account cards or computer tapes, discs,
printouts, and records pertaining to the Collateral which contain
information as from time to time may be requested by Foothill.
Each of the Borrowers also shall keep proper books of account
showing all sales, claims, and allowances on its Inventory.
6.2 Collateral and Other Reports. Each of the
Borrowers agrees to deliver to Foothill each of the following
accompanied by a certificate signed by its chief financial
officer certifying that the information contained therein is
complete and accurate:
(a) As soon as available, but in any event not
later than on Wednesday of each week, a statement in form and
substance satisfactory to Foothill setting forth: (i) the balance
in the Gaming Tax Escrow Accounts as of the end of the prior
week, (ii) the dates and amounts of deposits in and disbursements
from the Gaming Tax Escrow Accounts during the prior week, (iii)
the Gaming Taxes that accrued in respect of each of the
Borrower's operations for the prior week, and (iv) the unpaid
balance, if any, of Gaming Taxes that were due and payable as of
the end of the prior week;
(b) As soon as available, but in any event within
forty five (45) days after the end of each month, a statement
that Borrowers and CG&E are in compliance with Section 6.10 and
setting forth the Minimum EBITDA and the Interest Coverage Ratio
calculations; and
(c) As soon as available, but in any event within
forty five (45) days after the end of each month, an updated
schedule of each of the Borrower's Equipment together with a
schedule detailing any additions or dispositions of Equipment
since the date of the last updated schedule of Equipment.
(d) No later than the tenth (10th) day of each
month during the term of this Agreement, a detailed report
concerning all pertinent information concerning the Millsite
Property and the Project, including, but not limited to the
following items:
(i) status of all taxes and insurance;
(ii) status of construction of
Improvements; and
(iii) such other information as Foothill
shall require from time to time.
6.3 Financial Statements, Certificates. Each of the
Borrowers agrees to deliver to Foothill: (a) as soon as
available, but in any event within forty five (45) days after the
end of each month during each of such Borrower's fiscal years, a
company prepared balance sheet, income statement, and cash flow
statement covering such Borrower's operations during such period,
an accounts payable aging, including the status of all equipment
leases; and (b) as soon as available, but in any event within one
hundred and five (105) days after the end of each of such
Borrower's fiscal years, financial statements of such Borrower
for each such fiscal year, audited by independent certified
public accountants reasonably acceptable to Foothill and
certified, without any qualifications, by such accountants to
have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Foothill stating
that such accountants do not have knowledge of the existence of
any event or condition constituting an Event of Default, or that
would, with the passage of time or the giving of notice,
constitute an Event of Default. Such audited financial
statements shall include a balance sheet, profit and loss
statement, and cash flow statement, and, if prepared, such
accountants' letter to management. If a Borrower is a parent
company of one or more subsidiaries, or Affiliates, or is a
subsidiary or Affiliate of another company, then, in addition to
the financial statements referred to above, such Borrower agrees
to deliver financial statements prepared on a consolidating basis
so as to present such Borrower and each such related entity
separately, and on a consolidated basis.
Together with the above, Borrowers also shall
deliver to Foothill CG&E's Form 10-Q Quarterly Reports, Form 10-K
Annual Reports, and Form 8-K Current Reports, and any other
filings made by CG&E with the Securities and Exchange Commission,
if any, as soon as the same are filed, or any other information
that is provided by CG&E to its shareholders, and any other
report reasonably requested by Foothill relating to the
Collateral and financial condition of a Borrower.
Each month, together with the financial statements
provided pursuant to Section 6.3(a), each of the Borrowers shall
deliver to Foothill a certificate signed by its chief accounting
officer certifying that: (i) all reports, statements, or
computer prepared information of any kind or nature delivered or
caused to be delivered to Foothill hereunder have been prepared
in accordance with GAAP and fairly present the financial
condition of such Borrower; (ii) such Borrower is in timely
compliance with all of its covenants and agreements hereunder;
(iii) the representations and warranties of such Borrower
contained in this Agreement and the other Loan Documents are true
and correct in all material respects on and as of the date of
such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate
solely to an earlier date); and (iv) on the date of delivery of
such certificate to Foothill there does not exist any condition
or event that constitutes an Event of Default (or, in each case,
to the extent of any non-compliance, describing such non-
compliance as to which he or she may have knowledge and what
action such Borrower has taken, is taking, or proposes to take
with respect thereto).
Each of the Borrowers shall have issued written
instructions to its independent certified public accountants
authorizing them to communicate with Foothill and to release to
Foothill whatever financial information concerning such Borrower
that Foothill may request. Each of the Borrowers hereby
irrevocably authorizes and directs all auditors, accountants, or
other third parties to deliver to Foothill, at Borrowers'
expense, copies of such Borrower's financial statements, papers
related thereto, and other accounting records of any nature in
their possession, and to disclose to Foothill any information
they may have regarding such Borrower's business affairs and
financial conditions.
6.4 Tax Returns. Each of the Borrowers agrees to
deliver to Foothill copies of each of such Borrower's future
federal income tax returns, and any amendments thereto, within
thirty (30) days of the filing thereof with the Internal Revenue
Service.
6.5 Guarantor Reports. Each of the Borrowers agrees
to cause any guarantor of any of the Obligations to deliver its
annual financial statements at the time when the Borrowers
provides their audited financial statements to Foothill and
copies of all federal income tax returns as soon as the same are
available and in any event no later than thirty (30) days after
the same are required to be filed by law.
6.6 Title to Equipment. Upon Foothill's request, each
of the Borrowers immediately shall deliver to Foothill, properly
endorsed, any and all evidences of ownership of, certificates of
title, or applications for title to any items of Equipment owned
by Borrowers and appropriate assignments of leasehold and other
interests of Borrowers in any items of Equipment not owned by
Borrowers.
6.7 Maintenance of Equipment. Each of the Borrowers
shall keep and maintain the Equipment in good operating condition
and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating
efficiency thereof shall at all times be maintained and
preserved. Each of the Borrowers shall not permit any item of
Equipment to become a fixture to real estate or an accession to
other property, and the Equipment is now and shall at all times
remain personal property. Borrowers shall take such actions as
may be requested by Foothill from time to time to enable Foothill
to have access to the locations where Borrowers' Equipment is
located.
6.8 Taxes. All assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or
assessed against any Borrower or any of its property have been
paid, and shall hereafter be paid in full, before delinquency or
before the expiration of any extension period. Each of the
Borrowers shall make due and timely payment or deposit of all
federal, state, and local taxes, assessments, or contributions
required of it by law, and will execute and deliver to Foothill,
on demand, appropriate certificates attesting to the payment
thereof or deposit with respect thereto. Each of the Borrowers
will make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon request,
furnish Foothill with proof satisfactory to Foothill indicating
that such Borrower has made such payments or deposits.
6.9 Insurance.
(a) Each of the Borrowers, at its expense, shall
keep the Collateral insured against loss or damage by fire,
theft, explosion, sprinklers, and all other hazards and risks,
and in such amounts, as are ordinarily insured against by other
owners in similar businesses. Each of the Borrowers also shall
maintain business interruption, public liability, product
liability, and property damage insurance relating to such
Borrower's ownership and use of the Collateral, as well as
insurance against larceny, embezzlement, and criminal
misappropriation.
(b) All such policies of insurance shall be in
such form, with such companies, and in such amounts as may be
reasonably satisfactory to Foothill. All such policies of
insurance (except those of public liability and property damage)
shall contain a 438BFU lender's loss payable endorsement, or an
equivalent endorsement in a form satisfactory to Foothill,
showing Foothill and the trustee under the Indenture as the sole
loss payees thereof (as their interests may appear) and shall
contain a waiver of warranties, and shall specify that the
insurer must give at least ten (10) days prior written notice to
Foothill before canceling its policy for any reason. Each of the
Borrowers shall deliver to Foothill certified copies of such
policies of insurance and evidence of the payment of all premiums
therefor. All proceeds payable under any such policy shall be
payable to Foothill to be applied on account of the Obligations.
(c) Each of the Borrowers hereby irrevocably
makes, constitutes, and appoints Foothill (and any of Foothill's
officers, employees, or agents designated by Foothill) as such
Borrower's true and lawful attorney, with power, subject to
applicable Gaming Regulations, to make, settle, and adjust all
claims that individually or in the aggregate involve more than
Twenty Five Thousand Dollars ($25,000) under Borrowers' policies
of insurance and to make all determinations and decisions with
respect to such policies of insurance. Notwithstanding the
immediately preceding sentence, so long as no Event of Default
has occurred and is continuing, during the first one hundred and
twenty (120) days after the occurrence of an event giving rise to
a claim involving more than Twenty Five Thousand Dollars
($25,000) under Borrowers' policies of insurance, Borrowers may
negotiate the settlement of the claim with the insurance
carrier(s); provided, however, that the terms of settlement of
any such claim shall be subject to the prior written approval of
Foothill in its sole and absolute discretion. Upon the
expiration of such one hundred and twenty (120) day period or
upon the occurrence of an Event of Default, whichever occurs
first, Foothill shall have the sole and exclusive authority to
make, settle, and adjust all claims under Borrowers' policies of
insurance and to make all determinations and decisions with
respect to such policies of insurance. Each of the Borrowers
agrees, subject to applicable Gaming Regulations, that it will
hold in trust for Foothill, as Foothill's trustee, any insurance
proceeds with respect to any claims that individually or in the
aggregate involve more than Twenty Five Thousand Dollars
($25,000) that any Borrower receives and, upon request by
Foothill, immediately will deliver said insurance proceeds to
Foothill in the original form as received by each such Borrower.
(d) Within thirty (30) days after the Closing
Date, Borrowers shall deliver to Foothill certified copies of the
policies of insurance, together with the endorsements thereto, as
are required by this Section 6.9 and in the Mortgages, the form
and substance of which shall be satisfactory to Foothill and its
counsel.
6.10 Financial Covenants.
(a) Minimum EBITDA. Borrowers and CG&E shall
maintain a combined Minimum EBITDA of not less than Nine Million
Dollars ($9,000,000).
(b) Interest Coverage Ratio. Borrowers and CG&E
shall maintain a ratio of combined Minimum EBITDA divided by
Interest Expense of not less than five to one (5.00:1:00) for the
previous twelve (12) calendar months, calculated as of the end of
each calendar month.
6.11 No Setoffs or Counterclaims. All payments
hereunder and under the other Loan Documents made by or on behalf
of any Borrower shall be made without setoff or counterclaim and
free and clear of, and without deduction or withholding for or on
account of, any federal, state, or local taxes.
6.12 Location of Inventory and Equipment. Borrowers
shall keep the Inventory and Equipment only at the locations
identified on Schedule 6.12.
6.13 Compliance with Laws. Each of the Borrowers shall
comply with the requirements of all applicable laws, rules,
regulations, and orders of any governmental authority, including
the Fair Labor Standards Act and the Americans With Disabilities
Act, other than laws, rules, regulations, and orders the
noncompliance with which, individually or in the aggregate, would
not have and could not reasonably be expected to have a material
adverse effect on the business, operations, condition (financial
or otherwise), finances, or prospects of Borrower or on the value
of the Collateral to Foothill. Each of the Borrowers shall
comply with the requirements of all Gaming Regulations. Each of
the Borrowers shall maintain in full force and effect all
licenses from the Gaming Authorities that are necessary for the
conduct of its business.
6.14 Employee Benefits.
(a) Each of the Borrowers shall deliver to
Foothill a written statement by the chief accounting officer of
such Borrower specifying the nature of any of the following
events and the actions which such Borrower proposes to take with
respect thereto promptly, and in any event within ten (10) days
of becoming aware of any of them, and when known, any action
taken or threatened by the Internal Revenue Service, PBGC,
Department of Labor, or other party with respect thereto: (i) an
ERISA Event with respect to any Plan; (ii) the incurrence of an
obligation to pay additional premium to the PBGC under Section
4006(a)(3)(E) of ERISA with respect to any Plan; and (iii) any
lien on the assets of any Borrower arising in connection with any
Plan.
(b) Each of the Borrowers shall also promptly
furnish to Foothill copies prepared or received by such Borrower
or an ERISA Affiliate of: (i) at the request of Foothill, each
annual report (Internal Revenue Service Form 5500 series) and all
accompanying schedules, actuarial reports, financial information
concerning the financial status of each Plan, and schedules
showing the amounts contributed to each Plan by or on behalf of
such Borrower or its ERISA Affiliates for the most recent three
(3) plan years; (ii) all notices of intent to terminate or to
have a trustee appointed to administer any Plan; (iii) all
written demands by the PBGC under Subtitle D of Title IV of
ERISA; (iv) all notices required to be sent to employees or to
the PBGC under Section 302 of ERISA or Section 412 of the IRC;
(v) all written notices received with respect to a Multiemployer
Plan concerning (x) the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA, (y) a termination
described in Section 4041A of ERISA, or (z) a reorganization or
insolvency described in Subtitle E of Title IV of ERISA; (vi) the
adoption of any new Plan that is subject to Title IV of ERISA or
Section 412 of the IRC by such Borrower or any ERISA Affiliate;
(vii) the adoption of any amendment to any Plan that is subject
to Title IV of ERISA or Section 412 of the IRC, if such amendment
results in a material increase in benefits or Unfunded Benefit
Liability; or (viii) the commencement of contributions by such
Borrower or any ERISA Affiliate to any Plan that is subject to
Title IV of ERISA or Section 412 of the IRC.
6.15 Gaming Tax Escrow Accounts. Each of the Borrowers
shall establish an escrow account at the Deposit Account Bank on
terms and conditions acceptable to Foothill for the purposes of
reserving and paying Gaming Taxes (the "Gaming Tax Escrow
Accounts"). Borrowers shall, not less frequently than each week,
deposit in the Gaming Tax Escrow Accounts funds in an amount
sufficient to pay the Gaming Taxes that have accrued in respect
of each of the Borrower's operations for the prior week. Each of
the Borrowers shall cause all Gaming Taxes to be duly and timely
paid from the Gaming Tax Escrow Accounts.
6.16 Construction of Improvements. The construction
work to be performed on the Millsite Property will be performed
in a good and workmanlike manner with materials of high quality,
strictly in accordance with the Plans and Specifications, and all
applicable building, zoning, subdivisions and other applicable
governmental regulations, including pollution control
regulations, and that such construction will be prosecuted with
due diligence and completed within the time requirements of any
applicable law, rule or regulation or any governmental agency and
as required by any contractual time requirements (taking account
of extensions permitted by reason of Force Majeure).
6.17 Mechanic's Liens and Contest Thereof. Borrowers
will not suffer or permit any mechanics' lien or bonded stop
notice claims to be filed or otherwise asserted against any part
of the Project or against any funds covered by this Agreement and
Borrowers will promptly discharge the same, or, in case of the
filing of any bonded stop notice claims, post any bond required
by applicable law; provided that in connection with any such
lien, claim or stop notice which Borrowers may in good faith
desire to contest, Borrowers may contest the same by appropriate
legal proceedings diligently prosecuted, but only if Borrowers
shall furnish to Foothill such security or indemnity as the Title
Company may require to induce it to issue its title insurance
policy insuring against all such claims or liens or Foothill
shall require with respect to bonded stop notices; and provided
further, that Foothill will not be required to make any further
advances or disbursements until any mechanics' lien claims shown
by preliminary report on title or interim binder have been so
insured against by the Title Company. Borrowers agree, upon
demand by Foothill, to defend, indemnify and hold Foothill
harmless against costs, expense and attorneys' fees incurred by
Foothill in connection with any such claim and/or stop notice
and/or any action filed or asserted against Foothill for any
reason in connection therewith.
6.18 Personal Property. All of the personal property,
fixtures, attachments and equipment, delivered upon, attached to,
or used in connection with the Improvements or the operation
thereof shall be owned by Borrowers and will be kept free and
clear of all chattel mortgages, conditional vendor's liens and
all liens, encumbrances and security interests whatsoever, and
from time to time Borrowers will furnish Foothill with
satisfactory evidence of such ownership, including searches of
applicable public records.
6.19 Silver Hawk Property Appraisal. Borrowers agree
to obtain and deliver to Foothill by not later than June 15, 1996
an appraisal of the Silver Hawk Property in form and substance
satisfactory to Foothill.
7. NEGATIVE COVENANTS.
Each of the Borrowers, jointly and severally, covenants
and agrees that, so long as any credit hereunder shall be
available and until full and final payment of the Obligations, no
Borrower will do any of the following:
7.1 Indebtedness. Create, incur, assume, permit,
guarantee, or otherwise become or remain, directly or indirectly,
liable with respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness evidenced by the CAI Notes;
(c) Indebtedness evidenced by the Indenture and
the PIK Notes;
(d) Indebtedness secured by Permitted Liens; and
(e) up to Three Million Dollars ($3,000,000) of
additional unsecured Indebtedness, subject to Foothill's approval
of the use of the proceeds of such Indebtedness and Borrowers'
demonstrating to Foothill's satisfaction that Borrowers' cash
flow is and will be adequate to service such Indebtedness.
7.2 Restrictions on Equipment Financing. Refinance
any Equipment or purchase any Equipment with financing except
with the proceeds of the Equipment Refinance/Finance Facility or
enter into any Equipment lease.
7.3 Liens. Create, incur, assume, or permit to exist,
directly or indirectly, any lien on or with respect to any of its
property or assets, of any kind, whether now owned or hereafter
acquired, or any income or profits therefrom, except for
Permitted Liens.
7.4 Restrictions on Fundamental Changes. Enter into
any acquisition, merger, consolidation, reorganization, or
recapitalization, or reclassify its capital stock, or liquidate,
wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business,
property, or assets (except for a Permitted Sale of Bullwhackers
Central City), whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all of the
properties, assets, stock, or other evidence of beneficial
ownership of any Person.
7.5 Extraordinary Transactions and Disposal of Assets.
Enter into any transaction not in the ordinary and usual course
of a Borrower's business, including the sale, lease, or other
disposition of, moving, relocation, or transfer, whether by sale
or otherwise, of any of such Borrower's properties or assets,
except for a Permitted Sale of Bullwhackers Central City.
7.6 Change Name. Change any Borrower's FEIN, business
structure, or identity. Change any Borrower's name or add any
new trade name unless the Borrower gives Foothill at least twenty
(20) days prior written notice of such new name and, at the time
of such written notice, the Borrower provides to Foothill any
amendments to financing statements and any other Loan Documents
necessary to perfect and continue perfected Foothill's security
interests, all in form and substance satisfactory to Foothill.
7.7 Guarantee. Guarantee or otherwise become in any
way liable with respect to the obligations of any third Person,
except: (i) by endorsement of instruments or items of payment for
deposit to the account of a Borrower or which are transmitted or
turned over to Foothill, and (ii) the guarantee by Borrowers of
the obligations of CG&E as set forth in the Indenture.
7.8 Restructure. Make any change in any Borrower's
financial structure, the principal nature of a Borrower's
business operations, or the date of its fiscal year.
7.9 Purchase of CAI Notes or PIK Notes; Prepayments.
(i) Prepay, purchase, redeem, repurchase or acquire any of the
CAI Notes; (ii) voluntarily prepay, purchase, redeem, repurchase
or acquire any of the PIK Notes or otherwise make any voluntary
prepayments of any amounts under the Noteholder Documents, or
(iii) otherwise prepay any Indebtedness owing to any third Person
(other than (i) subject to the provisions of Section 1112 of the
Indenture, any amounts required to be paid under the Noteholder
Documents in accordance with the terms of the Indenture and the
other Noteholder Documents, and (ii) the existing note and deed
of trust on the Silver Hawk Property).
