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
____________________
HEMMETER ENTERPRISES, INC. 84-1242693
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 . . . . . . . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . 31
Summary Compensation Table . . . . . . . . . . . . . . . 31
Compensation of Directors . . . . . . . . . . . . . . . 33
Employment and Consulting Agreements . . . . . . . . . . 33
Management Incentive and Non-Employee Director Stock
Plan . . . . . . . . . . . . . . . . . . . . . . . 33
Management Cash Bonus Plan . . . . . . . . . . . . . . . 34
Other Plans . . . . . . . . . . . . . . . . . . . . . . 34
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . 34
ITEM 8. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . 36
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS . . . . . . . . 37
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES . . . . . . 38
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED . . . . . . . . . . . . . . . . . . . . . . . 38
Common Stock . . . . . . . . . . . . . . . . . . . . . . 38
Colorado Gaming Regulations . . . . . . . . . . . . . . 39
Certain Charter and Bylaw Provisions . . . . . . . . . . 39
12% Senior Secured Pay-In-Kind Notes Due 2003 . . . . . 40
General . . . . . . . . . . . . . . . . . . . . . . 40
Terms . . . . . . . . . . . . . . . . . . . . . . . 40
Redemption . . . . . . . . . . . . . . . . . . . . 41
Mandatory Offers to Purchase . . . . . . . . . . . 41
Guarantee of New Notes . . . . . . . . . . . . . . 42
Security . . . . . . . . . . . . . . . . . . . . . 42
Certain Covenants . . . . . . . . . . . . . . . . . 43
Events of Default and Remedies . . . . . . . . . . 46
Defeasance . . . . . . . . . . . . . . . . . . . . 48
Satisfaction and Discharge . . . . . . . . . . . . 49
Amendments and Waivers . . . . . . . . . . . . . . 49
Regarding the Trustee . . . . . . . . . . . . . . . 50
Guarantees of 12% Senior Secured Pay-In-Kind Notes due
2003 . . . . . . . . . . . . . . . . . . . . . . . 50
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . 50
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . 51
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . 51
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS . . . . . . . . . 52
ITEM 1. BUSINESS
General
Hemmeter Enterprises, Inc. (the "Company") develops, owns
and operates gaming and related entertainment facilities. On the
effective date of its Plan of Reorganization (see "- Background
of Bankruptcy; Plan of Reorganization"), the Company will own,
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 have continued
their business operations as debtors-in-possession under the
supervision of the Bankruptcy Court since the 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 will be consummated on the date
(the "Effective Date") on which certain conditions specified in
the Plan of Reorganization are satisfied or waived. The Company
expects that the Effective Date will occur prior to June 1, 1996.
The following events will occur at the Effective Date
pursuant to the Plan of Reorganization:
1. The Company and its Colorado Subsidiaries will be
discharged from any liability to GPRI or its creditors. 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 Colorado Casinos
and the Surface Parking Lot.
2. The claims of entities which provided 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<F1> and Resort Income
Investors, Inc., which holds a secured claim in the Hemmeter
Bankruptcy Case (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 (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 will be the principal creditors and
stockholders of the Company. The portion of the New Notes
paid to RII will be less than $1 million and a similar
portion of common stock will be 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 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 $1,621,329.35 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,
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 RII. See
"Item 8, Legal Proceedings."
6. Any amounts outstanding under the DIP Facility 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. See
"Item 2, Financial Information - Management's Discussion and
Analysis of Financial Condition and Results of Operation."
7. The Company will change 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 is expected to become effective on or about May 18,
1996. The Company and the Colorado Subsidiaries have continued
their business operations as debtors-in-possession under the
supervision of the Bankruptcy Court since the date their
bankruptcy petitions were filed.
On the Effective Date of its Plan of Reorganization, the
Company will adopt 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
will be 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 expects to obtain 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 of the Plan of Reorganization, the Old
Notes will be cancelled and the Company will issue New Notes in
the aggregate principal amount of $50 million. The New Notes
will bear interest at the rate of 12% per annum, payable semi-
annually, will mature in 2003, will be secured by a lien on
substantially all of the assets of the Company and its Colorado
Subsidiaries, and will be 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 is in the process of negotiating the definitive
terms of, and expects to enter into, a credit facility with an
unaffiliated lender (the "Post-Effective Date Credit Facility")
on the Effective Date to replace the DIP Facility. The Post-
Effective Date Credit Facility will provide for total loans of up
to $12.5 million, of which $3.5 million will be 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 will 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 will be 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 will be
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
On the Effective Date of the Plan of Reorganization, the
Company will own, 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 will be cancelled and 5 million shares of newly
issued common stock of the Company will be 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, will be 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 477,916 8.5%
Keystone Strategic Income Fund 195,874 3.5
Keystone Small Company Growth Fund 494,094 8.9
Equifax Inc. U.S. Retirement Trust 26,489 <F1>
Ampax Retirement Master Trust 11,782 <F1>
Buffalo Color Master Trust 1,435 <F1>
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 <F1>
MW Employee Retirement Trust 6,769 <F1>
The Common Fund 71,516 1.3
10 E. 50th Street, Suite 2600
New York, NY 10022 --- ---
PaineWebber Securities Trust 13,911 <F1>
PaineWebber Managed High Yield
Fund, Inc. 83,394 1.5
PaineWebber Managed Investments Trust 768,694 13.8
All-American Term Trust Inc. 73,300 1.3
PaineWebber Offshore Funds, plc 50,025 <F1>
1285 Avenue of the Americas, 15th floor
New York, NY 10010
SC Fundamental Value Fund LP 368,570 7.0
SC Fundamental Value Fund 204,819 3.9
BVI, Limited
712 Fifth Avenue
New York, NY 10019
__________________
<F1> 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,<F2> 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)
____________________
<F2> 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<F4> 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
____________________
<F4> 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 will be terminated on the Effective Date. On
the Effective Date, the Company will enter into the following
employment and consulting agreements:
Christopher B. Hemmeter. Pursuant to the Plan of
Reorganization, the Company will enter 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 will enter 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 will enter 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 will provide 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 will enter 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 will establish 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 will establish 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 will provide 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 will be settled pursuant
to the Plan of Reorganization. As a result, there will be no
litigation pending against the Company or its Colorado
Subsidiaries on 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
will be 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 will be cancelled
on the Effective Date and 5 million shares of Common Stock
will be issued to the holders of the Old Notes and the RII
Claim and 138,888 shares of Common Stock will be 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 IBJ Schroder Bank & Trust Co., 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 [________]. 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
[__________] and semiannually thereafter on [___________] and
[___________] of each year, to the holders of record of New Notes
at the close of business on [___________] and [___________]
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 [ ].
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 beginning on [___________] of
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 (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 certain permitted credit
facilities in an aggregate principal amount not to
exceed $17,500,0000.
(b) Indebtedness under the New Notes, the Indenture
and the Security Documents;
(c) Indebtedness if, immediately after giving pro
forma effect to the incurrance thereof, the
Consolidated Coverage Ratio would be greater than
1.75 to 1 in the case of Indebtedness
incurred prior to January 1, 1997, or 2.0 to 1 in
the case of Indebtedness incurred after December 31,
1997; and
(d) The Guarantee made by any Company Subsidiary which
is or shall become a Guarantor.
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) customary
non-assignment provisions restricting subletting or assignment of
any lease entered into in the ordinary course of business; (iii)
restrictions imposed by Gaming Laws or any Gaming Authority; (iv)
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; (v) any contractual encumbrance imposed by the
incurrance of any Indebtedness permitted hereunder, provided such
incumbrance does not restrict the payment of dividends to the
Company or any Company Subsidiary or the payment of Indebtedness
owed to the Company or any Company Subsidiary; (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 the
New Notes 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 the New Notes when due at maturity, upon
acceleration, mandatory redemption, optional redemption,
required purchase or otherwise; or
(c) the failure by the Company to own directed or
through wholly owned Company Subsidiaries subject to the
exceptions described under "Ownership of Stock of Company
Subsidiaries", 100% of the Voting Stock of all Company
Subsidiaries or failure by the Company to maintain the
required Consolidated Fixed Charge Coverage Ratio at the
required level.
(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 Security 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 in an
aggregate 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
Subsidiaries shall have occurred; or
(i) any Security Document ceases to be in full force
and effect or any Security Documents ceases to create in
favor of the Trustee, with respect to any material amount of
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 Bullwhackers 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 occurrence of certain restricted mergers or
consolidations; or
(n) the Company ceases to own 100% of the Voting Stock
of BWBH, Inc., sells the Bullwhackers Black Hawk or any
substantial part of its assets, or certain Events of Loss
occur with respect to Bullwhackers Black Hawk.
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 Event of Default, unless such
Event of Default shall have been cured or waived, the Trustee
must deliver notice of such Event of Default to all Holders.
Except in the case of an Event of 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 (g) above) occurs, the Holders of at least
25% in principal amount of the outstanding New Notes may, by
written notice, and the Trustee upon the request of the Holders
of not less than 25% in principal amount of the outstanding New
Notes shall, declare the principal of and accrued interest on all
the New Notes to be immediately due and payable. If an Event of
Default specified in clause (g) occurs, then the principal of and
accrued interest on all the New 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 New 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 the New Notes,
all overdue interest on the New 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 New 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 resulting from failure by the Company
or any Company Subsidiary to make any payment when due with
respect to any other Indebtedness in an aggregate principal
amount of $1 million or more, 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 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 New 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 New Notes
shall, initiate suit for collection of the New Notes and the
Guarantees, exercise all rights and remedies in respect of the
Collateral pursuant to the Security Documents or other use
exercise any rights and remedies available to it under the
Indenture or otherwise.
No Holder of any of the New 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 New 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 New 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 New 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 New Notes, to replace
mutilated, destroyed, lost or stolen New Notes and to maintain
agencies in respect to the New Notes. The Company may also at
any time terminate its obligations under certain covenants set
forth in the Indenture, including all of those described under "-
Certain Covenants" above, and any omission to comply with such
obligations shall not constitute a Default or an Event of Default
with respect to the New 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 New 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 or
registration of transfer or exchange of New Notes) as to all
outstanding New Notes when either: (a) all such New Notes
theretofore authenticated and delivered (except lost, stolen or
destroyed New Notes which have been replaced or paid and New
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 New Notes not theretofore delivered to the Trustee for
cancellation have become due and payable 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 New 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
IBJ Schroder Bank & Trust Company 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 Form of Amended and Restated Articles of Incorporation of
Hemmeter Enterprises, Inc.