7.10 Change of Control. Cause, permit, or suffer,
directly or indirectly, any Change of Control.
7.11 Capital Expenditures. Make any capital
expenditure, or any commitment therefor, where the aggregate
amount of such capital expenditures, made or committed for in any
year ending on each anniversary of the Closing Date, is in excess
of Three Million Dollars ($3,000,000), except for: (i) the
construction of the Improvements on the Millsite Property in
accordance with the Plans and Specifications, (ii) up to Five
Hundred Thousand Dollars ($500,000) for designing and
refurbishing Silver Hawk's Casino located in Black Hawk,
Colorado, and (iii) up to One Million Seven Hundred Thousand
Dollars ($1,700,000) for purchasing Equipment for Silver Hawk's
Casino located in Black Hawk, Colorado.
7.12 Distributions. Except as permitted by this
Section 7.12, make any distribution or declare or pay any
dividends (in cash or in stock) on, or purchase, acquire, redeem,
or retire any of CG&E's or a Borrower's capital stock, of any
class, whether now or hereafter outstanding, or otherwise
directly or indirectly make funds available to CG&E.
Notwithstanding anything contained herein or in any of the Loan
Documents to the contrary, but subject to the provisions of
Section 1112 of the Indenture, Borrowers may make distributions
to, or otherwise make funds available to, CG&E to pay amounts
required to be paid by CG&E under the Noteholder Documents in
accordance with the terms of the Indenture and the other
Noteholder Documents; provided, however, Borrowers may not
distribute to CG&E the amount that would otherwise be payable as
interest under the Indenture and the PIK Notes in the event the
option to pay such interest by the issuance of additional PIK
Notes has been exercised. Without in any way limiting the
immediately preceding sentence, so long as no Event of Default
has occurred or would result therefrom, Borrowers may make
distributions to CG&E for the following purposes:
(a) To pay CG&E's general corporate and overhead
expenses; provided, however, that the amount of such
distributions to CG&E in any calendar quarter shall not exceed
the sum of Seven Hundred Fifty Thousand Dollars ($750,000);
(b) To pay Reorganization Expenses in an aggregate
amount not to exceed Three Million Seven Hundred Fifty Thousand
Dollars ($3,750,000);
(c) To pay regularly scheduled payments of interest
and principal under the CAI Notes; provided, however, that the
amount of such distributions to CG&E in any fiscal quarter shall
not exceed the sum of One Hundred Eighty Seven Thousand Dollars
($187,000); and
(d) To, in conjunction with the advance under the
Silver Hawk Facility, prepay in full the remaining outstanding
balance of the existing note and deed of trust on the Silver Hawk
Property.
From and after the occurrence of an Event of Default, Borrowers
shall not make any payments in cash or property under the CAI
Notes or to CAI or make distributions, funds or property
available to CG&E to make payments under the CAI Notes or to CAI.
7.13 Amendments to Debt Instruments. Agree to or
permit any amendment to or modification of the Noteholder
Documents, the CAI Notes or the note or first deed of trust
relating to the Silver Hawk Property; provided, however, that so
long as no Event of Default has occurred or would result
therefrom, Borrowers may agree to or permit amendments to or
modifications of the Noteholder Documents which do not and would
not have the effect, directly or indirectly, of any of the
following: shortening the maturity date; increasing the interest
rate; increasing the principal amount outstanding under the
Noteholder Documents; increasing the amount or rate of payments,
premiums, fees or other amounts payable under the Noteholder
Documents; shortening the time for any payment under the
Noteholder Documents; adversely affecting Borrowers' cash flow;
adversely affecting Borrowers' financial condition; impairing the
prospect of repayment of any portion of the Obligations owing to
Foothill; impairing the value or priority of Foothill's security
interests in the Collateral; or adversely affecting the rights of
Foothill under Section 1112 of the Indenture. As a condition to
Borrowers' agreeing to or permitting any amendments to or
modifications of the Noteholder Documents that are permitted by
this Section 7.13, Borrowers shall give Foothill written notice,
along with copies of the final form of any such proposed
amendments or modifications, at least fifteen (15) days prior to
the effectiveness thereof.
7.14 Accounting Methods. Modify or change its method
of accounting or enter into, modify, or terminate any agreement
currently existing, or at any time hereafter entered into with
any third party accounting firm or service bureau for the
preparation or storage of any Borrower's accounting records
without said accounting firm or service bureau agreeing to
provide Foothill information regarding the Collateral or any
Borrower's financial condition. Each of the Borrowers waives the
right to assert a confidential relationship, if any, it may have
with any accounting firm or service bureau in connection with any
information requested by Foothill pursuant to or in accordance
with this Agreement, and agrees that Foothill may contact
directly any such accounting firm or service bureau in order to
obtain such information.
7.15 Investments. Directly or indirectly make or
acquire any beneficial interest in (including stock, partnership
interest, or other securities of), or make any loan, advance, or
capital contribution to, any Person; provided, however, that so
long as no Event of Default has occurred, Borrowers may make
loans to their employees which do not exceed Two Hundred Thousand
Dollars ($200,000) per fiscal year or Four Hundred Thousand
Dollars ($400,000) in the aggregate outstanding at any time.
7.16 Transactions with Affiliates. Directly or
indirectly enter into or permit to exist any material transaction
with any Affiliate of any Borrower except for transactions that
are in the ordinary course of such Borrower's business, upon fair
and reasonable terms, that are fully disclosed to Foothill, and
that are no less favorable to such Borrower than would be
obtained in arm's length transaction with a non-Affiliate.
7.17 Suspension. Except for a Permitted Casino Shut
Down, suspend or go out of a substantial portion of its business.
7.18 Compensation. Increase the annual fee or per-
meeting fees paid to directors during any year by more than
fifteen percent (15%) over the prior year; or pay or accrue total
cash compensation, during any year, to officers and senior
management employees in an aggregate amount in excess of one
hundred fifteen percent (115%) of that paid or accrued in the
prior year, excluding the amount of any bonuses payable pursuant
to the "Cash Bonus Plan" approved by an independent committee of
the Board of Directors of Borrowers. Schedule 7.19 attached
hereto describes the current compensation arrangements applicable
to Borrowers' current officers and senior management employees
and the "Cash Bonus Plan."
7.19 Use of Proceeds. Use the proceeds of the advances
made hereunder for any purpose other than as follows:
(a) The proceeds of the Revolving Advance
Facility shall be used: (i) on the Closing Date, to repay in full
the outstanding principal, accrued interest, and accrued fees and
expenses owing to Foothill under the DIP Loan and Security
Agreement, other than the outstanding balance of the "Equipment
Refinance Facility" (as defined in the DIP Loan and Security
Agreement); (ii) to pay transactional fees, costs and expenses
incurred in connection with this Agreement; and (iii) thereafter,
consistent with the terms and conditions hereof, for Borrowers'
lawful and permitted corporate purposes, including satisfying the
obligations pursuant to the Plan of Reorganization.
(b) The proceeds of the Equipment
Refinance/Finance Facility shall be used: (i) on the Closing
Date, to (x) to repay in full the outstanding balance of the
"Equipment Refinance Facility" (as defined in the DIP Loan and
Security Agreement), (y) refinance Borrowers' Equipment that is
currently leased/financed by Paine Webber in an amount not to
exceed Nine Hundred Thousand Dollars ($900,000) as approved by
the Bankruptcy Court; provided, however, in no event shall such
amount exceed the remaining outstanding balance owed under the
agreements with Paine Webber pursuant to which such Equipment was
leased/financed by Paine Webber, and (z) if not paid off by
Borrowers from available cash on hand, refinance Borrowers'
Equipment that is currently leased/financed by RW Leasing in an
amount not to exceed One Hundred Eighty Thousand Dollars
($180,000) as approved by the Bankruptcy Court; provided,
however, in no event shall such amount exceed the remaining
outstanding balance owed under the agreements with RW Leasing
pursuant to which such Equipment was leased/financed by RW
Leasing, and (ii) to purchase new Equipment.
(c) The proceeds of the Millsite Parking Lot
Construction Facility shall be used to pay the costs incurred
after the Closing Date of constructing the Improvements on the
Millsite Property strictly in accordance with the Plans and
Specifications and subject to the terms of this Agreement.
(d) The proceeds of the Silver Hawk Facility
shall be used, together with other funds available to the
Borrowers, to prepay in full the remaining outstanding balance of
the existing note and deed of trust on the Silver Hawk Property
in favor of Millsite 20 Limited Liability Company LLC.
Anything contained in this Agreement to the contrary
notwithstanding, no portion of the proceeds of the advances made
hereunder shall be used for purposes of developing, constructing
or operating a day care facility.
7.20 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees. Each of the Borrowers
covenants and agrees that it will not relocate its chief
executive office to a new location unless: (a) the Borrower gives
Foothill prior written notice of such new location which such new
location shall remain in the State of Colorado, and (b) at the
time of such written notice, the Borrower provides to Foothill
any fully executed financing statements and fixture filings
necessary to perfect and continue perfected Foothill's security
interests and a fully executed landlord's waiver, all in form and
substance satisfactory to Foothill. The Inventory and Equipment
shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Foothill's prior written
consent.
7.21 Limitation On Accounts. Not maintain any deposit
accounts other than the Construction Escrow Account, the Gaming
Tax Escrow Accounts and the Pledged Accounts.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall
constitute an event of default (each, an "Event of Default")
under this Agreement:
8.1 If any Borrower fails to pay when due and payable
or when declared due and payable, any portion of the Obligations
(whether of principal, interest, fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting
Obligations);
8.2 If any Borrower fails or neglects to perform,
keep, or observe any term, provision, condition, covenant, or
agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between
such Borrower and Foothill; provided, however, that any
Borrower's failure or neglect to comply with Sections 6.2, 6.3,
6.4 or 6.5 shall not constitute an Event of Default hereunder
unless such failure or neglect continues for five (5) or more
days;
8.3 If any Borrower fails to comply with any Gaming
Regulations and Foothill reasonably determines that such failure
to comply could materially impair the business of any Borrower or
could result in the loss of any Borrower's gaming license; or if
the Gaming Authorities issue an order to show cause to any
Borrower with respect to any matter that Foothill reasonably
determines could materially impair the business of any Borrower
or could result in the loss of any Borrower's gaming license; or
if any license issued to any Borrower by the Gaming Authorities
is suspended, expires or otherwise fails to remain in full force
and effect;
8.4 If any license issued to any Borrower by the
Gaming Authorities is not renewed for a full one year term each
time such license comes up for renewal commencing with the
renewal in December 1996 or if any restrictions are imposed on or
are applicable to any such license;
8.5 If any liquor license issued to any Borrower is
suspended, expires or otherwise fails to remain in full force and
effect or if any restrictions are imposed on any such license;
8.6 If Borrowers fail to operate any of the Casinos
for more than five (5) consecutive days, except during a
Permitted Casino Shut Down;
8.7 If there is a material impairment of the prospect
of repayment of any portion of the Obligations owing to Foothill
or a material impairment of the value or priority of Foothill's
security interests in the Collateral;
8.8 If any material portion of any Borrower's
properties or assets is attached, seized, subjected to a writ or
distress warrant, or is levied upon, or comes into the possession
of any third Person;
8.9 If an Insolvency Proceeding is commenced by any
Borrower;
8.10 If an Insolvency Proceeding is commenced against
any Borrower and any of the following events occur: (a) any
Borrower consents to the institution of the Insolvency Proceeding
against it; (b) the petition commencing the Insolvency Proceeding
is not timely controverted; (c) the petition commencing the
Insolvency Proceeding is not dismissed within forty-five (45)
calendar days of the date of the filing thereof; provided,
however, that, during the pendency of such period, Foothill shall
be relieved of its obligation to make additional advances
hereunder; (d) an interim trustee is appointed to take possession
of all or a substantial portion of the properties or assets of,
or to operate all or any substantial portion of the business of,
any Borrower; or (e) an order for relief shall have been issued
or entered therein;
8.11 If any Borrower is enjoined, restrained, or in any
way prevented by court order from continuing to conduct all or
any material part of its business affairs;
8.12 If a notice of lien, levy, or assessment is filed
of record with respect to any of any Borrower's properties or
assets by the United States Government, or any department,
agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes
a lien, whether choate or otherwise, upon any of any Borrower's
properties or assets and the same is not paid on the payment date
thereof;
8.13 If one or more judgments or other claims involving
more than Twenty Five Thousand Dollars ($25,000) in the aggregate
become a lien or encumbrance upon any material portion of any
Borrower's properties or assets (notwithstanding the foregoing,
Foothill always shall have the right to reserve against any
amounts that may otherwise be available to be advanced to
Borrowers under this Agreement the amount of any judgments, liens
or encumbrances);
8.14 If there is a default in any material agreement
(including under the Plan of Reorganization or the Indenture) to
which any Borrower is a party with one or more third Persons
resulting in a right by such third Persons, irrespective of
whether exercised, to accelerate the maturity of any Borrower's
obligations thereunder;
8.15 If there is an "Event of Default" under the
Indenture (as defined in the Indenture);
8.16 If there is a default in any agreement to which
any Borrower is a party with one or more third Persons and the
obligations under such agreement are secured by a lien which is
senior to any Foothill lien (including, without limitation, any
agreement with the seller of Silver Hawk Property);
8.17 If any Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent
such payment is permitted by the terms of the subordination
provisions applicable to such Indebtedness;
8.18 If construction of the Improvements on the
Millsite Property is not completed by the Completion Date;
8.19 If any material misstatement or misrepresentation
exists now or hereafter in any warranty, representation,
statement, or report made to Foothill by any Borrower or any
officer, employee, agent, or director of any Borrower, or if any
such warranty or representation is withdrawn;
8.20 If the obligation of any guarantor or other third
Person under any Loan Document is limited or terminated by
operation of law or by the guarantor or other third Person
thereunder; or
8.21 If (a) with respect to any Plan, there shall occur
any of the following which could reasonably be expected to have a
material adverse effect on the financial condition of any
Borrower: (i) the violation of any of the provisions of ERISA;
(ii) the loss by a Plan intended to be a Qualified Plan of its
qualification under Section 401(a) of the IRC; (iii) the
incurrence of liability under Title IV of ERISA; (iv) a failure
to make full payment when due of all amounts which, under the
provisions of any Plan or applicable law, a Borrower or any ERISA
Affiliate is required to make; (v) the filing of a notice of
intent to terminate a Plan under Sections 4041 or 4041A of ERISA;
(vi) a complete or partial withdrawal of a Borrower or an ERISA
Affiliate from any Plan; (vii) the receipt of a notice by the
plan administrator of a Plan that the PBGC has instituted
proceedings to terminate such Plan or appoint a trustee to
administer such Plan; (viii) a commencement or increase of
contributions to, or the adoption of or the amendment of, a Plan;
and (ix) the assessment against a Borrower or any ERISA Affiliate
of a tax under Section 4980B of the IRC; or (b) there shall be
any Unfunded Benefit Liability under any of the Plans of any of
the Borrowers or their ERISA Affiliates.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence of an
Event of Default Foothill may, at its election, without notice of
its election and without demand, do any one or more of the
following, all of which are authorized by each of the Borrowers:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable;
(b) Cease advancing money or extending credit to
or for the benefit of Borrowers under this Agreement, under any
of the Loan Documents, or under any other agreement between any
Borrower and Foothill;
(c) Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of
Foothill, but without affecting Foothill's rights and security
interests in the Collateral and without affecting the
Obligations;
(d) Subject to applicable Gaming Regulations,
appoint one or more Persons licensed under applicable Gaming
Regulations to manage and operate the Casinos;
(e) Settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which Foothill
considers advisable, and in such cases, Foothill will credit
Borrowers' loan account with only the net amounts received by
Foothill in payment of such disputed Accounts after deducting all
Foothill Expenses incurred or expended in connection therewith;
(f) Cause each of the Borrowers to hold all
returned Inventory in trust for Foothill, segregate all returned
Inventory from all other property of such Borrower or in such
Borrower's possession and conspicuously label said returned
Inventory as the property of Foothill;
(g) Without notice to or demand upon any Borrower
or any guarantor, make such payments and do such acts as Foothill
considers necessary and reasonable to protect its security
interests in the Collateral. Each of the Borrowers agrees to
assemble the Collateral if Foothill so requires, and to make the
Collateral available to Foothill as Foothill may designate. Each
of the Borrowers authorizes Foothill to enter the premises where
the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or
compromise any encumbrance, charge, or lien that in Foothill's
determination appears to conflict with its security interests and
to pay all expenses incurred in connection therewith. With
respect to any of each Borrower's owned premises, such Borrower
hereby grants Foothill a license to enter into possession of such
premises and to occupy the same, without charge, for up to one
hundred twenty (120) days in order to exercise any of Foothill's
rights or remedies provided herein, at law, in equity, or
otherwise;
(h) Without notice to any Borrower (such notice
being expressly waived), and without constituting a retention of
any collateral in satisfaction of an obligation (within the
meaning of Section 9505 of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of each of the
Borrowers held by Foothill (including any amounts received in the
Pledged Accounts), or (ii) indebtedness at any time owing to or
for the credit or the account of each of the Borrowers held by
Foothill;
(i) Hold, as cash collateral, any and all
balances and deposits of each of the Borrowers held by Foothill,
and any amounts received in the Pledged Accounts, to secure the
full and final repayment of all of the Obligations;
(j) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell
(in the manner provided for herein) the Collateral. Foothill is
hereby granted a license or other right to use, without charge,
each Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and each
Borrower's rights under all licenses and all franchise agreements
shall inure to Foothill's benefit;
(k) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such
places (including each Borrower's premises) as Foothill
determines is commercially reasonable. It is not necessary that
the Collateral be present at any such sale;
(l) Foothill shall give notice of the disposition
of the Collateral as follows:
(1) Foothill shall give Borrowers, the
trustee under the Indenture and each other holder of a security
interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of
public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the
Collateral, then the time on or after which the private sale or
other disposition is to be made;
(2) The notice shall be personally delivered
or mailed, postage prepaid, to Borrowers as provided in Section
12, at least five (5) days before the date fixed for the sale, or
at least five (5) days before the date on or after which the
private sale or other disposition is to be made; no notice needs
to be given prior to the disposition of any portion of the
Collateral that is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a recognized
market. Notice to Persons other than Borrowers claiming an
interest in the Collateral shall be sent to such addresses as
they have furnished to Foothill;
(3) If the sale is to be a public sale,
Foothill also shall give notice of the time and place by
publishing a notice one time at least five (5) days before the
date of the sale in a newspaper of general circulation in the
county in which the sale is to be held;
(m) Foothill may credit bid and purchase at any
public sale; and
(n) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by
Borrowers. Any excess will be returned, without interest and
subject to the rights of third Persons, by Foothill to Borrowers.
9.2 Remedies Cumulative. Foothill's rights and
remedies under this Agreement, the Loan Documents, and all other
agreements shall be cumulative. Foothill shall have all other
rights and remedies not inconsistent herewith as provided under
the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing
waiver. No delay by Foothill shall constitute a waiver,
election, or acquiescence by it.