3.2 Form of Amended and Restated By laws of Hemmeter
Enterprises, Inc.
4.1 Form of Indenture between Hemmeter Enterprises, Inc. and
IBJ Schroder Bank & Trust Company, as Trustee.
4.2 Specimen Certificate of Common Stock.
4.3 Form of Note.
4.4 Form of 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 Post-Effective Date Credit Facility.**
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 Form of Colorado Gaming & Entertainment Co. Management
Stock Incentive Plan.
10.26 Form of 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 Form of Employment Agreement between Hemmeter Enterprises,
Inc. and Stephen J. Szapor, Jr.
10.30 Form of Employment Agreement between Hemmeter Enterprises,
Inc. and Alan L. Mayer.
10.31 Form of 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 IBJ Schroder Bank &
Trust Company, as Trustee under the Indenture.**
_____________________
* Previously filed.
** To be filed by amendment.
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/
Name: Stephen J. Szapor, Jr.
Title: President & Chief Executive Officer
BWBH, INC.
(Registrant)
By: /s/
Name: Stephen J. Szapor, Jr.
Title: President
BWCC, INC.
(Registrant)
By: /s/
Name: Stephen J. Szapor, Jr.
Title: President
MILLSITE 27, INC.
(Registrant)
By: /s/
Name: Stephen J. Szapor, Jr.
Title: President
SILVER HAWK CASINO, INC.
(Registrant)
By: /s/
Name: Stephen J. Szapor, Jr.
Title: President
May 23, 1996.
FORM OF
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 _______________, 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:
Thomas Thorsen
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
FORM OF
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 Chairman of the Board or
the Board of Directors (sometimes referred to as the "Board"),
pursuant to a resolution approved by the majority of the entire
Board, 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.
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 partici-
pate 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 be the Chief Executive officer of
the Corporation and 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
Operating 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 or trust companies 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 shall be not more than
60, nor less than ten days before the date of any meeting of
stockholders. 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. The shares of the Corpora-
tion 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
IBJ SCHRODER BANK & TRUST CO.,
as Trustee
Indenture
Dated as of [ ], 1996
up to [$ ]
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 [ ], 1996
Trust Indenture
Act Section Indenture
Section
Section 310 (a) (1) 508
(a) (5) 508
(b) 505, 508, 509(d)
(b)(1) 508
Section 311 505
(a) 512
Section 312 (b) 601
Section 313 (a), (b) 604
(c) 604, 605(c)
Section 314 1110(a)
Section 314(a) 605(c), 909(a)
(a) (4) 908(a)
(c) 301(d)
(d) 1105(b)
Section 315(b) 501
(e) 509(d)
Note:This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
INDENTURE, dated as of [ ], 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 IBJ Schroder Bank &
Trust Co., a [], 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, that, among other things, the Company and the
Guarantors shall have executed this Indenture, the Company shall
have issued the Notes and the Company and the Guarantors shall
have granted and conveyed security interests in the Collateral
pursuant to the Security 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 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.
"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 payment of such debt security multiplied by the amount
of such principal payment by (ii) the sum of all such principal
payments.
"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 hereinafter created.
"Bank Indebtedness" means, at any date, any outstanding
Indebtedness of the Company and the Company Subsidiaries under
any Bank Facility and any guarantee of such Indebtedness executed
by any of the Company Subsidiaries.
"Bank Indebtedness Amount" means $17,500,000, less the aggregate
payments 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 Collateral Agent
receives a valid and perfected first priority security interest
(subject to Permitted Liens) in the assets comprising such
Permitted Related Investment, the Bank Indebtedness Amount shall
be increased, but not above $17,500,000, by 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).
"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) the failure of the Company to own, directly or indirectly,
100% of all classes of issued and outstanding Capital Stock of
BWBH, (iii) the occurrence of a Restricted Asset Sale involving
any assets owned by BWBH or used by BWBH in the operation of the
Black Hawk Casino, or (iv) 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 (iv) above only if the loss, destruction or
material damage to the property or asset giving rise to such
Event of Loss has not been repaired, replaced or otherwise
remedied, and the efficient operation of BWBH and the Black Hawk
Casino has not otherwise resumed, within a period of seven
Business Days after the occurrence of 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 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].
"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 obligation under
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.
"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
Security Documents and all other property or assets that become
subject to a Lien in favor of the Trustee or the Holders.
"Collateral Account" means a deposit account in the name of the
Company, but under the sole dominion and control of the
Collateral Agent or 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.
"Collateral Agent" means IBJ Schroder Bank & Trust Co., as
collateral agent for the Holders under the Security Documents.
"Collateral Proceeds" means (a) any Net Cash Proceeds received
or receivable by the Company or any Guarantor 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 1106.
"Collateral Release Date" has the meaning specified in Section
1106.
"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,
$, 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 (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 this "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 (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); less
(to the extent included in such consolidated Net Income) (a) the
Net Income (or net loss) of any Person (the "other Person")
(i) other than a Company Subsidiary or (ii) in which the Company
or any of the Company Subsidiaries has a joint interest with a
third party (which interest does not cause the Net Income (or net
loss) of such other Person to be consolidated into the Net Income
(or net loss) of the Company and the Company Subsidiaries in
accordance with GAAP), except in each such case such Net Income
shall be included to the extent of (A) in the case of the Company
or a wholly owned Company Subsidiary, the amount of cash
dividends or other cash distributions in respect of Capital Stock
or other interest owned actually paid (out of funds legally
available therefrom) to and received by the Company or such
Company Subsidiary and (B) in the case of a less than wholly
owned Company Subsidiary, the Company's proportionate share (to
the extent of the Company's direct or indirect interest in such
Company Subsidiary) of cash dividends or other cash distributions
in respect of Capital Stock or other interest owned actually paid
(out of funds legally available therefrom) to and received by
such Company Subsidiary; (b) items classified as extraordinary;
(c) the income (or loss) 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; (d) the net income of
any Company Subsidiary to the extent that the declaration of
dividends of 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; (e) any net gain or loss resulting from a
Restricted Asset Sale, Unrestricted Asset Sale or Event of Loss
or reserves relating thereto by the Company or any of the Company
Subsidiaries; (f) any gain (but not loss), net of taxes, realized
upon the termination of any employee pension benefit plan; and
(g) all income taxes of the Company and the Company Subsidiaries
paid or accrued according to GAAP for such period attributable to
extraordinary gains or losses.
["Consolidated Net Worth" means, at any date of determination,
the sum of: (i) the consolidated equity of the common
stockholders of the Company and the Company Subsidiaries on such
date, plus (ii) the respective amounts reported on the Company's
most recent balance sheet with respect to any series of preferred
stock (other than Disqualified Stock) that by its terms is not
entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year
of such declaration and payment, but only to the extent of any
cash received by the Company upon issuance of such preferred
stock, less (w) all write-ups (other than write-ups resulting
from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after
the acquisition of such business) subsequent to the date of this
Indenture in the book value of any asset owned by the Company or
a Company Subsidiary, (x) goodwill and other intangible assets,
(y) all investments in the Company that are not Company
Subsidiaries, and (z) all unamortized debt discount and expense
and unamortized deferred charges, all of the foregoing determined
in accordance with GAAP.]
"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 [], except
that with respect to presentation of Notes for payment or for
registration of transfer or exchange, such term shall mean the
office or agency of the Trustee located at [].
"Corporation" includes corporations, associations, 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 the fourth anniversary thereof, an amount
equal to 4% of the unpaid principal amount of all Outstanding
Notes, (ii) for the twelve-month period following the fourth
anniversary of the Issue Date, an amount equal to 3% of the
unpaid principal amount of all Outstanding Notes, and (iii) for
the period subsequent to the fifth anniversary of the Issue Date,
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 the Company Subsidiaries 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.
"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 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" has the meaning 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) [involving the use of or
relating to, ancillary or supportive of, connected with or
arising out of any Collateral].
"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); (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 [, 1996] and each [] and []
thereafter.
"Investment", in any Person, means any direct or indirect loan,
advance, 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), or purchase or
acquisition of Capital Stock, warrants, rights, options, bonds,
notes, debentures or other securities or evidences of
Indebtedness issued by any other Person or Indebtedness of any
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 (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. 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 [ ] , 1996.
"Legal Defeasance" has the meaning specified in Section 1202.
"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 of its
Capital Stock 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 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, 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.
"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.
"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 or any Affiliate
of the Company 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 or the
Guarantee, as applicable;
(vi)Liens in favor of the Collateral Agent under the Indenture
and the Security Documents;
(vii)Liens securing any Bank Indebtedness;
(viii)The replacement extension or renewal of any Lien permitted
by clauses (i) through (vii) 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.
"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.
"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.
"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 [ ] or [
] (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" has the meaning 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.
"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 in
favor of the Trustee for its benefit and the benefit of the
Holders.
"Security Documents" means this Indenture, the Security
Agreement, each mortgage, deed of trust, security agreement or
similar instrument securing the Company's obligations with
respect to the Notes or under this Indenture or any of the
Security Documents.
"Security Interest" has the meaning specified in Section 1101.
"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.
"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 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 herein
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 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, 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 [ ], 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 [, 1996]
and semiannually thereafter on [] and [] 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, 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 Security
Documents.
The Notes shall be repurchased by the Company, at the option of
the Holders, pursuant to Sections 917 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, 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 (ii) 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 [], 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
(other than any Notes that were issued after the Issue Date as
Secondary Notes pursuant to this Section 208) on the Notes 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. 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 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 Record Date in the aggregate principal amount
required to pay such interest. 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, 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 Fourteen 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 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 or 924; 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 Security 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 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, any Guarantor 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, any Guarantor 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 Security Document ceases to be in full force and effect or
any Security Document ceases to create in favor of the Trustee,
with respect to any material amount of Collateral, a valid and
perfected 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.
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 unpaid interest thereon and, in the
case of an Event of Default under Section 401(a), (b), (d), (e),
(j), (k), (l), (m), (n) or (o), 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 rescinded their declaration of acceleration in respect of
such Indebtedness, and written notice of such discharge or
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.
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 Security Documents or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy. The Trustee may (in its capacity as the
Collateral Agent), in connection with the matters covered by the
two preceding paragraphs, take such actions under the Security
Documents as shall be required or available thereunder.
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
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 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.
Any money collected by the Trustee pursuant to the Indenture, the
Notes, the Guarantee or the Security 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 Collateral Agent
under the Security 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 Security 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, 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 (subject to Section 208)
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
Security 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.
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 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 Trust Officer:
(1) the Trustee need perform only those duties
that are specifically set forth (or incorporated by
reference) in this Indenture and no others, and no
covenants or obligations shall be implied in or read
into this Indenture 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; 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 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 shall require the
Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
duties hereunder or to take or omit to take any action under
this Indenture or at the request, order or direction of the
Holders or in 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
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) 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 other Security Documents,
including in its capacity as Collateral Agent.
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 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 shall not be
accountable for the use or application by the Company of Notes or
the proceeds thereof.
The Trustee makes no representations with respect to
the effectiveness or adequacy of any Security Document, or the
validity, perfection or priority, if any, of Liens granted to it
under this Indenture or the Security Documents. The Trustee
shall not be responsible for ascertaining or maintaining such
validity, perfection or priority, if any, and shall be fully
protected in relying upon certificates and opinions delivered to
it in accordance with the terms of this Indenture or the Security
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.
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 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
Collateral Agent if the Trustee acts as such.
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 immediately 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. If, within one year after
such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding
Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed 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 hereinafter
provided, 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 charges, 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 or any Affiliate
acquires any Notes, the Company shall within 10 Business
Days after such acquisition by the Company and within 10
Business Days after the date on which it obtains knowledge
of any such acquisition by an Affiliate, provide the Trustee
with written notice of such acquisition, the aggregate
principal amount 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 this Indenture
or under the Notes 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 [ ] of each year commencing with the first [ ]
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 the immediately preceding [] 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 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 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 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 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 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 Security 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 security interests granted or purported
to be granted by the Security 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 (if the transaction or series of
transactions involves the Company) 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 Security 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
operation 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 the Indenture; and
(h) each Guarantor, unless it is another party to the
transactions described above, 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.
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 Security 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 a Lien 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 Security 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 Security 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 Security 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 Security Documents or under
the Guarantee; provided that, in such case, such provision
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 Lien of this
Indenture and the other Security Documents as a first
priority Lien (subject to Permitted Liens) and prior to
Liens (other than Permitted Liens) that are actually known
to the Company or to correct or amplify the description of
any Collateral subject to the Lien of this Indenture or the
other Security Documents, or to subject additional property
to the Lien of this Indenture or other Security Documents;
or
(i) to secure the Notes; or
(j) 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 Security 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 Security Documents or the
Notes or of modifying in any manner the rights of the
Holders under this Indenture, the Security 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 provided in Section 914 or 1105 or
the Security Documents, release any Collateral, permit
the creation of any Lien senior to or ranking equally
with the Lien of any Security Document, 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 Security 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 Security 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
Security 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
Security 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 limitation of Section
804, in the case of any amendment 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 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 shall cause to be maintained an
office in the State of New York, City of New York (to the extent
required by applicable law) as long as it 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, 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 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, 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), 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 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
Security 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
Security 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 Collateral Agent 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 Collateral Agent, (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
Collateral Agent and (iv) that its liability to the Collateral
Agent will not be affected by acts outside of the Collateral
Agent'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
Security 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 that is
continuing, 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 except to the
extent any such applicable law is contested in good faith by
appropriate proceedings and adequate reserves have been
established as required by GAAP, 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 Security Documents;
(b) Bank Indebtedness, so long as the aggregate
principal amount outstanding at any one time does not exceed
the Bank Indebtedness Amount;
(c) 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 pro forma 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 Indebtedness incurred or to be incurred
on or prior to December 31, 1996 and (B) 2.0 to 1, in the
case of 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) through (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 covenant 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 its Capital Stock, 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 Security Documents;
(b) customary non-assignment provisions restricting
subletting or assignment of any lease entered into in the
ordinary course of business, consistent with industry
practices,
(c) restrictions imposed by applicable Gaming Laws or
Liquor Laws or any applicable Gaming Authority or Liquor
Authority,
(d) 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,
(e) 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 Company
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
(f) 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 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 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 make a
Restricted Asset Sale Offer if, and only to the extent that, on
or before the 180th 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 first priority fully perfected security
interest (subject only to the Permitted Liens) in 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 security interest. 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;
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
360th 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 first priority fully perfected security interest
(subject only to Permitted Liens) in 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 security interest. 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.
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.
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.
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 at least 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 Company Subsidiary that shall be disposed of in its
entirety or consolidated or merged with or into the Company or
another wholly-owned Company Subsidiary, in each case in
accordance with Section 701 and 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 with 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 first priority fully perfected security interest
(subject only to the Permitted Liens) in 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 security interest.
(b) Subsection (a) shall not apply to any of the
following: (i) transactions between one or more Guarantors or
between the Company and one or more Guarantors, (ii) Restricted
Payments permitted to be made under Section 913 or
(iii) customary directors' fees and indemnities.
Section 921. Change in Nature of Business;
Limitation on Acquisitions.
The Company shall not, and shall not permit any of the
Company Subsidiaries to, own, acquire, manage or conduct any
operation other than a Permitted Line of Business.
Section 922. Additional Collateral.
The Company will, and will cause each of the Company
Subsidiaries that owns any assets to, grant to the Trustee a
valid and perfected first priority security interest (subject
only to the Permitted Liens) in such assets enforceable against
all third parties and to execute and deliver all documents and to
take all action necessary or desirable to perfect and protect
such a 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 (A) 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 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; (B) 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; (C) 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 (D) 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 first priority Lien
(subject only to the Permitted Liens) on all personal
property (exclusive of leasehold interests therein) that is
or becomes part of such assets (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; and
(iii) 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 such 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 . 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. Security Documents.
Simultaneously herewith, the Company shall execute, or
cause the Company Subsidiaries and Guarantors to execute, the
respective Security Documents, as appropriate, securing the
Company's and the Guarantor's obligations under this Indenture
(including the Guarantee), the Security Documents and the Notes.
Each Holder, by accepting a Note, agrees to all terms and
provisions of the Security 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 Security 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 Security Documents, the
terms of this Indenture shall govern.
Section 926. Validity of 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 Security Interest
referred to in Article Eleven, and the Company shall warrant,
preserve and defend the Security Interest of the Trustee in and
to the Collateral or any asset 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
Security Documents against the claims of all persons, and will
maintain and preserve the Security Interest contemplated by
Article Eleven. No assets may be used at or in connection with a
Gaming Facility unless the Company and/or the Company
Subsidiaries have done all things necessary or desirable to
create and perfect a first priority security interest (subject
only to the Permitted Liens) in such assets, except as otherwise
permitted by this Indenture and the Security Documents, and the
Company has delivered to the Trustee an Opinion of Counsel with
respect to the validity and perfection of such security interest.
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 Security 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. 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 Security Documents in a manner
inconsistent with the provisions of this Indenture or such
Security 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 or the Collateral Agent, 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 1001(b), 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 1001(b)) accrued interest on, all
the Notes or portions thereof which are to be redeemed on that
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 herein specified and from
and after such date (unless the Company shall default in the
payment of the Redemption Price and, subject to Section 1001(b),
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 accrued interest to the Redemption Date,
subject to Section 1001(b); 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. Upon surrender to the Paying Agent, such
Notes shall be paid on the Redemption Date at the Redemption
Price. 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, 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 (the "Initial Directors")
of the Company are approved by the 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 either directors
at the beginning of such period or whose election or nomination
for election was previously so approved or who were elected by
the vote of one or more of the Existing Equity Holders or their
Related Parties; provided, however, that 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 for purposes of this clause (iv)) 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, 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). 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) Any notice to Holders given pursuant to
Section 1011(b) shall include a form of Purchase Notice (as
defined below) and shall state:
(i) that the Company thereby offers to repurchase
at the Change of Control Purchase Price, all Notes of
such Holder;
(ii) 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 given;
(iv) the date as of which Notes will be purchased
pursuant to the Change of Control 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 Purchase Notice is
sent pursuant to Section 1011(b);
(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 1011 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 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 the
close of business on the third Business Day prior to 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.
The Company shall purchase from the Holder thereof,
pursuant to this Section 1012, all or a portion of a Note if the
principal amount of such portion is $1,000 or an integral
multiple of $1,000. Provisions of this Indenture that apply to
the purchase of all of a Note also apply to the purchase of a
portion of such Note.
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 the close of business on the third Business Day
prior to 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 preceding 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 1011 or 1012, the Company shall comply with
all applicable federal and state securities laws so as to permit
the rights and obligations under Sections 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
SECURITY INTEREST
Section 1101.Security Interests 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 Security Documents have
unconditionally and absolutely granted and conveyed to the
Trustee for the benefit of itself and all Holders, a first
priority security interest in the Collateral (the "Security
Interest"), subject only to the Permitted Liens.
(b) The 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 for
the enforcement of the payment of principal of, premium, if any,
and interest on the Notes in accordance with their terms.
(c) The Security Interest shall be and is expressly
made subordinate to any security interest in the Collateral that
the Company or any Guarantor grants to secure any Bank
Indebtedness. [Nothing contained herein shall restrict the
rights of the Trustee or the Holders to have claims filed on
their behalf in any proceeding under the Bankruptcy Laws
involving the Company or the Company Subsidiaries.]
(d) 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 Security
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 Security Interest and shall pay
all filing, recording, mortgage or other taxes or fees incidental
thereto.
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 Security Documents necessary
to make effective or perfect the Lien 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 Security
Documents, or financing statements, continuation statements or
other instruments of further assurance, as is necessary to
maintain the Liens of the Security 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 Security 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 Security
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
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 Security 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 Security Documents, free and
clear of all Liens, except for the (A) Liens created by the
Security Documents, (B) Permitted Liens and (C) Liens contested
in good faith or arising by operation of law and not by contract,
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
Security 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, to
assure and confirm to the Trustee the Security Interest in the
Collateral contemplated hereby and by the Security 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
Lien of the Security Documents 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, 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 otherwise permitted by Section
917, to release from the Lien of the Security Documents 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 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, if
any, 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 security interest in favor of the Trustee 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 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 Security 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 Security Interest under
this Indenture 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,
that the property to be released pursuant to a Company
Request may be lawfully released from the Lien of the
Security Documents and that all conditions precedent in
this Indenture and the Security Documents relating to
such release have been complied with.
(c) The Company or such Company Subsidiary or
Guarantor, as the case may be, shall cause such Net Cash Proceeds
of any Restricted Asset Sale pursuant to Section 917 that
involves Collateral or any Event of Loss that involves Collateral
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 or Guarantor. 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
first priority security interest (subject only to the Permitted
Liens) in the property or assets acquired by the Company or any
Company Subsidiary or Guarantor in connection therewith and 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), including
the following:
(A) the reason 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 first priority
security interest in such property or assets (subject
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 Security Documents relating to the
release of the Collateral Proceeds have been complied
with.