9.3 Gaming Regulations. Each of the provisions of
this Agreement that is applicable to BWBH, BWCC or Silver Hawk is
subject to, and shall be enforced in compliance with, the
provisions of the Gaming Regulations. Each of the Borrowers
agrees to fully cooperate with Foothill (including, without
limitation, providing to Foothill any and all financial and other
information) to facilitate Foothill's compliance with all Gaming
Regulations in connection with Foothill's exercise of its rights
and remedies under this Agreement and as provided under the Code,
by law, or in equity.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If any Borrower fails to pay any monies (whether taxes,
rents, assessments, insurance premiums, or otherwise) due to
third Persons, or fails to make any deposits or furnish any
required proof of payment or deposit, all as required under the
terms of this Agreement, then, to the extent that Foothill
determines that such failure by such Borrower could have a
material adverse effect on Foothill's interests in the
Collateral, in its discretion and without prior notice to
Borrowers, Foothill may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves
in Borrowers' loan account as Foothill deems necessary to protect
Foothill from the exposure created by such failure; or (c) obtain
and maintain insurance policies of the type described in Section
6.9, and take any action with respect to such policies as
Foothill deems prudent. Any such amounts paid by Foothill shall
constitute Foothill Expenses. Any such payments made by Foothill
shall not constitute an agreement by Foothill to make similar
payments in the future or a waiver by Foothill of any Event of
Default under this Agreement. Foothill need not inquire as to,
or contest the validity of, any such expense, tax, security
interest, encumbrance, or lien and the receipt of the usual
official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Each of the Borrowers
waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments,
chattel paper, and guarantees at any time held by Foothill on
which any Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as
Foothill complies with its obligations, if any, under Section
9207 of the Code, Foothill shall not in any way or manner be
liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising
in any manner or fashion from any cause; (c) any diminution in
the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person. All
risk of loss, damage, or destruction of the Collateral shall be
borne by Borrowers.
11.3 Indemnification. Each of the Borrowers, jointly
and severally, agrees to defend, indemnify, save, and hold
Foothill and its officers, employees, and agents harmless
against: (a) all obligations, demands, claims, and liabilities
claimed or asserted by any other Person arising out of or
relating to the transactions contemplated by this Agreement or
any other Loan Document, and (b) all losses (including attorneys
fees and disbursements) in any way suffered, incurred, or paid by
Foothill as a result of or in any way arising out of, following,
or consequential to the transactions contemplated by this
Agreement or any other Loan Document; provided, however, that
Borrowers shall not be required to indemnify or hold Foothill
harmless where such obligations, demands, claims, liabilities, or
losses are found, by a final determination of a court of
competent jurisdiction, to be the result of Foothill's wilful
misconduct or gross negligence. This provision shall survive the
termination of this Agreement.
11.4 Suretyship Waivers and Consents.
(a) Each Borrower agrees that it is jointly and
severally, directly and primarily liable to Foothill for payment
in full of all Obligations and that such liability is independent
of the duties, obligations, and liabilities of the other
Borrowers. Foothill may bring a separate action or actions on
each, any, or all of the Obligations against any Borrower,
whether action is brought against the other Borrowers or whether
the other Borrowers are joined in such action. In the event that
any Borrower fails to make any payment of any Obligations on or
before the due date thereof, the other Borrowers immediately
shall cause such payment to be made or each of such Obligations
to be performed, kept, observed, or fulfilled.
(b) The Loan Documents are a primary and original
obligation of each Borrower, are not the creation of a surety
relationship, and are an absolute, unconditional, and continuing
promise of payment and performance which shall remain in full
force and effect without respect to future changes in conditions,
including any change of law or any invalidity or irregularity
with respect to the Loan Documents. Each Borrower agrees that
its liability under the Loan Documents shall be immediate and
shall not be contingent upon the exercise or enforcement by
Foothill of whatever remedies it may have against the other
Borrowers, or the enforcement of any lien or realization upon any
security Foothill may at any time possess. Each Borrower
consents and agrees that Foothill shall be under no obligation to
marshal any assets of any Borrower against or in payment of any
or all of the Obligations.
(c) The liability of each Borrower under the Loan
Documents includes Obligations arising under successive
transactions continuing, compromising, extending, increasing,
modifying, releasing, or renewing the Obligations, changing the
interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Obligations after prior
Obligations have been satisfied in whole or in part. To the
maximum extent permitted by law, each Borrower hereby waives any
right to revoke its liability under the Loan Documents as to
future indebtedness, and in connection therewith, each Borrower
hereby waives any rights it may have under Section 2815 of the
California Civil Code. If such a revocation is effective
notwithstanding the foregoing waiver, each Borrower acknowledges
and agrees that (a) no such revocation shall be effective until
written notice thereof has been received by Foothill, (b) no such
revocation shall apply to any Obligations in existence on such
date (including, any subsequent continuation, extension, or
renewal thereof, or change in the interest rate, payment terms,
or other terms and conditions thereof), (c) no such revocation
shall apply to any Obligations made or created after such date to
the extent made or created pursuant to a legally binding
commitment of Foothill in existence on the date of such
revocation, (d) no payment by such Borrower or from any other
source prior to the date of such revocation shall reduce the
maximum obligation of the other Borrowers hereunder, and (e) any
payment by such Borrower or from any source other than Borrowers,
subsequent to the date of such revocation, shall first be applied
to that portion of the Obligations as to which the revocation is
effective and which are not, therefore, guaranteed hereunder, and
to the extent so applied shall not reduce the maximum obligation
of each Borrower hereunder.
(d) (1) Each Borrower absolutely,
unconditionally, knowingly, and expressly waives:
(a) (1) notice of acceptance hereof;
(2) notice of any loans or other financial accommodations
made or extended under the Loan Documents or the creation or
existence of any Obligations; (3) notice of the amount of
the Obligations, subject, however, to each Borrower's right
to make inquiry of Foothill to ascertain the amount of the
Obligations at any reasonable time; (4) notice of any
adverse change in the financial condition of the other
Borrowers or of any other fact that might increase such
Borrower's risk hereunder; (5) notice of presentment for
payment, demand, protest, and notice thereof as to any
instruments among the Loan Documents; (6) notice of any
unmatured event of default or event of default under the
Loan Documents; and (7) all other notices (except if such
notice is specifically required to be given to Borrowers
hereunder or under the Loan Documents) and demands to which
such Borrower might otherwise be entitled.
(b) its right, under Sections 2845 or
2850 of the California Civil Code, or otherwise, to require
Foothill to institute suit against, or to exhaust any rights
and remedies which Foothill has or may have against, the
other Borrowers or any third party, or against any
collateral for the Obligations provided by the other
Borrowers, or any third party. In this regard, each
Borrower agrees that it is bound to the payment of all
Obligations, whether now existing or hereafter accruing, as
fully as if such Obligations were directly owing to Foothill
by such Borrower. Each Borrower further waives any defense
arising by reason of any disability or other defense (other
than the defense that the Obligations shall have been fully
and finally performed and indefeasibly paid) of the other
Borrowers or by reason of the cessation from any cause
whatsoever of the liability of the other Borrowers in
respect thereof.
(c) (1) any rights to assert against
Foothill any defense (legal or equitable), set-off,
counterclaim, or claim which such Borrower may now or at any
time hereafter have against the other Borrowers or any other
party liable to Foothill; (2) any defense, set-off,
counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of
perfection, sufficiency, validity, or enforceability of the
Obligations or any security therefor; (3) any defense such
Borrower has to performance hereunder, and any right such
Borrower has to be exonerated, provided by Sections 2819,
2822, or 2825 of the California Civil Code, or otherwise,
arising by reason of: the impairment or suspension of
Foothill's rights or remedies against the other Borrowers;
the alteration by Foothill of the Obligations; any discharge
of the other Borrowers' obligations to Foothill by operation
of law as a result of Foothill's intervention or omission;
or the acceptance by Foothill of anything in partial
satisfaction of the Obligations; (4) the benefit of any
statute of limitations affecting such Borrower's liability
hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of
limitations applicable to the Obligations shall similarly
operate to defer or delay the operation of such statute of
limitations applicable to such Borrower's liability
hereunder.
(2) Each Borrower absolutely,
unconditionally, knowingly, and expressly waives any defense
arising by reason of or deriving from (i) any claim or defense
based upon an election of remedies by Foothill including any
defense based upon an election of remedies by Foothill under the
provisions of Sections 580a, 580b, 580d, and 726 of the
California Code of Civil Procedure or any similar law of
California or any other jurisdiction; or (ii) any election by
Foothill under Bankruptcy Code Section 1111(b) to limit the
amount of, or any collateral securing, its claim against the
Borrowers. Pursuant to California Civil Code Section 2856(b):
"Each Borrower waives all rights and
defenses arising out of an election of remedies by the creditor,
even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation,
has destroyed such Borrower's rights of subrogation and
reimbursement against the other Borrowers by the operation of
Section 580(d) of the California Code of Civil Procedure or
otherwise."
If any of the Obligations at any time are secured by a mortgage
or deed of trust upon real property, Foothill may elect, in its
sole discretion, upon an Event of Default, to foreclose such
mortgage or deed of trust judicially or nonjudicially in any
manner permitted by law, before or after enforcing the Loan
Documents, without diminishing or affecting the liability of any
Borrower hereunder except to the extent the Obligations are
repaid with the proceeds of such foreclosure. Each Borrower
understands that (a) by virtue of the operation of California's
antideficiency law applicable to nonjudicial foreclosures, an
election by Foothill nonjudicially to foreclose such a mortgage
or deed of trust probably would have the effect of impairing or
destroying rights of subrogation, reimbursement, contribution, or
indemnity of such Borrower against the other Borrowers or other
guarantors or sureties, and (b) absent the waiver given by such
Borrower, such an election would prevent Foothill from enforcing
the Loan Documents against such Borrower. Understanding the
foregoing, and understanding that such Borrower is hereby
relinquishing a defense to the enforceability of the Loan
Documents, such Borrower hereby waives any right to assert
against Foothill any defense to the enforcement of the Loan
Documents, whether denominated "estoppel" or otherwise, based on
or arising from an election by Foothill nonjudicially to
foreclose any such mortgage or deed of trust. Each Borrower
understands that the effect of the foregoing waiver may be that
each Borrower may have liability hereunder for amounts with
respect to which such Borrower may be left without rights of
subrogation, reimbursement, contribution, or indemnity against
the other Borrower or other guarantors or sureties. Each
Borrower also agrees that the "fair market value" provisions of
Section 580a of the California Code of Civil Procedure shall have
no applicability with respect to the determination of such
Borrower's liability under the Loan Documents.
(3) Each Borrower hereby absolutely,
unconditionally, knowingly, and expressly waives: (i) any right
of subrogation such Borrower has or may have as against the other
Borrowers with respect to the Obligations; (ii) any right to
proceed against the other Borrowers or any other person or
entity, now or hereafter, for contribution, indemnity,
reimbursement, or any other suretyship rights and claims, whether
direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which
such Borrower may now have or hereafter have as against the other
Borrowers with respect to the Obligations; and (iii) any right to
proceed or seek recourse against or with respect to any property
or asset of the other Borrowers.
(4) WITHOUT LIMITING THE GENERALITY OF ANY
OTHER WAIVER OR OTHER PROVISION SET FORTH HEREIN, EACH BORROWER
HEREBY ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY
WAIVES AND AGREES NOT TO ASSERT ANY AND ALL BENEFITS OR DEFENSES
ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF
CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815,
2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850,
CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c,
580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL
CODE.
(e) Each Borrower consents and agrees that,
without notice to or by such Borrower, and without affecting or
impairing the liability of such Borrower hereunder, Foothill may,
by action or inaction:
(1) compromise, settle, extend the duration
or the time for the payment of, or
discharge the performance of, or may
refuse to or otherwise not enforce the
Loan Documents, or any part thereof,
with respect to the other Borrowers;
(2) release the other Borrowers or grant
other indulgences to the other Borrowers
in respect thereof; or
(3) release or substitute any other
guarantor, if any, of the Obligations,
or enforce, exchange, release, or waive
any security for the Obligations or any
other guaranty of the Obligations, or
any portion thereof.
(f) Foothill shall have the right to seek
recourse against each Borrower to the fullest extent provided for
herein, and no election by Foothill to proceed in one form of
action or proceeding, or against any party, or on any obligation,
shall constitute a waiver of Foothill's right to proceed in any
other form of action or proceeding or against other parties
unless Foothill has expressly waived such right in writing.
Specifically, but without limiting the generality of the
foregoing, no action or proceeding by Foothill under the Loan
Documents shall serve to diminish the liability of any Borrower
under the Loan Documents except to the extent that Foothill
finally and unconditionally shall have realized indefeasible
payment by such action or proceeding.
(g) The Obligations shall not be considered
indefeasibly paid for purposes of the Loan Documents unless and
until all payments to Foothill are no longer subject to any right
on the part of any person, including any Borrower, any Borrower
as a debtor in possession, or any trustee (whether appointed
pursuant to 11 U.S.C., or otherwise) of any Borrowers' assets to
invalidate or set aside such payments or to seek to recoup the
amount of such payments or any portion thereof, or to declare
same to be fraudulent or preferential. Upon such full and final
performance and indefeasible payment of the Obligations, Foothill
shall have no obligation whatsoever to transfer or assign its
interest in the Loan Documents to any Borrower. In the event
that, for any reason, any portion of such payments to Foothill is
set aside or restored, whether voluntarily or involuntarily,
after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and continued in full force
and effect as if said payment or payments had not been made, and
each Borrower shall be liable for the full amount Foothill is
required to repay plus any and all costs and expenses (including
attorneys' fees and attorneys' fees incurred pursuant to 11
U.S.C.) paid by Foothill in connection therewith.
12. NOTICES.
Unless otherwise provided in this Agreement, all
notices or demands by any party relating to this Agreement or any
other Loan Document shall be in writing and (except for financial
statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered
or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid telex, TWX, telefacsimile, or
telegram (with messenger delivery specified) to Borrowers or to
Foothill, as the case may be, at their address set forth below:
If to Borrowers: c/o Hemmeter Enterprises, Inc.
One Norwest Center
1700 Lincoln Street, 49th Floor
Denver, Colorado 80203
Attn: Alan Mayer
Telefacsimile No. (303) 863-2401
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Telefacsimile No. (310) 478-9788
The parties hereto may change the address at which they
are to receive notices hereunder, by notice in writing in the
foregoing manner given to the other. All notices or demands sent
in accordance with this Section 12, other than notices by
Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual
receipt or three (3) days after the deposit thereof in the mail.
Each of the Borrowers acknowledges and agrees that notices sent
by Foothill in connection with Sections 9504 or 9505 of the Code
shall be deemed sent when deposited in the mail or transmitted by
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED
HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT
IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. EACH OF BORROWERS AND FOOTHILL WAIVES, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE
TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 13. EACH OF BORROWERS AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH OF BORROWERS AND FOOTHILL REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other
papers delivered to Foothill may be destroyed or otherwise
disposed of by Foothill four (4) months after they are delivered
to or received by Foothill, unless Borrowers request, in writing,
the return of said documents, schedules, or other papers and
makes arrangements, at Borrowers' expense, for their return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding
and deemed effective on the Closing Date. Upon the effectiveness
of this Agreement, the DIP Loan and Security Agreement is amended
and restated in its entirety by this Agreement. Borrowers
acknowledge and agree that the security interests and assignments
granted by them pursuant to the DIP Loan and Security Agreement
and maintained pursuant to this Agreement continue without
interruption in full force and effect in favor of Foothill. Each
of the Borrowers hereby assumes all of the obligations of the
Borrowers under the DIP Loan and Security Agreement as amended
and restated by this Agreement. All references to the Borrowers
(other than Silver Hawk) and CG&E in the Loan Documents shall
include such entities operating as debtors and debtors-in-
possession and as reorganized debtors under the Plan of
Reorganization.
15.2 Successors and Assigns. This Agreement shall bind
and inure to the benefit of the respective successors and assigns
of each of the parties; provided, however, that no Borrower may
assign this Agreement or any rights or duties hereunder without
Foothill's prior written consent and any prohibited assignment
shall be absolutely void. No consent to an assignment by
Foothill shall release any Borrower from its Obligations.
Foothill may assign this Agreement and its rights and duties
hereunder and no consent or approval by any Borrower is required
in connection with any such assignment. Foothill reserves the
right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in
Foothill's rights and benefits hereunder. In connection with any
such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may
have relating to any Borrower or any Borrower's business. To the
extent that Foothill assigns its rights and obligations hereunder
to a third Person, Foothill shall thereafter be released from
such assigned obligations to Borrowers and such assignment shall
effect a novation between each of the Borrowers and such third
Person.
15.3 Section Headings. Headings and numbers have been
set forth herein for convenience only. Unless the contrary is
compelled by the context, everything contained in each section
applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved
against Foothill or any of the Borrowers, whether under any rule
of construction or otherwise. On the contrary, this Agreement
has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all
parties hereto.
15.5 Severability of Provisions. Each provision of
this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal
enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement can only be
amended by a writing signed by both Foothill and the Borrowers.
15.7 Counterparts; Telefacsimile Execution. This
Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement.
Any party delivering an executed counterpart of this Agreement by
telefacsimile also shall deliver a manually executed counterpart
of this Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If the
incurrence or payment of the Obligations by any Borrower or any
guarantor of the Obligations or the transfer by either or both of
such parties to Foothill of any property of either or both of
such parties should for any reason subsequently be declared to be
void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Foothill
is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice
of its counsel, then, as to any such Voidable Transfer, or the
amount thereof that Foothill is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys
fees of Foothill related thereto, the liability of such Borrower
or such guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had
never been made.
15.9 Integration. Upon the effectiveness of this
Agreement, this Agreement, together with the other Loan
Documents, reflect the entire understanding of the parties with
respect to the transactions contemplated hereby and shall not be
contradicted or qualified by any other agreement, oral or
written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By_________________________________
Title:
BWBH, INC.,
a Delaware corporation,
By_________________________________
Title:
BWCC, INC.,
a Delaware corporation,
By_________________________________
Title:
MILLSITE 27, INC.,
a Delaware corporation,
By_________________________________
Title:
SILVER HAWK CASINO, INC.,
a Delaware corporation
By_________________________________
Title:
SCHEDULE E-1
Equipment Financing Contracts
SCHEDULE P-1
Permitted Liens
1. Security interests in favor of the trustee under the
Indenture and the holders of the PIK Notes in accordance with the
Indenture which such security interests shall at all times be
junior and subordinate to those of Foothill.
2. Security interests in favor of the equipment providers
on the Equipment which is the subject of the Equipment Financing
Contracts set forth on Schedule E-1.
3. A purchase money security interest granted to the prior
owner of the Silver Hawk Property to secure the obligation to pay
a purchase price balance of not more than One Million Eight
Hundred Thousand Dollars ($1,800,000).
SCHEDULE R-1
Real Property
See attached legal descriptions of owned and leased real
property.
SCHEDULE 6.12
Location of Inventory and Equipment
Chief Executive Office:
One Norwest Center
1700 Lincoln Street, 49th Floor
Denver, Colorado 80203
Bullwhackers Black Hawk:
101 Gregory Street
Black Hawk, Colorado 80422
Bullwhackers Silver Hawk:
100 Chase Street
Black Hawk, Colorado 80422
Bullwhackers Central City:
130 Main Street
Central City, Colorado 80427
Warehouse Facility:
15880 West 6th Avenue
Golden, Colorado 80401
Storage Facility:
Mountain Mini Storage, Inc.