(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, that
the property to be released pursuant to a Company Request
may be lawfully released from the Lien of the Security
Documents and that all conditions precedent in this
Indenture and the Security Documents relating to such
release (including, without limitation, the requirement that
the Trustee receive a first priority security interest in
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 thereof or this
Indenture 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 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
Lien of any Security Document.
(b) The release of any Collateral from the Lien of any
Security Document or the subordination of any Lien of any
Security Document shall not be deemed to impair such Lien or the
Collateral under the Security Documents in contravention of the
provisions of this Indenture or such Security Document if and to
the extent the Collateral or Lien is released or subordinated
pursuant to, and in accordance with, this Indenture and such
Security Document.
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
Collateral Agent and/or the Trustee, subject to compliance by the
Company with Section 1109, shall deliver to the Company and the
Guarantors a certificate stating that the Collateral Agent and
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 Security Documents, and, upon and
after the receipt by the Company and the Guarantors of such
certificate, the Collateral Agent and the Trustee shall no longer
be deemed to hold the Lien in the Collateral 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 Lien under
the Security Documents or the Collateral thereunder in
contravention of the provisions of this Indenture or the Security
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. Collateral Agent's Duties.
(a) The Collateral Agent shall:
(i) to the extent contemplated by the relevant
Security Documents and this Indenture, execute and deliver all
Security Documents required to be executed by the Collateral
Agent and hold in its possession all Collateral Proceeds from
time to time delivered to it; and
(ii) take all steps the Collateral Agent is
entitled to take under the relevant Security 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 Collateral Agent is entitled to discharge or pay),
provided the Collateral Agent 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 Security Documents to give such notice, or otherwise.
(b) The Collateral Agent shall have only such duties
with respect to the Collateral as are set forth in this
Indenture, the Security Documents.
(c) In the performance of its duties hereunder and the
Security Documents, the Collateral Agent shall be fully protected
and indemnified to the full extent of the indemnity provided in
Section 503.
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, 207,
208, 902, 903 and 1401, (c) the rights, powers, trusts, duties
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 Section 701 and Sections 911 through 928
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 Notes, to the Trustee and to the Collateral Agent, as
applicable, 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 the Security Documents, 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 Security Document, any of the
Indenture Obligations, any Lien on Collateral 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 Security 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 Security 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 Security Interests.
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 Liens and security interests created by any Security
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; provided, however, that the Guarantors may not
assign any of their rights or obligations hereunder other than in
accordance with Article Seven.
Section 1314. Release of Guarantee.
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), and subject to compliance
with the provisions of Section 1105 (including the delivery of
all required Officer's Certificates), the Company Subsidiary
whose Capital Stock or assets are sold shall be released from and
relieved of its obligations under this Article Thirteen.
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.
Upon the delivery by the Company to the Trustee of an
Officers' Certificate and, if requested by the Trustee, an
Opinion of Counsel to the effect that the transaction giving rise
to the release of this Guarantee was made by the Company in
accordance with the provisions of this Indenture and the Notes,
the Trustee shall execute any documents reasonably required in
order to evidence the release of a Company Subsidiary or all of
the Guarantors, as the case may be, from its or their obligations
under this Guarantee. 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 this Section) 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 (except as provided in the first part of this sentence)
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 authorized or
permitted by law or (ii) which the Trustee deems necessary
or appropriate in connection with the administration of this
Indenture.
Section 1402. Manner of Calling Meeting.
The Trustee may at any time call a meeting of 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, in regard
to proof of the holding of Notes and of the appointment of
proxies, and in regard to the appointment and duties of
inspectors of votes, and submission and examination of proxies,
certificates and other evidence of the right to vote, and such
other matters concerning the conduct of the meeting as it shall
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 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 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 proceeds 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) or of the
Notes.
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:
[ ]
with a copy to:
[ ]
If to the Trustee:
[ ]
with a copy to:
[ ]
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.
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 by the
Company and each Guarantor shall bind their respective successors
and permitted assigns, whether so expressed or not.
All covenants and agreements in the Security Documents
by each Guarantor shall bind its successors and assigns, whether
so expressed or not.
Section 1504. Benefits of Indenture.
Nothing in this Indenture or in the Notes, 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 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 or Redemption Date
or at the Stated Maturity or Maturity; provided that no interest
shall accrue for the period from and after such Interest Payment
Date, Redemption Date, Stated Maturity or Maturity, as the case
may be.
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 [ ] (the "Process Agent," which has consented
thereto) with offices on the date hereof at [ ], 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 [ ],
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 Security
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.
HEMMETER ENTERPRISES, INC.
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:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
Name:
Title:
(Form of Face of Note)
THIS NOTE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH APPLICABLE
GAMING LAWS.
12% SENIOR SECURED PAY-IN-KIND NOTE DUE 2003
No.__________ $____________
COLORADO GAMING & ENTERTAINMENT CO.
Promises to pay to ____________________ or registered assigns,
the principal sum of __________Dollars on June 1, 2003
Interest Payment Dates: June 1 and December 1, commencing
December 1, 1996.
Regular Record Dates: May 15 and November 15 (whether or not a
Business Day).
Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof which further
provisions shall for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, Colorado Gaming & Entertainment Co.
has caused this Note to be duly executed and has caused a
facsimile of its corporate seal to be hereunto affixed and
attested.
Dated:
COLORADO GAMING & ENTERTAINMENT CO.
By:________________________________
Name:
Title:
(SEAL)
Attest:
By:______________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
(This Note is one of the Notes referred
to in the within-mentioned Indenture)
IBJ Schroder Bank & Trust Co., as Trustee
By:____________________________________
Authorized Signatory
Dated:___________________
BWBH, Inc., BWCC, Inc., Millsite 27, Inc. and Silver
Hawk Casino, Inc. (each, a "Guarantor" and collectively, the
"Guarantors," which terms include any successor hereunder or
under the Indenture), have unconditionally and irrevocably
guaranteed the due and punctual payment of the Indenture
Obligations (defined on the reverse hereof), including, without
limitation, the payment of the principal of, premium, if any, and
interest on this Note.
The obligations of each Guarantor to the Holder of this
Note pursuant to the Guarantee (defined on the reverse hereof),
are expressly set forth to the extent and in the manner provided
in Article Thirteen of the Indenture and reference is hereby made
to such provisions of the Indenture for the precise terms of the
Guarantee therein made.
No stockholder, officer, director, employee or
incorporator, as such, of any Guarantor shall have any liability
under the Indenture, the Guarantee, this Note or the Security
Documents or for any claim based on, in respect of or by reason
of, such obligations or their creation.
The Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on this Note upon
which this Guarantee is noted shall have been executed by the
Trustee under the Indenture by the manual signature of one of its
authorized signatories.
Guarantors:
BWBH, INC.
By: . . . . . . . . . . . . . . . .
Name:
Title:
BWCC, INC.
By: . . . . . . . . . . . . . . . .
Name:
Title:
MILLSITE 27, INC.
By: . . . . . . . . . . . . . . . .
Name:
Title:
SILVER HAWK CASINO, INC.
By: . . . . . . . . . . . . . . . .
Name:
Title:
(Back of Note)
COLORADO GAMING & ENTERTAINMENT CO.
12% SENIOR SECURED PAY-IN-KIND NOTE DUE 2003
Capitalized terms used herein have the meanings
assigned to them in the Indenture (as defined below) unless
otherwise indicated.
Interest. Colorado Gaming & Entertainment Co.
(the "Company") promises to pay interest on the principal amount
of this Note (individually, a "Note" and collectively, the
"Notes") at the rate and in the manner specified below. Interest
will accrue at 12% per annum and will be payable semi-annually on
each June 1 and December 1, commencing on December 1, 1996, or if
any such day is not a Business Day on the next succeeding
Business Day (each an "Interest Payment Date") to Holders of
record of the Notes at the close of business on the immediately
preceding May 15 or November 15, whether or not a Business Day.
Interest shall accrue from the most recent date to which interest
has been paid or if no interest has been paid, from the date
hereof. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. To the extent lawful, the
Company shall pay interest on overdue installments of interest,
payable in arrears on each Interest Payment Date and on demand,
at a rate per annum equal to 12%. 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 (other than on any Note that
was issued as a Secondary Note) on this Note, pay interest on
this Note 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 this Note, if such
interest were paid in cash. Thereafter, the Company will pay
interest on this Note in cash. Interest on any Secondary Note
shall be payable only in cash.
Any Secondary Notes issued shall be governed by the
Indenture and shall be subject to the same terms, provisions and
conditions as this Note. Except as expressly provided herein,
the term "Notes" shall include all Secondary Notes that may be
issued under the Indenture.
Method of Payment. The Company will pay interest
on the Notes (except defaulted interest) to the Persons who are
registered Holders of Notes at the close of business on the
Regular Record Date for such interest. 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. 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.
No reference herein to the Indenture and no provision
of this Note or of the Indenture shall alter or impair the
obligation of the Issuer, which is absolute and unconditional, to
pay the principal of, premium, if any, and interest on this Note
at the place, at the respective times, at the rate and in the
coin or currency herein prescribed.
Paying Agent; Note Registrar. Initially, IBJ
Schroder Bank & Trust Co. (the "Trustee"), acting as agent of the
Company, will act as Paying Agent and Note Registrar. The
Company may change any Paying Agent, Note Registrar or co-note
registrar or co-paying agent without notice. The Company may act
as Paying Agent, Note Registrar and/or co-note registrar or co-
paying agent.
Indenture. The Company issued the Notes under an
Indenture dated as of May 31, 1996, between the Company, the
Guarantors and the Trustee (the "Indenture"). The terms of the
Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) as amended and in effect on the
date of the Indenture. The Notes are subject to all such terms,
and Holders of the Notes are referred to the Indenture and such
Act for a statement of them.
The Notes are obligations of the Company limited to
$50,000,000 (plus the amount of any Secondary Notes issued) in
aggregate principal amount, and are secured by the Security
Documents and the Collateral pledged as security thereunder.
Optional Redemption. The Company may not redeem
the Notes prior to the fourth anniversary of the Issue Date.
Thereafter, the Notes may be redeemed, in whole or in part, at
the election of the Company, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued
and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-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%
Notice of Redemption. Notice of redemption will
be mailed to the address of the registered Holder of each Note to
be redeemed at least 30 days but not more than 60 days before the
Redemption Date. On and after the Redemption Date, interest
ceases to accrue on Notes or the portions of Notes called for
redemption, provided that the funds necessary to pay the
Redemption Price thereof have been duly deposited with the
Trustee.
Denominations; Transfer; Exchange. The Notes are
in registered form without coupons in denominations of $1000 and
whole multiples of $1000. A Holder may transfer or exchange
Notes in accordance with the Indenture. The Note Registrar or
the Company may require a Holder to, among other things, furnish
appropriate endorsements and transfer documents and to pay any
taxes and fees required by law or permitted by the Indenture.
The Note Registrar and the Company need not transfer or exchange
any Note selected for redemption.
Repurchase at Option of Holders. Upon the
occurrence of any event which constitutes a Change of Control of
the Company, each Holder shall have the right to require that the
Company repurchase such Holder's Notes, at a purchase price in
cash in an amount equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of
purchase, in accordance with the procedures set forth in the
Indenture. The Company must give written notice of a Change of
Control to the Trustee within 15 Business Days after a Change of
Control. Holders of Notes that are subject to an offer to
purchase will, thereafter, receive notice of the Change of
Control Purchase Offer from the Trustee prior to any related
Purchase Date and may elect to have such Notes purchased by
completing the form Purchase Notice transmitted therewith.
The Indenture provides that the holder of this Note may
require the Issuer to make a partial repurchase of this Note from
the proceeds of certain Restricted Asset Sales and Events of Loss
as provided in the Indenture, at 101% of the principal amount
hereof plus accrued and unpaid interest hereon, if any, to the
date of repurchase. The Holder's right of repurchase referred to
above is as provided in and subject to the terms of the
Indenture.
Redemption Pursuant to Gaming Laws. This Note is
subject to redemption, at the option of the Company, as provided
in the Indenture at the lesser of the principal amount of this
Note or the price at which this Note was acquired by the Holder
hereof if any Gaming Authority requires that the Holder be
qualified, licensed or found suitable under any Gaming Laws, and
the Holder fails to become qualified, licensed or found suitable.
Such redemption shall occur within 30 days after such failure to
be qualified, licensed or found suitable and receipt of notice of
the Company's election to redeem this Note (or such shorter time
period as required by the Gaming Authority).
Persons Deemed Owners. The registered Holder of a
Note may be treated as the owner of it for all purposes whether
or not the Note is overdue, and neither the Company, the Trustee
nor any agent shall be affected by notice to the contrary.
Unclaimed Money. If money for the payment of
principal or interest remains unclaimed for two years, the
Trustee or Paying Agent will return the money to the Company at
its request. After that, Holders entitled to such money must
look to the Company for payment unless otherwise provided by law.
Amendment; Supplement; Waiver. Subject to certain
exceptions, each of the Indenture, the Notes, the Guarantee and
the Security Documents may be amended or supplemented and any
past default or failure to comply with any provision may be
waived with the consent of the Holders of at least a majority in
principal amount of the Notes. Without the consent of any
Holder, the Company and any Guarantor, when authorized by Board
Resolution, and the Trustee may amend or supplement the
Indenture, the Notes, the Guarantee and the Security Documents to
cure any ambiguity, defect or inconsistency, to provide for
certain mergers or consolidations involving the Company or a
Guarantor, to add covenants of the Company or a Guarantor for the
benefit of Holders, to add additional Events of Default, to add
additional Guarantors, or to comply with governmental regulations
in connection with the qualification of the Indenture under the
Trust Indenture Act and any registration or qualification of the
Notes under the Securities Act or state securities laws. No
supplemental indenture shall, without the consent of 66-2/3% in
principal amount of the Outstanding Notes, modify the provisions
of the Indenture regarding (a) the right of the Holders to
require the Company to repurchase the Notes upon a Change of
Control or (b) the effect of a Black Hawk Casino Event or the
waiver thereof.
Restrictive Covenants. The Indenture imposes
certain limitations on the ability of the Company and the Company
Subsidiaries to, among other things, incur additional
Indebtedness, make payments in respect of its Capital Stock,
enter into transactions with Affiliates, merge or consolidate
with any other Person and sell, lease, transfer or otherwise
dispose of substantially all of its properties or assets. The
limitations and covenants are subject to a number of important
qualifications and exceptions. The Company must report to the
Trustee on a quarterly basis on compliance with such limitations.
Defaults and Remedies. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at least
25% in aggregate principal amount of Notes then outstanding may
declare all of the Notes to be due and payable immediately,
together with unpaid interest and premium, if any, thereon, in
the manner and with the effect provided in the Indenture.
However, if an Event of Default specified in Section 401(h) or
(i) of the Indenture occurs and is continuing, the unpaid
principal of the Notes, together with unpaid interest thereon,
would become due and payable immediately without any such
declaration. Holders of Notes may not enforce the Indenture or
the Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders
of a majority in aggregate principal amount of the Notes then
outstanding may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Notes notice
of any continuing Default or Event of Default (except a Default
in payment of principal or interest), if it determines that
withholding notice is in the interest of Holders.
Defeasance. The Indenture contains provisions for
defeasance at any time of (a) the entire indebtedness of the
Company on this Note and (b) certain restrictive covenants and
the related Defaults and Events of Default, upon compliance by
the Company with certain conditions set forth therein, which
provisions apply to this Note.
Successor Corporation. All covenants and
agreements in the Indenture by the Company and each Guarantor
shall bind their respective successors and permitted assigns,
whether so expressed or not. All covenants and agreements in the
Security Documents by the Company and each Guarantor shall bind
its successors and assigns, whether so expressed or not.
Trustee Dealings with Company. The Trustee, in
its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company, may become
the owner or pledgee of the Notes, and may otherwise deal with
the Company, as if it were not the Trustee, Paying Agent or Note
Registrar.
No Recourse Against Others. A director, officer,
employee, stockholder or incorporator, as such, of the Company or
any Company Subsidiary shall not have any liability for any
obligation of the Company under the Notes, the Indenture or the
Security Documents 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. The
waiver and release are part of the consideration for the issuance
of the Notes.
Authentication. This Note shall not be valid
until the Trustee or an authenticating agent manually signs the
certificate of authentication on the other side of this Note.
Guarantee of Notes. Pursuant to the Indenture,
the Guarantors have executed a guarantee of the Indenture
Obligations (the "Guarantee"). 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 the Security Documents, 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.
Secured Nature of the Notes. The obligations of
the Company and the Guarantors under the Indenture (including
under the Guarantee) and the Notes are secured by a first
priority security interest and lien upon the Collateral (subject
only to Permitted Liens).
Abbreviations. Customary abbreviations may be
used in the name of a Holder or an assignee, such as: TEN COM
(= tenants in common); TEN ENT (= tenants by the entirety);
JT TEN (= joint tenants with right of survivorship and not as
tenants in common); CUST (= Custodian); and U/G/M/A (= Uniform
Gifts to Minors Act).
The Company will furnish to any Holder upon written
request and without charge a copy of the Indenture and the
Security Documents. Requests may be made to: Corporate
Secretary, Colorado Gaming & Entertainment Co., at the address
specified in Section 15.02 of the Indenture.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of [ ],
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 (the "Plan of
Reorganization"), of the Company. 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, Inc., BWCC, Inc., Millsite 27, Inc. and
Silver Hank 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, other than Registrable
Common Stock or Registrable Notes acquired in connection with
a public offering.
"Indenture" means the Indenture among the Company,
the Guarantors and IBJ Schroeder Bank & Trust Company, 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 in connection with an underwritten offering
by any Selling Holders of Registrable Securities, no
securities (other than Registrable Securities) shall be
included among the securities covered by such registration
(i) if 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 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"), (i) all of the
securities proposed by the Company to be sold for its own
account; (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 best 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 as shall be
agreed to 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 or
pursuant to a "shelf" registration), 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:
LeBoeuf, 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 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:
SUBDIVISION AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1996, by
and among the CITY OF BLACK HAWK, COLORADO (the "City"), THE
BLACK HAWK/CENTRAL CITY SANITATION DISTRICT (the "District"),
MILLSITE 27, INC., and MILLSITE 20 LIMITED LIABILITY COMPANY
(these last two entities are collectively referred to as the
"Developer").
RECITALS:
A. The Developer is the owner of certain real property
located in the City of Black Hawk which is more particularly
described in Exhibit A attached hereto and made a part hereof
(the "Property").
B. On February 28, 1996, the City Council of the City of
Black Hawk, after holding all necessary public hearings and
having received a recommendation of approval from the Black Hawk
Planning Commission, approved the final plat for the Property. A
copy of the final plat is attached hereto as Exhibit B and
incorporated herein.
C. The approvals cited above are contingent upon the
express condition that all duties created by this Agreement are
faithfully performed by the Developer.
D. The Millsite 20 Limited Liability Company has no
obligation to construct any of the public improvements described
herein.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the mutual
promises and covenants contained herein, the sufficiency of which
are mutually acknowledged, the parties hereto agree as follows:
1. Purpose. The purpose of this Agreement is to set forth
the terms, conditions, and fees to be paid by the Developer upon
subdivision of the Property. All conditions contained herein are
in addition to any and all requirements of the City of Black Hawk
Subdivision Ordinance and Zoning Ordinance, the City of Black
Hawk Charter, the rules and regulations of the District, any and
all state statutes, and any other sections of the City of Black
Hawk Municipal Code, and are not intended to supersede any
requirements contained therein.
2. Fees. The Developer hereby agrees to pay the City the
actual cost to the City for engineering, hydrological, surveying,
and legal services (the "Actual Costs") rendered in connection
with the review of the subdivision of the Property, including
related administrative fees not to exceed fifteen percent (15%)
of the Actual Costs. In addition, the Developer shall reimburse
the City for the costs of making corrections or additions to the
master copy of the official City map and for the fee for
recording the final plat and accompanying documents with the
Gilpin County Clerk and Recorder.