190 Hyland Drive
Evergreen, Colorado 80439
SCHEDULE 7.16
Executive Compensation
COLORADO GAMING & ENTERTAINMENT COMPANY
MANAGEMENT INCENTIVE AND NON-EMPLOYEE DIRECTOR
STOCK PLAN
TABLE OF CONTENTS
Page
1. Purpose . . . . . . . . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . 1
3 Administration of the Plan . . . . . . . . . . . . . . 3
4. Shares Subject to the Plan . . . . . . . . . . . . . . 5
5. Grant of Awards and Award Agreements . . . . . . . . . 5
6. Restricted Stock . . . . . . . . . . . . . . . . . . . 6
7. Certificates for Awards of Stock . . . . . . . . . . . 8
8. Amendment or Termination . . . . . . . . . . . . . . . 9
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . 9
MANAGEMENT INCENTIVE AND NON-EMPLOYEE
DIRECTOR STOCK PLAN
1. Purpose
The purpose of the Colorado Gaming & Entertainment Company
Management Incentive and Non-Employee Director Stock Plan is to
attract and retain Employees and directors of the Company or its
subsidiaries, whose responsibilities and decisions directly
affect the performance of the Company and its subsidiaries, to
motivate and reward good performance, and to encourage such
Employees and directors to continue to exert their best efforts
on behalf of the Company and its subsidiaries by providing
opportunities for equity ownership in the Company through stock
incentive awards to these Key Employees and Non-Employee
Directors. Such stock incentive awards consist of restricted
stock subject to such restrictions as the Committee may determine
or as provided herein. No award shall be granted under this Plan
until after the occurrence of the Effective Date.
2. Definitions
When used herein, the following terms shall have the
following meanings:
(a) "Award" means an award granted to any Key Employee or
Non-Employee Director in accordance with the provisions of the
Plan in the form of Restricted Stock.
(b) "Award Agreement" means the written agreement
evidencing each Award granted to a Key Employee or Non-Employee
Director under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means (i) a sale, assignment,
lease, transfer, conveyance or other disposition, directly or
indirectly, of all or substantially all of the Company's assets
or properties, whether in a single transaction or a series of
related transactions (other than by way of merger or
consolidation) to any "person" or "group" (as such terms are used
for purposes of Sections 13(d) and 14(d) of the Exchange Act),
(ii) the liquidation or dissolution of the Company, (iii) the
time that the Company first determines or reasonably should have
known that any "person" or "group" (as such terms are used for
purposes of Section 13(d) and 14(d) of the Exchange Act, whether
or not applicable) is or becomes the "beneficial owner" (as such
terms is used in Rules 13d-3 and 13d-5 under the Exchange Act,
whether or not applicable, except that a "person" shall be deemed
to have "beneficial ownership" of all shares that any such person
has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or
indirectly (including as a result of a merger or consolidation),
of more than 50% of the total voting power in the aggregate of
all classes of capital stock then outstanding of the Company
normally entitled to vote in elections of directors, (iv) during
any period of 12 consecutive months after the Effective Date,
individuals who at the beginning of such period constituted the
Board of Directors of the Company (determined after the
resignation of interim directors who are serving as directors
only until all of the individuals who are proposed by the First
Amended Joint Plan of Reorganization as the initial directors
(other than Thomas Thorsen) (the "Initial Directors") of the
Company are approved by the applicable gaming authorities with
jurisdiction and together with any new directors whose election
by such board or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority
of the directors then still in office who were directors at the
beginning of such period, cease for any reason to constitute a
majority of the Board of Directors of the Company; provided,
however, that (A) any interim director of the Company who is
still serving as a director of the Company six months after the
Effective Date shall be deemed to be an Initial Director for
purposes of clause (iv) hereof, and (B) the occurrence of a
"Black Hawk Casino Event" as defined in the Indenture dated June
___, 1996 among the Company, BWBH, Inc., BWCC, Inc., Millsite 27,
Inc., Silver Hawk Casino, Inc., and Fleet National Bank, as
trustee, shall not constitute a Change of Control.
(e) "Code" means the Internal Revenue Code of 1986, as now
in effect or as hereafter amended. All citations to sections of
the Code are to such sections as they may from time to time be
amended or renumbered.
(f) "Committee" means the Committee appointed by the Board
pursuant to Section 3.
(g) "Company" means Hemmeter Enterprises, Inc. and on and
after the Effective Date, Colorado Gaming & Entertainment Co.,
its successors and assigns.
(h) "Effective Date" means the date on which the First
Amended Joint Plan of Reorganization, as approved by the Federal
Bankruptcy Court for the Eastern District of Louisiana, is
consummated in accordance with its terms.
(i) "Employee" means a common law employee of the Company
or its subsidiaries.
(j) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(k) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(l) "Initial Award" means an Award of Restricted Stock
which has not previously been forfeited pursuant to the terms of
the Plan.
(m) "Key Employee" means Stephen J. Szapor, Jr., President
and Chief Executive Officer, Alan L. Mayer, Senior Vice President
and Chief Legal Officer, Richard Rabin, Senior Vice President of
Operations, and Robert Stephens, Chief Accounting Officer, and
such other officers or key employees of the Company or its
subsidiaries who, in the judgment of the Committee, are
responsible for or contribute to the management, growth or
profitability of the business of the Company or its subsidiaries.
(n) "Non-Employee Director" means a member of the Board who
is not an Employee of the Company.
(o) "Plan" means the Colorado Gaming & Entertainment
Company Management Incentive and Non-Employee Director Stock
Plan, as the same may be amended, administered or interpreted
from time to time.
(p) "Restricted Stock" means Stock delivered under the Plan
subject to the requirements of Sections 6 and 7 and such other
restrictions as the Committee deems appropriate or desirable.
(q) "Restriction Period" means (i) for the Initial Awards
under the Plan the three year period following the date of such
Awards and (ii) for subsequent Awards, as a result of the
forfeiture of any Award, such period as the Committee shall
establish.
(r) "Stock" means the common stock ($0.01 par value) of the
Company.
3. Administration of the Plan
(a) The Plan shall be administered by the Committee, as
appointed by the Board and serving at the Board's pleasure. All
members of the Committee shall be "disinterested" directors as
that term is defined in Rule 16b-3 of the Exchange Act and
"outside directors" as that term is defined in Code section
162(m). The Plan is intended to be a "formula plan" meeting the
conditions of Rule 16b-3(c)(2)(ii) of the Exchange Act with
respect to Awards made pursuant to Non-Employee Directors under
Section 5(b). Awards to Key Employees under the Plan are
intended to constitute "performance-based compensation" within
the meaning of Code section 162(m) and all provisions hereunder
shall be interpreted consistent with Code section 162(m) and the
regulations thereunder. The Committee shall have no discretion
to alter the terms of an Award to a Non-Employee Director which
would cause the Plan not to be a formula plan within the meaning
of Rule 16b-3(c)(2)(ii) of the Exchange Act with respect to
Awards made to Non-Employee Directors.
(b) All decisions, determinations or actions of the
Committee made or taken pursuant to grants of authority under the
Plan shall be made or taken in the sole discretion of the
Committee and shall be final, conclusive and binding on all
persons for all purposes.
(c) The Committee shall have full power, discretion and
authority to interpret, construe and administer the Plan and any
part thereof, and its interpretations and constructions thereof
and actions taken thereunder shall be final, conclusive and
binding on all persons for all purposes.
(d) The Committee's decisions and determinations under the
Plan need not be uniform and may be made selectively among Key
Employees, whether or not such Key Employees are similarly
situated.
(e) The Committee shall keep minutes of its actions under
the Plan. The act of a majority of the members of the Committee
present at a meeting duly called and held shall be the act of the
Committee. Any decision or determination reduced to writing and
signed by all members of the Committee shall be fully effective
as if made by unanimous vote at a meeting duly called and held.
(f) The Committee may employ such legal counsel, including
without limitation counsel regularly employed by the Company,
consultants and agents as the Committee may deem appropriate for
the administration of the Plan and may rely upon any opinion
received from any such counsel or consultant and any computations
received from any such consultant or agent. All expenses
incurred by the Committee in interpreting and administering the
Plan, including without limitation, meeting fees and expenses and
professional fees, shall be paid by the Company.
(g) No member or former member of the Committee or the
Board shall be liable for any action or determination made in
good faith with respect to the Plan or any Award granted under
it. Each member or former member of the Committee or the Board
shall be indemnified and held harmless by the Company against all
cost or expense (including counsel fees and expenses) or
liability (including any sum paid in settlement of a claim with
the approval of the Board) arising out of any act or omission to
act in connection with the Plan, unless arising out of such
member's or former member's own fraud or bad faith. Such
indemnification shall be in addition to any rights of
indemnification the members or former members may have as
directors of the Company or under the by-laws of the Company.
4. Shares Subject to the Plan
The aggregate number of shares of Stock which may be awarded
under the Plan shall not exceed 7.5% of the Company's outstanding
Stock on the Effective Date, determined as if (i) the shares of
Stock of the Company reserved for issuance hereunder were issued
and outstanding, and (ii) the shares of Stock of the Company to
be issued to Stephen J. Szapor, Jr., pursuant to his Employment
Agreement, were issued and outstanding, but subject to adjustment
as provided in Section 9. Such shares shall be made available
from authorized and unissued shares. The aggregate number of
shares of Stock which may be awarded to Non-Employee Directors
shall not exceed 0.5% of the Company's outstanding Stock on the
Effective Date, as determined in this Section 4. If, for any
reason, any shares of Stock awarded under the Plan are not
delivered by or revert to the Company, for reasons including but
not limited to a forfeiture of Restricted Stock, such shares of
Stock shall become available for further award under the Plan;
provided however, that shares purchased by the Company from Key
Employees, Non-Employee Directors and Stock withheld pursuant to
Section 9(g) hereof shall no longer be available for further
Award under the Plan.
5. Grant of Awards and Award Agreements
(a) Awards to Key Employees
(i) The Committee shall determine the Key Employees
who shall participate in the Plan.
(ii) The Committee shall determine the number of whole
shares, if any, of Restricted Stock for each Key Employee,
provided however, that the following Key Employees shall be
entitled to the percentage (as determined pursuant to Section 4)
of the Stock of the Company set forth opposite his or her name:
Name Percentage
Stephen J. Szapor, Jr. 2.5%
Alan L. Mayer 1.25%
Richard Rabin 1.25%
Robert Stephens 0.50%
Except as otherwise provided herein, the number of whole shares
of Restricted Stock awarded to any Key Employee shall be
determined in the sole discretion of the Committee based on such
factors as the Committee shall determine.
(iii) Subject to the provisions of the Plan and the
requirements necessary for an Award to constitute "performance-
based compensation" under Code section 162(m), the Committee
shall determine the terms and conditions of each Award, which
shall be based upon or derived from earnings before interest,
taxes, depreciation and amortization.
(iv) The maximum number of shares of Restricted Stock
that any Key Employee and all Key Employees as a group shall be
eligible to receive under the Plan shall not exceed 7.0% of the
Company's outstanding Stock on the Effective Date (as determined
pursuant to Section 4).
(b) Award to Non-Employee Directors
(i) All individuals who are Non-Employee Directors,
regardless of when appointed to the Board, shall participate in
the Plan.
(ii) Each Non-Employee Director shall receive an Award
of 2,315 shares of the Stock of the Company on the date such Non-
Employee Director first qualifies as a director and on each date
on which such Non-Employee Director is subsequently reelected as
such until the total number of shares awarded under the Plan to
Non-Employee Directors equals 0.5% of the Company's outstanding
Stock on the Effective Date (as determined pursuant to Section
4), subject to the requirements of Sections 6 and 7.
(c) Each Award granted under the Plan shall be evidenced by
a written Award Agreement, in a form approved by the Committee.
Such agreement shall be subject to the Plan and shall incorporate
the express terms and conditions, if any, required under the Plan
or by the Committee.
6. Restricted Stock
(a) Awards to Key Employees
(i) The shares of Stock awarded to each Key Employee
shall be Restricted Stock and shall be subject to forfeiture
during the Restriction Period.
(ii) The Committee shall establish annual performance
goals for each year in the Restriction Period and such Key
Employee shall earn 1/3 of his or her award by meeting the
performance goals for each year.
(iii) Upon achieving the performance goals for a
particular year, 1/3 of the Award shall vest, all restrictions on
such shares shall lapse, such shares shall no longer be
Restricted Stock and such shares shall become nonforfeitable.
(iv) If in any year during the Restriction Period for
an Initial Award under the Plan the performance goals for such
year are not achieved, 1/3 of the shares of Restricted Stock
under such Initial Award shall be forfeited. If the performance
goals for any Restriction Period with respect to an Award other
than an Initial Award are not achieved, then the shares of
Restricted Stock under the Award shall be forfeited at the end of
the applicable Restriction Period. All forfeited shares of
Restricted Stock shall be available for further Award under the
Plan.
(v) If a Key Employee terminates employment with the
Company for any reason before the expiration of the Restriction
Period, all forfeitable shares of Restricted Stock shall, unless
the Committee provides otherwise in the Award Agreement, be
forfeited by the Key Employee and shall revert to the Company.
Upon being forfeited, such shares of Restricted Stock shall
become available for further Award under the Plan.
(b) Awards to Non-Employee Directors
The shares of Stock awarded to each Non-Employee
Director pursuant to an Award shall be Restricted Stock when
awarded and shall be forfeited if such Non-Employee Director is
not a director of the Company on the date of the first annual
meeting of the Company following the date of such Award.
(c) Except as otherwise provided in this Section, no shares
of Restricted Stock received by a Key Employee or a Non-Employee
Director shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of during the Restriction
Period.
(d) Upon a Change of Control, the Restriction Period for
any Key Employee or Non-Employee Director shall expire with all
restrictions on shares of Restricted Stock lapsing and such
shares becoming nonforfeitable.
(e) The Committee may require under such terms and
conditions as it deems appropriate or desirable that the
certificates for Stock delivered under the Plan may be held in
custody by a bank or other institution, or that the Company may
itself hold such shares in custody until the Restriction Period
expires or until restrictions thereon otherwise lapse, and may
require, as a condition of any receipt of Restricted Stock, that
the Key Employee or the Non-Employee Director shall have
delivered a stock power endorsed in blank relating to the
Restricted Stock.
7. Certificates for Awards of Stock
(a) Subject to paragraph (b) of this Section, each Key
Employee or Non-Employee Director entitled to receive shares of
Stock under the Plan shall be issued a certificate for such
shares promptly after the restrictions expire. Such certificate
shall be registered in the name of the Key Employee or Non-
Employee Director, shall bear an appropriate legend reciting the
terms, conditions and restrictions, if any, applicable to such
shares, and shall be subject to appropriate stop-transfer orders.
The Committee may require that a Key Employee or Non-Employee
Director enter into a shareholder agreement or voting trust
providing such terms and conditions as the Committee shall
determine.
(b) The Company shall not be required to issue or deliver
any certificates for shares of Stock prior to (i) the listing of
such shares on any stock exchange on which the Stock may then be
listed and (ii) the completion of any registration or
qualification of such shares under any federal or state law, or
any ruling or regulation of any government body which the Company
shall, in its sole discretion, determine to be necessary or
advisable. No Key Employee or Non-Employee Director who receives
an Award shall have any right to compel the Company to register
or qualify the shares of Stock representing an Award under
federal or state securities laws in order to permit their
transfer.
(c) All certificates for shares of Stock delivered under
the Plan shall also be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is
then listed and any applicable federal or state securities law,
and the Committee may cause a legend or legends to be placed on
any such certificates to make appropriate reference to such
restrictions. The foregoing provisions of this paragraph (c)
shall not be effective if and to the extent that the shares of
Stock delivered under the Plan are covered by an effective and
current registration statement relating to such Stock under the
Securities Act of 1933, or if and so long as the Committee
determines that application of such provisions is no longer
required or desirable. In making such determination, the
Committee may rely upon an opinion of counsel for the Company.
(d) Except for the restrictions on Restricted Stock under
Sections 6 and 7, each Key Employee or Non-Employee Director who
receives an Award shall have all of the rights of a shareholder
with respect to such shares, including the right to vote the
shares and receive dividends and other distributions.
8. Amendment or Termination
(a) The Board may, at any time, amend or terminate the
Plan. The Plan may also be amended by the Committee, provided
that all such amendments shall be reported to the Board. No
amendment or termination of the Plan shall retroactively impair
the rights of any person with respect to an Award.
(b) Notwithstanding Section 8(a), the provisions of the
Plan pertaining to the formula applicable to Non-Employee
Directors may not be amended more than once every six months,
other than to comport with changes in the Code or ERISA.
9. Miscellaneous
(a) Nothing in this Plan or any Award granted hereunder
shall confer upon any Employee or Non-Employee Director any right
to continue in the employ or service of the Company or interfere
in any way with the right of the Company to terminate his or her
employment or service at any time.
(b) No Award payable under the Plan shall be deemed salary
or compensation for the purpose of computing benefits under any
employee benefit plan or other arrangement of the Company for the
benefit of its employees unless the Company shall determine
otherwise.
(c) No Key Employee or Non-Employee Director shall have any
claim to an Award until it is actually granted under the Plan.
(d) If the Committee shall find that any person to whom any
Award, or portion thereof, is payable under the Plan is unable to
care for his or her affairs because of illness or accident, or is
a minor, then any payment due (unless a prior claim therefor has
been made by a duly appointed legal representative) may, if the
Committee so directs the Company, be paid to the Key Employee's
or the Non-Employee Director's spouse, a child, a relative, an
institution maintaining or having custody of such person, or any
other person deemed by the Committee to be a proper recipient on
behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the
Company therefor.
(e) The right of any Key Employee, Non-Employee Director or
other person to any Award payable under the Plan may not be
assigned, transferred, pledged or encumbered, either voluntarily
or by operation of law, except by the laws of descent and
distribution upon death or as may otherwise be required by law.
If, by reason of any attempted assignment, transfer, pledge, or
encumbrance or any bankruptcy or other event happening at any
time, any amount payable under the Plan would be made subject to
the debts or liabilities of the Key Employee or Non-Employee
Director or would otherwise devolve upon anyone else and not be
enjoyed by the Key Employee or Non-Employee Director, then the
Committee may terminate such person's interest in any such
payment and direct that the same be held and applied to or for
the benefit of the Key Employee or Non-Employee Director in such
manner as the Committee may deem proper.
(f) Copies of the Plan and all amendments, administrative
rules and procedures and interpretations shall be made available
to all Key Employees or Non-Employee Directors at all reasonable
times at the Company's headquarters.
(g) The Committee may cause to be made, as a condition
precedent to the payment of any Award, or otherwise, appropriate
arrangements (including the withholding of Stock) with the Key
Employee, the Non-Employee Director or beneficiary, for the
withholding of any Federal, state, local or foreign taxes.
(h) The Plan and the grant of Awards shall be subject to
all applicable Federal and state laws, rules, and regulations and
to such approvals by any government or regulatory agency as may
be required.
(i) All elections, designations, requests, notices,
instructions and other communications from a Key Employee, Non-
Employee Director, Beneficiary or other person to the Committee,
required or permitted under the Plan, shall be in such form as is
prescribed from time to time by the Committee and shall be mailed
by certified mail return receipt requested or delivered to such
location as shall be specified by the Committee.
(j) The terms of the Plan shall be binding upon the Company
and its successors and assigns.
(k) Captions preceding the sections hereof are inserted
solely as a matter of convenience and in no way define or limit
the scope or intent of any provision hereof.
HEMMETER ENTERPRISES, INC.
By_________________________________
Its President
COLORADO GAMING & ENTERTAINMENT COMPANY
CASH BONUS PLAN
TABLE OF CONTENTS
Page
1. Purpose . . . . . . . . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . 1
3. Administration of the Plan . . . . . . . . . . . . . . 2
4. Bonus Pool . . . . . . . . . . . . . . . . . . . . . . 3
5. Eligibility and Terms . . . . . . . . . . . . . . . . 4
6. Amendment or Termination . . . . . . . . . . . . . . . 4
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . 5
CASH BONUS PLAN
1. Purpose
The purpose of the Colorado Gaming & Entertainment Company
Cash Bonus Plan is to attract and retain, as employees of the
Company or its subsidiaries, senior level persons whose
responsibilities and decisions directly affect the performance of
the Company and its subsidiaries, to motivate and reward good
performance, and to encourage such employees to continue to exert
their best efforts on behalf of the Company and its subsidiaries
by providing opportunities for cash bonuses to these Key
Employees (including officers and directors who are also
employees). Such cash bonuses shall be subject to such
requirements as the Committee may determine or as provided
herein.
2. Definitions
When used herein, the following terms shall have the
following meanings:
(a) "Base Period EBITDA" means, in respect of a Plan
Period, the consolidated EBITDA of the Company and its Operating
Subsidiaries determined for the same period in the immediate
preceding fiscal year of the Company.
(b) "Board" means the Board of Directors of the Company.
(c) "Bonus" means a cash bonus payable in accordance with
the provisions of the Plan.
(d) "Bonus Pool" means the amount available for the payment
of Bonuses hereunder for any Plan Period as determined in Section
4.
(e) "Committee" means the Committee appointed by the Board
pursuant to Section 3.
(f) "Company" means Hemmeter Enterprises, Inc., a Delaware
corporation, which shall, on the Effective Date, change its name
to Colorado Gaming & Entertainment Company, its successors and
assigns.
(g) "EBITDA" means for any entity, its net income, as
determined in accordance with generally accepted accounting
principles, before interest, taxes, amortization and depreciation
expense, with each such item determined in accordance with
generally accepted accounting principles, provided; however, that
in determining EBITDA, extraordinary gains and gains resulting in
changes in accounting practices, expenses incurred in connection
with the bankruptcy of the Company and BWBH, Inc., BWCC, Inc.,
and Millsite 27, Inc. and gains, and losses incurred in
connection with the Riverboat operations of the Company's Grand
Palais subsidiary shall all be disregarded.
(h) "Effective Date" means the date on which the First
Amended Joint Plan of Reorganization, as approved by the United
States Bankruptcy Court for the Eastern District of Louisiana, is
consummated in accordance with its terms.
(i) "Employee" means a common law employee of the Company
or its subsidiaries.
(j) "Key Employee" means any Employee of the Company or any
of its Operating Subsidiaries who, by the terms of his or her
employment contract, are designated as a participant in the Plan,
and such other officers or Employees of the Company or its
subsidiaries who are designated by the Committee as participants
in the Plan because they are responsible for or contribute to the
management, growth or profitability of the business of the
Company or its subsidiaries.
(k) "Operating Subsidiaries" means BWBH, Inc., BWCC, Inc.,
Silver Hawk Casino, Inc., Millsite 27, Inc., and any other
subsidiary of the Company (other than Grand Palais Riverboat,
Inc.) which is engaged during the period in question in the
operation of a casino or related facilities.
(l) "Plan" means the Colorado Gaming & Entertainment
Company Cash Bonus Plan, as the same may be amended, administered
or interpreted from time to time.
(m) "Plan Period" means the period commencing on the
Effective Date and ending on December 31, 1996 and each
subsequent six month period thereafter.
3. Administration of the Plan
(a) The Plan shall be administered by the Committee, which
shall be appointed by the Board and shall serve at the Board's
pleasure. All members of the Committee shall be "outside
directors" of the Company as that term is defined in Code Section
162(m).
(b) Bonuses paid under the Plan are intended to be
"performance-based compensation" within the meaning of Code
Section 162(m).
(c) All decisions, determinations or actions of the
Committee made or taken pursuant to grants of authority under the
Plan shall be made or taken in the sole discretion of the
Committee and shall be final, conclusive and binding on all
persons for all purposes.
(d) The Committee shall have full power, discretion and
authority to interpret, construe and administer the Plan and any
part thereof, and its interpretations and constructions thereof
and actions taken thereunder shall be final, conclusive and
binding on all persons for all purposes.
(e) The Committee's decisions and determinations under the
Plan need not be uniform and may be made selectively among Key
Employees, whether or not such Key Employees are similarly
situated.
(f) The Committee shall keep minutes of its actions under
the Plan. The act of a majority of the members present at a
meeting duly called and held shall be the act of the Committee.
Any decision or determination reduced to writing and signed by
all members of the Committee shall be fully as effective as if
made by unanimous vote at a meeting duly called and held.
(g) The Committee may employ such legal counsel, including
without limitation counsel regularly employed by the Company,
consultants and agents as the Committee may deem appropriate for
the administration of the Plan and may rely upon any opinion
received from any such counsel or consultant and any computations
received from any such consultant or agent. All expenses
incurred by the Committee in interpreting and administering the
Plan, including without limitation, meeting fees and expenses and
professional fees, shall be paid by the Company.
(h) No member or former member of the Committee or the
Board shall be liable for any action or determination made in
good faith with respect to the Plan or any Bonus granted under
it. Each member or former member of the Committee or the Board
shall be indemnified and held harmless by the Company against all
cost or expense (including counsel fees and expenses) or
liability (including any sum paid in settlement of a claim with
the approval of the Board) arising out of any act or omission to
act in connection with the Plan, unless arising out of such
member's or former member's own fraud or bad faith. Such
indemnification shall be in addition to any rights of
indemnification the members or former members may have as
directors or under the by-laws of the Company.
4. Bonus Pool
(a) The Bonus Pool for each Plan Period shall be equal to
15% of the difference between (i) the consolidated EBITDA of the
Company and its Operating Subsidiaries for such Plan Period, and
(ii) the Base Period EBITDA for such Plan Period. The Bonus Pool
for a Plan Period shall be determined by the Committee as soon as
practicable following the end of the Plan Period, provided;
however, that the Bonus Pool for any Plan Period that includes
the last day of the fiscal year of the Company shall not be
determined until after the audited financial statements of the
Company for such fiscal year are available and shall be increased
or reduced, as appropriate, to reflect audit adjustments to the
EBITDA of the Company and its Operating Subsidiaries during such
Plan Period.
5. Eligibility and Terms
(a) The Committee shall, prior to the beginning of each
Plan Period, determine the percentage of the Bonus Pool for such
Plan Period which will be payable to each Key Employee. Such
determination shall be made in the sole discretion of the
Committee based on such factors as the Committee shall determine.
Notwithstanding the foregoing, by approving this Plan, the
Committee shall be deemed to have approved the percentage of the
Bonus Pool payable to any Key Employee who, pursuant to the terms
of an employment contract in existence on the date of such
approval, provides that such Key Employee will participate in the
Bonus Pool at a specified level.
(b) Unless otherwise provided by the Committee, if the
employment of a Key Employee terminates prior to the end of a
Plan Period, then the Bonus, if any, such Key Employee would have
otherwise received shall be paid pro rata based on the percentage
of the Plan Period the Key Employee is employed by the Company.
(c) Subject to the provisions of the Plan, the Committee
shall determine the terms and requirements, if any, of each
Bonus.
(d) Bonus under this Plan shall be paid at the times
designated by the Committee, but in no event later than 15 days
after the filing by the Company of its Form 10-Q or Form 10-K for
the period ending on the last day of the Plan Period in respect
of which the Bonus is being paid.
6. Amendment or Termination
The Board may, at any time, amend or terminate the Plan.
The Plan may also be amended by the Committee, provided that all
such amendments shall be reported to the Board. No amendment or
termination of the Plan shall retroactively impair the rights of
any person with respect to a Bonus.
7. Miscellaneous
(a) Nothing in this Plan or any Bonus payable hereunder
shall confer upon any Employee any right to continue in the
employ of the Company or interfere in any way with the right of
the Company to terminate his or her employment at any time.
(b) No Bonus payable under the Plan shall be deemed salary
or compensation for the purpose of computing benefits under any
employee benefit plan or other arrangement of the Company for the
benefit of its employees unless the Committee shall determine
otherwise.
(c) No Key Employee shall have any claim to a Bonus until
all requirements established by the Committee for the payment of
such Bonus shall have been satisfied.
(d) If the Committee shall find that any person to whom any
Bonus, or portion thereof, is payable under the Plan is unable to
care for his or her affairs because of illness or accident, or is
a minor, then any payment due (unless a prior claim therefor has
been made by a duly appointed legal representative) may, if the
Committee so directs the Company, be paid to the Key Employee's
spouse, a child, a relative, an institution maintaining or having
custody of such person, or any other person deemed by the
Committee to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Company therefor.
(e) The right of any Key Employee or other person to any
Bonus payable under the Plan may not be assigned, transferred,
pledged or encumbered, either voluntarily or by operation of law,
except by the laws of descent and distribution upon death or as
may otherwise be required by law. If, by reason of any attempted
assignment, transfer, pledge, or encumbrance or any bankruptcy or
other event happening at any time, any amount payable under the
Plan would be made subject to the debts or liabilities of the Key
Employee or would otherwise devolve upon anyone else and not be
enjoyed by the Key Employee, then the Committee may terminate
such person's interest in any such payment and direct that the
same be held and applied to or for the benefit of the Key
Employee in such manner as the Committee may deem proper.
(f) Copies of the Plan and all amendments, administrative
rules and procedures and interpretations shall be made available
to all Key Employees at all reasonable times at the Company's
headquarters.
(g) The Company shall withhold from the payment of any
Bonus required withholding of any Federal, state, local or
foreign taxes.
(h) All elections, designations, requests, notices,
instructions and other communications from a Key Employee,
Beneficiary or other person to the Committee, required or
permitted under the Plan, shall be in such form as is prescribed
from time to time by the Committee and shall be mailed by
certified mail return receipt requested or delivered to such
location as shall be specified by the Committee.
(i) The terms of the Plan shall be binding upon the Company
and its successors and assigns.
(j) Captions preceding the sections hereof are inserted
solely as a matter of convenience and in no way define or limit
the scope or intent of any provision hereof.
HEMMETER ENTERPRISES, INC.
By__________________________
Its President
EMPLOYMENT AGREEMENT
This Agreement is made as of __________, 1996 by and between
Stephen J. Szapor, Jr. (the "Executive") and Colorado Gaming &
Entertainment Co., a Delaware corporation (the "Company").
Recitals
The Company desires to retain the services of Executive as
its President and Chief Executive Officer, and as a Director of
the Company, and the Executive is willing to serve in such
capacity on the terms and subject to the conditions herein set
forth.
NOW THEREFORE, in consideration of the promises, mutual
covenants and agreements contained herein, the Company and the
Executive agree as follows:
1. Employment and Duties. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to
employ the Executive during the Employment Period (as hereinafter
defined), as its President and Chief Executive Officer to perform
such duties and responsibilities as are customarily assigned to
such positions and such other duties and responsibilities not
inconsistent therewith as may be assigned to the Executive from
time to time by the Board of Directors of the Company. The
Executive shall be a member of the Board of Directors of the
Company on the Commencement Date (as hereinafter defined) and the
Board of Directors shall propose the Executive for reelection at
the conclusion of each term of the Executive as a director
occurring during the Employment Period.
2. Performance.
(a) General. The Executive accepts the employment
described in Section 1 of this Agreement and agrees to devote all
of his working time and efforts to the faithful and diligent
performance of the services described therein; provided, however,
that the Executive may participate in charitable activities and
may, subject to Section 15 hereof, participate in holding
investments and in businesses owned by members of the Executive's
family, provided that such participation does not have an adverse
impact on the Executive's performance of his duties for the
Company.
(b) Conduct. The Executive agrees that he will
conduct his activities, and will cause any activities conducted
on his behalf to be conducted in a lawful manner and specifically
will not engage in the following transactions:
(1) make payment or offers of payment, directly
or indirectly, to any domestic or foreign government
official or employee in order to obtain business, retain
business or direct business to others, or for the purpose of
inducing such government official or employee to fail to
perform or to perform improperly his official functions;
(2) receive, pay or offer anything of value,
directly or indirectly, from or to any private party in the
form of a commercial bribe, influence payment or kickback
for any such purpose; or
(3) use, directly or indirectly, any funds or
other assets of the Company for any unlawful purpose,
including, without limitation, political contributions in
violation of applicable law.
3. Term. The term of employment under this Agreement
shall commence on __________ (the "Commencement Date") and shall
remain in effect for a period of three (3) years, ending on
__________ (such date and the last day of any extended term of
employment pursuant to this Section 3 being referred to as the
"Termination Date"), unless sooner terminated hereunder (the
"Employment Period"). The Employment Period shall be
automatically renewed on the then current Termination Date for
successive one (1) year periods unless terminated by either the
Executive or the Company by giving written notice of termination
ninety (90) days in advance of the then current Termination Date.
4. Compensation.
(a) Base Salary. As base salary hereunder ("Base
Salary"), the Company agrees to pay, during the Employment
Period, a salary at an initial rate of Three Hundred Thousand
Dollars ($300,000) per annum payable in the manner and frequency
in which the Company's payroll for senior executives is
customarily paid. The Company and the Executive agree that the
Salary shall be subject to review at least annually, but may not
be reduced without the Executive's prior written consent.
(b) Incentive Compensation. In addition to the
Executive's Base Salary, the Executive shall be entitled, during
the Employment Period, to the following additional compensation
and benefits calculated as follows:
(1) Effective Date Bonus. The Executive shall be
entitled to a cash bonus of $100,000 which shall be fully earned
on the first day of the Employment Period and shall be payable
within five days of the Commencement Date.
(2) Stock Grant. On the Commencement Date, the
Executive shall be entitled to receive 138,888 shares of common
stock of the Company, which number of shares equals 2-1/2% of the
total number issued and outstanding shares of Company common
stock determined assuming that the maximum number of shares of
common stock of the Company available for grant under the
Management Incentive and Non-Employee Director Stock Bonus Plan
have been awarded and are issued and outstanding. It shall be a
condition precedent to the issuance of such shares that the
Executive make arrangements satisfactory to the Company to pay
any withholding taxes in respect of such shares.
(3) The Executive shall be a participant in the
Management Cash Bonus Plan of the Company at a level such that
the Executive will be entitled to 30% of the bonus pool created
by such plan and in the Management Incentive and Non-Employee
Director Stock Plan of the Company at a level such that the
Executive will be entitled to an award of 33 1/3% of the shares
of stock of the Company subject to award under such plan.
(c) Vacation and Sick Leave. The Executive shall be
entitled to vacation and sick leave in accordance with the
Company's policies for senior executive employees.
(d) Disability. If at any time during the Employment
Period the Executive is substantially unable to perform his
duties hereunder by reason or illness, accident, or other
disability and such disabilities is expected to last for a period
of six months or less (as confirmed by competent medical
evidence) ("Temporary Disability"), the Executive shall continue
to be treated as an employee hereunder for all purposes and be
entitled to receive periodic payments of Base Salary to which he
would otherwise be entitled pursuant to Section 4(a) of this
Agreement for at least the lesser of the balance of the
Employment Period or the period of such Temporary Disability. If
such disability is expected to last for a period of more than six
months (as confirmed by complete medical evidence) ("Permanent
Disability"), the Executive shall be treated as an employee
hereunder for all purposes and be entitled to receive periodic
payments of Base Salary to which he would otherwise be entitled
to pursuant to Section 4(a) of the Agreement for at least the
lesser of the remaining balance of the Employment Period or six
(6) months. Any payments under any long term disability plan
maintained by the Company shall be an offset against any payments
to the Executive hereunder.
(e) Death. In the event of the death of the Executive
during the Employment Period, his designated successors shall be
entitled to receive, as a survivor's benefit, the periodic
payments of Base Salary that would otherwise be payable to the
Executive pursuant to Section 4(a) of this Agreement by reason of
his employment for the lesser of the balance of the Employment
Period or six (6) weeks. In the event of the Executive's death,
the Company will use its best efforts to advance up to three (3)
months Base Salary to the Executive's beneficiaries of any life
insurance provided pursuant to Section 4(f) hereof, provided that
such advances are to be repaid by such beneficiaries upon
receiving such insurance proceeds.
(f) Other Benefits.
(1) General. Except as otherwise specifically
provided herein, during the Employment Period, the Employee shall
be eligible for all non-wage benefits that the Company provides
generally for its senior executives, including retirement,
medical, life insurance and long term disability benefits. The
Company reserves the right to alter, amend or terminate its
standard benefit programs for senior executives and to alter or
amend coverages thereunder.
(2) Legal Counsel. During the term of the
Agreement, the Company agrees to pay for the reasonable costs of
the Executive's legal counsel in circumstances where legal
representation for the Executive is necessary or appropriate with
regard to actions taken by the Executive in his capacity as an
officer of the Company.
5. Business Expenses - Reimbursement. The Company shall
reimburse the Executive for the reasonable, ordinary, and
necessary business expenses incurred by him in connection with
the performance of his duties hereunder, including, but not
limited to, ordinary and necessary travel expenses and
entertainment expenses and car phone expenses. In addition, the
Company shall reimburse the Executive the full cost of obtaining
and continuing any licenses which must be obtained or continued
by the Executive due to his employment by the Company. The
Executive shall provide the Company with an accounting of his
expenses, which accounting shall clearly reflect which expenses
are reimbursable by the Company. The Executive shall provide the
Company with such other supporting documentation and other
substantiation of reimbursable expenses as will conform to
Internal Revenue Service or other requirements. All such
reimbursements shall be payable by the Company to the Executive
within a reasonable time after receipt by the Company of
appropriate documentation therefore provided, however, the
Company shall have no obligation to reimburse any expense for
which appropriate and customary back-up documentation is not
provided within sixty (60) days following accrual of the
obligation in question.
6. Termination By Company.
(a) Termination for Just Cause. The Company shall
have the option to terminate the employment of the Executive
hereunder, effective upon the effective date set forth in written
notice of such termination to the Executive, for Just Cause. For
purposes of this Agreement, the term "Just Cause" shall mean the
occurrence of any one or more of the following events: (i) the
material breach by the Executive of his covenants under this
Agreement, and the failure by the Executive to promptly cure the
breach or failure of performance upon written notice thereof from
the Company; (ii) the Executive's willful refusal to perform, or
his substantial neglect of, the duties assigned to the Executive
pursuant to Section 1 hereof, and the failure by the Executive to
promptly cure the breach or failure of performance upon written
notice thereof from the Company; (iii) the commission by the
Executive of theft or embezzlement of Company property or other
acts of dishonesty relating to his employment; (iv) the
commission by the Executive of a crime resulting in injury to the
business, property or reputation of the Company or any affiliate
of the Company or commission of other significant activities
harmful to the business or reputation of the Company or any
affiliate of the Company; (v) any significant violation of any
statutory or common law duty of loyalty to the Company;
(vi) failure of the Executive to comply with any provision of the
gaming or liquor laws of Colorado or any other jurisdiction in
which the Company or any affiliate conducts operations or is
applying for a gaming or liquor license or failure of the
Executive to comply with any rule or regulation of any
administrative body having jurisdiction, which may materially and
negatively affect the gaming or liquor license of the Executive
or the Company or any affiliate of the Company; or (vii) the
failure of the Executive to obtain or retain any permit, license
or approval required by any governmental authority and such
failure is not the result of any negligence or omission by the
Company. A termination of employment of the Executive for Just
Cause shall be effectuated by giving the Executive written notice
of the termination setting forth in reasonable detail the
specific conduct of the Executive that constitutes Just Cause and
the specific provision(s) of this Agreement on which the Company
relies, and shall be given within 90 days of the date on which
the Company first acquires knowledge of occurrence of the conduct
giving rise to Just Cause. Upon termination of the Executive for
Just Cause, the Company shall pay the Executive the unpaid
portion of Base Salary attributable to periods up to and
including the effective date of such termination and any other
amounts to which the Executive may be entitled under any benefit
plan maintained by the Company or as may otherwise be provided by
law, and the Executive shall not be entitled to any severance
benefits pursuant to Section 10 hereof and all obligations of the
Company hereunder shall cease.