3. Specific Conditions. The Developer hereby agrees that:
a. The Developer shall construct creekscape
improvements according to plans and specifications
approved by the Public Works Director for the City
of Black Hawk on or adjacent to the Property. The
preliminary cost associated with this construction
is thirteen thousand six hundred and twenty-eight
dollars ($13,628).
b. The Developer shall construct, according to the
plans and specifications approved by the Public
Works Director for the City, a fire hydrant and
eight-inch (8") water loop connection line from
Chase Street as approved by the City Public Works
Director. The preliminary construction cost
associated with this construction is forty-eight
thousand and eighty-seven dollars ($48,087).
c. The Developer shall construct a left-hand turn
lane on north-bound 119 to Chase Street according
to the plans and specifications approved by the
Colorado Department of Transportation and/or the
Public Works Director for the City (the "Left-Hand
Turn Lane"). The Developer intends to construct a
parking garage in two phases, the first phase of
which shall not exceed 440 spaces. Prior to the
issuance of any building permit for the second
phase of the parking garage, the Developer shall
provide to the City Public Works Director the
plans and specifications for the Left-Hand Turn
Lane. Upon the approval by the City Public Works
Director of the estimated preliminary construction
costs associated with the Left-Hand Turn Lane, the
Developer shall provide the City with an
irrevocable letter of credit in an amount equal to
110% of the estimated preliminary construction
costs of the Left-Hand Turn Lane. The City shall
not issue a Building Permit for phase two of the
parking garage until these requirements are
satisfied.
d. The final plat from the Property is approved on
the condition that Hemmeter Enterprises, Inc. (or
its assigns), purchases that portion of the
Property owned by the Millsite 20 Limited
Liability Company, on or before April 8, 1996,
unless extended by written agreement between
Millsite 27, Inc. and the Millsite 20 Limited
Liability Company. In the event this condition is
not satisfied, the City Council's approval of the
final plat for the Property is negated. The final
plat for the Property will not be recorded until
this condition is satisfied.
4. Title Policy. A title commitment of the Property shall
be provided to the City. The title commitment shall show that
all property to be dedicated to the City is or shall be,
subsequent to the execution and recording of the plat, free and
clear of all liens and encumbrances (other than real estate taxes
which are not yet due and payable) which would make the
dedications unacceptable as the City in its sole discretion
determines. The title policy evidenced by the title commitment
shall be provided thirty (30) days after the recording of the
recording of the final plat.
5. Breach by the Developer; the City's Remedies. In the
event of a breach of any of the terms and conditions of this
Agreement by the Developer, the City Council shall be notified
immediately and the City, and where appropriate the District, may
take such action as permitted and/or authorized by law, this
Agreement, or the ordinances and Charter of the City and the
rules and regulations of the District to protect the public
health, safety and welfare; to protect lot buyers and builders;
and to protect the citizens of the City from hardship and undue
risk. These remedies include, but are not limited to:
a. The refusal to issue any building permit or
certificate of occupancy;
b. The revocation of any building permit previously
issued under which construction directly related
to such building permit has not commenced;
c. A demand that the security given for the
completion of the Public Improvements be paid or
honored; or
d. Any other remedy available at law.
Unless necessary to protect the immediate health, safety and
welfare of the City and/or the District, or to protect the City's
and/or the District's interest with regard to security given for
the completion of the Public Improvements, the City, and where
appropriate the District, shall provide the Developer thirty (30)
days' written notice of its intent to take any action under this
paragraph during which thirty-day period the Developer may cure
the breach described in the notice and prevent further action by
the City and/or the District.
6. Public Improvements and Warranty. All water lines,
sewer lines, fire hydrants, water or sewer distribution
facilities, drainage structures, paved streets, including curb
and gutter, street and creekscape improvements, and necessary
appurtenances as shown on the subdivision plat and the associated
construction documents (the "Public Improvements") as approved by
the Public Works Director of the City, and where appropriate the
Manager of the District, shall be installed and completed at the
expense of the Developer. The improvements required by this
Agreement and shown on the final subdivision plat submittal, and
the preliminary estimated costs of these improvements (or
procedures for estimating such costs) are set forth in Exhibit C
attached hereto and incorporated herein. All Public Improvements
covered by this Agreement shall be made in accordance with the
subdivision plat and associated construction documents drawn
according to regulations and construction standards for such
improvements and approved by the Public Works Director of the
City, and where appropriate the Manager of the District.
The Developer shall warrant any and all Public Improvements
which are conveyed to the City and the District pursuant to this
Agreement for a period of one (1) year from the date the City's
Public Works Director (except water improvements which shall have
a three (3) year warranty), and where appropriate the Manager of
the District, certifies that the same conform with specifications
approved by the City, and where appropriate the District.
Specifically, but not by way of limitation, the Developer shall
warrant the following:
a. That the title conveyed shall be marketable and its
transfer rightful;
b. Any and all facilities conveyed shall be free from any
security interest or other lien or encumbrance; and
c. Any and all facilities so conveyed shall be free of
defects in materials or workmanship for a period of one
(1) year (three (3) years for water improvements) as
stated above.
The City, and where appropriate the District, will accept
for maintenance all Public Improvements after the warranty period
has expired provided all warranty work has been completed. The
City shall accept for snow removal purposes only all dedicated
public streets after the warranty period expires or the City
issues the first certificate of occupancy.
7. Observation. The City, and where appropriate the
District, shall have the right to make reasonable engineering
observations at the Developer's expense as the City may request.
Observation, acquiescence in, or approval by any engineering
inspector of the construction of physical facilities at any
particular time shall not constitute the approval by the City or
the District of any portion of the construction of such Public
Improvements. Such approval shall be made by the City, and where
appropriate the District, only after completion of construction
and in the manner hereinafter set forth.
8. Completion of Public Improvements. The obligations of
the Developer provided for in paragraphs 3 and 6 of this
Agreement, including the inspections hereof, unless otherwise
indicated, shall be performed on or before May 30, 1997, and
proper application for acceptance of the Public Improvements
shall be made on or before such date. Upon completion of
construction by the Developer of such Public Improvements, the
City's Public Works Director or her designee, and where
appropriate the Manager of the District, shall inspect the
improvements and certify with specificity its conformity or lack
thereof to the City's specifications. The Developer shall make
all corrections necessary to bring the improvements into
conformity with the City's specifications. Once approved by the
City's Public Works Director, and where appropriate the District,
the City shall accept said improvements upon conveyance pursuant
to paragraph 10; provided, however, the City shall not be
obligated to accept the Public Improvements until the Actual
Costs described in paragraphs 2.a. and b. of this Agreement are
paid in full by the Developer.
9. Related Costs - Public Improvements. The Developer
shall provide all necessary engineering designs, surveys, field
surveys, and incidental services related to the construction of
the Public Improvements at its sole cost and expense, including
reproducible "as built" drawings certified accurate by a
professional engineer registered in the State of Colorado.
10. Improvements to be the Property of the City. All
Public Improvements for roads, concrete curbs and gutters, storm
sewers, sanitary sewers, water systems and drainage improvements
accepted by the City, and where appropriate the District, shall
be dedicated to the city, and where appropriate the District, and
warranted for a period of twelve (12) months (thirty-six (36)
months for water systems) following acceptance by the City as
provided above. Upon completion of construction and conformity
with the subdivision plat and associated construction plans, and
any properly approved changes, the Developer shall convey to the
City, and where appropriate the District, by bill of sale, all
installed physical facilities.
11. Performance Guarantee. In order to secure the
construction and installation of the Public Improvements above-
described for which the Developer is responsible, the Developer
shall, prior to recording the final plat in the real estate
records of Gilpin County, which recording shall occur no later
than ninety (90) days after the execution of this Agreement,
furnish the City, at the Developer's expense, with an irrevocable
letter of credit in which the City is designated as beneficiary,
to secure the performance and completion of the Public
Improvements, or the City may accept at its sole discretion some
other form of security from the Developer in an amount equal to
one hundred fifty percent (150%) of the estimated costs of the
Public Improvements to be constructed and installed as set forth
in Exhibit C. The Developer agrees that approval of the final
plat by the City is contingent upon the Developer's provision of
an irrevocable letter of credit to the City within ninety (90)
days of the execution of this Agreement in the amount and form
provided herein. Failure of the Developer to provide an
irrevocable letter of credit to the City in the manner provided
herein shall negate the City's approval of the final plat.
Letters of credit shall be substantially in the form and content
set forth in Exhibit D, attached hereto and incorporated herein,
and shall be subject to the review and approval of the City
Attorney. The Developer shall not start any construction of any
public or private improvement on the Property including, but not
limited to, staking, earth work, overlot grading, or the erection
of any structure, temporary or otherwise, until the City has
received and approved the irrevocable letter of credit.
The estimated costs of the Public Improvements shall be a
figure mutually agreed upon by the Developer and the City's
Public Works Director, and where appropriate the Manager of the
District, as set forth in Exhibit C. If, however, they are
unable to agree, the Public Works Director's estimate shall
govern after giving consideration to information provided by the
Developer including, but not limited to, construction contracts
and engineering estimates. The purpose of the cost estimate is
solely to determine the amount of security. No representations
are made as to the accuracy of these estimates, and the Developer
agrees to pay the Actual Costs of all such Public Improvements.
The estimated costs of the Public Improvements may increase
in the future. Accordingly, the City reserves the right to
review and adjust the costs estimate on an annual basis.
Adjusted cost estimates will be made according to changes in the
Construction Costs Index as published by the Engineering News
Record. If the City adjusts the cost estimate for the Public
Improvements, the City shall give written notice to the
Developer. The Developer shall, within thirty (30) days after
receipt of said written notice, provide the City with a new or
amended letter of credit in the amount of the adjusted cost
estimates. If the Developer refuses or fails to so provide the
City with a new or amended letter of credit, the City may
exercise the remedies provided for in paragraph 5 of this
Agreement; provided, however, that prior to increasing the amount
of additional security required, the City shall give credit to
the Developer for all required Public Improvements which have
actually been completed so that the amount of security required
at any time shall relate to the cost of required Public
Improvements not yet constructed.
In the event the Public Improvements are not constructed or
completed within the period of time specified by paragraph 8 of
this Agreement or a written extension of time mutually agreed
upon by the parties to this Agreement, the City may draw on the
letter of credit to complete the Public Improvements called for
in this Agreement. In the event the letter of credit is to
expire within fourteen (14) calendar days and the Developer has
not yet provided a satisfactory replacement, the City may draw on
the letter of credit and either hold such funds as security for
performance of this Agreement or spend such funds to furnish the
Public Improvements or correct problems with the Public
Improvements as the City deems appropriate.
Upon completion or performance of such improvements,
conditions, and requirements within the required time, and the
approval of the Public Works Director, ninety percent (90%) of
the estimated costs of construction shall be released to the
Developer within ten (10) days of acceptance by the City
provided, however, the City shall retain through the one (1) year
warranty period at least twenty percent (20%) of the total
construction costs of the Public Improvements.