(b) Termination Upon Death. This Agreement shall
automatically terminate upon the death of the Executive and,
other than as may be provided in Section 4 hereof or under any
benefit plan maintained by the Company or as may otherwise be
provided by law, the Company shall have no obligation to make,
and the Executive's estate or successors shall have no right to
receive, any further compensation or payments of any kind.
(c) Termination Upon Disability. The Company may
terminate this Agreement upon the Permanent Disability of the
Executive at the end of the period for which the Executive is
entitled to receive Base Salary pursuant to Section 4(d) hereof.
Thereafter, the Company shall be obligated to pay only the
amounts set forth in Section 4 of this Agreement or as to which
the Executive may be entitled under any benefit plan maintained
by the Company or as may otherwise be provided by law.
(d) Termination Without Just Cause. The Company shall
have the option to terminate the Employment Period at any time by
30 days written notice to the Executive. If none of the
circumstances allowing termination pursuant to Section 6(a), (b)
and (c) exist on the date such notice is given, such termination
shall be deemed to have been a termination without Just Cause and
the Executive shall be entitled to the unpaid portion of his Base
Salary attributable to periods up to and including the effective
date of such termination, to any other amounts to which the
Executive may be entitled under any benefit plan maintained by
the Company or as may otherwise be provided by law, and the
Executive shall be entitled to receive the severance benefits
described in Section 10 hereof.
7. Termination By Executive.
(a) Termination for Good Reason. The Executive shall
have the option to terminate his employment with the Company,
effective upon the effective date set forth in written notice of
such termination to the Company, for "Good Reason". For purposes
of this Agreement, Good Reason shall mean the occurrence of any
one or more of the following events: (i) the assignment to the
Executive of any duties inconsistent in any material respect with
the duties described in Section 1 hereof, or any other action by
the Company that results in an intentional diminution of the
Executive's position, authority, duties or responsibilities, and
(ii) any material breach of this Agreement by the Company that
either is not taken in good faith or is not remedied by the
Company promptly after receipt of notice thereof from the
Executive. A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice
of the termination, setting forth in reasonable detail the
specific conduct of the Company that constitutes Good Reason and
the specific provision(s) of this Agreement on which the
Executive relies, and shall be given within 60 days of the event
giving rise to the Good Reason. A termination of employment by
the Executive for Good Reason shall be effective on the fifth
business day following the date when such notice is given, unless
the notice sets forth alternate date (which date shall in no
event be later than 30 days after the notice is given). Upon
termination by the Executive for Good Reason, the Executive shall
be entitled to the unpaid portion of Base Salary attributable to
periods up to and including the effective date of such
termination, to any other amounts to which the Executive may be
entitled under any benefit plan maintained by the Company or as
otherwise may be provided by law, and the Executive shall be
entitled to receive the severance benefits described in Section
10 hereof.
(b) Termination Without Good Reason. The Executive
shall have the option to terminate his employment with the
Company at any time after the first anniversary of this
Agreement, upon six months prior written notice to the Company
delivered to the Company on or after such first anniversary date
of this Agreement. If none of the circumstances constituting
Good Reason exists on the date such notice is given, the
Executive shall be entitled to the unpaid portion of Base Salary
attributable to periods up to and including the effective date of
such termination and any other amounts to which the Executive may
be entitled under any benefit plan maintained by the Company or
as may otherwise be provided by law, and the Executive shall not
be entitled to any severance benefits pursuant to Section 10
hereof.
8. Surrender of Properties. Upon termination of the
Executive's employment with the Company, the Executive shall
promptly surrender to the Company all property provided him by
the Company for use in relation to his employment, and, in
addition, the employee shall surrender to the Company any and all
sales materials, lists of customers and prospective customers,
price lists, files, records, models, or other materials and
information of or pertaining to the Company or its customers or
prospective customers or the products, business, and operations
of the Company.
9. Continuation of Insurance. If, following notice of
termination given by the Company pursuant to Section 6(d) of this
Agreement, the Executive is unable to arrange alternate
employment before the stated effective date of such termination,
the Company shall, at the Company's expense, continue the
Executive's medical, disability, and life insurance coverage for
a period extending one hundred and twenty (120) days following
the effective date of termination or until the Executive secures
alternate employment, whichever date occurs first, and such
period shall be credited against any period for which the Company
is otherwise obligated to make such benefits available to the
Executive under Section 480-B of the Internal Revenue Code of
1986, as amended, or any similar provision of law.
10. Severance Pay. Notwithstanding any other provision of
this Agreement, if the Employment Period is terminated by the
Company or any successor of the Company pursuant to Section 6(d)
hereof, or by the Executive pursuant to Section 7(a) hereof, the
Company shall pay the Executive a severance benefit equal to the
greater of Five Hundred Thousand Dollars ($500,000.00) or the
Executive's Base Salary for the remaining Employment Period at
the annual rate in effect immediately prior to such termination.
Any payment required pursuant to this Section 10 shall be made
within thirty (30) days following the termination date.
11. Indemnification. The Executive shall indemnify the
Company and hold it harmless from and against any and all loss,
damage, and expense (including reasonable attorneys' fees and
disbursements) arising out of any claim or threat of claim
against the Executive or the Company resulting from or in any way
related to the Executive's relationship with any previous
employer, including any claim of breach of contract, interference
with contract or breach or impairment of a real or claimed
legally protected right of such previous employer.
12. Confidentiality of Information; Duty of Non-Disclosure.
The Executive acknowledges and agrees that his employment by the
Company under this Agreement necessarily involves his
understanding of, and access to, certain trade secrets and
confidential information pertaining to the business of the
Company. Accordingly, the Executive agrees that except as may be
required in the reasonable performance of his duties hereunder,
he will not, directly or indirectly, without the express consent
of the Company, disclose to or use for the benefit of any person,
corporation or other entity, or for himself, any and all files,
trade secrets or other confidential information concerning the
internal affairs of the Company, including, but not limited to,
information pertaining to its clients, services, products,
earnings, finances, operations, methods or other activities;
provided, however, that the foregoing shall not apply to
information which is of public record or is generally known,
disclosed or available to the general public or the industry
generally or was known by the Executive prior to his employment
under this Agreement. Further, the Executive agrees that he
shall not, directly or indirectly, remove or retain, without the
express prior written consent of the Company, and upon
termination of this Agreement for any reason shall return to the
Company, any figures, calculations, letters, papers, records,
computer disks, computer print-outs, lists, documents,
instruments, drawings, designs, programs, brochures, sales
literature, or any copies thereof, or any information or
instruments derived therefrom, or any other similar information
of any type or description, however such information might be
obtained or recorded, arising out of or in any way relating to
the business of the Company or obtained as a result of his
employment by the Company. The Executive acknowledges that all
of the foregoing are proprietary information, and are the
exclusive property of the Company. The covenants contained in
this Section 12 shall survive the termination of this Agreement.
13. Enforcement.
(a) Upon presentation of a claim or claims
(collectively, "Claims") arising out of or relating to this
Agreement, or the breach hereof, by an aggrieved party, the other
party shall have thirty (30) days in which to make such inquiries
of the aggrieved party and conduct such investigations as it
believes reasonably necessary to determine validity of the
Claims. At the end of such period of investigation, the
complained of party shall either pay the amount of the claims or
the arbitration proceeding described immediately below shall be
invoked.
(b) In the event that the Claims are not settled by
the procedure set forth immediately above, the Claims shall be
submitted to arbitration conducted in accordance with the
Commercial Arbitration Rules ("Rules") of the American
Arbitration Association ("AAA") except as amplified or otherwise
varied hereby.
(c) The parties shall submit the dispute to the Denver
regional office of the AAA and the situs of the arbitration shall
be Denver County, Colorado.
(d) The arbitration shall be conducted by a single
arbitrator. The parties shall appoint the single arbitrator to
arbitrate the dispute within ten (10) business days of the
submission of the dispute. In the absence of agreement as to the
identity of the single arbitrator to arbitrate the dispute within
such time, the AAA is authorized to appoint an arbitrator in
accordance with the Rules, except that the arbitrator shall have
as his principal place of business the Denver metropolitan area.
(e) The single arbitrator selected by the AAA shall be
an attorney or accountant licensed to practice by the State of
Colorado.
(f) Notwithstanding anything in the Rules to the
contrary, the arbitration award shall be made in accordance with
the following procedure: Each party shall, at the commencement of
the arbitration hearing, submit an initial statement of the
amount each party proposes be selected by the arbitrator as the
arbitration award ("Settlement Amount"). During the course of
the arbitration, each party may vary its proposed Settlement
Amount. At the and of the arbitration hearing, each party shall
submit to the arbitrator its final Settlement Amount ("Final
Settlement Amount"), and the arbitrator shall be required to
select either one or the other Final Settlement Amounts as the
arbitration award without discretion to select any other amount
as the award. The arbitration award shall be paid within ten
(10) business days after the award has been made, together with
interest from the date of award at the rate of eight percent
(8%). Judgment upon the award may be entered in any federal or
state court having jurisdiction over the parties.
14. Costs of Enforcement. In the event of any suit or
proceeding seeking to enforce the terms, covenants, or conditions
of this Agreement, the prevailing party shall, in addition to all
other remedies and relief that may be available under this
Agreement or applicable law, recover his or its reasonable
attorneys' fees and costs as shall be determined and awarded by
the arbitrator or court, as the case may be.
15. Competing Interest. During the Employment Period, the
Executive shall not, without the prior written consent of the
Company, engage in any other business activity that competes with
or is of a nature similar to that of the Company for gain,
profit, or other pecuniary advantage or engage in or in any
manner be connected or concerned, directly or indirectly, whether
as an officer, director, stockholder, partner, owner, executive,
consultant, creditor, or otherwise, with the operation,
management, or conduct of any business that competes with or is
of a nature similar to that of the Company, provided, however,
that this Section 15 shall not prohibit the Executive from owning
up to one (1) percent of the publicly traded shares of any
entity.
16. Noncompete Clause. If the Employment Period is
terminated by the Company for Just Cause pursuant to Section 6(a)
hereof, or voluntarily by the Executive pursuant to Section 7(b)
hereof, the Executive will be prohibited from accepting
employment with, and shall not in any manner be connected or
concerned, whether directly or indirectly, whether as an officer,
director, stockholder, partner, owner, executive, consultant,
creditor or otherwise, with the operation, management or conduct
of, any business having gaming operations in any state or other
jurisdiction in which the Company has gaming operations
immediately prior to the date of the Executive's termination of
employment, for a period beginning on the date of the Executive's
termination of employment and ending on the then current
Termination Date.
17. General Provisions.
(a) Goodwill. The Company has invested substantial
time and money in the development of its products, services,
territories, advertising and marketing thereof, soliciting
clients and creating goodwill. By accepting employment with the
Company, the Executive acknowledges that the customers are the
customers of the Company, and that any goodwill created by the
Executive belongs to and shall inure to the benefit of the
Company.
(b) Notices. Any notice required or permitted
hereunder shall be made in writing (i) either by actual delivery
of the notice into the hands of the party thereunder entitled, or
(ii) by the mailing of the notice in the United States mail,
certified or registered mail, return receipt requested, all
postage prepaid and addressed to the party to whom the notice is
to be given at the party's respective address set forth below, or
such other address as the parties may from time to time designate
by written notice as herein provided.
As addressed to the Company:
Colorado Gaming & Entertainment Co.
One Norwest Center
1700 Lincoln, 49th Floor
Denver, Colorado 80203-4549
With a copy to:
Leboeuf, Lamb, Greene & MacRae L.L.P.
633 Seventeenth Street, Suite 2800
Denver, Colorado 80202
Attention: Thomas J. Moore
As addressed to the Executive:
Stephen J. Szapor, Jr.
2026 Glenhaven Drive
Highlands Ranch, Colorado 80126
The notice shall be deemed to be received in case (i) on the date
of its actual receipt by the party entitled thereto, and in case
(ii) on the third (3rd) business day following the date of its
mailing.
(c) Amendment and Waiver. No amendment or
modification of this Agreement shall be valid or binding upon the
Company unless made in writing and signed by an officer of the
Company duly authorized by, the Board of Directors or upon the
Executive unless made in writing and signed by him. The Waiver
by the Company of the breach of any provision of this Agreement
by the Executive shall not operate or be construed as a waiver of
any subsequent breach by him.
(d) Entire Agreement. This Agreement constitutes the
entire Agreement between the parties with respect to the
Executive's duties and compensation as an executive of the
Company, and there are no representations, warranties, agreements
or commitments between the parties hereto with respect to his
employment except as set forth herein.
(e) Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws (and not
the law of conflicts) of the State of Colorado.
(f) Severability. If any provision of this Agreement
shall, for any reason, be held unenforceable, such provision
shall be severed from this Agreement unless, as a result of such
severance, the Agreement fails to reflect the basic intent of the
severance, the Agreement fails to reflect the basic intent of the
parties. If the Agreement continues to reflect the basic intent
of the parties, then the invalidity of such specific provision
shall not affect the enforceability of any other provision
herein, and the remaining provisions shall remain in full force
and effect.
(g) Assignment. The Executive may not under any
circumstances delegate any of his rights and obligations
hereunder without first obtaining the prior written consent of
the Company. This Agreement and all of the Company's rights and
obligations hereunder may be assigned or transferred by it, in
whole or in part, to be binding upon and inure to the benefit of
any subsidiary or successor of the Company, but any such transfer
or assignment shall not relieve the Company of its obligations
under this Agreement to the extent that an assignee does not
fulfill such obligations.
IN WITNESS WHEREOF, this Agreement is entered into on the
day and year first above written.
COMPANY:
COLORADO GAMING & ENTERTAINMENT CO.
By:
Its:
EXECUTIVE:
STEPHEN J. SZAPOR, Jr.
EMPLOYMENT AGREEMENT
This Agreement is made as of __________, 1996 by and between
Alan L. Mayer (the "Executive") and Colorado Gaming &
Entertainment Co., a Delaware corporation (the "Company").
Recitals
The Company desires to retain the services of Executive as
its Senior Vice President, Secretary and Chief Legal Officer, and
the Executive is willing to serve in such capacity on the terms
and subject to the conditions herein set forth.
NOW THEREFORE, in consideration of the promises, mutual
covenants and agreements contained herein, the Company and the
Executive agree as follows:
1. Employment and Duties. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to
employ the Executive during the Employment Period (as hereinafter
defined), as its Senior Vice President, Secretary and Chief Legal
Officer to perform such duties and responsibilities as are
customarily assigned to such positions and such other duties and
responsibilities not inconsistent therewith as may be assigned to
the Executive from time to time by the Board of Directors or
President of the Company.
2. Performance.
(a) General. The Executive accepts the employment
described in Section 1 of this Agreement and agrees to devote all
of his working time and efforts to the faithful and diligent
performance of the services described therein; provided, however,
that the Executive may participate in charitable activities and
may, subject to Section 15 hereof, participate in holding
investments and in businesses owned by members of the Executive's
family, provided that such participation does not have an adverse
impact on the Executive's performance of his duties for the
Company.
(b) Conduct. The Executive agrees that he will
conduct his activities, and will cause any activities conducted
on his behalf to be conducted in a lawful manner and specifically
will not engage in the following transactions:
(1) make payment or offers of payment, directly
or indirectly, to any domestic or foreign government
official or employee in order to obtain business, retain
business or direct business to others, or for the purpose of
inducing such government official or employee to fail to
perform or to perform improperly his official functions;
(2) receive, pay or offer anything of value,
directly or indirectly, from or to any private party in the
form of a commercial bribe, influence payment or kickback
for any such purpose; or
(3) use, directly or indirectly, any funds or
other assets of the Company for any unlawful purpose,
including, without limitation, political contributions in
violation of applicable law.
3. Term. The term of employment under this Agreement
shall commence on __________ (the "Commencement Date") and shall
remain in effect for a period of three (3) years, ending on
__________ (such date and the last day of any extended term of
employment pursuant to this Section 3 being referred to as the
"Termination Date"), unless sooner terminated hereunder (the
"Employment Period"). The Employment Period shall be
automatically renewed on the then current Termination Date for
successive one (1) year periods unless terminated by either the
Executive or the Company by giving written notice of termination
ninety (90) days in advance of the then current Termination Date.
4. Compensation.
(a) Base Salary. As base salary hereunder ("Base
Salary"), the Company agrees to pay, during the Employment
Period, a salary at an initial rate of One Hundred Thirty
Thousand Dollars ($130,000) per annum payable in the manner and
frequency in which the Company's payroll for senior executives is
customarily paid. The Company and the Executive agree that the
Salary shall be subject to review at least annually, but may not
be reduced without the Executive's prior written consent.
(b) Management Incentive Plans. The Executive shall
be a participant in (i) the Management Cash Bonus Plan of the
Company, and (ii) the Management Incentive and Non-Employee
Director Stock Plan of the Company at a level such that the
Executive will be entitled to an award of 16 2/3% of the shares
of stock of the Company subject to award under such plan.
(c) Vacation and Sick Leave. The Executive shall be
entitled to vacation and sick leave in accordance with the
Company's policies for senior executive employees.
(d) Disability. If at any time during the Employment
Period the Executive is substantially unable to perform his
duties hereunder by reason or illness, accident, or other
disability and such disabilities is expected to last for a period
of six months or less (as confirmed by competent medical
evidence) ("Temporary Disability"), the Executive shall continue
to be treated as an employee hereunder for all purposes and be
entitled to receive periodic payments of Base Salary to which he
would otherwise be entitled pursuant to Section 4(a) of this
Agreement for at least the lesser of the balance of the
Employment Period or the period of such Temporary Disability. If
such disability is expected to last for a period of more than six
months (as confirmed by complete medical evidence) ("Permanent
Disability"), the Executive shall be treated as an employee
hereunder for all purposes and be entitled to receive periodic
payments of Base Salary to which he would otherwise be entitled
to pursuant to Section 4(a) of the Agreement for at least the
lesser of the remaining balance of the Employment Period or six
(6) months. Any payments under any long term disability plan
maintained by the Company shall be an offset against any payments
to the Executive hereunder.
(e) Death. In the event of the death of the Executive
during the Employment Period, his designated successors shall be
entitled to receive, as a survivor's benefit, the periodic
payments of Base Salary that would otherwise be payable to the
Executive pursuant to Section 4(a) of this Agreement by reason of
his employment for the lesser of the balance of the Employment
Period or six (6) weeks. In the event of the Executive's death,
the Company will use its best efforts to advance up to three (3)
months Base Salary to the Executive's beneficiaries of any life
insurance provided pursuant to Section 4(f) hereof, provided that
such advances are to be repaid by such beneficiaries upon
receiving such insurance proceeds.
(f) Other Benefits.
(1) General. Except as otherwise specifically
provided herein, during the Employment Period, the Employee shall
be eligible for all non-wage benefits that the Company provides
generally for its senior executives, including retirement,
medical, life insurance and long term disability benefits. The
Company reserves the right to alter, amend or terminate its
standard benefit programs for senior executives and to alter or
amend coverages thereunder.
(2) Legal Counsel. During the term of the
Agreement, the Company agrees to pay for the reasonable costs of
the Executive's legal counsel in circumstances where legal
representation for the Executive is necessary or appropriate with
regard to actions taken by the Executive in his capacity as an
officer of the Company.
5. Business Expenses - Reimbursement. The Company shall
reimburse the Executive for the reasonable, ordinary, and
necessary business expenses incurred by him in connection with
the performance of his duties hereunder, including, but not
limited to, ordinary and necessary travel expenses and
entertainment expenses and car phone expenses. In addition, the
Company shall reimburse the Executive the full cost of obtaining
and continuing any licenses which must be obtained or continued
by the Executive due to his employment by the Company. The
Executive shall provide the Company with an accounting of his
expenses, which accounting shall clearly reflect which expenses
are reimbursable by the Company. The Executive shall provide the
Company with such other supporting documentation and other
substantiation of reimbursable expenses as will conform to
Internal Revenue Service or other requirements. All such
reimbursements shall be payable by the Company to the Executive
within a reasonable time after receipt by the Company of
appropriate documentation therefore provided, however, the
Company shall have no obligation to reimburse any expense for
which appropriate and customary back-up documentation is not
provided within sixty (60) days following accrual of the
obligation in question.
6. Termination By Company.
(a) Termination for Just Cause. The Company shall
have the option to terminate the employment of the Executive
hereunder, effective upon the effective date set forth in written
notice of such termination to the Executive, for Just Cause. For
purposes of this Agreement, the term "Just Cause" shall mean the
occurrence of any one or more of the following events: (i) the
material breach by the Executive of his covenants under this
Agreement, and the failure by the Executive to promptly cure the
breach or failure of performance upon written notice thereof from
the Company; (ii) the Executive's willful refusal to perform, or
his substantial neglect of, the duties assigned to the Executive
pursuant to Section 1 hereof, and the failure by the Executive to
promptly cure the breach or failure of performance upon written
notice thereof from the Company; (iii) the commission by the
Executive of theft or embezzlement of Company property or other
acts of dishonesty relating to his employment; (iv) the
commission by the Executive of a crime resulting in injury to the
business, property or reputation of the Company or any affiliate
of the Company or commission of other significant activities
harmful to the business or reputation of the Company or any
affiliate of the Company; (v) any significant violation of any
statutory or common law duty of loyalty to the Company;
(vi) failure of the Executive to comply with any provision of the
gaming or liquor laws of Colorado or any other jurisdiction in
which the Company or any affiliate conducts operations or is
applying for a gaming or liquor license or failure of the
Executive to comply with any rule or regulation of any
administrative body having jurisdiction, which may materially and
negatively affect the gaming or liquor license of the Executive
or the Company or any affiliate of the Company; or (vii) the
failure of the Executive to obtain or retain any permit, license
or approval required by any governmental authority and such
failure is not the result of any negligence or omission by the
Company. A termination of employment of the Executive for Just
Cause shall be effectuated by giving the Executive written notice
of the termination setting forth in reasonable detail the
specific conduct of the Executive that constitutes Just Cause and
the specific provision(s) of this Agreement on which the Company
relies, and shall be given within 90 days of the date on which
the Company first acquires knowledge of occurrence of the conduct
giving rise to Just Cause. Upon termination of the Executive for
Just Cause, the Company shall pay the Executive the unpaid
portion of Base Salary attributable to periods up to and
including the effective date of such termination and any other
amounts to which the Executive may be entitled under any benefit
plan maintained by the Company or as may otherwise be provided by
law, and the Executive shall not be entitled to any severance
benefits pursuant to Section 10 hereof and all obligations of the
Company hereunder shall cease.
(b) Termination Upon Death. This Agreement shall
automatically terminate upon the death of the Executive and,
other than as may be provided in Section 4 hereof or under any
benefit plan maintained by the Company or as may otherwise be
provided by law, the Company shall have no obligation to make,
and the Executive's estate or successors shall have no right to
receive, any further compensation or payments of any kind.
(c) Termination Upon Disability. The Company may
terminate this Agreement upon the Permanent Disability of the
Executive at the end of the period for which the Executive is
entitled to receive Base Salary pursuant to Section 4(d) hereof.
Thereafter, the Company shall be obligated to pay only the
amounts set forth in Section 4 of this Agreement or as to which
the Executive may be entitled under any benefit plan maintained
by the Company or as may otherwise be provided by law.
(d) Termination Without Just Cause. The Company shall
have the option to terminate the Employment Period at any time by
30 days written notice to the Executive. If none of the
circumstances allowing termination pursuant to Section 6(a), (b)
and (c) exist on the date such notice is given, such termination
shall be deemed to have been a termination without Just Cause and
the Executive shall be entitled to the unpaid portion of his Base
Salary attributable to periods up to and including the effective
date of such termination, to any other amounts to which the
Executive may be entitled under any benefit plan maintained by
the Company or as may otherwise be provided by law, and the
Executive shall be entitled to receive the severance benefits
described in Section 10 hereof.
7. Termination By Executive.
(a) Termination for Good Reason. The Executive shall
have the option to terminate his employment with the Company,
effective upon the effective date set forth in written notice of
such termination to the Company, for "Good Reason". For purposes
of this Agreement, Good Reason shall mean the occurrence of any
one or more of the following events: (i) the assignment to the
Executive of any duties inconsistent in any material respect with
the duties described in Section 1 hereof, or any other action by
the Company that results in an intentional diminution of the
Executive's position, authority, duties or responsibilities, and
(ii) any material breach of this Agreement by the Company that
either is not taken in good faith or is not remedied by the
Company promptly after receipt of notice thereof from the
Executive. A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice
of the termination, setting forth in reasonable detail the
specific conduct of the Company that constitutes Good Reason and
the specific provision(s) of this Agreement on which the
Executive relies, and shall be given within 60 days of the event
giving rise to the Good Reason. A termination of employment by
the Executive for Good Reason shall be effective on the fifth
business day following the date when such notice is given, unless
the notice sets forth alternate date (which date shall in no
event be later than 30 days after the notice is given). Upon
termination by the Executive for Good Reason, the Executive shall
be entitled to the unpaid portion of Base Salary attributable to
periods up to and including the effective date of such
termination, to any other amounts to which the Executive may be
entitled under any benefit plan maintained by the Company or as
otherwise may be provided by law, and the Executive shall be
entitled to receive the severance benefits described in Section
10 hereof.
(b) Termination Without Good Reason. The Executive
shall have the option to terminate his employment with the
Company at any time after the first anniversary of this
Agreement, upon thirty days prior written notice to the Company.
If none of the circumstances constituting Good Reason exists on
the date such notice is given, the Executive shall be entitled to
the unpaid portion of Base Salary attributable to periods up to
and including the effective date of such termination and any
other amounts to which the Executive may be entitled under any
benefit plan maintained by the Company or as may otherwise be
provided by law, and the Executive shall not be entitled to any
severance benefits pursuant to Section 10 hereof.
8. Surrender of Properties. Upon termination of the
Executive's employment with the Company, the Executive shall
promptly surrender to the Company all property provided him by
the Company for use in relation to his employment, and, in
addition, the employee shall surrender to the Company any and all
sales materials, lists of customers and prospective customers,
price lists, files, records, models, or other materials and
information of or pertaining to the Company or its customers or
prospective customers or the products, business, and operations
of the Company.
9. Continuation of Insurance. If, following notice of
termination given by the Company pursuant to Section 6(d) of this
Agreement, the Executive is unable to arrange alternate
employment before the stated effective date of such termination,
the Company shall, at the Company's expense, continue the
Executive's medical, disability, and life insurance coverage for
a period extending one hundred and twenty (120) days following
the effective date of termination or until the Executive secures
alternate employment, whichever date occurs first, and such
period shall be credited against any period for which the Company
is otherwise obligated to make such benefits available to the
Executive under Section 480-B of the Internal Revenue Code of
1986, as amended, or any similar provision of law.
10. Severance Pay. Notwithstanding any other provision of
this Agreement, if the Employment Period is terminated by the
Company or any successor of the Company pursuant to Section 6(d)
hereof, or by the Executive pursuant to Section 7(a) hereof, the
Company shall pay the Executive a severance benefit equal to the
Executive's Base Salary for the remaining Employment Period at
the annual rate in effect immediately prior to such termination.
Any payment required pursuant to this Section 10 shall be made
within thirty (30) days following the termination date.
11. Indemnification. The Executive shall indemnify the
Company and hold it harmless from and against any and all loss,
damage, and expense (including reasonable attorneys' fees and
disbursements) arising out of any claim or threat of claim
against the Executive or the Company resulting from or in any way
related to the Executive's relationship with any previous
employer, including any claim of breach of contract, interference
with contract or breach or impairment of a real or claimed
legally protected right of such previous employer.
12. Confidentiality of Information; Duty of Non-Disclosure.
The Executive acknowledges and agrees that his employment by the
Company under this Agreement necessarily involves his
understanding of, and access to, certain trade secrets and
confidential information pertaining to the business of the
Company. Accordingly, the Executive agrees that except as may be
required in the reasonable performance of his duties hereunder,
he will not, directly or indirectly, without the express consent
of the Company, disclose to or use for the benefit of any person,
corporation or other entity, or for himself, any and all files,
trade secrets or other confidential information concerning the
internal affairs of the Company, including, but not limited to,
information pertaining to its clients, services, products,
earnings, finances, operations, methods or other activities;
provided, however, that the foregoing shall not apply to
information which is of public record or is generally known,
disclosed or available to the general public or the industry
generally or was known by the Executive prior to his employment
under this Agreement. Further, the Executive agrees that he
shall not, directly or indirectly, remove or retain, without the
express prior written consent of the Company, and upon
termination of this Agreement for any reason shall return to the
Company, any figures, calculations, letters, papers, records,
computer disks, computer print-outs, lists, documents,
instruments, drawings, designs, programs, brochures, sales
literature, or any copies thereof, or any information or
instruments derived therefrom, or any other similar information
of any type or description, however such information might be
obtained or recorded, arising out of or in any way relating to
the business of the Company or obtained as a result of his
employment by the Company. The Executive acknowledges that all
of the foregoing are proprietary information, and are the
exclusive property of the Company. The covenants contained in
this Section 12 shall survive the termination of this Agreement.
13. Enforcement.
(a) Upon presentation of a claim or claims
(collectively, "Claims") arising out of or relating to this
Agreement, or the breach hereof, by an aggrieved party, the other
party shall have thirty (30) days in which to make such inquiries
of the aggrieved party and conduct such investigations as it
believes reasonably necessary to determine validity of the
Claims. At the end of such period of investigation, the
complained of party shall either pay the amount of the claims or
the arbitration proceeding described immediately below shall be
invoked.
(b) In the event that the Claims are not settled by
the procedure set forth immediately above, the Claims shall be
submitted to arbitration conducted in accordance with the
Commercial Arbitration Rules ("Rules") of the American
Arbitration Association ("AAA") except as amplified or otherwise
varied hereby.
(c) The parties shall submit the dispute to the Denver
regional office of the AAA and the situs of the arbitration shall
be Denver County, Colorado.
(d) The arbitration shall be conducted by a single
arbitrator. The parties shall appoint the single arbitrator to
arbitrate the dispute within ten (10) business days of the
submission of the dispute. In the absence of agreement as to the
identity of the single arbitrator to arbitrate the dispute within
such time, the AAA is authorized to appoint an arbitrator in
accordance with the Rules, except that the arbitrator shall have
as his principal place of business the Denver metropolitan area.
(e) The single arbitrator selected by the AAA shall be
an attorney or accountant licensed to practice by the State of
Colorado.
(f) Notwithstanding anything in the Rules to the
contrary, the arbitration award shall be made in accordance with
the following procedure: Each party shall, at the commencement of
the arbitration hearing, submit an initial statement of the
amount each party proposes be selected by the arbitrator as the
arbitration award ("Settlement Amount"). During the course of
the arbitration, each party may vary its proposed Settlement
Amount. At the and of the arbitration hearing, each party shall
submit to the arbitrator its final Settlement Amount ("Final
Settlement Amount"), and the arbitrator shall be required to
select either one or the other Final Settlement Amounts as the
arbitration award without discretion to select any other amount
as the award. The arbitration award shall be paid within ten
(10) business days after the award has been made, together with
interest from the date of award at the rate of eight percent
(8%). Judgment upon the award may be entered in any federal or
state court having jurisdiction over the parties.
14. Costs of Enforcement. In the event of any suit or
proceeding seeking to enforce the terms, covenants, or conditions
of this Agreement, the prevailing party shall, in addition to all
other remedies and relief that may be available under this
Agreement or applicable law, recover his or its reasonable
attorneys' fees and costs as shall be determined and awarded by
the arbitrator or court, as the case may be.
15. Competing Interest. During the Employment Period, the
Executive shall not, without the prior written consent of the
Company, engage in any other business activity that competes with
or is of a nature similar to that of the Company for gain,
profit, or other pecuniary advantage or engage in or in any
manner be connected or concerned, directly or indirectly, whether
as an officer, director, stockholder, partner, owner, executive,
consultant, creditor, or otherwise, with the operation,
management, or conduct of any business that competes with or is
of a nature similar to that of the Company, provided, however,
that this Section 15 shall not prohibit the Executive from owning
up to one (1) percent of the publicly traded shares of any
entity.
16. Noncompete Clause. If the Employment Period is
terminated by the Company for Just Cause pursuant to Section 6(a)
hereof, or voluntarily by the Executive pursuant to Section 7(b)
hereof, the Executive will be prohibited from accepting
employment with, and shall not in any manner be connected or
concerned, whether directly or indirectly, whether as an officer,
director, stockholder, partner, owner, executive, consultant,
creditor or otherwise, with the operation, management or conduct
of, any business having gaming operations in any state or other
jurisdiction in which the Company has gaming operations
immediately prior to the date of the Executive's termination of
employment, for a period beginning on the date of the Executive's
termination of employment and ending on the then current
Termination Date.
17. General Provisions.
(a) Goodwill. The Company has invested substantial
time and money in the development of its products, services,
territories, advertising and marketing thereof, soliciting
clients and creating goodwill. By accepting employment with the
Company, the Executive acknowledges that the customers are the
customers of the Company, and that any goodwill created by the
Executive belongs to and shall inure to the benefit of the
Company.
(b) Notices. Any notice required or permitted
hereunder shall be made in writing (i) either by actual delivery
of the notice into the hands of the party thereunder entitled, or
(ii) by the mailing of the notice in the United States mail,
certified or registered mail, return receipt requested, all
postage prepaid and addressed to the party to whom the notice is
to be given at the party's respective address set forth below, or
such other address as the parties may from time to time designate
by written notice as herein provided.
As addressed to the Company:
Colorado Gaming & Entertainment Co.
One Norwest Center
1700 Lincoln, 49th Floor
Denver, Colorado 80203-4549
With a copy to:
Leboeuf, Lamb, Greene & MacRae L.L.P.
633 Seventeenth Street, Suite 2800
Denver, Colorado 80202
Attention: Thomas J. Moore
As addressed to the Executive:
Alan L. Mayer
2471 South Adams
Denver, Colorado 80126
The notice shall be deemed to be received in case (i) on the date
of its actual receipt by the party entitled thereto, and in case
(ii) on the third (3rd) business day following the date of its
mailing.
(c) Amendment and Waiver. No amendment or
modification of this Agreement shall be valid or binding upon the
Company unless made in writing and signed by an officer of the
Company duly authorized by, the Board of Directors or upon the
Executive unless made in writing and signed by him. The Waiver
by the Company of the breach of any provision of this Agreement
by the Executive shall not operate or be construed as a waiver of
any subsequent breach by him.
(d) Entire Agreement. This Agreement constitutes the
entire Agreement between the parties with respect to the
Executive's duties and compensation as an executive of the
Company, and there are no representations, warranties, agreements
or commitments between the parties hereto with respect to his
employment except as set forth herein.
(e) Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws (and not
the law of conflicts) of the State of Colorado.
(f) Severability. If any provision of this Agreement
shall, for any reason, be held unenforceable, such provision
shall be severed from this Agreement unless, as a result of such
severance, the Agreement fails to reflect the basic intent of the
severance, the Agreement fails to reflect the basic intent of the
parties. If the Agreement continues to reflect the basic intent
of the parties, then the invalidity of such specific provision
shall not affect the enforceability of any other provision
herein, and the remaining provisions shall remain in full force
and effect.
(g) Assignment. The Executive may not under any
circumstances delegate any of his rights and obligations
hereunder without first obtaining the prior written consent of
the Company. This Agreement and all of the Company's rights and
obligations hereunder may be assigned or transferred by it, in
whole or in part, to be binding upon and inure to the benefit of
any subsidiary or successor of the Company, but any such transfer
or assignment shall not relieve the Company of its obligations
under this Agreement to the extent that an assignee does not
fulfill such obligations.
IN WITNESS WHEREOF, this Agreement is entered into on the
day and year first above written.
COMPANY:
COLORADO GAMING & ENTERTAINMENT CO.
By:
Its:
EXECUTIVE:
ALAN L. MAYER
EMPLOYMENT AGREEMENT
This Agreement is made as of __________, 1996 by and between
Richard Rabin (the "Executive") and Colorado Gaming &
Entertainment Co., a Delaware corporation (the "Company").
Recitals
The Company desires to retain the services of Executive as
its Senior Vice President of Operations, and the Executive is
willing to serve in such capacity on the terms and subject to the
conditions herein set forth.
NOW THEREFORE, in consideration of the promises, mutual
covenants and agreements contained herein, the Company and the
Executive agree as follows:
1. Employment and Duties. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to
employ the Executive during the Employment Period (as hereinafter
defined), as its Senior Vice President of Operations to perform
such duties and responsibilities as are customarily assigned to
such positions and such other duties and responsibilities not
inconsistent therewith as may be assigned to the Executive from
time to time by the Board of Directors or President of the
Company.
2. Performance.
(a) General. The Executive accepts the employment
described in Section 1 of this Agreement and agrees to devote all
of his working time and efforts to the faithful and diligent
performance of the services described therein; provided, however,
that the Executive may participate in charitable activities and
may, subject to Section 15 hereof, participate in holding
investments and in businesses owned by members of the Executive's
family, provided that such participation does not have an adverse
impact on the Executive's performance of his duties for the
Company.
(b) Conduct. The Executive agrees that he will
conduct his activities, and will cause any activities conducted
on his behalf to be conducted in a lawful manner and specifically
will not engage in the following transactions:
(1) make payment or offers of payment, directly
or indirectly, to any domestic or foreign government
official or employee in order to obtain business, retain
business or direct business to others, or for the purpose of
inducing such government official or employee to fail to
perform or to perform improperly his official functions;
(2) receive, pay or offer anything of value,
directly or indirectly, from or to any private party in the
form of a commercial bribe, influence payment or kickback
for any such purpose; or
(3) use, directly or indirectly, any funds or
other assets of the Company for any unlawful purpose,
including, without limitation, political contributions in
violation of applicable law.
3. Term. The term of employment under this Agreement
shall commence on __________ (the "Commencement Date") and shall
remain in effect for a period of three (3) years, ending on
__________ (such date and the last day of any extended term of
employment pursuant to this Section 3 being referred to as the
"Termination Date"), unless sooner terminated hereunder (the
"Employment Period"). The Employment Period shall be
automatically renewed on the then current Termination Date for
successive one (1) year periods unless terminated by either the
Executive or the Company by giving written notice of termination
ninety (90) days in advance of the then current Termination Date.
4. Compensation.
(a) Base Salary. As base salary hereunder ("Base
Salary"), the Company agrees to pay, during the Employment
Period, a salary at an initial rate of One Hundred Thirty
Thousand Dollars ($130,000) per annum payable in the manner and
frequency in which the Company's payroll for senior executives is
customarily paid. The Company and the Executive agree that the
Salary shall be subject to review at least annually, but may not
be reduced without the Executive's prior written consent.