12. Indemnification. The Developer shall indemnify and
hold harmless the City and the District, its officers, employees,
agents or servants from any and all suits, actions, and claims of
every nature and description caused by, arising from, or on
account of any act or omission of the Developer, or of any other
person or entity for whose act or omission the Developer is
liable, with respect to construction of the Public Improvements;
and the Developer shall pay any and all judgments rendered
against the City and the District as the result of any suit,
action, or claim, together with all reasonable expenses and
attorneys fees incurred by the City and the District in defending
any such suit, action or claim.
The Developer shall pay all property taxes on the Property
dedicated to the City and the District, and shall indemnity and
hold harmless the City and the District for any property tax
liability.
The Developer shall require that all contractors and other
employees engaged in construction of Public Improvements shall
maintain adequate workers' compensation insurance and public
liability coverage and shall faithfully comply with the
provisions of the Federal Occupational Safety and Health Act.
13. Waiver of Defects. In executing this Agreement the
Developer waives all objections it may have concerning defects,
if any, in the formalities whereby it is executed, or concerning
the power of the City and the District to impose conditions on
the Developer as set forth herein, and concerning the procedure,
substance, and form of the ordinances or resolutions adopting
this Agreement.
14. Modifications. This Agreement shall not be amended
except by subsequent written agreement of the parties.
15. Release of Liability. It is expressly understood that
the City and the District cannot be legally bound by the
representations of any of its officers or agents or their
designees except in accordance with the City of Black Hawk Code
of Ordinances and the laws of the State of Colorado.
16. Captions. The captions to this Agreement are inserted
only for the purpose of convenient reference and in no way
define, limit, or prescribe the scope or intent of this Agreement
or any part thereof.
17. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective heirs, successors, and assigns as the case may be.
18. Invalid Provision. If any provision of this Agreement
shall be determined to be void by any court of competent
jurisdiction, then such determination shall not affect any other
provisions hereof, and all of the other provisions shall remain
in full force and effect. It is the intention of the parties
hereto that if any provision of this Agreement is capable of two
constructions, one of which would render the provision void and
the other which would render the provision valid, then the
provision shall have the meaning which renders it valid.
19. Governing Law. The laws of the State of Colorado shall
govern the validity, performance and enforcement of this
Agreement. Should either party institute legal suit or action
for enforcement of any obligation contained herein, it is agreed
that venue of such suit or action shall be in Gilpin County,
Colorado.
20. Attorney Fees. Should this Agreement become the
subject of litigation to resolve a claim of default of
performance by the Developer and a court of competent
jurisdiction determines that the Developer was in default in the
performance of the Agreement, the Developer shall pay the City's
and the District's attorney fees, expenses, and court costs.
21. Notice. All notice required under this Agreement shall
be in writing and shall be hand-delivered or sent by registered
or certified mail, return receipt requested, postage prepaid, to
the addresses of the parties herein set forth. All notices so
given shall be considered effective seventh-two (72) hours after
deposit in the United States mail with the proper address as set
forth below. Either party by notice so given may change the
address to which future notices shall be sent:
Notice to the City: Rebecca Davidson
Public Works Director
City of Black Hawk
P.O. Box 17
Black Hawk, Colorado 80422
With copy to: James S. Maloney, Esq.
Black Hawk City Attorney
Hayes, Phillips & Maloney, P.C.
1350 17th Street, Suite 450
Denver, Colorado 80202
Notice to the
District: James Kirk
Black Hawk/Central City
Sanitation District
P.O. Box 364
Black Hawk, Colorado 80422
Notice to the
Developer: Alan L. Mayer, Esq.
General Counsel
Hemmeter Enterprises, Inc.
1700 Lincoln, 49th Floor
Denver, Colorado 80203
22. Force Majeure. Whenever the Developer is required to
complete the construction, repair, or replacement of Public
Improvements by an agreed deadline, the Developer shall be
entitled to an extension of time equal to a delay in completing
the foregoing due to unforeseeable causes beyond the control and
without the fault or negligence of the Developer including, but
not restricted to, acts of God, weather, fires, and strikes.
23. Approvals. Whenever approval or acceptance of the City
or the District is necessary pursuant to any provision of this
Agreement, the City and the District shall act reasonably and in
a timely manner in responding to such request for approval or
acceptance.
24. Assignment or Assignments. There shall be no transfer
or assignment of any of the rights or obligations of the
Developer under this Agreement without the prior written approval
of the City. The Developer agrees to provide the City with at
least fourteen (14) days advance written notice of the transfer
or assignments of any of the rights and obligations of the
Developer under this Agreement.
25. Recording of Agreement. This Agreement shall be
recorded in the real estate records of Gilpin County and shall be
a covenant running with the Property in order to put prospective
purchasers or other interested parties on notice as to the terms
and provisions hereof.
26. Title and Authority. The Developer expressly warrants
and represents to the City that it is the record owner of the
property constituting the Property and further represents and
warrants together with the undersigned individual(s), that the
undersigned individual(s) has or have full power and authority to
enter into this Subdivision Agreement. The Developer and the
undersigned individual(s) understand that the City is relying on
such representations and warranties in entering into this
Agreement.
WHEREFORE, the parties hereto have executed this
Agreement on the day and year first above-written.
CITY OF BLACK HAWK, COLORADO
By: /s/
Kathryn E. Eccker, Mayor
THE BLACK HAWK/CENTRAL CITY
SANITATION DISTRICT
By: /s/
Name: David D. Stellman
Title: President
MILLSITE 27, INC.
By: /s/
Name: Alan L. Mayer
Title: Vice-President and
Secretary
MILLSITE 20 LIMITED LIABILITY COMPANY
By: /s/
Name: David D. Stellman
Title: Member/Manager
EXHIBIT C
ESTIMATED COST OF PUBLIC IMPROVEMENTS
Public Improvements:
27. Fire hydrant and eight-inch (8") water loop connection
line from Chase Street as approved by the City Public
Works Director. The preliminary construction cost
associated with this construction is forty-eight
thousand and eighty-seven dollars (48,087).
Construction of the improvements will be completed
during Phase I prior to July 30, 1996. Detail for the
preliminary cost of this construction appears on
Appendix 1 hereto.
28. 8 foot wide concrete Creekscape walkway from SilverHawk
Casino to Selak Street as shown on the Site Plan
submittal drawing A 1.2. The preliminary construction
cost associated with this construction is thirteen
thousand six hundred and twenty-eight dollars
($13,628). Construction of the improvements will be
completed during Phase II prior to May 30, 1997.
Detail for the preliminary cost of this construction
appears on Appendix 1 hereto.
29. The Developer shall construct a left-hand turn lane on
north-bound 119 to Chase Street according to the plans
and specifications approved by the Colorado Department
of Transportation and/or the Public Works Director for
the City (the "Left-Hand Lane"). The Developer intends
to construct a parking garage in two phases, the first
phase of which shall not exceed 440 spaces. Prior to
the issuance of any building permit for the second
phase of the parking garage, the Developer shall
provide to the City Public Works Director the plans and
specifications for the Left-Hand Turn Lane. Upon the
approval by the City Public Works Director of the
estimated preliminary construction costs associated
with the Left-Hand Turn Lane, the Developer shall
provide the City with an irrevocable letter of credit
in an amount equal to 110% of the estimated preliminary
construction costs of the Left-Hand Turn Lane. The
City shall not issue a Building Permit for phase two of
the parking garage until these requirements are
satisfied.
EXHIBIT D
FORM -- IRREVOCABLE LETTER OF CREDIT
[INSERT DATE]
City of Black Hawk
P.O. Box 17
Black Hawk, Colorado 80422
Attn: Mayor and City Attorney
Gentlemen:
We hereby establish our Irrevocable Letter of Credit in your
favor in the amount of $(total public improvements). The purpose
of this Letter of Credit is to secure performance of a
Subdivision Agreement for (name of subdivision), dated ________,
199__, between the City of Black Hawk and (name of Developer)
(the "Developer").
You are hereby authorized to draw on sign on (name of
financial institution), by drafts, up to the aggregate amount of
$(total public improvements).
The sole condition for payment of any draft drawn against
this Letter of Credit is that the draft be accompanied by a
letter, on the City's letterhead, signed by the Mayor or her
designee, to the effect that the Developer is in default of
Developer's obligations pursuant to the Subdivision Agreement.
We hereby agree with drawers and endorsers, and bona fide
holders of drafts negotiated under this Letter of Credit, that
the same shall be duly honored upon presentation and delivery of
the documents as specified above.
This Irrevocable Letter of Credit shall expire (fourteen
(14) months after improvement completion date shown in
subdivision agreement) provided that (name of financial
institution) has given the City sixty (60) days prior written
notice of the impending expiration.
Signed this ___________ day of __________________, 199__, on
behalf of (name of financial institution).
By:
Title: (President or Vice President)
FORM OF
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) a sale, assignment, lease, transfer, conveyance or other
disposition, directly or indirectly, of the casino located in
Black Hawk, Colorado, owned and operated by BWBH, Inc., or all or
substantially all of BWBH, Inc.'s assets or properties, 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 Exchange Act), (iii) the
liquidation or dissolution of the Company, (iv) 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, (v) the failure of
the Company to own, directly or indirectly, 100% of the total
voting power in the aggregate of all classes of capital stock
then outstanding, normally entitled to vote in elections of
directors, of BWBH, Inc., or (vi) 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 (the "Initial Directors")
of the Company are approved by the 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 either directors
at the beginning of such period or whose election or nomination
for election was previously so approved or who were elected by
the vote of one or more of the holders of the common stock of the
Company who were such on the Effective Date provided; however,
that 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 this
cause (vi))cease for any reason to constitute a majority of the
Board then in office.
(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
FORM OF
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 certain of its Operating
Subsidiaries 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 Casinos, Inc., Millsite 27, Inc., and any other
subsidiary of the Company 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 the last quarter 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 the first three quarters of such
fiscal year.
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, the Committee shall be bound by
any terms of an employment contract of a Key Employee which
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.
The Committee shall determine how the portion not paid shall be
reallocated to other Key Employees.
(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 Company shall determine
otherwise.
(c) No Key Employee shall have any claim to a Bonus until
the requirements established by the Committee 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
FORM OF
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and
entered into as of the day of , 1996, by and between
Colorado Gaming & Entertainment Co., a Delaware corporation,
formerly known as Hemmeter Enterprises, Inc. ("CG&E"), whose
address for purposes of notice hereunder is 1700 Lincoln, 49th
Floor, Denver, CO 80203, and Christopher B. Hemmeter
("Consultant"), whose address for purposes of notices hereunder
is .
WHEREAS, CG&E desires to engage Consultant to perform
certain consulting services on behalf of CG&E and Consultant
desires to be retained for such consulting services, on the terms
and conditions more particularly described below.