(b) Management Incentive Plans. The Executive shall
be a participant in (i) the Management Cash Bonus Plan of the
Company, and (ii) the Management Incentive and Non-Employee
Director Stock Plan of the Company at a level such that the
Executive will be entitled to an award of 16 2/3% of the shares
of stock of the Company subject to award under such plan.
(c) Vacation and Sick Leave. The Executive shall be
entitled to vacation and sick leave in accordance with the
Company's policies for senior executive employees.
(d) Disability. If at any time during the Employment
Period the Executive is substantially unable to perform his
duties hereunder by reason or illness, accident, or other
disability and such disabilities is expected to last for a period
of six months or less (as confirmed by competent medical
evidence) ("Temporary Disability"), the Executive shall continue
to be treated as an employee hereunder for all purposes and be
entitled to receive periodic payments of Base Salary to which he
would otherwise be entitled pursuant to Section 4(a) of this
Agreement for at least the lesser of the balance of the
Employment Period or the period of such Temporary Disability. If
such disability is expected to last for a period of more than six
months (as confirmed by complete medical evidence) ("Permanent
Disability"), the Executive shall be treated as an employee
hereunder for all purposes and be entitled to receive periodic
payments of Base Salary to which he would otherwise be entitled
to pursuant to Section 4(a) of the Agreement for at least the
lesser of the remaining balance of the Employment Period or six
(6) months. Any payments under any long term disability plan
maintained by the Company shall be an offset against any payments
to the Executive hereunder.
(e) Death. In the event of the death of the Executive
during the Employment Period, his designated successors shall be
entitled to receive, as a survivor's benefit, the periodic
payments of Base Salary that would otherwise be payable to the
Executive pursuant to Section 4(a) of this Agreement by reason of
his employment for the lesser of the balance of the Employment
Period or six (6) weeks. In the event of the Executive's death,
the Company will use its best efforts to advance up to three (3)
months Base Salary to the Executive's beneficiaries of any life
insurance provided pursuant to Section 4(f) hereof, provided that
such advances are to be repaid by such beneficiaries upon
receiving such insurance proceeds.
(f) Other Benefits.
(1) General. Except as otherwise specifically
provided herein, during the Employment Period, the Employee shall
be eligible for all non-wage benefits that the Company provides
generally for its senior executives, including retirement,
medical, life insurance and long term disability benefits. The
Company reserves the right to alter, amend or terminate its
standard benefit programs for senior executives and to alter or
amend coverages thereunder.
(2) Legal Counsel. During the term of the
Agreement, the Company agrees to pay for the reasonable costs of
the Executive's legal counsel in circumstances where legal
representation for the Executive is necessary or appropriate with
regard to actions taken by the Executive in his capacity as an
officer of the Company.
5. Business Expenses - Reimbursement. The Company shall
reimburse the Executive for the reasonable, ordinary, and
necessary business expenses incurred by him in connection with
the performance of his duties hereunder, including, but not
limited to, ordinary and necessary travel expenses and
entertainment expenses and car phone expenses. In addition, the
Company shall reimburse the Executive the full cost of obtaining
and continuing any licenses which must be obtained or continued
by the Executive due to his employment by the Company. The
Executive shall provide the Company with an accounting of his
expenses, which accounting shall clearly reflect which expenses
are reimbursable by the Company. The Executive shall provide the
Company with such other supporting documentation and other
substantiation of reimbursable expenses as will conform to
Internal Revenue Service or other requirements. All such
reimbursements shall be payable by the Company to the Executive
within a reasonable time after receipt by the Company of
appropriate documentation therefore provided, however, the
Company shall have no obligation to reimburse any expense for
which appropriate and customary back-up documentation is not
provided within sixty (60) days following accrual of the
obligation in question.
6. Termination By Company.
(a) Termination for Just Cause. The Company shall
have the option to terminate the employment of the Executive
hereunder, effective upon the effective date set forth in written
notice of such termination to the Executive, for Just Cause. For
purposes of this Agreement, the term "Just Cause" shall mean the
occurrence of any one or more of the following events: (i) the
material breach by the Executive of his covenants under this
Agreement, and the failure by the Executive to promptly cure the
breach or failure of performance upon written notice thereof from
the Company; (ii) the Executive's willful refusal to perform, or
his substantial neglect of, the duties assigned to the Executive
pursuant to Section 1 hereof, and the failure by the Executive to
promptly cure the breach or failure of performance upon written
notice thereof from the Company; (iii) the commission by the
Executive of theft or embezzlement of Company property or other
acts of dishonesty relating to his employment; (iv) the
commission by the Executive of a crime resulting in injury to the
business, property or reputation of the Company or any affiliate
of the Company or commission of other significant activities
harmful to the business or reputation of the Company or any
affiliate of the Company; (v) any significant violation of any
statutory or common law duty of loyalty to the Company;
(vi) failure of the Executive to comply with any provision of the
gaming or liquor laws of Colorado or any other jurisdiction in
which the Company or any affiliate conducts operations or is
applying for a gaming or liquor license or failure of the
Executive to comply with any rule or regulation of any
administrative body having jurisdiction, which may materially and
negatively affect the gaming or liquor license of the Executive
or the Company or any affiliate of the Company; or (vii) the
failure of the Executive to obtain or retain any permit, license
or approval required by any governmental authority and such
failure is not the result of any negligence or omission by the
Company. A termination of employment of the Executive for Just
Cause shall be effectuated by giving the Executive written notice
of the termination setting forth in reasonable detail the
specific conduct of the Executive that constitutes Just Cause and
the specific provision(s) of this Agreement on which the Company
relies, and shall be given within 90 days of the date on which
the Company first acquires knowledge of occurrence of the conduct
giving rise to Just Cause. Upon termination of the Executive for
Just Cause, the Company shall pay the Executive the unpaid
portion of Base Salary attributable to periods up to and
including the effective date of such termination and any other
amounts to which the Executive may be entitled under any benefit
plan maintained by the Company or as may otherwise be provided by
law, and the Executive shall not be entitled to any severance
benefits pursuant to Section 10 hereof and all obligations of the
Company hereunder shall cease.
(b) Termination Upon Death. This Agreement shall
automatically terminate upon the death of the Executive and,
other than as may be provided in Section 4 hereof or under any
benefit plan maintained by the Company or as may otherwise be
provided by law, the Company shall have no obligation to make,
and the Executive's estate or successors shall have no right to
receive, any further compensation or payments of any kind.
(c) Termination Upon Disability. The Company may
terminate this Agreement upon the Permanent Disability of the
Executive at the end of the period for which the Executive is
entitled to receive Base Salary pursuant to Section 4(d) hereof.
Thereafter, the Company shall be obligated to pay only the
amounts set forth in Section 4 of this Agreement or as to which
the Executive may be entitled under any benefit plan maintained
by the Company or as may otherwise be provided by law.
(d) Termination Without Just Cause. The Company shall
have the option to terminate the Employment Period at any time by
30 days written notice to the Executive. If none of the
circumstances allowing termination pursuant to Section 6(a), (b)
and (c) exist on the date such notice is given, such termination
shall be deemed to have been a termination without Just Cause and
the Executive shall be entitled to the unpaid portion of his Base
Salary attributable to periods up to and including the effective
date of such termination, to any other amounts to which the
Executive may be entitled under any benefit plan maintained by
the Company or as may otherwise be provided by law, and the
Executive shall be entitled to receive the severance benefits
described in Section 10 hereof.
7. Termination By Executive.
(a) Termination for Good Reason. The Executive shall
have the option to terminate his employment with the Company,
effective upon the effective date set forth in written notice of
such termination to the Company, for "Good Reason". For purposes
of this Agreement, Good Reason shall mean the occurrence of any
one or more of the following events: (i) the assignment to the
Executive of any duties inconsistent in any material respect with
the duties described in Section 1 hereof, or any other action by
the Company that results in an intentional diminution of the
Executive's position, authority, duties or responsibilities, and
(ii) any material breach of this Agreement by the Company that
either is not taken in good faith or is not remedied by the
Company promptly after receipt of notice thereof from the
Executive. A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice
of the termination, setting forth in reasonable detail the
specific conduct of the Company that constitutes Good Reason and
the specific provision(s) of this Agreement on which the
Executive relies, and shall be given within 60 days of the event
giving rise to the Good Reason. A termination of employment by
the Executive for Good Reason shall be effective on the fifth
business day following the date when such notice is given, unless
the notice sets forth alternate date (which date shall in no
event be later than 30 days after the notice is given). Upon
termination by the Executive for Good Reason, the Executive shall
be entitled to the unpaid portion of Base Salary attributable to
periods up to and including the effective date of such
termination, to any other amounts to which the Executive may be
entitled under any benefit plan maintained by the Company or as
otherwise may be provided by law, and the Executive shall be
entitled to receive the severance benefits described in Section
10 hereof.
(b) Termination Without Good Reason. The Executive
shall have the option to terminate his employment with the
Company at any time after the first anniversary of this
Agreement, upon thirty days prior written notice to the Company.
If none of the circumstances constituting Good Reason exists on
the date such notice is given, the Executive shall be entitled to
the unpaid portion of Base Salary attributable to periods up to
and including the effective date of such termination and any
other amounts to which the Executive may be entitled under any
benefit plan maintained by the Company or as may otherwise be
provided by law, and the Executive shall not be entitled to any
severance benefits pursuant to Section 10 hereof.
8. Surrender of Properties. Upon termination of the
Executive's employment with the Company, the Executive shall
promptly surrender to the Company all property provided him by
the Company for use in relation to his employment, and, in
addition, the employee shall surrender to the Company any and all
sales materials, lists of customers and prospective customers,
price lists, files, records, models, or other materials and
information of or pertaining to the Company or its customers or
prospective customers or the products, business, and operations
of the Company.
9. Continuation of Insurance. If, following notice of
termination given by the Company pursuant to Section 6(d) of this
Agreement, the Executive is unable to arrange alternate
employment before the stated effective date of such termination,
the Company shall, at the Company's expense, continue the
Executive's medical, disability, and life insurance coverage for
a period extending one hundred and twenty (120) days following
the effective date of termination or until the Executive secures
alternate employment, whichever date occurs first, and such
period shall be credited against any period for which the Company
is otherwise obligated to make such benefits available to the
Executive under Section 480-B of the Internal Revenue Code of
1986, as amended, or any similar provision of law.
10. Severance Pay. Notwithstanding any other provision of
this Agreement, if the Employment Period is terminated by the
Company or any successor of the Company pursuant to Section 6(d)
hereof, or by the Executive pursuant to Section 7(a) hereof, the
Company shall pay the Executive a severance benefit equal to the
Executive's Base Salary for the remaining Employment Period at
the annual rate in effect immediately prior to such termination.
Any payment required pursuant to this Section 10 shall be made
within thirty (30) days following the termination date.
11. Indemnification. The Executive shall indemnify the
Company and hold it harmless from and against any and all loss,
damage, and expense (including reasonable attorneys' fees and
disbursements) arising out of any claim or threat of claim
against the Executive or the Company resulting from or in any way
related to the Executive's relationship with any previous
employer, including any claim of breach of contract, interference
with contract or breach or impairment of a real or claimed
legally protected right of such previous employer.
12. Confidentiality of Information; Duty of Non-Disclosure.
The Executive acknowledges and agrees that his employment by the
Company under this Agreement necessarily involves his
understanding of, and access to, certain trade secrets and
confidential information pertaining to the business of the
Company. Accordingly, the Executive agrees that except as may be
required in the reasonable performance of his duties hereunder,
he will not, directly or indirectly, without the express consent
of the Company, disclose to or use for the benefit of any person,
corporation or other entity, or for himself, any and all files,
trade secrets or other confidential information concerning the
internal affairs of the Company, including, but not limited to,
information pertaining to its clients, services, products,
earnings, finances, operations, methods or other activities;
provided, however, that the foregoing shall not apply to
information which is of public record or is generally known,
disclosed or available to the general public or the industry
generally or was known by the Executive prior to his employment
under this Agreement. Further, the Executive agrees that he
shall not, directly or indirectly, remove or retain, without the
express prior written consent of the Company, and upon
termination of this Agreement for any reason shall return to the
Company, any figures, calculations, letters, papers, records,
computer disks, computer print-outs, lists, documents,
instruments, drawings, designs, programs, brochures, sales
literature, or any copies thereof, or any information or
instruments derived therefrom, or any other similar information
of any type or description, however such information might be
obtained or recorded, arising out of or in any way relating to
the business of the Company or obtained as a result of his
employment by the Company. The Executive acknowledges that all
of the foregoing are proprietary information, and are the
exclusive property of the Company. The covenants contained in
this Section 12 shall survive the termination of this Agreement.
13. Enforcement.
(a) Upon presentation of a claim or claims
(collectively, "Claims") arising out of or relating to this
Agreement, or the breach hereof, by an aggrieved party, the other
party shall have thirty (30) days in which to make such inquiries
of the aggrieved party and conduct such investigations as it
believes reasonably necessary to determine validity of the
Claims. At the end of such period of investigation, the
complained of party shall either pay the amount of the claims or
the arbitration proceeding described immediately below shall be
invoked.
(b) In the event that the Claims are not settled by
the procedure set forth immediately above, the Claims shall be
submitted to arbitration conducted in accordance with the
Commercial Arbitration Rules ("Rules") of the American
Arbitration Association ("AAA") except as amplified or otherwise
varied hereby.
(c) The parties shall submit the dispute to the Denver
regional office of the AAA and the situs of the arbitration shall
be Denver County, Colorado.
(d) The arbitration shall be conducted by a single
arbitrator. The parties shall appoint the single arbitrator to
arbitrate the dispute within ten (10) business days of the
submission of the dispute. In the absence of agreement as to the
identity of the single arbitrator to arbitrate the dispute within
such time, the AAA is authorized to appoint an arbitrator in
accordance with the Rules, except that the arbitrator shall have
as his principal place of business the Denver metropolitan area.
(e) The single arbitrator selected by the AAA shall be
an attorney or accountant licensed to practice by the State of
Colorado.
(f) Notwithstanding anything in the Rules to the
contrary, the arbitration award shall be made in accordance with
the following procedure: Each party shall, at the commencement of
the arbitration hearing, submit an initial statement of the
amount each party proposes be selected by the arbitrator as the
arbitration award ("Settlement Amount"). During the course of
the arbitration, each party may vary its proposed Settlement
Amount. At the and of the arbitration hearing, each party shall
submit to the arbitrator its final Settlement Amount ("Final
Settlement Amount"), and the arbitrator shall be required to
select either one or the other Final Settlement Amounts as the
arbitration award without discretion to select any other amount
as the award. The arbitration award shall be paid within ten
(10) business days after the award has been made, together with
interest from the date of award at the rate of eight percent
(8%). Judgment upon the award may be entered in any federal or
state court having jurisdiction over the parties.
14. Costs of Enforcement. In the event of any suit or
proceeding seeking to enforce the terms, covenants, or conditions
of this Agreement, the prevailing party shall, in addition to all
other remedies and relief that may be available under this
Agreement or applicable law, recover his or its reasonable
attorneys' fees and costs as shall be determined and awarded by
the arbitrator or court, as the case may be.
15. Competing Interest. During the Employment Period, the
Executive shall not, without the prior written consent of the
Company, engage in any other business activity that competes with
or is of a nature similar to that of the Company for gain,
profit, or other pecuniary advantage or engage in or in any
manner be connected or concerned, directly or indirectly, whether
as an officer, director, stockholder, partner, owner, executive,
consultant, creditor, or otherwise, with the operation,
management, or conduct of any business that competes with or is
of a nature similar to that of the Company, provided, however,
that this Section 15 shall not prohibit the Executive from owning
up to one (1) percent of the publicly traded shares of any
entity.
16. Noncompete Clause. If the Employment Period is
terminated by the Company for Just Cause pursuant to Section 6(a)
hereof, or voluntarily by the Executive pursuant to Section 7(b)
hereof, the Executive will be prohibited from accepting
employment with, and shall not in any manner be connected or
concerned, whether directly or indirectly, whether as an officer,
director, stockholder, partner, owner, executive, consultant,
creditor or otherwise, with the operation, management or conduct
of, any business having gaming operations in any state or other
jurisdiction in which the Company has gaming operations
immediately prior to the date of the Executive's termination of
employment, for a period beginning on the date of the Executive's
termination of employment and ending on the then current
Termination Date.
17. General Provisions.
(a) Goodwill. The Company has invested substantial
time and money in the development of its products, services,
territories, advertising and marketing thereof, soliciting
clients and creating goodwill. By accepting employment with the
Company, the Executive acknowledges that the customers are the
customers of the Company, and that any goodwill created by the
Executive belongs to and shall inure to the benefit of the
Company.
(b) Notices. Any notice required or permitted
hereunder shall be made in writing (i) either by actual delivery
of the notice into the hands of the party thereunder entitled, or
(ii) by the mailing of the notice in the United States mail,
certified or registered mail, return receipt requested, all
postage prepaid and addressed to the party to whom the notice is
to be given at the party's respective address set forth below, or
such other address as the parties may from time to time designate
by written notice as herein provided.
As addressed to the Company:
Colorado Gaming & Entertainment Co.
One Norwest Center
1700 Lincoln, 49th Floor
Denver, Colorado 80203-4549
With a copy to:
Leboeuf, Lamb, Greene & MacRae L.L.P.
633 Seventeenth Street, Suite 2800
Denver, Colorado 80202
Attention: Thomas J. Moore
As addressed to the Executive:
Richard Rabin
____________________
____________________
The notice shall be deemed to be received in case (i) on the date
of its actual receipt by the party entitled thereto, and in case
(ii) on the third (3rd) business day following the date of its
mailing.
(c) Amendment and Waiver. No amendment or
modification of this Agreement shall be valid or binding upon the
Company unless made in writing and signed by an officer of the
Company duly authorized by, the Board of Directors or upon the
Executive unless made in writing and signed by him. The Waiver
by the Company of the breach of any provision of this Agreement
by the Executive shall not operate or be construed as a waiver of
any subsequent breach by him.
(d) Entire Agreement. This Agreement constitutes the
entire Agreement between the parties with respect to the
Executive's duties and compensation as an executive of the
Company, and there are no representations, warranties, agreements
or commitments between the parties hereto with respect to his
employment except as set forth herein.
(e) Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws (and not
the law of conflicts) of the State of Colorado.
(f) Severability. If any provision of this Agreement
shall, for any reason, be held unenforceable, such provision
shall be severed from this Agreement unless, as a result of such
severance, the Agreement fails to reflect the basic intent of the
severance, the Agreement fails to reflect the basic intent of the
parties. If the Agreement continues to reflect the basic intent
of the parties, then the invalidity of such specific provision
shall not affect the enforceability of any other provision
herein, and the remaining provisions shall remain in full force
and effect.
(g) Assignment. The Executive may not under any
circumstances delegate any of his rights and obligations
hereunder without first obtaining the prior written consent of
the Company. This Agreement and all of the Company's rights and
obligations hereunder may be assigned or transferred by it, in
whole or in part, to be binding upon and inure to the benefit of
any subsidiary or successor of the Company, but any such transfer
or assignment shall not relieve the Company of its obligations
under this Agreement to the extent that an assignee does not
fulfill such obligations.
IN WITNESS WHEREOF, this Agreement is entered into on the
day and year first above written.
COMPANY:
COLORADO GAMING & ENTERTAINMENT CO.
By:
Its:
EXECUTIVE:
RICHARD RABIN