NOW, THEREFORE, in consideration of the mutual promises
and covenants herein described, the parties agree as follows:
1. Engagement. CG&E hereby engages Consultant as an
independent contractor to perform the Services more particularly
described below and Consultant hereby accepts such engagement
upon the terms and conditions hereinafter set forth.
2. Services. Consultant shall provide CG&E, and all
of its subsidiaries, with a variety of consulting services as
specified by CG&E's management. Specifically, but without
limitation, Consultant shall provide consulting services
("Services") to assist CG&E (i) with respect to gaming regulatory
issues in Colorado and any other jurisdiction where CG&E has a
presence; (ii) in identifying new business opportunities in
gaming and related entertainment businesses in Colorado and other
jurisdictions in the United States and internationally; (iii) in
evaluating and implementing strategic decisions regarding CG&E's
subsidiary approximately $6 million loan/investment with a
Mexican-based gaming company known as PRINGSA, including, to the
extent specifically asked by management of CG&E, being involved
in negotiations with individuals form PRINGSA; and (iv) with any
other matter which CG&E determines appropriate in connection with
its business operations.
3. Term. The term of this Agreement shall begin on
the date set forth above and shall continue through, and
automatically terminate at the end of business on, August 31,
1997, unless terminated earlier by CG&E for cause upon 30 days
prior written notice to Consultant.
4. Consideration. For the Services rendered by
Consultant during the term of this Agreement, CG&E shall pay
Consultant $29,166.67 per month. Each monthly payment shall be
made in advance, with the first payment being made upon the
mutual execution hereof for the appropriate pro rata amount for
the period from the date hereof through June 30, 1996, the next
and all succeeding payments being made on the 1st day of the
month for the next following month and the last payment being
made on August 1, 1997, for the monthly period ending on the
expiration of this Agreement. Upon the prior written approval by
ending on the expiration of this Agreement. Upon the prior
written approval by CG&E and within 30 days of the submittal of
appropriate receipts, invoices marked paid or other satisfactory
evidence, reasonable out-of-pocket expenses will be reimbursed to
Consultant. CG&E will not reimburse any out-of-pocket expenses
unless Consultant has received the prior written approval of
CG&E.
5. Right of First Refusal: Gaming Opportunity.
Consultant covenants to CG&E that he shall not participate as an
owner, partner, manager, member, investor, lender, employee,
officer, director, agent or otherwise in any new business
opportunity in the area of casino gaming in any jurisdiction in
the United States or internationally ("Gaming Opportunity")
during the term of this Agreement unless Consultant first
provides all relevant information regarding such Gaming
Opportunity to CG&E. Upon the receipt of all such relevant
information, CG&E shall be given 60 days within which to conduct
its own due diligence of such Gaming Opportunity and determine
whether it desires to pursue an involvement therein. If CG&E
gives notice to Consultant within such 60-day period that it
desires to pursue an involvement in such Gaming Opportunity,
Consultant shall be precluded from participating therein, except
to the extent allowed by CG&E. If CG&E gives notice to
Consultant within such 60-day period that it does not desire to
pursue an involvement in such Gaming Opportunity, Consultant
shall be free to participate therein in any capacity and to any
extent. Gaming Opportunity shall specifically exclude any
matters involving Consultant's current participation in Outlaws
Casino, Ltd., known as Crooks Palace in Black Hawk, Colorado.
6. Trade Secrets. Consultant acknowledges that CG&E
has trade secrets in the connection with its business.
Consultant covenants that he shall at all times be precluded from
divulging or otherwise using any and all trade secrets,
proprietary information, material, systems information, general
information, and other matters of critical importance to the
operation of the business operated by CG&E to any person or
entity, including any competitor or any potential competitor of
CG&E. In addition, Consultant covenants that he shall not at any
time use such secrets to compete, directly or indirectly, with
CG&E.
7. Independent Contractor. Consultant shall at all
times act as an independent contractor. Nothing in this
Agreement is intended to, or shall create, the relationship of
principal and agent or employer and employee between CG&E and
Consultant. CG&E is not responsible for providing any health,
accident, medical benefits, disability insurance, life insurance
benefits or other insurance benefits to Consultant. It is
Consultant's sole obligation to pay any and all income and self-
employment taxes and Consultant agrees to indemnity CG&E in the
event CG&E is ordered to pay any of such taxes or other expenses
on behalf of Consultant. In addition, by their execution hereof,
both parties specifically acknowledge the following:
CONSULTANT IS NOT ENTITLED TO WORKER'S
COMPENSATION BENEFITS. CONSULTANT IS
OBLIGATED TO PAY FEDERAL AND STATE INCOME TAX
MONIES EARNED PURSUANT TO THIS CONTRACTUAL
RELATIONSHIP.
8. Colorado Law. This Agreement and the parties
respective rights, obligations and duties hereunder shall be
governed by, construed and interpreted in accordance with the
laws of the State of Colorado.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
COLORADO GAMING &
ENTERTAINMENT CO., a Delaware
corporation
By:
Title:
CHRISTOPHER B. HEMMETER
FORM OF CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered
into as of the day of , 1996, by and between
Colorado Gaming & Entertainment Co., a Delaware corporation,
formerly known as Hemmeter Enterprises, Inc. ("CG&E"), whose
address for purposes of notice hereunder is 1700 Lincoln, 49th
Floor, Denver, CO 80203, and Mark M. Hemmeter ("Consultant"),
whose address for purposes of notices hereunder is 6320 Reserve
Drive, Boulder, CO 80301.
WHEREAS, CG&E desires to engage Consultant to perform
certain consulting services on behalf of CG&E and Consultant
desires to be retained for such consulting services, on the terms
and conditions more particularly described below.
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein described, the parties agree as follows:
1. Engagement. CG&E hereby engages Consultant as an
independent contractor to perform the Services more particularly
described below and Consultant hereby accepts such engagement
upon the terms and conditions hereinafter set forth.
2. Services. Consultant shall provide CG&E, and all of
its subsidiaries, with a variety of consulting services as
specified by CG&E's management. Specifically, but without
limitation, Consultant shall provide consulting services
("Services") to assist CG&E (i) with respect to gaming regulatory
issues in Colorado and any other jurisdiction where CG&E has a
presence; (ii) in identifying new business opportunities in
gaming and related entertainment businesses in Colorado and other
jurisdictions in the United States and internationally; (iii) in
evaluating and implementing strategic decisions regarding CG&E's
subsidiary's approximately $6 million loan/investment with a
Mexican-based gaming company known as PRINGSA, including, to the
extent specifically asked by management of CG&E, being involved
in negotiations with individuals from PRINGSA; and (iv) with any
other matter which CG&E determines appropriate in connection with
its business operations.
3. Term. The term of this Agreement shall begin on the
date set forth above and shall continue through, and
automatically terminate at the end of business on, November 30,
1996, unless terminated earlier by CG&E for cause upon 30 days
prior written notice to Consultant.
4. Consideration. For the Services rendered by Consultant
during the term of this Agreement, CG&E shall pay Consultant
$10,416.67 per month. Each monthly payment shall be made in
advance, with the first payment being made upon the mutual
execution hereof for the appropriate pro rata amount for the
period from the date hereof through June 30, 1996, the next and
all succeeding payments being made on the 1st day of the month
for the next following month and the last payment being made on
November 1, 1996, for the monthly period ending on the expiration
of this Agreement. Upon the prior written approval by CG&E and
within 30 days of the submittal of appropriate receipts, invoices
marked paid or other satisfactory evidence, reasonable out-of-
pocket expenses will be reimbursed to Consultant. CG&E will not
reimburse any out-of-pocket expenses unless Consultant has
received the prior written approval of CG&E.
5. Right of First Refusal; Gaming Opportunity. Consultant
covenants to CG&E that he shall not participate as an owner,
partner, manager, member, investor, lender, employee, officer,
director, agent or otherwise in any new business opportunity in
the area of casino gaming in any jurisdiction in the United
States or internationally ("Gaming Opportunity") during the term
of this Agreement unless Consultant first provides all relevant
information regarding such Gaming Opportunity to CG&E. Upon the
receipt of all such relevant information, CG&E shall be given 60
days within which to conduct its own due diligence of such Gaming
Opportunity and determine whether it desires to pursue an
involvement therein. If CG&E gives notice to Consultant within
such 60-day period that it desires to pursue an involvement in
such Gaming Opportunity, Consultant shall be precluded from
participating therein, except to the extent allowed by CG&E. If
CG&E gives notice to Consultant within such 60-day period that it
does not desire to pursue an involvement in such Gaming
Opportunity, Consultant shall be free to participate therein in
any capacity and to any extent. Gaming Opportunity shall
specifically exclude any matters involving Consultant's current
participation in Outlaws Casino, Ltd., known as Crooks Place in
Black Hawk, Colorado.
6. Trade Secrets. Consultant acknowledges that CG&E has
trade secrets in the connection with its business. Consultant
covenants that he shall at all times be precluded from divulging
or otherwise using any and all trade secrets, proprietary
information, material, systems information, general information,
and other matters of critical importance to the operation of the
business operated by CG&E to any person or entity, including any
competitor or any potential competitor of CG&E. In addition,
Consultant covenants that he shall not at any time use such
secrets to compete, directly or indirectly, with CG&E.
7. Independent Contractor. Consultant shall at all times
act as an independent contractor. Nothing in this Agreement is
intended to, or shall create, the relationship of principal and
agent or employer and employee between CG&E and Consultant. CG&E
is not responsible for providing any health, accident, medical
benefits, disability insurance, life insurance benefits or other
insurance benefits to Consultant. It is Consultant's sole
obligation to pay any and all income and self-employment taxes
and Consultant agrees to indemnify CG&E in the event CG&E is
ordered to pay any of such taxes or other expenses on behalf of
Consultant. In addition, by their execution hereof, both parties
specifically acknowledge the following:
CONSULTANT IS NOT ENTITLED TO WORKER'S COMPENSATION
BENEFITS. CONSULTANT IS OBLIGATED TO PAY FEDERAL AND
STATE INCOME TAX MONIES EARNED PURSUANT TO THIS
CONTRACTUAL RELATIONSHIP.
8. Colorado Law. This Agreement and the parties
respective rights, obligations and duties hereunder shall be
governed by, construed and interpreted in accordance with the
laws of the State of Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COLORADO GAMING &
ENTERTAINMENT CO., a Delaware
corporation
By:
Title:
MARK M. HEMMETER
FORM OF
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.
FORM OF
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
FORM OF
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
